FDI in brownfield pharma: Cabinet clears $400-mn KKR proposal

This is the first major brownfield pharma investment proposal entailing FDI inflows higher than the 49 per cent mark.

By: ENS Economic Bureau | New Delhi | Published:May 14, 2014 12:46 am

Marking an end to the wrangling between ministries on the issue of allowing FDI in the area of brownfield pharma, the Cabinet on Tuesday cleared a $400-million foreign investment proposals by a global buyout fund KKR at its final meet under the UPA II rule on Tuesday. The move is significant as it is the first major brownfield pharma investment proposal entailing FDI inflows higher than the 49 per cent mark.

The deal, a two-part transaction, is a combination of fresh equity infusion and a buyout of Evolvance India Life Science Fund (EILSF), which invested $30 million in Gland Pharma in 2008. While KKR proposed to buy a 37.98 per cent stake in Hyderabad-based Gland Pharma, which develops and manufactures generic injectables primarily in the cardiovascular and orthopaedic segment. Besides, the transaction would also involve 29.4 per cent share purchase in Gland Celsus Bio Chemicals from an existing investor. Both proposals have been cleared by the Cabinet.

This is the last decision taken by the UPA-II regarding FDI and was referred by the Foreign Investment Promotion Board (FIPB) to the Cabinet Committee on Economic Affairs (CCEA) in February. The proposal, according to sources, had caused some unease in the department of industrial policy and promotion, as it had certain non-compete clause, something which is not allowed in brownfield pharma projects.

KKR, Gland Pharma and Gland Celsus had entered into the share purchase agreements on November 27 last year. KKR had also entered into a shareholders’ agreement with the promoters of Gland Pharma and Evolvance India Life Science Fund (EILSF), which invested $30 million in Gland Pharma in 2008.

Gland Pharma is engaged in the business of production and marketing of specialised injectable formulations for generic versions of drugs. It also manufactures a limited quantity of Active Pharmaceutical Ingredients for in-house consumption.

India allows 100 per cent FDI in pharma sector through automatic approval route in the new projects, but foreign investment in the existing companies are allowed only through the FIPB approval.

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