FIPB nod for Shanghai Fosun to take control of Gland Pharma

The Foreign Investment Promotion Board (FIPB) on Wednesday finally cleared the decks for Chinese pharmaceutical giant Shanghai Fosun Pharmaceutical Group to acquire majority stake in Hyderabad-based Gland Pharma, a manufacturer of small volume parenterals (SVPs).

The FIPB approval came five days after it had earlier deferred clearance of the deal. In July last year, Gland Pharma and Shanghai Fosun Pharmaceutical Group had announced that the latter will be acquiring 86-per cent stake in the privately-held Gland Pharma for $1.26 billion (then around Rs8,500 crore).

Gland Pharma had disclosed that Fosun Pharma will be purchasing all the shares of the company owned by KKR Floorline Investments Pte Ltd, which amount to around 37 per cent, in addition to shares of other shareholders of the company.

Post-acquisition, Gland Pharma's founder P V N Raju and his son Ravi Penmetsa will remain on the board, with Penmetsa  continuing as the company's managing director and chief executive. The P V N Raju family will also continue to hold s 10-per cent stake in the company, the company had disclosed earlier.

While Gland Pharma manufactures generic injectables, Fosun is a Chinese conglomerate with interests in businesses such as wealth management, healthcare and tourism, among others, and is headed by Chinese billionaire Guo Guangchang, known as China's Warren Buffett. Gland has four manufacturing facilities, including three in Telangana and one in Andhra Pradesh.

Gland Pharma has liquid injectables units at Dundigal and Pashamylaram and a penems unit in Hyderabad and an oncology unit at Visakhapatnam. The company has two Reserach and Development laboratories at Hyderabad with over 250 scientists.

The deal will boost Gland Pharma's presence in Africa, Europe and Japan.

Gland Pharma develops and manufactures generic injectables, primarily for the US market. Established in 1978, the company sells its products in India and other semi-regulated markets. Gland's manufacturing facilities have approvals from regulatory agencies from Australia, Germany and the UK, in addition to the World Health Organization (WHO).

This was the first deal in the pharmaceutical sector after the central government relaxed foreign direct investment norms in May, allowing FDI of up to 74 per cent in pharmaceutical companies through the automatic route.

The global market for injectables was estimated at around $300 billion in 2014. The US accounts for around 35 per cent of the market. The Indian market is estimated to be around $2 billion.

According to data from Grant Thornton Advisory Pvt Ltd, there were 54 pharma M&As in 2016 in India with total value of $4.87 billion, while private equity or venture capital investments in the sector totalled $653 million.