Entero Healthcare Solutions Ltd (NSE: ENTERO) Q3 2025 Earnings Call dated Feb. 13, 2025
Corporate Participants:
Prabhat Agrawal — Managing Director and Chief Executive Officer
CV Ram — Chief Financial Officer
Analysts:
Anshuman Gupta — Analyst
Sajal Kapoor — Analyst
Devanand Mohan — Analyst
Chintan Sheth — Analyst
Unidentified Participant
Gautam Gosar — Analyst
Alok Dalal — Analyst
Romil Jain — Analyst
Aman Jain — Analyst
Akul Broachwala — Analyst
Chintan Sheth — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Q3 FY ’25 Earnings Conference Call of Entero Healthcare Limited hosted by Investec Capital Services India Private Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing start and zero on a touchstone phone. Please note that this conference is being recorded.
Please note, this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on-date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
I now hand the conference over to Mr Anshuman Gupta from Investec Capital Services. Thank you, and over to you, sir.
Anshuman Gupta — Analyst
Thank you. Thank you very much. Good afternoon, everyone and a very warm welcome to Intro Healthcare Solutions Limited Q3 FY ’25 earnings call. I am Anshun Gupta, part of Investec Capital Services. I cover Pharma and Healthcare. On the call today, we have representing Entro Healthcare Solutions, the management team comprise — comprising of Mr Agarwal, Managing Director and CEO; and Mr Ram, CFO.
I will now hand over the call to the management team to make opening comments and then we will open the floor for questions. Over to you, sir.
Prabhat Agrawal — Managing Director and Chief Executive Officer
Yeah. Thank you. Thank you and so much so much. This is Pravat and good evening, everyone, and thank you for joining our earnings conference call. I will discuss the operational and financial performance for quarter three FY ’25. On this call, I’m joined by Ram, our Group CFO; and SGA, our Investor Relation Advisors. I hope everyone had an opportunity to go through the financial results and investor presentation, which has been uploaded on the stock exchanges and on our company’s website.
I shall provide a brief overview of the key operational highlights, after which Ram will take you through the highlights of our quarter three FY ’25 financial performance. We are pleased to report yet another quarter of strong growth and consistent execution at Healthcare. In-quarter three FY ’25, our consolidated revenue reached INR1,359 crores, reflecting a robust 37% year-on-year growth from INR993 crores in the last year’s same quarter. Our organic growth stood at 17%, significantly outperforming the Indian pharmaceutical market growth rate of 7% during the same-period.
Our gross profit for the quarter stood at INR133 crores, a 48% year-on-year increase with gross margin improving from 9.1% in-quarter three FY ’24 to 9.8% this quarter. EBITDA 75% year-on-year to INR50 crores with EBITDA margin improving from 2.9% in-quarter three FY ’24 to 3.7% in this quarter. The improvement in profitability underscores our focus on enhancing the product categories, adding more value-added services and driving procurement efficiencies. Further with the revenue growth and use of technology, the operating cost leverage is also helping in expansion of EBITDA margins.
Till late in FY ’25, we have completed 10 acquisitions, which have collectively contributed INR792 crores in annualized revenue. These acquisitions have expanded our presence into new geographies and product categories such as diagnostic consumables, medical devices and specialty pharma. Entro has strategically established itself as a leading player in India’s highly fragmented healthcare distribution ecosystem. With the Indian healthcare distribution market value at $33 billion, we see significant potential for consolidation that could fundamentally reshape the sector. To capitalize on this transformative opportunity, we have adopted a well-calibrated approach that combines both organic and inorganic strategies.
For organic growth, our focus is on expanding our geographical footprint, deepening our market penetration and increasing wallet share with existing retail pharmacies. We aim to grow our organic business at 1.5 to 2 times of Indian pharmaceutical market growth rate by adding new customers and expanding our product portfolio. For inorganic growth, we have a disciplined acquisition strategy, targeting businesses that enhance our geographical reach or expand our product and service offerings. We have built a robust acquisition pipeline where many of them are in advanced stages and nearing closure.
Leveraging our expansive and continuous growing Pan-India network comprising 104 warehouses, relationships with over 3,200 hospitals and reach to more than 86,200 retailers nationwide, we remain steadfast in delivering — delivering significant value to healthcare brands. Our STU portfolio has expanded to over 76,600, ensuring that we are well-positioned to cater to the diverse and evolving needs of our customers. Currently, we are actually actively deepening our market presence in Tier-2 and Tier-3 cities, unlocking untapped growth opportunities and enhancing our wallet share in these underserved regions.
We remain extremely excited about the potential and the opportunities that entire all-India distribution network, infrastructure and capabilities can bring to enhance the healthcare access and supply-chain efficiency in the country. Our strategic priorities are well-articulated and serve as a clear roadmap for our future initiative. Number-one, expanding market reach and portfolio. We remain committed to deepening our geographical footprint, broadening our customer-base and enhancing our product portfolio through collaboration with healthcare brands. Number two, diversifying product offerings. We’ll continue to introduce new product categories such as specialty pharmaceuticals, medical devices, in diagnostics and surgical consumer levels, solidifying our position as a one-stop procurement partner for our customers.
Number three, enhancing service capabilities. We aim to continuously expand our value-added services, including marketing and promotional support for healthcare brands, along with innovative solutions like Health Edge to deliver a differentiated and integrated service experience. These strategic initiatives collectively position us to achieve market-leading organic growth and establish LTEO as a partner of choice for both healthcare brands and our customers, including pharmacies and hospitals. We remain dedicated to expanding our operating margins by leveraging key drivers such as adding margin-enhancing product categories, more value-added services and enhanced procurement efficiencies and the benefits of operating leverage.
Our focus is on delivering consistent quarter-on-quarter improvements in these metrics to strengthen profitability and operational resilience. Further, through operational excellence initiatives and use of technology, we will continue to work on improving our working capital cycle and operating cash-flow. I extend my heartfelt gratitude to our team for their unwavering dedication and to our shareholders for their steadfast support and trust in our vision.
With this, I will now ask Lam to summarize the company’s financial performance for quarter three and nine months FY ’25.
CV Ram — Chief Financial Officer
Thank you, Prabar, and good evening, everyone. Summarizing below Q3 FY ’25 consolidated financial highlights, revenue for Q3 FY ’25 is at INR1,359 crores, registering a growth of 37% compared to same-period last year. 17% of this growth is organic and 20% is from acquisitions. As mentioned by Pravat, we have completed 10 acquisitions so-far in FY ’25 and we have recorded INR197 crores revenue during the quarter from these new acquisitions. We recorded gross profit margin of 9.8% in Q3 FY ’25 vis-a-vis 9.1% in Q3 FY ’24, an improvement of 73 basis-points. The improvement in gross margin is a result of our continuous effort to scale high-margin product categories, value-added services and initiatives taken by us for procurement efficiencies. EBITDA for the quarter is at INR50 crores with a growth of 75% on year-on-year-to-year basis. EBITDA margin in Q3 FY ’25 is 3.7% compared to 2.9% in the same-period same quarter last year. Recording an improvement of 80 basis-points, primarily coming from the gross margin improvement and operating leverage. We continue to make significant investments in talent, process improvements and technology to support the integration and expansion of recent acquisitions. Profit-after-tax for the quarter is at INR39 crores, increasing by more than four times compared to last year same-period. This is on account of higher EBITDA and optimized net finance costs. Now coming to nine months FY ’25 consolidated financial highlights. Revenue for nine months FY ’25 is at INR3,357 crores with a growth of 30% year-on-year basis. Gross profit margin stood at 9.5% compared to 9% during previous year’s same-period. EBITDA for nine months FY ’25 is at INR123 crores, an increase of 48% year-on-year basis. Operating margins for nine months FY ’25 were 3.3%, which is an improvement of 39 basis-points compared to previous year. Profit-after-tax for nine months FY ’25 is at INR76 crores, up by four times from INR19 crores recorded in the same-period last year. On the working capital front, in Q3 FY ’25, our net working capital days stood at 69 days, including acquisitions. We will continue to focus on efficient working capital management and this will remain a core pillar of our financial strategy going-forward. During Q3 FY ’25, we have witnessed an improvement in return profile of the company with an annualized ROCE stood at 12.3% and ROE stood at 9%. This improvement is primarily coming from the margin improvement during the quarter. With this, I would like to conclude the presentation and open the floor for questions-and-answers.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles the first question is from the line of Sujal Kapoor from Anti Fragile Tanking. Please go-ahead.
Sajal Kapoor
Yeah, hi, thanks for the opportunity and good afternoon. And healthcare to my mind now as well as in future is all about ATA, ATA that is accessibility, technology and affordability. So in that context, Slide 29, what — what characteristics of the platform are unique to Entero and how do these proprietary features provide a competitive advantage?
Prabhat Agrawal
Yeah, very, very good question. You know, I personally believe technology can play a big role in driving efficiencies in healthcare supply-chain. Okay. Just to give an example, there are many, many items in technology which helps in improving things, right? But I will just give you a very simple example of ordering. You know. Now most of the ordering is happening on, you know, app-based ordering is happening or web-based ordering is happening, right. A few years back, all the orders were manually collected by our salespeople or through telephone calls, which was a very inefficient process because when you order to a salesman, he will not be able to remember all the SKUs, he will not even know which SKUs are in-stock, then he will transfer those orders to our billing line warehouse. Then the billing guide will punch-in the orders accordingly, the products will get invoiced and all that.
Today, the customer at his own convenience can order looking at our inventory in our app and place an order and he can get involved immediately. He will also know which product are you stock, what are the schemes running on those products. All these things are — information is available transparently to him through tech. And even the ordering process has been so simplified for him that order to dispatch time reduces significantly because the movement he places an order, order is already captured in the system, right? So this helps him to reduce his stock levels at his own-retail pharmacy reduces expiry, lot of information and data that we provide to the healthcare brands can help them to optimize their own inventory, reduce their expiry rates.
So wastages and all can be reduced significantly. So some of these technologies we have — we have built in-house and we are using it to drive our business performance and also helping the customers to improve their customer experience. This is just one example. There are many such examples which helps where the use of technology is helping in driving efficiency in the healthcare supply-chain.
Operator
Thank you. We now invite our next question, which is from the line of Dewanan Mohan from Avendus Spark. Please go-ahead.
Devanand Mohan
Hello. Good evening and thank you for the opportunity, sir. Sir, I just wanted to — I just have a couple of questions. First one is, can you just give me a breakup of the other segments, sir, like when I’m talking about the sales and marketing as well as the private-label business. It was in the single-digits. Just wanted to know where it is now.
Prabhat Agrawal
Sorry, can you please repeat? I lost you on the last part of your question.
Devanand Mohan
Yes, so I just want to know the breakup of other segments, particularly the sales and marketing segment as well as the private-label segment, where it is currently in terms of revenue mix. We haven’t kind of disclosed the breakup between sales and marketing and other services because most of these things are integrated in nature. Where we are taking contacts with the companies, we are taking both marketing as well as distribution rights, okay. But one of the margin levers is also when you engage more deeply with the companies and do more value-added services to them, which includes marketing, promotion and all that, that helps us to grow your gross margin profile. And that’s also one of the reason you will see that our gross margin profiles have gone up in last few years and last few quarters.
Yes, I could see that. So you know, I don’t need the breakup of those two, but probably those two put together would probably increase in revenue mix, right, sir, maybe the low-double-digits now?
Prabhat Agrawal
Yeah, it’s not — it’s not — see distribution is the majority of our business, you know.
Devanand Mohan
Yeah.
Prabhat Agrawal
The marketing services is a small part of the business, but has a good impact on the margins.
Devanand Mohan
Okay. Okay, sir. Thank you. And the next one would be like what would be the EBITDA margins of units that have been of the acquisitions that have been scaled-up, so the scaled-up acquisitions?
Prabhat Agrawal
Sorry, what are the EBITDA margins for the recent acquisitions you asking?
Devanand Mohan
No, no, no, the acquisitions that you’ve already scaled-up.
Prabhat Agrawal
So I’m fully this is continuously scaling up. You know, the businesses, there are certain geographies where we are enjoying 20% market-share also and there could be geographies where we are enjoying 5% market-share, right? But even the 20% market-share geography, we can still scale-up because we still see a lot of opportunity in scaling up even in those micro markets. As we continue to grow, when you continue to grow and occupy a dominant market-share, it helps you in many ways. It helps you in, you know, implementing your credit policy, it helps you in getting to a better working capital cycle, you can optimize inventory, you can collect the money more in time from the — with the retailers.
You know your operating cost as a percentage of revenue goes down. So you know there are many advantages of, you know, scaling up, right? We don’t — I mean, we have not given the breakup — we have not classified any of our entities as scaled-up and something which is not — which has not scaled-up.
Devanand Mohan
So scaled-up in the sense that I meant integrated like integrated fully into the business.
Prabhat Agrawal
All our entities are fully-integrated in our business. Once we do the acquisition, next three months we spend on integrating them to our policy procedure systems, ERP, tech, you know, buying pattern, everything gets integrated in next three months from the acquisition date.
Devanand Mohan
Okay. Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Sajal Kapoor from Thinking. Please go-ahead.
Sajal Kapoor
Yeah, hi. I lost my connection. So apologies, but yeah, thanks for the follow-up. And how — so I just on that technology thing, Slide 29, I mean, how scalable is this technology? And can we use this technology to support 10 times as many hospitals, 10 times as many manufacturers as we are doing today or and what parts of this as I add-on what parts of this platform are getting prioritized for future investments and development. I mean, what I’m trying to understand is this could potentially be a very-high ROCE kind of a standalone revenue stream. I mean how scalable is this basically?
Prabhat Agrawal
Yeah. See, we are not selling technology as a separate revenue line, okay. So the technology is basically integrated with our business operations to drive a better customer experience or to drive more efficiencies at our warehouses and our delivery, right? So we are not — as of now, we are not monetizing technology as a separate business line for us, okay. Now coming back to your question on how scalable it is, the platform is an open platform. Today, 86,000 retailers are using it even tomorrow 150,000 retailers can use it because the same technology.
We have already done all the development work tested in the market, customers are enjoying seamless service on that. So what we need to do is to just maintain it. There could be a lot of small value-adds that we can build around it, like for example, we are working on a system where we can — we are creating a wallet for the retailers. So any additional offers and all, we can put them in their wallet, they can use that wallet to buy our private-label. So those add-ons, you know we continue to innovate and build.
Sajal Kapoor
So that’s helpful. And one bookkeeping question for Ram. On the operating cash-flow, I mean both organic and inorganic flavor. So adjusting for or excluding inorganic was operating cash-flow positive? What is the outlook for the operating cash-flow.
CV Ram
Yeah. So currently, you know, from the operating internal accruals to what we are spending for the working capital, operating cash-flow is negative currently and we are improving quarter-on-quarter and then we expect this to be positive by next year.
Prabhat Agrawal
We are very, very confident that next year our operating cash-flow will surely be positive.
Sajal Kapoor
Even including the ongoing inorganic.
Prabhat Agrawal
Yeah. So excluding investment, right. So what — when we say operating cash-flow, operating cash-flow means you know internal approvals to fund your own growth and taxes and all that paid from that, right? So for investments, we raised, you know, this IPO funds which we are using to purchase more assets in the country. But operating cash-flow is for organic business.
Devanand Mohan
Yes, yes. No, understood. Understood. Got the response. Thank you. That’s all from my side. Thank you so much.
Operator
Thank you. The next question is from the line of Chentan Shah from Capital. Please go-ahead.
Chintan Sheth
Thank you for the opportunity and great set of numbers. On the couple of questions on the acquisition part. The pipeline you mentioned has been pretty strong in your opening remarks. If you can give a little bit more color on how one should look at because that piece will be a significant part of our overall growth strategy going-forward, right? So if you can provide some color of what are the areas, which are the geographies we are currently looking at and some guidance in terms of whether the similar run-rate likely to continue for upcoming period or not, you know. That will be the first question and I’ll follow-up with another question.
Prabhat Agrawal
So if you look at the guidance that we had given at the beginning of this year was that we should be able to do INR1,000 crores of inorganic acquisition during the year. So out of that INR1,000 crore, we have already done INR800 crores, close to INR800 crores, right? So balance INR200 crores or more, we are targeting that we should be able to do in this 4th-quarter.
Chintan Sheth
Correct. Okay.
Prabhat Agrawal
And we have enough funds left, we have enough opportunity left with us to pursue a similar kind of numbers going-forward in the next year as well.
Chintan Sheth
Got it, got it. Thanks for that. And second is, if I look at the margin improvement and all, if you can quantify a little bit in terms of how much has come from product mix, how much has come from procurement efficiency, you know that gives us a direction to — at what lever is still available for us to further improve our margins through procurement efficiency because of the scale which we’ll be able to achieve by this acquisition.
Prabhat Agrawal
Yeah, if you look at this quarter, our gross margins have expanded by around 70 basis-points, right?
Chintan Sheth
Right, right.
Prabhat Agrawal
And now with the breakup of this 70 basis-points into various levers and difficult to give on this call, okay. But what I can say to you that this is not exhausted. There are still a lot of opportunities left in further expanding our gross margins because the levers that are being applied to expand the gross margins things like more value-added services, you know, scale-based procurement efficiency, that has not played out completely. I would say it’s still a small part that we have been able to leverage on right now. So still lots of more to go in future as well.
Chintan Sheth
And lastly on the — on the organic — inorganic side, do you see the market little tightening or the ask has been increasing, which might slow-down — it slows down in terms of comforting — our comfort to acquire our distributors going-forward or we are comfortable — even the current scenario is comfortable enough to target such kind of the number you guided that we will be able to achieve.
Prabhat Agrawal
So the market is very. There are lot many sellers. The buyers are very, very few, you know there are only two or three organized players out of which we are the most active one. So you know you know the equation is very unbalanced. You know there are lot many sellers and buyers
Chintan Sheth
Got it, got it. I’ll jump back-in queue. Thanks, thanks, I think that that’s my question.
Operator
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of from Ambit Asset Management. Please go-ahead.
Unidentified Participant
Yeah. Good afternoon, team and thank you for the opportunity and congrats for the good set of numbers. So is it fair to say that once we become a positive operating cash-flow post working capital company, are the pace of acquisition can actually see a leg-up?
Prabhat Agrawal
Sorry, last part, pace of acquisition could be a —
Unidentified Participant
Could be a increase in momentum.
Prabhat Agrawal
So I think the pace of acquisition is dependent more so on the right set of targets that we need to close, okay. It’s not that we are not closing anything because of lack of funds or anything like that. We are not closing because we haven’t closed anything in the last quarter specifically, we couldn’t close the transactions that we want to close, they need to have a right fitment into our business model, either they are adding a new geography or adding a new product segment that we don’t operate in, right? So the — to answer your question, it’s a ability to have more cash to invest necessarily bring you more acquisition opportunities.
Unidentified Participant
And sir, of the acquisitions that we would have done in the last two years, how many of those entrepreneurs would have continued to stay with us post the acquisition.
Prabhat Agrawal
Most of them,
Unidentified Participant
Okay.
Prabhat Agrawal
Majority of them.
Unidentified Participant
And that still continues, right? Most of them still continue to be with us.
Prabhat Agrawal
Yes, yes.
Unidentified Participant
Because if I remember — because if I remember correctly, earlier we used to give a sort of equity for them. But now post we getting, what is the incentive for them to stay back?
Prabhat Agrawal
So some of the acquisition that we have done recently, we haven’t done 100% acquisition, right? So it’s currently 80% stake that we have taken and we have a call option to buy the rest, right? So — and they are continuing with us and if you meet some of these promoters. Debate on and we also get offers to do that, okay. As of now, we have not taken-up any contract where we are 100% responsible for entire hospital procurement. But this is something that looks very interesting to us. Maybe in times to come, we would — we would pursue and close some of those opportunities.
Unidentified Participant
And in that event, is it fair to say that our share of private-label, especially in consumables or surgical items, we can also push that?
Prabhat Agrawal
Yes, if you have a complete control on the procurement of any entity, any hospital or pharmacy or anyone, you would have a much better chance of pushing your private-label because then you are deciding which brands will come in.
Unidentified Participant
And globally is it popular this model or not that popular?
Prabhat Agrawal
Sorry?
Unidentified Participant
Globally, globally is this popular —
Prabhat Agrawal
Globally it has been done in many countries. They have a group purchasing. So basically it’s like a GPO concept where they outsource the procurement to some larger entity who consolidates the requirement of many small entities and aggregate the requirement and tries to get a better pricing and deal from the manufacturers. And on this quick commerce, there have been talks that they will also start selling OTC. Are we in discussions with these quick commerce platform?
See, we still have to see, you know-how does the quick commerce perform in the pharma segment. I tell you the pharma as a category has three complexities which other categories don’t have, okay. Number-one is the SKU complexity. If you want to give a full-service to all pharmaceutical products to a to a customer, which typically a prescription would have three, four, five drugs written in it, then you’ll have to maintain a huge SKU list. You will — it will be. It might be difficult for you to give a 100% fill rate from your car store. That’s number-one.
Number two is how will you address the prescription requirement in those 10 minutes or 15 minutes of time that you have, right? And third, you know, there are issues around managing the trade associations and pharmaceutical AICD and others, right? So these are the three complexities that any commerce company would have to encounter before they try to scale-up pharma as a category on their platform.
Unidentified Participant
Great, sir, thank you very much for your answers and all the very best.
Prabhat Agrawal
Thank you.
Operator
Thank you. The next question is from the line of Gautam Gosar from Monarch AIF. Please go-ahead.
Gautam Gosar
Hi, sir. Thanks for the opportunity. Sir, my question is on-net working capital. So in Q1, you had around 71 days of net working capital and 69 days for Q2 and Q3. But in your presentation, you mentioned around 75 days working capital for the nine months. So I didn’t understand how much exactly is our net working capital days.
CV Ram
69 days is the working capital days for the quarter three and 75 days is for the nine months. So the way it is worked out is the — you have debtors plus inventory minus stable and then divided by the revenues gross-up with the GST of 12%.
Gautam Gosar
Okay. But for all the quarters, our working capital has been less than around 70 — less than 71 days. And for nine months, how is it 75 days?
CV Ram
No, no, actually this comes because on the nine months thing we have acquired no — we have announced acquisitions and we have closed acquisitions in the second part of the Q2 and Q3. So from the revenue — if you divide the working capital comes in-full because when we acquire the working capital is 100% is added to the base, while the revenue is only for three to four months. That is the reason you will see this number slightly higher.
Gautam Gosar
Although how much should be our aspiration on working capital are going-forward
Operator
After Mr, but can you please check your voice? Your voice is sounding muffled, sir.
Gautam Gosar
Hello.
Operator
Yes, please.
Gautam Gosar
Am I audible now?
Prabhat Agrawal
Yes, yes, yes.
Gautam Gosar
So basically, I was asking what should be our aspiration for the net working capital days coming down?
CV Ram
Definitely, I think there is additional five to six days we can definitely optimize from the current level for next 12 months.
Gautam Gosar
Okay. And one more question on the same lines. We are currently operating cash negative. So at what margins will we get operating cash-positive?
Prabhat Agrawal
Okay. Hello, are you there?
Gautam Gosar
Yeah.
Prabhat Agrawal
So operating cash-flow is a function of two things. One is margin and second is optimization in working capital. You know, we believe that even at current margins, we should be operating cash-flow positive just by improving our working capital. Okay. And the further improvement of margin from here should result into a bigger positive delta on operating cash-flow.
Gautam Gosar
Okay, understood. And sir, lastly, you’ve recently-announced the convertible debt of around INR600 crores, you’ve taken an approval for that. Can you highlight like for what reason is it and what should be the timeline for the same?.
CV Ram
This is — this is between the wholly-owned subsidiaries and the parent and this is more internal efficiencies in terms of funding the subsidiaries and there are in the intercorporate deposits already there and the cash-flow — it will be cash-flow neutral at overall level. So this is internal structure.
Gautam Gosar
Okay. Okay. That’s it from my side.
Operator
Thank you. The next question is from the line of Alok Dellal from Jefferies India Private Limited. Please go-ahead.
Alok Dalal
Yes, good afternoon., will you still be able to achieve your FY ’25 revenue growth guidance of 35% to 40%?
Prabhat Agrawal
Yeah. That will depend on how soon we are able to close some of these acquisitions — impending acquisitions in this quarter.
Alok Dalal
Because even if I assume that you are able to close, then the implied growth rate will be anywhere between 49% to 68% versus 4Q ’24. Is that achievable?
Prabhat Agrawal
I mean, the more we take time, the more difficult it becomes.
Alok Dalal
Okay. And one more guidance was about 4% EBITDA margin for the exit quarter, which is 4Q ’25. Will you be on-track to achieve that?
Prabhat Agrawal
We are targeting at. See, if quarter-on-quarter we have been able to deliver you know EBITDA margin improvement. So we are — we’ll continue to target improvement in this quarter as well.
Alok Dalal
Got it. But, you mentioned this delays in closing acquisitions. I missed the reason for that. Can you please help understand why are the acquisitions getting delayed?
Prabhat Agrawal
There is no — no specific reason. Some people were not available and it’s just procedural. There is no specific reason that we are not able to find opportunities or anything like that. It’s just that those identified opportunities we have taken a little more time to close it. I mean, the negotiations have taken little more time to close it.
Alok Dalal
Got it. Okay. Okay, Prabhat. Thank you for taking my questions.
Operator
Thank you. The next question is from the line of Romil Jain from Electrom PMS. Please go-ahead.
Romil Jain
Yeah, thanks for the opportunity. Am I audible, sir?
CV Ram
Yeah.
Romil Jain
Yeah. So just want to understand on this — on the acquired companies, how much of levers would be left in getting to the EBITDA margin targets that we have at a consolidated level. So of course, at a — I mean, we are working towards that, but just want to understand where does the subsidiary EBITDA margin stand together.
Prabhat Agrawal
So EBITDA margin improvement is not going to come only from new acquisitions. It has to come from our existing business, which is still the largest part of our business, right? So the new acquisitions have just added more scale, added us the capability to bargain more. That’s it. I mean, it’s not that the improvements will only be reflected in the new acquisitions.
Romil Jain
Okay. But when we acquire broadly, where are they in terms of margins?
Prabhat Agrawal
Okay. We have given — I think last-time we have given what, 6% to 8% orderance combined.
Romil Jain
Okay. Okay, okay. And sir, because we are continuously as a strategy, we are acquiring and I think the competitors would also have an understanding of this strategy, right? So in general, has the valuations also started increasing when we are out there to acquire?
Prabhat Agrawal
So how many people are there to acquire? How many people are out there to acquire? They are very, very few I mean only two, three people are in organized distribution space. Out of which only one Or two are chasing. I mean, one of the competitor is not even pursuing any acquisition and they are studying for their own fund management. So I don’t see any pressure on valuation at all.
Romil Jain
Okay. Okay. And lastly, in terms of — I just want to understand the wallet share gains with the existing — the chemists that we have, if you can give some data points how the wallet share has moved over a period of time
Prabhat Agrawal
This data is not specifically available right now on the call. Maybe you can connect with the finance team or Investor Relations team. They will share with you some data points on that on the team.
Romil Jain
Okay, okay. Okay. Thanks a lot
Operator
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Jash from Dalal;. Please go-ahead.
Unidentified Participant
Yeah, hi, sir. Thank you for the opportunity and congratulations on a great set of numbers. Sir, my question is with regards to the acquired entities. So how should we think about the working capital of the acquired entities?
Prabhat Agrawal
More or less similarly with the rest of our business.
Unidentified Participant
Okay. So at around 70 days.
Prabhat Agrawal
It’s just a bookkeeping that’s a little bit different what Ram tried to explain to you that when you acquire somebody, you acquire the full working capital and it gets reflected in the balance sheet, but revenues you only consolidate further from the time of acquisition.
Unidentified Participant
Yes. But then this — so I mean, so if at all, they are similar to us in terms of working capital, so then the goodwill should be a lower part. Is my understanding correct?
CV Ram
Goodwill should be. Sorry, we couldn’t hear you. Goodwill
Unidentified Participant
On the lower side, on the lower side.
Prabhat Agrawal
See, goodwill depends on two things, not only working capital, but also on the margin profile. Right. I can tell you that the multiples are in a similar range.
Unidentified Participant
Okay. And so you mentioned that 6% to 8% should be the gross margin end-of-the range of the acquired entities. So EBITDA level what should be there?
Prabhat Agrawal
2%, 8% is EBITDA margin, not gross margin.
Unidentified Participant
6% to 8% is EBITDA margin,
Prabhat Agrawal
Right.
Unidentified Participant
Okay. So they are better in terms of margins than us.
Prabhat Agrawal
Yes, we are not pursuing low-margin businesses. We are only pursuing margin-accretive businesses.
Unidentified Participant
Okay, okay. Okay. Perfect, sir. Thank you. Thank you, sir. That’s it from my side.
Operator
Thank you. Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Aman Jain from Capital. Please go-ahead.
Aman Jain
Yeah. Thank you, sir, for the opportunity. Sir, just wanted to understand on the organic growth part. So one part is that we are expanding on level through inorganic acquisitions. But on the organic growth part, sir, once the — once we are done with the strategy of inorganic growth, so how do we plan to scale our operations or on Pan-India level other than the value-added services?
Prabhat Agrawal
So we said that you know, the guidance that we have given is that organic growth we should be able to deliver between 1.5 times to two times our market growth rate, right? Now this delta of 0.5 to-1 of market growth rate will come from, you know, adding more customers, adding more products. There are many categories that we can expand, which we are not doing. We have many set of customers we can expand. There are many companies that we partner with, you know, for — just to give an example, next year, we are looking at a good growth or good launch of GLP-1, right? We partner with them and enjoy the growth.
Aman Jain
Okay. Okay, sir, understood. So my question was more related that do we have any plans to set-up a company by ourselves instead of acquisitions? And like, for example, if we set-up a company in Mumbai and for sure for the expansion.
Prabhat Agrawal
We — see, we open branches of our existing entities into nearby markets. That’s part of our organic growth strategy to add more customers to be closer to the customers.
Aman Jain
Understood, sir. Understood. Sir, my second question was on the margin front. So this is more of a broader question, sir. So currently we are at — we are inching towards 10% gross margins and about 3.7%, 3.8% EBITDA margins. So can we expect — so what is the optimum level of margins that we can expect in this business
Prabhat Agrawal
See, the guidance that I had given at the time of IPO as well as in the subsequent investor meetings, we said that near-term by end of this year, we should be targeting 4% EBITDA margin. And by end of next year, we should be targeting 5% EBITDA margin. And then from then we grow from there. But these are the near-term target guidance that you had given.
Aman Jain
Okay, sir, understood. Thank you so much.
Operator
Thank you. And the next question is from the line of Akul from Avendus Investment Managers. Please go-ahead.
Akul Broachwala
Yeah. Hi, thanks for the opportunity. Just in terms of your procurement strategy, so as and when like you continue to gain scale or do we — are we in a position to get some margin benefit or some benefit in terms of working capital from the pharma companies on procurement side?
Prabhat Agrawal
We get benefits on margins based on the scale.
Akul Broachwala
Okay.
Prabhat Agrawal
Offers, quarterly annual volume-driven targets.
Akul Broachwala
Okay. And so is this how do we plan to kind of manage our working capital as well by kind of elongating our payable days further.
Prabhat Agrawal
Not so much on the payable dates. We haven’t seen a huge improvement on the payable days. But then more you scale-up your business, the more dominant you become in the market, you can optimize inventory better, you can manage your receivables better because the shop is more dependent on you. So he is more likely to accept whatever terms you offer to him. So there are many ways the scale helps us in optimizing your working capital, not only from the payables to suppliers.
Akul Broachwala
Understood. And second question is on your acquisition strategy. So are we kind of focusing more on distributors who are in Tier-1 or metro cities or more probably towards Tier-2, Tier-3 kind of setup.
Prabhat Agrawal
So even in where we see that we are a very, very small player in Metro City. I mean there are very few large metro cities left for us where we are not a significant player. Plus Tier-2 and Tier-3 cities where we have opportunities which is underserved, we are not able to reach from one of our existing entities or from one of our existing warehouses properly. And so that’s what we are targeting even Tier-2, Tier-3 series.
Akul Broachwala
Understood. Thank you. That’s it from my side. Thank you.
Operator
Thank you. Participants who wishes to ask a question may press start on one. The next question is from the line of Chintan Sheed from Girik Capital. Please go-ahead.
Chintan Sheth
Thank you for the follow-up. One question I had was on the acquired entities for this year. So-far, how much we have spent in terms of capex? And if you can bifurcate of what will be the proportion of goodwill in it and what will be the working capital which we have consumed?
CV Ram
Yeah, close to INR300 crores is what we have spent so-far on the acquisitions. The total goodwill on the one segment. Incremental goodwill, I’ll just give you. Total INR430 crores is the total goodwill and then incremental will be about close to 200 crores is good incremental.
Chintan Sheth
Okay. And in terms of your other income run-rate, which we have seen from Q1 to Q2 and Q2 to Q3, there is a slight deceleration. How should one look at other income going-forward as we consume our capital, I believe that is the reason why our other income — interest income has been tapering off, right?
CV Ram
That’s correct. Broadly that is correct. I think we are deploying — we deployed from Q2, Q3 onwards. So that’s when the interest income has come down. The overall finance cost, we have net positive finance cost this year compared to last year. We have about INR7 crores net positive income from the finance.
Chintan Sheth
Got it, got it. I think that’s all from my. Yeah, thank you.
Operator
Thank you. The next question is from the line of Uniti Bhavikar from Share India. Please go-ahead.
Unidentified Participant
Good afternoon. Thanks for the opportunity. Just a couple of questions. What could be your plan India market-share individually? You had mentioned it before that for the top three
Unidentified Participant
Three players together, it is around 8% of the market. So has that particular market-share has increased in this quarter, if you can share it?
Prabhat Agrawal
Yeah. If you look at pharma market as somewhere onwards of INR2 lakh crores, we’ll be around 2%, 2.5%.
Unidentified Participant
So incrementally, has there been any change or has this been constant around 2%, 2.5%.
Prabhat Agrawal
How can it be constant when we are growing our growth rate much higher than the industry growth rate? Definitely the market-share is growing up, growing.
Unidentified Participant
Okay. Okay. So comparative number, would you be able to share year-on-year basis?
Prabhat Agrawal
Sorry, what numbers?
Unidentified Participant
Like Q3 ’24, what could have been your market-share then individually?
Prabhat Agrawal
So you have our revenues for Q3. You have the IPM market, you can calculate what’s our market-share and see what is our market-share now.
Unidentified Participant
Okay, sure. So the private-label share of the revenue was mentioned last-time at around 1% of the revenue. So has it been around the same percentage or has it increased in this quarter?
Prabhat Agrawal
No, no much significant change.
Unidentified Participant
Okay, and you expect it to be around the same number going-forward over a short-to-medium term?
Prabhat Agrawal
We are targeting to grow this for sure. But to make meaningful change a lot — because our revenues from other than private-label is also growing so significantly, like even to just maintain the same share and our revenue growth for this year is 37%. So just to maintain the same share, the private-label has to grow 37%, right? Which is, which is not an easy part
Unidentified Participant
Okay fine thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question.
I would now like to hand the floor over to the management for closing comments.
CV Ram
Would like to thank everybody for joining the call. I hope we have been able to address all your queries. For any further information, kindly get-in touch with our Investor Relations Advisors at GA. Thank you once again, and have a great day.
Prabhat Agrawal
Thank you.
Operator
Thank you, sir. On behalf of Investec Capital Services India Private Limited, that concludes this conference call. Thank you all for joining us and you may now disconnect your lines. Thank you