Exclusive | Manipal Group to lead Rs 2,500 crore investment in PharmEasy at massive drop in valuation: Sources

The entry of Manipal Group as a strategic investor could bring both capital infusion and valuable expertise to API Holdings as it gets a board seat, experts said.

A Manipal Group family office has expressed interest in investing about Rs 1,000 crore for an 18 percent stake (post-money valuation) in API Holdings, the owner of online pharmacy PharmEasy and promoter of Thyrocare, people aware of the matter said.

API Holding is in talks to raise funds to repay debt raised from Goldman Sachs. Exclusive details obtained by Moneycontrol reveal that API Holdings pledged Thyrocare shares as collateral for the debt.

Existing investors of API Holdings are expected to contribute Rs 1,500 crore in the funding round led by the Manipal Group.

As part of the potential investment, the Manipal Group family office may also secure a board seat at API Holdings and become its single largest shareholder.

The valuation of API Holdings for this funding round is estimated at about Rs 6,000 crore ($730 million). Experts said funding would solve many issues at PharmEasy, but a substantial drop in valuation from $2.8 billion is a massive markdown and signals difficult times for the digital commerce companies.

The fundraising comes at a crucial time for API Holdings, which is trying to strengthen its financial position and is under pressure to repay the debt of Rs 2,500 crore.

Debt covenant

“API Holdings needs to repay debt since it has breached debt covenants and lenders can invoke pledged shares,” people with direct knowledge of the matter said on condition of anonymity.

Thyrocare promoter entity Docon Technologies owns 71 percent in Thyrocare and pledged its entire shareholding to lenders.

API Holdings did not respond to queries seeking comment on the fundraising. The Manipal Group family office said it had no comment, and a Goldman Sachs spokesperson declined to comment.

Top private equity firms Temasek and TPG Capital also have an important role to play in stitching this deal, the people said. Both the marquee funds are common investors in the Manipal Group’s healthcare business and in API Holdings and are likely to infuse more funds in this round. Temasek and TPG did not offer any comment.

The entry of Manipal Group as a strategic investor could bring both capital infusion and valuable expertise to API Holdings as it gets a board seat, experts said. This investment is from a family office of the group and is not related to Manipal Health, which is owned by Temasek and has TPG as a large investor.

Industry watchers say that this deal solves for many issues at PharmEasy but a substantial drop in valuation from $5.6 billion (Rs 44,800 crore) to around Rs 6,000 crore ($750 million) is a massive mark down and signals difficult times ahead for the digital commerce companies, especially in the telemedicine space, going forward.

To be sure, Pharmeasy's valuation has come under pressure in the last six months. US-based asset management companies (AMCs) Janus Henderson and Neuberger Berman, who hold small stakes in API Holdings, had internally marked down the fair value of the company. Janus, as of March 31, had slashed the fair value of Pharmeasy to $2.7 billion, while Neuberger had cut it to $4.4 billion.