At a Glance
Zota Health Care zoomed 100%+ in the last 1 year – but under the hood, it’s been bleeding red ink. Despite launching India’s largest generic pharmacy chain (DavaIndia), the company is racking up losses, raising equity like there’s no tomorrow, and showing negative ROE of -36%. Is it a future pharma giant or just a well-branded mirage?
1. 🔔 Introduction with Hook
Once known for its nutraceuticals and OTC ayurvedic vibes, Zota Health Care is now famous for three things:
- Its DavaIndia pharmacy chain
- Its mountain of losses
- And its relentless equity fundraising spree
While the company keeps promising “the next phase of growth”, its financials look more like a hospital ICU report than a P&L. So why is the stock up 114% YoY?
2. 🏭 Business Model – WTF Do They Even Do?
Let’s break it down like a medical prescription:
- 💊 Domestic Sales (49%):
- 1050+ distributors across India
- ~3,000+ products including generics, OTC, ayurvedic, and FMCG items
- Sold under the “Zota” and “DavaIndia” umbrella
- 🌍 Exports (to semi-regulated + LATAM + Africa)
- Branded generics shipped across 20+ countries
- Focus on margin-accretive formulations
- 🏪 Retail Play – DavaIndia
- Their “pharmacy chain of the poor” with ~200+ franchise outlets
- Aim: Become the DMart of affordable drugs
- Reality: High opex, low revenue contribution, and perpetual cash burn
3. 📊 Financials Overview – Profit, Margins, ROE, Growth
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue (₹ Cr) | 139 | 180 | 293 |
| Net Profit (₹ Cr) | -6 | -14 | -57 |
| OPM % | 5% | 4% | -2% |
| ROE | -9% | -15% | -36% |
| EPS (₹) | -2.29 | -5.55 | -19.7 |
| Borrowings (₹ Cr) | 45 | 95 | 140 |
📉 While sales doubled in 2 years, profits have completely evaporated. They’re basically paying you with dilution.
4. 💸 Valuation – Is It Cheap, Meh, or Crack?
- CMP: ₹1,232
- Book Value: ₹78 → P/B = 15.8x
- P/E: N/A (because… losses!)
- Market Cap: ₹3,625 Cr
Let’s do a sanity check…
If Zota were to become profitable again and earn ₹30 Cr PAT (generous assumption), even then a 30x P/E gives a FV of ~₹310–₹400 range.
🧮 Fair Value Estimate: ₹310 – ₹400 (based on optimistic FY27E recovery + 30x P/E)
Current price = wild overvaluation unless this turns into the next MedPlus + Dr. Reddy’s lovechild.
5. 🍿 What’s Cooking – News, Triggers, Drama
📅 Recent Fireworks:
- June 2025: Acquired 1.18 lakh shares in DavaIndia for ₹49.24 Cr
- Feb–Apr 2025: Multiple preferential allotments, raising ₹250+ Cr
- 2024–25: Promoter stake falling from 68% → 58%
- 🧾 Total 4 EGM votes in 60 days – dilution speedrun mode
🔍 Translation: They’re raising cash to keep DavaIndia alive and expand stores, but the burn is brutal.
6. 🧾 Balance Sheet – How Much Debt, How Many Dreams?
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Net Worth (₹ Cr) | 80 | 90 | 224 |
| Borrowings | ₹45 Cr | ₹95 Cr | ₹140 Cr |
| Total Assets | ₹158 Cr | ₹228 Cr | ₹439 Cr |
⚠️ Total liabilities have tripled in 3 years.
⚠️ Net debt rising, equity dilution doing the heavy lifting.
It’s a classic “growth at all cost” setup — except the “cost” is shareholders’ sanity.
7. 💵 Cash Flow – Sab Number Game Hai
| Year | CFO (₹ Cr) | CFI (₹ Cr) | CFF (₹ Cr) | Net Cash |
|---|---|---|---|---|
| FY23 | -2 | 15 | -14 | -1 |
| FY24 | -6 | -13 | 19 | -0 |
| FY25 | -50 | -92 | 145 | 3 |
🚨 FY25 Operating Cash Flow = -₹50 Cr
They’re financing daily operations by raising equity, not by actual profits. That’s worrying.
8. 📐 Ratios – Sexy or Stressy?
| Ratio | FY25 |
|---|---|
| ROCE | -17% |
| ROE | -36% |
| OPM | -2% |
| D/E Ratio | 0.63 |
| Interest Coverage | <1x |
| Cash Conversion | 219 days 😱 |
📛 Stressy. Very stressy. Only thing expanding faster than revenue is the burn rate.
9. 🧾 P&L Breakdown – Show Me the Money
| Line Item | FY25 (₹ Cr) |
|---|---|
| Sales | 293 |
| Operating Profit | -6 |
| Other Income | 2 |
| Depreciation | 43 |
| Interest | 11 |
| PBT | -58 |
| PAT | -57 |
They are losing money even before finance costs. DavaIndia expansion is eating every rupee they raise.
10. 🥊 Peer Comparison – Who Else in the Game?
| Company | ROE (%) | OPM (%) | P/E | Mcap (₹ Cr) |
|---|---|---|---|---|
| Zota Health Care | -36% | -2% | N/A | ₹3,625 |
| MedPlus Health | 10% | 6% | 90x | ₹9,000 |
| Sun Pharma | 17% | 29% | 35x | ₹4,01,000 |
| Dr. Reddy’s | 18% | 26% | 19x | ₹1,07,000 |
Zota isn’t playing in the same league, not even the same gully. But the market has priced it like it owns Apollo Pharmacy + Divi’s Lab combined.
11. 📊 Miscellaneous – Shareholding, Promoters
| Category | Sep 22 | Mar 24 | Apr 25 |
|---|---|---|---|
| Promoters | 68.1% | 59.7% | 58.1% |
| FIIs | 0.07% | 0.87% | 3.6% |
| DIIs | 0.05% | 3.08% | 2.92% |
| Public | 31.8% | 36.3% | 35.4% |
- 👋 Promoters quietly exiting
- 🎯 FIIs entering during pump cycles
- 🥸 10,000+ retail shareholders now part of the dream
12. 🧑⚖️ EduInvesting Verdict™
Zota is a classic tale of narrative > numbers.
📌 If you’re betting on DavaIndia becoming India’s CVS Pharmacy, sure — dream big.
But right now:
- OPM is negative
- EPS is a horror movie
- Cash flow is a leaky bucket
- And every quarter comes with more dilution
🚩 Valuation is wildly stretched. If stock price is a reflection of fundamentals, this one’s on hallucinogens.
✍️ Written by Prashant | 📅 9 July 2025
Tags: Zota Health Care, DavaIndia, pharma IPOs, generics chain, stock overvaluation, equity dilution, retail investors, EduInvesting
