Laxmi Dental Limited — Q3 FY25 earnings call

Call held 14 Feb 2025

Management summary

Laxmi Dental reported its highest ever quarterly revenue in Q3 FY25, demonstrating strong YoY growth in revenue, EBITDA, and PAT for the nine-month period. The company is focused on strategic debt reduction, aiming for a debt-free status by FY26, and plans significant capex for digitization and capacity expansion. While Q3 PAT margins were lower than the nine-month average, management expects improvement, driven by operational efficiencies and resolution of Kids-E-Dental's regulatory delays.

Highlights

  • Revenue of ₹61.6 crores in Q3 FY25, marking the highest ever quarterly revenue.

  • EBITDA for Q3 FY25 stood at ₹9.6 crores, with an adjusted EBITDA of ₹10.8 crores.

  • For 9M FY25, revenue grew 28.8% YoY to ₹178.4 crores, and EBITDA surged 167.2% YoY to ₹32.3 crores.

  • Employee cost as a percentage of revenue reduced to 33.7% for 9M FY25 from 36.9% in the previous year.

  • The company aims to be debt-free by FY26, having already repaid ₹12.6 crores of debt in Q4 FY25.

Concerns

  • Q3 FY25 PAT margin of 7.8% was lower than the 9M FY25 PAT margin of 15% and the full-year guidance of 13-15%.

  • Delays in registration clearances for Kids-E-Dental products are impacting its near-term performance in certain countries.

  • Working capital days increased to 83 from 64, with an increase in debtors, attributed to strategic credit leeway for digital adoption.

Key financials

2 periods

Headline

  • Revenue
    ₹61.6 Cr
  • EBITDA
    ₹9.6 Cr
  • Adjusted EBITDA
    ₹10.8 Cr
  • PAT
    ₹4.8 Cr
  • Gross Margin
    73.9%
  • EBITDA Margin
    15.6%
  • PAT Margin
    7.8%
  • Finance Cost
    ₹1.5 Cr
  • Employee Cost
    ₹21.8 Cr

9M

  • FY25 Revenue
    ₹178.4 Cr
    YoY +28.8%
  • FY25 EBITDA
    ₹32.3 Cr
    YoY +167.2%
  • FY25 PAT
    ₹27.6 Cr
    YoY +57.3%
  • FY25 Employee Cost as % of Revenue
    33.7%

What they filed

Q1 FY27: revenue up 13.6%, net profit up 25.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue57 62 61 66 72 +26%66 +6%74 +21%75 +14%
EBITDA9 10 10 12 11 +22%7 −30%14 +40%14 +17%
Net profit6 5 4 8 9 +50%2 −60%10 +150%10 +25%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentShare of 9M FY25 RevenueSegment Margin
Dental Laboratory Offering62%16%
Aligner Solutions33%24%
Kids-E-Dental (9M FY25, not consolidated for revenue)——

Capital allocation

high confidence
  • Capex ₹68.5 Cr
    • New machineries ₹43.5 Cr
    • Investment in subsidiary Bizdent Devices Private Limited for new machinery ₹25 Cr
    Investment in certain subsidiaries for repayment, prepayment of INR4.6 crores worth of outstanding borrowings, INR43.5 crores of capital expenditure for purchase of new machineries, INR25 crores investment in subsidiary Bizdent Devices Private Limited for the purchase of new machinery and as we look ahead, the overall market for our offering is sizable and expected to grow at double digits. In the next 2 years, we plan to do capex of INR68.5 crores.
  • Debt Debt disclosed
    • Repayment Repaid in Q4 FY25 ₹12.6 Cr
    • Repayment Planned repayment of outstanding borrowings in Q4 FY25 ₹23 Cr
    Following the IPO, we have repaid approximately INR12.6 crores of borrowing in Q4 FY25. So on the debt side, currently we have repaid about INR12.5 crores of debt. And eventually our goal is to pay off the debt from the proceeds and we will be a debt-free company in FY26. So last financial year we had an outlay of interest cost of INR5 crores. So there will be savings on the finance cost going forward.

Guidance & targets

Revenue

  • Top line Revenue · FY25 · High confidence ₹240 crores
    For FY25, we are targeting to close the year with a top line of around INR240 crores with a PAT margin to the tune of 13% to 15%.

    — Sameer Merchant

Profitability

  • PAT Margin Profitability · FY25 · High confidence 13-15%
    For FY25, we are targeting to close the year with a top line of around INR240 crores with a PAT margin to the tune of 13% to 15%.

    — Sameer Merchant

  • PAT Margin Profitability · full year and moving forward · High confidence 13-15%
    So, what we have said we will end between 13% to 15%. We are very confident for the full year and even moving forward, we expect this trajectory to continue and move upwards.

    — Sameer Merchant

Growth

  • CAGR Growth Growth · next 3 to 5 years · High confidence 20-25%
    With our strengthened balance sheet position, Laxmi Dental is committed to invest in physical and operational infrastructure to leverage this tailwinds. With this tailwinds over the next 3 to 5 years, we expect and are comfortable to continue on this trajectory and grow at a CAGR of 20% to 25%.

    — Sameer Merchant

Debt

  • Debt Status Debt · FY26 · High confidence Debt-free
    And eventually our goal is to pay off the debt from the proceeds and we will be a debt-free company in FY26.

    — Dharmesh Dattani

Finance Cost

  • Finance Cost Reduction Finance Cost · from Q1 FY26 · High confidence Considerable reduction
    As a result, we expect a considerable reduction in the finance cost from Q1 FY26.

    — Dharmesh Dattani

ESOP Expense

  • ESOP Expense ESOP Expense · FY25 · High confidence ₹2.19 crores
    For FY25 and FY26, the company expects to record ESOP expense to the tune of INR2.19 crores and INR6.35 crores respectively.

    — Dharmesh Dattani

  • ESOP Expense ESOP Expense · FY26 · High confidence ₹6.35 crores

    — Dharmesh Dattani

What to watch in Q4 FY25

Kids-E-Dental Registration Clearances & Revenue Growth

next quarter
Current Delayed due to regulatory clearances
Target Clearances received, revenue growth starts

Why it matters

Unlocking growth for a key pediatric dental segment and contributing to overall revenue targets.

So the majority, the reason is we are awaiting registration clearances in countries, which we were hoping should happen in December, but due to the holiday and the extensive MDR, which is going across the world, there has been a delay on that. So the expectation is it should arrive anytime, just based on the registration authorities. So once that kicks in, we will be able to sell in those countries and then the revenue will start moving upwards.

Risks & concerns

  • Kids-E-Dental Registration Delays

    medium

    Delays in receiving registration clearances in certain countries for Kids-E-Dental products due to holidays and MDR, impacting Q4 FY25 performance.

    Management acknowledged

  • Increased Working Capital and Debtors

    medium

    Working capital days increased to 83 from 64, and debtors increased, which management attributes to providing credit leeway to dentists to encourage digital adoption.

    Analyst acknowledged

  • Raw Material Price Volatility

    low

    Minor fluctuations due to USD movement, but not seen as a major challenge due to diversified sourcing and natural hedge from exports.

    Management downplayed

Q&A highlights

7 direct
PAT Margin Discrepancy (Q3 vs. FY25 Guidance) Direct
So one of the key drivers there was we had increase in cost. And also the plan was to repay the debt in Q3, which eventually happened. The IPO happened in Q4 and we are repaying the debt in Q4. So blended based on that the margin profile will improve in Q4 and also throughout the year as well.

Analyst questioned the significant gap between current quarter's PAT margin and full-year guidance, prompting management to explain cost increases and debt repayment timing.

Asked by Jatin

Kids-E-Dental Performance and Future Growth Partial
So the majority, the reason is we are awaiting registration clearances in countries, which we were hoping should happen in December, but due to the holiday and the extensive MDR, which is going across the world, there has been a delay on that. So the expectation is it should arrive anytime, just based on the registration authorities. So once that kicks in, we will be able to sell in those countries and then the revenue will start moving upwards.

Analyst inquired about the soft performance of Kids-E-Dental and its future growth, revealing regulatory delays as a key factor.

Asked by Jatin

Employee Cost Increase and Sustainability Direct
So this, on the two parts here. One, we had an appraisal so that went through. Two, we have added people for growth in Q3 as we see the company growing, moving forward. In fact, if you see as compared to last year, our cost has gone down this year and we see that trajectory moving downwards as we keep scaling up with our digitization and automation efforts.

Analyst questioned the increase in employee costs, and management clarified reasons while reiterating expected efficiencies from digitization.

Asked by Jatin

People-Intensive Business and Digitization Impact Direct
Absolutely. In fact, when Rajesh Bhai mentioned on the call here in dentistry, the people cost has been historically higher. And now with our efforts, like Rajesh Bhai mentioned that globally, the digitization is about 23% penetrated of intraoral scanner. While we are already today at 60% digitization in terms of intraoral scanner. So we are leading that in India in terms of putting digital technology and scanners out. So as we move towards those digitization efforts in scanning, these number of people which will be needed to produce in the manufacturing will only go lower and that is the leverage we have brought up till now, where we have reached 60% and that's the leverage we will bring in the future as well.

Analyst probed how the company plans to manage and reduce costs in a people-intensive business, leading to a detailed explanation of digitization's role in efficiency.

Asked by Karan Mehra

Non-Consolidation of Kids-E-Dental Revenue Direct
So that's on the Kids-e dental, the question on the 60% As per Ind AS we are only able to consolidate the PAT margins there. And that is what we are currently doing.

Analyst sought clarification on the accounting treatment of the 60% owned Kids-E-Dental entity, revealing that only PAT margins are consolidated as per Ind AS.

Asked by Rohit Mehra

Working Capital and Debtors Increase Direct
And especially on our digitization efforts on the scanner which we are pushing a lot. That is where we are giving dentists a little bit more leeway than normal to make sure they go digital. Because if they go digital, the advantage is more on our side, where we can have driving a lot of operational efficiency. So making sure that we are able to take the dentist digital, we are okay with slightly extending the credit limits to them.

Analyst raised concerns about increased working capital days and debtors, prompting management to explain it as a strategic move to encourage digital adoption among dentists.

Asked by Ismile Ansari

Geographical Revenue Mix and Diversification Direct
So, great question. We started in the West. So, West has been the stronghold. It's been a long time we started from Mumbai. So, the facility first dental lab was started in Mumbai. And today, I would say 5 years, 10 years back, we were probably 90% West. Today, we are close to 50% in the West, 23%, 24% in the North, similar in the South and East is what we have just started. We see that percentage being lower.

Analyst questioned the heavy reliance on the West region for revenue and the strategy for diversifying geographical contribution, leading to management's explanation of historical context and ongoing expansion efforts.

Asked by Ismile Ansari

Overall Margin Compression Direct
No, over here like I said, we have added employees for growth. If you see, that is where I would say the majority of the difference is. And we wanted to build some traction here for future because for us in the next 3 years to 5 years a dentistry is something which is growing extremely well in India and across the world.

Analyst pointed out a decline in overall margins compared to prior periods, and management attributed it to strategic investments in headcount for future growth.

Asked by Kamlesh Jain

3 min read 8 chapters

Detailed narrative

Strong Q3 FY25 Performance and 9M Growth

Laxmi Dental achieved its highest ever quarterly revenue of ₹61.6 crores in Q3 FY25, with an EBITDA of ₹9.6 crores and PAT of ₹4.8 crores. For the nine months ended December 31, 2024, the company reported a 28.8% YoY revenue growth to ₹178.4 crores. EBITDA for 9M FY25 surged 167.2% YoY to ₹32.3 crores, and PAT stood at ₹27.6 crores, marking a 57.3% YoY increase.

Margin Profile and Efficiency Focus

The company reported a gross margin of 73.9% and an EBITDA margin of 15.6% for Q3 FY25. While the Q3 PAT margin was 7.8%, lower than the 9M average of 15%, management expects improvement, targeting 13-15% PAT margin for FY25. Employee costs as a percentage of revenue reduced to 33.7% for 9M FY25 from 36.9% last year, with further efficiencies expected from increased digitization and automation.

Strategic Debt Reduction and Capex Plans

Utilizing IPO proceeds, Laxmi Dental has already repaid ₹12.6 crores of debt in Q4 FY25 and plans to repay a total of ₹23 crores of outstanding borrowings in Q4 FY25, aiming to be debt-free by FY26. This is expected to lead to a considerable reduction in finance costs from Q1 FY26. The company has planned a capex of ₹68.5 crores over the next two years, with ₹43.5 crores allocated for new machinery and ₹25 crores for its subsidiary Bizdent Devices Private Limited.

Product Portfolio and Segment Performance

The dental laboratory offering, including crowns, bridges, and prostheses, constituted 62% of revenues for 9M FY25, with a segment margin of 16%. Aligner solutions contributed 33% of revenues, with a segment margin of 24%. The jointly controlled entity, Kids-E-Dental LLP, which offers preformed pediatric dental crowns, reported ₹21.5 crores in revenue and ₹10.7 crores in PAT for 9M FY25, though its revenue is not consolidated due to Ind AS norms.

Geographical Performance and Expansion

In Q3 FY25, domestic business contributed 66% of revenues, while international business accounted for 34%. The company currently caters to customers across 95 countries and works with approximately 22,000 dentists in India. While the West region has historically been a stronghold, contributing 50% of current revenues, the company is actively expanding its reach in other regions like North, South, and East.

Digitization as a Growth Driver

Laxmi Dental emphasizes digital dentistry, with about 60% of units produced at its domestic lab already done via digital medium. The adoption of intraoral scanners, currently at 23% globally and expected to grow to 28% by 2027, is seen as a major lever for growth. The company provides credit leeway to dentists adopting digital impressions to encourage this transition, which in turn enhances operational efficiency.

Market Opportunity and Outlook

The Indian dental care services market is estimated at $3.4 billion in 2023, projected to grow at a CAGR of 12.6% to $7.8 billion by 2030, driven by increased awareness and demand for specialized care. The company expects to grow at a CAGR of 20-25% over the next 3-5 years, supported by increasing dental awareness, rising disposable income, and technological advancements like 3D printing and CAD-CAM.

Kids-E-Dental Regulatory Delays

The performance of Kids-E-Dental has been impacted by delays in receiving registration clearances in certain countries. Management expects these clearances to come through, which will then allow revenue from these markets to grow. This delay is noted as a factor for the Q3 PAT margin being lower than the full-year guidance, but is expected to resolve.

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