Exploit-mor-explore-less-is-Dr-Reddy-strategy-in-tough-conditions‘Exploit’ more and ‘explore’ less. This has been the strategy of the Rs 6,944-crore pharma major, Dr Reddy’s Laboratories, to face challenges thrown up by the global economic slowdown.

“We have over the past one year, revisited our strategy to come up with this approach. We are focused on consolidating our position in our more significant markets,” said Dr K. Anji Reddy, Chairman.

Accordingly, the company has exited several small, distribution-driven markets, whose contribution while insignificant, added to the complexity of operations, he told shareholders at the 25th annual general meeting here today.

Structural changes

The entire organisation design has been reworked to respond comprehensively to the changing business landscape.

“We now have a global generics business, a pharmaceutical services and active ingredients business and proprietary products business,” he explained to shareholders.

Exuding confidence that by the end of the current fiscal Dr Reddy’s would be the number one pharmaceutical company in India in turnover, he said the 2020 aim is to be among the top 20 pharma companies in the world.

The recent structural changes involving merging discovery research and Aurigene and the alliance with GlaxoSmithKline, which will enable full realisation of the huge potential of product pipeline in high growth emerging markets, are in this direction.

“Our strategy for the future is in place.

“We are now focused on executing it. Done right, we shall keep our tryst with destiny,” Dr Reddy said.

Short-term goal

Mr G.V. Prasad, Vice-Chairman and CEO, said the near-time vision was to achieve a turnover of $3 billion by fiscal 2013. The growth guidance for FY10 is 10 per cent and the priority now.
Another top priority was to make the German subsidiary Betapharm profitable and contribute to the growth.

How Rs 2,500 becomes Rs 40 lakh

If a shareholder had invested a total of Rs 2,500 in Dr Reddy’s Laboratories through the IPO in August 1986 and the rights issue of 1989, what do you think would be the worth of the holding today? A whopping Rs 40 lakh.

This is a simple calculation from Dr K. Anji Reddy, founder Chairman of the Hyderabad-based pharma major, which in its 25th year, has achieved a turnover of Rs 6,944 crore.

In his address at the company’s AGM today, Dr Reddy said: “A shareholder should have bought 100 shares for Rs 1,000 in the IPO (initial public offering), and subscribed to the rights issue for 60 shares in August 1989 for Rs 1,500. The total investment in the company would be Rs 2,500.

“Since the IPO and the rights issue, there have been a number of bonuses and divisions of the shares [reducing the face-value]. Hence, against the original holding of 160 shares of face-value Rs 10, you would now own 5,760 shares with face-value of Rs 5 each.

“In the intervening years, the shareholder would have received Rs 1.95 lakh as dividends on the investment of Rs 2,500. Despite the ups and downs in the stock market, if the shareholder had sold out on March 31, 2009, it would have fetched him a handsome Rs 28 lakh.”