OBJECTS OF THE OFFER :
The offer comprises of a fresh issue amounting to ₹ 62,500mn. Out of which ₹19,290mn. would be used for prepayment or repayment of the borrowings, ₹12,590mn would be used for funding their organic growth initiatives, ₹15,000mn would be used for funding inorganic growth through acquisitions and other strategic initiatives and the balance amount is attributable to general corporate purposes.
PHARMEASY IPO ANALYSIS
CONSISTENT TRACK RECORD OF FINANCIAL PERFORMANCE:
Company has seen significant growth in its revenue in FY21, rising from ₹ 6,675.42mn in FY20 to ₹23,352.69mn in FY21. The resilient performance in the revenue came due to significant demand surge for the medicinal products during the COVID-19 pandemic. The company was able to reduce its EBITDA margin loss from (54.3)% in FY20 to (21.9)% in FY21. However, the company’s loss has increased from ₹ (3,352.79)mn in FY20 to ₹ (6,413.36)mn in FY21.
CONSOLIDATED FINANCIAL SUMMARY OF PHARMEASY
|(`₹ in millions)
|Revenue from Operations
|Adjusted EBITDA Margin (%)
|LPS (FV 10)
COMPETITIVE ANALYSIS: MARKET PEERS
Pharmeasy, India's largest digital healthcare platform based on GMV, is all set to make it debut on the stock exchanges. There are many existing businesses within the listed space that are making a foray into digital healthcare. Here's a look at Pharmeasy's peers in the stock markets.
|₹ 7,877 crore
|SBI Life Insurance
|₹ 1,073 crore
INTEGRATED BUSINESS MODEL WITH STAKEHOLDER RELATIONSHIPS
Through API Holdings Limited’s full stack connected presence across the healthcare value chain, they have entered into relationships with stakeholders across the value chain leading to network effects. The company’s value proposition for all stakeholders creates multiple self-reinforcing flywheels. Across their platform, they service 3,261 wholesalers, 87,194 pharmacies, and 4,617 prescribing doctors and clinics and 926 hospitals. PharmEasy marketplace had 25 million registered users. The scale of their platform, the breadth of their relationships with other stakeholders, and the company’s expandable tech-ops infrastructure enable them to scale rapidly. Through an expansive service offering on PharmEasy marketplace, consumers who avail their teleconsultation services are able to fulfil their prescriptions through the PharmEasy marketplace, while users on the PharmEasy marketplace are also potential customers for teleconsultations and diagnostic test services. API Holding Limited seek to leverage their connected platforms and user experience to migrate users to more expansive healthcare services such as chronic disease management and diagnostics.
RECOGNIZED PHARMEASY BRAND
API Holdings owns the PharmEasy brand, which is a recognized consumer healthcare brand across the length and breadth of India. As per RedSeer Report, PharmEasy is India's largest digital brand for the sale of pharma products and healthcare services, in terms of GMV of products and services sold on the marketplace. The company believes that the PharmEasy brand has a strong recall across all customer demographics and stands out in a sector that is constrained in its ability to create strong and empathetic consumer facing healthcare brands. They have licensed the “PharmEasy” brand to Axelia, which operates the PharmEasy marketplace in India. They also license the “PharmEasy” brand name and provide franchisor services, such as fulfilment, marketing and digital enablement for franchisee owned and operated offline pharmacies.
TECHNOLOGY DRIVEN APPROACH
API Holdings has built a technology and data driven platform that seeks to solve for multiple problems across the healthcare value chain in India. Also, while their product development has been effortful, their open architecture and modern API connectors ensure easy and seamless integration with all their partners’ systems. The company leverages modern technologies, such as J2EE, LAMP, MEAN stacks along with new age programming constructs. Over the years, they have also developed multiple custom algorithms including AI/ML techniques, data science models, and specialized workflows to support their business as well as enhance their capabilities. As a result of their coverage across the healthcare supply chain and traffic on their platforms, they also accumulate substantial data. Their analytics capabilities that drive real time insights from this data, enable the company to assist their stakeholders and help them better understand market demand and supply trends and to optimise their decision making. The company endeavour to attract new participants to their platforms, given these benefits, while successfully retaining existing ones.
TRACK RECORD OF ACQUIRING AND INTEGRATING BUSINESSES
API Holdings has a demonstrated record in acquiring and integrating companies, teams and business models over the last few years. Their management team has undertaken significant acquisitions in the last two years. The company has a dedicated M&A team that evaluates opportunities in the fragmented Indian healthcare market on a regular basis. Through acquiring both synergistic and complementary businesses, they have sought to consolidate a fragmented market, increase their scale, enhance their capabilities and expand into adjacencies. This has enabled the company to further increase value for their stakeholders across the healthcare ecosystem.
SCALED SUPPLY CHAIN CAPABILITIES
API Holdings has an expansive pan-India supply chain infrastructure inclusive of 82 warehouses, 10,886 warehousing personnel, and cumulative warehousing space of 699,000 sq.ft. This infrastructure currently undertakes 76,000 deliveries daily. They also have 1,879 last-mile delivery partners. 84.7% of the deliveries were made within 24 hours for metro cities. Their supply chain capabilities deliver operational efficiencies, lower delivery timelines and increasing asset turnover ratios for their partners while continuing to deliver a superior customer experience. They focus on providing real-time visibility into granular supply and demand patterns to their stakeholders across the healthcare value chain, along with insights and intelligence using advanced AI/ML techniques, operating on millions of data points and real world signals such as purchases across retail points, distribution supplies and availability across locations, location wise prescriptions details. They process real-time inputs from their delivery partners, delivery hubs, and first-mile, middle-mile and last-mile segments of the physical supply-chain to present a dynamic and live view of their logistics network, and its state. Utilizing the data from these different sections of the delivery supply-chain, their proprietary algorithms predict delivery timeframes for the incoming orders.
RESILIENT BUSINESS MODEL WITH SCALE AND IMPROVING FINANCIAL METRICS
API Holdings has successfully demonstrated consistent growth in scale across their businesses, which has enabled them to improve operating leverage and in turn improve the profitability profile. The company had Pro Forma GMV of ₹78,654.84mn in Fiscal 2021. Their revenue from operations grew by 249.8% to ₹23,352.69mn in Fiscal 2021 from ₹6,675.42mn. The company has also been able to demonstrate improving cost efficiencies and operating leverage in their business. Their EBITDA losses have also improved from (57.9)% in Fiscal 2020 to (24.4)% in Fiscal 2021. The resilience of their business model is demonstrated by their performance during the COVID-19 pandemic when most of the Indian pharma supply chain came to a standstill for several months. Most of their partner retailers and wholesalers, however, were able to come back into active business in fewer than three weeks. They were able to cater to significant demand surge during COVID-19 pandemic. The PharmEasy marketplace also significantly grew it’s network and scale as marketplace increased from 1.8 million in the three months to 2.6 million as customers moved to safeguard health for themselves and their families, and it served 18,587 pin codes.
Maintaining brand image and reputation is very important for the sustainability of the company
Company have had negative cashflows and incurred losses in the past and can continue to incur in future
Significant expansion of portfolio, private label and service offerings will support the company’s future growth
Strategic acquisitions for expanding the existing product line and entering new geographies can significantly contribute towards the growth of the business
Development of all-in-one healthcare platform can cater to all the customer’s need
Changes in laws and regulations in the E-commerce space can hamper the business.
Compliance requirement related to healthcare can affect the business.
High dependency on customer’s engagement for the digital platform.
Failing to maintain technology infrastructure can materially affect the business
STRATEGIES GOING FORWARD:
TO BUILD AN INTEGRATED ALL-IN-ONE HEALTHCARE PLATFORM
API Holdings Limited believes that connecting different parts of the healthcare ecosystem is central to creating value for all stakeholders. The company will continue to invest in processes, technologies and people to progressively create a more connected and integrated platform. While they already offer a wide range of products and services, the company sees vast potential of greater integration across both their own offerings and with the rest of the healthcare industry, using the data & technology stack. They will operationalize this strategy by further building new use cases and user-friendly tech layers over physical and manual layers, and enabling platform-wide access to aggregate data and insights. Their platform model will lead to lower operating costs and therefore improving operating margins.
FURTHER DEVELOP CUSTOM BUILT HEALTHCARE-FIRST SUPPLY CHAIN
API Holdings Limited intends to innovate and push boundaries on service level standards that they deliver to the customers, even as their platform grows in scale. They believe that their supply chain capabilities would need to lead any such change and further evolve in sophistication. The company will invest time, effort, and capital in a sustained manner to optimize their operations for reliability, speed, and accuracy across the country. They also expect that their supply chain could be the ‘source’ of platform wide innovations. They may plan to monetize Docon’s strong customer base of pediatrician doctors by leveraging their medical cold-chain infrastructure to become a pan-India one-stop-shop for pediatric vaccines, medicines for mothers and babies, and diagnostic tests (through Thyrocare).
STRIVE TO BE THE TRUSTED PARTNER-OF-CHOICE FOR STAKEHOLDERS
It is important to API Holdings that stakeholders across the healthcare value chain consider API Holdings and its constituents as a trusted, fair and honorable partner. Their Founders are focused on building strong, long-term relationships with their partners. They believe that the reputation and past performance as a partner allows the company to attract new enquiries for business collaborations, JVs, and M&As, among others. They intend to continue to grow and nurture their network of relationships with doctors, clinics, hospitals, pharmacies, pharmaceutical companies, wholesalers, diagnostic labs, investors, and healthcare entrepreneurs, among others. This would primarily be driven by demonstrating the company’s value proposition to existing and prospective partners, while offering them the products and services that best suit their own unique requirements.
FOCUS ON ‘OUTCOME ORIENTATION’ OVER ‘TRANSACTION ORIENTATION’ FOR END CUSTOMERS
API Holdings Limited continues to build their integrated healthcare platform, supply chain, and stakeholder relationships, they believe that the company should also focus on trying to improve eventual health outcomes for patients. They intend to create solutions, platforms and tools that both improve medical decision making but also adherence to those decisions. Given their cross-platform capabilities, they are running multiple pilots geared towards potentially improving protocol adherence, monitoring, information and support access via communities, and intuitive patient-doctor communication. For instance, they may also plan to pilot a chronic disease management program in therapies such as Oncology by cross leveraging Aknamed and Thyrocare.
PURSUE STRATEGIC INVESTMENTS AND ACQUISITIONS
API Holdings Limited intends to continue to pursue thoughtful strategic investments and acquisitions which are complementary to their businesses. Such efforts will be focused on increasing their scale, deepening the presence in certain geographies, enabling access to financial services, expanding their nascent private label portfolio and acquiring capabilities, including technology, to enhance their offerings. Given that the company’s various businesses are at varying stages of their growth and maturity cycle, their investments and acquisitions may also span a wide range of transaction types.
CONSTANTLY INNOVATE TO DELIVER EXCELLENT CUSTOMER EXPERIENCE
API Holdings Limited believes that well designed digitally powered products and services are crucial to driving pan-ecosystem habit formation and adoption of their offerings. To this end, the company shall continue to constantly innovate to build new solutions and attempt to deliver excellent customer experience for all their customers. At the same time, they shall endeavour to raise the overall bar of customer expectations from them for service quality, product pricing, fill rates, turnaround times, convenience, usability, and personalization. For instance, they may create a cashless, affordable, and channel agnostic insurance-like offering, for customers to seamlessly access primary OPD healthcare infrastructure across the country. The company intends to build a platform in a manner that every single customer is able to harness the technology and data insights of the entire platform in a uniquely personalized way. This may ensure that customers choose API Holdings Limited to serve them when in need.
FURTHER EXPAND THE PRODUCT PORTFOLIO, PRIVATE LABEL AND SERVICE OFFERINGS
The growth of API Holdings Limited platform is envisioned along multiple dimensions more stakeholders, more customers, more use-cases, more products, more services, and higher frequency. While they enhance the capabilities, they would also significantly broaden the range. Some of the offerings that are currently envisaged are developing and marketing their private label, distribution of vaccines, and greater integration of e-diagnostics with digital consultations. The ecosystem wide granular data insights also enable the company to partner with pharma and other companies to support with their new product launches; they have already run pilots with a few leading Indian pharma companies. In the future, API Holdings Limited may also license out PharmEasy brand for newer use cases.
TECHNOLOGY AND INFRASTRUCTURE
API Holdings Limited’s technology platform has been designed using scalable cloud-based technology architecture. This not only makes their offerings highly resilient to common infrastructure failures, but also allows them to build a highly elastic infrastructure that can grow and shrink in real time according to the business demand cycles rather than having a rigid and fixed infrastructure. This enables their business to scale quickly according to the changing market situations as well as limits their exposure to fixed costs of infrastructure and related maintenance.
Disclaimer - The content on this page is made available on the basis of the DRHP (draft red herring prospectus ) filed by API holdings Limited. The final content could change based on the Red Herring Prospectus (RHP) filed