Ajay G. Piramal

What is the outlook for the global economy, as you see it?

In Europe there is definitely some stress but I am optimistic about the US; despite the challenges I feel the US will remain positive. In India, we were expecting growth in the region of 8 to 9 percent. However, today, I expect growth to be around 6 percent.

In this environment, how confident are you about growth and why?

We will grow in the long run. Last year, we sold one of our major businesses (Piramal Healthcare's domestic formulations business was sold off to US-based Abbott Labs in September 2010). Post that, we are still evaluating investment opportunities. This has been a deliberate strategy of not coming to a quick conclusion and we are better off because of it.

Let me explain: compared to a year ago the stock market index is down 25 percent. So there is an option value to cash. Today, company valuations are much more attractive than they were last year. Today, we would pay half or one-third of what we would have paid for these companies last year. So, we are definitely in a far better position in terms of future growth than we were a year ago.

Overall, the Indian economy will grow. Last year, many companies were battered. They do not have the capacity to invest in the future and the capital markets have become absurd. There have been no initial public offerings (IPOs), while private equity is also sceptical. Valuations have come down. And large projects have come to a standstill because of regulatory reasons or cash constraints. So there are several opportunities out there for a cash-rich group like ours.

We have cash available for investment to the tune of around US $ 2 billion. Moreover, we have good talent available and a good reputation, which makes people want to come and work with us. All these factors make me optimistic about the future.

Looking back at the past year, what non-economic event (for example, social, political, technological, environmental, or personal) had the most significant impact on your organisation’s business objectives?

I can’t think of any non-economic event. But the global business environment has certainly become more volatile and difficult. Companies like ours who have more cash are in a much stronger position.

How much does the fiscal position of domestic or foreign governments worry you?

As a citizen, the fiscal position of the Indian government does worry me. If the global economy slows down, yes, it worries me. I am worried about Europe, and the stalemates in the US. Essentially, we need strong leadership across the world. We need leaders who can take good and rapid decisions; not leaders who only take populist decisions.

What's the one thing the government can do to better support your company?

The Indian government should just start acting. It had promised the introduction of Goods and Services Tax (GST) and the Direct Tax Code but all of this is currently in limbo. I would rather the government got on and introduced these taxes.

In what ways has your strategy changed over the past year? Do you anticipate more changes in 2012?

Our strategy has changed significantly: last year, we sold off a large part of our business. Before that sell-off, 55 percent of our turnover came from the domestic market and our teams went out and met individual doctors. Now those customers are no longer there. Today 70 percent of our revenue comes from outside of India. So that’s a big change for us: we have transformed ourselves from an India-centric business to a global business. Today, the majority of our employees are stationed outside the country. The number of our people who work in India has fallen considerably as many have gone to Abbott in the US.

We are also changing direction in terms of products. Our drug discovery company – Piramal Life Sciences – is being merged with Piramal Healthcare. This will allow Piramal Healthcare to do more work on drug development.

So our strategy is changing in a big way. We are moving from generics to patented drugs; and from an India-centric business to becoming a global business.

Have you identified industries or businesses where you want to invest?

We are not planning to invest all that money in pharmaceuticals ? we are looking at new businesses and opportunities. For example, we have entered the financial services business with a non-banking financial company and we are also getting into private equity. We are also exploring other areas.

Has the attractiveness of different countries or regions changed for you? And are you assessing newer markets?

Yes. With 70 percent of our revenues coming from outside of India, the attractiveness of various markets has certainly changed. We are looking at Latin America, which is becoming a big part of our business.

How are you getting to know customer needs in markets that are newer for you?

We ask a simple question – is there something we can offer that is unique? For instance, is there a product we can offer at a lower cost? Will this be something unique in the market?

We gain understanding of new markets by sending out our sales people there. In some markets we also appoint distributors to do this job. So, it’s a combination of our own field force and distributors.

How have building relationships and partnerships become more important to succeed in new markets? How do you make those relationships work?

Relationships play an important role in the pharma business. They have been our key strength. Our joint venture with Allergen in the US is one of the most successful joint ventures in the country and has been going on for the last 15 years. We also have relationships with many universities, global research institutes and hospitals for drug research.

When it comes to managing the enterprise, what are some of the risks you are facing? And how is your approach to managing enterprise-level risk changing?

The business environment is much more risky today. Indian companies have expanded their global footprint. And each country comes with its own set of risks. We have to understand risks in other markets.

The other risk emanates from the fact that the (global) economy is now much more volatile. Currency fluctuations are another risk we have to live with.

Is your board becoming more engaged with enterprise risk? How has that affected your planning and operations?

The board is definitely becoming much more involved in understanding the business, the risks and the risk mitigation process. It is raising the levels of governance each year.

In what ways has your response to environmental or social concerns become an element of your cost reduction, corporate reputation or revenue growth expectations?

Our desire to build sustainable communities propels us to imbue the developmental work we carry out with sustainability thinking. To us, sustainability is an all-encompassing concept which constitutes social, cultural, and ecological and health indicators.

We are doing CSR work in the areas of health, education, youth empowerment and preservation of the Indian culture. In health we have programmes around providing safe drinking water and taking healthcare to ‘no doctor zones’ in the rural areas of the country, through concepts like telemedicine and the creation of a 24x7 health helpline. In education we work through the NGO Pratham. The Pratham team comprises a mix of professionals from different fields who bring their varied experiences to the organisation but are unified by the shared vision of improving the future of our children.

How is your approach to innovation changing?

We are moving from generics to patented drugs. And it is innovation that will get us there. The amount of money we are spending on innovation is probably much higher than that invested by other pharma companies (in India).

We spend INR 1.5 billion each year on research and development and once we merge Piramal Life Sciences with Piramal Healthcare that will increase to INR 2 billion. Per se, there is a huge risk involved in pharmaceutical research.

In the pharmaceutical industry the approach to innovation is more basic and fundamental. It revolves around discovering a new drug to meet an unmet need. It is a global initiative and we have people from all over the world working on it.

Is your focus changing towards more radical innovations? Is it more important to generate more innovations, produce better innovations or bring innovations to market faster?

The focus in the pharmaceutical industry is always to bring new drugs to the market faster. Research institutes and other pharma companies help us in these efforts. But, of course, drug discovery cannot be done to order.

Are innovations coming from different places – perhaps from different geographies, different parts of the organisation or from outside your organisation?

It’s a combination. A large number of our scientists are based in India and we have teams in Montreal and in the US. Earlier on most of the innovation was coming out of India. But now we are sourcing it from other countries as well.

What about sourcing talent for your innovation needs?

That has not been a challenge for us. The (global) pharmaceutical discovery model is going through some restructuring and companies are cutting down on talent in the area of innovation. So high quality talent is available to us.

How is your talent changing? In what ways has talent become a strategic issue for you?

Talent is more a strategic issue for us now that we are entering different industries, as well as different geographies. That’s why talent is a concern.
There is always a war for talent. Good people are always scarce.

How are talent challenges different in different markets where you do business?

I cannot give you a general answer to that question. It depends. For instance, the US has a larger pool of talent. In some areas you get the talent you need, in other areas you don’t.

Are you confident that you will have the talent needed to deliver your strategy over the next few years?

Yes, I think so. Today the talent available to us is global in nature. In the past not many international managers were willing to come to India and work for an Indian company, and that included people of Indian origin. But today things are very different. People are happy to come and work for us.

What particular skills are absolutely vital for your strategy? Why?

Specialist skills are required for research and are vital to our strategy. Understanding the global market is also big challenge for us. We are planning to launch products globally so we need to understand these markets. That’s why getting the right people for our sales and distribution networks and people with the right global exposure is a challenge.

Are you finding that you need to move more personnel across borders to fill talent gaps?

There will always be skill gaps. And we have to take the right steps to fill those talent gaps. We need people with the right global exposure. Sometimes you find them in India, sometimes overseas.

We are moving people from the US to India and vice versa. So the flow is both ways.

Do you have well-formed succession plans for senior leadership positions?

We are not doing it formally but we are starting to think about it. We are developing more and more people within the system to take on senior positions.

Will the leaders of the future look like the leaders of today, from a geographical or cultural perspective? From a gender perspective? What measures are you taking to develop that leadership pipeline?

Looking into the future, I feel that we need more value-based leaders. They have to be much more global. You have to be sensitive to global nuances and also to the business environment in other countries. In terms of competence, you have to be world-class.

Unfortunately, we do not have many women as leaders within the organisation. In research we have more women, but overall the structure is more skewed towards men.

When we talk of leaders of tomorrow, do you see more professionals coming to the fore?

It will be a combination of both promoters and professionals running the show. For long-term shareholder value that is what is needed.

Have you experienced difficulties combining different national cultures into your corporate culture?

No, not really. There have been some idiosyncrasies but nothing significant.

What are the challenges and opportunities that younger workers, the millennial generation, bring to your organisation? Does your company need to do anything different to remain attractive to younger workers?

The Millennial generation want to be much more mobile. They are also quite impatient. They want to do more, be more involved. We try to make the job attractive to them through various measures such as giving them more responsibility earlier on. And we have been able to attract good talent, with people coming to us from Harvard and other international institutes of repute.

In what ways have the allocation of your time and attention changed over the past year? Will that return to 'normal' in the near future? Why or why not?

Over the last year, I have been focusing on new issues. As I mentioned, our group is in a transition (post the sell-off) and I am also giving my attention to social issues. The disparities in Indian society are increasing. And we cannot call ourselves developed till we provide access to basic amenities like health and primary education to all Indians.

I do not see my time allocation going back to what it was sometime back. And I would not want to do what I was doing five years ago.