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The month of June has been a mad rush for PharmEasy co-founders Siddharth Shah, Dharmil Sheth, Dhaval Shah, Harsh Parekh, and Hardik Dedhia. 

API Holdings, the parent company of healthtech unicorn PharmEasy, acquired 66.1 percent stake in Thyrocare from Dr A Velumani and affiliates at a price of Rs 1,300 per share, aggregating to Rs 4,546 crore.

Like most startups, PharmEasy has experienced several highs and lows in the past six years, but sealing the Thyrocare deal in such a short span of time has been one of the biggest challenges for the team. 

A six-year-old startup acquiring a publicly-listed company is not an easy feat. The team worked day and night to close the deal, which they consider as one of the biggest deals in the history of the company. 

It all started when Siddharth Shah, Co-founder and CEO, PharmaEasy, met Dr Velumani, Founder of Thyrocare, at Velumani’s home in Lonavala on May 25 this year. The 15-minute chat turned into a three-hour conversation, which finally concluded in cementing the deal. 

On June 10, the NDA was signed, and Dr Velumani threw a proverbial googly at 32-year-old Siddharth, saying, “Can we close this in a month, before July 10th?”. 

In a video conversation with YS, Siddharth says, “We had raised cumulatively $600 million in primary capital equity and $250 million in exits. This means we had close to $850 million. And Dr Velumani was telling me what we had done in 8 years and 11 months, we have to do that same amount in a month. And I don’t know what got into me. I said the deal will be done by June 30.” 

Needless to say, they were able to work backward and the deal was announced on June 25. 

The significance of the deal

Dr Velumani’s Thyrocare is one of the leading diagnostics solution providers by volume, performing over 110 million tests annually. Diagnosis is a precise science and Thyrocare has cracked the scale. 

“We see an asset that is built out to continue to scale. And it can be worked on the ways that we are comfortable with. We will individually take several years to do that, but we have technology and delivery efforts, so it is a win-win deal,” says CEO Siddharth. He explains that this deal also ties in with their larger vision of complete focus on outpatient healthcare. 

Siddharth says, any major global event, like the COVID-19 pandemic, makes people pay attention to healthcare. “We haven’t focussed on wellness earlier, and today that is changing and is becoming a part of our dictionary.” 

“I think healthcare will become the front and centre of everything we do. And as that grows, the focus on outpatient will be stronger. Everyone wants to manage health. For that, you want information, test, diagnosis, consultation, and treatment, and it all needs to be in one place. Technology is the way to bring it all together. This means the digitisation of labs, doctors, patients, pharma, etc. When ecosystems become digital, there will be massive adoption,” says Siddharth.  

This is the reason the Thyrocare deal is significant. It covers the offline aspects that can be easily tied to the online part of PharmaEasy. Siddharth explains that the two companies will continue to grow the way they are, and technology will be the interlinking aspect. 

“Thyrocare has been functioning strongly and efficiently. Why touch anything that isn’t broken? It will continue working the way it is,” says Siddharth. 

The fundraise

Siddharth says, what helped close the deal early was raising capital. In April this year, PharmEasy became a unicorn. It raised $350 million in a Series E round led by Prosus Ventures and TPG growth at a reported valuation of $1.5 billion, making PharmEasy the seventh startup in India to enter the unicorn club this year. 

The new capital raised was a combination of primary and secondary funding, which also saw the participation of existing investors including Temasek, CDPQ, LGT Lightrock, Eight Roads, and Think Investments.

While this was big news, the team went on to raise funds in May and June as well to aid the acquisition. 

“But we didn’t tell our investors what the money was used for and they trusted us. We informed our stakeholders what we had raised the money for only 72 hours before the announcement of the deal,” says Siddharth. 

The transaction is currently subject to regulatory and other applicable customary approvals. Docon Technologies Pvt Ltd, a 100 percent subsidiary of API, will be the acquirer and shall make an open offer for an additional 26 percent stake.

Dr Velumani will be separately acquiring a minority non-controlling stake of less than five percent in API as part of a series of equity investments by existing and new investors of API.

A teamwork

While the team was working with lawyers and compliances, Dr Velumani had an annual general meeting on June 25. 

“I felt it wouldn’t be right if we close the deal after the AGM,” says Siddharth. It took them a day to close the paperwork and close the deal by June 25. 

“I think I am blessed to have a great team. I did what I was craving and praying for all along, and there are no regrets,” says Siddharth.

Since the co-founders have been childhood friends, they understand each other well, says Siddharth. “When the team functions effectively and trusts one another, we can overcome any obstacle.” 

While PharmEasy is seeing success today, it had its own share of challenges. Siddharth says, “It is my failures that taught me the value of money. Nothing was easy for us. The five of us made our mistakes, we built online pharmacies that had all the MAUs and DAUs, but there was no revenue. Then we went offline, we failed, and then digital healthcare happened. We had four term sheets, we took one, and the investor backed out. Our families put in their personal wealth. My father put in Rs 21 crore into the business and he doesn’t own a single share in the company.” 

Today, PharmEasy has an online pharmacy and diagnostics brand called RetailIO – a B2B pharma marketplace and seller, and DocOn – a consultation and EMR platform. The company has a base of 12 million consumers, a network of 6,000+ digital consultation clinics, and 90,000+ partner retailers across the country.

At present, it serves over one million patients with pharmacy and diagnostics needs and conducts 300,000 consultations on a monthly basis. 

IPO calling 

The team is now gunning for an IPO in 2022. Siddharth explains that an IPO feels like the next logical step and milestone for the startup. While he couldn’t share too many details about the steps they are taking, he added the team is already looking at positive revenue growth and metrics. 

The acquisition of Thyrocare also works in their favour.

“Acquiring a public company makes us promoters of a listed company. This gives us an added push in our step towards an IPO,” says Siddharth.

Thyrocare is also a profitable company. In the first quarter of FY21, its EBIDTA margins stood at 35.09 percent, and it has made a profit of Rs 37.75 crore after taxes.