Aurobindo to divest 80% stake in China arm to Sinopharm

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HYDERABAD: Generic drug maker Aurobindo Pharma Limited (APL) today said it will divest nearly 80 per cent of its stake in its loss making Chinese subsidiary to China National Pharmaceutical Group Corporation (Sinopharm).

According to the city-based company, the initial offload will be 51 per cent and subsequently it will be reduced to 19.5 per cent in its subsidiary company Aurobindo (Datong) Bio Pharma Co Ltd, China (ADBPL).

Sinopharm will acquire the shares through its subsidiary company Sinopharm Weiqida Pharmaceutical Co Ltd.

“After acquisition of 51 per cent equity in ADBPL, the investors will further infuse capital to enhance its share holding to 80.50 per cent, reducing APL share in the JV to 19.5 per cent. APL’s loan of USD 23 million to ADBPL will entirely be paid back,” a company release said.

When contacted a senior official of Aurobindo said the deal may take 2-3 months time to close.

“There are other formalities like getting RBI and other regulatory approvals before we proceed further. The move gives us advantage in terms of supplying raw material to China besides ensuring our presence in the world’s largest pharma market,” the official told PTI.

ADBPL is engaged in manufacturing of 6APA, a derivative of Penicillin-G & most of its production is consumed by APL, India. In past the performance of ADBPCL has been affected due to economies of scale and is incurring losses.

Sinopharm group will infuse sufficient funds to relocate plant as required by local government in China and significantly enhance capacity and downstream products leading to better economies of scale and reduced cost of production.

APL’s share of 19.50 will be strategic in nature to ensure uninterrupted supply of raw materials at competitive price, the company said.
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This post was submitted by Mudit Agrawal.

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