PharmEasy parent to acquire 66% stake in Thyrocare for Rs 4,546 cr

On a buzzing pharma street and ahead of its ambitious IPO next year, this is the second deal for PharmEasy within months
In a first acquisition of a listed company by any Indian unicorn, digital healthcare startup PharmEasy’s parent API Holdings is buying a majority stake in diagnostic major Thyrocare. Announcing the Rs 4,546- crore deal, struck over masala chai at Thyrocare founder, chairman and managing director A Velumani’s Lonavala residence, API Holdings on Friday said it would pick up 66.1 per cent stake in the diagnostic firm at Rs 1,300 per share.

PharmEasy, founded in 2014 by Dharmil Sheth and Dhaval Shah, both in their early 30s, will retain the Thyrocare brand. While this gives PharmEasy a much needed offline presence in diagnostics through a network of over 3,300 collection centres, sources indicated that Thyrocare promoters looked to unlock value in the business as it did not have a clear succession plan in place.

On a buzzing pharma street and ahead of its ambitious IPO next year, this is the second deal for PharmEasy within months. In September 2020, the Competition Commission of India (CCI) had approved its acquisition of Medlife. At the time of its last fund raise earlier this month, PharmEasy was valued at around $1.8 billion. With funds from global investors including Temasek and Bessemer Venture partners, PharmEasy is often referred to as Zomato or Swiggy of the medicine world.        

Subject to regulatory approvals, API subsidiary Docon Technologies will be the acquirer and make an open offer for an additional 26 per cent stake.

The deal is at a 10.2 per cent discount to Thyrocare's closing price on Friday. The stock was up 6.23 per cent and closed at Rs 1,448.05 on the BSE. The announcement came after markets closed on Friday. There was buzz about the deal for about a week,  which may have been partly responsible for the stock's rise in recent days. From Rs 1,288 on June 18, the stock has gained 12.5 per cent, and in the month of June alone it is up 36 per cent.

Siddharth Shah (left), CEO, API Holdings, with A Velumani, CMD of Thyrocare
“We will provide world class customer experience in diagnostics, rivalling our pharmacy experience by leveraging technology, and building on top of the massive scale and truly pan-India presence of Thyrocare. It is our aim to deliver all outpatient healthcare products and services to every Indian within 24 hours,” said API Holdings CEO Siddharth Shah, an IIM Ahmedabad alumnus.

In a statement, Velumani, 62, said, “I am excited about this relationship, unique of its kind 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 the common man nationwide.’’ Nomura was the sole advisor to Velumani for the deal.

The acquisition fits well with PharmEasy, which aspires to be an all round digital health player and not just an e-pharmacy. “With Thyrocare, we will strengthen our offline presence and get more partners on board. We would like to have Dr Velumani as an advisor on board and help us navigate this journey,” said PharmEasy co-founder Dhaval Shah, a doctor with an MBA degree.

Velumani could not be reached for a comment immediately. He will be separately acquiring a minority non-controlling stake of less than 5 per cent in API as part of a series of equity investments by existing and new investors of API.

Thyrocare is the largest B2B player in the diagnostics space and has a network of over 3,330 collection centres across 2,000 towns in India.

“The acquisition of Thyrocare will give PharmEasy a unique pan India collections and labs supply chain that can be leveraged for huge online/home service demand. …It adds a very big engine to PharmEasy,” said Rajat Ranjan, executive director, Kotak Investment Banking.

PharmEasy’s parent, which is eyeing an over $1-billion IPO, is becoming the largest player in the domestic online pharmacy sector with around 2 million customers on a monthly basis. 

"PharmEasy has a large set of customers and expanding into diagnostics was natural as that is something they regularly need. It’s an exciting time for the company to get Thyrocare on board,” said Rehan Yar Khan, managing Partner at Orios Venture Partners, an early investor in PharmEasy. 

The Indian digital healthcare segment, still at a nascent stage, has seen a flurry of activities in the recent past. Earlier this week, Apollo created the country’s largest omnichannel digital health platform by merging its online and offline pharmacy businesses (excluding hospital pharmacies) and telemedicine verticals into a single entity called Apollo HealthCo. While Tata Digital, a 100 per cent subsidiary of Tata Sons, acquired 60 per cent stake in 1mg earlier this month in a deal size valued at $270 million, Mukesh Ambani-led Reliance Industries had last year acquired 60 per cent stake in online pharmacy Netmeds for Rs 620 crore. 

According to a RedSeer report, India’s e-health sector touched about $1.4 billion GMV in 2020 and is expected to grow around 10 times in about five years.

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