Summary
Zota Health Care Limited - Q3 FY 2026 Earnings Call Summary Thursday, February 05, 2026, 4:00 PM
Event Participants
Executives 3 Himanshu Zota (Founder & Whole Time Director), Moxesh Zota (Managing Director), Dr. Sujit Paul (Group CEO)
Analysts 8 Arman (Blue Sky Fintech), Bhaskar Kangal (Three Head Capital), Chintan Sheth (Girik Capital), Harsh Shah (Seven Rivers Holding), Manan Shah (Moneybee Investment Advisor), Neil Joshi (Individual Investor), Nishita (Sapphire Capital), Parikshit Kabra (Pkeday Advisors LLP), Umesh Ladda (Nirmal Bang), Zohaib Rashid (Swinglist)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹142.95 crores | +98.2% YoY; Driven by aggressive Davaindia store expansion and improved network scale. |
| Gross Profit | ₹86.18 crores | +113.9% YoY; Reflects benefit of scale and higher volumes; Gross Margin improved to ~66-67%. |
| EBITDA | ₹1.28 crores | Significant sequential moderation; Impacted by ₹52 crore employee cost and pre-operative expenses for 400+ pipeline stores. |
| Davaindia GMV | ₹121.72 crores | ~100% YoY growth; Reflects store productivity despite a 5.15% negative impact from GST reductions. |
| Davaindia Store Count | 2,331 units | Added 276 stores in Q3 (231 COCO, 45 FOFO); Total network consists of 1,438 COCO and 893 FOFO stores. |
| Quarterly Footfalls | 49 lakhs | +81.5% YoY; Stability in per-store footfalls despite the high proportion of new, low-traffic stores. |
| Average Wallet Spend | ₹231 | Remained stable YoY; Management views this as underlying growth since new stores typically start at <₹200. |
Geographic & Segment Commentary
- Davaindia Business: This segment remains the primary growth engine, contributing 80% of total revenue. The network now spans 23 states and 5 Union Territories. Management is focusing on a shift toward the Company-Owned Company-Operated (COCO) model to capture higher margins, with 586 COCO stores added in the first nine months of FY26.
- Domestic & Export Sales: Traditional domestic sales contributed 11% to revenue, while exports accounted for 6%. These segments leverage the company’s legacy manufacturing and distribution capabilities to support the capital-intensive retail expansion.
- Everyday Herbal Group: This segment contributed 2% to the quarterly revenue, focusing on wellness and OTC products that complement the Davaindia pharmacy offerings.
Company-Specific & Strategic Commentary
- Qualified Institutional Placement (QIP): Successfully raised ₹350 crores from institutional investors to fund the rollout of COCO stores and working capital for the next two fiscal years (FY27-FY28).
- Strategic Acquisition: Acquired 100% stake in “Curexis” (SKIA brand), a retail pharmacy platform, to block competition and expand the generic medicine footprint with a differentiated consumer experience.
- Subsidiary Formation: Incorporated KMHP Ventures Limited to manage the marketing and trading of pharma products, aimed at optimizing sourcing margins as the retail network scales.
- Brand Marketing: Initiated heavy BTL and TVC campaigns featuring brand ambassadors Sunil Shetty and MS Dhoni to drive neighborhood awareness and long-term brand equity.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Store Expansion | 5,000 stores by March 2029 | Long-term target remains intact; FY27 will see 800-1,000 COCO additions phased more evenly than FY26. |
| Gross Margin | 70% within 4-6 quarters | Expected to improve by 50-100 bps per quarter through sourcing efficiencies and higher COCO mix. |
| EBITDA Margin | 15% - 17% (Mature state) | Management targets this range for the consolidated entity once the store network matures and expansion pace stabilizes. |
| Funding | No further QIPs for 2 years | QIP proceeds and internal accruals from maturing stores are expected to cover all requirements through FY28. |
Risks & Constraints
| Risk | Context |
|---|---|
| Operating Leverage Pressure | Aggressive front-loading of store expansion has spiked employee costs (₹52 crores) and rentals, depressing near-term EBITDA margins to near-break-even. |
| GST/Pricing Impact | Recent GST reductions (12% to 5%) on medicines have lowered MRPs, creating a ~5.15% headwind on reported GMV growth despite volume increases. |
| Execution & Training | Rapidly hiring for 400+ stores simultaneously increases the risk of “dispensing errors” and requires significant lead time for pharmacist licensing and training. |
Q&A Highlights
Cost & Margin Drivers
- Question: Why did employee costs spike so sharply to ₹52 crores this quarter? (Chintan Sheth)
- Answer: The company is currently carrying costs for 231 newly opened stores and over 400 stores “in-process” where staff are already hired and being trained; this is a transitory “front-loading” to meet annual targets (Himanshu Zota).
Unit Economics & Cohort Performance
- Question: Is store productivity flattening, as the oldest cohort GMV dropped from ₹7 lakhs to ₹6.85 lakhs? (Harsh Shah)
- Answer: No, this is purely the 5.15% GST reduction impact on MRPs; on a like-to-like basis, the oldest stores grew 4% QoQ and are trending toward ₹1 crore annual revenue per store (Himanshu Zota).
Strategic Rationale
- Question: What is the purpose of the SKIA brand acquisition? (Swaraj Mehta)
- Answer: SKIA serves as a strategic “blocker” against forecasted competition in the generic space and allows for a differentiated consumer experience while maintaining the core focus on affordable healthcare (Dr. Sujit Paul).
Promoter Remuneration
- Question: Why link director commission to 1.1% of turnover when the company is at an EBITDA break-even? (Zohaib Rashid)
- Answer: The commission is part of minimum remuneration for founders with 30 years of experience; at 66% gross margins, a 1% turnover-linked cost is not considered material to the long-term model (Himanshu Zota).
Key Takeaway
Zota Health Care reported a robust 98.2% YoY revenue growth in Q3 FY26, driven by the aggressive expansion of its Davaindia network to 2,331 stores. While top-line momentum and gross margins (66-67%) remain healthy, EBITDA was pressured by a significant spike in employee costs to ₹52 crores, as the company front-loaded hiring for over 400 pipeline stores. The successful ₹350 crore QIP has secured the capital runway through FY28, shifting the focus toward maturing the existing COCO store base. Management expects a normalization of operating expenses over the next two quarters and maintains a long-term target of 5,000 stores by FY29. The strategy remains centered on capturing higher margins through the COCO model and aggressive brand building with celebrity endorsements to drive footfalls in a pricing-regulated environment. Forward performance hinges on the ability to convert the massive recent store additions into profit-generating mature units while maintaining a 15-20% growth rate in older cohorts.
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