Metropolis Healthcare Ltd
NSE:METROPOLIS
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 503.8
2 288
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Metropolis Healthcare Ltd
You don't have any saved screeners yet
Ladies and gentlemen, and welcome to the Q4 and FY '24 Earnings Conference Call of Metropolis Healthcare Limited, hosted by JM Financial.
This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of this call. This statement do not [indiscernible] the future performance of the company, and uncertainties. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Amey Chalke from JM Financial. Thank you, and over to you, sir.
Yes. Thank you, and good morning, everyone. On behalf of JM Financial, I am Amey Chalke. Welcome you all for Metropolis 4Q FY '24 Earnings Call.
With us today, we have the Metropolis senior management team, represented by Ameera Shah, Managing Director; Mr. Surendran Chemmenkotil, CEO; and Mr. Rakesh Agarwal, CFO.
I will now hand the call to Ms. Ameera Shah, for here. Over to you, ma'am.
Good morning, everyone, and thank you for joining us on the Q4 FY '24 earnings call.
Today, I'm joined by our CEO, Surendran Chemmenkotil; and Rakesh, CFO and [indiscernible].
We've uploaded our result in the stock exchange and website and hope everyone had an opportunity to go through the same.
Talking about the industry trends, the diagnostics sector is expected to grow at about 10% CAGR over the next 5 years. The organized segment of the industry is estimated to grow at a faster pace, marked by a transition from unorganized entities to larger organized [indiscernible].
Between 2020 and 2022, the industry also witnessed an [indiscernible], attracted by the proceed margins and return profile. However, [indiscernible] the market is easy. Scaling our profitable revenue poses a significant challenge from new entrants. And while aggressive pricing can play a role in creating the wellness market, it has not proven to be a favorable [indiscernible].
Health care players have the hope of acquiring customers [indiscernible] and then converting them to A-list customers. However, the conversion rate [indiscernible] low single digit. And therefore, these players have also now increased price [indiscernible].
Even globally, companies like [indiscernible], which were focused on wellness and 23 and being focused on wellness D&A testing have been struggling as very few businesses into pure wellness space build credibility amongst doctors or med cost.
On the contrary, Metropolis have similar established players have benefited from post-COVID wellness trend and having strong brand recognition and developing an omnichannel plan have been able to increase the share in the wellness sector.
We've also seen hospital change into diagnostic segment [indiscernible] where we believe that consumer brand is relatively stronger. While the perception is that we already have large testing infrastructure on Doctor Connect, and therefore, can easily pivot into diagnostics, the reality is that in health care, each area is [indiscernible] and doctors perception of expertise doesn't translate easily from hospitals to pathology [indiscernible].
Also, hospital from inherent structure challenges like the difficulty in attracting prescriptions from specialized doctors outside the hospital due to few of patients [indiscernible] to the doctors inside the hospital.
Also another challenge we face is on account of differential pricing inside and outside the hospital.
With these continuing challenges, hospital entrants have largely focused on B2B business for routine and semi-specialized plan by using aggressive pricing strategy, which tends to be focused on the tail end of B2B customers care more about pricing over other areas.
While competition persist in the states, there has been a recent trend towards reduced competition intensity and no rational pricing structure.
Interestingly, the emergence of organized players in the industry has [indiscernible] a noticeable shift in customer attitudes towards organized diagnostic care. As a result, stand-alone labs operating in the unorganized sector have experienced in decline market structure. This shift highlights the growing preference among customers but the reliability, efficiency and use of technology offered by the organizers.
Trending a specialized diagnostics business is all about your expertise behind the scene. It's not only about offering the large test menu but having the institutional knowledge for testing in each therapeutic area that produces better report compared to others.
At Metropolis, we are focused on the fastest-growing therapeutic areas such as transplant, neurology, nephrology, oncology, et cetera.
Additionally, to the future, we are investing deeply to the world class area of genomics and molecular diagnostics which is the future of the industry.
Looking at these trends and opportunities in the industry, the opportunity for Metropolis is to continue to outpace the industry and peers, which will happen via organic and inorganic growth.
For accelerated organic growth, we will do the following: We will focus on being the pioneer in new test advancement and amplify our engagement with specialty doctors to grow our specialty [indiscernible].
Number two, we will also expand our collection center network in new cities, which will be largely Tier 2 and Tier 3 markets in India. Three, we will heighten our service standard and digital market initiatives to improve the productivity o existing company. And fourth, we will expand our B2B platform not only in India but also to new markets outside India, using our global reference lab in Bombay as a specialty hub. [indiscernible] This will be an asset-light model, which will be moving outside India to Bombay.
When we look at inorganic growth, we will assess M&A opportunities through 3 lenses. Number one, we will acquire from [indiscernible] cutting-edge capabilities and skill within the technical testing skills and sales through our large distribution network.
Number two, we will acquire a typical and strong local brand B2C players in market where we don't have a strong consumer plan in order to establish a foothold to growth . Many to these local [indiscernible]lack prudence in capital allocation and scaling operations to the next level.
We intend to evaluate the target nationwide and do multiple bolt-on acquisitions that will create accelerated growth. This would largely be in the regions of north and east but also could be in specific cities in south and west as our industry is hyper local and not regional in nature.
And number three, we could look at good quality brick-and-mortar pharma, which are subscale and making inadequate [indiscernible] and management skills and advanced capabilities and strong brand recognition to scale these businesses and turn them along.
For multiple acquisitions, we had adhere to predefined internal parameters encompassing IRR, growth prospects, EBITDA, PBT margins along with drawn on capital and return on equity to assess possible acquisition. Thankfully, there has been a moderation in valuation expectations compared to the COVID period, and we will be open to using options that withdraw the cash accrual, debt and our own stock to conclude to you. We will be financially conservative in allocating capital or raising debt.
Currently, we see a fair number of opportunities to buy assets, which meet our strategic and financial check list and to capitalize on this opportunity of consolidation, the company plans to alter its dividend payout from historic 30% to 35% of tax to 15% to 20% of tax for the next couple of years.
Cash will be retained by the company for accelerated growth opportunities in terms of selective M&A, which we believe will fuel growth in the future.
Once these growth initiatives are successfully executed, we will restore the dividend payout of historical levels, if not higher. Should there be a case of nondeployment of the fund for M&A, we will prudently return to cash for reputable option.
Over the past 2 decades, we have successfully completed 23 acquisitions along with strategic [indiscernible] and have generated high IRR for the company. While most were done at very reasonable valuation, it will be integration and the ability to drive a high organic growth from them that really form part.
Since the integration of our most recent acquisition, Hitech, core revenues have shown significant growth and with synergies and operational efficiencies, we have been able to enhance EBITDA margins also by 4%.
Going forward, we are confident in our ability to do deals at fair valuation and integrate them well and execute plans to generate positive IRR from [indiscernible].
Over the past many years, my focus has been on professionalizing the company and to accomplish this as an augmenting our talent pool from within the health care domain and from our [indiscernible]. In pursuit of the subject [indiscernible] on board approximately 18 months ago to spearhead our business execution efforts.
[indiscernible] expensive background is running scale consumer-facing and distribution operations, [indiscernible] has assumed full responsibility for driving the implementation of Metropolis. Over the past 15 months under his guidance, Metropolis has grown faster than industry and peer and significantly drawn strong is setting the base for future growth.
Mr. Surendran and the team now formally established and demonstrated a strong track record of execution results. We believe it is the opportune moment to government from operations and run the form of a promoter led the professionally managed company. promoters in India who have successfully done this before has generated large value for shareholders, and I believe this is the right direction to go for Metropolis train as well.
Accordingly, as I will be transitioning into the role of Executive Chairperson and Whole-Time Director. In this capacity, and my responsibilities of encompass driving the strategy of the business and monitoring it, governance, strategizing capital allocation, including driving M&A activities, acquiring talent and fostering the culture of Metropolis.
Meanwhile, Surendran, our CEO, will lead the execution of all our operational initiatives by reporting to me.
Surendran and I have worked together in this construct for the past 15 months, and we complement each other well. Together with our strong Board, we will prioritize governance, strategy and sustainability initiatives aiming for even greater achievement.
Let me also take the opportunity to thank our Founder and Chairman, Dr. Sushil Shal, who will now transition into the role of Chairman and Medical. Under Dr. Shah's leadership, which [indiscernible] a trusted pathology ground, earning recognition from both medical professionals and consumer clearly defined his position as an industry leader.
Dr. Shah's leadership, commitment and dedication have been instrumental in shaping the company's success. In his new capacity as Chairman Emeritus and Director on the Board. Dr. Shah will continue to provide invaluable guidance to the Board and team, join upon his extensive medical experience and expertise to offer [indiscernible]. We express our heartfelt gratitude to Dr. Shah for his service and support in propelling Metropolis to global hub.
With this, I hand over the call to Surendran to take you through the quarter and the year gone-by and give some flavor of our strategy for FY '25 and beyond. Thank you, and over to you, Suren.
Thanks, Ameera, and good morning, everyone. Let me take you through the business highlights for this quarter gone by and along with the strategies going forward.
For quarter 4 '24, we are happy to report 11% year-on-year growth on reported revenues and a 15% year-on-year growth in our core revenues with corresponding volume growth of almost 7 percentage and on 7% on account of product mix change in realization benefit. We have delivered industry-leading volume growth over the last 9 quarters and are optimistic about the growth trajectory going forward. Our B2C revenue have grown faster at 20% year-on-year basis and quarter 4 with a volume growth of 7% and the 13% increase in RPP, attributable to the recent price increase implemented in January and shifts in product mix.
We are pleased to report that the price hike has been effectively absorbed. And despite this increase, our volumes are maintained at a growth rate of 7 percentage plus.
Alongside our revenues from Mumbai market have grown by 20 percentage, underscoring our increased market share and brand pull in our core geographies.
Our specialized and wellness testing grew by 17% and 22%, respectively, on a year-on-year basis, in line with our strategy of expanding our specialized and wellness business. Despite some competitive intensity on B2B side, we have been able to grow our B2B revenues by 11 percentage for quarter 4 with corresponding volume growth of 7 percentage. The discounting in the B2B segment has reduced as compared to full year '23 and B2B volumes have grown positive recovery.
More and more players are preferring faster labs with experience on the track of better service and quality of diagnosis.
Let me share some light on the network expansion and outcome of the same. Over the past 2 years, we have dedicated efforts to extend our presence across India. In the last 12 months, we have added 24 new labs with 7 labs added in the last quarter. Our plan for the current financial year entails addition of another 25 more labs in strategic locations to target underserved markets, thereby aiming for accelerated revenue growth and market share expansion.
In tandem with lab expansion, we are focused on expanding our collection center network and distribution channels. Full year '24, we have added more than 550 centers, including 150-odd centers in the last quarter alone.
Our footprint has expanded from 307 towns in April '23 to 600 towns by the time we exited last year. With all these efforts, we have been able to grow our revenues from other cities by 34 percentage for the quarter 4 and 28 percentage in full year '24, respectively.
Growth from the other cities largely on the back of growth in revenues from Tier 2 and Tier 3 city.
Our new labs are also showing robust growth over the last 2, 3 quarters with revenue contribution of 4 percentage for the full year '24.
In addition to prioritizing network expansion, volume and revenue growth, we have placed equal emphasis on efficiency, productivity and margin improvement. We are pleased to announce that our reported EBITDA margin stood at 25.5 percentage for the quarter 4 '24. Prior to factoring in CSR and ESOP, this is 26.5 percentage. And if we add back the dilution cost in the short term by the new lab, our EBITDA stood at 27.4 percentage for the same period.
We maintain an optimistic outlook regarding the sustenance of quarter 4 margins in full year '25. Upon the completion of our accelerated lab and network expansion by the end of '25, we are anticipating that the enhanced revenue stemming from both existing and new labs will further enhance our margin profile post full year '25.
Speaking of our organic strategy, we have been focusing on basically 4 or 5 big things, infra expansion into new markets to target accelerated growth with lab network and expansion of distribution channels. We have been focusing on technology transformation, both on the front end, consumer-facing for convenience to customer experience with improvise and also to strengthen our back-end, digital infrastructure to improve our service levels.
With increased focus on technology and digital marketing, we have been able to acquire new customers via the digital route and revenue contribution led by digital channels has showed robust growth in full year '24.
We have also revamped our 2 health wellness packages to suit right for consumer needs with focus on bundled testing packages, curated for specific target audience and also upselling to existing customers.
We have also taken multiple initiatives to enhance our service levels for B2B customers. We have set up dedicated relationship managers and special programs for our B2B clients, along with centralized help desk B2B partner portal for strong support system, et cetera. As a result, we have seen an increase in B2B volumes with rationalization in discounts over the last 2 to 3 quarters.
Lastly, as highlighted by Ameera earlier, we have strengthened our leadership bench, simplified the organization structure and have fortified our organization's capacity for efficient planning, execution and leadership continuity.
The wealth of experience and diverse background that these senior professions bring from various industries enriches our collective knowledge, knowledge base and enhance our ability to navigate complex challenges and seize the opportunity.
Their contribution extend beyond formulation of strategies and play a pivotal role in executing the road map ahead of us.
Going forward, is the brand strength of Metropolis, talent pool, trusted partners for doctors and consumers, coupled with aggressive expansion plans for into adjacencies with opportunities of inorganic growth, we are optimistic of outnumbering the industry growth in terms of revenue growth and profitability.
With this, I'll hand it over to Rakesh for the financial update. Thank you.
Thank you, Suren, and good morning, everybody. Let me share some of the key financial performance for the quarter. Reported revenue for quarter 4 financial '24 stood at INR 313 crores, a growth of 11% Y-o-Y. Our core revenue, excluding revenue for COVID and COVID allied and PPP contract grew by 15% Y-o-Y for Q4 financial year '24.
Our core revenue for financial year '24 grew by 13.3% Y-o-Y with 9% volume growth and approximately 4% on account of price increase and product mix change.
Reported EBITDA for the quarter stood at INR 79.7 crore as compared to INR 69.2 crore, a growth of 15%. The reported EBITDA margin for Q4 '24 stood at 25.5%.
EBITDA margin adjusted for ESOP, CSR and new lab margin dilution stood at 27.4% for Q4 financial year '24.
EBITDA for the full year stood at INR 84.6 crores with EBITDA margin of 23.9%. One-off expenses of INR 6.8 crores has been booked on account of whistleblower and Aam Aadmi Mohalla Clinic provision for financial year '24.
PAT for the quarter stood at INR 36.1 crores with margin at 11.6%. PAT for the full year stood at INR 128.1 crores with 10.8% margin.
Moving on to balance sheet. We are happy to share that we have paid all our debt in the last quarter and had 0 debt as on 31st March 2024. We have a net cash surplus of INR 117 crores as of 31st March 2024.
Our working capital days have reduced from 14 days on March '23 to 7 days on March '24.
Our OCF to EBITDA has improved by 3% and stood at 105%, indicating a higher cash conversion cycle.
The company has aligned the accounting year of its 4 overseas subsidiaries with the Indian accounting year with effect from 1st February 2024. Because of this change, the accounting year for the purpose of consolidation, which will hence for the 31st March, for that transition year, that is financial year '23, '24, the accounting impact of this change is an increase in revenue of INR 18.27 crores and PAT by INR 0.4 crores. That's all from my side.
With this, I open the floor for Q&A. Thank you.
[Operator Instructions] The first question is from the line of Anil Agarwal from Emkay.
My first question is on the quantification of any sums that we would be keeping aside for this M&A activity in the next 2 years?
So currently, we have, I think, approximately INR 120 crores cash on our book, if I'm not mistaken, half year. And we'll obviously be using this internal accrual plus raising debt or using stock of equity. It's difficult to obviously quantify an amount as of today because there are a bunch of things being evaluated. But my sense is that if we ever do look at raising debt, we would not look at it beyond 2 to maximum 2.5x our EBITDA. And if we were to use obviously stock of currency, then that could potentially play out well as well if the stock price is valuable for us.
So I don't have an exact number for you at this point because there are many things in the pipeline. But we'll obviously look at each deal from an IRR and ROE.
Got it. And while you have outlined the strategy behind selecting these M&A targets, would there be any specific region that we would be planning to target?
So as I mentioned, we have 3 strategies for the M&A and one of them is our geographical expansion strategy, right, which will be final in. We would look at obviously north and east, which are the markets where we would like to expand to a sort of a B2C route. That's one of the opportunities that we are sort of looking an one of the lens of M&A. But these are, as I said could also be in south and west of India because there are still markets in south and west certain cities in which we may not have a strong B2C brand. And entering those markets may also be useful. So I would say primarily north and east but also south and west for the geographical expansion strategy.
The other 2 strategies, which are about technical capability, which obviously could be anywhere in the location in the country and the third one, which could be a regional player or any other kind of player could be in any part of the country because we're looking at taking businesses which may not be necessarily providing the kind of profit on their own, either because they're subscale or need better management and picking those up and actually sort of being able to turn them around under our management skills a scale of customers.
Got it. My second question is on any indicative broad margin guidance for FY '26 post our network expansion plans?
So I think we are comfortable with our Q4 margin. We believe that we will be able to sustain that into the next year and hopefully try to expand it as the volumes grow and we're able to execute some synergies. So I think 25.5% to 26% margin cumulative, I think, is sustainable.
This would be reported margins, right?
That's right.
[Operator Instructions] The next question is from the line of Amey Chalke from JM Financial Limited.
Ma'am, there was a period when nationalized diagnostics change where we impacted with the qualification of e-commerce players who are cutting the prices. Now we are seeing the trend where most of the national or larger chains who are having good physical presence outgrowing the market. Is this only linked to pricing in your assessment or anything else which is also driving the [indiscernible]?
See, I think when [indiscernible] from [indiscernible] , it was during COVID or some of them which has started just before COVID, and it was a black swan event that really gave rise to digital usage, which obviously helps you in many industry player before [indiscernible], before we saw it in food tech, before we many industry chain. And we saw it in health tech as well. Not mostly because a lot of the unorganized centers were closed because they couldn't operate due to lack of employees, et cetera. And it gave lives to more of the home testing, home collection, especially for COVID.
Now in some industries, obviously, that could that trend consistently sustained. But in our industry, once COVID sort of came down, people actually prefer to go into brick-and-motor labs and actually give the sample. While the home testing, home collection has grown compared pre-COVID, it has still a minority share compared to more people walking into brick and mortar. So pricing was never really the key. Even at that time, the health tech from huge convenience as a way to really drive their business.
What the huge pricing for was for wellness expanding of the wellness market. Because in the wellness market, there's no need and you're actually doing a push product to create a need of preventive health care. And when they use pricing to create that kind of awareness, as I mentioned, it helps the incumbents a lot because it actually created a new market that we exist before, which was a preventive care, which was earlier a very small market. So there's actually been beneficial to the incumbents as well.
But that preventive care market while it's growing fast, it is not growing at the pace it was growing in COVID anymore. So I think for the health care firms really now the question is about where should they really play, what is going to be really unique -- what they bring to the table? And I think many of them are figuring out what that means for them.
From our perspective, pricing is never been the most important thing in health care. Because at the end of the day, you fall sick once or twice a year. And the more sick you are, the more critical your illness. You're really not looking at who's giving you something [indiscernible] cheaper. You're looking at who the best labs to get the best diagnostics usually recommended by your doctor so you can get treated quickly. I hope that [indiscernible].
Sure, ma'am. And the second question I have is on the expansion side. You have been saying that we are adding around INR 20 lakh, INR 30 lakh over 1 year. Why not INR 40 lakh or INR 50 lakh or why not INR 10 lakh? What is it that besides this number?
Generally for businesses, there is a capital limitation to expand or management mandate maybe a lack of a part of it or some of them are not ready to take the financial hit. What is it in our case that decides these factors organically? How much large will be adding going ahead? How do we decide?
I'll give you my input and Suren can come in as well. Look, in my opinion, the only reason there's no science behind this number INR 30 lakh is that earlier we were still about FY '19, '20, we will only be adding about 4, 5 [indiscernible]. You have to remember the lab is only a factor which as [indiscernible]. So demand generation really happens. When you go to the customers, you build collection centers and you are able to [indiscernible] demand in both collection [indiscernible].
The hard part is not in building a lab. Could we set up 100 labs in a year? The answer is yes. The question is, can you generate demand in all those locations because for an average lab, you need at least 20, 30 centers and B2B customers to be able to fill that lab. So really, it's about getting the right quality of talent on the front end, training them and to be able to go and scientifically sell to doctors and generate that demand and set up those collection centers.
Unlike other industries, which have [indiscernible] distribution, whether it's pharma or modern trade, in our industry, we have to set up each distribution point. So it's not like a product that we just pushed through an existing distribution. So really, that's where the time goes in getting to right talent training and setting up the distribution and generating [indiscernible]. Suren, anything you want to add to that?
No, I think you've covered it all, Ameera. I think if at all, I can add one more thing. We see setting up the lab does, I mean, start from the day you start working on the infrastructure of the lab, but it actually starts up more than the year before. We have to enter into a city. We need to familiarize with the Metropolis reports and we need to get the channels appointed and then we do start getting some level of customers and revenue from that market. And once the revenue reaches a particular level, that's the time when we start looking at putting up a lab there. So I think the whole process takes slightly time-consuming, and it's based on analytics. It's based on a lot of hard efforts. And hence, it may be prudent for us to do it more judiciously and at the right places and at the right pace.
So like Ameera said, the previous 2 years put together, we have set up 30 labs. And last year alone, we set up 24, 25 labs. So we definitely speeded up the process and this year, again, we are going to put up another 25 labs. So the required speed has almost has been brought in. And once we get this as our norms and even if there's an opportunity to get into any other market in the coming years, we will look at it. But otherwise, we are pretty happy with the current pace and also the ability to turn around the new labs into profitable ones in the about 2 years' time.
The next question is from the line of Kunal Randeria from Axis Capital.
So Ameera, just one of the points you made that a sick patient [indiscernible] quality and not really the price. So while I'm completely with you on that. But on the wellness front, do you think the pricing is a lot more important factor than it is in safeness and perhaps where some of the online labs would have an advantage over traditional players?
Sure. See, on the wellness side, if you remember, there is no one kind of customer. There are different kinds of customers, right? If you look at the customer segmentation, you have a more health conscious customer, brand conscious customer who's not educated and aware. Usually, they will prefer scheduling a health checkup on [indiscernible] and they're going to spend INR 2,000. They are not thinking, let me go and spend only INR 1,200 with somebody new who have not experienced and take a chance on my health check because you can understand while you are doing a health care is to find something early that you are able to then see so that it doesn't become a much bigger issue.
So there is a large amount of trust that is required whether it is in illness or whether it is in value. But in wellness because the doctor is not involved, consumers can be a very variety. So the health conscious, educated customer will still choose a brand which they are trusting. Slightly less aware customer may say that look, let me on price because some [indiscernible] that might be their expect nation.
And those people, those customers who have a wrong perception that all results are the same may go for a lower price and choose somebody who is sort of getting a more on the [indiscernible] side.
But finally, the question is that if it's being done at a discounted side, is there a structural cost advantage that help set levels have? And the answer is no. Actually, there is nothing differently being done that makes it cheaper, only probably the levels of quality control and quality will be different between the top incumbents and maybe some of the health tech players.
Now there's no structural cost advantage in actually doing it the way they are doing it. And therefore, it is about burning cash in the short term to acquire customers and then hoping that those customers will come to you again and again or hoping that those customers will convert to illness, and that's how you'll recover your money.
So I think it's more of a difference in business margin than I think it was really a structural cost advantage [indiscernible].
Sure. Just taking forward from there, does your B2B business to include some business from the online players?
I'm sorry, I couldn't hear you.
So sorry, I meant does the B2B business include the business from online players, and they may [indiscernible] on the website, but you would be maybe your lab would be analyzing the sample.
Yes. So the B2B business includes some of the online price and aggregators, but that contribution is very, very low for us. It's largely through the B2B labs and hospitals that we generate revenue on B2B segment.
Sure. Sure. And just one more question if I can. So just taking forward the discussion on lab expansion. So I think in the previous quarter, you had shared that you've added somewhere, I think [ 50 ] labs in the last 3 years. And these 2 acts a dilution to your EBITDA margins, it's around 100, 120 bps, right? So the fact that you are going to add more labs in the future, does your sort of guidance take these expansion plans for the next 2 to 3 years?
Yes. So like I mentioned in the last year, the 24 labs that we added at the EBITDA dilution of roughly 1 percentage, right? And the next 1 year also, we will add another 25 labs, and we will have an equal amount of dilution of the EBITDA of 1 percentage. But the guidance that we have said, 25.5% to 26% is already considering that lab addition-related dilution. So that's how it got. Maybe after full year '25 and beyond that, and I think our lab addition may not be at this pace, and hence, we will be able to see a little more expansion of the margins beyond full year '25.
Sure. But any maybe indicative number you can give at beyond '25, how many you plan to add and what part of the country you're targeting?
We will be adding about maybe 6, 7, 8 labs beyond '25. And we will go to specific markets that we want to penetrate further. And this number could be definitely well under 10. That's our current estimate.
Got it. Got it. And sorry, just one more if I can. Ameera, Mumbai is the biggest market, yet your revenue has been growing in double digits. I just want to understand what has been driving it? Are you adding more centers? Or is it more packaged sets. How is it, and what should we expect going forward?
Let me answer this for you. Basically, 3 things. One is our distribution expansion in Mumbai continues, right? And we are expanding enough number of service centers and collection centers in Mumbai, and we still see there's a good opportunity going forward, and we'll also get into the peripheries of Mumbai. And we believe that now we could rather set up a collection center for every 2.5, 3 kilometers in Mumbai. So we really clearly see an opportunity to further expand in Mumbai, and that will continue.
And the second one is, of course, we are our specialty business, Mumbai has got all the top of the hospitals in the country, and hence, in our engagement with the doctors in the top hospitals is getting amplified and we are trying to expand our business on the B2B segment also here.
So -- and also the third thing is our existing centers. We are not allowing the productivity of the existing centers to drop despite the increase in the number of centers that we're adding. So we have a very, very clear and dedicated focus on expanding the productivity of the existing centers. So a combination of these three things as what is actually driving our volumes in Mumbai.
So can you remind us how many centers you have in Mumbai and how do you plan to it in the next 2 to 3 years?
Mumbai, we have about 430 centers we have in Mumbai, and we want to take this number to 500 plus in the coming year or so.
[Operator Instructions]
The next question is from the line of Shyam Srinivasan from Goldman Sachs.
Just the first one is, Ameera, on the opening remarks, you talked about the 2 kinds of competition. I'm just more interested in the hospital-based competition, right? So if you could elaborate, I think you made two points, but just elaborate one was on B2B and the other one was the dissidence between pricing of hospital labs versus outside -- inside and outside. So if you could just clarify on those two points or elaborate on that, please.
So today as a customer, if you walk into a top sort of 20, 30 hospitals, you will find the prices of pathology of test inside these hospitals is are significantly higher, you can say, 50% to 100% higher compared to, let's say, Metropolis or other incumbent prices outside. So there is a much higher pricing when you actually go to the hospital and [indiscernible].
So when hospitals go outside to consumers, some cases they're choosing to have a lower pricing than they go to consumers outside. But that, as you can understand, creates a business for customers and for consumers, right? Because there's no logic why or there's limited logic why the pricing is so different inside and outside of hospitals. And that actually limits the hospital's ability to actually control the pricing outside because they already have very high pricing inside the hospital. So that becomes one structural problem and one fundamental issue for hospital.
The second issue for hospitals that I mentioned was that you have to remember that the hospital business is about bringing patients to a hospital and they're doing everything under the [indiscernible] of the hospital, right? But so there are doctors which are sitting outside -- the gynecologist being outside in the hospital. And that gynecologist refers that patient to the hospital while we will always be that listen will the patient then go to a gynecologist inside the hospital. And therefore, there is sometimes that has to be a concern for doctors outside the hospital to refer those patients to the hospital or to the hospital collection center.
So these are the 2 structural issues that hospitals may face and in the B2C side of the business. And therefore, I was saying that many of them have focused much more on the B2B side of the portfolio. And either they are going to small hospitals, nursing homes, whether in 5 life business and large business of topology per month and trying to do management contracts for these small hospitals, which we find in our experience tends to be a very, very poor margin and poor receivable or therefore, we don't do that business much at all or it tends to be on the B2B side, where you're going to the customers which are on the tail end. Because if hospital import in the other top hospitals and say, you give me your business, there's a competition there, so that doesn't happen. So they have to go to the labs which are the unorganized sector to say that, look, why don't you outsource a thyroid or a vitamin D, more common test to me, and that tends to be more price-sensitive. So these are some of the sort of challenges that come up with the B2C and the B2B side for [indiscernible]
Yes, maybe just harping on this again. So when in Apollo Diagnostics, which is the chain outside the hospital puts up like a INR 500 crore revenue number for, say, fiscal in a 12-month basis, you would imagine this is also probably cannibalizing their own in patients? I'm just trying to understand or it's largely led on B2B. That's the color I'm unable to understand.
So I would not like to comment on any individual player. But what I can share with you is that a lot of the players or some of the business comes from their own hospitals. Some of their business comes from other ventures that they have in health care. Potentially, there are people who are doing multiple things in health care. So it comes from captive their own sort of service facilities.
Some of it may come from an online digital and a large amount of it will come from B2B and the HLM contracts.
So when you have -- when you set up these collection centers, for example, Metropolis report separate B2C revenues and B2B, but most players, what they do is they don't report generalized revenue. And therefore, whether a patient is walking into a center, a collection center or whether that collection centers picking up a sample from B2B is not necessarily fully clear. So therefore, there is no data that you may get. But from the ground, we are aware that a lot of this tends to be BCP.
Got it. Helpful. Just the second question is on the outlook for fiscal '25. While we talked about margin guidance, trying to sustain at fourth quarter levels, what's our outlook on revenue for fiscal '25 and how we could likely split this between volume and price or ASP?
Suren, you want to take that?
Yes. So see, we have delivered a 13.3 percentage year-on-year growth during the last year. We're really looking forward to taking this further beyond this number and definitely looking forward for mid-teens kind of a growth in the year, full year '25.
The volumes, I mean, the split could be maybe the again, the volume is 8 to 9 percentage and 5 to 6 percentage maybe coming from the realization. That could be the split.
This includes the 3% increase we took in Jan. And there is also a mix change towards -- I'm just trying to see where the 5% comes from, 5% or 6%.
Yes, it's a combination of both the mix change as well as the price increase that we have taken.
That's helpful. And my last question, just bookkeeping one. When I look at Slide 17, last column, we have the 15-month data. We also have fiscal '24 few columns before, which is the one which doesn't include 15 months. So when we talk about flat margins, I'm -- is it -- sorry, I'm unable to understand, it should be actually 25.5, right, when we look at guidance for fiscal '25.
Yes. So we are saying 25.5% is the actual margin. And when we add up just the 4 entities for quarter 4 for additional 3 months, marginally, the reported EBITDA goes up from 25.5% to 25.6% because this entity has just reported a bit higher margin in Jan to March. So the guidance is on 25.5% only.
[Operator Instructions] The next question is from the line of Prakash Kapadia from Sparks PMS.
I have two questions. If I look at the data days, they are still at around 30 days. So how much can they reduce in the coming year? And secondly, if I look at the premium wellness segment, it's steadily growing for us and is now almost 15% of sales. So what is driving this? Is it self-awareness? Is it doctor advocacy? And if you could comment on the ARPU in this segment, is it top 5, 10 cities? Or is it beyond that? And some color will be helpful.
Yes. So I will think the better thing and then hand over to Suren for the next question. So debtors, we have been maintaining and reducing substantially. In the last 3, 4 years, you see we were at around 46, 47 days, and now it is coming down to 30 days. Definitely, it's also a combination of our cash and credit business.
So now going forward, this year, we are planning to reduce [indiscernible] by 20%. So we will be aiming to come down to 24 to 25 days of debtor days, if you ask for the target we internally taken and then keep improving it on a year-on-year basis. So that is -- definitely, there is a lot of focus in there. And 31 days last year has come down to 30 days, and we should move approximately around 25 days next year. I'm just handing over to Suren to have the wellness question ante.
See, on the wellness expansion, basically, there are -- there's 2 ways of looking at it. One is definitely the external reasons, which is one, the consumer awareness, the increasing consumer awareness, wanted to get a self checkup done on time, et cetera.
And also, a lot of awareness being created by the health tech players in the past by huge advertisements and the price, et cetera. And hence, now more and more people are coming with a banner of getting the wellness check done on a regular basis that we are getting the advantage of that both.
And internally, if you ask me, there are 2 or 3 things that we definitely do. One is the upsell at our centers. When a patient walks into a center even with an illness, our ability to upsell a full panel or maybe a wellness package at every center that we operate, it's getting increasingly better. So that's one place where definitely we are able to increase the wellness volumes.
And second is our digital initiatives, our website, our app, et cetera, where we -- and the way we reach out in the social media. So that's definitely able to get some traction on the wellness.
Third thing is our own customer base. We have now a good marketing CRM available with us, our ability to reach back to the customers on a life cycle management, reminding them on time about their next wellness check-up and on the base of certain illness patterns, advising them about the best packages and the best panels. So all this is helping us. It's a combination of both these external internal activities actions that we take put to the is taking the wellness revenues, which has grown 22 percentage last quarter and the last year. And we see that this can be further expanded in the days to come.
And Suren, is it top city-centric? If you could give some insights into what has been the realization or the ARPU per patient in this segment for us and what are we looking at.
Yes. So definitely, the big city, the top 4, 5 cities, the wellness growth is much better. If you ask me Mumbai, Chennai, Bangalore, et cetera, Pune, et cetera, the wellness growth is relatively higher. But definitely, the next set of cities also picking up. As we said, for the reasons I mentioned it to you, the wellness growth is picking up in the base is relatively smaller in some of the cities, but the growth rates are much better, right? So wellness overall, the wellness awareness is definitely picking up Tier 1, Tier 2 cities, and we're able to see the traction.
And the average revenue on the wellness [indiscernible] is about 2,400 and 2,400, we are able to see a INR 200 crores, INR 300 of growth over the last 2 quarters before versus now because of the realignment and the restructuring of the packages that we have done in the month of November, December.
The next question is from the line of Aashita Jain from Nuvama Institutional Equities.
Congratulations on a good set of numbers. I have one question on the volume growth. I think this quarter, we reported 7% patient growth versus high single digit that we usually report in last 3, 4 quarters. Just wanted to understand, could there be an impact of price increase taken in B2C? Are you seeing any impact in those markets? Or this is just a easier phenomenon and it should phase out as we expand going forward?
Yes. That's right. We have seen -- in our noncore markets, we have seen slight softness on the volumes after the price increases immediately after the price increases have been done, maybe in the first quarter. And then we are also now seeing that is getting stabilized, and we are trying to see -- we are seeing this is coming back to the normalcy. And also, we have done some few corrections in some of the markets we found that the impact was relatively higher.
So -- but overall, there is some softness in some of the noncore markets as a result of the pricing. Like any industry, if you are seeing that whenever there's a price increase happens, there's a little bit of hit on the volumes, but then it stabilizes maybe in 1 quarter or 2 quarters. And we've clearly seen that maybe by the end of quarter 2, the volumes will come back to our earlier levels for sure.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
Just on this core business side, as I see the number of patients with it and the number of tests has increased at a similar rate in FY '24. And effectively, let's say, test per patient is largely stable at 2. But at the same time, there has been a good increase in B2C or, let's say, the preventive health care space where typically the number of tests taken by patient is higher. So some disconnect here or see in terms of understanding this.
I'm not sure whether I really got the question right, but the revenue per patient on the B2C has gone up higher because...
No, not revenue per patient. I meant test per patient.
Yes for patients. I think it's 7 to 8 percentage as per patient volume growth.
Test for the patient is almost 2 for FY '24 as well as FY '23. And both number of tests as well as number of patient visits have increased at a similar rate of 8.8% for core business.
Well, let me comment on this. See, one of the things is that when we declare our test volumes and for example, we declare a wellness profile as one test, not as -- even if it has seen 10 test inside, we declare it as 1 part. So as there is a movement of some patients upselling and bundling the package. Even though the number of tests are increasing, you are not necessarily seeing that reflecting in the test for patients as well.
And going forward into FY '25, we are planning to change the way we [indiscernible] and we are trying to recalibrate the numbers where we are able to give the real test volume, including the breakup within the wellness package.
So [indiscernible] with us and hopefully, in a quarter or so, we should be able to align that for you.
That's really helpful. And just secondly, maybe in FY '24, some amount of price increase was actually with respect to reduction in the discount per se. So is there any further scope to reduce the discount? And if you could elaborate on in terms of pricing separately on routine test on premium wellness and specialized tests, that would be helpful.
Yes, I don't think discount is going to change much as been discount. It didn't change much from last year to year. There was a slight decrease in the discount. And I think what we were referring to is that basically, we have seen a marginal decrease, which means that the competitive intensity has sort of stabilized, right, because the discount is not going up, but it's actually stable and marginally sort of coming down. So there's not too much of a difference that really is going to attribute any benefit in [indiscernible] price increase on the different segments, the way the price increases are done is obviously done across the spectrum. But we look at sort of competition prices, local and national. We also look at our cost base, and that's how we do it.
I don't think we have a breakup of the price increase across 12 months, but largely, it would be pretty similar across the segments. I don't think you'll find too much of addition. But obviously, you will find a higher price increase for routine because you get B2C to that and some increase on specialized, you'll probably find a lesser price increase on semi-specialized pipeline because that area tends to come a little bit more from B2B, which tends to be a little bit more pricing.
Understood. And just to connect this on the final aspect in a sense. So effectively, the cost per test also then -- does it remain more or less stable irrespective of whether it is routine specialized or premium wellness? And so effectively, that converts to better profitability?
No. I mean your cost per test is different for every test, right? So for example, your gross margins on reticent to be higher, but your gross margins are specialized at lower, even though you may find a different result on a net margin basis because your material cost is obviously only one cost. Your servicing costs, your production cost is also additional.
Generally, we find that the specialty segment tends to be a fairly profitable net margin segment. And that's one of the reasons why Metropolis strategy is focused on B2C because that channel tends to give you better profitability. Doesn't matter which test comes to that channel.
And specialty as a segment, again, doesn't matter the channel, it comes through the specialty of a segment we find tend to be at a better and [indiscernible] and obviously build a stronger moat for the business because very few people are able to actually compete in this segment and provide the kind of quality of results for patient.
The next question is from the line of Vinod from Elara Capital.
Just a clarification on an earlier question regarding guidance. So when you say mid-teen growth last year on the base, we had some noncore businesses because of the report in growth was lower, but the core growth, like you said, was 13.3%. So when you look at FY '25, are all the noncore businesses out of the base in FY '24? So will the reported growth be in the mid-teen range? Or will there be some investments still to be made?
Yes, you are right. In fact, from this quarter onwards, the reported revenue is equal to core revenue is on of the group revenue. So there's only -- everything is same, but this what guidance we have provided is for the reported revenues.
And as I mention mentioned is that the growth is worth 13.3% from a quarter basis last year can go up [indiscernible]. So the guidance would be 13% to 15% would be sort of the guidance that we would provide for FY '24.
Thank you. As that was the last question for the day. I now hand the conference over to the management for closing comments. Over to you.
Thank you, everybody, for joining us today and being part of us with -- this quarter and in this journey. And it's been a very interesting and exciting year for Metropolis. We've done lots of changes from the technology side, lots of rollout, including obviously the size change, including some leadership and management changes. And I think despite all these changes, which obviously sometimes call some [indiscernible] within business, we've managed to really demonstrate a great service side, strong volume growth, ability to be able to take price and to an ability to be able to really navigate our expansion despite all of the changes.
And I think we are very excited about FY '25 as well. We feel confident of our team. We feel confident of our aggression on the ground. And we've really put in a lot of the ingredients it last year on the revenue side as well as on the cost side to be able to really demonstrate a good set of results next year.
Our focus is also going to move to not only the financials, but also really focusing on the sustainability of the business, the governance of the business and really ensuring our processes and systems when we get tighter as we move along.
So very excited about next year, and we believe that the industry has likely settle down, and it gives us the right platform to continue to be able to execute really well and be able to create for value for all the shareholders. Thank you so much. So Suren, is there anything you would like to add?
That's good enough, Ameera, and thank you, everyone.
Thank you. On behalf of JM Financial Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.