Monday 20 October 2014

Analysis of Piramal

Piramal, an Indian pharmaceuticals company

Company: Piramal

ISIN INE140A01024 | A0DQEJ

Business: An Indian mainly pharmaceutical company that before the 1980s was a textile company. They stand on four pillars today: Piramal Enterprises with (piramal healthcare, piramal life sciences, piramal capital, and the decision resources group), Piramal Glass (creating all kind of good looking glass containers for perfumes etc.), Piramal Realty (they have started to step into real estate) anf finally Piramal Foundation (social project to improve life in India).

Active: Their self developed pharmaceuticals are being sold in over 100 countries which gives them world wide presence.

P/E: -26.8

Comment: Approximately once per year I go to India for business and I was just not invited for going there in March. This caused me to take a look at some of the companies in Indian and from the screener Piramal looked very interesting. The result was not as interesting though.... The common shares have no voting power and the voting power shares seem to be held very tightly by the Piramal family. I almost get the feeling that when they get bored they start to invest in new things and maybe one should look more upon the Piramal Group as an investment company than anything else.

contrarian values of P/E, P/B, ROE as well as dividend for Piramal

The P/E turned out to be bad due to losses in 2014 and are therefor at -26.8 but the P/B is very nice with 1.3. Still Graham would not be happy with this company. Due to losses the E/S as well as ROE turns also out bad. The book to debt ratio is ok however ok with 0.8.
The have during the last five years had an ok revenue growth of 6.6% (inflation in India is above 3% which is the reason for the only ok remark) and this then gives us a motivated P/E of 16 to 22.
They have strong confidence in their company (or the family needed more cash) and they therefore paid out a dividend in the size of 7.7% which is excellent but it also correspond to far more than what they brought in and that I do not like. If one look more on them as an investment company then things makes more sense.

Conclusion: Graham is negative and honestly I do not know. If I would invest in the Piramal group then it would not be based on it being a pharmaceutical company but it would be based on that I would like to invest in the Piramal family and their future potential of remaining successful with their current and future investments. For me to make that kind of investment I would need to dig much deeper into the Piramal family before taking such a decision which means that I would with what I know today not make an investment in Piramal.

If this analysis is outdated then you can request a new one.

No comments: