Even if it is not a mega deal like the Walmart-Flipkart one, the API-Thyrocare transaction stands out in that it is apparently the first unicorn to buy out a listed firm.
It may not be the new normal yet, but API Holdings’ acquisition of Thyrocare, late last week, is definitely a landmark deal. API is the parent of PharmEasy, an online digital outpatient healthcare ecosystem. It is not as though online and offline businesses are not buying into one another. Amazon Inc picked up a tiny share of Shoppers’ Stop some years ago. And then Walmart scooped up Flipkart.
Typically, it is the brick&mortar businesses that have been trying to buy themselves an online presence. The Tata conglomerate, for instance, is trying to build a super app by snapping up e-commerce companies; it recently bought into Big Basket. Even if it is not a mega deal like the Walmart-Flipkart one, the API-Thyrocare transaction stands out in that it is apparently the first unicorn to buy out a listed firm.
That’s the harbinger of things to come. Buyouts in the past—primarily in the industrial space—have almost always been accompanied by a sharp fall in the share price of the acquirer; analysts fret the company will need to leverage to fund the transaction or that the earnings will get diluted and it will take years for the synergies to play out. API’s investors are so chuffed they have put in $300 million more to help it foot part of the Rs 6,000-crore bill for Thyrocare. Barely two weeks back, PharmEasy was valued at $1.8 billion, the latest funding round values it at $4.1 billion. Thyrocare’s shares lost value post the announcement.
That’s the kind of clout a good digital business enjoys these days. With every second person in the country now having access to the internet, it is almost as if brick&mortar businesses are going out of fashion. One estimate by 3one4 Capital says internet revenues will be nudging $70 billion by 2025, on a gross transaction value of $180 billion, while the profits would amount to $8.5 billion. The value created by Indian start-ups is expected to grow three-fold by 2025. For perspective, India Inc’s revenues in FY 21 (for a sample of close to 2,000 companies) were roughly `80 lakh crore—about $1 trillion—while profits were Rs 6.6 lakh crore (or $88 billion).
Digitisation is no longer merely another option for many traditionally offline sectors, banking for instance. But even a fully online business may want an offline presence. This symbiosis could see more offline businesses surrendering, mainly because digital players are backed by deep-pocketed investors. In the retail space, for instance, the traditional brick&mortar players like the Future Group are cash-strapped. Thyrocare’s Arokiaswamy Velumani has said API’s was the best deal he got in five years and he received some 25 offers.
Velumani may have sold out for personal reasons, not because his business was not profitable—in fact, it was doing brilliantly well—but in several sectors, surviving without an online presence may be difficult. API is another classic garage start-up story, set in the Mumbai suburb of Ghatkopar. If traditional businessmen envy its success, they need to learn to put the consumer at the heart of the business. That is something that does not come easily to them.