PharmEasy Parent To Acquire 66% Stake In Thyrocare For Rs 4,546 Cr

In a first ever acquisition of a listed company by a startup unicorn, digital healthcare startup PharmEasy’s parent API Holdings will be acquiring a majority stake in diagnostics major Thyrocare for Rs 4,546 crore. The landmark deal was struck in Lonavala over masala chai at Thyrocare Chairman A Velumani residence.

PharmEasy will retain the Thyrocare brand. While this gives PharmEasy a much needed offline presence in diagnostics through a network of over 3,300 collection centers, sources claim that Thyrocare promoters looked to unlock value in the business as it did not have a clear succession plan in place. Its founder Velumani is 62.

API Holdings on Friday announced the signing of definitive documents to acquire 66.1 per cent stake in Thyrocare Technologies from Velumani and affiliates at a price of Rs 1,300 per share. The transaction is subject to regulatory and other applicable customary approvals. Docon Technologies, a 100 per cent subsidiary of API, will be the acquirer and shall make an open offer for an additional 26 per cent stake.

“We will provide world class customer experience in diagnostics, rivaling our pharmacy experience by leveraging technology, and building on top of the massive scale & truly pan-India presence of Thyrocare. It is our aim to deliver all outpatient healthcare products & services to every Indian within 24 hours,” said Siddharth Shah, CEO, API Holdings.

The acquisition fits well with PharmEasy, which aspires to be a 360 degrees digital health player and not just an epharmacy. “With Thyrocare we will strengthen our offline presence and get more partners on board. We would like to have Dr V (Velumani) as an advisor on board and help us navigate this journey,” said Dhaval Shah, cofounder at PharmEasy. Shah said that they will retain the Thyrocare brand in the diagnostics business.

Velumani could not be reached immediately for a comment. He will be separately acquiring a minority non-controlling stake of less than 5 percent in API as part of a series of equity investments by existing and new investors of API.

Thyrocare is the largest B2B player in the diagnostics space and has a network of over 3,330 collection centres across 2,000 towns in India. It operates a multi-lab model with 1 mega central processing lab, two zonal processing labs and 13 regional processing labs across the country.

“The acquisition of Thyrocare will give PharmEasy a unique pan India collections & labs supply chain that can be leveraged for huge online / home service demand. Thyrocare has the lowest cost, highest capacity, excellent TAT, and best reach. It adds a very big engine to PharmEasy,” said Rajat Ranjan, Executive Director, Kotak Investment Banking.

For Thyrocare, which is a B2B player with a channel driven business, PharmEasy will give the company a B2C reach.

“I am excited about this relationship, unique of its kind in Indian healthcare industry. The unique reach and strength of Thyrocare in diagnostics blended with the young and dynamic team of PharmEasy will bring in better healthcare solutions for common man nationwide,” said A Velumani, Chairman & MD of Thyrocare. Nomura was the sole advisor to promoter Velumani in the deal.

PharmEasy’s parent which is eyeing an over $1 billion IPO had earlier acquired Medlife in May for an undisclosed amount becoming the largest player in the domestic online pharmacy sector, as the combined entity will serve around two million customers on a monthly basis.

"PharmEasy has a large set of customers and expanding into diagnostics was natural as that is something they regularly need. It’s an exciting time for the company to get Thyrocare onboard,” said Rehan Yar Khan, managing Partner at Orios Venture Partners, an early investor in PharmEasy.

The Indian digital healthcare segment, still at a nascent stage has seen a flurry of activities in the recent past. Earlier this week Apollo created the country’s largest omnichannel digital health platform by merging its online and offline pharmacy businesses (excluding hospital pharmacies) and telemedicine verticals into a single entity called Apollo HealthCo. While Tata Digital, a 100 per cent subsidiary of Tata Sons, acquired 60 per cent stake in 1mg earlier this month in a deal size valued at $270 million, Mukesh Ambani-led Reliance Industries had last year acquired 60 per cent stake in online pharmacy Netmeds for Rs 620 crore.

According to a RedSeer report, India’s ehealth sector reached about $1.4 billion GMV in 2020 and is expected to grow around 10 times over the period of CY20-25. The industry is expected to grow its GMV by $11-15 billion by CY25. The entry of multiple players such as Apollo, Tata, Reliance and Amazon is a validation for the large market opportunity that exists in the digital healthcare system.