Krsnaa Diagnostics Ltd (KRSNAA) Q2 FY23 Earnings Concall Transcript

Krsnaa Diagnostics Ltd (NSE:KRSNAA) Q2 FY23 Earnings Concall dated Nov. 10, 2022

Corporate Participants:

Yash Prithviraj Mutha C.A. — Whole-Time Director

Pawan Daga C.A. — Chief Financial Officer

Rajendra Khivraj Mutha — Executive Chairman

Analysts:

Anish Kara — VT Capital — Analyst

Adit Kanko — InCred BMS — Analyst

Nitin Agarwal — DAM Capital — Analyst

Sasha Desai — Sonic Capital — Analyst

Jane Shah — JM Financial — Analyst

Rishab Tiwari — ElioCapital Advisors — Analyst

Ravin Shah — Sumika Capital — Analyst

RanoDiepSin — Mass Capital — Analyst

Yogansh Jeswani — Methanex — Analyst

Sanjay Lakala — JM Financial — Analyst

Aditi — Securities Investment Management — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Krsnaa Diagnostics Limited Q2 FY2023 and 1H FY2023 Earnings Conference Call hosted by Equirus Securities. We have with us from the management, Mr. Rajendra Mutha, Chairman and Whole-Time Director; Mr. Yash Mutha, Whole Time Director; and Mr. Pawan Daga, Chief Financial Officer. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing and then 0 on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Yash Mutha. Thank you, and over to you, sir.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Good afternoon, everyone, and welcome to Q2 FY 2022 Results Conference Call of Customer Diagnostics Limited. And thank you, everyone, for joining us today. We have already circulated our earnings presentation, which is available on our website as well as the stock exchange website. I hope you all have had the opportunity to go through the presentation. From an industry perspective, the need for high-quality and affordable diagnostic services are clearly visible as it is an integral part of our health care industry, which plays an imperative role in diagnosis, assessing disease and plays a major role in the treatment management and even prevention of disease.

Today, the Indian diagnostics market is valued at $10 billion and projected to a CAGR growth of 14% in the next 5 years. The key fundamental drivers of the diagnostic industry, such as large population of 1.3 billion people, rising per capita income, allowing increased affordability and need to assess better health care services. emergence of lifestyle diseases and increased awareness of preventive well pickups. Overall, looking at India’s demographics, there is a vast and underpenetrated market of diagnostic services, which offers an immense opportunity to both organize and give unorganized players. Furthermore, recognizing the importance of making diagnostic services affordable the government and various states are continuously evaluating public-private partnerships as a viable and best alternative to provide high-quality diagnostic services at affordable rates to the market.

Today, Vistra Diagnostics is a leader in the public private partnership diagnostic space, and we’re proud to have expanded our presence in the last five years. making high-quality diagnostic services affordable and available to the remotest corners in the country. We are well positioned to serve our patients and we see tremendous runway ahead to build upon our solid foundation. With this backdrop, I’m pleased to inform that in line of setting up new centers in the state of Himachal Pradesh, the company has operationalized angles out of the 24 and 126 collection centers out of the 190. In the state of Maharashtra, the company has fully operationalized its diagnostic centers at KD Samara hospital and retest Center Siene, Mumbai and at FunditunMalvia Shatabdi Hospice in Goondiumbai.

In the state of Funda, as per the agreement with the government for procurement, operations and maintenance of 25 city standards, 6 new MRI machines, 30 pathological labs one refer laboratory and 95 collection centers across the state, the company has operationalized diagnostic centers at 2 more locations that is Mansa and cremated. With this, — the company has now operationalized 20 CT scanners, 5 MRI machines, 18 pathology labs, including on retalLabs and 95 collection centers in the state of Punjab, which amounts to completion of almost 88% of the project as on date. We are progressively expanding our presence. And during the quarter, we’ve added 7 radiology 50 telereporting, 20 pathology labs and 216 collection centers.

As of today, Kris is a leading PPP diagnostic player with 120 log centers, 1,408 Intellibot centers processing labs and 677 pathology collection centers. The implementation of the remaining center is on track. However, there have been some regulatory and procedural delays in operationalizing these centers. We expect all the centers mentioned in the RSV to be outlied by the end of the third quarter of the current fiscal. Coming to the financial performance during the quarter. During the second quarter, Christa registered core revenues of INR123 crores, a growth of 19% year-on-year despite of the high base in Q2 FY 2022 due to the second wave of and 9% on a sequential basis. The core rental revenues declined from INR5 crores in Q2 FY 2022 to INR0.3 crores in Q2 FY 2023. Krishna continues to grow its core revenues with a focused approach.

Our EBITDA stood at INR131 crores, with margins of 25.2% and net profit of INR15 crores with margins of 5%. Compared to previous quarters, we saw an impact on margins. Our margins for this quarter have stabilized with increased contribution from newly launched centers and, therefore, giving us confidence. Net margins are expected to improve in the upcoming quarters with a message of male loan centers. On the B2C side of the business, we are pleased to announce that we have decided to enter these markets through our franchisee model and plan to launch 600 collection centers across India, providing services at attractive rates. The company will strengthen its footprint across Maharashtra, Himachal Pradesh, Punjab, is Bingo and Rajasthan in a phased manner with a spread across metros, Tier 2 and Tier 3 cities.

The centers will be equipped to offer specialized services in genetics, genomics and molecular diagnostics, along with rooting investigations of biochemistry, serology and histopathology. The centers will offer dedicated services to women’s health, including hot loans PCOD as well as diabetes monitoring, cardiac health and cancer care. With this expansion, the company will be providing premium quality diagnostic services to patients which will be accessible to them at highly attractive rates. On the technology front, we’re also implementing the latest CRM from one of the leading vendors, which will help us create efficient operated business processes to increase productivity, provide the team with relevant data points to enhance customer engagement with an overall aim to improve customer experience and satisfaction.

Looking ahead, we are focused on timely implementation of a project, which will augment step up growth, coupled with maturity — maturing of our recently launched centers. Further expansion of the B2C businesses. With all these initiatives underway, we are confident that Krishna is well positioned to meet its annual targets and remain one of the fastest-growing diagnostic chains in India. I will now hand over the call to Mr. Pawan Daga, our Chief Financial Officer, to discuss the financial performance.

Pawan Daga C.A. — Chief Financial Officer

Yes. Thank you, Yash. A very good afternoon to all the at I will present a financial highlight for the second quarter and half year ended September 2022. In the second quarter, — the company registered total revenue from operation of INR123 crores, an increase of 13.6% on a year-on-year basis. from INR18 crores and 8.9% on basis from INR113 crores in Q1 FY 2023. The growth is led by our core business, comprising of readily and Pathology, which registered revenue growth of 18.7%. — year-on-year and 8.9% on a sequential basis. The COVID revenue declined by 94% from INR5 crores in Q2 FY 2022, INR in Q2 FY2023. Operating EBITDA for the quarter stood at INR31 crores an increase of 9.5% compared to the previous quarter. EBITDA margins were 25.2% in Q2 FY2020.

In spite of a new center being launched, the profitability margin remained stable quarter-on-quarter. The margin are expected to improve in the upcoming quarters. with the maturity of the newly launched center. Profit after tax for Q2 FY2023 was INR15 crores, an increase of 24% on a year-on-year basis from INR13 crores and 7.7% on a sequential basis from INR14 crores in Q1 FY2023. For the quarter, PAT margins were 12.5%. In the half year, the company registered total revenue from operations of INR236 crores — our core business comprising of Radiology and Pathology, which adjusted revenue of INR235 crores, a growth of 14.7% year-on-year basis. The COVID revenue declined by 98% from INR35 crores in H1 FY2020 to INR0.6 crores in H1 FY2023. Operating EBITDA for H1 FY2023 stood at INR59 crores, with a margin of 25.1% from the quarter. and profit after tax for H1 FY2023 stood at INR30 crores with a margin of 12.5% for the quarter. We can now open the floor for question-and-answer session.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Anish Kara from VT Capital. Please go ahead. Yes.

Anish Kara — VT Capital — Analyst

Hello, [Indecipherable] so my first question is on the Rajasthan tender. So there was a very large standard over there, right? So what exactly happened over there? Can you just shed some light on that? — road tender what are participant there. artisanal participant Colonsay could supply Carapa [Indecipherable] can government Sisco concession at lateral. This copies your third part Unencumbered what I — so team would make one a single data single-party tender open — so government is situation there, tenders or Waalender tender a single party to see tender open. I think Kalaote tender keep them better after taking it or the end of poor — maybe subsea December, but in that end of open [Indecipherable].

Rajendra Khivraj Mutha — Executive Chairman

So, 15% where the tender will be open? And then are we expecting a lot of competition here according to you?

Anish Kara — VT Capital — Analyst

[Indecipherable] Moratoria faster care documentation or commercial Joistamara [Indecipherable], user single party tender on in Sapa. So still government of tender cancer care or not tender oil Tender Aurrion Barreto, Grier Baradar was 15 days for Gomatam [Indecipherable] meeting, Kibarinder. Bradespar [Indecipherable] compute that.

Rajendra Khivraj Mutha — Executive Chairman

We’ll have visibility on the case correct. Also, if I look at your revenue line item on the PL — sorry, not the revenue, the fees to hospital is naturally amount it is down quarter-on-quarter. So was this the reason for that?

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. The reason why the 3 hospital is down because that is linked to the Rajasthan earlier project that we were working on, since the project has now been stopped. — from August onwards, that is why you see a decline in the revenue or the fee to the hospital paid as.

Rajendra Khivraj Mutha — Executive Chairman

Okay. Got it. And your receivables that were at 47% in FY 2022 and for the first half, they’ve gone up significantly. So is that something that we see or we’ve seen over the years that the second half is relatively better?

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. So as we’ve shown in the presentation as well, Basically, if you see from a government receivables, there is a certain level of seasonality wherein Q2, Q3 is where the receivables get stretched, but we always — like we’ve been communicating, we try to keep it within 90 days. And even for this half year or you will see that we have kept it about around 87 86 state. And as it comes to the year-end and the government is also — or the authorities are also basically they have to pay the use because the next ad budgets get impacted. So — we are confident and hoping to see it’s coming down to the similar number — receivable days that we saw during the March year-end. So these are seasonal — this has been a regular pattern if you see the year-on-year similar trains. In fact, this quarter has been better than compared to all the previous trends that we have seen and witnessed.

Rajendra Khivraj Mutha — Executive Chairman

All right. I’ll get back in the queue. Thank you.

Operator

Thank you. Our next question is from the line of Adit Kanko from InCred BMS. Please go ahead.

Adit Kanko — InCred BMS — Analyst

Yeah, Hi Thanks for the opportunity. Sir, in the balance sheet, I’m just noticing there is this line item called other financial assets. INR118 crores in H1 FY 2023, which was a negligible number last year. Could you throw some light as to what this other financial asset is?

Pawan Daga C.A. — Chief Financial Officer

So basically, the other financial assets include the fixed deposit of a long-term ten-year more than oneyear.

Adit Kanko — InCred BMS — Analyst

Okay. So you have — we are yet to execute the tender. So you have to put up in deposits with the government. Is that what is it?

Pawan Daga C.A. — Chief Financial Officer

Some deposits are of our internal equal and partially some fixed deposits of IP also, which we are utilizing the funds for our projects — upcoming projects and the project caremark [Indecipherable].

Adit Kanko — InCred BMS — Analyst

Okay. But I’m slightly confused as to why that would be classified as other financial assets generally, wouldn’t fix deposit effective come in the bank balance of cash and cash approval. Normally, we don’t do it that way.

Pawan Daga C.A. — Chief Financial Officer

Yes. So EUR10 of fixed deposit is more than one year will be classified as [Indecipherable].

Adit Kanko — InCred BMS — Analyst

Got it. No, I understand Thank you so much for that. And sir, secondly, on the Rajasthan tender, as you said, there was only one proper bidder and therefore, the government will to reopen the tender to see if there are other parties that expressed interest. Just try and walk us through what is the total size of the tender? Is it the government is willing to give you the entire tender does your balance sheet and funding allow you to initiate tender as big as Rajasthan tender?

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. So basically, the Rajasthan the Rajasthan tender, if you see, it’s one of the tenders, which has almost a large network of ubiotmodel, almost 3,000 collection centers and a bigger share of labs. So the government is also keen to have serious players, and that is the reason why when they invited bidders to core, we saw certain bidders with with certain terms which are not qualified, and hence, they can see the tender, which they will come up again. So of course, this is a good opportunity. I think in terms of just top line, it could be revenue-wise contribution, it could be in the range of about INR150 crores to INR200 crores, which for a mature level of this project can be expected?

Adit Kanko — InCred BMS — Analyst

Right. And as a company, let’s say, if we win the majority of the tender, let’s say we get the L1 in the tender. What is the capital outlay that we’ll have to put.

Yash Prithviraj Mutha C.A. — Whole-Time Director

So the capital outlay, again will be subjected to what is the requirement that the government is putting up, how many labs they want to establish. But unlike our redo tenders since Patwa required, it’s likely an asset-light model. So we — I don’t think that there will be significant investment required for this kind of potential. But where the actual other will only be — we can comment once we see what are the tender requirements? And accordingly, we’ll then update.

Adit Kanko — InCred BMS — Analyst

Understood. So basically, if I understand this correctly, the majority of your larger sand tender is for pathology. It’s not for radiology.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes, it is for at [Indecipherable].

Anish Kara — VT Capital — Analyst

Correct.

Adit Kanko — InCred BMS — Analyst

Okay. And sir, lastly, just one request. I was looking at the presentation that you guys have flowed. It’s very, very informative. But there are certain operating metrics like average revenue per patient and then a total number of patients, which you give on Slide 37, 38 on your deck. So these numbers are given only up to FY 2022 and not for first half of FY 2023. So just from a good practice standpoint, it would be very appreciated if the companies which the company would add first half and quarterly numbers to the operating metrics like number of patients, average revenue per patient, etc, etc, and all these open.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes, we take a suggestion. I think we’ll try to implement on that. You might accordingly ensure that the presentation has all these elements covered.

Adit Kanko — InCred BMS — Analyst

Right. So, sir, just for now because I don’t have that data with me. Can you — do you have the number ready with you as to what is the average revenue per patient in first half FY 2023? And also, what is the revenue from tele reporting, in first half of FY 2020.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Points, I don’t have the numbers on the top of my head, but the numbers in terms of the realization have been in line. So in fact, both tele reporting revenue per patient have also improved and as well as the average revenue per patient. But I know we can provide the data to you separately after this call. Paal, can you just take a note of this, please?

Adit Kanko — InCred BMS — Analyst

Sure, yes. And as I said, it would be great if you guys just add the quarterly data, along with the annual data, that will be fantastic. Thank you so much for taking the question I wish you all the best.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Thank you so much.

Operator

The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Is it better now?

Operator

Yes.

Nitin Agarwal — DAM Capital — Analyst

So, my question is on, if you look at the Q-o-Q revenue growth, we’re looking at about a INR10 crore delta. I’m not looking why looking at Q3 revenue growth, where COVID was for a small component of business. Now we — in the presentation, we talked about that a lot of our Punjab contract has got operationalized over the last six-odd months. So why is the impact — I mean, is the impact of the Punjab revenues Bajaj project operation already flat in the numbers? And if it is not, by when will start to reflect through.

Yash Prithviraj Mutha C.A. — Whole-Time Director

So, Punjab has already started contributing revenues to the overall business. In this quarter, we’ve seen about INR10 crores of revenue coming from the Punjab project. which has been increasing steadily. And I think now with these centers getting live more and more contribution will be seen from the Punjab project as well.

Nitin Agarwal — DAM Capital — Analyst

So what is — for example, of INR10 crores that we’ve done in this quarter, what is — what percentage of the peak potential of the Punjab contract will that represent?

Yash Prithviraj Mutha C.A. — Whole-Time Director

As of now, I think it will just be about close to 15-odd percent. There’s a significant opportunity as the centers get live and the true potential of Punjab, like we’ve been maintaining earlier as well, I think it is yet to be tapped into. So there’s a significant opportunity to grow from there than it has been ramping up month-on-month, quarter-on-quarter as we’ve seen the trend.

Nitin Agarwal — DAM Capital — Analyst

From your past experience, typically, it will take a couple of quarters before it starts to meaningfully scale when the project gets meaningful.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. From Q4 onwards, we will see Punjab improving the contribution. As you said, Panjab, compared to all the past experience in terms of deploying these centers and the project Panda had its own set of challenges in terms of regulatory approvals, along with the change of government, which is what resulted into a bit slow ramp-up compared to all our past experience. Having said that, now with the centers getting operationalized pushing the peril and all our energy and resources to ensure that the ramp-up happens and we are able to start getting contribution from the Punjab project.

Nitin Agarwal — DAM Capital — Analyst

And yes, when we sort of think about our business from here on, — so obviously, Punjab project is going to scale up. What are the other projects which is already run that have — that will meaningfully contribute from here over the next few quarters?

Yash Prithviraj Mutha C.A. — Whole-Time Director

So along with Punjab, we have machine the Punjab project, which we have, again, which has been implemented, then labs have been implemented. Along with that, we had Mumbai region, where we had some centers in the Mumbai region, which are coming up. So these are all the centers are — which we believe as they start maturing, they will start contributing to the existing revenue base that we have. Along with — then there are some new projects which are currently in the pipeline. — including Delhi, we have won a project then Tripura tater protein. So these are additional projects that we won, which will also continue to add to the existing revenue base.

Nitin Agarwal — DAM Capital — Analyst

Okay. And if I was the last one of the contracts you already won, right? If you were to assess like the peak quarterly revenue potential of these contracts, what kind of a number — can you — in a ballpark basis be looking at, say, maybe a year, 1.5 years by when all of these contracts that you run begin to get close to start to get at optimal levels?

Yash Prithviraj Mutha C.A. — Whole-Time Director

So all these contracts put together with Punjab, Bimal, I think on a mature annualized basis, like you said, it should be close to INR100 crores annualized revenue.

Nitin Agarwal — DAM Capital — Analyst

Each of these.

Yash Prithviraj Mutha C.A. — Whole-Time Director

No, no, all put together. So Panjaimashal and Maharashtra, if you take all of these, they would be in the range of about INR200 crores.

Nitin Agarwal — DAM Capital — Analyst

Annualized

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes, annualized.

Nitin Agarwal — DAM Capital — Analyst

So INR25 crores a quarter.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes.

Nitin Agarwal — DAM Capital — Analyst

Okay. Okay. That seems a little low, but that’s fine.

Operator

Yes, thank you. The next question is from the line of Sasha Desai from Sonic Capital. Please go ahead. Sorry, Shashi. — your audios breaking, not able to hear you clearly.

Sasha Desai — Sonic Capital — Analyst

Am I audible now?

Operator

Yes, better now.

Sasha Desai — Sonic Capital — Analyst

So, as I see, margins are affected by two things. One is employee expense, which is rising from last last year quarter 2. It has been steadily rising as a percentage of revenue. Secondly, other expenses, a major part of other exchanges reporting charges. So, these two expenses have risen a lot. So what’s the reason for that?

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. So I think that’s good obsession. Basically, the reason for rising manpower cost is linked to the project of Punjab anaciPadesh where significant resources have been deployed — just to give you a perspective, there are 25 cities can MRI number of labs coming up fully in Masato we have deployed manpower whilst the Mancos has been added, how would the revenue has not been commensurate to the extent of demand for because it’s a ramp-up, which is currently going on. So I think beyond this, there won’t be a significant addition to the manpower once the projects are now operationalized — and as the revenue starts increasing, you will see these costs getting stabilized are probably — they will come back to the standard level that we expect as a percentage of manpower to the revenues.

With regards to the reporting charges, again, here in Punjab, we have to appoint a radiator each of the centers. And that is the reason why — because the volumes are low, and we are not totally able to leverage the tele reporting, — that is why the doctors cost or reporting costs are high, but we are working where the other volumes could also be done to the doctors as a result of which you’ll see the doctors the reporting charges also coming down as the volumes go up in the subsequent quarters.

Sasha Desai — Sonic Capital — Analyst

Okay. Secondly, as for my understanding, earlier Panda was INR100 crore project and rest of all why now Panama and Maharashtra, we contributing only 10 India was INR20 to INR100 crores earlier.

Yash Prithviraj Mutha C.A. — Whole-Time Director

So the reason is, as we have seen today, there have been these defining challenges that we see, whilst on an annualized revenue basis, we would certainly have higher aspirations — but given that we are seeing, we just want to calibrate and see how we take it Aspiration-wise, or from — opportunal wise, of course, they will be providing much higher value what we — but currently, the way the state level decent dynamics are looking out, we just want to be cautious in terms of the approach. And of course, come back with much more update probably by Q3, in all the centers get operationalized. Like some of the centers we are seeing, there are some operational challenges like other areas, electricity is not getting supplied. So we just want to get the centers operationalized and then we’ll come with probably a more guidance in terms of how these projects will contribute to the revenues?

Sasha Desai — Sonic Capital — Analyst

Okay, sir. And with this pickup, are we in line to match a target of 15% growth this year, which is INR300 crores in the next half of the year?

Yash Prithviraj Mutha C.A. — Whole-Time Director

Sorry, could you repeat that question?

Sasha Desai — Sonic Capital — Analyst

So, we have the operational revenues, right? So are we in line to make a 25% growth this year, which is around INR300 crores in the next half of the year.

Yash Prithviraj Mutha C.A. — Whole-Time Director

So yes, I think you see from guidance wise, we are working towards it, where we will be able to — working towards achieving the target of having 20%, 25% growth. As these projects are answered, we are confident we should be able to achieve it.

Sasha Desai — Sonic Capital — Analyst

Okay thank you. And just one request. As earlier participant mentioned volume data is leading. So if you can grow volume and operational data, it could be helpful. Thank you.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes.

Operator

Next question is from the line of Jane Shah from JM Financial. Please go ahead.

Jane Shah — JM Financial — Analyst

Hi thank you for the opportunity. My question is on the gross margin. There has been some impact on the gross margin this quarter. So — if you can throw some color on is it the mix or what is it? Is it temporary? And how should we look at it going forward?

Yash Prithviraj Mutha C.A. — Whole-Time Director

Pawan, would you want to take that question?

Pawan Daga C.A. — Chief Financial Officer

Yes, Sure. So the gross margin slightly impacted because of the low volume in the news and operationalized center where we see our consumption cost is at a higher side. And the reason — this is the reason only where we see impact on the gross margin. But going forward, we will see the improvement in the gross margin as well as the stability in the gross market Okay. And on the — if you look at the growth of our Punjab contract, it’s just like around 4%, 3%, 4%. So what is impacting this growth in the base business? And how should we even look at the lumpiness in quarter-over-quarter. So that 2Q is supposed to be a very good quarter and still have muted growth. So how should we look at it?

Yash Prithviraj Mutha C.A. — Whole-Time Director

So, I think from an overall business perspective, as you said, our — today, the entire energy and focus is on ramping up the project of Punjab, these are large projects, which you want to get of life so that they get stabilized. Hence, there has been slight — the entire team is working on it. But I think as Punjab Himax will get operationalized, we will be focusing back on our existing centers, which are running on its own steel and this also start contributing more and more to the business. So I think quarter-wise, Q3, Q4 onwards, we’ll have some more perspective to share in terms of how the quarterly numbers will look like once all these projects get operationalized?

Jane Shah — JM Financial — Analyst

And are we still firm on our FY 2024 guidance because — and if you can just refresh, so our RHP tenders, as you mentioned, will contribute around INR100-odd crores. And Maharashtra, if I’m not wrong, last quarter, you mentioned INR65 crores, INR70 crores. And other tenders would contribute INR100 crores. Is that understanding correct?

Pawan Daga C.A. — Chief Financial Officer

Yes.

Jane Shah — JM Financial — Analyst

So — and base business, we are not seeing much traction. So then would that mean that we are — would be lowering our guidance a bit? Or maybe this could get delayed by like six months or so?

Yash Prithviraj Mutha C.A. — Whole-Time Director

I think from a guidance perspective, we are equally and very aggressively working on achieving the target that we have set out for ourselves. The only challenge that we are seeing is in terms of certain delays. And I think that is why I would want to calibrate and come back. I think from our perspective, given that various of these projects that are currently in the implementation — we believe that, hopefully, by end of next quarter, we’ll have some more realistic guidance to provide, which basically — though we are committed to achieving those targets of doubling profit as well as in terms of the revenue that we had mentioned in the previous quarter. So we are looking at it as is. And if you see the projects that we have in hand, some of these projects like large projects, which include Maharashtra the main produce the entire state. So I think that gives us confidence that we will be able to achieve this target.

Jane Shah — JM Financial — Analyst

Sure. That’s helpful. And one last question, if I may please squeeze in. What’s your exact plan on the B2C front. So we are going to operationalize around 600 — roll out 600 centers. So what is the time line for that? And how much contribution are we really expecting

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. So for our B2C segment, though we are late in the sense from a market perspective, but what we’ve done is we studied what are the current trends and come up with a unique model which benefits the so-called Europe business asset. And have we faced initial successes. As of date, we have almost close to 100 such touch points, including Maharashtra, where we have these what we call as Krishna Business Associates and the B2B touch points. And we are planning to do in a phased manner. So we are launching this in Panda very soon. I think we and the team is working on where they will be signing such agreements very soon. Having said that, but initially, it will be a bit slower amp because we really want to ensure that the model that we are coming into the market is strong enough, stable enough. — and then there will be a step type in terms of just basically replicating and scaling the model.

So we are expecting by end of Q4, there will be a gradual growth in terms of the numbers. And then from the next fiscal year, as one for the systems, the integration everything gets aligned, we should start seeing a spike in terms of getting this traction in terms of having more touch points and numbers getting added quarter-on-quarter. From a revenue wise also, I think we are seeing some good contribution coming up with about these 20-odd centers contributing to almost INR20 lakhs from the initial month itself. So we are seeing that as these centers start maturing, then to further add to the revenue base?

Jane Shah — JM Financial — Analyst

Sure. That’s helpful. If I have any other questions, I’ll get back in the queue. Thank you.

Operator

Next question is from the line of Rishab Tiwari from ElioCapital Advisors. Please go ahead.

Rishab Tiwari — ElioCapital Advisors — Analyst

Hi thanks for the opportunity. My question is regarding the material cost — so the material cost has gone up from 10.5% to 14% this quarter. And then — just wanted to know the reason of such a significant increase. And related question, is it related to change in the business mix as in the revenue mix of radiology, technology and tele reporting, if you could see if you have the numbers at the top of the [Indecipherable].

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. I think one of the key reasons for increase in the continuing cost is, of course, because of the pathology business rising there again, because as we mine ramp up, there are a lot of controls and calibrations to be done, which requires in the initial phase these testing have to be carried out, which adds to the consumption cost. As the volumes increase, you’ll see the consumption cost coming down and gradually stabilizing at the levels that we are using. Is this a matter of the ramp-up currently going on where merchants have to be tested, calibrated periodically to process as the volumes start kicking in?

Rishab Tiwari — ElioCapital Advisors — Analyst

We have the number down to the number at least ballpark, what is the technology revenue mix contribution this quarter. Last quarter, it was 3%. — has been significantly.

Yash Prithviraj Mutha C.A. — Whole-Time Director

I don’t have the numbers with me. Pawan, maybe to answer this question.

Pawan Daga C.A. — Chief Financial Officer

This is pathology contribution is 32% in this quarter.

Rishab Tiwari — ElioCapital Advisors — Analyst

Okay. And the tender reporting or radiology?

Pawan Daga C.A. — Chief Financial Officer

Tele reporting put in the range of 10% only contributed. That’s already what we said [Indecipherable].

Operator

Thank you. Next question is from the line of Ravin Shah from Sumika Capital. Please go ahead.

Ravin Shah — Sumika Capital — Analyst

[Technical Issues] Yeah thats my question-and-answer thanks.

Operator

Thank you. Next question is from the line of RanoDiepSin from Mass Capital. Please go ahead.

RanoDiepSin — Mass Capital — Analyst

Yeah, Thank you for the opportunity. Can you share some thoughts about the retail game plan, especially with respect to the franchise model? And what kind of EBITDA margins can we expect? Will it be marginally different from what we have been talking in our PPP centers?

Yash Prithviraj Mutha C.A. — Whole-Time Director

So the frontage model that we have conceptualized as I said, we — both from a pricing perspective, it’s a negative pricing compared to the market rates are highly competitive. And yet at the same time, given that there’s no significant investment to be made by Krishna. So most of the investment will be done by the franchisee, which is not a significant investment for them. The rest of the support comes from question terms of branding collateral in the system. With all these inputs, I think from a margin perspective, they will be having the same margin that we see from a center, which will be in the range of about 40% EBITDA margin is what we’re expecting from these franchise centers or the collection center.

RanoDiepSin — Mass Capital — Analyst

Okay. Okay. So good to hear that. My second question, any specific reason in terms of choosing the B2C foray, especially with the 5 states that you have mentioned in 1 and Phase II I would love to understand your thought process, especially why not we are opting for Tamilnadu and Kerala, which has the highest share of elderly citizens as per the elderly India 2021 report. So your thoughts on that?

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. So if you see, currently, Krishna has a larger footprint on the PPP side. And what we try to do is you already have a network of CT-MRI and pathology centers in the states like Maharashtra, made as well as Punjab. So the thought cases was that since we have a network of these centers and by establishing these franchisees centers will be state, we will be able to leverage the network in a much more impactful manner wherein patients, those who are not with a sense that the samples could be collected and processed at the nearest lab that we already have. And at the same time, even get patients who are coming for faster, maybe even also if they need a Ratoservices, they can be directed to our centers. So this is why we chose these existing states where we have a good footprint or network cost interest and trying to leverage them. Of course, as the model starts expanding, then you could look into other states where there is a need — but as a long, given that we want to have a very impact on to process in terms of the building statement because of leveraging our existing footprint in these states and then launching the B2C network.

RanoDiepSin — Mass Capital — Analyst

All right. Fair enough. And if I may just ask one question that I had, like an update, did we get on the tax issue that had come back like a couple of months back? So on the taxation, like we communicated as well in the earnings report. We are currently cooperating with the authorities. I think a significant part of the — in terms of the documentation or [Indecipherable].

Yash Prithviraj Mutha C.A. — Whole-Time Director

Information that the requested has been provided. We are also equally waiting to see the outcome of their assessment, and we still keep obviously holders informed about as and when we get in such kind of information from the active — as of now, no demand or claim has been made on the company by the income tax authorities. All right. next Thank you

Operator

Thank you. The next question is from the line of Yogansh Jeswani from Methanex. Please go ahead.

Yogansh Jeswani — Methanex — Analyst

Just one question on your — basically, the model in terms of I think in some states, we have a restriction on marketing and reaching also customers — so maybe in my model, how will we then grow if we are not able to market customer.

Anish Kara — VT Capital — Analyst

So there is

Jane Shah — JM Financial — Analyst

Sorry, go ahead.

Yogansh Jeswani — Methanex — Analyst

Just one more, one more point that I would like to add to this. So I think again, where we have a ritual reaching out to customers. And today, the conversation mention that the B2C segment, we will start with states like Ananda. So with such conditions, how do we then as the B2C business in a market

Yash Prithviraj Mutha C.A. — Whole-Time Director

Basically, there is no such restriction in terms of marketing our efforts. I think the — what the government tenders normally split is that — if there’s a government patient, we need to give them new service, what is stipulated in the tenders Government doesn’t discriminate between a private patient and a omepatient, — but because these are under the PPP, they expect that, especially for those people who don’t have access or the poor people and people from interfamily they get the due treatment and service. In fact, all the states that we are present, we have equal share of people coming from the government patients as well as private walk-ins. So I don’t think that there’s any restriction for us to leverage. In fact, the government is more happy to and more people even the services because that is what they intend to create access to quality and affordable health care to the market.

Yogansh Jeswani — Methanex — Analyst

Okay. So sir, I was under the impression of at least my understanding was that in a couple of states, you are allowed to put out banners or holdings or such things about operational diagnostic for getting outside patients outside the hospital. So is that understanding along

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes, we are. So even if you see Punjab, like you mentioned, Panda have huge holdings that are being put out outside our centers. Other words, how would people know that drones launched such tenants. In fact, if I give you an example like a the thing that they want to do a joint campaign with us to promote the services so that more and more people get to that services are being made available for the market.

Yogansh Jeswani — Methanex — Analyst

Okay. Sir, currently, say, for example, if I have to talk about Himachal and Panda, how much of your footfall is coming in from outside customers? And how much is it from the — within the government hospitals?

Yash Prithviraj Mutha C.A. — Whole-Time Director

So currently, in

Yogansh Jeswani — Methanex — Analyst

Oil

Adit Kanko — InCred BMS — Analyst

Sorry?

Yogansh Jeswani — Methanex — Analyst

We don’t have the exact number will adjust ballpark figure will be

Yash Prithviraj Mutha C.A. — Whole-Time Director

So currently, if you see today, in Punjab and marshal we almost have to the extent of 50% of government relations and 50% of private markets.

Adit Kanko — InCred BMS — Analyst

Okay.

Yash Prithviraj Mutha C.A. — Whole-Time Director

So like the Punjab rates are highly disruptive. So we have more and more patients coming. As they know that these are the services, they come in MEBservices. And likewise, the same trend has been seen in the mace.

Yogansh Jeswani — Methanex — Analyst

Understood. Just one question I am not asking, sir. Sir, if we look at your slide in terms of average revenue per patient. So I think we are back — going forward, do we expect some growth coming in from higher average revenue side? Or will it be more centers and volume given the kind of tenders that you have done, do you see this number also increase at PS by how much?

Yash Prithviraj Mutha C.A. — Whole-Time Director

So the average revenue that you see currently, these are at the stable level. I mean, if you see on a half year comparison with the previous year, there was a combination of a lot of focus and — but these are the stable level of average revenue that we expect, there will be a significant jump in the site unless there’s a new tender, which is one at differential prices. I think these are the stable revenues that we expect to continue going forward. However, as and when the mix of less a patient or the test many changes, there might be some effect, but I’m sure it will not go down, but it will be stable or at least continue to grow also coupled with the fact that there are certain price escalations added into a contract. So they might also have an impact in the realization going upwards from the base that we have today.

Yogansh Jeswani — Methanex — Analyst

Understood.

Operator

Thank you. Next question is from the line of Sanjay Lakala from JM Financial. Please go ahead

Sanjay Lakala — JM Financial — Analyst

Thanks for the opportunity. I just wanted to understand from the base business perspective, as we see for this quarter, the sluggishness that we are seeing, you hit volume led or the realization led — you mentioned as we will come back to concentrate on the existing centers, we should ramp up. But I want to understand some volume aspect or from the realization.

Yash Prithviraj Mutha C.A. — Whole-Time Director

It’s more from the volume side. As I said, with the centers getting deployed and delays — so the kind of footfall that we expected in terms of ramp-up that has not been achieved. Once they start achieving, you’ll see that trend. I think if I give you the parallel analogy or example of made in March in Paris, we started somewhere in September, and we’ve already seen revenue run rate of almost INR2 crores per month in the first two months is — so unlike all the other states, Panda has been a bit impacted because of delays. So now the center is getting operationalized and government also time in getting an understanding of how the PPP model works, especially the new government, we should see that the volumes coming back to the expected levels, and therefore, they should be contributing to the overall revenues.

Sanjay Lakala — JM Financial — Analyst

I understand that. I’m trying to understand the existing centers, not from the new centers or the upcoming centers, which we are just commissioning

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes, even for the — for example, even in the existing centers of a the ramp-up that we expected the Punjab is largely on cash-driven patients. now as more and more awareness is being created there, they are getting these prices. In fact, a lot of Other people are doing marketing without us like there are certain ensures they have got so they are spreading the word about. So as these centers they’re visibly get started across the various communities. — you’ll see traction coming on the existing center. Even Panja, which was like INR4 crores — I think INR4 crores of revenue in the Q1 has ramped up to almost INR11 crores in Q2, which is almost doubling of the revenue. So these are the trends which you are seeing as I said, as the centers and they get stabilized, we’ll see more jump coming up from the biggest centers as well.

Sanjay Lakala — JM Financial — Analyst

And how about Maharashtra

Yash Prithviraj Mutha C.A. — Whole-Time Director

Marta for the new project or for the existing centers?

Sanjay Lakala — JM Financial — Analyst

Both, if you could, in your channel like

Yash Prithviraj Mutha C.A. — Whole-Time Director

Sorry.

Rajendra Khivraj Mutha — Executive Chairman

On both sides

Sanjay Lakala — JM Financial — Analyst

Existing as many in Mahara

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. center, I think for the most mature centers like which are our old centers, they are — in fact, some of the centers have also shown good growth almost in double digits. The new centers like Mumbai and the Music Corporation centers, as I said initially, there is a bit of lag as the intricate operationalize, people start knowing about it. And then after a couple of months, the spike starts we’ve seen because these aware has been created about the centers, the prices, the quality of services and then peptic in the businesses as well. On the new Maharashtra tender, I think the project that will get operationalized only next year, it’s a large project. So — and there’s a lot of math possession to be taken over and the learnings from Punjabi Maharastra well. So Maharashtra new tender will be operated only in the next year.

Sanjay Lakala — JM Financial — Analyst

And in terms of EBITDA margins, you highlighted that it is stabilizing right now. So for this remaining second half also we should expect EBAs around 25% and as the ramp-up happens and newer centers mature from FY ’25 onwards. — we expecting the over EBITDA margins of closer to 20%, 29%, is that

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes. So like I mentioned, if you see in the quarter 1, the EBITDA margins were a bit interested because of the cost of operations and revenue is not being commensurate. But as the revenue starts stabilizing and they’ll further improve, we also see — expect a further improvement in the margins and hovering around the same 25%, 28% is what we expect in the subsequent quarter.

Sanjay Lakala — JM Financial — Analyst

Thank you so much.

Operator

Thank you. Our next question is from the line of Aditi from Securities Investment Management. Please go ahead.

Aditi — Securities Investment Management — Analyst

Hi thanks for the opportunity. Just one clarification. I believe that our revenue from a Punjab contract used to come from a subsidiary — so when I look at the difference between a stand-alone and consolidated revenue, so it comes for around INR2 crores, but we are seeing that we got around INR10 crores to INR11 crores from a contract on that. So is it is comment

Sasha Desai — Sonic Capital — Analyst

Could you just repeat the question?

Yash Prithviraj Mutha C.A. — Whole-Time Director

Yes.

Aditi — Securities Investment Management — Analyst

Earlier you used to say that the revenue from Punjab contract seems to come from a subsidiary — but when I look at the difference between a consolidated and standard everything, it is around INR2 crores. And we just said that we put around 10 to 17 cons. So what’s the discounting over

Yash Prithviraj Mutha C.A. — Whole-Time Director

So, Pawan, maybe you can answer that question.

Pawan Daga C.A. — Chief Financial Officer

Yes, yes. So basically, at the consol level, the revenue between the subsidiaries and the holding company gets knockoff. So the assets were deployed by the Personal Diagnostics Limited parent company. So we have an internal Arlen price Aslan transaction with the subsidiaries where we share revenue because the assets were deployed by the holding company. So that’s why this gap is arising and sharing which holding company is getting, which is added in the top line of the stand-alone number. Tax why this gap is arising.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Just to add, these are 100% subsidiaries created only for the Punjab project, which was a requirement of the tender where the government wanted us to have the subsidies are special purpose vehicles created 100% owned of the company. And so this is just an arrangement where, basically, since the holding company has invested the asset, there’s revenue that comes back with the holding company. But I think from all perspective, the consolidation level wherein these are all Christmas centers and owned and managed by Christmas. That is how we see it.

Operator

Thank you — ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for their closing comments. Thank you, and over to you.

Yash Prithviraj Mutha C.A. — Whole-Time Director

Sure. Thank you, everyone. Thank you for your time and for attending this conference call. Thank you very much. We hope we’ve answered all your questions. And if any questions unanswered, please feel free to connect with us or our Investor Relationship team at Sage Partners. Looking forward to interacting with you in the future. Thank you.

Operator

[Operator Closing Remarks]