Thread by @BeatTheStreet10

#Piramal Enterprises Demerger

Those who are thinking: Why price is down by approx 50%?
This is the quick explainer

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#PiramalEnterprises (PEL) has 2 Biz

#Piramal Pharma
#Piramal Lending/Financial

Now, To unlock value for investors in PEL, they announced Demerger in Oct-21.

After getting all regulatory approvals Now Piramal Pharma is ready to list separately.

Every 1 Shareholder of PEL will get 4 Shares of Piramal Pharma.

To list Pharma separately, first it needs to be hived off from the existing PEL biz which after Demerger will remain only lending biz.

For this, 1-Sep-22 is the record date and 30-Aug-22 was the Ex-Date.

On Ex-Date, value of pharma business removed from this and within 1-2 month, Piramal Pharma will list.

Now coming to valuation part of lending business which include investment in Shriram group :
IIFL expect value of this around 1456, where we believe it could be 1163.

The reason behind the gap between 1163 and CMP, is lesser multiple is given to unallocated networth and shriram group.
Brokerages also giving lesser multiple (below 0.5) to lending biz, which is not justified as now they are moving towards retail side of biz ie more secure

Shriram group also after merger can create huge value unlocking for piramal group if they can sell their stake to any PE/fund and use that money to thrive growth in lending biz.

Now coming to Pharma biz. Where we assign Multiple of 18 EV/EBITDA on a conservative basis, generally it can be given higher than 20 as well.

Per Share price as per our calculation : 240 vs IIFL 184

So if it list above 200 per share let's say 4x225 : 900

Lending biz remain like 1100-1150 which comes to 2050 and possible re-rating in lending biz can create more than that.

Which will give u net return of 7.5% even if you bought it on 1900 in less than 2 months, which is not bad at all.

Our Detailed video on Demerger :

For More such analysis check out our YouTube Channel : youtube.com/c/BeattheStree…

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