PharmEasy Raises INR 1,804 Cr At A 90% Valuation Cut

SUMMARY

API Holdings passed special resolutions to allot 18.63 Cr CCPS B at an issue price of INR 96.8 each, translating into a total of INR 1,804 Cr

The rights issue has been executed at a 90% valuation cut compared to the startup’s peak valuation of $5.6 Bn in October 2021

The INR 3,500 Cr rights issue concluded in October last year and saw participation from MEMG Family Office, Goldman Sachs, Prosus, Temasek, among others

Barely a month after the Competition Commission of India (CCI) greenlit PharmEasy’s INR 3,500 Cr rights issue, the digital pharmacy has raised INR 1,804 Cr ($216.2 Mn) in a down round led by the family office of Manipal Group chairman Ranjan Pai.

As per regulatory filings accessed by Inc42, PharmEasy’s parent API Holdings passed special resolutions to allot 18.63 Cr (18,63,74,897 to be precise) cumulative convertible preference shares B (CCPS B) at an issue price of INR 96.8 each. This translates into a cumulative total of INR 1,804 Cr.

The development was first reported by Entrackr.

The funds were raised as part of the ongoing rights issue at a 90% valuation cut compared to the startup’s peak valuation of $5.6 Bn in October 2021.

While the MEMG Family Office pumped in INR 800 Cr, Prosus invested INR 221 Cr. On similar lines, 360 One (formerly IIFL Ventures) infused INR 200 Cr through multiple funds, while Temasek invested INR 183 Cr.

Canadian pension fund CDPQ also invested INR 95 Cr in the epharmacy major.

Meanwhile, WSSS Investments, Goldman Sachs, and Evolution Debt Capital cumulatively invested INR 304 Cr.

The company’s board passed the proposal to allot the CCPS in two different board meetings held on April 9 and April 11. As per the filings, the startup plans to convert the CCPS into equity shares in the ratio of 1:20.

Meanwhile, it remains to be seen when the remaining INR 1,700 Cr of the INR 3,500 Cr trickles in for PharmEasy.

The fundraise comes just a month after the CCI approved the proposal of MEMG family office and 360 One to invest in API Holdings. Earlier in January, the competition watchdog also cleared the investment proposals of Goldman Sachs India, MacRitchie Investments and Evolution X, CDPQ, among others.

The digital pharmacy 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 company has been in choppy waters for some time now for a range of reasons including valuation markdown, funding woes, and mass layoffs. The startup was also the biggest underperformer in the Indian portfolio of investment giant Prosus in H1 FY24 with an internal rate of return (IRR) of -41%.

However, PharmEasy has been on the mend recently on the back of a restructuring exercise. It managed to cut down its loss to INR 2,289 Cr (excluding impairment loss) in FY23 from INR 2,731.7 Cr in the previous fiscal year. Operating revenue rose 16% year-on-year to INR 6,644 Cr in FY23.