Medlife has been looking to raise $100-150 million in growth capital for over a year but has not found an investor.
Online pharmacy startup PharmEasy is in talks to acquire smaller rival Medlife for about $200 million, a move aimed at consolidating its top position in a hotly contested market, sources said.
Bengaluru-based Medlife has been looking to raise $100-150 million in growth capital for over a year but has not found an investor, two people aware of the development said, requesting not to be identified.
The coronavirus outbreak has given online pharmacies a shot in the arm but positive unit economics remains a challenge.
“PharmEasy is probably the best candidate to acquire Medlife. They have the capital, can raise some more if needed, and see this as a long-term business,” said a person close to the talks on condition of anonymity.
Both companies didn’t respond to Moneycontrol’s emails seeking their comments.
Founded by Tushar Kumar and Prashant Singh in 2014, Medlife provides medicines, health products, doctor consultations and tests on its website and app.
It has not raised any external venture funding so far--an anomaly in the sector--and has been supported by co-founder Kumar’s trust.
Kumar’s father Prabhat Narain Singh is one of the founders of Alkem Laboratories, one of India’s largest pharmaceutical companies.
PharmEasy, run by 91Streets Media and Technologies Pvt Ltd, is the market leader and the most well-capitalised player in the sector.
It raised $220 million in a funding round late 2019, led by Singapore’s sovereign fund Temasek and Canadian pension fund CDPQ, among others. It was valued at about $700 million.
For FY19, Medlife’s revenue grew 165 percent to Rs 363 crore but its losses also climbed to Rs 404 crore, according to media reports.
PharmEasy’s FY19 numbers were not available but a source pegged revenue at over Rs 400 crore.
Sources said talks are still ongoing and the terms of the deal could change.
Selling to PharmEasy would be the last option for Medlife, which in August 2019 appointed Ananth Narayanan as the chief executive officer. Narayanan was earlier the CEO of online fashion retailer Myntra,
It is not unknown what his role would be if PharmEasy acquires Medlife.
PharmEasy was founded in 2015 by Dhaval Shah and Dharmil Sheth. Its investors include Eight Roads Ventures, Nandan Nilekani-backed Fundamentum, and Swiss firm LGT.
Investors have been expecting online pharmacies to consolidate into one or two big players, given the low margins in medicine retailing and additional services such as diagnostics and doctor consultation not taking off.
For most of the epharmacy players--PharmEasy, 1mg, Netmeds and Medlife--these ancillary services do not contribute more than 10-15 percent to the revenue, though the unit economics in these services is better.Medlife had in May 2019 acquired Myra, another fledgling epharmacy that was backed by top venture firm Matrix Partners.