Piramal Enterprises adds peptides segment to it its growth armoury

MUMBAI: Shares of Piramal Enterprises Ltd rose more than 2% on the bourses on Thursday as the company announced a large pharmaceutical acquisition. Piramal Pharma Ltd has entered an agreement to acquire 100% stake in Hemmo Pharmaceuticals Pvt Ltd. (Hemmo) for an upfront consideration of Rs775 crore and payouts linked to achievement of milestones.

While the size of the acquisition is large, the buyout will help the company enter the fast-growing peptide Active Pharma Ingredients (API) market. The global Peptide API market stands at about $2 billion, growing 6-8% annually, as per the company. This offers strong growth opportunities.

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With peptide API development and manufacturing capabilities added to its portfolio, the pharmaceutical contract development and manufacturing organisation (CDMO) business is expected to see stronger growth rates.

The company’s pharmaceutical business has three growth segments that typically have high entry barriers, ensuring limited competition and sustainable longer-term growth.

Piramal Pharma Solutions--the CDMO business--offers integrated solutions across a drug life cycle. This business will strengthen following the acquisition. Piramal Critical Care ensures the company’s presence in the complex hospital generics with low costs due to backward integration. In addition, India Consumer Products (OTC) business has well-known brands with a large distribution network.

In FY20, Piramal Enterprises hived off its pharma business into a separate entity Piramal Pharma and raised capital to strengthen the balance sheet. This positioned it better better for the next leg of growth through organic as well as inorganic route say, analysts. The company plans to achieve 15% organic revenue growth and an Ebitda margin in the high 20s.

Analysts at CLSA, in a note in early March, had said that capital infusion from Carlyle pegs the business at $2.7 billion at enterprise value and allows for strategic acquisitions.

Piramal Enterprises is a diversified company with interests in financial services, accounting for 59% of FY20 revenue, and pharma making up for 41%.