PharmEasy, the health tech startup whose own financial health was pretty bleak to say the least, has just gotten a lifeline — though a tough one at that. Manipal Group, the owner of $5Bn+ valued Manipal hospital chain among others, is set to become the single largest shareholder in API Holdings, the parent company of PharmEasy. This is set to happen with the infusion of fresh funds into the e-pharmacy, wherein a total of ₹2500 crore ($304 million) will be raised in order to deal with the debt that PharmEasy had raised from Goldman Sachs. The development was first reported by MoneyControl.
According to media reports, Manipal Group’s Ranjan Pai’s family office will invest around ₹1000 crore in PharmEasy, while the remaining ₹1500 crore will be pumped in by PharmEasy’s existing investors. With the fresh infusion of the funds, Manipal Group is set to get a stake of 18% in API Holdings, which is the promoter of Thyrocare as well. As part of the upcoming investment, the Manipal Group family office could also secure a board seat at API Holdings.
The fresh round of funding and infusion of capital is set to put the valuation of PharmEasy at around ₹6,000 crore ($730 million), which marks a significant markdown from its earlier valuation of $2.8 billion (which came after its last funding round). This also makes PharmEasy the latest unicorn to take a significant hit in its valuation. A spokesperson for Manipal Group declined to comment on the matter.
The markdown in PharmEasy’s valuation reflects a cautious investor sentiment and a re-evaluation of growth prospects in the larger Indian startup sector, and is likely to pose challenges for PharmEasy and other e-commerce companies in raising future capital. Potential investors might approach valuations more cautiously, leading to reduced funding opportunities or increased scrutiny of financials and business strategies.
PharmEasy’s current set of investors include the likes of Prosus, Temasek, B Capital, Tiger Global, Orios, and Kotak PE, among others. As per media reports, the fresh investment by Manipal and others is set to come through a rights issue that PharmEasy is planning, which will help the company raise fresh capital in what would be its second rights issue in a year. New stock will be issued at ₹5 per share. TPG and Temasek are in charge of the rights issue. API Holdings has kept the shares of Thyrocare, another company it owns, as collateral for the debt. For those who need a reminder, API Holdings had acquired a stake of 66% in Thyrocare for ₹24,546 crore.
Moneycontrol reports that API Holdings has kept the shares of Thyrocare as collateral for the debt agreement with Goldman Sachs. Under the terms of the agreement, the structured loan of ₹2,280 crore from Goldman Sachs is due in three years, but PharmEasy is required to pay ₹25 crore in interest in each quarter. The rights issue in question is set to be come at a discount of 90% to help a desperate PharmEasy repay the loan, media reports state. “API Holdings needs to repay debt since it has breached debt covenants and lenders can invoke pledged shares,” sources said on condition of anonymity, according to media reports.
