Dr. Lal Path Labs Ltd.

Arvind Lal

Executive Chairman

Om Prakash Manchanda

Managing Director

Bharath U

Chief Executive Officer

Ved Prakash Goel

Group Chief Financial Officer

Shankha Banerjee

CEO Suburban and other group companies

Rajat Kalra

Company Secretary and Head of Investor Relations

3 lakh

ragmented and dominated by unorganized players. According to news reports, there are approximately 3 lakh labs operational in India. During COVID-19, we also witnessed a new phenomenon of carrying out RT

rs,

During COVID-19, we also witnessed a new phenomenon of carrying out RT-PCR test by certain operators, who had never been in the diagnostic field earlier, but were able to pick up COVID samples, and we

20%

y managing underlying comorbidities. Swasthfit, which is our bundled testing offering has reached 20% in contribution to non-COVID revenues. On the operations front, as we grow in scale, our teams ar

7.2 million

ou all to this call today. I will take you through the business highlights. In Q2 FY'23, we served 7.2 million patients generating a revenue of INR533.8 crore, with a growth rate of 7.1% Y-o-Y. COVID and alli

INR533.8 crore

ough the business highlights. In Q2 FY'23, we served 7.2 million patients generating a revenue of INR533.8 crore, with a growth rate of 7.1% Y-o-Y. COVID and allied tests contributed only INR19.6 crore, which re

7.1%

Y'23, we served 7.2 million patients generating a revenue of INR533.8 crore, with a growth rate of 7.1% Y-o-Y. COVID and allied tests contributed only INR19.6 crore, which represents the lowest ever co

INR19.6 crore

venue of INR533.8 crore, with a growth rate of 7.1% Y-o-Y. COVID and allied tests contributed only INR19.6 crore, which represents the lowest ever contribution at 3.7% of the overall quarterly revenue. Our non-C

3.7%

and allied tests contributed only INR19.6 crore, which represents the lowest ever contribution at 3.7% of the overall quarterly revenue. Our non-COVID revenue of INR514.2 crore, registered a growth of

INR514.2 crore

s the lowest ever contribution at 3.7% of the overall quarterly revenue. Our non-COVID revenue of INR514.2 crore, registered a growth of 14.8% over Q2 last year. This growth has been led by patient volume of 8.6

14.8%

of the overall quarterly revenue. Our non-COVID revenue of INR514.2 crore, registered a growth of 14.8% over Q2 last year. This growth has been led by patient volume of 8.6% Y-o-Y. Sequentially, that i

8.6%

ore, registered a growth of 14.8% over Q2 last year. This growth has been led by patient volume of 8.6% Y-o-Y. Sequentially, that is Q2 FY'23 over Q1 FY'23, the revenue uplift rate for non-COVID busine

6.7%

. Sequentially, that is Q2 FY'23 over Q1 FY'23, the revenue uplift rate for non-COVID business is 6.7%, which is near historical pre-COVID averages, which used to be around 8%. Last year, we had an upl

“I believe we have built a robust business enterprise with a very strong interconnected lab network and the focus going ahead will be to stretch this huge infrastructure to deliver accelerated performance and enhanced value for all the stakeholders.”

“And going forward also, Q3 is also one such quarter, where the base is relatively higher, while Q4 is a soft quarter last year.”

“But we are very confident that going forward, we should come back quickly on this.”

“How should we look at going forward like, I”

“As far as we are growing in this trajectory, I think we are able to maintain our margins going forward, which used to be pre-COVID level.”

“But I mean, generally, should we expect that Q3 and Q4 will move on the lower side in terms of revenue?”

“So I actually have my doubt that Q3 will look higher than or it will be definitely weaker than Q4, Q2 is what my sense, right?”

“Highest ever and I think it will be the highest in any quarter of the year.”

“So please do not look at the current margin, as a margin, which we will deliver for the year.”

“When we take a 3 year view from here on, what kind of gross margin level do you expect?”

Om Prakash Manchanda

42

Ved Prakash Goel

19

Dheeresh Pathak

9

Nitin Agarwal

8

Bharath Uppiliappan

7

Prakash Kapadia

5

Arshita Jain

5

Sriraam Rathi

3

Moderator

3

Shyam Srinivasan

3

Arvind Lal

Ladies and gentlemen, good day, and welcome to Dr. Lal PathLabs Q2 & H1 FY23 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing “*” then “0” on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki of CDR India. Thank you. Good afternoon, everyone, and welcome to Dr. Lal PathLabs’ Q2 & H1 FY23 earnings conference call. Today, we are joined by senior members of the management team, including (Hony) Brig. Dr. Arvind Lal, Executive Chairman; Dr. Om Prakash Manchanda, Managing Director; Mr. Bharath U, CEO; Mr. Ved Prakash Goel, Group CFO; along with Mr. Shankha Banerjee, CEO of Suburban and other group companies; and Mr. Rajat Kalra, Company Secretary and Head of Investor Relations. I would li

Om Prakash Manchanda

Thank you, Dr. Lal. Welcome, everyone, to Dr. Lal PathLabs Q2 & H1 FY23 earnings call. I hope that you and your loved ones are safe and healthy. The diagnostics industry in the Indian healthcare context offers enormous growth potential even today and will continue to do so for the foreseeable future. I will talk to you today about the current trends, as well as strategic focus of Dr. Lal PathLabs. First, let me share a bit of current trends, competition to start with. Post- COVID-19 pandemic, the Indian diagnostic industry has faced severe competition that is two pronged, one from the online aggregators and e- commerce players, and another one from hospital chains and pharma companies. This is a different kind of competition that we are witnessing today than earlier. This intense competition has resulted in some kind of price erosion in some of the key routine tests and wellness packages. Given this backdrop, LPL has further increased the spend on marketing and promotion and in technol

Bharath Uppiliappan

either on an annualized basis or on sequential terms. Sequentially, non- COVID business growth for the current quarter, that is Q2 over Q1 is more or less in line with what our business used to deliver in the immediate years before COVID. There has been increased relevance of wellness and bundled tests, especially post the COVID outbreak. This has been driven by higher awareness around keeping good health and rightly managing underlying comorbidities. Swasthfit, which is our bundled testing offering has reached 20% in contribution to non-COVID revenues. On the operations front, as we grow in scale, our teams are continually evaluating and incorporating new tests into the menu, such that our patients can benefit from the latest innovation in technology and testing. This is driving sample traction both on the B2B aspect, as well as directly for walk- in patients, as doctors take to prescribing and relying on such new tests. Over the past few years, we have meticulously developed a pan-In

Om Prakash Manchanda

Yes. I mean, I can give you the question. So secondly, on Suburban, non- COVID was flat Q-o-Q. My sense was we were focusing on aggressive faster revenue growth because of new center openings here around Mumbai and Pune. So I'm not really sure why this number has stayed so low quarter-on- quarter. And thirdly, staff costs declined from first quarter to second quarter to INR91 crore, if any one-offs there, please. That's all. Okay. I think the first question, this is a very good question is how do we see this number internally. I think what we are looking at is before COVID, there used to be a pattern on quarter-on-quarter. Let's say, if you look at '18-19, '19-'20, so normally, there are 2 moments when the uplift in our revenue line happens, one is Q2 and other is Q4. So Q2, usually, as Bharath mentioned in his comments is about 7.5% to 8% higher than Q1. And this number that we have is about 6.5%. We were cruising along well, I think end of September, I don't know, you know that North

Ved Prakash Goel

Yes. So there is a charge of RSU. This was reduced by roughly INR 8.5 crore. That is where we are looking to employ cost down.

Sriraam Rathi

Classification: Internal We have our next question from the line of Sriraam Rathi from BNP Paribas. Please go ahead. Just one question. Sir on the margins, generally, we have been guiding like it should be around 25-odd percent. Looking at this quarter’s number, I assume that, of course, Q2 is on the higher base, but Q2 is generally the highest in terms of margins. How should we look at going forward like, I