Netmeds lost Rs 7 to make Re 1 in FY18; changes holding company

Dadha and Company run Netmeds Marketplace Limited, an online pharmacy is a platform that helps people look up medicines, and get them delivered as well.

Netmeds has recently revealed its financials for FY18 via RoC filings with MCA, and while the numbers are a tad bit better than FY17, there are other activities that make us raise a few questions regarding what is going on in the company.

As far as the numbers are concerned, the company has seen a 2.5X jump in revenue, up from Rs 3.94 crore in FY17 to Rs 10.05 crore in FY18. The losses have increased by 29.4 per cent to Rs 59.56 crore from a Rs 46.03 crore figure.

While the increase in losses is not a good sign, the improvement is based on how the company spent Rs 7 to earn a rupee in FY18, as compared to spending Rs 12 for the same in FY17.

The expenses of the company amounted to Rs 69.61 crore in the latest fiscal, a 39.3 per cent hike as compared to Rs 49.97 crore in last fiscal.

The revenue model of the company is divided in three parts - commission, marketing, and shipping charges, commissions being the largest contributor with making Rs 4.46 crore for the company in FY18. It was followed by support services provided to group companies which earned the company Rs 3.76 crore.

Meanwhile, the largest area of expense for the company was the advertisement, where the company spent Rs 24.43 crore in the latest fiscal, a 40 per cent increased amount as compared to Rs 17.46 crore in FY17. It cannot be ignored how the company failed to earn even half of the amount it spends on advertising in both the years.

Separately, the firm raised $35 million in series C round this September led by Daun Penh Cambodia Group and acquired JustDoc for about $1 million with the help of this funding.

Coming to the questionable activities going on in the company, first, we have to know that the company was held by Vitalic Health Private Limited at the beginning of FY18; and during the fiscal year, the ownership was transferred to Tresara Health Private Limited.

Both the companies’ board includes Sunny Sharma, Subhagmal Mohanchand Dadha and Mohanchand Pradeep Dadha; the co-founders of Netmeds, but Tresara does not have Biloliddin Nuriddinov and Kirill Kozhevnikov, the LPs of the company through investor Sistema Asia Fund, on the board. This points to the possibility of Sistemic Asia taking an exit from the firm.

Moreover, the company in the first 2 months of FY18, several times, borrowed unsecured loans from Vitalic and then converted them into equity shares within the same month. The question that now arises is why go through the hassle of borrowing unsecured loans and then converting them into equity in such short-term period, on a frequent basis for that matter, and why change the holding company entirely to remove investors for the board.

Entrackr sent multiple queries to the company regarding the same but hasn’t received any response as yet.

While the RoC filings do not seem to reveal any violation of Companies Act, one cannot help but question these events. The financial performance of the company might be slightly improving, but the activities taking place within the Public company are not reassuring.