Ranbaxy Deal Shames India

Years ago when I heard of Hindustan Motors handing over its earth moving machine division in Chennai to caterpillar, I got shock of my life. That was the best manufacturing plant of the CK Birla group of companies. CK Birla might have gone richer or wealthier or got rid of some debts, but in the general perception of all the employees as well as the people who knew the group, it was the decline of the business house. Many rumours went around including the personal ones. My shock was perhaps because of my rural upbringing where a sale of the inherited property brings bad name for a person selling it.

After hearing the sale of controlling stake of Ranbaxy laboratories to Daiichi Sanko for nearly $4.6 billion, or $17.14 per share, a 31% premium over Ranbaxy’s current share price, I got a similar feeling. Perhaps many in India might not have taken the deal as a good move by the grandsons when the founder grandfather was alive. It might be a good business deal as many pink papers reported, but it must have tarnished the perception about the young men who owned Ranbaxy.

Business Week called it ‘India’s Shocker Pharma Deal’. Why would Ranbaxy Managing Director Malvinder Singh bail out of a company set up by his grandfather Bhai Mohan Singh and built by his visionary father, the late Parvinder Singh?

Am I getting unnecessarily sentimental? Are these deals not connected with the nation’s pride? Is it just a business strategy to earn the best from what one owns at the right time? But then why should we grumble when Europeans or Americans expressed similar views when Mittal took over Arcelor, or Tata acquired Corus? Why should those acquisitions got so much of hype in Indian corporate houses and even in the political circles? It is interesting that none of the biggies in corporate India made any remark on the Ranbaxy deal, though Ranbaxy for years was the exemplary success story of Indian pharma sector almost similar to Infosys and Wipro for IT sector. Even among the political leaders I read only Advani making some remarks against the deal.

What a shame! Malvinder Singh is happy to remain the CEO of the new group. It is difficult to understand what Singh meant his statement, “The deal would “allow us to transform and go to the next level.” I consider such deal reflects poorly on the management talent of the enterprise that gets acquired. Should India take note of it? Couldn’t some Indian business houses, such as Ambani brothers, buy the company and run it better?

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