THE SMALL BIG DREAM It took a second generation of Agrawals to change the future of Ajanta Pharma which, from being mired in debt, has seen a 65-fold growth in market value By AVEEK DATTA called ‘30-Plus’. Jeetendra was in his bestseller, the Mumbai-based listed late 40s then, but looked much company—set up in 1973 by three younger. Though 30-Plus sold like brothers, Mannalal, Purushottam and Madhusudan Agrawal—had been TO DATE,T YESTERYEAR BOLLYWOOD hot cakes, revenues from its sales incurring huge losses for many years. superstar Jeetendra has appeared in didn’t justify the exorbitant marketing In June 2000, it was trading at just Rs only one television commercial to cost that its maker, a then little-known 24 per share on the Bombay Stock endorse a product. That was in the company called Ajanta Pharma, Exchange with negligible interest from 1990s, for a popular over-the-counter incurred. (It sold 30-Plus to Dabur for investors. In 2001-2002, it reported a (OTC) energiser capsule for men an undisclosed sum in 2011.) But even before it sold its consolidated loss of Rs 1 crore and by 36 \ Forbes India \ July 24, 2015 the following year, it was reeling under AJANTA PHARMA by focusing on the ‘specialty’ generic Rajesh Agrawal (left), Ajanta drug market and putting an end to the Pharma’s joint managing company’s legacy businesses, which director, with brother Yogesh, who is also managing director included OTC drug sales and of the company, at their supplying drugs to government health Kandivli facility agencies in India and other countries. This was a risky move, but it has paid off. Ajanta Pharma closed FY15 with a consolidated net sales of Rs 1,481 crore and a net profit of Rs 310 THE crore (this is a compound annual growth rate, or CAGR, of 57 percent SMALL for four years since 2011). In terms of net sales, it recorded a CAGR of 31 BIG percent for the same period. This growth has come on a low base, but DREAM the signs are encouraging. Its market It took a second generation value currently stands at around Rs of Agrawals to change the 13,500 crore; this is a 65-fold growth future of Ajanta Pharma in 15 years. which, from being mired Ajanta Pharma is a very small in debt, has seen a 65-fold player in a market full of giants such growth in market value as Sun Pharma, which reported a turnover of Rs 27,280 crore and net for Forbes India for profits of Rs 4,780 crore in FY15. Gori (These figures have been adjusted to reflect the earnings of Ranbaxy Laboratories, which Sun Pharma acquired in March 2015.) Yogesh and Image: Prasad Prasad Image: Rajesh knew they did not have the financial or operational muscle to a debt burden of Rs 130 crore. Ajanta US? I could have had a job there,’‛ compete with the ‘big boys’ in the $31 Pharma needed a shot of its own says Rajesh, 39, Ajanta’s joint billion Indian pharmaceutical market, medicine, an energiser like 30-Plus. It managing director, who has a some of whom have single generic found its antidote in the new management degree from Bentley drug brands that are worth more than generation of Agrawals: Mannalal’s College, Massachusetts. ‚It was Ajanta’s entire operating profit. sons, Yogesh and Rajesh. tough in the beginning, especially the Instead, they focussed on launching ‚When I joined Ajanta (in 2000), situation with creditors and debtors.‛ first-of-its-kind generic drugs. and realised what was going on, I Together, Rajesh and his older The way the brothers have wanted to run away. I thought to brother Yogesh, 43, who is managing channelled the company’s resources myself, ‘Why did I return from the director, changed Ajanta’s trajectory has caught the attention of analysts and 37 \ Forbes India \ July 24, 2015 INDIA’S SUPER 50 COMPANIES investors. ‚The small size of the ‚When I entered the business, we company presents an excellent were all over the place in the opportunity for investment as they are domestic market. We had a poised for rapid growth,‛ says generalised product portfolio and Raamdeo Agrawal, managing director were trying to cater to the GP and co-founder of Motilal Oswal (general physicians) market, which Financial Services. His company, was and even now is a big boys’ through investment products like game [with companies like Sun mutual funds, invested in Ajanta Pharma and Cipla in the fray],‛ says Pharma around three years ago and, Rajesh. ‚There is constant onslaught according to Agrawal, is sitting on at in terms of price competition in the least a ten-fold return on investment. Motilal Oswal continues to invest in Ajanta which, as of June 30, was trading at Rs 1,554 on the Sensex. By 2014-15, Ajanta’s return on equity stood at an impressive 43 percent, while return on capital employed was at 52 percent. It Ajanta Pharma has invested a lot in research reported one of the highest earnings and development facilities, before interest, tax, depreciation and like this one in Kandivli amortisation (EBITDA) margins It was Yogesh who convinced the among its listed peers in the company’s lenders in 2003 to open pharmaceutical sector at 34 percent. their wallets. After all, Ajanta needed The company has managed to achieve funds to invest in new R&D and all this with a small presence in the US manufacturing facilities. Initially, market, which is the golden goose. A daily prescription-based market. bankers were apprehensive. In early third of its sales comes from India, and Very early on, I realised that this is 2003, Ajanta’s lenders, including the rest from emerging countries in not the way to make any progress. officials from the State Bank of India Asia and Africa. Its products are sold We had to differentiate ourselves and and Exim Bank, gathered at a room in in 35 countries, including Iraq, focus on specialties.‛ Rajesh chalked the Taj Mahal Palace in south Mumbai Nigeria, Cameroon and the out a new business model: Ajanta to hear Yogesh out. ‚I made a Philippines. The Agrawals brought would make generic drugs that were presentation for an hour-and-a-half about this turnaround by changing their unique in their formulation and about where we were earlier and how strategy and focusing only on specialty dosages, and create specialty brands we planned to transition,‛ says generic drugs, identifying the right (medicines that can only be Yogesh. ‚The investors asked us to segments, products and markets, and prescribed by specialist doctors and step out so that they could discuss the taking a risk to borrow further so that not general physicians) in four areas- plan. About 45 minutes later, they said they could invest in research and ophthalmology, dermatology, they believed in our strategy and were development (R&D). cardiovascular and pain management where the competition was less willing to extend the loan facility we needed.‛ 38 \ Forbes India \ July 24, 2015 intense. AJANTA PHARMA procure such drugs from Ajanta as part of their global health care initiatives. In the international markets, it has registered 1,445 brands, and is in the process of registering another 1,609. All this wouldn’t have been possible without investing in R&D and manufacturing capacity. ‚After we convinced our lenders about the strategy, the next step was to build a team that was aligned to the new vision,‛ says Yogesh. ‚We knew we had the required talent in-house and decided to build the new team from for Forbes India for our existing employee base. So some people were given leadership Gori positions, others left the company and, yes, some were asked to go.‛ At present, Ajanta, which has its main R&D centre in Mumbai, employs Image: Prasad Prasad Image: around 5,000 people in India and abroad. With a strategy and funds in place, that was available only as an oral Its workforce has evolved to keep Ajanta has built a Rs 418 crore- dosage till Ajanta launched it in the up with the times. Before it changed its business in India and is ranked 36 out form of eye drops; and Met XL, a business model, Ajanta had some 600 of the top 300 companies in the Indian cardiovascular drug that was medical representatives in its domestic pharmaceutical market. Today, it available in dosages of two to three pharmaceutical business team. The stands net debt-free, with a cash capsules a day till Ajanta launched a Agrawals transformed the unit into a reserve of around Rs 100 crore, version of the drug that needed to be specialty marketing division that according to its chief financial officer taken only once a day. would only visit specialist doctors and Arvind Agrawal. (Though he shares Since 2004, it has gradually been educate them on the benefits of the same surname, he is not related to expanding to more emerging markets Ajanta’s first-to-market drugs. Today, the founders.) Today, around 70 in Africa and Asia (which Yogesh it has around 3,000 medical percent of Ajanta’s portfolio comprises oversees) with products that include representatives in India, each doing an products that it has made available for antibiotics and anti-malarial and average business of Rs 15-20 lakh per the first time in India, either in the way orthopaedic drugs. It is the first year. they were formulated or in terms of Indian generic drug-maker to secure The company also took a conscious their delivery mechanism.