Hindustan Antibiotics may not find buyers

With unpaid dues and near zero production, the public sector drug unit is in a state of neglect

The government will explore the strategic sale of Hindustan Antibiotics but industry experts are sceptical about private sector interest in the company because it lacks modern facilities or a strong product pipeline.

Hindustan Antibiotics, the country's first public sector pharmaceuticals unit, was set up in Pimpri near Pune in 1954 to manufacture and supply penicillin to patients in India and South East Asia. The company has another first to its credit – discovery of two new molecules, hamycin and aureofungin, to treat anti fungal infections.

But over the last two decades the company is in a state of neglect. Mired in losses since 1993, its condition has deteriorated in the last two years. The company has capabilities to produce bulk drugs and formulations but production is virtually shut for two years except in its agricultural division and salaries and other statutory dues have not been paid for months.

In their submission before a parliamentary standing committee earlier this year the Hindustan Antibiotics management pleaded for more funds fearing discontinuation of power supply to the unit. Employee agitations have been routine and on occasion company directors were prevented from entering the premises.

On Wednesday the Union Cabinet approved the sale of 87 acres of surplus land of the company to meet the net liabilities of Rs 821 crore. It also waived a government loan of Rs 307 crore and sanctioned an additional Rs 100 crore loan for urgent expenses. After the land sale, the government will explore a strategic sale, closure or revival of Hindustan Antibiotics.

This is the second time the government is working on a revival package for Hindustan Antibiotics. The first revival package was approved in 2006 and included a cash infusion, loan and debt waiver amounting to Rs 500 crore. With this the company set up new facilities and upgraded existing units. In 2010-11 it generated sales of Rs 95 crore, but since then sales have been declining.

Industry experts said the private sector would not be very interested in taking over Hindustan Antibiotics. “All that the company has is real estate. The plant and machinery is old. Setting up a new unit could be more economical,” said DG Shah, secretary-general of the Indian Pharmaceutical Alliance. “Revival is easier said than done and we do not see anything in the company that will attract private buyers,” said Sujay Shetty, partner, PwC.

“Hindustan Antibiotics began by producing penicillin but its focus has been bulk drugs, which are capital intensive. Inefficiencies led to losses. Also, like most other public sector units, it lacks marketing strategies,” said drug policy scholar Kannamma Raman.