Ranbaxy Laboratories Ltd has announced that the board of directors of the company has cleared a scheme of de-merger of the company's New Drug Discovery Research (NDDR) unit into a subsidiary, Ranbaxy Life Science Research Ltd. (RLSRL). This is subject to requisite approvals.

Ranbaxy believes that this is a significant step in creating an independent pathway for NDDR with dedicated resources and an enhanced focus for long-term growth. Ranbaxy has state of the art Research infrastructure and a highly skilled scientific talent pool. These strengths can be more effectively leveraged through an independent vehicle that better aligns assets with priorities to accelerate the company's drug discovery programmes. The resulting operational freedom and flexibility will also help to open up new growth opportunities while providing a platform for increased collaboration.

The demerger will result in cost savings of approx. US $25 million in the current year for Ranbaxy, a recurring expense, likely to increase significantly in the coming years.

Speaking on the occasion, Malvinder Mohan Singh, CEO and MD, Ranbaxy Laboratories Ltd, said, "The de-merger of our NDDR unit into a separate entity establishes a robust structure to carry out path breaking research at the cutting edge of modern medicine. It will also enable RLSRL to create intellectual property at a faster pace while positioning it for the future".

Under the Scheme, the shareholders of Ranbaxy will be entitled to receive one equity share of Rs 1 each of RLSRL, without any payment for every four equity shares of Rs 5 each held in Ranbaxy, as on the record date, to be fixed for this purpose, after receipt of requisite approvals. All assets, liabilities, research personnel and pipeline related to the NDDR unit will be transferred to RLSRL.

Ranbaxy has subscribed to redeemable preference shares of RLSRL aggregating Rs 200 crore, to meet its business needs. Post the de-merger, the equity capital of RLSRL will be approx. Rs 12.6 crore. Ranbaxy and RLSRL employees welfare fund trust will respectively hold 19.8 per cent and 4.9 per cent of the equity share capital of RLSRL. The balance will be held by the shareholders of Ranbaxy.

It is proposed that equity shares of RLSRL will be listed on the National Stock Exchange and the Bombay Stock Exchange while GDRs will be listed at the Luxembourg Stock Exchange.

All approvals required for the scheme to come into effect, including that of the Punjab and Haryana High Court, are expected in the 2nd half of 2008.