Piramal Healthcare: Diverted focus

With all business segments reporting dismal performance, optimal utilisation of surplus cash can be a saviour

Diverted focus on completion of Abbott and Religare deals affected Piramal Healthcare in the September quarter. The formulations business, set to go to Abbott, declined 22 per cent year-on-year (y-o-y) to Rs 409 crore. Revenues from the diagnostic segment, acquired by Religare, dipped 39 per cent to Rs 33.4 crore. Revenues from custom manufacturing and contract research (CRAMS) and critical care segments, to be retained by Piramal, were 28 per cent lower at Rs 214 crore and Rs 64 crore, respectively.

The CRAMS segment was hit by a 41 per cent y-o-y fall in Indian assets and a 15 per cent decline in assets abroad. With pharmaceutical demand picking up, innovators have started outsourcing again, say analysts. A brief lull was seen due to de-stocking during the global economic crisis. Now, funding for small and mid-sized pharma companies is likely to open up in the next two years. Analysts at Motilal Oswal estimate that the CRAMS segment will see growth of around 3.7 times in 2011-12. Critical care segment will get a boost from Sevoflurane (anaesthesia product) and monetisation of US-based Minrads’ products in the emerging markets.

Piramal has already received upfront cash of Rs 10,530 crore from Abott for the formulations business and Rs 300 crore from Religare for the diagnostic division.

With all business segments reporting dismal performance, optimal utilisation of surplus cash can be a saviour