Ajay Piramal was only 29 when his father died in New York. His brother, Ashok, took over the family business, but five years later he died, too. Just before that, the other brother, Dilip, decided to separate his business. Ajay Piramal, who took over in his early 30s, soon found the group’s textile business unviable. He sold his flagship textile company, Morarjee Mills, to try his luck in pharmaceuticals. In 1988, he took over Nicholas Laboratories and over the next 22 years, went for a string of acquisitions to make Piramal Healthcare one of the largest drug companies in India. Piramal is now gearing up to start a fresh innings. He spoke to P B Jayakumar & Arijit Barman soon after announcing the deal with Abbott. Edited excerpts:
What is the feeling after selling your flagship business?
When I decided to enter the pharmaceutical business 22 years ago, many people were exiting it. I saw pharma as an opportunity in the domestic market and entered. We had a tremendous compounded annual growth rate of 40-44 per cent over these years. When I entered the contract manufacturing business, other players were not even exploring that opportunity. Even now, India has huge opportunities in the healthcare space and in other new emerging sectors.
If you look at the valuations we got, it shows what we created from the time we started the business. The market capitalisation was just Rs 6 crore. In the history of our company, we raised funds from investors only twice, that also was just about Rs 100 crore and Rs 150 crore.
Unlike other pharma companies, Piramal Healthcare never focused on creating front-end marketing outfits abroad. Was this a reason for selling your generics business, when India is becoming a major destination for global pharma companies for generics?
I always believe India has the potential and our business grew to that scale, as I expected. We always believe in patented products and our goal is to become a true drug discovery company. While other companies focused on the generics business abroad, we focused on contract manufacturing for global pharma and now we are among the top contract manufacturing players. That has huge potential in future, considering the changing global pharma landscape.
Making money was not the reason for this sale to Abbott. If I wanted to make money, I could have sold off my stake through the stock exchanges. I could have also saved on tax. This deal is to create maximum value for the investors of Piramal Healthcare. If we look at our track record, our promoter stake remained more or less the same. Please note that the promoters have not sold any stake in this deal, but have created huge cash for our company.
Piramal Healthcare’s name was linked for acquisition with almost all multinational companies. How did Abbott become a suitor?
Almost all multinationals see our business as a jewel and many of them spoke to us. We chose Abbott because we found synergy in our values. They have also been present in India for over 100 years.
With divestment of your main business in the country, how many manufacturing units remain with you?
Piramal Healthcare will retain businesses with a turnover of Rs 1,700 crore and 11 manufacturing units in India, the UK, Canada and the US. Only the manufacturing units at Baddi go to Abbott. We have a globally spread-out custom manufacturing business, a growing critical-care business where we made some strategic acquisitions recently, a high potential over the counter (OTC) business and an active pharmaceutical ingredients business, vitamins and fine chemicals, diagnostics (pathology and radiology laboratory chains) and diagnostics equipment. All these areas of healthcare have huge growth potential in India. Piramal Healthcare also owns 80 per cent stake in Piramal Life Sciences (PLSL).
How do you propose to invest the funds raised from this deal? Will you invest it in developing new drugs?
The deal has just concluded and it is early to say where and how will we invest. We will launch patented products, as PLSL has 14 products under development and some are in the final stages. One big drug can change the fortunes of any company. Also, we will look at other areas of investment from time to time, subject to approval of shareholders and the board of directors.
What are the new areas?
It’s too early. There are opportunities in the healthcare space itself.