KRSNAANSEQ3FY23February 14, 2023

Krsnaa Diagnostics Limited

10,129words
178turns
12analyst exchanges
5executives
Management on call
Rajendra Mutha
CHAIRMAN, WHOLE TIME
Pallavi Bhatevara
MANAGING DIRECTOR - KRSNAA DIAGNOSTICS LIMITED
Yash Mutha
WHOLE-TIME DIRECTOR - KRSNAA DIAGNOSTICS LIMITED
Pawan Daga
CHIEF FINANCIAL OFFICER KRSNAA DIAGNOSTICS LIMITED
Nikhil Deshpande
COMPANY SECRETARY KRSNAA DIAGNOSTICS LIMITED
Key numbers — 40 extracted
15 billion
nagement and even prevention of diseases. Today, the Indian diagnostic market is valued close to $15 billion and projected to CAGR of 11.5% in upcoming years. The key fundamental drivers of diagnostic ind
11.5%
ases. Today, the Indian diagnostic market is valued close to $15 billion and projected to CAGR of 11.5% in upcoming years. The key fundamental drivers of diagnostic industries such as large population
1.4 billion
ng years. The key fundamental drivers of diagnostic industries such as large population of almost 1.4 billion people, rising per capita income, allowing increased affordability and need to access better heal
INR 88,956 crore
norganized players. Furthermore, recognizing the importance the Government of India has allocated INR 88,956 crores to health care expenditure, INR 2,350 crores, which amounts to a hike of 2.71% from INR 86,606 c
INR 2,350 crore
he importance the Government of India has allocated INR 88,956 crores to health care expenditure, INR 2,350 crores, which amounts to a hike of 2.71% from INR 86,606 crores in FY '23, '24, making high-quality hea
2.71%
ocated INR 88,956 crores to health care expenditure, INR 2,350 crores, which amounts to a hike of 2.71% from INR 86,606 crores in FY '23, '24, making high-quality health care and diagnostic services af
INR 86,606 crore
88,956 crores to health care expenditure, INR 2,350 crores, which amounts to a hike of 2.71% from INR 86,606 crores in FY '23, '24, making high-quality health care and diagnostic services affordable for the masse
rs,
I'm pleased to inform that recently, Krsnaa has been awarded with two major pathology tenders, one in the State of Maharashtra for setting up one lab and 600 collection centers and another one
INR 118 crore
cial performance during the quarter. During the third quarter, Krsnaa registered core revenues of INR 118 crores, growth of 12% year-on-year. The COVID-19 revenues declined from INR 1 crores in Q3 FY '22 to IN
12%
e quarter. During the third quarter, Krsnaa registered core revenues of INR 118 crores, growth of 12% year-on-year. The COVID-19 revenues declined from INR 1 crores in Q3 FY '22 to INR 0.1 crores in
INR 1 crore
core revenues of INR 118 crores, growth of 12% year-on-year. The COVID-19 revenues declined from INR 1 crores in Q3 FY '22 to INR 0.1 crores in Q3 FY '23. Our EBITDA stood at INR 30 crores with margins of 2
INR 0.1 crore
res, growth of 12% year-on-year. The COVID-19 revenues declined from INR 1 crores in Q3 FY '22 to INR 0.1 crores in Q3 FY '23. Our EBITDA stood at INR 30 crores with margins of 25% and net profit of INR 14 cro
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Guidance — 20 items
Pallavi Bhatevara
opening
“Today, the Indian diagnostic market is valued close to $15 billion and projected to CAGR of 11.5% in upcoming years.”
Pallavi Bhatevara
opening
“Further, I would also like to update you all on the phases of radiology and pathology project in the State of Punjab.”
Pallavi Bhatevara
opening
“We have operationalized 24 out of 25 radiology centers and the remaining 1 radiology center will be operationalized by Q4 FY '23.”
Pallavi Bhatevara
opening
“I would also like to add that we have operationalized entire pathology project in the State of Himachal Pradesh, and additionally, we have also successfully implemented the telereporting project in the State of Tripura, thus extending our reach to the Far East corners of India.”
Yash Mutha
qa
“Now the reason why this happens is typically, if you see from Q3 onwards to Q4, the authorities will start basically closing out their whatever processes so that before March end they can complete the payments so that their next year budget doesn't get impacted because they have to basically pay out, otherwise, if they don't pay us before March or before the year-end then their next year budget also gets impacted.”
Yash Mutha
qa
“After the Rajasthan project got over, and since that arrangement is no longer there.”
Jainil Shah
qa
“And any impact you're seeing on FY '24 guidance because of that?”
Yash Mutha
qa
“So FY '24, I think from a guidance perspective and considering the Punjab experience, we are looking at about INR 700 crores, INR 750 crores is what we are currently looking.”
Yash Mutha
qa
“I think maybe I'll be able to give a much more realistic guidance in the next quarter.”
Yash Mutha
qa
“And I think in the year-end, we will be sharing the information.”
Risks & concerns — 7 flagged
And this entire INR 11 crores decline in fees to hospitals from INR 27 crores to now INR 16 crores a quarter, this entire INR 11 crores per quarter decline in fees to hospitals is purely because of the Rajasthan tender, because it implies that in a contract that you were making INR 70 crores, you were paying INR 44 crores, INR 11 crores x4 quarters.
— Aditya Khemka
The only challenge is with the Punjab experience that we've had and at the same time to ensure that the investor community also has realistic expectations, we just want to come back with some more thoughtful approach to the expectations, hence we said hopefully by end of this quarter, the next quarter, I mean, we'll come back in terms of the realistic guidance that we expect we can achieve.
— Yash Mutha
So won't that be difficult for the patients currently coming in.
— Manoj Dua
Having said that, today, after the successful trial that we've had in Maharashtra and Punjab, we are getting lot of inquiries from people, but we are very selective in the way the entire process is where we want to really identify some good partners with a long-term vision because the way we are seeing in the market, there's so much of the kind of pricing pressure or deep discounting that's happening.
— Yash Mutha
We are very cautious because in a highly concentrated kind of a market where there are such players, we are also trying to see that we should have a good differentiator.
— Yash Mutha
Again, if you see from a data point perspective, while we wish for, it's a bit difficult to capture because differentiating whether it's a private walk-in and government patients, so there are certain measures, we're also working equally to have our systems to capture that kind of element from a more meaningful analysis and data analysis.
— Yash Mutha
It will be difficult for me to give that data point upfront now because the systems are not - again, given that we work in the government centers, it's equally challenging to differentiate very easily.
— Yash Mutha
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Q&A — 12 exchanges
Q
A few questions. Firstly, to begin with. If you can talk about the operating cash flow for this year, as you mentioned in the presentation, I think Slide 7, the operating cash flow for this year since 9 months seems to be INR 239 Mns or rather INR 24 crores versus -- INR 66 crores last year. And a large reason for that obviously seems to be the increase in receivables, which has gone up from 76 days 9 months last year to 97 days this year. So what is causing the increase in the change? That's question number one. And question number two, is there any other issue with the operating cash flow th
Yash Mutha
Sure. So it, in terms of the cash flows, you've picked up, right, that there has been an impact on the receivables. Now if you see the receivables normally in this time of the year, which is around Q3, the receivable days go around 94, 97 days, which is a typical trend we see in our line of business. And if you see, even comparatively in the previous periods, you'll see a similar trend that has occurred, that is the reason why the receivables are almost in the range of about 90 days plus. Now the reason why this happens is typically, if you see from Q3 onwards to Q4, the authorities will start
Q
Hi, thank you for the opportunity, Yash, my first question is on the potential of the new tender, the BMC collection centers and the Odisha collection centers. So what is the potential?
Yash Mutha
I think Pawan will just answer that question. So BMC, where we are looking for annualized revenue of INR 30 crores to INR 40 crores, considering the 600 collection center and 1 processing lab. And Orissa. Orissa, INR 50 crores to INR 55 crores annualized revenue, which we are expecting from 5 labs and 360-plus collection centers. Okay. And just a follow-up to the previous participant's question. So we have lost this Rajasthan tender from when and what has been the impact in this quarter? So what was the contribution of that Rajasthan tender in 3Q last year? So Rajasthan, we have discontinued f
Q
Thanks for the opportunity I have two questions, the first is on disclosure. So a lot of the questions that participants have been asking you could be solved easily by sharing your test volumes that have happened over the few quarters. Can you please tell me why we stopped disclosing this or at least not disclosing data of the lab, which will help us understand better how the business has performed overtime.
Yash Mutha
Yes. So we, of course, started sharing this information if you see in the earlier presentations. However, considering the recent various tenders, which we have participated, a lot of our information that we are publishing has been used and which unnecessarily creates in a way, a lot of competitive challenges for us. Of course, like we wanted to disclose this information. And I think in the year-end, we will be sharing the information. But on a quarterly basis because there are a lot of these tenders discussions going on and some of these people, they just use the numbers and basically come wit
Q
So sir, I just wanted to ask questions, kind of a follow-up question. So we were saying our potential for our BMC and Odisha is roughly combined nearly INR 90 crores of potential. So how would it kick in like we were planning to have some 200 pathology centers in BMC. Could you just help me with the progression of revenue that we can expect maybe how much we are expecting in FY '24 and how we will just operationalize?
Yash Mutha
So from a BMC perspective, of course, we'll try to operationalize the center in this next quarter in terms of establishing the center, setting up of the lab but I think meaningful contribution of revenue will -- should be seen only in the next year, hopefully, by Q2 or second quarter because it takes time to ramp up and given our experience and the logistics part of it, we expect it to roll up from Q2 onwards. Odisha will take a bit time as well because it's a very if you see the location-wise, geography wise, it's a wider area to be covered. The good part is Krsnaa will have its footprint acr
Q
Thank you for the opportunity Two questions. One is the projects that you have mentioned on your Slide 19, which are the new projects that you're undertaking, which has 58 radiology centers and 992 pathology centers. Can you tell me what is the total capex requirement for these projects?
Yash Mutha
So Maharashtra, I think there are about 39 CT scans. So that could be roughly about around close to INR 50-odd crores, within INR 50 crores and which was the other one? I am talking about all the projects, right? The total 50 centers, radiology centers and total 992 pathology centers that you mentioned on Slide 19. Yes. Orissa and Maharashtra, I think if you're referring to those 386 plus 1 and 600 that would be about INR 150 crores of total investment that we'll have to do for Maharashtra and Orissa. That's for the pathology centers, 386 and 600, right? Yes. Correct. You're referring to the i
Q
Just a very quick question from me. I'd like to refer to the same slide that the other gentleman referred to in terms of the project. Slide 19, projects other than mentioned in HP. When I look at that slide on the third quarter and compare it to the slide in the second quarter, the radiology center declined. Total center declined from 60 to 50. On the other hand, the pathology centers grew from 200 to almost 900. Are these 2 slides referring to the same thing? And how should we go forward reconciling these numbers?
Yash Mutha
Yes. So I think what you are referring to in terms of the numbers. Basically, these are the centers which are currently under implementation. And the ones that you see refer to 982, basically, these are the new projects or new centers that we have won in this quarter. So basically, it's quarter-on-quarter movement between centers that are currently in the implementation and those that we've added new centers into our pipeline or which is now going to get implemented in the subsequent quarters. If you're referring to the last Q2 implementation tracker where Uttar Pradesh, where we mentioned 4 c
Q
So all Punjab centers have been now functional, how much sales we can expect in next financial year from the Punjab Centers.
Yash Mutha
So Punjab, we expect about close to INR 60 crores to INR 70 crores annualized revenue in the next fiscal. Okay. So subsidiaries may not give the actual profit figure, but sale revenue can we take from the subsidiary of the Punjab. Sorry, if you can just repeat that? Whatever revenue the subsidiary is reporting, we can take that, that is our revenue from the Punjab Center. No, no, no. As I said, the subsidiaries, there is a certain arrangement that we've had where because the investment is made by the holdco in that case, Krsnaa Diagnostics Limited, and there are the various subsidiaries, so th
Q
Hi Sir thanks for the opportunity So when we came to the IPO, one of the key advantages of our model are we used to open centers in the hospitals and the in-house patients would help us with the revenue growth and the ramp up would be fast. But when we look at the Punjab, there has been a delay in the ramp-up of revenue. So just wanted to know what are the issues we are facing in this Punjab order?
Yash Mutha
So Punjab from all our collective experience of the past more than a decade. Sorry. So more than the I mean, the expense that we've had in the past versus Punjab proved to be an exception. For various reasons, there was a change in the government. And when they came in then in terms of getting the necessary approvals from the authorities took time. So that led to delay in implementation of the project. Also, one of the key things that is kind of putting an interest to the revenue ramp-up is the Punjab is purely cash business. Now typically, in government business, when it is under the free dia
Q
So Yash, if I understand correctly, compared to FY '22, when we did, let's say, revenues of INR 450 crores and this year, FY '23 will be in the range of INR 470 crores, INR 480 crores. So last year, we would have done almost as in FY '22, we would have done almost INR 70 crores on the Rajasthan tender, which in FY '23 would be how much about INR 30 crores or more?
Yash Mutha
Rajasthan in FY '23 would be close to about INR 40 odd INR 36-odd crores, yes. INR 36 crores, and then last year, there was INR 32 crores COVID revenue, which obviously, this year is like INR 2 crores. Am I right? Yes. I think last year, it was close to INR 40 crores. So if you see put together INR 70 crores of revenue has not been there, which is because of COVID and Rajasthan not being there, yet we've been still maintaining that kind of revenue growth by end of this year. Yes. So basically, if I knock off INR 70 crores from the base year, we are looking at a INR 385 crores revenue FY '22 co
Q
I wanted to ask some details about the retail strategy. I think you have highlighted the written part in the investor presentation in Slide 23. I wanted to understand what our broad projections are for this space? And what are the plans to eventually get into home collection of essential services, which have been highlighted on Slide 23.
Yash Mutha
Yes. So see from an overall, the B2C market, as we call it, we had announced that we are entering that space. We've already started the franchisee model, so to speak. Having said that, today, after the successful trial that we've had in Maharashtra and Punjab, we are getting lot of inquiries from people, but we are very selective in the way the entire process is where we want to really identify some good partners with a long-term vision because the way we are seeing in the market, there's so much of the kind of pricing pressure or deep discounting that's happening. So we also want to ensure th
Q
So Yash you mentioned that Punjab is already at INR 12 crores run rate. And if I heard you right, you said that next year is going to be about INR 15 crores, INR 16 crores run rate for Punjab. So we were thinking that even though Punjab not ramping up, profitability might be depressed. But that doesn't seem to be the case. So why do you think the margins Y-o-Y are down and continue to be down for the last 2, 3 quarters?
Yash Mutha
See like I said, the margins have been impacted primarily because for example, we have onboarded employees. Now, for example, Punjab might have about 700, 800 employees, but the revenue is not commensurate to the kind of number of employees we have because the project has not ramped up. Similarly, in the case of Himachal Pradesh where we've added more employees. So as the revenue ramp-up happens, that is where the contributions start increasing, and you should see an improvement in the margins going forward. So then the question is you expect similar numbers in terms of margin to also continue
Q
Thank you. Thank you, everyone, for joining our Q3 FY '23 earnings call. I hope we have answered all your questions. And in case you have any further questions, which have remained unanswered, please feel free to connect us with our Investor Relations team at the Churchgate Partners and looking forward to interacting with you in the future quarters. Thank you, and have a great evening ahead.
Yash Mutha
Thank you very much. Thank you, everyone.
Speaking time
Yash Mutha
67
Aditya Khemka
29
Pawan Daga
15
Moderator
14
Jainil Shah
8
Punit Mittal
8
Darshil Jhaveri
7
Manoj Dua
7
Nirvana Laha
7
Pallavi Bhatevara
4
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Opening remarks
Pallavi Bhatevara
Thank you, Bharat. Good evening, everyone, and welcome to Krsnaa Diagnostics Q3 FY '23 Earnings Call, and I thank each one of you for joining us today. We've already circulated our earnings presentation, which is available on our website as well and all the stock exchanges website. I hope you all have had the opportunity to go through the presentation. From an industry perspective, the need for high-quality and affordable diagnostic services are clearly visible as it is an integral part of health care industry, which plays an imperative role in diagnosis. Assessing diseases plays a major role in the treatment management and even prevention of diseases. Today, the Indian diagnostic market is valued close to $15 billion and projected to CAGR of 11.5% in upcoming years. The key fundamental drivers of diagnostic industries such as large population of almost 1.4 billion people, rising per capita income, allowing increased affordability and need to access better health care services. Emergen
Pawan Daga
Thank you, Ms. Pallavi. A very good evening to all the attendees. I will present financial highlights for the third quarter and 9 months ended December 2022. In the third quarter, the company registered total revenue from operation of INR 118 crores, an increase of 11% on a year-on-year basis from INR 106 crores. The growth is made by the core business comprising of radiology and pathology, which registered revenue growth of 12% year-on-year. Operating EBITDA for the quarter at INR 30 crores, EBITDA margin were 25% in Q3. FY '23 EBITDA margin were partially impacted due to additional costs incurred on-boarding team to operate and run the newly launched centers. The margins are expected to improve in upcoming quarters with the maturity of the centers. Profit after tax for Q3 FY '23 was INR 14 crores. For the quarter, PAT margin were 12%. In the 9 months FY '23, the company registered total revenue from operation of INR 354 crores. Our core business comprising of radiology and pathology,
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