Indian drug and medical services startup PharmEasy is in talks with investors to raise $200m, but at a valuation that could be 15% or even 25% lower than the year’s $5.1bn latest, two people with direct knowledge of the negotiations told Reuters.
Pointing to growing stress in India’s startup ecosystem, a source said PharmEasy, backed by big name investors such as Prosus, TPG and Temasek, is in talks to secure new funds at up to 15% lower valuation. to that of last year.
A second source said the company, which offers online drug delivery and diagnostic testing services, has told its bankers to even consider a 25% cut if needed to close the deal. This could reduce PharmEasy’s valuation for the new funding round to $3.8 billion, and the sources said an initial public offering (IPO) originally scheduled for 2022 has been delayed.
Indian startups have been rocked by uncertainty in global and domestic stock markets and growing investor skepticism over what they say are sky-high valuations, making it difficult for PharmEasy to raise funds at the same or higher valuation , the sources said. They declined to be named as the fundraising talks were private.
PharmEasy’s planned fundraising is expected to see participation from some existing investors, who have indicated they will commit around $115 million in the new round, the first source involved in the talks said.
API Holdings, the parent company of PharmEasy which is seeking to raise funds, declined to comment. API owns other businesses, including diagnostic test provider Thyrocare.
The company had seen its valuation jump in recent years amid a boom for Indian startups in general and a growth spurt in its own industry, where rivals include Reliance’s Netmeds, Tata’s 1mg and Walmart’s Flipkart.
Indian startups raised a record $35 billion in private funding last year, and many internet companies went public. PharmEasy, too, has profited from the boom and has raised a total of $1.89 billion since 2015, most of it in the past two years, according to data from Pitchbook.
Among India’s top startups, a PharmEasy “down” deal – when a company sells shares at a lower valuation than before – will be the first of recent times.
Bank of America Securities and Morgan Stanley are working on the deal, the sources said. Morgan Stanley declined to comment, while Bank of America did not respond.
IPO PENDING, MOUNTING LOSSES
Betting on rising healthcare spending and growing use of online ordering, API Holdings last year filed a prospectus to raise 62.5 billion rupees ($782 million) in an IPO , hoping to list in 2022. The sources confirmed that the plan is now delayed.
One of the concerns investors have ahead of the market debut is rising digital pharmacy losses, the sources said.
PharmEasy’s parent company saw its total revenue more than double to $714 million in the fiscal year ending March 2022.
But total spending for the period was $1.06 billion, partly due to a one-time outlay of employee stock benefits, according to a document seen by Reuters that lists the company’s latest unaudited financial statements. PharmEasy.
The net loss for the year quadrupled to $334 million, the document said.
PharmEasy is currently in “wait and watch” mode and plans to enroll next year, the first source said. A third person with knowledge of the matter also said that the IPO may not take place until late 2023 and that PharmEasy’s parent company may be required to refile regulatory documents for the IPO. stock Exchange.
The IPO delay comes as shares of major Indian listings last year, such as digital payments company Paytm and food delivery firm Zomato, fell more than 60% from their peaks.
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