PharmEasy appoints Avendus to help raise $100 mn capital

Existing investors, largely led by Prosus Ventures (Formerly Naspers Ventures), Temasek Holdings, CDPQ and TPG are finalising plans to put in around ₹250 crore into PharmEasy, the people cited above added, on condition of anonymity.

At the same time, Avendus Capital is expected to tap external investors for a fundraise. The mandate for the total fund infusion including investments from existing shareholders is for a $100 million capital raise.

The fund infusion from existing investors comes at a time when PharmEasy (operated by API Holdings) needs to raise equity to meet a key covenant in the loan extended to the company by Goldman Sachs.

An Economic Times report on June 1 said PharmEasy was required to raise ₹1,000 crore by end of March 2022 as per its loan agreement with Goldman Sachs.

“When the agreement was signed, PharmEasy’s burn rate was around ₹75 crore a month. At the end of March, the burn rate was down to ₹6 crore," one of the people cited above said. Investors did not want to dilute their equity with a higher fundraise, if it could be avoided, the person cited above said.

The company has since then been reporting operational Ebitda profitability, as Mint reported on 9 May. This does not include employee stock option expenses.

This allowed the company to negotiate a lower equity raise with the lender, the people cited above added. While ₹250 crore is being raised to meet the loan covenant, the rest of the funds will be raised to meet working capital needs.

The company raised debt from Goldman Sachs to refinance a previous debt raised from Kotak Mahindra Bank. As per the terms of the debt agreement, the structured debt of ₹2,280 crore from Goldman Sachs is due in 2026, but requires PharmEasy to pay a monthly interest. It also has a payment-in-kind (PIK) component—in the range of 7.25-8.25%—which is due to be paid only in 2026, Mint reported in May. A PIK component helps a company preserve cash but could allow for a delay in payment or payment through other ways including in securities.

CDPQ, TPG and Temasek declined to comment.

There is greater interest to acquire Pharmeasy’s subsidiary Thyrocare, however, the founders are resisting that as the business has become a strategic asset for PharmEasy. In June 2021, PharmEasy’s parent API Holdings acquired 66% stake in Thyrocare Technologies for ₹4,546 crore, which was the key reason the group raised debt financing.

PharmEasy has raised capital internally previously as well. In October 2022, the company raised ₹550 crore through a rights issue from its existing investors after it called off its IPO plans in FY23 because of poor market conditions.

PharmEasy declined to comment. Avendus Capital and the four investors did not immediately respond to a request for comment on Thursday. The company reported consolidated net sales of ₹5,728.8 crore in FY22, according to its regulatory filings with the registrar of companies or RoC. The losses in FY22 amounted to ₹3,992.4 crore in FY22, out of which around ₹850 crore was due to operational reasons, Mint reported earlier.

The company has not yet filed its FY23 results, but it is believed to have crossed ₹7,000 crore in revenues.