Cabinet nod for more foreign equity in Aurobindo, Glenmark

In two decisions that will result in an inflow of over Rs.4,000 crore as foreign direct investment into India's pharmaceuticals industry, the cabinet on Tuesday approved foreign funds to infuse more capital into Aurobindo and Glenmark.

A meeting of the Cabinet Committee on Economic Affairs here, presided over by Prime Minister Narendra Modi approved foreign funds to infuse fresh equity of 7 percent amounting to Rs.2,165 crore in Aurobindo Pharma, against the existing such holding of 27.32 percent.

Similarly, in Glenmark Pharmaceutical, the cabinet permitted an increase in the investment limit by foreign funds from 35.07 percent to 49 percent that will result in fresh inflow of about Rs.2,022 crore, as per an official note issued after the decisions.

"Both companies are promoted by Indian entrepreneurs who have developed a global footprint over the years. They are required to continue to produce medicines under the national list of essential medicines at the same levels as they had been doing in the past," it said.

"These companies are also required to maintain research and development expenditure at the maximum levels incurred in the past three years and provide complete information regarding transfer of technology that has been done."

The decisions came after the closing bell at stock exchanges where the two firms are listed.

According to the note, the cabinet took the view that such a decision was not only important but also underscored the importance given by the government to strengthening the healthcare sector in India by ensuring availability of drugs to the people at reasonable prices.

Co-founded in 1986 by a group of investors led by Ramaprasad Reddy and Nityananda Reddy, Aurobindo Pharma commenced operations in 1988-89 with a single unit to manufacture semi-synthetic penicillin at Pondicherry. It listed its shares in stock exchanges in 1995.

Besides penicillin, it has a presence in some therapeutic segments such as neurosciences, cardiovascular, anti-retrovirals, anti-diabetics, gastroenterology and cephalosporins, among others.

Glenmark is also a leading homegrown company and from the generics business earlier, it has become a major player in the new molecules pharmaceuticals business, with seven of them in various stages of development.

It listed its shares in 2000 and now also has a subsidiary in the fast-growing and robust US generics business. Its formulations business has drugs in dermatology, anti-infectives, respiratory, cardiac, diabetes, gynecology and oncology.