PharmEasy Unlisted Shares

Annual Report Summary

API Holdings Limited Directors' Report Summary (Fiscal Year Ended March 31, 2024)

• Annual Report Presentation: The directors present the 5th Annual Report, including audited financial statements (consolidated and standalone).

• Strategic Focus: During the year, the company realigned focus to improve Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) by enhancing operational efficiencies and synergies.

• Key Initiatives:

  • Sustainable Revenue Growth: Focusing on quality, consumer experience, and profitable customer segments amid capital constraints. 25 of 30 diagnostic labs are NABL accredited, providing to top 2% of all labs in India. PharmEasy saw a targeted approach to retain high lifetime revenue customers, increasing average order value by over 20%.
  • Capacity Utilization: Improved utilization of fulfillment and warehousing infrastructure through supply chain rationalization and integration.
  • Wallet Share Enhancement: Augmenting wallet share within existing chemist and hospital business via improved customer experience.
  • Margin Enhancement: Product mix optimization towards higher-margin products (private labels) and sales mix adjustment to prioritize comprehensive care opportunities (diagnostics services).
  • Cost Optimization: Workforce and expense rationalization through supply chain, back-office, technology headcount, and marketing expense reductions.
  • Cash Conservation: Working capital optimization via inventory management and improved collections.

• Fiscal Year Definition: "Fiscal 2024" refers to the 12-month period ending March 31, 2024, with "Fiscal 2023" referencing the period ending March 31, 2023.

• Key Revenue Segments (Fiscal 2024):

  • Sale of Products: INR 50,077.18 million.
    • Distribution to Retailer: INR 8,727.71 million (15.4% of consolidated revenues). Technology-powered platform selling pharmaceutical, OTC, surgical, consumables and private label products.
    • Distribution to Chemist/Institutions: INR 31,882.27 million (56.3% of consolidated revenues). Focus on profitable, sustainable growth via Retailio 1P, servicing 67K retailers.
    • Distribution to Hospital: INR 9,409.41 million (16.6% of consolidated revenues). Aknamed focused on profitable customers, wallet share, and portfolio expansion.
  • Sale of Services: INR 6,565.68 million.
    • Diagnostics: Thyrocare offers 900+ tests through 30 labs (25 NABL accredited). PharmEasy Labs recorded INR 1,164.76 million in revenues.
    • Other Services: Fulfilment, technology services, software for doctors/pharmacies, Retailio technology (INR 433.28 million).

• Key Milestones (Diagnostics):

  • NABL accreditation increased from 15 to 25 labs.
  • 95% of samples processed in NABL-accredited labs.
  • 147 million tests conducted (4% year-on-year growth).
  • 22 million samples processed (8% year-on-year growth).
  • Active franchisee base exceeded 7,900 (doubled in three years).

• Financial Highlights Summary (Consolidated):

  • Revenue from operations: Decreased 14.7% to INR 56,642.86 million.
  • Total Revenue: INR 57,589.41 million.
  • Total Expense: INR 72,547.98 million.
  • Loss before tax: (INR 25,219.70) million.
  • EBITDA before exceptional items and ESOP expense: improved to (7.5%).

• Commentary on Revenue Decrease: Concentrated on higher margin customers, maximized warehouse utilization, and consolidated marketing efforts. Reduced marketing expenses to concentrate on high-value customers. Sales to Hospital decreased by focusing on service levels, better fulfillment and faster delivery. Sales to Chemists/Institutions dropped due to capital constraints, but subsequently resolved with fundraising. Diagnostics grew due to Thyrocare's improved performance, test additions, and franchise network expansion. Focus on high margin business and discontinued non-strategic business.

• ESOP and Exceptional Items:

  • ESOP Expense: INR 2,218.52 million. Options granted in prior years are still valued at the fair market value existing at grant date, resulting in higher charge to profit and loss account. Options granted during the year have been valued at the lower fair market value in line with revised Company valuation.
  • Impairment in Value: INR 6,549.94 million toward impairment primarily related to retailer business.
  • Other Exceptional Items: Early redemption charges for NCDs (INR 3,424.94 million) and adjusted consideration charges paid towards Medlife acquisition (INR 295 million). Payments made in Q1 of FY 2024-25.

• Cash Flow: Reduction in net cash outflow from operating activities to INR 611.34 million due to reduced operating losses and working capital optimization. Increase in cash due to rights issue proceeds (INR 20,000 million).

• Major Events During the Year:

  • Mergers and Acquisitions: Proposed Composite Scheme of Arrangement and Scheme of Amalgamation were withdrawn due to the prevailing scenario and delay in/non-receipt of approvals.
  • Changes in Subsidiaries: Think Health Diagnostics Private Limited became a step-down subsidiary via acquisition. Increased share capital of Care Easy Health Tech Private Limited. Incorporated joint venture in the name of Thyrocare Laboratories (Tanzania) Limited.

• Changes in Share Capital: Increased authorized share capital and alloted shares.

  • Increased authorized share capital to INR 35,000 million.

  • The Company issued Compulsorily Convertible Preference Shares Series B (“CCPS B") by way of rights issue for an aggregate amount upto INR 35,000 million.

  • 20,66,19,848 CCPS B allotted for INR 20,000.8 million.

  • Allotment of 2,46,922 (Two Lakh Forty Six Thousand Nine Hundred Twenty Two) equity shares pursuant to the conversion of 10,756 CCPS A.

  • Further, the Company had allotted an aggregate of 9,81,47,440 (Nine Crore Eighty One Lakh Forty Seven Thousand Four Hundred Forty) equity shares pursuant to the conversion of 49,07,372 CCPS B.

• Debentures: Board approved issuance and allotment of unrated, unlisted, unsecured, redeemable, non-convertible debentures.

• Material Changes Affecting Financial Position (Subsequent to Fiscal Year End): Allotment of 15,49,50,398 CCPS B, and 3,14,24,499 CCPS B via preferential issue. Acquisition of additional equity stakes in Aryan Wellness, Mahaveer Medi-Sales, and Aushad Pharma Distributors. Acquisition of Polo Labs diagnostic business by Thyrocare Technologies Limited.

• ROR Letters: Vistra ITCL (India) Limited issued ROR Letters, intimation of failure to comply with covenants.

• Framework Agreement: The Company and the Debenture Trustee entered into a framework agreement ("Framework Agreement”).

• Undertaking Rights Issue: Company received approximately INR 35,000 million to comply with a fund raise condition, Rights Issue in September 2023.

• Post the end of the financial year, in accordance with the terms of the Framework Agreement, the Company redeemed (i) Tranche 2 NCDs (INR 6,412.90 million); (ii) Tranche 4A NCDs (INR 6,600 million); (iii) Tranche 4B NCDs (INR 6,600 million), (iv) issued CCPS B amounting to INR 3041.89 million and (v) paid early redemption charges of amounting to INR 3,424.94.

• Directors and Key Personnel Changes: Appointed Mr. Hardik Dedhia and Dr. Dhaval Shah, appointed Dr. Ranjan Pai, Mr. Shyam Powar and Mr. Dovaldas Buzinskas as additional Directors, Mr. Dharmil Sheth and Mr. Harsh Parekh tendered their resignations, Mr. Yartharth Bhargova was appointed as Chief Financial Officer and Mr. Rahul Guha was appointed as President Operations.

• Directors' Responsibility Statement: Confirms adherence to accounting standards, fair representation of company affairs, and preparation on a going concern basis.

• Auditors: Price Waterhouse Chartered Accountants LLP appointed as statutory auditors; HRU & Associates appointed as secretarial auditors.

• Risk Management: Company has a Risk Management Policy for sustainable growth.

• Vigil Mechanism: Company has a Whistle-blower Policy for reporting unethical practices.

• Internal Financial Control: Adequate internal financial control is in place with no reportable material weakness.

• Loans, Investments, Guarantees: Details provided in the standalone financial statements.

• Related Party Transactions: Transactions with related parties are on arm's length basis, with disclosure of particulars.

• Dividend: No dividend recommended due to losses.

• Deposits: No public deposits accepted.

• Corporate Social Responsibility: Company was ineligible to spend on CSR for the financial year 2023-24.

• Employee Stock Option Scheme: Disclosures provided under rule 12(9) of the Companies (Share Capital and Debentures) Rules, 2014.

• Sexual Harassment: No cases reported under the Sexual Harassment of Women at Workplace Act, 2013.

• Board Meetings: 11 Board meetings held.

• Audit Committee: 3 Audit Committee meetings held.

• Nomination and Remuneration Committee: 3 Nomination and Remuneration Committee meetings held.

• Stakeholders' Relationship Committee: No Stakeholders' Relationship Committee meeting held.

• Corporate Social Responsibility Committee: No Corporate Social Responsibility Committee meeting held.

• Secretarial Standards: Complied with applicable secretarial standards.

• Foreign Exchange Management Regulations: Received certificate for compliance with downstream investment regulations.

• Annual Return: Will be placed on Company website.

• Shifting of Registered office: Shifted its registered office within the local limits of the Mumbai city.

• Energy conservation, technology absorption and foreign exchange: Information on energy conservation, technology absorption, and foreign exchange earnings/outgo provided.

  • The company has installed 500 kWh solar power capacity plant at Bengaluru warehouse which generated 4,97,403 kWh of solar power during the financial year 2023-24, saving approx. INR 600 million+ in terms of electricity bill and also equivalent to mitigating approx. 4,10,000 kgs of carbon dioxide into the atmosphere; thus, contributing to towards the environment.
  • In the financial year 2023-24 the Company also installed another solar power plant at our warehouse at Bhandup having capacity of 300 kWh which generated 2,24,474 kWh of solar power which is equivalent to mitigating approx 1,85,000 kgs of carbon dioxide into the atmosphere and savings of approximately more than INR 400 million in electricity bill.
  • API Holdings is a technology-first organization. Technology led innovations are deployed to offer differentiated experience to our customers, build efficient supply chain, manage large scale health ecosystems (partners, stakeholders, marketplace etc.) and improve productivity across eco-system.

• General Disclosures: No disclosure/reporting required regarding equity shares with differential rights, material orders impacting going concern, cost records maintenance, auditor-reported fraud, transfer to reserves, one-time settlements, transfer to Investor Education and Protection Fund, or proceedings under the Insolvency and Bankruptcy Code.