Global Investors Mark Down PharmEasy Valuation Amid Financial Struggles and Broader Tech Downturn

1. Markdown in PharmEasy's Valuation:

According to regulatory filings with the US Securities and Exchange Commission (SEC), API Holdings, the parent company of Mumbai-based online pharmacy PharmEasy, has seen a significant markdown in valuation by funds managed by global asset management company Janus Henderson.

2. Significant Valuation Reduction:

Janus Henderson, which acquired a share in PharmEasy in September 2021, has cut its stake in the company in half, resulting in an estimated valuation of roughly $2.8 billion as of December 31, 2022.

3. Previously, Neuberger Berman, a New York-based investment management business, had decreased PharmEasy's valuation by 21% to $4.4 billion as of February 28, compared to its previous fundraise valuation.

4. Trend in the Technology Sector:

This is not an isolated event. Other large tech firms, such as Byju's, Swiggy, Pine Labs, and Ola, have seen their investors reduce their valuations. 5. PharmEasy, which is backed by Temasek, was valued at $5.6 billion during its most recent funding round in October 2021, when it raised almost $350 million from investors including Singapore's Amansa Capital, Blackstone-backed hedge fund ApaH Capital, and Janus Henderson. Its valuation increased significantly from $1.5 billion in April 2021 to $5.6 billion.

6. Valuation Markdowns in the Indian Market:

In a sluggish macroeconomic environment, the consumer Internet investment ecosystem in India has seen a series of valuation markdowns by US institutional investors, which could be attributed to a variety of factors such as layoffs, holding back on investments, and broader cost-cutting.

7. While markdowns are now hypothetical, they may foreshadow a trend in which companies may raise capital at lower valuations in the future.

8. Cash Flow Issues and a Postponed IPO:

PharmEasy postponed its IPO last year and has been trying to raise new capital in the midst of a larger tech slowdown. According to an ET article, PharmEasy's cash runway has reduced to around a year based on its December burn rate, raising questions about the company's long-term viability.

9. Financial Health of the Company:

As of December 2022, PharmEasy has a revenue of Rs 5,200 crore and a cash burn of Rs 30 crore each month. However, the company managed to cut its cash burn in January to Rs 15 crore, demonstrating a desire to improve its financial status. Finally, the decrease in PharmEasy's valuation reflects a broader trend in the tech sector, which could be attributed to a sluggish macroeconomic climate and the company's financial issues. It could also indicate a future trend of entrepreneurs raising money at lower values.

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