In one of the largest transactions in the Indian diagnostic field, PharmEasy on June 25 acquired a 66.1% stake in Thyrocare Technologies Ltd (Thyrocare) for Rs 4,546 crore.
API Holdings Ltd (API), the parent company of PharmEasy, has announced “the signing of a straightforward acquisition of 66.1 per cent of Thyrocare from Dr. A Velumani and its affiliates at a cost of Rs 1,300 per share comprising Rs 4,546 crore,” the official said in a statement. .
The deal was announced after market times on Friday. Thyrocare shares rose by 6.23 percent to end at Rs 1448.05 on BSE.
“We will provide a world-class customer experience in testing, challenge our pharmacy experience through technology, and build on the high level and presence of India without Thyrocare,” said Siddharth Shah, chief executive officer of API Holdings.
“It is our intention to deliver all health care products to the people of India within 24 hours,” Shah said.
What this means for PharmEasy
A few analysts and competitors say the deal could give PharmEasy access to diagnostic infrastructure for Thyrocare and a lucrative business, but nevertheless, startups can pay a high price.
Analysts say the COVID-19 test, which is a time of year, could be the reason for the high diagnostic value. The COVID-19 trial provided about a quarter of the revenue for diagnostic companies at FY21.
PharmEasy rated Thyrocare 13.9x of FY21 revenue, 40x EBITDA and 60x profit.
Recently, Mumbai-based Metropolis bought Hitech Diagnostics in South India for Rs 511. Metropolis paid 6x Hitech benefits in FY20.
“It is difficult to duplicate these numbers – they have all gained momentum at the same time as a result of the COVID-19 test,” said an analyst who followed the agreement.
Kunal Randeria, an analyst at Edelweiss Financial Services, says Thyrocare ratings are still reasonable, compared to peers such as Dr Lal Pathlab and Metropolis.
On June 25, Dr Lal PathLabs’ market capitalization stood at Rs 26,336.15 crore and Metropolis was close to R15,125 crore. Thyrocare stood at Rs 7,656 crore.
“Thyrocare relies heavily on the B2B (business-to-business) segment, where most of its business comes from transfers to hospitals, clinics and doctors, detection has declined.
The B2C (business-to-customer) segment in which the customer receives its test without referral offers approximately 10-15 percent of Thyrocare, while Lal and Metropolis are approximately 45-50 percent.
Randeria said PharmEasy given its customer service, which works with more than 20,000 codes, will help Thyrocare measure its B2C share.
One analyst says that PharmEasy will not only acquire Thyrocare visual infrastructure but also a profitable business as well.
Thyrocare revenue grew by 14 per cent to Rs 494.62 crores in FY21, with a total profit of Rs 113 crore and EBITDA by 37 per cent.
“If you look at the e-pharmacy business, the total limit on drug sales is 25 percent, and the discounts offered to customers are about 15 to 20 percent, with almost 5-10 percent marks, that’s not a benefit for the business. -Thyrocare is a lucrative business, “said Vishal Manchanda – Pharma – Nirmal Bang Institutional Equities.
But the combination of PharmEasy and Thyrocare – works well because most of the customers who buy medicines at e-pharmacies are people with chronic diseases such as diabetes and high blood pressure, and these are people who need regular check-ups.
PharmEasy can take advantage of this by offering a subscription model that includes online physician consultation, medication and diagnostic in one place.
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Reason for IPO
A PharmEasy competitor who did not want to be named said – the acquisition of Thyrocare will give them scale and profit as they prepare for a potential IPO.
“It won’t be the one changing the game,” said the person above.
API Holdings has been in the news for a possible listing of the public market for the purpose of collecting approximately Rs 3,000-Rs 3,700 crore. Private private companies such as TPG Growth, Prosus Ventures, Temasek, CDPQ, LGT Lightrock, Eads Roads and Think Investments own about 80 percent of API Holdings.
Manchanda says the diagnostic business comes with certain control systems such as nitty-gritty such as methods of controlling e-pharmacy chains that may find it difficult.
Initiation of established purchases co
The agreement allegedly took place when 32-year-old Siddharth Shah, Co-founder & CEO of API Holdings, met veteran diagnostic officer Velumani, chairman of Tyrocare, in Lonavala in the wet masala tea where the man lives.
Moneycontrol learns that the agreement has been valid for at least a few months.
“It is not uncommon for an unregistered e-commerce company to offer in this way a standard company,” said a person who did not wish to be identified, but who helped with the agreement.
PharmEasy was founded by Dharmil Sheth, Dhaval Shah, Harsh Parekh, Hardik Dedhia and Siddharth Shah. The online pharmacy managed to pull off a second major in less than a year after meeting its young rival Medlife.
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The Indian health sector is expected to have a $ 16 billion opportunity by the 2025 financial year, growing from $ 1.2 billion with an combined annual growth rate of 68 percent, according to RedSeer.
For Velumani, a scientist who became a first-generation entrepreneur, who started working with a single focus on thyroid tests and later grew into other tests, this was a good cash out.
“There have been problems with who is next after Velumani, he tried to bring professional management by appointing a senior manager, but somehow it didn’t work, and the manager resigned, so it’s a good way to retire with the remaining money in the bank,” said one of the above.
