Ladies and gentlemen, please stay connected. The call will begin shortly. Participants, you have been connected to the Jagsonpal Pharmaceuticals Ltd conference call. Please stay connected. The call will begin shortly. Ladies and gentlemen, you have been connected to the Jagsonpal conference call. Please stay connected. The call will begin shortly. Thank you. Ladies and gentlemen, good day and welcome to the Q4 and FY 2025 earnings conference call of Jagsonpal Pharmaceuticals Ltd, hosted by Go India Advisors. 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. Should you need assistance during the conference call, please signal an operator by pressing a star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Soumya from Go India Advisors.
Thank you, and over to you, ma'am.
Good evening, everyone, and welcome to the Q4 and FY 2025 earnings call of Jagsonpal Pharmaceuticals Limited. We have on call with us, representing Jagsonpal, Mr. Manish Gupta, Managing Director, and Mr. Sachin Jain, CFO. We must remind you that discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks pertaining to the business. May I now request the management to take us through the financial and business outlook, subsequent to which we will open the floor to Q&A. Thank you, and over to you, sir.
Yes, thank you, Soumya, and good evening to all. Thank you for joining us in this earnings call of Jagsonpal Pharmaceuticals Ltd. We are pleased to welcome you all as we share company progress and discuss our growth strategy. I must also apologize to keep you waiting for a couple of minutes. That was simply because of the technical time it took to log you all in into the system. Systems have been running a bit slow, unfortunately. We appreciate your interest in JPL or Jagsonpal and your continued support as we navigate through this pivotal phase in our growth journey. We continue to be assigned; we continue to be on a science-based approach with disciplined execution, backed by opportunistic inorganic strategies to create a stronger domestic pharma business. At the outset, I'm pleased to introduce Mr. Sachin Jain, our new CFO, who has joined us in February 2025.
Sachin is a Chartered Accountant and an MBA in Finance, and he brings in over 23 years of experience across multiple sectors. His financial achievement is already contributing meaningfully to Jagsonpal's growth and efficiency. I'm sure you would have all gone through the press release, the financials, and the investor presentation issued by us yesterday on our Q4 and FY 2025 results. Our various strategic initiatives undertaken in the last few years are already reflecting positively in the financial performance, as well as improving capital efficiency. As you may be aware, Jagsonpal saw a new strategic direction in June 2022, with Infinity Holdings acquiring a significant 43.3% stake and joining as promoter group of the company. I joined Jagsonpal sometime in July 2022, and it has been a phenomenal journey for me and the organization since then.
I take this opportunity to summarize this three-year journey on an ongoing transformation of nearly a 40-year-old family business to now a nimbler, aggressive, and more disciplined execution business under the oversight of a strong and independent board, as well as a strong framework of governance. The transformation had multiple significant positive outcomes, as well as its share of challenges. Looking back, Jagsonpal's business in FY 2022 was a low-growth, low-margin business with significant working capital requirements at almost 60 days of sales. On a positive side, the company had a good franchise of brands, especially amongst Gyneas and Orthos, and was a debt-free company with about INR 76 crore of free cash and investment at that point of time. We had started off riding on the success of our dydrogesterone franchise, which had great promise of growth at that time. In fact, it became our largest product in no time.
The initial focus was also on improving the business characteristics, that is, the quality of business in terms of hygiene and profitability. Overall, I believe there has been one area where we have fallen short of our objective, which is organic growth. We certainly did not anticipate the emerging competitive intensity in dydrogesterone franchise, which hit us hard in FY 2024. Coupled with the counterfeit product availability in Indomethacin the same year, it pulled down our performance for that year. I believe these learnings have made us stronger and a more resilient organization, which is also reflective in our strong recovery in FY 2025. Other than that, I believe we have made great progress in all our other objectives.
Today, JPL has amongst the best operating metrics amongst peers of its size, with operating margins in excess of 21%, working capital at 13 days or 3.5% of sales, and cash balance in excess of INR 145 crore. This is after concluding an investment of close to INR 93 crore in an acquisition, as well as higher dividend payouts in the last two years. Further, we now have a demonstrable strength of integration and value creation through acquisitions. We also have a more refined business model, which is balancing execution discipline with a growing pipeline of high-potential products. Overall, this three-year transformation is visible in all our operating metrics. Sales have grown at 23% in the period. However, the operating EBITDA has risen by 131%, with a margin expansion of one thousand basis points. Our PAT has nearly doubled, with PAT margins expansion by 550 basis points.
Cash and cash equivalents have surged 91%, underlining a robust financial foundation. Overall, we have generated over INR 161 crore of free cash in the last three years, which is more than our operating EBITDA combined for this period, as almost INR 24 crore came out of working capital reduction. FY 2025 marked the company's boldest year yet. On May 16, 2024, Jagsonpal signed a business transfer agreement to acquire the India Bhutan business of Yash Pharma. This acquisition expanded our therapeutic coverage, providing us access to emerging segments of derma and PDF. It also strengthened our reach in the western and eastern part of the country, as well as expanded the doctor reach by 50%. Further, we diversified our Faridabad facility in Q3 for INR 41 crore , thereby enhancing growth capital and operational flexibility. In December, Jagsonpal also achieved a key milestone as Indocap became our first INR 50 crore brand.
As we speak, we just strengthened our franchise with the launch of Indocap P, a potent fixed-dose combination of indomethacin 25 mg with paracetamol 325 mg, offering enhanced analgesia with reduced side effects. Operationally, we had our best year with revenue growth of 29% and a 59% increase in our operating EBITDA. Sachin shall, of course, delve deeper and provide deeper insight into our financial performance for the year. Amongst other updates, I wish to inform that we had to terminate our agreement with Resilience to acquire that business. This decision was taken due to inability of sellers to include certain critical CPs for the transition. This decision has no material impact on the company. We also welcome Pratham Rawal, an experienced professional with around six years of experience in corporate secretarial and compliance functions.
I wish him all the very best and a companionship that will together help the company grow and strengthen values. Looking ahead, we remain focused on our three-pronged strategy, driving growth through new product launches, optimized pricing, and volume expansion, complemented by inorganic opportunities in key territories and/or wider geographic reach. Amidst evolving market dynamics and global trends, we expect to achieve 15% plus revenue growth in the current year, with a higher growth in our operating profits with improved margins. Beyond FY 2026, we continue to maintain our earlier guidance of revenue growth of 12%-14%, with a potential 100-150 basis points margin improvement year- on- year. I now request our CFO, Sachin Jain, to take over the conversation and provide his most comprehensive introduction, as well as financial updates.
Thank you, Manish, and good evening, everyone. It's a privilege to address you all as I begin my journey with Jagsonpal. The company is continuously demonstrating strong financial momentum and strategic clarity. Giving a very brief description about myself, I started my professional journey 23 years back after completing my CA and started with a manufacturing company. My last assignment was with the Club One Air backed by UFLEX, a pioneer in the packaging industry at a global level. As Manish has told, I joined this company four months back in February 2025. Coming to the financial results, we closed our quarter with a revenue of INR 586 million against last year's quarter of INR 435 million. Our growth was 34.7%, and in absolute number, it is INR 151 million gross. Talking about the operational EBITDA, it's INR 97 million against last year of INR 49 million, a growth of 97%.
In terms of margin, it is 15.6% against last year of 11.3%, a growth of 530 basis points. Talking about the PAT, we closed the quarter with a PAT of INR 56 million against INR 35 million last year, which is a growth of 88.5%. In terms of the margin, PAT margin is 11.2% against last year of 8.2%. Talking about the full year financial results, we closed the year with a revenue of INR 2,687 million against last year of INR 2,087 million, which is a growth of 28.8%. The operational EBITDA was INR 579 million against last year of INR 364 million, an increase of 59%. If I talk about the PAT, we closed the year with a PAT of INR 554 million against last year of INR 225 million. The margin was 20.6%, and last year it was 10.8%, a growth of 320 basis points.
Our focus remained on the growth, and we closed the year. The operating side, after adjusting the exceptional items, is INR 37.375 million. This exceptional item is towards the sale of the Faridabad facility and certain expenses incurred for the acquisition of Yash Pharma. The combined impact of the exceptional item was INR 197 billion as an income. We closed the year with a cash balance of INR 145 crore. I now open the floor for the questions.
Hello, can we open the floor to Q&A?
Okay, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use hands up 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 Ankur Bhadekar from ULJK Financial Services. Please go ahead.
Yeah, thanks for the opportunity and congratulations on the good set of numbers. A couple of questions from my side. My first question is that the Indocap brand has shown strong growth, but Divatrone has declined by 26%. Could you provide an update on how the Divatrone market is currently shaping up? Also, when do you expect it to stabilize and return to a growth trajectory? When can we anticipate a recovery?
Can you complete all your questions before we dismiss?
Yeah. So my second question is that you mentioned that you will be launching four to six new products annually. What would be the nature of these upcoming launches? Will they be primarily extensions of existing brands or entirely new molecules? These were the two questions.
Yeah, thank you, Ankur. Let me first respond to your first question, which was pertaining to Divatrone or dydrogesterone . Clearly, that market has undergone significant transition in the last three years. While the molecule has grown, so has that competitive intensity. We had, at one point of time, close to 100 competitors in that market. The growth of that molecule thereby stopped. It grew to about INR 1,000 crore molecule as per IQVIA. Given the competitive intensity, it became a push molecule rather than a pull molecule at the doctor level. From our perspective, at one point of time, this franchise, the dydrogesterone franchise, was the largest and close to INR 40 crore in terms of internal revenue. Post the competitive intensity and variance, there was a lot of push, and as I said, there was very little pull element.
We took a back seat as far as this molecule is concerned, and it has dropped by almost 75% for us. Our business is now stable, but at a much lower level and less than INR 10 crore or about INR 1 crore a month. We believe we'll be back on growth track as far as this molecule is concerned from this year, but it will no longer be as relevant as it was in the past. That's point number one as far as Divatrone is concerned. Your other question was on new product strategy. Clearly, while I cannot disclose too much about it, JPL Plant is doing well in niche smaller molecules. Divatrone or dydrogesterone was one exception in that. We will be sticking back to our basics, which is picking up niche areas and taking a more meaningful share in those molecules.
About half of our new launches would be brand extension, and half would be totally new product concepts. At this point of time, that's what I can tell you as far as our new product strategy is concerned. You would have noticed that in the last 12 months, more or less, this strategy has played out. We became the first company to launch post-menopausal products in the country. We also launched Queezy ER, which was ER version for morning sickness. In fact, the product just got a patent from the CMO that supplies us that product. These are really the strategies that we have used. At the same time, the expansion strategy, which I was just mentioning, our Indocap P, which is a combination of indomethacin and paracetamol, is a brand extension strategy that I just highlighted.
That will continue to be a broad strategy as far as companies are concerned. Does that answer, Ankur?
Yes, yes, sir. And one more question about the therapeutic revenue mix between Gynea, Ortho, Derma, and Pediatrics in your portfolio. What does the current mix look like for FY 2025, and how do you see it evolving with the addition of Yash Pharma? So do you expect the contribution from Derma and Pediatrics to increase, given that most of Yash Pharma's products are mass market, if I'm not mistaken?
That's correct. So the product mix has already changed. Till last year, our therapeutic presence was almost 60% in Gynea and about 30% in Ortho. This was a bit of mixed product. So that was our product mix. As we speak, now it is about 50%. We still continue to be a Gynea-dominated company. We have 50% in Gynea, with the rest of the other three therapeutic segments contributing about 15% each.
Okay. Lastly, historically, if we check, Q4 has always been weaker as compared to the other quarters. Is there a specific reason for this? Is it due to any seasonality in the nature of the business?
Yes and no. There is very little seasonality, but the stockist purchases come down in Q4. Q4 is always weaker for us, as also for others who are in the domestic market. Now, why it does not reflect so strongly in other companies is because they are both in India and outside India. Generally, in businesses outside India, Q4 is the strongest. Therefore, it gets balanced in other companies. JPL is purely a domestic pharma-focused company. Therefore, our Q4 continues to be always weaker than the rest of the three quarters. It is a bit of seasonality, but more importantly, I think the purchasing behaviors of stockists who do not tend to pick up much quantity in March.
Right. That was helpful. Thank you and all the best.
Thank you, Ankur.
The next question is from the line of Aditya Chheda from InCred Asset Management. Please go ahead.
Yeah. Can you break down the revenue in organic and inorganic? Also, for organic, can you break it down into volume, price, and new product for FY 2025?
Let me respond to the extent I can. Clearly, the first part of your question, breaking into organic and inorganic, I have a very clear answer. 8% of our growth is organic growth, and the rest is inorganic. While we have reflected a 28% growth during the year, 8% of that has come from organic. However, what is very important to note is this growth was 1% in H1, which has increased to 15% in H2. Clearly, the change of strategy that we had adopted from the second half of previous years in FY 2024 has started reflecting in faster growth. H1 was lower growth because that is where we bore the brunt of Divatrone or dydrogesterone franchise coming down to a new level of business. Clearly, going forward, that is why we are guiding towards a 15% growth in the current year as well.
Now, coming to your second part of the question, it is a very difficult question simply because the product mix keeps changing, and it has changed dramatically, especially because of the Yash Pharma acquisition. Largely, our majority growth would have come from price increases and/or new product introduction. Our volumes in the last 12 months would have been flat. That is because of the drop in dydrogesterone , I would say. Whatever volume increases would have occurred in other products would have been compensated by the loss in volume of dydrogesterone .
Got it. The outlook that is shared for growth is all a function of organic outlook that you are looking forward to, right?
That's true. That's true. Excepting for a small because Yash Pharma business was there for 10 months last year versus 12 months, which it will be for this year. Everything else is organic growth. We can never kind of estimate what will happen inorganically. So we do not build it in our forecast or guidance.
Got it. The last question is on the slide on working capital, where it has come down to almost 3.5% of sales. Can you talk more about the initiatives that were taken forward, and how do you see the outlook for the working capital days or as a percentage of sales going forward? Thanks. These are the questions I have.
Very, very valuable question because this is something that we pride ourselves in. How we manage our working capital very efficiently. Clearly, it was a function of two things. We reduced our receivables in the market through tighter controls. We are now a very disciplined company. Every order is backed by checks, and we encash checks well on time. Our practices in the marketplace are aligned with the best in the industry. Therefore, our receivables in the marketplace are not more than 15 days of sale. That is one part of it. The second part of it came out of reduction in our inventory. Through better forecasting, planning, and management, that is, again, something which we have been able to bring down considerably in terms of days of sale. These are two areas wherein we could bring down our working capital significantly.
However, on the other side, creditors have also come down. Okay? Earlier, we never paid our creditors or vendors on time. For the last 18 months, every vendor is paid on the due date, which is a principle that we have adopted in our company. In spite of that, our working capital has come down. Great, I think, hygiene, the way we conduct business internally, as well as how we treat our vendors. That has, of course, facilitated some of our cost reduction, which is also reflected in improved gross margins in the company. If you were to ask us going forward, I think most of the low-hanging fruits around working capital are now there in place. Reducing it below 3% is going to be not really much different from where we are today. That phase is over.
In the last three years, we have extracted almost INR 24 crore from our working capital. I do not foresee much extraction going forward.
Got it, sir. Thank you, sir.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. The next question is from the line of Subrata Sarkar from Mount Intra Finance. Please go ahead.
Hello.
Hello?
Yes, please.
You're audible, please.
Yes, please. Go ahead.
Yeah. Yes. I have one simple question, sir. What is the on-field manpower that we have added in the last one year? What is the productivity of this EMR, basically? If you can highlight, prior to one year, what was the average productivity, and right now, what is the average productivity? What is our intention or target or, let's say, goal in terms of average productivity where we want to reach? These are the market conditions, industry average.
Yeah. Thanks, Subrata. That's really a good question. Basically, our current medical rep strength would be about 1,000 in the field force, give or take 10 or 20 odd numbers here and there. We have not really changed our field force strength, excepting for the acquisition that we did. Obviously, new field force came in with about 250 reps through Yash Pharma acquisition. Our MR productivity, as we speak, is in the region of 2-2.1 lakh PCPM or per capita per month. The 8% growth that we are talking of actually has come from increased MR productivity. Is there a scope of growing this? The answer is yes. I do not foresee us increasing our field force strength over the next two to three years. Clearly, there is an ability to increase this field force productivity by at least 50%.
That is what we are aspiring or working on. Does that answer your question?
Yes, sir. Do you have any, I know generally industry average is a little bit higher. Where do you want to reach, sir, as such? Do you have any target on that, sir? Not maybe in specific numbers, but at least some ballpark.
See, I must admit that our PCPM will always be a bit lower than the industry or big leaders' average. The reason is, A, we are in subchromic segments and not in chromic segments. B, most of our products are intervention products in gynecology. They support pregnancy. They are not general offtake products, as most or many companies have. These are highly prescription-driven products. Productivity is going to be a little lower than where many good companies will be. Our aspiration will be to take this, which is currently about 2-2.1 lakh PCPM, to between 3-3.5 lakh PCPM over the next three to four years.
Okay. Sir, now, another two questions. One is, sir, in your slide, you have shared, but even still, if you can explain why we called off the Resilience acquisition, basically.
Yeah. There were certain conditions precedent to the transaction. Lastly, these were related to certain challenges around the key trademarks. Fundamentally, when you buy a business in India, you're buying trademarks and the field force. The valuable thing is there in trademarks. A couple of trademarks had certain conditions precedent because they had to get them corrected. That was something they were unable to do within the timelines which we had forecasted. That was the reason why both the companies mutually decided to terminate that contract.
Okay. Sir, last question, more from a strategic point of view. Since last, around 50% of our business comes from a particular therapeutic segment. As you told, we do not have much intention to increase our MR strength in the next two years. We have cash in our books. Isn't it better from a strategic point of view, isn't it a better opportunity or option for us rather than acquiring a new company if we go for a particular brand in our strength therapeutic area if a few brands are available in the gynecology area? If we can add them, buy one or two, and then add up to use our sales force to ramp it up, isn't it a better opportunity or utilization of our strength, sir?
Absolutely right. You're bang on. Clearly, our first intent is to ideally acquire something which fits our strategy in the therapeutic areas that we are present. Having said that, the constraint there is, A, transactions are limited, and B, the asking prices are very, very high. I mean, recent brand acquisitions have been in the region of 8-10 times sales. Sometimes it becomes very difficult to compete at those levels of valuation. Strategically, you are absolutely right. Our preferred approach would be brand acquisition over business acquisition, but at valuation with footwork.
Okay. Thank you, sir. Thank you.
Thanks. Thanks.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Majid Ahamed from Trade Walk Research. Please go ahead.
Yes, please.
My first question, sir, is that the major tablets, like Indocap and Divertrone tablets that are there, but there are a lot of small players who are giving it at a more affordable rate. How are we going to position our brand, or how are we going to do this? Any sort of strategy we are looking at? That's my first question.
Okay. What is your next? If you can ask all your questions in one shot, then we can respond.
Okay. No problem. My second question is, sir, going forward, what type of CapEx that you're looking to do with your cash? Some sort of understanding that going forward, what is your CapEx plan going forward?
Oh, thanks. Thanks. Let me first take the first part of the question. See, India is a complex market. In a way, there are different price points for every product based on customers or consumers. Okay? Every product, be it Indocap or dydrogestrone or any other molecule, there will be products available at higher price, and there will be products available at lower price, and there will be, in fact, products available at virtually no price, which is generic. Okay? It finally boils down to the quality of doctors and quality of patients you cater to. Okay? Every company has its own strategy on where they target themselves. That is how pricing decisions are taken, and you create your own niche in the doctor's chamber. Jagsonpal is focused on specialists, and therefore, we are competitively mid to higher-priced brands in the doctor's chamber.
All our sales happen through prescription. When a doctor prescribes a brand, generally, especially in the areas we are in, they are less likely to be substituted. It is a matter of strategy on where you want to price your product. Generally, you tend to have a consistent strategy. You cannot have one product high price and one product low price, generally. That does not work. JPL, our prices will be generally on the higher bracket. Your second question was around CapEx. If you notice, we follow an asset-light model. We are purely in India, and therefore, all our products for India are using CMOs, which are plenty in this country. We do not have any CapEx plan. Our only investment is in computer infrastructure, the laptops and all that we have in offices and in some select field force locations.
Our investment or real use of cash is going to be only for acquisitions, which could be for brand acquisition and/or business acquisition. If we do not find any good target in the next couple of years, of course, this cash belongs to the shareholders, and we would be rather returning this cash in an appropriate form to the shareholders rather than doing anything not in line with our strategy.
Got it. Got it. Really great about your CapEx allocations. All the best.
Thank you.
Thank you. Participants who wish to ask a question may press star and one. The next question is from the line of Hardik Upadhyay . An investor, please go ahead.
I have two questions. First is, whether the company is planning to enter any regulatory market? The other question is, what is the current capacity utilization?
Yeah. Clearly, we are a pure domestic market-focused organization. We do not have any strategic intent to enter into either regulated or unregulated markets outside India. It does not really matter. We have no intent to get into anything outside India. That is the response to question one. Coming to your second question, which was pertaining to capacity utilization, clearly, again, as we follow an asset-light model, we do not have any own manufacturing. That is also one of the reasons for staying focused in India. Capacity is not a matter of utilization for us. On the other hand, really, our valuable resource is the medical rep. That is where I would say we are currently operating at about two-thirds of the potential of the medical rep. Our PCPM of a medical rep is about 2 lakh.
As I mentioned in one of the previous questions, we clearly see a headroom to grow by 50% there.
Okay. Thank you.
Thank you, Hardik.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. The next question is from the line of Amayra Shah, an individual investor. Please go ahead.
Hello.
Yes, ma'am. Please go ahead.
Yeah. Yeah. I have two questions. Firstly, in the present scenario, how is the company strategically positioning itself to maintain its market share? Second question is, is there any steps being taken by the company to mitigate the current pricing pressures?
Again, pricing pressures. We do not see any pricing challenges at all in India because that pricing pressure that you are referring to, or competitive intensity that you are referring to, is more outside India, which are unbranded generic markets or generic-generic markets. India is a branded generic market. While there are different price points, companies have their own strategy in terms of their presence in doctor's chamber, and they have the price points accordingly. There are low-priced companies, there are mid-priced companies, and there are high-priced companies. We fall somewhere in between the second and the third run, in the sense between mid-price to high-price. Our prices generally tend to go up. We do not reduce our prices. Having said that, our value proposition to the doctor is around science.
That is an area we keep working on, on how do we keep adding to the science around both the molecule and also around the doctor practice because doctor needs to be updated on latest trends. That is a knowledge thing that we keep providing to doctors. Of course, bringing in certain unique products which are useful for the patient and thereby the doctor practice. That is fundamentally our business policy. That is the way we conduct business. Pricing does not change for us.
Okay. Okay. Thank you.
Thank you, Amayra.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. The next question is from the line of Jatin, an individual investor. Please go ahead.
Hi. Am I audible?
Yes, sir.
Yes, sir. Yeah. Good evening, Manish. A couple of questions. One, I mean, you mentioned Q4 is perhaps a leaner quarter due to pharmacy stocking behavior. Other than that, in Q4, was it up to your expectations? I mean, of course, we had year-on-year growth. By and large, I mean, it would be good to hear your views on how Q4 was. If there are some stocking issues in Q4 seasonality, does it translate into, I mean, an increased sales in Q1? Historically, that is question one. Second, in terms of inorganic acquisitions, you mentioned reasonably priced acquisitions are a bit rare in this market. From that angle, how do you see this Resilience thing being called off in terms of impacting the growth plans of Jagsonpal? Thank you.
Yeah. Thanks, Jatin. Coming to your first question, yes, Q4 is slightly milder, and Q1 is, to that extent, slightly better. That is certainly the case. Q2 and Q3 are best in terms of seasonality. You will see typically Q1, Q2, Q3 are better for the domestic pharma industry versus Q4. Q1, on account of, I mean, stock is not buying in March, and they end up picking larger volumes in April. Q2, Q3, because of seasonality of some products, because those are the periods when people tend to become unwell more than regularly, Q4 being the weakest. That is the trend, and this is common for most companies. If you look at the historical Jagsonpal portfolio, given that we are more gyne and a bit of ortho. Gyne, there is no seasonality. Ortho, there is some seasonality, especially for winter.
Yash Pharma is, of course, the business that we acquired from Yash Pharma is, of course, a little different animal in that sense because Yash Pharma is Derma and Pedia. Pedia has stronger demand in Q3 and Q4, while Derma has stronger demand in Q1 and Q2. Derma is summer-oriented because that is when you have fungal infections and whatnot when it is too hot. Pedia is winter-oriented because that is when, again, cough, cold, and all the kids get sick in a way. Now our business is a little more curious as compared to what it was prior to the Yash Pharma acquisition. That is point one. Your second question pertaining to acquisition strategy, I do not have an answer per se. Yes, clearly, it is expensive. We keep trying to balance in terms of pricing.
Resilient transaction, while it was a good-to-have transaction, but it was not a need-to-have transaction. Therefore, strategically, it has its importance. It came to us at a fair price, but you cannot compromise on brands, right? If the brand is under certain dispute, which is unable to be resolved, there is no point of buying a business. That is why we walked out of that, or we kind of mutually terminated that transaction. That is it. It does not really bother us. It was a small transaction. It would have been useful, certainly, but nothing that derails our strategy and/or business.
Okay. I understood, Manish. Thank you. All the best for FY 2026.
Yeah. Thank you, Jatin.
Thank you. A reminder to all participants that you may press star and one to ask a question. The next question is from the line of Majid Ahamed from Trade Walk Research. Please go ahead.
Hello. Am I audible , sir?
Yes, Majid.
Yes, sir.
Sir, my last question, that is for doing modeling or understanding business even better. What type of KPIs can we track going for the company to be useful?
Yeah. Ours is a very simple business because we do not have too many moving parts in our business. It is all about chasing growth. I think there was one question, I think that it is—I think, Jatin, you had asked, and I missed out in that. That will partly answer your question also. Jatin, you had asked whether we are satisfied with the growth objectives that we delivered in Q4 or even maybe full year. As I mentioned in my opening remark, there is only one area where I feel a bit disappointed in my last three years' journey, which is the organic growth.
If you take our last three years of growth, it is only about 7%-8% year-on-year. Even this year, the organic growth was 8%. That is something certainly below our expectation. Are we growing? Answer is yes. Are we growing as much as we would like to? The answer is no. It is not for want of time, but it is something or other keeps happening, and that has kind of reduced our growth rate. We hope to be back on faster growth from this year onward. Majid, now partly responding to your question in that, for us, for you to model us out, it is all about growth. Okay. Because rest is a slow scoop. We are very confident. See, a difference in our P&L would be whether we are able to grow 8%, 12%, or 15%.
That will dramatically or reasonably alter our profitability profile because most of our costs are fixed costs. Other than costs, we are about a 35% gross margin business. Between gross margin to EBITDA, I would say 95% of our costs are fixed costs. If we grow at 15%, if we are able to demonstrate that growth rate, certainly that is our aspirational target internally. Gross margins will improve by 100 basis points every year. With operating costs not going in line with that top-line growth, our operating margins will keep expanding. Therefore, the easiest way to track our fundamental KPI that you should track is growth. The moment we are in double digit, I think, or a little more than double digit, 12-15%, our operational profit will grow 25% plus without any doubt.
Do you think you're saying is that there is more fixed costs or whatever additional revenue coming in, that will directly flow into the bottom?
That's correct. Because other than incentives, really, none of our fixed costs increase.
Okay. Thank you, sir.
Yeah. Thank you, Majid.
Thank you. Participants who wish to ask a question may press star and one. The next question is from the line of—
Sorry. Can we now take last two questions before we conclude?
Yes, sir. There are only two questions remaining.
Okay.
Yeah. The next question is from the line of Praval Shah. Please go ahead.
Hello. Am I audible?
Yes, please.
Yes. Great set of results. Also, wonderful insights onto the working capital management. An observation on that. Since we have more cash and that cash does not find its way in building more plants and machinery, just a question if you can help us understand, will we be amping up our R&D investments in order to go after truly differentiated, maybe first-to-file products and build that muscle slowly? Maybe in therapies of our choice in gynecology or maybe even in dermatology now, or are we steadfast in terms of acquiring other companies in an inorganic way and distributing the remainder back to the shareholders? If you could just give a qualitative understanding of allocation of capital.
Pravel, basically, in India, there is nothing called first-to-file or anything fundamentally. India is either a patent or an off-patent market, right? The moment the patent expires, then there will be 10 and 100 companies on day one. You'll soon see it happening when the Wegovy or the GLP-1 inhibitors come in. Very little to differentiate or constrain supplies in India because the moment patent is off, there is no other protection except in building your own brand. Also, investing too much in R&D in India, because unless you develop absolutely new patentable products, otherwise, which is not something any company has been able to do for India or otherwise. There's not really much you can spend on R&D as far as India businesses come first. You do spend on R&Ds in developing concepts.
You do spend in terms of establishing efficacies and whatnot. It is not really a new molecule development that you spend for India. Having said that, therefore, come what may, a real setback, if any, for us can be only in acquisitions. For us, acquisition is a matter of both opportunity and strategy. Disciplined execution is very, very critical because going wrong on price is the easiest you can do, especially when you're sitting on surplus cash. To that extent, I must admit that our board is extremely disciplined and focused. Even if I try, there is no way my board will allow me to splurge money in stupid acquisitions or overpriced acquisitions. We are also very clear that if we do not find the right targets, this money eventually belongs to shareholders.
Unless we can find something which adds value to our shareholders, it is better to return it rather than doing any acquisition for pride.
Thank you for that, sir. Thank you so much.
Thanks, Pravel.
Thank you. We'll take a last question. It's from the line of Aditya Chheda from InCred Asset Management. Please go ahead.
Hi. Thank you for the follow-up. The question was on gross margin improvement that we saw this year. Can you attribute the factors behind that? Was it just product mix?
No. It's always a mix of many things. One is product mix. We, of course, also rationalize and keep reducing, I mean, better procurement. As I mentioned, we pay on time, and therefore, we are able to extract better value from our vendors. We, of course, do take price increases wherever we can. It's a mix of all: product mix, some cost reduction, and some price increase.
Got it. Final clarification on the outlook side where we are referring to operating margins. That refers to the post-ESOP number or pre-ESOP number on the slide?
Actually, that refers to pre-ESOP numbers. Post- ESOP numbers automatically will improve because ESOP costs are continuously going down. That is the way Black-Scholes model works. You take the largest tech in year one, and thereafter, it keeps going down. That is why all our guidance is always on pre-ESOP costs. Increasing post ESOPs EBITDA very, very easy.
Got it, sir. Thank you, sir.
Thanks.
All the best.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. I now hand the conference over to the management for closing comments.
Yes. Thank you, all the participants, for your valuable questions and also engagement today. We appreciate your interest in Jagsonpal . Should you have any further questions or inquiries or additional information you may require, please do not hesitate to contact our investor relations team at Go India Advisors. We remain committed to engaging with all of you, fostering transparent communication, as we also continue advancing our objectives of creating value for all our stakeholders. Thank you once again and wishing you a great day ahead. Thank you.
Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
Thanks.