Earnings Call Transcript - XNSE:LAXMIDENTL 2026-11-04

Operator

Ladies and gentlemen, good day and welcome to Lakshmi Dental Ltd Q2FI27 Earnings Conference Call. As a reminder, all participant clients will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touch-tone phone. Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Rajesh Khakkar, Chairperson and Whole Time Director. Thank you and over to you, sir.

Rajesh Khakkar, Other

Thank you. Good morning, everybody. A warm welcome to all of you and thanks for joining our earnings call. I would like to take this opportunity to wish everyone a very happy and a prosperous Diwali. On this call, we are joined by our MD and CEO, Samir Merchant, CFO, Mr. Dharmesh Datani, and Strategic Growth Advisor, our Investor Relations Advisors. The results and the presentations are uploaded on the stock exchange and company website. I hope everybody has had a chance to look at them. I am delighted to share that Q2 F527 was another positive quarter for us. Building on the healthy start, we met for F527. We have delivered steady growth, healthy profitability, and continued progress on the strategic priorities we have laid out for the year. Our revenue for Q2 FY27 stood at Rs 79.5 crores, recording a highest ever quarterly revenue as well as EBITDA. Our EBITDA for the quarter grew by 38.5% and PEG grew by 17.6%. EBITDA and PET margin for the quarters to rate 19.2% and 12.6% respectively. This improvement in profitability is a result of a greater product mix and our continued focus on operational efficiency. The growth was broad-based across our core dental segments, dental laboratory, Alina solutions, and pediatric dental products. This is exactly how we had engaged our digital strategy to play out. The scanners deployed with our dental partners over the past few years were meant to deepen our connection with this clinic and create higher recurring opportunities across our laboratory and aligner business. We are now seeing that ecosystem translates into consistent recurring business. I am also happy to say that both our dental lab and Alana business deliver solid performance during the quarter. Our domestic dental lab, international lab, as well as BizDent, our clear Alana business deliver its highest ever quarterly revenue. Samir will take you through the segment details shortly. Moving on to an important update on our IPO proceeds, we successfully got a shareholder's approval for updating the objects and extending the timeline for utilizations. I would like to thank all our shareholders for the strong support and the confidence they have placed in us. The unutilized IPO fund of Rs.48.1 crore will now be deployed towards building our own manufacturing infrastructure, above Rs.27 crore towards acquisition of land and construction of building and infrastructure for dental laboratory and aligner manufacturing facilities, and above Rs.21 crore towards machinery, computer, equipment, and other movable assets for the existing and new facilities. This deployment is planned across FY27 and FY28. Dentistry today is at a defining moment with digital technologies, artificial intelligence, and precision manufacturing transformation clinical practices. As India's only fully integrated dental product company, we remain focused on our growth strategies across geographies, product innovations, market reach, quality standards, and achievement in our operations to create better efficiency and scalability. Now I will request Samir to give you some more color on our business performance during the quarter. Thank you.

Samir Merchant, CEO

Thank you, Rajesh Bhai. Happy Diwali to everyone. Speaking about our segmental performance for the quarter, our dental lab business grew by 22.7% YOY, with a solid growth of 32% in the international lab and 15% in our domestic lab business. In the domestic market, the growth is driven by increasing digital adoption and deeper engagement with our dental partners. Through our hub and scope model, our digital penetration in the domestic lab business has reached around 78% and remains firmly on track towards our medium-term target of over 90%. Every scanner deployed does far more than digitized impression. It strengthens our connection with the dentist, improves accuracy, and enhances workflow efficiency. In international markets, the momentum reflects the strong relationship and market presence we have built across USA, the UK, and Europe over the years. Along with our growing partnership with dental service organizations, we are also preparing for our participation in the International Dental Show in Cologne, Germany towards the end of the fiscal year. which will provide an excellent platform to showcase our products and further expand our global network. The cost of this event is already budgeted in our full-year marketing expense. Our aligner solution business recorded a healthy growth of 23.5% YOY during the quarter. Within this segment, Bizdent, our branded clear aligner business, delivered a strong growth of 27.7% YOY, while Vidya registered a 19.1% YOY increase in growth. The performance in our clear aligner business reflects the growing acceptance of our illusion aligners among dentists and patients. This showcases the impact of our branding and promotional activities as well as superior product quality. Our pediatric dental business, Kidzi Dental, continued its strong growth trajectory, delivering a 16.7% YOY growth during the quarter as the business continues to scale up steadily. Scanner sales contribution for the quarter was 3.5 crore against Rs. 8.9 crore in the same period last year. We continued to evaluate our Scanner roadmap in line with overall market situation. Scanner remains one of our strategic importance for us to scale the business with existing and new dentist along with cross-selling opportunities. Going forward, as part of our digitalization strategy, we plan to deploy scanners on a subscription model, reducing upfront adoption cost, making the solution more affordable for dentists, while increasing their stickiness and driving incremental business for the company. Speaking about transition plan for domestic lab and aligner solutions, We currently operate our manufacturing from leased premises in Mira Road across multiple vertically structured units, which have served us well so far, but with the increasing scale and complexity of our operation, a self-owned, purpose-built, horizontal, integrated facility is a strategic investment that will consolidate our operation. Improve our workflow and efficiency and provide the capacity and scalability required for the next phase of our growth. The transition from old plan to the new plan will happen in a plan and a gradual manner in order to avoid any impact on the regular operations of our business. Expected timeline to complete this transition is by end of financial year 28. We believe the potential for dentistry to grow both in India and globally is immense. With a continued investment towards expanding our capabilities and infrastructure, coupled with multi-decade experience, strong dentist relationship, and superior product quality, Lakshmi Dental is well positioned to scale and capitalize on the rising growth opportunities in the medium to long term. I now hand it over to our CFO, Mr. Dharmesh Duttani, to take it forward. Thank you so much.

Dharmesh Dattani, CFO

Thank you, and happy delivery to everyone. Let me give a glance at our consolidated financial performance during Q2FI27. Revenue from operations stood at Rs. 79.5 crore, marking the highest ever quarterly revenue as against Rs. 72.3 crore in Q2FI26. Gross profit increased by 23.5% YOY to Rs. 61.2 crore. Gross margin expanded to 76.9% compared with 68.5% in the corresponding quarter last year, primarily driven by a favorable product mix. We have witnessed some margin improvement in our core dental segments as well. Other expenses were lower sequentially and grew year-on-year due to higher business promotion, freight costs, and spend on AI-led automation. Other expenses stood at Rs. 14.8 crore. EBITDA grew by 38.5% , marking the highest quarterly EBITDA reported by the company. EBITDA margins expanded by approximately 390 basis points to 19.2% compared with 15.3% in Q2 . Our adjusted EBITDA, which includes recorded EBITDA, 60% of Kitsi Dental PAT, 49% of IDBG AIDN PAT and ESOB expenses stood at Rs. 16,00, for the quarter. Toffit after tax grew by 17.6% YOY, Rs. 2,10,00, but margin improved to 12.6% compared with 11.8% in Q2FI26. Additionally, I would like to highlight that we have recently received a tariff refund of approximately Rs. 5.5 crore excluding interest, which will be reflected in our Q3-FI27 results. Moving on to our H1-FI27 performance. Revenue from operations for the half-year stood at Rs. 154.2 crore compared with Rs. 137.9 crore in H1-FI26. Gross margin improved to 77.7% compared with 70.8% in the corresponding period last year. EBITDA grew by 29.2% while EBITDA margin expanded to 19.2% from 16.6% in H1 FI 26. Pat increased by 20.7%, 2 rupees, 20.4 crore, with pat margin improving to 13.2% from 12.2% in the corresponding period last year. The company continues to maintain a debt-free balance sheet. During H1, FI27, we incurred capital expenditure of approximately rupees 16.7 crore. As of September 30, 2026, our cash and bank balances in 26 deposit and other investment stood at Rs. 97 Crore. With this, we conclude our opening remarks and open the floor for Q&A. Thank you.

Operator

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Lakshmi Narayan from Durga Investment. Please go ahead.

Lakshmi Narayan, Analyst — Durga Investment

Yeah, thank you. The question is that in terms of your sales, what is the mix of the channel? Hospitals or to pharmacists or whichever area you are classifying?

Samir Merchant, CEO

So, I think our mix has never been on the pharmacy side. So, to clarify, you know, we don't deal with pharmacies today. In terms of hospital versus the clinics, I would say majority is clinics because there are very less hospitals who are running a very efficient dental unit within the hospital. So, even if it's there, it will be less than 1%. So, it's majority the clinics which are giving us business, and we are working with them.

Lakshmi Narayan, Analyst — Durga Investment

Okay. And what is the marginal structure in terms of what the customer pays and what you realize? What is the markup usually the clinics have?

Samir Merchant, CEO

So, again, it depends. We have spoken in the past. What we do is we provide our product and services based on the prescription which is custom by a dentist. You know, prescribes something to us which is custom as per the patient need. The cost varies from product to product, services to services, and also from teeth to teeth as well. In that scenario, it is the dentist's discretion as to what they think they should charge because it's an all-in charge for you. Suppose you do a root canal, the doctor is grinding your teeth, the doctor is also cleaning your teeth, and there may be more things that he is performing in terms of procedure. Within your mouth or on the teeth. So the charges, it's very hard for us to tell you that what is the markup. It just depends on so many factors.

Lakshmi Narayan, Analyst — Durga Investment

Then what kind of receivables do you have from this point? Like how long is your credit term plan?

Samir Merchant, CEO

Usually we have within 30 to 45 days. You know, I would say maybe 60. 30 to 60 days is the usual terms once we do a monthly invoice. So it's a monthly invoice that we do to a dentist since we share relationship with them since many, many years. And then they will pay within 30, 45 or 60 days depending upon the term that we have and the size of the practice.

Lakshmi Narayan, Analyst — Durga Investment

Okay. And if you just look at it from the split of geographies or split of tier 1 cities or metros, is there some kind of indication as to what is your split and then which region or which particular demographic segment is actually growing faster?

Samir Merchant, CEO

I think we have done well in the last few years regarding creating. So, I would say scenario where the West, the North and the South are doing well for us. East is still newer. We are still yet to do something bigger in the East. But in terms of growth, I would say all segments, whether it's South, West or North, they're all doing fairly well.

Lakshmi Narayan, Analyst — Durga Investment

And is it the majority of your sales, maybe 80-90% of your sales is concentrated in top 10 cities in India?

Samir Merchant, CEO

I wouldn't say that to that extent, because we are currently present, you know, across close to 300 plus cities in India. So, probably the top 20 would have a fair share of it. There are a lot of other cities which are catching up as well. Tier 2 cities are also growing. Tier 3 cities are also growing. And at the same time, I think we should focus on the international aspect as well because we are doing well internationally in terms of countries as well. So we are now present close to 90 to 100 countries depending upon the product lines that we have. And that also we are adding more and more as we speak.

Lakshmi Narayan, Analyst — Durga Investment

Okay, one last question on the international side. When you expand internationally, what is your way of expanding go-to-market? Is it you have some kind of a rep kind of a person who would or a rep offers? How does it happen?

Samir Merchant, CEO

Yeah, nice question. I think on the international side, there are a few areas. So, our business is divided basically into two categories. One is custom and one is standard. So, the standard businesses that we have, which is the VDA solutions, where the brand name is Tagless and KZ, over there, we have people. So, we have people who do the VDA effort, and we appoint distributors across the country, and distributors will sell in turn to the dentist or the aligner companies. So that's one model. Model two is custom, where we are selling the aligners or zirconia crowns to different countries. And over there, the main goal is to go to a chain of denture clinics within those countries. So that's how the strategy is split between two products. And also at the same time, we are evaluating a lot of options to open a lab in countries as well.

Lakshmi Narayan, Analyst — Durga Investment

And your receivable cycle there, like when you're invoiced from India, how long it takes for you to get the money, if you said internationally?

Samir Merchant, CEO

It's also very similar, between 30, 45 and 60 days.

Lakshmi Narayan, Analyst — Durga Investment

Okay, I mean, I hope you do airlifting of the products, right? That's the mode of sending products, correct?

Samir Merchant, CEO

Sorry, what listing?

Lakshmi Narayan, Analyst — Durga Investment

Air listing.

Samir Merchant, CEO

It's by air, yeah, it's by air, a majority is by air, very little is by sea. Okay, because teeth are very small in size, right? It's so tiny that teeth won't make sense. So, it's majority by air. Sometimes, if there are certain things, then it's by sea.

Operator

Sorry to interrupt, Mr. Naran. I'd request you to join back the queue for more follow-up questions. Thank you. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. The next question is from the line of Akshay Thakur from Hillos Capital Limited. Please go ahead.

Lakshmi Narayan, Analyst — Durga Investment

Hello, sir. Very good morning. Congratulations on good results. Thanks for taking my question. So, my first question is on aligner business. So, your presentation says that you have 43% from tier 1 cities and tier 2 as in tier 3 cities as well. So, what is the strategy differential between targeting different cities and in this category, is there any strategic difference while targeting the audience different tier two cities and tier three cities?

Samir Merchant, CEO

Yeah. So, hi. Hi, Asha. Thank you so much for the compliment. I really appreciate it. So, on the targeting part, I think one of the key factors is scanner because TIE2, TIE3 has less access to digitization as compared to TIE1 cities. So, that's one. Number two is on the aligner category, that is pay-as-you-go as well as compared to pay-in-full. So a lot of tie-to, tie-to, where affordability becomes a question, we can deliver aligner in phases. Since that customer is already a customer for our dental lab, so it becomes easier for us to deliver aligner in phases. Like suppose if you need 40 aligners for 10 months, but you may use only 4 a month. So we are in a position, we have the software capability and the logistic capability to deliver you 4 by 4. So we also only manufacture 4 and we can deliver you 4. So that way the dentist can make the treatment more affordable. And also at the same time, you know, we are doing a lot of public awareness initiatives as well with Kareena being our brand ambassador. So we have seen that tier 2, tier 3, the response is, I would say, better than tier 1 because, you know, tier 1, everybody knows. But in tier 2, tier 3, when you get a brand at a good price, then I think the patient is willing to move forward. At the same time, the third strategy is the education part as well. There are a lot of dentists in Tire 2, Tire 3 who are still new to aligners. So we are having great key opinion leaders who are conducting workshops, who are making sure that they are driving this education for the dentist across Tire 2, Tire 3 so that they can learn about aligners and implement aligners in their practice.

Lakshmi Narayan, Analyst — Durga Investment

Okay, thank you for that elaborate answer. One follow-up question, the previous participant, you said that you are planning to open labs in other countries. Was that the correct answer? Was that the correct interpretation which I had?

Samir Merchant, CEO

Yes, correct. So even last time, if you see, we had mentioned that we appointed a CEO in US and we are looking to add a lab in US because since we have a CEO, we are building a good team over there. You are seeing that our international business, US business is doing very well. So we now have the capability in terms of creating semi-automated lab out there. So that is one aspect of strategy which we will move forward. And as and when things happen, we will keep everyone posted.

Lakshmi Narayan, Analyst — Durga Investment

Okay. In terms of strategy, so lab business is a little labor intensive. India acts like a low employee cost strategy and export gives extra margins. How will the international lab be in place if the lab is set up abroad?

Samir Merchant, CEO

So that's a very good question, Akshay. You know, if you have seen our setup with the dental lab and the aligner, so there are some parts which can be really automated, you know, especially aligner automated. So when we say a lab, that lab will not just produce crown. The lab, when we mean, it will produce the crown as well as the aligner. The good part is those all labs that we will plan in the future will be a hybrid module where a lot of digital part of the lab will be done in India and only where required a physical presence of a person along with some semi-automation and CNC machines or 3D printing machines will be done in that respective country. So it's not going to be a 100% replica of what we have in Mumbai. It's going to be an in-person replica that we have in Mumbai, but any and every digital aspects of doing a job entry, doing a design, maybe customer communication, a lot of that will be done in India through hybrid. And I think important factor for all of us to understand is when we create a lab in a country like we have done in India as a spoke, forget about a country. Even in India, when we are in Mumbai, if we go to say Hyderabad and we open a smaller lab, it gives tremendous confidence to a dentist where if they have rush cases, something that is urgent, if they have cases where they may need an urgent intervention, they may need something which has to be fixed very quickly. and cannot even travel to Mumbai. So that sort of facility a dentist really appreciates and it only enhances our wallet share with them once we do this. So that's the same strategy in different parts of the world where if we are receiving business today of only outsourcing and if we go to their country and establish a domestic center, they are very happy to engage with us and be our dentist or our customer for the domestic lab as well. Or the domestic setup, like I said. And when I mean lab, you know, I'm still clarifying that the lab will produce everything that we have, whether it's aligners, retainers, zirconia, anything and everything that is the most automated piece of our manufacturing. Anything which is too labor intensive will still be done in India.

Priyank Parikh, Analyst — Singularity Asset Management Company

Thank you. Thank you for the answer. I'll get back in queue.

Operator

Thank you. The next question is from the line of Priyank Parikh from Singularity Asset Management Company. Please go ahead.

Priyank Parikh, Analyst — Singularity Asset Management Company

Yeah, thanks for the opportunity. Hello. Yes, you're on. Thank you. So, I wanted to understand on the economics and the configuration of our new list that we are planning.

Rajesh Khakkar, Other

We'll take this later.

Priyank Parikh, Analyst — Singularity Asset Management Company

Produce everything, starting from the sheet and input material to the finished annals, or it would be more focused over the finished products or finished products itself?

Samir Merchant, CEO

Yeah, I think it's a good question. So, whatever we do in that country, it's going to be for finished products. See, anything which is standardized, I'm not sure if you have visited our facility, but to manufacture sheet, we have 50,000 square feet facility, and it's a standard product. So for anything which is standard, at least at this point in time, we don't need multiple setups across the world to produce standard. We are capable to producing enough here in India and supply across the world. What we are talking of the lab, which will deal majority, I would say, zirconia crowns and aligner retainers are finished products. And even in that, like we explained, it's going to be more hybrid process. Anything which can be done through digital will be done in India. And the thing that will need physical intervention will be done in that respective country.

Priyank Parikh, Analyst — Singularity Asset Management Company

Okay, understood. And what sort of capacity we are planning here in terms of if we see today's sales of our aligners, would it be catering to all the sales and we would have some spare capacity or how we should look at this? So, I think the way, excuse

Samir Merchant, CEO

me, the way to look at it, in India, we can build capacity very fast. You know, we are constantly, if you see. In terms of aligners, we have enough capacity to expand the plate as well to expand. Internationally, like I said, we are just updating people that this is part of our mid-term to long-term strategy. As and when we plan, we will come back to shareholders and give them the details about what's the capacity out there, what's the size over there, what's the intention to build, what could be the market size over there for the domestic business. So we will share those details when the time is right. For now, I think the strategy for everyone to understand is that we will plan something like that in the future. No, so I am asking about the new plans that we are planning, the capacity out there. Correct. So the new plan that we are planning, the capacity over there, I would say let's focus on the size. First, because we have still not acquired the land, it's still in process. Once we have it, once we start constructing, that's when we'll start getting into more details because once we install semi-automation there, we will calculate a lot of things. But in terms of just sheer size, we could build somewhere around 1.25 to 1.5 lakh square feet, which as per the current that we have is between, say, 35 to 40,000 square feet. So we are almost 3x.

Priyank Parikh, Analyst — Singularity Asset Management Company

Okay, so if we are expanding this big, are we planning to sell to other aligners as well the products that we are going to make? Not in India.

Samir Merchant, CEO

In India, we will sell it with our own brand. You know, we have Illusion Aligners, we have Karina as a brand ambassador. In India, the focus is very clear that we will sell under our own brand only. We don't intend to do any white labeling for anyone.

Priyank Parikh, Analyst — Singularity Asset Management Company

Yeah, fine, fine. Okay, I'll join that with you. Thank you. Thank you so much.

Operator

Thank you. The next question is from the line of Bhavya Shah from Wall Food Funds. Please go ahead.

Bhavya Shah, Analyst — Wall Food Funds

So, good morning, Hamidji. Thank you for this opportunity to ask the question. I would like to see some data on how many touch points we have increased in terms of dental clinics that we are catering to over the last one or two years, and what kind of revenue share increase we have seen per clinic.

Samir Merchant, CEO

Morning, Mavya. Good morning. I think on that, Whenever we are communicating, we are trying to explain people, there are two aspects for everyone to understand for India. Aspect one is for us to take our network as digital as possible. That's our priority currently, where we have reached 78%, and we have been candidates saying that we want to be at 90-95%, so that in a layman's language, which I have explained in the past, is we are running an ATM and a cashier in our manufacturing facility. So, our goal is to eliminate the cashier and go towards an ATM. So, that's our current priority. Now, in terms of reaching out to the number of clinics, yeah, so we have added a certain, but like I said, our majority focus is digitizing them and not towards, you know, increasing. So, the current… KPI or the KRA for salesperson is to make sure that they're digital. And one of the aspects that we are doing is by increasing the wallet share per dentist is our hub and spoke model. So where as a hub, you know, sitting in Mumbai, say a dentist from Delhi is giving us X amount of business. But if we are giving him the opportunity to have a lab in Delhi as well, which is us, then the wallet share increases because he feels the comfort of working with two labs. Already majority of the dentists, they work with two labs. So, if we are the two lads, then it gives more comfort to them because their billing is single, you know. The key opinion or the point of contact that they have, the key account manager is one. So it's much more simpler. So that's the current strategy right now. I think expanding the footprint, adding more dentists probably will come in next financial year. Once we reach our target of digitizing majority of our network, then I think that foundation will be built where we will start adding more and more dentists. But even if we keep adding more and more dentists, it's important that we will only focus on the digital dentists or...

Bhavya Shah, Analyst — Wall Food Funds

So, thank you for that answer. So, would it be possible for you to throw a light at how our wallet share has grown vis-a-vis our clinic that we are catering to? Would that be possible for you to explain?

Samir Merchant, CEO

So, right now, Right now, as I said, I can't give you granular details, but we have internal our dashboards and stuff for us to see how we are increasing the dentist since once we have the hub and spoke model. So if you open a spoke in a certain city, we are clearly seeing a trend where the same dentist, the same store, like you said, in store growth. We are seeing the same dentist increasing his or her wallet share.

Bhavya Shah, Analyst — Wall Food Funds

Fair enough. I'll get back to the queue.

Samir Merchant, CEO

Thank you, Swann.

Bhavya Shah, Analyst — Wall Food Funds

Thank you.

Operator

Thank you. Just a reminder to all the participants to press star and one on the touchstone telephone for more questions. The next question is from the line of Vatsangvi from DYDX Advisor. Please go ahead.

Priyank Parikh, Analyst — Singularity Asset Management Company

Hello, am I audible sir?

Operator

Yes, sir, you are audible. Yes, you are.

Priyank Parikh, Analyst — Singularity Asset Management Company

Congratulations on the good side of Namaste. I have a couple of questions.

Operator

Sorry to interrupt, Ms. Sangvi. You, you're sounding very distant from the microphone.

Vatsangvi, Analyst — DYDX Advisors

Hello, I am audible now.

Operator

Yes, sir, please proceed now.

Vatsangvi, Analyst — DYDX Advisors

So, I have a couple of questions. First is, if we've seen H1 FY27, KITFA Dental revenue grew approximately 33%, while the share of profit from JV has declined by 35%. So, are there any one-offs in this, or margins have been contracted in KITFA Dental?

Samir Merchant, CEO

So, neither there is a one-off, neither there is a margin contraction. We were having a startup for the last three years, which is now, startup benefit can be availed for three years only, which is now not there. So, we are paying regular tax on it. So, that's why you are seeing a drop in terms of share. There is nothing else which has changed. This is a taxation impact, right? Yes.

Vatsangvi, Analyst — DYDX Advisors

Second thing is, now as a company, management plans to deploy scanners under a subscription model instead of a sale to the dentist. So how will this subscription will be structured, will the pricing will be structured, and what payback period is expected on the investment?

Samir Merchant, CEO

So there are, so currently what we have launched is something called a pink revolution, you know, if you follow our social media. So we have launched for women in dentistry to start with and soon we should have a blue revolution, hopefully on the men's day. So that's the plan right now. In terms of the current subscription model, it's 50,000 in terms of deposit, and it's 3,000 plus GST in terms of subscription per month, till the time the customer wishes to use the scanner. And we are only giving the scanner, the laptop is purchased and owned by the dentist themselves. And then there is a commitment of 25,000 business per month by them. So that way, you know, we're increasing the stickiness so that they give us the business because now we are the owner of the scanner. They are still not the owners. And at the same time, this makes the product more affordable in terms of for them to invest. Because right now, you know, just apart from the scanners, I think which we mentioned, the laptop pricings are going over the roof, which we all know. It's not like, you know, hidden parts. You know, me, you know, everybody knows that the cost of laptop is. Going very high, and for a scanner to operate, you need a very high-end laptop, which previously used to be in the range of like 1 lakh, and now it's almost close to 2 lakhs. So the laptop pricing has gone up a lot. So that is why we came up with the thought of creating a subscription model, which is also in the mid-term to long-term interest of the company that if we are able to deploy, you know, X number of scanners, which will give us three lakh business a year, then that's like an additional revenue which we are generating, which is assured. And at the same time, we have clearly seen. That when we do something like this, the dentist doesn't stop at 25,000. 25,000 is just the base threshold. You know, we have dentists who are also giving us maybe 1 lakh, 1.5 or 2 lakh of business per month by having the scanner. So we are very positive that once the scanner is deployed with any dentist and, you know, if you ask any dentist that once you have the scanner, will your practice grow? And I would say unanimous, 100% of them will say, yes, this is a very good growth builder for the practice. So, we are very positive about our initiative, and we'll keep everyone posted as and when things span out. Okay.

Vatsangvi, Analyst — DYDX Advisors

And the last question is, how sales have grown basically in 50s after introducing hub and spoke model compared to the pre-implementation period, like

Priyank Parikh, Analyst — Singularity Asset Management Company

last time we met then,

Vatsangvi, Analyst — DYDX Advisors

yes, in Introduced a spooking surat, right, you said. So, how basically sales have grown in the cities where we added a poke.

Samir Merchant, CEO

So, it has grown well if... I understood the question. So city by city, as we are adding spoke, you know, as the spoke will mature, it will have a bamboo tree kind of an effect, where if there's, you know, what we have clearly seen, if the spoke is three months old, there is X amount of growth. Once it becomes six months, there's X amount of growth. And majority of us spoke are within that, you know, one to three months, I think only one or two are beyond three months. So we are seeing a very, very positive trend. So if you see, you know, last quarter, we grew, say, domestic by single digit, and this quarter is 15%. And we are hoping and we are very confident that we will see more and more over the next quarters. Thank you. I'll get back and cut. Thank you so much.

Operator

Thank you. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. The next question is from the line of Vanayek from Pareto Capital Limited. Please go ahead.

Vanayek, Analyst — Pareto Capital Limited

Yeah, hi. Good morning, everyone. So, my question is largely around the aligner business. Can we understand more on the aligner that how much sale is coming from direct, you know, maybe the finished product versus the certain essays which we are selling to B2B or maybe to the lab?

Samir Merchant, CEO

We had given a split, so if you see on slide number 8, there is a split where the aligner solutions, where it's almost like a 50-50 or 55-45 kind of split that we have. So in the aligner, we have done 13 point. And in the B2B business, which we sell the raw material to India and international, the majority is international, it's about 11.5 crores. Got it, got it.

Vanayek, Analyst — Pareto Capital Limited

And on the Finnish side, which is B2C, how is the average realization over there?

Samir Merchant, CEO

So... I think we have about good, good realization. I, you know, probably in terms of numbers, I can tell you slightly later, because that's still internal and internal information. No, no, no, no. Pretty good. So we are seeing a good.

Vanayek, Analyst — Pareto Capital Limited

Okay. And as a strategy, you know, the focus is more reaching out direct to the consumer or, you know, we want to be focused more through labs or maybe the clinic.

Samir Merchant, CEO

So, we are very, very clear in our strategy that we are a B to B to C company, where we educate the patient, but our last message in every communication is ask your dentist, because we truly believe that if it is controlled by a dentist, then the efficacy of the treatment is much, much, much higher than if it's done direct. Got it.

Vanayek, Analyst — Pareto Capital Limited

And any insight on the margin driver? I think it moves from a pretty decent move from last year versus this year. What is the major contributor to that?

Samir Merchant, CEO

I think we have done well on a lot of aspects. It's not just one aspect, and we are very confident that we will keep working on multiple aspects, whether it's product mix, whether it's the digitization effort, whether it's operational efficiency that we are building, and whether it's AI-led initiatives that we are adding. All of this is contributing to this, and As and when we move forward with more and more initiatives, we are very confident that things will only do better.

Vanayek, Analyst — Pareto Capital Limited

And current aligner is 100% in-house, right, in terms of manufacturing?

Samir Merchant, CEO

Oh, yeah, yeah, yeah. Everything we manufacture. We are not a third-party thing, you know. So whether it's the sheets, you know, and we encourage anyone, everyone who would like to visit our facility, those who have, they can clearly see that everything that we do is we manufacture it ourselves.

Vanayek, Analyst — Pareto Capital Limited

Got it. And more on the, you know, landscape. Currently, I think aligners, there are handful of brands who are trying to capture the market, right? There are some international, there are, you know, Indian brand as well. So in terms of landscape, where we see ourselves and what is your anticipation in terms of, you know, getting more business on the aligner or the overall time, if I can understand more on the possibility, how it can, how big it can become in the next three to five years.

Samir Merchant, CEO

So, I think, in terms of, see, see, the landscape has always been there, like, you know, we have seen the landscape in dental labs since last. Probably 36 years of our existence. So, even in aligners, it's not unexpected that the landscape will be there. Probably some years, it may be more aggressive based on certain people getting funded, but it will all rationalize pretty soon. So, we feel in the next 2, 3, 4, 5 years, it is going to rationalize. There are going to be top 1, 2, 3, 4 players, and we are definitely going to be among them. What number it will be, time will tell. Our aspiration is always to be the number one. But we feel that the plus factor on an aligner case for a dentist is very, very important. While some small things may happen here and there, eventually any dental treatment or any dental product, it's a matter of trust. And that's what we have been able to build so far for the last 36 years. So, we don't see that as a challenge on a mid-to-long-term. Maybe one or two quarters, sometimes there could be certain situations. But we are experienced enough to manage and navigate and keep working towards our mid-term to long-term goals. And also just on one side note, you know, here in India, we are selling aligners in multiple countries across the world. So when we create those labs in different parts of the world, whether it's U.S., U.K., Europe, we are going to sell aligners in those territories as well.

Vanayek, Analyst — Pareto Capital Limited

Got it. Got it. Wonderful.

Samir Merchant, CEO

Thank you.

Vanayek, Analyst — Pareto Capital Limited

I will run back with you.

Operator

Thank you. The next question is from the line of Sanjay Chawla. An individual investor, please go ahead.

Sanjay Chawla, Analyst — Individual Investor

Hi, good morning. Thank you for the opportunity. Congratulations on the good side of the girls. I'll start with a couple of housekeeping questions. You know, your international growth has been quite strong in rupee terms, of course. Can you give a sense of, you know, what has been the, you know, trend in the constant currency growth? Why, why, as you see, you know, this quarter and the last couple of quarters as well?

Samir Merchant, CEO

Sure, I would say, Sanjay ji, it's in the range of maybe say 8 to 10%. Depends on which month the realization comes in, like dollar is fluctuating a lot, but I would say that could be the range.

Sanjay Chawla, Analyst — Individual Investor

And that has been sort of range bound, 8 to 10% YY growth?

Samir Merchant, CEO

I would not, it may not be constant. Like I said, it just depends on a few aspects.

Sanjay Chawla, Analyst — Individual Investor

I would actually request you to sort of, if you can provide this on a consistent basis, because the rupee growth, obviously, is high and fluctuates a lot. Just to strip out your currency impact and give a sense of your underlying business, it would really help. Sure, definitely. Yeah, and, you know, gross margins sort of fluctuate a lot because of the scanner mix. What has been, on an excluded scanner basis, what has been the gross margin this quarter and how has it moved on a QQYY basis?

Samir Merchant, CEO

So, excluding the scanner, we are in the range of, say, 77%, 76.9% to be precise, but 77%, and that has been historically, it's been in that range, you know, 75 to 77% is the range depending upon the product mix that we have.

Sanjay Chawla, Analyst — Individual Investor

Okay, and just a last bit on that, what sort of explains this quarter-in-quarter gross margin decline?

Samir Merchant, CEO

Decline? No, there is no... The gross margin? No, gross margin, there is no decline. In fact, there is an increase in gross margin this quarter as compared to last quarter and also YOY as well.

Sanjay Chawla, Analyst — Individual Investor

Excluding the... Okay, maybe I'm just... Okay. Maybe I'll just redo the number. I thought the gross margin is down. Okay, okay. And, you know, now, just following up on margin related questions, you know, what are the sort of margin headwinds and tailwinds, you know, that you see over the medium term, you know, in terms of big picture?

Samir Merchant, CEO

So I think the big picture is if you see our P&L people is one of the area where there is cost. But like I said, they have been important in terms of scaling the operations right now and also in the future as we adopt a lot of AI automation. These are the people who will be really impactful in terms of driving growth as well. So I think the future formula is very simple. We drive sales, we control the cost of people, because apart from that, more or less everything is under control. It's like a tap, you know. So if you have to do more marketing, we can always control the marketing spend. In terms of gross margins, it's pretty stable right now. So we don't expect that to change much. And the only area that we can constantly improve is the processes and the people efficiency through semi-automation, AI, and a lot of product mix as well. So that's the medium to long-term strategy.

Sanjay Chawla, Analyst — Individual Investor

Okay, so you're indicating gross partners are sort of at the near optimal level already.

Samir Merchant, CEO

I would say there is a chance to improve, but like, you know, 77 may not become 85 or 90. It's not going to happen in that range. 77 could become, you know, 78, 79, maybe borderline 80. So there could be some improvement there, but majority will come from people in process. Like you see, you know, our scanners went down, we started doing business, we are at like 19% in terms of margins. So, as soon as this scales up even more, our people costs remain similar and once we have, say, the newer setup, we adopt newer automation, AI, that cost will be not proportionate. So, our people cost will not grow in the same percentage of our growth, but it will always grow slower. That is where the margin contribution will start happening even further.

Sanjay Chawla, Analyst — Individual Investor

I understood. You talked about the subscription model. I'm wondering if you've done any sort of pilots of this model and what has been your experience?

Samir Merchant, CEO

It's good. In fact, we did a pilot and then we went live with that, I would say, about just three weeks back, and it has given tremendous response. We have seen wonderful response to this initiative, where people want to go digital. If you ask any dentist, do they wish to go digital, their answer is always yes. It's not that they don't want digital dentistry. Everybody wants digital dentistry. It's so convenient for a patient. It's so convenient for a dentist. But cost was one of the hindrance for all of them. And in fact, last year when we did very well by about thousand scanners, this year one of the hurdles came in laptop, where the laptop price is doubled. So dentist starts thinking that there is no rush for a dentist to go digital. They want to do it, but they are not going to do it if the cost is high. So, we kind of came up with a model where even if the cost of the laptop is slightly higher, if the scanner can be under subscription, then it becomes still a smaller adoption. So, instead of, say, before the dentist had to spend 4.2 lakhs or 4.4 lakhs last year, then it became 5.2 lakhs or 5.4 lakhs. This year, with our subscription, it's like 2.5 lakhs. So they can spend 1.6 to 2 lakhs for a laptop, your 3,000 deposit, and they can go digital. They can start the digital initiative. And there's a lot of good payback for them. You know, the OPEX cost reduces, the cost of impression that they're taking physically goes down. The growth part becomes better because if you come in as a patient, they are giving you a 3D consultation versus a standard consultation. Then in terms of speed, it's faster. Suppose you want to just scan and send it to your dental lab, it just takes five minutes for them to send. So there are so many benefits of going digital, which we are sure in the next two to three years, this will do very well.

Sanjay Chawla, Analyst — Individual Investor

But in terms of, you know, specifically in terms of scalability of this, you know, you have a certain volume of scanner sales, but compared to that volume, you know, what could be the volume of, you know, the scanner seeded through the subscription model, you know, if you are going forward basis relative.

Samir Merchant, CEO

Yeah, right now the trends are early, but we believe that we could deploy much more than what we have sold in the past.

Sanjay Chawla, Analyst — Individual Investor

So I'm thinking on a flow basis, like in a quarter or annual basis, you've been selling a certain number of scanners, I believe that's in 1,000.

Samir Merchant, CEO

I know. Yeah, last year we were at about $250 per quarter in terms of run rate. You know, this year we have hardly sold $250 in probably six months' time or even lesser. But like I said, it's only been two weeks that we have launched the subscription campaign. We have, without giving you a specific number, we have a few thousand leads which we have received. So we are just evaluating how it moves forward. Maybe next quarter, when we do a call, we should be able to give you some good number in terms of how much we were able to deploy in a quarter. But this is still starting, you know, end of October and still Diwali coming up for the next four days. So we are seeing that people are preferring to take the deployment post-Diwali. And just last question.

Operator

Sorry to interrupt, Mr. Chawla. I'd request you to join back to you for more follow-up questions.

Sanjay Chawla, Analyst — Individual Investor

So happy to go back. Thank you.

Operator

The next question is from the line of Tushar Manudhane from Odilal Oswal Financial Services Limited. Please go ahead.

Tushar Manudhane, Analyst — Odilal Oswal Financial Services Limited

Thanks for the opportunity, sir. Just on the scanner, just to conclude one aspect here, is there a flexibility for us to move the scanner from one dentist to another, considering or studying their pattern in terms of the patient flow,

Samir Merchant, CEO

or

Tushar Manudhane, Analyst — Odilal Oswal Financial Services Limited

the scanner is the patient completely at a particular dentist's place?

Samir Merchant, CEO

So, there will be two models, Tushar. Model one is where we are, if the dentist gives you a deposit, if the dentist is paying the subscription, and if the dentist is committing to the volume that they have committed, the scanner remains with the dentist. If the dentist is not able to give us the appropriate business, say, in a month, then, you know, sales team will go and meet, hey, hi, doc, you know, you were not able to do enough. He may say, oh, I was not well, I was out on holiday, don't worry, this month, it should be fine. If the number is fine, everyone's happy. Suppose this happens for two months, then since we are still the owner of the scanner, we will take back the scanner and we will deploy at some other dentist.

Tushar Manudhane, Analyst — Odilal Oswal Financial Services Limited

Got it. And lastly, like, there will be certain limitation because now that investment is going to stay from the balance sheet of Lakshmi Dental. So, you, while, you know, from a dollar's point of view, it will be beneficial as the capital moves from, from his pocket to now Lakshmi Dental's pocket. So, which is where there will be certain limitation in terms of number of scanners that could be deployed. So, from that perspective, if you could throw, you know, in terms of, like, how many scanners? You intend to put up on the subscription basis and what happens to someone who has recently bought is there a flexibility for him to get into subscription because the word will spread and so the other dentists would also demand a similar model from you then how are you going to look for that factor.

Samir Merchant, CEO

So, I think even it's been out since last two, two and a half weeks, we have not received any response from anyone who says, oh, I own this scanner now, I want to move to subscription because anyone who wants to own, even during this campaign of subscription Tushar for last two and a half weeks, we have still sold almost 14 scanners. So, there are still dentists who may say, no, no, I don't want this restriction of giving you business because these are locked scanners that we are giving. These are not open scanners. So, they may feel that, no, no, they may deposit, do rent, do subscription, do lock scanner, I'll rather buy. So, we are still selling. So, in fact, this has also increased both scenarios where the adoption is increasing through deployment and also it's creating some sales funnel for us for people who want to buy the scanner as well. So we don't see that as a challenge at all. And now your question to how many numbers? You know, more the merrier. If we can deploy more, because their subscription is taking care of the depreciation that we have, and the ROI period of deploying the scanner is very, very quick. So we can really, really improve a lot of parameters if we are able to deploy a lot. If we deploy a thousand, that's like almost. If you see per month 25,000 into 1,000, that's the amount of 2.5 crores is the business that is coming to us.

Tushar Manudhane, Analyst — Odilal Oswal Financial Services Limited

Got it. And is there any competitor would be doing such kind of subscription-based scanner setup for dentists?

Samir Merchant, CEO

Right now, we don't know. We haven't seen because we just started two weeks back. If people will come and copy, you know, don't know right now. But even if they do, I don't think it's going to be a lot of clear because it's not easy. You know, you have to build a lot of tech around it. You have to have a lot of skill set in terms of how you deploy this, how you manage the subscription, how you manage the log scanner updates. It's not easy. So if there could be, and I'm saying it will still be good, you know, if this happens, like you and me have discussed in the past, and I've explained to many of them, that this will only take business away from the unorganized player, because they will not be able to offer it.

Tushar Manudhane, Analyst — Odilal Oswal Financial Services Limited

Thank you. Thank you.

Operator

The next question is from the line of Priyank Parik from Singularity Asset Management Company. Please go ahead.

Priyank Parikh, Analyst — Singularity Asset Management Company

Thanks for the opportunity again. First, I want to understand on our margin moment, the margin improvement that we have seen over the time, especially in the aligner segment. So, how would we attribute this to the better realization versus the better efficiency? Directionally, if you can give a sense on the realization.

Samir Merchant, CEO

Sure. So, I think it's a mix of both. You know, I would not put it on one. So, it is realization as well as efficiency as well. And in the future, like I said, majority will come from efficiency. Only, I would say, a minor portion will come from either realization or the cogs. Majority aspect of a business will rely on how much efficiency we can build in terms of people and processes.

Priyank Parikh, Analyst — Singularity Asset Management Company

Okay. And what sort of quarterly run rate of new cases we are seeing? I think, if you can... So, I know the annual number, but what sort of quarterly run date we can assume?

Samir Merchant, CEO

So, whatever you have seen, you know, this quarter, I would say majority of the increase is happening through volume. So, if next quarter, say, we are X percentage in terms of growth, that 90% of that is driven through volume. In terms of number of cases, I am asking. So, number of cases is, you know, I think we have internally, but that's not something that we usually share out because those are internal numbers.

Priyank Parikh, Analyst — Singularity Asset Management Company

I'm sure.

Samir Merchant, CEO

But again, if there is something that you would like, you can definitely get in touch with SGA. We are happy to do a call and give you some aspect of it.

Priyank Parikh, Analyst — Singularity Asset Management Company

Yeah, yeah, yeah, sure. Thank you.

Samir Merchant, CEO

Thank you.

Operator

Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Priyank Parikh, Analyst — Singularity Asset Management Company

Thank you.

Rajesh Khakkar, Other

With this, I conclude the call. If you have any further queries, please contact HGA, our Investor Relations Advisor. Thank you, everyone, for joining us today on this earnings call. Thank you. Thank you.

Operator

Thank you. On behalf of Lakshmi Dental Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.