PharmEasy In Talks With Naspers, TPG For $100 Mn Infusion

SUMMARY

The proposed investment is likely to be done at a pre-money valuation $1.2 Bn

PharmEasy has so far raised $328 Mn across seven funding rounds and had last raised $220 Mn in November 2019

The funding talks come less than a month after CCI approved a merger between PharmEasy and smaller rival Medlife

Mumbai-based online pharmacy PharmEasy is in talks with South African technology and media conglomerate Naspers and US-based private equity firm TPG to invest up to $100 million each. The proposed investment is likely to be done at a pre-money valuation $1.2 Bn.

The funding talks come less than a month after the Competition Commission of India (CCI) approved a merger between PharmEasy and smaller rival Medlife. The merger heralded the first big consolidation play in a sector seeing tough competition with the entry of Reliance and Amazon.

PharmEasy has so far raised $328 Mn across seven funding rounds and had last raised $220 Mn in November 2019. PharmEasy, which counts Temasek, Bessemer Venture Partners, Nandan Nilekani etc., among its investors, was last valued at reportedly $700 Mn. PharmEasy also counts venture capital firm Orios Venture Partners and Eight Roads as its early backers.

In August last year, PharmEasy received $100 Mn from Singapore’s Temasek in August, valuing it at $650-$700 Mn. It also wrapped up a $100-$120 Mn equity financing round in July last year, led by a host of new investors, including the second-largest Canadian pension fund CDPQ, and LGT.

The proposed investment by Naspers and US-based private equity firm TPG was first reported by ET.

The merger of PharmEasy with Medlife will see API Holdings, the parent entity of PharmEasy, acquire 100% equity shares of Medlife, filings with the CCI show. Medlife’s promoters will in return get a 19.95% stake in the combined entity.

Launched in 2015, PharmEasy offers services including online medicines, healthcare products and booking lab tests in more than 1000 cities.

The pharmaceutical sector in India has seen an uptick since Covid-19. Giants like Reliance Retail, Amazon have entered the pharmacy space along with Flipkart planning a foray too.

After months of speculation, Reliance Retail entered the online medicine delivery space by acquiring 60% equity stake in epharmacy startup Netmeds, formally known as Vitalic Health Private Limited, for INR 620 Cr ($83 Mn).

With the acquisition, the Mukesh Ambani-led company has got the 100% equity ownership of Netmeds subsidiaries — Tresara Health Pvt Ltd, Netmeds Marketplace Ltd and Dadha Pharma Distribution Private Limited. All these subsidiaries are collectively known as Netmeds, and are in the business of pharma distribution and sales, and business support services.

Policy Paralysis

While Covid-19 and the subsequent behavioural shift towards ecommerce may have catalysed growth for online pharmacies, the sector was already poised to grow seven-fold by 2023 to $2.7 billion, according to Red Seer. This was mainly on account of the challenges faced by physical pharmacies that gave their online counterparts a problem to solve.

The government had floated draft regulations for epharmacies but these guidelines never saw light of the day. While the lack of proper rules governing the online pharmacy space has kept large investments at bay, it has allowed the existing players in the market to grow and overcome the challenges faced by traditional retailers, which account for almost 85% of the country’s total pharmaceutical sales. For pharmacies overall, India’s drug regulations require retailers to get a licence to dispense medicines from the state in which they are being sold.