Surya Pharmaceutical Ltd, the flagship company of Rs 1,700-crore Surya Corp, has closed two of its units namely Jammu plant, which was still under trial production and one at Panchkula (Haryana) unit. As far as the other manufacturing facilities are concerned, the company is curtailing and consolidating the operations for now as a part of restructuring, Surya said in an e-mail. The company has also submitted its case for debt restructuring.
The company has six units spread across Punjab, Haryana, Himachal Pradesh and Jammu & Kashmir according to the annual report 2010-11 and manufacture API, fine intermediates, formulations, herbal products, and menthol/mint derivatives and having a client base spread across 90 countries across the globe.
Surya cited that two plants have been closed due to the paucity of working capital. On being asked about the reason behind closure of units and where the strategy went wrong, the company said that recently it got into cash flow problem because of the delay in commissioning and cost over-run of the Jammu plant. It was also constrained to raise the required capital from the financial market due to high interest rates, tight monetary conditions and adverse global economy and consequently could not get the desired support from bankers. There have also been some foreign exchange losses and delay in receipt of export payments, which further tightened the cash flow situation.
However, insiders mentioned that the company executed massive expansion which includes acquisition and diversification during the last two-three years which led to cash flow problem. They also mentioned that qualified and very good talent are needed to manage the operations since the company has diversified interests, as the attrition level was very high at senior positions, things couldn’t be managed properly.
In December 2010, the company had acquired ActivOn, a leading OTC analgesic drug brand in the USA, with global marketing rights. The brand comes with the acquisition of Ameshire Investment Corp, USA through its 100 per cent subsidiary based out of Singapore.
The company had funded the investment of $22 million through a mix of internal accrual and debt financing from EXIM Bank. Besides that it has also diversified in pharmacy retail through its subsidiary, Surya Healthcare Ltd under Viva brand in Delhi, NCR, Punjab, Haryana, Maharstra, Andhra Pradesh, Uttar Pradesh, Chandigarh etc.
The company had also bought Hyderabad-based Medimart Pharmacy , which runs 42 drug retail outlets in Andhra Pradesh, for Rs 10.50 crore in 2010-11.
Despite cash flow problem, the company is hopeful that it can be revived post restructuring and it has submitted its case for Corporate Debt Restructuring (CDR). According to an e-mail sent to Business Standard, it states that the company was referred by the State Bank of India as the leading bank of the consortium of its bankers for debt restructuring and the case has already been admitted by CDR cell with the support of majority of lenders.
In view of the confidence reposed by the bankers and the company having very good manufacturing assets compliant to USFDA and other international standards, it is confident of reviving back post restructuring, it stated further.
On being asked about the reason behind top management people who left the organisation the company stated that some team members have left the Company for greener pastures which is quite common in the corporate sector.
The Rs 1700 crore group, Surya Corp is an integrated group of companies, with diversified interests in pharmaceuticals, healthcare, education, pharmacy retail and beverages.