PharmEasy sets stage for IPO return with new strategy, boosted cash flow

PharmEasy plans to re-enter the IPO market following a major business overhaul. The company aims to discuss its IPO strategy, including a potential merger with Thyrocare, at its February board meeting

Online pharmacy player PharmEasy is looking to relaunch its initial public offering (IPO) this year, two years after pulling its IPO application, according to a report by The Economic Times.

 

The company plans to present its IPO strategy to its board next month, which could include a reverse merger with its publicly listed subsidiary, Thyrocare. PharmEasy intends to use its improved cash flow and restructured business model to gain the confidence of public market investors, the news report said.

 

A source, as quoted by the news report, said that the company will discuss the IPO strategy at the February board meeting, with key focus on reducing cash burn.

 

Meanwhile, three of its co-founders — Dhaval Shah, Dharmil Sheth, and Hardik Dedhia — have stepped down from operational roles but remain on the boards of API Holdings and Thyrocare. Their departure from day-to-day operations took effect last year and have now been formalised.

 

Siddharth Shah, chief executive of API Holdings, continues in his role, working alongside Rahul Guha, PharmEasy’s president and CEO of Thyrocare. Shah, Sheth, and Dedhia are reportedly launching a new startup, with Siddharth Shah expected to be an investor.

 

PharmEasy joins the IPO trends

 

PharmEasy’s decision to explore public markets aligns with a broader trend in India’s startup ecosystem. Companies like Boat, Ola Consumer, and Oyo, which had postponed or withdrawn their IPOs for various reasons, have recently renewed discussions on going public. Boat appointed new bankers for its IPO in November, and Oyo plans to file its draft papers by Q1 of the next financial year, after raising capital and restructuring its shareholder base.

 

PharmEasy revenue declines

 

In FY24, PharmEasy’s revenue dropped by 14.7 per cent to Rs 5,664 crore from Rs 6,644 crore in FY23. However, the company cut its net loss by half, reducing it to Rs 2,533 crore from Rs 5,212 crore in the previous fiscal, largely due to a decrease in goodwill impairment charges — from Rs 2,826 crore in FY23 to Rs 582 crore in FY24.

 

PharmEasy’s medicine sales contributed Rs 5,008 crore to the total revenue, while lab tests and other services accounted for Rs 652 crore. Total expenses decreased to Rs 7,255 crore from Rs 8,974 crore in FY23, with employee expenses falling sharply from Rs 1,283 crore to Rs 699 crore, reflecting cost-cutting efforts.

 

PharmEasy focus on growth

 

PharmEasy’s recapitalisation in 2023 saw its valuation slashed by 90 per cent, from a 2021 peak of $5.6 billion. The rights issue, led by Manipal Group’s Ranjan Pai and backed by investors like Prosus Ventures, TPG, Temasek, ADQ, and Amansa Capital, raised Rs 3,500 crore, which was used for debt servicing and restructuring.

 

Since the recapitalisation, PharmEasy has focused on reducing cash burn and aiming for sustainable growth, a strategy that has helped curb its losses. However, rivals like Tata-owned 1mg and Apollo 24x7 are expanding their market share. Flipkart Minutes has also introduced a quick medicine delivery service in select Bengaluru locations. Meanwhile, PharmEasy continues to power medicine delivery for Swiggy Instamart.