Sitting in a modest office in one of the most posh areas of Ahmedabad, S Raghunandan, managing director and CEO of Paras Pharmaceuticals Ltd, seems to be a content man; someone who has just finished his assignment of creating huge value out of a small family-run venture. While Paras Pharmaceuticals had strong brands like Moov, Krack and Livon in the market, a lot of work had to be put in to revamp the organisational structure and doubling its turnover in a span of two years. With Reckitt Benckiser buying out Paras for Rs 3,260 crore, the company fetched a value that was eight times its turnover. In an exclusive interaction with Sohini Das and Vinay Umarji, he shares his experience of working with Paras. Edited excerpts:
Now that the deal is behind you, what next?
Honestly speaking, I have not yet made up my mind. I am still evaluating my options. A lot depends on what offers come across. As of now I am with Paras.
How has been the experience of working with Girish Patel? What was the brief that you had?
Working with Girish was one of the best parts of the assignment. He is a humble person and a nice human being. He is very clear and transparent about the way he runs the company. When there is a good alignment between the promoter and the professional team, a lot of the task is made easy. The brief from Girish was very clear. He said, “It is a strong business, but we feel that certain things have to change, including a sales and distribution revamp, leveraging the true potential of the brands, improve efficiencies, and put an organisational structure in place, together with increasing the top line and the bottom line”.
What prompted you to take up the Paras assignment from your earlier stint as the international business head in Dabur?
I was the CEO of Dabur’s international business in Dubai, when I was offered the Paras assignment. It was the very first time I would be working with a private equity player, and while the rewards of working with a PE could be very high, it is usually seen as a high risk-high return job. I told myself, ‘Raghu, this can make or break you’. I deeply admired the brands created by Paras. I have always been a sales and marketing guy with FMCG majors like Asian Paints, Hindustan Unilever and Dabur. And in Dabur, I had worked at a time when the company was transforming from a family-run business into a professionally managed one. So, I fit the bill for the Paras assignment. Both companies operated in the personal care and over-the-counter (OTC) segment. I decided to take up the challenge. Also, another consideration was the idea of coming back to India, coming home. India is ‘the’ country to be in the FMCG sector.
What have been the main challenges in transforming Paras from a family-run business to a professionally managed entity?
Paras was run by promoters, and it did not have a well laid out organisational structure. I realised there was only one person who handled the entire product portfolio of Paras. I created two marketing verticals, OTC and personal care, and gave this guy the personal care vertical to look after. I needed another person to head the OTC vertical.
The entire sales and distribution system had to be re-vamped. Paras did not have a distribution-driven sales system. It depended mainly on advertisements to create demand. When I joined, Paras got only two per cent of its turnover from modern trade. All this had to be changed, including putting product development teams in place. In the last 18 months, we have launched at least 15 new product initiatives, including a number of brand extensions.
Did you face resentment when you brought in new people on the board?
It was expected. We had to go in for heavy recruitments and had to get people with the right capability, and that implied higher costs. So, I had to discuss these issues closely with the promoters and the PE firm. Some of the new people who got on board were seniors and, hence, had higher remunerations. Initially, there was a huge disparity in pay-packets between those from the old legacy and the new recruits.
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In the first appraisal cycle, however, we decided to set things right, and reduced the difference in packages. This eased the situation to a great extent.
But those who had been working with the company for years and had remained loyal, but somehow did not fit the current requirements, were given the ‘golden handshakes’, and they were allowed to leave with very decent settlements. Nearly 75 per cent of the people who now work in Paras are new recruits, and it is a very young organisation. The average age is close to 30 years.
What are some of the strategies you employed to increase the efficiencies of the organisation?
We increased our focus on sourcing, and on product development. Lot of work was put in to bring in innovations around the existing brands. We identified the power-brands for the company, Moov, Livon, Dermicool and SetWet, and worked on developing brand extensions, like the Moov-neck and shoulder, among others. I brought in an operations head, who would look after purchase, supply chain management, as well as packaging and other related functions. This resulted in three per cent cost savings, and improvement in the gross margins.
