Warburg Pincus and PremjiInvest-Backed MedPlus Picks I-Bankers For Rs 2,000-Crore IPO; First By A Retail Pharmacy Chain

MedPlus, India’s second largest retail pharmacy chain in terms of store count , has shortlisted 3 investment bankers as advisors as it prepares for an IPO in 2021 to raise around Rs 2,000 crores, individuals familiar with the development told Moneycontrol. The move comes on the back of a surge in demand for COVID-19 related products which has benefited pharmacy players, especially those with online offerings.

“MedPlus has recently shortlisted Axis Capital, Nomura and Edelweiss Financial Services. They are likely to select a fourth investment bank soon,” said one of the individuals cited above.

“As of now, the plan is to raise around Rs 1,800 crores to Rs 2,000 crores via the IPO. This may increase depending on valuations and the size may vary later,” added a second individual.

“MedPlus is one of the clear beneficiaries of COVID-19 from a sales and demand point of view. It is a pandemic proof business so to say,” said a third individual with knowledge of the proposed IPO.

A fourth individual confirmed the shortlisting of investment bankers and said the process would be kicked off shortly.

“The IPO will be a combination of primary and secondary issue of shares and will help to provide a partial exit to investors like Warburg Pincus and Premji Invest. The proceeds can also be used to trim debt & may facilitate growth capital for store expansion,” he elaborated.

All four individuals spoke to Moneycontrol on the condition of anonymity

Moneycontrol is awaiting the response to an email query sent to MedPlus and will update this article as soon as it hears from the firm. Nomura declined to comment while the other investment banks had not responded at the time of publishing this article.

On March 24, 2020, Moneycontrol was the first to report the listing plans of the Hyderabad headquarted firm led by founder and CEO Madhukar Gangadi, a Wharton graduate. If these plans fructify, arguably, MedPlus could become India’s first listed retail pharmacy chain. To be sure, It’s not the only pharmacy chain planning a d-street debut. On April 26th, 2021, Mint reported that Poonawalla family-backed Wellness Forever was eyeing an IPO.

MedPlus is an omni-channel retailer with over 1800 stores serving over three lakh customers daily according to its website. It also operates online store MedPlusMart, lab testing centres MedPlus Pathlabs and surgical equipment distribution business RiteCure. As of March 2021, MedPlus had revenues of Rs 3,068 crores and PAT of around Rs 100 crores. Other than medicines and health products, the chain’s stores also provide items under baby needs, personal care and household requirements.

Largely focused on South India until now, the 15-year-old MedPlus has expanded to West Bengal, Odisha and Maharashtra and has more than 10,000 employees. In November 2019, MedPlus founder Madhukar Gangadi, had said the firm was looking at an IPO to raise more than Rs 700 crore. It is not the only pharmacy firm planning a d-street debut.

Other significant players in the domestic retail pharmacy segment ( online and offline) included Netmeds, PharmEasy( which merged with rival Medlife last year) and Apollo Pharmacy.

On February 11, 2021, VCCircle reported that Warburg Pincus, and PremjiInvest ( a return investor), the family office of Wipro founder chairman Azim Premji, had made an investment in MedPlus.

In January 2018, MedPlus raised around $115 million in debt financing from Goldman Sachs to buy out its existing private equity investors, including US-based Mount Kellett Capital Management, TVS Capital Funds and Ajay Piramal’s India Venture Advisors. The three investors together held a 69 percent stake in MedPlus. Later, Azim Premji's investment arm PremjiInvest picked up a minority stake for around Rs 200 crore.

Data from the Department of Industrial Policy and Promotion (DIPP) revealed that the Indian retail pharmacy segment was estimated to be worth $18 billion in 2020 and is expected to touch $50 billion by 2025. According to an EY report titled E-pharma: Delivering Healthier Outcomes, e-pharma players are likely to attain the combined market size of $2.7 bn by 2023 from the current $360 million.