Ladies and gentlemen, good day and welcome to the MedPlus Health Services Limited Q4 FY25 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. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Mr. Srinivas. Thank you, and over to you, sir.
Thank you, Sagar. Good evening, everyone. On behalf of MedPlus, it's my utmost pleasure to welcome you all to the MedPlus Q4 FY25 earnings conference call to discuss the financial results of MedPlus for the fourth quarter and full year FY25, which were announced yesterday. We have with us today the senior management team represented by Mr. Madhukar Reddy Gangadi, CEO and MD, and Mr. Sujit Mahato, 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, and over to you, Sujit.
Thank you, Srinivas, and good evening, everyone, on this call. As we prepare for the next phase of expansion, we are strategically strengthening our backend operations and infrastructure to support long-term scalability and ensure seamless execution. We remain focused on optimizing our existing network while laying a strong foundation for opening new stores across the 13 states in which we operate. As an update, we have added around 10 additional warehouses in the last financial year to enhance our availability at our existing outlet and further supporting our endeavor in new store expansion. This disciplined approach will enable us to drive sustainable growth and enhance value for all the stakeholders. An update on the network: we opened 113 stores during the current quarter. Over the past 12 months, we have added a net total of 305 stores, gross 398 store additions, and we closed down certain stores.
Throughout Q4, there were 13 store closures. Taking into account both openings and closures, we achieved a net addition of 100 stores during the quarter compared to the 60 stores added in Q3, 108 stores added in quarter two, and 37 stores in Q1, totaling 305 stores on a YTD basis. We expect a total of 600 net store additions in FY26. In terms of our stores' network age, around 22% of our stores are operational for less than two years, and the remaining 78% of our stores have been operational for two years or more. As a guardrail, we closely monitor the time frame for our new stores to reach break-even. For stores opened between April 2024 and September 2024, approximately 58% of them achieved break-even within six months of operation. As a cohort, all stores combined reached break-even in five months.
In terms of our store size, as at the end of the quarter, our network has grown to 4,712 stores with 2.5 million plus sq f t compared to 4,407 stores and 2.3 million sq f t at the end of March 2024. The average store size is 527 sq ft. In terms of the revenue mix, presently, MedPlus offers over 1,200 carefully selected SKUs spanning across pharmaceutical and non-pharmaceutical categories. Private label sales for Q4 FY25 constitute 23.3%, pharma 13.6%, and non-pharma 9.7% of our total revenue. The following is the impact of the launch of MedPlus branded products across our network. In Q1 FY24, prior to the launch, the share of private label pharmas stood at 7.9% of total GMV compared to 20.9% during the current quarter. Our consolidated revenue stands at INR 15,096 million for the quarter and INR 61,361 million for FY25.
Our consolidated operating EBITDA stood at INR 803 million, representing 5.3% for the quarter and INR 2,776 million representing 4.5% for the full year FY25. Around 99% of our revenue is from our pharmacy operations. Revenue from pharmacy operations grew by 6.2% on YOY basis on GMV terms and 1% YoY on net basis. On the full year revenue from pharmacy operations, it grew by 14.8% on GMV basis and 8.6% on net basis. The pharmacy operating EBITDA stood at INR 769 million, representing 5.2%. On the update on our store performance, I would like to update on our stores older than 12 months. Revenue from these stores in Q4 was INR 14,011 million, representing 95% of pharmacy revenue. These stores had a store-level EBITDA margin of 11.5%. The store-level operating ROC of these stores stood at 59.2%. A word here on the store-level EBITDA margin by age.
While stores greater than 12 months had a margin of 11.5%, this was 11.7% for stores greater than 24 months and 8.2% for stores in the 13-month to 24-month age bracket. If we allocated the non-store-related cost, then the operating EBITDA of stores greater than 12 months would be INR 817 million, which translates to a margin of 5.8%. On working capital, our net working capital for Q4 was 63 days. The inventory in our warehouse was 37 days. In Q4, the inventory level of our first-year stores was 108 days. In comparison, for our stores older than 12 months, the inventory was 43 days. Our diagnostics numbers: Diagnostics revenue grew to INR 280 million in Q4 FY25 compared to INR 232.4 million in quarter four FY24. Diagnostics segment recorded an operating EBITDA of INR 34.3 million compared to a loss of INR 11.3 million in quarter four last year.
In January, we sold 420 gross plants per day. In February and March, this was 462 and 478 plants sold per day, respectively. As of 31st December, we had 152,000 active plants covering 315,000 underlying lines. As of 31st March, we had 157,000 active plants and covering 327,000 underlying lines. Our current observed on-time renewal rate was 25% in Q4 versus 26% in the last quarter. That concludes our update for the quarter. I request the host to open the line for questions.
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 on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star, then 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. Again, to register for a question, please press star, then one. Our first question comes from the line of Saion Mukherjee from Nomura Securities. Please go ahead.
Yeah, hi. Good evening. Still, this question on GMV growth at pharmacy, which you mentioned, is at 6.6%. Given that the pharma market itself is growing at around 7%, and we would expect MedPlus to grow faster, what in your assessment is impacting the overall GMV growth in pharmacy?
So a couple of things, Saion. The one main one would be the mix of private label and branded products. Our private label, of course, sells for a much lesser price than the branded products, so the top line is going to be slightly lesser. That's one. Second, and I know we will come to this question going forward, our focus on private label and the incentives which we have set up for our employees have also probably dampened the overall or muted the sale of branded things to a small extent, right? I don't think it is significant. I think what we did was absolutely necessary to get the entire organization enthused about selling private label and everything else. So I think we have achieved what we set out to achieve. Now we're basically, again, aligning everyone to both private label as well as branded products.
So, I think we'll probably recover it again. And the third thing, which probably muted our overall sales and maybe did not give us the SSG which we really required, was because of the rapid expansion. We had a few constraints both on the manpower side on the backend and also on the warehouses, warehouses in particular. We have now started the process of getting the warehouses. We're seeing the benefits in just West Bengal where it is launched. The rest are still to come. So, I think going forward, we'll probably see the benefits of all those things as we go forward.
Yeah, exactly. I was mentioning about the GMV, which shouldn't have got impact. I can understand the transition and the mix change in favor of private label, but GMV growth ideally should have been sort of higher than where the pharma market growth is. I mean, is there any pricing issue with respect to private label? I mean, or is there market share gained by competition or online players or big pharma? Any such structural dynamics at play here, do you think?
I don't think so, Saion. Actually, the GMV growth is 9%, not 6%, right, for the year? Sorry. No, for the year is 9% for the year, so it is not 6%, so we have grown slightly. I mean, not that it is a big thing. We expect to grow much faster, but the other reasons are also there, which basically accounted for whatever happened out there, which is our own constraints and everything else and all. On the GMV side, it's definitely not lower for the year.
What's your expectation going forward? How should we think about this growth to play out now?
I think we will be back on track given that the new store numbers are going to be much less compared to the overall size of the company itself, and stores also will sort of get phased out throughout the year. I don't expect that to be a big factor. So whatever growth will come in will probably come in through the existing stores just growing. And that I expect it to be, let's say, high single digits to low double digits kind of number on the SSG.
Understood. Thank you.
Thanks, Saion.
Thank you.
Participants, you may press star, then one, to ask a question. Our next question comes from the line of Sudarshan Agarwal from Axis Capital. Please go ahead.
Yeah, hi. On the gross margin front, you have seen a strong expansion on a Q- on- Q basis and on a Y- on- Y basis. If I'm not wrong, every one percentage point of your private label expansion adds around 30-40 basis points, right? So is there some additional benefit that kind of came into this quarter on the gross margin front? Was there some inventory provision, etc., that kind of was taken? And also, what would be the steady-state margin going ahead for this on the gross margin side? Yeah.
In quarter four, Sanjay, what happened is we had an inventory provision release of around INR 3 crore. This was in connection with the provision which the company had made as part of its abundant caution accounting policy on the Wynclark or the old private label pharma product when we had transitioned to our MedPlus brand. There has been a release only into the books on actual liquidation or sale. During Q4, we were able to sell worth INR 3 crore of this inventory, and we got a release of around INR 3 crore in the gross margin. That would have contributed to around 20 basis points. The major surge, what you have seen, is for the private label increase between Q3 and Q4, both on pharma as well as non-pharma.
Your other question on the steady-state gross margin, we would look at in the range of 24.5% to around 24.75% going forward, and once again, the private label growth journey commences, we should again start seeing an incremental growth in the gross margin.
Okay. So my follow-up question is that given that you saw a strong ramp-up in this particular quarter for private label share, I think you had alluded to, let's say, 1% Q- on- Q expansion per quarter for, let's say, six to eight quarters. Do you still see that from current levels? Should it moderate? Can you provide some guidance on that?
Yeah, sure. So we probably grabbed the Q1 growth also in the Q4 side. So I expect this quarter to be slightly flattish as far as private label growth is concerned. But going forward, I think we will definitely be able to maintain the 1% growth pretty easily. I don't think that's an issue.
Got it. That's it from my side. Thank you.
Yeah. Thank you, Sudarshan.
Thank you. The next question comes from the line of Sanjay from Bastion Research. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. So my question would be, in the morning interview, you have guided the revenue growth to be at around 15%. And I understand you have said that the older retail stores which we have, which command 80% of the stores, they will grow at inflation plus. So is the understanding correct that the additional 600 stores which we are going to open in the next year, they will deliver, or the remaining below 12-month stores will deliver greater than 20% growth going forward? And how you are seeing that? How can we should see the revenue growth drivers going forward, if you can explain us?
See, revenue growth is going to come from regular same-store sales growth as more customers come to our store and everything else has been matured and all that. I actually said closer to, let us say, the low double digits kind of number. No, I don't think the 600 stores which we add is going to really add a lot in terms of top line. So most of it is going to come through SSG only. The 600 stores which we add at 50 per month typically will start with only around INR 2 to INR 3 lakh or INR 4 lakh per month. So it is not very significant to the overall growth of the company. So going forward, what are the drivers? There could be several. As we continue to make the private label popular, we're not really spending any money on advertisement, actually.
But as word of mouth spreads and more people benefit from the savings of private label, we expect at some point there will be people walking into our store to take advantage of that. But I don't think that time is now. I think we'll probably need to wait for a while before the commission starts happening in a major way.
Okay. So my second question would be on, so in Q4 FY25, our revenue growth for stores greater than 12 months has degrowed by 1%. So is it because of private label mix increasing, or is there something else attached to that?
No, as I summarized in the first answer, which I gave out, two things. The combination of private label mix and everything else obviously drives it down a little bit. Our focus on private label also kind of, I would say, maybe muted the overall growth and brands and everything else. And finally, as I said, our growth of number of stores in the last two, three years has constrained our supply chain systems and everything else. We're still in the process of easing that situation. It will take a little while. But that also has caused a little bit of, I would say, dampening of sales. So it's a combination of various things.
Okay, sir. So since we have added 10 additional warehouses and since the ramp-up is also on the stage, so in terms of growth, you have alluded that you are seeing high single digit of the overall revenue or of the greater than 12-month stores' revenue?
I don't think it really is going to change that much either way because the new stores which we added this year are only 300. The base is going to be really low out there. So you could take it as the full set, high single digits to low double digits kind of growth.
Okay, sir. Thank you. We'll come back in that case. Thank you.
Thank you. Our next question comes from the line of Madhav Marda from FIL. Please go ahead.
Hi, good afternoon. Thank you so much for your time. First, I wanted to understand that, just a clarification. When we say that the pharmacy sales growth was about 9% for FY25, how much was the GMV growth for the full year FY25?
The full year FY25 was 14.8% on GMV.
So which is a proxy for volume, right? So we can say 15% volume growth?
Yeah, 15%. Yes.
And the 6%, which is sort of the difference, is more of a mixed impact for more private label sales, right? So that's the way we should read it, very broadly?
Yeah, absolutely.
And the same thing, could you read the similar thing for quarter four as well? When we reported 1% sales growth, how much is the GMV growth for quarter four?
GMV quarter four? Can you hold for one second, Madhav? Can I get back to you on that? The growth of GMV.
Sure. So just the second question was on the margin side. So I think you all just guided for a gross margin of 24.5%-24.8% going ahead. This is for the pharmacy business, right?
Yes. Yeah. It will be plus one with diagnostics.
Sorry, sorry. I didn't get the last part.
I said you can add 1% for the diagnostics so that it comes to the consultant.
Correct. Correct. Yeah. So the pharmacy business where the guidance is 24.5%-24.8%, that number was 23.3% this year. So we are basically indicating 120-150 basis points of expansion of gross margin in next full financial year. That's how we should read it, right?
So for the current year, Madhav, it's in the range of 24.1% in the quarter full year. That's what we are saying it should move up to 24.5%-24.8%.
Okay. At the consultant level then, basically. Okay. Maybe I'll just check it with you offline. Maybe there's some confusion here. Other than on the margin side, the last follow-up was that it seems like this year we have spent some money for expansion of our warehouses, which probably would have led to some front-ending of some cost. So is it fair to assume that next couple of years the OpEx growth could be more controlled and we could see some operating leverage benefit from there? Is that the right thing?
The OpEx may or may not be controlled. We may continue to add some warehouses here and there, some automation and everything else. That we will see. But definitely, the benefits of these will come in the next year only because of all the warehouses which we actually kicked off. Only one has become functional as of now in Calcutta. Otherwise, almost everything is going to come online in the next few quarters.
So any guidance for the pharmacy operating EBITDA margin, which was at 4.5% this year? Any outlook for that over the next couple of years? Do you see that crossing 5% in the next two years or so? Or could you give some sense there? Thank you.
Yeah. I think so, Madhav, because the number of stores we are adding are not very significant. So the drag of the new stores is not going to be significant. But I think we'll continue to get the benefit of private label. So that should basically help us expand the margin, I think.
Perfect. Got it. Thank you. Thank you.
Thank you.
Thank you. Our next question comes from the line of Bino Pathiparampil from Elara Capital. Please go ahead.
Hello. Am I audible?
Yes.
Yeah.
Hello.
Yeah. Hi. Good evening. Madhav, this revenue growth with all the private label shift happening, are we looking at a relatively low revenue growth, increasing margin sort of strategy going forward?
Not as much as we have seen in the past. The main reason is I think the early adopters have basically come in and bought the private label already, so the growth from now on the private label is going to be just 1%. So the substitution of the brands is not going to be very high, so whatever growth which comes in through the brands will continue to accrete to it, and so the substitution is not going to be high. I don't expect that the drag because of substitution is going to be very high on the top line, but the margin will continue to grow, mainly because we will at least continue to have 1% every quarter on the mix.
Got it. So things get stabilized now more. Second question on store addition, the 600 that you mentioned, would that be net or gross?
That will be net.
Net 600. Okay. And yeah, finally, on your tax rate, why is it below the 25% level? And how do you see that moving over the next two, three years?
Yeah. On the income tax, there is a deduction which the company continues to claim. It's the Section 80JJAA, which is linked with the employment created for new employees. So as we continue to expand our network and new employees get added to the network, there is an additional deduction which is available over the next three years for the amount spent on salaries for these new employees. And that is driving down the tax numbers. And we expect this to continue in the same manner, provided this section is available in the Act.
Understood. Yeah. I'll jump back to queue. Thank you.
Thank you. The next question comes from the line of Aejas Lakhani from Unifi Capital. Please go ahead.
Yeah. Hi, Madhukar and Sujit. Nice to see the operating EBITDA number truly reflect the efforts that the team has been putting in. My first question, Madhukar, to you is that at the start of the year, we had called out for the 600 store addition, and we've closed at about half of that. So could you just walk us through what really took place for us to drop this run rate? And how were you thinking at that point of time?
So Aejas, a couple of things happened, actually. One, the first quarter of last year was not great because of elections and everything else. And then by the time that we went into the second quarter and all, we realized that our warehouses were getting very strained. They were not able to supply all the stores, and we decided that we would actually slow down, especially in the periphery and all. So for instance, in Tamil Nadu and Calcutta and all, we now have set up warehouses in Hubli and Madurai and likewise in other places in West Bengal and all. So the places which would be supplied by today's Madurai and Hubli were receiving the material very late, and we were having a little bit of challenge in the main cities because of manpower attrition and everything.
So because of all those reasons, we thought we would actually set up the back end properly and come back and actually start growing once again. And that's the reason we took a breather out there. We were hoping that we'd do around 400, but in the end, I think we got it towards the 300, 350 number, and that's where we ended up. We did a total of 398, though, gross additions, but we shut down a bunch of stores which were old and had their characteristics kind of changed and relocated and all. So the net addition then ended up being only around 305 stores.
Got it. Madhukar, the second question actually is a riff off of what you just answered. So one is that could you just give some further color on the 10 warehouses that you have added in the year? Is this more from a densification standpoint, or is it more expansionary towards tier two and onwards? And just double-tapping into that question, I'm trying to understand how have fill rates been, and if you can give me any color because have fill rates been affected because there was supply chain from a warehousing standpoint constraint, have fill rates been affected? And third, if you could just speak a little bit about the attrition aspect.
Yeah. Yeah. Fill rates, definitely, they were affected, and they were affected largely in the remote parts of the states which are getting supplied from the main warehouses. For instance, the Bangalore warehouse was supplying all the way up to Udupi, Mangaluru, and that was taking a hit because of attrition at Bengaluru. Attrition in the larger cities in South India has been fairly high. So combined both with warehouse which is not fully adequate and being short of people, we were barely able to supply the main cities. And so our sales and our fill rates, and then consequently, our sales in the smaller towns took a hit. Yeah. Attrition, fairly high.
We feel that as we go into the smaller towns, it will not be as high, and we'll probably be able to get slightly cheaper manpower, but at least the attrition will not be high, even if the cost is not very different. Second, definitely, as we go forward, fill rates, we expect they will be better, and hopefully, they'll all get reflected in sales as we go forward.
Understood. And could you just share that the warehouse, was it more densification or expansionary towards tier II , tier III cities?
Yeah. Okay. By densification, you would mean, are we doing more in the, let us say, in Hyderabad or Bengaluru, Chennai? No. We are definitely setting up warehouses in the, let's say, outer parts of the state, whereas in the initial stage, we would basically have just one warehouse for one state. We're now doing anywhere from two to three for each state. So you could say this is definitely densification of the state itself. They're putting in more in the state, but away from the main warehouse and to increase the supply lines to the remote parts of the states.
Understood. And just one last thing on the private label pharma as well as non-pharma. In your own mental construct, where are you from a category standpoint? Are you seeing white spaces there that you still wish to populate? Or the first wave of private label that you needed to introduce is all there, and it's just now about the push through and conversion?
On the pharma side, I don't think there's that many gaps. The one big gap, I would say, is insulin, but that's not an easy one to actually fill. We will have to find a willing and a reliable partner out there for us to actually go forward on that. So there are not that many gaps. And I think right now, as you said, it is going to be more about conversion of more of the newer guys. And that's why we say 1% every quarter. We're not going to be really jumping up on those numbers anytime soon. On the other hand, the private label and general goods, that's a wide-open thing.
There we can add a lot more categories and probably a lot more. I would say, we'd have a lot better chance of selling if the range was bigger so that the customers who walked into a store to buy the regular stuff now can see a variety of brands from us and appreciate the quality and the price difference and then start buying. So that would be all additional sales. And there we see a lot of scope, not as much in pharma, but definitely in the non-pharma side.
Understood. And finally, on diagnostics, I'm sorry, Sujit, I missed the starting remark where you called out the count of paying subscribers that we have. And where are we on that journey? I know we had a number which was significantly higher. So what's the callout there from a diagnostics standpoint? Are we just going to keep trying to increase that member base right now? And are we going to add those feeder diagnostics centers so that they feed into your larger centers? Just some color on diagnostics. Thanks.
Sure. The number was 157,000 active patients and 327 active underlying labs versus 152. So while we added 5,000 patients out there, it is definitely much lower than what we want. We need the number to be closer to 250,000 for us to actually take the leap of expanding to other states and all. So for now, we are going to continue to push forward and try to get this number up. We are seeing, obviously, a bigger level of acceptance out there. And one of the ways in which we expect to actually grow this number is by increasing the standalone collection centers across the city and increase the service level or increase the number of people available for home pickup of samples. So both these places, we will see some expansion and hopefully touch more people and increase the number of patients.
Understood. And Madhukar, the people who go for the home collection, so is my understanding correct that at the existing store only, you will have a technician who can double up as that and then go and collect it? Or are you talking about incremental hires and space required to execute the same?
No, no, no. So there's no space required. This is an online thing. You open up the slots based on the number of people you have. And typically, as the demand continues to grow, you keep hiring new people. So it is not in one shot. So rarely do we have a situation in which the people are not actually filled. In fact, today, we have a shortage of slots, and some of the active members are actually wanting more slots to be opened up for home pickup. So yeah. And space, that's not space, and that's not the people in the store don't double up. The home service guys are different.
Understood. Thanks so much, and wish you the best.
All these orders are booked a day in advance. And the people in the standalone collection centers, they stay there between 7:00 A.M. to 10:00 A.M. to take care of any walk-in customers. They don't go out to pick up the samples.
Got it. Thanks for that, and wish you and the team the best.
Thank you.
Thank you. The next question comes from the line of Gaurav Gandhi from GCM Limited. Please go ahead.
Yeah. Thanks for the opportunity. Sir, how do you plan to reduce the drug license suspension issue? And is there any possibility of any bigger regulatory action if such suspensions happen regularly?
No, we are working with the drug departments and all to correct all the issues out there as much as possible. I can tell you for sure, we probably are more in line with the government's mandate than anyone else out there. It is just that we are a larger company, so we attract a little bit more attention, and we probably - and we have to RCA report it. That's why it's probably the news. But otherwise, our stores are way more compliant than anyone else out there.
Okay. And the second question is, do promoters have any plan to cut down the stake in the company in the next three-to-four years?
Three to four years is a long time. I'm not really thinking about it right now, but I don't expect to sell any shares in the near future, at least.
All right. All right. Thank you. Thank you.
By the way, yeah, just to finish up that, make the answer slightly more elaborate. If I do sell, it will be mainly to clear the debt. And when it comes to refinancing, I may end up doing a little bit of that. But otherwise, I'm not looking to exit any amount of my stake out there.
Okay. Okay. Thanks for the clarification. Thank you.
Thank you.
Thank you. The next question comes from the line of Lakshmi Narayanan K G from Tunga Investments. Please go ahead.
Hi, Madhukar. A couple of things. I just want to understand, what are your top three priorities for the next three years?
I would say opening stores, 600 stores. That's the number one priority. Also getting into, let us say, making sure that the pilot for the franchisee store goes well. We'll try to make the franchisee thing as successful as possible. Given that the margins now have increased for us overall, we feel that this is the time for us right now where we can actually share a little bit with the franchisee and make it successful. At the same time, reduce the overall, let us say, burden of investment as well as the overall task of hiring people, slightly less onerous for us by going to the franchisee side. So we feel if we can get the franchisee thing right, we will be able to grow much faster.
So outside of opening the stores and doing the franchisee thing, I think the third one would be to continue to grow the private label and see if we can actually continue to increase the margins for us.
Good. Good. And second, I see that you have been expanding in Kerala in the last one year. How successful it has been? Because I could see a significant ramp-up in Kerala. And what kind of potential it will have in the next two, three years?
Actually, in comparison to other states and all, we're still going slow in Kerala. Kerala has its own set of problems out there. It's not very easy. There are several issues out there. We see a lot of potential. It's very dense. People are affluent. There's a lot of, I would say, need for medication out there and all. But it has its own set of problems. So we are still kind of doing a wait-and-watch kind of thing. We have put in a few stores. We want to make sure that they're all profitable and we find the right model for us to expand.
Good. Good. And you talked about 600 stores. That is over a period of. Can you just tell me in the next three years how do you want to ramp up those 600 stores?
The 600 are going to be in the next 12 months. So they'll be spread out. So we will continue to open every Q1. It's not going to be as big as the other quarters, typically. But yeah, otherwise, we'll be through all the year.
Got it. And this revenue mix that you actually show in your slide 14, I mean, I think this is calculated at the discounted price or at the MRP?
It is net price, net of discounts and everything else.
It's a net of discount. So which means that normalized thing—I mean, I'm just trying to understand our own brand pharma should be—what would be the normalized price because this is net of discounts?
So if you actually compare it, MRP to MRP, which is more of this thing of the volume, the pharma private label in the last quarter would be around 22%. And the non-pharma in the last quarter was 13%. So bearing in mind that 80% of our overall sale comes from pharmacy, given that we are already at 22%, that would mean roughly around 28% of all medicines sold today by GMV in GMV terms come from the branded.
Okay. Last question. Okay. And in terms of new state addition, whichever states you are planning to go for the next three years?
So the states are Madhya Pradesh, Chhattisgarh, and Kerala. That remains the thing, not changed.
Got it. Got it. Thanks, Madhukar.
Yeah. Thank you, Lakshmi.
Thank you. Our next follow-up question comes from the line of Saion Mukherjee from Nomura Securities. Please go ahead.
Yeah. Thanks for the follow-up. Madhukar, so you mentioned 28% of pharma is on private label. And it will keep growing, as you mentioned. Do you have any sort of optimum fraction in mind where this number can settle eventually?
Yeah. I would like it to go all the way to 90%. But the thing is, it will probably settle down at a much lower number, mainly because of two things. One, despite our discount, there are still some brands which will be cheaper. There's still some naturally, really inexpensive brands which you can't anyhow substitute. So there's going to be those. There's also going to be products for which we don't have a substitute: the insulins and all, and a bunch of other things. And as we go forward, we're also seeing an increasing share of pain-centered products with the likes of Gamsara and all coming in. If we start selling a lot of those, those will not have substitutes for a long time.
So between all these things and the fact that not everyone is going to switch, we ourselves are going to be obviously pushing a lot on emphasizing a lot more on increasing the top line rather than just the private label. I think over the next three, four, five, six quarters, a growth of not more than 1% is to be expected on the private label side. Beyond that, Sayan, I'm not sure. As more and more companies get to the generic side and they start talking about it, as the government starts talking about it, the overall word of mouth may spread to an extent where people may just, it may reach a tipping point where they just say, "That's it. We will end up taking just the generics and nothing more," and then it may just change, but right now, I don't see that.
I'm thinking for the next several quarters, it's going to be 1% every quarter.
Understood. And just one question I was thinking. This whole GLP-1 opportunity, which is going to come up next year, in terms of supply chain, is that something different with sort of benefits in any way, MedPlus? Or you think it's like one of the other products which goes off-patent? And obviously, we shouldn't expect any private label play in the short term in that, right?
No. Why would you not expect private label? Obviously, that is a great product to launch a private label. We'll definitely try and do it as quickly as possible. We're already talking to people about that. So that'll happen. Now, is there anything special in the supply chain? Not really. Obviously, the cold chain and all have to be maintained and everything else, but that's about it. I don't think there's anything. I mean, it's not really a big deal. I mean, it's like selling insulins anyway.
And what about private label for that injectable? When can you, I mean, launch? I mean, is there any timeline you have in mind?
So we are talking to people. I can't give you the exact timeline, Sayan, but I know it is coming out of patent, I think March 26. And I'm hoping that we should be ready on day one or maybe, if not day one, maybe month one.
Okay. Okay. Interesting. Thank you. Thank you.
Thank you. Our next question comes from the line of Harith Ahamed from Avendus Spark. Please go ahead.
Hi. Thanks for the opportunity. The share of pharma private label, which you disclosed, is down to 21% of GMV for the quarter. Madhukar, can you give some color on how this number looks like across various states and across tier one to tier four markets? How different is the share?
I don't have the exact numbers out there, Harith, but I can tell you this for sure. Tier IV, tier III, obviously, are going to be much, much higher than tier one. But that said, Hyderabad, Bangalore, and Chennai are not that bad. Even Bombay, which is the lowest, I think, for us, and private label is still at around 10% or 11% for us. Smaller towns, the private label medicine could be as high as 30% or 32%. Yeah. But state-wise, I don't think it really differs that much. It is more in line with our own entry into the state. It depends on when we have actually gone to the place. The older we are, the better known we are, the higher the overall private label mix in the state.
You touched on opening stores and other franchisee models. Can you share a bit of color on the economics? Will you be booking the entire revenue? What kind of share will go to the franchisee? And will these stores on top of the 600 stores that you've added so far?
No. Actually, they'll be part of the 600 stores. Part of the stores which we are doing will be franchisee. This will be like a wholesale kind of model where we sell the product to the store, and he then sells it downwards. Yeah, it'll be a MedPlus store where we act like a super distributor, you could say. The only product that that franchisee can sell is stuff which we sell him. So everything will be sold to him, and that'll be the price which will go. Yeah, the top line will come down slightly because of that. The overall return on capital and everything will be much better.
Wonderful. Thanks for taking my question.
Thank you.
Thank you. The next question comes from the line of Tarang Agrawal from Old Bridge. Please go ahead.
Hi. Good evening. Just quite a few questions, actually. On bookkeeping, what are your number of stores in tier two and beyond?
Don't have the exact, but I think around 40% now of our stores probably are outside of the tier one.
Sorry. 70%, is it? I mean, you used to call out this number in your opening remarks, right?
40% of it. I think 40% of our stores. But I'll come back to you on that. So why don't you go ahead with your rest of the question?
Okay. In Q2, if I'm correct, I think you had opened a store in UP. Is that right? I mean, is UP still there in your footprint, or it's no longer there?
See, we opened a store in Noida, one in Gurgaon, and one in Delhi. So this is largely to basically see if we could enter Delhi as a city and do online delivery out there. So we're still. That pilot is still running. Some of the stores are doing well, but it is not to enter the state of Haryana, UP, or this one.
Okay. Got it. Got it. Got it. Madhukar, you said you guys have added about 10 warehouses in FY25. What was this number in FY24?
So 10 less?
No, no. I mean, I'm trying to ask what's the overall warehouse number as of 31st March 2025?
It has actually doubled, I would say, close to doubled, because we had one large warehouse for each state.
Okay. Got it. And in terms of working capital, as the store matures, what are the inventory days that you guys generally work with? I mean, for your reasonably matured store in your footprint, generally, what are the inventory days that that store would work with?
Around 40-43 days.
But one would believe that, I mean, that's the number that you work with for stores greater than 12 months, correct? But typically, you would make it even more efficient, right, as the store matures even further? Or 40-43 is where sort of you hit the ceiling?
Not necessarily. If the store sales go beyond INR 200,000 per day, it'll probably come down a little bit. But anything below that, it's going to stay at around 40-43 days, or maybe it'll go down to 37. See, the reason is the store's reputation is built on fill rate. So if we're going to constantly cut the long tail, people will stop coming to us. We have several products in our store which we would have not sold even once in six months or once in seven months. But they need to be carried because every month we see from the list of products which you sell, there are several products which you have never sold in six months sold as part of a customer overall basket. And if it were not for that product, maybe the customer would have walked.
So the thing in pharma is not focusing a lot on inventory days in the store, but more on the fill rate and the top line, I would say.
Got it. Now, just out of curiosity, I mean, given the stock warehouse expansion that you've had, one would have presumed that your inventory days at the warehouse should have increased materially more, right? But that hasn't happened. So just wanted to understand because logically, if you're adding a warehouse, you would typically add as much of SKUs and product that was there in the earlier warehouse. And that would have a significant drain on your overall inventory. But that hasn't played out. Is that my understanding correct, though?
Not really. But the thing is, it is still to play out because the warehouses are not yet functional. There's only one warehouse up right now. The others are actually getting ramped up. But in the initial stage, maybe. But afterwards, it's not going to really change that much because each of the warehouses is going to be taking care of at least 250-300 stores. So the inventory, let's say the Chennai warehouse, is all going to be split between Madurai and Chennai.
Got it. Got it. And I mean, from a working capital standpoint, both on inventory and payables days, do you think there is scope of improvement, or you've maxed out there?
I don't think there's a lot to be done out there.
Okay. And last, just if this number is handy with you, actually, to Madhu's question, what was the MRP growth rate for Q4? And second, if you could give us a sense on what were the bills cut through the quarter?
We don't have that number. The MRP growth, I think, was 0.4% or something. 6.4.
6.4. Okay. Okay. Thank you.
Thank you.
Thank you. Our next question comes from the line of Vilina Jain from Perpetuity Ventures. Please go ahead.
Hi, sir. I just want to understand our employee expense trend. Over the last three quarters, it has grown significantly. Firstly, on that. Secondly, to grow private label pharma, are we using some kind of incentive in the stores?
Yeah. I think it's a great question, so it has both the components, as you rightly mentioned. As the private label sales increases, there is also the component of the employee incentive. Technically, we would have wished that to go from the gross margin, but the way the accounting literature dictates, it goes as a selling cost, and therefore, it is shown as part of the salary expenses, so that's the predominant thing for the increase. In addition to that, a couple of quarters ago, we had highlighted that we have brought in, for the purpose of retaining employees, there is a retention plan for the store-level employees, so that has also contributed to a little extent, and based on these reasons, the costs have gone up.
So just to highlight, what would be this selling cost, which is like an employee incentive for private label? And how should we see this growing as we grow the private label?
So it's again based on private label pharma and then private label non-pharma. And then there are, during this year, we are also trying to align to the overall sales. So this is a dynamic thing, which we try to do it every quarter internally. So maybe offline, I can take that with you.
All right. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we will take that as a last question for today. I now hand the conference over to Mr. Sujit for closing comments.
Thank you, Sagar. 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. You may now disconnect your lines.