Reliance Retail acquires majority stake in Netmeds’ parent in Rs 620 Cr cash deal

The e-pharmacy segment is witnessing a significant consolidation with back to back deals. Hours ago, a filing with the Competition Commission of India (CCI) sought approval for the merger of PharmEasy and Medlife and now, Reliance has announced the acquisition of a controlling stake in Netmeds.

Reliance Industries Limited through its wholly-owned subsidiary Reliance Retail Ventures Limited (RRVL) has acquired a majority equity stake in Vitalic Health Pvt. Ltd. and its subsidiaries (collectively called Netmeds) for about Rs 620 crore in cash, valuing the company at nearly Rs 1,034 crore in the transaction. 

According to a press statement by Reliance, the investment represents 60% holding in the equity share capital of Vitalic Health and 100% direct equity ownership of its subsidiaries including Tresara Health Private Limited, Netmeds Marketplace Limited and Dadha Pharma Distribution Pvt Limited.

The synergy between Reliance Retail and Netmeds began in April when the latter started fulfilling orders through JioMart. 

Cogs started moving earlier this year when Vitalic started making changes to its capital structure to facilitate this transaction, regulatory filings showed. 

Vitalic converted Series A shareholders’ stake and allotted them equity capital. Bennett Coleman and Company Limited, which held share warrants, was allotted 229,845 equity shares for the same. The company also passed a special resolution to cancel the existing employee stock option plan as well.

Vitalic’s promoters -- Pradip Dadha and family -- who controlled around 30% stake in the company and its largest investors including Sistema Asia Fund, Tanncam Investment and US-based healthcare fund manager OrbiMed, are likely the biggest beneficiaries of this transaction.

The company had last allotted 7750 Series C CCPS to BlackBuck Technologies LLP on 31 December 2019 and had filed a valuation certificate along with the documentation of share allotments. According to the certificate, Vitalic Health has valued at Rs 1,123.5 crore with an estimated turnover for FY20 pegged at Rs 604.5 crore at the loss of Rs 154 crore. Vitalic health has not filed audited financial results for FY20 yet. 

Vitalic had raised more than Rs 110 crore during FY20 alone.

On Tuesday, Medlife had made a formal filing at CCI for its proposed merger with bigger rival PharmEasy. If the deal goes through, the combined entity will sit third after Reliance and Amazon, the two new entrants in the segment. 

Early this month, Amazon marked its entry into the segment by launching its online pharmacy.

According to Fintrackr estimate, Medlife valuation might be discounted by over $140 million in the merger deal. As per its valuation report, the company had a total value of $375 million until January 2020. However, in the merger deal, Medlife appears to have been valued at $235 million -- over 37% haircut from Medlife’s eight months old valuation report.