Piramal to Hive Off Pharma and Focus on Financial Services

Piramal to Hive Off Pharma and Focus on Financial Services

by 5paisa Research Team Last Updated: Dec 12, 2022 - 03:42 pm 50.4k Views
Listen icon

The board of Piramal Enterprises approved a composite scheme of arrangement under which the pharma business of the Piramal group would be hived off into a separate company and would also be listed. The core Piramal Enterprises will only house the financial services business of Piramal Group.

According to Piramal, this is likely to simplify the corporate structure of the business and also create demarcated pockets of value. The risks, investments and ROI of the pharma and the financial business are totally different and hence keeping them under the same roof created distorted perceptions of risk and returns.

Under the scheme of arrangement, the pharma business of the Piramal group would get vertically demerged from PEL. The existing shareholders of Piramal Enterprises will get 4 shares of Piramal Pharma for every 1 share of Piramal Enterprises held by them. They will also continue to hold the PEL shares, albeit it would pertain to the downsized business.

Post the deal, Piramal Pharma will become one of the largest listed pharma companies in India and would compete with the larger names in India like Sun Pharma, Reddy Labs, Cipla and Divi’s Laboratories. Piramal Enterprises will be one of the largest fund-based NBFCs in India with substantial presence in retail and wholesale financing.

Perhaps, the DHFL deal was the trigger

Less than a fortnight earlier, PEL had completed formalities under the NCLT formula and taken full control of Dewan Housing and Finance Ltd. PEL had paid a total consideration of Rs.38,000 crore for controlling stake in DHFL. Here is how DHFL will position PEL in the top league of NBFC companies in India.

Firstly, the DFHL acquisition will take the retail wholesale mix to 50:50. The next step will be to take it to 75:25 in favour of retail and in this journey, the DHFL acquisition will be critical. DHFL gives tremendous reach to PEL with the addition of 301 branches, in addition to its existing 14 branches. 

This could also set the tone for the long-term bank license plans. Ajay Piramal had planned an entry into banking via the deal between IDFC bank and Shriram Group, which did not materialize. The decision to hive off pharma allows PEL to sharpen its focus on financial services.

Also Read:-

Will DHFL Shares Be Delisted After Being Acquired by the Piramal Group?

How do you rate this blog?

Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

oda_gif_reasons_colorful

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Open Free Demat Account
Resend OTP
Please Enter OTP
Mobile No. belongs to

By proceeding, you agree to the T&C.

Latest Blogs
Weekly Market Outlook for 4th March to 8th March

In the week gone by, Nifty traded with higher volatility as the index corrected during mid-week upto 21860, but it then witnessed a smart recovery to register new record high and the index ended the week just below 22400 with weekly gains of three-fourth of a percent.

Best EV Stocks in India 2024

As India shifts to a greener future, the electrically powered cars and trucks market will rise significantly in 2024. This article investigates the best EV stocks in India, highlighting firms leading the way in innovation, sustainability, and market capitalization.

Best Banks in India 2024

Navigating the many options for banking services becomes a crucial task for both individuals and enterprises as we enter the Indian financial scene in 2024. The top banks in India provide a wide range of services that extend beyond traditional banking, serving as cornerstones of the country's financial stability. These best banks in India offer individualized client care and state-of-the-art digital solutions that reflect the changing needs of the financial industry.