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Making Ranbaxy 'Singh' again

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The board meeting of Ranbaxy Laboratories, India’s largest pharmaceutical company in terms of sales, lasted all of two hours at The Oberoi in New Delhi. At the end of it, stepped down as the chief executive of the company. In his place, Atul Sobti was appointed managing director and CEO for a three-year term.

Singh’s exit cuts all ties his family had with Ranbaxy. Bhai Mohan Singh, who had bought over the company from Ranjit Singh and Gurbax Singh way back in 1947, often used to call the company his fourth son after Parvinder, Manjit and Analjit. The company was always run by the family except for the five years between 1999 and 2004 when DS Brar was at the helm. With the ownership of the company now with Daiichi Sankyo of Japan, what is certain is that men like Sobti will steer the destiny in the weeks, months and years to come.

What is also certain is that Sobti has a huge challenge ahead of him. The company carries huge derivative losses on its books and its operations are also under strain. Daiichi Sankyo had, in fact, recently stated that full-year profits will be below forecast, thanks to Ranbaxy, and it will get actively involved in the running of the company.

The pharmaceutical market worldwide has turned soft. Ranbaxy has a huge exposure to the US and Europe market, where its volumes are under pressure, having done a string of acquisitions under Singh. India could have been a good hedge in this scenario. But the market here is too fragmented — there are over 20,000 registered pharmaceutical companies in the country. Ranbaxy is the second-largest player in the market and its share is just 5.8 per cent!

More important, Sobti needs to sort out the mess with the United States Food and Drug Administration (USFDA) which has put a ban on the import of 30 drugs produced by Ranbaxy. The company has submitted a corrective action plan to USFDA, but Sobti needs to treat it as top priority. Credibility is everything in the pharmaceutical business and Ranbaxy cannot afford to be blasé about it.

On the positive side, Sobti has loads of experience behind him. He joined Ranbaxy in October 2005 as president and was made in charge of important geographies like India, West Asia and Asia Pacific as well as the vertical of global consumer healthcare. He was elevated to chief operating officer in January 2007.

Sobti has studied at St Stephen’s College in New Delhi and the Indian Institute of Management, Ahmedabad. He then worked for several companies like Xerox and Onida. But he gained notice only after 1998 when he joined Hero Honda. During the seven years he was there, the motorcycle producer ramped up its sales at a very fast rate. By the time he left, he was the company’s executive director in charge of sales, marketing, finance and human resources.

Some observers also point out that Hero Honda lost its way for a while after Sobti left. In less than a year, arch rival Bajaj Auto had more or less caught up with it. That is when Hero Honda did a total marketing makeover and recovered its market share from Bajaj Auto.

Daiichi Sankyo will look closely at Sobti’s work. That Singh’s five-year term was cut short shows that Japan’s third-largest pharmaceutical company is impatient for results.

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