Nectar to set up RS 6bn bulk drug plant

By Gareth Macdonald

- Last updated on GMT

Related tags: Finance, Pharmacology

Contract manufacturer Nectar Lifesciences is to invest around RS 6bn ($141m) in a new bulk drug and pharmaceutical intermediate manufacturing facility in India's northern Punjab state.

The facility, which will be managed by the company's new Nectar Organics subsidiary, will produce active pharmaceutical ingredients (API) and drug products for both domestic and international drugmakers. Nectar said that the project, which is still subject to approval by the state government, will be funded through a mixture of debt and equity.

The 300 acre site, which will house Nectar's eleventh manufacturing facility and its seventh in Punjab, is expected to generate revenue of around Rs 10bn when it becomes fully operational in 2012.

Nectar's vice president of finance, Sandip Goyal, that: "We have proposed to set up another pharmaceutical unit near Rajpura in Punjab with an investment of Rs 600bn for manufacturing bulk drugs and drugs intermediaries​."

At present, Nectar generates around 65 per cent of its annual revenue from exports, primarily though clients in the US and Europe. Goyal added that the new facility will allow it to continue developing its presence in these lucrative foreign markets.

Nectar was unavailable for comment at the time of going to press.

Profits double in fiscal '08

Earlier this month, Nectar posted a strong set of financials for the year ended March 31. Annual operating income was up 72 per cent to Rs 7.4bn, while net profit for the year reached RS 837m, nearly double its earnings in fiscal 2007.

Religare Securities told The Economic Times​ that they were upgrading Nectar's stock to "buy​" and set the firm a price target of Rs 503 per share for its 2009 financial year.

The analysts went on to say that Nectar's recent entry into the gelatine capsule market, coupled with its existing strength in cephalosporins and phytochemicals, had provided a successful and risk-free expansion of the firm's business model.

Religare also forecast that rising Chinese API prices will see an increasing number of global pharmaceutical players seek alternate overseas sources with Indian firms being among the most likely to benefit.

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