Dishman Pharma to set up facility in China

Total investment for the manufacturing plant pegged at Rs 45 cr.

Dishman Pharmaceuticals is setting up shop in China. The company is investing in a greenfield manufacturing facility in Shanghai.

To begin with, it plans to manufacture 11 drugs at the Chinese facility for the European and the US markets. Dishman is considering going in for GMP products once the first phase of the facility is on stream.

J R Vyas, managing director, Dishman Pharmaceuticals said the company has, for Rs 18 crore, acquired a 80,000 sqm land in Shanghai Chemical Industry Park (SCIP), which has cogen facilities for areas such as steam, compressed air, solvent storage, natural gas and effluent treatment. The total investment in the project would be around Rs 45 crore, said Vyas.

"We plan to manufacture six non-GMP quarternary compounds (Quats) and five intermediates in our China plant. This will save us from lots of hassles related to transfer of the same to our Ahmedabad-based facility for processing and giving back to the customers in Europe and the US," said Vyas.

Dishman Pharmaceuticals makes ammonium and phosphonium Quats "" speciality chemicals "" which, apart from being inputs in the manufacture of active pharmaceutical ingredients and intermediates, also find application in agro-chemicals, polymers and surfactants.

Dishman Pharma said the Chinese manufacturing facility would offer it a major advantage in terms of cost of the production.

"We hope to cut costs of our commodity chemicals by nearly 20 per cent and costs of utilities by as much as 50 per cent in China facility," said Vyas.

The company plans to manufacture some early intermediates from the basic chemicals in China and transfer them back to its Ahmedabad-based facility for further processing.

There, the lower cost of production mainly because of cheap energy cost and difference in commodity chemicals would give the company necessary advantage in its negotiations with the clients overseas.

"If we cannot reduce the cost of production, it would have direct impact on over profit before EBITDA (earnings before interest, taxes, depreciation and amortisation)," said Vyas.

Dishman raised $50 million through the FCCB route for the Chinese project as well as some planned and future acquisitions.

"We have used part of the funds raised for the payment of ECB, of $15 million, and the balance will be used for the proposed Chinese manufacturing facility. We have parked the remaining fund in Singapore for the future projects including China."

The Chinese venture is expected to go on stream by the end of 2007, said Vyas, adding that it would also help the company tap the Japanese market in the future.

DRAGON BECKONS

Dishman plans to manufacture 11 drugs at the China plant for Europe and the US

The company has acquired 80,000sqm land in Shanghai Chemical Industry Park for Rs 18 cr