People familiar with PharmEasy ‘s most recent financials claim that the online pharmacy had a positive ebitda in April of about Rs 14 crore for the first time since its establishment with a net revenue of Rs 600 crore.
The parent company of the Mumbai-based epharmacy platform, API Holdings, is in talks with existing investors CDPQ and ADQ for a fresh round of funding as a result of operating profitability. People with knowledge of the conversations told ET that it might involve convertible notes and be valued at $50-100 million. By September of this year, the company had informed the board that it hoped to have positive cash flow.
PharmEasy founder and CEO Siddharth Shah recently held a town hall with his staff and updated them on the company’s financial performance but numbers weren’t disclosed at the time. Shah is said to have told employees about the company’s plans to cross-sell more services on the platform in the ongoing financial year including its diagnostic services through Thyrocare, which now contributes about 13% of its revenue as against around 3% earlier
Also Read: PharmEasy Founders: Will Not Sell Thyrocare and Will Cut Cash Burn
In the same month last year, they had an ebitda of almost – Rs 80 crore. A person with knowledge of the situation told ET that the corporation, which has been under pressure to reduce expenses, has been aggressively combining operating costs and streamlining its acquisitions, which has resulted in April results.
It is currently running at a net revenue run-rate of Rs 7,200 crores based on its April data. According to an ET report from the firm’s board meeting in February, the company burned almost Rs 30 crore every month in December. According to Altius, the company also made it clear to the board that it has no plans to sell Thyrocare.
PharmEasy’s Shah declined to comment while emails sent to CDPQ and ADQ did not elicit any response till press time Sunday.
New funding?
PharmEasy has a debt service commitment to Goldman Sachs of approximately Rs 25–30 crore every quarter, however sources claim that despite the challenging funding environment, the company is now seeking to negotiate better terms for a funding arrangement after demonstrating improved unit economics.
As Goldman has also been encouraging the founders to raise finance and use it for expansion and business goals, they are in discussions with sovereign wealth funds. One of the individuals quoted above stated that Shah has been routinely updating these possible investors on financial information.
To restructure a prior loan from Kotak Mahindra Bank for the purpose of funding the Thyrocare purchase in 2021, Pharm Easy obtained $300 million from Goldman Sachs.
While the company has shown better numbers and cut down on burn, raising a new round at its previous valuation will still be challenging, It was last valued at $5.6 billion and recently faced a markdown of about 21% by funds managed by one of its investors-New York-based Investment management firm Neuberger Berman, as reported by ET
The firm has also been discounted by funds run by global asset management business Janus Henderson by half, according to regulatory filings with the US Securities and Exchange Commission (SEC). This would amount to an estimated valuation of $2.8 billion as of December 31, 2022.
The company is presenting its April financials and its commitment to continue this run of better pricing, but the ongoing discussions are still only at a discount compared to the previous round. According to the aforementioned person, the discussions now also cover the potential for convertible notes.
The corporation can avoid stating valuation while raising capital using convertible notes. Typically, these investors will get a premium or discount during the next round of funding or a public offering, ET has reported on startups such as Udaan, Dunzo and others tapping these funding Instruments to avoid significant dilution in their valuation while the funding winter continues to chill the startup ecosystem on the liquidity front.
Industry insiders have expressed concern that if PharmEasy chooses an equity investment round, it could still be difficult to maximise a valuation.
Integrations and growth adjustments
According to reports, PharmEasy’s average order value (AoV) in the drug delivery industry grew to a range of Rs 1300 to 1.900 in April, which assisted the company in turning around its financial situation.
The personnel received instructions on how to cross-sell additional goods and services. Over the counter products under its private label generate an annualised revenue run rate of Rs 150 crore. Since they have larger margins, the goal is to sell more of these, stated one of them.
People ET spoke with claim that PharmEasy has been consolidating warehouses to save operating expenses. That is a about 40% decrease. An illustration. PharmEasy had about 16 warehouses In Chennai and that’s now two. Besides these changes, new initiatives have been slowed down and focus is to grow between 15-25% Instead of earlier plans of more than 50%, said another person aware of the changes.
According to a report by ET, almost all Indian consumer internet companies have readjusted their growth strategies due to a financial shortage, which has also resulted in job losses.
The company had a cash runway of nearly a year at the time of the board meeting in February. The company closed a Rs 650 crore rights issue from current investors including Prosus Ventures, Temasek, and others, as reported by ET in October.
Also Read: All you need to know about PharmEasy Pre-IPO shares