Piramal puts plans for selling stake in R&D firm on hold

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The choppy stock markets and global credit squeeze have begun to pinch Indian pharma companies too. Piramal Healthcare (erstwhile Nicholas Piramal) has put on hold its plans to sell up to 10% stake in Piramal Life Sciences, its listed subsidiary, citing stock market vagaries and uncertain valuations.

Last year, Piramal Healthcare had spun off its novel drug discovery research operations into a separate company, later named Piramal Life Sciences. The company was, subsequently, listed on the Bombay and National stock exchanges.

“We are putting our plans for stake sale of our R&D company on hold at the moment,” said Swati Piramal, director, Piramal Healthcare. “This is owing to the present conditions in the stock market, which are not helping us to arrive at the right valuation. We are in a 'wait-and-watch' mode.”

The Piramal Life Sciences stock is at present trading at Rs 108.90 on the Bombay Stock Exchange (closing price as on Tuesday), well below its 52-week high this May (Rs 519.80 on May 29, 2008, following its listing the same day at Rs 300).

The parent, Piramal Healthcare, closed on Tuesday at Rs 287 on the BSE, below its 52-week high this June (Rs 388.70 on June 8, 2008). Apart from Piramal, several other Indian pharma companies, including Dr Reddy's, Ranbaxy and Sun Pharma, had hived off their R&D divisions into separate companies to mitigate the risks involved in the high-risk high-reward business of new chemical entity (NCE) discovery and development. The move also was expected to facilitate strategic or financial investors in future for these research programmes. Shares of Sun Pharma Advanced Research Company (SPARC), the hived off R&D arm of Sun Pharma, also listed on the BSE, closed at Rs 63.05 on Tuesday, compared a 52-week high of Rs 186 on December 17 last year.

Piramal Life Sciences was valued at $480 to $500 million, said its chairman Ajay Piramal in March this year. There were also plans for Piramal Life Sciences to go for an initial public offering (IPO) by June this year, which has also not materialised yet.