PharmEasy parent API Files for DRHP for IPO

With the season of digital IPO in full swing, the high-profile PharmEasy was unlikely to be too far behind. The holding company of PharmEasy, API Holdings, has filed the draft red herring prospectus with SEBI for its proposed initial public offer. The total offer size is expected to be Rs.6,250 crore but that is open to modifications based on how the demand and market valuations pan out.

Like in the case of Policybazaar, Nykaa and Paytm, this is again a case of the digital brand being more popular and better identified compared to the holding company. Ahead of the IPO, PharmEasy also plans a pre-IPO placement worth Rs.1,250 crore.

If the pre-IPO placement is successful, then the size of the IPO will be reduced proportionately. The anchor demand is also expected to be robust in the case of PharmEasy.

PharmEasy provides an agnostic platform for consumers to access online consultations and also buy medicines on the net with the appropriate checks and balances. In terms of gross market value (GMV), PharmEasy is the largest player in the digital medicine space.

PharmEasy offers digital tools, healthcare information, teleconsulting, diagnostic tests, radiology tests; apart from selling medicines. PharmEasy was founded in 2015.

PharmEasy had recently acquired India’s largest diagnostic services provider Thyrocare. In the last round of funding, PharmEasy had been valued at $5.6 billion and the company is expecting a higher valuation in the IPO.

However, most of the early investors have reiterated their faith in the PharmEasy business model and chosen not to offer their shares in the IPO. Till date, PharmEasy has raised $1.2 billion in equity and debt funding.

Out of the fresh issue component, PharmEasy will use Rs.1,929 crore for debt repayment, Rs.1,250 crore for financing organic growth and expansion initiatives, while another Rs.1,500 crore will be allocated to inorganic growth via mergers and acquisitions. Most of these applications of fresh funds are likely to be value accretive for the company.

To make its business model more robust, PharmEasy plans to focus on the 3 key areas as under to enhance growth in revenues and market share.

A) Marketing investments to increase brand awareness and recall.
B) Supply chain infrastructure to facilitate seamless and omnichannel fulfilment
C) Technology capabilities and technology infrastructure. 

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