After Pillpack, US-based retail giant is all set to acquire India’s second largest pharmacy chain, MedPlus after Apollo being the largest in India.
Founded in 2006 by Madhukar Gangadi, Hyderabad-based MedPlus runs over 1,400 stores across 150 cities in 12 Indian states. There are various lab testing centres MedPlus Pathlabs , online stores such as MedPlusMart and surgical equipment distribution business RiteCure where in online pharmacy operates. The company serves around 250000 customers on a daily basis.
“There have been preliminary discussions between Amazon and Medplus…Too early to call it a deal. But what’s confirmed is Amazon’s serious objective to build a conclusive pharmacy play in India,” a source aware of Amazon’s plans told FactorDaily.
Medplus is the online pharma industry relatively new in India which claims to have a turnover of over Rs 2,000 crore, generated revenues of Rs 1,726 crore in 2015-16, posted profits of Rs 9 crore. But like with other sectors prevailed by Amazon in the past, offline presence is going to be at the centre of its gameplan.
In January this year, the promoter of Medplus, Gangadi had raised around Rs 700-750 crore (approximately $115 million) in debt financing from Goldman Sachs to buy stakes from its existing private equity investors including US-based Mount Kellett Capital Management Lp, TVS Capital Funds Ltd and Ajay Piramal’s India Venture Advisors Pvt. Ltd. After gthe buyout, Gangadi now owns around 90% stake in the company.
Amazon officially made its foray into the pharmacy business last month with its $1 billion acquisition of PillPack. It was an online pharmacy business with Berkshire Hathaway and JPMorgan as partners. The Indian arm of Amazon is growing gradually and has also forayed into the areas like digital payments businesses , fintech and lending.
If the deal goes through, it will see another churn in the pharmacy retail space and the offline retailers’ association in the pharmacy trade is up in arms against the move already. Drugs and pharmaceuticals business has a high retail margin around 20-30% built into it and very few retailers offer discounts to the customers.
While many startups have floated online pharmacies offering great discounts and other bundled offers, the overall comprehensive business of selling medicines online is still to gradually develop in the country.
A big bonus for Amazon through the accession of MedPlus would be the rapid addition of offline stores to its arsenal and this would make the O2O shift quite smooth.
The Indian pharmacy business is already in the hands of small offline traders (except Apollo and Netmeds, who have a whole chain) and the online segment is just a beginning to sprout. It is worth around $17.5 billion annually and is likely to triple to around $55 in the next 2 years. Amazon’s biggest rival, Flipkart is also taking interests into the acquisitions in the same field. It has been reported that Flipkart have initiated a dialogue for a possible tie up with the two pharma companies 1mg and PharmEasy.
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