According to newspaper reports, Glaxo Wellcome Plc is considering setting up 100% subsidiaries in India for research and exports. The company is also considering stepping up research activities in India once the legislation pertaining to the intellectual property rights is in place.
Glaxo (India) is India's largest pharmaceutical company. The company has clocked net sales of Rs 2.5 bn and a net profit of Rs 160 m for the quarter ended 30th September 1999.
The disclosure that the parent is considering setting up of 100% subsidiaries in India will in all probability come as a rude shock to the shareholders of Glaxo (India). The most recent example was when SmithKline Beecham, the parent, set up a 100% subsidiary in India and transferred all its existing brands to the new entity. In the process, SmithKline Beecham Consumer Products, a listed company, lost ownership of its 'Eno' brand. The company was then asked to pay a royalty on sales to the 100% subsidiary. The shareholders of the company saw the value of their stock plunge after these moves were taken.
Glaxo, however, has tried to cool off the possibility of any alarm by stating that the plan is not likely to be implemented anytime soon. Moreover, the company has stated that as and when the plan is implemented it will be done so in a 'sensitive' manner. Glaxo's plan of setting up subsidiaries in India will have to be implemented very carefully lest it antagonise its existing shareholders.
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