Sun Pharma to bifurcate subsidiary

Mumbai: Domestic pharma major Sun Pharmaceutical Industries has decided to split its subsidiary MJ Pharmaceuticalss formulation and bulk drug business into two separate divisions and put the formulation divisions for sale. Currently, Sun Pharma and its group companies together hold 72 per cent stake in MJ Pharmaceuticals.

Says Sun Pharma chief financial officer R K Behati: "We have recently mooted a proposal with the Board of Industrial and Financial Restructuring (BIFR) to bifurcate the MJ Pharmas business into two separate divisions. We also sought the permission of the BIFR to sell MJ Pharmas formulation business to a third party and to merge the bulk drugs business with Sun Pharma."

MJ Pharma is a sick industrial company under the provisions of the Sick Industrial Company (Special Provisions) Act 1985, and was referred to BIFR and ICICI for a rehabilitation programme.

The company has a formulations plant in Halol that has been approved by the regulatory agencies like the UK MCA and South Africa MCC. Companies like Eli Lilly and Knoll Pharma are currently using this site as a contract-manufacturing site.

Sun Pharma officials say the proposed scheme seeks to bring MJ Pharma back to health and take it out of BIFRs purview while retaining the fiscal benefits to Sun Pharma. "Once BIFR approves this proposal, the bulk drug facility at Ankleshwar and the long-term loan and accumulated losses will become Sun Pharma liability."

The officials say Sun Pharma would take over MJ Pharmas long-term loans of Rs 20 crore to Rs 21 crore and the company will allot equity shares of Sun Pharma to MJ Pharma shareholders in the ratio of 1:210. The company valuers, PricewaterhouseCoopers, recommended this earlier. However, this ratio is subject to BIFR approval and other concerned authorities, Behati said.

The company may also invest Rs 8 crore to 10 crore towards capital expenditure, spread over the next 12 to 15 months in the bulk drug unit of MJ Pharma. The unit at Ankleshwar will have multiproduct flexibility and will eventually meet requirements of both domestic and less-regulated markets, the officials say.