API Holdings Aims for Profitability Despite Widening Losses in FY22
API Holdings, which owns PharmEasy and is planning an IPO, intends to become profitable on an Ebitda basis in the next 4-5 quarters, CEO Siddharth Shah said shareholders at the company’s annual general meeting (AGM) on Wednesday. This comes as the company’s comprehensive losses increased 161% to Rs 4,043 crore in FY22 from Rs 1,552 crore in FY21, owing to non-cash expenses.
However, the company’s overall sales climbed 48% to Rs 6,461.1 crore in FY22 from Rs 4,363.2 crore in FY21, according to its consolidated pro-forma financials. The company stated that its earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins have steadily improved from -13% at the end of FY22 to -7% now. Over the next 2-3 quarters, it expects that to improve to -4% and eventually to turn positive at 0.5% in the next 4-5 quarters.
API Holdings similarly submitted applications for a Rs 6,250 crore IPO in February, but withdrew its draught red herring prospectus (DRHP) in August, citing its cash balance and the unfavourable geopolitical environment.
“We decided it would be better to go public once we had delivered on our performance rather than simply our promise.” “We should enter the markets at a time when our scale, profitability, and KPIs are considerably stronger,” Shah said, disclosing a date for the company’s IPO.
Shah also ruled out the possibility of merging API Holdings with Thyrocare – an NSE listed company it acquired for Rs 4,546 crore – and listing the combined entity now but “we believe that in the near foreseeable future, once the company goes public, then options of merging API (Holdings) and Thyrocare maybe explored,” he said.
In the meantime, the company has been actively raising cash in the private sector. It is now financing 750 crore through a rights offering, and the business announced on Wednesday that more than 65% of the funds have already been raised. API Holdings also raised a loan of about 2,000 crore from Goldman Sachs about a month ago, to be repaid over 4-5 years.
“With our tie-up with Goldman (Sachs) and others, the company’s cash position is extremely robust to look (through) the next 12-24 months,” Shah added.
The company has also generating more revenue from the services it offers, like Thyrocare. Currently, 88% of the company’s revenue comes from products that it sells through PharmEasy and Retailio, its B2B pharmacy division. Services on the other hand, account for 12% of the company’s total revenue, up from 0% in FY20. Shah also said the company’s products unit is already profitable.
The company has a net margin of 2-3% from selling products and earns about 40% on a net basis from offering services. To further its goal towards profitability, Shah said the company was creating and focusing on private labels like Ever Herb, Zustle, TrueCure and Liveasy, among others as these typically had higher margins.
Also Read: API Holdings – PharmEasy Rights Issue
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