COLOMBO: One of the youngest conglomerates in Sri Lanka, Laugfs Holdings PLC, broke ground on one of South Asia’s largest pharmaceuticals manufacturing plants in Koggala recently, making a grand entrance to the country’s health sector.
“This is one of the largest pharmaceutical production investments not only in Sri Lanka, but also in South Asia. The initial investment is US$ 30 million, and as we go on, the investment will be Rs.6-7 billion. This will change the entire direction of the industry in Sri Lanka,” Laugfs Holdings Chairman W. K. H. Wegapitiya said. Situated in a 12 ½ acre land in the Koggala Export Processing Zone (EPZ), the Laugfs Pharmaceutical (Pvt) Ltd. facility will have a 10-year tax holiday, and will employ over 400 from the local community.
“The biggest benefit will come from foreign exchange. Sri Lanka currently imports 90-95 percent of its pharmaceuticals,” Wegapitiya noted. He said that the project will save around US$ 1 billion in foreign exchange for Sri Lanka in the first stage.
Opening in mid-2017, the factory will have a capacity to produce 7.5 billion beta and non-beta lactam tablets, capsules, dry powders, ointments, soft gels and suppositories annually under its own, or foreign licences, as opposed to Sri Lanka’s current consumption of 9 billion units annually.
However, Wegapitiya said that Laugfs will initially be able to command only a 5-10 percent local market share due to existing competition, thereby looking for export markets in South Asia, Africa and Europe. “With the certifications we are getting, we will be able to export to any country in the world. When we bring in the second stage, we can earn more than tea, and could become the second or the largest foreign exchange earner in time to come,
” Wegapitiya said. Pharmaceutical experts Premium International (Pvt) Ltd will be the second largest shareholder of the company, and will provide expertise by bringing in international level consultants from countries like Germany, Australia and Finland to benchmark the facility. Wegapitiya added that with the increasingly ageing population, Sri Lanka would run into a currency crisis if it does not produce drugs locally, and that the factory will appease both the export-driven and import substitution policies of governments, while minimizing the importation of poor quality drugs.
“When you look at India, Pakistan and Bangladesh, they are surplus manufacturers. They export. The drugs they make aren’t stored properly, spread out in the open. We’re importing these type of drugs,” he said. Premium International Managing Director/CEO Prasantha Kularatna said that Sri Lanka imported US$ 524 million worth of pharmaceuticals in 2013, which grew to US$ 570 million in 2014, and will grow to US$ 850 million in 2018. He said that the private sector healthcare makes up around 3.1 percent of GDP, and the healthcare sector is growing at around 12 percent year-on-year.
“The RoI (Return on Investment) for the factory is around 29-30 percent,” he added. The National Medicinal Drug Policy which was passed in Parliament last year is likely to help the venture. Meanwhile, Wegapitiya said that Laugfs Holdings was continuing its investments with around 40 percent borrowings, despite rising interest rates. He hinted that Laugfs could be eyeing the purchase or building of hospitals and other healthcare centres. “We’re bringing this under the Laugfs Lifecare brand, which will include both healthcare and nationcare,” he said. He revealed that the group will also be constructing a saline production plant which will neighbour the pharmaceuticals plant, but refused to divulge further information, except for the fact that it will become the second largest healthcare investment in Sri Lanka. Laugfs which began its operations as the country’s only private sector LP gas supplier has now successfully diversified into retail, industrial manufacturing, leisure, logistics and real estate. Power and…
“The new formula which is going to be there, is going to remove this hurdle,” Bohra noted. With the new formula in play, successive governments would find it hard to use oil prices as a bargaining chip, unless they ignore it, similar to the present situation. The formula is likely to affect certain plantation companies diversifying into palm oil manufacturing. While palm oil had brought in high profits in the past as a type of cooking oil, its use as an alternative for furnace oil had reduced profitability as oil prices fell.
