Need to diversify, rebuild business: Ajay Piramal

Written by fe Bureau | Mumbai | Updated: Jul 20 2012, 09:07am hrs
Faced with a volley of queries from shareholders on the visibility and risks involved in investments in realty, telecom and financial services, Piramal Healthcare chairman Ajay Piramal said the company is in the process of rebuilding its businesses after the Abbott deal.

The sale of our domestic formulations business to Abbott had bloated our profits in the previous fiscal. This is a one-off earnings, and we need to rebuild our businesses to reach those levels, Piramal said at the companys annual general meeting on July 19. Stating that the residential segment in Mumbai, where the company is investing as a fund and is also a lender through its financial services arm, is robust, Piramal reiterated that its investment in telecom will yield returns in the range of 17-20% over 2 to 3 years.

Piramal Healthcare had sold its domestic drug business to US-based Abbott Laboratories for R18,000 crore in 2010, and was left with contract manufacturing, over the counter, diagnostics and research & development of drugs in the pharma portfolio, most of which are yet to turn in high revenues as the domestic drug sales business had. The company has since forayed into financial services, real estate and digital imaging, and is also looking to enter the defence sector, apart from making certain opportunistic investments in Indias third-largest mobile telephony company Vodafone. We cannot only remain in pharma, we have to diversify and spread the risk, he said.

Shrugging off shareholders concerns that the telecom sector is mired in controversies and Vodafone is facing a $2-billion tax bill from the government, Piramal said We are confident of 17-20% returns over the next 2-3 years. We will exit either through an IPO or sale of shares to a third party.

Clarifying on its foray into realty, Piramal said that its is providing loans to real estate developers through its non-banking financial services company, and not taking any equity in realty projects. Also, through Indiareit, its funding arm, the company has invested around R100 crore. In Mumbai, the supply of homes is lower than the demand, he said, highlighting the potential of the business.

In R&D, where the company has 13 molecules in various stages of development, the effort will be to do work at 10-20% of the costs globally. Shares of the company were mamrginally down on the BSE on Thursday to close at R506.75.

Piramal has been following what he calls a string of pearls acquisition strategy to create a global presence in niche healthcare and pharma segments. In May, Piramal Healthcare acquired Decision Resources Group, a US-based company in the healthcare information segment, for around $635 million (R3,400 crore).

Earlier, it acquired the worldwide rights to the molecular imaging research and development portfolio of Bayer Pharma for an undisclosed sum, part of its efforts to build a strong portfolio under its drug discovery programme.

Meanwhile, Ajay Piramal told shareholders: To appropriately reflect the company's changed business profile, it is proposed that the name of the company be changed to Piramal Enterprises Ltd."

This is a research product, and we will keep investing for the next three years in the business, Piramal said, adding that the company plans to launch a tracer for the early detection of alzheimers disease by 2014.