- Wealth PMS (50L+)
Health-Tech is consolidating at a fast pace & everyone wants a piece of the pie. Tata Digital acquired 60% stake in 1MG for $270 Mn. Reliance acquired 60% stake in Netmeds for $85 Mn.
And now, PharmEasy buys the promoter stake in Thyrocare, one of India’s largest diagnostic chain. What are the benefits that will accrue on the back of this merger? What is in it for Thyrocare shareholders?
PharmEasy was founded in 2014 by Dhaval Shah & Dharmil Sheth. The company had generated 637 Cr in revenues & a loss of 100.7 Cr for FY20. In May 2021, the company had acquired Medlife for $250 Mn to become India’s largest e-pharmacy player with ~60% market share.
The company has a customer base of 17 Mn serving across 16,000 zip codes in India. It connects over 70,000 brick and mortar pharmacies & 4,000 doctors via its platform. On 2 June 2021, B Capital had picked up a minority stake in PharmEasy valuing the company at $1.8B.
Thyrocare Technologies was founded by A. Velumani in 1996. It has around 3300 collection centres & has Centralized Processing Laboratory in Mumbai. It conducts over 110 Mn tests annually. The company had grew its revenue by at 15% CAGR in the last 5Y to 495 Cr & generates a PAT of 112 Cr as of FY21.
In 2016, the company had came up with an IPO, mainly to provide the exit for its PE investors. Promoter Velumani & family currently owns 66.1% of the company. FIIs own 20.54% & the remaining is with DIIs & retail.
Click on the years below to see Thyrocare’s progression over time
This is huge leap for PharmEasy in the right direction. A unicorn acquiring a strong brand & profit making listed company is first of its kind in India.
PharmEasy is looking to become a one stop solution for all health care needs like Consultation, Medicines, Diagnostic tests etc. The management says ‘Funding Secured‘ for the deal backed by Temasek, TPG, Naspers, B Capital, Kotak PE etc.
On the other side of the story, Thyrocare is facing succession problems. Mr. Velumani’s children have no intention to run the business after him. The promoter tried to bring in professional management as CEO, but he resigned within months stating personal reasons. In all probability Mr. Velumani is looking for an exit & he got a decent one.
The regulatory process will take around 6-10 weeks to complete.
Post the open offer, Docon & API will hold anywhere between 66.11% to 92.11% stake in Thyrocare. Depending on the offer acceptance, we can expect the following scenarios to play out:
Scenario 1: New promoter stake >75%.
Scenario 2: New promoter stake <75%.
Scenario 3: Delisting
Scenario 4: Reverse Merger
Stay put for now.
Thyrocare is moving from the hands of a passionate founder to a fast growing Health tech startup. It will leverage on the PharmEasy’s brand & technology to reach the next leg of growth.
Thyrocare stock had a knee jerk reaction as the deal happened at 10.4% discount to the 25-June-2021 closing price. However, Long-term growth momentum remains same. Further clarity will emerge post the open offer.
This article is for information only, and should not be considered as a recommendation to buy or sell any stocks.
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