Aurobindo to cut stake in China JV

Aurobindo to cut stake in China JV

Mumbai: Indian drugmaker Aurobindo Pharma said on Tuesday it has signed a definitive agreement to divest 51% stake in its Chinese joint venture.

The Hyderabad-based company would get back the entire loan amount worth $23 million it had given to Aurobindo (Datong) Bio Pharma, it said in a statement.

Aurobindo’s joint venture partner China National Pharmaceutical Group Corp (Sinopharm) would further infuse capital, raising its stake to 80.5%, the Indian firm said.

A company spokesman refused to disclose the price at which the stake is to be sold.

The Hyderabad-based company would continue to hold 19.5% stake, which would be strategic in nature, to ensure supply of raw materials at a competitive price to the Chinese JV, it said.

Post-stake sale, Sinopharm Group would relocate the manufacturing unit as per government regulations to enhance capacity and reduce cost of production, it said.

“It was just a fermentation unit and was not a strategic fit for the company. There were some logistics issues as well, since most of its (Aurobindo’s) units are located in India and the US," Siddhant Khandekar, analyst with ICICI Securities, told Reuters over the telephone.

Aurobindo has shifted its focus to formulations business and hence the divestment is in the best interest of the company, the drugmaker said, adding the move would strengthen the overall cash flow and operating margins.

At 12:31 pm, shares of Aurobindo Pharma were trading at Rs1,313, up 1.85% in a volatile Mumbai market.