Ranbaxy Laboratories Ltd., an Indian MNC has become a subsidiary of Japanese drug major Daiichi Sankyo Co. Ltd., a R&D major. Daiichi had first acquired 9.25 crore shares of Ranbaxy (representing 20% of the emerging voting capital of Ranbaxy) at Rs.737 per share from Indian public. The company made a preferential allotment of 4.63 crore shares at Rs.737 per share, for Rs.3,410 crores to Daiichi. 8.19 crore shares were acquired by Daiichi from the promoters of Ranbaxy in the first tranche. Remaining 4.80 crore share would be acquired by Daiichi from promoters in the second tranche.
The present stake of Daiichi in Ranbaxy is now placed at 52.50%, which would rise to 64%, post acquisition of shares in second tranche from the promoters.
Now the question in the minds of investors in Ranbaxy is whether to treat the company as an overseas MNC and if yes, none of pharma companies with overseas promoters are well received by the market and are poorly discounted on the bourses. Some of them are Abbott India, Glaxo, Novartis, Pfizer and Wyeth.
However, one can’t go by the same yardstick while investing in Ranbaxy or taking a valuation call on the stock.
Ranbaxy on a consolidated basis, as at 31-12-07 had a total debt of Rs.3, 700 crores, net off cash. Now with infusion of Rs.3, 585 crores by Daiichi, by subscribing 4.63 crore shares and 2.38 crore warrants, the company has become totally debt free.
Now let’s have an analysis from Daiichi investment angle, who have invested R.3, 585 crore by preferential allotment paid Rs.6, 817 crores to public shareholders as also shall be paying Rs.9, 575 crores to the Indian promoters. An additional Rs.1, 580 crores shall be paid by Daiichi to the company, on conversion of 2.78 crores warrants, into equal number of shares at Rs.737 per share, within the next 6 – 18 months. So aggregate investment by Daiichi in Ranbaxy is to the extent of Rs.21, 557 crores, which is about U S $ 4.50 billion.
When Daiichi has made this kind of investment, definitely they have growth plans for the company, which will yield its results over a longer term. Ranbaxy stock is now ruling at Rs.260 per share, which translates into a market capitalization of about Rs.12, 000 crores, post warrant conversion. This kind of valuation definitely is very low when compared with its annual consolidated topline of Rs.7, 500 crores and debt free status. Ranbaxy had a profit after tax of Rs.787 crores for year ending 31-12-07. The company is aiming to a have a global sales of US $ 5 billion, by 2012 and to be among the top 5 global generic companies. This dream would not have been achieved by the Indian promoters due to various global litigations but now would be possible with Daiichi at the helm of affairs of the company.
Daiichi is an established R&D player and now with Ranbaxy coming in its fold, it becomes an end to end complete pharma company. With many patents going off-patent in the next 3 – 5 years, Ranbaxy, with the backing of Daiichi would be able exploit the potential of global markets.
We have been getting lot of queries from our viewers whether it would be prudent to remain invested in Ranbaxy stock or to buy it at Rs.260 levels. Going by the investments having made by Daiichi in the company and looking to scale and size of Ranbaxy, share at Rs.260 hold lot of long term potential with virtually minimal risk.
The present stake of Daiichi in Ranbaxy is now placed at 52.50%, which would rise to 64%, post acquisition of shares in second tranche from the promoters.
Now the question in the minds of investors in Ranbaxy is whether to treat the company as an overseas MNC and if yes, none of pharma companies with overseas promoters are well received by the market and are poorly discounted on the bourses. Some of them are Abbott India, Glaxo, Novartis, Pfizer and Wyeth.
However, one can’t go by the same yardstick while investing in Ranbaxy or taking a valuation call on the stock.
Ranbaxy on a consolidated basis, as at 31-12-07 had a total debt of Rs.3, 700 crores, net off cash. Now with infusion of Rs.3, 585 crores by Daiichi, by subscribing 4.63 crore shares and 2.38 crore warrants, the company has become totally debt free.
Now let’s have an analysis from Daiichi investment angle, who have invested R.3, 585 crore by preferential allotment paid Rs.6, 817 crores to public shareholders as also shall be paying Rs.9, 575 crores to the Indian promoters. An additional Rs.1, 580 crores shall be paid by Daiichi to the company, on conversion of 2.78 crores warrants, into equal number of shares at Rs.737 per share, within the next 6 – 18 months. So aggregate investment by Daiichi in Ranbaxy is to the extent of Rs.21, 557 crores, which is about U S $ 4.50 billion.
When Daiichi has made this kind of investment, definitely they have growth plans for the company, which will yield its results over a longer term. Ranbaxy stock is now ruling at Rs.260 per share, which translates into a market capitalization of about Rs.12, 000 crores, post warrant conversion. This kind of valuation definitely is very low when compared with its annual consolidated topline of Rs.7, 500 crores and debt free status. Ranbaxy had a profit after tax of Rs.787 crores for year ending 31-12-07. The company is aiming to a have a global sales of US $ 5 billion, by 2012 and to be among the top 5 global generic companies. This dream would not have been achieved by the Indian promoters due to various global litigations but now would be possible with Daiichi at the helm of affairs of the company.
Daiichi is an established R&D player and now with Ranbaxy coming in its fold, it becomes an end to end complete pharma company. With many patents going off-patent in the next 3 – 5 years, Ranbaxy, with the backing of Daiichi would be able exploit the potential of global markets.
We have been getting lot of queries from our viewers whether it would be prudent to remain invested in Ranbaxy stock or to buy it at Rs.260 levels. Going by the investments having made by Daiichi in the company and looking to scale and size of Ranbaxy, share at Rs.260 hold lot of long term potential with virtually minimal risk.
Source: sptulsian.com
