Hikal eyes China buyouts

Hikal Ltd is in talks with two or three pharmaceutical intermediaries firms in China for strategic tie-ups, including the possibility of picking up stake in those companies.

Hikal is already sourcing pharmaceutical intermediaries from these companies and seeks to strengthen the relationship by picking up equity in any or all of these companies.

Jai Hiremath, vice-chairman and managing director, Hikal, said that discussion were at an early stage and the company would not be able to provide more details. Though he said that he will be visiting China soon for further talks with the target companies.

Set up in 1988 and starting with agro-chemical business, Hikal is a fairly late entrant in the pharma business. The company is looking at strategic acquisitions as primary growth driver for its business.

In 2004 it picked up controlling stake of 51.1 per cent (valued at $6 million) in Denmark-based Marsing & Co, a pharmaceutical marketing and distribution company.

Hiremath said that acquisitions would definitely look for business synergy between the companies. The Danish acquisition, according to the company executives, will help Hikal reach western and eastern Europe markets, the US and Africa.

Aggregating Marsing's topline with Hikal's would add Rs 300 crore to latter's sales figure of the previous fiscal. "We are still contemplating this and exploring its legality.

Moreover, a bloated topline due to an acquisition would raise the expectations to greater heights next year. Hence, we are yet to decide on this matter," said Hiremath.

For the nine months ending December 2004, Hikal on its own had reported sales of Rs 133.29 crore. The company had indicated growth in topline to be around 35 per cent for the full financial year ending March 31, 2005.

In February 2005, Hikal had inaugurated a small volume, high potency active pharmaceutical ingredients (API) plant at Jigani near Bangalore. This USFDA compliant unit is capable of producing steroids and other high potency molecules under the cGMP conditions.

The company is also setting up a contract research centre near Pune, with a phase-I investment of Rs 20 crore. This unit is expected to become operational by end 2005, where the company expects to deploy about 100 scientists.