State-Run Takes Realty Pills To Survive

State-run pharmaceutical corporations, struggling to survive competition with private sector companies, are now emerging in a new avatar as developers of commercial complexes and IT parks because of their massive land holdings.

The recently-revived Bengal Chemicals and Pharmaceuticals Ltd (BCPL) is building a 38-floor sky scraper at Worli in Mumbai overlooking the Arabian Sea. The new office complex at this two acre land in the heart of Mumbai will be ready in about 18 to 24 months.

The company intends to offer the space on a 99-year lease. Potential tenants have already pooled in money for the Rs 300-crore construction, it is understood. Public sector developer National Building and Construction Corporation (NBCC) is assisting BCPL in this venture.

Another state-run company, the Indian Drugs and Pharmaceuticals (IDPL), which is awaiting a revival package from the government is planning to leverage its vast real estate assets in Hyderabad, Rishikesh, Gurgaon and Chennai for developing large commercial facilities like software and biotech parks as well as educational institutions.

The ministry of chemicals and fertilizers is now seeking the approval of a group of ministers headed by defence minister A K Antony for this diversification.

IDPL has about 900 acres of land in Hyderabd, about 1,200 acres in Rishikesh, 80 acres in Gurgaon adjacent to Microsoft’s office and about 650 acres in Chennai, all at prime locations. These assets are considered worth about Rs 50,000 crore, which comes to about twice the turnover of the domestic retail pharmaceutical market.

The government does not want to sell these assets or divest its stake in the company. Instead, it wants to leverage these assets to create commercial complexes so that it would generate revenue without losing ownership.

These government-run pharma companies were making losses because they could not match the professionally-managed private sector companies’ swift decision-making and efficiency in marketing. Secondly, their focus is to provide medicines that are needed for the masses and not to produce high-end drugs that are outside price controls.

The real estate development ventures are likely to give them the much needed resources to meet their social objectives without seeking government assistance