US private equity major TPG, Singapore’s Temasek, Facebook cofounder Eduardo Saverin’s B Capital, Prosus (previously Naspers) and Think Investments participated in the funding round along with a new investor — Kotak Group’s private equity arm, according to Siddharth Shah, chief executive of API Holdings, the parent company of PharmEasy.
Once the deal is complete, PharmEasy will aim to list the company on Indian bourses in “the next six to 18 months”, said Shah.
Shah led the negotiations for the Thyrocare acquisition that took place over a fortnight in Lonavala.
“All options are being considered for the (proposed listing) but we will finalise it once the Thyrocare deal is formally closed,” he added.
The company is expected to work with JM Financial and Kotak Investment Banking for the IPO, the same entities which were the advisers for the Thyrocare deal.
API Holdings was founded by Dharmil Sheth, Dhaval Shah, Harsh Parekh, Hardik Dedhia and Shah in 2015.
Shah, who leads new initiatives at the company, said US investment firm Tiger Global has already backed PharmEasy, as reported by ET, and is in further talks to pump more capital into the startup, which is now valued at $4 billion.
ET had also reported earlier this month that B Capital had picked up a minority stake in API Holdings. through a mix of primary and secondary deals that valued the company at about $1.8 billion, up from the $1.5 billion valuation that it snagged in April when it joined India’s fast-growing pool of unicorns — startups valued at $1 billion or more.
Thyrocare promoter A Velumani is also investing almost Rs 1,500 crore in the firm, as part of the acquisition, for a 5% stake valuing the e-pharmacy at $4 billion.
The Thyrocare deal will allow PharmEasy to offer four key elements of healthcare — information, consult, test and treatment — at a time when online adoption is growing due to the pandemic.
“While (healthcare) information is widely available online and we are strong in medicine delivery, testing was a missing piece. Thyrocare brings that element. This will bring in the second-largest profit pool for us with a pan-India presence of a national brand,” Shah said. The company also expects to evaluate potential deals in the health insurance segment, specifically “tech-led companies or even firms doing their own underwriting”, he added.
Consolidation gathers pace
These developments come at a time when the e-pharmacy space is witnessing a wave of consolidation driven by increased demand for online medicines, doctor consultations and at-home diagnostic services. The Tata Group acquired PharmEasy’s rival 1mg while Reliance Industries picked up a 60% stake in Netmeds in 2020. Last year, PharmEasy had also acquired smaller rival Medlife but closed the deal formally earlier this year.
Typically, e-pharmacies derive a bulk of their revenue from selling prescription medicines to chronic patients but are now expanding by offering services such as online doctor consultations and diagnostic services.
While the Thyrocare deal will offer an instant national scale to PharmEasy in diagnostic, Tata-owned 1mg is also looking to scale up this vertical through its own labs as well as by onboarding third-party labs, ET reported earlier this month.
PharmEasy has a user base of 12 million, a network of 6,000 digital consultation clinics and 90,000 partner retailers across the country. It currently serves the pharmacy and diagnostic needs of more than 1 million patients. It aims to expand its network to over 200,000 such pharmacies servicing orders across 100 cities.
India’s online pharmacy market is estimated to swell to $2.7 billion by 2023 from about $360 million in 2020, EY said in a report last year.
Industry reports estimate that about six million new households have tried online purchase of medicines in the past year, taking the total user base to about nine million. The second wave of the pandemic is believed to have further expanded e-pharmacy’s reach among Indian households.