'Deal in best interest of shareholders'

MUMBAI: For starting his business way back in 1988, Ajay Piramal had drawn inspiration from a story 'Foot prints on the sands of time'. Now 22 years later, the sands of time have prompted him to exit from a part of the same business.
After announcing the second-largest deal in domestic pharma industry which catapults lesser-known MNC Abbott amongst the country's top 10 drug companies, Piramal group chairman, Ajay Piramal explained the reasons of selling the business, and what he plans to do with the funds, in an interview with TOI.
Why did you take the decision to sell your domestic formulation business, which is also the mainstay of the company?
The future is bright for my people (after the deal with Abbott). Through this deal, everyone gains — the employees and every shareholder. It is in the best interest of shareholders and will create immense value, almost nine times of sales.
Secondly, as part of future strategy, I took the decision. The India story is an attractive growth story, but globally and particularly, in emerging markets, there is a new way of selling drugs (patented products), which we would not have been able do on our own. The company's business will get an impetus with Abbott acquiring it.
Is it because the business environment is getting tougher for domestic companies? Why sell at this juncture?
No, we don't have any problems in our domestic formulations business, with it having posted nearly 25% growth over last year, and faster than the overall market. Market capitalization of the company today stands at Rs 11,000 crore. It was Rs 6 crore in 1988, so in 22 years, there's been a CAGR of 44%.
How is the deal different from the other big sale in pharma space, of Ranbaxy's to Daiichi Sankyo?
We are selling only assets of the domestic formulation business, and not shares or equity of the company. We are selling approximately half our business, which includes one manufacturing plant, and have retained other seven businesses like contract manufacturing (CRAMS) for third parties, over-the-counter consumer products including the recently-acquired I-Pill, and others like Saridon and Lacto Calamine, diagnostic services, clinical research and critical care.
With this deal, the combined entity including domestic formulations along with Abbott's business will become the clear market leader in India, with market share of nearly 7%, and largest in terms of domestic sales.
What will you do with the funds?
We plan to retire company's debt of Rs 1300 crore. Also, the company's board will consider an interim dividend soon. I also plan to invest in existing businesses, and am looking at new opportunities and acquisitions, within and beyond healthcare.
Why weren't the research and development assets part of the deal with Abbott?
We will continue to carry on R&D in our company Piramal Life Sciences. Deep down, I still nurture a hope to discover India's first drug molecule. We feel that we can still do this on our own.
What happens to employees working in the domestic formulation business?
Abbott will be able to retain — 5,200-odd employees.