API Holdings (Pharmeasy): Financial Results for FY24

API Holdings Limited, the parent of PharmEasy, saw a sharp fall in its consolidated net loss in FY24 even as its revenue declined year-on-year. Revenue from operations declined 14.8% to ₹5,664 crore and consolidated net loss narrowed by more than 51% to ₹2,534 crore for the fiscal year ended March 31, 2024.

The bottom line improvement was due to lower total expenses and a big decline in goodwill impairment charges. But the company still reported a big loss and finance costs increased over the year. The FY24 results thus show a significant improvement in reported financial performance but not a return to profitability.

The figures discussed below are derived from the FY24 audited consolidated financial statements of API Holdings published in the company’s FY24 financial report.

API Holdings FY24 Financial Results at a Glance

Source:API Holdings FY24 audited consolidated financial statements.

Revenue Performance in FY24

API Holdings’ operating revenue fell to ₹5,664.3 crore in FY24 from ₹6,643.9 crore in FY23, a decline of about 14.8%.

Revenue from sale of goods was the biggest contributor at ₹5,007.7 crore in FY24 against ₹5,925.3 crore in FY23. Revenue from services stood at ₹652.3 crore against ₹701.3 crore in FY23 and other operating revenue declined to ₹4.3 crore from ₹17.3 crore.

The decline was therefore driven primarily by lower goods revenue, with services also contributing to the decline in the overall top line.

Why Did Revenue Decline?

The company’s FY24 filings provide additional context behind the decline in revenue.

API Holdings said it has taken steps to cut marketing expenses and close unprofitable distribution channels and warehouses to enhance efficiency and margins. The company’s filings show these actions cut revenue from its distribution-to-retailers business by about 37%.

This means that the revenue decline should not be seen as just a loss in sales. Part of the reduction was intended to cut costs and make the business more economically viable.

And the lower revenue indicates that the company had not yet found a way to combine cost discipline with sustained top-line growth in FY24.

PharmEasy's Loss Narrowed Sharply

API Holdings’ consolidated net loss came down to ₹2,533.5 crore in FY24 from ₹5,211.7 crore in FY23, a fall of around 51.4%.

The improvement was huge, but the company was still massively loss-making. So we are more accurate to say FY24 was a year of loss reduction and cost restructuring rather than a year of profitability.

The headline 51% reduction also needs some explanation as it was affected by both operating cost changes and exceptional items.

Why Did API Holdings' Loss Fall by 51%?

One of the biggest factors was the sharp decline in goodwill impairment.

API Holdings recognized impairment of goodwill of Rs 582.5 crore in FY24 against Rs 2,825.6 crore in FY23. This was a reduction of almost 79%.

The company’s financial statements show that the FY24 impairment was mainly related to the Distribution to Retailers cash-generating unit. Management said that measures to reduce marketing expenses and close unprofitable distribution channels and warehouses reduced revenue from this business by about 37%, which contributed to a lower valuation of the cash generating unit and the resulting goodwill impairment.

The reported net loss for FY24 improved substantially year-on-year driven by lower impairment charge as the FY23 goodwill impairment was substantially higher.

Exceptional Items in FY24

Goodwill impairment was not the only exceptional item.

API Holdings reported several exceptional charges in FY24, including:

• Goodwill impairment: ₹582.5 crore

• Impairment of investments in associates: ₹33.4 crore

• Early redemption charges for NCDs: ₹342.5 crore

• Other exceptional items: ₹68.6 crore

Together, these amounted to approximately ₹1,027 crore. 

This is important when interpreting FY24 earnings. The reduction in net loss was real, but exceptional items still had a substantial effect on the final reported result.

Operating Expenses Declined

Total expenses in FY24 stood at ₹7,254.8 crore as against ₹8,974.0 crore in FY23, a decline of about 19.2%.

A number of major expense categories declined during the year. Stock-in-trade purchased declined from ₹5,512.1 crore to ₹4,572.8 crore. Employee benefits expense declined from ₹1,283.3 crore to ₹699.4 crore. Other expenses declined to ₹562.0 crore from ₹982.5 crore.

This reduction in these expenses brought down the company’s loss before exceptional items and tax to ₹1,495 crore in FY24 from around ₹2,275 crore in FY23.

This is an important improvement as it shows that the financial improvement was not completely down to lower goodwill impairment.

Finance Costs Increased

Finance costs moved the other way.

API Holdings’ finance costs grew to ₹727.9 crore in FY24 from ₹665.5 crore in FY23, an increase of ~10%.

This was still a big drag on the company’s earnings.

The rise is especially pertinent as the company’s overall expense base declined sharply but finance costs still moved higher. The finding indicates that debt related costs continued to be a major challenge in FY24.

Borrowings Remained High

As on March 31, 2024, API Holdings had borrowings of about ₹4,098 crore, consisting of ₹2,024 crore of non-current borrowings and ₹2,074 crore of current borrowings.

For context, total borrowings were to the tune of ~₹4,120 crore as at 31 March 2023.

So FY24 should not be characterized as a big debt-reduction year. Overall borrowings were broadly similar, although the split between current and non-current borrowings had changed materially.

This also correlates with the higher finance cost reported for the year.

Cash Flow Improved Considerably

Cash flow is one of the clearest positive signals coming through the FY24 results.

Net cash flow used in operating activities improved to ₹61.1 crore in FY24 from ₹746.6 crore in FY23.

This is a substantial reduction in cash used in operations.

- The improvement was aided by changes in working capital, including a decrease in inventories and an improvement in trade receivables during the year. That said, operations continued to be cash burning in FY24, showing the firm hadn’t yet reached positive operating cash generation.

Inventory and Receivables

The inventory came down from ₹688.2 crore in FY23 to ₹555.6 crore in FY24.

Trade receivables, net of expected credit loss provision, reduced from ~₹905.0 crore to ₹706.2 crore. The financial statements also reveal that the expected credit-loss allowance saw a material increase during the year, to the tune of around ₹233.9 crore. 

The reduction in inventory and receivables helped release working capital and contributed to the improvement in operating cash flow.

Balance Sheet Position

API Holdings’ total assets increased from ₹8,256.4 crore at March 31, 2023 to ₹8,389.7 crore at March 31, 2024, a rise of about 1.6%.

Total equity grew from ₹2,436.9 crore to ₹2,588.3 crore during the period.

The balance sheet size was thus broadly unchanged, with the most significant shifts occurring within individual asset and liability categories.

Cash and Cash Equivalents

Cash & cash equivalents were approximately ₹328 crore as on March 31, 2024, as against approximately ₹194 crore a year ago. API Holdings also had other bank balances of about ₹1,283 crore at the end of the year.

The increase in cash and cash equivalents reported was supported by financing inflows during the year including proceeds from issue of compulsorily convertible preference shares.

The distinction is important, because stronger year-end cash does not necessarily mean the operating business was self-funding; operating cash flow remained negative.

What the FY24 Results Tell Us

The FY24 results reflect a business in the midst of significant cost and financial restructuring.

The top line was weak with operations revenue down almost 15%. But the fall in expenses was a bigger percentage and helped to improve the loss before exceptional items.

The net loss for the period decreased by over 51% and was also driven by the decrease in goodwill impairment and other exceptional charges.

At the same time, cash outflows from operations fell sharply, finance costs increased and total borrowings remained broadly unchanged.

Overall, FY24 was a year of substantial loss and operating cash-burn reduction for API Holdings, but it had not yet achieved profitability or fully resolved its financing burden.

Auditor's Report and Financial Reporting Considerations

The consolidated financial statements of API Holdings for the year ended March 31, 2024 have been audited by Price Waterhouse Chartered Accountants LLP and have received an unmodified opinion. However, the auditor added emphasis-of-matter paragraphs in respect of some subsidiaries whose financial statements were prepared on a basis other than going concern. These issues were subsidiary-specific and did not represent a change in the consolidated audit opinion.

This distinction is important when considering the FY24 financial statements because the matters at the subsidiary level should not be presented as if the consolidated financial statements themselves had received a qualified audit opinion.

API Holdings FY24 Financial Results: Key Takeaways

API Holdings' FY24 financial results can be summarized under five major developments.

Revenue declined: Revenue from operations fell 14.8% to ₹5,664.3 crore.

Faster fall in expenses Total expenses fell 19.2% to ₹7,254.8 crore.

Losses narrowed substantially: Consolidated net loss declined 51.4% to ₹2,533.5 crore.

Operating cash outflow improved: Net cash used in operating activities decreased to ₹61.1 crore from ₹746.6 crore.

Profitability continued to evade the company: Finance costs rose to ₹727.9 crore and it reported a huge consolidated loss.

Conclusion

API Holdings’ FY24 financial results were a stark contrast to the year before. Revenue was down, but the company cut its cost base, took a steep charge for goodwill impairment and halved its consolidated net loss.

Plus, there was improvement in operating cash-flow. But the company kept losing money, financing costs were higher and the total amount of borrowing was broadly the same.

The FY24 numbers therefore show a clearer picture of cost restructuring, lower cash burn and reduced accounting losses, rather than a completed turnaround. The sustainability of the improvement would depend on whether API Holdings can subsequently regain revenue growth while further improving operating margins and cash generation.