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Piramal plan to sell non-core glass business to raise funds, eyes $1 billion

MUMBAI: After unlocking value in his pharma business and flagship conglomerate, Ajay Piramal is now shifting focus to his private companies that are non-core to his empire to raise funds. Piramal has decided to sell his glass business at a time when the global pandemic has boosted pharma sales, world-wide.Bank of America and Axis Capital have been mandated to find buyers for Piramal Glass for a potential $800 million to $1 billion sale, said multiple people aware of the transaction. Global buyout funds such as KKR, Advent, Carlyle, TPG, Blackstone, investment companies like Temasek and global rivals like Saverglass, Veriscence, many of whom are already owned by these private equity funds, are being tapped as the sale process got officially launched recently, sources said. Gerresheimer Glass, Vetroplas, which sells both glass and plastics packaging in the UK, are other potential candidates in pursuit of product and geographical diversification.“To leverage opportunities arising out of emerging market consolidation, Piramal Glass, a privately held company, is looking to explore a potential equity capital raise from financial partner/s to augment our growth trajectory,” a group spokesperson told ET.World over, glass is a cyclical business. Low gas prices, a key input cost, is adding to that. Piramal’s a mature business with around 30% EBITDA (doubled in last few years) margin and global operation (over 50% of revenues coming from exports),” said an official aware of the development on condition of anonymity as the matter is still in private domain. “While pharma segment is clocking high numbers, with international travel, discretionary spending and outdoor socialising on the decline, parts of the business will face challenges.”77249552Industry peers however feel, Piramal’s premium valuation ask could be a stretch for several potential suitors. “In Europe these attract valuations of 5-7 times EBITDA multiples. But post the recent transactions in India in the packaging segment the expectation is 12-13 times EBITDA. That would make it a billion dollar plus transaction. Even at 7-8 times, this will be a play only for large funds and global players.” Piramal Group watchers say, the family had several private investments routed through Piramal Glass in the past and they are getting unwound prior to the sale. MIRRORING GROWTH Piramal Glass is the largest speciality glass packaging company in Asia, that caters to three key industries -- pharmaceutical, cosmetics and perfumery, food and beverage -- designing and manufacturing bottles and vials. 77% of its sales come from high end cosmetics and specialty spirits. It has seven subsidiaries, of which two—Piramal Glass Ceylon PLC and Piramal Glass USA Inc.—are operating subsidiaries and own manufacturing locations in Sri Lanka and USA, respectively. The company has five manufacturing locations—two each in India and the US, and one in Sri Lanka—with a total production capacity of 1435 tons per day (TPD), with 12 furnaces and 63 production lines.Incorporated in 1974, PGPL was acquired by the Piramal Group in 1984. In 1990, it was merged with Piramal Healthcare Limited (PHL, erstwhile Nicholas Piramal India Limited), and in 1998, the glass division was spun off to a subsidiary. Subsequently, private equity (PE) investors picked up 46% stake in this subsidiary. After restructuring operations, in July 2003, PHL divested its 54% holding in PGPL to a new subsidiary, Kojam Fininvest, which was subsequently listed. This was followed by the merger of Kojam Fininvest into PGPL and the merged entity was later relisted as Piramal Glass Limited. It was delisted from both stock exchanges effective from July 2014.The company claims its current global sales have touched Rs 2,500 crores ($357 Million). It is expected to have clocked Rs 750 crore ($90-$100 million) in EBITDA in FY20 backed by rising sales in the pharma segment, its smallest with 23% of total sales.In a recent interview, the company’s top brass said, the company is seeing a 30% jump in sales of Type 1 borosilicate glass vials, specialty vials used to bottle medicines, in the June quarter, on account of a demand surge for medicines to combat the COVID-19 pandemic.Earlier in the year, the company announced a Rs 300 crore ($42 Million) investment in a greenfield plant in Gujarat – an expansion plan that included 1 new furnace with 7 new manufacturing lines across approximately 300,000 sq.ft. plant, catering primarily to high-end specialty spirit, food & beverage and pharmaceutical markets primarily for exports to countries in Asia, Europe and the US. The company already manufacturers bottles for high end specialty spirits from its plant in the US. The facility was to cater to the high demand in Asia for premium water, spirits bottles and food packaging.