Sun Pharmaceutical Industries, India’s largest drug maker by sales, on Monday warned investors that its profits in 2015-16 are likely to take a hit due to certain charges related to the merger of Ranbaxy Laboratories.
The company, run by billionaire Dilip Shanghvi, said that consolidated revenue for 2015-16 is likely to “remain flat or show a decline over 2014-15.”
“In addition to the above revenue impact, profits may also be adversely impacted due to certain expenses/charges arising out of integration as well as remedial actions,” it said.
The move is seen as a clear indication that the integration of Ranbaxy is taking a lot more time and has not been as easier as Sun Pharma had earlier thought.
“This update has come as a surprise as even after fourth-quarter’s earnings Sun Pharma had not indicated any such thing. The market is going to react to it negatively,” an analyst at a local brokerage said.
Sun Pharma had acquired rival drug maker Ranbaxy from Japan’s Daiichi Sankyo in a $4-billion deal last year. The merger was completed in March this year.
The merger has been challenging, as four of Ranbaxy’s plants in India are banned by the US Food and Drug Administration for exports, over violation of standard manufacturing practices there.
“Our target for the synergy benefits from the Ranbaxy acquisition has increased by 15-20% as compared to our original target of $250 million by 2017-18,” it said.