Piramal Enterprises Limited (500302) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Piramal Enterprises Limited Conference Call to discuss on announcement of demerger and simplification of corporate structure. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Hitesh Dhaddha, Chief Investor Relations Officer from Piramal Enterprises Limited. Thank you, and over to you, sir.

Hi. Good evening, everyone. Hope you are safe and in best of your health. I'm pleased to welcome you all today to this conference call to discuss the announcement that we made today on demerger and simplification of our corporate structure. Our demerger announcement materials have been uploaded on our website, and you may like to download and refer during our discussion. As the company is in the filing period prior to the quarterly earnings release, the management will not be commenting on its earnings prospects or provide any new guidance or any other material nonpublic information pertaining to the company's current financial performance. On the call today, we have with us our Chairman, Mr. Ajay Piramal; Ms. Nandini Piramal, Executive Director, Piramal Enterprises and Chairperson Piramal Pharma; Mr. Anand Piramal, Executive Director of Piramal Group; and Mr. Rajesh Laddha, Executive Director and Group CFO, Piramal Enterprises. With that, I would like to hand it over to our Chairman and would request him to share his initial thoughts. Over to you, sir.

Welcome to our analyst call. Over the years our company has grown multifold with diverse businesses under one holding structure. Over the last 33 years, we have delivered a revenue CAGR of 22%, a net profit CAGR of 26% and annualized return to shareholders of 26%. In line with our stated strategy, we have announced the demerger of the Pharma business and simplification of the corporate structure, subject to shareholders, creditors and other regulatory approvals. This demerger will create 2 separate pure-play entities in the fast-growing verticals of financial services and pharmaceuticals in line with our commitment to the shareholders and investors. The key steps are in this -- the Pharmaceuticals business, we get vertically demerged from Piramal Enterprises Limited and consolidate it under Piramal Pharma Limited. Piramal Pharma Limited will become one of the large pharma companies listed on the NSE and BSE post the demerger. Two wholly owned operating subsidies, Hemmo Pharma Private Limited and Convergence Chemicals Private Limited, will also get amalgamated with Piramal Pharma to further simplify the Pharma corporate structure. In consideration, PPL, that is Piramal Pharma Limited, shall issue 4 equity shares of PPL for every 1 equity share in Piramal Enterprises in addition to their current holding in PEL. Thus to really simplify, every shareholder of PEL will now, at the time of the demerger, get 1 share in PEL and 4 shares in PPL. And both of these companies will be separately listed on the NSE and BSE. In the Financial Services space, we had 2 100% wholly owned subsidiaries, PCHFL, which is Piramal Capital and Housing Finance Limited; and Piramal Fininvest. PCHFL has now merged into DHFL and that has now become 100% subsidiary of PEL. And Piramal Fininvest, which was 100% subsidiary, is now being merged into the parent Piramal Enterprises. This sounds complicated, but actually, it's very -- it is really to simplify the structure. So in Financial Services, we will have 1 NBFC which is Piramal Enterprises Limited, which will hold 100% of shareholding in the merged entity of Piramal Capital and DHFL and the listed entity will be PEL, which is there today as well. This scheme of arrangement is subject to the approval of all the regular approval, shareholders and creditors, RBI, SEBI, stock exchanges, the Honorable National Company Law Tribunal and other regulatory authorities as applicable. We expect that this regulatory process -- all the approvals, which I have talked about now, should get done in a 9 to 10 month period. Also, these we believe are fairly routine approvals, and these are approvals which will only benefit minority shareholders on one hand and it will help the regulator have a simplified structure and better regulation. Now coming to the strategic rationale. As you all have been asking at every analyst meeting, that when will the demerger take place. So you know the rationale, but I will tell you from our point of view. The first one is it simplifies the corporate structure with 2 separate pure-play entities in the financial services and pharmaceutical space. It strengthens governance architecture for the businesses with separate dedicated boards and management teams. We are also creating an optimal capital structure. As you know, the capital structure of Financial Services business compared to that of our Pharmaceutical business is quite distinct and therefore, we have an option -- today we have an opportunity to create what is an optimal structure. There's also clear deployment of respective businesses cash flows. Again, another requirement of many analysts and investors telling us that they would like to understand cash flows from each business. Remember, there was an intermingling of those. So here is now a clarity in that. And it gives both entities the ability to independently pursue growth plan organically and inorganically. As you would see from the material that has been given to you, both businesses are now adequately capitalized and there is a good run rate for growth both organically and through acquisitions for the Financial Services business as well as for Pharma. And we believe that this would also enable better understanding of our 2 listed entities by you the investors, and the analyst community and will lead to better reporting of operating parameters for individual entities. So what is the implication for shareholders? Just to clarify once again, shareholders of PEL today will directly own shares in both the listed entities without any crossholding and minority stakes. Also, there will be no change in the shareholding pattern of Piramal Enterprises. We have been, as you are aware, been talking about this merger for the last few years, and I have been consistently saying that in the midterm, we will separate out these 2 companies to 2 businesses into 2 independent companies. And over this period, we have been preparing for this. Over the last 2 years, we've taken several measures to come to this stage. First of all, as you are well aware, we strengthened our balance sheet by getting inflows -- equity inflows of INR 18,000 crores since March 2019 against our commitment to you of getting INR 10,000 crores. Secondly, we have deleveraged the company. Today, on a consolidated basis, PEL's net debt-to-equity has reduced to 0.9x in March '21 versus 2x in March '19. We have divested our non-core businesses with the sale of DRG. We brought all pharmaceutical businesses under one company last year, PPL, and strengthened its balance sheet by raising $490 million from the Carlyle Group for a 20% stake in the pharma business. We've grown our multi-product retail lending platform in line with our strategy of diversifying our book into both retail and wholesale. And this is further enhanced by the merger of DHFL wherein our book in the near term would be 50% retail and 50% wholesale. And now we have a much more robust and future-ready Financial Services business. We have further strengthened our Board and Management teams across the Pharma and Financial Services space. In summary, the demerger and simplification of the corporate structure will create 2 independent listed entities in the Financial Services and Pharmaceutical sector. And both entities will have a leadership position across the business segments they operate in. All my family members and I will remain fully committed towards growth and stability of both the listed entities. The demerger also empowers both businesses to be future ready by independently pursuing their growth strategies with sharper focus on their strategic priorities. I am confident that both these entities will emerge as 2 strong companies, which will have a good run rate for growth. Going forward, in line with our philosophy of doing well and doing good, both the listed entities will continue to work towards creating value for our shareholders. With this, I would -- I'm open to questions. Me and my team are all here for you. And thank you very much once again for participating.

[Operator Instructions] The first question is from the line of Aditya Jain from Citigroup.

Just a couple of clarifications. So one, if you could talk about who will be the leadership team at both the listed entity. And secondly, PEL, this will become a listed NBFC. So PCHFL as its only holdco and every other subsidiary which used to be doing Pharma business or otherwise, it's getting -- it will be within Piramal Pharma Limited. I just wanted to confirm that.

Yes. So let me confirm that all the pharma subsidiaries and all the pharma business, whatever, was in PEL will be part of Piramal Pharma Limited. So there will be no intermingling between them. The management -- of your first question, the management remains unchanged. Piramal Pharma Limited is run by CEO, Mr. Peter DeYoung and will continue to do so. As far as PEL is concerned, it will continue to be run as before. We have in the -- we have -- in the retail business of DHFL, we have Mr. Jairam who is the Managing Director of that business, will continue. The wholesale business, we have Mr. Khushru Jijina and his team that will continue. And overall, Rajesh Laddha and his team will also continue. So it will remain unchanged in that sense.

The next question is from the line of Kunal Shah from ICICI Securities.

Congratulations for 2 updates in terms of DHFL integration as well as demerger announcement. A couple of questions. Firstly, in terms of the net worth. So the excess net worth which was there, maybe last time we have clearly allocated the net worth towards the pharma. So that's the only thing that is flowing into the pharma entity which will be demerged and the entire excess net worth which was unallocated equity, that will stay with financial services or it depends upon the organic, inorganic opportunity on both the businesses?

So about of the total net worth, about INR 6,800 crores, INR 7,000 crores will be in the pharma space. And that will move out into Piramal Pharma Limited. The balance will continue to be in Piramal Enterprises, out of which, the 100% subsidiary, which is PCHFL after the merger of DHFL will have an equity of about INR 11,000 crores. And that will remain with PCHFL and will be used to grow the retail book. The balance equity remains in PEL. So if you look at it, there's enough equity, both in the pharma space where the equity -- where the EBITDA to equity -- sorry, net debt-to-equity is in the region of a little over 2x. So there is enough scope to grow there. Similarly, if I look at PCHFL alone, after even the merger of DHFL, the debt-to-equity will be 3.5x. So, we are adequately capitalized in both, and there is still excess unallocated equity left in Piramal Enterprises.

Yes, sure. So just broadly, maybe in terms of INR 35,000 crores of equity, what you are saying is INR 11,000 crores will be in PCHFL, INR 7,000-odd crores in Pharma, and INR 17,000 crores will be at the PEL level into the NBFC. So that's the...

Yes. Yes. Roughly, yes.

Okay. And in terms of the cash also, which is normally lying in the balance sheet of INR 7,000-odd crores. So would that be more towards in the Financial Services business or that's pertaining more to the Pharma business?

No, that is pertaining to the Financial Services business. That is all the regulatory requirements which RBI has and a little more excess.

Okay. So that cash will also flow into the Financial Services.

Correct.

Okay. And secondly, in terms of the structure, which we are looking of amalgamating PHL invest into PEL and then having 100% subsidiary, any regulatory challenges that we see in terms of the approval over there?

So obviously, it is subject to RBI approval. We believe that RBI would be happy with it, but we will wait and see. Because in that case, today, there was some lending which was in PHL Fininvest, something in PCHFL and a little bit in PEL. And RBI was not very happy with that. Here now, we are consolidating the lending into one NBFC and one HFC. So I presume they will be happy, but we will wait and see for their reaction.

Sure. And in terms of funding cost benefit, so that will still flow through because retail will still sit at PCHFL. So now the funding cost benefit will ideally flow to PCHFL and not at the Piramal Enterprise. I think that funding cost will still continue to be there because wholesale book is lying and people will view it as somewhat similar what is existing today.

We think overall, weighted average cost will come down across the board in Financial Services.

Okay. Sure. And last question in terms of any tax implication on this demerger?

There is no tax implication as far as the demerger is concerned.

Okay. So there will be no -- okay. So there will be no liability, nothing which will get created goodwill. There is nothing which is going to come out there.

No.

[Operator Instructions] The next question is from the line of Prakash from Axis Capital.

Just wanted to understand, I missed the comment, if already discussed, on the cash. So what is lying in the pharma book today? And we have, in the past, said that we would need some funds for the CapEx as well as some inorganic opportunities where we see some gaps in terms of service offerings to scale up further and also scale up the OTC business. So we have a strong growth plan on the pharma side. Just wanted to understand, a, the cash position today and, b, which are the first few initiatives that we can see in these businesses.

See, as far as the Pharma is concerned, if I look -- if you look at the debt-to-EBITDA, there is enough scope for growth. Today, the debt-to-EBITDA is about twice, a little over twice in spite of doing a INR 750 crore acquisition -- after doing a INR 750 crore acquisition in June of this year. So there is enough runway for growth, both for acquisitions as well as for organic growth. Just for your information, in the last year, in the last 12 months, Pharma has seen 3 acquisitions that we have done. Hemmo, which I spoke about, which was done in June this year. And last year, we did 2 of them. We acquired a plant in Sellersville in Pennsylvania, the U.S., and we also acquired 50% of the balance shareholding of our joint venture with Navin. So totally, in spite of that, our debt equity today is still conservative and there's scope to grow.

Yes. And rough numbers would be, sir?

Of?

Of the Pharma debt-to-equity. I mean, the absolute number?

So the Pharma EBITDA this year will -- I mean, am I -- can I give the last year number? I think that's safer, about INR 1,500 crores.

EBITDA I don't want to know, EBITDA I am aware. I just wanted to know the debt levels as well as the [ capital levels ] in the pharma entities?

INR 3,000 crores. INR 3,000 crores.

INR 3,000 crores in the?

Pharma.

Yes, roughly about INR 3,200 crores.

Of debt?

Of debt.

Yes.

And the equity base there?

Equity base is about INR 7,000 crores. INR 6,800 to be precise.

Okay. Okay. Perfect. Okay, that helps.

[Operator Instructions] The next question is from the line of Satwik Jain from Perennial Funds.

So, it had already been discussed regarding the debt level. So, just wanted to clarify, like going ahead, are there any plans to reduce the debt, become debt-free in the Pharma business, especially? And the second thing was, are we planning any reentry into the domestic formulations business?

So Pharma, we don't have a plan to reduce debt too much. I think this is a conservative level. We'd rather put funds into growth. I think that will give a better return to shareholders and that's what we want to do in the pharma space. There is enough of a headway to grow. There is opportunities for growth, and we'll invest in growth. There will be cash flows coming in, but I think we want to reinvest in the business for some time. And what was your second question?

So the second question was regarding any reentry into the domestic formulations business.

We have -- we've been evaluating it. If it makes economic sense, we will do it because valuations are pretty stiff. And I keep saying that we, as a business, we are not like a private equity who will enter in something, the exit multiple goes up, they exit in 3, 4, 5 years depending on the multiple. We want to grow a solid business, which will continue in the long term as we've done in the past. So there is -- we believe that if there is a -- we believe that it's a good space to enter in if the value is right. So we will evaluate on the terms of valuation.

The next question is from the line of Utsav Mehta from Edelweiss Asset Management.

My first one is, we've seen like a very strong consolidation of both businesses over the last 2 to 3 years. Could you just talk a little bit about from now to, let's say, 3 years out, how do you see your ROE moving in each of the businesses? And when do you believe we'll be able to sort of hit and break the double-digit barrier in both?

I think we'll share numbers much more later. But we are focused on that. We have -- if you look at it, it's just part of our long-term strategy that we were doing. And I think we are in that line. We have now strengthened both the businesses in terms of equity. We believe that there are many opportunities for stronger companies to grow into the future. Opportunity is both in the organic space as well as through acquisitions. If you look at Financial Services as well, I see a consolidation taking place on a daily basis. Those companies which have strong equity and have access to -- have good access to debt levels, I think there's going to be many more opportunities to come. So we are just waiting for that. If you look at it, we have been able to easily absorb this acquisition of DHFL, which is a large acquisition. It is a INR 34,000 crore acquisition, and we've been able to digest it in terms of financial terms quite easily. So I think, let's be patient. You'll see the improvement coming through. There is firepower there, and we will continue to grow now.

Great. My second question on the question asked earlier on the domestic formulations and potential entry into it. I understand that valuations are stiff. Could you just help us understand what are the kind of payback periods or hurdle rates that you're looking after -- looking for?

I mean, I can't give you too much details now. Otherwise, let me say that till now we've had a successful record of doing acquisitions, integrating them and creating value, that's what we will do. So it varies. The payback period really varies depending on where we think the future will be. So let's leave it at that.

The next question is from the line of Piran Engineer from CLSA.

Congrats on the successful execution of all your plans over the past 2 years. I had a follow-up question on one of the things that was said. So you mentioned that the debt-to-equity ratio in PCHFL will be 3.5x on an equity of INR 11,000 crores.

Yes.

But if I look at -- as of FY '21, PCHFL anyway has INR 30,000 crores of debt. And now from Dewan we are taking over another INR 20,000 crores. So at INR 50,000 crores, it comes to almost 5x. So what exactly am I missing here?

Rajesh, you could answer the question.

Yes, I'll take that. These numbers what Mr. Piramal has just given are pro forma numbers. Between March '21 now and say another 2, 3 months, the debt levels of PCHFL on a standalone basis is coming down because of the fact that some of the down selling, et cetera, which is happening from PCHFL. So as we speak, it will be in the range of about INR 25,000-odd crores. INR 20,000 crores is coming from Dewan, INR 19,500 crores. And by next 3, 4 months, 5 months' time, by March '22, it will be down by another INR 5,000 crores is what our expectation is. So on a pro forma basis, like-to-like, post DHFL in next 3, 4 months' time, we expect this to be around INR 40,000 crores, INR 42,000 crores.

Okay. Okay. That's fair. And just one other question. In the future, would you be also looking to merge the HFC with Piramal Enterprises or it would always be a stand-alone HFC as a subsidiary and NBFC as a holdco?

No, that just gives us flexibility. We will see how it comes and how the future plays out to be. So it just gives an option. If you want to merge, you can merge. If you don't want to -- so we'll do whatever -- as we've done in the past, whatever is in the best interest of all shareholders and the business.

Piran, I would just add that our HFC is well positioned in now the affordable financing market, affordable housing finance market, apart from the specialized wholesale player that we had. So I think these are 2 really good areas where we'll continue to focus on to grow our HFC apart from the multi-product strategy that we will have at the overall Financial Services level.

No, no. Yes. I get that. It's just that if you are simplifying the group after consolidating things, I thought maybe that's the next step. So anyway, that answers my question.

The next question is from the line of Abhijit Tibrewal from Motilal Oswal Asset Management.

Congratulations on this announcement. Sir, 2 questions here. So firstly, will it now be fair to assume that we will be doing all the housing and the allied products through our HFC subsidiary, which is PCHFL? And on the other retail products, and let me talk about and the nonreal estate wholesale lending. On the retail side, we talk about doing SME loans, used car loans, education loans, some of the unsecured personal loans. Will they all be housed on the holding Piramal Enterprise's balance sheet now?

By and large, yes, but don't -- I mean I want you to look at it as a consolidated basis between Piramal Enterprises and PCHFL. That is a fairer and better way of doing it. But your -- the direction, what you are saying, is right, but it's not going to always be like that. So I don't want to put a black line that this is what will be on this side and the other. So just -- there will be some flexibility, but so look at it on a consolidated basis.

Sir, the other question was in June quarter, when we reported our results, there was an unallocated equity, including investments in the Shiran Group of about INR 11,300 crores. And I mean, some time back, you said that we'll be having INR 11,000 crores of equity in PCHFL, another INR 17,000 crores in PEL. So is it fair to say this is unallocated, there's no more unallocated equity that remains now? And large part of this unallocated equity which was there has been kind of allocated to PEL now?

Yes. So PEL is really unallocated only because there's hardly any debt at the end of the year. We will not have significant debt, so we'll see what to do.

Okay. Maybe -- and maybe the last question here. Are we now in a position to kind of disclose, I mean, what is the quantum of wholesale and retailing loans separately, which will kind of come on our balance sheet now after the continuation of this transaction? And sir, what are your thoughts around this life insurance business that's coming along with DHFL?

So we will be in a position to answer the difference between wholesale and retail when we give our quarter -- when we give our 6 monthly results because the auditors and us, we will discuss that and finalize that. Let's say, as far as DHFL is concerned, most of it will be only retail because we have not -- we have bought wholesale at a much lower valuation, and we'll continue to reflect that. But the numbers, you will see later. And what was your second question?

Sir, what are your thoughts around this life insurance business that's coming...

For life insurance, we are still debating what to do. There are options available with us. All the options are open with us today. And that was not an area of focus till now. We were just doing the DHFL. We had valued it on the basis of the existing book. Now we are looking at it. We are also in talks with Pramerica, which is a partner and then we'll decide what to do.

And sir, and maybe last follow-up question here. The INR 65,000 crores of loans that we have disclosed in our presentation, I'm assuming this is at the Piramal Financial Services level, right, and not just PCHFL?

Yes, it's a consolidated number.

Sir, which is to suggest that, I mean, from the INR 43,000 crores number that we reported as on June. And again, the INR 65,000 crore number is also pro forma as on June...

Yes, yes. This INR 65,000 crores is approximate. But as I said, the real numbers you will come to know at the end of this quarter when the quarter results are there.

The next question is from the line of Alpesh from IIFL Capital.

Congrats for the successful execution of your plan. Just one question. Most of the questions have been answered. There was -- if I'm not wrong, there was at the time of -- in the earlier mergers at the financial services level, we had around INR 10,000 crores kind of a goodwill at the PCHFL level. So does that still remain or it would be knocked-off during this entire merger process?

That will continue on the balance sheet as a goodwill.

Sorry, I can't -- I'm sorry, Rajesh, I didn't hear you.

That will continue on the balance sheet as goodwill. And corresponding to that, we have the net worth as well, capital reserve, but we don't count that net worth when we are giving the net worth numbers to you. So that's not available for CRAR purposes. So we don't count that number when we are disclosing the other net worth number -- the net net-worth number to you.

Okay. And the -- another question is why are we -- in the sense at the holdco level, at the PEL level, I believe we are still planning to go ahead with around INR 20,000 crores kind of a net worth allocation to that business directly. The Piramal Fininvest, I think the loan book is less than around INR 10,000 crores to INR 12,000 crores, if I'm not wrong. So any rationale of keeping such a high capital at that level rather than allocating it to the housing finance subsidiary more, which is going to be more...

How does it matter? It makes no difference. It's a consolidated balance sheet. We want the housing finance company to really run on its own. Otherwise, they get spoilt with too much capital. So that's an internal discipline we want to keep. As far as you are concerned, you could do even consolidated.

The next question is from the line of Bharat Sheth from Quest Investment.

Sir, just to understand now this DHFL in our fold, whether there will be a -- this PCHFL will be a reverse merger as we were discussing or -- if you can share any thought on that?

Yes, it is a reverse merger. It happened now. PCHFL has merged into DHFL, and now we've asked for a change of name of DHFL.

And now what will be the benefit of this unabsorbed tax loss, which was sitting on DHFL's book?

So we will get the benefit.

The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.

Sir, while you alluded to your plan to reenter into domestic formulation, just I'd like to understand while you are present across the value chain of synthesis based CDMO opportunities, are there any plans to at least go into inorganic way or biologic space CDMO given that, that is one of the key lever of growth to be seen over next 4 to 5 years at the industry level?

We believe that even in the chemical business, there's enough lever of -- there are enough growth opportunities, that's first. So it's not only biologics which makes the growth in these areas as well. There's a lot of growth happening. So that's one. Second, biologics, let us see if we get a reasonable acquisition, we will look at it. We do look at it, but frankly, the valuations of biologics are very high today. And so if it makes sense, we will do it. See, I just want to tell you again and again the same thing that as far as acquisitions are concerned, we have a lot of discipline in our mind. Maybe you may think we are conservative, but I think that has held us in good stead for so many years. So we want to continue being conservative and creating value from all our acquisitions. That's the overall approach and till now, you've seen it has paid results. Just to go back in history, we sold our Domestic Formulations business in 2011, if you remember, for $3.8 billion. Now in the next 10 years, we've been able to build a similar size business and through both organic as well as inorganic means. So we will continue on that path.

The next question is from the line of Kunal Dhamesha from Emkay Global.

So first question on if you could share the gross block in the Pharma business, that would help, gross block and the PAT for FY '21?

Rajesh, what is the gross block?

It's about INR 6,000 crores. Fixed assets. It's not gross, it's net block. If you want, we can separately share gross and net depreciation numbers separately. But it is a net block as of maybe 30th September of this year.

Sure. And can you also share the PBT or PAT number for Pharma business for FY '21?

I think we'll avoid answering too many number questions given that the results are not -- this is not a results call. So would request to ask all your number related questions more on the results call.

Sure. And the second question is more on the Pharma business, the outlook in terms of the acquisition. So we have done 3 acquisitions in last 12 months. So in terms of capabilities or in terms of the growth driver, are we there in terms of where we want to be or we can see some more capability-building acquisitions going forward?

So we will continue. In the CDMO space, particularly, there are very niche areas that you can get capabilities. And sometimes we buy those acquisitions for the capability that we have as well as the customers we have. So that, we continuously look for. So there will be opportunities all the time.

The next question is from the line of [ Devanshi Ashar ] from [ Sheela PMS ].

Congratulations, sir, for this. And great that you have been talking to us that you would be simplifying the structure, now you have done it, but all my [ questions ] are mostly answered. I just wanted to understand that last time when we sold 20% of the stake to Carlyle that was at valuation and now at present, after this structure, what will be the approximate value for the Pharma business?

So I can tell you the first part of your answer, it was at $2.8 billion valuation. The second part is for you all to tell me or the markets to decide. We don't know what the valuation will be. Let's -- we'll wait and see.

The next question is from the line of [ Share Surya ] from PMS Vantage Impex Private Limited.

First let me congratulate you for the merger. Now is there any plan to acquire any private sector bank by take over?

Only we will keep an eye and let's see. My answer is the same. First of all, if it makes sense and value, then we will do it. But I just want to remind you that we also have to now do the real integration where the work comes for the DHFL. So that is a job we are doing. This is only the structuring that has been -- we have done -- that job is done. The actual integration is still to be done.

Actually, it may be more beneficial to the organization sir. That is very much cheaper in the marketplace for the private sector bank.

Okay. Thank you. We will keep that in mind.

[ That value you ] have paid to the troubled organization, DHFL.

Yes, we'll look at it.

The next question is from the line of Hatim Broachwala from Union Mutual Fund.

Sir, my question is on DHFL. So it seems from the presentation is that we are getting a book of roughly INR 20,000 crores from DHFL. And for this transaction, we are paying net INR 23,000 crores ex of cash, which is already there on the DHFL balance sheet. So there will be a gap of roughly INR 3,000 crores. So this INR 3,000 crores will be reduced from the net worth. Is that the right understanding?

Rajesh, just explain it.

So there is no reduction from the net worth. So what we are doing -- what has been done is, whatever cash was lying on the balance sheet of DHFL as of 30th September, that cash has been used up and the balance funding has been done by PCHFL, which was approximately INR 2,000-odd crores as of 30th September. So there is no impact on the balance sheet.

So -- but we'll be paying INR 23,000 crores, right, to DHFL lenders?

No. We have INR 34,500 crores was the total consideration, out of which we have issued debentures to the extent of about INR 19,500 crores, right? So that is about -- balance is about INR 14,700-odd crores of cash, which we have to settle. And I'm saying we've got cash of about INR 12,500 crores on the balance sheet of DHFL. So the balance cash which got discharged was about INR 2,000-odd crores as at 30th September.

So the total NCDs plus cash out of our balance sheet is INR 22,000 crores, right, which we have paid?

Roughly, yes. Let's [indiscernible] INR 22,000 crores.

Okay. But just a question, because we are getting a book of INR 20,000 crores. So there will be still a gap of INR 2,000 crores, right?

No, we have not said INR 20,000 crores. That purchase price allocation is yet to be done as chairman mentioned earlier. We haven't closed the accounting part of it. I'm just giving you a reconciliation of what -- how consideration got discharged. Now when I do a total accounting of INR 34,500, which is the consideration amount and allocated to various assets, including retail book, wholesale book, insurance business and cash itself, which was there on DHFL's books. Would just like to add that...

Just wait. I think you just wait till the -- when the accounts are published.

The next question is from the line of N. Jayakumar from Prime Securities.

Congratulations to the entire team, Mr. Piramal, for an outstanding acquisition. From a stock market valuation perspective, just wanted to understand, this INR 35,000 crores that we have, the total network, INR 6,000 crores as you indicated, has gone to the Pharma business and that will be valued separately. It's fair to say, therefore, that it's not really relevant where this INR 29,000 crores balance resides because it needs to be seen as a Financial Services business with a total book value of INR 29,000 crores and a price-to-book multiple of that being the effective valuation that we need to arrive at?

I guess that's how you can look at it. Yes.

Because from your perspective...

I would say INR 7,000 crores in Pharma, balance is in this. But, yes.

That would be the simplest -- simpler way of -- because along with the simplification of the business is also a simplification of the valuation because when it was combined, I think people weren't clear how to value this -- the composite. So this could -- and this INR 28,000 cores, INR 29,000 crores will be used interchangeably in a sense between the 2, but maybe for tax purposes, the subsidiary will remain...

In the 2 financial services, just clarify between...

I'm sorry? Between...

Between Piramal Enterprises and PCHFL.

Between the PEL and the subsidiary, that's being Financial Services. But maybe for tax purposes, the subsidiary may remain as DHFL or PCHFL, depending on the name change, so that the tax advantages remain there.

Yes.

That's it. Just wanted to have a -- sort of 2 line -- the thing of this. Congratulations again, it's a fabulous acquisition.

The next question is from the line of Anurag Jain from Green Lantern Capital.

Congratulations for the confirmation of the transaction. Just 2 quick questions. This PEL has transferred around INR 565-odd crores of Pharma business into PPL. Was this already part of the Carlyle transaction earlier?

Rajesh?

So the way the demerger has been planned, when we subsidiarized the business last year and got Carlyle into PPL as 20% stakeholder, we had retained some part of the business, one plant and OTC distribution business in PEL. Now since we want to transfer all the businesses and its subsidiaries to a separately listed entity, we are transferring lock, stock, and barrel. So, Mahad plant, OTC business, investment into PPL, all subsidiaries under PPL are now getting merged into PPL and then PPL is getting a separately listed entity.

Why I was asking this question was because the Carlyle stake still remains 20% overall of the merged entity. So, was it valued earlier in this business that we have done?

Carlyle stake will slightly go up and there will be about 0.1% to 0.15% difference which will come in Carlyle's stake.

Okay it goes up. Just last question, in terms of timeline, what is your sense now from hereon in terms of listing of both the entities? What is your sense? How are you planning the -- just the same?

We expect all these regulatory approvals will take about nine months.

Okay. So not this financial year?

No.

The next question is from the line of Jainis Chheda from Spark Capital. Please go ahead.

Couple of questions on the Financial Services front. A, what will be the merged entity, like DHFL plus financial services of Piramal, the NPA numbers, estimated?

We will tell you all that. We are still in the process of finalizing the numbers with the auditor. So just please wait for the 6-monthly results and all these we will be able to tell you then.

Okay. And the capital breakup, I just missed what will be the debt on the Financial Services and on the Pharma business break up?

Rajesh, you can give that number.

Pharma we have just said, the debt would be about INR 3,200 to INR 3,300-odd crores.

That will be gross on that?

Net. And Financial Services overall debt between PEL and PCHFL would be around INR 42,000 to INR 45,000 crores.

Ladies and gentlemen, due to time constraints, we'll take one last question from the line of Kunal Shah from ICICI Securities. Please go ahead.

Just one last question. Our narrative last time has been, in terms of this unallocated equity, we will keep it unallocated and maybe we will utilize it for new businesses or inorganic opportunity or return to shareholders. But now with this, maybe is it like it's fairly allocated between PEL and PCHFL, okay? So I am not sure if INR 17,000-odd crores in PEL is towards the wholesale book and again INR 11,000-odd crores is in terms of the retail plus some proportion of wholesale over there and this unallocated equity is now getting utilized compared to that of our narrative that it will not be used for DHFL transactions or into the financing business?

No, it's not allocated. The total book even after merger of Fininvest in PEL, the total AUM will be INR 10,000 crores and less.

Okay. In PEL, it will be INR 10,000 crores or less. So still maybe the equity allocated, so there will be unallocated equity sitting at PEL level?

Yes.

I now hand the conference over to Mr. Hitesh Dhaddha for closing comments. Over to you, Sir.

Thank you, everyone. If you have more questions, we will be happy to take it up. For financial questions and other questions related to results, we will take it post results announcement.

Ladies and gentlemen, on behalf of Piramal Enterprises Limited, that concludes this conference. We thank you all for joining us and you may now disconnect your lines.