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    Tatas in talks to pick up majority stake in e-pharmacy firm 1mg

    Synopsis

    If the transaction goes through, it could significantly alter the face of India’s fledgling e-pharmacy sector, with two of the country’s biggest business houses battling for a piece of the action.

    Tata groupETtech
    Illustration: Rahul Awasthi
    The Tata group is in talks to acquire a majority stake in online pharmacy 1mg, three people in the know of the matter told ET, with the salt-to-software services conglomerate drawn in by the rapid growth of e-pharmacies in India due to the Covid-19 outbreak.

    If the transaction goes through, it could significantly alter the face of India’s fledgling e-pharmacy sector, with two of the country’s biggest business houses battling for a piece of the action.

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    In August, Reliance Retail, a subsidiary of India’s largest business conglomerate Reliance Industries, acquired a 60% stake in Vitalic, the parent company of Chennai-based online pharmacy startup Netmeds, in a deal valued at about Rs 620 crore.

    “The talks have been ongoing as Tatas look to build their super-app platform. The Tata group’s strategy is to pick up controlling stake but keep the management to run the operation...,” a person in the know of the discussions who did not want to be named said.

    A Tata group spokesperson declined to comment, while 1mg cofounder and CEO Prashant Tandon did not respond to ET’s email till press time on Thursday.

    ET reported on October 28 that the Tata group was in advanced talks with India’s largest online grocery BigBasket to invest as much as $1 billion in the company in return for around 50% stake. People in the know said that it was just one of the many collaborations planned by the Tatas to scale up their digital retail presence.

    The Sequoia Capital-backed 1mg has been in talks to raise around $100 million, but the funding may not come through, said another person familiar with the matter.

    “With heavyweights like Reliance and Amazon coming into the sector, independent players will find it hard to sustain themselves. They will need to align with one of the bigger groups...,” said a third person.

    Reliance’s entry also coincides with the world’s largest online retailer, Amazon’s foray into the e-pharmacy sector, which in August rolled out its prescription drug delivery service in Bengaluru in partnership with Cloudtail.

    Amazon has a 24% stake in the parent company of Cloudtail.

    The strategic investments in India’s online pharmacy sector has kicked off a wave of consolidation, with Mumbai-based Pharmeasy -- backed by Temasek, CDPQ and Orios Venture Partners -- entering into a deal to merge with its smaller Bengaluru-based rival Medlife.

    The Gurugram-based 1mg, Pharmeasy, Netmeds and Medlife are the four largest online pharmacies in the country and have looked to diversify their businesses with online lab testing, doctor consultations, and even insurance claims management services.

    They also developed a portfolio of private label products in the nutrition and supplements category.

    The first week the nationwide lockdown saw most e-pharmacy businesses getting hit, but they soon got back on their feet after the government recognised the importance of the service.

    This quickly led to a boom, with sales in the initial months doubling, according to industry estimates.

    According to Frost & Sullivan, e-pharmacies made inroads into about 9 million households in the country due to the lockdown, and the sector was expected to reach 70 million households by 2025.

    Prior to the Covid-19 pandemic, only 3.5 million households had availed of e-pharmacy services.

    India has unveiled draft rules for the sale of prescription drugs in the country, which if passed into law will require all e-pharmacies to be registered, along with setting some standards on the safety of patient data in accordance with the Information Technology Act.

    However, sale of tranquillisers, psychotropic drugs, narcotics and habit-forming drugs have been prohibited through e-pharmacies, as per the draft policy.
    The Economic Times

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