(Yicai) May 17 -- Shanghai Fosun Pharmaceutical Group, which is battling shrinking profits due to slumping sales of its Covid-19 jabs, has kickstarted the initial public offering of one of its subsidiaries after the unit secured an investment of CNY300 million (USD41.5 million).

Fosun Health, a healthcare service provider, has received a cash injection from institutional investor Foshan Chanxi City Investment and the parent group has initiated the listing process, Fosun Pharma said on May 15,

Fosun Health should go public by 2029 and this will help boost Fosun Pharma’s cash flow. The parent firm’s stake in the subsidiary has now been diluted to 97.1 percent from 100 percent.

The proceeds will be used in Fosun Health’s daily operations and business development and to further consolidate its healthcare services, the Foshun, southern Guangdong province-based firm said.

To safeguard its investment, Foshan Chanxi also inked a value adjustment mechanism with Fosun Health, which requires the healthcare company to buy back all or part of Foshan Chanxi's equity if it fails to achieve agreed performance targets or to go public in five years.

The parent firm has been struggling due to sinking sales of its Covid-19 vaccines. Fosun Pharma’s net profit plunged 36 percent last year from the year before to CNY2.4 billion (USD330.4 million) and revenue slumped 5.8 percent to CNY41.4 billion (USD5.7 billion), according to the company’s latest annual earnings report.

Fosun Pharma will optimize its asset and debt structures as well as its operating cash flow this year, Chairman Wu Yifang said at the earnings call. However, such improvements need time, he added.

Editor: Kim Taylor