PharmEasy May Raise $300 Mn At 50% Valuation Cut

SUMMARY

General Atlantic, CPPIB and ADIA may join the startup’s captable, while existing investors may also pick more stake

Pharmeasy shelved its IPO plans and withdrew market regulator-approved DRHP three weeks ago

It was planning an INR 6,250 Cr IPO but changed plans due to valuation mismatch and market volatility

Epharmacy startup PharmEasy’s parent company API Holdings is reportedly in early stages of discussions for raising $200 Mn-$300 Mn from General Atlantic, Canada Pension Plan Investment Board (CPPIB), and Abu Dhabi Investment Authority (ADIA).

Faced with a funding crunch, the startup, which shelved its IPO plans recently, is likely to follow some of its peers and take a valuation cut. It is likely to be valued nearly 50% lower from its valuation of $5.4 Bn in October 2021.

Previously, PharmEasy was also reported to be in talks with investors to nearly raise $200 Mn at a valuation of $3.8 Bn (a 30% valuation cut), but the deal did not materialise.

In the current round, existing investors TPG Growth, Prosus Ventures, Temasek and ADQ are also likely to contribute roughly $70 Mn-$80 Mn. The Economic Times report quoted sources as saying that the discussions are in an early stage and may not necessarily turn into a deal.

Founded in 2015, PharmEasy holds a substantial position in the $350 Mn Indian epharmacy market. API Holdings filed its draft papers for an initial public offering (IPO) of INR 6,250 Cr in November 2021, but withdrew the regulator-approved draft three weeks ago due to valuation mismatch and market volatility.

The startup offers a range of services such as teleconsultations, sample collections and medicine delivery. The epharmacy sector saw a boom amidst the Covid-19 pandemic and the related restrictions. However, with daily life returning to normalcy, the market has gone back to legacy players and funding inflow in the segment has dwindled.

Consequently, PharmEasy recently laid off 40 full-time employees from its subsidiary and electronic medical record solutions provider Docon Technologies.

It has been on the lookout for funds for the last six months, even at lower valuations. In a bridge financing round, it was also willing to raise $250 Mn in debt to fund its loan repayments and working capital needs.

The startup had been aiming to become EBITDA positive before hitting the bourses. PharmEasy’s loss widened to INR 640 Cr in FY21 from INR 335.2 Cr in FY20.