The Hindu Business Line : Dishman Pharma securitises future earnings from deal with European co

DISHMAN Pharmaceuticals and Chemicals Ltd, an Ahmedabad-based contract manufacturer of drugs, has securitised its earnings from a deal with a European company to raise $22 million (equivalent) through a consortium led by Rabo India Finance.

Claimed to be the first such arrangement in the Indian pharma industry, the deal is structured in the form of a future flow securitisation of the receivables from Dishman's long-term contract manufacturing agreement with Solvay Pharmaceuticals of the Netherlands.

Dishman has entered into a 10-year contract with Solvay to supply an active pharmaceutical ingredient (API) for the European company's hypertensive drug.

Under the loan agreement, Rabo India will chip in with Rs 20 crore while FMO of the Netherlands and DEG of Germany will provide euro 7.5 million each.

The funds, which work out to the equivalent of nearly $22 million, will be used for capital expenditure at Dishman's facility at Bawla, about 40 km from Ahmedabad.

"The funds will be used for future expansion and further capacity building in our contract research and manufacturing business. This low-cost debt will support overall cost reduction through substitution of existing high-cost rupee debt and funding future expansion through external commercial borrowings," said Dishman's Managing Director, Mr J.R. Vyas.

The company, which paid Rs 13.5 crore as finance charges in the last financial year, hopes to cut its interest expenditure half, which would give a boost to its profitability, he said.

The securitisation deal will also help Dishman to build future funding relationships with multi-national financial institutions for new contract manufacturing deals the company hopes to finalise in the next six months.

"Over the next two quarters, we hope to announce six major contracts from leading international companies. We will soon be undertaking contract manufacturing for at least four of the top five pharma companies in the world," Mr Vyas said.

He did not disclose any further details about the proposed tie-ups.

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