Many businesses in the world owe their success to one strategy that turned tables for the company. Pharma major, Lupin’s trump card is growth by acquisitions and it has been a part of the company’s emerging markets play, says Ramesh Swaminathan, CFO, Lupin. And this year Lupin is making another leap by foraying into Latin America, by acquiring Brazilian drug firm Medquimica in May. And that’s just one aspect of his role in the company. As E&Y puts it in their DNA of the CFO study, the CFO’s role is no longer only about accounting or rolling up sleeves and doing all the heavy lifting. A lot of it is about leadership, intuition, enabling business strategy, and setting controls. At Lupin, Swaminathan’s role revolves around all of this–and is also that of a partner and collaborator of technology.
What are some of the factors responsible for this transformation in the CFO’s role?
At Lupin, I wear several hats. The most important among those is the accounting hat. The second most important is the partnering hat where I collaborate with the respective SBUs. Sometimes, SBUs have the tendency to achieve X, but a CFO can motivate them to deliver X++.
The touch points for a finance guy are the highest across the company–sometimes even higher than the CEO. There are a lot of external, legal, and internal points that the CFO is supposed to handle. The touch points are huge and the role involves making qualitative assumptions that he gets from the environment, from the past, and turn it into quantifiable outcomes.
In such a volatile, ambiguous, uncertain, and complex world, this becomes extremely important that the company’s decisions are data-driven. And therefore, finance is the custodian for a lot of this data. Therefore, the information supply chain has to be managed by the CFO along with the CIO. You might take strategic calls based on hunches, but it is important to be data-driven, and thus, a CFO’s help is inevitable for a CEO.
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Is it true that a part of what you decide involves hedging strategies, looking at overall portfolio strategically and, deciding which businesses you want to keep in or outsource. How much of risk is associated with it?
There are two kinds of risks. One is the operational risk, and the other is strategic risk. There is a thin, dividing line between strategy and risks. So, if you foray into China or Turkey, there are risks associated with it. You might think of entering a new market at its periphery to be a strategic move but it could also be a risky one. You need to calibrate the risks and the returns associated with it. Again, that is also data-driven. Therefore, you are basically dependent on a host of data to actually decide on the decisions to be taken.
How do you see IT helping you tread this growth path at Lupin? What are some of the key initiatives (SMAC) that support this overall growth and strategy?
The CFO is responsible for the information supply chain as much as liquidity. The CIO plays an extremely important role in managing the information supply chain. It’s not transaction processing or keeping the books, but it’s more about processing information in such a way that we can retrieve it for decision making. And thus, analytics becomes an important part of it. Business decisions are driven by big data. We work in tandem to sieve different types of data and making sense of various trends become a part of CIO-CFO partnership.
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Lupin is also among the fastest-growing 10 generic manufacturers in Japan and South Africa and among the top five drug companies in India. You also wish to enter markets like Latin America, particularly Brazil, Eastern Europe and China. What was behind Lupin’s move to go global?
At Lupin, we are constantly looking at new territorial areas for entry. A good thing about pharma is that the same molecule can be leveraged across several markets. For instance, a drug such as Atorvastatin can be leveraged from Timbuktu to the USA. Even though the spend and the regulatory patterns could be different, the product is still the same. So we take advantage of that when we look at entering newer markets.
Growth can happen because of disruption on the cost front, or from innovation. One thing is clear, there’s no such thing as a sustainable competitive advantage, and you have to reinvent from time to time. So whether its cost or innovation, Lupin has been working on both fronts. Then comes a host of programs, sig sigma, procurement, R&D productivity, salesforce and, labor productivity through the operational sequencing technique which has contributed handsomely to improving our EBITA margins.
In your approach to acquisitions, what kinds of things do you do differently from other companies?
Our approach to acquisitions is divided into four buckets. The first is focusing on organic growth through leveraging existing portfolio. The second is looking at newer territories. The third is to look at look at higher geographic spread of companies and the fourth is to look at platforms and technology which you can use for building newer products. Encompassing all of this, we look at branded markets or branded IP driven products.
What are the lessons from other Indian generic drug makers in the industry, and where are you on the roadmap to become one of the top two global generic firms from India?
We obviously want to become the world major in generics. In order to do that, we want to scale up on the specialty front and build deeper pipelines across therapy areas, respiratory, and dermatology space. We also want to become bigger, weightier, and concentrate on building a superior salesforce. We are also constantly analyzing products from other parts of the world to make our product portfolio a lot more stable and profitable.
Shubhra Rishi is a special correspondent for IDG India. Send your feedback to firstname.lastname@example.org. Follow Shubhra on Twitter at @Shubhlime.