Over a decade in financial journalism, I have specialized in covering news that matters to India Inc. and its stakeholders, including developments at India's largest corporations and and MNCs. The subject of my writing has been analysis of strategy, financial performance, M&A and fundraising activity, consumption behaviour and emerging trends in management and leadership. Industry verticals that I have written on include oil & gas, power, infra, metals & mining, auto, telecom, FMCG & retail, and start-ups. I also play the role of an editorial lead for proprietary events like the Forbes India Leadership Award and the Forbes India CEO Dialogues. An alumnus of Asian College of Journalism, Chennai and Jadavpur University, Kolkata, I have worked for publications such as Mint, The Financial Express and The Indian Express before this.
To date, yesteryear bollywood superstar Jeetendra has appeared in only one television commercial to endorse a product. That was in the 1990s, for a popular over-the-counter (OTC) energiser capsule for men called ‘30-Plus’. Jeetendra was in his late 40s then, but looked much younger. Though 30-Plus sold like hot cakes, revenues from its sales didn’t justify the exorbitant marketing cost that its maker, a then little-known company called Ajanta Pharma, incurred. (It sold 30-Plus to Dabur for an undisclosed sum in 2011.)
But even before it sold its bestseller, the Mumbai-based listed company—set up in 1973 by three brothers, Mannalal, Purushottam and Madhusudan Agrawal—had been incurring huge losses for many years. In June 2000, it was trading at just Rs 24 per share on the Bombay Stock Exchange with negligible interest from investors. In 2001-2002, it reported a consolidated loss of Rs 1 crore and by the following year, it was reeling under a debt burden of Rs 130 crore. Ajanta Pharma needed a shot of its own medicine, an energiser like 30-Plus. It found its antidote in the new generation of Agrawals: Mannalal’s sons, Yogesh and Rajesh.
“When I entered the business, we were all over the place in the domestic market. We had a generalised product portfolio and were trying to cater to the GP (general physicians) market, which was and even now is a big boys’ game [with companies like Sun Pharma and Cipla in the fray],” says Rajesh. “There is constant onslaught in terms of price competition in the daily prescription-based market. Very early on, I realised that this is not the way to make any progress. We had to differentiate ourselves and focus on specialties.” Rajesh chalked out a new business model: Ajanta would make generic drugs that were unique in their formulation and dosages, and create specialty brands (medicines that can only be prescribed by specialist doctors and not general physicians) in four areas—ophthalmology, dermatology, cardiovascular and pain management—where the competition was less intense.
It was Yogesh who convinced the company’s lenders in 2003 to open their wallets. After all, Ajanta needed funds to invest in new R&D and manufacturing facilities. Initially, bankers were apprehensive. In early 2003, Ajanta’s lenders, including officials from the State Bank of India and Exim Bank, gathered at a room in the Taj Mahal Palace in south Mumbai to hear Yogesh out. “I made a presentation for an hour-and-a-half about where we were earlier and how we planned to transition,” says Yogesh. “The investors asked us to step out so that they could discuss the plan. About 45 minutes later, they said they believed in our strategy and were willing to extend the loan facility we needed.”
With a strategy and funds in place, Ajanta has built a Rs 418 crore-business in India and is ranked 36 out of the top 300 companies in the Indian pharmaceutical market. Today, it stands net debt-free, with a cash reserve of around Rs 100 crore, according to its chief financial officer Arvind Agrawal. (Though he shares the same surname, he is not related to the founders.) Today, around 70 percent of Ajanta’s portfolio comprises products that it has made available for the first time in India, either in the way they were formulated or in terms of their delivery mechanism. Some examples of the first-to-market products that Ajanta has produced include Gatifloxacin, an eye solution that was available only as an oral dosage till Ajanta launched it in the form of eye drops; and Met XL, a cardiovascular drug that was available in dosages of two to three capsules a day till Ajanta launched a version of the drug that needed to be taken only once a day.
Since 2004, it has gradually been expanding to more emerging markets in Africa and Asia (which Yogesh oversees) with products that include antibiotics and anti-malarial and orthopaedic drugs. It is the first Indian generic drug-maker to secure pre-qualification from the World Health Organization for its anti-malarial drug, which means that international agencies like Unicef can 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 our existing employee base. So some people were given leadership 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 around 5,000 people in India and abroad.
Its workforce has evolved to keep up with the times. Before it changed its business model, Ajanta had some 600 medical representatives in its domestic pharmaceutical business team. The Agrawals transformed the unit into a specialty marketing division that would only visit specialist doctors and educate them on the benefits of Ajanta’s first-to-market drugs. Today, it has around 3,000 medical representatives in India, each doing an average business of Rs 15-20 lakh per year.
The company also took a conscious decision to build its own marketing team in countries where it had a presence, and not rely on third-party distributors to promote its products. As a result, it has a field force of 572 people across 35 countries. “Many pharmaceutical companies have tie-ups with distributors who take care of product marketing. But they charge their own margins and deal with multiple products. In contrast, my medical representatives are single-mindedly responsible for ensuring my product moves,” says Arvind.
In terms of manufacturing capacity, Ajanta has four plants, three in Aurangabad (Maharashtra) and one in Mauritius. One of the three Aurangabad units is approved by the United States Food and Drug Administration (USFDA) and The UK Medicines & Healthcare Products Regulatory Agency. (This means that drugs produced from this unit can be exported to the UK and US.) It has recently commissioned a facility in Dahej, Gujarat. According to Arvind, this unit will start commercial operations by FY17. Another plant in Savli, Gujarat, is also in the pipeline. To date, Ajanta has invested around Rs 300 crore towards capital expenditure and R&D, and plans to invest another Rs 400 crore over the next two to three years which, according to Yogesh, should be enough to take care of its aspirations in the US and emerging markets.
Promoters and analysts tracking the company agree that the next big thing for Ajanta will be scaling up its presence in North America. The drug maker has filed 25 Abbreviated New Drug Applications (ANDAs), which is an application to the USFDA, requesting approvals to market new formulations of existing drugs. The expected market size that it will cater to based on the applications already filed is $1.5 billion. Its latest investor presentation states that it intends to file at least six ANDAs per year. According to Yogesh, Ajanta will eventually aim for a 20-25 percent share of this market. A March 2015 report by Anand Rathi Research states that Ajanta’s US business could grow exponentially to be worth $8 million (around Rs 50 crore) by FY17.