Ajay Piramal’s missed decade

The speed at which Piramal Enterprises grew its real estate loan book would put a SoftBank-funded startup to shame. It’s time for a reset.

Ajay Piramal is no ordinary businessman. Starting in the late 1980s, with a mere Rs 6 crore in capital, he built a significant pharmaceuticals business which he sold for over Rs 17,000 crore, a little over two decades later. In dollar terms, that’s going from about $4-5 million (at 1988 exchange rates) to $3.7 billion (at 2010 rates). In doing so, Piramal created a precedent that most Indian businessmen can only dream of.

Rs 1,000 invested in his company in 1988 would have been worth Rs 29 lakh when he sold the pharma business to US-based Abbott Laboratories in 2010, a compound annual growth rate of 43%. An investment in the 30-stock Sensex would have paled in comparison with a 17% annualized return. In those early heady days, Shekhar Gupta, the then editor of The Indian Express, had called Piramal India’s Warren Buffett on his talk show. The legendary American investor who ran Berkshire Hathaway had returned 15% in the preceding two decades.

That’s how the legend of Ajay Piramal was born. Cemented only further in the context that Piramal had invested a mere Rs 500 crore of additional capital in building the business, with most of the growth coming from the money the business generated. Essentially, Piramal had created value with hardly any capital dilution.

In 2013, armed with a cash pile of approximately $2.5 billion and a residual business that he did not sell, Piramal announced that he wanted to increase his group’s valuation from $2 billion to $20 billion by 2020. That’s today.

Knowing the man he is, you’d almost expect Piramal to have come some distance. Maybe 50% of his target. And for a while, it looked like he’d get there—as of March last year, his flagship company, Piramal Enterprises Ltd, was valued at $7.2 billion.

But today, Piramal Enterprises has a market capitalization of just over $4 billion.

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Lead image of Piramal group chairman Ajay Piramal by Richter Frank-Jurgen on Flickr, shared under the Creative Commons CC BY-SA 2.0 licence.

Correction: An earlier version of this story incorrectly stated that Ajay Piramal was formerly on the board of Tata Sons Ltd. He was reappointed for a second three-year term last year. The story has been updated to reflect this.

Update: The story has been updated on 14 March 2020 to reflect responses sent in by Piramal Enterprises, which have been added to the last section.


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