E-Pharmacy Giant Implements Cost-Cutting Measures Amid Revenue Decline
API Holdings, the parent company of PharmEasy, has managed to reduce its losses by more than 50% in FY24, thanks to significant cost-cutting measures. However, despite these improvements, the company’s revenue has faced a notable dip, signaling ongoing challenges for the troubled e-pharmacy giant.
In the fiscal year 2024, PharmEasy’s revenue from operations fell by 14.8%, totaling Rs 5,664 crore, down from Rs 6,644 crore in FY23. The revenue shrinkage highlights the difficulties PharmEasy continues to face in the competitive and highly regulated e-pharmacy market. Despite the decline, the company has managed to curb its losses, an effort attributed to stricter cost controls.
Revenue Breakdown: Pharmaceuticals Lead the Way
PharmEasy generates the bulk of its revenue—about 88%—from the sale of pharmaceutical and cosmetic products. The rest comes from a range of services, including diagnostic tests, teleconsultation, and delivery. These services, which include facilitating pathological tests and providing warehousing solutions, make up the remaining portion of PharmEasy’s operating income.
The company’s non-operating income, largely derived from interest and asset gains, amounted to Rs 94.6 crore. This helped bring PharmEasy’s total revenue for FY24 to Rs 5,758 crore, which still marked a decrease compared to the previous year.
Cost-Cutting Measures Bear Fruit
While PharmEasy’s revenue took a hit, its cost control efforts have paid off. The company managed to reduce its expenses by 19.2% in FY24, bringing total expenditures down to Rs 7,254.8 crore, from Rs 8,974 crore in FY23. The most significant cost element—materials—accounted for 67.3% of its total expenditure. This cost decreased by 14.8% to Rs 4,880.3 crore, reflecting the company’s ability to manage its supply chain and procurement more effectively.
Other areas of cost reduction included employee benefits, which dropped to Rs 699.3 crore, including an ESOP cost of Rs 221.8 crore. Additionally, the company cut down on its marketing and legal expenses.
Losses Narrowed, but Outstanding Losses Continue to Mount
Thanks to its cost-reduction measures, PharmEasy was able to lower its losses by 51.4% to Rs 2,533.5 crore in FY24, compared to a staggering Rs 5,211.7 crore in FY23. Despite these improvements, the company still faces significant financial challenges. PharmEasy’s cumulative losses have now ballooned to Rs 13,352 crore, or around $1.6 billion, as of the end of FY24.
PharmEasy’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) loss stood at Rs 552 crore, and its EBITDA margin improved slightly to -9.59%. The company’s Return on Capital Employed (ROCE) also improved to -15.71%, though these figures still indicate that PharmEasy has a long road ahead to achieve profitability.
The Road Ahead: IPO Uncertainty
PharmEasy, which once filed for an IPO in 2021, continues to face uncertainties in its quest for an initial public offering. The company withdrew its IPO application shortly after filing, citing unfavorable market conditions and strategic concerns. Now, nearly three years later, there is no clear timeline for the company’s listing, and its valuation has also taken a hit.
In April 2024, PharmEasy raised $216 million in a down round, bringing its valuation to around $710 million. However, global asset management firm Janus Henderson slashed its valuation by 91.8% to $458 million in September of the same year.
Despite these setbacks, PharmEasy remains one of the key players in India’s rapidly growing e-pharmacy and health services sector. The company’s ability to reduce costs and streamline operations will be crucial as it looks to regain momentum and improve its financial performance in the future.
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