Ladies and gentlemen, good day and welcome. Ladies and gentlemen, you have been connected for MedPlus Health Services Limited conference call. Please stay connected. The call will begin shortly. Ladies and gentlemen, you have been connected for MedPlus Health Services Limited conference call. Please stay connected. The call will begin shortly. Ladies and gentlemen, good day, and welcome to the MedPlus Health Services Limited Q1 FY 2027 Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Srinivas. Thank you, and over to you, sir. Thank you, Mano. Good evening, everyone. On behalf of MedPlus, it's my utmost pleasure to welcome you all to the MedPlus Q1 FY 2027 Earnings Conference Call to discuss the financial results of MedPlus for the first quarter of FY 2027, which was announced earlier. We have with us today the senior management represented by Mr. Madhukar Reddy Gangadi, CEO and MD, and Mr. Sujit Mahato, CFO. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks and uncertainties on slide one of the investor presentations 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 off the call to Sujit. Thank you, and over to you, Sujit. Thank you, Srinivas, and good evening everyone on this call. An update on our store network openings and closures. We have opened 222 stores at a gross level, and there were 52 store closures, including nine relocation cases and 27 franchisee outlet closures. Additionally, 24 stores are in the process of conversion from company-owned, company-operated stores to the franchisee model. We achieved a net addition of 146 stores during the current quarter compared to the 218 stores added during the last quarter. We continue with the outlook for adding 800 net new stores, including the franchisee stores in FY 2027. In terms of our network age, around 27% of our stores have been operational for less than two years, and the remaining 73% of our stores have been operational for two years or more. In terms of our network and the store size, at the end of the quarter, our network grew to 5,476 stores with 2.9 million plus sq ft compared to 4,813 stores and 2.5 million plus sq ft at the end of June 2025. The average store size is in the range of 539 sq ft. Update on the revenue mix. Presently, MedPlus offers a large range of SKUs spanning across pharmaceutical and non-pharmaceutical categories. Private label sales for Q1 FY 2027 constitutes 20%, pharma being 10.7%, and the non-pharma being 9.3% of our total revenue. Update on the financial numbers. Our consolidated revenue for the quarter is INR 18,796 million. Our consolidated operating EBITDA for the quarter stood at INR 651 million, representing 3.5%. Revenue from pharmacy operations grew by 21.8% YoY on reported basis. The pharmacy operating EBITDA stood at INR 588 million, representing 3.2%. An update on our store performance. Stores older than 12 months, revenue from these stores in quarter one was INR 16,436 million, representing 94% of pharmacy revenue. These stores had a store-level EBITDA margin of 10.4%. A word here on the store-level EBITDA margin by age. While stores greater than 12 months had a margin of 10.4%, this was 10.6% for stores greater than 24 months and 6.9% for stores in the 13-24 months age bracket. On allocating all non-store related costs, the operating EBITDA of stores greater than 12 months would be INR 707 million, which translates to a margin of 4.3%. An update on the working capital. Our net working capital for Q1 was 54 days. Inventory in our warehouse represented 33 days. In quarter one, the inventory level of our first-year stores was 100 days. In comparison, for our stores older than 12 months, the inventory was at 36 days. An update on our diagnostics numbers. Diagnostics revenue for the current quarter grew to INR 370.8 million compared to INR 302.9 million for quarter one, FY 2026. Diagnostics segment recorded an operating EBITDA of INR 65.9 million compared to INR 41.3 million in quarter one, FY 2026. In April, we sold 552 plans per day. In May and June, this was 557 and 644 plans respectively. As at end of June, we had around 2 lakh active plans. Additionally, we would like to inform that the CapEx proposals, as approved by the board, has been put on hold by the company. We would evaluate and later inform, update the market on the utilizations of the fund on the balance sheet. That concludes our update for the quarter. I request the host to open the line for questions. Thank you, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. We have our first question from line of Sudarshan Agarwal from Axis Capital. Please go ahead. Hey, hi. Thanks for giving me the opportunity. As you said, you have put the CapEx plans on hold. Just want to understand the rationale behind kind of putting that strategy forth and getting it approved. You have INR 40 crore of CapEx for a Food Park and oil extraction unit and another one for the Wellness Services Facility. Just want to understand, what are we thinking in terms of strategically going ahead with these plans that we have approved. Yes, we have put it on hold, yeah, more insights into how the company is thinking on investing in these aspects going ahead. That would be my first question. Sudarshan, I've been happy to take you through the whole strategy if Sujit had already not announced that we are now putting it on hold. I don't think there's any point in discussing it, honestly. There was a thought, I thought that backward integration would really help, especially in areas where the products are new, supplies are not easy to find, and sometimes it is just easier to own the supply chain and all. We have on further deliberation, decided that we'll probably put it on hold. Definitely put it on hold for now and come out with a plan on how we'll actually utilize the funds. Super. Yeah. This would be related to the Food Park. I guess you will be putting on hold the other one as well, or is that investment continuing? All Capex spend for now, if we are to basically come back. All Capex meaning the two main things, the Food Park and this one. Those are the conscious plan. On the Food Park, I understood your thought process. On the Wellness, this is something that we were thinking of trying as a new kind of foray, right? Like we did with diagnostics is whatever kind of. Okay. I'll tell you what my thoughts were on that. again, I have to reemphasize the fact that Yeah we are now putting it on hold; it probably is not relevant. anyway, the thought was that all companies today are looking at diverse revenue streams in adjacent areas. You can't just basically be just a pharmacy and keep I know there's a lot of opportunity even as a vertical grows, you also sometimes have to bring in some horizontal areas also. We thought that was a good area to go in. Prevention was a great area to go in. Concierge medicine, wellness prevention, longevity are all go hand-in-hand, and we thought that is the logical next place for us to go, given that we're already doing diagnostics. diagnostics has one piece left, which is when people come to a diagnostic center and they get themselves tested, since we're not offering a complete, let's say, we're not closing the loop on it. We're not telling him what he has to do. a lot of times he ends up going to a doctor, and doctors for reasons best known to them will disregard any kind of lab, which brings a result which is not marketed to them. Let me put it that way. we wanted to own that entire thing and basically do a complete out-of-hospital healthcare kind of stuff. Out of hospital. anyway, that we have now put on hold. We're not going to do it. We will think about it. It's unlikely now. We'll basically think about it in MedPlus, I would say. Okay. Got it. Coming to your performance in the quarter. Yeah, strong top-line growth. in terms of margins, we have seen yet again the private label share contracting in Q1. We had this issue last year. can you just give some sense on what led to this drop, and how should we think of this private label share moving in quarters ahead? For us private label, when we started off, we pushed very hard and we made sure that everyone was aware of it, the employees were also heavily incentivized to sell it and all. I think the early adopters very quickly shifted. After that, maybe our employees would have gone a little overboard in trying to push it to every single customer out there. In the process, we may have basically, I wouldn't say annoyed but at least put off some customers out there. We tried to pull it back. Now the stores are basically focused on While as a percentage it has de-grown slightly, year-on-year, the growth is still there. Every single molecule which we have, which we have been selling, we're selling more of it. We continue to grow. As a percentage, it has de-grown slightly because our overall sales has grown, we are now focused on basically making sure that the customer is completely served, whether it is for brand or whether he's looking for, let's say, a slightly more affordable kind of medicine. We offer it. If he takes it, great. If not, that's okay. What that has allowed us to do is allowed us to actually grow the customer base in the branded side. That's why you're seeing a small, let's say, dip in the overall percentage. Got it. How should the share move? Yeah. Going forward though, it's going to be a function of two things. One, a little bit of our own advertisement outside the store, which is through influencers, to various other sources to bring people in who are otherwise not coming into the store for seeking out the MedPlus equivalents of all the branded drugs. That is how we plan to actually grow that whole share. We'll also obviously try and get our employees to be slightly better salespeople, get the whole message out. Combination of both making our employee slightly more skilled at selling private label, and two, bringing in people who are otherwise not shopping with MedPlus at all to come into the store for the drugs. That's the plan for us. We think, we will with this quarter, be arresting the slight, I would say, de-growth, which we have had, and from there on start building up again at the rate of around half percent or 0.3%, 0.4% kind of stuff going forward. Okay. Got it. A part of your gross margin was also affected by franchisees, right? 50 basis points. Can you just broadly give me a sense? Private label, of course, will gradually come up, this franchisee dilution will be part of our numbers going ahead on the gross margin side, right? At least for the near term, as long as they don't scale up. Yeah. Let me explain a little bit. Franchisee is still in an experimental kind of stage. We believe that India is a market where you can have 20, 30, 47 stores. We believe that long-term, that's the only way for us to get to that number. For us, we're working on that right now. One of the main things, for us, the way we see franchisees as, that's a logical way for us to grow. Whatever margin we're getting is additional margin. Yes, it will definitely be slightly lower than a regular store. The thing is return on investment on that is going to be higher. Once we crack the model, we'll be able to grow way faster. That's how we see it. Got it. I have more questions. I'll come back in the queue. Thank you. We have our next question from the line of Saion Mukherjee from Nomura Securities. Please go ahead. Yeah, hi. Thanks for taking my question. Sir, on this CapEx plan, you would have had some reasons to sort of plan for this, would have thought about it over many months on this. You got a board approval. What has happened in the last, let us say, less than few hours that you decided to put it on hold? Difficult to say, Saion. Maybe it is the wisdom of the masses, I guess. You see for us, we definitely are, let us say, going to be sensitive to the stock market, for sure. While I believe it's a good thing to do, great adjacency. This is the way the whole world is growing out there, and that is what the board also felt. The fact that the market reacted so strongly and the fact that a bunch of our investors have also said the same thing and all, we feel that maybe we are not 100% right. I wouldn't say happy to put it on hold, yeah, we have taken the feedback, more put it on hold. Right. Does that mean that we should not expect any sort of big CapEx plan in years ahead? How do you plan to then do this? Because public shareholders could react the way they would. How would you have that process in place to ensure that any CapEx decision, et cetera, in the future, sort of doesn't have this kind of a fate? I guess public markets have not really said no to any kind of CapEx on our warehousing, on our stores or anything like that. I guess as long as we are focused on core business, I really don't see anyone coming out with anything. Even if they did, then we wouldn't really give the call. Core business will continue irrespective of what the market thinks or says, whether it's private label or regular stores and all that. That will happen. Can we basically take a pause at this time on CapEx spending? Absolutely. Is that something which we will do continually? No. Definitely not if it is about the core business. Okay. Sir, coming to the core business, you have shared your annual operating plan. Based on your Q1 performance, how does this plan change? You had INR 400 odd crores of operating EBITDA on a consolidated basis. What is your estimate now? Does that remain same or it undergoes a change based on quarter 1 number? Hi, Saion. This is Sujit here. Two things. One, maybe you are referring to the board deck, which was by mistake uploaded. The data remains as it is, what you have rightly pointed out. For the time being, numbers do not change because as Madhukar explained, we are working on getting back the private label back on track. We are working on certain costs which we had not anticipated, which has got hit during the current quarter. For example, effective 7th July, the company has already, I would say, tweaked the discount structure for all sales greater than INR 1,000, where the company gives 20% discount. We have already reduced to a 19% for a large number of customers. We see that traction, therefore, if there is any such other adjustments required so that we keep the annual operating plan as a basis and a guide. I would not say we are bound by that. We can either exceed that as well. On top line, you would have seen we have achieved 99.9%. On the operating EBITDA, there is a gap to be covered. That's been the nature of Q1 as well. We are pretty confident that coming quarters, we will be able to make that upside. Okay. Thank you. Sir, one last question on your private label traction. The growth has been weak on a year-on-year basis, though there is some growth. In terms of the number of people who are subscribed to this private label subscription, what is that number as in absolute number of people? How has that changed in a quarter-on-quarter on a year-on-year basis? Actively, there are close to 44, 45 lakh people who are on this plan. Every month there is an annual pattern. Last quarter, if I remember the number right, we added 10 lakh plans, including renewals. The good part is, earlier we were realizing INR 99. We have now increased that to INR 149. On membership alone, we should see a INR 10 crore-INR 11 crore impact on the top line for the whole year, which will flow through to the bottom line. Okay. Today, how many? You have 44, 45 lakh people on the plan as of June? Yes. How much was this number in the, say, the June of 2025 compared to- I don't remember it exactly; it was in the range of INR 39 lakh-INR 40 lakh. Okay. Around INR 40 lakh has gone to INR 44 lakh kind of a number. Yes. Not only that, we also actually increased our. That's what I explained. amount, right? Yeah, INR 99-INR 149. Yeah. Despite that it has gone up. You will see a lot of renewals going forward at INR 149. Okay. This was implemented recently, INR 149? Yeah, a month ago. A month ago. Okay. Sir, one last question. I've seen your employee expenses also have gone up. Is there any impact? Because you had earlier mentioned about lot of attrition and all of that. Has the pharmacy level employee compensations, those have gone up significantly? Anything on that side if you want to highlight? On a year-on-year basis, the major impact is coming from people which we had added in the various warehouses. We are getting the full quarter impact now. Additionally, we articulated on the labor court changes, especially in Karnataka and Telangana, where the increase has been more than, I would say, significantly more than the average of generally 4%. We have seen 60% increase in Karnataka and 25-plus in Telangana. We have factored that. However, these were effective 1st June. Which means going forward, in the Q1 quarter, we have the impact of only one month. Going forward, we will have the impact of the full quarter. We are taking steps to mitigate that in terms of, one, the retention bonus plan which we had, has been stopped effective 1st of March, which means there are no new additions because by design, the wages have gone up. Two, we are also looking at the non-statutory payments, for example, the private label incentives and other incentives, how we can optimize and structure that in a manner to get a relief. Three, as we just articulated on the private label mix, that should also help us in addressing this cost spend. Understood. Okay, sir. Thank you, and we'll join back. Thank you. Thank you. We have our next question from the line of Divyansh Gupta from Latent Advisors PMS. Please go ahead. Hi, sir. First question on the private non-pharma products, the absolute revenue dipped from March to June. Just wanted to understand why would that happen. Is there a supply issue or a demand issue, or is it just purely seasonality? Yeah, absolutely. You pointed out right. From quarter four to quarter one, which is a sequential quarter, we had an impact on the margin of around 100 basis points because of the private label and non-pharma. In non-pharma, we had a steeper fall from the last quarter. For certain categories of our non-pharma products, especially the diaper range, there were disruptions in terms of supply. It's now coming back on track. By the end of this current quarter, we should see the full impact coming back. We are very confident of the non-pharma contribution to sales, and we expect that to further grow in the coming quarters. Understood. The second question was on the franchises. You mentioned that 24 stores are moving from COCO to a franchisee. Yes. Are the staff there which is taking it up or someone else is I'm just trying to understand the Predominantly, it is the offering to the senior staff members who have been with the company for three years plus. That's as a retention strategy, that they also become individual entrepreneurs. They have learned with the company, they have been with the company. As a model, we said that's the only way we can facilitate them to become individual entrepreneurs. I think more than 95% of these stores will be taken up by the existing employees. Got it. The other question was the franchise stores which were closed during the quarter, the average age was only 0.7 years. Yes. Which is like eight months. Correct. The previous quarter you had mentioned the closure was of the older franchisee networks, which therefore had a higher age. Yes. Why would this be? Understand that franchisee is experimental, but any signals from the market that the franchisee model is not necessarily working out for them, and we will tweak to make it much better? You're absolutely right. That's the same observation we are having. As we speak, we have 600 plus franchisees. However, there is, in some cases, what we are observing also is there is an expectation mismatch, both from the franchisees who are first-time entrepreneurs. They get into this. Their expectation is X, they'll end up getting Y, and very quickly, they are taking decisions, which we have to honor them. That's what we are reporting. This will have to take some time to stabilize from both. One is from our end in tweaking the model. As we speak, we continue to look at this model to make it a win-win model. We have made certain adjustments. For example, helping the franchisees reach to a break-even in a much faster pace, helping them with supporting them with fees in the first year. Therefore, we will have certain cases where it still does not develop to their expectations. This is only an outcome of that. What were these expectations? Just the ramp-up of it, or like we were expecting that we will do more private label. It's a closure by the franchisor. Therefore, we are not directly involved. We do respect when they come back and say that "Look, we did a mistake. It's not meeting our expectations. The numbers do not tie up. We would like to go back." In 99% of the case, we do re-look at that and maybe help them with the exit, or we find another franchisee who is ready to take up that unit and give them an exit. This will continue to happen, Divyansh. Got it. Sir, two more questions. Average store size you mentioned is 539 or 529? 539. Given that, let's say last quarter it was more 520 something range, is it fair to assume that the new stores are much, much larger in size? There are few stores. As a strategy, we have been opening some large store formats, because as a strategy, we would like to even test out that, which means that it is as good as three stores coming up as one store. Then you can put in more people, more focus, much better fill rate, and a larger assortment of both the brand as well as the private label offering to the customers. That's one reason why you see an uptick in the average SFT per store. That limits our penetration into, like we said, we'll be the neighborhood pharmacy. We will continue to do that, Divyansh. This is a very small portion. I think as we speak, around 47 to 48 stores have been launched under this format. When compared to the 6,000 odd, this is a very small number, which also helps the company in garnering, I would say, local attention instead of spending good money for advertising. Understood. Absolutely. Understood. Sir, the last question. You mentioned that let's say, because of all the minimum wage hikes and everything, we are not allowing any new sign-up into the retention plan that we had designed. Right. How does it address the attrition problem due to which we had launched the retention program in the first place? Because if the minimum wages have gone up and let's say they don't have the retention plan, they can. I understand your question. I'll try to address that. The underlying issue itself was lower wages, especially when compared to employees in the quick commerce business. Now, since the minimum wages have gone up, we expect, and definitely we would very closely monitor this, that much better kind of employees will be available for this higher range of wages. Therefore, sense should prevail, and we will closely monitor this, how it works. If something is required, this is again a non-statutory area which the company can very quickly address it if there is need in each of the pockets wherever possible. What we wanted to inform you is, one, there is no major reaction. Only continuously, only the new guys from 1st March, if this plan is no more available for them. For colleagues and employees who are already part of this plan, it continues. Whatever amounts have been approved to them as on date, will be absolutely paid by the company or honored by the company as and when time comes. Therefore, we do not see a higher risk. As you rightly pointed out, we continue to monitor this space, and we will look at what interventions along with our HR we need to do to attract and retain such talent. Understood. Thank you. That is helpful. I'll join back the queue. Thank you. Thank you. Thank you. We have our next question from the line of Jasdeep Walia from Clockvine Capital. Please go ahead. Hi, sir. Thanks for taking my question. Sir, the diagnostics business has been scaling up well, what are your thoughts on scaling it further by way of either densification in the same market or maybe expanding into other markets? While it has been doing reasonably well, and it is profitable also, it has not really gone to the level we wanted. That is a model in which the subscription plan should have come both from the B2B and B2C side. We have not had much success in the B2B, and B2C also has languished around 220,000 or 210,000 kind of numbers. By now, we should have had anywhere between 250,000-300,000 members. For that reason, while we may do a little bit of maintenance kind of work here and there and replace one or two machines here or there, on the whole, I don't think we'll be expanding that in a significant fashion. At least the radiology part. Got it, sir. Sir, is there an inventory charge also this time on the expensive side? Inventory provisioning charge. The inventory provision charge this quarter is on the normal level. When compared to the previous quarter on a sequential basis, we had a release on the inventory provision line because whatever we had provided for, the company was able to liquidate, and therefore it appears that this quarter has a higher charge, but the charge is a normal number. Got it. Sir, what's the annual inventory provisioning charge for your company? Roughly 1%, 0.8 to 1% on the total sales. Got it. Sir, I'm guessing that there will be no inventory obsolescence on the branded pharma or branded FMCG side. This inventory charge is primarily linked to the private label, right? A large portion is linked to the private label. There is also a small portion which comes as a charge on the branded as well. You're right, predominantly more than 90, 95% of our branded pharma and non-pharma products, we are able to successfully return back to the manufacturers. Sir, if we look at this expense only on the private label side, I think the annual expense would be somewhere close to 350 basis points, right? That looks to be pretty high. What are the reasons why you need to do such a large amount of provisioning? Let's take it this way. For the branded pharmaceuticals or the branded non-pharma products, these are generally made-to-shelf products. They don't make for MedPlus, they make it for the whole market. Whereas if you take a private label product, both on the pharma and non-pharma, it is made to order, which means the entire risk of obsolescence, damage, non-saleability, and slow-moving is on the books of MedPlus. It's a conscious call based on the margin availability, the overall economics of the product, that up to 5% is what we consider as a very normal range on the private label. As you highlighted, it is well within that number. Got it, sir. Sir, as the business scales up, do you have any targets that this expense would be coming down in future? Or this will remain close to here? As a target itself, we said we do consider approximately up to 5% as a charge, we obviously will continue to keep working to minimize this number because the amount, whatever we minimize is straight bottom line. Got it, sir. Sir, are there any plans on launching your own private label for GLP-1? Not yet. If we do that, we'll definitely inform the market. Not for the moment. We have not yet locked it. Got it, sir. Sir, last question, sir, on the issue of promoter leverage. Is there any timeline to reduce leverage levels? That is actively being looked at by the family office. At present, there is no such plan, and as and when that happens, adequate disclosures will be made to the market. Got it, sir. Thank you, sir. That's all from my side. Thank you. Thank you. We have our next question from the line of Akhil Parekh from 360 ONE. Please go ahead. Yeah. Thanks for the opportunity. My first question is in terms of store opening, we are still maintaining our guidance of 800 store addition. That's at net level, right? How would be the mix between franchisee versus focused stores? Yes, Akhil. It's at the net level. The internal estimates what we had very broadly was 50/50%, this quarter it is completely on the franchisee side where we have increased on a net basis. Out of 146, 131 stores are the franchisee stores on a net basis, what we added. We continue to stick to the guidance of 800 net store openings for the current fiscal. Sure. Second, on growth and the margins front, right now we have been growing heavily at the top line. Should we continue to expect similar kind of growth trajectory in subsequent quarters in FY 2027? Second, on the margin front, given the actions we have taken in terms of reducing the discount, increasing the membership fees, as Madhukar sir said, we'll increase our private label portion by 0.3% to 0.5% on a quarterly basis, starting probably from third quarter, is it safe to assume that our margin profile for full year will go back to where it was in FY 2026? It might be still time in below that? It's too early, what I would request is allow us one quarter so that we also look at the outcomes of the actions which the company is currently taking. Maybe next quarter would be a much better period to see the benchmark and also look at the next balance two quarters of the current fiscal. We should be in a much better situation in quarter two to look at and project as well the latest estimate for the full year. Okay, sure. Last one, the cash generation part, right? I mean, we have a debt-free balance sheet, we have almost INR 600 crores cash, our operating cash flow, free cash flow also continues to be very strong by virtue of strong business fundamentals. Any plans to increase the dividend or do a share buyback because we'll have sufficient cash at the end of FY 2027? That's the last question. Your observation is absolutely right, Akhil. We are evaluating various options; we would take the guidance and present to the board various options. If there is an outcome, we would definitely inform you next quarter. Great. Thanks a lot and best luck on coming quarters. Thank you. Thank you. We have our next question from the line of Jitaksh Gupta from Tikri Investments. Please go ahead. Hello. Hi, sir. Hi. Sir, my question is regarding the revenue. This other revenue under the total revenue segment, it is moving up. Can you actually understand the nature of this revenue portion and where it will move for the financial year? See, the significant amount in that others is the franchisee sales. We still show it as others, and that's in the range of INR 830 million included in that number. That will be the largest number in that. Rest all are, if you see, it's in the same level of the previous quarters as well. Okay, sir. Fine. Thank you. Thank you. Thank you. We have our next question from the line of Bino Pathiparampil from Elara Capital. Please go ahead. Hi. Good afternoon. Madhukar, just to follow up from the initial questions. I completely understand that the margin was down this quarter because of the lower mix of private label as well as increased contribution from the franchisee, which is very well understandable. You also commented that all of these have grown, even the private label, in absolute terms, have grown compared to previous quarters, although the contribution has come down. In which case, the absolute EBITDA should have grown, although the margin comes down. Where exactly has the EBITDA decline happened? Hi, Bino. Good afternoon. This is Sujit here. I'll take this question. On a quarter-on-quarter basis, if you observe, the absolute sale for private label pharma and non-pharma have de-grown by around INR 33 crores. Sorry, can we look at it YoY? YoY also, is there a decline in private label? If you look at YoY, there is a 200-bps decline on the pharma alone, private label. As a mix, we had 13.8%. No, I'm not talking about the mix. The mix change from margin comes down. That is logical, I understand. But YoY in absolute sales, is there a dip? YoY on an absolute terms, INR 197 crore versus INR 200 crore on the pharma itself, it's flat. Okay. Why would EBITDA decline Y oY? EBITDA has an impact of mix and the increase in the cost, you know. The increase in cost is mainly the employee cost or some other cost? Predominantly the employee cost. Where does it get recorded? In the COGS or below that? I see that the gross margin has come down. The gross margin is due to the mix. The expenses go below the COGS. I understand that the gross margin percentage comes down because of the mix change. If neither of the segments have de-grown YoY, then the gross margin or EBITDA should not decline. Gross profit or EBITDA should not decline. Right. Hello, am I audible? Hey, I am. I think we answered that question. Okay, I'll take it up offline. Thank you. Thank you. We have our next question from the line of Ankit Bansal from AB Investment. Please go ahead. Hello. Yes, Ankit, we can hear you. Yeah. Sir, my question, you have just topped the OpEx plan. Rather than you're extending yourself to north or this part of India in the pharmacy business, you are just hold on that investment. What are your plans for the rest of India for your main business? The plan is to actually grow contiguously, in contiguous states. We are there in Maharashtra right now in a significant number, and we have extended into both Chhattisgarh and Madhya Pradesh. On the southern side, we have actually gone into Kerala. Once we get the states going fully and once they're profitable, we'll go again northwards and westwards. That's the plan for us. The CapEx on our core business has not stopped, will not stop. I don't think there's any reason for it to stop. That is not something on which we are looking for any kind of feedback from the market. This CapEx was for a slightly different thing, we rethought it a little bit, but it's nothing to do with our core business. Okay. Sir, my question, on the margin front, are the margins now they have come down. This fluctuation will continue for the coming year or will it get stable in that range or upper range? What will be the continuity for the investors to look for a stable kind of margins? See, once in a while, you're always going to have some issue like the new labor code was a pretty significant kind of impact, I would say. Whenever something like that happens, you are bound to see some kind of a impact. Other than that, no reason why the margin should change significantly. The one thing which we will continue to focus on is private label. It will now going forward after some of the supply chain issues and all will stabilize both on the pharmacy side as well as on the non-pharmacy side, the mix itself, and then start growing. That is what will drive the margins for us. Okay. Sir, the manufacturers whom you are manufacturing, all the auditing has been done by you? All the things are in place? You are satisfied with their kind of supply chain, all other services you're getting, the products you are getting manufactured from them? On the pharma side, we actually get them manufactured from some of the biggest names in the country. The three or four people who supply us supply to all the top 30, top 40 of the big pharma. We don't have any issues on the quality side with them. Actually, we go one step further. We also have our own NABL accredited lab in our own campus. Every batch, if not every other batch, is also tested in addition to the standard testing which the labs do. We make sure that the quality is maintained for our customers. The retail side, retail products? I'm talking about the retail products, right? These are private label products. What comes from the brand is the brand's responsibility. There we have nothing to do with the quality and all. We sell what the doctor prescribes, and so it is the responsibility of the company to maintain its quality. Okay. Thank you, sir. My side done. Thank you. We have our next question from the line of Axay Shah from VVD Asset Managers. Please go ahead. Thank you for the opportunity, sir. Sir, my question is that quick commerce platform are scaling in some cities, how do we see the competition from there? They are doing pretty well in few cities. Are you saying that quick commerce is doing well in some cities? Yes. For us, if the customer is actually willing to pay the cost of the delivery, we're more than happy to compete with quick commerce. I don't think it is something which we really want to focus on at this point of time, because as of now, almost all of these businesses are bleeding cash. They are subsidizing the cost, that is not something which we want to do. While they may take a little bit of our business or little bit of the overall business, I don't think there'll be any significant effect on the overall side. Pharmacy is slightly different from the general grocery business and all, It had its own challenges and everything else. I don't think anyone has really succeeded. The day people figure out how to actually give a 20% discount, give a free delivery, and give it in 10 minutes, we'll be more than happy to copy that model whenever it comes. Okay. Thank you, sir. Thank you. We have our next question from the line of Swaraj Mehta from Perpetual Capital Advisors. Please go ahead. Hello, am I audible? Yes, sir. I just wanted to understand. You've mentioned in your PPT that for stores that are greater than 12 months, the ROCE is around 63%. On a company level, that ROCE is very less. I just wanted to understand why does not that reflect in the overall company numbers, and where is this gap coming from? Significantly, your observation is right for a second. The way it is calculated, the store level ROCE is calculated based on store level investments and store level inventory. The company level, once it goes there, it also includes the warehouse level inventory, which is approximately 30 to 32 days of the company level sales. That's the only difference what you have in calculating the company level ROCE. Then you have, apart from the store level computation, even if you look at the profitability, you have the corporate expenses, the warehouse logistics expenses, and the sales and marketing related expenses. After netting that off and taking into consideration the inventory at the back end, which is the warehouse level inventory, we compute the company level ROCE, which is published, net of the cash what we hold. Okay, got it. Thank you so much. Thank you. Thank you. We have our next question from the line of Anil Sarin from K16 Advisors. Please go ahead. Good evening, everybody on the call. A lot of my questions have already been answered. I wanted to know what was the SSSG this quarter. As we have been informing the market, one, we do not really track SSSG per se because we strongly believe that while SSSG is a good metric for a retail store, but in pharma retail, purely it doesn't work because, one, we continuously add stores which is close by to our own stores beyond a certain densification. When we look at possibilities that it could be cannibalized by other stores or other competition, we do cannibalize our own store. Therefore, as a model, we really do not track SSSG, Anil. Okay. Fair enough. I noticed that your revenue growth rate has become quite handsome. In between, it had slowed down, so congratulations on the same. In the fourth quarter, there was very good movement, and now in the first quarter also, there is 22% improvement. However, in the latest quarter, the gross margin seemed to have suffered quite a bit. I just wanted your view. Is it solely due to the mix in favor of branded pharma that we have suffered this decline in gross margin? Roughly 200 basis points it has come off sequentially. Yes, out of 200 we mentioned, 100 basis points is due to the lower sales mix of private label products, both pharma and non-pharma put together. 70 basis points is attributable to the lower inventory provisions when compared to the sequential quarter. There was a question earlier that in quarter four of the previous fiscal, the inventory provisions were significantly lower because we had a release of provisions. In that period, we were able to liquidate products which had earlier been provisioned. Now, that same number is actually a like-to-like, a similar number, but Q4 was an exception. Therefore, we are seeing a larger dip, that impact is 70 basis points. Additionally, 40 basis points, at the year-end, we were able to negotiate with our large supplier for both pharma as well as the FMCG product. We had some extra, I would say, supplier-related discounts at the year-end, which we do not have in Q1, but we are pretty confident that during the year we will make up for that. The 100 basis points, we will make up for that during the year. A significant portion, we should see a traction coming back in the next quarter and beyond. The 40 basis points on a full year to year, we expect it to get recovered fully. The decrease of 70 because of the inventory loss also will not be visible because on an ongoing basis, around INR 12 crores is the inventory loss per quarter, and we should be on the same range on a quarter-to-quarter basis going forward. This INR 12 crore equivalent, what was the figure in the first quarter? Fourth quarter was around four and a half INR crore-five INR crore. That became INR 12 crore in the current quarter for which we are discussing. INR 11+. Yeah. Got it. Should I take that for the full year, when we close the books for fiscal 2027, our gross margin would have recovered to the trend or if not exceeding it? I think we are shooting for that. Allow us a quarter, we'll know the trajectory and the outcomes of the efforts, what we are tweaking. Post that, we can guide you for the whole year as well. Great. There are two developments which are somewhat concerning. One is that there seems to be a permanent increase. Thanks to the regulations regarding labor, et cetera. There is a culture which has gone up permanently, at least in the states that you mentioned, Telangana and Karnataka. That is one. Second, what one hears is that there is continuing kind of discounting going on, both by the offline as well as by the online pharmacies. I don't know whether that is temporary or not, but on the manpower cost, there is a permanent kind of a hit. Is it possible to overcome that and go back to our older reported 9%-odd kind of EBITDA margin that we saw? I think in that direction, we earlier articulated that the company has already tweaked the discount structure a little bit, effective 7th of July, we have reduced 1% for purchases greater than 1,000, where the payment mode is other than UPI. Therefore, we should see some benefit on that. Once we observe good traction and the impact on the consequential sale, the management would further evaluate and see if something else or additional tweaking is required. Our target also, Anil, is to go back to the earlier reported numbers and do it in a manner which is more sustainable. Fair enough. Thank you. Just one last thing. Sir, if you could just highlight the amount of the loan that has been taken against which the pledge has been made. One hears different figures. There was a repayment, and then there was a reinitiation of a debt. Obviously, it will go away only when the amount is repaid. What does the amount outstanding stand at currently? Are you talking about the promoter's debt? Correct. It's close to around INR 1,150 crores. Okay. Thank you very much. All included, which is interest included. That would essentially If we have a great fiscal 2027, without the price earnings multiple changing at all. I'm not talking about today's fall. I'm talking about the normalized kind of price earnings multiple. If the earnings were to go up at a certain level, the share price would consequently rise by an equivalent amount. That should be at a level where you might feel comfortable to liquidate the debt. That's the family office decision. Nothing to do with the list co. Yeah, you are right. Those calls and decisions are made by Madhukar and the family office. I think I cannot comment anything beyond this. Great. Thank you so much. Thank you. Thank you. We have our next question from the line of Akash Shah from Investec Capital Services. Please go ahead. Hi, sir. Am I audible? Yes, please. Okay, sir. As I can see from the presentation that was put on a second time, the SSSG has been reported at 15%, which is a fourth consecutive quarter of positive growth. In earlier quarter, we had alluded to the SSSG growth of 9%-10% for the full year going ahead. Two questions here. First, do you see the SSSG growth rate stick to 9%-10% for the full year? Second, as you had highlighted to earlier question, you expect to arrest the degrowth of 100 basis points, which was due to the decline in share of private labels. If your overall gross margins were to stay at the same level and EBITDA, would this mean that on an annual basis, the share will remain the same as it was earlier? These are the two questions. Thank you. As I mentioned on the SSSG, I think if you have followed my earlier response, it stays same. We do not report explicitly and track SSSG per se. Yes, if we are seeing a number, it's only a number which is a consequence of various activities which we do on the ground, including the new store openings as well as the cohort of stores which is performing. The number to shoot for is an overall number of 10%. On your second question, absolutely we aspire to recover as much as possible on the 100-basis points impact on the gross margins due to private label. That will be over a period of couple of quarters. Initially, we should see a comeback on the non-pharma and a bit on pharma, subsequent quarters, we should continuously see around 0.25%-0.3% growth on overall private label, whereby we believe we will be able to recover the entire decline, what we have. On a full year basis, as I had earlier mentioned, request you to be a bit patient, allow us a quarter, let us reassess the situation, we will be in a better position to guide or even articulate what could be the full year numbers. All right, sir. Sir, just one last question. In one of the quarters, I think it was in quarter four, you had said that every 20 to 30 basis points increase in the share of private label in the overall sales leads to 10 basis points growth in the gross margins. Is it correct or as per the current calculations in one of the you had uploaded two presentations yesterday. From the first presentation, what I could make is, for every 30 basis points increase in the share, there was 0.2% growth. Just on the numerical, if you could confirm. Thank you. What we uploaded as the investor deck, my request is to stick to that because between the pharma and the non-pharma, depending on which category of customers would convert to our private label, that percentage play would always be in a particular range. What we had guided you in Q4, I would request we continue with the same guidance. All right, sir. Okay. Thank you, sir, and all the best for the coming quarters. Thank you. Thank you. Thank you. Ladies and gentlemen, that would be the last question of the day. I now hand the conference over to the management for closing comments. I thank all participants on this call for your interest in the MedPlus journey. Our investor relations team can be contacted at ir@medplusindia.com. Thank you. Thank you. On behalf of MedPlus Health Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.