SEBI Green-Lights PharmEasy’s INR 6,250 Cr IPO

API Holdings, the parent company of epharmacy giant PharmEasy, has received clearance from the Securities and Exchange Board of India (SEBI) to raise funds through an Initial Public Offering (IPO).

The startup plans to raise INR 6,250 Cr through the IPO

The pharmacy giant’s IPO will be fully through primary share sale and will not have an Offer For Sale (OFS) component. This, essentially, means that the startup’s existing shareholders will not divest their stakes.

This comes months after API Holdings filed its Draft Red Herring Prospectus (DRHP) with SEBI in November last year. 

The startup will utilise the net proceeds to prepay or repay the outstanding debt of INR 1,929 Cr. The funds will also be used for organic growth initiatives, which have been pegged at INR 1,259 Cr. Additionally, the proceeds will also enable PharmEasy to pursue inorganic growth via acquisitions and other initiatives, amounting to a cumulative total of INR 1,500 Cr. 

With the SEBI nod, the startup will now take a call on whether it wants to delay the IPO or ‘readjust’ its valuation. Last week, it was reported that the epharmacy startup was ‘reconsidering’ its IPO amid launch amidst the ongoing market volatility, especially in the Indian tech stocks.

SEBI’s nod comes at a time when listed startups are witnessing a bloodbath on Dalal Street. Paytm hit its all time low, tanking as much as 2% and eroding its market cap by INR 48,120 Cr. Zomato too opened on a weak note on Monday with shares falling over 4%. Nykaa too witnessed a massive downturn, down 42% from its record high during the intra-day trading on February 21. Other tech stocks like CarTrade and PolicyBazaar were also down. 

Indian tech stocks are witnessing a major slump amid apprehensions over U.S-Russia conflict, a major correction in the U.S public markets as well as prospects of interest-rate hikes.

The situation has been complicated by the startup’s financial health as well. API Holdings posted a loss of INR 641.3 Cr in FY 21, an increase of 91% from INR 335.2 Cr it posted in FY 20. On the other hand, the startup’s revenue did soar from INR 737.4 Cr to INR 2,360 Cr during the same period.

Founded in 2015 by Dharmil Sheth and Dr Dhaval Shah, the startup caters to the chronic care segment and offers a range of services such as medicine deliveries, teleconsultations and sample collections for diagnostic tests.

PharmEasy claims to partner with over 60K+ brick-and-mortar pharmacies across India and has  reportedly served over 20 Mn patients since its inception.

The startup is backed by marquee investors like Prosus Ventures, TPG, Amansa Capital, Blackstone-backed hedge fund ApaH Capital, Janus Henderson, among others. It is pertinent to note that PharmEasy had merged with its investor entity, Ascent Health, to form API Holdings in 2019. Post which Ascent founders Siddharth Shah, Hardik Dedhia, and Harsh Parekh had joined PharmEasy as cofounders.

As per available data, PharmEasy was last valued at over $5.4 Bn. It last raised a massive $323 Mn in Series E funding round in April last year from Prosus Ventures and TPG Growth. With this, it became the first Indian epharmacy to enter the much coveted unicorn club.

PharmEasy competes against the likes of Tata-backed 1MG, Reliance acquired Netmeds, Amazon Pharmacy, Medlife among others

The mood has been sombre for all startups planning to get listed this year. Earlier, media reports had emerged that ecommerce logistics startup, Delhivery, had delayed its IPO by a few weeks amidst market volatility.

Add to this, reportedly hospitality startup, OYO too has been considering delaying its IPO and slashing its valuation amid market fears. Also, appears hanging in the air is the status regarding IPO of  automobile marketplace, Droom, which filed its DRHP in November last year.

Other startups like online travel portal, Ixigo and payments startup, Mobikwik, too have been cautious about their IPO strategy.  

MobiKwik received SEBI’s approval to raise INR 1,900 Cr from a public offering in October last year. ixigo too got the go-ahead from the market regulator for its INR 1,600 Cr IPO in December last year.

Despite this, India’s epharmacy market continues to grow by leaps and bounds. It stood at over $344 Mn in FY21 and is expected to grow at a rate of 21-28% by 2027. Another report from Bernstein Research stated that PharmEasy had a 50% market share, which was expected to grow to $1 Bn by FY25.

The causal doom and gloom situation has made startups fearful and investors wary. In such a situation, startups are moving slowly, one step at a time. So, is this the beginning of the end or will markets bounce back, only time will tell.