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Drug maker Neuland Laboratories on Wednesday said that its Board has approved the purchase of a manufacturing facility owned by Arch Pharmalabs located at Gaddapotharam, near Hyderabad, for an undisclosed amount.
The active pharmaceutical ingredients (API) facility comprising land, buildings, plant, machinery and equipment was acquired under the provisions of SARFAESI Act from JM Financial Asset Reconstruction Company (JMFARC) by mutual consent, Neuland said in a statement.
“The purchase would take place by way of execution of a Sale Certificate by JMFARC in accordance with the provisions of the SARFAESI, upon completion of certain conditions,” the statement added.
“The plant will accommodate our future growth plans,” said Sucheth Davuluri, Vice-Chairman and CEO of Neuland, in the company’s earnings call.
Davuluri said the company has paid a “fair value” to the plant, adding that the acquisition will be funded through debt and internal accruals.
The new plant, which is US FDA compliant, is expected to ease the supply bottlenecks the company is facing.
Davuluri indicated that Neuland will pursue more acquisitions as it plans to scale manufacturing capacity and expand product portfolio.
Neuland on Wedenesday reported 74.7 percent decline in its Q2 net profit at Rs 2.6 crore against Rs 10.2 crore in the year ago period, owing to lower-than-expected sales of key APIs Ciprofloxacin and Salmeterol in addition to capacity constraints at its Unit-1 facility.
Revenue was down 15.9 percent at Rs 125.9 crore versus Rs 149.6 crore.
Arch Pharma Labs, which was struggling under a debt burden of Rs 2,300 crore, was referred to the Corporate Debt Restructuring (CDR) cell in May 2013.
The company, built on string of acquisitions on borrowed money, got into debt trap.
Arch bought the facility now purchased by Neuland from Sibra Pharmaceuticals for Rs 40 crore in April 2007.
Matters turned for the worse when one of its largest foreign investors, the Japanese trading firm Mitsui & Co, exited the firm owing to a disagreement on the CDR package. Mitsui held about 32.5 percent stake in the company that it had acquired for nearly Rs 430 crore in two tranches in 2010 and 2012.
Last year, The Economic Times reported that State Bank of India, ICICI Bank and Axis Bank were among the lenders that have sold their portion of the loans of Arch Pharma to JMFARC at less than half the value.
JM Financial, which has been aggregating the Arch Pharma loans from various banks, is trying to sell the assets of the company.
As per the company's website, Arch currently has 11 manufacturing facilities across India. Four manufacturing facilities are located in Sangareddy district bordering Hyderabad, while five are in Mumbai and one each in Gurgaon, Haryana and Solapur, Maharashtra.
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