India's Online Pharmacy Industry Set for Consistent Revenue Growth in the Coming Fiscal Year
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New Delhi, Dec 24 (NationPress) The online pharmacy sector in India is projected to achieve consistent revenue growth in the next fiscal year, with operating losses expected to drop to below 10 per cent from over 30 per cent in fiscal 2023. This improvement will be driven by a sharpened focus on high-margin product categories and increased operational efficiencies, according to a report released on Tuesday.
E-pharmacies are targeting sustainable growth by branching out into high-margin categories, including wellness products and medical equipment, which are anticipated to account for 40 per cent of total sales in the next fiscal year, a rise from approximately 30 per cent currently and under 15 per cent in fiscal 2023.
“Industry players are also shifting away from aggressive discounting to lower essential operating costs (discounting, delivery, distribution, and employee — or DDDE) from around 65 per cent in fiscal 2023 to below 35 per cent in the forthcoming fiscal year, which should aid in reducing losses and hastening the path to profitability,” stated Poonam Upadhyay, Director at CRISIL Ratings.
While the sector is poised for steady revenue growth, securing timely equity funding will be critical for two main reasons: first, to obtain the necessary capital to exploit growth opportunities stemming from under-penetration, and second, to effectively manage cash burn while bolstering credit profiles during the expansion phase.
The report notes that the e-pharmacy sector is still in its early growth stages and is experiencing considerable operating losses due to substantial initial investments in technology, extensive inventory, and inefficiencies within the supply chain.
Attracting consumers in a fragmented market necessitates significant spending on marketing and discounts, resulting in elevated customer acquisition costs.
Naren Kartic K, Associate Director at CRISIL Ratings, mentioned that ongoing operating losses underscore the necessity for continued support from promoters, private equity investors, and venture capitalists, as bank financing will primarily be limited to working capital.
“As e-pharmacies broaden their operations and strive to mitigate losses, they will still incur cash losses and are likely to require additional equity funding of Rs 2,300 crore over this and next fiscal years, following the over Rs 9,200 crore already raised since fiscal 2020,” he added.
