Indian billionaire Ajay Piramal-promoted, Piramal Enterprises Ltd.’s profit soared in the quarter ended March as it recognised deferred tax assets arising from the merger of its wholly owned subsidiaries.
Profit rose 13 times to Rs 3,940 crore as compared with the same quarter last year, due to a tax write-back of Rs 3,569 crore, the company said in its filing with the stock exchanges. Net sales, contributed by its three verticals — financial services, pharma and healthcare analytics — increased 21 percent to Rs 2,991 crore on a yearly basis.
Earnings before interest, tax, depreciation and amortisation rose 33.7 percent to Rs 1380.6 crore while the operating margin expanded to 46.1 percent to 41.2 percent.
Merger Of Financial Services Arms
The company also concluded the reverse merger of its financial services subsidiaries — Piramal Finance and Piramal Capital into Piramal Housing Finance — effective March 31. “It made sense for us to bring all the lending businesses under one umbrella,” Piramal told BloombergQuint in an interview. The merger would provide the company a better credit rating due to a diversified portfolio of the combined entity, which would eventually bring down its borrowing costs by 30-50 basis points. The company also expects the return on equity to go up by 2-3 percent this year, he said.
The Rs 3,569-crore deferred tax asset created by the merger would reduce the actual tax outflow over the next 6-7 years, he said.