Reliance enters e-pharmacy space with Netmeds acquisition

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August 20, 2020 2:00 AM

The move by Reliance comes barely days after Amazon said it is launching online pharmacy in Bengaluru. According to media reports, Walmart-backed Flipkart is also eyeing the space.

The move by Reliance comes barely days after Amazon said it is launching online pharmacy in Bengaluru. According to media reports, Walmart-backed Flipkart is also eyeing the space.

Reliance Retail Ventures, a subsidiary of Reliance Industries (RIL), has acquired a majority equity stake in Vitalic Health, which owns online pharmacy store Netmeds, for Rs 620 crore. “This investment represents nearly 60% holding in the equity share capital of Vitalic and 100% direct ownership of its subsidiaries Tresara Health, Netmeds Marketplace and Dadha Pharma Distribution,” RIL said in a statement late on Tuesday.

Unlike apparel and smartphones, online grocery and pharmacy segments don’t yet have a sizeable customer base, Satish Meena, senior analyst at Forrester Research said, explaining that a huge e-pharmacy market is waiting to be tapped into.

A survey by market research firm RedSeer Consulting shows that of the 90 million online shopping households currently in India, close to 60 million are willing to use e-health services going ahead. A mere 7% of the potential 60 million households avail such services at present, it said in a February report. The pandemic may have only expedited the shift.

Ankur Bisen, SVP at Technopak Advisors, said as far as sale of prescription-based drugs is concerned, the brick-and-mortar pharmacy retail is limited by certain regulations. Essentially, a manufacturer cannot set up their own online channel to sell drugs directly to consumers. Also, they are only allowed to sell medicines to customers via distributors and retail store partners. The ambit of pharmacy retail has broadened to cover non-prescription-based cure like preventive medicine and supplements. Digital intervention will help retailers scale up their business and widen their consumer reach. “It is the stated ambition of Reliance and JioMart to grow through the digital route to make JioMart the centrepiece of the retail story. Hence, the acquisition of Netmeds is aligned to their growth plans,” Bisen said.

At some point, RIL may also get physical pharmacy stores on board, similar to their grocery model with kiranas. “There is hardly any penetration of digital pharmacy at present. Acquisition allows a company to compete faster in a changing landscape, but it remains to be seen as to how will it be executed on ground,” Bisen added.

Meena said since RIL has the intent to sell everything to consumers, the acquisition of Netmeds will strengthen its portfolio and meet its growth trajectory. As medical consultations are increasingly moving online, the sale of online medicines will get a boost. “This is the direction which everyone is taking. Such acquisitions would have happened in the next two years. Covid-19 has expedited the process,” Meena said.

“In the coming years, we will cover many more cities, serve many more customers and expand to many more categories,” Pradeep Dadha, founder & CEO at Netmeds, said.

The move by Reliance comes barely days after Amazon said it is launching online pharmacy in Bengaluru. According to media reports, Walmart-backed Flipkart is also eyeing the space.

Traders, however, are opposed to the online pharmacy business as they believe it will lead to sale of medicines without proper verification. An industry expert said traders feel threatened as prices are likely to get cheaper and consumers may shift to online purchases. Also, e-pharmacy is not regulated like physical trade.

The government is yet to notify the draft e-pharmacy rules.

According to estimates by RedSeer Consulting published in February, the $1.2-billion e-health sector has the potential to become a $16-billion opportunity by FY25.

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