How Torrent Pharma rebuilt a brave, new world

The erstwhile Soviet Union was once a huge opportunity for Torrent Pharmaceuticals as a trade pact between India and the USSR helped boost business.

“At one point in 1990-91, about 70 per cent of our sales and 90 per cent of our profits were from the USSR. The enzymes product was a big success… we had developed a few such products specifically for the USSR. This was a dream run for the company,” recalls Samir Mehta, Torrent Pharma’s Executive Chairman, and the 54-year-old younger son of late UN Mehta, founder of the ₹18,500-crore Torrent empire.

“But it didn’t last long after the disintegration of the Soviet Union in 1992,” he says, terming Soviet Union’s break-up as a “catastrophe” the company had to deal with.

It led to a severe cash-flow crisis that required massive restructuring of the businesses, including divestment of the then largest private sector power plant and financial services vertical, says Mehta, during a rare media interaction in his chambers in the executive block of Samanvay, the newly built Group headquarters, with its lush-green landscaping and an on-campus water body.

Mehta narrated how Torrent, one of India’s oldest drugmakers, picked up the pieces following the break-up of the Soviet Union and restrategised.

Lesson learnt Having learnt a hard lesson on the pitfalls of over-dependence on foreign markets, Torrent Pharma rebuilt its international presence with India as its homebase.

Its first international success came in Europe, where it used to sell through distributors. In 2005, Torrent acquired Pfizer’s branded generic marketing business in Germany.

“That was the first major overseas expansion. Simultaneously, we started pursuing a greenfield opportunity in Brazil to set up our own marketing network. Our strong base was India — a branded generic market — and so we opted to expand into Brazil and Germany, which were among the leading branded generic markets at that time,” says Mehta. (Generic medicines are chemically similar to an original drug as they have the same active ingredient.)

Currently, international markets account for about 60 per cent of Torrent’s consolidated revenues.

And though it is a late entrant in the US market, with peers Sun Pharmaceuticals, Lupin and Dr Reddy’s Laboratories already there, it is exploring acquisitions to narrow that gap.

Value acquisitions Looking for that “value” proposition, Mehta says, “The acquisitions have to be from our four market geographies... India is the first preference, the US is the second. We are more keen to pursue inorganic opportunities in these two markets.”

In 2014, Torrent Pharma pulled off an India acquisition, buying Elder Pharma’s branded domestic formulations business in India and Nepal for ₹2,004 crore. The Indian pharmaceutical space has been poised for consolidation.

“But it is an emotive issue for most promoters. It is the point when they see the extreme need to exit that will determine the consolidation. We see an opportunity and see ourselves playing an important role in the consolidation,” says Mehta.

“The Elder acquisition is fully integrated now and is doing quite well. It helped us significantly increase our access to women’s healthcare segment and the pain segment,” says Mehta.

“The Shelcal brand is now worth over ₹300 crores and still has good potential for growth. We have also been introducing new extensions under the Shelcal brand to penetrate into various sub-segments,” he adds.

There are currently over 200 brands in Torrent’s bouquet. And 40 of these top their respective segments; three of them clock over ₹100 crore revenues and seven another in the ₹50-100 crore range (see Infobox )

An acquisition enhances the existing capabilities and builds future opportunities. “In the US, we are essentially (an) oral solids company so far. Through our own offering, we are diversifying our portfolio into dermatology, oncology and ophthalmology areas. But our inorganic priority would be for an asset that boosts our presence,” says Mehta, making his intentions clear in his typical measured style.

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