My second question is on your revenue for this quarter. So would it be possible to quantify how much of the revenue from your acquired assets came from each of the assets? Like how much revenue came from Core and Dr. Ahuja's and Scientific Pathology, if that's possible?
Well, I think the overall put together is 11% of the revenue growth has come from all the integrated entities. Maybe, we can talk later to give you the details of each of the entities have contributed to each.
So firstly, like we have completed our major lab expansion last year. And this year, we are investing in collection centres. So from FY '27, FY '28 onwards, can we see some increase in the growth numbers from current 11%, 12% to around mid-teens kind of a growth over the next 1 to 2 years?
Well, a little too early for me to give you a projection for the coming year. Give me another couple of quarters more to give you the right projection for the coming year. But the effort is always to bring the growth level to the next level as we go forward.
And secondly, on the Core Diagnostics, we did mention that we are doing clean-up in the other acquisitions as well. But how should we see the revenues of the Core Diagnostics for this year? And how should we see Core Diagnostics as well as 3 the other acquisitions, these portfolios growing in the coming years? Would it grow faster than our standalone growth rate?
I think Ameera clarified to you, I mean, in one of the earlier questions about the overall growth, like because we are just cleaning up the business. So we are not necessarily looking at the year 1 so much about the revenue growth. We're just making sure the whole portfolio is very sound, clean and stronger. That's the year 1 focus. And year 2, of course, we will be taking the revenue growth in all these acquired entities. And definitely, it should further help the overall growth of the Group in the coming years.
I wanted to understand one thing on the test volume front. If one has to understand on the industry volumes based on doctor consultation tests, routine monthly tests, which are being done by patient and emergency test, can you help me understand, I mean, how much each of these tests would have a contribution in the overall volume front? If not for Metropolis, then in general for the industry?
Well, not very handy with these numbers. So maybe we'll have to connect separately so at least we can give you the best answers.
And just to get a sense on the Core Diagnostics scale-up that you mentioned during the start of the call for FY '27. What kind of growth are we expecting for Core once the integration is completed and we realize the initial synergies in FY '26?
I think that's exactly what I thought I have clarified in the earlier question as well. So by the end of this year, we will be able to start giving you the correct projections around each of the entity, how much they will grow. But I think I said, overall, this should help further increase the growth of the company. That's what we will be looking at.
Any colour on how big this business is for us?
We don't have that separate segmentation actually at this point. So like I said, it's not a very large market, but it's a market that's growing. And every year is different because it depends on how fast approvals come in for drugs. So some years, it's low, some years, it's high. So while we put an effort into it, it's not a business that we expect to become extremely large.
My first question is on margins. How should we look at margin trajectory going ahead? I mean, you have posted the healthy organic margin expansion. Should we expect this to continue with ramp-up in Core as well in the latter half of the year or would we stick to our margin guidance previously of almost flattish because of Core dilution?
Yes. So if you remember beginning of the year, when we stated the estimates, we said for this full year, the organic business will do about 70 to 100 bps margins better than the previous year, and the previous year was 24.3%. And we said we will move up by 70 to 100 bps, and we stay committed to the same number even at this point of time. And we said for the overall Group, there will be dilution of 1% to 1.2% because of the lower margins of Core. And that also by the time we exit this year, Core will be close to 2-digit margins. So these are the, I mean, statements we made in the beginning of the year. And all these remain same at this point of time. We are heading towards the same direction.
Just a follow-up to understand this better. Our organic business margins have surpassed the expectations that we would have had at the beginning of the year. So question was from that perspective.
Yes. So Anshul, what happens in quarter 2 is relatively a high-volume quarter, and hence, your margins will be definitely better than the average margin of the year. And hence, it's not necessary that the quarter 2 our margins will be the same going forward in quarter 3 and quarter 4. So for a full year basis, from a 24.3%, you would see 70 to 100 bps upside by the time we close this year for the full year. That will be the organic business trajectory.
In your opening remarks, you mentioned that we are adding certain radiology tests in the TruHealth packages. Would this sort of be limited to sort of filling up prescriptions or would we think of venturing into advanced radiology at this stage?
So currently, the plan on TruHealth with respect to radiology is that the basic radiology services like the ECG and then X-ray and ultrasound, these are 3 things that we are basically adding on to the TruHealth packages. And we have a capability of adding now the ECG across the country and the X-ray and ultrasound around 5 towns in the country. So that we now got integrated into the TruHealth packages. And not high end in this scheme of things for the rest of the year, we are not including the very high-end radiology like MRI or a CT scan, etcetera.
The last question that I had was on our volume or top line guidance. I understand it's a stable pricing environment as such with more tailwinds around GLP-1 drugs and specialized testing. Would we sort of retain our top line guidance as we stated at the start of the year?
Yes. We want to maintain top line guidance, like I mentioned, for the rest of the year as well.
So my first question is on the lab testing charges. Although it's a very small amount compared to your other operating expenses, on a half yearly basis, the expense has almost close to doubled. Just wanted to understand what is the reason behind this? And will we see the same quarterly run rate in that expense in the third and fourth quarter as well?
Yes. So I think H1, 60% of the lab testing charges are because of the Core, outsourcing charges of Core. But otherwise, nothing has significantly changed. And it's only because of the integration of Core and the trends will remain same for the rest of the year.
Coming back to the margin front, if I'm correct, earlier you had guided high-single-digit margin for Core. And given that you have already are at high-single-digit margin in the second quarter itself, so are you still sticking to your earlier guidance for Core or do you think there is a scope for low-double-digit margin for FY '26?
Yes. No, for FY '26, I think we'll stick with the high-single digit, because as you know, Q1 was I think about 2%, 3% margin. Q2 is, like we said, is sort of mid-to-high single-digit. Q3, we hope to move to a higher-single-digit and then Q4 move to sort of closer to a double-digit. So the average for the year will still come out to a high-single-digit, which gives us a good foundation to make a leap into next year to obviously move into a double-digit margin on track for what we had sort of projected when we actually made the acquisition. So I think the synergies are playing out as we expected. But usually in these acquisitions, what we've seen is whenever you buy one of these businesses, there is a certain amount of practice clean-up that has to be done, ways of working changes that has to be done, integration that has to be done.
Ameera and Surendran, just the competitive intensity at this point of time, maybe in B2B also, if you could kind of give us some qualitative comments. Your B2B revenue growth is now starting to trend better. So I just want to understand that. And is there any impact of this reclassification on any of these numbers?
So I'll answer the first question. I'll let Suren take the second one. So just talking on the competitive intensity, see, obviously, during COVID, we saw a bunch of health techs jump in, we saw a bunch of pharma guys jump in, hospital guys. We haven't really seen any new players jump in, in any significant way in the last couple of years. So on the B2B side, while some existing players are intensifying their efforts, we haven't seen any price competition escalation. We are seeing some amount of stability for that in the last 1 or 2 years now. So also the reflection of the B2B growth being higher in Q2 is not necessarily only about our execution getting better, which it is partly, but it is also about the nature of tests that are generated in the quarter. So this quarter, we saw more specialty and more acute business in the market and less of routine, which is represented through lower B2C growth because of the lesser routine, but higher specialty growth and higher B2B growth.
Just the second question is on GST impact. I know there is some benefit that accrues to you from a sourcing perspective. So just want to understand, are you calling out the quantitative impact or I know maybe you have to pass it on. So just how in the second half it flows through to you?
All right. So see, there are GST impact on 2 aspects. One is on the reagent and consumables and second one on the equipment when we purchase. Now coming to the reagent and consumables, we already had a part of the consumables and reagents at 5% GST only. And some of the consumables and reagents have moved from 12% to 5% GST. So not a very significant, what you call, benefit as such. But whatever benefit we will get, we want to pass it on to the customer one way or the other. And whatever GST benefit that we will get out of the equipment purchases, that will actually come on to the procurement efficiencies.
Sir, during the quarter and during the first half, how much was the revenue from radiology segment?
Radiology segment is very, very small for us. We are early days on radiology segment in a very, very small very low-single-digit percentage if you ask me.
So with the TruHealth and Core Diagnostics, how are you planning to increase your radiology segmental revenue? Are there any plans?
So Core Diagnostics, there is nothing on radiology. It's purely whatever we do. So let me give you some information. So we have about 35 centres across the country now fully equipped with all the basic radiology testing capabilities, which is the X-ray, ultrasound, 2D Echo and ECG, etcetera. That's 35 centres in about 5 cities now fully equipped and we will - start driving the radiology in these centres and also get the portfolios, including radiology in these 5 cities. So that is one opportunity for us to drive forward. And second thing is ECG capabilities now we have almost done across the country. So that will also start playing out.
Sir, my second question is with respect to the clinical trial. Can you explain the business part of it? And how do you see the traction in that particular? Like how much is it contributing to your overall pathology volumes and revenue?
Well, I think clinical trial is a very small percentage of the business. Only in the quarter 2, we got a contract, which we delivered in quarter 2. Basically, this is about working with the pharma companies and other alliances to do some turnkey projects. So it's not one of the things which we keep, all the time depending upon, but it's a relatively small part of the business.
So what are the margins in this business? Better than the consolidated margins or it's less?
Yes, it's a little better than the company level margins.
Sir, my final question is with respect to the Core Diagnostics. So by the end of this year, in the call, you mentioned it will move towards the double-digit by the end of this year. So can we expect that by first half of FY '27, the Core Diagnostics margins to be in the similar level of Metropolis?
No, no. So we said in the first half of the year, it's a single-digit number. We will come closer to a double-digit number by the time we exit this year. And full year basis, we will be still a very strong single-digit number. And we said in 3 years period, we will bring this into the current levels of Metropolis margins. It will take another 2, 2.5 years more to bring up to the Metropolis levels of margin. But the efforts are on, and we are in the right direction.
And on the volume front, you had a strong revenue and volume growth in the first half. Are we planning to maintain our mid-double-digit volume growth for the entire year or are you expecting much better than that?
At consolidated level, our volume growth will be in double-digit numbers, 10% to 11% for rest of the year as well.
Sir, lastly, on the GLP. I know, of course, it is too early to give any guidance or numbers. But have you seen any traction in terms of increase in test in obesity or weight management kind of a thing over the last 1, 2 quarters, given that there's one molecule that has already been launched. So has there been any increase in test in this space?
At this point of time, not anything that's significantly visible in terms of the growth per se, but we are quite hopeful that this will help the diagnostic operators in the days to come. I mean, the full-fledged availability of this medicine and usages in India has still not happened. I think it may happen sooner than later as per our information. But then once they start using, then the diagnostic testings will happen to keep getting the reports in between when they take the medicine. So I mean, we are hopeful that this will help us in the coming quarters.
My first question is on the Core Diagnostics integration. So whether the integration is fully complete by now? And the related question is that, since last 2 quarters that we are witnessing a strong double-digit growth on the revenue per patient. Anything because of the Core Diagnostics that this number is getting influenced positively?
So I'll just add something and Suren you can add on to it. See, any time you do an acquisition, what we find is, like I mentioned in India, there are various kind of practices that different organizations follow. So what we have seen historically is that every time we do an acquisition, we have to actually spend the first many months to clean up some of the past practices that may not be cohesive going forward for Metropolis. And that usually dips the revenue of the acquired entity for the short term. So the revenue growth in the first 6 months of the year would have been impacted Core negatively for any business that we already stopped and that we are cleaning up. So as this gets cleaned up, it sets the foundation for a faster growth in the future.
Second point, a related aspect. See, because of the Core integration, so now possibly the service offering quality and capability would have obviously seen a kind of improvement. So because of that, whether we have seen any upgrade to our TruHealth portfolio or package? And also recently, what we have added the ECG to this thing, TruHealth, so whether these 2 Core integration as well as ECG, whether that has created any uptick in the average realization for your TruHealth packages?
Just to clarify, Core Healthcare, Core Diagnostics, we acquired because it is a genomics-based platform specific in oncology. So therefore, the customers that you're selling to are mostly oncologists as well as oncologists sitting inside hospitals, right? And now as we continue to expand our genomics portfolio to beyond oncology to neurology and obviously, to women and child, etcetera, which we are already doing, this will obviously add all of these other customers, but this will not impact your TruHealth profile because your TruHealth packages are largely more routine tests which are things where consumers are making decisions to come and sort of do a bundle of a check-up every year. So it will not affect the TruHealth packages. The TruHealth packages RPP is moving up because we are able to provide more test to the patient scientifically that is relevant for them and patients are willing to pay us a higher price for these packages for the brand premium, the quality of care and the accuracy that we bring to the table maybe compared to others.
My next question was about the AI benefit. So see, obviously, this is theoretical so far that, okay, AI initiatives are benefiting us. But have you seen any tangible benefit so far? Could you say otherwise that, okay, what is the kind of investment on the AI-related aspect or upgradations? And what tangible benefit that you are either have started seeing or anticipating to see going ahead?
See, just to talk on AI, I mean, AI has been talked about from 2 different types, right? One has been on productivity and efficiency where you are able to replace manual labour on the non-medical side and be able to make your processes smarter and therefore, have more productive workforce, right? The second part is talking about using AI in the medical tests where you don't need doctors and all of that. So I want to separate these two. When you're talking about AI in non-medical, I think there are real use cases for it. There are organizations across industries who are using AI, let's say, for recruitment, for screening profiles, for talent onboarding, for billing, for all kinds of things, for accounting. And I think those are real life use cases which are across industries. We are early in that journey, but there are a bunch of things that we are trying to implement that will hopefully get us there over the next year or so. The second part of AI, which is using AI for medical tests where you don't need doctors is a very hypothetical scenario. In our minds, AI is a tool to empower doctors to make better decisions, not a tool replacing doctors.
So now obviously, that you are seeing the sweating of assets after creating significant network expansion. But simultaneously, hence, in the process that you are talking about expanding the pick-up points of the collection centres. So is there any kind of a standard equation that you think you will go up to that level in terms of the collection centre addition looking at your network expansion? So whether any equation between like collection centre to lab or collection centre to kind of your patient service centre, such equation you have in mind?
Well, I think neither in the company nor in the industry, there is no such ratios that lab versus collection centre per se. But we are currently at about 20, 22 centres per lab that we have, if I look at across the country. The first destination is we would like to take this to 30 centres per lab. So that may happen maybe in the next 12 to 18 months' time. That's the first destination. Then we will look at the lab profitability and lab profitability has to start getting better. So that's one aspect. And second aspect is most of the service centre addition that we are talking about is through the franchisee route. And very few of this will be happening through the own centres. Only in top 5 or 6 cities we will be adding our own collection centre. Rest all will be happening through the franchisees.
Firstly, on the organic growth of 12%, what percentage could be attributable to the price hikes that we took last year? And do we have any plans to take any price hikes in the coming year?
Okay. Well, I think roughly 2% of the growth must be attributed to the price hike. And we do not have any plans to increase the prices during this financial year for sure.
And just lastly, a book-keeping question. When I look at this quarter, below EBITDA line item, the depreciation has gone up, and the other income has gone down. So anything to read into this?
Other income has gone down because last year we had a cash which we had utilized in the month of March to acquire Core. And that's why the investment income has come down, and that's the reason for the other income coming down. And depreciation, certainly, we have added assets last year during the year, which has now has the annualized effect of the depreciation. So overall, that's where it's gone up.
Number one is, can you talk about the consolidation that is happening in the industry? In the last 1, 1.5 years, has the pace of consolidation increased? And can you throw some colour on it based on geographies, say, like is West consolidating faster than some of the other geographies?
Sure. I'll start with the industry and what we're referring to as consolidation. See, in our industry, the biggest good and bad has been that the sort of barrier to entry has been low and which is why you saw lots of small players, and we saw lots of new larger players enter. What people realize after spending 2, 3 years in the industry is that while the barrier to enter is low, the barrier to scale is not so low. It's actually hard. And the barrier to scale profitably is extremely high. Now even in the independent labs, there are 2 varieties. You have the technician labs, and you have the pathologist run labs. The pathologist run labs, which tend to be of better quality are still doing fine, are able to survive. The technician labs, which are the very subscale labs, which don't really have a moat, or they don't really have a differentiator are the ones who are really struggling and are actually shutting down. But I do believe that the more markets which are more educated and aware, which is more West and South, will certainly see probably more consolidation in my mind than markets of North and East where education is lower and therefore the focus on quality is lower.
And the second question is, can you throw some more light on the clinical trial business of yours? Like we wanted to understand who are your customers, what kind of projects are these and so on?
Clinical trial, yes. The clinical trial piece is where we really work with pharmaceutical companies. And pharmaceutical companies when they want to introduce a drug into India, either a drug that exists or a new one, they need to do clinical trial studies before exposing it to humans and selling it commercially. That's Phase I to IV. We usually participate in 2, 3 and 4. We work with these companies where we do all the testing for their clinical trials. They like to partner with companies who have the ability to pick up samples from all across sites in India, have the ability to maintain the high quality that they need, to keep all the documentation and the audit trails that are required for them to get approval from Indian FDA or U.S. FDA. So this business tends to be more structured and more difficult to enter compared to sort of the normal lab business. And that's why there are very few of us in the market who are able to do what we do.
So my question is on the centre expansion. Notably, over the last 3 years, the expansion in owned service network/centres has been faster, almost doubled versus the franchisee growth. So is it a function of the North market where we need to open more owned centres or if you can explain about the dynamics of the same? And since you classified rural separately, would those be a mix of franchisee and owned? And the last question is your -- if you can quantify the lab network and centre network expansion in number that you would be doing for FY '26?
Well, I think the number, let's say, 2 years back, the own network numbers were relatively lower. That's why last 2, 3 years, you find more number of owned centres coming up. And then most of the labs also come along with the owned centre. So we have added more than 100 labs in the last 3 years. So with every new lab addition, one more centre also get added. So that's how in all the key cities, you will find the own network has really gone up. And the franchisee network is otherwise largely the way that we will grow the collection centres in the days to come. And in the rural areas, definitely, there is no owned centres. I mentioned it earlier; only top 5 cities or 6 cities will have our owned centres. Rest all will be the franchisee centres. And like I said, for the rest of the year, we are estimating another 300 more centres to come up.