Piramal Enterprises to divest 20% in pharma business to Carlyle group 

PT Jyothi Datta Mumbai | Updated on June 27, 2020

Charts growth plans for pharma, step closer to listing 

Ten years on from Piramal Enterprises' or the erstwhile Piramal Healthcare's sale of its domestic formulations business, the Ajay-Piramal-led group has formalised another major deal in its pharmaceuticals business. The group is divesting 20 per cent equity in Piramal Pharma Ltd, its wholly-owned subsidiary, to global investment firm The Carlyle Group for $ 490 million (estimated Rs 3700 crore).

Piramal Pharma will hold Piramal Enterprises Ltd's (PEL) pharmaceutical businesses, and the latest transaction streamlines the Group's pharma and financial businesses, making it a step closer to the much talked about separation of the two.

The Carlyle transaction, coming in times of Covid, reflects the strength and quality of the pharma business, said Piramal Enterprises Chairman Mr Ajay Piramal. And the purpose behind it was to grow their global pharmaceutical business through both organic and inorganic avenues, he added. 

Reflecting on the progress over ten years, Piramal told Business line, the company had not moved away from pharmaceuticals but had built a stable business that was possibly "under the radar", as people focussed on their financial businesses. "You don't build businesses out of the blue. It took ten years to build the business," he said, indicating that they had a differentiated model that took the operations closer to the customer. And the strategy was becoming increasingly necessary against the Covid backdrop, as companies become nationalistic since healthcare is a strategic sector like defence, he explained.

The deal values the Group's pharma business at an enterprise value of $ 2.775 billion, said Piramal, with a $360 million component depending on the company's FY21 performance. Touted to be among the largest private equity deals in the Indian pharmaceutical sector, the transaction is expected to close by December 2020. The final amount of equity investment will depend on the net debt, exchange rate and performance against the pre-agreed conditions at the time of closing of the deal, the company said.

In 2010, Piramal Healthcare sold its domestic formulations business to Abbott for an estimated Rs 17,000 crore ($3.7 billion). PEL has since been in and out of several investments in segments including telecom and transport finance. 

Listing of pharma

The pharma business accounts for over 40 per cent of PEL's total business, and the plan is to list Piramal Pharma "in the near future", Mr Piramal said. 

Piramal Pharma will hold the group's contract development and manufacturing business (Piramal Pharma Solutions), critical care business (a complex hospital generics business selling specialized products across over 100 countries), consumer products division (selling over-the-counter healthcare products in India) and its investment in the joint venture with Allergan India, a key player in ophthalmology in the local market and Convergence Chemicals Private Limited. 

Nandini Piramal, PEL Executive Director said, the Carlyle investment will help create a "war chest" to support their strategy that included expanding manufacturing facilities at different sites, and acquisition both in India and abroad. They would look at branded formulations in the domestic market and opportunities in existing businesses in foreign markets, she said, citing the recent acquisition of a solid oral dosage drug manufacturing facility located in Pennsylvania. 

Debt on the pharma side of the business stood at Rs 4,200 crore, she said, adding that it was expected to be at Rs 2,500 crore by FY 21, without taking the acquisitions into account. 

Neeraj Bharadwaj, Managing Director, Carlyle Asia Partners advisory team pointed to the scope for growth in the different segments of the pharma business. This was Carlyle's second acquisition in healthcare this year, following the investment for a majority stake in SeQuent Scientific, an animal healthcare company, expected to close in the third quarter of 2020.


Published on June 27, 2020

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