If things had gone well, SastaSundar Marketplace Limited SML would have seen an infusion of funds from at least one private equity player.
Four months ago, the story took a dramatic turn when investment bank, Intellecap, led by its Managing Director, Pramod Kasat met B L Mittal and Ravi Kant Sharma, Sastasundar's founders, to suggest an alternative plan. The argument put forth was that there was steam left in the business and the private equity route was not the way to do it.
SML, who is owned by SastaSundar Healthbuddy Limited SHBL, has Flipkart as a joint venture partner, though the financial details remain under wraps. Flipkart will hold the majority stake in the B2 C business.
The market is structured, and the strategic rationale for this transaction comes down to how the market is structured. The gross merchandise value of GMV SML is the second largest player after PharmEasy. Industry trackers point out that this is a cash-burn business, which makes it a huge challenge for SML. It would have been difficult for the promoters to scale up and bring in Flipkart. The game opened up for the online pharmacy business at the beginning. M&A is in play with the Tatas having bought 1 mg and Reliance acquiring Netmeds. Amazon has taken its baby steps in the business, and PharmEasy is already a name. It gives it a foothold in an existing and established business, and with its base of over 30 crore customers, it can easily up the game.
They can really get a shot at the game with the help of the Walmart ownership. An official familiar with the transaction says that the online pharmacy is the next frontier.
The consumer Internet ecosystem in India is growing rapidly as consumers recognize the opportunities and conveniences that digital adoption is enabling, according to a statement issued by Flipkart's senior VP and head corporate development, Ravi Iyer. There is a huge opportunity for affordable healthcare and ancillary offerings with the increasing awareness and focus on health heightened by the Pandemic. The B 2 B business housed in SHBL is not part of the deal. Mitsubishi Corporation and Rohto Pharmaceuticals have a 28 percent stake in the company, which consists of fulfilment, distribution and distribution.
There is a good chance that the relationship will be strengthened with Walmart. The official says that once regulations are clearer, they will invest in the B2B business.
This could be the beginning of an interesting association, given Walmart's ability to play the long-term game. SHBL also has a diagnostic lab business, one that has a limited organized play but has the attraction of high margins. The marketplace story and the B 2 B business could see Flipkart moving ahead.
He says the gameplan is to get the best out of the Indian promoters' understanding of the business and bringing in the money when needed. A low-profile deal can be a good one to look out for over time.