Company and Document Details

Financial Performance

  • Consolidated revenue for Q1 FY27 stood at ₹18,796 million.
  • Consolidated operating EBITDA was ₹651 million, representing a 3.5% margin.
  • Revenue from pharmacy operations grew by 21.8% year-over-year on a reported basis.
  • Pharmacy operating EBITDA was ₹588 million, representing a 3.2% margin.
  • Diagnostics revenue grew to ₹370.8 million compared to ₹302.9 million in Q1 FY26.
  • Diagnostics segment recorded an operating EBITDA of ₹65.9 million compared to ₹41.3 million in Q1 FY26.

Operational Metrics

Store Network

  • Gross store openings: 222 stores
  • Store closures: 52 stores (including 9 relocations and 27 franchisee outlet closures)
  • 24 stores in process of conversion from company-owned to franchise model
  • Net store addition: 146 stores (compared to 218 net additions last quarter)
  • Total network: 5,476 stores with 2.9 million+ square feet (vs. 4,813 stores and 2.5 million+ square feet at June '25)
  • Average store size: 539 square feet
  • 27% of stores operational for less than 2 years; 73% operational for 2 years or more
  • Maintained outlook of adding 800 net new stores (including franchisee stores) in FY27

Store Performance

  • Revenue from stores older than 12 months: ₹16,436 million (94% of pharmacy revenue)
  • Store level EBITDA margin by age:
  • Stores >12 months: 10.4%
  • Stores >24 months: 10.6%
  • Stores 13-24 months: 6.9%
  • After allocating all non-store-related costs, operating EBITDA of stores >12 months would be ₹707 million (4.3% margin)

Private Label Performance

  • Private label sales constituted 20% of total revenue (10.7% pharma, 9.3% non-pharma)
  • Private label membership: Approximately 4.4-4.5 lakh active clients
  • Membership fee increased from ₹99 to ₹149 effective approximately June 2026
  • Membership sales: 552 plans per day in April, 557 in May, 644 in June

Working Capital

  • Net working capital: 54 days
  • Warehouse inventory: 33 days
  • First-year store inventory: 100 days
  • Stores older than 12 months inventory: 36 days

Strategic Updates

Capex Plans

  • All Board-approved capex proposals have been put on hold by the company
  • This includes a food park, oil extraction unit, and wellness services facility
  • The decision was made following negative market reaction and investor feedback
  • Company will evaluate and later inform the market on utilization of balance sheet funds

Franchisee Model

  • 24 stores in process of conversion from company-owned to franchise model
  • Predominantly offered to senior staff members with 3+ years tenure as retention strategy
  • 95%+ of these conversions expected to be taken up by existing employees
  • Franchisee model still in experimental stage with ongoing adjustments

Cost Management

  • Effective July 7, 2026, company reduced discount from 20% to 19% for sales above ₹1,000
  • Addressing labor cost increases: 60% wage increase in Karnataka, 25%+ in Telangana effective June 1, 2026
  • Retention bonus plan stopped effective March 1, 2026
  • Reviewing non-statutory payments and incentive structures

Management Commentary

Private Label Strategy

Management acknowledged that aggressive pushing of private label may have annoyed some customers. The new approach focuses on:

  • External advertisement through influencers to attract new customers specifically seeking MedPlus equivalents
  • Improving employee sales skills for private label products
  • Expecting to arrest the decline and gradually increase private label share by 0.3-0.5% quarterly

Diagnostics Business

While profitable, diagnostics has not reached expected levels (210,000-220,000 members vs. expected 250,000-300,000). The company plans minimal maintenance expansion but no significant growth in radiology services.

Competition

Management expressed limited concern about quick commerce platforms, noting they are cash-bled and subsidized. Believes pharmacy has different dynamics than general grocery delivery.

Inventory Provisioning

  • Normal quarterly inventory provisioning charge: approximately ₹12 crores
  • Q4 FY26 was exceptional with only ₹4.5-5 crores due to successful liquidation of provisioned products
  • More than 90-95% of provisioning relates to private label products (make-to-order) vs. branded products (make-to-shelf)
  • Target up to 5% provisioning for private label considered normal range

Labor Cost Impact

  • Full impact of wage increases (effective June 1, 2026) will be felt in Q2 FY27 (only one month impact in Q1)
  • Karnataka: 60% wage increase
  • Telangana: 25%+ wage increase

Forward-looking Statements

  • Maintaining FY27 guidance of 800 net new store additions
  • Evaluating options for capital return (dividend increase or share buyback) given strong cash position (~₹600+ crores) and debt-free balance sheet
  • Expect to recover 100 bps gross margin impact from private label decline over coming quarters
  • Planning 0.25-0.3% quarterly growth in overall private label share