Vijaya Diagnostic Centre Ltd

NSE:VIJAYA

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to Vijaya Diagnostic Q1 FY '26 Earnings Conference Call hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Mr. Amey Chalke from JM Financial Institutional Securities Limited.

[Amey Chalke, analyst]

Thank you, Pari. Good evening, everyone. I, Amey Chalke, on behalf of JM Financial, welcome you all to the 1Q FY '26 Earnings Call of Vijaya Diagnostics. At the outset, I thank the management of Vijaya for giving this opportunity to hold this call. I'm looking forward to have an insightful interaction on the quarterly earnings and the outlook here. Today from the company, we have with us Mr. Sunil Reddy, Executive Director; Mr. Sivaramaraju Vegesna, Vice President, Operation; and Mr. Dhiren Gala, Assistant General Manager, Strategy and Investor Relations.

I now hand over the call to the management for their opening remarks. Over to you, sir.

[S. Reddy, executive]

Thank you, Amey. This is Sunil Reddy, Executive Director. Thank you for hosting the call. So good evening, everybody, and thank you all for joining this call. I will begin by sharing the business updates followed by the financial highlights for the quarter ended 30th June 2025.

I'm pleased to begin my address on a positive note, highlighting that we have delivered a strong year-on-year revenue growth of 20.4%, with our Hyderabad market contribution returning to double-digit growth this quarter. The strong performance was largely driven by volume and change in the test mix. I'm also happy to state that all the new hubs, which we have started in Pune, Bangalore, and West Bengal are up and running with steady footfall. We remain optimistic about achieving breakeven across all centers within the 12 months with one hub center in Bangalore on track to reach breakeven even earlier than the estimated time line.

I'm also pleased to share that our Nizamabad Hub Center in Telangana has achieved breakeven within 2 quarters of its operations. Looking ahead, we would be commissioning 3 hubs in Q2 of FY '26 across our core geography and West Bengal. The other 2 hubs in West Bengal are also on track to be operationalized in the second half of FY '26. Earlier calls, we have mentioned that we will be doing 10 hubs in this financial year. So just keep in mind that I'm just giving updates on that, and we are on track to do that.

I'll also take you through the financial performance and key developments for the current quarter. The consolidated revenue for the current quarter stood at INR 188 crores, reflecting a strong revenue growth of about 20.4% year-on-year. The revenue growth was driven by test volume growth of 17% year-on-year and change in the test mix and the patient footfall also grew by 14% year-on-year.

Coming to EBITDA. We delivered a healthy margin of 39.1% in spite of the -- underscoring the strength of our business model, and this is in spite of the drag from the launch of multiple hubs during the current quarter. The strong growth momentum in our core network drove meaningful operating leverage, which helped us in delivering strong margins and also the PAT margin is very healthy at 20.4%.

Coming to updates on the capital investments I discussed earlier, we commissioned a total of 5 hubs and one Spoke in the current quarter. And again, the background is that in this year, we planned 10 hubs in the financial year, so already 5 hubs have been done.

To conclude, we are encouraged by the positive reception our brand has received in newly operational hubs in new geographies and also our existing network continues to witness growing footfall as Vijaya steadily gained market share, driven by our integrated offering with comprehensive portfolio under one group. We are well positioned to capitalize on the evolving diagnostic landscape where increasing awareness is driving greater emphasis on brand, trust, quality and wellness. That's all from my side, and I would now request the moderator to open the line for questions and answers.

Thank you, and thank you, Amey, for hosting the call.

[Operator]

[Operator Instructions] The first question is from the line of Nancy Yadav from [indiscernible].

[Unknown Analyst]

I just wanted to get 2 numbers. Could you tell me the net cash number for the quarter end?

[S. Reddy, executive]

So the cash position as on 30th June is about INR 270 crores. And if you take the net cash after the capital [ creditor ], it is about INR 220 crores.

[Unknown Analyst]

Okay. Understood. And sir, could you also give an idea of the shift in lease liabilities from the previous quarter?

[S. Reddy, executive]

We didn't get that question Nancy, could you repeat that?

[Unknown Analyst]

I was just trying to ask the lease liabilities number as well.

[S. Reddy, executive]

Lease liabilities. We have addition of 5 hubs in this quarter, Nancy, out of which 2 hubs, the rental started in the last quarter itself. So if you see the actual movement, I think it is about crore increase in liabilities is about INR 1 crore.

[Operator]

The next question is from the line of Anshul from Emkay Global.

[Anshul Agrawal, analyst]

Sir, a couple of questions. First, on any reason for this strong momentum in a seasonally weak quarter, is it because monsoons have been monsoons have come in quicker than anticipated? Or was there any pent-up demand from Q4? Any particular reason for the strong volume growth in the quarter?

[S. Reddy, executive]

No. I would say it's just -- I think a function of the brand. In the home market, what has happened is that we are seeing all centers getting more footfalls and more business is shifting to us from maybe the online sector. And as you can see, the new centers are all outside of Hyderabad. So the -- I mean, people like you have expected that this would be a drag on business and EBITDA, but that does not happen. Bangalore is doing well, Nizamabad is doing well. Whatever we have opened in Kolkata is doing well. So [Foreign Language], everything is doing well.

[Anshul Agrawal, analyst]

Yes. So you're calling that there's no one-off as such because of any particular reason, and this growth momentum could continue for the remainder of the year as well?

[S. Reddy, executive]

So Anshul, one-off can be to -- we don't know the extent it can be only just 1%, 1.5%, which happened in the initial days of April, right, from April 1 to 10. But otherwise, what we have seen in the quarter is across these 3 months, we have seen the average daily revenue went up from May to April, and from June to May. So while we don't want to comment anything on the exact number going forward. But then it's basically for the last 7 to 8 quarters, except 1 quarter, I think we were doing fairly well, growing more than 17%, 18%.

[Anshul Agrawal, analyst]

Got it. That's useful. And as a follow-up question to an Sunil, was saying that if you could quantify the drag because of the newly commissioned hubs in the current quarter? I'm trying to understand there is hardly any margin in the current quarter despite commissioning these hubs. If you could just quantify the drag.

[S. Reddy, executive]

So basically, Anshul, that is what I was saying that there is no drag, all the hubs have actually done well. The new hubs in new geographies have done well. So because of that, there is not much of a drag on the margins of the revenue.

[Sivaramaraju Vegesna, executive]

So yes, like sir said, the drag was much lower than what we expected because these centers are doing well and also because of the leverage that we are getting from the growth -- from the existing network that helped us keeping the margins intact at 39.1%.

[Anshul Agrawal, analyst]

Just one clarification on this, Siva. Generally, when hubs reached about 50% of their potential or slightly lower than that, we used to breakeven. Does that still hold through or very difficult to factor whether within the first 2 months itself, the ramp-up has been so strong?

[Sivaramaraju Vegesna, executive]

So basically, again, it depends from hub to hub Anshul. But generally, the hubs will break in when they reach 33%, 1/3 of its capacity, right? And like, again, like we said, so basically the track initially that we expected a slightly higher number, but it was only close to around 1%, 1.2%. But again, because of the operating leverage, the operating leverage played well and that basically took care of this 1%, 1.5% of -- 1.2% of drag.

[Anshul Agrawal, analyst]

And all expenses of these commission hubs would be in Q1, right? There would not be any ...

[Sivaramaraju Vegesna, executive]

For second half, it is only half quarter because we started centers in Kolkata and also the centers like Kalyani Nagar they started only in the month of May. So it's only like about close to 1 to 1.5 months of the operational expenditure.

[Anshul Agrawal, analyst]

Got it. Got it. And just one more question from my end. Have we started finalizing plans for hub additions in FY '27? How does FY '27 look like? And any guidance on CapEx numbers for both FY '26, '27 would be useful.

[Sivaramaraju Vegesna, executive]

So basically, like we always do, we are counting for locations across these geographies that we have mentioned, both in core geographies and also Bangalore, Kolkata and Pune. So maybe we'll be in a better position to answer this question by the next call because still we are in talks with the landlords, and we're still scouting for more locations. So maybe by next call, we'll have an answer Anshul.

[Dhiren Gala, executive]

Anshul, for FY '26, the guidance is the overall CapEx for the newer centers would be around INR 150 crores, INR 155 crores and replacement CapEx would be anywhere between 2% to 3% of the overall top line.

[Operator]

The next question is from the line of Manik Bansal from Master Capital Services.

[Manik Bansal, analyst]

So my question is like, what is the strategy rationale behind not participating in the PPP model that is working under the National Health Commission right now, that is getting a lot of traction?

[S. Reddy, executive]

Sorry, we couldn't hear you actually.

[Manik Bansal, analyst]

Yes. So my question is like what is the rationale behind not participating in the PPP model at the National Health Commission that is gaining a lot of traction right now?

[S. Reddy, executive]

So we've discussed this in many calls earlier. PPP is not something new. And we have looked at it in many -- on many occasions earlier. So there are 2 factors to PPP. One is that when you do business with governmental PPP models, the CapEx remains the same, but your realization price utilization drops. And secondly, the receivables become sometimes a problem. So we have chosen as a company, our business model is that we stay away from PPP. It's just a choice of the company.

[Manik Bansal, analyst]

But if we look at the realization -- on the realization front, there are some labs that are operating on pay basis, like they collect from the patients itself. So there is no case of getting the reimbursement from government?

[Sivaramaraju Vegesna, executive]

No, it's always a mix and it also depends on the tender. There is no such contract, which says only on cash mode, right? So even across geographies, different PPPs, you have a mix of both cash and credit. Okay, but like sir mentioned, so the ARP has dropped, and it requires a different -- like sir said, it's a choice that company we want to focus on B2C. If you have to do business, there are multiple channels, B2B, B2C and PPP. It was a conscious call that we want to focus on B2C and grow B2C.

[S. Reddy, executive]

Just to add to that, I would much rather open a center opposite the government hospitals and do B2C business rather than doing PPP inside government hospital.

[Manik Bansal, analyst]

Why is that? If you can just elaborate a little.

[Sivaramaraju Vegesna, executive]

Like we said it is more of a choice, right, because of the receivable issues and also the CapEx remains the same on the realization drop. Our strength is like scaling up our model in B2C and the focus of the company and the management is to grow that part of the business.

[Operator]

The next question is from the line of Siddhant from Tusk Investments.

[Siddhant Mayecha, analyst]

Sir, my first question is regarding the old center volume growth, what sort of growth are we seeing in the industry in terms of the old centers?

[S. Reddy, executive]

So in fact, the old centers like if you see the centers which were opened 2 years back, right, if you take the entire set right? So they have grown at a CAGR of, say, 11%, which contributed -- in terms of revenue, it has contributed almost close to 15% plus, right? But in terms of volume, they have grown close to 11 -- in terms of patient footfall, have grown about 11%. And also in the test, if you see number of tests, they've grown roughly around 13% in the old centers.

[Siddhant Mayecha, analyst]

So that means that if revenue has grown by 15%, then you're saying the volume plus the price mix -- so like 3%, 4% has been the price hike?

[Sivaramaraju Vegesna, executive]

It's not the price increase. So if you actually see -- because since we have opened a few of the hubs even in the last 2 to 3 years, we have done a lot of hub addition, right? It is basically because of the hub addition, right? And if you also see the mix -- revenue mix of this third quarter, radiology was at around 39%, there is pathology was 61%. And again, out of radiology, it was predominantly because of the advanced radiology. So the price effect is only about 1.5%, test mix, because of the test mix that happened during the quarter.

[Siddhant Mayecha, analyst]

Okay. So basically, the old center volume growth would be anywhere between 11% to 12% volume growth?

[Sivaramaraju Vegesna, executive]

So test volume is still at 13%, that 15%, 16% of growth was delivered by the 13%, 14% of the volume growth -- test volume growth.

[Siddhant Mayecha, analyst]

Okay. We are talking about the old centers only?

[Sivaramaraju Vegesna, executive]

Old Center, yes. Overall, at the company level, 20.4% growth was on account of 17% tax growth and 14.4% footfall growth.

[Siddhant Mayecha, analyst]

So sir, going forward, like how like this number should we project like the old center or industry growth? Will it be in a similar range? Or can we expect this to go up?

[Sivaramaraju Vegesna, executive]

So it -- so generally, when we guide 15%, right? So we always said 15% when we guide 15% of revenue growth, I think that will be backed by about 13% of volume growth. So out of which 9% to 10% of the growth would be coming from the existing centers and the rest is from the new centers.

[Siddhant Mayecha, analyst]

So that 9% to 10% will be the thing going forward also? Like we are not expecting that to increase?

[Sivaramaraju Vegesna, executive]

Yes.

[Siddhant Mayecha, analyst]

Okay. Okay. And sir, we are aggressively entering the West Bengal market, especially in Kolkata other parts of West Bengal. So what sort of growth are we seeing in this region versus like Telangana and Andhra Pradesh?

[S. Reddy, executive]

So Siddhant, firstly, we are not entering. We have fully entered into West Bengal. We have centers in West Bengal, which are fully operational, both in South Kolkata as well as in VIP Road, Krishna Nagar, Barasat. So we are fully there, right? These centers are doing well. They're ramping up well.

[Sivaramaraju Vegesna, executive]

So still they are in the ramping of stage. So if you see in terms of growth, it will look like close to 70, 80, whatever percentage, but they're ramping up still in the ramping up phase.

[Siddhant Mayecha, analyst]

No, I just wanted to understand like we are entering the Eastern market. So how is the growth overall in the Eastern market like versus our home market, which was Telangana and PP. So we have entered Eastern India what sort of growth are we targeting or we are already seeing in Eastern India, that's why you have shifted our base or maybe we are wanting to target this market as well?

[Sivaramaraju Vegesna, executive]

No, Siddhant. So actually, I see here more than personally, we should see in qualitative terms, like if you see the earlier like the pre-2021, we had only 1 center which was Medinova. On that base, you are seeing now we started adding multiple centers. So what we are basically seeing is to at least in the next 2 to 3 years, it is like opening of more and more hubs followed up by spokes. And how do we ramp up INR 50 crores to INR 100 crores kind of revenue in this geography is a target more than in percentage terms in the absolute terms, how do we go to INR 100 crore revenue as far as that number in the next 3 years is basically the focus as of now.

And for us to open more and more centers, the centers that we have launched are doing well. You know earlier Medinova did well and then we launched VIP Road, it did breakeven within 9 months and afterwards also, we are seeing good traction at that center. And even the recent centers, it's hardly been just 2 to 3 months, and the numbers are encouraging. So that is the reason why we are looking for more and more centers in this geography.

[Siddhant Mayecha, analyst]

Okay, sir. And sir, in terms of margins, like what will be our margin profile be for like a new center of 0 to 1 or 0 to 2 years versus a mature center of more than 3 years. What will be the margin profile?

[S. Reddy, executive]

Are you asking about East or specifically about ...

[Siddhant Mayecha, analyst]

Overall -- overall, like any general 0 to 2 years of operational of a new center, what will be the margin versus a mature center which is a 3 plus.

[S. Reddy, executive]

We have declared our EBITDA margins down. So I think -- why would you want us to break that up?

[Siddhant Mayecha, analyst]

Just to see how -- like in terms of projection, like how fast it is getting ramped up? Like are we making losses in the first year versus second or third year when we open a new center?

[S. Reddy, executive]

No. But see, again, when we say that we are breaking even on a center in 2 or 3 quarters, that basically means that we are not taking losses on our new centers. So beyond that there's no guidance. I cannot give that guidance, it would be wrong for me to give that guidance because it will be sensitive and it will be information for my competition. I don't want to give that guidance.

[Operator]

The next question is from the line of Abdulkader Puranwala from ICICI Securities.

[Abdulkader Puranwala, analyst]

My first question is with regards to PH or Pune as a cluster. So if we -- if I recall it correctly, we have added a couple of centers in last quarter Q4. And I think the revenues still are growing at a mild 3%, 4% from this particular geography. So any color as to how the ramp-up has happened at those new hubs and going ahead, how should we look at Pune as a territory for growth?

[S. Reddy, executive]

As Mr. [indiscernible], I think we have acquired this company PH. And of course, they were the #1 diagnostic brand in Pune when we acquired but only small constraint was that all of the centers were running at almost full capacity. So that is the reason why even in earlier calls, we mentioned that we have to add new centers to kind of increase growth. And that is what we are doing. We are adding new hubs and new spokes in Pune right now.

In terms of how to add color, if you have any suggestions, please give us suggestions. We are happy to listen to.

[Abdulkader Puranwala, analyst]

Sir, so I just -- I mean I recall that you are adding hubs, so just wanted to also understand that the 2 new hubs you added in Q4, any color there -- so how the ramp-up has happened?

[Sivaramaraju Vegesna, executive]

So we added only one hub in Q4. In the second hub, we just opened in the month of May and the full-fledged operations just started at the end of May, right? So the one hub that we opened in Q4, like we mentioned in the previous call also, it took 1, 2 month time when compared to the other hubs. But now if you see there is a traction even in the Pune market and we have seen uptick in the revenues from the past 1.5 months at Pune. So we'll be able to give you more update in the next con call.

[Abdulkader Puranwala, analyst]

Sure, sir, got it. And sir, just one more, if I may. On the EBITDA margins, so earlier we had guided that there would be an impact of, say, close to 100 to 200 bps of margin this year because of more vacation. Now that I think the operating drag is not that very significant, is there any revision to the guidance that we had given earlier?

[Sivaramaraju Vegesna, executive]

We are not revising the guidance. It will still be 1%, 1.5% because there are 5 more hubs, which are going to open right in the next 2 quarters. So as of now and even in the Q1, like we said, a few of the hubs, was only 1.5 months of operations. right? So at a year, maybe still we want to maintain that guidance of 1.5% the EBITDA margin around 38% at a full year level.

[Operator]

The next question is from the line of Lokesh Manik from Valent Capital.

[Lokesh Manik, analyst]

So my question was on the IndAS impact. If you could please quantify for depreciation right-of-use assets and for interest lease liabilities for this quarter.

[S. Reddy, executive]

So the IndAS impact for this quarter is around 1%, around INR 1.8 crores, Okay. So out of that, the interest impact would be around INR 0.92 crores and depreciation was INR 0.95 crores. So overall, around INR 1.8 crores will be the impact for Q1 FY '26.

[Operator]

The next question is from the line of Surya Narayan Patra from PhillipCapital Area Limited private.

[Surya Patra, analyst]

My first question is about, let's say, if I see the revenue per patient for the quarter, in the same quarter, it is looking like the best so far. So what is driving this? Is it some kind of mix change within pathology or radiology. What is driving this in fact since last -- if I see some 20-odd quarters, there is a consistent expansion in the revenue per patient. And this quarter is looking like the best as ever. So what is helping this explain this number?

[S. Reddy, executive]

Thank you, Mr. Surya. So actually -- so it is I would say the strong brand and the trust that we have from our customers. What has been happening is that even in existing older centers, we are seeing strong growth. And even though we are opening newer centers, new hubs and spokes are being opened, the growth in older centers is resulting in -- at a consolidated level, the numbers are looking very strong.

By the way, we have always been very conservative in giving our guidance. So I would say we are conservative, and we are also very lucky.

[Surya Patra, analyst]

Correct, sir. Sir, also on the -- if I just see the revenue per center also, that has also been very, very consistent and -- in the slack season, we are seeing one of the strongest kind of revenue per center number, although we have added new centers and which are not fully operational. So something is really helping sir. What is that? I'm not able to figure it out.

[S. Reddy, executive]

Firstly, are you comparing us with pure pathology centers or...

[Surya Patra, analyst]

I'm saying No, no, I'm saying I'm the revenue per center only. On a broader basis, I'm looking at it. So I'm seeing one of the strongest number this quarter. So although it was a kind of relatively slack period and new centers has been added. So is that -- there is a contest of focus or approach that we are adopting to improvise our revenue per patient, and that is how ultimately this center numbers are -- revenue per center or revenue per patient, those numbers are getting inflated or getting improved? Or is it a...

[S. Reddy, executive]

Okay. There are 2 factors. One is, firstly, this is not slack season. Typically, we look at Q3 or maybe part of Q4 as being slack season. So anyway, that is different. But also, if you look at the mix, radiology has been slightly higher in this quarter, right?

[Surya Patra, analyst]

Yes, that is clearly visible, 39%.

[S. Reddy, executive]

Yes. So what happens when radio is higher is your average revenue per patient will automatically move up, right, because the test costs are higher. That is what you are seeing.

[Surya Patra, analyst]

Yes. So exactly, sir, I think this is the best number in terms of the radiology contribution for the quarter that we are witnessing. But in terms of the scope and the opportunity for the radiologist progression in terms of revenue share, if we see -- See, what is the maximum potential scope, sir, in terms of the radiologist revenue share to the overall company's revenue?

[Sivaramaraju Vegesna, executive]

So Surya, firstly, see, the advantage of the model itself, like we discussed or multiple calls, right? Is that we are B2C integrated and creating that dense network in the geographies that we operate. Even if you take the Hyderabad market, which is almost 70% of our revenue, in this market itself time to time we've expanded the network, right? There's not a large cap between player #1 and player #2 in this market, right? And with the awareness that is getting created over branded health care play, which we have, to a certain extent, we have seen in hospitals right? And also many other things are playing out.

If you see the wellness share last year, Q1, January Q4. Yes, Q1 is about close to 13.5% versus 14.2% now. If you take home collection as a channel, earlier, we were at 2.5% of our overall revenue, we are close to 3.2% to 3.3%. And also the revenue that we are getting through digital means. There are multiple things that are working well for the company and that the advantage of becoming B2C players with dense network is that you get stronger year-on-year in the geographies that you operate, right? So that which would allow you to in the market share. So that's what I think we were -- to a certain extent, we were seeing every year for the last 3 to 4 years. If you see Hyderabad is still playing well for us, right?

And as a market, Hyderabad health care market is still growing at that double digit. I think Vijaya being the strongest player with the trust that we have from our patients, I think that will allow us to grow in that double digit at least in the near future.

[Surya Patra, analyst]

Okay. One point about the wellness, See, there is a kind of -- you are delivering one of the fastest growth compared to anybody in the industry so far as wellness is concerned, what is really helping your it is a kind of enhanced focus towards the packages, the number of package that you offer or it is kind of that -- having package covering both radiology and pathology, what is helping you to achieve a faster growth in the Wellness compared to the overall market Wellness growth trend?

[Sivaramaraju Vegesna, executive]

It's a mix of both Surya, it's basically the focus of the company and also the awareness that's been created in the market. And the coverage that we've increased to offer to our corporate customers. So it's a mix of all the 3.

[S. Reddy, executive]

Surya, just to be clear, when you look at any of the larger diagnostic players and you look at wellness in absolute terms, the numbers are not going to be very big.

So any incremental change, if you really look at it in absolute terms, it's not very big, right? So yes, we are getting more -- because of probably patient awareness is higher. Our digital marketing is doing better. If I add INR 1 or INR 2 crores more in a quarter, that will look [indiscernible] Yes. Yes. In percentage terms, you will see a significant number, but don't go too much by the percentage terms. Look at the absolute terms.

[Surya Patra, analyst]

Sure, sir. Just last one part, sir, from my side. Can you just tell me the number of the 6 center addition during the quarter, which all the areas that you have added?

[Sivaramaraju Vegesna, executive]

So we have added 2 in Pune, one obviously Ambegaon, in the end of Q4 and the second one was Kalyani Nagar, then doing Kolkata in West Bengal. So one in Barasat which Kolkata and then Krishnanagar a district 2 hours away from Kolkata. Then we added 2 in Bangalore, which is Yelahanka towards [indiscernible] and 1 in HSR.

[Operator]

Next question is from the line of Sumit Gupta from Centrum.

[Sumit Gupta, analyst]

Sir, a few questions. First is like from the revenue open of how much volume growth can we expect over the next 2 to 3 years?

[Sivaramaraju Vegesna, executive]

Sumit, I think our guidance is always consistent from the time of IPO days, right. The guidance would be 15% of -- 15% type of revenue growth backed by volumes, which will be about close to 13% and 1.32% would be the price change in the price. So we would like to stick to -- obviously, the efforts that we are putting is to surpass that, but then the guidance we want to be consistent on our guidance.

[Sumit Gupta, analyst]

Just I was looking from the newly opened store. So how is the traction that you are getting in, let's say, Bangalore and with respect to the investment market also, how is the competitive reshaping up?

[Sivaramaraju Vegesna, executive]

So like we told Sumit, competition, scenario is the same always, right? It is only that every company has their own strength, and in terms of the kind of equipment quality people, many other things that we have. And Bangalore, like we discussed earlier, there's a lot of, again, branded health care play in terms of hospitals. When you can see integrate the diagnostics, you have very limited, you have more number of players with only 2 to 3 centers each and different operating at different pockets. That is where -- and with the strength of radiologists that we have right, we definitely would leverage that strength. And all these factors are helping us to get a faster traction in these geographies.

[Sumit Gupta, analyst]

Understood. And with respect to wellness, what's the margin rate wellness generally need? I understand it's small with respect on the quantum side, but on the margin front, how much of it?

[Sivaramaraju Vegesna, executive]

We should not actually -- we don't trade separately at the gross margin level, obviously, you will have some impact. But if you see wellness, wellness is that extra business that you do other than your meat-based business, just by adding one footfall to the branch is not going to increase our fixed cost at that branch. It is only the variable cost, which is like 30% of our total cost is variable and 70% of our total cost is fixed in nature. So at EBITDA level, it doesn't matter much. But yes, at a gross margin level, you'll have lower margins on wellness.

[Sumit Gupta, analyst]

Right. So going forward also, we can expect this 14% kind of contribution to stay at this level or we can see some increase?

[Sivaramaraju Vegesna, executive]

So it keeps changing between the quarters, but at a year level, maybe a on -- blended basis. 14% to 15%.

[S. Reddy, executive]

Typically, Sumit in fact, it used to be about 11% to 12%. So 14% is actually at the higher end of the band.

[Sumit Gupta, analyst]

Yes, I was asking because there has around the -- so going forward also, can we expect this in to continue everything -- we were seeing stabilization around 13%, 14%?

[Sivaramaraju Vegesna, executive]

Yes, at this range, yes.

[Operator]

The next question is from the line of Harshal Patil from Mirae Asset Capital Markets.

[Harshal Patil, analyst]

Just one clarification. You did earlier say that out of the proper -- out of the revenue per test increased about 1% to 1.5% would be largely attributable to some price increases. So I assume that this would be ideally done in some select pocket or some selected category of tests for this quarter? So would that be a right assumption?

[Sivaramaraju Vegesna, executive]

So every year, yes, we take select test of select geographies, it is not across the test menu, it is across a few tests. Your understanding is right.

[Harshal Patil, analyst]

Yes. So going ahead, I believe, like further price hikes or something should be possible or shouldn't it be possible? I mean considering that we've taken for some select tests only.

[Sivaramaraju Vegesna, executive]

So as of now, see, if you ask me if it is possible, but in this particular financial year, we are -- we have no plans of increasing the pricing for -- we do in Q1 of every financial year.

[Harshal Patil, analyst]

Okay. And sir, just second question. In our core markets, Hyderabad, we've been really going strong in terms of test volumes and the reason you alluded to was market share gains. I presume this would be more from the unorganized sector. So just extrapolating this and wanting to understand like the new centers, which we've been commissioning, we are also kind of gaining some good traction, and we've been reporting some good growth numbers. So apart from the underlying demand, is there also this market share gain clearly working around? Or no?

[Sivaramaraju Vegesna, executive]

So Harshal, definitely right. So because if you see Hyderabad, like we said, we are -- we don't have numbers in hand, but definitely, we are gaining some market share because are not -- competitors are not growing at this pace. And all the other geographies and new geographies, right, like Pune, Kolkata, Bangalore all the new geographies where we just started growing, right? So definitely as we progress, at least for the initial years, we'll be gaining some market share every year, at this new geographies.

[Operator]

The next question is from the line of Lokesh Manik from Vallum Capital.

[Lokesh Manik, analyst]

My question was on pathology. So for sourcing, what is the model that we imply? Is it driven by you purchased the equipment and then the consumables or it is a rental reagent model that many peers following the market, which model do you follow out here?

[Sivaramaraju Vegesna, executive]

It is a reagent rental model.

[S. Reddy, executive]

Mostly for routine lab testing, it is on the reagent rental in the more specialized lab testing, we end up buying the equipment.

[Lokesh Manik, analyst]

Okay. And the repair and maintenance cost would be on the OEM, this would be on our books?

[Sivaramaraju Vegesna, executive]

If it is reagent rental, it is with the OEM not on books. If you purchase is then it will be on your books.

[Operator]

The next question is from the line of Gaurav from Antique Stock Broking.

[Unknown Analyst]

On the gross margin trajectory, we were seeing some softer margins last half, H2 of last year. And so this year also, given the ForEx, et cetera, we were expecting some input cost pressures and some gross margin decline, but gross margin have actually expanded this quarter. So anything that changed we've not taken pricing hike as well. So any structural change? And what should be the gross margin guidance for this year?

[S. Reddy, executive]

Firstly, Gaurav, we are very sorry. We disappointed you by giving higher gross margin.

[Unknown Analyst]

No. Sir you didn't.

[S. Reddy, executive]

But see, in our business, especially in a B2C model, you have to understand that price changes are not easy to do. So it only happens occasionally when our input costs go up. And if you look at input costs, in the recent times, there have been a few input costs due to which certain tests, certain specific tests, yes, we have increased prices. But across the board, we have not increased prices. So as Shiva mentioned earlier, we have got growth basically because of volume and footfall growth.

[Sivaramaraju Vegesna, executive]

And if you see the test mix Gaurav, so 39% is radiology. And ever radio revenue goes up, you will see higher gross margins because the material consumption radial is much lesser than what you see in pathology.

[Dhiren Gala, executive]

Also Gaurav, within radiology also, the advanced radiology component has gone up with the new hubs coming up during this quarter. And also if you compare it with Q4, the wellness proportion has reduced a bit. So all these factors have resulted in higher gross margin for the quarter.

[Unknown Analyst]

So we've always seen the radiology business growing faster than the pathology business. So the gross margin trajectory on an annual basis should keep on improving, right? Generally, directionally -- since the radiology is growing faster and share will keep on growing?

[S. Reddy, executive]

No, no, not necessarily Gaurav, because at our scale, the proportion of radiology and pathology will not change significantly. On -- maybe on a quarterly basis, you might see a 1% or 2% change because we've added some hubs. And next quarter, we may add more spokes. So that 1% or 2% will change. But beyond that, you will not see a big change. So you're not going to see a big change in the mix between radiology and pathology.

[Unknown Analyst]

Understood. On second question that I have. So Q2 is generally the best for our pathology business and 1 month has passed into Q2, any indication you can give us how is the acute season shaping out this quarter?

[Sivaramaraju Vegesna, executive]

We are still very thorough because to be really frank, the season -- the season -- the tender Q2 season, we you see a lot of fever-related testing all it, they just started picking up. So initially, we thought this time it was early monsoon, but then actually the margins are slightly delayed in the geographies that we are operating in at least.

[S. Reddy, executive]

So don't take it as a negative, don't take that in positive, comment on anything, right?

[Operator]

The next question is from the line of Siddhant from Tusk Investment.

[Siddhant Mayecha, analyst]

Yes. Sir, is there any capacity constraint per center in terms of volume or revenue like beyond which it is not possible to grow?

[Sivaramaraju Vegesna, executive]

It actually depends from center to center Siddhant, because sometimes if we capacity constraint on radiology on few of the equipment. But again, it depends, like we have spokes, which are about from 1,800 square feet to 3,300 square feet, 3,500 square feet. Each center has a different capacity. So it's -- definitely, every center, I think beyond the point will have capacity constrained, but then it's difficult to generalize and give you a number.

[S. Reddy, executive]

Right now largely, Siddhant, we don't have that in our network. To some extent, in Pune, we did have that we acquired [indiscernible]. We did have some capacity constraints. But as you know, we are adding new centers in Pune just to address that. So beyond that, there are no capacity constraints currently.

[Siddhant Mayecha, analyst]

Right. So but it will be very difficult to actually put like quantify it in terms of volume or revenue?

[Sivaramaraju Vegesna, executive]

Because like in the spokes, like we told earlier, so within the spokes, we have spoke generating INR 6 crore revenue a year as ideal spoke we generate INR 2 crores, INR 2.5 crores. But we do have spokes which are generating about INR 6 crores, INR 6.5 crores per year as well. So it is slightly difficult to quantify that number to that.

[Operator]

The next question is from the line of Amey Chalke from JM Financial Institutional.

[Amey Chalke, analyst]

So I have one question on management bandwidth, considering we are now moving aggressively outside AP Telangana like in 3 regions: East India, Bangalore, Karnataka as well as Maharashtra. So how are we looking to expand our team and what states we have taken on a [indiscernible]

[Sivaramaraju Vegesna, executive]

So in fact, over the last 4 quarters, we have added a lot of lateral talent right, which we also have given the disclosures in the previous quarters. In fact, in Pune, recently, we added a VP sales and operations and also we have strengthened the sales team by taking people from the relevant industry. So time to time, I think these geographies, both Pune, Kolkata and Bangalore. We have a team which is already in place and time frame, we're adding the mid- to senior level management, where and when required.

[Aditya Khandelwal, analyst]

So are we going to have like a regional hedge? Or currently, it has been operating out of Hyderabad?

[Sivaramaraju Vegesna, executive]

So we have regional heads reporting into Hyderabad corporate. -- policies, everything the way we operate everything is in the rear geographies. But all the 3 geographies, Pune, Kolkata and Bangalore, we have regional heads.

[Amey Chalke, analyst]

And the second question I have is on the inorganic expansion. I understand we are organically expanding very well. but we also have a good amount of cash. So what's our plan over there? Are we going to look to expand in the core regions or it will be largely outside the core region?

[S. Reddy, executive]

So Amey, if JM can give us a good acquisition opportunity, we are very happy to acquire.

[Sivaramaraju Vegesna, executive]

So we are on the look for acquisitions as and when we get the right opportunity, that's a continuous process, right? So as long as that falls when we have all the boxes ticked in terms of valuation quality of the asset, other integration aspects will be happy to do that.

[Operator]

As there are no further questions, I now hand over the conference over to management for closing comments.

[Dhiren Gala, executive]

I would like to thank everyone for attending this call. Should you need any further clarifications or any other information about the company, please feel free to reach out to us. Thank you so much.

[Sivaramaraju Vegesna, executive]

Thank you.

[S. Reddy, executive]

Thank you.

[Operator]

Thank you. On behalf of JM Financial Institutional Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.