Medplus Health Services Limited — Q2 FY26 earnings call

Call held 3 Nov 2025

Management summary

Medplus Health reported a robust Q2 FY26, with consolidated revenue of INR16,793 million and an operating EBITDA margin of 5.3%. The diagnostics segment demonstrated significant growth in both revenue and profitability. The company continued its network expansion, adding 117 net stores, and saw its same-store sales growth turn positive at 2.2%. Management expressed confidence in achieving annual store addition targets and outlined plans for private label growth re-acceleration and SSSG improvement.

Highlights

  • Consolidated revenue reached INR16,793 million for the quarter.

  • Consolidated operating EBITDA stood at INR887 million, achieving a 5.3% margin.

  • Diagnostics segment showed strong growth with revenue at INR332.5 million and operating EBITDA at INR50.9 million (15.3% margin) in Q2 FY26.

  • Net working capital improved to 53 days, indicating efficient inventory management.

  • Same-store sales growth (SSSG) turned positive at 2.2% during the quarter.

Concerns

  • Private label pharma growth was intentionally toned down this quarter, with re-acceleration planned for next quarter.

  • An accumulation of input credit by an average of 7% for the pharma sector due to GST changes caused a temporary blockage.

  • Pre-operative costs increased to approximately INR33 million this quarter, attributed to the property bank and initial training for future stores.

Key financials

  1. Consolidated Revenue 16,793 Mn
  2. Consolidated Operating EBITDA 887 Mn
  3. Consolidated Operating EBITDA Margin 5.3%
  4. Net Working Capital 53 days
  5. SSSG 2.2%
  6. Employee Expenses Growth 0.19 yoy_growth_rate

What they filed

Q1 FY27: revenue up 21.8%, net profit down 21.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,576 1,561 1,510 1,543 1,679 +7%1,806 +16%1,864 +23%1,880 +22%
EBITDA124 133 136 131 149 +20%159 +20%169 +24%133 +2%
Net profit39 46 51 42 56 +44%58 +26%64 +25%33 −21%
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

  • Pharmacy Operations
    99% Revenue Contribution0.088 yoy_growth_rate Revenue Growth (GMV)0.063 yoy_growth_rate Revenue Growth (Net)839 Mn Operating EBITDA5.1% Operating EBITDA Margin11.8% Store-level EBITDA (>12 months)68.6% Store-level Operating ROCE (>12 months)
  • Diagnostics Segment
    332.5 Mn Revenue (Q2 FY26)283.1 Mn Revenue (Q2 FY25)50.9 Mn Operating EBITDA (Q2 FY26)15.3% Operating EBITDA Margin (Q2 FY26)21 Mn Operating EBITDA (Q2 FY25)

Capital allocation

medium confidence
  • Capex Capex disclosed
    • Diagnostic centers setup (12 centers, 4 large ones) ₹1,200 Mn
    • Pre-operative costs (property bank, training for new stores) ₹33 Mn
    So for us, in the current model, which is capex intensive, where we put in INR120-odd crores to set up the 12 diagnostic centers, 4 of which are the large ones and all. We are not going to expand until we get the numbers we want. So that's it for that model right now. We are still looking to tweak the model to get those numbers.
  • Liquidity Liquidity disclosed Management mentioned having 'money in the bank and everything else' qualitatively.
    And the fact that we have money in the bank and everything else. So, please give us a little bit more time to really give you some proper color on what is going to happen in the next 2 to 3 years. I'd not be able to tell you right now.

Guidance & targets

Store Expansion

  • New store additions Store Expansion · Fiscal '26 · High confidence 600
    We continue with the outlook for adding 600 new store additions in fiscal '26. ... Yes. We will be able to make up the balance in the next half.

    — Madhukar Gangadi

  • Franchisee store additions Store Expansion · FY26 · High confidence 100
    I think you guys had said you would add around 100 out of the 600 stores this year from franchisee base. So, what is the update on that? ... But again, the 100 stores and franchisees shouldn't be a problem. We should be able to get that easily.

    — Madhukar Gangadi

Private Label Growth

  • Private label pharma growth (MRP basis) Private Label Growth · After this quarter · Medium confidence 1% every quarter
    For this quarter, it may be more or less at the same level. But after that, we should start growing at around 1% every quarter on an MRP basis.

    — Madhukar Gangadi

  • Private label general goods growth Private Label Growth · Ongoing · High confidence Will continue to grow
    We're taking advantage of the fact that we have so many stores and we are able to bring in whatever products we want to without too much of a problem. So, that will continue to grow.

    — Madhukar Gangadi

SSSG

  • Same-store sales growth SSSG · Next 2 years max · Medium confidence 9-10%
    Sir, we expect this to grow gradually because you saw the last couple of quarters, it did not show a positive traction. The company has changed the incentive plan and the other initiatives, adding supply chain capability. So, we expect this to grow gradually in the range and reach somewhere between the high-single digits of between 9% and 10%, but that should be a journey.

    — Sujit Mahato

Pre-operative Costs

  • Maximum pre-operative costs Pre-operative Costs · Ongoing · High confidence INR40 million
    So, this should not exceed maximum of INR4 crores, Saion, because we continue to grow and therefore, there is always this number, which we classify as pre-op. But on a steady-state basis, this should continue to go down.

    — Sujit Mahato

Market context

  • Employee expense growth YoY Employee Costs · Next quarter onwards · High confidence Moderate
    So next quarter onwards, it should start to moderate. The year-on-year growth in employee costs will start to moderate. Would that be a right assumption? Yes, it will start to moderate. Yes, that's the right assumption, Saion.

    — Sujit Mahato

What to watch in Q3 FY26

FY26 Store Addition Target

H2 FY26
Current 145 new stores opened in Q2, 117 net added. H1 trailing target.
Target 600 new stores for FY26 (balance to be made up in H2).

Why it matters

Verifies management's ability to accelerate store expansion and meet full-year targets, crucial for network growth.

We continue with the outlook for adding 600 new store additions in fiscal '26. ... Yes. We will be able to make up the balance in the next half.

Risks & concerns

  • Input tax credit blockage due to GST change

    medium

    Accumulation of input credit by an average of 7% for the pharma sector due to GST rate change, causing a temporary blockage.

    Management acknowledged

  • Diagnostic segment expansion paused

    low

    No further expansion in diagnostic centers until subscription numbers cross 250,000, as the current model is capex-intensive.

    Management acknowledged

  • Private label pharma growth muted for a quarter

    low

    Growth in private label pharma was intentionally toned down this quarter, with re-acceleration planned from next quarter.

    Management acknowledged

Q&A highlights

7 direct
Store additions and franchisee model progress Direct
Yes. We will be able to make up the balance in the next half. And franchisee also is on target for us. I don't think that's a problem.

Clarifies management's confidence in achieving full-year store expansion targets, including the franchisee component, despite H1 trailing.

Asked by Sudarshan Agarwal (Axis Capital)

Private label growth strategy and incentives Direct
For this quarter, it may be more or less at the same level. But after that, we should start growing at around 1% every quarter on an MRP basis.

Explains the temporary slowdown in private label pharma growth and outlines the plan for re-acceleration, differentiating between pharma and general goods.

Asked by Sudarshan Agarwal (Axis Capital)

Impact of GST change on business and working capital Direct
So, on the GST implementation, firstly, we went ahead with the broad intent of the Central Government, and we passed on the entire GST benefit to the customers right from 22nd of September when this got effective. ... So, there is an accumulation of input credit by an average of 7% for the pharma sector.

Details the immediate impact of GST changes, including passing benefits to customers, input credit blockage, and temporary credit period negotiations with suppliers.

Asked by Avnish Barman (Individual Investor)

Supply chain improvements, fill rates, and pre-operative costs Direct
On the supply chain side, the new warehouses have been added and some of them are already functional... On the fill rate, definitely, yes, we are slightly better... So, this is for the property bank and the number of apprentices, which we hired or the people which we put up for the initial training and those costs, we classify them as pre-operative. So, we have a property bank of 400 plus as we speak.

Provides updates on operational improvements and explains the increase in pre-operative costs as an investment for future store expansion.

Asked by Harith Ahamed (Avendus Spark)

Pharmacy retail operating EBITDA margins outlook Partial
I think where we are from where we are, it may not really go up by much. We'll probably be flat, maybe a slight increase, but I won't really count on it. So, a little early to tell you right now.

Management indicates a cautious outlook on margin expansion for the current year, expecting them to remain flat or slightly increase.

Asked by Harith Ahamed (Avendus Spark)

Employee expense growth and attrition reduction Direct
So, this is for the last 1 year, last 4 quarters. We have launched the scheme now close to a year ago. And I mentioned this is the first time where the payouts have happened, which means we have crossed the 12-month threshold. ... we drastically saw a reduction of around 15%.

Explains the reason for 19% YoY employee expense growth (first-time payouts for a year-old retention scheme) and confirms a significant reduction in attrition (around 15% in some cities).

Asked by Saion Mukherjee (Nomura Securities)

Same-store sales growth (SSSG) trajectory Direct
Sir, we expect this to grow gradually because you saw the last couple of quarters, it did not show a positive traction. ... So, we expect this to grow gradually in the range and reach somewhere between the high-single digits of between 9% and 10%, but that should be a journey.

Provides specific SSSG targets for the medium term (9-10% within 2 years), indicating confidence in operational improvements.

Asked by Tanya (Investec)

Private label non-pharma growth drivers and margins Direct
So on the PL non-pharma specifically, Aejas, what you rightly mentioned, couple of quarters ago, this was hovering around 7.5%, 7.8%. And we really grew steadily because one major aspect, if I can take you through is we have been guiding that the way we serve our customers in our stores, let's say, 18 months ago, we have changed that over period by bringing in the racks outside or the shelves outside wherever real estate allowed us. ... And to add to that what Madhukar explained earlier that we have added a large assortment of new products on the FMCG side, which is constantly driving this growth.

Explains the strategic shift in store layout and product assortment driving strong growth in private label non-pharma, and provides margin details (34% for non-pharma, 74-78% for pharma).

Asked by Aejas Lakhani (Unifi AMC)

2 min read 7 chapters

Detailed narrative

Network Expansion and Store Performance

Medplus Health added 145 new stores in Q2 FY26, resulting in a net addition of 117 stores, bringing the total network to 4,930 stores across 2.6 million square feet. The company remains confident in achieving its target of 600 new store additions for fiscal '26, including approximately 100 franchisee stores. Stores operational for over 12 months contributed 95% of pharmacy revenue and achieved a store-level EBITDA margin of 11.8% and ROCE of 68.6%.

Financial Performance Overview

For Q2 FY26, consolidated revenue stood at INR16,793 million, with consolidated operating EBITDA at INR887 million, representing a 5.3% margin. Pharmacy operations accounted for 99% of revenues, growing 8.8% YoY on a GMV basis and 6.3% YoY on a net basis. The net working capital improved to 53 days, reflecting efficient inventory management with warehouse inventory at 33 days and older store inventory at 37 days.

Private Label and Revenue Mix

Private label sales constituted 21.5% of total revenues in Q2 FY26, with pharma private labels at 12.1% and non-pharma at 9.6%. While private label pharma growth was intentionally toned down this quarter, management expects it to re-accelerate at about 1% quarterly growth from next quarter. Non-pharma private label sales are driven by strategic store layout changes (racks outside) and an expanded assortment of FMCG products, with a gross margin of 34%.

Diagnostics Segment Performance

The diagnostics segment demonstrated robust growth, with revenue increasing to INR332.5 million in Q2 FY26 from INR283.1 million in Q2 FY25. Operating EBITDA for the segment significantly improved to INR50.9 million (15.3% margin) in Q2 FY26, up from INR21 million in Q2 FY25. However, the company has paused further expansion of its capex-intensive diagnostic centers until subscription numbers reach 250,000.

Impact of GST Changes

Following the GST rate change effective September 22, Medplus passed on the entire benefit to customers. The change led to a temporary blockage of input tax credit, averaging 7% for the pharma sector, due to inventory procured at higher rates. To mitigate working capital impact, the company negotiated one-time extra credit periods with suppliers.

Employee Costs and Attrition Management

Employee expenses grew 19% YoY, primarily due to first-time payouts from a year-old employee retention scheme. This scheme, which includes a cash bonus for employees staying over 12 months, has significantly reduced attrition by approximately 15% in major cities. Management expects the year-on-year growth in employee costs to moderate from the next quarter.

Future Growth Outlook and Strategy

Medplus aims for same-store sales growth (SSSG) to gradually reach high-single digits (9-10%) within the next two years, supported by changes in incentive plans and supply chain capabilities. The company is also seeding initial stores in new regions like Chhattisgarh and Madhya Pradesh, indicating a cautious but continuous geographical expansion beyond its southern and eastern strongholds.

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