MedPlus Health Services Ltd (NSE: MEDPLUS) Q3 2025 Earnings Call dated Feb. 03, 2025
Corporate Participants:
Unidentified Speaker
Sujit Kumar Mahato — Chief Financial Officer
Chetan Dikshit — Chief Strategy Officer
Madhukar Gangadi — Managing Director and Chief Executive Officer
Analysts:
Saion Mukherjee — Analyst
Sudarshan Agarwal — Analyst
Tanmay Gandhi — Analyst
Madhav Marda — Analyst
Harith Ahamed — Analyst
Prateek Poddar — Analyst
Prakash Kapadia — Analyst
Akhil Parekh — Analyst
Prolin B. Nandu — Analyst
Presentation:
Operator
Hello, ladies and gentlemen, good day, and welcome to MedPlus Health Services Limited Earnings Conference Call. 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 star on your touchdone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Srinivas. Thank you, and over to you, sir.
Unidentified Speaker
Thank you. Thank you, Sagar. Good evening, everyone. On behalf of, it’s my utmost pleasure to welcome you all to Q3 FY ’25 earnings conference call to discuss the financial results of the company, which were announced on 31st January 2025. We have with us today the senior management team represented by Mr Gangari, Chief Executive Officer and Managing Director; Mr Sujit, CFO; and Mr Jakshi, CFO. Before we begin, I would like to mention that some of the statements made in today’s discussion may be forward-looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks and uncertainties on Slide 1 of the investor presentation shared with all of you earlier. Documents relating to our financial performance were circulated earlier and these have also been posted on our corporate website. I would now hand over the call to Sujit. Thank you, and over to you, Sujit.
Sujit Kumar Mahato — Chief Financial Officer
Thank you,, and good evening, everyone on this call. Our company remains committed to balance growth with profitability, while continuously enhancing our operational efficiency. We are strategically strengthening our back-end operations and infrastructure to support long-term scalability and ensure seamless execution. As we prepare for the next phase of expansion, we remain focused on optimizing our existing network while laying a strong foundation for opening new stores across the 13 states in which we operate. As an update, we have added four additional warehouses to enhance our availability at our existing outlets and further supporting our endeavor in opening new stores. This disciplined approach will enable us to drive sustainable growth and enhance value for all the stakeholders. On our networks, we opened 87 stores during the current quarter. Over the past 12 months, we have added a net total of 379 gross of 484 store additions. Throughout quarter three, there were 27 store closures. Taking into account both openings and closures, we achieved a net addition of 60 stores during the quarter compared to the 108 stores added in-quarter two and 37 stores in-quarter one, totaling 205 stores on YTD basis. We expect a total of 300 net store additions in the current financial year. In terms of our network, in terms of our stores, network age, around 27% of our stores are operational for less than two years and the remaining 73% of our stores have been operational for two years or more. As a guardrail, we closely monitor the timeframe for our new stores to reach breakeven. For stores opened between January 2024 and 20 — June 2024, approximately 55% of them achieved breakeven within six months of operations. As a cohort, all stores combined reached breakeven in six months. These include stores which have been opened in the new states. In terms of our store size, at the end-of-the quarter, our network has grown to 4,612 stores with 2.4 million-plus square feet compared to 4,233 stores and 2.2 million square feet at the end of December ’23. The average store size is 528 square feet. On the revenue mix, presently, MedPlus offers over 1,200 carefully selected STUs spanning across pharmaceutical and non-pharmaceutical categories. Private-label sales for quarter three FY ’25 constitutes 19.6% of our total revenue. The following is the impact of the launch of brand product across our network. In Q1 FY ’24, prior to the launch, the share of private-label pharma stood at 7.9% of total GMV compared to 17.7% during the current quarter. On the financial numbers, now on a quarter’s performance, our consolidated revenue is 15,614 million with growth of 8.3% on Y-o-Y basis and a degrowth of 0.9% on quarter-on-quarter basis. Our consolidated operating EBITDA stood at $799 million, representing 5.1%. Around 99% of our revenue is from our pharmacy operations. Revenue from pharmacy operations grew by 12.3% year-on-year on GMV basis and 7.9% year-on-year on a net basis. The pharmacy operating EBITDA stood at $780 million, representing 5.1%. On our store performance, I would like to update on our stores older than 12 months. Revenue from these stores in-quarter three was INR14,388 INR1,388 million, representing 94% of pharmacy revenue. These stores had a store-level EBITDA margin of 11%. The store-level operating ROCE of these stores stood at 61.7%, a word year-on the store-level EBITDA margin by age. While stores greater than 12 months had a margin of 11%, this was 11.3% for stores greater than 24 months and 8% for stores in the 13 to 24 months age bracket. If we allocated non-store related cost, then the operating EBITDA of stores greater than 12 months would be 815 million, which translates to a margin of 5.6%. On our diagnostics numbers, diagnostics grew revenue grew to INR274.7 million in-quarter three compared to INR196 million in-quarter three of the last year. The Diagnostics segment recorded an operating EBITDA of $22.1 million, representing 8.1% compared to a loss of $34.1 million in-quarter three last fiscal year. However, center-level operating EBITDA stood at INR49 million. On working capital, our net working capital for Q3 was 61 days. The inventory in our warehouse was 36 days. In Q3, the inventory level of our first year stores was 88 days. In comparison, for our stores older than 12 months, the inventory was 40 days. Now
Operator
From your line excuse me, sir, we have lost the audio from your line you. Ladies and gentlemen, the line for the management seems to have disconnected. Please stay connected while we reconnect the line back Ladies and gentlemen, we have the line for the management reconnected. Please go-ahead, sir.
Sujit Kumar Mahato — Chief Financial Officer
Our update on the working capital, our net working capital for Q3 was 61 days. The inventory in our warehouse was 36 days. In Q3, the inventory level of our first year stores was 88 days. In comparison, for our stores older than 12 months, the inventory was 40 days. Now I request Chetan to update on our diagnostic business. Over to you,.
Chetan Dikshit — Chief Strategy Officer
Thank you. Thank you, Sujeep, and good afternoon, everyone. Q3 is a seasonally weak quarter for Diagnostics. In October, we sold 413 gross plants per day. In November and December, this was 433 and 419 respectively. As on 30th of September, we had 148K active plans and 299K underlying lives. As on 31st of December, we had 152K active plans and 315K underlying lives. Our current observed on-time renewal rate was 26% in Q3 versus 25% in Q2. That concludes our update for this quarter. I request the host to open the line for questions.
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 N1 on the touchstone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Question ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Sayan from Momura Securities. Please go-ahead.
Saion Mukherjee
Hi, thanks and good afternoon. Sir, my question is around the growth in the pharmacy business, so you mentioned GMV growth of 12.3% this quarter. Obviously, there is some slowdown in new-store addition that might have played a role. And also the — if I look at the branded business, right, branded pharma number, you know, probably we are growing in low-single digit, which is obviously much lower than what the pharma market growth is. So can you just throw some color on how the dynamics with respect to private-label is playing out? Is there a very significant substitution that’s happening from private-label to branded, which is leading to very slow-growth in branded? And now going-forward, how are you thinking about the overall GMV growth in the pharmacy in the quarters ahead. Thank you.
Madhukar Gangadi
So we look at the growth in the pharma market.
Operator
Sir, we have lost the audio from your line once again.
Saion Mukherjee
I think you have to reconnect.
Operator
Sir, now we are able to hear you. Can you hear me, sir?
Saion Mukherjee
I can’t hear. No, I can’t hear. I can’t hear. No, I can’t hear. I can’t.
Operator
Ladies and gentlemen, the line for the management seems to have been disconnected. Please stay connected while we reconnect the line for the management back ladies and gentlemen, we have the line for the management reconnected. Please go-ahead, sir.
Madhukar Gangadi
Sure. Thank you. So as I was saying, we actually look at the overall pharma sales and for us, it is not — I mean, there is no real division between private-label and brands and all. Growth is growth. We offer the customer an alternative when it comes to the store, we tell him, okay, we have got what you have requested for and we also have an option in the private-label and that is at a 50% to 80% discount. Now one thing may get substituted for the other depending on the comfort with the overall thing at all. So for us, as long as we are growing the overall pharma, we are fine. Now the growth itself, I know was a little muted actually this quarter and that is partly because of the actual net sales would be slightly muted, I would say, mainly because the private-label sells at a much lower rate and all. But yeah, outside of that and a little bit of seasonal, I would say effect having plenty of the holiday season and all, especially in January and all. We did see a slightly, you know, I would say, lesser sale than expected, but I expect that we get back.
Saion Mukherjee
So sir, are you willing to guide any number for the GMV growth or how should we think about over the next year or so.
Madhukar Gangadi
So it should be, you know, the usual listing of inflation plus kind of thing or it should be in-line with the typical pharma market growth out there. So as we keep saying that for us, it is more important that we maintain the store-level EBITDA of 10% or 11% rather than just trying for the same-store sales growth and all. Some amount of cannibalization is always going to be there when we do this in these setups of the stores. But I’m fairly comfortable in saying that we should grow on the two-plus year stores also at inflation and slightly above that.
Saion Mukherjee
Yeah. Right. And my second question would be on your private-label and gross margin, in this quarter, we have seen a significant pickup in private-label, which is also reflected in gross margins, much higher than what you had guided in the previous quarter. So how should we think about that going-forward?
Madhukar Gangadi
Yeah. So think about the private-label as going up by roughly around 1% every quarter on the volume basis, which is on MRP basis, which means additional margin of roughly around 15 to 20 basis-points maximum per quarter. We could have one or two of one or two slightly better than normal kind of quarters and all, but I am fairly comfortable we should be able to do 1% every quarter.
Saion Mukherjee
Okay. Thank you.
Operator
Thank you. The next question comes from Sudarshin Agarwal from Axis Capital. Please go-ahead.
Sudarshan Agarwal
Yeah. Hi. So continuing on the previous participant’s question, apart from the fact that your share of private-label, you know, will kind of go up. What are your thoughts about the discounting policy in the private-label? I know right now you are at 60-65. At what levels do you think that maybe you could take a lower discount into consideration? And additionally, adding to this point, so let’s say the final brand that you are discounting against takes a hike, does that get reflected in your discount price also.
Madhukar Gangadi
Okay. About our private-label discount itself, we advertise a 50% to 80% discount based on the molecule. And I think the average discount comes out to around 50% 51%, that’s all because most of the higher selling drugs are all-around the 50% discount. On — I don’t expect that we’ll really reduce this at any point of time. It may go down slightly over a longer period of time, I would think. But as of now, given where the discounting is on various generic products and all, I don’t think we’ll be able to reduce this much lower than what it is right now, right? I think the second part of your question, if I understood it right, was you know, is the discount reflective of what the original brand is substituting for? Not — if that is what — that was your question? No, not necessarily. We set the price-based on the average price of the top two or the leader or the brand leader out there because most of the people would end-up actually buying those. And in places where the thing is fragmented a lot more, the market is fragmented a lot more and there are one or two or three players, all of them having more than, 20% 25% market-share, then we would probably take an average of come somewhere close to the middle of that and then set the price — set the discount such that the net price to the customer is around that. Right? The target count is off the average of these three.
Sudarshan Agarwal
Okay. Got it. Got it. And one more additional, while I understand the net store addition this year, you have trimmed it. For next year, are you guiding any number that we should kind of take into account, 500, 600 or it would be lower than that.
Madhukar Gangadi
No, I think it will be at least 600 stores for — I don’t think it will be less than 600 stores. This year, we have had a few things which we had to actually take care of because of our focus on private-label and a couple of other things. We also are, as Sujit spoke in this call, we are also in the process of strengthening the back-end. So we have actually launched a bunch of warehouses across the states in which we are there right now. These will help us actually reach the stores faster and help us to actually grow faster too. So a lot of that work is on. I expect that will be done in this quarter and we’ll be able to start with the usual growth next year onwards.
Sudarshan Agarwal
Got it. Thanks. That’s it from my side.
Operator
Thank you. Thank you. The next question comes from Tanmay Gandhi from Investec. Please go-ahead.
Tanmay Gandhi
Congrats, sir, on a good set of numbers. Sir, my question is again on private labels, right? So on a GMV basis, they are already at around 20% level, right, for the pharmaceuticals. So my question is that, do we need to put in more efforts to actually, you know, increase the contribution of the private labels from here on? Or do you think that it is going to be more organic?
Madhukar Gangadi
If you mean, are we going to spend a lot of money advertising? I don’t think so. What we’ll end-up doing is probably increasing the number of products which we have in private-label. We are today for the overall set of medicines, we probably are there at roughly around 68%. I expect insulins, which cover around 10% of the overall mission sale and some branded products will be another 5%, so which means that leaves at least around 85% to be targeted. I expect, if not 85%, we’ll probably take the 68% to maybe 75% to 77% or so. So increasing the number of products would be one thing, making these available on a much better level than what we have been able to do will be another thing. And third, as the number of people who buy these continue to increase, I expect that over a period of time, the world will spread and we will basically see a lot more people asking for the product. It may not — we may not really need to push as much as we are doing right now at this point.
Tanmay Gandhi
Sure. So sir, is it fair to assume that for the — for the next year, the core focus area for the management will be store additions?
Madhukar Gangadi
The focus will be definitely on adding new stores also, 600 stores odd. And then same-store sales growth, private-label will be a — will continue to grow anyway. So that’s going to be 1% per quarter is what we are aiming at. We could do slightly better, but I think we’ll be at least able to hit that number easily without too much of.
Tanmay Gandhi
Okay. And sir, one more question. The four new warehouses which you have launched, right, so that is largely for the upcoming stores which you’re planning to add-in FY ’26 or these are also to cater to your own private labels and overall increase the volumes at your existing store.
Madhukar Gangadi
No, no, these are actually to increase the overall operational efficiency. For instance, you know that we have actually added around 3,000 stores in the last four years. In some of the states, we have got now roughly around 1,000 stores each, Karnataka. We’ve got 1,000 stores, Tamilanada, we got 1,000 stores and API Tangana combined, we have more than 1,200 stores. So some of these states are big and we have not been able to reach the extreme parts as easily and so supply — and the store supplies have not been as good as we wanted to be and so sales have suffered a little bit. So now we’re setting up a warehouse in Hubli, like one in Madurai and two in Andra, one in and one in one in and one in Karapa and so on. So dividing up the states into two-parts now, at least a main area from where we operate and manage around 60%, 70% of the stores in a sub-area from there we manage around 25% to 30% of the stores. So West Bengal will probably have one warehouse in and sold area and so on. So this is — it will do two things. It will supply our current stores better. And with operational head sitting out there in that area, we’ll probably be able to launch new stores faster in those areas too.
Tanmay Gandhi
Understood. So what is the plan for warehouse addition for next couple of years?
Madhukar Gangadi
So I think I’ve pretty much told you where all we’re going to put. We are adding a few more, let us say, actually there’s one more coming up in. In the new states we are adding where there’s a small one in Raipur and one in Indore that will help us actually go deeper into Matty Pradesh as we go-forward. But I would think most of these we have already acquired. So you’re probably already seeing the rents in the cost already, but we probably will add three or four more warehouses. So I think a total of 10 smaller warehouses, anywhere between 30,000 to 50,000 square-foot kind of places.
Tanmay Gandhi
Understood. Thanks.
Madhukar Gangadi
That includes the ones I’ve already talked about you.
Operator
Thank you. The next question comes from Madhav from Fidelity. Please go-ahead.
Madhav Marda
Hi, good evening. Thank you so much for time again. So I had a slightly longer-term question. So now that our new private-label has been in the market for about six or seven quarters, maybe six quarters, if I’m not wrong. So I think — and it’s reached about like high-teens or almost 20% of our sort of volumes. So my sense is that it’s kind of stabilizing within our network over the last few quarters now. Now that you know some of this has been absorbed into the system, could you give us some sense on a three-year view, if you think about a network expansion, if you think about how gross margins could change for us and EBITDA margins have crossed 5% for the pharmacy business, which is quite healthy. So is this a sustainable base to work with for us as we think two, three years can it go a bit higher? Could you give us some sense because we’ve done a big transition in terms of the product mix, but how are we thinking in three years will be really, really helpful? Thank you.
Madhukar Gangadi
So Madhav, as I said earlier, even if you take it for the next eight quarters, I fully expect that we will be able to grow at the level of 1% per quarter on the MRP basis, right? I expect — see, this is something which we feel we can achieve without too much of a problem. Now, we could get benefited from the network effects of these, a large number of people using it, being happy about it, maybe talking about it, one, two, government pushing the generic products even more aggressively and three, possibly competition also taking these up and talking up the generic — the value of generic products out there. So all these could see a, I would say disproportionate increase in. It is possible for it to happen that way, but I’m not — I wouldn’t bank on it. I would say by our own thing, just by increasing the product, increasing the range of products and also pushing it a little bit, we should be able to get that 1% for every quarter easily. And that would mean possibly — I mean if nothing else changed, I would say 1% growth in gross margin because every 1% in MRP, I think increases our margin by around 20 basis-points.
Madhav Marda
So essentially, gross margins from here only have scope to improve as the private-label — brand private-label sort of improve. So I understand that bit. If you’re adding 600 stores, it seems like we can grow our network at, let’s say, 11%, 12% network expansion each year. So that’s low-double-digit. So is it fair to assume that you know if we have some so SSSG as well, we’re looking at 15% 16% sales growth with margins expanding for us from here? Or do you think this 5.1% margin has any element which can bring it down? I understand seasonality of the business, which would be every different quarter would have different seasonality, but are we at a fairly sustainable base now or how should we think about margins going ahead? Like can you be 5.5%, 6%? Yeah.
Madhukar Gangadi
No. I think we are at a fairly sustainable kind of margin level for the company out there. Now the only thing which can change it is if we add a ton of stores — new stores. But as you said, the number of stores which we add are going to be much lesser than the base which we have. So I really don’t see a significant dip out there. What we can do is we can call-out that number as we go-forward. But the current set of stores should only be at this level or should get better. But it’s not going to be a significant difference. There will always be a drag as we add stores, but it’s not going to be significant.
Madhav Marda
And just the pharmacy GMV growth is just 12%, which is kind of a proxy for volumes. Do you think that should grow in-line with our store expansion or can you grow a bit faster? I don’t know-how is that the right way to think about the pharmacy GMV growth.
Madhukar Gangadi
It’s a little difficult to tell you, but I am sure that as the new warehouses come into play and as our supply-chain also become slightly more efficient, I think we should be able to get some benefit, but I can’t really commit anything. We will maybe guide you in the next couple of quarters on any efficiency coming from that side.
Madhav Marda
So how much cost can be warehouses save for us? Is it any incremental cost-savings which will come through or it’s only sort of to kind of help the next leg of growth for the company?
Madhukar Gangadi
It is only to help the next level growth that’s.
Madhav Marda
Next level. Okay. Got it. Okay. Thank you.
Operator
Thank you. The next question comes from Harith Ahmad from Avendus Spark. Please go-ahead.
Harith Ahamed
Good afternoon. Thanks for the opportunity. I joined the call a bit late. So my apologies if it’s repetitive. The first question is on the pharma private-label GMV. What exactly was the — the share of pharma private-label as a percentage of our total GMV for the quarter? And Madhukar, your comment that we are looking to increase this by a percentage point every quarter. Is there a level that we are targeting and beyond which probably any further increase would be difficult given that branded generics will still be a significant part of our overall business and a significant part of the overall market.
Madhukar Gangadi
Yeah. So the private-label itself, on a GMV basis is around 17.6% right now on the pharma side. If you look at the net sales side, I think it’s around 11.6%. The non-pharma is also pretty significant now around 8% overall. So we are a little under 20% right now for the overall private-label on a net sales basis. On our aspiration for growth, you know, I have always been saying this if the customer actually starts to believe that the product is same. And if we can actually put in substitutes for all the products. I know there are some which we will not be able to do for a long-time, insulins and some obviously, leave the patented products aside, other than that only insulins is something which we will not be able to do a substitution for. But outside of that, if you are able to put everything out there and over a period of time over the next two, three, four, you know, people are not going to be, I would say, completely blind to the fact that these are all the same products being made in the same factory and across the world, this is what actually sells. If you look at a country like US and all, 90% of what they sell is generic and that’s all store generic. That’s just one — any one store basically selling their products. So people are not going to be completely blind to all this. I expect as we go-forward, this will go all the way up to whatever numbers there are across the world. I don’t see any limit to it. But over the next seven or eight quarters, I would still say maybe 1% every quarter.
Harith Ahamed
Okay. Got it. My second question is on discount rates. So earlier before we launched this branded from a private-label, we used to share this number of around 16% 70% as the discount rate — the blended discount rates across our various formats. Now my first question is, what is the current discount — blended discount rate in the pharma private-label and what is that rate for rest of the business, which used to be at that, 16% 17% level in the past?
Madhukar Gangadi
Okay. For the pharma private-label, it is around 51% right now. For the rest, I don’t see any reason why it should be any different. It used to be around 17% or 18%, it will probably be in the same number even today, but I will tell you, I’ll come back to you with the numbers.
Harith Ahamed
Okay. Last one on the provision. The MRP level growth that we’ve shared for the quarter, it’s around 8.5% and this is a decline versus 2Q where we had 13% 14%. So any reason — this lower store addition could be a reason, but that was the case even in 2Q. So I — I’m just wondering what has led to this lower-growth rate on a sequential basis.
Madhukar Gangadi
A little bit of effects of seasonality, holiday season and everything else. And I honestly I can’t think of any other reason out there. Possibly some of the stuff which you’re doing on the warehousing and everything else will add a little bit of efficiency and all, possible that our super quick addition of stores may have compromised the supply-chain a little bit and that also could have cost it, but I’m not 9% sure. But I feel that I believe it’s largely seasonal effect, nothing more.
Harith Ahamed
Okay. Got it. Thanks for taking my question.
Madhukar Gangadi
Thank you.
Operator
Thank you. Thank you. The next question comes from the line of Prateek Potar from Bundan Asset Management Company. Please go-ahead.
Prateek Poddar
Yeah, hi. I was just wondering if you could give me SSG basis GMV, like what would be SSG growth basis GMV? Hello. Am I audible?
Madhukar Gangadi
So yeah, yeah. No, we can hear you. So outside of what is there in the slide — slide 3 you have given, we’d like to come back to you with the more granular breakdown. So I think on the GMV side, you’re seeing the growth is year-on-year 8.3%, but we will come back to you with the actual SSG.
Prateek Poddar
Yeah, please. Thanks. The second question is distribution of private-label, right? Obviously, the average is 10.7% for the system, but maybe you could give us a sense in terms of the median number or let’s say, what’s the difference between the highest store and the lowest store? Just trying to get to get an understanding as to where are we trending? I understand you called out 1% per quarter but just that would help me.
Madhukar Gangadi
Yeah. Sure. So if you see across-the-board, the smaller towns and the rural areas are going to have a higher private-label than the bigger cities. One. Second, the older states in which we have been functioning are going to be higher than the newer states in which we have gone to. For instance, and are going to be at a slightly lower private-label number than AP, Telangana or West Bengal or, where we’ve been for a long-time. To give you an idea, I think Maharashtra, which is as urban as you can get, is probably at around 7% or 8%. I think Bombay and all are at 7% or 8% for us on the pharma side private-label, or maybe slightly less. On the other hand, a smaller town in Telangana or even Orissa or West Bengal is probably close to 20%.
Prateek Poddar
So, 22, zero, right?
Madhukar Gangadi
Yeah.
Prateek Poddar
And this is on-net sales basis, correct?
Madhukar Gangadi
There is a net sales basis.
Prateek Poddar
Okay. Fantastic. And last question, look, when I see your gross margins, sequential improvement of 130 basis-points and when I look at your operating EBITDA margins for stores older than 12 months, only a 40 basis-point of improvement. Can you help me understand where does this 80 basis-point go or where have you reinvested?
Madhukar Gangadi
Sorry, could you just repeat the question once again, Pradesh?
Prateek Poddar
No. So when you look at Madhukar, when you look at your gross margins, right, on an overall basis, 130 basis-point of improvement on a sequential basis, correct? But when I look at the store operating EBITDA margins, which is post all the unallocated — I mean corporate costs et-cetera, went up from 5.2 basis to 5.6, so 40 basis-point improvement. I’m just trying to understand why a lot of it didn’t flow down. What am I missing here?
Sujit Kumar Mahato
Yeah, yeah, sure. Sure. In terms of the movement, I would say around 60 basis-points came in because of our increase in the private-label pharma share make. Basis-points came in because of the non-pharma private-label share mix. And due to lower inventory provision, we had a 60 basis positive impact during the current quarter. And your observation is right, the entire thing did not flow down to the EBITDA as certain costs also went up. For example, in Samil Nadu, the minimum wages increased by 28%. This has also eaten away some portion of our store-level EBITDA. And we also set-up, as we had explained earlier, certain warehouses, which had costed us some amount of money.
Prateek Poddar
So understood. No, but let’s — okay. So I can also ask you when I look at store-level is going up by 80 basis-points. Okay, fair. Thanks. Thanks. Thanks a lot for this clarification. Best wishes for the future.
Operator
Thank you. The next question comes from Prakash Kapadia from Spark PMS. Please go-ahead. Please go-ahead.
Prakash Kapadia
Yeah. Couple of questions from my end. You know, what exactly is the store-level revenue growth which is reported in the PPT because if I take the absolute revenue growth of mature stores, it doesn’t come to 4.5%. So typically, most of the retail companies break sales down into SSSG growth, new-store addition and sales from new stores. So if we can do that, we’ll give a lot of clarity to investors as you know, retail, that’s the key metrics because here it’s very difficult to understand these numbers, 8.3, 4.4%. So if you could give some insight, that would be helpful. And secondly, as I see net store additions were 60 during the quarter, which brings us to around 205 stores. So what has changed because on every quarter we are scaling down the expected store addition? So those are my two questions.
Madhukar Gangadi
So for us, I know this year we have been a little up-and-down on the new-store opening and all, but lot of our bandwidth has been taken-up by focusing on the private-label one and two on setting up the new warehouses and everything else, we have seen that some of the supplies have suffered a little bit because of the super-fast growth which we have had in the last few years. So some of that we are already getting done. On the EBITDA, it’s on the same-store sales growth itself. For us, you know, we actually — and this is something which we have been talking about even before the IPO and everyone and even before the I feel and all. For us, we always look at the overall store-level EBITDA and to us, that is the most important thing. The reason I say that is in-markets like Hyderabad, Bangalore and Chennai and all where we already have 300, 4450 kind of stores. We have to put in new stores because new markets keep coming up and no matter how much of a different catchment it is, it ends up cannibalizing some of our stores anyway. And so there is always that effect. So if you were to basically look at it, a store which is doing, let’s say, a lack of rupees per day, if he is probably bringing in more customers from slightly farther than what you would want. And so if you go and set-up a new-store in that catchment, maybe 500 meters, 750 meters away, we will always see some decrease in sales. We’re not really concerned about that. When we set-up a new-store, we try to figure out whether it will breakeven in three or four months or not and whether it will actually get to the expected level of EBITDA within two or two-and-half years, which is around 10% at the store-level. And two, on the existing stores, one, we — let us say, even if the sales were to dip a little bit, our goal would be to make sure that these are the stores doing 10% or more. So overall, we would continue to gain market-share in everything else in that area, but for us to mention explicitly SSG would be a little bit more tough given how we operate. So for us, it’s more the market level and 1% EBITDA kind of thing, which we actually look at.
Prakash Kapadia
Yeah. I do understand the point of profitability, but typically that’s the standard retail metrics, which is the key performance indicator and it becomes difficult to evaluate businesses and cycles over a period of time. So think about it, I think maybe the SSSG breakup, new-store addition store-sales from new stores would really be helpful to investors. That’s my suggestion.
Madhukar Gangadi
Absolutely. We will definitely consider that.
Prakash Kapadia
Thanks.
Operator
Thank you. Thank you. The next question comes from Akhil Parik from B&K Securities. Please go-ahead.
Akhil Parekh
Hi, thanks for the opportunity and congratulations on a good set of numbers and healthy operating cash-flow generation. My second question is on the penetration level of private-label, you did highlight that the penetration levels are different across small versus larger towns. But going-forward, say, next two, three years, how are we seeing the of private labels and will it be because of the increasing in-depth of private-label in the existing stores or by more by increasing the bit of presence of private-label in industries.
Madhukar Gangadi
So both. We’ve definitely increased the range of products which we have out there and we definitely try and convert more customers into our private labels. But I also hope that you know some of the positive benefits which the private-label has on the consumer population out there will get talked about and more new customers will walk-in from neighboring stores to our stores. And so that will also help us in basically increasing our overall sales growth. For us, it’s going to be a combination of all three. And I think the longer we are in the market, the more likely it is that it will continue to actually grow.
Akhil Parekh
Sure. Second question on the store expansion, right? I mean, think answering to the previous participant, you highlighted that focus is more on the profitability rather than growth and more on gaining the market-share within that particular geography. So we have seen a reduction or decline in SSG over the last four, five quarters over Q3 of FY ’24 versus Q3 of ’25, I believe part to do with the increase in sales contribution from private-label. But are we monitoring if there is a cannibalization of sales because we are expanding aggressively within a similar cluster basis.
Madhukar Gangadi
So we are — but the thing which concerns us even more is that each individual store is it basically sticking to the profitable — profitability numbers which we expect to have. So that would be the first thing we should actually look at, one. Second, one of the things which probably is showing up as lesser for us is also this that we’ve always been talking about stores which are more than one year. The number of stores which are between, let’s say, 12 months-to 24 months have been decreasing constantly. And that number, those — the those number of stores, the stores between 12 and 24 are going to be growing much faster. And so decrease in those number of stores would have probably shown it as a decreasing overall number, but I don’t think the overall mature stores themselves are behaving any differently from what they were earlier.
Akhil Parekh
Okay. Okay. So should we assume that SSG of whatever 4%, 5%, is that a sustainable rate like for next two, three-year perspective ’23? Because certainly helps in terms of absorption of fixed-cost, right? I mean at one end, we want to improve the profitability, but at the other end, if not focused on SSG, it may not help us in terms of absorption of fixed-cost, right? I mean that’s how the typical retail model works. So what would be a normal — normalized SSG growth rate if we were to expand, say, 500, 600 outlets every year, say, for next two to three years.
Madhukar Gangadi
I think we’ll be at least at the level — current level where we are, I don’t really see it dipping any further at all. I don’t think that’s going to be a problem because we are not going to be adding so we are looking to add scores next year, so I don’t see.
Akhil Parekh
Sorry, just to clarify, you’re saying 3% to 4% is the base, new base at least.
Madhukar Gangadi
So 4% to 5% is what we are looking at actually. That is the number at which we can be adjusted sales as far as the profitability is concerned.
Akhil Parekh
Okay. Okay. Sure, sir. That’s all from my side and best luck for.
Operator
Thank you. Thank you. The next question comes from the line of from Public Alternatives. Please go-ahead.
Prolin B. Nandu
Yeah. Hi,. Thank you for taking my question. While you have talked a lot about private-label, but my question is also on the same. So Madhukar, you mentioned you know about the difference between metros and non-metros. But are you positively surprised by how fast the private labels are taking off? Can you give us some instances as to what are the products within pharma, which are tough to crack? And have you had customers come asking for private labels in those kind of products as well? And in some of the stores where you have introduced private labels much earlier than rest of your network. Are you probably surprised by, let’s say, that number from a net sales point-of-view reaching maybe 25-odd percent. Can you give some qualitative color on private-label and whether it is surprising your internal estimates at all?
Madhukar Gangadi
Not really. We expected this growth. I actually expected a slightly higher-growth honestly. But yeah, this is, you know, not out of, you know, I would say it’s not surprising. And as I said earlier, you know, the numbers are smaller towns do slightly better and all. And across the country now, we are almost at the same level, I would say, because it’s now been more than I would say, we started in June of ’23, it’s almost one and a half year right now. The full country started in November. So even for the full country, it’s been more than four quarters right now. So not much out there. But to give you an idea, you know the number of — I would say the private-label share of chronic versus acute is exactly the same as it is for the regular brands. So I think 60% to 70% of our sales are private-label comes from the chronic segment. And so people are buying all those and ethanols and everything else also at the same level. The top-10 molecules probably will have at least six chronic and four acute molecules.
Prolin B. Nandu
Okay. Okay, that’s clear. Thank you for that. Now the second question is more on competition, let’s say, from quick commerce, right? While what is appreciated that a typical quick commerce versus a quick commerce for pharma requires a very different kind of a setup. But in case if the competition were to ramp-up and you were to match their service levels in terms of tours or whatever for all your stores, which you are doing for some part of your store, how much of a drag will it be on margin, how soon you will be able to ramp-up right to probably meet the standards of, you know, quick commerce, let’s say, even if you were to you know, launch two hours delivery from your stores, right, how soon can you do it and what kind of a drag will it create on your margins?
Madhukar Gangadi
Yeah, as long as the customer is willing to pay the delivery fee, I don’t think there’ll be a drag at all. If the delivery were to be 100% free, today we charge around INR20. If we shift to a zero delivery fee and also try to kill ourselves by doing a 10-minute delivery, then yeah, it would be a drag, but I don’t foresee that happening. If we decide to do a 10 or a 20 minute delivery, if you bring on delivery partners, we are looking at the prices right now. The prices are not something which the customer will not pay, right? So I don’t really expect this to be attractive.
Prolin B. Nandu
Right, but how soon will it take, Madhukar, for you to ramp-up, let’s say, where you are offering a delivery, all our stores.
Madhukar Gangadi
No, no, they will never do all our stores at any point of time because customers across all the 600, 700 small towns in which we are there, don’t really expect this service and don’t really want to pay that kind of delivery fee also. It will always be there in the urban areas, in the highly dense networks where you can actually go and supply. I don’t think it’s going to — so we already have a two-hour thing. Now do we want to ramp it up to a much faster delivery time or not? That’s something which we have not yet decided. But we are monitoring the situation right now and we will figure out the best way forward to that in the next year.
Prolin B. Nandu
But, a couple of quarters back, you had probably ramped down this right in the number of stores or whatever your reach was. And right now, what I understand is that you are not — you’re not sensing any reason for you to ramp-up right. But am I correct in terms of competition and in terms of what the market is doing?
Madhukar Gangadi
We are monitoring the space right now. We will see depending on how the whole — see, it all depends, right? If you are able to get some delivery partners who are able to do it at a very good price, at a price at which the customer is willing to pay, then we could do it all right. But yeah, we will have to figure that out.
Prolin B. Nandu
Okay. All right. That’s it from my side. Thanks a lot much and all the very best.
Operator
Thank you. Ladies you. Ladies and gentlemen, we would take that as our last question for today. I now hand the conference over to Mr Sujit for closing comments.
Sujit Kumar Mahato
Thank you, Sagar. Thank you, ladies and gentlemen that I thank all the participants on this call for your interest in the journey. Our Investor Relations teams can be contacted at ir@medplus. Thank you.
Operator
Thank you. On behalf of Health Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.