11/24/2020 Next big digital revolution is taking place in pharmacy biz - The Economic Times

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Business News › Markets › Expert Views › Next big digital revolution is taking place in pharmacy biz

Next big digital revolution is taking place in

pharmacy biz
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Last Updated: Nov 24, 2020, 04:04 PM IST
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Synopsis
One of the big stories of e-commerce for the next one or two years is going to be the
transformation of the Rs 1.5-lakh crore pharmacy business., says Gopal Srinivasan.

ETMarkets.com
The big story this time is not that digital is
powerful, but the fact that it is widespread and
Replay
more interconnected than ever before. The whole
system is transforming, says Gopal Srinivasan,
Chairman, TVS Capital Funds

RELATED Given the kind of FII in ows that we have seen

Gland Pharma up 40% in 2 month to date, are you convinced that the
days, but nobody can
explain this sudden interest market has more legs to go? hat makes India
Strides Pharma Science
attractive right now?
gets USFDA nod for I am going to stay away from the momentum and
Prednisone tablets
the excitement that there is around that. The NSE
2 pharma stocks that could Bank is within 10% of all-time high and we do a
give good returns
lot of investing in banks. The way India has
weathered the most di icult challenge of the economic crisis created by Covid
is exceptional. So many countries have struggled in so many di erent ways to
surmount this greatest of challenge and India has done a very creditable job.

When I say India, I do not mean the Government of India alone. I just mean
the people of India -- be it small businesses, mid-sized businesses or large
businesses, be it RBI with its exceptionally astute policies on liquidity and be
it the government on public health. It has been an all-round good experience.
This makes an emerging giant like India more attractive because it has not
been damaged and it is actually coming back with more resilience than one
could imagine. At a very macro level that is what I would imagine.

FIIs have been coming in October and November far more aggressively

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11/24/2020 Next big digital revolution is taking place in pharmacy biz - The Economic Times
IN THE SPOTLIGHT
compared to the domestic market investors which shows that compared to How Sushmita Sen broke
the rest of the world, they nd India that much more attractive. stereotypes & inspired others

The world has turned digital in the post Covid era. here within this
phase do you see the big trends or disruptions emerging? High Dividend Yield
We invest mostly in the B2B and nancial services industries. In these s[aces,
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the digital potential was always there. The fact that we had this massive
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tested during the time of Covid. We have had these capabilities for the last few
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years and the internet bandwidth in the last 20 years but in terms of digital
transformation, all that have come to the fore only in the last few months.

Companies that we invested in and which were well managed, actually Why follow tips? Choose your winners
rationally in 3 simple steps!
produced dramatic transformations inside their businesses in the last nine
months and companies that were not, tried to but could not do it as START NOW

successfully. This is always the case whether it pertains to transforming

digitally or transforming to participate in global markets or any other kind of RELATED MOST READ | MOST SHARED
transformation.
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Companies that are well managed will use digital far better in terms of Better Than
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improving their operational e iciency and in terms of using data. The main Deposits

thing I look at is the fact that today it is available freely. There was a time 10 or
15 years ago when to access the power of digital one had to be large and one
had to be willing to take a lot of kind of blind faith type of large upfront
investments and kind of hope that this transformation would work. The entire Trending in Markets
organisation looked at it as some kind of temple that one had to go with IPO Allotment Status Stock Screener

slippers removed. From that time in the early 2000s to now, digital has been Sensex Stock Market

democratised. All the employees in the company in their personal lives use Stock Recommendations IPO

digital very extensively, starting with the fact that there is expected to be one Upcoming IPO Gold Rate Top Gainers

billion payments per day in the near future as per the MPC chairman speech Rupee Vs Dollar Share Market Silver Price

last week and the access to digital products are through SaaS and through the Nifty 50 Nifty Bank Infosys Share Price

massive integrations that we are seeing through APIs. It is a real Crude Oil Price

transformation.

In the past you could be a transformed island in the middle of a non digital

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11/24/2020 Next big digital revolution is taking place in pharmacy biz - The Economic Times

world. Today your suppliers, your customers, your even small suppliers have
adopted digital in some form or other. I am in Chennai, home of Zoho,
Freshworks. These are just two simple names where thousands and tens of
thousands of small and medium businesses today are being digitised. The big
story this time is not that digital is powerful, but the fact that it is widespread Replay

and far more interconnected than ever before. The whole system is
transforming. The entire forest is changing rather than some giant trees.

It is not that the size of the pie is growing e ponentially. The adaptation of
digital technology is coming at the cost of some other businesses. here
do you think the slack would kick in?
Unfortunately for the next few years, it is going to be related to size. Larger,
organised businesses are going to gain dramatically in the short term at the
cost of smaller businesses. Does it mean small businesses will wither away? I
do not know, I think they will adapt but that is de nitely where the win loss
score is being kept. We see it everywhere. We see the players are consolidating
and larger players are going to sustain for the short term.

Smallest example is if you take a look at what happened to the food business.
Only the organised restaurant chains have gained and not the individual
eateries.

Is there merit in looking at logistics space because that is one space which
has got a lot of levers now?
One is always saying logistics has great potential for the future and we never
know when the future could arrive. But honestly, the future has arrived with a
big bang in the last ve, seven years and Covid has accelerated it. Let’s look at
opportunities which are simpler like in cement or steel industry. The amount
of revenue that goes into logistics expenditure is crazy. In cement, it is about
30%. Imagine now with all these trucks being digitised, the entire truck supply
chain and drivers being digitised with platforms like Freight Tiger or
platforms like Blackbuck and so forth, the e iciency levels that will come
through is incredible.

Take another example, an Amazon statement two days ago talking about how
they want 10 million Indian micro and small businesses to participate on
their platform. This means a complete digitisation of the supply chain from
these small individuals. How do they load their products into the e-com sites,
how do they manage their inventory, how do they manage the delivery
linkages, the payment linkages? It is now like an infrastructure of logistics.

Take our own investment in a company that rents pallets out. You can rent a
pallet to put in a truck and go from A to B. Today pallet pooling in India is a
good indicator of logistics e iciency. It is 5% at present and it should be 20-
30%. That is the reason why India is spending such a large percentage of its
GDP on logistics. The last check was 12-13-14%, which should probably be in a
single digit number and that unleashing of the e iciency will bring down the
logistics cost as well as improve experience and reduce the lead time.

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11/24/2020 Next big digital revolution is taking place in pharmacy biz - The Economic Times

How does one go about understanding the pharma space? How are you
visualising your investments in this space?
Honestly, this is an out of portion question for me, I do not understand API, I
do not understand the US market FDA issues; all I see in the pharma space is a
very limited last mile issue. India has got a Rs 1.5 lakh crore pharmacy market.
This market has been attracting tremendous investments .

We saw recently the merger of Medlife with Pharmeasy -- two of the largest
online companies. Our own old business partner MedPlus which is a Rs 2,500-
crore pharmacy business with about 10-15% e-pharma is going through
dramatic transformation. The biggest news of all is Reliance is buying
Netmeds for Jio Mart and trying to digitise the e-pharmacy space. Amazon’s
announcements in this space have also come out.

There are rumours that other large, famous Indian business groups are also
interested in this space. It is a space with Rs 1.5 lakh crore of business with
nearly eight lakh or more retailers. There is a wide variation in prices of
pharmacy products across chains, across generic, branded and generic-
generics. That part is going through mega transformation.

One of the big stories of e-commerce for the next one or two years is actually
going to be the e-pharma business. I am really interested in that space because
this will mean consolidation into larger players, weeding out of ine iciencies
in the supply chain especially when it comes to the distributors and small
retailers. There is going to be huge change and Prime Minister Modi’s vision of
getting more generic-generics is going to become real. Enabled by e-pharms,
people will now be able to compare medicine prices. So that is the next big
step. We are going to a big revolution. The Rs 1.5-lakh crore pharmacy business
is getting transformed.

READ MORE NEWS ON

Amazon Covid Nse Bank Digital Revolution Digital Transformation Pharma Space

Gopal Srinivasan

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