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Sun Pharma to acquire Hindustan Antibiotics
By siliconindia staff writer
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Tuesday, 09 March 2004, 20:30 IST
NEW DELHI: Hindustan Antibiotics, IndiaÂ’s oldest PSU in the pharma sector, is finally being taken over by a private drug company. In what will be the first take-over of a pharma PSU, Sun Pharma is learnt to have got the government to agree to a Rs 260 crore proposal for transfer of the PSU to it.
Sun, a zero-debt company before the present transaction, has already tied up external commercial borrowings (ECBs) to execute the deal, according to sources close to the development. Under the proposal agreed upon between banks and financial institutions led by IDBI and also the government as the promoter, Sun will meet the liabilities of Hindustan Antibiotics, currently under the Board for Industrial and Financial Reconstruction (BIFR) ministration, including dues to lenders and a voluntary retirement scheme.
The deal amount also covers meeting fresh working capital requirements.
In return, Sun gets to acquire Hindustan AntibioticsÂ’ manufacturing facilities, enabling it to expand its product range, particularly in Penicillin G.
Sources said, Sun Pharma has already deposited Rs 5 crore with BIFR and has also submitted a detailed scheme for revival of the PSU. Following the BIFR approval, which is expected this month given the governmentÂ’s decision to back the proposal, Sun will have to make the payment within a period of 30 days.
Recently, a joint meeting of all lenders under the aegis of IDBI was held which had representation from the government, unions and the SBI and Canara Bank (the largest banks having secured exposure). While the secured lenders are fully covered under the restructuring packages, unsecured lenders are not completely covered.
The employees of Hindustan Antibiotics had also placed an offer for turning the company around. Government sources said the preference to Sun’s proposal was on account of its viability. The promoter, meaning the government, was clear that any revival proposal will not involve infusion of fresh state funds. The government reckons that privatising Hindustan Antibiotics will mark a major success, as its attempts to transfer the other major pharma PSU — IDPL — did not fructify and the company is being wound up under BIFR.
Hindustan Antibiotics, which pioneered penicillin manufacturing in the country, was established in 1954. The pharma PSU, which has its plants at Pimpri, near Pune, produces a range of antibiotics, anti-tuberculosis drugs, anti-bacterials, analgesics, cardiac drugs, vitamins and biotech drugs like Erythropoietin.
The PSU has three subsidiaries with the state governments of Karnataka, Maharashtra and Manipur. It has a JV with Gist Brocades — Hindustan Max. It’s facility, originally a streptomycin plant, is currently being used by the RPG group under a lease for manufacturing vitamins. The penicillin facility was closed down in December due to decline in prices.
Hindustan Antibiotics has been making cash profits for the past two years. But its books are in losses and net worth is negative. BIFR had earlier appointed IDBI as the nodal agency for finding a suitor for the PSU as part of a turnaround programme for the company.
When contacted, Hindustan Antibiotics managing director MC Abraham said the company will restart penicillin production as and when the market improves.
“We are likely to report a cash profit of Rs 6-7 crore in the current financial year, “ he said.
With this acquisition, Sun Pharma is expected to get the fermentation facilities of Hindustan Antibiotics. The company will soon start manufacturing Penicillin G which will add to its product range. It also plans to extend the research base and transfer a few products to the manufacturing facilities of Hindustan Antibiotics to increase synergies.
When contacted, a Sun Pharma spokesperson confirmed that the company has placed a bid with BIFR. “We can’t comment further as the process may need several government approvals,” she said.
Sun Pharma, with a cash reserve of over Rs 350 crore, has more acquisitions on the radar. It also plans to acquire a $100-m generic company in the US.
Recently, Sun Pharma has hiked its stake in its US subsidiary Caraco Pharmaceutical Laboratories to 60%. The Mumbai-based pharma player entered into an agreement with two large shareholders of Caraco to acquire most of their common stock and options for $42m.