Dr. Lal PathLabs Ltd
NSE:LALPATHLAB
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Dr. Lal PathLabs Ltd
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Ladies and gentlemen, good day, and welcome to the Dr. Lal PathLabs Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Siddharth of CDR India. Thank you, and over to you, sir.
Thank you, [indiscernible]. Good evening, everyone, and welcome to Dr. Lal PathLabs Quarter 1 FY '23 Earnings Conference Call. Today, we are joined by senior members of the management team, including honorary Brigadier, Dr. Arvind Lal, Executive Chairman; Dr. Om Prakash Manchanda, Managing Director; Mr. Bharath Uppiliappan, CEO; Mr. Ved Prakash Goel, Group CFO; along with Mr. Shankha Banerjee, CEO of Suburban and other Group Companies; Mr. Rajat Kalra, Company Secretary and Head of Investor Relations.
I would like to share that our standard disclaimer here. Some of the statements made on today's call could be forward-looking in nature, and actual results could vary from these forward-looking statements. A detailed update in this regard is available in the results presentation, which has been circulated to you and is also available on the stock exchange website. I would now like to invite honorary Brigadier, Dr. Arvind Lal to share his perspectives. Thank you, and over to you, sir.
Thank you, Siddharth. A very good evening and a warm welcome to everyone present on the call. We are here to discuss Dr. Lal PathLabs Q1 FY '23 earnings.
The industry has more than adequate headroom to go in FY '23, where with an effective vaccination drive and improve patient care infrastructure, India has successfully met the challenges posed during the pandemic. Meanwhile, the Indian diagnostic industry is undergoing a transformation and is estimated to grow at a CAGR of 14% over the next 5 years. With very few barriers of entry, it makes a great ground for new entrants that include investors, entrepreneurs and innovators.
To remind you all, when COVID-19 pandemic hit in 2020, we were amongst the first private labs to be approved by ICMR for COVID-19 RT-PCR testing. And last year, we performed over 32 lakhs COVID RT-PCR tests. We have continued to serve operations in the best possible manner, even with the challenges posed by COVID. I am happy to share with you all that we [ will adjudge the ] best star SME of the year by the prestigious Business Standard Financial newspaper. For this, I would like to thank the senior management team and all the 5,000-odd workers in our organization, which is the oldest diagnostic lab seen in India, having been started in the years 1949 by my late father, Dr. Major S.K. Lal.
We are all equally driven to achieve our large vision to be the most trusted health care partner enabling healthier lives. As we dealt with COVID-19 pandemic's rapid spread across the nation over the past 2 years, we do face both challenges and opportunities to improve our infrastructure, systems and procedures. The public now has a greater understanding of the importance of keeping a healthy lifestyle, which is more vital. Since then, people have been monitoring their health and wellness better, which from a nation building point of view, is a very welcome step. Dr. Lal PathLabs is committed to control the epidemic of noncommunicable diseases or lifestyle diseases that are responsible for nearly 65% deaths in India. For this to take place, we shall further increase our organic network expansion and to create structural levers for driving volume growth.
Our methodical network capacity creation nationally, investments in digital technology, Swasthfit and focus on better service parameters will prepare us comprehensively to lead this space for time to come. Today, LPL has become one of the most reputed laboratories in the world with a network of 277 labs, 4,731 collection centers and 10,599 Pick Up Points, serving across 1,500-plus cities with 5,000-plus tests and panels. We have a record number of 33 labs accredited by NABL and 2 labs by College of American Pathologists. As a forward-thinking company, Dr. Lal PathLabs has been at the forefront of incorporating technology into its business strategy. By doing so, we can cut costs while giving our patients a smoother, more coherent experience. Companies like ours must adapt to stay ahead of the competition given this period which the world is changing. India continues to be a grossly untapped market. For a brand like ours, there is a lot of room for expansion. So we want to take advantage of our position and create a mark for ourselves in the history.
Thank you very much, and I would now like to hand the floor to Dr. Om Manchanda. Over to you, Om.
Thank you, Dr. Lal. Welcome, everyone, to Dr. Lal PathLabs Q1 FY '23 Earnings Call. I hope you and your loved ones are safe and healthy. I'll talk to you about the current trends as well as strategic focus of Dr. Lal PathLabs. The Indian health care sector, particularly the diagnostic space, holds significant growth potential and was evident by the response of the industry with pandemic. An organized national brand like ours have met these challenges without raising prices.
The industry has seen entry of many new players. I foresee growth of organized sector, both due to overall market growth as well as accelerated shift from unorganized to organized segment. Our customers appreciate the certainty of quality and effectiveness that Dr. Lal PathLabs provides, which the unorganized players will not be able to structurally deliver. Going forward, we will continue to build and drive growth through the following: number one, organic expansion of labs and collection centers infrastructure; number two, through inorganic expansion route; number three, use of technology to enhance customer experience and also provide value-added services at one level and drive internal process efficiencies at another level to achieve productivity.
On the organic front, the initiative of creation of HUB labs has started yielding good results, especially in northern part of India. This will also give us capability to go deeper in Tier 2 and Tier 3 towns in large states like UP, Bihar, et cetera. As the markets get competitive, I foresee segmentation and differentiation will play a greater role in either maintaining or growing market share. For example, Swasthfit is seeing a good momentum and patients find greater utility in the offering, and we believe that it will further build up credibility of our brand. Similarly, I do see [indiscernible] business, we plan to focus on segments like oncology, autoimmune disorders, et cetera.
On channel front, network of collection centers is going to play a very important role. We expect CC network to service all types of customers like home collections, walk-ins, hospital pickups, et cetera. Last year, COVID contributed nearly INR 400 crores for the company's top line. That was roughly about 19% of the company turnover. Of which nearly 55%, that is INR 221 crores in only for first quarter -- came from first quarter of FY '22. From the current quarter, that is Q2 onwards, this overhang of large COVID base to a large extent, is going to be behind us, and we hope to stay focused on more stable part of the business that is non-COVID business going forward from here.
With that, now I would like to invite our CEO, Bharath, to continue this conversation. Over to you, Bharath.
Thank you, Om. I warmly welcome you all to this call today. I will now take you through all the business highlights. In Q1 FY '23, we [ served ] 6.9 million patients, [indiscernible] a revenue of INR 503 crores. As you're all aware that the COVID wave has abated significantly. And as a consequence, revenue from COVID and Allied test was [ INR 21 crores ] for quarter one with a contribution of 4% to overall revenue. This is in contrast to 36% contribution in last year's same quarter and also the lowest in last 2 years.
Our non-COVID revenue of INR 482 crores registered a robust growth of 25% over Q1 last year. This growth in non-COVID revenue is led by patient volumes, we registered a growth of 15%. The [indiscernible] for the quarter was 2.6%, the highest ever for the company. This quarter was marked by strong market activation program across our B2B and B2C channels. Our product and activation, innovation have led to a robust growth on our [ Swasthfit bundle ] test program, contributing to a strong patient and [indiscernible] growth.
As leaders in the diagnostic industry, we have taken account the task of establishing India's first center of excellence for autoimmune diseases. And this has shown very encouraging results in the first quarter itself. This initiative, combined with our focus on super specialized tests, including genomics, has contributed to our growth in this quarter. Our retail marketing initiatives and our efforts on growing the [ South ] business organically is also progressing well. We remain focused on our strategic agenda and execution focus.
With that, I would like to invite Ved to take you all through the financial performance. Over to you, Ved.
Thank you, Bharath. Hello, everyone, and thank you for joining this call. I trust each of you and your families are safe and healthy.
Please note that Q1 FY '23 includes Suburban results, hence not strictly comparable with previous year same quarter. We encourage to share the financial highlights for Q1 FY '23. We clocked the highest quarterly non-COVID revenue of INR 482 crores, a growth of 25%. Our dependence on COVID revenue has significantly reduced due to COVID revenue declining by 91% from INR 221 crores to INR 21 crores in this current quarter.
Though the non-COVID revenue increased by 25%, reduction in COVID business by INR 200 crores as compared to last year resulted in overall decline of 17%. Total revenue came in at INR 503 crores versus INR 607 crores last year same quarter.
As Dr. Om mentioned that out of total COVID business of INR 396 crores in FY '22, almost 55% business was in Q1 only. Revenue realization per patient for Q1 FY '23 is INR 727 as against INR 860 last year same quarter. The lower realization is due to sharp reduction in COVID and [ light ] testing. Non-COVID revenue realization per patient for Q1 FY '23 is INR 707 as against INR 653 for Q1 FY '22.
Normalized EBITDA after eliminating the impact of RSU and CSR for Q1 FY '23 is INR 126 crores as compared to INR 199 crores reported in Q1 FY '22. Normalized EBITDA margins for Q1 FY '23 is at 25%.
Q1 FY '23 margins are inclusive of Suburban, which is relatively a low margin business. Normalized PBT after eliminating the impacts of notional depreciation of INR 12.3 crores on consolidation of Suburban for Q1 FY '23 is INR 94 crores. Normalized PBT margin is 19% for this quarter. Normalized PAT for Q1 FY '23 is INR 71 crores. Normalized PAT margin is at 14%.
Net cash and cash equivalents after adjustment of borrowing at the end of Q1 is INR 436 crores. We are pleased to share that the Board of Directors of the company have approved an interim dividend of 60%. That is INR 6 per equity share.
At last, a quick update on Suburban performance. Suburban's revenue for Q1 FY '23 is INR 39 crores, of which non-COVID revenue is INR 36 crores. Please note, this revenue is recorded on a net basis due to transition to Ind AS from IGAAP. This is equivalent to INR 52 crores as [indiscernible] accounting practices. EBITDA margin for Q1 FY '23 came in at [ 12% ].
With that, I request the moderator to open the forum for questions.
[Operator Instructions] We take the first question from the line of Pooja Bhatia from Morgan Stanley.
I just wanted to know if you hold on to this year's guidance of mid-teens revenue growth, which was given last quarter. And how would this be -- if you are to split the growth, would it be -- how much would be volume value, if you could give you a little color on this?
Okay. This is Om here. We probably have not in so many terms given the guidance, it's more related to -- because one doesn't know the trajectory of COVID business. Now it's becoming a little more clearer. So we are not focused on COVID at all because we still don't know how it's going to pan out for the year. The focus for our teams has been on non-COVID part of the business. And as the current quarter indicates, we have done 15% for ex-Suburban and without -- including Suburban, we've done 25%. But one must keep in mind that last year, there are many months which are softer, many months which are very high because [indiscernible] trajectory of non-COVID. So if I go by month-by-month, April, May of last year was a little softer, but then July, August was a little higher. After that, again, it goes down from, I think, November onwards [indiscernible] February. So our best estimate is we will still try to maintain that, but I -- it's very difficult currently to put a number, but we are still very confident that we should fall in non-COVID -- the growth rate that we used to have in before COVID times, which was, I think, around 13%, 14%, 15%. But I would say that it's very important to wait it out for other quarter to see as to how it pans out.
Understood. On the acquisition front, M&A, what are the assets that would potentially interest you? Has there been any moderation in valuations that you're seeing? And is there anything in consideration at this moment?
So there is nothing right now that I can share. But definitely, I think teams are focused on making [indiscernible] assets integrate and work well. But right now, I think industry is in a bit of a state of flux. So I think we'll probably have wait and watch strategy.
And what's the road map to improve margins in Suburban from currently 12% to, say, company level 30%? What priorities are there to leverage this asset?
So if you have studied last 2-year data, it clearly showed that if you have a high top line, there is an operating leverage in this business, which suddenly fell because the COVID disappeared overnight. And we believe that if we focus on top line aggressively in this asset, we should really be able to improve our margins because the business is quite concentrated in city of Mumbai, and the potential is quite high. So we just want to aggressively drive top line [indiscernible].
Got it. And one last, if I may. So we've spoken about the competitors' outlook in every call for the past 24 months now. Like this month, there's been a new pharma player who has announced their plan to join the business as we speak. There are now 3 pharma players along with many others. Are we really undermining the new players that have entered into the market in terms of how we are looking at the industry growing? What's the outlook on this?
So we are definitely not undermining any player who enters in the market. So I think there is definitely a higher competitive intensity that we have seen especially in the last 24 months or 12 months. I think the important thing is now what is sort of a long-term implication of what's really happening. It's my personal judgement, and I think India is highly underpenetrated [indiscernible] diagnostic standpoint. Though there's no published data, but my sense is beyond metros and these mini metros, diagnostic is very little right now. And more players entering into the market, we have to drive 2 factors. One is, of course, acceleration of unorganized to organized shift which is going to be very rapid. That's going to be, I think, number one effect I see of a very high level of competition. Second is penetration levels will go up. We'll see a lot of growth coming from Tier 2, Tier 3 towns. So I personally believe that this competition is good for 2 things. One is it is -- accelerates only the market growth, even more for organized players. The second thing is the penetration levels in Tier 2, Tier 3 towns will actually go up, which [indiscernible] accessibility and affordability of quality diagnostics will improve [indiscernible]. Now obviously, for the company to do well, management teams will have [indiscernible] out how do we maintain or increase our market share.
We'll take the next question from the line of Sriraam Rathi from BNP Paribas.
Sir, firstly, particularly if you can provide some details in terms of, I mean, how much of our revenue is coming from franchisees as such because it seems that the fees to collection centers as a percentage of sales has got increased this quarter? So just to get an idea.
Bharath, do you want to take this?
Yes. So nearly 40% plus is entirely business for us. And right? But I don't think there's been a sharp increase on fees to collection center. It has been as per the normal trends.
I thought it has slightly come down this quarter.
Yes, yes. So yes, Sriraam, fees to collection center is not where we have increased the revenue share for any franchisee. But the only thing where the business contribution is increasing [indiscernible] but in this quarter, fees to franchisee is reduced as compared to last year.
Yes, [ Y-o-Y it is ]. It is because of COVID, I think. Yes, okay.
I think one important thing to note here is, Sriraam, that the contribution of a franchise business to our total business is on the rise. It went up. Now I think as the [indiscernible] which essentially means the patients are coming back [indiscernible] of walk-in format. Obviously, we still will not go back to where we were before COVID, but I think it's going to settle down at a slightly higher level of [indiscernible].
Okay. Just my second question was on that only, I mean, are we seeing the trend again reversing towards walk-in patients now versus what we would have seen in the last few quarters?
I think there is a come back to that. We will come back to that.
Okay. Got it. Got it. And secondly, on the other expenses, I think that amount is higher this quarter on a sequential basis when Suburban was there in Q4. So should we assume this INR 105 crores kind of run rate to continue, or it could be fluctuating quarter-on-quarter?
So Sriraam, if you are comparing last quarter to this quarter, I think there are a few investments we have made, especially in this quarter. One is on digital side in IT. And second is spend on marketing, which is A&P, is also high in this quarter as compared to last year. I think these are the 2 broad heads where we have spent a little more in this quarter. And that's where you are looking at -- there is a difference between other expenses.
Okay. Got it. Got it. So I mean that kind of high amount may not continue in the coming quarter? Is that the understanding or?
So there are expenses which are -- we are continuously spending, especially on the digital side and obviously, on A&P, it's quarter-on-quarter, but this is not something exception, which we have spent in this quarter. These are normal expenses. Maybe IT on a special case, we are investing in this quarter, but not otherwise.
Okay. Got it. Sure. That's helpful. .
And certainly, you should keep in mind that [indiscernible] that we have seen during COVID times are not sustainable. So we are definitely going to settle down on what we used to do earlier, which was in the range of [indiscernible]. That's the way it is.
Okay. So for the full year, it should be in that range more or less?
We still don't know as to how it's going to pan out. But I think we are -- right now, the way P&L shape is looking like, it's definitely settle down from what it used to be during COVID times.
Right. Right. Right. Okay. Got it. And lastly, just going back to the competition part. I mean, during this quarter in the last, I mean, 3, 4 months, I mean, what part of our business would have seen higher competitive intensity and might have some impact on the business, or I mean, not that much so far?
I think the intensity is brand awareness in general for many brands have gone up. So you don't [indiscernible] top-of-mind awareness. I think that is where probably the right now [indiscernible] mentioned that we had to spend this extra marketing money to stay top of mind. I think one should know that for any brand has to remain top of mind, especially in the health care because this is a need-based business. It is -- if you just drop on top of mind awareness, then you may tend [indiscernible] out. I think that's one area which I find is marketing spend will continue to stay up in the [indiscernible] down. That's the way I look at it. But from a business standpoint, I'm not sure because many of these companies are coming in a very routine business because we [indiscernible] and a lot of high-end [indiscernible] not all these players have that kind of portfolio.
We take the next question from the line of Shyam Srinivasan from Goldman Sachs.
Price volume. I think...
Shyam, you want to repeat that. I think we missed it.
Yes, yes. So let me repeat. I'm looking at Dr. Lal own non-COVID sales, excluding Suburban non-COVID. I think you said it grew 15% Y-o-Y. So just want to disaggregate that into price and volume because I don't know whether we got the volume numbers for Dr. Lal non-COVID.
So our volume growth is about 12.5%, 13% give or take, and rest is mix impact on pricing. So you see a price impact of 2% [ odd ]. It is not a price increase. It's a purely mix impact because of a higher contribution of Swasthfit. Our Swasthfit program actually did very well this quarter. And also a super specialized test portfolio did extremely well this quarter. And both these 2 contribute a mix impact. Because of [indiscernible] went up.
Got it. So Bharath, this reminds us of like older days where it used to be largely volume growth driven and like some contribution from mix, maybe some price where you're denying the price, which is fine. So largely volume growth is 14%, 15%. If you could then disaggregate that into geography because the worry was that -- and again competition link point, there's some of our core markets like NCR, how would the trend be in volume growth in our core markets?
So we are seeing robust growth as per the past trends across geographies in this quarter. And like I mentioned in my opening comments, our South business also done extremely well this quarter. So it has been an all-round performance, not South, East, West, no specific [indiscernible] past trends. All of them had contributed to a good volume growth this quarter.
I think just picking up the question that you were asking about Delhi NCR versus Rest of India, right? So I think we've always said that Delhi NCR will definitely be below our overall company growth. In our scheme of things, we always look the Delhi NCR should grow at least in high single digits, and that is what we have [ resisted ] this quarter. And our Rest of India is compensating for that. So the blended average is [indiscernible]. And overall contribution of Delhi NCR is steadily declining, which is basically our dependence on Delhi NCR over a period of time has sharply come down. I don't know what is the -- which quarter, but I think it has come down [ 25% ] of...
35%.
35%. Yes. So the contribution from Delhi NCR is now 35%. So 2/3 of our business actually is coming from Rest of India.
My second question, I think I missed it. Realization per patient. I think Ved called it out as INR 707. Is that the number? And can you also explain why it declines or I couldn't get those 2 bits, sorry?
Non-COVID is, Shyam is INR 707 against INR 653.
Yes. Yes. So you're saying whatever you're calling non-COVID realization is INR 707 versus INR 653 last year, right?
Yes. Yes.
So [indiscernible] on year-on-year basis? But I think on a full year basis, this number might look very different because I think the overall [indiscernible] that I get, I don't have full year data with me is that as the contribution of bundled tests is going up, which is probably the likely trend because customers are seeing greater value for money in that format. Maybe a little bit of increase in revenue per patient may happen.
Just to give an immediate last quarter Q4, it was INR 693.
INR 693. So INR 653 is not [indiscernible]?
[indiscernible] Yes.
Right. [indiscernible] by INR 653 versus INR 707, go by sequential, which is last quarter, it was INR 693 and now it's INR 707. I think as the Swasthfit contribution goes up, this number may inch little bit upward as we go along.
Got it, sir. And my last one, you also called out the 2.6 samples per -- sorry, test...
Yes, yes, yes. That is also because of Swasthfit. Because Swasthfit on the back end has much more tests per patients.
We take the next question from the line of Prakash Kapadia, Anived Portfolio Managers.
Post-COVID, we are witnessing an increased collection from home contribution. So if you could highlight what are the kind of initiatives we have taken to ensure for more seamless journey using technology or manpower-related training or other things?
Prakash, Bharath here. Can you hear me?
Yes. Yes, yes, yes. I can hear you, Bharath.
Prakash, our home collection contribution pre-COVID is 5%, 6%, which has settled around 10%, 11%, 12%, given you are taking the [ trade ] depending on the quarter on the non-COVID side of the business. So [indiscernible] things have happened on the home collection side. One is, say, geographic expansion, number of cities we cover. The second one is that the technology engine which we use has gone up significantly in sophistication. So slot allotment, our ability to look at delayed visits, reallocate visits have all gone up tremendously because we have now perfected with the art of how do you manage technology and people together. The third angle is to introduce new features like digital ID cards. So before today, when a home [indiscernible] comes to your house, we sent in advance, his ID card to you so that it's an added measure of security and safety that you know he's the guy who's coming to you. So [indiscernible] initiatives on building confidence amongst the people or users of service. And secondly, if the people are now doing using technology is upselling or cross-selling while at the point of patient's care, which is the home. So we are able to now add on tests for their spouses or [indiscernible]. So they get more from the same visit. So a lot many more initiatives in the pipeline as well, but we're happy with the progress we are making on the home collection front, an elegant technology, Prakash.
Sure, sure. And as a consumer, I see a lot of proactiveness at least in the Mumbai market, where there are now calls for new tests or a last test done due date. So coming to the question, which you were hinting at of cross-selling and upselling. What is the approach we've taken? Is it across newer geographies? Or is this just Mumbai, if you can highlight some clusters where we are trying to follow this approach because I see a lot of activity, at least in Mumbai.
From Lal PathLabs or competition...
Yes, yes. Lal PathLabs. I'm talking Lal PathLabs.
Yes, yes. So we have an approach on [indiscernible] how we leverage data for marketing programs. But [indiscernible] to be cautious on the other side as well because there are privacy related issues and so on. So it's a fine balance. But yes, we are getting -- like I had mentioned in my opening comments, we had a very aggressive, what I call, activation program around both B2B and B2C in this quarter. which will continue and some of this are part of that effort.
Okay. And that is specific clusters of cities which you've identified?
Yes. We do have strong [ points ] where we want to put the levers here.
Okay. And lastly, how are we managing attrition [ if any ] due to increased competition and any inflationary pressure or input cost increases we are witnessing, which could be a worry given the general inflationary environment?
Yes, yes. So the good news on attrition -- so on inflation is yes, visible in our system because fuel costs have gone up and so on. We have been looking at internal efficiencies and getting those efficiencies into a picture. And that's the reason -- one of the reasons why we we're able to keep the P&L healthy without taking a price increase. Attrition in particular, nothing substantial, I would say, at this stage. Frontline attrition continues the previous rate, no significant change. And because we are now more a system-driven company and a technology-driven company, dependent on people [ per se ] specific individuals, is far lesser than what they have been many years in the past.
We are also seeing another trend because of COVID, business is down 90%, not only for us, for the entire industry. So there are a lot of the [indiscernible].
We take the next question from the line of Bharat Shah from ASK Investment Managers.
[indiscernible] with a mention growth drivers. One of the major ones that was highlighted was inorganic. But when we look at kind of recent acquisition, Suburban, the price paid is a multiple of revenue, margins rather very low, not just compared to Dr. Lal business specially, but [indiscernible] rather inferior margins. Therefore, is this a kind of insecurity race that we are selling because growth for the sake of growth is a philosophy of [indiscernible]. It doesn't add to the value.
Yes. So [indiscernible]?
Yes.
So I think you're bringing a very good point, and I value that. I think we have never looked at revenue -- any organic sort of option to increase our revenue. We've always looked at any inorganic assets from the point of view of entering into that market. I think in our judgment, we felt that Mumbai is a highly competitive market. On our own we have tried in the past, and we believe that on our own we couldn't have really gained that kind of scale in that city without any inorganic sort of option. That was the reason why we looked at Suburban. Now coming to your question of -- yes, we realized that Suburban has lower margin. Unfortunately, in our judgement maybe COVID fell much sharply than what we had anticipated because last year COVID was very high in Mumbai, especially for Suburban. And I think, probably, we didn't anticipate that within 3 months, this decline of 90% would happen. So that means with that all margins have gone back to what historical margins for this company was. But having said that, what it has told us is that if we are able to at least double the sale of this business from here on, margins would actually go up to if not to our parent company level, but at least definitely close to 20%. So all we need to do is just grow the top line, and we feel we should be able to do that in the next 2, 3 years. But having said that, if we had not taken this option, on our own we could have done that, I think in my personal view, it would have been very tough for Dr. Lal PathLabs. And we can't ignore not only just Mumbai, but I think state of Maharashtra, not being present. That's been the reason. But otherwise, there are a lot of assets which come for -- to be acquired. We just don't face them at all because unless it makes sense for us, we don't go to those markets. For example, there were a couple of assets available in the eastern part of India. This would have been asset for us maybe 6, 7 years back, but now our East business is much more stable. We are not looking at anything East. There are lots of business that come to us from northern part of India. We don't look at any asset at all. I think today, if I look at any white space, which is left, it's southern part of India, we are seriously evaluating if you want to drive that now organically, it's not all in organic. But yes, you're right. But one priority that we have is that in order to tap the overall growth of the diagnostic market in India. We need to have a wider footprint compared to what we have today. I think the whole objective of Suburban was to how do we establish ourselves in West especially from a presence perspective. But let's see how it goes, but we are still very hopeful that in 3 to 5 years time, we should be able to do something with this asset.
So if I to interpret that Suburban was a bit of a one-off acquisition and was a strategic imperative, which, eventually after you've worked through it, would also make financial sense compared to the price that you paid for it.
Yes. It's a very, very strategic one. Whatever we have paid here does not stand good for any of the acquisition at all. So I don't think we look at any other asset this way the way we have looked at Mumbai.
And eventually, it will make financial sense as well.
I think so because last year, I think the company did close to INR 300 crores. Of course, not in net terms. At that -- or maybe even FY '21, it was nearly touching using INR 300 crores and the EBITDA was in the range of 20-odd percent. Of course, half of that was COVID. And now COVID has disappeared [indiscernible] it has gone back. I think it's fairly well placed [indiscernible]. We also know where are the levers for cost cutting in this asset, I think we should be able to do that. It may not happen within 3, 4 months or 1 year time, but I think over a longer period of time, this asset, I'm very sure, will turn out to be good for us.
My second question was in the opening remarks, Dr. Lal alluded to 14%, 15% growth rate. You also referred to it in lower trash. And we talked about a huge unpacked opportunity apart from conversion highway available from unorganized to organized. But in all of these, I also kind of sense that there is a pressure on the margin. And of course, we are talking of riveting debt to the pre-COVID margin. Sir, which is understandable that COVID might have just improved the journey for a temporary period. But eventually, growth is unlikely to mean only growth of revenue, but also a better profits because growth of top line is an affirmation of relevance of the business to society. And growth of profits and the cash flow is the affirmation for the value creation. So my fear is the growth of top line, will it come at inferior performance on the profits and cash flows compared to a reasonably modest 14, 15 top line growth? Or have I understood it wrong?
See, you all studied businesses much more than I do. I look at this one. At the end of the day, pricing and profitability, a lot of it is external market forces driven. I think currently, as I speak to a lot of these consultants, they actually tell me that diagnostic margins are pretty visible. And there are many companies who look at offsetting what is happening on the other side of business. This could be a noise, which will remain for next 12 to 14 months. But I think we do not want to get ourselves in a situation where our turnover put -- starts coming under bit of a pressure. So I think 2, 3 things we need to do. One is make sure that our presence is across the country, keep widening our footprint. So that's #1 priority. The second priority is that run the business so efficiently that if at all, we are competing with somebody like-to-like business, so our inefficiency should not be loaded on to price. So that productivity is very, very important. And I think third is right now, this mix of competition that we have, some of them are very similar cost structure. We don't have much problem with that. I think some of them are resorting to cash burn model. And I'm hoping that in the next 2 to 3 quarters, that noise should settle down. But as far as the margin sustainability is concerned then probably market forces will decide. But we are very hopeful that it won't crash to any much lower level. But I think at least the mid-20s, it should remain for overall industry in the sense that I get for at least next 3 to 5 years. Because market is also opening up in Tier 2, Tier 3 towns. It's not -- I think there are a lot of people are [indiscernible] for space in metros, especially Delhi, Mumbai, et cetera. But as we go deeper down the POS data, there is a lot of growth coming up there as well.
So, let me just reword my question, if I did not put it appropriately. Earlier, I talked about inorganic acquisition whether that makes apart from strategic necessity whether it makes value creating financial sense. This one I'm asking whether in our organic business, is the desire or pressure to grow, will it come at the expense of profitable growth? In other words, we may be -- we may end up chasing schedules without achieving concrete value creation in a sense that even if we grow the top line at 15% or 18%. But if it is not -- profits don't grow meaningfully and sync with it then it may end up kind of wrong definition of the growth. And I would say both are important, the top line as well as the cash flow growth.
So I agree with you. I think you're making a very good point. Revenue for the sake of revenue is not [indiscernible] the bottom line, right? Then we are running a commodity business. So it's a fine balance that we'll have to maintain. I think this question also got asked in the last quarterly call as well. Somebody asked me, will you actually chase these lower price points that are happening in the market. I think clearly, the answer is no. We will have to really very carefully maneuver this current market situation and have quite a bit of fine balance between revenue and bottom line. And I think the point that you're making is absolutely correct.
We take the next question from the line of Shalini Gupta from East India Securities.
Sir, you've taken so much price for the business and so many strong players are entering the industry. I was just wondering if you consider setting up a diagnostic center in collaboration with hospitals say, Lilavati. I mean, Lilavati is what comes to mind, but I mean so many others like Lilavati or there's so many hospitals in Bombay, for example, I mean, you would get a captive set of patients. And my last -- what is the downside in setting up such centers and how easy is it to set up such centers?
So it's a great idea. Thank you for giving us the input. We call it a hospital land management segment. And we continue to look for these opportunities. We'll probably refine this further and see how we gain sort of revenue lines from this side of the business.
I just wanted to say how difficult is it to set up such centers? I mean the person running the hospital may not want to...
Yes, yes. So now let's put it ourselves into other sites shoes. Now if the margin from this business is very high, they are reluctant to give it to you because they want to capture everything with them. Second is pathology is not a very asset-heavy business. So barrier to entry [indiscernible]. They actually want you to run their CTMR business, not pathology business. Second thing is even if they decide to give it to you, you also run a risk of receivables because 3, 4 months down the line, he won't pay you the money. So it's not a very easy business. But having said that, I think this is definitely a large enterprise close to 35% of the industry is lying inside the hospital, 37%. So we can't ignore this segment. So we'll definitely keep looking at it, but we'll have to do probably a lot of [indiscernible] before we sign up any contract with the hospitals.
Okay. But you are open to this?
No, no, we do that. We're part of this business. I guess we have close to -- we have 40 such centers inside the hospitals. This is an integral part of our business strategy. .
But Shalini, if you know somebody in Lilavati hospital, you should introduce them to us.
I don't know anybody sir. I was just wondering because I happen to visit a competitor lab in a hospital. This is a public hospital. So obviously, it was not very clean and all not the kind of thing you would expect when you go to say Suburban. But the number of patients there is amazing. So -- and also, I believe you don't have to pay any referral fees to the doctors, and you don't have to pay for space. So I was just wondering why is not everybody doing this more aggressively?
Because some of these guys don't [indiscernible] after 6 months.
We take the next question from the line of Mr. Shaleen Kumar from UBS.
So also, we have noticed one thing in our analysis that the competition from the digital platform is largely discount -- basically deep discounting is basically in 5 tests and then other 5 it drops and then substantially it drops after that. So basically largely in top 10 or maximum 15 tests. So I want to understand like what kind of revenue proportion, if any -- not for you even if your industry or organized [indiscernible] you can give us, right, what kind of revenue proportion does this test account for you top 10, 15? Anything possible to split?
Yes. I think your observation is right. I've gone through the report, it's very nicely written. And it's basically -- it's just making the news. It's like we go to a shop 50% off, when you walk inside you certainly find those 50% of few items lined in the corner. So it's the same thing happening here as well. So you said -- they are all kinds of prices. But overall, portfolio of diagnostic, if we look at it, that's much wider. Offhand, I probably may not have that number with me, but I think your report suggested 30%, right, of these 10, 15 tests.
Yes. So basically checking it from various participants ...
Yes, so I will -- my input here is probably may not give you exact answer on that, but my input here is there are a lot of tests which are hematology driven. And there is a manual component in those tests. A lot of tests are machine driven especially biochemistry, that's where the prices are lower. But wherever the human component is high in any tests, you can't drop prices just like that, and they are not sustainable at all. And for any of these companies to provide a complete -- to increase the scope of testing, they will have to start incurring those costs, which actually a full-blown company like us or any other similar competition will do that. And at some point in time, at the end of the day, diagnostic is not about these 10 tests. Diagnosis is about diagnosing a disease. So you need to have entire repertoire of testing rather than just about 10, 15 tests. While this will definitely grow screening side of testing, this will also grow the overall market. But we believe that if you screen 100 normal people, and 20 of them or 10 of them actually may fall into the funnel of medical testing, which essentially means the market is likely to grow faster.
Understood. Understood. Also, intuitively, is it the right way to think that prescription-driven tests are unlikely to go to the platform and because of multiple reasons, you may not get booking now or customer is not sure about -- or patient is not sure about buying that test online, et cetera. That's one bit. So your view on that? And second, again, do you track like how much of your testing is prescription-driven and how much is nonprescription-driven?
So I think it will be unfair to say that medical things will not go there. Some of them actually widen their test menu, of course, they have -- they can participate in this segment as well. But I think one thing I want to highlight is that this is not a business where like a daily-use item, it's not even a monthly-use item. I think last time I mentioned that average visit for a patient in our portfolio combined together is not even 1 per year. So whatever -- so you might just show a lot of trial generation, you do a lot of with camps and [indiscernible]. But certainly, you'll find yourself next one, nobody is there. But then -- so it's not a very high frequent purchase item. And for any company to show results, it is definitely 2 to 3 years of journey before they actually say, yes, we have arrived. So I think it's some -- we take a lot of time to build Healthcare brands. They don't get built overnight in my reading.
Understood, understood.
Plus somebody has to sustain the flow of funds as well to sustain those kind of firms as well.
For sure, for sure. Just on the other expenses, you made a comment that there has been an investment in IT and technology and marketing. Can we get some sense of what kind of investment you are making in tech side?
On the -- investment on the what side?
IT.
Marketing and tech, right?
Yes.
So marketing, we did in this quarter, like I mentioned, we promoted so very aggressively. So we were around transradio, et cetera, I think, 6 to 8 weeks of the quarter. Second is there is sort of what you call market activation plan. On IT and digital, a lot of stuff around digital marketing, building in data lakes, investing behind data science, putting up the control tower and running that for better service delivery on the front end. So some of those initiatives have obviously taken some bit of money. But I think we also -- they're also helping us get the top line in place.
Understood. Understood. Just last question. In presentation, INR 12 crore of notional depreciation towards Suburban. So like if I can understand what does it mean by notional depreciation? And it's not one-off, right, it will continue?
Yes. Shaleen, Ved here. So this is on intangibles where we have capitalized intangibles for Suburban and that intangible apart from goodwill is we are writing over a period of 8 to 10 years. So roughly, this is INR 12 crores in a quarter will continue for some time.
We take the next question from the line of Saion Mukherjee from Nomura.
Sir, on the organic growth part, can you throw some light, how should we think about, say, you have been increasing your lab or patient service centers at a particular rate, will we see a step up there? And if yes, any geography you have in mind you want to sort of go deeper in North and East and then sort of look for acquisition in South? If you can just throw some light on your organic growth strategy that you're thinking for the next few years?
So I think our organic strategy has to be [indiscernible] that we improve our service level, at the same time, also not increase our overhead structure. In the past, we've been opening a lot of these satellite labs, but each lab brings in close to INR 1 crores, INR 1.5 crores of operating costs as well. So we will look at judiciously the model of hub labs, I think we talked about this in earlier calls, where we increased the test menu in the region now. And that does 2 things to us. One is it gives us ability to go to Tier 2, Tier 3 towns. Because otherwise, to service Tier 2, Tier 3 towns, you have to bring those -- that sample over to Delhi and that will affect the service. So we want to go closer to the markets by opening more hub labs and maybe reducing the number of satellite labs but openly more wider test menu labs, which you call it hub labs. And then improve our logistics network so that we are able to service the market. So that's our strategy.
I think your second question was priority in terms of markets. Clearly, I think the rest of North, which is UP, Bihar, Jharkhand, Orissa, even Eastern part are definitely growth markets for us. We want to really make sure that we aggressively increase our presence. We are -- southern markets are giving good response to our organic strategy. We have to probably wait and watch whether it's sustainable. If that works, then we'll go South as well. But right now, that is still open to start with North -- rest of North will be #1 priority for us.
Okay. Sir, my second question is around competition. Basically, we are seeing new entrants in the sector. So at one end, you have the online players, who may not have that sort of equity on the healthcare side, but then you have the pharma companies, which are well-known names. They have the Doctor Connect, and they're trying to drive the business through that route. So which -- and they have the brand and they also sort of have the funding available from their domestic business. So in a sense, what is the bigger threat to the industry for a player like Dr. Lal in your view?
So I look at both. Opportunity, as we have said, I think, opposite I talked about. I think some of this organized competition coming into the market is good for the industry. It's good for the industry because, a, it creates a level playing field. So far, we will up against a lot of these small-time players where they have virtually no overheads. And any of these companies that you mentioned, will have to have overhead structure which is similar to ours. So to my mind, now we're going to play in a field, which is level playing. So that, I think, is a big upside to this. Second big upside is that a higher level of competition is technically there. I look at all these money being spent in the market is all marketing dollars. I think on a stand-alone basis, I won't have been able to spend that kind of money. So the more activity that happens if we grow the market. So that's another big positive. I think the only challenge is now, as you said, do we stand to lose to these guys? There may be a bit of market shift that will happen depending on who has got strength in which market. I think that's where our team really will have to be smart enough to, a, run the business efficiently, so that we are able to compete with them in terms of our efficiency. Second is carefully pick and choose our battles in terms of geography. And we believe we are very well placed in northern, eastern part of market on the organic front. And that to my mind is roughly half of the country. And also remember, we have a network of 5,000 collection centers and 270 labs and 10,000 pickup points. That was about -- it's not built in just overnight, 1 day. It has taken some much of time. And I -- from my personal experience, I can tell you that this is not a frequently purchased items where people would be coming month-after-month or week-after-week. So to sustain 1-year business, I think all the new customers have to be acquired. So it also takes -- it's operationally going to be very challenging. So to me, that actually is a bit of an insurance for us because operational excellence required in this business huge. And also remember, while we may be a [indiscernible] medical company, but inside, we are a huge logistics company. And while you may have Doctor Connect at one end, but to run this operation, those skills are very, very different than at least running a manufacturing setup. But having said that, overall market, I believe will definitely grow.
We take the next question from the line of Sayantan Maji from Crédit Suisse.
So my question is that how much of the total revenues do we get from routine tests, especially in the metro market. The reason I'm asking is that the competition, the impact of competition would be more on routine tests and maybe the wellness packages. So how much do these comprise as percentage of revenue?
So the definition is also...
I don't [indiscernible] data available and it's also usually defined. I would actually say 21% of our Swasthfit contribution. Maybe you had another 8%, 9%, close to 30-odd percent would be the figure.
Okay. Okay. And second question is that as per the last disclosure, North India total, I think, constitutes around say, 65% of the total revenue. So Delhi NCR is 35%, the remaining 35%. So do we expect a double-digit growth over there? So Delhi NCR, I understand we already have a high market share, so it will be high single digit. But for the rest of North India, do we expect maybe teens growth?
Yes, absolutely. So if we are 13%, 14%, 15% growth company and Delhi NCR is single digit. So obviously, the balance has to be close to 18%, 19% for rest of India.
Okay. And this includes the rest of North India, sir, right?
Okay. I think maybe it's fair to assume, let's a -- Yes, I probably would tend to agree with you that rest of North India.
Okay. And a couple of data-related questions. So first is, what is the IndAS benefit that is there in our reported EBITDA? And second is, what is the ESOP run rate that will be there going forward. So I understand we get ESOP and CSR, but if we exclude CSR, what is the ESOP run rate that we will have?
So in the past, it was used to be INR 24 crores, INR 25 crores per annum. I think last -- immediately last year, it was a little higher because the last grant was given at a higher price. And that's where the charge was higher. But if you see the couple of years, it was in the range of INR 24 crores, INR 25 crores kind of charge.
And IndAS?
Yes. IndAS impact, it is started 3 years, 4 years back. So pre-IndAS, we used to have 25%, 26% kind of margin. After IndAS, it's revised to 26%, 27%. So about 1% or so has impact of IndAS. So that is all due to IndAS.
Okay. And for ESOP, so we expect the run rate to be like INR 25 crores per year going ahead as well? Or would it be at a higher rate as we have right now?
See, it is year-on-year because depending on price on the day of grant, I think historically, what we have seen is that it has gone as high as INR 32 crores last year. It was also one of the year, which I remember was even INR 6 crores. I think the number that Ved is quoting is if you actually look at sort of where is a settled out number average for the year is, our estimate is close to about INR 23 crores to INR 25 crores. But year-on-year, this might just see up and down.
There's also a bit of a reversal that happens as somebody [indiscernible] also come back to the pool. So it's a very dynamic number. But I think it's fair to assume that currently at INR 2,000 crores give and take here in the top line, you have close to 1%, 1.2% of ESOP charge.
And this is going to be sustainable for like foreseeable, say, next 2, 3 years, right? This ESOP scheme will continue to -- it's part of our regular business now? I mean, it's part of the...
Yes, this is kind of competition [indiscernible] Stay there.
We take the next question from the line of Prakash Agarwal from Axis Capital.
A couple of questions and clarifications. So what I understood was 13% to 15% base business growth ex-acquisition is what you're guiding for. Would that be correct?
Yes, I think that's a way it looks like as of now, yes. That's our best case that's effective.
Okay. And this quarter, 25% margin is with 12% of Suburban. So, a, is -- and this is despite higher costs on IT and some expansion and advertisement that you talked about. So how do you think your margins? I mean, this is clearly the base level margins. Would you agree to that? And how do you think over the year financial '23, this margin should settle?
Ved?
So see, we were growing -- margins for pre-COVID level was in the similar range, 25%, 26%, around 26%. As far as -- I think if we are able to grow mid-teens, I think we are able to maintain these margins.
I think the sweet spot for this business is about I think if you are able to grow between 10% and 12%, my sense remains there, assuming there is no pricing pressure. We should be able to maintain. But since the dynamics of the industry keep changing every now and then. But I think if any business is able to deliver 10% to 12% growth on an organic basis, we should be able to maintain this margin, this is my [indiscernible].
Okay. So what I understand is that IT related as well as this advertisement-related expenses are here to stay on a quarterly basis.
Yes, yes, absolutely. We can't let the pressure down on brand awareness in this kind of intensity. So I think they are here to stay for some quarters.
Okay. And with improvement, some improvement in Suburban, which you are guiding for next couple of years, you're saying to sales to double. I think next year, you're expecting sales to double by [indiscernible]...
Right now, the challenges are of different nature because, a, Suburban is a fairly routine company by design. We want to test behind back end and increase our test menu. Hopefully, we'll have some news to talk about launch of our labs in Mumbai next quarter. That will consume some costs, obviously, whenever you do a transaction of this kind, there is a stability issue in the management team, management structure. So currently, we are in that process of making sure that, that is taken care of. I think Suburban is more company-owned, company-operated infra, it has to move towards franchisee-driven infra. So that also will take time. I think next at least 3 to 4 quarters, I want to make sure that we get the fundamental right. And hopefully, if we get the process right, outcome has to be right. So that's the way we are looking at it. So FY '23, I would give teen one-off sort of [indiscernible] rather than put pressure on profitability immediately.
Got it. And is there any [indiscernible] from the online alliances. I think last quarter, you said that you might evaluate something specific for online alliances. So anything to talk about at the moment?
I think online alliances probably we'll do that, but I think they are also figuring out whether they want to do completely on their own or they want to partner with a lot of players. I think there is a bit of a -- whether they are falling aggregated model or they are doing their own sort of business. I think it's bit of a -- I really won't say that the entire model has fallen in place. My personal view is to scale the business you need partnership. I think to scale on your own multicity model will actually be challenging. Let's see what happens this quarter or maybe next quarter because the COVID dependency has virtually come down by 90%. [indiscernible] new dynamics in the industry, which we will have to wait for another 3 to 4 months.
Fair enough. Lastly, on the pricing side, there are some ads coming with 80%, 90% discounts. And these are, I would say, routine tests. But on a general basis, though you mentioned you're not reacting or your prices are -- you've not raised or reduced prices, your action is on the advertisement and expanding the hub and spoke model. I mean is there anything else that we are doing to keep the volume intact or grow the volumes?
Yes. I think one more thing that probably is likely to happen is that within the portfolio of routine tests versus specialized tests, one may look at price rationalization. Some of our high interest maybe underpriced and some of our routine tests maybe overpriced. We'll do it in a manner that it doesn't jeopardize our overall margins for the business. But we will look at test case basis, those kind of things as well. I think directionally, in some ways, this has already started happening because the contribution of Swasthfit is going up, so in the way realizing [indiscernible] on the routine tests is coming down. So some bit of it is will have to be adjusted not for specialized business. I think those things will fall in place. That may be another additional stuff, which I would add to the list that you just mentioned.
One clarification, Swasthfit would be wellness, right? So those would be mostly routine.
I actually won't call it wellness. I think it's probably a long term to use because wellness found that its patient is not completely healthy. I think it's upgrading of those 2 or 3 tests to a bundled tests portfolio. So I think it's a mix of illness and wellness together rather than only wellness.
Okay. So you're seeing prices there, you could just a little bit rationalize and increase one with some of the specialized [indiscernible]...
I don't mean rationalize [indiscernible]. I'm just saying the realization per test because Swasthfit has a lot more number of tests in the package. What you and I look at normally is a revenue per patient, right? But what is also important to look at revenue per test. That to me, when you look at Swasthfit revenue per test, directionally, it is lower than if you order individual test.
And how about looking at EBITDA per test or EBITDA per patient?
EBITDA per patient will be higher, but EBITDA per test may be still lower because your overall realization per test is going down.
We take the next question from the line of [ Dheeresh Pathak ] from WhiteOak Capital Management.
Yes. Just trying to understand the non-COVID ex-Suburban patient growth. So you said revenue growth was 15% like-to-like non-COVID ex-Suburban. And then you gave some numbers on realization, [ INR 652 ] and INR 707. so that is again 8% growth in realization per patient. So that 15% revenue growth and 8% realization that means [indiscernible] 6%, 7% like-to-like patient growth. But you also talked about 12% growth like-to-like, sir. Can you just help me reconcile?
So it has impact because in Suburban, we have a little higher realization or even higher realization as compared to our own company. So these patients include Suburban as well, which was not there in last year same quarter. Apart from what Bharath was mentioning about the mix and all.
This non-COVID INR 707...
[ INR 652 ] is, obviously, last year base is a teen realization number, right? 15% is a teen revenue growth like-to-like. So INR 707, which is the realization this quarter, you're saying this is blended realization with Suburban. So can you help us with the -- like a teen realization ex-Suburban per patient, so we can...
Understood. I think that's about 2% growth, right?
Yes. RPP growth is 2.5%.
But revenue per patient?
Revenue per patient, I don't have a number exactly right.
I have the RPP [indiscernible]. So RPP ex-Suburban is...
We can come back separately, you can connect with me...
But I think this mixup is basically the INR 707 figure is including Suburban business also.
Understood. So -- but this would not be a whole lot different, right? Because you said last year, we were closer to INR 690 or something. So even if this is -- let's say, instead of INR 707, this is INR 690. Then also, it's like a 6% realization growth. So patient growth on the like-to-like this thing is only 9%...
INR 684, yes. So I think we'll come back -- Sorry, I couldn't get your name?
Dheeresh from WhiteOak. I know I'll again touch it.
Yes. We'll touch this.
Yes. The other question I had was on this -- so Suburban you're saying -- so realization per patient is good in Suburban. Gross profit is increasing with Suburban so I'm assuming the gross margin is not an issue. So the issue is you're saying the network is COCO instead of franchisee operated and that is not properly utilized. And that you are going to transition to franchisee owned. Is my understanding correct?
We do both because in any case, labs are -- even Dr. Lal PathLabs is also company-owned company-operated. So we will probably make the assets sweat more as the existing ones. And the network business, which comes from franchisee, that's where our focus would be. Because I think Suburban traditionally has been focused on walking into the lab. And they have been investing more in the lab infra, which for me compared to the Dr. Lal PathLabs is slightly -- there is a scope to improve productivity there.
Okay. But does it take time. There's no option to rightsize it like properly because you can always add franchisee centers later, right, labs, and they were quite concentrated in a few cities, right? So I'm assuming.
Probably, I don't think -- therefore, I can keep saying that, I don't know one has the pressure of quickly making the margin look very similar to industry margins or Dr. Lal PathLabs margins. I think I'm now -- I want to make sure that our top line grows in these cases. And then only -- automatically our output input ratio will improve if we increase our top line. If you are fairly hopeful that we should be able to do that.
Okay. Last question. What percentage of revenues from aggregators and it shall be very small, but just to get a sense?
Less than single digit. Single digit, which leads [indiscernible].
We take the next question from the line of Nikhil Chowdhary from Kriis [ PMS ].
And sir, I wanted to understand on the lab sharing arrangement that we have with Suburban. So is it something that we are actually doing it? Or is it in plan that we'll be using our network, our lab network and taking the campus on the Suburban because I saw an ad of Suburban expanding indoor also. So wanting to understand instead of setting up Suburban, will be we utilizing our own labs for the Suburban patients also?
Yes, it makes sense. This is one company, right? We will definitely look at back in infra synergies. So you will -- I don't think it makes sense to put another lab for Suburban. We are not competing with each other. So we'll figure a way out where one lab is able to [indiscernible] for the brands.
Understood. And sir, any thoughts on probably like a question to the earlier participant where probably due to the rising competition, ESOPs probably can help in retaining even mid-level guide. So because the competitive intensity is increasing as they may want to take some employees from us because we have been there in the industry for a long time. So any thoughts around that like have you been evaluating or any of the strategy that you are employing to probably retain the employees?
I think employees are smart enough to evaluate such opportunities. They actually -- I've seen many of them don't fall for short term on the raise in the salary, but they also know the sustainability of the whole idea. So as many of them who have actually gone from us have been wanting to come back as well. So I think some of them have really thought to figure out. They know the careers are 30, 40 years long, this is not 2, 3 quarters.
Sir, last question, probably, I asked it in earlier con call. Ads in paper, have you been evaluating because something probably has created noise has been the ads in the paper. So why can't we spend because we have cash on the balance sheet, spend some probably ad on the front page and get some traction for Dr. Lal also. Just asking you guys probably can have a thought around it as the participation even in the T20 or IPL matches, which actually are good probably areas of getting customer attention. So just probably wanting your thoughts around that.
Maybe we can sit separately and discuss this. I've been -- I think as all of us have worked for [indiscernible] company as well. So this business is -- by the way, it's still a medical business, I think very, very hyper local city-based. I feel it's going all over the place. Your presence is mainly in 2 or 3 years, 5 cities, you will end up spending a whole country. I think we can sit and discuss that. And this business is not about you see a holding and you go and get your [indiscernible]. We doesn't work -- so I think ultimately, medicine -- you are trying to solve a problem which is medical problem. It's a very knee brace. And it's a 3-way process. You still have to engage with the medical fraternity. And by the way, you also should know that in medicine, soliciting business this way is actually not a very appreciated format for [indiscernible].
Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Thank you, everyone, for being with us on this call today. I wish you and your families remain safe and healthy. I would now request the moderator to close the call. Thank you.
Thank you. On behalf of Dr. Lal PathLabs, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.