PharmEasy To Buyback ESOPs Worth $3 Mn, Move To Benefit 45 Employees

PharmEasy is the latest startup to join foodtech unicorn Swiggy, social commerce platform Meesho and others to buy back employee stock ownership plans (ESOPs). The online pharmacy has announced a $3 Mn ESOP buyback, as it looks to instill confidence in staff amid the Covid-19 pandemic. 

The buyback will benefit 40-45 nearly employees of the Mumbai-based company.

PharmEasy was valued at around $700 Mn when it raised $220 million, led by Temasek last year. PharmEasy also counts venture capital firm Orios Venture Partners and Eight Roads as its early backers.

“We raised a round, so we decided to allocate some portion of it to do a buyback and incentivise people for all they’ve done so far and we’ll continue to do so. We’re in a sector that’s fortunately not affected, but our employees’ families might be affected and facing issues,” Dharmil Sheth, cofounder of PharmEasy told ET.

In September the Competition Commission of India (CCI) had approved the merger of online pharmacy Medlife with PharmEasy. This was the first major consolidation in the sector since the entry of big players like Reliance Industries and Amazon.

South African technology and media conglomerate Naspers and US-based private equity firm TPG were in talks to invest up to $100 million each in PharmEasy at a $1.2 Bn pre-money valuation.

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).

Meanwhile, Sheth said PharmEasy has always wanted employees to have more skin in the game and its ESOPs account for between 5% and 7% of its total shareholding.

“These are times when we need to instil confidence. The company is doing well, people are putting in more than 100% to ensure we’re up and running,” he added.

In October, Bengaluru-based edtech platform and one of the latest entrants in the Indian unicorn club, Unacademy, announced an ESOP buyback program worth INR 25-30 Cr, which will take place in December this year. 

Several Indian startups such as Zerodha, CarDekho, BharatPe, Vy Capital and Mobile Premier League (MPL) have announced ESOP buybacks this year. The buybacks assume more significance when they happen in a year where many Indian startups have witnessed a financial crunch amid the Covid-19 pandemic. 

For companies that are unlisted, ESOPs for its employees are useless. Hence, a partial exit is simulated for the employees when the company buys back ESOPs from its workforce at the prevailing stock price of the company.