Dr Reddy’s will outsource its company-wide finance and accounting to Genpact in a bid to cut fixed costs.
Under the deal, Genpact will take over the Indian pharma’s shared services operations in Hyderabad, which supports the company's local operations and its business in the US and Europe.
The move comes as the firm increases its activities overseas, including the launch of generic versions of Pfizer's schizophrenia drug Geodon (ziprasidone HCl) and GlaxoSmithKline's blood clot therapy Arixtra (fondaparinux) in the US, and the 2010 takeover of a US penicillin plant.
India-based Frost & Sullivan senior research analyst Aiswariya Chidambaram told Outsourcing-Pharma the deal is likely a bid to help unite the finances for the company's various bases over the world, as well as to free-up funds for growth plans.
She said: “This will work out to be a cleaner operation for Dr Reddy’s. There will be one particular person at Genpact to manage the accounts across the company. This will help uniform the business for them, increase efficiency, and save time and costs.”
Of saving money, Chidambaram said that avoiding the fixed costs associated with employing a large finance department is the key. “This looks to be a very good risk management system for them,” she said. “Through freeing fixed costs, Dr Reddy’s can concentrate more on its core business areas – developing the pharma services and generics side of the business.”
Supporting this view, Dr Reddy’s CFO Umang Vohra said: “This engagement will ensure that our finance and accounting support processes become more effective while we continue to focus on growing our pharmaceutical business across therapeutic segments and geographies."
When asked if she had any insider knowledge of the reason for the cost-cutting efforts, Chidambaram said: “I wouldn’t say there is one particular plan in place for the saved costs. Just a bigger focus on the core assets.”