PIRAMAL ENTERPRISES LIMITED

Annual Report
2017-18
"You are what your deep driving
desire is. As your desire is, so is your
will. As your will is, so is your deed.
As your deed is, so is your destiny."
Brihadaranyaka Upanishad IV.4.5

SINCE 1988:

23% CAGR
29% CAGR
29% ANNUALISED
RETURN

ANNUAL REVENUES NET PROFIT TO SHAREHOLDERS

OVER THE LAST OVER THE LAST OVER THE LAST
30 Y E A R S 1 3 0 Y E A R S 1,2 30 Y EA RS3

SINCE ABBOT T DEAL:

29% CAGR
55% CAGR
40% ANNUALISED
RETURN

REVENUE OVER THE NORMALISED NET TO SHAREHOLDERS

LAST 6 YEARS4 PROFIT OVER THE OVER THE LAST
L A S T 6 Y E A R S 2,4 5 Y E A R S 3,5
NOTES
1. FY1988 Revenue and PAT numbers were for the year ending June 30, 1988. FY2018 numbers are reported as per Ind AS, rest of the numbers are as reported.
2. Normalised profit excludes exceptional items. FY2018 Normalised Net Profit excludes synergies on account of merger of subsidiaries in Financial Services segment.
3. Annualised shareholder returns computed using Bloomberg as on April 30, 2018 (assumed dividend reinvested in the stock).
4. For the period FY2012 to FY2018.
5. For the period FY2013 to FY2018.
CONTENTS

STRATEGIC OVERVIEW ............................................................ 1-41

Piramal Enterprises at a Glance.......................................................... 2
A Billion Dollar Fund Raise.................................................................. 4
Financial Services – Business at a Glance .......................................... 6
Pharma and DRG – Business at a Glance ......................................... 10
Chairman’s Message ......................................................................... 14
Key Performance Indicators ............................................................. 18
Key Milestones in the Last 30 Years ................................................. 20
30-year Journey of Piramal Enterprises ........................................... 22
Integrated Value-creation Model ..................................................... 28
Values-driven Culture ....................................................................... 30
Efficient Capital Allocation................................................................ 31
Constantly Building Businesses ........................................................ 32
Building Trusted Partnerships........................................................... 33
Board and Governance ..................................................................... 34

30 years of
Innovation Culture ............................................................................ 36
Delivering to Our Employees............................................................ 38
Delivering to Our Customers ............................................................ 39
Delivering to Our Investors............................................................... 40

Responsible
Delivering to Our Society.................................................................. 41

MANAGEMENT DISCUSSION & ANALYSIS............................ 42-117

Financial Review................................................................................ 43

Entrepreneurship
Operations Review - Financial Services............................................ 46
Operations Review - Global Pharma ................................................ 66
Operations Review - India Consumer Products ............................... 76
Operations Review - Healthcare Insight & Analytics ....................... 84
Risk Management ............................................................................. 90
Human Resources ............................................................................. 94
Information Technology & Digital .................................................. 100 Entrepreneurship is an art as well as a science. It is one of the most celebrated and
Data and Analytics .......................................................................... 104 rewarded virtues that moves the world forward. Responsible entrepreneurship
Environment, Health & Safety ........................................................ 106 goes a step further. It accentuates positive contribution to society while limiting
Corporate Social Responsibility ...................................................... 108 negative impacts on people and the environment. It is about treating customers
Awards & Recognition .................................................................... 114 fairly; caring about the well-being of employees; acting as good citizens in the local
10-year Financial Highlights ........................................................... 117 communities, and preserving natural resources and the environment.
BOARD & MANAGEMENT PROFILES ..................................118-125 Responsible entrepreneurship is not merely about building a business or
Board of Directors .......................................................................... 118 generating profits, without thinking about how the profits are to be generated.
Management Team ........................................................................ 124 Besides coming up with and implementing innovative ideas by leveraging the
STATUTORY REPORTS ........................................................126-185
potential of high-quality teams, responsible entrepreneurship is also about taking
Report on Corporate Governance .................................................. 126 all the stakeholders ahead together and consistently creating sustainable long-
Board's Report and Annexures ....................................................... 140 term value for each one of them.
Business Responsibility Report ...................................................... 176
At Piramal Enterprises Limited (PEL), we are led by our values of Knowledge, Action,
FINANCIAL STATEMENTS ...................................................186-396 Care and Impact. Over the last three decades, we have created a business model
Standalone that has constantly transformed itself with the ever-changing world. This has
Independent Auditor's Report ....................................................... 186 helped us to create sustained long-term value for all our stakeholders, including
Balance Sheet ................................................................................. 192 delivering outcomes that create a lasting impact on communities, people and the
Statement of Profit and Loss .......................................................... 193 world around us. For us, this is what responsible entrepreneurship stands for.
Cash Flow Statement ...................................................................... 194
Statement of Changes in Equity ..................................................... 196 We have also been responsive while being responsible. From being a textile
Notes to Financial Statements ....................................................... 197 company, over the last 30 years, we have moved to expand, diversify and grow
Form AOC-1 .................................................................................... 272 into Pharma and later also into Financial Services, while taking calculated risks
Consolidated and remaining constantly focused on long-term value-creation. Our journey has
Independent Auditor's Report........................................................ 275 been characterised by trusted partnerships, organic and inorganic initiatives and
Consolidated Balance Sheet ........................................................... 280 investments that make both business and social sense. Our well-integrated and
Consolidated Statement of Profit and Loss .................................... 281 diversified Financial Services business, highly responsible Pharmaceutical business
Consolidated Cash Flow Statement................................................ 282 and data-led Healthcare Analytics are all testament to how we carry forward an
Statement of Changes in Equity ..................................................... 284
experienced, yet contemporary enterprise.
Notes to Consolidated Financial Statements ................................. 285
As we celebrate 30 years of responsible entrepreneurship, we feel encouraged
NOTICE .............................................................................397-412 to do a lot more. Our entrepreneurial spirit is young at heart and enthusiastic to
CORPORATE INFORMATION .................................................. 416
achieve even bigger milestones in the future.
Piramal
Enterprises
at a Glance
Piramal Enterprises Limited (PEL) is one of India’s
large diversified companies, with a presence in
Financial Services, Pharmaceuticals and Healthcare
HIGHLIGHTS OF
Insight & Analytics. PEL’s consolidated revenues T H E C O M PA N Y
were over $1.6 billion in FY2018, with around 46% of

6,843
revenues generated from outside India.

EMPLOYEES

In Financial Services, Piramal Capital & Housing Finance Limited (PCHFL),

30
wholly owned subsidiary of Piramal Enterprises Limited (the flagship
company of Piramal Group), is registered as a housing finance company
with National Housing Bank (NHB) and engages in various financial
services businesses. It provides both wholesale and retail funding OFFICES ACROSS THE GLOBE
opportunities across sectors. In real estate, the platform provides

29%
housing finance and other financing solutions across the entire capital
stack ranging from early stage private equity, structured debt, senior
secured debt, construction finance and flexi lease rental discounting.
The wholesale business in non-real estate sector includes separate
F Y 2018 D I V I D E N D
verticals- Corporate Finance (CFG) and Emerging Corporate Lending
PAY O U T R AT I O
(ECL). CFG provides customised funding solutions to companies across
sectors such as infrastructure, renewable energy, roads, industrials,

44,002Cr
auto components etc., while ECL focuses on lending towards Small and
Medium Enterprises (SMEs).
1
PCHFL through its group companies provides customised strategies for
`
M A R K E T C A P I TA L I S AT I O N
institutional and retail investors (through Piramal Fund Management)
and has strategic partnerships with leading global pension funds such
as CPPIB, APG and Ivanhoe Cambridge. PEL entered into a JV with Bain

29%
Capital Credit (the credit arm of Bain Capital) to tap into distressed asset
resolution opportunity in India.

In Pharma, through an end-to-end manufacturing capabilities across ANNUALISED SHAREHOLDER

13 global facilities and a large global distribution network to over 100 R E T U R N O V E R 30 Y E A R S
countries, PEL sells a portfolio of niche differentiated pharma products
and provides an entire pool of pharma services (including in the areas of
OVER A
injectable, HPAPI etc.). The Company is also strengthening its presence in
the Consumer Product segment in India.

PEL’s Healthcare Insight & Analytics business, Decision Resources

Group, is the premier provider of healthcare analytics, data & insight
BILLION
D O L L A R R A I S E I N F Y 2018
products and services to the world’s leading pharma, biotech and
medical technology companies and enables them to take informed
business decisions. Note:
1. Market Capitalisation as on March 31, 2018
2 | Piramal Enterprises Limited
Our Values
Expertise Trusteeship Performance
We strive for a deeper Entrepreneurship We protect and enhance the interests of We strive to achieve market
understanding of We are empowered our customers, community, employees, leadership in scale and profitability,
our domain. to act decisively and create value. partners and shareholders. wherever we compete.

Knowledge action care impact

Strategic Overview
Innovation Integrity Humility Resilience
We aspire to do We are consistent in our thought, We aspire to be the best, yet strive We aspire to build businesses that
things creatively. speech and action. to be humble. anticipate, adapt and endure for
generations.
Our Purpose — Doing Well and Doing Good

Corporate Structure

Management Discussion & Analysis

PIRAMAL ENTERPRISES
Revenue H10,639 Cr

FINANCIAL SERVICES PHARMA HEALTHCARE INSIGHT & ANALYTICS

FY2018 Revenue Contribution­—47% FY2018 Revenue Contribution­—42% FY2018 Revenue Contribution­—11%

WHOLESALE LENDING GLOBAL PHARMA

(Real Estate, Corporate Finance Group, Emerging DECISION RESOURCES GROUP
(Global Pharma Products & Global Pharma Services)
Corporate Lending)

RETAIL LENDING
INDIA CONSUMER PRODUCTS

Board & Management Profiles

(Housing Finance)

INVESTMENTS IN SHRIRAM
(20% in SCL; 10% in STFC & 10% in SCUF)

ALTERNATIVE AUM
(Partnerships with APG, Bain Capital Credit, CPPIB, CDPQ)

INDIA RESURGENCE FUND

(for Distressed Assets)

Statutory Reports
Geographical Diversification
EUROPE
Total Revenue: 14%
Total Assets: 5%
NORTH AMERICA
INDIA
Total Revenues: 23%
Total Assets: 10% Total Revenue: 54%
Total Assets: 85%
Financial Statements

ROW
Total Revenues: 9%

10,639Cr C72,683Cr
Total Assets: 0.05%

C
T O TA L R E V E N U E S T O TA L A S S E T S
Annual Report 2017-18 | 3
A Billion Dollar Fund Raise
First major fundraise in the history of PEL - Raised ~`7,000 Cr

Raised ~`4,996 Cr through QIP of CCDs

HIGHLIGHT S OF QUALIFIED INSTITUTIONAL PL ACEMENT

(Q I P) O F C U M U L AT I V E C O N V E R T I B L E D E B E N T U R E S (C C D S)

Largest QIP deal First QIP of INR Widespread participation: Provides benefit
by any company denominated CCDs from FII long only of both debt (downside
(excluding banks) in India - A milestone investors, global university protection) and equity
in India deal in the history of endowment fund, (upside opportunity)
Corporate India — domestic institutions and instruments
a benchmark for alternative asset managers
future fund raising comprising over 30
deals in India institutional investors

The structure of the deal to set a benchmark for the

future fund raising deals in India

86% of CCDs were Top 6 investors contributed Investors were spread

allotted to FIIs (%) 63% of allotted CCDs (%) across geographies (%)

14 15
37

35
63 50
86
FIIs DIIs Top 6 Rest North Asia Europe
America
 Raising `1,978 Cr through Rights Issue

HIGHLIGHTS OF RIGHTS ISSUE

Existing Rights issue size Issue was CCD holders will be Promoter Group
shareholders of of `1,978 Crs oversubscribed entitled to subscribe had underwritten
PEL got an equal includes `190 Crs by 1.26x times to rights issue the Rights Issuance
opportunity to of entitlement excluding the portion of their to an extent of
participate in the reserved for the CCD holders entitlement as and 90% of its size
fund raising CCD holders reservation when they convert
CCD into shares over
the next one year

U S E O F T O TA L P R O C E E D S

Out of the `7,000 Cr that the Company

raised in this financial year, ~ `5,000 Cr has
been allocated to Financial Services and
balance is for Pharma and other initiatives.
Financial Services —
Business at a Glance
PEL’s Financial Services segment offers a comprehensive suite of financial products to meet the
diverse and evolving needs of its customers. The Company has created its unique positioning
in the financial services space through its strong presence in the following sub-segments:

Wholesale Lending BUSINESS DESCRIPTION L O A N B O O K /A U M P R O D U C T S/S E R V I C E S

Real Estate
Wholesale Lending
`31,833 Cr •
•
Mezzanine Lending
Construction Finance—Residential
• Construction Finance—Commercial
End–to–end real estate
financing model
87% • Lease Rental Discounting
Page 53 5-year CAGR

• Senior Lending
Corporate Finance Group
Sector agnostic corporate
`8,209 Cr •
•
Promoter Funding
Loan Against Shares
• Mezzanine & Structured Lending
lending book
(non – Real Estate)
118% •
•
Project Finance
Acquisition Funding
Page 54 3-year CAGR • Capex Funding
• Working Capital Term loan

• Senior Debt
Emerging Corporate Lending
Lending to emerging and
`916 Cr •
•
Loan Against Property
Lease Rental Discounting
• Structured Debt
mid-market companies Launched in FY2018 • Loan Against Shares
• Project Finance
Page 55 • Loan against receivables
• Acquisition financing

Alternative Asset Management

The platform in its fiduciary
`7,620 Cr •
•
Alternate Funds
Third party mandate
Assets Under • Managed account
capacity also manages alternate • Strategic partnerships:
Management
AUM under several categories APG, CPPIB, CDPQ
Page 57

Retail Lending
Housing Finance
Entered retail lending through `1,210 Cr •
•
Retail Housing Loans
Loan Against Property
housing finance business – • Small Construction Finance
a natural extension to our end Launched in FY2018 • Affordable housing
to end real estate financing
Page 56 solution

Investments in Shriram Group

Leading player in used
`4,583 Cr • 10% in STFC – `1,636 Crore
• 20% in SCL – `2,146 Crore
Amount invested • 10% in SCUF – `801 Crore
Commercial Vehicle and Micro,
Small and Medium Enterprises
Page 57
financing
Stressed Assets
India Resurgence Fund
Initial contribution of • JV with Bain Capital Credit
Debt and/or equity in assets • Target to launch US$1 billion fund
across sectors (other than real
estate) to drive restructuring
US$100 Mn each
Page 57 with active participation in by PEL and Bain
turnaround Capital Credit

6 | Piramal Enterprises Limited

 STRONG LOAN BOOK TREND (IN ` CR) 19%*
6-year Loan Book CAGR 122%

Strategic Overview
42,168
25%+

25%+

24,975
20%

13,338
15% 16%
NR1

4,766
2,861
2,016
350
KEY HIGHLIGHTS

Management Discussion & Analysis

69% YoY growth in Loan Book in FY2018
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Gross NPAs of 0.3% as on March 31, 2018

Loan Book ROE (%)
FY2018 ROE - 19% Note:
1. NR — Not Reported
*ROE went down marginally due to the recent fund raise
Merger of Piramal Finance and Piramal Capital
with Piramal Housing Finance to create significant
synergies
CONSISTENTLY ENHANCING DIVERSIFICATION
IN THE LENDING PORTFOLIO; SIGNIFICANTLY
The consistent growth in Loan Book is an outcome of
LOWERING THE OVERALL RISK PROFILE (%)
strong diversification - Launched 22 products across

Board & Management Profiles

various business verticals
17 15 16 15 15 18
98% Real Estate lending in Tier I cities of Mumbai,
3 6 7 19
Pune, Bengaluru Hyderabad, Chennai and NCR 8 9
23 6
70% of the portfolio comprising of Grade A 34
Developers 40
43 39
40
Relationship with 120+ developers and presence in
375+ projects pan India
76 59 44 38 29 29 21

Statutory Reports
Launched housing finance offerings in Delhi-NCR, MAR' 15 SEP' 15 MAR' 16 SEP' 16 MAR' 17 SEP' 17 MAR' 18
Bengaluru and Pune. Plan to open branches in
Nashik, Ahmedabad, Hyderabad and Chennai in near
Housing Finance RE Construction Finance—Commercial
term
Mezzanine RE Emerging Corporate Landing
Corporate RE Lease Rent Discounting
Partnered with 445 connectors, 123 Direct Sales Finance Group
RE Construction Finance—Residential
Agents & 100 projects on the housing finance
platform
RAPIDLY GROWING INCOME
4,981

22 corporate borrower groups on our Corporate FROM FINANCIAL SERVICES

Finance Group (CFG) platform BUSINESS (IN ` CR)
Financial Statements
3,352

6-year CAGR 60%

Formed the Capital Markets and Advisory group
which houses the Corporate Client Coverage Group
1,740

(CCG) and the Syndication Group (SG)

937
726
389
297

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

Annual Report 2017-18 | 7

Expanded Created India’s
presence in retail second largest
financing with and a high
the launch quality real
of Housing Finance estate developer
Company (HFC) financing
platform

• PEL’s real estate developer financing Loan

Book has grown at a robust CAGR of 112%
over last 6 years.

• Consistently delivering 50%+ YoY growth in

• Launched HFC and entered 4 cities –
Loan Book in each of the last 12 quarters
Mumbai, Pune, Delhi – NCR and Bengaluru
during FY2018
• End – to – end real estate developer
financing platform offering product
• Loan Book size of `1,210 Cr in 6 months
solutions right from the time of land
of launch
purchase to housing finance
• Natural extension to our end – to – end
• Real Estate lending in Tier I cities of
real estate financing platform to help
Mumbai, Pune, Bengaluru, Hyderabad,
the developers
Chennai and NCR
• B2B2C model wherein the developer
• Strong relations with 120+ developers and
relations would play an important role
has presence in 375+ projects pan India

8 | Piramal Enterprises Limited

Consistently Merger
delivered an of Piramal
ROE of 25%+ Capital
and GNPA of and Piramal
0.3%. Among the Finance into
best performing Piramal Housing
players in the Finance
industry

• Merger of Piramal Finance and Piramal

Capital with Piramal Housing Finance got
effective from March 31, 2018

• Benefits of merger:
–– Expected to improve the annual ROE of
• ROE of 25%+ over last 10 consecutive
the Financial Services business by 2-3%
quarters (prior to the fund raise through
in the next few years
QIP and Rights Issue)
–– Borrowing cost expected to go down
• Consistently maintaining a healthy asset
from 25 to 50 basis points
quality below 1% since last 9 quarters
–– Diversified portfolio comprising both
• Robust governance mechanism with the
retail and wholesale should improve
legal and risk teams reporting directly to
credit rating
board for reviewing any deals
–– Mutual Fund can lend higher amount
• Dedicated asset monitoring team to assess
to HFCs as against NBFCs (40% vs. 25%
early warning signals
of overall lending)

Annual Report 2017-18 | 9

Pharma — Business at a Glance
Global Pharma BUSINESS DESCRIPTION REVENUE P R O D U C T S/S E R V I C E S

Services
Contract Development and
`3,976 Cr Services
Discovery Services
HPAPI Development and
Manufacturing
Process R&D API Manufacturing
Manufacturing Organisation (CDMO)
offering end-to-end solutions across
16% Pharmaceutical
Development Services
Finished Dosage
Manufacturing (Oral
7-year CAGR Clinical Trial Supply Solids, Sterile Injectables)
the drug life cycle through a globally
Page 67 Services Antibody Drug Conjugation
integrated network of facilities.

Products Dipidolor*
Products Inhalation Anaesthetics Hypnomidate
A strong product portfolio of niche Sevoflurane * Controlled Substances
differentiated branded generic Isoflurane Intrathecal Severe
Halothane Spasticity/Pain
products that are difficult to Injectable Anaesthesia / Management
manufacture, sell or distribute. Pain Management Gablofen
Page 67 Sublimaze* Others
Sufenta* API Generics
India Consumer Products Rapifen* Vitamins & Premixes

It caters to the Indian self-care

market. Today, PEL’s OTC range
`537 Cr # Eight brands among
India’s top 100 OTC
Presence in Segments:
• Skin care
brands • Pain management
comprises of 18 major brands
from the pharmaceutical and
18% • Saridon
• Lacto Calamine
• Oral care
• Respiratory
9-year CAGR • I-Pill • Gastro-intestinal
personal care space, in diverse
• Tetmosol • Lifestyle problems
product categories like Vitamins & • Polycrol • Kids wellbeing
Page 76 Nutrition, Dermatological & Antacids, • Naturolax
Analgesics and Baby Care. • Caladryl
• Little’s

#
Includes ophthalmology (Allergan JV)

Healthcare Insight & Analytics — Busi

BUSINESS DESCRIPTION REVENUE P R O D U C T S/S E R V I C E S

Decision Resources Group

(DRG), is a best-in-class,
`1,209 Cr • Research & Data Products
• Custom Data & Analytics
decision support platform in • Consulting & Managed Services
the healthcare information • Learning
services space. It provides
indispensable insights to Segments covered:
Page 84 life sciences companies, • Pharma Companies
healthcare providers and • Payer
payers, through a variety of
• Providers
high value-added data and
analytics, research reports
and knowledge-based
services.

10 | Piramal Enterprises Limited

 PHARMA REVENUE AND GLOBAL
PHARMA EBITDA MARGINS (In `. Cr) 22%
7 year CAGR ~16% 20%
17%

4,322
16%

3,893
16%

3,467

Strategic Overview
14%

3,008
11%

2,715
KEY HIGHLIGHTS 10%

2,339
1,906
• Successfully cleared 27 regulatory audits

1,537
(including 3 USFDA inspections) and 167 customer audits
during FY2018
• Acquired and integrating product portfolios from
Mallinckrodt and Janssen
• Capex plans of over US$85 Million to expand capacities FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018
and capabilities across our facilities
• 13 manufacturing facilities spread across North America, Pharma Revenues1,2 Global Pharma EBITDA Margin %

Management Discussion & Analysis

Europe and Asia
1. Excludes revenue from JV with Allergan. Global Pharma revenue accounted for 92% of the
• Integrated offerings – 60 projects have been completed/ overall Pharma revenue during FY18;
being completed since last four years 2. FY2016, FY2017 and FY2018 results have been prepared based on IND AS, prior periods are
IND GAAP
• Robust pipeline of 110+ molecules in late phase
development GEOGRAPHY-WISE REVENUE BREAK UP
OF GLOBAL PHARMA BUSINESS (%)

• 4 acquisitions in last 3 years – baby care brand Little’s; 6

5 brands from Organon India & MSD BV; 4 brands from 10
Pfizer and Digeplex and associated brands 38
• Direct reach to ~4.2 Lakh outlets, spread across 2,000

Board & Management Profiles

North America India
towns with population of 50,000+ 16 FY2018
Europe Japan
• Large field force of 2,100 people RoW
• Asset light model

30

iness at a Glance
Statutory Reports
DRG'S ADDRESSABLE MARKET SIZE

(US$ Billions)

Healthcare
KEY HIGHLIGHTS Services LIFE
Solution SCIENCES PROVIDER PAYER TOTAL
Areas
• 340 positions on-boarded in Bengaluru and Gurugram
offices (29% of DRG’s headcount) MARKET
RESEARCH 3.0 0.3 0.5 3.8
• Addressable market size in excess of US$16 Billion
CONSULTING 2.7 0.6 0.8 4.1
Financial Statements

• Doubled the size of DRG’s data repository (healthcare SERVICES

claims, outcomes, formulary and insurance coverage)
to 100 Terabytes DATA &
ANALYTICS 4.5 2.4 1.5 8.4
• Acquired Context Matters & Acquired Walnut Medical
to expand and enhance data & analytics offerings TOTAL 10.2 3.3 2.8 16.3

Annual Report 2017-18 | 11

Strong Differentiated
performance business
in the areas model enabling
of Quality, superior
Compliance and business
Reliability – performance as
Zero production compared
loss due to any with Indian
regulatory issues peers

• End-to-end development and

manufacturing capabilities both for
APIs and Formulations, including niche
capabilities in handling cytotoxic injectable,
high potency APIs (HPAPI), anti-body drug
• Since the Abbott deal, PEL has cleared conjugates among others
31 US FDA inspections, 102 other
regulatory inspections and 826 customer • A strong product portfolio of niche
audits across all its facilities without a differentiated branded generic products
single hour of production stoppage that are difficult to manufacture, sell or
distribute
• At PEL, quality is viewed as an integral part
of the Company’s identity, it’s a culture • Moving up the value chain by focusing on
across the organisation. PEL employs the niche products & capabilities like controlled
concept of ‘Global Vision, Local Execution’ substances, intrathecal spasticity , drug
discovery, injectables etc.
• The Company’s quality management team
is independent of its businesses, and • Global Pharma has witnessed a 7-year
reports directly to the Board of Directors CAGR of 16%

12 | Piramal Enterprises Limited

Organic growth Inorganic growth
initiatives - initiatives -
Undergoing 8 acquisitions
capex over last 3 years
worth over in the pharma
US$85 Million business to
to expand boost future
capacities and growth
capabilities
across facilities

• Acquired two differentiated high margin

niche hospital generic product portfolios
from Janssen Pharmaceutica NV and
intrathecal spasticity and pain management
from Mallinckrodt LLC

• Acquired two US based CDMOs with niche

capabilities –Coldstream Laboratories Inc,
• Organic expansions at various sites specialised in manufacturing of cytotoxic
in order to be future ready for our injectable products and Ash Stevens
customers’ requirements. Major capex specialised in manufacture of HPAPIs in
projects include: North America
–– US$25 Million on Coldstream facility at
Lexington, US, specialising • In India Consumer Products business
in manufacturing of cytotoxic acquired 4 product portfolios - Digeplex
injectable products and associated brands from Shreya
–– US$55 Million expansion of API Lifesciences; four Pfizer brands; five brands
manufacturing capabilities and from Organon and MSD BV and baby care
capacities in North America and Asia in brand Little’s for age group of 0-4 years
our Global Pharma Services business

Annual Report 2017-18 | 13

Chairman's Message

23%
30- Y E A R C A G R O F R E V E N U E

29%
30- Y E A R C A G R O F N E T P R O F I T

`5,680 Cr
RETURNED TO ITS
SHAREHOLDERS IN THE FORM
OF DIVIDENDS, SPECIAL
DIVIDEND AND BUYBACK
S I N C E F Y 2011

14 | Piramal Enterprises Limited

 The Company delivered an annualised shareholder
return of 29% during this period, a milestone that

Strategic Overview
only a few Indian companies have achieved.

Dear Shareholders, `5,120 Cr. During the quarter, our Loan Book grew 69% to
`42,168 Cr. In addition to this, loans worth `23,300 Cr are
My warm greetings to all of you.
approved but yet to get disbursed.
Our 30-year journey
For the financial year 2018, the Board has recommended,
The Company has consistently transformed itself over the last

Management Discussion & Analysis

subject to your approval, a dividend of `25 per share at a
30 years. In 1988, we entered the pharmaceuticals space and
dividend payout ratio of 29%.
in over a period of two decades, we became one of the top
pharma companies in India. Consequent to the sale of our Restructuring in Financial Services business
Domestic Formulations business to Abbott in 2010, we have During the year FY2018, we had initiated the process of merging
once again transformed our business model. Today, we are a Piramal Finance and Piramal Capital into Piramal Housing
diversified Company with interests across Financial Services, Finance with an intent of streamlining the Financial Services
Pharmaceuticals and Healthcare Insight & Analytics. Apart from business, a step in the direction of de-merging Financial Services
scaling our existing pharma businesses, both organically and and Pharma businesses in the future. After obtaining all the
through acquisitions, we entered into new businesses, grew necessary regulatory approvals, the merger got effective on
them significantly, and attained leadership position in their May 23, 2018. The merger will result in significant synergies over
respective areas. Over this period of 30 years, the Company the coming years.

Board & Management Profiles

has a Revenue CAGR of 23% and Net Profit CAGR of 29%1 . The
The Company created a Deferred Tax Asset in its balance sheet
Company delivered an annualised shareholder return of 29%
that has resulted in an accounting gain of `3,569 Cr. Post
during this period, a milestone that only a few Indian companies
adjustment, our normalised Net Profit has grown by 24% at
have achieved.
`1,551 Cr for FY2018.
Performance since the Abbott deal
The benefits of these synergies are expected to accrue in the
Since the Abbott deal in 2010, the Company has delivered
coming years. Our Financial Services ROEs (on cash basis) are
Revenue CAGR2 of 29% and a normalised Net Profit CAGR2 (i.e.
expected to go up by around 2-3% for the next few years.
excluding exceptional gains/losses) of 55%. Over the last five
years, the Company delivered an annualised shareholder return Fund Raise
of 40% as compared with 14% return by Nifty. We raised around `7,000 Cr over the last few months, of which
~`5,000 Cr was through Qualified Institutional Placement
In both the key sectors, Financial Services and Pharma, the

Statutory Reports
(QIP) of Compulsorily Convertible Debentures (CCDs). This was
Company has been consistently delivering a strong performance
the first major fund raise in the history of PEL; the largest QIP
since the Abbott deal. In Financial Services, we recorded a ROE
deal by any company (excluding banks) in India and a unique
of 25%+ over last 10 consecutive quarters prior to the fund raise
structure that sets a benchmark for future fundraising deals
and has consistently maintained a healthy asset quality with
in this country. CCDs provide benefits of both debt (downside
GNPA below 1% since last nine quarters.
protection) and equity (upside opportunity). We also raised
The Pharma revenues3 have grown at a seven-year CAGR of `1,782 Cr through a rights issue. The issue was oversubscribed
16%. The margins for Global Pharma business (which accounts by 1.26 times (excluding the CCD holders’ reservation). The CCD
for ~92% of our Pharma revenues) have improved from 10% holders will be entitled to subscribe to the rights issue portion of
in FY2011 to 22% in FY2018, on account of both organic and their entitlement as and when they convert the CCD into shares.
inorganic initiatives. The objective of this rights issuance was to give the existing
PEL shareholders an equal opportunity to participate in the
Financial Statements

Performance for the year

fundraising process.
We have had another year of robust performance. For the year
FY2018, the Company has delivered 24% growth in revenues at
`10,639 Cr. The reported net profit for the year was at

Note:
1. FY2018 normalised net profit excludes synergies on account of merger of subsidiaries in Financial services segment
2. 6-year CAGR
3. Pharma revenues include Global Pharma and India Consumer Products

Annual Report 2017-18 | 15

Out of the total of ~`7,000 Cr of capital that we raised, we have Delhi-NCR, Bengaluru and Pune and plan to open branches in
allocated `5,000 Cr to Financial Services and remaining Nashik, Ahmedabad, Hyderabad and Chennai during the next
~`2,000 Cr has been kept for Pharma and other initiatives. few months. Apart from Housing Finance, we will continue to
explore various opportunities in the retail financing segment.
Financial Services
India’s GDP is expected to grow from US$2.6 trillion in 2017 to As we continue to diversify and with the size and scale that
US$6 trillion in the next 10 years. Our country is expected to our business is aiming for in next few years, we believe that we
become the third-largest economy in the world in a couple of should be able to deliver 20% ROE on a sustainable basis on a
years. A significant pool of capital will be needed to fund this much larger Loan Book in the future. During the year FY2018,
rapid growth in GDP. Higher financial penetration, significant the business generated an ROE of 19% as we allocated `5,000 Cr
reforms undertaken by the Government and the focus on from the fresh capital raised to our Financial Services business.
technology is expected to quadruple the size of the financial
Our Gross NPA ratio (based on 90 DPD) remained healthy at
services sector. We are very well-positioned to take advantage of
0.3% at the end of Q4 FY2018. As a conservative measure, we
this huge opportunity that our country is expected to offer.
continue to provide more than the regulatory requirements and
The Loan Book grew 69% Y-o-Y to `42,168 Cr as on maintain the provisioning at around 1.8%. During the year, we
March 31, 2018. Further, `23,300 Cr of loans have been received an upward revision in rating outlook from ICRA – from
approved but yet to get disbursed. We saw strong growth across AA Stable to AA Positive. Post the merger into Piramal Housing
all the verticals of Financial Services: Real Estate Developer Finance, we now expect further upgrade in our credit rating.
Financing, Corporate Finance Lending, Emerging Corporate
We had earlier launched India Resurgence Fund, a distressed
Lending and Housing Finance business.
asset fund in a joint venture with Bain Capital Credit, the credit
Despite these challenging times, over the last six years, quarter arm of Bain Capital. The platform is actively participating in
after quarter, our Company has been able to deliver a robust acquiring control of good assets with broken balance sheets in
CAGR of 122% in the Loan Book. The consistent growth in our growth sectors, recapitalising the capital structure to make the
Loan Book is also an outcome of our approach of consistently business viable through infusion of capital with controlling stake
creating innovative solutions for our clients and our high focus and driving business turnaround through active participation.
on diversification, through the launch of multiple new lower risk
Pharma
products and new business verticals. In March 2015, around
We continue to grow well in our Pharma segment despite the
76% of our book constituted of high-yield mezzanine loans in
tough business environment. Our Pharma business grew during
Real Estate. Now, ~46% of our Loan Book is Construction Finance
the year to `4,322 Cr. Our business model is different from that
where the risk profile is much lower as the developer already
of the other large Indian pharma companies. This differentiated
has all approvals and construction is currently ongoing. Our Real
business model has ensured that we perform better than the
Estate Developer Financing Loan Book grew by 50% to `31,833
others in this sector.
Cr. During the year, we also forayed into the Hospitality sector
by committing `1,200 Cr of loans across marquee hotel assets in Quality remains an ongoing concern for many Indian and
Gurugram, Bengaluru and Pune. global pharma companies, with many of them facing scrutiny
by regulatory authorities such as the US FDA. Similar to the
Our Corporate Finance Loan Book grew by 118% to `8,209 Cr as
risk monitoring and assessment framework that we set in the
on March 31, 2018. Due to our approach of offering customised
Financial Services business, in Pharma too, we have a high
solutions across the yield range to multiple sectors that we feel
focus on compliance and quality. Since 2011, we successfully
comfortable lending to, we see a huge growth opportunity in this
cleared all 31 US FDA inspections, 102 other regulatory
space. During the last year, in order to cater to this opportunity,
inspections and 826 customer audits. Quality is a culture at
the Corporate Finance business also formed the Corporate Client
Piramal and we have built an exemplary quality framework
Coverage Group, which is a dedicated sourcing team to build
that is implemented across our manufacturing facilities.
a relationship-driven lending business and offers customised-
Just as Risk, Legal and Compliance, the Quality function also
financing solutions for all wholesale-funding requirements of
reports independently to the Board.
corporates across our selected sectors; and the Syndication
Group that is responsible for down-selling of underwritten Global Pharma revenues for FY2018 grew 13% Y-o-Y to
transactions across the real estate and Corporate Financing `3,976 Cr on account of robust performance across various
platforms. facilities, strong order book and good growth in business
acquired from Mallinckrodt and Janssen. The transition
We are now targeting diversification into retail with housing
and integration of acquired products from Mallinckrodt is
finance. We are well underway to monetise the significant
completed and that of Janssen is progressing as per plan
opportunity that our country offers. Over the past few quarters,
and continue to perform in line with our expectations. The
we have put in place branches and teams across different
company is undergoing capex plans of ~US$85-90 Mn across
geographies, technology platforms and a highly-skilled analytics
our facilities to increase our capabilities and capacities for our
team, among other initiatives. Within a few months of its
customers. The margin profile for this business has improved
launch, our Housing Finance Loan Book grew to `1,210 Cr as on
significantly over the last couple of years. During FY2018 we
March 31, 2018. Additionally, the business has loans approved,
delivered EBITDA margins of 22% as compared with 20%
but not disbursed at `580 Cr. We launched our offerings in
in FY2017.

16 | Piramal Enterprises Limited

In our India Consumer Product business, we registered revenue DESH, a community awareness and screening programme for
of `346 Cr for FY2018, a decline of 8% over FY2017. This decline oral, breast and cervical cancer in Kamrup, Assam. Piramal
was largely on account of the introduction of GST and its Swasthya also launched a programme ASHWAS that focuses on
implementation that affected the industry and the wholesale the timely screening, identification, and treatment of diabetes

Strategic Overview
channel. During the year, we acquired Digeplex and associated and hypertension at Digwal, Telangana.
brands from Shreya Lifesciences to consolidate our position in
Piramal Sarvajal, which has been offering sustainable water
the gastrointestinal segment. We have also launched numerous
solutions for those without access to potable water, today
products/brand extensions during the year.
reaches more than 5.03 Lakh beneficiaries through over
Healthcare Insight & Analytics 1,140 touchpoints across 16 states.
The changing face of the healthcare and life sciences industry
PFEL and its associates continue to shape the student-learning
has resulted in a tidal wave of digital healthcare data, which in
outcomes of over 5.85 Lakh students across 4,600 government
turn has led to increased demand for high-quality information
schools. PFEL expanded its programmes by launching its District
and analytical decision-support tools and services. There is
Transformation Program in 3 districts. In addition, it has taken up
a significant shift in customer demand moving away from
projects for State Transformation, in partnership with Ministry of
traditional syndicated market research towards data- and

Management Discussion & Analysis

HRD and Niti Aayog, across 10 states in the country. The Gandhi
analytics-driven, technology-enabled offerings. In recognition of
Fellowship continued to attract high quality talent, which is
this shift, the segment has over the past few years increasingly
keen to engage with communities and contribute to the nation
invested in technology, data assets and analytics capabilities
building efforts.
that enable it to provide user-centric solutions, directly targeting
high-value client problems. During the year, Piramal Foundation collaborated with Niti Aayog
to support 25 Aspirational Districts across 7 states in improving
Healthcare Insight & Analytics FY2018 revenues were at
health and nutrition and education indicators over a four-year
`1,209 Cr. Revenue was largely stable as the Company continued
period. The Foundation has deployed resources across these
to evolve its delivery model from large, static research reports
25 districts to kick-start the programme.
to digitally-delivered, user-centric applications and analytics
services. Currency fluctuations also impacted the topline. We Priorities for the future
continued our India expansion initiative by onboarding The journey so far, has undoubtedly been exciting, but the

Board & Management Profiles

340 positions in Bengaluru and Gurugram offices, representing future holds more promise and optimism. As we move towards
29% of the total employees. This will help accelerate product a new growth trajectory, we will use the momentum that we
development, innovation and boost margins. have generated over the years along with the lessons of the
past as a guideline. Going forward, we will continue to change
Building leaders for the future
the paradigm, consolidating and recalibrating our businesses
At PEL, we continue to invest in our people and give them the
and product offerings, nurturing and developing future leaders,
tools to develop and sharpen their skills and talents so that
increasing customer intimacy, maintaining robust cost discipline,
they are able to remain valuable contributors to our success.
focused capital allocation and dynamic growth strategy – all
Our ASCEND and SUMMIT platforms have given our employees
aimed at generating sustainable value.
the opportunity to accelerate their growth and development to
the next level. Today, we have 280 high performers who have Your Directors and I thank our shareholders and other
undergone the ASCEND development journey. 78 of them have stakeholders – employees, customers, partners and

Statutory Reports
been identified as ‘High Potentials’ across PEL and are being Government – for their continued trust and support. We remain
groomed for roles at the next level. The SUMMIT leadership committed in acting as trustee to create long-term value for all
programme focuses on preparing senior leaders of the PEL our stakeholders.
business in the future. 58 senior leaders have undergone the
SUMMIT programme in the past years. A new programme,
IGNITE, meant for grooming young leaders to take on mid-
management roles, was initiated during the year. A group of Sincerely,
35 employees across our global teams were identified and are
currently undergoing their 18-month development journey.
Doing well and doing good
Doing well and doing good is our stated purpose. The Piramal
Financial Statements

Ajay G. Piramal
Foundation and our employees continue to drive initiatives
primarily in the areas of healthcare, water, education and youth Chairman
empowerment through our innovative programmes – Piramal
Swasthya, Piramal Sarvajal and Piramal Foundation of Education
Leadership (PFEL). Piramal Swasthya continues to focus on
bridging the gap in primary healthcare delivery in rural areas,
harnessing the power of technology across 13 states and serving
more than 9.6 Cr beneficiaries. Piramal Swasthya launched

Annual Report 2017-18 | 17

Key
Performance
Indicators
T O TA L R E V E N U E 1 (I N ` C R)
Consistently delivering strong
performance across financial,
operational and sustainability

10,639
parameters.

8,547
6,381
5,123
4,503
3,544

FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

T O TA L A S S E T S (I N ` C R)
72,683
48,239
30,980
21,505

22,003
20,252

FY2013 FY2014 FY2015 FY2016 FY2017 FY2018

18 | Piramal Enterprises Limited