If you ask someone that is it possible that a company which is the number one in pharmaceuticals in India , a company which is aggressive, ruthless and fast moving . A company which has the most number of brands among local companies in the top 20 pharmaceutical products and above all a company which posted a pretax profit of 10 billion rupees on sales of 74.2 billion rupees in calendar 2007, would be put on blocks , then the answer which you will possibly get that it is not possible , but the truth is that Ranbaxy , the Indian grown generic pharmaceutical giant has been bought over by Daichi Sankyo, Japan's second-largest drug maker company for 368.5 billion to 495 billion yen ($3.4 billion to $4.6 billion), or 147.4 billion equivalent to 198 billion rupees.
In one of the biggest buy outs of any Indian company by an MNC, Japanese major Daiichi Sankyo has picked up the promoters - Malvinder Singh and Shivinder Singh's - 34.8% stake at Rs 737 per share in drug maker Ranbaxy Labarotaries. This also means the complete exit of Ranbaxy promoters from the company. However, Malvinder Singh is expected to continue to head the management as per the agreement between the companies for sometime. This transaction to me seems to be inspired by the western models in which the promoter build business and then sell off when the valuations of the companies are the highest , but this thing was particularly absent and unseen till date. This is the reason why it came as a rude shock for many. Ranbaxy was one of India’s earliest entrepreneurial companies to stop the march of multinational drug companies and thus the sale mark an end of era in pharmaceutical industry.
If we look at the benefits or the synergies the two companies want to achieve then we see that Ranbaxy could enter the Japanese market through this deal and get access to Daiichi’s long list of drugs and superior technology. Daiichi on the other hand could gain from Ranbaxy’s wide presence across the globe and its low-cost production facilities, but one of the great merits of the deal is that Ranbaxy operates in multiple countries and has wide market reach and penetration.
Now why did the promoter sell it off ? well this answer can be given only by them but if we look at their business portfolio then we see that slowly they were also building their non – pharma empire. The promoter group has presence in Healthcare ( Fortis Hospitals) , Diagnostics ( SRL Ranbaxy – Pathology Labs) , Financial ( Religare ) and Travel ( Regius Aviation , unlisted ) . The question is that whether the money would be used up in building in one of these business . Their Financial company Religare has grown almost 20 times in the last three years , Fortis hospitals have also earned 525.04 crore rupees in FY 07 and in FY 08 400.98( in 9 months ) so their business other than pharma were also growing , coming back to their pharma business in last three years, intense competition from local companies had whittled profits in US market, while its new drug research programme has not paid even after 20 years in existence. At the same time, its clout in domestic market has also vanished. With patents act coming into force in 2005, Ranbaxy can no longer copy and launch new drugs in India. Several Indian firms like Wockhardt, Sun and Zydus Cadilla have mastered this act making market place less profitable, this might be one of the reasons for the promoters exit.
Whatever the reason may be being an Indian and being from the same Industry vertical I personally didn’t like the news , you may call me emotional but you should remember that we people who are from the biotech / microbio/ pharma field have been always aspiring to work for Ranbaxy , an Indian grown multinational company which had given the big pharma giants a run for their money and not a company owned by a Japanese giant , yea the nationalistic feeling has crept in the business decision at least for me
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