PharmEasy, a prominent player in the epharmacy space, is gearing up to make a significant dent in its outstanding debt. The company has set its sights on paying off a substantial portion of its debt to Goldman Sachs. An amount ranging between $100 million and $150 million out of the total $300 million owed will be settled from the proceeds of an anticipated rights issue next week.
Equity Conversion and Valuation Adjustments
Adding another layer to the debt resolution strategy, Goldman Sachs is reportedly contemplating converting a segment of the debt into equity. In the upcoming rights issue, PharmEasy might convert approximately $38 million to $40 million of the debt into equity. Experts anticipate that this issue will value PharmEasy in the range of $500 million to $600 million. This valuation represents a notable departure from its previous peak valuation of $5.6 billion.
PharmEasy Renegotiating Debt Terms and Reduced Interest Rates
With strong commitments already in place from existing investors for the impending rights issue, PharmEasy is capitalizing on this momentum to revisit its debt arrangement with Goldman Sachs. The company’s aim is to secure revised debt terms, including a potentially lowered interest rate on the remaining loan sum. Insider sources suggest that these discussions are currently underway, as reported by ET.
Ranjan Pai’s Potential Investment Adds Momentum
Industry watchers are paying close attention to the unfolding developments, as Manipal Group chairman Ranjan Pai’s potential investment injects further intrigue. Reportedly, Pai intends to invest around $160 million in PharmEasy. This investment is dependent on existing stakeholders’ involvement, including Temasek, Prosus Ventures, and CDPQ. These investors are set to lead the upcoming rights issue.
PharmEasy Debt Background and Timelines
PharmEasy initially raised the debt as part of its effort to resolve an earlier financial obligation related to its Thyrocare acquisition in 2021. The debt structured over a five-year period with an annual interest rate of 17-18%. Goldman Sachs included a covenant in the loan pact. It required PharmEasy to obtain INR 1,000 crore ($120 million) funding within a year of getting the loan. In June 2023, PharmEasy violated this covenant as it couldn’t meet the funding goal. This breach necessitated strategic action.
PharmEasy aims to repay the remaining debt by March 2025. The company is actively strengthening its financial position and adjusting its business trajectory through strategic maneuvers.
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