Pharma major Granules India to invest $84 million in expansion

Investment will be backed by IFC, which has three previous exposures to the company

Hyderabad-based pharma major Granules India Limited is planning to invest $84 million in setting up new capacities, expanding existing ones and investing in R&D to improve its product mix in favour of higher value-added products. The investment will be backed by World Bank's investment arm International Finance Corporation (IFC).

The project cost is proposed to be financed with debt of $68.5 million, including a corporate loan of up to $47.5 million from IFC's own account, and the rest through equity and internal accruals, according to the project disclosure.

IFC has made three investments in Granules till now, including debt and equity in 2007 (IFC exited the equity in 2014), Cleaner Production Lending Facility (CPLF) loan in 2009; and debt investment in 2011 for capacity expansion in the Gagillapur unit.

A greenfield active pharmaceutical ingredient (API) capacity will be set up at Vishakhapatnam, Andhra Pradesh, while existing API and PFI capacities will be expanded. This part of the plan includes construction of a new block at the Bonthapally facility. Besides, Granules India will  invest in R&D, quality assurance, and quality control and also ramp up its warehouse capacity.

The company's API capacity augmentation in base molecules includes addition of 7,000 TPA in Metformin capacity so as to reach to 9,000 TPA, addition of 2,000 TPA in Guaifenesin to reach to 3,200 TPA, addition of 6,000 TPA in Paracetamol to reach to 24,000 TPA, addition of 4,000 TPA PFI capacity (under implementation), according to a presentation made by the company to investors.

Granules India is a 30-year-old Hyderabad-based pharmaceutical company, with manufacturing facilities for APIs, pharmaceutical formulation Intermediates (PFIs) and finished dosages (FDs) of a variety of drugs including over-the-counter ones. The company is listed on the Bombay Stock Exchange.

The company has two API manufacturing facilities, near Hyderabad, Telangana (Jeedimetla and Bonthapally) and one in Visakhapatnam, acquired from Auctus Pharma in November 2014. It also has a PFI and FD facility in Gagillapur, near Hyderabad, Telangana; and an R&D and manufacturing facility in the US.

Additionally, the company has two facilities under its joint ventures (JVs) -- in Vizag Special Economic Zone and in Jingmen, China.

Its plants have been approved by USFDA, EDQM and other regulators.

Regulated markets of North America and Europe account for 60 per cent of Granule India's overall revenue, while the balance comes from quality conscious customers in Latin America, India and the rest of the world.

The company entered potentially higher margin products by establishing in-house Research Auctus Pharma acquisition in 2014 with focus on development of new APIs through in-house R&D.

It has presence in potentially higher margin CRAMS business through 50-50 JV with Ajinomoto Omnichem, also ventured into manufacturing and marketing of OTC products to the retail chains in the North American markets. The company also acquired Formulation facility in Virginia, USA to introduce value added form of existing products and to concentrate into formulation R&D of complex molecules.