API Holdings, the parent company of debt-laden PharmEasy, has reportedly decided to raise funds through a rights issue. During an all-investor meeting held on Monday (July 17), the company approved a rights issue to raise INR 2,000 Cr to INR 3,000 Cr. The primary purpose of this fundraising exercise is to repay the loan taken from Goldman Sachs.
Manipal Group to Step in if Investors Don’t Fully Participate
As part of the rights issue, API Holdings has also approved a proposal from the Manipal Group. The Manipal Group has offered to invest any shortfall amount if all investors do not fully participate in the rights issue. The aim of this move is to ensure the success of the fundraising initiative.
PharmEasy Immediate Need for Funds
Earlier this month, PharmEasy had informed its board and investors about its plans to raise approximately INR 2,400 Cr through a rights issue. The startup is facing an urgent need for funds to pay off a Term B loan of INR 2,280 Cr ($285 Mn), for which it had pledged shares of its subsidiary, Thyrocare, as collateral.
Manipal Group’s Offer to Invest
As per the latest report, the Manipal Group’s family office has expressed its willingness to invest up to INR 1,300 Cr in the e-pharmacy startup. However, some investors at PharmEasy had reservations about selling shares to the Manipal Group at low valuations.
Post-Money Valuation and Previous Challenges
PharmEasy expects the post-money valuation to be in the range of INR 6,000 Cr to INR 7,000 Cr (approximately $730 Mn-$850 Mn) following this investment. This valuation marks a significant drop from its previous valuation of $2.8 Bn during its last fundraise.
PharmEasy has faced challenges recently, breaching its loan covenant terms with Goldman Sachs. The startup was expected to raise an equity round of around INR 1,000 Cr ($120 Mn) but failed to do so. This led to the need for raising high-cost debt to pay off a previous debt used to acquire Thyrocare. Additionally, the company’s plans for a substantial INR 6,250 Cr IPO, filed in November 2021, were unsuccessful amid a severe market downturn.
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