Entero Healthcar

Entero Healthcare Solutions reported a strong Q2 FY25, with consolidated revenues reaching ₹1,301 crores, a 31% year-on-year increase. This growth significantly outpaced the Indian Pharmaceutical Market (IPM) growth of 8%. EBITDA for the quarter grew by 49% to ₹42 crores, leading to an EBITDA margin improvement of 40 basis points to 3.3%. Profit after tax surged nearly four times year-on-year to ₹26 crores. For H1 FY25, revenue stood at ₹2,398 crores (up 26% YoY), with EBITDA at ₹73 crores (up 34% YoY) and PAT at ₹47 crores (up 300% YoY).

The company's growth strategy combines organic expansion with strategic acquisitions. In Q2 FY25, ₹128 crores of revenue came from new acquisitions, with the full impact expected from Q3 FY25. So far in FY25, Entero has completed 9 acquisitions, which collectively had ₹750 crores in annualized revenue in FY24. The company has signed binding MoUs for two more entities and is on track to achieve its FY25 target of ₹1,000 crores in annualized revenue from acquisitions. These acquisitions are primarily margin-accretive and valued at mid-single-digit EBITDA multiples.

EBITDA margin improved by 40 basis points to 3.3% in Q2 FY25, driven by gross margin expansion (up 39 basis points to 9.4%). This improvement is attributed to procurement efficiencies, a better product mix, and cost optimization. Management expects this quarter-on-quarter margin improvement trajectory to continue, aiming for an exit run rate of around 4% EBITDA margin by Q4 FY25. The company is committed to pursuing only margin-accretive opportunities.

Entero demonstrated improved working capital management, with net working capital days reducing to 69 days in Q2 FY25 (65 days excluding acquisitions), down from 75 days in H1 FY25 (68 days excluding acquisitions). The company's target for working capital days by March 2025 is 60-65 days. Management anticipates operating cash flow to turn positive by next year (FY26), driven by continued margin expansion and optimization of the working capital cycle.

Organic growth for Q2 FY25 was 15%, significantly outperforming the 8% growth of the Indian Pharmaceutical Market. The company's internal target is to maintain an organic growth rate of 1.5-2 times the market growth. Entero's extensive network now covers approximately 500 out of 750 districts in India, reaching around 80,000 retailers in H1 FY25. The company continues to deepen its market presence across Tier 2 and Tier 3 cities and expand its customer base and product basket.

Entero is actively diversifying its product portfolio beyond traditional pharmaceuticals, with non-medicine products (including medical devices, diagnostic equipment, and surgical consumables) now accounting for approximately 10% of revenues. The hospital business currently represents around 24% of total business. The HealthEdge platform is a key strategic initiative, connecting retail pharmacies to Entero's warehouses with technology to enhance their competitiveness, thereby increasing Entero's wallet share through product supply.

The company reiterated its FY25 revenue growth guidance of 35-40% and an EBITDA margin target of around 4% by the end of Q4 FY25. Entero aims for net working capital days to be between 60-65 by March 2025. Management expects to complete over ₹1,000 crores in annualized revenue from acquisitions in FY25 and plans to pursue a similar number of acquisition targets in FY26, indicating sustained inorganic growth. The overall outlook remains bullish, with a focus on continued margin expansion and operational leverage.