Tomorrow Capital exits pharmacy chain ZenoHealth, makes 7X returns

Early-stage strategic investment fund Tomorrow Capital has sold all of its stake in retail  pharmacy chain ZenoHealth (previously Generico), reaping a seven-fold return from the 32-month-old investment.

It was a pure secondary transaction where a mix of existing investors and some secondary purchasers bought Tomorrow Capital’s stake, the Mumbai-based investor said in an email response to TechCircle.

Tomorrow Capital invested a total of Rs 13 crore in a mix of equity and debt funding. The equity investment was done in March 2018 while debt was carried out in Jun 2019. The investment firm claimed that its equity investment delivered a 7.25 fold returns or 140% internal rate of return (IRR). The returns are significantly higher than the 20-30% IRR that private equity and venture capital firms typically target in rupee terms.

ZenoHealth was Tomorrow Capital’s first investment.

“As active investors, we believe in driving the value of the entities we invest in through a capital+ approach and a hands on role in helping young businesses scale. With Generico, we had the right set of founders and a business at the right stage. The pace at which the company has grown has validated this way of operation in our minds,” Rohini Prakash, CEO, Tomorrow Capital said in a statement.

Tomorrow Capital operates a $100 million early-stage investment fund that looks to back consumer brands. The fund is backed by Abhinandan Lodha, the younger son of Mangal Prabhat Lodha. The fund invests in health and wellness, education, financial services, sports and fitness, packaged Food and beverages, and home interiors and furnishing.

The firm has invested or committed nearly Rs. 100 crore over the last three years across 4 investments including ZenoHealth; Bonito Designs, a home interior design and execution firm; and Multiliving Technologies, a technology-based real estate asset management and rental solution. The company said it has earmarked a further Rs. 100 crore to invest over the next 12 months in early stage consumer businesses.

Zeno Healthcare has raised $16 million till date, of which $14 million was infused by venture capital firm Lightbox in September last year.

The Mumbai-based company, run by Workcell Solutions, raised $1.39 million in venture debt funding from Alteria Capital in January.

Post the investment, a team from Tomorrow Capital, which comprises professionals with functional and business experience, worked with the founders to help scale the organisation and brand, and put in place systems and processes, the company said. They worked closely on areas of sales and marketing and financial management including developing and implementing the marketing playbook for new stores on ground, co-creating the sales and loyalty functions, hiring for key roles and coaching team members.

“Our startup’s synergy with a venture capital fund like Tomorrow Capital, has given us the requisite impetus and knowhow to sustain the business and achieve our long-term goals. They have been instrumental in providing us the right kind of mentorship when we needed it most. Our journey with Tomorrow Capital has been insightful, as it made us believe in our offerings, while aiding us with the development of a proper vision and scale for the business,” Siddharth Gadia, director of ZenoHealth,  said.

Founded by Gadia and Girish Agarwal in 2017,  ZenoHealth is a pharmacy chain selling low-cost generic drugs.  It aims to pass on the cost benefits of generic medicines to end consumers. It started operating on a company-owned, company-operated model and moved to a master franchise model in which Generico owns the brand and technology while the franchise owns the real estate and the front-end operations.The startup has since set up a network of over 60 stores across Mumbai, Thane and Navi Mumbai, and plans to expand the footprint to 150 stores by 2021.