pharma major Sun Pharmaceutical Industries has decided
to split its subsidiary MJ Pharmaceuticalss formulation
and bulk drug business into
separate divisions and put the formulation divisions for
sale. Currently, Sun Pharma and its group companies together
hold 72 per cent stake in MJ Pharmaceuticals.
Says Sun Pharma chief financial officer R K Behati: "We
have recently mooted a proposal with the Board of Industrial
and Financial Restructuring (BIFR) to bifurcate the MJ
Pharmas business into two separate divisions. We also
sought the permission of the BIFR to sell MJ Pharmas
formulation business to a third party and to merge the
bulk drugs business with Sun Pharma."
MJ Pharma is a sick industrial company under the provisions
of the Sick Industrial Company (Special Provisions) Act
1985, and was referred to BIFR and ICICI for a rehabilitation
The company has a formulations plant in Halol that has
been approved by the regulatory agencies like the UK MCA
and South Africa MCC. Companies like Eli Lilly and Knoll
Pharma are currently using this site as a contract-manufacturing
Sun Pharma officials say the proposed scheme seeks to
bring MJ Pharma back to health and take it out of BIFRs
purview while retaining the fiscal benefits to Sun Pharma.
"Once BIFR approves this proposal, the bulk drug
facility at Ankleshwar and the long-term loan and accumulated
losses will become Sun Pharma liability."
officials say Sun Pharma would take over MJ Pharmas long-term
loans of Rs 20 crore to Rs 21 crore and the company will
allot equity shares of Sun Pharma to MJ Pharma shareholders
in the ratio of 1:210. The company valuers, PricewaterhouseCoopers,
recommended this earlier. However, this ratio is subject
to BIFR approval and other concerned authorities, Behati
company may also invest Rs 8 crore to 10 crore towards
capital expenditure, spread over the next 12 to 15 months
in the bulk drug unit of MJ Pharma. The unit at Ankleshwar
will have multiproduct flexibility and will eventually
meet requirements of both domestic and less-regulated
markets, the officials say.