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In the largest bulk deal on Dalal Street, Japanese pharmaceuticals giant Daiichi Sankyo on Tuesday sold its entire 8.9 per cent stake in Sun Pharmaceutical Industries for $3.2 billion (about Rs 20,000 crore), at an average price of Rs 931.60 a share to a clutch of foreign institutional investors (FIIs) led by Goldman Sachs, the government of Singapore and Aranda Investments.
Daiichi sold 215 million shares at the lower end of the band of Rs 932 a share (the upper end was Rs 1,043 a share) of the book building issue, which opened Monday evening. As a result, Sun Pharma shares dropped nine per cent, their steepest fall in six years, to close at Rs 951.60 apiece on Tuesday. The shares were sold at an 11 per cent discount to Monday’s closing price, which explains the fall in the stock. Daiichi’s stock, on the other hand, closed 4.4 per cent higher on the Tokyo stock exchange.
Goldman Sachs, the banker for the transaction, was also one of the top buyers, with Rs 4,765 crore of investment from its Singapore subsidiary, stock exchange data showed. Aranda Investments Mauritius, a Temasek subsidiary, invested Rs 1,875 crore in the issue, while the government of Singapore (Government Investment Company) invested Rs 1,173 crore.
Sun Pharma said its promoter Dilip Shanghvi did not buy any shares in Tuesday’s transaction. Till the time of going to print, the stock exchange did not give data on all the buyers.
The deal beat many records on Dalal Street. A look at exchange statistics for Tuesday showed the size of the transaction was more than twice that of the previous biggest bulk deal. It also marked the highest single-day foreign portfolio investment into the equity market, as well as higher cash market volumes than the day the National Democratic Alliance government came to power last year.
The Rs 20,000-crore deal is more than twice a 2012 deal in which Citigroup sold Rs 9,393 crore worth of HDFC shares in a bulk deal.
On Tuesday, FIIs were net buyers by Rs 17,488.73 crore, with most of the funds allocated to the Daiichi deal. This was 95.28 per cent higher than the previous single-day record (February 2012, when FIIs were net buyers by Rs 8,955.3 crore).
The daily cash market volumes for Tuesday stood at Rs 44,970.51 crore, against Rs 43,036.50 crore in May 2014, when the results of the general elections were declared. The only other time cash market volumes have been higher was in May 2009 (Rs 51,903.46 crore).
Daiichi’s exit from the Indian market roiled the rupee, which fell to an intra-day low of 63.15 a dollar. However, it recovered later in the day, following intervention by the Reserve Bank of India. The BSE Sensex was down 0.75 per cent.
In 2008, Daiichi had bought Ranbaxy from Malvinder and Shivinder Singh for $4.6 billion.
The acquisition did not go well for the Japanese company, as Ranbaxy was found guilty of numerous violations of US Food and Drug Administration (FDA) rules. The company paid a penalty of $500 million to the FDA to settle the matter and the value of Daiichi’s stake fell about half.
In April last year, Daiichi agreed to merge Ranbaxy with Sun Pharmaceuticals in an all-stock deal worth $4 billion, which included Ranbaxy’s debt of $800 million. The merger made Sun Pharmaceuticals the world’s fifth-largest speciality generic drugs company and the biggest Indian drug company, with a significant lead in market share.
Analysts said the Sun Pharma management would now focus on addressing Ranbaxy’s issues with the US FDA, as four out of five US-centric facilities remained under a US FDA embargo. “Post offloading, the stock has corrected 10 per cent and is down about 20 per cent from its all-time high. This has provided an ideal opportunity to re-enter the stock. We will revisit our target price after the fourth-quarter results, as we will have the financials of the combined entity,” said an analyst with ICICI Securities. The analyst had a ‘buy’ rating on the Sun Pharmaceuticals stock.
Sun Pharmaceutical will continue to see rapid growth in the coming years, analysts say. The company’s promoters, Dilip Shanghvi and his family, now own 54.7 per cent stake in Sun Pharma. Shanghvi’s stake had fallen from 64 per cent, following the all-stock deal to merge Ranbaxy with itself, announced in April last year. Daiichi had received 8.9 per cent stake in Sun Pharma in lieu of its ownership of Ranbaxy.
