Orchid Chemicals & Pharmaceuticals on Wednesday confirmed the sale of its Penicillin & Penem active pharma ingredient to US-based Hospira.

Orchid said that its pharmaceutical division sold the Penicillin and Penem active pharma ingredient business to Hospira for around $200 million (Rs 1,200 crore) through a business transfer agreement.

The business transfer agreement also includes the active pharma ingredient facility in Aurangabad, Maharashtra, and an associated process research & development (R&D) infrastructure in Chennai.

Debt-laden Orchid described the decision as "prudent," saying it was important for the company to monetize those verticals to bring in cash so that it could de-leverage its debt position and fund its growth plans.

Announcing the sale, Orchid Chemicals CMD K Raghavendra Rao said, "This business transfer agreement with Hospira will help us fast track our future growth while maintaining a healthy debt profile in our balance sheet."

Out of the sale proceeds of around Rs 1,200 crore, the company intends to repay Rs 800 crore. But that will not make the company debt-free because the company is burdened with a debt pile of around Rs 2,200 crore. After repay Rs 800 crore, the company will utilize the balance to fund newer growth horizons.

In 2009, Orchid had sold its injectible antibiotics business to Hospira for $400 million.