Ambani’s Reliance Industries is in cutting edge conversations to secure a larger part stake in online drug store Netmeds as a feature of its more extensive play in trade, said three sources acquainted with the turn of events. The arrangement may see Reliance, through one of its auxiliaries, pay $130-150 million for the advantage, which may likewise incorporate a new mixture to grow the activities, said one of the sources referenced before. “The arrangement is going on at a slight premium to their last financing round valuation,” said the source.
Netmeds, which started operations in 2015, has till date announced three rounds of funding totalling about $100 million. The company was started by Pradeep Dadha, whose family was one of the first distributors for Sun Pharmaceuticals. The distribution business was later acquired by Sun Pharma. Besides Dadha’s family office, the Netmeds backers include healthcare investor OrbiMed, investment bank MAPE Advisory, Sistema Asia Fund and Singapore-based Daun Penh Cambodia Group.
“As a policy, we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis,” said a Reliance spokesperson, adding that it will inform exchanges according to Sebi on any developments.
“It would not be productive to comment on media speculations at this stage,” said Dadha in an emailed response, while adding that Netmeds has tied up with Reliance Retail for supplying essentials like groceries to its customers.
The conversations between Reliance and Netmeds, which had also held talks with Walmart-owned Flipkart, had been going on before the coronavirus lockdown, sources said. This will be the second major move by Reliance in the pharma sector as last year it acquired 82% in Bengaluru-based C-Square Info Solutions, which makes software for distributors, retailers and sales force in the pharma sector, for a total of Rs 82 crore. Some of the clients of the company include Apollo Pharmacy, Adcock Ingram and other players.
The development comes as Reliance is ramping up it’s online-to-offline (O2O) commerce business, first with grocery with the tie-up between Reliance Retail and WhatsApp last month. That deal came after WhatsApp’s parent company Facebook agreed to invest $5.7 billion for a 9.99% stake in Jio Platforms, the telecom and digital services business of Reliance.
Netmeds generates 90% of its revenue from prescription medicine and over-the-counter drugs. This is similar to other medicine delivery platforms like 1MG, Medlife and Pharmeasy who drive 80-90% of their revenue from selling medicine, focused on chronic customers who make repeat purchases regularly. Last year, Netmeds announced it would add a dozen new warehouses to take the total to 26 as it expanded across India. A RedSeer report in February said it has a base of 6 lakh monthly transacting users.
According to the RedSeer report, a market research firm, the e-pharma industry, including consultancy and diagnostics, is about $1.2 billion. This is expected to reach about $16 billion in five years. While over 4 million households were already opting for buying medicine online, this space has become one of the few beneficiaries of the virus outbreak as more consumers are opting to buy medicine online.
By the middle of March, e-pharmacy platforms saw a strong spike in sales of masks and sanitisers. 1MG co-founder and CEO Prashant Tandon had said sales of these products were up by 10-20 times before the virus outbreak. “Order volumes are still higher than before Covid-19. But going forward, we are looking at supply issues and manpower crunch to meet the rising demand,” said CEO of another e-pharma platform. Typically, consumers on average transact 1.5-2 times from these companies, while average ticket size of purchase is Rs 1,400-1,700.
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