Detailed Narrative
Q3 FY26 Financial Performance Overview
Zota Health Care reported a consolidated revenue from operations of INR 14,295.14 lakhs in Q3FY26, representing a strong year-on-year growth of 98.2% compared to INR 7,212.38 lakhs in Q3FY25. Consolidated Gross Profit also saw a significant increase of 113.9% YoY, reaching INR 8,617.82 lakhs from INR 4,029.15 lakhs in the prior year. However, operating profit and consolidated EBITDA moderated to INR 127.58 lakhs for the quarter, primarily due to higher operating expenses linked to aggressive network expansion, including pre-opening costs for approximately 400 stores under development.
Davaindia Network Expansion and Strategic Initiatives
The company continued its aggressive expansion of the Davaindia retail pharmacy network, adding 276 new stores in Q3FY26, comprising 231 COCO and 45 FOFO stores. This brought the total Davaindia footprint to 2,331 stores as of December 31, 2025. The medium to long-term objective is to cross 5,000 Davaindia stores across India by March 2029. Quarterly customer footfall increased to 49 lakhs in Q3FY26 from 27 lakhs in Q3FY25, and Quarterly GMV nearly doubled YoY to INR 12,172 lakhs, reflecting improved store productivity and network scale.
Capital Raising and M&A Activities
A key milestone during the quarter was the successful completion of a INR 350 crore Qualified Institutional Placement (QIP), with proceeds primarily utilized for accelerating COCO store rollout, working capital, and general corporate purposes. The company also incorporated a new wholly owned subsidiary, KMHP Ventures Limited, with an initial paid-up capital of INR 10 lakh, to engage in marketing and trading of pharmaceutical products. Furthermore, Zota acquired a 100% equity stake in Curexis, a retail pharmacy platform operating under the brand 'SKIA,' to expand its footprint in the retail generic and specialty pharmacy segment.
Margin Dynamics and Cost Management
While gross margins have improved to 66-67% in Q3FY26, up from 55% YoY, operating profit and EBITDA moderated due to higher operating expenses linked to network expansion. Employee costs increased from INR 38 crore in Q2 to INR 52 crore in Q3, primarily due to costs associated with approximately 650 stores (231 opened and 400+ in pipeline) that are not yet fully operational. Management expects these expansion-led costs to be transitory📎, with normalization and improved operating leverage anticipated in the next 1-2 quarters as newly added stores mature.
Impact of GST Reduction on GMV and Store Performance
The reported GMV in Q3FY26 was affected by a 5.15% GST impact, as the GST rate for certain products was reduced from 12% to 5%, directly impacting MRPs and reported GMV. Management clarified that when adjusted to the old GST structure, the underlying growth trend remains intact, with older cohorts experiencing 15-20% annual growth. Despite the addition of many new stores with lower initial wallet spends, the average wallet spend remained stable, indicating underlying improvement in customer purchasing behavior.
Marketing and Brand Building Initiatives
Zota Health Care has initiated extensive Below-The-Line (BTL) campaigns featuring brand ambassadors Sunil Shetty and MS Dhoni. TVC shoots with Sunil Shetty have been completed and are being aired in cinemas and taxis, while MS Dhoni's TVC is expected to be ready in two weeks. Television broadcasts featuring the brand ambassadors have also commenced, with more TVCs planned for the coming months. Management emphasized a judicious approach to marketing spend, aligning it directly with organizational growth and COCO store expansion rather than adhering to fixed budgets.