Close to a year after Piramal Healthcare sold its domestic formulations business for Rs 17,000 crore, its Chairman, Mr Ajay Piramal, charted a new course for his company, marking its entry into financial services.

This comes even as Piramal Healthcare Ltd (PHL) consolidated its existing pharmaceutical business, by merging into itself, the innovative research business of its life-sciences arm.

With a kitty of Rs 24,000 crore at its disposal, Mr Piramal said, PHL would start two non-banking finance companies (NBFC), for lending to the infrastructure sector and another to cater to other sectors. The NBFCs will be under Piramal Finance Ltd, a 100 per cent subsidiary of PHL, and will have a combined initial corpus of Rs 1,000 crore. While the infrastructure NBFC awaits the Reserve Bank of India's clearance, the other has got regulatory clearance, he said. PHL would also get into fund management for the real estate and infrastructure sector, he added.

Bouquet of services

Looking to offer a bouquet of financial services, PHL also announced the acquisition of Indiareit Fund Advisors Pvt Ltd and Indiareit Investment Management at Rs 225 crores, and the total funds managed by them is Rs 3,800 crore, he said.

Indiareit Fund Advisors is advisor to the Indiareit Fund, a domestic real estate private equity fund focused on India. Indiareit Investment Management Company is a manager of off-shore real estate private equity funds investing in India through the foreign direct investment route. Explaining the rationale behind financial services, he said, the sector is poised for strong growth given an expected 8 percent GDP growth in India for the next 7-10 years. Besides, the Government has also focused on financial inclusion as the next growth engine.

Responding to whether banking would be the next foray, he said: “Let the policy come out,” following which a decision would be taken.

Research arm merger

PHL's board, on Friday, also decided to merge with itself, the demerged innovative research business of Piramal Life Sciences (PLS). The move brings into PHL, 346 people and 77 global patents filed by PLS, he said. The process would be complete in six months, but would become effective from April 1.

Remaining with PLS is a Rs 4-crore business of nutraceuticals sold in the emerging markets, supported by about 16 people. In 2007, the decision to demerge innovative research (and form PLS) was taken as its risk profile was different, and the company grew PHL. Four years later, the innovative product pipeline is more robust and PHL, flush with funds, is better placed to leverage and manufacture these products, Mr Piramal said. PHL can also get 200 per cent weighted average deduction both on operational expense and capital expenditure on research, he added.

According to the arrangement, each shareholder of PLSL will get an equity share of PHL for every 4 equity shares held in PLSL.

(This article was published on May 6, 2011)
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