As of November 18th, 2012, Piramal Enterprises traded at INR 472.2 on the NSE. The market cap for the company is at 8,100 crores. There are 17.5 crores shares that are outstanding. (One crore in Indian Terms is equivalent to Ten Million) The company has equity of 11,296 crores and loans of 6,331 crores. The enterprise value is at 14,400 crores.
The key is to determine whether the company is trading at a discount to its intrinsic value as an on-going concern. Currently, The company had a loss of INR (82) crores in the recent quarter and hence it does not have any PE ratio.
My personal criteria from the investment is to invest in a growing business, with a good management at a 15%+ earnings yield at an attractive price. For a 15% earnings yield, the company must be capable of earning about INR 1,200 crores a year and redeploy to grow or return back the money to the shareholders. Because the company is trading at a price to book ratio of 0.7, a 11% return on the shareholder assets will provide a return of 15% earnings yield on the scrip.
Background
Piramal Enterprises used to be primarily in the healthcare business. In 2010, it sold the domestic formulation business to Abbott Labs and the diagnostic business to Super Reliagare. The deal unlocked about INR 17,800 crores for the company.
The company's investor relations was kind enough to provide me a breakdown of the 17,000 crores (as of Nov 2012) as used by the company.
Investment in Vodafone - Rs. 6,000 crores
Financial Services - Rs. 1,000 crores
Receivables from Abbott - Rs. 4,000 crores
The capital gains tax has been paid and the buyback has been completed. 11,000 crores is what is left from the deals out of which another 4,000 is yet to hit Piramal's coffers from Abbott Labs.
As of today, as seen in the company presentation below, the company's assets include the Vodafone investment, acquisition of DRG, Financial services, CRAMS and PEL business.
We will look into each one of these in subsequent posts.
The key is to determine whether the company is trading at a discount to its intrinsic value as an on-going concern. Currently, The company had a loss of INR (82) crores in the recent quarter and hence it does not have any PE ratio.
My personal criteria from the investment is to invest in a growing business, with a good management at a 15%+ earnings yield at an attractive price. For a 15% earnings yield, the company must be capable of earning about INR 1,200 crores a year and redeploy to grow or return back the money to the shareholders. Because the company is trading at a price to book ratio of 0.7, a 11% return on the shareholder assets will provide a return of 15% earnings yield on the scrip.
Background
Piramal Enterprises used to be primarily in the healthcare business. In 2010, it sold the domestic formulation business to Abbott Labs and the diagnostic business to Super Reliagare. The deal unlocked about INR 17,800 crores for the company.
The company's investor relations was kind enough to provide me a breakdown of the 17,000 crores (as of Nov 2012) as used by the company.
Capital gain tax - Rs. 3,600 crores
Buy back of shares - Rs. 2,500 crores Investment in Vodafone - Rs. 6,000 crores
Financial Services - Rs. 1,000 crores
Receivables from Abbott - Rs. 4,000 crores
The capital gains tax has been paid and the buyback has been completed. 11,000 crores is what is left from the deals out of which another 4,000 is yet to hit Piramal's coffers from Abbott Labs.
As of today, as seen in the company presentation below, the company's assets include the Vodafone investment, acquisition of DRG, Financial services, CRAMS and PEL business.
We will look into each one of these in subsequent posts.
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