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Lupin's appetite for growth

Lupin realises an acquisitions-driven strategy is essential for it to reach its targeted turnover of $5 billion by 2018

Sourav Majumdar
Published: Aug 21, 2015 06:41:41 AM IST
Updated: Aug 19, 2015 05:10:41 PM IST

It’s always a tough call for companies to decide on the need—or otherwise—for an acquisitions-led growth strategy. Oftentimes one has seen business owners examining the pros and cons of potential acquisitions and then going back to an organic growth strategy, keeping in mind current compulsions, cash flows and the impact an acquisition could have on the balance sheet. In this context, Lupin Ltd’s recent, and aggressive, acquisitions-driven growth recipe deserves special attention. The company, founded by Desh Bandhu Gupta in the ’60s, is India’s third largest pharma company by sales, and the next generation of the Gupta family—CEO Vinita and MD Nilesh—are currently busy implementing what is arguably one of the more aggressive buyouts-driven growth plans seen in the pharma sector. The target the two have set for themselves is daunting: A $5 billion turnover by FY2018. In rupee terms, it means the company will have to vault from a current turnover level of Rs 12,600 crore to Rs 31,875 crore in three years. And Lupin realises that if this has to happen, acquisitions would have to be an integral part of the company’s plans.

Lupin's appetite for growth
The first big steps have already been taken in that direction. The company announced three important buys in July, which includes a hefty $880 million one of Gavis, an American generic drug maker, which has become the largest acquisition by an Indian pharma company, bigger than the Dr Reddy’s-Betapharm deal of over $560 million in 2006. The Gavis acquisition will provide Lupin a stronger foothold in the American market, which accounts for 45 percent of Lupin’s FY15 revenues, apart from bulking up its portfolio with specialised products.

The Gavis buy, as Associate Editor Aveek Datta writes in the cover story, is an important piece of a broader ‘string of pearls’ strategy drawn up by the pharma major, whereby smaller companies will provide flanking support by way of a mix of specialised products, new markets and technologies. Not surprising then that the Guptas are already talking of further acquisitions to the tune of another $500-700 million over the next year. That the buyouts strategy has gathered serious momentum is also borne out by the fact that half of the 12 companies Lupin has acquired thus far have been bought over the past year-and-a-half. The strategy seems to have pleased shareholders, particularly billionaire investor Rakesh Jhunjhunwala, who has given the Guptas a firm thumbs-up.

This issue also brings you the coveted Forbes list of America’s Top 200 Colleges. The listing and the stories show that colleges and universities in the US are increasingly focusing on providing greater value to students, given the steep cost of higher education. And importantly, many are proving to be excellent launchpads for the next generation of entrepreneurs.

Sourav Majumdar
Editor, Forbes India
Twitter id:@TheSouravM 

(This story appears in the 04 September, 2015 issue of Forbes India. To visit our Archives, click here.)

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