PharmEasy’s parent company, API Holdings, has set its sights on generating capital through a rights issue valued between Rs 2,000 to Rs 3,000 crore. If current shareholders choose not to participate, the family office of the Manipal Group has stepped forward with a potential investment of up to Rs 1,300 crore. By taking this approach, the company aims to unravel concerns regarding debt repayment and valuation, all while providing the founders with added incentive through ESOPs.
API Holdings, the proud owner of PharmEasy, reportedly held an all-investor meeting on July 17, where they decided to undertake a rights issue ranging from Rs 2,000 crore to Rs 3,000 crore, according to undisclosed sources. Additionally, these sources revealed that in case not all investors participate, the PharmEasy parent company has approved the Manipal Group’s proposal to cover the remaining amount.
Interestingly, the board of API Holdings has allegedly given its approval to the binding offer from the Manipal Group, but only in the event of existing shareholders choosing not to participate. Sources suggest that the Manipal Group’s family office is willing to invest up to Rs 1,300 crore.
However, some investors at PharmEasy expressed concerns about selling shares to the Manipal Group at lower valuations. To address this issue, an agreement seems to have been reached to give priority to existing shareholders for investment on a pro-rata basis, as per independent sources.
API Holdings urgently requires a cash infusion of approximately Rs 2,500 crore to repay its debt to Goldman Sachs, for which it had used shares of Thyrocare as collateral. Failing to meet the debt covenant could leave PharmEasy with limited options, hinted one source.
Depending on the amount of funds raised, the post-money valuation of the company is expected to be around Rs 6,000 to Rs 7,000 crore. This marks a significant decline from its previous funding round, which valued PharmEasy at $2.8 billion.
Notably, the company’s valuation reached a peak of $5.6 billion a few years ago. However, the digital commerce sector has witnessed an overall correction, coupled with a funding downturn, resulting in a steep drop in valuations during the current funding round.
As part of the funding discussions, it has been clarified that there will be no liquidation preference. Nevertheless, the promoter shareholding is likely to dilute to approximately 4.5-5 percent. A source indicated that founders may be incentivized with ESOPs based on performance metrics as part of the deal. Prominent investors in PharmEasy include Prosus Ventures, Temasek, TPG Growth, and CDPQ.
