Forbes India - 27 May 2016

global game changers l nestl shifts gears
PRIce Rs. 180. MAy 27, 2016
if you respect
capital and
leverage it
properly, the
business will
always deliver
high returns.
The
League
of
anniversary special
{vaLue creaTors}
value from money

The rise and
rise of Bajaj
finserv has
Been powered
By invesTor
darling Bajaj
finance and
The vision
of iTs leader
Sanjiv Bajaj
www.forbesindia.com
Business.
Minus the paperwork.
You live on the go, travelling light.
You want things now,
not when the courier gets there.
Youre connected, 24/7,
and you want your reading at your fingertips.
Welcome to the
I NDIA
Tablet Edition
editors note
For our seventh anniversary, we pick companies which created value by doing a few things right
Seven Steps to Value Creation
Best,
Sourav MajuMdar
Editor, Forbes India
sourav.majumdar@network18publishing.com
@TheSouravM
4 | forbeS iNdia May 27, 2016
o matter how good a company or its top

management is seen to be, the ultimate test of
efficiency is around how much value they have
been able to create for their shareholders. If
a company, over a period of time, fails to generate healthy
returns for shareholders, there is every possibility that
the markets will vote with their feet and ensure it learns
its lesson or falls by the wayside. There are enough such
examples around the world and, of course, in India.
As chroniclers of entrepreneurial success, we at Forbes
India decided to pick shareholder value as the theme for our
seventh anniversary issue this year. The stories you will read
in this special issue are of those companies which, over a fiveyear period, have delivered handsome shareholder returns by
doing a few things right. We considered companies which have
generated the highest compounded annual growth rate (CAGR)
in market capitalisation over five years and selected seven of
the top 50 to deep-dive into. These seven have been chosen not
in any particular order, but more for the manner in which their
leaders have navigated them through the years. By way of a mix
of operational and cost efficiency, a keen focus on sustainable
profits and by underscoring the importance of the judicious
use of capital, these seven companies and their leaders have
demonstrated that if you focus on some of these basics and
continue to be bottomline-driven, the markets will value you
and that, in turn, will be in the best interests of shareholders.
As Senior Associate Editor Pravin Palande, who anchored
this issue, says: In nearly all cases, the promoters have proved
critical in the improvement of fortunes, constantly thinking
of different ways to stay ahead of competition. Take the case
of Sanjiv Bajajs Bajaj Finance. By focusing on differentiation,
innovation and sustainable profits, Rahul Bajajs younger son
has built an NBFC which is the toast of the marketsdelivering
a five-year CAGR of a staggering 71 percentand powers the
groups financial services business, Bajaj Finserv. As Sanjiv Bajaj
says, he doesnt want his company to be a Ferrari, but more a
Mercedes, delivering smart profits but with a reasonable size.
Aptly, this anniversary issue also carries the Forbes list
of Global Game Changers, the worlds boldest business
leaders who have leveraged technology, finance and the
power of their ideas to change lives across the world.
This inaugural list of 30 game changing business leaders
features three IndiansInterGlobes Rahul Bhatia,
Serum Institute of Indias Cyrus Poonawalla and the
Dubai-based Sunny Varkey of GEMS Education.
Contents
/ may 27, 2016
Volume 8 Issue 11
The
League
of
a n n i v e r s a ry s p e c i a l
Va L u e C r e aT o r s
28 | Serving Up An ACe
on the Cover
With cutting-edge innovation, Sanjiv

Bajaj has turned Bajaj Finserv into a
financial powerhouse
We value your feedback.

Write to us at:
forbes.india@network18online.com
letters may be edited for brevity.
Read us online at www.forbesindia.com
on the cover & this page:
Photograph by Joshua Navalkar
may 27, 2016

FeAt U r eS
Cor por Ate ACCoU nt
16
16 | neStl 2.0: BACk to BASiCS
How the worlds biggest food company is emerging

stronger from its Maggi fiasco in India
A nni v erSA ry pACk Age

22 | MAny BAngS For the BUCk
Seven value creators that produced king-sized

growth and returns
24 | SUper ChArged
Under Jay Gallas watch, Amara Raja Batteries

is within kissing distance of toppling
market leader Exide
34 | the ColoUrS oF SUCCeSS
Gurbachan and Kuldip Singh Dhingra have turned

Berger from the smallest to the second largest paints
company in the country
38 | A hoUSe For the CoMMon MAn
By staying focussed on low-income buyers, Sudhin

Choksey has carved a niche for Gruh Finance
42 | Mind over MAtter
With his humane approach, Krishnakumar Natarajan

has made Mindtree a $715-million software
services company
46 | A riCh hArveSt
Mayank Singhals PI Industries does not just give

high yields to farmers, but to its shareholders too
Suresh Narayanan is engineering a shift in Nestl Indias strategy
58
50 | the right ForMUlA
Torrent once lost much of its business overnight, but

the Mehtas soon resurrected it as a pharma major
54 | the hUnt For greAt indiAn

16: amIt VeRma; 58: tIm PaNNell foR foRbes; 66: Jae HyuN KIm foR foRbes
CoMpAnieS
Why fewer firms in the country have reliable financial

performances over a meaningful period of time
CroSS Bor der

58 | the god pill
A Turkish-American billionaire who owns the most

valuable biotechnology startup on the planet is
looking to reverse ageing
66 | how to BeAt AMAzon
Prodigal merchant CEO Bom Kim and his same-day

online retail firm Coupang is keeping Jeff Bezos out of
South Korea
Has osman kibar found a pharmaceutical fountain of youth?
66
82 | preSCription For diSASter
Valeant Pharmaceuticals, one of Americas

fastest-growing companies, was a pressure cooker
built to explode
bom kims around 19 percent stake in coupang is worth $950 million
6 | ForBeS indiA MAy 27, 2016
89
96
Today, very often, business articles are read on digital devices
82
ranveer Singh and other newsmakers from Forbes Indias seventh year
interv iew
78 | there iS no MArket More

iMportAnt thAn indiA
CEO of SAP Bill McDermott says companies that capture

Asia will run the world
r eCliner
82 | A thoUSAnd wordS
A selection of our best photographs from the past year
89 | in the Spotlight
Our seven newsmakers for the past year
96 | BUilding A BUSineSS (Book)
There are books that you buy to decorate your shelves. And
there are those that you should buy to read
CheAt Sheet
101 | CeleBrAting AnniverSArieS

Quirky ways of commemorating an event
r egU l A rS
08 | letterS
The best clicks by our shutterbugs (above: comedian abish Mathew)
10 | leAderBoArd
104 | thoUghtS
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MAy 27, 2016 ForBeS indiA | 7
89: CHaItaNya DINesH suRPuR; 96: Getty ImaGes; 82: JosHua NaValKaR
liFe
letters to the editor
Readers Say
Different strokes
Nod for Nalli
Water is precious
Great institution
Refer to When Sachin Means Business

(Issue dated April 29, 2016). Sachin
Tendulkar was always in the business.
Cricket for him was a part of sports
business where he played to win. He is
aware of his stature and therefore, he is
differentiating and positioning himself
in a different league of businessmen.
Vasant Khisty, on the web
twitter.com/Forbes_India
facebook.com/ForbesIndia
linkedin.com/groups?gid=1959962
www.google.com/+ForbesIndia
Refer to Drink It Neat (Issue dated

April 29, 2016). It takes very long to
take adequate measures to stop
frequent water leakages. Drinking
water is essential for life. A software
must be developed whereby
pipelines can be monitored on the
computer by the authorities, thus aiding
the quick repair of leaking pipelines.
Mahesh Kapasi, via email
Refer to The Dream Weaver (Issue

dated May 13, 2016). Nalli is at a very
grand scale in the market. My personal
experience with the store in Mumbai
has been amazing. The staff and the
store managers are highly cooperative.
They have a spark to show the best to
the customers and the quality is superb.
Neha Singh, on the web
Refer to Campus Calling (Issue dated

April 15, 2016). It is not hard to see
why the institution [IIM] is still the
best as it managed to practise the best
standards in the 1960s. This is a great
article detailing the nuts and bolts.
As the writer said, the routine is now
common to all management schools,
but still, the similarity may end there.
A Balasubramanian, on the web
value from money
Podcast
By Pravin Palande
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may 27, 2016 forbes india | 9
LeaderBoard
aperture
Over 3,000 hectares of green cover have been destroyed and seven people killed as
major forest fires raged across Uttarakhand. The blaze, which started in February
and blew up since late April, has been doused somewhat after a spell of showers
in the region in early May. But it caused widespread destruction and spawned
numerous conspiracy theories regarding its origin, blaming in particular timber
merchants and builders who want forest areas to be cleared for business
Getty ImaGes
Reign of Fire
$32 bln
indias net gems and jewellery

exports in 2015-16, down from
$36.2 billion the previous year,
according to the Gem & Jewellery
export promotion council
LeaderBoard
on the block
A Demand thats
Set in Stone
How the diamond brand from the De Beers Group

is surviving a challenging market
in 2015, the diamond industry in
India experienced a slowdown,
like the rest of the world, owing to
a decline in consumer spending,
reduced demand from key markets
and restricted credit. The diamond
jewellery market was very flattish
in 2015. Additionally, after a
strong start to 2016 in January and
February, the strike (by jewellers in
India) in March and the beginning
Stephen Lussier, CEO, Forevermark
of April roughly impacted sale,
says Stephen Lussier, CEO, Forevermark, the diamond brand of
the De Beers Group. In that context, Forevermarks performance
in Indiasales were up 35-40 percentis pleasing for Lussier,
who is also the vice chair of the Diamond Producers Association.
Globally, the De Beers Group generated revenues of $4.671
billion in 2015, a considerable decrease from $7.114 billion in
2014. Forevermark, however, touched $1 billion in worldwide
sales last year, higher than $750 million in 2014.
India is the brands third-largest market, accounting for 10 percent
of global demand, followed by the US (40 percent) and China (15
percent). Within the country, Bengaluru is our biggest market,
followed by Delhi. Apart from increase in sales, we have also added
20 doors last year, taking the total store count to 170. We will have
more than 200 stores by 2020, he says. The key to growth in a market
like this is through initiatives and newness, believes Lussier.
In line with this philosophy, Forevermark launched a new collection,
Artemis, in association with leading fashion designer Bibhu Mohapatra
in April. With my experience in fabrics, I know how it will drape on
the body. But each diamond has a different characteristic. That is where
Forevermarks expertise came in, says Mohapatra. The collection has
three core motifsthe sun, the moon and the starsin earrings, rings,
bracelets, pendants and brooches and starts at $4,000. The company
is also planning to collaborate with designer Sabyasachi Mukherjee.
That apart, Lussier believes their $10 million plant in Surat,
Gujarat, will play a key role in supporting the De Beers Group
globally. It has a capacity of processing 500,000 diamonds,
currently utilised at 150,000 diamonds annually.
Forevermarks bullishness on India is not misplaced. More and more
people are looking to buy certified diamonds. Being a part of the De
Beers Group, Forevermark comes with a quality assurance which will
fuel its growth, says Anoop Mehta, president, Bharat Diamond Bourse.
-shruti Venkatesh
The New
Rock Stars
Blue diamonds are white-hot
at auction
blue diamonds are extraordinarily

rare, but the records they set at auction
are not. In November 2015, the Blue Moon
diamonda 12-carat Internally Flawless Fancy
Vivid Blue gemshattered a sales record
when it was hammered down at Sothebys in
Geneva for $48.5 million. And in early April,
a 10-carat blue diamond with the pedestrian
name De Beers Millennium Jewel 4 set an
auction record for Asia, selling at Sothebys
Hong Kong for $31.8 million. The Blue Moon
could be eclipsed on May 18, when Christies
in Geneva puts forth the largest blue diamond
ever auctioned: The Oppenheimer Blue, a
14.62-carat Fancy Vivid Blue diamond with a
pre-sale estimate of $38 million to $45 million.
Loose stones arent the only things ringing
up millions; rings do as well. On April 19,
Sothebys auctioned a 9.54-carat blue diamond
ring (above) that once
belonged to Shirley
Temple. The piece, a
gift from her father
when she appeared
in The Blue Bird at
12, is expected to
sell for $25 million
to $35 millionor
roughly the cost of
10 million Shirley
Temple cocktails.
-michael solomon
stephen lussier: Joshua naValkar; sothebys / polaris / newscom (top riGht);

snap / reX / newscom (bottom riGht); top: Jayanta Dey / reuters
all that sparkles
LeaderBoard
The only Wall

Street souvenir in
Milkens office: A glassencased copy of a cheque for
$2,444,944,666.67. It
commemorates the amount
Drexel Burnham Lambert raised
in March 1986 for Occidental
Petroleum, one of 3,200
financings Milken
participated
in while at Drexel.
It was a
shrine to me, Milken
says of Top Dog, a latenight munchies stop he
frequented as a Berkeley undergrad. He once
ate 12 hot dogs in a
single sitting.
A baseball
bat signed by former
Los Angeles Dodgers
manager Tommy Lasorda is
a totem of Milkens annual
fundraising tour of Major
League stadiums for his
prostate cancer foundation.
(Lasorda often
accompanies him.)
SEAT OF POWER
inside Milkens Pine Paradise
when 69-year-old michael milkens jet-set schedule allows

him to be home in Los Angeles, he works from his airy, pine-panelled sixthfloor office in a Santa Monica building where the Milken Family Foundation and
the Milken Institute (a think tank) have their headquarters. Giving yourself to
others is the most important thing. When you give, you get something in return,
says the financier, who was banned from the securities industry after pleading
guilty to fraud in 1990. Armed with a $2.5-billion fortune, he has devoted his
time to helping solve some of the worlds most intractable problems. Through his
groups he has given hundreds of millions to everything from cancer research to
public health to education reform and has created a Davos-like yearly conference
in LA where the worlds power players discuss global issues. KATE VINTON
Milken tosses
this large felt cube
into the crowd when
giving talks about
finance, emphasising
how sudden cultural
shifts can
affect markets.
$50 mln
Amount Michael Milken
pledged to George
Washington University
in 2014, to fund public
health programmes
While battling
prostate cancer 23 years
ago, Milken surrounded
himself with pleasant smells
of the sea and pine to
energise [his] immune
system. His love of pine
goes back to walks with his
dad at Big Bear. He has had
pine panelling in his home
since before the
diagnosis and in this
office since 2003.
A collection of
Life magazines
includes one from
his birth month (July
1946), as well as others
about the Space Race.
As a young man, Milken
wanted to become
an astronaut.
Milken penned
a September 2000
Wall Street Journal
op-ed arguing that the
countrys huge and growing
wage gap would be solved
only by making education and training a greater
national priority; it caught
the eye of President
Clinton, who sent him a
thank-you note.
One of
Milkens favourite
books, Shel
Silversteins The
Giving Tree, sits on his
desk. He has read it to
all nine of his
grandchildren, ages
2 to 10. He babysits
a lot.
PHOTOGRAPH BY ETHAN PINES FOR FORBES; TOP: GUS RUELAS / REUTERS
A huge
Marvel Comics
nerd, Milken has
dressed up as
Captain America
on Halloween
for the past
two years.
Canvas tote bags

are my filing cabinet,
says Milken, who stuffs
them with papers to take on
flights. He travels extensively
so much, he says, that there are
trips where he works roughly
24 hours straight across
different time zones.
You have to be
in shape for that.
101,655
The record number
of students who are
seeking admission to
university of California,
berkeley, for 2016-17
LeaderBoard
sporTsmoney
The WWEs Highest-Paid Wrestlers
Americas Best-Value
Schools
which universities give students the biggest bang

for their tuition dollar? To compile our ranking of the
nations best-value colleges, we weighed tuition cost
against five factors, including graduate earnings and
dropout rate. There are some surprises here (the University
of Florida and Georgia Tech rank highly), as well as
appearances by the expected (Harvard, MIT, Princeton).
-Caroline howard
University of California, Berkeley
Brigham yoUng University
University of florida
University of California, los angeles
University of California, san diego
massaChUsetts institUte of teChnology
University of illinois, UrBana-Champaign
georgia institUte of teChnology
harvard University
10
University of California, irvine
11
California institUte of teChnology
12
stanford University
13
harvey mUdd College
14
prinCeton University
15
sUny Binghamton (Binghamton University)
16
University of north Carolina, Chapel hill
17
University of texas, aUstin
18
texas a&m University, College station
19
University of virginia
20 riCe University
21
University of pennsylvania
22
College of William and mary
23 University of Washington
24 University of maryland, College park
25 University of California, santa BarBara
public
private
14 | forBES indiA may 27, 2016
-Chris smiTh
1. John Cena
attitude adjustment
$9.5 mln
2. BroCk lesnar
f-5
$6 mln
3. triple h
pedigree
$2.8 mln
4. randy orton
rko
$2.7 mln
5. seth rollins
pedigree
$2.4 mln
6. roman reigns
spear
$2.1 mln
7. the Undertaker
Tombstone piledriver
$2 mln
8. the Big shoW
knockout punch
$1.5 mln
9. kane
Chokeslam
$1.3 mln
10. dean amBrose
dirty deeds
$1.1 mln
sCoreCard
Michael
Jordan
back off, hoop

dreamers: His airness, 53,
earned $110 million pretax last year, more than
the combined earnings of
current NBA superstars
LeBron James, Steph Curry
and Russell Westbrook.
sTephen websTer (Top lefT); CaTherine sTeenkesTe / geTTy images (boTTom righT);
JonaThan baChman / ap; Top: david liTman / shuTTersToCk.Com
Top Colleges
wrestlemania 32 was one for the record books.

The April 3 pay-per-view event at AT&T stadium in
Arlington, Texas, smashed a 29-year attendance mark (101,763
fans) and gave the WWE network its largest subscriber base
to date (1.82 million). All of which means WWE superstars
who share revenue with billionaire chairman Vince
McMahonwill be ringing up more money. Which wrestler
has the most financial muscle? Based on SEC filings, contracts
and sources, 15-time champion John Cena (below) has the
highest base salary among weekly performers and moves the
most merchandise. The 39-year-old pulled in $9.5 million last
year, nearly 60 percent more than Brock Lesnar, who is at
rank 2. Heres what all the blood, sweat and sneers earn the
WWEs top 10and a rundown of their signature moves.
Corporate aCCount
nestl
nestl 2.0:
back to basics
The Indian arm of the Swiss food giant is

emerging out of the Maggi crisis wiser and
clearer about its future direction, both in terms
of business strategy and operational approach,
under its new chief suresh narayanan
By Aveek DAttA
askaran Singh, 28, a dairy

farmer from Chaukiman village
in Punjabs Ludhiana district,
refuses to believe there are any
quality or safety issues with Maggi,
the brand of instant noodles sold by
81 billion-euro Swiss packaged foods
conglomerate Nestl SA in India
since 1982. Singhs conviction stems
from first-hand knowledge of Nestls
procurement standardswhich he
describes as stringentrather than
his love for the snack Indians have
long-consumed to satiate hunger
pangs at the oddest of hours.
The rural entrepreneur has
been associated with Nestl, the
worlds biggest food company, for
the past 11 years. He began as the
operator of a captive collection
centre for Nestls dairy business,
where milk from neighbouring
cow farms would be agglomerated,
processed mechanically and supplied
to the companys factory in Moga,
40 km from Singhs village. At
present, Singh has his own farm
with 130 cows, supplying 1,200
litres of milk to Nestl every day.
If, by accident, any trace of
antibiotics (sometimes used to treat
cow infections) appear in the milk
that Nestl tests after collecting from
16 | forbes india May 27, 2016
us, the entire batch is rejected and

our produce is subjected to rigorous
testing the next day, Singh says.
The milk that Nestl procures from
farmers like Singh is used for the
various dairy products it makes,
including dairy whitener, ghee,
curd, and child nutrition products
such as Lactogen and Cerelac.
Singhs conviction, however,
wasnt shared by the countrys
food regulators, including the Food
Safety and Standards Authority of
India (FSSAI), which found quality
issues with Maggi that first led to
its ban in several states last year,
followed by a voluntary withdrawal
of stocks from shelves across
the country by the company.
However, it is the relationships
Nestl has fostered with people
like Singh, and other suppliers,
distributors, retailers and customers
over the years that have helped Maggi
re-enter Indian households after the
Bombay High Court cleared the deck
by setting aside the ban on August
13, 2015. In just five months after its
relaunch, Maggi was once again the
market leader in the Rs 2,000-crore
instant noodles market, with a
market share of over 50 percent in
February 2016, according to data
Suresh Narayanan,
Nestl Indias chairman
and MD, says hes
not intimidated
by competition
from market research firm Nielsen.

Nestl SAs global CEO Paul
Bulcke had said on April 14, 2016,
while announcing the companys first
quarter (January-March) earnings,
that the Indian business, including
Maggi, was recovering faster than
expected. While the tide may have
turned, the battle is only half-won,
and Nestl Indias Chairman and
Managing Director Suresh Narayanan,
56, who took on the role in August last
year, is taking nothing for granted.
Challenges persist
Though Maggi is the market leader

again, its current market share is far
an interview in March. We were

out of the market for almost five
months and the market has become
a lot more competitive in that time.
Narayanan says that he considers
all peers, including ITC, Patanjali,
Hindustan Unilever, GlaxoSmithKline
Consumer Healthcare and Nissin
(makers of Top Ramen) credible
competition with unique product
offerings. Competition energises
me, it doesnt intimidate me,
Narayanan says. Each of us has
our own core value propositions
that we offer to customers and we
have to ensure we work overtime
to enhance these propositions.
While Maggis masala and chicken

variants have been available to
consumers through retail stores
and ecommerce platforms since the
relaunch, it announced the return
of other successful variants (four
in all) like vegetable noodles and
atta noodles in the third week of
April. The legal overhang on Maggis
presence on retail shelves is far
from removed as the FSSAI has
appealed against the Bombay High
Courts verdict in the Supreme Court
(which was yet to take a final call
on the matter at the time of writing
this article). But as it stands, Maggi
has cleared all the safety tests that
May 27, 2016
forbes india | 17
amit Verma
below the 77 percent it enjoyed prior

to the ban. Competitors like ITCs
Sunfeast YiPPee! noodles (the second
largest selling brand of noodles
with a 33 percent market share)
have strengthened their position in
Maggis absence, and new entrants
like Patanjali Atta Noodles, from
yoga guru Baba Ramdevs consumer
goods company Patanjali Ayurved
Ltd, have intensified the turf war.
One of the foremost priorities
is to get the business and portfolio
of Maggi into a much stronger
position than at present. It will
hopefully get back to where it was,
Narayanan told Forbes India during
Corporate aCCount nestl

the apex court asked for and which
were conducted at the Central Food
Technological Research Institute.
There is also the task of nursing
Nestl India back to financial health.
On a year-on-year basis, Nestl
Indias net profit for the financial year
ended December 31, 2015, halved to
Rs 563 crore. This was largely due
to an exceptional charge of Rs 501
crore recognised by the company on
account of stocks of Maggi withdrawn
from the trade channels; net sales
during the same period declined
by 17 percent to Rs 8,123 crore.
The Maggi imbroglio also
took a toll on the companys stock
price. Around a year back (on April 1,
2015), Nestl India was trading at
Rs 6,938.35 per share on the BSE.
A year later, its stock price had
declined by almost 17 percent to
Rs 5,768.95 per share (on March
31, 2016). Over the same period,
the S&P BSE Sensex has fallen by
10.3 percent to 28,260.14 points.
While the fate of some of these
issues is not in the companys
hands, Narayanan is utilising the
crisis to bring about a fundamental
shift in Nestls operating strategy.
The aim is to better prepare the
company for future growth as well
as any trials and tribulations it
may face in the years to come.
FoCus on volumes
The most crucial piece of Narayanans

game plan involves steering Nestl
back towards a focussed strategy
of growing volumes, away from
the path of product rationalisation
which the company had taken over
the last few years. What we sell
are packets or cases, not rupees,
says Narayanan. I always believe
that market penetration and
market share are driven by actual
consumption of products, not just by
increasing value through prices. It
is all about going back to the basics
of marketing as we learnt them.
As it seeks to shore up revenues
through volume expansion, Nestl
Nestl INdIas share

PrIce MoveMeNt
over the last Year
8000
Closing price
(in Rs)
6000
4000
2000
1 apr
2015
29000
1 oct
2015
31 mar
2016
S&P BSe Sensex
28000
27000
26000
25000
24000
23000
22000
21000
1 apr
2015
1 oct
2015
31 mar
2016
Source: Capitaline
is pinning its hopes on ensuring that

the full range of Maggi products is
available across the country at the
earliest. After all, Maggi has been
one of the highest contributors
to Nestl Indias overall topline
(around 30 percent in 2014), and the
year-on-year decline in revenues
in 2015 was entirely on account
of loss of sales from Maggi.
But cognisant of the fact that

it may take a while for the entire
portfolio of Maggi to be commercially
restored, the company has turned its
focus on innovating and launching
new products in other categories,
including milk and nutrition,
coffee and beverages, chocolate
and confectionery, and dairy.
And that is just as well. Because,
while Nestl has traditionally done
well in categories like instant noodles
and baby foods in India, it hasnt
been able to dominate certain other
segments such as chocolates and
dairy products, where competitors
like Cadbury India (now known as
Mondelez India Foods) and Amul
(Gujarat Cooperative Milk Marketing
Federation) have taken pole position.
According to Nielsen data, the
market for chocolates in India
is worth Rs 7,276 crore, growing
annually at 12.2 percent over the
last three years. A November 2015
Euromonitor annual report says
Mondelez had a 55 percent share of
the market by value in 2014, while
Nestl was the second-largest player
with a value share of 17 percent.
The company is aware that it can
extend its presence in the chocolates
market with popular brands like
KitKat and Munch in its portfolio.
Consequently, Nestl recently
launched variants like Kit Kat
Duo and Munch Nuts. In the dairy
products segment, it is launching
its Greek Style Yogurt, a low-fat but
creamy yogurt it sells internationally.
With rapid urbanisation, there is
a clear opportunity to cater to an
aspirational middle-class in India,
Narayanan says. The mantra at
Nestl is to focus on getting back
to double-digit growthboth in
terms of topline and volumes.
More launches in chocolates,
dairy products and coffee are
likely to be announced soon. As a
consequence of economic growth,
there are many health issues with
respect to obesity, diabetes and
cardiovascular ailments that have
surfaced. As a global company, we

have a repertoire of 2,000 brands
and Nestl has the expertise to bring
new product offerings, such as in the
dairy segment, to address some of
these concerns around well-being.
Rama Bijapurkar, an independent
management and market research
consultant, says that while brand
Maggi may have taken a hit, there
was little to be concerned about in
the long run, since such episodes
were common with food companies
(Cadbury India, Pepsi and Coca-Cola
have all faced similar issues in India
in the past). Lots of brands take a lot
of hits but they bounce back, says
Bijapurkar, who has served on the
boards of several Indian companies.
We like this change in strategy
[to focus on volumes], as we
believe disproportionate focus on
margins/profitability had impacted
Nestls topline performance
over 2012 to 2015, says a Motilal
Oswal research report.
In the 2012-13 and 2013-14
periods, Nestl Indias revenues
grew in single digits (9.1 percent
and 8.2 percent respectively).
For 2016, under Narayanans
leadership, the Motilal Oswal report
estimates the topline to grow by a
significantly higher 18.3 percent.
This is down to the focus on
growing volumes which, Bijapurkar
says, is the right way to go. The
food revolution in India is yet
to happen and there is enough
of a market out there to justify
growing volumes, she says.
Even Harsh Mariwala, chairman
Maggis current
Market share
is far below the
77% it enJoyed
prior to the ban
friendly face of Nestl; focus on

teamwork for speedier responses
and a sense of proud to be Nestl.
Winning some of these battles
entails a distinct departure from how
Nestl India operated before the
Maggi crisis. For instance, it is only
post this problem that executives
have been empowered at the level
of the states to communicate with
stakeholders such as local food
regulators. To understand the
importance of this move better,
consider the genesis of the issue
which took place in Barabanki, Uttar
Pradesh. It was from a store here
that Maggi samples were sourced for
testing. Thereafter, in May 2015, the
Department of Food Safety and Drug
Administration of Uttar Pradesh in
Lucknow published a report based
on tests conducted at a referral
laboratory in Kolkata. The results
showed lead content in excess of the
permissible limit and the presence
of MSG (monosodium glutamate).
While MSG in food products is
permitted, the regulator had a grouse
that Maggi packets carried the
disclaimer, No Added MSG, in the
past (before the investigations began).
Over the next few days, several
other state governments got samples
of Maggi tested to assess if they
violated food safety standards and a
number of them, including Punjab,
Assam, Karnataka, Maharashtra,
Telangana, Uttarakhand, Jammu
& Kashmir, Gujarat and Tamil
Nadu banned the product.
Subsequently, even as Nestl
continued to defend its product,
of consumer goods company Marico,

believes that is the approach that
works: I am of the opinion that
growth comes first and profits come
later. If there is sustained growth over
a period of time, profits will follow.
Which is why Nestl Indias
new chief is clear that while nonremunerative products will get
culled, this process will go handin-hand with the addition of
new products to the portfolio.
must-win battles
Apart from that, in his third stint

with Nestl India (he was head of
sales between 2005 and 2007, and
executive vice president, sales,
from 1999 to 2003), Narayanan
has identified 10 must-win battles
heading into the future. These include
bringing back double-digit growth;
restoring stability at Nestl India;
learning to manage volatility and
adversity; revamping the company to
become fast, focussed and flexible;
making people fit for battle by
enabling, empowering, engaging and
energising; zero tolerance for noncompliance; nurturing key partners
back to health; prioritising consumer
service engagement, digital media
engagement, media responsiveness,
the fINaNcIal uPs aNd dowNs

period*
2012
2013
Year-on-year
change
2014
Year-on-year
change
2015
Year-on-year
change
net sales
8,302.3
9,061.9
9.15
9,806.3
8.21
8,123
-17.16
net proFit
1,067.9
1,117.1
4.6
1,184.7
6.05
1,098
-7.31
*Nestle India follows a January-December calendar year (Amount in Rs crore)
Source: Company reports and Motilal Oswal Securities Ltd
May 27, 2016
forbes india | 19
Corporate aCCount nestl

stating that it was fit for consumption,
it voluntarily withdrew Maggi from
the market, citing an environment
of confusion for the consumer
that existed at the time. The issue
could have been nipped in the bud
if it was dealt with proactively
on channels like social media for
instance, points out Mariwala.
In the area of food quality and
safety, different Indian states have
different interpretations of what
is right and wrong. It is not just
one FSSAI that takes all decisions,
there are other local regulators as
well, Narayanan observes. As an
organisation we have started putting
greater emphasis on environmentsensing skills, to be able to interface
professionally and regularly with key
stakeholders in the states; and resolve
issues as and when they come up
rather than allowing them to fester
and take on greater proportions.
As a result of this strategy,
Nestl India is going to focus on
acquiring more talent at the midmanagement level. Narayanan calls
this the belly of the organisation
where the action really happens.
The company has already
mandated one employee at each
of its state offices with the sole
responsibility of interfacing with the
government and looking into any
complaints that may surface with
respect to Nestl products proactively.
greater external
engagement
The other area of focus for Narayanan

is greater external engagement.
He concedes that Nestl India
hasnt always been the most public
of organisations when it comes
to external communications, and
that is something that hed like
to change. Not only does this
entail greater interaction with
the media, but also accelerated
shared-value and corporate social
responsibility programmes with
stakeholders and more targeted
engagement with consumers.
Nestl faced criticism due to

the perception that it hadnt done
enough by way of its initial response
to the crisis. It took a while for
the global headquarters at Vevey,
Switzerland, to react to what was
happening at its Indian subsidiary.
It was in the first week of June 2015
that Bulcke flew down to India to
allay concerns around Maggi. But
the delay didnt help Nestls cause.
If a consumer is in doubt, then the
brand is out; and a period of even 10
days without proper communication
in the life of a brand that is in
crisis is a very long period, says
Jagdeep Kapoor, a brand expert and
chairman and managing director of
Samsika Marketing Consultants.
Nestl has redeemed itself
subsequently with a series of
effective ad campaigns, which sought
to evoke a sense of nostalgia and

pull at the heart strings of Indian
consumers. It even associated
itself with Fauja Singh, a 104-yearold marathon runner, ahead of
the annual Mumbai Marathon in
2016. The company tapped into
digital media by publishing a series
of short videos on its YouTube
channel, where the protagonists
ask longingly: Kab wapas aayega
yaar? (When will you [Maggi] be
back?) There were also Twitter
hashtags like #WeMissYouMaggi
that were actively promoted.
Even the central themes of
Maggis television ad campaigns have
changed. It is no longer only about a
mother quickly whipping up a bowl
of Maggi as a treat for her young
child in 2-Minutes. The characters
of the new Maggi commercials
In just five months after its

relaunch, Maggi regained
leadership in the instant
noodles market, with a
50 percent-plus market share
in February 2016
include college students bonding

with their seniors in hostel rooms
over the snack. What the target
group for communication campaigns
around Maggi was and what it is
at present mirrors the evolution of
young India, Narayanan says.
Nestl brought in McCann
Worldgroup as the creative agency to
execute the new campaign, relying on
the expertise of ad veteran Prasoon
Joshi. Some water had flown under
the bridge when Nestl requested that
we work alongside them and our first
job was to seamlessly communicate
through various channels, Joshi,
chairman of McCann Worldgroup,
Asia Pacific, and CEO and chief
creative officer at McCann
Worldgroup, India, tells Forbes India.
This was one of the toughest
campaigns one has worked for, Joshi
in the octoberdeceMber 2015

quarter, nestl
indias net profit
grew by 47.5%
longing for the brand experience.
Nestl will need to sustain the
velocity and intensity of these brand
and marketing campaigns, Kapoor
says, since the challenge is also
about recovering market share from
rivals. The strategy going forward
is being discussed, but consumer
connect and brand love will of
course be at the core, Joshi says.
building relationships
As mentioned earlier, relationships

with partners such as suppliers,
distributors and retailers are key to
the success Nestl has so far tasted in
India (prior to the crisis), Narayanan
says, and he is sensitive to the fact
that these bonds need to be further
fortified as the company recovers.
It is not only our business that
has suffered. We work with 400,000
wheat farmers, 15,000 spice farmers

and 1,500 distributors who have also
been impacted because of the crisis,
Narayanan says. The collateral
damage has been enormous, but
neither of these partners nor our
7,400 employees have expressed
lack of trust in us or left us. So we
want to nurture them by giving
them new business opportunities.
While it may be too early to
predict a sustained financial recovery
for Nestl India, the sequential
earnings reported by the company
have been encouraging. In the
October-December 2015 quarter,
Nestl India posted a turnover of
Rs 1,959.46 crore, up 12.5 percent
quarter-on-quarternet profit in the
same period grew by 47.5 percent
to Rs 183.19 crore. The profitability
number also compares favourably to
the Rs 64.40 crore-loss the company
suffered in the June 2015 quarter.
Our profit margins are up
between Q3 (July-September) and Q4
(October-December), but compared to
the levels in the previous year (2014)
they are low, Narayanan admits.
I see a sequential improvement
taking place and if Maggi picks
up traction and some of the new
product initiatives take off, we should
expect respectable running rate of
growth in a couple of quarters.
As the Motilal Oswal report puts
it, The Maggi crisis can eventually
prove to be a blessing in disguise
for Nestl and help shake things up
under the new MD, who we believe
is pressing the right buttons. At
the same time, it adds: Though
we like his focus areas, we believe
the task ahead for the new MD
is herculean. Focus on volume
growth, innovation and newfound
vigour in the management are key
positives. Nonetheless, it will be
a while before the fruits of [the]
new strategy are realised.
The good news is that Nestle,
and Narayanan, show all signs
of willing to be patient.
With inputs from Shruti Venkatesh
May 27, 2016
forbes india | 21
Getty imaGes
says. It was a charged atmosphere

and sensitivity and surefootedness
were the need of the hour. With
the support of the Nestl management
team behind us, as the first step,
we created the 100 years of Nestl
communication so that it was
realised that this is not just
another company; that there
exists a history with our country
and concrete commitment of a
100 years behind it. This was a
revelation to many and resonated
deeply with all the stakeholders.
Further, the emotional leg of the
campaign needed to manifest love for
brand Maggi in absentia, Joshi says.
McCann developed a creative plan
keeping the consumer at the core.
Without getting into regular product
shots or brand eulogies, the campaign
sought to give voice to the consumers
The
League
of
Many bangs
for the buck
How the seven companies in the following pages
have produced king-sized growth and returns
By Pravin Palande
or our seventh anniversary, Forbes India has

chosen to celebrate value creators. These
companies have shown significant growth
over the last five years while maintaining high
returns on equity. To ascertain this, we considered the
five-year compounded annual growth rate in market
capitalisation of the BSE 200 companies (see the top 50
on page 35). Of the top 50, we selected seven companies to
profileour choice was based on diversity in industries and
management styles and not on any quantitative criteria.
At the root of it, all seven of themlike others who
feature in this tableare on a consistent growth path. They
are also scrappy, having emerged out of the 2008 global
financial crisis in record time, and with few scars to show
for it. For instance, in March 2009, by which time the
crisis had taken a complete toll on the markets, these seven
companies were trading at low P/E multiples compared
to their competitors: Take, as examples, Bajaj Finance,
which had a P/E of 8, and Amara Raja Batteries 4, way
below the leaders in their sectors in terms of valuation.
Things have changed dramatically in the last
seven years. Today, Bajaj Finance trades at a

P/E of 41 and Amara Raja Batteries at 30.
In nearly all cases, the promoters have proved critical
in the improvement of fortunes, constantly thinking of
different ways to stay ahead of the competition. Read
their stories in the pages that follow to appreciate
the value leadership brought to these companies.
These stories are broadly structured such that the
role of decision-making in propelling the companies
on the growth path becomes clear. Think seven smart
decisions/tenets of highly successful companies.
You will find that one of the key takeaways has been
the importance of bringing in the right talent, at the
right time. To understand this better, lets consider this
framework created by Neil C Churchill and Virginia
Lewis, which appeared in a Harvard Business Review
(HBR) article (May-June, 1983) called The Five Stages
of Small Business, through which they describe the
transformation of small- or mid-sized businesses
into mature companies. These stages are existence,
survival, success, take-off and maturity (see chart).
the top 50 in the bse 200
five stages of growth

Stage I
Stage II Stage III Stage IV Stage V
Existence
Survival
Success
Take-off
Resource
Maturity
Size/dispersion/complexity
Large
Disengage
Grow
Age of the organisation
Mature
Most of the seven companies have crossed Stage III
Most of the companies that we have featured in this

issue are at a success-growth stage where the owners
disengage themselves to ensure that the basic business
stays profitable so that it will not outrun its source of cash
and develop managers to meet the needs of the growing
business. The second task requires hiring managers with
an eye on the companys future than its current condition.
This doesnt mean that the owners detach themselves,
but that they invite active participation from professional
management, and that is making all the difference in
reading the market clearly and taking the tough calls.
Consider that Berger Paints has had professionals
in operational roles since the Dhingras acquired the
companythey only involve themselves in strategic
callsand others like Bajaj Finance have long been
run by CEOs with significant industry experience.
An indicator of quality management is also its ability
to allocate capital. And these companies all know how to
get more bang for the bucks they deploy in their business.
In fact, what distinguishes them is their ability to earn a
higher return on capital employed (RoCE). Amara Raja
Batteries, within a short span of seven years, is vying for
market leadership with profitable growth. In 2009, its
RoCE was 21 percent and Exide Industries, the market
leader, was at 40 percent. In 2015, the roles have reversed
with Amara Raja at 36 percent and Exide at 8 percent.
This point resonates across the other companies
that we have featured too. All of them may not
yet be market leaders, but they show the way on
value creation and smart capital allocation.
Market Cap
(2011)
Market Cap
(2016)
5-yr CAGR
(%)
Ajanta Pharma
235
12,413
121
Amara Raja Batteries
1,615
15,023
56
Apollo Hospitals Enterprise
5,876
18,426
26
Arvind
1,757
7,053
32
Ashok Leyland
7,569
30,892
32
24,239
83,326
28
Aurobindo Pharma
5,703
43,595
50
Bajaj Finance
2,559
37,329
71
Bajaj Finserv
7,590
27,112
29
30
Asian Paints
Small
Young
Company Name
Bayer CropScience
3,621
13,324
Berger Paints India
3,049
16,956
41
Britannia Industries
4,426
32,100
49
Cholamandalam Investment and

Finance
2,059
11,139
40
Eicher Motors
3,594
51,986
71
Emami
6,051
21,129
28
Godrej Consumer Products
11,824
46,972
32
Gruh Finance
1,266
8,697
47
Gujarat Pipavav Port
2,711
8,455
26
Havells India
4,631
20,127
34
29
HCL Technologies
32,674
1,14,826
Hexaware Technologies
1,920
8,070
33
IndusInd Bank
12,282
57,570
36
Kansai Nerolac Paints
4,796
15,170
26
Kotak Mahindra Bank
33,663
1,24,922
30
Lupin
18,533
66,698
29
Marico
8,525
31,287
30
Mindtree
1,574
10,941
47
Motherson Sumi Systems
8,308
35,308
34
MRF
2,661
16,268
44
Natco Pharma
770
7,177
56
5,890
20,384
28
654
7,781
64
50
P&G Hygiene & Health Care

PI Industries
Page Industries
1,811
13,559
Pidilite Industries
7,551
30,335
32
Rajesh Exports
3,212
18,325
42
Ramco Cements
2,422
9,534
32
Shree Cement
7,235
43,274
43
Shriram City Union Finance
2,569
9,890
31
SRF
1,926
7,498
31
Strides Shasun
2,123
9,725
36
Sun Pharma Advanced Research
1,491
7,110
37
45,753
1,97,219
34
1,854
9,380
38
791
5,856
49
Sun Pharma Industries

Supreme Industries
Tata Elxsi
Tech Mahindra
8,512
46,015
40
Torrent Pharmaceuticals
4,894
22,670
36
TV18 Broadcast*
2,217
6,909
26
TVS Motor Company
2,851
15,329
40
827
10,470
66
10,758
36,357
28
Vakrangee
Yes Bank
Market cap, in Rs crore, as on March 31 of the respective years

Note: Companies listed in alphabetical order
* TV18 is part of Network18 which publishes Forbes India
Source: CapitalinePlus
The
League
of
Super
ChArged
Jay Galla, vice chairman & managing
director of amara Raja Batteries, also
wears a political hat, but never at the
expense of the company which has
challenged the might of Exide
By N MAdhAvAN
s the black Mercedes-AMG G 63 off-roader

hits the dirt track leading to a 45-acre
construction site at Velagapudi village in
Andhra Pradesh, hundreds of construction
workers taking a bath in front of a large, open, surfacelevel water tank turn around to see who the early morning
visitor is. It is 8 am on a mid-April morning and
the rising curve
the SUV screeches to a halt near an elevated
Market cap trend
platform in the middle of the site which is 16
1000
kilometres from Vijayawada town and part of
Amaravatithe new capital region that is being
800
built by the Andhra Pradesh government.
Jayadev (Jay) Galla, vice chairman and
600
managing director (MD) of Amara Raja
Batteries (ARB), emerges from the vehicle
400
to inspect the progress of the interim
government complex. After completion
200
in June, these buildings will house over 12
lakh employees of the state government,
0
2011
2016
he says, pointing to the multiple structures
Indexed to 100
that are currently pillars and pre-fabricated
Amara Raja Batteries
BSE 200
beams. A permanent government complex
is coming up on the banks of Krishna
river farther away which will be ready by 2018. There
is a palpable rush to build this complex. Reason: The
sooner we shift from Hyderabad (the capital Andhra
ArB is the mArket leAder in the industriAl

BAttery segment And is within kissing distAnce
of the top spot in the Automotive spAce As well
MExy xAvIER
Jay Galla, vice

chairman and
MD, Amara Raja
Batteries
May 27, 2016 forbes india | 25
The
League
of
which had become a generic brand in the auto segment,

Pradesh shares with Telangana), the better for our
with a strong mindshare as well as market share.
states economy. By being in Hyderabad, we are
The chairman saw it [the automotive foray] as an
contributing to Telanganas economy, says Galla.
extraordinary flirtation, says Ramana Prasad Alam, CEO
As a member of the crucial Capital Planning
of group company Amara Raja Electronics. But Galla was
Committee, Gallas involvement becomes even more
convinced that significant growth and leadership was
understandable. The chief minister [Chandrababu
not possible without a strong presence in the auto space.
Naidu] wants to make Amaravati the most liveable
Global auto majors like Ford, Hyundai and others were
city in the world, similar to Vancouver (Canada) or
entering India at that time and, more importantly, Exide
Copenhagen (Denmark), he says, and Naidu chose him
was entering the VRLA segment pioneered by ARB in the
to help realise this dream. Not just for political factors
country. If Exide chose to attack us by dropping the price
(Galla is Telugu Desam Partys Lok Sabha member from
of VRLA batteries, we had no way to retaliate, says Galla.
the Guntur parliamentary constituency which forms
He convinced his father in 1998 and Amaron batteries
part of Amaravati) but also for his business acumen.
were launched in 2000. It took the company five years
Consider that ARB, under Gallas watch, has become
to use up the first million battery capacity it had set up.
a market leader in the industrial battery segment and is
That took a toll on the 2003-04 and 2004-05 results.
within kissing distance of the top spot in the automotive
People started seeing me as incompetent, says the
space as well (where Exide Industries currently leads). The
50-year-old Galla who took over as MD in 2004. That,
company is also a technology leader, having introduced
however, changedtoday automotive batteries account
valve-regulated lead-acid (VRLA) and maintenance-free
for 55 percent of the companys revenues (and profits). Its
batteries in the country (the three-tier air-conditioned
market share of 25 percent
coaches in Indian Railways,
is just 5 percentage points
company officials claim,
RiDinG the UpswinG
lower than Exides.
would not have become a
2010-11
2011-12
2012-13
2013-14
2014-15
reality in 1993 but for ARBs
Revenue
1,761
2,365
2,959
3,467
4,211
innovative batteries). As
pArtNerShip with
a result, its turnover and
JohNSoN CoNtrolS
Net profit
148
215
287
367
411
profits have grown strongly.
Once the decision was made
RoCE (%)
31
36
38
38
36
ARBs market cap has risen
to enter the automotive
RoA (%)
35
46
60
65
49
from Rs 1,615 crore on
battery space, the next
RoCE is return on capital employed
Source: Company Annual Reports
March 31, 2011, to Rs 15,023
call to be taken was on the
RoA is return on assets
crore on March 31, 2016, at a Amount in Rs crore (unless specified)
partner. The automotive
CAGR of 56 percent. Simply
battery manufacturers in
put: An investment of Rs 100 in 2011 is worth Rs 1,000 now.
India till then preferred Japanese technology (Standard
All of this was facilitated by some critical
had it from Furukawa and Amco from Yuasa) which offered
decisions taken by Galla, including the companys
dry-charged batteries (batteries would come dry from
foray into the automotive battery segment.
the factory and dealers added acid and charged them).
Conventional wisdom said ARB should also go the same
way. But Galla decided on American company Johnson
eNteriNg the AutoMotive SegMeNt
Controls which did not even make batteries in the size
This was not an easy call. It took me five years to convince
India used. But they are technology leaders, he says.
my father, says Galla. Ramachandra N Galla, founder and
The batteries designed and launched in India (jointly
chairman of the Amara Raja Group, had his reasons. An
with the US partner) were five generations ahead.
automotive battery foray would mean a shift in focus from
They came factory-charged and required zero lifetime
B2B to B2C and this would call for expertise in branding
maintenance (traditional batteries required periodic
and distribution which we did not possess, Galla senior,
topping up of distilled water): These proved to be key
who set up ARB in the early 1990s, tells Forbes India over
differentiators. Unlike Japanese companies, Johnson
the phone from Hyderabad. That apart, the industrial
Controls, which has a 26 percent stake in ARB, was
battery segment was garnering the company a substantial
also open to sharing the technology. Even today we
profit of Rs 60 crore on a Rs 180 crore turnover. Also,
have one board meeting every year at a place where
no company till then had succeeded in taking on Exide,
ArBs mArket cAp hAs risen from rs 1,615

crore on mArch 31, 2011, to rs 15,023 crore
on mArch 31, 2016, At A cAgr of 56%
Johnson Controls plant is located to learn about their

best practices, says SV Raghavendra, Group CFO.
That said, ARB too has its own share of best practices.
AddiNg CApACity At the right tiMe
For instance, it has mastered the art of adding the right

capacity at the right time without over-investing. Despite
large-scale investments (the company spent Rs 1,800
crore in the last four years), it has avoided the trap of
unutilised capacity by following a five-year strategic
planning process. It enables the company to study the
market and plan capacity addition early. ARB adopts a
modular capacity expansion process where the front-end
and back-end infrastructure is set for full capacity and the
assembly lines are added based on demand. The creation
of UPS battery capacity is a case in point. The company
identified the emerging demand for data centres by the
turn of the century and was ready with the capacity when
the market exploded. It is the market leader in that space
and has built the single largest UPS battery manufacturing
facility in the world at Chittoor in Andhra Pradesh.
treAdiNg A differeNt pAth
Galla opted to do many things differently. He changed the

way automotive batteries were made [factory-charged],
sold [in air-conditioned shops on a cash and carry basis]
and serviced [36-month warranty] in the country, says
Rajesh Jindal, chief marketing officer of the companys
automotive strategic business unit. Automotive batteries
were never advertised (it was considered a lowinvolvement category) but Galla launched a branding
blitzkrieg to promote the Amaron brand (recall the very
first claymation ads used in the country that introduced
the brand and its technical superiority). These strategies
helped the company take on Exide effectively. Amara
Raja Batteries is gaining at the expense of Exide, says
Sanjeev Bhasin, EVP-markets at brokerage firm IIFL.
eye oN profitS
While Galla is focussed on market leadership, growth

was never at the cost of profits. For instance, tapping
original equipment manufacturers (OEMs) in the
automotive space was a sure-shot way to increase
volumes. But it comes at a cost. The prices they offer
are low and at times, a little more than the marginal cost
of production. The replacement market on the other
hand offered handsome margins, says Jindal. For a
newcomer with a million unit capacity on the ground,
it was a reasonable option to go for the OEMs but Galla
decided on an alternative route: He would limit the OEM

share at one-third of the total automotive capacity.
In another situation, in the industrial battery space,
a large telecom player dropped its procurement prices
sharply. To our shock, sales to the company, our biggest
buyer, were stopped, says Srinivas Ganga, chief marketing
officer, Industrial Strategic Business Unit. These actions
explain the 20 percent operating margin the company
enjoys compared to Exides 17 percent. They also highlight
Gallas approach, a balance of boldness and pragmatism,
which also manifests in his other foraypolitics.
the politiCS CAll
The seeds of becoming a politician were sown early in

Gallas life, when he saw his maternal grandfather P
Rajagopal Naidu, a freedom fighter, serve the public both
as a Parliamentarian and otherwise. Through business,
you impact a few thousand families, but if you can influence
policy, a lot more people can benefit, says Galla.
Having set his mind on politics, he ensured he had
a leadership team he could count on. He identified the
right talent and empowered them, also putting them
through a leadership development course at IIMBangalore. We have two apex leadership structures
the Growth Council (Grocon) for operational decisions
and the Amara Raja Corporate Council for strategic
decisions such as acquisition, divestment, etc, says
Jaikrishna B, president-group HR. These layers of
leadership also prepare the company for the future.
future reAdy
One of the biggest regrets I have is that ARB does not

have an overseas manufacturing facility. We were growing
at over 30 percent year on year and did not have the
appetite to look beyond India. In hindsight, we should
have, he says. He is changing gears now. A group strategy
office has been set up to explore such opportunities.
That we are a zero debt company with a cash war chest
of Rs 300 crore gives us immense scope to leverage and
fund acquisitions, says Raghavendra. Dividend payout has
been capped at 15 percent of PAT to conserve resources.
Galla has set an ambitious target of $10 billion revenue
for the group by 2025 (ARB and associate companies
currently aggregate a shade under $1 billion in revenues).
We cannot achieve this target if we continue to confine
ourselves to India and just grow organically, he tells
Forbes India at his home in Guntur, which doubles up
as his political office, before driving away in a convoy of
cars to distribute land pattas (titles) to poor people.
The
League
of
Serving
Up an ace
By combining a sharp focus on
sustainable profitability with innovation,
the Sanjiv Bajaj-led Bajaj Finserv has
created a financial powerhouse straddling
multiple business lines. At the core of it:
A rock-solid NBFC, Bajaj Finance,
which is the darling of investors
By SoUrav MajUMdar & Salil panchal
Rahul Bajaj (left) is impressed

with the manner in which
his younger son Sanjiv has
flourished since taking over
as BFSs MD in 2008
28 | forBeS india MAy 27, 2016
the market capitalisation of Bfl has grown to

rs 37,329 crore as of march 31, 2016, from rs 2,559 crore
on march 31, 2011a cagr of 71% over five years
MAy 27, 2016 forBeS india | 29
Vikas khot
arlier this year, seven members of the

management team of the Rs 18,000 croreplus (revenues) Bajaj Finserv Ltd (BFS),
the financial services mothership of the
Bajaj Group, were in Silicon Valley, meeting some of
the worlds best-known corporations and venture
capitalists. This not only included Microsoft, Amazon
and Salesforce, but also 15 fintech startups which were
doing new and different things in the finance space.
The kind of things they are doing there just blew our
minds completely. We thought tapping into the India
opportunity was good enough but it was fascinating to see
how they are using technology and ideas to change small
aspects of the business, says Sanjiv Bajaj, 46, the second
son of 77-year-old group patriarch Rahul Bajaj. Sanjiv Bajaj
took over as BFSs managing director in 2008, after a widely
publicised group demerger which saw two-wheeler giant
Bajaj Auto Ltd (BAL), the then flagship, go to older brother
Rajiv while Sanjiv focussed on financial services. (The Bajaj
family was ranked 19th on the 2015 Forbes India Rich List
with a total net worth of $4.4 billion, as of September 2015.)
Today, BFS operates as the financial services
holding company of the group, and holds stakes in
three key businesses: Bajaj Finance Ltd (BFL), the
non-banking finance company, Bajaj
high on performance
Allianz General Insurance (Bagic) and
Market cap trend
Bajaj Allianz Life Insurance (Balic). BFS
1500
holds 57.5 percent in BFL and 74 percent
each in the insurance firms which are
1200
joint ventures with Allianz of Germany.
The fact that a financial services firm was
900
scouting the landscape in Silicon Valley to
understand the ecosystem and also explore
600
opportunities to partner with some fintech
companies is evidence of BFSs approach.
300
Bajaj says innovation is at the heart of how
the group thinks. Together with innovation,
0
a single-minded focus on sustainable
2011
2016
profitability is what differentiates BFS and
indexed to 100
Bajaj Finance
BsE 200
its companies from the rest of the pack.
Investors are clearly happy with
this strategy. BFSs market capitalisation has grown
sharply to Rs 27,112 crore as of March 31, 2016, from
Rs 7,590 crore on March 31, 2011, a compound annual
growth rate (CAGR) of 29 percent over five years. In
fact, the NBFC, BFL, is an even bigger star performer,
clocking a staggering 71 percent five-year CAGR over
the same period, its market cap growing to a jawdropping Rs 37,329 crore from Rs 2,559 crore in 2011.
The
League
of
Veteran banker
Nanoo Pamnani
is Sanjiv Bajajs
mentor and guide
FroM top: Joshua NaValkar; Vikas khot
These figures should

bring a smile to Sanjiv
Bajajs face. Having worked
on the BAL shopfloor
in the early nineties as a
management trainee, he
went on to complete his
MSc in Manufacturing
Systems Engineering from
the University of Warwick,
UK, before returning to
BAL. After an MBA from
Harvard Business School
in 1997, he did ten straight
years at BAL, involving
himself in various functions
from finance to exports
until the demerger in 2008.
BFS apart, Bajaj is
also managing director
Rajeev Jain,
of Bajaj Holdings and
managing
director of BFL
Investments, the groups
holding company which
holds 31.49 percent in
BAL and 39.17 percent
in BFS. His role there
includes building strategy
and team, and guiding
this company which has
approximately $1 billion
in cash and investments.
The insurance
companies and auto
finance were existing
businesses, but BAL was
the only listed entity. We
had a lot of institutional
investors telling us that
with multiple businesses
under BAL, it was
becoming difficult to
derive a fair valuation, explains Bajaj on the context of the
demerger. Why not find a way so that people could own
both auto and finance separately? When my father and I
spoke about spinning off financial services, I was happy
to take that on and build it up because Id spent a good
deal of time at BAL which was being led by my brother
Rajiv, he adds, during the course of two lengthy meetings
with Forbes India at the BFS headquarters in Pune.
enter nanoo
paMnani
A masterstroke by the
Bajajs was to get veteran
banker Nanoo Pamnani
(Pamnanis wife and Rahul
Bajajs late wife are sisters)
on board in 2007 to guide
the financial services
business. Pamnaniwho
was director of Citibanks
Asia Pacific Group based
in Singapore and also
CEO of Citi in India
was the perfect mentor
and guide for Sanjiv
Bajaj. Pamnani, now 71,
serves as vice chairman
of BFS and is still deeply
involved in the business.
He also chairs BFSs risk
management committee.
Without him [Pamnani], wed not be anywhere near
where we are. Not just me, the team will tell you that,
says Bajaj, who is also the vice chairman of BFL, fondly.
Bajaj Finance had been around but it was largely captive
doing two-wheeler financing [for Bajaj Auto]. Sanjiv, when
still working with Bajaj Auto, had called me when I was
with Citi and asked me to spend a couple of hours daily to
guide us. He made a presentation. I called him back and
we dont want to Be a ferrari. we want to Be the equivalent

of a mercedes. [you need to] deliver outstanding profits
But also Be of a reasonaBly large size.
size, Bajaj stresses. The group has a single-minded focus

on excellence, innovation and, most important, profits.
told him it is interesting but really a lot more can be done.

I knew what an NBFC could do. The challenges were
enormous but so were the opportunities, recalls Pamnani.
When Bajaj took charge of financial services, the NBFC
was primarily into auto finance, while the non-life and
life businesses were relatively smaller. What followed
was a brick-by-brick approach to building all the three
business lines into major players. Today, BFL is a diversified
NBFC present in consumer finance, lending to small and
medium enterprises (SMEs), and in commercial and rural
lending with a book size of over Rs 41,760 crore as of
December 2015, a 41 percent jump over the same quarter
the previous year. Bagic is the countrys second largest
private non-life insurer and one of the most profitable in
the private sector, with among the best combined ratios
(the sum of incurred losses and operating expenses as a
percentage of earned premium). Balic, on the other hand,
is one of the most profitable life insurers in the country
and the fourth largest player in the private sector.
In a highly commoditised financial services industry,
where a number of players are aiming to offer pretty
much the same suite of products and services, how does
BFS differentiate itself from the rest? By thinking beyond
bajaj finance: growing

big, brick by brick
Share of profit, not Size alone
Our focus is on profit share, not market share. It really

doesnt matter what the topline is. Our aim is to be a
large part of the bottomline in the segments we are
in, says Bajaj. The evidence: From a negative of Rs 33
crore in FY08, BFS ended FY15 with a consolidated
profit after tax of Rs 1,690 crore. From FY11 to FY15,
the company clocked an 11 percent CAGR in profits.
BFL is clearly the star among group companiesfrom
Rs 20.58 crore in FY08, its FY15 profit stood at Rs 898
crore, translating into a CAGR of 71.49 percent.
We are always looking for long-term profit growth.
In the life- and non-life businesses, the net worth has
also grown sharply, multiple times of what it used
to be. If you see how well we have used capital and
compare us with the top 10, you will find how this has
worked for us in terms of long-term profit growth, says
Bajaj. If you respect capital and leverage it properly,
the business will always deliver high returns.
However, Bajaj adds that his idea of long-term profit is
+6
+34
emi card
+5
+5
extended
Warranty
cross Sell
co-branded
credit card
consumer
financial
fitness
report
Vendor
financing
infrastructure
financing
criSiL Sme
rating
+3
Loans
against
property
*construction
equipment
financing
relationship
management
+3
Lease rental
Discounting
retail
Sme
rural
commercial
fee products
+5
+3
corporate
finance
Business
Light
engineering
Business
general
insurance
Distribution
mSme rural
Lending
financial
institutions
Lending
Business
retailer
finance
property
fitness
report
Sme
financial
fitness
report
+2
+2
consumer
Durable
financing
Life
insurance
Distribution
Loan against
Shares
promoter
Loan against
Shares
retail
professional
Loans
2W & 3W
financing
personal
Loan cross
Sell
Business
Loans
home Loans
Self
employed
Salaried
personal
Loans
Lifestyle
product
financing
consumer
rural
Lending
Digital
finance
ecommerce
Seller
finance
legacy
fY08
fY09 & 10
fY11
fY12
fY13
fY14
fY15
fY16
home Loans
Salaried
* Closed
Source: Bajaj Finserv
The
League
of
share of profit
replicable but we have to keep raising the bar, says Jain.

also linked in a way to a certain size, though the latter is
Put very simply, the 30-second approval move is the
not the objective. We dont want to be a Ferrari. We want
biggest innovation. Banks do it only for existing customers.
to be the equivalent of a Mercedes. [You need to] deliver
What about new customers? says Bajaj. Today, BFL has
outstanding profits but also be of a reasonably large size.
a total customer base of about 15 million, with all the BFS
If you chase only size, there are enough examples across
firms together accounting for 80 million customers.
the world to show you that you end up making mistakes.
In the spirit of constant innovation, BFL moved from
The focus on profitability also played out when BFL
consumer electronics to furniture to mobile phones and
took the decision to move out of infrastructure lending in
now to apparel, shoes and accessories, increasing the market
2011, an area which many felt was lucrative when the group
size it addresses from Rs 50,000 crore eight years ago to Rs
entered the business. Bajaj says while infra lending is a
3 lakh crore now, by adding new business lines. It now has
good way to build the book, the number of lenders makes
5.5 million EMI cards and has also entered the ecommerce
margins very thin, even in good times. In the bad times,
financing space recently by going live on the Flipkart
youre in trouble anyway. So we got into it for a year or so
platform. It has also just received approvals
[in 2010] and then pulled out, he explains.
from the Reserve Bank of India to launch
The profitability mantra drives all
growing share
businesses across the group. When I joined
of bajaj finance a co-branded credit card with RBL Bank.
With this, the company will have its arms
BFL [in 2007], I wanted to be the most
in bfs profits
around the overall payments piece. Our
profitable business among the three Bajaj
strategy is to get to 10 million EMI cards by
Finserv businesses. This has now been
100
4%
15%
2019. That should position us as the largest
achieved with a higher pre-tax profit than
cards-in-force issuer in India with our own
the insurance businesses. My next goal is
80
12%
33%
merchant network, says Jain, emphasising
to make more profit than both of them put
3%
that BFLs competition is no longer the other
together, says Rajeev Jain, 45, the managing
60
NBFCs but large private banks. The strategy
director of BFL, who joined the group
25%
has translated into a return on equity (RoE)
after stints at GE Capital and AIG, and is a
40
of 20.4 percent for BFL as of March 2015.
member of the core brains trust of BFS.
70%
We think the overall discretionary
38%
pool of the mass affluent will expand
away froM the clUtter
20
significantly. With differentiation, we can
The innovation intent at BFS is critical for
make it, he says. We are not happy with
its growth and all businesses are oriented
0
2010-11
2014-15
our current state. We are finding better
towards it. In BFL, the biggest example is
Balic
Bagic
Bajaj Finance ltd
customer experiences and growing the share
how loans get approved in 30 seconds flat.
others*
of wallet. We are adding depth and width.
Earlier, if you wanted a consumer
*Others include Bajaj Finserv Standalone,
and all the remaining components
This model draws praise from peers and
durables loan, the retailer would ask for a
Source: Bajaj Finserv
competitors as well. Says Ajay Srinivasan,
set of documents, start processing the loan
chief executive of the Aditya Birla Financial
and send the product. Now the retailer
Services Group: They [BFS and BFL] have grown well
only requires a cancelled cheque from the customer,
and built a good franchise. They got into areas like
who would fill in an application, select the product and
consumer durables financing where others have not been
the approval comes on your mobile instantly, says Jain,
that successful and built a good track record. They run a
adding that last Diwali, BFL took this a step further with
good shop and there arent too many Id say this for.
the launch of Experia, the countrys first EMI-finance app
Bagic has also been an innovator in its field, as an
which approves a loan of up to Rs 3 lakh in 30 seconds.
early adopter of cashless claims in the industry. It was
The company provides documentation-free approval,
also the first to have an in-house health administration
on submission of the customers PAN and Aadhaar card
team to handle health insurance claims.
details. The customer can provide his deal ID at the
store which, once verified, allows him to shop, without
having to wait for loan approval. Thanks to the companys
tech-Savvy, analyticS-driven
robust back-end and focus on analytics, the good and bad
Bajaj agrees that the focus on technology has allowed the
customers are already separated. I agree that all of this is
group to be very customer efficient and add new products
we need to Be transparent... the goal of all the

26,000 employees of the group is to Build the Best
financial services company in india. period.
seamlessly. Added to that is the focus on analytics. Of the 15

million customers BFL serves, as many as nine million have
Bureau best scores, meaning they have scores of 750 and
above with Credit Information Bureau (India) Ltd (Cibil).
That is really the power of the franchise, says Jain.
This has come on the back of hard analytics which
the group works on, together with the likes of firms like
Equifax and now Bridge i2i Analytics, which pore over
customer data and sift the good from the bad, identifying
cross-selling opportunities. Our customer base is all
mapped, data cleaned, segmented, put into analytics
and credit stamped, Bajaj adds. Knowing Basel-III
norms will come, we have also built with Crisil an SME
rating product for customers where 300-400 SMEs get
rated every month. Not surprising, then, that BFLs
net non-performing assets (NPA) as on December 31,
2015 stood at 0.26 percent. (Rival Shriram City Union,
for instance, has a 0.66 percent net NPA level.)
The technology thrust is not just applicable to BFL but
to the two insurers as well. We have opened 300-400
virtual offices through the app on mobile/tablet, where
you can also swipe your card and receive the receipt on
phone, says Tapan Singhel, Bagics MD and CEO.
For customers, we have an app-like assist
where they can buy a policy, service it or ask any
question. For agents, in June 2015, we created an
offline app so that documentation can be completed
fast, says Anuj Agarwal, Balics MD and CEO.
own yoUr bUSineSS
Whether it is BFL or the insurance firms, the BFS approach

is to ensure each manager is trained to take ownership
of businesses as if they were running them totally as
entrepreneurs. This is at the heart of the manner in which
BFSs 26,000 employees and their companies operate
and Bajaj is keen to ensure this startup-ish and disruptive
attitude continues even as the group grows rapidly.
We want to create an environment where somebody
who wants to be an entrepreneur but may not have
the opportunity comes and does so here. Our 34 P&Ls
[in BFL] run like individual businesses. The business
head looks at everything like it is his money and his
business, says Bajaj. Not surprising then that people
like Singhel have risen to CEO from branch manager.
checkS and balanceS
While Bajaj says the entrepreneurial DNA at the group has

helped create high quality leaders because they understand
business, risk and expenses, robust processes and
reviews also ensure a single-minded focus on sustainable

profitability. For instance, Bajaj says he is personally
involved in HR and looks at mid- and end-year appraisals
for middle and senior management. We hold them [top
managers] responsible by way of detailed monthly reviews
and they are very happy to be responsible, says Bajaj,
adding that Pamnanis background as a top-notch foreign
bank professional brought in this element into the system.
The risk review meetings in BFL go on for a full
day. We now have over 450 slides, over 2,000 variables.
Doing it month after month, you know what to hone
in on, but the information is all there. More important,
this information is available to people so that they
can take action whenever needed, he adds. Theres
so much documentation and detail in the papers that
Bajaj jokes its enough to immediately start another
NBFC from scratch. Theres enormous intellectual
property in there. We need to guard it all carefully.
the bajaj way
Technology, innovation, disruption, differentiation:

These growth drivers are meaningless for the Bajaj group
unless its done the Bajaj way, says Bajaj, with the
focus on values, ethics and transparency. So whether it
is disclosing the internal rate of return on EMI loans of
zero percent, declaring net asset values when renewing
Unit Linked Insurance Plans or giving a longer free-look
period while selling insurance policies, he says the idea
is to ensure a high degree of transparency and fairness.
The market may go up or down but we need to be
transparent and explain things to customers, he says.
The goal of all the 26,000 employees of the group is to
build the best financial services company in India. Period.
It has been eight years since Sanjiv Bajaj took charge of
the financial services businessand father Rahul can now
give him a pat on the back. Consider how far he has come.
As of March 31, 2016, BFS and BFL had a combined market
cap of Rs 64,441.14 crore; BALs was Rs 69,625.32 crore.
What better validation could investors have asked for?
In 2007, the media universally thought that
the Bajaj group demerger was done to create
independent businesses for my two sons. That was
not the case. The objective of the demerger was
to unlock and create shareholder value. That the
boys were getting different businesses was a very
welcome by-product, says Rahul Bajaj. And, from
2007 to now, Sanjiv has really flourished.
For his younger son, these words would mean much
more than the profits his companies are bringing home.
The
League
of
Gurbachan (left) and

Kuldip Singh Dhingra
shares of Berger Paints have surged from

rs 44 on march 31, 2011, to rs 244.5 on march
31, 2016, clocking a cagr of 41%
The
Colours
of suCCess
The dhingras relentless focus on the
business has taken Berger Paints to the
second spot in Indias paint industry
By samar srivasTava
Amit VermA
verybody wants to be in the paint industry,

or so it seems when Kuldip Singh Dhingra,
chairman of Berger Paints, rattles off a long
list of competitors whove fumbled. They
all belonged to reputed houses too: Think Tata-owned
Goodlass Nerolac, Kirloskar-owned Kirloskar Paints or
Thapar-owned Thapar Paints. You name the business
house and I will tell you the paint company
they owned, quips Kuldip. But, though in
flying colours
market cap trend
jest, he is making a serious point. The paint
600
industry has proved to be a stumbling block
for many established corporate houses that
500
have made it big in a host of other industries.
400
In contrast, the Delhi-based Dhingras,
who are originally from Amritsar, Punjab,
300
have been paint sellers for the last five
generations. And the two brothers, Kuldip
200
(69) and Gurbachan Singh Dhingra
100
(66), have drawn on that experience
to take Berger Paints to the position of
0
Indias number two paint company.
2011
2016
2011
indexed
to 100
When the duo acquired Berger Paints in
Berger
BSe 200
1991 from United Breweries chairman Vijay
Mallya, its financial position was precarious.
It was, at the time, the countrys smallest paint company
and hadnt made money in years. But Gurbachan estimates
that since 1991, the market cap of Berger Paints has risen
2,200 times to Rs 18,072 crore as of May 3, 2016. The
company, established in 1923, is favoured by both domestic
and foreign institutional investors who have taken its stock
price up from Rs 44 on March 31, 2011 to Rs 244.5 on March
31, 2016a compounded annual growth rate of 41 percent.
The
League
of
Profit after Tax
Revenue
interfere in the day-to-day functioning. Even dealers they

Apart from 20 factories across India, Berger Paints
know are encouraged to deal directly with the company.
also operates in Bangladesh and Nepal. So committed
This degree of separation of ownership and
are the Dhingras to the paint business that, through the
management in Berger Paints is rare compared to other
years, theyve taken their shareholding to 75 percent,
companies, says Abhijit Roy, MD and CEO, Berger
the maximum allowed under Indian law. (When they
Paints. He explains that while the promoters take care
bought it from Mallya, they owned 32 percent.) They
of broad strategic issues like partnerships and joint
also own 95 percent of Berger Paints Bangladesh Ltd.
ventures, they are not involved in the
It is noteworthy, then, that the
day-to-day running of the company.
owners who are so close to the
scaling new
company they have built, are able to
heights
distance themselves when it matters.
suCCession planning
4000
And that separation has proven to
The Dhingra next-gen works in the
be the first key to Berger Paintss
company but they will eventually not
success, maintain the Dhingras.
hold any operational responsibilities.
3000
(Kuldips daughter Rishma Kaur, 43, is
national business development manager
separaTion of ownership
retail and Gurbachans son Kanwardip
and managemenT
2000
Singh Dhingra, 33, is national business
In the 1980s, the Dhingras had a thriving
12.02 11.57 12.14 12.42 13.39
development managerindustrial; they
paint business under Rajdoot Paints
1000
are both directors on the board as well.)
which was sold in India. They had
The succession planning may not
also started exporting to the Soviet
include
the traditional family-owned
Union. Kuldip would handle sales and
0
FY11
FY12 FY13 FY14 FY15
business concept, but it is still a critical
marketing while Gurbachan was in
area of focus for them. They are clear
charge of the factories. Given the tax
Operating profit (% of revenue)
that the chief executive of the company
incentives, the brothers discovered
must have a sales and marketing
that exporting was far more lucrative
300
background. The business can survive
they also started dabbling in soaps
anything but not sloppy marketing.
and detergent exports. But with the
Current CEO Roy was the marketing
collapse of the Soviet Union, that
250
director and chief operating officer of
business went bust and they were
the company before his elevation.
left with only the domestic market.
200
The brothers are closely involved
Around that time, Berger Paints
in identifying key talent. Board
came on the block. The brothers bid
150
members also play a key role in
for it and, in 1991, the company was
advising them. Gurcharan Das, a
theirs. The business, however, was
former CEO of Procter & Gamble India
based in Calcutta (now Kolkata) while
100
20.54 21.00 21.33 20.71 20.59
and a former independent director,
the Dhingras had spent all their lives in
was instrumental in helping them
Delhi. How were they going to handle
50
shape their thoughts on how to go
the management, in that context?
about this. He worked on identifying
Now, delegating and hiring
0
candidates and persuaded them to get
professionals had proved successful for
FY11 FY12 FY13 FY14 FY15
a proper succession plan in place.
them in Rajdoot Paints. We realised
Return on Net Worth (%)
All figures in Rs cr
The brothers are also unambiguous
pretty early on that if we had to grow, we
about the fact that they will not
had to get in professionals, says Kuldip.
Source: Company data
overshadow the CEO once he is picked.
It was this principle they decided to
Stepping back from the day-to-day affairs is very hard
apply to Berger Paints. While the brothers have steadfastly
but it has to be done for the health of the company, says
stuck to this, some would argue theyve taken the principle
Kuldip. They continue to be involved in charting the future
too far. They only travel to Kolkata for board meetings
course of the business and in forming joint ventures.
and for the board committees they chair. They dont
Bergers margins are Poised to rise with Better

Branding and Products, a new Plant in andhra
Pradesh and closer association with Painters
CapiTal alloCaTion
auTomaTion
Theres little doubt that the Dhingras are dedicated

to the paint business. And over the years theyve
put their money where their mouth is.
When they took over Berger Paints, the morale was
down and there was no money to even pay salaries. At
one time, the company asked us for a Rs 10 crore loan.
In those days, that was a lot of money. But we made it
available at short notice. In addition, we had to agree to a
lower interest rate as well as a moratorium on payments
for five years, recalls Kuldip. Tough ask, but they were
determined to make Berger Paints a force to reckon with.
Equally important, the family has never invested
in anything except Berger Paints. In the initial years,
even dividends were ploughed back. When Berger
Paints did a preferential allotment in 2008, the brothers
agreed to put in Rs 100 crore. Meanwhile, market
regulator Securities and Exchange Board of India (Sebi)
stipulated that promoter holding in all private sector
listed companies be brought down to below 75 percent.
Soon, the Lehman crisis broke and Berger Paints share
pricealong with the rest of the marketcollapsed. But
the family still subscribed to the issue at Rs 50 a share
even though the market price was Rs 38 a share.
Currently, they are faced with a peculiar problem.
While we are ready to put in more money into the
company, capital requirements have reduced over the
years, says Kuldip. Thats a good problem to have.
Expansion is also a function of having the desired products,

and at the required time. After all, in an industry that
has as many as 5,000 different colour shades, having
the right systems and processes in place is critical. This
can only happen through automation at the factories,
an effort that has been driven by Gurbachan.
Berger Paints new plant at Anantapur district in
Andhra Pradesh is completely automated: Paint tubs are
filled, automatically sealed and then robots stack them
on shelves. This is a far cry from the labour intensive
plants that the industry had just a decade ago.
While lowering the cost of production, automation
allows us to get the desired level of consistency in the
manufacturing process, explains Roy. The Dhingras
have also diversified their plant locations so as to not
give the labour unions much clout in one place.
iT sysTems
Demand forecasting also plays a key role in this business.

Earlier, Berger Paints had been hamstrung by the
lack of an IT system that allowed them to do this. In
December 2012, Roy had said, We lose some amount
of sales on account of our inability to supply the right
material on time. It is one area we are working on.
Recognition of this problem was the first step. The
company has since worked on running various packages
on an enterprise resource planning (ERP) system,
provided by Oracle, to help it forecast demand correctly.
improving markeT share and margins
The numbers provide the validation they need. The

markets are probably valuing us at the same level as the
market leader [Asian Paints] as they see more scope for
margin increase both through a mix of products as well
as geographical expansion, says Roy. In 2011, Ebitda
margins were at 12.02 percent, in 2015 it was 13.39 percent.
The company has also steadily expanded market share
and matched Asian Paints in revenue growth over the
last five years. Kuldip refuses to let on too much except
to say that he would like market share and margins
to improve by 0.5 percentage points every year.
Berger Paints margin expansion could continue for
three reasons. Berger Paints was known for lower-end
paints, but with better branding and products their margins
could continue to rise. Second, their plant in Andhra
Pradesh will help them reduce freight costs in servicing
southern markets. Painters, who form a key sales channel,
recommend products and Berger Paints has been working
with them, says Ravi Shenoy, an analyst at Motilal Oswal.
relenTless foCus on CosTs
The other hurdle faced by the industry is graft. Corruption

is a disease that afflicts not only the government but
also the private sector, says Kuldip. He narrates
examples of how suppliers short-change the company
by charging more and providing faulty material.
To combat this, the brothers went so far as to set
up their own packaging unit to supply to the company.
This was done so that they can get a clear idea of costs
and quality, which Berger Paints can then use as a
benchmark when it buys from other suppliers.
Wastage has reduced significantly as also
the price charged. Quality is up and costs are
down, words every promoter wants to hear.
The relentless focus on the business, costs and
non-interference has created a powerful cocktail
to propel Berger Paints to where it is today. As
has the brothers attitudepolite to a fault and
refreshingly devoted to the company.
The
League
of
A HOUSE FOR THE

COMMON MAN
With his decision to stay focussed on low-income home buyersa profitable
segment with a consistent trajectory of growthsudhin Choksey
has carved a niche for Gruh Finance
By SAMAR SRIvASTAvA
n 1998, when Sudhin Choksey took over as

STAYING TRUE TO FUNDAMENTALS
the CEO of Gruh Finance, the company was
One of Chokseys first steps after assuming
in a financial mess. For Choksey, the reason
charge at Gruh was to refocus on the founding
was not hard to see; correcting it, though, was
mission of the companyproviding home loans to
going to take the better part of the next five years.
people with small incomes and living in small towns.
Founded in 1986 by the late HT Parekhwho also
For this, he realised Gruh had to revamp its
established the financial conglomerate HDFCGruh
branch model.
Finances initial mission was to provide housing
I realised that the branch model of HDFC would not
loans to low-income people in small towns. But in the
work in small towns, he says. On a visit to a Gruh Finance
years preceding Chokseys elevation, the company
branch in Mehsana, on the outskirts of Ahmedabad,
had strayed from its initial mandate. In
Choksey noticed there were 11 employees
addition to making mortgages available to
(two each for marketing, legal, collections
up, up and away
the lower end of the pyramid, Gruh had
and so on)a large number in a branch that
Market cap trend
ventured into allied areas like providing
had little business. The branch structure
800
construction finance to developers.
had to be changed and this could only be
700
So it was hardly a surprise that the real
done by redeploying the staff, he says.
600
estate crash of 1994-96 hit the company
Across the smaller towns of Gujarat, new
hard. Developers stopped making interest
branches managed by just two people were
500
payments even as home sales dipped,
opened. With resources more efficiently
400
resulting in no cash flows. It was then that
deployed, Choksey now turned his attention
300
Choksey, 62, who describes himself as a
to perfecting his product offering and
hands on manager, got into the act.
tailoring it for the bottom of the pyramid.
200
Nearly two decades later, the results are
100
for all to see. Gruh Finance, a subsidiary
GETTING THE PRODUCT RIGHT
0
of HDFC, has established a niche for itself
While redirecting the company to
2011
2016
in the housing finance sector by providing
its founding principles, Choksey
Indexed to 100
Gruh Finance
BSE 200
small-ticket home loans in small towns and
realised that Gruh was missing out
cities. It has also developed its own model to
on an entire segmentthose without
assess the credit risk of people without regular incomes.
regular incomes and, therefore, no salary slips.
In the process, the company has grown its revenues
Providing home financing to this lot is something
and profits at a CAGR of 24 percent and 17 percent
that had not been attempted before and was fraught
respectively, in the last five years. Its stock price
with high risk. Choksey narrates the story of how he
has also grown at a compounded annual rate of 47
went about sanctioning a loan to a mojari (handcrafted
percent in the same period. These numbers alone
footwear) maker in Usmanpura in Ahmedabad. He
vindicate the changes effected by Choksey.
sat with him and assessed how many pieces of mojari
One Of ChOkseys first steps at Gruh was tO

refOCus On its fOundinG missiOnprOvidinG
hOme lOans tO peOple with small inCOmes
Sudhin Choksey,
MD and CEO,
Gruh Finance
he made in a day. Based on that, Choksey judged how

much he would be able to pay as installments and
sanctioned a loan of Rs 2.5 lakh. Initially, my staff
was unsure about making credit assessments like this.
I had to do the first few myself, Choksey admits.
Convinced, Choksey launched Gruh Suvidha, a
product for people without income proof. He devised
the scheme in such a way that it came with negative
amortisation, i.e. the monthly installments of the borrowers
would rise over time. Choksey reasoned that the rising
incomes of his borrowers would offset their higher
outgoes on installments. (This has to be distinguished from
US sub-prime loans where interest rates are increased
during the tenure of the loan. In Gruh Suvidha, interest
rates remain constant, just the initial monthly installments
are kept low.) It was later discontinued after auditors raised
an alarm. Today, in addition to Gruh Suvidha, the company
also has loans for those with income proof (Gruh Suraksha),
for those seeking to set up shops and offices (Gruh
Samruddhi) and for home renovations (Gruh Sajavat).
MANAGING RISK
While it got its target market right, Gruh realised

that assessing credit risk was equally important.
This was a challenge Chokseys team took up
in earnest, despite the lack of precedence.
They came up with a 23-point guideline for loan
assessments. When a customer approaches a branch
for a loan, the staff asks questions about the persons
profession, family, past credit record and future
liabilities. These 23 points are entered into a system
that juxtaposes it with information from creditors with
similar records, and instantly arrives at a decision on
whether the loan can be sanctioned and at what rate.
More importantly, this also removes any arbitrariness
from the system. This very clearly calibrates the risk
and, in time, has become a very scientific model, says
Suresh Iyer, general manager, operations, at Gruh
Finance. The model has also been validated by Crisil.
One large risk we face is that of fake property
documents, says Manish Gandhi, regional manager,
The
League
of
if yOu sanCtiOn a lOan, yOu are alsO

respOnsiBle fOr the reCOvery in
Case sOmethinG GOes wrOnG.
run banks like State Bank of India and Bank of Baroda.

Being a smaller company, Gruh would never be able
to match the interest rates of large mortgage companies.
(Currently, it offers loans at an interest rate of 9.75
percent versus 9.45 percent for SBI).
The focus has helped it to not only
growth story
carve out a niche but also cater to a
segment where growth has held up.
Loan disbursements
Gujarat. To counter this, Gruh forbade managers

from accepting laminated copies. If you feel the paper,
you usually get a good idea of its authenticity, he
explains. A simple solution, yet something few
companies practice.
BRANCHING OUT
While the early 2000s were spent in

getting the company back on its feet,
it was in the latter half of the decade
that Gruh began to expand beyond
Gujarat. The company currently has 179
retail offices across 10 states, including
Karnataka, Rajasthan, Maharashtra and
Chhattisgarh. It recently entered Uttar
Pradesh with an office in Lucknow.
While Choksey is confident that Gruhs
business model is replicable, he is also
acutely aware that only local staff can
handle local business. When we opened
in Karnataka we did not send anyone
from here [Gujarat], he explains.
3500
3000
FOCUS ON RETURNS
FOR INvESTORS
Even after Gruh was on a strong footing,

it took time for investors to discover the
company. But this did not bother Choksey.
2000
He never attended investor meets,
1500
and made running the company his sole
focus. (He once asked a headhunter, who
1000
tried to poach him, to leave his office.)
Yet, he was always available to meet
500
individual investors who made the trek
to their Ellisbridge office in Ahmedabad.
0
2010-11
2012-13
2014-15
2011-12
2013-14
For much of the 2000s, the business
was available at a reasonable valuation
Profit after tax
while the company clocked above
DECENTRALISING
250
20 percent revenue growth every
One of the hallmarks of success in the
year. It was post the 2008 financial
mortgage business is quick decisioncrisis that the companys stock price
making. Gruh was able to achieve that
200
rose rapidly, resulting in a 100-time
by granting autonomy to its branches to
appreciation from early-2000 levels.
make independent credit assessments
150
Barry Sahgal, the general partner of
and sanction loans up to Rs 1 crore. Only
New York-based Zaara Management,
waivers of fees or interest payments
who identified the stock in the early
were vetted by the head office. This is
100
2000s and has been a patient investor
a far cry from other housing finance
(in his personal capacity) since then,
companies where even routine approvals
50
has great respect for what Choksey
go all the way to the regional office.
has been able to execute and checks
Besides, at Gruh, the head office
0
with him a few times a year on how
determines strategy, and execution
2010-11
2012-13
2014-15
2011-12
2013-14
the company is expanding its branch
is left to the local units. Gruh
Source: Gruh Finance Ltd
network, building middle management
employs no collection agents.
Figures in Rs crore
and monitoring balance sheet risk.
If you sanction a loan, you are
Money is made by buying fabulous
also responsible for the recovery
companies that are consistent growers despite high
in case something goes wrong, explains Iyer.
valuation multiples because they deliver predictable
above-average financial metrics, says Sahgal. He cautions
STAYING PUT
that this is not a stock for someone seeking a quick trade.
For any small mortgage business, venturing into loans of
Sahgal had met Keki Mistry, vice-chairman of HDFC,
higher ticket sizes would be the natural course of evolution.
at a conference in New York and asked him about the
But Choksey was clear that it would dilute focus and also
company. His response: Its a wonderful company
expose Gruh to competition from the likes of Indiabulls
I wish I could buy more [of the stock] myself.
Housing Finance, Muthoot Finance, HDFC and also state40 | forbes india May 27, 2016
2500
The
League
of
Mind Over Matter
there is no point hiding something under the

carpet. honesty helps. there will Be some nonBelievers in the organisation, let them move on.
IT services company Mindtrees growth can be attributed to its focus on core areas
and large clients, as well as the leadership style of Krishnakumar natarajan
By debOjyOti GhOsh
Mallikarjun katakol for forbes india
rashant Mehra, associate vice president, social

inclusion, at IT services firm Mindtree, has
known his executive chairman Krishnakumar
Natarajan for close to two decades now.
Natarajan is someone with whom he can share his deepest
concerns and his silliest ideas without any inhibitions.
I first met him [Natarajan] in 1997 when I joined
Wipro as a software engineer in his team. A few months
later, I was asked to go to New York on an assignment.
I had been married for just a year and my wife was
working with IBM. I didnt want to disrupt her career [by
taking her with me]. Then he [Natarajan] struck a deal:
I could go for just six months. But my wifes birthday
was within that period, so he told me I could come back
one week before her birthday, recalls Mehra (43).
Although the project was on track, Mehra was not
able to set up a team to hand over his responsibilities
before returning. But he [Natarajan] kept his word. I
came back a week before my wifes birthday. At some
level, that was the beginning of a relationship that
still continues. He is an extremely trustworthy
the great leap
and reliable person, says Mehra, who joined
Market cap trend
Natarajan in 1999 when he co-founded Mindtree.
800
In 17 years of Mindtrees existence, Natarajan
700
(58), popularly known as KK, has played a crucial
600
role in building an organisational culture based on
trust and respect. Those familiar with the roots of the
500
$715-million software services company would insist
400
that this approach towards colleagues, clients and
300
investors is what has brought the company this far.
The best way to judge a company is by its
200
performance, says VG Siddhartha, chairman
100
and managing director of Coffee Day Enterprises
0
2011
2016
Limited (CDEL). Since 2011, the stock price of
indexed to 100
Mindtree has gone up by more than five times,
Mindtree
bse 200
with KK at the helm during that period. It depends
on the quality of the leadership and the team.
Siddhartha was the first venture capitalist (VC) to put
in a $2-million seed fund in Mindtree in 1999 when the
IT services company was founded. Siddhartha, along
Krishnakumar
with his two entities (CDEL and Coffee Day Trading
Natarajan, executive
Ltd), is the single-largest shareholder in the company.
chairman, Mindtree
Natarajan, along with nine co-founders from Wipro,
The
League
of
big bets, but not bet the company. Natarajan has no qualms
Lucent Technologies and Cambridge Technology Partners,
in admitting that the mobile business wasnt the right call.
had started Mindtree as one of Indias first VC-backed IT
I realised that there is no point trying to hide something
services companies and has helped build it from ground
under the carpet. Honesty and over-communicating at
up; he took over as CEO and managing director in April
that time helped. There will be some non-believers in the
2008, and became executive chairman on April 1 this year.
organisation, let them move on. If we had tried to hold
As CEO and MD, Natarajan initiated some key strategic
them, it would have created negative energy in the system.
course corrections, and fuelled growth by venturing into
newer businesses in the highly-commoditised softwareservices industry. The mid-cap IT company has grown
rePOsitiOninG
at a compound annual growth rate (CAGR) of 16.7
While Mindtree was trying to come out of what
percent in the last five years, ahead of
Natarajan calls a self-inflicted wound,
the industrys 12.6 percent. Mindtree has
the rise and rise there was a clear need to reposition
also enhanced value for its shareholders:
itself, and to differentiate its services
of mindtree
On March 7, 2007, the day it was listed,
in a highly competitive market.
Revenue
Mindtrees shares were trading at Rs
In the later part of 2010, Siegel+Gale,
5000
155; they have gone up to Rs 653 as of
a US-based strategic branding firm,
March 31, 2016, a growth of 321 percent.
was brought on board to spearhead the
4000
Many would agree that Natarajan
repositioning exercise. Management
has been a cornerstone of this growth.
consulting major Bain & Company was
3000
In 17 years, it has given more than 30
also roped in to provide a roadmap.
percent returns on my investments,
Natarajan was clear about verticalisation
says Siddhartha. After KK took over
of services, and not trying to become
2000
as CEO, he has done a commendable
everything to everybody. Based on Bain
job. He knows how to motivate
& Companys suggestion, in late 2011,
1000 26.9 23.3 28.4 17.5 31.7
his team and achieve targets.
Mindtree decided to focus on four key
business segmentsbanking, financial
0
fY12 fY13 fY14 fY15 fY16
services and insurance (BFSI), high-tech
exitinG a wrOnG bet
Revenue Growth (%) Figures in Rs crore
businesses (semi-conductors, consumer
The Bengaluru-based company witnessed
electronics and gaming), retail and consumer
rapid growth between 1999 and 2005,
Net Profit
700
packaged goods, and travel and hospitality.
crossing $100 million in revenue, followed
Despite operating in an industry where
by a successful initial public offering (IPO)
600
service offerings and clients are more or less
in 2007. But when the global markets
500
similar, Mindtree has managed to create
tanked in 2008, Mindtree saw its growth
its own position, while competing with
slowing down. Seeing an opportunity in
400
larger players such as TCS, Infosys and
the mobile handset business, it acquired
300
Wipro, says Som Mittal, former chairman
the India R&D unit of Kyocera Wireless
and president, Nasscom. He [Natarajan]
(a software engineering company,
200
had a strong conviction that, despite all
especially for mobile devices) in 2009, to
115.1 55.3 32.9 18.9 12.5
100
the negative cycles, the company can
make smartphones. But as higher capital
move on. And he has done that effortlessly,
requirement began to eat into profits,
0
fY12 fY13 fY14 fY15 fY16
without dismissing the problems.
Mindtree exited the business in 2010, and
Profit Growth (%) Figures in Rs crore
suffered a loss of $15 million in FY11.
It wasnt just a monetary blow:
Client MininG strateGy
Source: Mindtree
The company also saw the exit of
With a focus on specific business
then executive chairman and co-founder Ashok
verticals, Natarajan made a conscious effort to reSoota, and about 35 percent of its senior executives
evaluate Mindtrees customer base, as Bain & Company
in the ranks of vice president and above.
had recommended. It cut down on its number of
Natarajans mind keeps going back to the words of a
clients to focus on building long-lasting, deepboard member: In growing the business, you should make
engagement relationships with major customers.
the company has cut down on the numBer

of clients to focus on Building longlasting relationships with major customers
The distillation helped. Mindtrees growth from its top

accounts has been one of the best in the industry. More
importantly, growth at its top client has been more than
two times the companys revenue growth over the past
two years, says an April 2016 report by IIFL Research.
Focussing on large clients and cross-selling services
to increase revenues from each client is a strategy that
mid-size IT firms in India have been adopting in the recent
past. Mindtree could be called a pioneer of sorts in this
field: In 2010, the companys top 10 clients accounted for
36 percent of its total business; in the last four years, this
has risen to 46 percent. At present, it has six $25-million
clients and 15 customers in the $10-million category.
FOCus On diGital business
As clients began to move towards newer technologies such

as cloud, mobility and analytics, thus transforming their
business platforms, Natarajan realised that offering digital
services to clients would be the way forward. Digital will
not just be restricted to front-end business; customers
are also changing their back-end support, which is the
enterprise resource planning [ERP] system, says Natarajan.
ERP software integrates data across departments, such as
product planning, purchase, sales and manufacturing.
Rostow Ravanan, CEO and MD of Mindtree, credits
Natarajan for seeding and growing the idea. Today,
Mindtrees key clients in the digital space include Microsoft,
Unilever and P&G. The digital business, started in 201314, currently comprises about 35 percent of Mindtrees
total revenue. Digital is a major benefit to our topline
and helped create a differentiator, says Ravanan.
shOPPinG sMart
To fuel its digital business, in the last one year, Mindtree

has made three acquisitions: UK-based Bluefin Solutions,
which specialises in German IT firm SAPs business
software HANA; US-based Relational Solutions Inc, an
analytics provider, primarily for consumer packaged
goods; and US-based Magnet 360, a Salesforce consulting
partner with clients such as Nike, Honeywell and Cargill.
In 2008, Mindtree had acquired Bengaluru-based
Aztecsoft, which had two key businesses: Software testing
and software product engineering. This acquisition
had helped Mindtree ramp up its product engineering
business and tap into Microsoft, a key client of Aztecsoft.
Today, Microsoft is one of Mindtrees top clients.
Most of Mindtrees acquisitions have paid off.
While many look at M&As as a strategy to bulk up
revenue, I feel an emotive connect with the founding
team of the other company; aligning with their key

objectives is crucial, says Natarajan. Acquisition
is not about shopping and throwing money.
COllabOrative aPPrOaCh
Growing up in Chennai, where his father was a doctor in the

Indian Railways (stationed in Perambur, then the divisional
headquarters of the medical department), Natarajan had a
modest middle-class upbringing.
The advantage of growing up in a railway colony was
that I had many friends, he recalls. An infrastructure set-up
like the Indian Railways gives you facilities where you can
learn outside your school environment. What that subtly
brings in is the ability to work with a diverse group of people.
Even clients have noticed Natarajans collaborative spirit
and team-player attitude. Pramod Varma, chief architect
and technology advisor, UIDAI, remembers his first meeting
with him: During the half-a-day presentation, where
Mindtree was presenting its proposal for the Aadhaar
project, KK orchestrated his team as a leader, but never
interfered. He let his team speak. He only intervened
when it required a commitment from the organisation.
In 2010, Mindtree bagged the three-year application
development and maintenance services contract of the
governments Aadhaar project, one of its key wins.
PeOPle-Oriented aPPrOaCh
Natarajans genuineness, humility and inclusiveness are

regarded as his hallmarks. His way of functioning is very
democratic. He takes everybody along and makes sure
that the decision is consensus-driven, says Ramakrishnan
Chandrasekaran, executive vice chairman, Cognizant India,
who has known Natarajan for 15 years and has worked
closely with him at Nasscom. Natarajans colleagues agree.
In the last five years, I have closely worked with him in
multiple areas of human resource, says Vidya Santhanam,
director, organisational and leadership development,
Mindtree. I find his involvement genuine in leadership
development, which is core for any large organisation.
In 2014, Mindtree partnered with US-based Korn Ferry,
one of the worlds largest advisory firms, and developed a
five-level programme to build a strong leadership pipeline.
I personally know a lot of people who work at Mindtree.
They feel good being part of the company. It is an extremely
employee-friendly organisation, says Chandrasekaran.
For the year ended March 2016, Mindtrees attrition
rate stood at 15.7 percent, one of the lowest in the industry.
The average attrition rate in the IT industry varied
between 16 and 17 percent during the same period.
The
League
of
a riCh
harvest
With cutting-edge research
and world-class facilities, CEO
Mayank singhal has ensured
that PI Industries does not just
give high yields to farmers,
but to its shareholders too
By Deepti ChauDhary
If you Bought 1,000 shares of the company

In aprIl 2003 (at a cumulatIve rs 1,670),
they would Be worth rs 6,29,500 today
Amit VermA
ourteen years ago, when Narendra Kumar retired

as a sub-divisional magistrate, he started another
full-time job: Farming. For the 72-year-old in
western Uttar Pradesh, farming was as much
a way of keeping himself busy, as it was to give back to
society. What will you eat if no one grows anything? he
asks. Kumar was primarily a wheat and sugarcane grower,
but weeds in his wheat crop had been reducing yield and
affecting grain quality. Grass weed can lead to high yield
loss, sometimes by as much as 25 to 30 percent, he says.
Two years ago, Kumar came across Melsa, a herbicide
for wheat management. After using it extensively, his
latest crop yield has risen by 15 to 18 percent. Its one of
the most effective solutions I have found so far, he says.
The product that has eased Kumars woes comes
from Gurgaon-based PI Industries, an agrochemicals
company that has given high yields not just to farmers,
but also to its shareholders. Over the last 13 years, the
shares of the company (set up by PP Singhal in 1947 as an
edible oils maker called Mewar Oil & General Mills Ltd)
have offered gains of a whopping 37,694.6
percent, according to Forbes India estimates
Rapid gRowth
market cap trend
based on the stock price on the BSE.
1500
On April, 23, 2003, PIs shares were trading
at Rs 1.67 per share; on the same day this year,
1200
the stock price was Rs 629.50. Which means
if you bought 1,000 shares of the company
900
in April 2003 (at a cumulative Rs 1,670),
they would be worth Rs 6,29,500 today.
600
The spike has sharpened over the last six
years, when the stock gained 1,343.4 percent.
300
Ritesh Gupta, associate vice president at
Ambit Capital, which tracks the company,
0
says, In the last six years, their overall
2011
2016
sales/PAT have grown at 27 percent/47
indexed to 100
BSe 200
Pi industries
percent CAGR, which is a consistent good
performance by a company when compared
to the industry average growth of 12 to 14 percent.
Its perhaps no mere coincidence that the spike
corresponds to a period when PP Singhals grandson
Mayank assumed the CEOs role. Mayank, 43, has
been associated with the company since 1996 when
his father Salil was at the forefront. (In the 1960s, Salil
took over from his father and transformed the company
from an edible oils maker to an agrochemical firm;
he is now its chairman and managing director.)
But when Mayank Singhal became CEO in December
2009, he made one of the most visible changes in
the company by shoring up its custom synthesis and
The
League
of
manufacturing (CSM) business. Under this vertical PI

Industries offers process research, analytical development
and large-scale manufacturing needs of agrochemical
biggies and other global innovators. This vertical (the
other being domestic agrochemicals) gave PI Industries 59
percent of its revenues in FY15 compared to 37 percent in
FY10. When asked about the companys cutting edge in the
CSM business, Singhal says, We have invested in building
relationships for the last 10 to 15 years. Customers see us as
partners. We are a knowledge-based company; companies
that we work with see the value we bring to the table.
Its a similar philosophy that hes adhered to in some
of the key decisions he has taken over the past six years.
revenues of between Rs 170 crore and Rs 200 crore. Singhal

oversaw the expansion of its R&D facility in Udaipur, the
Panoli facility in Gujarat and spent about Rs 1468.8 crore
on R&D in FY15, compared to Rs 811.8 crore a year earlier.
The difficult-to-build CSM business is a $6 billion
opportunity globally. Experts say PI seems to have perfected
the business model by building strong relationships with
global innovators, which is evident through the faultless
execution of more than 18 commercialised molecules,
and large partnerships in Europe and Japan. It has an
order book of over $600 million. Mayank brings his
fathers ethics, along with his own aggression, which is
visible in the clients list, says Gupta of Ambit Capital.
BuilDing WorlD-Class assets
Divesting the polymer Business
From chemical plants and manufacturing plants to research

labs, Singhal has ensured that PI has world-class facilities
to cater to future business demands. These facilities are
highly automated, multipurpose and compliant with global
environment standards. PI has three plants at its Jambusar
facility in Gujarat for its custom synthesis exports business.
Two of these plants started production in September
(2015) and January (2016) and are expected to generate
Focus is a keyword in Singhals lexicon; anything else

is irrelevant. Thats why, in 2010, just a year after
taking over as CEO, he sold PIs polymer compounding
business to French multinational Rhodia SA, a specialty
chemicals major. The transaction was part of PIs strategy
to concentrate on its agro-inputs and CSM businesses
where performance momentum was continuing to
build on the back of a pipeline of new products and
PERfoRmAncE ovER ThE yEARs

EBITDA (Rs CRoRe)
REvEnuEs (Rs CRoRe)
400
PRofIT AfTER TAx (Rs CRoRe)
2500
300
2000
250
350
300
250
200
1500
200
150
1000
150
100
100
50
500
50
0
2011-12
2012-13
2013-14
2014-15
0
2011-12
YeAR
2013-14
2014-15
16
14
12
800
700
200
600
10
8
6
500
150
400
100
300
200
50
4
2
100
2012-13
2013-14
YeAR
2014-15
2014-15
20
18
900
250
2013-14
EARnInGs PER shARE (Rs)
1000
300
2012-13
YeAR
nET WoRTh (Rs CRoRe)
350
2011-12
2011-12
YeAR
cAsh PR0fIT (Rs CRoRe)
2012-13
0
2011-12
2012-13
2013-14
YeAR
2014-15
2011-12
2012-13
2013-14
YeAR
2014-15
we could not spend half a BIllIon to a BIllIon

dollars on product InnovatIon, But we found
InnovatIve ways to Be present In that space.
a large order book, respectively. The sale gave PI a

healthy pool of capital (the company refuses to divulge
it, media reports estimate it to be $17.6 million) and its
management the bandwidth to focus on its core areas.
The massive jump in revenues in the CSM business
vindicates Singhals move to bet big on PIs strengths.
eye on researCh
Singhal believes in innovation being a sureshot way

of adding value for his customers. But finding frugal
ways to do that is equally important. We could not
spend half a billion to a billion dollars on product
innovation with high risks, but we found innovative
ways to be present in that space, he says.
To boost innovation, he signed an agreement with
Sony Corp and Hokkaido University of Japan to set up
a joint research centre to carry out niche research in
the area of synthetic organic chemicals for applications
in the electronics industry. This laboratory, part of
PIs R&D facilities at Udaipur, engages in developing
commercially viable processes for molecules invented
by Sony that can be applied to futuristic products.
introDuCing neW proDuCts
For Singhal, one of the best ways to keep the

customer hooked is by bringing them better, valueadded products on a regular basis. Hence, bringing
new products into the market has become an
important strategy for the firm to stay relevant.
PI is known for registering high revenue growth on
the back of introducing new products every year. For
example, in FY10 it launched Nominee Gold, one of its
blockbuster products, bringing in the highest revenues and
margins among its product portfolio. In FY13, it introduced
insecticide Osheen in India, through an in-licencing deal
with Japans Mitsui Chemicals. The product was a runaway
success, reaching sales of Rs 100 crore in two years.
Singhal says PI now intends to launch two new products
every year that can help it increase its market share.
On the agrochemical front, PI concentrates on a few
niche products that can become bestsellers in the coming
years. It has about 33 products in the market compared to
other agrochemical companies that have 80 to 100 products,
which are mostly generics without any big differentiators.
entering neW markets
Geographical expansion is a tried and tested method for

Singhal; he believes its one of the key ways for increasing
the companys market share and keep the momentum going.
His approach to new markets is simple: PI has to be the

biggest player in it. In Japan, for example, PI has a strong
presence with the largest financial partnerships and sales in
the agrochemical business. In the last six years, it has been
focusing on Europe, and has entered Germany five years
ago. PI is also one of the largest CSM players that European
companies look to for innovative products out of India.
In early 2000, the company had entered the American
market, but the move didnt work out and PI had to pull
out after two years. Singhal has decided to take the US
challenge once again and, over the last year, has re-entered
the American markets by forging several partnerships.
iDentiFying neW areas oF groWth
While focus is the mantra for Singhal, he is also aware

that he needs to identify new areas of growth, leveraging
the companys expertise in chemicals. While he is
keeping things under wraps to keep away competitors,
its understood that, under his guidance, PI is looking
for opportunities in specialty chemicals, electronic
chemicals, intermediate pharma, application products
in the imaging area, among others. Expansion into
other sub-segments of specialty chemicals will act
further as a growth driver. They are a preferred partner
today, and this gives us confidence on their ability to
expand into other areas eventually, says Gupta.
DisBursement oF Capital
Singhals expansion plans are ambitious but he also

realises that it means he needs access to deep pockets.
For him, the responsibility is even higher as there are
many thousands of stakeholders involved. Hence, he
has a clear way of how PI will handle cash inflows
give back to the shareholders and fund growth.
We dont believe in borrowing excessively
and [prefer to] plough back the capital into the
business. Its good to have some leverage but the
company is generating enough cash flows to fund
the expansion plans and new opportunities, says
Jayashree Satagopan, the company CFO.
Singhal, who likes to meet people and is passionate
about photography and traveling, knows well the
responsibilities of taking a listed company forward. Do
shareholders and customers expectations bother him?
In a business, you cant have everything right.
One important thing for me is the creativity to
handle situations, he says. Considering how
he has handled PI Industries since 2009, his
creativity may well keep him going.
The
League
of
The RighT
FoRmula
Brothers samir and sudhir Mehta have
taken Torrent Pharma to new heights with
a measured approach to business and by
showing resilience in adversity
By aveek DaTTa
he chemistry works is a phrase that

pops up often as Samir Mehta narrates
the journey of his company, Torrent
Pharmaceuticals Ltd. That makes sense
then, since chemistry is at the core of the business.
But Mehta, 53, uses the phrase not just to refer to the
formulations involved in manufacturing the drugs he
sells. There is also chemistry in his relationship with
elder brother Sudhir, 62, whom he succeeded as executive
chairman in 2014, he says, sitting in his office at the
company headquarters overlooking the Sabarmati river in
Ahmedabad, Gujarat. (Sudhir, who was also responsible
for the $2.17-billion Torrent Groups foray into the power
sector, is currently chairman emeritus of Torrent Pharma.)
The success of this chemistry reflects in
charting success
the strategies that have helped the company
Market cap trend
500
clock exponential growth over the years.
Torrent Pharmas market value has grown at
400
a compounded annual growth rate (CAGR)
of 36 percent to Rs 22,670 crore on March 31,
2016 from Rs 4,894 crore on March 31, 2011.
300
Its revenues have ballooned from Rs 1,778
crore in FY11 to Rs 4,653 crore in FY15a
200
CAGR of 21.22 percent. Net profit in the
same period has grown at a CAGR of 20.88
100
percent to Rs 751 crore from Rs 291 crore.
For FY16, Torrent Pharma was well on its
0
2011
2016
way to becoming a $1 billion (around Rs 6,600
Indexed to 100
crore) company by sales. In the first nine
Torrent Pharma
BSE 200
months of the fiscal, the drug-maker registered
a consolidated turnover of Rs 5,177 crore and net profit
of Rs 1,500 crore. (The company was yet to announce its
fourth quarter results at the time this story was written.)
TorrenT Pharmas markeT value has

grown aT a cagr of 36% To rs 22,670 crore in
march 2016 from rs 4,894 crore in march 2011
MExy xavIEr
Sudhir Mehta (seated),

chairman emeritus of
Torrent Pharma, with
brother Samir, who is
executive chairman
The
League
of
avenues of growth that would yield quick returns

with limited resources. The centralised procurement
system also meant that Torrent Pharma did not need
a large field force in that region. The strategy was
successful and the USSR was Torrent Pharmas biggest
market until the country broke apart in 1991.
The numbers are all the more impressive given

that over two-thirds of Torrent Pharmas business
was wiped out when the Soviet Union disintegrated in
1991. Its resurrection can be attributed to a measured
approach to business expansion, resilience, a quick
course correction led by the brothers and its focus on
core values, including ethics and governance. And these
principles existed right from the companys inception.
SPeCialTY DRugS
Torrent Pharma was founded by Uttambhai

Nathalal Mehta, a medical representative
for Swiss pharmaceuticals giant Sandoz,
with a seed capital of Rs 30,000, his life
savings, in 1959. From his time in the
field, Uttambhai learnt the innards of
the pharma business and realised that it
would be futile, with limited resources, to
compete with bigger rivals in selling drugs
to a wide array of general physicians.
He chose to focus solely on psychotropic
drugsa less competitive segmentthat
could be pitched to psychiatrists. One
of Torrent Pharmas earliest products,
Trinicalm Plus, launched in 1970 and
used in the treatment of ailments
related to the central nervous system,
turned out to be a blockbuster.
Even today, Torrent Pharma focuses
largely on specialty drugs, including
branded generics targeted at chronic
ailments in segments such as psychiatry,
dermatology and oncology.
ReCoveRY oF DueS (aND FoRTuNeS)
Following the collapse of the Soviet Union, the

centralised procurement system was disbanded and 70
percent of Torrent Pharmas market
going strong
vanished overnight. A large chunk of
the companys receivables were still
Net sales
outstanding and there was no surety that
5000
the drug-maker would recover its dues.
21.22
5-year CaGr (%)
It would have been natural for any
4000
promoter to lose heart under such
circumstances. But we decided to rebuild
3000
the business brick-by-brick, recalls Mehta.
The first few years were spent in trying
to recover dues. We had to go from
2000
department to department [in Moscow] to
find someone who would acknowledge that
1000
there was money owed to us, Mehta says.
We were successful in recouping most of
0
2010-11
2012-13
2014-15
the money. That helped ease the situation
2011-12
2013-14
somewhat. It could have been worse.
Net profit
800
20.88
FReSh eXPaNSioN
The promoters decided to start their global

business afresh. They were aware that it
600
would take many years before they could
start commercial supplies for new markets.
500
To offset the effect of these delays, the
400
brothers focussed on growing the domestic
goiNg gloBal
300
business with new products. Though the
By the 1980s, Sudhir and Samir Mehta
cash garnered by the Indian business was
(who were ranked 25th on the 2015
200
only a fraction of what Torrent Pharma was
Forbes India Rich List with an estimated
100
earning from the Soviet Union, it was just
wealth of $3.3 billion) were playing an
enough, along with the money recouped,
active role in the business and Torrent
0
2010-11
2012-13
2014-15
2011-12
2013-14
to plan another round of global expansion.
Pharma had begun to harbour ambitions
The brothers chose Brazil because of its
of going global. The Soviet Union
Source: Company filings on BSE
was a natural choice as it was Indias
Amount in Rs crore similarity to the Indian pharma market.
It was a paradigm shift for us.
biggest trading partner at the time. The
Earlier we were looking at opportunities that could
region offered Torrent Pharma the benefit of access
be monetised quickly with limited resources. Now
to a large international market with a centralised
we were deploying capital that would yield returns
procurement machinery headquartered in Moscow.
only after a period of gestation, says Mehta.
The expansion into the Soviet Union was an extension
The advance into Latin America materialised only
of Uttambhais philosophy of carefully choosing
700 5-year CaGr (%)
almosT Three quarTers of

TorrenT Pharmas revenues in The firsT
nine monThs of fY16 came from overseas
in 2002. And this was followed by a quick succession

of international acquisitions and expansions. In
2005, Torrent Pharma acquired Pfizers German
business Heumann Pharma, gaining inroads into
the European market. In 2007-08, the company
also began to market its drugs in the US.
Almost three quarters of Torrent Pharmas
revenues in the first nine months of FY16 came
from overseas. The company is also the largest
Indian generic drug manufacturer in countries
like Brazil, Germany and Philippines.
iNoRgaNiC gRoWTh
Torrent Pharma made its next big buy from the domestic
market when it snapped up Mumbai-based Elder
Pharmaceuticals for Rs 2,004 crore in 2013. With that, its
product portfolio widened to include over-the-counter
drugs. The company followed this up with the acquisition
of Zyg Pharma in 2015, gaining access to a portfolio
of dermatological formulations for the US market.
Aligning cultures is what Torrent Pharma stresses on
after acquiring another company. Speaking of Torrents
Heumann acquisition, Mehta says, The idea of an Indian
company acquiring a European company was unfamiliar
[when Heumann was bought] and the German workforce
didnt know what to expect. But we communicated with
them and even ensured that the new CEO was German.
With the Elder deal, Torrent Pharma acquired a
highly unionised workforce, a first for the company.
We focussed on building a trust bridge [with Elders
employees]. We explained the rationale behind each
of our productivity-linked HR policies and gave them
the choice to either continue with the existing policies
or switch, explains Mehta. Within a year, all Elder
employees opted for Torrent Pharmas HR policies.
FoRWaRD-lookiNg CallS
Decisions that we take for the business need to add longterm value and not just short-term profitability, explains
Mehta. This has been at the root of allowing us to develop
a business that has been sustainable over the years.
Senior executives have the freedom to take decisions
that are in the best interest of the company. This is one
of the reasons why Chaitanya Dutt, Torrent Pharmas
director for research and development, has stayed with
the company since 1987. If there is a quality issue with
a particular batch and I decide that it has to be thrown
down the drain, it is thrown down the drain, he says.
At a time when Torrent Pharmas business was
ailing from the Soviet crisis, the Torrent groups

power businessestablished in 1996was going
strong. There was speculation that the promoters
may utilise funds from the latter to support the
former. But nothing like that happened, Dutt says.
Pharma was pharma, and power was power.
The law has to be followed in letter and spirit at Torrent
Pharma, Mehta says. He adds that prudent decisionmaking prevented the company from a major recall when,
earlier this year, the Indian government banned 344 fixeddose combination drugs. Torrent Pharma pre-empted the
fact that these drugs may not stand regulatory scrutiny and
did not launch them in the market. We didnt succumb
to the temptation of utilising the short time-window in
which these drugs could have been sold in the market to
make a quick buck before the regulator banned them,
Mehta says. So it is more by design than default that we
are least affected among pharma companies by this ban.
PRoFeSSioNaliSm
A true hallmark of a well-run company is that its

directors and senior executives are kept in the loop on
all matters of concern to them, and this is something
that Torrent Pharmas promoters do very well, says
Haigreve Khaitan, senior partner at law firm Khaitan
and Co, and a director on the board of Torrent Pharma.
The professionalism with which the board of Torrent
Pharma functions is remarkable, says Khaitan. No matter
how big or small a decision is, it is communicated to all,
most often by Sudhir and Samir themselves. They are open
to suggestions and while they take their own decisions,
they do so after taking everyones views into account.
It is this professional approach that has helped Torrent
Pharma build a sizeable business in the US despite being
a late entrant and having a limited product portfolio.
In recent times, Torrent Pharma has one of the best
track records in terms of securing timely approvals for
its key products. Mehta believes his companys strategy
to take its time in preparing dossiers to be submitted to
the regulator and seeking approval for new products has
resulted in quick nods. Wed rather take two years to
prepare a filing, but make sure its foolproof, he says.
Mehta doesnt believe in setting five-year targets. The
constant endeavour, he says, is to build a world-class
institution that delivers best-in-class profitability.
Torrent Pharmas operating profit margin of around 27
percent is several notches higher than the industry average
of 19 percent. As long as this trend continues, the chemistry
will continue to work for the companys stakeholders.
The
League
of
The hunT
for greaT
IndIan
companIes
Why fewer firms in the country have
reliable financial performances over
a meaningful period of time
By saurabh mukherjea
Greatness is not a function of circumstance.

Greatness, it turns out, is largely a matter of conscious
choice. - Jim Collins, Good to Great, 2001
moved to India in 2008 to work in the Indian stock

market. As I came to terms with Indias corporate
and economic landscape, I realised that very few
companies delivered steady financial performance
over long periods of time. While I have captured my journey
to understand India in my book, Gurus of Chaos: Modern
Indias Money Masters, my next book delves into the issue
of why there are so few Indian companies that deliver
reliable financial performance over meaningful periods of
time. Thanks to a bit of goading from the editors at Forbes
India, I am giving you a sneak peek into my next book. Let
me begin by being precise about what I define as reliable
financial performance over meaningful periods of time.
Step 1: Define long periods: A decade in India usually
accommodates both the up and down cycles in the
economy. For example, the decade from FY06 (i.e. the
financial year ending March 31, 2006) to FY15 (i.e. the
financial year ending March 31, 2015) coincides with
six years of strong economic growth (FY06 to FY11,
where average nominal GDP growth was 15.7 percent)
and four years of weak economic growth (FY12 to FY15,
where average nominal GDP growth was 12.8 percent).
Hence measuring greatness over a decadal period should
neither unfairly penalise cyclical companies nor unfairly
advantage companies in more stable, steady sectors.
Step 2: Define superior financial performance: At
the very basic level, a company doing well would mean

it is profitable and it is growing (by reinvesting its
profits). Over very long periods of time, the twin filters
of growth and profitability, in my view, are sufficient
to assess the success of a franchise. Thus, my stock
selection filters are companies that deliver revenue
growth of 10 percent and return on capital employed
(RoCE) of 15 percent every year for the past 10 years.
Why revenue growth of 10 percent every year? Indias
nominal GDP growth rate has averaged 14.5 percent over
the past 10 years. However, very few listed companies
have managed to achieve this. Therefore, I reduce
this filter rate modestly to 10 percent per annum.
Why RoCE? A company uses capital to invest in
assets, which in turn generate cash flows and earnings.
This capital invested consists of equity and debt and the
sum of the cost of equity and the cost of debt (weighted
in proportion to their share in total capital) is known
AsiAn PAints is A rAre exAmPle of A lArge indiAn

comPAny, held By multiPle Promoters And yet run
By A high cAliBre, ProfessionAl, mAnAgement teAm
more popularly as the Weighted Average Cost of Capital

or WACC. A measure of a companys effectiveness in
investing its capital is to compare its WACC with the
quantum of cash flows or earnings generated by the
investment. The latter is known as RoCE. Companies with
low RoCEs keep requiring external infusions of capital to
fund their growth. Therefore, this excess of RoCE over
WACC is a measure of the excess returns to an investor
in the company. It follows, therefore, that if a company
grows without excess returns, it creates no value for
equity investors. In general, I have found that RoCE is the
single biggest factor affecting a companys stock price.
Why minimum RoCE of 15 percent? The minimum
return that one would rationally expect from equities is
the risk-free return that you would earn if you invested in
the safest investment in India, namely, government bonds.
In early 2016, the government of Indias 10-year bonds
gave a return of around 8 percent. Given that equities
carry an element of risk that government bonds dont,

an equity investor would want a premium return for this
extra risk. This is the equity risk premiumthe extra
return an investor expects over and above the risk-free
rate for investing in equities. The equity risk premium, in
turn, is calculated as 4 percent (the long-term US equity
risk premium) plus 250 bps to account for Indias rating
(BBB- as per S&P). Hence, adding the risk-free rate (8
percent) and an equity risk premium of 6.5 to 7 percent
gives a cost of capital of broadly 15 percent. Also, over the
past 20 to 30 years, the Sensex has delivered returns of
around 15 percent per annum, thus validating my point
that 15 percent is a sensible measure of the cost of capital
for an Indian company. Therefore, if a company is to be
deemed to be great, it has to deliver an RoCE in excess
of 15 percent per annum over long periods of time.
There are around 1,500 companies in India with a
market cap of Rs 100 crore or more. If we look at the
FY06-15 period, how many of these companies passed
the twin filters of 10 percent-plus revenue growth
and 15 percent-plus RoCE? The answer is 16, or 1
percent of the 1,500 largest listed companies in India.
Among these 16, the crme de la crme includes:
ITC: For over a century now, ITC has had more than
70 percent share in the Indian cigarette market. It has
used the free cash flow arising from this dominant
position to pay hefty dividends to shareholders (over
the past decade, ITCs dividend payout ratio has been
more than 50 percent) and to build a formidable FMCG
franchise (the second-largest in India after HUL).
Marico: Over the last 25 years, Marico has built a
strong consumer franchise by, (a) focusing on its core
categorieshair oil and edible oils; (b) building a positive
work culture based on values such as empowerment,
meritocracy, innovation, openness and integrity; and
(c) prudent capital allocation that balances deepening
of competitive moats in Indiafor example, through
installing best-in-class inventory management
systems for its dealerswith expansion overseas.
Asian Paints: Asian Paints is a rare example of a large
Indian company, held by multiple promoters and yet run by
a high calibre, professional, management team. Over the last
50 years, no Indian company has been able to match Asian
Paints consistent delivery of growth in revenues, earnings
and RoCE. With over 50 percent share of the Indian
market, Asian Paints stands out as the best among the best.
Getty ImaGes
Since its inception in 1994, HDFC Bank has focussed on low-cost

funds, conservative lending and technology-driven solutions
The
League
of
A comPAny is deemed to Be greAt if

it delivers An roce in excess of 15%
Per Annum over long Periods of time
franchise using the IBAS (Innovation, Brands,

Berger Paints: In post-1991 India, Berger Paints has
Architecture and Strategic Assets) framework: The
cemented its position as Indias second-largest paint firm.
IBAS framework was created by the legendary British
Its current promoter and management team are nurturing
economist John Kay and captures neatly how great
the key factors that have defined its success since 1970s,
companies strive over decades to create sustainable
around quality of talent, a refreshingly enlightened
competitive advantages (which allow them to pull away
employee work culture and prudent capital allocation.
from competitors). Examples of this include Asian Paints
Page Industries: Leveraging on their experience of
use of IT as early as the 1970s to forecast sales patterns.
successfully operating Jockeys master franchise in
Similarly, Astral Poly Technik has innovated with its CPVC
the Philippines, Pages promoters have delivered a
pipes and fittings by launching products that are lead-free,
unique product proposition in Indias fast growing
sound-proof, bendable, etc. As Sandeep Engineer, promoter
innerwear segment: Comfort and durability with an
of Astral Poly Technik, told me: We grew at 40 percentaspirational brand at an affordable pricea combination
plus CAGR for more than seven to eight years up to 2014
that nobody else has been able to replicate.
while the economy wasnt that strong;
Astral Poly Technik: In the last decade
From 2011-2016
where was the slowdown? Slowdown is
and a half, Astral has emerged as Indias
The markeT
in the mind. If you create new product
strongest franchise for chlorinated poly
segments, if you create leadership, if you
capiTalisaTion oF
vinyl chloride (CPVC) pipes, despite
stiff competition from larger peers like
These seven companies create brand, growth will be strong and
ahead of industry. The challenge for
Supreme and Finolex. The company
has gone up by
most successful Indian companies is that
maintained focus on prudent capital
once the first generation promoter exits
allocation, which manifested in strong
the business, the progeny rarely have the
earnings growth (41 percent CAGR) and
compared To
stomach for the amount of work required
average RoCE of 23 percent in FY05-15.
to further deepen the competitive
HDFC Bank: Since 1994, HDFC
moats. As a result, second generation
Bank has delivered clockworkFor The bse 200
promoters usually oversee the slide to
like execution with a high focus
mediocrity of what their ancestors built.
on low-cost funds, conservative
3. Sensibly allocate capital while studiously avoiding
lending and technology-driven solutions. Thus, HDFC
betting the balance sheet on expensive and unrelated
Banks stable financial performance has been driven
forays: As successful companies grow, they throw off
by a balanced set of underlying drivers: Net interest
ever-increasing amounts of cash. The challenge then
margins, operational efficiency and super asset quality.
is to allocate this cash in such a way that RoCE does
So why do we have only 16 companies in India that
not suffer. The best way to protect RoCE is to return
have, over the past decade, passed the basic twin filters
large amounts of money to shareholders, something
of at least 10 percent revenue growth per annum and 15
that most promoters dont have the stomach for.
percent RoCE per annum? There are three reasons:
ITC is an example of a firm that has returned large
1. Focus on the long term (more than 10 years) without
amounts of money to shareholders while making modest
being distracted by short-term gambles: For 99
investments in new businesses. Similarly, Asian Paints
percent of Indian promoters, the opportunistic gene
has forayed overseas but never stretched its balance
is so deeply embedded that as soon as they spot a new
sheet for this purpose. In a chat in November 2015,
sector they can venture into, they go off-strategy. As
KBS Anand, MD and CEO of Asian Paints, said: At the
the leading market strategy consultant, Rama Bijapurkar,
moment, the home improvements business is too small
says, Most companies tend to focus on short-term
to have any significant impact on the overall firms
results and that makes them frequently do things that
RoCE. But if you are talking about building long-term
deviate from their articulated strategy. These diversions
strength with your channel partners, then whatever
take them away from the path they have to travel on to
RoCE we lose in the new business will be more than
achieve their long-term goals. The willingness to resist the
offset by the increase in RoCE of the paints business.
temptation of short term off-strategy profits for long-term
sustainable gain is not there in most Indian companies.
The writer is CEO-institutional equities, at Ambit Capital and the
2. Constantly deepen the moat around the core
author of Gurus of Chaos: Modern Indias Money Masters
19%
7%
CROSS BORDER
OSman KiBaR
The
God Pill
A brilliant Turkish-American billionaire thinks he

can heal arthritis, cure baldness and erase wrinkles.
And thats just the start, as he aims
to reverse the ageing process itself
Tim PannEll fOR fORBES
By matthew herper
58 | forbes india mAy 27, 2016
mAy 27, 2016 forbes india | 59
CROSS BORDER OSman KiBaR
Global
GamE ChanGERS
they are our best and brightest: Citizens
of the world who leverage technology,
finance and sheer brainpower to upend
entire sectors and transform the everyday
lives of billions. to compile our list of the
worlds boldest business leaders, we started
by screening hundreds of companies for
growth, innovation and global presence.
We only considered for-profit entities with
a market value of more than $1 billion.
although we sought balance in terms of
industries and geography, inclusion was
mostly determined, in the end, by the
brilliance of their ideas and the
audacity of their ambition.
marc Benioff, 51
founder, Ceo,
SaleSforce.com
united StateS
Cloud-computing pioneer
has upended the software
business with its ubiquitous
customer relationship
software. revenues, which
were $6.7 billion in 2015,
continue to grow at 30% annual clip.
What were using today

will be obsolete in a few
years. The past is never
the future.
august 8, 2011
Jeff Bezos, 52
founder, Ceo,
amazon.com
united StateS
first books, then retail. now movies and

data farms. next: drones and grocery
delivery. Bezos seems to remake an
industry nearly every year, and amazon
has global sales of nearly $110 billion.
PORTRaiT illuSTRaTiOnS By RiCK Tuma fOR fORBES
We are comfortable
planting seeds and
waiting for them to
grow into trees.
april 23, 2012
rahul Bhatia, 55
Co-founder,
IndIGo
india
Brought the discount airline model to the

developing world, supersized it and made it
profitable. indiGo is now indias largest and
most profitable carrier, with 29 million
passengers in 2015, or 2 in 5 domestic fliers.
recently expanded to dubai, Singapore,
Bangkok, Kathmandu and Muscat.
We keep asking ourselves:

What other cost can we
remove without losing a single
customer? This is our religion,
and it serves us well.
October 20, 2014
f you Google Osman Kibars

name, youll find pictures of him
playing poker. Its not that he
was ever a serious playerjust
that in 2006, he won the first poker
tournament he ever played in and
then, a year later, came in second out
of 3,000 players at a tournament run
by the World Series of Poker in Vegas.
I dont get this, he told a
friend. Im going to enter another
tournament just to check this
assumption. So he played one more
tournament, won it and then quit.
While Im playing, its you and
the other players, says Kibar, 45.
The cards are
irrelevant. [But]
when you just
stare at cards
12 to 14 hours a
day, you get this
hangover effect.
He couldnt think
straight for days,
he says, so he gave
it up. Instead,
for fun, he now
reads highermath textbooks and meditates.
Kibar, an engineering PhD who
emigrated from Turkey to the US for
college, doesnt
need to bet on
cards for money.
Samumed, the San
Diego firm he has
been stealthily
building for a
decade, is the
most valuable
biotechnology
startup on
the planet.
Based on
investments made by private investors
that include IKEAs private venture
firm, anonymous high-net-worth
individuals and a single venture
capital firm, Samumed has raised
$220 million, and the most recent
round of financing valued it at $6
billion. It is halfway through raising
another $100 million at a $12 billion
valuation. Kibar owns a third of

the company, which would give
him a net worth of $4 billion.
Samumed is finding it easy to raise
huge amounts of cash because it
believes it has invented medicines that
can reverse ageing. Its first drugs are
targeted at specific organ systems. One
aims to regrow hair in bald men. The
same drug may also turn grey hair back
to its original color, and a cosmetic
version could erase wrinkles. A second
drug seeks to regenerate cartilage in
arthritic knees. Additional medicines
in early human studies aim to repair
degenerated discs in the spine, remove
scarring in the lungs and treat cancer.
After that, Samumed will attempt
to cure a leading cause of blindness
and go after Alzheimers. The firms
focus, disease by disease, symptom by
symptom, is to make the cells of ageing
people regenerate as powerfully
as those of a developing foetus.
Its exciting but also incredibly
speculative. The studies so far
indicate that the drugs seem pretty
safe, may regrow hair and seem to
ease pain and improve function in
people with knee arthritis. But its
crucial to remember that 80 percent
of new drugs that reach this stage of
research fail to make it to the market.
And that valuation? Its insane.
The most valuable publicly traded
biotechnology company without
approved drugs is worth just $6
billion. And at this point, everybody in
biotechnology worries about investing
in the next Theranos, the bloodtesting company that private investors
valued at $9 billion before the
accuracy of its tests was challenged.
So the question is: Has Osman
Kibar found a pharmaceutical
fountain of youth, or is he simply
one of the most talented poker
players the world has ever known?
ibar was born in Izmir,

Turkey, across from the
Greek Islands, on the Aegean
Coast. It is a warm, beautiful place,
and to this day, he gets depressed
in cold weather. After elementary

school, he went to Robert College in
Istanbul, an elite school that drew
from among the top 0.2 percent of
students who took Turkeys national
standardised test at the age of 11.
Robert College was the prelude
to Samumed: It was where Kibar
befriended the boys who would
eventually become his chief financial
officer, chief legal officer and chief
medical officer. He then went to
California, picked for its climate,
to study at Pomona College (BA,
mathematical economics, 1991),
Caltech (BS, engineering, 1993) and
UC San Diego (PhD, biophotonics,
1999). While in grad school, he
founded a biotech, Genoptix, which
was sold to Novartis for $470 million
in 2011. He also co-founded E-Tenna,
which made antennas for the wireless
industry and was split up and sold
a partner at Greywolf Capital, the

powerful $3.6 billion hedge fund.
On the back of a boarding pass
Kibar sketched out his investment
strategy, which involved focusing
only on technologies that could have
world-changing impact. After that
meeting, Samikoglu helped him
secure $3.5 million to create new
startups. One, housed in a Pfizer
incubator, was called Wintherix. It
would eventually become Samumed.
But the Pfizer deal that created
Wintherix ended in conflict. After two
years, Pfizer decided not to go forward
with Wintherixs drugs, and the
companies sued each other. Wintherix
sneaked out of the Pfizer incubator
over the course of a weekend. One
Wintherix employee swiped into the
building 130 times to move stuff out.
In a 2010 complaint, Pfizer
alleged that Kibar did a round of
osman Kibars firm samumed is

The mosT valuable bioTechnoloGy
sTarTuP on The PlaneT
to Intel and Titan Corp. He had
no management role in either.
Kibar quit academia because he felt
it was too bureaucratic and moved to
New York to work at Pequot Capital
scouting new technology ventures.
His Robert College friends were there,
and they met for weekly basketball
games. But as careers took off and
families got started, the games slowed,
and Kibar grew disenchanted with
his role at Pequot, as the firm became
less interested in bleeding-edge tech.
I woke up one morning, and I was
an investment banker, he says.
So he decided to go back to San
Diego, where the weather didnt make
him want to stay in bed all day. In
an airport in Turkey, he ran into one
of his Robert College pals, Cevdet
Samikoglu, a banker who, after a
stint at Goldman Sachs, had become
financing that diluted the drug

giants stake in Wintherix from 60
percent to 2.6 percent. Wintherix
countered that Pfizer was deliberately
trying to drive it out of business by
preventing fundraising so Pfizer
could buy it on the cheap.
During the battle, Wintherixs bank
balance shrank to $9,000. But Kibar
found money. His brother-in-law,
Ugur Bayar, the CEO of Credit Suisse
Turkey, was the lead investor in a $2.4
million friends-and-family round. In
2012, the Pfizer suit was settled in a
way that gave Wintherix the right to
the drugs. Kibar renamed the company
Samumed, after a Zen term, samu, that
means meditating through everyday
tasks like gardening or chopping wood.
Someone at Pfizer was impressed:
VenBio venture capitalist Corey
Goodman, who was on Pfizers
Global
GamE ChanGERS
Sara Blakely, 45
founder,
Spanx
united StateS
in just over a decade, Spanx

has become a byword for
shapewear in the same
way Kleenex is for tissues,
spawning dozens of competitors and copycats.
Blakely still owns 100% of the brand, which had
estimated sales of $400 million last year, ships to
61 countries and is rolling out its own brick-andmortar network (14 stores and counting).
im game for anything. The

company has to pull me back.
march 26, 2012
Katrine Bosley, 47
Ceo,
edItaS medIcIne
united StateS
Bosley is spearheading the push to

turn CriSPr, a revolutionary geneediting technology that has been
called a word processor for dna because of its low
cost and ease of use, into new medicines. its first
treatment, soon to be tested in humans, is for
Lebers congenital amaurosis, a rare inherited eye
disease. it is also developing cancer-killing cells
with Juno therapeutics of Seattle, Washington.
after a successful iPo earlier this year, the
company is already worth some $1.5 billion.
Brian Chesky, 34
Co-founder, Ceo,
aIrbnb
united StateS
the first smash hit of the share

economy, airbnb has provided
beds for more than
60 million since 2008. the company offers accommodations in 34,000 cities in
190 countries, including Cuba.
People providing these services

in many ways are entrepreneurs
or micro-entrepreneurs.
Theyre more independent,
more liberated, a little more
economically empowered.
february 11, 2013
Global
GamE ChanGERS
Daniel ek, 33
Co-founder, Ceo,
SpotIfy
SWeden
after napster nearly

destroyed the music
business, ek found a way to
put Humpty dumpty back
together again, offering
up millions of tunes and
splitting the revenue (from a combo of
subscriptions and ads) with the artists and labels.
His service is available in 59 nations and has
75 million monthly active users.
it disturbed me that the music

industry had gone down the
drain, even though people
were listening to more music
than ever and from a greater
diversity of artists.
January 16, 2012
Jay Flatley, 63
Ceo,
IllumIna
united StateS
not long ago, it cost

$200,000 to sequence one
persons genome. now,
thanks to illumina, the cost
is around $1,000 per person,
opening up the possibility of truly individualised
medicine. Sales increased by 19% to $2.2 billion in
2015, and profits went up by 21% to $490 million.
flatley has even greater ambitions: a new
subsidiary, Grail, is working on inventing a
simple blood test that can catch cancer in its
earliest stages.
if we remain the leader in

sequencing, we can grow our
company with a much more
fantastic return on investment
than anything else.
September 8, 2014
Ilene
Gordon, 62
Ceo,
InGredIon
united StateS
High-fructose corn syrup

is cheap, plentiful and
terrible for you. the stuff
is still a part of ingredions core business, but
Gordon is focussed on turning corn (and berries,
fruits and potatoes) into ingredients for
organic, gluten-free and non-GMo foods.
its working. Specialty sales, which include
gluten-free ingredients, have gone from 5% of
revenue to 25% on Gordons watch, and could hit
30%, or more than $2 billion, by 2019.
executive team at the time of the legal

battle, has advised Samumed and has
a small position in the company.
As the lawsuit wrapped up, Kibar
called Samikoglu again. What are
you doing right now? Kibar asked.
Samikoglu responded that he was
investing his own money in Turkey.
Hed returned home to care for his
mother, who had cancer, but she
had died. Okay, youre not doing
anything, Kibar said. Come help me.
Samikoglu became Samumeds
chief financial officer and made
another investment in the company.
Nervous, Samikoglu called another
Robert College friend, Yusuf Yazici,
now a top NYU rheumatologist. Did
Kibars science make any sense?
Samikoglu asked. He arranged for a
15-minute phone call with Kibar that
lasted an hour. During the call, Yazici
texted him: You have to get me in on
drug that got his previous company,

Targegen, bought by Sanofi for
$635 million. He has a distinct take
on drug development: He thinks
everybody takes too many shortcuts
and insists on doing work himself
that other companies outsource,
including formulating drug chemistry,
testing drugs in laboratory animals
and running clinical trials.
The target Hood and Kibar went
after was obvious: A gene called
Wnt, which stands for wingless
integration site, because when you
knock it out in fruit flies, they never
grow wings. Its a lynchpin in a group
of genes that control the growth of a
developing foetuswhether youre a
fly or a person. Together these genes
are known as the Wnt pathway.
Trigger the right ones and you might
revive old flesh. Some cancers do
their dirty work by hijacking Wnt,
if somebody, iT doesnT maTTer

Who, can GroW carTilaGe, iT Would
be larGer Than aPPle.
this. Osman has found the god pill.
Another Robert College friend,
Arman Oruc, left a partnership at
white-shoe law firm Simpson Thacher
& Bartlett to become chief legal
officer. He forgot to even negotiate
his salary before moving to San Diego.
Then Yazici joined, as chief medical
officer. This crap had better work,
Oruc was told by his wife when Yazici
signed up. Now youre starting
to involve people I really like.
hat did Kibar have that got

his high school friends, all
of them already incredibly
successful, to join him at salaries
of about $300,000 a year, with no
management bonuses? A lot of it had
to do with Samumeds chief scientific
officer and co-founder, John Hood.
Hood, 49, had invented a cancer
and blocking it might stop tumours.

Most other researchers who had
searched for Wnt drugs used one of
biomedicines workhorses: A cell line
derived from an aborted foetus in The
Netherlands in 1973. Those foetal cells
are easy to use in the lab, but over
the intervening decades, they have
become very different from normal
cells in humans. Hood opted to look
for drug targets in colorectal cancer
cells that expressed Wnt, comparing
them with healthy colon cells that
didnt. It took almost three years.
Exactly what did Hood find?
Samumed isnt quite saying. Normally
a patent explains which chemicals
a drug targets. But in 2013, the
Supreme Court said that genes
arent patentablethe case involved
a test for a gene variant that causes
breast cancera ruling Samumed
interprets as saying the company can

have its patents while keeping those
biochemical pathways under wraps.
That is our trade secret, says Kibar.
That is our bread and butter.
For scientists, this is a huge
problem. There is always a tradeoff, says Roel Nusse, a Wnt expert
at Stanford. It is hard to find a
molecule that is always going to affect
disease, but not normal tissues. To
calibrate the balance, you have to
know what the mechanism is. Kibar
says only academics and rivals care.
What the company will show is
the animal and human data for its
baldness and arthritis treatments.
In mice and mini-pigs that have
had hair removed, it grows back.
Experiments in arthritis involve
cutting the ligaments in the knees of
rats so that the cartilage is destroyed.
Samumeds drug regrows the cartilage,
and the rats can walk again.
Animal studies are a dime a dozen,
though. Ive seen dozens of these
animal results that dont translate
into clinical results, says Nancy
Lane, a rheumatologist at UC Davis
who is a paid advisor to Samumed.
So what happens in people? In
March, Samumed presented data on
the use of its baldness drug, codenamed SM04554, in 300 patients at the
American Academy of Dermatology
(AAD) in Washington, DC. Subjects
heads were photographed and hair
counted. Those on placebo saw their
hair count drop by 2.5 percent. Those
who rubbed a 0.15 percent solution of
SM04554 on their heads daily saw hair
count increase by 9.6 percent. Those
who got a 0.25 percent solution saw
hair count increase by 6.9 percent.
Hair-loss specialists who saw the
data were not blown away. Those
results arent big enough to be certain
theyre not occurring by chance or that
men will really feel that the product is
making their hair grow back. I think
at best they are presenting a trend,
said Daniel Zelac, a dermatologist at
the Scripps Center for Integrative
Medicine in La Jolla, California.
Wilma Bergfeld, a Cleveland Clinic

hair-loss expert and past president
of the AAD, helped run Samumeds
hair-loss studies. She says its too
soon to say whether Samumeds
drug is more effective than Rogaine.
That drug was introduced in 1988
to a wave of hypebut men still go
bald. For most men, Rogaine prevents
further hair loss but wont cause a
lush regrowth of hair. Samumeds
scalp solution will have to do better.
When it comes to Samumeds
valuationand medicine as a
wholethe arthritis data are far more
important. More than 27 million
Americans suffer from arthritis as the
cartilage that cushions their joints
wears away. Every year, 700,000
people have their knees replaced with
metal joints because their bones have
been rubbed raw by age and activity.
Another 300,000 get artificial hips.
The largest study of Samumeds
arthritis drug, SM04690, included only
60 patients. Allan Gibofsky, a professor
of medicine at Weill Cornell Medical
College who advised Samumed, points
out that even for small numbers, the
results line up alluringly: Patients who
got SM04690 scored better than those
on placebo on two questionnaires that
measured how well they functioned
and whether their pain improved. On
X-rays of patients knee joints, the
space between the bones seemed to
have increased, indicating cartilage
might really have grown back.
Still, again, even Samumeds
own consultants say the data are
preliminary. More proof will
come from a 445-person trial
that Samumed aims to complete
by the end of the year.
Its small and premature, says
Nebojsa Skrepnik, director of research
at the Tucson Orthopaedic Institute
in Tucson, Arizona, who is helping
run the trial. This is a small number
of patients. Yes, you get a good feel
for where this is going to go. But
can you really make any conclusion
that would be valid and withstand
scientific scrutiny? Probably not.
Global
GamE ChanGERS
terry Gou, 65
founder,
Hon HaI precISIon InduStry
co (foxconn)
taiWan
Without Gou, you probably

couldnt afford that iPhone in
your pocket. Marrying a low-cost
workforce with high-precision
assembly has transformed foxconn from a small
plastics supplier into the largest electronics maker
in the world. its most famous customer is apple: it
has made about 80% of all iPhones on the planet.
over the past five years, revenues have increased
by 20% to $141.2 billion, and profits have grown
to $4.6 billion. the company recently agreed
to buy Sharp, the venerable Japanese
consumer-electronics concern.
reed hastings, 55
Co-founder, Ceo,
netflIx
united StateS
Whether you want your entertainment delivered

in the mail on a dVd or prefer to stream it on your
phone, netflix is there for you.
Having conquered distribution,
Hastingss company is now
gunning for network status,
producing critically acclaimed
binge-watchable blockbusters
like House of Cards and Orange Is
the New Black. in January, netflix
made its service available in 130
more countries, effectively doubling its footprint.
the number of subscribers has expanded by 30%
since 2014.
Jen-hsun huang, 53
Co-founder, Ceo,
nvIdIa
united StateS
nvidia is best-known for

making the high-end graphics
chips used by gamers to soup
up their PCs. its single-minded pursuit of creating betterlooking aliens has also led the
company to a slew of related technological advances. Some of the fastest supercomputers in the world run on its tesla chips,
and the firm has a portfolio of 7,300 patents used
in virtual reality, artificial intelligence and autonomous driving.
The more content there is,

the more visual interest there
can be, the more processing
horsepower people need.
January 7, 2008
Global
GamE ChanGERS
wang Jianlin, 61
founder,
dalIan Wanda Group
CHina
Wang became Chinas richest man by

shrewdly playing the high-stakes
Beijing real estate market. now he is making an
equally shrewd move to hedge his bets by
diversifying globally. Most recently, he purchased
the aMC movie theatre chain for $2.6 billion in
2012 and earlier this year, spent $3.5 billion for
Legendary entertainment, maker of Godzilla and
Straight Outta Compton. Group revenue was up
by 19% in 2015 to $44 billion.
legendary is a gateway to
cultural and financial alignment
between the hollywood moviemaking world and the rapidly expanding Chinese marketplace.
february 29, 2016
travis Kalanick, 39
Co-founder, Ceo,
uber
united StateS
Hailing a taxi often used to mean

overpaying for a ride in a dirty
jalopy. no more. ubers rides are
affordable, clean and, because of its
rating system for both drivers and passengers,
nearly always pleasant. uber is available in 405
cities around the world and in some markets is
also available for food and other deliveries. the
company has raised more than $10 billion, valuing
it above $62 billion.
alexander Karp, 48
Co-founder, Ceo,
palantIr tecHnoloGIeS
united StateS
Big brother meets big data. Karps

secretive firm is the go-to partner for
central governments, law enforcement agencies and multinationals
trying to glean actionable intelligence from massive data sets. Palantir has helped capture terrorists,
thwarted sex traffickers and identified rogue traders.
the Cia was an early investor (and client), but customers now include foreign governments, the nYPd,
JPMorgan and Hershey. its last round of funding, in
december 2015, valued the company at $20.5 billion.
The only time im not thinking

about Palantir is when im
swimming, practicing Qigong
or during sexual activity.
September 2, 2013
Osman Kibar, 45
Co-founder, Ceo, Samumed

united StateS
the new biotech billionaire is

backed by a deep purse of
international money that has
raised $270 million from
investors gambling that the
turkish-american scientist has discovered a
real fountain of youth (see adjoining story).
iewed under the microscope,

Samumed looks like a
company with a pair of
drugs that have not been proved
and, if trends in drug discovery hold
true, will probably not make it to the
market. But its investors obviously see
something far more wonderful, worldchanging and potentially lucrative.
We can only say that what they
told us they would have achieved, they
are achieving, says Bjorn Konig, the
head of private equity at the Inter IKEA
Group, Samumeds largest investor.
Money matters to everybody, but the
underlying motivation was to build
a long-term company whose goal
was to better the lives of people, to
alleviate so much pain in this world.
But Samumeds investors say the
company is already worth as much
as BioMarin and Incyte, companies
that have marketed products with
annual sales of $889 million and
$753 million, respectively.
The arthritis drug alone justifies
the valuation, insists Finian Tan, a
Samumed investor at Vickers Venture
Partners who, while at Draper Fisher
Jurvetson ePlanet, made a legendary
early bet on Baidu. He insists
Samumeds arthritis drug could be the
bestselling medicine ever. Right now
I hurt when I run, he says. If you can
grow one millimetre of cartilage, Ill
go for the jab so long as there are no
side effects. I think that if somebody, it
doesnt matter who, can grow cartilage
it would be larger than Apple.
Samumeds investors do have a
case. Sovaldi, the cure for hepatitis
C that has generated $32 billion in
revenue for Gilead Sciences, was
purchased for $11 billion, and that
was a single drug. And Samumed
is promising something bigger.
Even some of the doubts about
Samumeds drugs offer hope. Both the
baldness and arthritis drugs have the
same issue: Instead of getting more
effective with a higher dose, the drugs
have a Goldilocks zone where the
medicine works best. Thats a warning
signit could mean the results are
just statistical chance. It could also, as

Samumed hopes, just be what happens
with Wnt drugs: Theres a perfect
dose, and if you hit the pathway too
hard, it stops working. One bonus:
These drugs seem remarkably
safe, because Hood designed them
to stay where theyre puton a
bald mans head or in an arthritic
kneeand not to move throughout
the body, as most medicines do.
And if these drugs work, it becomes
a better bet that some of Samumeds
other medicines will work, too.
Theres a treatment for scarring
of the lung, known as idiopathic
pulmonary fibrosis. And for macular
degeneration, which causes blindness.
Could these drugs, added together,
eventually support a valuation of
tens of billions of dollars? Absolutely,
though so much has to go right.
But this is certain: Samumed is
not Theranos. That company had a
business plan that was hard to grasp.
How could a disruptor that was going
to defeat diagnostics giants LabCorp
and Quest by making diagnostic
tests cheaper, thereby shrinking the
market, be worth as much as LabCorp
and Quest? More than that, despite
what Theranos says, it looks like
it launched its testing technology
into wide use before it was ready,
potentially putting patients at risk.
Samumed is doing no such
thing. Its medicines will reach the
market, through the Food & Drug
Administration, only after they
have proved their effectiveness. If
its investors are willing to wait for
a megahit, good for them. Well see
the big trials of Samumeds first
drugs over the next year and a half.
After a full day of talking at their
San Diego office buildingSamumed
employs 120 people and has its own
labs and rooms full of mice and
ratsKibar and Samikoglu went to a
restaurant for sushi. Samikoglu did
most of the talking, while Kibar sat
quietly, like a man peeking at his cards,
sizing up his opponents and waiting
for the opportunity to raise his bet.
Cross borDer
bom Kim
How to beat
amazon
Coupangs blitz into same-day online
retail is all but keeping Jeff Bezos out of
South Koreaand making its prodigal
merchant CEO, bom Kim, a very rich man
ts the top of the third in

game three of a best-of-five
series in the Korean Baseball
Organization (KBO) playoffs.
The home team, Seouls Doosan
Bears, are up a run and trying to keep
the visiting NC Dinos, who have
two men on base, from scoring. Its
a warm night, and the air is hazy.
The aromas of squid balls and fried
chicken trail the vendors in the aisles.
Bom Kim has amazing seats just a
few rows behind the Dinoss dugout,
but hes fixated on his smartphone.
Eric Th Thames from
Pepperdine, he says, translating
the name off the scoreboard. The
Dinoss burly first baseman digs in
at home plate. Kim is reciting stats
off his Wikipedia page: The first
player in KBO history with 40 homers
and 40 steals drafted 219th by the
Toronto Blue Jays in 2008... stopped
in Seattle, Baltimore and Houston.
Thames raps a lazy fastball up
the middle. Kim finally looks up
from his phone. A runner scores,
and the away crowd launches into
rapturous song and a coordinated
dance dedicated to their Barry Bonds
look-alike, a sight that puzzles Kim,
who hasnt been to a KBO game in
years. Hes more of a Red Sox fan.

The distinction is academic
anyway, because Kim is almost
always occupied round the clock as
the CEO of Coupang, South Koreas
fastest-growing ecommerce site of
all time. Its the closest thing the
country has to Amazon.comand in
several key ways its better. Coupang
and its founder, Kim, are a big reason
Jeff Bezos will continue to avoid the
country and its 51 million people. The
six-year-old startup grossed about
$300 million in 2014, a figure that will
likely quadruple for 2015 when fullyear numbers are reported later this
year. Last June the company raised
$1 billion at a $5 billion valuation in a
round led by Japanese telecom firm
SoftBank, which hit pay dirt betting
early on Alibaba. SoftBank thinks
it can do it again with Coupang.
Kims estimated 19 percent stake
in Coupang is worth $950 million.
Hell be a billionaire soon, barring
disaster or recession. Scoring that
well is a rare feat in a country where
wealth is concentrated in the hands
of chaebol family conglomerates.
Kims story is in many ways like that
of itinerant ballplayer Eric Thames.
Both gave up uncertain careers in the
Jae Hyun Kim For Forbes
By Ryan Mac
Cross borDer bom Kim
Global
Game CHanGers
Continued from page 76
Bom Kim, 37
Founder, Ceo,
Coupang
south korea
the harvard-trained kim is

beating Jeff Bezos at his own
game in south korea (see
adjoining story).
Jorge Paulo Lemann, 76

Co-Founder,
3g Capital
united states
With the backing of Warren

Buffett, Brazils richest man
(whose firm is headquartered
in new York City) has become
the undisputed master of the
megadeal, transforming mature brandsfrom Budweiser
and Burger king to heinz
ketchup and Jell-ointo gigantic profit centres. the secret is razor-sharp cost-cutting implemented by forcing
managers to justify every single number on their budgets,
every single year. anheuser-Busch inBevs 32%
operating margin is now the envy of the industry, and it wants to spread the gospel by spending more than $100 billion to buy global rival
saBMiller.
Jack Ma, 51
Portrait illustrations by riCK tuma For Forbes
Founder,
alibaba
China
the biggest internet company

in China is a one-stop ecommerce shop, combining the
functions of amazon, eBay and
PayPal under the same roof.
now its pushing deeper into
financial services through ant
Financial and opening new offices in places like London and
Milan. in 2014 alibaba raised
$25 billion in the largest initial public offering of all time.
the company has been clocking sales growth in the range
of 50% per year, with 2015
revenues at $12.3 billion and profit margins of
around 45%.
John Milligan, 55
Ceo,
gilead SCienCeS
united states
By diving more deeply into the

science of viruses than any other
company, Gilead has managed
to create meds that put hiV in
check and cure hepatitis C 95% of the time. harvoni, its hep C drug, is already one of the worlds
bestselling, and the market could even be bigger:
the disease still afflicts 150 million people and kills
500,000 every year. annual sales have tripled to
$33 billion in three years.
US to become megastars in Korea.

Kim, though, is the native son. And
talk of wealth bothers him. When
asked about it, he refocuses the
conversation on Coupang: This is
a huge market opportunity, and its
completely overlooked. Amazon isnt
even doing what were doing now.
On-demand commerce, sameday delivery, instant gratification.
Call it what you will, but its the
customer-pleasing, margin-crushing
chimera that Amazon is
chasing like mad. Coupang
is already making same-day
the norm. Amazon is using a
variety of outside contractors,
experimenting with an Uber-like
driver network and floating the
idea of using drones to shrink
deliveries from days to hours.
Even so, same-day shipments
from Amazon are available
in only 27 metropolitan areas.
In two years Coupang has built
a last-mile delivery network of
customised trucks, algorithmcontrolled warehouses and 3,600
Coupangmen who deliver goods and
chat up customers. For South Korea,
where the average package
takes two or three days to arrive
at a customers door, Coupang
can get most of its orders to
a shoppers front steps in a
day or less at no extra charge.
You can cancel an order thats
already on its way or change a
packages destination at the last
minute. Try that with Amazon.
Where Amazon has dallied,
Kim has been decisive. But the
downside to his mad dash to shrink
delivery times to a day or even
an hour has generated serious
doubt. One analyst jokingly likened
Coupang to Isis for the way it
terrorises rivals with unsustainable
practices. Its a red ocean, says
Hyundai Securitiess Keun Jong Kim.
Coupangs losses were reportedly
around $325 million in 2015.
Bom Kim disregards the chatter.
Koreans are unfamiliar with startups,
Kim says, adding that if his company

is built correctly it can surpass
eBays Gmarket and Auction Co as
the nations largest shopping site.
I dont think people are used to
the scale and long-term thinking.
They will misinterpret what were
doing, but thats okay as long as
our customers are benefiting.
ts easy for Americans to forget

that Amazon is less than a giant
abroad, operating in only 13
countries. One thats missing is South
Korea, and if you could invent the
ideal nation for online commerce,
it would look very much like The
Land of the Morning Calm: Wealthy,
wired and dense. It trails only Japan
in GDP per capita in Asia, and almost
everyone has a smartphone on a
high-speed network. About half the
population lives in the greater Seoul
area, making for simpler logistics.
As a result, 15 cents of every retail
dollar in South Korea is spent online,
according to Euromonitor. In the
US its a little more than 9 cents.
So why hasnt Jeff Bezos turned his
attention here? Amazon has focussed
instead on more populous nations
like Japan (with some success),
China (a complete disaster) and
India (still a work in progress, with
$2 billion invested there). When I
was at Amazon we talked constantly
about Korea, says Henry Fong,
Amazons former vice president of
operations in China, who now leads
global operations for Coupang. But
we were having such a challenge
trying to grow in China that there
were not enough resources, and it
was always Not now, not now.
Bom Kims path to seizing the
opportunity left open by Amazons
absence has been roundabout, to
say the least. He was born in Seoul
but left Korea at the age of 7 with
his father, who worked abroad for
Hyundai. At 13, he went to boarding
school in Massachusetts, where
he subsisted on a steady diet of
New England Patriots and Red
Sox games. He lettered in varsity

wrestling and track and kept good
enough grades to get into Harvard.
Kim got hooked on the media
business at first. He interned at the
New Republic and started a student
magazine called Current, which
Newsweek took over a year after
Kim graduated in 2000. In 2006
Kim raised $4 million for a Vanity
Fair-inspired Harvard alumni
magazine named 02138, but it folded
under the 2008 financial collapse.
Kim tried Harvard Business School
in 2010 but lasted only a year. I
knew I wanted to start something
in commerce [in Korea], he says,
having spent several summers there
and some time studying at Seoul
National University prior to his
MBA attempt. Groupons daily-deal
model was the hot thing at the time,
and it was easy to get funded, says
in-house, but Coupang still relied

heavily on third-party sellers that
packed and shipped their own items.
Two years later I visited South
Korea to find that Coupang had
changed again. It had raised
$400 million from the likes of
Sequoia Capital and BlackRock
to double-down on its own
inventory, with the goal
of getting high-frequency
goods like diapers, bottled
water and rice to customers
as quickly and cheaply as
possible. With the newer
infusion of SoftBank money
in June, the company was able to
commit $1.3 billion to further its
logistics infrastructure, which already
consists of 21 warehouses, a fleet of
trucks and an army of Coupangmen.
The investment, Kim says, will pay
off when customers, accustomed
Global
Game CHanGers
Elon Musk, 44
Co-Founder, Ceo,
teSla MotorS, SpaCeX
united states
the worlds most innovative

businessman has stratospheric
ambitions: hes reimagining the
electric car as more of a rocket ship than a golf cart and reimagining the rocket ship as
more of a car (i.e., reusable).
teslas newest car, the more affordable Model 3, booked $7.5
billion in preorders the first day
it was offered, and the vertically
integrated company has a threeyear sales growth rate of 114%.
teslas Gigafactory in nevada
will soon produce more lithium batteries than all
the other factories in the world.
life sucked in the old days.

People knew very little, and you
were likely to die at a young age
of some horrible disease. youd
probably have no teeth by now.
april 9, 2012
Peder Holk nielsen, 60
We cant bend customers to WHat

We Want... We can bend ourselves
to WHat tHe customers Want.
Kim. He moved back to Seoul to
create what was to be the nations
30th Groupon clone. In order to
make it easier to raise money from
American investors, Kim registered
it as a limited liability corporation in
the US. He spent close to $1 million
on ads, becoming Facebooks top
advertiser in South Korea. At one
point every Korean on Facebook was
seeing 72 Coupang ads a month.
But daily deals, as Groupon
discovered, are a lousy business
model, with low customer retention.
When Forbes first talked to Kim
in the summer of 2013, he had
manoeuvered Coupang away from
one-off deals to become an eBay-style
marketplace. At the time, Kim had
begun experiments with taking on
first-party inventory, and handling
the sale and fulfillment of goods
to fast delivery speed, order more

over time. We cant bend the
customers to what we want, says
Kim, but we can bend ourselves
to what the customers want.
ak-Yong Choi is getting ready

for his morning truck route
out of Incheon, Koreas
transport-hub city southeast of Seoul.
Coupang has built a new warehouse
here thats about 1 million square feet,
or the size of 15 soccer fields. At a
separate regional distribution centre,
Choi, a 32-year-old Army vet in a
blue polo shirt and Coupang snapback cap, is shoeless to keep his truck
spotless while packing it with boxes.
He and 89 other drivers will deliver
about 120 packages each during their
10-hour shift, moving along routes
fed to an app on their smartphones.
Ceo,
novozyMeS
denMark
novozymess enzymes replace

nasty chemicals in places like refineries and food factories, making
the industrial world run cleaner
and more efficiently. the companys products could save 100 million tonnes of
carbon dioxide by 2020. research is a religion at
the company: scientists spend 10% of their time
pursuing personal projects.
Larry Page, 43
Co-Founder, Ceo,
alphabet (google)
united states
not content with just being the

Ma Bell of the internet, the parent company of the worlds
most knowing search engine is
busy pursuing dozens of moon
shots. these high-risk, highreward (and often high-minded) projects include self-driving cars, computers that create
original art and a network of balloons that deliver high-speed internet access to rural areas in the
developing world. Google, far and away the largest subsidiary of alphabet, raked in $74.5 billion in
revenues in 2015, up from $65.7 billion in 2014 and
$10.6 billion a decade ago.
Cross borDer bom Kim
Global
Game CHanGers
cyrus Poonawalla, 74
Founder,
SeruM inStitute of india, india
the worlds largest vaccinemaker by volume produces 1.3

billion doses annually, which
have immunised close to twothirds of the worlds children.
serums revenues, estimated
to be some $620 million, have
been growing at about 30%
compounded and profits about 40%. it supplies
low-cost vaccines to 140 countries through
agencies such as unicef and the Pan american
health organization. new vaccines are being
developed for diarrhoea, cervical cancer,
pneumonia and tuberculosis.
Hakan
Samuelsson, 65
Ceo, volvo CarS, sWeden
safety-first Volvo has publicly pledged that no one should die

or be seriously injured in its cars
by 2020. now owned by Chinas Geely holding
Group, Volvo tripled its operating profit to $780
million in 2015 on revenues of $20 billion. Worldwide, Volvo sold 503,127 vehicles last year, the
highest in the companys 89-year history.
Howard
Schultz, 62
Ceo, StarbuCkS
united states
schultz has turned a commodity product into a high-margin

lifestyle brand that represents
everything from digital savvy
and green living to progressive
politics. the coffee-shop social experiment resonates on a global scale: starbucks now has more
than 24,000 stores in 70 countries, 6,000 opened
in the last five years. sales grew 17% to $19.2 billion in 2015.
We can elevate citizenship

and humanity. march 21, 2016
Sunny Varkey, 59
Founder, geMS eduCation
united araB eMirates
he never went to college, but

Varkey is building the largest network of private k12 schools in
the world, many focussed on providing education to girls in places where they would otherwise have no access.
GeMs has 250,000 students enrolled in 240
schools in 17 countries across the globe. over the
next four years, Varkey plans to invest $200 million in expanding in africa and his native india.
We adopted the airline

model of economy, business and first class to make
top-notch education available based on what families
could afford. april 14, 2014
Coupang has 3,600 Rocket

Delivery drivers in all, and theyre as
much a marketing tool as anything
else. Drivers hand out balloons and
candy to children, politely talk to
customers and text them reassuring
photos of dropped-off packages.
At one stop at an industrial
apartment complex, Choi pauses
to take out a felt-tip marker and
draw a cartoon on the box of
a character straining his back
while bending down to pick up
a package. We are men, not
heavy, he says in broken English.
Customer is woman. Heavy!
The companys target demographicmothershas come to
trust the Coupangmen, whose net
promoter score of 97 out of 100
is unheard of compared to that of
independent contractors hired by
external logistics firms, which pay
among them former Amazon execs,

consultants and Silicon Valley
engineersbrought in to apply a
Western perspective to building a
commerce startup. Coupang has hired
an army of translators to follow its
executives and serve as mediators for
Korean employees. Chief Technology
Officer Jim Dal, who previously
built logistics software for Siebel,
came to Korea following Coupangs
acquisition of his startup and says
he cant even read the companys
website or mobile app. No matter:
Good code is understood across
borders. Its Dals software that
courses through Coupangs delivery
chain and allows it to be the fastest in
Korea yet nimble enough to process
delivery changes and returns left
at customers doors. Coupangs
algorithms also inform staff which
goods to move where so that the most
Kim says tHe intention Was alWays

to move to tHe amazon model, but
Hes not Wedded to any plan
their workers based on the number
of packages delivered. That can lead
to rushed and cold encounters, says
Kyuri Kim, a university student.
The Coupangmen system has added
a whole new personal element to
the shopping experience, she adds.
JD Yang, a startup entrepreneur,
says that even though Coupang may
not have the cheapest prices he is
willing to pay a little extra for its
convenience and the friendliness.
The over-the-top service, imported
from the US, has helped Coupang
run circles around South Koreas
online commerce leader, Gmarket.
Coupangs head of marketing is
Darrin Shamo, an 11-year veteran
of Zappos, whom Kim talked into
moving to Seoul with his wife and
three kids last year. Shamo is one
of more than 200 non-Koreans
frequently purchased items at any

given time are closest to the pickers.
With sales of its own inventory
up sevenfold in 2015 to a $1.5 billion
annual run-rate, Coupangs firstparty retail division will overtake
its marketplace business in the next
couple of years at its current pace.
Kim says the intention was always
to move to the Amazon model, but
hes not wedded to any business
plan. He encourages executives
to understand the missteps of
competitorsevery key hire is given
a copy of The Everything Store, a
book on Amazonand hes compared
Coupang to the ancient Mongol
empire in meetings. Genghis Khan
conquered lands from the Far East
to Europe because he was willing to
adapt the way his armies fought, says
Kim: Whatever it took to win battles,
they did, and whatever it takes to

win customers hearts, we will do.
om Kims office in Seouls

Gangnam neighborhood is
fairly free of typical CEO
tchotchkes, but the one thats most
meaningful to him is a slightly
deflated ball signed by New
England Patriot coach Bill Belichick. Hes a man of few words,
says Kim. And he just wins.
Like Belichick, who is mostly
reviled by anyone not from Boston,
Kim has cultivated an us-versusthem mentality that leads to
some people working more than
80 hours a week in a relentless
drive to provide better service
and products than competitors
who have clearly taken notice.
According to reports, the CEO
of Shinsegae, the department store
conglomerate that checked Walmarts
Korean expansion plans a decade ago,
told his internal staff that Coupang
was taking away his customers. We
must not lose customers to Coupang,
said Shinsegae billionaire Chung
Yong-Jin. Why are we ignoring this
and not confronting the issue?
Local freight companies spurred
a government inquiry into Coupangs use of trucks without delivery
licenses; it was later dismissed.
In September parliament called
Coupang to appear at a hearing
with other online retailers and
questioned the company about the
possible coercion of vendors. Kim
skipped the meeting because of a
torn Achilles tendon sustained in
a pickup basketball game and sent
the companys head of public policy,
a move which drew swift rebukes
from the press, who saw his absence
as a cop-out to tough questions. I
didnt think itd be appropriate for
me to show up like this, he says,
pointing to a giant boot on his foot.
Another tough question is
whenor howCoupang plans to
turn a profit. Kim declined multiple
times to discuss the companys unit
economics, noting only that the

company had been cash-flow positive
prior to committing $1.3
billion to Rocket Delivery.
Up to now Coupangs
smart logistics and giant
mobile footprint (more
than half of the 51 million
people in South Korea
have downloaded its app)
have created a big enough
moat to persuade investors
to continue funding the
expansion. If I am getting into the
market, I need to ask what kind
of infrastructure do I need off the
bat, says SoftBank Vice Chairman
Nikesh Arora when asked about any
potential challenge from Amazon.
The more you can add, the harder
it gets for people to compete with
you. In 2014 Diego Piacentini,
Amazons then-head of international
operations, all but admitted this to
The Economist, saying, The cost
to be a relevant ecommerce player
[in Korea] would be too high.
Its fine to keep people out, but
where does Coupang go once it has
conquered South Korea? China and
Japan are ruled by retailers Alibaba
and Rakuten, respectively. The
companys investors believe that
Korea is a large enough opportunity.
Weve had zero discussions
at Greenoaks about how
Coupang can sell into other
countries, says Greenoaks
Capitals Neil Mehta, who
sits on the board. He can
think of other businesses
Coupang could get into,
such as using its warehouses
to pack other companies
merchandise much the way
Amazon does with its Fulfillment
by Amazon programme.
Kim says he has better things
to do than peer over his shoulder
for Amazon. He has an early lead
at dominating one of the worlds
brightest ecommerce markets: Its
only the top of the first inning.
Global
Game CHanGers
Frank Wang, 35
Founder, Ceo, dJi, China
Chances are if you own a drone,

it was made by Wangs company: his shenzhen-based dJi has an
estimated 70% share of the consumer drone market. and unlike most Chinese tech companies,
which tend to be fast followers of
their Western counterparts, dJi
is blazing the trail in this entirely new electronic category. nearly
1,500 of its 4,000 employees are focussed on r&d.
it doubled its sales to an estimated $1 billion last
year, evenly distributed among asia, north america and europe.
all you need to do is to be

smarter than othersthere
needs to be a distance from
the masses. if you can create
that distance, you will be
successful. may 25, 2015
Tadashi yanai, 67
Founder, Ceo,
faSt retailing, JaPan
in a business where choking on inventory is commonplace, Yanais

flagship, trendy uniqlo is a master
of speed-to-market. in-store sales
are tracked obsessively, and slow-selling products
are yanked and replaced by new ones. in addition
to uniqlos 1,700 stores spread across 17 countries,
Fast retailing runs the denim-focussed J Brand
and, in February, introduced a popular line of clothing for Muslim women in america. revenues are up
15% annually over the last five years.
Mark Zuckerberg, 31
Co-Founder, Ceo, faCebook
united states
Five words: one billion active

daily users. thats roughly one
out of every seven humans alive
today and nearly a third of all
people who have internet access.
eighty-four percent of Facebooks
users hail from outside the us,
and sales have grown at an average annual rate of 49% over the
past five years to $18 billion, generating 2015 profits of $3.7 billion. Zuckerberg is leveraging that
financial success to buy his way
into hot new markets. in 2014 he
acquired the pioneering virtual-reality firm oculus for $2 billion and messaging giant Whatsapp
for $22 billion.
Edited by: Michael Noer, Steve Schaefer and Matt Schifrin
Reporting by: Keren Blankfeld, Abram Brown, Kathryn
Dill, Christopher Helman, Matthew Herper, Naazneen
Karmali, Ryan Mac, Joann Muller, Andrea Murphy, Clare
OConnor, Natalie Robehmed, Abby Tracy.
With reporting from Grace Chung
Embattled Valeant
chief executive
J Michael Pearson
CROSS BORDER
VAlEAnt
Prescription
for disaster
In less than a year, Valeant Pharmaceuticals has

lost 87 percent of its valuesome $80 billion
amid accusations of mismanagement and
financial shenanigans. The inside story reveals
a pressure cooker that was built to explode
hen you are speeding

towards billionaire
status, nothing
says Ive arrived
more loudly than a big donation
to ones alma mater. In June 2014,
Duke University announced that
J Michael Pearson, the CEO of
Valeant Pharmaceuticals, one of
the fastest-growing companies in
America, and his wife Christine
would be making a $30 million gift
to its engineering school, on top
of $23 million in earlier gifts that

had resulted in renaming Dukes
nursing school building after her.
Were grateful the Pearsons share
our vision, Laurie Patton, former
dean of Dukes Trinity College of
Arts & Sciences, said in a release that
recognised the husband and wife as
some of the schools most prominent
alums, as well as the fourth-largest
contributors to its capital campaign.
Less than two years later, its
hard to view this announcement
BEnjAmin lOwy / COntOuR By GEtty imAGES
By NathaN Vardi aNd aNtoiNE Gara
CROSS BORDER VAlEAnt

as anything more than a mirage.
The Pearsons, it turns out, werent
actually a coupleNew Jersey
court records show that Christine
had sued her husband for divorce
in 2013. In fact, a Florida magazine
had featured him and another
woman several years before as a
couple who were in the midst of
decorating their three-bedroom
apartmentwhich documents
show they purchased togetherin
a luxury highrise in Miami Beach.
They also didnt actually have the
cash available to make the donation.
On paper, Michael Pearson, now 56,
was a billionaire, but his wealth was
locked up in Valeant stock, earned
by meeting seemingly impossible
shareholder-return goals. He was
barred from selling his shares
for years and even prohibited
from borrowing against them.
Valeants board waived its policy
in order to allow Pearson to borrow
$100 million from Goldman Sachs
against his stock to fund the Duke
contributions, build a community
swimming pool and finance his own
tax obligations. But even this wellintended gesture turned southby
last November, the aggressive moves
that Pearson had used to juice
Valeants stock were backfiring, its
price was tumbling and Goldman
had issued a margin call, resulting
in the liquidation of 1.3 million of
the CEOs shares, a forced sale that
spooked the market and sent the
stock plummeting even more.
All told, Valeants market cap has
fallen 87 percent since Augustsome
$80 billion in shareholder value has
vanished. The company has come
under intense congressional scrutiny
for its drug-pricing policies, lumping it
in with the firestorm surrounding the
new poster boy for corporate greed,
Martin Shkreli. Next were revelations
about an undisclosed mail-order
pharmacy called Philidor Rx that
Valeant essentially controlled, which
was accused of using controversial
methods to get patients, doctors and
insurers to use expensive Valeant

drugs instead of cheaper alternatives.
In March, Valeant slashed its
earnings and revenue projections and
said its continuing inability to file its
annual financial report could lead it
to default on its $30 billion of debt
because of covenants it has with its
lenders. The company also announced
that Pearson would leave Valeant as
soon as a replacement CEO is chosen.
(Pearson did not respond to numerous
interview requests from Forbes.)
It would be easy to blame Valeants
Icarus-like plummet on a CEO whose
life is seemingly falling apart. Or on
an unsustainable business model that
was destined to catch up with itself.
Or on the kind of financial-statement
gymnasticsand an accompanying
announcement from the company that
blamed these ills on the tone at the
top of the organisationthat bear too
much resemblance to those of Enron,
Tyco and WorldCom for comfort.
And theres some truth to all
of those things. But the ultimate
culprit here is something for
which until recently Valeant was
lauded far and wide as a role
model for other corporations: Its
executive compensation plan.
Valeants plan was praised for
the debt-fuelled
acquisition
strategy
created
rich fees for
bankers, gutted
r&d, fired
emPloyees,
boosted drug
Prices and
moved valeants
tax address
to canada
years by everyone from activist

hedge fund billionaire Bill Ackman
to top executive-pay experts at the
University of Chicago and Harvard
Law School for its unique incentive
model. Pearson and other top
executives would receive relatively
little in the way of cash compensation
but massive amounts of incentive
stock and options. And that stock
would be tied up for extremely
long periods (an extended vesting
periodthen for Pearson another
three years). In short, Pearson and
his team would be paid handsomely
if they could create long-term value,
in lockstep with their shareholders.
There would be no easy cash-out.
On paper, it worked brilliantly, and
Pearson went on a tear that created
tens of billions in value and continued
for several years. Ackman, who
invested $4 billion in the company,
compared him to Warren Buffett. But
the plan also put an inordinate amount
of pressure on Pearson to sustain
the growth, and the stock price, by
whatever means he could. Valeant
was built to become a pressure
cooker. And eventually the lid
exploded, taking the chef out with it.
or most of his career, Michael

Pearson was a consultant, and
a very successful one at that.
During his 23 years at McKinsey &
Co, he became one of the firms most
talented and hardworking partners,
running its pharma practice as
consigliere to CEOs like Johnson
& Johnsons William Weldon and
Schering-Ploughs Fred Hassan.
Then he began to advise a moneylosing California drug company that
had been around since 1960 and
focussed on neurology drugs and
generics. When Valeant sought a
new CEO in 2008, San Franciscos
ValueAct Capital, a hedge fund
run by Jeffrey Ubben and Mason
Morfit, recruited Pearson and
designed his compensation plan.
Pearson simultaneously brought
outsider and insider credibility.
We think he is ideally suited to

run a business that is at heart a value
investor in pharmaceutical products,
wrote Robert Goldfarb and David
Poppe early in Pearsons tenure,
explaining to investors why their
Sequoia mutual fund was on its way
to making Valeant its biggest position,
replacing Berkshire Hathaway.
He brought a mission: To prove
that the buy and cut growth strategy
he had long been preaching from
McKinseys ivory tower was more
than expensive hot air. In the first
year of Pearsons watch, Valeant,
which then had revenues of about
$800 million, made three acquisitions,
including buying acne remedy
specialist Dow Pharmaceutical
Sciences for $285 million. And then he
increased the pace: By last year, he had
swallowed more than 50 companies.
This debt-fuelled acquisition
strategy created rich fees for
investment banks and sold investors
on a low-cost pharmaceutical
company model that emphasised
boosting drug prices, gutting
research and development budgets,
firing employees and lowering
taxes through a merger that moved
Valeants tax address to Canada.
Instead of creating new drugs,
Pearson bought and squeezed profits
out of old remedies like Wellbutrin
XL, an antidepressant; Isuprel, an
off-patent heart drug; and Provenge,
a prostate medicine whose maker
had filed for bankruptcy. Pearsons
drug-price increases became
legendary, and there were no US
laws on the books to stop him.
For example, Valeant boosted the
price of its diabetes drug Glumetza
by about 800 percent in 2015, the
year Valeant bought it. The company
acquired Carac cream in 2011,
and the price for the treatment of
cancerous skin conditions rose by
1,700 percent in six years, mostly on
Valeants watch. Pearson defended

his prices, claiming that just about
anyone who needed Valeants drugs
would receive them because patients
were protected by insurance and
financial assistance programmes.
Pearson acquired some of the
drugs and products in big deals
for companies like Medicis (antiwrinkle medicines), Bausch &
Lomb (contact lenses) and Salix
(gastrointestinal treatment). Along
the way, more than 4,000 pharma
employees in the US alone fell victim
to Pearsons axeas much as half
of the workforces of companies he
acquired. The result was a company,
Valeant, headquartered in Canada and
employing 18,000 but with executives
in New Jersey, that spent 3 percent
of its revenues on drug research and
development while selling products in
areas ranging from dermatology and
eye care to gastrointestinal neurology
and over-the-counter remedies.
BEnjAmin nORmAn
Valeants culture
was hard-charging,
and the distinctions
between work and
play became blurred.
Pearson set the tone
CROSS BORDER VAlEAnt

Wall Street analysts, whose
investment banking colleagues
thirsted for Valeants fees, issued
bullish reports, and big hedge funds
rushed into the stock. Valeants shares
soared by 2,450 percent in seven years,
affording it a market cap of nearly $90
billion by 2015. Investment banks like
Goldman Sachs and Deutsche Bank
made $750 million in fees. ValueAct
realised $1.15 billion in gainsand
still retained a 4.4 percent stake in
the company. Everybody got rich
at least on paperboard members,
executives and, most of all, Pearson.
Pearsons original employment
agreement with Valeant, struck in
February 2008, put him on track to
become one of the richest executives
in the pharmaceutical industry
within three years, based on large
amounts of stock and option awards.
But the lockups were long, and the
awards came with both hurdles
(he needed to deliver a minimum
15 percent return annually) and
incentives (his allotment tripled if
the company produced a 45 percent
annual return). In 2011, he renewed
his employment contractextending
both the lockup (2017) and the bonus
potential (maximum-return hurdles
at 60 percent). His most recent deal,
struck when Valeants stock changed
hands for $141, included up to 2.25
million in performance share grants
if Valeants stock hit $1,068 by 2020.
Yes, Pearson was incentivised.
Perhaps fatally so. They would
cloak it in shareholder equity,
as if theres a bunch of widows
and orphans [invested]but it
was just all about money, says
a former Valeant executive.
That was all that mattered.
n early warning sign for

Valeant came late on
September 30, 2009, as
Pearson returned from his Madison,
New Jersey, office to his New
Vernon estate. Without signalling,
Pearson made a fast right in his gray
BMW and was almost immediately
apprehended by Madison police.

When Pearson lowered his window,
the patrolman noticed a waft of
alcohol coming from the vehicle.
Police records show that Pearson
slurred his speech and was unable to
touch the tips of his fingers together
or recite the alphabet from the letter
D to the letter W. After the officer
had Pearson spit out his chewing
tobacco, his breath test indicated
that the chief executive had a blood
alcohol level of 0.13 percent. Pearson
ultimately pleaded guilty to driving
under the influence and lost his
drivers licence for three months.
DUIs are commonplace, even
they Would
cloak it in
shareholder
equity, as if
theres a bunch
of WidoWs and
orPhansbut
it Was just all
about money,
says a former
executive. that
Was all that
mattered.
in executive suites, but Pearsons
2009 drunken driving arrest fed
concerns about Pearsons behaviour
that were spread by both shortsellers targeting Valeants once
lofty stock and employees in the
corridors of the companys offices.
Like many top executives, Pearson
was a workaholic. He overate, and he
travelled all the time. Even though
Valeant was decentralised, with
operating units run by their business
leaders, Pearson micromanaged
things he deemed important. His
dedication to drive Valeant and

its stock forward was fierce.
Pearson led gruelling weekly
calls with dozens of Valeants top
business managers and made it clear
they had to deliver their numbers
on a weekly basisor else. Though
Valeant was ostensibly a science
company, scientists were seen as
unnecessary costs to be cut, unless
the product they were working on
looked almost certain to succeed. And
as Pearson made acquisitions, those
cuts came quickly. The company once
handed out envelopes to Valeants
new employeesif you got a black
envelope, it meant you were fired,
the Wall Street Journal reported.
Management turnover was high
more than half of Valeants top 15
executives have left the company
since 2011and those who stayed took
their lead from the CEO. The culture
was hard-charging, everyone kept late
hours, and the distinctions between
work and play became blurred. One
former executive says Pearson was a
heavy drinker who favoured double
bourbons and that he sometimes
saw Pearson gulp down six to eight
drinks before business dinners.
Another former executive saw
Pearson get inebriated at an important
function during the negotiation
of a major business acquisition.
Others who worked with
Pearson told Forbes that his alcohol
consumption never impeded his
working ability. But at least one
sizeable investor in Valeants stock
was worried enough to raise an alarm
to a board member, who shared the
information with another board
member. (Valeants response: The
company is not going to discuss or
comment on topics related to Mr
Pearsons personal life or family.
Valeant announced on March 21
that it has initiated a search for a
new CEO and that Mike Pearson
will be leaving the company upon
the appointment of his successor.)
The senior management, for its
part, was filled with Pearson diehards.
He liked to hire cronies like his former

McKinsey partner Robert Rosiello,
who is now Valeants chief financial
officer. Pearson hired his brother-inlaw, who was paid $299,000 a year as
director of corporate procurement/
real estate. Ryan Weldon, head of
Valeants US dermatology operation,
had been a summer associate at
McKinsey and was the son of
former J&J CEO Bill Weldon.
Mike wanted to win at all costs
and surrounded himself with people
who would basically do whatever he
told them to do, said a former Valeant
executive, who says he left because
he was uncomfortable with positions
that Pearson asked him to take.
As for the board, which, like the
management, was paid generously
in restricted shares, there was no
incentive to question Pearson.
Indeed, by the beginning of 2015,
eight of Valeants independent
directors held $108 million of
equity between them. Their stock,
like the CEOs, was also extremely
restricted, incentivising them to keep
Pearsons streak going a bit longer.
Ultimately, that proved impossible.
Their business model was: Borrow
money, buy companies and boost
prices, says Erik Gordon, who
studies the pharmaceutical industry
at the University of Michigans
Ross School of Business. Thats
a lousy business model, and its a
business model which you know
obviously comes to an abrupt end.
Valeants golden run began to
unravel last September after it
came under attack for its drugpricing policies and the tactics of
its captive pharmacy, Philidor Rx.
Philidor denied the accusations,
but that didnt stop a congressional
subpoena and increased scrutiny
that placed into question Valeants
accounting and business model.
Pearson wrote a letter to his
employees, saying it was nonsense
to suggest that Valeants business
model was dependent on drug-price
increases or that there should be
PEARSONS WILD RIDE

Everyone got rich until the
pressure cooker blew.
2000
VALEANT
PHARMACEUTICALS
1000
600
500
400
300
200
(02/01/08=100)
S&P 500 INDEX
100
60
50
40
02/01/08
12/30/11
04/11/16
Source: Factset
concerns around Valeants exposure

to US government drug-price
reimbursement. It assured investors
that Valeants sales to Philidor were
recorded only when the product
was dispensed to patients and then
terminated its relationship with the
pharmacy, which had been linked to 7
percent of its sales. ValueActs Morfit
rejoined the companys board, which
also hired a former US deputy attorney
general to help on issues related to
Philidor. To replace Philidor, Pearson
struck a deal with Walgreens.
Then in December, Valeant
announced that Pearson had been
hospitalised after contracting
pneumonia and would be going on
medical leave. The news further
rattled investors. Press reports at
the time indicated Pearson had
been working around the clock to
get the Walgreens deal done.
After about two months of
convalescing, Pearson returned
to the helm of Valeant at the end
of February. He told employees
he was learning to walk again
and that he had lost 30 pounds,
Bloomberg reported. Within a
month, he was on his way out.
aleant has been trying to make

former chief financial officer
Howard Schiller the fall guy
for the companys current accounting

woes. In March, when Valeant
admitted that $58 million in revenue
should not have been recognised in
2014 when its drugs were delivered
to Philidors mail-order pharmacy, its
statement used the phrase tone at
the top, implying that the improper
conduct was driven by Schiller.
The former CFO is accused of
providing false information to the
companys auditor, PwC, in an effort
to get it to sign off on Valeants
2015 10-K, critical to avoiding debt
covenant default. Schiller, who refuses
to leave the board despite being
asked to, denies any wrongdoing.
Not a single person Forbes
spoke with, who was familiar with
Valeant, believes that Schiller was
the company mastermind. It was
always the Michael Pearson show at
the Madison executive offices, which
was converted from a YMCA building
and still has a basketball court,
emblazoned with Dukes Blue Devil
insignia. Class action lawsuits have
been filed, the SEC is investigating
and the Senate Special Committee on
Aging threatened to begin contempt
proceedings against Pearson. Bill
Ackman, who infamously compared
Pearson to Buffett, was forced to
join Valeants board in an effort to
shore up billions of dollars that his
Pershing Square has so far lost on its
investment. Valeant is under attack by
politicians for its drug-price gouging,
and it recently said that it would need
to restate previous financial results.
Effectively fired from the company
he built but still technically its chief
executive, Pearson has yet to fulfill
his most important obligation,
signing Valeants long overdue
10-K annual report. Valeant has
some valuable assets, like Bausch
& Lomb, but its also saddled with
some $30 billion in debt associated
with Pearsons acquisition strategy.
Without new deals or the ability
to raise prices, its unclear where
Valeants growth will come from.
Additional reporting by Matthew Herper
interview
Bill McDerMott
There is no Market More

important Than india
bill Mcdermott, CEO and executive board member of software services firm
SAP AG, says companies that capture Asia will be the ones to run the world
By N MadhavaN
he fact that he was raised

in the working class
neighbourhood of New
Yorks Long Island and, as
a teen, began working in a corner deli
for hourly wages (he acquired the deli
later) did not deter Bill McDermott
from dreaming big. He wanted to
become the CEO of a company. He
sold his deli and pursued a corporate
career. His dream came true when he
was made co-CEO of SAP in 2010 and,
four years later, the German firms sole
and first non-European CEO. Under
him, the worlds largest software
services company (with revenues
of 20 billion euros) has got its mojo
back by re-focusing on customers,
and embracing innovation to deliver
value. His thrust on OnPremise (SAPs
core enterprise software), OnDemand
(cloud-based offering) and OnDevice
(mobile strategy) has put the company
firmly in line to achieve its revenue
target of 26-28 billion euros by
2020. A freak accident last year cost
McDermott, 54, his vision in the left
eye, but that has not slowed him down.
During a recent visit to India, he
spoke to Forbes India about his plans
for SAP and the critical role India
has in its growth. Edited excerpts:
Mexy xavier
Q almost 87 percent of the forbes

Global 2000 companies, 98 percent
of the most valued brands and
100 percent of dow Jones top
scoring sustainability companies
78 | forbes india MAY 27, 2016
are your customers. Where will

your future growth come from?
A lot of our growth will come from

growth in the same-account revenue
[existing customer base] as our
product portfolio is a lot broader than
it used to be. If you look closely at
our same-account revenue growth,
based on the innovation that we have
put into the portfolio over the last six
years, 80 percent of our revenues are
coming from businesses we were not
there in five years ago. We are having
an amazing up-sell and cross-sell
within our existing customer base.
Q You have been focusing

on small and medium
enterprises (sMes) as well...
Yes. SMEs are an important part

of our business strategy around
the world. India, for instance, is
the third largest startup ecosystem
in the world for SAP and we have
only just begun. I am personally
taking the leadership role in
spearheading the SME marketplace.
We have to use cloud computing
to enable them to grow faster. It is
a big, big opportunity in India.
Q How has the global slowdown

impacted your business? does
a downturn help you?
Well, whether you are growing or

you are just trying to make your
business efficient and simple, SAP is
very relevant. All the CEOs you talk
to, in India or outside, will tell you, I

have to have a digital boardroom so I
know what is going on in my business
all the way from my supply chain to
my customer relationships. Thats
why we have grown much faster than
all the other large-scale enterprise
technology companies. We made a
bold move in the cloud [business]
and have now achieved about 100
million users. The cloud is growing
faster than, I think, anybody realised it
would. Finally, what is really growing
fast is the business networkthis idea
of a global economy with fragmented
supply chains forcing companies to
realise that they have to be digital
not only within their company but
also with their trading partners.
Q You plan to raise the share of

cloud business from 11 percent
to 29 percent by 2020?
Yes. Cloud business is exceptionally

good. Companies can now run their
entire core business in the cloud. SAP
offers HANA Enterprise Cloud, which
runs on a twelve-and-a-half times
less hardware than other cloud-based
technology and is a thousand times
faster than any other data platform,
so you are enabling a real-time, live
system strategy. Our lines of business
[various industry verticals] clouds
continue to grow extremely fast
because they are easy to consume,
faster to value, and are the best. The
most recent development is the HANA
interview Bill McDerMott

Cloud Platform as a service where you
can take our data platform and bring
it into your enterprise or we will run
it on our cloud for you. That is going
to be a super-fast growth model.
Q analysts tracking your company

have warned of the need to
balance your margins with the
growth of the cloud business...
I have always believed that the market

should get what the customer wants
because, in the end, the customer
has to win. If you look at recent
earnings announcements of other
companies in our space, they have
announced a sharp decline in margins
and operating income. In fact, they
have abandoned their operating
income and their core business is
negative in double digits. That is
because they chose to hype their
growth in the cloud business at the
expense of operating income. I think
the more relevant way to look at is
to keep your core business strong,
grow your cloud business in addition
to your core, and show progress
on the operating income side.
Q How open are companies to give

up control over their data and move
their core operations to the cloud?
They are. What is happening now is

acceleration to the cloud. Customers
who were, till a year ago, saying, I
will move something or nothing to
the cloud are now saying how can I
move almost everything to the cloud.
We are heading to a strong hybrid
cloud environment where customers
are trying to move much of their
operations to the cloud, apart from
managing some legacy assets in their
own data centres with perhaps a road
map to move that too to the cloud. The
reasons for that are simple: They are
tired of buying hardware. You need a
lot of people to support the hardware
and recurring expenses are high. It is
not very sustainable [environmentally]
if you do not manage it right.
Cloud offers economies of scale
and scope apart from protection
80 | forbes india MAY 27, 2016
from technological obsolescence.

Why will you not opt for it?
Q saP is almost unchallenged

in the market. What gives you
sleepless nights: Technological
disruption, competition or
fear of complacency?
Successful companies will always

have to fight complacency. When
we announced our strategy in 2010,
we basically said we will help the
world run better and improve
peoples lives. It is about keeping
the spark of innovation alive where
people are in service not just to their
customers but also to customers
of the customers. That is why our
software has to be beautiful to use,
easy to consume and make their
breakTHrouGH
ideas GenerallY
do noT CoMe
froM WiTHin
a CoMPanYs
PlanninG
ProCess
day better. The sophistication of
a company like SAP to keep that
promise is really not simple. It is
challenging because you have to
get 77,000 people to move as one.
Q How do you keep your ears to

the ground, pick up emerging
trends and be ahead of the curve?
What companies like us have to be

constantly aware of is the idea of
a new idea, and the fact that new
ideas are coming from every place.
Breakthrough ideas generally do
not come from within a companys
planning process. So we are
looking around corners. We look
at universities with young brilliant
minds. We invest in startups. We
are spotting new ideas that we can
offer as new categories combined

with existing businesses. We have
put a billion dollars aside for this. It
is making us relevant. For a company
like SAP, which is present in 190
countries, a small idea can become a
multi-billion dollar business pretty
quickly. That is why I am constantly
looking for the next multi-billion
dollar business opportunity.
Q saP has been in india for

30 years. How has it been?
We continue to do very well in India

and it is time to hit the accelerator.
We are at an inflection point. Digital
India is real and Prime Minister
[Narendra] Modi has a big vision. I
met with the leaders of some of the
biggest and most important companies
and they totally understand it
[Digital India] and are behind it. I
strongly believe that Digital India
is only possible with an amazing
collaboration and partnership
between the public, private sector
and the best technology companies.
With the trust India has in SAP, we
are uniquely positioned to do that.
Q but india is yet to break into

the top five markets for SAP...
India is one of the fastest growing

businesses for SAP. It is in the top
10 in the revenue stack rank, but
I keep reminding people in SAP
that the curse of a business person
is to compare himself to what has
happened historically. There is a new
world to be won and that world is
Asia. Within that, there is no market
more important than India. So what
we have to do is redouble our focus,
investment, leadership, management
talent and everything we have on
India. When I look back at the era
between the early 21st century and
the early third of the 21st century,
the companies that capture Asia will
be the ones that will run the world
and those that miss it will be alsorans. In the next five years, India
and China will be among the top
five countries globally for SAP.
Life
th
a n n i v e r s a ry
special
Planning to
buy a book
on business?
Heres how to
pick the best
P/96
A not-so-hard look
at the newsmakers
of the past year
P/89
Photographs often capture stories that words cant. Heres our selected best
HarsH Mariwala,
As part of the 2015 Forbes
India Rich List, we featured
some of Indias wealthiest along
with a possession they most
treasure. For Harsh Mariwala,
chairman of Marico, it was a
Leica IIIa rangefinder camera.
This was a gift from his father,
Charandas, who bought it in
Europe on the occasion of
the birth of Mariwalas son,
Rishabh, in 1982.
PhotograPh: vikas khot
th
special
A
thousAnd
words
a selection of our best photographs from the past year
Curated By vikAs khot
AjAy singh,
the entrepreneur who
co-founded SpiceJet
in 2005, returned to
manage the affairs of
the beleaguered airline
in December 2014 to
ensure that it didnt
get grounded. By the
time we wrote the cover
story of our October 30,
2015, issue, SpiceJet
was showing signs of a
turnaround, scripted in
detail by Singh
PhotograPh: amit Verma
th
special
udAy shAnkArs appointment as CEO of Star India was an unexpected but inspired choice. Under his
stewardship, Stars turnover grew fivefold to Rs 8,500 crore by the end of FY15. Little surprise then that he is
the blue-eyed boy of the Murdochs, especially 21st Century Foxs new CEO and Rupert Murdochs son, James. It
is also the reason why he was conferred the Best CEO-MNC award at the 2015 Forbes India Leadership Awards
PhotograPh: Joshua NaValkar
vg siddhArthAs Coffee Day Enterprises Limited (CDEL) saw a tepid response at the
stock market after it got listed last November (although the company was valued at more than
$1 billion). This muted reaction was attributed, in part, to CDELs varied interests (real estate,
logistics, etc)some considered them a distraction from the core business, while others call
them balancers. Its early days, however, and some of its biggest investors are still invested
PhotograPh: mexy xaVier
Under the leadership of sAndeep sAbhArwAl, Sohan Lal Commodity Management

has cracked the code of managing agricultural commodities. Its model, which eliminates
wastage, could well prove to be what India needs for harvest management
PhotograPh: amit Verma
th
special
rhythm house, Mumbais iconic music store

downed its shutters in March 2016, 68 years after it
had started business. In our New Year Special issue,
we spoke to its chairman, who recalled his 45-year-old
journey with the citys much-loved musical cornerstone
PhotograPh: Joshua NaValkar
ZAkir hussAin took time off from his rehearsals running up to a

performance at the National Centre for the Performing Arts (NCPA) in
Mumbai to discuss the technicalities of composing a tabla concerto that would
be played by an orchestra of Western musical instruments. Peshkar, the first
work commissioned by the Symphony Orchestra of India, was performed in
September 2015, before travelling to Switzerland in January 2016
PhotograPh: Vikas khot
th
special
It was not narcissism that

prompted udAy kotAk
to include his surname while
naming Kotak Mahindra Bank,
but the willingness to put his
reputation on the line. Today,
the institution he has built
over three decades has become
a byword for credibility and
growth in the Indian banking
industry. Reason why Kotak
was named Entrepreneur for
the Year at the 2015 Forbes
India Leadership Awards
PhotograPh: Vikas khot
In the
SpotlIght
So much happened in recent times that it was difficult to pick only seven newsmakers
from the seventh year of Forbes India. But we sifted and screened and finally chose
those peopleand eventsthat lent themselves best to our crafty caricaturists pen
Illustrations: ChaItanya DIneSh Surpur
Text: angaD SIngh thakur & ShrutI VenkateSh
hello batman
Move over Krrish, Ra.One and Flying Jatt. After many
trials and errors, India finally has its own superhero;
combating bowlers by day and social media trolls by night.
th
special
oDD man out

Odd-even is the scheme that Delhi needs, but not the
one it deserves, the Delhi chief minister was overheard
saying in a hoarse voice. Not unlike myself.
houSe that?
Following his brief return to Housing.com after his initial
resignation, Rahul Yadav released a statement that read: I
look forward to staying on at Housing as CEO and building an
even greater company, while working in full harmony with the
board. Heres a rare glimpse of a board meeting that followed.
th
special
groomIng tIpS
In which Ranveer Singh did for mens fashion what
Chetan Bhagat did for novels. Whats that? You tell us.
CheCk but no mate

Paswan: I heard you got into a bit
of boiling water, old friend.
Maggi: Hmmph. Ill see you in two minutes.
th
special
fury roaD
I ordered a pizza 30 minutes ago,
and its still not here!
There may come a time when even Kanhaiya
Kumar runs out of things to protest about.
nooDle aSana
Step 1: Stretch
Step 2: Set up an ashram
Step 3: Breathe in
through your nose
Step 4: Set up
manufacturing plants and
television channels.
Step 5: Exhale (sorry, this
shouldve been step 4)
Step 6: Use your celebrity

status to sell products.
Benefits include:
Expanding top and
bottom lines, muscle
relaxation, Z-category
security and the ability
to cure both cancer and
homosexuality.
th
special
buIldIng a
busIness
(book)
How do you separate the books that you buy
to decorate your shelves from those that you buy
to read? We tried to find some answers
n July 2014, Bill Gates named

Business Adventures (1966) by
John Brooks as his favourite
business book. It happened
to be Warren Buffetts favourite as
well. (In fact, Gates said Buffett had
recommended it to him and lent him
his copy because the book had gone
out of print.) Not only did this nugget
of information spawn a series of
news articleson Gates, on Buffett,
on business, and everything between
themit also spiked the sale of
Business Adventures in second-hand
books stores, and prompted a reprint
of the book, as well as an ebook
version, by its original publisher
Open Road. The book made it to the
bestsellers list on Amazon.com, ahead
of hit fiction thrillers Gone Girl (by
Gillian Flynn) and The Goldfinch (by
Donna Tartt), and that summers nonfiction biggie Capital in the TwentyFirst Century (by Thomas Piketty).
Such is the power of the worlds
richest man dropping the name of an
out-of-print book that inspired him.
But what is it that makes a good
business book? Every year, we see a
slew of titles making their way to the
bestsellers shelves in bookstores, and
articles listing the ones that you must
get your hands on. But what will one
book give you that another will not?

Then there is this pattern of what
is hailed as the next big thing in the
world of business publications in
one year, only to be forgotten by the
following year. How do you know
what to read, in that context?
Publishers of business books Forbes
India spoke to have figured out,
obviously, what to look for when they
decide on a certain subject or author.
A book that has relevance,
says Dibakar Ghosh, senior
commissioning editor at Rupa
Publications. This relevance might
be in the form of a company that is
being written about, or a subject.
Of the four things that we
would look for, says Debasri
Rakshit, commissioning editor at
HarperCollins, three are: The idea
of the book; whether it has something
to do with something new in the
workspace; and the third is a company
that is of interest at the moment.
The fourth variety, she says, are those
that tell readers how to negotiate
their way in their workplaces
and become more successful.
The idea, for instance, could be
to do with startups, adds Rakshit
something that is currently on the
minds of a lot of people. Books
Chaitanya Dinesh surpur
By Jasodhara BanerJee
th
special
on entrepreneurs and startups are
doing very well, she says. Today,
young people have the opportunity
to change jobs; they are ambitious.
The fact that there are thousands of
students graduating from engineering
and management colleges creates
this constant pool of young readers
who are looking for inspiration
and new-age role models.
Researching and writing about
companies today, says Rakshit, is
easier than what it used to be. One
of the primary reasons for this is
the increased transparency in their
functioning, and a willingness to
share details about themselves.
Two of HarperCollinss successes in
this category are The Maruti Story
(2010) by RC Bhargava (chairman of
Maruti Suzuki) with Seetha, and The
Z Factor (2016), the autobiography
of Subhash Chandra, founder
and chairman of Zee Media.
Books with insightful lessons
by highly successful businesspeople
and professionals seem to do well,
concurs Ghosh. Dream with Your Eyes
Open: An Entrepreneurial Journey
(Rupa Publications, 2015) by Ronnie
Screwvala, for instance, is what
Ghosh would say is a book that has
relevance. Good books will try and
unravel the paradox and problems
in business, and suggest solutions.
This could explain why books
such as Zero to One: Note on
Startups, or How to Build the Future
by Peter Thiel with Blake Masters
and Stay Hungry Stay Foolish by
Rashmi Bansal topped the list of
business and management books
on Amazon.in in 2015, according to
data sourced from Amazon India.
But how would it explain the
presence of Who Moved My Cheese?
by Spencer Johnson on the same list?
The book, first published in 1998, has
sold more than 26 million copies in
37 languages. This is perhaps where
the difference between a good book
and a bestseller must be considered.

In his Financial Times (FT)
column, John Kay (one of the leading
economists in the UK, visiting
professor at the London School
of Economics and the author of
many books), says that though Who
Moved My Cheese? is a bestseller,
it is a bad book. Its vocabulary
and style are appropriate to junior
school students. He adds that
since its author used metaphors, he
did not need to justify his thesis
or anticipate objection to it.
This category of books, often on
the list of bestsellers, is perhaps what
Arvind Sahay (professor of marketing
and international business at the
Indian Institute of Management,
Ahmedabad) calls conversational
books. Sahay includes authors
Malcolm Gladwell and Martin
Lindstrom in this category. These
books, while based on some good
research, are partly speculative and
tend to stretch the research findings,
he says. Readers get curious about
the tall claims that are made in such
books. The claims, he adds, tend to
make these books more popular; they,
however, can provide conversation

points at cocktail parties, though
not always any real depth in
terms of insight or information.
He clubs business books into
four kinds. The first is based on
thorough research, and meant for a
very narrow slice of the managerial
class (such as Leon Zurawickis
Neuromarketing: Exploring the
Brain of The Consumer). Books like
these provide deep insights, says
Sahay. They often do not provide a
framework at the managerial level in
terms of application. Readers have
to interpret the book and build their
own frameworks. They tend to be
heavy reading [material], but very
worthwhile, if one invests the time.
The second category, says Sahay,
is of books based on equally deep
research, but the research has been
interpreted and presented for the
reader (such as Daniel Kahnemans
Thinking, Fast and Slow) and tend
to be easier reads. These books can
make it to the list of bestsellers,
as well as to that of classics.
The third category is what
Sahay calls popular books,
such as Gladwells The Tipping

Point, Blink, and Outliers and
Lindstroms Buyology.
Sahays last bracket would include
books based on personal experiences,
such as Nandan Nilekanis Imagining
India: The Idea of a Nation Renewed,
and Richard Bransons Losing
My Virginity. These are in the
nature of stories and resonate
well since humans are hardwired
to relate to stories, he says.
This point resonates in what
Subroto Bagchi, co-founder of IT
services firm Mindtree, believes a
good book on business should be:
Accessible. It should make the
subject accessible to the readers,
not by talking down to them but
by respecting them and by holding
up something in a way that is not
sophisticated; to make people feel that
they are a part of the conversation,
as against holding up something
from a pedestal. Business writers,
he adds, tend to write lofty stuff; it is
important to say things that people
can take and run with, as opposed
to be supremely impressed with.
The ability to humanise business
choices and business issues is

critical. So that it is no longer
an abstract thing. If you can see
things in images, then people can
remember them better, he says.
Bagchi, personally, prefers reading
something like Robert Greenes
Mastery. It is not on business per
se, but on the idea of mastery, he
says. The book looks at the lives of
masters from many different fields,
and at patterns in peoples lives.
Kay, in his FT column, makes his
pick of good business books: The
Concept of the Corporation by Peter
Drucker, Strategy and Structure by
Alfred Chandler, and My Years with
General Motors by Alfred Sloan.
That all the three books are about
General Motors (GM)written
books with
insightful lessons
by highly successful
businesspeople
and professionals
seem to do well.
with three different approaches

is not surprising. The rise of the
modern, professionally managed
corporation, of which GM was a
defining example, was the most
important management phenomenon
of the 20th century, he writes.
And, in sharp contrast to Who
Moved My Cheese?, Kay mentions
Dale Carnegies How to Win Friends
and Influence People as a good
book. Based on sound psychological
research, the 1936 book is a howto-do-it that has sold more than
30 million copies. No surprise that
it tops Amazon.ins list of all-time
bestselling books in the business and
management category even now.
Gatess and Buffetts choice of best
business books has to do with this
test of time as well. Brookss Business
Adventures is a collection of articles
he had written for The New Yorker in
the 1960s and, it might seem, would
have little to do with contemporary
businesses. As Gates wrote in his
blog, gatesnotes.com: After all, in
1966, when Brooks profiled Xerox,
the companys top-of-the-line copier
weighed 650 pounds, cost $27,500,
required a full-time operator,
and came with a fire extinguisher
because of its tendency to overheat.
A lot has changed since then.
Gates went on to say that many
of the particulars of business have
changed. But the fundamentals
have not, making Brookss insights
relevant through the decades. John
Brookss work is really about human
nature, which is why it has stood the
test of time, he said. This longevity
is what makes The Intelligent Investor
(1949) by Benjamin Graham another
favourite of Gates and Buffett.
Grahams books, and those of
others such as Buffett, Charlie
Munger, Howard Marks, and James
Montier, are on the constant re-read
list of S Naren, chief investment
officer at ICICI Prudential Mutual
th
special
Getty imaGes
The owner of a
reading device
downloads an
average of 55
books per year,
according to
amazon India
Fund. Investing has not really

changed much in the last 70 years or
so, says Naren, whose usual reading
list comprises all forms of news
publications, company annual reports,
research and analytical reports,
and the guidelines provided by the
gurus of investing. You have to keep
reading the same books over and over
to make sure you have not forgotten
the basic rules. The guidelines and
checklists that they provided are still
applicable to investing today as they
were when the books were written.
Naren, however, admits that
although the total amount of time he
spends on reading has gone upYou
can now carry so many books in a
single device like a tablet, rather
than carry individual booksthe
amount of time he spends on books
alone has actually come down.
According to Amazon India, the
owner of a reading device downloads
an average of 55 books (paid and free)
per year; the total sales of ebooks
(paid and free) as a percentage of
physical books grew from 56 in
January 2015 to 86 in December 2015.

The crunching of reading time
could be a result of information
overload, points out Bagchi.
When you look for a certain
kind of book, you see hundreds
of titles, and ultimately you will
not read anything. The visual
medium is exploding, choices are
exploding, and attention deficiency
is exploding, he says, referring to
digital platforms and channels that
have developed as a profuse source
of information in recent times.
People are living in a hyperlinked
world. Today, when someone sits
down to read an article on business
or management, very often it is
on a digital device, says Bagchi.
While reading an article today, you
see a link to some Wikipedia page,
which perhaps takes you to a TED
Talk video or a podcast, from there
you go somewhere else. You have
moved from one link to another,
and have completely lost bearing of
where you are, and where you are
going. You have flitted from one
idea to another, and in the process,

youve lost reflective space.
But this is also true: Physical books
provide readers with a reflective
space that no other medium can.
The fact that books allow you to
pause and absorb what you have
read is what makes them matter.
You can go out there and collect
all kinds of information, but what
are you absorbing? asks Bagchi.
That information and insights
are now available in different
(digital) formats is also indicative
of the fact that the life cycle of
knowledge is not as long as it used
to be, says Rajesh Srivastava, who,
along with having a successful
corporate career over a span of three
decades, is visiting faculty at Indian
Institute of Management, Indore.
Srivastava says that, traditionally,
business books were written by
university professors, but that is
no longer the case. Universities
were the custodians of knowledge,
he says. That has now changed:
Companies are the modern-day
custodians of business knowledge.
Universities have failed to evolve as
fast and keep up with the changes
in business. He gives examples
such as Starbucks, which epitomises
marketing; Amazon, which embodies
retailing; and Tesla, which pushes
the future of technology.
If you are reading a book, in
some ways you are already behind
the times, says Sahay, adding that
the books subject matter might
already be conventional wisdom
among more informed readers.
Sahay cites Kahnemans example
and says that Thinking, Fast and Slow
is a distillation and compilation of 45
years of knowledge-gathering, with
the first paper appearing in 1971.
But those decades of insights are
perhaps the reason why books written
decades ago are still flying off the
shelves, whether real or virtual.
Cheat Sheet
Celebrating
anniversaries
Commemorating an event, whether personal or public, can be quirky and fun
By KathaKali Chanda
Florida couple Ann (81) and

Ken Fredericks (85) relive their
wedding day every year by biting
into the cake that was served at their
wedding party in August 1955. Their
kids wont touch it and the duo admits
that the dark fruit cake, preserved in
a coffee can in their kitchen closet,
has gotten a tad dry in 60 years. But
a splash of brandy moistens it up
and, as Ann says, makes
it taste just fine.
securethey gave each household

a safe to store the valuables in.
When Steven Spielbergs Jaws

was released in 1975, it sent
chills down many a spine. In 2015, to
commemorate 40 years of the classic,
Alamo Drafthouse, a Texas theatre
famous for its no-texting policy during
screenings, set up a giant screen on
the Sistine Chapels ceiling. The

edible replica, which contained
10,000 marshmallows and about
half a billion cake sprinkles and
took 168 hours to complete, was
titled The Baking of Adam.
Single and turning 30 in Germany?

Pick up a broom. No, not just to
clean up your drunken birthday eve
bash. Tradition demands
that an unmarried man
celebrating the milestone
birthday, in some northern
and western states, must
dress as a woman and
sweep the steps of the city
hall, town square or church
till hes kissed by a virgin.
Li Jinyuan, the
billionaire owner of
Chinese multinational
group Tiens, took 6,400
employees on a four-day
trip to France to celebrate
the firms 20th anniversary
last year. The group got a
Dan McIntyre and
mass viewing of the Louvre
Dunya Kalantery of
and the Moulin Rouge in
Greater London loved
Paris and later checked
each other, as well as
into Nice. Li is estimated to
congealed fat found in
have spent nearly 13 million Tiens Group staff who were treated to a vacation in France last year
sewers, notoriously known
euros on the trip. You know
as fatbergs. The two
where to apply to for your next job.
met in 2013, thanks to their shared
the banks of a lake, and invited its
interest in a 15-tonne grease mass
audience to watch it while floating on
that blocked sewage pipes and caused
water. You wouldnt know what was
More from China: Jiangsu Xin
havoc. The following year, the duo
lurking beneath the water, would you?
Chang Jiang Group, a villagecelebrated their first anniversary
owned business in the Jiangsu
of getting together by going down
province, distributed gold and silver
British cake artist Michelle
a manhole and watching clumps
bars among its stakeholders (read:
Wibowo commemorated
of waste float around in Londons
The villagers) to celebrate its 40th
Michelangelos 450th death
sewers. Dunyas only regret? That
anniversary in 2012. The group, one of
anniversary in 2014 by baking a lifeshe couldnt bring home a piece as a
the top 20 enterprises in the country,
sized replica of the Italian artists
souvenir. All for the best, perhaps.
also ensured that the gifts remain
The Creation of Adam painted on
Getty ImaGes
th
special
ThoughTs
on Youth and ageing
anyone can get old. all you have to do is live long enough.
a contented man is either

over the hill or doesnt
know there is one.
Groucho Marx
Ive always believed in the adage that the secret of eternal

youth is arrested development.
alice roosevelt lonGworth
a man has every season while a woman has only the right
to spring. That disgusts me. Jane Fonda
The older one becomes, the quicker the present fades into
sepia and the past looms up in glorious technicolour.
Beryl BainBridGe
MalcolM ForBes
Do not let anyone look down on you because you are young,
but set an example for the believers in speech, in conduct,
in love, in faith and in purity. 1 tiMothy 4:12
I recently turned 60. Practically a third of my life is over.
woody allen
Oh, to be 70 again! oliver wendell holMes
sameer pawar
The really frightening thing about middle age is the

knowledge that youll grow out of it. doris day
If Id known I was gonna live this long, Id have taken
better care of myself. euBie Blake
They have found that the fountain of youth is a mixture of
gin and vermouth. cole Porter
No man is so old as to think he cannot live one more year.

cicero
People have this obsession. They want you to be like you

were in 1969. They want you to, because otherwise their
youth goes with you. Mick JaGGer
young people ought not to be idle. It is very bad for them.
MarGaret thatcher
Hope you loved our

I NDIA
Tablet Edition
Do mail us your feedback at:

letterstoforbesindia@network18online.com

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global game changers l nestl shifts gears

PRIce Rs. 180. MAy 27, 2016

value from money

Seven Steps to Value Creation

Editor, Forbes India

4 | forbeS iNdia May 27, 2016

o matter how good a company or its top

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With cutting-edge innovation, Sanjiv

We value your feedback.

may 27, 2016

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Seven value creators that produced king-sized

Under Jay Gallas watch, Amara Raja Batteries

34 | the ColoUrS oF SUCCeSS

Gurbachan and Kuldip Singh Dhingra have turned

38 | A hoUSe For the CoMMon MAn

By staying focussed on low-income buyers, Sudhin

42 | Mind over MAtter

With his humane approach, Krishnakumar Natarajan

Mayank Singhals PI Industries does not just give

Suresh Narayanan is engineering a shift in Nestl Indias strategy

50 | the right ForMUlA

Torrent once lost much of its business overnight, but

54 | the hUnt For greAt indiAn

Why fewer firms in the country have reliable financial

CroSS Bor der

A Turkish-American billionaire who owns the most

66 | how to BeAt AMAzon

Prodigal merchant CEO Bom Kim and his same-day

Has osman kibar found a pharmaceutical fountain of youth?

82 | preSCription For diSASter

Valeant Pharmaceuticals, one of Americas

bom kims around 19 percent stake in coupang is worth $950 million

6 | ForBeS indiA MAy 27, 2016

Today, very often, business articles are read on digital devices

78 | there iS no MArket More

CEO of SAP Bill McDermott says companies that capture

A selection of our best photographs from the past year

Our seven newsmakers for the past year

96 | BUilding A BUSineSS (Book)

101 | CeleBrAting AnniverSArieS

The best clicks by our shutterbugs (above: comedian abish Mathew)

MAy 27, 2016 ForBeS indiA | 7

letters to the editor

Nod for Nalli

Refer to When Sachin Means Business

Refer to Drink It Neat (Issue dated

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value from money

Dont associate bigotry,

Small cities are Indias emerging business locations

8 | forbes india may 27, 2016

Cognitive Computing: Redefining

CEO-News & Group Editor-in-Chief:

Editor, Forbes India:

CNBC TV18 PRODuCTS TEAM

Deputy Executive Editor:

Design Director: Anjan Das

Associate Editor: Aveek Datta

Senior Assistant Editors: