Piramal Pharma aims to reduce debt through organic growth: Chairperson Nandini Piramal

Nandini Piramal, Chairperson of Piramal Pharma Ltd, believes that one of the significant hurdles the company encountered following listing, was its absence from index funds, prompting a concerted effort to educate the market about its business operations for the past year.

Piramal Pharma, the demerged pharma entity of Piramal Enterprises Ltd, was listed in October 2022. Post-listing, the stock did see volatility reflecting the challenges of the business such as margins and debt. However, in the past few quarters, the company has been charting its turnaround story with a 120% rise in the stock from its 52-week low.

One of the key steps was focusing on reducing debt. The company raised ₹1,050 crore via a rights issue and deployed the funds to reduce debt levels. With gross debt levels of ₹4,000 crore, currently the company is looking to reduce its debt to equity from the current 3.1x to below 3x by the end of FY24.

Piramal Pharma’s core business is contract manufacturing, wherein the company manufactures drugs for various clients. The CDMO (contract development and manufacturing organisation) segment accounts for around 50% of sales.

The other two segments are hospital generics, which comprises around 30% of sales, and the over-the-counter (OTC) segment in India, which is around 15% of sales. The OTC brands include Lacto Calamine, Littles, I Pill, I Know, Saridon, among others.

The company’s CDMO segment, which grew around 14% for 9M of FY24 to ₹3,101 crore, has been impacted by the slowdown in the US biotech market, which has been impacted by higher rates and sluggish funding.

However, Piramal Pharma expects the CDMO business to grow in the mid-teens with a focus on integrated projects and a rebound in order inflows to drive growth.

In addition to its CDMO segment, Piramal Pharma’s inhalation business continues to have a steady market share in the US and UK. While the company sees price pressure in the segment it is expanding by looking to foray into generic injectables. The company has around 25 generic injectables in the pipeline focused towards regulated markets.

When it comes to the OTC business, the power brands in the OTC space are expected to drive growth. In the near term, Piramal Pharma will be focusing on the profitability of OTC brands, aiming to provide consumers a proposition of price and quality.

When it comes to mergers and acquisitions (M&A) in the OTC space, Piramal is not looking to divest any brands or buy new ones as the valuations of the deals in the Indian domestic market are too high and difficult to justify as a listed company.

Interestingly, the company, which sold its domestic formulation business to Abbott in 2010, is not looking to return to the space. Piramal pointed out that the company doesn’t have the field force for domestic formulations, with the supply and distribution plans being different.

Piramal Pharma has one of the most successful track records when it comes to regulatory inspections. The company sees at least 180-200 customer audits a year and has no official action indicated status pending.

From a 2-3-year perspective, Piramal Pharma expects the revenue mix of CDMO, complex hospital generics and OTC to remain the same, with significant improvement in EBITDA (earnings before interest, taxes, depreciation, and amortisation).  The chairperson believes that after the volatility seen in the margins, the company can get to 22-25% margins on a 3-5-year basis on a sustainable basis.