The Union Cabinet chaired by Prime Minsiter Narendra Modi has approved the proposal of global pharma major Mylan to invest $750 million in its Indian arm to help it acquire Taparia family-owned Jai Pharma Ltd (JPL). The approval brought an approval of FDI of $750 million to the country.
The Cabinet has "approved the proposal of the Department of Economic Affairs for increase in FDI up to $750 million in Mylan Laboratories Ltd (MLL) by Mylan Luxembourg and / or Mylan Group through subscription of equity shares and / or compulsorily convertible debentures for providing MLL part of the funds required for the acquisition of the entire share - holding of JPL post the demerger from its then shareholders (including Orizaba and resident Indian shareholders)," an official statement said.
The approval has been accorded subject to certain conditions. As per those conditions, the company has to maintain the production level of consumables and NLEM ( National List of Essential Medicines) drugs and their supply to the domestic market at the time of induction of FDI over the period of next five years at an absolute quantitative level. Besides, R&D expenses have to be maintained in value terms for five years at an absolute quantitative level at the time of induction of FDI, it said.
Further, the company receiving FDI will continue to produce medicines under the NLEM for the domestic tariff areas at the level which would be the highest quantity of production in the previous three financial years for the next five years, it added. The company will also be required to maintain the R&D expenditure at the maximum level incurred in any of the three financial years immediately preceding the year of induction of FDI. This absolute level should be maintained for the next five years, the statement said.
"Second leg of transaction involves infusion of fresh foreign funds by Mylan group for acquiring shares of M/s. Jai Pharma Ltd.
The taxability of capital gains arising out of the said transaction shall be examined by the field formation," the statement added.
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