Dishman plans IPO for spread

The city-based Dishman Pharmaceuticals and Chemicals Ltd has chalked out a massive expansion plan to set up a GMP active pharmaceutical ingredient (API) plant, a GMP intermediate plant and a dedicated research and development centre, besides expanding its existing facilities.

GMP, or good manufacturing practice, regulations promulgated by the US Food and Drug Administration require that manufacturers of drugs take steps to ensure that their products are safe, pure, and effective.

The company will use funds raised through an IPO "" between Rs 50 crore and 60 crore "" and also a loan of 19 million euros (about Rs 105 crore) to finance the expansion projects, Dishman managing director J R Vyas said on Wednesday.

"The expansion and upgradation projects will be completed by March 2005," Vyas said.

A consortium of Dutch financial institutions FMO and Rabobank, along with Germany's DEG, have recently sanctioned a loan of Rs 19 million euros for Dishman on the basis of the company's association with the Netherlands-based company Solvay Pharmaceuticals.

Dishman has a long-term supply contract with Solvay for a patented hypertension drug.

The company has a facility at Naroda in Ahmedabad and constructed another facility at Bavla on the outskirts of the city. It has purchased a plot of land near the plot at Naroda.

The new API and research and development facilities will come up at Bavla and the new plot at Naroda will have an export-oriented unit that will manufacture quaternary ammonium and phosphorium compounds, which are the raw materials for pharmaceuticals industries.

"The Rs 50 crore-Rs 60 crore from the forthcoming IPO will be spent on the facilities at Bavla along with a portion of the loans from the consortium. Rs 15 crore will be spent on the new Naroda plant. We are expecting a USFDA inspection of our Bavla facility in the next fortnight," Vyas said.

The API unit will be engaged completely in contract manufacturing and the research and development centre with 250 scientists will provide the backbone for quality research and production, the official said.

The Rs 40 crore debt, mainly in the form of loans from Exim Bank, will be swapped against the loan of the European consortium.

Set up in 1989, Dishman has recorded sales of Rs 114.4 crore and a net profit after tax of Rs 14.3 crore with export sales accounting for 82 per cent of the total sales, in the last fiscal year. "We intend to develop as a contract research outsourcing and contract manufacturing outsourcing) partner of choice in the global pharmaceutical and chemical industry," Vyas said.

Dishman has filed the draft Red Herring Prospectus with the Sebi for its proposed IPO of 34,33,500 equity shares of Rs 10 each, Vyas said. The issue will constitute 25 per cent of the fully diluted post-issue paid-up capital of the company and the IPO will be though 100 per cent book building route.

Vyas said the issue will open in the first or second week of March. The company is likely to raise between Rs 50 and 60 crore through the IPO. "We also plan to list the company on European stock exchanges within two to three years," Vyas said.