Hikal Ltd, the Mumbai-based API (active pharmaceutical ingredients) manufacturing company, will pick up a minority stake in a Chinese firm.
The exporter of bulk drugs to the US and European markets is currently in advanced negotiations with the Chinese company, which has been its intermediate supplier for a long time.
The deal is expected to be finalised by June end.
Jai Hiremath, vice chairman and managing director, Hikal, said: "We are yet to reach a conclusion on the valuation and size of the stake. In a month there will be more clarity."
He said that the investment in the Chinese company will consolidate its supply chain and the intermediate supply for its manufacturing requirement can be made more regular and assured.
"Assured and dependable raw material supply in line with our requirement is the synergy anticipated through this acquisition," Hiremath said.
Last year, Hikal had invested in a European company -- Marsing & Co, which is a pharma marketing outfit having presence in most of the European markets. Hikal currently holds 51 per cent stake in this company.
Hiremath said through Marsing, Hikal can reach out to the regulated markets using its marketing network and brand name, apart from using the company for registration purposes.
Hikal is also planning to restructure its European enterprise to improve profitability over the next year. This would include rationalising the product mix by moving into higher margin products, optimisation of cost of operations and moving up the value chain.
Also, as part of a diversification plan, Hikal plans to set up an R&D centre in Pune by investing Rs 20 crore (Rs 200 million).
The centre, which would have a 100-strong workforce, would undertake mainly process research for in-house product development and contract research for clients. The company is also planning a capacity expansion in its Bangalore facility.
Hikal is now planning to raise funds through a fresh issue of capital to the tune of Rs 100 crore (Rs 1 billion) for meeting its expansion and diversification plans.