Metropolis Healthcare Ltd
NSE:METROPOLIS

Watchlist Manager
Metropolis Healthcare Ltd Logo
Metropolis Healthcare Ltd
NSE:METROPOLIS
Watchlist
Price: 2 032.2 INR -0.63% Market Closed
Market Cap: 104.1B INR
Have any thoughts about
Metropolis Healthcare Ltd?
Write Note

Earnings Call Analysis

Q1-2025 Analysis
Metropolis Healthcare Ltd

Solid Growth in Revenue, Profit, and Strategic Expansion

Metropolis Healthcare reported a strong quarter with a 13.1% revenue increase, within the guided range of 13-15%. EBITDA rose by 21.2%, and PAT surged by 31.3%, attributed to operational efficiencies. The company maintained a 25% EBITDA margin, expecting to reach 26% by year-end. Patient volumes grew 7%, driven by higher revenue per patient. Expansion into 650 towns, focusing on Tier 3 cities, boosted revenue. Despite a temporary dip from a price hike in the B2C segment, growth rebounded by 7.5% in June. Continued focus on True Health packages and strategic initiatives are expected to sustain profitability and growth.

A Solid Start to FY '25

In the first quarter of FY '25, Metropolis Healthcare recorded a robust revenue growth of 13.1% year-over-year, totaling INR 13.4 crores. This growth was driven by an increase in patient volumes, which rose by 7%, alongside a 6% boost attributed to a price adjustment and changes in product mix. Additionally, the test volumes surged by 10%, reflecting Metropolis' effective strategies in a competitive healthcare market.

Margin Improvements

The company's EBITDA grew significantly by 21.2%, landing at INR 78.2 crores, and the EBITDA margin improved by 170 basis points year-over-year to 25%. This growth was largely fueled by operational efficiencies and effective expense management, with operating expenses increasing by just 10%. The profit-after-tax (PAT) saw a notable rise of 31.3%, reaching INR 38.1 crores, further signaling Metropolis' strong operational performance.

Strategic Business Segments: B2C and B2B

Metropolis' Business-to-Consumer (B2C) revenue soared by 18.4% to INR 169 crores, driven by specialty and True Health revenues which grew by 22% and 31%, respectively. The B2C segment now contributes 54% of total revenue, up from 51% in Q1 FY '24. Meanwhile, the Business-to-Business (B2B) revenue also witnessed a healthy growth of 12.4%, contributing 37% to total revenue. This demonstrates Metropolis' well-rounded growth strategy across both consumer and corporate sectors.

Optimizing Cost Structure

Management attributed the margin improvements to a combination of seasonality and structural optimization measures, including cost control, process automation, and productivity enhancements. The guidance for EBITDA margins for the full year is set between 25% and 26%, indicating confidence in ongoing cost management strategies and operational efficiencies.

Future Growth Initiatives

Looking ahead, the company aims to maintain revenue growth in the range of 13% to 15% for FY '25, targeting additional expansion into Tier 3 cities with plans to establish 25 new labs and 500 centers. This expansion is anticipated to enhance revenue from these underpenetrated markets, which currently represent a significant opportunity for the company. Revenue from these cities already grew by 18% year-over-year, contributing over a third of total revenue.

Focus on True Health Segment

True Health services, now contributing 17% to total revenue, represent a strategic growth area. Metropolis aims to drive sales through scientifically curated health packages while enhancing the consumer experience with technology-enabled services. The management foresees a positive trajectory in client engagement and sales through this segment.

Challenges and Considerations

While Metropolis has set ambitious targets, there are potential challenges. The competitive landscape remains intense, particularly in major urban markets. However, the company's focus on quality and customer experience is expected to set it apart from less organized competitors. Additionally, management remains mindful of the pricing dynamics in the industry, suggesting a cautious approach to any future price increases.

Commitment to Health and Governance

Finally, Metropolis is dedicated to enhancing its governance framework and ESG initiatives, ensuring long-term sustainability. The management's focus on scientific excellence and operational integrity assures investors of a stable growth path, blending ethical practices with commercial success.

Earnings Call Transcript

Earnings Call Transcript
2025-Q1

from 0
Operator

Ladies and gentlemen, good day, and welcome to the Metropolis Healthcare Q1 FY '25 Conference Call hosted by Centrum Broking Limited. [Operator Instructions]

I now hand the conference over to Mr. Sumit Gupta from Centrum Broking Limited. Thank you, and over to you, sir.

S
Sumit Gupta
analyst

Good morning, and a very warm welcome to all the participants on Metropolis 1Q FY '25 Earnings Call hosted by Centrum Broking Limited. With us today, we have the senior management team represented by: Ms. Ameera Shah, Chairperson and Executive Director; Mr. Surendran Chemmenkotil, CEO; and Mr. Rakesh Agarwal, CFO.

I will now hand over the call to Ameera Shah for opening remarks. Over to you, ma'am.

A
Ameera Shah
executive

Thank you, and good morning, everyone. Thanks, everyone, for joining us for this Q1 FY '25 earnings call today. I'm joined by Suren and Rakesh and IR adviser from HG. We have uploaded our updated results on the stock exchanges and the company's website, and I hope everyone has had an opportunity to go through them.

I want to start by thanking each of you for your continued trust and support, and it's your belief in our vision that drives us to push our boundaries and achieve new milestones. Let me begin with giving you an overview of the industry scenario.

The diagnostics industry is set for significant growth driven by rising health care awareness, the prevalence of lifestyle related and critical diseases, and the expansion of tertiary care across the country, especially in non-metro towns. Currently, we are observing increased consolidation within the industry.

The stand-alone unorganized players are struggling to grow in terms of volume, and the health tech players are facing a stagnation in terms of element growth. Both groups lack the pricing power of branded players in the illness segment who offer superior quality testing and tech-enabled solutions to enhance the consumer experience.

The wellness-oriented health tech players don't enjoy the same level of confidence from doctors, making it difficult for them to enter the illness space in any meaningful way. Moreover, consumer preferences for superior testing experiences are driving the industry to adopt higher standards, such as a more specialized talent pool, advanced infrastructure and large investments in technology. These elements are now integral to stand apart in the market and scale profitably.

A year ago, the industry was characterized by aggressive pricing and intent competition. However, the current landscape is shifting towards a more stable pricing environment. Consumers are now prioritizing higher-quality services over low prices.

There's also a clear focus on developing new capabilities in genomics and molecular diagnostics, which is in the illness space expected to drive future growth. The industry is seeing an increase in M&A opportunities with more reasonable valuations compared to COVID times, but high quality and ethical players will always demand a premium because they are for few.

New players have realized that while entry barriers are low and scale can be built via the tail end of the market, the sustainability of the business is challenging, and profitability will remain elusive by building it this way. At Metropolis, our focus remains on scientific innovation that differentiates us from the others.

Secondly, geographical expansion that provides access and driving growth through strategic initiatives. I've always maintained that science is at the core of Metropolis. Our specialty segment is a key differentiator, collaborating with tertiary care specialists and providing them comprehensive super specialty diagnostics for treating complex diseases.

There is an increase in demand in this segment, and it is more margin accretive due to higher value and the specialized nature of tests, which command premium pricing. To this effect, we are strengthening our centers of excellence for specialty testing by expanding our test menu and accelerating our efforts in molecular genomics.

We have also created IMAP, which is the Internal Medical Advisory Board, to provide expert guidance on clinical and medical matters. Their insights and guidance will drive innovation and maintain our reputation for clinical excellence.

In line with the government's focus on upskilling and workforce development, we have recently launched MILES, which is a Metropolis Institute of Laboratory Education and Skilling in collaboration with reputed universities to provide continuous education and training for doctors and technologies.

We are actively expanding our market share in both core and emerging geographies, focusing on specialized tests and bundled wellness and illness packaging. Currently, the top 8 Tier 1 cities in India constitute about 60% of our revenue, and we are leaders in 4 of these 8 towns. While our peers are leaders in only 1 such city each.

Metropolis strategy has been about deep penetration in large cities through our own and retail franchise centers, which has led to premium pricing and world of pulp marketing. When you look at the top 20 towns in India, they contribute 75% of our domestic revenue. We believe the growth opportunity in these 20 markets remains robust, providing us a long runway for growth and continued expansion.

Given our strong operational lab infrastructure in these markets, our key strategy are to keep opening new collection centers and increase productivity at all these centers through brand's trust and excellent service. This will remain our focus this year.

Meanwhile, we have built 79 labs between FY '21 and '24, primarily in Tier 3 and 4 markets. By '25, we will have achieved our goal of establishing 90 labs. While these markets are growing rapidly for us, they still represent a small portion of our overall business. However, the significant growth opportunity that lies ahead of us is generating revenue from these 630 Tier 3 and 4 markets where we are already present but have not focused on extensively and therefore, they contribute a small percentage of the revenue.

Since we have already established the necessary infrastructure in these markets through our labs and collection centers. We believe that by intensifying our sales and product efforts, we can turn these regions into a strong growth engine for the future.

Our goal over the next 18 months is to additionally expand our network from 650 towns to 1,000 towns and at the same time, focus on driving more sample load through our existing centers in these markets. We plan to offer a full range of tests and work with both B2C and B2B channels through this franchise ARC model in the 650 going to 1,000 markets.

While we extend our network and geographic reach, we also remain dedicated to enhancing the growth and profitability of our existing partners and networks. Our aim this year is to create a differentiated brand and empower our services with AI and digitization for a serious customer experience for both B2C and B2B customers.

This will make it easier for customers to access services, schedule appointments, make payments and diseases that received results digitally. These enhancements also facilitate quick resolutions to queries and concerns overall improving customer satisfaction.

As we mentioned last quarter, exploring bolt-on and strategic acquisitions remains a key focus, allowing us to enter new markets and acquire new skills. I'm personally dedicating a positive on by my time in identifying and pursuing acquisitions that I believe will align with our strategy going forward. Any acquisitions will be done after due consideration of strategic benefits and return ratios over mid to long term.

Additionally, we have focused our time and money on building our IT infrastructure to optimize operations, streamline processes, reduce manual interventions and overall improved productivity. Our partnerships with renowned industry players, ensure access to the latest technologies and best practices, enabling us to implement operational automation and efficiency improvements.

Since they're investing significant capital and infrastructure and technology, we've established a CapEx committee to oversee these investments, ensuring efficient capital deployment.

We are deeply committed to enhancing compliance and solidifying our governance framework, prioritizing impactful ESG initiatives and social responsibilities is also central to our long-term strategy. One of the key focus areas for me this year will be to strengthen our governance to ensure that we operate with utmost integrity, transparency, accountability and no surprises.

Speaking of the quarter gone by, we have delivered strong financial and operational performance for Q1 FY '25 with revenue and margin growth as was expected in Q1, in line with our overall anticipation for the year.

In closing, our strategy for this year focuses on expanding organically in our core markets of pathology, exploring new growth opportunities in Allied Services and maintaining our commitment to scientific excellence and sustainability. With these strategic initiatives, we are confident in our ability to deliver exceptional value to our shareholders, customers and partners.

I personally want to thank our team, investors and Board for their commitment to Metropolis. Your contributions are what helped us able to provide the future for Metropolis and the communities we sell.

With that, I will ask Suren to now take you through our operational performance for the quarter and our strategy for FY '25.

S
Surendran Chemmenkotil
executive

Thank you, Ameera, and good morning, everyone, on the call today morning. We have had another superb quarter and began the year on a strong footing. Our Quarter 1 revenue grew by 13.1 percentage year-over-year, well within our guided range of 13% to 15% growth for the year.

We need to read this along with the fact that Quarter 1 is historically a relatively weaker quarter for the West and South of India for the industry. EBITDA and PAT for Quarter 1 '25 grew by 21.2% and 31.3% respectively. This margin increase is attributed to operating leverage and operational efficiencies. We have maintained better OpEx control with costs increasing by only 10 percentage while the revenues grew by 13%. In the coming quarters, we anticipate to build on this further better.

Moving on to the operational KPI. Our patient volumes for Quarter 1 grew by 7% year-on-year with a 6% increase in revenue per patient. Test volumes grew by 10% year-on-year with 3% increase in revenue per test. We have consistently seen high single-digit patient volume growth over the last 9 quarters and remain confident in our volume trajectory going forward as well.

In this quarter, patient volume growth was partially impacted by a price increase in our B2C segment effective January '24. As I told you all earlier, typically, after a price increase, there is a temporary dip in volumes for 1 or 2 quarters. However, we have observed a month-on-month uptick with volumes of June, growing by 7.5%, and we expect this positive trend to continue.

In Quarter 1, our revenues from True Health, wellness and illness package bundling grew by 28% year-on-year. Our approach to selling packages are focused on empowering consumers with health information along with providing a commercial benefit, all backed by an excellent tech-enabled service. This strategy has enabled us to upsell to existing customers, resulting in higher revenue per patient and more test per patient.

Scientifically-curated packages and targeted marketing allow us to maintain a laser focus on digital channels, enhancing our margins. With continued emphasis on this approach and further automation, we believe Truths contribution will increase with each coming quarter.

Through our network expansion strategy, we have increased our presence to over 650 towns by Quarter 1 end, up from 300 towns in financial year '23. We have successfully identified and entered markets with significant potential that faces supply side challenge for quality diagnostic services. While we have entered these markets through a franchisee center and the expansion has boosted our revenue from Tier 3 cities, it is still early days, and we believe this part of the business has a long runway for growth.

Revenue from TSB cities has grown by 18% year-on-year, now contributed to more than 33% of total revenues. We are committed to our expansion strategy of adding 25 labs and 500 centers this financial year with a focus on Tier 3 cities. This involves building a lab infrastructure and establishing network spokes to serve these labs as feeders, which will drive long-term revenue growth.

While building lab add to cost initially, once the feeders are established and productive, they will significantly increase our revenues in the future. Our B2C revenue growth has been very robust, increasing by 18.4% in Quarter 1. The B2C segment now contributes to 54% of total revenue, up from 51% in Quarter 1 '24, keeping us on track to reach our target of 60% B2B.

Our B2B revenues from True Health and Specialty grew by 31% and 22%, respectively. Our B2C revenue for the Mumbai market has increased by 18 percentage, the overall B2C growth of 1.4 indicate we are expanding across various markets. We've also seen faster than average revenue growth in cities like Bangalore, Pune, Surat indicating increased consumer mind share for quality diagnostic testing.

Based on our internal costing analytics, we understand that our B2C segment yields higher margins improvement and specialty areas, which is why we continue to focus more on these segments. Additionally, our strategic initiatives on B2B channel have enabled us to achieve robust same-store growth from our own center in established markets. We aim to replicate the same in our partner network as well, ensuring their growth and profitability.

Our recently launched partner engagement program, NetLink, will be instrumental in this regard. By providing structured support and basis to our partners, we have enhanced our network reach and efficiency. This program will help us strengthen relationships with our existing partners and retain them, thereby ensuring growth and success.

Our B2B segment has also performed exceptionally well, with revenues growing by 12.4% in Quarter 1 '25. Over the last 4 quarters, we have increased our market share in the B2B business while maintaining our discount structure ensuring profitable growth. B2B revenue contribution stood at 37% for Quarter 1. We have implemented several initiatives, including engagement through the partner portal, a centralized as and assigning dedicated key relationship managers to enhance service levels and drive B2B growth.

We have consciously decided to defocus on our institutional business coming from government tenders, low-margin corporate accounts and aggregators. As a result, the remaining 9 percentage of our business, excluding B2C and B2B has grown at a slower pace than the company average, impacting overall revenue growth for short term. However, we believe that this is a well thought out plan and there is sufficient potential in our B2C and B2B segment to meet and exceed our revenue growth aspirations in the near future.

Regarding our broader numbers for full year '25, we hope to achieve revenue growth in the range of 13% to 15% for the year as guided at the beginning of the year. Keeping in mind that coming quarters are historically stronger, particularly Quarter 2 and Quarter 4. This will -- this growth will be driven by high single-digit volume increase and favorable change in product mix, which will help enhance the revenue per patient.

In terms of operating margins, while Q1 has been a strong start, we expect margins to expand further during the rest of the year due to operational leverage and seasonal factors within the business. We will continue to focus on margin-enhancing segments like True Health and Specialty through our B2C channels.

As we continue building new labs at a rapid pace this year, we anticipate roughly a 1% EBITDA dilution due to the OpEx losses associated with these new labs. This valuation is already reflected in our current P&L and is expected to continue at a lesser number until full year '26 after which issued sees and contribute positively to our margins for long term.

I would like to take a moment -- on the closing, I would like to take a moment to acknowledge the hard work and dedication of our partners, the trust of the clinical representatives and their first of our team. Together, we are building a stronger and more resilient organization.

With this, I'll now hand over to Rakesh for the financial updates.

R
Rakesh Agarwal
executive

Thanks, Suren. Let me share some of the key financial performance for the quarter.

Our revenue for Quarter 1 financial year '25 stood at INR 13.4 crores, a growth of 13.1% Y-o-Y with 7% patient volume growth and 6% on account of price increase and product mix change. Our test volume growth stood at 10% for Q1 financial year '25. We count profiles as one test in ML and underlying debt count will be higher. Revenue per test has increased by 3% on a Y-o-Y basis.

Our B2C revenue stood at INR 169 crores as compared to INR 143 crores in Quarter 1 financial year '24, an increase of 18.4%. Our B2C revenue for True Health grew at 31% and for specialty at 22% on a Y-o-Y basis.

Our B2B revenue grew by 12.4% for Q1 compared to same period last year with B2B True Health and Specialty growing by 24% and 11%, respectively. Revenue contribution of True Health segment to total revenue has moved up to 17% from 14%, indicating a growth of 28% Y-o-Y.

Reported EBITDA for the quarter stood at INR 78.2 crores as compared to INR 64.5 crores, a growth of 21.2%. Reported EBITDA margins for Q1 financial '25 stood at 25%, a growth of 170 basis points year-on-year. PAT for the quarter stood at INR 38.1 crores with margin of 12.2%, up from 10.5% for Q1 financial year '24, which is an increase of 170 basis points year-on-year basis.

Moving on to the balance sheet. We have a net cash surplus of INR 137 crores as on 30 June 2024.

That's all from my side. With this, I open the floor for Q&A. Thank you.

Operator

[Operator Instructions] First question is from the line of Amey from JM Financial.

A
Amey Chalke
analyst

The question I have is on the other expenses, which have gone down sequentially. So in the opening remarks, you mentioned that we are optimizing costs, et cetera, which has led to margin improvement as well. So should we assume the other expenses as a structural change? Or is it led by some seasonality or compare?

R
Rakesh Agarwal
executive

Yes. So I will take this. So this is a combination of both. We -- obviously, the seasonality will help us to ramp up the revenue and that will come in a bit of a margin. And at the same time, you are also looking at some structural changes like a bit more of automation, process improvement and the efficiency coming through productivity increase.

So all this combination will also help us. And at the same time, the seasonality will. So this is a combination of both.

A
Amey Chalke
analyst

So going ahead, considering we are expanding as well. So how should we look at on the margin front, if you can guide us for the full year?

R
Rakesh Agarwal
executive

So we have already guided that we will be in between 25% to 26%. So we have closed our Quarter 1 at 25%, and we believe that we should go upside to 26% as we go further. So we'll be somewhere landing at between 20%, 25% to 26% during the year -- for the full year.

A
Amey Chalke
analyst

Sure. And on the top line guidance of 13% to 15% for the full year, I believe we also said that high single digit would be coming in from the volumes and best effect would be maybe the mix and the price hike. So is it possible to -- guidance on the price hike from next year, it would be a similar nature like we saw last year?

S
Surendran Chemmenkotil
executive

Yes. All right. So see, at this point of time, there is no discussions going on on the price hike because it's too early for us to think about it because we just only over with 2 quarters with the earlier price hike. So -- and our focus is to definitely to increase volumes, improve productivity out of the stores, from the franchisees, expand into the 650-plus markets, et cetera. So that's where we are focus going to be when it comes to the revenue growth.

Any price increase at this stage or early for next year, it's not -- I mean, under discussion at this point of time, we will take a call at the appropriate time depending upon what the market conditions as well. So volume growth definitely is one of our big focus areas, and you will see that rolling out as we go towards the sort of year.

A
Ameera Shah
executive

I just want to add something to that. Can I add something to that? As you remember that the 13% is a breakup of 3 things. One thing is a 7% volume growth. The second is the price input. And the third is actually the product mix, which is changing the average revenue per patient. So the price does not impact the product mix part of it.

So what we will certainly see going into next year and out of this 13%, only approximately 2%, 2.5% has been effectively added by price. So the rest of it is actually coming because of sort of work on the ground in terms of volumes and in terms of changing the product mix.

So when we are thinking about next year, are -- we obviously don't have any guidance at this point of time in terms of revenue, et cetera. But the way these look income the 3 levers. And even if tomorrow, we don't end up doing price or we end up doing price, we are thinking about price as an annual or once in 18 months kind of a scenario. So we don't have a time line fixed yet at this point, but we certainly obviously the volume and the increase in ARPP, which is the average revenue per patient will certainly happen regardless whether we do the price increase or not.

A
Amey Chalke
analyst

Just one follow-up is that the price hike is not taken, let's say, as of next year. Then the ask for the ARPP is significantly higher. And are we confident of achieving that next year?

A
Ameera Shah
executive

See, ARPP is factored in by multiple things, right? It's about one, educating doctors about the more advanced diagnostics that are available and therefore, then recommending more specialty diagnostics for patients. That's one.

The second is how much we are able to drive more to Health, which is the bundling and the wellness, right? So as patients walk in, there are patients who want to then buy bigger packages. And what is our ability to do that to worsen.

Now on both sides, as you can see, as we have shared between in the presentation, both these areas are growing faster for us than the overall revenue for the business. And that's what our aim is to continue to do is to drive specialty and True Health at a faster pace. And therefore, if we are able to continue to do that, automatically, the ARPP will keep increasing.

So I think we are confident in where we stand on the execution front. And like we said, it's not that we are not planning to do a price increase, we just haven't decided on the time line whether it will be 12 months, 18 months. So I think we'll just have to wait for that.

Operator

[Operator Instructions] The next question is from the line of Kaustav Bubna from BMSPL Capital.

K
Kaustav Bubna
analyst

I wanted to understand what's stopping us from growing any 25% on a year-on-year basis, why are we guiding for mid-teen growth. What is it in the market and the factors that are stopping us from growing faster. Could you say?

A
Ameera Shah
executive

So the industry -- the way the industry is structured is you have a head in a team. The head is really where you have your best quality doctors, best quality hospitals and the top labs, which are your customers. And then you obviously have a team, which is made up of a lot of unorganized players, which tend to be sort of a lower standalone, right?

Now the customer base that we are sort of going after is really more in the head because in the tail, we find that the quality of work because there's no minimum standards in India. The quality of work and therefore, the kind of discounting and the kind of service requirement, it makes your business actually not so profitable if you follow good quality minimum standard.

So if you try to grow much, much faster, you have to then be willing to play in all parts of the business, in all parts of the industry, which may then actually have a negative impact from a margin perspective because you line up providing overservicing unit economics for customers which are not really profitable. It might impact receivables days and fairly among other KPIs as well.

So I think the -- and you have to remember also that the market is, at this point, still quite fragmented and unorganized in nature, and while we've always service an easy market to enter from a competition perspective, it's not an easy market to scale profitably. And therefore, I think these are some of the thoughts that we are thinking about where we should really play, where we should focus our energy because it's easy to build scale and grow at 25%, but we are not going to necessarily get the commensurate profit.

That actually make this business work build or a business, which is sticky enough and where you're building it on the back of brand and science rather than building it on the back of your discount. So I think it's our model is more unique based on science and service and then we would like to build it in a way that is sustainable and profitable.

S
Surendran Chemmenkotil
executive

As I can just add one more statistic to that. In Quarter 1, if I look at the industry average growth of all the operators who have published the results, it stands at 12.6 percentage and we are at 13.1 percentage. So our endeavor is always to grow higher than the industry average, and we are putting our efforts to be there.

K
Kaustav Bubna
analyst

Excellent. Just one more question. A few years ago, we did an acquisition to expand our presence in the South. So I want to understand, going ahead, obviously, this market could consolidate going ahead. So -- and we could be the ones consolidating it.

So I wanted to understand where would we like to expand inorganically? Now where are the opportunities you're seeing, like in which states and which regions in India?

A
Ameera Shah
executive

So there's a -- we have about 2 or 3 different strategies now when it comes to acquisitions. One is what we have traditionally done, which is the geographical expansion, right? In Hitech also, which we did in October '21 was not so much about expanding into South as we were already the leaders in Chennai, and we were a significant player in Bangalore.

And by acquiring Hitech, it accomplished two different things for us. It helped us solidify our leadership in Chennai. And what we have found in health care is when you are a dominant player in the market. There are specific benefits on word-of-mouth premium pricing, profitability, all of those benefits come through.

And therefore, rather than being in 20 different places in markets, it's always better to actually be leaders in fewer markets rather than just being a very, very diversified option. So keeping this in mind, we would like to continue the strategic thought around geographical expansion. So that's one.

The second thought we also have is that there will be sort of technical or medical skill you may want to in terms of products, in terms of new services and new that specifically help us grow for the future. So there might be acquisitions also potentially linked to bringing in new service offerings into the business.

And the third kind of acquisition, which could be looked at could be that we've seen a lot of entry over the last 15 years of players who've come into the market. And there are many what we call as sort of dumb forms in the industry today, which are knowing that they are never going to make money because they're subscale or structurally, there are issues, but a larger player can potentially to be around with better management.

So we are looking at these 3 different buckets for strategic acquisitions. And we'll obviously, whenever we are applying our lens for a acquisition, we look at not only the strategic imperative, we look at obviously the return ratios, the IRRs on these projects over a period of time. And we obviously look at the quality of the test.

Operator

[Operator Instructions] The next question will be from the line of Pranav Chala from Antique Broking.

U
Unknown Analyst

Congratulations for good set of numbers. So my first question would be regarding -- we've seen a slowdown in the growth in our focus to. So would you like to give any color on the reason for this slowdown? Is this competition is the facturation or a high base or anything that stuff?

S
Surendran Chemmenkotil
executive

The focus is -- sorry, focus, it's in this range only over last couple of Quarters, 2, 3 quarters, we are in the 8% to 10%, 11% range on the growth because these are the big market, the top markets and already keeping with the reasonably good high base. Our efforts to drive these markets for further growth is like, as I told during the speech, it's about increasing the same-store growth further and also bringing in the franchisees to add on to the overall growth story and also focusing on the True Health and the specialty segments, right?

So this focus city in the coming days, you will see a little more upside on the growth perspective. But if you look at it 2, 3 quarters, it's in a similar range and we want to do better on the focus cities.

U
Unknown Analyst

That is actually very helpful. And on the M&A front, any particular geographies that we are looking for because some of our players are, I think, in South as of now, South and East. So what would be our record markets given that we already have a strong presence in Southwest?

A
Ameera Shah
executive

See, our belief, our model is a little bit different from our peers models. I think some of our peers look at sort of regional expansion as a goal. We always have looked at this business as a citywide focus. And the reason for that is like the statistics that we mentioned in the speech, we're out of the top 8 Tier 1 markets in India, we are leaders in 4.

Now that cannot happen unless you have a city-specific mindset. If you have a regional mindset, then that will never happen, right? Because in these Tier 1 markets, you have to be able to build very strong B2C and the ability that we have is to be built it in 4 markets where we are the leader, right?

So while we will continue looking at North and East, obviously, because those are the -- we are challengers and not leaders in those markets, and therefore, M&A will be helpful. But there are many cities we win in West and South, in which today we are not leaders. And therefore, is the model we did get a good acquisition that allowed us to fund, to build dominance in leadership in the market in South and West, we would not refrain from it.

Because it's very different to go into a market and like through a distributor and build the B2B business, but it's very different to actually go into a market and build a B2C business. And therefore, we'll be open to all markets, but obviously, preference is not.

U
Unknown Analyst

And then last question from my end. Given that we have changed our presentation, can you provide us a split bid-out North, South, East, West for the quarter?

A
Ameera Shah
executive

I think that's already in the presentation, right?

S
Surendran Chemmenkotil
executive

What is that question? Contribution -- it's the overall contribution. So we'll look at it and provide you. We'll have noted down this.

U
Unknown Analyst

Okay. And as well as value and volume split for our test.

S
Surendran Chemmenkotil
executive

All right.

U
Unknown Analyst

Infection in concessions. I'll get back in the queue.

Operator

The next question will be from the line of Gupta from Centrum Broking.

S
Sumit Gupta
analyst

And I want to understand all the brand market analysts in the Western India part of it. And how is the pricing scenario going there? And how much is -- like what is the competitive intensity that you see in the esterlindian marketers, particularly by region?

S
Surendran Chemmenkotil
executive

See, the Western India, particularly Mumbai, the competition intensity is not any lesser or more than the past, right? I mean we continue to see a similar amount of rigor from all the competition. But of course, we have been seeing too much of competition from the pricing point of view over the last 2, 3, 4 quarters, right?

It's purely on the basis of the productivity efficiency, product mix, et cetera, is what's playing in this market. So we can see -- you have seen that we have done 18 percentage growth in Mumbai and our Pune is another city in the West region is doing very well. Surat is doing very well.

So we are -- I mean, on our trajectory with respect to growth on all the Western part of the country. And as a whole also Maharashtra is doing very well for us. So any specific thing that you wanted to know, please ask. Otherwise, in terms of our action plans on the West part of it, the rigor, et cetera, will continue to be as it is and it's going to help us in terms of our overall growth.

S
Sumit Gupta
analyst

Okay. So just want to understand the geographic mix over the, let's say, next 2 to 3 years, like you plan to expand into like to M&A Southern market. So just want to understand when the program remains more or less the same? Or will it change over the near future?

S
Surendran Chemmenkotil
executive

The mix could, of course, today, West and South being our strong markets, the mix is largely skewed towards West and South at this point of time. And as we keep expanding to the North and East and to the next 300 towns, like we said, of course, the mix will start changing a little bit as we go forward, right? But to some extent, things will also depend upon where we will go and do some of the acquisitions, et cetera.

But organically, if you ask the mix, the mix will definitely keep changing, and we will -- you will keep seeing North and East part of the country getting stronger. And we talked in the past that a Pages, Matias are some other 3 states where we are going to put a lot of expansion plans and also Andhra and Telangana, right?

So -- which, of course, falls in south. So I mean, you will definitely see some amount of change in the mix going forward on the market, which today, we may not be as strong as what we should be.

S
Sumit Gupta
analyst

Okay. And sir, just one thing on this point. So what is the rationale that you look forward to target new markets just like you said, [indiscernible]. So I just want to understand on that.

S
Surendran Chemmenkotil
executive

What is the rationale for?

S
Sumit Gupta
analyst

Like how do the markets like what do you see in the particular market debt we focused on?

S
Surendran Chemmenkotil
executive

Okay. When you enter in the new market you're asking, right? What we do there is a science behind entering into a new market, right? See what we look at it is, first, of course, we start with what is the population of the city, what is the medical facilities in the city and how many hospitals, how many physicians and how many doctors in that city? What is the same city, what is the competition.

So all this put together, we have a science we figure out, okay, what is the right time to and right market to enter, what's the right time to enter. We first process that. And then we start with the B2B presence in that market. We go and appoint some of the B2B clients who will take samples for us and send it to us, particularly specialty samples.

And when the volume leads to a certain level, then we go there and start our own centers and we start the B2C. And if the volume picks up to certain more level, then we'll go and put up a lab there. That's largely the broader central science that we use in setting up any new cities.

So we mentioned that we have moved from 300 to 600 cities that we put up labs as an Alberta centers either through B2C or B2B, and we need to keep expanding this 650 cities first and grow the volumes, that's the first opportunity available. And at the same time, we'll move the number from 650 to 1,000 cities using the science that I talked about.

S
Sumit Gupta
analyst

Understood, sir. And sir, lastly, on the experience that impact in India tests specialized routine tests, how results going teased. And if possible, can you provide the split between these making us to provide previously specialized mansion on also.

S
Surendran Chemmenkotil
executive

I think we talked -- we have mentioned that 37% of the total revenue is coming from the Specialized testing. And the True Health, which is the wellness and illness bundle packaging has moved up to 70 percentage. So 54 percentage of the total business is actually coming from Specialty and True Health and the rest is coming from the routine and semispecial.

S
Sumit Gupta
analyst

Okay. So how was the pricing scenario like what kind of pricing power we have and we just want to understand this pricing also. So what is equated bring the pricing down. Is it only the rupee less that is there? Or are you certain competition and some other MBS.

S
Surendran Chemmenkotil
executive

See, whenever -- yes, sorry, please go ahead, Ameera.

A
Ameera Shah
executive

Yes, I'll just add something to that. So remember 1 thing, pricing is not competitive on a specific test. It depends on the customer. I'll tell you what I mean by that. People think that routine test pricing is commoditized and specialty tests are advanced. That's not actually true. The way it works is that you are a -- if you were a patient is fine, you're not a patient at all, you're a healthy customer, then you may start looking at discounts depending on your mindset. Something that drives your decision making.

But even in wellness, we find there are many customers who are most the saying we are bins once a year, I don't want to compromise and I'll do it only from a trusted player and I'll pay whatever I need to pay. But when it comes to illness and your SIC. For example, a patient who's got heart disease, even a cholesterol, which is a very routine test. This is a very important test for them. So you can't say that the cholesterol test is therefore commoditized, and therefore, the pricing is low.

So actually, what we find is that pricing is completely impacted by the criticality of the patient. And the more critical the patient the less chances they are willing to take on something going wrong. And the more chances that they will go to a branded player that they trust and then price actually has very little meaning because you're doing testing once a year, and your average spending some INR 700, INR 800. It's not a very expensive deal for most people.

So we actually have found that the pricing is not a challenge. The only thing which is increasing every year has actually been the distributor margin. So it's not that consumer prices are coming down, but distributor margins are going up. And now that depends on your model.

If you are largely led by a sort of you have built a business which is discount led and very heavily dependent on distributors, then the last few years have been challenging for you. But as an organization, as we mentioned, that has not been our model. Our model has been more direct-to-consumer, direct-to-doctor and therefore, frankly, we are discount percentages are not increasing. In fact, they've been very stable when it comes to margins for distributors.

Suren, if you want to add anything?

S
Surendran Chemmenkotil
executive

Yes, that's fine. I think you mentioned that.

Operator

[Operator Instructions] question. The next question will be from the line of Pranab Chawla from Antique Broking.

U
Unknown Analyst

So much for giving an opportunity I can. So on the gross margin front, if I see our gross margins has been -- has only marginally improved, whereas our B2C mix has continue to improve our focus in Tire 1 cities has also improved. So on those sides, it has always been tactic, but our gross margins are not meaningfully improved. So is there a particular reason why that is the case?

S
Surendran Chemmenkotil
executive

Yes. So I will just add on 1 or 2 things. While you are right that this whole B2C growth and growth should add the gross margin. There are certain activities, which we are doing also taking a new labs which we are creating. So that actually has a higher material cost in the initial 6- to 8-month period because there are very low volumes there. And the cost of material is directly proportional to the volume. So that is one reason.

Secondly, that we are also expanding our testimony in a lot of new geographies. So we have added a lot of new tests in new locations. And in RL, that also in the initial stage, we face a bit of gross margin lower in that sense. And definitely, as we are expanding our test menu every month.

So we are adding a lot of new tests, and when we add new tests, especially in the facility segment, but this test comes with a lower volume in Italy stage and a higher cost. So these are the 3 factors which actually unify. But obviously, from a long run point of view, all these are work investing.

U
Unknown Analyst

Sir, just a follow-up on that. So when -- if you're saying the new expansion that I fail to understand how new navigation is impacting gross margin because I'm assuming these may be franchisee centers majorly and you may be processing tests at your main center. So your other expense traveling the test movement cost would be captured in our expenses in your processing maybe happen in your main processing center.

S
Surendran Chemmenkotil
executive

So okay. Please understand this, we are expanding the centers to the franchise and labs all labs are our own less. The one which is coming up in Tier 2, Tier 3 to is all our own less. So when a new lab comes up, the cash volumes in the initial months will be lower. But at the end of the day, we have to -- once you open up a consumable kit, you need to consume a certain amount of period.

And hence, there is relatively higher material cost from a new labs and also all varieties of new tests that we start right? So that is what is impacting the impact in the gross margin, like Rakesh said. And it's not anything to do with the franchise when it comes to the new labs. Only the centers are been done by the franchisees and a last run by us, if that clarifies your question.

U
Unknown Analyst

Sir, in Delhi, if I'm not mistaken, the previous couple of quarters, we were taking write-offs and making provisions for receivables that we had from the government. So is there any update on that?

S
Surendran Chemmenkotil
executive

So we continue to do that. I mean the -- whatever revenues come from that account, we continue to provide for at this point of time. And while our efforts on collecting the monies are also on.

U
Unknown Analyst

But if I'm not mistaken, we had decided that we were planning to stop supplies and until we start receiving from the government.

R
Rakesh Agarwal
executive

So there are 2 accounts in the government. Obviously, one is this magne, which we spoke last year, and there are discussions that how should we continue the relationship. The volumes have come down particularly this year. And there are contractual obligations on Amami, which we are looking at.

And accordingly, we will act upon. We cannot just abruptly stop any services. These are which are publicly distributed. And there is no other contract as such as of now, where we are not receiving payment, and we are continuing to supply services.

Operator

The next question is from the line of Aashita Jain from Nuvama Institutional Equities.

A
Aashita Jain
analyst

A couple of questions. So firstly, on your revenue growth guidance. Would it be possible that the 13% to 15% growth seems sustainable even for the next 2 to 3 years in the absence of price out. As stated today are expanding and the focus is more in the mix. How do you see this coming out in the next 2 to 3 years?

S
Surendran Chemmenkotil
executive

Okay. So actually, sir, we have guided for 13 to 15 percentage for the full year. And also -- I mean, once we do that, and I think going forward also, we should be talking about a similar level of growth. And on the pricing part, like Ameera also mentioned it, we are not saying that price increase is not on the cost, but we're not going to take the prices up I mean we said it's an appropriate time, we will do that.

And we need to earlier, I mean, as of now, the industry do in 2 years, 2.5 years once but we will keep looking at the opportunity to increase the price as we go, right? And I mean, until then, we will focus on the volume growth, the cash mix between TruHealth and the specialty and also the volumes coming from the new towns and the new labs that we launched.

So it's a combination of all that. So we are optimistic that the guidance that we have given for this year can even be stretched to the year beyond the next 1 year.

A
Aashita Jain
analyst

Okay. This is fine. The second question is on TruHealth. So it's already contributed about, I think, 17% to our revenues. Where do you see it settling in the next 2 to 3 years?

S
Surendran Chemmenkotil
executive

Well, I think I don't want to put a number to it because there's a great opportunity. As and when we keep exploring, we keep seeing a lot of opportunities in this segment. Bundling in the illness packages and also driving the wellness. We are clearly seeing good opportunities because, one, of course, is giving a lot of good information about the health to the consumer and also commercially good for the consumer, right?

And we are delivering it through technology-enabled platforms. So I mean -- and also 360-degree like is going through all the -- all kind of touch points, whether it is digital, whether it is or service centers or from the call center. So every piece is helping us to grow this business.

So as and when the consumer adoption and the awareness goes up, this only keep getting quarter-on-quarter. I mean, every quarter, we see that this last quarter to this quarter, last year to this year, we are seeing growth, right? So we can be sure that this will keep growing.

I don't want to put a number to it for a year or 2 at this point of time. We would take this to -- we would definitely like this to be a very big part of our portfolio.

A
Aashita Jain
analyst

Understood. No, I just wanted to understand the extra how you are looking at.

S
Surendran Chemmenkotil
executive

Yes, for actually. So you would see that 17, 20, 25, so I don't want to put a time bank to that. But definitely, there's a huge opportunity as we keep exploring. We can clearly see that it's a good portfolio that we are working upon.

A
Aashita Jain
analyst

Sure. And just lastly, on your expansion plan. So I see that one of the key geographies that you plan to expand in UP and other players who are directing their expansion trends towards this season. So what gives us confidence to grow there and even been successful brand given the noncore market for us?

S
Surendran Chemmenkotil
executive

Yes. So I want to -- yes, some time back, I spoke about the signs that we use for geography expansion, right, the population, the medical setup, the opportunity, the competition, et cetera. So we do all those kind of signs and we arrive. These are the key cities. Then we should go and operate.

And also, some of the cities are not supplified. It's definitely we find efficiencies in terms of good quality diagnostics. So on the base of that, we are identifying these parts and putting up labs. And so far, our success rates have been pretty good, right?

And of course, like you know, UP, MP, on all very highly populated places. There medical facilities can still get better. So that's the reason why focusing on these cities. I mean we are seeing -- wherever we are putting up labs and centers we are finding things getting better sooner.

Operator

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

A
Ameera Shah
executive

Thank you, everybody, for joining us today for the Quarter 1 were of results. As we've mentioned and just trying to summarize, it's been a good quarter for us. We've been very encouraged by the very positive volume growth, the ARPP growth. And we believe that we are very much on the right track. And obviously, the margin holding up as well.

Usually, Q2 and Q4 are the best quarters of the year for the organization. And we have already gone into Q2 with that optimism of being able to have this quarter be better than obviously Q1.

We are very excited also about the other robust things that we are building in the organization, whether it's the systems, processes, technology and really good quality of team. And all of these things together really make us very excited about the future and really diversifying into new markets, like we said, we are present in about 630 other markets, which constitute low revenues today. And how we can really make these centers much more productive and expand further into 1,000 markets of India.

So the future and the runway for growth for this industry and from a chocolate specifically is very high, and we would definitely continue to see these engines of growth keep churning quarter-by-quarter. Additionally, of course, we will be looking at acquisitions as well, things that are strategically aligned to us and look forward to accelerating the growth through that aspect as well.

But we are very excited and positive and we look forward to continue to chatting with you the next quarter. Thank you, everybody.

Operator

Thank you. On behalf of Centrum Broking Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.