API Holdings, the parent entity of online pharmacy chain Pharmeasy, has begun exploratory talks for a potential public market listing, aiming to raise around Rs 3,000-Rs 3,700 crore ($400-$500 million), multiple people aware of the development said.
The share sale proposal, which comes amid increased investor interest in the pharma sector and ecommerce space following the Covid-19 pandemic, will include both a primary as well as a secondary component, where some early backers will partially exit.
The initial public offering is likely to value the company at around Rs 21,800 crore ($3 billion), the people said.
Last week, nearly a dozen investment banks pitched for the IPO mandate of the Mumbai-based company, one person said. Investors are eyeing a listing towards the end of this year or early next year, the person added.
Investment firms such as TPG Growth, Prosus Ventures, Temasek, CDPQ, LGT Lightrock, Eight Roads and Think Investments hold about 80% stake in API Holdings, with the top three - Prosus, TPG and Temasek – alone owning around 30% stake. Prosus Ventures (previously Naspers Ventures) and TPG Growth picked up minority stakes in the e-pharmacy last month.
Dhaval Shah, founder of Pharmeasy, and a TPG spokesperson declined to comment. Spokesperson with Temasek declined to comment
Last week, pharmacy chain Medplus, backed by PE fund Warburg Pincus, hired bankers to launch a Rs 2,000-crore IPO at a valuation of Rs 7,200 crore ($1 billion).
Acquires rival Medlife
Meanwhile, Pharmeasy said on Tuesday that it had acquired smaller rival Medlife, in the largest consolidation deal in India’s fast-growing online pharmacy sector.
Medlife would be merged from Tuesday and the latter’s customers and retail partners will be brought on to its own platform, Pharmeasy said in a blog post.
ET was the first to report in August last year that Pharmeasy had submitted a proposal to the Competition Commission of India to acquire Medlife.
At the time of the closing of the deal, Medlife’s shareholders received a 19.59% stake worth about $240 million in API Holdings.
Last month, API Holdings raised around $350 million in its Series E round, led by Prosus Ventures and US-based private equity firm TPG Growth, valuing Pharmeasy at $1.5 billion and making it the first online pharmacy in India to become a unicorn – or startups with valuations of $1 billion or more.
The family office of Prabhat Narain Singh, one of the founders of drugmaker Alkem Laboratories Ltd which was the largest shareholder in Medlife, also has a seat on the board of API Holdings.
“This will make us the largest healthcare delivery platform across the country by a distance - serving more than two million families every single month,” Dhaval Shah, cofounder of Pharmeasy wrote on professional networking site LinkedIn.
“While we love the Medlife brand, we believe that a singular focus on our consumer needs through a single platform ‘Pharmeasy’ will help us solve for consumer needs much better,” Shah added.
Founded by Shah and Dharmil Sheth in 2015, Pharmeasy works with around 80,000 pharmacies currently and intends to expand that to 1,20,000 outlets across 100 cities by the end of 2021.
The company’s business-to-business pharma operations have recorded gross merchandise values (GMV) of around Rs 600 crore per month, while its front-end online pharmacy drives an additional Rs 240 crore to retailers on its platform.
Strong e-pharmacy growth
Online pharmacies are among the few verticals in e-commerce to have grown during the second Covid-19 wave.
According to data from e-commerce services platform Unicommerce, shipment volumes of pharmaceuticals rose 18% in April compared to the previous month. Overall e-commerce shipments fell by 11% over the same period.
Online order volumes for pharma products more than doubled in 2020, according to industry insiders, while the number of people who used online pharmacies tripled. Nine million families used online pharmacies last year, research firm RedSeer Consulting said.
The Indian e-health sector is expected to become a $16 billion opportunity by financial year 2025, growing from $1.2 billion at a compounded annual growth rate of 68%, according to RedSeer.
EY said in a report last year that India’s online pharmacy market is estimated to swell to $2.7 billion by 2023 from about $360 million currently.
This has spurred big conglomerates such as Reliance NSE 3.13 % Industries and Tata Group, as well as e-commerce behemoth Amazon, to enter the fast-growing online pharmacy space.
While Reliance acquired a majority stake in Chennai-based Netmeds for Rs 640 crore last August, the Tata Group signed a definitive agreement to acquire 65% stake in New Delhi-based 1mg earlier this month. Amazon, too, has begun offering its prescription drug deliveries to customers in Bengaluru through its largest seller Cloudtail.
EY said in a recent note that the Covid-19 pandemic had created the need for a digitally integrated healthcare ecosystem to help patients and doctors who refrain from in-person visits to avoid infections.
“Key stakeholders in the healthcare space are showing interest towards adoption of different teleconsultation and e-pharmacy platforms. With the current levels of adoption by the patients and doctors along with emerging technologies and ecosystem, India is well poised to grow the digital health ecosystem,” EY added.