Business

Granules to sell full stake in China JV

Granules India is selling its entire stake in Granules-Biocause Pharmaceutical Co., an equal joint venture in China, to JV partner Hubei Biocause Heilen Pharmaceutical Co for RMB 109 million.

On Friday, the Hyderabad-headquartered drugmaker informed the stock exchange of an agreement it had entered into with Hubei Biocause Heilen Pharmaceutical Co. for sale of 33 million equity shares of 1 RMB each in the JV for a consideration of RMB 109 million. As is the norm for such transactions, the conclusion is subject to fulfilment of certain closing conditions as well as applicable regulatory approvals. The agreement follows an announcement in October by Granules about an intent to divest the stake in the JV, which it had formed in 2007 to ensure a regular supply of Ibuprofen API to support its requirements for manufacturing pharmaceutical formulation intermediaries and finished dosages. The manufacturing facility of the JV is in Jingmen, China. One of the reasons it had cited for the stake sale decision were environmental issues that “created an atmosphere of business uncertainty in China. To comply with regulatory issues, Granules Biocause Pharmaceuticals‘ production unithad invested and will continue to invest substantial capex, which is contrary to Granules India’s strategy of reducing capex outflow,” the company had said.

Also, several existing Ibuprofen API manufacturers had expanded capacity or announced intent to do so. Many firms also planned to enter the Ibuprofen API market. In this backdrop, “Granules believes [such] additional API supply will enable it to have more supply options and having a JV is not necessary to ensure Ibuprofen API continuity,” the company said. The sale proceeds from the transaction was expected to enable Granules India’s cash position and eventually reduce the net debt position.

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Printable version | Feb 22, 2020 10:24:42 AM | https://www.thehindu.com/business/granules-to-sell-full-stake-in-china-jv/article30300314.ece

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