Entero Healthcare Solutions: Navigating Growth with Strategic Acquisitons and Operational Finesse

Entero Healthcare Solutions Limited, a prominent player in India's healthcare supply chain, has reported a robust performance for the second quarter and first half of the financial year 2026. The company's consolidated revenue from operations for Q2 FY26 stood at INR 1,570.9 crore, marking a significant 21% year-on-year increase. For H1 FY26, revenue reached INR 2,974.8 crore, up 24% from the previous year. This growth trajectory is underpinned by strategic initiatives, particularly in the high-margin MedTech segment, and a relentless focus on operational efficiencies.

Management commentary highlighted a continuation of strong growth and margin expansion. The company achieved an EBITDA Margin of 4.0% in Q2 FY26, a 69 basis points improvement year-on-year, driven by a focus on gross margin expansion and improved net working capital days. Profit After Tax (PAT) for Q2 FY26 grew by an impressive 41% year-on-year to INR 36.6 crore, with the PAT margin expanding to 2.3% from 2.0% in Q2 FY25. For H1 FY26, PAT increased by 43% to INR 66.8 crore.

Strategic Expansion in MedTech and Acquisitions

A key highlight of the period is Entero's aggressive expansion in the MedTech segment. The company closed five acquisitions between July and October 2025, with proforma revenues based on FY25 financials totaling approximately INR 545 crore. Additionally, binding agreements and MoUs have been signed for two more MedTech-focused entities, Anand Chemiceutics and Bioaide Technologies, which are expected to be completed subject to due diligence. On a full-year basis, Entero is on track to close over INR 1,000 crore in revenue acquisitions through seven M&A transactions.

The MedTech segment is particularly attractive due to its high-growth nature and synergistic potential with Entero's existing pharmaceutical distribution business. Management noted that the role of distributors in MedTech is more value-added, leading to higher margin pools. These acquisitions are expected to positively impact gross margin by 70-90 basis points and EBITDA margin by 50-75 basis points on a proforma basis. Post consolidation, MedTech's representation in Entero's overall business is projected to be 14%-15%. The company also acquired a distributor in trade generics, another segment offering higher growth and margin accretion.

Financial Performance Snapshot (Consolidated, INR Crore)

Operational Excellence and Working Capital Management

Entero has demonstrated significant improvements in operational efficiency. Net working capital days improved to 63 days in Q2 FY26 from 66 days in Q1 FY26 and 69 days a year ago. This progress is attributed to ongoing initiatives in credit monitoring, enhanced collection discipline, and data-driven inventory planning. The company is confident of closing FY26 with working capital days of around 60, which is expected to generate strong positive operating cash flow of over INR 100 crore for the year.

The company's distribution network continues to expand, catering to over 85,000 retail pharmacies and more than 2,800 hospitals across 490 districts, supported by 113 strategically located warehouses and over 83,000 SKUs. Entero leverages its proprietary technology platform, including its self-developed ERP and customer interface app, to create synergies, improve efficiency, and enhance customer experience through better fill rates and reduced turnaround times. The company is also developing new features like the HealthEdge app to further engage customers with loyalty programs and cashback offers.

Management Outlook and Future Growth Drivers

Management remains optimistic about achieving its full-year guidance, with stronger momentum expected in the second half of the financial year. The company aims to accelerate growth, deliver margin improvement, and generate operating cash flow. Key growth drivers include benefiting from market consolidation, strengthening market position through customer base expansion, pursuing marketing and distribution collaborations, continuous investment in technology, and expanding product adjacencies and private label offerings.

While acknowledging a slight delay in H1 revenue growth due to slower-than-anticipated inorganic deal closures, management expressed confidence in catching up in H2. The positive impact of GST changes, with a reduction from 12% to 5% on customer billing, is also expected to contribute positively to cash flow in the second half of the year. The company's disciplined approach to acquisitions, targeting single-digit EV/EBITDA multiples, further underscores its commitment to value creation.

In conclusion, Entero Healthcare Solutions is strategically positioned for sustained growth, leveraging its robust distribution network, technological prowess, and a focused approach to high-margin segments like MedTech. The company's commitment to operational efficiency and disciplined capital allocation provides a strong foundation for future success and investor confidence.