PharmEasy’s ₹3,500 crore rights issue oversubscribed, co-founder Siddharth Shah to have 3-year lock-in for remaining stake

Fresh details are emerging from PharmEasy’s much sought after rights issue. The company has been successful in raising the desired sum — in fact much more than what it had anticipated. The ₹3500 crore rights issue was oversubscribed up to ₹3900 crore, reported Economic Times. Furthermore, co-founder and CEO Siddharth Shah will be in a 3-year lock in for selling his remaining stake, which is now very much in minority.

The ET report also adds, that Ranjan Pai, the head of the Manipal Group, has emerged as a central figure to PharmEasy’s future. In a testament to his investment of ₹1300 crore in the company, Pai is poised to get not one but three board seats within API Holdings, PharmEasy’s parent entity. With a stake of at least 15%, Pai is also emerging as the single largest shareholder in the company, solidifying his influence in critical strategic decisions. Ranjan Pai’s involvement with PharmEasy extends beyond his significant investment. He will not only be joining the board of PharmEasy but is also anticipated to work closely with CEO Siddharth Shah. As long as his holding remains above the 15% threshold, Pai will continue to wield his influence through the three board seats he holds.

PharmEasy’s rights issue, which commenced as a targeted ₹2,400 crore affair, ultimately bloomed into a colossal ₹3,500 crore funding triumph. The founders of PharmEasy, including Siddharth Shah, Dhaval Shah, Dharmil Sheth, Harsh Parekh, and Hardik Dedhia, also actively participated in the rights issue, and will now get new stock options once their stake in PharmEasy is diluted.

Marquee institutional names such as Prosus Ventures, TPG, Temasek, Abu Dhabi’s ADQ, and Amansa Capital, together contributed around ₹2,200 crore, while the remaining capital infusion came from Ranjan Pai, fortifying his significant role in shaping PharmEasy’s future.

This lock-in, while showcasing Shah’s confidence in the company’s future, also secures him a prestigious seat on PharmEasy’s board of directors, according to the ET report. He will be present on the board of the company for the next three years. “We launched a rights issue of Rs 3,500 crore and we are glad to announce that we are oversubscribed. Yes, we raised Rs 3,500 crore and there was more demand which we had to politely reject,” co-founder Dhaval Shah announced in a post on LinkedIn. “Every single shareholder stood up and supported us, believed in our vision and saw value in what the team at API is building.”

Dhaval Shah revealed that PharmEasy has recorded a cumulative EBITDA of ₹60 crore, covering the first six months through September. This announcement followed an earlier report in August, which indicated an EBITDA of ₹40 crore for the initial four months of fiscal year 2024. The proceeds from the rights issue are primarily earmarked to address the company’s financial obligations. This includes clearing a debt of approximately $120 million owed to Goldman Sachs. The remaining debt repayment to Goldman Sachs, arising from a prior debt taken from Kotak Mahindra Bank, is scheduled to be concluded by March 2025. A portion of this debt, approximately $40 million, will be converted into equity within API Holdings.