Ladies and gentlemen, good day, and welcome to Metropolis Healthcare Q1 FY 2024 earnings conference call, hosted by Nuvama Wealth Management. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Aashita Jain from Nuvama Wealth Management. Thank you, and over to you, Ms. Jain. Thank you, [indio]. Good morning, everyone. On behalf of Nuvama Group, I, Aashita Jain, welcome you all to Metropolis Q1 FY 2024 earnings call. With us, we have Metropolis senior management team, represented by Ms. Ameera Shah, Managing Director, Mr. Surendran Chemmenkotil, CEO, and Mr. Rakesh Agarwal, Chief Financial Officer. With this, I hand over the call to Ms. Ameera for the opening remarks. Thank you. Good morning, everyone, thank you for joining us on the Q1 FY 2024 earnings call. Today, I'm joined, as mentioned, by Surendran and Rakesh, and FJ, our IR advisor. We've uploaded our updated result document on the exchanges and the company's website, and I hope everyone's had a chance to go through the same. In the last few interactions, we have guided our near-term objectives. Q1 FY 2024 has largely played on these objectives. Let me give you a bit of an overview. We achieved a 12% YoY increase in core business revenue through a combination of increased test volumes, revenue per test, and better product mix. Over the past five quarters, our core business revenues have consistently experienced double-digit growth, and we are optimistic of improving the same. Our overall revenue grew by 1%, primarily on account of a large B2G contract imposed by the government, impacting the total revenue. Excluding this, our revenues for the core business, B2C and B2B, grew by 12%, as I mentioned earlier. Going forward, we are confident on scaling up revenue for the coming quarters, which will have a positive impact on margins with high operating leverage play in our business. Looking at the details, we saw the B2C revenue had a 13% year-on-year increase, whereas even mature markets like Bombay witnessed a higher growth of over 15%, with volume growth of 10% and RPP growth, which is revenue per patient growth, of 5%. I would also like to add that we continue to see a competitive environment in the B2B segment, although the intensity has reduced. In spite of this challenging environment, our revenue for B2B grew by 9%, with much faster growth rate coming from the specialized segment, which tends to be stickier as the need for quality reports is high. It's important to note that the growth we have seen is for the quarter, which is historically the slowest quarter in the financial year for Metropolis, as seasonality is different in every, every region of India. Every year, Q1 is the lowest quarter for us. In raising a positive outlook for FY 2024, we remain confident of revenue build-up through the year, with the second quarter and the fourth quarter expected to scale even higher, leading to an expansion in margins. Over the last few quarters, we have received many queries about industry opportunity and the addressable market for, for Metropolis. Let me take this opportunity to provide some insight and hope that this helps you appreciate our long-term strategy and direction. In FY 2023, the diagnostic industry's estimated size was to be INR 100,000 crore. Within this, the pathology sector is approximately INR 58,000 crore. This figure can be further broken down into three segments. The OPD, which is the outpatient department market, where it is outside the hospital, has a share of INR 33,000 crore. The inside hospital industry is INR 20,000 crore, and the B2G, the business, the government business, is about INR 5,000 crore. Out of this, we have identified specific areas which we believe have substantial room for growth, but also require expertise in testing and are therefore characterized by a sticky and loyal customer base. Accordingly, the two segments that we are targeting are: one, there is an organized market between the OPD services, which is the out-of-hospital services. There is already an organized market, which is estimated to be about INR 11,000 crores. We are seeing this category increasing faster after COVID, as doctors and consumers are moving from unorganized lab to organized lab. While the organized sector is INR 11,000 today, it is not capped at this because there is a constant movement from unorganized to organized, increasing this category. Within this market, we are specifically focused on prescriptions coming from specialist doctors, as they are the ones who care more about the quality and results, and therefore are willing to pay a premium for the services. The outsourced market from IPD, which is the hospitals which are doing testing inside their hospital, but still need to outsource specialized tests to lab players like us, is approximately valued at INR 4,000 crore. Increasing growth in this category depends on taking our brand to more hospitals and delivering on our commitment of accurate reports, wider test menu, doctor recommendation, and reports delivered on time. Combining these two segments, the current addressable market is at about INR 15,000 crore, and in the next two to three years, This is expected to be growing at about 12% CAGR to reach INR 21,000 crore. What sets this addressable market different from the rest of diagnostics, is that this is what we consider as stickier business, characterized by sustained volumes, loyal customers with a preference for quality services, a better margin profile, low churn rates, and therefore offering a long runway of growth, both from a revenue and a profitability perspective. Within this addressable market, our focus lies on catering to the top tier of the pyramid, targeting customers that prioritize quality and reliability above all else. This is the organic opportunity of the addressable market, in addition to the growth that can be taken on account of a leadership position in innovation, test menu, network, and science-based benefits. The Metropolis brand has earned a reputation for being highly reliable and trusted, both amongst consumers and medical practitioners. This trust factor plays a crucial role in fostering long-term relationships with referring doctors, ultimately contributing to our continued success. With these advantages firmly in place, we are optimistic about our ability to outpace industry growth in the years to come. Let me now take you through Metropolis 3.0, our three-year strategic plan based on this addressable market. Our focus revolves around three pillars. The first one is to strengthen our core business, and the goal here is to grow faster than the industry by focusing on quality and sticky business that sustains long term, to become an efficient testing pathology player, driven by automation and medical expertise. To stay a pioneer in introducing new tests and innovation in testing, and to provide access to patients across the country up to all tier two, tier three and tier four towns. In the next three years, we will be in more than 700 cities, compared to the 370 cities that we are in today. With 270 labs and 6,000+ collection centers, our goal will be to increase our network across the country with increasing productivity per center. Our target will be to have 20%-25% revenue coming from wellness testing and 40%-45% coming from specialty testing. Simultaneously, we will be focusing on margin expansion, with margins stabilizing at pre-COVID levels and ROCE to increase proportionately. While we maintain our leadership position in West and South, we are also aiming to be in the top three players in North and East. The second part of our strategy on the Metropolis 3.0 strategy relates to expanding adjacencies. As part of our strategic plan, we are embarking on a journey of exploring adjacencies in health services closely linked to our core business, such as basic radiology, like ECG, X-ray, and sonography, as one of those possible services. By doing so, we aim to unlock new avenues for growth and diversification. Through this expansion into complementary segments and services, we aim at leveraging our existing expertise to cater to a broader spectrum of healthcare needs. This approach allows us to not only deepen our relationship with current customers and doctor fraternity, but also attract new stakeholders into our ecosystem. These adjacencies will aid our position of being a reliable partner in the industry, a healthcare partner in the industry. Whichever adjacencies we pick up, they will be CapEx light and will help us grow our organic business of pathology. At this point of time, we won't have many details to share, but we believe in the coming quarters we'll come back with a far more detailed plan and action. The third part of the strategy, as part of Metropolis 3.0, relates to the bolt-on acquisition. We recognize the potential of inorganic growth as a means to strengthen and complement our existing capabilities. As part of our strategic plan, we will consider smaller bolt-on acquisitions that align with our values and vision. These acquisitions will serve as strategic entry points into new geographies, enabling us to expand our reach, enhance our service offerings, and leverage the local brand expertise that you get through acquisition, and consolidate our position as a leader in the healthcare industry. We plan to do about five to six bolt-on acquisitions in the next three years. Given the ample opportunities for growth in the diagnostics industry, coupled with the robust brand strength of Metropolis, we are poised for a very exciting journey ahead. Additionally, with Suren coming on board, bringing fresh perspective and leadership, infused with a wealth of experience and strong execution rigor to drive efficiency, foster innovation, and optimize our operational abilities, all of this will lead us to greater heights. Suren, if you could come in and talk more about the operational priorities. All right. Thank you, Ameera. Let me speak about our strategic priorities and avenues of growth for the year. From an operations point of view, three big priorities guide the organization forward. That's network expansion, focus on specialty, and strengthen our wellness portfolio. Our journey of network expansion is well underway, with a focus on establishing new laboratories and satellite collection centers. quarter one, we successfully added six new labs and about 120 centers. Most of the new lab additions came from North and East, and the collection centers across geographies. Our target is to open an additional 25 labs in around 700 centers within the remaining nine months of the fiscal year. We have started 70 new towns in the last quarter, and now we are present in almost 370 towns across the country. Our target will be to expand this and take it to 500 towns by the end of this year. This expansion is supported by a robust data science approach, like I mentioned in our last call. I must mention here that not only we are focusing in opening new network, but we are also making a concerted effort to enhance the productivity of all our existing centers across markets. Over the next couple of quarters, we are actively considering the reclassification and structuring of our focus city and other cities categories, and I feel that after seven years, this requires a review now. We are considering inclusion of four to five additional cities into our focus cities portfolio, and these cities will see higher investment outlay and better infrastructure support that is required to build the true potential of these locations. Some of the other cities will remain, will similarly move into seeding category as we continue to expand the other cities category. These potential additions are based on crucial factors such as current revenue performance, market share in those markets, future growth prospects, B2C focus, and the feasibility of scaling operation through our existing network as well as planned expansions. To further strengthen our specialty business, we have built a strong and dedicated team of sales force who will single-mindedly focus on key specialty portfolios across the country. We have trained them well and equipped them with all necessary work tools. We're actively working on expanding our presence and collaboration with specialized doctors across the country. By engaging with renowned medical professionals, we have been able to offer them tailored scientific propositions and foster a collaborative approach for the most suitable diagnostic parameters for their patients, which strengthen the doctor's preference for the Metropolis brand and enriches our value proposition in the long term. We continue to believe that specialized business of Metropolis is very quality-focused business and with high degree of stickiness. This is further aided by an enhanced test menu and the introduction of new tests. Now, allow me to provide an update on our revenue, volume and RPT growth. At a group level, our revenues were at -1% year-on-year quarter one basis, all inclusive, as Ameera mentioned. It is important for me to mention here that in the last quarter, the same number was at - 8%, and we see this getting better as we go forward from here. Just to recap, we did not have the volumes of COVID and entire PPC in this quarter. We have achieved a 12% year-on-year growth in our core business revenue, excluding these two. This growth has been driven by a combination of 9% increase in volume and 3% growth in RPT and change in product mix. While we did a marginal price increase in specialized test in end of April, adding about 1% benefit, we also made seven price corrections in about 25 routine tests in Delhi, NCR geography, to align with our strategy there. In every local market in India, we adopt different strategies based on our market share and the level of competition in specific regions. In certain micro markets, we may implement volume-driven strategies to gain market share. This balanced approach, incorporating both volume-driven and RPT-focused strategies, has contributed to our growth and market leadership. As we move forward, we remain committed to delivering growth, with volumes being the primary driving force. Our pricing decisions are driven by careful analysis and aim to align with competition intensity from both organized and unorganized markets. Let me also provide an update on HiTech business. HiTech has been successfully integrated, and we have identified multiple synergies and cost efficiencies across the system. We also have been able to cross-sell, upsell, and merge the lab operations, which will further enhance revenue growth and profitability going forward. Our revenue growth from HiTech stood at a double digit in the last quarter, with margin slightly higher than company level EBITDA. Our strategy for HiTech business this year will be to add another 50 touchpoints across Chennai and rest of Tamil Nadu, targeted campaigns for increasing wellness segment revenues, and step up cross-selling radiology to the existing and new customers, focus on D2C campaigns and digital marketing to increase the brand strength, and talent acquisition to increase consumer connect with expanding doctor network. I also want to take this opportunity to give a brief overview of our international business. Currently, our international business revenue accounts to about 7% of the group revenue. Our strategies for international expansions are based on the premise that the markets we are present are relatively untapped, presenting us with opportunity to establish a strong presence. In these emerging markets, we have noticed lack of organic, organized players, creating a favorable environment for our growth. Our approach to international expansion is focused on organic growth, complemented by a mix of B2B and B2C strategies. We are strategically utilizing specialized testing capabilities to maximize utilization of our assets in India, ensuring a high return ratio with minimal investments. International business is driven by a dedicated team reporting directly to me. Going forward, we remain committed to nurturing our international business in an organic way, generating higher growth and attractive returns in the future without any major capital commitment. With that, I hand over to Agarwal Rakesh. Thank you, Suren. Most of our financial and operational highlights have been shared in the presentation uploaded, and we hope everybody has an opportunity to go through the same. Let me provide specific insight into the product into our productivity and scaling metrics for the labs opened in the last 15 months. Lab opening financial year 2023, revenue stood at INR 20 crore. During quarter one financial year 2024, the revenue for these labs amounted to INR 7.38 crore. Lab established in quarter one, financial year 2023, witnessed growth of 2%-270% in quarter one, financial year 2024, compared to the previous year. Our strong execution, regional operational efficiencies and focused marketing and brand building efforts have significantly contributed to scaling of revenue from these new labs. We are optimistic about the potential of these national labs to mature over time and generate even higher revenues in the future. We believe this labs will continue to achieve significant growth and contribute significantly to our overall revenue going forward. Speaking of the productivity of this labs, we have been able to achieve 5% EBITDA margin for this labs from -5% in year one. The scaling of the revenue will have high operating leverage, which should deliver higher margin going forward. We believe that in 24-36 months of maturity of this labs, we will be able to clock company level EBITDA margin for all these newly opened labs. Now, I'd like to give an update on the financial and operational KPI. Our revenue for quarter one FY 2024 was down by 1% on account of insourcing of large B2C contract and high base of COVID revenue in quarter one FY 2023. We are optimistic of higher revenue growth for quarter two and onward, backed by high utilization and productivity of new network. Our EBITDA margin before CFR and ESOPs stood at 24.2%, dilution of 1.1% on account of network expansion for Q1 FY 2024. EBITDA before network expansion stood at 25.3% for Q1 FY 2024. Our EBITDA has been impacted largely on account of network expansion to a tune of 1.1%, and 0.7% due to loss of revenue on account of insourcing of B2C contract, which has a negative operating leverage play. We'd like to highlight that we have taken stringent cost control measures to keep the cost structure under check. Despite higher cost of people, aggressive lab and network expansion, increasing marketing initiatives, and implementation of delivery initiatives in our system, our cost just grew by only 1% YoY for quarter one FY 2024. We are optimistic of volume and revenue bouncing back in quarter two, and should have a positive operating leverage with upstick in margin. Our premium wellness business grew by 25% YoY for Q1 FY 2024, with average realization in the range of approximately INR 2,200. Overall contribution of wellness stood at 15% for Q1 FY 2024, as compared to 13% for Q1 FY 2023. Moving to the balance sheet, our gross debt as on June 13 stood at INR 67 crore. We plan to be debt free by the end of this year. That's all from my side. With this, I open the floor for Q&A. Thank you. Thank you very much. We now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the of Rahul Agarwal from InCred Capital. Please go ahead. Yeah. Hi, good morning, and thank you for the opportunity. The first question essentially was, you know, Mumbai growing faster within the overall B2C. you know, the question on that essentially is, we hear from your peers about, you know, health tech platforms cutting discounts. was Mumbai a function of that, you know, the growth? your thoughts on digital competition, is this sustainable going forward as well? That's the first question. Hi, Rahul. Look, I think if you see for the last four to five quarters, Bombay has been actually growing at a similar pace. You know, what we always maintained was that if you have built a good quality business in pathology like Metropolis has, the digital competition would not have impacted you much. Because the customers who value your brand did not really value price, and were not the ones who are going to move, to competitors for price benefits. I think we have seen that play out very clearly in Metropolis, where we have not seen an impact from a B2C perspective. In fact, we've only been growing and even in mature markets like Bombay. You know, we see this trend to continue, and if as digital guys have cut back on their discounting, it only means that the noise in the industry will start settling. I don't think those discounts have aided them in building very large businesses from the numbers that we know. I think there is a recognition coming in that price is not the big driver in pathology. You think, going forward, even this, this should continue, right? It's good news, right? I mean, I understand Metropolis has not lost much of business, but going forward, if this, this happened, I think whatever we have lost, you know, maybe it's like not very material to the company, it still gets back to us, right? At least from an industry standpoint, that's positive, right? See, I, I think, you know, whether people choose to discount or not, frankly, is not in anyone's control, right? Of course, till the time that they choose not to discount, I think it's healthy for everybody, including the industry. My only point was that I think our growth continues either way. Got it. Secondly, on international, you know, two questions there. Firstly, is it similar to, you know, Indian profitability, 24%-25%? Second is: any plans here to grow faster? I think Surendran also has become one of experience in similar markets. We also hear some Indian diagnostic player trying to enter Africa sometime this year. Your thoughts please. I think, you know, we have been doing well on the international side. The business model is actually very similar to what it is in India. The reason why we are in these markets is because we actually threat our assets from India. You know, for example, in these locations, we do about 60%-70% of the testing required locally, and almost 30%-40% of the samples come back to our global reference lab in Bombay for specialized tests. We believe it is very strategically connected to the Indian business. The biggest challenge in some of these markets is lack of talent and scientific expertise, and we are able to bring it from our core DNA into these markets. I think we'll keep seeing international do well for Metropolis. The margin profile, as mentioned in the, in the speech as well, is actually, for this quarter, is slightly, you know, it's around a similar profile as the group profile. The international business is, is on a good track as well. At this point, the, the only concern obviously with the international business is the currency devaluation from some countries. That's the only reason why we are not pushing much, much harder. The opportunity is there, and I think we'll continue to, you know, invest small amounts of capital from the profits that are being generated in these markets and keep driving organically. Should reflect like 10%, 12% of similar growth what you do in India, right? Growth is actually a little bit higher, in the international market because the base for some of these labs is also smaller. Okay, got it. Lastly, just your outlook for the full year, like-to-like sales growth 12% for the first quarter. I understand reported basis, top line will be lower, but just your thoughts on full year outlook, please. Thank you. As we've mentioned, I think we feel quite confident about the core business growth for the full year. Quarter one is usually our slowest quarter. We certainly expect Q2 and Q4 to be better quarters for us. As we know, and as volumes increase, it certainly impacts our profit margin as well. Any number you want to put? We'll pause at this time. Perfect. Thank you so much. All the best. Thank you. Thank you. Next question is from the line of Shyam Srinivasan from Goldman Sachs. Please, go ahead. Yeah, good morning, and thank you for taking my question. Just the core revenues of 13%, I think you've given volume growth of nine and RPT of four. Want to just deconstruct the volume a little bit further down, like SSG plus you've been expanding as well. Just want to understand how, how are your mature stores? What's the kind of volume growth? Maybe as a corollary, you can also tell us how Mumbai, the 15% that we have grown, how is that deconstructed, please? Yeah. Basically, if you look at the construct, 12% is the overall growth for us. As I said in my speech also that in quarter one, whatever lab we started in last 15 months, for those labs, we have got around INR 9 crore of revenue in this quarter. INR 7 crore of revenue, sorry, INR 7.3 crore of revenue in this quarter, which is 3% of the overall revenue. Overall, if you look at 9% is coming from our old base and 3% is coming from the newly opened labs. Got it. As I was saying, can, can we do it like the SSG way, where in the volume growth is where I'm more trying to get a sense of how much of the incremental volume. Is it similar, like 75% coming from old stores volume and 35%, sorry, 25% coming from new stores? If that is one way to deconstruct. No, volume, I don't think 25% will be contributed by the new store. We will just check and come back to you on that. Overall, constructing 9.39% coming from the volume and 3% coming from the pricing. Let us come back specifically on what is the volume growth coming, out of the 9% from the new labs. That's, that's helpful. Thank you. Just second question, again, just on the network expansion. We had about 120 basis points for accurate rate of dilution on the margins in FY 2023 because of the network expansion. We've seen it slightly moderate, 110, I think is what the presentation calls out. Any, any sense on where we would likely see this number starting to even get lower? Then is there a corresponding uplift that the overall corporate margins will see, or will we use this to do our continuing investment? Just that's my second question. Yeah. Basically what we intend is that we intend to open, as mentioned by Shyam, that we intend to open around 20-25 labs this year. Obviously, that will have a dilution of it, but there will be moderation of the lab opened already in last two years. What we feel is that this number will remain in the range of 1.1%-1.3%. It will keep on, you know, moving 0.1% here and there as we go along. The next two years, as we have expansion plans, this, we see this percentage dilution coming in the beta margin for sure. Helpful. The last question, Ameera, I think you called out the INR 15,000 crore as the, you know, kind of addressable time for us. A little surprised, if I add the, all the listed players, FY 2023 revenue, just the pathology bit, it's INR 6,000 crore, I'm ballpark. Have this players already achieved 40% of that share, you think? I always thought the number was higher, so that's where my concern is. No, thanks for asking the question. It's a fair question. See, firstly, not all the listed players and unlisted players are targeting the same segment. We have to remember that, you know, it's not like listed players are all following one strategy and unlisted are following another strategy. Each company is choosing to target different segments of the diagnostics industry. What we are attempting to do in this speech, we've actually been more clear about the segment that Metropolis is going after. As we have always mentioned, our goal has been to go to specialists and get them to recommend patients to come, because the patients who go to specialists tend to have more critical illnesses. The people who have more critical illnesses, for the, the doctor and for the patient, the quality of the report matters more. Therefore, the segment we are going after is about INR 15,000 crore, and our goal will be to keep measuring what percentage of market share we have in that segment. Other players are choosing other segments. Some people are focusing on B2G, which is the INR 5,000 crore segment. Mm-hmm. There's, you know, some listed players may choose to go there. Some listed players are focusing, not focusing on specialist-driven pathology. They are focusing on GP-led pathology, or they are focusing on B2B, which is a different part of the segment. I think just the clarity important is that not all listed players have the same strategies and goals, and therefore it's important to see each in its own strategy. Got it. Last question again, Rakesh, just data point, HiTech, what is the revenue and maybe volume there? Yeah. HiTech is, as, as mentioned by Surendran, HiTech is growing a bit higher than our core revenue for the group. That is one data point. From a volume and RTP point of view, this is more or less similar to us. 8% is the volume growth and 4% is the RTP growth for HiTech. Got it. Thank you, and all the best. Thank you. Next question is from the line of Rishi Mody, from Marcellus Investments. Please go ahead. Hi, am I audible? Yes, you are. Yeah. My first question was on HiTech, right? We've seen a bit of lab and center closures out there in the last one year or so. Sorry, the audio is too loud, may I speak through the handset? Sure, one second. Is it better? Hello. Yeah, thank you. Yeah. On HiTech, right, we've seen a bit of lab closures and center closures. Just wanted to understand why were these centers closed? What was wrong with them? What efforts were taken to turn them around if they were not profitable? Secondly, is this exercise now complete? The third question on HiTech was the 50 center expansion that has been announced that you all are targeting, in what form is it gonna come? Is it gonna come in the COCO form or the FOFO form? Sure. Just one clarification first. We have not closed centers for HiTech, either collection centers or labs. What we have done, merged them with Metropolis Labs in certain markets. The HiTech that we acquired had three parts. One is the Chennai business, one is the rest of Tamil Nadu business, and one is the Bangalore business. The Bangalore business and the rest of Tamil Nadu business, we have merged the brands, and therefore, wherever there were synergy opportunities, we have merged lab operations, and merged some collection centers. In Chennai, as we know, we have continued to maintain both the brands separately, and therefore, we have not yet merged operations or merged collection centers or labs. I hope that this gives clarity. We have not shut any labs for HiTech without a synergy reason. The second question about adding, approximately 50, 45-50 centers for HiTech. The idea is basically this will be in Chennai and Tamil Nadu. These will be a combination of, COCO and FOFO. there'll be some franchise centers and some company-owned, company-operated centers, across these markets. the centers that we've already opened last year, I think we opened 11 last year, if I'm not mistaken [crosstalk] 12 last year. I think most of them are doing well. There are maybe a few, two or three, from what I know, that have not performed as well as we had hoped for, but the rest have done fairly well. Okay. Like, Sorry, you, did you mention the mix of how much of that INR 40 to INR 550 will be a FOFO, COCO mix? Or, like, is there any planned proportion, or is there just, how the opportunity presents itself? See, we just not prepared any specific, you know, mix between COCO and, you know, the one under the franchisee. It depends upon the respective markets. So, it's largely today, out of 50, I mean, you know, wherever we get an opportunity to do our own, we'll do that. It's bigger markets, et cetera. In the rest of Tamil Nadu, we may go through the PHC route. We'll take a combination of both without having a fix in our mind about how much should be, you know, the PHCs and how much should be the franchisees PHC. Okay, got it. Second, Ameera, you mentioned that you all are planning to do some five to six bolt-on acquisitions the next three years. Firstly, are there good quality assets available in the market at reasonable valuations, which you can acquire in the next three years? Secondly, how big will these businesses be in terms of top line? Thirdly, what is the budget that we have planned for these acquisitions? Finally, are we investing in a team which will, you know, continuously help us acquire such bolt-on acquisitions year-on-year? Or is it going to be a more opportunistic way of doing M&A? Firstly, in terms of the assets that are available, it is difficult to find, not easy, which is why the numbers we have quoted are five to six, are not large numbers. It's very important to us that we buy assets that we believe are ethically run, clean, and can be scaled up versus, you know, where you actually have to clean up huge number of skeletons in the closet, and use revenue and profit as a part of it. I think we'll continue to be selective and careful, but at this point, we do believe that, that is possible. Of course, if anything changes, we'll, we'll come back and update you. We don't have a number at this point of time on valuation. Obviously our goal will be, you know, to, to try to do acquisitions at as fair and reasonable valuations as possible, which are not a very high number. What I've often seen in our markets, it is only the large clean acquisitions which tend to be very premiumly priced, because there are such few of them in India. At a smaller level, it will be a little bit, like we believe it'll be more... It'll be a little bit more fair in terms of valuation and not as distorted. We should be able to get this done. We don't have any budget in mind at this point, that we can sort of quote, because it'll depend on each opportunity that comes forward. What size are we targeting these bolt-on acquisitions in terms of their revenue size? Look, I mean, they can be anything from INR 5 crores a year to, you know, INR 20-INR 30 crores a year, right? So it difficult to tell at this point, but these will be all sort of usually individual pathologist-run labs, which have done well for themselves from a brand equity perspective in a city. And, you know, are not really sure either of their succession plan or their scaling, and therefore are looking for a partner like us, that we can work together. Because Metropolis has already done about 23-24 bolt-on acquisitions in the past many years, we have the internal DNA on knowing on how to integrate them and how to get value and scale them. So I'm not too concerned around building the expertise for integration. Understood. Understood. My, like, my next bigger questions are more, okay, just on the strategy front, right? The commentary that you've given in the call seems that you all are now targeting the specialized and the wellness mix. I remember a few quarters back when you had first announced the Metropolis 3.0 plan, you had said that we're going to build a B2C consumer-led brand, have organic footfall and reduce doctor dependency. Now, is the plan still the same? Because if it's going to be footfall-led, there will be a good chunk of routine mix that will also come through. Are we not targeting that segment now, or are we... Like, if you could just give some clarity on that aspect? No, sir, thanks for the question. I'm happy to provide clarity. See, Metropolis 3.0 is a combination of multiple strategies. It is not a single strategy. Metropolis has always been a company which has gone to specialist doctors, as well as top quality GPs, and gotten recommendations for patients to walk into our centers from them, and that will continue. That is not going to change. The second thing that we have added in Metropolis 3.0, which Metropolis did not do earlier, which is to try to go directly to the consumer and to acquire the consumer for chronic and for wellness testing directly. See, for chronic testing, if you're a diabetic, you're a heart patient, you're a vitamin D deficient, you're anemic, et cetera, these are decisions you, as a patient, can make independently, and for wellness, you can make independently. We go to the consumer directly to acquire these consumers for chronic and wellness. For anything more complicated than that in your life, when you have an illness, you will depend on your doctor to make decisions for you. Therefore, we have to go to the doctor for getting more complicated illnesses and consumers to come to us. The strategy is twofold: to go to the consumer for routine and chronic, and to go to the doctor for more critical cases of patients. I hope that clarifies things. Yes, that's good for me. Just two bookkeeping questions. I see your core business mix has grown by 11%, while your focus areas have grown by 11%, while your seeding have grown by 5%. But the chart on the left, on slide 17, slide 17, we see that the proportion of seeding has increased compared to focus. I just wanted to know, is there a typing error out there, or is there some methodology change in calculation? seeding has been doing better for us, for sure. As you can see that, you know, the, 11% growth is coming in the core market, 5% in seeding. Yeah. Other market, because we are opening up new labs, so that is seeing a 22% growth. Your seeding mix has gone from 21% to 23%. Just trying to, like, understand whether there's some methodology change or just a typing error? Seeding... That is basically, you know, to do with the NACO, because NACO was coming in the, you know, other streams, and that basically once gone. We'll again check back on this because your point is well laid, that 21% is now moving to 23%. Let me just check back on this and come back to you, but it may have a NACO impact. The point well taken, and let, let us clarify it for this. Sure. Secondly, Ameera, for the seeding cities, right? We've seen that focus has been, you know, growing ahead of seeding for the last few years. Just trying to understand, like, what efforts are we taking to build up the seeding to grow faster than focus areas. Sure. See, I think, first we've got to understand what we are building in each, right? If you see, the focus markets are our B2C markets, primarily B2C markets, right? Where we, where we have continued to focus on B2C, and we've been able to through the doctor route and the B2C route, we've been able to generate a fair B2C percentage, growth percentage, sorry. The seeding cities are usually ones where we have had more B2B, primarily B2B. Those markets, as we know, in the last many years, have faced a fair amount of competition on the B2B side. While the competition did not impact our customers directly too much on the head, our tail customers, which were the smaller customers, which were not as quality conscious, and we have some amount of those in the tail, but not a large amount, those started to churn a little bit. As competition intensity came in, and as we started to see price and discounting, sort of increasing, we saw the tail end of our customers starting to have a leach on, which has brought down the overall growth of B2B, specifically in the semi-specialized segment, which happens to be in the seeding cities. We've actually created a new plan for B2B in the seeding cities, which is now in execution, and which has already shown us, as Suren mentioned in his speech, we have seen a 9% increase in B2B in the quarter one of this year, which means that the plan seems to be working and is on better track. My estimate is that this should look better for the rest of the year as well. Suren, you want to add anything on that? No, I just wanted to reiterate that, you know, this definition of, you know, focus cities and other cities being slightly older version now. That's why I mentioned that we are reviewing the cities. You know, maybe next time when we talk about it, maybe we'll have additional kind of cities in the focus cities, where we're going to put more emphasis on the B2C and some fresh investments in terms of stores, et cetera. Also the seeding cities and, you know, will also go for a revision. We are just working on these, you know, categories to further strengthen it, right? Yeah. Understood. The B2B strategically- Sorry, can I interrupt you, Rishi? Sorry, I just clarify that this is a typo. Actually, 23 and 18 is the interchange. There is a contribution of 80% from seeding and 23% from context. Just clarify, you know. Thanks. Okay, got it. Just following up on that. Dr. Rishi, I have a request to join the queue again for- Sure. One more question. Thank you. Next question is from the line of Anish Devra, from the Nomura. Please go ahead. Yeah. Hi, thanks for the opportunity. Firstly, I just wanted to understand whether there is an increasing trend of insourcing happening on the government side. Like, do you see that the government has the tendency to, you know, rather than outsourcing to itself, and whether the profitability of the government business is, you know, higher or lower than the normal core business? Just wanted to color here. See, B2G is an area as we know that we don't focus on much, and we have been very, very selective about what we pick up. Generally, we are not huge fans of the B2B business because we find it's not in line with, you know, our sort of way of doing business in terms of the quality parameters, in terms of the compliances, in terms of all of that. I think this is an area that we don't expect to focus on, frankly. We find that the profitability of any business, whether B2C, B2B, B2G, all depends on your own underlying governance, values, quality that you apply to it. Frankly, in an industry like India, where there is no minimum standard or regulatory context, it is up to each player to decide what kind of level of quality they apply to their own business. Frankly, there are no two businesses you can find, unfortunately, which are comparable, you know, from an apple-to-apple basis on a quality basis. Each company will have their own practices, and really the reputation builds on the back of top doctors, either recommending your brand or not. And that's how you know whether a company has got good quality customers. Understood. That's helpful. Secondly, ma'am, on the, you know, this seasonal weakness that the West region experiences in the first quarter of the fiscal and the fact that it differs across regions in India. You know, can you just give some broad, high-level reasons as to why there's this difference in the seasonality across the regions in India? Like, I think the Northern region does not get to be seasonally weaker in one quarter compared to the Western region. Any color there, why and broad level? See, there are, there are two, three reasons that we are aware of, there might be others. You know, one thing which we certainly know impact seasons is festivals. Festivals, as we know in India, are celebrated at different times in different states. Festivals play a hugely important role, and each festival is celebrated a certain amount. For example, you'll see Diwali is very large in North India as well as in Gujarat. You know, you'll see, for example, something like Ganesh Chaturthi is very large in West, right? In Oman and Kerala, et cetera, et cetera. Depending on festivals, you find a big impact, and the reason around that is because people's mindsets is not so concerned around healthcare. People learn to travel a lot, they're spending time with family. The second thing that impacts is holidays. Depending on where school holidays and children's holidays are, people land up planning their travel. Doctors also are human beings at the end of the day, who like to travel and take holidays. Usually we find that when doctors are traveling, that's when we find that the business comes down. In West India, the school holidays are usually in the first quarter, which is when doctors land up traveling, and that changes things. Third, obviously, thing that impacts it is weather. Weather is different in different parts of the country. Depending, rains in, in Bombay, for example, may in some years create dengue, in some years it may not, depending on the kind of rain. In winters or where there's pollution, in some markets will cause more illnesses in those quarters. These are the three broadly, I would say, that impact the seasonality across the country. Yeah. That's great. Thanks. Thank you. Participant you may press star and one to ask a question. Next question is from the line of Dino, from the Mirae Capital. Please go ahead. Hi, good morning. Just a question on the lab addition. You have this target of adding 90 labs and 1,800 pickup points. If I do the math from the time of original target setting, it adds up to around 215 labs by the end of FY 2025, and maybe around 4,400 PUPs. Is that math right? Does it change with your new strategy of, you know, expanding your geographic presence, et cetera, et cetera? Yeah, I think, we have not changed those numbers, right. You know, when the 90-30 project when we started, we talked about adding, you know, 90 labs in 30 months, right? Yeah. That remains same, and we are on course, and same as the service centers we talked about it, right? By 2025, right, we will get 1,800 more service centers that we started off with, and, and we are on course to deliver that. Okay, thank you. Yeah. The 6,000 centers, if that's what the question is that is mentioned by Ameera, I think that goes beyond the 2025 time period we talked, talked about it. Got it. Thank you very much for the clarity. Thank you. Next question is from the line of Kapil Agarwal from Tara Capital. Please go ahead. Hello, am I audible? Yes, you are. Yes, you are. Yeah, I just, seeing your notes that there is an income tax notice under Section 147, 148, which I believe is an income escaping assessment. Can you please elaborate a bit on this part? Yeah. Basically, you, you understand the whole, you know, search and the process after search. This is a very normal procedure that after search, the income tax authority sends a 147, 148 to reopen the assessments done previously. They can open up to 10 years, that's the limit. This is just to, you know, procedural thing which has happened with us. Without doing anything specific, they have opened the cases, and we will comply with what is required, and we'll provide all the details. This is just a procedural thing which will happen, and whatever development will happen in this, we, we will keep coming back and, you know, sharing that stage. Yeah, the amount that is being mentioned in the notice, or, or we have, we need to carry a provision maybe in the current quarter? No, no, there is nothing. It is. Again, I am, again, I am reiterating that this is a procedural thing, where they open the previous assessment. Any search happens, it happens, in 100% cases. There is nothing specific, and this is a procedural thing, where they are opening the assessment of the previous years. Okay. Lastly, what is the time limit for replying to this notice? Pardon me, sir. Time limit, time limit for replying to the notice. No. Basically, when they open, then we just, you know, there, there is nothing we have to do about it. We said, "Okay." Now they will have, you know, reopen the assessment, and they will have some specific queries and questions on those assessments, and then we will go and reply to them. This is just a notice that they are reopening our cases, and they will scrutiny, scrutinize the earlier assessment done with all numbers. If there is anything which they feel they, they want to, you know, get information on, then they will come back to us. This is not nothing to do with us. They are just informing us that they are reopening the assessment, and they will come back on any query or question regarding any year for re- assessment. Okay, okay. Thank you. That, that is very helpful. Thank you. Thank you. Thank you. Next question is from line of Aniket Kulkarni, from BMSPL Capital. Please go ahead. Yeah, good morning, thanks for the opportunity. I had a Sorry to interrupt you. Hello? The mic is too close to your mouth. Yeah. Okay, yeah. Sorry. Yeah. I had a question regarding to the, you know, overall industry perspective. I just wanted to get a sense on how is the diagnostic industry currently covered in, you know, insurance schemes. If, and, you know, how will the insurance coverage and future regulations evolve in this industry, as in, you know, it, it can help us to solve the issue of under-penetration and, you know, take market share from the unorganized sector. If you can give some color on this? Currently, if you see, the connection between insurance and diagnostics happens mostly, and when people are buying insurance at a pre-policy level, or in some cases, at a post-policy level. At this point, diagnostics is only covered by insurance when you are hospitalized, not when you are outside hospitalization. There are some insurance policies which are covering OPD care, but it is a very small, small number and not have taken any significance in scale. The direction we do believe the industry will move in, in years to come, will be where insurance policies do cover out of hospital, what is called as OPD care. This will land up increasing the volume of testing quite significantly, and like you rightly said, will move more unorganized to organized. Having said that, we do not have a timeline on when this is expected to happen. If we look at other countries and the direction they've gone, this is a no-brainer. This will not only increase the volume of patients, but will also increase the volume of tests per sample, because that's what we've seen happening in, in most other countries. Okay, all right. Thank you for the detailed answer, and, best of luck for the next one. Thank you. Yeah, yeah. Thank you. Next question is from the line of Gulshan Shah, from KR Choksey. Please go ahead. Yeah, hi. I have a couple of questions. Am I audible? Yes. Yeah. In the introduction, you said you, your target is to get 25% of the revenues from the value segment. Don't you think the wellness segment is kind of an expensive test, and only a few category of people in India are able to afford that test? What are your views on that? Sorry, I didn't get that clear. I was asking, you all you said in the introduction that 24% of the revenues will come from the wellness test. Yeah. Going, going forward. Don't you think the wellness test is kind of an expensive test, which only a few category of people are able to do it in India? What are your views on that? Do you think that's an overestimation of test which you're going to do? Yeah, I think this is the plan for the next. If you look at it, you know, year-on-year basis, you know, we have enhanced our wellness portfolio from where it was last year versus now at this point of time. What we're able to see is that once we're able to get a customer doing their, you know, full health check, you know, then we are able to follow up with this at a periodic level and get them back doing the test with us again. Also some of the customers, you know, walking up to our centers, for the normal illness related tests, we're able to upsell with them with, you know, entire wellness package. I mean, it's basically a combination of both, you know, and where we are able to move up the revenue from wellness. I mean, earlier this used to happen in the tier cities. Now we are able to see the tier, even the tier two, tier three cities. We're also able to do some of these movements through the, even the B2B, you know, partners as well. Overall, the portfolio is growing, and the customer also getting increasingly aware about getting the regular, you know, health check done. That's the reason we have, you know, believing that, you know, this portfolio will go up to 25%, you know. With more and more centers getting opened, you know, we get an opportunity for the consumers to come walk in, and we get an opportunity to interact with them, and we'll be able to, you know, grow this particular portfolio. That's where the confidence is coming from. Okay. My next question is, what steps are you taking to expand Metropolis into the North side, where your tier is? There's a bit of background noise coming from. I can't hear the question clear. Am I audible now? Yeah. Please go ahead. What steps are you taking to expand Metropolis in the North side? Competition is very strong. How will you penetrate that area? Yeah. I think in the, in my earlier speech, I also mentioned, and if you look at it, the new labs, you know, the large portion of the new labs that we have opened and we're opening up is in the North and East. You know, where we wanted to, you know, further expand our footprint. Of course, that doesn't mean that, you know, in the South and West, you know, we really don't add new, we will increase the depth in South and, you know, West, and where we will increase the width as well as North and East is concerned. We are picking up to start with strategic markets, and then, you know, we are going and opening up the labs, and then, supplemented by adding more collection centers and B2B clients, et cetera. We have, North definitely is an opportunity market for us, and we have our plans ready for, North in the coming, quarters. Thank you. The line for the participant drop. Let me move on to the next question. Ladies and gentlemen, due to time constraint, we'll take the last question from the line of Saurabh Kapadia from Sundaram Mutual Fund. Please go ahead. Yeah. If you could talk about what is the, you know,% of revenue coming in the wellness from the focus cities, and how, how has the growth been in this cities in the wellness segment? wellness segment. The majority of the wellness revenue, maybe remember when we are calling it wellness, actually the product is, could be wellness or it could be bundling. This could be a patient who's walking in for free poor test for illness and has been saying that: "Look, I would prefer a larger variety of tests because I'm giving my blood." It could be a bundle package or it could be wellness in particular. You know, it could be either of them. This mostly we are finding is coming from the focus cities, but also we are now beginning to see an increase from wellness coming from smaller markets as well. Okay. Has the discounts gone up in the wellness segment for you? Not really. I think it's about the same. I think the, depending on. See, as we are focused, if we are in the core sort of focus cities, the price for package is the same. As we are entering into small markets, smaller markets, the prices are obviously lower. Now, it doesn't mean that the discount has increased, but the product itself is different. The product is lesser test and therefore lesser price. Because we find that the entry point for smaller markets may be little bit different than they would be for macro markets. That's why overall, we may find that the RPP for wellness is marginally gone down, but it's not because of increased discounting, it's more because of product mix. Okay. Thank you, and all the best. Thank you. Thank you very much. I now hand the conference over to the management for closing comments. Thank you, everybody, for joining us and discussing with us today. As we mentioned, we feel very positive about this year. As we have shown that we have had a volume-based growth, and we've been affirmed to be able to generate those kind of volumes even in the lowest quarter of the year. We firmly believe that quarter two and quarter four will continue to be the strongest quarters for the year from the revenue and the profitability perspective. We sort of stand by our comments and our commitment to get to sort of a similar margin profile as we were at last year over the course of the year. Having said that, there will be seasonality, and therefore, every quarter will not be exactly the same. We believe that overall, the next three-year journey at Metropolis is going to be a really exciting one. With not only our core strengthening, we're very focused and clear on where we need to go in terms of the current business. With the opportunity we really see for Metropolis is expanding to a large number of cities for distribution all across the country, you know, and continuing to build, as we said, strong B2C led growth. We also see opportunity in the adjacencies, in health services and like we said, in the bolt-on acquisitions. I think as a management team, we're very focused and clear on where we need to go, and we are just at this point, just maintaining the execution rigor to achieve operational excellence, as well as the numbers that we have committed to ourselves, as well as to our shareholders. I look forward to engaging with all of you on this journey in the next quarter, and of course, in the middle with those of you who we'll end up chatting with. Thanks so much. Thank you very much. On behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.