Ajay Piramal To Divest 40% In Gujarat Glass

In the largest ever deal of its kind, Ajay Piramal is divesting more than 40 per cent stake in Gujarat Glass, a wholly-owned subsidiary of Nicholas Piramal India Ltd (NPIL), for a Rs 400 crore plus consideration.

When contacted Ajay Piramal, chairman of NPIL, refused to comment on the matter, saying I am not in a position to talk about it right now.

Industry sources say that this is the highest consideration to be paid for a minority stake in an Indian company. The proceeds from the divestment will be used for expanding the pharma business under NPIL and other core businesses.

 

The divestment is in line with Piramals strategy of getting out of non-core businesses and concentrate on the pharma business. Since Gujarat Glass is a captive supplier to NPIL, Piramal decided to retain majority control in Gujarat Glass.

Though the identity of the buyer for the 40 per cent plus holding could not be ascertained, top industry sources said EM Warburg Pincus & Co, the US-based investment fund, is picking up the stake. The $7-billion company, already owns a 6.5 per cent stake in Nicholas Piramal.

Sources also said that one of the reasons for Piramals selling 40 per cent holding was the requirement of funds for acquisitions and joint ventures in the pharma business.

Ajay Piramal has been on an acquisition mode for expanding the pharma business. After acquiring Roche, Boehringer Mannheim and a bulk drug company, Sumitra Pharma, he took the joint venture route to strengthen the business.

A joint venture was signed with Reckitt Coleman and another one was planned with Boots Plc for the over-the-counter business. Besides, NPIL entered into a joint venture with Ambalal Sarabhai.

Even where the business is non-core, Piramal entered into joint ventures to access technology of foreign partners. Two divisions -- Morarjee Goculdas Spinning and Weaving Co Ltd -- were spun off to joint venture companies, with both partners having a 50:50 holding.

Gujarat Glass is a wholly-owned subsidiary of NPIL and is one of the most profitable companies in the group. It has ISO certification from Bureau Veritas Quality International (BVQI) and is the leader in the domestic pharmaceutical glass market.

With manufacturing facilities at Surat and Jambusar (near Baroda) for bottles and vials, the company sells almost five per cent of its total glass production to NPIL. The turnover for 1996-97 stood at Rs 104 crore, with 70 per cent coming from sales of glass and 30 per cent from vials.

Gujarat Glass is implementing a Rs 120-crore expansion at its Jambusar facility and has set up a 8 MW power plant at its Kosamba facility in Surat for meeting power requirements.

With export turnover currently at five per cent, the company is making efforts to expand its presence in overseas markets.