"The proposal of GlaxoSmithKline has been cleared," said a source after the meeting of Foreign Investment Promotion Board, headed by Economic Affairs Secretary Arvind Mayaram.
The Singapore subsidiary of the UK-based GlaxoSmithKline plans to buy 24.33 per cent stake or 2.06 crore equity shares in GlaxoSmithKline Pharmaceuticals Ltd through an open offer.
The acquisition will result in foreign exchange inflow of Rs 6,400 crore, as per the firm's proposal to FIPB.
GlaxoSmithKline Pharmaceuticals is already majority owned and controlled by the GSK Group.
After the purchase, holding of the promoter group firms in the Indian subsidiary will go up to 75 per cent from the current level of 50.67 per cent.
The open offer for tendering of shares is scheduled to remain open from February 7-21.
GSK Pharma makes, distributes and trades a variety of drugs. Its portfolio includes prescription medicines and vaccines across areas such as anti-infectives, dermatology, and gynaecology.
The company employs more than 5,000 people and generated more than Rs 2,600 crore turnover in the financial year ended December 31, 2012.
FDI inflow in the pharma sector during the April-October period totalled Rs 5,956 crore (USD 1.08 billion).
In September, the government cleared the Rs 5,168-crore deal of the US-based Mylan Inc for acquiring Bangalore-based pharma firm Agila Specialties, a subsidiary of Strides Arcolab.
In 2008, Japanese firm Daiichi Sankyo had bought out the country's largest drug maker Ranbaxy for USD 4.6 billion. US-based Abbot Laboratories had acquired Piramal Health Care's domestic business for USD 3.7 billion.
India allows 100 per cent FDI in pharma sector through automatic approval route in the new projects, but foreign investment in the existing companies is allowed only through the FIPB approval.