Sun Pharma has asked 18 top executives of Ranbaxy Labs to leave the firm in one of the biggest culls of senior management professionals in recent times. The order comes a year after the Dilip Shanghvi-led firm acquired Ranbaxy in an all-stock deal and a few weeks after Q4 profits shrank 44 per cent due to costs incurred in assimilating the buyout and regulatory issues.
Those who have been asked to leave are Indrajit Banerjee, President and CFO; Yugal Sikri, country head (India) Ranbaxy; Maninder Singh, V-P marketing; Govind Jaju, global head, sourcing; Ratul Bahaduri, director-finance; among others, people close to the development said.
The executives have been given a severance package and the freedom to exercise their stock options before leaving. A Sun Pharma spokesperson said that the objective of the Sun-Ranbaxy merger was to create a larger and better organisation for all its stakeholders. “In order to make this happen, the company has made and will continue to make all efforts to utilise the total available talent in the most appropriate manner. If there are a few employees who could not be positioned appropriately, the organisation will make all attempts to handle the same in a fair, transparent and sensitive manner. We reiterate that our focus continues to be on creating an environment of meaningful professional opportunities for our employees to lead, succeed and grow,” the spokesperson said. Ranbaxy’s merger with Sun was always supposed to be an intensely complex exercise due to the sheer size of the two firms. The salesforce of the combined organisation is itself close to 30,000 in India and overseas.
The two companies also had more or less similar organisational structures with a focus on emerging markets, developed markets, Europe, Russia and India. A surplus was inevitable once the basic merger procedures were sorted out.
Most senior management who have been asked to leave were brought in after Japanese giant Daiichi bought Ranbaxy from the Singh brothers in 2008.
In the annual press conference last month, Sun CEO and MD Dilip Shanghvi warned that some leaders may have no role in the merged entity. “I have already announced people who will report to me, in coming days we will make more announcements of people who will be reporting to me,” Shanghvi added. “However, there are a few senior leaders of Ranbaxy who have no role in merged entity, and they are talented individuals so we are looking at finding a way of retaining all people.”
The problem for the senior Ranbaxy executives became acute after Sun filled crucial slots in the merged organisation with its own people. Abhay Gandhi was given charge of the India market for both the companies; Aalok Shanghvi was elevated as the emerging markets head and Kal Sundaram was made incharge of the North America market of both Sun and Ranbaxy. Subhodh Deshmukh is one of the few Ranbaxy executives to be retained and he is in charge of the overthe-counter business.
“Nearly 150 senior management staff including those who are VP and above will be asked to leave over the coming months,” said a person closely associated with the ongoing development, who did not wish to be quoted due to the sensitivity of the issue.
In its fourth-quarter results last month, Sun Pharma reported weak businesses across segments. Consolidated revenue fell 11 per cent quarter on quarter to Rs 6,200 crore. India market sales was also down 10 per cent at Rs 1,500 crore.
“We reiterate our earlier stance that Sun-Ranbaxy integration will be lengthy and would lead to cost pressures. We expect the stock to remain subdued over the next few quarters until we start seeing benefits (only by FY17E) from the merger of these two large entities as well as clarity on Halol plant,” said Meeta Shetty, analyst from Kotak Securities in a research note.
Sun shares have fallen 12 per cent in the past one month.
By Divya Rajagopal