Piramal group chairman Ajay Piramal has done it again - the art of investing in profitable future businesses and exiting at the right time with handsome profits.
Piramal, who bought the US-based health information company Decision Resources Group (DRG) for $635 million (then valued at Rs 3,400 crore) in May 2012, today announced to sell it to the US-based Clarivate Analytics for $950 million (Rs 6750.8 crore at Rs 71.06 a dollar). That is a clean profit of Rs 3,350 crore within eight years, 2.3x times when comparing initial equity investment in rupee terms.
Piramal says his flagship Piramal Enterprises will utilise that money for further business expansion. "Along with the ongoing equity capital raise in PEL, this transaction not only further strengthens the company's balance sheet but also marks another step towards significantly unlocking the value in future," he said.
In October last year, Piramal had announced to raise Rs 5,600 crore through preferential allotment and rights issue to fund and sustain the growth momentum of the financial services business and capital infusion in other businesses.
It is not the first time Piramal buys and exits businesses with handsome earnings at the right time. Piramal, who built a pharma business empire by acquiring Australian firm Nicholas Laboratories' India business for Rs 16.50 crore in 1988, and later acquiring business divisions of various multinational companies, sold his formulation business worth Rs 1800 crore in 2010 to Abbott for a whopping $3.8 billion (Rs 18,500 crore at the time). That is still the most profitable sale in terms of multiples in the pharmaceutical industry.
He redeployed that money in equity investments and in acquiring new businesses such as DRG. Piramal Enterprises bought an 11 per cent stake in Vodafone India, for Rs 5,856 crore - in two tranches in August 2011 and February 2012 - and exited in April 2014 with Rs 8,900 crore, with a profit of Rs 3044 crore.
He also invested around Rs 4,500 crore in the Shriram Group's companies. Piramal Enterprises bought a 20 per cent stake in the holding company Shriram Capital for Rs 2,014 crore and a 9.9 per cent stake in Shriram Transport Finance Co (STFC) for Rs 1,652 crore and another 9.9 per cent in Shriram City Union Finance Co (SCUF) for Rs 790 crore. Piramal sold entire stake in Shriram Transport last year for Rs 2,300 crore.
After exiting pharma formulation business, Piramal Enterprises' entire business was less than Rs 2000 crore. From Rs 2,352 crore revenues and Rs 112 crore net profit in 2011-2012, Piramal grew his business to Rs 13215 crore with a net profit of Rs 1936 crore by 2018-19, mainly investing in financial services business. In the first half of 2019-20, the company had revenues of Rs 7,110 crore with a net profit of Rs 1029 crore. Of this, DRG contributed 9 per cent revenues. DRG had revenues of Rs 652 crore in the first half of 2019-20, a 14 per cent increase over the comparative six months in the previous year.
In case of DRG, Piramal has paid four times the $160 million revenues, estimated at that time. Then, that transaction was the largest outbound acquisition by any Indian pharmaceutical companies. Piramal had acquired DRG from Providence Equity Partners, a private equity firm that acquired it a year before. The firm offers advisory services on drug utilisation trends, database and analytical services for healthcare companies. Most of the leading companies are its clients.