At 37% of net sales, Dr. Reddy’s Lab’s operating margin in 2006-07 comes closest to Sun’s 44%. Cipla is at about third of that, and Ranbaxy’s is even lower. Ranbaxy, Cipla and Dr Reddy’s are often mentioned in the same breath as pioneers of India’s pharma revolution and while they deserve the accolades, Sun Pharma’s performance has been equally praiseworthy.
...In acquisitions, a very similar philosophy has been played out. Ranbaxy, Dr Reddy’s are often perceived to be aggressive in buyouts. Sun has also been active though it has managed to maintain a low profile. In the past 10 years, it has bought out several domestic and overseas companies. But the purchases have also been carefully calibrated and designed to secure the maximum possible at the lowest possible price.
“We wait for the right buy at the right price,” says Mr Shanghvi, who has likened his strategy to his colleagues to that of a `bottom-hunting fish’. For instance, the Taro Pharma acquisition is only about 1.5 times sales compared with the Betapharm purchase where Dr Reddy paid three times sales and the Terapia buyout where Ranbaxy paid more than four times sales. “We go in for complex products which are difficult to make and where competition is limited,” Mr Shanghvi says.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.