PharmEasy is the latest startup to join Swiggy, Meesho Unacademy, Zerodha and others to buyback ESOPs. The online pharmacy has announced a $3 Mn ESOP buyback. It looks to instil confidence in staff amid the Covid-19 pandemic. The buyback will benefit 40-45 nearly employees of the Mumbai-based company.
PharmEasy was valued at around $700 Mn when it raised $220 million, led by Temasek last year. PharmEasy also counts venture capital firm Orios Venture Partners and Eight Roads as its early backers. “We raised one round, so we decided to allocate some portion of it to do a buyback and incentivise people for all they’ve done so far and we’ll continue to do so. We’re in a sector that’s fortunately not affected, but our employees’ families might be affected and facing issues,” Dharmil Sheth, cofounder of PharmEasy told ET.
In September the Competition Commission of India (CCI) had approved the merger of online pharmacy Medlife with PharmEasy. This was the first major consolidation in the sector since the entry of big players like Reliance Industries and Amazon. South African technology and media conglomerate Naspers and US-based private equity firm TPG were in talks to invest up to $100 million each in PharmEasy at a $1.2 Bn pre-money valuation.
Launched in 2015, PharmEasy offers services including online medicines, healthcare products and booking lab tests in more than 1000 cities. The pharmaceutical sector in India has seen an uptick since Covid-19. Giants like Reliance Retail, Amazon have entered the pharmacy space along with Flipkart planning a foray too.
After months of speculation, Reliance Retail entered the online medicine delivery space. It acquired a 60% equity stake in e-pharmacy startup Netmeds. It was formally known as Vitalic Health Private Limited, for INR 620 Cr ($83 Mn). Meanwhile, Sheth said PharmEasy has always wanted employees to have more skin in the game. Its ESOPs account for between 5% and 7% of its total shareholding.
Several Indian startups such as Zerodha, CarDekho, BharatPe, Vy Capital and Mobile Premier League (MPL) have announced ESOP buybacks this year. The buybacks assume more significance when they happen in a year where many Indian startups have witnessed a financial crunch amid the Covid-19 pandemic.
For companies that are unlisted, ESOPs for its employees are useless. Hence, a partial exit is simulated for the employees when the company buys back ESOPs from its workforce at the prevailing stock price of the company.