f o r    m a n a g i n g    t o m o r r o w
MARCH 12, 2006
 Cover Story
 BT Special
 Back of the Book

Trade Battle
Hots Up

The never ending fight between European Union and the US has taken another twist. The EU has threatened to impose up to $4-billion-worth of sanctions on the US, after the WTO upheld a ruling that the latter failed to end an illegal tax rebate for exporters. Analysts believe that us now has three months to act to avoid the reimposition of retaliatory measures. A look at the flare up.

e-Credit: What Next?
In most developing countries financial service providers are not yet in a position to use modern credit risk management techniques. Many developing economies still need to establish functional credit information systems in order to improve the quality of financial information. Will they?
More Net Specials
Business Today,  February 26, 2006
The Importance Of Being
Kiran Mazumdar-Shaw

She's rich, socially aware, the muse of an entire industry and an emerging voice of India Inc. So, what makes Kiran Mazumdar-Shaw tick?

One day in January, some three months after she changed her company's work timings to 7.30 a.m. to 4 p.m. so that employees could come in to and leave work without spending hours on Bangalore's chaotic roads where the traffic in peak hours can be killing, 52-year-old Kiran Mazumdar-Shaw decided that she had had enough. The state government did not seem bothered by the city's crumbling infrastructure, politicians of various hues were busy taking potshots at N.R. Narayana Murthy, the iconic Chairman of Infosys Technologies, for speaking his mind about just what needed to be done, and things, such as the traffic on Hosur Road that leads up to Electronics City (housing Infosys and several other tech companies), and further down, to Biocon's office, were rapidly spiralling out of control. And so, the Chairman and Managing Director of Biocon went on television and trashed the government. Nothing changed (nothing ever does, a cynic might say), but the incident was another minor milestone in the progression of Mazumdar-Shaw from a mere biotech entrepreneur made immensely rich by an IPO (initial public offering) to one of the few voices of India Inc., and, arguably, its most powerful female one.

If power is measured by its trappings, then Mazumdar-Shaw has it all. Her stake in Biocon is worth Rs 2,059 crore. She is the face of the biotech industry and President of Association of Biotech Led Enterprises (able), an association and industry lobby that promises to do for the biotech industry what NASSCOM, the software industry's equivalent did for it (significantly, Infosys' Murthy was one of the founder members of nasscom and was its Chairman between 1992 and 1994). The Biocon campus has, along with that of Infosys, become a regulation-stop for heads of states and other assorted dignitaries who visit Bangalore. And when the Prime Minister wants to discuss issues related to trade, industry and commerce, Mazumdar-Shaw is among the handful of CEOs he seeks out (others being the likes of Reliance Industries' Mukesh Ambani, HDFC's Deepak Parekh and Infosys' Nandan Nilekani). There aren't too many people in India, men or women, who can claim similar distinctions.

» India's richest woman; her holding in Biocon is worth Rs 2,059 crore
» Founded Biocon in her garage in 1978; capital, Rs 10,000
» President of Association of Biotech Led Enterprises (ABLE), biotech's Nasscom
» Biocon's heads of marketing, R&D, finance and operations have been with the company 20 years
» Biocon started with enzymes, moved to statins, and now focuses on bio-therapeutics, outsourced R&D and clinical research
» Conferred the Padmashri in 1989

Brewing Up A Biotech Empire

The story of how a Gujarati Brahmin girl-important because alcohol is anathema to this community even today-became India's first female brewmaster and brewed up a biotech empire, in a classic garage success story, has entered Indian corporate folklore. Mazumdar-Shaw founded Biocon as an enzyme manufacturer in the November of 1978; the company worked out of the garage in her Koramangala house (it continued to do so for three years); and her initial capital was a mere Rs 10,000. All this is known. What isn't is her ability to attract and retain talent. Six years after she founded Biocon, when neither its revenues nor its profits would have warranted a tag of 'the next big thing', she was approached by Shrikumar Suryanarayan, a just-graduated engineer from Indian Institute of Technology, Madras, who wanted to borrow some enzymes (they were expensive) for a project he was working on. She loaned him the enzymes, and then convinced him to come to work for her. Today, Suryanarayan says he is the only one of his class of 1984 who still works in India. "I wanted to destroy the notion, and this was before the it boom happened, that to work at the cutting-edge of science or to even earn a decent living, one had to necessarily emigrate," says Mazumdar-Shaw. "I wanted to attract the best brains in the business and provide them a work environment where merit and talent was nurtured to the fullest and duly rewarded." That she has done: most of Biocon's senior executives have been made millionaires by the company's April 2004 IPO.

The desire to make Biocon a great place to work didn't mean the company escaped going through the growth pangs most start-ups suffer. Nor does it mean Mazumdar-Shaw was a pushover. In the early 1980s, the company's labour union created trouble and the lady stood her ground. "Biocon has always recognised and rewarded talent," she says, "but no one can browbeat me into making unviable concessions." The labour unrest prevented Biocon from servicing its Rs 12-lakh loan from the Karnataka State Finance Corporation (KSFC). Her company was declared an offender and the government-firm released advertisements in newspapers stating that its assets would be auctioned, but Mazumdar-Shaw was not intimidated. "She is a very determined person," says Vijay Mallya, Chairman, UB Group, and a childhood friend of Mazumdar-Shaw (her father was Chief Brewmaster at UB in the late 1970s). "Once she decides on something, she gives it her all." In this case, she managed to convince KSFC to hold on, and sacked the troublemakers.

» Trained classical singer (Guru: Ustad Ghulam Rasool Khan)
» Lives two km from office in Spanish-themed villa, Glenmore
» India's first female brewmaster; author of Ale and Arty
» Married John Shaw, a Scotsman and former CEO of Madura Coats, in 1996 when she was 42
» Only brother Ravi is a professor at Purdue; Mazumdar-Shaw is a doting aunt
» Drives around in E200 and E220 Mercedes cars

Biocon's most severe challenge, however, was funding, or the lack of it. "Today, funding options are numerous and there are individuals and institutions that understand the sector," says Mazumdar-Shaw. "Back then, there were really few." Sometime in 1988, in the quest for funds, she convinced N. Vaghul, then CEO of ICICI (now ICICI Bank), to grant her an audience. Over breakfast, she managed to convince him to extend a loan to Biocon. And things looked up. Bala Manian, Vaghul's brother, a serial entrepreneur based in Silicon Valley, one of the few individuals in the world who understands the curious coming together of biotechnology and nanotechnology (his start-up, ReaMetrix is trying to parlay this understanding into a competitive advantage), and a member of Biocon's board says Mazumdar-Shaw has the three things required to make anyone a success. "Kiran has maintained her connections to her roots through the entire journey to success, lives the moment with gusto, passion and energy, and wants to make a difference to other people's lives with her energy and commitment."

Along the way, Mazumdar-Shaw has also proved to be a canny entrepreneur. In the early 1990s, she realised the potential of the market for statins (cholesterol fighting drugs) long before large Indian pharma companies did. Biocon didn't just bet aggressively on statins (today, these account for a little over 50 per cent of the company's revenues), it entered into long-term supply contracts thanks to which it continues to get better prices despite prices of some statins such as Lovastatin and Simvastatin having fallen. And even as prices of statins plummeted, Mazumdar-Shaw steered her company into bio-therapeutics. Biocon has already launched human insulin and is working on oral insulin (Pfizer is working on an inhaler version), a Rs 300-crore opportunity in India alone, the country with the largest population of diabetics in the world. And four years ago, when the Centre for Molecular Immunology from Cuba was scouting for Indian partners to jointly work on drug discovery, Biocon jumped at the opportunity. Today, the company's oncological (anti-cancer) product pipeline is overflowing and some of the products are in early stages of human trial.

The Shaws in Glenmore: John Shaw is in charge of Biocon's international forays

Biotech's Untiring Advocate

Mazumdar-Shaw, however, isn't just a successful entrepreneur or rich promoter; she has been an untiring advocate for the biotech industry. She fought and won the battle to simplify the procedure to import genetically modified organisms, a key requirement to tap the massive opportunity in contract research and manufacturing and spearheaded the move to establish a biotech park in Karnataka. As the head of India's largest biotech company, she is closely involved with not just industry, but with academia as well, leveraging her position as the head of the government's Biotechnology Vision Group to establish the Institute of Biotechnology and Applied Bioinformatics in Bangalore. And she has a ready wishlist of things Budget 2006 could do for the industry. "We want exemption of customs duty on R&D equipment," she rattles off. "Patent filing costs should be tax deductible". "There should be priority lending status for investments in biotechnology." That kind of focus has won her friends and admirers within her industry and without. Nandan Nilekani, President, CEO and Managing Director, Infosys, who has known Mazumdar-Shaw for over a decade calls her "an absolute role model for first generation entrepreneurs". "She has the guts to say what she feels is wrong," he adds. R.A. Mashelkar, Director General of Council of Scientific and Industrial Research, seconds that. "Some people have already referred to Kiran as Narayana Murthy of Biotech! Yet, she has remained a totally humble, humane and warm human."

"She is a very determined person. Once she decides on something, she gives it her all"
Vijay Mallya
Chairman/ UB Group
"Kiran wants to make a difference to other people's lives with her energy and commitment"
Bala Manian
"A role model for first generation entrepreneurs, she has the guts to say what she feels is wrong"
Nandan Nilekani
President & CEO/Infosys Technologies

Even as she lobbies for the sector as a whole, however, Mazumdar-Shaw faces challenges at home (see Biocon's Stress Test, Business Today, August 14, 2005). Biocon has embarked on the risky gambit of the pharma industry's equivalent of discovering a new molecule (it is akin to an Indian it services firm stepping off the trodden path and trying to build an operating system that can compete against Windows). And the company will have to manage expectations; with few biotech companies listed, Biocon's stock enjoys a significant scarcity premium and that, in turn, means that the company's stock trades at 20.3 times its estimated 20006-07 earnings, according to brokerage Motilal Oswal. The report, which was released after Biocon announced its results for the October-December quarter, adds that "while this is not cheap" there are mitigating factors. "The insulin and immunosuppresants markets' portfolio may bring long-term benefits. A significant expansion in statin volumes (post patent expiry) can lead to upside in the short term."

Whichever way Biocon goes-Manian, for one, believes "it has the potential to become a great global company"-the fact is, Mazumdar-Shaw's journey so far (she is the head of a company that will end 2005-06 with Rs 775.4 crore in revenues and Rs 175 crore in net profit according to some estimates) qualifies her as an A-lister in the Indian corporate sector. And very few of her fellow listers can claim to have founded a company, even an entire industry, as recently as 1978.




Partners: BT-Mercer-TNS—The Best Companies To Work For In India