US-based Mylan Inc’s $1.6-billion (Rs 9,920 crore) foreign direct investment proposal has finally seen the green light. Prime minister Manmohan Singh on Friday cleared the Strides Arcolab-Mylan deal, overruling the concerns raised by Department of Industrial Policy and Promotion (DIPP) and Ministry of Health.
The Foreign Investment Promotion Board (FIPB) had kept its approval on the deal in abeyance till there was clarity on “brownfield” foreign direct investment (FDI) norms — one in which acquisition is built into a new project. Now, the deal will be brought to the Cabinet Committee on Economic Affairs (CCEA) under existing policy to get the final approval.
Government sources confirmed the development, which sent Strides shares up by 5% to Rs 796.40 even as the benchmark Sensex plunged nearly 4% on a day of a market bloodbath.
On February 28 this year, US-based Mylan and Bangalore-based Strides Arcolab signed the agreement under which the US drug major was to acquire Agila Specialties, the injectible medicine business of Strides.
However, DIPP told the PMO that brownfield investment in pharmaceuticals hurts domestic companies. Regulators have been also concerned if Mylan may steer cancer drugs made in India to the US market, reducing domestic availability.
Strides Arcolab refused to comment on the development. Email sent to Mylan did not elicit any response.
“In such dismal economic scenario, PM has tried to infuse optimism. The nod will have no negative implications on pharma industry or on entire economy,” said Zarir H Charna, independent pharma analyst and former director of the Organisation of Pharmaceutical Producers of India.
On Tuesday, Strides Arcolab shares had fallen by 6% after the Reserve Bank of India said that foreign institutional investors (FII) cannot buy shares of the pharmaceutical company. The RBI on Monday directed all the custodian banks not to facilitate any purchase transactions on behalf of Flls for the company till further intimation.