Piramal Enterprises Ltd.: Carlyle leads race for Piramal pharma stake

Mumbai: Carlyle has emerged as the frontrunner to pick up a significant minority stake in Ajay Piramal’s pharma business for Rs 3,500-4,000 crore, said people in the know, reflecting the US private equity group’s appetite for large pharma and healthcare deals.

The other contenders in the fray include TA Associates and KKR. All three have recently submitted binding offers to acquire a 20 per cent stake.

If successful, this will be the second pharma transaction for the US private equity group in as many months, having bought Sequent Scientific, India’s largest pure-play animal healthcare company, in May.


“Going purely by the bids, Carlyle’s offer is most aggressive. It joined the race late but has upped the tempo in recent weeks,” said an official with knowledge of the transaction, who spoke on condition of anonymity as the discussions are in private domain.

“The final negotiations before the share purchase agreement are ongoing,” said the official.

Carlyle’s offer would value the business at around Rs 20,000 crore ($2.6 billion), almost as much as the Rs 23,131.21 crore current market capitalisation of the combined businesses.

Listed Piramal Enterprises (PEL) is a diversified company with a presence in pharma, financial services and healthcare information management business. The promoters own 46.6 per cent in the company as on March 2020. But the group’s financial services businesses have been under pressure like most of its peers in the sector. In the last year, PEL shares have lost 51 per cent compared with a 16 per cent decline in the Sensex.

Piramal and Carlyle spokespersons declined to comment.

PEL posted a loss of Rs 1,703 crore in the March quarter, after provisioning more than Rs 1,500 crore for potential coronavirus-related losses in its lending business, even as the company reduced its net debt by almost a quarter in the past year to Rs 37,283 crore.

Piramal has been looking at unlocking value in the pharma vertical of flagship Piramal Enterprises by selling a stake to a financial partner ahead of a proposed demerger. The plan is to eventually list the pharma business separately, in India or overseas.

The group had mandated Rothschild to run a formal sale process that had seen initial interests from TPG, CVC, Apax among others, as per people tracking the developments.

The funds were to be used as growth equity and also to give the promoters liquidity in efforts to deleverage the balance sheet that has been hit by concerns of exposure to weakened corporate lenders and developers who borrowed from its nonbanking financial company (NBFC) arm.

Even after selling its domestic formulations business to Abbott for a record 17,000 crore ($3.7 billion) in 2010, the Piramals have built a near-billion-dollar business in pharma spanning continents and segments. But even then, it currently contributes only 41 per cent of the group’s overall revenues, a sharp drop from 60 per cent just two years ago.

“Piramals have partnered with several marque PE names like Warburg Pincus, Goldman Sachs or pension funds like CDPQ and CPPIB. So they are comfortable with financial sponsors. Similarly, many funds see him (Piramal) as a valuable strategic partner to have. The proposed pharma listing will also offer an exit route to the new investor in future,” said another official involved directly.

[Source – Economic Times]


Please enter your comment!
Please enter your name here