With manufacturing operations in seven countries and a presence in 40, Ranbaxy seems well on its way to realising its objective of becoming an MNC by 2004. But plateauing domestic sales, the lack of deep pockets, and potential internal strife could throw a spanner in the works.

By Suveen K. Sinha

D.S.BRAR: CEO Ranbaxy Labs

Davinder singh brar, the 49-year old chief executive of Ranbaxy doesn't like the question that's just been posed to him, but he is ready for it. The query refers to reports about the exodus of senior managers in the 24 months he has been chief executive. Instead of answering the question directly, Brar pulls out a sheet of paper from the top left draw of his uncluttered desk. ''This,'' he says, pointing to the sheet which has the names of executives written by hand, ''is my balancesheet of attrition''. There are arrows-some pointing north, others south-or equal to symbols against each of the names. The direction of the arrows signifies the impact of the person's departure on Ranbaxy: a north-pointing arrow, for instance, means the manager's exit was actually a good thing for the company. There are only two south-pointing arrows in Brar's list of twelve. ''It's not as if we've been drained of a reservoir of talent,'' says Brar. ''I am not too concerned.''

It's a pity the man can't display the same sang-froid when it comes to the issue of Ranbaxy's financial performance. The company's revenues in 2000, were, at Rs 1,745.8 crore, just 11.9 per cent higher than the previous year's Rs 1,559.82 crore. The first quarter of this year brought more bad news: according to an ORG-MARG survey of the pharmaceutical industry, year-on-year growth for Ranbaxy came down from 20.6 per cent in September 2000, to 1.3 per cent in February 2001.

Analysts have been quick to punish the company: JM Morgan Stanley has pruned earnings estimates for 2001 and 2002 by 8.8 per cent and 11.2 per cent respectively citing ''a disappointing 2000 and concerns over domestic performance''.

Speculations abound on Ranbaxy's ability to meet its much-articulated target of $1 billion in revenues (Rs 4,704 crore) by 2004. Brar is confident it will: he claims Ranbaxy will end 2001 with over $600 million (Rs 2,820 crore) in revenues, a 20 per cent jump over last year. The milestone is not merely a matter of honour. It has a greater significance in the context of the company's much-vaunted strategy to become a global player in the pharma industry. That strategy is built around three investment-intensive initiatives: introducing a clutch of drugs in the US market soon after they go off patent; new drug delivery systems (NDDS); and new drug discovery research (NDDR).

Global, Ranbaxy can already claim to be, at least in parts: 41 per cent of its revenues in the first half of this year came from countries outside India; the company has manufacturing facilities in seven countries, and a presence in 40. But it will have to become a significant player in the US market which accounts for 47 per cent of the world pharma market, to really lay claim to that word. That would require Brar to address a range of issues from spurring sales in the domestic market to retaining talent to managing finances optimally. And while both he and his predecessor, the late Parvinder Singh's sons Malvinder and Shivinder insist that there are no 'succession-issues' at the pharma major right now, the fact remains that the brothers Singh are the largest shareholders in Ranbaxy with a 32.10 per cent stake; ironically, neither sits on the board. While Malvinder is Director (Global Licensing & Business Development) at Ranbaxy, Shivinder looks after Fortis, the healthcare company in which the family owns an 85-per cent stake (Ranbaxy holds the rest). Significantly, at the press-preview of Fortis' state-of-the-art hospital in Mohali, the PR-people were anxious to project the Fortis experience as part of the 'grooming-process' for the brothers Singh, especially Malvinder, to move on to better things at Ranbaxy.

Globalisation: The Story That Was And Will Be

Ranbaxy's tryst with globalisation really began in a 1993 brainstorming session in Jaipur, when, stung by the criticism of the then head of HR, Purnendu Sarangi-he likened Ranbaxy to a small time trader sending a few consignments abroad-the company's senior management came up with the mission statement, a framed copy of which adorns every Ranbaxy exec's office today. The numerical part of the statement was the turnover target of $1 billion by 2004; the non-numerical one was the desire to become an ''international, research-driven, pharmaceutical company''.

It wasn't that the company hadn't ventured beyond India before that: it had three joint-ventures, one each in Nigeria, Malaysia, and Thailand, by the mid-1980s; by then, Ranbaxy had renamed its exports division its international one; and in 1987 Brar, then heading the pharma division, visited the US to explore the possibility of venturing into that market. But the joint-ventures were adventitious offshoots and Brar's US visit only served to remind him that while there was a market for generics-drugs not protected by patents whose names were, often, indicative of their chemical structure-in that country, Ranbaxy was way behind American companies in the business in terms of quality, manufacturing practices, and adherence to standards.

But in 1993, things were different: that was the year Parvinder Singh gained control of Ranbaxy, after a messy two-year family fracas. A visionary in many ways, Singh realised that India would have to accept product patents, sooner than latter, and that the good times-Ranbaxy was growing by well over 40 per cent in the late 1980s and early 1990s-wouldn't last. Becoming an international, research-driven company, Singh knew, wouldn't be easy; besides, building strengths in R&D would (and still does) take time. Ergo, he decided to focus on the global market for generics as a sort of strategic add-on. The strategy came at a cost, but the lead-times involved were far shorter than those involved in, say, NDD. And it would help Ranbaxy establish beach-heads in important markets.

Singh died in July 1999, but Ranbaxy's vision and strategy have remained unchanged. Today it is present in 40 countries; it has marketing offices in 22, and manufacturing facilities in seven. Circa 2000, India accounted for the single largest chunk of the company's revenues, 30 per cent, but Brian W. Tempest, the president of the company's pharmaceuticals business, believes that could soon change: ''In three-four years, the US will overtake India as the single largest region for Ranbaxy.'' Tempest's boast may be based on the performance of Ranbaxy's two US subsidiaries, Ranbaxy Pharmaceuticals Inc, and Ohm Laboratories Inc. Both declared their first profits last year.

Ranbaxy's global play envisages the company entrenching itself in Germany, UK, France, and Brazil by 2004. Brazil has been a success story for Ranbaxy: it was the first Asian company to have its generics approved there. ''We have 35 products in Brazil now. In five years, this number will go up to 150,'' says Malvinder Singh. That success is spurring the company to look at other markets in South America. The move makes great business sense: 95 per cent of the $20 billion (Rs 94,000 crore) South American pharma industry is generics, and it takes just six months to get a drug approved in most countries in the continent as opposed to 24 months in the US.

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