PharmEasy parent recalls draft IPO papers, weighs rights issue to raise funds

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API Holdings, the parent entity of PharmEasy, on August 20 announced the  withdrawal of the draft red herring prospectus (DRHP) submitted for an initial public offering (IPO).

The pre-IPO draft papers, which were filed on November 9 last year, are being withdrawn due to "market conditions and strategic considerations", the company said in a notice.

API Holdings noted that the company is committed to its growth and expansion plans, and is considering to raise funds via a "rights issue".

"Shareholders of the company will receive the letter of offer inviting them to participate in the rights issue on the terms which will be approved by the board," it said.

The type of instrument to be used for the fund raise will be compulsory convertible preference shares (CCPS), and the issue price is "expected to be around Rs 100 per CCPS", the PharmEasy owner added.

"The rights issue will be open for a period of 30 days, starting from on or around the first week of September," it further said.

API Holdings, in the now-withdrawn DRHP for an IPO filed last year, had stated an intent to raise Rs 6,250 crore via fresh equity issuance. The targeted amount was to be used for addressing an outstanding debt of Rs 1,929 crore, fund organic growth initiatives aggregating to Rs 1,259 crore, pursue inorganic growth through acquisitions and other strategic initiatives totalling Rs 1,500 crore.

The notice announcing the withdrawal of IPO DRHP comes around a month after a Reuters report, citing sources, claimed that PharmEasy is in talks with investors to raise $200 million, but at a valuation that could be 15 percent or even 25 percent lower than last year's $5.1 billion.

PharmEasy's planned fund raising will see participation from some existing investors, who have indicated they will commit about $115 million in the new round, one of the sources who spoke to the news agency had claimed.

Last year, Indian startups raised a record $35 billion in private funding and many internet companies went public. PharmEasy, too, cashed in on the boom raised a total of $1.89 billion since 2015, with most of it coming in the last two years, data from Pitchbook shows.

(With Reuters inputs)