Thyrocare Technologies Ltd (NSE:THYROCARE) Q3 FY23 Earnings Concall dated Feb. 03, 2023.
Corporate Participants:
Rahul Guha — Managing Director and Chief Executive Officer
Sachin Salvi — Chief Financial Officer
Analysts:
Abhishek —
Rahul Agarwal — Incred Capital — Analyst
Rahul Balani — Aditya Birla Finance Limited — Analyst
Aashita Jain — Nuvama Group — Analyst
Sumit Sardar — Compound Everyday Capital — Analyst
Sayantan Maji — Credit Suisse — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Thyrocare Technologies Limited Q3 FY ’23 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Abhishek. Thank you and over to you.
Abhishek —
Thank you, Tanvi. A very good evening to all of you and thank you for joining us today for Thyrocare earnings conference call for the third quarter and nine months ended, financial year 2023.Today, we have with us Mr. Rahul Guha, MD and CEO and Mr. Sachin Salvi, CFO to share the highlights of business and financials for the quarter.
I hope you have gone through our results release and the quarterly investor presentation, which have now been uploaded in the stock exchange website. The transcript of this call will be available in a week’s time on the company’s website. Please note that today’s discussion may be forward looking in nature and must be viewed in relation to the risk pertaining to our business. After the end of this call, incase you have any further questions, please feel free to reach out to the Investor Relations team.
I will now hand over the call to Rahul to make the opening remarks.
Rahul Guha — Managing Director and Chief Executive Officer
Thank you, Abhishek, and welcome to everybody on the call. A very good evening to you. Thank you for making the time out on a Friday evening to join us for this call. Just a brief introduction to those of us on the call. My name is Rahul Guha, I’m the MD and CEO of Thyrocare. It’s been about nine months since I’ve joined and thank you for the opportunity to present the Q3 FY ’23 results.
I’m joined by my colleague, Sachin Salvi, who is our CFO and well known to most. Additionally Pratik Hire, who is part of our strategy team, and leads Investor Relations is with me, along with Aditya Shinde, who heads our Finance, Admin and Sourcing functions.
Before we begin, as with all my calls. I will start with the quote from the Mahatma. the future depends on what you do today and with that, I wanted to give a sense of what we have been up to in the last few months. Before we get into the strategy and its execution, I want to reiterate on how we are presenting our performance, which I had shared last quarter. In line with our strategy as a B2B business, we have reoriented and our investor presentation is along those lines, on how we present our results to correctly reflect our channels to market.
We classify our business into four categories. The first is our franchisee business. This is our franchisee network, which has 950 branded Thyrocare outlets and 5,000 plus non-branded outlets. These franchisees primarily serve diagnostic lab, small nursing homes, hospitals, and individual customers. The Thyrocare branded franchisee have a direct consumer business as well.
The second area is our partnerships. These are partnerships with healthcare platform, direct selling agents of corporates, where we enable them with diagnostics as part of their portfolio. Our flagship partnership is API Group, which accounts for 12% of our pathology this quarter. However, we work with all the leading e-pharmacies, most of the major e-consultation platforms, healthcare at home providers and surgery platform. In addition to this, we have a large network of direct selling agents who engage online to promote our packages.
Finally, we work with several insurance companies for their pre-policy and annual health checkup and with corporates for their annual health checkups. In this year, we have added several pharma companies who work with us for their patient support program. We also have a small direct-to-consumer business. This is business driven directly from our website app and CRM teams. This is where a customer books from Thyrocare directly.
And finally, we have our government business where we participate on several government programs, in particular, our strength is in the tuberculosis space and we work with the government on multiple TB initiatives.
As we have shared in our presentation, we have shown strong growth year-on-year across all verticals and the revenue picture is quite strong. We continue to execute on the strategy we outlined and have made good progress across all elements. In pin-code expansion, although our activation rate was similar last quarter, we had a significant amount of churn. And so that has led to a net addition this quarter of only about 50 pin-codes against last quarter. We have been working very hard to get to the root cause of the churn and we believe we have addressed much of it and with focused farming efforts, we hope to continue the trajectory of pin-code expansion that we have done in the last couple of quarters.
We also expanded our flagship Aarogyam series to include a plus and pro series at higher price points and to provide a wider range of preventive health packages to our patients. The journey on quality is ongoing and we have made good progress, with four labs receiving their NABL certificate this quarter and two labs completing the NABL audit successfully that the certificates are expected.
With this, we now have 14 labs as of Q3 and 15 labs as of today, which are NABL-accredited. It remains our goal to have 90% of our sample load processed as an NABL lab. And today, I’m very happy to say that 70% of our sample load is processed in an NABL lab. It is important to understand this 70% in the context that today only 2% of pathology labs in the country have an NABL accreditation.
On the customer connect, we expanded our field team who goes out and meets franchisees and doctors. This team is at 59 members and have already activated several partnerships over the last quarter, who have been working with Thyrocare. Additionally, we have complemented the field teams with an outbound call center, which promotes our packages and our network. This team has 50 people.
On TAT, the journey has been very encouraging. We continue to optimize the TAT in any of the 22 cities where our lab is present. Our P90 that is, the 90th percentile of turnaround time, is less than 15 hours. I’m happy to say that we are able to reliably deliver same day reports from 90% of our samples across the country.
This quarter, we also moved forward in engaging doctors on diagnostic testing and how it can impact their patients. In partnership with key opinion leaders, we have developed educational videos and I’ve also started participating in conferences to share and debate our perspective on diagnostic testing.
Finally, when it comes to leveraging the API group. As I shared earlier, API Group today accounts for 12% of our pathology level revenue, which is the same as last quarter. As I mentioned, we have three major initiatives, cross-selling on the PharmEasy platform, enabling pharmacies or pharmacy counters to sell diagnostics through Retailio and Marg, which are the retailer app, as well as the retailer ERP respectively and entering the hospital space through the partner company Aknamed. As informed last quarter, a large part of the lower volumes from API groups has been on the ParmEasy platform and this is primarily because as a group, we are focused on profitable growth. As a result, the rate of customer acquisition has slowed down as the group pruned the low-profitable orders in the portfolio.
With that, while the overall number of orders has reduced, it has resulted in an average order value improvement and as we correct this base with the right growth formula, we are hopeful that the growth from the PharmEasy platform comes back in the next couple of quarters. Retailio, the B2B retailer app and Marg, the retailer ERP initiatives are going well and are on track. As of today, we have been able to onboard 4,900 pharmacy counters, who have placed one order for diagnostics with their customers. The revenue of this channel is up by 14% versus last quarter. So, it is still of a very small base.
Additionally, through focused efforts, we have now on boarded a 180 hospitals for their outsource business across the country. This is a mix of small and big hospitals and we are watching this initiatives to see how it scales up.
As we get into the results, I wanted to share with you a few highlights or main pointers before we deep dive into this. Our focus has been on driving sustainable revenue growth. We continue to sustain the healthy recovery in our volumes and this is the first quarter where we have seen Y-on-Y growth after some time at an overall level, despite a significant dip in the COVID business. This has been driven by continuous focus on channel expansion through our pin expansion initiative and focus on onboarding new accounts in our partnerships. As a result, we have been able to deliver 20% year-on-year growth in our non-COVID business, while growing 6% year-on-year in spite of a significant COVID business of INR15 crores in the same quarter last year.
With that, I will hand over to my colleague, Sachin to cover the results. Over to you, Sachin.
Sachin Salvi — Chief Financial Officer
Thank you, Rahul. And thank you everyone for attending this call. I will briefly update you about the key highlights of Q3 Financial Year ’23 financial performance. Before we get in to the details, I reiterate about the ESOP program that I had mentioned in the last quarter. This program has been introduced at the Group level to retain talent at Thyrocare. The ESOPs of our parent company will vest over the period of six years and we are recognizing the same as per the IND AS, IFRS as a book entry towards share-based payments and appropriately reflected in the profit and loss account statement as an expense and in the balance sheet at equity contribution from the parent Company. The total value of the ESOPs granted are INR45.53 crore over the period of six years. But one thing you must note is that this is the cashless charge. It is not a cash outflow. As per IND AS, the options are valued at a grant date as per Black Scholes formula, which is a charge to profit and loss account over the vesting period proportionately and typically it results in the year of grant and then proportionately charged over the period of vesting. The breakup is included in the presentation as well.
As these are not operating expenses and do not impact the cash outflow of the company, we have normalized EBITDA to that extent and reported EBITDA in line.
To now going into the performance, first, I’ll start with the revenue from operations. Our revenue from non-COVID operations for the current quarter on a standalone basis has increased by about 20% Y-o-Y to INR109 crores, however our COVID revenue has declined 94% Y-o-Y to INR87 lakhs for this current quarter, resulting in a 6% growth in our Pathology revenue. However on a sequential basis, our pathology revenue has declined by 6%, which is in line with expected seasonality owing to festival seasons in quarter three.
In the last nine months, we have grown our non-COVID revenues of INR275.3 crore in YTD ’22 to INR338.6 crores in YTD ’23, which is about 23% growth. Additionally, we have seen a strong recovery in our radiology business too. We have grown revenue on a Y-o-Y basis by 50% and on a sequential basis by 11%. As far as EBITDA margin is concerned, our standalone EBITDA margin stands at 28% versus 30% last quarter. This margin impact can be explained by lower revenue on account of seasonality, while the overhead cost remains the same.
To summarize our financial highlights, revenue growth of 20% Y-o-Y in non-COVID business, 6% Y-o-Y in overall pathology business and 6% decline Q-o-Q on account of seasonality. Gross margin is marginally down at 67% versus 68% last quarter. Employee cost and other expenses have remained stable versus last quarter. In terms of volumes, we have processed in the current quarter about 5.3 million non-COVID samples, which is 47% up Y-o-Y.
With these deep highlights, I’ll pass it onto our MD and CEO Mr. Rahul Guha for the strategic updates to the investors. Thank you.
Rahul Guha — Managing Director and Chief Executive Officer
Thank you, Sachin. Briefly, I would like to take a few minutes to recap to you on our strategic direction, then as always, I’ll be happy to discuss Q&A. First, I will cover our value proposition to the customer. As always, as I’ve iterated in every call, we will continue to remain an affordable option to all patients with good quality and on time reports. All our efforts on our value proposition is towards ensuring low cost to the patient, assurance on quality of testing through our certifications and engagement with doctors. We have made substantial progress on this, which I updated in my initial comments and is reflected in the presentation. This will continue to remain at our core, and will guide all that we do.
Second, our strategy. We hope to become the B2B partner of choice to all front-end healthcare services companies in India. Whether it is a small Diagnostic Center in semi a urban area, a pharmacy in a metro, a small nursing home, an individual doctor or a leading online diagnostics platform, or Health Tech market place, we are happy to provide low cost robust testing solutions to ensure they can serve their patients in the most effective manner. If they require phlebotomy, we are happy to mobilize our phlebotomy network of almost 900 company and 400 network phlebotomists to serve them better. This strategy has been working well for us. We believe, we are uniquely positioned in the diagnostics industry to enjoy the best of both worlds.
With our offline presence of almost 6,000 channel partners, should the offline world pick up, we are well-positioned with this channel partners to win in that space. And with all our partnerships in the online world, should the online side of the business pick-up, we are well-positioned to take advantage of that uptick as well. As a result, this quarter we have delivered 20% year-on-year value growth and 47% volume growth in our non-COVID business.
Third, our roadmap remains the same as we shared every quarter. I will give an update on where we are on this. I will cover this in two parts. Part A, leveraging the power of the API Platform. As we mentioned in the investor presentation, we have four focus areas to maximize our advantage. The first is serving the PharmEasy online customer base of regularly transacting quarterly users. Today, we are at 6% of diagnostics cross-sell. Similarly, we wanted to leverage the advantage from Retailio and Marg of the 2.8 lakh counters to expand order points. We have a pipeline of 11,000 retailers who have expressed interest in diagnostics. And as I shared earlier in my presentation, we have 4900 retailers, who have placed an order on this platform.
We also continue to leverage Aknamed in our Thyrocare franchise network to build a presence in the hospital space. While we have leveraged the Aknamed, we’ve also used our own field team and partnerships with other companies to scale our hospital presence. Today, we serve 180 plus hospitals versus our 110 plus hospitals last quarter in our network and continue to focus on this.
We also ensure the expansion of the ParmEasy offline collection points. They continue to rapidly expand their offline presence, with almost 300 plus offline franchisee stores for lab collection where Thyrocare served all the lab collection needs.
On the Thyrocare side as well, we have four areas where we maximize our advantage. The first is, continuing to improve our value proposition to our franchise network. We are expanding aggressively. We continue to scale our business footprint and as I mentioned, we are now at the 950 active [Technical Issues]. We also focus on our health packages Aarogyam and promoted to cooperates, online and offline players.
We’ve launched a set of packages on our flagship Aarogyam series to really have a full range from INR500 to INR5,000 so that we give the best options to customers for their annual health [Technical Issues]. We’ve also, as I said earlier, launched a number of preventive profiles depending on the specific lifestyle diseases, so that customers can have a more targeted approach towards their health.
The third area is where we’re expanding our lab network selectively to address the TAT challenges. We have been investing in accreditation and getting our voice out there [Technical Issues]. 50% of our lab by NABL at 36, target is to get most done by the year. In all cities where our labs are present, we give same day reports and as an all India basis as I said earlier, our P90 is within 24 hours. We also continue to invest in technology. Much of the achievements we have been able to in terms of quality, on-time reporting and costs have been because of the technology investments we have been able to make and leverage value of.
That in brief is our mandate as management. Thank you once again for giving us the patient hearing. As always, I’ll end with the quote from the Mahatma. ‘Find Purpose, the Means will Follow. And our purpose remains to provide affordable high quality testing to the market. With that, we’ll open it up for questions.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions]. First question is from the line of Rahul Agarwal from Incred Capital. Please go ahead.
Rahul Agarwal — Incred Capital — Analyst
Yeah, hi, thank you for the opportunity. Good evening, everybody. Just three, four questions, clarifications. Essentially, firstly Rahul play of the land, in how our consumer is behaving, both in franchisees and partnerships, we’ve seen some peers on B2C side reporting weak growth on volumes and revenue. But what color are you picking up from the industry, has competition slow down, is the change in pricing, how our patients behaving, anything you’d like to share please. This is the first question.
Rahul Guha — Managing Director and Chief Executive Officer
Sure. You want me to note down all your questions or you want me to take it one at a time?
Rahul Agarwal — Incred Capital — Analyst
No, I think one at a time will be good.
Rahul Guha — Managing Director and Chief Executive Officer
So on the franchisee side, if you see in the presentation Rahul, we’ve actually seen very strong growth on both sides. Both on the franchisee side, as well as our partnerships. That being said, our partnerships are growing much faster than our franchisee business. So, that should give you a little bit of a glimpse into how patients are at least behaving. So overall, I would say, as you know Thyrocare almost 80% of our business is tier two and beyond, so Metro Tier-1 actually, our business is only 20%. So that business has grown quite well. I do believe though on — if I take a look at our Metro Tier-1 business, I would say competition is heated up quite a a bit over there. As I can see from our partnerships, our partners have been growing all very very fast in that space.
So, I would say the Tier-1 market, it seems like people have many options and some of our partners are of course gaining share or at least seeing strong growth in those segments. But, I think in the Tier-2 and beyond [Technical Issues] where actually 80% of our business is there. That also continues to enjoy a decent amount of growth.
Rahul Agarwal — Incred Capital — Analyst
Got it. That helps. Secondly, on the API engagement, basically on both on Retailio, Marg and Aknamed. Quarter-on-Quarter, we have improved with engagement right, in terms of hospitals, in terms of pharmacy retailer. We haven’t seen flow through and when do we expect that to happen?
Rahul Guha — Managing Director and Chief Executive Officer
I would say, on the platform you will — as I said, we’ve been correcting the focus and the [Indecipherable]. So, I think a little bit of time has taken to get that model right and then scale it up from there. So, you haven’t seen that. But, I would say Retailio, now starting to become a significant part of our numbers. We don’t report it separately, but it’s not a small number anymore. On the hospital side though, it is still a very small number.
Rahul Agarwal — Incred Capital — Analyst
You mentioned in your speech, some 14% of top line. Is that the Retailio and hospital number put together of total top line?
Rahul Guha — Managing Director and Chief Executive Officer
No, 12% is what I said. And 12% is overall API as a group, which includes the platform Retailio. However, hospitals, we don’t book in that API number. Because it’s a mix of actually leads from Aknamed and our own sales network that goes out and connects. So in effect, it doesn’t get counted in the API revenue. because API revenue is largely the platform and Retailio and Marg. But, I would say if I go back couple of quarters, that ratio would have been 99:1. Today the ratio, I would say closer to 95:5.
Rahul Agarwal — Incred Capital — Analyst
Got it. Yeah, I understand the 1% number. I think there were some 14% number in your speech. I got confused. Anyway, I’ll take it offline. Thirdly, on the pin churn, you mentioned, obviously the activations are lower in the quarter. But, why is churn like, you know, what has really happened here.
Rahul Guha — Managing Director and Chief Executive Officer
I think, one mistake we made in the second quarter, which we have corrected now is, we went quite deep. So, we had gone almost to TIer-3 and Tier-4 kind of town where I think we were struggling to maintain a decent TAT and so as a result, we saw a quite a bit of churn. So, now we’ve kind of pulled back from that and said, we will do it only in a 100 kilometer to 150 kilometer radius from where we have a lab and we’ll focus on those territories rather than going into the interior and only when we are reliably able to do report within 24 hours will we open up a pin code. And I think that will help address all our churn.
Rahul Agarwal — Incred Capital — Analyst
So that’s largely done or this 3950 number could also see some churn going forward?
Rahul Guha — Managing Director and Chief Executive Officer
No, no. I think we’re done on that. We should be okay. We should be back to our old run rate.
Rahul Agarwal — Incred Capital — Analyst
Got it, and two small questions for Sachin. The ESOP charge, I think second quarter, third quarter put together is INR12.5 crores. Total, my understanding is INR45 crores over six year. Could you — I know the valuation is tough here, but could you help me with the fourth quarter number, approximate numbers and the next year number, which will debit to the P&L? please?
Sachin Salvi — Chief Financial Officer
So, again, as I said in the opening remark, it depends upon the date of grant. So, assuming that there is no grant in the quarter four, the number which you are asking for could be similar that is about INR6 crore. And I think in the presentation, in one of the slides, we have given further breakup. So you can recalculate the number which you are asking for the next financial year accordingly.
Rahul Guha — Managing Director and Chief Executive Officer
Yeah Rahul, in the presentation on slide number 8, actually the year-wise breakup is given. So you can actually calculate the impact.
Rahul Agarwal — Incred Capital — Analyst
Yeah, I’m aware of that. I thought those are — those percentages are not really applicable to the INR45 crores. If I just multiply that percentage in to INR45 crores, will I get the annual numbers? Is that correct?
Rahul Guha — Managing Director and Chief Executive Officer
That’s correct. Exactly.
Rahul Agarwal — Incred Capital — Analyst
Okay. I understand that. And lastly, the provisions on receivables, and just bit not clear. I know these are smaller amounts, but till date, all the provisions created for government receivables are all related to COVID, is that understanding correct?
Rahul Guha — Managing Director and Chief Executive Officer
That’s, correct.
Rahul Agarwal — Incred Capital — Analyst
Anything incremental you would expect or is entire receivable balance clean now?
Sachin Salvi — Chief Financial Officer
So, as of now, based on the accretion, which is there as on 31 December or as on 3rd of February 2023, we do not anticipate any additional provisions. But it depends upon any further clarifications, which will be asked by the government bodies. We may have to assess again either at the 31st of March or say on 31st May by the date on which we are supposed to declare our provisions.
Rahul Agarwal — Incred Capital — Analyst
Because, these are more ECL provisions; because of law we have to do it or you think these are something, which we would really never get it back?
Sachin Salvi — Chief Financial Officer
These are yearly ECL provisions. You are right.
Rahul Agarwal — Incred Capital — Analyst
Okay, got it. I’ll come back in the queue. Thank you so much.
Sachin Salvi — Chief Financial Officer
As of May, we are expecting that all our [Technical Issues] will get realized, but since we have a ECL [Technical Issues], which we follow. Based on the ECL [Technical Issues].
Rahul Agarwal — Incred Capital — Analyst
I understand. Thank you so much. I appreciate you answering all my questions. Thank you so much. All the best.
Rahul Guha — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you. [Operator Instructions]. The next question is from the line of Rahul Balani [Phonetic] from Aditya Birla Finance Limited. Please go ahead.
Rahul Balani — Aditya Birla Finance Limited — Analyst
Good evening. My question is basically about [Technical Issues].
Operator
Sorry, Rahul. Your voice is not clearly audible, please speak a bit louder.
Rahul Balani — Aditya Birla Finance Limited — Analyst
Good evening. I want to know about this INR2.5 crores investment in Hitech health services. Can we get a little brief about it?
Rahul Guha — Managing Director and Chief Executive Officer
Hi, Rahul. We are trying a pilot project in the Radiology space with a partner who is very, very experienced in the radiology space called Pulse Hitech. So we have opened or in process of opening our first Radiology Center, which will have CT, MRI, ultrasound and X-Ray, all the main radiology modalities, along with pathology. It will be coming up in [Indecipherable] as our first pilot location. [Technical Issues] if the radiology space can be an interesting space for us and we have done a small pilot in that space.
Rahul Balani — Aditya Birla Finance Limited — Analyst
Okay. And my next question is on NHL, like previously there was a time that was a — you had to take a impairment. So, is there any situation [Technical Issues] there could be a impairment for NHL.
Sachin Salvi — Chief Financial Officer
This question, Rahul, I think, I have already addressed. So as on 31 December 2022 or as on 3rd of February 2023, that is the today’s dates, we do not anticipate any further provision, but we will asses the situation once again as of 31st of March, ’23 or as of the date of declaration of our results for the quarter four and then if we required, we will take the provision. Again, this provision has been made on the basis of ECL metrics, which we follow. As of now, we do not have a definite amount, which is not likely to receive the premium for government parties.
Rahul Balani — Aditya Birla Finance Limited — Analyst
Actually my question was NHL impact, Nueclear Healthcare Limited.
Sachin Salvi — Chief Financial Officer
NHL impact. I’m sorry, I’m sorry. So as on the Nueclear Healthcare Limited is concerned, we have taken the impairment [Technical Issues] in March 2020. We will assess the situation once again as of 31st March, 2023. But going by the results Nuclear or the performance of the results of Nuclear, we do not anticipate any future impairment as far as NHL investments is concerned.
Operator
Rahul, do you have any further questions?
Rahul Balani — Aditya Birla Finance Limited — Analyst
No.
Operator
Thank you. [Operator Instructions]. The next question is from the line of Aashita Jain from Nuvama Group. Please go ahead.
Aashita Jain — Nuvama Group — Analyst
Hi good evening. My question is on your PharmEasy revenue. Having going through your last quarter call highlights, I think you made the same commentary last quarter as well that there is the profitable growth. There has some slowdown, which has continued this quarter [Technical Issues]. So, I just want to understand your thought, how — what are your plans to grow this [Indecipherable] revenue going forward.
And secondly, when I look at your profitability, it hasn’t improved much as today within the [Technical Issues] right now. I understand [Technical Issues]. But any color on the 12% revenue. as well as on the profitability.
Rahul Guha — Managing Director and Chief Executive Officer
Yeah, so see the 12% of revenue, as I mentioned, it has remained — I would say as a percentage flat for the last quarter at least. But before that, it used to grow quite significantly. Look, it’s difficult to say or give you guidance on where we think that number will go, but I do believe as we enter into this quarter, that formula of what is profitable growth and what is the appropriate price point to sell has been figured out.
Now we’re really investing along with PharmEasy to see how that business will be scaled and of course it benefits Thyrocare if that business scales, but it is very difficult at this point to give you a number on where we think that percentage can go. But we are quite bullish on at least how that partnership is panning out and will continue to pan out. [Speech Overlap]
I just wanted to share as I keep reporting, just last quarter, the diagnostics cross-sell, which is basically the percentage of diagnostics revenue on PharmEasy versus the percentage of revenue on medicine at PharmEasy has been steadily increasing. So it was I think roughly around 3% when I first started reporting and now we’ve doubled that to almost 6%. And so as the medicine order start to grow, when the diagnostics orders that are 6% of medicine orders, we expect that to also rapidly scale at the same pace.
Sorry, you were giving a clarification on the question.
Aashita Jain — Nuvama Group — Analyst
Yeah. that’s really helpful, but my question is on not from the number perspective, but more from a strategy perspective. How do you plan to grow this business going forward.
Rahul Guha — Managing Director and Chief Executive Officer
Okay one is — as the medicine orders increase, diagnostic orders also will come. We have invested quite a bit in the technology products. The on-time or free proposition on PharmEasy and actually if you use the app, you’ll see, it’s quite a seamless experience overall. I think a lot of investments has gone into making the consumer experience on that App to book a diagnostic test, get your results, all of that. I think the journey has been quite seamless and as we continue to invest, if you see at the PharmEasy Group level also, diagnostics is a very big priority. So a lot of the investment is going behind diagnostics to acquire customers or cross sell to customers from medicine to diagnostic. And if you see the investments there, it’s lined up against that.
So I’m hopeful as we invest behind the cross-sell and the medicine orders now continue to grow, we should be in a good place. The product is fantastic. So if you go and see the app and all of that, I don’t think there isn’t much to be done anymore to make the journey of purchasing a diagnostic test on PharmEasy. To improve that. I don’t think there’s much to be done. You should try it out yourself.
When it comes to the EBITDA as I said. sorry?
Aashita Jain — Nuvama Group — Analyst
Please go ahead sir.
Rahul Guha — Managing Director and Chief Executive Officer
When it comes to the EBITDA, we still continue to carry some amount of COVID in the base from last quarter. Last quarter we had about INR15 crores of COVID sitting there. COVID, of course, came at a higher overall gross margin and EBITDA margin and that — as we keep seeing that come out of the base, it does have an impact on earning. And the second is, as I’ve said before, we’ve been investing on the employee side. So, if you look at the same time last quarter versus this quarter, there is still an increase in employee cost, but if you look at quarter-on-quarter, we have kind of kept it more or less steady or actually going down. And overheads, we have kept under control throughout this period. So to answer your question on the overall margin, it’s two effects. One is coming COVID coming out of the base and it is taking us some time to accelerate the NOVID business And NOVID business of course came at a lower-margin than the COVID business. So that has it’s impact on the gross margin. And the second is the investments in manpower, which hopefully as the business scales, we will get operating leverage out there.
Aashita Jain — Nuvama Group — Analyst
Sir, this is very helpful. Thank you.
Operator
Thank you. [Operator Instructions]. The next question is from the line of Sumit Sardar [Phonetic] from Compound Everyday Capital. Please go ahead.
Sumit Sardar — Compound Everyday Capital — Analyst
Yeah, hi, am I audible?
Operator
Yes.
Rahul Guha — Managing Director and Chief Executive Officer
Yes, Sumit.
Sumit Sardar — Compound Everyday Capital — Analyst
Yeah, hi. Thanks for the opportunity. My question is for Sachin. First is on the ESOP. I understand the cost part of it, cash less part of it. But I just wanted to see when there we need dilution of Thyrocare’s equity shares when will the shares are finally issued or no.
Sachin Salvi — Chief Financial Officer
No. The equity shares are — So there are two skews; one is ESOP scheme of Medicare and other one is the ESOP scheme ECS. For the first one, the equity shares of Thyrocare have been issued, but very small amount. As far as the second one is concerned, the shares of API [Technical Issues].
Sumit Sardar — Compound Everyday Capital — Analyst
Okay. For the API holding ESOP program, there won’t be any dilution of equity share at Thyrocare. Am I correct?
Sachin Salvi — Chief Financial Officer
Yes, that is correct.
Sumit Sardar — Compound Everyday Capital — Analyst
Okay, neither there will be any issuance to API holdings in the lieu of that.
Sachin Salvi — Chief Financial Officer
There will not be issuance for API holdings.
Sumit Sardar — Compound Everyday Capital — Analyst
Okay, got it. And then the final one is on, what is the absolute amount of receivables as on date.
Sachin Salvi — Chief Financial Officer
Absolute of receivables at Thyrocare?
Sumit Sardar — Compound Everyday Capital — Analyst
Yes.
Sachin Salvi — Chief Financial Officer
In Thyrocare books, it is INR87.704 crores as on 31st of December 2022 total.
Sumit Sardar — Compound Everyday Capital — Analyst
Okay and as you early alluded, most of it is toward the government [Technical Issues].
Sachin Salvi — Chief Financial Officer
Yes. Okay. Got it. On the — one final question to Rahul, if I may. What is the trend of pricing. I think, of course there is a impact of COVID in the base, but if you exclude that and as you had alluded that you are trying to increase volumes, can we assume that the pricing rationalization has been stabilized or can we expect further rationalization.
Rahul Guha — Managing Director and Chief Executive Officer
No, no. If you see it in our presentation also, we report both the revenue and the workload, which we is the [Technical Issues]. Over the last couple of quarters we’ve been steadily increasing prices, of course not dramatically, but you know a small increases you can take it.
Sumit Sardar — Compound Everyday Capital — Analyst
Okay, okay. And, are you saying that the competitive intensity kind of allows you to do that?
Rahul Guha — Managing Director and Chief Executive Officer
Yes, particularly on our franchise network, it does allow us to do it. On our partnerships also, I think we have been able to pass-on price increases to the partners as well. So I think yeah on both sides, we have not had a — but again, I want to clarify, these are small price increases. These are not very large price increases. But yes, it those cases, our partners have been able to absorb this and compete in the market.
Sumit Sardar — Compound Everyday Capital — Analyst
Got it, I’ll get back in the queue. Thank you.
Operator
Thank you. [Operator Instructions].
Sachin Salvi — Chief Financial Officer
Is there any further questions?
Operator
Yes sir, there is just one question from the line of Sayantan Maji from Credit Suisse. Please go ahead.
Sayantan Maji — Credit Suisse — Analyst
Yeah, thank you for the opportunity. So my question is on Aarogyam. So we have been hearing some peers have spelled that patients opting more for bundled packages, because it conveys better value proposition for the patient and the doctor if he is prescribing multiple tests. So has our share — so I know you used to report it earlier in March ’22. But you know and we had seen some increase in the last one or two — two or three months prior to that. So has the contribution from Aarogyam increased for us, say in the last three to six months?
Rahul Guha — Managing Director and Chief Executive Officer
So this quarter is, actually a lot of this quarter is around the festive season. So, we typically, in this quarter run a lot of camps and many of our channel partners run festive season camps and all of that. So, Aarogyam typically around this quarter is a good, how do you say, it’s a good season for Aarogyam, but the overall market tends to be depressed, because of the — again because of the festivals, as well as the winter season. So, our overall Aarogyam today is steady at about 35% and it was at the same level last quarter as well. As we move into the next quarter, you should see a big spike again in Aarogyam. The next quarter tends to be quite a good season for packages because of the tax benefits from diagnostic testing. So, as of now it is 35%, but I would expect it to grow as we go in to the next quarter.
Sayantan Maji — Credit Suisse — Analyst
Right and even my next question is also related to that, now we are introducing Aarogyam plus and Aarogyam pro packages. So, what led to this decision? Do you see patients moving up so you have multiple Aarogyam packages as well. So do you see patients opting for a higher value package, and what are these packages trying to spin a bit as well, the plus and pro packages.
Rahul Guha — Managing Director and Chief Executive Officer
So, if you look at our Aarogyam series, it used to start at about INR1000 and end at about INR2500 with actually then a very big jump to about INR5,500 in that range. So we realized that there were gaps in our portfolio, both at the lower end of the range, as well as in this mid-tier of between INR2,000 to INR5,000. So, the plus and pro portfolio, it’s there. It fills the gap and it gives patient, a lot of option. So earlier, we ended at INR2,500 and there’s a big jump at INR5,000. Now we have INR2500, INR3,000, INR3,500, INR4,000 and we’ve been able to provide customers a full range, starting from actually INR750 all the way to INR5,000. And the reason we did that is we found actually there was a good mix of customers in that INR2,000 to INR3,000 range who ever opting for these packages. And that, for example, the pro and plus series, what we call the higher end sets of packages, I think, are already almost 8% to 10% of our Aarogyam business.
Sayantan Maji — Credit Suisse — Analyst
Got it, that’s very clear. And so are you promoting these packages I mean to the direct to consumer channel itself or do you know, are you also promoting it to that 59 member field team that is engaging with doctors.
Rahul Guha — Managing Director and Chief Executive Officer
No. So packages normally don’t go through the doctor network. So our franchisee network is promoting these packages and of course these packages are live on all our parrtners.
Sayantan Maji — Credit Suisse — Analyst
Okay, got it. So just one last question. So this is on PharmEasy. So, you know API share of revenues I remember, I think it was 13% and then it was 12%, then again at 12%. So of all — and as you had mentioned that you know the product has been upgraded to optimize for cross-selling diagnostic test as well. So, I would believe from a PharmEasy point of view also because diagnostic tests are more profitable than say selling medicines, so, the focus should be high there is as well. If you want for a profitable growth, then diagnostic revenue in absolute term should have ideally increased quarter-on-quarter over the last few quarters. So, what has been the challenges in that total number of users on the platform has decreased or is it that benefit of better product and advertising has not yet reflected — is not yet reflecting but you expect it to reflect in the subsequent quarters.
Rahul Guha — Managing Director and Chief Executive Officer
No. I think, if you do the mathematics of how I have reporting if cross-sell of PharmEasy Diagnostics to medicine was 3% and then it has slowly increased 4%, 5% and now 6%. But the overall contribution to Thyrocare has remained flat. It means that the overall users transacting had come down over the last time, but that was intentional to remove the low-profitable orders from the PharmEasy platforms and ensure that we are — we retain the profitable customers and ensure that we grow.
Sayantan Maji — Credit Suisse — Analyst
Got it, but do you expect this 12% share to increase as a percentage of our revenues.
Rahul Guha — Managing Director and Chief Executive Officer
Absolutely. Once the — as I said and as you rightly pointed out also, the core around getting to profitable growth, diagnostics is a very strong pillar for PharmEasy in that and Thyrocare is the entire back end partner for all the diagnostics on PharmEasy. So, strategically for the API Group, diagnostics is one of the most important vertical when it comes to the journey of the path to profitability. So the investments have been planned accordingly to scale this business on the PharmEasy side and Thyrocare of course benefits from that. And we are quite hopeful that as the platform also continues to grow from this space, the diagnostics business will accelerate from here much faster.
Sayantan Maji — Credit Suisse — Analyst
Right. And it’s safe assume that this — since 95% of the revenues are still coming from the platform and PharmEasy has a more dominant presence in say metros. So, this 12%, majority of it will be coming from the metro cities itself?
Rahul Guha — Managing Director and Chief Executive Officer
So. I would say, the top 20 cities in India. But yes within that also, if the top five cities account for about 70% and then the remaining 15% would account for 30% of that business.
Sayantan Maji — Credit Suisse — Analyst
Okay sure. Okay, thank you so much for answering the questions. It’s very clear. Thanks.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments.
Rahul Guha — Managing Director and Chief Executive Officer
Thank you so much for spending the time with us on on this evening. As always, we continue to remain focused on our strategy, which is to be the most affordable, good quality diagnostic testing partner for anyone in the health business and we continue to execute on that strategy. We have been investing in improving our quality, improving our reach and ensuring our turnaround time as well as close to best in class and we have made substantial progress on all of this and I thank you for all your support in this journey.
With that, I’ll hand over to Abhishek for closing comments.
Abhishek —
Thank you all. Tanvi, let’s conclude the call now.
Operator
[Operator Closing Remarks].