A file photo of Ajay G. Piramal. Photo: Mint
A file photo of Ajay G. Piramal. Photo: Mint

Piramal Enterprises may split healthcare and financial services businesses

Piramal Enterprises is trying to diversify to newer areas, including financial services, for the last three to four years

Mumbai: Ajay G. Piramal-led Piramal Enterprises Ltd is contemplating to split its healthcare business and financial services, as part of an attempt to unlock value for its shareholders.

Piramal Enterprises has a presence in healthcare and healthcare information management, besides financial services.

The Economic Times on Wednesday quoted Piramal saying that the company is getting conglomerate discount currently, adding “as we go forward, we split them up separately" owing to low cost for raising capital and better understanding of customers.

Piramal’s spokeswoman declined to comment.

On Monday, Piramal, while announcing its results, said that on financial services, the company is looking at opportunities that will give a return on equity (RoE) of over 20%.

Piramal said the company is still under-leveraged with current debt-to-equity ratio of just 1.1:1 and there is significant scope to grow from here.

“The strategy of diversifying into financial services is paying off for the group. At present, apart from having large healthcare and information management businesses, Piramal Enterprises has become a power house in financial services and a force to reckon with," Piramal said in an interview to Mint post results.

“In terms of wholesale lending to corporates, we are among top players in the country. We are also working with high quality customers. It was well thought out strategy that the group took four years ago. We are rapidly scaling the financial services business with good quality talent and enhancing our penetration in the market," he said.

While healthcare, the mainstay of the company, registered a 16.7% rise in the third quarter of the current financial year, the financial services vertical posted 131.3% growth.

Healthcare contributed 53% of the total sales, while financial services accounted for 26.8%.

Piramal Enterprises is trying to diversify to newer areas, including financial services, for the last three to four years.

“The ratio of revenues from financial services will change in the next three years even though there can be some M&As in healthcare segment. It is difficult right now to predict the potential change in the revenue proportion in coming years as the group is focussing on all three verticals equally," Piramal said.

He said the firm has a wholesale lending book of over 11,000 crore as on 31 December 2015 against 3,900 crore for the corresponding period of the previous year.

“We also have a Real Estate Fund Management business with investments of over Rs.9,000 crore," he said.

The firm had invested in 57 projects across six cities with 23 leading developers last year.

Piramal Enterprises had invested in Shriram Group and Ajay Piramal took over as chairman of Shriram Capital Ltd last year.

“We have long term strategy for financial services. We are looking at well diversified financial play. The investments in Shriram Group are giving us access to retail financing," Piramal said.

But that does not mean that Piramal Enterprises will stay out of healthcare.

“On healthcare, we are focussing on both organic and inorganic growth opportunities. We have recently conclude two acquisitions in our OTC business," he said.

On the third vertical, Piramal said information management services is very niche and the company has registered 15% growth in that business, adding it is unusual for a US-based business to clock such growth.

Piramal Enterprises’ consolidated net profit was up 29.2% to 321.71 crore in the December quarter against 249.02 crore a year ago, owing to pure revenue growth, the company said in a statement on Monday.

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