Mumbai: The Board of Directors of Piramal Enterprises Limited (‘PEL’, NSE: PEL, BSE: 500302), in their meeting held today, approved a composite scheme of arrangement providing for the demerger of the pharmaceuticals business from PEL and simplification of the corporate structure to create two industry-focused listed entities in Financial Services and Pharmaceuticals.
Mr. Ajay Piramal, Chairman, Piramal Group, said, “Over the years, Piramal Enterprises has grown multi-fold with diverse businesses under one listed holding company structure. In line with our stated strategy, the Board has today approved the demerger and simplification of our corporate structure, to create two independent listed entities in Financial Services and Pharmaceuticals, with a leadership position across the business segments they operate in. It will firmly empower both entities to be future-ready and enable them to independently pursue their growth strategies with sharper focus and identity.
Piramal Enterprises Limited will get transformed into a large listed diversified NBFC, focused on retail and wholesale financing, with a consolidated loan book of ~INR 65,000 Crores. Our retail lending platform will be digitally-led, that will serve the financing needs of the under-served customers in the ‘Bharat’ market. With the recent acquisition of DHFL, the wholly-owned housing finance housing subsidiary has been significantly scaled to become one of the largest HFCs of our country, focused on affordable housing finance.
Piramal Pharma Limited will be a large India-listed pharma company with proven capabilities in Contract Development & Manufacturing, global distribution of complex hospital generics, and a large geographic footprint in the consumer products market in India. PPL’s Contract Development and Manufacturing (CDMO) business is one of the top three in India and the 13th largest globally. PPL’s Complex Hospital Generics and India Consumer Healthcare businesses are well positioned with differentiated products and business models.
Going forward, in line with our philosophy of ‘Doing Well and Doing Good’, both the listed entities will continue to work towards creating value for all our stakeholders.”
Demerger and Simplification of the Corporate Structure:
Pharma:
The pharmaceuticals business will get demerged from Piramal Enterprises Limited and consolidated in Piramal Pharma Limited (PPL). Hemmo Pharma Private Limited (focused on peptide APIs development and manufacturing capabilities) and Convergence Chemical Private Limited (setup for development, manufacturing and selling speciality fluorochemicals), will get amalgamated with PPL to create a consolidated listed Pharma entity.
In consideration of the demerger, PPL shall issue 4 (four) fully paid-up equity shares of PPL of Rs. 10 each to the shareholders of PEL for every 1 (one) fully paid-up equity share in PEL having a face value of Rs. 2 each held by them, in accordance with the Share Entitlement Ratio.
Financial Services:
The amalgamation of PHL Fininvest Private Limited with PEL will create a listed Non-banking Financial Services (NBFC) entity. The merged Housing Finance company, (HFC) post DHFL acquisition, will remain a 100% subsidiary of PEL.
Through this demerger and simplification of the corporate structure, the shareholders of PEL will directly own shares in both the listed entities, without any cross-holdings and minority stakes.
The composite Scheme of Arrangement is subject to the approval of the shareholders and creditors of the companies, the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), National Stock Exchange of India Ltd. (NSE), Bombay Stock Exchange Ltd (BSE) Limited, Hon’ble National Company Law Tribunal (NCLT) and other regulatory authorities, as applicable.
Strategic Rationale:
The demerger and simplification of the corporate structure is expected to create synergies for both the companies and unlock significant value for both the companies and stakeholders.
· It will simplify the Piramal Enterprises’ corporate structure with two separate pure-play entities in Pharmaceuticals and Financial Services.
· It will further strengthen governance architecture for the businesses with separate dedicated Boards and Management teams.
· It will create an optimal capital structure for each business.
· It will give both entities the ability to independently pursue growth plans organically and inorganically.
· It will enable a better understanding of each sector-focused listed entity by the investor and analyst community.
Outcome:
The demerger and simplification of the corporate structure will lead to the creation of separate sector-focused listed entities in Financial Services and Pharmaceuticals.
