Piramal Enterprises (PEL), post DHFL acquisition and integration, has now announced the substantially-awaited demerger of its pharma business enterprise and simplification of the corporate structure. Its board has authorized a scheme of arrangement with the objective of transforming the group from a multi-sector conglomerate into two separate sector-focused listed entities in economic services and pharma business enterprise. The demerger will:1) strengthen the governance architecture for the organizations with separate committed Boards and management teams 2) develop an optimal capital structure for every of the two organizations 3) empower and allow each the entities to independently pursue their development tactics (organically and inorganically) with sharper focus 4) trigger worth-unlocking for PEL shareholders. The demerger is topic to shareholders’, creditors’ and regulatory approvals, and the approach is anticipated to take a further nine-10 months. We earlier highlighted this as a trigger to additional drive up valuation with optimal capital allocation. Maintain ‘hold’ with a revised SoTP-based target cost of Rs 2,933 (earlier: Rs 2,797). Effectively leveraging the acquired DHFL network to cross-sell current retail items will be crucial going forward. We continue to await visibility on utilisation of unallocated equity (an optional worth).
Scheme of arrangement mostly to simplify corporate structure:
Demerge the pharma business enterprise and list it separately:
The pharma business enterprise will get vertically demerged from PEL and consolidated below Piramal Pharma (PPL). Post the demerger, PPL will be listed on the BSE and the NSE. Two operating subsidiaries, wholly-owned by PPL, will also be amalgamated with PPL to additional simplify the pharma corporate structure. They are: 1) Hemmo Pharma Private Limited (focused on development of peptide APIs and manufacturing capabilities), and 2) Convergence Chemical Private Limited (for development, manufacture and sales of speciality fluorochemicals).
Financial services structure: NBFC at holdco level with one hundred% HFC subsidiary PHL Finvest Private Limited, one hundred% owned NBFC subsidiary of PEL, will be amalgamated with PEL to develop a listed NBFC. The merged housing finance corporation, post the DHFL acquisition, will stay a wholly-owned subsidiary of PEL.
No adjust in PEL shareholding structure 4:1 equity share consideration:
Shareholders of PEL will get 4 equity shares of PPL for every single one equity share in PEL, in addition to their current holding in PEL. Both the businesses will be separately listed on the NSE and the BSE.
Shareholders of PEL will straight personal shares in each the listed entities, devoid of any cross-holdings and minority stakes.
No adjust in the shareholding pattern of PEL pursuant to the demerger.