Dilip Shanghvi was born on the 1st of October, 1955, in Amerali, Gujarat state, India. He attended J. J. Ajmera High School and later attended the University of Calcutta where he earned a Bachelor Degree in Commerce in 1952. His father was a wholesale generic drug distributor in Kolkata. So immediately after Dilip graduated he joined his father’s business. It was during this time that he considered producing his own drugs rather than distributing those produced by other companies. This was how the idea for the conception of Sun Pharmaceutical was birthed.
Dilip started Sun Pharmaceutical in 1983 in Mumbai with a RS10,000 (approx. #30,000) loan he got from his father. The company started with a two-man marketing team in a small facility producing five psychiatry drugs. Now, this was against popular knowledge as anti-infectives drugs were the biggest money makers in India during the 1980s. Majority of the big pharmaceutical companies and multinationals in India had interest in this category of drugs. Dilip reasoned that entry into this category, although lucrative, would cost too much money that he didn’t have, as resources would be needed for nationwide marketing, distribution, research and sales. Also, this would mean that he would consistently be in competition with so many domestic drug manufacturers.
Rather than embark on a fruitless journey of endless strife, Shanghvi focused his attention and meagre resources on creating a portfolio of niche generic drugs (in fields such as psychiatry, cardiovascular, neurology, oncology and dermatology) that were not a priority for others because of their low revenue potential. Lifestyle ailments were not common in India as at the time so these drugs had a low market, but Dilip was focused on the margins that were to come from a least contested category and their long time potential in fast-growing economy like India.
Dilip’s calculations paid off. In the first year of business, he did business to the tune of Rs 7 lacs (#2.1million), but then he realized that he needed to make his own factory. He borrowed some money from his friend, with whom he had been producing, and set up his own production center. As time went on Sun Pharma began to attain volume and value leadership in the categories in which it produced drugs. The growth of Sun was aided by the increase in the incidence of lifestyle ailments. The decrease in the rate of infectious diseases due to improved living condition and hygiene forced the table to turn around, and the last suddenly was becoming the first.
Sun Pharma’s steady growth continued until the 1990s, specifically 1993, when Dilip decided to do something drastic to bring about a more substantial growth; he reinvested his entire profit of Rs 4 crore into building his own Research Center and manufacturing facilities and diversified into the field of Cardiology and Gastroenterology. The following year the company went public. Dilip’s decision to expand and begin producing drugs in the field of Cardiology and Gastroenterology was well calculated. According to Dilip, he reasoned that most of the diseases associated with these fields tend to strike at an advanced age and the patients are most likely to continue taking the drugs for life. In an interview Dilip compared the human body to a car, the older it becomes the more attention and repairs it needs, and some of such cares would continue for a long time.
In 1997, three years after taking the company public, Dilip began a series of international Meager and Acquisitions (M&A) that would allow the company to enter into new markets and drastically increase its revenue. The first of such acquisitions was the purchase of the Detriot-based Caraco Pharmaceutical Laboratories, a loss-making American company, with the aim of expanding into the United States, which is the largest market for generic drugs in the world. In no time Dilip turned the fortunes of Caraco around, and the company was once again profitable.
His very first acquisition however was the buyout of the bulk drug plant of Knoll Pharma in Ahmednagar, Maharashtra. Dilip is one of the Pharma bosses who is reputed for using M&A for expansion. In 1998, he acquired India-based Natco Pharma’s respiratory brands followed by the acquisition of dosage form plants in 2005 in Hungary and the US. Dilip’s acquisitions are always strategic and for specific purposes. His first international acquisition of Caraco Pharmaceuticals was because he wanted to enter into the American market. He acquired Chattem Chemicals in the US in 2008 for its Active Pharmaceutical Ingredient (API) plant in the US and Israeli drug maker Taro Pharma in 2010 in order to gain hold of its dermatology and topical product manufacturing plants in Israel and Canada. The takeover of the Taro Pharmaceutical, a takeover battle that took close to three years, was pivotal to Sun Pharma, as its US revenue almost doubled to more than $1billion accounting for more than half of the company’s US revenue which in total constitute 63% of revenues for Sun Pharma. Till date, Sun Pharma has acquired and merged with close to twenty different companies.
Last year, Dilip oversaw the completion of a record acquisition of its generic drug rival, Ranbaxy Laboratories from Japan-based pharmaceutical giant Daiichi Sankyo Co. for $3.2 billion. The deal made Sun Pharma the fifth largest generic-drug producer in the world as well as the largest pharmaceutical company in India. But just a little over two decades before, in 1987, when Dilip started selling nationally, Sun Pharma was ranked 108th. The deal with Ranbaxy gives Sun Pharma access to new markets where Ranbaxy drugs are popular.
Dilip is one of the few pharmaceutical companies bosses who do not have a science background, and for this reason and more, he is humble enough to recognize his limitations. Dilip is known for bringing in reputed managers from outside to assist him in the running of the business. For instance, in 2010 he brought in Kal Sundaram, the then head of GSK India, to become Sun’s India CEO and then in 2012 he brought in the former president of Israeli-based Teva Pharmaceuticals to head the board of Sun. Over the years there have been several other senior managerial heads whom he had brought in to help take the company to the height it has attained.
“I have never seen myself as a promoter. I always evaluate myself as a manager,” he said in an 2014 interview. “When we told Israel to take over as a chairman, I felt that as a manager I needed help. It was never difficult emotionally or from an ego point of view,” he said
Dilip is married (his wife, Vibha, is a pharmacist) and has two children (Alok and Vidhi), whom have also entered into the family’s business. He is a modest, softspoken gentleman who hates being in the limelight for his wealth.
“I am not comfortable at all with this tag of being dubbed the richest Indian and all the attention that follows for the reason. The truth is that I like to focus on my work and do it right,”
In 19 February 2015, Dilip surpassed Mukesh Ambani as the richest man in India when the stock of his parent company surged in price.
One of Dilip’s dreams is to produce a drug for cancer. He stated in an interview that the drug the company presently has emasculate patients physically. He was looking forward to a drug that would stamp the disease out once and for all.
Business Lessons from Dilip Shanghvi
Don’t just sell, produce:
This was one of the lessons the richest man in Africa, Aliko Dangote, taught young emerging entrepreneurs. It is good to sell, but it is better to produce. Dilip joined his father’s wholesale drug distribution company immediately after graduating with a degree in commerce. But he sat down to reason, those whom he was distributing their drugs were not better than himself, they didn’t have two heads neither were they from the moon, why couldn’t he also produce his own drugs and then have someone else or others distribute for him? That was the thinking that birthed Sun Pharma.
As a retailer or distributor the level of your income would majorly be determined by the producer. Ultimately he (producer) would be the one to call the shot. You may get rich selling his products but you would never get richer than him.
In whatever business you find yourself, always have the Dilip Shanghvi pattern of thinking, “Why can’t I also produce this? Why must I be the salesperson for this person or this company?
Benefit of the Blue ocean strategy:
When Dilip started Sun Pharma in the 1980s anti-infectives drugs were the biggest money makers in the country therefore that category was the most lucrative and most logical for any pharmaceutical company in the company. So the Herd Mentality concept kicked in and majority of the pharma companies, including the big multinationals who had very deep pockets and wide distribution, in the country were producing anti-infectives drugs.
But Dilip was smart enough not to join the bandwagon or be a prey to the herd behavior, instead he choose a category with the least competition and began to produce drugs.
He reasoned that, “‘If we had made some popular antibiotics, we would have had to retain a large number of medical representatives to ensure that general practitioners were duly informed about them. And where was the money to employ such huge force? Besides, I always wanted to make drugs that rivals would not be interested in.’
The least competed category, although with small number of patients, helped to provide a profit margin that not only sustained the business but allowed it to steadily grow bigger.
Why go to fight in a highly packed competitive market when you can create or find a blue ocean and make silent slow gains which would, with time, take you to the zenith.
Know your limits, respect them:
Dilip said that he believes in experts and professionals running his business because the bigger a business gets the costlier the mistakes. Dilip is not the only entrepreneur to have realized this, many other have tasted the bitter pills of dabbling into arenas where they have no strength. Femi Otedola lost close to $1 billion due to bad management and lack of proper delegation. Oracle founder, Lawrence Joseph Ellison almost lost his entire company for that same reason. They both however survived to tell the story and make necessary readjustments.
You are not God, so stop claiming to know it all. Regardless how gifted you may be you can’t be a master in all fields. The fact you founder a business doesn’t necessarily make you a good administrator or manager.
Know your limits and respect them.