The Hindu Business Line : De-merger buzz lifts Ranbaxy

Some investors have begun accumulating Ranbaxy on the assumption that the company may formalise its plan for hiving off its drug discovery research operation soon. In October, the Ranbaxy board gave in-principle approval to a proposal for de-merger of its drug discovery research operation. The company had also indicated that specific framework for the proposed de-merger would be finalised by the end of 2007.

According to market sources, the company is likely to formalise the earlier decision in January. A company spokesperson, however, told Business Line that the detailed plan including structure of the new entity, which would be listed, has not yet been finalised.

Market talk is that the company may take a few strategic and financial investors on board for the new entity. Incidentally, the Ranbaxy board is meeting on January 17, to take on record the un-audited results of the company for the fourth quarter to December 31, 2007. No official confirmation could be had whether the de-merger issue figured on the agenda. Ranbaxy has 1,200 researcher-strong multi-disciplinary centre at Gurgaon. It is also pursuing research with GlaxoSmithKline for which the milestone payment (without royalties) could exceed $ 100 million. According to the company, the separate entity would provide more flexibility and opportunities in collaboration. Analysts said the de-merger may unlock fresh value for the Rs 5 face-valued stock and also reduce cost. Ranbaxy’s US subsidiary, Ohm Lab, meanwhile, has obtained FDA approval for cetrizine tablets as OTC products, it informed bourses. The stock moved up 2.5 per cent to Rs 426 as 8 lakh shares changed hands on the NSE and 2.83 lakh shares on the BSE. —

Jayanta Mallick