Indian drug and medical services platform PharmEasy is in talks to raise Rs 2500 crore ($304 million) from Manipal Group and other existing investors, to repay its debt, MoneyControl reported on Wednesday.
Manipal Group has expressed interest in investing about Rs 1000 crore for an 18% stake (post-money valuation) in the company, the report added. Separately, existing investors of the company are expected to contribute about Rs 1500 crore in the funding round led by Manipal Group.
The company did not immediately respond to a request for comment by DealStreetAsia.
The fundraising talks come following reports that PharmEasy has breached its loan covenant terms with Goldman Sachs after failing to raise equity.
Economic Times reported in June that the company was supposed to raise equity of around Rs 1,000 crore, or about $120 million, linked to its burn rate velocity, within a year of taking the loan. It has failed to do that after trying for a year and postponed its initial public offering (IPO). However, PharmEasy has not defaulted on any of its payment obligations so far, according to the report.
The terms of the covenant agreement allow the US investment bank to potentially take over the entire company or its most profitable arm Thyrocare on account of the breach as all the assets of PharmEasy’s parent API Holdings have been used as security for the loan, people cited in the report said.
Negotiations are currently going on to either restructure the debt or raise equity from existing or new investors and rectify the violation, the report added.
PharmEasy had reportedly borrowed $285 million, from Goldman Sachs in August last year to pay off an earlier debt it had incurred from Kotak Mahindra Bank to buy Thyrocare. It was a five-year loan attracting a 17-18% annual interest rate.
In August last year, the company had said it was planning to raise funds from existing shareholders via a rights issue after it withdrew the draft red herring prospectus (DRHP) to float its IPO to raise about Rs3,000-3,700 crore, citing “market conditions and strategic considerations”.
Subsequently, in November, the startup raised an undisclosed amount in debt from the growth-stage financing platform EvolutionX Debt Capital.
PharmEasy, backed by investors such as Temasek, B Capital, Prosus, Steadview Capital, and Nandan Nilekani’s Fundamentum Partnership among others, has raised a total investment of more than $1.12 billion across 16 funding rounds since its launch in 2014. It was last valued at over $5 billion, when it raised funds in October 2021.
For the year ended 2022, PharmEasy’s annual losses widened 4.3 times to Rs 2,731 crore. Its cash outflows from operations also surged 3.2x to Rs 2,589 crore in FY22, according to Entrackr. Earlier this year, the company’s chief financial officer (CFO) Chebolu V Ram quit his role to join healthcare supply chain services firm Entero Healthcare.
In June, DealStreetAsia exclusively reported that PharmEasy laid off employees as the startup was struggling to raise funds amid a slowdown. While the total number of employees affected by the downsizing exercise could not be determined, sources said the company has been laying off employees across departments ranging from logistics, procurement, operations, sales, design and technology.