Zota Health Care LImited — Q3 FY26 earnings call

Call held 5 Feb 2026

Management summary

Zota Health Care reported robust top-line growth in Q3 FY26, with revenue nearly doubling and gross profit increasing over 113% YoY, driven by aggressive expansion of its Davaindia retail network. A successful INR 350 crore QIP provides capital for further growth. However, profitability metrics like EBITDA moderated due to front-loaded operating expenses and employee costs associated with a large pipeline of new stores, which management expects to normalize in the coming quarters.

Highlights

  • Consolidated revenue from operations grew 98.2% YoY to INR 14,295.14 lakhs in Q3FY26, driven by store additions and improved scale.

  • Consolidated Gross Profit increased 113.9% YoY to INR 8,617.82 lakhs, supported by operating leverage.

  • The Davaindia retail pharmacy network expanded by 276 new stores (231 COCO, 45 FOFO), bringing the total footprint to 2,331 stores as of December 31, 2025.

  • A INR 350 crore Qualified Institutional Placement (QIP) was successfully completed, strengthening the balance sheet and providing financial flexibility for growth initiatives.

  • Quarterly customer footfall increased to 49 lakhs in Q3FY26, up from 27 lakhs in Q3FY25, and Quarterly GMV nearly doubled YoY to INR 12,172 lakhs.

Concerns

  • 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.

  • Employee costs increased significantly from INR 38 crore in Q2 to INR 52 crore in Q3, mainly attributed to non-live/under process stores and front-loaded store additions.

  • Near-term margins have been impacted by expansion-led investments, though management expects these costs to be transitory and normalize in the next 1-2 quarters.

Key financials

  1. Consolidated Revenue ₹14,295.14 lakh +98.2%YoY
  2. Consolidated Gross Profit ₹8,617.82 lakh +113.9%YoY
  3. Consolidated EBITDA ₹127.58 lakh
  4. Employee Costs ₹5,200 lakh
  5. Quarterly GMV ₹12,172 lakh
  6. Customer Footfall ₹49 lakh

What they filed

Q1 FY27: revenue up 67.3%, net profit down 214.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue67 72 97 104 129 +93%143 +99%163 +68%174 +67%
EBITDA-1 -6 2 4 6 +700%0 +100%9 +350%-12 −400%
Net profit-12 -19 -13 -14 -16 −33%-30 −58%-14 −8%-44 −214%
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

  • Davaindia
    80% Revenue Contribution
  • Domestic Sales
    11% Revenue Contribution
  • Export Sales
    6% Revenue Contribution
  • Everyday Herbal Group
    2% Revenue Contribution

Capital allocation

high confidence
  • M&A Curexis Acquisition · Closed

    Expand footprint in retail generic and specialty pharmacy segment under the brand 'SKIA'.

    Additionally, as part of our broader strategy to expand our footprint in the retail generic and specialty pharmacy segment, the Company acquired 100% equity stake in Curexis, a retail pharmacy platform operating under the brand "SKIA."
  • M&A KMHP Ventures Limited Incorporation · Announced · Consideration ₹10 lakh

    Build a fully integrated and scalable retail-pharma ecosystem, engaged in marketing and trading of pharmaceutical products, enabling greater control over sourcing, distribution, and margin optimization.

    In line with our strategy to build a fully integrated and scalable retail-pharma ecosystem, the Board approved the incorporation of a new wholly owned subsidiary, KMHP Ventures Limited, with an initial paid-up capital of INR 10 lakh.
  • M&A Davaindia Health Mart Limited (DIHML) Investment · Announced

    Support the expansion of COCO stores and meeting working capital requirements, ensuring seamless execution as store additions accelerate.

    Further strengthening our internal ecosystem, the Company increased its investment in Davaindia Health Mart Limited (DIHML), its wholly owned subsidiary, through additional equity subscriptions during and subsequent to the quarter.
  • Liquidity Cash ₹350 Cr QIP proceeds utilized to accelerate COCO rollout, support working capital requirements, and meet general corporate purposes.
    A key milestone during the quarter was the successful completion of a INR 350 crore Qualified Institutional Placement (QIP), with participation from a diverse set of institutional investors... The capital raised significantly strengthens our balance sheet and provides long-term financial flexibility. The proceeds from the QIP will be primarily utilized to accelerate the rollout of Company-Owned Company-Operated Davaindia stores, support working capital requirements, and meet general corporate purposes.

Guidance & targets

Network Expansion

  • Davaindia Stores Network Expansion · by March 2029 · High confidence 5,000 stores
    Collectively, these strategic initiatives reinforce our confidence in achieving our medium to long term objective of crossing 5,000 Davaindia stores across India by March 2029, supported by fresh capital from the QIP and steadily improving cash flows from our maturing store network.

    — Moxesh Zota

  • COCO Store Additions (Annual Target) Network Expansion · current financial year · High confidence 800 stores
    So, during this quarter, our annual target was to open 800 COCO stores. For the current financial year, we have guided for 800 COCO store additions.

    — Himanshu Zota

  • COCO Store Additions (Quarterly Run-Rate) Network Expansion · next year onwards · High confidence 200-250 stores

    From >500 stores (Q3 FY26) today

    If we look ahead to next year, assuming a similar target of 800 to 1,000 stores, the expansion will be much more evenly phased. In that scenario, we would typically put around 200 to 250 stores into process each quarter. In contrast, this quarter saw over 500 stores being put into process due to the aggressive push, which is not a run-rate scenario.

    — Himanshu Zota

Profitability

  • Gross Margin Profitability · in 4-6 quarters · Medium confidence 70%

    From 66-67% today

    Going forward, we believe there is scope for continued improvement, with gross margins potentially increasing by about 0.5% to 1% every quarter. Over the next four to six quarters, margins could move closer to 70%.

    — Himanshu Zota

  • Company Level EBITDA Margin (all stores mature, no new stores) Profitability · in 2-3 years · Medium confidence 17-20%
    At the company level, if all stores were to reach maturity, EBITDA margins could be around 17% to 20%, subject to the entire network being mature.

    — Himanshu Zota

Cost Management

  • Employee Costs Normalization Cost Management · next one to two quarters · High confidence Normalize
    However, as these stores become operational, this cost structure will normalize, and we expect this impact to largely settle over the next one to two quarters.

    — Himanshu Zota

What to watch in Q4 FY26

Employee Cost Normalization

next one to two quarters
Current INR 52 crore (Q3FY26)
Target Normalization and stabilization

Why it matters

The significant increase in employee costs impacted Q3 EBITDA; its normalization is key for margin recovery and improved profitability.

So overall, the increase is primarily driven by higher salary costs related to non-live stores and the aggressive expansion undertaken during the last quarter. Going forward, we expect this to normalize and stabilize over the next one to two quarters.

Risks & concerns

  • Near-term margin compression due to expansion-led investments

    medium

    Higher operating expenses and pre-opening costs for new stores are impacting near-term margins, but these costs are expected to be transitory and normalize in 1-2 quarters.

    Management acknowledged

  • Significant increase in employee costs

    medium

    Employee costs rose from INR 38 crore in Q2 to INR 52 crore in Q3, primarily due to costs associated with ~650 stores (opened and in pipeline) that are not yet fully operational. Normalization is expected in 1-2 quarters.

    Management acknowledged

  • GMV reporting lags revenue recognition for FOFO stores

    low

    GMV reporting is dependent on franchisee invoicing, and sell-through may lag goods supplied, leading to a narrowed gap between revenue and GMV. Limited control over franchisee invoicing can also affect full capture of sales.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
Employee cost spike and normalization timeline Direct
So overall, the increase is primarily driven by higher salary costs related to non-live stores and the aggressive expansion undertaken during the last quarter. Going forward, we expect this to normalize and stabilize over the next one to two quarters.

Addresses the significant increase in employee costs and provides a timeline for its expected normalization, crucial for margin recovery.

Asked by Chintan Sheth

Revenue to GMV discrepancy and FOFO store performance Partial
This effect is particularly visible in the FOFO model. Typically, there should be a ~40% difference between revenue and GMV, but over the last two quarters, this gap has narrowed. This is because franchisees have been purchasing higher inventory from us, while their reported GMV has not increased proportionately.

Explains the reasons behind the observed difference between revenue and GMV, particularly for FOFO stores, highlighting inventory dynamics and reporting challenges.

Asked by Chintan Sheth

Average revenue for older cohorts and GST impact Direct
However, because GST was reduced from 12% to 5%, there is a direct impact on GMV since MRPs came down accordingly. Currently, there is a GST impact of roughly 5.15%, and this automatically reflects as a lower reported GMV even though underlying volumes and performance have improved.

Clarifies that the apparent flattening of revenue for older stores is due to a GST rate reduction, not a lack of underlying growth, providing a crucial context for performance assessment.

Asked by Harsh Shah

Steady-state EBITDA margins at company level Direct
At the company level, if all stores were to reach maturity, EBITDA margins could be around 17% to 20%, subject to the entire network being mature.

Provides a clear long-term target for company-level EBITDA margins, offering insight into future profitability potential once the network matures.

Asked by Swaraj Mehta

QIP utilization and future funding needs Direct
The QIP we undertook was planned with a two-year horizon in mind. The funds raised are sufficient to meet our requirements for the next two financial years, starting April 1, 2026, that is, FY'26-27 and FY'27-28. For this period, we do not anticipate the need for any additional external funding.

Reassures investors about the sufficiency of current funds for the next two years and hints at reduced future funding needs due to internal cash generation from maturing stores.

Asked by Neil Joshi

Inventory shortages at COCO stores Partial
See what happens is that wherever you go, in any store you go you will at times you know find that okay maybe you may have sometimes this medicine not available and there it will come back after some time. It is a continuous process of efficiency development. It is a continuous process.

Acknowledges operational challenges like temporary stock-outs and frames them as part of an ongoing process of efficiency improvement, indicating areas for operational focus.

Asked by Bhaskar Kangal

Whole Time Director remuneration increase and impact on costs Direct
The commission component is around 1%, and even after including remuneration, the total impact is at most 1% to 2%. So overall, there is no material impact from this.

Addresses concerns about the significant increase in WTD remuneration and its contribution to overall employee costs, downplaying its material impact.

Asked by Zohaib Rashid

Davaindia IPO plans Evasive
It is too early to say right now we don't have any such internal planning or any thought process.

Indicates that a potential IPO for Davaindia is not on the immediate horizon, managing investor expectations regarding future capital market events.

Asked by Neil Joshi

3 min read 6 chapters

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.

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