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The Competition Commission of India (CCI) has given its nod to Ranjan Pai’s Manipal Education and Medical Group (MEMG) and 360 One to invest in API Holdings, the parent entity of the online pharmacy giant PharmEasy.
The clearance follows CCI's earlier sanction of investments by notable investors, including Goldman Sachs, Naspers, Temasek, and CDPQ, in API Holdings.
While the exact investment figures from MEMG and 360 One remain undisclosed, Several media reports said that MEMG will be investing Rs 1,000 crore for an 18% stake in the company.
Ranjan Pai to become largest investor in Pharmeasy
Ranjan Pai, who had previously backed PharmEasy in its nascent stages before exiting, is set to acquire a significant stake in the company, making him one of its largest investors with more than 12% ownership.
The investment is part of a Rs 3,500-crore rights issue aimed at repaying debt and stabilizing the company's financials. Pai is also expected to secure three board seats at API Holdings, marking a significant influence in the company's future direction.
The ongoing financial challenges
PharmEasy has faced considerable financial challenges, including a default on loan covenant terms with Goldman Sachs, leading to a valuation cut of nearly 50% by investor Janus Henderson.
Additionally, Neuberger Berman reduced PharmEasy’s valuation by 21.4% to $4.4 billion as of February 2023, a stark contrast from its peak valuation of $5.6 billion. Despite these setbacks, PharmEasy reported a 16% growth in revenue to Rs 6,644 crore in FY23, alongside a 16% reduction in losses due to its cost-cutting measures and operational streamlining.
The path to recovery
In response to its financial and operational challenges, PharmEasy has laid off employees to reduce cash burn and achieve profitability. The rights issue, concluded in October last year, saw participation from major investors and was part of the company's strategy to alleviate its debt burden and stabilize its financial standing.