labels: industry - general, pharmaceuticals, rashtriya chemicals and fertilisers, hindustan antibiotics
HAL and RCF divestment gains momentum news
Our Corporate Bureau
19 January 2004
Sun Pharmaceuticals Industries Ltd, K.P. Pharmaceuticals and the H.G Thombre group are in a race to take over public sector pharmaceutical company Hindustan Antibiotics Ltd (HAL).

These firms are bidding for acquiring all the existing businesses and infrastructure of HAL and its three other joint ventures, Karnataka Antibiotics Ltd, Maharashtra Antibiotics and Pharmaceuticals and a penicillin manufacturing JV with Gist Brocades.

HAL was referred to the Board of Industrial and Financial Restructuring (BIFR) three years ago as its financial losses kept on growing. The BIFR appointed the Industrial Development Bank of India (IDBI) as the nodal agency for finding a suitor for the PSU as part of a turnaround programme for the company.

A senior IDBI official said: "During the BIFR hearing held on December 18, four takeover proposals including one from the current HAL management came up before the board. The BIFR has given a month's time for the bidders to carry out the due diligence."

The bidding price for HAL could not be ascertained immediately. Industry sources said among the current bidders, Sun Pharmaceuticals may emerge as the possible acquirer because compared to Sun the other bidders are smaller in size and the HAL management has to bring in an outside investor to acquire the company.This gives Sun Pharma an upper hand in the bid process.

HAL, which has its plants at Pimpri, near Pune, produces a range of antibiotics, anti-tuberculosis drugs, anti-bacterials, analgesics, cardiac drugs, vitamins and biotech drugs like erythropoietin.

HAL has also leased out a pilot plant to RPG Life Sciences for production of vitamin B 12. Following IDBI's recommendation, BIFR had earlier suggested winding up of the PSU. The government as the promoter, also refused to support a turnaround of the company by infusing fresh funds.

According to pharma analysts, if Sun succeeds in acquiring HAL, it would make a good business synergy for the company because HAL has a huge market share in many antibiotic segments and currently a major chunk of revenue of most pharma companies is coming from the antibiotics segment. Besides, Sun can use HAL's manufacturing facilities for contract manufacturing.

The union government has roped in ICICI Securities as the merchant banker for the strategic sale of its stake in Rashtriya Chemicals and Fertilisers Ltd.

The government has released a preliminary information memorandum of RCF, which indicates intent about its stake in RCF. The central government holds 92 per cent stake in RCF and plans to offload 51 per cent through a strategic sale. The company produces urea and complex fertilisers apart from chemicals and other industrial products.

According to senior RCF officials, the company holds roughly 800 acres in Mumbai and 700 acres in Thal. The Mumbai property alone is expected to fetch the company more than Rs 2,000 crore, according to estimates based on current prices.

The department of disinvestment had called for global bids from investment bankers to advise it on the RCF sale.

The RCF scrip has gained nearly 40 per cent in the last one month from a low of Rs 34 to close at above levels. Sources close to the development said that there have been queries from some leading business houses which have interests in chemicals and fertilisers. A refineries and petrochemicals giant is also said to have evinced interest in the company for the real estate.

Meanwhile, a senior RCF official said that the company is likely to withdraw from the race for Hindustan Organic Chemicals Ltd (HOCL). "There is not much activity on the divestment front of HOCL and we are now not keen to bid for HOCL" the official said.

RCF's move to bid for HOCL had raised eyebrows earlier as the centre has identified both these companies for disinvestment. While HOCL figures among the 25 PSUs which have already been privatised or cleared for strategic sale by the cabinet committee on disinvestment, RCF's case was under consideration by the core group of secretaries on disinvestment at that time.

RCF, which has fertiliser plants in Mumbai and Thal with annual capacities of 11 lakhs tonnes and 14 lakhs tonnes respectively, also owns vast tracts of real estate in the heart of Mumbai city and in Thal in Raigad district. Its network of several offices, staff colonies and sports complexes are considered a major attraction for prospective bidders.


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HAL and RCF divestment gains momentum