Has the PharmEasy IPO been put off and is the company planning to raise funds from other sources?
Answer
Answer
It has not been the best of times for the digital start-ups in India and the latest example is the PharmEasy IPO. While there is no announcement of postponement, it is obvious since PharmEasy has started sounding out the PE investors to raise $200 million. It looks like that, considering the market conditions, the issue may be well and truly off for now. Ironically, PharmEasy was one of the most sought after digital pharmacy portals in India.
A lot has changed in the last few months beginning with the Paytm listing and the global slowdown fears. Most digital IPOs had a rough time in the bourses and even the global enthusiasm to fund such start-ups in on the decline. PharmEasy is now willing to raise funds of about $200 million even at valuations that are 20-25% lower. After all, PharmEasy has marquee investors like Prosus, TPG and Temasek.
PharmEasy, the digital business platform of API Holdings Ltd, offers online medicine deliveries as well as diagnostic test services. In addition, it also sets up online doctor consultations. Under the changed circumstances, PharmEasy is willing to settle for a valuation of $3.8 billion instead of $5.5 billion at the time of IPO filing. Apparently, PharmEasy already has ready commitments worth $115 million from its investors.
What has changed so drastically for PharmEasy. FPI selling of $35 billion since October 2021 was one reason. With waning FPI interesting, it would have been impossible to see through an IPO of $1 billion. Of course, digital plays like Delhivery did push their IPOs through, but it would be pushing your luck too far. PharmEasy does not have big ticket backing like NetMeds that is backed by Reliance Group and 1MG that is backed by the Tata Group.
The problem for PharmEasy is that it cannot wait too long. Revenues are growing but cash burn is high and so losses are mounting. In FY22, PharmEasy earned $714 million in revenues but expenses were $1,060 million. The outcome of the delay would be that API Holdings, the parent, will have to re-file papers for the IPO. But that is much smaller risk compared to attempting an IPO in these markets.