Piramal aims 5-fold topline growth, says no to biz demerger now

Written by MG Arun | Mumbai | Updated: Jun 19 2012, 07:14am hrs
Ajay Piramal-led Piramal Healthcare (PHL) is targeting a five-fold growth in revenues by 2017 through its focus on five sectors, a clarity that investors had been looking for its core domestic formulations business to US firm Abbott Laboratories in May 2010.

The company, however, would not demerge any key business from PHL in the immediate future, as each of them will need PHLs funds to grow to reach a critical mass and in some new divisions, turn cash positive, a top executive said. Over the next five years, we should be in the range of R8,000 crore to R10,000 crore in revenues, Rajesh Laddha, group chief financial officer, PHL, told FE in an interaction. These would accrue from the business divisions that have been carved out pharma, drug discovery, information management, financial services and defence.

Growth in certain sectors, however, is also linked to economic growth and sound policy decisions at the government level, he cautioned. As of now, we have stopped looking at new sectors, Laddha added. For the financial year ended March 31, PHL had consolidated revenues of R2,352.36 crore and a net profit of R111.5 crore. The companys stock had lagged behind on the bourses, on investor concerns on the growth and scalability of the remaining businesses. On Monday, PHL shares were trading marginally higher than the previous close at R489.25. Analysts had said Piramal needed to spell out a clear path for the company if it needs to get rid of the concerns. Investors have been looking for clarity on the profitability and scalability of the companys recently announced businesses, said Sarabjit Kaur Nangra, the vice-president research at Angel Broking, a domestic broker.

The consolidated revenue figures, Laddha clarified, still may not convey an exact picture of the company since it is not easy to forecast revenues from a high-risk businesses like drug discovery or from defence, where the group is shaping up the final contours.

While pharma remains one of the core segments, financial services will be a large play, comprising two non-banking financial companies (NBFCs) and real estate private equity fund through Indiareit. In the NBFC space, the company plans to take its exposure to R5,000 crore. It wants Indiareit to do R10,000 crore from the present R4,000 crore In contract manufacturing (CRAMS), PHL plans to double revenues in next four years, from around R1,600 crore now, while targeting R250 crore from the OTC business by then. In drug discovery segment, the group is pumping in around R250 crore every year, targeting the successful commercialisation of its molecules in development.

Information management was carved out as a separate division after PHL acquired Decision Resources Group, a US-based company in the healthcare information segment, for around $635 million, in May. In defence, the company would focus on surveillance technologies, and would not get into destructive segments, and would debut with an acquisition in Europe, the US or Israel.