SastaSundar Ventures Ltd (a new venture in the nascent epharmacy space)

Deven · June 19, 2021, 4:57am

Am user of Apolloph and pharmeasy.
Apollo and SS are using their shops to deliver at last mile.
Whereas pharmeasy mostly has few ties-up in cities, they need to travel more for last-mile delivery.

There are some characteristics of Internet Businesses (IB). Exceptions are there…

Mortality rate is very high. Space is mostly for 2 players; Zomato vs Swiggy likewise.
Founder should be fanatic Like Bhavish Aggarwal or Elon. They are a source of free advertisement besides their vision.
IB mota-moti divides into 2 parts;
A. Requires efforts in delivery or content creation like Amazon or Buyu
They require more cash to burn; discount and operations.
B. Like PolicyB or MMT or easy trip. They burn cash on discount only.
Difficult to survive for small players if they are not in niche market (like co who delivers specialised products like foreign books etc.)

With this, as per my opinion, the chance of survival for SS is less. The stock was there in my father’s PF which we exited recently. Discloser and hence views are biased.

Just my views on businesses (not on stock) with the above disclosures.

sahil_vi · June 19, 2021, 5:24am

Scuttlebutt

In a environment with several aggregators, the experiences of the users speak louder than any metrics. With this in mind, I went through several google play reviews for pharmeasy+medlife, SS and 1mg. methodology was as follows:

Went to https://play.google.com/store/apps/details?id=com.aranoah.healthkart.plus&showAllReviews=true
Looked at latest reviews. (relevant reviews would bring in google playstore ranking algorithm bias and might show us how the app/UX used to be, not how it is).
Only evaluated those reviews which were at least 5 words. Read 50 of these for each of the apps.
Documented what people are trying to tell the app.

Here is the raw data after aggregating for each opinion/experience being expressed:

Raw Data

Find the raw data/opinions in table below. If you have trouble reading this table, consider reading in this google sheets:

Also attaching excel version for those who stay away from Google products or online docs:
e-pharmacy scuttlebutt.xlsx (25.5 KB)
In a single cell of the table, (a, b) means that opinion a was expressed in b reviews out of the 50 reviews I read.

	Pharmeasy + medlife		SastaSundar		1mg
Long Reviews Read	50		50		50
Platstore Rating	4.3		4.6		4.3
Type of experience	Good	Bad	Good	Bad	Good	Bad
Delivery	(Fast/ontime, 13); (good service, 3)	(order not delivered since X days, 10); (delivery person charged extra, 1)	(fast/ontime delivery, 14); (good service, 10); (even during covid, delivery is still good, 1); (well behaved delivery boy, 2)	(not delivered on time, 7); (delivery date too far away, 3); (delivery boy experience bad, 1)	(fast/ontime delivery, 5); (good service, 5); (even during covid, delivery is still good, 1)	(not delivered on time, 8); (X items split into Y orders, 1); (delivery date keeps getting moved, 3)
Prices	(good discount/price, 7)	(want more discount, 2)	(cheap price, 7); (good discount on household items, 2)	(need more discount on household items, 1)	(good discount/price, 6)	(extra charges, 1); (get more discount from local shop, 1)
Ordering Experience	(prescription uploading, 1)	(not able to return, 4)	(medicines near mfg date, far away from expiry, 1); (easy return, 1)	(order not getting confirmed, 2); (prescription uploading, 1); (not able to return, 1)		(order not getting confirmed, 2); (got expired medicine, 1); (dont show delivery time while placing order, 1)
Getting what you ordered		(modified/cancelled order without consent, 11)		(modified/cancelled order without consent, 1)		(modified/cancelled order without consent, 8); (price increased post selection, 2); (after payment didnt get anything, 3)
Medicine Availability	(Allopathy good, 1); (wide range, 5)	(No Availability of ayurvedic, 1); (No Availability of Homeopathic, 1); (bad availability, 4)	(good availability, 1); (was able to order medicine not available on competitors, 2)	(bad availability, 2)
Competitor commentary	(better than competitors, 2)	(Competitors are better, 2)	(better than competitors, 4)			(Competitors are better, 1)
Billing	(prompt and fast, 1)					(dont provide bills for lab tests, 1)
App	(good app, 6)	(not supported, 1), (bad app, 1)	(good app, 11); (able to reack order, 1)	(not able to login, 1), (not able to chose doctor, 1)	(good app, 9); (gives extra info like medicine details/alternate brands, 3); (easy to consult doctor, 1)	(lesser choice in labs, 1); (dont trust lab report, 1)
Customer Care experience	(happy with CC, 1)	(didnt resolve problem, 13)	(good experience, polite, courteous, leading to resolution, 4)	(not able to solve, 1)		(didnt resolve problem, 6)
Packaging		(was bad/could have been better, 1)	(good packaging, 5)		(good packaging, 1)
Responses from the Business	Very copy pasty; even if customer is complaining they just say refer our app		Thoughtful personalized responses; l did not find even 1 tenplatized copy pasted responses		Short, terse to the point replies, do not personalize although replies are not templates

Here are my high level conclusions from reading 150 long format reviews.

Conclusions

Delivery: While the perception on forum is that Pharmeasy is fastest delivery. User reviews/perception is very interesting. Both SS and PE are perceived to be fast. 1MG did not have that many reviews praising delivery times. While 1mg and PE oftentimes misplaced the orders with customers not getting their desired orders, SS seemed to err more on orders getting delayed. Some customers also pointed out that 1mg outsources delivery to delhivery and other couriers which ends up making the delivery experience non consistent and bad.
Price: All these had similar perception WRT discounts. Interestingly most reviews do not seem to be about price. Very few complain about the price.
Ordering Experience: 1mg had many problems like orders not getting confirmed, getting expired medicine, not being able to see delivery times. Ss had similar problems but to lower extent. People also appreciated being able to see manufacturing date. PE customers’ biggest problem was not being able to return orders.
Getting what you ordered: One of the biggest pain points for both 1MG and PE was getting what you ordered: Customers often got replacements for their ordered medicine without their consent, often had their items cancelled which were shown as in stock when the order was placed. SS has substantially low instances of this problem.
Medicine Availability: People were more opinionated on this for PE. Equally split between good and bad availability. SS had far fewer people talk about this, but equally split. 1mg nobody talked about this.
Comparisons with Competitors: While PE customers were split between whether it is better or worse than competitors, all such reviews on SS side emphatically said SS was better. Many also appreciated that they were able to find medicine which were not available on other apps. 1MG users did not say much about this but they did say SS was better.
Billing: not many reviews on this, customers appreciated prompt billing for PE. For 1mg people complained not getting bills for tests they booked.
App: SS app was most appreciated, then 1mg then PE. Few problems were also pointed out for all 3 like not being able to login for SS, not being supported on phone for PE, having choice of labs removed and not trusting listed labs for 1mg.
Customer Care Experience: Far Far worse experiences for PE and 1mg. PE customers were scratching their heads on who the PE customer support were so nonchalant, and lacked basic understanding of what they were going through. Similar, although less vocal concerns for 1mg. In stark contrast, most customers enjoyed their SS customer care experience with many describing as courteous, polite. Even when they complained, this was more around them not liking the resolution.
Packaging: People appreciated SS packaging a lot, some complained about PE and some liked 1mg but opinion was less voiced on last 2 apps.
Responses from Business/app: This is our chance to see directly how the app treats their customers. PE responses were fairly templated, did not have any empathy for the customer, oftentimes they replied to bad customer experiences by saying “share our app with your friends to get 5% discount”. Lol. 1mg responses were better, although they only replied to negative comments mostly and often missed replying to comments. SS comments were most thoughtful and addressed the reader in an empathetic way. They also made it a point to reply to most reviews if not all.

Meta-level conclusion: Although 1mg and PE have scaled, the scale is only in App and digital. The real world is frustrated with their bad user experiences. SS is treating its users far better by all accounts and all metrics this study shows us. This also shows us why the app rating is far higher (even netmeds is also at 4.3) and also why customer retention is far better. (something similar to Amazon Vs competitors might be playing out here with SS obsessing over customer experience similar to Amazon; need to verify with more scuttlebutt). Also, such positive reviews come from all parts of India (I know this coz sometimes people mention in the review where they live). These are not only from Paschim Banga.

Disc: Invested and biased, this exercise was eye-opening. Might look to average up depending on the expansion plans

Deven · June 22, 2021, 11:55am

1 MG valuation given by Tata Group: $ 240 Mn = 1700 cr
Revenue: 358 cr in Fy 20 (from 202 cr in Fy 19)
Loss is 298 cr in Fy 19 and 318 cr in Fy 20

Pharmeasy valuation: $ 1.5 B = Rs. 10500 cr
Revenue in Fy 20=637 cr (340 cr in Fy 19)
Loss 100 cr (was 50 cr in Fy 19)

For SS:
Valuation: 1000 cr
Revenue 388 cr; Loss: 40 cr

Though fig of ss seems good; however as a retail investor, you need to think – should I buy SS for 1000 cr?

SS burn money since they changed their business model in 2013 (from finance to online medicine). Since 2013 they have burnt 150 cr; difficult to survive without funding or profit.

SS can survive if it got funding or it turns profitable. In such a digital space role of the founder is very important. One needs to die or have success early. You can’t linger beyond few years.

The founder of pharmeasy got early funding from PE and people like nandan nilekani, fidility etc. made them vocal.

Some videos of founder:
CNBC Power Breakfast with PharmEasy - YouTube - Pharmeasy
Decoding E-Pharmacy In India: SastaSundar Co-Founder Mr. B L Mittal in conversation with ET Now - YouTube - SS

Disc: Discussion is on business not on stock. Also figs are approximate.

sahil_vi · June 22, 2021, 12:06pm

ssq4.pdf (6.0 MB)
Q4 revenues are roughly 15% higher YoY which is reeasonable given that Q4 last year is when the spike of revenue growth for SS was:
https://trends.google.com/trends/explore?date=2020-01-01%202021-06-22&geo=IN&q=%2Fg%2F11c3wv527v

In any case, this is not an investment to be tracked quarterly for me, key directionals are more important: losses remain much lower than last year, quality of service to customers is far better than competitors, funds to be raised sometime this year; eagerly waiting for quarterly results.

Disc: Invested, biased.

RedEPS · June 23, 2021, 7:35am

For private cos, the valuation depends on a lot of things, including preference and lower valuation for early investor in later funding rounds. I also don’t think revenue is as important as GMV and GP as they may have different ways to recognise revenue.

It makes one wonder why VCs are willing to pay 5x for competitor. They aren’t stupid to do so for no reason.

sahil_vi · July 7, 2021, 6:18am

sahil_vi · August 12, 2021, 10:14am

Good results from ss. Good growth. Control on losses. Possibly some spends on marketing side.

Disc: invested, biased

sujay85 · August 15, 2021, 2:33pm

Sastasundar starts yearly membership plans starting at Rs.699/- + GST. All / some of the yearly packages come with Free Delivery for any order value, Additional Discounts, Genu Path Labs Diagnostic Test(s), YANA Diet Consultation Package(s) etc. As everyone is aware of such plans help improve customer stickiness, repeat order etc.

sujay85 · August 17, 2021, 6:26am

MedPlus DRHP.pdf (4.9 MB)

Update

sahil_vi · October 3, 2021, 4:04am

http://www.uniindia.com/~/sastasundar-com-bags-best-online-pharmacy--national-level-award/States/news/2522633.html

sujay85 · October 23, 2021, 8:40am

Chandragupta · November 19, 2021, 6:44am

Breaking:

Indian e-commerce giant Flipkart to acquire an online pharmacy marketplace to foray into healthcare space | TechCrunch

sujay85 · November 19, 2021, 8:43am

Flipkart said it has signed definitive agreements to acquire a majority stake in SastaSundar, but did not disclose the size of the deal.

Hopefully, it will remain listed.

sanjeev_thakur · November 19, 2021, 12:08pm

If we draw parallel with Thyrocare acquisition by Pharmeasy, it has just added uncertainties. Price is down 8-10%. Though I am not tracking SS closely, it brings some near/mid confusion to retail investors.

vnktshb · November 23, 2021, 2:37am

Look like he knew the flipkart deal would happen

sujay85 · November 23, 2021, 6:30am

Can’t be sure if he knew this, but it was almost obvious, isn’t it? Tata bought 1mg, RIL bought Netmeds, Pharmeasy is PE owned and so only good acquisition bet remained was Sastasundar. I think even in this thread we discussed about such possibility.

And even if Sastasundar wasn’t acquired, it was still a good bet, given the industry tailwinds, growth rates and Sastasundar’s positioning in it. It was also the nearest among its peers to the breakeven point.

Sastasundar needed an acquisition or large investment urgently, as given the tight ship they were running, they were not able to spend adequately on A&P, and that had put them on a disadvantage relative to its peers.

kanvgarg123 · November 23, 2021, 10:29am

There is a possibility, it takes minimum of a month to conclude a deal once all the due diligence and negotiations are done.

madhav.maheshwari · November 26, 2021, 5:41pm

Why aren’t they disclosing the amount for which Flipkart has acquired the stake.
doesn’t SEBI LODR covers it?

Bibhu · December 14, 2021, 4:43am

Now what will happen to the promotors ?

Madhav_Gupta · December 14, 2021, 4:50am

Interesting article