PharmEasy Enlists Avendus Capital for Upcoming Funding Round

• ByStartupStory     |    June 9, 2023

PharmEasy, the online pharmacy unicorn, has reportedly enlisted the services of Avendus Capital to facilitate equity funding. In an effort to bolster the company, existing investors such as Prosus Ventures, Temasek Holdings, CDPQ, and TPG are considering investing up to INR 250 crore into PharmEasy, as per sources cited by Mint. Avendus Capital may also explore opportunities to secure additional funding from external investors.

PharmEasy, the epharmacy major, is actively seeking to raise up to $100 million (INR 824.64 crore) in its ongoing funding round. Additionally, the company has internally raised capital. In October 2022, PharmEasy initiated a rights issue to potentially generate INR 750 crore from its existing investors. As a result of unfavorable market conditions, the company decided to cancel its IPO plans for FY23. Avendus, which advised PharmEasy during its Series C funding round in September 2018 worth $50 million, is also involved in the current funding efforts.

PharmEasy has secured funding as a means to fulfill a crucial covenant in the loan provided by Goldman Sachs, the US-based lender. Recent media reports indicated that PharmEasy was required to raise up to INR 1,000 crore ($120 million) in equity as per the terms of its loan agreement with Goldman Sachs, which was established in March 2022. The funding obtained by PharmEasy addresses this requirement and supports the company’s ongoing operations.

PharmEasy, the leading online pharmacy, has announced operational EBITDA profitability, excluding ESOP costs. This achievement has enabled the company to negotiate a smaller equity raise compared to the initially planned INR 1,000 crore with the lender. It is reported that the unicorn will raise INR 250 crore to fulfill the loan covenant, while the remaining funds will be allocated towards meeting working capital requirements.

In August 2022, PharmEasy reportedly borrowed INR 2,280 crore ($285 million) from Goldman Sachs to repay a previous debt owed to Kotak Mahindra Bank, which was utilized for the acquisition of Thyrocare. The loan agreement spans a five-year term, carrying an annual interest rate of 17-18%. While there is interest in acquiring PharmEasy’s subsidiary, Thyrocare, the founders are resisting as they view the business as a strategic asset for the unicorn.

In June 2021, API Holdings, the parent company of PharmEasy, completed the acquisition of a 66% stake in Thyrocare for INR 4,546 crore. This acquisition drove PharmEasy to secure debt from Kotak Mahindra Bank and subsequently Goldman Sachs. In the fiscal year ended March 31, 2022, PharmEasy witnessed significant growth, with its revenue from operations reaching INR 5,729 crore compared to INR 2,235 crore in FY21.

 However, the company also reported increased losses, with INR 2,731 crore in FY22 as opposed to INR 641 crore in FY21. Recently, investors Neuberger Berman and Janus Hendersen marked down PharmEasy’s valuation to $2.8 billion amid an ongoing valuation markdown trend in the Indian unicorn ecosystem.

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