InvestorQ : Why has Piramal Enterprises sold off its pharmaceuticals business and how will the cash flows be used?
vaishnavi mhatre made post

Why has Piramal Enterprises sold off its pharmaceuticals business and how will the cash flows be used?

diksha shah answered.
1 year ago

Let me clarify that Piramal Enterprises is not selling its pharma business but it has only sold the healthcare insights and analytics business. The funds will be largely used to expand its financial services vertical and to try and take advantage of opportunities created by the liquidity crisis in the NBFC space. The healthcare insights and analytics business is housed under the banner of Decision Resources Group (DRG) which has been sold to the NYSE-listed Clarivate Analytics for a consideration of $950 million.

DRG is basically a decision support system for the pharma industry and it specialises in enabling the world’s leading pharma, biotech and medical technology companies to achieve commercial success in complex health markets with effective patient-centric commercial strategies. Piramal Enterprises had invested $650 million in the year 2012 to acquire DRG of which $260 million was equity. From that perspective, Piramal has realized 2.3 times the investment in rupee terms. This is part of the Piramal Group’s commitment to raise up to Rs.10,000 crore to fund the financial services business in a big way. In addition to the sale of DRG for close to Rs.6,500 crore, Piramal Enterprises will also raise Rs.3,650 crore via a rights issue and raise another Rs.1,750 crore through a preferential allotment to Canadian pension fund (CDPQ).

The move should be broadly positive for Piramal Enterprises as the money will be used to grow and diversify its lending business. The big bet for Piramal is that the financial services sector should see consolidation and this would enable to position themselves accordingly. In addition, the company will also look at the inorganic route for its re-entry into the domestic formulations business which PEL had exited in 2010 by selling out to Abbot for $3.7 billion.