MANAGEMENT DISCUSSION & ANALYSIS




"PEL continues to deliver strong revenue performance during the year. The consistency in our performance reflects the strength of our business model and the successful execution of our proven growth strategy. The Company continues to progress well on its strategic initiatives across various businesses that will help it to deliver a better growth in the years ahead."






Business-wise revenue performance

PEL’s consolidated revenues grew by 33.9% to ` 8,546.8 Crores in FY2017 as compared with ` 6,381.5 Crores in FY2016. The rise in revenues was driven by growth across business segments, where 51% of PEL's FY2017 revenues were generated in foreign currencies.

The Pharma business revenue increased by 14% in FY2017 to ` 3,972.9 Crores1 vis-à-vis ` 3,485.9 Crores1 for FY2016, on account of both organic and inorganic initiatives during the year. PEL acquired injectable anaesthesia and pain management products from Janssen Pharmaceutica NV; intrathecal spasticity and pain management products from Mallinckrodt LLC; HPAPI facility of Ash Stevens Inc.; and four over-the-counter (OTC) brands from Pfizer India.

Income from the Financial Services business expanded by 92.6% to ` 3,351.5 Crores in FY2017 as compared with ` 1,739.7 Crores in the previous year. This growth was primarily on account of growth in loan book from ` 13,339 Crores in FY2016 to ` 24,975 Crores in FY2017. Moreover, new product offerings under Corporate Finance loans and launch of lease rental discounting helped strengthen PEL’s loan book.

Revenue from the Healthcare Insight and Analytics business grew 5.7% to ` 1,222.4 Crores in FY2017 vis-à-vis ` 1,155.9 Crores in FY2016.







Financial highlights (Consolidated)



Operating profit and margin
In FY2017, operating profit grew by 93.5% to ` 3,732.9 Crores vis-à-vis
` 1,928.9 Crores in FY2016. Higher revenue growth across business segments primarily led to this growth. OPBITDA margin was higher at 42.5% in FY2017 compared to 29.1% in FY2016.

Finance costs
Finance costs for the year were higher by 111.8% at ` 2,031.0 Crores as compared with ` 959.1 Crores in FY2016. This was mainly due to increase in borrowings for growing the lending business and for funding acquisitions.

Depreciation
Depreciation for FY2017 was higher at ` 381.7 Crores vis-à-vis ` 255.5 Crores in FY2016. This was largely due to increased capitalisation of the amounts invested for acquisitions of pharma and healthcare insight and analytics businesses.

Taxation
Tax expenses increased to ` 228.1 Crores in FY2017 as compared with ` 49.5 Crores in FY2016, primarily on account of an increase in profits largely from our financial services business.

Net profit after tax
Net profit after tax for FY2017 grew 38.4% to ` 1,252.3 Crores vis-à-vis ` 904.7 Crores in the previous year. Strong profitability was mainly on account of improved performance across business segments.

Dividend
The Company paid a final equity dividend of ` 21 per share.

Loan funds
Total borrowings as on March 31, 2017 were ` 30,451.0 Crores as compared with ` 16,278.8 Crores as on March 31, 2016. During the year, increase in borrowings was largely on account of higher investments in the Financial Services segment and for funding acquisitions.

Fixed assets
During FY2017, total fixed assets increased by ` 3,030.2 Crores, primarily on account of acquisitions and organic expansions in pharmaceuticals space.

Investments
Book Value of Investments as on March 31, 2017 was higher at ` 25,180.6 Crores vis-à-vis ` 16,316.7 Crores as on March 31, 2016. This increase was largely on account of higher investments under the Financial Services business.





"PEL has seen a consistent improvement in its profitability over last many quarters. The consistent growth in net profits is backed by strong performance across business segments. Also, we have made significant capital allocations over last few years across businesses that will be yielding strong results in years to come."








KHUSHRU JIJINA
Managing Director, Piramal Finance & Piramal Housing Finance

"I am extremely pleased with the progress made by the platform in achieving the twin objectives of overall growth and diversification over the past year. With the addition of Lease Rental Discounting earlier in the year followed by the introduction of our equity funding platform alongside Ivanhoe Cambridge, we are finally able to offer a complete suite of funding alternatives within the real estate space. We have also greatly enhanced our capability to grow within the Corporate Finance Group, adding newer products and sectors to the mix. We also announced our entry into retail by applying for a housing finance licence and strongly feel that our existing wholesale business, coupled with a unique service delivery proposition, will help us achieve scale in the near term. With these changes, and further aided by an opportune market environment and ever deepening relationships with our funding counterparts, the platform is poised for robust growth in the months and years to follow."


PEL's Financial Services segment offers a complete suite of financial products to meet diverse needs of its customers. The Company has created its unique positioning in financial services space through its strong presence in the following sub-segments:

Wholesale Financing

  • ` 24,975 Crores of loans for Real Estate Development and under Corporate Financing opportunities in sectors other than real estate
  • ` 7,157 Crores of Alternative Assets Under Management deployed in real estate through private equity funds and in other sectors (also includes amount deployed under PEL’s co-investment alliances with its partners)

Retail Financing

  • Strategic investments of ` 4,583 Crores in Shriram Group of Companies
  • Applied to the National Housing Bank (NHB) for incorporating a Housing Finance Company (HFC)

MARKET SCENARIO

Post demonetisation and introduction of the Real Estate Regulation (and Development) Act (RERA) in FY2017, the Indian real estate industry has matured considerably with enhanced transparency – a key aspect valued by both domestic and foreign investors.

PEL’s portfolio withstood the impact of demonetisation without any incidence of non-performing asset (NPA). This was largely due to an already established set of extremely conservative underwriting and monitoring parameters that the Company follows.

RERA brings certain customer-friendly covenants which could to some extent, curtail a developer’s flexibility to ‘phase’ a project and cater to ever-changing market demands. However, PEL believes that RERA is a step in the right direction towards a more mature, transparent and customer-friendly marketplace. It presents a unique opportunity for PEL that plays to the strengths of its end-to-end platform and that can offer a unique solution designed to facilitate the transition of developers towards RERA registration. This solution in a way can minimise the impact of any associated conditions under RERA that may restrict the developers’ ability during the initial stages of a project.

Retail housing as an asset class has always been representative of the significant economic potential demonstrated by India’s growing middle class with the individual home loan segment tracking healthy growth. The mass appeal of affordable housing lies with its lower development costs, improved sales velocity amid an environment of muted real estate demand and infrastructure status accorded in the 2017 Union Budget. These factors have heightened interest from both private equity and NBFCs alike. The demand for the affordable housing loans are driven by multiple factors like the ‘Housing for All by 2022’ and Pradhan Mantri Awas Yojna initiative of the government. The Central Government’s initiative of providing credit subsidy schemes to middle and lower income groups witnessed great response with a deluge of applications for various credit linked subsidised housing loans. The huge opportunity under affordable housing along with the initiatives (substantial tax benefits) taken by Central Government has already started showing signs of being the next big opportunity for both developers and investors. In addition to various initiatives taken by the Central Government for ‘Housing for All’, a large underserved non-salaried market creates a huge potential for the Company in the housing finance space.

In India, corporate lending covers a wide variety of funding requirements. Historically, such funding has been catered to by the banking system. However, over the last few years, the banking system has been struggling with non-performing assets and NBFCs have stepped in to fill up the gap. PEL, through CFG, will include opportunities that play this transition. This includes project finance (due to budgetary impetus to renewable energy and roads/highways), brownfield expansion (historically funded by banks), growth funding for companies of certain size (minority private equity funding is usually not available), holding company financing (to fund as equity into subsidiaries). Additionally – banks cannot finance certain situations such as acquisition finance, promoter financing, etc. which are exclusively financed by NBFCs, thus providing an opportunity for CFG.

Also, in recent years, the rising bank non-performing loans have put a strain on capital adequacy and credit growth and there exists stressed assets across sectors including power, steel, construction and textiles, among others. Reserve Bank of India (RBI) has also introduced various guidelines to banks on ways to handle stressed assets and methods to improve financial conditions of banks. The Company believes that there could be strategic investment opportunities in such an economic climate and intend to seek out and participate in such opportunities through its Distressed Asset Platform.



Well positioned to
create a large and
well-diversified
Financial Services
business

STRONG POSITIONING

  • Ability to deploy capital across all stages of the life-cycle of real estate projects
  • Market Leader in terms of month-onmonth disbursements
  • Among the largest providers of corporate financing solutions in India
  • Among the fastest growing players in the financial services space - delivering high returns and superior asset quality

DOMAIN EXPERTISE

  • Group has a strong track record of developing large real estate projects
  • Ability to quickly identify and capitalise on new financing opportunities
  • Long-standing expertise in alternate financing
  • Ability to take over projects, complete and sell them (if required)
  • Deep industry experience and expertise of External Experts and Board Members in Investment Committees

DIVERSIFIED EXPOSURE ACROSS BOTH WHOLESALE AND RETAIL FINANCING

  • Well-diversified loan book across multiple products and yield range under both Real Estate and Corporate Financing
  • Increasing diversification to low-risk products and improving leverage possibilities & risk adjusted returns
  • Diversification of lending across multiple sectors/industries
  • Further diversification into Retail Housing Finance
  • Significant exposure to retail through strategic investments in Shriram Group

ROBUST RISK MANAGEMENT AND SUPERIOR ASSET MONITORING

  • Off the 224 employees, 60 employees in investment team and balance in legal, asset monitoring, risk management and other support functions
  • World-class systems and processes at every stage of the deals
  • Unique asset monitoring model to detect early warning signals
  • Unique Insights - Primary data, in-house sales and research team
  • Security Cover -1.5 to 2 times; nearly 100% escrow on cashflows; mostly first charge on assets
  • Consistently delivering superior asset quality performance – Gross NPA at 0.4%

MANAGEMENT DEPTH

  • Highly talented and experienced teams of 224 professionals, with a healthy mix of investing and operating experience
  • Ability to deeply understand individual customer needs and proactively come out with customised and innovative solutions
  • Localised teams in the cities where the Company operates

CONSISTENTLY EXPANDING PRODUCT PORTFOLIO TO BOOST GROWTH

  • End-to-end real estate financing model
  • Introduced Construction Finance and flexi Lease Rental Discounting for commercial projects
  • Introduced senior lending, promoter financing and loan against shares in CFG portfolio
  • Applied for housing finance licence
  • Launched Distressed Asset Fund – To also focus on turnaround of the assets

ESTABLISHED TRACK RECORD

  • Robust and consistent growth in loan book - created a loan book of ` 24,975 Crores in a period of over six years
  • Alternative AUM of ` 7,157 Crores
  • More than 150 transactions till date, with 85+ developers located in Tier 1 cities, under our loan book
  • Established track record - Cumulative repayments of ` 18,464 Crores over last six years
  • Delivering an ROE of over 25%

STRONG RELATIONSHIPS PROVIDING AN ACCESS TO PATIENT AND INTELLIGENT CAPITAL

  • APG – Rupee denominated mezzanine investments in India’s infrastructure
  • Bain Capital Credit – Investing debt or equity in materially distressed companies across sectors
  • Ivanhoé Cambridge – Providing long-term equity capital to blue chip residential developers
  • CPP Investment Board – Rupee debt financing to residential projects

ROBUST REVIEW AND GOVERNANCE MECHANISM

  • Independent risk, legal and compliance teams – direct reporting to the Board
  • Asset monitoring team independent of investment team
  • Investment committees also include Independent Directors and External Experts
  • No inter-group lending to Piramal Realty
  • Brickex, the in-house real estate distribution arm, provides contextual market intelligence and independent perspective on deals

CONSERVATIVE ACCOUNTING

  • Provisioning of 2.2%
  • Among early adopters of:
  • 90 day provisioning
  • IND AS accounting
The Real Estate loan book grew by 90% to ` 21,208 Crores in FY2017 from ` 11,166 Crores in FY2016

OPERATIONAL PERFORMANCE

Seamless product innovation amid changing paradigm is what defines the Financial Services business of the Company. From 2006, when the platform started offering private equity to real estate projects through Indiareit, new product introductions and the agility to meet changing market expectations have been the group’s strategy. The idea was to provide its developer partners with solutions that could help them ride through India’s dynamic real estate environment.


Real Estate Developer Financing

  • Introduced Construction Finance for Commercial Projects: In 2015-16, Construction Finance in commercial projects showed potential based on a steady growth in the segment. The imbalance in supply and demand of Grade ‘A’ office space presented a great opportunity to developers to start or revive greenfield commercial development and PEL was quick to respond to the funding requirement. The Company identified Mumbai and Bengaluru as the key markets with investment opportunities and started offering Construction Finance during FY2017 for office development. As on March 31, 2017, the Company deployed ` 12,688 Crores in Construction Finance, of which ` 1,926 Crores was towards Construction Finance for commercial projects.
  • Launched an Innovative Flexi Lease Rental Discounting (LRD) for Commercial Assets: By the end of 2016, the owners and holders of marquee assets required to raise funds for expansion of their existing projects and for deployment in new projects. To capitalise on this opportunity, PEL expanded its portfolio to offer Flexi Lease Rental Discounting (LRD) for completed commercial assets that include office and retail space. The Company offers LRD to its partner developers and existing relationships to enable them raise additional capital against the same asset compared to traditional forms of LRD offered by banks. With the launch of Flexi LRD, PEL is targeting to provide added flexibility for the developers in terms of both serving and repayment. Owners of completed assets will therefore, be able to approach PEL to raise significantly more flexible financing than they would otherwise be able to source from a bank. The Company typically sanction loans with a loan-to-value ratio within the range of 70% -75%. It has already disbursed loans worth ` 1,196 Crores during FY2017.

  • Joint Venture (JV) with Ivanhoé Cambridge: In early 2017, post the demonetisation exercise and the announcement of various reforms by the Government like RERA, Goods and Service Tax (GST) and affordable housing getting an infrastructure status, investor sentiment was steadily turning around. Hence, to enhance ROE and cater to its preferred partner requirements, PEL decided to further explore equity finance opportunities beyond its earlier Indiareit fund raise from HNIs. Considering the interest from International Institutional Investors in partnering with PEL, the Company partnered with Ivanhoé Cambridge, a real estate subsidiary of Caisse de dépôt et placement du Québec (CDPQ), to provide long-term equity capital to blue chip residential developers across the five major metro cities in India. An external capital commitment of USD 250 mn has been formalised for both pure and preferred equity transactions and a pipeline of initial transactions is being assessed. PEL will co-invest 25% for pure equity transactions and 50% for preferred equity transactions with the balance being contributed by Ivanhoé Cambridge. The capital will be made available to a selective list of Grade A developers who have already demonstrated a track record of execution capability, corporate governance and strong return potential. The investment focus shall include the Mumbai Metropolitan Region, Delhi (NCR), Bengaluru, Pune and Chennai.

    Additionally, the Company believes that with the onset of RERA, the pace of consolidation would increase both within the developer and financing communities. With the announcement of this JV with Ivanhoé Cambridge, PEL is one of the first few platforms to be able to offer longer tenure/early stage equity funding for land acquisition. This is also a theme for which the timing is opportune, given developers are looking to take advantage of the regulations to drive land acquisitions at attractive entry points. PEL is among a selected list of funding counterparts with a dedicated equity platform focused on the same.
  • Preferred Partner Programme: 'Piramal Preferred Partner' is a programme, whereby the selected existing development partners are allowed to draw from a pre-sanctioned limit in order to pursue opportunistic acquisitions. By making capital available at an earlier stage, the developers would be able to focus on their core competence without worrying about their external financing requirements. As a result of these pre-approved limits, the developers will be able to close their choice of transactions much faster. This facility is extended only to a selective list of developers, who have already demonstrated both the strength of balance sheet as well as the execution capability required for the intended end use. The limit itself would also be arrived at keeping in mind various other organisation and project specific parameters and would be reset on a periodic basis. So far, the Company has sanctioned 50% of the pre-approved limits of ` 15,000 Crores granted to the ‘Grade A’ developers in Tier I cities.

    The Real Estate Loan book grew by 90%, to ` 21,208 Crores in FY2017 from ` 11,166 Crores in FY2016.


Housing Finance

  • Entry in Retail Housing Finance: Having successfully scaled up its presence in wholesale finance, the Company has established a blueprint for growth within the real estate asset class. It now feels that the timing is opportune to make a foray into retail housing finance. During the year, the Company announced its plan to enter the retail housing finance market and applied for licence to the National Housing Bank (NHB) for incorporating a Housing Finance Company (HFC) as its subsidiary. Individual housing loans are both a diversification strategy as well as a natural extension of its business, completing its suite of products. The Company intrinsically believes that HFC is a B to B to C business and an extension of the partnership relationship with the developer. PEL would naturally stand to benefit from its existing relationships (85+ development partners and investments in 275+ projects pan India) and its ability to extend the tenure of its relationship from financing construction of the project to funding the individual home buyer. The Company is confident, that the developer-partner relationships will go a long way in promoting the brand. It is working on digitalisation of the entire process of new loan disbursal to balance transfer for a seamless and glitch-free experience for customers.





Corporate Finance Group (CFG)
The Company is building a sector agnostic corporate lending book through the Corporate Finance Group (CFG). While CFG started by providing structured credit solutions to the infrastructure vertical, PEL has now started to provide credit solutions to non-RE corporates with a yield expectation of 12-18%. The Company targets situations of general corporate lending, structured credit solutions, promoter funding (for private equity take out, equity infusion, loan against shares and so on), project financing, capex funding, and special situations, among others.

CFG philosophy is to identify particular sectors and work closely with clients to develop credit solutions that tie-in to the underlying cashflows of the business. Accordingly, the team started with infrastructure and renewable energy in FY2014 and over a period of time, has added cement, auto components, logistics, entertainment, etc. to its focus area. Within these sectors, the Company provides an entire gamut of credit solutions.

The Corporate Finance Loan book grew by 73%, to ` 3,767 Crores in FY2017 from ` 2,172 Crores in FY2016.

During FY2017, the Corporate Finance Group took several initiatives to transform and significantly expand the potential of this platform:



Distressed Asset Funding

In the recent years, rising bank non-performing loans (NPLs) has put a severe strain on capital adequacy and credit growth, besides inhibiting fresh private sector capital formation. Over the last few years, the Government and RBI have introduced various measures to drive adequate and timely recognition of stress, and also create an enabling regulatory environment to drive eventual resolution.

There could be strategic investment opportunities in such an economic climate in distressed assets and to seek out and participate in such opportunities, Piramal Enterprises Limited and Bain Capital Credit (the credit arm of Bain Capital, one of world’s leading multi-asset alternative investment firms with approximately USD 75 Billion in AUM globally) have entered into a Joint Venture. The sponsors believe that there is over an USD 1 Billion investing opportunity in this space over the next few years. The sponsors plan to fund this partly through their own funds on joint contribution basis and raise the balance of the funds from various institutional investors from global and domestic markets.

The Distressed Asset Investment platform will invest capital directly into businesses and/or acquire debt of distressed businesses to drive restructuring with active participation in turnaround. The platform’s mandate is to look at all sectors other than real estate as an asset class. Within these, the platform’s preference is to invest in businesses that have fundamentally strong growth prospects linked to India’s infrastructure and consumption needs and require restructuring. The platform will drive a resolution plan focused on specific financial and non-financing solutions with dedicated management oversight, while looking to protect the sustainable debt value and maximise stakeholder value. From an acquisition perspective, the focus will be on acquiring large borrower assets from banks and financial institutions and work towards their revival and turnaround.

The platform has completed key management hires covering investing, credit, legal and compliance. The platform has also received the Alternative Investment Fund (AIF) licence from SEBI. The investment team has established a robust pipeline of deals; and is at various stages of diligence and negotiations with banks, financial institutions and ARCs.



DISTRESSED ASSET PLATFORM’S DIFFERENTIATED POSITIONING & STRATEGY





FINANCIAL PERFORMANCE

Income from Financial Services was 93% higher at ` 3,352 Crores for FY2017. The growth in income was primarily driven by increase in size of Loan Book. Loan Book grew by 87% to ` 24,975 Crores as on March 31, 2017 vis-à-vis
` 13,339 Crores as on March 31, 2016. The growth was aided by robust growth in both the Real Estate and Corporate Finance portfolio and introduction of new products like Flexi LRD and Construction Finance for commercial assets. Construction Finance constitutes 60% of the Real Estate loan book. The Company has significantly diversified its existing wholesale lending portfolio with the addition of these new products, entry in retail housing finance, widening the CFG platform and launch of Distressed Asset Fund, thereby reducing the overall risk profile of the loan book. The portfolio withstood the near term impact of demonetisation without any incidence of NPA. GNPA ratio improved further to 0.4% as compared with 0.9% in FY2016, driven by the stringent underwriting parameters and strong asset monitoring systems built by the Company. Gross Assets under Management was at ` 7,157 Crores as on March 31, 2017. The Financial Services business continued to deliver a RoE of 25%+ during the year.









99%
Real Estate lending in Tier I cities of Mumbai, Pune, Bengaluru, Hyderabad, Chennai and NCR

70%+
Portfolio comprising of Grade A Developers

100%
Deals with a ‘Minimum Selling Price’ clause ensuring collection of sales value into our Escrow A/C

100%
Deals with underwriting assumptions based also on delay in velocity by 6 to 12 months

100%
Deals with Escrow A/C

93%
Deals with fixed IRR & obligation to pay without any linkage to market performance or sales realisation

170+
Site Visits/month

100%
Developer sales MIS monitored per month

100%
Project escrow A/Cs monitored per month

137+
Transactions covered every month in Project Monitoring Meetings

85%
Projects approved, above the ground, significant portion sold out and financial closure achieved



Asset Quality and Risk Management

PEL has a strong risk management framework to ensure robust asset quality in its financial services business. The risk management framework is established to span across the pre-qualification stage and pre-approval stage of a financing project. Besides, it encompasses constant asset monitoring throughout the life cycle of the project.



Pre-Qualification Stage

At the pre-qualification stage of its financing projects, the Company is very selective of the developers to which it provides funding. It takes into consideration factors, such as the developer’s track record, market reputation, balance sheet and the status of such developer’s projects. It mostly selects projects, which are located in select micro markets in Tier-1 cities of India.

The Company maintains independence among the risk, legal and investment teams such that investment decisions can be over-ruled by its risk or legal teams if required. In addition, its investment committees include independent directors and third party external experts who keep an independent check on the quality of the transactions.



Pre-Approval Stage

At the pre-approval stage, the Company analyses the potential investment by leveraging on Brickex to verify price, ticket size and sales velocity assumptions. Moreover, every potential investment is subject to a standard risk scoring system by the Risk team to measure risks associated with the investment. PEL believes that its strategic alliances with large funds like CPPIB and APG, who independently assess each investment, also serve as an external validation of its investment thesis and decisions. It structures its financing services and offerings in a manner that links the disbursements of loans to the milestones linked to sales/collection of rental income etc.



Constant Asset Monitoring

As part of its constant asset monitoring efforts, the business has set up dedicated local teams in cities where it has investments. The local teams constantly assess the performance of each project from the time of its initial investment up to the Company’s exit or completion of such investment. Most importantly this helps the business continuously ‘cure’ its investments by proactively measuring actual progress versus underwriting assumptions and immediately react to any deviation, no matter how small, by taking a range of remedial measures such as increasing security, modifying business plan, adopting a new marketing strategy, changing the sweep ratio of the designated escrow accounts or proactively seeking a refinance in some cases. This is the single most important ingredient in maintaining a low incidence of Gross NPA ratio.

Some measures it adopts in respect of the asset monitoring include:

  • Monthly site visits to ascertain the physical progress of the project, the quality of the project and to estimate any potential cost overruns and potential delays. Site visit reports are prepared, which include details illustrating the number of labourers on the site, cement consumption, slab cast, sales velocity, among others. Moreover, the reports contain the progress made in respect of each work stream over the course of each site visit. The site visit reports including those on stalled projects are highlighted to the management on a monthly basis;
  • Monitoring monthly project escrow accounts and performance of items including sales volume, sales prices collections, physical progress and construction costs;
  • Monthly computation of cash cover to ensure adherence to minimum stipulated cash cover and to ascertain whether additional security is required; and
  • Monthly project monitoring meetings

The risk team also periodically assesses the risk levels of its investment portfolio by measuring a project’s performance against certain factors including: sales velocity, pricing of the project, approval timelines, ability to meet principal and interest obligations and site visit findings. Depending on the results of such assessment, the portfolio may fall under one of four categories of performance: namely (i) no issue with no action required over next six months, (ii) no issue but to closely monitor for next six months, (iii) stress envisaged over next six months or (iv) default. This allows the teams to map and monitor the portfolio risk levels and accordingly adjust overall exposure in each city or region.

Healthy security and balanced portfolio

  • The Company maintains healthy security and cash cover of 1.5x-2x at all times based on its conservative underwriting assumptions and have the ability to enforce security.
  • PEL has an in-house project development arm - Address Makers that can take over and complete the project, which in turn can be sold by its in-house broking distribution arm, Brickex, if required.
  • The Company is constantly de-risking its portfolio by changing overall portfolio mix towards lower risk products like Construction Finance, LRD, HFC, senior lending in CFG, etc.





FOCUS AREAS OF KEY FUNCTION




ASSET MANAGEMENT TEAM

  • Regular Site Visits
  • Monitoring the Project
  • Providing real time feedback
  • Micro-market analysis
  • Performance Review
  • Ensuring adequate cash cover at all times

RISK MANAGEMENT TEAM

  • Independent & unbiased assessment of risk
  • Provide insights using portfolio analytics
  • Analyse & benchmark deal based on proprietary risk rating model
  • Recommend changes to enhance the Risk-Reward pay-off

LEGAL TEAM

  • Indentifying legal risks
  • Ensuring adequate mitigants
  • Transaction structuring & compliance
  • Legal Checks & Balances
  • Due dilligence and documentation
  • Legal recourse in the event of default





FINANCE & COMPLIANCE TEAM

  • Budgeting & Forecasting
  • Continous tracking of ROE
  • Proactive monitoring of overdue accounts and exits
  • Audits, compliances & internal controls
  • Co-investment and down selling opportunities



BRICKEX

  • Micro Market research to assist price and velocity assumptions
  • Support developer in achieveing sales velocity
  • Sourcing new deals through wide channel partner network
  • To support retail housing finance



TECHNOLOGY TEAM

  • End-to-end technology solutions
  • Reduce turnaround time
  • Centralised analytical capabilities
  • Standardisation and efficiency in process
  • Streamline processes









Over the years, the Company has successfully established itself as one of the most recognised and respected names in the global pharmaceutical industry. Its 13 development & manufacturing units are located across North America, the UK and India. PEL’s culturally diverse team of over 5,000 people from over 20 countries is its key strength. The Company has reported a strong trend of revenue growth across its Pharma businesses. In the last six years, the overall Pharma revenues have grown at a CAGR of 17%, touching ` 3,893 Crores during FY2017.

The pharma vertical of Piramal Enterprises is uniquely positioned with a strong presence both within and outside India. The pharma vertical is divided into two large businesses: the global pharma business that sells pharma products and services globally; and the India consumer products business that sells OTC products in India.

  1. Global Pharma: Global Pharma business sells pharma products and services globally.
    1. The pharma products include a strong portfolio of niche differentiated branded generic products that are difficult to manufacture, sell or distribute.
    2. The pharma services include end-to-end manufacturing and service delivering capabilities both for APIs and formulations including niche capabilities in handling cytotoxic injectables, high potency APIs, antibody drug conjugates and so on.
  2. India Consumer Products: The Company’s Consumer Products business is primarily an India-centric over-the-counter (OTC) business with a strong brand portfolio. Most of its brands feature among the top two in their respective markets and product categories.

FOCUSED CAPITAL ALLOCATION STRATEGY

The Company remains focused on its strategy of efficiently allocating capital, while undertaking controlled risks, to consistently achieve higher profitability and deliver superior shareholder returns. In the last two years, the Pharma segment efficiently deployed around half a billion dollar of capital for future growth through various organic as well as inorganic initiatives.






In the Global Pharma business, the Company has:

  • A strong product portfolio of niche differentiated branded generic products that are difficult to manufacture, sell or distribute;
  • End-to-end development and manufacturing capabilities both for APIs and Formulations, including niche capabilities in handling cytotoxic injectable, high potency APIs (HPAPI), anti-body drug conjugates, inhalation and intravenous anaesthesia and so on;
  • Manufacturing facilities located both in the East and West of the world, most of the which are US FDA approved;
  • A large global distribution network reaching over 110 countries, through dedicated sales force and distributors; and
  • A strong presence in key geographies of North America, Europe, India and Japan.



MARKET SCENARIO

The pharmaceuticals industry is among the largest industries in the world and comprises companies that are involved in the development, production and marketing of pharmaceutical products. Globally governments are increasingly focused on improving healthcare infrastructure that provides people with greater access to treatment and medication. This has contributed to the growth of the pharmaceuticals industry across the world. Global spending on medicines is expected to reach USD 1.4 trillion by 2020. Spending on specialty therapies will continue to be more significant in developed markets than in emerging markets.

Contract Manufacturing Organisation (CMO) services can range from pre-clinical services, to clinical services, to post-approval services. These CMO services may include providing small amounts for pre-clinical research and development (R&D), supply of clinical trials with drugs or the supply of drugs for commercial purposes. Initially, the pharmaceutical CMO industry was such that CMOs were short-term suppliers to pharmaceutical companies in the event that in-house resources were insufficient. However, in the last two decades, this sector has evolved and CMOs are a mainstay of the industry. Now, they provide a wide range of essential services to the pharmaceutical sector. Pharmaceutical companies are now outsourcing regularly a wide range of manufacturing services to CMOs, such as manufacturing of small molecules, biologics for generics and branded drugs. The benefits of outsourcing in the pharmaceutical market are lower costs, access to specialised equipment and flexibility. In addition, pharmaceutical companies can enter new market sectors with fewer risks and costs, as CMOs provide them with expertise on new sectors and regional market areas. The global pharmaceutical contract manufacturing market (in terms of revenue) amounted to USD 65.3 billion in 2016 and is forecasted to increase to USD 83.9 billion by 2020.



The global sterile injectable market was approximately USD 367 billion in 2016. The two largest segments in it are the biologics and small molecule. The United States was the largest market for sterile injectables in 2016, contributing 40.6% of the global demand, while Europe’s share contributed to 23.8% for the same period. The Company has now entered into a USD 20 Billion hospital generics market from merely a USD 1.1 Billion inhalation anaesthesia market that it continues to cater.

(Source: Global Medicines Use in 2020 dated November 2015, published by IMS Institute for Healthcare Informatics)
(Source: Pharmaceutical Contract Manufacturing Market 2016-2026 dated March 2016, published by VisionGain)
(Source: IMS)

Well-positioned
to create a large
and profitable
global pharma
business

END-TO-END MANUFACTURING CAPABILITIES WITH NICHE OFFERINGS

  • 13 manufacturing facilities globally, of which nine are US FDA approved
  • Offers array of services covering entire drug-lifecycle – from drug discovery and development to commercial manufacturing
  • Strong capabilities in niche areas like HPAPI, hormonal formulations and cytotoxic injectables

STRONG PRESENCE IN US, EUROPE, JAPAN AND INDIA

  • Strengthened presence in North America and Europe - the Company generates over 70% of its revenues from these two geographies, which host close to 70% of its assets
  • Four plants in North America and two plants in the UK (include manufacturing of injectable, ADCs, HPAPI, and inhalation anaesthesia, among others)
  • 30% market share in Inhalation Anaesthesia in the US
  • Piramal continues to strengthen its distribution presence in key European countries like the UK, Italy, Germany, and others
  • Dedicated sales force to sell products in North America and Europe

GROWING ORGANICALLY TO MOVE UP THE VALUE CHAIN

  • In FY2018, the Company plans to organically launch Desflurane, the latest generation of Inhalation Anaesthesia - the only competitor to the originator, Baxter
  • Investments for expansion of the manufacturing and service delivering capabilities in niche areas of ADC, injectables, inhalation anaesthesia and discovery services:
  • Phase-I expansion of Lexington is nearing completion. The next phase of expansion will begin immediately, and is expected to be operational by the end of CY2018
  • Debottlenecking at API plants, at Digwal and Canada to handle higher volumes

WIDE RANGE OF SERVICES

  • Complete range of services, starting from discovery to development and commercial manufacturing, to off-patent supplies of APIs and Formulations
  • Increasing focus and expansion in services like ADC, injectables, drug discovery and HPAPI
  • Integrated service provider with services across geographies and niche capabilities;
  • Currently working on ~30+ integrated development projects globally
  • Robust pipeline and additional launches scheduled this year highlights the Company’s strong reputation as ‘partnerof- choice’ for both large pharma and innovative biotechs
  • Successful history with innovators – collaborated in the launch of 34 products for innovators (including few blockbusters)

LARGE DISTRIBUTION NETWORK REACHING >110 COUNTRIES

  • PEL operates through its own field force in the US, the UK, Italy, and Germany; and through more than 80 business partners in other countries
  • The Company has a global distribution network of over 5,500 hospitals through its direct sales force
  • Distribution presence in over 110 countries across the world

STRONG PORTFOLIO OF NICHE PRODUCTS

  • One of the market leaders in global Inhalation anaesthesia - only pharma company to have all four generations of inhalation anaesthesia products under its basket (Desflurane launch expected in FY2018)
  • Market leader in Isoflurane and Halothane globally; among the global leaders for Sevoflurane
  • Portfolio of niche products that are difficult to manufacture, distribute or sell
  • Acquired niche high margin products and controlled substances (including brands) in the Injectable anaesthesia and pain management from Janssen
  • Acquired highly profitable and unique products (including brands) for Inthrathecal spasticity from Mallinckrodt

GROWING INORGANICALLY TO MOVE UP THE VALUE CHAIN

  • Recently acquired two differentiated niche hospital generic product portfolios in the areas of controlled substances, injectable anaesthesia, and intrathecal and pain management
  • In March 2017, acquired a portfolio of intrathecal spasticity and pain management drugs from Mallinckrodt LLC
  • In October 2016, acquired five injectable anaesthesia and pain management products from Janssen Pharmaceutica NV
  • Acquired products have high entry barrier, as they are differentiated in terms of manufacturing, selling or distribution, resulting in limited competition
  • Continue to seek more generic hospital pharmaceutical products to further strengthen portfolio
  • Acquired two global businesses with niche capabilities of injectables and HPAPI in North America
  • In August 2016, acquired Ash Stevens Inc, a US-based CDMO, specialised in manufacture of HPAPIs
  • In January 2015, acquired Coldstream Laboratories Inc, a US-based CDMO, specialised in manufacturing of cytotoxic injectable products
  • The Company has combined a robust product portfolio that will effectively leverage its large global sales force and distribution network

STRONG FOCUS ON COMPLIANCE, QUALITY AND RELIABILITY

  • A strong quality governance model, with the ‘quality function’ reporting to a Board member
  • Quality is part of the employees’ KRAs, including the business CEO and the entire leadership team
  • Of 13 manufacturing facilities, all key manufacturing sites are US FDA approved
  • Excellent track record with all the regulatory authorities including US FDA
  • No instance of halting production or any negative publicity due to issues raised by US FDA or other regulatory authorities
  • Since 2011, successfully cleared all 28 USFDA inspections, 78 other regulatory inspections and 568 customer audits
  • The Company, business head and quality head has been individually recognised at reputed global and domestic forums
  • Quality Empowering Strategic Transformation (QUEST) is an organisationwide initiative to further imbibe ‘Quality as a Culture’ mantra

POTENTIAL TO GROW RAPIDLY AND EXPAND MARGINS

  • Since the Abbott Deal, global pharma business has grown largely organically at 16%, over last six years
  • The Company invested around half a billion dollar in the last two years in various inorganic initiatives to promote growth in future
  • Both sets of acquired products (including their brands) as well as the niche manufacturing of HPAPI and injectables will further improve the margin profile of the business
  • Piramal will continue to add more generic hospital products both organically and inorganically to leverage its strong sales and distribution network, integrating the acquired products and generating synergies
  • Leverage and expand end-to-end manufacturing and service delivering capabilities
  • Good traction for development business and integrated offerings
  • Injectable and HPAPI acquisitions will enable the Company to cross-sell its capabilities of discovery, ADCs, development and commercial scale manufacturing of Formulations and APIs
  • Further expand presence in strong markets including the US, Europe, Japan and so on
  • From a largely services model, now transforming towards more and more products supplier - increasing share of high margin niche products in the revenue mix from 24% in FY2009 to 44% in FY2017 and 49% if all acquisitions are added on normalised basis in FY2017 numbers
  • Integration or launch of high margin products; manufacturing at facilities with niche high-end capabilities; higher capacity utilisation; backward integration for raw materials; and further leveraging global distribution network to improve margins significantly


OPERATIONAL PERFORMANCE

The Company is progressing well on its initiatives to reduce costs and add high value niche products and services to its portfolio to improve its EBITDA margins.

The Company has executed well on its strategy of moving up the value chain. It acquired two high margin niche branded generic product portfolios from Janssen and Mallinckrodt. The combined strong product portfolio that has been created post the two product acquisitions will effectively leverage Piramal’s large global sales force and distribution network. The acquired products have a high entry barrier as they are complex in terms of manufacturing, selling, or distribution resulting in limited competition. Through addition of these niche products Piramal’s addressable market size expanded from USD 1.1 Billion in the Inhalation Anaesthesia market to a USD 20 Billion generic hospital product market. These acquisitions are margin accretive and will improve the overall profitability.

The Company also acquired niche high value HPAPIs facility (Ash Stevens) in North America. Ash Stevens acquisition is expected to fill gap by providing manufacturing capabilities for high potent molecules. It also integrates well with the injectable capability as it will help in cross selling opportunities to sell API’s to clients working with Coldstream facility.

Debottlenecking of API plants and capacity expansions at various sites like the one at Coldstream, Phase I expansion is nearing completion and Phase II to operationalise by end of CY2018.

PEL continued high focus on quality and successfully cleared 28 regulatory audits including 5 USFDA Audits. Mahad plant cleared its first ever USFDA audit without any observation.





FINANCIAL PERFORMANCE

Revenue grew by 10% Y-o-Y for FY2017 to ` 3,517 Crores on account of organic and inorganic initiatives. Inorganic initiatives include addition of differentiated hospital branded generic products portfolio. In FY2017, the Company achieved EBITDA margins of around 20% for Global Pharma business vis-à-vis 17% in FY2016.



Revenue and EBITDA Margins of Global Pharma



WAY FORWARD



VIVEK SHARMA
CEO, Pharma Solutions

"Over the last few years, we have taken several initiatives to expand our capabilities to support the growth requirements of our customers while continuing to move up the value chain. These initiatives include acquisition of niche facilities in the US that enable us to handle Cytotoxic Injectable and High Potent APIs. We have continued to invest in capacities in the growing segments of Antibody Drug Conjugates, Discovery services and APIs. Our strong focus on customer centricity together with great track record on quality and our end-to-end offering have enabled us to attract several customers looking to source integrated projects from a single CDMO. This puts us in a good position to deliver strong performance in the years ahead."




PETER DEYOUNG
CEO, Critical Care

"The Company is well positioned to reach to a large number of hospitals around the world. Leveraging this strength, during the year, we made a significant progress in executing our strategy to add differentiated products that are difficult to produce, make, or distribute. These product niches have less competition than many other generics. Looking ahead, we will continue to work towards adding more hospital generic products to better leverage our global distribution network. We also plan to launch the first generic version of Desflurane, the latest generation inhalation anaesthesia product, in FY2018. These initiatives are expected to improve pharma topline and bottomline performances in the years to come"




Quality

Over the years, Piramal has built a robust quality framework that is implemented in 13 facilities over three continents. The quality architecture ensures that, the Company is both, ahead of its competition, and has a differentiator that is attractive to customers looking for preferred partners with strong regulatory credentials. The Company is consistently strengthening its quality systems by introducing improvement initiatives and hiring world-class talent.

Addressing regulatory requirements
The dynamic regulatory landscape coupled with greater scrutiny by regulatory authorities has been a key challenge for a number of pharmaceutical manufacturers. Piramal addresses the evolving regulatory requirements by establishing even higher internal standards that ensure perpetual inspection readiness. Over the past six years, the Company has cleared 28 USFDA audits, 78 other regulatory inspections and 568 customer inspections. With 100% success rate for inspections at all its facilities, Piramal has set an excellent track record. Finally, Piramal firmly believes that quality should not be limited to inspection clearance and product approvals; and considers patient safety a key driver for quality.

Quality assurance across manufacturing sites
At Piramal, ‘quality’ is viewed as an essential part of the Company’s identity. Quality is the most important aspect of its brand and dictates the Company’s culture, hires and policies. Piramal employs the concept of ‘Global Vision, Local Execution’, which enables each site to serve customers at their location with Piramal’s global standard of quality.

Risk Mitigation Strategies
Piramal’s quality team has developed multiple proprietary tools for quality health evaluation and risk mitigation. These tools are used within the organisation for quality control and risk aversion at the site level. Some of the Company’s proprietary tools include:

  • SENSOR/Site Health Barometer – Measures the quality health of the Company’s sites and predicts perpetual inspection readiness.
  • Quality Intelligence Platform – Shares updates on regulatory guidelines, warning letters, FDA 483 inspection notices, corporate guidelines and white paper among other items.
  • Data Integrity Calculator – Determines compliance based on check points from a data integrity checklist.
  • Audit Readiness Scorecard – Assesses probable outcome of regulatory inspections at a site.
  • Acquired Site Integration – Follows a quality on-boarding model that conducts due diligence during early stages of mergers and acquisitions (M&A) process and rolls out integration strategies for quality systems and processes.

Quality Governance
A strong governance and escalation mechanism is the foundation of Piramal's quality management infrastructure. The Company’s quality management system is independent of its businesses, and reports directly to a Board member. This autonomy in the quality organisation ensures that business pressures do not dictate quality standards. IDEATE, a self-policing initiative serves to guide building a robust governance model at Piramal:

  • Invest in an experienced quality team at Piramal
  • Drive robust escalation matrix to expedite quality issues to senior management
  • Empowered and autonomous quality function
  • Align quality with (as) business strategy
  • Treat 'quality' and 'integrity' as part of Piramal's culture and core values
  • Evolved quality management systems as per ‘best-in-class’ practices

In addition, the Company has multiple layers of vigilance, which include surprise corporate inspections of manufacturing sites by the QA team. These inspections lead to proactive identification of risks and their mitigation in a timely manner.

Summary
At Piramal, quality is a collective responsibility, and it is woven into the fabric of the organisation. Thus, the Company is moving on quality advancement journey from 'Quality for Compliance' to 'Quality as a Culture' with a focus on systems, processes, and people.



GLOBAL PHARMA: BEST IN CLASS QUALITY GOVERNANCE



6 BRANDS AMONG TOP 100 OTC BRANDS OF INDIA








Piramal’s India consumer products portfolio currently comprises 18 brands with products spanning across categories such as skin care, pain management, oral care, respiratory and lifestyle problems. It aims to be among the top three over-the-counter (OTC) product companies in India by 2020.

MARKET SCENARIO

India's self-care market has grown at a compounded rate of 12% over 2010-2015 period, to ` 15,633 Crores. The market is experiencing strong growth trends owing to rising income levels, increasing consumer confidence in self-care along with easy access to information, rural penetration and channel development. Market is competitive, with limited differentiation among the offerings on a product level. This, however, means there are enough opportunities for players who go the extra mile to address consumer needs. Piramal, through its range of products, targets specific consumer needs. This has made our Consumer Product business one of the fastest growing players in the domestic consumer healthcare market.

During the year, the Company faced some headwinds in the form of the fixed dose combination (FDC) ban and demonetisation. In FY2017, 344 FDC drugs were banned with immediate effect by the Government, including Saridon. Due to our proactive measures, we could reduce the impact of the ban and convince outlets to continue to stock and sell Saridon.

Despite demonetisation, the Company’s growth continued. Piramal proactively extended temporary credit to channel partners to help them tide over the cash crunch. The Company’s portfolio of niche consumer products largely caters to routine needs and being non-discretionary in nature, their sales were not much affected by demonetisation. It was Piramal's large field force, which focused to cover each outlet seven times during the Nov-Dec’16 period, thereby increasing sales, despite scarcity of capital with the customers.



NANDINI PIRAMAL
Executive Director, PEL

"FY2017 was truly a remarkable year for our consumer product business. We saw an exceptionally strong performance by the business despite events such as demonetisation and FDC ban. Also, all three brand portfolios that we had acquired have been able to deliver much better than our expectations. Hence, our ability to perform well under difficult circumstances and to execute on our strategy of effectively leveraging our distribution through adding brands both organically and inorganically, gives us a greater confidence that the business will become one of the top three players in the Indian OTC market in coming years."




OPERATIONAL PERFORMANCE

During the year, the Company successfully completed integration of all three acquisitions – Little’s, five MSD brands and four Pfizer brands. All three acquisitions have crossed their erstwhile annual sales within a short span of time, post their launch. Besides, Piramal expanded its distribution network from 350,000 outlets to 420,000 outlets.

PEL also launched quite a few products/brand extensions – I-pill daily range, Polycrol paan flavour variant, Stop AllerG, Stop AllerG All Day, Quikkool-D, Tetmosol Total etc. The Company made strategic investments in conventional & digital media platforms targeting new consumers.



NEW PRODUCT LAUNCHES







Well-positioned
to create a large
and profitable
India Consumer
Products business
focusing on niche
areas of routine
disruption

STRONG PRODUCT PORTFOLIO

  • Six brands feature among top 100 OTC brands
  • Products categories include skin care, antacid, women intimate range, child wellbeing and baby care, pain management, oral care, gut health, respiratory and lifestyle problems
  • Most brands are either No.1 or No.2 in their respective markets
  • Joint Venture with Allergan (India), leader in ophthalmology
  • Adding products organically and inorganically

STRONG TRACK RECORD

  • Business has grown at compounded annual rate of 21% over past nine years since inception
  • 25%+ Y-o-Y growth in every quarter of FY2017, despite fixed dose combination (FDC) ban and demonetisation

LEVERAGE LARGE FIELD FORCE AND INDIA-WIDE DISTRIBUTION NETWORK

  • Piramal has a direct reach to around 4.2 Lakh retail outlets
  • Recognised as one of the widest network in pharma, Piramal’s distribution is spread across 2,000 town with population of 20,000 and above
  • Approximately 190,000+ square feet of storage space at hub and CFA spread across all major nodes in India
  • Large field force of 2,000 people
  • To enhance customer centricity, the Company has established a dedicated 24x7 help desk to support consumers solve their queries and concerns

LAUNCHING NEW PRODUCTS AND EXTENSIONS

  • Strong pipeline of new products
  • Launched new products like Throatsil and StopAllerG during the year
  • Added brand extensions like i-pill daily, Polycrol Paan flavour, Tetmosal Total Cream and Quikkool-D, among others
  • Looking to enter spaces having minimal presence of competition with the objective to acquire leadership position in short-term

ACQUIRING LEADING BRANDS OR BRANDS WITH POTENTIAL TO BECOME #1

  • Business acquires brands having latent potential and steers them to the leadership position
  • In May 2016, acquired four Pfizer brands – Ferradol, Neko, Sloan’s and Waterbury’s Compound
  • In December 2015, acquired five brands - Naturolax, Lactobacil and Farizym from Organon and MSD BV
  • In November 2015, acquired baby care brand Little’s for age group of 0-4 years
  • Little’s, five MSD brands and four Pfizer brands surpassed their pre-acquisition erstwhile annual revenue within seven to eight months, post acquisitions

POTENTIAL TO RAPIDLY GROW REVENUES

  • Successful integration of acquired portfolios will further drive revenues
  • Continue to add products both organically (including brand extensions) and inorganically
  • Efficient execution and operational excellence
  • Reduced stock-outs
  • Tap e-commerce, rural, exports and alternate opportunities
  • Investments in technology and database, to serve customers promptly and provide customised solutions

SIGNIFICANT MARGIN EXPANSION

  • The Company made conscious choice over last few years to re-invest profits for scaling the business and its distribution network. It is in line with its aim to be among the top three OTC players in India by 2020
  • Addition of products to leverage the distribution network and aid fixed cost amortisation resulting in higher margins
  • Asset light model through third party manufacturing has maximised competitiveness and lowered manufacturing cost
  • Higher variable compensation for sales staff keeps overheads low and incentivise higher performance


FINANCIAL PERFORMANCE

Despite FDC ban and demonetisation, the Company delivered strong growth in Consumer Products division. Revenue grew by 44% to ` 375 Crores for FY2017. Existing portfolio witnessed a 26% Y-o-Y organic growth for FY2017.



PRODUCTS/BRANDS ACQUIRED IN LAST TWO YEARS





WAY FORWARD

For the India consumer business, Piramal will continue to develop new brands and products, along with evaluating inorganic opportunities. The Company’s focus is to further grow the India consumer business through improved margins by (a) reinvesting profits into scaling the business, (b) lower manufacturing costs by using third-party vendors, (c) leveraging our India-wide sales distribution network and (d) continuing to develop and acquire new brands and products.

Over the last 15 months, the business has invested significantly in various growth levers. The Company’s strategy of expanding product portfolio and distribution network has worked well and the Consumer Products business is evolving into a strong player in India’s over-the-counter (OTC) market.



KEDAR RAJADNYE
COO, Consumer Products

"Our exceptional performance despite events like demonetisation and FDC ban clearly shows the strength that we have built in our business model over last few years. The well designed business model with significant India-wide presence across 2,000 towns, a portfolio of niche consumer products largely non-discretionary in nature, our pro-activeness of extending credit to our channel partners and our higher urban & minimal rural exposure enabled us to perform much better than the industry. Over and above, the effective integration of new brands that we added organically and inorganically has enabled us to deliver exceptional performance during the year."








JONATHAN SANDLER
CEO, DRG

"DRG sits at the intersection of the most extraordinary business trends of our time – Healthcare, Data, Analytics and Digital Innovation. With healthcare costs approaching 20% of GDP in many Western nations, there is tremendous pressure on Health Care Providers and Pharmaceutical and Device Manufacturers to reduce cost, manage access and prove value. At the same time, science is unleashing a huge range of potential solutions for diseases that we once thought were untreatable. DRG has the opportunity to be part of the solution to this seemingly intractable problem. By applying subject matter experts, analysts, data scientists, and machine learning to leading edge proprietary and purchased data sets, DRG is answering challenging, yet critical questions for our healthcare clients. In doing so, we are adding value to our clients, and creating dramatic value for our shareholders."




PEL’s Healthcare Insight & Analytics business, Decision Resources Group (DRG), is a best-in-class, decision support platform in the healthcare information services space. DRG leverages core data assets, teams of disease and drug experts, data scientists and machine learning to help Life Sciences, Medtech, Provider and Health Insurance companies answer the following questions:

  1. Where to invest?
  2. How to prove value?
  3. How to negotiate for payment/reimbursement?
  4. How to drive commercial success?

These answers, enabled via a variety of value-added data and analytics, research reports and knowledge-based services, increasingly are provided through technology-enabled content delivery platforms.

MARKET SCENARIO

The healthcare market today faces enormous changes and challenges. The increasing cost to bring drugs and medical devices to the market, a marked shift in focus from volume to the value and efficacy of treatments provided, ongoing and greater regulatory scrutiny and a tidal wave of digital healthcare data have resulted in an increased demand for high-quality information and analytical decision support tools and services. Life Sciences companies and healthcare payers and providers more than ever require current, relevant and easily accessible solutions that progressively leverage multiple data sources and analyses to enable key business decisions. For example:

  • New product teams must understand their end-markets and the reimbursement climate for, and have the clinical and economic evidence to support production of, extraordinarily high cost drugs targeted at rare and orphan disease states.
  • Commercial teams face a progressively higher bar to prove value of increasingly more expensive new drugs and therapies
  • Brand teams need to understand patient journeys and prescriber decision-making processes to launch new drugs and drive share.
  • Sales teams must use claims and electronic health records data, together with drug reimbursement and patient lives data, to demonstrate incremental efficacy and develop the most effective sales strategies.

These myriad needs, coupled with DRG’s recent expansion in the payer and provider end markets, have increased the business’ total addressable market from USD 2 billion (at the time that PEL acquired DRG in 2012) to
USD 16+ billion:






Well positioned
to grow and
improve
profitability

GLOBAL TEAM OF INDUSTRY EXPERTS AND DATA SCIENTISTS

  • 1,083 employees across 17 global offices in North America, Europe and Asia
  • World Class Epidemiologists
  • Expert Data Scientists and Engineers
  • Industry Leading Healthcare Market Forecasters and Predictive Modelers
  • Digital Behaviour Analysts
  • Internationally Renowned Consultants
  • Certified Pharmacists, Health Economists, Health System & Policy Analysts
  • Sophisticated Primary Researchers and Team Trainers

COMPREHENSIVE PRODUCT SUITE

  • Portfolio comprises of Data and Analytics, Research Products and Global Consulting Services
  • One of the few players that provides end-to-end expertise, including bespoke solutions, to address its clients’ most complex problems

SINGLE, INTEGRATED GLOBAL PLATFORM

  • Shifted from a portfolio of brands accumulated through a roll-up acquisition strategy to an integrated healthcare insight and analytics services business ‘under one roof’ with significant opportunity to up-scale
  • As a result of its investments in global sales and marketing, distributed production technologies and global capacity, cross-functional data and analytic talent, and a new product delivery platform, the business is increasingly achieving revenue gains and cost synergies that have come from this consolidation

DATA AND ANALYTICS CAPABILITIES

  • Invested in core technology and analytic methods to manage, clean, link, and nimbly utilise massive healthcare data assets
  • Real-world evidence (RWE) repository of health care claims is among the largest in US and matches that of the biggest RWE providers

TECHNOLOGY AND INNOVATION

  • Products and services delivered through user-centric technology platforms
  • Delivery modality has shifted dramatically from large, static research reports to digitally delivered, modular content

LONG-TERM REVENUE VISIBILITY

  • Serving 45 of top 50 pharma companies
  • 10+ years of relationships with its top ten customers
  • Data & Analytics and Research Products, which are highly recurring in nature, comprise over 70% of total revenue
  • Stable revenue base with 100% retention among top 50 customers, contributing to approximately 68% of revenues
  • Total revenue retention by value is ~96% across the entire customer base, and no single client comprises more than 4% of DRG’s annual revenue
  • Large foothold in US Payer/Pharmacy Benefit Manager (PBM) Market - Relationships with 15 of the top 20 PBMs and 12 of the top 20 Health Plans

INDIA ADVANTAGE

  • Of the 1,083 employees, 250+ are located in India, in DRG’s Bengaluru and Gurugram offices
  • Skills augmentation accelerates growth and increases capabilities beyond existing products and services, enhances customer delivery and response time and enables cost efficiencies
  • Recruitment of critical talent, especially data science and analytical talent, is significantly enhanced by the Piramal brand


OPERATIONAL PERFORMANCE

Enhanced Data and Analytics Capabilities
PEL has invested in core technology and analytic methods to manage, clean, link, and nimbly utilise massive healthcare data assets.

Over the past 3 years, the business has compiled and organised a leading data repository – its real world evidence data set is among the largest in the U.S., placing it in the top tier for healthcare analytics providers. The repository covers over 90% of the healthcare ecosystem, enabling the business to deliver deep and contextually relevant insights organised by key areas of client interest (patient journey, drug, disease, device, and stakeholder dynamics). Few, if any, other industry participants can integrate financial (claims) and clinical (EHR) data with proprietary data, such as drug formulary and restrictions status, and convert the data into useful business insights.

Investments in tech-enabled delivery platforms
The Company is increasingly delivering its products and services through user-centric technology platforms. It’s delivery modality has shifted dramatically from large, static research reports to digitally delivered, modular content that enables clients to obtain ‘just in time’ answers. For example, in FY2017, the Company combined 11 different legacy brands under a new, dynamic, web-based ‘Ask DRG’ Insights and Content Platform. It provides clients with an easy-to-use portal to access all of its expert forecasting, market sizing, and gold-standard epidemiology for over 140 diseases. This best-in-class technology gives its 9,000+ users both the ease of web browser-like searching and the ability to drill deep into the Company’s proprietary data sets.

M&A and Strategic Combinations
Acquisitions and strategic initiatives are fundamental to business information services companies’ growth, both of which have been an essential component of DRG’s development. This strategy fortifies existing offerings, fosters product innovation, adds capabilities and expands reach to new markets. DRG targets businesses with additive data sets and analytics capabilities, as well as complementary product offerings, that would fit well into DRG’s distribution network.

  • Walnut Medical: In April 2017, DRG acquired Walnut Medical, a UK-based data company that offers hospital procedure volume data covering 14 major European markets and 19,000 hospitals in 25+ countries. This acquisition provides DRG access to key European hospital-level data, to enhance and expand its data and analytics offerings

Additionally, the Company is increasingly focused on strategic investments, partnerships and joint ventures to enhance product innovation, data capabilities, and sales in new channels. Recent key transactions include:

  • An alliance with Dstillery, a US-based digital intelligence and marketing firm, to create a proprietary DRG digital data stack that leverages AdTech data
  • A collaboration with Compile, a US and India-based data aggregation firm, to launch a market-leading data set for physician/hospital affiliations
  • A collaboration with Zephyr Health, a US-based software company serving the Life Sciences industry, involving product sharing and marketing to enhance and create a greater value proposition regarding health care Provider targeting
  • Investments in the US-based SaaS firm Procured Health, a provider of solutions for value decision making in provider procurement, and Context Matters, a provider of pharma market access solutions

FINANCIAL PERFORMANCE

Revenue from Healthcare Insight & Analytics business grew to ` 1,222 Crores in FY2017 from ` 1,156 Crores in FY2016, registering 6% Y-o-Y growth. The Company’s modest growth reflects, in significant part, shifting customer demand away from traditional syndicated market research toward data and analytics-driven, technology-enabled offerings. In recognition of this shift, over the past few years the Company has increasingly invested in technology, data assets and analytics capabilities that enable it to provide user-centric solutions directly targeting high-value client problems. These investments are expected to enable the Company to increase its penetration and growth within its addressable market of USD 16 billion. During the year, the Company continued with its initiative to transform its global talent pool by expanding further in India. With two offices in Bengaluru and an office in Gurugram, the business now employs over 250 people in India. DRG India, with a deep and diverse talent pool, enables the Company to accelerate growth and increase its capabilities beyond existing products and services, improve customer delivery and response time and realise cost efficiencies.


WAY FORWARD

Clients increasingly are seeking data and analytics services, particularly in the pharma, biopharma and medical technology sectors, to understand and solve their most pressing business challenges. And, as a result of the Company’s investments in this service segment, its data and analytics revenue grew significantly in FY2017, with continued strong demand for its services expected in FY2018 and beyond. As per industry estimates, the Company’s potential revenue opportunity for its data and analytics capabilities across the Life Sciences, Payer and Provider segments is USD 8.4 billion.







Enterprise Risk Management

A well-defined risk management framework is integral to any business. PEL has an independent and dedicated Enterprise Risk Management (ERM) system to identify, manage and mitigate business risks. Risk management, internal controls and assurance processes are embedded into all activities of the Company.

PEL's ERM framework is designed by integrating COSO* framework at its core.

The Risk Management Group (RMG) establishes the risk policy and processes for risk evaluation and measurement; and business units focus on developing and implementing mitigation measures, while taking controlled risk. Specific risk approaches are in place for financial and non-financial businesses.

The Company ensures a seamless interaction between the Strategic Business Units (SBUs) and RMG to assess the real risks and their severity on the business. The RMG is independent of SBUs and reports directly to the Board. PEL believes that risk management is a culture to ensure sustainable growth of the organisation. In this regard, every function performs certain duties to ensure risks are managed and mitigated at enterprise level.



The Board
The Board oversees PEL’s risk management programme. It regularly reviews and evaluates the programme to ensure adequate policies, procedures and systems are in place to execute the strategy and manage related risk. Board level ‘Audit and Risk Committee’ reviews the micro-level risks and reports it to the Board.

Periodically, the Board dedicates a separate meeting with RMG to review the risk profile of the business verticals in non-Financial Services (non-FS) businesses and portfolio health in Financial Services (FS) vertical.



Business head and teams
Business head and operational teams assess the risk profile of their business/transactions and propose mitigants for the same. Besides, they work closely with RMG to provide requisite information about the transactions or business environments to assist RMG to execute its role effectively.





*Committee of Sponsoring Organisations of the Treadway Commission


Financial Services Business
The Risk Management Group (RMG) independently assesses all investments of PEL’s Financial Services business. The Group uses customised risk assessment models to evaluate credit, market and concentration risks embedded in any deal. Based on the risk assessment, the group recommends plans to mitigate or to eliminate the identified risks in the investments.

Risk Assessment Approach

The approach involves identification and measurement of risk for each investment. Risks are classified into quantifiable and non-quantifiable risks.

  1. Quantifiable risks are estimated as the deficit in Cash Flow under stress testing
  2. Non-quantifiable risks are estimated through comprehensive scorecards and standard mark-ups
    • Security value, promoter score, exit options, etc. are rated through scorecards
    • Operational and concentration risks are covered through standard mark-ups

The risk team considers various factors like historical performance, execution capability, financial strength of the promoter and company, competitive landscape in the industry and specific segment, regulatory framework and certainty, impact of macro-economic ‘changes’, etc. while assessing the deal. The security structure is assessed for value, enforceability, and liquidity.


Portfolio Revaluation Process

All executed deals are re-valued by the Group at regular intervals, to provide the Management with current overview of the portfolio performance. The portfolio performance results are used to identify action plans, if required. These are then duly executed by business teams to mitigate or eliminate the identified risks. Also, the insights are used for better credit underwriting in future.


Asset Liability Management Policy

The Risk Management team and the Treasury team had initiated the ALM process for the Financial Services business. The Board has approved the Asset Liability Management Policy and the formation of Asset Liability Management Committee (ALCO). The ALCO includes the Company’s senior management and an external industry expert; and defines the strategy for managing liquidity and interest rate risks in the business.

  • Liquidity risk: ALCO assesses the static liquidity gap statement, future asset growth plans, tenor of assets, market liquidity and pricing of various sources of funds. It decides on the optimal funding mix taking into consideration the asset strategy and a focus on diversifying sources of funds.
  • Interest rate risk: ALCO reviews the interest rate gap statement and the mix of floating and fixed rate assets and liabilities. The Risk Management Group has also initiated a scenario analysis to assess the short-term impact of interest rates on net interest income (NII).
  • Transfer pricing: The Treasury Group has started publishing a transfer pricing curve based on the cost of borrowing and negative carry on liquid assets.


Non-Financial Services Businesses
Risk assessment at Non-Financial Services Business units is carried out using risk registers. Risks across different business units; their probability, impact and mitigation plans are properly documented at regular intervals. These risks are then aggregated, and key risks across each business units along with the proposed mitigants are presented and reviewed by the Board on periodic basis.





The major risks perceived by PEL along with the measures taken to mitigate the same are highlighted as follows:







Over the last year, PEL's Human Resource (HR) function has focused on generating and delivering ‘value’ in the areas of Knowledge, Action, Care and Impact on employees across geographies.

In 2014, PEL’s HR function embarked on a comprehensive HR Transformation journey called SEEDS (Strategy for Employee Engagement and Development Support). The SEEDS project focused on transforming multiple areas of HR from building people capability across levels to focus on technology driven HR. Up till 2016, the SEEDS project focused on establishing basic systems to enable the kind of transformational change that the HR function wanted to bring in.

During the past year, the HR function has focused on building on these base systems to help employees derive ‘value’ both professionally and personally from these changes.

Today, through it's HR Function, the Company offers its employees value in the following ways




15,000+
learning needs delivered across 50+ unique
courses through Piramal’s Learning University.




33% High
Potential

At mid management were
promoted over the past 2 years




75% High
Potential

At mid management had role
expansions to support their growth




26% High
Potential

At senior management were
promoted to the next level




Top 5%
PEL has been ranked amongst the
Top 5% in the world in employee
engagement by Towers Watson



Some of the key contributions that the HR function brought in through SEEDS were:



Integrating Piramal Values with people systems of the organisation through introduction of the Piramal Success Factors. The Piramal Success Factors form a framework of behaviours that each PEL employee is expected to display across levels. Over the past two years this framework has been integrated with the Recruitment, Performance Management and Capability Building systems of the HR Function to ensure consistency and clarity for all employees.

Digitising people practices by setting up the Human Resource Management System in partnership with Oracle. Over the last 2 years, the HR function has focused on systematically migrating employee data and systems to the digital platform on Oracle across PEL.

Early identification of high potential talent through the ASCEND programme at middle management level and SUMMIT programme at the senior management level and nurturing them through relevant training.

Hiring the right people by bringing in more science to the art of recruitment. The HR team ensures that a potential employee’s value system, behavioural and functional traits are aligned with that of the Company. This is achieved through psychometric assessments, logical reasoning tools and structured behavioural interviewing methods.



ENABLING EMPOWERMENT THROUGH 'MY PIRAMAL' 'My Piramal' is PEL's HR Management System which allows employees to take charge of the HR systems that impact them.

  1. Hiring through 'My Piramal'
    • 'My Piramal' enables employees to take charge of their own team hiring through the system with easy access to raising requisition requests and tracking the status of their joining. Managers can also utilise system analytics to understand root causes behind joining delays, offer-acceptance ratios, most effective sources for new 'candidates', etc.
    • The linkage of the recruitment system to the ‘Careers Page’ of the Company website also enables easy application of jobs for external candidates.
  2. Performance Management through 'My Piramal'
    • Digitalising the performance management process through 'My Piramal' has brought in much higher efficiency and transparency in the process.
    • Employees can set their goals, check their manager’s goals for the year and ensure there is alignment across the business/function. ‘My Piramal’ also enables employees to take charge of their own and their team’s capability building by allowing them to document development plans and assign training programmes on the system.
  3. Enabling greater accessibility to learning through 'My Piramal'
    • With the launch of 'My Piramal', virtual learning will now be strengthened by improving the range of e-learning modules available for employees. Employees and managers will also be able to track the extent of development needs met through the various offerings under the Piramal Learning University.

Overall the 'My Piramal' system has opened up information and made it transparent and accessible to employees across the organisation. This is a big step in ensuring 'Integrity' and giving 'Empowerment' to employees.



STRENGTHENING LEARNING CULTURE THROUGH GREATER EMPLOYEE INVOLVEMENT

One of the key values that the Piramal Learning University has focused on in the past year has been to build in a culture of shared ownership between business leaders and HR towards driving capability building across levels.

In line with this objective, custom calendars were built in consultation with leadership across PEL’s sites and functional teams through the constitution of ‘Learning Councils’. The Learning Councils at the site level consisted of the entire site leadership team which participated in deciding the learning needs for the year. At the central level, these councils included representation from both functional and business leaders to ensure the process was democratic and there was built in ownership from all the key leaders.

As a result custom learning offerings were built for each of PEL’s businesses.

Over the past year, 15,000+ learning needs were delivered across 50+ unique courses through Piramal’s Learning University.

Additionally, there has been increased involvement of ‘Leaders as Teachers’ specifically through ‘Discover Piramal’ – PEL’s business induction programme where senior leaders have been meeting new joinees across PEL businesses to help them understand the culture, values and future plans of the business.

Piramal’s Learning University has been building select courses and training in-house leaders to take on the role of teachers. Some of the courses run by in-house leaders have been on building financial acumen, language and communication upskilling, feedback and coaching for ‘teams’, etc.

The ASCEND Programme also had senior leaders taking on the role of facilitators to train participants on people and business skills. These programmes which were driven by in-house leaders become amongst the highest rated programmes in terms of feedback (3.85 on a scale of 4).

PEL’s leaders have also been involved in the campus hiring and campus branding initiatives.



BUILDING A TALENT POOL

At PEL, employees are given the opportunity to accelerate their growth and development to the next level through the ASCEND and SUMMIT Platforms.




At PEL, employees are given the opportunity to accelerate their growth and development to the next level through the ASCEND and SUMMIT Platforms.


ASCEND
The ASCEND platform gives high performing employees at the middle management level, the opportunity to be selected and groomed for senior leadership roles. The programme is offered across PEL’s global employee base. The selection process uses the Piramal Success Factors at its base. The selection process is conducted by leading firms specialising in leadership assessments.

High Potentials who qualify through ASCEND undergo a 1 year structured development process where they are exposed to multiple experiences – such as working on a cross business project under the leadership of a senior mentor and CEO, working with a cross business cross functional team to deliver results in an unfamiliar environment, being exposed to leadership coaches to transform their personal behaviour, classroom interventions, and more.

They also undergo unstructured development through virtual learning platforms in partnership with Harvard Business School.

Today, the Company has 170 high performers who have undergone the ASCEND Development Journey. 51 of them have been identified as 'High Potentials' across PEL and are being groomed for roles at the next level.

Post the development journey, the HR function has focused on building a career management system for high potentials to ensure succession plans could be made to groom them for specific senior roles. This financial year, the function implemented a talent review process for all identified high potentials across businesses to take stock of their future potential, fitment and roadmap for the journey ahead.

A 360o Feedback process initiated after the first batch of ASCEND was concluded. The results showed that 81% of employees undergoing the programme had shown improvement on the Piramal Success Factors.

As a result of the process, in the last two years, 33% high potentials have been promoted to higher roles and 75% high potentials have had role expansions or role changes to aid their development.



SUMMIT
The SUMMIT leadership programme focuses on preparing senior leaders to become successors to the CEOs of PEL Businesses. Through the SUMMIT journey, senior leaders are given the opportunity to define their own ‘business mandate’ – to act as true Entrepreneurs of their business units or functions. The programme also inter-connects the senior management by encouraging peer feedback, peer support groups and inputs from CEOs on each leader’s business and personal mandates.

31 senior leaders have undergone the SUMMIT programme in the past one and a half years. To ascertain the impact of their transformation post this journey, a 360o feedback was initiated. 73% of the stakeholders taking the survey reported visible changes in behaviours of these leaders and 70% of the stakeholders reported clear to dramatic impact on work as a result. About 97% of the participants undergoing the programme reported positive progress.

26% of these senior leaders have been promoted to higher roles. 45% of them have taken expanded roles in preparation for the future.



DIVERSITY AND INCLUSION

As a Group, PEL is present across industries as diverse as Pharma, Financial Services, Healthcare Insight and Analytics and Social Enterprise. PEL’s customer base comes from over 100 countries and represents multiple regions, religions, ethnic backgrounds, genders, social identities, thought processes etc. PEL’s employee base covers employees from 19 nationalities based in 32 global offices. PEL’s senior leaders are from 8 different nationalities.

PEL's philosophy towards diversity and inclusion is to build an employee base which is as diverse as its customer base to ensure it is able to deliver value to its diverse customers.

Generational Diversity
Close to 57% of PEL’s employee base represents millennials. Across PEL, generational diversity is well represented allowing seamless transition across age groups from employees as young as 18-21 years to as old as 60-65 years.

Connect talent pools across levels
As a part of PEL’s focus on diversity, the ‘Piramal Konnect’ initiative was launched. ‘Piramal Konnect’ is a 2-way mentoring programme where high potential talent pools from mid and senior management are partnered with each other in a 2-way mentoring relationship. ‘Piramal Konnect’ aims to encourage learning across levels and businesses through a formal mentoring partnership. In line with PEL’s values of Expertise and Innovation, it encourages diverse and breakthrough thinking and in line with its value of Humility, it seeks to break the barriers of hierarchy by encouraging a culture of cross level learning.

Through 'Piramal Konnect' – 20 two-way mentoring partnerships were launched this year.

Being an equal opportunity employer
At the heart of PEL’s diversity agenda is the commitment to being an equal opportunity employer. The PEL’s code of conduct emphasises the Company’s commitment towards supporting diversity in hiring and promotions across levels. The PEL’s ‘High Potential’ philosophy also emphasises the Company’s stand on giving all high performers an equal opportunity to grow and accelerate and not allow discrimination on the basis of gender, age, background or any other demographic factors while identifying high potentials.

Today, 29% of identified high potential employees from the ASCEND programme are females. This Programmeme represents employees from India, US, UK, Canada, Germany and Sri Lanka working for various PEL businesses. The high potential population through ASCEND also represents a diverse age group with an age range of 27 – 45 years.



UNDERSTANDING THE PULSE OF THE EMPLOYEES

'Bandhan' is PEL's employee engagement initiative. Through 'Bandhan', employees are given the opportunity to share their thoughts and feedback with the leadership, through the annual employee engagement survey.

PEL has been ranked amongst the top 5% in the world in terms of employee engagement by Towers Watson. 93% of employees who participated in the survey opined that they feel engaged with the organisation.

The 2017 survey results showed that 93% of employees across PEL believed strongly in the goals and objectives of the Company. 94% of those taking the survey felt they had clarity on their job responsibilities and felt that their strengths were being utilised.

Additionally, the HR Leadership team has actively engaged in personally connecting and understanding the individual development needs of all identified high potentials of the Company through structured connects twice a year. They have met all 170 employees undergoing the ASCEND programme and the 31 leaders undergoing the SUMMIT programme to ensure they were in touch with the needs of their employees.

BUILDING A SUPPORTIVE WORK ENVIRONMENT FOR EMPLOYEES

The HR Function re-evaluated some its policies and employee benefits to ensure that the work environment was conducive and supportive towards personal and professional needs of its employees.

Flexi work hour policy
Through the flexible work hour policy, employees are now empowered to work as per their convenience and choose when they would like to begin and end their working day. Employees also have the choice to work from home for two days in a month as per their need.

Crèche Facilities for working parents
The HR and Admin functions have collaborated with child–care facilities in
a 5 km radius of PEL offices in Mumbai. This will give working parents the choice and comfort of having their children taken care of in a safe environment.

Flexible Maternal and Paternal Leave
PEL offers 6 months of maternal leave and up to 7 days of paternal leave for new parents. It also offers the flexibility to work part-time during the growing years of the child.









VISION AND STRATEGY

In this era of 'digital enterprise', Information Technology (IT) has the opportunity to become a key contributor to revenue and business improvement. All businesses in PEL have an aspirational 2020 goal. In order to help each business achieve its goal, the Company has aligned IT Vision & Strategy to play the role of a key business enabler.

Vision: 'To become a Strategic Business Partner by providing high value IT solutions at optimised cost'

PEL has initiated Project ASPIRE to help achieve the objective of IT-enabled business transformation.

  • Aspire to be
  • Strategic
  • Partner through
  • Innovative solutions for
  • Rapid growth
  • Enablement

Technology is redefining the competitive landscape. It is creating new business models, value chains and revolutionising the way a company engages with customers, partners and employees. PEL has increased its capital investments in strengthening the core systems and various technology-led transformation initiatives across businesses. These are preparing PEL for non-linear business growth and making it future-ready.



GROUP INITIATIVES

As PEL leverages its technical knowhow, IT is transforming the organisation at all three levels of system of record, system of differentiation and system of innovation. The synergy is evident in the way the Company delivers its projects, and its commitment towards the core values and Piramal Success Factors.

To further strengthen its leadership position in global markets, PEL has adopted ‘Global Technology Led Business Transformation’ bilateral strategy. Its first aspect is, focusing on strengthening the core systems, and the other, innovation & digital transformation. Significant investments are being made to upgrade infrastructure across the sites and strengthen core business applications. Digital Transformation journey will enable the Company to leverage emerging technologies such as Internet of Things (IoT), Mobile, Analytics and Cloud. This will enable PEL to transform its operations, enhance the customer experience, partner and vendor relationship and generate new revenue models.

  • Strengthening the Company’s core with Infrastructure Upgrades: To meet the growing needs of its businesses, the Company has been moving its computing technology to the next level by leveraging virtual computing and the Cloud. It made significant investments in upgrading the internal and external networks to the latest global network solutions like the Hybrid Cloud Network, considering the performance, availability and security requirements.
  • Enhanced Employee Experience: In collaboration with the HR team and in line with PEL’s culture of entrepreneurship and empowerment, the Company launched Phase 1 of ‘>MyPiramal’, its online Human Resources platform with capabilities like e-PMS, e-recruitment, employee and manager self-services, and more.
  • Effective Communication and Collaboration: Global implementation of virtual collaboration platforms is helping PEL to improve staff productivity and improve collaboration and effectiveness of various internal and external stakeholders working together across different geographic locations, at a lowest cost.

BUSINESS SPECIFIC INITIATIVES

In addition to taking care of common business needs through the above group initiatives, the Company is equally focused on individual business priorities to enable them achieve business specific goals.


Financial Services business
In its Financial Services business, PEL has challenged itself with significant non-linear growth, increasing revenue considerably, without linearly increasing manpower. To achieve this, the Company has embarked upon technology enabled business transformation initiative. The aim is to have end-to-end business process automation and enhanced productivity, adopting global best practices followed by the world’s leading financial institutions.

This technology enablement is currently in the final stages of Best-in-class technology solution rollout. Its expected key benefits include:

  • Enhanced customer experience: Superior CRM and service for investors, investee companies and channel partners
  • Superior risk management and internal controls: Stronger portfolio risk management and control, dashboards and data analytics to detect early stresses
  • Data-driven insights for underwriting: Using micro market, project sales and developer insights and learnings from past assumptions for more robust underwriting decisions, as well as using proprietary insights for identifying future lending opportunities
  • Operational efficiency: Reduction in process turnaround, increase in productivity across the business system, elimination of data duplication and reduction in physical paperwork
  • Robust financial management and compliance: Reduced operational risk in collections, reconciliation and accounting, systemdriven tracking of compliances and regulatory limits on exposure


Pharma
In Pharma business, the Company has focused on innovative technology solutions considering the business dynamics, regulatory requirements, scalability and its inorganic & organic business growth. Its technology solutions have yielded higher stakeholder value by creating better operational efficiency, improved margins and higher customer satisfaction.

Some of the key technology initiatives implemented this year are expected to garner several benefits for the business:

  • Enhanced customer experience: Superior CRM system for internal and external customer servicing as well as complaint management solutions
  • Operational efficiency: Reduction in process turnaround and increase in productivity across the business system, through various business process automation initiatives
  • Process standardisation and best practices: End-to-end workflow integration and use of standardised best practices across locations
  • Regulatory requirements compliance: The Company has established a dedicated IT compliance and security team to strengthen compliance to regulatory requirements across all its plants.
  • Strengthening real-time decision making: Analytical view of business critical data from multiple sources using advance business analytics to enable real-time decision making


Healthcare Insight and Analytics

  • Tech-enabled, web-based delivery platforms: In the Digital Age, delivery modality has shifted dramatically from large, static research reports to digitally delivered, modular content that enables clients to obtain 'just in time' answers.
  • 'Ask DRG' Insights and Content Platform: To provide clients an easy-to-use portal to access all of DRG’s expert forecasting, market sizing, and gold-standard epidemiology for over 140 diseases
  • Implementation of a new ERP system (Workday): To create greater efficiencies regarding financial reporting and people management



GOING FORWARD

The world is changing rapidly, and so are businesses. At PEL, Information Technology will continue to play a very important part of its business transformation journey. Disruptive technologies, globalisation, economies of scale and more value for less, are the needs of the hour. Technology is going to be at the core and a driving force behind business transformation. The world is changing rapidly and so is business.






For PEL, 'sustainability' is at the core of what it does, and integral to its strategy. 'Care' is one of the values of PEL, and as a responsible company, it is committed towards protecting the environment where it operates, besides focusing on promoting health, safety and well-being of all employees, stakeholders and society at large.

At PEL, Environment, Health and Safety (EHS) are three crucial pillars for sustainable growth of its businesses. The corporate EHS team develops policies and guidelines, providing technical support and assistance to all sites to maintain compliance with the EHS policies. The EHS function ensures that products are manufactured in a safe environment and in compliance with national and international regulations and customer expectations. Regular audits at sites ensure compliance and provide a robust system for continuous improvement. In addition, continuous audits of various locations by PEL’s global customers help raise standards even further.


HEALTH AND SAFETY

The Company’s mission is to protect and enhance the well-being of its employees, visitors and partners. Safe working is non-negotiable for PEL. The Company follows global safety standards at all its operations. Its safety practices ensure that all possible safety hazards are identified and eliminated, not only at the workplace but also during travel. The Company strives for a holistic safety culture to improve safety of employees beyond their work.

Piramal has been achieving continuous improvement in safety performance through a combination of systems and processes as well as co-operation, involvement and support of all employees. The total recordable injury rate witnessed a reduction during the year. Each and every safety incident at the sites is recorded and investigated. Safety receives the highest attention from all levels of management. All official events in the Company, whether it’s a CEO address to a large group of employees in townhall or an internal small meeting addressed by a factory manager of a remote unit, every meeting begins with a safety briefing. All Managing Committee members personally review the EHS performance on a periodic basis.

To prevent serious injury and fatalities, the Company has implemented the following programmes:

  • Engagement of DuPont for Behaviour Base Safety Training: A customised behavioral safety framework is being developed and implemented across India’s sites to improve risk perception and remove the risk behavior of employees at work. The programme targets change in behavior patterns and elimination of unsafe acts since these are found to be the root cause of majority of safety incidents.
  • Contractor Safety Management
  • Pro-active safety inspection programme
  • Corporate EHS Audit by cross-functional EHS site team
  • Hazard recognition programme implemented to report near miss and unsafe conditions


Developing an EHS learning culture
The Company invests its resources and efforts in training and hardware upgradation to improve its safety performance every year. Total training Man hours has increased from 24,277 hours in FY2016 to 40,888 hours in FY2017.


Employee Health

  • Employees and contractors health is monitored through pre-medical checkup and periodic medical checkup
  • Employees are counselled after every medical checkup by factory medical officer
  • Commenced the risk base employee assessment programme to assess the chemical concentration exposure to employees
  • Trained employees to use first-aid treatment

ENVIRONMENT

PEL is committed towards conserving its resources as it recognises the importance of preserving the environment. Quality environmental performance is a key component of PEL’s facility operations. During the year, the Company’s manufacturing sites maintained their applicable environmental regulations. The Company has adopted ‘reuse and recycle’ mantra for natural resources; and thus, has developed adequate infrastructure to treat and re-use the waste water. Following are some of the key areas of environmental protection that PEL undertook during the year:

  • The Company continues to improve efficiency through replacement of furnace oil with agro briquette as a fuel, which helped in energy conservation. This initiative enabled PEL to reduce CO2 emissions.
  • Energy efficiency initiatives:
    • Reduced power consumption by optimising and changing utilities usage
    • Introduced Energy Monitoring System (EMS) to monitor online load in all plant – This initiatives helps to identify the energy losses in the plant
    • Provided Variable Refrigerant Volume (VRV) in air conditioning system, significantly reduced the energy consumption
    • Diminished energy costs significantly by replacing LED lights at selected sites
  • Waste re-use and re-cycle rate increased by 28% in FY2017
  • Increased tree plantation by 29% over the previous year








Piramal Foundation is the philanthropic arm of the Piramal Group. It develops innovative solutions to resolve issues that are critical roadblocks towards unlocking India’s economic potential.

The Group's core values of Knowledge, Action, Care and Impact guide the organisation in carrying out its responsibilities towards society. The Company believes in collaborating with like-minded partners to bring positive changes in the society. It nurtures projects that are scalable and ensure to deliver sustainable impact.

In line with the Group’s sustainable development goals, Piramal Foundation is focused on:

  • Universal primary education
  • Youth empowerment
  • Maternal health, child health and non-communicable diseases and
  • Access to safe drinking water

The Foundation currently works across 21 states, mostly in partnership with state governments. It has developed innovative approaches and programmes in every vertical and has built strong partnerships with governments, technology partners and international organisations (including with Michael & SUsan Dell Foundation, Harvard Graduate School of Education and World Diabetes Foundation). The projects are implemented through Piramal Swasthya, Piramal Sarvajal and Piramal Foundation of Education Leadership.

Vision: "Piramal Foundation is committed to transforming Health, Education, Water and social sector ecosystems through high impact solutions, thought leadership and partnerships.

Core areas of focus

  • Health
  • Water
  • Education
  • Youth Empowerment

OPERATING MODEL

Piramal Foundation’s operating model represents the framework that is expected to achieve a sustainable transformation.

Seeding innovation
The Foundation has attempted to address complex and deep-rooted issues by developing new approaches and solutions, built on its core expertise in each domain. This effort to build ‘out-of-the-box’ solutions has called for an approach which aims to address root causes to an outward symptom.

In touch with ground reality
The Company owes to its stakeholders to generate an optimum social return on its investment. The field presence of the Company's CSR arm ensures it develops the need-based solutions for communities. Successful solutions are fine-tuned over time to create scalable and replicable models. A ‘proof of concept’ that is co-created with our stakeholders helps improve the probability of success at scale.


Partnerships are a way of life
The Foundation's philosophy is rooted in partnerships to deliver holistic solutions at scale. Partnerships ensure that it does not duplicate infrastructure, thereby managing its resources in a most optimum fashion. Public private partnerships with governments have been its core strength in carrying out its mission. The Foundation’s engagement with partners leads it to observe and absorb best practices and encourage a collective approach to problem solving. At the same time, it believes a partnership built on complementary skills is an area of greater focus in philanthropy.

Technology as a key enabler
While deployment of technology at an operational level is an accepted fact, it believes that its deep engagement in each of its sectors also provides an opportunity to create technology platforms that can be offered as public good. While automating processes and digitalising data can seamlessly integrate all players in a delivery chain to promote accountability and transparency, it can be deployed to enhance seamless operations of the Company’s CSR project. The possibility of replicability and scalability with this approach opens up interesting opportunities in the future.

Scale, an important lever
To meaningfully address issues, it is imperative for the Piramal Foundation to create robust solutions that can be scaled across geographies and different socio-economic contexts. Thus, the organisation ensures all its efforts are maximised for improved social returns. Piramal Foundation’s partnership with governments and other organisations have also been built with this being a core objective.



DEMOCRATISING HEALTHCARE - PIRAMAL SWASTHYA

Piramal Swasthya believes in ‘Democratising Healthcare’, i.e., making healthcare accessible, affordable and available to all segments of the population, especially those most vulnerable. Piramal Swasthya offers three services that integrate with the government network in providing clinically validated services:

  1. Remote Health Advisory and Information

    1. Health Information Helpline

      The Health Information Helpline (HIHL) is a health contact centre that aims to address minor ailment load on the public health system. HIHL provides 24×7 basic medical advice and counselling services. The platforms now support government’s front-line programmes like Mother and Child Tracking System (MCTS) and HIV/AIDs counselling.

    2. Tele-medicine Services

      Piramal Swasthya’s tele-medicine service focuses on both, beneficiary and the doctor, delivering the most accessible and affordable care by providing high-quality specialists with an electronic health record of each patient. It virtually connects doctors to patients and reduces the need for highly-skilled health workers where they are scarce.

  2. Community Outreach Programme: Mobile Health Services

    Mobile health services tackle barriers in accessing primary healthcare in rural India. Mobile Medical Units (MMUs) are equipped with technology, medical devices, medicines, health workers and visit even the remotest of villages. They are staffed with paramedics and doctors who can identify, screen, diagnose, refer, monitor and treat select diseases and minor illnesses.


    Outcome
    • Served more than 8.34 Crore beneficiaries (including revisits) till March 2017
    • More than 4.3 Crore beneficiaries have been provided validated health advice through our remote health advisory and intervention services
    • 3.8 Crore beneficiaries have been delivered health facilities at their doorstep through community outreach programme
    • Nearly 9.8 Lakh mother and child beneficiaries were tracked and provided advice as part of Mother and Child Tracking System (MCTS) Call Centre initiative.
    • 1.7 Lakh beneficiaries have been provided specialist consultation through telemedicine services
    • Geographic outreach: 11 states
    • Associated with Andhra Pradesh government for 277 mobile medical vans



SUSTAINABLE WATER SOLUTIONS - PIRAMAL SARVAJAL

Piramal Sarvajal innovates, demonstrates, enables and promotes sustainable water solutions for those lacking access to safe drinking water. It focuses on last mile delivery of safe drinking water at affordable prices by installing community-level purification plants and water ATMs. Sarvajal uses cutting-edge, top-of-the-line technology to operate state-of-the-art water treatment and distribution systems. It is a socially conscious model enabling sustainable livelihood opportunities in the communities it operates in.

Outcome

  • Reaches out to 3,82,000+ consumers on a daily basis through 810+ touch-points across 16 states
  • Rural entrepreneur model helped seed 350+ entrepreneurs, thereby providing employment to over 1,000+ individuals.
  • Real-time monitoring and accountability to drinking water solutions. Decentralised solutions’ unique advantages include:
    • Cashless transactions
    • Price transparency
    • Pay-per-use methodology
    • 24x7 service availability
    • Quality control
    • Targeted subsidies for masses



PIRAMAL FOUNDATION OF EDUCATION LEADERSHIP (PFEL)

Piramal Foundation for Education Leadership (PFEL) envisions making a disproportionate change in the quality of primary education by creating and replicating sustainable programmes for grooming education leaders in the government educational system.

PFEL created a four-year School Leadership Development Programme (SLDP) to improve the learning levels of students enrolled in Government schools of India. The programme focuses on developing leadership and administrative capabilities of school principals and education officers. It aims to enhance pedagogical knowledge and classroom teaching abilities of teachers and engage local community members in the school development process.

In order to do so, PFEL designed the Piramal Fellowship Programme. This unique Fellowship Programme selects bright young individuals from top universities across the country, who eventually work in a district with teachers and headmasters of five different schools, five communities and five school heads; an average of 25 teachers creating impact and orchestrating transformations from within the system.

PFEL has also initiated District Transformation Programme (DTP) for systemic change that aims to coach and influence the middle management education officers into becoming better leaders. Currently, DTP works in two districts : Jhunjhunu, Rajasthan with 927 schools and Surat, Gujarat with 1,000 schools.


Piramal fellowship
PFEL has developed ‘The Piramal Fellowship’, an intense 24-months Youth Empowerment & Leadership Development Programme that acts as catalyst in creating change agents & nation builders. Fellows selected from A+ colleges of India facilitate the process of school change by working closely with the Principals, Teachers, Parents, Community members and Students engaged in the SLDP. They provide on-ground training and coach them in various aspects of pedagogy, institutional leadership and administrative efficiency. Fellows are trained to learn from the context (sector specific knowledge), their peers who are from diverse backgrounds and cultures (exposing them to observe the problem from different academic, genders and urban & rural lenses) and mentors who provide emotional support and guidance for self-growth. The two year journey creates an eco-system for young people to engage with social issues in a real manner and devote their energies to bring about the change through their tenure and effectively lead complex public systems in the future.

More than 60% of the alumni are directly or indirectly associated with government and non-government entities working in the education domain.


Outcome

  • Impacts more than five lakh students studying in over 3,400 schools in rural, tribal, hilly and urban demographics in Rajasthan, Gujarat, Maharashtra, Haryana and Uttarakhand
  • Geographical outreach: 5 states, 10 districts
  • The fellowship eco-system currently has more than 750 Fellows, which include both graduated and current fellows. Alumni are working with various non-governmental organisations (NGOs), corporates and government organisations holding high-impact positions across domains of education, health, livelihood and employment.
  • A campaign ‘Apna Bacha, Apna Vidyalay’ was jointly-initiated by Department of Education, PFEL and various media agencies in the academic year 2015-16 in the district of Jhunjhunu in Rajasthan, which resulted in enrolment of 30,000+ children in the government schools. The campaign was praised by Hon’ble Prime Minister of India during his ‘Mann ki Baat’ episode in the month of February 2017.



ESI (EMPLOYEE SOCIAL IMPACT)

As part of its overall CSR Policy, the Company implements Employee Social Impact (ESI), its ongoing programme offering volunteering opportunities to its employees.

It is an effort within the Piramal Foundation, dedicated to inspire and nurture commitment to social responsibility at an individual level by creating opportunities for strategic volunteering for the employees of Piramal Group.

ESI functions as a platform to bring volunteers and NGOs together. It ties up with various NGOs that provide their beneficiaries either the skills or the opportunities that they lack. Volunteers are recruited to engage in various skill-based activities that either help an NGO in capacity building or meet the special needs of the community.

Each Piramal office and plant has a lead volunteer – the Champion For Change (CFC). He or she is the go-to person during any of our collaboration. The CFC manages the co-ordination and execution of all volunteer activities within the office.





10-YEAR FINANCIAL HIGHLIGHTS