Entero Healthcare Solutions Ltd Management Discussions

INDIAN ECONOMIC OVERVIEW

India continued to outpace the worlds major economies amid heightened global uncertainty, driven by domestic consumption and sustained investment in infrastructure and productive capacity. During the financial year 2025-26, the global environment was shaped by geopolitical instability, policy shifts across advanced economies, particularly around trade and industrial policy, tari escalations, rising energy prices, and volatile capital o ws. The Indian government focused on strengthening domestic fundamentals and cushioning external pressures through structural reforms including GST 2.0 alongside tax-relief measures and supportive monetary and scal polic y.

Indias structural advantages a large and growing consumer base, favourable demographics, rising digital penetration and improving ease of doing business continue to reinforce the long-term economic outlook. Real GDP growth is projected at approximately 7.4-7.6% in FY26, with broad-based expansion across manufacturing, services and infrastructure. Headline ination moderated through the year to 3.4% in March 2026, within the Reserve Bank of Indias tolerance band of 2% 6%. Indias external position remains stable, with foreign exchange reserves of approximately US$697 billion as of early April-2026, having touched record US$728 billion during the year.

Indias economic momentum is further underpinned by strong GST collections, growing participation of domestic institutional investors and government-led initiatives in renewable energy, infrastructure, and digital innovation. Industrial production and PMI indicators remained in growth territory. Collectively, these factors position India to sustain its growth trajectory and continue to contribute meaningfully to global economic expansion in the years ahead.

Indian Pharmaceutical Industry

The Indian pharmaceutical market was valued at approximately US$55 billion in 2025 and is projected to reach US$120 130 billion by 2030. This will be driven by increasing adoption of specialty medicines, biologics and complex therapies. The Indian export market is as large as the domestic consumption market. The industry is f th largest contributor to manufacturings GVA and largest supplier of generic medicines globally.

During the onancial year 2025-26, the domestic pharmaceutical market grew by approximately 10%, reaching around 2.56 lakh crore, with rising chronic disease prevalence, increased healthcare spending, and improved access to medicines across urban and semi-urban markets. The sector is expected to maintain its growth momentum in FY27.

The industry is supported by a range of favourable government policies aimed at strengthening domestic pharmaceutical manufacturing and innovation. Key initiatives, including the Production Linked Incentive (PLI) scheme, increased budgetary support for the sector, and the expansion of a ordable medicine programmes, are expected to enhance manufacturing capabilities and improve access to medicines across the country. Continued expansion of organised healthcare infrastructure, rising penetration of health insurance, and increasing adoption of digital healthcare platforms further underpin long-term demand growth.

A structurally signicant and emerging sub-segment within this landscape is GLP-1, which is getting increasing traction across both the anti-diabetic and metabolic treatment categories. Driven by rising prevalence of diabetes, obesity and expanding therapeutic applications including weight management the domestic GLP-1 market is expected to grow nearly v efold from approximately 1,000 1,200 crore in 2025 to 4,500 5,000 crore by 2030. Improved a ordability led by drug prices declining by more than 50% following patent expiry in March 2026 is expected to progressively expand penetration. Type 2 diabetes is projected to account for approximately 60 70% of the market, with the balance driven by the growing weight management segment. This emerging segment can create incremental distribution opportunities for us over the medium term.

The overall outlook for the Indian pharmaceutical industry remains constructive, underpinned by rising healthcare demand, increasing chronic disease prevalence, growing urbanisation, higher healthcare awareness and improved medicine a ordability. Entero Healthcare Solutions Limited (Entero or the Company) derives its revenue from the domestic pharmaceutical market, which is characterised by stable and resilient demand, positioning the Company well to navigate external uncertainties while sustaining operational continuity and consistent growth.

INDIAN MEDTECH INDUSTRY

Indias MedTech industry represents one of the most signicant structural growth opportunities within the broader healthcare ecosystem. The Indian medical devices market is currently estimated at approximately US$14 16 billion, with growth expected in the range of 12 14% per annum positioning India as the fourth-largest medical devices market in Asia and among the top 20 globally. This growth is driven by rising healthcare demand, expanding medical infrastructure, growing procedural volumes and increasing adoption of advanced diagnostic and treatment technologies.

A dening structural feature of the market is its heavy import dependence, with approximately 75 80% of domestic device consumption by value sourced from the United States, Germany, Japan, and China. The Government of India has responded with a coordinated policy framework comprising the Production Linked Incentive (PLI) Scheme for Medical Devices, the National Medical Device Policy 2023, and the development of dedicated medical device manufacturing infrastructure. These interventions are progressively increasing the domestic manufacturing share, with a growing cohort of Indian manufacturers active in in-vitro diagnostics (IVD), cardiovascular devices and imaging. Domestic players are gaining competitive ground through product innovation, deeper Tier-II and Tier-III distribution penetration, PLI-linked capacity investments and the inherent cost advantage of local manufacturing.

The outlook for the Indian MedTech market is constructive, with a multi-year growth opportunity supported by continued government health sector spending, capacity expansion, insurance-driven demand and favourable demographic trends. Enteros strategic push into MedTech distribution is directly aligned with these structural tailwinds, providing the Company with a platform to diversify its revenue mix and further enhance protabilit y.

Domestic Distribution Industry Overview

The Indian pharmaceutical and healthcare products distribution sector continues to exhibit robust growth potential, underpinned by rising healthcare accessibility, increasing chronic disease prevalence, and continued policy support directed at improving healthcare infrastructure and supply chain efficiency .

The total addressable market for pharmaceutical and medical devices distribution in India stood at approximately US$33 billion in FY23 and is expected to grow at a CAGR of 10 11% through FY28. This growth is further supported by a structural shift towards organised distribution. Indias healthcare distribution sector remains structurally underpenetrated in terms of organized distribution. Approximately 90% of the market is still serviced by small, region-specic distributors. This fragmentation poses challenges in scale, compliance, technology adoption and access - particularly in Tier-II and Tier-III geographies. However, with the undergoing market shift and rising compliance standards, technology adoption, and consolidation imperatives, the share of organized distribution in India is expected to rise.

Entero is well positioned to ride this wave of consolidation with a proven execution track record, access to capital, technology backbone, and trusted relationships across the ecosystem. We offer a full-stack distribution solution that enables both demand generation and fullment across the healthcare ecosystem. We aim to scale responsibly while

unlocking e ciencies and transparency for all stakeholders.

BUSINESS OVERVIEW

Financial year 2025 26 marked a signicant milestone in our evolution as an integrated healthcare supply chain platform, with a presence spanning both pharmaceuticals and MedTech. This broadened product spectrum has strengthened our ability to serve the evolving requirements of our customers while enhancing the depth and resilience of our offer ing across the healthcare value chain.

Our operating platform today reec ts meaningful scale and depth. We have built relationships with over 3,300 manufacturers and maintain a portfolio exceeding 95,000 SKUs. Through a network of 135 warehouses, we service more than 100,000 retail pharmacies and over 3,500 hospitals across 523 districts in India. This extensive pan-India footprint provides us with a strong competitive position, underpinned by scale, product breadth, and consistent service capability.

We are leveraging our proprietary technology stack as a key enabler of operational excellence. This includes our in-house ERP systems, Entero Direct platform which provides real-time inventory visibility and seamless order execution and the HealthEdge initiative, designed to deepen retailer engagement. Together, these platforms support efficient inventory management, improve ll rates, and the smooth integration of acquired businesses into our operating framework.

Our competitive differ entiation is anchored in our ability to offer a comprehensive product basket, maintain high service standards, and deliver reliable fullment, enabling customers to source meaningful share from us. This positioning is reinforced by the depth and breadth of manufacturer relationships. These attributes, collectively, translate into enhanced customer stickiness, higher wallet share, and a differ entiated value proposition in terms of product availability, service reliability, and overall customer experience.

These attributes position the Company well to capitalise on the structural growth opportunities in Indias healthcare supply chain, while delivering improving financial outcomes and long-term value to all stakeholders.

Our MedTech Strategy

The key strategic focus during the year has been expansion into MedTech, a high-growth segment that offer s structurally superior margins relative to pharmaceutical distribution. Our capabilities in this segment range from fullment-led arrangements to value-added commercial roles and exclusive pan-India distribution partnerships with leading manufacturers, leveraging our existing distribution network and customer relationships. We are progressively prioritising higher-value engagement models that enable us to play a deeper role across demand generation and customer engagement, thereby enhancing both the strategic relevance and the economic contribution of our relationships.

As our MedTech initiatives continue to scale, the segment is expected to emerge as an increasing contributor to our consolidated protabilit y. Post integration, the MedTech vertical is expected to cross 1,000 crore in annualised revenue in FY27. The MedTech vertical is one of the most compelling long-term value creation opportunities within our portfolio and a central pillar of our strategic agenda.

Organic Growth

We continue to prioritise organic growth that is both sustainable and value accretive. Consistent and healthy organic growth reec ts the strength of our customer relationships, the quality of our execution and the relevance of our offer ings in our served markets.

During the financial year, we delivered meaningful acceleration in organic growth, with like-for-like organic revenue growth reaching 15.6% year-on-year in FY26 as we continued to outperform Indian Pharmaceutical Market, which grew by approximately 10% in the period. This was driven by deeper penetration within existing customers, expansion of wallet share, and addition of new customers across key geographies. Our ability to consistently meet service commitments and proprietary operating platform enables us to strengthen our position with long-standing customers and emerge as a preferred partner for new ones. A deeper understanding of customer requirements, and a continued focus on tailoring our solutions to their evolving needs, has translated into improved retention, higher sales, and a steady rise in our share of business within each customer relationship.

Looking ahead, we remain condent in our ability to sustain this organic growth trajectory. Our focus will continue to be on deepening customer relationships, expanding wallet share, and enhancing service quality leveraging our platform to deliver differ entiated value across every market we serve.

Inorganic Growth

We have built a strong and consistent track record of identifying, acquiring, and integrating businesses that complement and strengthen our healthcare distribution. During FY26, we completed seven strategic acquisitions across both pharmaceutical distribution and the high-margin MedTech segment, contributing aggregate annualised revenue over 1,000 crore. Of these, three acquisitions were in the MedTech segment Anand Chemiceutics, Ace Cardiopathy and Bioaide Technologies, reec ting our deliberate focus on deepening our presence in a category that offer s structurally higher margins and signicant headroom for consolidation in a fragmented landscape. These additions have expanded our capabilities in in-vitro diagnostics (IVD), cardiology, and consumables.

Acquisition targets are selected on the basis of a clearly dened strategic t in terms of product portfolio and regional network strength that may complement our existing footprint. These additions have broadened our geographic reach, expanded our presence in higher-margin product segments, enriched our SKU portfolio, and deepened our relationships with leading manufacturers. Our demonstrated ability to close, integrate, and scale acquisitions reinforces our position for regional distributors seeking scale and long-term value creation.

Our inorganic growth strategy is anchored in a well-developed and proven acquisition model, iterated over successive acquisition cycles. This framework encompasses rigorous diligence on target quality, financial performance and cultural alignment; a well-dened integration process covering systems, supply chain, procurement, human capital and compliance; and clearly identied value creation levers, including procurement consolidation, operating cost rationalisation, and onboarding onto our proprietary technology platform. This disciplined approach has enabled us to integrate acquired businesses efficient ly while progressively unlocking synergies that enhance long-term value.

Financial Performance Highlights

FY26 delivered a strong financial performance reec tive of consistent execution across the business. Consolidated revenue grew 29.35% year-on-year to INR 6,591 crore (FY25: INR 5,096 crore), driven by 13.4% organic growth and 16% inorganic contribution. During the same period, the Indian Pharmaceutical Market (IPM) grew by approximately 10%, reec ting continued market share gains by the Company. Gross prot rose 39.91% year-on-year to INR 680.38 crore, with margins improving by 78 basis points to 10.32%, driven by margin-accretive product categories and procurement e ciencies. EBITDA for the year stood at INR 265.96 crore, growing 55.03% year-on-year, with EBITDA margins improving by 67 basis points to 4.03%. Prot After Tax (PAT) grew 35.75% to INR 145.84 crore (PAT margin: 2.21%), notwithstanding a one-time exceptional charge of INR 6.1 crore (net of tax) arising from the implementation of the new Labour Code.

Margins have demonstrated a clear and steady improvement trajectory, with further expansion expected to be driven by ongoing business mix improvement, integration benets , and operating leverage as the business scales further. Another notable highlight of financial year is meaningful improvement in operating cash o w, with OCF for the financial year improving signicantly from an outo w of INR 76.90 crore in FY25 to net cash ino w from operations of INR 96.20 crore in FY26, driven by better inventory management, tighter receivables control and improved EBITDA margins. This marks a signicant st ep towards better capital efficiency .

Working Capital and Return Metrics

Working capital management remains a key operational priority. Net working capital days on a like-for-like basis improved steadily through the year from 70 days for FY25 to 68 days for FY26 reec ting consistent and measurable progress in working capital efficiency . During the year, we focused on higher efficiency across inventory and receivables, along with strengthened systems and tighter controls. We will continue to focus on further improving working capital cycles as the business scales.

Our Return on Capital Employed (ROCE) improving to 14.60% in FY26 (from 10.7% in FY25) and Return on Equity (ROE)* improving to 12.49% in FY26 (from 7.7% in FY25), reec ting a sustained positive trajectory in capital efficiency . The Return of Net Worth (RONW) as on March 31, 2026, stood at 8.32% as compared to 6.07% as on March 31,2025.

Other ratio analysis are provided in Notes to the Financial Statement.

Key Ratios (Consolidated basis):

	Particulars	31 Mar 26	31 Mar 25	YoY Variance (%)	Reason for Variance
(a)	Current Ratio	1.58	2.46	-36%	Lower current ratio in the current year is mainly on account of increased current liability as compared to the comparable period.
(b)	Debt-Equity Ratio	0.32	0.17	92%	Higher debt equity ratio in the current year is mainly on account of increased debt as compared to the comparable period.
(c)	Inventory turnover ratio	7.87	8.53	-8%	Decrease mainly due to new acquisition for which sales is included only part of the year post acquisition.
(d)	Trade	6.45	7.05	-8%	Decrease mainly due to new acquisition for which sales is included only part of the year post acquisition.
	Receivables turnover ratio
(e)	Net prot margin	2.21%	2.11%	5%	Increase net prot mar gin ratio is mainly on account of increase in gross margin coupled with reduction in tax expense as compared to the comparable period.
(f)	Operating Prot Margin (%)	4.03%	3.37%	20%	Increase operating prot mar gin is mainly on account of increase in gross margin as compared to the comparable period.
(g)	Interest Coverage Ratio	6.36	6.24	2%	No signicant change

RISK AND CONCERNS AND RISK MANAGEMENT

Risk management is integral to our business strategy and operations. We have a Risk Management Framework to mitigate and minimise the impact of risks on our business operations. We have procedures for Risk Identication, Risk Assessment, Risk Treatment/Mitigation and Risk Review & Closure

Risk Category	Risk	Mitigation Plan
M&A Integration Risk	To the extent we fail to identify, complete and successfully integrate acquisitions with our existing business or should the acquisitions fail to deliver internal results, our financial performance could be adversely affect ed.	Our M&A team actively seeks to identify new targets that aid Territorial expansion, Territorial dominance or give a Unique product mix. Members within the business team focus on integration of the acquired business with the mainstream by actively providing support and guidance to the newly acquired entities.
Supply Chain Disruptions Liquidity Risk	We have no control over the supply of products from suppliers which could be impacted by a number of factors. Lack of available liquid financial assets such a cash may cause di culties in achieving projected growth as the business is working capital intensive	We have contingency plan designed to enable us to transfer goods from alternate locations within the group. The Company raised capital through Initial Public O ering which provided adequate liquidity to full the Companys growth plans. The Company is also taking several measures to drive revenue growth and optimise costs to improve cash o ws.
Product Integrity	Our business is exposed to risks inherent in the distribution of healthcare products, such as distributing expired, defective or counterfeit products, transportation damage and customer returns. This could result in financial losses, damage to our reputation and potential product liability claims, all of which could harm our overall financial performance and customer trust. Any claims, regardless of validity, could tarnish our reputation and condenc e in our products.	We have distribution relationships with healthcare product manufacturers. Under these distribution arrangements, we buy products directly from manufacturers meeting agreed quality standards, with any defects promptly replaced by the manufacturer.
Operational Risk	Any disruption to the operation of our warehouses, or to the development of new warehousing and logistics facilities, could adversely impact our business, onancial health, and operational results. Natural disasters or other unforeseen catastrophic events may disrupt our warehouse operations and hinder new facility development, impacting our business signiocantly.	We have a nationwide presence of 100+ distribution warehouses located across India. This broad network enhances our resilience to potential disruptions by providing redundancy and alternative options for maintaining operations during unforeseen events.
Technology Risk	Loss of data and unauthorised access to information technology systems due to security breach, could adversely impact the business operations of the Company.	The Company has a robust cyber security framework in place through use of antivirus, r ewalls to protect against possible breach. The Company also uses remote data backups and the latest versions of software to mitigate technology risks.
People Risk	Human capital is an important pillar for the Companys success. It is important to attract, engage, develop and retain qualioed and experienced employees, including key executives and other talent. High attrition rates could impact the performance of the Company.	Employee retention is managed through learning and skill development workshops, employee engagement initiatives, Entero Cares programme and rewards / recognition programmes. High performers are given opportunities to move to cross-functional roles in order to enhance their overall career.

INTERNAL CONTROL AND ITS ADEQUACY

The Company has an adequate system of internal controls commensurate with the nature of its business and the size and complexity of its operations. The Company has adopted various policies and procedures covering all financial , operating and compliance functions. These controls have been designed to provide a reasonable assurance over:

E ectiveness and efficiency of operations;

Prevention and detection of frauds and errors;

Compliance with applicable laws and regulations;

Safeguarding of assets from unauthorised use or losses;

Accuracy and completeness of the accounting records and

Timely preparation of reliable financial inf ormation.

The Audit Committee reviews the Internal controls and also meets Internal Auditors and Statutory Auditors for their inputs on the internal controls, periodically. The Internal Controls of the Company are adequate and commensurate with its size and nature of operations.

Material Developments in Human Resources

Our Human Resources play an integral role in driving business growth. During FY26, the Company carried out various programs and initiative for its workforce for employee retention, well-being and growth. During FY26, the human relations remained cordial. As on March 31, 2026, the Companys employee strength stood at 4,698 employees (on Consolidated basis).

Strategic Priorities and Outlook

Our strategic priorities are anchored in building a sustainable and scalable business for the long term. We aim to sustain and strengthen the organic growth trajectory, driven by deeper customer engagement, broader geographic reach and continued operational discipline. We will expand our presence into adjacent product segments that offer attractive long-term growth potential, including medical devices, diagnostics, trade generics, specialty pharmaceuticals, OTC products and wellness categories. These adjacencies will complement the core business, enhance customer stickiness and open new avenues of value creation for us. We will invest in business scalability, driving process e ciencies, enabling the overall customer and supplier relationships. We will continue to evaluate inorganic growth opportunities in a selective and disciplined manner, with a view to enhancing geographic reach, broadening capabilities, and augmenting the product and service offer ing. These strategic priorities reec t our aspiration to build an institution that plays a meaningful role as a vital enabler of healthcare access across India.

Cautionary Statement

The statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, and expectations, maybe forward-looking statements within the meaning of applicable securities laws and regulations. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are di cult to predict. These risks and uncertainties include but are not limited to, the performance of the Indian economy and various international markets, the performance of the industry in India and globally, competition, changes in the government regulations and tax laws as well as the Companys ability to implement its strategy successfully, future growth and expansion, technological implementation, changes and advancements, changes in revenue, income or casho ws, the Companys market preferences and its exposure to market risks, as well as other risks. Actual results could differ from those expressed or implied in the forward-looking statements. The Company assumes no obligation to update, amend, modify or revise any forward-looking statements, whether as a result of any subsequent developments, new information, future events, or otherwise.

Source:

1. Ministry of Statistics and Programme Implementation (MoSPI) CPI Press Release, January 2026

2. Press Information Bureau, Government of India

3. India Brand Equity Foundation (IBEF) Indian Economy Overview

4. International Monetary Fund World Economic Outlook

5. IBEF Indian Pharmaceutical Industry

6. CareEdge Indian GLP-1 Industry Report