THE promoters of Ranbaxy Laboratories face the unwelcome prospect of
paying around Rs 1,000 crore by way of capital gains tax to the
exchequer. The Securities and Exchange Board of India (Sebi) has
rejected a plea from the drugmaker’s promoters for a wavier of rules
applicable to bulk deals through the stock exchanges. The proposed bulk
deal was intended to transfer the Singh family’s 34.82% stake in
Ranbaxy to Japanese drug company Daiichi Sankyo.
“The company had approached the regulator seeking relaxation of norms related to bulk deals. However, Sebi cannot relax the norms for one company since it will send wrong signals,” Sebi officials said.
Ranbaxy CEO and MD Malvinder Singh declined to comment when asked whether he would now opt for an off-market transaction.
This June, Daiichi acquired over 34% in Ranbaxy for Rs 9,576.3 crore. Daiichi paid a negotiated price of Rs 737 per share to Ranbaxy’s promoters. However, the global liquidity crunch and Ranbaxy’s problems with US regulators have pulled the scrip down to Rs 266, a 64% drop. Ranbaxy had sought Sebi’s approval to execute the deal at Rs 737 a share through the stock market. Sebi has denied permission as there is a big difference between the deal price and the current market price.
Ranbaxy’s promoters were keen to use the block deal route to sell their stake to Daiichi. Through this window, they can sell their shares through the stock exchange without being bound by price restrictions applicable to a bulk deal or having to pay a long-term capital gains tax of around Rs 1,000 crore.
Unlike an off-market transaction, which attracts a 10% long-term capital gains tax in addition to a 1% surcharge and another 3% tax on the surcharge, any transaction routed through the stock exchanges do not attract such a tax. A stock market deal means that Ranbaxy’s promoters will have to pay a nominal securities transaction tax of 0.125% besides the broker’s fee and a 12.5% service tax (on the broker’s fee), which could run into only a few crores.
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