Home >companies >Piramal Enterprises seeks to sell diagnostic solution business

Mumbai: Piramal Enterprises Ltd, the flagship of the Ajay Piramal Group, plans to divest its diagnostics unit, one of the two consumer-facing businesses remaining in its portfolio, having sold its generic medicines unit to Abbott Laboratories for the equivalent of $3.72 billion and its diagnostics services business to SRL Ltd in 2010.

Potential buyers that have shown interest in acquiring the diagnostics unit include the laboratory diagnostics arm of Siemens Healthcare and Abbott Diagnostics, a division of US-based Abbott Laboratories, said three persons familiar with the development who spoke on condition of anonymity.

At least two “strategic players have shown interest in the asset, which is on the on the block now," said one of the three persons.

The divestment follows the company’s decision to exit from businesses that don’t fit into its new strategy of concentrating on segments that do not need a retail presence in a large way.

Piramal Enterprises is moving to an industry-centric business model in which all its existing ventures are concentrated in two main areas of interest—healthcare and financial services.

The diagnostics unit, which is part of the group’s healthcare business, makes and sells biochemistry analysers, hematology analysers used in the study of blood composition and reagents, which are used to test for the presence of a substance in the human system by causing a reaction with it.

It is also India’s second largest maker of immunoturbidimetric HbA1c kit, a lab test that shows the average level of blood sugar over the previous three months.

A spokesperson for Piramal Enterprises declined to comment. “As per the policy we do not comment on market speculation," the spokesperson said in response to a query.

Piramal’s diagnostics business had sales of close to 100 crore in fiscal 2014, said a second person.

According to him, talks on the sale of the unit are at a preliminary stage now. “But it may be closed soon as it is purely strategic in nature, although a high valuation expected by Piramals could pose a hurdle in the current market situation," this person said.

India’s diagnostics sector is growing at 20-25% annually. So, the current market valuation for Piramal’s unit could be 1.5-2 times its sales, said a deal maker who is not involved in the transaction.

Abbott India Ltd, which has an active presence in the diagnostic solutions and the reagents business in the local market, has been seeking to expand its market reach and product portfolio.

“Abbott does not comment on market rumours or speculation," Abbott India’s public affairs director Varsha Chainani said in response to a query.

A spokesperson for Siemens Healthcare also declined to comment, citing a similar policy.

“India’s diagnostics industry is highly fragmented, although the market growth is high. Since the overall healthcare market is growing at much faster pace and also with a sizable volume, many dedicated companies on the diagnostic solutions (material and equipment supply) side, especially multinational companies which are already dominant in the local market, will expand their hold," said Muralidharan Nair, partner, healthcare, at consultancy firm EY India. “This will lead to consolidation in the market and small units could find this as a better opportunity to make a profitable exit."

The other user-facing business Piramal is operating at present is consumer health or over-the-counter pharmaceuticals.

Its financial services business is currently focused on corporate lending and strategic investments in the reality and infrastructure sectors.

Healthcare ventures including pharmaceutical solutions (contract manufacturing of drug formulations and ingredients), information management and discovery research are catering to industry users.

Another group company, Piramal Glass Ltd, which manufactures glass bottles, also caters to industrial customers in cosmetics, liquor and pharmaceuticals sectors.

Piramal Enterprises fell 0.93% to 530.65 a share on BSE on Friday, while the Sensex fell 0.66% to 22,359.50 points.

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