A big shot in the arm

The country''s fastest growing pharmaceutical company, as per an ICRA study, Orchid Chemicals recently got a big vitamin M (money) shot in its arm with the Schroder Ventures Group investing Rs 175 crore in the company. This lump sum investment will be used for R&D (15 per cent), international marketing (10 per cent), development and production of non-cephalosporin bulk drug (30 per cent), cephalosporin bulk production (5 per cent), formulations (25 per cent) and the balance will go towards short and long term working capital.

While the fresh funds will be expended in a years time, Orchid would be able to reduce its interest cost by Rs 8 crore. "The additional investments would enable us to generate Rs 100 crore internally, enabling us to pay off routine debts," Rao remarks.

While the company''s new formulations plant at Irrungattukottai, near Chennai, will conform to USFDA, UKMCA and MCC, South Africa standards, for the existing cephasosporin injectible and oral plants, Orchid Chemicals is in the process of filing necessary papers for getting the coveted approval. "We expect to get the USFDA''s approval by next June," says Rao.

Meanwhile, for the first half of the current fiscal, Orchid Chemicals clocked a turnover of Rs 175.37 crore and a profit of Rs 19.21 crore. Agreeing that the per unit price of cehpalosporin bulk range is more or less stagnant or going down, over the past few years, Rao says, the corresponding reduction in the input prices like Pencillin G, 7 ACA, is protecting or even improving the company''s margins.