Dr Lal PathLabs Ltd (LALPATHLAB) Q2 FY23 Earnings ConCall Transcript

Dr Lal PathLabs Ltd (NSE:LALPATHLAB) Q2 FY23 Earnings Concall dated Nov. 08, 2022

Corporate participants:

Arvind Lal — Executive Chairman

Om Prakash Manchanda — Managing Director

Bharath Uppiliappan — Chief Executive Officer

Ved Prakash Goel — Group Chief Financial Officer

Shankha Banerjee — Chief Executive Officer, Suburban

Analysts:

Nishid Solanki — CDR India — Analyst

Rahul Agarwal — InCred Capital — Analyst

Sriraam Rathi — BNP Paribas — Analyst

Shyam Srinivasan — Goldman Sachs — Analyst

Prakash Kapadia — Anived Portfolio Managers — Analyst

Sayantan Maji — Credit Suisse — Analyst

Sameer Gilani — — Analyst

Nitin Agarwal — DAM Capital — Analyst

Sameer Baisiwala — Morgan Stanley — Analyst

Rishabh Tiwari — Allegro Capital Advisors — Analyst

Rishi Modi — Marcellus Investment Managers — Analyst

Harshita Jain — — Analyst

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Prashant Nair — Ambit Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Dr. Lal PathLabs Q2 FY23 Earnings Conference Call.

[Operator Instructions]

I now hand the conference over to Mr. Nishid Solanki of CDR India. Thank you, and over to you.

Nishid Solanki — CDR India — Analyst

Thank you. Good afternoon, everyone and welcome to Dr. Lal PathLabs Q2 FY23 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, CEO, Mr. Ved Prakash Goel, Group CFO, along with Mr. Shankha Banerjee, CEO of Suburban and other group companies and Mr. Rajat Kalra, Company Secretary and Head of Investor Relations. I would like to share our standard disclaimer here. Some of the statements made on today’s call could be forward looking in nature, and the actual results could vary from these forward-looking statements. A detailed statement in this regard is available in the results presentation which has been circulated earlier and also available on stock exchange website.

I would now like to invite Dr. Lal to share his perspectives. Thank you, and over to you, sir.

Arvind Lal — Executive Chairman

Thank you, Nishid. A very good evening, and a warm welcome to everyone present on the call today. We are here to discuss Dr. Lal PathLabs Q2 FY23 earnings. I would like to take you all through some of the key initiatives and perspectives that have unfolded during this quarter. Dr. Lal PathLabs has been very tactfully increasing its presence across the country, which is otherwise fragmented and dominated by unorganized players. According to news reports, there are approximately 3 lakh labs operational in India. During COVID-19, we also witnessed a new phenomenon of carrying out RT-PCR test, at certain operators who had never been in the diagnostic field earlier, but were able to pick up COVID samples and we have learned that many such companies have now closed down as if they did not have the expertise in carrying out the non-COVID tests.

For Dr. Lal PathLabs, our relentless focus has been on delivering high quality diagnostics to customers at competitive rates, while offering them superior experience with omni-channel approach. This is precisely in accordance with the internal strategy framed by us to reach out to more customers across different towns in India. Today Dr. Lal brand has significantly strengthened premised on best-in-class quality of services offered across the gamut of test range that is second to none. Not only have we created an excellent lab network, but also invested extensively on the brand to create a lasting impact on the customers. Patients trust us for the entire test experience from drawing the blood to receiving accurate reports in a time-bound manner. To streamline the overall brand experience for our patients, we have heavily invested in solidifying our technological infrastructure across the entire value chain. In fact, we have witnessed twice the increase in the IT space over the past two years to create an asset that has cutting-edge technology with enhanced focus on R&D capabilities.

Lately, we have witnessed a very noticeable shift in the industry dynamics favoring the organized change due to consistent quality and superior service standards. Increased test intensity is also being driven by higher literacy rates, health awareness, better disposable income and an aging population. Dr. Lal PathLabs, being the biggest pan-India player, is well poised to benefit from this rapid shift and the acquisition of Suburban Diagnostics has only bolstered our presence further in some of the three key clusters of the western region. I believe we have built a robust business enterprise with a very strong interconnected lab network and the focus going ahead will be to strict this huge infrastructure to deliver accelerated performance and enhanced value for all the stakeholders.

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

Om Prakash Manchanda — Managing Director

Thank you, Dr. Lal. Welcome everyone to Dr. Lal PathLabs Q2 2022 earnings call. I hope that you and your loved ones are safe and healthy. The diagnostics industry in the Indian healthcare context offers enormous growth potential even today and will continue to do so for the foreseeable future. I will talk to you today about the current trends as well as strategic focus of Dr. Lal PathLabs.

First, let me share a bit of current trends competition to start with. Post-COVID-19 pandemic, the Indian diagnostic industry has faced severe competition that is two pronged. One from the online aggregators and e-commerce players, and another one from hospital chains and pharma companies. This is a different kind of competition that we are witnessing today than earlier. This intense competition has resulted in some kind of price erosion in some of the key routine tests and wellness packages. Given this backdrop, LPL has further increased the spend on marketing and promotion and in technology to maintain its leadership position. The service delivery levels remain top-notch thereby helping LPL gain competitive advantage over peers. On the other side, or the positive side, one advantage of organized competition has been that it has pushed the overall quality and service standards in the industry.

Now let me talk about general industry environment. Based on the publicly available information, it seems after witnessing a strong pent-up demand for diagnostics, following the ease of pandemic restrictions, the industry is staring some kind of moderation in growth in some of the matured and highly penetrated metro markets. LPL is leveraging its expertise to penetrate deep across some of the untapped regions with high growth potential. Overall, the sector is also seeing some pressure from diverse form of competition in the market, which is also transforming the industry value chain. However, in the recent months, we have seen some of the new entrants, who had been resorting to deep discounting have started taking up the prices of some of the bundled packages. Having said that, India remains a very large market with limited access to diagnostics, hence from a long-term standpoint, we believe the growth prospects appear promising.

Now a bit about our business. At macro level, we continue to witness favorable trends in sample collection growth on the non-COVID side of the business. As you are aware that last year had wild fluctuations on month-on-month basis for both COVID and non-COVID sales. Last year, Q2 and Q3 were very high base non-COVID quarters, while Q1 and Q4 were soft non-COVID quarters. Therefore, the best way to analyze the numbers is either on an annualized basis or on sequential terms. Sequentially non-COVID business growth for the current quarter, that is Q2 over Q1, is more or less in line with what business used to deliver in the immediate years before COVID. There has been an increased relevance of wellness and bundled tests especially post the COVID outbreak. This has been driven by higher awareness around keeping good health and rightly managing underlying comorbidities. SwasthFit which is our bundled testing offering has reached 20% in contribution to non-COVID revenues.

On the operations front, as we grow in scale, our teams are continually evaluating and incorporating new tests into the menu, such that our patients can benefit from the latest invasion of technology and testing. This is driving sample traction both on the B2B aspect as well as directly for walk-in patients as doctors take to prescribing and relying on such new tests. Over the past few years, we have meticulously developed a pan-India operations reaching important population centers. We have strengthened home collection capabilities and revamped our digital assets at the front end. It remains a constant endeavor to densify our reach to adjacent clusters, and we have taken the route of creating Hub Labs and Model Reference lab to support higher momentum in sample volumes. In Northeast, we are moving into the hinterland, and in the West, we are making inroads through our dual brand approach with Suburban. And in South given our new Reference Lab at Bengaluru we are driving sample collection across the region.

With that, now I would like to invite our CEO, Bharath to continue this conversation. Thank you.

Bharath Uppiliappan — Chief Executive Officer

Thank you, Om. I warmly welcome you all to this call today. I will take you through the business highlights. In Q2 FY23, we served 7.2 million patients, generating a revenue of INR533.8 crores with a growth rate of 7.1% Y-o-Y. COVID and allied tests contributed only INR19.6 crores, which represents the lowest ever contribution at 3.7% of the overall quarterly revenue. Our non-COVID revenue of INR514.2 crores registered a growth of 14.8% over Q2 last year. This growth has been led by patient volume of 8.6% Y-o-Y. Sequentially, that is Q2 FY23 over Q1 FY23 the revenue uplift rate for non-COVID business is 6.7%, which is near historical pre-COVID averages, which used to be around 8%. Last year, we had an uplift of 16.1% Q2 over Q1 in our non-COVID portfolio due to COVID pandemic-led non-COVID testing for tests like KFT, LFT, CBC, etc. Hence these numbers have been achieved in the context of a high base of last year, of COVID-associated non-COVID tests, slip in seasonal and festive calendars along with unprecedented rains towards the last fortnight of the quarter.

Now I will take you through some of the key trends and directions in the business. Last quarter saw a significant uptrend in SwasthFit portfolio due to a continued market activation, family offer and other distribution excellence programs. Continuing on this trend, we are pleased to share with you that Q2 FY23 we have achieved the highest ever quarterly revenue of INR94.9 crores from our SwasthFit portfolio. After the launch of an L-ACE, our Center of Excellence in autoimmunity, we are happy to launch our latest Center of Excellence called L- CORD. L- CORD stands for Dr. Lal PathLabs Center of Excellence for Reproductive Diagnostics. Our mission via the center of excellence at LPL is to improve the medical outcomes in infertility, pregnancy, and newborns. Issues like infertility have affected over 15% of Indian couples due to late marriages, stress and poor lifestyle. Over 1.7 million babies are born with birth defects in India every year, due to lack of awareness and affordability. This center of excellence will significantly benefit from a wide geographic footprint, strong clinician connect, comprehensive menu and sample aggregation capabilities. Our expansion in South in Tier-II plus cities continues to do well and we are further strengthening these efforts. Recognizing the competitive landscape, we continue to be aggressive in our customer acquisition and retention programs. The operating teams have continued to focus sharply on productivity initiatives to actively manage test mix, cost to deliver, a healthy EBITDA margin.

With that, I would like Ved to take you all through the financial performance. Over to you, Ved.

Ved Prakash Goel — Group Chief Financial Officer

Thank you, Bharath. Good evening, everyone, and thank you for joining this call today. I trust each of you and your families are safe and healthy. Please note that Q2 FY ’23 results include Suburban, hence not comparable with previous year same quarter.

Now I will share some of the financial highlights. We clocked the highest quarterly non-COVID revenue of INR514 crore, a growth of 14.8%. Non-COVID revenue grew by 19.5% to INR996 crore in first half FY23. Though the non-COVID revenue increased by 14.8% in Q2, reduction in COVID business by 61%, as compared to last year resulted in overall growth of 7.1%. Total revenue came in at INR534 crore versus INR490 crore last year same quarter. Revenue realization per patient for Q2 FY23 is INR746 crore as against INR721 crores last year same quarter. The better realization is due to the higher contribution of SwasthFit, which has now reached to 20% of non-COVID business excluding Suburban.

Normalized EBITDA after eliminating the impact of RSU and CSR for Q2 FY23 is INR150 crores as compared to INR152 crore reported in Q2 FY22. Normalized EBITDA margin for Q2 FY23 is at 28.1%. This margin’s inclusive of Suburban, which is relatively a low margin business. Normalized PBT after eliminating the impact of notional depreciation on account of Suburban acquisition, INR12 crore and one-time exceptional expenses of INR2 crore for Q2 FY23 is INR117 crore. Normalized PBT margin is 21.9%. Normalized PAT for Q2 FY23 is INR86 crore and normalized PAT margin is at 16.1%. Net cash and cash equivalents after adjustment of borrowings at the end of September 2022 is INR419 crore.

At last, a quick update on Suburban performance. Suburban revenue for Q2 FY23 is INR40 crores of which non COVID revenue is INR38 crore. Please note this revenue is recorded on net basis due to transition to Ind AS. This is equivalent to INR55 crore as per erstwhile accounting practices. Normalized EBITDA margin for Q2 FY23 for Suburban came in at 17.6%.

With that, I request the moderator to open the forum for Q&A. Thank you.

Questions and Answers:

Operator

[Operator Instructions]

We have a first question from the line of Rahul Agarwal from InCred Capital. Please go ahead.

Rahul Agarwal — InCred Capital — Analyst

Yeah. Hi, good evening, and thanks for the opportunity. I have three questions. Firstly Dr. Om, I wanted to know how was 2Q as per your own internal expectations? Because it was a monsoon quarter, should have been seasonally stronger. I understand the festival change in the quarter also. And the base being bit high because 1Q last year was COVID impacted, but 6.5% revenue growth ex of Suburban, is it in line with our expectations? I mean you highlighted on competition. But how do you look way forward for this? This is my first question.

Om Prakash Manchanda — Managing Director

You want me to answer now, or your wait for your second question?

Rahul Agarwal — InCred Capital — Analyst

Yeah, I mean I can give you the question. So secondly on Suburban non-COVID was flat Q-o-Q. My sense was we were focusing on aggressive faster revenue growth because of new center openings here around Mumbai and Pune. So I am not really sure why this number has stayed so low quarter-on-quarter. And thirdly, staff costs declined from first quarter to second quarter to INR91 crores, if any one-offs there please? That’s all. Thank you.

Om Prakash Manchanda — Managing Director

Okay. I think the first question, this is a very good question is how do we see this number internally. I think what we are looking at is, before COVID there used to be a pattern on quarter-on-quarter. Let’s say, if you look at ’18-’19, ’19-’20. So normally, there are two moments when the uplift in our revenue line happens, one is Q2, another is Q4. So Q2 usually, as Bharath mentioned in his comments, is about 7.5% to 8% higher than Q1. And this number that we have is about 6.5%. We were cruising along well, I think, end of September. I don’t know, you know that. Northern part of India had massive rains and that affected last week, but that’s not a problem — excuse as to why this number is lower. But I would actually say slightly more or less in line with what we were doing earlier. But I think 6.5%, I could have been happy about say, about 7.5% is what I would say. Now why this number looks lower than year-on-year basis is mainly because Q2 of last year is highly bloated quarter. And Q2 of last year versus Q1 of last year there is a jump of nearly 16%, which to my mind, I think is affecting this particular year-on-year number. And that’s what I actually said in my commentary that try and look at for the full-year basis as to see what the growth would be rather than on just one quarter. Going forward also, Q3 is also one such quarter where the base is relatively higher while Q4 is a soft quarter last year. Now, second question about Suburban. Yes, I — probably yes. Internally, we would have expected slightly higher growth. But I think there are a few challenges that we’re facing in stabilizing the asset. We’ve just — the new leadership is just stabilizing. There is some sort of cleaning up that’s happening about because there is a huge tail with a small little volumes here and there. There’s is a bit of rationalizing on our channel is happening. And that is what has led to this. But we’re very confident that going forward, it should come back quickly on this.

Rahul Agarwal — InCred Capital — Analyst

Lastly, sir, on the staff cost, why has it come down quarter-on-quarter to INR91 crores?

Om Prakash Manchanda — Managing Director

Ved, you want to answer that?

Ved Prakash Goel — Group Chief Financial Officer

Yeah, so there is a charge of RSU and — I mean RSU particularly this was reduced by roughly INR8.5 crores. That is why we are looking employee costs down.

Om Prakash Manchanda — Managing Director

But that is not normalized, it is all inclusive.

Ved Prakash Goel — Group Chief Financial Officer

All inclusive.

Operator

Thank you. We have our next question from the line of Sriraam Rathi from BNP Paribas. Please go ahead.

Sriraam Rathi — BNP Paribas — Analyst

Yes, thanks for the opportunity. Just one question, sir, on the margins, generally, we have been guiding like it should be around 25% odd. Looking at this quarter number. I assume that, of course, Q2 is on the higher base. Q2 is generally the highest in terms of margins. How should we look at going forward, like I mean Q3, Q4 moving back to 25% or you would like to say that, I mean, probably, it can be on the higher side now?

Ved Prakash Goel — Group Chief Financial Officer

So Sriraam, Ved here. So you are right that Q2 is always higher margin quarter for us. And if we see pre-COVID levels, I think the same trend we have seen for last two quarters. As far as we are growing in this trajectory, I think we are able to maintain our margins going forward, which used to be pre-COVID level.

Sriraam Rathi — BNP Paribas — Analyst

Okay, So reported EBITDA margin of somewhere around 26%-odd is what we used to do pre-COVID. That should be —

Ved Prakash Goel — Group Chief Financial Officer

Yes, so you see 26.6% and that too with Suburban.

Sriraam Rathi — BNP Paribas — Analyst

Yeah, that too with Suburban. So I mean, assume that Suburban margins will improve. So ideally, we should be at this level where we are right now, the first half?

Ved Prakash Goel — Group Chief Financial Officer

Yeah.

Sriraam Rathi — BNP Paribas — Analyst

Okay, that’s helpful. That’s helpful. And just another thing is that, I mean, then Q2 is of course the highest quarter for us. But I mean generally, should we expect that Q3 and Q4 will move on the lower side in terms of revenue or this quarter — this particular year. It could be different because still, we have not seen the pre-COVID level kind of growth in Q2?

Om Prakash Manchanda — Managing Director

No, no, Q3 is the lowest quarter in our portfolio. So Q2 is the highest actually. Normally Q4 tends to be higher, but I think in the last four, five years, I am not seeing Q4 equal to Q2. Generally, I think I would say out of all the four quarters, Q2 is the highest. And that’s not only true for us, but for the entire industry.

Sriraam Rathi — BNP Paribas — Analyst

Right. So I mean just on that only I was asking that probably like in this year Q2, we are still not in the full potential of growth, like we used to see in pre-COVID era. So I mean this year can it be different that only Q3 and Q4 may not be that direct weak versus Q2?

Om Prakash Manchanda — Managing Director

May not be that big —

Sriraam Rathi — BNP Paribas — Analyst

Weak, weak, yes.

Om Prakash Manchanda — Managing Director

Weak, okay.

Sriraam Rathi — BNP Paribas — Analyst

Versus Q2 this year. Just, I mean, just qualitatively if you can indicate.

Om Prakash Manchanda — Managing Director

I don’t know. I’m not commenting on the numbers, but generally winters business actually in healthcare in general gets very depressed. So I actually have my doubt that Q3 would look higher than — or not it will definitely weaker than Q4 due to inward lifestyle right? Yeah.

Sriraam Rathi — BNP Paribas — Analyst

Okay, sure, sure. That’s helpful, sir. Thank you.

Operator

Thank you. We have our next question from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Shyam Srinivasan — Goldman Sachs — Analyst

Yeah, good evening and thank you for taking my question. Just the first one on your opening remarks, you talked about moderation in growth for the industry. Maybe your number also reflects some of it. But also the contrary statement that organized is gaining share from unorganized, so just can you help us understand, is it — some commentators have used the word COVID fatigue from a consumer perspective that there has been too much testing and there is now less of testing or wanting to go out? Anything qualitatively you can share on the moderation of growth?

Om Prakash Manchanda — Managing Director

I think this moderation term, I picked up mainly by analyzing all the data that’s available in public domain. And I noticed that definitely growth rates of our — many players is definitely not in line with what market used to have earlier. I think that’s where I was coming from that, that are we seeing some kind of moderation. And then if I look at deep down the profile of various companies and their businesses, mainly it is lying in metros. That’s where the moderation is coming now. It could be combination of few things which is very, very difficult for us to figure out. It could be competitive intensity because there are so many players coming in. Obviously they are gaining share from some of these established players, could be one reason. The other reason could be, I don’t know that some kind of fatigue that has set in, because so much of testing, everybody has gone through in just the last six, seven months, or one year. But I think overall the contradiction that you are seeing is that because our bundled packages are going up. There is general health awareness. Obviously people know that they have to take charge of their health is where I — this comment came.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. Sir. That’s helpful. Just coming to your point on SwasthFit. So we have grown 20%, 21% I think, Y-o-Y, so is there tailwinds post-COVID that you’re seeing SwasthFit grow the way that is, and what are some of the building blocks and enablers that you are putting in place so that this growth can continue?

Om Prakash Manchanda — Managing Director

I think there is a change in consumer behavior that I’m noticing. Maybe I’ll ask my colleagues to add on to this, if I missed out something, is that, which I’ve always been saying. A lot of people used to call this is a preventive health checkups. So I don’t think it is preventive health checkup. There may be some component of that, but definitely non-communicable diseases-related customer base is now moving to bundled packages, because it’s a great value for money from a customer point of view. They see that they are able to get more tests done and they want to scan themselves for much wider portfolio of tests rather than just say only diabetes or thyroid, now in maybe sub INR1,000 you can actually get lot of tests done. So I think there is a change in consumer behavior who are seeing a much greater value for money. The second thing is illness-related testing or high-end testing is — relation is one is to one. The doctor visit leads to testing. Then it again they go back to doctor and come back to the lab. But in a non-communicable diseases, usually it is a one visit to the customer and there is a frequent visit to the lab. There is no in-between visits to the doctors. So to that extent, it tends to behave like as if consumers are making their own decisions or choice about testing. So I think that is driving this whole bundled packages situation, right? You want to add to it?

Bharath Uppiliappan — Chief Executive Officer

Just like I mentioned in the opening comment, Shyam, is that two other things, which are coming up and what SwasthFit is really doing is, one is around family offer. So like Om said with the consumer behavior change could have more and more people are willing to get their spouse or one of the other family members also tested on the same visit or let’s say in a matter of one or two days. So we enable some tech solutions wherein family members can get tested within one or two days of the main person getting tested. And second, obviously, is that a lot of focus on distribution expansion for Swasthfit as a product. Number of collection centers, etc., are selling. Are they selling daily? So there is a usual way, product companies sell that rigor is setting in, I guess.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. And my last question, if I may, is on the comment again, that Om, on price erosion realization that you quoted this quarter don’t seem to suggest. So are we breaking it down, like non-suburban realizations have eroded, if you can explain that commentary? Thank you.

Om Prakash Manchanda — Managing Director

It’s a good question. I think, good that you asked this question. Let me explain. So I think there are two. Most companies are talking about revenue per patient. But if you look at revenue per test that is where the erosion is happening, because now the number of tests per patient is very sharply moving up across in the entire industry. So when earlier, let’s say, INR1,000 was realization for five tests and suddenly, — I’m just giving an illustration. Now you are doing more number of tests, maybe just increasing the price by INR200, not to the extent of INR1,000. So technically, revenue per patient is moving up but per test is going down because now you’re doing more tests for the [Indecipherable]. That’s what I meant by price erosion.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. So you are not alluding to competitive pressures here?

Om Prakash Manchanda — Managing Director

Absolutely, no.

Shyam Srinivasan — Goldman Sachs — Analyst

Okay, and your comments suggest that you have maintained prices.

Om Prakash Manchanda — Managing Director

Per patient, per test is falling, but the good news is that if we are able to actually maximize revenue per single visit, it’s actually beneficial, but if it’s on the base of multiple visits, then you have a problem, where Bharath mentioned that if [Indecipherable] goes for the home collection, if you are able to collect more patient samples, a large number of family members, then actually it becomes much more viable proposition.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it, Dr. Om. Thank you, and all the best.

Operator

Thank you. We have our next question from the line of Prakash Kapadia from Anived Portfolio Managers. Please go ahead.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Yeah. Couple of questions from my end. Maybe if you could give us some color into SwasthFit revenues, I think Bharath did mention about some geographically expansion in terms of increasing the rate. So what would be say SwasthFit revenues from Top five cities for us as of now?

Bharath Uppiliappan — Chief Executive Officer

Prakash, hi Bharath here. I’m sorry, I didn’t carry that number today. But yes, I can pull this out and then —

Prakash Kapadia — Anived Portfolio Managers — Analyst

Sure. And in a competitive, increasing competitive scenario, how critical are the 100 million patients which we’ve serviced say, during the last five years because as the business works for us, and we realize in terms of cross sell, that scale, repeat purchase. So what is our endeavor and focus on these existing customers, which we serviced over last couple of years?

Om Prakash Manchanda — Managing Director

So yes, Prakash. This is something we realize as big opportunity. There is obviously work in play, and some that’s got executed, some is yet to get executed. We are not going to share some very specific unless you get in touch with us. You can see what we do in the background but needless to say we recognize this farming activity as a large source of revenue. And our teams are at work on that front.

Prakash Kapadia — Anived Portfolio Managers — Analyst

So we are internally trying to up-sell and cross-sell to some of these customers and ensure we get more per visit or some more family member tests is what the endeavor would be?

Bharath Uppiliappan — Chief Executive Officer

Yes, so like Om mentioned, we are significantly upping our A&P spends in the direction and lot of them have got technology back ends built in now.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Sure. That’s helpful. And lastly from my side, Suburban say at annualized revenues of around INR160 crores, we are around INR80 crores as on H1. What would EBITDA margins look like from the current level? So at what scale does those EBITDA margins go to 20% plus for us or Suburban?

Ved Prakash Goel — Group Chief Financial Officer

I think Prakash. I would probably not put a number right now because it’s very early stage. As I’ve always been saying that our focus right now is to see if we can stimulate the top line growth, then worry about EBITDA margins. We probably would look at maybe two, three quarters down the line as to how we look at it. But I see this is a great platform for us to see if we can drive growth further. Unfortunately, this year because dependence of Suburban on COVID was extremely high, nearly half of the business was coming from COVID and entire industry has seen COVID very sharp fall. So to that extent Suburban is also adversely impacted, but we just need to go through this for a couple of quarters and then take a call on how do we look at the margin trajectory. But I think the immediate focus is to see that we are able to build infrastructure, collection infrastructure in the City of Mumbai.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Yeah. And post the acquisition, it’s been almost a year, more than a year now, so where are we in terms of say the test menu? How many have we added in Suburban? Some sense on the patient collection center is that Mumbai lab opened. Where are we in that journey for Suburban?

Om Prakash Manchanda — Managing Director

So maybe I’ll request Shankha to talk about this because he’s the one who is driving this.

Shankha Banerjee — Chief Executive Officer, Suburban

Yeah, hi Prakash. So in terms of three specific things you said, in terms of adding collection network, it’s an ongoing process. We’ve been on the job and we are adding network each quarter. I may not be in a position to share the exact numbers right now, but maybe after two or three quarters, we will start sharing numbers, if at all. And the new lab in Vidyavihar that we get set Reference Lab that we have started in terms of testing and stabilizing that lab internally, and all the required accreditations is what is under progress right now. I think as and when that gets over you would maybe hear more about it in the market place.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Sure, sure. And on the test menu, is that going to be now very important addition to Suburban to drive growth for us?

Shankha Banerjee — Chief Executive Officer, Suburban

Yes, that is a part of the plan. And yes, it will happen once — like I said once these accreditations, etc., are completely done, then action on that end will also start happening. Also we are looking at a very close integration between the Suburban and LPL test menu, leveraging both together.

Om Prakash Manchanda — Managing Director

So I think Prakash, this is Om here. It’s very clear in our mind, it’s a Reference Lab for Dr. Lal PathLabs group companies in the City of Mumbai. This lab of Vidyavihar is not only for Suburban as a legal entity. But it’s for the all group companies and which we believe is very important for us to go forward.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Sure, sure. Understood. That’s helpful. Thank you. All the best.

Operator

Thank you. We have our next question from the line of Sayantan Maji from Credit Suisse. Please go ahead.

Sayantan Maji — Credit Suisse — Analyst

Yeah, thank you for the opportunity. So I have a clarification on the personnel cost. So does CSR and RSU expense of INR53 million right? So where is this INR85 million sitting?

Ved Prakash Goel — Group Chief Financial Officer

Sorry Sayantan. So I have clarified that there is a RSU cost, not CSR, RSU cost which is included in personnel cost, is down because there is a low-cost on account of RSU this quarter.

Om Prakash Manchanda — Managing Director

This quarter charge from RSU is much less than what it was last year.

Ved Prakash Goel — Group Chief Financial Officer

Yes, yes.

Om Prakash Manchanda — Managing Director

And I think that frankly the share price and that’s why this fluctuates, right.

Arvind Lal — Executive Chairman

The share price is one of the variables. There are other variants also. Share price was one variable.

Sayantan Maji — Credit Suisse — Analyst

Okay, understood. And also in this quarter, so can you give a rough idea in terms of which were the regions which grew at a faster rate compared to the corporate average? So for example is North India growing at a slower rate compared to say East India?

Om Prakash Manchanda — Managing Director

Yeah, core markets of UP, Punjab, Rest of North, South, they all really grew at a very fast pace this year.

Operator

Thank you. We have our next question from the line of from Sameer Gilani, an Individual Investor. Please go ahead.

Sameer Gilani — — Analyst

Yeah, hi. Thank you for taking my question. My question is more on your cash flow statement. There seems to be an increase of trade receivables by INR92 crores, which not a large number, but given the numbers you’ve seen in the past, it seems slightly large. Can you throw some light on this please?

Om Prakash Manchanda — Managing Director

Sorry, your voice is not very clear. I repeat you are saying there is a increase in the cash flow amount this year — this quarter you are seeing a very large number. Is that what you’re asking?

Sameer Gilani — — Analyst

No, I’m saying — I’m asking on the trade receivable side there seems to be a jump in the trade receivables, to INR92 crores. So I was just wondering what that number was?

Ved Prakash Goel — Group Chief Financial Officer

Yeah, so it used to be INR35 crore kind of number. This quarter it is slightly high because of government outstanding, but still well within our DSO, which is 30 days.

Operator

Thank you. We have our next question from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Hi, thanks for taking my question. Om, just two questions, one is A on SwasthFit, and just taking back to the price competition that we talked about, I mean, just your thoughts on, isn’t the bundled packages most — relative to the acute sort of testing, more acute to price erosion or the pressures around discounting and all of that?

Om Prakash Manchanda — Managing Director

So like I’m not sure, I got your question.

Nitin Agarwal — DAM Capital — Analyst

So, my question was, when we consider bundled packages, while it is acute testing which happened in response to when a doctor sort of prescribes a diagnostic test, where the quality and the brand starts to become very important. I mean a bundled test is an impulse sort of a purchase in some sense and more prone to maybe the pricing or the discounting that really, the offers the best offer a potentially a customer gets.

Om Prakash Manchanda — Managing Director

No. Quality is equally important in this, sir, because I have also talked to my laboratorists [Phonetic] as well as our courier network, they have actually told me that, yes, it leads to certain trial generation, but people are still coming back and saying that, okay we want to go still back to quality. Nobody will take chances just because somebody is selling at INR100 lower. They would definitely want to try it out, but the quality is important across the portfolio, not only just because it can also — wrong results can also lead to anxiety. Otherwise you may not have a problem, but you may have anxiety disorder. So I think quality is important all across. And I’m talking about first hand feedback from my team, people who actually go and collect the samples.

Nitin Agarwal — DAM Capital — Analyst

Okay. And secondly on SwasthFit, I mean these are largely home tests which are home collection — I mean how important is home collection in this sort of bundled test versus the acute tests?

Om Prakash Manchanda — Managing Director

So I think, I go back to the first question someone asked about generally what is happening in the industry. I think there is definitely consumer behavior change is coming. One is that they are looking for value for money, which is leading to bundled packages, so that lot about preventive health checkup, bundled packages that we talk about. I think that’s one chain. Second is convenience is becoming a more sought after some value by patients and convenience essentially would mean is that, can they access the brand online, can they pay online. So they don’t want to come to the lab and wait for 40, 45 minutes. So I think with all that put together, home collection is one element of that convenience. Convenience could also be how quickly you deliver the report, how easy your website is accessible or app, etc. So I would call that a convenience and the overall value is quite sought after by the patients these days in addition to pricing and quality.

Nitin Agarwal — DAM Capital — Analyst

And sir, one more thing, we talked about — we’re not increasing prices and some amount of pricing competition. But our gross margin seems to be probably amongst the highest you’ve done in a while. And this is despite some amount of rupee depreciation happening and we probably having some amount of imported raw materials. So how does one sort of tally that?

Om Prakash Manchanda — Managing Director

So I think mainly because Q2 generally, one is of course we all look at growth percentage, but if you keep mind away from that in absolute terms, it’s a very high quarter. So INR534 crores in just one quarter is a very high number. So whatever our Q2 margins that you see, I don’t think they are representative for the annual, for the year margin [Speech Overlap].

Nitin Agarwal — DAM Capital — Analyst

Yeah, this quarter is non-COVID is highest revenue, INR514 crore is the highest ever.

Om Prakash Manchanda — Managing Director

Highest ever. And I think it will be highest in every quarter of the year. So please do not look at current margin as a margin which we will deliver for the year.

Nitin Agarwal — DAM Capital — Analyst

I was looking at the gross margin. But I understand the EBITDA margin because there’s an operating leverage involved. I was more surprised by the expansion in the gross margins.

Om Prakash Manchanda — Managing Director

Gross margins, I mean is it that high, Ved?

Ved Prakash Goel — Group Chief Financial Officer

It is high, little bit Om.

Om Prakash Manchanda — Managing Director

Sorry, I haven’t seen that. Is it — I don’t think it’s– no. I don’t think it’s sharply high.

Nitin Agarwal — DAM Capital — Analyst

It’s not that.

Om Prakash Manchanda — Managing Director

We will look into that, but my — at least my gut says that it won’t be that high.

Nitin Agarwal — DAM Capital — Analyst

And I can take one last one, when I take — say when we take a 3 year view from here on, what kind of — what would be your [Indecipherable]?

Om Prakash Manchanda — Managing Director

Let me come back. I think you are talking about gross margin being higher, mainly because last year COVID was higher. So COVID has a lower gross margins. You are comparing with the last year number, right.

Nitin Agarwal — DAM Capital — Analyst

I was looking on a Q2 basis.

Om Prakash Manchanda — Managing Director

In last — like I am looking at material cost, which is 23.2% this quarter versus 24.6% last year same quarter. So which essentially means gross margin this year is better than last year.

Ved Prakash Goel — Group Chief Financial Officer

First half.

Om Prakash Manchanda — Managing Director

First half, sorry. I’m looking at both the quarters together. It’s mainly because COVID component last year was very high and the COVID had a lower gross margin than our rest of the portfolio. Now COVID has just gone away. So obviously our gross margins look better.

Nitin Agarwal — DAM Capital — Analyst

That explains. Sorry, last one from — if we take a three year view, what is the — or rather, what is your assessment when you look at the business, what is a good volume growth number, patient volume growth number that we should be sort of looking at?

Om Prakash Manchanda — Managing Director

It’s very difficult to put that figure because industry is definitely in a state of flux. And on one side, I’m seeing some new euphoria declining amongst competition. So we’ll have to wait and watch. It’s too early, maybe next couple of quarter we will have to see. I think this whole excitement which COVID created in the financials is dying down. So my sense is we will see a stable sort of rate after two quarters. So my best guess would be, I think we should wait and watch for another two quarters to see a real trend. But I think at a macro level, all the macros are in place In terms of diagnosis is highly underpenetrated India, medicine has to become evidence-based, very large country 1.4 billion people. It has to go to Tier-II, Tier-III towns. I don’t see any reason why industry growth rates should be long-term basis, if not higher not the same as what we have seen. From a volume perspective, I actually don’t see any reason why industry should not grow. I think where the challenge could be, if the competitive intensity and some of these players continue to resort to cash burn. And I don’t know how pricing would settle down, is the only probably watch out I have in the industry, which to my mind, if funding is drying up as we keep reading in the newspapers, we’ll have to see after two, three quarters, what’s really happens and how they resolve. I think early signs are some of these players have started taking up prices of the packages, which could be a sign that they have run out of steam to stay on those current price points.

Operator

Thank you. We have our next question from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Sameer Baisiwala — Morgan Stanley — Analyst

Thank you, and good evening everyone. Sir, can you update us on your distribution expansion that is underway. I know you disclosed the numbers at the end of the year. But we’re seven months down. Is it on course labs, PSCs and PUPs?

Om Prakash Manchanda — Managing Director

Bharath?

Bharath Uppiliappan — Chief Executive Officer

Hi, Sameer, Bharath here. Yes, indeed it is on track, and I mentioned in the opening comment, that we are seeing good response from Tier-II plus cities and South also as a geography. And our expansion plans continue both on collection center, pickup points as well as the lab network. No slowdown on this count.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, great. And sir, the second question is, you’ve been mentioning on your presentation deck, things like home ECG testing, radiology, gene testing, if you can talk a bit more about these, do you think these can become big in the overall portfolio or how do you view this?

Om Prakash Manchanda — Managing Director

Hi, firstly [Indecipherable] can recover, because these are much more filler tests, I would say. I don’t think this is the value of the business at all.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, that’s fine. And final question from my side, how do you judge Suburban acquisition on ROI basis given that you must have spent about INR1,000 crore plus and where the numbers are tracking right now?

Om Prakash Manchanda — Managing Director

I think we have looked at Suburban more from a strategic and will — both from an angle of that Mumbai and Maharashtra are very big markets. On our own organically, we may have had a very few challenging in settling down. We have tried this last 10, 15 years, INR160 crores, INR170 crores of business, 80% coming from Mumbai. I think we see this is a great platform in the life of Dr. Lal PathLabs journey for times to come. So we are not looking at on a quarterly or one year basis. I know this year, some of these math may look little awkward given that COVID has just gone away, we think half of the business. But so be, that’s the life and I really don’t look at from a — or rather as a team. We don’t look at it from three months or one year perspective. For us this really is from a very, very long-term standpoint. And it also gives us the ability to build, I think Prakash asked this question about Central Lab. If we’re able to build a nice platform of a very, very high-end wide test menu in Mumbai. I think it’s a great thing for us too. On a small scale, sometimes these investments really don’t deliver but at such a high base this can really work well for us if we can turn this around.

Sameer Baisiwala — Morgan Stanley — Analyst

Yeah, sure. Got it. Thank you.

Operator

Thank you. We have our next question from the line of Rishabh Tiwari from Allegro Capital Advisors. Please go ahead.

Rishabh Tiwari — Allegro Capital Advisors — Analyst

Yeah. Hi, thanks for the opportunity. I was — the question is regarding the non-COVID revenue growth, which is around 6.6% for this quarter. Could you please throw some light on how much of this is coming from volume and how much of this is coming from price, given that there is a price erosion in the revenue per test while the RPP is going up?

Arvind Lal — Executive Chairman

So let us say, there is no price erosion per se, there is a bundled test and super specialty contribution moving up. So if you put the numbers for half will be volume and half will be revenue realization, not a price increase. The revenue realization moving up?

Rishabh Tiwari — Allegro Capital Advisors — Analyst

So half-half. Okay, noted. Thanks. Just the last question, what was the contribution of Delhi NCR since the opening remarks mentioned about 4% in expansion in South and also the Reference Lab coming in Bangalore. So if we could have a broad number, the contribution from Delhi NCR? I remember it was 35% last quarter.

Om Prakash Manchanda — Managing Director

The same range. Yes. It remains the same range. We just say, I think this price erosion comment is not from a company standpoint. It’s a very general comment for the industry because that’s the way the It has happened.

Operator

Thank you. We have a next question from the line of Rishi Modi from Marcellus Investment Managers. Please go ahead.

Rishi Modi — Marcellus Investment Managers — Analyst

Yeah, so my first question is that our three-year revenue CAGR right, non-COVID, non-Suburban has been around 9% to 10%. So are we seeing some saturation out here or are we losing market share, like I’m guessing the industry might be growing much faster, given post COVID as well. So just trying to understand, have we lost any market share?

Om Prakash Manchanda — Managing Director

See we have done this analysis all the companies who publish data and we are seeing at least our growth rate of the CAGR of 10% is still the highest growth of all of them right. Is that correct?

Ved Prakash Goel — Group Chief Financial Officer

Yeah, yes.

Om Prakash Manchanda — Managing Director

So I don’t see any — at least from the published data, I don’t see that we’re losing out market share very much. Maybe it might just take bit of time for it to come back to the same old trajectory, but slowly, slowly business is inching upwards. And that’s the point I was saying, rather than looking at year-on-year, see that how quarterly this trajectory is moving. It is more or less mimicking what it used to be earlier. I don’t think that we are losing our market share at least. If I look at the pace on the published data. Now of course there are large number of unlisted players, but we don’t have access to the information that they have. But having said that, of course, they also are getting some business So they must be nibbling away a little bit here and there, but I don’t know whether that’s a sustainable number for them. We’ll have to wait and watch this.

Rishi Modi — Marcellus Investment Managers — Analyst

And as you said, right now that you’re moving into Tier 2, Tier 3, so how do the productivity and profitability in numbers stack up for Tier 2 Tier 3 versus the current Tier 1 numbers, like what are you seeing out there.

Om Prakash Manchanda — Managing Director

So if you look at productivity there are two cuts of productivity. One is throughput per outlet and the entire ecosystem, the throughput per outlet obviously takes a bit of time more the Tier 2, Tier 3 to build up. There are various types of markets, brands strong market, brand weak markets. On an overall level if you manage the expansion plan well enough I think you’ll continue to see the results the way we are seeing now.

Bharath Uppiliappan — Chief Executive Officer

I think broad thumb rule is that as you go away from your non — from your core markets, your margins are slightly lower. The trick lies in managing in a very calibrated manner, how you expand into these markets to manage your margins. Let’s say if our company was only Delhi NCR company, margins definitely would look much higher. They obviously get diluted as we go into the hinterland. I think that’s a broad rule. You want to very, very carefully maneuver the balance between metro as well as Tier II, Tier III towns and also how you manage your lab infra.

Rishi Modi — Marcellus Investment Managers — Analyst

All right. Got it. Okay. And sir, you just mentioned on the call that you’ve doubled your tech expenses in the past few years. So where are you investing this tech like on the front end what are you doing, what are you doing on the back end if you could give some more clarity?

Om Prakash Manchanda — Managing Director

So on the front end — so you rightly pointed out front end, back end and the security layer. There are three different ways to cut it. On the front end all our digital properties have been revamped website, app. The whole experience has been revamped. On the back — on the supply chain side, we’ve put a lot of digital assets to monitor the sample flow. So we talked in the past about having a control tower. We talked about having AI/ML layer, analytics layer, all those things are now in place. And at the back end and the infra side also, there is a migration to cloud which is happening slowly and steadily. Most of applications are now cloud hosted. Also there is a large investment around security, governance, data governance, etc. So host of initiatives, just not about making a nice app, but the entire end-to-end, front-end and back-end and the middle layer in between also.

Arvind Lal — Executive Chairman

And Rishi, this is Dr. Lal here. We were the first people to bring IT into the entire healthcare industry in 1986. So the experience that we have in IT and digitalization nobody else has. So we are going around along very well and I think we are still the best.

Bharath Uppiliappan — Chief Executive Officer

Also the partner ecosystem is largely digitized now and a lot of programs are running on further strengthening those.

Rishi Modi — Marcellus Investment Managers — Analyst

Understood, okay. Also finally, I know I think Om touched upon the challenges of Suburban. If you could get into more depth on that. I think two, three points were mentioned on Suburban. One was getting the partner network economics right and then there was the team settling in. So if you could give more color on that?

Om Prakash Manchanda — Managing Director

I think to my mind, nearly half of the business was out of COVID last year. That is settling, now decline to about 90% decline. I think that is one challenge, which we have to now manage, because that has obviously dropped in the channel, and we have to look at the whole viability angle. Second is we have input — and it’s a changeover from a model run setup to a professional run setup. So I think there are few HR things which are of course behind us. And third is putting this Vidyavihar lab, which is very critical to our success and Shankha mentioned that we are in the process of getting accreditation. As we launch that, this should fall in place. And third is, of course, Mumbai. Having said that is not a very easy market. Otherwise we wouldn’t have done this — we would have done it ourselves. So it’s a highly competitive platform. And I think we’ll just find it out.

Rishi Modi — Marcellus Investment Managers — Analyst

Right, so on Suburban right, you all have some basic radiology in the Suburban centers. So like what’s the plan? Are you’re all planning to continue with the radiology, or — and then maybe scale it up pan India or are you all planning to continue being only a pathologist?

Om Prakash Manchanda — Managing Director

So I think it’s — since you used the term radiology, we don’t do CPM, MR there. It’s mainly X-ray, ultrasound and primarily if I look at they are more basically into the health checkup sort of a concept. I think as a company, we are more pathology, pathology, I think it will be more in terms of building our collection network. That’s the way we have done in LPL, because that really gives you reach and scale. So our focus, essentially is to build the infrastructure in terms of collection network.

Operator

Thank you. We have our next question from the line of Harshita Jain from [Indecipherable] Group. Please go ahead.

Harshita Jain — — Analyst

Hi, good evening, sir in continuation to the last participant so you mentioned the new management is still stabilizing this asset. So just wanted to understand what are your internal expectations from this asset, particularly the Suburban, growth expectations?

Om Prakash Manchanda — Managing Director

So I think our internal expectation is if we can build the Western region for combined business of Dr. Lal PathLabs, Suburban together, that is — that’s how we will define success for ourselves. And when I say that our ability to really get synergies at the back end, so that both sides labs are able to cater to the market. And at the front end, we continue the dual product. So I think I would say Western region business are slowing. That’s our successful will be defined for us.

Harshita Jain — — Analyst

You think this can grow much higher than the market growth, industry growth in coming years?

Om Prakash Manchanda — Managing Director

Can you repeat the question?

Harshita Jain — — Analyst

I’m saying, you think this asset can grow much faster than the industry growth in the coming years?

Om Prakash Manchanda — Managing Director

I think so. Yeah.

Harshita Jain — — Analyst

Okay. The second question is on your — the revenue contribution from the metros and Tier 1. What is it now and what was it three years back? Any color on that?

Om Prakash Manchanda — Managing Director

So let’s say if I take Delhi NCR, three, four years back, it used to contribute nearly about 50% or 55%, now it is down to work with the 36%.

Ved Prakash Goel — Group Chief Financial Officer

35%.

Om Prakash Manchanda — Managing Director

Is that correct?

Ved Prakash Goel — Group Chief Financial Officer

Yeah.

Om Prakash Manchanda — Managing Director

So we are expanding our reach very well outside the NCR. So our dependence on metros over a period of time is reducing.

Harshita Jain — — Analyst

If you even include the Tier 1s also?

Om Prakash Manchanda — Managing Director

I don’t know what you mean by Tier 1, are you talking about mini metros as Tier 1 or How do we define Tier 1s if I could ask?

Harshita Jain — — Analyst

Basically Just wanted to know your contribution from Tier 2 to Tier 6 towns, and not Tier 2, Tier 3 towns, right which is–

Om Prakash Manchanda — Managing Director

Directionally we are all going down the pop strata, for our growth strategy. So whether we go to Tier 3 or Tier 4, idea is to go down the pop strata. Let’s say you are in the South region, you are slightly still fighting the battle out in metros. So we will go to the next layer of towns. In North we are obviously in Tier 3 right now, Tier 3, Tier 4. So I think it’s — I would say, whatever markets we are looking at next pop strata which is down the pop strata.

Harshita Jain — — Analyst

And this SwasthFit so it’s now already 20% of your non-COVID revenues. Where do you think this contribution can move up in the coming quarters since you know you’re seeing change in the customer behavior or consumer behavior? Or what you can do?

Om Prakash Manchanda — Managing Director

I think that’s a brilliant question and I think that’s the overall trend in the industry. I would actually say that it will keep growing. I don’t know what that number is, because if you historically study 15-20 years back even these panels were not there, LFT, KFC etc. And somebody would have talked about these panel as a great story that time. Today now you are bundling these panels calling them bundled packages, right. So I think directionally that’s the way industry has moved from single test to a panels being bundled into a big thing. So directionally. I would say it will keep growing. I don’t know where it will finally land up. And good news is that these are those packages where doctor intervention is relatively lesser than let’s say in an acute testing.

Arvind Lal — Executive Chairman

And actually this is Dr. Lal here. Don’t forget that 65% of the mortality and morbidity in India and elsewhere is due to the non-communicable diseases, and which diseases there are. Those are not going to stop. Diabetes is going to grow, hypertension is going to grow, cancer is definitely growing and the liver disease, kidney disease. So there is — during the COVID there was a lull there because of the COVID, because COVID took center place because of the mortality. But the rest of the things have not disappeared.

Operator

Thank you. We have our next question from the line of Dheeresh Pathak from WhiteOak Capital Management. Please go ahead.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Thank you for the opportunity. The non-COVID non Suburban patients would be 6.7 million right for the quarter?

Om Prakash Manchanda — Managing Director

Non-COVID, non-Suburban, 6.9.

Ved Prakash Goel — Group Chief Financial Officer

7.1.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Would be around 3 lakh right?

Om Prakash Manchanda — Managing Director

What is the — you want exact number or what’s the question behind –?

Dheeresh Pathak — WhiteOak Capital Management — Analyst

No, I basically — what I want. Is that I was looking at you saying that seasonally Q2 has done well. I have a number of based on my math, 6.7 million. So that is just 0.2 million increase in footfalls which is a measure of number of patients ex-COVID, ex-Suburban between Q1 and Q2, which in the pre-COVID time used to be anywhere between 0.4 million to 0.5 million extra patients we would get between Q1 and Q2. So from a footfall point of view, it’s been softer versus what we would see in the pre-COVID time periods.

Om Prakash Manchanda — Managing Director

Between Q1 and —

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Whether these numbers are right, that I’m talking about?

Ved Prakash Goel — Group Chief Financial Officer

For Q2 the volume growth is 3.3%.

Om Prakash Manchanda — Managing Director

No, no, I think his question is the way we are highlighting Q1 to Q2, 6.5% value growth. He is saying volume growth is lower, is that correct?

Ved Prakash Goel — Group Chief Financial Officer

Yeah, volume, yes.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Yes. What will be — if you look at it just in terms of delta between the patient footfall between Q1 and Q2, on an absolute number, it is much lesser versus what you would do in a pre-COVID, So pre-COVID in FY19 between Q1 and Q2, we did about 0.5 million extra patients then in FY20. This is obviously COVID hit in the last quarter, but if you see between Q1 and Q2 that was about 0.4 million. This year, if we take out Suburban. It is only 0.2.

Om Prakash Manchanda — Managing Director

Yeah. So I think you have an observation. I think we — if you don’t mind, we would definitely loved to have an offline conversation. I don’t have readily that data available, so I can’t engage myself deeper into the conversation.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

But is that the right metric, now you are saying looking more at patient footfall. So that is a measure that we should — because more test targeting bundles. So patient footfall also will be an important metric in your mind, or value growth is more important?

Om Prakash Manchanda — Managing Director

No, no. Actually all three I would say. I think that’s a good point you are saying, I would say revenue, then revenue per patient, then number of patients, then I would say, number of tests per patient. I think all the four are important for us to actually see how healthy trends the business is going up.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Okay. And volume I can see — sorry, go ahead, sir.

Om Prakash Manchanda — Managing Director

I said all these four metrics are important. Yeah. But having said that I won’t worry about quarter-to-quarter variation. I’ll tell you reason why. This year let’s say a year in which many dengue incidence is very high, you will certainly see volume shooting up very sharply, because one dengue patient in a week’s time might visit your lab 10 times, you understand what I mean.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Yes.

Om Prakash Manchanda — Managing Director

So in a quarter, if the dengue is not that high and certainly you will see volume drop. So I really won’t worry about one quarter to another quarter. I would see — I would definitely look at this metric over a longer period as to how it’s trending.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Certainly. How would you characterize dengue this quarter versus the past years?

Om Prakash Manchanda — Managing Director

I really won’t have that data. But I think this year, slightly dengue has been little muted and in some places it’s high but it is — so it’s an average thing, I won’t say it’s unusually high.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Okay. And Ved, what was the acquisition-related amortization and what were the Ind AS adjustments?

Ved Prakash Goel — Group Chief Financial Officer

So in this quarter INR12 crores amortization on account of acquisition.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Okay. And what was the Ind AS? Is it INR14 crores Ind AS between the EBITDA and Ind AS adjusted EBITDA.

Ved Prakash Goel — Group Chief Financial Officer

So it is not unusual. It’s in line with the past only, so about 1%, 1.5% kind of yes.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Okay. Yeah, so, it is 2.9% of revenue, it was last quarter, which was INR14 crore in absolute term, which is higher than 1%. I’m assuming, it will be similar in absolute terms versus last quarter, right?

Ved Prakash Goel — Group Chief Financial Officer

Yeah, similar. So there is no change. The only thing Ind AS rental cost is coming down in the form of interest and depreciation. That’s it, in our case.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Okay, when you say 1%. It is higher than 1%. It is INR14 crores, which is 2.7%.

Ved Prakash Goel — Group Chief Financial Officer

I will just check, but it is —

Om Prakash Manchanda — Managing Director

He doesn’t have that figure.

Dheeresh Pathak — WhiteOak Capital Management — Analyst

Okay. I’ll connect offline. Thank you.

Operator

Thank you. We have a next question from the line of Prashant Nair from Ambit Capital. Please go ahead.

Prashant Nair — Ambit Capital — Analyst

Yeah, hi, good evening. Thanks for taking my questions. So first question on tax rate for the full year, will it settle back down to the 25% odd levels that you would normally have or will it stay elevated as it came in the first half?

Ved Prakash Goel — Group Chief Financial Officer

Yes, it will be similar. There is — nothing changes here, in terms of tax.

Prashant Nair — Ambit Capital — Analyst

So similar as the first half of this quarter or similar to what you’ve been doing in the past?

Ved Prakash Goel — Group Chief Financial Officer

Yes, Similar I mean in which first half also is similar. It’s nothing which has changed.

Prashant Nair — Ambit Capital — Analyst

All right. And one question on generally on the growth front, so when we look at industry growth, would it be fair to say that growth that you are doing in the Delhi NCR market where you are leading player and have high market share, is a fair reflection of what the industry would be growing at, or do you think you are still gaining some share in that market as well.

Om Prakash Manchanda — Managing Director

In Delhi NCR?

Prashant Nair — Ambit Capital — Analyst

Yeah, so I mean is that — so for example, my question is if you’re growing say 8%, 10% in Delhi NCR, is that a reflection of what industry growth would be for that market and similar markets, like say larger markets, larger cities or each state has its own dynamics and growth rates could vary?

Om Prakash Manchanda — Managing Director

I think each city has its own dynamics because I think competitive intensity in general I am seeing is high in four or five cities in the country. That’s where the maximum noise is. You go down the pop strata you will not hear some of these names. So I think it’s a city level sort of a thing. And let’s say you all talk about certain pharma companies. We don’t even hear them here in northern part of India. So I think depending on where they are strong, where their infra is strong that’s where they — I would say very strong six cities. But definitely four or five big metros, are where especially online players are more aggressive.

Operator

Thank you. We have a follow-up question from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

For taking my question. Om in the initial comments, you mentioned something about introducing a new suite of tests for pregnant women. I mean if you can probably highlight a little bit more color on that. And what kind of opportunity do we see this space?

Om Prakash Manchanda — Managing Director

So I think that Bharath mentioned about that. Our view is that industry is getting sort of vertically split. You have bundled packages and then you have all these high-end packages right. Now that’s where the segmentation would come in, since all of you cover pharma space and you have things like derma division, you have gynae, you have things like that. So similarly like we have launched autoimmunity and this kind of segmentation, segment focus would come. Dr. Lal talked about histopathology. So this reproductive diagnostics is one such promising segment in the industry. And that’s what Bharath meant by that. So it’s not about just pregnancy alone. And I would say we are all life stage testing starting with puberty and motherhood and things like that. So I would club all that into a reproductive diagnostics.

Nitin Agarwal — DAM Capital — Analyst

Okay. Thanks. And just one sort of separate question, when you alluded earlier point about expansion into sort of smaller towns and your comment that probably that growth comes at a slightly lower margin. So just picking your thought on it, is something like an absolute EBITDA per patient, is that a right metric to look at this business, when you are overall — is that a metric that you track internally also?

Om Prakash Manchanda — Managing Director

I think what I meant by that was basically it’s a lower utilization. You go down the towns, it’s affected by many factors like ability to pay or for prescription habits of doctors, it’s not like you somebody would go for a 2000, 3000 [Indecipherable].

Operator

Sir, I am sorry I am not able to hear you clearly.

Om Prakash Manchanda — Managing Director

Okay, you hear me now?

Operator

Yes, sir.

Om Prakash Manchanda — Managing Director

What I meant was that ability to pay is lower down the Tier. And similarly patient behavior is very different than, let’s say, metro cities and the profile of testing is also very different, because they are more routine in nature, which are low price and compared to that, it’s sometimes very difficult to get pathologists. Some of the times we end up being slightly higher salary in smaller towns than even metros. So all-in-all, put together [Indecipherable]

Operator

Sir, I’m sorry. Your voice is not clear, sir.

Om Prakash Manchanda — Managing Director

I don’t know whether I can speak even louder than this. So I said it’s also revenue trajectory also doesn’t pick up that sharply and thereby overall net impact is margins are slightly depressed than what you realize in metros. The scale is also very high in metros.

Arvind Lal — Executive Chairman

Also, this is Dr. Lal here, also when you go away from the metros, you go into the other towns, smaller towns, you are faced with lack of electricity, lack of potable water. And so you have got to spend money on other things including electricity, you got to pay much more and sometimes we have even had to carry RO water all the way from Delhi to smaller towns. So nothing goes cheap as you go actually deeper down the pop strata cost of servicing that patient actually increases.

Nitin Agarwal — DAM Capital — Analyst

I mean just a link pointer is as a proportion as grow more of a volume growth is coming from the smaller areas, does that, on a weighted average basis create pressure on our EBITDA margins while absolute EBITDA may come through. But percent perspective it may just create problems or rather pressure on EBITDA margins?

Om Prakash Manchanda — Managing Director

So I think there are factors which are favorable. I think that is where the whole management lies, are of management lies. To the best of our ability we are trying to see how we don’t dilute the margins. I think that’s where you’re seeing the numbers, but we are cautious also in our commentary, because as you go down the pop strata. I think it’s natural to believe that margins won’t go up, but we are trying to see how we keep on sustaining our correct level.

Operator

Thank you, ladies and gentlemen, that was the last question for today. I now hand over the call to management for closing comments. Over to you, sir.

Bharath Uppiliappan — Chief Executive Officer

Thank you everyone for being with us on this call today. I wish all of you remain safe and healthy. Looking forward to meet you next quarter conference call. Till then, thank you and all the best. I would now request the moderator to close the call. Thank you.

Operator

[Operator Closing Remarks]