Dishman's Bavla land sale hangs on MAT removal in Union Budget

If tax incentives on SEZs are back, then the company might consider keeping the land for future expansion

In a new move, Ahmedabad-based contract research and manufacturing services (CRAMS) player Dishman Pharmaceuticals and Chemicals Ltd (DPCL) might keep the Bavla special economic zone (SEZ) land for future expansion and drop the plans to sell it to pare off debt, if the upcoming Union Budget promises some tax incentives for SEZ operators.

Amidst the buzz that the Commerce Ministry is keen that the Union Finance Minister to consider a roll back of the minimum alternate tax (MAT) and also discontinue the dividend distribution tax (DDT) that are imposed on SEZ units and developers, the Ahmedabad-based bulk drug exporter has decided to wait until there is more clarity on that front in the upcoming Union Budget before they go ahead with selling the land.

As JR Vyas, chairman and managing director of Dishman Pharmaceuticals said, "Our exports have grown tremendously this year, almost three times compared to last year. We are currently sitting on an orderbook of $60 million. If the tax incentives on SEZs are back, then we might consider keeping the land ourselves for future expansion."

SEZs, which contribute to nearly 25 per cent of the country's total exports, had become unviable after the imposition of 18.5 per cent MAT on book profits of SEZ developers and units in 2011.

The move, which is widely dubbed to have impacted investor confidence to invest in these zones, has been criticized by the industry at large. Over 50 developers have already surrendered their projects and another 57 are eyeing de-notification after the change in tax regime.

Dishman was looking at selling the 174 hecatare (Ha) land parcel that it had at Bavla for developing an SEZ for the last few years, planning to use parts of the proceeds from the land sale to pare off debt on the company's books.

The land, however, as Vyas clarified, does not belong the company, but to his family. He had earlier told Business Standard that they were in talks with some infrastructure companies who planned to develop an industrial park on that plot of land. The company's plan was to raise at least Rs 500 crore from the sale.

Meanwhile, Vyas also informed that the company's China unit is expected to break even by next year. Vyas said that the products the Shanghai facility is manufacturing is profitable, and we expect it to break-even soon.

The company, which had invested close to $25 million on the facility, had at one point considered selling it owing to delay in regulatory approvals in China. It, however, dropped the plans after the Chinese facility started production some time back.

Dishman had earlier in 2012 turned around its ailing Swiss subsidiary Carbogen Amcis on the back of a successful restructuring, and strategic changes in its focus geographies.