Shares of API Holdings Ltd, the parent of online pharmacy PharmEasy, have corrected 44 percent in the unlisted market over the past three months. On February 21, API Holdings received approval from the Securities and Exchange Board of India (SEBI) to launch an initial public offering (IPO).
Shares of API Holdings started trading in the unlisted space in the first week of November at Rs 108-110 each. The shares rose to Rs 140 in a short span of time before starting to correct.
The stock then hit a low of Rs 68-70, an analyst said on the condition of anonymity. "The correction can be attributed to the fall in global and Indian new-age stocks amid rising concern on valuations," the analyst added.
PB Fintech and AGS Transact traded at Rs 1,200 and Rs 220 a share in the unlisted market before their IPOs. Their IPO prices were much lower at Rs 980 and Rs 175 apiece, respectively.
The stock is trading at around Rs 76-78 and is valued at Rs 47,565 crore ($6.35 billion), which analysts feel is still expensive. In October, the firm was reportedly valued at $5.4 billion.
‘One-way fall’
"The stock hit a record high of Rs 140, owing to huge demand which was supported by bullish market sentiment, especially in new-age stocks. With the disappointing listings and cracks in new-age stocks accompanied by a broader market correction, concerns over valuations were raised, which resulted in a one-way fall of share prices to Rs 68-70," said Manan Doshi, co-founder of unlistedarena.com, a platform that facilitates investors in pre-IPO shares.
"After the rapid correction, the shares have again started gaining momentum as the valuation has eased to a greater extent and are trading at Rs76-78 currently after receiving the nod from SEBI for an IPO, making it a hot cake in the unlisted market," Doshi added.
API Holdings filed draft papers with SEBI in November 2021 to raise Rs 6,250 crore via an IPO. Unlike other start-ups such as Zomato, Nykaa, Paytm, Policybazaar, and Delhivery, API Holdings’s IPO will consist only of a fresh issue of shares and entail no exit by investors.
Proceeds of the share sale will be used to repay debt, and fund organic and inorganic growth through acquisitions and other strategic initiatives. API Holdings is also exploring the option of a pre-IPO fundraise via private placement to the tune of Rs 1,250 crore, the share-sale prospectus said.
Digital healthcare delivery
API Holdings is a big player in India’s digital healthcare ecosystem, owning businesses and brands like Aknamed, Docon, PharmEasy, Retalio and Thyrocare.
The PharmEasy brand has a market share of over 50 percent. The firm provides digital tools and information on illness and wellness and offers teleconsultation, diagnostics and radiology tests and delivers treatment protocols, including products and devices.
The firm has reported losses in the last two years and the first quarter of the financial year 2022.
In FY21, its net loss widened to Rs 641.34 crore from Rs 335.28 crore a year ago. Net sales rose to Rs 2,335.27 crore from Rs 667.54 crore. The company’s loss before interest, tax, depreciation and amortisation widened to Rs 569.33 crore from Rs 386.21 crore.
In the three months ended June 2021, the firm reported a loss of Rs 313.89 crore on net sales of Rs 1,196.81 crore.
Siddharth Shah, Dhaval Shah, Dharmil Sheth, Harsh Parekh and Hardik Dedhia in 2015 founded PharmEasy, which they conceived as an Indian Amazon in healthcare delivery.
In June 2021, API Holdings bought listed diagnostics company Thyrocare for Rs 4,546 crore. API picked up a 66.1 percent stake in Thyrocare for Rs 1,300 a share.
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