Npil To Spin Off Bulk Drugs, Glass As Separate Ventures

Nicholas Piramal India Ltd (NPIL) is spinning off the bulk drugs and Gujarat Glass as two separate subsidiary companies.

In the Rs 450-crore Gujarat Glass, NPIL will retain 60 per cent stake while the remaining 40 per cent will be held by IndOcean Packaging Ltd, a fund set up by Chase Capital Partners and the Soros Chatterjee Group, The India Private Equity Fund supported by the Overseas Private Insurance Corporation and Citicorp Investment Bank (Singapore) Ltd.

The 40 per cent equity stock has been worked out on the consideration of Rs 118 crore in cash. About Rs 120 crore is being transferred as debt of the division to Gujarat Glass. NPILs debt equity ratio will improve from 0.75:1 to 0.40:1.

 

NPIL is focusing on its core business of formulations by hiving off bulk drugs and fine chemicals business into a separate company - Global Bulk and Chemicals Company. NPIL is negotiating with a leading European chemicals company to place 51 per cent equity.

NPIL plans to plough the proceeds from the sale of the stock in the bulk drug into bulk drug subsidiary.

There is a need to invest in bulk drugs to improve operations, says Ajay Piramal, chairman of NPIL. The bulk drug division which accounts for around 20 per cent of NPILs turnover, has relatively low return on capital expenditure of 8 per cent.

NPIL expects to target a takeover of pharma brands and companies which will strategically fit with NPILs core therapeutic areas. Piramal pointed out, If the investment criteria is not met in about three years, the company intends to give the funds by way of dividend.

However, he pointed out that the takeover brands will have to generate ROCE of over 25 per cent.

He categorically pointed out that NPIL will not deploy the funds for investments in real estate, stock market or unrelated businesses including n the group companies.