Markets cheer Malvinder’s exit from Ranbaxy

The exit of Malvinder Singh as chairman, managing director and chief executives of Ranbaxy Laboratories Ltd, may mark the end of an era for family-controlled businesses; but unsentimental investors in both Tokyo and Mumbai cheered the news that Singh had been politely shown the door by new owner Daiichi Sankyo Co.

Shares of both Ranbaxy and Daiichi surged on their respective exchanges. On Tuesday, Daiichi Sankyo headed for the biggest two-day gain since 2 April on the Tokyo Stock Exchange, even as the benchmark Nikkei 225 Stock Average dropped 0.9 per cent.

In Mumbai, investors in Ranbaxy Laboratories got richer by over Rs1,900 crore in a single day as the scrip surged by a little over 20 per cent on the Bombay Stock Exchange a day after the pharma major announced a change of guard at its top management level.

On 12 May Daiichi, Japan's third-biggest drug manufacturer, had forecast that its full-year profit would be well below expectations, blaming the losses on Ranbaxy, in which it had bought a 63.9 per cent stake, including the founder's stake, last year. Daiichi had said that it planned to get actively involved in resolving its unit's problems.

Ranbaxy has been hit by a US ban on some of its products for alleged falsification of data, and by foreign exchange hedges being hurt by a weaker rupee. Daiichi's stake was eroded in value by more than two-thirds by the end of the last financial year for these reasons. Last month, Ranbaxy forecast a loss of $150 million in 2009, on a 9 per cent fall in sales to $1.4 billion.

Singh's tenure at the helm was scheduled to end in 2013 and he was entitled to a severance package of Rs45 crore if he left the company before that. Daiichi Sankyo has said it would proceed according to the employment agreement. The company was founded by Singh's grandfather.