Piramal Enterprises (PEL) share price fell over one per cent on BSE in Monday’s trade despite 20 per cent stake buy in Piramal’s pharma business by the global private equity major The Carlyle Group. Piramal Enterprises was trading 1.19 per cent lower at Rs 1,326.50 apiece on BSE in early morning deals. PEL on Saturday announced that Carlyle will invest a fresh capital for 20 per cent stake in Piramal’s pharma business. As on March 31, the equity value for 20 per cent stake in Piramal Pharma would be about $490 million, or Rs 3,700 crore. “The final amount of equity investment will depend on the net debt, exchange rate and performance against the pre-agreed conditions at the time of closing of the proposed transaction,” Piramal Enterprises said in an exchange filling.
Brokerage firm Motilal Oswal has pegged a target price of Rs 1,600 on Piramal Enterprises stock, an upside of nearly 20 per cent from previous close of Rs 1,343 apiece with a ‘buy’ rating to it. “The stake sale is another step on the part of PIEL toward simplifying the group structure and effectively demerging the Pharma division in the ensuing quarters.More importantly, the company has continued its deleveraging exercise that has been ongoing over the past year,” Motilal Oswal said in a research report. Over the past year, Piramal Enterprises has curtailed disbursements in wholesale lending and reduced exposure to its top-10 clients.
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The transaction is one of the largest private equity deals in Indian pharmaceutical industry, which values the pharma business at an enterprise value of $2.8 billion. “The company has also made its intention clear of exiting its investments in Shriram group,” it added. It also said that the tough environment of the past 1-1.5 years has prompted Piramal Enterprises to undertake various steps to protect its balance sheet. “These steps include (a) consolidating its loan book and reducing the share of large exposure, (b) raising significant capital and reducing leverage, and (c) now preparing a strategy to foray into retail products in the Lending business,” it said.