Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Commentary

Ranbaxy sells to Daiichi

The story is that Ranbaxy promoters are selling their (nearly) 35% stake to Daiichi of Japan. The price is Rs. 737 per share and reflects a big premium on the Rs. 560 current price. Interesting part: The transaction may be done as a bulk deal on the stock exchange for which the price needs to reach a max of Rs. 729 in order for a bulk deal to be allowed (bulk deal max is 1% above stock price). A bulk deal makes more sense as it saves nearly 1000 cr. in income tax.

So if the Ranbaxy promoters need to do this transaction the price needs to go up; and if they save 1000 cr. would they not be incentivised to pay for a few more shares and push the price up? With the average daily traded value around 250 cr. a push to the price can easily be made with a few hundred crores. It may not happen immediately but it should be looked at carefully – huge volumes may indicate this activity. (Note: there’s nothing wrong with doing this, as the intention to sell is public knowledge.)

My analysis: Heck, this is a deal and a half. The price should reach the 737 mark within a year, and if Pfizer settles on Lipitor it’s a huge bonus for the company. I’ve liked Ranbaxy – personal reasons though. After my father passed away in 97, some Ranbaxy shares he bought moved to my mother’s name – and today it is 20x of the 1997 value. In fact, today my mother receives as much dividend a year as Dad had paid for the shares in the first place. It’s ensured a good living for at least one middle-class family; for that, I must thank the promoters and wish them the very best.

Like our content? Join Capitalmind Premium.

  • Equity, fixed income, macro and personal finance research
  • Model equity and fixed-income portfolios
  • Exclusive apps, tutorials, and member community
Subscribe Now Or start with a free-trial