Land parcels of pharma PSUs find no takers, but momentum likely in few mths

In December 2019 the decision was revised to allow sale of land to private entities as well through a competitive bidding process

There are no easy takers for land parcels of pharmaceutical (pharma) public sector undertakings (PSUs) after the process was set into motion in 2016. However, independent valuation of land parcels is now being done, and PSU sources indicate that the process of sale may gather momentum in the months to come.

Initially, the bidding was restricted to government agencies, and several tenders issued by PSUs for sale of surplus land did not find any takers.

“Since land could not be sold, the liabilities of PSUs could not be met and no progress made in respect of their closure or strategic sale,” noted the 2021-22 (FY22) annual report of the Department of Pharmaceuticals (DoP).

The matter was again placed before the Cabinet, and in December 2019, the decision was revised to allow the sale of land to private entities through a competitive bidding process.

In December 2016, the government had identified four pharma PSUs — Indian Drugs & Pharmaceuticals (IDPL), Rajasthan Drugs & Pharmaceuticals (RDPL), Hindustan Antibiotics, and Bengal Chemicals & Pharmaceuticals (BCPL) — for the sale of surplus land and eventual closure or strategic sale.

IDPL and RDPL are to be shut down after meeting their liabilities, while Hindustan Antibiotics would be taken up for strategic sale.

The two profit-making PSUs — BCPL and Karnataka Antibiotics & Pharmaceuticals (KAPL) — are also up for strategic disinvestment.

A senior government official heading one of the PSUs told Business Standard that the process of evaluation of land is ongoing by independent valuers.

“We expect the process to pick up momentum now. It’s because of the huge land parcels that we hope to find buyers for PSUs. Some of these units are making several rare drugs (narcotics related, fermentation-based, etc),” said the official.

Last July, the government again discussed the sale of assets of pharma PSUs to take care of their liabilities. In view of pending dues to the retirees of Hindustan Antibiotics and RDPL, the committee of ministers under the chairmanship of the Union home minister had approved budgetary support of Rs 139 crore to the two PSUs.

As for IDPL, it was asked to return 833.38 acres of leasehold land at Rishikesh to the Government of Uttarakhand; transfer 50 acres land at Hyderabad to National Institute of Pharmaceutical Education and Research (NIPER).

BCPL, on the other hand, was asked to transfer 20.55 acres of land at Panihati in Kolkata to NIPER, Kolkata. The Centre also waived the loan of Rs 193.71 crore of BCPL, along with accrued interest.

Hindustan Antibiotics also sold 3.5 acres of land in Pune to the Employees’ Provident Fund Organisation at a price of Rs 42 crore. KAPL, meanwhile, is up for 100 per cent strategic disinvestment.

Hindustan Antibiotics’ land in Pune had encroachments from slum dwellers. Sources indicated that these encroachments have now been taken care of, and the land parcel was now free to be sold.

A senior pharma sector executive, whose firm is looking for buyouts, said: “The PSU plant and machinery need complete overhaul. It’s only the land or real estate that is valuable. When we look for buyouts, we typically want some technology, product basket or some synergies. Such a rationale does not exist in the case of buying out a pharma PSU.” He added that PSUs may find takers from real estate players.

Some PSUs like Hindustan Antibiotics have shown turnaround in the past few years. From a turnover of Rs 14.78 crore in 2016-17, its turnover touched Rs 89.56 crore in 2020-21. According to sources in the know, Hindustan Antibiotics crossed a turnover of Rs 150 crore in FY22.

Hindustan Antibiotics is planning to upgrade its antibiotics and active pharmaceutical ingredient facilities to generate more funds for the company.

“The company had 918 employees on March 31, 2019. As on November 1, 2021, the total number of employees is 436,” stated the DoP annual report. It has relieved 385 employees through a voluntary retirement scheme and is in the process to relieve another 150-200 employees which shall reduce the salary burden.