Ranbaxy-Daiichi deal a windfall for little-known firm

By Arjun Sen, New Delhi, Sep 4 : A little known firm, Oscar Investments, will make a windfall of Rs.13.04 billion (USD 325 million) once Japan's Daiichi Sankyo picks up the promoter's stake in Ranbaxy Laboratories, India's largest drug company.

This is by virtue of the 4.74 percent shareholding that Oscar Investments has in Ranbaxy Laboratories, which forms a part of the 34.8 percent stake Malvinder Singh and family hold in Ranbaxy, data with the Bombay Stock Exchange shows.

According to the share purchase and share subscription pact, Daiichi Sankyo will pick up the 34.8 percent stake from the promoters of Ranbaxy, apart from making an open offer for an additional 20 percent.

Oscar Investments holds a total of 17,698,468 shares in Ranbaxy Laboratories and at Rs.737 a share that Daiichi Sankyo has agreed to pay for the acquisition, the money expected to accrue to Oscar is Rs.13.04 billion.

As per the pact between the two companies, the payment will be made by March 31, 2009.

The bulk of the promoter group's shares in the Indian drug maker - amounting to 26.57 percent - is held by Ranbaxy Holding Company. But that is an unlisted entity.

Spokespersons for Ranbaxy Laboratories or Relegare, a financial services arm of Malvinder Singh and family, could not say whether or not Oscar would declare dividends following the windfall.

"Perhaps, only Malvinder Singh himself can provide an answer," said the group's director for corporate communications.

Oscar Investments, incorporated in 1978, is a non-banking finance company that is registered with the Reserve Bank of India and listed on the Bombay Stock Exchange and the Delhi Stock Exchange.

A look at the financials of Oscar Investments reveals that the company is yet to publish its audited annual report for 2007-08. But, the earning per share, that sets the mood for the listed price, was Rs.63.77 and Rs.80.68 in the previous two years.

On the other hand, given that Oscar has a floating stock of 17.28 million issued shares, the windfall on account of the acquisition deal with Daiichi Sankyo will be a whopping Rs.755 per share.

So if the same financials are maintained, the additional money coming in from the Japanese drug maker will translate into an enhanced earnings per share of Rs.827.23.

Oscar Investments has not declared any dividends for the past few years. But for 2008-09, they might do so in a bid to share some of the windfall gains from the Daiichi Sankyo deal - that is at least the market expectation.

"Even if they use 10 percent of the Rs.13.04 billion for paying dividends, it will mean a dividend yield of 31 percent on the company's current market price of Rs.240," said a security analyst who chose to remain unidentified.

--IANS