Over $700 million have been invested in e-pharmacy players since the beginning of the COVID-19 pandemic and some of the largest venture investors such as Sequoia and TPG are now facing the risk of seeing their investments evaporate without an IPO or an acquisition as an exit option.
Last year, PharmEasy had pulled its IPO papers and is now facing the hurdle. Over $1.6 billion have been invested in the online pharmacy players. It has also made some big-ticket acquisitions, picking up Medlife and even the listed Thyrocare to grow its diagnostics business.
Earlier in the day, sources had told CNBC-TV18 that the Indian government is seeking legal opinions on the regulation of e-pharmacies. The Ministry of Chemicals and Fertilisers has drafted regulations aimed at curbing the operations of e-pharmacies. The government is concerned about data leaks and misuse via these online platforms. As a result, the government is now considering whether e-pharmacies should be allowed to sell medicines online.
The government's move is not just a risk for venture investments. Some of India's largest conglomerates have an exposure too. Tata has a controlling stake in 1mg and pumped in $40 million just six months ago. When it comes to Netmeds, it was acquired by Reliance Retail in mid 2020.
While the concept of e-pharmacy caught on in 2015, it was the pandemic that drew investor interest. Before the pandemic hit, only three million people were ordering medicines online. Once the lockdown was imposed, within two months, it went up to nine million people.
It is estimated that 70 million people will be ordering medicines online by 2024, following the the trends of e-commerce supported by a growing internet user base.
As it stands, the e-pharmacy market in India is valued at around $350 million. While there are around 50 companies operating in the space, the online pharmacies account for only 1.5-3 percent of the total pharmacy sales in India, which stand at over $10 billion.
Despite the surge during the pandemic, the domestic e-pharmacy market is still in its infancy. Netmeds, Tata 1mg and PharmEasy together hold 80 percent of the total market share. It is these market leaders and their investors who are most at risk if the government takes a U-turn on e-pharmacy.
(Edited by : Shoma Bhattacharjee)
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