Arch Pharmalabs lines up Rs 120 cr capex

Mumbai-based Arch Pharmalabs Limited has lined up a capital expenditure plan of Rs 120 core for expansion of its existing and newly acquired bulk drug and intermediaries manufacturing facilities in the next couple of years.

The company last week acquired a Hyderabad-based firm, making it its fifth acquisition.

Ajit A Kamath, chairman and managing director, Arch Pharmalabs, on Wednesday announced the acquisition of Watsol Organics Limited, a manufacturer of pharmaceuticals and agro-chemical intermediaries, for an enterprise value of Rs 30 crore.

In April this year, Arch had bought out Sibra Pharmaceuticals Limited, another Hyderabad-based SME, for about Rs 40 crore.

The company now has six sites, including those in Gurgaon and Tarapur. It forayed into bulk drug manufacturing by taking over Hyderabad-based Merven Drug Products Limited in 1999.

The three private equity firms � ICICI Ventures, IL&FS and Swiss Technology Venture Capital Fund (SwissTec) � which have been nurturing the inorganic growth of the company currently hold 58 per cent equity in Arch Pharmalabs. Of this, ICICI Ventures holds 33 per cent while IL&FS and SwissTec have 12.5 per cent each.

Besides the internal accruals of over Rs 30 crore and further possible funding from PE firms, the company has got a commitment from DEG, a German financial institution, to meet the requirements of the fresh acquisition and expansion, Kamath said.

It proposes to invest Rs 40 crore in the Watsol facility, Rs 30 crore in Sibra and Rs 65 crore in the Gurgaon facility besides revamping the corporate R&D facilities to attract contract outsourcing in R&D from European and American companies.

Arch Pharma registered a turnover of about Rs 362 crore last year and aims to reach the Rs 1,000-crore mark by 2010.

"We expect the three Hyderabad facilities together to contribute around Rs 500 crore to the turnover by the end of the financial year 2010," Kamath said.

While the intermediaries and active pharmaceutical ingredients (APIs) currently contribute 60 per cent and 40 per cent to its total turnover respectively, the company wants to remain in the bulk drug and intermediaries space to pursue the current path of non-competing business strategy.

Arch Pharma has also expanded its technology agreement with US-based Codexis Inc to use the bio catalyses process on 15 products in the next three years in a bid to become clean and green and more cost-efficient as compared with the present synthetic route to develop generics drugs.