The service quotient

INTERVIEW: D.C. JAIN

'Retaining customers is much more important'.

Though contract manufacturing is getting crowded with a host of small players, D C Jain, MD, Akums Drugs & Pharmaceuticals Ltd., is hardly worried. The fittest survive he feels and has demonstrated that in the rapid ramp up of his organisation from the time it got incorporated in April 2004. In fact, the company achieved a turnover of Rs 17 crore within one-and-half-months of inception, and it is today looking at being a Rs 1000-crore entity. Akums manufactures pharmaceutical formulations in the form of tablets, capsules, liquid orals and dry syrups.

Some excepts from the interview:

How has this Budget impacted you?

Impact of Budget on our company is very negligible: we do import certain raw materials, which will become cheaper due to custom duty rebate. However, the benefit is ultimately passed on the customers to that extent our rates of pharmaceutical formulations will go down.

CST, on most of the raw materials we buy, is already 2 per cent and the rate we charge to customers is 1 per cent. Most other things are really not applicable to us. However, increase in dividend distribution tax is a little irksome.

Is it true that benefits from excise free zones such as Baddi, Uttaranchal, etc., may not withstand competitive pressures as they are getting overcrowded resulting in excess capacity and margin pressures?

To some extent it's true that excise free zones are getting overcrowded and the resulting excess capacity is creating stiff competitive situations. In fact, I would go as far as to say that these excise free zones have lured many entrepreneurs, who have never been in pharmaceuticals business or were just traders of medicines. I think, such units will face a tough battle for survival and will probably be most vulnerable to price pressures.

The finance minister has extended the sunset limit to 2010. New entrants now should be very cautious. Having said this, capable and experienced entrepreneurs should not worry as they have their existing networks to transact business with. In the long run, of course, the profits margins for manufacturers and marketers may go down unless new and innovative products are developed.

What are your plans for the future?

We manufacture and supply medicine to most of the top pharmaceuticals companies of India. In a short span we have reached a situation where there is hardly any chemist shop in the country that does not stock some products manufactured by Akums. We believe that retaining customers is much more important than creating new ones.

Akums has the highest manufacturing capacity compared to any single unit in the country. Our projected turnover for year ended March 2007 is Rs 310 crore and we are looking at a turnover of Rs 700 crore next year and aim to be a Rs 1000-crore entity by 2009. To aid growth plans, the company has added two more manufacturing units as per US-FDA norms to manufacture range of injectables in the form of dry powder/liquid in both Beta & Non-Beta lactum sections, eye/ear drops in international FFS packs.

We have setup our injectable unit following UK-MHRA norms and have also set up soft gelatin capsule and clavulanic formulations. We are starting production of Unit II & Unit III from April 2007 and propose to add a section of pre-filled syringes in our injectable units or in a new unit. In addition to all this, we have ambitious plans on the export front and already signed two contracts for export and have registered the products.