CRISIL reaffirms rating of RANBAXY LABORATORIES following acquisition announcement

CRISIL has reaffirmed its 'P1+' rating on the commercial paper programme of Ranbaxy Laboratories Limited (Ranbaxy). This follows the company's recent acquisitions in Europe: Terapia S.A. (Terapia) in Romania, Allen S.p.A (Allen), a division of Glaxo Smithkline (Glaxo) in Italy, and of Ethimed NV in Belgium. Ranbaxy will fund the three acquisitions from the proceeds of the FCCB issue of US $ 440 million (Rs. 19.8 billion) it raised in February 2006.

Ranbaxy will not take over any significant debt from the acquired companies. Ranbaxy gets access to the product portfolios of these companies: Terapia has a portfolio of 157 products, and Allen S.p.A and Ethimed's product basket includes 15-20 products each. In CRISIL's opinion, the acquisitions would improve Ranbaxy's business profile in Europe. In 2005 (refers to financial year from January 1 to December 31), revenues from Europe were $ 200 million, accounting for 18 per cent of the company's consolidated revenues. The acquisitions would add $ 100 million to the company's consolidated revenues, enhancing the contribution from Europe.

The rating continues to reflect Ranbaxy's status as the largest Indian player in the international generics market, its strong position in the domestic market, and its focus on R&D. The rating factors in the growing competition in the global generics market and Ranbaxy's high exposure to the legal and regulatory risks therein. Ranbaxy's financial profile suffered in 2005 due to its weak performance in the U.S. market and its high R&D expenditure, However, CRISIL believes that Ranbaxy's strong business profile gives the company the resilience to weather the impact of these factors.

Ranbaxy is India's largest pharmaceutical company. The company has the most diversified geographic mix among Indian players. The U.S., Europe, and BRIC (Brazil, Russia, India, and China) countries accounted for 28 per cent, 17 per cent, and 29 per cent of total revenue respectively, in 2005; the rest of the world accounted for 26 per cent of revenue. Ranbaxy recently sold off its fine chemicals, animal health, and diagnostic businesses, which contributed to 3 per cent of revenue in 2005. For the year ended December 31, 2005, Ranbaxy reported a consolidated (with all its subsidiaries) net profit of Rs. 2.6 billion (Rs. 7.0 billion in the previous year) on net sales of Rs. 51.1 billion (Rs. 52.4 billion).