Tatas Shelve Merind Stake Sale Plan

The Tata managements proposal to sell its stake in the pharmaceutical company, Merind Ltd, has suffered a setback with bidders reluctant to purchase at the price quoted by the Tatas.

This has forced the Tata management to put the proposed sale on hold for a some time and use the opportunity to try and add value to the company. The decision comes after consultants KPMG Peat Marwick advised the Tatas that short-term investment in the company would improve valuations and thereby fetch a better price.

Among the companies that have bid for Tatas 47 per cent stake in Merind are Wockhardt.

 

Merind was hit by the decreasing margins in anti-malarial drugs on account of dumping by the Chinese manufacturers and the Supreme Court ban on combination drugs. Besides, the companys cost of funds have been mounting.

In a scenario where other pharmaceutical companies have been expanding their product portfolios, having a limited product portfolio does not help either. Merind will consider adding new capacities or expanding its product portfolio to add more value to the companys assets.

There is also a proposal to merge another Tata group company Rallis pharma division with Merind to further better valuation.

The Merind management was unavailable for comment. While N D Khurody, managing director was out of town, A H Tobaccowala could not be contacted.

Merind is the only domestic producer of Vitamin B12, which is the major constituent of vitamin-based formulations. Besides, the company makes bulk drugs, pharma formulations, animal healthcare products and diagnostic kits at its Bhandup factory.

Branded and generic pharmaceutical formulations account for around 60 per cent of the turnover while animal health products account for nearly 10 per cent.

The pharma business grew by 12 per cent and the animal health business grew 27.5 per cent during 1996-97.As a part of a restructuring programme, the management had planned to manufacture their products on loan license basis at Tata Pharmas Patalganga plant.

Merind was hit by the decreasing margins in anti-malarial drugs on account of dumping by the Chinese manufacturers and the SC ban on combination drugs