Mumbai: Indian billionaire Ajay Piramal is considering initial public offerings for two of his units and plans to expand his financial services division to boost market capitalization of his conglomerate to $20 billion by 2020.

Piramal forecasts he will get the financial services business listed in the “medium term" while his healthcare data management firm, Decision Resources Group, may sell shares in the US, he said in an interview in Mumbai without giving details. Piramal, who bought stakes in the Shriram Group companies, which run businesses from financing trucks and buses to broking, is considering “all options" to increase cooperation between the two groups’ financing divisions, he said.

Piramal, 61, who sold his branded generic drugs unit to Abbott Laboratories for $3.8 billion in 2010, seeks to boost market value of the group by revamping his companies and spinning off businesses housed in his flagship Piramal Enterprises Ltd. Piramal, who says he’s “dispassionate" about his investments, is betting that growing demand for financial services in Asia’s third-largest economy and mounting pressure in the US to cut healthcare costs, will help him meet his goal.

“We will look at unlocking value through listings," Piramal said. “If the Indian economy grows, finance has to grow. That’s the real fuel in the economy. Spending in healthcare is only going to increase with the aging population particularly globally."

Piramal Enterprises’ market value has increased 89.5% to 32,900 crore ($5 billion) this year. The billionaire also has a realty unit backed by Goldman Sachs Group Inc. and Warburg Pincus & Co.

Listing units will help because investors prefer to have a choice on which assets they want to own, said Prashasta Seth, chief investment officer at IIFL Asset Management Co., which has $890 million of assets. “You’ll get a better valuation than a scenario where you combine everything and force investors to take the entire spectrum."

Piramal’s focus on expanding and listing the financial services unit is shared by billionaire Kumar Mangalam Birla, whose $41 billion group is also planning to spin off and list its lending division.

Outstanding loans at the financial services arm of Piramal Enterprises have more than doubled to 16,110 crore in the 12 months to 30 June from 7,610 crore, according to a company presentation. Credit growth at Birla’s financial-services business has increased to 27,730 crore as of March from 1,850 crore in 2011, Ashish Adukia, Aditya Birla’s head of group corporate finance, said last month.

Shriram Investments

In 2014, Piramal Enterprises bought a 9.99% stake in Shriram City Union Ltd. as well as a 20% in the holding company Shriram Capital Ltd. after acquiring 10% in Shriram Transport Finance Co. the year before. Piramal was named chairman of Shriram Capital in 2015.

Helping expand the Shriram group will also go a long way in Piramal’s goal. The Mumbai-based company’s 4,600 crore investment in the Shriram companies haven’t factored in Piramal Enterprises’ valuation yet, the billionaire said.

“Right now everything is possible," Piramal said, when asked if he will consider combining the two finance units. “Let the boards decide. We will examine all the options."

Turn arounds

Piramal, who inherited a strife-hit textile mill in the 1980s, soon diversified into glass packaging, pharmaceuticals, realty and financial services. He helped turn around businesses and sell them profitably.

Piramal Enterprises sold its domestic drug formulations business to Abbott Laboratories before selling its shares in Vodafone India to Vodafone Group Plc for $1.5 billion. That was 52% more than what was paid for the stake in the wireless service provider.

“You have to be dispassionate," said Piramal, who is now monitoring the performance of the group’s imaging business. “You don’t have to get attached to your investment. Just because I’ve grown a pharmaceutical business, do I get attached to it? No."

Piramal is now betting on stressed assets. The proportion of soured credit in India’s banking system has surged to a 16-year high of 11.5% as of 31 March, central bank data show, with lenders being given a March 2017 deadline to clean up their balance sheets.

Piramal Enterprises and Bain Capital Credit are raising as much as $750 million to invest in soured credit. The two partners are also considering setting up an asset reconstruction company.

“To do that you will need specialized funds and specialized people like us," Piramal said. “In the past we have done turnarounds."

The rapid diversification has made it harder for investors and analysts to take a call on Piramal Enterprises’ stock. Only two brokerages have a recommendation on the stock compared with 33 in 2010 before the company sold its pharmaceutical business, data compiled by Bloomberg show.

“It’s hard to know what’ll be the shape of Piramal Enterprises five years from now because of the businesses they have sold and those entered recently," said Giriraj Daga, an analyst at Mumbai-based Visaria Securities Pvt. “It’s like investing in a private equity fund where you have to just believe that the Piramal management would have done their due diligence."

So far the strategy has worked for Piramal and his exits have made money for investors. Shares of Piramal Enterprises in the past five years have risen 424 percent compared with 69% increase in the benchmark S&P BSE Sensex.

“If you had invested a hundred thousand rupees when we came into pharmaceuticals in 1988, today it would be worth about 130 million," Piramal said. “So we believe we can create value for our investors." Bloomberg

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