Tube Investments of India (TII), a Murugappa group company, has identified contract development and manufacturing organisation (CDMO) and active pharmaceutical ingredients (API) as new lines of business with the ability to grow and expand. To that end, it plans to establish a subsidiary and spend up to Rs 285 crore in it.
This is part of the company's diversification strategy, which involves finding new growth opportunities, such as its recent ventures into clean transportation, electronics, and alternative fuels. As major pharma players increasingly outsource R&D and manufacturing to concentrate on core business activities, CDMO is one of the fastest growing segments in the pharmaceutical industry.
"Considering the growth potential in this sector, and subject to shareholder approval for an amendment to the Objects Clause allowing the company to foray into CDMO," the company said in a statement. The planned subsidiary will concentrate on API and related products.
Govindarajan will be the subsidiary's chief executive officer, establishing the company and driving its development and profitability. The company "proposes to invest up to Rs 285 crore into this subsidiary in the shape of equity and compulsorily convertible preference shares in tranches," according to the statement.
In tranches, Govindarajan will spend up to Rs 15 crore in equity and compulsorily convertible preference shares. "Subject to the agreement's performance and other terms and conditions, N Govindarajan will be eligible to up to 25% of the equity for his investment," the statement said.
Arun Murugappan, executive chairman, TII said, “TII’s foray into CDMO, a business with high growth potential, augurs well with its plan to diversify its business portfolio and reduce dependency on traditional revenue streams. TII is delighted to join hands with N Govindarajan, a well accomplished professional in the pharmaceutical industry in India.”
Govindarajan said, “I am privileged to partner with Murugappa group for its entry into CDMO business and looking forward to work with TII to make the new venture a great success.”