Reliance Takes On Amazon Pharmacy With $83 Mn Netmeds Acquisition

SUMMARY

Reliance has acquired 100% equity ownership of all Netmeds’ subsidiaries

All these subsidiaries have recorded losses in the last three financial years

Amazon recently launched its epharmacy venture looking at strong growth

After months of speculation, Reliance Retail has finally 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).

With this acquisition, the Mukesh Ambani-led company has got the 100% equity ownership of Netmeds subsidiaries — Tresara Health Pvt Ltd, Netmeds Marketplace Ltd and Dadha Pharma Distribution Private Limited. All these subsidiaries are collectively known as Netmeds, and are in the business of pharma distribution and sales, and business support services.

Speaking on this strategic investment, Isha Ambani, Director, RRVL, said, “This investment is aligned with our commitment to provide digital access for everyone in India. The addition of Netmeds enhances Reliance Retail’s ability to provide good quality and affordable health care products and services, and also broadens its digital commerce proposition to include most daily essential needs of consumers.”

“We are impressed by Netmeds’ journey to build a nationwide digital franchise in such a short time and are confident of accelerating it with our investment and partnership,” Ambani added.

Reliance Retail, in the BSE fillings, highlighted that the acquisition of Vitalic has been through a mix of secondary purchase and primary investment, for at least 80% stake by April 2024, with an option to increase it to 100% ownership.

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Commenting on this development, Netmeds’ founder and CEO Pradeep Dadha, said, “As a third-generation entrepreneur, I have the greatest admiration for Reliance, the biggest global Indian brand and a multinational conglomerate, which has the welfare of every Indian at the heart of its operations.”

“With the combined strength of the group’s digital, retail and tech platforms, we will strive to create more value for everyone in the ecosystem, while providing a superior Omni Channel experience to consumers. In the coming years, we will cover many more cities, serve many more customers, expand to many more categories and work to fulfil the ‘Make in India’ dream.” he added.

Netmeds’ Streak Of Losses In Last Three Years

Netmeds was founded in 2010 by Pradeep Dadha. The startup is a licensed pharmacy marketplace that offers authenticated prescription and over-the-counter (OTC) medicine digitally along with other health products. The company has acquired two healthtech startups KiViHealth and telemedicine startup JustDoc. As of March 2019, Netmeds claimed to have served more than 3.7 Mn customers in over 610 Indian cities and towns.

It reported a consolidated turnover of INR 221.02 Cr, net loss of INR 184.35 Cr in the financial year 2020. Similar to FY 2020, Netmeds reported INR 304.74 Cr and INR 184.23 Cr consolidated turnover, and INR 192.95 Cr and INR 4.69 Cr net loss in the financial year 2019 and 2018, respectively. Even the subsidiaries that wholly acquired by Reliance have also reported losses in the last three years.

Dadha Pharma Distribution Private Limited recorded a turnover of INR 132.52 Cr and a net loss of INR 0.46 Cr in FY20. The subsidiary has noted INR 149.05 Cr and INR 114.52 Cr turnover in FY19 and FY18 respectively, leading up to INR 1.21 Cr and INR 1.10 Cr net loss.

Tresara Health Pvt Ltd had a turnover of INR 85.80 Cr, INR 191.50 Cr and INR 78.52 Cr in FY20, FY19 and FY18, respectively, leading up to a net loss of INR 14.87 Cr, INR 10.93 Cr and INR 8.82 Cr.

Netmeds Marketplace Ltd had a turnover of INR 7.77 Cr and a net loss of INR 164.15 Cr in FY20. In FY19 and FY18, respectively, the companies had a turnover of INR 13.94 Cr and INR 10.05 Cr, and a net loss of INR 172.41 Cr and INR 59.56 Cr.

Reliance Retail believes that this investment will allow it to further enhance affordable availability of essential quality health care products and services offered by the company itself. Alongside this, the investment will also increase its digital offerings. As the Indian government is yet to launch epharmacy guidelines, Reliance did not require any regulatory approvals for the said investments.

Reliance To Challenge Amazon, Flipkart And Others

Last week, Amazon India launched its online pharmacy service named ‘Amazon Pharmacy’. The online pharmacy will be piloted in Bengaluru first and will be expanded to other cities later. Meanwhile, its rival Flipkart may also enter this domain soon.

According to an Economic Times report, Flipkart may partner with Mumbai-based epharmacy startup PharmEasy for its latest venture. Flipkart CEO Kalyan Krishnamurthy has held multiple rounds of discussions with PharmEasy’s founding team led by Dharmil Sheth. The ecommerce giant is reportedly open to any investment opportunity in PharmEasy, but the details for the same have not been finalised yet.

Meanwhile, PharmEasy is also in advanced discussions to sign a merger with Bengaluru-based rival Medlife to get a larger pie of the market. According to a Business Standard report citing sources, the duo has been in talks for a merger deal valued at $200 Mn to $250 Mn to create one of the largest healthcare companies. With this, Medlife will retain 20-30% stake in the combined entity, the report has added.

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