Entero Healthcare Solutions Ltd Management Discussions

INDIAN ECONOMIC OVERVIEW

India continues to shine as a bright spot in the global economic landscape. At a time when several major economies are grappling with slowing growth and heightened uncertainties, India has maintained a steady and resilient growth trajectory. This performance has been underpinned by strong macroeconomic fundamentals, prudent policymaking, and sustained government reforms aimed at enhancing ease of doing business and fostering a favourable investment environment. These concerted e orts have further cemented Indias standing as a preferred destination for global investors.

For FY 2024-25, Indias real GDP growth is projected at 6.5%, rea rming its position as the worlds fastest-growing major economy. This growth momentum is being driven by strong private and government consumption, coupled with a positive contribution from net exports - achieved despite the volatile and challenging global backdrop.

On the ination front, recent trends have been encouraging. Core ination remained moderate across both goods and services categories, while the fuel segment continued to witness deation. This has largely been a result of softer global crude oil prices, government-led reductions in fuel taxes, and the growing adoption of renewable energy, which has gradually reduced reliance on conventional fuels.

The Consumer Price Index (CPI) inoation moderated to a seven-month low of 3.6% in February 2025, largely driven by a signiocant decline in food prices as the arrival of winter crops improved market supplies. However, core inoation (excluding food and fuel) edged up to 4.1%, reoecting persistent pressures in services and other non-food categories.

The governments timely and e ective interventions - including strengthening bu er stocks, enhancing food supply management, and subsidizing essential commodities - have played a pivotal role in easing inationar y pressures. These measures have provided the Reserve Bank of India (RBI) with the exibilit y to adopt a measured monetary policy stance, carefully balancing the dual objectives of price stability and growth support.

On the external front, Indias current account decit (CAD) is estimated at a contained 1% of GDP for FY 2024-25, marginally higher than 0.7% in the previous scal . This stability is underpinned by resilient nancial ino ws and a sustained surplus in the services trade. While risks from global nancial market volatility and foreign portfolio outo ws persist, Indias solid domestic investment momentum, stable ination environment, and proactive macroeconomic management have collectively bolstered the countrys capacity to sustain economic growth and navigate

external headwinds e ectively.

Adding further strength to the macroeconomic environment, the Union Budget for FY 2025-26 lays out a roadmap for sustainable growth through targeted initiatives. Key focus areas include driving agricultural development, strengthening domestic manufacturing under the ‘Make in India programme,

and accelerating skill development to create employment

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opportunities and enhance productivity.

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Indian Economy Real GDP Growth Rate (in %)

Outlook

Indias economic outlook for FY 2025-26 remains cautiously optimistic amid persistent global trade tensions and rising protectionist measures. Estimates from key institutions including the IMF, EY, and the Asian Development Bank project Indias GDP growth in the range of 6.3% to 6.8%, with a broad consensus around 6.5% to 6.7%. Growth is expected to be driven by a recovery in rural demand, moderating ination, and sustained government expenditure, even as geopolitical uncertainties and tari actions - including recent U.S. levies on select Indian exports - pose headwinds. While these tari measures could potentially shave 20-40 basis points o growth, Indias strategic diversication of trade partnerships, rising manufacturing competitiveness, accelerating digital adoption, and ongoing structural reforms are expected to mitigate risks and sustain momentum. Ination is projected to ease closer to the Reserve Bank of Indias target range, providing room for a measured monetary policy approach that balances growth imperatives with price stability. Indias large domestic market, resilient services sector, and expanding export base position the economy to

navigate global uncertainties and deliver steady growth in a dynamic international trade environment.

INDUSTRY STRUCTURE & DEVELOPMENTS

Indian Pharmaceutical Industry

Indias pharmaceutical market was valued at USD 50 billion in FY 2023-24, comprising domestic consumption of USD 23.5 billion and exports worth USD 26.5 billion. The country continues to hold its position as the worlds third-largest pharmaceutical market by volume and ranks 14th globally in terms of value of production.

The Indian pharmaceutical industry is characterized by a highly diversied product portfolio, encompassing generic formulations, active pharmaceutical ingredients (APIs), over-the-counter (OTC) medicines, vaccines, biosimilars, and biologics. This diversication, coupled with strong manufacturing capabilities and regulatory compliance, has established India as a prominent player in global pharmaceutical supply chains.

As per the National Accounts Statistics 2024 published by the Ministry of Statistics and Programme Implementation, the total output of the Pharmaceuticals, Medicinal and Botanical Products industry stood at 4,56,246 crore at constant prices for FY 2022-23, with a value addition of 1,75,583 crore. The

sector also remains a signicant source of employment, engaging approximately 9.26 lakh people during the year.

The Indian pharmaceutical market is poised for robust long-term growth, with projections indicating its expansion to USD 120 130 billion by 2030 and further to USD 400 450 billion by 2047. This growth trajectory is expected to be driven by multiple structural and demographic factors, including the rising incidence of lifestyle-related and chronic diseases, an aging population, increasing awareness around preventive healthcare, and a growing emphasis on holistic health and wellness.

Additionally, the consumerization of healthcare, marked by greater patient awareness, access to digital health platforms, and demand for personalized treatment solutions, is anticipated to further accelerate market growth and broaden opportunities across pharmaceuticals, nutraceuticals, and wellness products.

Indian Pharmaceutical Distribution Industry

The Indian pharmaceutical market, valued at 1.9 trillion in FY 2023, has grown at a 9% CAGR since FY 2018 and is projected to maintain a 9-10% CAGR through FY 2028, driven by rising chronic disease incidence, improved healthcare access, and increased consumer awareness. The addressable distribution market, including pharmaceutical products and medical devices, stood at 2.7 trillion (USD 33.4 billion) in FY 2023 and is expected to grow at 10-11% CAGR over the next ove years.

Pharmaceutical distributors in India typically handle not only medicines but also medical devices and healthcare consumables. Accordingly, the total addressable market for pharmaceutical distributors, comprising both pharmaceutical products and medical devices, stood at 2.7 trillion (USD 33.4 billion) in FY 2023 and is forecast to grow at 10-11% CAGR over FY 2023 2028.

Indias healthcare distribution sector remains structurally underpenetrated in terms of organized distribution. Approximately 90% of the market is still serviced by small, region-specioc distributors with limited infrastructure and digital readiness. This fragmentation poses challenges in scale, compliance, technology adoption and access - particularly in Tier 2 and Tier 3 geographies. However, the market is undergoing a shift. With rising compliance standards, technology adoption, and consolidation imperatives, the share of organized distribution in India is expected to rise to 25%-30% over the next ove years.

We believe Entero is best positioned to ride this wave of consolidation given our proven execution track record, access to capital, technology backbone, and trusted relationships across the ecosystem. Enteros platform is designed to catalyse and capture this transition. Unlike traditional wholesalers or pure logistics providers, we o er a full-stack distribution solution powered by digital infrastructure and last-mile connectivity. This model enables both demand generation and fullment across the healthcare ecosystem

and positions us uniquely to scale responsibly while unlocking e ciencies and transparency for all stakeholders.

COMPANY OVERVIEW

The nancial year 2024 25 marked a dening chapter in the evolution of Entero Healthcare Solutions Limited, representing our rst complete scal year as a publicly listed company post our IPO in February 2024. This milestone year was characterized by consistent execution, expansion of scale, margin enhancement, and a deeper penetration into Indias healthcare distribution value chain. Our commitment to building Indias largest and most integrated healthcare distribution platform was reec ted in our results, strategic initiatives, and the trust reposed in us by our stakeholders.

Since inception, Entero has rapidly become one of Indias top healthcare product distributors by revenue, with a reach covering 500 districts nationwide. We have built an unparalleled infrastructure backbone consisting of 101 warehouses across 20 states, catering to over 95,300 retail pharmacies and more than 3,600 hospitals. Our SKU portfolio has grown to over 80,600, supported by relationships with 2,700+ manufacturers, ensuring our ability to serve a broad and diversied demand base. These numbers reec t our relentless focus on expanding both depth and breadth of distribution while o ering seamless, reliable access to pharmaceuticals and healthcare products across the country.

Financial Performance Highlights including Segment

wise Performance

Our performance in FY25 has demonstrated continued strength across onancial, operational, and strategic dimensions. On the onancial front, we delivered a consolidated revenue of 5,096 crore, a year-on-year growth of 30% over 3,922 crore in FY24. This growth was well-balanced between organic growth (16%) and inorganic growth (14%) contributed by strategic acquisitions. In comparison, the Indian Pharmaceutical Market (IPM) grew at 8% during the same period, indicating Enteros continued market share gains and superior execution. Gross proot rose 38% to 486 crore, with gross margins improving to 9.5%, up from 9.0% in the previous year. This was driven by improved procurement e ciencies, contributions from more value added services and better product mix. EBITDA stood at 172 crore, reoecting a 53% growth with margins expanding to 3.4% from 2.9% in FY24. Most signiocantly, our Proot After Tax (PAT) jumped 170% to 107 crore, a reoection of the strong operating leverage, and capital e ciency that we have been steadily building into the business model. The Company operates in a single reportable segment i.e. wholesale distribution of pharmaceutical goods and therefore no segment reporting is applicable to the Company.

Strategic Acquisitions, Inorganic and Organic Growth

During the year, we completed 10 strategic acquisitions, which contributed over 792 crore in annualized revenue. These acquisitions were not only accretive in nancial terms but also strategic in nature. They enabled us to expand into underserved markets, new product segments like medical devices and diagnostic equipments and consumables. With these moves, Enteros total footprint now spans 44 cities and more than 500 districts.

Our inorganic growth strategy is supported by a well-developed M&A playbook that allows us to identify high-quality regional players, integrate them and scale them further through expansion of product o erings, operational integration with our proprietary technology systems, and route-to-market alignment. The post-acquisition performance of acquired entities continues to validate our thesis of protable consolidation in an otherwise fragmented

healthcare distribution landscape.

Organically, we have continued to grow at 1.5x to 2x of the IPM growth rate by onboarding new customers, entering into new product categories, and increasing our share of wallet with existing clients. We have prioritized deeper penetration into Tier 2 and Tier 3 cities where access to organized distribution remains limited. Our cluster-led branch expansion model ensures localized service with national scale benets . Additionally, we launched initiatives to increase wallet share from hospital customers, with a renewed focus on private tertiary care chains and emerging multi-specialty setups in smaller cities.

Technology as a Competitive Advantage

Central to our strategy is our proprietary, fully integrated digital platform that enables seamless ordering, inventory visibility, dispatch, and reconciliation for our customers and manufacturers. The platform includes functionalities such as live SKU availability, scheme visibility, one-touch ordering, order tracking, payment dashboards, and micro-market analytics. This digital-rst approach enables us to reduce order-to-delivery cycle time, improve ll rates, and customer purchase experience. It also allows us to capture and analyze secondary sales data, a key input for pharma brand teams seeking visibility beyond the CFA (Carrying and Forwarding Agent) layer. With the acquisition of Aayu chemist app and Medcords platform and its integration with our agship HealthEdge program, we intend to o er a tech driven interface for our retail pharmacy customers to enhance their consumer engagement, drive business growth, operational e ciencies and protabilit y. HealthEdge platform also o ers opportunities to healthcare brands to increase their brand awareness and availability through deeper channel engagement.

Working Capital and Return Metrics

Working capital e ciency remains a core area of focus for us. Our Net Operating Working Capital Days stood at 70 days for FY25 (increase from 67 in FY24), increase owing to newly acquired businesses. We continue to improve our cash conversion cycle by leveraging scale, optimizing inventories, and streamlining receivables. Our ROCE for FY25 stood at 10.7% while ROE improved to 7.7%, both metrics witnessing notable improvement from the prior year as a result of margin expansion and better capital deployment. We also benett ed from lower nanc e costs owing to improved credit terms and stronger balance sheet post IPO. The Return of Net Worth (RONW) as on March 31, 2025, stood at 6.07% as compared to 2.42% as on March 31,2024. Other ratio analysis are provided in Notes to the Financial Statement.

Key Ratios (Consolidated basis):

Particulars	31 Mar 25	31 Mar 24	YoY	Reason for Variance
			Variance (%)
(a) Current Ratio	2.46	3.34	(26.47%)	Lower current ratio in the current year mainly due to higher Current
				liabilities
(b) Debt-Equity	0.17	0.17	0.54%	No signicant change
Ratio
(d) Return on	6.07%	2.42%	150.27%	Increase mainly due to higher Prot af ter tax compared to last year
Equity Ratio
(e) Inventory	8.53	9.36	(8.90%)	Decrease mainly due to new acquisitions for which sales is included
turnover ratio				only for part of the year post acquisition
(f) Trade	7.05	6.94	1.57%	No signicant change
Receivables
turnover ratio
(i) Net prot	2.11%	1.01%	107.77%	Net prot mar gin increase is mainly due to increase in gross margins,
margin				lower nanc e costs and higher other income coupled with reduction
				due to higher tax compared to last year
(j) Operating Prot	3.37%	2.85%	18.06%	Operating prot mar gin increase mainly due to increase in gross
Margin (%)				margins
(k) Interest	6.24	1.86	236.05%	Increase mainly due to higher Prot bef ore tax and lower interest
Coverage Ratio				compared to last year

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 Identiocation, Risk Assessment, Risk Treatment/Mitigation and Risk Review & Closure.

Risk Category	Risk	Mitigation Plan
M&A Integration	To the extent we fail to identify, complete	Our M&A team actively seeks to identify new targets that
Risk	and successfully integrate acquisitions with	aid Territorial expansion, Territorial dominance or give a
	our existing business or should the	Unique product mix. Members within the business team
	acquisitions fail to deliver internal results, our	focus on integration of the acquired business with the
	nancial performance could be adversely	mainstream by actively providing support and guidance
	a ected.	to the newly acquired entities.
Supply Chain	We have no control over the supply of	We have contingency plan designed to enable us to
Disruptions	products from suppliers which could be	transfer goods from alternate locations within the group.
	impacted by a number of factors.
Liquidity Risk	Lack of available liquid nancial assets such a	The Company has raised capital through Initial Public
	cash may cause di culties in achieving	O ering which provides adequate liquidity to full the
	projected growth as the business is working	Companys growth plans. The Company is also taking
	capital intensive	several measures to drive revenue growth and optimise
		costs to improve cash o ws

 

Risk Category	Risk	Mitigation Plan
Product Integrity	Our business is exposed to risks inherent in	We have distribution relationships with healthcare
	the distribution of healthcare products, such	product manufacturers. Under these distribution
	as distributing expired, defective or	arrangements, we buy products directly from
	counterfeit products, transportation damage	manufacturers meeting agreed quality standards, with
	and customer returns. This could result in	any defects promptly replaced by the manufacturer.
	nancial losses, damage to our reputation
	and potential product liability claims, all of
	which could harm our overall nancial
	performance and customer trust. Any claims,
	regardless of validity, could tarnish our
	reputation and condenc e in our products.
Operational Risk	Any disruption to the operation of our	We have a nationwide presence of 80+ distribution
	warehouses, or to the development of new	warehouses located across India. This broad network
	warehousing and logistics facilities, could	enhances our resilience to potential disruptions by
	adversely impact our business, nancial	providing redundancy and alternative options for
	health, and operational results. Natural	maintaining operations during unforeseen events.
	disasters or other unforeseen catastrophic
	events may disrupt our warehouse
	operations and hinder new facility
	development, impacting our business
	signicantly .
Technology Risk	Loss of data and unauthorised access to	The Company has a robust cyber security framework in
	information technology systems due to	place through use of antivirus, r ewalls to protect
	security breach, could adversely impact the	against possible breach. The Company also uses remote
	business operations of the Company.	data backups and the latest versions of software to
		mitigate technology risks.
People Risk	Human capital is an important pillar for the	Employee retention is managed through learning and
	Companys success. It is important to attract,	skill development workshops, employee engagement
	engage, develop and retain qualied and	initiatives, Entero Cares programme and rewards /
	experienced employees, including key	recognition programmes. High performers are given
	executives and other talent. High attrition	opportunities to move to cross-functional roles in order
	rates could impact the performance of the	to enhance their overall career.
	Company.

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 nancial , operating and compliance functions. These controls have been designed to provide a reasonable assurance over:

E ectiveness and e ciency 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 nancial 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 FY25, the Company carried out various programs and initiative for its workforce for employee retention, well-being and growth. During FY25, the human relations remained cordial. As on March 31, 2025, the Companys employee strength stood at 4111 employees (on Consolidated basis).

STRATEGIC PRIORITIES AND OUTLOOK FOR FY26 AND

BEYOND

As we look forward to future, our strategic priorities are clear and ambitious. We aim to sustain and improve upon our organic growth trajectory, expand into adjacent product segments such as medical devices and consumables, diagnostics, trade generics, specialty pharma and OTC and wellness categories. We also aim to enhance our digital, data and technology infrastructure with a focus to scale business and improve e ciencies. Margin expansion, improvement in working capital and generating positive cash o ws remains our key nancial goals. We will continue to evaluate acquisition opportunities to enhance our reach, capabilities, and o erings, with an eye on building an institution that is not just commercially successful but also 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 cash o ws, the Companys market preferences and its exposure to market risks, as well as other risks. Actual results could di er 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. https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/0BULT19032025F9CCA0AB1F7294130A950E2FD5448B5FC.PDF 2. https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/0BULT19032025F9CCA0AB1F7294130A950E2FD5448B5FC.PDF 3. https://www.india-briefing.com/news/indias-economic-outlook-2025-gdp-forecast-35580.html/

4. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2085345#:~:text=by PIB Delhi-,Indias pharmaceutical market for FY 2023 D24 is valued at,under various scientific Ministries/Departments 5. https://www.india-briefing.com/news/why-indias-pharmaceutical-industry-remains-poised-for-growth-in-2025-35988.html

6. CRISIL Rating