Dear Shareholders,

My warm greetings to all of you.

The continuation of the COVID-19 pandemic, together with the recent geopolitical events, have fuelled inflation globally, resulting in enhanced uncertainties in the business and economic environment.

Over the last few years, we have made our balance sheet stronger and our business model more resilient, to adapt to such uncertainties. This got reflected in our performance during the year. Our efforts resulted in revenues of ₹ 13,993 Crores and a net profit of ₹ 1,999 Crores.

Infact, FY 2022 was marked by the achievement of two major milestones:

  • Firstly, we completed the acquisition and integration of DHFL, the first financial services company to get resolved through the Insolvency and Bankruptcy Code (IBC) route, and amongst the largest resolutions in value terms. The acquisition also enables us to create a pan-India platform to address diverse financing needs of the underserved ‘Bharat’ market.
  • Additionally, our Board approved the demerger of our Pharma business and the simplification of the corporate structure in October 2021, transforming our company from a multi-sector conglomerate structure into two separate sector-focused listed entities in Financial Services and Pharmaceuticals. We have already received consent from RBI, SEBI, Stock Exchanges, and clearances from most of our creditors. NCLT has now allowed us to convene a shareholders’ and creditors’ meeting and seek their approval too. We are on-track and the demerger is expected to get completed by the Q3 FY 2023, subject to various required approvals.

Financial Services – Embarking on our next phase of transformation

Over the last few years, we took several steps to build a resilient business model that could tide over multi-year business cycles. These measures included – improving capital adequacy, reducing loan book concentration, creating provisions in response to COVID-19, reducing leverage and strengthening our liability side.

DHFL Acquisition enabled major transition and quantum growth

FY 2022 was a pivotal year for our Financial Services business. DHFL acquisition was a major step in the transformation journey of our Financial Services business. We acquired DHFL for a total consideration of ~₹ 34,250 Crores (including upfront cash of ~₹ 14,700 Crores and ~₹ 19,550 Crores through 10-year NCDs at 6.75% per annum). Through the DHFL acquisition, we achieved a major portfolio transition, as well as significant growth, that would have otherwise taken several years to accomplish through the organic route.

Growth: Overall AUM grew 33% yoy to ₹ 65,185 Crores, with the retail loan book growing by 4x yoy to ₹ 21,552 Crores.

Diversification: The acquisition helped us to make good progress towards transforming ourselves into a diversified lender. The share of retail loans increased to 36% as of March 2022 from 12% in March 2021.

Scale: The acquisition enabled us to have access to ~1 Million life-todate customers and a network of 309 branches across 24 states/union territories across the country.

We completed the acquisition and integration of DHFL, the first financial services company to get resolved through the Insolvency and Bankruptcy Code (IBC) route, and amongst the largest resolutions in value terms. The acquisition also enables us to create a panIndia platform to address diverse financing needs of the under-served ‘Bharat’ market.

Granularity: It also helped us become one of the leading Housing Finance Companies in India, focused on affordable housing, with an average disbursement ticket size of ~₹ 13 Lakhs during Q4 FY 2022.

With healthy loan book spreads, no incremental operating costs to be incurred on the acquired loan book, potential upside from recoveries from DHFL’s legacy NPA pool and a large off-balance sheet fee-earning securitised pool worth ₹ 18,747 Crores, we believe that the DHFL acquisition is a profit accretive acquisition for us. This growth has been achieved without infusing any additional equity. Additionally, the valuation paid by us has created an adequate buffer to mitigate any unforeseen asset quality risks.

We have made significant progress in the last 6 months on the integration of DHFL. We have retained 3,000+ employees of DHFL and rolled out several job offers post the DHFL acquisition. We have reactivated nearly all erstwhile DHFL branches.

Now focused on sustained Growth and Profitability

With the DHFL integration now largely complete, we are focused on achieving sustained growth and profitability. We are working towards further diversifying our financial services business model to make it retail oriented, while achieving a balance between three pillars -Growth, Risk and Profitability

Our Board approved the demerger of our Pharma business and the simplification of the corporate structure in October 2021, transforming our company from a multi-sector conglomerate structure into two separate sector-focused listed entities in Financial Services and Pharmaceuticals. We are on-track and the demerger is expected to get completed by the Q3 FY 2023, subject to various required approvals.

Retail Lending

In 2020, we launched a technology-led multi-product retail lending platform, which is ‘digital at its core’ and ‘phygital’ (i.e. physical, as well as digital) at the customers’ end. Over the last few quarters, we also assembled a best-in-class leadership team across various businesses. Post the acquisition of DHFL, we have adopted a ‘Twin Engine’ approach for our Retail Lending business, which would drive scale and growth.

  • Engine #1 is the ‘phygital, secured lending’ business with a dominant position in affordable housing, mass affluent housing and MSME loans, contributing to 90%+ of retail AUM.
  • Engine #2 is the ‘Digital embedded Finance’ business, where we offer small-ticket and short-duration loans (such as personal loans, purchase finance, etc.), originated through digital channels and partnerships. We are live with 12 partnerships across several segments. This acts as a customer acquisition engine, helping add 90%+ of our new customers.

This approach is leading to a significant growth traction in the Retail Lending business. Retail disbursements have witnessed healthy growth, reaching ₹ 1,480 Crores in the fourth quarter (267% yoy growth), as a result of the activation of multiple branches along with new customer acquisition.

As a part of our technology initiatives, we have built in-house software development capabilities to build and scale our digital assets.

  • Our Digital Centre of Excellence is located in Bengaluru with a strong team of ~200 members, for technology and analytics.
  • We also launched our mobile app, recording 125,000+ downloads till date.
  • As part of our technology strategy, we are building a world-class tech and Artificial Intelligence (AI)-driven lending business, which is cloud-native and hence scalable.

We are looking forward to:

  • Expand our branch network further, by adding 100 branches in FY 2023.
  • Expanding our product suite by launching new differentiated higher-yielding products.
  • Enter new partnerships with Fintech and Consumer Tech firms to acquire customers at scale, at low acquisition costs.
  • Making equity investments in select leading Fintech players, such as Earlysalary, which have the necessary building blocks to reach significant scale.
  • Continued investments in technology to help us improve cost efficiency and better manage asset quality to stay ahead.

With all these initiatives, we are on-track to achieve disbursements of ₹ 2,500-3,500 Crores in Q3 FY 2023 (i.e. 5-7x of pre-merger levels).

Wholesale Lending

The real estate sector goes through up-cycles and down-cycles, which typically last for 6-8 years. Residential real estate inventory levels have come down and affordability has also improved. Moreover, there has been significant consolidation in the real estate sector over the last few years.

Our developer clients’ collections from homebuyers improved, amidst advancement in the completion of projects. Additionally, over the last few years, we have increased the granularity of the wholesale loan book. As of March 2022, there is no single-borrower exposures (net of provisioning) that exceed 10% of the net-worth of the Financial Services business.

With the DHFL integration now largely complete, we are focused on achieving sustained growth and profitability. We are working towards further diversifying our financial services business model to make it retail oriented, while achieving a balance between three pillars - Growth, Risk and Profitability.

‘Wholesale Lending 2.0’

Going forward, it is essential that our strategy reflects the challenges and opportunities in our operating landscape, paving the way for us to adapt and innovate to grow. In FY 2022, we laid out the foundation for ‘Wholesale Lending 2.0’. With significant consolidation taking place among NBFCs in wholesale lending/developer financing businesses, we believe that we are among those few NBFCs that have continued to remain strong, even after this prolonged crisis environment. We aim to cater to a large addressable market and have started executing new deals in our wholesale lending business.

Our new approach will be to make the wholesale lending business a lot more calibrated, granular, focused on smaller loans and cash-flow backed, with a superior risk management framework. We will have a more focused, analytics-driven underwriting as well as pro-active asset monitoring in place, to reflect early warning signals. Additionally, high-yield loans will be done only under fund structures.

Resilient asset quality

Our gross NPA declined during the year to 3.4% in March 2022 vs 4.1% in March 2021 and NNPA ratio fell to 1.6% in March 2022 vs 2.1% in March 2021. The consolidation of DHFL did not have any material impact on our asset quality. Additionally, the asset quality of the acquired DHFL book has been in line with our expectations.

In Q4 FY 2022, we re-evaluated our wholesale portfolio to detect the impact of the pandemic as well as the recent uncertainty in the macro economy, on our clients. Our assessment indicated that while the Real Estate loan book (76% of our wholesale loans) remained steady in terms of asset quality, we had to move a few of our non-Real Estate exposures to Stage-2, resulting in an additional provision worth ₹ 822 Crores and an interest reversal of ₹ 215 Crores, totalling ₹ 1,037 Crores. These non-Real Estate deals were high-yield, structured mezzanine loans in the non-real estate portfolio, done under the ‘Holdco’ structure prior to FY 2019. We have discontinued engaging in such deals now.

Total provisions post the additional provisions made during Q4, now stand at ₹ 3,735 Crores, equivalent to 5.7% of our AUM. Provisions against wholesale AUM now stands higher at 7.9%. We continue to remain vigilant across our portfolio and maintain conservative provisioning to take care of contingencies that may arise in the future.

Non-lending businesses

Alternatives platform: Our fund management business has marquee institutions such as CDPQ and Bain Capital Credit as our longstanding partners. The platform had nearly $ 1 Billion in committed capital across two funds as of March 2022. We aim to build a robust Alternatives platform, by scaling-up the existing funds and launching newer funds in the near future.

Life Insurance business:Through the DHFL acquisition, we have also acquired a 50% stake in Pramerica Life Insurance (JV with PrudentialUS). The company has a customer base of 2.5 Million and a network of 15,000+ agents. Given that the Company has a robust balance sheet reflected in its Solvency Ratio of 404%, we aim to drive growth of this business in the coming years.

Robust Liability Management

Over last few years, we significantly improved our ALM by replacing short-term commercial paper (CP) borrowings with long-term borrowings. The DHFL acquisition enabled us to raise 10-year loans worth ~₹ 19,550 Crores, further strengthening our ALM profile with significant positive ALM gap across all buckets. In FY 2022, with the aim to further diversify our borrowing mix, we raised debt through our maiden public bond issuance, which received a healthy participation from retail investors and HNIs.

Our average borrowing costs has been gradually declining over the last few quarters. For Q4 FY 2022, the cost of borrowings declined 170 bps yoy to 9.2%, while our incremental cost of funds reached nearly 8.5% post the DHFL transaction. We expect the borrowing costs to decline further, as we continue to diversify the loan book, tap additional funding sources to diversify the borrowing mix and repay/re-finance high-cost debt. Moreover, we are well-positioned to navigate the current rising interest rate environment, as 79% of our borrowings are on a fixed rate basis.

Outlook for our Financial Services business

Over the next 5 years, we have a target to expand our presence across 1,000 locations (with 500-600 branches) across India, in our Phygital Retail Lending business. We also plan to continue to build newer partnerships in our Embedded Finance business, resulting in 40-50% growth in retail disbursements (on a CAGR basis). This will enable us to double the overall AUM from FY 2022 levels, despite reduction in our existing wholesale book (in line with our strategy to make it more granular), resulting in our loan book mix moving towards two-thirds Retail Loans and one-third Wholesale Loans.

With a scalable, tech-driven lending platform, significant firepower for organic growth as well as acquisitions (given our low debt/equity of the FS business at 2.7x) and considerable value-unlocking potential (i.e. investments in Shriram), we feel that we are well-poised to become one of the largest, top quality NBFC in the coming years.

Pharma – Delivered on consistent performance track record

The role of the Pharmaceutical industry has become even more important because of the ongoing pandemic. Pharmaceutical and healthcare firms play a significant role in assuring the accessibility of critical pharmaceuticals while also ensuring the development of novel vaccines and therapies, in a rapidly changing environment. In the current circumstances, the Pharmaceutical sector has emerged as an essential industry, with an ever-more critical role in today’s evolving world.

The world’s economy and infrastructure continue to be affected by significant supply chain disruptions and volatility in raw material costs. Hence, safeguarding the supply chain is extremely critical. For the last few years, our teams have been pro-actively working towards diversifying our vendor base and obtaining alternative suppliers, with the goal of reducing supplier/geographical concentration.

Within Pharma, we have demonstrated consistent execution against key strategic priorities and are in the process of executing on our investment plans. Our global footprint with a diversified revenue base, presence in attractive segments with high entry barriers, our capability to meet a wide range of customer requirements across multiple geographies and best-in-class quality track record, provides greater stability from a longterm investment perspective.

Another important area of growing significance in the Pharma sector is maintaining a strong focus on quality and compliance. As the impact of the pandemic decreases, Pharma businesses that have a strong track record of quality compliance and can remain with agile towards new regulatory requirements, will emerge stronger. We are steadfastly advancing on our journey from ‘Quality for Compliance’ to ‘Quality as a Culture’, with a focus on systems, processes, technology, and people. Our strong Quality function reports directly to a Board member. Since the beginning of FY 2012, we have successfully cleared 36 USFDA inspections, 269 total regulatory inspections and 1,377 customer audits, without receiving any ‘Official Action Indicated (OAI)’, reflecting our utmost commitment towards excellence in quality and compliance.

Continuing to deliver in line with our long-term performance track-record

We have consistently delivered a strong performance in line with our performance track record over the last 10 years. Our Pharma revenue has grown at a 10-year CAGR of 13% from ₹ 1,906 Crores in FY 2012 to ₹ 6,701 Crores in FY 2022. EBITDA has grown over 8 times during this period from ₹ 140 Crores in FY 2012 to ₹ 1,206 Crores in FY 2022, improving the EBITDA margin from 7% in FY 2012 to 18% in FY 2022.

Continuing with our long-term track record, our Pharma business recorded 16% yoy revenue growth in FY 2022, despite a challenging macro environment, demonstrating the strength of our business model as well as the agility of our teams to deliver a resilient performance, even in a tougher environment.

CDMO – Revenue growth continued in FY 2022, investing for future

Our uniquely positioned CDMO business grew 10% during the year. The business grew despite some execution related challenges related to logistics, availability of raw material, and manpower. Our revenue from commercial products has increased 3x since FY 2019 to $ 56 Million. Leveraging our end-to-end model to offer integrated services, we now have a track record of executing 170 integrated projects. The number has grown 1.5 times since FY 2019 and contributes to 36% of our development order book. We continue to attract customers with our differentiated offerings (such as Injectables, HPAPIs, Antibody Drug Conjugates, Peptides, oncology, etc.) that now contribute 22% to our total revenues as compared with 19% in the last financial year.

The strengthened balance sheet has also accelerated our organic and inorganic growth plans. We have been focusing on expanding major sites through customer-led brownfield expansion across our facilities. We have committed $ 157 Million of growth-oriented capex investment across various sites such as at Aurora, Pithampur, Riverview, Grangemouth, and Morpeth.

During the year, we acquired a 100% stake in Hemmo Pharmaceuticals for an upfront consideration of ₹ 775 Crores and earn-outs linked to the achievement of milestones. The acquisition added peptide API development and manufacturing to our capabilities. We also acquired 28% stake in Yapan Bio in December 2021, which was further increased to 33% in April 2022. The acquisition enabled us to add new technologies and capabilities in large molecules, including vaccines and gene therapy to our global offerings.

Complex Hospital Generics – Significant recovery during FY 2022

Our Complex Hospital Generics business witnessed significant recovery during FY 2022, with 20% yoy growth during the year. We continue to retain our leadership position in key portfolio products across multiple geographies. The business leverages a differentiated portfolio of 40 existing products. We have also developed a strong pipeline of 36+ SKUs in niche areas, including injectable anaesthesia, pain management, intrathecal therapy, and a broad range of other indications.

India Consumer Healthcare – Robust performance despite slowdown reflecting agility

Our India Consumer Healthcare business grew 48% yoy during the year. Our power brands delivered a strong performance, contributing 57% to the FY 2022 revenues. We also launched 40 new products and 18 SKUs, demonstrating the agility of the business to leverage opportunity in the face of severe challenges. To improve the recall for our key brands, we continued to significantly invest in media and trade spends and have also engaged well-known brand ambassadors. We strengthened our presence on alternate channels of distribution with the launch of our own website and are now also selling our products across 24 e-commerce platforms and in 8,700+ modern trade stores.

Outlook for the Pharma Business

Post the Carlyle fund-raise for pharma, we have been investing organically and inorganically across all our pharma businesses. All our key businesses have a compelling plan for their growth and are executing on the strategic priorities. We believe that we will continue to deliver in line with our long-term growth track record through organic initiatives. In the medium-to-long term, we expect nearly 15% CAGR revenue growth across the businesses. As we grow revenues we expect to improve our operating margins through better fixed cost absorption and therefore also improve our return on capital employed.

Building a future-ready organization

Strong Talent Pipeline: We continue to invest in building a strong talent pipeline by attracting, retaining and developing high-quality talent. We identified and groomed over 50 high-potential employees for future leadership roles through our flagship top talent programs involving personalized skill development journeys and exposure to business-critical projects in line with their aspirations.

Project Sangam: This year, with the acquisition of DHFL, we integrated erstwhile DHFL employees into the Piramal Family. We strived for seamless integration of DHFL employees and oriented them to the culture and values of the Piramal group through 4884 hours of HR training and 8456 hours of functional training. We undertook the task of unifying and harmonizing the grade and designation structures for over 1600 DHFL employees to ensure that the structure and people are poised to support the future growth aspirations of the organization. Policy documents of both organizations were reviewed & revised to ensure we incorporate best-in-class practices that serve our employees well. As a result of our change management and communication interventions, we were able to score exceptionally well in the post-integration feedback survey.

Other Acquisitions: With the acquisition of Hemmo Pharmaceuticals, we added more than 250 employees including several Ph.D. scientists and a robust R&D and Quality team of over 60 employees in Piramal Pharma. An integration project was launched to ensure all the necessary steps were taken to orient Hemmo employees to the Piramal processes and practices. Post acquiring minority stake, we also supported Yapan Biologics for key recruitments and Learning & Development interventions.

Project Prism: We commenced “Project Prism” to help align PPL’s culture to our long-term vision and strategy and co-create work practices to build an engaged and motivated workforce as we enhance PPL’s profitable growth momentum. A multi-pronged approach involving strategy analysis, leadership listening, current and desired culture survey, focused group discussions, and leadership workshops were leveraged to diagnose the current culture and crystallized the cultural priorities and action plans for the future. In the coming year, we plan to embed the cultural priorities which will serve as the common thread to unite all the 3 businesses of PPL.

Employee Wellbeing: In line with our value of Care and our commitment to employee health and wellbeing, multiple preventive measures to ensure employee health and safety at our manufacturing sites and offices have been sustained during the pandemic. Our COVID response management touched more than 7000 lives with our ongoing vaccination drives. We partnered with a wellness platform that provided 24x7 support to help employees with their mental wellbeing during the pandemic. We have also enhanced our healthcare benefits to support employees and their families by introducing Mental Well-being Cover that encompasses therapies and related sessions as part of the base Mediclaim policy itself. Additionally, our Mediclaim policy provides customised maternity plan option that comprises added specific medical coverages for embracing parenthood, and offers discounted Super Top-Up policy for employees. We also continued with our COVID communication at regular intervals to create awareness and inculcate healthy habits amongst our employees and their families.

Doing Well and Doing Good

Upholding our purpose of ‘Doing Well and Doing Good’ and motivated with the spirit of Sewa Bhaav, the Piramal Foundation Teams dedicatedly supported government efforts to battle the pandemic, serving the most underserved communities across India. We impacted 2.73 Million people across 112 Aspirational Districts and 6 tribal districts through our campaigns on COVID-19 awareness and vaccine hesitancy. We strengthened government systems to deliver better to citizens by building capacity of 97,604 people. The Foundation has a significant footprint in 27 States, 2 Union Territories, and 112 Aspirational Districts, and has impacted 113 Million lives.

Despite the best efforts of the government and other players, social inequalities continue to rise, and many intractable problems remain unsolved. This called for a paradigm shift. Hence, we re-imagined the Foundation, moving from projects to large collaborative platforms and adopting a bold new approach in the form of our 6 Big Bets.

These 6 Big Bets, mirror our tested business mantra, are helping us to create value for our stakeholders. We are employing a three-pronged mantra in the Development Sector for the benefit of our stakeholders.

  • Problem: Focus on deeply endemic issues that India has been unable to solve for the past 75 years – the most intractable problems critical to Bharat achieving its potential.
  • Innovation: Taking risks where governments cannot take (as they can lead to considerable wastage of public money).
  • Partnership: Partnerships and collaborations with like-minded, values-based entities, along with local influencers, to complement the Government’s efforts, provide much-needed impetus and ensure that we reach every person in need of assistance.

These 6 Big Bets are bold tenets of Philanthropy in Action. They help us transition into a ‘platform for public good’ - supporting governments by inviting large commitments of funding and nonfinancial resources from diverse partners, and bringing them together in alliances to strengthen systems and solve social problems at scale. We strengthened our partnerships with NITI Aayog, 112 District Governments and other organisations such as USAID, BMGF, Rockefeller, Google and The Children’s Investment Fund Foundation (CIFF). Each Big Bet, leverages technology, engages communities and works with governments, to ensure that India advances towards achieving its Sustainable Development Goals by 2030.

In closing

During FY 2022, our businesses have demonstrated a resilient performance and navigated the COVID-19 pandemic, along with other macroeconomic uncertainties. Moreover, the Company has undergone a major transformation to build a solid foundation for our long-term success.

In Financial Services, we completed the DHFL acquisition and its integration during the year, thereby driving growth and diversification of the business, progressing towards making it more retail oriented. We have set for ourselves an ambitious set of goals and with the progress made during the year, we remain confident about the longterm success of the Financial Services business.

Within Pharma, we have demonstrated consistent execution against key strategic priorities and are in the process of executing on our investment plans. Our global footprint with a diversified revenue base, presence in attractive segments with high entry barriers, our capability to meet a wide range of customer requirements across multiple geographies and best-in-class quality track record, provides greater stability from a long-term investment perspective.

We believe that both the emerging listed Financial Services and Pharma companies, with their balance sheet strength and uniqueness of our business models, are well-positioned to tap organic and inorganic growth opportunities and create long-term value for our stakeholders in the years to come.

The Board has recommended a dividend of ₹ 33 per share, subject to the shareholders’ approval at the AGM. The total dividend pay out would be ~₹ 788 Crores.

I would like to thank all our stakeholders, including our shareholders, employees, customers and partners, who are the driving force behind the success of our businesses. We will continue to execute on our strategic priorities to create long-term value for all our stakeholders.

Please take care of yourself and your family, and stay safe.

Best regards,

Ajay G. Piramal