Medplus Health Management Discussions

Indian Economy

The previous financial year started with runaway inflation, anxiety of worldwide recession, aggressive monetary policy tightening, and soaring commodity prices that threatened to push the world economy into a tailspin. However, by the end of thatvolatile period, almost all the major economies adjusted to the new situation, and consumer confidence and spending rebounded, even though the world is not out of the woods yet.

Meanwhile, the latest MoSPI (Ministry of Statistics and Programme Implementation) data suggests that the Indian economy grew by 6.1% in the March quarter of FY23 pulling the annual GDP number to 7.2%, 200 bps, higher than earlier estimates.

The Government of India?s capex continues to be a key growth driver as the GFCF (Gross Fixed Capital Formation) grew by 11.4% in the financial year. The overall growth pattern remains broad-based, with sectors such as construction and agriculture witnessing better-than-expected growth.Moreover, strong manufacturing growth was evident in the last quarter of the financial year.

Private final consumption showed a healthy growth of 7.5% last fiscal, touching almost the pre-pandemic trend.But it was mostly urban in nature, whereas rural consumption remained weak owing to highrural inflation of 6.8% against 6.4% in urban centers in FY23. By the end of the last financial year inflation dropped significantly because of a cumulative repo rate hike of 250 bpsasit fell within the periphery of RBI?s tolerable limit.

Outlook:Most global and Indian agencies have projected the Indian economy to grow between 6-6.5% in FY24. A recent pickup in investment (government and private) in manufacturing and infrastructure may augur well for the Indian economy which may be looking at a multi-year growth cycle. But variables like geopolitical fragmentation, weak global demand, persistent inflation and resultant monetary tightening by RBI, and high borrowing costs may cause a decline in growth and a reduction in investments as well.

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Indian Pharmacy Retail Industry

Previously being traditional brick-and-mortar medicine shops, Indian pharmacies were a completely unorganized subset of the Indian pharma industry. But with the introduction of organized retail in the Indian market and the advent of technology, organized pharmacy chains have started cropping up in the country.Today, it commands a significant presence in most urban and semi-urban centres in India.

Compared to the older neighbourhood pharmacies, modern retail pharmacy chains have attractive displays with completely digitized work models selling 100% reliable goods. Additionally, they also provide value-added services to the customers like home delivery of medicine, etc.

They have mobile app support where customers can browse the products easily where they sell healthcare and wellness products too. Hence, these pharmacy chains operate on hyperlocal or omnichannel business models.

This sector is gaining traction in recent years primarily due to the deep discounts and convenience the companies are offering. Several companies including large conglomerates, leading E-commerce companies, brick-and-mortar shops and startups have entered this market.

E-pharmacies came into prominence during the Covid-19 pandemic which disrupted our traditional healthcare system but impacted online pharmacies in a positive way. The market witnessed a huge spike in sales during this time. These companies also collaborated with E-payment platforms for safe and convenient transactions.

Growth drivers:

• Today a sizable amount of the population prefers doorstep delivery because firstly, not all medicines are available at all locations of the country. Secondly, it reduces the need for elderly and sick people to actually go to a medicine shop and buy them. Lastly, the younger generation heavily relies on online shopping rather than actually going to the physical store.

• Increasing smart phone and internet penetration is also helping the E-pharmacy market to grow. In 2023, the penetration rate of smart phones in India reached 71% and is estimated to reach 96% in 2040. (Source: Statista)

Growth drivers:

In 2020, the pharmacy retail market in India was valued at H1,783.83 Bn and is expected to reach H3,078.46 Bn by 2026, expanding at a CAGR of 12.02%. Owing to the growing population and patient pool as well as thea_ordability of medicines, this market has witnessed significant growth in the last few years. Further, consumers have improved access to medicines because of advanced medical infrastructure and the launch of new patented drugs.


Preventive healthcare: The approach towards health has changed since the pandemic which marked a shift from just remedial to preventive. To this effect, immunity-boosting drinks, food, vitamin and several diagnostic products& packagesare getting increasingly popular. Thus,modern healthcare sector is working on a ?predict and prevent? model.This increase in demand for better quality preventive healthcare is driving the growth in organized retail pharmacies in India.

Omni channel/Hyper local presence: E-pharmacies offer extreme convenience for consumersin ordering anddelivering products. But with an extremely diverse consumer pool, there is a requirement for pharmacies to offer all modes of service, physical and otherwise. These omnichannelmodels where pharmacies can offer a seamless experience be it an in-person, app/ website, phone delivery or other mode of service are also pushing the growth in the industry.

Technological advancements: Retail pharmacies are investing heavily in tools such as artificial intelligence (AI), big data analytics and thereby improving service, cutting costs and optimizing stock availability. The goal here is to enhance patient access to virtual care via mobile devices, to find the most efficient way to share information between patients, healthcare providers and treatment centres. As consumers continue to prioritise their health, these pharmacies can provide better convenience, informed advice, and quality services to the consumers.


Supply-demand gap: The number of organised retail chains in the pharma space in the country is limited. Right now, the organised pharma retail space in India largely has regional chains or popular standalone outlets within cities catering to a captive market which is a very small percentage of the overall pharma market.

Naturally, there is still a demand and supply gap for pharma products especially in rural and tier II cities. This presents an opportunity for all the organised players to expand their network and distribution channels through the length & breadth of the country. The reason why, the country?s top two organized retailers are also jumping the bandwagon to this large pharma retail market in India which can scale up the future of the industry.

Emergence of private-label products: Retail pharmacy chains are also witnessing the rise of private-label products. These products are mostly in health, beauty and wellness categories and offer significant margins to the retailers compared to the branded products.

Rising income, lifestyle, awareness & a_ordability: The growth in the annual income of the population, increasing a_ordability of medicines and increasing demand for e-commerce sites will provide beneficial opportunities for the pharmacy retail market. Further, the rise in chronic diseases and increasing health awarenesswith growing healthcare expenditure, innovative marketing strategies, an upsurge in the development of hospital-based pharmacies and wellness stores, and a rising geriatric population are the factors that are likely to expand the pharmacy retail market in the future.


Trust factor:Though big companies are entering the pharmacy retail segment, it would be difficult for some time before the organized retail pharmacy playerscan actually replace the neighbourhood chemist, due to the sheer reach and size of the segment.

Increasing competition: With the growing popularity of organized retail pharmacies, many large companies are throwing their hat in the ring which intensi_es competition and may hamper margins and profitability in the future.

Changing consumer preference: Indian consumers today expect medicine shopping to be a pleasurable experience. But this trend is more prevalent only in urban centers where people are ready to pay a premium price. However, things are very different in tier 2 and beyond where traditional shops are likely to stay longer than anticipated.

Counterfeit medicines: Because of gaps in the distribution system and proper regulatory oversight at each level of the logistics supply chain incidents of fake medicines entering the system are not very uncommon which can portray the industry in a bad light.

MedPlus? takes

Retail chain pharmacy is considered a sunrise sector in India that is still in its nascent stage and has tremendous scope to grow. But pharmacy retailing is a capital-intensive business and setting up involves scouting for strategic locations while operating within a fixed margin regulated as per government-stipulated prices.

So, the nature of the business dictates that only organisations in leadership positions with strong financial backgrounds can leverage the opportunities in the market and still grow effortlessly. MedPlus Health is one such organization.

Given our strong in-depth knowledge of the industry and market dynamics, our deep understanding of the demographics we serve and our solid back-end infrastructure (warehouses, distribution channels), we are in a perfect position to grow exponentially in the years to come.

Further, our vertically-integrated operations supported by technology, omnichannel presence and a step-up in store expansion will lead MedPlus to gain market share within the organized pharmacy retail space.

India Diagnostic Industry

The Indian diagnostic industry is a highly fragmented sector largely dominated by unorganized players. The domestic diagnostic industry is primarily a doctor-driven market which helps local players thrive. However, with large players entering tier 2 and tier 3 cities, there is an accelerated formalization of the industry.

The diagnostics part of the healthcare industry has been growing at a fast pace over the past couple of years – fuelled by the pandemic. In recent times, the domestic market is evolving from standalone centres to multiple diagnostic chains while continuously reinventing itself.

India Diagnostics Market was valued at USD 1,928.7 Million in 2022 and is projected to reach USD

6,347.9 Million by 2029 owing to a rise in healthcare awareness, increase in preventive healthcare check-ups, prevalence of cancer, infectious diseases , and also largely because of an increase in better health insurance penetration.

Company overview

MedPlus is an organized pharmacy retail company with both an online and offine presence.The Company was established in 2006 by our Founder, Managing Director and CEO ("MD & CEO") Mr. Gangadi Madhukar Reddy with a vision to deliver authentic quality medicine to the customers with the aid of technology while streamlining the ine_ciencies in the supply chain. The Company operates in retail and wholesale sales, import, distribution, manufacturing and contract manufacturing of private-label pharmaceuticals, wellness and FMCG products and full-fledged diagnostic centres only in Hyedrabad, Telangana. The Company has nearly 4000 stores across ten states in India with little more than 21,000 permanent full-time employees.

MedPlus? operations across the entire value chain are backwards-integrated and are managed in-house. It bodes well for the Company and has made us the second-largest pharmacy retailer chain in India in terms of revenue.

Segmental revenue H ( in Million)

FY23 FY22
Retail 45,268.70 37,718.03
Diagnostics 305.54 74.76
Others 1.52 0.00

In FY 23, the Company witnessed significant revenue growth, Stores older than 12 months rose by15.6% over FY 22, and Revenue from operations increased by 20.6% over FY 22. The Company?s mature outlets (>12m) maintained solid operational performance, with 9.5% Store Level EBITDA margin and 2.8% Store Level Operating Return on Capital Employed. Private label share climbed from 12.7% to13.6% in FY 23, while gross margin improved from 21.1% to 21.9% in FY 23.

As of March 31, 2023, the Company had 3,822 pharmacy outlets. In FY 23, the business opened 1144 gross new pharmacy stores, up from 747 in FY 22. This marks a new high for MedPlus and demonstrates the strength of its supply chain and operational skills. The Company has three full-service Diagnostic Centres and four Level-2 Diagnostic Centres and one full service Diagnostic centre and 4 Level-2 Diagnostics centres were yet to open as on March 31, 2023, and both its current and potential clients have embraced it enthusiastically.

Financial overview

Summarised consolidated Profit and Loss statement

Particulars FY23 FY22 % change y-o-y
Total Income Rs million 46,036.54 38,106.42 20.8%
Revenue from operations Rs million</td> 45,575.76 37,792.79 20.6%
Purchase of stock-in-trade, cost of Rs million 35,576.88 29,823.75 19.3%
materials consumed and changes in % of revenue 78.1% 78.9% -1.1%
inventories ("Cost of goods sold")
Employee benefits expense Rs million 5,451.29 3,939.2 38.4%
% of revenue 12.0% 10.4% 14.8%
Finance costs Rs million 830.27 664.28 25.0%
% of revenue 1.8% 1.8% 3.6%
Depreciation and amortisation expense Rs million 1,815.56 1,193.6 52.1%
% of revenue 4.0% 3.2% 26.1%
Other expenses Rs million 1,890.91 1,306.16 44.8%
% of revenue 4.1% 3.5% 20.0%
Total Expeneses Rs million 45,564.91 36,926.99 23.4%
% of revenue 100.0% 97.7% 2.3%
Profit before tax Rs million 471.63 1,179.43 -60.0%
% of revenue 1.0% 3.1% -66.8%
Total Tax expense Rs million -29.42 232.27 -112.7%
% of revenue -0.1% 0.6% -110.5%
Profit after tax Rs million 501.05 947.16 -47.1%
% of revenue 1.1% 2.5% -56.1%

Total income

Total income is increased by 20.8% in FY 23 compared to FY 22. Growth has been contributed by Matured stores and New stores.

Revenue from operations

Revenue from operations has grown by 20.6% in FY 23 compared to FY 22. Stores greater than 12 months in age has grown by 15.6% during the same period.

Cost of goods sold

Increase in cost of goods is largely in line with the increase in revenue from operations. Cost of goods as % of revenue has decreased by 8 bps to 78.1% in FY 23 from 78.9% in FY 22.

Employee benefit expenses

Employee benefit expenses have increased by 38.4% in FY 23 in comparison to FY 22. This incremental cost is mainly driven by addition of 1144 stores in FY 23.

Finance costs

Finance costs increased by 25.0%, driven by increase in interest on lease liabilities primarily on account of new stores added during the year FY 23.

Depreciation and amortization expenses

Depreciation and amortisation expenses increased by 52.1% in FY 23 primarily due to depreciation and amortisation of plant and equipment in new stores and amortisation of lease asset in new stores.

Other expenses

Other expenses have been increased by 44.8% in FY 23 in comparison of FY 22, primarily driven by increase in electricity, communication expenses and other operational expenses primarily on account of New stores.

Total tax expenses

Tax expenses have decreased by 112.7% in FY 23 in comparison to FY 22 driven by deferred tax benefit on account of increase in claim under Section 80JJAA with increase in number of employees and reduction in non-deductible expenses compared to FY 22.

Profit after tax

As a result, Company?s overall profit is decreased by 47.1% in FY 23 in comparison to FY 22.

Key balance sheet items

Particulars FY2023 FY2022 % change yoy
Property, plant and equipment 2,883.35 1,618.69 78.1%
Inventory 11,440.87 9,149.84 25.0%
Cash and Bank balances including fixed deposits 2,874.87 6,575.60 -56.3%
Trade payable 2,601.44 2,462.32 5.6%
Trade receivables 86.51 60.36 43.3%
Total equity (Shareholders funds/ networth) 14,905.01 14,172.53 5.2%
Borrowings - 1,426.82 -100.0%

The strength of the balance sheet in FY 23 is improved primarily on account of increase in inventory and additions to Property Plant and Equipment due to increase in new stores and repayment of borrowings.

Key financial ratios

Particulars FY2023 FY2022 % change yoy
Inventory Turnover (Days) 91.63 88.37 3.69%
Interest Coverage Ratio 1.57 2.78 -43.50%
Current Ratio 3.11 2.92 6.44%
Debt Equity Ratio - 0.10 -100.00%
Debtors Turnover (Days) 0.69 0.58 18.85%
Operating Profit Margin 2.86% 4.88% -41.45%
Net Profit Margin 1.10% 2.51% -56.13%
Return on Net Worth 3.45% 8.82% -60.92%

Explanation of the ratios

Inventory turnover ratio measures the efficiency with which a Company utilises or manages its inventory. It establishes the relationship between revenue from operations and inventory held during the period. It is calculated by dividing the inventory with revenue from operations and multiplied by 365 days. Interest Coverage Ratio measures how many times a company can cover its current interest with its available earnings. It is calculated by dividing earnings before interest and tax by total finance cost. Current ratio indicates a company?s overall liquidity position and measures company?s ability to pay short-term obligations or those due within one year. It is calculated by dividing current assets by current liabilities. Debt equity ratio is used to evaluate a Companys financial leverage. It is a measure of the degree to which a company is financing its operations through debt versus owned funds. It is calculated by dividing total borrowings by total equity.

Debtors?(Trade receivables) turnover ratio measures the efficiency with which a Company utilises or manages its debtors. It establishes the relationship between revenue from operations and debtors held during the period. It is calculated by dividing the debtors with revenue from operations and multiplied by 365 days. Operating margin % - operating margin measures how much profit a company makes on a rupee of sales after paying for cost of goods sold, employee benefits expenses, other expenses and depreciation and amortization expenses, but before paying finance cost and tax. It is calculated by dividing EBIT by revenue from operations. Net profit margin % net profit margin measures how much net profit a company makes on a rupee of sales It is calculated by dividing a company?s profit after tax by its revenue from operations. Return on Networth/ equity is a measure of profitability of a company expressed in percentage. It is calculated by dividing net profit by average net worth/ total equity.

Risk Management

Risks are an unpredictable yet inevitable part of any business operation. It may include pillage in the office premises, losing revenue because of a sudden change in customer preference or loss or damage due to theft or fire and much more. These risks can?t be totally eliminated but with a proper risk management policy and mitigation measures in place, the negative impact of the untoward incidents can be minimised to a great degree.

Product Quality risk:

Customer dissatisfaction due to ine_ective product quality and service.


- The Companys quality team conducts rigorous quality and safety tests to verify that all quality requirements are met. Customer concerns are taken seriously by the Company.

- The stores offer authentic, high-quality pharma products and quickly moving consumer goods at competitive rates, presenting a consistent and uni_ed customer experience.

Competition risk:

Being a lucrative marketplace, the organized retail medicine chain has the potential to attract new companies which may intensify the competition to a much greater degree.


• MedPlus has a large portfolio of products and services that can cater to a wide variety of customers.

• The Company has an omnichannel presence through which customers can be reached conveniently and easily.

• The Company regularly engages in campaigning to increase brand awareness and customer loyalty.

Supply-chain risk:

Problems in the logistics supply chain can force our entire operations to a standstill.


• The Company works only with suppliers across the various states to reduce the risk of supply chain interruptions, and also diversifies the sourcing partners for uninterrupted supply.

• We review our supply chain risk profile regularly.

Insufficient inventory risk:

Insufficient products in the inventory can lead to loss of sales, missing out on cost efficiencies and increasing customer dissatisfaction.


• MedPlus employs state-of-the-art technology for accurate inventory forecasting to avoid understocking and overstocking.

Internal control and adequacy

The Company has a strong internal control structure in place for its activities and operations. It continuously aims to integrate all aspects of the business, from basic operational activities to strategic support activities. We make sure that all of our methods adhere to established rules, practises and legal requirements. The Company hascreated well-documented policies, authorization and approval processes, as well as routine audits. All financialand operational controls across all departments, divisions, and functions are included in the internal audit system. Our internal audit team regularly examines the organisation?s different operations and spots areas for improvement.

Human resources

At MedPlus we consider our team members as our most valuable resources who contribute towards the long-term vision and sustenance of the Company. We also treat all our team members equally and fairly irrespective of their position in the organization. In turn, all our team members are committed to acting with compassion, integrity, honesty and high ethical standards while developing their career aspirations working with the Company.

As an organization, we are committed to create a culture of providing an energetic, enabling, safe and open work environment for all our team members. We also focused towards recruiting talents from different world-class institutions and nurturing& retaining them so that they can develop cross-functional expertise and deliver a high-quality experience for all our customers. The details relating to developments in human resources including number of employees forms a part of the Business Responsibility and Sustainability of this Annual Report.

Cautionary statement

The statements made in the Management Discussion and Analysis describing the Company?s objectives, projections, estimates, and expectations, maybe ‘forward-looking statements? within the meaning of applicable securities laws & regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Company?s operations include economic conditions affecting demand, supply and price conditions in the domestic & overseas markets in which the Company operates, changes in the government regulations, tax laws & other statutes & other incidental factors.