New Delhi, Dec. 1: Pharma majors Sun and Ranbaxy must sell some of their brands to get approval for their mega merger, according to the Competition Commission of India (CCI).

The watchdog feels the $4-billion deal, struck some seven months back in April, violates competition norms.

When the merger proposal went for its approval, the CCI for the first time put up the deal for public scrutiny.

It is now awaiting a response from Sun and Ranbaxy on the divestment of brands.

Officials said the CCI investigated about 46 drugs in which the merged entity will have a significant market presence.

However, the CCI wants Sun-Ranbaxy to divest not more than 10-12 of those 46 drugs.

In at least four generics, the combined market share of Sun and Ranbaxy is more than 90 per cent. Besides, for about six other drugs the market share of the two companies stands at over 55 per cent.

The drugs cover therapy segments such as neuropsychiatry, cardiology, anti-infectives, gastroenterology, pain and analgesics, dermatology, gynaecology and respiratory. Officials feel that such a huge market presence could be abused.

Sun Pharma has till now obtained permission from the Bombay Stock Exchange and the National Stock Exchange, shareholders and competition authorities in all applicable markets other than India and the US.

The CCI can take up to 210 days to clear a merger. After that a proposed deal is deemed to have been approved. The US regulator will be the next big hurdle for this landmark deal. Over the last few years, the US regulator has cancelled Ranbaxy’s drug licences citing flaws in reporting and testing.

The deal today received a clearance from the foreign investment promotion board (FIPB). The finance ministry said Sun Pharma has got FIPB approval to issue equity shares to the non-resident shareholders and those holding global depository receipts of Ranbaxy pursuant to the merger of Ranbaxy into Sun Pharma.

News of the FIPB approval jacked up Ranbaxy and Sun Pharma shares on the Bombay Stock Exchange today.

At the end of the day’s trading, however, Sun Pharma’s scrip was down half a per cent to Rs 835.25, while Ranbaxy’s was up 4.5 per cent to Rs 616.90.

The Sun Pharma-Ranbaxy transaction, which would create the country’s largest pharmaceutical company, had come under the close scrutiny of the CCI after it was found prima-facie that the “combination is likely to have an appreciable adverse effect on competition”.

The combined entity will have operations in 65 countries, 47 manufacturing facilities across five continents and a significant platform of speciality and generic products marketed globally. Together, it will be the fifth biggest generic drug company in the world.

Under India’s merger and acquisition rules, companies need the CCI’s approval if the combined assets of the two entities are worth more than Rs 1,500 crore or sales amount to more than Rs 4,500 crore in India.