it is a new beginning for Piramal Pharma Ltd (PPL) after its demerger from parent Piramal Enterprises Ltd (PEL). After the National Company Law Tribunal (NCLT) approved the demerger on August 12, 2022, the group’s pharma businesses were consolidated into PPL, which was then listed on the bourses on October 19. The responsibility of nurturing the new entity has fallen on the shoulders of Nandini Piramal, 41, daughter of industrialist Ajay Piramal, Chairman of the Piramal Group. Nandini earlier headed the OTC (over-the-counter) business of PEL, and provided assistance in areas such as setting the strategy and driving results at the group’s pharma business. She also headed the HR, IT and quality functions as Executive Director of PEL.
As Chairperson of PPL, Nandini is gearing up to take the new entity on a path of sustained growth. With Rs 6,559 crore in consolidated revenues in FY22, PPL manufactures pharma products in 15 global facilities with distribution spread over 100 countries. PPL includes Piramal Pharma Solutions (PPS), a contract development and manufacturing organisation (CDMO) that also provides discovery and development services; Piramal Critical Care (PCC), a complex hospital generics business; and the India consumer healthcare business that sells OTC products. Its CDMO business is among the top three in India and 13th largest globally, while the consumer and PCC businesses are also well positioned with differentiated products and business models.
Way before the demerger, Nandini decided to beef up PPL’s Board with some pharma expertise. That saw the induction of Peter Stevenson, Nathalie Leitch and Sridhar Gorthi into the PPL board in July 2022. In September 2022, Vibha Paul Rishi was also brought in as a non-executive director. The objective was to maintain high governance standards for the newly listed entity, bolster business insights, and augment its organic growth and acquisition strategies, says Nandini. “Peter Stevenson is an expert in pharma manufacturing, Natalie is an expert in generic hospital products, and Rishi is a consumer goods and ESG expert. Having such a board will provide us focus,” she adds.
Besides strengthening the Board and management, Nandini has big plans for the business. “When we sold the generics business, we wanted to focus on contract manufacturing, hospital generics and India consumer healthcare. In each of these, we have plans for major expansion and [organic and brownfield] growth. We are going to spend about Rs 1,200 crore in the next 18-24 months on expanding existing factories,” she says, adding that a lot of new products are in the pipeline.
The enthusiasm was tempered somewhat by an underwhelming performance in Q2FY23 (July-September), its first results as an independent company. It posted a net loss of Rs 37 crore in Q2FY23, largely because the CDMO business was hit by macroeconomic pressures in the US and Europe and, as per the company spokesperson, also because of slower decision-making by customers. And while its Q2 revenues rose 9 per cent YoY to Rs 1,720 crore, Ebitda margin fell to 13 per cent in Q2FY23 against 14 per cent in Q2FY22 (the company, however, stated in its results that the Q2FY23 figures were not comparable to those of Q2FY22 or even Q1FY23, as the Group’s pharma business was a part of PEL before the demerger). Its stock has also underperformed, trading at Rs 114.50 on December 23 compared to Rs 201.80 on listing day.
Going forward, PPL expects sales to grow at about 15 per cent YoY, and expects margins to improve. It is also exploring inorganic growth, in which it has significant experience. As part of PEL, it had successfully closed and integrated 15 acquisitions of Rs 4,000 crore since 2010. They include the acquisitions of Ahmedabad-based Oxygen Bio-research (CDMO) for $13 million in February 2011; Little’s baby care brand for Rs 75 crore in November 2015; and Ash Stevens (CDMO, Riverview facility) for $43 million in September 2016. Revenues of these businesses have grown four times, five times and two times, respectively, since they were acquired. “We bought them for capabilities such as peptides (proteins for making drugs), or high potent pharmaceuticals. We expect them to grow much faster than the rest of the business,” says Nandini. “We are always looking in the market. But valuations have to make sense for us.”
With 78 per cent of its revenues coming from overseas in FY22, Piramal Pharma’s biggest overseas market is the US, followed by Europe (excluding the UK) and Japan. “These are the largest markets in the world. You have to be where the customer is,” says Nandini.
As a CDMO, Piramal Pharma has about $56 million of on-patent products comprising 19 molecules. Another 34 molecules are in the pipeline and Nandini expects about half of them to succeed. “This will increase our number of on-patent molecules. And when it’s on-patent, and just launched, volumes grow. That is the kind of sweet spot we want to be in,” she says.
Apart from focussing intensely on the CDMO business, which comprised 59 per cent of its revenues in FY22, Piramal Pharma is also gearing up to make big dents in the hospital generics and consumer healthcare products businesses. Its hospital generics business was badly hit during Covid-19, when it had no sales for a few months during the first lockdown. “In hospital generics, our biggest product is anaesthesia. And during Covid-19, people were not using anaesthesia. But now, after two or three years, the world is coming back to normalcy,” says Nandini.
In consumer healthcare (OTC), too—which has grown from Rs 127 crore in FY11 to Rs 741 crore in FY22 at a CAGR of 17 per cent—PPL is among the leading players in India with brands such as Saridon (manufacturing and distribution), Little’s, Lacto Calamine, Tetmosol, etc. “We have learnt how to do the business. We have got offline distribution. We go to all the chemists in every town with a population of about 200,000. We have... set up the infrastructure for both online and modern trade,” says Nandini.
With quite a bit going for it, analysts are bullish on the firm. “We remain positive on Piramal Pharma considering the growing requirement for development services, especially with complex regulatory processes for newer drugs, high entry barriers, limited competition for complex hospital generics (that provides sustainable long-term growth), and the rising contribution from the fast-growing consumer segment,” says Vinay Bafna, Research Analyst at ICICI Securities.
It is early days yet for PPL, especially in the pharmaceuticals industry, where its revenues of Rs 6,559 crore is a far cry from top dog Sun Pharma’s consolidated revenues of Rs 38,426.42 crore in FY22 (albeit their businesses are different). Nandini Piramal would need to leverage all her experience, Board expertise, product strength and M&A smarts to put Piramal Pharma on a high growth trajectory.
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