Bakshi has diluted only 0.5% of his stake so, in his own words, it doesn’t make “much difference” to his life. (Except it has made him richer by Rs 41.45 crore.) Conversely, though, it makes a difference to the pharmaceutical sector, which has not seen a company grow from scratch to this scale in a span of 10 years. Except perhaps for Mankind Pharma, which is now 21 years old.
Eris makes specialty drugs, which is a subset of the crowded branded generics market. Close to 200,000 brands sell in the Indian market of which brands yielding more than Rs 10 lakh in annual sales are just about 70,000-80,000. That’s still crowded considering how they jostle for a few minutes of attention in a doctor’s clinic. Into that space, Bakshi made an entry in 2007 with an eye for spotting product gaps and launching new brands in chronic diseases like cardiology, diabetes gastroenterology and others. As much as 96% of its prescriptions are written by specialists, even today. In 2012, when I spoke with him for a special edition of Hidden Gems in Forbes India, Bakshi was indeed hidden. Reticent, and somewhat shy, he admitted it was his first media interaction ever. He says he was discovering the product differentiation then, he has “mastered it” now.
Going public was a decision, guided not by the company’s need for funds but the private equity investor, ChrysCapital’s need for an exit. The existing fund was nearing its end, and Chrys had to raise a new fund. Moreover, secondary sales are not always possible, and strategic sales, another exit option, happen only when the investor has substantial equity in the company, says Sunil Thakur, director and chief operating officer at Quadria Capital, which has multiple investments in pharma.
As a purely domestic company, Eris is shielded from the vagaries of the international market, which have battered all the top Indian pharma companies. And now its market cap has perched it in an enviable position. Though Bakshi likes to say, people will see Eris’ story unfold in at least two quarters. “Analysts will then know it’s a real [growth] story.”
“That’s how humble our story is”
ChrysCapital partner Sanjiv Kaul was sufficiently piqued in 2007 when he saw Bakshi, a national sales manager at Intas Pharmaceuticals, quit to start on his own. As an investor in Intas, he was acutely aware that Bakshi had managed to pull away 30-odd field force staff. “I was perplexed how could someone, drawing a salary of Rs 10 lakh and who perhaps did not have a bank balance exceeding Rs 20 lakh, have the gumption and fortitude to dream of entrepreneurship. How could he motivate so many people to align with him,” recalls Kaul.
After 11 years in the industry, Bakshi knew one thing well—that sales in pharma was inefficient and “unproductive”. He tried selling a more productive sales story to many. “I went to a dozen people in the medical rep field. Let’s be frank, you become a medical rep because you don’t have any other job…You have to grow in that environment when your daily allowance is Rs 150. I also did not have any management background,” says Bakshi, pretty much matter-of-factly.
Ways to make money
“But as a medical rep,” he continues, “the wealthiest people you know are your stockists.” One of them agreed to lend Rs 1 crore, at 15% interest and on the condition that he’d write each cheque himself, even interview every staff whom Bakshi hired. That was April 2007. By November that year, Eris was making money and ended the first year with Rs 8 crore in sales and Rs 70 lakh in losses. The following year ended with Rs 32 crore in revenue with Rs 2 crore in Ebitda (earnings before interest, tax, depreciation and amortisation). Bakshi has a habit of dropping the term, Ebitda, a little too often in his conversations, as if the margins calculation is running at the back of his mind like a background process on a Windows machine.
In two years, Bakshi returned the borrowed capital to the stockist, who exacted his friendly pound of flesh by asking for a higher interest rate of 22%, which Eris happily obliged. (The stockist, whom Bakshi wouldn’t name, remains a shareholder.)
“That’s how humble and small our story is,” says Bakshi, who turned 42 this year.
Eris closed FY17 with Rs 724.9 crore in revenue and a whopping Rs 242 crore in profit.