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Ranbaxy :Is there any Rationale in Holding for the Open Offer? ?

Can’t help it ! this is my second post in two days on Ranbaxy

The Share Price is Rs 440 just now on BSE…The Open Offer opens on August 8,2008 and ends on August 27,2008.It is a direct offer to shareholders who will have to tender their shares at Rs 737 and expect only one in three to be accepted.

Nothwitstanding the controversies of FDA and possible US Congressional Investigation Legal Issues in USA even the Mathematics is just not exciting enough

Methinks it’s prudent to sell off holdings now in the marketyou will realise Rs 1320 for three shares and if you have made short term gains you will be subjected to just 10% short term gains tax

Alternatively if you tender in the Open Offer in August,you will receive Rs 737 for one share of the three and will be exposed to the fate of the Share Price in the market for the remaining two shares

Moreover the sale of the accepted share in the open offer is an off market transaction and you will be subject to tax at your slab rate

Check my earlier blog on Ranbaxy….I feel the price will slide below Rs 300…If it does,your aggregate proceeds will be @ Rs 1300…moreover you’ll get proceeds only in September 2008 and be in all probability subject to a higher tax

I’m not even discussing the potential risk of US Congressional Investigation into FDA’s continuing to give approvals to Ranbaxy post February 14,2007 when it had conducted a search at the Company’s New Jersey office and was investigating the Company’s manufacturing practices that had led to introduction of sub standard drugs in USA

Check out  ….. you’ll find Ranbaxy News Releases in 2007 and 2008 that announce having received manufacturing and  marketing approval from FDA for Zolpidem Tartrate (March 2007) ,Loratadine (April 2007) ,Pravastatin(April 2007) and many others….. post Valentines Day,February 14,2007 when FDA had expressed their love for Ranbaxy by searching  their offices

Mr John Dingell,Chairman of the US Congress Energy Committee has been quoted that if it is true that Ranbaxy has introduced sub standard drugs then they have imperilled the lives of Americans….a possible Congressional Investigation may follow

In India ,the CEO and MD of Ranbaxy,Mr Malvinder Singh,continues to appear in media channels accusing a big multinational,without naming it,of being behind the downward price movement in the Stock Markets and also lobbying the authorities in USA in an attempt to influence them to intensify and extend scope of the Investigations into Ranbaxy’s Operations.According to him,this is being done to sabotage the Daiichi Sankyo Deal and therefore create hurdles in Ranbaxy growing even bigger in scale and size in USA 

Whatever !…when in doubt…sell out and stay out!…and it’s a big doubt!


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