Ranbaxy has been an example of the rise of an Indian MNC.After many years of acquiring some big companies globally, it was a role reversal to see the promoters of Ranbaxy deciding to sell their controlling stake of 34.8% for Rs10,000 crores at Rs 737 per share ( 31.4% premium over the company’s closing share price on the same day).
If the Daiichi Sankyo’s acquisition of Ranbaxy leads to a stronger company in this globalised era, and can also retain its name and country of origin then it may give a fillip to the rise of Indian MNC. However, if it becomes Daiichi India, with no trace of Ranbaxy then it may become one less Indian MNC.
The company reported an operating income of more than Rs 4000 crores and a net worth of more than Rs 2000 crores for FY 2008. The company also commanded respect in our stock market enjoying a P/E ratio of 34. It has a total debt-equity ratio of 1.4 and long term debt-equity ratio of 0.9. This gave it scope to raise resources both from the equity market as well as the bond market.
The promoters may have very good reasons for selling their controlling stake, but overall I feel a little sad that Ranbaxy promoters sold the controlling stake.
Prof J N Mukhpopadhyaya
(Globsyn Business School)
3 comments:
I think the Right vs Wrong in a decision like this depends on who the decision maker is. Second generation entrepreneurs are able to look at businesses lot more objectively and less emotionally than the first generation entrepreneur. From a non emotional stand point, the deal looks just, but i would agree with the author, than the Name of the company should not be changed. Replacing any existing brand with substantial good will is an expensive decision and can swing either way.
-Romit
At a time when Indian firms are on an acquisition spree, the Ranbaxy sale has stumped many in the industry, more so since the pharma industry in India has been on a fast growth track.
But to me the Ranbaxy promoters have made a shrewd move. Here's why...by 2012 a whole host of drugs would be out of the patent protection umbrella meaning generic drug companies like Ranbaxy would have to compete with a much larger mass of generic drug companies with the potential of margin dips. On the other hand patented drugs sell at a premium but R&D is not only a huge money guzzler but a lottery in some senses and R&D was never at Ranbaxy's business core.
Daiichi in contrast is a research driven firm and adding a generic drug firm to its kitty would seem a win-win deal to not only prepare for 2012 but build a strong global firm with proven competencies in both research driven and generic drugs.
My initial reaction was one of dismay—how could one of India’s finest companies become a mere Japanese subsidiary? A company that had acquired 14 companies in 30 months is now itself acquired. Slowly I realised, however, this momentous deal would make the merged company much stronger and create greater value to the Indian nation.
Companies create wealth for nations when they create jobs, give returns to shareholders, and pay taxes to governments. If Ranbaxy had not been sold, it would have continued to generate steady returns. By joining hands with a larger, innovative Japanese concern, it will produce more and better products, be able to better fight patents, and provide Japanese skills in process, quality and teamwork to its employees. Daiichi Ranbaxy will potentially create more jobs, more returns to both shareholders, and more taxes to both governments.
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