Monday's approval, industry analysts say, could also see a host of other big names--like Bristol Myers Squibb--zero in on the Indian market via a wholly-owned subsidiary. No official confirmation of this could be obtained.

Pfizer Inc's proposal was being handled by the Mumbai-based Ambit Corporate Finance Pte, headed by Ashok Wadhwa. Senior Pfizer officials confirmed that the proposal had been approved, but it is unclear whether the approval is conditional or restricted in nature.

Pfizer's proposed 100 per cent subsidiary would be primarily engaged in three areas--exploring opportunities for sourcing and procurement of raw materials, bulk drugs and formulations from India, expansion of clinical research activity andmanufacturing of new molecules. It will also be a service provider to other global Pfizer affiliates.

Industry analysts, however, expressed moderate to deep concern on what they claim were the "worrying side-effects" of the clearance. "The possibility of certain new research molecules being brought in through the new subsidiary is certainly disturbing. We expect the Pfizer stock to dip below the Rs 1,100 level tomorrow," an analyst with a leading foreign brokerage said.

"What is questionable is the need to bring in new products as also route sourcing activities via this 100 per cent arm. The Pfizer scrip is bound to witness a downward circuit," an analyst added.

The Pfizer scrip which opened the day at Rs 1,219, moved to a high of Rs 1,279, before closing at Rs 1,175 on Monday on the Bombay Stock Exchange (BSE). The counter clocked volumes of 82,655 shares.

Industry analysts also explain that Pfizer India's current product portfolio features only one-sixteenth of the American giant's overseasformulations and it is quite natural to expect the patented blockbusters to come in via the 100 per cent subsidiary.

"As per IMS data, Pfizer India is the second fastest growing pharma company in India, with volume growth of 18 per cent. This is despite the fact that currently Pfizer India markets only around 25 products from the American multinational's basket of over 350 drugs. So, obviously in the new circumstances, the current valuations could be affected," an analyst said.

INSIGHT
Larger issues involved

Although there was nothing to stop FIPB clearance for Pfizer Inc's move to establish a 100 per cent subsidiary, this development will affect the Pfizer Ltd stock. The market sentiment was just reviving in Pfizer following the restarting of its B complex business, but now this may weaken.

The issue, however, goes beyond Pfizer. There are norms governing foreign companies seeking to set up new fully-owned subsidiaries when they already have joint ventures. But there are nonegoverning foreign companies with existing listed subsidiaries setting up 100 per cent subsidiaries.

The latter category can have a free run to the detriment of the minority shareholders. A better way, from the point of view of minority shareholders' interests, would have been to make an open offer to the minority shareholders and delist the stock. That way shareholders would be adequately compensated.

Aaron Chaze