Indian Antitrust Regulator Greenlights Investment in PharmEasy Parent Company

PharmEasy Store
Preeti Bali / 8:00 am / March 27, 2024

The Competition Commission of India (CCI) has granted approval for an investment in API Holdings, the parent company of online pharmacy giant PharmEasy. This move paves the way for increased financial backing for PharmEasy.

Details of the Investment

  • Family Office of Ranjan Pai Receives Approval: The CCI greenlit a proposal from MEMG LLP, the family office of Manipal Group chairman Ranjan Pai, to invest in API Holdings. This investment is expected to make Pai one of PharmEasy’s largest stakeholders, with a holding exceeding 12%. Additionally, reports suggest Pai will secure a seat on the API Holdings board.

  • 360 One (Formerly IIFL) Gains Approval: The antitrust body also approved an additional investment from 360 One, previously known as IIFL.

  • Investment Follows Rights Issue: Pai’s investment follows PharmEasy’s rights issue, a fundraising effort that concluded in October 2023. This initiative, which ultimately raised INR 3,500 crore, also attracted participation from Goldman Sachs, Prosus, and Temasek. These three investors received CCI approval in January 2024.

PharmEasy’s Financial Maneuvering

  • Rights Issue Addressed Debt: Notably, PharmEasy’s rights issue aimed to settle a significant portion of its debt obligations to Goldman Sachs. The company had breached loan agreement terms just one year after securing the funding.

  • Missed Equity Round Led to Rights Issue: The loan terms stipulated that PharmEasy raise an equity round of approximately INR 1,000 crore. However, this fundraising failed to materialize due to mounting losses, a general slowdown in investment activity, and broader economic pressures.

PharmEasy’s Recent Challenges

The online pharmacy has faced a series of hurdles in recent times, including:

  • Valuation Decline: PharmEasy’s valuation has undergone a significant markdown. The rights issue was conducted at a price point reflecting a more than 90% reduction from the company’s peak valuation of $5.6 billion in 2021.

  • Funding Difficulties: PharmEasy encountered challenges in securing additional funding.

  • Employee Layoffs: The company implemented workforce reductions to streamline operations and reduce cash burn.

Signs of a Turnaround

Despite these difficulties, PharmEasy has exhibited efforts to improve its financial health by:

  • Reduced Losses: In the financial year 2022-23 (FY23), PharmEasy managed to decrease its losses by 16.23% year-on-year (YoY) to INR 2,289 crore.

  • Revenue Growth: The company also achieved a 16% YoY growth in operating revenue, reaching INR 6,644 crore in FY23.

Looking Ahead

The CCI’s approval of these investments signifies a potential turning point for PharmEasy. The additional financial backing and streamlining efforts suggest the company is aiming for a more stable and profitable future.

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