Hindustan Antibiotics seeks redemption amid rising anti-China sentiments

Rising anti-Chinese sentiments and India’s search for alternative sources of bulk drugs have come as booster dose for sick public sector enterprises like Hindustan Antibiotics (HAL).
 

The firm is charting a turnaround plan by beginning the manufacturing of key bulk drugs that the government has identified under a production-linked incentive (PLI) scheme.
 

Speaking to Business Standard, Nirja Saraf, managing director of HAL, said: “We have requested the government to review the decision to go for a strategic sale of HAL.”
 

The PSU is planning to invest Rs 20 crore (requirement for the newly announced PLI scheme) to augment its production capacity at its Pune plant, to make three key active pharmaceutical ingredients (APIs) — telmisartan, meropenem and gabapentin. Of these, meropenem is now in high demand. For financial year 2020-21, the firm is targeting Rs 100 crore in turnover and zero losses.
 

Saraf said the PSU would invest Rs 20 crore from its internal resources. “We are selling some scrap and have rented out some properties,” she said. As for initial capacities, it would be 100 tonnes per month (tpa) for telmisartan and gabapentin, and 20 tpa for meropenem. Saraf said production could start by December.
 

The government is moving fast on incentivising API production. India imports 70 per cent of its API requirement from China now.
 

The government had announced a Rs 10,000-crore PLI scheme in March, aimed at reducing dependence on China (for crucial antibiotics, vitamins, anti-diabetic medicines etc). Under the scheme, it would provide Rs 10 crore to a domestic manufacturer who would make 41 products that cover 53 crucial APIs. The units need to be completely backward integrated.
 

Saraf clarified that HAL would be vertically integrated, and would make the key starting materials (KSMs) and other chemicals required to produce the APIs.
 

HAL has also started work on becoming leaner; it has released 375 people on voluntary retirement scheme (VRS) and has sought funds from the government. “If we get the funds, we will release another 300. There would be 175 people on the payrolls. For 480 people, the wage bill stands at Rs 2.1 crore per month, and this will reduce to less than Rs 1 crore,” Saraf explained.
 

Saraf did not wish to disclose the turnover and losses for FY20, saying those were being currently worked out. People in the know said HAL’s accumulated losses stood at around Rs 530 crore.
 

HAL plans to take up fermentation-based APIs in its next phase of expansion. In December 2016, the government had identified four pharma PSUs — Indian Drugs and Pharmaceuticals (IDPL), Rajasthan Drugs and Pharmaceuticals (RDPL), Hindustan Antibiotics (HAL) and Bengal Chemicals and Pharmaceuticals (BCPL) — for sale of surplus land and eventual closure or strategic sale.
 

Despite the Cabinet nod, the efforts to sell surplus land did not make any progress. Multiple tenders were floated but the government did not find any buyers. The December 2016 decision was to sell the land to government entities. In July 2019, this was revised to allow sale to private entities as well.
 

HAL has been making losses since 1972 as its main product penicilin, a bulk drug, is mostly imported from China.