Metropolis Healthcare Limited (METROPOLIS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call of Metropolis Healthcare Limited, hosted by JM Financial Institutional Securities. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements do not guarantee the future performance of the company and may involve risks and uncertainties, which are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abin Benny from JM Financial Institutional Securities. Thank you, and over to you, sir.

Thank you, Albert. Good morning, and warm welcome to all participants on the Metropolis Healthcare 1Q FY '27 Earnings Call hosted by JM Financial. Today on this call, we have with us the management, Ms. Ameera Shah, Promoter and Chairperson; Mr. Surendran Chemmenkotil, Managing Director; Mr. Sameer Patel, Chief Financial Officer; and Mr. Mohan Menon, the Chief Marketing Officer. I will now hand over the call to Ms. Ameera Shah for her opening remarks. Thank you, and over to you, ma'am.

Hi. Good morning, everyone, and thank you for joining us today for the Q1 FY '27 Earnings Conference Call at Metropolis Healthcare. I'm joined by Surendran, MD; Sameer Patel, CFO; Mohan Menon, CMO; and the rest of our leadership team, along with SGR Investor Relations partner. We've uploaded the investor presentations on the exchanges and website, and I hope you've had an opportunity to go through the same. To give you a brief perspective on the broader landscape before I move to company-specific updates, the Indian diagnostics industry is entering a phase of sustained structural growth supported by 3 reinforcing shifts. First, patients, clinicians and institutions are moving towards organized quality-led diagnostic providers as expectations around accuracy, consistency, advanced testing capabilities and service standards continue to rise. This is accelerating the shift away from nonstandardized unorganized diagnostics and creating an opportunity for trusted branded players with scale and quality. Second, India's health care ecosystem is expanding beyond metropolitan markets. New hospital capacity, rising OPD and IPD volumes, greater availability of specialists and improving access across Tier 2 and Tier 3 cities are bringing more patients into the formal health care system. Hospitals and institutional partners are also outsourcing a larger share of specialized and high-end testing to providers with strong quality systems, comprehensive test menu, scientific depth and nationwide reach. Third, treatment pathways are becoming more advanced. The pharma industry's growing focus on targeted therapies, biologics and biosimilars across oncology, neurology and autoimmune disorders is increasing the need for precise diagnosis, patient stratification, biomarker-led treatment selection and ongoing monitoring. This is expanding the role of molecular genomic and immunological testing across the patient journey. Together, these shifts are broadening the addressable market for diagnostics and creating a strong structural opportunity in specialty testing. However, this opportunity will not accrue evenly across the industry. Specialty Diagnostics is an attractive segment, but it is not an automatic right to win. Success cannot be built simply by adding new tests or investing in advanced equipment. It requires years of investment in scientific expertise, quality systems, clinical credibility, specialist relationships and a broad high-end test portfolio. These capabilities create meaningful entry barriers and differentiate providers that can participate sustainably in this market. Metropolis has built these capabilities over several decades. Our specialty portfolio comprises more than 2,200 tests across gastroenterology, nephrology, neurology, oncology and chronic disease categories, including allergy and autoimmunity. This breadth allows us to support specialty led pathways across treatment selection and ongoing monitoring. We have also added 36 new tests during the quarter, following 347 additions in FY '26, including the integration of the core test menu, further strengthening our capabilities across high-growth, high-value specialty categories. Our scientific differentiation is supported by a 99% ECA score, which is an external quality assurance score, 99.99% report accuracy and a lab network in which every lab is either accredited or benchmarked to recognize quality standards. Around 30,000 specialist doctors across the country prescribed tests through Metropolis and every leading hospital, individual and chain in the country, reflecting the depth of clinician trust built over many years through scientific programs, educational initiatives, sustained engagement and a deeply scientifically operational culture at Metropolis, which manages the trust earned over here. On the tech and digital transformation front, technology remains a strategic pillar of our long-term growth. We are executing a company-wide automation and digital transformation program spanning labs, customer engagement, vendor consolidation, commercial operations, finance, procurement and support functions. Across these initiatives, we are strengthening data governance and ensuring DPDP-compliant handling of patient data with a clear focus on privacy, security and responsible use of information. Within labs, automation and in-platform standardization are improving quality, throughput and turnaround times, particularly in oncology and specialty diagnostics. Beyond laboratories, AI and automation are improving workflow efficiency, strengthening decision-making, enhancing customer engagement, improving inventory management and simplifying back-office operations. Taken together, these initiatives are creating meaningful productivity gains and building a more scalable, data-led and efficient operating model across the organization. This growth continues to be anchored in quality with strong external quality assurance scores, high report accuracy and a lab network operating under the accreditation and benchmarking. Turning to the current quarter of Q1 FY '27, we began on a strong note. We delivered healthy growth in both patient and test volumes, translating into an even stronger financial performance. We exceeded our stated guidance with revenue growing by approximately 17% year-on-year, driven largely by volume growth, while margins expanded through operating leverage and continued efficiency gains. The strong growth in patient volumes are driven by a combination of structural industry trends and focused execution. We further strengthened our presence in Tier 2 and Tier 3 markets where awareness of high-quality diagnostics is rising alongside improving health care access. We believe this is a good start to our year and that we can sustain revenue growth outlook of 14% to 15% for the year, which we expect to be primarily driven by volume growth. On the margin front, supported by ongoing operational efficiencies and cost optimization initiatives, we expect an improvement of 100 to 150 basis points on EBITDA during the current financial year. And over this year and the next year, we remain focused on achieving an EBITDA margin of 27% to 28%. On the inorganic growth front, our other recent acquisitions are now fully integrated and are performing in line with our expectations, with the businesses benefiting from the wider Metropolis network operating processes and commercial capabilities. Core Diagnostics is currently in the final leg of integration. Since it has been a year since the acquisition, it is an appropriate time to reflect on the objectives of the acquisition and the progress we have made against them. Our first objective was to build a strong genomics platform for Metropolis. When we evaluated the build versus buy decision for genomics, we recognize that while acquiring sequencing platforms and equipment is relatively straightforward, the real gestation period in genomics lies in building scientific expertise, R&D capabilities and the ability to accurately integrate complex genomic data. We believed that acquiring Core Diagnostics could accelerate our genomics journey by 2 to 3 years, and that has proven to be the right decision. Over the past year, our genomics portfolio has doubled and is now one of the fastest-growing segments within our specialty business. Our second goal of acquiring Core was to strengthen our brand in North India through deep clinician and hospital relationships. We wanted to leverage Core Diagnostics strong relationships with leading hospitals and doctors. Over the past year, supported by our genomics and specialty portfolio, we have significantly strengthened our scientific engagement in the region. As a result, North India now contributes 18% of the company's revenue, up from a single-digit contribution before the acquisitions and has emerged as the fastest-growing region in our network. Our third goal was to create shareholder value through disciplined acquisitions. We acquired a distressed loss-making business of CR at an attractive valuation of less than 2x revenue with a clear plan to transform it into a business capable of delivering EBITDA margins of around 25% over 3 to 4 years from acquisition. Based on the EBITDA that Core Diagnostics is expected to generate in FY '27, which is just the second year as part of Metropolis, our effective acquisition multiple would be approximately 10x EBITDA. This demonstrates the value that disciplined acquisitions and successful integration can create for our shareholders. As the Core integration progresses, our focus is increasingly shifting from integration to growth. We are seeing encouraging early signs as we use Metropolis' pan-India network to expand the reach of core super specialty capabilities, driving higher test volumes, improving network utilization and creating operating leverage. This further strengthens our specialty diagnostics portfolio and our ability to serve clinicians and patients with advanced testing solutions. We're confident that we'll be able to enhance revenue and EBITDA growth at core going forward as per estimates given previously. Under the Metropolis 3.0 strategy, as we move ahead in FY '27, our focus will be translated into 5 key execution priorities. Number one, accelerating network expansion. We'll continue to expand our network to improve accessibility, especially in Tier 2 and Tier 3 towns and drive higher sample volumes to our recently commissioned laboratories, resulting in better capacity utilization, operating leverage and profitable growth. We aim to open approximately 400 to 500 centers in Tier 2 and Tier 3 towns this year. Strengthening specialty diagnostics is the second. We'll further expand our advanced testing portfolio while deepening engagement with clinicians. Growth in specialty diagnostics also drives higher routine and allied test volume, improving wallet share and customer retention. We aim to increase contribution of this portfolio to 45% from the current 40%. Number three, we will strengthen our True Health portfolio through targeted wellness offerings and higher customer engagement, driving increased adoption, customer lifetime value and market share in preventive diagnostics. We've expanded True Health beyond pathology to include basic radiology, vital checks and consultations. And we'll continue to increase the number of our centers to provide all these services under one roof. While this may not become a huge contributor to revenue, it certainly helps increase average revenue per patient and build further engagement with our consumers. Number four, leveraging technology and AI. Continued investments in digital platforms, automation and AI will improve customer experience, lab efficiency, doctor and patient engagement and support long-term profitable growth. And five, pursuing disciplined inorganic growth. With recent integrations progressing well, we are building our acquisition funnel. We'll continue evaluating high-quality, strategically aligned assets that can create long-term value through our proven integration. With this, I hand over the call to Suren to take you through the business performance for Q1 FY '27. Thank you. Suren, over to you.

Thank you, Ameera, and good morning, everyone. Quarter 1 financial year '27 marked a strong start to the year with broad-based growth across businesses, geographies and channels. Revenue grew by about 17% year-on-year to INR 450 crores ahead of our stated guidance, while EBITDA margin expanded by 210 basis points to 25.2 percentage. Usually, quarter 1 is not a strong quarter for Metropolis. However, this year, we saw the revenue sequentially increase by approximately 6 percentage, reflecting seasonal momentum, healthy operating leverage and a disciplined execution. Growth was broad-based across channels, geographies and test categories. B2C grew by 18 percentage and B2B grew by 15 -- all regions delivered double-digit growth, while routine semi-specialty, specialty and True Health also recorded high double-digit growth during this quarter. What is particularly encouraging is that the performance was predominantly volume-based. Despite not increased price increase over the last 18 months, we delivered 17% revenue growth, supported by 10 percentage growth in patient volumes and 11% growth in test volumes with the balance coming from a richer mix and improved realizations. This demonstrates the strength of our underlying business and structural demand drivers supporting the diagnostics industry. The only industry-wide price increase during this period was for CGHS test, as you know. This helped other players in the industry as a onetime benefit much more than us. And for us, it is a very small component of the total business. Volume growth was driven by a combination of network expansion and improving productivity across our existing network. During the last 12 months, we added more than 500 service centers, including 300 centers in quarter 1 '27 and remain on track to add more than 500 centers during the current financial year. We are now operating across 750 towns in the country and are deepening our presence in existing as well as the new territories. Our network expansion strategy continued to be a key growth enabler. Over the last 2 years, we have significantly strengthened our presence while simultaneously deepening our footprint within the existing markets. The expanding network is improving accessibility, driving patient acquisition and increasing sample throughput across our laboratory infrastructure. Our center to laboratory ratio improved from 1:21 a year ago to 1:21 in quarter 1, and we remain on track to improve this to around 1:30 by year-end, creating meaningful operating leverage as utilization continues to improve. Importantly, our expansion strategy is data-driven rather than opportunistic. Every new center is selected based on detailed market mapping, including population density, health care infrastructure, competitive intensity and our ability to establish a strong market position. This disciplined approach enables us to penetrate underserved markets while strengthening our brand presence and improving access to quality diagnostics. Alongside expansion, we have improved the productivity of our existing network through focused operating initiatives. We continue to increase throughput at high potential centers, rationalize underperforming locations and redeploy resources to more productive markets. Volume growth during the quarter reflected a balanced contribution from healthy growth across our mature centers and the ramp-up of centers added over the last 12 months. Continued investments in micro marketing, deeper clinician engagement, expanded test venues and the targeted activation of newly launched centers are accelerating growth across both existing and new markets. Taken together, these factors give us the confidence that our growth momentum is broad-based, structural and sustainable. Speaking of our sales channels, our B2C business delivered 18% revenue growth with a balanced contribution from enhanced revenue across mature centers and the ramp-up of centers added over the last year. Growth was strong across our own centers and across Tier 2 and Tier 3 markets with the rural centers delivering 36% revenue growth. CLM-led customer engagement, local micro marketing, strong brand pull and increasing digital adoption all contributed to patient acquisition. Specialty revenue within B2C grew by 21 percentage while TruHealth and value-added offerings such as body vital checks, consult and ECG supported higher revenue per patient. Our B2B business grew by 15 percentage led by a deliberate focus on hospitals, clinicians and high-quality organized institutions. We are prioritizing relationship where scientific capabilities, specialty portfolio, service quality and nationwide network create a higher right to win. Our partner portal and other digital enablement initiatives are making it easier for partners to do business with us. improving visibility, service responsiveness and access to our wider test menu. With a presence of more than 750 towns, we are also targeting additional business from smaller laboratories and hospitals in these markets, giving us significant headroom for growth. Our presence in North India has been strengthened steadily. Revenue from the region grew by 19% on a year-on-year basis and now contributes to 18 percentage of our overall revenues, supported by successful integration of Core Diagnostics, Scientific Pathology Agra and DAPIC Dehradun. Our strategy over time has been to acquire high-quality assets in a particular geography and then drive sustained organic growth by leveraging our strong brand, deepening doctor engagement, expanding our network and enhancing our test portfolio. We remain confident of further increasing revenues and market share from North over time. The best hospitals and leading specialist trust Metropolis for their specialized testing requirements. While we will continue to build our B2C business in select pockets of North India, markets such as Delhi, Punjab and Uttar Pradesh and the surrounding regions, we will continue to predominantly run on the B2B markets, driven by our strength in specialty diagnostics and deep relationship with the clinicians and hospitals. Our recent acquisitions in Agra and Daratun are also performing very well with both business tracking ahead of the revenue growth and EBITDA. We remain confident of further increasing our revenue and market share in North India over time. Coming to Specialty Testing and TruHealth. Both our strategic growth engines continue to perform well. TruHealth revenues grew 22%, supported by integrated preventive health care offering and targeted digital customer acquisition initiatives. Radiology integrated wellness packages grew by more than 40%, while premium TruHealth packages grew by more than 50 percentage led by doctor consultation, body vital checkups and ECG-led extensions. Specialty Diagnostics grew by 17% during the quarter, supported by increasing adoption of advanced testing, deeper clinician engagement and cross-selling of Core Diagnostics, oncology and super specialty capabilities across the Metropolis network. Our genomics capabilities and core super specialty menu are increasingly complementary. Genomics brings advanced testing and interpretation capabilities, while core adds a deeper super specialty oncology portfolio and established clinician relationships. We are now taking the Core test menu to our existing clients, prescribing clinicians and service network across India, expanding access to these tests and increasing our share of specialty testing. With core diagnostic in the final leg of integration, we remain focused on accelerating specialty volumes through our nationwide reach and wider clinician network. Our international business continued to perform well, delivering healthy growth and both revenue and EBITDA. We are the market leaders in 2 of the 5 countries in which we operate and rank amongst the top 3 players in all the markets. While business model is similar to India with specialized testing being sold to our reference laboratories in India, the operating environment across African markets is quite different. Over the years, we have developed a deep understanding of these markets and built the capabilities required to succeed in them. We remain optimistic about the strength of the brand we have built internationally and are confident of continuing to grow our business across these markets. Coming to margins and productivity. EBITDA margin expanded to 25.2 percentage an improvement of 210 basis points year-on-year and ahead of our guidance. The expansion was driven by healthy volume-led operating leverage, disciplined cost management and continued progress on our productivity agenda. A key contributor has been our laboratory transformation program. We are standardizing testing platform across the network, consolidating vendors, increasing automation and improving procurement efficiencies. These initiatives are at different stages of rollout. Those already implemented are improving throughput, turnaround time, material productivity and laboratory utilization, while further benefits are expected as the remaining platform transitions and automation initiatives go live over the coming quarters. Importantly, our organic business delivered healthy margin expansion, both year-on-year and sequentially. This was achieved despite the relatively lower margin profile of Core Diagnostics and the impact of advancing annual employee increments from July to April this year. Lastly, over the past 12 to 18 months, we have strengthened our leadership team, completed the integration of acquisitions, expanded our network and significantly enhanced our operational capabilities. With strong momentum across all growth engines, healthy volume-led growth trajectory and multiple productivity initiatives beginning to scale, we remain confident of delivering sustainable, profitable growth and continuing to outperform the diagnostic industry over the medium term. With this, I hand it over to the call to Sameer, who will take us through the financial highlights. Thank you, and over to you, Sameer.

Thank you, Suren. Good morning, everyone. Let me briefly walk you through the key financial highlights of quarter 1 FY '27. Revenue stood at INR 450 crores, registering growth of 17% year-on-year, supported by 10% growth in patient volume and 11% growth in test volume. B2C and B2B revenue for the quarter grew 18% and 15%, respectively, on year-on-year basis. segment continued to perform well contributed 18% of quarter 1 FY '27 revenue and grew 22% year-on-year and specialty contributed 40% of revenue grew 17% year-on-year. While the acquisition of Core Diagnostics was completed in March '25 and was therefore part of the base for Q1 FY '27, the acquisition of Scientific Pathology Agra was completed towards the end of the Q1 FY '23. As a result, Q1 FY '27 numbers are now consolidated. With respect to margins, Q1 EBITDA stood at INR 113 crores, growing 27% year-on-year. EBITDA margin expanded by 210 basis points to 25.2% PAT stood at INR 57 crores, growing at 26% year-on-year. PAT margin expanded by 90 basis points to 12.6%. With this, I open the floor for question and answers.

[Operator Instructions] The first question comes from the line of Tausif Shaikh with BNP.

Congrats on a good set of numbers. First question is on patient volume growth of 10% during the quarter. Can you give us the split between B2B and B2C separately for the quarter? And also some color would be helpful on the strong volume growth, which we have seen this quarter despite a seasonally weak quarter and a delayed monsoon.

So the B2C patient volume growth is about 13.5% and the B2B patient volume growth is about 6%. That's the split of B2B and B2C...

And if you talk about Q1 sort of patient volume growth, I think it's a combination of 2 things. We also mentioned some of the things that are spurring the industry to progress in general. But obviously, part of it is execution in terms of building access in markets in which diagnostics was not frequently prescribed and creating market categories for tests in which earlier people were not getting diagnosed at all. And part of it is seasonal sort of momentum. While Q4 was a normal quarter, it wasn't an exceptionally strong quarter. And we don't know whether there was some overflow from there that made Q1 a little stronger than it normally is, but a little difficult to completely dissect the reason, but we have some theories around what it could be.

That's helpful, ma'am. M my second question is related to your strategy in Tier 2 and Tier 3 cities and against stand-alone labs. I wanted to check whether Metropolis is involved into getting into O&M agreement or regional lab management with the stand-alone players where Metropolis starts managing these labs and start developing franchisees. And ultimately, there is some kind of profit share agreement with the stand-alone labs and Metropolis.

So basically, we already have this business of lab on lease model. We are running it for many years, what happens is in a lab run by a pathologist, we just take over the lab completely and bring in all the system processes, people, et cetera, from Metropolis. So this is a model that we have been running it for a few years. And as and when we get the right opportunity, we just continue to explore this. And what happens over a period of time after this is some of these cases, we look at acquiring them or some places, we continue to do the model for a longer duration of time. So this is something that is already in working.

Is it possible, can you share the number of labs you have in this model?

I'll have to come back to you on that exact number because it's spread across the markets, and this has been in operation for almost about 10-odd years now. So I need to come back to you exactly on the specific numbers on this.

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

So first thing is on the TruHealth, which is definitely delivering a consistent performance strong. And recently that you have mentioned even radiology is also kind of blended into that, which is also supporting the momentum there. And now I think you have taken a new initiative about TruHealth Mind and Body. So can you talk something about that? What is the objective here? And what practically that we are trying to achieve through that new initiative and what growth that we can achieve out of it?

TruHealth has basically got 2 parts of it, right? One part of it is you're basically trying to check what's happening in the body and mind sort of start to finish. In some cases, these are consumers who are walking in saying, look, I've not fallen sick, but I just want to find out what's going on. In some cases, these are consumers who are walking in for some illness tests but are choosing to sort of upsell themselves to a bigger bundle and say that, look, if I'm going to get fixed and I might as well do more tests at one time. So it's a combination of these 2. And Metropolis' attempt is to be a health partner to our consumer to say that, look, any kind of information that you need for your body, whether it's coming through blood or whether it's coming through vitals or it's coming through basic radiology or a test for your cognitive assessment or your mental health, we are here to sort of provide it for you. So it's just an attempt to make sure that we are screening every aspect of ourselves. We don't really have any particular targets for individual packages or individual things. But overall, as the TruHealth portfolio, we certainly believe that we'll keep innovating new products and new options and keep growing it in multiple markets.

Is it a blend of even genomics and advanced radiology, ma'am?

Radiology, yes, basic radiology, yes, things like x-ray, ECG synography are sometimes a part of it. But genomics are so far not a part of it. That may be something we may do in the future once we become more comfortable with the science behind sort of predictive genomics, which we think at this time point of time is more useful and scientifically correct for illness. And the predictive genomics for wellness has still not gotten validated in India.

Sure. Second question is about the CGHS price revision, what has happened and I think industry has started getting the benefit. Am I audible?

Yes, you're audible. Go ahead.

Yes. So the CGHS pricing benefit that is now -- that is accruing to competition. So sure, if you can tell that, okay, what portion of our business is CGHS, whether we have seen any benefit out of it?

So our contribution of CGHS to the business, overall business was almost about a percentage or so, right? And hence, we are not getting a huge bump up on the CGHS price increase depending. But whatever you get it out of that small business we have, we definitely get it. But unlike some of the other peer group companies, our case, the numbers are very, very low.

We are continuing to empanel with CGHS across the country. And while this onetime benefit will obviously not accrue next year. But overall, we believe that this is a business that can continue to grow fast as we keep empaneling.

Sure. You have alluded in the opening remarks your 5 strategy for growth. But if you just -- because we have seen the integration benefit flowing in already and the growth, hence can see a moderation in the current financial year for the organic business now. So is it fair to believe that the way that you have the focus is on the B2B growth in that Tier 3 kind of areas that is the core area beyond what qualitative or AI-related kind of initiatives that we are taking? Or what would be the kind of real driver going ahead?

Just to clarify and then Suren can talk about the plans. So just to clarify, our current numbers of Q1 are organic growth. And therefore, we believe -- as we said that the guidance we believe is possible for the year is about 14% to 15% for the year. And obviously, we said that we are expecting a margin expansion of 120 to 150 basis points for this year, which will be driven by lots of productivity and operating leverage. But Suren can give you some color.

Yes. So just to further detail this out. So we continue to maintain that our medium-term CAGR guidance is about 14 to 15 percentage. And out of the 14 to 15 percentage, about 9 to 10 percentage will come from volume patient volume growth and the remaining will come from the product mix. And the volume growth actually will happen because of the 2 initiatives. One is, of course, our expansion into the Tier 2, Tier 3 towns and increased number of network that we are building. So every quarter, we do now about 200 to 250 new centers. And over a period of 2 to 3 quarters, that's getting mature and that getting delivering the numbers. So that cycle has actually now kicked in 5 to 6 quarters now, that's now continue to give us the benefit. So the patient volume growth will come from that. And parallelly, what we do is all our existing centers, a lot of initiatives on the ground, digital and the doctor engagement also help us to get the patient volume growth from the existing centers and their productivity goes up. So that gives me the patient volume growth, and that's why we are saying that about 9 to 10 percentage is definitely doable going ahead. And the mix actually is getting better because we already talked about the TruHealth and the specialty growing at around 17 percentage on the specialty and 20 percentage on TruHealth gives us the realization benefits of about 5 to 6 percentage. And that's largely the overall growth plans and the way we look at in the days to come.

[Operator Instructions] The next question comes from the line of Sudarshan Agarwal with Axis Capital.

So one of the questions that I had was on your center closure. You said you have added around 300 centers. But in terms of the total center count, it has actually come down. So I believe you would have rationalized some. So these would be in Tier 2, Tier 3 towns underperforming? And how should we kind of think about it going ahead? I mean net additions is something that you are saying you will add 500 or attrition will kind of continue to happen?

Yes. So let me tell you about almost every year, every year to 18 months, we take this call of looking at low productive centers and centers where we have quality issues, et cetera, we just try to knock them off. And in some cases, of course, the partner also decided to do something else or move out of the city, move out of the country, do something else in his life. So I mean, it's a regular process. So every year, we take a call on how many of them have not really been productive for us, not making -- not worth to put our efforts and energy there. That's why we just knocked them off. So this time we knocked it off after almost 2 years, we knocked off the 300 centers. And the number that we are talking about 500 center expansion is a net number that we are talking about.

Got it. And on my second question, so when you kind of allude to your Tier 2, Tier 3 expansion, how is the traction on the wellness side over there? I mean your wellness portfolio, I would guess, is more on your metro cities or core markets, right? So is the traction in the Tier 2, Tier 3 markets also strong? And do you expect this wellness share to continue inching up over the next couple of years because of your foray into Tier 2, Tier 3?

Yes. See, currently, majority of the wellness or a true health is happening in the big cities, Tier 1 and there is a bit of Tier 2 towns. And the Tier 2 and the second part of Tier 2 towns and the Tier 3 and beyond, it started to gain traction on the TruHealth. That's why we stay confident that there is an opportunity, there's a headroom available to build the TruHealth portfolio further. So as and when a new center, a new town comes up and basically the routine and semi-specialty and then the specialty kicks off and then the later comes the TruHealth. So that's the sequence in which the TruHealth, the wellness gets built up. So I mean, currently, we have a lot of opportunity to build the TruHealth portfolio from Tier 2 and Tier 2 towns, and we are just on the job on it.

The next question comes from the line of [ Samit Bhaskat ] from Kotak Institutional Equities.

In the line of the 5% to 6% realization growth which we had during this quarter, was that entirely led by the and special exchange? Because if I look at the revenue growth and contribution on a Y-o-Y basis that the revenue growth was more or less in line with the company top line growth and contribution was also roughly flattish. So just wanted to understand if there was any element of price hikes included here?

No, there is absolutely no price increase during this quarter. In fact, last time we increased the prices was January 25. So there's no price increase after that. And we just talked about the CGHS price increase, which is a very, very insignificant part of our business. So that really didn't help us too much. So most of it is driven by the organic growth, both in terms of volumes as well as the realization. And like you mentioned, the realization growth has come on the back of TruHealth and specialty growing at 21% and 17%, respectively.

And what is our stance on price hike in the near to medium term? Are we planning any?

In the near future, we are not contemplating a price increase at this stage. I mean at the right appropriate opportunity, whenever the market is conducive to absorb a little more on the price, we will definitely would like to do that. And definitely, the agenda is to at least to pass on part of the inflation that may come on to us to the consumer at the appropriate time.

My second question is on medium guidance of 27% to 28% for the next couple of years. So on one hand, we are witnessing an improving productivity at some of our mature collection centers and labs. On the other hand, we are also expanding into Tier 2, Tier 3 towns. So the margin profile is relatively a bit lower. And also in the context of the ongoing geopolitical situation pressures could you split the margin guidance, maybe what kind of drag we would be facing on the cost pressures and deteriorating geographic mix and what kind of benefits from the productivity improvement?

Yes. So see, we are not now further expanding beyond the 750 towns. I mean, we are deepening our presence in 750 towns. So we have our network, we have our logistics system and we have our collection centers. So we are going further deeper into 750 towns. So we're not exposing to beyond 750 towns to add further cost at this point of time. And secondly, I mean, we have also halted the lab expansion agenda that we had done almost last 5 quarters. We have not really went on with the lab expansion. So these 2 things will make sure that we don't further have any stress on margin because of the new towns and new centers, new labs, right? And increasing productivity from the existing centers -- and the new centers coming up, we will continue to be the agenda. And that's where we are confident about getting our margins to 27 and 28 percentage on the back of the operating leverage and some of the other cost initiatives that we already taken.