Piramal Enterprises decides to demerge its healthcare and financial services businesses

MUMBAI: Piramal Enterprises has decided to demerge its healthcare and financial services businesses to grow unrelated divisions separately, marking an important turn in legacy of the diversified conglomerate. ET was the first newspaper to report on this change in structure in February. Ajay Piramal curtailed his presence in healthcare after he sold erstwhile Piramal Healthcare's domestic formulations division for $3.7 billion to Abbott in 2010. He used the cash to enter the finance business through strategic investments and joint ventures.

"I think the businesses are mature and can stand on their own. The size is becoming large. The restructuring will give a little more focus and a little more transparency for shareholders," chairman Piramal told ET. "Shareholders will have a choice to own shares in either of the entity. The demerger will be within two years." The healthcare business, which makes up for more than half of Piramal Enterprises Rs 6,610 crore annual revenue, grew 14% last financial year. The financial services division, which accounts for 28%, almost doubled in revenue.

On Monday, Piramal Enterprises reported a Q4 net profit of Rs 180 crore, up 89% from a year earlier, helped by high growth at its financial services business. Revenue jumped 34% to Rs 1,734 crore. The conglomerate has grown at compounded annual growth rate of 34%.

“The growth in financial services income was primarily driven by increase in the size of loan book. Loan book grew by 174% to Rs 13,048 crore as on 31 March 2016,” the company said. “Our entry into construction finance enabled us to significantly scale up our loan book. It now constitutes 42% of the real estate loan book.” The company said its intent is to simplify the structure and create focused business, and in the process unlock value for shareholders as a conglomerate may be seen as complex.