Online pharmacies offer convenience, affordability, and wider reach.
The online pharmacy sector (1✔ ✔Trusted Source
Editorial: Internet pharmacies
) is expected to achieve steady revenue growth next fiscal, cutting operating losses to below 10% from over 30% in FY 2023, driven by a focus on high-margin products and improved operational efficiencies.
“Players are also moving away from aggressive discounting to reduce key operating costs (discounting, delivery, distribution and employee — or DDDE) from around 65 percent in fiscal 2023 to below 35 percent next fiscal, which should help narrow losses and accelerate the move to profitability,” said Poonam Upadhyay, Director, CRISIL Ratings.
While the sector will see steady revenue growth, securing timely equity funding will be essential for two key reasons: one, to secure the capital needed to maximise growth opportunities arising from under-penetration; and two, to effectively manage cash burn while supporting credit profiles during the expansion phase.
According to the report, the e-pharmacy sector is in the early growth stage and faces significant operating losses due to high initial investments in technology, large inventory and supply chain inefficiencies. Attracting customers in a fragmented market also entails substantial spending on marketing and discounts, leading to high customer acquisition cost.
Naren Kartic K, Associate Director, CRISIL Ratings, said that ongoing operating losses highlight the need for continued support from promoters, private equity investors and venture capitalists, as bank funding will be limited to working capital.“As e-pharmacies expand operations and aim to reduce losses, they will still incur cash losses and likely require additional equity funds of Rs 2,300 crore over this and next fiscals, following over Rs 9,200 crore already secured since fiscal 2020,” he mentioned.
Reference:
- Editorial: Internet pharmacies – (https://www.frontiersin.org/journals/pharmacology/articles/10.3389/fphar.2024.1489396/full)
Source-IANS
