Nov 27, 2021

How Flipkart's strategic buyout of SastaSundar can change the e-pharmacy game How Flipkart's strategic buyout of SastaSundar can change the e-pharmacy game The deal, which went largely unnoticed when it was announced, could mark the emergence of a formidable player in the online pharmacy segment. SML, owned by SastaSundar Healthbuddy Limited (SHBL), has Flipkart as a joint venture partner, though the financial details remain under wraps. Krishna Gopalan Updated Nov 27, 2021, 8:34 AM IST If things had gone to plan, SastaSundar Marketplace Limited (SML), an online pharmacy and digital health platform would have seen an infusion of funds from at least one private equity player. The story took a dramatic turn four months ago 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. Now, SML, owned by SastaSundar Healthbuddy Limited (SHBL), has Flipkart as a joint venture partner, though the financial details remain under wraps. This is only the B2C business where Flipkart will hold the majority stake. Now, the strategic rationale for this transaction comes down to how the market is structured. In terms of the gross merchandise value (GMV), SML is the second largest player after PharmEasy. Industry trackers point out that this is a cash-burn business, making it a huge challenge for SML. "It would have been difficult for the promoters to scale up and bringing in Flipkart is a win-win situation." How exactly is that? At the outset, the game has really opened up for the online pharmacy business. M&A is in play with the Tatas having bought out 1mg and Reliance acquiring Netmeds. Amazon has taken its baby steps in the business and PharmEasy is already a name. For Flipkart, it gives it a foothold in an existing and established business and with its base of over 30 crore customers can easily up the game. "With the Walmart ownership, they can really bring in the expertise and get a serious shot at the game. Online pharmacy is the next frontier," says an official familiar with the transaction. In a statement, Flipkart's Senior VP and Head - Corporate Development, Ravi Iyer said, "The consumer Internet ecosystem in India is growing rapidly as consumers recognise the opportunities and convenience that digital adoption is enabling in their lives. With growing awareness and focus on health heightened by the pandemic, there is a large opportunity and demand for affordable healthcare and ancillary offerings."