Piramal Enterprises gains on announcing demerger

Piramal Enterprises (PEL) rose 1.69% to Rs 2890.05 after the company said its board approved the demerger of the pharmaceuticals business and simplification of the corporate structure.

PEL said that it is transforming itself from a multi-sector conglomerate structure into two separate sector-focused listed entities in financial services and pharmaceuticals.

The board of PEL at its meeting held today, 7 October 2021, approved the composite scheme of arrangement between the company, Piramal Pharma (PPL), Convergence Chemicals (CCPL), Hemmo Pharmaceuticals (HPPL), PHL Fininvest (PFPL) and their respective shareholders and creditors.

The pharmaceuticals business will get vertically demerged from PEL and consolidated under Piramal Pharma. Shareholders of PEL will get 4 shares of Piramal Pharma for every 1 share in PEL, in addition to their existing holding in PEL.

Post the demerger, Piramal Pharma will become one of the large pharma companies listed on NSE and BSE.

Two operating subsidiaries -- Hemmo Pharma (focused on peptide APIs development and manufacturing capabilities) and Convergence Chemical (setup for development, manufacturing and selling speciality fluorochemicals) -- will get amalgamated with Piramal Pharma to create a consolidated listed pharma entity.

Further, PHL Fininvest, the non-banking financial company (NBFC), will be amalgamated with PEL to create a large listed NBFC. The merged housing finance company, post the DHFL acquisition, will remain a wholly-owned subsidiary of PEL.

Following the arrangement, PEL will get transformed into a large listed diversified NBFC, focused on retail and wholesale financing, with a consolidated loan book of about Rs 65,000 crore.

On the other hand, Piramal Pharma will be one of the large India-listed pharma companies offering a portfolio of differentiated products and services through end-to-end manufacturing capabilities across 15 global facilities and a global distribution network of over 100 countries. PPL's contract development and manufacturing (CDMO) business is one of the top three in India and the 13th largest globally. Its complex hospital generics and india consumer healthcare businesses are well-positioned with differentiated products and business models. The JV with Allergan is the market leader in the fast-growing ophthalmology category in India.

Currently, PEL is one of the large companies in India, with a presence in financial services and pharmaceuticals. Its consolidated net profit rose 8.85% to Rs 539.40 crore on 4.58% increase in total income to Rs 3176.94 crore in Q1 June 2021 over Q1 June 2020.

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