Many will feel a twinge of regret that a company that has been a symbol of successful Indian entrepreneurship in a research-intensive field has decided to throw in the towel, for this is the flip side of Indians celebrating corporate acquisitions overseas (and Ranbaxy has done its share of them). But the time may have come to set nationality questions aside, and to look at business rationale with the same clinical detachment with which Malvinder Singh has put Ranbaxy's future ahead of his own natural desire to hold on to his corporate inheritance. This newspaper has long argued that management and ownership are independent issues, and that the tendency of family businesses to confuse the two is what has frequently led to corporate under-performance. The Singh family needs to be complimented therefore for looking at hard business logic even as it negotiated a good price for its shares; Malvinder Singh's exposure to the financial world would have helped him focus on the value rather than the ego questions.
The issues that Ranbaxy faced, and which it hopes to solve by becoming a subsidiary of Daiichi Sankyo, are technical and financial. On the technical side, it needed a stronger product pipeline. Implicit in the change of ownership is also the admission that the company's strategy for research and generics has run into a headwind, and therefore that the game has to be re-invented. Financially, the company has been burdened by the prospect of having to redeem $400 million of convertible bonds issued in dollars. On the Daiichi Sankyo side, the company gets market entry into some 60 countries, a strong production base and a low-cost research capability. The question of course is whether Ranbaxy will remain an independent player or play second fiddle to its new owner, since there is a natural tendency for mother-companies to capture value in their own balance sheet rather than in a subsidiary.
Does this spell trouble for other Indian pharmaceutical firms, and could they also come to the conclusion that they are better off by aligning in one form or other with global drug companies? There cannot be a one-size-fits-all answer; the other Indian firms are neither clones of Ranbaxy, nor do they mimic its business strategy. However, pharmaceutical firms have tended to under-perform vis-
