E-Pharmacies Expected to Cut Operating Losses Below 10% in FY2025: CRISIL

The report, covering e-pharmacies representing over 80% of the online market, noted that while the sector will see steady revenue growth, cash losses are expected to persist for two more years due to high operational costs and stiff competition.

India’s e-pharmacy sector is projected to reduce operating losses to below 10% in the next fiscal year from over 30% in FY2023, driven by a strategic shift toward high-margin products and improved operational efficiencies, according to an analysis by CRISIL Ratings.

The report, covering e-pharmacies representing over 80% of the online market, noted that while the sector will see steady revenue growth, cash losses are expected to persist for two more years due to high operational costs and stiff competition.

“While the sector will see steady revenue growth, securing timely equity funding will be essential for two key reasons: one, to secure the capital needed to maximise growth opportunities arising from under-penetration; and two, to effectively manage cash burn while supporting credit profiles during the expansion phase,” CRISIL Ratings said.

E-pharmacies are focusing on high-margin segments like wellness products and medical equipment, which are forecast to contribute approximately 40% of total sales in FY2025, compared to about 30% currently and less than 15% in FY2023. This diversification, combined with a move away from aggressive discounting, is expected to reduce operating costs significantly.

"Discounting, delivery, distribution, and employee costs—collectively referred to as DDDE—are expected to fall from around 65% of sales in FY2023 to below 35% in the next fiscal. These changes should help narrow losses and accelerate the path to profitability," said Poonam Upadhyay, Director, CRISIL Ratings.

Despite efforts to improve operational efficiency, the sector remains reliant on substantial equity funding. According to the report, e-pharmacies will require an additional INR 2,300 Cr in equity funding over FY2024 and FY2025, following INR 9,200 Cr raised since FY2020.

“Ongoing operating losses highlight the need for continued support from promoters, private equity investors, and venture capitalists, as bank funding will be limited to working capital,” said Naren Kartic. K, Associate Director, CRISIL Ratings.

The report emphasized that the sector, still in its growth phase, faces challenges from technology investments, inventory management, and supply chain inefficiencies. High customer acquisition costs, driven by marketing and discounting in a fragmented market, continue to weigh heavily on profitability.

As e-pharmacies aim to achieve sustainable growth, diversification and operational efficiencies are expected to play a key role in narrowing losses. However, the need for continued equity support underscores the financial challenges facing the sector.

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