Thyrocare Technologies Ltd
NSE:THYROCARE
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Thyrocare Technologies Ltd
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Ladies and gentlemen, good day, and welcome to Thyrocare Technologies Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Pratik Hire from Thyrocare. Thank you, and over to you, Mr. Hire.
Thank you, Thanvi. A very good evening to all, and thank you for joining us today for Thyrocare's earnings conference call for the fourth quarter and full year FY '23. Today, we have with us Mr. Rahul Guha, MD and CEO; and Mr. Sachin Salvi, CFO, to share the highlights of the business and financials for the quarter.I hope you have gone through our results release and the investor presentation, which now have been uploaded on the Stock Exchange website. The transcript of this call will be available in a week's time on the company's website. Please note that today's discussion may be forward-looking in nature and must be viewed in relation to the risk pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the Investor Relations team.I now hand over the call to Rahul Guha to make the opening remarks.
Thank you, Pratik, and welcome to everyone on the call. Thank you for once again taking out time from your schedules to join us this evening. Just to -- for those who are joining for the first time, just a quick introduction of us on the call. I have -- my name is Rahul Guha, I'm the MD and CEO of Thyrocare. It's actually been roughly a year since I joined, and I want to thank you all for the opportunity to present Q4 and annual results for this year. I'm joined by Sachin Salvi, who is our CFO and well known to most people on the call. Pratik Hire, who is part of our strategy team and leads Investor Relations, and that kicked off the call is with me, along with Aditya Shinde, who heads our Finance, Admin and Sourcing functions.So first, I'll just talk a little bit about the focus areas over the last few months and the year that has been. But before we begin, as with all my calls, I will always start with the quote from the Mahatma. "The future depends on what you do today." And therefore, I wanted to give you a sense of some of the highlights of what we've been doing in the last 1 year. If you recall, when we first took over, we touched upon a brand -- rebranding effort to bring a fresh and modern perspective to the brand. That has been completed. And with our new test menu of 700 tests, our brand logo actually moves away from the old imagery of the thyroid gland and anchors on 2 tenets. The first is a drop of blood, signifying our heritage in pathology. The second element is a microscope, which we wanted to use to bring out our anchoring and science and technology at all our labs.Quality remains a key priority area for us. It is an ongoing journey, and I want it to report that we have made good progress over the last 1 year. We have now 20 labs that are NABL accredited, which includes our COVID labs. And today, I'm very happy to say that 85% of our sample load is processed in an NABL lab. It's important to understand this in context, this 85%. Today, only 2% of the pathology labs in the country have an NABL accreditation. And actually, what we did was we had commissioned an independent study on quality through a research paper that has been published in the International Journal of Advance Research, Ideas and Innovations in Technology. That report actually shows that 9 out of 10 doctors trust Thyrocare reports to be reliable and recommend the patients to get tested from Thyrocare. That is a big stamp of approval of all the work that we have been doing on the quality front.Beyond the work on quality, we have expanded our offerings substantially in the preventive care space. As I talked in the last quarter call, we had introduced the Plus and Pro series in our flagship Aarogyam. We have also launched a set of 24x7 non-fasting packages to offer round-the-clock diagnostic services on the wellness front. And working closely with doctors, we have launched a new series of investigative packages under the brand name Jaanch. These packages are curated by doctors to help doctors and patients investigate specific chronic and lifestyle diseases in a much more targeted way. The way to think about it is Aarogyam is our wellness brand, but Jaanch is our investigative or sickness brand. If you are concerned about any health concern, then we would recommend that you use a targeted Jaanch profile. We have Jaanch profiles for hair fall, for fever, for PCOS, for thyroid, for any sickness or chronic condition. We have worked very closely with doctors to curate these packages to put the power of diagnosis in the hands of the patients and doctors. And we have branded this series with Jaanch, and we have launched it across the country in the last few weeks.We also continue to engage doctors on diagnostic testing and how it can better impact their patients and the treatment that they receive. In partnership with key opinion leaders, we have developed educational videos and have also started in participating in conferences to share and debate our perspectives on diagnostic testing. You would have seen through many of our campaigns, we have engaged with regional celebrities to create awareness about diabetes testing. We've also revamped our technology stack. We have now launched our new platform called ThyroNXT for our franchisee partners, which aims to make transacting with Thyrocare as a B2B company, a frictionless experience. On the financial front, we also distributed an interim dividend of INR18 per share at the rate of 180%. We are very proud of some of the key milestones that we achieved in the last year.On the quality front, we have reduced our complaints from million samples by 35%. Our T90 TAT is now less than 24 hours pan-India as compared to 28 hours last year, and our average TAT now is less than 14 hours. Through our pin expansion initiative, we are now active in 4,600 pins as compared to 2,600 pins in FY '22, and we now have 7,400-plus active franchises as compared to 4,400 in FY '22. As a result, we processed 22.3 million non-COVID samples and has served 15 million patients in the year, which is a 39% and 32% year-on-year growth, respectively, in volume. In our Nuclear business, we performed 30,800 PET CT scans this year, which compares to 24,000 scans last year. And when it comes to API Group, it continues to account for 12% of our pathology revenue for the full financial year.As we get into the results, I wanted to share with you a few highlights or pointers before we deep dive into the same. Our focus has always been in driving sustainable revenue growth. We have seen a healthy recovery in our non-COVID volumes year-on-year. This has been driven by continued focus on channel expansion through our pin expansion initiative and a focus on onboarding new key accounts in our partnerships. As a result, we've been able to deliver a 22% year-on-year growth in our non-COVID business. And while there has been a degrowth at an overall level, that is largely the drop from COVID being out of the picture.With that, I'll hand over to Sachin to just cover the overall results.
Thank you, Rahul. Good evening, and thank you, everyone, for joining this call. I'll briefly update you about the key highlights of Q4 and for the year, financial year '23 financial performance. Before we get into the details, I will reiterate about the ESOP program that I have mentioned in the last couple of calls and last couple of quarters. This program has been introduced at the group level to retain talent at Thyrocare. The results of parent company will vest over the next 6 years, and we are recognizing the same as per Ind AS and IFRS standard as a book entry towards the share-based payments and appropriately reflected in the profit and loss account as an expense and in the balance sheet at equity contribution results from the parent company. The total value of the ESOPs granted are INR45.3 crores over a period of 6 years. But one thing you must note that this is a cashless charge. It is not cash outlook. As per the Ind AS framework, the options are valued at grant date as per the Black Scholes formula, which is a charge to the profit and loss account over the vesting period proportionately and typically it results in a hit in the year of a grant and then proportionately charge over vesting period. The breakup is included in our detailed presentation. As these are not operating expenses and do not impact our cash flow, we have normalized EBITDA to the extent and reported EBITDA in line.Now going into the performance, first, I'll start with the revenue from operations. Our revenue from non-COVID operations for the year on a stand-alone basis has increased by about 22% Y-o-Y to [ INR457 ] crores. Our COVID revenue declined by 96% Y-o-Y to INR6 crores for the current year. In Q4, we have grown our non-COVID revenue by 18% and overall revenue by 4% Y-o-Y. Additionally, we have seen a strong recovery in our radiology business. We have grown revenue on a Y-o-Y basis by 47% in the year and 53% Y-o-Y in Q4. As far as the EBITDA margin is concerned, our stand-alone normalized EBITDA margin stands at 31% for the quarter and 29% for the full year.With these deep highlights, I'll pass it on to our MD and CEO, Rahul Guha for the strategic updates to the investors. Thank you.
Thank you, Sachin. And just one important point to clarify, while we have reported a consolidated normalized EBITDA of INR151 crores, our free cash flow from operations this year is INR129 crores. So our normalized EBITDA to cash conversion is quite good.I'll just take now a few minutes to recap our strategic direction, and then I'll open it up for Q&A. As always, I will first start with our value proposition to the customer. We will continue to remain an affordable option to all patients with good quality and on-time reports. All our efforts on our value proposition is towards ensuring low cost to the patient, assurance on quality of testing through our certifications and engagement with doctors. We have made substantial progress on this, which I updated in my initial comments, and you will see reflected in the presentation. This will remain at our core and will continue to guide all that we do.Second is our strategy. We continue to maintain our strategy of being the B2B partner of choice to all front-end diagnostic services and companies in India, whether it is a small diagnostic center in a semi-urban area, a pharmacy in the metro, a small nursing home, an individual doctor or even a leading online diagnostic platform, or a health tech marketplace. We are happy to work with them to provide low-cost, robust testing solution, so that they can serve their patients in the most effective manner. If they require phlebotomy, we are happy to mobilize our phlebotomy network of almost 900 and 400 network phlebotomists to serve them better. This strategy has been working well for us. We have delivered a year-on-year value growth of 22% and a 39% volume growth in our non-COVID businesses.Going forward, we have 3 key pillars of growth, which is slightly different from what I have been sharing over the last few quarters. We are focusing on 3 areas. The first is our franchise business. The focus is to take our franchise business deeper into India with a focused test menu and provide our clients with a frictionless experience to transact with us and provide their customers the best testing experience that they can. We continue to focus on private as well as public partnerships. In the public space, we will focus on TB and infectious disease, where we are by far one of the strongest players in these segments with large screening programs, partnering with health bodies and funding agencies to participate in this segment to provide better testing and care to patients who are suffering from this disease.Additionally, we will continue to expand our partnership across healthcare companies, hospitals and other health services companies and enable them to provide this diagnostic testing to their customers. The third area which is new from before is we believe we have a strong and robust B2B model with a core of execution. We believe there is a lot of opportunity to take this model internationally, and we will start to look at emerging markets where we can bring this model to provide affordable testing into those markets. That is, in a brief is our mandate as management, and thank you for giving us a patient hearing. I'll once again end with the quote from the Mahatma. "Find Purpose, the Means will Follow" and our focus always remains to be to provide affordable, high-quality testing to the market -- to the market.With that, I'll open it up for Q&A.
[Operator Instructions] The first question is from the line of Rahul Agarwal from InCred Capital.
I'll start with your last point, Rahul, you mentioned foray into international markets, could you elaborate, please, why is this even mediate for the company?
So as we look at growth and our business model, we are always looking for new avenues for growth route. And we believe there is an opportunity there. We've done a detailed study in some of the emerging markets in terms of the prices, in terms of our operating model and the return that we can generate. And also with a thorough assessment of the competitive scenario, we believe there's a sweet spot to disrupt some of these emerging markets in the same way that Thyrocare has disrupted the Indian market a few years ago. We believe there's a substantial opportunity to take our model international.
Okay. Got that. Any countries you would want to focus on at the initial stages?
So we are looking largely at emerging markets, Rahul. So we have done a full assessment on Africa. We believe that could be an interesting opportunity for us. The Middle East is the second and Southeast Asia is the third that we have prioritized. Again, I want to reiterate, we will follow a B2B model there where we will largely to a large extent, take our lab strength, infrastructure and the ability to operate large-scale labs at a low cost and work with partners in those respective markets to develop them all.
So labs essentially are going to get set up there and they'll service the B2B market. Is that correct or they'll get the samples come to India and get tested?
No, no, labs will have to be set up there. We won't be able to manage an international airfreight logistic.
Okay. I get good. Secondly, a few discussions or questions, I'll just skip -- I'll put in 2, and then I'll come back in the queue. On the B2C side, right, I mean, we generally end up discussing all B2B on Thyrocare's call. Just on B2C, how is that moving for the business, obviously, the own lab infra, your pincode expansion, your NABL labs, should actually boost that isn't it? And plus the B2C side of it, which is our own app and website, how is the traction there?
So see, on the B2C side, just to clarify, we don't follow a customer acquisition strategy where we invest in Google AdWords and Facebook and so on and then acquire customers into the platform. It's largely organic traffic that we look at. That business has grown well. But to be honest, it's not -- it's a very small part of our business. And we haven't really pushed that part because it's very expensive to acquire customers online and then service them. So that's not really our cup of tea. We prefer to work with partners who have acquired customers and then we are able to work with them to service their diagnostic testing needs. And that strategy has overall worked fine.So if you look at our business, as I said many times, we break our business into 2 parts: the franchise business and the partnerships business. And then we have our D2C, which is 5%. Our franchise business, as you've seen last quarter -- same year last quarter was INR62 crores and now INR73 crores. And our partnerships was last time, INR31 crores and now it's INR38 crores, which is roughly kind of the same growth rate for the company. So I would say both engines, our off-line franchise business and our largely online partnerships are kind of firing at the same rate.
I understand. So overall, B2C, not the D2C part, but including D2C, like overall B2C should be like [ INR50 crores ] of the business, like pure Thyrocare denominated report?
No. I would say almost all our reports are Thyrocare denominated reports. As I said, we look at our business travel in 2 ways, which is we believe we are largely B2B and we look at our business in 2 ways. One is our franchise network that works with pathology labs to collect samples and then process them at Thyrocare. And then our partnerships, which may be like PharmEasy, but we work with many of the other online players who have their own captive customers, but for diagnostics, actually pass on the customers to Thyrocare. And we -- except for PharmEasy, actually for almost all our partners, we released the Thyrocare report.
Got it. And lastly, on Aarogyam, what was the revenue share for fiscal '23? And after the realignment you've done across being present across price points, the Pro and Plus series, have you seen -- what's been your experience over the last 2, 3 months?
Yes. So Pro and Plus has basically launched in the last quarter. So I think it will take some time. It's roughly the -- there is a set of packages that have got launched over that. They account for about 10% or 15% of the overall Aarogyam now, the new packages that were launched in the Pro and Plus series. Our Aarogyam to non-Aarogyam remains at about 40-60. So 40% of FY '23 would be Aarogyam and about 60% would be non-Aarogyam. To be precise, it is 41 point something and 58.7 something. But that is, you say 40-60 is the rough ratio of turnover for Aarogyam to non-Aarogyam.
[Operator Instructions] The next question is from the line of Nitin Shakdher from Green Capital Single Family Office.
My question is in relation to what is the exact current cash on books? And obviously, related to that is what is the management viewpoint, I mean, creating shareholder value in terms of buyback because, obviously, the share price, while the management will not comment on it but as an investor, I feel it's heavily undervalued. So any initiatives on that, which will change the paradigm -- current paradigm?
Sure. So to a large extent, the cash on books is about INR40 crores is now after the payout of the INR95 crore dividend that we paid just in the month of April. So post the payout of the 95 million, cash on books is about INR40 crores. We generate a decent amount of operating cash every month. As I said, over the course of last year, we generated INR129 crores of cash.Coming to the shareholder point, one of the things that we always followed is a pretty aggressive dividend strategy, and we will continue to do that when we don't have material uses for the cash. We haven't evaluated a share buyback at this point, but we typically lose dividend as the way to return money to the shareholders. The other is in our capital allocation, when we reviewed it as well, we found that actually we use a lot of operating cash to fund equipment purchases. So there, we have moderated some of that, obviously, capital allocation strategies, where we will use debt to finance equipment and actually free up a lot of the shareholder cash that normally would get used in purchasing equipment and continue to dividend it out unless we find a material deployment area that can be remunerative from a return on capital point of view. The international expansion is one area where we may deploy some of that cash to generate returns. But that's the overall capital allocation strategy right now.
Come to the international expansion, which is very interesting because you're looking at Africa as #1. And obviously, in Africa, whether it's Rwanda, Nigeria or South Africa or even Kenya, can you just highlight a little bit on the strategy in terms of what exactly business to business, on B2B, you will be looking at? Is it in terms of tie-ups? Or is it in terms of endemic or pandemic pathology testing? Or is it in terms of even exploring markets like Vietnam, Philippines, Thailand, Indonesia, is the strategy going to be different for Southeast Asia or it will be very similar for Africa as well?
Yes. So as I said...
At this point, how much is allocated for the international expansion for the financial year, please?
Sure. So as I said, the 3 geographies, Africa, Middle East and Southeast Asia that we have prioritized as the first wave. Just to say, what do I mean by the B2B models. Typically, in all these markets, there are a large number of hospitals and large number of pathology labs that operate in these markets. Typically, as just like in India, we go in and set up a lab of a significant scale that allows us to bring the cost down of testing of particularly high CapEx kind of tests. So hormones, which is one of the most famous is thyroid, but there are multiple hormones that can be leveraged as well. Many of the infectious diseases, particularly when it comes to PCR-based testing and things like that. So effect which are also endemic in these countries.So the strategy is to go in and set up a large infrastructure and lab, which can process significant volumes at a much lower cost. And then work with distribution partners in those markets to gather the volume. And those distribution partners are typically distributors to hospitals or distributors to pathology labs, typically people who sell vials or reagents into these labs and have a good connect. And we are effectively then able to provide them one more line of business into that market. So that's the outline of the strategy. For next year, we have actually allocated not a lot. We have allocated about INR20 crores that will be largely deployed in the Africa space. But once we taste success in Africa and then we look to scale the model is when we will consider a further capital deployment.
Okay. That's very comprehensive and all the best for this financial year.
The next question is from the line of Aditya Khemka from InCred Asset Management.
Rahul, sorry, I couldn't catch that. How much capital would it need for you to enter these emerging markets next year?
So we've allocated for the first wave, we said INR20 crores.
INR20 crores. And this INR20 crores would be spent across what time frame?
I would say -- to be honest, I would say between the quarter 3 and quarter 4 is when we would incur most of it because that is the time that the labs would get better.
And this INR20 crores would be sufficient for how many geographies? So as in how many countries or how many labs as we can look up there?
3 geographies, and it would be 3 labs.
Understood. 3 geographies, 3 labs. Secondly, on the government receivable that you have provisioned for, how long has the receivable been due? And we also look at this company called Krishna Diagnostics that does business from the government. We haven't seen any provisioning ever from their side, they seem to get their receivables on time. So if you could slightly elaborate on what caused this to be provisioned and how long has it been overdue from the government? And why is it different from what other players are doing?
I cannot comment on the provisioning practices of other companies. So I will just talk about us. This outstanding has been due for 2 years. It is COVID testing related. I don't think we are very different from other players when it comes to the COVID receivables from particularly the specific testing agencies that we have been working with. It has taken time to clear the bills. And according to the process with our auditors, we are provisioning as appropriate, and we remain hopeful as and when the funds are released that we will receive the fund. But we've been provisioning as per the guidance from our auditors. But it is -- particularly I understand there are 2 parts of the government business. There is pathology and there is radiology. In radiology, the receivables tend to be more under control because you control the equipment as well. So if over a period of time, you have not been paid, you can shut down the equipment and effectively precipitate your payment, whereas in pathology and particularly in COVID, where the testing was done at such a high volume in such a short period of time, right? It will take time for the payments to get released.
Okay. Okay. I get that. Could you also clarify is the state government payments or central or -- split between state and central?
So this is state government payments and municipal corporation.
State government of municipal corporation. Okay, that clarifies, because under the NHM which is National Health Mission controlled by the state government, and my understanding is that the payments are fairly moving fast, any which ways. Lastly, on the non-COVID business. So we see that the volume is growing faster than the top line revenue. So is the realization per test coming down as in are we actively offering discounts to get higher volumes in? And if so, what is your outlook for the future? Can you maintain like a 20%-ish kind of volume growth without taking significant price cuts? Or you feel you would have to offer some sort of price cuts to get volumes north of 20% on the non-COVID side?
Actually, there, Aditya, if you recall, when I had first taken over, we had done a price correction in just prior to in Q4 of 2022. And so if you look at Q4 '22 to Q4 '23, actually, our gross margin has improved over the year. So we have not -- after that Q4 '22 price correction that we took, we have not corrected prices throughout this financial year. So if you compare Q4 to Q4, our gross margin has improved by 1 percentage point overall. So I would say whatever correction we did to the operating model, which was to correct the prices and all of that in Q4 of last year. Since then, that has carried us forward in terms of the revenue growth that we're seeing.
That's fair enough. Just one more question from my side. This ESOP pool of INR45-odd crores, right, which we are writing off over the next 6 years. So in the foreseeable future, as in the next 2, 3 years, do we have any visibility if there would be a fresh pool again created for ESOP to incentivize more? Or do you think this ESOP pool will last for like 10 years or 6 years or whatever? Can you give us some clarity on can they be for the ESOP grants in the future?
So there could be a possibility of further ESOP grants in the future. It always remains a priority to attract talent. But as of now, at least at the Board level, there has been no discussion of improve, enhancing or increasing this. But as and when we get key talent, we may evaluate a further ESOP grant. But at this time, there isn't any plan.
And just to clarify on this Rahul, these ESOPs are for the API Holdings shares and in Thyrocare's book, there is an entry, but there is no cash impact and there is no dilution of equity happening in the books of Thyrocare?
That is correct. So as I discussed also, if you see -- if you look at our normalized EBITDA for the year, we -- our normalized EBITDA was INR150 crores, and our reported EBITDA actually goes down all the way to INR120 crores because of this ESOP cost and provision for receivables, but our free cash flow from operations for the year is INR130 crores.
So I see a normal ESOP of Thyrocare shares would not also impact cash flow, but it would impact the number of shares, diluted number of shares. So I just want this to be on record that your diluted number of shares is not actually increasing because of these ESOP grants.
Because of the API ESOP grant, no. But as you know, we have a small ESOP program in Thyrocare as well, which is -- which then created was 1% of the outstanding equity, that ESOP plan continues as always.
What is the quantum of the ESOP plan, 1% of Thyrocare's equity? It was 1% of Thyrocare's equity?
Yes. It was about 5 lakh shares. It was granted over a period of 10 years. So it roughly works out to about 50,000, 60,000 every year.
50,000, 60,000 shares every year. And out of the 10 years, how many years have lapsed and how many years are left?
8 has lapsed, there are 2 more years left.
8 have lapsed, 2 more years left. So this -- total ESOP cost of 45%-ish Holding cost -- this is not a...
Yes, this is the API Holding ESOP cost. The Thyrocare cost is not significant. So we have absorbed it as part of employee benefits.
It's not significant, it's not north of INR1 crore, is it? I'm just trying to get a sense of the quantum, sorry.
About INR2 crores.
It's about INR2 crores. And it's included in employee benefit expense.
It's employee -- in the employee benefit.
The next question is from the line of Nilesh Doshi from Prospero Tree.
Sir, I have 2 questions only. One is the -- you have answered a little bit on the government outstanding amounts. Sir, what is the exact amount outstanding as on the 31st March 2023?
Sachin, do you want to take that?
It is about INR60 crores, INR51 crores from 1 data, which is NHM Maharashtra, and there will be some small debtors like NHM Uttarakhand, NHM Jharkhand, and Bangalore Municipal Corporation. That will be another INR7 crores, INR8 crores.
So it was around INR80-plus crores as on 31st March 2022. So we received INR20 crores during the year or we have provided out of this INR20 crores?
No, no, no. So the total billing was about INR80 crores. We have received about INR20 crores in financial year '22. During financial year '22, '23, we have not received a significant amount. So that's why as on 31st March 2023, the tentative outstanding from NHM on account of COVID business was roughly about INR60 crores.
So -- but you did the provision of around INR10 crores in FY '23. So the amount is -- outstanding amount is INR61 crores for the FY '23. It was INR80-plus cross in 2022. So the difference between these 2 amounts is INR20 crores. So we must be made the provision of INR20 crores, if we have not received any amount from the government authority.
No. The provision for the outstanding [ tables ] is made on the basis of [ PCL ] model. So it is not on the basis of whether the money has been received or not. It is based on the amount which is outstanding and for how much period the amount is outstanding of the total quantum. So this has nothing to do with how much amount that we'll receive, how much amount was outstanding as on 31st March '22 or as on 31st March 2023.
We are not receiving the amount because of any dispute or there is anything wrong billing? Or what has actually exactly happened?
There is no wrong billing and all. The only thing is there were some clarification which have been swapped by the regulator on account of the reports, which has been approved on the ICMR website, we have given the clarification to the respective department, and they are just quantifying by seeking a confirmation from the respective MOH you are setting in the respective districts.
So when we are expecting to receive this amount, sir?
So we are expecting it to receive in the last quarter, but somehow this process is getting delayed, and we have been informed that it will take another, say, 5 to 6 months to release this payment. So by September 2023, we are expecting.
So -- but now are we doing any government project? And for that, we are receiving the regular payment?
As of now, you are asking? As of now, we are not doing any government -- any big government project as such. We are doing municipal corporation project, that is BMC, but that has been awarded to Krishna in the month of February. So that has been stopped. As far as that committee is concerned, we are receiving that payment again that outstanding quite regularly. But we are not doing any substantial government business as of now.
Okay. Okay. Okay. And so what is the total receivable as on 31st March '23, including the other party and government party -- government authorities?
The total receivable as on 31st March 2023, net of provision is about INR85 crores.
INR85 crores, excluding the provision or after the -- making the provision?
That is true.
Okay. And sir, my last question is related to dividend, sir, I've described the capital allocation strategy, that's fine. But we are the growing company and should not reuse the fund for the infracture development rather than distributing the amount to the shareholder, which will -- which is the beneficial to the shareholder because dividend is good, but I think the growth is better.
Yes. So just to take that question. As I said, the overall company growth is fine. We are growing at -- as I said, last year, we grew at 22%. The important question is, at this point in time, should I -- should we invest in setting up more labs in the country to deepen our presence. At this point, we don't believe it's prudent to use cash and shareholder cash to fund equipment, we can actually fund equipment at very good rates with debt. So there is no need to use shareholder money to fund equipment at this point in time. At this point in time, we are not looking at any material acquisitions to purchase any kinds of companies to see if we can grow the top line. And our organic growth has actually been quite healthy. As I said, we are allocating some capital for our international expansion strategy, but we don't think it's prudent at this point to hold on to the cash or to use it to fund equipment and deprive the shareholders of their own avenues to deploy the money. And as I said, our current strategy has been delivering healthy growth. So we don't foresee very large, how do you say, CapEx or acquisitions to deploy that cash?
Okay. Okay. So the current dividend rate will be maintained in the earnings net of current status?
Yes, unless something changes and we see a great opportunity where we can really accelerate the performance of the company.
Okay. Sir, are we offering any special discount to PharmEasy or we are giving the same rate to other partners?
So this forms part of the related party transactions, which we get approved in the AGM also. It is actually public information. The PharmEasy gets a 15% discount over our published rate. But many of our other customers also get the benefit of discount basis their volumes. So it is -- we have a standard published rate card basis volume and PharmEasy enjoys that 15% discount because of the volumes that they [ get close ].
Okay. Okay. Sir, and what is the status of the pilot project, which is likely to be set up at Ghatkopar with some other partner?
The pilot project is operational, sir. We have just done a few scan, CT scans in particular. The full project will be operational, I would say, towards June, July. But that is a small pilot, as you rightly pointed out. And it's our first step in the radiology segment. Let us see how it goes. If it goes well, then we will consider investing. But at this point, it is just a pilot.
But will there be any conflict of interest with our Nuclear business or both are in the -- different with that?
Sir, very different segments. Nuclear is in the Pet CT business. The pilot that we are doing has CT, MRI, x-ray and ultrasound. So it is a full radiology business but does not have Pet CT.
Okay. And sir, last question. Sir, under the Nuclear, we are operating at 9 center or 10 centers?
Sachin?
We are operating 9 centers.
9 centers. Baroda and Surat because in the presentation, the Baroda and Surat are provided and in the annual report Baroda was there. So I confused, it is 9 or 10. 8 was there in the annual report, 8 centers are mentioned. So Surat is the new one?
Just a minute. Sorry, we operate 10 centers -- we operate 10 centers.
10 centers?
Yes. Including Surat and Baroda. Yes. Including Surat and Baroda.
The next question is from the line of Harini Dedhia from Tamohara Investment Managers.
Just 2 quick points. One was on the -- when I look at the partnership workload, we are in Q4, marginally lower than Q1, but our revenues are higher. So is this because we have increased the number of tests per sample? Or is it because we've managed to push some price hikes on platforms?
So I think some of our newer partners are coming at a much better realization and that is what is driving the...
Okay. Got it. So maybe we've seen some workload rationalization happening at the older partner, which is understandable because of the push to profitability. But the newer partners because they are not getting -- giving us the same volumes as yet realizations are better. So that would... Okay. And just broadly speaking, Sachin, if you could help us, what portion of other expenses are available and fixed? If you can just give a broad number, that would be very helpful.
Thyrocare or Nuclear?
Thyrocare, the pathology business.
Okay. So as far as the pathology business is concerned, I think almost all the expenses are variable, except the rental cost, which we are incurring. Otherwise, all the expenses are almost variable. As far as Nuclear is concerned, I would say mostly all the expenses are fixed expenses and hardly everything variable because the CIT cost of the machine, the cost of the personnel which are engaged to report, and is the cost of running the center like rent and other charges like electricity, all these costs are fixed. So for a pathology, most of the expenses will be variable, whereas for radiology, most of the expenses will be fixed.
Got it. So for the quarter of the INR27 crores-odd other expenses, what is the rental?
I'm not having the exact number as of now.
I'll just [indiscernible]
Yes, maybe we can take that of separately.
The next question is from the line of Rahul Agarwal from InCred Capital.
Thanks for the follow-up. First question is on CapEx. So INR41 crores were spent in fiscal '23. Could I understand where was the spend? And fiscal '24, you mentioned INR20 crore is what you allocate for international expansion into second half. What will be the total CapEx for the year, including the Indian operations?
Sure. Just give us one second. On FY '23, to answer your question, a large part of the CapEx would have been -- large part of the CapEx, Rahul, of FY '23 would have gone in the regional labs. We would have set up 6 regional labs through the year. Each lab roughly costs us between INR5 crores to INR6 crores as a full setup. Additionally, we had a set up, I think, 2 Nuclear centers during the year, new centers. Okay. So that's still capital work in progress. But I would say the large part of the CapEx, Rahul, has been in setting up of new labs.
Get it. And for fiscal '24, INR20 crores international plus domestic, how much would that be?
It would be in the range of [ INR40 crores ] again because as I guided earlier, we are not planning too many more new labs. I think are only our Goa lab and maybe a couple of satellite labs will be there. And then in Nuclear, we are shifting a couple of labs. So that is the main CapEx that we are seeing, forecasting in India. If we do any material CapEx, I would imagine it would be in the international side.
Right. So one question was on the international foray again. What -- will the P&L balance sheet see any material change in the short term purely because -- and let's say, most of that actually comes in second half, will the P&L balance sheet will have some kind of OpEx impact on EBITDA level or on the balance sheet side, really from an investment perspective, how should we see that going into next year?
Difficult to say at this point, Rahul, we are still in the, how do you say, MOU stage and the capital feasibility, CapEx feasibility and all of that. What I can say is that obviously, as a new business, it will not deliver a 30% EBITDA from the get go. But again, as I said, we are only allocating INR20 crores across 3 geographies. So it would be about INR6 crores, INR7 crores in each geography. If I look at the overall revenue and cost, operating cost of those labs in those cities, I don't think it would have a very material impact in the second half of the year on a INR500-odd crore base. So let's see how it plays out, but it's very early for me to be able to tell you how much of this will really hit the P&L. But all I would say is they are small investments. It's almost actually to enter an African market is almost as much as what we would have spent to set up our radiology center in that book or in partnership. So let's see how it plays out.
No, I understand. And thirdly, MCGM, the business goes off from [ PAB ]. What was the annual revenue in fiscal '23 from that business?
It's been about INR12 crores, so roughly INR1 crore a money.
Okay. Got it. And lastly, is Nuclear growth business or an annuity business for us? Obviously, fiscal '23 looks like a stellar year, but I think that's more recovery from a lot of issues we had. How should we look at that going forward? Like should we expect similar growth rates, 25%, 30% or it stabilizes here on?
No, I think you should expect it to stabilize. See, a large part of this growth has come from centers that were not operational because of different issues over there to us resolving those issues and getting the centers operational. I think going forward, we would expect 2 more centers where we would get them operational, right? And so that is -- so on a base of whatever, 9 to 10 centers, you can say, one might expect 2 more centers to get operational in the second half of this year. So that is how I would look at it. But I would not kind of anticipate this kind of growth rate coming into the next year.
So essentially 10 plus 2 is, let's say, second half would have like a 10% volume impact purely from new centers. And is there any pricing here or pricing is largely stabilized?
I think pricing is largely stabilized. It's not easy to raise price in this market.
Right. Okay. Got it. So we should think it as an annuity business going forward. Is that correct? Like 10%, 12% of pure, pure scan growth is what we should predict. Is that correct?
Yes. Yes. I would say think of it as a more organic group.
Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments.
Thank you. Thank you, everyone, for the questions and spending the time with us. Some of the questions, particularly, it seems like our international strategy has evoked quite a bit of interest. And as we progress on that in the coming quarters, I will share more details around this. The base business, as I've shared, our franchisee business and our partnerships are going well, and they are very encouraged by the results in the last quarter as well, and let's see how the next year goes. And on the quality front, as I've said, we made a lot of progress. The validation from the doctor community also has been well received, and we hope to anchor our communication around that. That is Thyrocare trusted by at least 9 out of 10 doctors in the country. And with that, I look forward to next year and our continued engagement. And with that, I'll hand over to Pratik to close the call.
Thank you, Thanvi. You may close the call now.
Thank you very much. On behalf of Thyrocare Technologies Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.