#4 Indian Unicorn Company PharmEasy is ready to cut its valuation from $5B to $0.5B. WHY?
Yeah you read that right, a 90% cut in valuation :)
PharmEasy is India's leading online healthcare and medicine delivery platform. At one point of time, PharmEasy was valued at $5.6B and was planning to do an IPO of INR 6250 Crores.
Then, why did things go wrong? Lets find out👇
This company was doing really well and many people wanted to invest money in it to help it grow even more. The company wanted to raise money for reasons I will tell later. Now, if you need to raise money for your business, there are two ways:
To raise money by offering shares of your company
To raise money by getting a loan
PharmEasy decided to go with the second option and approached a bank which goes by the name ‘Goldman Sachs.’ It promised that it would give back the money (INR 2280 Crore) within a year to the bank with some interest. Goldman Sachs agreed but on one condition. Goldman Sachs said that it will give the loan only when PharmEasy promises to do a INR 1000 Crore funding round which the company failed to do.
Now why did PharmEasy want to raise debt from Goldman Sachs? It had raised money from the bank to clear its previous debt. The previous debt was taken from Kotak Mahindra Bank to acquire ‘Thyrocare.’
To settle Goldman’s debt, PharmEasy asked its existing investors to give money. Investors said they will give money but only if the valuation is reduced so that they get more shares in the company with same money.
Now, the business of PharmEasy wasn’t doing well, and the debt to be repaid was huge. The new valuation on which both the parties agreed on was a 90% cut on its previous valuation.
PharmEasy had no option but to agree on the deal because they had to pay away the loan.
Byjus and PharmEasy teach us one lesson → take acquisitions seriously.