MedPlus Health Services (NSE:MEDPLUS) Q1 2026 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Medplus Health Services Limited q one FY twenty seven earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Srinivas. Thank you, and over to you, sir. Thank you, Manav. Good evening, everyone. On behalf of Medplus, it's my utmost pleasure to welcome you all to the Medplus Q1 FY 'twenty seven earnings conference call to discuss the financial results of Medplus for the first quarter of FY twenty seven, which was announced earlier.

0:54 We have with us today the senior management represented by mister Madhukar Reddy, Gangadi, CEO and MD and Mr. Sujit Matho, CFO. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks and uncertainties on slide one of the investor presentation shared with all of you earlier. Documents relating to our financial performance were circulated earlier, and these have also been posted on our corporate website. I would now hand over the call to Sujit. Thank you, over to you, Sujit.

1:41 Thank you, Srinivas, and good evening, everyone on this call. An update on our store network openings and closures. We have opened 222 stores at a gross level, and there were 52 store closures, including nine relocation cases and 27 franchisee outlet closures. Additionally, 24 stores are in the process of conversion from company owned, company operated stores to the franchisee model. We achieved a net addition of 146 stores during the current quarter compared to the two eighteen stores added during the last quarter. We continue with the outlook for adding 800 net new stores, including the franchisee stores in FY twenty seven.

2:31 In terms of our network age, around 27% of our stores have been operational for less than two years, and the remaining 73% of our stores have been operational for two years or more. In terms of our network and store size, at the end of the quarter, our network grew to 5,476 stores with 2,900,000 plus square feet compared to four thousand one eight hundred and thirteen stores and 2,500,000 plus square feet at the end of June twenty five. The average store size is in the range of 539 square feet. Update on the revenue mix. Presently, MEDPLUS offers a large range of SKUs spanning across pharmaceutical and non pharmaceutical categories.

3:21 Private label sales for q one FY twenty seven constitutes 20%, pharma being 10.7%, and the non pharma being 9.3% of our total revenue. Update on the financial numbers. Our consolidated revenue for the quarter is 18,796 million dollars Our consolidated operating EBITDA for the quarter stood at $651,000,000 representing 3.5%. Revenue from pharmacy operations grew by 21.8% Y o Y on reported basis. The pharmacy operating EBITDA stood at $588,000,000 representing 3.2%. An update on our store performance.

4:06 Stores older than twelve months, revenue from these stores in quarter one was 16,436 million, representing 94% of pharmacy revenue. These stores had a store level EBITDA margin of 10.4%. Award year on the store level EBITDA margin by age, while stores greater than twelve months had a margin of 10.4. This was 10.6 for stores greater than 246.9% for stores in the thirteen to twenty four months age bracket. On allocating all non store related costs, the operating EBITDA of stores greater than twelve months would be seven zero seven million, which translates to a margin of 4.3%. Update on the working capital.

4:52 On our net working capital for q one was fifty four days. Inventory in our warehouse represented thirty three days. In quarter one, the inventory level of your... Of our first year stores was hundred days. In comparison, for our stores older than twelve months, the inventory was at thirty six days. An update on our diagnostic numbers. Diagnostics revenue for the current quarter grew to $370,800,000 compared to $302,900,000 for quarter one FY 'twenty six. Diagnostic segment recorded an operating EBITDA of 65,900,000 compared to 41,300,000 in quarter one FY twenty six.

5:38 In April, we sold five fifty two plants per day. In May and June, this was five fifty seven and six forty four plants respectively. As at end of June, we had around two lakh active plants. Additionally, we would like to inform that the CapEx proposals as approved by the board has been put on hold by the company. We would evaluate and later inform, update the market on the utilization of the fund on the balance sheet. That concludes our update for the quarter. I request the host to open the line for questions. Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch tone telephone.

6:27 If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. We have our first question from the line of Sudarshan Agarwal from Axis Capital. I I think you will have a lot of questions on this. But as you said, you have put the CapEx plans on hold. But just want to understand the rationale behind, you know, kind of putting that strategy forth and getting it approved. So you have 40 crores of CapEx for a food park and oil extraction unit and another one for the wellness services facility. So just want to understand, you know, what are we thinking in terms of strategically going ahead with these plans that we have approved? Yes. We have put it on hold, but we have more insights into how the company is thinking on investing in these aspects going ahead?

7:42 That would be my first question. So that's an idea. I'm happy to take you through the whole strategy if it if Sujit had already not announced that we are now putting it on hold. I don't think there's any point in discussing it, honestly. There was a thought, and I thought that, you know, backward integration would really help, especially in the areas where the products are new, supplies are not easy to find, and sometimes it is just easier to own the supply chain and all. So... But we have on, you know, further deliberation decided that we'll probably put it on hold.

8:30 Definitely put it on hold for now and come out with a plan on how we'd actually utilize the funds. So Super. Yeah. Yeah. This would be related to the food park. I guess you will be putting on hold the other one as well, or is that investment continue? All CapEx spend for now. If we are to basically come back and get... Oh, yeah. All CapEx meaning the main... The two main things, the food park and the... This one. Those are the concierge plan. So on the on the food park, I understood your thought process. On the wellness, I mean, this is something that we would... We would thinking of trying as a new kind of foray. Right? Like we did with diagnostics is what I would kind of Okay. I'll I'll tell you what my thoughts were on that.

9:17 But, again, I have to reemphasize the fact that we are not putting it on hold, so it probably does not... It's not relevant. But, anyway, the thought was that, you know, all companies today are looking at diverse, you revenue streams in adjacent areas. You can't just basically be just a pharmacy and give... I I know there's lot of opportunity, but even as the vertical grows, you also sometimes have to bring in some horizontal areas also. We thought that that was a good area to go in. Prevention was a great area to go Concierge medicine, wellness, prevention, longevity, and all, you know, kind of go hand in hand, and then we thought that is the logical next place for us to go given that we're already doing diagnostics. But diagnostics has one piece left, which is when people come to your diagnostic center and to get themselves tested, since we're not offering a complete... Let's say, we're not closing the loop on it. We're not telling him what he has to do.

10:13 And a lot of times he ends up going to a doctor, and doctors for, you know, reasons best known to them will, you know, disregard any kind of lab which brings a result which is not, you know, in their... Which is not marketed to them. Let me put it that way. Right? So we wanted to own that entire thing and basically do a complete out of hospital health care kind of stuff, out of hospital. But, anyway, that... We we are now put on hold. We're not gonna do it. We will think about it a little... It's unlikely now we'll basically think about it in MEDPLUS, I would say. Okay. Okay. Got it. Coming to your performance in the quarter, yes, strong top line growth. But in terms of margins, we have seen yet again the private label share contracting in Q1. We had this issue last year.

11:05 So can you just give some sense on what led to this drop? And how should we think of this private label share moving in quarters ahead? So for us private label, when we started off, we pushed very hard, and we made sure that everyone was aware aware of it, and the employees are also heavily incentivized to sell it and all. So I think the earlier adopters very quickly shifted, and after that, maybe our invoice would have gone a little overboard in trying to push it to every single customer out there. And in the process, we may have basically, I won't say annoyed, at least put up some customers out there. So we try to put it back, and so now the stores are basically focused on... See, while as a percentage, it has grown... Degrown slightly.

11:56 Year on year, the growth is still there. Every single molecule which we have which we have been selling, we're selling more of it. We continue to grow. As a percentage, it has degrown slightly because, you know, our overall sales service has grown. And we are now focused on basically making sure that the customer, you know, is completely served, whether it is for brand or whether he is looking for a, let's say, a slightly more affordable kind of medicine. So we offer it. If it takes it, great. If not, that's okay. But then what that has allowed us to do is to allow us to actually grow the customer base in the branded side. And that's why you're seeing a small, let's say, dip in view all percentage. Got it. And how should the share move? Yeah. Going forward, though, see, it's gonna be a function of two things. One, a little bit of our own advertisement outside the store, which is, you know, through influencers to other...

12:48 Various other sources to bring people in who are otherwise not coming into the store for, you know, seeking out the Medplus equivalents of all the branded drugs. So we... That is how we plan to actually grow that whole share. And we'll also, you know, obviously, try and get our employees to be slightly better salespeople, you know, get the whole message out. So combination of both making our employee slightly more skilled actually in private label, and two, bringing in people who are otherwise not shopping with Medplus at all to come into the store for the drugs. So that's the plan for us. We we we think, you know, we will... With this quarter, are resting the slight, you know, I would say, degrowth which we have had, and from there on, start building up again at the rate of around half percent or, you know, point three, point 4% kind of stuff, the big one. Okay.

13:43 Okay. Got it. And a part of your gross margin was also affected by franchisees. Right? 50 basis points. So can you just broadly give me a sense? Private label, of course, will gradually come up, but this franchisee dilution will be part of our numbers going ahead on the gross margin side, right, at least for the near term as long as they don't scale up. Yeah. So let me explain a little bit. Franchise is still in a experimental kind of stage. We believe that India is a market where you can have 20, 30, 40,000 stores, and we believe that long term, that is the only way for us to get to that number. So for us, we're working on that right now. One of the main things is, you know... Yeah. So so for us, the way we see franchisees as... You know, that... That's a logical way for us to grow. Whatever margin we're getting is additional margin. Yes. It will definitely be slightly lower than a regular store, but the thing is return on investment on that is going to be higher. And once we crack the model, we'll be able to grow way faster.

14:46 That's how we see it. Got it. Got it. I have more questions. I'll come back in the queue. Thank you. We have our next question from the line of Saiyan Mukherjee from Nomura Securities. Please go ahead. Yes. Hi. Thanks for taking my question. Sir, on this CapEx plan, you would have had some reasons to sort of plan for this, would have thought about it over many months on this, you got a Board approval. What has happened in the last, let's say, less than few hours that you've decided to put it on hold? Difficult to say a sign. You know, maybe there's a wisdom of the masses, I guess.

15:39 But, you see, for us, We definitely are, you know, let us say, going to be, let's say, sensitive to the stock market for sure. So not going to file. I believe it's a good thing to do, create adjacency. This is the way the whole world is growing growing out there, and that is what the board also felt. But the fact that the market reacted so strongly and the fact that, you know, bunch of our investors have also, you know, said the same thing and all. We feel that maybe, you know, maybe we're not 100% right. So happy to put it... I will... I'm so happy to put it on hold, but, yeah, we are taking the feedback, and we wanna put it on hold.

16:30 Right. So so does that mean that we should not expect any sort of big CapEx plan in years ahead? I mean how do you plan to then sort of do this? Because public shareholders could react the way they would. So how would you have that process in place to ensure that any CapEx decision, etcetera, in the future sort of doesn't have this kind of a fit? So I guess public markets have not really said no to any kind of CapEx on our warehousing, on our stores, or anything like that. So I guess as far... As long as we are focused on core business, I really don't see anyone, you know, coming out with anything. And even if they did, then we won't really get the call. So core business will continue with respect to what the market thinks or says, whether it's private label or regular stores and all that. So that will happen.

17:26 Can we basically take a pause at this time on CapEx spending? Absolutely. But is that is that something which we'll do continually? No. As long as it is... And definitely not if it is about the core business. Okay. So coming to the core business, you know, you have shared your annual operating plan. So based on your quarter one performance, how does this plan change? You had INR 400 odd crores of operating EBITDA on a consolidated basis. So what is your estimate now? Does that remain same or it undergoes a change based on quarter one number? Hi, Arun. This is Sujit here. So two things. One, maybe you are referring to the board deck, which was by mistake uploaded, but the data remains as it is what you rightly pointed out.

18:20 And for the time being, numbers do not change because as Mankur explained, we are working on getting back the private label back on track. We are working on certain costs which we have not anticipated, which has got hit during the current quarter. For example, effective July 7, the company has already, I would say, tweaked the discount structure for all sales greater than thousand when the company gives 20% discount. We already reduced to 19% for a large number of customers. We see that traction. And, therefore, if there is any such other adjustments required so that we keep the annual operating plans as a basis and a guide. I would not say we are bound by that. We can either exceed that as well.

19:06 So on top line, you would have seen we have achieved 99.9%. On the operating EBITDA, there is a gap to be covered. That's been the nature of q one as well. But we are pretty confident that coming quarters, we will be able to make that upside. Okay. So thank you. And, sir, one last question on your private label traction. So the growth has been weak on a year on year basis, though there is some growth. So in terms of the number of people who are subscribed to this private label subscription, what is that number? As an absolute number of people, like, how has that changed in a quarter on quarter on a year on year basis? Actively, there are close to 44, 45 lakh people who are on this plan.

19:54 And every month, there is an annual pattern. Last quarter, if I remember the number right, we added 10 lakh plans including renewals. The good part is, earlier, we were realizing 99 rupees. We have now increased that to $1.49. So on membership alone, we should see a 10 to 11 crores impact on the top line for the whole year, which will flow through to the bottom line. Okay. So so today, how many... You have 44, 45 lakh people on the plan as of June? Yes. Yes. And how much was this number in the, say, the June 2025 compared to 40 four I don't remember it exactly, but it was in the range of 39 to 40 lakhs. Okay. So around 40 has gone to 44 kind of number. And not only that, we also actually increased our That's what I explained. About. Right? Yeah. 99 to one forty nine. Yeah. Despite the result.

20:53 Lot of renewals going forward at one forty nine. Okay. So this was implemented recently, one forty nine? Yeah. A month ago. A month ago. Okay. And, sir, the one last question I've seen. Your employee expenses also have gone up. So is there any impact? Because you had earlier mentioned about lot of attrition and all of that. So has the pharmacy level employee compensation, those have gone up significantly? Anything on that side if you want to highlight? So on a year on year basis, the major impact is coming from people which we had added in the various warehouses, so we are getting the full quarter impact now. Additionally, we articulated on the labor for changes, especially in Karnataka and Telangana, where the increase has been more than, I would say, significantly more than the average of generally 4%.

21:46 Have seen 60% increase in Karnataka and 25 plus in Telangana. We have factored that. However, these were effective June 1, which means going forward, in the q one quarter, we have the impact of only one month. Going forward, we will have the impact of the full quarter. We are taking steps to mitigate that in terms of one, the retention bonus plan which we had has been stopped effective March 1, which means there are no new additions because by design, the wages have gone up. Two, we are also looking at the non statutory payment. For example, the private label incentive and other incentive, how we can optimize and structure that in a manner to get a relief. And three, as we just articulated on the private label mix, that should also help us in addressing this cost spend.

22:36 Understood. Okay. So thank you. I'll join. Thank you. Thank you. We have our next question from the line of DeviAnch Gupta from Latent PMS. Please go ahead. Hi, sir. First question on the private non pharma products, the absolute revenue dipped from March to June. So just wanted to understand why would that happen? Is there a supply issue or a demand issue, or is there a... Is it just purely seasonality? So... Yeah. Absolutely. You pointed out right. From quarter four to quarter one, which is a sequential quarter, we had an impact on the margin of around 100 basis points because of the private label mix both on pharma and non pharma.

23:30 In non pharma, we had a steeper fall from the last quarter. For certain categories of our non pharma products, especially the diaper range, there were disruptions in terms of supply. It's now coming back on track. By the end of this current quarter, we should see the full impact coming back. So we are very confident on the non pharma contribution to sales, and we expect that to further grow in the coming quarters. Understood. Understood. The second question was on the franchisees. You mentioned that 24 stores are moving from Coco to franchisee. Yes. So is it... Are the staff there which is taking it up or someone else is? I'm just trying to understand the Predominantly, it is the offering to the senior staff members who have been with the company for three year plus. So that's as a retention strategy, and so that they also become individual entrepreneurs. They have learned with the company.

24:24 They have been with the company. And as a model, we said that's the only way we can, you know, facilitate them to become individual entrepreneurs. And I think more than 95 of these stores will be taken up by the existing employees. Got it. And the other question was the franchise stores which were closed during the quarter. The average is... Was only point seven years. Yes. Which is far... Which is just, like, eight months. Right. The previous quarter, you had mentioned it was... The closure was of the older franchise networks, which therefore had a higher age. Yes. Why would this be? Is it... Well, I know... Understand that franchisee is experimental, but any any signal from the market that the franchisee model is not necessarily working out for them, and we will tweak to make it much better?

25:16 You're absolutely right. That's the same observation we are having. That look, as we speak, we have 600 plus franchisees. However, there is... In some cases, what we are observing also is there is a expectation mismatch both from the franchisees who are first time entrepreneurs. They get into this. Their expectation is x. They land up getting y. And very quickly, they are taking decisions, which we have to honor them. So that's what we are reporting that this is again... This will have to, you know, take some time to stabilize from both. One is from our end in tweaking the model. As we speak, we continue to look at this model to make it a win win model. We have made certain adjustments, for example, helping the franchisees reach to a breakeven in a much faster pace, helping them with supporting them with fees in the first year.

26:05 And therefore, we will have certain cases where it still does not, you know, double up to their expectations, and there's only an outcome of that. And what were these expectations? Just the ramp up profit or, like, we were expecting that we will do more private label? It is... It's a closure by the franchiser, and therefore, we are not, you know, directly involved. We do respect when they come back and say that, look, we did a mistake. It's not meeting our expectations. The numbers do not tie up. So we would like to go back. In 99% of the case, we do relook at that and maybe help them with the exit, or we find another franchisee who's ready to take up that unit and give them an exit. So this will continue to happen, Divyansh.

26:53 Got it. And, sir, two more questions. Average store size you mentioned is five three nine or five two nine? Five three nine. Given that, let's say, last quarter, it was more five twenty something range, Is it fair to assume that the new stores are much, much larger in size? So there are few stores as a strategy. We have been opening some large store formats because as a strategy, we would like to even test out that, which means that it is as good as three stores coming up as one store. And then you can put in more people, more focus, much better fill rate, and a larger assortment of both the brand as well as the private label offering to customers. So that's one reason why you see a uptick in the average SFT per stock.

27:43 But then that limits us penetration into, like, said, we will... We'll be the neighborhood pharmacy. We we continue to do that, Dipyans. This is a very small portion. I think as we speak around 47 to 48 stores have been launched under this format. So when compared to the 6,000 odd, this is a very small number, which also helps the company in garnering, I would say, local attention instead of spending good money for advertising. Understood. So sort of a marketing Understood. And, sir, the last question, you mentioned that, let's say, because of all the minimum wage hikes and everything, we are tweaking the... We are not allowing any new sign up into the retention plan that we had designed.

28:31 Yeah. But then how does it address the attrition problem due to which we had launched the retention program in the first? Because if the minimum wages have gone up and, let's say, they don't have the retention plan, they can anyway I understand your question. I'll try to address that. The underlying issue itself was lower wages, especially when compared to employees in the quick commerce business. And now since the minimum wages have gone up, we expect, and definitely, we would very closely monitor this, that much better kind of employees will be available for this higher range of wages. And therefore, sense should prevail, and we will closely monitor this how it works. And if something is required, this is again a non statutory area which the company can, you know, very quickly address it if there is need in each of the pockets whenever possible.

29:27 So what we wanted to inform you is, one, there is no need of reaction. Only continuously, only the new guys from March 1 if this plan is no more available for them. But for colleagues and employees who are already part of this plan, it continues. So whatever amounts have been approved to them as on date will be absolutely, you know, paid by the company or honored by the company as and when time comes. So therefore, we do not see a higher risk. But as you rightly pointed out, we continue to monitor this space, and we will look at what interventions along with our HR we need to do to attract and retain such talent. Understood. Understood. Thank you. That is helpful. I'll join back the queue. Thank you. Thank you.

30:18 We have our next question from the line of Chazdeep Palia from Blockwin Capital. Please go ahead. Hi, sir. Thanks for taking my question. So that diagnostic business has been scaling up well. So what are your thoughts on scaling it further by way of either densification in the same market or maybe expanding into other markets? See, while it has been doing reasonably well and it is profitable also, it has not really gone to the level we wanted. That is a model in which the subscription plan should have come both from the b to b and b two... B to c side. We have not had much success in the b to b, and b to c also has languished around two lakh 20 or two lakh 10,000 kind of numbers. The... By now, we should have had anywhere between 250 to 300,000 members.

31:07 So for that reason, while we may do a little bit of maintenance kind of work here and there and replace one or two machines here or there, in... On the whole, I don't think we'll be expanding that in a significant fashion, at least the radiology part. Got it, sir. Sir, is there is there an inventory charge also this time in the in the expensive... On the expensive side? Inventory provision charge? So the inventory provision charge this quarter is on the normal level. When compared to the previous quarter on a sequential basis, we had a release on the inventory provision line because whatever we had provided for, the company was able to liquidate. And therefore, it appears that this quarter has a higher charge, but the charge is a normal number.

31:56 Got it. So what's the annual inventory provisioning charge for your company? Roughly 1%, 0.8% to 1% on the total sales. Got it. Sir, but I'm guessing that there will be no inventory obsolescence on the branded pharma or branded FMCG side. So this inventory charges primarily did to the private label. Right? So a large portion is, you know, linked to the private label. There is also a small portion which comes as a charge on the branded as well. But you're right. Predominantly more than 90, 95% of our branded pharma and non pharma products, we are able to successfully return back to the manufacturers. Sir, then if we look at this expense only on the private label side, I think the annual expense would be somewhere close to 360 basis points. Right? That looks to be pretty high.

32:50 So what are the reasons why you need to, you know, do such a large amount of provisioning? So let's take it this way. For the branded pharmaceuticals or the branded non pharma products, these are generally made to shelf products. They don't make format plus. They make it for the whole market. Whereas if you take a private label product, both on the pharma and non pharma, it is made to order, which means the entire risk of of solutions, average, non scalability, and slow moving is on the books of MEDPLUS. So it's a conscious call based on the margin availability, the overall economics of the product. That up to 5% is what we consider as very normal range on the private label. And as you highlighted, it is well within that number.

33:38 Got it, sir. And, sir, as the business scales up, do you have any targets that, you know, this expense would be coming down in in in future or this will remain close to here? As a target itself, we said we do consider approximately up to 5% as a charge, but we obviously will continue to keep working to minimize this number because this the amount, whatever we minimize is straight bottom line. Got it, sir. And so are there any plans on launching your own private label for GLP one? Not yet. We... If we do that, we'll definitely inform the market. Not for the moment. We have not yet launched. Got it, sir. So last question, sir, on the issue of promoter leverage, is there any timeline to reduce leverage levels?

34:30 So so that is actively being, you know, looked at by the family office, but at present, there is no such plan. And as and when that happens, adequate disclosures will be made to the market. Got it, sir. Thank you, sir. That's all from my side. Thank you. We have our next question from the line of Akhil Pare from three sixty one Capital. Please go ahead. Yes. Thanks for the opportunity. My first question is in terms of store openings that we still maintain our guidance of 800 store additions. That's at net level, right? And how would be the mix between Frontier versus Focus Plus? Yes. Yes, Akhil. It's at the net level.

35:16 The internal estimates what we had very broadly was 5050%. But this quarter, it is completely on the franchisee side where we have increased on a net basis out of one forty six. One thirty one stores are the franchisee stores on a net basis what we added. And we continue to stick to the guidance of 800 store... Net store openings for the current fiscal. Sir, and and second one on growth and the margin front, right, now they've been growing heavily in the top line. So should we continue to expect similar kind of growth trajectory in subsequent quarters in FY twenty seven? And second, on the margin front, given the actions we have taken in terms of reducing the discount, including the membership fees, And as Madhu Karshav said, we'll increase our private label portion by 0.3% to 0.5% on a quarterly basis starting probably from third quarter.

36:19 Is it safe to assume that our margin profile for full year will go back to where it was in FY twenty six, or it might be still... If I would do that? It's too early, but what I would request is you allow us one quarter so that we also look at the outcomes of the actions which the company is currently taking. Maybe next quarter would be a much better, you know, period to see the benchmark and also look at the next balance two quarters of the current fiscal. We should be in a much better situation in quarter two to look at and project as well the latest estimate for the full year. Okay. Sure. And last one, cash generation part. Right? I mean, we have a debt debt balance sheet, and we have almost 600 total cash.

37:09 And our operating cash flow, free cash flow also continues to be very strong by virtue of strong business fundamental. So any plans to increase the dividend or leave a share buyback because we'll have sufficient cash at the end of FY twenty seven. Yes. Your observation is right, Akhil. We are, you know, evaluating various options, and we would, you know, take the guidance and present to the board various options. And if there is an outcome, we would definitely inform you next quarter. Great. Great. Thanks a lot, and best luck for coming quarters. Thank you. Thank you. We have our next question from the line of Jitag Gupta from TechRe Investments. Please go ahead.

37:59 Hello. Hi, sir. Hi. Hi. So, sir, my question is regarding the revenue. So this for the other revenue under the total revenue segment, is moving up. So can you actually understand the nature of this revenue portion and where it will move for the financial year? See, the significant amount in that others is the franchisee sales, which still show it as others. And that's in the range of 83... 830,000,000 included in that number. That will be the largest number in that. And rest all are, if you see, it's in the same level of the previous quarters as well. Okay, sir. Fine. Thank you. Thank you.

38:49 Thank you. Have our next question from the line of Vinopati from Ilara Capital. Please go ahead. Madhushar, just a follow-up from the initial questions. I completely understand that the margin was down this quarter because of the lower mix of private label as well as increased contribution from the franchisees, which is very well understandable. But then you also commented that all of these have grown, even the private label in absolute terms have grown compared to previous quarters, although the contribution has come down. In which case, the absolute EBITDA should have grown, although the margin comes down.

39:37 So where exactly has the EBITDA decline happened? Hi, Vinu. Good afternoon. This is Sujit here. So I'll take this question. On a quarter on quarter basis, if you observe, the absolute sale for private label pharma and non pharma have de grown by around 33 crores. And the... Sorry. Can we look at it to y o y? Y o y also, is there a decline in the private label? If you look at y o y, there is a 200 bps decline on the pharma alone private label. As a mix, we had 13.8%, and now No. No. I'm not talking I'm not talking about the mix. The mix change from margin comes comes down. That is logical, and I understand.

40:25 But y o y in absolute sales, is there a dip? Y o Y on an absolute terms, 197 versus 200 crores on the pharma itself, it's flat. Okay. So then why would EBITDA decline Y o Y? EBITDA has an impact of mix and the increase in the cost, Mabinu. And the increase in cost is mainly the employee cost or some other cost? Predominantly the employee cost. And where does it get recorded? In the COGS or below that? Because I see that the gross margin has come down. So the gross margin is due to the mix.

41:10 The expenses goes under the... Below the COGS. So, see, I understand that the gross margin percentage comes down because of the mix change. But if neither of the segments have de grown Y o Y, then the gross margin or EBITDA should not decline. Gross profit or EBITDA should not decline. Hello? Am I audible? Yeah. Yeah. Think we answered that question. Okay. Okay. I'll take it offline. Thank you.

41:56 Thank you. We have our next question from the line of Ankit Bansal from AB Investments. Please go ahead. Hello? Yes, Ankit. We can hear you. So my question, like you have just stopped the OpEx plan. Rather than you're extending yourself to North or be part of India in the pharmacy business, you are just holding that investment. What are your plans for the rest of India for your main business? So the plan is to actually grow contiguously in contiguous states.

42:47 So we are there in Maharashtra right now in a significant number, and we have extended into both Chattisgarh and Madhya Pradesh. And on the southern side, we have actually gone into Kerala. Once we get these states, you know, going fully and once they're profitable, then we'll go again northwards and westwards. That's the plan for us. The CapEx on our core business has not stopped, will not stop. I don't think there's any reason for it to stop. And that is not something on which we are looking for any kind of feedback from the market. This CapEx was for a slightly different thing, and so based on, you know... We we retort it a little bit, but it's nothing to do with our core business. Okay. Okay. So my question, like, how on the margin trend, are the margins like now they have come down?

43:42 Are this fluctuation will continue for the coming year? Or will it get stable in that range or upper range? What will be the continuity for the investors to look for a stable kind of margins? See, once in a while, you're always going to have some issue like the, you know, the new labor code was a pretty significant kind of, you know, impact, I would say. So whenever something like that happens, you are going to see some kind of a impact. But other than that, I see no reason why the margin should change significantly. The one thing which we will continue to focus on is private label. It it will, you know, now going forward after some of the supply chain issues and all will stabilize both on the pharmacy side as well as on the non pharmacy side, the mix itself, and then start growing.

44:38 And that is what will drive the margins for us. Okay. Sir, the manufacturers from your manufacturing, are they of the... All the auditing has been done by you? All the things are in place. You are satisfied with their kind of supply chain, all other services you are getting... The products you are being getting manufactured from them? On the pharma side, we actually get them manufactured from some of the biggest names in the country. The three or four people who supply us supply to all the top 30, top 40 of the big pharma. So we don't have any issues on the quality side with them. And, actually, what we we go one step further, we also have our own MEDPL accredited lab in our own campus. So every batch, if not every other batch, is also tested in addition to the standard testing with the labs too. So we make sure that the quality is maintained for our customers.

45:43 And the retail side? Retail products? So I'm talking about the retail products. Right? These are private label products. What comes from the brand is the brand's responsibility there. We have nothing to do with the quality and all. We sell what the doctor prescribes, and so it is the responsibility of the company to maintain its quality. Okay. Oh, thank you, sir. Thank you. So my side done. Thank you. We have our next question from the line of Akhtesha from BBD Asset Managers. Please go ahead. Thank you for the opportunity, sir. Sir, my question is that quick commerce platform are stealing in some cities, and how do we see the completion from there?

46:34 Because we are doing pretty well in few cities. So are you saying that QuickCommerce is doing well in some cities? Yes. See, for us, if the customer is actually willing to pay the cost of the delivery, I'm more than happy to, you know, compete with good commerce. I don't think it is something which we really want to focus on at this point of time because as of now, almost all of these businesses are needing cash. They are subsidizing the cost, and that is not something which we want to do. While, you know, they may take a little bit of our business or a little bit of the overall business, I don't think the... There'll be any significant effect on the overall side.

47:20 Pharmacy is slightly different from the general grocery business and all. So it has its own challenges and everything else. I don't think anyone has really succeeded. The day people figure out how to actually give a 20% discount, give a free delivery, and give it in ten minutes, you know, we'll be more than happy to copy that model whenever whenever it comes. Okay. Thank you, sir. We have our next question from the line of Suraj Mehta from Perpetual Capital Advisors. Hello? Am I audible?

48:11 Yes. Yes, sir. I just wanted to understand. You mentioned in your PPT that the... For stores that are greater than twelve months, the ROCE is around 63%. So... But on a company level, the ROCE is very less. So I just wanted to understand why does the doesn't that reflect in the overall company number, and where is this gap coming from? So significantly, your observation is right. For a second, the way it is calculated, the store level ROCE is calculated based on store level investments and store level inventory. The company level, once it goes there, it also includes the warehouse level inventory, which is approximately thirty to thirty two days of the company level thing. So that's the only difference what you have in calculating the company level policy.

49:07 And and then you have... Apart from the store level computation, even if you look at the profitability, you have the corporate expenses, the warehouse logistics expenses, and the sales and marketing related expenses. So after netting that off and taking into consideration the inventory at the back end, which is the warehouse level inventory, we compute the company level invent... Company level ROC, which is published. Net of the cash what we hold. Okay. Got it. Thank you so much. Thank you. Thank you. We have our next question from the line of Anil Sarin from K16 Advisors. Please go ahead. Good evening, everybody on the call.

49:53 A lot of my questions have already been answered, but I wanted to know what was the SSSG this quarter? So as we have been, you know, informing the market, one, we do not really track SSLG per se because we strongly believe that while SSLG is a good metric for a retail store, but in pharma retail, purely doesn't work because, one, we continue slow... Continuously add stores which is close by to our own stores beyond the certain densification. And when we look at possibilities that it could be cannibalized by other stores or other competition, we do cannibalize our own store. And therefore, as a model, we really do not track SSFC, Anil.

50:44 Okay. Okay. Fair fair enough. So I I noticed that your revenue growth rate has, you know, become quite handsome. In between, it had slowed down. So congratulations on the same. In the fourth quarter, there was very good movement. And now in the first quarter also, there is 22% improvement. However, in the latest quarter, the gross margin seemed to have suffered quite a bit. I just wanted your view, is it solely due to the mix in favor of branded pharma that we have suffered this decline in gross margin, roughly 200 bps, it has come off sequentially. Yes. Out of 200, we mentioned 100 bps is due to the lower sales mix of private label products with pharma, non pharma put together. 70 bps is attributable to the lower inventory provisions when compared to the sequential quarter.

51:35 There was a question earlier that in quarter four of the previous fiscal, the inventory provisions were significantly lower because we had a release of provisions. In that period, we were able to liquidate products which had earlier been provisioned. Now that same number is actually a like to like a similar number, but q four was an exception, and therefore, we are seeing larger debt and that impact is 70 basis points. And additionally, 40 basis points at the year end, we were able to negotiate with our large supplier for both pharma as well as the FMCG product, and we had some extra, I would say, supplier related discounts at the year end, which we do not have in q one, but we are pretty confident that during the year, we will make up for that.

52:27 So the 100 basis points, we will make up for that during the year. A significant portion, we should see attraction coming back in the next quarter and beyond. And the 40 basis points on a full year to year, we expect it to get recovered fully. The decrease of 70 is because of the inventory loss also will not be visible because on an ongoing basis, around 12 crores is the inventory loss per quarter, and we should be on the same range on a quarter to quarter basis going forward. So so this 12 crore equivalent, what was the figure in the first quarter? Fourth quarter was around 4 and a 5 crore. And that became $12.12 crores in the current quarter for which we are discussing. $1,111.11 plus. Yeah. Got it. So should I... That for the full year, when we close the books for fiscal twenty seven, our gross margin would have recovered to the trend or if not exceeding it?

53:24 I think we are shooting for that. Allow us a quarter. We will we will know the trajectory and the outcomes of the efforts what we are tweaking. And post that, we can guide you for the whole year as well. Great. Further... Yeah. You know, there there are there are two developments which are somewhat concerning. One is that there seems to be a permanent increase. I mean, you know, thanks to the regulations regarding labor, etcetera. So there is a comp chart which has, you know, gone up permanently, at least in the states that you mentioned, Telangana and Karnataka. That is one. Second, there is... What one hears is that there is continuing kind of, you know, discounting going on both by the offline as well as by the online, you know, pharmacies. So that...

54:10 I don't know whether that is temporary or not. But on the on the manpower cost, there is a permanent kind of a hit. So is it possible to overcome that and go back to our older, you know, reported 9% odd kind of EBITDA margin that we saw? So I think in that direction, we earlier articulated that the company has already tweaked the discount structure a little bit effective July 7, and we have reduced 1% for purchases greater than thousand where the payment mode is other than UPI. And therefore, we should see some benefit on that. And once we observe good traction and the impact on the consequential sales, the management would further evaluate and see if something else or additional tweaking is required.

55:02 But our target also, I mean, is to go back to the earlier reported numbers and do it in a manner which is more sustainable. Fair enough. Thank you. Just one last thing. Sir, if you could just, you know, highlight the the amount of the the loan that has been taken for... Against which the pledge has been made, that one one here's different figures. So there was a repayment, and then there was a reinitiation of a of a debt. Obviously, it will go away only when the amount is repaid. But what what does the amount outstanding stand at currently? Is this... Are you talking about the promoter's debt? Correct. It's close to around 1,150 crores.

55:48 Okay. 1,100. Thank you very much. Included, which is interest included. So that that would essentially... I mean, you know, if if if we have a great fiscal twenty seven without the price earnings multiple changing at all, I'm not talking about today's fall. I'm I'm I'm talking about the normalized kind of price earnings multiple. If the earnings were to go up at a certain level, the share price would consequently rise by an equivalent amount, and that should be, you know, at at a at a level where you might feel comfortable to liquidate the debt. So that's the family office decision, nothing to do with the list code. But, yeah, you are right. Those calls and decisions are made by MEDPLUS and the family office.

56:33 So I think I cannot commit anything beyond this. Great. Thank you so much. Thank you. Thank you. We have our next question from the line of Akasha from Investec Capital Services. Please go ahead. Hi, sir. Am I audible? Yes, please. Okay, sir. So as I can see from the presentation that was put on a second time, the SSSG has been reported at 15%, which is fourth consecutive quarter of positive growth. Now in earlier quarter, we had alluded to the SSSG growth of 9% to 10% for the full year going ahead.

57:18 So two questions here. First, do you see the SSG growth rate stick to 9% to 10% for the full year? And second, as you had highlighted in the in the to an earlier question, you expect to arrest the degrowth of 100 basis points, which was due to the decline in share of private label. So if your if your overall gross margins were to stay at the same level and EBITDA, would you would you would you... Would this mean that the... On on an on an annual basis, the the share will remain the same as it was earlier? These are the two questions. Thank you. So as I mentioned on the SSSG, I think if you have followed my earlier response, it stays same.

58:08 We do not report explicitly and track SSSG per se. But, yes, if we are seeing the number, it's it's only a number which are the consequence of various activities which we do on the ground, including the new store openings as well as the cohort of stores which is performing. But as a... The the number to shoot for is an overall number of 10%. And on your second question, absolutely, we aspire to recover as much as possible on the 100 bps impact on the gross margins due to private label, but that will be over a period of couple of quarters. Initially, we should see a comeback on the non pharma and a bit on pharma. And subsequent quarters, we should continuously see around point two five to point 3% growth on overall private label, whereby we believe we will be able to recover the entire decline what we have. On a full year basis, as I had earlier mentioned, request you to be a bit patient, allow us a quarter, let us reassess the situation, and we will be in a better position to guide or even articulate what would be the full year numbers.

59:21 Alright, sir. And, sir, just one last question. In in... Thereof in one of the quarters, I think it's... It was in quarter four. You had said that every 20 to 30 bps increase in the share of private label in the overall sales leads to 10 bps growth in the gross margins. Is it correct? Or as per the current calculations in one of the... So so you had you had uploaded two pip... Presentations yesterday. In the in the first presentation... From the first presentation, what I could make is for every 30 bps increase in the share, there was point 2% growth. So just on the numerical, if you could confirm. Thank you. Yeah. What we uploaded as the investor deck, my request is to stick to that because between the pharma and the non pharma, depending on which category of customers would convert to our private label, that percentage play would always be, you know, in a particular range. What we had guided you in q four, I would request we continue with the same guidance.

1:00:29 Alright, sir. Okay. Okay. Thank you, sir, and all the best for the coming quarters. Thank you. You. Ladies and gentlemen, that would be the last question of the day. I now hand the conference over to the management for closing comments. I thank all participants on this call for your interest in the Medplus journey. Our investor relations team can be contacted at ir@medplusindia.com. Thank you. Thank you. On behalf of MEDPLUS Health Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.