Aurobindo setting up formulation unit in Saudi

Aurobindo will have a 55 per cent stake and the local company will hold the remaining 45 per cent in the new facility being set up at a cost of $15 million (Rs 60 crore).

"We are expecting to enter into a memorandum of understanding with the local partner in the next two weeks" Aurobindo chairman, PV Ramprasad Reddy, told Business Standard.

The formulation unit, which is expected to go on stream by 2009, will have a capacity to produce one billion tablets, capsules and oral suspensions per annum.

Aurobindo would be investing $5 million in the JV while its local partner would put in a little less than that amount. The remaining amount would be taken as loan from the Saudi banks.

Besides Saudi Arabia, Reddy said, the facility had been planned for penetrating into the markets of the GCC (Gulf Cooperation Council) countries of Bahrain, Qatar, Kuwait, Oman and United Arab Emirates. It would be a subsidiary of Aurobindo's recently acquired Pharmacin International BV in The Netherlands.

On the domestic front, Aurobindo has lined up a capital expenditure of Rs 75 crore this year for strengthening its manufacturing capabilities. With the rise in international prices of raw material, the company would be focusing on production of drugs raw material, intermediaries and chemicals.

The company had also targeted to go in for Para IV filing (patent challenge) of at least 6 products this year. Its current portfolio includes over 20 Para IV filings. It has so far filed 297 abbreviated new drug applications (ANDAs) of which 132 have been approved.

"All our capital expenditure plans are coming to an end by March 2009. We are expecting a better utilisation of our capex from 2010 onwards," Reddy said, adding the company was well on its course to achieve its targeted turnover of $1 billion by 2010.

In 2007-08, the company posted a turnover of Rs 2,530.15 crore and a net profit of Rs 238.48 crore.

The company's Rs 170-crore new formulation unit being set up in a special economic zone near Hyderabad would commence production in a couple of months.

The new unit has a capacity to produce 13,200 million tablets and 1,300 million capsules per annum. "We have a large infrastructure created at economic cost," he said.

According to Reddy, there is no change in the company's strategy in the light of Ranbaxy Laboratories' sellout to Daiichi Sankyo.

The company is awaiting the response of Securities and Exchange Board of India (Sebi) to its proposal to buy back equity shares.