Divi's Lab to shift Rs 500 cr project if Kakinada protest not resolved

Hyderabad-based Divi's Laboratories Limited has chalked out alternate plans to keep the capacity expansion going after the Rs 500-crore greenfield project near Kakinada ran into rough weather, first by the local protests and later by an interim order issued by Hyderabad high court pertaining to the project land.

Earlier this year, Andhra Pradesh government had allotted 500 acres of land to the company near Kakinada in East Godavari district as Divi's had sought to build a large plant close to the seacoast owing to logistic requirements. 

However, local villagers and the activists from left and other opposition parties had launched protests against Divi's plant soon after the company started the work. Eventually, some farmers had approached the high court and got stay orders on the use of the project land.

"We have a couple of alternate green-field sites in mind. If the state government fails to resolve the issue in the next 2-3 months time we will select one of these alternate sites for construction of our new green-field project. Meanwhile, we are investing Rs 300 crore-Rs 400 crore in the existing plants to build the additional capacities in this year" L Kishore Babu, chief financial officer of Divis Laboratories told Business Standard. 

According to him, the court orders were pertaining to the issues between the government and the farmers while the company had already paid whatever the amount it was asked to pay towards the land cost.

A prominent player specialised in APIs and drug intermediates for supply to global pharma players, Divi's has two large manufacturing sites, one in Hyderabad with 13 multipurpose production blocks located on a 500-acre campus and the other one at Visakhapatnam consisting of 14 production blocks on a 350-acre site.

Besides weighing its options on the location of the new project, the company is also investing around Rs 300 crore-Rs 400 crore in the existing plants to take care of the new orders, according to Divi's CFO. The company has reported Rs 1,000 crore plus revenues in each of the past three quarters while its total income for the full year 2015-16 stood at Rs 3,815 crore.

Even as the company says it will move to another green-field site within AP if things were not sorted out quickly at Kakinada, the authorities fear that such a decision will impact the state government's image and also gives scope for a similar resistance to the other industrial projects elsewhere in the state.

Already a Rs 800-crore aqua food park project in the neighbouring West Godavari district has been facing large-scale protests since June. However, the authorities were still not able to convince the people to cooperate for these projects.

The issues of a possible air and groundwater pollution were cited as the main reason behind these protests at both the places. Fishermen fear that the effluents discharged into the sea would impact the fish population there by threatening their livelihoods.

Meanwhile, the company said it would respond to the '483 observations' issued after a recent inspection by the US Food and Drug Administration (USFDA) related to Vizag plant in a couple of days. "I believe that all 5 observations received from the USFDA were mostly related to the procedural aspects and we will respond to all of them in the next 2-3 days," Kishore Babu said.