Aurobindo turns cold on Dee Pharma unit

The Rs 298-crore, Hyderabad-based Aurobindo Pharma has shelved its plan to acquire the bulk drugs unit of Dee Pharma. The reason cited: delay in approvals by the Board of Industrial and Financial Reconstruction.
     Aurobindo Pharma had received in-principle approval from the BIFR to buy Dee Pharma's 38 tonnes per annum Rajasthan plant in March 1999 for a consideration of Rs 7 crore. According to Aurobindo's managing director P V Ramaprasad Reddy the company had set 28 February 1999 as the deadline for the acceptance of the acquisition offer. That deadline has lapsed.
     The cause of Dee Pharma's sickness are the slump in the bulk drugs market, plus higher input costs and poor liquidity. The company became a BIFR case in 1997-98 after its accumulated losses exceeded its net worth. Dee Pharma had proposed the sale of its bulk drugs and gelatin capsule plant as part of its rehabilitation proposal.
     The acquisition would have increased Aurobindo's bulk drug capacity, and facilitated higher levels of backward integration. Having dropped the Dee Pharma plan, Aurobindo is expected to avoid acquisition of existing manufacturing facilities, and go in for capacity expansion on its own. This will not affect the company's plan to acquire brands. Immediate acquisitions will include cardiovascular brands.
     Aurobindo Pharma, traditionally a bulk drug company, has recently announced plans to venture into formulations. The company has invested Rs 29 crore in building two new formulation units. These units will go on stream in June and December 1999.
     Other companies to shift focus from bulk drugs to formulations include Kopran and Orchid. According to Mr Reddy, Aurobindo Pharma is building a Rs 25-crore research centre this year to do process research.