Piramal Enterprises AGM Notes
For once attendees fawning over Ajay Piramal were fewer in number and he had to answer some tough questions from shareholders!
He opened the meeting by informing shareholders that the company has had to write of Rs 400 crore as a one-time exceptional item following the sale of its Imaging business. He said the performance of the Imaging business was dragging down the margins of the pharma vertical which would improve in the coming quarters.
Later during the interaction with shareholders, PEL’s decision to sell at a loss the Imaging business it bought from Bayer six years was questioned by investors.
Ajay Piramal said the Imaging business was basically used in the drug discovery for Alzheimer’s and the research in this field was not giving the desired results. Bigger companies like Astra Zeneca and others were exiting the field of Alzheimer’s disease and PEL also decided to cut its losses and exit the Imaging business.
For those who have been invested for long in Piramal Enterprises, exits like these are common when a business fails to achieve these goals. Ajay Piramal had simply shut down the company’s molecular research division some years ago after several molecules under development failed Clinical tests. At that time, he said the company would not throw good money after bad and chose to exit the research business. It was not sold, but shut down instead and the scientists in the team retrenched.
Another shareholder sought more details on the performance of the DRG business, one of the three verticals set up by Ajay Piramal after the sale of the formulation business to Abott ten years ago. This gentleman who had done some amount of research on PEL’s performance pointed out that the management was only showing DRG’s revenue growth in rupee terms and sought more information about its performance on dollar terms.
Ajay Piramal admitted that DRG’s
performance in
dollar terms was
poor.
He said the nature of the information management business has been undergoing a big change. From detailed research provided after a period of time, DRG’s customers are looking for research and information in real time and accordingly PEL is restructuring (Piramal did not use this word) this vertical.
He pointed out that the company was strengthening its team in India by hiring more people and the DRG business would hopefully turnaround “not next year but in the next two-three years”. “The need for data is growing and the future is very bright,” he said.
Piramal’s decision to merge the sick Piramal Phytocare with PEL was also subject to some questions from shareholders. One of them recalled the logic behind the setting up of Phytocare which was to carry out research and manufacturing in the field of herbal medicines. Ajay Piramal said it was decided to bring back Phytocare back into the field of PEL as there was not enough infrastructure for the herbal medicines.
The performance of the INDIAREIT funds, which is not part of Piramal Enterprises, also came in for criticism from a shareholder who apparently lost a lot of money in that business. He wanted to know from the management how it was so bullish on Piramal Enterprises’ real estate business when it was not able to generate much returns to investors in the INDIAREIT funds.
Piramal said the core business of PEL was different from the INDIA REIT businesses. He said PEL lent to the top few (I think he gave the figure eight, I am not sure) companies in the real estate business and spoke at length about the processes adopted by PEL in lending to customers.
Like in the last AGM he pointed out that promoters owned 50 per cent stake in PEL and thus it was in his interest to ensure that capital lent to borrowers came back to the company.
After the AGM I went upto the dais asked Piramal if there was any over lapping between PEL’s clients and companies that were in INDIA REIT’s portfolio. Piramal said there was no overlap.
He also pointed out to the investor who had lost money in INDIAREIT that the management team of the fund has been changed and the newer funds were doing very well.
disclosure: holding Piramal Enterprises for long in core portfolio
shiv kumar
