Exclusive: IPO-Bound PharmEasy Lays Off 40 Employees From Subsidiary Docon Technologies

API Holdings-run PharmEasy, which is heading for an initial public offering (IPO), has laid off around 40 full-time employees from its subsidiary Docon Technologies in the past few weeks. Docon Technologies is an EMR or electronic medical record solutions provider.

Most of the laid off employees were from sales background, like business development managers, cluster heads and area managers, sources told Inc42. The employees were based out of various cities like Mumbai, Delhi, Jaipur, Chandigarh, among others. 

The startup offered a two-month salary as part of the severance package and is also trying to help them get jobs.

According to sources, PharmEasy management announced in April that Docon would be rebranded to PharmEasy One as a whole entity and most of the employees of Docon would be shifted to any of the API Holdings’ entities. 

It must be noted that PharmEasy acquired Aknamed and Thyrocare recently, and also owns Retailio under its belt. 

While the startup was able to shift a significant workforce of Docon to various other entities, some of the employees resigned. By the end of April, around 40 full-time employees who were left in the Docon team were laid off by the company. 

Sources attributed the restructuring of Docon to business reasons. According to people aware of the matter, Docon, which was acquired by API Holdings in 2016, was unable to scale up its revenue and was running in loss. 

API Holdings is aiming to become EBITDA positive as it will be hitting the public bourses soon. In FY21, its EBITDA margin improved to -23.04% from -42.89% in FY20. 

Docon Technologies incurred a loss of INR 29.7 Cr in FY21, while its total income stood at INR 2.25 Cr. The startup’s total expenses shot up to INR 31.7 Cr, of which employee benefit expenses were the highest at INR 15.8 Cr.

As per API Holdings’ DRHP, around 4,617 prescribing doctors generated prescriptions through Docon software and teleconsultation tools in June 2021. It said that around 10.7 Mn digital prescriptions were generated during fiscal 2021 and it enabled 3.4 Mn teleconsultations during the same period. 

Currently, Docon has completely halted its on ground operations and is conducting all operations virtually. This means that no on-ground employees of Docon would visit doctors to sell its software and hardware. 

PharmEasy declined to comment on the matter when Inc42 reached out to the startup.

PharmEasy IPO Plans

API Holdings, the parent company of the epharmacy unicorn, filed its draft red herring prospectus (DRHP) last November. The startup plans to raise INR 6,250 Cr through fresh issue of shares and there will not be any offer for sale (OFS) component. The startup, however, will look at an option of pre-IPO fundraise of up to INR 1,250 Cr through private placement after consulting with the BRLMs (book running lead managers).

The startup said it would utilise around INR 1,929 Cr of the IPO net proceedings for prepayment or repayment of all or portion of certain outstanding borrowings availed by the company and its subsidiaries. As per the DRHP, Naspers Ventures, Temasek, and TPG Growth hold 12.04%, 10.84%, and 6.65% stakes, respectively, in API Holdings.

PharmEasy incurred a loss of INR 641.3 Cr in FY21, a 91% jump from INR 335.2 Cr in FY20. Its revenue from operations stood at INR 2,335.2 Cr, while total expenses were at INR 2,980.9 Cr during FY21. 

As per media reports, API Holdings is in talks with private equity (PE) investors to raise debt to the tune of $250 Mn in a bridge financing round.

According to Inc42’s layoff tracker, the Indian startup ecosystem has laid off 9,608 employees (including Docon)  in 2022 so far. With the layoffs, Docon has become the third healthtech startup after MFine and Breathe Well-being to fire employees this year.