A Classic Turnaround Story

Creating tailor-made solutions by understating the patients’ unfulfilled needs through continuous innovation helped this Mumbai-based drugmaker to come back to limelight. And, it created real niche with these innovations in each of its markets and could successfully ward off the competition, including big multinationals, in those product segments to a great extent.

The Agrawal brothers of Ajanta Pharma — Yogesh and Rajesh could achieve this 360 degree turn around of the family business, which was saddled with huge debt and declining growth, in the last 10 years. Ajanta Pharma’s revival in the stock market too was significant in the last three years.

Ajanta Pharma, as any other old-generation Indian generic pharmaceuticals company, was making most of the generic drug formulations, active pharma ingredients or bulk drugs, over-the-counter products including herbal brands. Its sales revenue was mainly from government supply of generic medicines or institutional sales, some from exports of bulk drugs and certain brands that sold in the OTC health and energy space. While the profit from most of these generic market segments was negligible, the government supply that was accounted for at least 30 per cent of the business was completely uncertain.

But, the new generation promoters were not ready to succumb to the hassles of the conventional business model. The management degree holders decided to make a difference. And, the first thing they wanted to do was to undo several of the traditional businesses, when they took over in the early 2000.

“It was painful and risky decisions to undo all these, especially discontinuing the age-old API business and completely withdrawing from government sales,” recalls Yogesh Agrawal, the current managing director. In 2001-02, the company had sales of around Rs 85 crore with an annual loss of Rs 1.09 crore and a debt of Rs 125 crore. Its sales in 2015-16 touched Rs 1567.15 crore. The BW-Cedar Management Survey shows that its average of last 3-year CAGR of sales and profit were 22.60 per cent and 59.29 per cent respectively. The company’s market value steadily grew and the growth in its return on capital employed (ROCE) was 53.89 per cent on an average in the last three years.

It was thus a rebirth for the maker of India’s oldest OTC herbal energy pill 30-Plus, with the new strategy of differentiated products. It discontinued several of its me-too products in the general therapy area and the company discontinued its OTC and herbal portfolio too. After zeroing on the speciality drugs strategy, which demanded additional investment in research and development and manufacturing, the bigger challenge was the limited resources. This forced the aspiring young management to limit their focus on four key segments—ophthalmology, cardiovascular, dermatology and pain management in India and niche generic products in the unregulated and semi-regulated markets outside. It had to expand research and upgrade and set up new manufacturing facilities.

“We had to take additional risk of borrowing more to pursue the new strategies. But all these efforts were rewarding,” says Agrawal.