In one of the quarterly sales review meetings of Ranbaxy in 2001, Sanjiv Kaul stumbled upon a nondescript name of a rival company for the first time. “It was hygiene for a pharma company to look at the top three closest competing brands,” recalls Kaul. Though the name didn’t ring a bell, it stirred the curiosity of the honcho who had spent over two decades at Ranbaxy in key positions, including country head for China and regional director for India and the Middle East.
Kaul sought details of the six-year-old pharma startup. The response was dismissive. “It’s a fly-by-night operator. You don’t need to worry,” was how the sales manager making the presentation tried to assuage his jittery boss. Kaul nodded. The topic, and rival, were forgotten. For six months.
In another sales review presentation two quarters later—made by the same manager—it became evident that the ‘operator’ hadn’t yet flown away. Quite to the contrary. “This time the name popped up in two more categories,” recounts Kaul, who was furious. Within the next seven days, a detailed report about the Meerut-based company was tabled. “That’s how I came to know about the Juneja brothers,” he recalls. “They looked promising,” adds Kaul, who quit Ranbaxy and joined private equity firm ChrysCapital in 2004.
Three years later, Kaul backed his instincts and invested in Mankind Pharma, which was then a little under ₹400 crore in revenue. In 2015—after a good eight years—when ChrysCapital exited Mankind by selling its 11 percent stake for reportedly $200 million to Capital International Private Equity Fund, the PE major bagged a windfall: A return of 13 times. The deal valued the pharma company founded by Juneja siblings Ramesh and Rajeev at around $1.8 billion. The reason for a jaw-dropping valuation was not hard to fathom. Mankind had grown at a compounded annual growth rate of nearly 20 percent for the last five years, and closed fiscal 2015 with revenues of ₹3,500 crore.
Fast forward to 2018. Three years after exiting from Mankind, ChrysCapital decides to reinvest, and with a bang. Billed as the largest PE investment in Indian pharma, Mankind was valued at $3.5 billion, and the PE firm reportedly picked up a 10 percent stake for $350 million. Mankind, which caught the imagination of the nation by roping in Sunny Leone for its condom brand Manforce, closed fiscal year 2019 with a top line ₹5,000 crore. Ramesh Juneja is worth a cool $2.3 billion as per the 2019 Forbes India Rich List.
Kaul is thrilled. “The Junejas changed the rules of the game by cracking the bottom of the pyramid, which no pharma company could achieve,” he says, alluding to the strategy of the price warrior company to reach out to every nook and corner of the country by rolling out blockbuster over-the-counter and prescription brands such as Nurokind, Moxikind, Telmikind, Manforce, Prega News and Unwanted 72. “If Coke can be present in a village, so can Mankind,” Kaul recalls one of the arguments made by Ramesh Juneja backing his ambitious pan-India plan to be an accessible and affordable brand.While Mankind has morphed into India’s fifth-largest pharma company by sales, it traces its roots to 1984 when the three Juneja siblings started a formulation business called Bestochem. “We just had ₹1.5 lakh to start,” recalls Ramesh Juneja, the first-generation entrepreneur who worked as medical representative with pharma company Lupin for eight years. The trigger to start the company was simple: Make medicines affordable to a vast section of the population. And the strategy to achieve the objective was effective: Focus on antibiotics and painkillers, and sell them at almost half the rate offered by MNCs. “We didn’t have enough money. So we targeted the bottom of the pyramid,” says Juneja, who criss-crossed smaller towns and villages across Uttar Pradesh on his Yezdi motorcycle selling his medicines. “The experience of being a medical representative came handy,” he grins.
The business strategy remained the same when Ramesh, along with his brother Rajeev, started Mankind in 1995. The only difference was the assets that the duo possessed at the time of starting the company: ₹55 lakh, and a Maruti 800 small car. They also had a vision, a dream to make it big. “We had nothing to lose as we started from scratch. So why fear,” says Juneja.
The fearless streak of the brothers and the alarming pace at which Mankind grew made rivals take notice. “The first time a big buyout offer was made to us was in 2007 by Pfizer,” claims Juneja, adding that the deal didn’t materialise as the company wanted a 51 percent stake, but the brothers didn’t want to cede control. The Junejas now own 80 percent of the company, which gets over 10 percent of its revenues from sale of vitamins, another 10 percent from antibiotics, 20 percent from drugs dealing with lifestyle medicines, and the rest from other verticals.
The success of Junejas, reckon marketing experts, has a lot to do with the way they approached the pharma business. “If you look at the 4Ps of marketing, Mankind has grown by focusing on three: Price (lower than the MNCs), place (Tier 2 and beyond) and positioning (using mascots like Sunny Leone and Amitabh Bachchan for OTC),” says Jessie Paul, founder of marketing advisory firm Paul Writer. This strategy, she adds, is probably an outcome of the fact that Junejas were initially distributors rather than producers. This is different from the bigger pharma players who spend billions on R&D, and a good way to sidestep them. “They have also been clever in choosing their market segments,” she says, adding that having a big sales and marketing investment helped them grow in India.
Mankind’s strategy to focus on prescription drugs to expand market share also worked brilliantly. The Indian pharma market, says N Chandramouli, chief executive officer of brand insights company TRA Research, is a price-sensitive one. Though the influencer in this segment is the doctor, with increasing patient knowledge and awareness, recommending a costlier product can cost the doctor dearly. “So Mankind’s price positioning has been apt, and the reason for its growth,” he says, drawing a global parallel. The original ‘cheap’ generics campaigner in the global market, Chandramouli adds, has been Cipla and has been credited as the Indian Robinhood of drugs by the UN, when it helped bring down the cost of ARV drugs for AIDS to a dollar a day.
Roping in Amitabh Bachchan was another masterstroke to tackle the tag of being ‘cheap’ due to its low-priced medicines. Bachchan’s mass appeal has added heft to the brand’s credibility and trust. “His endorsement projects the trust of Mankind, and it is something that has not been attempted in this category so far,” he says.
Juneja, for his part, concedes that the perception of being ‘cheap’ is something that played on his mind initially. Quality, though, wasn’t compromised. “Pehle kehte the Meerut ki company hai, iske standards doosre honge (people used to take a dig by saying it’s a Meerut-based company, so it might have a different standard),” he smiles. The perception changed a bit when Junejas relocated their headquarters to Delhi in 2002.
A far bigger challenge for the Junejas, going ahead, would be to maintain the brisk pace of growth in a challenging market. While revenue for March ended 2018 stood at ₹4,800 crore, it increased by just ₹200 crore the next fiscal. “2018-19 was not very great. We grew by 5-6 percent, compared to around 14 percent, which we had been clocking,” Juneja concedes.
In a tough micro-economic environment and slowdown, what saved the day was exports. Though overseas sales now contribute a little under 4 percent to revenues, the target is to take it into double-digits over the next few years.
A steady uptick in exports is what Arjun Juneja, son of Ramesh Juneja, is aiming at. “We have to be more ambitious and aggressive on this front,” says the director at Mankind. The company, he lets on, has started operations in the US and Asian markets, and is bullish on expanding overseas. “That’s the next leg of growth and opportunity for us.”
In a tough and low-cost market, pressures on margins are high. “Also, most of their products are not proprietary, which makes entry barriers low and innovation merely remains in price, positioning and communication,” says Chandramouli.
Juneja is backing his instincts. “I am a simple science graduate with no fancy degrees or high intellect or intelligence.” But if the company has managed to reach its present scale from a modest beginning, then there should be no looking back, he reckons. “We will grow without any fear.”
Kaul backs the Junejas. “I knew I was backing a winner when I first invested in Mankind,” he says. “They will stay a winner.”