Scoop: PharmEasy valuation halved to $2.8 billion, logs ebitda profitability; Paytm’s loan biz decoded

By Daisy On May 15, 2023

Online pharmacy PharmEasy recorded a positive ebitda of around Rs 14 crore, which means it is operationally profitable, even as one of its investors marked its valuation down to $2.8 billion. This and more in today’s ETtech Morning Dispatch.

Also in the letter:
■ Inside the changing VC deal terms
■ IT clients push for generative AI-based solutions
■ SCO members vote to adopt India’s proposal on DPI

Scoop: PharmEasy valuation slashed by half to $2.8 billion; company logs ebidta profitability in April

Hi, this is Pranav Mukul in New Delhi. Today, my colleague Digbijay and I have two important updates on Mumbai-based online pharmacy PharmEasy.

Driving the news: For the first time in April, PharmEasy clocked a positive Ebitda, which means it is operationally profitable. This comes even as one of its investors halved its valuation to $2.8 billion, amid a slew of such markdowns at Indian late-stage startups that have made headlines over the past weeks.

Tell me more: Global asset management company Janus Henderson slashed the value of its holding in PharmEasy by 50% as of December 2022, reducing it to $2.8 billion down from 5.6 billion. ETtech reported last week that Neuberger Berman had marked down the valuation of the company as of February 2023 by 21%.

Recent tech markdowns by investors_14 May_Graphic_ETTECH

Latest numbers: PharmEasy recorded a positive Ebitda in April of around Rs 14 crore for the first time since inception with net revenue of Rs 600 crore. The ebitda stood at negative Rs 80 crore in April 2022. The company had told the board it was aiming to hit this milestone by September this year.

Jargon Buster: Ebitda stands for earnings before interest, taxes, depreciation and amortisation. It is a measure of a company’s profitability.

Tell me more: The firm’s average order value in April also increased to a range of Rs 1,300-1,900 in the medicine delivery business, which, sources said, helped the company turn its finances around. Siddharth Shah, founder and CEO of PharmEasy, spoke to his staff during a recent town hall about plans to cross-sell more services on the platform, including Thyrocare, sources told us.

Fresh funding: On the back of these numbers, PharmEasy parent API Holdings is in talks with existing investors Canada-based CDPQ and Abu Dhabi’s ADQ for a new round of funding, potentially between $50-100 million, which may also happen through convertible notes, people aware of the discussions told ETtech.

Decoding Paytm’s aggressive lending, collections playbook

Paytm CEO Vijay Shekhar Sharma expects more revenues from expanding UPI use cases

Hi, Pratik here in Bengaluru. Among all its major business lines, credit has emerged as the fastest growing business for Paytm, growing 187% in the past year. Unlike its peers, Paytm is doubling down on its loan aggregation business, working with multiple lending partners, though it does not have a lending licence yet.

Driving the news: A closer look reveals that Paytm is not only sanctioning loans in quick time, it is focusing on collections, too. It is leveraging the Creditmate platform to send SMS reminders for repayments and tracking loans across multiple tenures.

What’s the significance? Paytm is generating a take rate of around 4% on its loan disbursals, add to that the nearly 0.5% to 1.5% commission for loans. With this two-pronged strategy, the fintech firm is expecting to grow its credit book rapidly while keeping NPAs under check.

What’s next? Since listing in the public markets, Paytm has seen its market capitalisation erode significantly. As a loan aggregator with only a commission fee as its source of income, it remains to be seen if the company will be able to claw back its valuation.

ETtech Deep Dive: Inside the changing VC deal terms as easy startup funding era ends

Nervous investors drive VC funding for startups

Legal experts, VCs and investment bankers said as the negotiating power goes back into the hands of the capital provider, some VCs are going all out to indemnify their investment from risk, sometimes transferring the risk entirely to the founders.

Also read |Wary VCs go slow on startup deals, step up diligence

More diligence: Investors are also spooked by a string of governance lapses at startups like BharatPe, Zilingo and GoMechanic, leading to stronger legal documentation and longer due diligence cycles.

FOUNDER FRIENDLY DEAL TERMS 2020-21_Graphic_ETTECH

2020/21 VS 2023: Capital poured into Indian startups in 2020-2021. Unicorns lost rarity, as a record 39 unicorns were minted in 2021 and VC investment peaked in India’s startup history at $35.6 billion. In stark contrast, Indian startups raised a meagre $2.06 billion in the first quarter of this year, down 81.7% compared with the same time in 2022, according to data platform Venture Intelligence.

Restructuring and layoffs: The shift in investor mindset and the urgency to preserve capital has led to layoffs at over 75 startups, including Byju’s, Dunzo, Ola, Meesho, Sharechat, and Unacademy. Multiple unicorns including Swiggy, Ola, and Uncademy have also shut down non-profitable verticals over the past two years.

Also read | Startups fire 9,400 employees between January- March, more cuts coming

IT clients push for generative AI-based solutions to drive productivity

Amidst a slowdown in discretionary tech spending, IT clients are choosing investments in generative AI-based solutions because of efficiency gains that the technology can offer, industry executives told us.

Generative AI buzz: Many companies like Tata Consultancy Services, HCLTech, Infosys and LTIMindtree among others are exploring building their own version or consortium-based generative AI solutions for enterprise use cases. Customers in banking and financial services are also keen on implementing this technology as they seek to control costs.

Also read | TCS to harness vast data troves to build ChatGPT-like generative AI tech

Challenges galore: Experts suggest that while a lot of early trials and POCs are being implemented in generative AI use cases, the regulatory framework around IP and security of data and output of generative AI solutions remain murky. Security concerns around the use of large language models (LLM) like ChatGPT have also made many employers wary of experimenting with such platforms.

Tweet of the day

SCO members vote unanimously to adopt India’s proposal on DPI

The Shanghai Cooperation Organisation (SCO) on Saturday voted unanimously to adopt India’s proposal for developing digital public infrastructure (DPI) as the right way for deploying digital technology, a senior government official said. Member nations will also mull setting up a body to decide common standards for the interoperability of their digital systems.

What is DPI? DPI are blocks or platforms built either by private or government agencies with government support, meant to deliver essential services in the digital space.

On AI regulation: In the meeting chaired by India, union minister for electronics and information technology Ashwini Vaishnaw also suggested that the time was ripe for nations across the world to create an apt regulatory environment for artificial intelligence.

Pitch for Aadhaar, UPI: Vaishnaw also urged member nations to support the adoption of India’s DPI services such as Aadhaar, UPI, DigiLocker, and Cowin, the government official said.