Brothers Samir and Sudhir Mehta have taken Torrent Pharma to new heights with a measured approach to business and by showing resilience in adversity
Sudhir Mehta chairman emeritus of Torrent Pharma, with brother Samir, who is executive chairman
“The chemistry works” is a phrase that pops up often as Samir Mehta narrates the journey of his company, Torrent Pharmaceuticals Ltd. That makes sense then, since chemistry is at the core of the business.
But Mehta, 53, uses the phrase not just to refer to the formulations involved in manufacturing the drugs he sells. There is also “chemistry” in his relationship with elder brother Sudhir, 62, whom he succeeded as executive chairman in 2014, he says, sitting in his office at the company headquarters overlooking the Sabarmati river in Ahmedabad, Gujarat. (Sudhir, who was also responsible for the $2.17-billion Torrent Group’s foray into the power sector, is currently chairman emeritus of Torrent Pharma.)
The success of this chemistry reflects in the strategies that have helped the company clock exponential growth over the years. Torrent Pharma’s market value has grown at a compounded annual growth rate (CAGR) of 36 percent to Rs 22,670 crore on March 31, 2016 from Rs 4,894 crore on March 31, 2011. Its revenues have ballooned from Rs 1,778 crore in FY11 to Rs 4,653 crore in FY15—a CAGR of 21.22 percent. Net profit in the same period has grown at a CAGR of 20.88 percent to Rs 751 crore from Rs 291 crore.
For FY16, Torrent Pharma was well on its way to becoming a $1 billion (around Rs 6,600 crore) company by sales. In the first nine months of the fiscal, the drug-maker registered a consolidated turnover of Rs 5,177 crore and net profit of Rs 1,500 crore. (The company was yet to announce its fourth quarter results at the time this story was written.)
The numbers are all the more impressive given that over two-thirds of Torrent Pharma’s business was wiped out when the Soviet Union disintegrated in 1991. Its resurrection can be attributed to a measured approach to business expansion, resilience, a quick course correction led by the brothers and its focus on core values, including ethics and governance. And these principles existed right from the company’s inception.
Torrent Pharma was founded by Uttambhai Nathalal Mehta, a medical representative for Swiss pharmaceuticals giant Sandoz, with a seed capital of Rs 30,000, his life savings, in 1959. From his time in the field, Uttambhai learnt the innards of the pharma business and realised that it would be futile, with limited resources, to compete with bigger rivals in selling drugs to a wide array of general physicians.
He chose to focus solely on psychotropic drugs—a less competitive segment—that could be pitched to psychiatrists. One of Torrent Pharma’s earliest products, Trinicalm Plus, launched in 1970 and used in the treatment of ailments related to the central nervous system, turned out to be a blockbuster.
Even today, Torrent Pharma focuses largely on specialty drugs, including branded generics targeted at chronic ailments in segments such as psychiatry, dermatology and oncology.
By the 1980s, Sudhir and Samir Mehta (who were ranked 25th on the 2015 Forbes India Rich List with an estimated wealth of $3.3 billion) were playing an active role in the business and Torrent Pharma had begun to harbour ambitions of going global. The Soviet Union was a natural choice as it was India’s biggest trading partner at the time. The region offered Torrent Pharma the benefit of access to a large international market with a centralised procurement machinery headquartered in Moscow.
The expansion into the Soviet Union was an extension of Uttambhai’s philosophy of carefully choosing avenues of growth that would yield quick returns with limited resources. The centralised procurement system also meant that Torrent Pharma did not need a large field force in that region. The strategy was successful and the USSR was Torrent Pharma’s biggest market until the country broke apart in 1991.