PharmEasy Raises INR 1,804 Cr in Down Round Led by Ranjan Pai's Family Office

The fundraising round, marking a 90% valuation drop from the startup's peak in October 2021, saw involvement from several prominent investors.

Leading e-pharmacy, PharmEasy, has secured INR 1,804 Cr (approximately $216.2 million) in a down round of funding. The investment was led by the family office of Ranjan Pai, chairman of the Manipal Group.

This marks a significant development barely a month after the Competition Commission of India (CCI) approved PharmEasy's INR 3,500 Cr rights issue.

Established in 2015 by Dharmil Sheth, Dhaval Shah, Harsh Parekh, Siddharth Shah, and Hardik Dedhia, PharmEasy operates as an online pharmacy, offering medication and diagnostic services under its various brands.

Details of the Fundraise

According to regulatory filings accessed by Inc42, PharmEasy's parent company API Holdings passed special resolutions to allot 18.63 Cr cumulative convertible preference shares B (CCPS B) at an issue price of INR 96.8 each.

This substantial investment amounts to a cumulative total of INR 1,804 Cr. The fundraising round, which represents a 90% valuation cut compared to the startup's peak valuation in October 2021, garnered participation from various prominent investors.

The MEMG Family Office spearheaded the investment with INR 800 Cr, followed by Prosus with INR 221 Cr. Additionally, 360 One (formerly IIFL Ventures) injected INR 200 Cr, while Temasek contributed INR 183 Cr.

Other notable investors included the Canadian pension fund CDPQ, which invested INR 95 Cr, and WSSS Investments, Goldman Sachs, and Evolution Debt Capital, with a combined investment of INR 304 Cr.

Conversion Plans & Future Fundraising

PharmEasy's board approved the proposal to allot the CCPS in two separate meetings held on April 9 and April 11. The startup intends to convert the CCPS into equity shares at a ratio of 1:20.

While this fundraising round marks a significant milestone, it remains to be seen when the remaining INR 1,700 Cr of the INR 3,500 Cr rights issue will be secured by PharmEasy.

This fundraising initiative follows the CCI's recent approval of investment proposals by the MEMG family office and 360 One in API Holdings.

Earlier approvals granted in January included investment proposals from Goldman Sachs India, MacRitchie Investments, Evolution X, and CDPQ, among others.

The rights issue was initiated by PharmEasy to address a substantial portion of its outstanding debt owed to Goldman Sachs. Barely a year after raising the debt, the startup breached its loan covenant conditions with Goldman Sachs.

Under the loan terms, the Mumbai-based startup was required to secure an equity round of approximately INR 1,000 Cr. However, the fundraising endeavor fell due to increasing losses, funding challenges, and macroeconomic pressures.

Challenges & Restructuring Efforts

Recently, PharmEasy has faced various challenges, including valuation markdowns, funding constraints, and organizational restructuring.

Additionally, it ranked as the worst-performing investment in Prosus's Indian portfolio in the first half of fiscal year 2024, with an internal rate of return (IRR) of -41%.

However, PharmEasy has shown signs of improvement following a restructuring initiative. It succeeded in reducing its losses to INR 2,289 Cr (excluding impairment loss) in the fiscal year 2023, compared to INR 2,731.7 Cr in the previous fiscal year.

Furthermore, its operating revenue increased by 16% year-on-year to INR 6,644 Cr in fiscal year 2023.

As PharmEasy navigates through a dynamic and competitive landscape, its ability to secure substantial investments reflects investor confidence in its long-term prospects.

PharmEasy aims to consolidate its position as a leading player in India's digital healthcare ecosystem with a renewed focus on financial stability, operational efficiency, and customer-centric innovation.