PharmEasy Eyes raises $200 million fund at 15-25% lower valuations: Report

PharmEasy plans to raise $200 million at low valuation: Report

Indian pharmaceutical and medical services startup PharmEasy is in talks with investors to raise $200 million, but at a valuation that could drop 15 percent, or 25 percent, from last year’s $5.1 billion, two with direct knowledge of the deal talks said. People told Reuters.

In a sign of rising tensions in India’s startup ecosystem, a source said PharmEasy, backed by big-name investors like Prosus, TPG and Temasek, to secure new funds at a valuation of 15 per cent lower than last year’s negotiating.

A second source said the company, which provides online drug delivery and diagnostic testing services, has asked its bankers to also consider a cut of 25 per cent, if needed, to close the deal. That could cut PharmEasy’s valuation to $3.8 billion for the new funding round, and an initial public offering (IPO) previously targeted for 2022 has been delayed, sources said.

Indian startups have been jolted by uncertain global and domestic stock markets, and rising investor skepticism over what they say is skyrocketing, making it difficult for PharmEasy to raise funds at similar or higher valuations, sources said. Sources said. He declined to be named as talks on raising funds were private.

The first source involved in the talks said that PharmEasy’s planned fund raise will see participation from some existing investors, who have indicated they will invest about $115 million in the new round.

API Holdings, PharmEasy’s parent company, which is looking to raise funds, declined to comment. API owns other businesses including diagnostic test provider Thyrocare.

The company had seen a boom in recent years in a moment of boom typical for India’s startups and in its own sector, where rivals include Reliance’s Netmeds, Tata’s 1mg and Walmart’s Flipkart.

Last year, Indian startups raised a record $35 billion in private funding and several internet companies went public. PharmEasy, too, cashed in on Boom, raising a total of $1.89 billion since 2015, most of which came in the past two years, data from Pitchbook shows.

Among high-profile Indian startups, the ‘down round’ deal by PharmEasy’s – when a firm sells shares at a lower valuation than before – will be a first in recent times.

Sources said Bank of America Securities and Morgan Stanley are working on the deal. Morgan Stanley declined comment, while Bank of America did not respond.

IPO stalled, rising losses

Betting on higher healthcare spending and increased use of online ordering, API Holdings last year filed a prospectus to raise 62.5 billion rupees ($782 million) in an IPO expected to list in 2022. Sources confirmed that the plan is now getting delayed.

Sources said one of the concerns among investors is the mounting losses of digital pharmacies ahead of its entry into the market.

The PharmEasy parent saw its net income more than double to $714 million in the fiscal year to March 2022.

But total expenses for the period stood at $1.06 billion, partly due to a one-time employee stock benefit outlay, according to a document seen by Reuters, which listed PharmEasy’s latest unaudited financials.

The document said the net loss for the year quadrupled to $334 million.

The first source said that PharmEasy is currently in “wait and watch” mode and is considering listing next year. A third person with knowledge of the matter also said that the IPO could only happen in late 2023, and that PharmEasy’s parent may need to refile the IPO regulatory papers.

The delay in the IPO comes as stocks of major Indian listings last year, such as digital payments firm Paytm and food-delivery firm Zomato, have fallen more than 60% from their peak.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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