Ranbaxy Plans $150m Buyout Fund
Domestic pharmaceuticals major Ranbaxy Laboratories has decided to set aside $150 million (Rs 650 crore) to fund acquisitions, domestic as well as overseas, over the next three years.
Ranbaxy has also decided to spin off its diagnostic division into a separate entity. The decision is in line with its new corporate strategy to develop Ranbaxy as a research-based pharmaceuticals company, and to hive off all non-pharmaceutical businesses into independent units. Ranbaxy has already spun off its fine chemicals division into a separate unit.
Talking to Business Standard, Ranbaxy president D S Brar said the company planned to create the acquisition fund through a mix of internal accrual and market borrowing.
"We do not want to go back to our shareholders to raise funds for this purpose. Besides, we have a lot of scope for leveraging as the company has a comfortable debt-equity ratio of 0.5:1. We plan to increase this to 0.7:1, depending on our requirements," he said.
Brar said Ranbaxy would consider only brand acquisitions in the domestic market while eyeing both brand and company acquisitions in overseas markets.
"In the US market, we will be looking only at strategic alliances and outsourcing of products for strengthening our product basket. We plan to use the buyout
route to enter markets in Brazil and France." Ranbaxy's decision to set aside $150 million to fund its acquisition plans is significant as the company is believed to have identified about 13 brands in the domestic market, including some over-the-counter products, for possible buyout.
The company is understood to be close to clinching a deal for acquiring an over-the-counter brand of an Indian pharmaceuticals company.
Ranbaxy was, at one point of time, engaged in negotiations for buying out a medium-sized Brazilian pharmaceutical company.
The deal, however, could not be clinched due to a difference over the sale price.
Admitting this, Brar said the Brazilian market was huge and required making huge investments to have a meaningful presence. "Because of the substantial fund requirement, we have postponed our plans in Brazil for the moment," he said.
Ranbaxy, however, is planning to step up investments in China and the CIS, where it sees high growth potential due to altering market conditions.
In Russia, consumers are expected to shift from expensive Western drugs to cheaper drugs, including those made by Indian manufacturers, in the aftermath of the rouble devaluation. The Chinese pharmaceuticals market is expanding rapidly, offering opportunities to joint ventures, which have the advantage of operating in a price decontrolled regime.
"In both these countries, we are planning acquisition of more products, besides introducing our own new products," Brar said.
As part of streamlining its domestic marketing operations, Ranbaxy is considering tying up with some small players for marketing some of its low volume products.