PharmEasy is restructuring the debt agreement with Goldman, negotiating for a lower interest rate on the total loan
The epharmacy unicorn is conducting a rights issue worth INR 3,500 Cr at a valuation of $500 Mn - $600 Mn, a far cry from its peak valuation of $5.6 Bn
PharmEasy is expected to pay a part of the loan from the proceeds of the right issue, with the total payout to Goldman Sachs being around $100 Mn - $150 Mn
PharmEasy is set to pay $100 Mn – $150 Mn of the $300 Mn debt to Goldman Sachs from the proceeds of the expected rights issue next week.
The investment bank is also considering converting around $38 Mn – $40 Mn of the debt into equity at the $424 Mn (INR 3,500 Cr) rights issue. The rights issue will likely value PharmEasy at $500 Mn – $600 Mn, significantly below its peak valuation of $5.6 Bn.
In light of binding commitments from existing investors for the upcoming rights issue, PharmEasy is renegotiating its debt terms with Goldman, aiming for a reduced interest rate on the outstanding loan amount, ET reported, citing sources.
“The rights issue is slated to start September 4, and based on a commitment from existing investors, the cash position of the firm is looking better than six months ago. This has led to the (discussions about) restructuring debt terms and conversion to equity,” one person aware of the talks told the publication.
It is also likely that the payout to Goldman Sachs could reach $200 Mn, given that Manipal Group chairman Ranjan Pai is also interested in investing in the startup.
Pai is expected to invest up to $160 Mn (INR 1,300 Cr) in the epharmacy unicorn, contingent on the amount invested by existing shareholders such as Temasek, Prosus Ventures and CDPQ, who are likely to lead the rights issue.
PharmEasy raised the debt to settle an existing debt it secured from Kotak Mahindra Bank for financing the Thyrocare acquisition in 2021. The loan was structured as a five-year agreement with an annual interest rate of 17-18%.
Goldman Sachs had set a covenant in the loan agreement, which mandated the epharmacy unicorn to raise INR 1,000 Cr ($120 Mn) in funding within a year of raising the debt. The failure to do so triggered a breach of covenant in June this year.
PharmEasy is likely to pay back the remaining debt by March 2025.