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Granules India Limited to divest its stake in its Joint Venture located in China

Posted On: 2019-10-14 12:03:06

Granules India Limited, today announced its intention to divest its entire equity shareholding in Granules Biocause Pharmaceuticals Co, Ltd. by selling its stake to joint venture partner, Granules Biocause Pharmaceuticals Co. Ltd. is an equal joint venture between Granules India Limited and Hubei Biocause Heiien Pharmaceuticai Co Ltd. The manufacturing facility of the joint venture is in Jingmen, China.

Granules formed the JV in 2007 to ensure a regular supply of ibuprofen API to support its requirements for manufacturing Pharmaceutical Formulation intermediates and Finished Dosages. The key reasons for exiting the JV are as follows:

- Environmental issues have created an atmosphere of business uncertainty in China To comply with regulatory issues on pollution, Granules Biocause Pharmaceuticals' production facility had invested and will continue to invest substantial capex, which is contrary to Granules India's strategy of reducing Capex outflow and Free Cash Flow generation.

- Several existing Ibuprofen API manufacturers have expanded capacity or stated their intention to increase capacity. In addition, several companies have announced their intention to enter the ibuprofen API market, Granules believes the additional API supply will enable it to have more supply options and having a JV is not necessary to ensure ibuprofen API continuity.

Granules has a supply agreement with the JV and ibuprofen API supply will not be impacted since the existing agreement will continue. In addition, Granules has several other reliable approved suppliers of ibuprofen API in the international and domestic market Granules India's decision to dilute the stake of this JV will not impact its commitment of achieving the profitability target provided for the year even without any additional JV's contribution in the consolidated Net Profit. Further, the sale proceeds from this transaction will enable Granules India's Cash position and will eventually reduce the Net Debt position.

Shares of GRANULES INDIA LTD. was last trading in BSE at Rs.100.45 as compared to the previous close of Rs. 102.65. The total number of shares traded during the day was 21145 in over 340 trades.

The stock hit an intraday high of Rs. 102.45 and intraday low of 98.25. The net turnover during the day was Rs. 2134397.


Source: Equity Bulls

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