Home grown multinational Ranbaxy Laboratories Ltd, India’s largest pharmaceutical company, now has a Japanese owner — Daiichi Sankyo Co.
Promoters Malvinder Mohan Singh and Shivinder Mohan Singh, grandsons of Bhai Mohan Singh, a refugee who bought the company in the aftermath of India’s partition, on Wednesday said they were selling their entire stake, 34.82 per cent, in Ranbaxy to Daiichi Sankyo Holdings for Rs 9,576 crore ($2.4 billion).
The deal, the biggest ever selloff by an Indian business family, marks a full circle for Ranbaxy that started off in 1937 as a distributor for another Japanese company Shionogi. Bhai Mohan Singh bought the company in 1952 — from his cousins Ranjit Singh and Gurbax Singh, whose names combined to form the Ranbaxy brand. It was after Parvinder Singh, Bhai Mohan’s son, joined the company in 1967 that Ranbaxy saw a significant transformation in its business and scale.
“This was an emotional decision for the family,” Malvinder said at a news conference.
The move marks a watershed for Indian pharmaceuticals companies, many of which had transformed from tiny entities into large enterprises on back of a favorable patent regime that allowed them to copy patented drugs from the West and make low-cost alternatives.
But with India doing away with that regime three years ago, domestic pharma companies appear to be facing difficult times. The game is changing, said Piramal Enterprises chairman Ajay Piramal. "In the last four years, investors in other sectors have made more money than those in pharma companies."
In Ranbaxy's case, "we have a company that finds the business landscape has changed — and it needs to scale up the business to survive," said KPMG India executive director Sudhir Kapadia. "The limitations of being an Indian company is hitting hard and the only way out is to sell out to a global major and let it provide the sense of scale."
The agreement with Daiichi values Ranbaxy at $8.5 billion (Rs 35,000 crore), or Rs 737 per share and it would catapult the combined entity to the rank of 15 among the world's biggest drug makers. Currently, Daiichi is ranked 22. Coca Cola's acquisition of Parle Drinks and Holcim's takeover of Gujarat Ambuja are some recent examples of promoters exiting the business they had built on their own, but Ranbaxy's selloff is an instance where promoters are exiting a business empire that had been built by their ancestors.
Even after the selloff, Malvinder Singh will remain chairman and CEO of the company for another five years. The company will issue fresh equity to Daiichi. Along with an open offer Daiichi will have to shell out anything between $3.4 billion and $4.6 billion for a controlling stake in the Indian company.
(With inputs from Suprotip Ghosh)