Goldman may convert a portion of its debt to stock in PharmEasy

30 Aug 2023 , 01:17 PM

Following the forthcoming rights issue of roughly $424 million (Rs 3,500 crore) by the online pharmacy that is scheduled to open on September 4, news reports said Goldman Sachs is expected to convert a portion of the loan it advanced to PharmEasy into stock.

Goldman, which provided PharmEasy with a $300 million loan, is negotiating to convert about $38 to 40 million in debt into equity. The e-pharmacy will probably be valued at $500–600 million after the rights issue. Compared to its peak valuation of $5.6 billion in 2021, this is much less.

PharmEasy is reworking the debt agreement with Goldman and negotiating for a reduced interest rate on the entire loan as a result of legally binding promises from current investors in the rights offering. ‘The liquidity position of the company is looking stronger than it did six months ago, and the rights offer is expected to begin on September 4 based on commitment from existing investors. As a result, there have been talks about revising debt conditions and converting to equity, according to news reports.

According to news reports, PharmEasy, which also controls the diagnostics company Thyrocare, will probably repay Goldman’s debt of between $100 and $150 million after the rights offering. PharmEasy currently owes Rs 30 crore (about $3.6 million) in quarterly interest payments.

Reports continued, ‘It (payback amount) could even reach $200 million depending on how much money arrives from existing investors and then the remaining money will be from Ranjan Pai, chairman of Manipal Group.

By March 2025, PharmEasy should have paid off the remaining debt.

According to a report by ET, Pai is anticipated to spend up to $160 million (Rs 1,300 crore) in the e-pharmacy, with existing investors Temasek, Prosus Ventures, CDPQ, and others likely to take the lead in raising money through a rights issue. The amount of capital ultimately invested by current shareholders will determine how much Pai invests in PharmEasy.

PharmEasy’s spokeswoman declined to comment, and Goldman Sachs did not respond to an email addressed to them.

Shareholders can buy more shares through a rights issue. Additionally, current investors will have the choice to contribute more than their pro-rata or proportional entitlement.

According to Tracxn, a data platform for privately held firms, Prosus Ventures owned 13.1% of API Holdings as of November 2021, while Temasek held 11.8%, TPG Growth 7.2%, and CDPQ 4.5%. API Holdings is the parent company of PharmEasy. Manipal Hospitals, a subsidiary of the Manipal Group, is also backed by TPG and Temasek.

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