The Hindu : Business : Malladi Drugs acquires U.S. firm

Online edition of India's National Newspaper
Wednesday, May 11, 2005

Business

Business

Malladi Drugs acquires U.S. firm

Staff Correspondent

Funded by private equity investors

ACTIVE IN ACQUISITION: The Managing Director of Malladi Drugs & Pharmaceuticals, Prashant Malladi (left), with the Chief Executive Officer, V. N. Gopalakrishnan, at a press conference in Mumbai on Tuesday. — Photo: Vivek Bendre

MUMBAI: In what is the first cross-border acquisition by an Indian pharmaceutical company in the Active Pharmaceutical Ingredients (API) segment, the Chennai-based Malladi Drugs and Pharmaceuticals Ltd. (MDPL), a leading producer of Ephedrine and Pseudoephedrine salts, has acquired the U.S.-based Novus Fine Chemicals, a Pseudoephedrine major.

The cross-border acquisition will be financed through strategic funding aggregating Rs. 100 crores from a consortium of private equity investors including ICICI Venture, Sanders Morris Harris Group and IL&FS. Malladi has entered into a definitive agreement with the three private equity firms for infusion of funds through the issue of common stock. The funding covers the acquisition, MDPL's own capital expenditure and Novus' setting up a pilot plant in the U.S.

The acquisition is a move towards industry consolidation given that the U.S. company is in the same segment of cough and cold.

The combined entity will be of similar capacity size to the global leader, BASF. MDPL now meets 14 per cent of global demand for Pseudoephedrine, a controlled substance; the same as Novus, the only maker of phenyl ephedrine in the U.S. The global leader, BASF accounts for around 28 per cent. Thus, the acquisition also strengthens Malladi's position in the high growth Phenylephedrine segment.

MDPL now makes 250 tonnes of Pseudoephedrine annually at its Ranipet facility while Novus has a similar capacity so the combined entity will have a capacity of 500 tpa against a global demand of around 1,500 tpa.

Addressing the media here on Tuesday, Prashant Malladi, Managing Director, MDPL, said, "with this acquisition, Malladi will be in a position to provide a platform to innovators and also start-up biotech companies, which will be fully backward integrated into India with a front end in the U.S.''

While Novus is a $15 million company, MDPL in 2005-06, is looking at consolidated revenue of Rs. 200 crores and aims to be a $100 million company in five years time.

MDPL is also involved in custom synthesis and manufacturing for global companies.

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