Piramal Healthcare-Piramal Lifesciences

Piramal Healthcare ( PHC ) is folding in the New Entity Research Business of Piramal Lifesciences ( PLS ) into itself and is issuing 1 shares of itself for every 4 shares of PLS. No shares will be issued for its own stake in PLS. Once this takes effect there will be a dilution of approximately 4% in the earnings for PHC.

Towards the fag-end of today’s trade ( Oct 11,2011), PHC fell off to 348 from 352 while there was strong buying interest in PLS at 88 and above and it closed at 89.

The process of hiving off of the business from PLS has been on since May and the final clearance from Bomaby High is expected any day.

At the current prices, if the residual business of PLS is valued at even Rs 5 per share then the equivalent price for PHC works out to 336 ( 89-5)*4. At zero residual value ( an unlikely event ) the e.v is 356.

If one gets an opportunity to short PHC at a price above 356, I would think that trader is likely to make money.  If the residual value is assessed by the market at more Rs 3 then even after transaction charges there is profit to be made.

I think the whole process should be over within the FNO expiry of November month.

Disclosure: I am long PLS and short PHC for now more than a month.

Pl. take whatever I say with a pinch of salt and do your own research before taking any action. It is your money and that should be very dear to you.

3 thoughts on “Piramal Healthcare-Piramal Lifesciences

  1. Oh thanks, that clears my doubt. So, the residual business will continue to be held by PLS shareholders. Of course, the market will decide the price that it wants to give for the same.


  2. PLS will continue to be a spearte entiy and also listed. It is only a part business of PLS that is being spun out and merged with PHC. As yet Piramal has not announced any plan of winding up PLS. I think at some point as the clarity emerges and other business ( Finance and Real Estate) gather pace for PHC that some part of current PHC business may be transferred to PLS ( Contract Mfg etc ). No harm is keeping a listed entity alive. Interesting thing to watch would be the residual price of PLS and the resultant impact on PHC price in the short run.

  3. Hi Sunil,

    I have one li’l doubt related to this story. Once the PLS is merged into PHL and the shareholders of PLS receive 1 share of PHL for 4 held in PLS. What happens to residual business of PLS in the sense of listing ?
    Like, will PLS cease to be a listed company ? Who will then own the residual portion of the company ?
    I hold shares of both PHL and PLS, bought sometime back with a long term view on PHL.
    I had bought PLS as a indirect way of owning PHL, when the gap between it and PHL was wider like 83-84 in PLS and PHL was at 340-345.


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