How Ashok Modi planned aggressive growth without stressing the balance sheet
Ahmedabad-based Torrent Pharmaceuticals has put its business back on the fast track in the last 3-4 years, thanks to investments in both inorganic and organic growth opportunities. However, maintaining the company’s liquidity position in order to strike such opportunities has been the company’s biggest challenge. Ashok Modi, the company’s CFO, accepted the challenge and devised a bright and intuitive financial plan to help the company.
Modi used his rich experience as a Torrent group veteran and his sharp insights on financial management to align the company’s objectives with his unique inorganic restructuring strategies. Taking over as CFO of Torrent Pharma in 2014, after several years of experience in the Group’s power arm, Modi wasted no time learning the ropes in the new industry. Within six months into his new responsibility, he successfully managed Torrent Pharma’s first acquisition deal kickstarting its inorganic growth plan.
Torrent Pharma acquired 100 per cent stake in Zyg Pharma in May 2015. Zyg, a privately held drug maker of Encore group, with manufacturing capabilities for various dermatological formulations such as creams, ointments, gels, lotions and solutions, was purchased for an undisclosed amount. The acquisition not only helped Torrent to get into the new area of dermatology drugs but also created a big manufacturing platform as Zyg had been a manufacturing partner to several international companies both in the regulated and unregulated markets. With Modi’s financial strategies in place, the company could manage this acquisition fully through internal accruals. Soon after the Zyg buyout, it bought the large India business portfolio of Elder Pharma.
Torrent Pharma, part of the $3 billion power-to-pharma Torrent Group, posted an average 166.28 per cent growth in revenue and 466.88 per cent growth in profit between 2012 and 2016 on the back of expanded sales in India and strong US sales. The improved efficiency in the manufacturing process and a better product mix also helped the company maintain a much higher rate of CAGR during this period.
The company could also take a risky but informed decision to test the low competition opportunities in the US market with the support of its innovation capability.
Several successful launches in the US market led to exceptional growth in profit. It also achieved India business growth at 15 per cent despite impact of hygiene improvement measures and discontinuation of promotional schemes. The company also launched two biosimilars in India, to increase focus on specialty portfolio. “The key factors that helped the company to get figured in the fastest growing companies during the last four years include the successful integration of Elder portfolio and strong execution of low competition opportunities in the US,” says executive chairman Samir Mehta.
“We also focused on building larger brands in India and Brazil and a continued improvement in efficiency across the value chain including field force productivity,” he says.
Modi strongly believes that efficient cost management and maintaining a better liquidity position would further help leverage the existing capabilities thereby enhancing growth and profitability.