Ladies and gentlemen, good day and welcome to MedPlus Health Services Limited Q1 FY 2024 Earnings Conference Call. As a reminder, all participant lines will be placed on 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 100 on the touch-tone phone. Please note that this conference call is being recorded. I now hand the conference over to Mr. Prasad from MedPlus Health Services Limited. Thank you. Over to you. Thank you, Ranjan. Good evening everyone. On behalf of MedPlus, it's my utmost pleasure to welcome you all to the MedPlus Q1 2024 earnings conference call for the first quarter of 2023 which were announced on August 10, 2023. The senior management team represented by Mr. Madhukar Gangadi, Chief Executive Officer and Managing Director Mr. Sujit Mahato, CFO, and Mr. Chetan Dikshit, CSO. Before we begin, I would like to mention that some of the statements made in this discussion may be forward-looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning the risks and uncertainties are on slide one of the investor presentations shared with all of you. Earlier documents relating to our financial performance have been circulated earlier and these have also been posted on our website. I will now hand over the call to Mr. Sujit. Thank you. And over to you, Sujit. Thank you, Prasad, and good evening, everyone. As of June 30, we have been serving the healthcare and household needs of communities in 581 cities across seven states through our extensive network of 3,975 pharmacy outlets. During the current quarter, we have successfully expanded our presence to 29 additional cities. In addition to our pharmacy operation, MedPlus operates four full-service diagnostic centers, Level 2 Centers and 122 collection centers. These facilities play a crucial role in our commitment to providing affordable diagnostic services to our customers. An important milestone in our diagnostic journey is we have crossed the 100,000 active membership as at the end of the current quarter covering 180,000 lives. Our comment on the network remains on track as we continue to balance growth and profitability. Over the past 12 months we have added a net total of 995 stores with 168 stores opened in Q1. Notably, West Bengal and Karnataka saw the highest number of store additions with 53 and 32 stores respectively. Of the store openings in Q1, 53% were in Tier 2 cities and beyond. Reflecting our strategic focus in these markets. Currently, out of our 3,975 stores, 1,762 stores representing 22% are located in Tier 2 cities and beyond. We recognize the potential of these markets and aim to further expand due to the maturity of our operations and global supply chain capabilities. During Q1 we experienced 15 store closures. Considering both openings and closures, we achieved an addition of 153 stores in Q1 compared to 265 store openings in Q4 o f the previous year. In terms of age of our network, approximately 27% of our stores are less than a year old. Around 52% of our store are in the second year of operation. The remaining 51% of our stores have been operating for two years or more. To illustrate the impact of our rapid store expansion on the age distribution of the network, by the end of Q1, approximately 49% of the stores fall within less than two years in bracket. In comparison, during Q1, FY 2023 only 45% of our scores were less than two years old. It's important to note that all stores in the less than two years age bracket are still in their ramp up [phase]. From a financial perspective, they currently have a negative impact on our operating EBITDA. However, as these stores mature, we anticipate them contributing positively to our profi tability. We closely monitor the time it takes for new stores to breakeven. Our stores opened between July 2022 and 2022. Approximately 58% of those achieved breakeven within. Six months of operation. Additionally, as a cohort, all the stores combined achieved breakeven in just four months. Now, the store base as at the end of the quarter, our network has grown to 3,975 stores with 2.1 million-plus square feet compared to 2,980 stores representing 1.7 million square feet. At the end of June 2022, the average store size is 542 square feet. To give you a sense of spread in store sizes, we have 2,855 stores less than 600 square feet and 1,120 stores. With our expanded scale, we are strategically positioned to enhance our revenue share from private label products. Our private label range is designed to offer customers high quality products at affordable prices. Currently, MedPlus offers over 1,300 SKUs spanning across pharmaceutical and non-pharmaceutical categories. Private label sales accounted for 14.3% of our total revenue in Q1 FY 2024. We have observed a reduced sale in our private label due to extended summer and trade monitoring. Furthermore, our expanded presence in Tier 2 cities and beyond is making a significant impact on our revenue mix. Sales from these markets accounted for 34% of our pharmacy revenues in the current quarter, demonstrating an increase from 31% in the same period last year. New offering MedPlus has introduced the MedPlus Advantage subscription plan for its customers in Hyderabad offering several exciting benefits. To become a member of this plan, customers are required to pay an annual subscription subscription fee of INR 499. Initially the company is offering the subscription at INR 49. As part of the plan, customers gain access to medicine products at discounted rates ranging between 50%-80%. Initially the plan covered 433 pharma products and the company is now planning to expand the offerings to include more products. Financial numbers for quarter performance. The consolidated revenue was INR 12,843 million with a growth of 29.2% year-on-year and 2.5% quarter-on-quarter. INR 91 million representing 2.3%. Around 99% of our revenue is from our pharmacy operation. The pharmacy operating EBITDA is INR 343 million representing 2.7% on our store performance. I would like to update on our stores older than 12 months. Revenue from these stores in Q1 was INR 11,124 million or 89% of pharmacy revenue. These stores had a store level EBITDA margin of 8.9%. The store level operating ROCE for these stores stood at 49.1% as before year-on-year the store level EBITDA margin by 8 while stores greater than 12 months had a margin of 8.9%. This was 9.7% for stores greater than 24 months and 6.1% was stored in the 13 to 24 month age bracket. If we allocated the non store related cost then the operating would be INR 452 million which translates to a margin of 2% on our diagnostic numbers. Diagnostic revenue has grown to INR 139 million in Q1 FY24 compared to INR 13 million in Q1 FY 2023 which is primarily due to launch of new centers in Hyderabad. Diagnostic segment recorded an operating EBITDA loss of INR 46 million compared to a loss of INR 52 million in Q1 FY23. On the working capital details our net working capital for Q1 was 66 days. The inventory in our warehouse was 35 days. As you are aware because of the. Sales trajectory of new stores, their inventory. Turnover is lower in the first year. In Q1 the inventory level for first. Year store was 114 days. In comparison, for a store older than 12 months, the inventory was 41 days. Now I request Chetan to update on our diagnostic business. Over to you, Chetan. Thank you Sujit and good afternoon everyone. Because Sujit has already mentioned in our pilot market of Hyderabad we now have two full-service diagnostic centers, seven Level 2 centers and 122 collection centers. In July of this year we made two tweaks to the MedPlus Advantage plan. Firstly, we made the configuration scalable so now add-on participants. For example, a family member can be included anytime during the one year of the plan. Secondly, we increased the price of our plan by INR 150. Simultaneously we introduced the same INR 160 as a discount for timely renewal. In effect our old members will have the option to renew on time at the old price, there's no change to the benefits. Any customer of MedPlus Advantage can avail the full range of diagnostic tests and pathology tests at 75% discount to MRP. As on 31 March we had 92,000 active clients and 162,000 underlying lines. As on 30 June we had 105,000 active clients and 186,000 underlying lives. We are now setting our sights on the 250,000 underlying lines milestone for this quarter. In April we sold 333 gross lines per day. In May and June this was 308 and 343 respectively. We have launched MedPlus Advantage in March 2022 after the completion of one year. Our current observed on-time renewal rate is 15%. In 60 days post-expiry we have observed renewal to be at 30%. That's an update on diagnostics we are handing over to Madhukar now. Thank you Chetan. On June 17th we launched a new product line in app stores. It's actually first on the private label which we had earlier. Products were sold under the name of MHS and Wynclark and they were offered as substitutes as a convenience to customers for whom we did not have the same set of products under the mainstream. These were sold at the same time as the original brands and all and there was no pricing difference. As I said earlier, these are some fallback and kind of for the last few quarters we have been observing that more and more customers are now looking to actually take up or at least have been asking for unbranded alternative products. So as a response to that and as a response to the fact that the Indian customer is now more aware than ever before and the fact that most of them now realize that 80% of all the drugs that are sold in the country are off-patent and are actually with really no big difference on the patented drugs and everything else. So given that most people have now realized this, they have been asking for this kind of products, we thought it was the right time for us to introduce our products. And the main difference now is that while the earlier private labels were offered as just the convenience kind of things substitute for a brand for which we stock in this product. Right. We have now started offering these actively to customers who are looking to go for a less expensive product from the branded product. This comes through a membership plan. The membership plan will be. We have started it. What it. Offers to the customers is 50%-80% discount on a broad set of. We have started with products. We expect that we'll extend this to around 800 over the coming months. We have actually launched it only in Hyderabad and as of now and I'm happy to tell you that the uptake for the customers have been fantastic. We are actually seeing a lot of customers asking us for these products. So what it will tell me that as of July we are at a total of roughly around 15% of products sold in our stores today are optimal. This while it is solid, it's still magnificent to also help in bringing in new customers into our space. We also have been seeing a lot of customers who we had actually lost in the past few months. For the foundation of this we expect as we go forward that 15% will continue to. We also expect to launch these products across all the services and we expect this to not just add to our margin but also add to. We believe now we are at the stage where the [MedPlus point] is accepted and we will now start selling customers to one best price on a branded generic product. Part two, a MedPlus point. If customer is. I would like to know. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question press star and one on the touch-tone 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'll wait for a moment as the question queue assembles. The first question comes from the line of Ankit Bansal from Avendus Capital. Please go ahead. Hello, sir, my question is. Hello. Yeah, yeah. My question is your private label brand. Which you recently started. Can you elaborate the kind of manufacturer? You have been tied up with information. Which will help investors in the growth of the company moving forward? Yeah. So we have shortlisted around 10 different manufacturers across the country. I don't want to give you, you know, name any names out here right now, but these are people who are actually doing for the largest brands in the country. They have. I would say they have one of the better facilities in the country and. We are very confident that can actually give us quality which is on par with. Okay, my next question is: any idea of expanding to North India? Any in the mindset? Any project. We are actually expanding into the contiguous states in which we are already present. We are going into. We will definitely be looking at the North India expansion. Okay. Sir, are you seeing a healthy competition or a competition is looking more tougher and tougher with the e-commerce like local manufacturers are also. I'm witnessing a lot. Of growth in their businesses. How you see them sir? So there are two parts to the question I guess. One is the e-commerce we have seen while a couple of players have actually reduced the amount of discounting and reduced the amount of. Not everyone is doing that. Obviously there are dealers who continue to increase on the local manufacturers and all. I can't really comment on that. What we believe is that MedPlus you know I would say we are the best surveyors of complete interest. Our scale allows us to actually give a price which no one else can match. At the same time we also have a size and scale and capabilities to actually make or at least have these drugs contract manufactured at the best across the country and keeping the prices which no one else can match. So for us we really don't see any of the smaller and local manufacturers. Okay sir. Okay. Thank you sir. Thank you sir. Thank you very much. Thank you. Next question comes from the line of Nikhil Mathur. Hi, good afternoon sir. So my question is on the revenue first. I'm looking at the pharmacy count numbers, taking the pharmacy revenue, dividing the number of stores and kind of analyzing it by multiplying it by four. So this quarter, company's at INR 8 million. This has been coming down not very sharply but if I look at the previous quarters from INR 13.2 million -INR 13.3 million it was in the first nine months of FY 2020. At the same time if I look at the aging of stores the number of stores because Year 1 has classified in your investor presentation that has come down from 20%-27%. So I'm not sure what I missed what I'm missing here that despite the 18 kind of improving the revenue per store is trending down. Not. Not trending up. Yeah. So couple of things. One, the store continues to mature till it actually goes to 24 months. While yet last quarter we probably would have slightly less number of store features. Right. Overall number of less than two years pretty high. It is more than 50% of the overall network and that is what is actually driving the overall number down for us. We really don't see any other impact other than a small seasonal impact on the Q1 which is normal this time extended typically if you're in May by rentals usually the two months don't really have any kind of I would say infections or morbidity concern which would otherwise result in some kind of medication. So that's one and other than that I really don't see. Right. So just would have been much better. That's what you take out for this, I would say. No, no, no. See. Seasonal thing, you know it's a cold. Kind of thing, that's all. Okay. So sir, I mean we still have 900, I think 800 plans in next year. At what point would there be some leverage available on revenue post two and I think this is what will drive market as well. Unless your revenue portfolio increases I'm not sure if the margins can end up to what some of your companies I mean like a listed company which supports margins they are getting to be much, much higher than what MedPlus is at. So when that kind of breakthrough happens when the credit for. So you know. As we have been saying since the. Beginning of the year last year, we said we had actually 1,000 and 1,200 stores. We ended up with around 1,045 the year we've been driving towards 800-2,000 stores. We are conscious of the fact that to improve EBITDA more than that, you know, we are actually, I would say, extremely cautious about the money we want to make sure. Second, the margin expansion is going to naturally control several things. The maturing of the stores, the frictional will basically definitely help the stores become more profitable. As we go forward, as we move from the INR 4,000 per store top line further towards the next year. But more than anything else, you know, I think our recent, let's say, initiative of two in-house brand private labels, I feel extremely confident that this is what is going to actually drive the top line. It's also going to drive the margin scale. We just launched the second on June 17th. We're basically seeing the overall traction, and this is just. We're very confident that not only will this bring in more customers to the MedPlus store, it'll also benefit the platform which we have built; it will basically now start getting monetized significantly because, you know, you require this kind of to get simply stabilized to the online. Got it. One more question I had was, if I look at the employee and other expenses, can you give some ballpark indication what percentage of these costs are sitting in the corporate overheads, and how much of that is in store? I'm sorry, one of the question again. The employee expense and other expenses. What of these expenses are related to the corporate overhead and what percentage is related to stores? See, I'm not sure about the exact thing, but let me just give you the numbers. We have a two-year, two-year store, we expect a 10% and below that we have a 3% corporate expense and a 3% expense for a two-year store. You're saying. So, overall. So yeah, the two-year qualifier was two years to 2.5 years. That's when we hit 10%. So no matter what. So if your entire network system was to be two-year-old MedPlus as a consolidated entity would be representing 5% extra margin. Is that the right understanding? As of now, yes. But as we go forward with scale benefit and with private label and everything else. Okay. We're talking about pre-India or no or not. Yeah. Yes, all rents and everything is taken. Okay. I'm not sure if you explain the debt. What is the position as of this quarter? Net debt zero as of this quarter. Okay. Okay. I have one last question. How much of inventory is sitting in the stores and how much inventory is sitting in the warehouses? For any store which is more than one unit, 39 days of inventory sits in the store and around 70-35 days sits in the warehouse. Okay. After one year it pretty much remains the same. I would say for a store which does more than a lakh of INR per day kind of stuff, it probably will come down to 28-30 days. But on the whole I would say across the board at the store level it is roughly around 35 days. So the number starts falling significantly after only or at least after one year. Otherwise you know, starts off with INR 16 lakh rupee inventory and a lot of times it ends up being only INR 3 lakh rupees per month which means a six month inventory in the initial stage. Okay. Okay. I mean, we're hearing various discussions around e-tailing and the pressure because of funding constraints and all. Is there any way that the ARPU can come down systematically and that should or would you keep this high-end? Order to gain volume share which has. Been standing till now? See, we definitely seeing slightly less noise on the side from some of the pharmacy companies out there. But as I've been actually mentioning in. the past too, e-commerce is a small portion of the overall business and what we're seeing is a lot of the small independent operators are selling a lot of traded generics as brands and they are basically pushing up the direction there. So there is some competition out there and our own private label with 50%-80% discount is I would say kind of move towards, you know, the same. Our own experience, you know, we have been seeing more and more people buying. Thank you so much. Thank you. Next question comes from the line of Tanmay Gandhi. Yeah. Hi. Thanks for taking my question. The first question is on the foreclosures. So this quarter we had almost 15 closures and the average age is more than seven years. Did that impact our financial? No, no. See, that's a very candid set of older sections. You have store closures, right? Yeah, so for, I think for. eight stores it was, it was relocation. There is another item which is, and we are not sure what is that. And also if we can highlight relocation leads to, for, you know. Yes. No, if it is not relocation, then you should differentiate the, you know, where we have, you know, had a problem or something like that. Yeah, it should be visibility. Okay, so assuming, you know, a. Metro store can do anywhere between INR 1 crore -INR 1.5 crore a year. Right. So does that mean that you would have lost so much 80 cents? I don't see it that way because, you know, you're already relocating most of the stores. Some of them are actually going somewhere else anyway. So in all these markets there's almost no place where we would have. If it is not exact relocation, you probably get. It's unlikely that, you know, I would take them as a losing revenue. Understood. And again, on your new trend, which you launched. Right. We understand that our private labels are around 13%. What would be the revenue from these products? See, earlier when we talked about 13.5 private label, we were talking mainly about a whole specific. So earlier if you look at only the pharmacy of around eight, now that has actually made it 13 and 14.5 overall. But given that new set of private labels which we have come with a big discount, I am basically comparing this as a MRP sale, which means if the entire sales score, the overall sale of on MRP, the discount would be normally 70% or whatever. To make sure that the comparison is like right. We basically. These products comprise. Okay. And our margin on this would be private because your would be similar. Absolute margin. This would be far better than branded products. Yeah. When we tell these countries to is. It's fair to assume that it can. Also, cannibalize because if the customer is not comfortable switching, let's say, a third-party brand to some other brand, right? Then he would probably wouldn't want to actually go to an unbranded brand. Is it fair to say that he might actually, you know, it might actually penalize the private labels. So, see, earlier we had, we had a private label that is being sold at the price, and now we have got the MedPlus brand to go forward and basically merge both this into one. The reason for that is, you know, we want this four and five to be just one five product and not look to start, not, you know, I would say, be inclined to sell slightly higher-cost, higher-margin product. The cost, say, of confusing the customer, basically saying, yeah, I don't have this product or something else. So we don't want that kind of message going out. Hence, yes, initially the market, but given that we are able to more than offset. If we were selling, let's say 8%. And this is going really rapidly, we expect that we would be at least even at 1,000. I would say margins are more or less in line with what we earlier. The big difference is our announcing the 50%-80% discount on the MedPlus Mart have actually brought in a lot of new customers and we are seeing growth in the top line which will take care of all these other issues. Understood. Last question from my end. Can you share number? I'm not sure. I think you know we will come out of the numbers shortly but I don't think I can tell you that right now. Okay. Can you tell us directly whether it has improved or not? Because probably you know out of many other competitive effects probably we are offering highest discounts. Has that actually resulted in some volume gains or you know better? Absolutely. The new private label initiative plus has definitely resulted in extremely good growth. I would say not really small. We have three large, so definitely, so we are definitely seeing growth in July and August. Thank you. Next question comes on the line of Mehul Sheth with Axis Capital. Yes, thank you for the opportunity. More on this. Can you talk more about like how many you are currently having, what is your expansion plan in that? Apart from that, what as a percentage of same the current competition is and of the unit economics part of a business. I'm sorry, you're not very clear. I can't really make out. I know you're asking about the private end. Can you just repeat that? Yeah, let me repeat my thing. First, I want to know about how many you currently have and what are your expansions, run of plant coverage. You know, secondly, how the unit economic was in this part of the business. Thirdly, what is the exact competition? Right now from this particular business exit as a percentage of what is the second question unit economics how unit economics so yeah we started with 233-odd products we are now expanding it to 800 continue to basically receive products from manufacturers across the country and over a period of next two months we probably be there closer to that number I'm looking at that's the number of states and these are all over. And all the contribution is roughly around 14.5% as of now in Hyderabad we expect and that is a number of jewels by the way going forward we track some of this number to you know go forward actually as we increase the overall number of market. Unit economics, right. INR 100 MRP drug has a weighted average discount of roughly 65%-60%, so we'll actually end up our margin on that would be anywhere from 60%-70% on the net sales. Look at the MRP side then obviously on the net sales value. If you were guiding your. Now you are like would like to change your guidance considering there will be filling your. Is your question the impact of margin? Between our traditional and the new method, [audio distortion]. Am I audible now? Yes, we do comprehend your question. You did you ask us to make. A comparison of margin between our traditional. Private Label and the new necklace brand private label. Obviously. Okay, you can finish this answer, then I want to. I have one more question. Yeah, so let's take both products are selling at around 150 MRP. The old one would have had a, and the new one probably has anywhere between 40-45, so that would be the revenue side. On the margin itself, you know, the products are made at more or less the same cost, so we would definitely after GST, after the incentive to employees, and after all the other costs, we land at roughly around 21%-22% on MRP contract. So, your margin will be, sir, INR 21-INR 22, which is 50% of the product, and this is after taking all costs including GST and entire. Last question, so I was asking about the overall various groups of the community, so our expectation was around that community can grow around 25%-30% range now with addition of this new business venture. So would you like to change your top line guidelines or anything like that? No, not. Not really. See, this is going to be a significant but still a small portion of our overall business. But while it can go to 14%-20% or whatever, it also will help us basically add some customers. So I really don't need to change the overall top line. I... I don't see any need. We will definitely let you know if we feel the need to solve. Okay, that's all from my. Thank you. Next question comes from the line of Madhav Marda with Fidelity. Power range which you all are launching. If you just take any one SKU as an example. If somebody buys the branded generic version versus the one best is selling. Just trying to understand. So it's very difficult to give an exact number because it could vary depending on the type of product. If the product is a DPCO kind of product under price control then earlier we would normally get a discount of let's say 30%. If you bought this enrollment now discount would be anywhere from 30%-20% of price control. On the ones which are not under price control it could go anywhere from 50%-90%. So the net saving out there will be even if you take it as so it will still be a 60%. So basically just simplic. Anyway, let me just say one more thing. While the entire range is 60, what we are seeing is the overall average discount which we are seeing is around 60. So we say around 40% savings. Typical about. 40% saving for the customer. Yeah, understood. Just the second question was basically actually expanding more into the Tier 2 Tier 3 and beyond kind of discussions. How does the unit economics change in terms of the kind of investment that we make and sort of sales per store. If you could just help us understand that economics. And gat. Obviously the rents are lower. The overall inventory would definitely be 50 lower and the cost of manpower is also lower out there. So it also means the cost is also slightly lower by 10%-15%. But what we have seen is given that the product mix is usually better in terms of profitability, we see that on a smaller top line the net EBITDA is going to be actually higher. Okay, yeah. The costs are lower and. The more private label. You mentioned how many stores are there in prior to? Okay, thanks. There's a fraction of this on the [Tier 2 and Tier 3]. Thank you. Next question comes from the line of Bino Pathiparampil with Elara Capital. Regarding the revenue. You know, many of your new stores. Are happening in towns where population will be more stars and maybe their population will be less. Is it possible that our revenue per store can remain a bit constant? Compared to where it was earlier? Even if the. We think because we have more stores and small towns the revenue will not grow because yeah, the revenue per store for most stores will be lower compared to our stores which you know, we operate. So overall revenue. No, no, I see it's always going to be slightly lower than a metro the costs out there and the product mix makes it better for us. Hence you know it's actually a more profitable store. We end up actually we see a lot of potential for opening the stores and small towns and so once the supply chain is set up, once we have the central warehouse in the main capitals which again once we are getting all the setup, you know, every additional store is profitable. Yes. On the diagnostic part of the business, you mentioned that. Teams to 30% range. Are you happy with that? Or, what are the benchmarks out there? Yes. So, this is not an insurance kind of business where, you know, people have to necessarily come to new MedPlus. We are seeing our subscription businesses possible and we see that, you know, wherever there's not including in the cat. So, we are happy with the way things. I don't think this is, you know, as expected. I would say business model at times value works fine even if there's a new. We have 12 large centers in Hyderabad, 11 actually, and now we have 120-odd collection centers and we also have home services and these can serve the entire city of Hyderabad which has a population of. Our model basically is dependent on profit from a subscription basis and today, so within the year and most of the 18 months, where at least for a majority part of this period in which we started the business. Since we started the business, we had only two figures. Despite that, we have actually gone to 110,000 members. We see no reason why it cannot be a 250,000 or even a 500,000 membership as we go forward. From that I know you know. Some people there will be a rolling kind of renewal kind of thing out there to find. So we're looking at a much bigger pool of subscribers as we go forward as the brand continues to grow and more and more people become aware that the services we have. Thank you very much. Thank you. Thank you. Next question comes from the line of Aashita Jain with Nuvama. Please go ahead. Hi, good evening. My first question is [on gross margin], which could be the worst and we should see some market. Yeah. See the gross margin. We actually look at it the direct of the discount actually and this is I would say kind of seasonal. There's also the. I would say reduction in that private label itself private label typically in the in Q1 is slightly lesser only because of the reduction in the infectious kind of disease and all which you know usually help sales of OTC and antibiotics. So both those combined you know has actually been a. You know for good and we also have a small one-time and that is also resulted in slightly less than usual. You are also. You have also introduced plan and which you. Yeah, so as I said earlier, despite the discount and despite, you know, whatever we do out there, it's still, you know, margin profile actually is slightly more than on the standard drugs, and the important thing is this: there is this gray area is in our control. This is governed by the government regulations and all, and discount is also something which is in our control. So the goal for us would be. You know. Increase the overall customer base and then we would have the perfect kind of platform to be. Just asking on this diagnostics excluding, is it possible to share what was the loss? And then what are the steady state margins from this entire business. What we've been saying earlier and this kind of contract is we've been saying that the state has turned a different nation to the AC eight months roughly around the 8th month onwards and even though Q1 has been a seasonally weak quarter we've been through the trajectory in that direction. If you have a more specific question. Last one, just one clarification which I was only in June. Where are you in graduate or Private Label? I think your question is that where are we reporting the revenue for the new branded pharma? Is that. Yes. It is still as of now, as of this quarter it's still included in private label. It is part of that earlier group of. But its contribution in the last quarter was really small given that we launched it only and only on June 17th. So I expect you know we probably have slightly this quarter. Thank you. Thank you. Next question comes from the line of Nikhil Mathur with HDFC. Yeah, thank you for the follow-up. So I just wanted to end the argument of metro and non-metro stores. So in summary. Our store-out versus a metro store in non-metro cities. It's actually better. What about working capital? I mean, is there any more elongated in non-metros? Not really, no. Because the range of products which are asked for in a non metro store are much less good both in terms of medicines as well as general tools and as we go forward the private label continues to be if we go north of 20%. Given the fact that our cost of that product is you know in the. I would say low teens on 150 product. What was a 60 cost of work for branded product. Given that the small towns will actually sell more than you actually, you know, have less inventory. So the return on capital will actually be better. Okay, so basically a non-metro store is accretive on working capital as well as on the store. Great. You have 10 warehouses. Can we get to know how well? Are these warehouses currently utilized? Are your warehouses back to capacities or significant space in these warehouses? No, no, I'm afraid most of the warehouses are utilized almost full. We are looking to expand a little bit here and there. But again as we actually make this web and more easy to operate. The question they are all being utilized. Well and I don't really see too much expansion in the overall as we expand the number of stores. It will change as we go let's say into newer states. And as we expand right now though we operating from the layers in the states which are. But as we go forward as 20 - 50 and so on, we would definitely. Right. And one final question related to this. Is there scope for a lot of automation in your warehouses? I mean there are so many technological breakthroughs happening in terms of vertical cladding, energy cost saving. You can do a full dark kind of warehousing without requirement of brick and energy and all. Are there a lot of technological developments that MedPlus has a warehouses to kind of draw a lot more expensive? Absolutely. So we are now looking to automate our warehouse in Chennai and this will probably happen over the next quarter or so. In fact, I'd like to tell you that we have actually developed a technology in-house. Half of the core of or. Data. That are now from the automatic machine which has been delivered by us. We are now looking to so and the reason why we are not actually a particular kind of space. We were actually looking to do something. To develop this in ch of this and we looking to actually automate that fully. So we'll let you know that you know, I'm thinking that at least by the year end we should have a fully. In the medium long term, what kind of implication can this have on your margins? Any. Any broad range that you can share? What kind of savings can be generated? Given that our warehousing now is at a 2% overall cost and manpower is a big part of it as we automate it and as we make it. First of all, products are sent to our stores every single day without it taking a break for holidays and all that. So, but we'll also be able to say in the range of, let's say, so I would say. Right. That's perfect. Thanks so much for this. Thank you. Ladies and gentlemen. Due to time constraints, we have reached the end of the question and answer session. I would now like to hand the conference over to Mr. Madhukar Gangadi for closing comments. Thank you. I thank all participants in the call for your interest in the MedPlus journey. Our investor relations team can be contacted for any further queries. Thank you. Thank you. On behalf of MedPlus Health Services Limited, thank you for joining us. You may now disconnect your lines.