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The Business Interview/Ajay Piramal

'Indians are very intelligent, of that there is no doubt, but we are not necessarily hard working'

Amberish K Diwanji

Ajay Piramal started with textiles and today, his Rs 9 billion Piramal Enterprises comprises pharmaceutical firms placed among India's top 5. Last year, he merged Piramal Healthcare and Boehringer Mannheim India Ltd into Nicholas Piramal India Ltd to create a Rs 4.5 billion conglomerate, and is today preparing to become globally competitive by tying up with foreign companies. Piramal, who has gained a tremendous reputation after acquiring dying pharmaceutical firms and turning them around into profit centres, has firm views on the urgent need to adapt and change for India to be competitive into the next century.

In his office located inside his textile mill complex, in the heart of textileland -- southcentral Bombay -- the tall and well-built Ajay Piramal, 41, spoke on a variety of subjects, thus revealing a sharp and clearly focussed mind. Piramal was particularly harsh on the government's inability to prepare for globalisation.

"Many people say that in a liberalised world there is little for the government to do, but the fact is that there is much for the government to do in fewer areas. One such area is to provide infrastructure," he said.

To give an example, he spoke of the Internet on which this interview will be read! "Today people should be able to access the Internet easily, which can help us bridge the gap with the developed world. The key task before us is how do we catch up with the developed world? The Internee can bring us much closer to the developed world. But the government is not providing the necessary infrastructure." And added: "Unfortunately, today we also do not have a government."

Piramal points out that an unstable government has an effect on long-term policies. "No one is thinking about these long-term measures. We keep saying the country is moving in the right direction, but even on the core issues, we are not speaking enough. We have just started speaking on infrastructure."

He rues the delay. "We are losing valuable time. Recently, the government agreed to let private companies provide Internet services, but why could they not have done this earlier? Why can't we move faster? Why can't we see the trend in the world and move accordingly? "

So many whys, and no answer. Today, India doesn't just lack a government, it lacks leadership, something that Piramal's management will never accuse him of. Piramal has very clear-cut ideas on what the top person must do. "Leadership is more than just managing economic reforms. Leadership means giving broad direction, take up challenges which other people cannot do," he says.

Asked to enunciate further, he agreed that there were certain similarities between government and corporate leadership. "I gave the direction of going into pharmaceuticals after looking into it. Once in, performance has to be good, which I oversee. Then, for five years, we made quality our thrust area: that was a leadership decision. Managing the quality process is a managerial task. Now, we have decided to incorporate information technology into our industry. What role can IT play, how can it enhance quality and productivity, these are leadership concerns and decisions. The management will take care of the process. The government has to show direction, decide what it wants to do, and then go ahead with it," he said.

Piramal adds a rider: "I am not saying the process is not important. We will, of course, monitor it, but that is the difference between leading and managing and the same applies to the country. Implementation is important: there is no point in the prime minister saying he wants to end corruption, and then letting all the corrupt people stay on! There is dissonance in that."

India is notorious for its weak implementations of policies, and Piramal is only too aware of that. "One reason for this weakness in implementation is the lack of discipline. We don't have the discipline to follow up. Ideas are there, but when we have to do the nitty-gritty in a systematic way, we fail. Indians are very intelligent, of that there is no doubt, but we are not necessarily hard working. Implementation means hard work, lots of it, getting the system going, the process on, which we don't like to do," he said.

Adds Piramal: "Another aspect of leadership is delegation. In my own companies, I have a limited role in their day-to-day functioning. Leadership means empowering your people."

People have often marvelled at Piramal's success in pharmaceuticals. But why did he choose to go into pharmaceuticals? Why did he not choose to consolidate or expand in the area that he was already in, textiles? "I realised that in the long term, pharmaceuticals had to grow. All the studies showed that. As an industry, it was not as mature as textiles. Modern manufacturing was not likely to grow much, but there was scope for pharma. And worldwide, it has been the most steady industry," he answers simply.

Piramal began his pharmaceuticals acquisitions in 1988 with Nicholas Laboratories (renamed Nicholas Piramal Laboratories), and continued the process into the reform era post-1991. He had an interesting answer to what he thought was the impact of liberalisation upon Indian business? "The greatest benefit of liberalisation is the exposure we have had to some of the biggest companies in the world and their way of thinking," he said. "We are now much more aware of what is happening in the world and not just by reading about it, but by seeing it in the market place. These big companies bring with them global experience and vast resources and now we have to compete with the world. My own thinking has changed from, say, five years ago, and that is what is so important."

Warming up to the subject, he went on: "I was reading an article a few days ago which said that all the resources available in the world are finite: iron, copper, oil, etc. The only thing that is infinite is the human intellect, knowledge, and capability. And I think liberalisation is opening up the minds of people, who are now thinking differently.

"Take the classic example, Coke. What is Coke? It is just coloured water. But in a stagnant market like the US, it is still growing. And it is growing in every country. What has it created value out of? Just water, brand, and distribution. It is the infinite human mind that is doing all this, and I think liberalisation exposes us to this. Look at Reliance. I don't think they would have gone so far had it not been for liberalisation."

Yet, the key problem is whether liberalisation has percolated down from the boardrooms to the shopfloor? Piramal think it has, but he remains concerned too. "The effect of liberalisation is reaching the workers and the unions, but very slowly. In India, we don't have value for time. This is one of India's biggest problems, and the country is losing out because we are slow to change."

"For instance, we have a merger proposal pending in the courts simply because there has been no judge for the past six months! I asked our solicitor why don't we go and request the chief justice to appoint a judge to hear as the case is important, and my solicitor replied: 'This case is important to you, but it is not important to him'. But the case is important to others also -- our shareholders, about 50,000 to 60,000; our employees; our future in terms of collaborations; and our partners. And this must be happening to so many companies, but no seems to be bothered," he laments.

"Time has no value in this country and we must realise otherwise," he continues. "I am told files now move within days from the minister down to the officer. But the letter then takes one month to reach me. So it still takes time! Finally who loses? The country."

Piramal is worried that despite the need to be globally competitive today, unions are slow in responding to the changing times. When he wanted to implement a new system of management and operations in his textile mill, the Morarjee Goculdas Spinning and Weaving Company, he ran up against a wall. "I had to convince both the government and the unions, and it takes so long to get ideas across to the unions. I told the unions that I am willing to put in money and technology, but I need their agreement. I offered to take 20 of my workers to Europe so that they can see for themselves how factories out there operate. But there was no response from the unions or from the government. They have just not yet changed their mindset," he says in despair.

While the unions did finally agree to Piramal's plan, he remains doubtful. "But after how long? How much time and energy I have spent on just getting the idea through. This is what I mean when I say that there is no value for time, or for the customer." He shakes his head ruefully.

After liberalisation, many Indian companies voiced the fear of a takeover by multinationals. Strangely, Piramal sails in a different boat. "Actually, pharmaceuticals is the one industry where Indian industries are taking over the multinationals. If you have good distribution, good sales, fine manufacturing and access to the products, all of which we have, then you are better placed than any rival."

He isn't too sure that Indian companies will buckle under the threat of foreigners. "Indian companies have created a first-class distribution network in the country which outsiders will find difficult to break. For instance, no major petrochemical company has come in because Reliance has such a wonderful distribution network. So we are not worried about any multinational company coming in; I am sure we can take on them, or for that matter, so can Ranbaxy."

Piramal should know. Roche, the Swiss giant, was unable to introduce any drug in India for 16 years, and finally sold its Indian wing to Piramal. After that, Roche under Piramal has introduced six new products!

Nor is Piramal unduly bothered about the the new patent regime. "I don't think it is a cause for worry. India has an established pharmaceutical industry, and many Indian companies are now looking to the world as a market because with our lower labour costs, our prices are very competitive. So while we may lose out in some ways with the new patent laws, we will also gain.''

Indian companies are known to spend an abysmal three to four per cent of their turnover on research, compared to global pharmaceutical firms who often spend around 15 to 20 per cent. Piramal blames the government for this. "The government controls our sale price, thereby keeping our profit margins very low. There is no money for research. This will have to change. We need more money so that we can invest in research and development, which will ensure our future."

Supposing the government does not relent? "We have the knowledge for drugs which cover most illnesses. New drugs coming in will cost much more, for example, a drug to cure AIDS. But there is little that we can do: we can't have low prices and expect more on research. So this will have to change or the drugs will be smuggled inside."

To stay ahead under the new World Trade Organisation rules, which will come into effect from 2005, Piramal has his plans chalked out. "We have in India a fine distribution network, we have world class manufacturing at low costs. What we lack are the resources for product research. So we have tied up with some of the leading firms worldwide like Roche, Boehringer Mannheim (diagnostics and research in cancer and cardiovascular), Allerghan (of France for eyecare), Scholl (of Germany for footcare), who will give us access to their products. We will manufacture some of them or import some of them, and distribute them in India."

Photographs: Jewella C Miranda