Why Ashneer Grover calls PharmEasy Funding Round as “Sudden Death”?

Are you aware of the latest news surrounding PharmEasy, a company that was previously valued at $5 billion? What led to PharmEasy’s decision to undergo a down round? How will this impact its franchise owners? What’s all happening in PharmEasy Funding round?

Are you a current PharmEasy franchise owner or a pharmaceutical enthusiast interested in partnering with PharmEasy? Hold on, you may need to read this informative article that offers a comprehensive overview of PharmEasy’s ongoing funding round and the potential impact it may have on existing franchise owners.

• PharmEasy, once valued at $5 Billion is planning for latest funding round and cut down its valuation to more than 90%.
• The investment($300 million) will be utilized for repayment of its debt($285 Million), which was raised last year to acquire thyrocare.
• ‘Down Round + Anti-Dilutive Clause = Sudden Death (Jhatka) for the Founders!’ – Ashneer Grover Said

What is PharmEasy | PharmEasy Funding Round

PharmEasy is one of India’s popular and leading healthcare platforms that has emerged as a prominent brand in the healthcare industry. Talking about its foundation, the chain was established in 2014 by Dharmil Sheth and Dhaval Shah in 2014, who shared the aim to transform complete pharmacy and medical industry into a much reliable, transparent, and affordable systems.

They also succeeded in the process who went on to open more than 250 stores across 30 cities within its 8 years of operation. The franchise has got reputation for serving a diverse range of OTC pharmaceutical prescription healthcare products through retail channel and online platform.

Why did PharmEasy’s new funding round suddenly come into the spotlight?

PharmEasy’ latest funding round

Citing the report published by leading startup, TechCrunch, PharmEasy, which was once valued at US$5 Billion is now planning to raise a fresh fund of about $300 million. This new funding round reflects a significant markdown of 90% from its previous valuation.

If sources are to be believed, India’s leading newspaper Economics Times has reported this development at first, then followed by MoneyControl, also revealed that leading Healthcare group Manipal was looking to lead the $300 million funding into the startup.

It is worthy to mention that even some of the early age investors have been pushing PharmEasy to sell the business, according to the two people familiar with the matter.

But, suddenly what happened with PharmEasy, who had filed for an $843 Million IPO in 2021, and later had to postpone the plan? Worry not! More interesting information lying ahead.

Why PharmEasy planning to raise fund at low valuation?

PharmEasy, a franchise burdened with debt, has engaged in acquisitions and received investments from multiple venture capitalists and investment firms. The interesting aspect lies in how they have effectively allocated and utilized these funds.

1. According to multiple verified sources, PharmEasy raised funds specifically to expand its portfolio, acquiring businesses, and repayment of loans obtained from other firms.
2. Last year, PharmEasy acquired Thyrocare business at a valuation of $600 Million and to pay that they borrowed about $285 million from Goldman Sachs.

Currently, the company finds itself unable to fulfill this liability, leading to a significant reduction of over 90% in its valuation. This is a substantial decline. The issue at hand is not solely related to business acquisitions, but it reflects the quality of the brand itself.

Unlike other companies that have acquired multiple businesses, PharmEasy’s approach involved borrowing money from one source to pay off another, which is at least not expected from the PharmEasy.

What’s the Ashneer Grover saying on PharmEasy?

According to the BharatPe co-founder Ashneer Grover, A new round of funding led by leading healthcare group Manipal for debt-laden PharmEasy chain will serve as a “Sudden Death” to the founders and its employees because of the anti-dilutive clause kicking in.

“In a tweet, the entrepreneur, known for their appearance on Shark Tank India, expressed the equation: ‘Down Round + Anti-Dilutive Clause = Sudden Death (Jhatka) for the Founders!'”

The entrepreneur further commented on the situation, stating, “If this news regarding Pharmeasy is accurate, it goes beyond just a down round; it signifies the end. The anti-dilutive clause will be triggered, resulting in VC investors who initially invested at a value greater than ₹5 per share receiving additional shares, effectively bringing down their holding cost to ₹5 per share.

This means that even investors from the previous round who invested at ₹55 per share will receive 10 times more shares at no cost, reducing their holding cost to ₹5 per share. Everyone benefits except for the Founders and Employees! The Founders and ESOP holders’ ownership will diminish to a fraction, such as 0.001%.

The debt taken in 2021 will likely turn out to be the most expensive capital ever raised by the Founders.”

Impact on existing PharmEasy Franchise Owner

We acknowledge that you may have grasped the reason behind the latest funding round. However, our focus will now shift towards exploring the specific impact it will have on existing PharmEasy business owners.

1. Uncertain Future:
   • If Ashlee Grover’s statement proves to be true, it would indeed signify a significant downfall for PharmEasy. This suggests that the company’s valuation has plummeted dramatically, going from sky-high levels to a much lower valuation.
     • Hence, we’ll certain recommend the franchise aspirants to wait for the settlement and see what’s coming up in future.
2. Valuation Impact:
   • While PharmEasy intends to utilize the funding to pay off its debt, the significant decline in its valuation is expected to have repercussions on the brand image and market positioning.
     • It will ultimately impact or influence the customer perceptions and franchise performance.