Reliance Industries (RIL) said on August 18 that it acquired 60 percent stake in online pharmacy Netmeds for Rs 620 crore in a deal that pits India’s largest company directly against e-commerce giant Amazon in a hotly contested space. The deal values Netmeds around Rs 1,000 crore.
The acquisition gives RIL’s retail unit Reliance Retail entry into a vertical e-commerce space, one of the few that has soared during the COVID-19 pandemic, in addition to its online grocery platform JioMart.
Founded by Pradeep Dadha, Netmeds currently delivers medicines, personal and baby care items, and provides doctor bookings and diagnostics on its website and app. It has been looking for a buyer for nearly a year now, after it was unable to raise a large round of funding.
Its investors include Singapore-based Daun Penh Cambodia Group, Sistema Asia Fund, Tanncam Investment and healthcare-focused investment firm OrbiMed.
Isha Ambani, Director, Reliance Retail Ventures, said in a statement, “The addition of Netmeds enhances Reliance Retail’s ability to provide good quality and affordable healthcare products and services, and also broadens its digital commerce proposition to include most daily essential needs of consumers.”
A scrum of startups have fiercely fought in e-pharmacies for a few years now on the thesis that delivering medicines for chronic illnesses regularly could be a springboard to becoming a large internet company. Netmeds, PharmEasy, Medlife, 1mg, etc have been jostling for space. However, margins in medicine delivery are minimal, and investors will not fund money-losing startups unless they are market leaders.
The pandemic however turned this notion on its head. The segment has benefited from many first-time customers flocking to these apps as they were forced to order medicines from home during lockdown. Moneycontrol reported on August 7 that these apps have seen orders surge 50 percent and taken the sector forward by two years in the last three months.
According to people close to the deal, although RIL was eyeing the sector, and Netmeds, even before the pandemic hit, the lockdown helped close the deal, find the right valuation and proved the business thesis.
Last week, Amazon India rolled out its e-pharmacy service in Bengaluru, with plans to launch in the rest of the country soon.
The entry of these conglomerates, to some extent, gives the sector long-term prospects. Barring PharmEasy, every other startup in the sector has been battling for survival, struggling to raise funds and been eyeing mergers with larger rivals.
“It is a good outcome for both sides. Netmeds needed to survive and find a home. RIL wanted to enter the sector, but not pay a very high tech-style valuation,” said an investor in the space, requesting anonymity.
The deal fuels Jio’s desire to have a full-fledged ecommerce platform, delivering goods of all kinds. Acquiring distressed startups has been a step in this direction. It is reportedly in talks to acquire online furniture startup Urban Ladder, online lingerie retailer Zivame and online milk delivery startup Milkbasket.Disclaimer: Reliance Industries (RIL), which also controls Jio Platforms, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments which publishes Moneycontrol.