Krsnaa Diagnostics - what is the diagnosis?

A big thank you to @Deenar_Toraskar and @Anish_Moonka for working on Krsnaa with me over the last month or so.


Tender Landscape

Following on from previous posts, one goal in this thread has been to chart out the landscape of tenders that are currently being floated by the government. @Deenar_Toraskar has done fantastic work on finding a number of them.

Key points:

  • The current tender landscape is around 600 Cr. conservatively. These tenders close by the end of the month, and should be awarded in 2023.

  • Rajasthan is the largest tender at 200-300 Cr. Following this is a large pathology contract in Odisha worth around 100 Cr., and a couple of smaller tenders worth 50 Cr. each.

  • Cancellations of tenders and subsequent re-tendering happens all the time for various reasons. We found 3 tenders on this list that are up for re-tendering. One in particular has been in the works since 2020.

  • Therefore even if things are up for re-tendering, it’s fine. There are many on the table at any given moment.

  • There are lots of smaller tenders in the 5-25 Cr. range that individually add up to around 100 Cr.

This is a work-in progress sheet. It will be updated when we find more details.

Assumptions in value: I’ve assumed each CT scanner gives around 3 Cr. of revenue, and each MRI gives around 2.5 Cr. of revenue. Pathology tenders are harder to ballpark, but have been done by reasonably extrapolating from Rajasthan data that we had above, and comparing the number of district hospitals in each contract, and the population of each state.


Tenders won in 2022, to be implemented

  • Largest win has been the operation of 39 CT scanners in Maharasthra, providing around 100 Cr. of revenue.

  • Uttar Pradesh contract is second largest at around 20 Cr.

  • Himachal Pradesh path contract is statewide, but I assume revenue is not very high as HP is not a populous state.

From a very recent interview, it’s clear that HP path isn’t fully implemented yet:


Centrewise CT Scan Data

  • I have found Krsnaa’s yearly throughput for some existing CT scan centres, along with dates of when contracts end.

  • The median number of tests done per year is around 13,500. At Rs. 2000 per test, this comes out to around 2.7 Cr. of revenue per CT machine, and around 36 scans per day. (Further points to my assumption on CT revenues being in line.)


Krsnaa Teleradiology Ramp Up

Case study: Maharashtra

  • Krsnaa set up the teleradiology centres in Maharashtra just as the pandemic hit, in Q1FY21.

  • I have found district level data on the number of scans conducted, and categorised them quarterly.

  • Krsnaa went from conducting 40,000 x-rays per quarter to around 300,000 in the span of 8 quarters.

  • Since inception, centre did around 1.2 million tests, reporting 99.02% of all tests within the required turn around time.

Here’s the data visually:

  • Note Q3FY23 data is current, as of 3rd December 2022, and therefore the quarter looks weak. At this run rate, quarter will end at around 300,000 tests.
District Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23
Total 7604 41901 57211 75959 100016 142688 133476 178694 263327 188033
AHMEDNAGAR 8 888 1050 1400 2238 2524 2484 3569 4633 2936
AKOLA 1 1013 1170 1700 3621 4359 3341 3680 7943 3755
AMRAWATI 5 1677 3139 3624 5587 6776 6259 8113 11078 6161
AURANGABAD 3 3190 2662 2336 3724 3992 3929 5984 9504 6597
BEED 7 225 576 686 1569 3307 3346 5502 8254 5706
BHANDARA 19 36 265 537 1486 4213 1622 1858 2799 2262
BULDHANA 9 475 984 1128 2410 2690 3101 2926 7397 6212
CHANDRAPUR 313 1981 906 1423 3372 6763 4817 7206 9023 6212
DHULE 1 206 427 433 1275 1847 2276 2983 3394 2388
GADCHIROLI 305 653 1287 2180 2934 4169 3129 3650 7209 6053
GONDIA 118 439 543 594 1629 2960 2015 2796 3120 2153
HINGOLI 6 383 472 724 783 1429 1198 1484 5009 3515
JALGAON 16 850 1034 981 1324 1457 1249 2054 3299 2594
JALNA 2 3732 2114 2433 2248 4228 3730 4997 8089 6561
KOLHAPUR 11 3670 3707 3717 4231 7593 7208 8984 14078 9853
LATUR 2 895 1626 2451 3928 4923 3918 6005 8498 4011
NAGPUR 2 461 885 904 1862 4154 4006 5334 6894 4310
NANDED 126 997 1578 1698 2016 4354 4100 4854 6853 4589
NANDURBAR 19 121 1040 844 1410 2012 1512 1458 1885 2250
NASHIK 1738 2519 3051 3200 6791 8151 8888 11931 16079 13522
OSMANABAD 4 513 907 1799 2745 4346 2581 3796 7122 5551
PALGHAR 2 133 869 752 1190 2842 3374 3859 5625 4433
PARBHANI 2 66 341 1930 998 2153 1728 2336 4095 3069
PUNE 18 2257 4232 6337 5518 7236 9512 13262 18708 12823
RAIGAD 1227 1557 3205 3852 3662 4197 3271 4270 6125 4934
RATNAGIRI 2009 1834 2020 2572 1752 1674 1846 2441 3554 3167
SANGLI 0 1060 843 2508 2524 5587 4341 8060 13611 4940
SATARA 2 988 1753 4109 4184 3838 3210 6634 11946 9685
SINDHUDURG 1243 3514 3925 4985 4439 4426 5350 5400 6968 5632
SOLAPUR 3 571 700 410 870 2872 3711 6324 8593 6337
THANE 345 3116 6056 6917 7692 9162 10677 12341 13985 11872
WARDHA 36 898 2025 2723 4962 6404 4649 5927 7563 5907
WASHIM 1 703 718 1907 2723 2896 3300 3996 4641 3680
YAVATMAL 1 280 1101 2165 2319 3154 3798 4680 5753 4363
  • I have found teleradiology data for 8 states, will compile and upload when I work on this again.

All the data we have is compiled at the following sheet:

Disclosure: Invested, Krsnaa forms 10% of my portfolio.


40 Likes

Promoter holding is only 27% and out of that 78% holding is locked. Is it not concerning ? Any data point around that?

Thanks for this detailed research. The last concall, management mentioned that the combined optimal revenue for Maharastra + HP + Punjab is 100 Cr. annually. Do you think it is conservative guidance, or are we missing anything?

1 Like

I think investors need to ignore management guidance and just look at the data. This is a company for which there is quite a lot of data publicly available, but not many people are working on it.

Punjab has 25 CT centres. In general, mature CT centres give around 3 Cr. of revenue. This adds up to 75 Cr. potentially from these centres.

An MRI machine adds around 2-2.5 Cr. of revenue. Punjab has 6 of these machines. That’s around 12-15 Cr. of revenue.

Adding all of this up, 100 Cr. from Punjab + HP Pathology + Maharashtra is very reasonable. By my own calculations, I think it is conservative, and they should be able to do 130 Cr. from these 3.


PS: The Rajasthan tender is up again.

https://rajswasthya.nic.in/PDF/331%20dt%2007.12.2022%20RFP.pdf

18 Likes

seems ICICI smallcap fund bought shares.

6 Likes

Can someone explain what is tele-reporting centres. How different are they from other 120 CT/MRI centers

1 Like

Teleradiology is where X-rays or other scans (like CT, MRI, etc.) are done at local hospitals by technicians. These are then scanned and digitally transmitted over the internet to a central server usually on the cloud. Then the radiologists at Krsnaa’s teleradiology hub (or working remotely) analyse and interpret the images and prepare a report. The report is then sent back to the patient/prescribing doctor.

Usually in this model Krsnaa provides the imaging equipment, scanning operators, and connectivity to their hub at each tele-reporting centre. The scans are the responsibility of the local hospital.
image

This means one does not need a skilled radiologist in each remote location.

4 Likes

MRIs, CT equipments are owned by krsnaa or the center? Scan operators are under payroll of krsnaa or center?

1 Like

For tele-reporting contracts, the MRIs, CT, X-ray equipment, and their scan operators are the responsibility of the hospital, not Krsnaa. Only the image/scan digitisation equipment and the operator of this equipment are the responsibility of Krsnaa.

6 Likes

Most PPP contracts are linked to CGHS rates. CGHS rates for tests at NABL or NABH certified labs are 15% higher.

11 Likes

Great input.
Right now I understood Krsnaa made 10% of their revenue via Tele reporting.
However, this has the potential to grow as more Private / government hospitals go towards this model.

One of the interesting thing to note is the number of radiologists (2087) , Total colleges- 329 coming out every year in the country.
The NEET score for Post Doc Radiology is very high and most likely the students who pursue that will prefer to stay in cities. From my point of view the TeleRadiology can act as a operating leverage due to the shortage of doctors
Source: MD Radiodiagnosis - MBBSCouncil

6 Likes

I have just starting analysing Krsnaa diagnostics. Can you please let me know where to get data on revenue for FY23 and expected revenue for FY24 from different states?

Hi Bhavana,
Till Q2FY23 quarter wise revenue, you can get it in screener / Quarter results published by the company.
For the expected revenue you can go through the concalls where the management provides some information
Regards
Gourab

5 Likes

Currently the stock appears to be undervalued at ca. Rs.460 and can be bought for long term. The company is making the right moves. All of the diagnostic sector is under pressure. Time to accommodate in large quantities if possible.

1 Like

The equipment is owned by Krsnaa and the long term AMCs are awarded respectively almost immediate. The downside of equipment is limited as all the machines are from high end branded players with long term warranty- where available.

I know some of the operators are on Krsnaa payroll, but I am not sure if that’s the case for every operator.

Hope this helps

3 Likes

Krsnaa Diagnostics latest credit rating report by ICRA - 02/01/2023 [ICRA]A(Stable); reaffirmed.
Key highlights from the report.

  • the ramp-up of operations in the new centres shall remain a key monitorable.

  • capex plans of over Rs. 100.0 crore in FY2023 for setting up new centres.KDL is also exploring asset-light expansion (pay-per-use or deferred credit from original equipment manufacturers) over the near to medium term.

  • KDL’s high debtor days with ~70% of its debtors being receivables from various Government entities. The debtor days improved to 46 days as of March 31, 2022, from 69 days as of March 31, 2021, backed by improved collection from Government debtors. However, its debtor holding period remained at 88 days as of September 30, 2022, in line with the cyclical trend in Government receivables witnessed during the fiscal.

  • KDL’s established position in the PPP segment mitigates the competitive pressure to a certain extent.

  • The company has an established market position in the PPP segment with over 2,020 diagnostic centres across 15 states and two union territories (UT; Delhi and Chandigarh) in India. KDL also has tie-ups with private hospitals and operates 27 centres under this segment (as on September 30, 2022).

  • OPM improved to 28.9% in FY2022 from 23.8% in FY2021, backed by significant improvement in the core business. During H1 FY2023, additional manpower costs for the newly launched centres (which is yet to fully ramp-up) led to contraction in OPM, while remaining healthy at 24.8%.

  • As on September 30, 2022, the company had over 45 active PPP contracts, with the contract tenor ranging between 3-12 years(including renewal clauses). Additionally, the PPP contracts have an embedded price escalation clause (mandating yearly price increases of 2-7%), which is expected to support the realisation levels, going forward.

  • The company witnessed a healthy bid-win ratio of ~78% in the past four years and the same is expected to remain healthy going forward as well, backed by its strong market position.

  • 60% of its revenues coming in from western India. With new centres in Punjab, Himachal Pradesh, Uttar Pradesh, Maharashtra, Tripura, Chandigarh, Rajasthan and Delhi expected to generate revenue from FY2023-FY2024, the geographical diversification is expected to improve, going forward.

  • The company derives ~73% of its revenues (FY2022) from the PPP segment.

  • The company operates a teleradiology hub in Pune with a team of over 200 radiologists. This addresses the shortage of fulltime doctors and staff in the diagnostic industry, and considerably increases the turnaround time for diagnostic test reports. In addition, it also allows KDL to serve patients in remote locations where diagnostic facilities are limited.

6 Likes

Any fundamental projections based on the valuations and growth guidance…I remember a big analyst expecting it to be a doubler in 3 years

This looks like a Krsnaa B2C franchise. It will be useful to track progress and how much this contributes to the top and bottom lines in the coming years.

4 Likes

New revised last date of Rajasthan tender submission is 23rd Jan.

1 Like

Concall extract Q4 21-22 : 'Looking ahead we are confident that we will be able to maintain our growth momentum and therefore we have started a clear strategic roadmap to double the revenue and triple the profitability in next two to two-and-a-half years."
Management had guided 40% growth for next 2 to 3 years vis a vis flat growth delivered during first half year. Management needs to be more realistic in its guidance.
Constant selling pressure is visible in the stock price.
Disclosure : Exited my positions at around 500.

1 Like