India-based Aurobindo Pharma Limited (APL) has entered into a definitive agreement with China National Pharmaceutical Group Corporation (Sinopharm) to divest in its subsidiary company Aurobindo (Datong) Bio Pharma, China (ADBPL), subject to regulatory approvals. Sinopharm will acquire the shares through its subsidiary company Sinopharm Weiqida Pharmaceutical. ADBPL is engaged in manufacturing of 6APA, a derivative of Penicillin-G & most of its production is consumed by APL,India. In past the performance of ADBPCL has been affected due to economies of scale and is incurring losses. After acquisition of 51 percent equity in ADBPL, the investors will further infuse capital to enhance its shareholding to 80.50 percent, reducing APL share in the JV to 19.5 percent. APL’s loan of $23 million to ADBPL will entirely be paid back. Sinopharm group will infuse sufficient funds to relocate plant as required by local government in China and significantly enhance capacity and downstream products leading to better economies of scale and reduced cost of production. APL’s investment of 19.50 percent will be strategic in nature to ensure uninterrupted supply of raw materials at competitive price. Over the past six years, APL has undertaken a paradigm shift from API to formulations business. Hence, the board feels that the said divestment is in the best interest of the company. This will strengthen the overall cash flow and operating margins.