Mumbai: Ajay Piramal spoke to Mint a few hours after he announced the sale of his branded generics business to Abbott Laboratories Inc. Edited excerpts.
The stock markets have taken it badly. Is there something that you haven’t told us?
There is nothing that is unsaid in terms of material information. In the long term, the market will understand the deal.
Is it a smart move to pay 22% capital gains tax? It would have been much less if you had sold the stake in the stock market?
We could have paid zero tax had we sold our shares in the stock exchange. But the promoter and 20% of the minority shareholders would have gained (because the acquirer would need to make an open offer for 20% shareholder), but not all shareholders. We will create long-term value for our shareholders.
Better foothold: Piramal Healthcare chairman Ajay Piramal.
When we acquired the drug business 22 years ago, the valuation of the entire company was Rs6 crore. Today, the value of a part that we sold is Rs17,000 crore. We have created a compounded annual growth rate of 44%.
In my knowledge, there must be a handful of companies who have created such value over a consistent period. The market is not appreciating the fact that so much money is coming in.
You have allied businesses in pharma such as original drug research, over-the-counter, etc. These businesses need funds to grow. Was that the motive?
We will use this money not only to invest in our existing businesses but create new businesses. We are not going to sit idle with all this money. There are different ways to grow this business, but I am not in a position to tell you which are the new areas that we will enter.
We don’t need money to grow these businesses as we have invested in them and they are on a stage of growth on their own. Our debt equity (ratio) is not high. In fact, if you see the history of this company, we have raised money twice in 22 years and that too only around Rs250 crore. We did this (the Abbott deal) because of the valuation. To get 9 times valuation in a branded generics market is very good. They (Abbott) can grow beyond India, which we would not be in a position to do.
So, it is multinational corporation (MNC) might that forced your exit.
It is not a distress sale. There is a difference from what others did and what we have done... They (Ranbaxy’s Indian owners) sold their entire stake and they are no longer in that business. We have not sold our stake.
The MNCs have their might, but the Indian companies too have held their own. From being fourth in ranking in the domestic market in the beginning of the year, we became No. 3 by the end of the first quarter beating GSK (GlaxoSmithkline).
How did this happen?
People were approaching us. The biggest challenge was that it is a good business and not a distress business, and so why should we exit this? The second issue, what should we do with so much money. How will we use it for the company and all the shareholders?
Then there was a moral issue. With so much money, will we get spoilt? Frankly, by the grace of the Lord, even before this event we had enough money. After a certain point, you can’t eat more and can’t have a bigger home than the one where you are living now.
You have built this business in one generation. Feeling emotional?
The emotion is the same as somebody marrying off his daughter. There is a combination of joy and sorrow. You are happy that it is going to a good home. There is sorrow because you have built it, you are attached to it and any parting in life is sad.
After divesting, will acquisitions be on your radar? And will they be in the existing lines of business?
We have never gone slow on strategic acquisitions for lack of funds. But now we can look at larger deals. Frankly, it could be beyond pharma.