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 Dr. Lal PathLabs Q4 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar of CDR India. Thank you, and over to you, sir.
Thank you, Aman. Good evening, everyone, and welcome to Dr. Lal PathLabs Quarter 4 and 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. Goel, Group CFO; and Mr. Shankha Banerjee, CEO of Suburban and Other Group Companies.
I would like to point out 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 disclosure in this regard is available in the results presentation, which is available on the stock exchange website. I would now like to invite Dr. 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 on this call. We are here to discuss Dr. Lal Pathlabs' Q4 FY '23 earnings, and I would like to take you all through the key developments and updates during the period under review. India requires quality diagnostics of scale. Over the years, we have tracked the gradual evolution of the way doctors and patients manage disease and health. Accurate diagnostics is increasingly contributing throughout the treatment process, including health management, disease detection, prognosis, diagnosis, treatment planning and post-treatment monitoring. We, therefore, continue to invest in creating an efficient technology-backed network that can align with the growth in sample volumes.
To start with, I am delighted to share that Dr. Lal PathLabs has topped 15.5% growth in the non-COVID revenue in FY '23. We have proudly served about 27 million patients in FY '23. This has come on the back of a sharp focus on core operations across the country, including Tier 2 and Tier 3 cities and investments in digital infrastructure. We have continued to make progress across our 3 strategic pillars. That is geographical expansion, creating a unique and specialized portfolio and augmenting the technology infrastructure for the future.
The highlight was the unveiling of our Mumbai Reference Lab at in January this year. This has immediately resulted in the increased testing of the high [indiscernible] test. And in the first -- it is also the first private lab in West India to have a BSL Level 3 biocontainment lab. This speaks leaps and bounds of our commitment to offer best-in-class services to our patients by bringing accurate diagnosis at reasonable prices to the fore.
We also added a second electron microscope at our National Reference Lab in Rohini in Delhi. At this point, I would like to remind you that Dr. Lal PathLabs already has the world's largest histopathology testing center or load, processing up to 1,400 biopsies a day and also the largest kidney biopsy testing center. We were the first private lab in South Asia and Southeast Asia to have an electron microscope way back in 2016.
Furthermore, I am pleased to share that we continue to work towards enhancing our technological capabilities. We have begun implementing an upgraded lab information system and advanced tools like artificial intelligence and data mining. These have enabled us to achieve enhanced operational efficiencies and quicker turnaround times or TAT. We continue to add new tests to our test menu and diversify our rich [indiscernible] franchise share of patient service centers. Our processes are tuned to drive trust towards our brand. And therefore, I think we are uniquely placed to both drive and benefit from expansion in consumption of diagnostic services going forward. Thank you very much, and I would now like to hand over the floor to Dr. Om. Over to you, Dr. Om.
Thank you, Dr. Lal. Welcome, everyone, to Dr. Lal PathLabs Q4 and FY '23 Earnings Call. I hope that you and your loved ones are keeping safe and healthy. I'll share a few of the industry and business insights that I see emerging based on FY '23 results. During the entire FY '23 in quarterly commentaries, I have always been highlighting that we should analyze -- annualize instead of quarterly trends. Now since the financial year is over, the entire analysis becomes a bit more meaningful as we have full year numbers in front of us.
Let's have a quick look at FY '23. While FY '22 was operationally very challenging due to very high incidence of Delta and subsequent overhang of travel-related test requirements and [indiscernible] like Omicron, et cetera. In contrast to FY '22, we experienced FY '23 turned out to be financially very challenging for the entire industry due to the following reasons: number one, nearly 80% to 90% decline in COVID and COVID-related revenues. The higher the contribution of COVID testing to the total revenue, bigger the challenge.
The second is inability to roll back capacities and manpower and reagent stocks due to unpredictability of the future COVID demand pattern. On the other hand, FY '23 also experienced uneven quarterly days and, coupled with aggressive competitive activities, further made it difficult for all of us in understanding the underlying growth trend.
Now since FY '23 is over, I am clearly seeing a few trends, so my take is the following: number one, bundled packages have become way of life in our industry. Contribution of [indiscernible] to LPL total revenue has further gone up to 22% in quarter 4. This means we are doing a higher number of tests for patients and that's very clearly visible in our sample volumes as well. Number two, CAGR trend based on -- this is our internal estimates, a few large players. Their data is in public domain. That also include their inorganic assets and residual FY '23 COVID revenues, over 4 years, suggest that some of these players have experienced all put together a growth rate of 10% to 11%.
This may not be reflective of entire industry growth. But if I look at all the data put together of -- in public domain, I am seeing CAGR of 10% to 11%. Number three, after a long gap, we saw in Q4 some of the players have taken price increase, and we also did a little bit in the month of February. We will talk about that. Number four, as the pressure on margins build up in the industry, especially on smaller and midsized players, we do see consolidation opportunities emerging in times to come. However, valuation expectations and unavailability of quality assets will make this journey a little difficult.
On Suburban Diagnostics as a platform, we are now set for next phase of integration. As Dr. Lal mentioned that we built a state-of-art reference lab in in the month of January this year. Second is, as all of you know, that COVID contributed nearly 50% of the total revenue of FY '22. It is now down to just 6% in FY '23. The stage is definitely set for next phase wherein we plan to bring in now back-end synergies between the parent company NPL as well as Suburban Diagnostics and go further aggressive in Mumbai and Western region.
In the end, I would say the brand that has the trust of the patients and medical facility, holistically invested in network creation, infrastructure scale-up, patient services, et cetera, will sustain and grow in the long run. With that now, I would like to invite our CEO, Bharat, to continue this conversation. Thank you, and over to you, sir.
Thank you, all. A very good evening to everyone present here, and I warmly welcome you all to our Q4 FY '23 earnings conference call. I will now take you through some of the operating and business highlights of our company. In Q4 FY '23, we registered 6.3 million patient visits, generating a total revenue of INR 491 crores. COVID and tests declined 83% and contributed to only INR 11 crores. That is just 2% of the overall revenue. During the full financial year, we registered 26.9 patient visits and generated a total revenue of INR 2,017 crores.
You would remember last year, in Q4, we had a pronounced Omicron wave of COVID with high testing volumes comparable to the end of Delta wave. As a result, test mix profile shifted significantly. Hence, analysis purposes, one must look beyond Y-o-Y growth and use other metrics like sequential and 3 year CAGR numbers. Our non-COVIDrevenue at INR 480 crores registered a Y-o-Y growth of 14.4% and followed historical sequential trends between Q3 and Q4. The test per patient also moved up from 2.48 in Q4 FY '22 to 2.76 in Q4 FY '23, representing 11.2% growth in non-COVID tests conducted.
Underlying non-COVID patient resets in the organic business grew near 8%. As you are aware, we had taken some price corrections in the month of February '23. The same has got settled and has been absorbed by various segments of our customers. According to our estimate, this price correction has had a 1.7% impact in this quarter and 2.5% on an ongoing basis.
We have been focused on programs, building -- our bundled test portfolio super specialty business, enhancing digital capabilities and geographic expansion, including serving Tier 3 and 4 cities. Like Om mentioned, our bundled test portfolio continues to do very well, and it contributed nearly 22% of Q4 FY '23 of non-COVID business. Overall, Swasthfit portfolio generated a revenue of INR 370 crores in FY '23. Our super specialty portfolio led by genomic testing division, GENEVOLVE, center of excellence for reproductive diagnostics, and auto Center for Excellence is becoming similar to the Swasthfit portfolio in size and growth rates.
Our expansion program reaching the interiors of the country in Tier 3-plus towns of Bharat continues unabated. We now have 277 labs at the year-end -- at year-end, including 70 labs at Tier 3 towns like [indiscernible] Mositabadin East and Sultanpur in the North. We continue to invest in scalable and profitable digital programs, combining medical excellence and leveraging digital and analytical capabilities to improve patient journey. I would like to talk about 3 initial properties recently launched and scaled up today, namely CHIPS, recommendation engine and patient wallet.
Our CHIPS, Customer Health Improvement Plans, is designed to engage our patients digitally with personalized digital interventions -- digital diagnostic interventions. Further, we have better recommendation engines that share these specific tests at the point of sales. All these programs combined with the patient wallet will provide personalized scalable digital customer relationship management program. We are receiving good customer traction on this program since their launch.
We believe we have the right set of building blocks, which we have put in place in the marketplace with a few more in the pipeline. And these, we believe, will help us deliver industry-leading growth rates. With that, I would like to invite Ved to take you all through the financial performance. Over to you, Ved.
Thank you, Bharat. Good evening, everyone, and thank you for joining this call. I'm now sharing some of the key financial highlights for Q4 and FY '23. Our non-COVID revenue for Q4 FY '23 came in at INR 480 crores versus INR 420 crores last year same quarter, a growth of 14.4%, whereas FY '23 non-COVID revenue came in at [ INR 19 54 ] crores versus [ INR 16 91 ] crores last year, a growth of 15.5%. Total revenue for Q4 FY '23 came in at INR 491 crores against INR 486 crores last year same quarter, a growth of 1.1%.
Total revenue for FY '23 came in at INR 2,017 crores versus INR 2,087 crores in FY '22. Revenue realization per patient for Q4 FY '23 is INR 770 crores against INR 728 crores last year same quarter, an increase of 6%, led by price increase, test mix and higher contribution of Swasthfit. Normalized EBITDA after eliminating the impact of RSU, CSR and 1 exceptional expenses for Q4 FY '23 came in at INR 131 crores and INR 528 crores for FY '23. Normalized EBITDA margin for Q4 is at 26.6% and 26.2% for FY '23.
Normalized PBT after eliminating the impact of notional depreciation on account of consolidation of Suburban financials for Q4 FY '23 came in at INR 102 crores versus INR 94 crores in last year same quarter and INR 400 crores for FY '23 versus INR 494 crores in FY '22. Normalized PBT margin is 20.8% for Q4 FY '23 and 19.8% for FY '22 -- sorry, FY '23. Normalized PAT for Q4 FY '23 came in at INR 76 crores versus INR 73 crores in Q4 FY '22 and INR 297 crores for FY '23 versus INR 369 crores in FY '22. Normalized PAT margin is at 15.5% for Q4 and 14.7% for FY '23.
Cash and cash equivalents as on March '23 is INR 838 crores. Net of borrowing, it is INR 601 crores. I'm pleased to share that our efforts towards optimizing cost and increasing the operational efficiency by using the technology and digital tools has resulted in reducing our outstanding and inventory to 28 days now. So 1 side, we are doing efforts on front-end patient size. As Bharat mentioned, that digital or technology has given the edge. Another side, on the operational side, we are taking technology and tools to optimize the cost.
Finally, we are pleased to share that the Board of Directors has proposed a final dividend of INR 6 per share. With this, the total dividend for FY '23 is INR 12 per share. Final dividend will be paid after the shareholders' approval in the upcoming AGM. This brings me to the conclusion of my opening remarks. And now I would request the moderator to open the forum for Q&A. Thank you.
[Operator Instructions]
The first question is from the line of Rahul Agarwal from InCred Capital.
Two questions. Firstly, I noticed revenue mix largely shifting to outside Delhi NCR. So obviously, other geographies are doing better. B2B is a bit higher Y-o-Y and Swasthfit is obviously growing faster. All of this combined on the questions for you that does this result in margin dilution for fiscal '24 Y-o-Y? That's my first question.
Margin dilution for FY '24 impact?
Yes.
We don't think so. We -- our margins, if you look at our nearing our preCOVID level, so the COVID impact is out. So even in FY '24 also, we believe that we should be able to sustain a single [indiscernible]
In spite of these 3 things, gaining revenue share outside the B2B and Swasthfit?
Yes. outside Delhi NCR, one must realize that as the scale picks up, there are markets which actually mimic like Delhi NCR. And if you noticed in the last sort of 4 to 5 years, our expansion through lab network is actually not that fast as it used to be earlier, because most of it is now building through hub labs where our tendency is now to open more collection points and labs. So I think we are actually optimizing the lab cost in margins don't mean So that's the way we see it. And in any case, if you look at earlier portfolio mix, we always had some markets which are operating at lower margin, but our rest of not now is fairly scaled up when margins are pretty early there.
Perfect, got it. And secondly, again...
Variation, it's not material enough so that's the way I would look at it.
Got it. And secondly on the growth side of it, obviously, the starting first quarter of fiscal '24, the base is supportive because we no more have very large COVID revenues. Life coming back to normal, obviously. That helps in getting normal and hence, normal testing for non-COVID should pickup. Employee attrition is generally low now in favor of digital labs is what I understand from my channel checks. And obviously, growth outside Delhi NCR is faster than Delhi NCR. So combined of all of this, do you see 13%, 14% revenue growth next year?
So I think instead of me putting a number, clearly, I do believe that we entered in FY '23 a much more difficult outside environment than FY '24. As you outlined it very well, pressure on attrition is very low. Our ability to take price increases there, we have demonstrated that. COVID pressure of should we roll back capacity or not, should we buy some more COVID tests, et cetera, I think now that is also behind us. So the good news is that we are now entering into FY '24 cleaner slate with less sort of headwinds compared to what we saw last year. I think overall, it augurs well. Now coming to growth rate, it's very difficult to put a number right now, but I definitely do believe that we should do better than what we've done previous year.
Got it, perfect. And lastly, just a bookkeeping. The 26.6 million patients non-COVID for full year, could you break down that into Dr. Lal and separately, please?
For FY '23?
Yes, 26.6 million patients.
We had that number.
So Rahul, because we have not -- Suburban was not fully baked in this year. So probably, these numbers may not give the right picture. So at this point, I think this is the consolidated number we have.
For us, if you look at Suburban so far, our tendency was to show separately because in some quarters, we didn't have a base. So now since that sort of issue is no more with us, we want to operationally see it as it both and salable go hand-in-hand together. So we would want to actually report, not highlight some of the uncertainties. That's the way we look at it.
Can I get it for fourth quarter in that case? That's the Y-o-Y comparison, right?
I'll come back to you.
That number, I think, is immediately not available with us. We'll come back to you.
The next question is from the line of Prakash Kapadia from Anived Portfolio Managers.
A couple of questions from my end. There have been price hikes in the industry by new age players. Any change in competitive landscape we are witnessing? And given that growth rates in industry have generally come down post COVID, so any acceleration or any trends we are witnessing or sensing shift from unorganized from regional players for national players like us? That is the first question.
We've also taken some price hikes in our portfolio. So if you could help us understand the impact of the revenues for FY '24. And is it in specialty? Is it in packages? Is it in specific geographies, if you could highlight that? And the third question is in an endeavor to drive organic growth, what should be the key drivers for that in FY '24 and beyond? So obviously, Suburban scale is one of the factor. But how is non-metro contribution shaping up? How is new patient addition happening, new test menu? So some of these points will be helpful if you can clarify.
Prakash, this is Bharath. Let me start with the first question on how the competition intensity is shaping up in the industry, right? So there are 2, 3 ways to look at it. One is that the incumbent players and, let's say, some of the new traditional players, model players that I say, for sake of in need of better word, continue to intensely be competitive in the marketplace, so there is no letdown on that count. So including new entrants, regional lab change, et cetera, all continue to compete very aggressively in the marketplace like in the past.
What we are seeing is that some of this new age e-comm-based Google advertising, Facebook advertising-based companies, because of maybe funding pressure or because they're not able to see attraction themselves, are scaling down, let us say, deep discounting because patients are also now realizing that discounting are actually a clickbait operation, whereas they finally end up paying the money, they pay similar money to what will pay to one of the incumbent players. So I think it is all catching up and the industry is in a bit of a transitionary phase. Everyone is trying to innovate and trying to do the best we can. So that is the way to look at the competitive landscape today. But yes, the advertising internally has mildly come down, at least from an ETL above the line perspective. Digital media competition still continues very intensely.
Okay, okay. So this would take time? So Bharath, effectively you are saying, this would take time and there is no major shift? It's maybe the pace has decreased but it remains as competitive as it was?
Yes, yes. So as if the world has come to a new age, new world where in a less competition and other things back. It is still intensely competitive, all of us signing for our share of the business. But yes, some segments of competition have kind of come down.
So second question revolves around, just remind me on...
It was about price hikes which we have taken. So is it for specialty portfolio? Is it specific geographies and the impact of that, if any, on next year and going forward?
So we have not taken any price increase on routine tests, the most commonly ordered test, including packages. So that is the first statement I'd like to make. We have taken price increase on what is really esoteric test, high-end test, lab-only and so on and so forth. And I told -- talked about that in the, what I would call, the opening speech of 1.7% impact for this quarter and 2.5% estimated going forward, assuming the mix holds up, right?
So it is not geography-specific pan-India basis and really a test which have less frequently orders for consumers and patients don't feel the picture. Good news is that all our B2B partners from where the samples predominantly come from have largely accepted the price increase. We are not finding any major impact or pushback as a result of this because it's been long overdue as they also realize that they have also taken up prices. So I think it has gone well in execution was planned for.
And on the third question of growth levers going forward, Dr. Lal covered this, Dr. Om covered -- there are 3 or 4 ways look at it. One is geographic expansion in Tier 3, Tier 4 cities, along with strengthening our metro city presence either in where we offer in Northeast or also including Mumbai. So there is a geographic expansion plan. Second is differentiated channel management programs. We talked about that, I think, in the last quarter also on how do we manage B2B separately than B2C. So channel management programs and driving growth from channel partners.
[indiscernible] obviously, we spoke about today high-end testing, either the genomic testing of the centers of excellence on diagnostics or autoimmunity. Those are all key differentiate your business while delivering value to all stakeholders. The fourth is obviously getting the tech stack up to shape so that we constantly provide a wow factor to the patients saying something new has happened. So we spoke about the CHIPS program today. We spoke about the recommendation engine and also the wallet. So it's a combination of what we have done traditionally, which is geographic expansion combining with, obviously, sort rate and super specialty portfolio and layering a tech component to that.
Right, right, right. Fine, fine. That's helpful. I have 1 or 2 more questions. Maybe I'll join back the queue.
[Operator Instructions] The next question is from the line of Bino Pathiparampil from Elara Capital.
Just a quick clarification. When you say the price increases you took will have an impact of 2.5%, is that on your overall revenue or on just the portfolio on which you have taken price increases?
On the overall revenue.
Okay. And what are your plans for addition of labs FY '24 and '25?
So our lab expansion program continues the way it has always been, about 10 to 15 labs, predominantly in Tier 3, Tier 4 cities spread across Northeast and some portions of South and West.
The next question is from the line of Lavanya from UBS.
So I just wanted to understand the margin for Suburban in this quarter just because last quarter, we have seen a meaningful hit.
So normalized margins for Suburban for this quarter is about 11.2%, and for full year, it is 12%.
Okay. So we are still seeing the impact of the new franchise opened on the margin from Suburban?
No, I think on Suburban, if you go back pre-COVID times, that was the trajectory of this business in any case. I think during COVID time, they experienced very high leverage. Because Suburban has experienced a very sharp drop of COVID revenue this year from nearly INR 113 crores has fallen to just INR 9 crores. The P&L shape is very similar to, let's say, what it used to be pre-COVID times.
But the important thing is that this has a platform of nearly INR 155 crores of revenue. 80% of that comes from city of Mumbai. And now with the support of centralized lab and NPL parent support, we are basically hoping to drive this, both revenue synergies as well as the cost side synergies. We realize higher margins but this is a margin which we've used to have pre-COVID times.
And these margins, please note that we have launched reference labs, big reference lab in Mumbai. So this quarter, the -- all the impact of that reference lab has also.
Okay, got it. Sir, 1 more thing on the exceptionally large expense that you have seen in the current quarter. What was it related to? And I just wanted to understand the tax rate guidance that you gave for next financial year, FY '24.
So this exceptional item is 1 site, 1 large amount is receivable from BMC, multiple corporation. As per policy, we have provided, but we are hopeful that this money will come to us very soon. And second, a small amount which has been provided on account of COVID inventory which is going to expire. So these are the exception item.
Okay. On the tax rate?
Tax rate, we have normal tax rate, which is about 25% for the corporate. There is nothing which is exceptional here, normal tax rate.
The next question is from the line of Prakash Agarwal from Axis Capital.
First question is on just trying to understand the price increase. You mentioned it is for specialized test. How has been the experience versus the competition? Has the competition followed you or have you lost some business because of price hike? Or it is status quo and it is value accretive?
So Bharath here. So 3 things. One is that this price increase has gone relatively well. We were skeptical in the beginning but I think the execution was near-perfect and communicating to customers on why this price increase. And in the context of the overall tenure of the price increases seems to be logical and reasonable to them.
Number two, we explained the impact, it's about 2.5% on an ongoing basis on the overall portfolio, given the mix of the portfolio of it, this price increase has been taken. Yes, now -- and we also have not taken price increase on the routine portfolio, the most commonly ordered test portfolio or the health packages and so on, all the stages.
Now when competition follow, each company will follow its own, what I would call, policies, procedures, priorities, et cetera. But given the inflationary situation, the lowering of COVID volumes, I do expect that everyone will take price increase as per their, what we call, areas of strength and what they think they should be doing. So yes, in industry price table should start to move up.
Okay. And the price increase would be only for your specialized, which is about 30%, 35% or lower in terms of total volume value?
So it's on a value basis, it's about nearly 50% of the portfolio is only we have taken.
Okay. And 50% you claim is your specialized testing menu?
It is not only specialized, specialized plus, I said, less frequently ordered tests and so on.
Fair enough, okay. And the second question was trying to understand the competitive environment in the B2B segment. We hear that a lot of new players are getting very aggressive, especially on the B2B side. And your progress on the south, please?
Yes. So on the B2B side, my response is that, yes, it is as competitive as ever. We have actually put in place multiple programs to better manage this channel and segment this channel like we do for patients. So we have a B2B channel program which is very intense and very well appreciated. And in fact, B2B is one of our fast-growing channels today as well compared to historical averages. So we are very pleased with the progress, the sole approach of a channel management program on the overall revenue growth rates.
On South also, our progress continues. We grew South at a reasonable pace compared to, what I would call it, the company growth rate. It grew ahead of the company growth rate significantly. So I think yes, we'll continue to build deeper penetration in South and the geographies that we currently operate in.
So B2B, you would have grown in what you're saying? You've done well, we endured so .
We have good growth rates on B2B.
And margin addition or flattish?
Yes, yes. So if you manage the mix well and the cost structure well and there is also scope to negotiate the back-end cost, so I think it plays out well enough. Also, as the volume grows, testing efficiencies come in, we are able to amortize a lot of control calibration costs, et cetera.
Okay, fair enough. Okay, I have more questions.
The next question is from the line of Anish from Nomura.
Sir, I'm looking at the quarter-on-quarter sequential data of 4Q, 3Q. So while the realization per patient has improved and even the number of tests per patient and the number of samples processed have shown an uptake, but if you see the number of patients that has a patient volume, they have shown a decline over 3Q, which was supposed to be your seasonally weaker quarter over a strong 4Q. So can you share your thoughts around this decline? And is it pointing out to any particular trend that you are seeing that we have a bearing in the coming periods?
So on patient I don't think we should get swung by quarter-on-quarter movements. There's a lot of base issue last quarter, this quarter last year, this year, et cetera. Like I mentioned in the opening comments, our underlying patient visit growth rate is near 8% visit visits. Number of tests performed is at 11.2% and revenue is obviously higher.
The next question is from the line of Nitin Agarwal from DAM Capital.
Two questions, one is on the operational bid. We've seen some reduction in employee costs on a Y-o-Y and a Q-o-Q basis. Likewise, if I adjust for the one-off that you mentioned about INR 7-odd crores, I mean, other expenses are down. So how -- what would we attribute to these reductions to, given the fact that business has been growing?
So while we're taking to specifics at an overall level, business opening comment talked about use of technology in automating all our processes, et cetera. So that has given us a large headcount, what I would call, leverage. But specifics around the rest of the equation, Ved, will you take on?
Yes. So Nitin, so this is primarily because of RSU charge, which is lower than last year, and that is the precise reason for the compensation or employee cost. So this is one. Other expenses, obviously, we had a lot of programs run in this year -- I mean, last year, whereas efficiency has been created as in my opening remarks also, a lot of use of technology tools we have created and duplication of the repetition of the work, which can be used by technology tools. So those have given some advantage and that's why we have got some advantage on other expenses.
And secondly, on the -- since we have the full year numbers and you have some more clarity on the post-COVID trends, what is a realistic ballpark range that one should work with in terms of the patient testing volume growth for us?
Volume means patient, you are saying?
Yes, patient volume growth, yes, going forward. I mean, on a directional basis, it's late single-digit, early double digit, mid-double digit? I mean, what is the realistic number that one, given the industry dynamics you can work with?
See, it's very difficult to put a figure, but I -- as I made -- I think the first question was is that we do believe that FY '24 numbers should really be better than last year figures. I think all sort of variables are pointing towards that. We are -- we will not have that sort of competitive scenario as we experienced last year. And as you mentioned that since COVID is not there, actually, in 1 way, good news that they've done with it and make money on it fell otherwise we would have been struggling base effect. And now we can completely focus on non-COVID business. I think the only thing we are now having with us, I think, INR 63 crores of COVID.
Yes, INR 63 crores. COVID.
[indiscernible] in our base. If we don't know, it's highly unpredictable. It can actually be as good as 0 as well. It could be same. But I think if I take this out, we definitely are hopeful of improving our performance in FY '24.
And just lastly on that, typically, from a seasonal perspective, isn't Q4 expect supposedly a better quarter for the diagnostic business than Q3?
No, no. I mentioned in the opening speech saying that sequentially, Q3 and Q4 are similar for us.
I think it's a fair -- I think we've also made this comment in the past. But I think for the last 2, 3 years, I'm seeing that even these variations come due to infections. And for some reason, I find that you are not following a pattern because Q3 is no more ADC than any mode. Even in Q3 also, we are having a lot of infections. So in some way, Q3 actually has moved up while Q4 may have been similar. So that's why the difference you see is much less than before.
Let's see how it happens this year because this COVID thing has always been, right? In fact, whole respiratory infection in general has been there in the [indiscernible] the population. As you let this wait out for FY '24, but you're right, for Q3 is a softer quarter but we have not seen that trend in the last couple of years.
And since you mentioned the point of infections, we've seen very high intensity of incidence rather of infections, the whole of FY '23 which is reflected in, I guess, the pharmaceutical sales of anti-infectives and all the cold and cough preparations. I mean, has it had, in your assessment, any tailwind for our business also?
Actually, respiratory infections is generally do not really directly to very high jump in testing. In fact, while we were all talking about during this month of April and even in March also when we talked about COVID, et cetera, we didn't see a direct sort of jump in COVID testing. But I think 1 test which normally tends to work in situations like this the CRB, is implementing. So that is 1 test we have seen a very significant jump in this -- in Q4, right?
Yes.
So CRP is 1 test we saw a big jump.
And lastly on the realization per patient, obviously, with the bundling that we are doing, that's sort of going up. We are what, [ 7 80 ] or thereabouts for this quarter. I mean, how does one look at this number? Is there a significant scope for appreciation from these levels on this number?
I don't think so. It has a Suburban -- I think there are a few things that have gone into this. One is, of course, bundled practices now contribution going up to [ 22% ]. I don't foresee a very sharp jump again the contribution. I think it should stabilize around this number. Suburban, in general, has a higher realization than labs. So that also has gone in for the full year impact. I think whatever little will come now is due to price increase that we've taken in the month of February. Maybe that will have some marginal impact. Mix may not change. My gut says that we will not see a very sharp jump on this in FY '24.
The next question is from the line of Sandra Karafro Financial Limited.
So if we are looking at the volume growth, you, in your opening remarks, quite interestingly highlighted the Mumbai lab. We know our earlier labs, whenever they have come, they have given us a good traction. So what do you think about the Mumbai lab, how it will contribute to our overall patient growth? Like how should we relate this, if you can help us understand this?
This is Shankha here. So the Mumbai lab has been launched in January. And so the thing is it's going to be a slightly longer wavelength compared to the other reference labs because from the Suburban point of view, it's kind of starting a completely new vertical, so to say, in terms of the specialized business and also trying to get a completely new customer client profile under -- to be built under the portfolio that we are currently doing. So from that point of view, yes, the -- from the last few quarters, it will definitely have better impact in terms of patient growth. But it may not be exactly comparable in terms of the things which we saw in East Kolkata or Bengaluru. It might take a slightly longer way.
Understandable. And in your opening remarks, you also mentioned about a slightly higher cost base that we carried for the entire FY '23. So now if we look at our cost base versus the growth that we have seen, at least the normalization that we have seen in FY '23, do you think the upcoming year FY '24, '25, this cost base will support us on the growth and you should see some operating leverage also?
Yes. Sandila, Ved here. So definitely, see, that's the idea because 1 is launching this reference lab, which will obviously give advantage and what Shankha is saying on B2B side. But another -- because all the infrastructure is in place and I think you also have visited that lab, now we have to leverage this infra. In our view, the efforts is on more on top line, but similarly, the operating leverage will also come on the bottom line. So I believe that margins from here should be improved.
Okay. That is helpful. And sir, if we try and understand the overall marketing scenario, today, you highlighted that there is some sluggishness. The intensity continues. We have taken specialized price increases, but the specialized size increase should reflect across the entire year, right? I mean, we just started in month of Feb. Is that understanding correct?
Yes, indeed.
The next question is from the line of Rishi Mody from Marcellus Investment Managers.
No. My question has been asked earlier. I tried to remove myself from the queue.
The next question is from the line of from Investec.
Sir, first question is on the sequential growth, right? If you historically look at our sequential growth in 4Q, it has ranged between 3% to 5%, right? But this time, it was flat. So anything worth highlighting here?
We couldn't hear your question properly. Could you repeat yourself, if you don't mind?
Yes. So sir, my question is that historically, if you look at our sequential growth for 4Q, so historically, it has ranged between 3% to 5%, right? But this year, it is flat. So anything particular you would like to highlight here?
That's what I actually mentioned. Your observation is right that it's not 3% to 5% normally, it's about 2%. And the 2% actually is neither here nor there. So sometimes depending on the inflation rate is flat. But I'm actually seeing this trend for the last 2 years. Even I think if I remember, even the previous year also, we saw the same thing. So my hypothesis is that now it's just evened out in terms of infection rates.
Earlier, Q3 was seen as a healthy quarter. I think now because of air pollution, et cetera, all these things, generally,and sourced, which is more screening packages has become a little bit of even. So it looks like now the pattern that I'm seeing in the Q2 is the highest. All of the 3 quarters are very similar, Q1, Q3 and Q4. observation that I have for the last couple of years. So let's see in FY '24, what happens because [indiscernible] year will not have this whole variable of COVID will be more pace. But your observation is right. At this time, we are not seeing a sequential jump, which we normally see. And This is not the first time going in [indiscernible]
And sir, if we understand that year-on-year growth for this year is not that relevant because of volatile base. But sir, if we try to extrapolate our sequential growth, which we have seen during the last 4 quarters, right, to FY '24, then it roughly translates to mid- to high single-digit growth. So is that the right way to look at it?
No, no, I don't think. It will be -- our estimate is I know we have done 15.5% non-COVID, but it also has 4 quarters of some of the compared to 2 quarters previous year, right? So the normalized book much for this year [indiscernible] -- we definitely to better performance this year. [indiscernible] single digit.
Okay. And sir, last question on right? So we have been saying that largely, it has peaked out and you don't see any jump from this level, right? And historically, our revenue growth was largely driven by a patient and sample growth. But now -- but this year, it was also driven by higher realization for a patient. Going forward, as we expect some moderation expansion, so do you see that the -- again, our revenue growth would be driven by volume and volume growth has actually come down, right?
So yes, our efforts will always be to drive the volume growth, patient visit growth. It's not volume patient visit growth and there are various techniques we are using to get better on that count. But as a result of bundling, the test per patient is also moving up significantly, about 11-odd percent in Q4. And that trend as it further growth. It will reflect in the numbers. But our intrinsic effort is to acquire new customers and service our existing customers in a better fashion.
Understood. And sir, related question in 4Q, did we have any one-off kind of growth in tax-related packages? [indiscernible]
Growth or what did you say?
Growth in tax-related packages for -- any one-off growth?
Last 2, 3 years, I think Q4 [indiscernible] picks up because of this tax advantage. There's a normal in the base as well. But this year's growth has been still better than the previous year, led by better distribution but understanding from patients, acceptances, et cetera. So it is more than tax.
The next question is from the line of Yogesh Tiwari from Arihant Capital Markets.
My first question is post-COVID, what would be the growth of the in vitro diagnostic industry?
In vitro diagnostics.
Yes, sir.
Normally, I [indiscernible] to the resin suppliers. asking for pathology but people like us, right?
Yes.
So I mentioned to you the data which is available in public domain. I just added up at least 4, 5 companies data. The last 4 years, I have removed this impact of COVID years, which is FY '21 and '22. The growth rate that I'm seeing is about 10% to 11% CAGR over 4-year, 3-year period. I firstly feel that it should sustain. One variable which probably is going to get added because last full year may not have very high pricing impact. But since our price increase is now coming back, let's see how other players do. But my reading is it will definitely be in this range going forward.
And sir, what would be the total size of the industry, if you can share the thought?
What is the total size of the industry?
Yes.
So there is no published data that will normally we refer that these large players contribute about 15% of the value. So I think 1 crude method would be that divide is growth by 0.15 would be about INR 30,000 crores, INR 35,000 crores, INR 40,000 crores, which is essentially the the private lab business. So when you add this to about hospital lab results there. So my sense is it should go up to INR 60,000 crores, something like that. That's one of the ways to look at it.
Which you mentioned, this is for the Indian domestic, right?
Yes. India domestic market.
The next question is from the line of Praveen Kumar from Equitas Capital Advisors.
I had a couple of questions. The first question was on a comment that Dr. Om had made in his opening remarks. He had mentioned that the budget packages have become a way of life. So just thinking about the comment a little bit more. See, as bundled -- in terms of bundled packages, the decision-making point could be perceived to shift to the customer, the patient instead of the doctor. And since the doctor is a major complete advantage for how does -- how do you perceive this planning out in terms of your competitive advantage? That was my first question.
I think that's a great sort of question. My reading if it is only limited to preventive health checkup, yes, decision-making is with consumer or the patient. Since a lot of chronic disease patients also are shifting to bundle back, they will actually upgrade this to these packages, mainly we're going to see better value for money. So even in patients are also in bundled package. So doctor decision-making is still there. The only thing is that the doctors also started prescribing some of these packages as a part of the normal prescription.
Okay, understood. I had a second question, which was more on the investor presentation, the financials in particular. What I wanted to understand was the company declares normalized EBITDA margins where a few items are excluded, one of which is the employee stock composition of the RSU-based composition. So I just wanted to understand the rationale for excluding this. Is it that you conceive these to be more one-off kind of expenses? Because if not, if you that these are more ongoing nature of competition-based practices, then in 1 way or the other, the company is bearing the cost for that, right? So shouldn't it be part of the overall EBITDA itself not a specific normalized EBITDA?
So Praveen, there are 2 reasons. One is, of course, this is a noncash item. It is not really the big cash outflow from the company. And second, this charge varies depending on the price of the share because if we are granting ESOP at a time where the price differentiates, so probably this fluctuates the charge. So these are the reason why we are showing subject.
But just to understand that if I look at your past annual reports and other financial disclosures, this cost has varied between 1% to 1.5% kind of a number, right? So just wanted to understand that there is that -- it seems to vary in that range. So shouldn't that be part of this non-normalized EBITDA?
I think you have both the figures in any case, so you have a normalized and if you see EBITDA figures so you can see that. But you're right. So there is a baseline number which will stay here which could be, I think 1%, 1.5% is good assumption, yes.
The next question is from the line of Jed Munshi from Concept Investor.
Sir, my question is related on the hospital beds. So do we have any plans to expand with partnering with hospitals for their diagnostic part as we don't disclose the numbers with how many hospitals you operate?
So we have said in the past that we continue to look at HLM, as and when we find a very strategic or a geographic fit available to us because expanding into a hospital lab management without back normal retail business can lead to a lot of other issues like outstanding debtors and so on. So it is best to do it with a lot of consideration rather than do it on a mass scale. So we are selective about the HLMs we enter in the contracts. But yes, we do, do HLMs.
Okay. So currently, our main focus is on independent labs and not on hospitals?
Yes, yes. So I think that is the main focus. Once in a while, we had an opportunity, we'll do HLM, no problem at all.
The next question is from the line of Sayantan Maji from Credit Suisse.
So my first question is on home sample collection. So I just want to check, what are the current trends that you're seeing? After realization in post-COVID outbreak, do you see patients coming back to your centers and the percentage of revenue from home sample collection, has it come down? And what is it currently? How much percentage of B2C revenues are coming from home sample collection? And what are we -- in case this is something which is sustaining even after COVID, and what are the steps that we're taking to be competitive versus especially versus the integrated digital platforms?
So 2, 3 points. One is that during COVID, I think the predominant mode of operation itself was home collection. So the number was very, very high, I think close to 20-odd percent those days. But pre COVID, number of home collection was [ 5% ] Today, I think what we are seeing is, let us say, about 8%, 9% of home collection, which is a better trend than what we had in the pre-COVID days but significantly down obviously from the COVID days. So that is 1 way to look at the numbers.
Second is underlying thing is about the patients choosing a lab of trust. It is not about convenience. Convenience is one of the way factors involved in it, but they want to look at lab of trust, and we continue to enjoy a very trusted position, a very favorable position on that count. So we're seeing our home collection revenues in line with this part of us.
Okay. And this 8% to 9% is of B2C or of the total revenue?
Of, I think, the total revenues, yes.
Of total revenue, okay. Okay. And in the day you have mentioned of variable model, can you just explain it a little bit, like what is this variable model which grows with business for you?
When we speak of variable model? Sorry, if I...
So in Slide 25 of the investor deck, it says that in the home collection slides, it's a variable model which grows to...
So Sayantan, this is 1 way of hiring people, which is fixed pay and another way is a pickup -- you pay as per pickup. So it is not a fixed charge like you have our own center versus franchisee center. It is similar to that, like instead of hiring people or giving fixed contracts, it is per pickup base payment.
Okay. So basically, [indiscernible] is entirely dependent on the number of samples he or she picks up in a day?
Right.
Okay, got it. Sure. And the second question is a bookkeeping one. So now that FY '23 is over, so what was the total impact on the EBITDA or IndAS benefit to EBITDA?
So it is about 2.5% roughly, which is on account of.
Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for their closing remarks. Thank you, and over to you.
Thank you, everyone, for being with us on this call today. I hope we were able to address your queries. If you have any more questions or queries, please feel free to reach out to us or our Investor Relations team in India, and we will be happy to clarify your thoughts. Thank you once again. I would now request the moderator to close the call.
Ladies and gentlemen, on behalf of Dr. Lal PathLabs, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.