Shares of Zydus Wellness Ltd have given up most of their initial gains following the company's major international acquisition, raising questions about the deal's long-term value. The stock, which was trading near ₹403 when the acquisition was announced on 29 August, soared to a record high of ₹530.90 by 19 September. However, the rally proved short-lived, with the stock price cooling off to around ₹424, nearly erasing all post-deal gains.
The Strategic Rationale Behind the Comfort Click Acquisition
On 29 August, Zydus Wellness announced it was acquiring UK-based Comfort Click Ltd for approximately ₹2,380 crore. Comfort Click operates in the fast-growing global vitamins, minerals, and supplements (VMS) segment, which represents a strategic extension of Zydus's existing wellness portfolio. The Indian company already boasts strong brands like Sugar Free, Complan, RiteBite Max Protein, and Nutralite in the nutrition and wellness space.
This acquisition provides Zydus with direct access to developed markets including the United Kingdom, the European Union, and the United States. This move is designed to reduce the company's heavy reliance on the Indian market and establish a global wellness platform. Comfort Click's business model is notably digital-first and asset-light, with a strong direct-to-consumer approach and a significant e-commerce presence.
From a financial perspective, the deal appears reasonably priced. Comfort Click operates with an Ebitda margin of about 16%, which is higher than Zydus Wellness's current margin of 13-14%. The acquisition was finalized at roughly 11.4 times EV/Ebitda, a valuation considered fair for a digital wellness platform in high-growth developed markets.
Financial Performance and Near-Term Challenges
The company's September quarter (Q2FY26) results reflected the immediate impact of the deal. Consolidated revenue jumped 31% year-on-year to ₹652 crore, driven largely by the consolidation of Comfort Click's financials and robust performance from non-seasonal brands. However, seasonal products like Glucon-D and Nycil underperformed due to an extended monsoon.
Profitability faced pressure, with the Ebitda margin contracting by 50 basis points year-on-year to 3.5% in the quarter, attributed to seasonality. For context, the margin stood at 11.8% in the first half of FY26 and 14% in the full previous fiscal year.
Looking ahead, the company's management has outlined an aggressive growth strategy focused on new product launches across protein and functional nutrition, healthy fats, sugar-reduction solutions, and the VMS category. In India, key brands are being scaled up through deeper distribution networks and a push on e-commerce and quick-commerce platforms.
The Road to Profitability and Valuation Outlook
Despite the strategic upside, the near-term financial picture is expected to remain challenging. The company will face several headwinds:
- Higher upfront marketing and customer acquisition costs for new product launches.
- Annual amortization costs of approximately ₹160 crore over the next 15 years related to the acquisition.
- Ongoing interest costs and continued investments required for growth.
Analysts view these pressures as largely part of an investment phase. As these one-off costs normalize, operating efficiency improves, and higher-margin businesses like VMS and protein nutrition gain scale, profit margins are projected to recover gradually over FY27 and FY28.
Overall, Zydus Wellness is undergoing a significant transformation from a traditional fast-moving consumer goods (FMCG) player into a diversified health and wellness platform. The stock currently trades at around 30 times its estimated FY27 earnings. While the market still predominantly values Zydus through a pharmaceutical lens, its increasing exposure to high-growth FMCG and wellness segments could eventually lead to a valuation re-rating, bringing it closer to its pure-play FMCG peers.
