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PharmEasy IPO: Here’s why CAIT is asking SEBI to reject the offer

The platform’s legality was called into question by the traders’ body, citing an order passed by the Delhi High Court.

pharmacy

The Confederation of All India Traders (CAIT) has written to the Securities and Exchange Board of India (SEBI) asking the regulator to reject the initial public offering (IPO) of API Holdings, owner of PharmEasy, arguing that the online pharmacy’s business model is “entirely based on gross illegality.”

Earlier in November, Delhi-based South Chemists and Distributors Association (SCDA) had also asked SEBI to reject the IPO on the grounds that online pharmacies are not legal under Indian law.

Why this matters: The objections by SCDA and CAIT further stress why regulations for online pharmacy and healthcare are imperative. The government in August 2018 published a draft policy to regulate e-pharmacies, but it is yet to be finalised. Despite the lack of regulatory clarity, this sector continues to grow rapidly and many big players are entering the market: last August, Reliance acquired NetMeds and in June this year, Tata acquired 1MG.

Why is CAIT objecting to PharmEasy IPO?

In its letter dated December 10, CAIT lays out the following arguments:

  1. Online sales of medicines continue despite the Delhi High Court order prohibiting it: Online sales of medicines are not allowed according to an order passed by Delhi High Court in W.P.(C) No 11711 of 2018 but the sale of medicines still continues, CAIT said. “The Contempt of Court proceedings are still pending against all parties in the said case,” CAIT noted.
  2. Provisions for online sales presently under consideration: The Ministry of Health and Family Welfare said in a sworn affidavit before the Delhi High Court that the online sale of medicines is presently under consideration and the Drugs and Cosmetics Act 1940 and Rules 1945 have no provision on the online sale of drugs.
  3. No framework for license: The Delhi High Court’s injunction prohibits the online sale of medicines “without a license,” but there is no provision for a license under the current rules and regulations because they are still under consideration, CAIT noted.
  4. API Holdings mention Thyrocare as a subsidiary despite no approval from CCI yet: While API Holdings has proposed to acquire pathology lab Thyrocare, it has still not received the clearance for the same from the Competition Commission of India (CCI). Despite this, API Holdings mentions Thyrocare as their subsidiary in the draft red herring prospectus (DRHP) submitted to SEBI, CAIT pointed out.

“We believe that investor wealth worth billions is at stake if this IPO is approved by SEBI. We are sure that it will receive your kind and immediate attention.” – Praveen Khandelwal, National General Secretary, CAIT

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