Wockhardt and Dr Reddy’s Laboratories have recast the terms of their Rs 1,850-crore deal for the sale of the former’s branded generic business because of the Covid-19 impact.

In February this year, Dr Reddy’s had signed a business transfer agreement (BTA) with Wockhardt to acquire its domestic branded business for Rs 1,850 crore.

Dr Reddy’s said in a statement that while it has now completed the acquisition of the select divisions of Wockhardt’s branded generics business in India and a few other international territories of Nepal, Sri Lanka, Bhutan and Maldives, there have been some changes to the pact.

It said that because of the Covid-19 pandemic and the consequent government restrictions, there has been a reduction in the revenue from the sales of the products forming part of the business undertaking during March and April.

So, they have amended the transfer agreement following which both the parties have agreed that the deal consideration shall now be up to Rs 1,850 crore. However, this will be paid according to certain terms.

An amount of Rs 1,483 crore will be paid on the date of closing. Further, Rs 67 crore will be deposited in an escrow account which shall be released “subject to adjustments for net working capital, employee liabilities and other contractual and statutory liabilities”.

Dr Reddy’s said an amount of Rs 300 crore or the holdback amount will only be released subject to certain conditions.

If the revenue from the sales of the products forming part of the business undertaking during the 12-month post closing exceeds Rs 480 crore, Dr Reddy’s will be required to pay to Wockhardt an amount equal to two times the amount by which the revenue exceeds Rs 480 crore subject to the maximum of the holdback amount. The transaction was also to include Wockhardt’s manufacturing plant located at Baddi, Himachal Pradesh.

Wockhardt on Wednesday said that due to the restrictions on movement into and within Himachal Pradesh on account of the pandemic, the approval of the state government for the transfer of the land is pending.

Therefore, both the parties have agreed that the Baddi facility shall only be transferred once the approval of the government of Himachal Pradesh is received. In the meantime, Wockhardt and Dr Reddy’s will enter into interim arrangements for management of the Baddi facility by the latter.