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Slowdown pill chokes Reliance Pharma

Slowdown pill chokes Reliance Pharma

Mumbai: The drug manufacturing aspirations of Mukesh Ambani may have taken a beating, if only temporary, because of the economic slowdown.

Reliance Pharmaceuticals Pvt. Ltd , a generics or off- patent drug manufacturing and exporting firm that is being set up at a cost of at least Rs1,000 crore, may start functioning later than originally envisaged.

Chief executive Lalit Kumar quit the firm about two weeks ago, and at least 50 people in sales, marketing and administration have been laid off, said a person familiar with the development. He declined to be identified because of the sensitive nature of the matter.

Mint had first reported on Reliance’s pharma plans in 2007. Kumar had then said that construction of plants would commence by the end of that year. The company had never given a launch date for its operations, although Kumar had said in 2007 that Reliance Pharma wanted to be one of the largest generics firms in India.

The company, part of Reliance Life Sciences Ltd, is backed by Mukesh Ambani and other promoters of Reliance Industries Ltd.

The pharma project envisaged multiple drug plants that met international quality and compliance standards at Reliance’s special economic zone at Jamnagar in Gujarat. Some of the infrastructure work on these plants has been put on hold, added the person familiar with the development.

Kumar joined Reliance Pharma in 2007, from the country’s sixth largest drug maker Wockhardt Ltd , where he was executive director.

The generics plan was a key part of the strategy of Reliance Life Sciences. The manufacturing complex at Jamnagar was to have had a capacity of “several hundred tonnes" of capsules, tablets and liquid oral drugs.

“The global economic crisis has not significantly impacted the expansion projects of Reliance Life Sciences, including the pharma project, and the exit of Reliance Pharma CEO and few employees had nothing to do with the project or the business," said an official spokesperson for Reliance Life Sciences, in an email response. He declined comment on any possible delay in the project.

The spokesperson also said that “the company, which has completed a fill-finish facility for commercial scale recombinant proteins manufacture, a larger plasma proteins manufacturing facility, a pilot scale API facility and a biodiesel manufacturing facility in the recent past, continues to grow its products and services offerings, as well as revenues, and expects to almost double revenues this financial year".

A pharma analyst with a Mumbai-based foreign brokerage firm said that although the drugs business has been comparatively less affected by the economic slowdown, profit margins in exports have fallen on the back of increased competition and price negotiations by various governments and insurance firms. “These concerns, coupled with a cash crunch within the promoter group, must have led to a rethink on the slow-return investments," he said on condition of anonymity because he is not authorized to speak to the media.

Soon after the Reliance Pharma plans were announced, there were some media reports that the group would acquire a top-rung drug maker in India to cater to the local as well as export markets, with a ready product portfolio. However, Reliance Life Sciences president K.V. Subramaniamhad, in an earlier interview, said that “Reliance, as a large player in chemicals and related researches, does not need to depend on others’ capabilities to build a product portfolio in chemistry space".

Bhuma Shrivastava contributed to this story.

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