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Aurobindo Pharma Ltd has announced that it has entered into an agreement with China National Pharmaceutical Group Corporation (Sinopharm) to divest in its subsidiary company, Aurobindo (Datong) Bio Pharma Co Ltd, China (ADBPL), subject to regulatory approvals.
According to the arrangement, Sinopharam will acquire the shares through its subsidiary Sinophram Weiqida Pharmaceuticals Co Ltd.
Loss-making
In a filing with the stock exchanges, the Hyderabad-based Aurobindo Pharma (APL) has informed that ADBPL is engaged in the manufacture of 6APA, a derivative of Penicillin-G and most of its production is consumed by APL, India. The performance of ADBPL has been impacted due to economies of scale and the company has been incurring losses.
The deal
The company said that after acquisition of 51 per cent equity in ADBPL, the investors will infuse capital to enhance shareholding to 80.50 per cent, thereby reducing APL shares in the joint venture to 19.5 per cent.
The APL loan of $23 million to ADBPL will entirely be paid back.
Further, Sinopharm group will infuse sufficient funds to relocate plant, as required by the local Government in China, and thereafter enhance capacity and add downstream products leading to better economies of scale and reduction in cost of production.
APL's holding of 19.5 per cent would ensure uninterrupted supply of raw materials, it claimed.
In a statement, APL said that it has brought about changes in its functioning in the past six years. The accent is on formulations business from API.
The APL board believes that this divestment is in the interest of the company and also helps strengthen the overall cash flow and operating margins.
The company shares closed firmer at Rs 1,292.85 as against previous close of Rs 1,289.15.
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