Piramal plans big splash in consumer products biz, eyes Rs 10 bn revenue

With its non-compete agreement with Abbott ending next month, Piramal’s consumer products division has drawn up elaborate plans to expand its existing portfolio as well as acquire brands that have the potential for over-the-counter (OTC) switches. OTC business plans are part of the company’s broader strategy to enter the domestic pharmaceutical formulations market. 

Ajay Piramal, chairman of Piramal Enterprises, indicated a few months ago that the firm was exploring a possible re-entry into the domestic formulations market, which it had exited after selling the business to Abbott for $3.7 billion in 2010. 

According to market sources, Piramal has already opened talks with distributors, etc and a possible roll-out may be expected in the second half of the current financial year. However, the same could not be verified with the company. 

Kedar Rajadnye, president & COO of the consumer products business of Piramal Enterprises, plans to ramp up the unit’s revenue to Rs 10 billion by 2020, almost three times the current revenue of Rs 3.46 billion. Most of it will come via the inorganic route. “The success rate of new product launches is 10-20 per cent in the OTC segment, and the cost of advertising is very high,” he reasoned. 

The consumer products division has made five acquisitions so far and, Rajadnye claims, all of these have been successful. In 2010, Piramal had just three brands — Saridon, Lacto Calamine, and Polycrol. 

Now, it has six in the top 100 OTC brands. i-Pill, for example, a brand it acquired in 2010 has clocked a 25 per cent compounded annual growth rate. The Pfizer portfolio (four brands, including Waterbury’s Compound) has doubled in two years.   

Now, Piramal’s division is eyeing borderline areas in the OTC segment that have a self-care possibility. New brands can come in areas like motion sickness, etc. While Rajadnye did not wish to share further details, he said the company was keen on acquiring brands with the potential to switch to OTC. 

As such, self-medication for minor ailments is a rising trend in India, and it is estimated around 76 per cent of the population self-medicates. 

Allergies, antacids, vitamins and dietary supplements are areas that Piramal is looking at, for example. It can enhance its doctor-interface as the non-compete agreement is now over. Line extensions may come up in certain therapy areas, possibly antacids. 

Also, currently 95 per cent of the consumer products portfolio comprises products that require a drug licence. Of the over 400,000 outlets that Piramal covers, 220,000 are chemist outlets. “We are thus eyeing products that do not require drug licences,” Rajadnye said, adding this would expand its distribution reach considerably. 

The India consumer business reported a 7.9 per cent year-on-year (YoY) dip in revenues in 2017-18, clocking Rs 3.46 billion. The global pharma business, on the other hand, grew 13.1 per cent YoY. 
 

Rajadnye said the dip was due to downstocking for GST transition in the first quarter, and the business picked up in the subsequent quarters. “We are now growing faster than our historical growth rate of 18 per cent or so,” he added. 

The consumer division has invested around Rs 6 billion in the last eight years and has clocked a CAGR of 18 per cent or so. After selling its domestic formulations business to Abbott, Piramal had retained the global pharma business, the consumer products division in India and the bulk drugs business. Global pharma business constituted nearly 92 per cent of the FY18 pharma revenues. Pharma accounted for 42 per cent of the overall Piramal Enterprises revenue in 2017-18.

On the table

- Piramal’s Consumer Products division aims to touch Rs 10 bn revenue by 2020

-  Inorganic route may be key to entry in new areas

- Therapy segments like antacids, vitamins & diet supplements, anti-allergics, anti-motion-sickness on its radar

- Piramal has six OTC brands in top 100; its OTC business clocked 18% CAGR over last eight years 

- Acquired brand i-Pill  clocked 25% CAGR; Pfizer portfolio doubled in two years