Tata 1mg Pursues $200 Million Funding as Novo Holdings and CPPIB Express Interest
Tata 1mg, the online pharmacy subsidiary of Tata Digital, is actively seeking to raise $200 million in a new funding round. The initiative has garnered interest from notable investors, including Novo Holdings, the Canadian Pension Plan Investment Board (CPPIB), Permira, and Chrys Capital. This fundraising effort is part of a broader capital raise strategy across various Tata Digital units, including Big Basket. However, potential investors have expressed concerns regarding the company’s previous valuation of $1.25 billion, suggesting a more conservative valuation range of $750 to $800 million instead.
Investor Dynamics and Valuation Challenges
Tata 1mg is recognized as one of the standout performers within the Tata Digital portfolio. Despite this, the company faces challenges in aligning with investor expectations regarding its valuation. Some investors are pushing for board seats and additional rights, which Tata has reportedly been reluctant to grant. Should the deadlock over valuation continue, Tata Sons may consider injecting approximately $75 million of its own funds in a down round while seeking external capital for the remainder. Alternatively, the company might opt for a smaller fundraising round. Currently, Tata 1mg is in need of $125 million in fresh capital to support its ongoing operations and growth initiatives.
The company has previously attracted interest from major investors like GIC of Singapore and Warburg Pincus, but these discussions have since fallen through. Tata Digital holds a 63% stake in Tata 1mg, with other significant investors including Sequoia Capital, Intel Capital, Omidyar Network, and the Bill & Melinda Gates Foundation. The platform, which was valued at $1.25 billion during its last funding round in 2022, not only provides e-pharmacy services but also offers diagnostics and healthcare solutions.
Financial Performance and Growth Trajectory
Tata 1mg has demonstrated robust financial growth, with its consolidated revenue increasing by 22% to ₹2,392 crore in FY25, up from ₹1,968 crore in FY24. This revenue is divided between Tata 1mg Technologies, which contributed ₹2,016.5 crore, and Tata 1mg Healthcare Solutions, which accounted for ₹375.5 crore. The company has also managed to narrow its consolidated losses to ₹276 crore in FY25, down from ₹313 crore in the previous fiscal year. On a unit basis, Tata 1mg spent ₹1.12 to generate one rupee of operating revenue, indicating a focus on improving efficiency and profitability.
An executive close to the company noted that Tata 1mg continues to perform strongly, with effective execution and no significant delivery challenges. The integration with Tata Neu, which is positioned as a super app, has further accelerated growth and expanded the business’s reach. The company remains optimistic about securing funding in line with the best available options, emphasizing that funding is not a primary concern at this stage.
Expansion Plans and Market Potential
Since its acquisition by Tata in June 2021, Tata 1mg has made significant strides in expanding its delivery capabilities. The company now offers delivery within four to five hours in select locations, including the Delhi-NCR region, and provides a 30-minute express delivery service for certain products. Tata 1mg operates over 100 physical medical stores that combine pharmacy and diagnostics services, with plans to open 3,000 outlets by FY30.
Despite the growth of online pharmacies, they currently account for only 3-5% of the Indian market, compared to nearly 20% in developed countries. This discrepancy highlights substantial growth potential for Tata 1mg as it continues to scale its operations. The company has successfully transitioned beyond online services into offline retail and integrated healthcare solutions, offering a comprehensive range of services that include e-pharmacy, diagnostics, consultations, and institutional health solutions. With over 800,000 stock-keeping units and delivery capabilities extending to more than 20,000 pin codes, Tata 1mg is well-positioned to capture a larger share of the burgeoning healthcare market in India.
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