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Piramal Healthcare like Berkshire Hathaway: Piramal

Arijit Barman Raghavendra Kamath & Reghu Balakrishnan  |  Mumbai 

Sitting in the 10th floor of his corporate headquarters that resembles a mini-Louvre, with its art trove and long corridors, is almost Zen-like in his approach to life and business. One would assume, with $3.8 billion at his disposal after selling his formulations business to Abbott two years ago, the Piramal Group’s chairman would be suffering from the quintessential problem of plenty: restless, edgy, dying to jump into various new ventures and ideas.

But, Piramal knows the virtues of patience. There is an air of serenity around him, except for his vermillion hand-painted floral tie. Cool, composed and collected, a day after his latest headline-grabbing deal — the buyout of analytics firm Decision Resources Group — Piramal talks karma.

But, he is aware investors are wary of his recent diversifications, calling his empire a patchwork of small businesses — from pharma to glass manufacturing, to real estate and defence — that lack both depth and scale. Equally foxed are people with his investments in scarred sectors like telecom, in marquee brands like Analysts have stopped tracking Piramal Healthcare; its stock price is lower than the cash or book value of the company. Clearly, there is a huge discount to the cash.

So, is Limited (PHL) a lifesciences franchise or is it like a PE firm, investing for grand returns? Or better still a holding company for various different businesses?

“To some extent, we are like Berkshire Hathaway (of Warren Buffett). Berkshire looks at the long term and they too are in many businesses,” Piramal agrees after much cajoling.

Piramal is pragmatic when he says he’s equally clear the conglomerate approach may not be beneficial in the long run. “It’s not that we are married to the idea of having everything together permanently.” So, splitting is an inevitable option. But, to do that, "you need critical mass and still most of our businesses are in the investment phase without having a significant top line or bottom line. So, I do think it would be too early to split them just yet,” he says. It is exactly because of such funding requirements that the drug discovery business was brought back under the rubric of PHL.

But, the astute businessman is clear in his thinking. “In the future, though, if we have a good pipeline of products in our discovery and development programme, we could look at the drug discovery business independently or when our financial services reach a good size, we could look at it separately.”

Even though he is not “overly concerned” about the investor confusion and panning of his blueprint, he feels his investors need to have patience for the long haul. “I won’t say they are harsh, I believe they have not understood us. I cannot blame them.”

But, with PHL soon changing its moniker to Piramal Enterprises, one would assume investors will get clarity on what’s cooking.

“It will remove us from the pharmaceutical comparison... Idont want to give a wrong picture and say we are in the pharma business because we have other businesses also," he says.

Diversification beyond defence into other greenfield ventures is also ruled out for the moment and most future investments will also be for strategic stakes. Drug discovery will, however, continue to remain a passion for Piramal and his doctor-turned-scientist wife, Swati. And, the group will invest up to $200 million in new molecules and formulations. But, it cannot be devoid of commercial realities.

"We are also clear if we dont get some result by 2015, we will stop the investment. I have told our people that. We cant invest billions of dollars like big pharma does for drug discovery." For the new chemical entities (NCE) portfolio under different stages of evolution and the innovative herbal portfolio, Piramal is open to partnerships and out-licensing.

"It will be a combination. We could out-license or somewhere we can also explore a joint partnership model where we can get some royalty." He hints at a big bang global alliance by the end of the year, but refuses to divulge details.

"The way we are looking at the whole programme of discovery is that it is going to be a range. So, we could keep the products with ourselves; the second option is the sale of products/IP under development or a hybrid where we can probably give marketing rights to a partner." Always an investment bankers delight, Piramal however rules out any big bang discoveries in the space in the short term, except maybe "some minor things to fill up the gaps in technology".

Real estate is another sector where he is getting equally aggressive, with buyouts of headline properties and assets ,especially in the Mumbai region. "Our strategy has always been contrarian. Because the market is sluggish, there is opportunity and we are getting much lower valuations," he explains the recent burst of activities. "Since it is becoming more transparent, we are willing to enter and explore projects a lot more proactively." Even then his flagship Piramal Realty, which his son now oversees, will remain private as he feels sector valuations are often opaque and investor-unfriendly.

First Published: Mon, May 21 2012. 00:41 IST