Taking Contrarian Bets

Ajay Piramal was just 29 when he had to suddenly take charge of the family textile business. His elder brother Ashok Piramal had passed away, and Ajay was left with the task of running the group's flagship Morarjee Gokuldas Spinning & Weaving Mills in 1984. It was not a good time to be in the textile business, especially in the business of running composite mills. The historic textile mills strike called by the militant trade union leader, Datta Samant, was running out of steam finally, but it had crippled almost all the big composite mills of Mumbai (then Bombay). The textile business had entered a period of steep decline. Most textile mills had incurred heavy losses because of the strike, and the power looms in Gujarat and Maharashtra had taken away the business of the composite mills during the strike. Most of the big textile companies were sick, and almost none of them was in a shape to be revived. Ajay Piramal managed to nurse the family company back to profitability, but it was apparent the textile business was not where the future lay.

Meanwhile, the other group businesses, which included automobile components, etc., were not doing particularly well either. A few years earlier, Ajay's elder brother Dilip Piramal had moved away from the group, taking with him the luggage and plastics businesses, which he would later build into India's biggest luggage manufacturer, VIP.

While he was nursing the textile and other businesses of the group back to health, Ajay Piramal also decided to take a bet on pharmaceuticals by buying Nicholas Laboratories for Rs 16 crore in 1988. Most people, he says, had advised him against getting into a business he knew nothing about. As it turned out, that would be his best investment till date. In 2005, the Piramal family went through its second split. Urvi Piramal, the late Ashok Piramal's widow, retained the textile mill and the land and some other businesses, while Ajay took with him the pharmaceutical business, the glass business and a few others.

By 2010, Piramal had built his group up to Rs 4,094 crore in revenues, when he stunned market observers by selling the generics formulation business - which accounted for half of the group's revenues - to Abbott Ltd for Rs 18,000 crore. Flush with cash, Piramal made a slew of bets that seemed to have no connecting link. He picked up a stake in Vodafone twice, 5.5 per cent each for Rs 2,856 crore and Rs 3,007 crore. In 2013, he sold off his Vodafone stake for Rs 8,900 crore, netting a neat Rs 3,037 crore in profits.

Since then, Piramal has made even bolder bets - in financial services, in realty and realty financing, and in health care, mainly in informatics and contract manufacturing. Is there a method to his investment pattern? Piramal says he looks at returns he will generate in the medium term - and businesses he can scale up. He is not sentimental, he points out. He knows when to enter and when to exit. And he can take completely contrarian bets. For example, even while realty is down in the dumps, he has decided to offer financing to some of the big builders in the country, expecting a turnaround in the sector in a few years.

In our cover story this issue, Senior Editor P.B. Jayakumar looks at one of the biggest investors in Mumbai today and his bold bets.