Nicholas Piramal to sell of Deonar plant - Views on News from Equitymaster

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Nicholas Piramal to sell of Deonar plant

Feb 16, 2000

Nicholas Piramal (NPIL) is planning to sell its Deonar facility. The company plans to offer a Voluntary Retirement Scheme to its existing staff of around 180 people. NPIL was formed by the triple merger with Sumitra Pharmaceuticals, Piramal Healthcare Boehringer Mannheim apart from the business of Roche earlier. The key therapeutic areas that the company focuses include antibiotics, cardiovasculars, nutritionals and central nervous system drugs.

The proposed sale of the Deonar facility is in line with the company’s continuous efforts to restructure its operations and bring about more efficiency in its functioning. The facility manufactures ointments and vitamins that are anyway being manufactured at the company’s other facilities.

Since Deonar is within Mumbai itself the company can hope to get a good price for its real estate and deploy the money towards partly paying of the VRS of its workers and using the balance cash for shoring its pharmaceutical business.

It would also reduce the cost of operations for the company since Mumbai is one of the costliest places to run a manufacturing operation.

However the sale of Deonar facility would only be one of the number of moves to restructure the company. The others include the sale of the bulk drug unit and the sale of the stake in Gujarat Glass.

Market View:
The company has been rated as a 'buy' by most analysts primarily due to the company’s restructuring where both the bulk drugs as well the non-pharma activities would be hived off, the management’s proactive approach in forming co-marketing alliances with multinationals and the expected dilution of price control which would bring down the share of revenues from products under price control for NPIL to less than 42%.

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