Pharmax is a family owned and managed company with turnover close to INR 700 Crores. Pharmax is a leading name in the Active Pharmaceutical Ingredient (API) and Finished Drug Formulation (FDF) segments which is sold in both the regulated and the generic markets in India and over 50 countries worldwide. The company has state of the art manufacturing facilities approved by US FDA and has 17 Abbreviated New Drug Application (ANDA) filed and 12 in the pipeline.
Challenges for MyCFO
Budgeting at Pharmax was a simple ‘spread sheeting’ exercise restricted only to collation of data inputs received from various departments. The variance between budgets and actuals for instance in financial year 13-14 was more than 80%. The variances were reported every month to the HOD’s and the management on a month on month basis for their review and comments.
MyCFO Approach
MyCFO’s mandate here was to play the role of an ongoing CFO for Pharamax. MyCFO’s approach was to identify the principal reason behind the budgeting exercise, which in this case was to help the management get a clear idea on the cash flow requirement and in helping them stabilize the FDF business. This was followed by a communication from the management team on the need for the departments to participate in the budgeting exercise. A 6 member budgets team was constituted which was lead by MyCFO. This was followed by one on one meetings with the department heads where targets were discussed and agreed. Some of the meetings which involved key decision making were attended by the promoters. The targets were discussed and debated amongst teams on parameters such as stock (max order quantity, credit period, lead time, logistics, distribution), debtors, creditors, zero based budgeting for PDF business, competency of personnel involved in the process, inter departmental dependencies, product strategy, capacity utilization, investment in fixed assets and ANDA, making each SBU within the company profitable, EBITDA improvement, misses and issues based on last year’s achievements amongst others. The budget exercise was finally completed in 8 weeks with 3 revisions. The exercise also served to set individual KPI’s for department heads and were eventually linked to incentives.
How the client benefited
The budget exercise allowed standardization of MIS reports across the company, helped the company to institute and track performance for the Senior Managers, formation of the budget committee helped the departments to resolve potential issues which may come in the way of achievement of targets. The process also allowed a formal mechanism to review actual progress and it also set the ball rolling in terms of weekly monitoring reports on sales, cash flow, stock movement to the management.
Pharma Group is a global leader in excipient solutions. The Group develops, produces, and markets excipients for oral solid dose and dry powder inhalation formulations. The Group’s customers are leading pharmaceutical companies. The Group had taken over a closely held Indian company 2 years back and needed MyCFO to manage the Post merger acquisition as their India CFO.
MyCFO role
MyCFO’s role was to ensure correct, accurate, complete and timely review of day to day accounting based on accounting conventions and principles in line with Indian GAAP and IFRS, addressing issues that came up as part of the due diligence process, Develop and report MIS to the India CEO, Complete timely monthly reporting to Group CFO, ensure local compliances, Implement internal controls in line with Group policy, Assist in the implementation of the Group ERP (Navision), Participation in fortnightly review India CEO and the Group CFOs office, authorizing and tracking of expenses, liaise with the auditors for accounts finalization, setting the India budgets, managing and forecasting future cash flows, getting involved in monthly review meetings with the India CEO and the Group CFO and measuring business performance by setting up profit center accounting and reporting. The role comes with accountability to deliver results that an in house Controller/CFO would take on had there been one.
How the client benefited
MyCFO’s involvement resulted in clean up of accounting and compliance related legacy issues, reduced monthly reporting time from 8 weeks to 1 week, implementation of an ERP system within 6 months from the start date, discontinuation of non – profitable products by developing robust costing systems and in reduction of debtors collection cycle from 120 days to less than 45 days.
NRTis one of the largest multinational pharmaceutical companies in the world. As a part of its global product portfolio transformation, NRT spun off its Over-The-Counter Division (OTC Division) in one of its global subsidiaries to a Joint Venture with OGS (Acquirer). The transaction was structured as a ‘sale of business’ for a consideration of ~USD 20million. MyCFO was called in by NRT as Interim CFO for the OTC division to project manage the transition of accounting and financial processes.
MyCFO Expected Role
Delivering on-time, regular and accurate reporting data as per Global Rporting standards of NRT till ‘Closing Date’ and as per OGS standards from the Closing Date
Deliver variance analysis and management commentary for decision making to ORG on a monthly basis
Contract novation
Finalising ‘cut over’ of data from legacy system (SAP)
MyCFO Action Plan
Old outstanding vendor balances were settled and No Dues Certificate was obtained from all major vendors
Novated contracts of ~130 active vendors and ~65 active customers
Facilitated stock count and transfer of ~1,300 SKUs of Raw Material and Finished Goods inventory
Computed provisions for dues to Distribution Agents
Facilitated de-activation of all GL Codes and Cost Centres relating to OTC Division in legacy SAP
Warehoused all pending litigation and tax matters relating to OTC division
Impact Delivered
All vendor accounts settled within ~45 days of Closing Date
Month closing of OTC division completed in OGS’ ERP (Oracle) within 50 days of Closing Date
90% of contract novations completed within 21 days of Closing and 99% within 45 days
100% compliance with Financial and management reporting timelines to NRT and OGS, for all months of the engagement
Coordinated and ensured 100% compliance with actions agreed for Finance and Accounts matters, in weekly Steering Committee meetings
Traced, quantified the exposure and ensured systematic documentation of ~100 legacy pending legal and tax matters, for further resolution by NRT team
