At a time when the privatization of the central public sector enterprises, is sweeping the Modi Government, a number of PSEs are striving hard to retain their PSE character. Bengal Chemicals & Pharmaceuticals ltd (BCPL) is one which has performed a miracle by its turnaround in the last five years.
Bengal Chemicals & Pharmaceuticals Ltd (BCPL) has been through the best and worst of times. The company had flourished under a great founder, Acharya Prafulla Chandra Ray, who made it a household name during in the 1940s. But his demise in 1944 saw the company drift in a leadership vacuum and started incurring losses continuously. The relentless deterioration forced the Government of India to take it over in 1977 in the hope of nursing it back to health with liberal financial packages, the last of which was in 2006 and amounted to Rs 440 crore. But all this could not stem the rot and the company recorded its highest loss of Rs 41 crore in 2012-13.
Then came a twist in the story as a new management team headed by Managing Director P M Chandraiah took charge in 2014. The new management brought in big changes, including a new work culture, financial discipline, streamlining of operations and a new level of transparency in the working of the company, all of which contributed to a sense of belonging and partnership among the workers. Bengal Chemicals is now on the path of a rediscovery, and a steady one at that.
Thanks to the positive change, the company has started reporting net profits. In 2016-17, it reported a net profit of Rs. 4.51 crore for the first time after years of running into losses and has never looked back, continuously doubling its net profits year after year. BCPL reported a net profit of Rs. 10.06 crore in 2017-18 and more than doubled it in 2018-19, by clocking Rs 25.26 crore, the highest profit in its 118-year history. The company has now targeted a net profit of over Rs 40 crore in the current year and these performances would make it the biggest turnaround story in the Indian corporate scene.
According to Chandraiah, the years from 2013-14 to 2018-19 constituted the first five years of the turnaround, during which the idea was to double the profits every year. With the targets for the first five years having been reached, the company has now set an ambitious target of Rs 500 crore as turnover and Rs 150 crore as net profit by 2023-24, which would mark the completion of the next five years of the turnaround period.
Chandraiah says the company is now striving to become the highest turnover company out of all pharma PSEs by the end of the second turnover period. He also wants to see BCPL emerge as a Mini-Ratna Category-1 by 2023 and Schedule-B Company by 2025.
“The company has improved its turnover from Rs. 17 crore to Rs.85 crore in a period of 4 years commencing from 2013-14. If we maintain the same tempo, in between having some consolidation periods, we can easily achieve Rs. 500 crore turnover and Rs. 150 crore net profits by 2024,” explains the managing director.
To become a Mini-Ratna Category-1 status, the company has to be a profit making concern for the previous three years, with the profit hitting at least Rs 30 crore in one of the three years. Further, it should be a positive net worth company. According to the MD, the company is already adhering to the guidelines of DPE and to achieve the status of positive net worth company it will take another 2 to 3 years since it had been incurring losses for more than five decades. “To wipe out the accumulated losses, we need 2 to 3 years more,” he said.
BCPL in its heydays had enjoyed tremendous goodwill in the marketplace. It was a pioneer in introducing hygiene and leading FMCG products. Its brands like Phenol, Aqua Ptychotis, and Cantharidine Hair Oil were household names and enjoyed huge market share. But as the fortune of the company declined, its products also faced steep challenges and could no longer hold on to its market leadership. India’s Pheneol market itself is estimated to worth more than Rs. 6,000 crore, but BCPL was struggling to achieve a turnover of even Rs 20 crore, which is equivalent to merely 0.3 per cent of the total market value, despite the fact that it was the first company to introduce the product. That showed the extent to which Prafulla Chandra Ray’s company had declined.
Now to regain the lost glory, an invigorated BCPL is improving its product profile and market availability through greater efficiency at the factories and expansion of the distribution network by signing up new distributors. The company also has plans to enter e-commerce in a big way so that it can claim a share of the ever-growing pie of the online market. Also being lined up are suitable marketing plans for create greater awareness about the company’s products and enhance the brand value.
The company is planning to enter new segments like the active pharmaceutical ingredient (API) manufacturing, a high growth area in pharma manufacturing. It is already producing generic drugs and injectables. The commercial production of injectables was launched last year and the company hopes to bag sufficient orders from the government and its departments for these products. Also under consideration are plans to enter the prescription market and add more pharmaceutical products. With all these avenues, the company hopes to easily achieve the target of Rs 500 crore turnover.
It is a measure of the success of the company in recent years that it has been getting excellent corporate governance ratings for the past four year as against poor ratings in the earlier periods. The company has been constantly upgrading its systems to meet the challenges and has achieved tremendous success in this regard. As part of the turnaround strategy, the company has introduced centralised systems for procurement, accounting, collection, payment, billing, bill processing, payroll, stores, fund management, HRM, record maintenance etc.
As a result of these measures, procurement costs have come down drastically while financial leakages have been plugged. In fact, the company’s direct cost to net sales has come down from 86 pe rcent in 2013-14 and 64 per cent in 2015-16 to 53 per cent in 2017-18.