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PharmEasy may have to rework IPO valuation as the mood sours, Retail News, ET Retail

PharmEasy may have to rework IPO valuation as the mood soursAs new-age companies feel the pressure of broader market rout, online pharmacy PharmEasy may have to readjust its valuation it was aiming for through a public offering, according to industry sources.

In what could be an indication of the same, in the grey market, its shares are currently being traded anywhere between Rs 70 and Rs 80, significantly lower than over Rs 100 earlier this year, according to people aware of the matter. PharmEasy parent API Holdings is yet to get final clearance from Sebi on its IPO and is also reconsidering its IPO launch time. Unlike Delhivery and Oyo Hotels & Homes, its IPO is fully through primary share sale and doesn’t have an OFS (offer for sale) component. It filed the draft IPO papers in November to raise Rs 6,250 crore by issuing only new shares.

PharmEasy was last valued at $5.4 billion and was aiming at an IPO valuation of around $7-8 billion. “It (grey market pricing) signals the current nervousness on tech IPOs and valuations. Before Paytm IPO, PharmEasy’s secondary shares were available at Rs 120-130 as well,” one of the people directly aware of the grey market pricing of the company said. Another person aware of PharmEasy’s plans also said the grey market pricing has been fluctuating and does not indicate the full picture of a company’s valuation.

ET reported on February 10 that Oyo is considering to cut its IPO size and is likely to reconsider its valuation in the proposed IPO. It had planned for a valuation in the range of $9-12 billion but it might settle at around $7 billion. No final decision has been taken on pricing of its IPO as it awaits the final nod from Sebi.

“They (PharmEasy) continue to be in talks with marquee investors for anchor slots. Now, at what price it happens remains to be seen but there is of course a correction in tech stock,” another person aware of PharmEasy’s plans said.

When contacted, PharmEasy cofounder and CEO Siddharth Shah declined to comment on the matter.

All said, PharmEasy is yet to get Sebi’s nod for its proposed IPO. “They (PharmEasy) will only finalise pricing after the nod,” one of the sources said, adding that the firm is expecting the clearance this month. Even then, the issue launch is likely to be moved to next financial year. It was planning to list on Indian bourses within this financial year.

A recent report from Bernstein Research showed PharmEasy has the lion’s share in online pharmacy GMV (gross merchandise value) with a 50% share compared to Tata-owned 1mg having 16% share and Reliance Industries’ Netmeds with 15% share. ” Market leadership in both epharmacy and diagnostics augurs well for the future. The evolving market structure with entry of horizontals like Reliance, Tata and Flipkart is a concern but we are positive about API Holdings retaining dominant market share,” the Bernstein report noted.

Epharmacy GMV for PharmEasy is estimated to be $1 billion by FY25 , which would be a 25% market share based on the estimates of the overall epharmacy market to be $4 billion in the same time frame.

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