Corporate Front: Strategy [Does Amrutanjan Face A Painless Future?]

CORPORATE FRONT: STRATEGY
Does Amrutanjan Face A Painless Future?

This single-product company must fight several headaches simultaneously.

By R Sridharan

S Radhakrishna Last year, when the Rs 52-crore Amrutanjan wished the millions watching Doordarshan's New Year's Eve Special ''A Painless 1998,'' everyone chuckled at its implications for the sponsor.

Paradoxically, while the prescription hasn't worked for viewers, it sure has for the Chennai-based Amrutanjan, which manufactures and markets the country's oldest Over-The-Counter pain-relievers. For the first time in its 105-year existence, the company's turnover, at Rs 51.83 crore, breached the Rs 50-crore mark in 1997-98. Better, its net margins went up dramatically: from 1.60 per cent in 1996-97 to 9.66 per cent in 1997-98.

Explains S. Radhakrishna, 65, the CEO of Amrutanjan: ''The previous year, we had an excise-related problem, the prices of raw materials had shot up, and there was widespread demoralisation in the company. That is now over.'' True. In another sense, his troubles may just be beginning: the good news makes Amrutanjan more attractive than ever to the predators who have been eyeing the low-profile company for some time now.

Don't forget, in the 3-year period between 1994 and 1997-when its net profits fell from Rs 93 lakh in 1993-94 to Rs 62 lakh in 1996-97-Radhakrishna deftly parried several takeover bids from giants like the Rs 8,574.90-crore Hindustan Lever and the Rs 426.94-crore Procter & Gamble India (P&G). Despite the promoter family holding almost 50 per cent of Amrutanjan's equity, they had sniffed out chinks in this seemingly-insurmountable citadel.

For one, Radhakrishna's brother, Nageswar Rao-who holds a 10 per cent stake-has pledged it privately, and wants to sell out. Secondly, his son and heir-apparent, Sambhu Prasad, is, apparently, reluctant to join the family business, and is pursuing a career in the US instead. And, finally, at the scrip price of Rs 77 per share on the Madras Stock Exchange on August 3, 1998, the acquisition of the Rao family's stake will cost a measly Rs 50 crore even if a premium of Rs 400 per share is paid to them.

However, Radhakrishna rules out the possibility. ''Selling out was never an option. Neither is it today.'' In which case, he faces another problem: Amrutanjan is largely a single-product company. Agrees Bharat Patel, 53, the CEO of P&G: ''Apart from Amrutanjan balm, none of its other products have a national presence.'' Worse, the Amrutanjan balm is targeted at adults-unlike P&G's Vicks Vaporub, which is aimed at children-and, thus, has a limited market, where it could soon face competition from a potentially strong global brand, Elder Pharma's Tiger Balm.

So, although Amrutanjan has a lion's share of 70-75 per cent in the Rs 90-crore pain-balms segment, it is losing out in the Rs 250-Rs 300-crore pains- and cold-relieving products market. On the other hand, P&G has maintained its 38.70 per cent share of the market in the last 4 years. Not surprisingly, P. Easwaradas, 45, Executive Vice-President, Amrutanjan, is trying to tackle the problems related to a limited product portfolio. He explains: ''While Amrutanjan used to focus on segment-leadership rather than category-leadership, we no longer do so.''

For instance, in September, 1997, the company launched Cold Snap-a pain-relieving gel that directly competes with Vicks Vaporub-which has garnered an 8 per cent share of the Kerala market. Unfortunately, the other products launched by Amrutanjan haven't done as well. For instance, its Agni revitaliser capsules, and mentholated drops, like Tingle and Swas, have received only a tepid response so far. Reasons Easwaradas: ''To be honest, the company hasn't pushed these brands the way it has its other products.''

Perhaps it should. With the barbarians at the gates, boosting marketshare-and profits-may just be the balm the Raos will need to assuage the headache of another raid on Amrutanjan.

Issue Contents Write to us Subscriptions Syndication