Orchid Chemicals and Pharmaceuticals, which is based in the southern Indian city of Chennai in Tamil Nadu, has indicated that it will soon exit from its 50:50 manufacturing joint venture in China.
The move is a part of the company's strategy to consolidate its manufacturing facilities in India. In the joint venture, NCPC-Orchid Pharmaceuticals, the company will transfer its 50 per cent stake to North China Pharmaceutical Corporation (NCPC) for a total cash consideration of $13.9 million or about Rs 76.19 crore.
The company had entered into a joint venture partnership with the Chinese firm in 2002 to establish a Cephalosporin API manufacturing facility located in Shijiazhuang, China. The company has invested around $5 million into the Joint Venture in the neighboring country.
K Raghavendra Rao, chairman and managing director of Orchid Pharma said that the operating conditions in China have become very competitive as local player are increasing looking to integrate.
"Moreover, the products that the JV manufactures and markets in the local Chinese market have reached a mature stage resulting in flat growth prospects going forward. Hence, it was a prudent decision to relinquish our stake to the partner and exit the JV," he said.
Orchid has recorded a net loss of Rs 24 crore during the second quarter of the year compared to a profit of Rs 20.72 crore during the same period of the previous financial year. The total income stood at Rs 378.37 crore compared to Rs 465.71 crore recorded during the same period of 2011. Rao said that the increased interest outflow and the liquidity pressure has affected profitability.