Dishman looking to sell China plant to pare off debt

Company had started operations at Shanghai plant a couple of months back

Ahmedabad-based contract research and manufacturing services (CRAMS) player Dishman Pharmaceuticals and Chemicals Ltd, is looking to sell its China plant to pare off some debt. The plant in the Shanghai Chemical Industry Park had started operations last year and is currently making intermediates and speciality chemicals.

"We have decided to liquidate the Chinese asset. However, while we are looking for a suitable buyer, we have started manufacturing from that plant so that it achieves a break-even," sources in the company said.

The company had begun constructing the Shanghai facility in 2006. However, regulatory approvals from the Chinese authorities took longer than the company had anticipated and hence the facility had been a drain on the company's resources.

J R Vyas, chairman and managing director of Dishman Pharmaceuticals, said that, "We have started production at the China facility a couple of months back." As regards the sale, he said that nothing is final as of now. Vyas added that the company is also simultaneously looking to sell its special economic zone (SEZ) land in Gujarat to reduce debt.

Another senior Dishman official, however, explained that the company will try to find a suitable buyer, and till that time it will continue to manufacture. "We are looking to get at least $ 25 million from the sale, the amount we have invested in the facility. If something suitable works out, it is good, or else we will continue to manufacture at the plant," he said.

Market sources said that one of the reasons that the company has not been able to finalise the deal was lack of regulatory approvals, however, now with local regulatory approvals in place, prospects of finding a potential buyer are much bright. "Dishman is also open to forming a joint venture with a global interested party, and if offered a reasonable price, the company is open to sell the facility as well," said an industry insider.

The company has total debt of Rs 799.69 crore as on March 2013. According to analysts, the company currently has a gross debt of around Rs 982 crore, this includes current maturity of long term loans. Vyas had indicated to Business Standard earlier that Dishman was looking to sell its SEZ land (around 174 hectares) and aimed to raise around Rs 500 crore from the land sale. "The land does not belong to Dishman, but to my family. However, we have decided to sell off the SEZ land," he had said. The land is in Gangad and Kalyangadh village near Bavla in Gujarat.

Dishman Pharma had posted Rs 1,272 crore consolidated revenue for 2012-13, and a profit after tax of Rs 100.3 crore. While the CRAMS segment constitutes nearly two-thirds of its revenues (Rs 813.25 crore), the remaining business (which includes bulk drugs, intermediates, speciality chemicals and outsourced/trade goods) contributed around 36 per cent of consolidated turnover in 2012-13.