Mumbai: Himalaya Drug Co., the country’s largest herbal drugs and personal care products company, is averse to acquisitions and joint ventures. Executive chairman Ravi Prasad says it’s largely because over the past 80 years the company has “covered almost every therapeutic segment” on its own, with its research and development unit consistently introducing successful new products in the market. The company, whose products are sold in 86 countries now, also doesn’t plan to sell shares to the public as it doesn’t want to lose its independence and “long-term focus”, Prasad said. In an interview, Prasad spoke about the company’s business model and plans to expand its global reach. Edited excerpts:
Himalaya, in spite of its continued expansion drive in the local as well as global markets, has always followed an organic growth model. Why haven’t you tried an acquisition or even a collaboration model?
As a policy, we believe in only introducing those products that we have worked upon from the drawing board. We don’t take products from outside. Himalaya’s growth will be completely organic because we feel that with the 80 years of experience, we have covered almost every therapeutic segment on our own. We don’t need products from outside. In addition, there aren’t many in this space who follow this model that will complement our company, as far as products and strategies are concerned. So, we will remain focused on organic growth. It doesn’t matter if it takes time as we are not under any pressure. Also, we are not listed and hopefully will remain unlisted in future. We don’t want to lose that independence and that long-term focus.
Growth curve: Prasad says the firm is growing at 20% CAGR every year. Photo: Hemant Mishra/Mint
So, more offshoots of Himalaya with the expansion in different regions?
Yes, definitely. As we get into newer places, we will have more subsidiaries. Because you have to be present in the market you’re in to work with the consumers, to work with the retailers and channel partners. There’s a model of exporting the product and getting somebody else to sell it. That’s a primitive model. If you want to build the brand, then you have to be there at the forefront. We’re no longer an exporting company, but an international entity with direct presence.
How viable is this model and how do you do it?
It’s an expensive model. But if the products take off well, then it’s a viable model. It imposes upon you a system of checks and balances. So, you enter one country, make sure that you are successful and then move to another. Once a market is targeted, we send in a team there for due diligence, market research and other related processes. It may take about six months to a year to ensure the results are good and the potential is high, after which we decide to invest in that country.
What is your current global reach?
We’re in 86 countries now. We have subsidiaries in the Middle East, the US, Singapore and Riga (in Latvia) in Europe. The business split between India and outside is about 60% and 40% respectively. On an average we’re growing at around 20% compound annual growth rate (CAGR) every year, which is much higher than the allopathic industry’s 15-16% growth.
Who are your global competitors?
For us everyone. Globally, we compete with European and US herbal manufacturers. But our reach that is to a large extent through the doctors is an advantage. We are the only people who do it through the medical channel there. In personal care, we compete with companies like Aveda and Body Shop to an extent.
In India, we compete with everybody because the doctor can choose to prescribe a Silymarin, for instance, for jaundice, or Liv.52. So, I’m competing with an allopathic product. Also when a consumer goes to the market to buy a shampoo, she might not go with the pre-conceived decision to buy a herbal shampoo. She may have gone to buy a shampoo for dandruff let’s say. So, I’m competing with Head & Shoulders.
How much do you spend on research?
The only division in the company that does not have a budget is research and development. We just don’t limit the budget for this simply because we realize that the entire portfolio and success of Himalaya is based on dedicated research and development. It’s totally project driven. It’s not linked to the revenue or profit. This division works as an autonomous body.
How do you sustain that?
It sustains because they’re giving us so many products and those products are successful. The model has worked is obvious from the fact that not a single product that is developed by our research has failed and had to be recalled. The secret is the rigour of research and development. For instance, many of our pharmaceutical products, including the new Hepatitis B drug, were results of projects that took as long as 12 to 15 years.
Why isn’t it explored by others?
Because it’s a rigorous process. Plus, you don’t know where to get the herb from and the quality of the herb varies from one crop to another. So, you need to backward integrate and that’s a lot of work. So, what we do are two things: One is we go through the ancient texts for leads and my other laboratory constantly keeps screening new herbs, and both result in new products.