VIMTA LABS LTD (VIMTALABS) Q3 FY23 Earnings Concall Transcript

VIMTA LABS LTD (NSE:VIMTALABS) Q3 FY23 Earnings Concall dated Jan. 30, 2023.

Corporate Participants:

Harita Vasireddi — Managing Director

D.R. Narahai Naidu — Chief Financial Officer

Analysts:

Bhavya Sanghavi — Nirmal Bang — Analyst

Viraj Mehta — Equirus PMS — Analyst

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Aman Vij — Astute Investment Management Private Limited — Analyst

Ankit Gupta — Bamboo Capital — Analyst

Aman — Aman Investment — Analyst

Sunil Kothari — Unique PMS — Analyst

Ranvir Singh — Nuvama Wealth — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY23 Earnings Conference Call for Vimta Labs Limited, hosted by Nirmal Bang Institutional Equities Private Limited. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded.

I now hand the conference over to Mr. Bhavya Sanghavi from Nirmal Bang. Thank you and over to you, sir.

Bhavya Sanghavi — Nirmal Bang — Analyst

I would like to thank the management of Vimta Labs for giving us an opportunity to host this call. Today we have with us the senior management of the company, represented by Ms. Harita Vasireddi, Managing Director, Mr. Satya Sreenivas Neerukonda, Executive Director. Mr. Narahai Naidu, Chief Financial Officer, and Ms. Sujani Vasireddi, Company Secretary.

I now hand over the call to the management for opening remarks, post which we can take questions from the participants. Thank you and over to you ma’am.

Harita Vasireddi — Managing Director

Thank you. Good morning, everyone. Thank you for joining us on our Q3 results conference call. We are pleased to have this opportunity to update you on our business performance and answer any questions that you may have. I will share a few financial and operational highlights and update for the quarter and also nine months and then our CFO, Narahai will get into a little more detail on the numbers side.

Overall, [Technical Issues] growth for the nine months ended December 31, 2022, we achieved a consolidated total income of INR2,391.5 million; this is a growth of 16.5%. Q3 revenues are slightly lower when compared to previous quarter. This is majorly because of few projects have slided into the next quarter and hence the slight dip in revenue. We think of this as a small aberration. For the quarter ended December 2022, we achieved consolidated total income of INR785.1 million, which is a growth of 15.4% when compared to Q3 of previous year. The outsourcing market in year 2022 for the industries we serve, they remain very strong and particularly good growth momentum, led by the pharma and food industry.

Future outlook of these markets is also very positive. Our reach into overseas markets is also progressing and we continue to have strong order book and pipeline. On the operations side, we have successfully completed a USFDA inspection of our clinical research operations. We also went through a good WHO inspection of our pharma in Mettukkal operation. In Q3, we continued to invest in newer analytical technologies and also capacities. The [Indecipherable] expansion project, that we have undertaken at our life sciences facility to augment the future growth is progressing as per schedule. We continue to channelize our efforts to achieve both short-term and long-term growth goals and remain confident on the results. Normally, we told our investors. That we would connect with you one to six months and we will make that quarterly [Technical Issues] in case there is a need for us to clarify few things for you. So that’s the reason we have taken-up this Q3 results slightly lower, but we are happy to address any questions or concerns that you have.

With this opening remarks. I will now conclude and request Narahai to please take over.

D.R. Narahai Naidu — Chief Financial Officer

Very good morning, everyone. Thank you Bhavya for organizing the call. Thank you all for joining us for our Q3 results performance call. We are pleased to take you through the consolidated financial performance of the company, quarter three followed by the nine-month year ended December 2022.

Our consolidated revenue from operations for quarter three of FY23 stands at INR773.8 million as compared to INR673.4 million compared to the same quarter last year. This give us the growth of 15.2%. This is excluding the revenue from Service Concessionaire Arrangement. Profit before-tax for the quarter stands at INR140.8 million, which is a slight decline of 9% compared to same quarter last year, majorly due do increase in G&A expenses. Overall, our spend towards travel, business promotion has increased during the quarter. Increase in employee benefit expense commensurate with the increase in revenue from operation and also include the amortization of ESOP expense of INR9.4 million during the quarter.

Moving on to the nine months ended December 2022 performance. Revenue from operations for the nine months ended December 2022 stands at INR2,363.7 million as compared to INR2,041.9 million in the corresponding nine months ended FY22. This translates to a growth of 21.9%, of course excluding the revenue from Service Concessionaire Arrangement. EBITDA for the nine months stands at INR735.1 million, recording a healthy growth of 26% on a Y-o-Y basis. The depreciation and finance cost for the nine months ended December 2022 have increased majorly due to the capitalization of our electrical and electronic testing operations during quarter four of the previous financial year and addition of lab equipment during the current year.

The company is having a positive cash balance of about INR256 million at the end of December 2022. The profit before tax for the nine months ended December 2022 stands at 484.4 million, a growth of 22.8% compared to the corresponding nine months ended December 2022.

With this brief summary, I’ll hand it over back to the operator and we’ll be happy to take any questions. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Viraj Mehta from Equirus PMS. Please go-ahead.

Viraj Mehta — Equirus PMS — Analyst

So thanks a lot ma’am, for your time. Ma’am, can you discuss segment-wise how is the traction that you’re seeing. Also if you can talk about the government project, the scale-up, are we seeing 50,000 samples, where are we in that journey. If you can talk a little bit about both of these things.

Harita Vasireddi — Managing Director

Sure. Coming to segment-wise traction, the food and pharma segments are doing very well, especially food I think is progressing very well for us. Electronic testing we have had very good response from the industry and the variety of industries that we’ve reached out to, have been very encouraging for us and we are quite optimistic on growing the electronic testing division as per our plans.

Coming to diagnostics, we lost a little bit of ground last few quarters. We have now begin to gain back a little bit of that ground, but it still remains to be a tough market. Our environment division is doing well. Year-on-year, their growth is quite satisfactory and that covers all our business verticals.

Coming to the National Food Laboratory, the revenues remain constant. We were expecting the inflow of samples to grow, but the government is taking a little bit of time to correct that for us. So we still await their action on that.

Viraj Mehta — Equirus PMS — Analyst

What will be a rough daily samples that we are doing at this point [Speech Overlap].

Harita Vasireddi — Managing Director

That is a privileged number. We are not authorized to share it by our government partner.

Viraj Mehta — Equirus PMS — Analyst

Sure ma’am. Thank you and best of luck.

Harita Vasireddi — Managing Director

Thank you.

Operator

Thank you. We have the next question from Dixit Doshi from Whitestone Financial Advisors Private Limited. Please go-ahead.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Yeah, thanks for the opportunity. My first question is regarding the growth. So you mentioned in the opening remark that Q3 revenue compared to the Q2 was slightly lower also because of the. Some projects moving into the Q4. So how do you see considering the order book and all, how do you see the growth in let’s say FY’24.

And just a related question to that thing. Earlier, we had a target of around INR500 crores by FY’25, and let’s say, mostly we will be around INR300 crores to INR320 crores by end of this year. So, do you want to revise that target? Hello?

Operator

Ladies and gentlemen, the line for the management seems to have disconnected. Please stay on the line while we reconnect with the management. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Mr. Doshi, if you could please repeat your question.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Yeah, thanks for the opportunity. So my first question is regarding the growth. So you did mention that Q3 there was slightly dip over Q2 in terms of revenue, also because of a some sleepover of some contract into Q4. So considering the current order book and everything, how do you see growth going forward and also you — earlier our guidance was around INR500 crore topline by FY25, this year, we may end-up at around INR300 to INR320 crores. So how do you see — do you want to revise that target or you still feel optimistic about reaching that target?

Harita Vasireddi — Managing Director

INR500 crores by 2025 we have not specifically said by FY 2025. So we want to take the spectrum between 2025 to 2026. So we won’t be revising that as such and we are confident that we will reach that target. Our estimate for next year is that we will be able to continue the good growth rate that we have experienced in the last couple of years, but that will continue into FY 2024. If you have been following the earnings calls, you may recall that I’ve talked about some capacity constraints. So ideally, the new capacities that we’re adding now should have been added by now, but for the COVID situation that we experienced few years ago. So but for that, there is actually no change. We will be adding those extra spaces in capacity by end of 2023. And so that will further help us stay on the target. Order books are strong.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay. So not holding for you any number, but considering, let’s say, whatever order book or like you mentioned that we are also expanding into the export market and the new capacity is coming, so is it fair to assume that on a medium-term basis 15% to 18% kind of growth is still possible?

Harita Vasireddi — Managing Director

That’s the number we have been having and we are very optimistic that we’ll be able to maintain those numbers.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay. Now in terms of diagnostic business, so obviously, the competition is high and we are not performing as per our own expectation. So how do you see it going-forward and you were earlier mentioning that we are talking with some players for outsourcing their lab setup business, lab setup also. So any anything on that?

Harita Vasireddi — Managing Director

Yes. In the diagnostics, we have made progress. We have been pursuing hospital laboratory management and also independent laboratory operations management. We have had the good success there, as we continue to pursue the strategic line to grow that business.

Dixit Doshi — Whitestone Financial Advisors Private Limited — Analyst

Okay, fine. That’s it from my side. Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Aman Vij from Astute Investment Management. Please go ahead.

Aman Vij — Astute Investment Management Private Limited — Analyst

Good morning, ma’am. My first question is on this few projects which have slided in the next quarter. Could you quantify the amount?

Harita Vasireddi — Managing Director

It will be about INR2 crores to INR3 crores.

Aman Vij — Astute Investment Management Private Limited — Analyst

Okay. So then that is not substantial, right. And still, we were expecting Q3 to be much better compared to Q2. So any other segments which grew less than what you were expecting?

Harita Vasireddi — Managing Director

No particular segment as such. We have had slow movement wherever we have project, we’ve had slow movements like in pharma, there was a little bit of slackness. Now we are shifting more towards large projects. It will shift towards end-of-the quarter can be [Indecipherable] numbers there. Similarly in environment, usually Q3 is low, but Q3 is very strong, but there again, we’ve had a few projects shift. The impact was only to that extent. And yes, we were expecting a better Q3. But again, like I said it is a little slow because of shift of projects and also capacities we have been continuing to add those capacities for the receipt of technologies, the installation, qualification all that got slightly delayed and then we had the regulatory inspections, couple of them that also slightly lowers the operation speed during those few days. So all that cumulatively had a slight impact on Q3. Nothing concerning in my opinion.

Aman Vij — Astute Investment Management Private Limited — Analyst

And ma’am, we have done quite well with the inspection, we have successfully done that. So going forward, say in Q4, do you expect the run-rate to continue or do we think we can scale on that run rate, especially on the margin side ma’am, because margins we were expecting that 30% kind of thing will be the new base, but this quarter it was lower after many quarters, so if you can talk about the same.

Harita Vasireddi — Managing Director

Sorry. The voice was very blurred. I couldn’t clearly understand the last few sentences. Can you repeat?

Aman Vij — Astute Investment Management Private Limited — Analyst

Yeah. Ma’am, I was saying that Q3, we understand there was delay, there was inspections, because of that maybe our business we couldn’t fully utilize our capacity, but Q4 things, are they normalizing, are we seeing the good growth that we have continued for last couple of quarters. And then on margin side, we were expecting that 30% kind of margin will sustain, which has sustained for last couple of quarters. But this time, we saw a dip. So if you can talk about Q4 when things normalize or we will still for one, two quarters we might face some pressure on margin going forward?

Harita Vasireddi — Managing Director

Q4 we expect to see a step-up, both on the topline and also we expect that that can give us [Indecipherable] bottom-line step, but we are quite positive about Q4.

Aman Vij — Astute Investment Management Private Limited — Analyst

Sure ma’am. Now coming to the segment-wise. So on electronic testing side ma’am, if you can talk about what is the number of customers today and how many of these are MNC clients and also what is the employees working in this division as of today?

Harita Vasireddi — Managing Director

The number of customers, we are slowly touching about 100, some small, some big. We work with large organizations, MNCs. I won’t be able to take any names, but at least 10% to 15% of our clients are very large companies, both MNCs and also large organizations within India.

Aman Vij — Astute Investment Management Private Limited — Analyst

And what is the number of employees who are working in this division as of now?

Harita Vasireddi — Managing Director

As per electronics?

Aman Vij — Astute Investment Management Private Limited — Analyst

Yes. Electronics and electrical testing.

Harita Vasireddi — Managing Director

The team is very small as of now, it’s just eight people.

Aman Vij — Astute Investment Management Private Limited — Analyst

And we are expecting it to scale this quarter or maybe next year?

Harita Vasireddi — Managing Director

Can you repeat please?

Aman Vij — Astute Investment Management Private Limited — Analyst

We are expecting this team size to scale this quarter or next year as well as if you can talk about the utilization level because we were expecting to start the second shift.

Harita Vasireddi — Managing Director

We are already utilizing a part of the second shift. The numbers we will add as we need more reporting [Phonetic].

Aman Vij — Astute Investment Management Private Limited — Analyst

Sure ma’am. Coming to the food side, ma’am. The accreditation was done last quarter and I think we were expecting — we were supposed to have this joint committee for allotment of higher sample. So has that meeting happened and if that meeting has happened, the delay is for one quarter or there can be further delays for ramping-up because now we have all the accreditation we acquired.

Harita Vasireddi — Managing Director

Yeah, the meeting has happened. But unfortunately for us as soon as the meeting happened, the CEO has also changed [Technical Issues]. So we are facing those issues there. Hopefully, there’ll be a review again after another quarter. And then we keep pushing from our side and government takes time.

Aman Vij — Astute Investment Management Private Limited — Analyst

Sure ma’am. On the pharma side, so we did a very successful USFDA approval. So if you can talk about, has the — the order book has been growing at 20% plus. So is it still growing that fast and also what we understand, in the next one, two years lot of drugs are getting off-patent. So will this lead to a strong tailwind for all those studies, which you can talk about the same.

Harita Vasireddi — Managing Director

See coming to coming off-patent, there is going to be a patent cliff around 2024 to 2025 and this is largely related to large molecules. And we see that in the way our order books are also slowly now changing, primarily, our business has been focused on small molecules, but we also have a large molecule capability and we see the demand for large molecule capability increasing, on both the preclinical end and analytical end and also impact actually the clinical research end.

Aman Vij — Astute Investment Management Private Limited — Analyst

And ma’am, the order book growth, is it still that strong of 20% plus like you have highlighted in this division or have they slowed down a little bit because of some recession and global slowdown?

Harita Vasireddi — Managing Director

Which division, sorry, your voice is not at all clear. I’m struggling to understand.

Aman Vij — Astute Investment Management Private Limited — Analyst

Ma’am, this will be better. So on the pharma division I’m talking about the order book historically last couple of quarters have grown at 20% plus kind of number, the order book, not the actual amount. So is the growth still that strong or the recession is impacting the pharma industry any way?

Harita Vasireddi — Managing Director

We don’t see any negative impact on our order book, they remain strong.

Aman Vij — Astute Investment Management Private Limited — Analyst

Sure, ma’am. Final question from my side. On this electronics and electrical testing site. Ma’am, we have recently, we have got the CAB status under the Telecommunication Engineering Center. So will this help the tele sub-segment, the testing segment grew significantly in the next couple of quarters. And what is the current breakup. Is it mostly telecom as of now, is it non-telecom. If you can talk about the same.

Harita Vasireddi — Managing Director

Division is still in an infancy stage. Too early to break it up. Basically our EMI AMC capabilities span a wide range of products. Telecom is just one of them.

Aman Vij — Astute Investment Management Private Limited — Analyst

Okay. So but we were expecting to do the second level of capex. So will that happen in FY’24 or do you think it will only happen in FY’25. The first capex we have done INR25 crore odd in this division.

Harita Vasireddi — Managing Director

There will be a minor amount of capex that will go into it because now we are still in our learning phase here. So small tweaking of our capabilities will need certain investment year-after year. It depends on what are the customer requirements, what are the products that are coming up in the R&D pipeline across various industries. So that tweaking, that capex investment will be continuous for us.

Aman Vij — Astute Investment Management Private Limited — Analyst

Sure, ma’am. I have more questions. I’ll come back-in the queue. Thank you.

Operator

Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.

Ankit Gupta — Bamboo Capital — Analyst

Yeah, thanks for the opportunity. Ma’am just wanted to have more clarification on the guidance of Q3 INR500 crore. So what you are now saying is that we can we are targeting to reach that kind of number by FY26 [Technical Issues].

Harita Vasireddi — Managing Director

Sorry, can you repeat your last sentence.

Ankit Gupta — Bamboo Capital — Analyst

So what I’m asking is the INR500 crore revenue that we were aspiring to reach are we now targeting to raise that number by FY26?

Harita Vasireddi — Managing Director

I have already clarified that our goal 2025 when I made that — announce that goal, I didn’t specify a financial year because we wanted the flexibility to achieve it within 2025 or take the 2026 up to March. So I want to retain that flexibility. So please don’t be rigid over there. It’s just a few quarters here and there, but we are very strong on targeting that number. Our confidence is very good on that number.

Ankit Gupta — Bamboo Capital — Analyst

Sure. And ma’am, any update on the capex, when the new facility is expected to come on-stream for us.

Harita Vasireddi — Managing Director

The new facilities, we hope to finish all the infra works by sometime between October to December. As soon as that is done, we will be moving in our instrumentation there, qualifications, all that will take about another three months time. So by end of — we will certainly be ready to start operations there anytime between January to March of the next year.

Ankit Gupta — Bamboo Capital — Analyst

Sure. And will we also require some of the regulatory approvals that USFDA and other regulatory authorities approval or it will be part of our existing facility.

Harita Vasireddi — Managing Director

Yeah, we won’t need any other approvals. It is all in the same facility, so not needed.

Ankit Gupta — Bamboo Capital — Analyst

Okay. And then on the JNPT food lab that we have, have you reached breakeven there or we are hardly anything [Technical Issues].

Operator

Mr. Gupta, the line seems to have disturbance. You are not very audible or clear sir. If you could —

Ankit Gupta — Bamboo Capital — Analyst

I’ll try to go to a better reception area. Is it better now?

Operator

It is slightly, but not as clear as it should be, sir.

Ankit Gupta — Bamboo Capital — Analyst

Hello. Is it better?

Operator

Much better. Sir, please go ahead.

Ankit Gupta — Bamboo Capital — Analyst

Sure. So I was asking about this the JNPT food lab ma’am. Have we reached breakeven there or we are incurring some minor losses because the scale-up has not happened as per our expectations?

Harita Vasireddi — Managing Director

Vimta P&L will look as one. So we don’t break it up and look at each one separately.

Ankit Gupta — Bamboo Capital — Analyst

Sure. But do we expect that given the kind of some teething issues mostly from the government side that we have faced in the current figure at least in FY25, maybe by next — by Q2 of FY24, sorry, by Q2 of FY24 will be hopefully, all this government issue has been get resolved and we should see ramp-up in the lab. What is our expectations from this lab in terms of growth for next year?

Harita Vasireddi — Managing Director

I’m really hoping that we will have improvement in the number of sample volumes being allotted to NFL and we are working or pursuing the government quite intensely on this and I know some change will happen.

Ankit Gupta — Bamboo Capital — Analyst

Sure ma’am. And you highlighted that FY24 you highlighted that food except for JNPT is doing pretty well for us. So if you can highlight what is happening on that side and then what is fueling our growth on the food excluding JNPT lab.

Operator

Come again, Ankit.

Ankit Gupta — Bamboo Capital — Analyst

I was asking about food division doing well for us. Ma’am highlighted that food is doing well for us and if you can talk about what is fueling this growth and how do you see growth in the segment for us over the next few years.

Harita Vasireddi — Managing Director

Food is doing very well. And in fact, the last five, six years food has been a steady growth, year-on year growth has been good, the number of clientele that we are working, the number of projects that have been running is quite satisfying for us and we think that food will continue this growth even into the next four, five years, comfortably.

Ankit Gupta — Bamboo Capital — Analyst

Sure. And we were expecting that apart from pharma, two other segments which will drive our growth will be food and diagnostic. Diagnostic we do understand the kind of challenges we are facing, but are we still hopeful of food crossing INR100 crore kind of revenue in FY24 or FY25.

Harita Vasireddi — Managing Director

That definitely our goal. INR100 crore number is definitely our goal, and I think we are progressing very well towards that goal.

Ankit Gupta — Bamboo Capital — Analyst

Sure. And ma’am just last question on the margin side. You highlighted that this quarter was largely had some one-off cost and the revenue also — a small portion of revenue also got shifted to FY24. So do you expect from at least in FY25, FY24 will be back to 29% 30% kind of EBITDA levels.

D.R. Narahai Naidu — Chief Financial Officer

Ankit, so yeah. As you rightly said, the quarter three has been an aberration, but we expect our EBITDA margins to come back in line with quarter one and quarter two of current financial year.

Ankit Gupta — Bamboo Capital — Analyst

Okay. So quarter four also we’ll see some pressure on margins or will see improvement?

D.R. Narahai Naidu — Chief Financial Officer

No, we are not forcing any pressure on margins. We are seeing a step-up from quarter three.

Ankit Gupta — Bamboo Capital — Analyst

Sure, okay. Thank you, ma’am and wish you all the best.

Operator

Thank you. The next question is from the line of Aman from Aman Investment. Please go ahead.

Aman — Aman Investment — Analyst

Am I now audible now?

Operator

You are audible, sir. You can go ahead, please.

Aman — Aman Investment — Analyst

Yeah, sure. Yeah, so first of all, congratulations on the sustainable result. Ma’am, I had couple of questions first with respect to Crop Care in our agricultural division. As we do various market resurgence came lately, do you believe the newly [Indecipherable]. Will it be more efficient than the traditional fertilizer bag if the government is providing subsidiary and will it also reduce the subsidy and also are we seeing samples and testing coming from manual urea and also can it be made commercially viable.

Harita Vasireddi — Managing Director

Our Crop Care business mostly is from overseas and honestly, we have not felt any impact of the local regulations on our business from this company.

Aman — Aman Investment — Analyst

Okay ma’am. Ma’am, also our newly added divisions of Electronics and Electrical, so recently India has joined to be the net exporter of traditional toy industry. And companies such as Hasbro, Hamleys also have come into the picture because of the rising raw-material prices. Do you believe that the toy industry is also coming into electronic toys and other things. Are they coming from samples and also if they are coming, are they coming from small players like SMEs and MSMEs or few large players who are providing these gadgets their machinery, technology and other testing devices to be tested in our labs?

Harita Vasireddi — Managing Director

You see the R&D flourishing in the electronics industry. So there is a lot of hype around it, and we do sense that energy in the industry. There is lot of start up ecosystem also, so our samples or rather our customers are both from the small companies and also large companies.

Aman — Aman Investment — Analyst

Okay ma’am. So if you can just be little bit numbers specific, how do we see [Foreign Speech] are the numbers are increasing or they are sustained like previous quarters?

Harita Vasireddi — Managing Director

This is a very new business for us. The numbers are very small. Don’t comment on growth. I think we should wait to see how this pans out for us, the first few years and then get into these conversations.

Aman — Aman Investment — Analyst

Okay. Ma’am also, are we looking into revaluing our fixed assets because most of our fixed assets has been in historical cost for more than within ten year. Are we listening to revalue whether it be land or plant or property to just strengthen our financial positions in the coming quarters?

D.R. Narahai Naidu — Chief Financial Officer

So the replacement is an ongoing activity. So whenever we feel that there is a specific asset, which is offset, we generally replace. So considering the historic brand of replacing fixed assets with the amount of depreciation that we expect to continue, this is excluding our specific project capex plans.

Aman — Aman Investment — Analyst

Okay. We are just looking to maintain at the historical cost, if I’m not wrong?

D.R. Narahai Naidu — Chief Financial Officer

Yes.

Aman — Aman Investment — Analyst

Okay. And also are we — as mentioned by ma’am in last investor call and also thank you for organizing this because Vimta had half yearly calls, and this one they conducted to the quarterly as well. I hope this continues in the further quarterly calls as well. So ma’am had mentioned that we have new collaborations in diagnostic sector as well. Are we seeing in terms of [Technical Issues] translate in terms of revenue and profitability to be coming in coming quarters.

Harita Vasireddi — Managing Director

Now first coming to the first one around calls. Our intent is to connect at least once in six months. If there is a need with respect to the results or anything with respect to our operations, our business, then we will come for a quarterly call as well.

Coming to diagnostics, we have been able to establish a few good partnership we have from HLM/LOMs currently being operational. Now, these are new cities for us, so we are in the process of setting up our business development and sales activity there. So it will take a little time for us to mature or actually make a good progress in these markets. So we hope that will happen in the coming quarters.

Aman — Aman Investment — Analyst

Okay. And going forward, are we looking to raise equity in terms in the market, whether it be right issue or potential to just pin on our capex in terms of electronic because those sectors we as in industry or as an analyst, we feel that company can do even well because EV is coming also in a big-picture, electric vehicles. So their component also have to be tested and we are little bit export-wise we are equipped, but with technology and capex side, we are not till now. So do we look forward to just raise enough sufficient funds to just match-up with the demand with other EV states in testing business, in specific to automobile sector?

Harita Vasireddi — Managing Director

Okay. So we do have current capabilities to test electrical rating components there. Actually doing a few component testing already. And right now we have one chamber to do these testings. And in the next year, depending on the demand we could even add another chamber.

Aman — Aman Investment — Analyst

Ma’am, if you can be specific, which component, with battery or is it the resistors or which particular component or are we doing the whole EV vehicle as a whole. And whether it’s a car or a scooter or a motorcycle.

Harita Vasireddi — Managing Director

I wouldn’t know what components they are, not that technical, but we are getting components from two-wheelers.

Aman — Aman Investment — Analyst

Two wheelers. Okay. Ma’am as mentioned by you what we are seeing a little bit of de-growth for reason mentioned was the delayed billings and others. It has been shifted to either quarter four or the coming financial year. So do you estimate that the revenues for the fourth quarter will be in the range of INR90 crore to INR120 crore, just [Technical Issues]

Harita Vasireddi — Managing Director

No. I have never made those projections.

Aman — Aman Investment — Analyst

No ma’am, you have not made. I’m just giving you a number which you feel that the company will be able to achieve, provided H2 is always better than H1.

Harita Vasireddi — Managing Director

Yeah, but I won’t be able to give a specific number. Okay. Ma’am because H1 I think each quarter we have done roughly about INR70 crores, INR80 crores of turnover. So as H2 will always be better. So we are expecting in the line to be INR90 crores to INR100 crores of quarterly turnover. So okay then. So that’s one. And then the last question and I’ll come again later. Do you feel that so as we are in the part of market research and scalability also, do you seen financially viable also new plants are coming, like have you seen any testing samples, which are totally different from the industry, which we are in but they have potentials and we are planning to insert it into. Do you feel that these type of products are coming ma’am? Can you be a little more specific [Speech Overlap].

Aman — Aman Investment — Analyst

Yeah. Okay, ma’am. So we are into crop care and agricultural division to be specific. So do you feel that any product which is coming, which can be more in terms of cost in manufacturing with and also it’s more sustainable efficient in terms of the current what we are getting supplied in the market. Do you feel any substitutes or alternatives are coming to the products for testing and they are commercially viable in our plant as well?

Harita Vasireddi — Managing Director

We test hundreds of products. So I don’t think I’ll be able to comment on that question at all.

Aman — Aman Investment — Analyst

Okay, ma’am. Ma’am, I just wanted to get your opinion, what do you feel as we are into contract research and manufacturing firms. What do you feel about packaging sector ma’am or do you feel any alternative materials to like more sustainable packaging apart from paper and cardboard, which you already have, a plastic, which is more degradable in nature is coming up or what do you feel about the packaging sector as a whole whether we are seeing a transition from totally single-use plastic to renewables plastics, hat is your opinion on plastic sector as a whole, packaging sector to be specific.

Harita Vasireddi — Managing Director

We don’t want to do a lot of plastic testing. We do little bit of testing with respect to pharmaceutical product packaging and food product packaging. That’s a very small component of our testing activities. So I won’t be able to comment or answer your questions.

Aman — Aman Investment — Analyst

Okay, ma’am. Ma’am just on the financial part, if you can just give me what is the total loan book standing as on date of 31 December?

D.R. Narahai Naidu — Chief Financial Officer

So, can you come again. So you want to understand outstanding —

Aman — Aman Investment — Analyst

Yeah, outstanding loan book totally non-current assets, non-current loans, to be specific.

Harita Vasireddi — Managing Director

So we are close to INR25 crores of outstanding in our books as on 31 December 2022.

Aman — Aman Investment — Analyst

Okay. And also can you give the split of unsecured and secured loan.

D.R. Narahai Naidu — Chief Financial Officer

Yeah. Everything is secured for us. So there is no unsecured loan within the INR25 crores. [Technical Issues] INR5 million, which is unsecured, but outstanding is secured.

Aman — Aman Investment — Analyst

Okay. And those are from the promoter side, [Technical Issues].

D.R. Narahai Naidu — Chief Financial Officer

These are from the bankers.

Aman — Aman Investment — Analyst

Okay, so direct. Okay ma’am. I’ll just come back again for questions. Thank you.

Operator

Thank you. The next question is from the line of Sunil Kothari from Unique PMS. Please go ahead.

Sunil Kothari — Unique PMS — Analyst

Thanks for the opportunity ma’am, and it is a really good texture for, having call on, little, say little bit lower quarter-end, we wanted to clarify. It is a really great job you are doing. Ma’am, my larger question is, I am since last three four year following you and I heard your calls and you are very comfortable with your guidance and your business appraisal and all these things. Wanted to understand during last two, three years, you must have expected some segment to do maybe some number, some better performance, some must have done better or some below your expectation. Do you like to comment on the segmental larger picture. How you see opportunity where you feel you have challenges, where you required to overcome those challenges. That will be really great help.

Harita Vasireddi — Managing Director

Thank you for that question. Other than diagnostics, now we are into food and pharma in clinical research, pre-clinical, we are at electronics, we are at environment. So other than diagnostics, we are optimistic about all other services. Only diagnostics has been two feet forward and two feet backward. So retaining our current position there itself result is huge challenge and we are staying there very strong. Ideally we should have made some progress there. But we continue to push, we are not giving up our efforts in any of our service area. So this also, we will keep fine-tuning our strategies as per the competition that we see around us.

Sunil Kothari — Unique PMS — Analyst

So overall, you feel that whatever expectation you built and capability you have built, nore or less other than diagnostics things are coming as per plan?

Harita Vasireddi — Managing Director

Yes. Diagnostics we were hoping will take us a little bit faster towards that INR500 crores, but now that is not growing at the speed that we are expecting it to grow, but then we are able to leverage our other very mature services. So we are able to push them more.

Sunil Kothari — Unique PMS — Analyst

Very logical. And ma’am, you mentioned that there is some capacity constraint and I think that was the [Indecipherable] or that was the reason since last almost five, six quarters, we are in the range of plus-minus INR75 crore, INR2 crore, INR3 crore, whether it is INR72 crore or INR78 crores something. So capacity I think you must be overcoming now. So by when you feel that capacity will not be challenged, but you have to capture more business from the customers?

Harita Vasireddi — Managing Director

Yeah. We in-spite of having capacity constraints, we continue to remodel our existing facilities to squeeze more in the same space and that effort has been going on for us in the last almost for one year. So that will continue for another nine to ten months because we will have our new facilities with us by early 2024. So capacity-wise, coming to preclinical, that’s a huge need that we see and we will be addressing that need with the new facility. And also for analytical services, pharma analytical and even for food actually, we see a need to expand our capacities and that also will be fulfilled with the expansion that we have taken-up. Now, this expansion has been taken-up with the long-term vision. So it’s at least we think the capacities or the pace will be good for us, at least for the next five years. So the growth will also have happens commensurately.

Sunil Kothari — Unique PMS — Analyst

And ma’am regarding capex, if you can disclose first nine months capital expenditures for maintenance and capacity and if you can save numbers for next years.

Harita Vasireddi — Managing Director

Next year plans, we have not yet finalized. We are in the process actually right now. So I have that information during the May conversation that we will have. This year the numbers, here I’ll ask CFO to share those numbers with you.

D.R. Narahai Naidu — Chief Financial Officer

So for the nine months ended December 2022, we have incurred close to INR27 crores of capex. Out of this, above INR22.5 crores we have invested in lab equipments.

Sunil Kothari — Unique PMS — Analyst

Okay, that is called maintenance capex?

D.R. Narahai Naidu — Chief Financial Officer

Please come again.

Sunil Kothari — Unique PMS — Analyst

Those INR22.5 crores is related to maintenance capex or is it capacity addition capex.

D.R. Narahai Naidu — Chief Financial Officer

So it’s a combination of replacement and capacity additions.

Sunil Kothari — Unique PMS — Analyst

Great. And ma’am, just last question. Recently, Eurofins has announced some big lab at Genome Valley only. Do you feel this is a competitive expanding scenario or you said because opportunity is increasing, size is increasing of opportunity that is the reason. How you analyze Eurofins this new announcement.

Harita Vasireddi — Managing Director

Hyderabad has become a very hot hub for pharma industry and also the related supporting industry. And I think the attractiveness of Hyderabad, especially is very strong. So that’s why we see players like Eurofins coming here. That will definitely bring the competition closer to home, but then their services are not an exact match to ours. There are some overlaps. And wherever there is an overlap, yes, there will be strain little bit especially on the human resource capital.

Sunil Kothari — Unique PMS — Analyst

Great ma’am. Thanks a lot. Thank you very much.

Harita Vasireddi — Managing Director

Welcome.

Operator

Thank you. We have the next question from the line of Ranvir Singh from Nuvama Wealth. Please go ahead.

Ranvir Singh — Nuvama Wealth — Analyst

[Technical Issues]

Operator

Sorry to interrupt. Sir, the line for you is not very clear, you are not audible. If you could please your handset.

Ranvir Singh — Nuvama Wealth — Analyst

Yeah. Is it okay now.

Operator

Yeah.

Ranvir Singh — Nuvama Wealth — Analyst

Thanks for taking my question. I think most of questions have been answered, but a little bit on, you mentioned INR2 crore, INR3 crore kind of revenue has been deferred to fourth quarter. Assuming that even INR2 crores, INR3 crores would have fallen in this quarter, then also on Q-on-Q would have been very flattish. So I think the similar question has already been asked, but specifically I wanted to understand, which segment has actually had this shortfall and which we are expecting to coming back in subsequent quarters?

Harita Vasireddi — Managing Director

The major projects have been in the field of pharma and environment. That have moved slightly.

Ranvir Singh — Nuvama Wealth — Analyst

Okay. And as for as in previous question, you mentioned about competitive scenario is now getting us defer after coming up bigger player here. So overlap certainly will happen. So how do you see that whether our growth would be affected or do you see that there would be, still we will grow, we have been guiding.

Harita Vasireddi — Managing Director

We don’t think our growth will be impacted.

Ranvir Singh — Nuvama Wealth — Analyst

Okay, fine. Just coming back to it, that on INR75 crore, revenue between INR75 crore or INR78 crores has been for the past few quarters. Going forward we see that now we will come back in terms of EBITDA margin also. So whether product mix is going to change or it is just operating leverage — we will have a better operating leverage in fourth quarter?

Harita Vasireddi — Managing Director

Product mix could change, like food business is like seasonal business. So there could be a little change and environmental business is also seasonal business. That also put impact. Diagnostics to certain extent, it has an off-season and then it has a non off-season. There are seasonal impacts across our service basket. So that impact will be there for a quarter-on-quarter.

Ranvir Singh — Nuvama Wealth — Analyst

Okay. And for FY24 also you are likely to retain this kind of EBITDA margin?

Harita Vasireddi — Managing Director

Yeah. We will be retaining those and hopefully even better those with the growth in topline.

Ranvir Singh — Nuvama Wealth — Analyst

Okay. And that’s nice. Thanks a lot. That’s all from my side. Thank you.

Operator

Thank you. Ladies and gentlemen, that was our last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, ma’am.

Harita Vasireddi — Managing Director

Wish to thank all the participants and questions that there are. We look-forward to connecting with you again after our last quarter results. Thank you and good day. Bye-bye.

Operator

[Operator Closing Remarks]