Vijaya Diagnostic Centre Limited (VIJAYA) Q2 FY23 Earnings Concall Transcript

Vijaya Diagnostic Centre Limited (NSE:VIJAYA) Q2 FY23 Earnings Concall dated Nov. 11, 2022

Corporate Participants:

Suprita Reddy — Chief Executive Officer

Narasimha Raju — Chief Financial Officer

Analysts:

Anoop Poojari — CDR India — Analyst

Unidentified Participant — — Analyst

Prakash Kapadia — Anived Portfolio Managers — Analyst

Aneesh Deora — Nomura — Analyst

Priya Harwani — Perpetuity Ventures LLP — Analyst

Aditya Khandelwal — Securities Investment Management — Analyst

Girish Bakhru — OrbiMed — Analyst

Sivaramaraju V — Head of Strategy Team

Namit Mehta — KC Capital — Analyst

Sudhir — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Earnings Conference Call of Vijaya Diagnostic Centre Limited. [Operator Instructions] I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you and over to you.

Anoop Poojari — CDR India — Analyst

Thank you. Good afternoon, everyone and a very warm welcome to Vijaya Diagnostic Centre’s Q2 FY23 Earnings Conference Call. We have with us Ms. Suprita Reddy, Chief Executive Officer; Mr. Sunil Chandra, Executive Director; Mr. Narasimha Raju, Chief Financial Officer; and Mr. Sivaramaraju, Head of Strategy, of the Company.

We’d like to begin the call with opening remarks from the management followed by an interactive question-and-answer session. Before we start, I’d like to point out that some statements made in today’s call may be forward-looking in nature and a disclaimer to this event has been included in the earnings presentation shared with you earlier.

I would now like to invite Ms. Suprita Reddy to make her opening remarks.

Suprita Reddy — Chief Executive Officer

Thank you. Good afternoon, everyone. I’d like to take this opportunity today to welcome each one of you to this forum on behalf of the management team of Vijaya Diagnostic Centre Limited. I will first present the key highlights for the period after which Mr. Narasimha Raju will take you through the operational and financial highlights of the quarter and half year ended 30th September 2022.

The Second quarter saw healthy improvement in the demand for non-COVID business across all segments. The company managed to enhance its network and made considerable progress on its calibrated expansion plans. The Wellness business is showing positive results and the company continues to increase its revenue share from this segment. During Q2 FY23 the Wellness segment recorded its highest ever contribution to revenues at 12.4%. This being the case we are quite sure that the integrated diagnostic service provider derived major business from B2C will not be influenced by competition of different formats.

I’m glad to announce the commencement of operations of a one off it’s client-centered Punjagutta this centre is spread across 16,000 square feet. The facility is the first-in South India to introduce a walk-in, walk out dual Cardiac CT and the biometrics 3.0 Tesla MRI. Apart from advanced imaging equipment such as a PET CT and Gamma Camera. During Q2, FY23 we successfully commissioned one hub at Rajahmundry and 12 new spoke centres. A few of the spoke centres was setup to capture upcoming pocket across Hyderabad. This helped us ease up existing centres in the region facing capacity constraints. These spoke centres also strengthened our hubs and contributed to positive growth in volumes. These small-sized spoke centres are over and above our initial plan expanding by 15 more centre in FY23.

I’m also happy to share that we have recently migrated all our centres and lab across the network to a more efficient, robust and comprehensive ERP that will enhance operational efficiency, enable construction of useful and informative analytics, facilitate an interactive customer interface, help engage the customer and make the entire experience more complete and wholesome. We are determined to stay committed to our [indecipherable] strategy and business initiatives which we believe will enable us to grow and strengthen our brand in our key markets. We will continue to intelligently expand into profitable Tier two and Tier three cities across whole markets and untapped adjacent geographies. The promising dynamics of the Indian diagnostics sector coupled with our innate capabilities, and that would be trusted brand of choice will surely enable us to maintain steady growth in time to come.

With this. I would like to hand over to our CFO, Mr. Narasimha Raju, who will take us through the operational and financial highlights for the period. Thank you.

Narasimha Raju — Chief Financial Officer

Thank you, Madam. Good afternoon, and warm welcome to everyone joining us on the call today. I will briefly take you through the company’s operating and financial performance for the quarter and half year ended 30th September 2022. The, consolidated revenue for the quarter stood at INR121 crores as against INR113 crores in Q2 FY22. During the current quarter the company continued to witness month-on-month improvement in non-COVID test volumes. Also the transitioning the revenue mix profile from COVID to non-COVID, continuing in the current quarter as well. The non-COVID business revenues stood at INR117 crores, comprising 97% of our revenue share as against 90% revenue share, in Q2 FY22.

Overall our non-COVID business registered a growth of 15.1% year-on-year, while COVID revenues registered a decline of 67.6% on a year-on-year basis. The number of footfalls stood at 0.85 million as compared to 0.87 million in Q2 FY22. The number of test registered a year-on year increase of 11% from 2.36 million to 2.63 million. The number of tests per footfall has also increased to 3.09 in the current quarter from 2.72 in the last year Q2.

The revenue per test was INR459 and revenue per footfall, INR1,418 during the current quarter. EBITDA for the current quarter was at INR49 crores as against INR51 crores in the corresponding previous period. EBITDA margin stood healthy at 40.4%. Higher non-COVID revenues the test volumes coupled with the operating leverage assisted us to achieve EBITDA margin of above 40%, despite the cost incurred due to the recently commissioned centre.

The profit after tax for the current quarter stood at INR23 crores and the surplus cash balance amounted to INR249 crores as at September 2022.

I will now summarize our performance for the half year ended September 2022. Consolidated revenue stood at INR225 crores as against INR235 crores in H1, FY22. The non-COVID business comprise 97% of our revenue share as against 82% revenue-share in H1 FY22. Our B2C share stood healthy at 94% in H1 FY23. EBITDA stood at INR89 crore as against INR108 crore in the corresponding previous year. EBITDA margin stood at 39.4% and the profit after tax was INR41 crore. In conclusion, I would like to say that both the internal and external factors bode well for Vijaya’s growth and we remain confident of delivering consistent performance going-forward. This brings me to end of my address. I would now request the moderator to open the line for the Q&A session. Thank you.

Questions and Answers:

Operator

[Operator Instructions] We have our first question from the line of Aashita Jain from Novama[Phonetic]. Please go-ahead.

Unidentified Participant — — Analyst

Hi, good afternoon. First three questions, Firstly Raju could you help me with the growth rate three CAGR this quarter that is from Q2 FY20 to Q2 FY23 in the non to non-COVID side?

Narasimha Raju — Chief Financial Officer

So Aashita maybe see we roughly grew at a CAGR of 8.5% okay, but that’s not the correct number to see because in 2020 specifically in Q2 there was a dengue outbreak in Hyderabad. That particular year in just Q3 itself we were — we upgraded, about INR90 crores of revenue which was high on dengue and malaria testing. That point in time we roughly got about say INR10 crores of revenue from this segment, which is not the case in the current year. So even with that if you see we’ve roughly grown at 8% to 8.5%, CAGR.

Unidentified Participant — — Analyst

Already in the month of November and you mentioned that you have grown — we are growing month on month. Just wanted to understand your take on the seasonality of the Q2? And how the volumes picking-up in October month?

Suprita Reddy — Chief Executive Officer

So for this particular geography, Q2 and Q4 are pretty seasonal in nature, Aashita. So typically we do see that Q1 and Q3 are more healthier quarters down here and looking at the actually if we do see Q2 we have seen lot of evo packages and a lot of more of basic radiology wellness business do well.

So that’s a good sign but we should always keep in mind that Q3 is going to be seasonally a little probably a low quarter and Q4 can be a better quarter for us.

Unidentified Participant — — Analyst

Secondly on the Punjagutta and Rajahmundry, I think commenced both the centres now and, I understand your peak revenues will take time, two, three years but fixed-cost is already almost hitting the P&L. Is it possible — could you quantify the OpEx from just these two facilities because currently in our P&L this quarter?

Narasimha Raju — Chief Financial Officer

So Aashita as I mentioned earlier the large format centre commission now both Rajahmundry and Punjagutta like Rajahmundry commissioned in August and then Punjagutta recently but from last five to six months a few of their costs are sitting in the P&L. So if, you come to a number roughly like 0.9% to 1% of the EBITDA is impacted because of these costs coming from these two major centres and also a couple of smaller pharma centres also but these two centres from the major number out the total fixed costs hitting to the P&L.

Suprita Reddy — Chief Executive Officer

Aashita just to add to that it’s also because of the advanced and very high end centre. We also do that because we invest in people, you are getting the best-in class technology but you also want to make sure that they are trained and the centres are ready to take on a loan and keeping in that — keeping that point in mind is still say that normally the breakeven happen as per three quarter is what we say but we also make sure that we keep in mind that this cost is there for about four, five months, six months in advance because this is what is going to drive the volumes in these centres going forward.

And it’s just in fact today is the exact third month anniversary of Rajahmundry so one quarter completed there and Punjagutta just opened very large centre with very advanced technology, so training is a crucial part there.

Unidentified Participant — — Analyst

Thank you. And lastly on your app. So any update on your digital app and the digital initiatives?

Suprita Reddy — Chief Executive Officer

Yes, Aashita like I mentioned in this page the lab information software and ERP have just gone live on 1st of November. So they are in a state of stabilization at the moment in fact we did it all together in one-go. So probably give it a month’s time for the links to settle in and then we release that the app. The app is absolutely ready at the backend and the app and website will both be in line once we release the app probably December second week or so.

Unidentified Participant — — Analyst

Thank you. That was all from my side.

Suprita Reddy — Chief Executive Officer

Thank you.

Operator

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

Prakash Kapadia — Anived Portfolio Managers — Analyst

Yeah. Thanks for the opportunity. You know as we are adding 15 locations and we are trying to move beyond greater Hyderabad, could you give us some sense, what could be the pricing difference in the smaller towns versus a local player by us? And down the line is the strategy, to get basic pathology services first some of these Tier two, three towns and then get them to move to radiology and ensure stickiness. Is that the plan in Tier two, Tier three or it is just pathology focus which is enough for us to grow?

Suprita Reddy — Chief Executive Officer

Well, like we’ve mentioned earlier, Prakash we normally go with the concept of going in with the large format hub first. So it’s never just pathology, in fact it’s a large sites centre about 6,000 to 10,000 square feet at both pathology and radiology and once that stabilizes then we start adding the spoke. It’s never been our strategy to go with only pathology or a B2B kind of a business model into a new geography that we go to.

And the second thing is definitely there is a pricing decrease in these tier two and tier three places. I think it should be about 10% to 15% lower than what would be the charge that we do in the core Hyderabad market.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Hyderabad market. And the pricing in these smaller towns and cities, how would they compare it with say a local player?

Suprita Reddy — Chief Executive Officer

It would be comparable and that is why it’s about 10% to 15% lower because in fact in Hyderabad itself we are pretty affordable and we are more or less right at the unorganized sector level. So that is why you’re seeing only a 10% to 15% lower gap there in Tier two and Tier three cities.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Understood. In Hyderabad what is the sense you are getting from new age players? As you know pricing pressure remains same, have prices increase, have prices decreased or it’s status quo. Any sense from competitive landscape?

Narasimha Raju — Chief Financial Officer

We not able to hear you.

Prakash Kapadia — Anived Portfolio Managers — Analyst

I was trying to understand about competitive pricing in Hyderabad. So is pricing pressure increase from new age players? Is it same? Is it decreased? What is the sense of pricing in the Hyderabad market?

Narasimha Raju — Chief Financial Officer

So Prakash if you can see the average revenue per test in the quarter two also right so we are on track so as of now we have not reduced the price because we are not seeing the pressure and today in Hyderabad if you see still the revenue that we get from online players is like less than 1% of our revenue. So in fact in Q2 because like when you have this seasonality effects so we have seen lot of testing in the basic routine testing also coming back to us. So as of now we are not seeing any pressure on pricing.

Prakash Kapadia — Anived Portfolio Managers — Analyst

At this. And if I look at the first half results our PAT is down roughly INR20 crores or around 32% you did mention some of the front-ending of the expenses. So if I were to just try and quantify these front ending expenses in terms of employees OpEx and increment depreciation on some of the newer large centres. So would that all amount to INR10 crores of the INR20 crore kind of fall is that a fair understanding?

Narasimha Raju — Chief Financial Officer

Prakash, I just explained this. If you look at the numbers try to — you might see that the half year PAT there is a dip from around INR60 crores to INR40 crores because of the pre-operative expenses that I was talking with it just like a 0.9% to 1% impact on EBITDA. The main reason is as you know last year, okay it was like a COVID year right in Q1 almost really INR30 crore revenue in the last year Q1 and also in the last year Q2 approximately like a INR10 crore. So that’s the reason why your EBITDA margin was sitting at almost close to 45.9% in the last year. As we highlighted in a general non COVID scenario we expect a regular EBITDA margins up 39% to 40% what we achieved in the current quarter.

So if you see that cleanly there is 6% to 6.2% margin difference is there from the last year first half to the current year first half which boiled down to PAT level apart from that below EBITDA, there is also increase in the depreciation interest because of the new centres that we added. So last year post-September 2021 we added almost close to 10 new centres and also in the current six months we added almost close to like 18 centres. So because of that the interest and depreciation because of India’s 116 notional numbers also have gone up, which impacted in the PAT from 26% to almost close to 18% to 19%.

But broadly the 6% gap is mainly coming from EBITDA margins, which was due to the COVID is in the last first half.

Prakash Kapadia — Anived Portfolio Managers — Analyst

Right. Yeah so if I add all these notional and the depreciation it should come to INR8 crores, INR9 crores roughly if not INR10 crores is what I was trying to understand.

And lastly from my side after four quarters we’ve seen a sequential improvement in sales and PAT. So going forward for the balance of the year and in the coming quarters what are we doing to ensure this trend continuous for us and we continue to grow on a sequential basis?

Narasimha Raju — Chief Financial Officer

So Prakash the efforts are always there and we are track on opening up new centres where we are also going to come up with new hubs in the Tier two, Tier three towns where you will get fresh revenue. Right, apart from that the focus on the wellness and also with the few digital initiatives we can increase the efficiencies at our current centres where we are facing the capacity constraints. So. I think like for the current year like as you were indicating earlier also because the transition from COVID to non-COVID dips happening so we would be in that 13% to 15% year-on year growth on non-COVID for the current year and on going forward we are sticking to our 15% growth.

Unidentified Participant — — Analyst

That’s helpful. Thank you. All the best.

Suprita Reddy — Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] We have a next question from the line of Aneesh Deora from Nomura. Please go ahead.

Aneesh Deora — Nomura — Analyst

Yeah. Hi thanks, for taking my question. So I had just one question. About like six months back when the organized retail pharmacy chains had announced the opening of full fledged diagnostic centre in Hyderabad which is one of your core markets, I mean which is your core market in fact. So I just wanted your comments around whether do you consider such openings as a potential threat or your views about how the competitive intensity is going to play out going-forward?

Narasimha Raju — Chief Financial Officer

So Aneesh in fact see Vijaya being a 40 year-old player in the market and being the market leader we are still say would be like less than 20% of them having less than 20% of the market share today. Because you know for every price there exist a market and these models are not — even previously also like we were having other players offering services at different, different prices. I think in healthcare it’s more than pricing it’s about the trust and also the quality of diagnostics, etc. So we have a different kind of clientele and we believe that you know we will not either venture into these models or these models will affect our business.

Aneesh Deora — Nomura — Analyst

Thanks That’s it from my side.

Operator

Thank you. We have our next question from the line of Priya Harwani from Perpetuity Ventures LLP. Please go ahead.

Priya Harwani — Perpetuity Ventures LLP — Analyst

Yeah thanks.

Operator

Harwani, I’m sorry, you’re voice is breaking. Can you speak please. I’m sorry, you’re not audible. We’ll take the next question from the line of Aditya from Securities Investment Management. Please go ahead.

Aditya Khandelwal — Securities Investment Management — Analyst

Hi thanks for the opportunities. Sir I wanted to understand —

Operator

Mr. Aditya can you please use the handset. Your volume is very low.

Aditya Khandelwal — Securities Investment Management — Analyst

Yeah. Am I audible now?

Operator

Yes.

Aditya Khandelwal — Securities Investment Management — Analyst

Yeah. Just wanted to understand do we have a very good doctor connect in Hyderabad to refer the patients to Vijaya? The reason why I’m asking this question is just understand will it be difficult for the new player to take market share away from us because of the relations we have developed with doctors over the years? Or is there any other reason why you think it will be difficult for the players to take the market share away from us in Hyderabad?

Suprita Reddy — Chief Executive Officer

I think it’s not about relation with the doctor like you mentioned earlier. See there are two people that we treat as our customers the first one is the customers walking into a centre and the second one who is the doctor who is actually referring that patient. Without certain clinical history and diagnosis is going to be not complete and holistic in nature. Being in a market for 40 years, has created trust just not in the customer but also in the doctors and like we mentioned earlier there’s a lot of work that we do that we have made our standard, gold standard like an Epilepsies and PET CT and oncology imaging. We have more than 120 full time radiology consultants sitting here, and, it’s like a tertiary care centre.

So we do make sure that we like Siva mentioned earlier it’s about quality and we never compromise on that and if we talk about Punjagutta centre today, diagnostics centre bringing in a walk-in, work-out dual — it is the second in India as of today but also because of the kind of work we do and the kind of consultants that we have with them. So we do have a relationship both with the doctors and the customers that is only because without a proper history however, even going to report a case which is probably not possible on an inferior quality of technology or more lesser experienced kind of consultant sitting in one of the more unorganized or cost-competitive kind of sectors.

Aditya Khandelwal — Securities Investment Management — Analyst

Right. Okay. And are there any plans to open more centres in Hyderabad or we have reached the saturation point over there?

Suprita Reddy — Chief Executive Officer

I would not say we have reached a saturation but our concentration is to actually move into it remote areas into Andhra and Telangana, AP adjacent geographies where we do see scope in Hyderabad we will continue to put our smaller format centre. We are not looking at adding anymore large hub centres immediately in the near future until and unless we see a capacity constraint. So whatever new hub large format centres will come, will be in West Bengal, the adjacent geographies and in rest of Andhra and rest of Telangana market.

Aditya Khandelwal — Securities Investment Management — Analyst

Right. Okay. And we have been seeing an increasing in the share of our wellness testing and this trend as we have seen in our peers as well. So just wanted to know from you what do you think is driving this tread the increase in wellness testing?

Suprita Reddy — Chief Executive Officer

There are two things here, but one thing, I would definitely say is COVID as bought in a lot of change in the mindset of the people itself and that itself is one driving force just not for us but the entire industry, they’ve become healthier they’re thinking better. So that’s one. And the second thing that we’ll have to see is not just us if you look at even our peers, you’ve seen an improvement in this line even though we always keep talking about the aggregators coming in, you still see that customers prefer to walk into a centre where they can put the face when they can talk to our consultant and this is actually driving the business, in fact this was the segment where, and I think the Q1 call we had mentioned that we will have to see how this sector will take-off. It’s actually doing better. We are seeing more walk-ins come in for this wellness and we are also seeing that we have a larger footfall in this sector because we are integrating. We have both radiology and pathology and that giving a more holistic and full checkup. So we in fact see this growing even coming in near-future with app releasing in December. So we’ll just have to wait-and-see but, we’re very confident of this sector growing.

Aditya Khandelwal — Securities Investment Management — Analyst

Right. And Ma’am what are the economics like for this bundled packaging? Does it make your company-level margins or lower margins because if a share of this increases how will the margin profile change for a company?

Suprita Reddy — Chief Executive Officer

I would not say that the margins would be same, they will be slightly lower but it will not make a large difference in the overall EBITDA going forward probably the pricing would be about, 10%, 15% lower not greater than that.

Aditya Khandelwal — Securities Investment Management — Analyst

Okay. Thank you. That was all.

Operator

Thank you. We have a next question from the line of Girish Bakhru from OrbiMed. Please go ahead.

Girish Bakhru — OrbiMed — Analyst

Yeah. Hi. Actually going back to same question that probably has been asked before in previous calls that, with these two centres now firing and overall momentum in radiology pretty good. What is the mix that we will see let’s say 2, 3 years down the line pathology versus radiology?

Sivaramaraju V — Head of Strategy Team

So Girish at a network level there may not be a big shifts depending on season to season, you’ll see like 1%, 2% here and there because last quarter you have seen radiology at 66 and in the current quarter we have seen pathology at 66 right, but coming to Punjagutta and Rajahmundry generally hubs are like radiology heavy and spokes where you get higher amount from pathology. So definitely in centralized Punjagutta so, you’ll be seeing about 50%, 55% of revenue coming from radiology but again we have to wait-and-watch, right and, 40%, 45% of revenue coming from pathology because they have all the modalities like PET CT, gamma camera and the high-end MRI and CT.

Girish Bakhru — OrbiMed — Analyst

But the realization or general value of Radiology is higher assuming that, so I mean what you were saying if the mix is same growth in pathology volumes also is very strong. Is that the —

Sivaramaraju V — Head of Strategy Team

Yes.

Suprita Reddy — Chief Executive Officer

Pathology is strong, Girish in fact even if you look at — or going up now in wellness will also be a little greater mix of pathology right so overall on a company level with a few more adding also we would still say that it would be very good if that ratio get maintained at 65, 35, 2, 3 years down the line because you would still new app coming up in new geographies and they take another one year for spokes to come up and maintain that ratio of 65-35 is what we try to achieve.

Girish Bakhru — OrbiMed — Analyst

Okay. And just on related this, I mean given that looking at this quarter and it’s good to see that revenue per footfall is largely to those previous levels before COVID but revenue per test is still lower. How should one read?

Narasimha Raju — Chief Financial Officer

No it’s Girish, it’s not actually lower. So if you see you know we were at kind of non-COVID revenue per test is about 470 now we are at in this last quarter we were at 460 it’s because you’ve seen the pathology revenue growing in that quarter because of the seasonality effect pathology was about 60%, 67% of the revenue. That’s the reason and also the other fact is that even in radiology because we have opened more and more spokes in the last one and half year you’ve got lots of contribution from basic radiology where the average revenue per test is low. It’s more of a mix change and where you have seen a 2% change on the average revenue per test.

Girish Bakhru — OrbiMed — Analyst

Okay okay. And just lastly when you said you’ve opened more spokes these are new spokes largely around these two new ones right?

Suprita Reddy — Chief Executive Officer

Those not these two Girish. So they would be around more of the new hubs that you’re seeing like the Rajahmundry we have the ones that are coming up in future. I don’t know if you told them already the adjacent geographies [indecipherable]. Those are areas that you be seeing a lot more spoke side. Like I told you we see that when there is an expansion of geography in Hyderabad or there is a capacity constraints, only tend to be spoke in the existing geography.

Narasimha Raju — Chief Financial Officer

During the last one and half years the spokes were opened closer to our existing hubs.

Suprita Reddy — Chief Executive Officer

Yeah in rest of Telangana.

Girish Bakhru — OrbiMed — Analyst

Okay understood. Thank you. Thank you.

Operator

Thank you. We have our next question from the line of Priya Harwani from Perpetuity Venture LLP. Please go ahead.

Priya Harwani — Perpetuity Ventures LLP — Analyst

Yeah, am I audible?

Suprita Reddy — Chief Executive Officer

Yeah.

Priya Harwani — Perpetuity Ventures LLP — Analyst

Yeah thanks for the opportunity, Ma’am. So I have couple of questions. Firstly on your plans regarding addition of labs for the next two to three years like you have already mentioned in last two to three quarters that you will be adding 15 labs per annum. So is this plan like, are you targeting the same this time also?

Suprita Reddy — Chief Executive Officer

Look we have 15 centres as a combination of 3 to 4 half reversals rest of them being spokes. So the plan is to continue that and the plan is to continue to open these hubs in the rest of Andhra, Telangana, existing geographies and West Bengal and we are, I think going as per plan on that.

Priya Harwani — Perpetuity Ventures LLP — Analyst

Understood. And what would be the CapEx for our second half of FY23?

Suprita Reddy — Chief Executive Officer

I’ll let Raju take that one.

Narasimha Raju — Chief Financial Officer

So Priya as we indicated this year is different financial year with large hubs like Punjagutta and Rajahmundry. So that’s why we estimated okay in the previous quarter that this financial year’s CapEx will be somewhere around INR110 crores to INR115 crores because of Punjagutta and other large hubs. So already for the first half the CapEx was approximately INR89 crore to INR90 crore. So as per the target we need to open one more hub and three to four more spokes which will add-up to the guidance of INR100 crore and INR115 crore for this current financial year. But and one more point. So we are targeting other hubs like as we mentioned like Kolkata, Gulbarga, Tirupati which are planned for the next financial year. The work is already going on at the centre in case successfully we accompanied these two or three hubs in the last quarter of this financial year for accounting purpose that capitalization might come and sit in this financial year but that is a good to us because the revenue also will start early.

So other ways for the current year guidance of 15 centres, including 4 hubs and 11 spokes the CapEx for the current financial year will be around INR110 crores to INR115 crores.

Priya Harwani — Perpetuity Ventures LLP — Analyst

Understood. And just one clarification on the guidance part. I think you mentioned 13% to 15% growth going-forward, is it?

Narasimha Raju — Chief Financial Officer

Yes. On the COVID revenue Priya.

Priya Harwani — Perpetuity Ventures LLP — Analyst

On non COVID revenue, okay. Understood. Just one last question like just sort of curiosity on your Punjagutta and Rajahmundry. How you are seeing demand from last one month in these two facilities?

Narasimha Raju — Chief Financial Officer

So Priya Punjagutta we just launched because again — and we have just completed the third month and the numbers are in —

Suprita Reddy — Chief Executive Officer

In line with what we had projected and in fact there is a lot of demand for high-end testing which we did not expect to see so fast. So I think Rajahmundry is definitely given us good vibes and it’s in line with what we projected. And Punjagutta like we’ve mentioned it’s just been a eight days probably, I’ll be able to give you a better picture but, we’re very confident about Punjagutta’s growth also.

Priya Harwani — Perpetuity Ventures LLP — Analyst

Okay. That’s helpful. Thank you so much.

Suprita Reddy — Chief Executive Officer

Thank you.

Operator

Thank you. We have a next question from the line of Namit Mehta from KC Capital. Please go ahead.

Namit Mehta — KC Capital — Analyst

Hi team congratulations on a good quarter. Just one question that I had. When you look at opening new hubs how large must the population be of that town or city for it to be viable? Have you done some sort of calculation around that just curious to get enough sense of that?

Suprita Reddy — Chief Executive Officer

Namit thank you so much and I would say that probably we don’t have a formula. We don’t look at going into a market with that kind of strategy but we do look at towns where we see that as more like district headquarter or there is a Government Medical College where you have about, 200, 150 kilometers of population coming into that down or smaller kind of city. So if you look at Kurnool per se, we did not look at Kurnool population wise but we looked at Kurnool into how much of feeding comes into Kurnool. So we normally look at those, dense probably the housing, the affordability of the population in that area and availability of say two or three medical government hospitals and one medical college. This is something that helps us understand the market and decide whether a hub is feasible.

Namit Mehta — KC Capital — Analyst

Understood. And sir just to take Rajahmundry as an example. Can that market take multiple hubs over a period of time? Can that scale-up to two or three hubs within Rajahmundry or is a sort of one hub the max that you can go to in a town maybe —

Suprita Reddy — Chief Executive Officer

I would not say that it would take us three years as of today but at the pace at which Rajahmundry is growing probably it will take up two more hubs going forward but it has capacity to take-in a lot of spoke and affordability is very high in that particular geography and we don’t have Vijaya Centre in a vicinity of 200 kilometers and the technology that is there is something that patients who are traveling all the way to Vijayawada or to Hyderabad to get that kind of testing them. And that is why we see that the centres ramping-up well already and then you have in a close proximity of Rajahmundry about five medical colleges. That is the basic ARPU of Rajahmundry and but if you ask me ma’am will you add one more hub in the next one year, no. We will give some time for this to actually stabilize and then probably look at adding one more.

Namit Mehta — KC Capital — Analyst

Understood, Ma’am. Thanks so much. That’s all from my side.

Operator

Thank you. We have a next question from the line of Sudhir, an Individual Investor. Please go ahead.

Sudhir — Individual Investor — Analyst

Hi. So my questions are mostly answered, but I have a couple of questions. Say considering the EBITDA margins moderate in now close to the pre COVID levels of around 37% to 40% can this be consider sustainable level or do you think that 40% to 44% that we’ve seen in the last two years it’s still achievable on a long-term basis? What I’m trying to understand is the cyclicality of the margins, is it a common phenomenon here?

Narasimha Raju — Chief Financial Officer

So as we informed in the earlier communications, okay we are quite confident on 39% to 40% sustainable margins okay in the long-run on non-COVID revenues. So that’s what we are confident if you’re talking about okay in the short-term okay there might be a few percentage of drag might be there because currently we are expanding with large central pharmacy in and around Hyderabad, Gulbarga, Tirupati, Kolkata. And also the revenue transition is happening from COVID to non-COVID. So because of these couple of points in the short-term quarter-on-quarter there might be a drag of a few basis-points but what we’re confident is this 39% to 40% sustainable margins on non COVID revenues going forward.

Sudhir — Individual Investor — Analyst

Okay so another question is on the do you have this franchisee model already or we are yet to have that kind of a model? I’m assuming that we have mostly owner-operated model at this point.

Suprita Reddy — Chief Executive Officer

So Sudhir we’ve done a lot of brainstorming on the franchisee model but keeping this integrated kind of model with both radiology and pathology and radiology being a lot in terms of an opinion that we give rather than something that we get like in your lab. We decided to make sure we maintain this quality and have all-company owned centres but saying that we are not saying they are absolutely averse to that but immediately in near future we have not planned anything and all of the centres that you see today company-owned centres.

Sudhir — Individual Investor — Analyst

Okay I’m asking this question because in the presentation you said you will be leveraging this owner and franchisee model.

Suprita Reddy — Chief Executive Officer

Like I told you Sudhir is not that we are not planning to do it but immediately in the near future there is enough and more than growth that we see for company to start centre. So we’ve not — we don’t have anything concrete in plan but if there’s something that comes up we will surely do it.

Sudhir — Individual Investor — Analyst

Another question is pertaining to business. I just wanted to understand how does it agger for the current business in terms of now margins assuming your focus maybe at a later point regarding the franchisee model?

Suprita Reddy — Chief Executive Officer

Raju he want to know —

Narasimha Raju — Chief Financial Officer

Currently okay what we’re expecting assuming that all the centres are owned by the company is around 40% on a sustainable basis but once we get into a franchisee model you need to leave something on the table for the other partner and generally what we have seen is that okay there will be a revenue share mechanism something like 20% to 25% and then 70% to 75%. So if you go with this model for the centres under franchisee model there will be a dip in EBITDA margins to that extent but the object of doing that is to ramp-up the revenue in those new markets and also you need not have that management bandwidth in those small format centres. You need not spend lot of time there but you can quickly ramp-up in those areas if you go with this kind of model.

Sudhir — Individual Investor — Analyst

Sure one last question. This is regarding the new equipment then more — CT MRI which you already launched here Punjagutta branch. So just wanted to understand having this high end equipment is it add to the top-line considering the pricing should get a premium to both the MRI, etc?

Narasimha Raju — Chief Financial Officer

See we are not going to charge anything premium on the price except for few high-end tests which are not available in the current network. So on the topline yes definitely Punjagutta is going to contribute a good chunk of revenue in the coming years in a span of next three to four years but on the pricing front only few tests are where we have we are going to have a differential pricing but all other regulators will be like normal like any other branch.

Sudhir — Individual Investor — Analyst

Okay so when this new equipment is high-end equipment will be eventually rolled-out into the other reference or hub labs. Is there an exclusivity to Punjagutta branch? Cost — equipment are probably the rentals should also be on the higher side it’s the equipment is —

Narasimha Raju — Chief Financial Officer

So as of now Sudhir it’s only for Punjagutta branch see because first of all Hyderabad itself has got equipment today right and the best part of this equipment is the number of scans the throughput of this machine is high for example if you’re doing say some say something like 10, 15, 20 scans on a regular machine you will be able to do perform the scans quicker with 35 scans per day where the revenue output for each machine you know there’s a lot of difference.

Suprita Reddy — Chief Executive Officer

It’s also more than that Sudhir that it’s safety of the patients this dual walk-in walk out CT, basically CT scan is known for little amount of radiation. This is very negligible radiation to the patient. So in terms of safety this is the best equipment that you can have as of today.

Sudhir — Individual Investor — Analyst

Okay thank you. Thank you. That’s all from my side and congratulations for the good set of results.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Aneesh Deora from Nomura please go ahead. Mr. Aneesh?

Aneesh Deora — Nomura — Analyst

Yeah hi. Am I audible now?

Suprita Reddy — Chief Executive Officer

Yes, Aneesh.

Aneesh Deora — Nomura — Analyst

Yeah thanks for allowing the follow-up. So I seen the revenue per test is around INR460. I just wanted a sense about how this varies for the radiology and pathology segments separately?

Narasimha Raju — Chief Financial Officer

So generally revenue per pathology tests to be in the range of say 330 to 350 per radiology it will be something like 1150 to 1200.

Aneesh Deora — Nomura — Analyst

Understood. Okay. And could you just also give a sense on how the EBITDA margins vary between these two segments?

Suprita Reddy — Chief Executive Officer

We don’t look at a centre like that Aneesh at all. For us it one centre, one customer, one prescription. So we’ve not been able to do a differentiation on EBITDA margins because it’s all shared costs. When a customer walks in it’s the same biller who will be billing both for pathology, radiology. It’ll be the stay same staff being utilized for both. Centre overheads are all shared. So it’s difficult to give you — on EBITDA margins in that format.

Aneesh Deora — Nomura — Analyst

Got it. Got it. Alright. Helpful. Thank you. That’s all from my end.

Operator

Thank you. As there are no further questions, I now hand the conference over to management for closing comments.

Suprita Reddy — Chief Executive Officer

I would like to thank everyone, for attending this call and showing interest in Vijaya Diagnostics. I hope we were able to answer all of your questions. Should you need any further clarification or seek to know more about the company please feel free to reach out to us or to CDR India. Thank you all once again, and I hope to see you next quarter.

Operator

[Operator Closing Remarks]