Debt-ridden contract manufacturing specialist Jubilant Organosys today said it was evaluating its performance polymers division, a non-core business of the pharma major, for possible divestment.

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Jubilant had a net debt of Rs 3,480 crore as of May 31, 2009, accrued mainly due to capital expansion and two large acquisitions in the past two years. The plans of Jubilant are to reduce debts by focusing on improved cash flows and effective working capital management, besides divestment of non-core assets.

“The company is strategically focusing on pharmaceuticals and life sciences products and services business and has identified performance polymers business as a non-core business,” Jubilant informed the stock exchanges. At an appropriate time and price, the company would take a decision on such divestment, it added. Sources said the move could fetch Jubilant about Rs 200-300 crore. The company has to repay foreign currency convertible bonds (FCCBs) worth Rs 162 crore in 2010 and Rs 568 crore in 2011. It has Rs 421 crore cash in hand.

Another debt-ridden pharma major, Wockhardt, is also trying to hive off its non-core business and had recently got shareholders’ approval to sell its animal health business.

“We have a strong cash flow and hope to maintain 25-27 percent margin on a top line growth of 20 per cent in the coming year. This will help to bring down the debt burden,” R Shankaraiah, chief financial officer of Jubilant had told Business Standard. Jubilant’s fourth quarter results for 2008-09 was a disaster, as the company posted consolidated net profit of Rs 12.37 crore, 81 per cent less as compared to Rs 63.88 crore in the corresponding quarter a year ago, mainly on account of mark to market losses.

If over 60 per cent of Jubilant’s revenues in 2002-03 was from industrial products and performance polymers, this share has come down to about 24 per cent in 2008-09, as the company is focusing more on contract manufacturing of pharmaceutical products for global majors.

Its performance polymers business, named Jivanjor, supplies adhesives, sealants and decorative products for furniture, footwear and allied industries, and an extensive range of products for packaging, textiles and coatings. In the domestic market, the company sells these products through 600 distributors and 25,000 retailers.

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