Mukesh Ambani’s deal-making spree since April, which garnered a cumulative $15.2 billion for his telecom and broadband agency Jio, amid the pandemic, had everybody agog. Now it’s the flip of billionaire Ajay Piramal, whose son, coincidentally, is married to Ambani’s daughter, to make a splash. In one of many largest personal fairness offers within the pharma sector in latest occasions listed Piramal Enterprises agreed to promote a 20% stake in its pharma subsidiary for $490 million to non-public fairness agency, The Caryle Group.
The proceeds of the deal–which can formally shut later this yr–will go in direction of funding development and extra crucially, lowering debt, which stands at $5 billion (as of March 31, 2020). The $1.7 billion (income) Piramal Enterprises has two principal strains of enterprise, monetary providers and pharma, with the previous accounting for near 60% of its annual income.
“This is an affirmation of the strength of our ability to build new, attractive and scalable businesses with a significant runway for continued organic growth and opportunities for consolidation,” mentioned Piramal in a press release. “This infusion of funds will further strengthen our balance sheet and provide us with a war chest for the next phase of our strategy.”
As a part of the stake sale, Piramal Enterprises plans to combine all its pharma companies below Piramal Pharma, which can embody contract analysis, specialised medicine and over-the-counter medicine in India. It is going to additionally embrace a three way partnership with eye-care main Allergan India and specialty chemical substances maker Convergence Chemical compounds.
“Piramal Pharma has built a strong, diversified pharma business with a solid market position and scale in each of its core business segments of Pharma Solutions, Critical Care and Consumer Products,” mentioned Neeraj Bharadwaj, managing director of Carlyle Asia Companions’ advisory crew. “Given global pharma industry trends, we see attractive opportunities for organic as well as inorganic growth in each of these businesses.”
Carlyle has already made different bets on Indian healthcare with stakes in Medanta Medicity Hospital in Delhi, Mumbai diagnostics chain Metropolis Healthcare and Mumbai animal healthcare outfit SeQuent Scientific. The Piramal acquisition can be via an affiliated entity of an funding fund managed by Carlyle, which has $217 billion in property below administration. The agency mentioned in a press release that there could possibly be a better payout as much as a most of $360 million. However that can be pegged to the corporate’s efficiency in fiscal 2021. The ultimate fairness funding quantity can be based mostly on sure efficiency parameters.
“This deal turns the spotlight on the pharma business, clarifies the group structure and unlocks value,” says Alpesh Mehta, deputy head of analysis at Mumbai funding outfit Motilal Oswal, who tracks Piramal Enterprises. “The valuation is also more or less in line with peers. I think this a positive step towards the eventual de-merger of the pharma business.”
That is the second act in pharma for Ajay Piramal, who began out within the household’s textile enterprise in 1977 and diversified into pharma with a sequence of acquisitions beginning within the late 1980s. In 2010, Piramal bought the home pharma formulations enterprise for $3.7 billion to Abbott Labs, sealing his popularity as a shrewd dealmaker. Following that landmark sale, he expanded into monetary providers however continued to develop the rest of his pharma enterprise to a dimension vital sufficient to draw Carlyle.
Revenues on the pharma arm have grown greater than three-fold previously decade to Rs. 54,190 million ($719 million) in fiscal 2020 from Rs. 15,370 million ($345 million) in fiscal 2011.
Piramal, with a internet worth of $2.Three billion, has been navigating the credit score disaster that hit the nation’s property market over the previous yr. Shares of Piramal Enterprises took a success on issues that the monetary providers enterprise was overly uncovered to debt-ridden builders. Over the previous yr, Piramal has deleveraged the corporate’s steadiness sheet, shrunk the loan e-book by 12% and created extra provisioning.
He has additionally lowered internet debt to $5 billion from $eight billion via a sequence of measures, together with a rights situation for $520 million final October and a preferential allotment of $250 million to current Canadian pension investor Caisse de dépôt et placement du Québec (CDPQ) in December. In January, he bought the conglomerate’s healthcare insights and analytics enterprise, DRG, for $950 million.