Ladies and gentlemen, good day and welcome to Q3 FY 2026 earnings conference call of Entero Healthcare Solutions Limited, hosted by DAM Capital. As a reminder, all participants' line will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch tone phone. Please note that this conference is being recorded. A brief reminder, this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Ms. Payal Shah from DAM Capital Advisors.
Thank you, and over to you.
Thank you. Hi. Good morning, everyone, and a very warm welcome to Entero Healthcare Solutions Q3 FY 2026 earnings call hosted by DAM Capital Advisors. On the call today, we have representing Entero Healthcare Solutions, the management team comprising of Mr. Prabhat Agrawal, Managing Director and CEO, Mr. Balakrishnan Kaushik, Group CFO, and Ms. Akanksha Gupta, Head Investor Relations. I will hand over the call to the management team for opening remarks, and then we'll open the floor for questions. Please go ahead, sir.
Thank you, and good morning, everyone, and thank you for joining our earnings conference call to discuss the performance for quarter three and nine months of this year. My name is Prabhat, and I'm joined by Balakrishnan Kaushik, Group CFO, Ms. Akanksha Gupta, Head Investor Relations, and SGA, our investor relations advisors on the call. I hope everyone had an opportunity to go through the financial results and investor presentation, which are uploaded on the stock exchanges as well as on our company's website. Let me begin with performance update of the quarter, which is another strong quarter for us. Revenue grew by 26% year-on-year and 9% quarter-on-quarter to INR 1,707 crores.
After adjusting for the sales recognized on net margin basis and divestment of a subsidiary on like-to-like basis, our revenue growth stood at 28.5% year-on-year and organic growth was 17.1% year-on-year. This is the highest organic growth for this financial year, and we continue to grow faster than the industry, which grew by 12% and hereby increase our market share. Gross profit came in at INR 173 crores, up 29% year-on-year, with our gross margins improving by 30 basis points to 10.1% versus last year. Compared with last quarter, the GP margin was 10 basis points lower because of one-time GST incentive amounting to 17 basis points received from pharma companies being offset by improvement driven by better business mix, margin accretive categories and procurement efficiencies.
EBITDA for the quarter was INR 68 crores, representing the growth of 36% year-on-year, with margins improving by around 30 basis points versus last year to 4%. in this quarter, there is an exceptional impact of new labour code of INR 6.1 crores on PAT. Adjusted for the one-off impact of new labour code, PAT margin was 2.3% with PAT at INR 40 crores. That is a growth of 36% over last year. Our reported profit after tax increased 15% year-on-year to INR 34 crores with PAT margin of 2%. On working capital front, I had shared during the last quarter that this optimization remains a key priority for us.
The same is now reflected in our net working capital days on a like-to-like basis that improved to 61 days in quarter three FY 2026 from about 66 days in quarter one and 63 days in quarter two. Reported NWC at 64 days is primarily due to change in grossing up GST tax rates on sale from 12% to 5% in quarter three, which doesn't reflect two days of inventory reduction and one day of receivable reduction. One of the most important key positive improvements that was reflected in operating cash flows with OCF at INR 49 crores in the quarter. This is driven by our ongoing focus on EBITDA margin expansion and improvement in working capital management.
I am confident that we are on track to deliver operating cash flow for the year in the range of INR 100 crores through improvement in EBITDA margin profile and initiatives being undertaken to further optimize working capital. You can also see a steady improvement in the return ratios. Return on capital employed improved to 14.8% in quarter three from 13.8% in quarter two, and return on equity, excluding impact of new labour code in India, increased to 12.3% from 11% in the last quarter. Operationally, our reach and network have continued to expand.
In the first nine months of the year, we catered to over 97,600 retail pharmacies and more than 3,000 hospitals across 505 districts in India, supported by 131 strategically located warehouses and 89,200 plus SKUs sourced from more than 3,100 healthcare manufacturers. Our relationships with such a huge range of healthcare product companies, nationwide pharmacies and hospital reach, robust and technology-enabled last mile distribution infrastructure creates a very strong business moat and differentiated value proposition for both our suppliers and customers. Now coming to inorganic growth progress. We closed acquisitions of Anand Medilink in Pune, Ace Cardiopathy, Bioaide Technologies, and Anand Chemiceutics in MedTech segment. Each of these acquisitions further expands our distribution reach, widens our product segments, and builds new capabilities for us.
Particularly in MedTech segment, we have added scale in IVD, cardiology, POCT devices, lab consumables, et cetera. As I have already guided, post completion and integration of all these businesses, annualized revenue will cross over INR 1,000 crores in MedTech segment. There will be a positive impact of 70- 90 basis points on gross margin and 50- 75 basis points on EBITDA margin on pro forma basis after all the acquisitions are integrated with us. This segment represents an attractive growth opportunity for Entero along with margin enhancement potential. Overall, we are very well poised to accelerate the growth, margin expansion, and cash flow generation journey, post-integration of the acquisitions, and are on track to achieve our FY 2026 guidance. With this, I close my opening remarks and invite people to ask questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Avnish Tiwari from Vaikarya Change LLP . Please go ahead.
Hi. Congratulations on closing these medical device transactions. Prabhat, can you articulate your growth strategy in this medical device segment? Let's say for your branded pharmaceutical segment, you needed acquisitions as well to grow. But here, what kind of levers you can pull to accelerate growth here?
Yes. Thank you, Avnish. I believe that in MedTech segment, you can grow much faster without a lot of inorganic acquisitions because unlike pharma, in MedTech, you can do a lot of pan-India exclusive distribution deals with a lot of companies because there are not many specialized distributors in this space in India. The companies also are looking for people who have pan-India reach who can give customer access at an all-India level to them, right? There are very few players who can do that. So now we have kind of built a reasonable scale of INR 1,000+ crores in MedTech. I think it gives a lot of opportunity for us to grow on from here.
Right. What is the existing infrastructure you think you can leverage, either physical or human, as you grow, which you already have? If you can just help us understand that part.
Yeah. So like we have 130 warehouses. We have existing relationships with all these pharmaceutical companies who also have MedTech segments, right? For example, Abbott has diagnostic devices and stuff like that. Same with Roche, right? So, our existing relationship with the companies, our distribution infrastructure further provides leverage to grow this business together. There is a lot of synergies that can happen between pharma and MedTech for us.
Right. The second question I had on the margin side. If you look at the leverage to over time with the scale improving margins, it was somewhat different here in MedTech because as you gain scale, you get better pricing terms compared to more association-driven segment, which is branded pharmaceutical.
Avnish, can you repeat the last part? I did not understand very well, sorry.
I meant to say, as you become bigger, as you grow in this business, do you have ability to get better margins or better volume-based pricing in MedTech? Is it better than you would have in branded pharmaceuticals?
Yes, certainly. The reason because in the MedTech segment, the distributors not only play only the demand fulfillment part, but they also play an active role in demand creation part, right? So the companies also depend on distributors to grow sales, right? And for that, if you grow their business, they are ready to part with more margins with distributors.
Lastly, is there an opportunity for over time getting to private label here, which you have seen some places, but in India, you think not today, but over time when you scale up in this business you can think on that line?
Yeah. One can think on those lines, on launching some of your labels as well. We have some private labels on home healthcare, but as of now it is not scaled up. It is still pretty small, right? But over a period of time, we will definitely push for it.
Great. Thanks, Prabhat, and wish you the best.
Thank you. The next question is from the line of Dev from Seven Rivers Holding. Please go ahead.
Hi. Good morning, Prabhat. Congratulations on a great set of numbers. Just to clarify, you had given a guidance of achieving a CFO of INR 100 crores in FY 2026, and so far in nine months, you have achieved a INR -8.5 crore CFO. Does that mean that you are looking to generate over INR 100 crores in CFO in Q4 alone?
Yeah, that is what we are shooting for, Dev.
Got it. The earlier guidance that we were given is on your EBITDA margins for the full year to be north of 4%. Looking at the trend so far in nine months, we have achieved around 3.8%. To meet that guidance, we will have to cross 4.5% in EBITDA in Q4 alone. Are you still holding on to that guidance of achieving a 4% EBITDA margin?
Yes. I think now all the eyes will be on quarter four, because everyone can work out this math that on a full year guidance and subtract nine months actual. What needs to be done in quarter four to achieve the full year numbers, right? We are on track to deliver our full year guidance.
Got it. Lastly, just a bookkeeping question from my end. Why has your interest cost gone up significantly while the working capital days have improved? Or rather, you have generated a CFO this quarter, why is the interest cost going up?
Because we have been acquiring companies, right? We have been investing in acquisitions so that cash is going out, which was earning interest for us before. IPO funds are almost used now.
Are there any plans for a further fundraise or loading on some additional debt for the next set of acquisitions?
Broadly, we have completed all the big acquisitions now. As of now, we are not looking forward to raise any equity capital. There could be some movement in debt, but overall, we are not looking to do more meaningful acquisitions from here on. I think next few quarters, we will spend in consolidating what we have acquired because we have made big moves in this financial year. We will wait for some quarters, stabilize operations, improve margins, improve cash flows, and then we will look for new acquisitions.
Got it. Thank you, Mr. Prabhat.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. The next question is from the line of Naman Bagrecha from IIFL Capital Services. Please go ahead.
Thanks for the opportunity. One question. Our listed, let's say peer, highlighted that they have discontinued their Amazon partnership. Does this benefit Entero in any way?
Sorry, I didn't hear very well. What have they discontinued?
Amazon partnership.
They have discontinued the partnership with Amazon. One of our listed peers highlighted on the call that they discontinued their partnership with Amazon. So does this in any way benefit Entero?
Yes, it does.
Okay, thanks.
Thank you. The next question is from the line of Chintan Sheth from Girik Capital. Please go ahead.
Hi, Prabhat and the team. Good show. Congratulations. One question on the acquisition you mentioned to slow down a little bit for next couple of few quarters. So next year, the CapEx required will be lower, right? We will be focusing more on generating cash, retain debt, and then maybe look out for acquisition maybe in FY 2028. That understanding stands correct?
Yeah. That's what I said. Next two to three quarters, we have done some big acquisitions this year. So we'll focus on integrating those with us. There are a lot of other businesses that can grow significantly. MedTech segment also, as I said, is a focus area for growth for us. So, I think next two to three quarters will be a little bit slow on acquisitions. Next three quarters, we focus and improve our margins, improve our cash flows, and then we'll evaluate more opportunities.
Right. On the competition front, as I'm seeing, PharmEasy kind of getting back on its feet, not completely, but they are at least recovering over time. Does that challenge us in a way that by the time we get into the market for right acquisitions, they will also be a party competing with us in acquiring businesses, which we are kind of looking forward to?
In my view, that's not much of a concern for us right now, because when we started off, PharmEasy was acquiring businesses, right? We were also acquiring at the same time.
Then PharmEasy went through its own set of issues, and they-
Right
-quickly stopped acquisition. I am not sure if they are looking to get back into this space aggressively in future.
Even if they choose to do so, I do not see much of a problem because the set of distributors available for acquisitions are huge, while the buyers are only two or three, right? So it is not a-
That dynamic remains the same. That is what you are trying to say?
Yes. It does not change the dynamics much.
Got it. On the employee cost, the provision which you have made, that is kind of retrospective. Does that on the recurring basis going forward have any implication to our employee cost and margins because of the new labour code? Do we see or expect some incremental pressure on employee cost because of the higher provision required under the new labour code?
Chintan, this is Bala here.
You can quantify. Yes.
Chintan, this is Bala here. What we have recognized under exceptional is the past service cost, which is a one-time cost.
Yes.
Going forward, we do not expect the numbers to materially affect our overall margins. We do not expect that.
So ballpark, what we are currently or historically been operating as a percentage of revenue, we kind of-
Yes
-try to maintain and improve upon it.
Yes.
If at all.
Yes, that is correct.
Okay. Got it. Bala, I will join back in queue. Thank you, and all the very best.
Thank you.
Thank you. The next question is from the line of Bhargav Buddhadev from Ambit Asset Management. Please go ahead.
Yeah. Good morning, team, and congratulations on good performance. My first question is it possible to share what could be the gross margins and the EBITDA margins in our MedTech business?
Bhargav, we have not disclosed product-wise margins. But we have given you a pro forma impact of that, like 70- 90 basis points improvement on overall basis for us, right? On the gross margin and 50- 75 basis point improvement on the EBITDA on overall company basis.
Okay. This is primarily contributed by MedTech.
Yeah. Because what we said in the investor presentation, this is just a pro forma impact, not including impact from anything else.
Okay. Understood. Maybe in the next three years, where do you see this business shaping up for you?
We are very bullish and optimistic about this business. This is a unique opportunity in India in a very large market size, more than INR 3 lakh crore of market size available for us to go in with a very clear right to win in this segment. The value proposition that we offer both for our customers and to our vendors is very unique. Not many people can offer the same value proposition. I give, for example, like GLP-1 drugs, just being launched. Almost, I would say, 10% of GLP-1 drugs is being sold by us.
Wow.
The reason being because we have a pan-India presence, we can enter into relationship with the companies, then at one point in time, they get access to a huge market through us.
Okay. Lastly, sir, you said that in terms of acquisitions, now it's time to sort of gear it down. Does that mean that organically only we are seeing almost 20%-25% revenue growth opportunity, and therefore, it makes sense to first integrate the acquisition made so far and then maybe one year down the line again, re-look at more acquisitions?
If you look at the next year, all the acquisitions that we did this year are basically in the second half of this year, right?
Sure
Part of it in quarter three and some in even quarter four. So, the full impact of these acquisitions will be visible in the next financial year. So a lot of growth will come just because of the timing impacts of acquisition that we did this year, right? Plus the organic growth. Next year, the revenue growths are all sorted, and we would want to focus on first few quarters on improving it. Then anyway, once we see the cash flows and all that coming, we will keep identifying opportunities and maybe do something next year for FY 2028. But FY 2027 is more or less sorted just because of the work that we have done in this year.
Lastly, sir, do we have any exposure to this nutraceutical market? How big is that for us? Is it likely to become big?
We have exposure to nutraceutical. We are doing distribution for Himalaya, Dabur, Zydus, many companies, Wellbeing, many nutraceutical companies, right? So it is part of our portfolio. If they grow at a rate higher than the overall IPM growth rate, we will enjoy that growth rate in our business as well.
And herein, the margins will also be better, right? Because they need you more than you need them, or maybe I am wrong.
Both need each other. So it is like if those products are being sold at a medical counter, pharmacy counter, or hospital, it is part of our portfolio. So the retailers will take it from us. I do not see any big meaningful difference coming from there. See, we are an aggregator. As I told you, we have 89,000 SKUs in our portfolio with more than 3,000+ companies. I do not think anyone would have such a big portfolio. So any few companies will not make a big difference in that portfolio.
Sure. Great, sir. Thank you very much, and all the very best.
Thank you. Ladies and gentlemen, you are requested to restrict your questions to two per participant. The next question is from the line of Akshat Mehta from Seven Rivers Holding. Please go ahead.
Hello, sir. Am I audible?
Yes.
Hello.
My first question is on the growth path, sir. This year that we guided for 30% like-to-like growth, right? That implies that we will have a 35% growth requirement in Q4. Will we be able to achieve that? And sir, are we planning to get to a 35% revenue growth rate? On the other side as well, sir, given the acquisition slowdown that we are expecting next year, what is the kind of growth that we should look forward to? Is it 30% or 20%-25%? What should we bake into our assumptions?
Coming first to answer your question on this year, which I answered also previously in this call, that Q4, we can work out the math. You are right in your math that to deliver 30% like-to-like, we will have to grow 35% in quarter four, right? Same for margin, same for OCF, everything goes. What I said, we are on track to deliver full year, which means we are on track to deliver Q4.
Okay. And sir, next year, how should we look at growth?
Next year, whatever acquisition that we have done this year, the impact of this will be felt in the next year, in terms of revenue growth. Plus, there will be organic growth as well. Even without much of an acquisition, our growth rate is not going to materially come down.
Should be. Yeah. Okay, sir. Next is on the margin side.
Maybe I will give you in Q4 conference call, probably I will give you the broad range of numbers that we can look for next financial year.
Okay. Sir, next question is on the margin parts. You said earlier that we are obviously looking at doing 4.5%. Can you help us understand, what will be the factors that will drive 4.5% margins in Q4?
See, the impact of MedTech acquisitions will drive the margins up, plus all other factors that we continuously work on.
Okay. Just a small bookkeeping question as well, sir. Our other expenses have kept on increasing very sharply, every quarter-on-quarter. So what is the key factor behind increasing other expenses?
When I say the MedTech acquisitions and all, they come with a higher gross margin, but at the same time, they come with a higher cost also because they are in the business of demand generation also. So their cost structures are not as lean as pharma distribution. At the same time, their gross margins are also high. So one should look at the net EBITDA margin rather than only gross margin or only operating leverage. Excluding that, there is a good operating leverage on our business. In fact, even inclusive of that, our total, we were like 20 basis points improvement over quarter one of this year. Quarter one, our expenses were like-
[inaudible]
-it was 6.4%, now it has gone to 6.1%.
Okay. One last question, sir. Just wanted your views on what will be the impact of these new trade deals that have happened with U.S. and E.U. on the industry as a whole and probably for the company, if you have any share of views on that.
I can speak about our company. In our company, we are insulated from these global trade deals and all that because we are focused on domestic India market, right? We are not exporting anything out of India, and our import component is also very low, right? We are practically more impacted by what happens in India consumption story, what happens in India macro, what happens in India healthcare rather than U.S. or E.U. trade deals with India.
Will it not be positive for us if there are-
Sorry to interrupt you, Akshat.
Yes.
Can you please rejoin the queue for more questions?
Sure. Thank you.
Thank you. Ladies and gentlemen, you are requested to restrict your questions to two per participant. The next question is from the line of Rikeen Dalal from Ficom Advisors LLP. Please go ahead. Rikeen, you can go ahead with your question.
Hi. Thank you for taking the question. It is Ronil Dalal. Sorry, I think there is a mistake in the name. My first question is that on the cash flow from operations, you had mentioned to an earlier participant that we are on track to do over INR 100 crores for the fourth quarter. What could be the drivers or mathematics behind that? What are your assumptions there?
The assumption would be increase in EBITDA margins and reduction in days of working capital. Basically, cash flow is a function of these two only, right? How much margins we are generating, adjusted for change in working capital.
We are still on track for working capital days moving towards INR 60 crores?
Yeah, what we are saying is we are on track to deliver that INR 100 crores of OCF, right? On a full year basis, which means that it will have to happen in the fourth quarter.
Right.
Because quarterly basis, we are almost breaking even on cash flow, which is a significant improvement if you consider what was last year.
Yes.
It is not that everything is going to happen in last quarter only. In quarter three also, we generated almost INR 49 crores of positive cash flow compared to INR -21 crores in the last year, quarter three. So it is almost like INR 70 crore improvement has happened in this year also in one quarter itself.
Sure. The next question is that I just wanted to check some of your older acquired companies, like maybe if I give an example of GS Pharma, is reporting losses while the revenues are still increasing. So what factors are contributing to this? What are your thoughts around shutting down companies which are loss-making for extended periods of time, in case any such companies you are having here?
We have done similar actions before. We have closed down. We closed down a company called CPD Pharma before. We closed down a branch in Tirupati before. We closed down a branch in Belgaum before. So that is a normal process, where we see that particular subsidiary is not making sense, then we kind of walk away from it. Specifically for GS Pharma, I think it is also because of the interest being charged from Entero to that subsidiary. On a EBITDA level, they are not at loss.
Right. Next is procurement from pharmaceutical companies currently centralized, or does it occur at the individual entity or pharmacy level? The second is, do you operate on a hub-and-spoke distribution model in markets such as Mumbai, Bengaluru, and Hyderabad?
Coming to the first question that whether it is centralized. All the procurement is happening at the local level. The supplies are being received at a local level from their local CFAs. The discussions, negotiations, and anything like that is happening at central level, but the supplies are happening at local level.
We get the benefit of centralized purchase-
Sorry to interrupt you, Mr. Dalal. Sorry to interrupt you. Can you please-
Yes, the same question.
The same question.
I think that the question is not answered yet.
Okay.
Yeah. Go ahead, Ronil. Sorry.
No, I was just saying that the question was left unanswered. The second part was on the hub-and-spoke. Do we get the benefits of centralized purchase?
Yes, the centralized purchase, the discussion, negotiations, and all that happen at the central level, but supplies happen at the local level because it does not make sense to buy centrally in one warehouse and then redistribute to 130 warehouses, right? Because that will just add to your cost. All the deals and discussions happen at the central level, but supplies we are receiving at the local level because that is the most efficient way to do it.
The hub-and-spoke, sir?
What exactly would you mean by hub-and-spoke?
No, I was saying, let's say supposing like Mumbai, Bangalore, Hyderabad, places where you have a lot of volumes. Instead of having many warehouses, would you maybe have some centralized warehouses? Because earlier we did not have that. I was just wondering, in case we have transitioned to having large warehouses, which then cater to for smaller areas in-
It is not possible to supply Hyderabad from Mumbai, okay? For two reasons. One, that we are in the last mile business where the-
No, not Hyderabad. Sorry, sir. Sorry to clarify, but not Hyderabad from Mumbai. In Mumbai, you would have large warehouse catering to Mumbai. Bangalore, larger warehouses catering to Bangalore. For example, earlier, you may have had maybe 10 warehouses in the city of Mumbai, which are smaller in size. Maybe then you move to a large warehouse-
Yes
which then caters to two, three smaller ones. Then you move from 10 warehouses to four, example, like.
Yes. That we have. We have a large warehouse in Mumbai, which is catering to large part. And from there, we supply to other smaller places also like Thane and others, right? That always happens.
Right. Okay, thank you. I will get back in the queue.
Thank you. The next question is from the line of Vansh Solanki from RSPN Ventures. Please go ahead.
Hi, good morning. My question is on private labels and generic and MedTech. Currently, how much revenue contribution is from these segments? And after the acquisition of Anand, what will be the revenue contribution you are expecting from these segments for private labels, generics, and MedTech?
MedTech, I think we have given that with post this INR 1,000 crores coming into our books, it will reflect almost 15% of our business.
Right.
Generics and private label are still very small part of our business, in low single digits.
Okay. Second is on that our effective tax rates are continuously lower, like 16%, 18% in quarter one and quarter two, and also this quarter also it is 13%. Are we getting benefit from taxation side, any tax sales or this will continue, or we will come to the normal 25% corporate tax levels soon?
Vansh, currently we have certain losses available to us, carry forward losses, on account of which currently you are seeing the effective tax rate at about 18%. As and when those losses get completely consumed, the tax rate obviously will slowly go up a bit. But for this financial year, we are holding on to our 18% of effective tax rate.
Can you give me a number, how much accumulated losses are there as of now? Or maybe if you are not, the number is available for now, then you can give also for September, if you have.
If you look at the losses, probably we will utilize all those losses maybe by next year.
Okay. That will be also helpful. Last question on the bookkeeping. How much is gross debt and net debt level we have as of quarter three end?
Net debt is at about INR 200 crores, and we had cash of about INR 250 crores.
Okay. Thank you. That is from my side, and all the best.
Thank you.
Thank you. The next question is from the line of Swaraj Mehta from Perpetual Capital Advisors. Please go ahead.
Hi. Thank you for the opportunity. I am relatively new to the company. I just had one question. What metrics do we look at before acquiring companies, and what is the reason for acquiring companies? Is it scale or reach to client? Thank you.
Say that again.
What do we look at when acquiring companies, and what is the reason to acquire?
We acquire distributors to gain entry into those geographic segment and product segment, right? With any acquisition, what comes to us is basically a portfolio of companies, a portfolio of customers, right?
Yeah.
Operating in a particular product segment or in a particular geography. Did I answer or do you want me to elaborate more?
Yes. What metrics do we look at before acquiring companies? What are the key things we look at before acquiring a particular company?
Basically, the most important criteria we look at before acquiring a company is what is that company going to add to us? Because we are already sitting on a wide network today, right?
Yes
A duplication of our network. So, what is that unique thing that is going to add to us, which will be more difficult or time-consuming for us to build ourselves? So either he is giving us a new geography that is a difficult geography for us to go on our own, or he is giving a product segment that is very difficult to build on our own, or it will take time for to build on our own. So if you look at last year's acquisitions, and I have given that in one of the slides, and rationale for each of those acquisitions. So some acquisition gave us entry into MedTech segment, which was not our forte before. Some people gave us trade generic exposure. One of the acquisition gave us one of the largest presence in Pune as a market, which is a large market.
So like that, every acquisition has to add something to us. Either a new geography or a new product segment, like that.
Got it. Thank you.
Thank you. The next question is from the line of Pranay Roop Chatterjee from Burman Capital Management . Please go ahead.
Hi. Good morning. Am I audible?
Yes.
Hi. Yeah. My question is pertaining to the launch of GLP-1 products expected in the near term. I am thinking about it from two perspectives. One is you have an existing product which contributes. Obviously, you put it the other way, where you sell 10% of GLP-1 products. Based on the numbers I can see at an IPM level, that would likely be high single digit to low double-digit percentage of your existing business. So it is a meaningful contributor. One impact could be when these cheaper alternatives come into the market, there could be some hit to your existing business, or there could be a cap to further growth because this existing product has been growing tremendously on a month-on-month basis.
The other second order impact is that if there is a new product that is expected to be launched, I would expect that a pan-India distributor to get an up-fronted disproportionate benefit, just for the sake of easier access to the market or wider access before it normalizes and all the smaller guys also get a piece of the pie. From these two perspectives, netting off against each other, how do you see your overall throughput expanding over the next, let's say, four quarters simply because of these new products launching?
Pranay, one, we have to look at our base. Our base is huge. Our base is today more than INR 7,000 crores annual revenue, right? So, any one particular product is not going to make a very meaningful change in our growth profile or anything like that, right? Because even if we are doing, let's say, the GLP-1 is still a very small proportion of our sale because we are selling so many other products at the same time. Let's say by end of March or April, the semaglutide new players come in, generic players come in. We will continue to sell their products also. How much share they will take from the innovator, because today, most of the sales is only from the innovator, right? So overall, the market is going to expand.
But how much it will impact our own growth, I do not think so any very meaningful part I can estimate right now.
Got it. My second question is more a hygiene question. If I simply divide your organic like-for-like growth of 17% by the IPM growth of 12%, it comes to about 1.4. I know it might be a myopic way to look at your business on a quarterly basis, but that being said, mathematically, this is the lowest quarterly outperformance we have seen, at least since I have started collating the numbers from back in FY 2023. So is there any one-off, or we should just ignore this quarterly volatility?
I would say just ignore this quarterly one. I was also surprised to see such a huge growth on the IPM side because last four, five quarters, the IPM had been growing by 7%, 8%, and in this quarter it grew by 12%.
The denominator completely changed. I wouldn't read much into it.
Got it, sir. Thanks and all the best.
Thank you.
Thank you. The next question is from the line of Binoy Jariwala from Upachaya Investments. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Sir, there are two questions from my side. One is that you have already called out that next two, three quarters, the focus will be on integrating the acquisitions, improving the margin profile, and working on reducing working capital. Is there any target for FY 2027 that you would like to call out in terms of cash flow generation as well as working capital days reduction? The second question is, how many more INR 100+ crore revenue size acquisitions are actually available now for you, going forward, whenever you decide to increase the pace of acquisitions?
Your first question. On FY 2027, I am not giving the guidance, except that I can only say that FY 2027 is going to far better than FY 2026. Given the fact that a lot of work we have done in the second half of FY 2026 is going to have a full year impact for next year. Okay. We will talk about the next year numbers in the next call, when we will have the full business plan and everything ready. Coming to your second question, how many distributors of above INR 100 crores are available? There are many available. Even today, we have so many in our pipeline. When we decide to go back to the market and shop for more, we would find enough targets.
Just to follow- up on this, would you say that whenever you go back to the market, you have a pipeline visibility of at least a couple of years?
Pipeline is already there with us. There are many people who keep approaching us for collaboration. We have the pipeline ready. As I told you, next two, three quarters, we improve on our own internal operations, internal metrics, and then we will go and see which of those pipeline are still there and which of those pipeline would make sense to us.
Understood. If I may ask one more question.
Sorry to interrupt you, sir. Can you please rejoin the queue for more questions?
Sure. No problem.
Thank you. Ladies and gentlemen, you are requested to restrict your questions to one per participant. The next question is from the line of Vineet from Toro Wealth Managers. Please go ahead.
Hi, sir. Am I audible?
Yes, yes, you are.
Yeah, sir. My question was with respect to one of the participants asked you about the other expenses being increased this quarter, right? If you can mention about a few of the top five line items in the other expenses, because I did not exactly get what MedTech is actually making the other expense to increase.
In MedTech, we are doing demand generation also, which means higher manpower and more qualified manpower as compared to warehouse and delivery manpower in demand fulfillment business. There are other marketing and promotion expenses also there in MedTech. These are the two big cost items that are there when you do demand generation activity as well.
Okay. I understood.
That helps you to drive higher gross margins, but that expense ratio, they will be higher compared to pure play pharma distribution.
Mm-hmm. Got it. And sir, if you can also give a broad understanding-
Sorry to interrupt you, Vineet. As we have a long queue, can you please rejoin the queue for a follow-up question?
This was my second question only.
Yeah. But we are restricting to one question per participant to ensure that the management answers all the questions.
Okay. I will join the queue then.
Thank you so much. The next question is from the line of Reshab Sisodiya from Bastion Research. Please go ahead.
Hi, sir. Thank you for the opportunity. Am I audible?
Yes.
Yeah. Hi, sir. Sir, I have a slightly longer-term question about the business. If you could just explain the levers behind the organic growth which we have had 1.5x and more higher than that. What are the levers, if you could just quantify? Let's say, is it the increase of the wallet share of the existing customer? Is it the cross-sell that we do to the newer acquired customers via the M&A activities? The reason I am asking, I am trying to understand what would be a sustainable growth rate for our business, let's say five years down the line, when we would be out of any sizable or meaningful acquisitions.
Yeah. A very good question, actually. This is basically the core of our business. Why should we grow faster than the industry, or why should we grow faster than our competitors, right? This is totally dependent on the value proposition that we offer to our customers. What do we offer to our customers? We offer to our customers a very huge product portfolio, right? Today, the pharma market is so fragmented that for any retailer to run his shop, he needs 6,000 different items, right? Those could be divided over 300, 400 companies, right? We offer him an opportunity to consolidate his buying through one supplier, right? So he gets a huge amount of convenience in terms of getting a large portfolio fulfilled through us. Secondly, our service levels to him in the sense that we are delivering two to three times per day.
We are running our warehouses 24/7. He can place the order right before closing his shop, and he gets the goods just before opening his shop in the morning. He can order on our app, so he doesn't have to do manual ordering and all that. All this is a big value add for a customer, and that helps us to gain wallet share at his counter. We also expand our customer base. We keep hunting for new customers, new shops that are open in the area. We expand our geographical reach. We are going from main center in the city. We are also going to the nearby districts where we offer the same value proposition because we are sitting on a huge portfolio, the portfolio of products.
That gives you a huge advantage over anyone else in business. That's the reason why we have been acquiring also companies to build that portfolio because we have the customer. It's like a two-way moat. Why do so many companies come to you? Because you have such a huge customer base. Why do so many customers come to you? Because you have so many products to sell to them or they can buy from you. That moat reinforces itself every time, every time we add companies or every time we add customers.
Understood. Sir, can I have a small follow-up on this?
Yeah.
Can you just give me any guidance for any maintenance CapEx for our business? If you could just explain me that. We have been continuously increasing our overall warehouses. I'm just trying to understand what is a peak asset terms for us or if any color on that part. It would help us understand better what would be the incremental return on capital potential for our business, given we are continuously decreasing our working capital days and see what would be further operating leverage benefits for our business.
As you know, our business is not capital intensive, it is only working capital intensive. So from a fixed assets point of view, we have a very small fixed asset base because all of the warehouses are on leases. So the only equipment that we would put there is storage equipment and cooling equipment to maintain the temperature and stuff like that. From a CapEx point of view, it is very minimal compared to the revenues that we generate from that warehouse. Probably to do one warehouse, you would not need more than INR 30 lakhs-INR 40 lakhs of CapEx.
Understood, sir. That is from my side. Thank you. All the best.
Thank you. The next question is from the line of Prateek Srivastava from Nivesh Wisdom. You are requested to limit your questions to one per participant. Please go ahead.
Sure, madam. Sir, I recently attended one of the con calls for the Ayurvedic healthcare provider. I think they were openly mentioning the call that they have tied up with you for the distribution of their Ayurvedic products. But they also mentioned that for allopathic and other devices, the margins are high, but for these, the margins are low. So is that true? And why are we getting into low margin, if that is true, sir? I want your
What did they say in the last? I didn't hear that conference call, so you'll have to tell me what did they say.
In that conference call, sir, they were saying that they have anyways tied up with Entero for their Ayurvedic supplements and other products for distribution. But they were also saying that it is better for them to tie up, and they were saying they are getting that at a lower margin than what typically you charge for other allopathic sort of products, like other electronic devices or other things. Is that true? I want to hear from you also on that. What are the margins going to be in the Ayurvedic products distribution, sir?
Ayurvedic products don't carry lower margins than other pharmaceutical products, right? The normal pharmaceutical product margins are like 10% +, right? It's in the same line or it could be more. It won't be less.
Okay. All right, sir. Okay. I can ask just one more question, sir, because on the U.S., now there are other U.S. devices also coming in.
Mr. Prateek, sorry to interrupt you. Please rejoin the queue if you have a follow-up question.
Okay, sure.
Thank you. The next question is from the line of Sumit from Finserv Analytics. Please go ahead.
Thanks for the opportunity. I have a simple bookkeeping question on debtors outstanding for more than six months. What is the amount of debtors outstanding for more than six months as on December 25? Hello, am I audible?
All the debtors which are at different aging profile, they are adequately provided. We are not giving the debtor aging separately in the deck.
Okay.
As per the accounting policy of the company approved by the auditors and the board, whatever provision is required to be made is being made based on the aging profile of the debtors.
Okay. I wanted to understand what is the amount of debtors outstanding for more than six months as of December 25.
We don't give that kind of a data. Why would you need that data? What would you do with that data?
Okay. Just for the valuation purpose and to understand how much provision can come in future. Provision for doubtful debts.
Just based on that data, you wouldn't be able to take a judgment on how much provision is required, right? That judgment is being taken by the management.
Okay. Understood. Thanks.
Thank you. The next question is from the line of Chintan Sheth from Girik Capital. Please go ahead.
Yes. Hi, Prabhat. Just a follow-up and clarification on the cash flow. Sorry to hop on it. You mentioned third quarter last year was INR -23 crore, and first half, I think it was INR -62 crore . So nine months we were down INR 85 crore, and the full year was down INR 77 crore. This year we are kind of recovered from INR -85 crore to INR -8 crore. Already INR 100 crore delta largely has been covered. Is just the numbers right? I am just trying to reconcile that. You mentioned INR 23 crore, last year it was INR 62 crore. INR 85 crore was nine-month negative.
Yeah. Chintan, numbers are right, and when you are looking at operating cash flows, yes, there has been a significant improvement in Q3.
Prabhat mentioned earlier, we have done INR 49 crore of positive in Q3 itself.
Right.
We were INR -47 crore in Q1, INR -10 crore in Q2. So we are about it as of YTD, and we maintain our full year cash flow projections, operating cash flow projections. We maintain that.
Great.
If you look at last year on a full year basis, we were INR -77 crore.
Down INR 77 crore. Correct. So fourth quarter implied was positive only.
Yes.
Yes.
Yes. Last year, fourth quarter was positive, yes.
Got it. I think great. Thank you for the clarification. I will join back.
Okay.
Thank you. Ladies and gentlemen, we will take this as a last question for today due to time constraint. I now hand the conference over to Mr. Prabhat Agrawal for his closing comments. Over to you, sir.
Well, thank you everyone for joining this call, and thank you for your trust in the company. If you have any questions which has been left unanswered, please do reach out to SGA or to our IR team. Thank you once again for joining. Bye. Take care.
On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.