PharmEasy Withdraws DRHP, Mulls Fundraise Via ‘Rights Issue’

Online pharmacy giant PharmEasy has shelved plans for its initial public offering (IPO) for the time being and withdrawn the draft red herring prospectus (DRHP) it filed with the Securities and Exchange Board of India (SEBI) last year, sources told Inc42.

They cited valuation mismatch and market volatility as the reason behind the deferment of IPO.

In a notice to its shareholders, the epharmacy unicorn also said that it is mulling a fundraise via ‘rights issue’ to fuel its ‘immediate expansion and growth plans’.

“The rights issue will be open for a period of 30 days, starting from on or around the first week of September,” PharmEasy said.

The startup plans to raise the funds through issuance of compulsorily convertible preference shares (CCPS) which would be priced at around INR 100 per share. 

“Shareholders of the company will receive the letter of offer inviting them to participate in the rights issue on the terms which will be approved by the board,” the notice said.

PharmEasy, founded in 2015 by Dharmil Sheth and Dr Dhaval Shah, offers a range of services such as medicine deliveries, teleconsultations and sample collections for diagnostic tests. PharmEasy merged with its investor entity Ascent Health to form API Holdings back in 2019. 

API Holdings, the parent company of PharmEasy, filed the DRHP with the markets regulator in November last year. 

The unicorn planned to raise close to INR 6,250 Cr via a fresh issue of shares. It planned to spend the capital raised largely on payment of certain outstanding borrowings as well as to fund organic and inorganic growth initiatives.

It even received the SEBI nod for the listing in February this year. However, things only went downhill from there.

As headwinds such as rising interest rates and market volatility emerged in the early months of the year, the pharmacy unicorn considered slashing its IPO valuation. 

Later in July, PharmEasy was reported to be in talks with investors to raise $200 Mn at a valuation of $3.8 Bn. This was in contrast with its previous funding round when it raised $350 Mn at a reported valuation of $5.1 Bn-$5.6 Bn. 

The deferment comes at a time when Indian new-age tech stocks have been under intense selloff pressure. The Russia-Ukraine war and tightening global liquidity have raised fears of an impending recession, which has made investors’ wary and focus on profitability.

While shares of foodtech giant Zomato have fallen by more than 63% from its record high of November, fintech major Paytm’s shares have plummeted 60% from an all-time high of INR 1,961.05.

PharmEasy currently has a presence in more than 1,000 cities and towns across 22,000 pin codes in the country. 

The Mumbai-based online pharmacy giant is backed by big investors such as Prosus Ventures, Temasek, TPG, Amansa Capital, among others.

According to a report, the Indian epharmacy market was pegged at around $344.78 Mn in the financial year 2020-21 (FY21) and was expected to surge to $1.13 Bn by FY2027 at a compounded annual growth rate (CAGR) of 21.28% during the period.