Union Budget 2024-25 cuts funding for HLL Lifecare

While HLL Lifecare, India’s public sector enterprise known for products like Moods condoms and Saheli contraceptive pills, has already been experiencing fluctuating investment allocations over the past three years, the government has reduced allocations for the firm in the Union Budget for 2024-25.
 
An analysis of the past three fiscal years shows notable volatility in funding. In 2022-23, HLL Lifecare saw a 21.01% increase in revenue and capital allocations, creating a positive outlook ahead of the 2023-24 Budget. However, the revised allocations for 2023-24 showed a 464.29% increase compared to the previous year. The public sector undertaking (PSU) now faces an 81.82% budget reduction for 2024-25, which could affect the company’s long-term projects and strategic initiatives.
 
Founded on March 1, 1966, HLL Lifecare was initially established to produce contraceptives as part of the Government's family planning programme. Over the years, HLL has diversified into various healthcare segments, including hospital products, infrastructure management, medical equipment consultancy, diagnostic services, and pharmaceutical retail.
 
As a mini-ratna public sector enterprise under the Ministry of Health & Family Welfare, HLL Lifecare for the financial year 2022-23, HLL Lifecare reported revenue from operations of ₹3,708.01 crore, compared to total revenue of ₹35,712.36 crore. 
 
This 90% reduction is primarily due to the absence of Covid vaccine revenue, which was significant in the previous year. Nevertheless, revenue from normal operations increased by 26%, reaching ₹2,223.00 crore, up from ₹1,764.25 crore in 2021-22. Profit after Tax (PAT) was ₹39.77 crore in 2022-23, down from ₹404.38 crore in 2021-22. The company’s net worth as of 31 March 2023 is ₹658.84 crore, a decrease from ₹747.42 crore as of 31 March 2022, primarily due to a dividend payout of ₹122.47 crore during the year. HLL Lifecare also plans to pay a dividend of ₹11.93 crore for the financial year ending 31 March 2023.
 
“While HLL Lifecare is a profitable organisation, the company has cash flow challenges. In FY23, the company’s net cash flow from operating activities was a negative ₹700 crore. Considering the significant working capital and capital investment needs, there is a need for long-term funding support,” said Vishal Manchanda, Senior Vice President–Institutional Research at Systematix, a stock broking firm.

“The Covid times were opportune and allowed the company extraordinary profitability. In FY23, when Covid subsided, net earnings sharply declined from ₹404 crore to ₹40 crore—a 90% dip,” he said. 

 
HLL has been involved in several strategic expansions and acquisitions, including a 74% stake in Goa Antibiotics Ltd (GAPL). Located in Tuem, Pernem in Goa, GAPL's pharmaceutical manufacturing facility covers approximately 84,000 sq. metres and operates manufacturing units for Ayurvedic and Homeopathic products in Rajasthan and a chain of 24x7 retail pharmacy outlets in Goa.
 
The Ayurvedic and Unani products line includes traditional medicinal items catering to various health needs. HLL also manages subsidiaries such as HITES and LifeSpring Hospitals, further diversifying its portfolio.
 Despite these expansions, HLL has faced financial challenges, prompting the Indian government to consider strategic disinvestment.
 
 
"With operations spanning healthcare, pharmaceuticals, and diagnostics, the reduction in funding could impact efforts to maintain and enhance these essential services,” said a senior government official on condition of anonymity.
 
 “This situation suggests that HLL, while broad in operations and reach, struggles with financial self-sufficiency and may require governmental support or strategic restructuring to sustain its operations effectively,” said the official.
 
 
In December 2023, the Department of Investment and Public Asset Management (DIPAM) announced its active pursuit of strategic disinvestment in entities like HLL Lifecare Limited. The Indian government began divesting its 100% stake in HLL Lifecare Limited in 2018 as part of a broader strategy to privatise PSUs.
 
However, this decision faced significant opposition from civil society organisations and political parties, who raised concerns about the potential impact on public health, the affordability of healthcare products, and job security for employees.