Piramal Enterprises, the financial services-to-pharma conglomerate, indicated that it may look at the possibility of sale of healthcare insights and analytics subsidiary, Decision Resources Group (DRG), if it fails to grow revenues and improve profitability in the quarters ahead.
"Our focus is always to do what is in the best interests of shareholders. At the moment, we feel that if we can increase the topline and profitability — the value should go up significantly," Ajay Piramal, Chairman of Piramal Enterprises, said in the earnings call referring to DRG.
"If we find that, in the future, this is not happening, we will go for unlocking value," Piramal added.
Piramal bought US-based DRG for Rs 3,400 crore in 2012 from private equity firm Providence Equity Partners, paying four times the $160 million revenue of DRG. At the time of acquisition, DRG was growing at 20 percent annually.
DRG contributes about 11 percent of total Piramal's revenues, but the sales have been almost flat in last three financial years as the division struggles to catch up with the group performance. The FY18 sales of DRG stood at Rs.1,209 crore, dropping 1 percent, while Piramal grew its total revenue in the same period by 24 percent.
In the first quarter of FY19, the sales of DRG grew 6 percent in dollar terms and 10.5 percent in rupee terms to Rs 278 crore helped by rupee depecriation.
Piramal says lacklustre performance of DRG was due to shift in delivery model from large, static research reports to digitally-delivered, user-centric applications and analytics services.
DRG caters to the information needs of pharmaceutical, insurance and hospitals.
"What has happened now is that it has gone towards real world data and more analytics. That is the transition we are taking to," Piramal said.
The group, to cut costs and accelerate product development, has been expanding its workforce in India. Close to half of DRG's workforce is now based in Bengaluru and Gurugram offices.
"There is some early signs of topline growth. Now we are focusing on improving the profitability. Yes, it is an area of focus for the management to ensure this. And we are monitoring it closely," Piramal added.
Piramal, in the first quarter, offloaded the loss-making imaging business it acquired in 2012 from Bayer Pharma for an undisclosed amount involving revenue-based milestone and royalty payments.
The acquisition gave Piramal access to a novel positron emission tomography (PET) tracer substance called florbetaben, used for the detection of Alzheimer’s disease.
However, despite getting approvals from USFDA and Europe drug regulators, use of florbetaben failed to gain much traction due to lack of new treatment options or drugs to treat Alzheimer’s.
Piramal took a write-off of Rs 452 crore in Q1FY19 towards imaging assets which it sold to UK-based Alliance Medical Group.
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