Document Summary
API Holdings Limited, in a Letter of Offer dated September 25, 2023, is raising up to INR 3500,00,00,000 through a Rights Issue, by issuing Compulsorily Convertible Preference Shares (CCPS B) to its eligible equity shareholders ("Equity Shareholders") on the record date of August 11, 2023. The CCPS B will be issued at a price of INR 96.8 per CCPS.
Restrictions and Disclaimers: The CCPS B have not been registered under the U.S. Securities Act of 1933 and cannot be offered or sold in the United States, except in transactions exempt from registration. This letter of offer is for information only and should not be copied or re-distributed.
Background: API Holdings initially aimed for an IPO in 2021-22 but withdrew in July 2022 due to market conditions. To repay outstanding debt, the Company raised debt from Goldman Sachs and EvolutionX in June 2022 through non-convertible debentures. A key term was raising additional capital by January 2023, which the Company couldn't meet. On July 15, 2023, MEMG International India Private Limited made a binding offer to subscribe to the Company's securities worth INR 1300,00,00,000. The Board decided to offer CCPS B to its internal stakeholders first before the Incoming Investor.
Key Terms of the Rights Issue:
- Instrument: Series B CCPS
- Rights Issue Price: INR 96.8 (including a premium of INR 95.8)
- Rights Issue Ratio: 1 CCPS B for every 17 fully paid-up Equity Shares held
- Issue Size: Up to INR 3500,00,00,000 (approximately 36,13,06,123 CCPS B)
- Eligible Equity Shareholder: Equity Shareholders on the Record Date.
- Renouncee: Person(s) (other than a Competitor) in whose favour the Eligible Equity Shareholders have renounced
- Investor: Eligible Equity Shareholder(s) and the Renouncee(s)
- Record Date: August 11, 2023
- Form of Issuance: Demat form
- Issue Period: September 29, 2023 to October 27, 2023 (until 5.00 p.m.).
- Listing: The CCPS B will not be listed on any stock exchange.
- Purpose of the Offer: The proceeds from the Rights Issue will be utilized as detailed in para M of Part 1 of Annexure A.
- Mode of Payment: Crossed cheques or demand drafts in the name of "API Holdings Limited-R" or "API Holdings Limited-NR."
Other Key Details:
- The Board can provide alternate payment options and defer allotment for persons requiring CCI approval.
- Application Form: Composite application form (Annexure E). Template for ‘Other Eligible Persons’ is to be provided by the Company to them.
- Investors are requested to submit the Application Form on or before 5:00 p.m. on October 27, 2023.
The document also includes Annexures detailing company information (Annexure A), general terms of the Rights Issue (Annexure B), terms of the offer of Unsubscribed Rights Issue Amount (Annexure C), terms of the CCPS (Annexure D), the application form (Annexure E), and financial information (Annexure F), restrictions on purchases and resales (Annexure G) and timelines for submission of applications forms and allotment of CCPS B to other eligible persons (Annexure H).
Annexure A: Company Information
- API Holdings Limited is an unlisted public company incorporated on March 31, 2019.
- The company operates an integrated, end-to-end business providing healthcare solutions through delivering healthcare products, diagnostics, and technology products.
- The management team includes Siddharth Shah (Managing Director and CEO) and other co-founders like Dharmil Sheth, Harsh Parekh, and Dr. Dhaval Shah.
- The Board of Directors includes Aditya Puri (Chairman) and Independent Directors such as Deepak Vaidya and Vineeta Rai.
- The document identifies numerous risk factors for investment in the CCPS B including risks related to the digital healthcare industry, brand reputation, limited operating history and acquisitions, regulatory requirements, technology infrastructure, and competition.
- Legal proceedings include ongoing cases before the Madras and Delhi High Courts concerning the online sale of drugs.
- The Company has committed certain financial covenant breaches under the DTD, being addressed as part of a Framework Agreement.
- Drashti Shah is the Compliance Officer.
Details of Debt and Settlement with Goldman and EvoX
- Between June and September 2022, the Company raised Debt from Goldman, EvoX. The Company was required to raise (a) USD 65 million and (b) USD 150 million. The Company fulfilled the covenant mentioned in i(a) above, by announcing a fund-raise with offer size of INR 750,00,00,000
- The Company could not raise fresh capital within the specified timeline and hence came to be in breach of covenant in terms of Clause i(b)
- Since the Company failed to raise the requisite capital within specified timelines, Goldman called an event of default under the DTD
- Goldman imposed certain additional conditions on the Company, including raising at least INR 2000,00,00,000 from existing as well as incoming investors. In light of the same, the Company has launched this Rights Issue.
- To record the terms of settlement, the Company is in the process of executing a framework agreement with Goldman. The Board shall allot to Goldman and EvoX, such number of CCPS B for an aggregate amount of INR equivalent of upto USD 38 million from the remaining portion of Unsubscribed Rights Issue Amount
Purpose of the Offer
- Firstly, for redemption of non-convertible debentures issued by the Company.
- Secondly, towards meeting any business requirements of the Company.
- Thirdly, towards maintenance of cash or cash equivalent reserves at the Company
- Fourthly, towards payment of the respective Payment Amounts to the relevant Identified Debenture Holders
- Lastly, towards such other purpose as may be decided by the Board.
Business Overview (Part 2)
- Operate an integrated, end-to-end business that aims to provide solutions for healthcare needs of consumers across the following
- Our pro forma GMV for sale of products was INR 66,913.89 million in Fiscal 2023. This includes GMV from (i) distribution to retailer and (ii) distribution to chemist/institutions and distribution to Hospitals.
- We sell pharmaceutical, OTC, surgical, consumables and private label products procured from pharmaceutical companies, manufacturers, and wholesalers to retailers across the country through a technology powered platform. In Fiscal 2023, this business recorded revenues of INR 15,194.34 million
- We strengthened our distribution business to hospitals, clinics and medical centers through the acquisition of 67.30% shareholding of Aknamed effective September 2021. In Fiscal 2023, Aknamed recorded revenues of Rs. 11,996.92 million. Aknamed serviced 1,648 and 1,801 hospitals in Fiscal 2023 and Fiscal 2022 respectively
- Our Pro Forma GMV from sale of services was Rs. 76,549.24 million in Fiscal 2023.
- In Fiscal 2023 our diagnostics business recorded consolidated revenues of INR 5,868.10 million.
- We provide EMR and practice management software and teleconsultation tools to doctors through our proprietary software called Docon
- 77% of PharmEasy marketplace's GMV for Fiscal 2023 came from repeat users vs 71% in Fiscal 2022
- During Fiscal 2023 and Quarter ended 2023 we have focused our efforts in improving our profitability by targeting the right customer segments that contribute to better economics and efficiencies across our operating, marketing, and other costs.
Financial Performance Highlights (Part 4)
- Our pro forma GMV was ₹1,34,576.43 million in Fiscal 2022, ₹1,43,563.14 million in Fiscal 2023 and ₹28,875.38 million in Quarter ended June 2023.
- Our revenue from operations increased by 5.0% to ₹67,051.20 million in Fiscal 2023 from ₹63,836.30 million in Fiscal 2022
- Our total expenses decreased by 1.7% to ₹90,352.65 million for Fiscal 2023 from ₹91,934.17 million for Fiscal 2022
- Our finance costs increased by 29.57% to ₹5,202.80 million in Fiscal 2023, from ₹4,015.50 million in Fiscal 2022
- As a result of the foregoing factors, our loss after tax decreased to ₹(22,768.66) million for Fiscal 2023 from ₹(40,535.95) million for Fiscal 2022.
Capital Structure and Shareholding Pattern (Part 3)*
- Authorised, issued and paid up capital of the Company are detailed.
- Details of Equity Share Capital:Number of shares allotted
Share premium, other than cash
Restrictions on Purchases and Resales (Annexure G):
- This Rights Issue is not for people in the United States and has several investment-related warnings and notifications.
- Rights Entitlements and the CCPS B referred to in this Letter of Offer are being offered in offshore transactions outside the United States in compliance with Regulation S under the Securities Act
Timelines for other eligible persons (Annexure H)
- (A) Pre-emption Exercisee; and (B) holders of CCPS A
- (A) Pre-emption Exercisee; and (B) holders of CCPS A to submit Application Form and deposit application monies
- Notice to be issued to ESOP holders, The number of working days for completion has been provided.
