Piramal Enterprises share price rose over 2 percent in the early trade on October 8 after the company had announced the demerger of its pharmaceuticals business.
"The board of directors of Piramal Enterprises on October 7, approved a composite scheme of arrangement providing for the demerger of the pharmaceuticals business from Piramal Enterprises and simplification of the corporate structure to create two industry-focused listed entities in financial services and pharmaceuticals," company said in its release.
“Over the years, Piramal Enterprises has grown multi-fold with diverse businesses under one listed holding company structure. In line with our stated strategy, the Board has today approved the demerger and simplification of our corporate structure, to create two independent listed entities in Financial Services and Pharmaceuticals, with a leadership position across the business segments they operate in," said Ajay Piramal, Chairman, Piramal Group.
"It will firmly empower both entities to be future-ready and enable them to independently pursue their growth strategies with sharper focus and identity," he added.
Shareholders of Piramal Enterprises (PEL) will get 4 shares of Piramal Pharma Limited for every 1 share in PEL, in addition to their existing holding in PEL.
The board has appointed Mr. Puneet Yadu Dalmia as an additional director of the company with effect from October 7, 2021 to hold office as independent director of the company for a term of 5 years, subject to the approval of the shareholders.
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Research house has maintained an outperform rating on the stock with a target at Rs 2,960 per share.
The company has initiated the demerger process of its pharmaceuticals business and would focus only on the financial services business of the group.
The company believes both businesses are adequately capitalised for organic & inorganic growth, added CLSA.
Over the next three years, we expect the company's financial services business to make meaningful inroads into retail.
Product diversification within retail would help the company deliver strong growth and lower concentration risk.
We expect the financial services business (excluding the Life Insurance JV) to deliver ~ 2.3% RoA/10% RoE over the medium term (post building in the DHFL acquisition). We have an unchanged target multiple of 1.8x for the financial services business.
We roll forward our valuation to Sep '23E. Using SoTP, we arrive at a target price of Rs 3,310/share and maintain our buy rating, said Motilal Oswal.
At 09:18 hrs Piramal Enterprises was quoting at Rs 2,908.70, up Rs 22.30, or 0.77 percent on the BSE.
The share touched a 52-week high of Rs 3,013.00 and a 52-week low of Rs 1,198.90 on 07 October, 2021 and 29 October, 2020, respectively.
Currently, it is trading 3.46 percent below its 52-week high and 142.61 percent above its 52-week low.Disclaimer
: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.