The Delhi High Court has issued notice to the Competition Commission of India (CCI) and Securities and Exchange Board of India (SEBI) seeking clarification from them on denial of the South Chemists & Distributors Association (SCDA)’s objection to PharmEasy’s acquisition of Thyrocare, a chain of diagnostic and preventive care laboratories.
 
The high court issued notice to CCI and SEBI while hearing a petition filed by SCDA.
 
The court asked CCI and SEBI to remain present on the next date of hearing i.e. on January 13, 2022 to respond to the averments made by SCDA regarding non-consideration of its representations.
 
SCDA has approached the high court against the failure of the CCI to respond to its representations, raising objections to online pharmacy PharmEasy’s parent company API Holdings Ltd’s acquisition of Thyrocare Technologies Ltd. (Thyrocare).
 
API Holdings picked up a 66.1 per cent stake in Thyrocare Technologies from its founder A Velumani for Rs. 4,546 crore (about Rs. 1,300 per share).
 
API Holdings mentions Thyrocare as their subsidiary in the draft red herring prospectus (DRHP) submitted to SEBI.
 
SCDA stated that it came to know on December 17, 2021 that API never sought approval of the CCI for its combination with Thyrocare, even though SCDA had written to CCI regarding the combination.
 
The chemists’ association stated that the combined assets of API, after its acquisition with Thyrocare, are above the threshold values prescribed and approval of CCI is mandatory for the same.
 
SCDA also relied on the CCI Market Study on Pharmaceutical Sector in India dated November 18, 2021 where concerns regarding anti-competitive effects of e-pharmacies have been considered by the CCI.
 
SCDA also stated that SEBI has refused to consider and respond to its representations regarding the DRHP issued by API. PharmEasy had filed for an initial public offering (IPO) of up to Rs. 6,250 crore last month. The startup would use the proceeds from this IPO to prepay or repay its outstanding debt of Rs. 1,929 crore. The company will be looking to invest Rs. 1,259 crore to fund organic growth initiatives. It has also set aside another Rs. 1,500 crore would be spent on inorganic growth initiatives through acquisition and organic growth initiatives.
 
Last month, SCDA wrote to SEBI seeking rejection of the proposed IPO alleging that online pharmacies are illegal in the country.
 
The chemists’ body relied on SEBI (Framework for Rejection of Draft Offer Documents) Order, 2012, which states that (a) for the protection of interest of investors, and where investor may not be able to assess the risks associated with the issue and (b) where there exists litigation including regulatory action which is so major that the issuer’s survival is dependent on the outcome of the litigation.
 
In its DRHP, PharmEasy has mentioned the ongoing litigations. Petitions were filed by Tamil Nadu Chemists and Druggists Association, South Chemists and Distributors Association and Small Retail Chemists Association.
 
The Confederation of All India Traders (CAIT) has also raised concerns over PharmEasy’s acquisition of Thyrocare. CCI has not yet approved the acquisition of Thyrocare, it said.
 
Last year the ministry of health & family welfare had filed an affidavit before the high court stating that there is no provision under the Drugs and Cosmetics Acts and Rules for online sale of drugs. The issue of regulations regarding e-pharmacies is still under consideration.
 
Further, the court had injuncted online sale of medicines in order dated December 12, 2018. Thus, to overcome this, API had created a maze of companies to confuse the public. While the public is being given an impression that the IPO would be issued by PharmEasy, in DRHP, API has distanced itself from the business of PharmEasy by stating that it is being run by another company. However, SEBI has yet not responded to the representations of SCDA. In order to protect the wealth of the investors, SEBI ought to consider the issue and not let the general public misguide, said SCDA president Jitender Goel.