Why did PharmEasy withdraw its IPO?

24 Aug 2022 , 02:43 PM

PharmEasy’s parent company API Holdings has given market conditions and strategic considerations as reasons for the decision to withdraw its IPO. The company’s management probably thought that given the weak market conditions its IPO may not see strong demand at the valiuation it is seeking.

Investors’ desire for upstart companies, that are finding it difficult to achieve profitability and positive cash flows from operations, has weakened in the post pandemic scenario. The economic devastation caused by Covid restrictions has dried capital flows into upstarts. Investments in upstarts and their shares carry much higher risks. And in this atmosphere of uncertainty, risk appetite of investors has gone down considerably. A number of upstart companies in India and around the world have already filed for bankruptcy protection.

PharmEasy will now raise money through a rights issue. In a rights issue money is raised from existing investors by issuing more shares to them. PharmEasy needs capital for paying some of its existing debt. Its outstanding debt currently stands at around Rs 1929 crore. It also needs capital for further growth of its business. In 2020-21 net loss of PharmEasy was Rs 641 crore. In 2019-20 its net loss was Rs 335.28 crore. Revenue of the company in 2020-21 increased to Rs 2360.66 crore from Rs 737.47 crore in 2019-20.

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