CCI Clears Ranjan Pai, 360 One’s Stake Acquisition In PharmEasy

SUMMARY

The CCI approved subscription to CCPS class B shares of API Holdings, the parent of PharmEasy, by MEMG LLP and 360 ONE

With this, Ranjan Pai will emerge as one of the biggest investors in PharmEasy with an estimated stake of more than 12% and will join the startup’s board

Pai’s investment is part of PharmEasy’s INR 3,500 Cr rights issues which concluded in October last year and also saw participation from Goldman Sachs, Prosus and Temasek

The Competition Commission of India (CCI) on Tuesday (March 26) approved the proposal of the family office of Manipal Group chairman Ranjan Pai to invest in online pharmacy major PharmEasy’s parent company, API Holdings.

The CCI also cleared an additional investment from 360 One (formerly IIFL) in PharmEasy. “CCI approves subscription to CCPS B of API Holdings by MEMG LLP and 360 ONE,” the competition watchdog said in a statement.

“The proposed combination envisages subscription of class B compulsorily convertible preference shares (CCPS B) of the target (PharmEasy) by the acquirers. The proposed combination consists of acquisitions and fall(s) under Section 5(a)(i)(A) of the Competition Act, 2002,” it added.

As per reports, Pai will now emerge as one of the biggest investors in PharmEasy with an estimated stake of more than 12%. Last year, reports also said that Pai would receive three seats on the board of API Holdings in lieu of the investment. With the CCI nod now in place, Pai will now reportedly join the board of the online pharmacy.

Pai’s investment is part of the online pharmacy’s mega INR 3,500 Cr rights issues, which concluded in October last year and saw participation from Goldman Sachs, Prosus and Temasek. The three investors received the CCI’s nod in January 2024 to acquire stakes in the Mumbai-based startup.

Previously, reports also suggested that the issue also saw participation from CDPQ (Canadian pension fund).

Notably, the startup was initially looking to raise INR 2,400 Cr via the issue but later increased it to INR 3,500 Cr at a valuation cut of more than 90% from its peak valuation of $5.6 Bn in 2021.

PharmEasy undertook the rights issue to clear a significant portion of its outstanding debt to Goldman Sachs. The startup had violated its loan covenant conditions with Goldman Sachs barely a year after raising the debt.

As per the terms of the loan, the Mumbai-based startup was supposed to raise an equity round of about INR 1,000 Cr but the fundraise failed to materialise amid mounting losses, funding winter, and macroeconomic pressures.

Founded in 2015 by Dharmil Sheth, Dhaval Shah, Harsh Parekh, Siddharth Shah, and Hardik Dedhia, PharmEasy sells medicines online and also offers diagnostic tests to its customers through its other brands.

The online pharmacy has been in the eye of the storm for quite sometime now. Be it valuation markdown, funding woes or mass layoffs, it has grabbed headlines for all the wrong reasons in the recent past.

However, it has been looking to turn around its fortunes by laying off employees in droves and streamlining operations to bring down cash burn and charting a path to profitability. In the financial year 2022-23 (FY23), PharmEasy trimmed its loss by 16.23% year-on-year (YoY) to INR 2,289 Cr while clocking a 16% YoY growth in operating revenue to INR 6,644 Cr.