India is a key outsourcing hub for the Pharma manufacturing and clinical trials. Evaluating CRAMS is outside my circle of competence. So, I tried to look up the comprables for the unit.
Divi's CRAMS business is trading at 7 times sales and Jubilant is trading at 1.6 times. It looks like Piramal's pharma assets are losing money at this point. They are growing at 20% annually and Piramal has indicated that this rate is likely to continue for the next few years.
Since they are losing money, we could like to conservatively estimate the business at Rs, 1,500 crores conservatively at 1X sales (30% discount to Jubilant) We understand the point that you can sell a dollar for a penny all day long but we think a 30% discount is appropriate at the same time. There is no major magic behind the 1X sales number except that it is conservative given the economics of the other players in the market.
We will value the CRAMS business at Rs, 1500 crores of 10% of the Enterprise value. We believe that this estimate is far too conservative but we are comfortable with it.
For OTC and Critical care, we are going to do something similar as evaluating the pipeline is outside my circle of competence. The only observation we have is that other players in the market are quoting at a multiple of sales. We will again to be on the conservative side value the firm at 1X sales of 950 crores or 6% of sales.
With the same logic for the R&D unit that Piramal acquired. We would like to write down the value to zero.
Divi's CRAMS business is trading at 7 times sales and Jubilant is trading at 1.6 times. It looks like Piramal's pharma assets are losing money at this point. They are growing at 20% annually and Piramal has indicated that this rate is likely to continue for the next few years.
Since they are losing money, we could like to conservatively estimate the business at Rs, 1,500 crores conservatively at 1X sales (30% discount to Jubilant) We understand the point that you can sell a dollar for a penny all day long but we think a 30% discount is appropriate at the same time. There is no major magic behind the 1X sales number except that it is conservative given the economics of the other players in the market.
We will value the CRAMS business at Rs, 1500 crores of 10% of the Enterprise value. We believe that this estimate is far too conservative but we are comfortable with it.
For OTC and Critical care, we are going to do something similar as evaluating the pipeline is outside my circle of competence. The only observation we have is that other players in the market are quoting at a multiple of sales. We will again to be on the conservative side value the firm at 1X sales of 950 crores or 6% of sales.
With the same logic for the R&D unit that Piramal acquired. We would like to write down the value to zero.
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