Started in early 1980โs by Ajay Piramal, Piramal Enterprise Ltd (PEL) is broadly divided into 2 parts; Piramal Pharma Solutions and Piramal Capital & Housing finance limited. This is a series of thread. The first part focuses on Ajay Piramal:
1. Piramal Pharma Ltd (PPL) is comprised of 3 verticals: CDMO (1.1), Complex Hospital Generics (CHG, 1.2), India Consumer Healthcare (ICH, 1.3) and Ophthalmology branded products (1.4)
2. Before illustrating anything about Piramal, itโs better to look at this great man at the helm: Ajay Piramal. A long time admirer of Benjamin Graham school of thought, he makes his way to attend Berkshire Hathaway annual meet
3. Born to the family of textile traders who have been in the business for 70 years, he was at the forefront of textile business till 1982 when his one elder brother died of cancer and another separated himself to run VIP industries
4. Fuelling with the dual blow, he bought Gujarat Glass in 1984 when revenues were around 5 crores. He turned it over to the revenues of 2500 crores in 2020 and sold it to a PE at $1bn
5. At the time in 1990โs when MNC Pharma began exiting from India and Indian generic players began competing with the big pharmas outside India, he bought Nicholas labs in 1988 for the mere 6.5 cr. The company had the plant in Pithampur
6. He also bought Indian division of Roche Products for mere 20 crores in 1993. Now he closed the plant of Roche in Mumbai and merged it with Pithampur plant. The land on which Mumbai plant was situated, was developed into first retail mall of India โCrossroads Mallโ
7. The land parcel itself had the EV of 700 crores as of today. In 1996, he acquired German MNC Boehringer Mannheim. The beauty of the deal was that he did not have to shell out even a single penny.
8. On the contrary, the company was facing issue on excise duty. They paid Rs 100 crores to Piramal to shell out their assets and deal with excise issues. Proof: Here's the screenshot. Net block, Cash, loans to subsidiaries increased drastically
9. Bought Phone Poulenc at Rs 236 cr in 2000 which was the largest acquisition to date. It doubled the revenue of Formulation business within a year
10. Finally in 2009, it acquired Minrad for 188 cr. In 2008, Piramal walked out of the deal since Minrad was quoting high price than what Piramal had in mind (1900 cr). Minrad got into trouble with tax authorities and Piramal acquired it for 10% of the value one year later
11. Now in late 2000โs when MNC pharmas were vying to enter in India, he exited the Pharma by selling its division to Abbot for $3.2 bn. Piramal sold it at 9 times sales multiple whereas the big Pharma had previously shelled out 3.5 times sales multiple for acquiring Ranbaxy
12. When housing finance sector was saddled in asset liability mismatch and no one was willing to touch HFCโs in 2018-19, he came forward for the acquisition of DHFL since it was quoting at low prices (more on it in part 3)
13. He acquired 11% stakes in Vodafone in 2012 and sold it at 52% premium in 2014. Bought Sriram finance at 2000 cr in 2014, the stake of which is at 8000 cr currently
14. This confirms the following attributes of Ajay Piramal: Contrarion, No emotional value, ethical outlook and a bargain hunter
15. Contrarian: Buying Pharma when MNC pharmas were exiting from business and selling Pharma when MNC pharmas were vying to enter India
16. No emotional value: Walking away from Minrad deal when the higher price was quoted and ultimately acquiring it a year later at 10% of the value
17. Bargain Hunter: Bought Vodafone bonds at a mark down when the telecom sector was saddled with debt. Bought Boehringer Mannheim where the company paid 100 crores. Bought Roche for its land value at Rs 20 crores
18. Ethical outlook: Its JVโs with big pharmas continues since late 1990โs (Allergen, Reckitt & Colman) etc. Abbot bought its formulation division at 9 times sales multiple. Even then, Abbot has given 28% CAGR to its shareholders from 2010.
19. There can be no doubt in putting Ajay up as Charlie Munger of India. More thread on their business coming soon. Holding PEL in my portfolio and plan to keep it till my retirement. Warning: Confirmation bias likely to creep in my analysis
20. If you like my thread, hit the retweet:
@Dhruvapandey @bharatbetpf @MultipieSocial @alphainvesco
@Dhruvapandey @bharatbetpf @MultipieSocial @alphainvesco
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