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My warm greetings to all of you.
During the financial year 2013, we made the transition from exploring opportunities for deploying capital to defining and executing growth strategies for our existing and new businesses. We laid the foundations for building a strong and sustainable global enterprise as under:
Focus on three sectors
We have now committed to building our presence in three sectors: Pharmaceuticals, Financial Services and Information Management. We made significant investments in each of these areas during financial year 2013:
We acquired Decision Resources Group, US (DRG) as the growth platform for our Information Management business. DRG is the gold standard provider of syndicated research, information and analytics to the global healthcare industry with a strong management team.
We acquired Bayer's Molecular Imaging business and successfully hired key Bayer employees, ensuring a smooth transition to Piramal Imaging. This team has achieved a significant milestone with the US Food and Drug Administration (USFDA) and the European Medicines Agency (EMA) submissions for approval of Florbetaben, a diagnostic imaging agent for diagnosing Alzheimer's disease better.
We substantially grew our NBFC business in the Real Estate Sector and started lending to the Education Sector as well. We made two structured investments in the Infrastructure Sector aggregating Rs. 925 Crores.
Quality and Depth of Management Team
We enhanced the quality and depth of our management team by:
Making senior appointments in existing businesses,
Bringing on board best–in–class leaders in our new lines of business,
Adding depth to our corporate functional departments and
Building our talent pipeline by bringing in experienced managers and reorganizing operating responsibilities in specific areas.
The leadership team at Piramal Enterprises Limited (PEL) is focused on execution and building a performance–oriented organization. We are starting to see early results from the leadership changes and from the renewed focus on operating metrics in each of our businesses.
We have also formulated sub–committees of the Board and constituted Advisory Boards which play an active role in both strategy formulation as well as in critical operational decisions. This is enabling us to bring world class thinking into our diverse businesses.
Building our Governance Systems and Enterprise Risk Management Capability
We have strengthened our governance systems to match the changing profile of the company. We undertook a project to assess the issues related to governance, risk and compliance. This is enabling us to put in place adequate systems and processes for identification, reporting and mitigation of risks, and for ensuring compliance.
We have further strengthened our Board of Directors with the additions of:
Siddharth N. Mehta, who brings senior executive level experience and extensive knowledge of the banking industry and financial markets to our Board of directors. Mr. Mehta is a former President and Chief Executive Officer of Transunion. He was also the Chief Executive Officer of HSBC Finance Corporation and HSBC North America Holdings, Inc. He has served as a Senior Vice President at the Boston Consulting Group in Los Angeles and co–leader of Boston Consulting Group's Financial Services Practice, where he developed retail, insurance and investment strategies for a variety of financial service clients. He also serves on the board of directors of TransUnion LLC, DataCard Group, the Chicago Public Education Fund, the Field Museum and the Myelin Repair Foundation. Mr. Mehta has an undergraduate degree from the London School of Economics and an MBA from the University of Chicago.
Gautam Banerjee, who has extensive experience in the realm of finance, accounting and management. Mr. Banerjee is currently a Senior Advisor with Blackstone Group and Chairman of Blackstone, Singapore. Mr. Banerjee has held various positions during his association with Pricewaterhouse Coopers ('PwC'), from 1982 to 2012. Mr. Banerjee has been a member of various statutory boards / committees of the Government of Singapore and has also been a member of several Industry Associations in Singapore. He was a Nominated Member of Parliament in Singapore from 2007 to 2009. He is also an Independent Director of Singapore Airlines Limited, the Government of Singapore Investment Company Ltd. and the Straits Trading Company Ltd. He is a graduate from the University of Warwick, England and is a member of the Institute of Chartered Accountants in England and Wales and also a member of the Institute of Certified Public Accountants, Singapore.
'One Piramal''Values and Purpose
We initiated the process for building the 'Piramal Way' that brings together its people and stakeholders. We articulated our values as 'Knowledge, Action, Care'. We defined the One Piramal purpose as 'Doing Well and Doing Good – Making a positive difference, serving people and living our values'. We are in the process of making our values and purpose an integral part of the way we work and engage all our stakeholders at PEL.
Our efforts in laying the foundations for a sustainable growth have started showing results, and are reflected in PEL's overall financial results. Our FY2013 revenues have increased by 51% to Rs. 3,544 cr. The rest of this letter highlights our key financial achievements in the three sectors – Pharmaceuticals, Financial Services and Information Management:
Update on Pharmaceutical businesses
After a robust growth in FY2012, revenue from Pharma Solutions business continued to grow in FY2013. This increase in revenue came from across our operations in India and outside India. The contract development and manufacturing market continues to expand, driven by Pharmaceutical industry's need for reducing costs and improving R&D productivity. PEL's Pharma Solutions business with its asset mix that offers a combination of eastern and western assets, proximity to target market, good relationship with global pharmaceutical companies, excellent regulatory and execution track record is well placed to leverage this trend.
The Critical Care business grew revenues at an impressive rate in FY2013. This growth came primarily from increase in share of Sevoflurane market in the US. The business is poised for further growth in the next few years with the launch of Sevoflurane in Europe and potential launch of Desflurane in the coming years. The Critical Care business has an infrastructure to sell anesthetic products and other critical care products to hospitals in over 100 countries. We continue to strengthen this marketing, sales and distribution infrastructure.
Sales from our OTC and Ophthalmology businesses increased at above industry growth rates in FY2013. Our OTC business has a strong brand portfolio, which we continue to develop through new launches. This portfolio should drive growth over the long term, given low penetration levels and high growth profile of the Indian market. We are also looking to expand our portfolio through inorganic initiatives. Our JV with Allergen in India for Ophthalmology products has a leading market share in India and continues to benefit from the expanding market in India.
During the year, we acquired worldwide rights to the molecular imaging development portfolio of Bayer Pharma AG. We filed the New Drug Application (NDA) for our lead compound, Florbetaben, during the year. This NDA has been accepted by USFDA and EMA for review. Florbetaben is used for early diagnosis of Alzheimer's disease through detection of beta–Amyloid plaque deposition in the brain. We believe Florbetaben addresses a significant unmet medical need and will help improve lives of millions. We would look to obtain regulatory approval for Florbetaben in the US and Europe and prepare for launch in Q4 of FY2014.
Our New Chemical Entity (NCE) unit in Mumbai has a strong pipeline of 13 drugs with 11 drugs in clinical trials phase and is focused on three therapeutic areas – Cancer, Diabetes and Inflammation. We will continue developing our clinical and pre–clinical NCE and Imaging pipeline according to plan and also pursue inorganic opportunities in the future.
Update on the Financial Services businesses
During the year, we have substantially grown our lending operations for the Real Estate Sector and have also started lending to the Education Sector. This enabled us to grow our loan book to Rs. 1,591 Crores as at March 31, 2013 from Rs. 351 Crores as at March 31, 2012. During the coming year, we will continue to scale up the NBFC business and evaluate opportunities for entry into other high growth areas of the financial services landscape in India. We believe that the NBFC business offers significant growth opportunities for PEL over the long term.
PEL made its first two structured investments in the Infrastructure Sector aggregating Rs. 925 Crores. Of this, Rs. 425 Crores were invested before March 31, 2013 while the rest were invested in April 2013. During the coming years, we will build a sustainable business model for making such investments.
Our real estate fund management platform, INDIAREIT had Rs. 4,257 Crores under management as of March 31, 2013. INDIAREIT successfully raised another fund for Mumbai Redevelopment projects of Rs. 400 Crores under difficult market conditions during the year. INDIAREIT is also in the process of making exits worth Rs. 440 Crores for some of the earlier funds.
Update on Information Management business
We completed acquisition of DRG in June 2012 for a consideration of US$ 635 million (~Rs. 3,400 Crores). DRG is a growth platform for our Information Management business and we further strengthened it through acquisition of Abacus International, UK in December, 2012. This acquisition will help our information management business to grow in Europe. DRG has approximately 200 analysts, including 100+ highly experienced PhDs, MDs, MPHs and other key industry experts. DRG has an organic growth strategy in place and we would continue to make tuck–in acquisitions to expand our presence in the information management industry.
While PEL continues to grow across the three sectors with long term growth opportunities, we continue to pursue initiatives that co–opt its stakeholders and build a sustainable global enterprise. The One Piramal purpose of 'Doing Well' and 'Doing Good' is reflected in the work undertaken by PEL through the Piramal Foundation. The Foundation today operates at scale with wide reaching impact as under:
Healthcare: Health Management and Research Institute (HMRI) reaches 50 million patients across 6 states.
Education: The education leadership programs reach 120,000 school children through 750 principals and 250 Piramal fellows.
Water: Sarvajal provides clean drinking water to over 100,000 people every day.
Rural empowerment: Source for Change, a rural BPO, has created rural empowerment for over 400 beneficiaries.
Other initiatives: We support Annamrita (ISKON Food Relief Foundation) in providing meals to 50,000 students daily. In addition, we continue to actively support Pratham and Chinmaya Mission, amongst others, in their endeavors.
We are focused on building a strong and sustainable global business enterprise that will create shareholder value over the long term. I thank you for your continued faith and support.
Ajay G. Piramal
Date : May 3, 2013