Margins will improve with backward integration: R C Juneja

Drug maker Mankind Pharma has grown its revenue at a compounded annual growth rate of nearly 23 per cent for the last five years. The Rs 3,500-crore company expects to clock Rs 4,100 crore in revenue this year. The 20-year-old company is now doing a backward integration to improve margins and exports to the US market. R C Juneja, founder-chairman, tells Ajay Modi that the company will continue to grow at a rate better than the industry. Edited excerpts:

What developments will shape Mankind’s growth in near future?
Mankind has decided to manufacture active pharmaceutical ingredients. We will start our first plant by April in Rajasthan at an investment of Rs 50 crore. A second plant to manufacture ingredients will come up at Udaipur in mid-2017. Here, we will invest Rs 200 crore. We have got possession of land recently. Once we have these two plants operational, the cost of molecules that we use will come down. It will reflect in a combination of lower pharmacy prices and better profitability. Profitability can go up by 150-200 bps. Currently, we depend on imports and also procure from the domestic market. We will be partly self-sufficient in active inputs.

Do you think that there is an increasing scrutiny of Indian pharma products in top export markets?
I will differ on this. The quality standards are so high everywhere these days. When you grow either in the domestic or export market, you face such problems. In the US, you will find that products of some Indian companies are getting withdrawn. It is the same with American companies as well. Quality is the order of the day. In India, too, MNCs fail in quality and withdraw their products. We also do that. But the intention of every manufacturer is to give best quality product.

What is the kind of geographical revenue mix that Mankind is looking at?
As of now, about 92 per cent of our revenue is from the domestic market. But we now want to grow the export revenue, ideally to 20 per cent in the future. We are novice in the export. It will take time to establish the mix of products. But we are doing well. We have entered the African subcontinent, some Asian countries and now we are planning for the US. We were waiting for our plants to get ready to meet quality standards of APIs.

How challenging will it be to export to the US market?
I don’t think it is difficult. Initially, you face some problems. There is a massive competition everywhere. Once you decide to export, it takes a minimum of two years to enter the country. We are hiring teams to take care of export division.

To fund your growth plans, will you look at a listing or bringing investors on board?
Ten per cent of the stake is with an investor. When I look back, I think we should not have gone for it. Many people approach us now but we are not interested. Ours is a cash-rich company and there is no need to borrow money from outside. Our internal resources are adequate.

India has a policy of price control on a variety of drugs. Does control help in improving access?
Price control is a burning issue. It is a mixed bag. At places, the common man is benefited. At places, he is deprived. Pharma is a business where we have to spend on R&D and quality. Cost of these and wages is going up. Price control does not allow the industry to spend good amount of money on R&D. Policy makers and regulators should consider this.

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