Krsnaa Diagnostics Limited ($KRSNAA)

Ladies and gentlemen, good day, and welcome to Krsnaa Diagnostics Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bharat Celly from Equirus Capital. Thank you, and over to you, sir.

Thanks, Steve. Good day, everybody. I, on behalf of Equirus Securities, welcome you all to quarter 4 FY '26 results conference call of Krsnaa Diagnostics. Today with us, we have Mr. Rajendra Mutha, Chairman and Whole-Time Director; Mr. Yash Mutha, Managing Director; Mr. Mitesh Dave, Group CEO; Mr. Chandra Prakash Singh, Interim CFO; and Sujoy Bose, Secretary, Legal and Compliance. So I would now like to hand over the line to Mr. Yash Mutha for opening remarks, and subsequent to which, we will have a Q&A. Thank you. Yash, over to you.

Thank you, Bharat. Good afternoon, everyone, and thank you for joining us. At Krsnaa, we are not building just another diagnostics company, we are building a diagnostic platform for [indiscernible]. Working closely with government to strengthen public health care infrastructure and improve access to high-quality diagnostics across the country. At the heart of this mission is a very simple belief. Quality diagnostics should not be a privilege limited by affordability or geography. Through our PPP-led model, millions of patients, particularly from the economically weaker sections of the society, are able to access advanced diagnostic services, either at highly affordable prices, are completely free of cost to various government health care initiatives. And in many ways, that is the true purpose behind the platform we are building. From the very beginning, Krsnaa consciously chose a different path from the conventional diagnostic players. While most diagnostic businesses historically followed an asset-light, urban-centric and [ patronate ] models, Krsnaa built an integrated radiology and pathology platform leveraging the PPP route, working with the government to serve absolutely underserved geographies. And in that context, comparing Krsnaa with traditional diagnostic model alone does not fully capture the scale, purpose and the long-term structural value the platform we are creating. This is undoubtedly a more difficult and capital-intensive model to build. It requires investments in infrastructure, advanced medical equipment, technology systems, logistics capability and skilled health care manpower, along with the number of radiologists and qualified pathologists. But this very complexity is what creates Krsnaa's differentiation and the long-term moat, because once such infrastructure is built at scale, it becomes extremely difficult to replicate, operationally, financially and structurally. Additionally, given the nature of our model, where capital deployment happens upfront, while the utilization and monetization follows over time, our reported return ratios, such as ROC and ROE, during the expansion phases may not fully reflect the underlying operational potential of the platform being created. As these assets mature and the utilization scales up, we believe the operating leverage in our [indiscernible] model becomes significantly more visible. What makes Krsnaa unique is the combination of integrated radiology and pathology capabilities, deep PPP presence, 24/7 operational capability, high affordability pricing and the ability to deliver diagnostics at population scale, while maintaining strong margins and quality standards. That is where Krsnaa stands apart. In line with this strategy, Krsnaa is cumulatively defined nearly with [ 5,000 million ] of CapEx across Rajasthan, CT MRI expansions, retail infrastructure and associated banking systems. Against this, the company now has a long-term revenue visibility, both from the existing operations and the newly secured business, aggregating to nearly INR 6,000 crores to INR 7,000 crores over the next 5 to 7 years. That, in our view, is a very important reflection of debt, scalability and long-term visibility embedded within the platform we are building. Coming to the FY '26 performance, our revenues stood at approximately INR 7,728 million. The EBITDA stood at approximately INR 2,149 million, with margins of around 28%. Our reported PAT grew significantly for approximately INR 1,014 million, and the Q4 reported PAT alone stood at approximately INR 417 million, growing over 101% year-on-year. Importantly, this performance was delivered while simultaneously executing one of the largest diagnostic infrastructure expansions undertaken in the country. Today, Krsnaa operates 190-plus CT and MRI centers, 147 pathology laboratories, more than 4,700 patient collection center presence across 18 states and even territories, supported by 350-plus radiologists, 100-plus pathologists and 3,000-plus health care professionals. In FY '26 alone, we processed nearly 59 million tests and served approximately 20 million patients. These are just not numbers. These are millions of clinical decisions enabled by Krsnaa's infrastructure. And importantly, we have achieved this while delivering diagnostics at prices which are nearly 70% lower than the prevailing market rate, while maintaining margins comparable to some of the best years in the industry. India PPP Rajasthan is now substantially implemented with 27 model labs and 800-plus collection centers being rolled out across this. Upon completion of our existing order book, Krsnaa has crossed 200-plus CT MRIcenters, an important milestone, making us one of Asia's largest radiology platforms. The radiology infrastructure, the [indiscernible] integration, the logistics capability and the doctor network, along with technology systems and the statewide execution, create a very strong and long-term mode. The second engine for Krsnaa is our retail expansion, leveraging PPP infrastructure. Unlike conventional diagnostic players who will retail through heavy incremental investments and customer acquisition costs, Krsnaa's strategy has been to leverage the deep diagnostic infrastructure we've already created through our PPP network across the country. Retail today contributes across approximately 8% of the company's revenues and is increasingly contributing to towards improving the overall cash profile of the business. Strategically, we believe that retail has the potential to become a very meaningful long-term growth and cash flow driver for Krsnaa. Our strategic investment in Apulki Healthcare has been in the right direction. The value gain of approximately INR 222 million during the year validates our investment thesis around integrated tertiary health care and long-duration health care infrastructure partnerships. More importantly, Apulki positions Krsnaa within the oncology and cardiac care ecosystems, which we believe represents a very significant long-term health care opportunity in India. We also remain sharply focused on collections and working capital discipline during the year. In the half year alone, collections stood at approximately [ INR 2 9 1 0 million ], including INR 1,580 million in Q4, the highest quarterly collections in our history. 14 years, virtually 0 bad debts. That reflects the underwriting discipline and execution culture embedded across the platform. Krsnaa is built around accessibility, infrastructure efficiency, affordability and population scale health care delivery. We are building a health care infrastructure that serves millions of patients across India. Given the nature of PPP business, implementation time lines and project tenures can create variability across [indiscernible] periods. However, if one looks at Krsnaa's journey over the years, the company has continued to grow consistently. The headline numbers at times reflect the strength and resilience of this model. Over the last couple of years, despite certain projects completing their tenure, revenues from these projects tapering off and implementation time lines in some large projects taking longer than anticipated, Krsnaa has continued to grow consistently while simultaneously expanding infrastructure and investing for the future. In context, during the last 5 years period, Krsnaa has recorded an approximately 12% revenue CAGR compared to around 8% sales CAGR for the broader diagnostics peer group. In many ways, that itself is a validation of the scalability and resilience of the platform that we have built. Tenders and project cycles will continue to evolve more time, but what Krsnaa has created today is far larger than any individual contract. It is a deep, integrated health care infrastructure platform with strong execution capabilities, significant entry barriers and long-term public health care relevance. And that is why we believe the long-term potential of platforms still remains significantly under penetrated. If I step back and look at Krsnaa today, I believe the company needs to be viewed not barely a diagnostics business, but as a national health care infrastructure platform serving part of that scale. In many ways, Krsnaa sits at this intersection of health care, infrastructure and nation building, and I believe the full potential of Krsnaa is still unfolding. With this, thank you now. I now hand over the call to our group CEO, Mr. Mitesh Dave, to walk you through further updates on retail and the operations. Over to you, Mitesh.

Hi. Good morning, everyone. I am Mitesh Dave, Group CEO of Krsnaa Diagnostics Limited, welcoming you all today in the quarter 4 earnings call. Thank you, Mr. Yash for sharing details and the insights for FY '25-'26. Now as we close FY '26, I'm pleased to share that this has been a year of disciplined execution, strategic expansion and strengthening of our long-term fundamentals. Despite a dynamic operating environment, Krsnaa Diagnostics has continued to deliver resilient growth while steadily improving operational efficiencies, expanding retail presence and strengthening cash flows across the businesses. During the quarter 4, our revenue from operations and sales stood at approximately INR 1,926 million, representing year-on-year growth of around 4%, sequential quarter-on-quarter growth of nearly 7%. EBITDA for the quarter stood at approximately INR 559 million, with EBITDA margins of 29%, reflecting the efficiency and strength of our operational discipline, along with the scalability of our integrated diagnostic platforms. One of the most encouraging development during the year has been our focused effort towards improving collections and strengthening working capital efficiency. Through the sustained engagement, disciplined receivable management and tighter execution across the projects, we have successfully reduced our DSO from 155 days in quarter 3, 239 days at the end of the quarter 4 FY '25-'26. This reflects not only improvement in cash conversion cycle, but also reinforces our sharp focus on building a healthier and more sustainable balance sheet. Our retail diagnostics business continues to emerge as a very strong strategic growth engine for Krsnaa. Retail diagnostics in India remains massively underpenetrated, especially outside metro cities and Tier 1 towers. Patients are looking for transparent pricing, reliable reports, quick turnaround times and the health care experience. That feels simple and accessible. This is where we believe our model creates long-term value. Quality and execution continues to remain the central to our organization. Today at Krsnaa, we operate with 54 NABL accredited labs, 54 NABH accredited radiology center, India's first ACR accredited teleradiology platform, India's first CAP accredited pathology laboratory in the government facility. The journey for retail started approx a year before. And within a year, retail contribution for FY '26 stood at approximately 8% of the overall revenue, in line with our strategic road map. More importantly, the underlying momentum continues to remain extremely strong. Today, our retail network has expanded more than 3,500 plus touch points across the country, including 500-plus franchises and collection center across 5 states. Our foray into specialty segment in certain selective geographies strengthens our presence in strategically important markets, and we continue to see encouraging traction across Maharashtra, Punjab, Assam, Odisha and Himachal Pradesh. Going forward, we remain highly optimistic about opportunities ahead for FY '27. We expect retail contribution to further scale up to double digits, supported by strong network expansion, deeper customer engagements and increasing adoption of preventive health care and wellness services. With our asset-light model, operational expertise and growing brand credibility, we believe Krsnaa is well positioned to outpace industry growth and deliver sustainable long-term value creation. In FY '27, as a part of our strategic growth initiatives, we are also exploring opportunities to expand in newer geographies beyond our existing PPP operational states through strategic alliances and selective acquisitions. We will continue to strengthen both our PPP and retail business while steadily building one of India's most trusted, accessible and future-ready health care diagnostic platform. With strong fundamentals, improving unit economics, our rapidly expanding retail footprint and a highly committed team, we are entering FY '21 with a confidence, clarity and large long-term vision for scale. With that, I would now like to hand it over to -- call to -- call for the financial highlights to our interim CFO, Mr. Chandra Prakash. Thank you very much.

Thanks, thanks very much, Mr. Mitesh. Good afternoon, everyone. A very warm welcome to the Quarter 4 and Full Year FY '26 Earnings Conference Call of Krsnaa Diagnostics Limited. Myself, Chandra Prakash Singh, I'm the interim CFO of the company, and it is my privilege to walk you through the financial performance for the quarter and full year ended March 31, 2026. FY '26 has been a year of systematic execution and milestone achievement for Krsnaa Diagnostics. We have achieved a sales of INR 7,728 million against the previous year sales of INR 7,171 million. We crossed INR 1,000 million in reported PAT for the first time and achieved a reported PAT of INR 1,014 million against our previous year PAT of INR 776 million. We achieved EBITDA margin of 27.81% on a full year basis. Our EBITDA grew to INR 2,149 million against last year EBITDA of INR 1,958 million, representing a growth of almost 10%. Our retail business scale from almost INR 10 crores in FY '25 to INR 60 crores in '26, which is a sixfold growth in a single year that firmly establishes the consumer appetite for Krsnaa's brand of affordable and quality diagnostics. Our working capital situation is improving steadily. Collection of 1,580 million in Q4 FY '26 was our highest for the year. And just to clear the recovery trajectory, we'll be -- are going to increase it further. Our receivables stood at 139 days against 155 days in the previous quarter. Our improvement journey to sub-120 [ days ] guided for FY '27 remains on track. Just as said by Mr. Yash, I wanted to reiterate this again, that we have maintained our unblemished record of virtually 0 bad debts since inception. The timing delays are administrative in nature, not a credit risk issue. Our balance sheet remains healthy, our borrowing include NCD issued to [ 2 80 ] [indiscernible] [ 440 double zero ] million term loans and working capital. We continue to fund our growth through a combination of internal approval, operational cash flows and efficient vendor finance CapEx model. Capital allocation remains at the heart of our growth strategy. We have planned a total capital investment of INR 5,000 million in FY '27, which includes both the carryforward commitments from FY '26 and fresh investment in FY '27, which includes both Rajasthan and our projects in radiology and other projects. Looking ahead, we see FY '27 as the year in which all the investment we have made come together, [indiscernible], retail achieving the breakeven and accelerating to next level, new MRI adding to radiology base, adding to the next layer of long-term growth. The foundation is strong. The execution track record is [indiscernible] and the opportunity ahead for us has never been larger. Last but not the least, I'm happy to share that the Board has recommended a dividend of INR 2 per share. That is 40% of face value. With that, I would like to conclude the CFO's opening remarks. We are deeply grateful for your continued confidence in Krsnaa's revenue. I'm now inviting the moderator to open the floor for your questions. Thank you.

[Operator Instructions] The first question comes from the line of [ Palam Umli Krishna ] with [ Oman ] Investment Advisors.

So I want to know any contribution from Rajasthan in the current quarter number? Also, how the ramp-up will take place in this financial year? So like we can expect around by H1 [indiscernible]?

So in this quarter, there was no contribution of Rajasthan. We were all in the case of establishing the labs and the collection centers. We see Rajasthan contribution coming in from Q1 FY '27. The revenues have started coming up. The entire installation is expected to be completed majorly within Q1 and some bit of it flowing into Q2. So by Q2, we expect all the installations to be completed.

What would be the revenue potential from Rajasthan in this season?

So Rajasthan, we believe the revenue potential to be in the range of about INR 100 crores to INR 150 crores on a full year basis.

And a follow-up on that on earlier, we are expecting around INR 250 crores to INR 300 crores. Why there is being a past year? Or is it the same kind of revenue we can expect it going forward also?

So from an aspiration and the project value perspective, the number that we quoted earlier was good. It is just that considering the ramp up here and from our experience, we'd like to have a conservative approach.

Okay. Secondly, on order pipeline. So this is only the last tender we have to implement and also some Maharashtra, [indiscernible] pending center to implement it. And as of now, there is no progress on the radiology because the center remains similar. How do you see that will come -- when do you think that we can complete the radiology centers? And what could be the other chances of getting some new orders in the current financials? As of now, I think there is no pipeline also.

Sure. So which one are -- there are 2 parts of the question. The first part is regarding the MRI or the radiology projects. I'm pleased to inform you that the MRI centers have already been started launching in the last couple of months. So we have around 10 MRIs that are going live. Some of them already live, some of them will be in the coming weeks or months. So we have MRI base getting activated. As regards to the other PPP projects, there are PPP opportunities, but as we've maintained in the past, Krsnaa is conscious about which PPP project to participate and eventually add into our city. So there are a couple of PPP opportunities which are under works. And hopefully, in the coming quarters, we should be able to update you all with the outcome of the same. We continue to pursue opportunities, but also conscious of the fact that we have a large Rajasthan project under implementation, the MRI is now getting live and pursuing selective opportunities which create long-term value for all of us.

Good. So on the retail part, this time has been flat Q-o-Q. Being a scale up business, I think, is a little bit slowdown in revenue front. So how do you think this will shape up in the current year? And also on the margin front, so this quarter, good margins, even excluding that valuation gain. So in this current year, can we maintain that 29%, 30% margin this one-off or?

Mr. Bala, on the retail side, I'll ask Mitesh to answer the query. With regards to the margin profile, we are working towards maintaining the current level of EBITDA margins. There might be some impact in the Q1 where there is upfront deployment of manpower. For example, in Rajasthan almost, we are adding up 5,000 people. So to that effect, there will be some impact. But on an annualized basis, we are trying to maintain the same level of EBITDA margins that we achieved within the year. Mitesh, on the retail side...

Mr. Bala, so, well, this is nothing, but it's a basic part and parcel of any business, quarter-on-quarter a little bit muted. So it has nothing to do with the -- or nothing to impact on any long-term planning or long-term vision that we carry. Another quarter 1 and further upcoming quarters, you're going to see even a very large extent of growth and numbers coming through from the retail part.

Okay. That's helpful. And last question is a case on a bookkeeping question. So what is the amount of receivables which are delayed by more than 6 months? So the long-term pending receivables are like Karnataka and Himachal Pradesh. So what is the status of that? And how much is pending as on -- from that or pending the surplus, sir?

Yes. So for both the projects, for HP and Karnataka, collections have happened. HP almost, significant collections has happened. Karnataka, we've received a sizable chunk. There are certain people who are there, for example, some of the officials have been transferred, so there are delays, but I think it's in track and hopefully, in the coming quarters, we'll be collecting to the individual state-wide amounts, we'll share -- ask [ Sujoy ] to share separately with you.

[Operator Instructions] The next question comes from the line of [ Hitendra Platan ] with [ Maximal ] Capital.

I hope I'm audible. So sir, my first question is like adjusting for the nonrenewal. What was our like-to-like revenue growth on the PPP side? Because revenue growth was a little muted. So just wanted to -- existing for the nonrenewal that was our organic growth this quarter and...

So our organic growth or like-for-like projects which are continuing is almost in the range of around 13-odd percentage. And that was offset to an extent by some of our projects that got closed because of the tenure who got completed.

So 13-odd percentage for on full year, sir, and for the quarter?

Yes. For the quarter, I think we'll share the details on...

Okay, sir. And the second related question, sir, like any -- what are the quantum of projects that are up for renewal and we can expect any kind of nominal this year? If you can give some color on that?

So I think, except for Tamil Nadu, there are no major contracts which are also renewed during the year because typically in the journey also many times, the [indiscernible] is also give us -- to exchange sections happening if tender is published or not. Not in the immediate, but if anything comes up, it will operate in the coming quarters as well.

Okay, sir. And the second question, sir, is just wanted to understand on the PPP side again. I mean, I mean, we provide a completely free of cost kind of treatment through government schemes, but are there any price escalation clauses there? I mean what is the pricing looks like? I mean, if you can give some context and color to that.

Sure, sure. So for the PPP tenders, we have rate escalations, which are factored into the agreement. They are contractually embedded. And these rate escalations vary for each tender, ranging anywhere from 2% to 5%, some of them are annually, some of them, every alternate year. So there are these pricing ranges that are there in each of these contracts.

The next question comes from the line of Surya Patra with PhillipCapital.

First of all, if you can give what is the revenue breakup between the pathology and radiology for the year, sir?

I think there is a different -- I mean, the split within radiology and pathology is in the range of 50, 50%.

50-50, okay. So my first question about radiology projects. So whether we have downsized a couple of pipeline project because earlier, the Maharashtra was something like 56-odd MRI center -- MRI city center is supposed to be created. And now in this presentation, we are mentioning, after the pipeline project, the number will go -- increase just 10. So if you can give some clarity about that? And what is the update about implementation of the other pipeline radiology centers in the Maharashtra.

Yes. So I think from the headline numbers, there's no downsizing of any of our projects. As I said, if some of the projects would have completed the tenure, some of the centers would have gotten. But on the radiology front, we are adding MRI centers. Like I mentioned, we have almost 10 MRIs that will be added in the coming quarter as well, out of, I think, the total 17-odd MRIs that we are under implementation. So those are the new centers over and about the existing number that we have shown.

Okay. So that means the pipeline is just 10 months centers in the Maharashtra that is how one should believe?

10, and total is around 17, 10 are already at the installation state, where they are under commissioning.

Okay, sir. Sir, now in regards to pathology and related to Rajasthan also, see you have guided for about INR 150 crore kind of annualized revenue. So since we are likely to set up something like 157-odd centers in Rajasthan, so we are talking about 1 crore revenue per center kind of equation, which looks very, very conservative considering the INR 3 crore kind of a run rate what we are having. Any headwind that you do see for that PPP contracts?

Yes. So I think that's a very valid question. And like we've been also maintaining in the past, from an aspiration perspective and the numbers that we've quoted, of course, the headline or headroom for growth is significant. We're just being calibrated in our guidance or the communication that we do, wherein this is something we know which is realistic. Of course, there's an upside as more and more collection centers get activated, more labs is activated. So there's certainly an upside. But from a guidance perspective, we'd like to be maintaining a conservative stance.

Okay. In that case, then may I know, sir, what is the kind of upfront cost that we would have already seen in FY '27 -- '26, which would have, to some extent, pressurize our margin so far as Rajasthan is concerned?

So we've been trying to see that the cost and the revenue go hand-in-hand. So in FY '26, there were not significant cost impact that came through except a few of less traveling or some of the logic costs. Hopefully, in Q1, as I said, Q1, there will be some pressure because we have, as I said, almost 5,000 people onboarded at these different collection centers or the stuff. So that will be -- but again, the revenues are also flowing through. So we are trying to see how the cost impact on EBITDA is not very high, and it's probably a few basis points here and there, and it should be able to allow us to continue to maintain the EBITDA margin.

Okay. Just last question from my side.

Sorry to interrupt, Mr. Surya, I would request you to please come back in the queue for further questions. The next question comes from the line of Manoj Dua with Geometric.

My first question is in Rajasthan next year, we can expect a sale of more than INR 200 crores plus. As you know, the state [indiscernible] ramping up will be over until then?

Yes. So as I said, from a headline, we expect around INR 200 crore plus. But since it also -- PPP is under the implementation, there could be certain opportunities. We are just being careful in terms of the guidance and risk-taking is about INR 150 crores.

Okay. On retail, private, what is your aspiration for longer wall of around 3, 4, 5 years, whatever you can think of? And can you maybe just give elaborate on that?

Well, good afternoon, Mr. Manoj. And over the longer horizon, around 3 to 4 years or 5 years kind of a period that we are looking for. Having contribution of retail alone within the entire group revenue close to 25% to 30% should be there in the line with.

Okay. And last question, how much sales we are expecting from the MRI from the Maharashtra?

Could you just repeat the question?

Addition, addition. How much sales we can expect addition of adding more to MRI in the Maharashtra?

We will say this number to you offline.

The next question comes from the line of Mayur with Wealth Managers India Private Limited.

So this is not a question, first, the comment. So I'll go to the 2 questions which I have, but just to open just to comment. So when we look at the narrative around Krsnaa and the qualitative aspects, I think you pick mark all boxes with respect to the health care opportunity and the way it has done and the number of -- and the scale at which we are operating and even the business model at which we have been able to crack compared to the challenges, which are there in the PP. So a great narrative on that and great team execution there. In the same breath, I'll also say that the execution, and you will also appreciate that execution has lagged given the opportunity size, which we had. So I just had a one long-ish observation and one from the yours perspective. From a listing perspective, FY '21, we were looking at 20%, 25% as the minimum CAGR given the penetration, low health care opportunity size, the state at which we are present across the -- and it's been there. It's what we have been looking at over the long term. After 4 years, we are -- the CAGR is more in the region of 12% -- 10%, 12%. And out of that, 2 years have been flattish. It's just that there has been lumpiness in 2 years. And when we look at FY '27, while Rajasthan will scale up, but the pipeline of new projects, as you said, because of pricing, and it's not there. So does it structurally break -- it structurally mean that we are looking at a more calibrated growth as we go ahead, given the CapEx requirements or given the challenges in that, firstly. Secondly, FY '25, I remember we were looking at 25% growth. We ended with 16% growth. FY '26, we were looking at 15%, 16% growth. We ended at 1% growth. So even in the near term, the challenges were -- of guidance versus what has been the delivery has been slightly subpar given the narrative. So sir, your comments on that?

I think you kind of touched upon 2 aspects of the model. The first aspect regarding the PPP as a business model as an opportunity. That opportunity still exists, it's still is there. The only difference in our approach as post-listing, like you mentioned, of course, given the scale at which we are operating then, considering the various states that were supposed to deploy PPP, we were also bullish and looked at those opportunities to convert to mature and to deliver. Having said that, over the period also, if you can see, there are various PPP projects that Krsnaa undertook and which are under implementation. And some of the PPP projects, considering the scale at which they came in or the price point at which they came in, we decided not to participate. The simple reason being we don't precisely pursue PPPs, and that has not been just post listing. It has been since the historical trend and the reason why Krsnaa is able to be a successful company in the PPP space, whereas there are other players who have not been successful enough. So which is a core at Krsnaa. We look at PPP projects which are in the same table to create long-term value. Now with regards to the growth, when you mentioned about and, yes, we had aspirations to grow at a high. There were also certain reasons. Some of the reasons could be attributed to, as I said, delays. Just to give you a reference of Maharashtra, the Maharashtra project is a certain delays getting government side on time. So when we project, we expect certain things to happen in a certain amount of time. But then there are these operational delays. Some of them were setback, which we did experience beforehand. So these are there. Fundamentally, the model remains intact. The stealth in the model is there. We continue to look at PPP projects. And as I said, there are a couple of PPP projects in pipeline, which we are working towards. And hopefully, we should be able to announce it in the coming quarters. So I don't see a change. Yes, we have been calibrated in our approach in terms of the guidance considering these backwards and which I believe is a more mature way of looking at the business since the last couple of years.

Right. Okay. So the second element is slightly more on the financial side, I'll just club 2, 3 in order to combine them and request you to answer each of them on just one by one, I'll club it so that it's the part of the 2 questions. One is the Rajasthan total CapEx was expected to be 200 to 250. The CWIP shows more than INR 200 crores of largely -- what it shows is a large part of it has already gone inside. With respect to that, yes, we are saying FY '27 to be INR 500 crores. So where is that balance such a large CapEx expected to come from, given the fact that the projects pipeline at least has not been yet announced and it will take some time. So the actual...

Yes. So the INR 500 crore CapEx is a combination of Rajasthan, the MRI projects put together. So Rajasthan, about INR 300-odd crores. And if you take MRI, which is about INR 250-odd crores and the balance are for certain small projects like we won in [indiscernible]. So that combination put together is a INR 500 crore CapEx that is outlined.

Is there a cash flow CapEx? When we say CapEx, we understand as cash flow, are you taking of capitalization?

This is capital investment. So when I say capital investment, it's a combination of the debt, the combination of our internal accruals that we would be -- and it's an investment...

We will be spending INR 500 crores in this year is what you are saying? Because we must have spent for Rajasthan already, right?

So let me just clarify. The INR 500 crores CapEx is the capitalization that we expect to happen in this financial year, out of [indiscernible], right? And the balance, like even the Maharashtra MRI project will -- the capital issue will happen in this year. We are most -- were paid at different points in time, either through vendors or for capital advances. The capitalization and therefore, the capital investment happens in this financial year. I hope that clarifies the...

Yes, yes. Now it clarifies, yes. So on the numbers side, as I was trying to ask a norm, we also had aspiration to bring the receivables down to 100 days at the start of the year, subject to the expectation. We are at 135 days. So on the receivable side also, if you can mention what has gone. There has been regularly some of the other developments, whether it was the systems upgraded NABL and NHM, whether it was preshifting, people are shifting, as you mentioned, or some of the other things. But then we are still guiding for 120 days. The understanding was it should be more in the region of 100 days. So why are we going back to 120 and not able to achieve 100 days? And how long do you see that the Rajasthan and HP -- sorry, the spin Karnataka things will continue to be there in the numbers. Sir, let me just complete one more small question so that my turn is over and will come back in the question in a few. Just one small thing. Rajasthan FY '27, once it comes in the P&L, do you believe that FY '27 PAT will be higher than FY '26 because of the cost and other things? That's it. Yes, 2 questions.

Okay. So again, I'll try to answer the 2 questions. The first one was regarding receivable delays. The receivable delays are something, which if you see, again, historically we have not seen these kind of delays, and we appreciate that, and we've taken significant efforts to bring it down. The challenges are something, which are -- some of them are beyond our control. For example, when a MDM officer or a government official gets transferred or moves out, the new officer takes his own time to look into the records. There were also some challenges from the funds that were coming from the central and the new system, the [indiscernible] first that is being deployed, where there are operational challenges at the respective governments. So there are multiple reasons why there are receivables. And therefore, whilst if you see internally, we would like to bring it down to 100, which has been a historical trend. But considering the realistic position on the ground, we have now looked at bringing it around to 120 days. We've already come to almost 139 days. And I think the teams are geared up to bring it down with a stronger documentation. And also if you see a reflection from a past track record of 14 years, which is almost a virtual 0 type, we try to maintain that. And that is how Krsnaa, whether it is for optimization or to the process or the checks and balances, we try to achieve that. Now coming to your second question about the profits once Rajasthan gets fully implemented, whether they'll be higher. Directionally, yes, we would love to have profits which are higher, but we are also cognizant that there's an impact of ramp-up that happens, and the revenues, which I said from a conservative basis. So we would love to achieve that. But I think then as maybe in the coming quarters, we'll be able to have a much better clarity once the full labs get deployed, the full staff gets deployed. But yes, especially, we are trying to achieve at least the same level of PAT margins in the coming year as well.

Mr. Mayur, I would request you to please come back in the queue for further questions. The next question comes from the line of Lokesh Manik with Vallum Capital.

Yes, my question was on radiology. So '24 to '25, we expanded from 148 centers to 180 centers. We were expecting some revenue flow through, at least in '26. So by when do you expect this expansion that we took from 140 to 180 for the revenue to come in?

Yes. So the revenues are expected to come in this year. As I said, there were certain delayed installations of previous centers. The revenues will start coming for the radiology this year as well.

Okay. And my second question, just a clarification, Yash, that is it correct to understand that by Q2, we will have all the infrastructure up and running for Rajasthan, which would take a pathology lab network to about 297, including satellite and other large and reference labs? That is one. And second, do we see FY '27 where radiology goes, like you mentioned, 190, we are already, 10 we are adding and 60 are in pipeline. So that 60 also gets completed by FY '27 exit?

Could you just repeat the question? I think you spoke on the pathology front?

Yes. So pathology going to 297, which is existing, plus Rajasthan coming in. Is that the correct understanding by Q2? Would that happen?

Yes.

And second is radiology, we are at 190. We are adding 10 centers in this quarter of Q1. And you mentioned there are 60 or [ 70 ] in pipeline. So will that also get added by this year or that will get added by the next year?

So total are [ 17 ], out of which 10 will be added in this quarter, in the current [indiscernible] in the coming quarters.

By FY '27 exit, we will be at about 260 radiology centers as well. Is that understanding correct?

No, 190 plus 17.

1-7, okay. Okay. Okay. Got it. Got it. Got it. That's it from my side.

The next question comes from the line of [ Vinod Krishna ] with Avendus Wealth.

Am I audible? It's great to see such a health care platform build. But my question is coming from the long term concern the inherent risk in the business. Because we are dealing with government, so how should we think about receivables, it's last 2 years, you have the [ Marshall ] and Karnataka. Tomorrow governments can change in other states. And if it happens in other 1, 2 states, suddenly our balance sheet and our business model will look very risky. Now we have -- we have started taking debt and we are going in a huge expansion phase. So how do you think that you said you never had debt but maybe because maybe that may not repeat because we have already seen 2 states giving us a lot of trouble to what governments can change the center in many states, right? So how should we look and business model again within 2, 3 quarters can completely be pay off the tracks, right? So how should we think how you guys are taking care of the receivables risk? Or why should we think that receivables is not a big risk for this business?

Sure. I'll answer that. So there are -- if you look at fiscal historically as well, we've seen various governments come and go. It is not that this is the first time we have seen. Governments will come and go, these tenders typically are with central and the state combination. Per se, as I said, as a business model, the risk does not change significantly. There have been procedural delays, there were elections post that. The new system came in and of course, some of the budget approvals from the central state. But if you see, apart from these 2 states, we are doing business across 18 states, and the problem doesn't exist in the other so many states.

So one other states -- these 2 states are congress so tomorrow, congress can come in other states, right?

No, no. Even we have seen government change, with Rajasthan, it was earlier in the Congress, when it came to BGP. Likewise, we've seen other states where government has changed, whether it is Congress or BGP, it really doesn't matter because as I said, these funds are from the NSM, which are central driven funds. And they are following a budgetary process. The delay, as I said, mostly are operational in nature, nothing to do from a structural or a state...

But in the contract, do we have any liabilities if you stop doing services, like you have stopped one service in Karnataka. So how are you -- like -- that clarity if you give...

I'll answer that. So in some of these contracts that there are arrangements where we can sustain the operations if payments are not done. And again, as I said, Krsnaa has been what we call it a temporary suspension of these operations, wherein we inform the authorities in advance that the payments are getting stuck. So kindly release remit or we will be forced to suspend. When we do this, and this has actually borne fruit, where we are now receiving confirmations from the government that the payments will be made. In some instances, the payments have also come through. So these are -- as I said, this is a partnership between the government. And this is -- while there are other sectors where payments are getting impacted, but considering health care and the NSM driven model, we do get our funds on time. Delays have happened, which, as I said, is an [ aberration ], but we are continuously monitoring this and taking steps to again strengthen this going forward.

Mr. Vinod, I would request you to please come back in the queue for further questions. The next question comes from the line of [ Nikhil Gupta ] with [ Y ] Capital.

I hope I'm loud and clear. So we are basically to do business, trying to understand your thoughts. And most of my question is answered. So one question on the leadership team. Can you talk about the soon -- the so high-level [indiscernible] people are working because I can see so many regulations in the past few months, CFO, CDO, COO, [indiscernible]. Also in the last concall, I think [ Ms. Pallavi ] was there, she was executing director. Can you talk about her profile? What she was handling and what she's doing right now? So basically a high-level question on the leadership team because it's a very operational heavy business.

So yes, I think from an operational perspective, the leadership team remains intact. It's strong, to continue to deliver. People will come and go, which happens in any company as we move along. Just to give you a reference, our earlier CFO spent 5 years, and after 5 years, he wanted to pursue his own personal growth plan. So that done. [indiscernible] itself demonstrate there was stability and likewise for the other players. [indiscernible] Pallavi, her role was handling the installation of centers, looking out at government. But again, after having spent for many years and [indiscernible] board. So fundamentally, as from a leadership team perspective, the team is stable. We have Mitesh there, our Group CEO, along with me, our Chairman as well, and now the Interim CFO and the rest of the team. So I think the team is intact and strong to deliver growth and value in the coming years, the coming quarters as well. And any specific details, you can return to Sujoy, and he'll share more of these details offline.

So a last follow-up question on the same thing. I think [ Pallavi ] was the cofounder at the start, right? Why was not given equity in that particular state?

So I think [ Pallavi ] wasn't a co-founder. She was part of the founding team member. And regarding the equity or not, I think those are pursuit questions, which we'll probably take it offline.

The next question comes from the line of Surya Patra of PhillipCapital.

Yes. Just a follow-up, sir. Just on the [indiscernible], now we have mentioned that [indiscernible] is no longer [ SMC ] company. So does that mean we have monetized our investment there? That is one. And the related question is that Apulki and chain of hospitals were considered to be one of the key growth drivers for us also. So what happens to that opportunity if Apulki is not part of our -- not a partner for the business going as it?

Mr. Surya, Apulki's investment from an accounting, it's not an associate. But our partnership is intact. We have exclusive rights for all the diagnostics, both in the cardiology and oncology space for the next 30-plus years across all the hospitals that Apulki is becoming. The first one was recently launched by the hands of -- [indiscernible] Mr. Maharashtra, and therefore, now it's entering into the business where the business will start ramping up and the other hospitals under differ stages of construction. So we do have the growth strategy that we had in [ Visas ] that is bearing fruit. As these hospitals ramp up, we have the exclusive tie-up for their revenues on the diagnostics side. And again, as you are aware, [indiscernible] cardiology both have significant diagnostic requirements. And therefore, we see a strong upside in the years to come from Apulki as a strategic partnership.

Okay. Second point was that, sir, in the opening remarks, you have mentioned that expanding business beyond -- geographically beyond India, it sounded that way. So any thought process on that front or any initiatives that you are taking? Or how is it?

Yes, yes. Yes. So we have conversations going in some of the states where we are not present in the PPP. These are some of strategic alliances across the states. I think probably by end of Q1, we should be announcing some of these alliances as well.

That is domestic expansion, geographic expansion?

Yes. Yes. Yes.

Just last one point about RPL, sir. Can you share what would be the EBITDA that we would have generated out of in the first stage of enrollment -- I mean, implementation and all that?

You mean the first year of...

I mean FY '26 could be a kind of practical first year for RTL. From that angle, I was saying that, okay, to what level of EBITDA that would be operating? And what scope of expansion in the margin front in the following year with the further ramp-up.

Yes. So in the first year, the EBITDA was negative, I think margin largely because of we had to deploy the manpower for scaling up in these geographies, some of the logistic costs. But in this FY '26, '27 is where we are looking at positive EBITDA and trying to get it to the same levels of the consolidated EBITDA level by the end of financial year FY '26 '27.

Okay. So then is it fair to believe that the margins in are your trajectory for FY '27, considering the kind of hit we would have seen from RPL in the FY '26 and some marginal bit from Rajasthan and incremental revenue-led expansion or contribution coming from the radiology new centers and Rajasthan also. So on the margin front, we should see a kind of a decent scale improvement on a Y-o-Y basis for FY '27?

Yes. So I think directionally, we're also -- aspiration towards having improvement. And as I said earlier, a combination of our existing business, the retail also as well as the Rajasthan picking up. Quarter-wise, there might be some aberration because of revenue not being commensurate especially on the Rajasthan front. But I think from a -- if you look at it from a year-end perspective, we believe that the EBITDA margins at least should be same and not have a dent and of course, looking forward for an upside to these various levers that we are working.

The next question comes from the line of [ Pipa Gajmara ] with [ IGE ] India.

My question is on the retail side. If I look at the touch points...

I'm sorry to interrupt Mr. Pipa, could you please use your handset? Your voice is not audible.

Yes. Now it is audible?

Yes.

Okay. On the retail side, if we look at the touch point, it is coming down consistently for last 2 quarters, and the revenue is also lower compared to last 2 quarters. So what's -- where as we have a huge expression on that segment? So what's your gap there?

Sorry, could you just repeat the question?

On the retail side, the touch point is coming down consistently for last 2 quarters. And revenue is also almost flat or down compared to last quarter...

I guess you need to check around data and because the touch points and the expansion is very much progressive quarter-on-quarter, from quarter 1 to quarter 4. And in quarter 3 versus quarter 4, achieve tradition has gone for 700 and 3 others as in touch points. However, in quarter 4, revenue is little muted versus quarter 3, and that's a basic part of any business. So it is nothing too much look around because as it has revived back and address on a very strong growth trajectory as well.

Hello?

[ Mr. Deepak ], sir, could you please repeat your question?

We answered the question. Were we you audible?

Yes, sir. [ Mr. Deepak ], does that answer your question? As there is no response, we move to the next question. It's from the line of [ Jash Harbi ] with [indiscernible].

I just wanted to ask whether the Rajasthan capital expenditure will be capitalized from Q1? And also, what is the impact on depreciation and interest cost for FY '27? If you can quantify the depreciation and interest cost numbers outlook.

Sure. So Puja, the capitalization will happen from Q1 onwards, around almost INR 200-odd crores. On the specifics with regards to the depreciation interest, I'll ask Sujoy to come back to you a separately.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Yash for closing remarks.

Sure. Thank you. Thank you, everyone, for joining our Q4 FY '26 earnings call. Hopefully, we were able to address all the queries. If any questions remain unanswered, please feel free to connect with Mr. Sujoy Bose, our Company Secretary, and looking forward to interact with you in the coming quarters. Thank you, and have a good day ahead.

On behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.