FC Businessman Of The Year
Dec 30 2008 , New Delhi
Ratan Tata? Mukesh Ambani? Anil Ambani? Nandan Nilekani? None of them did anything to shake up the Indian corporate world. Tata did, but only to an extent, with Nano. That was hardly a surprise though; everyone knew Nano had been in incubation for some time. Mukesh’s new refinery was on its way, and Anil pulled no rabbit out of his hat. Nilekani only did what he was expected to do – manage Infosys well.
Financial Chronicle’s editorial team went through a great deal of CVs and found the man who qualifies for the honour: Malvinder Mohan Singh, 35, of Ranbaxy fame. He is our Businessman of the Year. Forget, for a while, that he, along with his brother Shivinder Mohan Singh, piled brick upon layered brick on a significant edifice that their grandfather Bhai Mohan Singh and father Parvinder Mohan Singh had built, and made it India’s biggest drug company by sales and among the world’s top five generic drug company. Blot out, for a moment, also the fact that Ranbaxy, under the brothers’ combined baton, crafted some fine foreign acquisitions.
The sole deed that makes him the first denizen of the FC Hall of Fame was that one deal that left India Inc thunderstruck, caught media by surprise, and put the general public in bewilderment over the size and significance of it. Yes, we are talking of the Ranbaxy deal of June 11 with Daiichi-Sankyo of Japan.
What marked the deal was, of course, its size --- $4.6 billion, or Rs 18,400 crore at exchange rates prevailing then, Rs 10,000 crore of which was to go straight into the promoter family’s coffers for its 34.82 per cent stake, and the rest to other shareholders via the open offer from the Japanese company. There have been takeovers of Indian companies by foreign ones in the past, but this was the biggest such transaction of them all. Yet, more significant was the fact that the Singhs decided to sell the brightest of their family jewels, and that was going into foreign hands. Ranbaxy was considered so precious to India that even our public men wondered in Parliament if it was wise to let it fall into the lap of a foreign company.
Another small detail: The Daiichi deal was the best kept secret in the Indian corporate world. Not a whiff, no inspired leaks before the deal was actually announced. Amazing, given that most Indian companies leak like a sieve, mostly with encouragement from the promoters themselves. So when the announcement came, it both surprised and shocked.
But that’s how Mailvinder works – on the quiet and away from public gaze. Till the end of 2007, the thought of selling Ranbaxy never crossed the mind of anyone in the family. Early in 2008, the need was felt for a strategic R&D partner. That’s when they went on a scouting mission and came into talks with Daiichi. Even so, according to Malvinder, selling Ranbaxy was not thought of. It was Daiichi which insisted on a majority stake. The only way this could be accomplished was by selling the entire Singh family stake. Negotiations were quick and came to fruition fast.
The decision was an emotional wrench, admits Malvinder, and taken keeping in mind the company’s future well-being and, of course, the unprecedented shareholder value that it would unleash.
Consider the details: Daiichi offered Rs 737 a share, a premium of over 50 per cent on the preceding three months’ average daily closing price of the Ranbaxy share on the Bombay Stock Exchange, and way above the Rs 560 that the scrip commanded a day before the deal was announced.
Supporting Malvinder’s decision to exit Ranbaxy was Brian Tempest, former chief executive officer of the company, who was privy to the talks and the secret deal. Speaking about the deal, he told Financial Chronicle: “It would help take Ranbaxy to the next level… It now has a partner/ owner with deep financial pockets that could help the company in further acquisitions and patent litigation.” Tempest believes there are many big pharmaceutical companies envious of Daiichi’s success with the Ranbaxy deal.
We may dare add that there would be a legion of Indian business families who might have turned green thinking of the unprecedented millions that the Singhs have earned by selling out.
Other corporate leaders, too, see the deal as path-breaking. G V Prasad, vice-chairman and chief executive officer of Dr Reddy’s, says the deal combines two very strong companies to create a new global force in the pharmaceutical industry. “Ranbaxy adds international presence, a generic pipeline and a strong India presence to Daiichi Sankyo,” he adds.
A former chief executive officer of Ranbaxy, D S Brar, is on record that, after the deal, mergers and acquisitions would be seen in a “little more” positive light.
In the financial world, the deal has become legendary and is often cited as a case study. Gagan Banga, chief executive officer of Indiabulls Financial Services, says, “It was a smart move by the Ranbaxy management, as R&D is crucial for growth of pharmaceutical companies. The amount of investment required in pharmaceuticals may not have been otherwise possible for Ranbaxy to muster.”
Sudip Bandyopadhyay, director & chief executive officer of Reliance Money, says, “The timing of a deal is all about luck and chance. But Ranbaxy was right in its strategy. They were quick to read the writing on the wall, that R&D is a crucial element for further growth. Unless a company develops new drugs it cannot grow beyond a point. Ranbaxy was smart enough to understand its limitation.”
Post- deal, the standing of Ranbaxy has undergone a huge change. For one, it has become a debt-free firm with a combined market capitalisation of around $30 billion. The Daiichi-Ranbaxy combine is now the world’s 15th largest pharmaceutical company.
It wasn’t always so for Ranbaxy. Founded by Bhai Mohan Singh in 1961, the fledgling company barely managed to mark its presence in the pharmaceutical world. When his son, Parvinder, took over in 1993, Ranbaxy was a mere Rs 36 crore turnover company. Malvinder became chief executive officer and managing director in January 2006, with the company having reported net sales of Rs 3,408 crore in calendar 2005. Last year, net sales clocked were Rs 4,026 crore. Results for calendar 2008 are yet to be compiled, but the first three quarters saw net sales of Rs 3,350 crore.
In recent years, Ranbaxy has experimented with professional executives at the helm, but they came a cropper and had to soon leave. Though a family run company, Malvinder always saw himself as a promoter who was also professional. As far as Ranbaxy goes, one may say he is truly a professional now, having been retained by Daiichi to run the company.
Today, Malvinder is not a stake holder in the company that has been with the family for more than four decades but he has acquired a triple-barrelled designation – in addition to being CEO and MD, he is also the chairman. He is also better off as a professional manager than he was as a promoter-professional. Daiichi pays him Rs 25 crore a year. As owner-cum-professional, he used to earn Rs 19 crore.
(With inputs from Vivek Sinha)