Pharmeasy in talks with PE firms to raise $250 mn debt

API Holdings Ltd, the parent of Pharmeasy, is in talks with private equity investors to raise around $250 million in debt in a bridge financing round as current market conditions are unfavourable for an IPO (initial public offering), said two people aware of the development. 

The company had filed the draft prospectus in November. “Pharmeasy has been engaged in talks with the credit arms of at least two American private equity firms. The transaction is expected to close soon. This is a bridge financing round to help the company fund its business till markets become more conducive to launch an IPO,” said one of the people cited above, requesting anonymity as the talks are private. 

The funds will be used by India’s largest digital healthcare platform to repay certain loans, as well as for working capital requirements. Pharmeasy plans to raise ₹6,250 crore through its IPO, of which ₹1,929 crore will be used for paying of outstanding debt.

“Our company and certain subsidiaries have entered financing arrangements for availing various credit facilities from banks and financial institutions, including borrowings in the form of terms loans, fund-based and non-fund-based working capital facilities. As on 15 September, 2021, we had total outstanding borrowings of ₹2,494.73 crore on a consolidated basis. We intend to utilise an estimated ₹1,929 crore from the net proceeds towards prepayment or repayment of all or a portion of certain outstanding borrowings availed by our company and certain of our subsidiaries. This shall include investments to be made by our company in certain subsidiaries... who in turn shall utilise the funds for repayment or prepayment of all or a portion of their borrowings,” the draft prospectus said.

The loans that have been earmarked for repayment in the prospectus have a repayment schedule in August 2022, the document showed. 

Out of the IPO proceeds, ₹1,259 crore will be used for funding organic growth initiatives, and ₹1,500 crore for funding inorganic growth and strategic initiatives. 

To be sure, Pharmeasy is not the only tech company that is exploring a debt bridge financing round, said the second person cited above, also speaking on the condition of anonymity. 

“The current market volatility has impacted IPO launches for companies, and tech companies have also been hit on valuations. So companies that have near-term capital requirements are evaluating a debt round to avoid diluting equity at softer valuations ahead of their IPOs. These are expensive loans, and can cost as much as 15% in dollar terms, but can be of great help for these companies in the current environment,” he added. 

Pharmeasy declined to comment on Mint’s queries. 

Pharmeasy operates an integrated, end-to-end business, providing digital tools and information on illness and wellness, offering tele-consultation, diagnostics and radiology tests and delivering treatment protocols, including medicines and devices. Apart from Pharmeasy, API Holdings runs these businesses through various brands, including aknamed, docon, retailio and Thyrocare Technologies.