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Management Discussion  
Piramal Enterprises Ltd.
 
BSE Code 500302
ISIN Demat INE140A01024
Book Value(Rs.) 1003.29
NSE Code PEL
Dividend Yield % 0.99
Market Cap(Rs. in millions) 319926.06
P/E 220.87
EPS 6.42
Face Value(Rs.) 2  
Year End: March 2015
 

MANAGEMENT DISCUSSION AND ANALYSIS

1.1. Business-wise Revenue Performance

PEL's consolidated revenues grew by 13.8% to INR 5,122.6 crores in FY2015 as compared with INR 4,502.7 crores in FY2014, driven by growth across business segments (Exhibit 1). Piramal Pharma Solutions business grew by 12.4% to INR 2,007.7 crores as compared with INR 1,786.0 crores in FY2014, on account of higher offtake from ongoing contracts and good traction in the development business. Revenue from the Critical Care business grew by 5.1% to INR 756.8  crores as compared with INR 720.3 crores in FY2014, primarily driven by continued gain in the Company's share in existing markets and entry into new markets. Sales from the Consumer Products business was at INR 356.7 crores as compared with INR 313.3 crores in FY2014, registering growth of 13.8% for the year, driven by improved marketing strategy for existing brands and effective launch of new brands.

Income from the Financial Services, grew by 29.0% to INR 937.1 crores this year as compared with INR 726.2 crores for FY2014, on account of increase in the size of loan book and Assets under Management. Revenue from the Information Management business grew by 13.4% to INR 1,019.6 crores this year as compared with INR 899.3 crores in FY2014, driven by growth across entire range of products and services.

Total Revenues

During FY2015, each of the business segments have grown, contributing to the overall growth of 13.8% in the Company’s total operating income. 68% of PEL’s FY2015 revenues were generated in foreign currencies.

Operating profit

Operating profit for the year grew by 38.6% to INR 885.5 crores as compared with INR 639.1 crores in FY2014. Growth in operating profit for FY2015 was driven by strong revenue performance across most of the businesses and fall in R&D expenses. R&D expenses were lower, on account of scaling back of the Company’s investments in NCE research.

Operating profit margin (OPBITDA)

OPBITDA margin was higher at 17.3% in FY2015 as compared with 14.2% in  FY2014.

Finance Costs

Finance costs for the year were lower by 51.4% at INR 510.6 crores as compared with INR 1,049.6 crores in FY2014. This was on account of the reduction in debt, using the cash proceeds from the sale of the Company's stake in Vodafone India. Finance costs for FY2014 also included one-time charges of INR 178.3 crores, on account of discounting of Abbott receivables, for investing in lending operations.

Debrciation

Debrciation for FY2015 was higher at INR 289.9 crores as compared with INR 246.9 crores in FY2014. This was primarily on account of capitalization of intangible assets of Florbetaben and increase in fixed assets under Pharma Solutions (including acquisition of Coldstream), Critical Care and Information Management businesses.

Taxation

Tax expenses increased to INR 345.0 crores in FY2015, from INR 62.8 crores in FY2014. This was primarily on account of INR 267 crores of taxes paid on the profit made on the sale of the Company's stake in Vodafone India.

Net profit after tax (excluding exceptional items)

Net profit after tax (excluding exceptional items) for FY2015 was higher at INR 420.8 crores as compared with a net loss of INR 502.8 crores for FY2014. The increase in net profit was on account of significant improvement in sustainable factors, including strong performance across businesses, de-leveraging and associate income from strategic investments in Shriram Group.

Exceptional items

Exceptional gain for FY2015 includes profit on sale of 11% stake in Vodafone India for INR 8,900 crores (an investment of INR 5,864 crores made in FY2012), partly offset by the amount written down on account of scaling back of investments in NCE research.

Net profit and Earning Per Share (EPS)

Net profit for the year was INR 2,850 crores as against a loss of INR 501.4 crores in FY2014. The significant increase in net profit was primarily on account of higher operating profits, reduction in interest cost and gain from sale of stake in Vodafone India. EPS for the year was at INR 165.2 per share.

Dividend

The Board has recommended Equity Dividend of INR 20 per share. The total cash outflow will be INR 415.4 crores on account of dividend payments, including dividend distribution tax.

Loan Funds

Total debt as on March 31, 2015 was INR 7,306.1 crores, as compared  with INR 9,551.9 crores as on March 31, 2014. Reduction in debt during the year was primarily on account of repayment of debt, using cash proceeds from sale of the Company's stake in Vodafone India, partially offset by increase in debt due to higher investments in Financial Services segment.

Fixed Assets

During the year, PEL's fixed assets increased by INR 660.3 crores, primarily on account of acquisitions, capitalization of intangible assets of Florbetaben and increase in fixed assets under Pharma Solutions (including acquisition of Coldstream), Critical Care and Information Management businesses.

Investments

Book Value of Investments as on March  31, 2015 was lower at INR 7,767.9  crores, compared to INR 9,445.8 crores as on March 31, 2014. The decrease was primarily on the account of sale of the Company's stake in Vodafone India (an investment of INR 5,864 crores made in FY2012), partially offset by the acquisition of 20% equity stake in Shriram Capital Limited (SCL), ~10% equity stake in Shriram City Union Finance Limited (SCUF) and increase in investments under Financial Services business. As on March 31, 2015, the total amount invested in SCL and SCUF stands at INR 2,146 crores and INR 801 crores, respectively.

PEL ventured into the healthcare sector  in 1988. Over the last 27 years, the  Company has established itself as one of the most recognised and respected names in the healthcare industry. The Company has its manufacturing units located across India, Europe, US and Canada. Its strength lies in its culturally diversified team of over 4,000 members, from 20 nationalities. The Company has reported a strong trend of revenue growth over the years across all Healthcare businesses. The Healthcare revenues have grown at a CAGR of 16% in last three years and reached to INR 3,121.2 crores during  FY2015.

The Healthcare segment broadly operates in four businesses:

1. Pharma Solutions

The Pharma Solutions business featured among the world's top 10 Contract Development and Manufacturing Organisations  (CDMOs) (Source: UN Conference  on Trade and Development). It continued to serve five of the top seven global pharma firms for the past two decades. It also has long-term partnerships with several leading mid-size, small, virtual pharma firms in the West and in Japan, from br-clinical through clinical development and from commercialization through life cycle management.

2. Critical Care

PEL's Critical Care business is the third largest player in the global Inhalation Anaesthesia (IA) market. It is the only company in the world with a complete product portfolio of inhalation anaesthetics drugs. The Company has product availability in over 100 countries and is globally renowned in the domain of anaesthesia and critical care.

3. Consumer Products

The Company's OTC business is an India-centric consumer healthcare business. It has a strong brand portfolio, with most of its brands featuring among the top two in  their respective rebrsentative market and product categories. The business has a significant distribution footprint covering over 481 towns (with population of over one lakh) across the country. This gives an access to over 231,000 retail outlets (including 140,000 chemist stores) across India. Allergan India, the Company's JV with Allergan, continues to remain India's leader in Ophthalmology.

4. Imaging

The Company's Imaging business has a combrhensive pipeline with strong R&D and Marketing & Sales infrastructure in PET imaging. It is well positioned to become a market leader in molecular imaging. The potential size of the market could be in multi-billion dollars. Its promising lead commercial stage product, NeuraCeq (INN: Florbetaben), which received approvals from the USFDA and European Commission in FY2014, has commenced its commercial sales during this financial year.

Focused capital allocation strategy

The Company continues to remain focused on its strategy of efficiently allocating capital to consistently generate higher profitability, while undertaking controlled risk, with an overall objective to deliver superior shareholder returns. The segment has efficiently deployed the capital for its future growth through various organic and inorganic initiatives, during the year. Few of the key avenues include:  

Acquired Coldstream, a US based  CDMO into injectables (a promising  field)

Carried out debottlenecking and capacity expansion at different locations of Pharma Solutions business

In August 2014, the Company entered into a Joint Venture and Shareholders' agreement with Navin Fluorine International Limited (an Arvind Mafatlal Group Company) to form a Joint Venture Company named Convergence  Chemicals Private Limited. This Company will develop, manufacture and sell speciality Fluorochemicals to be used for Healthcare business. PEL holds 51% of the equity share capital of the Joint Venture Company.

Expanded global brsence and increased market share in Critical Care business

Improved marketing strategy for existing brands and effective launch of new brands in Consumer Products business

Further, in line with PEL's strategy and to rationalize the overall business structure, it decided to sell/discontinue few of its businesses, which were either non-strategic/non-core in nature or required investments for a longer time horizon, involving higher risk. During August 2014, the Company scaled down the R&D activities of its New Chemical Entity (NCE) division based in Mumbai, India. In September 2014, the Company sold its diagnostic solutions business, 'Lab Diagnostics and Point of Care' (LDPOC) to DiaSys Diagnostics India Private Limited. In April 2015, the Company sold its clinical research division known as 'Piramal Clinical Research' to Indoco Remedies, as it was not considered strategic in nature and formed a relatively small portion of PEL's consolidated business.

2.1.1. Pharma Solutions

Market scenario and our positioning

The pharmaceutical industry is facing a dual set of challenges. On one hand, patent expiry of blockbuster drugs, leaner drug pipeline, increasing drug development costs and reducing exclusivity period due to aggressive generic penetration have impacted revenue growth and profitability of various pharma companies. On the other hand, increased regulatory scrutiny has driven compliance and quality assurance costs northward while increasing the time it takes to bring a New Chemical Entity (NCE) into the market. The combined impact of these factors has led the industry to embrace strategies that optimize costs, while increasing efficiency, including increased outsourcing (in functions like research, manufacturing and clinical trial management), adoption of novel R&D models and migrating non-core business functions to lower cost countries (in China and India), among others.

Among these trends, the global pharmaceutical outsourcing market, which is currently about USD 131 billion, is expected to grow at a CAGR  of 8.7% between 2015-2020, to reach as much as USD 215 billion by 2020  (Source: Research and Markets). With high quality development and manufacturing assets (that are located, both in eastern and western parts of the world), strong scientific talent, solid client relationships, a brand that is trusted by innovators and an excellent regulatory track record, PEL is well placed to gain from this growing outsourcing trend.

Excellent reputation in global market

The Piramal Pharma Solutions (PPS) business of PEL, is among the leading Contract Development & Manufacturing Organizations (CDMO) with an excellent reputation in the global market, and has been the recipient of numerous recognitions and awards. The Company featured among the top 10 global contract drug manufacturers (Source: UN Conference on Trade and Development). In January 2015, PPS was recognized by the industry as a top performer in Quality, Regulatory, and Reliability. This brstigious award is a critical barometer of performance as it is voted on by clients that PPS serves. Recently, the Company was also voted as the No.1 CDMO in the world of ADCs. These awards validate PPS's approach that revolves around the pillars of customer centricity, investment in innovation, infrastructure leadership and nurturing strong scientific talent.

The key differentiators

Strong customer relationships:

PPS has continued to serve five of the top seven global pharma firms for the past two decades. In addition, the Company has long-term partnerships with several leading mid-size, small, virtual pharma firms in the West and in Japan, from br-clinical through clinical development and from commercialization through life cycle management.

End-to-end service offering:

The business has a seamless global network of quality, contract development and manufacturing facilities in North America, Europe and Asia (Exhibit 3). It offers an imbrssive array of services that cover the entire drug-cycle, from development and commercial manufacturing, to off-patent supplies of Active Pharmaceutical Ingredients (APIs) and Formulations (Exhibit 4). The Company is uniquely positioned and is among the select few CDMOs that offer services in both early development and late phase commercialization. Its capability as an integrated service provider and experience with various technologies has enabled it to serve innovator and generic companies worldwide.

World leader in ADC Manufacturing, a promising field:

Antibody Drug Conjugates (ADCs) are targeted therapies designed to deliver a drug payload to cancer cells, while minimizing the adverse effects on normal healthy cells and reducing the dose of toxins. Targeted therapies have been a major focus of research in Oncology. ADC has emerged as the best option among various options available globally. The ADC CMO Market in 2014 was USD 85 million and is expected to reach USD 1.1 billion in 2024 (CAGR of 29%) (Source: Roots Analysis Business Research published in  2014).

PPS offers integrated services of Conjugate Manufacturing and ADC Fill Finish. It is the only player with this kind of integration, giving it an unbrcedented advantage over the competition. Currently,  the Company has over 30% market share in the conjugates manufacturing. It has also won a World ADC 2014 Award - 'World leader in ADC conjugation services'.

A brand known for its Quality, Reliability and Compliance:

Most of the development centres and manufacturing sites have accreditations from regulatory bodies in the US, Europe and Japan. All manufacturing sites of Pharma Solutions continue to successfully clear regulatory audits, conducted by various leading global regulatory agencies. 'CMO Leadership Awards 2015'  re-rated the Company among best global CDMOs in areas of Quality, Regulatory and Reliability.

FY2015 operating performance

During the year, business delivered a record revenue performance, crossing INR 2,000 crores mark for the first time, primarily on account of higher offtake from ongoing contracts and good traction in the development business (Exhibit 5). During the year, the Company successfully completed USFDA audit in Pithampur, Morpeth and Canada sites.

Growing organically and inorganically  

Debottlenecking and capacity expansions

As PPS clients continue to look for new molecules to augment their lean pipeline, their investment in the discovery process is expected to increase. Due to the availability of strong scientific talent in Asia, it is expected that this research will be carried out at centres in countries, such as India and China. Recognizing this need, PEL invested in increasing the capacity at its Discovery Services facility in India, to carry out medicinal chemistry related services that support both biotech and large pharma clients. Additionally, PPS has also invested in capacity expansion at Grangemouth that enables the site to handle larger batch sizes for ADC manufacturing.

• A value accretive acquisition to enter into injectables, a promising field

PPS acquired Kentucky based Specialty Pharmaceutical CDMO, Coldstream Laboratories Inc. in January 2015 for USD 30.65 million. Coldstream is focused on the development and manufacturing of sterile injectable products. Coldstream has developed differentiated expertise to formulate and manufacture high potency and cytotoxic compounds, including ADCs. This acquisition will expand PPS's offerings and reach to new customers and bring significant synergies with existing operations. Coldstream operates from a FDA approved facility located in Lexington, Kentucky, USA. It is a high quality operation and has built significant customer relationships and a track record for sterile products. This acquisition allows PEL to move further into the injectable market segment and complements well with its sterile injectable development capability at Mumbai. It offers fill and finish options to its ADC customers.

Way forward

The business will continue to operate across the life-cycle, with a focus on late phase/off patent opportunities. Also, the focus will be on growing organically and inorganically in areas that offer growth opportunities, and are synergistic with the existing offering. It will further strive to expand its customer base and target newer segments/geographies

Over the past decade, we have significantly grown our business, initially inorganically and now organically. Our performance over the years is reflected by our strong global brsence in over 100 countries. Providing the best value to our customers and being the only player with the entire inhalation anaesthetic portfolio, positions us to continue to expand our share of the market. To drive growth, apart from working towards launching Desflurane, we are also working to add new products to our portfolio

Market scenario and our positioning

PCC is a leading player in the global anaesthesia market. With a varied range of anaesthesia solutions, primarily inhalation anaesthetic products, PCC provides customers with superior access to high quality critical care drugs across the world.

The global inhalation anaesthesia market is estimated at USD 1.2 billion. Currently, the Company is one of the top three global players in inhaled anaesthetics.

Evolution of business

PEL entered the field of inhalation anaesthetics in 2002 with the acquisition of ICI India Ltd. Since then, PCC has established itself as a global anaesthetic company. The Company made five more value accretive acquisitions up through 2009 and subsequently grown organically (Exhibit 6). These acquisitions were critical in shaping the Company's offering, providing access to global markets and integrating state-of-the-art manufacturing capabilities. PCC had a market share of 3% in 2009. The organic growth since then has enabled the Company to take its market share to 12% globally (Exhibit 7).

The key differentiators

p End-to-end product coverage:

PCC's product portfolio includes inhalation anaesthetics, such as Halothane, Isoflurane and Sevoflurane. Other critical care products, such as Propofol and plasma volume expanders also form a part of offerings. PCC is the market leader in Halothane (~90% of market share) and Isoflurane (~60% of market share] globally. As a firm, it continues to remain dedicated to the field of anaesthesia. With the addition of Desflurane, PCC will be the only company to offer a complete product portfolio of Inhalation Anesthetics (Exhibit 8).

• Global reach:

The Company sells products across 100+ countries and is globally renowned in the domain of anaesthesia and critical care. It has a strong brsence across major regulated markets including the US, Europe and Japan and over 50% market share in emerging markets (Exhibit 9).

• Trusted customer relationships:

PCC has strong relationships and high credibility among the  hospitals, doctors and end-customers, which it serves. It serves over 6,000 hospitals through a combination of a direct sales force (the US and select EU markets) and elsewhere with marketing partners. The Company works collaboratively with over 150 marketing partners in countries where it does not have direct capabilities. The Company's customers and partners depend on it to reliably provide them with high quality life-saving products.

Strong team:

The Company leadership has deep industry experience in the critical care and generics business. Its nimble and focused team acts collaboratively and entrebrneurially to adapt to meet the customer and partner expectations. The business strength also lies in its culturally diversified team of ~350 members from 20 nationalities, based out of 15 countries, with major operations  in the US.

Manufacturing and supply chain excellence:

The Company's focus on manufacturing and supply chain  excellence and its strategic decision to vertically integrate key inputs, enable it to profitably gain share in a market, with declining prices. Simultaneously, it ensures regular high quality product supply.

• Established track record:

PCC's revenue has grown at a robust rate in last 10 years, exceeding the market. The Company's growth until 2009 was driven primarily by successful M&As. Its more recent growth was organic as it integrated and capitalized on the products and capabilities it had acquired.

Increasing strong brsence in Sevoflurane - product capturing around 70% of the market

Sevoflurane, the current generation product, accounts for more than 70% of the global inhalation anaesthesia market (Exhibit 10). The US and Europe are the largest markets for critical care segment.

PCC has a large share in the US Sevoflurane market and is gaining traction in key European and emerging markets. Over the years, the Company's Sevoflurane market share, in terms of volume has grown tremendously in the Sevoflurane accounts for over 70% of the global inhalation anaesthesia market

US. New Sevoflurane contracts were won following the registrations and launches done in FY2015 in several new markets, including the UK, Australia, Saudi Arabia, Germany and the Netherlands.

Manufacturing facilities

PCC operates state-of-the-art manufacturing facilities in the US (Bethlehem, PA) and India (Digwal). It ensures adherence to world-class standards. The strategic location of these facilities enables PCC to produce high quality products at market-leading costs. The Company is able to supply all major markets from these facilities. It also ensures supplying throughout the length and breadth of the world with great amount of flexibility and commitment towards uninterrupted delivery. PCC's commitment for quality is resonated in global regulatory approvals (including USFDA approval] that are accredited to its manufacturing facilities. A strong team, global practices and appropriate use of technology ensure that its products are in accordance with the international standards.

FY2015 operating performance

Revenues from Critical Care business grew by 5% YoY to INR 757 crores in FY2015 from INR 720 crores in FY2014, primarily driven by continued gain in its share in existing markets and entry into new markets, despite high global currency volatility during the year. Recent policy changes in Japan opened the market to generics and PCC was able to exploit this opportunity. PCC's market share in Japan reached 51% for the month of March 2015. During the year, Sevoflurane was launched in new markets including the UK, Australia, Saudi Arabia, Germany and the Netherlands. Also, Sevoflurane's market share increased in the US and other emerging markets. The focus on manufacturing and operational excellence has enabled the Company to maintain its cost leadership through productivity improvements and volume growth.

Way forward

PCC is in the process of registering and launching its next generation product - Desflurane. Desflurane has untapped market potential with only one competitor. PCC's customer relationships, global reach and cost competitiveness are likely to make Desflurane another success story for PEL's Critical Care business. Apart from launching the first generic Desflurane, its core focus areas going forward will include:

•Increase market share in the inhalation anaesthesia markets where it is already brsent

Register and launch existing products in new geographies

In-organically and organically expand portfolio beyond inhalation anaesthetics - Injectable anaesthetics, analgesics, other hospital and veterinary injectable products, which are used in the critical care setting

Improve cost leadership and customer focus

.1.3. Consumer Products (otc)

Market scenario

The Indian self-care Market is sized at over INR 15,000 crores and has a large number of players operating in the Healthcare and Wellness segment. The market is witnessing exciting times with strong trends due to rising incomes levels, increasing consumer confidence in Self-care and exploding access to information. PEL's Consumer Product division is one of the fastest growing players in the domestic Consumer Healthcare Market.

Evolution of Business

Post dissolution of JV with Boots, PEL independently started its Consumer Product division in 2007. Acquisition of some of the top brands like i-pill from Cipla in the year FY2010 and Caladryl from Inova Pharmaceuticals in FY2014, gave a boost to revenue and business positioning in the industry. The business has grown at a CAGR of  18% over FY2012-2015 as against 12%  CAGR, reported by the addressable market. The ranking jumped from 40th position in 2007 to 7th position at brsent, by focussing on providing products with faster relief and proof of action vis-a-vis the competition (Exhibit 11).

The key differentiators

1. Strong distribution franchise:

The division has a unique capability of ensuring the availability of any new product in stores within 21 days of its launch. The distribution footprint has been expanded to cover over 481 towns (with population of over one lakh), including 140,000 chemist stores across the country (Exhibit 13).

2. Tie-ups with manufacturers:

PEL's OTC business has tie-ups with some of the best third party manufacturers in the industry, which helps it to maintain its cost at lower levels.

3. Strong brand positioning:

The business has strong brand portfolio and most of its brands are among the top two in their respective rebrsentative markets (Exhibit 12). Ranking of its major products in market are as follows:

• Saridon - It is India's largest selling Headache Analgesic and is recognized as 'Super Brand' in the list of top 100 brands. Saridon is Piramal Consumer Product's  first INR 100 crores+ brand and is growing fast. It is rated the largest oral analgesics brand by value market share.

Lacto Calamine Lotion -

Recognized as a 'Super Brand' - The brand also has strong footprints in the skin care market with its unique oil control formulation and brsence across various formats, such as lotions, face-washes, sunscreen and anti-aging cream. It continues to be the largest brand in calamine skin lotions.

i-pill/i-know - An acquisition from Cipla - the second largest brand in the Emergency Contraceptive Market. i-know is India's 1st ovulation strip and extends i-pill equity to other adjacent markets.

p Polycrol - An antacid brand, which is a largest in the East of India.

Tetmosol - India's number one doctor brscribed soap for skin related disorders

Jungle Magic Perfumes - India's 1st perfume for kids.  Caladryl - Largest brand in the topical anti-allergic and antipruritic segment

4. Multiple growth engines:

The Company has improved its market positioning through both organic and inorganic routes. For instance, it has acquired and grown products like i-pill and Caladryl,  introduced products like QuikKool in adult mouth care and entered into exclusive S&D partnership for Equal.

Sales & Distribution agreement with Merisant

The Company had entered an exclusive sales and distribution agreement for the Indian market with Merisant for its artificial sweetener, 'Equal'®. Equal® is one of the world's largest aspartame based sweetener brands, and is 2nd largest in India, in terms of unit volume sold. The deal enables Merisant to tap into PEL's strong distribution network in India and allows the Consumer Product  business to expand its offerings in the self-care segment. Merisant brings a brand of international repute to PEL's self-care portfolio. PEL aims to significantly increase Equal®'s reach across the target markets from its current levels. Equal® enjoys a strong brand brsence, and this alliance promises to combine strengths of both companies for the sole benefit of the consumers.

Joint Venture with Allergan

Allergan India, a 51:49 Joint Venture between Allergan Inc. And PEL, for ophthalmic products, commenced commercial operations in 1996. It has emerged as the market leader in the fast growing ophthalmic category, with the successful launches of a series of high technology medication and devices for diseases, such as glaucoma, dry eye, infections and inflammations. Today, Allergan India is the partner of choice for majority of the country's ophthalmologists, and is poised to grow at a rapid pace. It is an undisputed leader in the eye care pharma market with dominance in all major disease segments.

FY2015 operating performance

Revenues from OTC and Opthalmology business grew by 14% during the year to INR 357 crores, as compared with INR 313 crores, primarily on account of improved marketing strategy for existing brands, and effective launch of new brands. Products and brands launched earlier are now showing traction. 'Quikkool' became 2nd largest national brand for mouth ulcer in less than a year of launch. 'Jungle Magic' is the leading perfumery brands for kids.

Way forward

The Company will continue with its growth trajectory and has plans to be one among the top three players by 2020, through launching new products and further improving product availability across the country.

Note: All market data and positioning are based on independent syndicated research providers.

2.1.4. Molecular Imaging

During April 2012, PEL acquired the worldwide rights to the molecular imaging research and development portfolio of Bayer Pharma AG, through its subsidiary - Piramal Imaging SA. The portfolio involves developing novel PET tracers for molecular imaging, a key field of modern medicine. Piramal Imaging has offices located in Boston (US) and Havant (UK) to carry out its commercial operations and marketing functions in the US and EU, respectively. The Company's R&D hub is located in Berlin, Germany.

PEL aims to build its position as an innovator and leading player in the Molecular Imaging field with capabilities, spanning the entire value chain from research to sales. It is striving to develop innovative products that improve early detection and characterization of chronic and life threatening diseases, leading to better therapeutic outcomes and improved quality of life.

The leading product, NeuraCeq (INN: Florbetaben), is used for the detection and quantification of Beta-Amyloid plaques in the living brain. It supports the differential diagnosis in adult patients with cognitive impairment, who are being evaluated for Alzheimer's disease. At the time of acquisition, it was in the final stages of its Phase III clinical trials. Post the acquisition, Neuraceq™ has received approval from the US Food and Drug Administration (FDA) in March 2014, from the European Commission in February 2014 and from the Korean Ministry of Food and Drug Safety in December 2014.

Key Highlights

• Attractive Pipeline:

Piramal Imaging acquired all of Bayer's Molecular Imaging assets. These include a combrhensive pipeline of Molecular Imaging compounds, based on 10 years of R&D at Bayer, and a set of compounds that have been tested in human proof of mechanism studies. Piramal Imaging has prioritized four pipeline compounds in the fields of neurology, oncology and cardiology.

• High Quality R&D Team:

Piramal Imaging has a unique expertise in identifying, developing and commercializing novel Molecular Imaging compounds. Its existing R&D infrastructure with state-of-the-art labs in

FY2015 was a really important year for us. After getting approvals in FY2014, we commenced the commercialisation of our lead product NeuraCeq. We also executed several manufacturing and distribution agreements with our partners in the US and Europe. My team continues to work towards creating clinical and health economic evidence for the payers. Our combrhensive pipeline, strong R&D, marketing infrastructures and international network of manufacturing and distribution partners in PET imaging have positioned us well to become a major player in Molecular Imaging.

Berlin, in-house radiochemistry, QA/QC competencies and proven market development capabilities make it a strong platform for the development. The launch of additional Molecular Imaging tracers will enable advancements in Personalized Medicine.

• High Market Potential:

Since the incidence of Alzheimer's disease (AD) increases with age, the brvalence of this devastating disease will grow continuously with all industrial societies getting older. The total market size for Amyloid imaging agents is estimated to reach over USD 1  billion by 2025.

• Well Positioned to be a market leader:

Due to the ageing population, advances in imaging technology and pharma's shift to personalized medicine, the field of Molecular Imaging is expected to grow significantly. Piramal Imaging, with its combrhensive pipeline, strong R&D, marketing infrastructures and international network of manufacturing and distribution partners in PET imaging is well positioned to benefit from the growth and become a major player in Molecular Imaging.

• Business Alliance with Leaders:

Piramal Imaging has a history of successful research, clinical and commercial collaborations with university and research institutions, biotechnology, and pharmaceutical partners worldwide. Some of its renowned partners include AC Immune SA, IBA Molecular and CiCo Healthcare.

FY2015 business performance

The business has already started selling commercial doses in the US, Germany, France, Austria, Spain, the Netherlands & Italy and executed manufacturing and distribution agreements with partners in EU and the US. Licensing deals have also been signed for Australia, Canada and Ireland. Finally, the business has signed its first clinical supply agreement with a pharmaceutical company developing a disease-modifying drug for Alzheimer's disease. The Imaging team is now focused on driving sales, by educating dementia experts and supplying additional pharma trials, as well as creating health economic evidence for payers in registry trials.

Way forward

Piramal Imaging has a world-class molecular imaging portfolio with a promising lead product (Florbetaben) and an exciting clinical stage pipeline. The Company is also seeking a strategic co-investor to fund the business through key inflection points.

PEL's Financial Services segment offers a complete suite of products to meet the diverse needs of its customers. The Company has created its unique positioning in financial services sector through its strong brsence in the following sub-segments (Exhibit 14]:

Wholesale Lending

w INR 4,766 crores of lending to real estate developers and under special situation opportunities in sectors, including infrastructure.

Alternative Asset Management

w INR 8,441 crores of alternative  assets under management through a private equity fund that invests in real estate sector. It currently manages 12funds, including three third party mandates and one managed account. It is one of the first institutions (earlier named as INDIAREIT) in India to enter in real estate fund management business. It has a strong sponsor commitment of 7.5%.

Investment in Shriram Group

m INR 4,583 crores has been invested in Shriram Group's Financial Services business of companies. This investment has enabled the Company to enter into a long-term association with Shriram Group and strengthen its brsence in the Financial Services sector by diversifying into various areas. These majorly include used and new commercial vehicle financing, Micro, Small and Medium Enterprises (MSME) lending, life and general insurance, broking, wealth management and retail asset management. Following were the key milestones under our association with Shriram Group :

In May 2013, PEL acquired ~10% equity stake in Shriram Transport Finance Company Limited (STFC) for a consideration of INR 1,636 crores.

In April 2014, PEL acquired 20% equity stake in Shriram Capital Limited (SCL), the holding company for Financial Services business of Shriram Group. The total amount invested in SCL is INR 2,146 crores.

In June 2014, PEL acquired ~10% equity stake in Shriram City Union Finance (SCUF). The total amount invested in SCUF is INR 801 crores.

In November 2014, Mr. Ajay  Piramal, the Chairman of Piramal Enterprises, was appointed as Non-Executive Chairman of Shriram Capital (Holding company).

Over the years, the company has created a robust Financial Services portfolio with a strong trend of income growth and a solid exit track record (Exhibit 15).

The key differentiators Strong positioning:

PEL is one of the largest deployers of capital across all stages of the life-cycle of residential real estate projects in India PEL also stands among the top providers of structured mezzanine funding in India. It's exposure is well diversified across geographies, sectors and products in India.

Established Track record:

PEL has a well-established track record in wholesale lending (Exhibit 16). In last four years, the Company has grown the size of its loan book by multiple times. The Company has a loan book of INR 4,766 crores under real estate and special situations. It entered into over 77 transactions till date, with over 50 development partners located in the five Tier 1 cities - Mumbai, Pune, Bangalore, NCR and Chennai, to reach this scale. Under the lending business, the Company has made total disbursements of INR 7,559 crores till date.

The Company real estate private equity fund has an AUM of INR 8,441 crores, created through its investments in over 57 projects across six cities, with 23 leading developers (Exhibit 17).

Given PEL's reputation, network and track record of success, developers recognize the benefits of working with the Company,providing a brferential access to opportunities and repeat transactions.

The Company is among the first and few Indian players to have demonstrated a full cycle of fund raising, deployment, exits and distributions from the projects.

Robust review mechanism:

The business has stringent oversight by highly experienced Board & Investment Committees, including external industry experts  as well (Exhibit 18).

Seasoned Team:

PEL has highly talented and experienced teams of over 100 professionals, with healthy mix of investing and operating experiences, operating in five cities, reflecting the depth and scale of its operations.

Domain expertise:

PEL has expertise in alternate financing across asset classes private equity, mezzanine equity, mezzanine debt and senior lending, among others) and the ability to quickly identify and capitalize on new financing opportunities. The Group also has a strong track record of developing large real estate projects in India. Further, there exists an effective mechanism for sharing of learnings between PEL's Real Estate Financial Services business and Piramal Realty teams, without compromising its fiduciary responsibilities. This continuously enhances the expertise of both the teams.

Strong relationships providing an access to patient and intelligent capital:

Over the years, PEL has established strong relationships with large reputed partners (including APG Asset Management and CPPIB Credit Investments) and Ultra High Networth Individuals that gives it an edge to access long-term patient and intelligent capital. Strong corporate reputation gives it brferential access to capital. Alliances with these large, known partners reaffirms credibility in the Company's business mechanism

Areas of operation

The Company has its Financial Services businesses operating in following areas of national and economic significance:-

2.1.1. Real Estate

Piramal Fund Management (PFM), an arm of PEL, is one of the largest deployers of capital across all stages of the life-cycle of residential real estate projects in India. It deploys both internal and third party capital, in attractive opportunities in real estate to provide attractive returns for all its stakeholders. During the year, PEL brought its real estate private equity fund management business (earlier known as Indiareit) and its NBFC business, under a single vertical targeting funding opportunities within real estate. With over USD 2 billion of loan book and assets under management, it is one of India's largest real estate funding platforms. This platform provides an exposure to the  ntire capital stack across real estate, including private equity, structured  mezzanine equity, structured debt, senior secured debt and construction finance. The unique combination of a debt and equity practice within the same platform facilitates deeper engagement with development partners across their entire capital requirement through the project life cycle, right from longer tenure / initial stage equity funding to more mature / shorter tenure debt funding. PFM is uniquely positioned to deliver superior risk-adjusted returns, by leveraging its unparalleled skill sets, sector experience and industry relationships.

Unique features *

w Strong Governance:

The Investment Committee of PFM consists of sponsor rebrsentatives as well as independent experts from the industry. All investment proposals are reviewed by the Investment Committee members, who provide strategic inputs and oversight governance to ensure that an opportunity meets the investment criteria.They also ensure that investment guidelines have been thoroughly and appropriately evaluated, downside risks have been mitigated and the investment offers superior risk adjusted returns. Our in-house Risk and Legal teams strengthened their independent role in evaluating and monitoring transactions (Exhibit 19,  Exhibit 20).

Alliance with CPPIB:

PEL has entered into a strategic alliance with CPPIB Credit Investments Inc., a wholly-owned subsidiary of Canada Pension Plan Investment Board (CPPIB) to provide rupee debt financing to residential projects across India's major urban centres and invested under this alliance in FY2015. CPPIB is ranked as one of the top ten retirement funds in the world.

As on March 31, 2015, the CPP Fund totalled C$264.6 billion managing pensions of over 18 million Canadians. The partnership aims to jointly invest upto USD 500 million (with each party having committed USD 250 million) in India's burgeoning middle class residential sector, which has demonstrated

Several factors during the year, gave rise to numerous financing opportunities for us. Lack of equity capital to fund growth, valuation and cash flow mismatches in the short/ medium term, stressed situations of traditional capital providers and unavailability of fresh equity capital have helped our business. APG's partnership with us underlines the confidence reposed by the investors in our business model. J Jcompelling  fundamentals through ongoing population and income growth, and rapid urbanization.

Innovative Investment Opportunities:

During the year, the platform expanded its offerings to include construction finance, consciously completing its entire suite of products. Typically, structured equity or structured debt investments often get refinanced by banks or other NBFCs once the projects achieve certain milestones. Construction finance gives PFM the ability to extend the overall tenure of the relationship with a project, by not requiring the development partner to refinance once the project matures.

The fund management business has over the years introduced several innovative products for its investors, harnessing the unique skill set of its investment professionals. In keeping with the strategy of bringing special propositions to the market, designed to take advantage of a specific opportunity, it launched the 'Indiareit Apartment Fund' during the year. This fund is centred around a new deal structure focused on bulk buying of apartment units at substantial discounts to brvailing market prices while providing liquidity to the developers at an early stage. It has, in the past, at opportune moments, brought to market customized products with varying risk appetites like the 'Indiareit Mumbai Redevelopment Fund'.

Recognition:

During the year, PFM won two coveted awards announced by Private Equity International. It won the 'Firm of the Year - India' and 'Real Estate Debt Fund Manager of the Year - Asia' for 2014. The real estate fund management business was also rated 12th in top Asia Real Estate Fund Managers by PERE Guide in January 2015.

2.1.2. Special Situation Investments

191 Market Scenario

Indian infrastructure players have moved up in maturity scale as the portfolio of operational projects has increased and hence, is lending high visibility to future cash flows. Significant equity and mezzanine funding is required to meet government target investment of USD 1 trillion until 2017. This is the gap which players like PEL seek to bridge. Mezzanine investments for sectors such as infrastructure, etc. offer a compelling investment proposition.

Lack of equity capital to fund growth, valuation mismatches, cash flow mismatches in the short/medium term, stressed situations of traditional capital providers, private equity investors looking to exit and unavailability of fresh equity capital to the companies give rise to such financing opportunities. The last mile funding in the form of structured mezzanine products to corporates in such conditions are called 'Special Situation Investments'. The special situation arm of PEL provides funding to various sectors, including infrastructure.

PEL stands among the top providers of structured mezzanine funding in India. Following transactions have been entered under Special Situation:

v Vodafone - A milestone transaction:

During FY2015, PEL sold its 11% stake in Vodafone India Limited to Prime Metals Ltd, an indirect subsidiary of Vodafone Group Plc, for INR 8,900 crores. The Company had acquired this stake for INR 5,864 crores in FY2012 and earned a br­tax annualized return of ~19%. This transaction reaffirms shareholders' faith in the Company to generate attractive long-term returns and has also increased liquidity to make further investments that will generate superior returns.

• Structured Investment in Navayuga:

In March 2013, PEL made a structured investment of INR 425 crores through Optionally Convertible Debentures in Navayuga Road Projects Pvt. Ltd. (NRPL), the road subsidiary  of the Navayuga Engineering Company Ltd. (NECL). The portfolio comprises of eight Road SPVs, with a mix of operational and under construction assets, and has a tenor of 60 months with investor put at the end of 60 months.

• Structured Investment in Green Infra:

In April 2013, PEL had invested INR 500 crores in Optionally Convertible Debentures of Green Infra Limited. The Company monetised this investment in FY2015 by way of full cash payment. This is pursuant to Singapore's Sembcorp Utilities, a wholly-owned subsidiary of Sembcorp Industries, agreeing to buy a controlling stake in Green Infra, an IDFC Private equity fund-promoted independent renewable power producer in India. This transaction is first of its kind in India, wherein mezzanine investor has successfully exited investment made in the renewable energy sector. The business generated a return in high teens, upon monetization of this transaction.

•Strategic Investment Alliance with APG Asset Management

In July 2014, PEL and APG Asset Management, a Dutch pension fund asset manager in the Netherlands with an AUM of €424 billion (as on February 2015), entered into a strategic alliance for investing in rupee denominated mezzanine instruments issued by India's infrastructure companies. It has a target investment of USD 1 billion over the next three years. PEL and APG, both have initially committed USD 375 million for investments under this strategic alliance. This is one of the largest private sector commitments to the infrastructure sector in India. This alliance accentuates the confidence reposed by institutional investors in Piramal Group's capabilities. This strategic pool of capital will focus on operational and near completion projects with limited execution risks and high visibility of cash flows coming from a portfolio of projects

2.1.3. Strategic Investments in the Shriram Group

To further strengthen its brsence in the financial services industry and diversify the business across retail and MSME customer segment lending, the Company entered into a long-term association with the Shriram Group, by investing INR 4,583 crores. PEL's long-term partnership with Shriram diversifies its footprint into retail and SME customer segments through asset-backed and consumer finance, life and general insurance, distribution, broking, wealth management and retail asset management.

Investment in Shriram Transport Finance (STFC):

In May 2013, PEL acquired ~10% equity stake in STFC for a consideration of INR 1,636 crores. STFC, with a consolidated AUM of INR 621 billion, is one of India's leading players in commercial vehicle finance with a brsence in financing br-owned trucks and lending to small truck owners. It has pan-India brsence with a network of 741 branch offices, 776 rural centres, 16,160 employees, partnership with ~500 private financiers and a large customer base of ~1.2 million.

Investment in Shriram Capital  (SCL):

In April 2014, PEL acquired 20%  equity stake in SCL. The total amount invested in SCL is INR 2,146 crores. SCL is the holding company for the Financial Services businesses of Ajay Piramal is a good entrebrneur and we are organization builders. The equity investment by Piramal in Shriram creates a platform where both these skills get combined. So the entrebrneurial skills of Piramal Group will certainly help in introducing new ideas into the way we are doing business at  Shriram Group......and now with  Piramal on board, we can look forward to better entrebrneurial thoughts that can enable the business to do things differently and at a different pace. J J  the Shriram Group, created with the primary objective of optimizing the synergies across the Group's entities.

w Investment in Shriram City Union Finance (SCUF):

In June 2014, PEL acquired ~10% equity stake in SCUF. The total amount invested in SCUF is INR 801 crores. Shriram City Union is among the most established players in the consumer and MSME financing segment with an AUM of around INR 167 billion. SCUF is the largest small enterprise finance company in India in the small loan segment. It is also a prominent provider of loans against gold, financing for two wheelers, br-owned and new vehicle loans, personal loans and housing loans. Currently, SCUF has its brsence through 969 branches across the country.

FY2015 Operating performance

Income from Financial Services was 29% higher at INR 937 crores for FY2015, from INR 726 crores in FY2014. The growth in income was primarily driven by increase in the size of loan book and Assets under Management. Loan book grew by 67% over last year to INR 4,766 crores from INR 2,861 crores in FY2014. Fund Management AUM grew to INR 8,441 crores during FY2015, from INR 7,569 crores in  FY2014.

Way forward

Going forward, the Company plans to increase leverage by targeting a diversified liability mix, and thereby enhancing returns to shareholders. The Company will continue to remain nimble to new and attractive opportunities in identified business segments that arise as an outcome of the brvailing market environment

Information Management

The Company's Information Management business is a global, market leading, decision support platform in the healthcare information services sector. It provides indispensable insights and business oriented analysis through a variety of high value data, analytics, research reports, as well as knowledge-based services, which enable customers to make informed investment and cost containment decisions in each phase of the product lifecycle. These are built around proprietary data, algorithms, primary research and domain expertise. Most of the branded product lines have a leading market share in their respective niche. Currently, the Company serves the Life Sciences market (BioPharma and Medtech), but the business is expanding and leveraging its core assets to provide services to both the provider and payer communities, as well as other organizations keen in the healthcare market information.

Robust Industry outlook

In the US, national health expenditures increased from USD 1.4 trillion in 2000 to USD 2.6 trillion in 2010, and are expected to grow at the rate of  6% to reach USD 4.6 tillion in 2020  (Source: Centers for Medicare & Medicaid Services). Regulations such as 'The Patient Protection and  Affordable Care Act' (PPACA) of 2010 are expected to expand coverage to 32 million uninsured individuals (Source: Congressional Budget Office). In the wake of the PPACA and the resulting higher healthcare spending trends, the primary constituents in healthcare will change the way healthcare costs are reimbursed, shifting from a focus on volume to value. This, as well as the increasing cost to bring drugs and devices to market and greater regulatory scrutiny have resulted in an increase in demand for high quality information and analytical decision support tools and need for third-party insight from experts to navigate the increasing sector and regulatory complexity.

The Company's Information Management business has the proprietary data, strong analytical capabilities and industry insight to drive true performance improvement for key stakeholders across the healthcare value chain. It is already solving the evolving set of questions Life Sciences customers are facing within the value framework (Exhibit 21). The Company is well positioned to penetrate the broader healthcare services sector (Payers/Providers), which increasingly needs similar actionable insights and workflow tools.

The DRG 'core' business acquired by PEL served a USD 2 billion market, providing syndicated content to Life Sciences customers. Since the acquisition, the business has expanded its addressable market into the USD 6 billion Life Sciences information-enabled performance management (IEPM) market as estimated by the company management. The global healthcare expenditures are growing at a rapid rate driven by aging populations in G7 countries, new regulations and the availability of new treatments. The Company expects that these factors will contribute to increasing demand  for products and services among its customers (Exhibit 22).

To extend the Company's addressable market beyond Life Sciences, the Company will expand into the provider and payer markets within the broader healthcare services sector. The addressable market opportunities within the provider and payer markets are estimated USD 4 billion and USD 6 billion, respectively. As participants within these markets confront challenges similar to those impacting the Life Sciences market, the need for actionable insights and workflow tools brsents an opportunity for entry through leveraging current DRG products, new product innovation enabled by the Company's existing assets and actively pursuing acquisitions to accelerate market penetration.

The key differentiators

Combrhensive Product Suite:

The Company's portfolio is structured into three product categories (i.e. Data and Analytics, Research Products and Global Consulting Services) that have significant synergy with each other Exhibit 23). Such a portfolio allows the Company to meet customer needs brcisely. This flexibility also provides strong long-term competitive differentiation.

Strong brsence:

Headquartered in Burlington, Massachusetts (US), the business has brsence in the North America, Europe and Asia. The Company has leveraged its existing capabilities to establish brsence in large countries like China. This will enable the company to address its clients' demand for China data. Its offerings provide coverage of the G7 countries and all major emerging markets. The business has more than 700 employees globally.

Long term revenue visibility:

The Company's combrhensive product suite and the breadth of coverage have established strong relationships with its customers, embedding its services within their products and workflows. Its differentiated and indispensable offerings have contributed to 10+ year relationships with the top ten customers. The Company's growth has led to a well-diversified customer base (900 total clients including the vast majority of top pharmaceutical and medical technology companies) with no one rebrsenting more than 5% of revenue. Data & Analytics and Research Products comprise over  75% of total revenues. With 100%  retention among top 50 customers contributing to -80% of revenues, the Company has high revenue visibility. Total revenue retention by value is -96% across the entire customer base.

Gold standard solution provider:

For more than two decades, the business has provided the gold standard solutions for healthcare customers needing to evaluate the critical balance between economic viability of therapeutic choices and  their corresponding efficacy.

A single integrated global platform:

The Company has been working towards shifting from a portfolio of brands (accumulated through a roll-up strategy), to an integrated healthcare information services and analytics business. The business has been restructured as one integrated organization, with significant scalable platforms via investments in global sales and marketing, distributed production technologies, cross-functional talent and new product delivery platforms. The shift towards consolidation is resulting in revenue and cost synergies brviously unrealized, as acquired companies were kept as individual brands, prior to the Company's acquisition of Decision Resources Group (DRG).

Growing through product Innovation and acquisition:

PEL's Information Management business competes with multiple 'pillars' for accelerating the value of new product innovation and acquisition synergies. New product innovation and acquisitions are leveraged into the existing business platforms, which in turn, create multiple sources of synergies such as, moving production to low-cost centres, co-mingling content for improved/new offerings, transformed methods and faster delivery. Under PEL's ownership, the business have made the following successful acquisitions. Each of these transactions was executed because of the strategic fit within the new business strategy and are meaningfully contributing to the business capabilities platform while facilitating addressable market expansion (Exhibit 24).

Abacus International:

In December 2012, the business acquired UK-based Abacus, a pioneer in evidence-based global market access solutions for many of the world's leading healthcare companies. The acquisition resulted in a significant global expansion of its capabilities.

Relay Technology Management:

In January 2014, the business acquired Relay Technology Management, a Data Analytics company focused on the life-sciences industry. The acquisition was a strategic step in the Company's effort to supply its clients with brmier data analytics through delivery systems that most fit their needs.

Activate Networks:

In March 2015, the Company announced the acquisition of Activate Networks, a provider of network and relationship analysis. The acquisition will expand the Company's underlying analytics capabilities and support clients with sales force targeting.

Health Hiway:

In April 2015, the Company agreed to acquire a majority stake in Health SuperHiway Private Limited, a healthcare analytics company, within the next three years. It is well regarded for its strong competencies in providing data integration, analytics and solutions development to Indian healthcare providers.

Healthcare Business Insights (HBI):

In May 2015, the business acquired HBI a trusted provider of best practice research, training and services to more than 1,400 hospitals across the US. This acquisition will mark the Company's entry into the provider space.

Strong operating performance during the year

Revenue from Information Management business grew by 13% YoY, to INR 1,020 crores in FY2015 from INR 899 crores in FY2014, driven by growth across entire range of products & services.

Way forward

Growing Organically - The business has a successful history of launching new products, delivery formats and accretive cross-brand portfolio solutions, and has built a process to continue this trajectory that will drive substantial organic growth. It has built a process to gain insights into evolving customer requirements to create an engine for new product development.

Growing inorganically - The  business' combined sales, product, data, and content platforms serve as a unique platform to execute accretive acquisitions. To accelerate the growth and achieve meaningful scale, the business is pursuing M&As. Its proactive  approach includes building a pipeline consistent with its core growth strategy.

 The business will continue to  leverage its existing capabilities to expand in key growing jurisdictions to strengthen its global footprint and diversify into provider and payer markets. The business segment is also planning to enter India to accelerate growth through accessing talent, improving customer delivery and response time and realizing cost efficiencies.

Note: All market data are based on proprietary market research and internal estimates.

3. Risk Management

Managing risk is integral to PEL's business. The Company operates a structured and continuous process of identifying, analysing, responding and mitigating the risk events that have the potential to generate adverse effect on the achievement of organizational objectives. PEL has established an independent and dedicated risk management function and has a Board approved Enterprise Risk Management (ERM) Policy (Exhibit 25).

ERM as a framework provides a set of tools that helps senior management and the Board to assess the risks being undertaken, align their strategy & operations to suit the risk appetite and take necessary steps to reduce / mitigate risks, which could potentially affect their operations, performance and reputation. The ERM framework lays out the risk philosophy, governance structure, and measurement approaches to be followed in PEL. The policy also ensures that PEL maintains an effective distinction between those who establish the risk policy and its methodologies (i.e. risk management  group) and those involved in taking controlled risk (i.e. business units). Specific risk approaches have been formalized for financial and non-financial businesses.

The overall approach to risk management at PEL is based on the following principles:-

aims at value creation and protection

is an integral part of processes and  decision making  

addresses uncertainties explicitly  

is structured, dynamic and  responsive to change

Risk assessment for existing businesses (non-financial)

Risk registers are maintained for all existing business units. All potential risks are assigned an impact and likelihood rating. Risks are classified into various categories for better management and control. Each risk category is assigned an owner and appropriately defined for the purpose of common understanding. Further, mitigation plans are identified,  documented and undertaken periodically. The aggregated risks across various business units along with the proposed mitigants are brsented and reviewed by the Management on periodic basis.

Risk assessment framework for Financial Services

A standard risk assessment framework is developed to measure the risk of new investments in Financial Services businesses. Risk evaluation takes into consideration market risk, credit risk and operational risk.

Risk analysis begins with identification and measurement of quantifiable and non-quantifiable risks.

Quantifiable risks are estimated as variability of cash flows due to market factors.

Non-quantifiable risks are measured as strength of security, promoter and exit options. All these are evaluated using scorecard based approach. Impact of concentration risk, reputation risk and operational risk is considered through standard mark-ups.

All risk parameters are aggregated to generate a risk measure which indicates investment attractiveness.

Quantitative risks

Quantification of financial impact under stressed market scenarios:

Identification of key risk factors:

Key risks which are likely to impact the project cash flows are identified.

Monte Carlo simulation or stress case scenario modelling is done to determine the cash flows under stressed market conditions. Stressed market conditions are simulated to reflect the risk factors identified above. Variation between base case cash flows and stress case cash flows provides a measure to determine the robustness of cash flows.

Non Quantitative risks

Non-quantitative risks are measured using scorecards. Scorecards provide an objective way to quantify parameters which are otherwise non-measurable. Following risk parameters are measured using scorecard approach:

• Security package strength:

Cover aspects like regulatory risks, legal risks, security adequacy and ease of enforceability.

• Promoter strength:

Cover aspects like promoter's financial, management and business strength.

•Exit Options:

Cover aspects like ease of exits, investor rights and brcedence of exits.  Concentration and operation risk are factored through mark-ups. Concentration mark-up is determined based on incremental portfolio exposure to single borrower, sector and  geography.

4. Human Resources (HR)

The Human Resources team of the Group has sharpened some of its key initiatives last year to align itself with the needs of the businesses while keeping a strong focus on integrating the core values of 'Knowledge, Action and Care' with every HR touch point.

In line with its purpose of 'Doing Well and Doing Good' and ensuring alignment with the overall medium to long term business priorities, the Group has now embarked on a journey to transform its Human Capital practices thereby steering its alignment to each of the businesses.

HR Transformation Project: SEEDS (Strategy for Employee Engagements & Development Support):

The Human Capital transformation project was initiated late last year after a detailed research conducted by Towers Watson, a globally renowned HR consulting firm, to determine how HR can partner better with the businesses to help them achieve their medium to long term priorities. Post their findings and recommendation, the Group identified following areas in which HR will strengthen its support to the business. The deliverables in these areas will be co-owned by HR team members and business/functional heads to ensure that each of the practices is suitably aligned with the business needs.

1. Continue driving "One Piramal" culture:

Identifying cultural elements that would help businesses attract and retain talent based on the uniform experiences and standard processes delivered across businesses in various geographies. Keeping our core values at the center, the teams are in the process of determining cultural threads that are felt consistently across the organization thereby providing a distinct experience to our potential as well as current employees and stakeholders and also strengthening Piramal Group's image of being an Employer of Choice.

2. Enhance Talent Capabilities:

In line with our larger vision, the Group has recognized a need to build a strong bench strength of the future ready talent that will support its ambitious business growth plans. The team here will focus upon designing and delivering capability development programs for "ready now" talent, Hi-potential development, creating "adaptable global leaders" for sustained growth and promoting performance driven culture.

3. Improving Efficiencies:

The team here aims to empower our managers to take better HR decisions by providing them with analytics that will co-relate with the business performance achievement. A right blend of systems and matrices will ensure that decision making across the organization becomes faster, informed and efficient. The team here will be creating systems that will help reduce transactional activities thereby allowing HR teams partner better with their business counterparts.

The 3-year HR Strategy roadmap will create enhanced alignment in our businesses and introduce platforms for our current and future employees to experience some of the best in class practices in the employee development domain.

Talent Acquisition: One of the  objectives set out for the Group was to help potential employees feel a distinct and uniform experience while being interviewed for positions across the organization. To do so, a central talent sourcing team was set up to facilitate the sourcing for all businesses across the Group. Apart from reducing of the employees who participated in the 'Bandhan' survey, are favorably engaged with the organization. the turnaround time for filling up various positions, the creation of this team is further helping the business HR partners to spend more time with their respective businesses in addressing their strategic HR priorities.

Learning and Development:

PEL's values of 'Knowledge, Action and Care' include the need for its employees to constantly build expertise and domain knowledge, thereby, creating value for themselves and for the company. The 'Learning University' our in-house university - continues catering to the learning and growth needs of the employees in the group. The Learning University continued to partner with businesses by offering specific interventions aimed at driving customer centric culture, improving productivity and skills of the employees at various levels and improving execution efficiency in our businesses. More than 4,000 employees became a part of various Learning University offerings and managers of such participants have continued to provide positive feedback scores on the impact that such initiatives have on the overall business deliverables.

Performance Management System:

With an objective of enhancing the performance measurement system and making it robust, the elements of performance conversation, coaching and mentoring and critical incident based review process was introduced. This helped in bringing a holistic approach in the review process since it included the contribution made by an employee to the business other than the traditional KRAs

E-learning modules, explaining the process of conducting such dialogues with employees, were also introduced with an objective of making the process interactive and meaningful for every employee in the Group.

Bandhan - Employee Engagement Feedback:

As an extension of the value of 'Care', every year employees in the Group participate in the employee engagement survey 'Bandhan' that provides valuable inputs to the organization on how employees feel and perceive the organization, leadership, the roles and the overall culture within the Group. More than 85% of the employees provided their valuable feedback in this survey conducted last year and the results showed that 92% of the participated employees are favorably engaged with the organization. Also, 93% employees felt that they have energy to sustain through the day and get along well with their peers and an equal percentage of employees felt that we are truly customer focused and we constantly look for ways to improve the customer experience. The results of this survey  were then cascaded into every business unit and employees drew up action plans along with their managers to sustain the positive scores and improve upon areas that need attention. The action plans are regularly monitored and evaluated to help improve engagement levels within various teams.

. Environment, Health and Safety

As a responsible company, we are committed towards protecting the environment (where we operate) and promoting the health, safety & well-being of all our employees. We at Piramal believe that Environment, Health and Safety (EHS) are crucial pillars for sustainable growth of our business. The Corporate EHS team develop policies and guidelines that provide technical support and assistance to all the sites on EHS matters. Regular audits of our sites ensure compliance and also provide a strong and robust system for continuous improvements. In fact, constant audits of various locations by our global customers help us to raise our standards even further.

Performance of our overall EHS management system is regularly evaluated and reviewed throughout the year. The effectiveness of our EHS management system can be reaffirmed by the fact that we are mostly in compliance with all the Indian and global standards.

Environment

We recognize that brservation of the environment is vital and we remain committed towards conserving our resources and acting responsibly. Quality environmental performance is a key component of our facility operations. During the year, all our manufacturing sites remained compliant with their applicable environmental regulations. Reuse & recycle of natural resources is one of our key objectives. We have developed adequate infrastructure to treat waste water and reuse it.

Various initiatives were undertaken to up-grade the infrastructure for environment management at our manufacturing sites. Up-gradation of waste treatment plant, installation of online monitoring system for process emissions and ambient air quality, switch over from fossil fuel to carbon neutral fuel etc. are among the few. Most of our facilities have achieved various recognitions / certifications such as ISO-14001 & OHSAS-18001.

Occupational Health and Safety

We actively promote a policy and culture of workplace risk brvention in order to guarantee a safe and healthy workplace. We have undertaken numerous initiatives to enhance safety standards at our manufacturing sites / office brmises to ensure that our employees and all other stakeholders feel safe while working at PEL.

As an acknowledgment of our efforts, Digwal facility received 'Sword of Honour' from British Safety Council. The British Safety Council Sword of Honour in 2014 was brsented to 50 companies across globe for pinnacle of achievement in the world of health and safety management. PEL was among the five companies in India, which received this honour. Further, in the Healthcare sector, PEL is among three organisations globally and only organization from India selected for the honour.

6. Piramal Foundation - A Piramal Group's CSR initiative

India faces enormous challenges in provision of basic public services to large parts of the population, more particularly in assuring a minimum quality of service, albeit at a reasonable cost. There is also a growing realization that complex and seemingly insurmountable social problems cannot be solved by individual organizations or a single stakeholder group. It requires different parts of the ecosystem, such as funders, government, non­profits, corporates and media to work collaboratively to create long-term social change.

The Piramal Foundation aims to create solutions to some of India's most brssing challenges. It aims to transform Health, Education, Water and Social Sector Ecosystems through high impact solutions, thought leadership and partnerships.

Piramal Group is playing a meaningful role in bringing professionalism, leadership and rigor in implementation to projects undertaken through Piramal Foundation. We believe that innovation can play a crucial role in  developing 'out of the box' solutions to seemingly intractable problems faced by the country. At the same time, it is crucial that any solution piloted by the Foundation has the potential to achieve scale and be replicable across large geographies of India. In doing so, we actively seek partnerships with government and private entities in an open source relationship that seeks to maximize the impact of its solutions.

In line with the focus areas that our Foundation has invested in, we work on improving learning levels in primary education, improving child mortality rates and maternal health, empowering women in rural areas and improving access to safe drinking water. We currently work across 19 states having touched over 44 million lives in the last 7 years. Our programs in every vertical are built on bedrock of strong partnerships with multiple State Governments, International Organizations, Corporates and Educational Institutions. Other Piramal group companies also collaborate with PEL in making investments in its CSR initiatives.

Education - Piramal Foundation for Education Leadership (PFEL)

PFEL's mission is to build leadership capacity in Government schools thereby contributing to an improvement in Student Learning Outcomes. PFEL also implements a two year Fellowship Program, developing young graduates into nation builders of tomorrow.

The Principal Leadership Development Program (PLDP) works on inculcating right mindsets and leadership skills of headmasters in government schools across three states. With support from the fellows and other PFEL staff, the headmasters develop processes and systems that can improve the schools in the long-term. Our Foundation is building sustainability for this program by engaging with all stakeholders of school ecosystem, causing intrinsic impact at three levels, that is, changing attitude of individuals, building new skills and institutionalizing learning outcome. The program delivered an improvement in student learning levels in academic year 2014-15: 23% and 18% in Class 3 & 5 Maths and 27% and 17% in Class 3 & 5 Language, respectively across 700 schools at 4 program locations in Rajasthan.

PFEL also works towards adoption of global best practices through multiple partners including State Governments, International organizations like UNICEF, USAID, Michael and Susan Dell Foundation, and other knowledge partners. PFEL is actively engaged with the National Council for School Leadership (NCSL) in providing capacity building support to other state governments in the areas of school leadership.

Healthcare - Piramal Swasthya Management & Research Institute

Piramal Swasthya is built on the core belief of 'Healthcare for All'. It works towards improving health status by delivering primary healthcare solutions to most vulnerable sections of society by leveraging Information & Communication Technology (ICT) platforms. Its smart deployment of ICTs combined with on-the-ground delivery mechanisms, have created customized scalable solutions across multiple states.

Piramal Swasthya offers three distinct services:

Health Information Helplines providing medically validated advice and counselling services

Mobile Health Services addressing issues of physical access, especially towards maternal and child health

Telemedicine Services bringing specialist support for people in remote locations through use of digital medical technology.

Swasthya employs an efficient three-dimensional model to design and implement its services - People (Beneficiaries, Health Specialists), Platforms (Virtual, Mobility platforms] and Portfolio (Services such as Screening, Identification, Advice, Referral and Follow-up].

The Swasthya solutions are replicable and flexible to accommodate varied services and have strengthened government programs in seven states. In addition, its partnerships with International foundations, such  as World Diabetes Foundation and MacArthur Foundation has helped pilot new solutions to existing problems, before being scaled up through government programs.

Piramal Swasthya is an active member of the USAID Dasra Alliance on RMNCHA (christened the Dasra Girls Alliance] in contributing best practices, scalable models and capacity building support for organizations engaged in this space. Piramal Swasthya was recognized as Winner - Health Category in the Times of India Social Impact  Awards 2014.

Safe Drinking Water - Piramal Sarvajal

In line with our focus on clean drinking water, Sarvajal aims to innovate, demonstrate, enable and promote affordable safe-drinking water solutions. Sarvajal uses patented, top-of-the-line technology to make pure, affordable drinking water accessible to underserved communities through community based solutions. Sarvajal has also pioneered a hub-and-spoke model built around decentralized water-filtration plants and supplying water to decentralized Water ATMs located throughout the community. Real-time monitoring, quality control and transparency are the hallmarks of a Sarvajal deployment.

Sarvajal is a socially conscious, self-sustaining model operating in collaboration with local entrebrneurs in villages. Furthermore, its partnerships with government bodies, such as Delhi Jal Board, Delhi Transport Corporation, Department of Irrigation and Public Health (Himachal Pradesh] under existing water-supply programs make it a sustainable model in the long run. Its community-based-water-solutions have helped in evolution of the entire water eco­system in its areas of operations. Sarvajal is increasingly working with corporates in implementing clean drinking water solutions in water stressed communities.

Through its seeding approach, Sarvajal has catalyzed local investments in this sector. Sarvajal is today recognized as a leading social enterprise setting benchmarks by easing access and affordability of water.

Women Empowerment - Piramal Udgam Data Management Solutions

Piramal Udgam is a rural state-of-the-art BPO in Rajasthan, which aims to create opportunities and provide employment to rural youth, primarily women. It provides data and voice processing to varied national and international clients, including some of India's large private corporate groups.

Working at Udgam empowers these women with an employable skill set, achieve financial and social freedom and earn renewed respect from the community. Above all, it enables them to choose responsibly for their families and communities. Udgam is also undertaking focused efforts on generating livelihood opportunities through Self Help Groups and formation of Co-operative for disaster hit locals in Uttarakhand. The Uttarakhand project has entered into partnerships with technical partners on agriculture related activities.

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