ranbaxy - the bitter separation

7/29/2019 RANBAXY - the bitter separation

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RANBAXYThe Bitter Separation


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Introduction: In 1980s there had been several instances of bitter corporate

rifts in India.

Early in 1990s two family spats stunned the corporate wold.

First was between Raunaq Singh of the Delhi-based ApolloTyres and his son Onkar singh Kanwar.

In terms of sheer unpleasantness, this fight was nothing whencompared to the one between Bhai Mohan Singh and Dr.

Singh. Every Ranbaxy insiders and those who knew the family well

were taken by surprise.


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In an article published in the Tribune of Chandigarh in 1984, Bhaimohan Singh was quoted as saying:

I feel particularly blessed that I have a brilliant son who has done twoyears, against the three years taken by others, his Ph.D in pharmacyfrom a US University.

He has been particularly helpful in launching of one unit of ourcompany in Nigeria and another in Malaysia.

Though the newspaper called it more an acknowledgement of factthan an expression of parental pride.

Everybody knew who was the apple of Bhai Mohan Singhs eye.

Being first child of his parents, he was closer to his mother.

He gave both his sons the middle name Mohan- Malvinder MohanSingh and Shivender Mohan Singh


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Soon after the three brothers split in 1989.

Ranbaxy profitability went up substantially. While turnovermore than doubled from Rs. 199.11 cr. In 1989-90 to Rs.

460.67 cr. In 1992-93.

The profit after tax shot up from Rs. 8.09 cr. to Rs. 35.34 cr.

The companys net worth too increased from Rs. 40.64 cr. In1989-90 to Rs. 124.56 cr. In 1992-93.

At the same time, Manjits Montari Industries was turning intofinancial mess.

Analjits Max India, though profitable, was still small. It had received a blow when Ranbaxy decided to make its won

7ADCA in the early 1990s.

Analjits other venture into BOPP films was close to shuttingdown.


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Ranbaxy was now being completely run by professionals.

The only members of the family in the new-look executivecommittee were Bhai Mohan Singh and Dr. Singh.

Brar had been promoted as president (pharmaceuticals) in1991. the second most important position in the company.

Dr. Singh trusted his genius totally and would consult himwhile taking all decisions.


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Division:

Bhai Mohan Singh has transferred all his Ranbaxy shares toDr. Singh.

There was an agreement in the family settlement that Bhai

Mohan Singh would be involved in important matters. Company would take care of his expenses on things likehousing, medical treatment and travel.

Dr. Singhs deep attachment and respect for his father gave noreason to believe that transfer of shares could one day lead

result in he being stripped of all powers. Ranbaxy was more than just an enterprise for Bhai Mohan

Singh.

He mostly referred to his close friends as a fourth son.


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The fact that his wings had been clipped soon started preying BhaiMohan Singhs mind.

He blamed Dr. Singh for it. From being inseparable, they now got into a bitter struggle. Once news broke out Bhai mohan singh was not averse to washing

dirty linen in public.

He started telling his friends that Dr. Singh was violating the familyagreement.

He also complained that Dr. Singh was showing no signs offulfilling his promise of setting up a trust to carry out charitableactivities.

The valuation of the family assets was done by Bansi Mehta, therenowned Mumbai based chartered accountant.


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The Change Dr. Singh knew that there will be a change in

pharmaceutical business. The days of unprotected patents was numbered. Bimal Raizada, his close associate, was the fist

who came to know abhot the changing views ofDr. Singh.

Dr. Singh ordered that Ranbaxy will stopfunding National Council for Patent Laws.

Cipla continued to fund NCPL, arguing againstIndias commitment to reintroduce productpatents from Jan 1st, 2005.


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Dr. Singhs views..

The new era of acceptance of patent laws, it is anew opportunities.

With the new IPR regime, focus will shift toinnovation.

Profit margins remain low due to rigid price

control mechanisms. Companies need to invest in R&D.

Future belongs to those companies who enhancetheir research capabilities.


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Structural change and R&D. Ranbaxy had to change its style of functioning. After the 1989 split, Dr. Singh got an opportunity to restructure the

executive committee. Earlier, 12 member committee had five family members- Bhai

Mohan Singh, his 3 sons, and Jaswant Singh- and 1 loyalist inSawhney.

The new committee of 6 had only 2 family members, Bhai MohanSingh and Dr Singh, and other 4 were Sheth, Raizada, Brar andChakroborty. These 4 were professionals.

Next year, Jag Mohan Khanna was co-opted into this high powered

body. Ranbaxy had to invest in R&D and had to increase its product

portfolio. This could be done my mergers and acquisitions, and required

infusion of more capital. This would dilute management andpromoters stake in the company.

This was too radical for Bhai Mohan Singh


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Environmental Changes andManagement Differences Government opened up the economy in 1991.

Bhai Mohans skills of environmentmanagement were now redundant.

Dr. Singh wanted Bhai Mohan Singh to be theface of the company in industry associations, but

this was not acceptable to Bhai Mohan Singh. The Differences started appearing in board

meetings and it appeared that Dr. Singh was notgoing not win the boardroom battle.


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The support of Dr Singh was withdrawn. The top

professionals gave him undated resignationletters.

Though, father and son were fighting in the

boardroom, it did not affect the day to dayfunctioning of the company.

But if these professionals resigns, then Ranbaxycould come to a halt.

In companys board meeting, around 50executives entered boardroom shouting slogansfor Dr. Singh. This was led by Sanjiv Kaul, whojoined ranbacy in 1983.


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The fight started to turn in favour of Dr. Singh whenProf. Veda Vyas, Rustom P. Soonawala, Narottam Sahga;

and D.D. Chopra resigned from companys BOD, on 18thSept 1992. Dr. Singh appointed, Tirath R. Mulchandani, Vivek

Bharat Ram of Eicher group and journalist SumanDubey.

Vivek Bharat Ram and Dr Singh had grown very close. Brar and Sheth were appointed as alternate directorsb/w Sept and Nov 1992.

Dubey resigned as he became in-charge f Dow Jones, afinancial news agency.

Dr Singh rarely uttered a word against his father but hisfriends targeted Bhai Mohan Singhs friends on board. Avtar Kaur served ranbaxy board till 1983. When Bhai Mohan Sighs and his sons fight erupted, 3

members apart form Manjit, decided to support BhaiMohan Singh: Dan Singh Bawa, Air Marshal OP Mehra,and MM Sabharwal.


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Relations with board members Sabharwal had first met Bhai Mohan Singh in 19880 as they were bothmembers of PHDCCI (Punjab, Haryana, and Delhi Chambers of Commerceand Industry).

For Sabharwal, Bhai Mohan Singh was a cordial person with a lot ofinfluence in corridors of power and had used the licence raj to ensure

Ranbaxys Growth. Sabharwal joined Ranbaxy board in 1984. He used to support Bhai Mohan Singh as for him Dr Singh was a man in

hurry and Bhai Mohan Signh was more conservative and wanted to ensurethat plans for rapid growth should not end in a disaster.

Sabharwal notices that Ranbaxy had a same story like Dunlop, they hadborrowed heavily to bankroll its ambitious expansion plans.

Still, Bhai Mohan Singhs supporters could feel the tide turning againstthem.

Capt. Amarinder Singh, who belonged to the royal family of Patiala, joinedRanbaxy board in 1983, told Bhai Mohan Singh that he would physicallypick him up and remove him from the boardroom.

Capt. Amarinder Singh, later became CM of Punjab. He did not attendboard meetings regullrly. Yet he strode into the board meeting to make his

statement and he snapped the pencil into two.


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Bitterness By now, father and son were not taking terms. Dr Singh used

to visit his mother daily, but father refused to see him. Avtar Kaur was torn between her husband and favourite son.

After this, her heath started failing. She died in July 2004,after prolonged illness.

Several friends of both father, and son, tried to resolve thecrisis but in vain.

Sabharwal and Avtar Kaur went several times to counsel Dr

Singh when father and son were not talking terms. But herefused to relent. Realtions went too sour that father wrote a letter to son saying

that there was no need to attend his funeral. No one was able to patch things between them. It is not easy to get Punjabis to compromise


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Prem Pandhi, an old friend of Bhai Mohan Singh

and executive chairman of Cadbury India, toldBhai Mohan Singh to let things go but he wouldnot listen as he was boiling from inside.

Pandhi even tried to reason with Dr Singh bytelling him that all his father needs is a littleattention.

But for Dr Singh, he had to win the battle against

his father as if he lost, then the ambitious planshe had drawn for Ranbaxys Success would all bescrapped.


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Another Change in structure On Feb 6th 1993, Bhai Mohan Singh, Sabharwal, Bawa

and Manjit resigned from the Ranbaxy BOD.

Same day, Dr Singh took over as the Chairman and MDof the company. Bhai Mohan Singh was made chairman emeritus. On the previous night, Manjit came to know that there

were plans to oust Bhai Mohan Singh in board meeting

scheduled for the day. He disclosed this to his father. Rather than to be ousted, Bhai Mohan Singh chose to

resign. Along with him, his friends also resigned.

The boardroom battle was over.


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Only the boardroom battle was over.

Bhai Mohan Singh now took the fight to the courts,charging Dr Singh with reneging on the commitmentsmade in the family to give money for his charities.

When Dr Singh died in 1999, Malvinder and Shivindergot embroiled in legal cases.

Even when Dr Singh was diagnosed with cancer, therewas no thaw in relations. At the same time, Bhai MohanSingh did visit his son while he was undergoing

treatment. The normal empathy of son dying too young was not

there. But the fight did upset Dr Singh. In his last interview, he

mentioned the ugly spat with his father was the only

regret he had.


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A few decisions

Once Dr Singh died, Bhai Mohan Singh madeone last attempt to regain control of Ranbaxy.

He did not make nay formal demand, but he toldmedia that the promoter family should berepresented on Ranbaxy board and therefore,

Malvinder and Shivinder, should be inducted onthe board right away.

But Dr Singh had made very clear that his sonswould join the board only on the basis of merit.


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Sons supporting Dr Singh Both the sons were in mid-twenties and did not have

much work experience at the time of their fathersdeath.

But they understood that whatever Dr Singh hadwilled was in the best interests of the company.

Once Bhai Mohan singh started voicing his demand,they promptly issues a statement saying that they

would abide by their fathers philosophy ofseparating ownership of an enterprise from itsmanagement.

That put paid to Bhai Mohan Singhs last efforts toget the family back on the driving seat.


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Bhai Mohan Singhs relations with Brar

Brar had become the symbol of executive powerduring the fight. Bhai Mohan Singh had directed

much of his ire against him.

Over the yars, Brar started delivering the results,Bhai Mohan Singh mellowed down.

He started sending letters to Brar seeking adviceon various matters regularly and Brarreciprocated to the gesture.


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In the years 2002 and 2003. In 2002, Bhai Mohan singh attended a board meeting of

ranbaxy at New Jersey. He was overwhelmed by the reception he got and the

results turnedin by the company his son had built, BhaiMohan Singh broke down.

He lavished praises on his son like never before. In 2003, Ranbaxy was chosesn Company of the year by

the Economic Times.

Bhai Mohan Singh sent a cheque of Rs. 50,000 to Brar toorganise a tea for companys seniors executives.

Brar sent the cheque back, assuring that it would be heldon the companys expenses.

FINALLY, EVERYTHIN WAS ALL RIGHT AGAIN.


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ranbaxy - the bitter separation

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