New Delhi: Daiichi Sankyo Co. Ltd, Japan’s third largest drug maker, has obtained the Indian government’s approval to buy Ranbaxy Laboratories Ltd for as much as Rs19,700 crore ($4.2 billion), finance minister P. Chidambaram said.

The Tokyo-based company’s plan to buy a controlling stake in India’s largest drug manufacturer was referred to the Union cabinet for review, as required by law, Chidambaram told reporters in New Delhi after a cabinet meeting on Friday.

The Japanese firm had bid for control of Ranbaxy in June to enter the market for generic drugs, sales of which are growing almost twice as fast as that of branded medicines.

Daiichi Sankyo, which aims to complete the transaction by March, still needs approval of the Reserve Bank of India, Shigemichi Kondo, a company spokesman, said on Friday.

Ranbaxy rose as much as 9.2% to Rs274.70 before Chidambaram’s comments, the biggest intra-day gain since 16 July. The shares shed some of the gains to close at Rs263.85, up 4.83% from the previous close. The shares gained after the US government offered to withdraw a motion seeking to force the company to turn over audit reports.

Daiichi Sankyo fell 2% to 2,665 yen (Rs1,199.25) at close in Tokyo, valuing the company at 1.89 trillion yen.

The Japanese company agreed to buy the 34.8% holding owned by Ranbaxy’s chief executive officer, Malvinder Singh, and his family, and a portion of about $1 billion of preferential stock.

Daiichi Sankyo also offered to buy 20% from other shareholders.

Kanoko Matsuyama in Tokyo contributed to this story.