Aurobindo to sell majority stake in Chinese unit

Aurobindo Pharma Ltd (APL) has agreed to divest more than 80 per cent stake in its loss-making Chinese subsidiary, Aurobindo (Datong) Bio Pharma Ltd (ADBPL), to China’s largest pharmaceutical and healthcare group, China National Pharmaceutical Group (Sinopharm). APL has signed a definitive agreement with Sinopharm for the same.

ADBPL, engaged in manufacturing of 6APA, a derivative of Penicillin-G, is incurring losses and its performance has been affected due to economies of scale. Most of its production is consumed by APL.

After acquiring 51 per cent in ADBPL, Sinopharm will further infuse capital to raise its stake to 80.5 per cent. Sinopharm will acquire the shares through its subsidiary Sinopharm Weiqida Pharmaceutical Co Ltd. Sinopharm group would infuse sufficient funds to relocate plant as required by local government in China and significantly enhance capacity and downstream products.

“APL’s investment of 19.5 per cent would be strategic in nature to ensure uninterrupted supply of raw materials at competitive prices and APL’s loan of $23 million (Rs 104.5 crore) to ADBPL will be paid back,” the Hyderabad-based generic drugmaker said in a press release today.

A spokesperson at APL told Business Standard that the company was looking at unlocking its non-core assets and thus, had decided to divest its stake to Sinopharm. In the process, APL would get a “small consideration”. Besides, the company need not account for the $8-10-million loss it had incurred on the Chinese facility in its balance sheet.