Legal tangles delay Divi’s Labs’ greenfield expansion

G Naga Sridhar Hyderabad | Updated on January 10, 2018


Measures being taken to meet immediate capacity needs

Legal tangles related to land acquisition have been delaying the proposed greenfield expansion of Divi’s Laboratories Ltd forcing it to look for alternative arrangements.

The company is in the process of setting up a manufacturing facility on a greenfield site at Ontimamidi near Kakinada, Andhra Pradesh. It announced earlier that the investment in the plant could be to the tune of ₹500 crore. As per the original plan, the plant was expected to be operational in 2017-18.

“Though the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) allotted and gave us advance possession of the 505-acre site, it could conclude registered sale agreements only for about 352 acres in bits and pieces,’’ Murali K Divi, Chairman and Managing Director, Divi’s Laboratories said, while addressing the investors in the 27th annual general meeting of the company held here.

Several farmers and earlier owners whose land had been acquired or resumed by the government moved the High Court either contesting the acquisition or seeking higher compensation.

The Hyderabad-based company is in a fix now as it will not be able to implement the proposed project unless it is able to get a contiguous site.

The company, however, secured the site by paying ₹34 crore to the government during the financial year ended March 2017. It also completed a public hearing and had applied for environmental and other regulatory approvals for setting up a facility for pharma ingredients.

The company hopes that the “government will resolve the legal issue soon paving way for handing over of the rest of the land to enable it to start setting up its facility”, Divi’s said.

In order to meet the immediate capacity requirements, Divi’s is creating capacities at existing manufacturing sites.

It had capitalised plant, property and equipment and intangible assets valued at ₹244 crore. In addition, it spent ₹444 crore on capex in the last financial year. Its capex plans at the existing manufacturing sites include building two additional production blocks at unit I with an investment of ₹175 crore.

“This capital expenditure at the existing units will help us to meet the immediate capacity requirements,’’ he said.

Divi’s Laboratories posted 8 per cent increase in total revenue at ₹4,142 crore last year.

Published on September 28, 2017

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