India’s online pharmacy sector is on the brink of transformation, as companies aim to reduce their operating losses below 10 percent next fiscal year. This marks a significant improvement from the over 30 percent losses documented during fiscal 2023. The structural shifts are driven largely by e-pharmacies sharpening their focus on high-margin product segments and increasing operational efficiencies.
According to CRISIL, the rating agency providing insight on market trends, cash losses within the sector, though declining, are likely to persist over the next two financial years. This is attributed to high operational costs and intense market competition. “While the sector will see steady revenue growth, securing timely equity funding will be important for two key reasons: one, to capitalize on growth opportunities arising from under-penetration; and two, to effectively manage cash burn, thereby supporting credit profiles during the expansion phase,” CRISIL stated.
A comprehensive analysis of e-pharmacies, which represent over 80 percent of the online segment, indicates these companies are pursuing sustainable growth by tapping high-margin segments such as wellness products and medical equipment. These categories are projected to account for around 40 percent of sales next fiscal year, compared to about 30 percent currently and under 15 percent during fiscal 2023.
Poonam Upadhyay, Director at CRISIL Ratings, remarked, “Players are also moving away from aggressive discounting to reduce key operating costs—discounting, delivery, distribution, and employee-related expenses—which stood at approximately 65 percent of their operations during fiscal 2023. This is expected to drop to below 35 percent next fiscal year, aiding the efforts to narrow losses and move toward profitability.”
The e-pharmacy sector finds itself still in the early stages of growth, wrestling with substantial operating losses largely due to high initial investments tied to technology adoption, large inventories, and supply chain inefficiencies. Compounding these issues is the fragmented market, which necessitates significant spending on marketing and discounts to attract customers. This leads to high customer acquisition costs.
The path to expansion appears to necessitate additional capital funding estimated at approximately ₹2,300 crore over the current and following fiscal years. This requirement follows the impressive figure of over ₹9,200 crore already secured since fiscal 2020. The quest for sustainable growth continues to be punctuated by the challenge of balancing rapid development against operational constraints.
The use of e-pharmacies signifies not only the growing consumer demand for convenience and accessibility but also points toward changing trends in healthcare distribution within India. With customers increasingly leaning toward online solutions, the potential for growth is substantial, provided these companies can stabilize their operations and gain market share.
Overall, as India’s online pharmacy sector implements strategies aimed at enhancing profitability, the focus on high-margin product segments appears to be one of the most promising trends to look out for.
