PharmEasy’s parent API Holdings postpones IPO citing market conditions

Amidst challenging market conditions, API Holdings, the parent firm of online pharmacy company PharmEasy, has decided to postpone its plans to launch an IPO.

The firm informed its shareholders that It has also withdrawn the draft red herring prospectus (DRHP) it filed with SEBI on November 9, 2021, citing market conditions and strategic considerations.

In its DRHP, PharmEasy had stated that it was planning to raise Rs 6,250 crore from its public listing. Previously, PharmEasy raised funds at a $5.5-5.7 billion valuation in a pre-IPO round, according to Fintrackr’s estimates. In February, The firm also received approval from SEBI for the proposed IPO.

The indication of PharmEasy’s IPO deferment got apparent from the fact that the company has been in the market to raise $200 million with a 25% haircut in valuation.

Entrackr has sent queries to API Holdings for more information on the development. We will update the story in case the company responds.

The seven-year-old pharmacy startup grabbed everyone’s attention in June 2021 when it acquired diagnostic chain Thyrocare Technologies for about Rs 4,546 crore. A couple of months earlier PharmEasy had become a unicorn after raising a $350 million round co-led by Prosus Ventures and TPG Growth. The startup counts Tiger Global, Temasek, Eight Roads, and Think Investments among its marquee investors. 

From the proposed capital raised through the IPO, the company planned to spend Rs 1,929 crore on prepayment or repayment of all or a portion of certain outstanding borrowings. Another investment of Rs 1,259 crore was planned to fund organic growth initiatives and the improvement of the supply chain and technology infrastructure.

Another Rs 1,500 crore was supposed to be utilized for inorganic growth through acquisitions and other strategic initiatives, and the rest for general corporate purposes.

PharmEasy's plans to launch for an IPO came after startups such as Zomato and Paytm failed to impress the investors on their public debut.

The pre-IPO run for PharmEasy hasn’t been without hurdles. Its existing shareholders aren’t keen on selling their shares, according to an Economic Times report in February. Although considering the recent market aversion to secondary offerings, that may not necessarily be a bad thing.

However, what is possibly a bigger issue is the firm’s response to the increased level of competition that has intensified in both the now key diagnostics business as well as pharma sales business. Top business houses including the Tata’s (through 1mg), Reliance (through Netmeds) and even the Adani group have got a play in the market now, besides Adar Poonawalla through his investments in Mylab Discovery.

With the IPO plans shelved, for now, it should be interesting to see how and when PharmEasy will raise funding for the initiatives it had spoken about in its DRHP.