Piramal Ent dips 5% on profit booking on demerger plan of pharma biz

Shareholders of Piramal Enterprises (PEL) will get four shares of Piramal Pharma for every one share in PEL, in addition to their existing holding in PEL

Shares of Piramal Enterprises were down 5 per cent to Rs 2,727.80 on the BSE in Friday's intra-day trade on profit booking after the company's board approved the demerger of the pharmaceuticals business and simplification of the corporate structure. With today;s fall, the stock has declined 9.5 per cent from its record high level of Rs 3,013 touched in Thursday's intra-day trade.

Piramal Enterprises has approved the restructuring of its business to demerge its financial services and pharmaceuticals businesses into two separate listed entities. The pharmaceuticals business will get vertically demerged from Piramal Enterprises and consolidated under Piramal Pharma (PPL) while PHL Fininvest Pvt Ltd, the non-banking financial company (NBFC) will be amalgamated with Piramal Enterprises.

The merged housing finance company, post the DHFL acquisition, will remain a wholly-owned subsidiary of Piramal Enterprises. Shareholders of Piramal Enterprises (PEL) will get four shares of PPL for every one share in PEL, in addition to their existing holding in PEL.

"The demerger is expected to unlock significant value for PEL shareholders. Both listed entities to have a leadership position in their respective sectors. The demerger is subject to shareholders, creditors and regulatory approvals," PEL said in a statement.

PEL will get transformed into a large listed diversified NBFC, focused on retail and wholesale financing, with a consolidated loan book of around Rs 65,000 crore. Piramal Pharma will be a large India-listed pharma company with proven capabilities in Contract Development & Manufacturing, global distribution of complex hospital generics, and a large geographic footprint in the consumer products market in India. PPL’s Contract Development and Manufacturing (CDMO) business is one of the top three in India and the 13th largest globally, the company said.

ICICI Securities believes this is a positive step as it will unlock valuation, provide better understanding of individual entities and derisk both the businesses from each other while allowing potential investors the option of being associated with the business of their choice.

"We remain positive on PEL on the back of its fully integrated CDMO presence, niche portfolio, with global distribution in the Complex Hospital Generics (CHG) space, strong brands with an established pan-India distribution network, independent Financial Services (FS) business, which is simpler to understand and execute relative to it being housed under a conglomerate structure, strong opportunity for Piramal Capital and Housing Finance to scale up DHFL’s mortgage franchise and leverage the platform to effectively cross-sell its other organic Retail products to its native customer pool," Motilal Oswal Financial Services said.