Dr Reddy's says India prime target for company’s inorganic growth

With growing concerns around the reality of climate change and environmental hazards, corporates around the world are shifting their focus to their Environment, Sustainability and Governance (ESG) goals.

Pharmaceutical major Dr Reddy's Laboratories held its Investor Day on June 21, when the company highlighted its focus on sustainability, ESG goals, plans for innovation and more.

The company has listed out a “Horizon 1” strategy which hopes to address growth in the short to medium term and a “Horizon 2” strategy which hopes to address and identify growth drivers from the long-term perspective.

The company has said that it hopes to continue to target double-digit revenue growth, 25 percent EBITDA margins and a 25 percent return on capital employed in the medium term.

In an interview with CNBC-TV18, GV Prasad, Co-Chairman & MD of the company, said competition and pricing pressures are key risks to growth in the US market.

“The US generic business has always been driven by price. It is a commodity market and when there is more supply than demand, the prices will go down and they are going down. What has changed is the number of players operating in each of the molecules. What typically used to be 5 or 6 ANDAs per molecule, has gone up beyond 10 and that is causing the pricing pressure," Prasad said,

He expects revenues from China market to double in next five years.

“China is a significant market but it is not comparable in size to our presence in the US or in India. So it is a relatively smaller play for us. However there is significant growth there because the denominator is small. In the next five years we should doubling or more of revenue from China," he said.

According to Prasad, India is a prime target for company’s inorganic growth.

“This is our home market, we want to increase our ranks here and so we are putting a lot of capital into M&A in India. If you see the last 2-3 years we have been programmatic in terms of acquiring small brands and businesses in the Indian market. We will continue to drive that. We are also finding other areas of growth like nutraceuticals, OTC and even in digital platforms,” he said.

Prasad added that they hope to grow at a higher rate in India on back of the innovation initiatives undertaken by the company.

“The company will have more capital allocated to India and will drive many of the innovation initiatives in India first. So overall India, will get more attention," he added.

Speaking about company’s sustainability goals, he said they are looking to achieve gender parity by 2035 and expect to have women appointed to at least 35 percent of leadership roles.

“We have goals to make the whole world more equitable and that largely revolves around gender parity. So giving women more leadership roles. We have said we need to have at least 35 percent of women in leadership roles. We aim to achieve gender parity by 2035 and this is a tough goal especially in a business where women are not very significant in the manufacturing systems. So we have taken them on and we will do our best," he said.