Piramal eyes big-ticket buys in US, Europe

Contract manufacturing is one of the three business segments the company has retained after divesting its domestic formulations and diagnostics businesses for around $4 billion (Rs 17,880 crore on Tuesday) last year. The other two are consumer health and critical care such as intravenous fluids and anaesthetics.

“We have identified CRAMS (contract research and manufacturing services) as the segment within the existing businesses in which part of the money can be deployed to take it to the next level of growth," executive director and chief operating officer N. Santhanamsaid on Tuesday. “The growth anticipated in this space will be through a combination of acquisitions and organic expansion."

As part of this growth plan, the company is looking at more than one acquisition target abroad and also building new capacities in India.

“We are looking at companies and facilities of various size that fits to our strategy in the western markets, where such assets are available in the range of $50 million to as big as $1 billion by cost," Santhanam said. He declined to give details of targeted assets. “The cost of asset will not be a constraint if it is a strategic fit," he said.

Piramal Healthcare sold its domestic formulations business valued nine times of its ₹ 1,800 crore sales to US pharma firm Abbott Laboratories in May 2010.

It has since formed a core team of executives to formulate a fresh investment strategy to deploy the ₹ 17,600 crore in new businesses. “Our in-house mergers and acquisition team is already on the job, but there is no timeline that we have set for closing an acquisition," Santhanam said.

The world’s largest drug maker Pfizer Inc., which sold one of its factories in Europe earlier, had recently renewed its contract manufacturing business with Piramal Healthcare for another four years.

Ajay Piramal, chairman and managing director of Piramal Group, had in an earlier interview said the group, which had acquired several firms in the past, had never outsourced scouting and due diligence to external agencies or merchant bankers.

To grow the CRAMS business, Piramal Healthcare is looking at significant capacity addition locally. This is also part of the new investments in this business. It has built three new factories in India dedicated to contract manufacturing by investing ₹ 200 crore.

“Piramal Group’s strategy had always been growing a business to a critical size through small and big acquisitions, and to sell them out to create value. So it may follow the same route in CRAMS business, too, which is now picking up after taking a beating during the 2008 economic melt down in the developed markets," said an industry analyst with a leading local brokerage, who didn’t want to be identified. The $60 billion global pharmaceutical contract manufacturing industry is expected to grow between 12%-15% this fiscal, Santhanam said.

Out of the ₹ 17,600 crore Piramal Healthcare had received from the two divestment deals, it has spent ₹ 2,508 crore on buying-back shares soon announced after the transactions in May last year. The buy-back offer was closed on Monday.

Its shares tanked 5.8% to ₹ 438.75 on the Bombay Stock Exchange; the benchmark Sensex index gained 0.9% to 19,120.80 points.

ch.unni@livemint.com

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