Thread by @agrawalmohit12

Pharmeasy IPO (API Holdings IPO)

#pharmeasy #apiholdings #pharmeasyipo

A thread on the key takeaways from DHRP .....

IPO expected in Feb 2021

investmentbank.kotak.com/downloads/api-…

The parent company of PharmEasy, API Holdings, has filed for its DRHP with SEBI on 08th Nov for a fresh issue of ₹6,250cr ($830m) value equity shares and there is no offer for sale (OFS) by the promoters.

They are also looking for a pre-IPO placement of ₹1,250 cr in this issue

Objectives of the issue
1. Repay its outstanding debt of ₹1,930cr
2. Fund organic growth initiatives ₹1,260cr (marketing and promotional activities, supply chain and ramp up technology infra)
3. Fund inorganic growth initiatives ₹1,500cr
4. Corporate purposes ₹1,560cr

Banks involved
# Kotak Mahindra
# Morgan Stanley India
# BofA Securities India
# Citigroup Global Markets India
# JM Financial

PharmEasy not just takes online orders of medicines but also offers teleconsultation, diagnostic tests & s/w services

Co-founders Siddharth, Dhaval, Dhramil, Harsh and Hardik started their journey with on-call telecon platform DialHealth in 2012, which evolved into PharmEasy

Over the last two years, the firm has made five acquisitions
- Ascent Healthcare
- Thyrocare
- Akna Medical
- Marg ERP
- Medlife

These have helped it become largest online aggregator and increase its scale in technology, Pharma distribution and Diagnostics

The increase of scale due to acquisitions is evident in the operating revenue which went up 3.5X to ₹2,335cr in FY21 from ₹667cr in FY20.

PharmEasy also benefited from the sale of medicines from its online platform during the Covid-induced lockdowns.

Key Numbers DHRP

# GMV ₹78.65 billion
# Revenue ₹43.2 billion
# Active Pharmacies 87,194
# Active wholesalers 3,261
# Prescribing doctors 4,617
# E-consultations 3.4 million
# Digital prescriptions generated 10.7 million
# Registered users on PharmEasy 2.5 crore

Naspers Ventures BV and Temasek are the largest shareholders in the company with ~12% percent and ~11% percent stakes.

While CEO Siddharth Shah has less then 2% of the shareholding

In Oct'2021, it raised ₹2,600cr ($350m) in pre-IPO round from Amansa Capital, hedge fund Janus Henderson and other investors

The round valued API Holdings at $5.4bn at a revenue multiple of 17X.

It was valued at $4bn after it acquired diagnostics chain Thyrocare for over $600m

API Holdings has a $100 Billion market opportunity

India’s digital penetration in health is at a nascent stage
- Online pharmacy at 2.3%
- Doctor consultation via online platforms at 0.8%

and is considerably lower than China (10-15%) and US (30-35%)

API Holdings generates revenue from four segments:

1. Product to retailers ₹966cr
2. Products to institutions / chemists ₹1,315cr (56% - was non-existent during FY20)
3. Sale Of Services ₹26cr
4. Other Operating Revenue ₹28cr

GMV rose by 54% to ₹7,865cr by FY21.

# Annual costs surged 2.8X in FY21
# It spent ₹1.27 to earn a ₹1 of rev, improving by 22% from ₹1.62 in FY20
# Cost of procuring grew 3.4X in line with revenues / GMV
# Employee expense grew by 1.97X reflecting acquisitions
# Sales promotion & marketing expenses remained flat

# burned more cash during FY21 as annual losses spiked by 91.3% to ₹641cr in FY21 from ₹335cr in FY20

# however EBITDA margin improved from nearly -43% in FY20 to -23% in FY21 even after increasing its operating scale >3X

# Thyrocare earnings not incl in FY21 numbers

Keys risks

# Healthcare industry in India is subject to extensive government regulation and supervision

# Faces intense competition from other online platforms, wholesalers and diagnostics companies

# Changing regulations could lead to new compliance requirements in ecommerce

Conclusions #1

# Few generic concerns which could be addressed

# “PharmEasy” brand has traction + PharmEasy is India’s top healthcare super app

# although loss making they are growing rapidly with improving bottomline

# Massive unpenetrated TAM and they are market leaders

Conclusions #2

# With few comparable listed peers makes it difficult to Value. The market has stumped people with the high valuations given to both Zomato and Nykaa, even with aggressive pricing

# It will all come down to the premium it seeks for the digital platform

Appreciate your inputs

@aditya_kondawar @AdityaD_Shah @JstInvestments
@itsTarH @Investor_Mohit @Akshat_World @KevalAshar @BahirwaniKrish @SejalSud @Longterm_wealth @WealthEnrich @AimInvestments
@Arpit1223 @indian_stockss @StocktwitsIndia
@skhetpal @Arunstockguru @ishmohit1

@abhymurarka @iramneek @nid_rockz @rohan_investor
@InvestorAyush @stockifi_Invest

@AimInvestments @REDBOXINDIA @StocktwitsIndia @Invest_books_IN @Vivek_Investor @InvestorAyush

Many thanks and glad you retweeted for helping people understand what they are buying into

Many thanks and glad you retweeted for helping people understand what they are buying into