Piramal's big bet
Ajay Piramal is betting on real estate and financial services to create a $20 billion business by 2020. The Shriram Capital-IDFC deal will fast-track his march.
- Jul 22, 2017,
- Updated Jul 28, 2017 7:57 PM IST
When Business Today carried a report in April last year about Piramal Group Chairman Ajay Piramal's plans to create a $20 billion empire by 2020, many felt it was an aspirational, even aggressive, target. The reason for this scepticism was simple. In 2010, his net worth was estimated at $1 billion, and after selling the flagship drug formulations division of Piramal Healthcare to Abbott for $2.9 billion, the group was left with a small pharmaceutical business and a struggling glass business with revenues of nearly Rs 2,000 crore. The listed Piramal Enterprises (then Piramal Healthcare) got just Rs 15,000 crore after expenses and paying taxes. After buybacks and dividends (Rs 4,866 crore), Piramal decided to invest the rest in businesses with 20-30 per cent-plus profits and took three-four strategic decisions. One was investing more in the US and continuing investing in contract pharmaceutical and over-the-counter, or OTC, businesses, apart from new areas such as knowledge management. Another was to deploy personal wealth into the real estate business in Mumbai. The third was to enter financial services, mainly funding the real estate sector and investing strategically in companies, in a big way. Among all businesses - from pharmaceutical, knowledge management, OTC, critical care and glass - financial services and real estate have turned out to be the biggest value creators. In 2017, Piramal's net worth was estimated at $5.6 billion. The recent proposal for the merger between IDFC and Shriram Group, where Ajay Piramal is the Chairman and Piramal Enterprises one of the largest investors, seems the Piramals' ticket to the $20 billion goal. But the question is, can they make it work? Though the finer details of the deal are yet to be worked out, the group's recent moves indicate that the pieces of Ajay Piramal's grand plan are finally falling into place, slowly but surely.
When Business Today carried a report in April last year about Piramal Group Chairman Ajay Piramal's plans to create a $20 billion empire by 2020, many felt it was an aspirational, even aggressive, target. The reason for this scepticism was simple. In 2010, his net worth was estimated at $1 billion, and after selling the flagship drug formulations division of Piramal Healthcare to Abbott for $2.9 billion, the group was left with a small pharmaceutical business and a struggling glass business with revenues of nearly Rs 2,000 crore. The listed Piramal Enterprises (then Piramal Healthcare) got just Rs 15,000 crore after expenses and paying taxes. After buybacks and dividends (Rs 4,866 crore), Piramal decided to invest the rest in businesses with 20-30 per cent-plus profits and took three-four strategic decisions. One was investing more in the US and continuing investing in contract pharmaceutical and over-the-counter, or OTC, businesses, apart from new areas such as knowledge management. Another was to deploy personal wealth into the real estate business in Mumbai. The third was to enter financial services, mainly funding the real estate sector and investing strategically in companies, in a big way. Among all businesses - from pharmaceutical, knowledge management, OTC, critical care and glass - financial services and real estate have turned out to be the biggest value creators. In 2017, Piramal's net worth was estimated at $5.6 billion. The recent proposal for the merger between IDFC and Shriram Group, where Ajay Piramal is the Chairman and Piramal Enterprises one of the largest investors, seems the Piramals' ticket to the $20 billion goal. But the question is, can they make it work? Though the finer details of the deal are yet to be worked out, the group's recent moves indicate that the pieces of Ajay Piramal's grand plan are finally falling into place, slowly but surely.