Growth is a way of life

Can Ajay Piramal make a success of Boehringer, his tenth and latest acquisition?

HIS physique matches his formidable reputation in business circles. But the tall and well-built Ajay Piramal, chairman of Piramal Enterprises, doesn’t talk like the take-over tycoon that he is.
Piramal’s latest acquisition is the Rs. 105-crore Boehringer Mannheim India Ltd (BMIL), the Indian arm of the German healthcare giant Boehringer Mannheim AG.
This is his tenth take-over in the last 15 years and the fifth in the pharmaceutical sector. With the takeover of Boehringer, Piramal, 41, is now among the top five pharma players in the country with a combined sales of Rs 440 crore last year.
His first acquisition was Nicholas pharmaceuticals in 1988, the second was Roche Products in 1993 followed by Sumitra Pharma in 1995 and Lactocalamine last year.
The Rs 900-crore Piramal Enterprises has five public limited companies and four joint ventures. His flagship is the Rs 450-crore Morarjee Goculdas spinning and Weaving Company, one of the oldest and largest composite mills in the country.
In the past, Piramal has managed to pull off the Impossible and transformed sinking companies into profit ventures. But can he repeat his success with Boehringer?
Piramal took over the company when it was facing criminal and civil cases. In September last, contaminated Comsat Forte, an antibiotic manufactured at its Thane factory, led to the death of three people; more than 20 had to be hospitalised.
But Piramal believes Boehringer has bright prospects because of its excellent product lines. Besides, it is the largest player in diagnostic products in the world. Mergers make better business sense as it gives him ready-made research and development facilities. He can concentrate on marketing and distribution.
Piramal is getting ready for the year 2005 when the GATT agreement comes into effect. He will then be allowed to manufacture only patented drugs. Mergers will provide a steady supply of products.
Piramal had demonstrated his management and marketing skills when he acquired the Swiss giant Roche which couldn’t introduce any new product in the market for 16 years. After it was taken over by Piramal, Roche launched six new products.
Such is his reputation that Piramal claimed, "any MNC pharma company approaches us first if it has decided to sell out."
Meanwhile, the group recently brought together Nicholas Piramal India Ltd. Boehringer Mannheim Indian Ltd and the pharmaceuticals business of Piramal Healthcare Ltd to create a Rs 500 crore consolidated venture. His wife Swati Piramal is the medical director of Piramal healthcare limited.
Excerpts from an interview with Piramal:

What next after Boehringer Mannheim AG?
There is a strategy. We don’t operate on impulse. At the moment there is nothing on the cards. If there is a niche which will fit into our business, we will go for that.
What are your plans for Boehringer?
Boehringer had a few problems in India. A drug called Comsat led to an unfortunate incident in which two people died. The factory was asked to close down. We have discontinued the product and we are revamping the factory. Boehringer was making losses last year and there was a huge outflow because of interests. We have done some financial restructuring.
But the major problem with Boehringer was that it could not introduce new products which is what we are now doing. When the field forces of Boehringer as well as Nicholas and Piramal Healthcare join we will be huge and we will be able to effectively market the product. We will revamp the manufacturing at Thane and we are upgrading the Mahad plant. It should turn around next year.
But the timing of the take-over wasn’t right.
Yeah the timing was bad. It was an unfortunate incident. But I think we have got good manufacturing practices, we have got good controls in other places so we thought we could rectify this. It was not the best time but you can’t help it.
How are you handling the civil and criminal liabilities?
The civil liabilities are on the company. Criminal liabilities are on individuals. We are trying to do all the changes, upgrade the manufacturing.
What are the advantages of taking over? Does it save a lot of time?
That’s right. Taking over a company like Boehringer saves a lot of time because they were the number one in diagnostics in the country. It also gives us ready-made access to a field force of 300 people so you save the time building the field force. More importantly it would give us access to all their new products which is significant. They have a very rich product pipeline. This is a big benefit once the Intellectual Property Rights come into being.
With so many acquisitions and so many companies is there any conflict of products?
Not with the major products. We will discontinue the minor products which overlap.
Are you looking at a group merger?
Yes, we have announced it. We are merging Nicholas, Boehringer and Piramal Healthcare. The turnover of the Pharmaceuticals division will be about Rs. 500 crore plus.
What is happening to textiles?
The textiles is separate and we do not want to merge the two. Textiles has its own identity. We have got into a new joint venture with a leading Italian company. We have formed a new 50-50 joint venture called Morarji Brembana for high value shirtings.
Many alliances around the country are facing problems.
They succeed when people from both sides bring strength into the alliance. Each partner is bringing something valuable to the table without which the alliance will not work. Take for example. In textiles we bring in the Indian experience and our partner the the technology to make high class shirtings. So we know that our partner cannot do without us as we cannot without them.
Similarly with Boehringer. They could not manage successfully in India so we are bringing the management. They are bringing the products. Similarly with Roche. All alliances go through some difficult period but it has to be handled well.
In the present scenario can an Indian company survive without collaboration?
It depends. The world is really trying to become one and there are so many opportunities and alliances will be the way to grow into the future. I am a strong proponent of alliances because there are too many markets in the world, there are too many products.
Do you agree that the Indian companies don’t have a level playing field?
Yes to some extent. The funds at the disposal of the MNC’s are tremendous. Also if they enter the Indian market and lose about 100 million dollars it will not be a big thing because their profits are very high. No Indian company however large can afford this.
How do you transform a company after takeover?
When we enter a company we don’t want to change the management. Probably it’s the direction or the way you handle them that has to be changed. We look at the problems and find the solutions. Each one is unique.
For instance in Roche we realised that it had very high inventories so we worked on that. These are basics, so we just cut down the inventories and the interest costs go lower. The distributions costs were too high so we changed the method of distribution. The manufacturing costs were extremely high because it was in a high-cost location and the proactivities were not matching so we worked on that.
The sales were not being pushed enough so we pushed from our side, we introduced new products. So it was a combination, all basic simple things of management.
How do you select a company for takeover?
It again depends on the company. Sometimes we go because it has goo products, new products. Sometimes we go because it has the manufacturing capacity which we need, or distribution, or sales force. There is no standard formula. Roche for instance got a very strong product pipeline, it got a very strong alliance with a world leader. These were very big assets, we got very good people.
There is a lot of risk involved also. Take Boehringer…..
I don’t see Boehringer as a great risk because the way it is structured we think it has very good products. I think financially it has been restructured and even Boehringer has helped in that.
Textiles and pharmaceuticals are poles apart. How do you manage?
We have very good people who are specialists in their fields. We have a very good team which helps. My role is to provide the leadership.
What is your background in pharmaceuticals
No background as such. My wife is a doctor if that is a background.
What are you future plans?
We are doing a combination of several strategies. Growth is a way of life. So we want to grow through organic internal growth. We are trying to grow through acquisitions. We are also trying to grow through alliances. So it’s a combination of all these.
What is your style of functioning?
I believe in making our senior managers entrepreneurs who have a stake in the business and giving them enough leverage to perform. I basically trust people. They all want to do their best and it is for us to take out their best. We believe we are trustees of the employees, the shareholders, customers and the society. The role of the senior management is to perform as a trustee. He is supposed to use them for the benefit of all without any personal benefits. That is the role we are trying to play, we don’t always fulfill it.
Any takeover in the near future?
Nothing.
Do you get a lot of offers?
We have always got offers. People have always approached us.
How do you relax?
I spend time with may family, I do horse riding. I travel sometimes.
There is not much time I have for relaxation.

SEJAL SHAH