Krsnaa Diagnostics Ltd (KRSNAA) Q3 FY23 Earnings Concall Transcript

Krsnaa Diagnostics Ltd (NSE:KRSNAA) Q3 FY23 Earnings Concall dated Feb. 14, 2023.

Corporate Participants:

Pallavi Bhatevara — Managing Director

Pawan Daga — Chief Financial Officer

Yash Mutha — Whole-Time Director

Analysts:

Aditya Khemka — InCred PMS — Analyst

Jainil Shah — JM Financial — Analyst

Chinmaya Bhargava — LSSB — Analyst

Unidentified Participant — — Analyst

Punit Mittal — Global Core Capital HK Limited — Analyst

Jamie Soo — HSBC Asset Management — Analyst

Manoj Dua — Individual Investor — Analyst

Aditya Khandelwal — SIMPL — Analyst

Vineet Jain — Individual Investor — Analyst

Nirvana Laha — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Krsnaa Diagnostics Limited 3Q FY ’23 Earnings Conference Call hosted by Equirus Securities Private Limited. We have with us on the call Mr. Rajendra Mutha, Chairman and Whole-Time Director, Ms. Pallavi Bhatevara, Managing Director, Mr. Yash Mutha, Whole-Time Director, Mr. Pawan Daga, Chief Financial Officer and Mr. Nikhil Deshpande, Company Secretary. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Ms. Pallavi Bhatevara, Managing Director. Thank you and over to you, ma’am.

Pallavi Bhatevara — Managing Director

Thank you, Bharat. Good evening, everyone, and welcome to Krsnaa Diagnostics Q3 FY ’23 Earnings Call. And I thank each one of you for joining us today. We have already circulated our earnings presentation, which is available on our website as well and all the stock exchanges [Technical Issues]. 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 healthcare industry, which plays an imperative role in diagnosis. Assessing diseases plays a major role in the treatment management and even prevention of diseases. Today, the Indian diagnostic market is valued close to $15 billion and projected to CAGR of 11.5% in upcoming years.

The key fundamental drivers of diagnostic industries such as large population of almost 1.4 billion people, rising per capita income allowing increased affordability and need to access better healthcare services, emergence of lifestyle diseases, increased awareness of preventive health checkup and government initiatives. Overall, looking at the diagnostic Indian demographics, there is a vast and underpenetrated market of diagnostic services, which offers an immense opportunity to both organized and unorganized players. Furthermore, recognizing the importance, the Government of India has allocated INR88,956 crores to healthcare expenditure, INR2,350 crores, which amounts to a hike of 2.71% from INR86,606 crores, in FY ’23-’24 making high-quality healthcare and diagnostics services affordable for the masses. The governments in various states are continuously evaluating PPP as a viable and best alternative for their goal of providing high-quality healthcare and diagnostic services at affordable prices.

Today, Krsnaa is a leader in PPP diagnostic space, and we are proud to have expanded our presence all over India making high-quality diagnostic services affordable and available to remotest corners in the country. We are well positioned to serve our patients, and we see tremendous runway ahead to build upon a solid foundation. I am pleased to inform that recently Krsnaa has been awarded with two major pathology tenders, one in the state of Maharashtra for setting up one lab and 600 collection centers and another one in the state of Odisha for setting up five labs and 386 collection centers. With these wins, we continue our journey of expanding our footprint across the country, especially in newer territories and geography thereby increasing our customer base. The recent wins are also aligned to our focus of increasing our business shares in pathology and therefore create a healthy balance between radiology and pathology. We are happy to announce the launch of new Genexus system, the first fully-integrated Ion Torrent NGS platform in PPP model and offers a fully automated specimen to report workflow with unparalleled turnaround time. The Genexus system sets a new standard in NGS technology, and we are confident that it will have a significant impact on the molecular pathology community.

Further, I would also like to update you all on the status of radiology and pathology project in the state of Punjab. We have operationalized 24 out of 25 radiology centers and the remaining one radiology center will be operationalized by Q4 FY ’23. All the 30 laboratories and 95 collection centers in Punjab are now fully operational. I would also like to add that we have operationalized entire pathology project in the state of Himachal Pradesh, and additionally, we have also successfully implemented the Telereporting project in the state of Tripura thus extending our reach to the far east corners of India.

We are progressively expanding our presence and during the quarter, we have added seven radiology, 33 tele-reporting, 25 pathology labs and 64 collection centers. As of today, Krsnaa is a leading PPP diagnostic player with 127 radiology centers, 1,522 tele-reporting centers, 97 processing labs and 741 pathology collection centers.

Looking ahead, considering the ramp-up of our recently installed centers and the new tender win and considering a few projects in pipeline, which are under evaluation phase, Krsnaa Diagnostics remains confident to further expand its geographical footprint and penetrate deeper into the tier II and tier III cities by offering high-quality diagnostic services at affordable prices.

Now coming to the financial performance during the quarter. During the third quarter, Krsnaa registered core revenues of INR118 crores, growth of 12% year-on-year. The COVID-19 revenues declined from INR1 crore in Q3 FY ’22 to INR0.1 crores in Q3 FY ’23. Our EBITDA stood at INR30 crores with margins of 25% and net profit of INR14 crores with margins of 12%. The increase in new centers being launched, the profitability margins remained stable quarter-on-quarter as revenue contribution from new centers continued to grow. The margins are expected to improve in the upcoming quarter with the majority of these newly launched centers. On the B2C side of business, we have launched wellness packages at affordable rate, which help us to expand in the B2C side. The wellness package is Ayaksham, which covers basic test as well as special tests. Further, in terms of technology adoption, we have also continued our focus and as part of the Phase I, we shall be launching the website for the B2C segment in the next month with more technology-led initiative being implemented in the following months including digital pathology, integrated lab management, etc. With all these initiatives underway and considering the implementation of existing projects as well as considering the recent wins, we are confident and believe that we have a strong outlook in the future.

Now, I will hand over the call to Mr. Pawan Daga, our Chief Financial Officer, to discuss the financial performance. Thank you.

Pawan Daga — Chief Financial Officer

Thank you, Ms. Pallavi. Very good evening to all the attendees. I will present financial highlights for the third quarter and nine months ended December 2022 [Phonetic]. In the third quarter, the Company registered total revenue from operation of INR118 crores, an increase of 11% on year-on year basis from INR106 crores. The growth is led by a core business comprising of radiology and pathology, which registered revenue growth of 12% year-on-year. Operating EBITDA for the quarter at INR30 crores. EBITDA margins were 25% in Q3 FY ’23. EBITDA margins were partially impacted due to additional cost incurred for onboarding team to operate and run the newly launched centers. The margin are expected to improve in upcoming quarters with the maturity of the centers.

Profit after tax for Q3 FY ’23 was INR14 crores for the quarter. PAT margins were 12%. In the nine months FY ’23, the Company registered total revenue from operation of INR354 crores. Our core business comprising of radiology and pathology, which registered revenue of INR353 crore, a growth of 14% year-on-year. The COVID revenue declined by 92% from INR1 crore in Q3 FY ’22 to INR0.10 crore in Q3 FY ’23. Operating EBITDA for nine months FY ’23 stood at INR89 crores with a margin of 25% for the quarter and profit after tax for nine months FY ’23 at INR43 crores with a margin of 12%.

We can now open the floor for question and answers.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. The first question is from the line of Aditya Khemka from InCred PMS. Please go ahead.

Aditya Khemka — InCred PMS — Analyst

Yeah, hi, thanks for the opportunity. Hi, everyone. A few questions, firstly, to begin with, if you can talk about the operating cash flow for this year, as you mentioned in the presentation, I think Slide 7, the operating cash flow for this year nine months seems to be INR239 crores [Indecipherable] versus 66 crores last year, so — and a large reason for that obviously seems to be the increase in receivables, which has gone up from 76 days nine months last year to 97 days this year. So, what is causing the increase in receivables? That’s question number one. And question number two, is there any other issue with the operating cash flow that we need to pay attention to?

Yash Mutha — Whole-Time Director

Sure. So Aditya in terms of the cash flows, you’ve picked up right. There has been an impact of the receivables. Now, if you see the receivables, normally in this time of the year, which is around Q3, the receivable days go around 94, 97 days, which is in our line of business. And if you see even comparatively in the previous periods, you’ll see a similar trend that has occurred. That is the reason why the receivables are almost in the range of about 90 days plus. Now the reason why this happens is typically if you see from Q3 onwards to Q4, the authorities will start basically closing out their working [Phonetic] processes so that before March end, they can complete the payment so that their next year budget doesn’t get impacted because they have to basically pay out. Otherwise, if they don’t pay us before March or before the year end, then their next year budget [Technical Issues]. So this is a typical cycle we see in our line of business and we don’t see any concerns around it. The other reason in terms of the cash flow, I think, Pawan might want to add few points.

Pawan Daga — Chief Financial Officer

The main reason, which is the increase in receivables days, that’s the concern where we see the cash flow from operating activities are low compared to the last nine months.

Yash Mutha — Whole-Time Director

So, basically it is just a part of our routine business and like we’ve demonstrated in the past as well, come year end, the receivables will go down and we should be able to collect all our outstanding dues.

Aditya Khemka — InCred PMS — Analyst

Right. So Yash, what has been the capex that we have done this year obviously for the newer projects that have been [Technical Issues] which we can see in manpower and other expenses. But what is the capex we have done this year in nine months?

Yash Mutha — Whole-Time Director

Yeah. I think Pawan…

Pawan Daga — Chief Financial Officer

So in total around INR107 crores of capex we have already incurred in nine months.

Aditya Khemka — InCred PMS — Analyst

And what is the budget for the fourth quarter?

Pawan Daga — Chief Financial Officer

So in the range of in a similar way INR20 crores to INR25 crores, which is as per the plan, which we have to get executed by this Q4.

Aditya Khemka — InCred PMS — Analyst

Understood, understood. That helps. Second question is on the gross margins. So if I just look at the past eight quarters, right and I’m starting — 8 to 10 quarters. So I’m starting from Q1 FY ’21 to Q3 FY ’23, the trend that I can notice. So Q1 FY ’21, Q2 FY ’21, our gross margins used to be 70% to 75%. Then starting Q3 FY ’21, the gross margins dramatically went up to 83%, then 87%, then 89% also. And now we have again started seeing, for the last two quarters, the gross margins declining from that 88%, 89% to 86% and in this quarter 84%. So one question, part one, why did the gross margins from first half FY ’21 from 75% go up to 88%, 89%? Part two of the question, why is that 88%, 89% in this year now starting to come down to 84%, 86%?

Yash Mutha — Whole-Time Director

So, Aditya, basically what you see here in the gross margins, one of the key components that was there earlier was the Rajasthan business. Now in the Rajasthan business because we had the arrangement with our business partners, hence, in terms of costs [Technical Issues] basically straightaway, they were managing most of the costs and we had very little component and which is why the gross margins were higher. After the Rajasthan project got over and since that arrangement is no longer there, that is the reason why you’re seeing slightly softer gross margins where it has reduced.

Pawan Daga — Chief Financial Officer

So, another impact on the P&L side, which is the revenue sharing, fees to hospitals have reduced.

Yash Mutha — Whole-Time Director

[Speech Overlap] which used to be about 25%, now it has come down to about 21%.

Aditya Khemka — InCred PMS — Analyst

Yeah, exactly. So that was my other part of the question. So just remind me this Rajasthan tender, which we stopped doing, I think, sometime in August, you said last concall, what was the size of this tender per annum?

Yash Mutha — Whole-Time Director

The Rajasthan tender what we were doing was about INR70 odd crores [Phonetic] annually, INR70 crores last year, I mean, the one that we were doing.

Aditya Khemka — InCred PMS — Analyst

Yeah, so that’s INR70 crores last year. And the reason why we stopped doing it because we wanted to bid for the larger tender, the one that is supposed to come up in February?

Yash Mutha — Whole-Time Director

Yeah, there were two parts; a, after the tender, we also got an extension and we served the extension period. In the interim, the government had launched a smaller tender, which we did not want to participate because it didn’t make sense from a business perspective and now the government has come up with a much larger tender, which has more collection centers and more labs and I think that’s much more bigger business than what we had done in the past in Rajasthan and which we have currently bid and we are awaiting the results.

Aditya Khemka — InCred PMS — Analyst

So Yash just, — sorry can you just talk about this a little more? So the INR70 crore per annum tender that we stopped doing. We stopped doing it, because the contract period got over or we stopped doing this by choice because we had to bid for the new tender, which of two is it?

Yash Mutha — Whole-Time Director

No, we stopped it because the contract period got over after the extension that was granted to us.

Aditya Khemka — InCred PMS — Analyst

Got it, so the extension period also got over basically. So the contract expired essentially.

Yash Mutha — Whole-Time Director

Yeah, right.

Aditya Khemka — InCred PMS — Analyst

And that is why, now the new tender is coming, which is larger, you are saying, and the potential of this tender is how much, the newer tender?

Yash Mutha — Whole-Time Director

Well. I think if you see from the government, the way they put it, it’s roughly about around INR450 crores, INR500 crores.

Aditya Khemka — InCred PMS — Analyst

INR250 crores to INR500 crores?

Yash Mutha — Whole-Time Director

No, no, INR450 crores to INR500 crores.

Aditya Khemka — InCred PMS — Analyst

INR450 crores to INR500 crores per annum? Okay.

Yash Mutha — Whole-Time Director

No. No. No. This is spread over I think a couple of years.

Aditya Khemka — InCred PMS — Analyst

Okay, spread over a couple of years. So per annum would be about INR225 crores to INR250 crores?

Yash Mutha — Whole-Time Director

Yes.

Aditya Khemka — InCred PMS — Analyst

Okay. Understood. And Yash, just help me understand this as well, so if we — since we are incrementally winning more and more contracts in pathology, are the pathology gross margins, EBITDA margins going to be lower than our consolidated EBITA and gross margins that we are doing historically? Because radiology to me seems to be a higher EBITDA margin, but a lower ROC contract, whereas pathology seems to be a lower margin and a higher ROC contract. Am I on the right track when it comes to analyzing these two businesses?

Yash Mutha — Whole-Time Director

Yeah, so from comparing between radiology and pathology, certainly pathology margins — EBITDA margins are a bit lower than the radiology, but I think the difference will not be significantly high between radiology and pathology. It hovers around anywhere between 5% to 7%, and also one of the reasons why because there have been more pathology tenders and also to — like we have been saying, we want to have a healthy balance between radiology and pathology that is the reason why we’ve also participated in these tenders and continue to win them. And of course, from an ROC perspective, pathology is better compared to radiology.

Aditya Khemka — InCred PMS — Analyst

Understood. And this entire INR11 crore decline in fees to hospitals from INR27 crores to now INR16 crores a quarter, this entire INR11 crore per quarter decline in fees to hospitals is purely because of the Rajasthan tender? Because it implies that in a contract that you were making INR70 crores, you were paying INR44 crores, INR11 crores into four quarters, you were paying INR44 crores to hospitals as fees.

Yash Mutha — Whole-Time Director

Yeah, so basically what we have done is like — in larger states we normally go with business partners, because these are [Technical Issues] places. So we look at local partners with whom we have arrangements where they provide certain services and that is how it was where we were paying fees to them. So like I mentioned in the previous calls as well, over a period of longer duration of the contract, when we even absorbed some of these employees on to our roles, and basically the share of the revenue contribution keeps on reducing year on year.

Aditya Khemka — InCred PMS — Analyst

Understood. A couple of more questions from me. In the Punjab tenders, if I understand correctly, all our subsidiaries that we have are linked to the Punjab tender because of the way the tender has been drafted. Am I right?

Yash Mutha — Whole-Time Director

Sorry, if you can just repeat that question?

Aditya Khemka — InCred PMS — Analyst

Yeah, sure. So, all the subsidiaries that Krsnaa has as an entity, as a parent entity to subsidiaries that Krsnaa Diagnostics has, these subsidiaries are all linked to the Punjab tender or there are other tenders also which require us to have subsidiaries for different [Technical Issues]?

Yash Mutha — Whole-Time Director

[Speech Overlap] it’s linked only to Punjab tender.

Aditya Khemka — InCred PMS — Analyst

Only to Punjab tender?

Yash Mutha — Whole-Time Director

Yes. So basically, there was a very specific requirement in the tender for Punjab where after winning they wanted us to create subsidiaries for each of these clusters and that is the only reason why Krsnaa had to create subsidiaries. Otherwise in our history, we’ve never had subsidiaries. And since this was a specific requirement, they had to be created and accordingly, they are 100% subsidiaries of Krsnaa Diagnostics Limited.

Aditya Khemka — InCred PMS — Analyst

Yeah, so then if I look at the difference between your consolidated profit and your standalone profit, the loss that I see in the subsidiary level, which is about INR3 crores to INR4 crores. And — so that loss is purely coming from the Punjab tender?

Yash Mutha — Whole-Time Director

Yes.

Aditya Khemka — InCred PMS — Analyst

And this is INR3 crores to INR4 crores a quarter, that’s the loss we’re making in the Punjab tender as of now?

Yash Mutha — Whole-Time Director

No, so if you see Punjab tender, I think, as I said, the subsidiaries are only for — from the regulatory perspective. Financially, you should look at consolidation [Phonetic] because for example the fund raise, which happened for the IPO, happened in the holding company from which the equipments are purchased, so the subsidiaries are purely just from a tender requirement perspective because there are certain revenue upstreamings which happens from the subsidiary to the HoldCo. There are certain expenses, which are there in the HoldCo, and some of them are in the subsidiary. So I think, it is basically the consolidated the way you should look at our business and not from a subsidiary to a HoldCo perspective.

Aditya Khemka — InCred PMS — Analyst

Fair enough. And any update on the income tax investigation that was ongoing? Any conversations or dialogs you have had with the IT department?

Yash Mutha — Whole-Time Director

No. I think as of now, whilst we have submitted all the requisite information, there is no update or any information that we have received from the authority and we are also equally waiting [Technical Issues].

Aditya Khemka — InCred PMS — Analyst

Okay, all the best guys. I have more [Phonetic] questions. I’ll come back in the queue.

Yash Mutha — Whole-Time Director

Thank you.

Operator

Thank you. The next question is from the line of Jainil Shah from JM Financial. Please go ahead.

Jainil Shah — JM Financial — Analyst

Yeah. Hi, thank you for the opportunity. Yash, my first question is on the potential of the newer tender [Technical Issues] the BMC collection centers and the Odisha collection centers, so what is the potential?

Yash Mutha — Whole-Time Director

I think Pawan will just answer that question.

Pawan Daga — Chief Financial Officer

So BMC where we are looking for annualized revenue of INR30 crores to INR40 crores considering the 600 collection centers and one processing lab.

Jainil Shah — JM Financial — Analyst

And Odisha?

Pawan Daga — Chief Financial Officer

Odisha, INR50 crores to INR55 crores annualized revenue, which we are expecting from five labs and 360 plus collection centers.

Jainil Shah — JM Financial — Analyst

Okay and just a follow-up to the previous participant’s question. So we have lost this Rajasthan tender from when and what has been the impact in this quarter? So what was the contribution of the Rajasthan tender in 3Q last year?

Pawan Daga — Chief Financial Officer

So, Rajasthan we have discontinued from — or the tenure completed in August ’22 — mid of August ’22, so in this quarter, there is no contribution from Rajasthan pathology per se.

Jainil Shah — JM Financial — Analyst

No, no, how much was the contribution in the last quarter — I mean last year?

Pawan Daga — Chief Financial Officer

Last quarter, somewhere INR11 crores to INR12 crores.

Jainil Shah — JM Financial — Analyst

Okay, so hence your base business is showing lower growth. Is that the right understanding?

Yash Mutha — Whole-Time Director

Could you just repeat that question?

Jainil Shah — JM Financial — Analyst

So we were talking about 15% to 20% growth in our base business, so I mean it’s not — we’re just seeing 12-odd percent growth, so the difference is the contract that we have lost and…

Yash Mutha — Whole-Time Director

If you see [Technical Issues] growth, the growth we have achieved is in spite of the loss of Rajasthan revenue.

Jainil Shah — JM Financial — Analyst

Right, right. And any impact you’re seeing on FY ’24 guidance because of that? Are we devising it?

Yash Mutha — Whole-Time Director

So FY ’24 whatever we had basically considered, we knew that Rajasthan would not be there, so FY ’24, I think from a guidance perspective and considering the Punjab experience, we are looking at about INR700 crores, INR750 crores is what we are currently working. I think by end of this year, when we will have more clarity in terms of given these projects Punjab [Phonetic] completely getting deployed and other projects, I think we will be able to give a much more realistic guidance in the next quarter.

Jainil Shah — JM Financial — Analyst

So anymore [Speech Overlap].

Pallavi Bhatevara — Managing Director

[Speech Overlap] Jainil, we have not lost the Rajasthan contract, the contract tenure got over and it is for rebidding, so it is a stop of services for a particular period, because we got extension for the contract and even the extension period got over and hence now the government is retendering it because of the process to be followed, so we have not lost the contract, we have just stopped the services due to the tenure exhausting.

Jainil Shah — JM Financial — Analyst

Fair enough, fair enough. Yeah, that’s all from my side for now. Thank you.

Operator

Thank you. The next question is from the line of Chinmaya Bhargava from LSSB [Phonetic]. Please go ahead.

Chinmaya Bhargava — LSSB — Analyst

Hi. Thanks for the opportunity. I have two questions. The first is on disclosure. So a lot of the questions that participants have been asking you are — could be solved easily by sharing your test volumes that have happened over the few quarters. Can you please tell me why we have stopped disclosing this or at least not disclosing data [Technical Issues] which would help us understand better how the business has performed over that?

Yash Mutha — Whole-Time Director

So, we of course started sharing this information, if you have seen the earlier presentations; however, considering the recent various tenders, which we have participated, lot of our information that we are publishing has been used and which unnecessarily creates, in a way, a lot of competitive challenges for us. Of course, like — we wanted to disclose this information and I think in the year end, we will be sharing the information, but on a quarterly basis, because there are lot of these tenders discussions going on and some of these people, they just use the numbers and basically come with some very weird tender quotes, which has kind of we’ve seen and that is one of the reasons we decided to hold. We’ve also seen a comparison with what information is being shared amongst the peers, and I think to that extent, we are trying to share as much as information possible, but given that there are some large tenders also that we wanted to participate in and hence the reason to not disclose. So in terms of whatever information is relevant and required for the investor community, I think we are sharing all of that information.

Chinmaya Bhargava — LSSB — Analyst

Okay, so two follow-ups on this, the first is in terms of prices that you’ve bid for these tenders. Surely, that is anyway public information, right? So tenders that you won, that data is already out there. So would disclosing these figures change what [Technical Issues]?

Yash Mutha — Whole-Time Director

Well. I think — see some of these questions, which are more in terms to do with the number of patients, volume and then the discounting, people can join the dots and there are — we’ve seen some very — cases where some very high kind of unreasonable discounts are quoted seeing what our numbers are and hence the question, I think — we are conscious of the fact that there is an information that needs to be shared and accordingly, we are giving whatever information is required and anything that is required, we can go on a personal, whenever if any — like for example, investors need information, we can happily share that on a one-on-one basis.

Operator

Thank you. The next question is from the line of [Indecipherable] from Crown Capital, please go ahead.

Unidentified Participant — — Analyst

Hi, good evening and thank you so much for taking my question. So, sir, I just wanted to ask questions — it is a kind of a follow-up question. So we were saying our potential for our BMC and Odisha is roughly combined at least [Phonetic] INR90 crores of potential. So how would it kick in like we were planning to have some 200 pathologic centers in BMC? Could you just help me with the progression of revenue that we can expect, maybe how much we are expecting in FY ’24 and how will it — just to operationalize?

Yash Mutha — Whole-Time Director

So from a BMC perspective, of course, we will try to operationalize the center in this next quarter in terms of establishing the center, setting up the lab, but I think meaningful contribution of revenue will — should be seen only in the next year, hopefully by Q2 or second quarter because it takes time to ramp up and given our experience and the logistics part of it, we expect it to roll up from Q2 onwards. Odisha will take a bit time as well because it’s a very — if you see the location wise, geography wise, it’s wider area to be covered. The good part is Krsnaa will have its footprint across these locations including Mumbai as well as in Odisha and that also favors additional way to look into increasing our — the B2C model as well.

Unidentified Participant — — Analyst

Okay, so around — from BMC, we can — incremental we can expect around INR20 odd crores of revenue, maybe in the next year, if you’re planning to operationalize the Q2. Would that be a fair assumption, sir? [Speech Overlap].

Yash Mutha — Whole-Time Director

Yeah. So the centers would be — collection centers would be activated as per whatever timelines we have to commit to the authorities, but I think ramp-up wise, we would be a bit conservative in terms of how the ramp-up will happen and eventually from Q4 onwards, we will start seeing the business [Technical Issues].

Unidentified Participant — — Analyst

Okay, sir. And sir, our FY ’24 guidance that you were just talking about, just as we are planning to double our revenue, so we just spoke about, I think, INR700 crores, but I think this year only we would be crossing I think INR450 crores easily, so doubling would be nearly 900, right, sir? Or am I [Speech Overlap].

Yash Mutha — Whole-Time Director

[Speech Overlap]. The doubling that we had — no, no, the doubling that we had quoted was from the FY ’22 base number and see [Technical Issues] we would want to achieve that and we are working towards it. The only challenge is with these Punjab experience that we’ve had and at the same time to ensure that the investor community also has realistic expectations, we just want to come back with some more thoughtful approach to the — in expectation. And hence, we said hopefully by end of this quarter, the next quarter, I mean we will come back in terms of the more realistic guidance that we expect we can achieve, but I think if you see the way we are currently focusing in winning these tenders, at the same time working in — even if you see the overall growth that we’ve achieved, including in this Q3, I think compared to whatever is happening in the industry, whether with our peers, Krsnaa still has demonstrated in our opinion, a good performance and we hope to continue the same in the subsequent quarters.

Unidentified Participant — — Analyst

Yeah, yeah correct. And if I may have a few more questions, can I ask them, sir? [Speech Overlap] Yeah, yeah, so I just, again, another clarification that just — so our Rajasthan business [Technical Issues] before, we would have I think [Technical Issues] INR11 crores of revenue we booked in Q2. Correct, sir? Or…

Pawan Daga — Chief Financial Officer

Correct.

Unidentified Participant — — Analyst

So basically, if we exclude that we have actually grown by INR6 crores of revenue in Q3. So, I would just want to know our new all operationalized — we are yet to deploy some assets. So how would we just see the ramp-up of these coming in. We have some 40 plus, CT scan machines and everything. So just could you help me in maybe Q2, Q1, when will we be able to see a significant jump, because I think it would be disproportionate — it will be a non-linear jump, correct sir. Because a lot of them will come together. [multiple speakers]

Yash Mutha — Whole-Time Director

Yeah, so I think that’s a good question. If you see, we have the Maharashtra project also, which is a large project almost of 39 CT scans to be deployed. And then we have the recent wins of Odisha and BMC. Now, Maharashtra in large project, it will take almost from an installation perspective and assuming we get all the centers handed from the government we are still expecting the ramp-up in terms of implementation of the centers will take anywhere by end of Q2 or Q3 of the next year and likewise, as I said, the BMC and Odisha will start kicking-in from Q2. So I think Q2 onwards, we should see a ramp-up in terms of our overall business. The new tender wins to contribute revenues for existing base.

Unidentified Participant — — Analyst

Okay, sir. So just to summarize so the next Q4 and Q1, we might see our current range of revenue and then from Q2, Q3 onwards, we will see our step up sir. Would that be fair sir?

Yash Mutha — Whole-Time Director

Sorry, can you just repeat that?

Unidentified Participant — — Analyst

Yes, sir I was just asking sir. Q4 and Q1, would be our current range of revenue and then from Q2 to Q3, you would see a higher growth revenue, sir.

Yash Mutha — Whole-Time Director

Yes, we should see an increase in the revenues.

Unidentified Participant — — Analyst

Okay, okay, sir, thank you so much sir. That helps me a lot and all the best for the future. Thank you.

Yash Mutha — Whole-Time Director

Thank.

Operator

Thank you. The next question is from the line of Punit Mittal from Global Core Capital HK Limited. Please go-ahead.

Punit Mittal — Global Core Capital HK Limited — Analyst

Hi. Thank you for the opportunity. Two questions. One is the projects that you have mentioned on your slide 19, which are the new projects that you’re undertaking, which has 50 radiology centers and 992 pathologic centers. Can you tell me what will be the total capex requirement for these projects?

Pallavi Bhatevara — Managing Director

So, Maharashtra I think there are about 49 — 39 CT scans. So that could be roughly about around close to INR50 odd crores — between INR50 crores and which was the other one.

Unidentified Participant — — Analyst

Asking about all the projects, right. The total 50 centers, radiology centers and total 992 pathology centers that you mentioned on slide 19. [Foreign Speech]

Pawan Daga — Chief Financial Officer

Sorry, Odisha and Maharashtra together would be about close to 100 odd. [multiple speakers] Odisha and Maharashtra I think if you’re referring to those 386 plus one and 600 that would be about INR150 crores of total investment that will have to go for Maharashtra and Odisha.

Punit Mittal — Global Core Capital HK Limited — Analyst

That’s for the pathologic centers 386 and 600, right?

Pallavi Bhatevara — Managing Director

Yes, correct.

Yash Mutha — Whole-Time Director

You are referring to the investment, right?

Punit Mittal — Global Core Capital HK Limited — Analyst

I am referring to the investment for both the 50 radiology centers and 992 pathologic centers that you have mentioned in slide 19, correct.

Yash Mutha — Whole-Time Director

Punit ji, I think we misunderstood. So the capex that we planned for Maharashtra and Odisha project that are mentioned on the slide, that would be in the range of about INR50 odd crores put together.

Punit Mittal — Global Core Capital HK Limited — Analyst

Okay. Okay, the next question, which you may have answered in your previous calls, but apologies for repeating that. When, for example, you said the Rajasthan project got expired and you have basically you had set-up the projects when you got the contract so for example, when you get the new contract you set-up the projects and things like that, once the contract expires, what do you do with with the machines and all that, that you have installed in these centers?

Yash Mutha — Whole-Time Director

Sure. I think there was some static, if I understood your question correctly, you’re asking what happens with the equipments that — in the case of Rajastan, right.

Punit Mittal — Global Core Capital HK Limited — Analyst

Correct.

Yash Mutha — Whole-Time Director

Was it your question? See basically typically, these are like in case of pathologic projects, these are very portable equipments, which can be deployed at other projects, because these are owned by us, they are in our books in our balance sheet. So as and when if we require to move them to other locations, we can do so. Now in the case of Rajasthan, it’s just we knew that there is a tender. So as of now we’ll have those equipments. If required some of these equipments we can relook at other private collection centers or in private labs as well. So these equipments can be deployed wherever we feel it appropriate to do so.

Punit Mittal — Global Core Capital HK Limited — Analyst

Okay, and my last question. When you do these capex for these centers do you — do you depreciate the assets over the life of the contract or how do you do the depreciation for these assets?

Yash Mutha — Whole-Time Director

So for the equipment we do as per the life of the equipment but for the infrastructure and other things, which we do for the life of the project.

Pawan Daga — Chief Financial Officer

So as I said, these equipments can be deployed, whether it is radiology or pathology. These equipments can be deployed so considering the life of the equipment, the depreciation is done, which is also reviewed by the auditors, and accordingly, from accounting standards perspective, the depreciation is carried in the books.

Punit Mittal — Global Core Capital HK Limited — Analyst

Got it, got it. Thank you so much and all the very best. Thank you.

Pawan Daga — Chief Financial Officer

Thank you.

Yash Mutha — Whole-Time Director

Thank you.

Operator

Thank you. Next question is from the line of Jamie Soo from HSBC Asset Management. Please go-ahead.

Jamie Soo — HSBC Asset Management — Analyst

Hi, good afternoon. Just a very quick question from me. I’d like to refer to the same slide that the other gentlemen referred to in terms of the project. Slide 19 projects other than mentioned in the RHP when I look at that slide on the third-quarter and compared to the slide on the second-quarter the radiology center declined, total center declined from 60 to 50. On the other hand, the pathology centers grew from 200 to almost 900. Are these two slides referring to the same thing and how should we go public in telling these numbers. Thanks.

Yash Mutha — Whole-Time Director

Yeah, so. I think what you referring to in terms of the numbers. Basically, these other centers which are currently under implementation. And the ones that you see refer to 992 basically these are the new projects or new centers that we have won in this quarter. So basically it’s quarter-on-quarter movement between centers that are currently under implementation and those that we’ve added new centers into our pipeline or which is now going to get implemented in the subsequent quarters.

Pawan Daga — Chief Financial Officer

If you’re referring to the last Q2 implementation track curve where would Uttar Pradesh, where we mentioned four centers, four radiology center will be operationalized in Q4, but out of that two is already operational and two is in the pipeline, which will be operationalized in Q4 FY ’23, so this is kind of how the status we are changing and adding the new projects which are coming up.

Jamie Soo — HSBC Asset Management — Analyst

No. I guess the timing of it, but there is a line or column on your — on the table that basically sums up freezing radiology center that is under either operational construct or work in progress right on that, on the total number on the third-quarter slide extend to 50, but on the same slide, in the second-quarter it stood at 60. So it’s — so quarter-on-quarter, it’s down by 18. And then on the — on the pathology center, the same number. Excuse me. Increased from 214 to 992.

Yash Mutha — Whole-Time Director

Yeah, so, Jim, if you see in the Q2, we would have shown about Tripura, where there were 18 centers, which were under implementation. Now, these 18 centers have already been operationalized. So basically from that 68 if we remove 18 you’ll have 50 which is what you’re seeing in Q3. So as the centers get implemented, they move from this table, because these are only tables, which are currently under implementation.

Jamie Soo — HSBC Asset Management — Analyst

Oh, I see, okay. okay, I get it.

Yash Mutha — Whole-Time Director

Basically we have completed the integeration[phonetic] in our network. It is just showing which are completed and which are still in the pipeline.

Jamie Soo — HSBC Asset Management — Analyst

Oh, I see, okay, okay, got it. Thank you.

Operator

Thank you. Next question is from the line of Manoj Dua as an individual investor. Please go-ahead.

Manoj Dua — Individual Investor — Analyst

[technical issue]

Operator

Manoj, use the handset sir, you are not very clear. The audio is not clear.

Manoj Dua — Individual Investor — Analyst

Am I audible now?

Operator

Yes.

Manoj Dua — Individual Investor — Analyst

All Punjab centers has been now functional, how much sale we can expect in next financial year from the Punjab state?

Pawan Daga — Chief Financial Officer

So, Punjab we expect about close to INR60 to INR70 crores annualized revenue in the next fiscal.

Manoj Dua — Individual Investor — Analyst

Okay. So subsidiaries may not give the actual profit figure, but same revenue, can we take from the subsidiary of the Punjab.

Yash Mutha — Whole-Time Director

Sorry, if you can just repeat that.

Manoj Dua — Individual Investor — Analyst

Whatever revenue the subsidiary is reporting, we can take that revenue from the Punjab center.

Yash Mutha — Whole-Time Director

No, no, as I said, the subsidiaries. There is a certain arrangement that we’ve had, where because the investment is made by the Holdco, in that case, Krsnaa Diagnostics Limited and there are these various subsidiaries. So there is a certain revenue-sharing that happens between the subsidiary and parent company, because investments are in one company and operationally the other company. As I said, the subsidiary was purely from the regulatory requirements and also the accounting is done in the way the arrangement was there between the holdco and subsidiary.

Manoj Dua — Individual Investor — Analyst

What was the revenue from Punjab in this quarter?

Pawan Daga — Chief Financial Officer

INR12 crores.

Manoj Dua — Individual Investor — Analyst

INR12 crores. I like we were doing at Rajasthan center and tender got stopped after the extension. So normally what we see is that services don’t stop. So in this case of Rajasthan, those services have stopped, so one that we difficult for, [technical issue] Can you comment on that?

Yash Mutha — Whole-Time Director

Yeah, I’ll just comment on that. So basically if you see the Rajasthan tender it cannot be said it was stopped. The contract tenure was completed after that the government basically brought in a new tender, but again, when we participated, there were a lot of, as I said, competition that had come in with a lot of complications around the tender, then it got canceled, and now it has come for re-bidding. If you see our past experience, there was — the first tender, we had won for Rajasthan when it came for extension we bid for it and it continued for another period of three to four years. So particularly there is a continuity that happens in these tenders, only in this particular case, because there was a lot of interest I mean some complications that were there in the tender, because of which it had to cancel. And that is where this gap has now come. Otherwise normally these tenders work in continuity.

Manoj Dua — Individual Investor — Analyst

Okay, can you give me the capex requirement for the new BMC and Odisha pathology orders? What would be the capex for that?

Pawan Daga — Chief Financial Officer

Either INR20 to INR22 crores approximately capex.

Manoj Dua — Individual Investor — Analyst

Okay. Thank you and best of luck.

Operator

Thank you. The next question is from the line of Aditya Khandelwal from SIMPL. Please go-ahead.

Aditya Khandelwal — SIMPL — Analyst

Yeah, hi sir, thanks for the opportunity. So when you came to IPO, one of the key advantages of our model was that we used to open centers in the hospitals and the in-house patients would help us with revenue growth and the ramp up will be fast. But when we look at Punjab, over there we have seen a delay in the ramp up. So just wanted to know what are the issues we are facing in this Punjab order.

Yash Mutha — Whole-Time Director

Correct. So Punjab from all our collective experience of the past more than a decade, excuse me. Sorry. So more than the I mean, the experience that we’ve had in the past versus Punjab proved to be an exception. For various reasons there was a change in the government and when they came in then in terms of getting the necessary approvals from the authorities took time, so that led to delay in implementation of the project. Also one of the key things that is kind of putting a hindrance to the revenue ramp-up, is the Punjab is purely cash business. Now, typically in government business when it is under the free Diagnostics scheme, then you’ll see a very good ramp-up because patients come and they win these tests, because it is entirely cash driven that is one of the reasons that we are seeing where the ramp-up has not happened the way we had anticipated.

Now, of course, you know that we will have to do more of I mean in terms of community outreach and what those initiatives are being undertaken to educate the consumers and showcase that these are the kind of facilities that are available, and hopefully that should translate into additional or increased revenues in the subsequent quarters.

Aditya Khandelwal — SIMPL — Analyst

Sir, when we had the disposal contract we would have made some assumptions regarding a particular revenue growth, and particular total revenue across the contract period. Now since because of this delay our revenue projections would have taken a hit. So the return which would be — which we would have calculated would be lower now because of this delay in the ramp-up or you think the IRR, which we added further estimated we would be able to achieve that.

Yash Mutha — Whole-Time Director

I think you’re right, from a timeline perspective, the IRR would have been delayed. But as I said, potential wise and like today now, more-and-more people are becoming aware of the kind of centers, we’ve deployed in Punjab, the rates at which we are offering and which has also been seen in translation in terms of more volumes coming to our centers. I’m sure I think it’s a matter of time where you know once these projects achieve that true potential whatever projections we’ve made, we should be able to achieve this. And we’ve seen that in the past as well in some of these projects that there are delays happening, it is more of a timing difference, the way I look at it. A couple of months here and there, but then the projects get streamlined and that’s one of the uniqueness or beauty of our business model.

Aditya Khandelwal — SIMPL — Analyst

Okay, and then if you could give us a split between the margins, which we are making for the old centers the three IPO, the centers which we had opened three IPO and the margins which we are making in the new centers, if you could just provide a split between them.

Yash Mutha — Whole-Time Director

I don’t think so I would have had that split with me ready.

Pawan Daga — Chief Financial Officer

We don’t that handy as of now.

Yash Mutha — Whole-Time Director

Yeah, we can share that information to you separately.

Aditya Khandelwal — SIMPL — Analyst

Sure, thank you. That was all from my side.

Operator

Thank you. Next question is from the line of Aditya Khemka from InCred PMS. Please go-ahead.

Aditya Khemka — InCred PMS — Analyst

Yeah, hi, thanks for the follow-up. So, Yash, if I understand correctly, compared to FY22 when we did, let’s say revenues of INR450 crores. And this year, FY23 will be in the range of INR470 to INR480 crores. So last year we would have done almost — as in FY22, we would have been almost INR70 crores from the Rajasthan tender which in FY23 would be how much. About INR30 crores or more.

Yash Mutha — Whole-Time Director

Rajasthan in FY23 would be close to about IN40 odd — INR36 odd crores.

Aditya Khemka — InCred PMS — Analyst

INR36 odd crores. And then last year there was a INR32 crore COVID revenue which obviously this year is like INR2 crores, am I right?

Yash Mutha — Whole-Time Director

Yeah. I think last year it was close to INR40 crores. So if you see, put together INR7 crores of revenue has not been there, which is because of COVID and Rajasthan not being there yet we’ve been still maintaining that kind of revenue growth.

Aditya Khemka — InCred PMS — Analyst

So, basically if I knock off INR70 crores from the base year. We are looking at INR385 crore revenue off FY22 comparing that to whatever INR470 something we’ll do this year.

Yash Mutha — Whole-Time Director

Yeah, so that is the kind of growth we have still maintained and continued to grow.

Aditya Khemka — InCred PMS — Analyst

Correct, correct. No, that makes sense. The other question is, you know you have a couple of data points we got from the government website. But it seems that there may be three CT scans, which are coming up for expiry I think which we have done. I think one of them is the [indecipherable] I think J&K and then there is Madhya Pradesh, one hospital, these are CT scan machines, which I think we had contracts for seven to eight years and now I think, these contracts are expiring sometime in 2023. So could you talk about what kind of — what size of contracts are expiring in 2023, I understand that we may get extension, but as an investor would be good to know — what could be the potential revenue loss we could face in 2023, this is the calendar year ’23, I’m talking off, so FY24.

Yash Mutha — Whole-Time Director

So Aditya I think again thanks for bringing that. So if you see for MP we’ve already got an extension for one year and that continues. And typically we’ve seen, given that like the investment and radiologic projects normally the extension happens. Jammu also there is already an extension in place, so we don’t see any of these tenders coming up for expiry in at least the next fiscal. I think the other one is Nasik. Nasik is continuing. I don’t see that coming to expiry anywhere soon.

Aditya Khemka — InCred PMS — Analyst

Okay, so in your assessment for the next one to two years. There is nothing significant coming up for expiry.

Yash Mutha — Whole-Time Director

Yes.

Aditya Khemka — InCred PMS — Analyst

Okay, that is understood. Last question. So you said that when these contracts are not renewed especially your pathology machines you are able to transport other locations where you maybe setting up pathology labs, but what do you do with the radiology scanners, the MRIs, CT scanners, do you also transport them?

Yash Mutha — Whole-Time Director

Yeah, so for example, see over a 10-year period, you would have already recovered the investment that we’ve made in our radiology equipments, whether it is a CT scan or an MRI, given our kind of payback that we expect. Hence these machines, we deploy, we can deploy to either private centers, we can deploy to Tier two, Tier three locations. So there is absolutely flexibility in terms of how we can use these equipments and there is no kind of any hinderance or bottlenecks in using these equipments.

Aditya Khemka — InCred PMS — Analyst

Great. And am I correct in assessing that ending FY23 radiology would be about 55% of total revenue and pathology will be 45%, would that be the split broadly speaking.

Yash Mutha — Whole-Time Director

I would have loved to answer that, but I don’t think so I have an immediate answer to this may be towards the close of the year, we’ll have more clarity on this.

Aditya Khemka — InCred PMS — Analyst

Sure, sure. I’ll get back on that. Thanks, Yash. All the best.

Yash Mutha — Whole-Time Director

Thanks Aditya. Thanks.

Operator

Thank you. The next question is from the line of Vineet Jain as an Individual investor. Please go-ahead.

Vineet Jain — Individual Investor — Analyst

Hi, thank you for the opportunity. I wanted to ask some details about the retail strategy. I think, you will have highlighted it in part in the investor presentation on slide 23, I wanted to understand what our broad projections are for this space and what are the plans to, eventually get into home collection of essential collections which have been highlighted on slide 23.

Yash Mutha — Whole-Time Director

Yeah, see from overall the B2C market, as we call it we had announced that we are entering that space. We’ve already started the franchisee model, so to speak. Having said that today after the successful trial that we’ve had in Maharashtra and Punjab we are getting a lot of inquiries from people, but we are very selective in the way the entire process is where we want to really identify some good partners with a long-term vision, because the way we are seeing in the market, there is so much of the kind of pricing pressure or deep discounting that’s happening. So we also want to ensure that there is a strong partnership with these kind of players with whom we want to be associated. So we’re not very, as I mentioned in my previous calls as well. There will be where it will be a slow ramp-up and then all of a sudden, we should expect a good spike once our model gets baked well. And we also see strong these kind of partnerships.

Home collection, we have also started there and like we mentioned, once the franchisee model also gets in full steam we will also expand home collection in all these locations as well. Currently in home location does work in areas like Pune and Bombay or where we have our network and we’ll be soon launching it across other locations. The reason why we currently don’t really focus, because we already have a kind of customer base or captive customer-base, which comes to our centers. So home collection is again a very differentiated service and also it means of adding more manpower. So as and when the overall network gets established, then we should be able to leverage all these other verticals of business as well.

Vineet Jain — Individual Investor — Analyst

Sure, so then is it fair to assume that home collection and other, no one walk-in patients is not going to be an immediate focus and that’s honestly good to hear, because I was worried about exactly what you said, the entire cost structure involved with it and — but wasn’t sure if this will work-in the semi-urban and rural settings where the density of population will be significantly lower as compared to urban as well as transportation, et-cetera, would be challenging. Is that a correct assessment?

Yash Mutha — Whole-Time Director

Yes, so we have been mentioning that as well. We are very cautious because in a highly concentrated kind of a market where there are such players. We are also trying to see that we should have a good differentiator, price is of course that’s a disruptive model that we have. But at the same time in terms of quality, the logistics we are also studying this and you know as I said, hopefully in the next fiscal when we have these franchisees accordingly we will start working on it. Having said that, today also in our government centers, we are seeing an increased participation from private walk-ins. That is the result because people have now started appreciating that in government centers you’re getting such kind of facilities and we are seeing a very good healthy increasing trend in these centers as well.

Vineet Jain — Individual Investor — Analyst

Sure, thank you. But Yash two questions on exactly that point. Will it be possible for you to share details of what proportion of your revenues by center or maybe by geography come from private walk-ins as opposed to the traditional government contract that’s one, and second, the BMC contract that you all have won. We do a quick — the numbers suggest that the revenue potential there from the government contract is about INR27, INR28 odd crore per annum. Correct me if I’m wrong, wanted to understand your sense of whether that contract in particular can be high in terms of potential from private walk-ins and the fact that it will be, Mumbai and we’ll be in the backyard, so to say, of the traditional large pathology players. Could this be in your view a step towards disrupting the pathology diagnostic ecosystem in urban India as well.

Yash Mutha — Whole-Time Director

Yeah, again, if you see from a data point perspective we wish for it’s a bit difficult to capture, because differentiating, whether it’s a private walk-in and government patient, there are certain measures, but we’re also working equally to have our systems capture that kind of element from a more meaningful analysis and data analysis and again thank you for raising this, we are equally working on it. It will be difficult for me to give that data point upfront now because the systems are not again, given that we are working the government centers, it’s equally challenging to differentiate very easily.

The second part of the question which you asked about from the Mumbai, of course density of population, very-high metro like Mumbai potential wise yes we also believe that it could probably have a better potential or in a much better potential. And at the same time we could leverage our presence in Mumbai to also reach out to the much more wider urban markets with our disruptive prices and the kind of quality that we’re offering. So I believe yes, Mumbai could be a good base for us to look into and tap into these kind of urban models.

Operator

Thank you. The next question is from the line of Nirvana Laha an Individual Investor. Please go-ahead.

Nirvana Laha — Individual Investor — Analyst

Yeah, thanks for the opportunity, sir. So Yash you mentioned that.

Operator

Can you use the handset, please. You are not clearly audible Nirvana.

Nirvana Laha — Individual Investor — Analyst

Yeah, actually using my handset. Am I audible now?

Operator

The audio is low. Now it’s fine.

Nirvana Laha — Individual Investor — Analyst

Yeah, so Yash, you mentioned that Punjab is already at INR12 crore [phonetic] run-rate. And if I heard you right, you said that next year is going to be about INR15, INR16 crores run rate for Punjab. So you kow we were thinking that due to the Punjab not ramping-up profitability might be depressed but that doesn’t seem to be the case so why do you think the margins y-o-y are down and continue to be down for the last two-three quarters.

Yash Mutha — Whole-Time Director

See, like I said, the margins have been impacted primarily because, for example, we have onboarded employees now, for example, Punjab might have about 700, 800 employees, but the revenue is not commensurate to the kind of number of employees we have, because the project has not ramped-up. Similarly the case of Himachal Pradesh where we’ve added more employees. So as the revenue ramp-up happens, that is where the contribution will start increasing and you should see an improvement in the margins going-forward.

Nirvana Laha — Individual Investor — Analyst

So then the question is, do you expect similar numbers in terms of margins to also continue next year because what we’re projecting is a very small growth on the number that you already have for this quarter for next year.

Yash Mutha — Whole-Time Director

I think see now, most of the fixed orders have been incurred. So we don’t expect a further dent on the margins and that trend should continue, where the margins will be stable or improve going-forward.

Nirvana Laha — Individual Investor — Analyst

Okay, around [technical issue] next year is it for Punjab?

Yash Mutha — Whole-Time Director

Sorry could you repeat that question.

Nirvana Laha — Individual Investor — Analyst

Sorry. So your guidance for Punjab for next year remains at around INR60 to INR70 crores. That’s about INR17 crores [multiple speakers] Okay, okay and can you help us understand what exactly is the slide item called fees to hospitals and other. Is this only to do with private hospital tie-ups or even for government hospitals and what is the trend in this expense item going-forward. I can see, it’s reducing. But can you — can you please explain this.

Yash Mutha — Whole-Time Director

Yeah, basically what gets captured under these two hospital is there are two components, like, one is, we are also currently tied-up with various medical colleges and private hospitals, where we have centers. There is a certain revenue-share that we do to these hospitals and then there is a element that we have in some of our bigger projects like Punjab or partner[phonetic] locations where we have business associates as we call them with whom we work in serving the state. These are very remote location, so [technical issue] tribal area or the remotest corner. For example, if I give you in Himachal Pradesh, we have a center, which is near the Tibet border. So it’s absolutely impossible for people to go, so we leverage these local partners who will help us in terms of the logistics, in terms of sample collection, and these are the partners to who we it’s a state of enrichment of a revenue-share. So, basically it doesn’t recover fixed-cost. It is linked to the revenue. And at the same time, they’re also incentivized in terms of helping us not only increase our revenue, but also ensure that quality service is being delivered. So this is how the business partners and the revenue or the fee to the hospital arrangement works. I hope I have answered your question.

Nirvana Laha — Individual Investor — Analyst

Partner part is completely clear how does the fee to the hospital, like what does the hospital and medical college deliver to Krshnaa in return for the fees?

Pawan Daga — Chief Financial Officer

They will give us space, right. So when we are operating inside their premises, the medical colleges or the hospitals, gives us the space and that is one of the reasons why we expect the revenue share because it’s a kind of a partnership, right.

Nirvana Laha — Individual Investor — Analyst

Okay, so this is for your private tie-ups. The fees to hospital.

Yash Mutha — Whole-Time Director

Yes, yes.

Nirvana Laha — Individual Investor — Analyst

Okay, okay. Thanks.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. I would now like to hand the conference over to Ms. Pallavi for closing remarks. Thank you and over to you ma’am. Hello, ma’am. Your line is muted, I believe.

Pallavi Bhatevara — Managing Director

Thank you. Thank you everyone for joining our Q2 FY 23 earnings call. I hope we have answered all your questions. And in case you have any further questions which have remained unanswered, please feel free to connect us with our Investor Relations team at the Churchgate Partners and looking-forward to interacting with you in the future quarters. Thank you and have a great evening ahead.

Operator

[Operator Closing Remarks]