Piramal to demerge financial,  pharma  business

Piramal Enterprises Ltd on Thursday said it will separate its drugs business and merge the group’s financial services units, including Dewan Housing Finance Corp. Ltd (DHFL), with the group holding company to simplify the corporate structure and unlock value.

The pharmaceuticals business will be separated from Piramal Enterprises and consolidated under Piramal Pharma Ltd, the group said in a statement.

Two operating subsidiaries of its pharma business will also be merged with Piramal Pharma

For every share held in Piramal Enterprises, shareholders will get four shares of Piramal Pharma.

As part of the plan to consolidate the group’s fragmented financial services businesses, PHL Fininvest Pvt. Ltd, a non-banking financial company (NBFC), will also be merged with Piramal Enterprises to create a large listed NBFC, the group said.

Home financier DHFL will, however, remain a wholly owned subsidiary of Piramal Enterprises.

“Our existing shareholders will get two shares, one of Piramal Enterprises and one of pharma. This is a much better and cleaner way and much more investor-friendly. Both will be listed separately, and both will be widely held. This will create more value in the hands of shareholders,” said Ajay Piramal, chairman of Piramal Group.

Piramal said that the group had been taking steps to simplify its structure over the last couple of years, in line with investors’ demand.

“Last year, we segregated the pharma business into a subsidiary and brought in Carlyle as an investor. Our DRG (Decision Resources Group) business, which was unrelated to both these companies, we have sold out, and then the DHFL acquisition has happened. So, we felt that this was the right time to go ahead with this,” said Piramal.

After the restructuring exercise, the promoter holding in Piramal Enterprises and Piramal Pharma will stand at 44% and 34%, respectively, he said, adding that the group will decide on the board composition of the two companies in due course of time.

Piramal added that there is no plan to change the name of Piramal Enterprises to reflect its new focus on the financial services business.

The demerger is subject to shareholders, creditors and regulatory approvals, which could take as many as 10 months to complete.

Piramal said that he does not expect any headwinds to the restructuring of the group, adding that the decision to go ahead with this structure was made after taking into account the interest of minority shareholders.

“It is in the interest of minority shareholders. The regulator will be happy, shareholders should be happy, and creditors should be happy,” he added.

Piramal Enterprises, which will become a large listed diversified NBFC, focused on retail and wholesale financing, will have a consolidated loan book of ₹65,000 crore. Piramal Pharma will have a presence in contract development and manufacturing, global distribution of complex hospital generics and a large geographic footprint in the consumer products market in India