Dr Lal PathLabs Ltd (LALPATHLAB) Q1 FY23 Earnings Concall Transcript

Dr Lal PathLabs Ltd  (NSE:LALPATHLAB) Q1 FY23 Earnings Concall dated Jul. 28, 2022

Corporate Participants:

Arvind Lal — Executive Chairman

Om Prakash Manchanda — Managing Director

Bharath Uppiliappan — Chief Executive Officer

Ved Prakash Goel — Group Chief Financial Officer

Analysts:

Pooja Bhatia — Morgan Stanley — Analyst

Sriraam Rathi — BNP Paribas — Analyst

Shyam Srinivasan — Goldman Sachs — Analyst

Prakash Kapadia — Anived Portfolio Managers — Analyst

Bharat Shah — ASK Investment Managers — Analyst

Shalini Gupta — East India Securities — Analyst

Shaleen Kumar — UBS — Analyst

Saion Mukherjee — Nomura — Analyst

Sayantan Maji — Credit Suisse — Analyst

Prakash Agarwal — Axis Capital — Analyst

Dheeresh Pathak — White Oak at Management — Analyst

Nikhil Chowdhary — Chris BMS — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Dr. Lal Pathlabs Q1 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. [Indecipherable] of CDR India. Thank you, and over to you, sir.

Unidentified Speaker —

Thank you, [Indecipherable]. Good evening, everyone, and welcome to Dr. Lal PathLabs Quarter one FY ’21 Earnings Conference Call. Today, we are joined by senior members of the management team, including honorary Brigadier, Dr. Arvind Lal, Executive Chairman; Dr. Om Prakash Manchanda, Managing Director; Mr. Bharath Uppiliappan, CEO; Mr. Ved Prakash Goel, Group CFO; along with Mr. Shankha Banerjee, CEO of suburban and other good companies. Mr. Rajat Kalra, Company Secretary and Head of Investor Relations. I would like to share that our standard disclaimer here. Some of the statements made on today’s call could be forward-looking in nature, and actual results could vary from these forward-looking statements. a detailed update in this regard is available in the results presentation, which has been calculated to you and is also available on the stock exchange website. I would now like to invite honorary Brigadier, Dr. Arvind Lal to share his perspective. Thank you, and over to you, sir.

Arvind Lal — Executive Chairman

Thanks,– A very good evening and a warm welcome to everyone present on the call. We are here to discuss Dr. Lal Pathlabs Q1 FY ’23 earnings.. The industry has more than adequate headroom to go in FY ’23, where with an effective vaccination drive and improve patient care infrastructure, India has successfully met the challenges posed during the pendent Meanwhile, the Indian diagnostic industry is undergoing a transformation and is estimated to grow at a CAGR of 14% over the next five years. With a very few barriers of entry it makes a great ground for new entrants that include investors, entrepreneurs and innovators. To remind you all, when COVID-19 pandemic hit in 2020, we were amongst the first private labs to be approved by for COVID-19 RT-PCR testing. And last year, we performed over 32 lakhs COVID RT-PCR tests. We have continued to serve operations in the best possible manner, even with the challenges posed by COVID.

I am happy to share with you all that we will adjust the [Indecipherable] star SME of the Year by the prestigious Business Standard Financial newspaper. For this, I would like to thank the senior management team and all the 5,000-odd workers in our organization, which is the oldest diagnostic gap stream in India, having been started in the years 1949 by my late father, Dr. [Indecipherable] Lal. We are all equally able to achieve our large vision to be the most trusted health care partner enabling healthier lives. As we did with the coveted rapid spread across the nation over the past two years, we do face both challenges and opportunities to improve our infrastructure, systems and procedures. The public now has a greater understanding of the importance of keeping a healthy lifestyle, which is more vital. Since then, people have been monitoring their health and wellness better, which from a nation building point of view, is a very welcome step.

Dr. Lal Pathlabs as committed to control the epidemic of noncommunicable diseases or lifestyle diseases that are responsible for nearly 65% debt in India. For this to take place, we shall further increase our organic network expansion and to create structural levers for driving volume growth. Our methodical network capacity creation nationally, investments in digital technology, so it and focus on better service parameters will prepare us comprehensively to lead this space for time to come. Today, LPL has become one of the most reputed laboratories in the world with a network of 277 labs, 4,731 collection centers and 10,599 pickup points, serving across 1,500-plus cities with 5,000-plus cats and panels. We have a record number of 33 labs accredited by NABL and two labs by [Indecipherable] American Pathologists. As a forward-thinking company, Dr. Lal Pathlabs has been at the forefront of incorporating technology into its business strategy. By doing so, we can cut costs while giving our patients a smoother, more coherent experience. Companies like ours must adapt to stay ahead of the competition given the period which the world is changing. India continues to be a gross the untapped market for a brand like ours. There is a lot of room for expansion. So we want to take advantage of our position and create a mark for ourselves in the history.

Thank you very much, and I would now like to hand the floor to Dr. Om Manchanda. Over to you, Om.

Om Prakash Manchanda — Managing Director

Thank you, Dr. Lal. Welcome, everyone, to Dr. Lal Pathlabs Q1 FY ’20 Earnings Call. I hope you and your loved ones are safe and I’ll talk to you about the current trend there as well as strategic focus on Dr. Lal Pathlabs. The Indian health care sector, particularly the diagnostic phase, hold significant growth potential and was evident by the response of the industry with pandemic. And organized national brands like ours have met these challenges without raising prices.. The industry has seen entry of many new players. I foresee growth of organized sector, both due to overall market growth as well as accelerated shift from unorganized to organized segment. Our customers appreciate the certainty of quality and effectiveness that Dr. Lal Pathlabs provides, which the unorganized players will not be able to structurally deliver. Going forward, we will continue to build and drive growth through the following: number one, organic expansion of labs and collection centers infrastructure. Number two, through inorganic expansion route.

Number three, use of technology to enhance customer experience and also provide value-added services at one level and drive internal process efficiencies at another level to achieve productivity. On the organic front, the initiative of creation of hub labs has started yielding good results, especially in northern part of India. This will also give us capability to go deeper in Tier two and Tier three towns in large states like UP, Bihar, etc. As the markets get competitive, I foresee segmentation and differentiation will play a greater role in either maintaining or growing market share. For example, Swasthfit is seeing a good momentum and patients find greater utility in the offering, and we believe that it will further build up credibility of our brand.

Similarly, I do see [Indecipherable] business, we plan to focus on segments like oncology, autoimmune disorders, etc. On channel front, network of collection centers is going to play a very important role. We expect CC network to service all types of customers like home collections, walk-ins, hospital pickups, etc. Last year, COVID contributed nearly INR400 crores for the company’s top line. That was roughly about 19% of the company turnover, of which nearly 55%, that is INR221 crores in only for first quarter — came from first quarter of FY ’22. From the current quarter, that is Q2 onwards, this overhang of large COVID base to a large extent, is going to be behind us, and we hope to stay focused on more stable part of the business that is non-COVID business going forward from here. With that, now I would like to invite our CEO, Bharath, to continue this conversatoin. Over to you, Bharath.

Bharath Uppiliappan — Chief Executive Officer

Thank you, Om. I warmly welcome you all to this call today. I will now take you through all the business highlights. In Q1 FY ’23, we started 6.9 million patients, debating a revenue of INR503 crores. As you’re all aware that the COVID wave has abated significantly. And as a consequence, revenue from COVID and [Indecipherable] test is INR31 crores for quarter one with a contribution of 4% to overall revenue. This is in contrast to 36% contribution in last year’s same quarter and also the lowest in last two years. Our non-COVID revenue of INR482 crores registered a robust growth of 25% over Q1 last year. This growth in noncore revenue is led by patient volumes, we registered a growth of 15%. The test operation for the quarter was 2.6%, the highest sale for the company.

This quarter was marked by strong market activation program across our B2B and B2C channels. Our product and activation innovation have led to a robust growth on our soft banded program. contributing to a strong patient and RPT growth. As leaders in the diagnostic industry, we have taken account the task of establishing India’s first center of excellence for autoimmune diseases. And this has shown very increasing results in the first quarter itself. This initiative, combined with our focus on [Indecipherable] tests, including genomics, has contributed to our growth in this quarter. Our retail marketing initiatives and efforts on growing the sub business organically is also progressing well. We remain focused on a strategic agenda and execution focus. With that, I would like to invite Ved [Indecipherable] the financial performance. Over to you, Ved.

Ved Prakash Goel — Group Chief Financial Officer

Thank you, Bharath. Hello, everyone, and thank you for joining this call. I trust each of you and your family was safe and healthy.. Please note that includes Suburban results, hence not strictly comparable with previous year same quarter. We encourage to share the financial highlights for Q1 FY ’23. We clocked the highest quarterly non-COVID revenue of INR482 crores, a growth of 25%. Our dependence on COVID revenue has significantly reduced due to COVID revenue declining by 91% from INR221 crores to INR21 crores in this current quarter. Though our non-COVID revenue increased by 25%, reduction in COVID business by INR200 crores as compared to last year resulted in overall decline of 17%. Total revenue came in at INR503 crores versus INR607 crores last year same quarter. As Dr. Om mentioned that out of total COVID business of INR396 crores in FY ’22, almost 55% business was in Q1 only.

Revenue realization per patient for Q1 FY ’23 is INR727 as against INR860 last year same quarter. The lower realization is due to sharp reduction in COVID and light testing. Non-COVID revenue realization per patient for Q1 FY ’20 is INR707 as against INR653 for Q1 FY ’22. Normalized EBITDA after eliminating the impact of RSU and CSR for Q1 FY ’23 is INR126 crores as compared to INR199 crores reported in Q1 FY ’22. Normalized EBITDA margins for Q1 FY ’23 is at 25%. Q1 FY ’23 margins are inclusive of Suburban, which is relatively a low margin business. Normalized PBT after alligating the impacts of national depreciation of INR12.3 crores on consolidation of Suburban for Q1 FY ’20 is INR94 crores. Normalized PBT margin is 19% for this quarter. Normalized PAT for Q1 FY ’23 is INR71 crores.

Normalized PAT margin is at 14%. Net cash and cash equivalents after adjustment of borrowing at the end of Q1 is INR436 crores. We are pleased to share that the Board of Directors of the company have approved an interim dividend of 60%. That is INR six per equity share. At last, a quick update on Suburban performance. Suburban’s revenue for Q1 FY ’23 is INR39 crores, of which non-COVID revenue is INR36 crores. Please note, this revenue is recorded on a net basis due to transition to India from IGAAP. This is equivalent to INR52 crores as far as accounting practices. EBITDA margin for Q1 FY ’23 came in at 12%. With that, I request the moderator to open the forum for questions.

Questions and Answers:

Operator

[Operator Instructions] We take the first question from the line of Pooja Bhatia from Morgan Stanley.

Pooja Bhatia — Morgan Stanley — Analyst

I just wanted to know if you hold on to this year’s guidance of mid-teens revenue growth, which was given last quarter. And how would this be — if you are to split the growth, would it be — how much would be volume value, if you could give you a little color on this?

Om Prakash Manchanda — Managing Director

Okay. This is Om here. we probably have not in so many terms given the guidance, it’s more related to — because one doesn’t have a trajectory of COVID business. Now it’s becoming a little more clear. So we are not focused on COVID at all because we still don’t know how it’s going to pan out for the year. The focus for our teams has been on long covet part of the business. And as the current quarter indicates, we have done 15% for ex-Suburban and without including Suburban. But one must keep in mind that last year, there are many months which are softer many works which are very high because we reject. So if I go by month-by-month, April, May of last year was it softer, but then July, August was a little higher. After that, again, it goes down from, I think, November onwards February. So our best estimate is we will still try to maintain that, but I — it’s very difficult currently to put a number, but we are still very confident that we should fall in non-COVID — the growth there that we used to have is before COVID times, which was, I think, around 13%, 14%, 15%. But I would say that it’s very important to wait it out for the quarter to as to how it pans out.

Pooja Bhatia — Morgan Stanley — Analyst

Understood. On the acquisition front, M&A, what are the assets that would potentially interest you? Has there been any moderation in valuations that you’re seeing? And is there anything in consideration at this moment?

Om Prakash Manchanda — Managing Director

So there is nothing right now that I can share. But definitely, I think teams are focused on making some of the assets integrate and work well. But right now, I think the industry is a bit of a state of flux. So I think we’ll probably have a wait on both strategy.

Pooja Bhatia — Morgan Stanley — Analyst

And what’s the road map to improve margins in Suburban from currently 12% to, say, company level 30%? What priorities are there to leverage this asset?

Om Prakash Manchanda — Managing Director

So if you study glass two-year data, it clearly showed that if you have a high top line, there is an operating leverage in this business. We set fell because a proven disappeared overnight. And we believe that if we focus on top line aggressively in this asset, we should really be able to improve our margins because the business is quite concentrated in city of Mumbai, and the potential is quite high. So we just want to aggressively drive top line as ours.

Pooja Bhatia — Morgan Stanley — Analyst

Got it. And one last, if I may. So we spoken about the competitors’ outlook in every call for the past 24 months now. Like this month, there’s been a new pharmacy who’s announced their plan to join the business as we speak. There are now three pharma players along with many others. Are we really undermining the new players that have entered into the market in terms of how we are looking at the industry growing? What’s the outlook on this?

Om Prakash Manchanda — Managing Director

So we are definitely not undermining any player who enters in the market. So I think there is definitely a higher competitive intensity that we have seen, especially in the last 24 months or 12 months. I think important thing is what is sort of the long-term implication of what’s really happening. It’s my person [Indecipherable], and I think India is highly underpenetrated under [Indecipherable] diagnostic standpoint. Though there’s no published data, but my sense is beyond metros and mini metros diagnostic is very weak right now. And more players entering into the market, we have drive two factors. One is, of course, acceleration of unorganized to organized shift which is going to be very rapid. That’s going to be, I think, number one effect I see of a very high level of competition. Second is penetration levels will go up. We’ll see a lot of growth coming from Tier 2, Tier three towns. So I personally believe that this competition is good for two things [Indecipherable] accelerate from the market growth, even more for organized players. The second thing is the penetration levels in Tier 2, Tier three towns will actually go up, which we use accessibility and affordability of quality diagnostics will improve in sight. Now obviously, for the company to go well, management teams will have really to get a pay out how do we maintain or increase our market share.

Pooja Bhatia — Morgan Stanley — Analyst

I’ll get back in the queue.

Om Prakash Manchanda — Managing Director

Sure. Thank you.

Operator

We’ll take the next question from the line of Sriraam Rathi from BNP Paribas.

Sriraam Rathi — BNP Paribas — Analyst

Sir, firstly, particularly if you can provide some details in terms of, I mean, how much of our revenue is coming from franchisees as such because it seems that the fees to collection centers as a percentage of sales has got increased this quarter? So just to get an idea.

Om Prakash Manchanda — Managing Director

Do you want to take this?

Bharath Uppiliappan — Chief Executive Officer

Yes. So nearly 40% plus is entire business for us. And right? But I don’t think there’s been a sharp increase in collection center has been as per the normal trends.

Om Prakash Manchanda — Managing Director

I thought it has slightly come down this quarter.

Ved Prakash Goel — Group Chief Financial Officer

Yes, yes. So yes, Sriraam, fees to collection center is not where we have increased the revenue share for any franchisee. But the only thing where the business contribution is increasing that — but in this quarter, feed [Indecipherable] can change is reduced as compared to last year.

Sriraam Rathi — BNP Paribas — Analyst

[Indecipherable] is because of COVID. Yes, okay.

Om Prakash Manchanda — Managing Director

Yes. I think one important thing to note here is, Sriraam, that the contribution of a franchise business, our total business is on the rise. It went up. Now I think as the component is receiving, we are seeing a slight different that, which essentially means the patients are coming back to a bit of a working format. Obviously, we still will not go back to where we were before to it, but I think it’s going to settle down at a slightly higher level of contraction [Indecipherable].

Sriraam Rathi — BNP Paribas — Analyst

Okay. Just my second question was on that only, I mean, are we seeing the trend again reversing towards working patients now versus what we would have seen in the last two quarters?

Om Prakash Manchanda — Managing Director

I think there is — come back to that. We will come back to that.

Sriraam Rathi — BNP Paribas — Analyst

Got it. And secondly, on the other expenses, I think that amount is higher this quarter on a sequential basis in Suburban was then Q4. So should we assume this INR105 crores kind of run rate to continue or it could be fluctuating quarter-on-quarter?

Ved Prakash Goel — Group Chief Financial Officer

So Sriraam, if you are comparing last quarter to this quarter, I think there are a few investments we have made, especially in this quarter. One is on digital side in IT. And second is we spend on marketing, which is A&P, is also high in this quarter as compared to last year. I think these are the two broad had where we have spent a little more in this quarter. And that’s where you are looking at there is a difference between other expenses.

Sriraam Rathi — BNP Paribas — Analyst

Okay. Got it. Got it. So I mean that kind of high amount may not continue in the coming quarter? Is that the understanding also?

Om Prakash Manchanda — Managing Director

So there are expenses which are — we are continuously spending especially on the digital side and obviously, on A&P, it’s quarter-on-quarter, but this is not something exception, which we have spent in this quarter. These are normal expenses. Maybe IT on a special case, we are investing in this quarter, but not for the range.

Sriraam Rathi — BNP Paribas — Analyst

Okay. Got it. Sure. That’s helpful.

Bharath Uppiliappan — Chief Executive Officer

And certainly, should keep in mind that barges that we have seen during commenting are not sustainable. So we are definitely going to settle out on what we used to do earlier, which was in the range of earnings [Indecipherable]. That’s the way it is.

Sriraam Rathi — BNP Paribas — Analyst

Okay. So for the full year, it should be in that range more or less?

Om Prakash Manchanda — Managing Director

We still don’t know as to how it’s going to pan out. But I think we are — right now, the way P&L shape is looking like it’s definitely shut it down from what it used to be doing COVID times.

Sriraam Rathi — BNP Paribas — Analyst

Right. Got it. And lastly, just going back to the competition part. I mean, during this quarter in the last, I mean, three, four months, I mean, what part of your business would have seen higher competitive intensity and might have some impact on the business or I mean, not that much so far.

Om Prakash Manchanda — Managing Director

I think the intensity is brand awareness in general for many brands have gone up. So you don’t want to move out on top of mind here. I think that is where probably the right now and that’s a moat. We mentioned that we had to spend this extra marketing money to say [Indecipherable]. I think one should more that for any brand had to remain booming especially in the health capital, this is a need-based business. It is if you just drop on top mind awareness, when you matte news out. I think that’s one area which I find is marketing spend will continue to stay up in the mine is intensity line down. That’s the way I look at it. But from a business standpoint, I’m not sure because many of these companies are coming in a very routine business because we have test many of 4,000 pets and lot of high-end debt that not all these players have that kind of progress.

Sriraam Rathi — BNP Paribas — Analyst

Right, right, right. Okay. Got it. So that’s helpful.

Operator

We take the next question from the line of Shyam Srinivasan from Goldman Sachs.

Shyam Srinivasan — Goldman Sachs — Analyst

Price volume…

Om Prakash Manchanda — Managing Director

Shyam, you’re going to repeat that. I think we missed it.

Shyam Srinivasan — Goldman Sachs — Analyst

Yes, yes. So let me repeat. I’m looking at Dr. Lal own non-COVID sales, excluding Suburban non-COVID I think you said it grew 15% Y-o-Y. So just want to disaggregate that into price and volume because I don’t know whether we got the volume numbers for Dr. Lal non-COVID.

Bharath Uppiliappan — Chief Executive Officer

So our volume growth is about 12.5%, 13% gilt and rest is mix impact on pricing. So you see a price impact of 2% out. It is not a price increase. It’s a purely mix impact. because of a higher contribution of it, our [Indecipherable] actually did very well this quarter. And also a super fishline portfolio did extremely well this quarter. And both these to contribute a mix impact because of it, the PRPP went up.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. Bharath, this reminds us of like older days where it used to be largely volume growth driven and like some contribution from mix, maybe some price you’re denying the price, which is fine. So largely volume growth is 14%, 15%. So Yes, if you could then disaggregate that into geography because the worry was that and again competition link point, there’s some of our core markets like NCR, how would the trend be in volume growth in our core markets?

Bharath Uppiliappan — Chief Executive Officer

So we are seeing global growth as per the passes across geographies in this quarter. And like I mentioned in my opening comments, our South business also done extremely well this quarter. So it is all on performance, not Southeast West, no specific spreads are past trends. all of them that contributed to a good volume growth this quarter.

Om Prakash Manchanda — Managing Director

So I think just picking up the question that you were asking about [Indecipherable] the rest of India, right? So I think we’ve always said that [Indecipherable] will definitely be below our overall company growth. In our scheme of things, we always look at the grow at least high single digits, and that is what we have resisted this quarter. And our restores compensating for that. So the blended average is where the — and overall contribution of Bari-NCR is readily declining, which is basically our dependence on [Indecipherable] a period of time has sharply come down. I don’t know what is the number this quarter, but I think it has come down 35% of….

Bharath Uppiliappan — Chief Executive Officer

35%. Yes.

Om Prakash Manchanda — Managing Director

35%. Yes. So the contribution on NCR is now 35%. 2/3 of our business actually is coming from rest of India

Shyam Srinivasan — Goldman Sachs — Analyst

My second question, I think I missed it. Realization per patient. I think we had called it out at 707. Is that the number? And can you also explain why it declines or I couldn’t get those two bits, sorry?

Ved Prakash Goel — Group Chief Financial Officer

Non-COVID is, Shyam is 707 against 653.

Shyam Srinivasan — Goldman Sachs — Analyst

Yes. So you’re saying whatever you’re calling non-core realization is 707 versus 653 last year, right?.

Ved Prakash Goel — Group Chief Financial Officer

Yes.

Om Prakash Manchanda — Managing Director

So are that on year-on-year basis? Yes. But I think on a full year basis, December might look very different because I think the overall the sales that I get, I don’t have full year data in is that as the contribution of bundled tests is going up, which is probably the likely trend because customers are seeing greater value for money in that format. Maybe a little bit of increase in revenue position will happen.

Ved Prakash Goel — Group Chief Financial Officer

Just to give an immediate last quarter, Q4 it was 693. Yes.

Om Prakash Manchanda — Managing Director

So 653 every year right?

Ved Prakash Goel — Group Chief Financial Officer

Yes, right?

Om Prakash Manchanda — Managing Director

We don’t go by 653 versus 707 sequential, which is last quarter, it was 693 and now it’s 707. I think as the first contribution goes up, this number may elite bit upward as we go along.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it, sir. And my last one, you also called out the 2.6 samples per…

Om Prakash Manchanda — Managing Director

Yes, yes, yes. That is also because of soft to the sort and the packet has much no test for patients.

Operator

We take the next question from the line of Prakash Kapadia Anived Portfolio Manager.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Post-COVID, we are witnessing an increased collection from home contribution. So if you could highlight what are the kind of initiatives we have taken to ensure more seamless journey using technology or manpower-related training or other things?

Bharath Uppiliappan — Chief Executive Officer

Prakash, Bharath here. Yes. Can you hear me?

Prakash Kapadia — Anived Portfolio Managers — Analyst

Yes. Yes, yes, yes. I can hear you, Bharath.

Bharath Uppiliappan — Chief Executive Officer

Prakash, our home collectoin contribution pre-COVID is 5%, 6% [Indecipherable] around 10%, 11%, 12%, given you are taking the trade depending on the quarter. On the non-COVID side of the business. So three things have happened on the home collection side. Why you say geographic expansion number of cities we cover. The second one is that the technology engine is youth has gone up significantly in sophistication. So slot allotment our ability to look at delayed resets, reallocate visits have all gone up tremendously because we have now perfected with the art of how do you manage technology and people together. The third angle is to introduce new features like digital ID cards. So before today, when a home installation club comes to a house, we set in advance is ID card to you so that it’s an added measure of security and safety is that he’s a guy who’s coming to you. So lot is a initiative on building confidence amongst the people or users of service. And secondly, if people are now doing using technology is upselling or cross-selling while at the point of patient care, which is the home — so we are able to now add on tests for their stores or other intersect. So that we get more from the same visit. So a lot many more initiatives in the pipeline as well, but we’re happy with the progress we are making on the home collection front and elegant technology, Prakash.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Sure, sure. And as a consumer, I see a lot of proactiveness at least in the Mumbai market, where there are now calls for new tests or last test on due date. So coming to the question, which you were hinting at of cross-selling and upselling. What is the approach we’ve taken. Is it across newer geographies? Or is this just Mumbai, if you can highlight some clusters where we are trying to follow this upload because I see a lot of activity, at least in Mumbai.

Bharath Uppiliappan — Chief Executive Officer

From Lal Pathlabs or competition…

Prakash Kapadia — Anived Portfolio Managers — Analyst

Lal Pathlabs. I’m talking Lal Pathlabs.

Bharath Uppiliappan — Chief Executive Officer

Yes, yes. So we have an approach on tech how we leverage data for marketing programs. But we use a to be cautious on the other side as well. because there are privacy related issues and so on. So it’s a fine balance. But yes, we are getting — like fission opening comments, we had a very aggressive, what I call, activation program around both B2B and B2C in this quarter. which will continue and some of this are part of that effort.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Okay. And that is specific clusters of cities which you’ve identified?. Okay. Okay. Understood. Thank you. All the best.

Bharath Uppiliappan — Chief Executive Officer

Yes. We do have strong points where we want to put the levers here.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Okay. And lastly, how are we managing attrition were due to increased competition and any inflationary pressure or input cost increases we are witnessing, which could be a worry given the general inflationary environment?

Bharath Uppiliappan — Chief Executive Officer

Yes, yes. So the good news — so on tens yes, visible in our system because fuel costs have gone up and so on. We have been looking at internal efficiencies and getting those efficiencies into a picture. And that’s the reason one of the reasons why we’re goal to keep the P&L healthy without taking a price increase. Attrition in particular, nothing substantial, I would say, at this stage. Frontline attrition continues at the previous rate, no significant change. And because we are now more system-driven company and a technology-driven company, depending on people per se specific individuals, is far lesser than what they have been many years in the past.

Om Prakash Manchanda — Managing Director

We are also seeing another trend because the coverage business is down 90%, not only for us, for the entire industry. So a lot of the reversals [Indecipherable].

Operator

We take the next question from the line of Bharat Shah from ASK Investment Managers.

Bharat Shah — ASK Investment Managers — Analyst

[Indecipherable] with a mention growth drivers. One of the major ones that was highlighted was inorganic. Bharath, when we look at kind of recent acquisition Suburban. The price paid is a multiple of revenue, margins rather pretty slow. — not just compared to Dr. Lal business in that does a rather intricate margins. If you — is this a kind of in security was that we are selling because growth for the sake of growth is a lot of our center. It doesn’t add to the value.

Om Prakash Manchanda — Managing Director

Yes. So [Indecipherable]?

Bharat Shah — ASK Investment Managers — Analyst

Yes.

Om Prakash Manchanda — Managing Director

So I think you’re bringing a very good point, and I value that I think we have never looked at revenue — any organic sort of option to increase our revenue. We’ve always looked at any inorganic assets from the point of view of entering into that market. I think in our judgment, we felt that Mumbai is a highly competitive market. On our own we have tried in the past, and we believe that on our own, we could have really gained that kind of scale in that city without any inorganic sort of option. That was the reason why we looked at some of the — now coming to your question of — yes, we realized that [Indecipherable] lower margin. Unfortunately, in our adjustment may be coin fell much sharply than what we had been stated because last year over was very high in Mumbai, especially for Suburban. And I think probably we didn’t anticipate that in within three months, this decline of 90% would happen. So that means that all margins have gone back to a historical margins for this company was.

But having said that, what it has told us is that if we are able to at least double the sale of this business from here on, margins would actually go up to if not to our parent company level, but at least definitely close — so all we need to do is just grow the top line, and we feel we should be able to do that in the next two, three years. But having said that, if we had not taken this option on our own, we could have done that, I think in my personal view, it would have been very tough for the class Atlas. And we can’t more not only just Mumbai, but I think state of Maharashtra, not being present. That’s been the reason. But otherwise, there are a lot of assets which come for to be acquired. They just don’t face them at all because unless it makes sense for us — we don’t go to those markets. For example, there were a couple of assets available in the eastern part of India. This would have been an asset for us maybe 6, seven years back, but now our East business is much more stable. We are not looking at anything as — there are lots of business that come to us from northern part of India.

We don’t look at any asset at all. I think today, if I look at any white space, which is left, it’s southern part of India, we are seriously evaluating if you want to drive that now organically, it’s not all in organic — but yes, you’re right. But one priority that we have is that in order to tap the overall growth of the diagnostic market in India. We need to have a wider footprint compared to what we have today. I think the whole objective of Saber was to how do we establish ourselves and invest especially from a presence perspective. But let’s see how it goes, but we are still very hopeful that the three to five wells, we should be able to do something with this asset..

Bharat Shah — ASK Investment Managers — Analyst

So if I to interpret that suburban was a bit of a one-off acquisition and was a strategic import, which will eventually after we work through it. would also make financial sense compared to the price that you paid for it?

Om Prakash Manchanda — Managing Director

Yes. It’s a very, very strategic one. whatever we have paid here does not stand good for any action account. So I don’t think we look at any asset in the way we have looked at Mumbai.

Bharat Shah — ASK Investment Managers — Analyst

And eventually, we make financial sense that…

Om Prakash Manchanda — Managing Director

I think so because last year, I think the company is close to INR300 crores, of course, not in net terms. At that — maybe even FY ’21, it was nearly using INR300 crores and the EBITDA was in the late of 20-odd percent. Of course, half of that was COVID. And now COVID has disappeared as an it has gone back. I think it’s fairly well placed [Indecipherable]. We also know where are the levers for cost cutting in this asset, I think we should be able to [Indecipherable]. It may not happen within three, four months or one year 5, but I think over a longer period of time, which is a rational turn out to be good for us.

Bharat Shah — ASK Investment Managers — Analyst

My second question was in the opening remarks, Dr. Lal, [Indecipherable] did to 14%, 15% growth rate you also reflective in lower [Indecipherable]. And we talked about a huge generic opportunity apart from conversion highway available from unorganized to okay. But in all of these, I also kind of thinks that there is a pressure on the margin. And of course, we are talking of reverting to the COVID margin. So this is understandable that COVID might have just included the journey for the temperature in period. But eventually, growth is unlikely to mean only growth of revenue, but also a better profits because growth of top line is an affirmation of relevance of the business to society. And growth of profits and the cash flows is the affirmation for the value creation. So my fear is the growth of top line, will it come at inferior performance on the profits and cash flows compared to a reasonably modest 14, 15 top line growth? Or have I understood it wrong?

Bharath Uppiliappan — Chief Executive Officer

It’s a great idea. Thank you for giving us input. We call it a hospital lab management segment, and we continue to look for these opportunities, we’ll probably refine this further. — and see how we gain is sort of the revenue line from this side of the business.

Om Prakash Manchanda — Managing Director

Six you all study businesses much more do I look at this one. At the end of the day, pricing and profitability, a lot of it is external market forces driven. I think currently, as I speak to a lot of these consultants. They actually tell me that time or fixed margins are pretty visible. And there are many companies who look at offsetting what we have to do on the other side of business. This could be a noise, which will remain for next 12 to 14 months. But I think we do not want to get ourselves in a situation where our turnover, but [Indecipherable] coming under a bit of pressure. So I think the three things we need to do. One is make sure that our presence is across the country, keep widening our footprint. So that’s number one priority. The second priority is that run the business so efficiently that if at all, we are competing with somebody like-to-like business.

So our inefficiency should not be loaded over price. So that productivity is very, very important. And I think third is right now, this mix of competition that we have, some of them are very similar cost structure. We don’t have much problem with that. I think some of them are working to cash burn model. And I’m hoping that in the next two to three quarters, that noise should settle down. But as far as the margin sustainability is concerned and probably market forces will decide. But we are very hopeful that it won’t crash to any much lower level. But I think at least the mid-20s, it should remain for overall industry in the sense that [Indecipherable] for at least next three to five years. Because market is also opening up in Tier 2, Tier three towns. It’s not — I think there are a lot of — people are talking for space in metros, especially Delhi, Mumbai, etc. But as we go deeper down the poster, there is a lot of growth coming up there as well.

Bharat Shah — ASK Investment Managers — Analyst

So, let me just reword my question, if I did not put it appropriately. Earlier, I talked about in [Indecipherable] whether that makes apart from strategic necessity whether it makes value creating financial change. Then I’m asking whether in our business. Is the desire or pressure to grow, will it come at the expense of profitable growth? In other words, we may be — we may end up chasing schedules without achieving concrete value creation in a sense that even if we grow the top line at 15% or 18%. But if it is not a profit don’t grow meaningfully in sync effect. Then it may end up kind of wrong definition of the growth. And I would say both are important, the top line as relates the cash flow growth.

Om Prakash Manchanda — Managing Director

So I see you — I think you’re making a very good point. Revenue for the state of revenue is not gone bottom line, right? Then we are running a commodity basis. So it’s a fine balance that we’ll have to maintain. I think this question also got asked in the last quarterly call as well. Somebody asked me, will you actually change these lower price points that are happening in the market. I think clearly, the answer is no. We will have to really very carefully renewer this current market situation and find quite a bit of fine balance between revenue and bottom line. And I think the point that you’re making is absolutely correct.

Operator

We take the next question from the line of Shalini Gupta from East India Securities.

Shalini Gupta — East India Securities — Analyst

Sir, you’re taking for of price for the business and so many strong players are entering the industry just wondering if you consider setting up a diagnostic center in collaboration with hospitals say, relate. I mean, we love what comes to mind, but I mean so many others like Indecipherable or there’s so many hospitals in Bombay, for example, I mean, you would get a captive set of patients. And my last — what is the downside in setting up such centers and how easy to set up subcenters?

Om Prakash Manchanda — Managing Director

So it’s a great idea. Thank you for giving us the input. We call it a hospital land management segment. And we continue to look for these opportunities. We’ll probably define this further and see how we gain is sort of revenue line from this inside of the system.

Shalini Gupta — East India Securities — Analyst

I just wanted to say how difficult is it to set up such centers? I mean the person running the hospital may not want to…

Om Prakash Manchanda — Managing Director

Yes, yes. So let’s put it as in other sites shoes. Now if the margin for this is very high, they are reluctant to give it to you because they want to capture everything with them. Second is pathology is not a very asset-heavy business. So barrier to entries go. They actually want you to run their CTMR business, not pathology business. Second thing is even if they decide to give it to you, you also run a risk of receivables because three, four months down the line, we won’t pay the money. So it’s not a very in the business. But having said that, I think this is definitely a large seize 30% to 35% of the industry is lying inside of at 37%. So we can’t god this segment. So we’ll definitely keep looking at it, but we’ll have to do probably a lot of highest before we sign up any contract with [Indecipherable].

Shalini Gupta — East India Securities — Analyst

Okay. But you are open to open to this?

Om Prakash Manchanda — Managing Director

No, we do the — as we have no — we have four centers inside the hospitals. This is an integral part of our business strategy. Shalini, if you know somebody in [Indecipherable] hospital, you should introduce them to us.

Shalini Gupta — East India Securities — Analyst

I don’t know anybody sir. I was just wondering because I happen to visit a competitive lab in our hospitals. This is a public hospital. So obviously, it was not very clean and all not the kind of thing you would expect when you go to say Suburban. But the number of patients there is amazing. So — and also, I believe we don’t have to pay any rectal fees to the doctors, and you don’t have to pay for pace. So I was just wondering why is not everybody doing this more aggressively?

Om Prakash Manchanda — Managing Director

Because some of these guys don’t pay after six months.

Operator

We take the next question from the line of Mr. Shaleen Kumar from UBS.

Shaleen Kumar — UBS — Analyst

So also, we have noticed one thing in our analysis that the competition from the digital platform is largely come discount basically deep discounting is basically in five test and then the it drops and then substantially it drops after that. So basically largely in top 10 or maximum 15 tests. So I want to understand like what kind of revenue proportion, if any — not for even if our industry or organized farther you can give us like what kind of revenue proportion does this just account for you top 10, 15? Anything. What [Indecipherable]?

Om Prakash Manchanda — Managing Director

Yes. I think your observation, right? I’ve gone through the report, it’s rely nicely — and it’s basically — it’s just making the news. It’s like we go to a shop 50% off when you walk inside certainly in those 5% of new items lining the comes. So it’s the same thing happening here as well. So you said — they are all kinds of prices. But overall, portfolio of diagnostic looked that’s much wider. Offhand, I probably do not have that number with me, but I think your report suggested 30%, right, of these 10, 15 tests.

Shaleen Kumar — UBS — Analyst

Yes. So basically checking it from various participants…

Om Prakash Manchanda — Managing Director

My input here is probably not an exact answer the network my input here is there are a lot of tests which are hematology driven. And there is a manual component in those tests. A lot of paces are machine driven especially by currency. That’s where the prices are lower. But wherever the human company is high many tests, you can’t grow prices as clear, and they are not sustainable at all. And for any of these companies to provide a complete — to increase the scope of testing, the [Indecipherable] to start incurring those costs, which actually a full blown company like us or a semi competition is doing there. And at some point in time, at the end of the day, diagnostic is not about the 10 tests, diagnosis is not diagnosed with the disease. You need to have entire record of rather than just about 10, 15 tests. While this will definitely grow screening side of testing. This will also grow the overall market. But we believe that if you screen 100 normal people, and 20 of them or 10 of them actually may fall into the funnel of medical testing, which essentially means the market is likely to grow faster.

Shaleen Kumar — UBS — Analyst

Understood. Understood. Also, intuitively, is it the right way to think that prescription-driven tests are unlikely to go to the platform and because of multiple reasons, you may not get the booking now or customer is not sure about — or patient is not sure about buying that test online, etc. That’s one bit. So your view on that? And second, again, do you track like how much of your testing is subscription-driven and how much is nonprescription driven?

Om Prakash Manchanda — Managing Director

So I think it will be unfair to say that medical things will not go [Indecipherable] them actually widen that menu, of course, we have we participate in this segment as well. But I think one way I want to highlight is that this is not a business where like a daily written, it’s not even monthly item. As mentioned that average is it for pacing in our portfolio combined to never not even one per year. So whatever — you might just show a lot of trials into — we do a lot of the cans and promotions sale. But suddenly, you’ll find estate nobody is there. But then — so we saw very high frequent purchase items. And for any company to show results, it is definitely two to three years of journey before we actually see the year we have arisen we will take a lot of time to build Healthcare brands. We don’t get built other [Indecipherable].

Shaleen Kumar — UBS — Analyst

Understood, understood.

Om Prakash Manchanda — Managing Director

Plus somebody has to sustain the flow of funds is things kind of as well.

Shaleen Kumar — UBS — Analyst

For sure, sure. Just on the other expenses, you made a comment that there has been an investment in IT and technology and marketing. Can we get some sense of what kind of investment you are making in Texel?

Bharat Shah — ASK Investment Managers — Analyst

On the investment of the what side?

Shalini Gupta — East India Securities — Analyst

[Indecipherable].

Bharat Shah — ASK Investment Managers — Analyst

Marketing impact, right?.

Shaleen Kumar — UBS — Analyst

Yes.

Bharath Uppiliappan — Chief Executive Officer

So marketing, we did in this quarter, like I mentioned, we promoted so with the aggressive bid. So we were around transradio, etc, I think, six to eight weeks of the quarter. Second is there is sort of what you call market activation plan. On IT and digital, a lot of stuff around digital marketing, building in data lakes investing behind data science, putting up the control tower and running that for better service delivery on the front end. So some of those initiatives have obviously taken some bit of money. But I think we also — they’re also helping us get the top line in place.

Shaleen Kumar — UBS — Analyst

Understood. Understood. Just last question. In presentation, INR12 crore of notional depreciation towards Suburban. So if I can understand what does it mean by notional depreciation? And it’s not one-off, right, it will continue?

Ved Prakash Goel — Group Chief Financial Officer

Yes. Shaleen, Ved here. So this is on intangibles where we have capitalized intangibles for suburban and that intangible apart from goodwill is we are writing over a period of eight to 10 years. So roughly, this is INR12 crores in a quarter will continue for some time.

Operator

We take the next question from the line of Saion Mukherjee from Nomura.

Saion Mukherjee — Nomura — Analyst

Iron the organic growth part, can you throw some light, how should we think about — as you have been increasing your lab or patient service centers at a particular rate? Will we see a step up there? And if yes, any geography you have in mind you want to sort of go deeper in North and East and then sort of look for acquisition in South? If you can just throw some light on your organic growth strategy that you’re thinking in the next few years?

Om Prakash Manchanda — Managing Director

So I think our organic strategy helps to be [Indecipherable] that we improve our service level, at the same time, also do increase our overhead structure. In the past, we’ve been opening a lot of the satellite lanes that [Indecipherable] in close to INR one crores, INR1.5 crores operating costs as well. So we will look at judiciously the model of hub labs, I think we talked about this in earlier calls, where we increased the test mining in the region now. And that does two things to us. One is it gives us ability to go to Tier 2, Tier three towers. Because otherwise, the service Tier 2, Tier three towns, you have to bring those that sample load to bid and that will affect the [Indecipherable]

So we want to go closer to the markets by opening more hub labs and maybe reducing the number of satellite labs but openly more wider test many large, which we call it hub labs, And then improve our logistics network so that we are able to submit the market. So that’s our strategy. I think your second question was priority in terms of markets. Clearly, I think the rest of North, which is UP, Bihar, Jharkhand, [Indecipherable] Eastern part are definitely growth market for us. We want to really base on that we aggressively increase our presence. We are — southern markets have given good results to our organic strategy. We go to probably wait and worse whether it’s sustainable. If that works, then we’ll go south as well. But right now, that is still open to start with north — rest of north will be number one priority for us.

Saion Mukherjee — Nomura — Analyst

Okay. Sir, my second question is around competition. Basically, we are seeing new entrants in the sector. So at one end, you have the online players, who may not have that sort of equity on the health care side, but then you have the pharma companies, which are well done. They have the Doctor Connect, and they’re trying to drive the business to that — so which — and they have the brand and they also sort of have the funding available from the domestic business. So in a sense, what is the bigger threat to the industry for clearly Dr. Lal in your view?

Om Prakash Manchanda — Managing Director

So I look at both. Opportunity, as we have said, I think, opposite I talked about. I think some of these organized competition coming into the market is good for the industry. It’s good for the industry because, a, it creates a level increase. So far, we will up against not of the small-time players where they have virtually no overheads. And any of these companies that you mentioned, will have to have overhead structure that is similar to ours. So to my mind, now we’re going to pay in a fee, which is level play. So that, I think, a big upside to this. Second big upside is that a higher level of competition technically, the [Indecipherable] look at all the money is being spent in the market is all marketing dollars. I think on a stand-alone basis, I won’t have been able to spend that kind of money.

So the more activity that happens if we grow the market. So that’s another big positive. I think the only challenge is now, as you said, do we start to lose to these guys. There may be a bit of market shifts that will happen depending on who and what spend in which market. I think that’s where our team really will have to be smart enough to, a, run the business efficiently, so we are able to compete with them in terms of our efficiency. Second is carefully pick into our battles in this geography. And we believe we are very well placed in North and Eastern part of market on the organic front. And that to my mind is roughly half of the country. And also remember, we have a network of 5,000 collection centers and 270 labs and 10,000 pickup points.

That was — it’s not built in just overnight one day. It has taken some time. And from my ties can tell you that this is not a frequently purchased items where we would be coming month-after-month or week-after-week. So to sustain value business, I think all the new customers have to be acquired. So in for of it’s operationally going to be very challenge. So to me, that actually is a bit of an insurance operational excellence requiring [Indecipherable]. And also remember why we may be [Indecipherable] medical company, but inside, we are a huge logistic company. And while you may have a Doctor Connect at one end, but to run this operation, those skills are very, very different then at least running a benefiting setup. But having said that, overall market, I believe will equally grow.

Operator

We take the next question from the line of Sayantan Maji from Credit Suisse.

Sayantan Maji — Credit Suisse — Analyst

So my question is that how much of the reported revenues to be cut from routine tests, especially in the macro market. So reason I’m asking is that the competition, the impact of competition would be more on routine tests and maybe the wellness packages. So how much do these comprise as a percentage of revenue?

Ved Prakash Goel — Group Chief Financial Officer

[Indecipherable]…

Om Prakash Manchanda — Managing Director

I don’t think Radius data available and it senses defined I would actually say 21% of our contribution. Maybe you had around 8%, 9%, close to 30-odd percent would be the figure.

Sayantan Maji — Credit Suisse — Analyst

Okay. Okay. And second question is that as per the as disclosure North India total, I think, constitutes around say, 55% of the total revenue. So we are 35%, the remaining 35%. So do we expect a double-digit growth over there? So any make I understand you already have a high market share, so it will be high single digit. But for the rest of not India, do we expect maybe teens growth?

Om Prakash Manchanda — Managing Director

Yes, absolutely. So if we are 14%, 15% growth for the company and really MCR is single digit. So obviously, the balance has [Indecipherable] 18%, 19% for rest of India.

Sayantan Maji — Credit Suisse — Analyst

Okay. And this includes the rest of North India, right?

Om Prakash Manchanda — Managing Director

Okay. I think maybe it’s fair to assume, let’s a — Yes, I probably would end agree with you.

Sayantan Maji — Credit Suisse — Analyst

Okay. And a couple of data-related questions. So first is, what is the IndAS benefit that is there in our reported EBITDA? And second is, what is the ESOP run rate that will be there going forward. So I understand we give ESOP and CSR, but if we exclude CSR, what is the ESOP run rate that we will have?

Om Prakash Manchanda — Managing Director

IndAS?

Ved Prakash Goel — Group Chief Financial Officer

Yes. IndAS impact, it is started four years back. So pre-IndAS, we used to have kind of margin. After IndAS, is revised to 26%, 27%. So about 1% or so has impact of IndAS. So that is on the IndAS.

Sayantan Maji — Credit Suisse — Analyst

Okay. And for ESOP, so we expect the run rate to be like INR25 crores per year going ahead as well? Or would it be at a higher rate as we have right now?

Om Prakash Manchanda — Managing Director

This hedge is year-on-year because depending on price on the day of and I think historically, what we have seen is that it has gone as a INR32 crores last year. It was also one of the year, which one was even INR six crores. I think the number that Ved is quoting is if you actually look at sort of where a settled out number on average for the year is our estimate is close to about INR20 crores to INR25 crores. But year-on-year, this is might just see up and down. There’s also a bit of a reversement that happens there somebody designs also come back to the pool. So it’s a very dynamic number. But I think it’s fair to assume that currently at INR2,000 crores give or take her in the top line you have close to 1%, 2% of [Indecipherable].

Sayantan Maji — Credit Suisse — Analyst

And this is going to be sustainable for like foreseeable, say, next two, three years, like the ESOP scheme will continue to — it’s part of our regular business now? I mean, it’s part of the

Om Prakash Manchanda — Managing Director

[Indecipherable] kind of competition with stay there.

Operator

We take the next question from the line of Prakash Agarwal from Axis Capital.

Prakash Agarwal — Axis Capital — Analyst

A couple of questions on clarification. So what I understood was 13% to 15% base business growth ex acquisition is what you’re guiding for. Would that be correct?

Om Prakash Manchanda — Managing Director

Yes, I think that all it looks like as of now, that’s our best case [Indecipherable].

Prakash Agarwal — Axis Capital — Analyst

Okay. And this quarter, 25% margin is with 12% of suburban. So — and this is despite higher costs on IT and some expansion and advertisement that you talked about. So how do you think your margins. I mean, this is clearly the base level margins. Would you agree to that? And how do you think over the year financial ’23, this margin should settle?

Om Prakash Manchanda — Managing Director

Ved?

Ved Prakash Goel — Group Chief Financial Officer

So see, we were going — for margins for pre-COVID level was in the similar range, 25%, 26% around 26%. As far as — I think if we are able to grow mid-teens, I think we are able to maintain these margins.

Om Prakash Manchanda — Managing Director

I think the sweet spot for this business is about I think if you are able to grow between 10% and 12%, my sense remains there, assuming there is no pricing pressure. We should be able to maintain. But since the dynamics of the industry keeps changing every now on there. But I think if any business is able to deliver 10% to 12% growth — on an organic basis, we should be able to maintain this margin is not that currently for [Indecipherable].

Prakash Agarwal — Axis Capital — Analyst

Okay. So what I understand is the IT related as well as this advertisement-related expenses are here to stay on a quarterly basis.

Om Prakash Manchanda — Managing Director

Yes, yes. We can’t let the pressure down on brand awareness in this kind of density. So I think they are here to stay for some quarters.

Prakash Agarwal — Axis Capital — Analyst

Okay. And with improvement, some improvement in Suburban, which you are guiding over next couple of years, you’re saying to sales to double. I think next year, you’re expecting sales to double [Indecipherable]…

Om Prakash Manchanda — Managing Director

Right now, the challenges are of different nature because, a, Suburban is a fairly routine company by design. We want to bet behind back end these assets level. Hopefully, we have some move to talk about the launch of our [Indecipherable] in Mumbai next quarter. That will consume some costs obviously, whenever you do a portion of this kind, there is a stability issue in the management team management structure. So currently, we are in that process of making sure that we taken care of. I think Suburban in more company-owned company-operated infra, it has to move towards franchisee-driven infra. So that also will take time. I think next 3, three to four quarters, I want to make sure that we get the further main right. And hopefully, if you get the process right, outcome has to be right. So that’s the way we are looking at it. So FY ’23, I would give [Indecipherable] hasn’t put pressure on profitability [Indecipherable].

Prakash Agarwal — Axis Capital — Analyst

Got it. And then on the online alliances. I think last quarter, you said that you might evaluate something online alliances. So anything to talk about at the moment?

Om Prakash Manchanda — Managing Director

I think online alliances probably we do that, but I think they are also figuring out whether they want to do completely on their own or they want to partner with a lot of players. I think there is a bit of a whether they are falling model or we are doing their own. I think it’s a bit of a — I really won’t say that the entire model has fallen in place. My personal view is to create the use new partnerships. I think we see only all multicity model the city challenges. Let see what happens this quarter or maybe next quarter because the COVID dependency has virtually come down by 90% to new dynamics in the industry, we will not wait for the month.

Prakash Agarwal — Axis Capital — Analyst

Fair enough. Lastly, on the pricing side, there are some ads coming with 18%, 90% discounts. And these are, I would say, routine tests. But on a general basis, though you mentioned you’re not reacting or your prices are not gained or reduce prices, your action is on the advertisement and expanding the urban spoke model. I mean is there anything else that we are doing to keep the volume in that or grow the volumes?

Om Prakash Manchanda — Managing Director

Yes. I think one more thing that probably is likely to happen is that within the portfolio of routine test versus specialized tests, one may look at price rationalization. Some of our high interest may be underpriced and some of our routine test will be price. We’ll do it in a manner that it doesn’t goose our overall margins for the business. But we will look at tastes basis, those kind of things as well. I think directionally, in some ways have already started happening because the contribution of Swasthfit is going down, the way realizing ports on the routines coming down. So some bit of it is all to be adjusted for us to specialized business. I think those things will fall in place. That may be other additional stuff, which I would add to the list that you just mentioned.

Prakash Agarwal — Axis Capital — Analyst

One clarification, Swasthfit would be wellness, right? So those would be mostly routine.

Om Prakash Manchanda — Managing Director

I actually won’t call it wellness. I think it’s probably a long term being moved because we owe recently got completely healthy. I think it’s upgrading of those two or three tests to a bundled debt portfolio. So I think it’s a mix of illness and wellness together rather than only wellness.

Prakash Agarwal — Axis Capital — Analyst

Okay. So you’re seeing prices there, you could just a little bit rationalize and increase one with some of the specialized [Indecipherable]…

Om Prakash Manchanda — Managing Director

I don’t mean rationalize [Indecipherable]. I’m just saying the realization per test because Swasthfit has a lot more number of tests in the package. What you and I look at normally is a revenue per patient, right? But what is also important to look at revenue per test. And to me, when you look at Swasthfit revenue per day, directionally, it is lower than if you order individual test.

Prakash Agarwal — Axis Capital — Analyst

And how about looking at EBITDA per test or EBITDA per patient?

Om Prakash Manchanda — Managing Director

EBITDA per patient will be higher, but EBITDA per test may be still lower because your overall realization project is going on.

Operator

We take the next question from the line of Dheeresh Pathak White Oak at Management.

Ved Prakash Goel — Group Chief Financial Officer

So it has impact because in Suburban, we have a little higher or even higher realization as compared to our own company. So these patients include Suburban as well, which was not there in last year same quarter. Apart from what Bharat was mentioning about the mix and all.

Bharath Uppiliappan — Chief Executive Officer

Non-COVID [Indecipherable]…

Dheeresh Pathak — White Oak at Management — Analyst

Obviously last year base is a clean realization number, right? 15% is a keen revenue growth like-for-like. So 707,which is the realization this quarter. You’re saying this is blended realization with seven. So can you help us with the — like a team realization exportation so we can [Indecipherable]…

Om Prakash Manchanda — Managing Director

Understood. I think that’s about 2% growth, right?

Dheeresh Pathak — White Oak at Management — Analyst

Yes.

Bharath Uppiliappan — Chief Executive Officer

No. [Indecipherable] 2.5%.

Om Prakash Manchanda — Managing Director

Revenue [Indecipherable]…

Bharath Uppiliappan — Chief Executive Officer

Revenue profit, don’t remember, it’s at right

Ved Prakash Goel — Group Chief Financial Officer

I have the [Indecipherable]. [Indecipherable] — we can come back separately, you can correct the [Indecipherable].

Om Prakash Manchanda — Managing Director

So I think is basically the 707 is including Suburban business also.

Dheeresh Pathak — White Oak at Management — Analyst

Understood. So — but this would not be a whole lot different, right? Because you said last year, we were closer to 690 or something. So even if this is like change of 707[Indecipherable] Then also, it’s like a 6% realization growth. So patient growth on the like-for-like business is only 9%..

Om Prakash Manchanda — Managing Director

We’ll come back — Sorry, I couldn’t get your name?

Dheeresh Pathak — White Oak at Management — Analyst

Dheeresh from White Oak. Yes. The other question I had was on This — so Suburban you’re saying — so realization per patient is good in Suburban. Gross profit is increasing with Suburban so assuming the gross margin is not an issue. So the issue is you’re saying the network is cocoa instead of franchisee operated and that is not properly utilized. And that you are going to transition to franchisee owned. Is my understanding correct?

Om Prakash Manchanda — Managing Director

We do go because unit lab, even Dr. Lal Pathlabs also company-owned company operated. So we will probably make the assets sweat more as the existing ones. And the network business, which comes from franchisee, that’s where our focus would be. Because I think Several traditionally has been focused on walking into the lab. And they have been investing more in the lab infra, which for me compared to the cloud at a slightly — there is a scope to improve productivity there.

Dheeresh Pathak — White Oak at Management — Analyst

Okay. But does it take time. There’s no option to rightsize it like properly because you can always add entire centers later, right, labs, and they were quite concentrated in a few cities, right? So I’m assuming.

Om Prakash Manchanda — Managing Director

Probably I don’t think — therefore, I can keep saying that, I don’t know one has the pressure of quickly making the margin look very similar to industry margins a I think I’m now on to make sure that our top line grows in this case. And then only — automate our output input ratio will improve if we increase our top line. If you are fairly hopeful that we should be able to do that.

Dheeresh Pathak — White Oak at Management — Analyst

Okay. Last question. What percentage of revenues from aggregators and it can be very small, but just to get a sense?

Om Prakash Manchanda — Managing Director

We had invest in single digits. — single digit, which leads [Indecipherable].

Operator

We take the next question from the line of Nikhil Chowdhary from [Indecipherable] PMS.

Nikhil Chowdhary — Chris BMS — Analyst

And sir, I wanted to understand on the lab sharing arrangement that we have with Suburban. So is it something that we are actually doing it? Or is it in plan that we’ll be using our network our lab network and taking the campus on the [Indecipherable] because I saw an ad of Suburban expanding inure also. So wanting to understand instead of setting up Suburban will be utilizing our own lab for the sub patients also?

Om Prakash Manchanda — Managing Director

Yes, it makes sense. This is one company, right? We will definitely look at back and instruct synergies. So we will — I don’t think it makes sense to put over last or capable. We are not competing retailer we’ll figure a way out where on a second the brands.

Nikhil Chowdhary — Chris BMS — Analyst

Understood. And sir, any thoughts on probably like a question to the a participant where probably due to the rising competition, [Indecipherable] can help in retaining even mid-level guide. So because the competitive intensity is increasing as they may want to take some employees from part because we have been there in the industry for a long time. So any thoughts around that like have you been evaluating or any of the strategy that you are employing to probably retain the employees

Om Prakash Manchanda — Managing Director

I think employees are smart enough to evaluate opportunities. They actually — I see many of them do fall for short term on the banana we also know the sustainability of the provider — so as many of them who have actually gone from us have been wanting to come back as well. So I think some of them are really part froth careers are 30, 40 years longer quarters.

Nikhil Chowdhary — Chris BMS — Analyst

Sir, last question, probably, I asked it earlier con call ads in paper, have you been alluding because something probably has created noise has been the ad in the paper. So [Indecipherable] because we have cash on the balance sheet, spend some probably add on the front page and get some traction for Dr. Lal asking you guys probably can have a thought around it as the participation even in the 320 or IP matter, which actually are good probably areas of getting customer attention. So there’s probably one thing you thought around that.

Om Prakash Manchanda — Managing Director

Maybe you can sit separately and discuss this I’ve been — I think as all of us have one for [Indecipherable] company as well. So this business is — by the way, it’s still a medical business, I think very, very hyper local city-based is going all over the place. Your presence is mainly in two or three years, five cities, you will end up spending a whole country. I think we can sit and discuss that. And this business is not what you see a holding and we go and get you have some bit debt it will work — so I think ultimately, you are trying to solve the problem with its medical problem. It’s a very neat base. And it’s a 3-way process. You still have to congee with the medical security — and by the way, you also should know that in medicine, soliciting business this way is actually not a very appreciated format for — understood under

Operator

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

Bharath Uppiliappan — Chief Executive Officer

Thank you, everyone, for being with us on this call today. I wish you and your families remain safe and heavy I would now request the moderator to close the call. Thank you.

Operator

Thank you. On behalf of Dr. Lal Pathlabs, that concludes this conference call. Thank you for joining us. And you may now disconnect your lines.