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Posts Tagged ‘malvinder singh

Ranbaxy shocks & sells out!

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Only thing that I felt on hearing the news was shock!! A serious shock!


Ranbaxy sold out to some Japanese Daiichi Sankyo.


Why did the flag bearer of Indian pharma industry bow out like this? After 3 consecutive years of gobbling up large and promising pharma companies around the world, why did Ranbaxy sell out? Leave alone me, even the business veterans are shocked. Mahindra & Mahindra’s vice-chairman Anand Mahindra sums up the sentiment of many in corporate India:


It’s a landmark deal for the pharma industry. But I can’t help feeling a twinge of regret about an Indian multinational becoming a Japanese subsidiary.


                                                               The hunter gets hunted


So why this happened? There are some very valid reasons for this action by Malvinder Singh. This is what he had to say –


It was an emotional decision for the family, but after weighing several permutations and combinations, we felt that the deal with Daiichi Sankyo was the best for the shareholders and employees. What the family would get out of this was least of my concerns.


But why did the family have to sell out? Couldn’t they just have gone for any other way? “The family had to completely exit Ranbaxy to allow Daiichi Sankyo 50.1% stake without which they would not have come on board,” said Mr Singh. He added, with current regulations preventing Indians from holding shares in foreign companies, a merger by way of a share swap was not possible.

Quite a few important observations can be made from this deal.


Firstly, though pharma sector is poised for growth, the Indian pharmaceutical policy is not very conducive for the same. The policy does need some tuning up. It is easier for the Indian companies to become subsidiaries of foreign firms to have better growth.


Secondly, it shows the coming of age of the Indian businessmen. Who are not at all afraid to leave their homegrown companies to look for greener pastures. Is it the start of Americanization of Indian businessmen or the start of the era of serial entrepreneurs? Only time shall tell. Major question for Mr. Singh is now to decide on ways of deploying his new found treasure of INR 10,000 Crores.


Thirdly, it will help Ranbaxy to enter newer markets hitchhiking with Daiichi and join forces with ‘new drug discovery’ division of its new parent. The Ranbaxy-Daiichi combine will be the fifteenth largest drug maker in the world, with a footprint in major global markets. In addition to an expanded global reach, the combined entity will have a complementary product portfolio and a strong growth potential by effectively managing opportunities across the full pharmaceutical life-cycle; and cost competitiveness by optimising usage of R&D and manufacturing facilities of both companies, especially in India.


Fourthly, its good for retail investors, who would be gain a whopping 30% in the open offer. Ranbaxy would be converted into a debt free firm with infusion of $1 billion retiring a debt of $500 million. The surplus funds can be pushed into newer growth areas and help in satisfying Ranbaxy’s hunger for newer acquisitions.


Lastly ;-) it will help Ranbaxy to fight its patent battles with giants like Pfizer, etc. with a newfound parent which would be the 15th largest drug maker now.


New details were made available by the company later but it seems that the initial shock and horror has paved way for respect for the intelligent business sense shown by Ranbaxy’s board.

Cheers to Ranbaxy for this path breaking decision!!