A PROJECT REPORT

ON

“A STUDY ON ACQUISITION OF RANBAXY BY DAIICHI

SANKYO”

SUBMITTED BY

JETESH KUMAR

(Registration no - 200622961)

Submitted in partial fulfillment of the requirements for the award of Post Graduate Diploma in Business Administration

DEPARTMENT OF BUSINESS ADMINISTRATION

SYMBIOSIS CENTRE FOR DISTANCE LEARNING(2006-2008)

1

PROPOSAL

TITLE OF PROJECT - A STUDY ON ACQUISITION OF RANBAXY BY DAIICHI

SUBMITTED BY – JETESH KUMAR

REGISTRATION NO – 200622961

PROGRAMME – P.G.D.B.A (FINANCE)

ADDRESS – H.NO, 3539, CHEEMA PARK, MODEL GRAM, LUDHIANA-141002

GUIDE NAME – Ms. SHALOO CHOPRA

ADDRESS – SRI KRISHNA INSTITUTE OF IT & MANAGEMENT

S.C.F – 56-57, SECOND FLOOR

PHASE-X, MOHALI- 160055

ENAIL – skiimindia@yahoo.com

QUALIFICATION –

DESIGNATION – MANAGING DIRECTOR

EXPERIENCE -

2

DECLARATION

I hereby declare that this Project Report titled “A STUDY ON ACQUISITION OF

RANBAXY BY DAIICHI” submitted by me in partial fulfillment of the requirements

for the award of Post Graduate Diploma in Business Administration to Department of

Business management, SCDL, PUNE, is a bonafide work undertaken by me and has

not been submitted to any other university or Institution for the award of any degree

diploma/certificate or published any time before.

Name of the student Signature of the student

(Jetesh Kumar)

PLACE: Ludhiana

DATE: 17.11.2010

3

ACKNOWLEDGEMENT

I get this opportunity to remember and acknowledge cooperation, support provided by

several individuals out of which this project has involved, I am grateful to all those who

have directly or indirectly contributed to make this project a success.

I would like to thank Ms. Shaloo Chopra, Managing Director, Sri Krishna Institute

of IT & Management Studies for their meticulous guidance throughout my project.

I express my gratitude for her valuable assistance, guidance and suggestions for

completion of my project.

On this occasion I would like to thank my friends for their valuable time that, they have

allocated to me for my completion of this project.

PLACE: LUDHIANA (Jetesh Kumar)

DATE: 17.11.2010

4

CERTIFICATE OF PROJECT GUIDE/SUPERVISOR

Certified that the work incorporated in this Project Report Titled “A STUDY ON

ACQUISITION OF RANBAXY BY DAIICHI” submitted by Jetesh Kumar is his

original work and completed under my supervision.

Material obtained from other sources has been duly acknowledged in the Project Report.

Date: 17.11.2010 Name of the Guide: Ms. Shaloo Chopra

PLACE: MOHALI, PUNJAB Signature of guide

5

CHAPTERISATION

6

S.No Contents Page no

1 CHAPTER 1 – INTRODUCTION 1.1 Need for the study 1.2 Objectives 1.3 Methodolgy 1.4 Scope 1.5 Limitations 1.6 Sources of Data

10-11111112131313

2 CHAPTER 2 - REVIEW LITERATURE 2.1 Merger 2.2 Acquisition 2.3 Takeover 2.4 Types of Merger 2.5 Advantages of Mergers & Acquisitions

15-26161717

17-2424-26

3 CHAPTER 3 - INDUSTRY & COMPANY PROFILE

3.1 SWOT Analysis of Indian Pharma Industry 3.2 History of the companies 3.3 Companies Profile 3.4 Reasons for the Deal

28-42

28-3132-3637-4041-42

4 CHAPTER 4 - DATA ANALYSIS & INTERPRET 4.1 About the Acquisition 4.2 Share Holding of Ranbaxy (Pre Acquisition) 4.3 Share Holding of Daiichi Sankyo(Post Acquisition) 4.4 Interpretation of Shares held Pre & Post Acq. 4.5 Financial Data 4.6 Market Shares

44-5644-45

4647

48-4949-5051-56

5 CHAPTER 5 - FINDINGS & SUGGESTIONS 5.1 Findings 5.2 Suggestions 5.3 Conclusion

58-6158

58-5960-61

6 CHAPTER 6 – BIBLIOGRAPHY 63

7 CHAPTER 7 - ANNEXURE 65-68

7

S.NO. CONTENTS PG. NO.

1 Figure: 3.1 SWOT Analysis of Indian Pharma Industry. 29

2 Table: 4.1 Share Holders of Ranbaxy (Pre Acquisition) 46

3 Figure: 4.1 Share Holders of Ranbaxy (Pre Acquisition) 46

4 Table: 4.2 Share Holders of Daiichi Sankyo (Post Acquisition) 47

5 Table: 4.3 Interpretation of Shares Held Pre & Post

Acquisition.

48

6 Figure: 4.3 Interpretation of Shares Held Pre & Post

Acquisition.

48

7 Table: 4.4 Financial Data of Ranbaxy Laboratories Limited. 50

8 Table: 4.5 Comparative Analysis of Annual Results. 50

9 Figure: 4.4 Comparative Analysis of Annual Results. 51

10 Table: 4.6 Market Share of Daiichi Sankyo. 51

11 Figure: 4.5 Market Share of Daiichi Sankyo. 53

12 Table: 4.7 Comparative Analysis of Companies Spent on R&D.

54

13 Table: 4.8 Market Share of Ranbaxy. 55

14 Figure: 4.7 Market Share of Ranbaxy. 56

15 Table: 7.1 Annual results of Ranbaxy in detail. 65

16 Table: 7.2 Consolidated Balance Sheets of Daiichi Sankyo Co. Ltd.

66-68

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CHAPTER - 1

INTRODUCTION

9

[1] – INTRODUCTION

In the world of growing economy and globalization, major companies on both domestic

and international markets struggle to achieve the optimum market share possible. Every

day business people from top to lower management work to achieve a common goal –

being the best at what you do, and getting there as fast as possible.

This Thesis, about the Mergers & Acquisition is about the study of dynamics involved as

the companies merge or gets acquired, the external and internal factors that influence this

dynamic aspect and the synergies of the conglomerates to define this topic more clearly,

a corporate merger is defined as “the combination of the assets and liabilities of two firms

to form a single business entity”. In everyday language, the term "acquisition" tends to be

used when a larger firm absorbs a smaller firm, and "merger" tends to be used when the

combination is portrayed to be between equals.

A merger is considered to be successful, if it increases the acquiring firm’s value.

Usually, a merger can be construed as being anti competitive if it makes the market very

saturated after the merger, as opposed to before the merger’s completion, and if the

merger in addition makes it impossible or highly difficult for new firms to enter the

market and present a challenge to the existing corporations.

Mainly, there are three types of mergers – Vertical, Horizontal & Conglomerate Merger

or Potential Competition Merger. A vertical merger can impair competition by preventing

other companies who use the same suppliers or distribution channels to operate normally.

A potential competition or conglomerate merger is said to take place when one company

10

merges or buys another company that is anticipated to enter a market and become a

potential competitor to the acquiring company. Cross-border mergers and acquisitions

Comprise a major part of the foreign direct investments or FDIs, which have also been

developing quicker in the past decade. a horizontal merger is an acquisition of a

competitor with an intention to increase the market concentration, and often also to

increase the probability of collusions.

Hence Mergers & Acquisition is the study of a dynamic trend in the Business World.

1.1 - Need for the Study:

• The study deals with the evaluation of financial aspects of 2 merged companies.

• The emphasis is on evaluation of Pre & Post merger performance related to Ranbaxy

and Daiichi Sankyo.

1.2 - Objectives:

• To know the pre merger and post merger performance.

• To analyze the causes of Mergers & Acquisitions.

• To acknowledge the effects of Mergers & Acquisitions on the participating

Parties i.e., Daiichi Sankyo & Ranbaxy.

• To study the influence of Financial Structures while in

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the process of Mergers & Acquisitions

1.3 – Methodolgy:

The methodology employed in this study is designed to produce report meeting the stated

objectives. The project consists of three phases:

1 st Phase: ( Secondary Data Search )

Assessing: It will include collection of information about the mergers &

acquistions, models and approaches, SEBI guidelines, implications of new

guidelines for risk management of mergers & acquisitions and Basel Norms

with the help of secondary data sources.

Envisioning: It would include the understanding the framework of mergers &

acquistions under the Basel Accords.

Building and Designing: It includes developing the research report objectives

and methodology. It will encompass other issues related to its implementation

which would be necessary for proper understanding of the concepts.

2 nd Phase: ( Primary data search )

In primary search situation of mergers & acquistions will be examine in INDIA,

how companies handling mergers & acquistions, what are the procedures they are

following to handle.

The project will also discuss in brief the various principles for the mergers &

acquistions:

Establishing an appropriate business strategy.

Operating under SEBI guidelines.

Maintaining an appropriate administration, measurement and monitoring

process.

Ensuring adequate controls.

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1.4 - Scope:

• The scope of the project mainly deals with the pre merger and post merger of Ranbaxy

& Daiichi Sankyo which has been taken place during the year 2008.

1.5 - Limitations:

• The study is confined only to 2 companies of Mergers & Acquisitions’ i.e, Daiichi

Sankyo & Ranbaxy.

• It evaluates the performance of a company. (2008-09)

• Confined only to 1 year data prior to acquisition and after acquisition.

1.6 - Sources of data:

• The entire project is based on the secondary data mainly which is collected through

various sources like books, journals, company published data and websites.

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CHAPTER – 2

REVIEW LITERATURE

14

[2] - REVIEW LITERATURE

We have been learning about the companies coming together to from another

company and companies taking over the existing companies to expand their business.

With recession taking toll of many Indian businesses and the feeling of insecurity

surging over our businessmen, it is not surprising when we hear about the immense

numbers of corporate restructurings taking place, especially in the last couple of years.

Several companies have been taken over and several have undergone internal

restructuring, whereas certain companies in the same field of business have found it

beneficial to merge together into one company.

In this context, it would be essential for us to understand what corporate

restructuring and mergers and acquisitions are all about.

All our daily newspapers are filled with cases of mergers, acquisitions, spin-offs,

tender offers, & other forms of corporate restructuring. Thus important issues both for

business decision and public policy formulation have been raised. No firm is regarded

safe from a takeover possibility. On the more positive side Mergers & Acquisition’s may

be critical for the healthy expansion and growth of the firm. Successful entry into new

product and geographical markets may require Mergers & Acquisition’s at some stage in

the firm's development. Successful competition in international markets may depend on

capabilities obtained in a timely and efficient fashion through Mergers & Acquisition's.

Many have argued that mergers increase value and efficiency and move resources to their

15

highest and best uses, thereby increasing shareholder value. .

To opt for a merger or not is a complex affair, especially in terms of the

technicalities involved. We have discussed almost all factors that the management may

have to look into before going for merger. Considerable amount of brainstorming would

be required by the managements to reach a conclusion. E.g. A due diligence report would

clearly identify the status of the company in respect of the financial position along with

the net worth and pending legal matters and details about various contingent liabilities.

Decision has to be taken after having discussed the pros & cons of the proposed merger

& the impact of the same on the business, administrative costs benefits, addition to

shareholders' value, tax implications including stamp duty and last but not the least also

on the employees of the Transferor or Transferee Company.

2.1 MERGER:

Merger is defined as combination of two or more companies into a single company

where one survives and the others lose their corporate existence. The survivor acquires all

the assets as well as liabilities of the merged company or companies. Generally, the

surviving company is the buyer, which retains its identity, and the extinguished company

is the seller.

Merger is also defined as amalgamation. Merger is the fusion of two or more

existing companies. All assets, liabilities and the stock of one company stand transferred

to Transferee Company in consideration of payment in the form of:

Equity shares in the transferee company,

Debentures in the transferee company,

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Cash, or

A mix of the above modes.

2.2 ACQUISITION:

Acquisition in general sense is acquiring the ownership in the property. In the

context of business combinations, an acquisition is the purchase by one company of a

controlling interest in the share capital of another existing company.

Methods of Acquisition:

An acquisition may be affected by

a) Agreement with the persons holding majority interest in the company

management like members of the board or major shareholders commanding

majority of voting power;

b) Purchase of shares in open market;

c) To make takeover offer to the general body of shareholders;

d) Purchase of new shares by private treaty;

e) Acquisition of share capital through the following forms of considerations viz.

Means of cash, issuance of loan capital, or insurance of share capital.

2.3 TAKEOVER:

A ‘takeover’ is acquisition and both the terms are used interchangeably.

Takeover differs from merger in approach to business combinations i.e. The

process of takeover, transaction involved in takeover, determination of share exchange or

cash price and the fulfillment of goals of combination all are different in takeovers than

in mergers. For example, process of takeover is unilateral and the offeror company

decides about the maximum price. Time taken in completion of transaction is less in

17

takeover than in mergers, top management of the offeree company being more co-

operative.

De-merger or corporate splits or division:

De-merger or split or divisions of a company are the synonymous terms signifying

a movement in the company.

Purpose of Mergers & Acquisitions

The purpose for an offeror company for acquiring another company shall be

reflected in the corporate objectives. It has to decide the specific objectives to be

achieved through acquisition. The basic purpose of merger or business combination is to

achieve faster growth of the corporate business. Faster growth may be had through

product improvement and competitive position.

Other possible purposes for acquisition are short listed below: -

(1) Procurement of supplies:

1. To safeguard the source of supplies of raw materials or intermediary product;

2. To obtain economies of purchase in the form of discount, savings in

transportation costs, overhead costs in buying department, etc.;

3. To share the benefits of suppliers economies by standardizing the materials.

(2) Revamping production facilities:

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1. To achieve economies of scale by amalgamating production facilities through

more intensive utilization of plant and resources;

2. To standardize product specifications, improvement of quality of product,

expanding

3. Market and aiming at consumers satisfaction through strengthening after sale

Services;

4. To obtain improved production technology and know-how from the offered

company

5. To reduce cost, improve quality and produce competitive products to retain and

Improve market share.

(3) Market expansion and strategy:

1. To eliminate competition and protect existing market;

2. To obtain a new market outlets in possession of the offeree;

3. To obtain new product for diversification or substitution of existing products and

to enhance the product range;

4. Strengthening retain outlets and sale the goods to rationalize distribution;

5. To reduce advertising cost and improve public image of the offeree company;

6. Strategic control of patents and copyrights.

(4) Financial strength:

1. To improve liquidity and have direct access to cash resource;

2. To dispose of surplus and outdated assets for cash out of combined enterprise;

3. To enhance gearing capacity, borrow on better strength and the greater assets

backing;

4. To avail tax benefits;

5. To improve EPS (Earning Per Share).

19

(5) General gains:

1. To improve its own image and attract superior managerial talents to manage its

affairs;

2. To offer better satisfaction to consumers or users of the product.

(6) Own developmental plans:

The purpose of acquisition is backed by the offeror company’s own

developmental plans.

A company thinks in terms of acquiring the other company only when it has

arrived at its own development plan to expand its operation having examined its own

internal strength where it might not have any problem of taxation, accounting, valuation,

etc. But might feel resource constraints with limitations of funds and lack of skill

managerial personnel’s. It has to aim at suitable combination where it could have

opportunities to supplement its funds by issuance of securities, secure additional financial

facilities, eliminate competition and strengthen its market position.

(7) Strategic purpose:

The Acquirer Company view the merger to achieve strategic objectives through

alternative type of combinations which may be horizontal, vertical, product expansion,

market extensional or other specified unrelated objectives depending upon the corporate

strategies. Thus, various types of combinations distinct with each other in nature are

adopted to pursue this objective like vertical or horizontal combination.

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(8) Corporate friendliness:

Although it is rare but it is true that business houses exhibit degrees of

cooperative spirit despite competitiveness in providing rescues to each other from hostile

takeovers and cultivate situations of collaborations sharing goodwill of each other to

achieve performance heights through business combinations. The combining corporate

aim at circular combinations by pursuing this objective.

(9) Desired level of integration:

Mergers and acquisition are pursued to obtain the desired level of integration

between the two combining business houses. Such integration could be operational or

financial. This gives birth to conglomerate combinations. The purpose and the

requirements of the offeror company go a long way in selecting a suitable partner for

merger or acquisition in business combinations.

2.4 TYPES OF MERGER:

Merger or acquisition depends upon the purpose of the offeror company it wants

to achieve. Based on the offerors’ objectives profile, combinations could be vertical,

horizontal, circular and conglomeratic as precisely described below with reference to the

purpose in view of the offeror company.

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(A) Vertical combination:

A company would like to takeover another company or seek its merger with that

company to expand espousing backward integration to assimilate the resources of supply

and forward integration towards market outlets. The acquiring company through merger

of another unit attempts on reduction of inventories of raw material and finished goods,

implements its production plans as per the objectives and economizes on working capital

investments. In other words, in vertical combinations, the merging undertaking would be

either a supplier or a buyer using its product as intermediary material for final production.

The following main benefits accrue from the vertical combination to the acquirer

company i.e.

1. It gains a strong position because of imperfect market of the intermediary

products, scarcity of resources and purchased products;

2. Has control over products specifications.

(B) Horizontal combination:

It is a merger of two competing firms which are at the same stage of industrial

process. The acquiring firm belongs to the same industry as the target company. The mail

purpose of such mergers is to obtain economies of scale in production by eliminating

duplication of facilities and the operations and broadening the product line, reduction in

investment in working capital, elimination in competition concentration in product,

reduction in advertising costs, increase in market segments and exercise better control on

market.

(C) Circular combination:

22

Companies producing distinct products seek amalgamation to share common

distribution and research facilities to obtain economies by elimination of cost on

duplication and promoting market enlargement. The acquiring company obtains benefits

in the form of economies of resource sharing and diversification.

(D) Conglomerate combination:

It is amalgamation of two companies engaged in unrelated industries like DCM

and Modi Industries. The basic purpose of such amalgamations remains utilization of

financial resources and enlarges debt capacity through re-organizing their financial

structure so as to service the shareholders by increased leveraging and EPS, lowering

average cost of capital and thereby raising present worth of the outstanding shares.

Merger enhances the overall stability of the acquirer company and creates balance in the

company’s total portfolio of diverse products and production processes.

2.5 ADVANTAGES OF MERGERS AND ACQUISTIONS:

Mergers and takeovers are permanent form of combinations which vest in

management complete control and provide centralized administration which are not

available in combinations of holding company and its partly owned subsidiary.

Shareholders in the selling company gain from the merger and takeovers as the

premium offered to induce acceptance of the merger or takeover offers much more

price than the book value of shares. Shareholders in the buying company gain in the

long run with the growth of the company not only due to synergy but also due to

“boots trapping earnings”.

Mergers and acquisitions are caused with the support of shareholders, manager’s

ad promoters of the combing companies. The factors, which motivate the

23

shareholders and managers to lend support to these combinations and the resultant

consequences they have to bear, are briefly noted below based on the research work

by various scholars globally.

(1) From the standpoint of shareholders:

Investment made by shareholders in the companies subject to merger

should enhance in value. The sale of shares from one company’s shareholders to

another and holding investment in shares should give rise to greater values i.e. The

opportunity gains in alternative investments. Shareholders may gain from merger in

different ways viz. From the gains and achievements of the company i.e. Through

(a) Realization of monopoly profits;

(b) Economies of scales;

(c) Diversification of product line;

(d) Acquisition of human assets and other resources not available otherwise;

(e) Better investment opportunity in combinations.

One or more features would generally be available in each merger where

shareholders may have attraction and favour merger.

(2) From the standpoint of managers:

Managers are concerned with improving operations of the company, managing the

affairs of the company effectively for all round gains and growth of the company

which will provide them better deals in raising their status, perks and fringe benefits.

Mergers where all these things are the guaranteed outcome get support from the

managers. At the same time, where managers have fear of displacement at the hands

24

of new management in amalgamated company and also resultant depreciation from

the merger then support from them becomes difficult.

(3) Promoter’s gains:

Mergers do offer to company promoters the advantage of increasing the size

of their company and the financial structure and strength. They can convert a closely

held and private limited company into a public company without contributing much

wealth and without losing control.

(4) Benefits to general public:

Impact of mergers on general public could be viewed as aspect of benefits and

costs to:

(a) Consumer of the product or services;

(b) Workers of the companies under combination;

(c) General public affected in general having not been user or consumer or the

worker in the companies under merger plan.

(a) Consumers:

The economic gains realized from mergers are passed on to consumers in the

form of lower prices and better quality of the product which directly raise their

standard of living and quality of life. The balance of benefits in favour of consumers

will depend upon the fact whether or not the mergers increase or decrease competitive

25

economic and productive activity which directly affects the degree of welfare of the

consumers through changes in price level, quality of products, after sales service, etc.

(b) Workers community:

The merger or acquisition of a company by a conglomerate or other acquiring

company may have the effect on both the sides of increasing the welfare in the form

of purchasing power and other miseries of life. Two sides of the impact as discussed

by the researchers and academicians are: firstly, mergers with cash payment to

shareholders provide opportunities for them to invest this money in other companies

which will generate further employment and growth to uplift of the economy in

general. Secondly, any restrictions placed on such mergers will decrease the growth

and investment activity with corresponding decrease in employment. Both workers

and communities will suffer on lessening job Opportunities, preventing the

distribution of benefits resulting from diversification of production activity.

(c) General public:

Mergers result into centralized concentration of power. Economic power is to be

understood as the ability to control prices and industries output as monopolists. Such

monopolists affect social and political environment to tilt everything in their favour to

maintain their power ad expand their business empire. These advances result into

economic exploitation. But in a free economy a monopolist does not stay for a longer

period as other companies enter into the field to reap the benefits of higher prices set in

by the monopolist. This enforces competition in the market as consumers are free to

substitute the alternative products. Therefore, it is difficult to generalize that mergers

affect the welfare of general public adversely or favorably. Every merger of two or more

companies has to be viewed from different angles in the business practices which protects

26

the interest of the shareholders in the merging company and also serves the national

purpose to add to the welfare of the employees, consumers and does not create hindrance

in administration of the Government policies.

CHAPTER – 3

INDUSTRY & COMPANY

PROFILE

27

[3] - INDUSTRY AND COMPANY PROFILE

The pharmaceutical industry develops, produces, and markets drugs licensed for use as

medications. Pharmaceutical companies can deal in generic and/or brand medications.

They are subject to a variety of laws and regulations regarding the patenting, testing and

marketing of drugs.

The earliest drugstores date back to the Middle Ages. The first known drugstore was

opened by Arabian pharmacists in Baghdad in 754, many more soon began operating

throughout the medieval Islamic world and eventually medieval Europe. By the 19th

century, many of the drug stores in Europe and North America had eventually developed

into larger pharmaceutical companies.

Most of today's major pharmaceutical companies were founded in the late 19th and early

20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin,

became mass-manufactured and distributed. Switzerland, Germany and Italy had

particularly strong industries, with the UK, US, Belgium and the Netherlands following

suit.

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3.1 SWOT ANALYSIS OF INDIAN PHARMA INDUSTRY

It is often said that the pharma sector has no cyclical factor attached to it. Irrespective

of whether the economy is in a downturn or in an upturn, the general belief is that

demand for drugs is likely to grow steadily over the long-term. True in some sense. But

are there risks? This article gives a perspective of the Indian pharma industry by carrying

out a SWOT analysis (Strength, Weakness, Opportunity, Threat).

Before we start the analysis lets look a little back in the industry’s last six years

performance. The Industry is a largely fragmented and highly competitive with a large

number of players having interest in it. The following chart shows the breakup of the

growth (YoY) of Indian pharmaceutical industry in last six years.

Figure: 3.1 SWOT Analysis of Indian Pharma Industry.

*Volume growth of existing products

The SWOT analysis of the industry reveals the position of the Indian pharma industry in

respect to its internal and external environment.

29

Strengths:

1. Indian with a population of over a billion is a largely untapped market. In fact the

penetration of modern medicine is less than 30% in India. To put things in

perspective, per capita expenditure on health care in India is US$ 93 while the

same for countries like Brazil is US$ 453 and Malaysia US$189.

2. The growth of middle class in the country has resulted in fast changing lifestyles

in urban and to some extent rural centres. This opens a huge market for lifestyle

drugs, which has a very low contribution in the Indian markets.

3. Indian manufacturers are one of the lowest cost producers of drugs in the world.

With a scalable labour force, Indian manufactures can produce drugs at 40% to

50% of the cost to the rest of the world. In some cases, this cost is as low as 90%.

4. Indian pharmaceutical industry posses excellent chemistry and process

reengineering skills. This adds to the competitive advantage of the Indian

companies. The strength in chemistry skill help Indian companies to develop

processes, which are cost effective.

Weakness:

1. The Indian pharma companies are marred by the price regulation. Over a period

of time, this regulation has reduced the pricing ability of companies. The NPPA

(National Pharma Pricing Authority), which is the authority to decide the various

pricing parameters, sets prices of different drugs, which leads to lower

profitability for the companies. The companies, which are lowest cost producers,

are at advantage while those who cannot produce have either to stop production or

bear losses.

2. Indian pharma sector has been marred by lack of product patent, which prevents

global pharma companies to introduce new drugs in the country and discourages

30

innovation and drug discovery. But this has provided an upper hand to the Indian

pharma companies.

3. Indian pharma market is one of the least penetrated in the world. However,

growth has been slow to come by. As a result, Indian majors are relying on

exports for growth. To put things in to perspective, India accounts for almost 16%

of the world population while the total size of industry is just 1% of the global

pharma industry.

4. Due to very low barriers to entry, Indian pharma industry is highly fragmented

with about 300 large manufacturing units and about 18,000 small units spread

across the country. This makes Indian pharma market increasingly competitive.

The industry witnesses price competition, which reduces the growth of the

industry in value term. To put things in perspective, in the year 2003, the industry

actually grew by 10.4% but due to price competition, the growth in value terms

was 8.2% (prices actually declined by 2.2%).

Opportunities:

1. The migration into a product patent based regime is likely to transform industry

fortunes in the long term. The new patent product regime will bring with it new

innovative drugs. This will increase the profitability of MNC pharma companies

and will force domestic pharma companies to focus more on R&D. This

migration could result in consolidation as well. Very small players may not be

able to cope up with the challenging environment and may succumb to giants.

2. Large number of drugs going off-patent in Europe and in the US between 2005 to

2009 offers a big opportunity for the Indian companies to capture this market.

Since generic drugs are commodities by nature, Indian producers have the

competitive advantage, as they are the lowest cost producers of drugs in the

world.

31

3. Opening up of health insurance sector and the expected growth in per capita

income are key growth drivers from a long-term perspective. This leads to the

expansion of healthcare industry of which pharma industry is an integral part.

4. Being the lowest cost producer combined with FDA approved plants, Indian

companies can become a global outsourcing hub for pharmaceutical products.

Threats:

1. There are certain concerns over the patent regime regarding its current structure.

It might be possible that the new government may change certain provisions of

the patent act formulated by the preceding government.

2. Threats from other low cost countries like China and Israel exist. However, on the

quality front, India is better placed relative to China. So, differentiation in the

contract manufacturing side may wane.

3. The short-term threat for the pharma industry is the uncertainty regarding the

implementation of VAT. Though this is likely to have a negative impact in the

short-term, the implications over the long-term are positive for the industry.

3.2 HISTORY OF THE COMPANIES:

HISTORY OF DAIICHI SANKYO COMPANY LIMITED.

32

In 1894, Matasaku Shibora, Shotaro, Genjio Fukuji started the small enterprise in Tokyo

named as Sankyo Pharma Ltd.

In 1913, Dr. Katsuzaemon Keimatsu and others established Arsemin Shokai named small

enterprise.

In 1916, Dr.K.Keimatsu gave the new name as; Daiichi Pharmaceuticals Co. Ltd.

In 1949 both companies separately listed on Tokyo Stock exchange.

Established Sankyo USA Corporation (New York City, USA)

Established Sankyo Europa GmbH (Dusseldorf, Germany), in 1990.

In April 2005, establishment of DAIICHI SANKYO COMPANY LIMITED (Sankyo

Co., Ltd. and Daiichi Pharmaceutical Co., Ltd. a joint-holding company).

From 1st April2007, it started its operation as the newly formed “DAIICHI SANKYO

GROUP”.

HISTORY OF RANBAXY LABORATORY LIMITED.

IN 1960;

Shri. Surendar Singh started the Ranbaxy Laboratories (pvt.) ltd.

33

IN 1973;

RANBAXY pharmaceuticals ltd. Make an I.P.O. & set up a multi-chemical plant in

Mohali, Punjab.

IN 1977;

RANBAXY’s first joint venture was set up in Logas (Nigeria).

IN 1988;

It granted its first U.S.Patent for product,”Doxycyline”.

IN 1992;

It entered into an agreement with Eli Liily & co. of U.S.A. for setting up a joint

Venture in India to market select Lilly products.

IN 1995;

It acquired “Ohm Laboratories Ltd.”, a manufacturing facility in U.S.A. Then it

becomes the wholly subsidiary of Ranbaxy.

IN 2000;

It acquired the German company Bayer’s Generic Business (trading under the

name of Basics.) and also entered into Brazil, the largest Pharmaceuticals market in

South Africa.

IN 2001;

Ranbaxy U.S.A. (the wholly subsidiary of R.L.L.) crossed sales of US $ 100

million and become the fastest growing company in the U.S.

34

IN 2003;

Ranbaxy and Glaxo SmithKline Plc (GSK) enter into a global alliance for drug

discovery & development.

IN 2005;

Ranbaxy made joint venture with Nippon Chemiphar in Japan (known as Nihon

Pharmaceuticals Industries Ltd.). This joint venture launched the first product Vagseal for

Diabetes.

IN 2008;

It redefined it’s business model and bring Daiichi Sankyo as a majority partner

to create strategic combination of an innovator and Generic power house.

IN 2009;

Daiichi Sankyo and Ranbaxy announced reconstitution of Ranbaxy executive

leadership.

3.3 COMPANIES PROFILE:

35

PROFILE OF DAIICHI SANKYO

Company name:

DAIICHI SANKYO COMPANY, LIMITED.

Nature of Enterprise:

Research & Development, Manufacturing, import, Sales & Marketing of pharmaceutical

products.

Head Office Address:

3-5-1, Nihonbashi-honcho, Chuo-ku, Tokyo,

103-8426, Japan.

Phone: +81-3-6225-1111.

BOARD OF DIRECTORS:

Representative Director and Chairman: Mr. Kiyoshi Morita.

Representative Director and President & CEO: Mr.Takashi Shoda.

Executive Directors:

Mr.Ryuzo Takada.

36

Mr. Hitoshi Matsuda.

Mr.Tsutomu Une .

Mr.Takeshi Ogita.

Outside Directors: Mr. Kunio Nihira .

Mr.Yoshifumi

Nishikawa.

Mr.Jotaro Yabe .

Mr.Takashi Okimoto

AUDITORS:

Internal: Teruo Takayanagi & Hikaru Nagata.

External: Kaoru Schimada & Koukei Higuchi.

WOKFORCE:

28,895 people. (consolidated as on 31st march 2009.)

MISSION:

To Contribute to the Enrichment of Quality of life around the World through the Creation

and Provision of Innovative Pharmaceuticals.

37

VISION:

“Global drug-discovery-oriented company”. Realization of Global Pharma Innovator.

DAIICHI SANKYO Group aims for the realization of the Global Pharma Innovator in

2015. “ Global” means the international scope of corporate activities. “Pharma

Innovator” means a company that continuously develops innovative drugs.

VALUES:

Social Value

Fulfill the responsibility as a member of society by performing duties.

Contribute to society through activities such as the active consideration of the

environment, support of community development, and efforts to help solve

problems faced by community.

Economic value

Become a company that grows robustly, creating special values and premiums.

Humanistic value

Become a company whose members are qualified professionals who work all over

the world.

Provide motivating jobs, setting equal opportunities to perform, supporting career

development, and rewarding our staff according to their jobs and performance

38

PROFILE OF RANBAXY LABORATORIES LIMITED.

Company name:

RANBAXY LABORATORIES LIMITED.

Nature of Enterprise:

Research & Development, Manufacturing, Import, and Sales & Marketing of

pharmaceutical products (mainly generic products).

Head Office Address:

Plot no- 90, Sector 32,

Gurgaon, 122001,

Haryana, India.

39

BOARD OF DIRECTORS:

Dr. Tsutomu Une

Chairman

Non-executive and

Independent director.

Mr. Atul Sobti

Chief Executive Officer &

Managing Director.

Mr. Takashi Shoda

Non-Executive &

Non Independent Director.

Dr. Anthony H. Wild

Independent Director.

Mr. Rajesh V. Shah

Independent Director.

Mr. Akihiro Watanabe

Independent Director.

 

40

MISSION:

To become a research based pharmaceutical company.

VALUES:

Achieve customer satisfaction is fundamental to the business.

Provides products and services of the highest quality.

Ensure profitable growth & enhance wealth of shareholders.

Be a responsible corporate citizen.

VISION 2012:

Achieve significant business in proprietary prescription products by 2012 with a

strong presence in developed market.

41

3.4 - REASONS FOR THE DEAL

Daiichi Sankyo and Ranbaxy believe this transaction provides the significant long-term

value for all stakeholders through:

(i) A complementary business combination that provides sustainable growth by

diversification that spans the full spectrum of the pharmaceutical business. RLL &

D.S. are major player in the world pharmaceuticals industry. Both have potential

to cater the demand and through research to generate the demand for further

development of the business.

(ii) An expanded global reach that enables leading market positions in both mature

and emerging markets with proprietary and non-proprietary products. Ranbaxy

has large market in India and neighbour countries, while .D.S. has wide market in

developed countries like: Japan, U.S., Europe and U.K. So, both can extend their

market and provide best quality services & products.

(iii) Strong growth potential by effectively managing opportunities across

the full pharmaceutical life-cycle. The world pharmaceutical industry is growing

at 11%.so, this acquisition will beneficial to meet the extending opportunities of

the industry. The future industry scenario demanding more quality products which

can definitely be cater by this acquisition.

(iv)Cost competitiveness by optimizing usage of R&D and manufacturing facilities

of both companies, especially in India. As in terms of the labour cost,

manufacturing cost, exporting cost lower than the other countries, it reduces the

cost per unit and that is directly beneficial to customers. Cost advantage get in the

India, by that surplus amount utilise into R&D.

42

CHAPTER – 4

DATA ANALSIS &

INTERPRETATION

43

[4] - DATA ANALYSIS AND INTERPRETATION

4.1 - ABOUT THE ACQUISITON

On 11th June 2008, Daiichi Sankyo Company Limited, one of the largest

pharmaceutical companies in Japan and Ranbaxy Laboratories Limited , among the top

10 generic companies in the world and India’s largest pharmaceutical company,

announced that a binding Share Purchase and Share Subscription Agreement (the

“SPSSA”) was entered into between Daiichi Sankyo, Ranbaxy and the Singh family, the

largest and controlling shareholders of Ranbaxy (the “Sellers”), pursuant to which

Daiichi Sankyo will acquire the entire shareholding of the Sellers in Ranbaxy and further

seek to acquire the majority of the voting capital of Ranbaxy at a price of Rs737 per

share with the total transaction value expected to be between US$3.4 to US$4.6 billion

(currency exchange rate: US$1=Rs43). In terms of the Indian currency, approximately

Rs.20, 000 corers.

The SPSSA has been approved by the Boards of Directors of both companies. Daiichi

Sankyo is expected to acquire the majority equity stake in Ranbaxy by a combination of;

(i) Purchase of shares held by the Sellers(54.30%-Singh & his family),

(ii) Preferential allotment of equity shares(9.12% to buyer),

(iii) An open offer to the public shareholders for 20% of Ranbaxy’s shares, as per

Indian Regulation Act, And

44

(iv) Daiichi Sankyo’s exercise of a portion or all of the share warrants to be issued

on a

Preferential bases. All shares will be acquired/issued at a price of rs.737 per

share.

This purchase price represents a premium of 53.5% to Ranbaxy’s average daily closing

price on the National Stock Exchange for the three months ending on June 10, 2008 and

31.4% to such closing price on June 10, 2008.

The deal was financed through a mix of bank debt facilities and existing cash resources of

Daiichi Sankyo. Nomura Securities Co., Ltd., the Japan headquartered investment bank,

acted as the exclusive financial advisor, Jones Day as the legal advisor outside India, P&A

Law Offices as the legal advisor in India, Mehta Partners LLC as the strategic business

advisor and Ernst & Young as the accounting and tax advisor to Daiichi Sankyo.

Religare Capital Markets Limited, a wholly owned subsidiary of Religare Enterprises

Limited, is the exclusive financial advisor to Ranbaxy and the Singh family. Vaish

Associates are the legal advisors to Ranbaxy and the Singh family.

45

4.2 - SHARE HOLDING OF RANBAXY (PRE ACQUISITION)

Table: 4.1 Share Holders of Ranbaxy (Pre Acquisition)

SHARES HELD BY %

SINGH 34.82

SINGH’S FAMILY 19

MUTUAL FUND 5.56

BANKS 1.71

INSURANCE COMPANIES 14.39

FOREIGN INSTITUTIONAL INV.(F.I.I) 12.42

GENERAL PUBLIC 12.1

Figure: 4.1 Share Holders of Ranbaxy (Pre Acquisition

Before acquisition the Singh had 34.82% of the holding in Ranbaxy.

His family had 19% of the shares.

Mutual fund companies holding were 5.56%.

Banks had 1.71%.

Insurance companies hold 14.39%

46

General public 12.1%

4.3 - SHARE HOLDING OF DAIICHI SANKYO (POST

ACQUISITION)

Table: 4.2 Share Holders of Daiichi Sankyo (Post Acquisition)

SHARES HELD BY %

DAIICHI SANKYO 63.92

MUTUAL FUND 2.58

BANKS 0.37

INSURANCE COMPANIES 9.19

FOREIGN INSTITUTIONAL INV.(F.I.I) 4.41

GENERAL PUBLIC 19.53

Figure: 4.2 Share Holders of Daiichi Sankyo (Post Acquisition)

After the acquisition the singh and his family’s complete stake in Ranbaxy had been

taken over by Daiichi Sankyo which is 63.92% of total holdings.

47

The holdings by mutual fund, banks, insurance companies and foreign institutional

investments decreased by 53.9%, 58.47%, 36.13%, 64.49% respectively. Where as the

general public holdings were increased by 61.40%.

4.4 - INTERPRETATION OF SHARES HELD PRE & POST

ACQUISITION

Table: 4.3 Interpretation of Shares Held Pre & Post Acquisition.

SHARES HELD BY PRE % POST % CHANGE

%

SINGH 34.82 - (100)

SINGH’S FAMILY 19 - (100)

DAIICHI SANKYO - 63.92 63.92

MUTUAL FUND 5.56 2.58 (53.59)

BANKS 1.71 0.32 (58.47)

INSURANCE COMPANY 14.39 9.19 (36.13)

F.I.I 12.42 4.41 (64.49)

GENERAL PUBLIC 12.1 19.53 61.40

Figure: 4.3 Interpretation of Shares Held Pre & Post Acquisition.

48

INTERPRETATION:

The above chart shows % of shares held prior and post acquisition, it is clear that the

Singh and his family have completely sold their stake to Daiichi Sankyo which lead to

100% changes in share acquisition, with this acquisition Daiichi Sankyo has acquired

63.92% of the total shares. Other companies such as mutual funds, banks, insurance

companies and F.I.I share holdings have decreased to some extent.

Where as the general public holdings have been increased up to 62%. This is because

Daiichi Sankyo expects to increase its stake in Ranbaxy through various means such as

preferential allotment, public offer and preferential issue of warrants to acquire a majority

in Ranbaxy, i.e. at least 50.1%.

49

4.5 - FINANCIAL DATA

RANBAXY LABORATORIES LTD. (Last 5 years).

Table: 4.4 Financial Data of Ranbaxy Laboratories Limited.

Annual results in brief (in crores)

Dec ' 09 Dec ' 08 Dec ' 07 Dec ' 06 Dec ' 05

Sales 4,784.76 4,494.52 4,071.29 3,973.56 3,490.13

Operating profit 822.89 239.75 546.87 559.45 65.76

Interest (109.85) 893.40 93.43 58.10 26.41

Gross profit 1,210.12 (562.40) 893.14 580.92 249.01

EPS (Rs) 13.61 (24.56) 16.56 10.37 6.01

Table: 4.5 Comparative Analysis of Annual Results.

COMPARATIVE ANALYSIS OF ANNUAL RESULTS (in crores)

Base

yr. 05

Dec. 06 %

diff.

Dec. 07 %

diff.

Dec. 08 %

diff.

Dec. 09 % diff.

Sales 3490.13 3973.56 13.85 4071.29 16.65 4494.52 28.77 4784.76 37.09

50

Operating

profit

65.76 559.45 750.74 546.87 731.61 239.75 264.58 822.89 1151.35

Interest 26.41 58.10 120 93.43 253.76 893.40 3282.8 (109.85) (515)

Gross

profit

249.01 580.92 133.29 893.14 258.67 (562.40) (221) 1210.12 385.97

EPS (Rs) 6.01 10.37 72.54 16.56 175.54 (24.56) (508) 13.61 126.45

Figure: 4.4 Comparative Analysis of Annual Results.

INTERPRETATION:

51

From the above graph it is found that the sales have been increasing which is considered

to be positive trend for the future.

The operating profit shows a fluctuating movement, but it is showing a increasing trend

of the last year.

The interest has been showing a increasing trend unless and until the last year.

Gross profit has increased consistently over the years and there is a momentum in it since

last year.

There has been a double fold increase in the EPS share.

4.6 - MARKET SHARES

MARKET SHARE OF DAIICHI SANKYO:

Table: 4.6 Market Share of Daiichi Sankyo.

RANK NAME OF THE COMPANY TOTAL

REVENUE(US

D millions)

R&D(USD

millions)

1 PFIZER (U.S.) 70,696 11,318

2 JHONSON &JHONSON (U.S.) 63,747 N.A.

52

3 BAYER (GERMANY) 48,149 3,770

4 HOFFMAN-LA ROCHE (SWIS) 43,970 2,348

5 NOVARTIS (SWIS) 41,460 3,221

20 DAIICHI SANKYO CO.LTD.(JAPAN) 9,682 1,597

(AS YEAR ENDING ON 31ST MARCH,2008.WIKIPEDIA.COM)

Figure: 4.5 Market Share of Daiichi Sankyo.

53

The above graph indicates the revenue of the top companies in the world and the amount

of money spent on Research & Development. Daiichi has spent more amount in terms of

percentage when compared to other top companies in the world. It has spent 16.5% of its

total revenue.

COMPARTATIVE ANALYSIS OF THE COMPANIES SPENT ON

REASEARCH AND DEVELOPMENT

Table: 4.7 Comparative Analysis of Companies Spent on R&D.

RANK NAME OF THE

COMPANY

TOTAL

REVENUE(USD

millions)

% OF REVENUE SPENT ON R&D

1 PFIZER (U.S.) 70,696 16

2 JHONSON

&JHONSON

(U.S.)

63,747 N.A.

3 BAYER

(GERMANY)

48,149 7

4 HOFFMAN-LA 43,970 5.34

54

ROCHE (SWIS)

5 NOVARTIS

(SWIS)

41,460 7.76

20 DAIICHI

SANKYO

CO.LTD.(JAPAN)

9,682 16.5

From the above table it is clear that Daiichi Sankyo has spent much of its revenue in

terms of percentage on R&D while compared to its other competitors’. It has spent 16.5%

of its total revenue which is more when compared to the other top companies.

This move indicates the company is trying to invent more drugs and increase its patents

further, which will ensure that the company will increase its revenue further.

MARKET SHARE OF RANBAXY:

Table: 4.8 Market Share of Ranbaxy.

RANK NAME OF THE COMPANY %Of Total

market

acquired

1 RANBAXY LABORATORIES LTD. 5.12

2 CIPLA PHRMA.LTD. 5.02

3 GLAXO SMITH KLINE (INDIA) 4.08

4 PIRAMAL HEALTH CARE 3.37

55

5 ZYDUS CADILA 3.08

OTHERS 79.03

(AS YEAR ENDING ON 31ST MARCH,2008.WIKIPEDIA.COM)

Figure: 4.7 Market Share of Ranbaxy.

56

The above graph indicates the market share of Ranbaxy in India that has a market share

of 5.12% which makes Ranbaxy a market leader in terms of pharmaceutical sector in

India.

This indicates the competitive advantage of the company in respect to the market share.

CHAPTER – 5

57

FINDINGS &

SUGGESTIONS

58

[5] - FINDINGS AND SUGGESTIONS

5.1 - FINDINGS

The main findings of this project are

• Before acquisition the Singh had 34.82% of the holding in Ranbaxy. After the

acquisition the singh and his family’s complete stake in Ranbaxy had been taken over by

Daiichi Sankyo which is 63.92% of total holdings

• Daiichi has spent more amount in terms of percentage when compared to other top

companies in the world. It has spent 16.5% of its total revenue.

• There has been a double fold increase in EPS prior and post acquisition.

• The market share of Ranbaxy in India is 5.12% which is the highest and No. l in India.

5.2 - SUGGESTIONS

General suggestions:

From the above analysis it is found that it is a profitable deal which gives more value to

the share holders. However, it is a dangerous trend for the following reasons.

• Generic industry is based on low prices. Such acquisitions will lead to prices increase

and thus the loss of primary advantage.

59

• Every time Ranbaxy achieved a new landmark abroad, their local consumer base

automatically increased due to increased confidence and pride. This advantage will be

lost.

• All great businesses have an emotional component (Walmart, GE, Welgreen, Siemens,

Daimler Benz, Ferrari etc). It is a driving force and a source of sustained invisible

support. Acquisitions like this one lose that and will face very serious challenge in the

long term.

• In the short term they make money quickly but not for long. We have seen that a big

name built over years goes into oblivion forever. Hope it does not happen to Ranbaxy.

Financial suggestions:

• Though there has been increase in sales the operating profit is not increased in

accordance to sales.

• The Research & Development expenses have been completely ignored from Ranbaxy

point of view.

• The EPS is showing a double fold increase without much of increase in gross profit

which indicates that the reserves & surplus should be made available accordingly.

• The balance sheet of daiichi sankyo indicates that the current liabilities have increased

to 161% when compared to current assests which have decreased by (15.43%).

60

5.3 - CONCLUSION

Ranbaxy laboratories ltd. (which is the no.1 pharmaceutical company in India) acquired

by Daiichi Sankyo Company Ltd.(a Japan’s third largest pharmaceutical company and

also in top 20 pharma company in the world.

It was the biggest acquisition of a domestic pharmaceuticals company

by foreign company. This acquisition provided benefit to both companies. D&S could

enter into the Asian market which is world’s largest pharmaceuticals market. Ranbaxy

got the strategic partner which helped to explore the foreign market and its innovator

facility to accelerate the growth of the company.

We hope this acquisition will prove more beneficial not only D & S

and Ranbaxy but also to the mankind in terms of the new innovative drugs and medicines

for the deadly dieses.

In summary, Daiichi Sankyo’s move to acquire Ranbaxy will enable the company to gain

the best of both worlds without investing heavily into the generic business. The patent

Perspective of the merger clearly indicates the intentions of both companies in filling the

respective void spaces of the other and emerge as a global leader in the pharmaceutical

industry. Furthermore, Daiichi Sankyo’s portfolio will be broadened to include steroids

and other technologies such as sieving methods, and a host of therapeutic segments such

as antiasthmatics, anti-retrovirals, and impotency and anti-malarial drugs, to name a few.

Above all, Daiichi Sankyo will now have access to Ranbaxy's entire range of 153

61

therapeutic drugs across 17 diverse therapeutic indications. Additional NDAs from the

US FDA on antihistaminics and anti-diabetics is an added advantage.

Through the deal, Ranbaxy has become part of a Japanese corporate framework, which is

extremely reputed in the corporate world. As a generics player, Ranbaxy is very well

placed in both India and abroad although its share performance belies its true potential.

Ranbaxy is also an emerging branded drug manufacturer possessing tremendous clout in

terms of strategic alliances with some of the biggest players in the industry. Given

Ranbaxy’s intention to become the largest generics company in Japan, the acquisition

provides the company with a strong platform to consolidate its Japanese generics

business. From one of India's leading drug manufacturers, Ranbaxy can leverage the vast

research and development resources of Daiichi Sankyo to become a strong force to

contend with in the global pharmaceutical sector. A smooth entry into the Japanese

market and access to widespread technologies including, plant, horticulture, veterinary

treatment and cosmetic products are some things Ranbaxy can look forward as main

benefits from the deal.

However, the recent ban on the US imports of more than 30 Ranbaxy drugs is a major

pain point for the company now. While Daiichi Sankyo has stressed that it going ahead

with the deal, it raises some concerns over the impending benefits and has in fact already

affected.

Ranbaxy’s share performance in September 2008. Post the deal, Ranbaxy’s debt will be

significantly reduced and will impart more flexibility to pursue growth opportunities. The

acquisition corroborates the strong possibility for similar moves in the future, particularly

from Japanese players who have begun displaying confidence in Indian patent laws and

respect for intellectual property rights.

62

CHAPTER – 6BIBILOGRAPHY

63

[6] - BIBLIOGRAPHY

Books:

• Mergers & Acquisitions ICFAI Study Material

• Mergers, Acquisitions & Alliances Vol. II

• Financial Strategies

Internet:

• www.wikipedia.com

• www.associatedcontent.com

• www.ebook.com

64

CHAPTER – 7

ANNEXURE

65

ANNEXURE

Annual results in details (in crores)

Table: 7.1 Annual results of Ranbaxy in detail.

  Dec ' 09 Dec ' 08 Dec ' 07 Dec ' 06 Dec ' 05

Other income 276.39 91.26 439.70 79.57 209.66

Stock adjustment -35.26 -180.92 -40.66 -48.65 -30.96

Raw material 1,602.08 1,548.90 1,513.34 1,657.24 1,535.85

Power and fuel - - - - -

Employee expenses 728.40 480.07 421.61 342.28 301.65

Excise - - 44.69 48.15 82.00

Admin and selling expenses - - - - -

Research and development

expenses- 422.58 413.94 382.82 486.36

Expenses capitalised - - - - -

Other expenses 1,663.65 1,984.15 1,171.49 1,032.27 1,049.47

Provisions made - - - - -

Depreciation 148.20 125.39 118.73 111.76 101.33

Taxation 489.93 -594.37 156.69 60.11 -22.34

Net profit / loss 571.98 -1,032.33 617.72 386.45 223.70

Extra ordinary item - -938.92 - -22.60 53.68

Prior year adjustments - - - - -

Equity capital 210.21 210.19 186.54 186.34 186.22

Equity dividend rate - - - - -

Agg.of non-prom. shares (Lacs) 1462.05 1444.31 2323.26 2243.20 -

Agg.of non promotoHolding (%) 34.78 34.36 62.27 60.19 -

OPM (%) 17.23 5.33 13.43 14.08 1.88

66

DAIICHI SANKYO COMPANY LTD. (Consolidated Balance Sheets, 2008 & 2009)

(millions of yen)

Table: 7.2 Consolidated Balance Sheets of Daiichi Sankyo Co. Ltd.

ASSETS: As of March 31, 08 As of March 31, 09

Current Assets:

Cash and time deposits 47,335 76,551

Trade notes and accounts receivable 166,980 195,512

Marketable securities 526,805 235,475

Inventories 98,158 -

Merchandise and finished goods - 93,502

Work in process - 14,496

Raw materials and supplies - 31,447

Deferred tax assets 52,677 76,747

Allowance for doubtful accounts (293) (1,018)

Total current assets 926,524 783,506

Non-current assets:

Property, plant and equipment 136,821 132,732

Land 33,116 42,358

Machinery, equipment and vehicles 33,150 42,358

Construction in progress 2,397 13,315

Other, net 15,239 15,669

Net property, plant and equipment 221,266 250,113

Intangible assets:

Goodwill, net 15,403 77,380

Other intangible assets, net 75,667 115,180

Total intangible assets 91,070 192,560

67

Investments and other assets:

Investment securities 216,038 153,727

Long-term loans 1,304 614

Prepaid pension costs 8,023 6,920

Deferred tax assets 5,995 91,600

Other 18,018 15,864

Allowance for doubtful accounts (352) (309)

Total investments and other assets 249,028 268,418

Total non-current assets 561,364 711,093

Total assets 1,487,888 1,494,599

(millions of yen)

LIABILITIES As of March 31, 08 As of March 31, 09

Current liabilities 46,405 59,419

Trade notes and accounts payable 68 264,345

Short-term bank loans 18,682 8,243

Income taxes payable 754 589

Allowance for sales rebates 776 2,666

Allowance for contingent losses 226 -

Other current liabilities 127,599 173,271

Total current liabilities (a) 194,514 508,535

Long-term liabilities

Convertible bond-type bonds

Rights to shares - 47,082

Long-term debt 18 15,852

Deferred tax liabilities 26,724 5,427

Accrued employees retirement benefits 6,781 10,589

68

Accrued directors retirement benefits 115 177

Provision for environmental measures 1,057 92

Other long-term liabilities 14,165 18,224

Total long-term liabilities (b) 48,862 97,447

Total liabilities (a*b) 243,376 605,982

NET ASSETS

Shareholders equity

Common stock 50,000 50,000

Capital surplus 179,863 105,194

Retained earnings 1,025,144 753,820

Treasury stock at cost (43,407) (14,555)

Total shareholders equity 1,211,600 894,459

Valuation and translation adjustments

Net unrealized gain on inv. securities 48,539 19,882

Deferred gains and losses on hedges - 76

Foreign currency translation adj. (16,263) (51,367)

Total valuation and translation adj. 32,276 (31,408)

Minority interests 377 23,175

Total net assets 1,244,512 888,617

Total liabilities and net assets 1,487,888 1,494,599

69