The online pharmacy sector in India is witnessing strong revenue growth financially next
The country’s online pharmacy sector will see continued growth in future revenues, reducing operating losses to less than 10 percent from more than 30 percent in fiscal year 2023, by sharpening focus on high-margin product segments and operational efficiencies, a report said on Tuesday. .
Pharmacies are looking for sustainable growth by splitting into high-end segments such as health products and medical devices, which are expected to account for 40 percent of sales next fiscal year, up from about 30 percent now and less than 15 percent in fiscal year 2023. .
“Players are also moving from discounting to lower core operating costs (discount, delivery, distribution and labor – or DDDE) from about 65 percent in fiscal 2023 to less than 35 percent in the next fiscal, which should help reduce losses and accelerate move on to profitability,” said Poonam Upadhyay, Director, CRISIL Ratings.
Although the sector will see continued revenue growth, securing timely financing will be important for two key reasons: one, to secure the capital needed to maximize growth opportunities arising from low penetration; and second, to effectively manage cash burn while supporting credit profiles during the expansion phase.
According to this report, the e-pharmacy sector is in the growth phase and is facing significant operational losses due to high initial investment in technology, large inventory and inefficient supply chain.
Attracting customers in a different market also involves more money in advertising and discounts, leading to higher customer acquisition costs.
Naren Kartic K, Associate Director, CRISIL Ratings, said the ongoing operating losses highlight the need for continued support from developers, private equity investors and venture capitalists, as bank funding will end in working capital.
“As pharmacies expand operations and aim to reduce losses, they are still going to lose money and may need an additional equity capital of Rs 2,300 crore in this and the next fiscal, following over Rs 9,200 crore already received from the 2020 financial year,” he said.
