The government has drawn up an ambitious plan to unlock the value of surplus land held by state-run pharmaceutical companies at prime locations in the country. The plan will allow the companies to make these assets, worth tens of thousands of crores, available to private investors on a long-term basis, without an outright sale.
Indian Drugs and Pharmaceuticals Ltd (IDPL) alone has real estate holdings with an estimated value of over Rs 50,000 crore at current market prices. Three other pharma PSUs ?Hindustan Antibiotics Ltd (HAL), Bengal Chemicals & Pharmaceuticals Ltd (BCPL) and Karnataka Antibiotics & Pharmaceuticals Ltd (KAPL) ? also have prime land worth thousands of crores of rupees, lying idle.
What?s being envisaged is the creation of a clutch of joint ventures between these four PSUs and private investors including pharma companies. The PSU and the private player will form Special Purpose Vehicles (SPVs) to set up businesses that potentially create robust revenue streams. These include biotech and IT parks, drug manufacturing facilities, educational institutes, clinical laboratories, quality control units and large animal farms.
The PSU?s equity in the venture will be tantamount to the estimated value of the land earmarked for the venture, while the private sector investor will have to infuse funds and manage the SPV. ?Co-development of land would be either on the build, operate and transfer (BOT) model or through revenue sharing proportionate to equity,? a senior official who did not want to be named, told FE.
The government has already appointed nationally accredited valuation experts for the land assets of HAL and KAPL, the official said. BCPL would also work out its scheme soon, he added. IDPL?s proposal has to be approved by the Cabinet as an inter-ministerial panel headed by defence minister AK Antony is looking at the revival of the company.
This model differs from that of the now-famous National Textile Corporation (NTC) revival, where significant parts of the corporation?s surplus property are being sold to private players and the proceeds being used for expansion projects, besides funding a massive VRS scheme.
IDPL?s land assets include about 900 acres in Hyderabad, 1,200 acres in Rishikesh, 80 acres in Gurgaon and 650 acres in Chennai, all at prime locations. In Pune alone, HAL has surplus land of 250 acres. BCPL too has similar assets at Panihati and Maniktala in West Bengal.
The new ventures will enjoy significant autonomy and operational independence, unlike their public sector parents with limited ability to compete with sophisticated private sector pharmaceutical giants.
Co-development of new projects in a public-private partnership mode and through joint ventures is expected to enable the PSUs to overcome their constraints — time consuming decision-making process and an older work force. The new projects will enjoy significant operational autonomy. The ministry of chemicals and fertilizers, the administrative ministry for the drug industry, expects these projects to strengthen the financial health of pharma PSUs, which are already showing signs of a gradual recovery after a protracted period of sickness and lethargy. IDPL made a small operational profit last fiscal, and its performance this fiscal is expected to be even better. A revival plan is under implementation for HAL also.