Why is PharmEasy delaying its IPO?

22 Jul 2022 , 09:05 AM

According to reports, online pharmacy company, PharmEasy, has given up its IPO plan for the time being. Instead, the company is trying to raise $200 million through private placement, and that too at a lower valuation than before. This means that it will shell out a higher stake to investors than before for raising the same amount of money. Some reports say that the company is ready to lower its valuation by as much as 25%.

The decision to raise money by lowering valuation once again shows the difficulty that startups are facing in raising capital now. A global recessionary environment has made investors reluctant in investing in startups that have still not turned profitable. PharmEasy’s losses in 2022-23 are reported to be around $324 million. Like many internet based business model, startups, PharmEasy is seeing strong sales but even higher expenses. In 2022-23 its sales are reported to be around $700 million.

PharmEasy filed its DRHP for raising $782 million through IPO last year. But that plan has now been delayed because of the lowering of risk appetite in general in the Indian equity markets. Given the highly uncertain economic scenario in the medium and long term, investors are hesitating in investing in startups. Investments in startups are often long term bets, with higher risks.

Prominent existing investors in PharmEasy include Temasek and TPG.

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