No Life

Opens on : Deceber 5, 1996

Listing at : Hyderabad, Chennai and Ahmedabad

Lead manager : Aryaman Financial Services

There is extensive price competition and making a mark in this market is going to be extremely difficult for the company.

Neulife Laboratories is making a Rs 3 crore issue to part finance a project to to make 75 tpa of ciproflaxin in Medak. The funds garnered will also meet working capital requirements. The project cost, estimated at Rs 4.98 crore, has not been assessed by any financial institution. Of the total cost, the promoters are to bring in Rs 87 lakh (18 per cent), while FIs are putting in another 20 per cent. Till July 1996, only Rs 20 lakh was spent on the project.

 

Neulife currently makes 48 tpa of mebendazole with its plant attaining a capacity utilisation of 74 per cent. The core pormoters are experienced and run two more companies. They are Veco Pharma and CRIPS Laboratories Ltd. While Veco showed net profits of Rs 33 lakh on sales of Rs 4.51 crore with equity of Rs 48 lakh for 1994-95, the corresponding figures for CRIPS were Rs 23 lakh, Rs 3.76 crore and Rs 54 lakh. Both the concerns have been making profits since 1992.

Ciproflaxin is expected to see a demand growth of about 20 per cent over the next few years, down from 50 per cent in 1992-93. Moreover, ciprofloxacin already is made by a lot of players. To top that, there is extensive price competition in the market, especially among SSIs, and making a mark in this kind of a market is going to be extremely difficult for the company.

It could also be pointed out that the pharmaceutical sector has been witnessing major mergers and realignments among global majors, the outcome of which has been the combining of their Indian counterparts. What this impoies is that by the end of the century, small units may either have to club up against the big-wigs (unlikely, given the competition) or tie up with the forces that be. Either way, the outlook for small units does not look good. It