Krsnaa Diagnostics Ltd
NSE:KRSNAA
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Krsnaa Diagnostics Ltd
Earnings Call Analysis
Summary
Q2-2024
In the second quarter of FY '24, the company's revenue soared by 27% year-on-year to INR 155 crores, coupled with a robust EBITDA growth of 4% to INR 32 crores and net profit rise to INR 10.5 crores. With a major project in Assam poised to boost revenues from Q4, FY 2024 is shaping up strongly. The healthy balance sheet shows a net debt-free position, with gross debt at INR 109 crores against cash of INR 236 crores, underscoring a solid financial status.
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A very warm welcome to the H1 FY 2024 Results Conference Call of Krsnaa Diagnostics Limited. Before we begin, I would like to remind all participants that today call may contain statements that are forward-looking statements including but without limitation, statements related to the implementation of strategic initiatives and other statements relating to Krsnaa Diagnostics future business development and economic performance.
While these forward-looking statements indicate our assessment and future expectation concerning the development of our business. A number of risks, uncertainties and other unknown factors could cause actual development and result to differ materially from our expectation. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Jainil Shah from JM Financial. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and welcome to the H1 FY 2024 Results Conference Call of Krsnaa Diagnostics Limited. Joining us today on the call are Mr. Rajendra Mutha, Chairman and Whole Time Director; Ms. Pallavi Bhatevara, Managing Director; Mr. Yash Mutha, Whole-time Director; Mr. Pawan Daga, Chief Financial Officer; Mr. Vivek Jain, Head, Investor Relations. I would like to now hand over to Ms. Pallavi Bhatevara for her opening remarks. Thank you, and over to you, ma'am.
Ladies and gentlemen, good afternoon, and thank you for joining us today for Krsnaa Diagnostics H1 FY '24 Earnings Call. I want to express my gratitude to each of you for being a part of this call. Our investor presentation has already been shared and is accessible on our website as well as on the stock exchanges website. I hope you all have had a chance to review the presentation. I'd like to kick off our discussion by focusing on the comprehensive health care initiatives undertaken by the Indian government. The current state of the diagnostic service industry and shedding light on Krsnaa Diagnostics position within this ever-evolving landscape.
Let's start with Ayushman Bharat recognized as the world's largest government-funded health care program. Ayushman Bharat or Pradhan Mantri Jan Arogya Yojana extends free health insurance coverage to over 500 million individuals from underprivileged households. Another crucial [Technical Difficulty] National Health mission which concentrates on enhancing health care accessibility in rural areas with a focus on primary health care services, maternal and child health care, immunization and communicable disease control.
Notable other programs like Pradhan Mantri Surakshit Matritva Abhiyan, Janani Shishu Suraksha Karyakram, Rashtriya Bal Swasthya Karyakram, Rashtriya Kishor Swasthya Karyakram and many more. Diagnostic services are a cornerstone of the health care sector, crucial for diagnosis, treatment and disease prevention. The Indian diagnostic market is anticipated to reach approximately 1,200 billion by fiscal year 2028 with a remarkable CAGR of 8% to 10% expected in the coming years.
Several interesting factors are driving the diagnostic industry growth, including India's sizable population, aging demographics, increased noncommunicable and chronic illnesses rising individual income, greater insurance coverage, government initiatives in teleradiology, telemedicines, heightened health awareness and the expanding adoption of point-of-care testing and home collection.
Krsnaa diagnostics, a front runner in the field of PPP Diagnostics is expanding its presence across India, ensuring advanced diagnostic services that are not only accessible but also economically viable even in the remotest area. On a positive note, I am pleased to share updates regarding our growth trajectory. Krsnaa Diagnostics had been recently awarded the National Diagnostic Chain of the Year by ET Healthcare Awards. We have successfully operationalized our projects in Odisha in Q2 FY '24 with 6 laboratories and 386 collection centers.
We received accreditation from NABH and NABL for our centers. Currently, we have 17 centers accredited by NABH and NABL. We have started our first private state-of-art pathology laboratory in Mumbai, which has the capacity to serve not only the Mumbai region, but will also act as a processing laboratory and central lab for the Western region. Over the last 3 months, we have successfully established 7 new pathology labs and established 93 pathology collection centers and 5 new telereporting centers.
These endeavors have been meticulously aligned with our expansion strategy. Looking ahead, we continue to leverage and build upon our existing presence across Tier 2 and Tier 3 cities providing high-quality diagnostic services at competitive prices.
Our recent center installations, successful tender wins and ongoing evaluation of pipeline projects all point to a promising future of growth. I would now hand over the call to Mr. Yash Mutha, our Executive Director, to discuss Krsnaa's strategic plans and future growth prospects. Thank you, and have a wonderful evening.
Thank you, Ms. Pallavi. Ladies and gentlemen, good afternoon. I am pleased to present the impressive performance of Krsnaa Diagnostics during the second quarter and the first half of fiscal year 2024. As you all are aware, Krsnaa is currently implementing pathology operations across various geographies, including Mumbai, Odisha, Himachal Pradesh, Assam, Maharashtra, Karnataka, et cetera. As a strategy, we are establishing 40 labs across these locations in private premises taken on lease rental with each lab spread around 4,000 to 15,000 square feet in accordance with the business requirements, wherein eventually these labs will allow us to leverage the government business as well as the B2C business.
As of date, we have established 22 out of 40 labs and the implementation for these labs required us in deploying equipments, interiors, human resources and logistics, along with other costs. These labs allow us to augment revenues not only from PPP, but incremental revenues from the B2C and B2B segments and therefore, allow us to leverage the infrastructure that we are creating beyond the existing long-term contract periods. These labs will further allow us to grow our network of collection centers, franchisees, et cetera, in these geographies.
Our total revenues in H1 FY '24 have experienced a significant surge. Our total revenue stands at INR 295 crores, demonstrating a strong 25% year-on-year growth, in terms of Q2 FY 2023. Our top line grew by 27% year-on-year and 11% quarter-on-quarter. Our growth can be attributed to projects, one in the earlier quarters, which are maturing and with our focus on increasing the brand awareness of Krsnaa Diagnostics.
As mentioned previously, these implementation costs have a bearing on our existing margins. Accordingly, the sequential gross margins were impacted because of the newer pathologic projects, wherein consumption being higher in the initial period as well as with a higher consumption due to increasing pathology business wherein our rates for pathology tests are highly competitive when benchmarked to the [ CAGR ] rates.
As the pathology businesses of these projects mature, consumption is also expected to normalize. Our normalized EBITDA has seen a substantial increase, reaching to INR 39 crores showcasing a remarkable growth of 27% year-on-year with a substantial margin of 25%. Equally, noteworthy is a normalized net profit which stands at INR 18 crores, representing a 17% year-on-year growth, along with a corresponding margin of 12%. Additionally, our regular EBITDA has reached INR 32 crores, reflecting a 4% year-on-year growth, accompanied by a margin of 21%. Our regular net profit has also displayed growth reaching to INR 10.5 crores with a margin of 7%.
Additionally, in Q2 FY '24, there was an additional impact of IND AS amounting to INR 2.5 crores which arose largely due to the lease rental as per our strategy discussed earlier. It is worth noting that our profit margins have experienced some fluctuations deviating from the previous quarter's performance. This change is largely attributable to our ongoing expansion efforts, encompassing various projects incurring higher expenses that are yet to contribute proportionately to the revenue.
Nonetheless, we maintain an optimistic outlook for positive margin shifts as these projects mature in the upcoming quarters. Let me provide some highlights of our existing projects. We are pleased to inform you that our projects in Odisha, which commenced its operations in the second quarter of fiscal 2024 have been receiving a positive response and is poised for substantial revenue growth starting from the fourth quarter of fiscal 2024.
In the state of Maharashtra, we have finalized our plans for the installation of 39 CT scan units across the 20 locations. The implementation of this project is scheduled to commence in a phased manner during this current quarter with revenue projections expected to materialize in the first quarter of fiscal 2025.
Our ongoing BMC project, which encompasses the establishment of 600 collection centers has already seen 462 of these centers becoming operational. The remaining centers are on track of operationalization, which provide us with a high degree of revenue visibility. Our project in Rajasthan, which is of 150 labs and 1,295 collection centers, wherein after the intervention of the High Court, we have already submitted the bank guarantee aggregating to INR 86 crores in total and subsequent to which the High Court had asked both economic authorities as well as Krsnaa to complete the due process.
However, as we've been given to understand that subsequently, due to the elections being announced across the state and with the model code of conduct being implemented, the response to execute these agreements have been delayed. We have nevertheless filed a contempt pleas in the High Court and are expected to have a hearing on this soon -- very soon. In the interim, we have focused our priorities on the projects of Assam, Odisha and Maharashtra. Despite these delays, the company continues its growth momentum and will continue to see the same in future as well.
The large project of Assam, which we secured during the first quarter of this year, encompassing the establishment of 10 laboratories, 44 collection centers, operational 24/7 and 1,212 collection centers. Anticipated revenues from this project is expected to become visible in the fourth quarter of fiscal 2024.
As discussed earlier, the implementation of Assam and other labs earlier might have an impact on the margins for Q3 with such large-scale implementation going on. However, we are confident that from Q4 onwards, contribution both to the revenue and margins will improve -- helping us improve the overall revenue and margins for the company.
To further fuel our growth and bolster our presence, we are deeply engaged in a comprehensive pipeline of various public private partnership projects, including the development of labs, collection centers addition to the CT and MRI facilities across various states. The strategic approach empowers us to explore new opportunities and strengthen our operations within our existing geographical footprint. Our unwavering commitment to serving the B2C segment remains central to our efforts with the introduction of cost-effective wellness packages designed to cater to the diverse needs of our valued customers.
As we persist in our ongoing initiatives, execute the existing projects and build upon recent achievements, our outlook for the future remains robust and resilient. We have unwavering confidence in our ability to harvest to the substantial opportunities that lie ahead, poised to drive sustained growth and create value that resonates deeply with all our stakeholders. I would now like to hand over the call to Mr. Pawan Daga, our Chief Financial Officer, who will provide further insights into our financial performance. Thank you.
Thank you, Yash. Good afternoon, everyone. I will now present the financial highlights for the quarter ending in September 2023. In the second quarter of FY '24, our total revenue from operations experienced a notable upsurge reaching INR 155 crores, making an impressive 27% year-on-year growth. Our Q2 FY 2024 regular EBITDA reached INR 32 crores, signifying a comfortable 4% -- commendable 4% year-on-year growth, and we maintained a healthy margin of 21%.
Additionally, our net profit amounting to INR 10.5 crores with a corresponding margin of 7%. In H1 FY '24, our normalized EBITDA has exhibited a significant increase reaching to INR 74 crores, demonstrating an outstanding 25% year-on-year growth, along with a substantial margin of 25%. Equally remarkable in our normalized net profit standing at INR 35 crores reflecting 18% year-on-year growth, margin of 12%.
Furthermore, our regular EBITDA has reached INR 64 crores showing a notable 8% year-on-year growth with a margin of 22%. Our regular net profit has also displayed a growth which INR 25 crores with a margin of 9%. Taking a closure look at our balance sheet. We currently hold a gross debt of INR 109 crores, while maintaining a cash and cash equivalent worth INR 236 crores as of September 30, 2023. It is worth noting that our company continues to uphold our net debt-free status and a noteworthy accomplishment. Our receivable base maintained a figure of 97 days in Q2 FY '23. We can now open the floor for the question and answer. Thank you.
[Operator Instructions] The first question is from the line of [ Bala Murali Krishna ] from Oman Investment Advisor.
Congratulations on the great set of numbers. I want to know about this Punjab status. So I think still we are what we thought that -- maybe I think we thought to have good visibility of revenue, but still, we are not up to the market in the case of revenue. And margins also I think still -- we are still on loss in the Punjab. Could you throw some light on that so when we can expect and what is the problems we are having countering on the tender.
So on the Punjab tender, I think we are on track. The entire project has been implemented and the revenues are also ramping up. Whatever we had challenges in the operations, all have been put aside and the centers are now running smoothly with the business growing with every passing day.
One of the important things is the entire Punjab business is on cash, unlike other PPP projects. And equally, we've started the home collection services there. So this will also help us in increasing the revenues in the subsequent quarters. I hope that answers the question.
Yes, and regarding this radiology tenders implement this quarter, we have not implemented any single project also so is there any delay from the equipment or any -- I hope we'll conclude all these projects by the end of the financial year, except the Rajasthan tender. Is it right?
Could you just repeat the question, please?
Radiology -- in case of radiology, we haven't commissioned a single unit also in this quarter. So I think by the end of the year, by March '24, I think we can complete all these tenders, which we are awarded. Is it right or any tenders can go forward to the next financial year for implementation, other than Rajasthan?
So for the CT scan project of Maharashtra, the entire project, as I mentioned earlier, is under implementation. The machines are getting delivered ordered as well as some of the sites that we received. So it is under implementation and by end of this fiscal, we expect the project to get completed.
Okay. And on the B2C segment, what are the current revenue contribution and any further visibility on that segment?
So B2C revenues, like whether it is the franchisees or the home collections, which we have started in this fiscal, though it has been a slow and steady start, but the results have been very positive. On a monthly basis, we are seeing the uptick and surge in the wellness packages that we started promoting even inside the government centers or even in our private labs.
So whilst the contribution is not so significant. However, we are positive that with the Krsnaa's kind of brand awareness being created and we're leveraging our networks and similarly, with the other states that we're deploying, we should be able to expand the B2C initiatives across these various geographies, and which will have a slightly better contribution to the overall revenues in the next fiscal as well.
Okay. Then sir, just a small follow-up on that. So going forward, maybe down the line -- 3, 4 years down the line, what could be the percentage of contribution we are expecting from the B2C?
Well, I believe we would expect their B2C contribution to be in the range of about 10%.
Okay. That's fair enough. And lastly, on the pipeline tender, I think in the last call, you told that there is southern region tender, I think that is from Andhra Pradesh. So could you please throw some light whether it is a radiology or pathology and what could be the area is covering the entire state or implemented to some particular hospitals, like that.
So the Andhra Pradesh tender was primarily on radiology and that is currently under different stages of the evaluation. Apart from this, there are other states also, which we are participating both in radiology and pathology.
The next question is from the line of [ Kishan Toshniwal ] from Polar Ventures.
I have 3 questions basically. First question that I want to understand, is there any seasonality in our business because what I understand is that some quarters will be high, some quarters will be low. Is it because of seasonality?
Yes. So normally, in our industry, if you see across -- typically for us, Q3 is normally where there is an element of seasonality. The reason being, normally winters are a healthy season. Also, there are holidays.
So typically, Q3 is where we would expect a slightly overall business. Otherwise, there are not such a severe impact of the seasonality. There are typically -- and the diagnostic business is not something which you can just go and ask people to order. These are again tests, which are required based on either there are certain seasons like monsoon or otherwise. But basically, Q3 is the lowest business that happens.
My second question is, in the last quarter, you had mentioned that you people will be growing even at -- even without Rajasthan at 50% on the top line. And also in long-term, maybe see 2, 3 years down the line, what is the sustainable margin that you see at Krsnaa as a diagnostic company?
I'd just like to correct, we have maintained that we will be growing with our existing CAGR growth rate, which is about 30% and that is excluding Rajasthan. So that visibility, we still have in the subsequent years as well. Whether Rajasthan happens or not considering the existing projects in hand and existing revenue run rate and what we've achieved, it gives us the confidence that we will continue to maintain that growth rate.
In terms of the utilization of the margins, as we've been saying earlier as well, for us 26% to 28% is what the EBITDA margins we expect to be sustainable. Of course, our aspirations are to improve it. But with the kind of current projects that we have in hand, we believe 26% to 28% will be sustainable margins going forward as well. And of course, they will be improving as the business matures.
My third question is as and when we win the tender, and we are supposed to -- what you say radiology tender has to be put on or the pathology labs has to be put on, we'll always see the threat, whenever there is a tender that has been won and you have to front-load the expenses. So in that quarter -- in whichever quarter you do that front-load, the margins will be different than the actual margins we should have.
Yes. This is the typical nature of our model and the business. What happens is if you consider in a government setup, normally, when we are to establish CT scans or pathology labs in the connection centers, there's a requirement to deploy the equipment, the manpower, the interiors, the infrastructure, the logics first and the revenue might come in trickle initially and then it keeps on ramping up.
So while -- this is the feature of the model, but the advantage is after the center matures and as we've seen -- and we've demonstrated in the past as well, for our mature centers, the revenue and the corresponding EBITDA in spite of our price has been 40%, 50% or 50% lower than the market rates, these are really good EBITDA and margins that we can generate from these kind of projects.
So it is typically wherein the initial project till it ramps up, there is an impact. But once the project matures, then the revenues and margins also start contributing and increasing as the year goes by.
When you consider it as a matured center?
So it differs between radiology and pathology, but typically for mutual centers are those which have completed at least 2 years of operations. So 2 to 3 years is when they start coming at a mature stage.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Sir, first, I just wanted to understand, well, more on the margin front. I mean since we are on the expansion mode, these expenses will keep on happening, right? I mean this INR 7 crores, the expenditure that we have incurred. So something where else will come every quarter, right? So ideally, what I wanted to understand is that the EBITDA margin that we are talking about or we have guided in the past as well so why adjust for it. I mean -- so just wanted to understand is this the margin that you are seeing after existing for this operational expenses of, let's say, INR 7 crores. So how do we look at it?
Yes. So if you see, had we -- did not have these kind of expenses or the implementation of the projects, our margin profile look different, right? So Krsnaa as a company, if you consider our entire past years of existence and operations, we've always been invested in creating capacities and capabilities.
Now the benefit of this will, of course, come in the subsequent years. And as it has been seen, for example, whether it's Punjab, whether it is our Karnataka projects, which are now mature and are contributing significantly to the overall business.
So the initial years, like any business, when you start a new business, it requires initial investments in terms of expenses. The benefit will definitely come in. And as today, Punjab, Himachal Pradesh projects are maturing, they will start also contributing to better margins in the subsequent quarters. So it's a combination of both. In terms of sustainable, we believe 26% to 28% is a sustainable EBITDA, excluding these kind of implementation costs.
So you have to adjust these costs, right? Because where I'm coming from currently Assam, UP or Maharashtra, then again, Rajasthan will come. So what I understand is that these kind of costs will keep on coming. I mean you have to look at the next 2 years, these kind of costs will keep on coming, right? So ideally, this 26%, 28%, if we adjust for these expenses will become what to a 20%, 21% kind of a range? I mean currently, what we did this quarter.
No, see, this EBITDA is also expected to improve which -- for example, when in the next 2 quarters or from the next fiscal, when Assam and Odisha, they start contributing, so the reported EBITDA is also expected to increase with all these contribution coming up from all the centers that are going to ramp up. It is not going to give permanent feature. Of course, it depends on what projects we have on hand and what is the stage of implementation.
Okay. So at the start of the year, I think when we guided for 25% EBITDA margin for FY '24 on an annualized basis, so how do we look at? So should we subtract -- I mean this 25% margin, is it on a reported basis or on an adjusted basis?
Could you just repeat the question?
So at the start of the year, we guided for around 25% of our EBITDA margin for FY '24. So how do we look at it then? I mean, is it the reported margin we are talking about? Is it the 25% is the reported margin, without adjusting for this operational expenses? Or after adjusting for this operational expense, we would be kind of at 25% EBITDA margin?
So we are looking to have these numbers without the adjustment considering our -- all the Assam, Odisha project ramp-up.
Okay. So FY '24, 25% EBITDA margin excludes the adjustment, right? So it will be on a reported basis.
Correct. Correct.
And that excludes other income also, right?
Yes.
Okay, okay. And this is what we are targeting -- but how will achieve that? Because ideally, this ramp-up will happen only towards the fourth quarter, right? So ideally...
Basically for us, Q4 normally is a good business. And as I said, there are certain strategic initiatives being undertaken for ramping up the revenues across the various. So once the fixed cost and all these overheads are absorbed, every additional revenue will start contributing to the bottom lines or the EBITDA margins straight away, and that is what we expect Q4 and Q3 gradually to help us deliver and achieve those numbers.
Okay, I understand. And on the Rajasthan front, I mean, now because of this delay, we don't expect any kind of revenue in this fiscal year, right?
We had -- nevertheless, did not expect any fiscal '24 except for the last quarter in which ways in spite of Rajasthan, we continue on this growth momentum.
The 30% growth that you have been guiding on a CAGR front?
Yes -- so this year also, we expect and also the next year.
Okay. And this INR 2.5 crores IND AS impact that has come lease rentals. So how do we see it going forward, I mean, it will keep happening every quarter?
I just ask maybe Pawan...
Yes. This is for this quarter only. Going forward, the impact is already taken care in this regular business, and there's part. So this is an exceptional where we have started private labs, where the long-term association of rental premises has taken into the consideration for the year period of 3 years to 8 years or maybe more in. In that, this is the impact of IND AS basically.
Okay. So it will not recur, right, in coming quarters?
Yes.
And where is it, setting in depreciation, right? This INR 2.5 5Crores? Come again, your voice is not audible.
Depreciation and the finance cost.
Depreciation. So this INR 2.5 crores is sitting in depreciation and interest cost. And it will not reoccur, right?
Yes.
Next question is from the line of Pranay Khandelwal from Alpha Invesco.
I had this question that this -- so our relationships with private hospitals and the Krsnaa Business Associates have been going up. I just wanted to understand what is the structure of the contract we have with them? Like is there a specific time period? Or do we pay rent? How does it work? Because I believe it must be different as compared to the PPP projects that we do.
Correct. So on the private hospital partnerships that we have, typically, the structure broadly remains the same with the long-term contracts that we enter into it. The only difference being is in the private hospital partnerships, we pay them a revenue share because we are operating out of their premises. And that's the only difference. The prices could be slightly up compared to the PPP projects to accommodate the revenue share that we pay to these private hospitals.
Okay. So -- and I believe this revenue share this must be the fees to hospitals that we show in our P&L. So I see that, that amount had also been coming down recently. So only reason why is there low volumes over there? Or is there a change in contract or revenue share percentages?
No, no, no. The fees to hospital, there are 2 components. One is, of course, the revenue share that we discussed. The other component is also where we pay fees to certain business partners that we take in these remote locations where we pay them on a revenue-sharing basis. So as and when the center or the project matures, we absorb those employees and the reviews shares is not required to be paid. So that is where -- and this is a strategy which we've been maintaining, and we've also mentioned previously that we want to ensure that over the period of years, the fees to hospital or the revenue share that we pay to these business partners reduces and we basically are able to manage the entire project by ourselves.
Okay. So -- okay. So there would be projects where the employees are not on our payrolls and we acquire them. That's what happens...
If I have to look at some of the projects which are [indiscernible] there are certain processes, it could be the logistics, it could be some other activities, which are work along with these business partners when we take. This allows us to enter into such remote areas or states where we might not have a presence and allow us to build with their existing stand that they have in those particular geographies. And once the project matures, then we takeover the entire activities that we would have used their support.
And just the last question on the Rajasthan contract. Last quarter, we had said that our revenue assumption -- like the peak revenue that we can realize from this project has -- went up from INR 150 crores to INR 300 crores I believe. And it was referred to us that that's because the districts were increased from 33 crores to 50 crores, but as I see, the labs and the collection centers remain the same. So I just wanted to understand how is that assumption got changed?
So with the increased number of districts, the coverage also increases wherein we are asked to cater to more population resetting in those. And that's how our estimation also changed.
Okay. But the labs and the collection centers remain the same. So that has not changed, right?
Yes. So there are basically additional primary incentives that we are required to cover under these locations, which allow us to go much deeper into the particular districts and hence, reach out to more people. So the network of labs might remain the same, but the addition of primary centers in these districts gives us the visibility to go and approach more and more centers and thereby better volume that we can expect.
The next question is from the line of Bharat Celly from Equirus.
Sir, just wanted to understand on Rajasthan, so considering that there have been new events. In that case, when we can expect Rajasthan to be commercialized now. And whether we have already started putting our laboratories or that is also put on hold?
Bharat, if you could repeat the last part of the question, please?
Considering the elections, are we already working on putting up the laboratory or that is also put on hold?
So Bharat to answer the first part of the question, Rajasthan, we are also working to ensure that the outcome is achieved as soon as possible. But I believe with the current election scenario, this might get delayed, and we expect this to see hopefully in the next quarter or Q4. In terms of implementation, our ground teams are still working on with some little bit of whatever activities we need to do.
So that considering that we are confident that the outcome will be in our favor, we don't want to have too much of delay. So whatever is necessary and with limited whatever resources we can, the activities are ongoing.
So in that case, when can we expect the revenues to start for Rajasthan, in the worst case scenario?
Rajasthan -- as we said, Rajasthan, whilst we were hoping, if all goes well, in Q4 of this year. However, we expect it to come in next fiscal. But as I said earlier, that doesn't take away the [ 30% ] growth that we are thinking without Rajasthan.
Yash, actually just wanted to understand on that part. So we were expecting our revenues to almost double over the next 2 years now. So -- when you look at, Rajasthan was a chunky part, where we were expecting around 300 people -- INR 300 crores sort of revenues to come through that. So except that, how do you see that step up? Because as far as we remember, you already gave INR 430 crores of number including Rajasthan, et cetera and we used to estimate Rajasthan to be around INR 150 crores? Except Rajasthan, how that step-up will be happening? If you could run us through what sort of revenues will be coming from each tender, if you could give any hit around them.
Yes. So if you see today, we have various projects which are currently under implementation, which includes Himachal Pradesh, Odisha, Assam, the Mumbai project, then there is the Maharashtra CT project. If we consider revenue streams on an annual basis for all these, there is a significant chunk that is coming out, which will allow us to grow and achieve that 30% growth that we expect in FY '25 as well.
This over and above with our existing base that we are already running, which has been growing year-on-year. So if you take a combination of both these existing projects and the new projects that are under implementation, both this will allow us to achieve that 30% growth trajectory that we expect to achieve in FY '25 as well.
What the revenues we are expecting from all these new tenders except Rajasthan...
So all these tenders, expect in the next fiscal, should give us at about INR 140 crores of top line additionally.
That is a max revenues or even I think FY '25 or FY '25...
For FY '25. Of course in FY '26 onwards, as the center matures, they will, of course, keep on increasing the contribution.
Right. From the mass potential perspective, what sort of revenues it can have?
Sorry, could you repeat the question?
From the maximum potential perspective, what sort of revenues it can have?
It could go up to almost INR 200 crores.
INR 200 crores? Okay. And in that case, are we expecting our base business to grow at 15%, 20%, considering that this is almost like 50%, so probably for the next 2 years -- are we expecting our base business to grow at 20% sort of number in that business?
Base business, sorry...
I'm so sorry. Are we expecting our base business to grow at 20% CAGR considering that we are guiding for 30%?
So our base business -- see there are certain businesses which -- our base business are also increasing -- are growing at a rate of almost 20% to 30%. And some of the mature businesses will be growing at about 8% to 10%. And with this new business combination, we expect all of this put together, if you put it in a bucket that will come to about 30% year-on-year growth.
Okay. In case if there something goes wrong as far as our expectation in Rajasthan, is there a possibility that the whole tender can go for rebidding?
Well, as of now, we -- considering the High Court order that has come in our favor, we don't expect anything to go wrong, in terms of the possibility that has to -- if we were to see. As a logical process, if something goes wrong, of course, there might be retendering. But whatever we have been discussing and with the high put intervention, I don't see anything going wrong, at least as of now.
But, Yash, still, I'm unable to understand. We have submitted our bank guarantee. We have done what is required from the government end. So why government is stopping why? So why there is a delay, right? Because if we have done our bid, why government is pushing it to the later date, especially when it is a requirement from the public side? In the election year, even the government would be needing it to be on time from the population, et cetera. So why there is a push to the later stage.
Honestly, the authorities would be the person to answer this. But if I can just guess on this, it could probably with the elections being around the corner. And typically, everyone would want to defer the decisions because there would be a change of government or whatever. Having said that, given the High Court order and since the High Court has made it very clear, we believe that whomsoever government officials, the authorities will have to enforce on orders of the High Court. Otherwise, it becomes the contempt of the court, for which we have anyways filed those required plea. So I think it's a matter of time. And for us also, it allows us to focus -- as we discussed, it allows us to focus on other priorities and continue to expand on those geographies out of projects.
The next question is from the line of Rikesh Parikh from Rockstud Capital.
Just want to understand on the Punjab contract side. I mean, if I look at the subsidiary between holdco and stand-alone and consolidated number, top line should be just INR 8 crores. So am I missing something over there?
Yes. I think I have Pawan answer this question.
This is where we haven't [ transversing ] arrangement, arm's length price arrangement between the subsidiaries and the holding company. If you look at calculating by subtracting consolidated to subsidiaries number -- stand-alone numbers so it is not right approach to calculate because we have an internal basically -- internal -- basically, the pricing mechanism, which we already calculated based on the arm's length price and which is already weighted by the statutory auditors.
No. It is just INR 8 crores of revenue. So it is just a profit number, what we show over there or it is arm's length pricing that I understand.
So there is a revenue-sharing arrangement between the subsidiaries and the holdco that's why it's not showing the correct numbers there because the sharing income is shown in the holdco company's revenue. [indiscernible] correct revenue number.
Second is on our BMC contract, where we are expanding quite rapidly, so has the operation being stabilized and what was the peak run rate over there?
So in terms of BMC, we have operationalized all the centers. In fact the kind of volumes that we were expected to complete in 4 years, we've delivered that in the last 6 to 9 months and hence we've also invested in the Mumbai lab that we are currently expanding. And the revenue is, of course, expected to increase as the months go by and the current run rate...
So also I'm just adding BMC given us further mandate to start this home collection services across the Mumbai region. For that, we can charge additional basically, the convenience fee to the patients or citizens or collecting a home sample from this -- from their home residents or any other location?
So monthly run rate, which is in the range of INR 2 crores, INR 2.5 crores of a monthly run rate, which will further move up to INR 4 crore to INR 5 crore of revenue.
And last thing, I mean this Rajasthan contract, we had estimated some revenue fall in the fourth quarter. So it seems that will be falling into the next year only. So which -- from where exactly we'll be making up for the 30% offline growth?
So as I said, Rajasthan -- in spite of Rajasthan, we have Assam, Odisha, the Mumbai CT, then Punjab, Himachal also some of the additions that have been done there and the Maharashtra CT. We believe all of this will help us achieve that or bridge the gap, which Rajasthan would have contributed in Q4. So our focus is on to ramp up the operations of Assam, Odisha so that they will allow us to ramp up faster and bridge that gap or -- anyways, we forecasted likely without Rajasthan only, we will continue to maintain our CAGR growth of 30% without Rajasthan.
And then last 1 for my side, this Andhra tender, by when it is likely to be finalized and what is the size of the tender?
Could you repeat the question?
Andhra Pradesh tender, radiology, so what is the size of the tender and by when is it likely to be finalized?
As I mentioned earlier, this is currently under the evaluation phase so as and when we get some more information, we'll be able to update this.
The next question is from the line of Ankeet Pandya from InCred Asset Management.
Sir, just 2 questions. So firstly, on the margin front where you said that for full year '24, we expect around 25%, EBITDA margin. So do you expect that to sequentially, we'll see improvement in margins and almost a 25% plus EBITDA margins in '24?
Yes. So for FY '24, we are expecting those kind of margins. And for FY '25, if all the projects getting up, we are also hoping that the margins should continue to improve then.
So sir, I was asking -- how much of more the cost will be incurring in the coming -- for the next 2 quarters? Like almost in the first quarter, there was around INR 3 crores of cost that -- because of the new lab centers being implemented and in this quarter around INR 7 crores. So in the next 2 quarters, how much of those costs where the centers are not yet implemented or those costs can we expect?
So I believe the majority of the implementation would be done, except for Q3, where the balance of the implementation is going on. That is where we expect and where there might be an impact on the margins. Q4 onwards the centers are expected to contribute to the revenues. And hence, in Q4 onwards, we don't believe a significant impact for the ongoing projects that are being implemented.
So by Q4 will be -- the exit margins will be significantly higher compared to the previous 2, 3 quarters.
Yes.
Sir, lastly, on the receivable days, there has been a jump in the receivable days during this quarter. So any particular reason? And should we expect to normalize by end of FY '24?
Yes. So if you see year-on-year September quarter -- typically, the receivables are within the same 90 days. The only reason this time it has been slightly delayed further is because of certain exceptional matters. For example, in Himachal Pradesh, there were flood situation. Meghalaya and Manipur, there have been these riots and whatever. So they have further impacted some of the receivables.
But we see this something which is seasonal. And typically, we value the receivables mostly at the year-end -- at the financial year end because even from authorities -- government perspective, they are supposed to ensure that all the money that has been out earmarked for the budgets are paid. So we don't see any stress on the receivables, and we are confident that we will be able to record all the delays.
But with Assam, Maharashtra, the BMC contract, Odisha, we shouldn't expect any major jump in or any challenges in the receivable days?
No. Absolutely, no.
The next question is from the line of Mayur Parkeria from Wealth Managers.
I have actually 1 question, and I don't know if that has been answered. What is -- is there any upfront -- how much upfront expenditure we have made on Rajasthan? And is it capitalized on balance sheet? Or is it already expensed out?
We have not made any significant capitalization for Rajasthan. There have been some operational expenses and some of basic work that we need to start setting up that. So to that extent, otherwise, there has not been any major investments in the Rajasthan project.
And whatever we have made is all expensed out till now. Or is there anything sitting on the balance sheet?
It has been expensive.
[Operator Instructions] The next question is from the line of Saumitra Joshi from Individual Investor.
Hello, so I basically have 2 concerns here. One is from a margin perspective, I'm still not able to fathom the fact that we're talking about EBITDA margins of 25% normalized, not adjusted for the year of FY '24. So if you just look at being in the first quarter and the second quarter, are we saying considering that there will be some costs that it would compare in Q3 also?
Are we saying that we are going to do margins of around 29%, 30% in the coming 2 quarters so that if adjusted also the overall EBITDA margins for the year come out to be 25%. I don't know this -- how this calculation falls in of -- ending up with 25%, I am doubting that. So if there is something that you can help me?
Yes. So see, there are a couple of strategies we have implemented in terms of certain costs that would also be reduced in the coming quarters either basically on the consumption side, some of purchasing costs, operational costs. That put together, along with the incremental revenue that we see in Q4, whereby then Assam and Odisha would have been fully at least help us with the initial contribution, and we expect some good run rate.
So -- and some of these projects having a better margin profile compared to the other existing projects. With the combination of these initiatives, we believe that we should be able to achieve that kind of EBITDA margin run rate.
Again, I'm saying that this would mean around 29%, 30% of actualized margins for the quarter. This is like huge. Okay. So it's a little unbelievable, one. Second -- okay, I think that this will be a very tough task to achieve. I don't think so that these kind of margins can be achieved for Q3 and Q4.
Second thing is being in the licensing business for some time while I was working and interacting with the government, there are a few things that is bothering me about the Rajasthan tender. One, is assuming the elections don't go the way for this particular government. Can the new government completely start the project from scratch.
Second, even if it is this government considering the number of INR 21 crores that we've had with the courts and with whatever. The little experience that I have of licensing over a period of time for multiple companies, it doesn't all do well in terms of relationships and word of mouth for the company in other areas. So how -- have you spoken to government officials, et cetera?
I mean just -- yes. So we have seen various PPP projects, governments come and go. We have -- so Punjab is a very classic example where we started off with different government and then after government came in. So per se, with governments coming -- even Himachal where we are currently -- there were different governments.
The government is coming and going doesn't really impact the PPP process. The reason being is these are process which have gone through the tendering process, they have been validated at different stages. And thereby, the question of enforceability or entering fee agreement is only the final leg of the process.
Whichever government comes in, like even during Punjab, the AP government, which was new to this PPP project that we had won in the earlier government, they took time to understand. But after they realize the benefit, in fact, they have been supportive to us, including the recent home collection, which was placed by the health minister. So we don't see any impact here.
And whichever government comes, even if it be new government or an old government, given that, as I said earlier, the entire process has been completed, except for the agreement. We don't see any impact in either of our relationships because we have not -- there has been more issue of our relationships. It is only on the technical disagreements we had in terms of the bank guarantee, which was anyway subsequently resolved and which the company has paid as well. So I don't see there are any disagreements, which either if new or old government comes and they'll have to plate out differently.
My experience working with governments have been slightly different, especially in terms of cases going to the courts and then subsequently working with them, it becomes very difficult. But I'm assuming that you've done your background check and you're coming with that?
Yes, yes. See, we have been in this business for the last 10 years. And as I said, across 14 states, across various governments, we have worked this. We've seen government...
How may such cases have gone to for legal tendering through the courts ultimately for the contracts?
Yes. As I said, Rajasthan has been 1 of the aberrations, 1 of the exceptions, and we've not seen this. In fact both the sides are equally...
Yes. So I'm talking about this aberration itself. I'm not talking about the others. So I'm saying the -- that ends the question. That is why I was looking at the past also to end the question considering that this is an aberration and this has happened for the first time. I am saying from my little experience that I have working as [ legal ] officer. Clearly, these things have an impact. So I'm assuming -- so I just wanted to understand what the background [indiscernible] because it's an exception, and it's not the norm. And this is also probably [indiscernible] such a situation. How have you ensured that there would be no gap in the working relationship because I have always seen a gap, that's what I'm asking...
No. I think I wouldn't be able to comment on your experiences, but being part of this business for the last 10 years and more importantly, with the High Court order coming in our favor, which was also very well appreciated during the conversation with the government authorities as well. We don't see any issues there. I think as I said, with the elections around the corner, that would just be a bit of dealing happening.
But even during the discussions with the High Court as well as our submission on the guarantees, we did not see any pushback or issues from the government. And as of now, all we can do is hope for the best and look forward how this evolves.
So this was an anomaly, but no prior experiences of cases going to be High Court, right? That is what I wanted to do. This was probably an aberration or anomaly that happened in Rajasthan.
Yes.
So you don't have that experience of post this what happens. Fair enough, okay. Fair enough. Okay.
The next question is from the line of Manoj from Geometric.
Sorry for the interruption, the current participant line get disconnected.
[Operator Instructions] the next question is from the line of [ Ashish Chhabra ] an Individual Investor.
So I just wanted to ask like how roughly can we expect this Rajasthan tender to go through, like 1 quarter, 2 quarter? And since you just said that like in the past also in 2, 3 states like Punjab, there has been a change of government, but we still went through it. So I think it's just a matter of time, right? The entire process won't repeat, right?
So in terms of the Rajasthan, what we expect is the process to follow its natural course of justice, which is the contracts have been executed and the government -- the High Court has ordered to complete the process. For us, Rajasthan is like 1 of our many PPP projects. It doesn't really impact the company's vision or the company's plans for the future. Of course, if it comes, as we mentioned, it's a buffer for us.
But considering our revenue run rate, our existing projects, the other PPP projects also which are in our hands. We don't expect Rajasthan to impact us so significantly. And we believe that the process will follow its normal course and the agreement will be executed in the short term.
Okay. And, sir, I just wanted to ask like which are the states that are in the pipeline right now, like you said, Andhra Pradesh and are there any more states like where we have bidden recently?
Well, there are a couple of states, but I think this will be too early for us to discuss at this stage in time. As and when the project come up and we have information to share, we'll certainly share with the group.
Okay. And thirdly, like you said like in FY '25 also, we'll expect 30% growth rate to continue. So like presently, we should do like INR 600 crores by FY '24. So like what will be the main contributors for FY '25, if you can just share a bit ?
For FY '25, as I said, we have various projects of Odisha, Assam, the BMC project, then we have Maharashtra CT coming up and the Himachal Pradesh also ramping up. So all these projects are expected to contribute to achieve that 30% growth trajectory that we have set out ourselves for.
So that is safe to say, right, we can do INR 180 crores to INR 200 crores per quarter in FY '25? Roughly estimate?
Yes, yes.
The next question is from the line of Pranay Khandelwal from Alpha Invesco.
I asked the question regarding those private tie-ups that we have. You said those are long-term contacts, but can you just give me a range of -- might be the range of this contracts?
Typically, these private hospital partnership that we enter into there for 10 years, mostly, considering the investment that we have to do into the kind of hospital setups, so these are 10-year plus contracts. And most of the times, we've also seen that we get extended over a bit of time.
Okay. So it does not matter even it's radiology or pathology and it's 10 years plus. Okay. And another thing, I was just looking on this Rajasthan contract. Also I asked this question about the assumption change in the revenue potential from -- Rajasthan was INR 300 cores. That was changed [indiscernible]. So as far as I can understand that Rajasthan recently added a [indiscernible] and apart from that, there is no change in the quarter and that we have got. So again, [indiscernible] we have changed the guidance from INR 150 crores to INR 300 crores because [indiscernible] right?
Basically, when we had initially estimated, considering that we were in the early stage of estimating and getting the ground inputs, that is why we have given a conservative. When we started after getting into winning the contract, getting more of the details of the colors and like we discussed about the primary health centers , we also added into the kitty. Those all inputs when we need process, that gives us the kind of estimation that we had quoted and we believe that is still something is achievable, of course, after the agreements were executed.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to management for closing comments.
Thank you, everyone, for joining our Q2 FY '24 earnings call. I extend lots of wishes for the upcoming Festival of Lights, Diwali, on behalf of the entire Krsnaa Diagnostics family, and I wish everyone a very, very happy and prosperous Diwali and New Year.
Hopefully, we have answered all your questions. And if any questions remain unanswered, please feel free to connect with our Investor Relations team head, Mr. Vivek Jain, looking forward to interacting with you all in the future quarters. Thank you. Have a great evening ahead.
Thank you. On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.