This conference is being recorded. I now hand the conference over to Mr. Madhukar Reddy. Thank you, and over to you, sir.
Good afternoon. On behalf of MedPlus Health Services Limited, I extend a very warm welcome to everyone who has joined us on our call today. I'm Madhukar, and I'm the CEO of MedPlus. I'll now request Prasad to make the necessary disclosure statements.
Thank you, sir. Good afternoon, everyone. Please note that anything which we say that refers to our outlook for the future is a forward-looking statement, which must be read in connection with the risk that the company faces. A complete statement is included in our investor presentation dated November 11, 2022.
Thank you, Prasad. At MedPlus today, we are over 50,000 colleagues who as on thirtieth September, we cater to the health care and household needs of neighborhoods in 454 cities across seven states through 3,328 pharmacy stores. I would like to thank my team for their discipline and hard work and passion for providing a vital service to our customers. I would now like to introduce our new, new CFO, Sujit Kumar Mahato. Sujit joins us from Dr. Reddy's, where he worked for 22 years and was reporting to the group CFO. He has extensive experience across functions like financial recording, business finance and partner partnering, taxation, and implementing controls and cost saving programs. He has worked in India, Germany and Russia. Sujit is a CA from the 1998 batch.
I look forward to Sujit as an addition to our leadership team at MedPlus. On our last quarter's performance, our revenue was INR 11,206 million. We had a gross margin of INR 2,428 million and an operating EBITDA of INR 283 million. Over 99% of our revenues came from our pharmacy operations. The pharmacy operating EBITDA was INR 336 million, so the pharmacy segment level operating EBITDA was 3%. With that, I will now continue with the update of first. I'll first cover the update on our network. We are continuing with our store expansion program. We have added 1,202 net stores in the last twelve months. In Q2 alone, we added 362 stores. This is the highest openings in any quarter in our history.
The highest additions were in Tamil Nadu, where we added 86 and 78 stores respectively. MedPlus will continue to push ahead on store openings, while sticking to our store strategy. In Q2, 56% of our store openings have been in Tier 2 and beyond. We now have 1,387 of 3,328 stores in Tier 2 and beyond. Business-wise, these are good markets from a good economic standpoint. MedPlus can expand in this market to maturity of our operations and supply chain capabilities. There are 15 store closures in Q2, versus 20 store closures in Q1. So overall, we had net additions of 348 in Q2 versus Q1. For the last 12 months, net additions have been 1,008.
Our store network is split into 33% being less than a year old, 16% being in their second year, and 51% being two years and older. To give you a sense of the impact of the rapid store expansion on network, we entered Q2 with 49% of our stores being in less than two years age bracket. In comparison, for Q2 FY 2022, 34% of our stores were less than two year old. When in the two-year age bracket, our stores are still in the rampant phase. From a financial standpoint, they are a drag on the operating EBITDA. However, as they mature, we expect these stores to contribute to the profit side MedPlus.
Closely track the time to break even of new stores, and the stores opened between April 2021 and March 2022, 71% of the stores actually break even within six months of their operations. We closed Q2 with 3,328 stores, as I said earlier, with 1.9 million sq ft. Last Q2, this was 2,360 stores and 1.4 million sq ft overall. The average size, store size in Q2 was 967 sq ft. To give you a sense of spread in store sizes, we now have 2,271 stores less than 600 sq ft and 1,057 stores that are greater than 600 sq ft. So, we have been talking about the store expansion.
This quarter, as I said earlier, we opened 348, but I have to tell you that this is also a function sometimes of other outside factors. The store is open when all the infrastructure and network guys working in the store done properly and on time, and all the regulatory authorities, license and everything else also unexpected time and all. So there could be some variation in this as we go forward or potentially so. But we will continue to maintain the rapid growth. We expect that as we go forward, there could be a little bit of variability in the actual number of stores opened per quarter. Same store metrics.
On our same store performance, we measure this as stores that have been in operation for 12 months or more as of last day of the reporting quarter. Revenue from these stores in Q2 was INR 9,350 million or 85% of pharmacy revenue. These stores had a store level EBITDA margin in the range of 9.7%. Store level operating gross margin of these stores were 60%. A word here on the store level EBITDA margin by age, while stores greater than 12 months had a margin of 9.7%, which was 10.4% for stores which are greater than 24 months and 6.9% for stores in the 13 months-24 months.
If we allocated non-store costs, then the operating EBITDA of stores greater than 12 months would be INR 433 million, with a margin of 1.6%. With our scale, we are better poised to increase share of revenue from private label. Our private label range is intended to provide quality product at affordable prices. MedPlus has now over 920 SKUs across pharmacy and non-pharmacy goods . In Q2, 13.9% of our revenue came from our private label. This compares with 12.7% in Q1, 13% in Q4 2022, and 9.9% in Q3 of 2022. I can point out that Q4 of 2022 also had the impact from Omicron, and hence the slight increase over the previous quarter.
So overall, the trajectory of increasing share of our private label MedPlus basket continues. Within private label, our pharma range has been gaining share. In Q2, 8.9% of sales was from private label pharma. This compares with 3.1% in Q1 and Q4 FY 2022, and 7.3% in Q3 of 2022. Our increasing presence in Tier 2 and beyond is reflecting in our revenue mix. This quarter, 31% of our pharmacy revenues came from stores in these tiers. This is up from 28% Q2 last year. Omnichannel. We continue to extend our coverage of inputs from where we take orders online. This complements well with our stores. MedPlus is focused on increasing the coverage of our two-hour delivery offering.
Store picks as a share of online orders continue to maintain a high, higher share than home delivery, reflective of the convenience and accessibility of our store network. Our strategy on online remains unchanged. We do not spend to acquire customers online, and we'll continue to maintain our omnichannel as a profitable channel. We feel that the online channel is one other channel, which is as important as the rest of the channels through which we operate. While we recognize that customers will start moving to us, we feel that acquiring customers paying INR 500 or INR 1,000 for customer acquisition cost is not at all warranted. Hence, we have constantly been maintaining the level, maintaining our, I would add, spend and making sure that all channels are profitable with us. Now I'll request Sujit to cover a few additional points.
Thank you, Madhukar. Good afternoon, everyone. I'm Sujit Mahato, and I am the Chief Financial Officer of MedPlus. While I'm only beginning to settle in, I would like to add by covering some of our capital efficiency metrics. Our net working capital for Q2 was 61 days. The inventory in our warehouse corresponds to 36 days. As you are aware, because of the sales trajectory of our new stores, their inventory turnover is lower in the first year. In Q2, the inventory level of our first-year stores stood at 111 days. In comparison, for our stores older than 12 months, the inventory corresponds to 37 days. The store level operating ROCE trend for our stores greater than 12 months stands at 60%. Operating cash flow for quarter two stands at INR 237 million.
On our segment data, I would like to add an important note. In page 17 of our earnings update, we have presented the business segments, which are different from our regulatory filings. For example, the optical business has been grouped under other in the presentation, whereas in our regulatory filing, optical is grouped under retail segment. We hope this will be useful for you. Back to you, Manisha.
Thank you, Sujit. As I mentioned earlier, in my past calls, we have initiated a test project in Hyderabad and diagnostics space. The essence of this project is twofold. One, we have a larger share of our customers' wallet in the OPD basket, which comprises pharmacy, diagnostics, and doctor consultation. Two, we do this via a membership model. In spite of the competitive nature of the space, in six months of operation, we have successfully leveraged the network effect of our pharmacy stores, which have acted as a point of sale for our diagnostic plans. So as of the thirty-first of October, we have sold 7,000 plans with 90,000 underlying lives. I now request Chetan to give you a short on the project.
Thank you, Manisha. Good afternoon, everyone. I'm Chetan Dixit, and I'm the Chief Strategy Officer of MedPlus. I will start with a brief overview of the diagnostic product. We offer to our customers a choice of plans. These could be single adult, couple, or family. On purchase of any plan, 3 benefits are extended. The first being free diagnostic tests at MRP versus purchase price of the plan. This element of the plan is important to lock the customer for a year. The second benefit is flat 75% discount on all diagnostic tests. While our pricing is noted attractive, the key feature is that we offer high discount on all diagnostic tests. Due to the full suite, we have 3 full service diagnostic centers in Hyderabad, where a plan participant can walk in and avail the full range of radiology.
Example: MRI, CT, and onward, and the full range of pathology tests. We expect to take the count of these full-service centers from 3 to 5. In addition, we also have 100 collection centers for pathology that are conveniently spread across the city and are housed within our pharmacy premises. Customers can also avail of home collection. The third benefit of the plan is 50% discount on all in-house doctor consultations. Once the customer has purchased the plan, there is no restriction on visits or tests. The plan benefits are for a period of 12 months, after which the customer will have to renew. How are we able to offer a 75% discount? There are four differences in our model versus our typical tier. Firstly, we do not operate via franchisees, and so there is no revenue sharing.
Secondly, our collection centers are housed within our pharmacies, so there are only marginal incremental establishment costs at a consolidated level. Thirdly, our plan is designed such that we do not depend on referral network for patient walk-ins. As you are aware, referral model is often a 30% share of the customer's bill. Lastly, we expect our centers to achieve scale faster than peers. As an indication, the RC utilization for our advanced radiology machines in 6 months of operations is nearly twice that of a typical new center. Up to 31st October, we have sold 51,000 plans with 90,000 underlying lives. 65% of these plans are sold via our pharmacies. The average realization for plans sold was 1,292.
To give you a sense of run rate of sign up, we sold 233 plans per day in August, 264 plans per day in September, and in October, we sold 251 plans per day. We estimate that 80% of plans sold were to existing MedPlus customers. The average age of a participant is 45 years - 44 years, and 26% of participants are above the age of 60. Availability of the full battery of radiology tests for the full battery of radiology tests for plan participants is an important selling point. While 65% of customers have purchased the plan at the pharmacy, 40% have availed their first service at our full-service account centers. The other 60% have availed their first service at collection centers and via home collection.
We have found that customers tend to add radiology tests to their pathology tests when visiting a diagnostic center, and about 70% of the revenue at the full-service diagnostic center is linked to radiology. Of this, 33% is standalone advanced radiology tests, such as MRI and CT. Based on our limited time of operations, we expect 2.4 visits per plan over a six month horizon from date of joining. On profitability, we expect our full-service diagnostic centers to be operating EBITDA breakeven in 6-8 months, and collection centers by two months. At the end of first year, we expect the operating EBITDA margin for a full-service diagnostic center to be in the 19%-23% range and collection centers to be at 20%. That's our special update on diagnostics. Handing the call back to Madhukar.
Thank you, Chetan. I would like to add that the diagnostics space is an important adjacency to our pharmacy business. Various estimates peg the size of the diagnostics space to be $10 billion and growing at 13% per annum. The per capita consumption of diagnostic tests is low in our country. It is also well known that our out-of-pocket share for healthcare in India is very high. So I believe there's a room for a national full-service player catering to the composite OPD needs of customers. However, it is also a competitive space with new entrants, and we will invest with caution. This, of course, this competitive space is not to be confused with the, with a bunch of new announcements which come out from pharma companies and all which have been entering into this space.
They are primarily in the business of just biochemistry and pathology, while we in sharp contrast, actually offer a full service, radiology and pathology service. And this in this case, and in this sector, actually, the competition is not as high as one would expect from all the reports which are out there in the press. Our allocated CapEx for the test project in Hyderabad is INR 850 million-INR 900 million. We will seek to extract benefits from this project before venturing into our other geographies. Going forward, what can you expect from MedPlus? We operate in the very attractive pharmacy space, and that tends to grow on the back of our store expansion. Our cluster-based network enables profitable omni-channel service.
Scale allows a larger share of our Private Label investment, and our diagnostics projects have shown that we can use our pharmacy stores to cross-sell other healthcare solutions, and we will explore other avenues that can add incremental sales without increasing costs... This is the end of my update. I request the host now to open the line for questions.
Thank you, sir. We will now begin the question and answer session. Participants who wish to ask a question may press star and one on your telephone. 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. We have the first question on the line of Aashita Jain from Nuvama Wealth Management. Please go ahead.
Hi, good evening. Congratulations on the very good set of numbers. Just the first question from growth. So given your expansion plan, you're adding almost 1,000 stores on the base of 3,000, almost additional addition. Do we believe you can grow much faster than our current rate or just 20% growth will be the sustainable, rate going forward? And also please update us on your store expansion plans for
I'm sure we'll be able to do better than what we are going forward. Right now, because of the overall competitive intensity in the business itself, I think, you know, it would be fair to assume a minimum growth of at least 20%-22% for the year. On the expansion plan, I expect that we will, you know, basically be at this number for at least a year. You know, and we will, you know, be according to the guidance which we gave, earlier in the year, a minimum of 1,000 and up to 1,200 or slightly more. So that's what we're still looking at.
Sure. Thanks. My second question is on competition. I think the last quarter call you made, you made a comment on competition, eating up some revenue shares, and you expect it to continue for some time. How are things now? What are our benefits, counts, and compare to competitors? How are things on the ground? Any color on that?
MedPlus continues to be a number one value priced pharmacy retailer out there on the offline side. But that does not take into account all the online players who have been busy advertising with a promotional discount of 20% for the first three purchases. Almost all the players are there, including our the largest player out there, have been doing this for the last two quarters. I haven't seen the intensity come down, but it hasn't gone up either. I think we will most likely be slightly more stable going forward.
While there's going to be some impact whenever someone spends a lot of money advertising out there and then offering a much higher than usual discount, I fully expect that none of those things are sustainable for many of these people, and they will end up actually trying to come back to the usual discounts, which are 10%-18%, similar to that. For MedPlus also, the overall discount remains at the same level, which was earlier, roughly around 16.4%-16.5%.
Thanks for your help. Lastly, I think you made some comment in your opening remarks, really interesting thing about diagnostics or breakeven, of the centers as well as collection centers and profitability. Can you repeat on that one?
Let Chetan take the question on the diagnostics.
Yeah. Aashita, on the full service diagnostic centers, we are expecting break, operating EBITDA breakeven at the center level in the 6 month-8 month horizon. The two centers that have already been in existence for six months did so in the 6-month window, but we are giving a slightly shoulder room of 6-8. The collection centers, we expect them to break even within the first two months.
Thank you so much. Thank you.
Thank you. We have the next question on the line of Aneesh Deora from Nomura. Please go ahead.
Yeah, thanks for the opportunity. Sir, I just wanted some color around how your prescription fill rates are currently, and where do you see them going forward?
We track the prescription fill rates continuously, but I have to tell you that this is not an exact science, because in a store, physical store, when people walk in and ask for a product, they don't necessarily leave a prescription or they don't necessarily leave any proof of their asking. So it is as good as the diligence of the store employee who is writing down what is the product asked for and what are the... And if the product wasn't available at the store at the time of the customer visit. So we do. We have a bunch of other proxies to figure out this. You know, we access keystrokes of the employee when he's searching for products in our point of sale.
And based on that, we are able to tell you that depending on the store and depending on the location, it is anywhere between 85%-90%, 92% fill rate. This is, you know, based on the fact that based on our understanding of the demand through the operation of the point of sale.
Got it, that's helpful. And do you see a scope for further improvement on this number, just on color there?
We, you know, obviously, you know, we would like to get slightly better, but we know from our past experience, it is extremely expensive in terms of inventory at the store to actually maintain a higher level of, you know, fill rate at the store level itself. What we do, though, is basically offer a much wider range of inventory at the warehouse. So if a customer were to walk into a store, and he would want to get one or two of the products which he asked for, then our store employee can quickly look up the warehouse, which has got a super set of all the inventory of all the stores out there in that city. So usually has very low on 55 SKUs, whereas the warehouse has anywhere between 25 SKUs-27 SKUs.
So most of the times, you know, whatever product is being asked for in that particular city could be there in the warehouse. So we are able to offer it on the next day delivery basis to the customer, and this works very well for our customers. Our goal is to make sure that we maintain it at a healthy, you know, 90%-92% kind of fill rate, which avoids the overall expiry problem and all because the long tail of this is very, very long, unfortunately, because of the hundreds and thousands of, hundreds of thousands of, you know, pharma companies with billions of brands, you know, being sold in every city. So while we would like to do slightly better, the intention is not to get to the 100% fill rate at all in this store.
That's helpful. The second question being around the fact that we have increased our private label contribution to 3.9% in this quarter. But this gain has not been reflected in the improvement in operating margins. So any color there, like, I was expecting some improvement in the operating margins, but they have remained kind of sluggish. So can you throw some light on the factor?
So the gross margin continues to go up, if you actually look at it. The reason why the overall operating EBITDA margins in the company have not gone up as much is because of the new stores which are dragging down the overall EBITDA. If you look at it, all stores which are more than 1 year are today now operating with an operating EBITDA margin of INR 43.3 crores. But dragged because of the new stores, the stores which are, you know, less than 12 months and the stores which are yet to be open, both of these are pulling it down. That's the reason. But otherwise, the gross margin continues to grow.
Got it. That's all, all mine. Yes.
Thank you. We have the next question on the line from Ameya Gawande from Moerus Capital . Please go ahead.
Yeah, good afternoon, sir. So my question is with regard to the diagnostic center, what we can expect within the next three years, expansion plans and new openings?
Little early for us to comment on the next three-year plan. You know, we started off this whole thing because we think it would be a good adjacency to our pharmacy platform. Given the fact that 60% of our people set of people who are monitoring some, you know, kind of a level or something out there, diagnostics would be a good adjacency and hence we set it up. Now, but to that, we also added overall radiology case, which we think actually works very well, because anyone who goes to a diagnostic center typically has both the radiology needs, you know, to clear ultrasounds, chest X-ray, or, in a lot of cases, the Echo or a TMT or even an MR Angio, along with the usual things. So hence we thought it was necessary for us to add that.
But, in, in a lot of cases, our thesis is actually proving out to be, you know, quite what we expected. We still will give it some more time. We will go to 5 centers in Hyderabad, stay with the same collection centers and add some more small satellite radiology centers and all. But as we said in our, earlier commentary, we are not going to expand our investment in this beyond the INR 85 crore-INR 90 crore in Hyderabad. Only after we are fully sure are we going to go ahead and expand to other geographies. So a little bit early for me to tell you where we will be in 3 years. It all depend on how, well we actually grow from here.
We are confident that we will, you know, make money, but the speed and the amount will determine if we have to go to other places.
Okay. Just another question. Like, don't you think the pricing in the diagnostics business is a little bit aggressive?
As Ketan said earlier, given the fact that we don't have referrals, that everything is serviced by us, there's no franchisee involved, and there's no referral being there, and the acquisition is through our own, you know, stores. And we also have a model in which we are actually taking a subscription fee. I think it is the right number. And given the fact that such large centers have actually become EBITDA positive within the first six months, clearly proves that we are on the right track here.
Thank you, sir. Thank you, sir.
Thank you. Participants who wish to ask a question may press star and one on your telephone. Participants who wish to ask a question may press star and one on your telephone. We have the next question on the line from Prakash Agarwal from Axis Capital. Please go ahead.... Mr. Prakash, can you hear us? Mr. Prakash Agarwal, this is the operator. Are you able to hear us? It looks like there's no response from this participant. Participants who wish to ask a question, press star and one on your telephone. We have the next question from the line of Patanjali Srinivasan from Mirabilis Investment Trust. Please go ahead.
Hello.
Yes, you may go ahead with your question.
Yeah. So I'd ask, like we have visited that first six months stores that we opened very well. But, when does the cash point in the first six months usually get recovered by the store? How much time does it take for that?
Is this question meant for the diagnostics full-service center?
No, no, no. I'm asking for the pharmacy business. Like, generally, you've mentioned that the new store is break even about six months, right?
Typically, the amount which is, you know, lost during the time of ramp up to the break even is made up within the first 12 months-15 months.
Okay. Okay. Sir, and with respect to our diagnostics business, do we have a home collection facility, or that is still not there? How is it currently?
We do have a home collection center facility. The customers can go online onto our app and request home collection service. You can also go to a call center and request the same service.
Okay, and do we charge for it or is it included in the subscription plan? How do they go?
No. Any home collection is charged. It is INR 100. As of now, the collection fee is INR 100. It's a discount at which we give. It's highly, I don't think it is possible for us to give a free service. What we do, though, is we have, you know, opened 100 collection centers across the city, making it very convenient to go out there and give a sample. So for anyone who is not wishing to actually pay that money, he can actually easily access our collection services where it is free. But if he wants the service at home, then he pays for it.
Okay, sir. Sir, at the current pace that we are adding stores, do we have enough cash for us to expand at this pace, or we'll be looking at raising money?
It is unlikely that we'll be looking at raising money right now because we don't have any debt at all. We are cash in the bank, and we are accumulating cash, too. So, raising money is not on the books, anytime soon.
Okay, thank you.
Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. Participants who wish to ask a question may press star and one on your touchtone telephone. We have the next question on the line of Shantanu Bhandari from Credit Suisse. Please go ahead.
Yeah, thank you for the opportunity. I have a couple of questions. So first, expansion. So do we aim to maintain expanding to 1,000 square meters to be clear for FY 2022 as well?
Absolutely. Because, you know, the opportunity to grow in the southern states is very high, and we continue to actually see that opportunity, and we continue to get our stores to break even and go to the 10% EBITDA level very quickly. So I would see no reason to back off.
Sure. And what is the CapEx for the tier you are entering today?
So the all-in costs come to around INR 30 lakhs, out of which INR 6-7 lakhs, INR 7-8 lakhs goes towards the load of the store. INR 2-3 lakhs go towards the store rental advance, and the balance is into inventory. So when I say INR 30 lakhs, that also includes inventory. Otherwise, if you're just looking at only the build-out and rental advance, it's only anywhere between INR 9-10 lakhs.
Okay, understood. In terms of store network strategy, so we know we have been adding more number of stores beyond, you know, Tier 2 and Tier 3 towns. So will this continuous strategy that in the states where we are present, we will continue to add more of these stores, or are we planning to enter, you know, some new state as well and, you know, grow our country stores there?
So the seven states in which we are there account for around 50% of the overall pharmacy market. It also account for- they're also very, you know, dense and affluent states. We see, we see a lot of opportunity in these states, so we will continue to grow. And whether it is Tier 2 or Tier 3, depends on the current state or current number of stores in each of these states. For instance, states in which we entered first, which are AP and Telangana. Here we are there in the district code as Tier 1 level in a significant manner, and we're going to Tier 2 and Tier 3 at this stages.
There are states which we entered towards the later part, on West Bengal and Maharashtra, for instance, we are entering into new districts, so that would be mainly the Tier 2 and less Tier 3 and Tier 4, I would say. So it all depends on, our saturation of the Tier 1 cities. Once that is done, we go down that level, go down that path. And, as regards to new states, we're looking at a couple of states at least to seed, this year, and which will enable us to actually start growing at some point of time, maybe next year or something like that. So we're looking at both, three states in South Kerala, Madhya Pradesh and Chhattisgarh, to seed some, you know, kind of expansion in their major cities, which will be mentioned, either be Kerala and Madhya Pradesh.
Understood. And my next question is on diagnostics. So you mentioned that the EBITDA margin would be somewhere around 19%-20% for the full service diagnostic center and 20%. So how soon do we think we can achieve this level of EBITDA margin?
You know, we have three full service centers in operation currently. The third one went online only last month. It's early. The other two have been in operation for six months, and we have broken even on operating it.
EBITDA margin guidance, even on say 19%-20%. So when do we expect to achieve these levels? So is it after one year, two years?
Yes. That's at the exit of the first 12 months. So 12th month, that's where we expect the 19% to come in.
Thank you. Okay. Thank you so much for answering questions. Thank you.
Thank you. We have the next question on the line of Prakash Agarwal from Axis Capital. Please go ahead.
Yeah, hi. Am I audible?
Yes, we can hear you.
Okay. Hi, good afternoon, all. First question, slide 13. I just want to go on margin, last three years, at 5%+, and now it's 2.6 and 6.6. So we have improved. Q4 and these are again 12+ months stores. So is this all a function of higher discounting by the peers as well as inflation, or there is more to it?
You mean the decrease in the margin from 5.3 to 4.3, and then now to 4.6? That's, is that what you're asking, Prakash?
Yes, sir.
Yeah. No, I would say it is more a function of the number of new stores which have gotten added into the 12+ months category, right? Now, we have roughly around 1,000 stores which are less than 12 months, and, I think around 500 efficient stores which are in the 12+, 12-24 months. This is what is actually pulling it down, given the fact that our full ramp up of, to the, expected actually happens only 24 months. So that said, definitely the headwinds which you're seeing because of the increased competition in the online space and the increased discounting by the online players, has also, you know, I would say neutralized growth a little bit.
We're countering it with increased sales, a little bit of increased, you know, with the operational risk out there, but more importantly, through increase in the private label product out there, and that has been driving our margin. We don't expect that anyone can sustain at a 20%-25% discount level, so we expect that to come down as we go forward. And once that comes down, I think we should be able to take off from there to even higher levels.
Okay. Did you say 1,000 + 1 under 12 months and the number is 12-24 months?
Prakash, I'll help you on that. So it's number of stores in the year one bracket is 1,083. Number of stores in 24-month category is 543.
543. Specifically, what is the, you know, the margin that 12-24 months, given that you mentioned, you know, on a blended basis above 10, 10%. But I would assume that 12-24 months would be a little lower. Is it in the same range?
It's around 6.9% right now, for the stores which are in the 24 months age bracket.
Okay, fair enough. And secondly, on your omnichannel strategy, I mean, share seems to be coming off a bit. What are we planning to do? Are we still investing or, you know, you know, wanting to keep that share up, or are we okay with the way things are panning out?
You know, the way I see it, we'd rather spend INR 3 crore per month on opening new stores, which will give us, you know, people who will keep coming back to our stores and spend it on advertisement and getting new customers. Because if you actually look at it, Prakash, you know, the fact of the matter is, on purchases beyond the first three, we have the best discount. We have greater availability than anyone else out there. Our two-hour, two-hour availability is actually at, two-hour delivery is around 95%-98%. So on the service side, we don't lack. We know that there's a market and people will come here, but we don't think this is the right way to spend money to acquire customers at this point of time.
We believe that as customers get more and more used to the online side, especially in the demographic in which our customers primarily live, as these guys get more and more convinced, they will come, and we are ready to service them at that point of time. At this point, we don't foresee spending any extra money on acquiring customers for this.
Fair enough. And secondly, on your expansion plan, so I mean, obviously, you mentioned 25% of the market that you are going to serve. But have you got plans to move into the remaining 65, especially up north?
No, it's unlikely that we'll get anytime soon. But we are looking to seed at least a couple of the neighboring states. Well, on the southern side, Kerala, and on the central side, we'll probably do Chhattisgarh and Madhya Pradesh. We're looking at opening some stores in the next two quarters or so in Cochin and Bhopal, and Bhopal or Indore and Raipur. The plan assessing this thing into the north side is not on the cards as of now.
Okay. Okay. Understood. And lastly, on Mumbai, so last time, there was an evaluation of having a express store kind of thing, much smaller, given the rentals are very high. Is there a, you know, are we doing that or there is not, or how do you plan to move in?
Yeah. So Mumbai, as we said last time, we want to open stores which are more in line with the expected revenue and all. Or at least, we want to open stores whose rents are more in line with the national average. So INR 30,000-INR 35,000 is the usual rents we pay for stores, which are 300 sq ft. In Bombay, we are okay with paying maybe INR 10,000 or INR 5,000 more, but not much more. So we are opening stores that way, and they are working out reasonably well for us, and definitely working out better than opening up large stores.
Okay. Okay, lovely. Thank you very much.
Thank you, Prakash.
Thank you. Participants who wish to ask a question may press star then one while it is on your touch-tone telephone. I would now like to hand it over to the management for closing comments.
Thank you. 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 Magnus, I conclude the conference. Thank you for joining us, and you may now disconnect your lines.