Ranbaxy-Daiichi Deal Reaches 1,000 Crore Obstacle

Author: Anurag Bhullar

The deal between Ranbaxy and Daiichi Sankyo has encountered another obstacle which is forcing the promoter of Ranbaxy Company Mr. Malvinder Singh and family to pay a sum of Rs 1,000 crore to the government so as to finalise the transaction.

The deal is already under question from the stock exchanges which have objected the deal completion through the block deal window. Instead of completing the stake selling transaction through block deal means, now it can only be initiated through direct selling of shares from the promoters to the buyer company. This measure of directly stake selling will attract a tax of 1,000 crore in the form of long term capital gains at the rate of 10 percent.

As per the block deal method, the share price at which the deal is finalized should not be more than 1 percent of the prevailing market price of shares, which is not the case with the Ranbaxy deal. The current market price of Ranbaxy shares is around Rs 266.35 per share which is 63.5 percent down from the deal price of Rs 737 per share.
	In early June, Ranbaxy and the Japanese Company Daiichi agreed upon a deal according to which Malvinder Singh and family are required to sell off their entire stake in the company, around 34.8 percent, for Rs 9,578 crore at a share price of Rs 737 per share. Daiichi was paying a premium of 31 percent on the share price at that time and the approximate value of the calculated at $4.6 billion.