MyCFO: CFO Services India Case Study

Pharmax

Our client 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 HODs and the
management on a month on month basis for their review and
comments.

MyCFO Approach:

MyCFOs mandate here was to play the role of an ongoing

CFO for Pharamax. MyCFOs 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 years
achievements amongst others. The budget exercise was finally
completed in 8 weeks with 3 revisions. The exercise also
served to set individual KPIs 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.