PharmEasy parent files for IPO; looks to garner Rs 6,250 crore

The issue will comprise only primary share sale

Healthtech start-up PharmEasy’s parent company, API Holdings, has filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) to raise Rs 6,250 crore via an initial public offering (IPO). API Holdings’ pre-IPO round that closed in October 2021 reportedly valued the company at $5.4 billion.

The issue will only consist of a primary share sale, and the money raised will go towards debt repayment, besides expansion and other purposes. The existing investors won’t make any exit in the IPO. Among a slew of large tech IPOs happening in India, such as Zomato, Nykaa, Paytm, Policybazaar, and Delhivery, this will stand out as the only one with no secondary sale by existing shareholders.

For the five friends from the Mumbai suburb of Ghatkopar, who called themselves the Ghatkopar Gujju gang and set up PharmEasy in 2015, the IPO will be a significant milestone. Siddharth Shah, Dhaval Shah, Dharmil Sheth, Harsh Parekh, and Hardik Dedhia founded the company with the dream of building India’s ‘Amazon’ on the health-care delivery platform.

In June this year, they managed to acquire the listed diagnostic player Thyrocare for total consideration of Rs 4,546 crore. API Holdings picked up a 66.1 per cent stake in the diagnostic firm at Rs 1,300 per share. It was the first unicorn to acquire a listed company and the move was also one of the biggest consolidations in the domestic health-care space.

API Holdings is now considering a private placement aggregating up to Rs 1,250 crore. If it goes through, the size of the issue will be reduced. 

The company said in its IPO prospectus that it will use the proceeds for repayment of debt, acquiring an additional stake in hospital supply chain management company Aknamed, and general corporate purposes.

South African technology investor Naspers with a 12 per cent stake in API Holdings, Temasek with 11 per cent, TPG with 7 per cent, and Canadian pension fund CDPQ with 4 per cent are some of the large institutional shareholders in the company.

 According to the company’s DRHP, its revenue increased 250 per cent from Rs 668 crore in FY20 to Rs 2,335 crore in FY21 amid the pandemic. It registered losses of Rs 335 crore and Rs 645 crore in FY20 and FY21, respectively. For the quarter ended June, its revenue was Rs 1,197 crore and loss was Rs 306 crore.

"We expect our operating expenses to increase as we expand our operations. If our revenue does not grow at a greater rate than our expenses, we may not be able to achieve and maintain profitability," the DRHP states.

As of 30 June 2021, API Holdings offered more than 50,000 stock keeping units (SKUs) across 18,587 pin codes in 2,601 cities and towns across the country. Its network includes 3,261 wholesalers, 87,194 pharmacies, 4,617 prescribing doctors and clinics, and 926 hospitals, with 25 million registered users.

According to a RedSeer Report, PharmEasy is India’s largest digital health-care platform based on gross merchant value (GMV) of products and services sold for the year ended March 31, 2021. It offers solutions for the health-care needs of consumers through doctor teleconsultation, diagnostics and radiology tests, and delivering treatment protocols including products and devices.