PharmEasy Rights Issue, CCI Approval for Ranjan Pai, 360 One Stake

PharmEasy is an online platform that allows users to buy medicines and health products. It offers free home delivery within a certain radius of its partner pharmacies. PharmEasy also provides information on medications, such as their side effects, usage, and precautions. It works by partnering with registered pharmacies to sell medicines directly to customers. The platform’s mission is to make healthcare more accessible and affordable for everyone.

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On Tuesday (March 26), the Competition Commission of India (CCI) greenlit the family office of Ranjan Pai, chairman of Manipal Group, to invest in the parent company of PharmEasy, a leading online pharmacy.

Additionally, the CCI gave the thumbs up for an extra investment from 360 One (previously known as IIFL) in PharmEasy. According to a statement from the competition watchdog, “CCI approves subscription to CCPS B of API Holdings by MEMG LLP and 360 ONE.” This proposed move involves the acquisition of class B compulsorily convertible preference shares (CCPS B) of PharmEasy by the investors. It’s all part of a larger combination of acquisitions falling under Section 5(a)(i)(A) of the Competition Act, 2002.

According to reports, Pai is set to become one of PharmEasy’s major investors, holding an estimated stake of over 12%. It was also mentioned last year that Pai would secure three seats on API Holdings’ board as part of the investment deal. Now that the Competition Commission of India (CCI) has approved the arrangement, Pai is expected to officially join the online pharmacy’s board.

Pai’s investment is part of PharmEasy’s significant INR 3,500 crore rights issues, which concluded in October of the previous year. Notable entities like Goldman Sachs, Prosus, and Temasek participated in this funding round. The CCI granted approval in January 2024 for these investors to acquire stakes in the Mumbai-based startup.

Beforehand, there were also reports mentioning that the CDPQ (a Canadian pension fund) was involved in the issue.

Interestingly, the startup initially aimed to raise INR 2,400 Cr through the issue. However, they later bumped it up to INR 3,500 Cr, albeit at a valuation slashed by over 90% from its peak value of $5.6 Bn in 2021.

PharmEasy decided to go for the rights issue mainly to tackle a large chunk of its outstanding debt owed to Goldman Sachs. It turns out, the startup breached its loan agreement terms with Goldman Sachs just about a year after securing the loan.

According to the loan agreement, the Mumbai-based startup was required to secure an equity round of approximately INR 1,000 Cr. However, due to increasing losses, lack of funding, and macroeconomic challenges, the fundraise did not come to fruition.

Established in 2015 by Dharmil Sheth, Dhaval Shah, Harsh Parekh, Siddharth Shah, and Hardik Dedhia, PharmEasy is an online pharmacy that provides medication and diagnostic tests to customers through its various brands.

For quite some time now, the online pharmacy has been at the center of attention, but not for the best reasons. Whether it’s facing valuation markdowns, financial struggles, or significant layoffs, it’s been making headlines for all the wrong reasons lately.

Yet, there’s hope on the horizon. The company is striving to change its luck by letting go of numerous employees and streamlining its operations. This move aims to reduce spending and pave the way towards profitability. In the fiscal year 2022-23 (FY23), PharmEasy managed to cut its losses by 16.23% compared to the previous year, totaling INR 2,289 Cr. Additionally, it saw a 16% year-on-year growth in operating revenue, reaching INR 6,644 Cr.

The Competition Commission of India (CCI) approved Ranjan Pai’s family office and 360 One’s investments in PharmEasy, comprising the acquisition of class B shares. Pai is expected to secure a significant stake and three board seats. PharmEasy’s INR 3,500 crore rights issues garnered support from major entities like Goldman Sachs, Prosus, and Temasek. Challenges such as valuation markdowns and layoffs prompted strategic initiatives, resulting in reduced losses and increased operating revenue. These developments indicate a notable shift for PharmEasy amidst its efforts to weather challenges and pursue growth in the online pharmacy sector.