The Union Ministry of Chemical and Fertilisers is all set to hand over the pharma PSU, Hindustan Antibiotics Limited to the Mumbai-based K P Sales Group, a pharma trading company for a song. With K P Sales Group being qualified as final bidder for the take over of HAL, the government is expected to announce the change of management soon.

As per the deal finalized, the Mumbai-based company would bring in just Rs 5 crore as the estimated valuation of the company. This amount would be used for the Rs 15 crore voluntary retirement scheme (VRS) offered to the employees. The VRS will be operated by the new promoter after the acquisition. In order to facilitate completion of VRS, the government would give another Rs 10 crore to the new incoming promoter. HAL has a staff strength of 2180 in its only plant at Pimpri.

According to informed sources, in return of Rs.5 crore, the new promoter will get the company and its assets estimated at around Rs 750 crore on a platter. HAL is also the majority stakeholder in Karnataka Antibiotics Pharmaceuticals Limited (KAPL), joint venture with Karnataka state government and Hindustan Max GB, another joint venture with the private sector pharma major Max GB.

The Rs 750 crore valuation of the company comprises of the value of the fixed assets including the land of 350 acres and plant & machinery besides the 54 pharmaceutical and veterinary brands. The worth of the equity holdings in the joint venture companies is to be estimated additionally.

However, the current outstanding liabilities, which includes the loans from banks, financial institutions and the government is estimated at around Rs 65 crore. This would, however, be settled by the new promoter by disposing the surplus land. The new promoter is likely to bring another Rs 20 crore into company later as a fresh fund infusion, it is learnt.

The deal between the government and the Mumbai-based company was subsequent to an open bid invited in June 2002 by the Industrial Development Bank of India (IDBI), the operating agency appointed by the BIFR.

K P Sales Group was one of the only two bidders for the company participated in the recently opened takeover bid. The Industrial Development Bank of India (IDBI), which scrutinized the bid proposals as the operating agency appointed by the Board for Industrial Finance and Reconstruction (BIFR), has however accepted the KPS' document without considering the earlier conditions like the experience and expertise of the bidder in the area of pharmaceutical industry management.

It may be recalled that when the private bidding was closed on July 6, 2002, IDBI received only two proposals for taking over the company. However, both the bidders, a Mumbai-based Associate Consultancy and K P Sales Group, are little known entities in the country's pharmaceutical industry. Early this year, the government had asked the BIFR to proceed with a change of management in the company under the SICA Act albeit the company's current status as a profit making company.

However, the Hindustan Antibiotics Mazdur Sangh (HAMS), the only employees union in the PSU is fully determined to stop any company taking over the company with an intention to use the assets by halting the existing operation. However, once the VRS scheme is accepted by the majority of the employees, the future operation of the company is at the sole discrimination of the new promoter.

The sources said that ideally, when a public limited company is referred to the BIFR as declared sick, the Board has its liberty to analyze the actual financial liabilities and resources of the same and to act upon the proposal submitted by the operating agency. The final decision for either revival or change of management or closure should come from the Board after its assessment and routine hearings of the parties concerned. Then the promoter puts their willingness/ suggestion to follow the decision of the Board. However, the sources, quoting the Ministry's earlier letter to BIFR, said that the government has stated that it has decided to go for a change of management in the company by inducting a strategic partner due to strategic reasons. This statement sounds like dictating the Board about what should be the action of the Board in regard to the revival of HAL, the sources said.