Case Study on Sun Pharma Industries Limited Acquisition of

Ranbaxy Laboratories: Corporate Restructuring in India

Introduction

A partial dismantling or reorganisation of a firm to make it more effective, competent, and

lucrative is known as corporate restructuring. Mergers and acquisitions (M&A), amalgamation,
leveraged buyouts, takeovers, buybacks of stocks, derivatives, sales of corporate divisions and
properties, and wealth reorganisation are examples of corporate restructuring. The corporate
restructuring aims to increase the organisation's market value, brand power, and synergies by
making company processes more efficient, effective, and competitive.

After the 1991 New Industrial Policy changes, when India entered the Liberalisation,
Privatisation, and Globalization era, mergers and acquisitions became a hot subject (LPG). The
takeover of Ranbaxy-Labs Ltd. by Daiichi-Sankyo Co. Limited, a Japanese firm, was the most
critical transaction in India on June 11, 2008. In the fiscal year 2003–04, India saw eight thirty-
four M&A worth Rs 35,980 crore. Sun Pharma announced on April 6, 2014, that it will buy 100%
of Ranbaxy Labs Ltd. in a $4 billion deal.

We must examine and evaluate corporate restructuring involving Sun Pharma Industries Limited
and Ranbaxy Labs Limited to investigate the theoretical concepts and strategies employed in a
successful business reorganisation. Sun Pharmaceutical boasts a fantastic track record, having
completed 20 successful acquisitions.

After acquiring Ranbaxy Labs Limited from Japan's Daiichi-Sankyo Limited in a $3.2 billion deal,
Sun Pharma Industries Limited has become India's first and world's fifth largest generic
medication manufacturer (approx. Rs.19,200 crore).

Secondary data was gathered from yearly audited financial accounts to meet the study's goal.

Corporate Reorganization Definition

The procedure of modifying a company's corporate strategy, administration team, or financial
structure is known as corporate restructuring. Mergers, amalgamations, demergers, takeovers,
slump sales, and other developing trends are now used to restructure businesses.

Mergers and acquisitions (M&A) are intended to maximize the use of existing resources,
accelerate the company's development, overcome competition, achieve economies of scale,
increase sales volume, improve operational efficiency, achieve synergies, obtain tax-benefits
through proper tax planning, diversify the business risk, reduce competition, reduce
organizational costs, and ultimately increase the firm's worth.
Goals of the Report

• Investigate the effect of Sun Pharma mergers and acquisitions on the company's performance.
• To determine whether a combination between Sun Pharmaceutical and Ranbaxy Labs is
necessary.
• To examine a case study of corporate restructuring in the context of Sun Pharma's acquisition
of Ranbaxy.
• To see if Sun Pharma made the correct decision when it bought Ranbaxy.
• To draw attention to the post-merger problems that Sun Pharma would face.
• Make an improvement proposal to acquirer companies.

Different Strategies for Corporate Restructuring

The following are some of the several restructuring techniques used:

Data Analysis and Interpretation

 About Sun Pharma

Sun Pharma Laboratories Limited (SPLL) is based in Mumbai, India. The firm was founded on
January 17, 1997, and it is based in India, where it manufactures and sells pharmaceutical
products. On March 9, 2012, it became a wholly-owned subsidiary of Sun Pharmaceutical
Industries Limited (SPIL). In India, the business is the market leader in the chronic sector,
accounting for more than 60% of total sales. Export accounts for more than 72 per cent of Sun
Pharma's revenue. Sun Pharma is India's largest and most lucrative pharmaceutical firm at the
moment. Sun Pharma completed 17 acquisitions between 1997 and 2017, commencing with the
purchase of Detroit-based Caraco Pharmaceutical Laboratories in 1997. In 2010, Sun Pharma
bought a significant share in Israel's Taro Pharmaceutical Industries.
  About Ranbaxy
Ranbaxy Labs, located in Gurgaon, was founded in 1961. Ranbaxy has a global network of
associates, joint endeavours, partnerships, and field operations in forty three countries and
twenty one production sites distributed around the globe, serving clients in over 150 countries.
In 2008, Daiichi Sankyo acquired control of Ranbaxy. Despite high sales statistics, the firm has
been losing money since 2011. As a result, Ranbaxy merged with Sun Pharma at a critical
moment after failing to strengthen its financial condition.

 Sun Pharmaceutical Industries takeover of Ranbaxy Labs

Sun Pharma and Ranbaxy Labs sparked excitement in the Indian pharma business on April 6,
2014, when they announced that Sun Pharmaceutical would buy 100% of Ranbaxy Labs for $4
billion, becoming the world's fifth-largest generic pharma company. Ranbaxy will combine with
Sun Pharma under these agreements, and Ranbaxy stockholders will get 0.8 Sun Pharma shares
for each share of Ranbaxy. Sun Pharma finalised the purchase of Ranbaxy Laboratories Limited
on March 25, 2015. Key things to note with this merger:

 On a proforma basis, Sun Pharma the world's 5 th largest specialty generic

pharmaceutical company, with revenues of US$ 4.2 billion in C.Y. 2013.
 The combined firm's pro forma U.S. earnings for C.Y. 2013 are estimated to be
US$ 2.2 billion, and the entity has a strong competence in developing
complicated medicines thanks to an extensive portfolio of 184 ANDAs awaiting
FDA clearance.
 Sun Pharma is now India's largest pharmaceutical firm, with Pro-forma revenues
of US$ 1.1 billion for C.Y. 2013 and a market share of over 9%.
 Sun Pharma's global track record has also strengthened due to the acquisition,
with cross-selling and brand-building prospects in emerging pharma markets
such as Russia, Romania, South Africa, Malaysia, and Brazil.
 Ranbaxy expects Pro-forma profits before interest, taxes, depreciation, and
amortisation (EBITDA) of US$ 1.2 billion for the fiscal year 2013.
Table 2 indicates that the company's pre-merger Net Sales Rs. 1,60,044 million in Financial
Year 2013-14 increased to Rs. 2,72,865 million in Financial Year 2014-15, indicating synergy
advantage following the successful merger. Additionally, Gross Profit went from 1,32,250 to
2,05,473, and Net Profit climbed from 31,415 to 45,394 dollars (Rs. in Million). After the
merger, its financial sheet reveals that it is in good shape in practically every category. In
2013-14 and 2014-15, the book value per share was Rs. 89.4 and Rs. 106.5, in that order.
Consolidated revenue from operations climbed 70% to Rs. 277,178 million in FY15, while
EBITDA increased 10% to Rs. 78,166 million.

The Ranbaxy acquisition reflects the same financial conservatism. As a result, Ranbaxy shareholders
have profited from the merger transaction today. The company's equity shares grew to 2,406.2
million after RLL and the Company merged in April 2015.

Conclusion

Previously, Ranbaxy Labs Ltd was merged with Sun Pharma Ltd under a Scheme of Merger on
March 24, 2015. The benefits of this integration began to show themselves in the 2015-16 fiscal
year. The primary goal of this merger is to achieve rapid growth and create prospects for all parties
involved. When the price of Ranbaxy Labs is compared to the price of the U.S. Regulatory and Food
and Drug Administration (FDA), concerns are at an all-time high. Sun Pharma has pursued a
strategy of purchasing underperforming businesses. Sun Pharma paid $3.2 billion for Ranbaxy and
$800 million for its debt. Our research demonstrates that establishing synergy will help the firm in
the long run.
Suggestions

The following is a list of proposals for business restructuring in a developing country like India:

 Immediate practical steps to reimburse for the societal costs of the predicament and
reorganization should be done.
 As soon as a problem is determined to be systemic, the authority should be prepared
to play a substantial role.
 Favorable legal, regulatory, and accounting foundation must be established for a
successful business reorganization.
References

 https://www.indianresearchjournals.com/titles.aspx
 https://www.ranbaxy.com/sun-pharma-to-acquire-ranbaxy-in-a-us4-billion-landmark-
transactions/
 https://www.ripublication.com/gjfm18/gjfmv10n1_01.pdf/
 Sun Pharma Ranbaxy Merger | Sun Pharmaceutical Industries Limited
 Sun Pharma Acquires Ranbaxy | M&A Critique (mergersindia.com)

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