API Holdings, the company behind PharmEasy, has filed preliminary papers seeking regulatory approval to launch its maiden public offer. PharmEasy IPO is likely to raise INR6,250 crore through an initial share sale.
While most IPOs nowadays include an Offer For Sale (OFS) from existing investors, PharmEasy IPO will be completely a primary share sale and there will not be any OFS component. This means that the entire IPO proceed of INR6,250 crore will go to the company.
Additionally, the company, in consultation with the bankers to the issue may consider a private placement aggregating up to INR1,250 crore. If such placement is completed, the fresh issue size in the upcoming IPO will be reduced.
API Holdings’s pre-IPO round that closed in October 2021, was oversubscribed significantly, with participation from Singapore-based Amansa Capital, US-based hedge fund Janus Henderson, OrbiMed Advisors, Steadview Capital, Abu Dhabi’s sovereign wealth fund ADQ, Neuberger Berman. The latest round valued the company at USD5.6 billion.
From humble beginning to India’s largest digital healthcare company
The five founders of API Holdings, Siddharth, Hardik, Harsh, Dharmil and Dhaval are childhood friends, coming from the suburb of Ghatkopar in Mumbai. The journey of the API Holdings founders that started from DialHealth in 2012, a digital and phone order platform that allowed access to teleconsult, diagnostic lab pickups and medical product delivery has come a long way to now become India’s largest digital healthcare platform.
According to its DRHP, API Holdings is India’s largest digital healthcare platform based on gross merchant value (GMV) of products and services sold for the year ended 31 March 2021. It is an integrated, end-to-end business that aims to provide solutions for healthcare needs of consumers providing digital tools and information on illness and wellness, offering teleconsultation, offering diagnostics and radiology tests, and delivering treatment protocols including products and devices.
Acquisitions leading to PharmEasy IPO
API Holdings had most recently acquired 66.1% in Thyrocare Technologies from its founder A Velumani for INR4,546 crore (at INR1,300 per share) through a 100% subsidiary Docon Technologies. Similarly, the company acquired a majority of Bengaluru-based tech focused, healthcare supply chain startup Akna Medical Pvt Ltd (Aknamed) that is backed by Lightrock for an undisclosed sum.
As of 30 June 2021, API Holdings provided access to more than 50,000 stock keeping units (SKUs) across 18,587 pin codes in 2,601 cities and towns across the country. Its revenues and business are spread across the length and breadth of India, urban and rural and provides its services to 3,261 wholesalers, 87,194 pharmacies, and 4,617 prescribing doctors and clinics and 926 hospitals, with 25 million registered users.
Indian pharma industry is expected to grow at a CAGR of 9% from nearly INR2.1 trillion (USD28 billion) to INR3.2 trillion (USD43 billion) by 2025 (growing at nearly 9% CAGR), led by growth in the chronic segment, non-metro markets and organized channel and due to increased urbanization and higher awareness of medication. Meanwhile, government-led initiatives and digitization, favourable government policies such as Ayushman Bharat (to improve quality & access to care) are also likely to offer tailwinds to the sector.
According to the draft prospectus, the company posted a top line of INR2,360.7 crore in FY2021, up significantly from INR737.4 crore in FY2020, primarily on account of the acquisitions mentioned above. Its losses for the year stood at INR644.8 crore, again bigger from INR335.1 crore in FY2020. The company also posted a loss of INR306 crore in the three months ended 30 June 2021.
Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited, BofA Securities India Limited, Citigroup Global Markets India Private Limited, JM Financial Limited are the book running lead managers to PharmEasy IPO.