Wednesday, October 20, 2021
HomeMarket Live UpdatesAjay Piramal explains pharma business demerger, growth prospects and more

Ajay Piramal explains pharma business demerger, growth prospects and more


“The pharmaceutical business that we had sold to Abbot in 2010 was a domestic formulation business. In the last 10 years since the sale, we have been able to rebuild the business and it has been bigger than what we had when we sold out,” says Ajay Piramal, Chairman, Piramal Group.

You have announced the demerger or reorganisation of the organisation. For the longest time, a large part of the Street, ignored the value in the pharma business and the focus was on financial services. Now you have demerged the pharma business. Explain the rationale.
The rationale has been that all along we have been saying that we will demerge the pharma business at the right time because what even the Street was telling us, even our investors were saying was that there was not much synergy between the pharma and the financial services space. We realised that this is the appropriate time because both businesses on their own are now strong and can be run independently.

Over the last two years we have taken many steps which have really brought us to this stage. We raised Rs 18,000 crore of equity. We got Carlyle as an investor in our pharma business. We made it a 100% subsidiary. Now we have done the merger of DHFL and Piramal Capital. So all these were steps which were moving towards this.

One thing I have been saying is that whatever we commit to the market we have delivered and probably a little more than that. We had committed that we will bring in equity of Rs 10,000 crore, we got Rs 18,000 crore. We had said that we will diversify our mix in financial services from wholesale to both retail and wholesale, we have done that and we had said we are going to do a demerger, which is what we are doing. So we are just delivering on a plan which we had set ourselves to achieve.

We can break down the segments of the pharma business between CDMO, the healthcare wellness business and other manufacturing. What lies ahead and what are the strengths of the organisation and the assets you are sitting on?
We have three major businesses in pharma; the CDMO business, the complex hospital generics business and the over-the-counter business. All three have been growing well. The CDMO business is a totally global business where we manufacture products and services for global pharma. And today post the pandemic, this has become a robust growth engine for us. We have manufacturing facilities in the US, in Canada and the UK as well as in India. We did two acquisitions in CDMO space in the last 12 months. We acquired a business in Sellersville which is in Pennsylvania in the US. We also acquired an Indian business called Hero Pharmaceuticals which was completed in June. So the CDMO business is one which is growing and we have had a good track record in that business. In India, we are amongst the largest and globally we are number 13 in the CDMO business and this is growing well.

Next is the complex hospital generics business where we started off with inhalation anaesthesia products which were globally distributed and after that, we manufacture anaesthesia products both for India as well as in the US and after that we also manufacture products which we acquired as well as organically.

So again, this is a business which during the pandemic was a little lower because people were getting admitted to hospitals. But now growth is coming back.

The third is the OTC business which is an India business. The OTC business has a range of products. We are happy to share with you that this has been growing well. Our brands are performing well during this period. So overall, I think, our business is now well placed to grow further that is why we also have equity from Carlyle so that independently the pharmaceutical business has enough capital to grow both organically as well as through acquisitions.

Just for the understanding of the shareholders, how much potential does each of these business have in future? What is the runway for growth?
There is enough runway in each of the businesses. The CDMO business especially, during the last 18 months, has seen a lot of focus on developing the pharmaceutical space more and more. We have a very good track record and now we don’t have any issues with the FDA. We have a good product and service reputation in this. In the past, we have had a CAGR growth of about 15% per year. We should be doing better than that in the current year.

I want to just highlight one thing that the pharmaceutical business that we had sold to Abbot in 2010 was a domestic formulation business. In the last 10 years since the sale, we have been able to rebuild the business and it has been bigger than what we had when we sold out. At that time it was $3.8 billion and now it is much higher than that. So, that is where we are.



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