Contents
PharmEasy IPO: PharmEasy, under its parent company API Holdings Ltd., is India’s leading digital healthcare platform. It operates online pharmacies, diagnostic services, and a doctor consultation platform.
- The Indian healthcare industry is booming, driven by factors like rising disposable income, increasing awareness about health, and a growing aging population. PharmEasy, as a pioneer in the digitalization of this sector, is strategically positioned to capitalize on this growth.
PharmEasy IPO Key Details:
- Timeline: While the DRHP (Draft Red Herring Prospectus) was filed with SEBI in November 2021, the specific dates for the open, close, and listing of the IPO are still to be announced.
- Offer Size: The planned IPO aims to raise up to Rs. 6,250 crores through a fresh issue of shares.
- Price Band: The price band hasn’t been disclosed yet, but reports suggest it could be in the range of Rs. 600-700 per share.
PharmEasy IPO Offer Details:
Types of Securities Offered:
The PharmEasy IPO will solely offer equity shares of API Holdings Ltd., the parent company of PharmEasy. These shares will represent ownership in the company and entitle holders to vote on certain corporate decisions and receive dividends.
Reservation Percentages:
- Retail investors: 10% of the total offer size will be reserved for retail investors. This gives individual investors like you an opportunity to participate in the IPO.
- Qualified Institutional Buyers (QIBs): 75% of the offer will be reserved for QIBs, which include mutual funds, insurance companies, and foreign institutional investors.
- Non-Institutional Investors (NIIs): The remaining 15% will be available for NIIs, such as corporate entities and high-net-worth individuals.
Minimum Lot Size and Investment Amount:
The minimum lot size for the PharmEasy IPO is yet to be finalized. However, based on past precedent and the offer size, it is likely to be set around 50 shares. This translates to a minimum investment amount of approximately Rs. 30,000-35,000 at the estimated price band of Rs. 600-700 per share.
PharmEasy Company Profile:
History and Operations:
- Founded in 2015 by Dharmil Sheth and Dhaval Shah, PharmEasy started as an online pharmacy platform aimed at simplifying medicine access and affordability.
- Over the years, it has expanded into a comprehensive “super app” offering diverse services:
- Online Medicine Delivery: Offers over 1 lakh medicines and healthcare products through partnerships with local pharmacies.
- Diagnostics: Acquired Thyrocare, a leading diagnostics chain, providing convenient home sample collection and test reports.
- Telehealth: Connects users with licensed doctors across specializations for instant consultations via video calls.
- PharmEasy is currently present in over 20,000 pin codes across India, aiming to serve 90% of the population.
Market Position and Share:
- PharmEasy is India’s leading e-pharmacy player, holding a commanding 45-50% market share as of 2023.
- It stands out in the competitive healthcare landscape with its extensive network, user-friendly app, and focus on affordability and accessibility.
Prominent Brands, Subsidiaries, and Partnerships:
- PharmEasy: The flagship brand for all services and app.
- Thyrocare: A leading diagnostics chain acquired in 2021.
- Docon: A telemedicine platform acquired in 2019.
- Pharmeasy Surgicare: Focuses on medical supplies and equipment for hospitals and clinics.
- Partnerships: Numerous tie-ups with insurance companies, healthcare providers, and diagnostic labs to expand reach and offerings.
Key Milestones and Achievements:
- Achieved unicorn status in 2019 with a valuation of over $1 billion.
- Acquired Medlife, a major rival, in 2021, further solidifying its market leadership.
- Crossed INR 10,000 crore in annual revenue in 2023, showcasing rapid growth.
- Won prestigious awards like Deloitte Fast 50 India and ET Startup Awards.
Competitive Advantages:
- First-mover advantage: Early entry and strategic acquisitions established a strong brand and network.
- Comprehensive platform: One-stop shop for diverse healthcare needs fosters user retention and loyalty.
- Technology focus: Mobile app provides seamless user experience and facilitates efficient logistics.
- Affordability focus: Offers discounts and partnerships with insurance companies to attract customers.
PharmEasy Financials:
Analyzing PharmEasy’s recent financial performance reveals both promising growth and concerns regarding profitability:
Revenue Growth:
- PharmEasy has exhibited impressive revenue growth, with figures indicating:
- FY22: INR 6,381 crores (5x jump from FY21)
- FY23: INR 6,702 crores (5% increase from FY22)
- Though the growth rate slowed in FY23, the overall scale and consistent expansion remain noteworthy.
Profitability:
- Despite high revenue, PharmEasy still operates at a loss:
- FY22: Net loss of INR 3,970 crores (increased from FY21)
- FY23: Net loss of INR 2,283 crores (reduced from FY22)
- While losses show improvement, turning a profit remains a crucial challenge for investor confidence.
Debt Levels:
- PharmEasy’s debt has risen alongside its growth:
- FY22: Total borrowings of INR 9,909 crores (increased from FY21)
- FY23: Debt levels slightly reduced, but remains considerable
- High debt levels pose a financial risk and need to be managed effectively.
Key Financial Ratios (FY23)
- EPS (Earnings per Share): Negative due to losses, currently at INR -34.06.
- Debt-to-Equity Ratio: 0.24, indicating moderate leverage compared to industry average.
Industry Benchmarks:
- Healthcare industry’s average P/E ratio is around 30, highlighting the potential valuation PharmEasy could achieve upon profitability.
- Profitable peer companies typically have debt-to-equity ratios lower than 0.15, suggesting room for PharmEasy to reduce its debt burden.
PharmEasy IPO Objectives:
PharmEasy’s decision to go public is driven by a multi-pronged strategy aimed at bolstering its leadership position and accelerating its future growth:
Reasons for Going Public:
- Raise Capital: The primary objective is to raise Rs. 6,250 crores through the IPO. This fresh infusion of funds will support the company’s ambitious expansion plans.
- Enhance Brand Reputation: Being a publicly traded company brings additional legitimacy and transparency, potentially boosting investor confidence and brand perception.
- Unlock Liquidity for Investors: Early investors and shareholders can leverage the IPO to exit their investments and provide liquidity for potential reinvestment.
- Attract and Retain Talent: Becoming a publicly traded company makes PharmEasy more attractive to top talent, aiding in recruitment and employee retention.
Plans for Utilizing the Funds:
PharmEasy has clearly outlined how it intends to utilize the raised capital:
- Debt Repayment and Prepayment: Around Rs. 1,929 crores will be used to manage existing debt, improving the company’s financial footing.
- Organic Growth: Rs. 1,259 crores will be allocated to enhance its existing operations, expand the pharmacy network, and launch new healthcare services.
- Inorganic Growth: Rs. 1,500 crores are earmarked for strategic acquisitions and other inorganic growth initiatives to solidify its market leadership.
- General Corporate Purposes: The remaining amount will be utilized for general corporate needs, including working capital and technology upgrades.
PharmEasy IPO: Lead Managers and Registrar
Lead Managers:
PharmEasy’s IPO boasts an esteemed lineup of lead managers, each with a strong track record of handling successful healthcare and technology IPOs in India:
- Kotak Mahindra Capital Company Limited: A leading investment bank in India, managing IPOs for companies like Nykaa, Zomato, and Policybazaar.
- Morgan Stanley India Company Private Limited: A global investment bank known for its expertise in healthcare IPOs, including IPOs for Dr. Lal PathLabs and Metropolis Healthcare.
- BofA Securities India Limited: A global investment bank with extensive experience in technology IPOs like Paytm and Zomato.
- Citigroup Global Markets India Private Limited: Another global investment bank with a successful track record in healthcare IPOs like Glenmark Life Sciences and Fortis Healthcare.
- JM Financial Limited: A renowned Indian investment bank renowned for managing IPOs like IRCTC and SBI Cards.
Registrar:
- KFin Technologies Private Limited: A leading share registrar in India, handling large IPOs like Tata Motors, Reliance Industries, and HDFC Bank. Their extensive experience and robust infrastructure ensure smooth investor record maintenance and communication.
PharmEasy IPO: Risky Waters or Blue Skies?
While PharmEasy’s potential is undeniable, several risks and concerns deserve careful consideration before you invest in its IPO:
Industry Headwinds:
- Regulatory landscape: The Indian healthcare industry is subject to evolving regulations, leading to potential uncertainty and compliance challenges.
- Competition: The e-pharmacy market is fiercely competitive, with established players like Tata 1mg and Medlife, along with potential new entrants, vying for market share.
- Macroeconomic factors: Inflation and economic slowdown could impact consumer spending on healthcare, affecting PharmEasy’s growth.
Company-Specific Challenges:
- Profitability concerns: As mentioned earlier, PharmEasy remains unprofitable despite high revenue, raising concerns about its ability to generate sustainable returns for investors.
- High debt levels: The company’s debt burden, while moderate compared to the industry average, still needs to be effectively managed to avoid financial burdens.
- Execution risk: Successfully delivering on ambitious expansion plans requires efficient capital allocation and operational expertise, which remain unproven at PharmEasy’s current scale.
Financial Red Flags:
- Negative EPS: The negative Earnings per Share (EPS) highlights the company’s current lack of profitability.
- Burning cash: PharmEasy continues to burn cash despite revenue growth, indicating concerns about future financial sustainability.
Also Read: How to Apply for an IPO?
