PharmEasy opens up quicker public listing options with its acquisition of Thyrocare

• This is the first time in Indian history, a startup has acquired a publicly listed company.
• PharmEasy has been valued at $4 billion after this acquisition, given its performance over the last year.
• The company will be looking at dual listing or reverse listing options with Thyrocare.

Mumbai-based PharmEasy, run by API Holdings, has been hitting one milestone after another this year. First, it became the first e-pharmacy unicorn of India and then by merging with rival Medlife to build a consolidated platform. But the third announcement is the one where PharmEasy has created history by acquiring Thyrocare, a chain of diagnostic and preventive care laboratories.

This is the first time in Indian corporate history, a startup has acquired a publicly listed company. The duo is yet to figure out the corporate structure of Thyrocare after the acquisition. However, it is clear that PharmEasy is going to be a promoter of the 25-year-old company.

Founded by Dharmil Sheth, Dhaval Shah, Harsh Parekh, Hardik Dedhia, and Siddharth Shah, PharmEasy caters to the chronic care segment and offers a range of services such as teleconsultation, medicine deliveries, and sample collections for diagnostic tests. It also operates a business-to-business (B2B) pharma marketplace with over 6,000 consultation clinics with 90,000 partner retailers pan India.

PharmEasy has acquired about 66.1% stake in A Velumani-led Thyrocare Technologies for ₹4,546 crore ($612 million). The e-pharmacy startup has paid about ₹1,300 per share. It is also looking to acquire an additional 26% stake through an open offer. Once successful, PharmEasy can own anywhere between 66%- 92%.

Doors open for PharmEasy’s initial public offering (IPO)

This acquisition has also opened doors for the listing of PharmEasy’s parent company API Holdings on the bourses as well.

Commenting on this deal, PharmEasy’s chief executive officer (CEO) and cofounder Siddharth Shah told Business Insider, “It's an epochal moment in Indian startup ecosystem where a unicorn, for the first time in India, is acquiring or becoming a promoter of a listed entity of this scale and size... I think there are lots of smart board members, who have a lot of wisdom, and advisors will figure out what is the right corporate structure [of Thyrocare, after the acquisition].”

“Should we merge or demarge? [Consider] dual listing or reverse listing, right?. I think some of those things we'll figure out along the way,” he added.

Dual listing is a corporate structure in which two companies function as a single operating business through a legal equalisation agreement. A reverse listing or initial public offering (IPO) is the acquisition of a private company by an existing public company, so that the private company can bypass the lengthy and complex process of going public.

According to a media report published last month, PharmEasy is looking to hit the public markets by financial year 2022 to raise $1.2 billion. It has also shortlisted Morgan Stanley and Kotak Mahindra Capital as advisors for the IPO process.

How does Thyrocare fit into PharmEasy’s business model?

In a filing with the BSE, Thyrocare has disclosed that API Holdings intends to raise another funding round, where it may sell about 4.9% stake to Thyrocare’s promoter and founder Velumani for about $202 million. This will imply a valuation of over $4 billion for the startup.

Shah has confirmed the valuation, saying that seven marquee institutions-- including Naspers, Temasek, Think Capital, B Capital, Kora Capital, and TPG Group -- have valued the company at $4 billion after the acquisition due to its performance over the last year.

The acquisition of Thyrocare is a part of PharmEasy’s vision to build an end-to-end healthcare platform from a customer’s point of view. “You don't have to run to somebody for medicine, somebody for devices, somebody for lifestyle, somebody for consultation, and somebody for a test,” Shah added.

He further added that the company has already built its diagnostics business vertically through pilots and acquisition of Medlife. “But what we required was something which will match the pace and scale of our ambitions and Thyrocare fits in right there. Thyrocare today is the largest lab in India in terms of volumes, which has a network of 4500 partners across the length and breadth of the country. 70% percent of India's population can get a diagnostic test done within 24 hours,” Shah told Business Insider.

“I am excited about this relationship, unique of its kind [sic] in Indian healthcare industry. The unique reach and strength of Thyrocare in diagnostics blended with the young and dynamic team of PharmEasy will bring in better healthcare solutions for common man nationwide,” Velumani, chairman and managing director of Thyrocare said in a statement. The 25-year-old company operates a network of over 3,330 collection centres in over 2,000 towns in India.

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