Simultaneously, the country’s largest e-pharmacy is also stitching up a secondary transaction of up to $100 million, buoyed by high interest from pre-IPO investors looking to come on board, sources said. PharmEasy is likely to be valued at around $6 billion post the funding round, creating a benchmark valuation ahead of a public listing. It was last valued at $4.2 billion in June. The Mumbai-based company’s parent, API Holdings, has also received board approval to convert the private firm into a public company, according to the people cited above.
“The pre-IPO funding round construct is almost final. Among the names coming on board, it has yet to finalise the deal contours with BlackRock only,” one of the persons said.
The online pharmacy has been given estimates that it could fetch a valuation of $9-10 billion in a public listing, people aware of the matter said.
High Investor Interest
However, it “may price the IPO at a valuation of $7-8 billion so there is an uptick in valuation for investors post the IPO,” they added.
ET reported last month that
PharmEasy aims to file its draft red herring prospectus (DRHP) by October and that it is in talks to raise new capital at $5.6 billion pre-money valuation. “It (PharmEasy) is on track with its timeline to file the prospectus with markets regulator Sebi (the Securities and Exchange Board of India) next month,” a source confirmed.
PharmEasy’s investors include HDFC Bank founder, former managing director and chief executive Aditya Puri, who sits on the board of API and has also invested in a recent funding round of the company. He owns less than half a per cent in the firm, regulatory documents sourced from business intelligence platform Tofler showed. Investment firm Tiger Global too has little over 1% in API Holdings.
Typically, in a secondary transaction, existing investors sell a part of or all their shares to new investors and the money doesn’t go to company coffers, as opposed to a primary funding, when the company gets the capital by issuing fresh shares.
Owing to the interest among late-stage and pre-IPO investors to get a stake in tech startups before their public issue, PharmEasy founders are negotiating with existing investors to get them to sell some of their stakes for the secondary transaction, so new investors can be accommodated.
“Right now, conversations are underway to do a $100-million secondary as the management doesn’t want to dilute their holding a lot before the IPO,” said one person aware of the matter, adding that the company is aiming to file DRHP between the second and third week of October.
Founders Hike Holdings
Meanwhile, the founders of API Holdings — Siddharth Shah, Dharmil Sheth, Dhaval Shah, Harsh Parekh and Hardik Dedhia — are investing more in the company as it prepares to go public. “They (founders) have got new incentives based on certain milestones the company has achieved. It would be around Rs 50 crore for each founder but they are reinvesting it in the company,” said sources.
“Even venture investors who backed PharmEasy before its merger with API Holdings are not keen on diluting their stakes through a secondary before an IPO,” they added.
Siddharth Shah, cofounder and chief executive of PharmEasy, declined to comment on the story. Emails sent to the above-mentioned investors didn’t elicit any response on the matter.
As of August 15, founders hold around 10% in API Holdings, data from industry tracker Tracxn showed. API Holdings had acquired Ascent Health and its subsidiary, 91 Streets Media, which ran PharmEasy. The merged entity counts Prosus Ventures, Singapore’s Temasek, US private equity major TPG and B Capital among its investors.
New Board Members
On Monday, the e-pharmacy
announced that it had appointed five independent directors to its board. Subramanian Somasundaram, former chief financial officer of Titan and Ramakant Sharma, founder and chief operating officer of Livspace, are among them. The board now has 12 members.
PharmEasy also said it plans to hire over 200 engineers for its soon-to-be-launched development centres in Hyderabad, Pune and NCR. It has over 6,100 employees currently.
These moves come at a time when the company is looking to position itself as an e-healthcare platform, following the acquisition of Thyrocare in June. It is now scouting for buyouts in the insurance space and ramping up offerings such as its online doctor consultations.
According to a recent report from Praxis Global Alliance, the Covid-19 pandemic accelerated growth for teleconsultation in India, whose market size was $163 million as of March. This is estimated to grow to $800 million by March 2024.
The online pharmacy market in India is estimated to be at around $2.7 billion by 2023, from about $360 million in 2020, EY said in a report last year.