JUBILANT TO HIVE OFF A PART OF INDUSTRIAL PRODUCTS DIVISION

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JUBILANT Organosys is hiving off and putting on the block a part of its Rs 1,200-crore industrial products division as it looks to focus on its core pharmaceutical and lifesciences business.

A person familiar with the matter said Jubilant expects to make up to Rs 350 crore from the sale of the consumer products and application polymer business, which has sales of Rs 200 crore a year and will use the proceeds to retire debt and expand the drugs business.

“There were preliminary proposals of interest from domestic and international companies,” the person said on condition of anonymity. Jubilant is expecting to raise around Rs 300-350 crore from the sale based on a valuation multiple of around 1.5 times annual revenue for such businesses, the person added.

Products made by the division include consumer items sold under the ‘Jivanjor’ brand and application polymer products used in coatings, textiles and packaging.

A company spokeswoman declined to comment. Jubilant Organosys, one of the largest custom research and manufacturing services company in India, is also into the business of drug discovery and posted revenues of Rs 3,500 crore in the last fiscal year. Its mainstay pharma business accounted for more than 65% of its sales.

During the period, the pharma and lifesciences division grew 52%, while the industrial and performance products (IPP) grew 25%. “Jubilant’s contract research and manufacturing business is more stable and provides higher profitability for the company. So it does make sense to do away with the noncore chemical business,” said Sarabjit Kour Nangra, vice president for pharma research at Angel Broking.

Jubilant sits on a debt burden of Rs 3,500 crore, a significant part of which is in the form of foreign currency convertible bonds (FCCB) borrowing. The company had recently said that about $150 million of the around $200 million FCCB comes up for repayment in mid 2011. Jubilant has cash reserves of Rs 400 crore.

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