Vijaya Diagnostic Centre Limited (VIJAYA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '24 Earnings Conference Call of Vijaya Diagnostic Centre Limited, hosted by YES SECURITIES. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bhavesh Gandhi from YES SECURITIES. Thank you, and over to you, Mr. Gandhi.

Thanks, Michelle. Good morning, everyone. Bhavesh here. On behalf of YES SECURITIES, I welcome you all on the Q2 FY '24 Earnings Call of Vijaya Diagnostics Limited. Firstly, I would like to thank the management of Vijaya for giving us this opportunity to host the call. Today, from the management team, we have with us Ms. Suprita Reddy, Managing Director and CEO; Mr. Sunil Chandra, Executive Director; Mr. Narasimha Raju, Chief Financial Officer; and Mr. Sivaramaraju, Head, Strategy and Investor Relations. I would now hand over the call to Ms. Suprita Reddy for her opening remarks. Over to you, ma'am.

Thank you, Bhavesh. Good morning, everyone. On behalf of the management team of Vijaya Diagnostic Centre Limited, I welcome you all to this forum. I would like to first share the key highlights for the period, following which Mr. Narasimha Raju, our CFO, will take you through the operational and financial highlights of the quarter ended 30th September 2023. I'm glad to announce that we were able to maintain a healthy business performance this quarter. Along with a steady 18% year-on-year non-COVID revenue growth, we also recorded a 15% quarter-on-quarter growth, demonstrating the strengthening of our core business. The wellness segment maintained a contribution of 13%, while the B2C segment continued to stay strong, contributing 95% to the total revenues. Completing 3 months of successful business operations, our hub center in Kolkata has gathered notable business traction bringing to life the fact that Vijaya as a brand was successful in establishing its presence in West Bengal, a new geography we set foot into. That too the very first time that we launched out under the Vijaya branding. We remain confident that at the current pace of progress, we will be able to achieve the operational breakeven as guided earlier. Making progress in line with our plan for strategic expansion, particularly into the Tier 2 cities, we have recently come up with a one-of-its kind hub at Mahbubnagar, where formal operations started in October 2023. The center is equipped to offer a comprehensive range of diagnostic services, both in pathology and radiology, right up to MR and an automated lab. We consistently strive to strengthen our expansion efforts with thorough market study and research and to extend our 'All under one Roof' comprehensive model of business even to Tier 2 cities and new geographies. Our objective is to address the customers' need, position ourselves as the customers' brand and stand out in the diagnostics space as one of a kind in every region and geography. This approach has always resulted in a generous acceptance of our brand and consistent progress in our business performance wherever we expanded, and we believe that it will continue to be so in the days to come. I would now like to invite Narasimha Raju, our CFO, who will take us through the operational and financial highlights for this period. Thank you.

Thank you, Madam. Good morning, and warm welcome to everyone joining us on the call today. I'll briefly take you through the specific financial performance and key developments for the current quarter ended and also half-year ended 30th September 2023. The consolidated revenue for the current quarter stood at INR 139 crores as against INR 121 crores in corresponding quarter of the last year, registering an overall year-on-year growth rate of 15%. When it comes to the non-COVID business, I'm delighted to inform that it has grown at year-on-year growth rate of 18%, that is from INR 117 crores to INR 139 crores in the current quarter. This robust revenue growth was largely driven by volume growth. This significant growth in the business was driven by both radiology and pathology segments underscoring the robustness of our B2C-focused integrated business model. The B2C revenue share, just like every quarter, stood healthy at 95%. Our radiology business stood higher at 36% as compared to 33% in Q2 of last year. The revenue per test was INR 459, and revenue per footfall was INR 1,525 during this current quarter. EBITDA for the current quarter stood at INR 57 crores as compared to INR 49 crores in the corresponding previous quarter, registering a year-on-year growth rate of 18%. The EBITDA margin was healthy at 41.3% in the current quarter marking a year-on-year increase of 90 basis points. The faster ramp-up and early breakeven at major hubs like Rajahmundry and Tirupati and the opening operating leverage due to fixed costs have contributed for this improvement in the margins on a year-on-year basis. The profit after tax for the current quarter stood at INR 33 crores, and the PAT margin was also healthy at 24%. Coming to the update on the capital investments for the current quarter, as you are aware, we have successfully launched our Kolkata hub center. And in addition to this, we have upgraded our main hub facility in Vizag by adding a PET-CT. And we have added first Open MRI in our Hyderabad network at an existing hub center. With this Open MRI, customers with claustrophobia, our kids and elders can get a comfortable MRI scan. As part of the digital initiatives already in the last quarter, we have launched mobile app, e-commerce web portal, and WhatsApp chatbot, et cetera. We are currently working on a few more digital initiatives like AI-enabled radiology reporting software, comprehensive CRM software for better customer engagement. I will now summarize our performance for the half-year ended September 2023. The consolidated revenue is INR 260 crore as against INR 225 crore in H1 of last year, marking a year-on-year growth rate of 15% on total revenue. And when it comes to the non-COVID, it is 19% year-on-year growth. EBITDA stood at INR 105 crores as against INR 89 crores in the corresponding half-year, registering a year-on-year growth of 19%. EBITDA margin stood healthy at 40.6%, and the profit after tax was INR 60 crores with margin of 23%. To conclude, I would like to say that the balance sheet of the company remains healthy and robust with surplus cash and reserves of INR 288 crores and impressive return ratios as well. This brings me to the end of my address. I would now request the operator/moderator to open the line for the Q&A session. Thank you.

[Operator Instructions] The first question is from the line of Abdulkader Puranwala from ICICI Securities.

Congrats on the good set of numbers. Sir, just wanted to understand the broader split of growth in this particular quarter. Sir, is it fair to assume that your radiology business this quarter would have grown upwards of 25%?

Not exactly upwards of 25%, but it's upwards of 20% in the range between 20% to 25%.

Okay. Okay. So sir, I mean, if we bake in that particular number, the pathology growth then stands between -- somewhere between 10% to 15%. So any reason for this lower growth in the pathology as compared to radiology? And if you also could share some bit of a color on how the margins are panning out in both of these segments would be helpful.

So Abdul, I think first thing, see, last year Q2, if you see, 66% of revenue came from pathology and -- 67% from pathology and 33% from radiology. Out of that 67%, close to 3% is from COVID. So if you remove that COVID base and see, even pathology grew more than 15%, right? But again definitely radiology grew at a faster pace because of the additional hubs that we launched in the last year. But, otherwise, both the segments grew at a healthy rate. And coming to margins, again, yes, definitely at a gross margin level because of radiology we will have some advantage. But, otherwise, at EBITDA margin, more or less 1% change in revenue mix will not change the needle by much.

Understood, sir. Sir, so secondly then on the cash accumulation which is happening on INR 228 crores, sir, I mean, are we evaluating any M&A here? And how do we plan to deploy this capital?

So Abdul, this is Sunil here. We've been getting this question every quarter and right from in fact our probably IPO roadshow time. So yes, the company is debt free. We have cash on the books, and we have aggressively been looking at many M&A opportunities. But criteria remains the same, one, that they are aligned with our business model, which is integrated B2C kind of a business, not B2B. And two, valuation multiples need to be reasonable. We've seen that there is a moderation in this valuation in fact in recent times. So I think maybe we will be more -- we might have more positive news in the shorter term now. Maybe a year ago, the valuations were not looking so attractive because of COVID. But now, I think things are looking a little more attractive. So we are very, very keen to do some M&A based on the quality of the assets that are available.

Sure, sure, sure. Sir, and lastly, we called out that Kolkata is on track for breaking even as per expectations. So I mean in the current quarter, would it be possible to call out the overhead cost which would be sitting at this facility? As well as on the -- if you could give some color on the Tirupati venture that we had done a few quarters ago. I mean, how is -- what is the progress there as well?

So, Abdul, your question is not fully clear. Can you repeat it once again, please?

I think, yes, there was some disturbance...

There's some static, we couldn't hear you, but...

Sure, sure. Yes, yes. So my question was into 2 parts. First is on the Kolkata hub center. So what would be the operational cost for this quarter? And secondly, on the Tirupati facility, what we had ventured a couple of quarters ago, how is the traction there? And what's the plan ahead in terms of the network expansion and spokes over there?

So Abdul, as you know, the Kolkata center was just launched, okay, just like a 3-months-old center. So for a hub center like big size with 3 Tesla MRI, 128 slice CT, you need to give at least like 3 more quarters, okay, to achieve an operational breakeven. As you know, in case of Rajahmundry, in a couple of quarters, we achieved breakeven. And in case of Tirupati, it surprised everyone that in the first quarter itself we could achieve the breakeven. But Kolkata being a new market, okay, for us, we expect another couple of quarters to achieve this operational breakeven. And coming to the operational expenditure on the Kolkata front for the current quarter, it's not a material number. The impact on the -- the drag impact on EBITDA will be hardly like a 0.2% or 0.25%.

[Operator Instructions] We'll take the next question from the line of Rishi Mody from Marcellus Investment Managers.

Am I audible?

Yes, sir, please proceed.

Yes. So just picking up on the previous participant's questions. Suprita, could you just give me some light on how Kolkata is progressing like in terms of productivity versus say if you had opened the hub in Hyderabad with how far ahead or behind is Kolkata?

Rishi, like I've mentioned earlier, West Bengal being a new geography and Vijaya going in with almost about 2 decades of experience with Medinova, we still went in with the Vijaya brand itself and chose to go into the northern side of Kolkata. And mentioned earlier that we would give it a year to breakeven, whereas we would say normally 9 months in the home markets of Andhra and Telangana. And saying that, I think it's on track. It's doing well. And we're very, very confident that we'll see an operational breakeven in the 11th or the 12th month as guided earlier. And when it comes to expansion there, we're also looking at putting in a few more hubs because it's a larger city. And until and unless there is a base, we cannot start opening up a pure spoke center keeping the TAT in mind and keeping the advanced radiology. So probably we'll also be able to give you more light in the next quarter on the next 2 or 3 hubs coming up in Kolkata itself.

So you're going to put up these hubs before achieving breakeven on the first hub, is that correct?

Yes. Exactly.

Rishi, Sunil here. So if I understand your question correctly, you are trying to ask us what happens when we go to a new geography and do the same kind of fast operational breakeven numbers work? You have to understand, we are not new in Kolkata. We've already had that Medinova center. We were doing INR 12 crores, INR 13 crores, and it was a profitable center. The new center is under the Vijaya brand, of course, but most of the patients and doctors already know the brand. We are not new in Kolkata. And we have been a little conservative in guiding for Kolkata because we don't want people to say like Tirupati in 1 quarter you reached breakeven...

And why not Kolkata? So I was just being a little conservative by saying we'll take an extra quarter, and that's the reason why we set a year instead of the normal 9 months in the home market.

Understood. Understood. And you also mentioned you'll opened up in Mahbubnagar, which is a Tier 2 town. So how is that shaping up versus, say, Kolkata or Hyderabad? Are they on similar lines? If you could just set a time line on how your hubs function in core cities versus Tier 2 and non-core cities?

Great question, but Mahbubnagar and Kolkata are not comparable, both in terms of size, equipment, technology, and a lot of size of market. Mahbubnagar is a Tier 2 town in Telangana, where we have a basic automated lab and a CT and an MRI, which is a typical small hub in a Tier 2 city. Versus you have the best of class technology in Kolkata with a 3T wide bore and a 128 cardiac CT, a 10,000 square feet center versus about a 4,500 square feet hub that we're talking in Mahbubnagar. And it's opened only in October. So it's been just about 15 days since it's open. So we'll probably have to give it some time to give us some light on numbers.

Understood. Understood. Finally, just you'll have opened 2 centers in H1. Are you still guiding for the 15-center addition for the full year or you are revising that?

Yes. So we would stay with the 15-center number by the end of the year, probably this is the way that they've not -- a lot of things, hubs opening up, delays, and certain things, but we will stay with the 15 centers by the year-end, quarter 4.

And just to add to that, Rishi, the plan is to open like 4 hubs in this current year. Out of that, we already opened Kolkata, Mahbubnagar. Gulbarga is just like 1 or 2 weeks away from now. And then the fourth hub, again, in the Tier 2 location in AP, we are expecting some time in the end of Q4 this financial year.

[Operator Instructions] We'll take the next question from the line of Bhavesh Gandhi from YES SECURITIES.

So just continuing on the Kolkata hub discussion. So let's say -- so we understand you have given an outline of -- the time line of breakeven, which is longer than some of your other hubs. But stretching this over, say, a longer horizon, let's say over 3 years, what sort of margin levers can you bring to the table vis-a-vis, say, somebody like say, Suraksha, which we understand there's a certain level of margin. And if indeed we have to cross that number at maturity, then what additional we need to do in Kolkata as in a wider test menu and what vis-a-vis competition? So just wanted to understand something on that.

So, Bhavesh, just one question firstly. If you compare our profitability versus Suraksha, you will find that we are significantly higher. So I'm not sure what the question is about. Are you expecting us to lower our margins or...?

No. So at least -- so I believe in Kolkata in the first year, we might be breakeven. But eventually, so -- is the expectation that we should set is will Kolkata be similar to your company level margins in, say, 3 years' time?

So, Bhavesh, basically, if you see Kolkata today, right, so the costing there is much higher than what we have in Hyderabad. At the same time, if you see the revenue that we get for each of these tests, except MRI, barring MRI, any of the tests, you can also check on our website, they are much higher when compared to Hyderabad. And second thing is, I think, more than comparing it to peers, the way we operate is a little bit different. The synergies that we get is a little bit different. And it's the first half. And the minute we start opening more and more hubs and the spokes, I think operating leverage is going to play out in any of these areas. So Hyderabad is not different from these markets, it's how we operate and the costing structure that we have. So for Vijaya, it's all about -- if you see the model, the uniqueness is it's all about introducing high-end technology, recruiting good doctors, and giving the services at affordable price, and then, thereby building volumes. I think that's the volume that's going to make the difference.

And also, if you look at how we have always generated these high margins, is through this hub and spoke model. So Kolkata is -- we have 2 hubs now. Maybe we will plan 1 or 2 more, but we have not fully added spokes yet. So over the next maybe a year or 2, as you see the smaller spoke centers being opened, what will happen as a cluster, the profitability will definitely kind of be similar to what you see with any of our other locations. That's our business model. That's what we have always believed in, and that's what will happen even in Kolkata.

[Operator Instructions] The next question is from the line of Sashwat Jalan from Purnartha Investment Advisers.

I just have one regarding the Doctors Connect program. I was curious to know how are we shaping back up in the newer geography, be it Kolkata or any of the Tier 2 towns. Like are we having any advantages? Or on the contrary, any challenges? Would like to hear your thoughts on that.

So Sashwat, just like the way that we are doing in Hyderabad, if you basically see Tier 2, like if you see the slide Doctors Connect, we have also put a few pictures relating to Nellore, right, and Vizag. So I think this is a different way of connecting. So there are CMEs where multiple players will conduct. But what differently that we do is, if you follow any of our social media handles, it's a continuous program. So every week you'll see some webinars happening. And this is across geographies, not just in Hyderabad. Likewise, we also started doing in Kolkata. And it's not very challenging to do in Tier 2. I think one way to engage the doctors is to take the technology and collaborate with those doctors and try to publish something in terms of research papers, collaborate with them and do some research work and publish it in RSNA or EU Congress, et cetera, like that. So that's been something that we were doing in all the geographies that we are present.

Right. And does this create some kind of a network that helps in other geographies like our Connect program in Hyderabad helping back in Kolkata?

So Sashwat, more than network, what this is, is it has a team of more than 200-plus doctors, radiologists especially, specialized in different modalities, so like we have mentioned earlier we have cardiac radiologists, pediatric radiologists, and we are connected through tele across the network. And the kind of the work that we would see from 0.3 Tesla to a 3 Tesla MR in a unique case, which is a case study is a interest for most consultants whether it is Tier 2 or whether it is city or whether it is Kolkata. That's also a reason because of the kind of cases and the data bank that we have is that we are able to retain and keep these 200-plus doctors engaged with us. So this is something that we do to probably share, discuss, impart, present papers, multiple things. So there is a particular set of doctors that is very keen on academic sessions. So that is where these CMEs and the Doctors Connect come into play.

[Operator Instructions] The next question is from the line of Tanmay Gandhi from Investec.

Am I audible?

Yes, Tanmay. How are you?

Good. Good. All good. Ma'am, my first question is on the wellness contribution. So again, given our integrated presence, what kind of numbers is more realistic in the medium term? Do you have any target in mind?

So I think with the digital initiatives that we started doing with the app and also the digital marketing that we just recently started, Tanmay, I think in the medium, say, maybe 1 to 2 years of time. So I would say that's something we're expecting in the range of 15%. Currently, that is say 12.7% to 13%, 15% is something that we are expecting.

And what would be the average...?

Purely -- just to add, Tanmay, these are purely, purely wellness packages and not the bundled tests.

Understood. And sir, what would be the average realization for the wellness tests if you can share that?

Closely -- as of now, it's in the range of INR 2,400 to INR 2,500. So we have a package, right, starting from INR 1,000 till INR 12,000, INR 13,000. So the average realization across the markets put together is about INR 2,400 to INR 2,500.

Understood. And sir, how many of those tests which are done would have an element of radiology?

All of them.

All of them. There is no package in Vijaya which has only pathology tests.

Understood. And again, just a clarity on the non-COVID performance, so if you have to break up that 18% growth, so how much of that would have been driven by realizations? And how much would have been driven by patient group?

It's -- so Tanmay, again, there are 2 things here. So first thing is because the quarters that we are comparing last year to current year, there's some amount of COVID element because almost close to 50,000 footfalls last year was just because of a single test COVID. So in terms of test, we have seen that the revenue was largely driven by test volume, very -- a little bit of the realizations going up. But if you just see -- if you remove the COVID effect and see the patient footfall, roughly around 13.5% to 14% is basically because of the patient growth. And the rest is because of your case mix and also the change of that radiology and pathology mix.

Understood. And going forward, do you think that this 4%, 5% kind of realization growth can continue? Or do you believe that it will be largely driven by patient growth?

It would be largely driven by patient growth. If you see quarter-on-quarter, right, from Q1 to Q2, when we delivered 15% growth, if you see the patient volume, it's purely backed up by patient volume of 15% growth.

[Operator Instructions] The next question is from the line of Bhavesh Gandhi from YES SECURITIES.

Yes. So coming back to your opening remarks, you had mentioned about M&A where valuations may have become palatable this year. So just wanted to know what sort of the acquisition that we might do. Would it be similar to -- I mean, does it have to have radiology/pathology both and it has to operate in similar way that we do, company-owned centers and a hub and spoke model or you're open to assessing other business models also in diagnostics? So that was one.

So, Bhavesh, when we talked about M&A also, and this has been something consistently that we have said, we are not insisting that a center do everything integrated. But as a B2C player, we're looking at assets where they are also B2C, they are focused on walk-in patients, and there is some kind of a brand recall that they have built. If they have not built much radiology, I mean, we can always acquire and add radiology or add pathology. That is not an issue. But what we are, again still, looking at is the kind of maybe B2B kind of model, which doesn't fit with what we do. So the model has to be aligned with our model. Beyond that -- yes.

It can be either pathology or radiology, I think what we're looking at is the quality of the asset, the quality of the promoters and the strong brand recall in that particular geography. So if that fits in, then I think definitely we'll be able to evaluate and...

And valuation is a separate issue that you know better than us. You're all investors. So end of the day, valuation has to be something which is -- it has to reflect the reasonableness of the business itself. And also in terms of profitability, we had a situation 2 years ago where very small assets were coming and asking for a valuation of the top player in the country. And that was not going to make sense. It's not going to help the company or the shareholders of our company. Today, we are seeing a little bit moderation. We are talking to many different options. So let's see what happens. Maybe we'll have some news for you.

The next question is from the line of [ Aditya from Securities Investment Management Company ].

So I just had one question. So just wanted to understand how do the mature centers behave? So your center which is 5 to 6 years old, our volume growth wouldn't be that much in that center while our costs would grow at normal inflation levels. So what helps us maintain our margins in these centers? So one lever which we could think of is price hikes. But in this industry, peers generally don't take any price hikes. So if you could just help us understand what helps us maintain margins in these centers?

So [ Aditya ], so basically, see it differs from center to center. For example, if we take a center, a spoke, which has hit about 130, 140 footfalls per day, I think it depends on multiple scenarios. Because if you see the recent spokes that we have put, we sometimes try to convert even the rooms that are not being used properly for some other modality into a modality which is generating a business to us. To a certain extent, even if the center hits the maturity, depending on that mix change within the center, we can try to bring that revenue to a certain extent. But beyond a point, right, at some point in time, if it hits the peak, we'll have to add one more smaller mini spoke like we've done in the last year near to the center, but this is a business. In any retail business, I think, [ Aditya ] one thing is there is a certain amount of growth that would be coming from the existing centers. In that, again, if you take different brackets, high-end mature centers may only grow at 1% or 2%, whatever is the price hike that we take, right, and some growth coming from the new centers. I think the scenario is going to continue. But today, if you see in Vijaya's network, I would say, at least 70%, 75% of the centers still have the capacity to build the revenue.

Got it. Got it, sir. And sir, in the presentation, you used to give one slide regarding the number of flagship centers, hubs, and spokes. So if you could just let us know what is the number of centers is around 123, what is the bifurcation between all these 3?

Currently, the flagship is 1 center in Himayatnagar and then we have 29 other hubs. So the total hubs including flagship is about 30, and the rest are all spokes, 92.

Okay. Are any labs added?

Yes. So we've added 1 lab in Kolkata in the last quarter. So 18 labs, so 1 lab we added in the last quarter.

[Operator Instructions] We'll take the next question from the line of Bhavesh Gandhi from YES SECURITIES.

So one question on your Q2, the revenue kind of break up. So how would that be between, say, the, let's say, hubs opened 2 years ago and the newly opened hubs? So in a way, I'm trying to get the same-store sales growth. So how would that be? And also, secondly, the split, how would that be between, say, Hyderabad, your core market, and the neighboring hubs, say, Tirupati and so on? I believe Kolkata is still new, but how would that split be?

So the way we see, Bhavesh, is that any center that is opened last 1 year, we separate that. But we don't have the number handy for the 2 years old hubs, right? So basically, if you see the growth of 18%, roughly around 7.5% of the growth has come from the centers that were opened in last 1 year and the rest 10.5% to 11% from the existing centers. And if you basically see the mix between Hyderabad and other areas, last year, I think in Q2, Hyderabad was generating about 83% of the total revenue. Versus this Q2, it's roughly around 80% of the total revenue. But at the same time, if you see the growth between the markets, Hyderabad grew at 15% non-COVID -- on non-COVID front, whereas, obviously, rest of Hyderabad, because of the investments we made, like Rajahmundry and Tirupati, grew at a much faster pace to up to something like 40%. So that's the reason we are seeing that 18% of growth. But one thing to note is Hyderabad is still growing at the 15% rate.

Okay. Secondly, I mean, competition has kind of indeed taken a step back, at least from the aggregators and some of the incumbents' perspective. But we do keep hearing of at least one of your peers trying to get into radiology. One of large Mumbai-based chain kind of trying to get into radiology, and they also have presence in Chennai. So how do you read this situation? And does competition -- new competition in radiology affect the vertical in the same way we have seen in pathology, in the sense routine tests get commoditized? And then would a similar roadmap can unfold in radiology if we see rising competition in that segment?

So, Bhavesh, I mean, we can't comment about our competitors. What we can assure you is that our business plan, we are very confident about continuing to grow. And also, if you look at this integrated model, this is something we started in -- our founder, Dr. Surendra Reddy, started in 1981. We were integrated, radiology, pathology, from the last 42 years. And we've had, today, so many centers in these 2 locations where, over the last few years, maybe people like you would question, saying, if you go to a new geography, what is going to happen to you. And we have opened these hubs, we have opened these spokes, and these centers are performing and the assets are being maintained and the growth is being maintained. So if somebody wants to compete, I think the market is very large, the opportunity is very large. As you know, unorganized diagnostics segment is still -- in India is about almost 80%. So anybody can go and open new centers, and I'm sure there's opportunity. We can't comment on how they will do. But we are very sure about our growth plans.

And Bhavesh, just to add what Sunil sir mentioned, I think being in this business -- Vijaya being in this business for 40 years, at least what we have realized is that this is a sector -- unlike many other sectors, this is a sector where you need not to act on every change that a competitor or a new player gets into the market. Because unlike other sectors, it's not the product or something that you are selling here, it's more about the trust. The trust that you are going to create with the patient and also with the clinician. I think what's more important is that to build this business, for Vijaya at least, the main pillars were like introducing new technology. We were always at the forefront to introduce new technology. We were always on the forefront to get the best medical talent and nonmedical talent. And also, you see the centers, right, the kind of infrastructure, et cetera, we have. And we churn out the quality report at a much faster TAT. I think this is something which has made us to have that dominant position in Hyderabad, and that's a correct -- that's a good spot to be in. I think as long as we maintain that I think...

In any geography that we go to, I think we would be very confident on whatever we've guided on our growth plan.

Got it. Got it. So sir, one follow-up to that. You mentioned, and you have kind of always highlighted technology on the radiology side in terms of 3 Tesla machine and so on. So wanted to know on the pathology side, on the specialized tests, what additions can we expect, say, on the oncology side over the next 1 year or so? Because I believe this specific segment has seen a lot of action in recent times in terms of new kind of tests being offered. So sir, anything on the specialized test front we are looking to add over next, say, 1 year or so to broaden our test menu?

So, Bhavesh, basically, we are integrated. But at the same time, if you look at our labs, the pathology business, we have a very deep test menu. So we do a lot of specialized tests, and we keep adding every year. So when you look at -- I'm assuming you're referring to things like our oncogenomics or sequencing and things like that. And a lot of these areas are also to -- there somewhere we are investing already in launching those tests and some we already offer. So...

And it's also that histopathology basically was also part of our test menu from the early '90s itself, Bhavesh. So we do a considerable large amount of histopathology work, just not in the flagship center, but also in 2 other centers. We are a center of excellence for skin biopsies and renal biopsies. We have specialized talent for that. We do -- I wouldn't know an exact number, but a lot of IHC markers as of today. And like Sunil has mentioned, sequence is something that we are actually getting in. And probably the next 2 quarters, there'll be a new lab setup for that particular department. And in terms of numbers, every quarter there's almost about 2% to 5% increase across the test menu, across all of the departments. Just not in histo or onco, but also in terms of your molecular pathology, your serology, your microbiology, across all of them. So I think probably the test menu that we do offer today is deep enough to cater to all the requirements that we are getting as of today.

Sure. So one question on wellness part. So do we have any specific kind of numbers in mind about wellness being so much of our business or we think that it can continue on its own? Because there are some nuances involved here. I mean the number of tests might go up. But from our business premise perspective of being more focused on sickness and kind of relying on patients who has acute need for testing vis-a-vis wellness, which at least ourselves is more discretionary in nature and it is more prone to competition. So is there any specific thought process on wellness as part of your business? Do you want to cap it? Or how should we look at it?

So firstly, Bhavesh, I should congratulate you that you've realized that -- if you look at wellness and if you look at any of our listed peers also, I don't think anybody will have more than maybe 10% to 12%, 13% contribution coming from wellness. And when I say wellness, I'm talking about the packages, whatever health tests and other things...

Department...

Now, do we not do this? No, we also do it. Everybody does it. It's one part of our business. We obviously offer a lot more than just wellness. Wellness is one segment where, yes, there is some pressure on pricing because you have these aggregators, you have third parties trying to focus on this. But as a percentage of the total revenue, it is not so huge for any of the large players, including us. We are not going to stop doing it. We are going to keep growing that business. But if your question was wellness, profitability margins are more under pressure than actually doing something more advanced or doing some other individual tests, then yes, that is true.

[Operator Instructions] The next question is from the line of Bhavesh Gandhi from YES SECURITIES.

Yes. So one last question from my side. In terms of -- so hub addition let's say over next 12 months, how should we look at it? I know we are coming off from a large CapEx program last year and we are kind of more focused on monetizing it. But if I had to kind of focus on what's next apart from the one which you have opened in October '23 in Mahbubnagar. Which other geographies can we look up to?

So I'll let Siva answer this, Bhavesh. But I had one small question for you. Is Mr. Amar still with YES SECURITIES?

Yes, he's still. Very much so.

Very good. Convey our regards to him. And I'll let Siva answer your question.

Sure.

So, Bhavesh, so there is one center that's coming in Karnataka, which is Gulbarga in the next 1 to 2 weeks, right? Apart from that, like we said, in FY '24 and '25, put together, we will be opening 8 hubs. Out of which, it will be a mix of Kolkata and rest of Andhra and Telangana in our core geographies.

Sir, can we take one more question? We have one participant in the queue.

Sure.

We'll take the next question from the line of Rishi Mody from Marcellus Investment Managers.

Am I audible?

Yes, yes. Yes, Rishi.

Siva, you mentioned that we are expanding in Karnataka or in -- opening up a hub in Gulbarga. If I remember correctly, we had tried a foray in Karnataka in the past as well. So just wanted to understand what have been our learnings from that experience, what are we doing differently this time around.

So, Rishi, I will take that. So the -- like you said, there was a small foray into Karnataka a few years back. Like we've been mentioning there's a lot of inflow of patients who come in from our adjacent geography. Gulbarga, maybe in Karnataka, but it's bordering the Telangana state border. So that was the reason why we chose Gulbarga because most of the Gulbarga work does come into Hyderabad as of today. So the center that you would be seeing in Gulbarga, again, would be a larger hub, around 8,000 to 10,000 square feet, with a fully automated lab and a very high-end MRI, but a low-end CT. So we did see a requirement for that. So that is an adjacent geography that happens to be in the state of Karnataka.

And our medical talent will go from Telangana to Karnataka or we are going to hire local talents? How we'll be doing that?

In any new geography, Rishi, it's partly both. Some of our core team members do go there for a certain time and stay, and some of them are local. And most of the advanced radiology is anyway done through the entire network through the tele-radiology. So it will be the same model that we have taken up in both Tirupati, Rajahmundry, and Kolkata kind of centers.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you.

Thank you. I'd like to thank all of you for your interest in Vijaya and for taking time out to attend this call. I'd also like to thank YES SECURITIES for hosting the call. Should you need any further clarifications or seek to know more about the company, please feel free to reach out to us. Thank you.

Thank you, members of the management. Ladies and gentlemen, on behalf of YES SECURITIES, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.