The proposed transfer plan of ailing Kerala State Drugs and Pharmaceuticals Ltd to the Central PSU, Hindustan Latex Ltd announced by the Kerala Industries minister may not be that easy considering various financial implications involved in such a deal, it is learnt.
A top-level official from KSDP told Pharmabiz that the 'process may take sometime' and the government has to address many issues to effect the transfer. Primarily, the government will have to find adequate funds to wipe away the losses of the beleaguered drug firm, now accumulated to over Rs 54 crores. The industries department has to discuss the proposal and the cabinet is yet to take a decision on the matter. The proposal from HLL was only an Expression of Interest, and it is yet to work out a detailed takeover proposal. The government will have to come out with concrete plans involving various agencies to settle the debts of KSDP, besides considering the fate of its employees. Then only a clear picture would emerge on the prospects of takeover, said the source.
When contacted, Chandrasekharan Nair, general manager, Corporate Affairs of HLL said it was too early to comment on the modalities of transfer. "We have given only our Expression of Interest and the Kerala Government has to take the decision. We are interested in KSDPs assets, infrastructure and manufacturing capacity, and it is in line with our growth plans. We are yet to evaluate their assets and other details of a possible takeover including the case of its employees," said Nair.
Sources point out the company has not paid wages for its 417 employees in the past 9 months. Statutory liabilities and wages to employees amounts to Rs 3 to 4 crore, besides many lakhs of rupees have to be paid to state electricity board, telephone department etc. Further, about Rs 4 to 5 crore is due to raw material suppliers besides an amount of Rs 6 to 7 crore to other debtors. Another Rs 3.5 to Rs 4 crore is due to KIRFB, which infused funds a few years to save the company from closure due to lack of working capital. Without calculating the interest for the last two years, KSDP owes about Rs 1.5 crore to State Bank of Travancore and Rs 60 lakhs to Travancore Titanium Products. The long-term liabilities include Rs 160 lakhs to Malabar Cements Ltd and Rs 34 crores to the government.
KSDP, which declared the VRS option for employees during November, last year is yet to implement the Rs 10 crore scheme. Most of the employees, including the top brass, had opted for the scheme. The Vitamin A plant is fully defunct and the formulation division is functioning only partially, thanks to a Rs 4 crore odd order from the health departments of Kerala and Andhra Pradesh.
Though the Government had tried to privatize its vitamin plant, the only one of its kind PSU manufacturing unit for Vitamin A in India, there were no takers except for the interest shown by the NDDB. A RIAB study report to restructure the company had suggested the state health department should take over the formulation division and should sell off surplus assets in land to partly wipe out the debts. But the health department declined the proposal.
KSDP, located at Kalavoor near Alappuzha, once described as the pride of Kerala, was started in 1974 to supply cost effective life saving drugs to the state run hospitals and clinics, thanks to the initiative of the late communist leader A K Gopalan. In 1983, KSDP commenced production of nutritional Grade Vitamin A from lemongrass oil as the basic raw material, either as Palmitate or as Acetate, designed to suit the various needs of pharmaceutical, Vanaspati manufacturing and for the fortification of various animal feeds and other food materials.
The plant, started in technical collaboration with M/s Hofmann-La-Roche, had an installed capacity to make 30 Mega Million Units (MMU) of Vitamin A and 22 Metric Tonnes of Beta Ionone per annum. The formulation division, which employs 320 people, manufactures tablets, anti TB Drugs, anti asthmatic, anti-allergic drugs etc, vitamins and antibiotics in capsules, large and small volume parenterals and steroids etc.