Novartis, Nicholas to buy Hoechst units

Ananth Iyer
16 October 1999

Pharmaceuticals major Hoechst Marion Roussel has finally found buyers for two manufacturing facilities in Mumbai that have been idle for some time now. The company is negotiating the sale of its Mulund facility with Nicholas Piramal and its Thane facility with Novartis Enterprises Pvt Ltd.

Hoechst is reportedly close to striking a deal to sell its manufacturing unit in Thane, originally a Roussel plant prior to the merger with Hoechst, to NEPL for Rs 10 crore. NEPL is a 100 per cent subsidiary of Novartis AG, Basle, and is solely into development and manufacturing of drugs for export. Sources say that the Indian subsidiary is the sourcing base for Novartis'' generics arm Biochemie. The Indian subsidiary has set up an R&D centre to develop off-patent processes for generic drugs. Deb Bhadury, managing director, HMR, says hiving off manufacturing units is part of the restructuring that Hoechst has been doing after the merger with Roussel. At present there is no production at the plant where earlier Roussel produced formulations. Hoechst has also put four of its older generation brands on the block, but is still to attract buyers. The brands have sales in the range of Rs 18-20 crore. for report on Hoechst brands. According to a Novartis spokesperson, the consideration for the Roussel unit is a little over Rs 10 crore. "We intend to make newer products in this unit for exports," the spokesperson says. The Roussel unit occupies around 40,000 square metres, and has a built-up area of around 19,000 square metres. Analysts expected the sales to be valued at Rs 8-10 crore.

Nicholas Piramal has reportedly evinced interest in the Mulund manufacturing facility, part of which it already owns. Last year, the Piramals acquired the Hoechst Research Centre for Rs 20 crore. The Hoechst property at Mulund is valued by analysts at over Rs 40 crore.

However, it is still unclear whether the Mulund property will be bought by Piramal Holdings or the pharma arm Nicholas Piramal. In some recent acquisitions by the Piramals, the land has been transferred to Piramal Holdings. This happened with the Roche manufacturing unit at Thane, near Mumbai, the Roche office premises at Haji Ali in Mumbai, which was converted into the Crossroads shopping mall. Since the Mulund facility is reportedly equipped to produce nutritional products, it is not clear whether the Piramals will resume manufacturing in Mumbai, where labour costs are high and laws stringent. The company already owns a state-of-the-art manufacturing unit at Pithampur, near Indore in Madhya Pradesh. Speculation is rife that Mulund may house another Crossroads-like project. Hoeschst Marion Roussel''s Mulund unit has been idle for some time now after nearly 400 employees, including staff, opted for a voluntary retirement scheme in February-March 1999. This was the fourth VRS offered by the company.

Hoechst is one of the earlier companies to move its production out of Mumbai in an attempt to cut costs. However, unlike other pharma multinationals in India, the company is not exiting from manufacturing per se, by delegating it to third parties. The company has shifted production to its recently commissioned state-of-the-art manufacturing unit in Goa.

Earlier, sources in HMR had said the company was confident of finalising a deal for its Roussel plant this quarter and that the consideration would be reflected in the quarterly results.The board of directors of HMR is meeting on 21 October to take on record the unaudited second quarter results.