Dishman eyes $20-25 million revenues from China API unit

After facing delays, the China facility of Ahmedabad-based Dishman Pharmaceuticals & Chemicals will finally begin commercial operations from April.

According to chief financial officer VVS Murthy, the facility which will be involved in contract research and manufacturing (Crams), will contribute about $20-25 million per year in the future.

“In the initial years, we expect about $8 million coming from there, which will increase substantially going forward.”

Dishman has invested about $10 million in the facility at Shanghai, which is spread over 40,000 square metres at the Shanghai Chemical Industry Park. This facility will produce raw material for the manufacture of drugs (active pharmaceutical ingredients, or API) for Dishman’s European clients.

The company was aiming at starting its China operations in late 2009, which got delayed due to issues related to delay in validation of equipment by the government, etc. The commencement was then expected in August 2010, which also got delayed due to similar reasons.

“All matters pertaining to the plant are clear now,” said Murthy.
The company expects its Crams business, which makes up about 75% of its turnover of about Rs 915 crore, to grow by 15% this year, said Murthy. “This is because issues such as rationalisation of inventory and decreased investments in research and development, which had precipitated because of the slowdown, have got sorted out,” said Murthy.

However, analysts say it is still too premature to predict anything about the China revenues as it all depends on the kind of contracts they get and timely execution of those contracts.

Bhavin Shah, research analyst with Dolat Capital Market, said that it’s tough to say how big China will prove to be for Dishman.

“Compared to India, China will be much cheaper to do business due to lesser labour costs. Many MNC drugmakers such as Novartis, BMS are setting up bases in China, so for Crams it would mean proximity to clients,” said Shah.