Business Today

'Values Create Value'

With a purpose of Doing Well and Doing Good, Piramal Foundation drives initiatives in the areas of youth leadership, education, healthcare and drinking water.
Ajay Piramal | Print Edition: January 14, 2018
'Values Create Value'
Ajay Piramal, Chairman, Piramal Group and Shriram Group (Photo: Rachit Goswami)

About a decade ago, we invested time in finding out how various stakeholders, including our employees, viewed our group, and what the reasons for its continued growth were. The year-long study revealed that it was our values that were the common thread that bound people across a diverse set of businesses, geographies and functions. While we had always lived by our values, we then went on to articulate these as 'Knowledge', 'Action', 'Care' and 'Impact'. From these values was born our Gyan Mudra logo, which is now our group's signature.

Why are values important? At their heart is the desire among people to live by virtues which their kin can be proud of, and to leave behind a legacy for them.

One of the biggest lessons I'd like to share is that Values create Value. Let me cite a few examples from our own businesses.

Almost a decade ago, we decided to enter into manufacturing of bottles for the cosmetics and perfumery industry. Until then, this market had been dominated by European companies. We acquired deep expertise in the field with a combination of world-class technology and learning from the best-in-class plants globally. Today, we are among the top three players globally in this business. One in every two nail polish bottles sold in the world is manufactured by us.

This quest of pursuing Knowledge (Gyan in Sanskrit) is evident across many of our businesses. Take, for instance, the Decision Resources Group (DRG), our health care information management business. In our DRG today, 75 per cent of analysts have PhDs and other advanced degrees. It is a highly skilled workforce across the globe, catering to the research and information needs of the global health care industry. Almost all the top 50 global pharma companies have been customers of DRG for over a decade, a testimony to its expertise and domain understanding.

The 1990s were the decade when export of Indian pharma products rose. At that time, we were in a dilemma as to whether to follow the example of other Indian pharma companies in exporting generic versions of patented medicines, or whether to stay true to our commitment in letter and spirit to our multinational partners whose Indian subsidiaries we had acquired. We had assured our partners that we would not copy and export any of their brands, and that we would maintain quality. We chose to honour our commitment and forego our exports income. We set up a new state-of-the-art plant at Pithampur, MP, to maintain and improve the quality of our output.

Our investment in our plant then was almost equivalent to the sales of Nicholas Laboratories, which we acquired in 1988. One could argue that these two steps had a negative impact on our sales and profitability, but we lived up to our core value of integrity. It paid off in the long run when multinationals exiting India looked to us as their preferred partner for collaboration as well as for sale of their businesses, despite us not being the highest bidder in many cases.

In 2010, when we sold our Indian branded generics business, Abbott Laboratories, realised the value of our business built on the foundations of integrity, and hence paid us the highest multiple till date in the Indian domestic formulations business. Thus, the short-term loss we incurred by adhering to our values paid us dividends in the long term.

The way we conduct our business at Piramal Realty provides several instances of our commitment to trusteeship towards customers and partners. The realty business in India is marred by lack of transparency in various aspects, which eventually result in delayed delivery of constructed units and disgruntled customers. In contrast to prevailing market practices, Piramal Realty has adopted the practice of never-launching units for sale until it has acquired a thorough understanding of the time regulatory approvals. This has resulted in loss of opportunity and additional costs in the short term, but is creating far greater trust and transparency with customers.

This trust-based approach has also resulted in Piramal Realty becoming the partner-of-choice for Indian and global design firms, and architects, as well as marquee global investors like Warburg Pincus and Goldman Sachs. We also offer Piramal Assurance - a buy-back guarantee, giving the customer more trust in the organisation.

Values creating value is not restricted to our business, but also permeates the work of Piramal Foundation. In line with our purpose of Doing Well and Doing Good, Piramal Foundation drives initiatives in the areas of youth leadership and education, health care and clean drinking water. The foundation today operates at scale with significant impact: the health care programmes reach 70,000 lives every day; our education and leadership programmes reach 550,000 schoolchildren; the mid-day meal scheme reaches 50,000 students daily; Piramal Sarvajal caters to 360,000 individuals daily. We also continue to support other organisations such as Pratham - the largest NGO in primary education in India, ISKCON on their mid-day meal programme, Chinmaya Mission and Parliamentary Research Services, amongst others.

We took a contrarian approach and started our financial services business in 2012, at a time when the macroeconomic situation was weak. We started out with structured financing to the residential real estate industry. Through successive innovations, we expanded our product suite to provide financial solutions to a diverse spectrum of sectors from real estate to infrastructure, manufacturing and services. We entered the retail housing finance market to offer our solutions to individuals as well as small businesses. We entered into partnerships with marquee global names such as Canada Pension Plan Investment Board and Ivanhoe Cambridge. We read the signs of NPA distress in banks, and formed a joint venture with Bain Capital Credit to solve the distressed financing challenges plaguing the industry today.

In less than five years since we started, we are today one of India's leading non-banking finance players with assets under management of more than `33,000 crore, and NPAs of barely 0.2 per cent.

Has pursuit of this path of values created monetary value for the group and its stakeholders? I will let numbers speak. We have always given above par returns to our shareholders and capital providers - `1 lakh invested in Piramal Enterprises in 1988 would be valued at `21 crore today - a CAGR of 29 per cent, putting us in the top decile of companies by shareholder return in every time frame - one year, three years, five years and so on, in BSE 100 Index.

So, values have created value, and I believe will continue to do so. With a global workforce of over 15,000 people comprising more than 40 nationalities across diverse businesses spanning health care, financial services, real estate development and information management, we continue to focus on cascading and integrating our values into our day-to-day working. We have hard-wired our values into our formal and informal mechanisms by articulating the six Piramal Success Factors as Thinks Big, Serve Customers, Commit and Deliver Results, Display Humility, Collaborate, and Empower and Develop, forming the basis for recruitment, skilling, continuous learning, performance assessment and progress within the organisation.

By Ajay Piramal, Chairman, Piramal Group and Shriram Group

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