Over sumptuous Bohri cuisine, the Wockhardt chairman talks about his children and how his company has learnt to do more with less
Habil Khorakiwala seems to have done his research quite well: he knows that Lunch with BS also “writes about the menu” and has made sure that the best home-made Bohri cuisine is served at his private dining room on the ninth floor of Wockhardt’s headquarters at Mumbai’s Bandra Kurla complex, writes Shyamal Majumdar.
On our way from his office to the dining room, Khorakiwala asks his aide to tell the managing directors (MDs) of Wockhardt and Wockhardt Hospitals that they should join us. The two MDs – son Murtaza (39) and daughter Zahabiya (29) – arrive but, apart from the initial pleasantries, remain courteous listeners throughout. The third MD in the family, eldest son Huzaifa (of Wockhardt Foundation) is busy elsewhere.
Since the 70-year-old chairman of Wockhardt is always on the wing, Khorakiwala doesn’t have time to follow the standard Lunch with BS format of allowing us to host him at a restaurant of his choice.
Apart from the lassi, it’s an all-mutton affair – mutton sheekh kebab, mutton samosas, mutton keema and mutton biryani – and can give any five-star chef a run for his money. Murtaza volunteers to explain that the family does eat home-made Bohri food in office every day, but the menu is less “special” as some of the items are replaced by vegetable dishes so that “we can keep awake through our afternoon meetings”.
Obviously, the family patriarch has not only been awake through those meetings, but has been extra active as well, going by the spectacular turnaround the pharma giant has achieved after a near-bankruptcy experience in the past few years that saw Wockhardt racking up huge debt and defaulting on overseas bonds. It was also pushed over the edge by Rs 550-crore losses on foreign exchange and derivatives during the global financial crisis in 2008. Lenders panicked and even demanded liquidation of Wockhardt’s business to recover their dues.
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A few months before that, Wockhardt Hospitals was forced to withdraw an initial public offer owing to under-subscription and lenders to the company blocked its nutrition business sale to Abbott Laboratories. A cornered Khorakiwala also had to sell off something to which he was emotionally attached — half of the company’s 14 hospitals to Fortis Healthcare. He also sold two of the companies he had acquired overseas. Pushed to the wall, Wockhardt entered the corporate debt restructuring (CDR) process in June, 2009.
Three and a half years later, all that is distant memory. Wockhardt has written to its bankers asking them to advance its exit from CDR to as early as December. “The company has a cash balance of over Rs 2,000 crore that came from the recent divestment of our nutrition business to Danone and the profit that we made during the last few quarters. It is enough to settle all dues,” Khorakiwala says, grinning from ear to ear. As a consequence, the company has reduced its debt-to-equity ratio from a pathetic 5.5 in 2010 to less than 1. No wonder, the stock price has risen over 300% in the year-to-date. Khorakiwala is quick to point out that Wockhardt’s forward price-to-earnings ratio of 12.7 times is the lowest among larger-cap Indian pharmaceutical companies, most of which trade at around 20 times.
Khorakiwala is indeed a gracious host — evident from his repeated insistence that I should not allow my plate to remain empty.
Even during the worst of times, Khorakiwala says he never lost hope since he knew there was nothing wrong with the company’s core business model. For example, even when the company made its maiden loss, sales grew 35%. The other reason for his cool approach could be the years of practising yoga, which he has given up now just to “try out something new”. Yoga has been replaced by one hour of gym and swimming every day.
Khorakiwala says he is immensely proud of his stakeholders who kept the faith even during the troubled years. For example, the suppliers allowed him more leeway by extending credit and employees made sure that they could do “more and more with less and less”. Adversity can often bring the best out of your people, he says, adding the biggest benefit from the troubled phase is that cost efficiency is now part of Wockhardt’s DNA.
Though he is quite flexible about his approach towards business and life, Khorakiwala has taken one firm decision: Wockhardt will not touch derivative instruments ever in his lifetime. “We don’t understand hedging and will not risk our business. A large portion of our business comes from overseas, so some loss here or there does not matter,” he says, adding that what had gone wrong was some of the company’s bets on its currency hedging strategy. There were times the top management wanted to sell positions, but banks stopped them in order to get better margins.
But his confidence in Wockhardt’s future stems from the company’s spectacular performance in the US market whose contribution to overall sales went up to 41% in fiscal 2012 from 28% last fiscal. The company, Khorakiwala says, is now focused on the development of innovative and technologically-complex products — evident from the 167 patents and a pipeline of 1,606 that have been filed. The focus on the US market will be strengthened since Wockhardt has received 17 abbreviated new drug applications (generic drugs), which will translate into revenues in the near term.
Khorakiwala orders tea and takes a trip down memory lane. The eldest son of Fakhruddin who was chairman of the erstwhile Akbarally’s chain of departmental stores, he took charge of a small company named Worli Chemical Works that had no takers in the extended family because everyone wanted to be associated with retail. There was another reason for his interest: Worli Chemical, which employed 20 people and had annual sales of about Rs 4 lakh in the early sixties, made over-the-counter medications. This was up his street since he had just returned to India after doing Masters in pharmaceutical science from Purdue University. The firm was renamed Wockhardt because it sounded German enough. By the time it went public in 1991, Wockhardt’s annual sales touched Rs 90 crore. He also set up the Wockhardt Biotech Park in Aurangabad, which has the capacity to produce 10 to 15% of the world’s major biopharmaceuticals.
Khorakiwala says apart from high-profile drug research, Wockhardt’s current focus is anti-infectives that are easier to market and where global majors are less active. Meanwhile, the focus on research and development (R&D) is being strengthened and the company has set up R&D centres in the UK and the US.
The troubled phase, however, does not mean the company has stopped taking calculated risks. For example, even before the cardiac drug Metoprolol got the nod from the US Food and Drug Administration, Wockhatdt took a big risk by building inventory in advance so that it could start supplying to US drugstores immediately after it got the approval. The risk paid off big time.
He has big plans for Wockhardt Hospitals as well — the company, which has eight hospitals, is setting up a super-specialty facility in south Mumbai in association with Harvard Medical International that gives it access to the knowledge pool of the 17 Harvard associated hospitals in the world. Another super-speciality hospital will come up in Delhi later. He has no plans to take Wockhardt Hospitals public since “money is no longer an issue”.
Khorakiwala’s enthusiasm can be infectious, but I ask him whether getting talent is or will be an issue since the corner offices have all been distributed between him and his three children. He dismisses the question by saying the leadership has been well accepted for three reasons: it gives a long-term stability at the top; the top management has a lot of empowerment; and all his children are professionally well-qualified. Huzaifa is an MBA from Yale and Murtaza is a doctor anddid an MBA from the University of Illinois. Daughter Zahabiya is a psychology graduate from New York University and an MBA from the Indian School of Business.
Besides, Khorakiwala says, he does extensive mentoring on larger strategy issues. So how does he rate their performance? While the children look at him anxiously, Khorakiwala ducks the question and says the governing council meets twice a year to rate the top management’s performance and give feedback.
What else does he do apart from taking care of Wockhardt? Khorakiwala says contrary to perception, he makes sure he has enough time to read books and play with his four grandchildren who are his biggest stress busters. In future, he wants to get more involved with Wockhardt Foundation, which has big plans for the future under Huzaifa’s guidance. That includes scaling up the number of mobile vans from 70 to 1,000. “I want to sit back and enjoy the sheer joy of giving,” Khorakiwala says. Going by his current pace of work, however, the “sitting back” part has to wait for quite some time.