Bajaj Healthcare is the first private company in India that will supply opium-derived alkaloids and active pharmaceutical ingredients to the government.
In a country where the opiate business is highly regulated, the entry of private companies in processing is considered a ground-breaking move that can reduce import dependency for various alkaloids that are used by pharmaceutical companies to manufacture pain relievers.
Moneycontrol spoke to Anil C Jain, joint managing director of Bajaj Healthcare, about how his company plans to manufacture concentrated poppy straw (CPS) alkaloids and active pharmaceutical ingredients, the challenges and the potential. Edited excerpts:
How did you decide to venture into the tightly regulated opium-processing business?
This was an idea that we got from Pfizer – we have a good rapport with the company. The company uses alkaloids in a product named Corex. We enquired about it, got all the details. It looked like a good opportunity with high margins. So we entered the opium-processing business.
Also read: Move to open opium market to private players could take Rs 1,000 crore business to new highs
How lucrative is the opium-processing business in India and what is the profit margin that you are looking at?
It’s a highly regulated market in India, which is over Rs 1,000 crore. The government is processing 500 to 700 metric tonnes but the demand is more. We have been told that it will be a long-term contract. The margins on opium processing will be 20 to 25 percent of EBITDA (earnings before interest, taxes, depreciation, and amortisation).
What will be your role in alkaloid extraction?
The government will provide us with the poppy straw. We will convert it through CPS (concentrate of poppy straw) technology into different kinds of alkaloids. These alkaloids will be given to the government of India, which will sell it to the sector concerned. We will get the processing charges, which have already been defined by the government of India.
Also read: Healthcare associations write to FM, raise concerns over 5% GST on hospital room rent
Why should a private company be involved in a highly regulated business like opium-processing?
When the government was processing opium, they did not have enough capacity. They were not able to meet demand and the government used to import alkaloids. To minimise this import, the government felt that it would be an opportunity for both government and private players. So whatever the shortfall, a private company can bridge that gap.
When you process opium gum, how concerned are you about illegal trafficking and how will you manage it?
The menace of trafficking is real in this business. We are putting cameras in plants, we are taking advice from professionals. We will have enhanced security. We are taking the help of the government also. We will train our workforce in a way that everyone knows the consequences of wrongdoing in a highly regulated business like this.
What changes have been made at the company’s plant in Savli near Vadodara?
The Savli unit manufactures APIs. We have 11 blocks for manufacturing and we have converted one block for manufacturing alkaloids. The work is on. By the end of this month, the changes in reactors and equipment will be done. By the middle of August, we will be able to start the process.
This comes under narcotics, so we will need clearance from them as well.
How will private players reduce India’s import dependency in this segment?
The government has told us to do a minimum of 100 metric tonnes of opium gum and 500 metric tonnes of poppy capsules. We will start with a small volume of opium gum. As it gets going, we can process up to 800-900 metric tonnes of opium gum for the government annually. If we are through with the 100 tonnes, then we are sure that the government won’t require any alkaloid material imports.
Now that you have tweaked the manufacturing plant in Savli, is there a plan to get into the business of associated chemistry of alkaloids?
Right now, we are going to look at the processing part. There is no plan for entry into the business of associated chemistry of alkaloids.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
