Dilip Shanghvi, founder and managing director of Sun Pharmaceutical Industries, is already a well-known figure in India’s corporate circles as someone who built his empire around well-timed acquisitions, but Sun’s mega all-stock $4 billion acquisition of the troubled Ranbaxy Laboratories last week, pitch-forked the company into an altogether different league.
Now, Sun Pharmaceuticals straddles the Indian pharmaceutical sector like a colossus.
Mr. Shanghvi’s past exploits have earned him sobriquets like ‘Takeover Tycoon’ and ‘Medicine Mogul’ and not without reason.
Setting up the company in 1983, with a loan from his father, Mr. Shanghvi (57 years), a commerce graduate from Kolkata with no formal training in pharmaceuticals, today owns India’s largest pharmaceutical company with a market capitalisation nudging $20 billion.
Sun has grown over the years by a string of 16 acquisitions, and, in the process, Mr. Shanghvi has established a track record of being a turnaround specialist.
His friends insist that all the hype that came with his meteoric rise has not changed him over the years. In interactions with this writer, the media-shy Mr. Shanghvi has always been extremely polite, soft-spoken and often reluctant to talk about himself.
A teetotaller and vegetarian, Mr. Shanghvi is known to be an extremely private person, living a simple life devoid of any ostentation. A friend of Mr. Shanghvi said that his family, including his wife, son Aalok, daughter-in-law and daughter meet at least once a week for a meal. The family is also known to vacation together.
After completing his education in the U.S., his son’s first job was not at Sun. He co-founded PV Powertech, a solar panel making unit. Later, he joined Sun as a product manager and now is Head, International Formulations Business in Emerging Markets.
Dilip Shah, a former Pfizer director and now Secretary-General of Indian Pharmaceutical Alliance (IPA), a lobby group of leading Indian pharmaceutical companies, fondly recalled a time in the late 1990s when Mr. Shanghvi would call on him to learn the ‘best practices’ of multi-national companies. “He also enlisted the services of a Bombay University professor to learn the basics of chemistry”.
Mr. Shanghvi’s innate ability to spot opportunities and talent are characteristics which have hugely benefited Sun.
The move to induct Israel Makov as Chairman of Sun in 2012 is seen both as a masterstroke and a huge testimony to Mr. Shanghvi’s foresight.
Mr. Makov was earlier CEO of Teva, a pharma giant, and he was brought on board to leverage his experience and insights on the global pharmaceutical industry. Kal Sundaram, a former managing director of GlaxoSmithKline India, is on the board.
Mr. Shah, who is a close friend of Mr. Shanghvi for over three decades, said he was a “totally self-made man who is always willing to learn. His most important quality, unlike other CEOs, is that he is a patient listener not given to losing his patience”.
Citing an example of his unwavering focus of putting company before self, Mr. Shah said that in the mid-Eighties, when the government allowed an increase in the excise duty exemption limit for small-scale industries , Sun stood to gain around Rs.10 lakh.
“Instead of using this windfall for personal benefit, he chose to hire more medical representatives as the company had only a handful of them then. This is his business sense, and it has not changed over the years”.
An industry veteran described him as “aggressive in intent and action but a very soft and humble personality”.
That came to the fore in early 2014, when a stand-off over higher margins emerged between the industry and trade , Mr. Shanghvi is said to have refused to negotiate with trade.
Subsequently, most Indian and multi-national pharmaceutical companies acquiesced to trade’s demands but Sun remains among the few which did not give in.
Industry peers acknowledge his skills of acquiring distressed assets and successfully turning them around.
“Of all the transactions we have done, this is the largest for sure. It was not the most challenging but was a validation of many of my basic principles,” Mr Shanghvi told journalists in a conference call, after announcing the Ranbaxy deal.
The most challenging may well have been the purchase of Israel’s Taro Pharmaceuticals in 2010 for which Sun was involved in a hard-fought court battle. Detractors of Sun question the merit of the Ranbaxy acquisition, given its waning fortunes and continuing troubles with the U.S. Food and Drug Administration .
But, as one senior industry voice put it, Sun will be paying much less for Ranbaxy than the $10 billion Daiichi Sankyo paid in 2008.
And then again, given his track record, there is none better qualified than Dilip Shanghvi to turn Ranbaxy around.