Thyrocare hopeful of growing revenues 25% in FY17

First quarter revenue growth was led by diagnostic business, says A Velumani, Chairman, CEO & MD of Thyrocare Technologies.The company’s revenue grew 21.7 percent to Rs 69.36 crore and operating profit margins improved to 39.4 percent in the first quarter of FY17. Going ahead, Velumani expects the organised business to grow at 20 percent plus levels while the unorganized sector is likely to see growth in the range of 10-12 percent. He is also confident of maintaining the margins at 40 percent levels year-on-year. FY17 revenue for the company is likely to go up to Rs 300 crore, a 25 percent jump.Thyrocare will go slow as far as global expansion is concerned. Africa and Indonesia are prospects for expansion of diagnosis business, Velumani says.Below is the verbatim transcript of Dr A Velumani's interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: It is an excellent revenue performance and a very good growth in EBITDA and margins as well. How is it that you are able to maintain the margins as well? I can understand your revenues, you guided us for this kind of a revenue growth but what is going right in the margin front?A: I think the margins have remained the same literally for 10 years now.Latha: I thought your operating margins were 39 percent now.A: 40 percent plus or minus one has been always on and in fact the worry has never been on margin, it was always on growth and only when you see a challenge in growth then you need to sacrifice the margin.Fortunate for us especially in healthcare industry where the organized market is comfortably growing and top 10 players are very powerfully driving. There has been a comfort of 25 percent plus growth. We have a difficulty of comparing this quarter and the previous quarter because all the quarters have ups and downs seasonal.Latha: If you compare year-on-year (Y-o-Y), you have done 21.7 or 22 percent so should that be the run rate that we should expect?A: I think in this industry, organized players should do 25 percent growth. The unorganized industry might grow somewhere around 12-14 percent but an organised player is 20 plus, if somebody doesn’t do 20 percent that means something is wrong.Sonia: In your imaging business also, you have broken even this time around marginally in Q1, what kind of margins can we expect in that business and revenue growth over the next couple of quarters?A: Imaging business is as tempting as pathology business except that it demands a high capital expenditure (capex). When we do a Rs 100 crore turnover in imaging business, we should have 60 percent EBITDA, it is only the depreciation which is a bit higher because of the high capex. So I don’t truly see radiology business as any worrying business when you touch Rs 100 crore turnover. This Rs 100 crore turnover is a mark on which you will find very attractive otherwise you will always feel it is less EBITDA business. So it is a long way to go.Latha: What is your revenue now?A: Today we are doing around Rs 22-23 crore and this business once each unit is put, it takes 30 months to breakeven but the scanners have a 10 years of like. So I have said earlier also, it is not a banana business, it is a coconut business, it takes seven years for you to see a result in case of coconut.Sonia: Coming back to the growth numbers that you said in this year, most of the companies in your industry should do about 25 percent growth. You are sitting on a base of around Rs 240 crore revenues as of last year. So should we expect Rs 300 crore by FY17 or better?A: I think Rs 300 crore should be done and any better should be even a happy news to me. We have been growing at this rate except that in between  one year we went down as low as 12-13 percent and then we did some tweaking in prices and then you have a comfort in EBITDA, you can always tweak it exactly when it is needed until that time you can keep driving the business.Latha: Likewise then EBITDA of 35 percent also is something you can maintain?A: If it goes less than 40, I will be worried about.Latha: But it is less than 40, it is 34-34.5 percent.A: Quarter-on-quarter there are some fluctuations. Average 40 EBITDA has been there, I have never heard in Thyrocare, anything less than 40 percent on an annual number.Latha: Can you update us on your regional processing labs expansion?A: We have the Bangalore lab inaugurated last Sunday. So we have sixth going on. I want to go bit more aggressive there but I think I should only grow as per the growth. So I might do next six in this financial year.Sonia: What about the expansion outside India of your diagnostics labs business?A: We are in discussion. I am of that opinion, if I go to their table, I have to follow their terms and I am waiting for them to come to my table.Sonia: Anything lined up in this calendar year itself?A: We do see couple of relationships possible in Africa because that is an emerging market and in Indonesia also we are in an active discussion with a party. We are not in a hurry, I think we would be going bit slow on the global expansion.