Suven Pharma issues shares to Borregaard of Norway

Alok Agarwal
12 March 2001

Hyderabad-based Suven Pharmaeuticals Ltd. is all set to step on the fast track as planned. Suven Pharma is engaged in contract research and manufacturing service. According to Mr. Venkat Jasti, managing director of the company, the company began its activities in 1994 and has always ensured that it has not competed with its customers for whom it does contract manufacturing.

The company has planned a Rs 40 crore expansion and up-gradation, which it hopes to implement in the current year, to speed up its growth in the coming years. The plan includes acquisitions and increased research and development expenditure. As part of its plan, the company has already identified for acquisition, a unit in Hyderabad manufacturing advance intermediates.

To supplement its resources, Suven has raised Rs 10 crore, placing 4-lakh equity shares of Rs 10 each at Rs 250 each with Borregaard Industries Ltd. of Norway as a result of which the latter will hold a 15 per cent stake in Suven Pharmaceuticals. The company plans to raise an additional Rs. 15 crore at a later date through the private placement route. According to Mr. Venkat Jasti, managing director, the funds from the present equity dilution will be used for its expansion and upgradation plans.

The relationship between Suven and US $ 800 millon Borregaard Industries Ltd. is not new. Borregaard, the second largest company on the Norwegian Stock Exchange and a part of $4 billion Orkla Group of Norway, has been outsourcing products from Suven Pharmaceuticals since 1995. Suven is essentially engaged in contract research and manufacturing service has effected substantial exports to Borregaard in the last few years and also enjoys its technical cooperation for developing intermediates.

Speaking to domain-b Mr. Hargovind Rathore, president Borregaard, said, "We chose our partners as well as products very carefully. In all our segments, we are either number one or two. On its relationship with Suven Pharmaceuticals Mr. Per Sorlie, president and chief executive officer, Borregaard Industries told domain-b, "We felt that continued relationship with Suven with equity participation will further solidify the cooperation agreement we have with it and would facilitate a fast track growth in the international market in the ensuing IPR regime" Borregaard also outsources from IPCA, Alembic, Sun and Zandu, well known Indian pharmaceutical companies.

However Borregaard is not sure whether it will enter into similar alliances, as with Suven, with other companies. Says Mr. Sorlie, "Without forging working alliances you cannot prosper. We may work out similar alliances with other companies like Suven but a lot will depend upon the trust and understanding, the kind of which is there between Suven and us."