Piramal plans buys in contract manufacturing

To receive $2.12 billion within the next 45 days from Abbott.

Ajay Piramal-led Piramal Healthcare Ltd (PHL) is gearing up for major acquisitions in the contract manufacturing segment. The decision comes after hiving off its flagship formulation division to multinational drug maker Abbott for over Rs 17,500 crore and its ailing pathology and radiology laboratory network to Super Religare Laboratories Ltd (SRL) for Rs 600 crore.

PHL will receive $2.12 billion within the next 30 to 45 days from Abbott and Rs 300 crore from SRL as upfront payments. “The company is chalking out aggressive strategies to scale up the Rs 1,470-crore remaining businesses of PHL in critical care, contract manufacturing and over the counter (OTC) segments,” Murari Rajan, PHL’s executive director with responsibility for mergers and acquisitions (M&As) and strategy, told Business Standard.

“Contract manufacturing will be a major area of growth for us in the future, as multinational companies are cutting down production facilities. We expect to get big business in the future in this segment and will acquire facilities in India and abroad. We are exploring opportunities,” he said.

After completing the deal with Abbott, PHL will retain 11 manufacturing units in India, UK, Canada and the US. Its pharma solutions (custom manufacturing) business had recorded lower sales of Rs 880 crore in 2009-10 compared to Rs 1,060 crore during the previous year. The slump in business was primarily due to the closure of a manufacturing facility at Huddersfield, UK.

Piramal Healthcare is one of the first entrants into contract manufacturing business and has supply agreements with nine out of the top 10 multinational drug makers. This will act as a boost for the company to scale up its business in this segment, he said.

PHL will follow an aggressive acquisition strategy to scale up its Rs 327-crore turnover critical care (mainly anaesthesia products) business. Targets of acquisitions in the domestic and overseas markets will be primarily products and services related to critical care.

A few months ago, PHL had acquired Bharat Serums and Vaccines’ injectable anaesthetic products and had earlier acquired the blood plasma products of PlasmaSelect AG, Germany, marketed under the brand name “Haemaccel” across 38 countries. Two years ago, the company had bought the inhalation anaesthetic gas distribution arms of RxElite Inc and Minrad International in the US and Sanofi-Aventis’ haemaccel-related business in the Indian market, along with the manufacturing facility in Mumbai.

Rajan said PHL will also look at acquiring more brands in the Over the Counter (OTC) segment, but that will be restricted to the domestic market.

Rajan said the company would soon pay its debts of Rs 1,300 crore to become debt-free. It would also unveil its growth plans in the coming weeks.

To sell diagnostic chain to SRL for Rs 600 crore
Piramal Healthcare today said it would sell its diagnostics unit to Super Religare Laboratories (SRL) for Rs 600 crore.

In a statement, the company said it had entered into an agreement with SRL to sell the diagnostics arm — Piramal Diagnostic Services Private Limited (PDSL).

Piramal Healthcare will receive Rs 300 crore on closing of the deal and the balance over a period of three years.

It will also continue to be involved in the business, including by way of representation on the Board of Directors and the Executive Committee of SRL, the statement added. For SRL, the deal will make it the country’s largest diagnostic services provider by acquiring PDSL’s network of 107 laboratories, with an FY10 revenue of over Rs 200 crore.

Commenting on the divestment of Rs 200-crore Piramal Diagnostics to SRL, PHL’s executive director Murari Rajan said there were only four organised players with a 10 per cent market share in the Rs 8,000 to Rs 10,000 crore pathology and radiology business in India and this, limited the future growth.

The Piramals are not planning to enter into the hospital business and thus divestment of the diagnostics business is a right decision. “As against this, SRL has the back- up of the Fortis Hospital chain and hence joining hands with SRL is beneficial for Piramal Diagnostics,” he said.