Ajay Piramal-led Piramal Enterprises Ltd is looking to split its healthcare and financial services businesses as it seeks to unlock value for its shareholders, The Economic Times reported quoting Piramal.
The Piramal Group—which was founded in 1984 and has operations in 30 countries and brand presence in over 100 countries—has diversified into areas such as finance, private equity and real estate funding from its core pharmaceuticals business over the past years.
"Today, what is happening is that we are getting conglomerate discount. As we go forward, we split them up separately, unlocking value," Piramal told the newspaper.
An email sent to Piramal seeking more details on the plan and the timeline for the demerger did not elicit a response till the time of publishing this article.
Piramal's plans to demerge comes as another Indian diversified conglomerate Max Group recently reshuffled its top management as part of a larger organisational restructuring that would see the firm being split into three separate listed companies housing different businesses—life insurance, health & allied businesses and manufacturing.
While Piramal reduced exposure to its core pharmaceuticals business after selling its key domestic formulations business to Abbott in a multi-billion dollar deal in 2010, the healthcare division still remains a significant part of its business.
In the third quarter ended December 31, 2015, the revenue of healthcare business, comprising pharma solutions, critical care and consumer products, grew 16.7 per cent year on year to Rs 915 crore, contributing 53.4 per cent to total sales.
In the recent past, it has been making acquisitions to expand its presence in the over-the-counter (OTC) business.
In December, the company acquired five OTC brands from global drug giant Merck for Rs 92 crore (about $14 million), a month after it bought baby-care brand Little's for an undisclosed amount.
While its focus on healthcare remains, its push to expand into the financial services businesses in the past years has been noteworthy.
In 2014, Piramal bought a 20 per cent stake in Shriram Capital Ltd for Rs 2,014 crore ($334 million) expanding its presence in the financial services space and later took over as its chairman. Shriram Capital is the holding company for the Chennai-based Shriram group’s various financial services units, including Shriram Transport Finance and Shriram City Union Finance besides two insurance ventures. Piramal also has investments in Shriram Transport Finance and Shriram City Union Finance.
Its income from financial services grew 131 per cent year on year to Rs 508 crore in the quarter ended December 31, 2015, contributing 26.8 per cent to the company's total sales.
Piramal also has a Real Estate Fund Management business with investments of over Rs 9,000 crore. The firm had invested in 57 projects across six cities with 23 leading developers last year.
The company’s revenues from its third vertical information management business grew 13 per cent year on year to Rs 427 crore during the quarter, driven by growth in data and analytics products and the acquisition of US-based Healthcare Business Insights, a provider of best practice research, training and services to more than 1,400 hospitals across the US.
Shares of Piramal Enterprises were trading lower by 1.02 per cent at 952 apiece at noon on Wednesday in a weak Mumbai market.