DCA to vet Ranbaxy share sale

Ranbaxy’s chairman and managing director, Parvinder Singh had submitted an application to the FIPB seeking government’s approval for divesting a maximum of 35 lakh shares owned by him and his family through Merrill Lynch.

These shares account for around 6-7 per cent of the company’s current paid-up capital, and are held by Singh and his associates which comprises Ranbaxy’s management group.

At present, Singh’s family owns 145 lakh shares, which amounts to around 29 per cent folding in the company. The private placement will enable Ranbaxy’s promoters to access cost-effective capital and bring in resources without the transfer of shares. The private placement is expected to bring in around Rs 200 crore.

This is being done to primarily reduce the company’s debt burden incurred because of the payments for warrants, which were converted into equity more than 17 months ago.

According to the proposal, Ranbaxy would privately place up around 35 lakh shares to RX Pharmaceutical Holdings Inc., an offshore special purpose vehicle (SPV). Merrill Lynch, in turn, will widen the foreign direct investor base through placement of appropriate securities issued by SPV.

The SPV will be used as a vehicle through which GDRs will be issued to investors. The shares will be transferred to the SPV on payment of the balance at the end of three years.

Ranbaxy has a total share capital of 494.1 lakh shares. Singh and his associates hold around 29 per cent. UTI holds 6.19 per cent, GIC and its subsidiaries 3.69 per cent, LIC 0.46 per cent, mutual funds 1.56 per cent, FIIs hold 11.31 per cent. Around 10 per cent of the equity has been issued through GDRs. The rest is held by the public.