Dishman to break-even China facility within this fiscal

Leading contract research and manufacturing services (CRAMS) player Dishman Pharmaceuticals and Chemicals Ltd is aiming to achieve a cash-break even at its Shanghai facility by the end of this fiscal. The company has also dropped plans to sell the China facility.

A senior official in Dishman Pharma confirmed the same and said that the Chinese facility has started production since last year and the company expects it to break even by the end of this fiscal. Dishman had invested close to $ 25 million on the facility. "There is no plan to sell the facility now.We are producing at the facility for the global market," he said.

The company had begun constructing the Shanghai facility at the Shanghai Chemical Industry Park way back in 2006, however, regulatory approvals took longer than Dishman had expected, and hence, the facility had been a drain on the company's resources.

The company had at one point of time even decided to sell the facility to pare off debt on its books. However, as Ranjit Kapadia, senior vice president, Centrum Broking pointed out, "Dishman has enough orders, and its Swiss subsidiary Carbogen Amcis is falling short of capacity. Therefore, the company has decided to make some of the high-potency anti-cancer products and intermediates at its China facility for the global market. The intermediates made at Shanghai would be brought into the company's Bavla facility in Gujarat for making the finished products." He also added that chemical costs are at least 10-15 per cent cheaper in China, as well as labour costs are also cheaper.

The company's annual report of FY14 says that, "Going forward, we see decent headroom for margin expansion. As our Chinese facility has come into production, it will keep manufacturing intermediates for the Bavla facility and start cash break-even in FY2015."

Industry insiders, however, indicated that while Dishman found a buyer for its Shanghai facility, they did not reach an agreement on price. Kapadia informed that the company currently has a debt of over Rs 800 crore, and is looking to sell a land parcel at Bavla to pare off some debt.

Dishman had earlier in 2012 turned around its ailing Swiss subsidiary Carbogen Amcis on the back of a successful restructuring, and strategic changes in its focus geographies.

Dishman's consolidated turnover for 2013-14 stood at Rs 1385.3 crore against Rs 1272.2 crore in the previous fiscal.