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Flipkart to acquire majority stake in SastaSundar.com and enter online healthcare despite regulatory uncertainty

The lack of well-defined regulations casts a shadow on the e-commerce platform’s decision.

flipkart online health care

Flipkart is entering the online healthcare sector through its new vertical Flipkart Health+ and is acquiring a majority stake in online pharmacy and digital healthcare platform SastaSundar.com as part of this development, the company said in a press release.

The Walmart-backed e-commerce platform is the latest to enter the crowded online healthcare space despite the regulatory uncertainty around the sector. Reliance acquired a majority stake in NetMeds last August and Tata acquired a majority stake in 1mg in June this year. Meanwhile, Flipkart’s rival Amazon launched its online pharmacy in Bangalore in August last year and has since expanded to the whole of Karnataka and Delhi.

Leveraging Flipkart’s pan-India reach and technology capabilities and SastaSundar’s deep expertise in healthcare, Flipkart Health+ will offer affordable healthcare starting with e-pharmacy and expanding to other healthcare services such as e-diagnostics and e-consultation over time, the company said in its announcement.

“This new venture builds on the Flipkart Group’s efforts to address the growing consumer internet ecosystem, providing end-to-end offerings from travel to healthcare as digital technologies continue to democratize access to products and services.” – Flipkart

Sector growing despite the lack of regulatory certainty

Just last week, in a letter to the Securities and Exchange Board of India (SEBI), Delhi-based South Chemists and Distributors Association (SCDA) has asked the regulator to reject the initial public offering (IPO) of PharmEasy, one of India’s largest online pharmacies, on the grounds that online pharmacies are not legal under Indian law.

The Delhi High Court and Madras High Court in 2018 had both passed orders prohibiting the online sale of medicines without a license. However, the Madras High Court stayed its order in 2019 after PharmEasy argued that it acts as an intermediary to connect customers with registered retail pharmacies and that it does not stock, sell or distribute any drugs, but merely provides delivery services. SastaSundar works in a similar model to PharmEasy by not maintaining its own inventory.

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SCDA had also previously written to the Competition Commission of India (CCI) objecting to PharmEasy’s merger with MedLife and Reliance’s acquisition of NetMeds. But CCI approved both the deals anyway, offering some confidence to Flipkart, which will also need CCI approval for its SastaSundar acquisition.

The government in August 2018 published a draft policy to regulate e-pharmacies, but these are yet to be finalised, leaving this sector fraught with regulatory uncertainty.

What is SastaSundar.com?

Launched in 2013, SastaSundar.com partners with more than 490 pharmacies across India to provide home delivery of medicine. The platform also runs a health blog and provides other healthcare-related features like a medicine tracker, generic drug name finder, and symptoms checker.

Along with medicines, SastaSundar also sells health foods, home care products, wellness devices, ayurvedic medicines, and beauty and personal care products. But following the Flipkart acquisition, it is not clear if these services will continue to exist considering that Flipkart primarily deals in these sectors as well.

“At SastaSundar.com we are focused on developing innovative ways to provide access to affordable healthcare easily and conveniently, building a trusted network for authentic medicines, diagnostics and wellness. Through this partnership with Flipkart, we see an opportunity to further grow and reach a larger consumer base, using complementary technologies and logistics infrastructure.” – B.L.Mittal, Founder and Chairman, SastaSundar Healthbuddy Ltd

While we do not know the size of the acquisition, SastaSundar had told The Economic Times in May that it was valued at $100 million.

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