ABSTRACT
This research paper presents the analysis of the demerger of Piramal Enterprises Limited into two entities, Piramal Pharma Limited and Piramal Financial Services Limited. The research paper examines the impact of demergers on the share prices of Piramal Enterprise Limited, Piramal Financial Services Limited, and Piramal Pharma Limited. On May 8, 2024, PEL completed a reverse merger with its subsidiary, Piramal Capital & Housing Finance Limited (PCHFL), and the combined entity, Piramal Finance Limited (PFL). In addition, the research paper examines the impact of this demerger on the financial metrics such as net sales, net profit, return on equity, and market capitalization. In this manner, the study highlights pre- and post-demerger fluctuations in these metrics, showcasing the demerger’s impact on the entities’ financial performance. The study also delves into the demerger process, the reason behind the demerger, and its framework in the context of relevant regulations and
emphasizes the growing importance of demergers as a strategic tool for business growth.
REFERENCES
Piramal Pharma Limited. (2021;2023). AGM report 2021. Piramal Pharma Limited. https://www.piramal.com/investor/piramal-pharma-limited/corporate-governance/board-committees/
Investing.com. Piramal Healthcare historical data. Investing.com. Retrieved December 6, 2023, from https://in.investing.com/equities/piramal-healthcare-historical-data
Companies Market Cap. (2023). On Holding market capitalization. Retrieved April 6, 2024, from https://companiesmarketcap.com/on-holding/marketcap
Piramal Enterprises Limited. (2012–2021). Annual reports (2012–2024). Piramal Enterprises Limited. https://www.piramal.com/investor/piramal-enterprises-limited/financial-reports/
quarterly-results/
Piramal Enterprises Limited. (2021;2023). AGM report 2021. Piramal Pharma Limited. https://www.piramal.com/investor/piramal-enterprises-limited/corporate-governance/board-of-directors/
Live Mint. Piramal Enterprises share price: NSE, BSE. Live Mint. Retrieved December 6, 2023, from https://www.livemint.com/market/market-stats/stocks-piramal-enterprises-share-price-nse-bse-s0003118/
Piramal Enterprises Limited. (2021–2024). Annual reports (2012–2024). Piramal Enterprises Limited. https://www.piramal.com/investor/piramal-enterprises-limited/financial-reports/quarterly-results/
National Stock Exchange of India. Piramal Enterprises Limited (PEL) - Equity Quotes. National Stock Exchange of India. Retrieved December 6, 2023, from https://www.nseindia.com/get-quotes/equity?symbol=PEL
Yahoo Finance. Piramal Enterprises Limited (PEL.NS) - Historical Data. Yahoo Finance. Retrieved December 6, 2023, from https://finance.yahoo.com/quote/PEL.NS/history/
Baba, C. M., Duguleană, C., Dincă, M. S., Duguleană, L., & Dincă, G. (2021). The Demerger Impact upon Sustainable Development of Economic Entities: Evidence from Romania. Sustainability, 13(15), 8316.
Bandose, V. “Piramal Enterprises demerger news: Check record date, share ratio - what investors should know August 30 Retrieved on March 25, 2024 from”https://www.zeebiz.com/market-news/news-piramal-enterprises-demerger-news-check-record-date-share-ratio-what-investors-should-know-196272.
Bao, J. (2017). Evaluating the impact of mergers and demergers using the DuPont method: A case study of ABN AMRO Bank. Finance Research Letters, 21, 58-64.
Basak, S. (2016). Evaluating investor value post demerger: A case study of Unilever India Exports Limited. Journal of Corporate Finance, 38, 150-165.
Bergh, D. D., & Lim, E. N. K. (2008). Learning how to restructure: Absorptive capacity and improvisational views of restructuring actions and performance. Strategic Management Journal, 29(6), 593-616.
Brigham, Eugene F., Houston, Joel F. 2010. Essentials of Financial Management 2nd ed. Cengage Learning Asia, Singapore.
Business Today. (2021). Piramal board approves demerger of pharma biz, financial services, October 8. Retrieved on March 25, 2024 from “https://www.businesstoday.in/latest/corporate/story/piramal-board-approves-demerger-of-pharma-biz-financial-services-308799-2021-10-08.”
Cecchetti, S. G., & Schoenholtz, K. L. (2017). Money, banking, and financial markets. McGraw-Hill.
Chai, D., Wernerfelt, B., & Zinkhan, G. (2018). The performance of spin-offs and related market dynamics in Australia. Australian Journal of Management, 43(3), 423-444.
Chen, L. (2018). Carve-outs and demergers in the Asian technology sector: Innovation and market expansion. Asian Business Review, 12(1), 55-70.
Companies Market (2024) Market Capitalization of Piramal Pharma, May 10. Retrieved on May 28 from “ https://companiesmarketcap.com/piramal-pharma/marketcap/”
Dittmar, A. (2004). Capital structure in corporate spin‐offs. The Journal of Business, 77(1), 9-43.
Duguleana, C., & Duguleana, L. (2021). Financial Profitability of Demerged Companies. Bulletin of the Transilvania University of Brasov. Series V: Economic Sciences, 14(63), 173-182.
EDT (2024). Piramal Pharma Limited Announce result for Q4 and FY 2024, May10. Retrieved on May 28, 2024 from “https://www.marketscreener.com/quote/stock/PIRAMAL-PHARMA-LIMITED-145512665/news/Piramal-Pharma-Limited-Announces-Results-for-Q4-and-FY2024-46694040/
Gonzalez, R. (2017). Split-offs and break-ups in the Latin American mining sector: A focus on Chile and Peru. Latin American Journal of Economics, 35(4), 210-225.
Government of India. (1961). The Income Tax Act, 1961. Government of India. Retrieved from https://www.indiacode.nic.in/bitstream/123456789/2435/1/a1961-43.pdf
ICRA (2024). Piramal Enterprises Limited: Update on Material Event; matured instruments withdrawn, May 16. Retrieved on August 14, 2024, from https://www.icra.in/Rating/GetRationalReportFilePdf?id=127526
Institute of Company Secretaries of India. (n.d.). Corporate restructuring. Retrieved from https:// www.icsi.edu/media/portals/0/CORPORATE%20RESTRUCTURING.pdf
IST (2022). NCLT approves demerger of Piramal Enterprises August 12. Retrieved on August 24, 2024 from https://www.livemint.com/companies/news/nclt-approves-demerger-of-piramal-enterprises-11660319023843.html
Kirchmaier, T. (2003). The performance effects of European demergers. European Financial Management, 9(4), 451-471.
Kumar, B. (2022). Piramal Enterprises demerger gets NCLT approval; what it means for the two entities, August 13. Retrieved on March 25, 2024 from“ https://www.zeebiz.com/companies/news-piramal-enterprises-demerger-gets-nclt-approval-what-it-means-for-the-two-entities-194001.”
MarketScreener. (n.d.). Piramal Pharma Limited. Retrieved from https://www.marketscreener.com/quote/stock/PIRAMAL-PHARMA-LIMITED-145512665/
Metha, R., Haria, R., Dholaria, S., Bharucha, E., Tarphe, Y., & Shah, H. (2019). IMPACT OF DEMERGER’S NEWS ON SHARE PRICE. International Journal of Engineering Applied Sciences and Technology, 4(06), 133-137.
Ministry of Corporate Affairs. (2013). The Companies Act, 2013. Government of India.
Moneycontrol. Piramal Enterprises: Balance sheet. Retrieved March 6, 2024, from https://www.moneycontrol.com/financials/piramalenterprises/balance-sheetVI/PH05
MoneyWorks4Me. Top pharma companies in India. MoneyWorks4Me. Retrieved April 6, 2024, from https://www.moneyworks4me.com/best-index/bse-stocks/top-pharma-companies-in-india/
Njeri, N. A. (2013). The effect of the separation of life assurance and general insurance on the financial performance of insurance companies in Kenya. An Unpublished MBA Thesis Submitted to School of Business University of Nairobi, Nairobi.
Padmanabhan, P. A. (2018). Do demerger announcements impact Shareholders Wealth? An empirical analysis using event study. Vision, 22(1), 22-31.
Paramasivan, C. (2009). Financial management. New Age International.
Pilla, V. (2022) NCLT approves demerger of pharma business from Piramal Enterprises, August 12. Retrieved on March 25, 2024 from https://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/nclt-approves-demerger-of-pharma-business-from-piramal-enterprises/articleshow/93527356.cms?from=mdr
Piramal Pharma Limited. (2021–2024). Annual reports (2021–2024). Piramal Pharma Limited. https://www.piramal.com/investor/piramal- pharma-limited/financial-reports/annual-reports/
Poddar, N. (2021). Piramal Enterprises demerger aims to make co structure simpler & more focused, says Ajay Piramal, October 7. Retrieved on March 25, 2024 from https://www.cnbctv18.com/business/piramal-enterprises-demerger-aims-to-make-co-structure-simpler--more-focused-says-ajay-piramal-11031162.htm.
Press Release (2021). Piramal Enterprises Announces Demerger and Simplification of Corporate Structure; To Create Two Separate Listed Entities in Financial Services and Pharmaceuticals, October 7. Retrieved on March 24, 2024 from https://www.piramal.com/wp-content/uploads/2021/10/PR_Piramal-Demerger_October-7-2021.pdf.”
R, Drushti. (2021) Valuation Report of Piramal Group October 5. Retrieved on March 23, 2024, from https://www.piramal.com/wp-content/uploads/2021/12/Valution-Report.pdf.”
Roberts, D., & Thompson, M. (2018). Corporate Demergers in the U.S. Healthcare Sector: Strategic Focus and Shareholder Value. American Journal of Business, 33(1), 23-40.
Rose, Peter S. 2010. Bank Management & Financial Services. McGraw-Hill education, Singapore.
Singh, B. (2021) Composite Scheme of arrangement of Piramal Group Retrieved on March 24, 2024 from https://www.piramal.com/wp-content/uploads/2021/11/Composite_Scheme_of_Arrangement.pdf.
Singh, R., Bhowal, A., & Bawari, M. V. (2009). Impact of demerger on shareholders’ wealth. Enterprise Risk, 1(1), 44-59.
Singh, R., Bhowal, A., & Bawari, V. (2009). Impact of Demerger on Shareholders’ Wealth. Enterprise
Risk Management, 1(1) 44-59.
Singh, S. (2021). Piramal group to demerge financial, pharma biz into separate listed entities, October 7. Retrieved on March 25, 2024 from “ https://www.livemint.com/companies/news/piramal-group-to-demerge-financial-pharma-biz-into-separate-listed-entities-11633603477756.html.”
Smith, J. (2015). The impact of regulatory changes on demergers and carve-outs in the European telecommunications sector. Journal of European Business Studies, 23(2), 123-145.
Smith, J., & Williams, K. (2020). Retail Sector Demergers in Australia: Strategic Realignments and Market Adaptation. Australasian Journal of Business and Social Science, 45(2), 98-115.
Vyas, P., Pathak, B. V., & Saraf, D. (2015). Impact of Demerger Announcement on Shareholder Value Evidence from India. Journal of Management & Public Policy, 7(1), 13-26.
Zakaria, N., & Arnold, G. C. (2012). Do Malaysian focus-increasing spin-off firms underperform?. Asian Academy of Management Journal of Accounting & Finance, 8(1) 91-123.