Metropolis Healthcare Limited (METROPOLIS) Earnings Call Transcript & Summary

Good day, and welcome to the Q1 FY '26 Earnings Conference Call of Metropolis Healthcare Limited, hosted by JM Financial. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements do not guarantee the future performance of the company, and it may involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. With this, I now hand the conference over to Mr. Amey Chalke from JM Financial. Thank you, and over to you, sir.

Yes. Thank you, Shruti. Good morning, everyone. I am Amey Chalke. On behalf of JM Financial, welcome you all to the 1Q FY '26 Conference Call of Metropolis Healthcare. From Metropolis, we have with us today Ms. Ameera Shah, Chairman and Whole-Time Director; Mr. Surendran, Managing Director and Chief Executive Officer; Mr. Sameer Patel, Chief Financial Officer; and Mr. Avadhut Joshi, Chief Business Development Officer. Now I will hand over the call line to you, ma'am. Over to you for your opening remarks.

Thank you, Amey, and good morning, everyone, and thank you for joining us today for the Q1 FY '26 Earnings Conference Call. We've uploaded our investor presentation and the related documents on the stock exchanges on the company's website, and I hope everyone's had the opportunity to go through the same. India's healthcare landscape is gradually shifting, shaped by a range of equipments how care is delivered, accessed and monitored. We are keeping an eye on a few broad global trends that stand out: AI-led diagnostics, decentralized point-of-care testing and the growing relevance of GLP-1 therapies in metabolic health. Artificial intelligence is increasingly being embedded into diagnostic workflows, particularly in radiology, enabling faster, more accurate reporting and personalized recommendations. In the pathology space globally or in India, it has started entering the workspace and customer service, back-end processes and a few technical tests. However, it is far from being used on mass at this time. At Metropolis, we're applying AI across multiple areas, from clinical reporting in a few tests and customer chatbots to test recommendation engine and AI-assisted testing in prostate cancer, allergy testing and karyotyping. No one in India at this time is using AI in a very scaled or differentiated way that we believe is going to be severely disruptive to the existing industry. The second trend when we review, which is of POC diagnostics, we are seeing it help improve access, especially in semi-urban and rural areas, where setting up a lab may not make a economic sense. Point of care is not cheaper or more accurate than the current standardized platform, and therefore, usage is more for urgent reporting in metros and access to diagnostics in smaller rural markets. If a scaled use case for using point-of-care diagnostics is found, Metropolis would certainly consider using this channel to access new customers or markets. On the GLP-1 front, the receptor agonist market in India is currently valued at USD 110 million in 2024 and projected to grow to USD 500 million by 2050. This shift is likely to drive higher demand for regular monitoring of glucose, lipids, liver, kidney and cardiac parameters. This marks a shift from episodic testing to longitudinal health tracking with consumers increasingly investing in proactive wellness. Together, these trends point to a gradual move towards more personalized and proactive diagnostics. Also, certain metabolic panels and other tests may increase as the use of GLP adoption increases. We are very happy to announce that our strategy of strong organic growth plus good quality acquisitions has resulted in 23% growth in revenues for MHL quarter 1 FY '26. Despite Q1 typically being a soft quarter in the West and South regions, Metropolis recorded a strong 13.2% organic growth in revenue growth, driven by volumes and improved realization, supported by our strong brand equity and expertise in the Specialty Diagnostics segment. With North region now contributing 17% of our overall revenue, we will continue to spend considerable time and effort in growing the space in the northern region. While quality, scale and brand equity continue to be strong pillars, we are now doubling down on our scientific depth and innovation to further distinguish ourselves from competition, particularly in the market where pricing gaps are narrowing. We are in the process of building a center of excellence in oncology diagnostics, which will centralize in genomics, histopathology, cytogenetics, molecule oncology and precision testing. The center of excellence will serve as a hub for clinical collaboration, research and education, positioning Metropolis as a leader in onco diagnostics and enabling differentiated high-trust offerings for oncologists and hospitals. The acquisition of Core and putting together skills and expertise Metropolis already has in oncology, along with the new relationships acquired by Core. We will create a platform for Metropolis to not only be the largest oncology testing player in the country but keep innovating and investing for growth for the next several years to come. Additionally, we have been actively upgrading our labs and associated IT systems while complementing and implementing several lab automation initiatives to boost efficiency and productivity. As we keep increasing our test menu, not only in our global reference lab but also in our regional reference labs, it allows us to deliver faster results and reduce turnaround time for our specialty tests for all markets. But fast is not enough. The result has to be precise and accurate according to each doctor's individual experience. To achieve this, we not only have curated our own quality protocols but we have standardized them across all our labs and continue to uphold and show our quality results in every test for every patient and every doctor. Our rigorous internal quality control process operates in parallel to NABL accreditation and is rolled out across every lab under Metropolis. This doesn't mean just testing the sample on a single machine and transferring the data to the patient but it includes multi-tier validation of test results using various testing platforms to cross-check results, curation of reference ranges for the Indian patient, daily quality checks and the use of global quality controls and standards, ensuring consistency, accuracy and reliability across our entire lab network. This system provides a significant edge over not just unorganized players where such uniformity is often lacking but also sometimes organized players where our expertise and knowledge of pathology over 40 years proves to be a differentiator. Just to update you on the integration of our recently acquired targets. Last quarter, we completed 3 acquisitions as part of our inorganic growth strategy. The integration of these assets is progressing smoothly with no significant challenges encountered. Led by a dedicated steering committee, the integration process is already yielding synergies, particularly in lab consolidation, procurement efficiencies and reduction of overlapping overheads. Our immediate focus is to fully integrate these acquisitions into the Metropolis ecosystem, prioritizing operational efficiency and margin improvement in the first year. Once integration is complete and synergies are captured, we will shift our focus to accelerating revenue growth through cross-selling opportunities and expanding the reach of Core Diagnostics across Metropolis' pan-India network in year 2. While Metropolis has organically posted a 24.7% EBITDA margin and Scientific Pathology and DAPIC, Dehradun are of good margin profile, Core Diagnostics will be turned around this year. And this year, it will drag the consolidated EBITDA margin. If we look at Core, Core has shown a positive year-on-year revenue growth with a notable improvement in profitability, achieving a low single-digit EBITDA margin compared to the breakeven levels in Q4 FY '25 before we acquired it. Our immediate goal is to integrate the team into our culture and processes while unlocking efficiency gains through integration synergies. Our goal for year 1 is to reach a high single-digit EBITDA margin, primarily through cost synergies, and we should see the progress over the coming quarters. PAT for Q1 is negative, largely due to high depreciation and high cost interest for Core, and it has a INR 12 crore loan in the books, which has been now refinanced in July at a much better rate, and hence, Q2 PAT for Core should be much better. Scientific Pathology, Agra and DAPIC, Dehradun, both entities have delivered revenue growth in line with the company average and margins are slightly above the company average for both. These brands are well established in their respective local markets, and our strategy moving forward is to expand into adjacent regions by increasing the number of collection centers and offering the broader Metropolis test menu, helping us capture a larger share of the market. It's worth noting that DAPIC, Dehradun has been consolidated only from 23rd May 2025 and Scientific Pathology, Agra only from 16th June 2025, and hence, only proportionate revenue and margins have been consolidated in Q1. Just yesterday, we have announced our acquisition of Ambika Diagnostics in Kolhapur, founded and run by Dr. Patil and considered the most credible lab in Kolhapur. We have been in a management contract with Ambika for the past 2 years where Metropolis runs the business with employees on our payroll and all processes and technology under the Metropolis guidelines. This lab on lease model has done very well in the last 2 years and has grown 60% since we started managing it. We believe this growth will continue to be strong in the future, and we thought it made sense to acquire this business and merge it with the Metropolis Kolhapur lab that runs independently in the city. While the revenue of the business was INR 8 crores in FY '25 with INR 1.8 crore EBITDA, when we look at the valuation of INR 17 crores for 100% of this business, it will actually -- while it looks like a 9.4 multiple of FY '25 EBITDA, in reality, the EBITDA will be INR 3.4 crores once we acquire it because it will include the synergies between the labs, and fully show the profit on its own, which would actually effectively be a 5x multiple of EBITDA. Together, the labs when we merge them would create the largest lab in Kolhapur and the region -- in the whole region, and it will be a good hub to grow in the whole district. Dr. Patil will continue to work with us for over 10 years, and we believe this acquisition to be highly accretive from day 1. The acquisition would be done from internal accruals and closed within 30 days from signing, which was yesterday. We have consistently emphasized our strategic intent to diversify into adjacent healthcare services, which can enhance customer engagement, and we have been piloting several initiatives, including basic radiology like ECG and x-ray and non-blood vital checkups and on-call doctor consultations. We are pleased to share that our basic radiology pilot has gained encouraging traction. We have 20 locations offering full radiology services, which include X-ray sonography and ECG, 36 locations offering X-ray services and 240 locations offering ECG services across the Metropolis network. The integrated approach, which combines blood diagnostics, non-blood vital assessment and basic radiology enables us to offer a more comprehensive and holistic preventive health solution under the TruHealth brand. By expanding these services within the Metropolis ecosystem, we are not only enhancing customer value but we are strengthening our ability to deliver end-to-end health screening packages, and this is helping us improve our RPP as well. Early indicators from these pilots are promising, and we believe this direction has the potential to serve as an additional growth lever, further deepening customer engagement and expanding our service footprint. Lastly, on the competitive front, the landscape remains largely unchanged. The unorganized sector continues to lose market share to organized players, and the growth is largely through marginal volume increase in the unorganized side. this shift in market share was initially concentrated amongst a few organized players pre-COVID. And post-COVID, the same is now distributed across a slightly larger number of organized players. Meanwhile, in the last 12 to 18 months, health tech players are facing heat on lower growth and trying to demonstrate the -- that their unit economics work. In response, they have been consistently raising prices and are now transitioning from discount-led volume growth to a value-based growth approach, bringing their revenue growth similar to organized players. We continue to remain excited for Metropolis revenue and profit growth for this year, while we will spend most of our energy on growing the business organically and integrating the deals already announced, we will continue to evaluate other acquisitions that make sense for Metropolis for the future, always from the goal of buying businesses which fit our culture, long-term vision and can create financial value for shareholders. I'll now ask Suren to brief you on the progress on key operational and financial metrics. Thanks, Suren. Over to you.

Thank you, Ameera, and good morning, everyone. So we are pleased to report that both patient volumes and the revenue growth have returned to normalized levels in line with our guidance. After a temporary dip observed in quarter 4 last year, largely due to seasonal and regional factors, the business has rebounded as expected in the quarter 1. The recovery has been broad-based, supported by several strategic growth levers. Let me just deep dive into some of them. TruHealth Preventive portfolio. Our TruHealth range of preventive health checkups continues to be a key contributor to patient footfall and test volume growth. With increasing awareness around preventive diagnostics, lifestyle management and chronic disease monitoring and our ability to upsell, TruHealth is witnessing healthy adoption across urban and rural markets. Our integrated approach of blood diagnostic, non-blood vital checks and doctor consultation is helping us, and we have now reached 18 percentage contribution via TruHealth portfolio. Specialty growth in high-end specialty tests, particularly in oncology and genomics have added both volume and value to our overall portfolio. These tests not only command higher RPP but also reinforce Metropolis' positioning as a science-led differentiated diagnostic provider. On the network expansion side, continued geographic expansion, especially in underserved Tier 3 and urban markets has been strong tailwind. Through a focused hub-and-spoke model, we have added new collection centers, enhancing access and brand presence across newer micro markets. The Tier 3 cities have shown strong growth in patient volume driven by increasing brand preference, widening test menu availability and improved local infrastructure. Starting this quarter, we have reclassified our B2C and B2B portfolios to align with prevailing industry standards to make it easier for investors and analysts to compare. We have dropped the institutional bucket completely and divided the business under only B2B and B2C. Under the revised classification, B2C now includes all revenues from company-owned centers, franchisee centers and rural collection centers. B2B encompasses service to laboratories, hospitals, government institutions, corporates and pharma companies. As per the revised definition of B2C, our organic business B2C revenue contribution stood at 59 percentage as compared to 57.8 percentage in quarter 1 last year. For MHL Group, B2C now contributes 56% to overall revenues, including the acquisitions. The decrease in B2C contribution on group level is largely on account of Core Diagnostics, which has majority of revenue contribution from B2B channels. Going forward, with cross-selling of the specialty test across Metropolis network and leveraging the existing channels, we believe that contribution of B2C share from core should increase. Our organic B2C business continues to show robust and consistent growth with revenues increasing by 16 percentage on a year-on-year basis. Now this is driven by 9 percentage growth in patient volumes, reflecting strong consumer engagement and reach, 6 percentage growth from improved test mix and pricing, highlighting our ability to offer differentiated and value-added diagnostic services. In Maharashtra, which is our largest B2C market, revenues also grew by 16 percentage year-on-year with Mumbai outperforming the state average, fueled by deeper brand equity, broader test offerings and strong medical community trust. Our strategic push into Tier 2 and Tier 3 towns is further strengthening our B2C footprint, helping us reach new patients through an expanding network of collection centers and franchisee partners. A key enabler of B2C growth has been the increased adoption and engagement of our mobile and digital platforms, including the Metropolis app. Key enhancements that are driving stickiness and repeat usage include personalized health journeys, tailored test suggestions and curated wellness content based on patient history and preferences, real-time tracking of orders, seamless report access and proactive health reminders significantly improving customer satisfaction. End-to-end digital integration of test booking, home sample collections, payments and customer support, resulting in smooth and hassle-free experience. This omnichannel approach is not only enhancing patient convenience but also improving operational efficiency by reducing dependency on manual channels and lowering service turnaround times. At the local level, our micro marketing strategy is helping us drive targeted awareness and patient acquisition in high potential clusters. This includes hyperlocal campaigns based on regional health trends and demographic insights, clinician engagement programs to build strong relationship with the medical community, expansion of Metlink partner program, which has been made the relationship between franchisee and Metropolis even stronger. These initiatives have led to a visible increase in B2C contribution, stronger brand recall and improved penetration in both metro and non-metro markets. We remain confident that this momentum will continue to build as we scale our reach, optimize our best offerings and deepen customer relationships. Our B2B revenue for the quarter grew by 10 percentage and now stands at 41 percentage as per the revised classification of the B2B definition for the organic business. Patient volume in B2B segment grew by 4 percentage, while RPP rose 6 percentage, primarily driven by high-value outsourcing from hospitals. This reflects our continued focus on specialized and advanced diagnostic offering that command better pricing. We increased our partnership with the pharmaceutical companies in line with our strategic emphasis on specialty diagnostics. Upgrades to our partner portal have improved end-to-end visibility and service experience for B2B clients. Enhanced tracking, transparent reporting and faster resolution mechanisms have significantly improved partner satisfaction and operational efficiency across labs, hospitals and corporate accounts. This quarter, we also concluded our engagement with Aam Aadmi Mohalla Clinic, in line with our long-term strategy to move away from low-margin government or institutional contracts. Instead, we are focusing on science-led B2C and B2B segments, which offer higher margins and greater long-term sustainability. Turning to the productivity and margin performance. The EBITDA margin for quarter 1 stood at 24.7 percentage higher than quarter 4 last year. Our attempt will be to strengthen the margin every quarter 4 this year on a year-on-year basis. The reported group EBITDA has marginally impacted by the consolidation of Core Diagnostics, which is currently operating at low single-digit margins. While it's an improvement from breakeven levels of quarter 4 last year before we acquired the business, we remain hopeful of bringing Core's margin profile to high single digit by the end of the financial year as integration progresses and synergies begin to reflect the financials. To strengthen EBITDA margin this year, in the next few quarters, we have rolled out multiple productivity initiatives aimed at unlocking efficiencies. Over the last 18 to 24 months, we had invested heavily in automation and digital workflows to streamline operations, reduce manual effort and enhance service turnaround times. Many of these programs are now live and will start to add to our productivity efforts. Also, our lab infrastructure expansion, which is in execution for the last 4 years, successfully concluded last quarter. With this foundation in place, our focus has now shifted to rapidly scaling our collection center network to feed these labs, thereby driving higher throughput and utilization, which will translate into better margins over time. In quarter 1, we have added 80 new collection centers, and we are on track to add approximately 400-plus collection centers across various regions this year with a strong focus on Tier 2 and Tier 3 towns. This expansion is being supported by our recently strengthened lab infrastructure in these geographies. As of now, we are serving customers in about 750 towns across India, and we aim to expand our footprint to 1,000 towns soon, further deepening access and enhancing our presence in high-growth, underpenetrated markets. So in summary, we have entered financial year '26 with renewed momentum, clearly shifting gears compared to the previous 2 quarters. The integration of recent acquisition is well on track, and we expect this to unlock meaningful cost synergies over the remainder of the year. This includes operational consolidation, procurement efficiencies and overhead optimization, all of which will contribute positively to our margin profile. On the growth front, we are seeing healthy revenue performance supported by strong execution across core growth drivers. The TruHealth Preventive portfolio, specialty diagnostics and Tier 3 market expansion continue to be the leading contributors. These segments not only add scale but also bring higher value and margin-accretive business, aligning with our strategy of moving towards quality-led growth. We have also deepened our focus in science and quality, an important pillar of differentiation for Metropolis. This includes enhancement in quality processes, test menu expansion, step towards building center of excellence and continuous upskilling through scientific platforms. These actions position us as a trusted diagnostic partner, especially in the specialty and high-end testing space. In parallel, we have activated several productivity enablers across the organization from digital process automation to optimize resource deployment. These efforts are already yielding improvements in operational efficiency and are expected to support sustained margin expansion going forward. Overall, with strong execution across integration, science, digital and operational fronts, we are entering the year with solid traction and clear line of sight to our goals. We remain committed to delivering profitable, sustainable growth with reinforcing Metropolis' position as trusted science-led diagnostic leader. With this, I hand over the call to Sameer, who will take us through the financial highlights. Thank you, and over to you, Sameer.

Thank you, Suren, and good morning, everyone. Let me now share some of the key financial performance for Q1 FY '26. We have bifurcated our reporting on 2 aspects: one, MHL Group; and second, MHL Organic. MHL Group includes recent 3 acquisitions of Core Diagnostic, DAPIC Dehradun and Scientific Pathology, Agra, and MHL Organic excludes these 3 acquisitions. Also, a change in definition of B2C and B2B segment to streamline the same with the industry standards. B2C now includes all owned franchisee and rural centers and B2B now includes B2B lab, hospitals, government, corporate and clinical trials. Moving on to the financial performance and operational performance. First, I would like to highlight operational performance of MHL on organic basis. Revenue and EBITDA grew by 13.2% and 11.9%, respectively, and PAT grew by 21.2% on a year-on-year basis. Patient volume stood at 3.2 million, a growth of 7%. Our test volume growth stood at 8% on a year-on-year basis with increased contribution from TruHealth segment. We consider one profile as one test, which is different from peers. As on like-to-like basis as peers, this number would be significantly higher. Our B2C revenue stood at INR 209 crores, a growth of 16% on a year-on-year basis and B2B revenue stood at 10%. TruHealth and Specialty segment grew by 22% and 16%, respectively. As the revised classification of B2C segment, B2C contributes 59% of total revenue compared to 57.8% in Q1 FY '25. Revenue for Specialty B2C segment grew by 18% and B2C TruHealth segment grew by 19% on a year-on-year basis. B2B revenue stood at 14% of total revenue and B2B Specialty grew by 15%. TruHealth segment for Q1 FY '26 grew by 22% and TruHealth now contributes at 18% of overall revenue. Specialty segment grew by 16% on a year-on-year basis for Q1 FY '26. EBITDA for MHL on organic basis stood at INR 87.5 crores, a growth of 11.9% on year-on-year basis. EBITDA margin for MHL Organic stood at 24.7%, an increase of 40 basis points on a sequential basis, and we are optimistic of seeing an uptrend every quarter. PAT for MHL on an organic basis stood at INR 46.2 crores as compared to INR 38.1 crores in Q1 FY '25, a growth of 21.2%. PAT margin for MHL Organic stood at 13% compared to 12.2% in Q1 FY '25, an increase of 80 basis points. Now let me share the key performance indicators for MHL at a group level. Revenue grew by 23.2% on a year-on-year basis from MHL Group, including the revenue of recent acquired entities. Patient volume stood at 3.4 million and test volume stood at 7.1 million, a growth of 11% and 12%, respectively. B2C business revenue grew by 19% for Q1 FY '26 and B2B revenue grew by 29% on a year-on-year basis. On MHL group basis, revenue for the North now contributes 17% of overall revenue, largely because of integration of Core Diagnostics, which has its major presence and revenue coming from North region. Revenue growth from Tier 1 town stood at 27% and Tier 3 towns stood at 17% on a year-on-year basis. Revenue for Tier 3 town now contributes 17% of total revenue for Q1 FY '26. Contribution from B2C revenue stood at 56% in Q1 FY '26. The decrease in B2C compared to organic business of 59% is largely on account of consolidation of Core Diagnostics, which has major -- majority of revenue contribution coming from B2B. EBITDA margin for MHL Group stood at 23.1%. The decrease was largely attributed to lower margin profile of Core Diagnostics. However, we are happy to report that Core has turned positive with a lower single-digit margin profile in Q1 FY '26. PAT for MHL Group stood at INR 45.2 crores. This PAT is at 11.7%. That's all from my side. With this, I open the floor for question and answers.

[Operator Instructions] The first question is from the line of Anshul Agrawal from Emkay.

Sir, my first question is on integrated offerings, while our pilot projects have indicated positive traction in basic radiology. What would be our plan going forward? Would we sort of think about getting into advanced radiology or continue to expand basic radiology across our network? And secondly, would this be on an asset-light basis? Or would we own these equipments?

So I think on the basic radiology, we'll continue to spread it across our centers. And these equipments are not very expensive. These are smaller equipments. A lot of them are on asset-light basis. We are not procuring all of them. It's a combination, I would say. We are evaluating whether higher-end radiology is something worth getting into or not. We don't have a clear answer at this point of time. I think over the next couple of quarters, I think we'll have a clearer direction. But meantime, we'll continue to roll out the basic radiology. Where we are finding this is helping, it's not helping, obviously, very significantly on the independent revenue front. But what we are finding is that customer frequency to our centers increases with it. And when they do add on some of these tests, either radiology or the non-blood vitals, it actually helps them do a larger screening program, wellness screening program with us. So it's more about the completion of the services at the center, which also helps in NPS with the customer.

Second question is on GLP medication. From what we understand, Ameera here, would patients or would customers becoming healthier by using this medication? Is that a risk for the healthcare delivery providers? How should we look at it? I understand this is a very nascent stage but why do you view this in positive light versus what the product is destined to deliver?

See, the product is only talking about weight loss. The product is not necessarily saying better health. These are not necessarily the same thing. They can be for somebody who's got obesity is an issue. Obviously, automatically, it brings about diabetes and other things. But you also have to remember any time you're giving a dosage of a drug, there also can be side effects. There are known side effects of these drugs. And therefore, doctors who are prescribing them will also have to continue to monitor those patients to watch out for whether those side effects are taking place in the patient's body or not. So our sense is that while it has a potential to manage maybe diabetes better because of obesity coming down but things like cardiovascular risk and other risk, which could be caused because of these GLP-1 medications will continue to have to be monitored. And it's not just the heart but also watching the liver, the kidney and to see if there's any impact there. We have to remember that these drugs are not that old in the world, and people have not had a chance to really see what is the impact of these for the next 10, 15 years. So I sense that people will continue to monitor their health because one of the things they are doing to take GLP-1 is to get healthier. And that automatically means also that you want to do a more regular wellness screening to make sure that all parts of your body are working fine.

That's clear. Just one more, if I can squeeze in. In terms of our margin profile, I'm talking about the organic part of the business, excluding the acquisitions. When do we start seeing the benefits of the hub expansion that we took over the last 2 to 3 years to sort of creep in our margins? Should we not expect a margin expansion of 100, 150 bps on our organic business?

Anshul, we have mentioned this in the past also that the drag on the margin from the newly acquired labs actually happens for 2 years actually. First year, it normally gets into a negative margins and the year 2, it gets into a positive 10, 12 percentage margin and the year 3 normally gets into the company levels of margin. So we have halted all the accelerated expansions last year, I mean, at the end of quarter 4. So this year, for the labs that we expanded last year and the year prior to that, there will be some little bit of drag on that. And the next year, we will have a little bit of drag on because of the labs we expanded in the previous year. So you'll start seeing benefits on an EBITDA margins coming this year to start with. And next year, by the end of next year, we'll get the full benefit of the lab expansion, which has been halted. So I think it's a couple of years' time where you fully get that 1 percentage plus benefit, which otherwise we used to talk about.

But compared to last year, obviously, in FY '25, '26, we will certainly see a margin bump EBITDA expansion. We've already -- you'll start seeing it obviously from Q2 itself.

[Operator Instructions] Our next question is from the line of Tausif Shaikh from BNP Paribas.

Ma'am, while you have mentioned in the initial comments that Core Diagnostics have turned positive. Can you throw some light on the patient volume growth and the revenue growth, which the Core Diagnostics has seen on a Y-o-Y basis?

So at this point, we are not providing the separate information for each of these. But like we mentioned, broadly, in year 1, what we traditionally see when you acquire any organization, whether it's unorganized or organized is that sometimes the practices in it may not be exactly the same as Metropolis. And therefore, sometimes you have to cut certain customer accounts, you have to let certain things go because you want to clean things up. And therefore, the first year, the goal will be margin expansion and cleaning up the practices and integrating. And from year 2, the focus will really be on the revenue acceleration. And that's the direction that we are going in. It's obviously just the first quarter of the acquisition and some of these acquisitions have only had 15 days of -- in the quarter. So we felt it's just too early to start sort of giving indications on the separate growth and the separate margins for everything. The only reason we indicated for core is just to show the trajectory on what we committed when we did the acquisition that we will see a quarter-to-quarter improvement in the profit profile, and we just wanted to indicate that that's on track.

That's helpful. And second question, again on core Diagnostics. At the time of the acquisition, you had mentioned we had a field force of 100 people. Have we done kind of any kind of restructuring to this field force?

No, we have not disturbed the field force at this point of time. That's continue to operate the way they used to operate because they are all specialist salespeople, and we have not done any restructuring at this stage.

Our next question is from the line of Sumit Gupta from Centrum.

So first is like what's the strategy for expanding into this Kolhapur area? Like, will be it acting as a...

Sorry to interrupt. Sumit sir, your voice got low and your audio break. Can you please repeat your question?

Is it fine now?

Yes, sir. Now it's fine. Please go ahead.

Yes. So just -- so I want to understand on the basic rationale for expanding into Kolhapur?

So like Ameera mentioned, this lab, which is Ambika Diagnostics used to be on a lab on -- lease on lab with us in the past for the last 2 years and where it has been run by our people, right? Now we have decided to acquire this lab. And we also have a Metropolis separate lab in that area. So now with this acquisition, we need to have only 1 of the 2 labs in that place because it will be fully owned by us. And this will also help us to expand into the entire Kolhapur region, right? And we already have presence in most part of the Kolhapur region. But with the addition of Ambika Diagnostics, we'll have a little more stronger footprint and good coverage across that area.

Okay. So going forward, like can we expect more kind of more acquisitions of this particular size or we can expect a size to be bigger?

We'll continue to -- at this point, we don't have anything else that we are expecting to announce at least in the next quarter or so. But as we keep evaluating the funnel, we are obviously looking at different sizes. We are looking at small ones, which are very credible like we did DAPIC, like we did Agra, like we have done Ambika. And we are looking at larger ones as well. But the final goal is not about small or big. The final goal is about whether it really fits the culture, whether it fits the way of thinking that Metropolis has a strategy. And most importantly, does it create value for our shareholders. And we are only buying -- doing deals where we feel that we are able to create that kind of value and not having to pay a crazy price when it becomes difficult to create value.

Understood. Okay. And like just a bookkeeping question. How -- what was the EBITDA for this Ambika in FY '25, EBITDA...

So stand-alone, it was INR 1.8 crores on its own, if you look at FY '25. But in the model of lab on lease, we were also sharing certain revenue share with the Ambika Pathology, et cetera. So when it's in our books, it will actually be INR 3.4 crores and not INR 1.8 crores.

Our next question is from the line of Kunal Thanvi from Banyan Tree Advisory Private Limited.

So my first question was on the competition. Like in our annual report, we have talked about some easing out of competition on pricing also from the organized and unorganized players. So if you look at some of the data points like the gross margin for most all the listed players and the kind of acquisitions we have been doing in the last 18 months or so, there are some signs from -- like from an outside investor, we can see there's some ease out in terms of the competitive intensity and the valuations also seems to have kind of normalized. If you can throw some more light on how the organized and unorganized piece in terms of competition has behaved? And what are the factors that have led to competition kind of abating in last 18 months, it would be really helpful.

See, if you look at the period of 2020 to 2023, it was, as we all know, a black swan event. And in any black swan event, you have lots of people who look at opportunities that are hot and try to jump, right? So that's what really happened in healthcare and especially in diagnostics because there was so much COVID testing that needed to be done. But you saw a bunch of new corporate players who sort of said, this is an industry, which is going to grow for a long time, let's jump in. And you also saw obviously health tech guys coming in. The reality of our industry, however, is that these black swan events, which create large revenues in a short period is not a norm. And the norm of the industry is you really have to work on the ground, building sample by sample, building it through brand trust and credibility and expertise. And I think as some of the players, some new and some old are recognizing the challenges in actually building the business and the kind of moat there is, you are seeing, in some cases, people saying, okay, maybe this is not necessarily what we are cut out for. You're seeing a funding slowing down. In some cases, you're seeing a funding winter because companies have not been able to show and prove unit economics that work profitability for them, and therefore, funding is not coming for them. So I think there are different reasons. But I think largely, I think it all comes back to commercial, where the understanding is that, look, the organic growth in the industry is about 8% to 10%. And anything you want to do above that or even to reach there is going to take a lot of hard work and a lot of patience and long-term vision. So generally, we are seeing that there is a little bit more rationality on the pricing. And we are seeing the kind of intensity we saw between 2020 and '23 has certainly come down. The players have not gone anywhere. They are still in the market. They continue to compete but we are not seeing irrationality, which is a good thing for the industry.

Sure. And when we look at the gross margin for most of the listed players, it seems either stability or going up. So like is it to do with the pricing, how do one look at or there is some spite on the raw material side also because if at all these listed players are gaining market share?

Can you just repeat the question?

Yes, Kunal, your voice is breaking when you're speaking.

Sorry for that. So my question was when you look at the gross margins, right, they seems to have stable down or they are improving for most of the listed players. Is it entirely due to pricing rationality coming up or because the large guys are -- have started seeing market share gains, so there's a second order impact on the raw material procurement cost?

Actually, it's a combination of multiple things, actually. One, of course, the price stability is definitely coming and become more predictable. That's really helping us. And a lot of operational efficiencies are coming in because of automation, digitization, et cetera, right? I mean -- and then, of course, as the scale goes up, the profitability gets better. So basically, it's a combination of all these 3 things put together. And you will see it's playing out for everyone as we go forward.

Sure. And the last question that I had was on like when we are moving from top towns to Tier 2, Tier 3 towns, how do one look at the unit economics in those smaller towns because the scale at which we would be operating in top 8 cities would be very different when you're going to those smaller towns, can one expect similar kind of unit economics in terms of throughput margins, et cetera, on those smaller towns, how you think about it?

Yes. So see, now our expansion into Tier 3 and beyond will only be with respect to centers, not with respect to labs. The labs part of the expansion is already over, right? So -- and this expansion of the centers are also happening on Tier 3 and beyond only through the franchisee route. So from a Metropolis point of view, largely the investments are in terms of clinician engagement, logistics, et cetera, which has properly been stretched. So your unit economics will largely be at par with the rest of the Tier 3 towns, and we don't really find any further stress on that going forward when we expand. And actually, we are going deeper into this. We already reached 750 towns, and we already have currently mechanism to engage with the clinicians and the logistic arrangements. Now your question is only about going deeper and becoming -- getting more volumes. So the unit economics only get better from these towns.

Okay. Sure. Maybe one thing was on radiology, the basic radiology that we talked about. Are margins again similar there as well compared to what we have in our core business?

See, it's too early days for us. We just -- in the last year or so, we have expanded into, like Ameera said, 20 centers where we have both x-ray and ultrasound and about 35 centers we don't have x-ray alone and 250 centers with ECG. So very early days to look at the margin profile of this business separately. But we are sure that it will only be adding to the overall profitability because it's happening from the same centers. We are not set up extra centers for the same centers, same people. So there is no additional cost other than the processing cost in these cases. So the margin should only be at par or better.