Spotlight

An Indian rejoinder…

The Chinese manufacturers have found an unassuming adversary in Anu's Laboratories, one of India's largest manufacturers of intermediaries. Garima Arora explores

The India versus China debate has probably been the longest running confrontation of our times. Just when we think we are reaching the conclusion, either country calls for a 'rebuttal round'. However, it was not always so. There was a time when Indian companies shied away from competing with their Chinese counterparts. But in the last few years, the economic boom seems to have given Indian companies the much needed confidence boost. Today native companies are taking Chinese competition head on and beating them at their own game. One such intermediate company is Hyderabad-based Anu's Laboratories.

Against the dragon

"We have achieved this position we through focussing on quality and finding the right balance between developments and improvements, and maintaining a close rapport with our customers" - K Haribabu Chairman and Managing Director Anu’s Laboratories

Before 1996, the Indian companies that were manufacturing ciproflaxin (a broad-spectrum antibiotic) had a hard time procuring a raw material 2, 4-Dichloro-5-fluoroacetophenone (DCFA). The standard practice was to import a fine chemical—2, 4-Dichloro fluorobenzene and convert it into DCFA. However, not many companies could succeed in the process of synthesising DCFA from the chemical.

In such a scenario, Anu's devised a process for manufacturing this intermediate and took raw materials from people, who were hoarding stock, and converted it into finished products. And this is how Anu's came into being. Hitting off well with its innovative start, the company went on to take over a major chunk of the market, which until then was only met by Chinese imports. Today, the company enjoys almost 60 percent market share of the DCFA.

In the beginning, Anu's had to compete with China in the DCFA market. When the company started producing this intermediate, the market price of the product was $15 a kilogram, which hit rock bottom at $5 a kg in 2003. The price has improved in the last couple of years to around $8. The initial drop in prices made it difficult for the company to compete with their Chinese counterparts. However, it sailed through this rough patch just fine. This reinforced the company's strength in the market. Anu's worked on a dual advantage that it had in relation to the Chinese exports. Firstly, the quality produced by Anu's was far superior than what was imported from China. And secondly the company strongly believed in and worked towards better customer relations. "So if any customer reports any problem, we are practically with them in a couple of hours. This has helped them to gain more insight into the product, which has in turn helped us to expand within the market. Besides, we always competed with the Chinese on the cost front," says K Haribabu, Chairman and Managing Director, Anu's Laboratories.

This self-effacing company has had an interesting decade of achievements and hurdles behind it. A sick unit was acquired by Haribabu and his partner in 1996 and was named Anu's Laboratories. Since then, the company's PAT has grown 25 times from Rs 5.4 million in 2003-04 to Rs 135.4 million in 2006-07. Its first product was Astrophenom, a drug intermediary. But the company's star drug has always been DCFA. Today, the company is the market leader in the production of DCFA, and maintains a competitive position for production of other intermediates as well. Anu's has been successful in keeping Chinese competition at bay with its competitive pricing and quality foothold. "As compared to China, in India we have adequately skilled people, better ability to handle longer process products. Our scaling up capacity is also greater. And because we are an English speaking nation, we have a greater ability to have better customer relationships. At Anu's we used all these aspects to gain advantage over our Chinese competitors," says Haribabu.

'Green pace'

Anu's has not only devised technology that is friendly to the market but also to the environment. The company believes that all requirements, as stipulated by various governmental secretarial agencies to maintain environmental standards, are getting progressively stringent. And the company on their part does all it can to surpass these new standards by setting higher ones that they try to meet internally. So if regulatory authorities are seen to be tightening the ropes at a particular stage, the company moves their own improvements at a greater pace. Besides, environmental issues are a vital concern in future India versus China deliberations. "In the future a lot of manufacturing will be sourced from India and China. Hence, as Indian operations are growing at a high pace we have to also address the environmental issues," says Haribabu. According to the company, the biggest hurdle in doing so is the industry's inability to meet the norms of environmental standards. "We believe that for quality survival of pharma companies, addressing these issues is very crucial. We have already shown that a specific approach is necessary to address these issues and we need to increase our focus on them," added Haribabu.

The company, since its inception, has been working on development of technologies that reduce and minimise the generation of waste (solid and liquid). The efforts have resulted in steep reduction of water consumption by 25 percent. Anu's has developed a zero discharge process by recovering by-products of commercial value from waste-water and the project is implemented in most spheres of operations. About 40 percent of the R&D efforts are directed at developing processes for waste reduction or elimination. Similarly, about 40 percent of all investments are made into projects for recovery of by-products or effluent treatment. Treatment facilities include gas scrubbers, solar evaporation ponds and elaborate settling tanks. Anu's has also received a grant from the Andhra Pradesh Pollution Control Board as an incentive for implementing project for the recovery of by-products and for showing the company’s commitment towards cleaner production.

In times ahead

The king of all its surveys—this is the best way to describe Anu's market position. The company is the leading manufacturer in all the intermediates that it produces. "This position we have achieved through our focus on quality and finding the right balance between developments and improvements and maintaining a close rapport with our customers," says Haribabu. And it is this leadership position that it plans to leverage to establish dominance in all future ventures. Anu's plans to capture a bigger marketshare for its leading products by expanding their capacities. Most overseas customers are encouraging Indian suppliers of intermediates to venture into APIs, in an exclusive arrangement in what is called contract manufacturing. In line with this demand, Anu's is also planning to move up the value chain by converting some of their intermediaries into APIs, as required by their customers. "Basically some of our customers would like to outsource part of their manufacturing business, giving them the ability to focus more on marketing. We can achieve this by undertaking forward integration. This way we don't compete with our customers, but help them outsource some part of their manufacturing operation to us," says Haribabu. Meanwhile, the company is looking to take forward its custom synthesis work. To achieve all of this, Anu's plans to focus on the R&D aspect in a big way.

As we see the scale tip more and more in favour of India, in what we now call the battle of the emerging super powers, it is companies like Anu's Laboratories that in their own way add significant weight to the Indian side of the scale. Many believe that if India and China were to come together they would form a formidable force, both in bulk drug manufacturing and clinical trials. But for now, it's a race to 'get there' first between the two.

garima.arora@expressindia.com