Ranbaxy Chem eyes buyouts

In what could be termed as a major turnaround in the venture capital- funded management buyouts in India, Ranbaxy Fine Chemicals (RCFL) "" the demerged non-core business entity of Ranbaxy Laboratories - is making stronger consolidation moves in the country's fine chemicals and diagnostics industry even before completing first year of operation.

The company is now eyeing potential targets for inorganic growth in the animal health and laboratory chemicals space within India and abroad.

Sources said the company had already initiated talks with a few local players in the animal health and fine chemicals business for possible takeovers. "The company has lined up domestic acquisitions in the range of Rs 50 crore to 100 crore," the sources added.

Ranbaxy Labs, the country' s largest pharmaceutical company, decided to divest the allied business unit in 2004. The company is expected to fund these acquisitions through internal accruals, issue of fresh equity and through debts.

A senior company executive said; "Organic as well as inorganic growth plans are very much there on our agenda but it is too early to comment on its acquisition plans in the country."

RCFL, which comprises three different pharmaceutical allied businesses such as fine chemicals, diagnostics and animal health products, was divested by Ranbaxy Laboratories through a management buyout supported by the country's leading venture capital company, ICICI Venture in 2005.

The Rs 200 company, which reported 25 to 30 per cent growth in the first year of operation after the takeover, has also formed a core strategy group exploring expansion opportunities by way of strategic alliances and diversifications in addition to suitable acquisitions for the targeted growth by the next three years.

At present, ICICI Venture holds a major stake in the company, which has a workforce of about 400 people. The current management, comprising a 13-senior member team, owns the rest of the equity and was part of Ranbaxy Lab's allied business unit before the demerger.

ICICI Venture had signed the buyout agreement with Ranbaxy to acquire the allied businesses in 2005 with the intention of providing additional resources, motivation, and freedom of operation to enable the three business segments to realize their complete business potentials.

The three business segments of the company now cover a range of industries, including the veterinarians, aqua and poultry farms, in vitro diagnostic facilities in clinical labs, hospitals, nursing homes and laboratory solutions for pharmaceuticals, biotechnology, etc.