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Champ in the Making

Champ in the Making

PharmEasy's deal to buy Thyrocare is the first-ever acquisition of a listed company by an Indian unicorn. Here is the story behind the miracle

Siddharth Shah, CEO and Founder, PharmEasy -- Photograph by Mandar Deodhar Siddharth Shah, CEO and Founder, PharmEasy -- Photograph by Mandar Deodhar

The rags-to-riches story of Arokiaswamy Velumani, the founder of diagnostics chain Thyrocare, is well-known and a motivation for aspiring entrepreneurs. He was born in a poor family in a village on the outskirts of Coimbatore. His mother funded his education from whatever little she earned from her two buffalos. He graduated in science and after years of struggle got a job at the Bhabha Atomic Research Centre in Mumbai. He worked there for 15 years before starting his own business, painfully building up a diagnostics chain with a one lakh square feet central laboratory in Navi Mumbai. He lived in a small portion of the lab and recruited mostly freshers whom he wanted to help considering his own early struggles. The 62-year-old hogged headlines recently when he sold his pan-India diagnostics chain, Thyrocare, to PharmEasy, a six-year-old e-pharmacy, for Rs 4,546 crore.

The deal put PharmEasy’s media face, founder and chief executive officer Siddharth Shah — a 32-year-old computer engineer and IIM-Ahmedabad graduate who comes from a rich family in Mumbai and is fond of cars — into the limelight as a new-age business celebrity. It is, after all, going to be the first-ever acquisition of a listed company by a start-up. PharmEasy, which became India’s largest e-pharmacy after the acquisition of its rival, Medlife, has been the first Indian e-pharmacy start-up to enter the unicorn club. The Thyrocare deal, backed by many leading private equity entities, has doubled its valuation to over Rs 30,000 crore ($4 billion).

The deal is being celebrated as another story of a new-age business whiz-kid mentored to success by experienced private equity masters. However, probe a little, and the story turns out to be different. Siddharth, despite his privileged background, exemplifies the struggles new-age entrepreneurs go through to script success.

Born Entrepreneur

Unlike most rich kids who work for global financial firms to gain experience for running their family business, Siddharth never tried to get a job. The parents of this three-time national go-karting champion in his school days were liberal enough to allow him to choose what he wanted to do in life. His first ambition was to become a race-car driver. His mother used to take him for races from city to city despite having a busy schedule. He studied computer engineering in college and at 21 got into IIM-Ahmedabad. As part of management studies, all students had to develop a business plan. Usually, everyone submits the project, gets marks and tries for campus placement. “My professor Anil Gupta told me ‘instead of a project plan, why don’t you float a company and show how to run it?’ I went on to register a company, DialHealth, a concept for India’s first online pharmacy. That is how the story began,” says Shah. After a two-month mandatory internship with Goldman Sachs, he opted out of the placement process and decided to start his own business. “My mindset was never fit for a job. I thought if I get a fat job, my mind may get used to its pleasures and comforts. I did not want that to happen,” he says.

The biggest challenge for new entrepreneurs those days was mindset of parents and society, he says. “Nowadays, a lot of youngsters can tell their parents they want to start own business. The concept of start-ups was not cool in 2011-12,” he says. But his parents supported his plans. The first company, DialHealth, was a simple concept like the already successful JustDial. He launched it with Hardik Dedhia, a childhood friend and a Carnegie Mellon graduate. Four months later, another friend and a Narsee Monjee Institute of Management Studies alumnus, Harsh Parekh, joined as partner. They floated a website,, with a simple dial-in number (4000 5000) for information, consultation with doctors and getting connected to a nearby pharmacy for medicines. Within months, customers flooded the portal.

Failed Starts

Soon, they encountered what most digital businesses face — supply constraints. Most patients wanted to consult well-known doctors. But such doctors were not in a position to spare time for patients from a portal. There were orders for medicines but supplying them was an issue as doctors usually prescribe a brand that is available either in the hospital pharmacy or in the neighborhood pharmacy. “We realised there are over two lakh brands of molecules and a medical store can have 3,000-4,000 brands at the most,” says Siddharth Shah. Same was the case with diagnostics services — either you have to tie up with doctors to get customers or own a diagnostics chain, which requires a huge investment. They decided to “strengthen the backend to make up for issues in the front-end” and started a chain of medical stores. The result was the same.

This was a learning process for the entrepreneurs. They realised that retailers were facing the same issues. A medical store may not have a particular medicine and may ask the customer to wait for two days to get it from its distributors, who supply A company’s drug on Monday, B company’s drug on Tuesday, and so on. In 2013, after 18 months of DialHealth’s failure, they set up Ascent Health and Wellness, a distribution set-up that promised retailers any drug within four hours. It was a game-changing experience for both retailers and customers. Soon, Ascent built a network of thousands of retailers and started acquisitions in the distribution space across Mumbai, Bengaluru, National Capital Region, Chennai and Ahmedabad. By March 2015, two more friends, Dharmil Sheth and Dhaval Shah, joined. PharmEasy was formed. That was the start of a successful run. They went on to acquire Docon, a doctor consultation platform, and then Medlife, before going for Thyrocare.

Parental Support

“Possibly I am the most fortunate son in the entire country because my father trusted me so much despite the failures. Parents of my other founder partners also trusted them very much, and that changed everything for us,” says the young entrepreneur. Before private equity, the venture was funded by Sidharth’s father Dr. Bhaskar Shah and mother Dr. Jasmine Shah, who exhausted almost all their wealth during the initial years of their son’s business journey. Dr. Bhaskar Shah was born and brought up in poverty with five siblings in a 100 sq.ft. home in Mumba’s Malad. He studied hard to become a cardiologist, the only person in the family to get a good education. His wife Dr Jasmine also had humble beginnings. Dr. Bhaskar Shah started a small hospital in Ghatkopar, called Ashirvad Hospital, with 22 beds and an ICCU, in 1986. In 1999, he became a co-founder of the Asian Heart Institute in Bandra Kurla Complex, Mumbai — he was the second-largest shareholder after Dr. Ramakanta Panda, the main promoter. In 2007, he was one of the co-founders of Jupiter Hospital, a chain of hospitals in Thane, Pune and Indore. He not only gave his son his personal savings, he also mortgaged his house and his first hospital, sold his entire shareholding in Asian Heart Institute and mortgaged his Jupiter Hospital shares to raise money for his son. Almost 95 per cent of the family's wealth was pledged to help Siddharth. The amount was huge, Rs 21 crore in all, which Dr. Bhaskar Shah had earned over decades of hard work. Besides, he gave another Rs 20 crore, a personal loan he had taken from friends. “For me, my parents are my gods, I don’t know why they trusted me so much even after two failures in three years,” says Siddharth, with moist eyes and choked words. It is not just the money, it is the mindset of his parents that has helped him succeed, he says. Hardik’s parents also mortgaged their savings to give their son Rs 2-2.5 crore.

Ride to Success

With a strengthened backend in Ascent and frontend success in PharmEasy, investors started showing interest. The first to invest was Nimesh Kampani of JM Finance (Rs 2 crore as equity and Rs 10 crore as loan to Dr. Bhaskar Shah). Then, the Bagodia family of Ahmedabad and a neighbour friend, the Morabia family, invested. The other initial investors included Bessemer Venture Partners, Orios, Ranjan Pai of Manipal Hospital and Everstone Capital. “PharmEasy has become a leader driven by its full stack vision of pharmacy, diagnostics and consultation which delivers a unified superior consumer experience,” says Vishal Gupta, Partner at Bessemer Venture Partners.

Until 2015, the company was present only in Mumbai. It slowly expanded to Delhi and then Bangalore. It started TV publicity only after having a pan-India presence by 2018. Ascent and PharmEasy merged into a holding company, API Holdings, which stands for Ascent, PharmEasy and India Holdings. Private equity investors Temasek, CDPQ, LGT Lightrock, Eight Roads and Think Investments came on board. Some of them exited when Prosus Ventures (previously Naspers Ventures and the investing arm of South African conglomerate Prosus) and US-based private equity firm TPG Growth invested about $350 million (Rs 2,570 crore) in API Holdings in April. That deal valued PharmEasy at $1.5 billion. So far, the company has raised over Rs 8,500 crore, which includes Rs 7,000 crore primary capital and old investors exiting for Rs 1,500 crore..

“Increasing digitisation of services, accelerated by Covid-19, has offered new opportunities in this space. As a long-term investor, we provide patient capital for companies like PharmEasy, as they continue to grow over time and provide solutions to address healthcare needs,” says Promeet Ghosh, Deputy Head, India, Temasek.

“We believe PharmEasy has made significant strides in consolidating its market leadership and providing holistic and comprehensive outpatient healthcare solutions. The company is best positioned to provide affordable and best-in-class quality healthcare across the length and breadth of the country,” says Ankur Thadani, Partner at TPG Growth and RISE Fund.

PharmEasy claims to have 12 million consumers, a network of 6,000 digital consultation clinics and 90,000 partner retailers catering to over one million patients. Thyrocare has 3,330 collection centres in 2,000 towns. It reported revenues of Rs 495 crore and a net profit of Rs 113 crore in FY21. According to media reports, PharmEasy’s revenue nearly doubled to Rs 637 crore in FY20, though the start-up is still in losses. Siddharth prefers not to comment on this as the acquisition process is on. “We have been growing revenues by more than 80 per cent every year for five-six years, and all our businesses have variable profits if you discount the fixed costs for growth,” he says.

“This deal brings together India’s leading digital health platform and one of the most cost-efficient diagnostics solution providers to create an unbeatable integrated digital health platform,” says Vishal Kampani, Managing Director of JM Financial Group, which advised on the deal. Velumani sees the deal as a very rare and unique combination in the diagnostics space with potential to change healthcare delivery practices.

PharmEasy’s parent API Holding’s unit Docon will buy 66.1 per cent stake in Thyrocare Technologies for Rs 4,546 crore at Rs 1,300 per share. The deal will trigger an open offer for an additional 26 per cent stake, costing another Rs 1,800 crore. Velumani will continue to guide Siddharth and his team as an investor in API Holdings (Rs 1,500 crore for about 5 per cent stake). Siddharth and his young partners and 600 employees together own just 14 per cent in API Holdings. For them, that is not a deterrent. “Ownership as a percentage does not define how risky you are as a promoter or how successful you will be. Look at the success of L&T or HDFC Bank or Infosys, where owners’ shareholding did not matter in their success,” says Siddharth.

The new business whizkid has more dreams to accomplish, though he couldn’t become a Formula One driver. “With blessings of my parents, and if god gives me more money, one day I will buy a Formula One team.”

pb_pbjayan; joecmathew