Wednesday, June 11, 2008

Daiichi takeover of Ranbaxy

In my previous post on Ranbaxy, I had expressed my concern on how the balance sheet was looking and the fact that other income was driving bottomline. Well I guess the promoters were concerned about the same :-).

Daiichi Sankyo has bought Ranbaxy and the promoters, the Singh family, have made a good exit for themselves and are laughing to the bank. Emotions apart I think they have got a great deal for themselves.

To be honest the deal completely caught me by surprise and is a example of a white swan which comes along the way occasionally.

I hold a few shares in the company and was planning to exit post the demerger of the R&D business ( which has now been put on hold). So what should the retail shareholder do?

The open offer price at Rs 737 though attractive will only pick up about 1/3 th of the share that will get tendered. The stock might languish much lower post the open offer from the current price of Rs 560. I plan to exit if I get a spike in the share price closer to the open offer date.


Mahendra Naik said...

Interesting blog. Nice to see someone focus on fundamentals. Incidently, technicals would have shown you a breakout in Ranbaxy at around 350. I have found out thru experience that a combination of fundamentals and technicals work out beautifully in the Indian context. I too write my blog where I try to focus on both as well as some perspective on general investment strategy.

Ninad Kunder said...

Hi Mahendra

Thanks. To be honest I focus more on the fundamentals where I am relatively more comfortable.

I go with your suggestion that a combination of fundamental and technical would be a good bet and do ocassionally look at the technical position of the stock especially if the stock is relatively illiquid.

Will visit your blog.



Rohit Chauhan said...


if you look back a few years, ranbaxy and other india pharma companies were hot stocks. there were articles praising these companies and saying that sky was the limit

if i remember correctly these companies sold at high valuations. it is interesting to see this turnaround now


Ninad Kunder said...

Hi Rohit

Like always the hype moves far ahead of substance and thats what happened to the Indian pharma industry.

The ability to raise easy money at high valuations triggered off the entire takeover frenzy of generic companies worldwide. Clearly those acquisitions have to start becoming value accretive. I think both Matrix and Ranbaxy promotors managed a great deal for themselves.

Lets see how the other players in the industry evolve.