Chennai: The board of directors of the speciality pharmaceutical company Sun Pharma will meet on 30 May 2002 to take on record the Board for Industrial and Financial Reconstruction (BIFR) order sanctioning the merger of the Rs 37.66-crore sales MJ Pharmaceuticals with Sun Pharma after its restructuring, effective 1 January 2002.
As per the sanctioned scheme, the shareholders of MJ Pharma will receive one share of Sun Pharma for 210 shares of MJ Pharma.
Sun Pharma had made an equity investment in MJ Pharma in 1996. The former now holds 44.3-per cent stake, while the total group stake in MJ Pharma (loss Rs 0.80 crore) stands at 72 per cent. The primary reason for this investment was the interest in using MJ Pharmas formulation site for the regulated market in Europe.
MJ Pharma comprises two units a bulk drug facility in Ankleshwar and a formulations unit in Halol. The Ankleshwar unit is non-functional since the early 1990s. On the other hand the formulations unit approved by UK MCA and South Africa MCC is used as a third-party/contract manufacturing site by Sun Pharma (to derive sizeable fiscal benefits) and other companies like Eli Lilly and Knol Pharma.
As per the rehabilitation scheme approved by BIFR, M J Pharma will sell the formulation unit in Halol (except land and building) as a going concern to Sibai, Mumbai. Sibai will continue to manufacture products for Sun Pharma and other multinational companies. Sun Pharma will also continue to have access to the facility for its registrations for the European markets.
The residual MJ Pharma with a bulk drug facility in Ankleshwar, land and building of the Halol unit, a long-term loan (Rs 20.21 crore) and accumulated losses (Rs 28.63 crore as on 31 March 2001) will be merged with Sun Pharma with effect from 1 January 2002. Upon merger Sun Pharma is likely to benefit from a tax shelter of Rs 12.5 crore. Unabsorbed losses and depreciation could be set off in Sun Pharma against income in the year of merger.
The board will also approve Sun Pharmas audited annual accounts for the year ended 31 March 2002 and has recommend a dividend on equity shares of the company.