Question one is on the breakup of one-off costs. Could you kindly provide me with the breakup of these one-off costs of INR 21 crores, the 3 things that you mentioned?
I don't have the exact breakup right now. But as we mentioned, the majority of that is coming from M&A-linked costs. We have to remember that we evaluated about 6 opportunities. We went into diligence and contracting, etc., on 6 opportunities, and we finally only decided to be very disciplined and choose 3 out of those. So the M&A costs are linked, I would say, it's largely to a larger number of assets. Plus, like we said that we had some costs which came for the tax cases. The last one was a small provisioning for inventories at the end of the year, which we believed were slow moving or close to expiry, etc.
Last one question from my end. On the revenue trajectory, I think we have guided for almost 12% organic growth. Now this is in line with what we have done in the last couple of years. Despite this accelerated lab expansion, are we being conservative in this guidance? Do we see upside to this?
Difficult to answer that question, Shyam. It's a no win. It's a lose-lose question. So look, I mean, I think we are just guiding in terms of historic data points and what we feel comfortable with. Obviously, as a group, we are aspiring for higher. But at this point of time, the only thing we can go with is what we have shown that we have delivered and then obviously hope for better numbers.
Okay. Got it. Second, on the INR 21 crore one-time expense, could you just split it between the 3 purposes, acquisition, legal and inventory write-off? Because from what I understand, legal and inventory write-offs seem to be like a regular day-to-day business. So just wanted to get some clarity.
The normal legal, we would also put it as part of the normal billing. This is related to the tax matters. The majority, as I mentioned, are on the M&A costs, which are all one-off along with the tax expenses. The inventory part of it is much smaller, which is mostly connected to sort of expired goods, which therefore, doesn't happen sort of on a monthly or a quarterly basis, but more of an accounting entry that happens at the end of the year, more from a provisioning perspective.
Okay. And finally, the 100 bps margin expansion that you've guided for on the organic business, which is the entire FY '24 numbers, if I take, excluding the one-time expense of INR20 crores. I'm just trying to understand because we've done with the lab expansion, is this on a conservative side from your end?
See, what happens, like we always maintain a lab when we expand the labs, it takes a couple of years for us to get into the company levels of margin or sometimes a little more than 2 years. So the last 2 years, we have done a very high number of labs. So a little bit of impact will be there in this financial year also and maybe in some part of the next financial year. By the time it will completely vanish, it will take 2 more financial years. So we have factored a part of it in this financial year's projections and the rest we will put into the next financial year.
Sir, I have only 2 questions. One is what is your volume guidance for the coming years? And can we expect the 100 bps margin expansion in FY '26? Or will it be a gradual increase?
Yes. So we have mentioned it in this call and the previous calls also, this year, we did 6 percentage patient volume growth. And primarily the defocusing of the institutional business has a little bit of impact on the overall patient volume growth. So this current year, we are confident of getting back to the 7 percentage range on patient volume growth. And your second question on the margin expansion. So this year, financial year, the adjusted EBITDA, we are at 24.4 percentage. We expect the EBITDA to expand by about 1 percentage in this financial year.
My second question is with respect to, sir, how much of the current revenue in FY '25 is from B2C segment? And how much are you expecting it to be in FY '26?
So in FY '25, the B2C revenue is 55 percentage of our total revenue. And the B2C revenues grew by about 17 percentage. And the previous financial year, we have improved by about 2 percentage in terms of contribution from B2C. And I think with a similar growth, we expect the expansion to be in the range of 1 to 2 percentage more in this financial year.
I have one question on Core Diagnostics ma'am. So is it possible to give some breakup like how much revenue for this entity will be coming from genomics? And what are the reasons for having a low margin for this entity? And what steps we can take basically to improve margins?
Sure. So I mean, if you look at industry-wide, you will find that even at sort of INR 100 crores, the new entities which have built businesses over the last 7, 8, 10 years have not really managed to make profits because it's either subscale. In Core case, it's also completely driven by specialty revenues, right? With specialty revenue, your gross margins tend to be a little bit lower because your cost of goods is a little higher. So when this is merged into Metropolis, there will be 2, 3 benefits. One is there will obviously be some synergy of cost because we don't need to have so much overlapping infrastructure as currently Metropolis and Core have across the country. So I think with combination of these things, we believe that we can take this to a similar to a Metropolis profitability in 3 years, as we mentioned. The first year, we are hoping for a high single-digit EBITDA, and then that will sort of keep expanding over the next 3 years. To your question around the genomics as part of Core. Core has got, obviously, I don't remember the exact number, but I think it's about 20%, 30% of the revenue is genomics and which is all specifically oncogenomics.
So this INR 100 crores revenue needs to go to what level to come to the margins of Metropolis?
So actually, within the Metropolis Group, even at this INR 110 crore level, it will start to make profit. It's already a breakeven business. So really, we've already started putting some of the cost synergies at play, which are the procurement costs, the overlapping of lab infrastructure, etc. So in our hands, this will already be profitable in the next few months. We don't have to wait for it to really scale. We can get it to, like I said, a single-digit profitability on our own. And then obviously, some of it will come through revenue growth as well over the next 3 years.
Second question I have is seems to become very aggressive in expanding ourselves in North India. However, adding so many assets together, are you looking to bring them under Metropolis umbrella as a brand or you will keep it them as a separate centers with generating some cost synergies from labs, etc., other IT?
So I'll tell you if you look at the DAPIC and the scientific acquisitions we announced Dehradun and Agra, this is a playbook Metropolis has done many times before, right, which is to go in and partner with the leading player in a particular location, in this case, Agra and Dehradun, use that as a base to then grow across the city across different channels, B2C, B2B, institutional, corporate, etc. Core, of course, is a different kind of acquisition for us. But for all 3, the goal is very much to put it under Metropolis brand, not necessarily immediately, but in a phased manner. So for example, the Scientific and Dehradun will immediately come under Metropolis brands as soon as we sign the deals and we close them and we integrate them in the few months. Core will take about 12 months for it to come under the Metropolis brand.
Just last question, if I can squeeze in. So going ahead, like in FY '26, what would be our plan in terms of the lab addition, etc.? You are giving guidance for the margin improvement. So is the plan we are not going to add that many labs like?
Yes. So well, I think we have mentioned in this call as well in the previous call that the rapid lab expansion is almost over. To serve almost 800 towns in this country, we have now enough number of labs. So like last year, we added about 29 labs. That levels of lab addition will not be happening or will not be required going forward. So we may add some single-digit number of labs based on just filling in some of the markets to improve the turnaround time, etc. But otherwise, we don't have plans to increase the number of labs in this coming year.
Just the first one on the revenue guidance. I was not sure whether we have articulated anything. I heard 7% patient volume growth. So if you could also help us understand how we are looking at overall top line development in fiscal '26?
Yes. So we expect the realization continue to be at around 5 percentage levels. So with the 7 percentage patient volume growth and a 5 percentage realization improvement, I think we expect the revenue growth to be in the similar range of 12 percentage as we did during the previous year. And of course, the acquired entities will also grow about 13, 14 percentage in this year.
Yes. Just dialing back a couple of years where we had aspirations to grow mid-teens until '26, if I recollect right. So maybe we are falling a little bit short of that. But is there a plan to accelerate? And is this the inorganic moves that we are doing? Is that the way to kind of bridge the gap?
No, you're absolutely right. I think the combination of organic and inorganic will certainly take Metropolis to obviously a much higher growth. I mean if you put the 2 together, we'll be closer to a 26%, 27% growth overall in the year '25, '26. As Suren mentioned, the idea is to grow organically about 12% and then to grow the acquired assets also at about 13%, 14%. So together, that will definitely take us a leap forward in the year of FY '25, '26.
Very helpful, Ameer. Last question, just on some of the revenue segments, right? The routine and semispecial seem to be showing like a slowdown versus -- and you articulated about specialty and TruHealth, which really are doing much better. So anything on -- is it competitive dynamics? Or is there something else that is making the slower growth? Or is it just a Q4 phenomenon, sorry?
It's largely a quarter 4 phenomenon. You will see that getting into the quarter 1 and quarter 2, you will see the routine semispecialist still coming back close to the 2-digit number.
Got it. So these costs incurred for M&A transactions, once the other 2 assets get closed, would they recur? A part of it would recur? Or are this the entire cost that you have booked concluded and booked?
This is the entire cost we have booked because we signed all 3 deals in March. So all the costs have been booked in this quarter. So you won't see any more costs from the M&A translating into Q1 of FY '26.
Second question is on the margin trajectory. I think we guided for 100 basis point expansion on normalized margins. Now this, I believe, is after accounting for dilution of margins from core as well at single-digit margin guidance for core probably will dilute about 150 basis points at a consol level. So would we be expanding...
So Anshul, sir, the 100 basis points is on the organic business that we talked about it, okay? And Core from a breakeven, they'll get into a single-digit EBITDA during this year. That's the plan that we stated before as well. And the other 2 acquisitions that we have done is in the same range of the company margins. Then there is no dilution or anything from that side. But Core will be a high single-digit EBITDA by the time we close this year.
So just on the revenue guidance, the organic growth would be 12% and the acquisitions will add on to it and the reported revenue growth in FY '26 should be around 25%, 26%. Is that right?
That's right.
Okay. And second, on margins, the 100 basis point expansion will be on the adjusted EBITDA margin. So 24.4% plus 100 bps, 25.4% should be the organic margin we should look at FY '26, correct?
You're right.
Understood. And last question, the number of labs you have given, which is 210 now right now, does that include the labs of Core Diagnostics?
No, it doesn't include the labs of Core Diagnostics. From this quarter onwards, we will include the number of Core Diagnostics. In fact, we are in a rationalization phase as we speak, like just looking at which lab is required and which lab we can consolidate. So by the end of this quarter, we will have that clear number in hand since we'll start reporting from quarter 1 onwards.
Okay. And tentatively, all 3 acquisitions put together, how many labs will be roughly adding -- we will be adding? If you can give a range also, that will be fine. 10 labs.
Less than 10 in a consolidated level, all the 3.
Could I get the FY '25 numbers for Core Scientific Pathology and Dr. Ahuja on the revenue and EBITDA margin levels, if you all have those ready?
Yes, we do. So Core is approximately INR 108 crores, this is for FY '25, you're asking, right? Yes. So I think Core is approximately, between INR105 crores and INR 110 crores of revenue with breakeven sort of -- I mean it had a loss in '25. But currently, in Q4, it's at a breakeven level. And then for Scientific, I think it's about INR 25 crores to INR 26 crores for the whole year in FY '25. And Dehradun is approximately INR 10 crores to INR 11 crores of revenue. And Scientific and DAPIC, both are at company level margins, Metropolis company level margins. So therefore, there should be no dilution from those.
Okay. And when you say, Core is Q4 FY '25 breakeven, is there something which -- like normally, what I've seen in acquisitions of a relatively larger size, people tend to hive-off some of the businesses which don't fall in line with the existing company's policies. So do you see any of that happening and hence, Core would be either a revenue decline and profitability increase or flattish revenue?
So I mean, certainly, there will be some synergies and some dis-synergies, and we have sort of netted those off. But overall, despite the synergies and dis-synergies, we will have a positive revenue growth. So we certainly don't see it flat lining. We see it in a positive revenue growth situation. And like we mentioned, we hope to take the margin up to a high single-digit number this year.
Okay. And when do you expect the Scientific Dr. Ahuja kind of consolidating into your numbers?
In the final stages of the -- in the acquisition. So maybe not later than by the end of this month, sorry.
Okay. So one should expect somewhere close to INR 10 crores and INR 15 crores, INR 25 crores of addition in EBITDA from these 3 acquisitions in the upcoming year. Is that correct?
Give us a moment to confirm that to you, yes. Yes. So it should be between INR 20 crores, INR 25 crores.
Right. What is the inventory write-off amount? Is it like INR 1 crore, INR 2 crores, INR 3 crores?
It's close to INR 1 crore to INR 2 crores.
Okay. INR 1 crore to INR 2 crores is the inventory write-off. Third, I wanted to ask Surendran, till Q3, you were doing a B2B client rationalization exercise. Is that over in Q4, like Q4 is a normal B2B business on a like-for-like basis? Or Q1 would be a more?
So what we mentioned to you earlier was defocusing on the institutional business. So that is 1 full-year, we have run with that and that part is over. From quarter 1 onwards, you will start seeing the institutional business, which we want to keep and which we want to grow. That's what happened. And B2B overall improvement plans are continuous, and we should start only getting better on the B2B revenues going forward.
And B2B, I'm assuming the growth now should converge to B2C growth? Or is there some gap that you still think will be there?
No B2B growth levels will be like 10% to 12% levels of growth.
Okay. Finally, Ameera, on the competitive scenario, just wanted your comment, are you seeing the market share recoup by your firm done in Mumbai and the core markets of yours? Or do you think there's still some market share gains that you can do from the unsustainable e-commerce-led players that had started out?
To be honest with you, we don't hear so much around the health-tech players much anymore. We don't see the aggression either on the ground or from a funding perspective either at this point of time. We are finding that the omnichannel approach that we are taking, which is the brick-and-mortar as well as online digital engagement is actually working quite well with customers. And as you've seen, our growth continues to do very well in our core markets on the B2C side as well. So frankly, we believe the opportunity continues to be there for us.
So my first question is about the new test additions that we are now seeing backed by the AI and next-gen sequencing and technologies. So by this, what is the kind of a target market that we are likely to add for us?
So if you see the new tests are across different spaces. A lot of them are coming from the genomics segment. And we are really doing a lot across not only oncogenomics, but also across neuro and women and child care as well. And as we continue to grow this area, it will allow us to offer even more advanced and specialty testing to doctors for their patients across the country. We are also doing something on the allergy side and which is quite interesting and also something on prenatal, which is basically sort of pre-pregnancy and also post pregnancy.
My second question is about the capital allocation priorities, ma'am. So while we have said that now we want to go slow a bit on the center addition front. But just trying to understand that whether on the M&A front, we will remain as focused as we were or we are like to prioritize there also targeting like, let's say, North may not be thinking right now about the East on that front? And what is the kind of investment that you're targeting for '26?
See, from a capex basis, certainly, the capex numbers will come down. While we have spent probably between INR 60 crores to INR 70 crores in the last couple of years, we believe that the capex numbers will be closer to INR 50 crores for the organic business for this year. So you can say INR 50 crores, INR 55 crores. And in terms of acquisitions, look, I mean, I don't think we are at this point looking to go out and do another 3 deals in the first quarter of this year. I don't think we are in that place. So I would say, broadly, we are not actively looking to close any deals in the next 3 to 6 months. But if any of the discussions conclude into something, we may look at something.
So just on the gross margin to understand better for the organic business. Did we take any price hikes in FY '25? And do we intend to take any price hikes in FY '26?
So in the quarter 4 of '25, we did do a price increase in the select markets, like I said, as a part of the micro marketing strategy, about 4, 5 markets, we took the prices up. And then a few markets, we also kind of rationalized the prices. The net impact of that is about close to 2 percentage. And so that's as far as quarter 4 of last financial year is concerned. So for the next 2, 3 quarters, definitely, there is no plans to do any price changes. And as we get into the next calendar year, we will see looking at the market dynamics and the related stuff, we will take a call.
So we've maintained the gross margin around the 80% level for around 8 quarters now. Going forward, we see some pressure on the gross margin front for the organic business with input costs, etc.?
We are not -- yes, we're not anticipating any further pressure on the gross margin levels.
Okay. That's helpful. Sorry, continuing on Core, you've been asked a lot of questions, but so revenue seems to be flat FY '24 to '25, what you disclosed in December '24 and now. Any reason why they're not able to scale up despite the Doctor Connects? Is there a capacity issue? Is there just less BD marketing focus? And what is the Core revenue? What is the peak revenue that Core can achieve with the current capacity?
Revenues were not planned. I don't know where you picked that up from. The revenue is growing at -- yes, we said last year, we ended with about INR 110 crores, which came at a 15 percentage, 16 percentage growth. And we are also saying this year, we will be growing in excess of 13 percentage. So financial '25 was INR 116 crores. So it's on growing. It's not a steady state. And what is the best revenue that you can hit? I don't want to comment on that first, but I think we are looking at 13 percentage, 14 percentage year-on-year revenue growth for the financial year '26.
Okay. Looking at it differently, do we envisage any capex 1 year after integration?
Yes, there could be some capex. We really want to strengthen the genomics portfolio there using the Core as a platform. So there will be some capex we will be incurring in Core.
Just last clarification. You mentioned gross margins are lower assessment of other specialty players. Will gross margins for the Core business be in the 55%, 60% range or in that ballpark?
The gross margins of Core is at 60 percentage levels. And like we said, getting the procurement benefits coming on the back of Metropolis procurement process, I think we should only be able to get some benefits, some improvements on the gross margin levels of Core.
And the equity cash split remains the same, right? And the co-founder continues to be a part of operations?
That's right. INR 130 crores was cash and the rest was equity. Yes. The CEO who was running the business before we acquired continues to be the CEO of the business and the team is stable.