Metropolis Healthcare Ltd
NSE:METROPOLIS
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Metropolis Healthcare Ltd
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Thank you for joining us for the Q4 FY '20 Earnings Call. I'm today joined by Vijender Singh, CEO; and Rakesh Agarwal, CFO; and SGA our IR adviser. The presentation and press release has been issued to the stock exchanges and uploaded on our company website. I hope everyone has had a chance to have a look at our performance.Let me begin by stating that we remain supremely confident on the growth of our business and industry, and believe we are at the cusp of a dynamic shift towards organized diagnostics in India, where players like Metropolis will gain and cement leadership position. While we may have short-term pain in immediate months to follow, the normalization of operations will increase momentum in favor of organized players.The last time we spoke, no one would have imagined the extent of spread of coronavirus in India. In early March, we were continuously asked by everyone if we will be testing for COVID-19 with specialized experience of over 26 years in molecular biology techniques. We were always fully prepared to meet the testing needs and challenges. At Metropolis, resilience is in-built in our DNA, and the entire Metropolis family is working together with a deep sense of urgency, passion and commitment. The only goal for our experienced team of doctors and scientific team is to be able to help patients and doctors to get a reliable diagnosis as quickly as possible.Let me now give you a quick update on COVID-19 impact on our business; our resilient model, which has emerged stronger during the crisis; how we believe the industry will shape the post-COVID era; and I will spend some time on Q1 FY '21 outlook and overall FY '21 objective.Q4 is traditionally the strongest quarter for our company in the diagnostics industry. With absence of festival vacations, Q4 tends to be a very strong revenue quarter for us. Q4 FY '20 began on a very positive note with strong momentum in January and February, where we saw 13.5% growth in January and 17.5% growth in February, and our March revenues were very strong, and had we not been in lockdown situation, we would have witnessed our best monthly and quarterly revenue. On account of COVID-19, we believe we have lost INR 25 crores in revenue and approximately INR 17 crores in EBITDA. The reason I say INR 17 crores, which appears a bit high for 2 reasons, one, we get tried for benefits that typically show in an account of high volumes we were clocking for March month, as well as for Jan, Feb, March at the end of the quarter, which did not come in this time because we were not able to reach the numbers for volume; second, subsequent operating leverage benefit. Let me now spend some time on how we view COVID-19 in subsequent business environment. COVID-19, I'm happy to share that we were the first private lab in the country to start testing to this day. With the best TAT, which is turn around time of report; continuous medical engagement with doctors and government authorities; strong branding and customer equity that we enjoy, we were successful in turning out COVID-19 testing. Initially, the testing lab was set up in our Global Reference Lab in Mumbai, however, as volume increased, we set it up at a separate facility and a dedicated facility in Thane, which is in Bombay, and subsequently in Chennai, Bangalore, Pune and Delhi.We have strengthened the safety and collection protocols across our lab network with heightened training for our collection and technical staff. We are ensuring minimum disruption due to availability of manpower. Each location during crisis had a business continuity plan coordinator to raise red flags in terms of absentees and sickness. Crisis management team of clinicians and lab head who we identified will be back up for processing [ the amount ]. We had 100% adherence to Ministry of Health and Family Welfare guidelines. Over the course of April and May, we have crossed the samples from across India. Our CapEx investment in setting up COVID-19 tests is estimated about INR 1.25 crores. With testing price capped at INR 4,500 per test, the realization is not profit accretive for unit economic basis on project, but will help us in covering fixed costs in a significant way and therefore, minimizing margin downfall. We are happy to report that COVID-19 has given huge impacts to our stakeholder engagement, whether it be doctors, central and state government regulators in not only existing markets or new markets [ at all ], it has certainly improved the brand equity for Metropolis at all levels.In our view, the way forward for COVID-19 is expected to be as follows: safety and hygiene will become very important to the consumer, so we will use this as an opportunity to use our professional services to gain market share. As we know, the unorganized sector does not tend to have safety and hygiene parameters to same length. More point-of-care testing will emerge for testing at home, and we are evaluating how we can participate in this opportunity. Corporate individuals will want to do antibody testing in large-scale to scan the immunity levels of workforce. If the government permits, this will be an opportunity. And people may want more home visits rather than walk into centers. We are scaling this up in a significant manner and expect it to be a big opportunity for organizing trusted brands to gain more market share. It will also allow rationalization of front-end networks and cost savings.At a macro level, we strongly believe COVID-19 will change the operating dynamics for the industry and organized, capable testing laboratories such as ours will be the biggest beneficiary of this change. We estimate that unorganized stand-alone labs are facing similar cost pressure due to lockdown. With faster adoption of quality standards, partly enforced by government and partly indirectly forced upon by customers, therefore, the closure of operations for many of these stand-alone labs.Another important factor we foresee for the industry will be that the customer will no longer view pricing as a criteria for lab selection, but quality is the #1 criteria. Higher quality standards will tend to support after-sales service and doctor engagement will be key factors enabling lab selection process. And this is the organized lab [ selection ]. Indian customers will view diagnostic chains as COVID-19 capable and non-COVID-19 capable. As these tests will become the new norm, more market share will shift towards the more capable labs as we have seen for the past. Diagnostic chains, which have a lean balance sheet, strong consumer connect and high-quality standards will therefore gain market share. Finally, we expect faster consolidation in the industry, along with changes in the regulatory framework. Let me now give you some insight on how we, at Metropolis, has built a resilient model, which has stood the test of COVID-19 and continues to gain momentum with each passing day. Our fourth initiative in lockdown is reduction of our fixed and semi-variable costs. The initiative is exercised in March '20, and I'm happy to report we were successful in reducing our fixed and semi-variable costs by 20% to 22%. Further, we have increased spend on smarter digital initiatives and doctor engagement, direct to the customers -- connect to customers and medical knowledge sharing to improve our brand equity.Our second initiative was to be COVID-19 ready in more cities, having spread to more cities and the COVID-19 antibody testing ready, we have increased our brand equity in market of our operations and strengthened our leadership position.Our third initiative was network rationalization. In April 2020, we have initiated steps to rationalize our collection center network and anticipate this exercise to continue to June and July 2020. The rationalization exercise will see a 10% to 15% reduction in ARC network, which was not contributing meaningfully to revenue and were at the bottom of the period, but we're adding a little bit of cost to maintain them. So by removing the -- rationalizing the network, it will help us reduce some of these costs. All of this has resulted in resilient performance, the results of which are as follows: the last 15 days of March 2020, we witnessed sharp revenue degrowth of 46% on Y-o-Y basis, wherein clocked revenues of INR 21 crores against our expectation of INR 46 crores. In April 2020, we achieved 40% of the revenue we clocked in April '19. With improving logistics, improving engagement with doctors and COVID-19 testing scaling up, we have been able to achieve 65% of May 2019 revenues in May 2020 as of date. And we expect improvement to continue in June '20 as well as we continue to drive specialized tests, COVID-19 testing and doctor clinic opening up for getting access to routine samples. With a strong balance sheet, asset-light model and high cash growth of INR 223 crores, Metropolis is well placed to weather the storm and poised to increase market share.Having said this, it is important for us to highlight the Q1 FY '21 outlook here. Revenue in April 2020 was down to 40% of the normal trend and is expected to improve to about 75% to potentially higher off to June 2020 compared to last June 2019. April 2020 for EBITDA loss, followed by breakeven in May 2020, which is expected to turn to EBITDA positive in June 2020. In the beginning of the lockdown, we had around 75% of our lab network nonfunctional, and slowly and gradually, we are opening up all our laboratories. 15% to 20% of the own collection centers were operating at the end of March, and we have now commenced operations in 60% of our network.One of the important pillars of our business is human resources. Let me give you a quick snapshot of our efforts here. We have ensured continuous engagement and communication with all our employees, while ensuring timely payment of salary, ensuring no job losses and continuity of workforce. We are evaluating a flexi system of work from home -- excuse me, for our employees, which will have dual benefits in terms of employee productivity as well as cost reduction. Safety and hygiene of employees is very important, so we are engaging in continuous training programs to upskil our workforce, continuously working on strengthening our scientific brand with focus on quality of talent in our processing unit.I'll now spell out our focus areas for FY '21, which will be as follows: increased productivity of our young network and rationalize the network where needed in order to not only save cost, but including efficiency and revenue percentage; improving our collection efficiency, especially in our B2B network, resulting in improvement in DSO Day, which is the outstanding receivables day; prudently evaluating inorganic opportunities and strengthening our market position in existing markets and new geographies; continue to do cost rationalization exercise to benefit from operating leverage, which will play out as we scale up revenue.I'm also happy to share that we recently partnered with CIPLA Foundation and Citibank Foundation under the aegis of NGO United Way. Under this initiative of CIPLA, Citibank and Metropolis, we will be testing 100 -- up to 100,000 unaffording patients for COVID-19. This will not only utilize the expertise of Metropolis, but will also help us build a stronger consumer and government interface, and thus, will volume for COVID testing, thereby keeping our labs productive and helping us move faster towards improved group profitability. While CIPLA and Citibank Foundation will be funding this step, Metropolis will be using all our skills to be able to do this in partnership. Metropolis will always put people first and we will continue to strongly hold on to this value that will help us navigate this unprecedented crisis. As an organization, we remain empathetic to all our stakeholders as quality and safety and hygiene will remain our top priority going forward. There is no doubt in our minds that we will not only emerge stronger from this crisis, but with more empathy, compassion and determination. That's all from my side. I would now like to hand over to Vijender, our CEO, to take you through some of the operational parameters.
Yes. Thank you, Ameera, and good evening, everyone. Let me give you a perspective on our operating parameter. We had a strong FY '20 in terms of all operational and financial parameters, barring the last 16 days of March quarter, where we lost business on account of COVID-19 outbreak across the country. For FY '20, we reported patient visits of 10 million, which is a milestone in it itself, witnessing a growth of 11.3% on a year-on-year basis. The growth would have been higher, had it not been for Q4 FY '20, where we saw a degrowth of 3.3%. For FY '20, our patient tests grew, post-check, 19.62 million, a growth of 15.7%. Q4 FY '20 saw a muted growth of 7.1%. On year-on-year basis, number of tests saw a growth of 13% in January, a healthy 28% in February and a degrowth of 16% in March impacted by lockdown. Our revenue per patient continues to remain stable at INR 856 per patient for FY '20 versus INR 854 in FY '19. For Q4 FY '20, we reported an increase of 6% on year-on-year basis from the INR 794 per patient in Q4 FY '19 to INR 841 per patient in Q4 FY '20. Revenue per test, we grew but -- [ a weak, grew by ] 2% from INR 447 per test in FY '19 to INR 436 per test in FY '20. The largest drop was witnessed in Q4 FY '20, where the revenue per test dropped by 4% from INR 409 in Q4 FY '19 to INR 392 in Q4 FY '20.Our revenue profile among focus cities and other cities stood as followed. Focus cites, 5 cities, including the city and peripheral area around metropolitan regions, contribution has moved from 60% in FY '19 to 56% in FY '20 on back of increased contribution from cities and other cities. Seeding cities, which is about 8 cities, has moved from 20% in FY '19 to 19% in FY '20. Other cities contribution has moved from 20% in FY '19 to 25% in FY '20, thus, growing at a faster pace. Our revenue profile on the basis of geography stood as follows: West India share stood at 54% versus 55%; South India share stood at 26% versus 27%; North India share stood at 9% versus 8%; East India share stood at 6% versus 5%; International share stood at constant 5%. We are happy to report all the progress we are seeing in newer markets of North and East India, which has increased their contribution to the overall business.Moving on to revenue mix, we are pleased to share that we're continuously growing on the B2C part of our business. Our B2C revenues in focus cities in FY '20 was up by 15.5% on year-on-year basis from INR 233 crores in FY '19 to INR 269 crores in FY '20. In focus cities, B2C revenue shares stood at 56% in FY '20 as compared to 52% in FY '19. We reiterate that our strategy is to improve this contribution to 65% in coming years on the back of sharp focus on improving the productivity of our young network. The B2C revenue uptick has been growing steadily on account of greater focus on increasing productivity of our young network to go further to the patients, obsessively monitoring customer experience and generating a healthy net promoter score across the group. The price increase in B2C business, which we initiated in October 2019, has also started to contribute.Let me now give you highlights of test mix on volume and value basis. FY '20, routine test contributed 39% in terms of volume and 18% in terms of value. Semi-specialized test contributed 38% in terms of volume and 37% in terms of value. Specialized test contributed 15% in terms of volume and 37% in terms of value. Wellness contributed to 8% in terms of volume and value. We believe that specialized contributions would have grown slightly higher but was affected by the COVID-19 effect in the early March and later the lockdown.Network highlights, our network expansion and utilization strategy continues to gain traction. From expansion of network, we have now moved on consolidation and focusing more on productivity and profitability of each lab. As a result, we have initiated our service network rationalization exercise in April 2020, and we believe that we should be able to complete this exercise by June-July 2020. We estimate a closure of 10% to 15% centers with no major revenue loss on account of these centers as they are at the bottom of the pyramid, as mentioned previously by Ameera. Our patient service network stands at 2,731 at the end of March 2020 compared to 2,781 at end of Q3 and 2,336 at the end of FY '19. Third-party PSCs comprised of 1,873 centers, ARC comprised of 598 centers, while company's PSCs comprised of 260 centers.Overall at the end of FY '20, our network count stood at 124 as compared to 119 at the end of FY '19. Our focus will be to increase the throughput at our lab, which will not only give us revenue uptick but better utilization levels, which are currently estimated at 55% to 60%. This will lead to operating leverage and margin increase and better return ratios as the CapEx cycle for lab network is behind us. 92% of center network and 16% of lab network is asset-light in nature. A total of 49 new tests have been validated and added to the testing lab in Q4 FY '20, thus expanding our CapEx capability to conduct more specialized test. These tests are in field of infection -- infectious molecular field, chemistry field and rest in molecular pathology. We strongly believe that all the test menu is our biggest focus, and we will continue to spend on R&D and clinical talent to increase our test menu. We verify that we were among the approved private labs by ICMR to start COVID-19 test and moreover, the first lab to start and deliver test with the best that speak volumes of our capabilities in testing and efficiency of our lab.We continue to strengthen our business with a number of technological initiatives, wherein we have completed registration and invoicing system. Further, we have initiated inventory management system, payment platform system and financial module, Oracle NetSuite. We expect these initiatives to go live by mid of Q2 FY '21 and operational benefits to pick up accordingly. I'm also happy to share that we are working extensively on cost management and amongst the few points that Ameera highlighted, a key focal area for us has been material cost. We have rolled out our new agreement with the Roche Diagnostics for improvement in rupees test pricing and standardization across units. This will help us on material cost, once business returns to normal. One of the key changes we foresee for COVID is that home testing is expected to increase. For safety reasons, we believe more and more customers will adopt for home testing and to address this, we're beefing up our front-end resources and network partners. To further address this issue, we have appointed Mr. Kannan A as the Chief Service Officer. He joined us from Hi Care Services and is a veteran in customer experience in the B2B and B2C segment. In his previous stint, he was responsible in implementing the digital clinic service model to deliver on-time service and improve Net Promoter Scores.Our objective for FY '21 would continue to be towards increasing utilization of lab network, specifically revenue per center; rationalize service network; and increase the focus of the sales team towards non-COVID business. We believe we are poised for greater heights in coming quarters as the economics for standalone labs and unorganized labs gets beaten down. That's all from my side. I will ask Rakesh, our CFO, to take you through the financials.
Thank you, Vijender. Good evening to everyone on the call. Financial year '20, given the year-end challenges, we are happy to report that we have made significant efforts towards improving the quality of operation, where we are focusing on network rationalization, which will lead to improvement in breakeven levels, including the health of our balance sheet, where we have continued to remain asset-light; increase our cap levels and continue to grow inorganically through acquisition without compromising on key parameters; increasingly focus on working capital, which has led to improvement of our OFC (sic) [ OCF ] to EBITDA, which has improved to 93% in financial year '20, an improvement from September 2019 level. And if I compare it with March '19, it has improved more than 100%, ultimately leading to healthy growth of 14.1% for TAT before exceptional item.We have indicated the impact of COVID-19 in our presentation and speech earlier. But I would like to spend some more time in giving an assessment of the growth that we would have achieved. While we have reported revenue of INR 206 crores, we believe we lost INR 25 crores in revenue for the last 15 days of March, which was impact due to the nationwide lockdown and the necessary measures taken. Accordingly, Q4 financial year '20 revenue would have been INR 231 crores, with a growth of 15.1% on year-on-year basis, if we had a clear March 2020. To give you a better perspective on the strength of our performance in Q4 financial year '20, I'm glad to share that Y-on-Y basis in January, we achieved 13.5% growth, February saw growth of 17.4%. For the period of 1st January to 15th March, we were -- we achieved 14.5% year-on-year growth, really depicting the growth momentum we built up. Similarly, for financial year '20, we reported revenue of INR 856 crores, after addition of our estimated INR 25 crores in revenue, which we have lost in last 15 days of March 2020, we would have achieved revenue of INR 881 crores thus, clocking a growth of 15.9% on Y-on-Y basis. We believe that the EBITDA margin and profitability would have been increased at higher pace as we would have benefited out of the operating leverage and lower material costs on the basis of revenue and volume numbers, we were clocking for Q4 financial year '20. Accordingly, our estimate is that we have lost INR 17 crores in EBITDA for Q4 and financial year '20. Accordingly, our Q4 financial year '20 EBITDA would have been INR 69 crores, a growth of 19.5% on a year-on-year basis, with a margin of 29.5%, which is typical of the last quarter in our industry. Similarly, for financial year '20, our EBITDA would have been INR 249 crores, a growth of 21.1% on Y-on-Y basis, with a margin of 28.3%. On our operating metrics have showed vast improvement and continue to post positive trajectory. On reported basis, EBITDA for financial year '20 stood at INR 232 crores, registering a growth of 12.9% on Y-on-Y basis. Accordingly, the margin stood at 27.11% for financial year '20. In quarter 4 financial year '20, reported EBITDA stood at INR 52 crores, registering a degrowth of 10.1% with a margin of 25.03%. The EBITDA margin would have been higher by 0.5% if we exclude the lab on lease for financial year '20. The lab on lease contract existing in financial year '19, which were 9 in number and fully operational in financial year '19, have moved from 19.5% EBITDA to 22.1% EBITDA margin financial year '20. When new lease on net -- lab on lease contracts started in financial year '20, which is 4 in numbers and partially operational in financial year 7 in numbers, has diluted. The total lab on lease EBITDA to 0.5%, which was frankly, expected. Financial year '20, PBT before exceptional items stood at INR 193.8 crores, a growth of 1.2% on a Y-on-Y basis.There was a provision of INR 17.7 crores pertaining to receivables related to a B2B hospital. While we were under arbitration for recovery of our dues and expected the proceedings to conclude in March 2020, however, COVID-19 has resulted in all judicial matters getting postponed. We now expect the proceeding to conclude by end of the calendar year or early next year. We believe and are confident of recovery of dues from the hospital, however, as a matter of prudency, especially with hospital business getting slowed down on account of COVID-19, we are taking this provision. If and when the case gets over and we will public settle, we will write-back the provision.PAT before exceptional items stands at INR 29.3 crores from -- for quarter -- for financial year '20, while the financial year -- for financial year '20 stands at INR 146.7 crores, an increase of 14.1% on Y-on-Y basis. Reported PAT, that is after provision, stands at INR 15.5 crores for Q4 financial year '20, while for financial year -- full financial year '20, it increases -- increased by 3.2% to INR 127.6 crores. As of 31st March 2020, we had cash and cash equivalent to the tune of INR 223 crores, this ensures financial flexibility we have to further strengthen the business operation and cement our leadership position. We are a zero debt company. Our ROCE has improved and stood at 40% in financial year '20, while ROE stood at 27%. Despite the COVID-19 impact in March 2020, we have been able to improve our collection efficiencies and improve our DSO days. Our DSO days in financial year '20 before Q4 hospital account stood at 62 days, an improvement of 4 days on Y-o-Y basis and 5 days from September 2019 level. Our working capital base improved vastly in financial year '20 on increased efforts towards improving collection efficiency, better inventory management and better trade of terms with suppliers. Our working capital days, excluding cash and cash equivalent and excluding lease liability on account of Ind AS-116 for comparable purpose and pre-provision of debt all stood at 20 days at the end March '20 compared to 24 days at the end of September 2019 and 33 days at the end of March 2019.Our CapEx expense -- expenditure acquisition stood at INR 22.7 crores. We spent INR 11 crores towards acquisition, primarily towards the Surat acquisition announced in September, October last year. During the year, we paid dividend, including dividend pay of INR 48 crores, and thus, the dividend payout for financial year '20 stood at 37.5%. This is from my side. We now leave the floor open for Q&A. Thank you.
[Operator Instructions] We'll take first question from the line of [ Ashik Padani ] from AlfAccurate Advisors.
First of all, congratulations for a good set of number in otherwise, a challenging environment. All I have is two quick questions. The first question is, can you give more color on what is your B2B strategy? And in your presentation, you shared a lot of data, revenue per patient, revenue per clinic, so on and so forth. Is it possible to get similar numbers for B2B side transparency? What is your per hospital risk and exposure? How do you try to reduce the risk, so that such incidence of write-offs will not happen in future? That is question number one. Question #2 is in terms of cash flow, while we have seen a good improvement, how do you see going forward in terms of your target cash flow? And last question is to the promoters, because there is a place of share and I'm sure everybody is aware, having such market conditions, there are many accidents, which have happened in the market. So what are the promoter's thought process by when to plan to reduce this play and some color on that?
So Vijender will take question one, Rakesh can take question two and I'll come to question three.
Yes, on the B2B side, in this particular instance, what you are talking is about 1 [indiscernible] lab management, where there's no running the lab based on management. And there was arbitration and that arbitration was in our favor. So that was one instance. But if you generally talk about B2B, if you look at -- I can a little bit talk the forward-looking numbers because COVID is still on. Our B2C ratio, actually, what we have seen in the last 2 months has gone up from 44%. As I said in my talk also that B2C ratio currently is about 44% at the group level. However, in last few months, this B2C ratio has gone up to almost about 49% to 50%. So our dependence on B2B, automatically has reduced. One is, of course, that B2B during this COVID, that we've seen a lot of B2B last and hospitals were shut and now so a lot of hospitals have also converted to COVID as well. So our dependence on B2B is not very high. However, if you look at our past model, in the past models, we have 2 different models, one is [indiscernible] lab on lease and second one is the [ PSC ] model, where we had gone to a small time lapse and this time, we had over our B2B customer, could we have asked them to start their lab and converted those into franchisees of the [indiscernible]. I mean last 2 months also, they have taken a step towards in order to revise this model. And we were pretty much successful. And we were -- let me tell you that we have almost converted about [ 40 labs ], who are now completely also [ 100% ] to Metropolis. So that time, that will go to the strategy going forward.
Yes. So coming to the cash flow question, just to answer you, right now, we have a cash flow of INR 233 crores in our cities. And happy to say that we have already started not losing any cash anymore from the business adaptation, if we started giving a positive cash flow, so we don't see any balance going forward. So as of now, we are getting [ INR 38 crores, INR 233 crores ], and we don't see any challenge to [indiscernible] case from a cash flow and cash point of view.
On the promoter pledge, as we know that the pledge is significantly lower than it was even at the time of our listing. And I was only working for the -- I always maintained to sort of all investors and stakeholders that over the next 12-month period, my interest has always been to exit whatever did and completely become unpledged. And I continue to stand on the same pact. So any of the risk is sort of be much lower now than it was earlier. And I will continue to evaluate my options and try to unpledge estimates, be it possible. Like I said, over the next 12 months.
Okay. In fact, just to respond to the answer one which the management has given. My question is literally completely different. So I'm not asking your B2C. It is going up or not because we're talking that hospital revenue itself is coming down, and that results into the highest proportion of B2C. My question is, what is your risk management policy for B2B, and do you have a minimal bench for that if you are receivable in particular for a hospital, it will go up beyond 25%, 35%, 45% but you will not probably continue with that, what is the strategy of B2B? Because it is still a substantial part of your revenue. It is not 5% of revenues, we are talking about 40%, 45%, 50% of revenue. So some color on B2B strategy and risk management that will be very useful. And to the promoters, madam, the shareholder, we are concerned because while I clearly appreciate your target of depledging over the next 12 months, but 12 months is such volatile time, it's actually very long period. So my -- since I requested if you can address this concern at the earliest that can put shareholders like us a little bit on rest. Yes?
Yes. So just to answer your question on the first part, the risk management and how are we looking at the whole piece. So just to update you that we don't have any arbitration on anybody, except this one arbitration, which we are having since the last 3, 4 years. So apart from that, there is no arbitration as of now. And we are having a credit policy of ranging from 30 days to 90 days, depending upon the business situation and the requirement and the opportunity and where are we placed. So the credit terms differ from place to place and from party to party. And we have a policy of blocking the core if the numbers of ays increases from a particular limit. And we have a robust system of getting the money. And obviously, we have an ECL model which we have implemented. So anything which goes beyond the credit limit is always provided in books. So whatever is there, which has gone beyond the limit and not come in time as per the credit policy has been provided for, so that ECL model, we have already implemented [ forever since ]. So if that answers your question.
We'll take the next question from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.
Ma'am, if I take your initial remarks about this COVID testing, where you said that at INR 4,500, we are barely breaking even, but it helps to absorb the fixed cost. Can you give some color with respect to what are the capacities that we have here? I mean, how is it helping us to cut or utilize it better and reduce the fixed cost over there? And especially if I'm looking at -- when you're talking about the business coming back to 70% and now in air and running at about [indiscernible], I mean how much of this proportion is typically COVID and how much of the proportion is move it?
Sure. So what I said in my speech earlier, it was not that we are barely breaking even. What I said was that, if we not add to profit on a unit economic basis, meaning that if we were to just count sort of all the costs that were there, it's not that this is going to be significantly profit accretive. But then we are counting the cost of our fixed manpower, we are costing -- counting the cost of the overhead that are involved direct and indirect, then we are finding that actually is significantly adding from a group perspective to making sure that in these difficult times, when revenues are lower than normal, we are actually able to get to a breakeven faster. So on a group basis, it is adding to profitability, but on a test basis, it may not necessarily be adding to incremental profitability. I hope that's clear. So therefore, as we have continued to support all our staff of 4,000-odd people and pay all the salaries because at the end of the day, we are a company within -- is within health care for the long-term. So obviously, we don't want to be making any drastic decisions short-term of letting go of good talent. So this actually, COVID testing is helping us in terms of supporting all those costs. And the fact that we only had a loss in April, then obviously, revenue was down because I mean, the whole country was in lockdown. But the fact that we have already broken even in May, I think, speaks a lot for the point that it is adding to grow profitability.
And the capacities and the number of tests that they are doing?
So we are not able to release the details on that right now, because we are under confidentiality based on that quantity, on terms of capacity as well as in terms of the data, which is only supposed to come from the authorities, unfortunately. But I can tell you that we have ramped up our capacity significantly in the past 2 weeks. And we are prepared for handling triple the volume that we currently are getting today. And we believe that COVID testing will continue for the next at least 12 months. And we are positioned very well in all the cities that we have got labs in as well as the places that we are able to collect. So for example, to give you an example of Maharashtra, while we have a COVID lab in Bombay and Pune, we are collecting samples from all across Maharashtra. And with the project that I mentioned to you, project we need, which is with the foundation of CIPLA and Citibank, this will allow us to scale up our COVID testing even more, because in this case, the foundation will be paying for the test and not the individuals, which will allow us not only to offer free testing to people who need it, but allow us to ramp up our capacities and build better relationships with authorities.
Ma'am, and second is, I know about 2, 3 days ago, ICMR had come out and said that the INR 4,500 cap is removed, and it now depends on different states to basically look at the costing and their economics. Should this be possible? Or how do you see this development?
This is even before ICMR came out with this rule, in tacticality, the INR 4,500 price cap was basically what you can charge a patient, so there were some labs charging INR 4,500. There was some lab charging lesser than that because it was up to INR 4,500, so you could decide your price. Metropolis, of course, like all the leading chains, were charging INR 4,500. But even earlier before the ICMR notification, the price that the government was paying when they were outsourcing samples was anywhere more than INR 4,500 because it becomes like a retail price and wholesale price. Plus what we have to remember is that the INR 4,500 price also includes the collection of sample, which includes new different costs along with the testing.In most cases, when the government was outsourcing or is outsourcing to lab provider, they are collecting the sample and giving us only for the analytical testing. So therefore, the prices have to be different. So my estimate is that on the retail side, I don't think we will see the price getting severely affected. I think it will remain around the same level. But on the wholesale side, which is on the government outsourcing, the prices have anyway been quite different from INR 4,500, and that will continue to stay different in different locations.
And if I look at the overall scenario at this point of time with especially a peer of people setting out, and they're going to [ partition of lab ]. I mean here, you talked a little bit about especially for home collection center. If we are looking at a business model, what was earlier focusing on B2C having frankly, you walk in. I mean now, how do we tend to build our business model differently? And how do you capitalize the current situation?
See a couple of things, while you're right and while we did point out that as of today, people are worried about going to a hospital, what we have to remember is that our lab collection pattern is very different from a hospital. Number one, because when you go to a hospital, there are crowds, you're worried about infected patients coming there, you're worried about contracting an infection. When you walk in into a collection center, you have to remember that 9 times out of 10, there is no other patients, they're walking in alone. Maximum, there is one other patient there, right? So it's not a very crowded space, unlike a hospital. So that's number one.Number two, we believe knowing health care for the last 20 years, I can confidently tell you that even though this crisis have happened, we are not going to see health care move over 100% to home services of either for diagnostics or for treatment or for doctor visits, right? It's not going to happen. We will see home services increase because people will be preferring to do things at home. But what we also have to remember is that societies and the communities may have their own restrictions about letting people from outside come in. So my -- our belief at Metropolis is that with the combination of brick and mortar and home services is going to continue. While I believe that home services may scale up, it does not mean that walk-ins are going to decrease, because it's not like the number of patients is finite, and the same number of patients are going to be split. So what I expect to see is that we are going to see more and more patients move from unorganized players to organized players. And in the organized players quota, we will see some patients move more to home services. But I don't believe that we are going to see a complete shutdown of brick-and-mortar.So our plan is really that we should not continue to -- that's why we said we are going to do a slight rationalization of our collection center network. And the goal will not be right now, to keep expanding centers in the cities where we already believe we have a good network, but the idea will be to now ramp up on the home services front. And as you know, anyway, our collection center network is completely 92% asset light. So frankly, it's not like we are carrying some very large fixed costs on our P&L. That [ fiscal scenario ], for whatever reason, the walk-ins are not as much as we expect it to be, it's not going to make us carry a big fixed cost in our P&L, but we do believe that both will survive and both will do well.
We'll take the next question from the line of [ Sushmita Soduwal ] from Motilal Oswal Asset Management.
I wanted to understand this write-off that you've taken off something called the old unreconciled balance. Hello?
Yes. So we have taken INR 1.5 crores of write-off for old unreconciled balance, I think it was taken in quarter 2, if I'm not wrong. Are you talking of that?
Yes. Yes. Yes.
So basically, what happened is that we have initiated a reconciliation drive with all the channel partners to make sure that whatever amount receivable is coming in our dossier, is matching with these channel partners they are also having in their book. So we have done a onetime exercise and then the reconciliation with all the channel partners. And after the reconciliation, we found that there were some differences, which were there unreconciled and we are not able to reconcile with the partners. And this was very old balances because this bill may belonging to some 2012 or 2013. And because these are very old balances, and we are not able to reconcile, we have taken a onetime provision of this amount in quarter 2, for this amount. Hope that clarifies.
And I'm assuming that now the systems are such that you may not have anything like this in the future?
Yes. So we are doing a quarterly calculation now. So every quarter, we are compiling. So that I think is onetime thing which has happened. And we are now doing a quarterly reconciliation with all the given partners.
So there is -- I mean, I'm sorry to ask this, but is there an automated SAP kind of system that helps you do this? Or because of the nature of the cash collection...
Sorry, I just lost you in between, can you repeat?
Sorry, I'll just jump in. Yes. We had an SAP system which we are currently using, but unfortunately, it was not adapting as we would like it to be. And we are actually moving to an older version. We are moving to Oracle NetSuite. We are actually in the process of implementation. We are expecting implementation to be completed, like we said, mid of Q2. And we believe then a lot of these things will become automated and will actually release a lot of productivity and efficiency in the system as we move from more manual networks to automated networks. So right now, like Rakesh said, we are doing our quarterly reconciliations. And we hope that it becomes much more efficient in an automated fashion in the next few months.
Right. And the next question is, are you already seeing a flush of proposals at your desk for M&A?
We are. We have seen, in the last 2 months, I would say, lots of proposals come through. Some of them are companies, which have been traditionally funded by CE. Some of them are companies, which are start-ups, who have been working in the health care space for the last 2 years and trying to build traction. And some are individual labs, which feel that they will not be able to operate independently in the new environment. So we are seeing a lot of proposals come through. And our inorganic strategy and thought is very clear that while we believe that we have the ability to execute M&A very well, probably better than most in the industry because they have done about 20, 22 M&As in the past many years and integrated them very well. We, one, would like to be prudent as to where we spend our money. So we'll continue to evaluate each one of them. And of course, as anything, if anything comes up, which is interesting and at the right time, we would be happy to share.
And just a last question on this global hospital write-off that you've taken, you've taken the whole 100% write-offs?
Rakesh?
Yes. So there are two parts to it, one is up to September outstanding and after September. So these are up to September outstanding as we told that there is some litigation going on. And because of that and now we expect delay in litigation to come up with the results. So we have just prudently taken this provision, whereas our internal assessment and the assessment taken by the third-party is that we have a good chance of winning the case. So basically, this is just a prudency because the delay is happening, and we don't know now if it will take another 1-year to -- for the litigation to get over. Therefore, taking this provision and the actually distributed amount is up to September. From October onwards, we have started getting the money from them. And we have got almost 50% of the amount, which we have billed after October to them, and they are paying on a regular basis. So on that basis, we have not provided for the amount which is outstanding after September. But yes, almost 90%, 95% of the amount, which are outstanding from the hospital, has been provided for.
And Metropolis continues to work with global?
So yes, we are right now in the litigation up to September. So that is going on separately, and we are dealing with that separately, and we are very hopeful that, that would have settled soon. And as we are getting the money, right from October onwards, so we don't see any reason to stop it. But obviously, we are looking at on a daily basis that whether things have been working fine or not, and we are being triple cautious about it. So yes, we are, as of now, we are still operating with them.
Next question is from the line of Praveen Ranjan Sahay from Edelweiss.
So the first question related to the B2B and the B2C, as you are mentioning that the B2C is increasing continuously. So can you elaborate on the B2C definition? It's just in a walk in patient or the doctor recommended patients you are including in the B2C and B2B, just a hospital business?
So Vijender, do you want to take it?
Yes. So B2C means where patients are walking into our centers, third-party centers, and there is a direct engagement with the patient. So all the patients coming to our lab, whether walk-in, whether we are going to their houses to collect samples. And so these are all part of our B2C. Whereas on B2B side, the lab, the hospitals, who are outsourcing where the patient is directly in touch with the B2B lab or hospital, those are all B2B.
Okay. So the B2B is more to do with the hospitals only?
Hospital and labs also.
And labs, okay. And secondly, on the COVID testing, so as you had already said that right now, now you are doing some increase in the previous numbers for the test. And also, you had mentioned in the presentation that INR 1.25 crores of CapEx you had incurred related to that. So should I believe that's related to the 5 different geographies currently you are doing and there, you had incurred this INR 1.25-odd crores CapEx? And with the increase in the coming -- number of tests in the coming days that will also require a further CapEx related to that? Or is that enough?
See, as of now, as we said, that we have [ 5 gaps ] and in order to enhance capacity, because there is going to be more demand from different states like Gujarat, they still not started. So probably Gujarat will also start the day we get approval. So we are ready with our capacity, current capacity. And as Ameera mentioned, that we have enough capacity to tackle 3x the current volume. So we don't foresee much of CapEx required in future.
Okay. Okay. And just to clarify on the -- related to this only, as I can see that Thane, Pune, Mumbai and Chennai, there is a lab of Metropolis and operating for COVID. But you had also mentioned for the Bangalore and Delhi. So is there some other name for that, other name these labs are operating out there? It's not Metropolis?
They are all under Metropolis brand. And there is no confusion on that. So all across, we have Metropolis brand and all the approvals are under the banner of Metropolis.
But these are not...
I'm finally answering -- yes. So Delhi has -- yes, we are just waiting for approval to come through. We are ready to start. We expect that in the next few days.
Next question is from the line of Bhumit from Aditya Birla Sun Life Insurance.
Just two questions. One is, what -- if you could give some sense on the payment cycle for -- related to COVID testing? And some sense on how -- so at the peak of the COVID testing as and whenever you reach it, how big can this become as a part of the overall revenue? And my second question would be, where is the INR 223 crores of cash invested in?
So I'll take the first one on COVID, and I'll ask Rakesh to take the one on treasury. Look, I think on COVID, the different channels, like we said, give different price points and therefore, at different volumes. So what we have tried to do actually is to try and make sure that we are not taking a severely discounted business as far as COVID, and therefore, we are able to have a decent unit economics on the sample. So therefore, we have been getting business from B2C predominantly, a little bit from government and some from B2B. The payment cycles for B2C is cost of cash upfront. For B2B, we have also been doing cash upfront. We have been doing daily cash or rolling advances with -- or most of the B2B players. And then government is the only one where you're giving a little bit of credit, but as government is a small percentage of the COVID business, so we don't see it as too much of a risk. As far as -- and some of the governments have already started paying. As far as how big it can get, I mean, at this point of time, as part of RT-PCR rule, I expect that we'll continue doing a significant amount of testing for the next few months. Probably we'll go over the next 12 months, but definitely, the next 3, 4 months will be quite heavy. If they open up antibody testing, then, of course, it's a much larger number. And if for RT-PCR they open it up for asymptomatic, which we are also hearing they might, then of course, it opens up for the whole country. So it's very difficult to estimate today because it's very driven by regulatory approvals from what is allowed and not allowed, difficult to estimate, it's very binary. So if it can become big, I think we can be doing 10,000, 15,000 tests per day. But whether we'll get there or not depends on the regulatory environment.
Yes. So coming to the second question, where you said that what are we exactly doing on the cash which you have. So on the INR 223 crores, we have some INR 13 crores of investment in mutual funds. Fortunately, that investment is -- has not devaluated at all because that was more from a debt investment rather than total investment. So the investment is intact. The rest of INR 200 crores, we have around 20% of that is with us. We keep it for us so that we can have day-to-day expenditures everything can be taken care of, handle payments. Out of the rest, we have 50%, which has been invested in the long-term FTE, and the rest has been invested in the short-term FTE. So basically, we are cautious now not to invest in a long-term basis because we don't know how the situation will clear up. So we are prudent and we are keeping cash in the short-term investment, so that we can take it whenever there is a requirement. So that's how it is. Do you have a further question then?
Sure. That's helpful. Just one clarification. So this INR 13 crores, which is lying in the debt mutual fund, that's -- I'm assuming it is all stipulated and liquid?
Yes. Yes. Yes. So we -- in fact, we don't -- we have not devalued anything in this. In fact there is increase.
All right. All right. And sorry, one last question, if I may squeeze in. So this is for Ameera. So if you can just sort of a little long-term-ish -- and you did allude to this in the opening remarks also in terms of how the industry structure could move more toward consolidation and what would be organized players, but if you could just probably talk a little bit more about mainly from the regulatory side? Now that the government has clearly bifurcated the accredited and the other labs, how does that help in the long-term, in the overall scheme of things? Does it clearly, like speed up the process? So how do you look at it?
Let me -- sure. Let me just give you some little perspective on the industry. I think currently, there's estimated to be about 100,000 labs in the country. There are about 150 labs which have been approved for COVID, right, out of 100,000. So these 150 labs are all pathologists-run, reasonably good quality, they're the only labs in their cities. And out of the 100,000 labs, so just to give you an estimate, there are 10,000 which are run by pathologists and 90,000 run by technicians, right? So the bigger issue are those unorganized technician labs, which do very, very small business, but are in every nook and corner. So what our estimation is, is that, honestly, with COVID testing becoming such a big thing and talk about pathology testing happening for months on in, we think that the -- in the mind of the consumer who never really thought about the quality of pathology before in a significant way, now they're going to be thinking about the brands that they have heard for the last 3 months, and they're going to be thinking about, look, who is capable of doing this kind of advanced testing and who's not. And out of these 150 labs which have been approved by ICMR for testing, just factually for you to know, 50% have not done a single test so far. So actually, it is only 75 private labs which have actually done, whatever, [ 50% ] of the entire testing so far done in the country. And out of the 75, the top 5 chains have done majority. So what we have seen is actually in a crisis-like situation, it has been the leaders in the country, which have actually carried most of the weight and consumers and doctors and governments and hospitals have seen our faces on a daily basis, while they have not seen the small unorganized players at all. Our sense is that this will lead to consolidation. Like we said, there are a lot of M&A proposals already coming through. But even on the organic side, we think customers who are used to moving to the local lab next door will now start moving to a more reputed brand. And frankly, the small labs are now having a hard time functioning, because their labor is not -- they don't have enough labor to continue working and tomorrow, when customers are going to demand that we are now wanting safety and hygiene. For example, today, if you come get a Metropolis person to come home, whether you're doing a COVID test on, there is somebody coming with a full PPE kit. There's somebody trained to show you how every glove and needle is disinfected. Now your expectation is going to be the same when you go to a lab, a small lab next your house. Now when that small lab has to start bearing the cost that Metropolis does, they will not be able to afford it at the prices that they charge. And so either they will have to increase their prices and the difference between the reputed player prices and unorganized prices will decrease, and that will make then patients actually move towards the brands more. So I think this is a journey that we will go through over the next many months.
We'll take the next question from the line of Anuj Sehgal from Manas Asian Equities.
I just wanted to check, so your network has increased by 6.4x in the last 5 years. So what percentage of your revenue do you get from your own centers, from third-party centers and from ARC? And then secondly, while longer term, the industry will consolidate, as we just mentioned, is there a risk that in the near term, a lot of your third-party centers could also actually shut down. And therefore, that could actually affect the business in the near term, even after things come back to normalcy in the next few months?
As far as we haven't got the specific details on third-party versus our own, et cetera. But I can tell you that our own centers are still contributing a large amount of the B2C revenue. The network that we have created in the last 3 years, has an average aging of only about 2 years, right, to 1.5 to 2 years. So that's why we keep saying it's still a very young network. And usually, the maturity is about 5 years of a collection center to get to top revenue. So therefore, a smaller percentage of our revenues come from the third-party network at this point of time, but we are seeing that continuously increase every quarter, and that will continue to increase. That's one point.As far as your second question on will the third-party partner survive, frankly, I'm not sure why they would not be able to because they don't require any new working capital to this. It's not like they are buying goods from us in advance and holding inventories. Usually, the way it works for a franchise partner, is that a patient walks into their center, at least for the retail franchise partner, the patient walks into their center with cash. And usually, we collect either daily cash or weekly cash from our partner. And usually, the consumables that they are using to lead the patient is provided by Metropolis. So I think the only change that might happen now is that if PPE is required for patients, there will be an additional cost as far as the PPE, and we will be working out with our partners as to how do we make sure that, that cost is not -- burden them or burden us definitely.
And just a follow-up. So you mentioned that you will be rationalizing your third-party network and reducing it by 15%. So in the last couple of months, have you seen any churn in the network where some centers have not opened up, even though they were allowed to open up in different geographies?
Vijender, do you want to take that?
Yes, there were a few centers, especially during COVID, where we ourselves have said that please do not open the centers, we will come back to you. So at that time, the risk was very high and people were also really scared on what will happen. But slowly, gradually they started asking third-party centers to open. And as Ameera mentioned, that we are already planning about 10% to 15% of our centers who are nonformal in the ARC segment, which automatically would take care of our cost versus the risk of churn, because that it still would be our initiative to take it up, so that there is no risk.
So the 15% rationalization is only on the ARC and not on the third-party centers?
Yes, majorly good on ARCs.
And then may I ask what is the difference between ARC and third-party centers?
ARCs generally are in nonlab towns where we are, this particular segment is open to cater to B2B collection of samples on behalf of Metropolis from hospitals [indiscernible] and labs They are part of our B2B strategy.
Okay. So ARC business is categorized under the B2B part of the business?
Yes.
We'll take the next question from the line of Anmol Ganjoo from JM Financial.
My question is to Ameera. Ameera, you spoke about the current disruption being some kind of a catalyst in terms of driving the unorganized or organized shift. In terms of some granular details on nuts and bolts, can you help us understand how is this playing out on the ground? One way, obviously, is patients being more comfortable, that's on the revenue side, but are you seeing similar behavior on the cost side with probably vendors or landlords trying to make -- trying to give you better terms given the distress on the landscape?
So as Vijender mentioned in March itself, we approach sort of all the landlords of our centers we own and obviously, they value the fact that the company like Metropolis is [indiscernible] with them. So most of them are very happy to offer us sort of flexible terms for the period of the lockdown, which we have come to an understanding with them on. But I think it's still a little bit early to know whether on the cost side, we are going to get benefit from a perspective of unorganized and organized. I mean we always got benefits from a perspective of material costs because, obviously, just the floor economies of scale give us much better pricing power with vendors. That is always the case.But I sense that the changes will come more on the -- one, on the talent perspective. Because while in the last 3 months, we have been open every single day and not a single employee of Metropolis has lost their job or have any salaries cut. The reality is that 90% of small labs have been shut. And obviously, I think it will be very difficult for them to continue to support salary payments when they are completely getting no revenues at all. So my sense is that talented sales will also start migrating towards more secure and safe pastures like companies like ours. But I don't -- I think personally, I have not seen any witness of that on the ground yet. This is just a hunch. I think it's still early for that. So definitely changes on the demand side for sure. Vijender, do you want to add anything? Anything you think that is useful? Hello?
Hello, that's fine Ameera, that's fine.
Yes. So a follow-up on that. Right now I think the case for organic growth relative to -- on the landscape has improved so much, does M&A as an option become less appealing, because anyway, you guys have now a far clearer runway for growth going forward?
Yes, I think the market is still very, very fragmented, right? Like we've always said, the top 2 players, the top 3, 4 players in the country are in the 10% to 15% of the entire market share. And we direct listing. So yes, while there is going to be an opportunity to continue to grow organically, again, I don't think things are going to drastically change overnight because at the end of the day, you're in health care, over the relationship to services. So while I do think organically will -- things will change, I don't think we should completely disregard M&A at this period of time. I think there will still be good opportunities, chances to consolidate faster, along with organic growth. And we, as a company, would like to continue to evaluate both opportunities, organic and inorganic, at the same level.
We'll take the next question from the line of Chandramouli from Goldman Sachs.
The first question is related to your prepared remarks, you mentioned that about 50% of the network was working as in mid-May, and this compares to 25% of the network as in late March. So is this collection centers?
This is collection center as well as the labs.
Right. Right. And just a clarification on that, could you just give us the numbers on patients over centers specifically?
We had 260 patient collection centers overall, which are owned and operated by us. Plus how many do we have with our third parties A-PSC?
1,800.
1,800 A-PSC.
No, no, sorry. I was trying to understand what percentage of the patients service center network is open now versus in late March?
I see. Vijender, do you have an answer to that?
Yes, now it is almost about 70% centers, which are open on the B2C side.
Got it. Got it. That's helpful. And second question is on the cost side. So if I just move your EBITDA margin of maybe 25%, 26% [ out net service case basis ], so of the remainder, 75% of your cost of your sales, which are cost, what proportion would be fixed in your opinion as a percentage of sales?
Rakesh?
Yes. So see, there are a lot of costs which are not in the bottom line. So we absolutely find the bifurcating of the [indiscernible] overall absolutely, but if I just take an overall currently, in that term price, the 50% of the cost basically fall into like renewable -- semi-renewable and fixed cost and the rest [ 50% new based upon ] -- and then again, the fixed cost changes when the volume changes. For example, if the volume goes up from the fixed cost basically, the bigger normal time of [indiscernible], so almost [ 50%, 50% the ratio ].
Got it. Got it. And just given the pressure on volumes this quarter and maybe the next quarter as well, I'm sure there are initiatives on trying to bring the fixed cost down. So if you could just give us some color on what sort of cost you think you can rationalize over the medium term?
Yes. So just to give you a perspective, I think as has been told earlier, the rent has been a bit negotiated with all the landlords and the landlords are kind enough to come back and support us in different areas. So that is one fixed cost which has seen a bit of reduction. But obviously, once the lockdown is lift out and things becomes a bit normal, so then that will go away. So that is one cost which we are looking at. Some costs which will naturally go down, it's regarded as cost, but will go down automatically, go down probably on traveling cost and conveyance costs. These costs are actually fixed cost, but we will reduce drastically because of the situation today we are in. There's some cost like printing stationary. They are more into sending the reports through mails and through digital mode. So we are seeing a lot of saving in the pending [indiscernible] space also. While we are spending a lot of money in the digital platform and to connect with the customers, doctors and our centers and everybody. But the bottom line, the marketing cost has gone down a bit because there's no point of spending in that line.So these are some of the costs, which basically are seeing a bit of a downtrend. And obviously, we go forward, we will see how can we try to maintain even if our revenues are up.
We'll take the next question from the line of Sameer Baisiwala from Morgan Stanley.
Ameera, the volumes that were lost in the last 3 months, is this a pent-up demand? Or is it a lost volume story?
My sense is, I think, firstly, the volumes that have been lost has been -- cost mostly March in, I will not say last 3 months. Of course, the economy itself is struggling a little bit before that, so there's some impact, but not huge. But of course, most of it is end of March, the last 15 days. The general thought in health care industry is what has happened is that with the lockdown, all elective surgeries have been postponed. People getting sick has been self-treating at home, but obviously, that will also come back to bite people, unfortunately, once the lockdown opens. So I would estimate, my sense is, half of it would be suppressed demand and half of it would be volume, which isn't completely lost. Because if I had a cold and fever, and I didn't get a chance to go to a GP, I took a call and then I treated myself, the chance is that in the [indiscernible] management will become okay. Unless it's COVID of course. But things like elective surgery, somebody needs to get a knee replacement down and they have to deliver, they'll have to go at some point, [indiscernible] these require testing. So my estimate is it's half, half.
Okay. And Ameera, when you mentioned about potentially COVID testing being as high as 10,000 to 15,000 tests per day, these are all antigen PCR test? Or were you including antibody also again?
No, I was only referring to PCR. I mean if tomorrow antibody test opens up, frankly it can be marching out on that. It can become like a thyroid -- okay, right, for a period of time. Thyroid tests are extremely high-volume tests in our industry. So if antibodies opened up because that's easy to do like a thyroid test, it takes a couple of hours to do a testing, to give a report. And it can be completely automated. And actually, if you see those diagnostics has come out with an antibody test, which is the copyright of the approval, and we actually have the largest capacity for immunoassay testing with Roche all across the country. So for us to be able to execute large-scale antibody testing would not be difficult. But that depends on the regulatory scheme. And that leads to like 100,000, 200,000 tests a day. But these are all numbers today without any -- without much basis, still, obviously, the government opens it up.
Okay. No, that's great. And as far as your partnership with CIPLA and Citi is concerned, what -- I mean, I don't know if it's a right question, what pricing would this be done at?
We'd like to share, Sameer, but we have the confidentiality.
Okay. Okay. No worries. And Ameera, last one on COVID testing, which is, are large corporations approaching you? As the lockdown is lifted, they open manufacturing sites, offices, large banks, IT companies, they want to test the entire office, entire workforce?
Absolutely. Lots of companies are approaching us. But at this point of time, from a regulation perspective, we are not allowed to because their people, all their employees are asymptomatic and ICMR today does not allow us to do our asymptomatic testing. So like I said, if they change the screening criteria and they allow asymptomatic testing, then frankly, I think all of India who can afford a test would want to get one done. So that and antibody testing a few things which are up to the government.
That's great. Ameera just a third -- on this point once -- one more time. And that is, what's the thought process with the regulators and the government ICMR? I mean it's going to only help their cause in containing the virus, if they do allow both these things, so is it a matter of time? Or do they think that India is not prepared for it? What's driving this?
I mean I can't pretend to know their mindset, but my guess and my personal opinion would be that at this point of time, they think that there is a shortage of capacity of testing and therefore, they want to give first priority to people who are symptomatic and need the testing. And probably, I think it's a matter of time that we will open it up for the asymptomatic people or potentially, antibody. I mean, traditionally, if you see antibody testing is actually not meant for individual patients. That should be meant for surveillance, I think over health data for population. Now whether the government will choose to do this on their own or they will engage target players with them to do it, I would suspect that they would increase prices then, time will tell.
And ladies and gentlemen, due to time constraint, we take that as the last question. I would now like to hand the conference over to Ms. Ameera Shah for her closing comments. Over to you, ma'am.
Thank you so much, and thank you all for joining us. We know we recognize the speech is a little long today. We just wanted to give you a lot of visibility and color on exactly what we are thinking, where we are going in uncertain times, but we want to create as much certainty as we can in these uncertain times for our investors and stakeholders. And like I had mentioned earlier, we remain very strong and confident on our fundamentals. I think our operating performance stands tall and industry-leading. And we genuinely hope that as things start getting open up, like lockdown opens up, we will continue to get only stronger in our performance. And we look forward to sharing with you as soon as possible in the next few months. Thank you all.