STARTUP-STORIES

PharmEasy Secures INR 1804 Cr in Down Round Led by Manipal Group Chairman's Family Office

SUMMARY

PharmEasy secured INR 1804 Cr ($216.2 Mn) in a down round funding led by Manipal Group chairman's family office. This comes after CCI approval for their INR 3500 Cr rights issue. Key investors include Prosus, Temasek, and Canadian pension fund CDPQ. The funds will be used for debt repayment and growth initiatives.

This down round reflects a significant discount from PharmEasy's peak valuation and highlights their recent challenges including valuation markdown, funding woes, and layoffs. However, restructuring efforts have shown some improvement with reduced losses and increased revenue in FY23. The company's future depends on securing the remaining INR 1700 Cr and continuing its successful restructuring.

PharmEasy, India's leading online pharmacy platform, has raised INR 1,804 crore ($216.2 million) in a down round of funding. This development comes just over a month after the Competition Commission of India (CCI) greenlit the company's INR 3,500 crore rights issue.

The funding round was led by the family office of Manipal Group chairman Ranjan Pai (MEMG Family Office), which contributed INR 800 crore.
Other prominent investors include Prosus (INR 221 crore), 360 One (formerly IIFL Ventures, INR 200 crore), Temasek (INR 183 crore), and Canadian pension fund CDPQ (INR 95 crore).
Goldman Sachs, WSSS Investments, and Evolution Debt Capital collectively invested INR 304 crore.

Down Round Reflects Market Correction

The funds were raised at a significant discount compared to PharmEasy's peak valuation of $5.6 billion in October 2021. This down round reflects the ongoing market correction within the Indian startup ecosystem.

Debt Repayment and Growth Plans

The proceeds from this funding round will be used to clear a substantial portion of PharmEasy's outstanding debt to Goldman Sachs. The company had previously defaulted on its loan covenants with the investment bank. Additionally, the funds will be directed towards supporting PharmEasy's ongoing growth initiatives.

Conversion of Shares and Remaining Funds

The company plans to convert the issued cumulative convertible preference shares (CCPS) into equity shares in a 20:1 ratio. As of now, it remains unclear when the remaining INR 1,700 crore from the initial rights issue target of INR 3,500 crore will be secured.

Recent Challenges and Restructuring Efforts

PharmEasy has faced a series of challenges in recent times, including valuation markdowns, funding woes, and workforce reductions. The company's performance in H1 FY24 was particularly concerning, with Prosus reporting an internal rate of return (IRR) of -41% on its PharmEasy investment.

However, PharmEasy has undertaken a restructuring exercise to improve its financial health. These efforts have yielded some results, with the company reducing its losses in FY23 compared to the previous year. Operating revenue also witnessed a 16% year-on-year increase.

While this down round funding secures some much-needed capital for PharmEasy, the company's path forward remains uncertain. Successfully raising the remaining INR 1,700 crore and continuing on its restructuring path will be crucial for PharmEasy to regain investor confidence and navigate the competitive Indian e-pharmacy landscape.