Unichem Laboratories to now focus on markets abroad

To give shareholders half the proceeds from sale of domestic business to Torrent

Unichem Laboratories would use at least half the net proceeds from sale of its domestic business to reward shareholders. And, use the rest for research & development (R&D) and to expand its international business, Chairman Prakash Mody has said.

“It could either be through a dividend or a share buyback or both. The promoters will not benefit at the cost of other shareholders. The board (of directors) is very clear about it,” Mody said, a day after he concluded a Rs 3,600-crore transaction to sell the domestic formulations business to Torrent Pharmaceuticals.

The seven decade-old Unichem is among the oldest Indian pharmaceutical companies. It gets about 60 per cent of its revenue from domestic operations. For the past few years, there has been a buzz about an impending sale of its domestic arm. Mody says there were several overtures from rival manufacturers and a decision to sell the business was taken a few months earlier.

Mody appointed Jayendra Shah, a merchant banker and  family friend, to help find a suitable buyer. There were several suitors but the final race was between two contenders, private equity firm Advent and Torrent Pharmaceuticals. Finally, Mody decided to sell his business to Torrent, whose promoters (Samir and Sudhir Mehta) he has known for years. 

“I wanted my brands to have a good home,” Mody said, expressing confidence that Torrent would be able to grow the business further. The deal was signed on Friday.

Mody, who turns 65 later this month, denied the deal being triggered due to succession issues. His daughter, Supriya, looks after the emerging markets business segment at Unichem and is also developing other business ventures independently.  

However, Mody says, he’s not looking for a successor only within the family. “I am not looking at any family succession. I have professionals who have done a great job. Today, my entire team is of professionals and I am sure there is a lot of competence within professionals to take over, as and when it is required,” he said.

Over recent years, Unichem's revenue grew as the company launched products and expanded facilities for customers in India and abroad. Now, however, Mody says he is focusing his energy to scale up the international business, to help generate better value for the company and its shareholders. “I am not exiting the pharmaceutical space,” he said.

The company is preparing a plan to expand its business in the US, Europe, Brazil and South Africa. This will be discussed in the next board meeting.

“We have FDA (the US drugs regulator)-approved plants. We have a R&D centre in Goa, where 400 scientists are doing work for developed markets. We have filed 52 Abbreviated New Drug Applications in the US and have approval for 28. In the next three years, we want to file another 60 applications in the US.  We are also ramping up our business in Brazil, where we see good profitability. I think this is the right time to scale up our international business,” said Mody.

Unichem will increase its R&D spending and is already working on some complex drugs and biosimilars, the applications for which it hopes to file in the next three to four years. Also, the company is expecting approvals from the US FDA for three drugs with limited sale exclusivity, enabling it to improve revenue and margins.