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Shasun Chemicals: Smooth integration of maiden acquisitionnews
Venkatachari Jagannathan
05 May 2007

S Vimal Kumar, whole time director, Shasun Chemicals and Drugs Limited, talks on the integration of his companies'' acquisitions in the UK .

S Vimal KumaChennai: It takes two to tango. S Vimal Kumar, whole time director, Shasun Chemicals and Drugs Limited, would readily agree with that. For Shasun Chemicals, and its wholly owned UK subsidiary Shasun Pharma Solutions Limited, that means working in tandem towards a common goal - a higher share in contract research and manufacturing services (CRAMS).

It may be recalled that the Chennai-based bulk drug company Shasun Chemicals made it''s maiden acquisition of two plants in the UK from the French drug company Rhodia SA, in 2006 through Shasun Pharma Solutions. The operations were subsequently integrated with that of the parent company.

"The integration was smooth. We retained the top management and did not reduce the workforce," he says. Today, a common marketing team meets prospects to sell the services of the parent as well as that of the subsidiary companies. Depending on the customer''s preference and other aspects, the location of executing the orders are decided," says Kumar.

The UK operations have contributed handsomely towards Shasun Chemicals'' consolidated revenues, which will be in the region of Rs780 crore for FY07. The company is fast moving towards the magic figure of Rs1,000 crore.

Here Kumar talks in detail about the integration and also about Shasun Chemicals'' plans. Excerpts.

What were the challenges faced in integrating the UK operations with that of the parent company?
There were no major challenges. In fact, the integration was easy. Not wanting to disturb the existing setup, we retained the top management at the acquired plants. We put one of our men there and also hired a chief financial officer who is of Indian origin, but based in the UK. The focus of the UK and the Indian operations are entirely different.

We didn''t reduce the workforce at the UK, as the erstwhile owners had already done that. Instead, we added people. The people at the UK plants are excited, as the activity levels have increased. For Shasun Chemicals, the Rhodia acquisition has given it a global positioning.

How did you synergise the Indian and UK operations?
We have asked the UK sales team to market Shasun Chemicals'' CRAMS capability. There is an exchange of knowledge amongst all our centres and research projects. The hardware and software needs of the UK and Indian operations have been standardised. We will soon implement an ERP solution in India as the UK operations already has one in place.

On the challenges faced in retaining Rhodia''s client base…..
We retained 99 per cent of Rhodia''s customers. Only one or two quit because they were having their work done at Rhodia''s laboratory in the US, which was not acquired by us. Post acquisition, there is 15 per cent top-line growth. Within two months of takeover, we won over two clients, and one of them is a large innovator company. The CRAMS business in the UK leans more towards patented products, whereas in India it bends towards products that are going out of patent. It has a proven advantage as we can expand the product range. Shasun Pharma has posted a turnover of 41 million pounds. We are looking at a top-line growth of 18-20 per cent this year.

What is the learning you had with this acquisition?
The UK operations are more system-based. We would like to replicate the same here.

Do you have any plans to acquire a lab in the US?
We are looking at a R&D lab and a pilot plant in the US to cater to emerging clients there.

On the performance of Shasun Chemicals during FY 07…
The top-line logged double-digit percentage growth; with last years'' major growth driver being Ibuprofen, which registered both a value and volume increase. The bulk drug accounted for 54 per cent of the company''s turnover. If one looks at the consolidated numbers then Ibuprofen''s share in the total turnover is 29 per cent.

On the other hand, sales of ranitidine came down by around 15 per cent, but this year we expect the volume to increase by 40 per cent. The other bulk drug nizatidine logged some growth, giving us revenues of Rs77 crore. However, during this fiscal (FY 08) we expect revenues from nizatidine to be in the region of Rs70 crore, and later stabilise at around Rs75 crore.

We have started commercial sales of gabapentin for the US market, and the expected turnover for this fiscal is around Rs16 crore. During the course of this year we will start formulation sales. The CRAMS business of Shasun Chemicals logged 30-35 per cent growth during FY 07, and good growth is expected for next couple of years.

On the status of your Vishakapatnam plant…
We are running out of capacity at our existing facilities at Cuddalore and Pondicherry. Hence we found the new plant to be a necessity. We chose Vishakapatnam so as to locate the new plant in a special economic zone (SEZ). However, the project is delayed on account of issues connected with the SEZ. The idea is to make active pharmaceutical ingredients at Vizag. We will first set up a commercial pilot plant, and later scale up capacity. The outlay for the new plant will be Rs110 crore, and will be funded out of internal accruals and debt.

 

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Shasun Chemicals: Smooth integration of maiden acquisition