Traders' Body Confederation of All India Traders (CAIT) has written to the Security and Exchange Board of India (SEBI) urging the market regulator to dismiss the IPO proposition of e-pharmacy company PharmEasy.
CAIT has reasoned that the sale of medicines over the internet is not allowed according to an order passed by the Delhi High Court in 2018.
CAIT has alleged that the business model of PharmEasy is "entirely based on gross illegality". The traders' body has pointed out many discrepancies in the DRHP (draft red herring prospectus) of API Holdings, the parent firm of PharmEasy.
CAIT noted that it wanted to draw SEBI's attention towards a communication sent by South Chemist and Distributors Association (SCDA) to the market regulator on November 15, 2021.
In the letter addressed to SEBI Chairman Ajay Tyagi, CAIT national general secretary Praveen Khandelwal wrote that PharmEasy has been selling medicines via the internet in violation of the Delhi High Court order of 2018.
"The Contempt of Court proceedings are still pending against all parties in the said case," read the letter.
CAIT also wrote that the Ministry of Health and Family Welfare in a sworn affidavit before the Delhi High Court had noted that the online sale of medicines was still under consideration of the government.
It added that the Drugs & Cosmetics Act 1940 and Rules 1945 had no provision for the online sale of drugs.
CAIT has alleged that PharmEasy has been selling drugs without a license as there is no provision for any licensing scheme under the current rules and regulations.
"The injunction is on online sale of medicines 'without license' and clearly there is no license for the same and no provision under the current rules and regulations regarding online sale of medicines," wrote CAIT.
The traders' body also noted that API Holdings proposed to acquire pathology lab Thyrocare a few months ago, however, the Competition Commission of India (CCI) had passed no order concerning the acquisition.
Yet, API Holdings in its DRHP has listed Thyrocare as its subsidiary.
The SCDA had sent a letter to CCI seeking clarification in this regard but had received no response even after several reminders.
CAIT wrote that it believes that investor wealth worth billions are at stake if the IPO of PharmEasy is approved by SEBI.
This is not the first time CAIT has complained about PharmEasy. In August, it had alleged malpractices and violation of rules by e-pharmacy firms and urged the government to take action against them.
In a memorandum to Commerce and Industry Minister Piyush Goyal, CAIT said it "has strongly raised the issue of malpractices being conducted in online pharmacy trade and alleged" that firms including "Pharmeasy, and1Mg" are conducting business practices in contravention of provisions of The Drug and Cosmetics Act, 1940.
E-pharma start-up PharmEasy is looking to raise Rs 6,250 crore ($840 million) in the upcoming Initial Public Offering (IPO), according to the company's filings with the Securities Exchange Board of India (SEBI).
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