ZOTA HEALTHCARE / DAVA INDIA

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ZOTA HEALTHCARE / DAVA INDIA.

ZOTA Healthcare a couple of years ago pivoted to Franchise based generic pharmacy chain business called Dava India in 2017.

Zota Health Care Limited (the “Company”) a Gujarat based pharmaceutical company has started “DAVAINDIA” a retail generic pharmacy chain back in the year 2O17 with the aim to provide affordable medicines to the citizens of India. The Company has started its first DAVAINDIA store in Surat in the year 2017 then spared its footprint in the western belt of lndia and as on date have marked its presence in more than 21- states of lndia. For faster stores roll out and to increases top of the brand recall in the minds of the customers the Company has adopted various marketing strategies and as a fruition of this the Company has rolled out its 83’d DAVAINDIA stores in the DELHI-NCR region. With this till date we have opened total 491 stores covering 21 states of lndia.

The company really kickstarter branding DavaIndia in Dec – 2019 –

To understand the ground reality with respect to this business, i would highly recommend going through all of these videos –

It seems like some youtube influencers are doing word of mouth marketing for the company free of cost – https://www.youtube.com/watch?v=Zn9jruHloFo

So far the biggest problem has been the supply side issues –

After watching these videos you might have realized the following –

  • There is a push from Gov to promote generic medicine industry via Jan Aushadhi scheme.

The financials have been looking impressive –

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The Dava India sales have been growing at healthy rate QoQ-

The Dava India sales grew yoy – 100% and QoQ 21% .

And in last two Quarters company had added 3x more stores than used to be and SKU’s showing healthy trend too – Although SKUs will improve over time today their focus is on – “Being asset light in nature the store continues to remain focused on chronic ailments – Cardiac, Diabetic, Thyroid and Neuropsychiatric ailments as repeat business from customer guides for store revenue visibility” .

Chronic is the biggest / recurring market of all which is eating into the bank balance of vast majority of population.

They have already established the pan india footprint – Davaindia has added 109 new

stores in Q3FY21 taking the total store count to 491 as of December 31, 2020. Plan is to

reach 3000 in next two years.

Healthy growth in 1) average wallet spends and 2) customer acquisition.

And as you can see the company is spending most of its energy growing Dava india pharmacy chain –

Company is currently doing Rs 7 Cr if quarterly sales in dava india (7% of total sales), Rs 28 Cr annually with a current run rate of growing 100% YoY. It will be able to do Rs 400 Cr of sales in 4-5 years from now, which is companies Mcap today ~ Rs 363 Cr.

DavaIndia is India’s only retail generic pharmacy in which 95% products are private label products (i.e. DavaIndia’s own brand).It has 76 store openings signed up thus underlying its expansion strategy.

I don’t think it’s unrealistic to assume doing Rs 400 Cr sales in 5 years given they just started adding 100 stores per Quarter increase by 3x. It’s perhaps around Rs 20 lac Cr industry so , doing Rs 400 Cr revenue in 5 years still going to mean a very small market share gain from the pie & should be practically doable ( may be they end up doing more) , Given company is already planning to open 3000 (6x of today) retail stores by FY22.

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Given the market today is still 80% dominated by unorganized players, there is huge scope for organized players to gain market share ( perhaps the only industry still dominated by unorganized). In the U.S 80% of the whole of pharmacy retail is dominated by 3 players & 20% is mom and pop stores owned by individuals but in India its opposite.

They did one of its kind Virtual stakeholders meet – ( Kudos for the effort )

You should watch it to see where they are going, Vision and values. Its very evident they want to double down on Dava India and it seems to be working out.

Moreover company opened its own Dava India stores as well –

https://archives.nseindia.com/corporate/ZOTA_30122020185132_PressRelease30122020.pdf

Economics of opening franchise is very attractive –

  • Given today there is not much of competition in the market, a very good returns can be made by investing 4 lac into opening a store ( As claimed in the various videos shop owners have made Rs 1 lac Per month with 40,000 operational cost ).

Although company claims its even better than Rs 1 lac – Great economics for shop owners.

Some other interesting facts about this company –

  • They has around 6 patents & is waiting for other 15 patents approvals in India.
  • Recently filed a patent in Shirlanka – Zota Health Care LImited has informed the Exchange regarding ‘Received a Patent Certificate in Sri Lanka for an invention “COMBINATION OF TAURINE AND RACEMETHIONINE FOR TREATMENT OF LIVER DISEASES”.
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  • This shows company is innovative, quick, always looking for opportunities even in adversities – ( even if they don’t succeed but hunger to do new things is imp)

Interesting management interviews –

  • https://www.youtube.com/watch?v=7H2ygjy-tLo
    • Dava India – they solved most of the supply side issues by their own private label & owning the manufacturing.
    • Retail store makes 25% margins and Dava india makes 35% margin.

Monthly Updates –



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Dhruva Pandey

Dhruva Pandey

Dhruva looks for companies with a durable competitive advantage that are run by honest people, and available at a price that makes sense to him. His interests include technology, investing, markets, psychology, and chess.
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