New Delhi: Although its troubles with the US Food and Drug Administration (FDA) aren’t over yet, India’s biggest drug maker Ranbaxy Laboratories Ltd, controlled by Japan’s Daiichi Sankyo Co., has posted improved quarterly earnings for the first time in a year. Buoyed by the revival, Atul Sobti, chief executive officer and managing director, says in an interview that his company is eyeing acquisitions in India. Edited excerpts:
Your India business has been lagging for a while. Do you plan any business remodelling? Ranbaxy is aggressively planning acquisitions in India, we hear.
Foreign business: Ranbaxy’s Atul Sobti says large markets for the company now would be France and Italy and a little bit of Spain. Ramesh Pathania / Mint
Well, of all the places we are aggressive in, India has to be aggressive. I would not use the term aggressive anywhere else. I think for a leading company it’s very important to be a leader at home. So to that extent, resource-wise, marketing-wise, manpower-wise, whatever it takes, we have taken a conscious decision to do that and part of that answer could be inorganic growth.
How much would Ranbaxy be willing to invest in India?
We know normally 10-15% growth is possible. So obviously, you need to wait for 20%-plus growth as a starting point and what we need. But to me it’s more than just going from current to future. In India, we need to see what we may envision five years down the line and then come backward. I wish we had done it two years ago. We need a scale-up in our inputs and research. We have to go to smaller towns.
I think that’s the investment we have to make and we will do it. In fact the project is already on, we have just kicked it off and three months down the line we should be able to share it.
Ranbaxy’s Ebitda (earnings before interest, taxes, depreciation and amortization) margins, which have been low for the last few quarters, managed to enter double digits this year. How did you achieve that?
The first half of last year was between 12% and 14%. We started off with a very low base in terms of the revenue itself, especially in quarter one. I am not including any forex impact because that is a completely different area. On top of that, we had cost-wise started implementation of various models and cost reduction sometime in the first quarter itself and that has paid off. By the time we hit the third quarter, our cost base per se is at a much lower level.
And this is despite the fact that we have not chopped off people or facilities in the US despite the business becoming half. There was very good reason for us to reduce our facility or people in the US but in the US it’s a long-term market and we know that we will come back. We are operating at half the revenue or less than half the revenue and full cost in the US. If anything, actually in the US we have increased our capacity to ensure that we do not lose out some important launches for the future.