Caught in the middle of multiple financial troubles, epharmacy giant PharmEasy has set in motion the process to raise additional capital from investors. The board of API Holdings, the startup’s parent company, has reportedly approved a resolution to increase the company’s authorized share capital.
Proposal pending before equity investors
The proposal for the share capital increase is now pending before PharmEasy’s equity investors, who will vote on the proposal. The voting process will start on July 8 and conclude on August 5.
According to reports, PharmEasy plans to increase its authorized share capital to INR 3,500 crore (approximately $423 million). This will be divided into 3,000 crore equity shares of INR 1 each and 500 crore preference shares of INR 1 each.
Rights issue and debt repayment
This development follows recent reports that PharmEasy was looking to raise nearly INR 2,400 crore through a rights issue at a significant discount. The rights issue was initiated to repay the debt the company took from Goldman Sachs after breaching loan covenants.
If the rights issue goes through, PharmEasy could become one of the first new-age tech companies to undergo a down round, indicative of the valuation correction trend seen recently. The startup’s valuation is expected to decrease from a record high of $5.6 billion two years ago to an estimated $500-600 million.
Background and challenges
Founded in 2015, PharmEasy sells medicines online and offers diagnostic tests through its subsidiaries. The startup has raised over $1.5 billion across multiple funding rounds. However, it has faced challenges such as increasing losses, a debt crisis, shelved IPO plans, and difficulty in securing further funding.
PharmEasy breached loan covenant terms with Goldman Sachs after failing to raise the required equity round. The company reported significant losses of INR 2,731 crore in FY22. Additionally, valuation cuts by investors such as Janus Henderson and Neuberger Berman have added to its challenges.
Uncertain future ahead
PharmEasy’s debt repayment concerns are intensified by the fact that it pledged shares of Thyrocare, a subsidiary, as collateral for the loan. The startup also faces potential compensation obligations to the founder of Thyrocare due to anti-dilution rights. The company’s future is uncertain, and it faces various challenges as it determines its next course of action.
