We are devoted to creating long-term shareholder value: Dilip Shanghvi

Sun Pharmaceutical Industries Ltd has been in the spotlight after a whistle-blower complaint on corporate governance prompted the stock market regulator to investigate India’s largest drugmaker.

In an email interview, Sun Pharma’s founder and managing director Dilip Shanghvi comments on the issues faced by the drug maker, steps to strengthen the governance and plans to enter China. Edited excerpts:

Corporate governance directly impacts the profits and reputation of the company. What problems have you faced ever since these issues surfaced? Do you think the company has lost credibility and reputation?

Our learning is that apart from being right - legally and technically, we also have to take into consideration how the transaction would be perceived by the world outside. Even though our actions were legal and in the best interest of the company, we thought it is important to address investor concerns. There were some perception issues which have already been addressed.

Do you think it has shaken the belief of some small investors, with many exiting the company?

While there has been an erosion of shareholder value for some small investors, we have seen some long term institutional investors have used this opportunity to increase their holding. We have to continue to perform consistently to regain shareholder trust and valuation.

Q: How do you plan to restore the faith of investors? Do you have a correction plan in sight?

Sun has provided consistent returns to its shareholders in the last 25 years and we remain committed to creating long term shareholders value. We have always believed that if you perform well, people will appreciate and acknowledge. In line with this philosophy, we will continue to focus on performance and producing consistent returns that we are known for.

Q: You have maintained that there was nothing illegal that the company did. Why did you then make some corrective measures then?

As I have explained earlier we may be legally right but perception is important. Some investors gave us feedback that if it does not significantly impact the company’s cost structures, we should make the changes and we did.

Q: Do you think Sun Pharma handled the issue well? Do you think it was blown out of proportion?

We are not a very media-savvy company. We tried to swiftly respond to all queries within the constraints of operating as a public company.

Q: Are there more issues that need to be settled with Sebi? Or are these issues beyond Sun Pharma now?

We received two sets of queries from Sebi and have shared the requisite information. We hope that they will close the investigation at the earliest.

Q; How do you plan to ensure that these corporate governance issues will not take place again? What measures have specifically been taken by the company on that front?

As a leading global pharmaceutical company, we have been adhering to global best practices in the industry. Our board has initiated necessary steps to strengthen the governance standards further.

Q: Do you think pricing pressure in US generic pharma has impacted your profits? Have you made any revamp strategies to cope with the pricing pressure?

The market dynamics in the US have changed in the last few years and it has impacted the entire pharmaceutical industry. To address these challenges, we have taken some steps. We have added speciality as an additional engine of growth in the US. On the generics front, we are focusing more on complex & value-added products. Given the tough pricing conditions in the US market, we will continue to focus on cost optimisation including rationalisation of generic R&D investments.

Q: In 2015, you were the wealthiest person in India, surpassing Mukesh Ambani. What went wrong? Do you think some bad decisions have been taken?

I believe that valuations based on how the company’s stock price reacts is transitionary.

Q: Do you think acquiring Ranbaxy was a wise decision?

Acquisition of Ranbaxy has given us size and scale. We have gained market leadership in India and expanded our presence in emerging and other regulated markets. It has given us entry into the OTC space with established brands like Revital and Volini. All parts of Ranbaxy business are growing and as it starts contributing fully to our future growth, there will be a greater appreciation.

Q: Are you the face of Sun Pharma and continue to be or will we see your son to be on the front foot in days to come?

Traditionally, Sun has a reputation of being reserved with the media. We prefer to let our work speak for ourselves. While this I believe is the right decision for the company, it has led to a perception that Sun has only one visible face. Sun is a professionally run company managed by a world-class team. I don’t plan to retire anytime soon.

Q: What are the future plans?

In each of the key geographies including North America, India, Europe and emerging markets our plan is to grow faster than the market. We have added speciality as a new engine of growth and invested approximately $1 billion in this business over the last 4-5 years. Seven of our speciality products are already in the US market. It is currently a small part but we expect reasonable revenue contribution from this business over the next 3-5 years. Besides, we are also focusing on entering new growth markets like China. We have big expectations from markets like Japan and China.