 "We are not averse to IPO, but after four-five years: Binish Chudgar")
Catapulting into the big league of drug makers in the UK and Ireland, Binish Chudgar, vice-chairman and managing director of the Ahmedabad-headquartered Intas Pharmaceuticals, has plans in motion to double its production capacity in India. Talking to Sohini Das and Abhineet Kumar over phone from the UK, Chudgar says the target is to grow at 20-25 per cent annually over the coming years. Edited excerpts:
Some time ago you had said you were looking for one big acquisition in the US or the EU and after that, the company might go for an IPO. What are your plans now?
At that time we were also trying to exit ChrysCapital but the stake changed hands with Temasek. Temasek is one year in the company and they usually have a tenure of four-five years. We will go for an IPO at the appropriate time because we believe we will have to provide an exit. Otherwise, we are very strong in balance sheet and don't need more funds.
We would be hoping for more debt. We are not averse to an IPO but we are as good as listed now. All compliances, all board members are as per a listed company. Also, the PE is happy with the way the company is doing and they are multiplying their valuation. We are happy and we are able to concentrate on the job, so right now nothing immediate. But, we may do it in four-five years.
You now have the Barnstaple plant, which might ease some capacity in your Indian plants that supply to the EU. How will you make use of the capacity at hand?
We have 10 billion units (of tablets and capsules) capacity right now and are on the verge of starting an additional 10 billion capacity in our special economic zone expansion. That is 14-15 months away from commercialisation. Inspections and audits do take time. We are short of capacity. The Barnstaple plant is fully utilised and they are generating a handsome bottom line.
The service level for the UK market is very well matched. So, we have new product launches, we have new activity of parenteral, hospital (drugs). We would support all that from India and our expansion in other parts of Europe would be supported from India. We don't want to disturb the Barnstaple plant; it is very well utilised now and costings and everything are perfect. It’s a well-run plant.
In fact, we have another facility which we acquired from Sanofi in the north of UK. That's for a separate category of products, we are hoping to start its production in January. These products are very much in demand in the UK and it is very difficult to make them here in India. We will be utilising that facility at Newcastle for the UK market.
How much is the investment for this expansion of capacity?
We have expansion plans for India worth around Rs 600-800 crore, which includes expansion in Dehradun, Ahmedabad and a little bit of expansion in our biotech facility. We will be doubling the production in certain categories, and in some categories it will be more than double.
We are commercialising so many products in the years to come, not only in Europe but also in the US, that we need higher capacity. We need the capacity at the right time, so we have to plan in advance, such that when we need it, the plant is ready. Another thing is that the technology also changes and as the authority requirements are becoming stringent, we have to keep on updating our infrastructure.
Do you think the price you paid for the Teva UK assets was reasonable? How soon do you expect RoI?
It’s already generating RoI every day. They are generating around 70-75 million pounds every year. It’s one of the best performing assets. I don't think we have paid less or more for the asset, it's just perfect and very suitable for our present set-up.
Eventually, we have seen that the growth is a bit less in India compared to international operations as we are mature here in India. In the US and Europe we consider ourselves a little young, and especially in some of the European sides, we are infants. The growth rate there is thus sometimes in three digits. We are likely to maintain an overall growth path of 20-25 per cent in the years to come, that is one of the highest in the entire world in the generics space.
How do you plan to fund the acquisition?
Debt is available quite cheap in the global markets today. So we plan to fund the entire acquisition through long-term debt. We have already tied up with a consortium of global and foreign arms of local banks. There is a provision of paying out annually and we plan to re-pay the entire debt in the next four to five years.
Some time ago you had said you were looking for one big acquisition in the US or the EU and after that, the company might go for an IPO. What are your plans now?
At that time we were also trying to exit ChrysCapital but the stake changed hands with Temasek. Temasek is one year in the company and they usually have a tenure of four-five years. We will go for an IPO at the appropriate time because we believe we will have to provide an exit. Otherwise, we are very strong in balance sheet and don't need more funds.
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You now have the Barnstaple plant, which might ease some capacity in your Indian plants that supply to the EU. How will you make use of the capacity at hand?
We have 10 billion units (of tablets and capsules) capacity right now and are on the verge of starting an additional 10 billion capacity in our special economic zone expansion. That is 14-15 months away from commercialisation. Inspections and audits do take time. We are short of capacity. The Barnstaple plant is fully utilised and they are generating a handsome bottom line.
The service level for the UK market is very well matched. So, we have new product launches, we have new activity of parenteral, hospital (drugs). We would support all that from India and our expansion in other parts of Europe would be supported from India. We don't want to disturb the Barnstaple plant; it is very well utilised now and costings and everything are perfect. It’s a well-run plant.
In fact, we have another facility which we acquired from Sanofi in the north of UK. That's for a separate category of products, we are hoping to start its production in January. These products are very much in demand in the UK and it is very difficult to make them here in India. We will be utilising that facility at Newcastle for the UK market.
How much is the investment for this expansion of capacity?
We have expansion plans for India worth around Rs 600-800 crore, which includes expansion in Dehradun, Ahmedabad and a little bit of expansion in our biotech facility. We will be doubling the production in certain categories, and in some categories it will be more than double.
We are commercialising so many products in the years to come, not only in Europe but also in the US, that we need higher capacity. We need the capacity at the right time, so we have to plan in advance, such that when we need it, the plant is ready. Another thing is that the technology also changes and as the authority requirements are becoming stringent, we have to keep on updating our infrastructure.
Do you think the price you paid for the Teva UK assets was reasonable? How soon do you expect RoI?
It’s already generating RoI every day. They are generating around 70-75 million pounds every year. It’s one of the best performing assets. I don't think we have paid less or more for the asset, it's just perfect and very suitable for our present set-up.
Eventually, we have seen that the growth is a bit less in India compared to international operations as we are mature here in India. In the US and Europe we consider ourselves a little young, and especially in some of the European sides, we are infants. The growth rate there is thus sometimes in three digits. We are likely to maintain an overall growth path of 20-25 per cent in the years to come, that is one of the highest in the entire world in the generics space.
How do you plan to fund the acquisition?
Debt is available quite cheap in the global markets today. So we plan to fund the entire acquisition through long-term debt. We have already tied up with a consortium of global and foreign arms of local banks. There is a provision of paying out annually and we plan to re-pay the entire debt in the next four to five years.