GUNNING FOR THE SUN

Sun Pharma’s two-pronged strategy – of making low-priced acquisitions and its cost control mechanisms – enabled it to run effortlessly ahead when others in the sector were panting during FY09!

Once considered ‘destined for greatness’, Wockhardt and Ranbaxy are bed-ridden today when it comes to operational excellence and India’s pharma sector, once considered immune to downturns, stands battered. So is it all bad for the bigwigs in the sector? Not really. Sun Pharmaceuticals has surprised everyone with its mind-boggling performance even in a recession- hit FY09!

Here are some numbers that stand testimony – while most players saw a dip in revenues and profits, Sun Pharma grew its topline by a smashing 27.3% y-o-y to garner Rs.4,272.3 crore, and its bottomlines by another handsome 22.2% y-o-y to touch Rs.1,817.8. So what enabled this $4.5 billion giant to take control in a situation when goliaths around the world were crumbling to the ground? We asked Uday Baldota, VP – Investor Relations, Sun Pharma, about the most critical strategies that help Sun Pharma beat the beatdown and he outlined two of them, “Success at acquisitions and cost leadership…”

True. In the recent past, Sun Pharma has proven critics of M&As wrong, having acquired 14 distressed assets over the years (at low prices) and turning them into profit-churning machines. And these turnarounds, which helped Sun to diversify into new drug segments, are showing signs of being the key drivers of revenues for the pharma major today. For example, when it laid hands on Dadha Pharma (Tamil Nadu), Sun entered the oncology space. With purchase of Milmet Labs, they acquired expertise in the opthalmological space and with Valeant, gained entry into the controlled substances niche. And if its $454 million Taro deal comes through (as per Baldota, “The deal is still on, with some court decisions awaited.”), Sun will get another headstrong entry into the dermatological market.

Besides, Sun has always remained a cost leader in the generics drugs platform. As Baldota reveals, Sun’s net operating margin is a tremendous (43%), which for the other top ten pharma players, is only a modest 10%! Sun also doesn’t believe in over investing in R&D (its R&D budget allocation is only 8% of revenues, while that figure for the industry stands at a much higher 14-15%)! Further, unlike major drug majors, it faces no danger of patent expiry, as Baldota clarifies, “We don’t have any problems of patent expiries as ours is a generics company…” Yes, one can claim that cost-control has been a key reason for Sun’s ultra-superior bottomlines even as the slowdown monster was gobbling-up profitability all around. “Focus on costs has remained a top priority for us (even) in good times…” confesses Baldota. For some, the year gone by looked duller than ever, but we guess that for others, the ‘Sun’ just didn’t stop shining!

Steven Philip Warner

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Why Finmin fears El Nino?

Pranab mukherjee is in a dilemma these days – should he allow the fiscal deficit to soar high or should he apply brakes and impose some degree of fiscal discipline. It’s a tough choice for all that the aam aadmi wants is a popular budget (not using the term populist budget as it sends negative connotation). Thanks to the accelerated public spending and a dwindling revenue collection, the fiscal deficit for the first month of FY 2009-10 has shot up to 16.3% of the projected full year budget deficit of Rs.3.32 trillion. The irony is that even this figure is elusive as it doesn’t take into account the off budget liabilities like the fertilizer subsidy and compensation to state-run oil companies. On a comparative basis, the total spending in April 2009 amounted to Rs.662.17 billion (up 43% from Rs.463.33 billion in CPLY) while the net tax receipts fell 32% to Rs.74.62 billion from Rs.109.63 billion last year. In fact, the tax GDP ratio, which had seen a steady rise through the boom years slipped to 11.4% in FY 2008-09 from a peak of 12.3% a year earlier. Economic think tank Centre for Monitoring Indian Economy (CMIE) attributes the lower tax collection to post-budget announcement of cuts in excise duty and service tax. The government, in its interim budget, had pegged the gross fiscal deficit at 5.5% of the GDP (lower than the 6.1% ratio in 2008-09); but given the scenario, the ratio is expected to remain higher than the budgeted estimate in 2009-10. “There is a possibility that India’s fiscal deficit would increase by 1% of GDP from the level expected by the interim budget,” forecasts the S&P report. El Nino can possibly favour the Aussies in the upcoming Ashes Series but for the finance minister, it can possibly shower fresh bout of trouble as he strikes to balance fiscal prudence and populism.

Gyanendra Kashyap

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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For the patrons of smiles...

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For the first multiplex in India, service has been the key. And PVR still believes that best service on their part and great experience on part of the consumers is the only way to their success, finds Pallavi Srivastava

This certainly is not the best of the times for Rahul Singh, Senior Vice President, PVR Ltd. The face-off between distributors and film makers is taking its toll on him, at least it appeared to be so when we met him over his morning cup of coffee. But even then, his smile had not left his face. And why not, after all, his company banks on ‘Bringing smiles’ to its customers. Thirteen years ago, when PVR started its first multiplex in 1997, the vision was to enhance the movie-goers cine-watching experience and they claim to have lived up to it. Of course, compare the multiplex retail chain’s first mover advantage in the segment, and its current pan India presence with 26 theaters, and you’d agree that PVR has indeed come a long way. And its the unswerving commitment and relentless efforts of small cogs like Rahul to enhance the giant wheel of the customers cine viewing experience that have played a vital role in this achievement.

Like most other senior executives of PVR, Rahul begins his day at office by sifting through the previous day’s financial and operational figures, followed by checking his appointments scheduled for the day. But his critical job is to follow up the problems occurring at any of the 26 PVR Cinema theatres and resolve it as soon as possible. Asked whether he finds the job very stressful, he gently shakes his head (with a smile intact of course!) and says he draws his inspiration from boss-man Ajay Bijli. “Our CMD believes that there is nothing more exhilarating than seeing patrons coming out smiling from our cinemas and we are committed to it,” stresses Rahul.

Interestingly, at PVR, the company claims to not only treat its patrons like kings, but also the employees. The general philosophy that prevails in the company is that the employees who deliver services are the only ones who can improve it. That is why every unit in PVR has a BODGI box (Box of Damn Good Ideas) where employees put in their ideas to improve processes or systems leading to service or operational excellence. Rahul who leads a team of 1500 energised members, points out that these BODGI boxes bring in great innovative ideas and help foster a feeling of belonging among employees.

When asked about whether the name ‘PVR’ comes to their rescue while dealing with customers, Rahuls immediately answers in the affirmative. “Of course!” he says, explaining that since patrons are sure of their PVR experiences, many potential problems are automatically averted. To ensure that this perceived value remain intact, PVR employees are encouraged to always remain on their toes to help and service customers. “We cannot be complacent in this competitive market or rest on past laurels. I would like PVR to be always reckoned for the quality of service it provides and for that, living up to the expectations is just not enough. We need to surpass it more often,” says Rahul passionately. This apparently is the qualitative difference that PVR bets big on to differentiate itself from rivals.

Segmenting its offerings is another recent strategy of PVR to cater to the diverse needs of consumers. They’ve launched brands like PVR Premiere targetted for the metros and PVR Talkies for Tier II and Tier III cities. Then there’s also the focus on complete retail entertainment to enhance the overall service experience of customers. Rahul sites an example of the new ‘Blue-O’ (a 24 lane bowling alley) at its theatre in Ambience mall, Gurgaon. It claims to provide unique entertainment to customers, combining a world class bowling and movie experience.

We caught the picture perfect service manager off guard, when we enquired how he spends his after-office hours. He revealed that he was in fact a fitness freak. “I always make it a point that I work out at least 4 times a week,” he admits shyly, before the greatest religion in India surfaces in our talks. Avers Rahul, “I am a great fan of cricket and I am completely hooked to IPL. My favourite teams are Deccan Chargers and Delhi Daredavils.” Besides, he says, “I love reading management books,” and the latest one in his hand is The Ice-Cream Makers. That’s the PVR flavour, we hope!

Pallavi Srivastava

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Reliving the up-close and personal confidence

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Close Up Confidence was the re-launch campaign for the HUL brand which was facing stiff competition from Colgate and low-end players like Anchor, Babool, et al. The campaign, which had a retro feel to it (a la K. L. Saigal style) was a run-away hit and Close Up became the most recalled brand that year. New ‘tingly red’ variants and the fresh campaign worked wonders. The toothpaste increased its share from 11.7% in FY06 to 12.1% in FY07 and 12.7% in FY08.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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