Krebs Biochemicals & Industries is fundamentally a manufacturing outpost for Ipca Laboratories, one of India’s largest pharmaceutical exporters, kept alive by its parent’s cash and technical support after years of its own losses. Incorporated in 1991 and operating since 1994, the company runs two factories in Andhra Pradesh that make Active Pharmaceutical Ingredients (APIs) - the essential molecules that give medicines their effect - using fermentation, the same process behind brewing beer but tuned to grow drug-producing microorganisms. Its entire operating model rests on a single recurring approach: Ipca provides the working capital, the technical know-how and the customer, and Krebs provides the factory floor and the fermentation vats, a relationship the company itself calls “essential for its very survival”. # Business segments Two deeply intertwined engines - a contract-manufacturing operation that is the company’s economic reason for being, and a small legacy product business - both running on the same fermentation infrastructure and both dependent on a single promoter. ## 1. Contract manufacturing: the factory-for-hire that keeps the lights on **Krebs earns its income almost entirely by charging conversion fees to make APIs and drug intermediates for Ipca Laboratories, which supplies the raw materials, the technical support and the working capital.** - **Paid per batch, not per bottle** - the company’s revenue comes from job-work charges rather than from selling its own products, so even when the quantity produced and dispatched rises substantially, the top line reflects only the manufacturing fee, not the value of the goods. - **One customer is the whole market** - Ipca Laboratories, which holds just under half the voting shares, gets its APIs and intermediates made at Krebs’ facilities on a loan-license or contract-manufacturing basis, and the company had no export earnings at all in the latest year. - **The Vizag plant is the crown jewel** - Unit-II in Anakapalli runs on fermentation technology and holds a certification from the European Directorate for the Quality of Medicines (EDQM), making it one of a handful of facilities globally that can produce a specific fermentation-based API used in Ipca’s largest-selling formulation. - **Survival comes with a written promise** - Ipca has given a formal assurance of financial support to help Krebs meet its obligations and reach break-even, and the two companies have shareholder approval for related-party transactions worth up to Rs. 150 crore in any given year. - **The pipeline is thin but deliberate** - the company is developing new fermentation-based products and is in discussions with potential customers for manufacturing tie-ups, though product development and regulatory approval in the pharma industry is a lengthy, multi-year process. ## 2. Own-product APIs: a small legacy line on the same machines **Alongside the contract work, Krebs makes and sells a handful of its own APIs - a business that once dominated revenue but has now shrunk to a cost-recovering sideline.** - **Four molecules, one stabilised plant** - as of FY21 the company produced four products: Phenylephrine HCl, Simvastatin, Serratiopeptidase and RSS, with the Nellore facility (Unit-I) now more or less stabilised and recovering its costs by manufacturing and selling one API in good volume. - **Simvastatin and Phenylephrine were the old backbone** - in FY20, Phenylephrine contributed about 62% of turnover and Simvastatin about 36%, but the company is now dependent on only a few products for whatever own-product revenue remains. - **Raw materials are not the headache** - the products have very low dependence on imported raw materials, and supply has been smooth and uninterrupted throughout the year, with no production stoppages due to shortages. - **Coal is the real cost pressure** - running the fermentation vats at Vizag consumes large amounts of energy, making coal prices a major overhead, so the company has started manufacturing some drug intermediates on a job-work basis that do not require the fermentors, cutting energy costs. # Group structure and partners **Krebs Biochemicals is not a standalone enterprise - it is a manufacturing extension of Ipca Laboratories, soon to be formally absorbed into it.** - **No subsidiaries, no joint ventures, no foreign tie-ups** - the company has no investments or collaborations outside its two Andhra Pradesh plants, and its entire corporate existence is contained within the relationship with Ipca. - **Ipca owns just under half the equity** - following the conversion of the last tranche of warrants in April 2021, Ipca Laboratories holds 49.65% of the voting capital, and two of Krebs’ directors are Ipca nominees or employees. - **A Rs. 100-crore preference-share lifeline** - in December 2021, Ipca subscribed to 1 crore preference shares carrying a 9% annual coupon, with the proceeds used to repay debt and fund working capital, and Ipca agreed to forgo voting rights on those shares. - **The merger is subject to necessary approvals** - on 26 June 2026, the board approved a scheme to amalgamate Krebs into Ipca with effect from 1 April 2026, with Krebs shareholders receiving 7 Ipca shares for every 200 Krebs shares they hold, and Ipca’s own stake in Krebs being cancelled for no consideration.