Thank you, Ren. Good evening, everyone.

On behalf of MedPlus, it's my utmost pleasure to welcome you all to MedPlus Q3 FY26 Earnings Conference Call to discuss the financial results of MedPlus for the third quarter of FY26 which were announced earlier. We have with us today the senior management team represented by Mr.

Madhukar Reddy Gangadi, Chief Executive Officer and Managing Director, and Mr. Sujit Mahato, CFO.

Before we begin, I would like to mention that some 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. We have opened 228 stores during the current quarter, and there were 46 store closures.

Out of 46 closures, 17 stores were relocated, seven stores are in the process of getting converted into franchisee, 10 franchisees we saw withdrawals, and 12 stores are closed for other reasons. We achieved a net addition of 182 stores during the quarter compared to 117 stores added during the last quarter.

During the current financial year, we have achieved net addition of 400 stores. We continue with the outlook for adding 600 new stores in FY26.

Update on the network: in terms of our store network age, around 23% of our stores have been operational for less than two years, and the remaining 77% of our stores have been operational for two years or more. In terms of the network size, at the end of the quarter, our network grew to 5,112 stores with 2.6 million-plus square feet compared to 4,612 stores and 2.4 million square feet at the end of December '24.

The average store size is 527 square feet. Update on the revenue mix: presently, MedPlus offers a large range of SKUs spanning across pharmaceutical and non-pharmaceutical categories.

Private label sales for quarter three FY26 constitute 22.2%, pharma being 11.6% and FMCG being 10.6% of our total revenues. On GMV basis, during the current quarter, the share of the private label pharma sales stood at 18.9% compared to 7.9% prior to the launch of MedPlus branded pharmaceutical product.

That was in last year quarter one. An update on financial numbers: our consolidated revenue for the quarter stood at 18,061 million.

Our consolidated operating EBITDA for the quarter, after considering the non-recurring charge of 70.59 million rupees on account of the implementation of the new labor code, stood at 96.8 crores, representing 5.4%. Revenue from pharmacy operations grew by 15.6% year-on-year on a reported basis.

The pharmacy operating EBITDA stood at 925 million, representing 5.2%. An update on our store performance: stores older than 12 months, revenue from these stores in quarter three was 16,300 million, representing 96% of our pharmacy revenue.

These stores had a store-level EBITDA margin of 12.4%. A word here on the store-level EBITDA margin by age: while stores greater than 12 months had a margin of 12.4%, this was 12.6% for stores greater than 24 months and 8.8% for stores in the 13 to 24 months age bracket.

On allocating all non-store related costs, the operating EBITDA of stores greater than 12 months would be 967 million, which translates to a margin of 5.8%. On working capital, our net working capital for quarter three was 53 days.

The inventory in our warehouse stood at 34 days. In quarter three, the inventory level of our first-year store was 103 days in comparison for a store older than 12 months, the inventory was around 35 days.

An update on our diagnostic numbers: diagnostic revenue grew to 326.7 million in quarter three FY26 compared to 274.7 million in quarter three FY25. Diagnostic segment recorded an operating EBITDA of 50.7 million compared to 22.1 million in quarter three FY25.

This translates to 15.5% as an operating EBITDA margin. In October, we sold 506 gross plans per day.

In November and December, this was 529 and 528 respectively. As on 31st December, we had 180,000 active plans covering 368,000 underlying lives.

As on 30th September, we had 170,000 active plans covering 351,000 underlying lives. Our current observed on-time renewal rate is 23% in Q3 versus 24% in the previous quarter.

That concludes our update for the quarter. I request the host to open the line for questions.

hello. Am I audible?

Yeah. Hi team, congrats on a stellar number.

My first question is that, Madhukar, could you explain that 10% plus SSSG, we've seen that after some time now, and you also spoke about in your opening comments, Sujit mentioned the 18.9% private pharma GMV sales. Could you give some more color about what's driving that?

I think it's a great question. What we had articulated earlier, while we had seen a slowdown in the greater than 12 months stores, the company tweaked the incentive arrangement at the store level, and we are seeing that paying off dividends.

This is in the right direction, at least there are two reasons for this SSSG growth. One, we started with a bit lower base of the previous quarter in the last year, and two, the impact of the changes in the incentive structure and a bit of availability improvement due to the implementation of the new warehouses.

Understood. Sujit, you have alluded to the incentive structure change, but I thought that you had reached the desired level of private pharma sales, and you were hoping that branded would again start to pick up.

Did we make those tweaks in this quarter, or the revised incentive structure continues which is continuing to drive the private pharma sales?

No, as we had indicated earlier, we have tweaked the incentive structure so as to consider the total sales growth at our store level, which is paying off dividends. We are clearly seeing the improvement in the branded pharma uptake as well as the uptake in the private label non-pharma, which is helping us to achieve these numbers.

Understood. Secondly, could you speak about the margin profile again has been very strong this quarter, congrats on excellent execution.

How do you expect gross margins to continue to trend for 4Q and next year along with operating EBITDA?

I think we do not generally give guidance, but on the gross margin level, we expect it to remain at the same level.

Understood. Thirdly, could you just speak a little bit about what's happening on your franchisees, the expansion on that?

Is this an opportune time to start speaking about it, or should we expect more color after 4Q?

I think after the full year we would like to get into that, but as you rightly picked up, that initiative is ongoing, and we are working with couple of models, couple of partners to see which is the right fit and how does it fit into our overall strategy. That being said, that initiative is currently ongoing.

These numbers include the impact of franchisee and distribution sales, which is captured in the presentation in the others segment, which currently if you see, the others would be in the range of 5.7% of the total revenue, and this alone is now 3.7%. As a comparison, earlier this was 1%.

Understood. Incrementally, to understand the run rates of the franchisee, we'll be reporting it under others so that we get more clearer sense.

Is that broadly correct?

Yes.

Understood. Could you just call out quantitatively how many franchisees were there this quarter, any color on those things at least if you can quantify?

Going forward we would like to do a comprehensive disclosure on that, but for the moment, I think we will continue with this. We can connect offline.

Okay. Thanks so much, and all the best, sir.

Thank you.

Hi team. Thanks, congratulations on fantastic set of numbers.

Couple of quick questions. Could you just talk a little bit about the GMV growth that we have seen in the quarter on a consolidated basis?

I'll have to take it offline. I do not have it handy.

Okay. Sure, I can take that offline.

Parallely, just from a top-down stand point, this quarter we saw substantial growth in your non-pharma business, right? We saw growth of about 48%.

Could you just walk us through how does the margin profile look along the branded pharma versus non-pharma on the branded side, and parallely the unbranded pharma and the unbranded non-pharma. What does the margin profile across this spectrum look like?

On a net basis.

Sure. On the reported basis, branded pharma would give us around 13% to 14% gross margin.

Branded non-pharma would be more or less in the similar range. For us, the private label pharma, the old as well as the new MedPlus brand put together, would anywhere be between 65% to 70%, and the private label non-pharma would be around 25% to 28% gross margin.

Wow. 25% to 30% you said?

Yes.

Great. After very long time we are seeing a very good growth in terms of the store expansion side.

Could you just throw some color on what the guidance could be for next year on FY27 as well? Should we expect the 1,000 target of the 1,000 number on a full year basis for FY27?

Sure. Currently we are not guiding, but yeah, once we finish our internal AOP process, maybe at some point in time or next quarter or beyond that, we will definitely let you know.

Okay. Any ballpark numbers that you're looking at for next year, sir?

It should at least be the similar numbers of this year.

Got it, got it.

Not more.

Sure. Structurally for next year, do we have any guiding in terms of the top line that we're expecting?

How should we be seeing the mix change between the four key areas, between the branded, unbranded side?

We do not provide such guidance, I'm sorry actually.

Sure. No worries.

Thank you so much.

Thank you.

Hi. Thank you for the opportunity.

Congrats on the great set of numbers. One of my questions is regarding SSSG.

You mentioned that base year growth was kind of low. Just kind of extrapolating, Q4 was actually a decline for you in SSSG, so that should mean that SSSG at least for the near three to four quarters will remain at current levels or kind of improve also?

Is that the right kind of conclusion to be taken away?

I think, Sudarshan, your observation is right. At least for the next one quarter, I have a very clear visibility, but we will see as we move forward.

Okay. On the gross margins, I understand that the private label pharma has kind of gone down a bit, but on the other hand, you have your non-pharma private label that has gone up.

The delta in gross margins, I think we used to allude that every 50 basis points adds around 10 to 20 basis points of gross margin. That is relative to pharma private label, or overall private pharma label would also add that kind of level?

Pharma private label, but you are right, since there is no substitution being done on the private label non-pharma, the overall increase in the sales and the gross margin will be accretive to that extent. Pharma, there is a possibility that there could be a switch from the brand to the private label, but in non-pharma we see that very low.

That could be only incremental sales and incremental margin. However, from an optics, the gross margin stood at the similar level, but that had a small impact of our franchisee as well, because we sell to the franchisee at a lower margin, and that after netting of that and the increase in the private label non-pharma, we were able to continue with the similar gross margin level.

Got it. Got it.

One more request. On the private label, I understand that you're still kind of working around with the incentives, etc.

Let's say two, three years out the line, do you have a visibility right now key you would want it to be, let's say 25% or 30%? Is there some number that we still are looking to kind of get to either pharma or non-pharma?

As this is a growth journey, Sudarshan, you'll also agree, our numbers will be aspirational, but we're not giving any guidance at the moment, because non-pharma by design, there is no cap, because at least on the pharma, there is a cap theoretically because there is a doctor's prescription which we need to fill. On the non-pharma, if the experience is good, the product is good, the availability is good, and the quality is good, there is no cap per se in terms of how far this could go.

The company continues to add new assortments, new categories, which is helping the sales and the gross margins.

Got it. Got it.

Got it. That's it from my side.

Thank you.

Thank you.

Yeah. Hi, sir.

One question. When I was looking at non-store expenses, they seem to have gone up materially, and not only on year-on-year, but also on the quarter-on-quarter basis also.

Can you please explain and is this run rate inching up going forward? How should we think about that?

In the corporate expense line, there includes a one-off non-recurring expense also. We'll have to be mindful of that 70 million or ₹7 crores, which was the impact of the past service cost, post the implementation of the new wage codes.

That's a one-off. Going forward, it should be more or less in the same range because, one, we'll have to be mindful of what could come.

Those notifications and the rules are still not yet final, like others, we are closely monitoring this space, and maybe by end of March, end of April, we should have more clarity. As we speak, we are on a very good footing.

This ₹7 crores is one time, or is it expected to continue?

It is one time. You are right.

One time, okay. Sir, all the warehouses and the other logistics improvement that we were doing, is that and all open and that cost is in the base now?

At least 60% to 70% of the new warehouses have been operationalized. The rest will also get operationalized in the next two quarters.

The manpower recruitment for all these warehouses are complete, we do not expect any significant ramp-up on the expenses on those line items.

Understood, sir. Got it.

Thank you. Thank you, sir.

Thank you.

Good evening. Thank you so much for the time.

On the FMCG side, could you give a little bit more color in terms of what are the new assortments or categories that we're adding, and what sort of helping this growth which will sustain in the coming times?

I think, Madhav, we'll take this offline, but yeah, what we have been adding now is more of the food category, the wellness categories, some cold-pressed oils which are in again in the wellness category. These are the few categories we have started adding, and we are seeing good traction.

Understood. Got it.

Sir, just on the margin side perhaps, I think this quarter if we adjust for that one-off of the 70 million, pharmacy operating margins are about 5.5%, 5.6%. Like you said, a lot of the costs of the warehouses is already in the base now.

Are we sort of within striking distance of getting to 6% in the next couple of years? Is that a fair way to think about it given some of the operating leverage plays out with the sales growth?

Given SSSG is sort of now improving at a good pace as well.

Madhav, our margins whatever we actually start improving on will be largely a function of the private label. On private label, I actually am now equally bullish about the non-pharma side.

Non-pharma is just a matter of adding categories out there. We are, let us say, getting the full benefit of the 5,000 stores, which basically means we have the minimum order quantity for almost any product.

As long as the product is something which people will buy in the regular convenience or wellness category, we are more than happy to actually put it out there. I feel, at least given the last couple of quarters' performance, I see no reason why we should not get to that number.

Again, on the pharma side, while we fully expect this to continue to go up, I expect that to happen as a result of, let us say, the quality of the product, as a result of all the positive publicity we expect to get from customers who are already using it. We have significantly reduced the push on the private label pharma, but we continue to be, let's say, bullish about the non-pharma side.

Okay. Sorry, sir, when you talk about the margins that there's potential for us to reach the 6% over a period of time?

I don't see any reason why not. It will be early to say, there are a lot of things out there on the ground, but given that only 20% of our sales now come from general goods, and most of our competitors are in the range of around 30% to 40%, even 50%, even a slight jump into general goods side, and most of it coming from private label, will definitely increase the top line, and also will improve the profitability.

I feel confident about that, but I can't really give you a exact timeline in which this will happen.

Fair enough, sir. Got it, got it.

Great, perfect. Thank you, sir.

Great, thanks.

Hello, sir. Can you hear me?

Yes, please.

Sir, I just want to understand, you have mentioned that you have tweaked your incentive structure which helped your SSSG growth to be in the range of 10.5%. Can you throw some light on what are the incentive structure that you tweaked?

Earlier, the incentive structures was predominantly working around the private label sales. What we have tweaked is, we have now included a component of total sales at the store level, which means the branded as well as the private label sales.

If the total sales are not achieved, or let's say there are targets linked to that, then the achievement percentage on the private label goes down by certain basis points, and that keeps motivating the store level employees to achieve both the private label as well as the branded total sales growth at the store level. This is helping us in the overall journey as well.

Understood, sir. Sir, I just want to understand the nature of goods or basket of goods under the non-pharma business, like branded as well as private non-pharma business.

What are the products that you are launching, and the growth in this business is recurring, or is it because you are introducing new products, hence your total addressable market is expanding?

The product range in the non-pharma, both branded as well as private label, is a large assortment of all our daily needs right from your early morning let's say the needs of toothbrush, toothpaste, hair oils, creams, solid toilet cleaners, the soaps, shampoos, there is a large assortment of, I would say, 1,300-plus SKUs which we offer to the customers, great quality and great affordable price. That is helping us, and what we mentioned earlier, we keep on adding new categories depending on what the needs are, what we identify at the store level, where there is a regular need and a good product available.

That is what is helping our incremental sales on the non-pharma products.

Understood, sir. Thank you.

Thank you.

Hi. Thank you so much for the opportunity, sir.

Sir, I just wanted to have a bookkeeping, we have stopped giving store-level MRP growth for stores resident 12 months. Could you please share that data?

It was not making sense, Sanjay, because you would agree that since the change in the GST rate, there is a flat reduction of the GST by around 6.5%, 7%, which makes comparability a big issue. That is the only reason we removed that, but otherwise we would have to do a manual adjustment and then give you a number which is not directly comparable.

Understood, sir. Okay.

Sir, also wanted to understand that we are going much deeper into the states which we are already present, I see the store expansion are largely into our states which we are present and have a enough present on that district. Do we plan on that side, or going forward how's the store expansion we are looking forward?

I understand that we follow cluster-based approach, but wanted to have your sense on how we are planning to new store or new geography or new city, to say.

The priority always would be going deeper into the existing states and then sweating the warehouse assets which we have created for these states, and then slowly getting into adjacent states. We had started Chhattisgarh, we have started Kerala, but yeah, the main new stores where you can see now is a part of the densification of the existing presence what we have.

It's an ongoing strategy, Sanjay.

Sir, you also shared, in your opening remark or somewhere you shared the revenue for stores greater than 12 months. Did we share overall for the last quarters as well?

Because I'm not seeing that. If you can allude for the quarter-on-quarter and Y-o-Y, that revenue for greater than 12 months, it would be really helpful.

Thank you.

At the overall level we have given, but if you're only with a specific thing we have added is for greater than 12 months as a bucket, but at the overall we have anyhow given you both in the investor deck as well as in my call, but I did not get your question if you're asking other cohort.

Sir, I'm asking for greater than 12 months only. Because, in the previous comments or previous concall, we we don't spoke to revenue greater than 12 months stores.

Just wanted to have your, Y-o-Y and quarter quarter numbers on that side.

We'll look at it. I'll take this offline.

Sir. Thank you.

Thank you so much, sir. Thank you.

Hi, sir. Couple of questions.

With the change in the incentive structure, the previous guidance that we used to give that every 50 bps increase in private label will lead to certain margin accretion, does that still hold, or is there any new reference point you want to share?

I think we can continue with the same assumption. There's absolutely no change on that.

Got it. Got it.

The second question was, I think in the last concall we had mentioned for that employee retention, we had introduced a scheme, and probably this quarter would be the first quarter where we would actually see the results of exercise. If you can share some insights on that part, is it working as per plan or

It's an ongoing scheme which is going to run for three years, which when we launched for only three cities. That's again one initiative which you're very closely monitoring to see the effectiveness.

Basis that, the company would then take a call whether to extend that across all the regions or curtail that further.

My question was that given that the exercise timeline was in this quarter, has it panned out as per our expectations even in the pilot?

I'll explain to you. The first exercise was post 12 months an employee getting into this plan, and we had the first exercise last quarter wherein we saw a segment of employees exercise their right to claim that first 18,000, and a segment of employees who have postponed their right to claim 50,000 in year two, and we are seeing improvement in attrition rates in the three cities which we have implemented.

I also mentioned that the company is closely monitoring this initiative to see whether it would make sense to continue this, expand this, or further curtail this. All these are still open.

Got it. Understood.

Sir, you had mentioned the gross margins for the various product categories on a gross basis. What can be the margin on a net basis?

Any

Whatever I mentioned is on net basis. It's all on net basis.

It's on net basis. Yeah.

Yeah. Got it.

Got it. Understood.

That's all right now. Thank you.

Thank you.

A few questions. Just want to understand what's the kind of mix of therapies you have in your pharma side?

The second question is that, in your old stores in the pharma, what kind of repeat business you actually get in a sense that, let's say the customer comes back and buys in the last one year or whichever way you qualify or quantify? The third, since we have significant amount of private non-pharmacy also, private label, what kind of inventory write-off or damages you actually occur every quarter and how you plan to bring it down?

These are three questions.

Sure, thank you. Thank you for your questions.

To start with, the entire private label pharma portfolio consists of both the acute as well as the chronic segments. I would say we are more to 55 chronic and 40, 45 on the acute.

We are all the top five therapeutic areas as listed by WHO, we are all in all those top five categories. You can take diabetics, cardiovascular, and the hypertension, all these areas are completely covered by our chronic range.

The acute, as you are aware, again, around 40%, 45% of our sales comes from the acute range. Coming to the private label non-pharma, absolutely there's a large assortment, and you also mentioned about the inventory risk.

You are absolutely right, on the private label the inventory risk is completely on our books. As a trend, we have been providing close to 0.9% to 1% of our sales of private label as a provision for deterioration in inventory.

Got it. In terms of repeat business, can you just give some views on that?

See, as we speak, we have more than 46 to 47 lakh of members on the pharma side itself. That actually gives us a very strong conviction of our repeat business.

Customers become members to access the deep discounts which is offered by the company on the private label product as well as a higher discount on the branded pharma product, and once they become members, they get full access to these discounts for one year. What we are seeing is on the both private label pharma and non-pharma, a very good repeat business every once in three months.

This is the exercise what we do internally. We are seeing complete repeat business of close to 90%.

Got it, got it. Then last one more question, I see that these days, you are able to provide or service the online pharma very quickly.

Can you just help me understand whether this is like a one-off or you have actually consciously improved your serviceability in the online purchases?

Helpful. We are also looking at this space very carefully because you would appreciate the competition or the offerings by the quick-commerce.

We have also ramped up our offerings on this space, but as and when needed, we can further improve it, but I think what you have experienced is a positive story for us if you have seen that improvement. We are also consciously working on that.

All right. Thank you.

Thank you.

just one other question. Our working capital has come down a fair bit, almost 10 days year-over-year.

Could you explain why that has come down and is it sustainable at these lower levels going ahead?

See, I think a couple of things. One, wherever we have opened the franchisee model stores, we are not carrying inventory on our book, it is sale on the first day.

To that extent, roughly 15 to 18 lakhs of inventory per store, that's the reduction which we have, otherwise we were carrying on our book. That's one.

On the second hand, we have been mindful of the inventory what we are carrying both on the store level as well as at the warehouse level, and those improvements are very clearly getting reflected on the number of days. On top, we have added only 400 stores.

To that extent, a year-on-year comparison shows you a better benefit because cash has been conserved.

Okay. Does the higher private label mix help as well to that number?

In one of the earlier commentaries you mentioned, for private label structurally we need to carry lower inventory at the stores because the SKUs come down, is that helping at all or not really?

Currently we are carrying both the inventory, Madhav. We have not yet, what we had discussed earlier, that at a certain point we can then cut the tail or the long tail of the brand, but at the moment we have not so that we ensure full availability to our customers.

Understood. Just last question on the gross margins for the pharmacy business, I think you said about 25% odd.

Sort of they should keep gradually moving up as the private label mix goes up, right? That's just the way to think about this parameter.

Absolutely. That's what Madhukar explained.

You're right.

Okay. Thank you.

Good night. Great, thanks.

Thanks for the opportunity and many congratulations on a excellent set of numbers. My first question is I know you're not guiding for next year, but for our business model, what is the sustainable SSSG growth rate now given that we are at 5,000-plus stores and our private label business has fairly stabilized?

Any guidance or any ballpark thing basically which one should look at basically whether it's high single digit or low double digit SSSG is sustainable? That's my first question.

I think that's the aspiration which we are generally working with, but we do not give any such guidance because again, we have seen the store network getting matured over period, and that's where we are also looking at what measures we can take at our store level, including the back-end efficiencies so that we can continue this healthy SSSG and aspire for much more. At least for this moment, we are not giving any guidance, please.

Sure. Second and last question, if I look at our sales contribution from metros, right, has continued to decline over last many quarters, and non-metro and tier 2, tier 3 has gone up.

Is it largely to do with our private label story? Because what I understand is the adoption of private label is much better in tier 2, tier 3, tier 4 towns, and hence as we kind of increase our sales contribution from private label, we'll kind of continue to see that expansion more into the non-metro cities.

Is that understanding correct?

I think it's not a straight answer, but what we could also keep in mind, we need to be mindful of the net realization on our private label pharma especially. Earlier we were able to realize around 83, 100 minus 17 of blended discount, we were able to realize 83 vis-à-vis now 45, 46.

That has to play out for couple of quarters to have a like-to-like comparison.

Okay. Got it.

That's all from my side and best luck for coming quarters.

Thank you.

I thank all participants on this call for your interest in the MedPlus journey. Our Investor Relations team can be contacted at [email protected].

Thank you.