Acquisition Provides Global Reach & Enhances Licencing Capabilities: Sun Pharma | CNBC TV18

To Sun Pharma's management, they're getting ready for the big deal announcement that they made earlier this morning in the Ranbaxy transaction. At that point of time, we were of course a much smaller company. But at that time also, we were buying another company which was almost 80% of our company in terms of size. We did not pay for that acquisition through cash. But we paid for that acquisition through a much more expensive currency. We paid through our stock. And dilution to Sun Pharma shareholders was close to 20%.

Kirti will present the details to you about both the companies. And you will see that Organon, in terms of size, is more or less the same as that of Sun Pharma. In terms of profitability, it's maybe even a little bit higher than Sun Pharma. However, the transaction values Organon at less than 25% of the Sun valuation. So the key difference in my mind is the difference in our growth trajectory. Sun has been consistently growing and Organon has not been growing. So we know that for us to create value, the key driver is to find a way to grow this business much better than what it has been able to do. It'll possibly require some investment, some focused effort to improving processes, and also many of the other tools that Kirti says we plan to use so that we can reignite the growth of the company. But what is more important for me is that it gives us a global presence. It gives us an ability to license products globally. Also launch many of the products that we already have in our pipeline in many geographies that we are not currently present in. And those are interesting geographies.

However, I think some of the concerns that people have expressed to me are related to the large size of debt that we might have to raise to pay for the company. We will be of course using our own cash. But we will also have to raise some significant debt. So I think I want to remain objective. This debt, even though large in terms of overall size, it's still going to be 2.3 times the combined company EBITDA. And we have a focused effort towards finding a way to minimize the debt by finding a way to repay the debt as early as possible. I mean, all of you who've been tracking the company for a long time, you know that we've been either a low debt or maybe a significant cash positive company for a long time. And even the debt that we got as a result of Ranbaxy acquisition, we found a way to repay it in the shortest possible time. So that would be our effort. That would be our focus. But we will still have ability to do business development deals. And we will focus on investing our investable surplus into products which are close to market and products in therapy areas of our interest.

The other important issue is the ability to repay the debt. I think Kirti and Jayshree will share with you what you call combined company cash flows and what is it that we can theoretically achieve. Other important issue is the dividends that we pay. We know that for investors, especially who invest in emerging markets, dividend is one of the attractions for them to invest. So whatever decision that we will take for what to do with the future dividend policy, we will factor this preference and liking of our shareholders while we take a decision. And we will keep people informed. As on today, when we've done the cash flow calculations and our desire to repay the debt, I think we've kept a provision so that we will continue to have the dividend maintained. But I think greater clarity for all of you and also subsequently questions from you will help people understand the logic of the transaction and also why we see ability to create significant value for Sun shareholders as the time passes. So thank you.