Piramal Enterprises which announced sale of 20 percent stake in its pharma subsidiary Piramal Pharma for Rs 3,700 crore to private equity firm Carlyle, said it plans to use the divestment proceeds to invest on pharma acquisitions, expanding existing manufacturing operations and repaying debt.
The company said it is looking at a range of pharma assets in India and abroad that include branded formulations, manufacturing sites, complex hospital generics and even possibly entering vaccines.
"We will look at acquiring branded formulations in India, that is an interesting idea for us. Vaccines is something we don't know a lot about but will look at that. We also look at acquiring plants for manufacturing both in India and outside, complex hospital generics that are sold across the world in hospitals," Nandini Piramal, Executive Director, Piramal Enterprises told media.
"The acquisitions will all depend on right asset at the right price," she said.
Nandini Piramal didn't disclose the ticket size of acquisitions the company is looking at.
"We also look at doing organic capital investments, in our plants to improve capacity, in order to serve our customers and patients better," Piramal added.
Ajay Piramal, Chairman of Piramal Enterprises, there are many acquisition options available in pharma. "Many people think that it's a difficult time, if you want to acquire (valuations) are also reasonable today," Piramal said.
On listing the pharma subsidiary, Piramal said he will work with partners to decide what is the most appropriate time to that.
Piramal said the pharma business will be put into a subsidiary called Piramal Pharma, a 100 percent subsidiary of Piramal Enterprises Ltd in which 20 percent of equity will be given to Carlyle. PEL will be the holding company.
The proposed transaction values the pharma business at an enterprise value of $2.78 billion, with an upside component of up to $360 million depending on the company’s FY21 performance.
Piramal Pharma includes an end-to-end contract development and manufacturing (CDMO) business, a complex hospital generics business selling specialized products across over 100 countries; consumer products division that sells over-the-counter products in India, an investment in the joint venture with Allergan India, to make ophthalmology products in the domestic market and Convergence Chemicals, a joint venture with Navin Fluorine International to make fluorochemicals.
The pharma business had revenues of Rs 5,419 crore in FY20, with an EBITDA margin of 26 percent.
Piramal said he plans to use some portion of the proceeds to deleverage the balance sheet bringing down the debt equity ratio to 1.5 percent.
Piramal in FY20 raised raised Rs 14,500 crore of additional capital through asset sales and fund raising including the sale of healthcare insights and analytics subsidiary Decision Resources Group (DRG) to US-based Clarivate Analytics for a sale consideration of $950 million in January this year.
Its debt-to-equity ratio stood at 2.6 times versus 3.9 times a year ago.
Piramal sold almost all of its domestic pharma business to Abbott in 2010 for $3.8 billion, following which it rebuilt the business over the last 10 years.