BENGALURU: Tata Group is now eyeing the online pharmacy space and is in discussions to buy a large stake in Gurgaon-based 1MG, said three sources familiar with the matter. The development comes as 1MG is also in talks to raise $100 million in funding from a private equity consortium led by Gaja Capital, which was first reported by TOI in September. Both the investment talks are happening in parallel.
The development comes even as the Tatas are also in advanced discussions to buy close to 50% in e-grocer Bigbasket. Tata’s investment in 1MG is still not finalised, but this indicates the growing interest of large strategic players in this segment. Reliance’s retail arm picked up a 60% stake in Netmeds, while Amazon India and Flipkart have also recently entered the space. PharmEasy too is merging with smaller rival Medlife. This combined entity is in talks to raise new capital to battle the bigger conglomerates.
“There is definitely a lot of interest in 1MG and Tatas have held talks with them as part of the broader e-commerce push. At the same time, Gaja continues to engage with 1MG over its planned $100-million fund-raise,” a person aware of the matter said. Sources added, with the Tatas coming into the picture, the overall round may surpass $100 million in size. “They (1MG) were working out the contours as to which investors they want to go ahead with, when Tatas expressed interest,” another person aware of the discussion added.
When contacted, 1MG co-founder and CEO Prashant Tandon, a spokesperson of Gaja Capital and Tata Group declined to comment on the matter. If the deal fructifies with Tatas, then 1MG — so far the only remaining large independent player — would also become part of a bigger group. 1MG was valued $200-225 million after closing its last round in 2019.
For 1MG, unlike its rivals, its business is split almost equally between medicine delivery and services like lab tests and online doctor consultation. For 1MG’s rivals, most of their revenue comes from medicine delivery, while they are expanding into verticals like online doctor consultations and lab tests. 1MG’s existing investors include Sequoia Capital and World Bank investment arm IFC.
E-pharmacy has already benefited from the pandemic with industry reports saying 6 million new households have tried e-pharmacy since the virus outbreak, taking the total to 9 million. A potential entry of Tatas along with existing names like Reliance and Amazon indicates a digital healthcare play at a higher scale in India. A high-order frequency, the average ticket size of purchases along with a bigger healthcare play is what these large strategic players are focusing on.
Source From : Times Of India