It all started in the year 2000 for this company that can boast of annual revenues of Rs.200 crore, with 30% of it coming from exports. And it all happened when an enterprising technocrat decided to risk his high-paying job to establish a pharmaceuticals company and explore his love for drug APIs and intermediates!
Andres M. Molier | November 2016 Issue | The Dollar Business
When Dr. Giridhar Thota completed his post graduation from Regional Engineering College in Warangal (now National Institute of Technology, Warangal), he decided to gather experience before sowing the seeds of innovation and entrepreneurship. The idea called 'Shodhana Laboratories' had hit him early in his career, but he needed the requisite experience to fulfil his dream. “Though I received the Central Sector Scholarship to pursue my PhD programme, I was clear that I wanted to work,” he shares. With a wide grin, he continues, “I could hardly wait to complete my post-graduation degree. So after finishing university, I immediately started working in a small local factory, where I spent a few months learning the nuances of the pharma industry.” His quest for industry knowledge and professional growth were not easily satisfied. A couple of jobs later, he attained the position of group leader of R&D at Standard Organics, an organisation co-founded by Dr. Anji Reddy, a pioneering entrepreneur of India's pharmaceutical industry.
“I remember meeting Dr. Anji Reddy for the first time at Standard Organics. That meeting was the turning-point of my life,” he reminisces. During his tenure at Standard Organics, Dr. Thota played a key role in developing and delivering new molecules.
Incidentally, he later worked as a scientist at Dr. Reddy's Laboratories. “I spent many years there in senior management positions after taking charge of the production process. Meanwhile, between 1995 and 1998, I completed my PhD from NIT Warangal. However, I wasn’t satisfied with all my achievements and was eager to start something of my own,” shares Dr. Thota.
Finally, in 2000, after quitting his corporate life, Dr. Thota founded Shodhana Laboratories Ltd., a bulk actives and ingredients manufacturing company, which is now scaling fresh heights in the world of R&D and new molecules. However, the initial days were fraught with challenges. “I invested my life-long earnings and sold all my properties to start Shodhana. However, since it wasn’t enough, I took loans from friends. Securing a bank loan was very challenging as in those days as the banks had no clear understanding of pharma companies and considered them to be non-performing units.”
The initial ordeals were mammoth enough to diffuse an average person’s spark. However, Dr. Thota was adamant that he can deliver success. His persistence paid and finally State Bank of India granted him a loan after two years. “My dream was two-pronged. On one hand I wanted to excel in my career, and on the other hand, I wanted to create employment opportunities for people,” he shares. “Steve Jobs once said if we want to be great we’ve got to risk failure. And that was exactly what I did,” he sums.
When we probed deeper, Dr. Thota was quick to point out that the pharma industry isn’t everybody’s cup of tea. As per him, the industry has grown tremendously in scale and sophistication within the last 40 years. “Before the 1990s, manufacturers could simply pick any product and sell it in market – it was as easy as that. And even if the manufacturers failed in delivering quality, buyers would still give them multiple chances and allow them to correct the errors. Today this is not the case.” he adds.
On a serious note, he continues, “Today, we have to be accurate right from the start. The first thing that the buyers require from us is composition details for pre-sales support. And if we plan to make any changes in the present composition, even to the minutest solvent, we must inform the buyers and wait for their approval. In case we go wrong, we have to provide a Corrective and Preventive Action (CAPA) plan. Despite all these precautions, if we still go wrong while delivering the product, there is a huge chance that the buyers will disqualify us.” Dr. Thota however believes that since the industry is complex and thrives on high-quality, it attracts some of the best talents and that helps keeping the process tight and efficient. In fact, this explains why India is emerging as the largest player in the segment globally.
Dr. Giridhar Thota, Founder & CEO, Shodhana
Laboratories Ltd, is upbeat about the
future of the Indian pharmaceutical industry.
Shodhana claims to be among the first few firms in the country that started exporting pharma products from India. In fact, for drugs such as Carvedilol, Citalopram Hydrobromide, Duloxetine Hydrochloride and Ondansetron Hydrochloride Dihydrate, the company has both Certificate of Suitability (COS) and Drug Master File (DMF) licence that are pre-requisites to export to Europe and US. While these drugs are exported to Europe, Japan and US, the company also exports several intermediaries, including Rivastigmine Hydrogen Tartrate and Escitalopram Oxalate, for which they have received DMF certificates.
“Currently, we are in the process of developing 12 new products, involving Darifenacin, Silodosin, Tapentadol HCI and Valsartan,” claims Dr. Thota. Interestingly, Shodhana claims that it was one of the first few Indian companies to export Rivastigmine intermediaries to 30 countries including Japan, US, Iran and EU. Dr. Thota believes that investing in R&D is the only way to take the company forward and strengthen its position in this extremely competitive market. While, at the moment, the company spends 3% of its annual revenue on R&D, Dr. Thota affirms that the investments will increase in the coming years.
Despite challenges, the company seems to have done fairly well in terms of exports. “Currently exports constitute 30% of our total annual revenues of Rs.171 crore. About 10% comes from direct exports, while approximately 18% is through merchandise exporters and the remaining 2% are exports through SEZ,” he shares. However, Dr. Thota isn’t very happy with the export numbers. “I am in the process of increasing the exports share,” he reveals.
“Most of the journey till now has been a one-man show. But now both my sons have come back from US and have joined the business. I am very happy to see their involvement. In fact, Nikhil, my younger son, has just joined the office yesterday while Rahul has been with me for almost two years now,” he says with pride. The company now plans to set up another unit at Visakhapatnam by 2017.
With expansion, exports are expected to grow in the near future! But it isn’t going to be a smooth ride, especially with our neighbour, China, aggressively capturing global markets. Dr. Thota, however, strongly believes that India has an upper hand and will beat China, come what may! “It’s a war of technology with China in an open market, and I think both countries have their own advantages. Though there are some chemicals or high volume drugs where India cannot compete with China.” When quizzed how Shodhana plans to counter the stiff competition, Dr. Thota replies, “Thanks to our colonial past, all our records, documents and communications are in English, unlike the Chinese. It isn’t easy to do business with China because their computers, communication, records, all are in Chinese. You can’t even view their website, not to mention communication! Our quality is becoming better and we’re now able to offer products at competitive prices; add to that our advantage in English and our business environment, and you have a strong contender for the top spot.
"The company is already exporting to US, Japan, EU and Latin America"
While pharma exports from India have been growing steadily over the last few years, India does rely heavily on imports of advanced machinery and chemicals, which translates to an impediment. Besides, exporting from a country known for its red tapism is not a piece of cake, especially if one is an SME. Companies like Shodhana receive 3-5% incentive on exports from the government – which may sound demotivating to many.
Dr. Thota though has a different philosophy. “I believe in strengthening myself rather than relying on the government for money. Having said that, more incentives will encourage many exporters. It will boost our confidence and our foreign exchange,” he tells the magazine. At the moment, the company imports analytical equipment from Japan and US. “We do not import manufacturing equipment because all kinds of machines are available in India. However, we import some chemicals, for which we pay 7.5% Customs duty. In fact, we import these chemicals because they are cheaper outside India and some of them are not available here,” he shares.
In its first year, Shodhana’s earnings were just Rs.17 lakh. However, after its first exposure to the international market in 2005, the company’s earnings started to grow dramatically. Today, its total annual earnings have grown to Rs.171 crore.
Apart from its rapid growth year-on-year, the company has also won multiple awards, including India’s Small Giants 2016 and India SME 100 Award 2015. Humbled by all achievements, Dr. Thota says, “To be honest, I have no idea how I won the award; I never participated in it. The organisers surveyed the market and took reports from our clients. They examined our company’s financial report and growth, and that’s how we were selected as one of the winners.”
Dr. Thota though remains a person who is guided by ethics and values. “Winning is important, but first we are humans. We have to look after each other. We follow some best practices and never delay our payments. However, when our buyers fail to pay us on time, I don’t rush them. If they don’t have the money now, they’ll pay when they earn something. We’re all trying, and, we need to help each other,” he says.
When quizzed on the logistics infrastructure in the country, Dr. Thota replies, “There is no end to greed, but I am happy with what India has. There are delays at times, but I am sure developed countries also face similar issues.” He believes there is no point talking about what we don’t have.
Dr. Thota believes in action more than words, and that has helped him achieve success as an entrepreneur. As a manufacturer and an exporter, he believes in self-sustenance. Undeniably he is a yeoman example. India needs more entrepreneurs like Dr. Giridhar Thota, who have the potential to take India's manufacturing-exports to the next level and earn precious foreign exchange for the country. Need we say more!