Mumbai: The Ajay Piramal-led Piramal Healthcare Ltd has agreed to acquire US-based health information company Decision Resources Group (DRG) for $635 million (Rs 3,400 crore), marking its entry into the $5.7 billion global healthcare database and consulting services industry.

Ajay Piramal, chairman of Piramal Healthcare (Bloomberg)

Piramal Healthcare will pay four times the $160 million revenue forecast by DRG this year for the acquisition, which was announced on Wednesday. The US company is currently owned by private equity firm Providence Equity Partners Llc, which acquired the business five years ago and expanded it through several small strategic acquisitions. Details of the value of the earlier deals were not available.

“It is the best valuation for a company of this size in the global healthcare information space, as many such entities, especially listed ones, command even higher premium," said Ajay Piramal, chairman and managing director, in an interview. “This business, which is specialized in nature and with stable revenues and low working capital, maintains high cash flows."

Piramal Healthcare shares fell 0.95% to 427.60 apiece on BSE on a day the benchmark Sensex index declined 1.83% to 16,030.09 points.

The transaction will be India’s biggest outbound acquisition since hospital chain Fortis Healthcare (India) Ltd bought Singapore-based sister firm Fortis Healthcare International for $665 million in November, according to Thomson Reuters data.

India mergers and acquisitions deal volume was at nearly $13 billion in the first quarter of 2012, down from $19 billion in the same period last year, the data showed, as global economic uncertainty and the domestic economic slowdown made Indian companies cautious.

DRG, one of the fastest growing companies in the healthcare information industry, is focused on three market segments: advisory services on drug utilization trends, database and analytical services that healthcare companies use to assess the current and future market opportunity for their products, and providing insights and data on the medical devices market.

“This is an excellent opportunity for our business, customers and employees," said DRG chief executive Peter Hoenigsberg in a statement on Wednesday. “Our customers have indicated that independent, objective, indispensable information from emerging markets is one of their greatest needs and Piramal’s experience in emerging markets is important since these markets are the primary avenues for growth in the pharma industry."

The company, which has maintained annual revenue growth at around 20% in the last five years, has one of the largest clientele bases in the segment, including 48 of the world’s top 50 drug makers.

“Since continued data and advisory services are very critical in the decision making in the healthcare industry, especially when the sector globally is facing several challenges, including regulatory pressures and increasingly complex reimbursement systems, among others, the demand for such reliable information services is growing," said an industry analyst with a global consulting firm who did not want to be named because of the company policy.

DRG has about 500 employees, including some 300 analysts. “We will retain all the employees as it needs the same talent pool to manage this highly sophisticated information-based business. Hence, it will continue to be led by Hoenigsberg and the existing senior management team," said Piramal.

To scale up the business, Piramal will be looking at a few more small- and medium-sized acquisitions in the same space in the emerging markets, he said.

“DRG is mostly focused in the US and a few other developed markets, including the UK and Japan, currently. Since its next growth region is emerging markets, including India, we will look at expanding both organically and through acquisitions in these geographies," Piramal said.

Following the completion of the DRG acquisition, Piramal Healthcare will operate this company as a stand-alone business, which will remain headquartered in Burlington in the US.

Piramal Healthcare, which is to be renamed Piramal Enterprises Ltd soon as part of its diversification plan, has invested in mobile phone operator Vodafone India by picking up a stake of around 11% for about 6,000 crore.

The drug maker, which specializes in contract manufacturing, over-the-counter drugs and drug discovery, also purchased a research and development business from Germany’s Bayer AG last month. The company, which is also into financial services, is firming up plans to enter the defence and security sectors.

ch.unni@livemint.com

Reuters contributed to this story.

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