API Holdings, the parent company of e-pharmacy startup PharmEasy, has received approval from the Securities and Exchange Board of India (SEBI) to raise capital via an initial public offering (IPO). The startup intends to raise Rs 6,250 crore through the IPO.
The IPO of the pharmacy giant will be executed purely through primary share sales, with no Offer For Sale (OFS) component. This essentially indicates that the startup’s existing shareholders will not liquidate their holdings. The development comes months after API Holdings filed it’s Draft Red Herring Prospectus (DRHP) with market regulator SEBI in November of last year.
The net proceeds will be used to prepay or repay the startup’s existing debt of Rs 1,929 crore. The funds would also be leveraged for organic growth strategies totaling Rs 1,259 crore. Furthermore, the money will facilitate PharmEasy to pursue inorganic expansion through acquisitions and other initiatives, amounting to a cumulative total of Rs 1,500 crore.
With the SEBI clearance, the company will now make a decision whether to reschedule the IPO or “readjust” its valuation. Last week, it was reported that the e-pharmacy company was ‘reconsidering’ its IPO given ongoing market volatility, specifically in the tech firms in India. Indian technology stocks have plummeted citing concerns about the US-Russia conflict, a huge drop in US public markets, and the potential of interest-rate hikes.
The startup’s financial health has also complicated matters. API Holdings reported a loss of Rs 641.3 crore in FY 21, up from Rs 335.2 crore in FY 20. During the same time period, the startup’s income increased from Rs 737.4 crore to Rs 2,360 crore. The firm, which was founded in 2015 by Dr. Dhaval Shah and Dharmil Sheth, focuses on the chronic care market and provides services such as pharmaceutical deliveries, teleconsultations, including diagnostic sample collection.
PharmEasy claims to collaborate with more than 60,000+ brick-&-mortar pharmacies in India and claims to have served around 20 million patients since its inception. The startup is backed by marquee investors like Blackstone-backed hedge fund ApaH Capital, Prosus Ventures, Amansa Capital, TPG Growth, Janus Henderson, among many others. It is worth noting that in 2019, PharmEasy merged with its investment firm, Ascent Health, to become API Holdings. Ascent founders Hardik Dedhia, Harsh Parekh, and Siddharth Shah, joined PharmEasy as cofounders after that.
PharmEasy was last valued at about $5.4 billion, according to the publicly available information. It recently raised $323 million in a Series E round from TPG Growth and Prosus Ventures in April of last year. It became the first Indian e-pharmacy to join the prestigious unicorn club as a result of this. PharmEasy competes with companies such as Amazon Pharmacy, Tata-backed 1MG, Reliance-owned Netmeds, and Medlife, to name a few.