In 2008, when FMCG major Emami Group took over Zandu Pharmaceuticals from Mumbai-based Parikh family, 22-year-old Nihar Parikh decided to buyback Zandu Chemicals, a subsidiary, and carve it out into a separate firm. Little did he know that his initial investment of ₹12.5 crore would multiply 160 times to fetch him a whopping ₹2,000 crore in just 12 years.
On Tuesday, private equity firm Advent International acquired the entire stake in ZCL Chemicals Ltd (formerly known as Zandu Chemicals Ltd) for about ₹2,000 crore, a move that also marked the exit of Morgan Stanley Private Equity Asia (MSPEA), which also sold its 19 per cent stake in the company.
“When the takeover of Zandhu Pharmaceuticals was in its final leg, my father asked me about my future plans. And I was just 22 then, with a background in chemical engineering, and was doing an internship in Belgium with Johnson & Johnson. I decided to come back and run this company,” Nihar Parikh told
The takeover of Zandhu Pharmaceuticals had also its fair share of controversies. The Parikh family wanted to prevent the takeover but as the other co-founder group had already sold its stake to Emami, the family was forced to sell its 40 per cent stake for about ₹400 crore.
“My thought was let me come back and explore the opportunities. So I left Belgium, left all the good beers out there, came back to India and joined Zandu Chemicals,” he added.
Nihar’s dad Ajay Parikh, who was 55 years old then, wanted to be completely off hands of any venture, and wanted his only son to find his own path.
Back from Belgium, Nihar Parikh’s first move was to change the name of the subsidiary Zandu Chemicals to ZCL Chemicals Ltd. “I just shortened it, to give it some identity.”
The initial problem was a cultural issue as it was a typical family-run organisation.
“I restructured the entire firm, brought in place a new set of professional team and ensured that I hired the best in the industry. Next year, in 2009, we established a modern plant, and got US Food Drug Administration and WHO Good Manufacturing Practices approvals among others. The growth came in from focusing on the bottomlines, and businesses and products that were high in value and low in volume, and specialty products were the competition was low but margins were high,” Parikh said.
In 2016, MSPEA invested ₹150 crore for a 19 per cent stake, valuing ZCL at ₹750 crore, a whopping 60 times compared with the initial investment in 2008.
Today, ZCL Chemicals has more than 100 clients compared with just 20 clients in 2008, and an employee strength of 450 as against the earlier 150 personnel. In 2008, Zandu Chemical was an EBITDA loss-making firm.
“Both father and son, I would say, are very professional entrepreneurs and are successful in creating good products. They created comfort and confidence in the minds of the multinationals — mainly in Europe and the US — by being a credible a credible source from India, supported by a professional team. They did it well,” Satish Khanna, former group president of Mumbai-based Lupin, said.
For ZCL, more than 90 per cent of its sales comes form US and Europe.
What next for Nihar Parikh?
“There are a lot of ideas I am working on but is yet to finalise anything.”