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    Piramal Enterprises demerger this week — all you need to know

    business | IST

    Piramal Enterprises demerger this week — all you need to know

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    Shareholders of Piramal Enterprises will receive four shares in Piramal Pharma for every one share held in Piramal Enterprises. Piramal Pharma will have a total of 1,193 million outstanding shares.

    The long-awaited demerger of Piramal Enterprises' pharma and financial services business is set to take place on September 1. The pharma entity's shares are expected to be listed by the third quarter of the 2022-23 fiscal year.

    Shareholders of Piramal Enterprises will receive four shares in Piramal Pharma for every share held in Piramal Enterprises. Piramal Pharma will have a total of 1,193 million outstanding shares.

    The Carlyle Group, which bought 20 percent in Piramal Pharma in October 2020 for Rs 3,700 crore in one of the largest PE deals in the pharma space, will get 239 million shares.

    Shares of Piramal Enterprises started trading ex-demerger on Tuesday.

    The pharma entity has three verticals:

    • The contract development and manufacturing (CDMO) arm constitutes most of the business. It is a B2B business which entails drug discovery, development and commercial manufacturing.
    • The complex hospitals and generics arms: It comprises inhalation anaesthesia and injectables.
    • The India consumer healthcare arm.
    • Both the CDMO and India consumer businesses are consumer focused and total around 40 percent of sales. The company also has a joint venture with Allergan for branded ophthalmology products in India.

      Strong track record

      The company has a strong regulatory track record. Piramal Pharma gets 41 percent sales from North America. It has completed a total of 280 regulatory inspections, with six USFDA inspections, which have gone off successfully.

      Piramal also has a strong presence in the anaesthesia market. The company is fourth globally when it comes to inhalation anaesthesia. This business is categorised by lower competition and higher barriers to entry. While it did see a hit during COVID-19, it is on the path to recovery as hospitalisations and surgeries have picked up. The business grew 20 percent in FY22 and 10 percent in the first quarter of the 2022-23 fiscal year.

      The growth of the company’s over-the-counter (OTC) arm is also keenly watched. The OTC arm leads with household brands such as Lacto Calamine and the women’s health-focused ‘i-brands.’ The business grew 48 percent in FY22.

      Few factors to watch for

      The CDMO business has been impacted by execution-related challenges. While the company did not share the overall guidance for FY23 due to volatility, the Street will watch for the company’s ability to meet long-term guidance, especially on the margins, which are currently below the industry average at 11 percent.

      The company has closed and integrated 15 acquisitions in the past decade and sees inorganic moves as a key driver to growth.

      Listing and valuation

      The pharma entity's shares are expected to be listed by the third quarter of the 2022-23 fiscal year. CLSA has a mid-October timeline. The likes of CLSA are valuing the company at Rs 1,030 crore, including Carlyle’s stake of 20 percent. This should translate to Rs 206 per share on the listing of Piramal Pharma.

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