Drug, medical services firm PharmEasy may lay off hundreds of employees

Indian drug and medical services firm PharmEasy may lay off hundreds of employees, according to sources. This move is being seen as part of a drive by the unicorn company towards profitability via cost-savings and consolidation, as funds dry up, they said.

“The company is facing a funding crunch due to which it is laying off staff,” said a person familiar with the matter. “It was trying to raise funding from Goldman Sachs, but that deal didn’t materialise.”

The company has a total workforce of about 1500. 

A query to PharmEasy founders about this development remained unanswered till the time of going to press.

API Holdings, the parent entity of PharmEasy, is a major digital healthcare platform. It operates an integrated, end-to-end business solving the healthcare needs of consumers through technology and fulfilment capabilities. It competes with players such as 1mg, Netmeds, Flipkart Health+ and Amazon Pharmacy.

On 20 August 2022, API Holdings, said it has decided to withdraw its draft red herring prospectus (DRHP) filed with the Securities and Exchange Board of India (Sebi). It cited volatile market conditions and ‘strategic considerations’. The DRHP was filed on November 9, 2021.

The company had informed its shareholders that it has decided to go ahead with a rights issue instead.

PharmEasy reportedly had plans to raise around Rs 6,250 crore from its public offering. 

The Mumbai-based firm has raised a total funding of $1.6 billion from investors such as Prosus Ventures and Temasek. API Holdings was last valued at $5.6 billion during a pre-IPO (initial public offering) round.

In July, there were reports that PharmEasy was trying to raise around $200 million via private placement, but at a lower valuation--by as much as 25 per cent as per reports.

According to a report by India Infoline, a financial services company, the decision to raise money by lowering valuation shows the difficulty that startups are facing in raising capital now. It said the global recessionary environment has made investors reluctant in investing in startups that have still not turned profitable.

“PharmEasy's losses in 2022-23 are reported to be around $324 million. Like many internet-based business model, startups, PharmEasy is seeing strong sales but even higher expenses. In 2022-23, its sales are reported to be around $700 million,” said the India Infoline report.

In November this year, EvolutionX Debt Capital, a growth-stage debt financing platform, made its maiden investment in API Holdings, the parent company of PharmEasy.

Siddharth Shah, chief executive officer and co-founder of API Holdings, had said the investment, of an undisclosed amount, is part of a sequence of planned capital raises and it will be followed by equity infusion in the company in the near-term.

He had said this collective capital raise will optimize the capital structure as well as improve the net debt position and financial strength of the company, ensuring a clear runway to profitability.

In June 2021, PharmEasy had acquired diagnostic chain, Thyrocare Technologies, for Rs 4,546 crore. In April 2021, the company turned unicorn or a startup with over $1 billion valuation, after raising $350 million in a round co-led by Prosus Ventures and TPG Growth.

A growing list of top tech unicorns or companies with over $1 billion valuation each is laying-off employees in an attempt to conserve cash and focus on profitability amid a funding winter this year. Experts said that these companies are coming out with all guns blazing to fire employees, struggling to justify their decisions, and not doing enough to support the sacked employees. Over 23,000 employees in startups have lost their jobs since the pandemic began in 2020, according to the staffing firm TeamLease.

However, it said amid the funding winter this year, 15,216 employees have been laid off by 44 startups, including unicorns. With 14 education technology startups laying off 6,898 employees in 2022, edtech sector has laid off the most workers followed by consumer services and e-commerce. The sacking of employees has happened in multiple tranches throughout the year.