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Dr Reddy's Laboratories: A good example of succession planning

By Giulia Cambieri

Relinquishing control can often be difficult for company founders, but one Indian family business head is currently in the process of ensuring succession at his firm goes well.

Anji Reddy, founder and chairman of Dr Reddy’s Laboratories, transferred the shares he personally holds in the Indian pharmaceutical company to the Reddy family’s holding company late last year. This was in a bid to ensure “smooth succession” at the Hyderabad-based firm, said Kavil Ramachandran, professor of family business and wealth management at the Indian School of Business.

In total, Reddy transferred a 0.35% stake in Dr Reddy’s Laboratories, India's second-biggest generic drugs firm, to the holding company, which controls 23.4% of the pharmaceutical business.

The transfer took place in November but it was only reported to the Bombay Stock Exchange on 23 January.

The figures may seem small, but according to Ramachandran, the transfer was important because it showed Reddy trusted the next generation to run the business and control the family fortune.

“The current decision has to be seen as a natural progression in smooth succession,” Ramachandran told CampdenFB.

“By transferring shares to the holding company, he has ensured that the wealth goes to the full family and no one else,” he added.

Reddy effectively left the management of the company to his son, Satish Reddy, and son-in-law, GV Prasad, a few years ago, Ramachandran said. Since then, the second generation has focused on developing operations and the business’s strategy, while the patriarch has worked on research.

Satish Reddy is the company’s managing director and chief operating officer, while GV Prasad serves as vice-chairman and chief executive.

Both are possible candidates to take over the chairmanship of the family business, which Reddy founded in 1984 with just 25 million rupees (€38,360).

He is often credited with turning around Indian’s drug sector, which in the 1980s was heavily dependent on imports but is now an export-oriented industry.

In the financial year 2010-2011, the company reported revenues of 74,693 million rupees (€1.3 billion), a 6% increase on the previous year.

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