Laxmi Dental Ltd (NSE: LAXMIDENTL) Q3 2025 Earnings Call dated Feb. 14, 2025
Corporate Participants:
Rajesh Vrajlal Khakhar — Chairperson and Whole Time Director
Sameer Kamlesh Merchant — Managing Director and Chief Executive Officer
Dharmesh Bhupendra Dattani — Chief Financial Officer
Analysts:
Aashita Jain — Analyst
Tanay Gabhawala — Analyst
Unidentified Participant
Karan Mehra — Analyst
Ankit Dharamshi — Analyst
Swaraj Mehta — Analyst
Rohit Mehra — Analyst
Kalmesh Jain — Analyst
Karthik K — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Laxmi Dental Q3 FY25 Earnings Conference Call hosted by Nuvama Wealth Management. Before we begin, a short disclaimer. 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. As a reminder, all participant lines will win the listening-only mode and there will be an opportunity for you to ask question questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Aashita Jain from Noama Wealth Management. Thank you. And over to you ma’am.
Aashita Jain — Analyst
Thank you, Muskan and good day, everyone. I, Aashita Jain, on behalf of Nuvama Wealth Management welcome you all to Q3 FY25 Earnings Conference Call of Laxmi Dental Limited. From the management we have with us today Mr. Rajesh Khakhar, Chairperson and Whole Time Director; Mr. Sameer Merchant, Managing Director and CEO; Mr. Dharmesh Dattani, Chief Financial Officer. I now hand over the conference call to Mr. Rajesh Khakhar for his opening remarks and we will then open the floor for Q&A session. Over to you Rajesh, sir.
Rajesh Vrajlal Khakhar — Chairperson and Whole Time Director
Thank you so much Aashita for the introduction. Good morning everybody. A warm welcome to all of you and thanks for joining our first earnings call after the listing. On this call we are joined by our MD and CEO; Mr. Sameer Merchant, CFO; Mr. Dharmesh Dattani and Strategic Growth Advisor, our Investor Relation advisors. The results and the presentations are uploaded on the Stock Exchange and company website. I hope everybody has had a chance to look at them. We are happy with the overwhelming response to our IPO.
We thank all the shareholders for reposing their faith in us. We welcome our new shareholders and congratulate every stakeholders of the company that is employees, customers, business partners, bankers, lawyers and all of them who made our IPO listing successful. The company has shown a solid performance across all metrics. The quarter marked our highest ever revenue of INR61.6 crores. We achieved an EBITDA of INR9.6 crores. Adjusted EBITDA including our share of profit in entity kidsi dental was rupees INR10.8 crores. PET stood at INR4.8 crores. Since this is our first earnings call, I would like to take some time to establish who we are and what we do and also give you a bird’s eye view of our industry. Speaking of healthcare, spending trends continue an upward trajectory in developed countries like the USA and UK.
Similar trends are visible in the overall dental industry globally. When we look around in India, healthcare has been an underpenetrated segment historically but with rising level of disposable income and increased awareness focus on healthcare is growing leading to an increased recessionary spending on the segments. The global prevalence of oral health disease was 40 times higher than cancer, 6.7 times higher than cardiovascular disease and 3.6 times higher than mental disorders. In 2019, the need of dental care services is evident globally and in India. India’s dental care services market is estimated to be US$3.4 billion in 2023 and expected to grow at a rate of 12.6% to reach US$7.8 billion in 2030. This growth is expected to be driven by increased prevalence of oral health disorders such as dental caries, malocclusion and periodontal disease among the populations and greater demand for general and specialized dental care due to growing awareness. The Indian pediatric dental crown market is estimated to grow at a CAGR of 14.5% in 2030 compared to global CAGR of 7.5% for the same time frame. At Lakshmi Dental with our integrated offering, we are well positioned to capture these vast market opportunities with our comprehensive portfolio of dental products which caters to the dental life cycle of a person from early years to old age. Now to talk about our journey and give you some more details, own the business. We started this journey back in 1989 with a very small setup to manufacture dental crowns for a few clients.
We were formally incorporated in 2004. This small business over time evolved into an end to end dental company with a comprehensive portfolio of dental products. Today our offering includes custom made crowns and bridges branded dental products such as Clear Aligner, Thermopoint Sheath and Aligner related product. As a part of Aligner Solutions and Pediatric Dental Products, we have adopted a B2B2C business modules for sale of most of our products which are sold through the Dental Network to the end consumer patient lending credibility to our dental products since they are being recommended by our dental networks. This element is important to our strategy as a number of our products including Crown Bridges, Clear Aligner, Denture are custom made to the teeth of end consumers. This means that the dentist takes impressions either manually or digitally, then share it with us for each order that’s placed. In the recent times we have seen rapid adoption of digital impressions among dentists across many countries including India due to increased uses of Intraoral Scanner iOS. Globally, the penetration of Intraoral Scanner is about 23% and it is expected to grow 28% in 2027 due to increase in number of brands and significant decrease in its price.
Unlike conventional physical dental impressions, digital impressions using iOS offering increased speed, better clinical efficiency, greater comfort for patients and ease of use for clinicians. It also delivers comparable or even superior accuracy. To physical impressions. Increasing number of digital impressions will help us eliminating logistics as well as cut down on a couple of steps in the manufacturing process, thereby helping us improve our capacity utilization and margin profile. Today at Laxmi Dental, about 60% of units produced at our domestic lab are done via digital medium. With increasing adoption of digital dentistry, we supply our dental products to various international markets. Higher adoption of intraoral scanner is expected to be a major lever for our growth going ahead. We cater to our customers across 95 countries including India through six facilities, three of which are located in Mira Road, Mumbai Metropolitan Region Maharashtra, two in Boiser Mumbai Metro Operator Region Maharashtra and one in Kerala, Kochi and further five supporting facilities, two of which are located in Mumbai and one each in Delhi, Bengaluru and Ahmedabad with manufacturing capabilities. We are proud to share that 40% of our employees are women. Our manufacturing facilities in Boiser and one of our manufacturing facilities in Mira Road will be registered with US FDA and all of our manufacturing facilities in Mira Road and Boiser have been certified by iOS by ISO.
We are able to ensure high quality standard with such stringent regulatory compliances. The overall Indian dental care and dental lab market is highly fragmentary in nature. On the clinic side, large hospitals and dental chains account for less than 10% of all practices. This is expected to move towards an organized market with growth of large dental networks. The number of dental chain networks is expected to double in the next five years. Currently, we work with about 22,000 dentists across India of the total network of approximately 3 lakh dentists.
On the left side, growing emphasize on compliance is for quality standards and licensing requirement of dental products from the CDSCO Central Drug Standard Control Organization is expected to drive the growth of large organized dental labs in India in order to increase the awareness toward our range of products, we have robed in Bollywood celebrities Madhuri Dixit Nene and Kareena Kapoor Khan for products like our Zirconia range of dental crowns and aligners respectively. Now I will request Sameer to give out some more facts about our business performance and speak about the pathway ahead. Thank you,
Sameer Kamlesh Merchant — Managing Director and Chief Executive Officer
Thank you, Rajesh bhai. Good morning to everyone and thank you for being a part of our first earning call. As you understand that our business has reached across multiple geographies. Just to give you a flavor on that front, with respect to the quarterly performance. In the domestic business where we typically cater to large network of dentists, we contributed 66% of the revenues in quarter three FY25.
However international business contributed 34% of the revenue in Q3 FY25. We continue to expand our geographic reach globally for all the products including pediatrics. Looking at the performance from the lens of our products offering for the nine month ended FY25, the dental laboratory offering constituted 62% of the revenues where we manufacture crowns, bridges and prostheses for dental network in India under the name of Illusion Zirconia also we manufacture and supply the same products across US, UK and Europe to cater to the international markets under Laxmi Dental. Aligner solutions contributed 33% of the revenues. Over here we also provide branded clear aligners with a dentist led prescription under Illusion Aligners. Also with the vertical integration we provide branded aligner sheets, automated thermoforming machine and 3D printing resin under our brand Taglus.
This is a B2B offering for dentists and dental labs. The balance revenue came from our other businesses. We entered the pediatric dental market through a jointly controlled entity Kids-E-Dental LLP by acquiring 60% stake in 2021. For 9 months FY25 this segment delivered revenues of INR21.5 crores with an EBITDA of 11.32 and a PAT of 10.7. Kids-E-Dental provides a range of preformed pediatric dental crowns, silver diamond fluoride and others.
Essentially this is part of our portfolio which is not custom made. However, due to indAS norms we are not able to consolidate this entity’s performance in terms of revenue. For FY25, we are targeting to close the year with a top line of around INR240 crore with a PAT margin to the tune of 13% to 15%. Now with the proceeds from our IPO, we plan repayment, prepayment of INR23 crores of outstanding borrowings availed by the company as part of its already done Q4 in FY25. 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 machinery, INR25 crore 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 due to the growing awareness of oral health care and cosmetic dental procedures, high prevalence of dental problems and increase in the penetration of dental care. Technological advancements like 3D printing, CAD CAM technology and tele dentistry. Besides India, the market will further benefit from increasing medical tourism, dental tourism, higher dental insurance and China plus one policy by the global companies. With our strengthened balance sheet position, Laxmi Dental is committed to invest in physical and operational infrastructure to leverage these tailwinds. With these tailwinds over the next three to five years, we expect and are comfortable to continue on this trajectory and grow at a CAGR of 20 to 25%. Just to add bit on the business side, we are exhibiting in the world’s largest dental conference which happens in Cologne, Germany and it happens once in every two years. We have three dental booths over there from three different companies and we expect good momentum going forward post this exhibition.
Now I will hand over to our CFO, Dharmesh Dattani to take it forward. Thank you so much.
Dharmesh Bhupendra Dattani — Chief Financial Officer
Thank you so much. Allow me to walk you through our financial performance. Let me give you a glance at our consolidated financial performance during quarter three of FY25. Revenue from operations rose by 29% year on year to INR61.6 crore. We delivered our highest ever quarterly revenue.
Gross margin stood at 73.9%. Typically it hovers in range depending on the product mix. Employee cost, which is a major cost in our business stood at INR21.8 crore. It includes ease of expense of INR36 lakh in quarter three of FY25. With higher proportion of digitalization and automation, we expect to achieve efficiencies in this cost. The EBITDA reached INR926 crore up from INR3.9 crore in the same quarter last year. The EBITDA margin stood at 15.6 percentage. Our finance cost was INR1.5 crore. Following the IPO we have repaid approximately INR12.6 crore of borrowing in Q4 FY25. In line with our use of profuse, we plan to further bring down our debt. As a result, we expect a considerable reduction in the finance cost from quarter 1 of FY26. Debt for the quarter total INR4.8 crore vis a vis INR2.3 crore in the previous year resulting in the previous year resulting in a PAT margin of 7.8%. Now coming to nine months FY25 performance. Revenue from operations at rupees 178.4 crore. Year-on-year growth of 28.8%. EBITDA at rupees 32.3 crore. Year-on-year growth of 167.2%. PAT at INR27.6 crore. Year on year growth of 57.3 percentage. Looking at the hard work of all our people, we wanted to reward them with ESOP and this will keep them motivated and aligned towards the growth of our company. For FY25 and FY26, the company expects to record ESOP expense to the tune of INR2.19 crore and INR6.35 crore respectively. In the next two years we plan to do capex of INR68.5 crore. With this, we conclude our opening remarks and open the floor for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may press star and one on the touchstone telephone. If you wish to remove yourself from question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, wait for the moment while the question queue assembles. The first question is from the line of Tanay Gabhawala from TRUST Mutual Fund. Please go ahead.
Tanay Gabhawala
Yeah. Hi sir. Congratulations on good set of numbers. A couple of questions. One was just trying to understand if you can give me the breakup of lab offerings how that segmented in terms of EBITDA and your aligner solutions and kind of if you can walk me through how you expect those businesses to kind of improve their margins going forward over the next couple of years. And maybe you can also walk me through how you see your top line going to about say a couple 200 crores — incremental 200 crores. Where would it come from and how your domestic exports pretty strong. Thanks.
Sameer Kamlesh Merchant
Sure. So like we mentioned over here, you know we are comfortably forecasting to grow between 20% to 25%. So based on that you can populate the number of how we can add additional couple of hundred crore in the next few years. Now on the lab and the Aligner Solutions, the breakup is the lab margin is currently at 16% and Aligner Solution is at 24%. And over year if you see our efforts of digitization and also increasing our sales team, we’ve added a few sales resources as well and in terms of geographical spread and also DSO network in US and couple of other parts of the world. We are confident that this will in the next, you know, moving forward few quarters we will start seeing traction in those categories.
Tanay Gabhawala
Right, thank you. So are you able to guide towards how your margins are going to improve? You seen a steady state improvement from say ’22, ’23? It’s continuously improved. What’s your target EBITDA margin over say by FY ’27, FY ’28. Rough cut.
Sameer Kamlesh Merchant
As we move forward in quarter-on-quarter we will keep you posted. But the goal from here is to definitely improve this as the operational leverage will keep coming in and as we keep growing in India with digitization and automation, as we deploy the capital towards capex of machinery and as we also expand our geographical reach.
Tanay Gabhawala
Okay, thank you,
Sameer Kamlesh Merchant
Thank you,
Operator
Thank you. The next question is from the line of Jatin from RTL Investments. Please go ahead.
Unidentified Participant
Yeah, hi, good afternoon and thanks for the opportunity. My first question is on the margin side. You’ve given a PAT guide of 13% to 15% for the full year whereas your PAT margin for this quarter is about close to 8%. So there is a big gap. I think there is some one-off of six and a half crores which is helping the margins for the full year. So this 13% to 15% PAT margin, is this the guidance only for this year or do you expect to sustain this kind of margin going forward as well?
Sameer Kamlesh Merchant
So you know what we have said we will end between 13 crore to 15 crore — 13% to 15%. We are very confident for the full year and even moving forward, we expect this trajectory to continue and move upwards since we are making sure that when we grow say from 20% to 25% and even the tailwinds, the whole environment for dental in India and across the world is growing. And we now getting an additional credibility of a listed company moving forward from India to the world, we expect this momentum to carry forward.
Unidentified Participant
Okay. Let me pose the question in a different way. So your nine month PAT margin is 15% and this quarter is only 8%. So what is the reason that this quarter’s margin is so much lower than the nine month margin?
Sameer Kamlesh Merchant
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.
Unidentified Participant
Okay. When I look at your quarter wise numbers, your employee cost in 1Q was close to 18 crore and that has increased to now almost 22 crores in 3Q. So this increase is driven by what and what is a sustainable employee cost number that we should look at?
Sameer Kamlesh Merchant
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.
Unidentified Participant
When you say cost has gone down, you’re saying employee cost as a percentage of sales.
Sameer Kamlesh Merchant
Yes. As compared to last year as a percentage of sales, it has gone down. Our employee cost last year was 36.9 percentage as compared to revenue. And this nine months we are at 33.7 percentage.
Unidentified Participant
Okay. Okay. Got it, got it. And on the kKids dental side, you’ve spoken that there has been some impact. We have seen number come off and 4Q is also expected to be soft. So what has really happened and I think, you’re seeing FY26 onwards growth should come back. So what would be the driver of that?
Sameer Kamlesh Merchant
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.
Unidentified Participant
So what sort of growth do you expect for kids dental?
Sameer Kamlesh Merchant
Similarly, what we have forecasted over here, the blended growth. But again like I said, it’s hard to say how the registration clearances will happen as and when it happens. You know you will see the update quarter on quarter. But we are very confident that it is only a matter of registration clearances.
Unidentified Participant
Got it, Got it. Great. Thanks a lot for the opportunity.
Sameer Kamlesh Merchant
Thank you so much.
Operator
Thank you. A reminder to all participants, you may press star Invent to ask question. The next question is from the line of Karan Mehra from Mehta Investment. Please go ahead.
Karan Mehra
Hi, thank you for the opportunity. Just two questions from my end. First I would like to understand more on the raw material side. What are the raw materials that typically use and from where do we source it? If you can help some — give some idea over here.
Sameer Kamlesh Merchant
Sure. Karan, as a company we are pretty balanced in terms of our raw materials from US, Europe and APAC. And we have 1, 2, 3 companies who can supply certain raw materials. That way we are pretty leveraged. And even if you see our raw material cost, it’s still reasonable in terms of what we are. So we don’t see that as a challenge for us, it’s been never been since 35 years we’ve been doing business, 20 years since the formal incorporation, we’ve never had a challenge in terms of raw material procurement.
Karan Mehra
Understood. And so this seems like a people intensive business. So how do we train and retain the talent? And also employee cost in this business seems to be on a higher side. So do you think this can be reduced with scale going ahead?
Sameer Kamlesh Merchant
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, the 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.
Karan Mehra
Understood sir. Sir thanks for elaborating that answers — my question.
Sameer Kamlesh Merchant
Thank you.
Operator
Thank you. The next question is down the line of Ankit Dharamshi from R&M Capital Advisors. Please go ahead.
Ankit Dharamshi
Good morning and congratulations for the good set of numbers.
My question is we just mentioned that we have used IPO proceeds for repaying debt this quarter and we have decayed during quarter. So can you guide us what would be the closing number for the debt for the FY25.
Dharmesh Bhupendra Dattani
Hi, Ankit, Dharmesh here. So on the debt side currently we have repaid about 12 and a half 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 5 crores. So there will be savings on the finance cost going forward.
Ankit Dharamshi
Okay, so pardon me. Just so we are saying that we’ll be paying, paying off most of the debt, right by end of this year?
Dharmesh Bhupendra Dattani
That’s correct.
Ankit Dharamshi
Okay, thank you.
Operator
Thank you. The next question is from the line of Swaraj Mehta from Perpetual Capital Advisors. Please, go ahead.
Swaraj Mehta
I just had two questions. What are the margins on a steady state basis and if it, if it is possible to give segment wise margins and what are the growth levers? So is it the growing number of dentists or growing network of dentists or what would be the — what would drive growth going forward? Thank you
Dharmesh Bhupendra Dattani
Thanks, Swaraj. See on the growth part, like we mentioned, you know, there are tailwinds from the number of dentists. Of course, every year there are number of dentals which are growing and at the same time the discretionary spend is also growing. Now if you see dental awareness in India and across the world, especially if you talk about India, across the world we have a great awareness. Anyways in India, if you see awareness is growing. Swaraj and I tell people when I meet a lot of people from the industry that kids nowadays know dentists, you know, they go to a dentist, pediatric dentists are doing well.
There are a lot of dental checkups happening in school where patient at a young age have been made aware of dentistry. You know, discretionary spend of lot of young people towards aligners on aligning their teeth. Even now, saving tooth, you know, putting an implant, putting a cap or a crown is treated as a more functional thing rather than a need, you know, need base. It’s now a want based movement which is happening in dentistry as compared to need. And we see this trend going upwards in India. As we have seen it a lot of other parts of the world. So we are very clear that this is an industry which is there to grow for the next decade and so on and so forth.
Now on the margin side, we have showcased margin improvement as you would have seen year on year. And we are confident that as you move forward a quarter on quarter will keep updating. We are confident of improving the margins.
Swaraj Mehta
Is it possible to give segment wise margins?
Dharmesh Bhupendra Dattani
So already segment wise margin, we gave that. We are approximately 16% in the lab segment and 24% in the aligner segment.
Swaraj Mehta
Okay, thank you.
Operator
Thank you. A reminder to all participants, you may press star and one to ask question. The next question is from the line of Yash Mehta from Art Ventures. Please go ahead.
Unidentified Participant
Yeah, thank you for the opportunity. Sir, I wanted to ask that at the time of the IPO you had given a PAT guidance of rupees 50 crores for FY25. So now we have given a PAT margin guidance of 14%. So you will end a PAT at INR34 crores for FY25. So sir, are you lowering your PAT guidance sir.
Dharmesh Bhupendra Dattani
We are providing a bad guidance of 13 to 15 percentage for this current fiscal
Sameer Kamlesh Merchant
And that is what we have maintained.
Unidentified Participant
Okay. Okay. So thank you.
Operator
Thank you. The next question is from the line of Tanay Gabhawala from Trust Mutual Fund. Please go ahead.
Tanay Gabhawala
Yeah, hi. Thanks for the opportunity again. Could you kind of touch on how decadental brand is going, you know, Heartland Clinic, your new client, how that’s gearing up and maybe touch on. So you have signed up I think with a new UK distributor as well as a new client. Just trying to understand this, the model, how it’s working with them because they’re bigger clients. Whether that will, you know, affect your margin profile and whether that is going to drive a lot of the growth. That’s part one.
Secondly, if you start from your bills that you’ll sell the machine, sorry, the machines that you’ll sell for aligners, how that trajectory has been monthly.
Sameer Kamlesh Merchant
So on the US and the UK DSO signed a new partnerships which have happened in past this year, things are moving well in good direction. In fact, post the credibility of an IPO, we have shared this thing. We have received a lot of congratulations on that. We only expect things to move strongly going forward. And on the machine part, on the aligner, it’s been there. So we are doing well. In fact, like I mentioned, we are just exhibiting in the largest dental event ever, which happens in dentistry once in two years where we are displaying this machine, then other companies also live.
We have three companies who have taken booths. You know, I don’t know if there are any Indian companies who have three booths in this large event which is one of the biggest in the world. So we are very confident that this will show good traction in the coming quarter.
Tanay Gabhawala
Okay, thank you.
Sameer Kamlesh Merchant
Thank you.
Operator
Thank you. A reminder to all participants you may press anyone to ask questions. The next question is from the line of Rohit Mehra from SK Securities. Please go ahead.
Rohit Mehra
Yeah, hi, sir. Good morning. Thank you for the opportunity. So I have only one question. Can you help us to understand the structure of business better and why are we not consolidating a 60% entity into a top line.
Dharmesh Bhupendra Dattani
On the kids, the question on the 60%, as per inAS, we are only able to consolidate the pat margins there. And that is what we are currently doing. And while, you know, we have just finished the IPO, as you would understand, it’s been hardly about, say, 20 days or two to two and a half weeks, we will, you know, look at everything and all things that we can to make sure that we keep doing better and better as things move forward. Whether it’s in terms of the structure of the company, whether it’s in terms of the product offering that we have, whether it’s in terms of the geographical spread or the digitization that we do, the automation that we do, the branding that we do, we are just getting started. We’ve just come after a long work on the ipo, we’ve just come back, it’s been two weeks, and you start seeing things which will improve in all directions.
Rohit Mehra
Sure sir okay, got it. Thank you.
Operator
Thank you. The next question is from the line of Kalmesh Jain from Lotus Asset Managers. Please go ahead.
Kalmesh Jain
Yeah, thanks for the opportunity, sir. So just one question on the part of the margins. If I see 6 monthly margins when you posted in your IPO, DRHP or RHP, then it was roughly around 90 margins. But as we see for this quarter and the subsequent quarter, the margins have gone down to like, say 15.5%. But even if I adjust for your ESOP charges, like, say it would be around 50 basis points, even then your margins are down roughly around 350, basically over H1. And so that. That particular clarification I needed on that
Sameer Kamlesh Merchant
Over here, like I said, you know, we have added employees for growth. If you see, that is where the, I would say, majority of the differences. And we wanted to build some traction here for future because for us, you know, in the next three to five years, dentistry is something which is growing extremely well in India and across the world. There are a lot of tailwinds. Like I mentioned, this Krishna spend, people from a very young age from Pediatric are going to the dentist and are getting dental awareness. So the overall construct is that whatever is important for the growth of the company, we are doing that. And like I said, you know, we anticipated this to happen in November while it happened in January.
And then now with the proceeds that we have, the deployment that we are doing in this quarter and the coming years, we will definitely see results going upward.
Kalmesh Jain
Can you, sir, attribute how much headcount increase you have seen over the sequential basis and year-over-year basis? Because otherwise it can be managerial, increasing managerial remuneration as well. So if you can approximately
Sameer Kamlesh Merchant
We have added approximately 95 people in the last three to six months.
Kalmesh Jain
Okay and on a — in percentage terms how much it would be because your employee cost has gone up from like say 182crore even on 9 month I’m not seeing such a sharp increase in employee cost.
Sameer Kamlesh Merchant
So it is currently about 35.3%.
Dharmesh Bhupendra Dattani
So in the current quarter it is at 35.3% on a YTD basis nine months we are at 33.7 percentage as we mentioned that you know as the growth kicks in further this percentage is going to be coming down over the period of time in the coming quarters and the years.
Kalmesh Jain
And lastly sir, what are your guidance for like say FY26 you have provided for FY25 there barely a quarter is left there. But going forward like say FY 26 and 27 what guidance we are projecting on the overall revenue numbers, growth numbers and margins.
Sameer Kamlesh Merchant
Like I said on the revenue side we have given a guidance in terms of 20% to 25% growth and hopefully in the next quarter we will keep you posted on the guidance for the other numbers as well.
Kalmesh Jain
Great, great, great and best of luck sir, Thanks a lot.
Sameer Kamlesh Merchant
Thank you sir
Operator
Thank you. A reminder to all participants, you may press star and one to ask question. The next question is from the line of Aashita Jain from Nuvama Wealth Management, please go ahead.
Aashita Jain
Hi, am I audible?
Sameer Kamlesh Merchant
Yes, yes. Hi Aashita. Yes you are.
Aashita Jain
So I have one or two questions. So firstly on the gross margins. So in this quarter there was some contraction despite international lab and aligner business growing very good in this quarter which I believe have high gross margins. So were you seeing any raw material pressures maybe due to USD INR or any other reason that you would, you know assigned to? And what are the sustainable gross margins that we should build in for coming here?
Sameer Kamlesh Merchant
So may you know material is say close to 26% so there could be minor fluctuations in terms of USD how the USD has gone up because we are importing majority of the material. But on an overall side, I think there has been a few minor percentage which has changed but I think moving forward we don’t see this as a major challenge.
Dharmesh Bhupendra Dattani
And Aashita, we also have the exports. So close to 33% of our revenue comes from the exports. So we have a natural hedge there. So we do not anticipate any loss due to the fluctuation in the foreign currency.
Aashita Jain
Sure, this is helpful. My second question is on your employee cost. While you have you know mentioned that you’ve hired people, 95 people in the last three to six months. But could you give us more color? Where, where have we hired people? Which departments or segments? More granularity on that front would be really helpful.
Sameer Kamlesh Merchant
If I have to give you a top three versus you know the whole granular thing. It would be in regulatory, it would be in finance and sales. Those are the three major areas that we have added since you know we as a company believe we need more clearances in more geographies across the world. So regulatory is one addition, two is on the finance part, three is on the sales part to grow the business.
Aashita Jain
Understood. And just lastly when I look at your aligners margin on a nine month basis there is some marginal compression on a YonY basis. Is it only because of employee cost or were there any marketing spends or any other cost that you would like to highlight and how should we see the trajectory from here?
Dharmesh Bhupendra Dattani
Yeah, so there was employee cost addition. Like I said we are forecasting growth there. So that’s why we have added a few employees and also we have put in a little bit more effort on the marketing side as well to grow the brand.
Aashita Jain
Sure, sure. That that’s all from my side. Thank you.
Dharmesh Bhupendra Dattani
Thank you.
Operator
Thank you. A reminder to all participants, you may press star and one to ask questions. Next question is from the line of Karthik K from Suyash Advisors. Please go ahead.
Karthik K
Sir good morning. My first, very first interactions. Excuse, excuse me, I’m asking a very basic question. Just wanted to understand how is your industry structured? Would there be players of similar size in your specific segment and how organized is the business?
Sameer Kamlesh Merchant
Thank you, Karthik, that’s a great question. You know this is a very fragmented industry and like we mentioned, hopefully with the CDS GO which came in 18 months back where we are trying to see that the industry is working towards consolidation and getting more organized. But currently majority I would say, you know a major, major percentage is very, very unorganized currently.
Karthik K
And how would the average size of the companies be in your space? Are there companies of your size smaller than you?
Sameer Kamlesh Merchant
Like I said, you know, hard to predict because all of them are private and extremely small. But as a end to end products company, you know we do not see a player currently which is doing end to end like we are doing. There may be some in some different categories and some in India like on an export side we are doing extremely well. So it’s still, I would say, still very, very fragmented, very small in terms of numbers and like lot of them do not even have a GST. So very hard to compile data from an industry perspective.
Karthik K
Interesting. Second question would be sir, people intensity is obviously there on account of various reasons. So couple of things. One is how do you achieve, what would be your current reach of dentists in India both directly and through hospital networks.
Sameer Kamlesh Merchant
So currently we have 22,000 dentists is what we are reaching as part of it.
Karthik K
Righ. And what would be the addressable market there? 100,000.
Sameer Kamlesh Merchant
There are about 200,000 dental clinics in India.
Karthik K
200,000 right so there is obviously a large amount of reach related expansion that is possible.
Sameer Kamlesh Merchant
Absolutely. Karthik.
Karthik K
The third one, sir, on the people intensity part again, I’m just trying to understand this better. Is it very labor intensive? As in, is it very assembly intensive? Why exactly would you require so many people? And what is the typical background of the employees in this, you know, in this category, how do you acquire them, how do you train them? Is there a large attrition number?
Just trying to understand that.
Sameer Kamlesh Merchant
So this like you said, it is a very skilled, semi skilled to skill people who are part of the job and training. And when you said it’s intensive currently, it’s yes. In fact in the past, you know, if you take 10 years back this was like your cost would be 50, 60 of the cost would be people. Even for a lot of dental labs today, you know, it’s still that high cost because they are not digital and they’re not using a lot of technology. While we have brought it down to close to 34% in evaluating the automation and the digitization efforts that we are doing and I’m sure in the next couple of years we will see that improvement.
In the people space. We hire people who come from different kinds of background because there are a lot of steps which are needed. This is not one kind of people. For the whole dental industry there are a lot of steps. Some are technology steps. So we will have CAD engineers, other guys coming in. Some are very artistic steps. We will have someone from art background coming in. Some are very number driven steps. So we would have people from finance or account background who will come in. So it’s a hybrid mix of people that we choose from based on the process for which we need them.
Karthik K
Right. And how do you ensure quality? As in because there is an element of how skill here versus something that is standardized. How exactly do you ensure quality of your products? Or does it depend on the employee on the job?
Sameer Kamlesh Merchant
No, because see, like I said, we are doing a lot on the digital side and also, you know, we’ve been doing this since a lot of years, Karthik. It’s been if you compare just me and Rajesh bhai management team, we have more than 50 plus years of experience just doing this. So we know how to do this. Of course, you know, we have the ISO QMS systems, all of that to make sure what we deliver are world class products.
Karthik K
I was just trying to get a sense because the description you gave me is it’s a combination of skill plus hands.
Sameer Kamlesh Merchant
That’s most important. You need good hands to make a nice looking crown and you need good eyes to detect
Karthik K
Which is really why I was asking you that question because standardization on scale is a, is a complex challenge. Thanks very much sir for interviewing me and best wishes.
Sameer Kamlesh Merchant
Thanks Karthik.
Operator
Thank you. The next question is from the line of Ismail Ansari from Paradise Investments. Please go ahead.
Unidentified Participant
Hi, just wanted to check on the working capital. The debtors have increased substantially in September ’24 and your working capital days have also gone up from 80 have gone up to 83 from 64 days. So is there any stress that you all are seeing in recovery and what would be the position as on end of quarter three of FY25?
Sameer Kamlesh Merchant
So on that part, you know, proportionate to the business, as we keep growing the business, if you see in terms of percentage, it has in a very minor way gone up. But you know, there are international contracts that are Indian, there are some large customers where we have slightly different payment terms.
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 you know, making sure that we are able to take the dental digital, we are okay with slightly extending the credit limits to them.
Unidentified Participant
Second question would be on the breakup of the revenues that you’ll generate. It’s predominantly from the west, which is about 56%. And now with the digitization it should be, you know, coming equally across all the regions of the country. So what are these things that they’re doing especially when you’ll have connected with about 22,000 dental networks versus a universe of 300,000 which is just a penetration of 7.3%. So what are the efforts that they are taking to increase it? Because definitely on increase in the dentistry network is going to increase your revenue. That’s what it looks like. And your domestic revenues have been flat for this quarter.
Sameer Kamlesh Merchant
Okay. So on the. I think I missed a few things between but hopefully, I got the gist of it. On the dental network increase today we have close to 320 odd people in sales. So that’s their job to make sure we keep adding new dentists. And also important criteria that we have spoken about is also cross-selling. Since we have the crown and bridge dentists, we our effort is to cross sell the aligner business. If it’s in the aligner dentist, our effort is to cross-sell the crown and bridge business. So that way the sales team is very aware that there is a hybrid mix to increase revenue.
One is addition of new dentists like you said and two is the cross-selling of the different products to the existing dentist. This is how we see that in the future as well we will keep continuing with this hybrid thought process.
Unidentified Participant
Any focus on increasing the revenues from the other regions because right now it’s only west that is predominant in your portfolio.
Sameer Kamlesh Merchant
Sir, can you repeat the question?
Unidentified Participant
Predominantly our revenues are coming from the west region and northeast is very much down, it’s just about 2%. So with the digitization that you are talking about, why aren’t the revenues getting spread equally or you know, in a more uniform manner across all the four regions?
Sameer Kamlesh Merchant
So great question. We had — we started in the west so west has been the strong goal. It’s been a long time. We started from Mumbai so the facility, first dental lab was started in Mumbai. And today, you know, I would say five, ten years back we were probably 90% west. Today we are close to 50% in the west. You know, 23%, 24% in the north. Similar in the south and east is what we have just started. See that percentage being lower.
Unidentified Participant
Thank you so much.
Sameer Kamlesh Merchant
Sure. Thank you.
Operator
Thank you. Ladies and gentlemen, in interest of time, we will take this as a last question. I now hand the conference over to the management for closing comments. Over to you, sir.
Sameer Kamlesh Merchant
Yeah, just one second.
Rajesh Vrajlal Khakhar
Thank you. With this, I conclude the call. If you have any further queries, please contact SGA, our Investor Relation Advisors. Thank you everyone for joining us today on this earning call. Thank you.
Sameer Kamlesh Merchant
Thank you so much, everyone.
Rajesh Vrajlal Khakhar
Thank you. On behalf of Nuvama Wealth Management that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.