Malvinder Singh, MD and CEO, Ranbaxy, has said that Ranbaxy is well positioned to capitalise on opportunities in the generics space and the company had various options to, but Daiichi was the best. Takashi Shoda, president and CEO, Daiichi Sankyo said he would like the company to grow with Ranbaxy both organically and inorganically.

CNBC-TV18 shares with domain-b its exclusive interview with Malvinder Singh and Takashi Shoda

Could you speak on behalf of Daiichi Sankyo and tell us whether their end game is to only stop at more than 50 per cent  when they get a majority stake? Will they continue to mop up stake in the secondary market to bolster their stake even post-open offer?
Singh: It is to get 50.1 per cent.(See: Japan's Daiichi Sankyo to acquire majority stake in Ranbaxy)

 If they get the entire 20 per cent  in the open offer, would they accept the entire 20 per cent ?
Singh: We will have to see what happens. Let us not get into presumptive games. There is the promoter shareholding, which will get sold at Rs737. There is an open offer, which is up to 20 per cent, which will also happen at Rs737. Then, there is a preferential allotment of shares and of warrants, which will also happen at Rs737.

So, the money will come to promoters, the open offer money will go to shareholders and the preferential allotment and the warrants money will come into the company, which will be around a billion dollars.

Is it true that you spoke to some other players as well for a possibility of this stake sale? Were other large global company like GSK in the frame as well?
Singh: I am not going to give any names. But yes, we certainly had various options but I believe this is the best option and this is the best transaction that we had.

Have some of the large domestic institutional investors been taken on board with this decision. Have you any idea what they might do with their stake because the holdings that some of them have in Ranbaxy is sizeable?
Singh: I think the value that every shareholder will get will be very substantial. Over the average last three months of share price, this is a more than 50 per cent  increase. The Ranbaxy share has been trading within a defined band over the last many years and this is a very substantial jump where the market capitalisation of the company becomes $8.5 billion. So every single shareholder in Ranbaxy will be very handsomely rewarded.

What is other companies in which Ranbaxy holds a sizeable stake because we have a comment from Daiichi saying that they are going to put an open offer for Zenotech as well. Any plans for Kreps' biochemical or Orchid? Any indicative price for the open offer for Zenotech right now?
Singh: Zenotech open offer price will be post closing of this transaction for Ranbaxy and it will be as per the SEBI formula. The other investments are strategic investments. Our shareholdings in those are below 15 per cent  and therefore there is no need to make an open offer. However if we decide to go above 15 per cent, we will make an open offer.

News that will be a little bit disappointing for your shareholders is that there is no demerger of the research division that the shareholders were expecting. Would it be considered at a future date or is the chapter closed?
Singh: There will be no demerger of Research & Development (R&D). R&D is a very integral part of our business and I think since we are going to be putting Daiichi Sankyo, which is an innovated company and Ranbaxy which is a generic company together, there is tremendous value that we can jointly create on the R&D side together. So what we wanted to do through a demerger, we will actually do within the company as a division, so there is no need to look at a demerger at this point in time.

Give us one clarification on that open offer once again, because it is important for minority shareholders. Earlier it was disclosed that the total price was between Yen 300-400 billion. if you work backwards and look at the amount to the promoters, which is Malvinder Singh and the $1 billion of infusion, you are not left with too much money to pay for the entire 20-per cent  open offer. Would it mean that you would actually lay out extra cash, which is higher than Yen 400 billion so as to take that entire 20 per cent  if it is tendered?
Singh: The transaction is very clear. The promoters will get Rs 737. There will be an allotment on a preferential basis of equity shares into Ranbaxy, which is 9.5 per cent  of the total diluted capital. That money will come in at Rs737. There are warrants, which are upto 4.9 per cent  and then there is the open offer, which is anywhere between 0 per cent  and 20 per cent.
So whatever comes will be taken through the open offer and then based on what the gap is, the warrants will be exercised. It could be partially, completely or it maybe nothing. So there is flexibility on the warrants, which ensures that we go to 50.1 per cent. But they have that flexibility within the system to ensure that whatever comes in the open offer upto 20 per cent  will definitely get taken at Rs737.

Aside from amount that's been set out for picking up the stake whether via open offer or from buying the stake from promoters, will there be any infusion of cash into operations straight away because I believe the deal will fructify only by March '09. Will there be cash that will be put into operations right now?
Shoda: Basically just as Mr Singh has responded to that question, we will proceed with the deal just as the terms have been explained by Mr Singh.

Even though you stay in management capacity, a lot of shareholders might actually take a signal from your stake sale that the generics business is topping out. How would you respond to that kind of take?
Singh: That is a wrong perception. There is tremendous opportunity in the generics space in terms of patent expiry, healthcare cost pressures in the developed markets, and higher life expectancy of people. Ranbaxy today is extremely well positioned to capitalise on opportunities in the generic space. In terms of a geographical break down of our business, we have a very strong mix of emerging and developed markets. We have tremendous strength coming from our R&D manufacturing in India, which today is defining the future of the global generic landscape.

We also have a very strong portfolio of first-to-file products, where there is huge uncertainty. This will give significant economic gains to the company over the next many years. In addition, this new transaction with Daiichi Sankyo will further add significant business to Ranbaxy. It will enable us to do so much more, especially in the Japanese generic market, where the intent is to be the No.1 organically or inorganically.

I see substantial opportunity in the generic space on the global basis. Ranbaxy is well positioned to capitalise on that. The company has been on a substantial upswing over the last two years. I see that carrying on. Through this transaction, we will be far stronger to do a lot more than what we would have done on our own.

My dream and vision is to continue to define and create a company and model that will be far more successful and sustainable in future.

For Ranbaxy, when does the open offer open and when does it close? Do promoters, via any holding company etc, still continue to hold any stake at all in Ranbaxy or is 34 per cent  the sum total of it?
Singh: We will be handing over the entire equity to Daiichi Sankyo. We have to go through regular procedures in regards to the open offer and will make the respective announcements in due course.

Was this always the end game? For the last two - three years, have you been making those big global moves, eventually to sell to a large global company, once you solidified the company enough?
Singh: This is not an end game, this is the start of a much larger game that we are going to play. Singh: Yes, certainly we will be making investments as a family in other businesses in healthcare, in financial services and we will work on those details based on the needs of those businesses.

How much specifically would you want to put in Fortis out of the money that you have raised because that is the other listed company, which is quite excited today at the prospect of getting more of your attention and finances?
Singh: I want Fortis Healthcare to be the largest healthcare player in India. We are very clear on that and we will do everything to make that happen. In terms of Religare, on financial services we want to be a comprehensive financial services provider and be the leader in that and ensure that we can make Religare have a global platform and to have a global position just like Ranbaxy has in pharmaceuticals.

So whatever those companies need to do, they will be doing that.

Is there an exclusivity arrangement that has been reached between Ranbaxy and the company or might they be open to other Indian acquisitions as well?
Singh: We at Ranbaxy will continue to evaluate inorganic opportunities in India and internationally for that matter.

So I think with the company being stronger and I have always maintained and said that the Indian market needs a consolidation; it is too fragmented. I already have a list of companies I would like to make investment and acquire and create strategic partnerships with.

Shoda: In India we believe Ranbaxy is our chosen partner and we take Ranbaxy as our own company now. Organically and inorganically we would like Daiichi Sankyo to grow with Ranbaxy and not any other company.