The Divi's Labs Formula
Focus and discipline allows this business to double profits every 4 years
Every Sunday I share what I learn about health, money and business. Here is what I learnt last week:
How does Divi’s Labs double its profits every 4 years?
Can day-dreaming help you become more intelligent?
Can a carbohydrate mouthwash help you lift more weights?
You can access previous editions of my weekly emails here. Let’s begin!
(1) How does Divi’s Labs double its profits every 4 years?
On a Saturday morning I walked around the living room to kill two birds with one stone - get to 10,000 steps and listen to Saurabh and Sudhanshu talk about how this one business has turned every 1 lac of investors money into 80 lacs, compounding at an astonishing 23% CAGR over 20 years.
The star of this success story is Murali Divi. This 13th child of his family studied pharmacy in 1969 and graduated with distinction in 1974. He had a keen interest in pharmaceuticals.
Over the next 20 years, Murali Divi worked for companies in India and the US and gained significant experience in the field of chemistry. Murali felt like India could become the medicine manufacturer of the world when it started opening up in the 1990s. So he bought a 500 acre plot of land with the help of debt.
In order to survive Divi's Labs first ventured into the manufacturing of bulk drugs, focusing on Naproxen, the API for pain killers. They were the 22nd company producing this Active Pharmaceutical Ingredient (API), competing with global giants like Roche. Today they control 75% of the world's global production for this API for pain killers. They have also grown to become leaders in the API for cough suppressants called Dexamethasone in which they command 65% market share globally. They also produce 30% of the worlds Vitamin D, K and B12.
The obvious question then becomes, how on earth did this startup take on 21 other companies and win? How did they go from 0 to 7840 crores revenue in annual revenue (~ $1 billion)?
The way that Divi's did it was by firstly innovating. In order to compete, Divi's created a new process in which the APIs were created using enzymes instead of chemicals. This made the APIs more cost efficient and clean.
Secondly Divi’s made sure that his business did not compete in anyway with the clients it serves.
As their business grew, they were able to drive down costs further which brought more clients and more efficiencies.
Success in the bulk API business allowed Divi's to also double down on the second part of their business which is contract manufacturing. Here Divi's wins because of its reputation, superior quality and world class systems. Their factories are approved by regulators globally. And they have the ability to supply the volumes that are needed by global majors at competitive prices.
Today Divi's Labs works with 12 of the top 20 pharmaceutical companies globally. It is also the preferred supplier for 6 out of the top 10 pharmaceutical companies globally. Despite it being a high fixed costs industry, Divi's average operating margins have been an incredible 36%. Their revenues have compounded at 18% per year for the last 19 years, profits have compounded at 19% per year, and share price has compounded at 23% per year. They are able to double their profits every 4 years.
The lessons I learnt? Be focussed and disciplined. Do very few things really well. And do it better than anyone else in the world.
(2) Can day-dreaming help you become more intelligent?
You need to give yourself time to day dream.
I was on a two hour car ride. I requested the taxi driver to turn off the radio. I got driven in silence.
I just stared out of the window and let my mind wander. By the time I got to my destination, I had ideas, thoughts, plans and excitement. My brain 🧠 had made connection that it had not made before. It had synthesized data and recent events and churned out a checklist of what needs to be done. It was like magic.
You have your own Chatgpt like RI (Real Intelligence) running inside your head. You need to cultivate that power by giving it room to do its job. If you're constantly bombarded with information, distraction, dopamine elevating likes and loves, and algorithm curated videos and photos, then when do you get the time to build your Real Intelligence muscle?
Make time for yourself. Turn off that phone. Don't stare at any screen. Go for a walk. Listen to music. Tap into the power of your brain. You'd be surprised about how powerful it is. It's got the answers to all your health, money, family, relationship, and purpose problems ... if only you let it do its job!
(3) Can a carbohydrate mouthwash help you lift more weights?
In this fascinating experiment, 20 men who regularly performed resistance training were put in a study in which some of them were asked to rinse their mouth with a carbohydrate mouth rinse for 20 seconds before lifting weights. The result was that they were able to perform better (deadlifts) without affecting perceived effort.
This means that you do not have to ingest carbohydrates to boost performance. Even swirling it around your mouth can have a similar ergogenic effect.
Harsh Batra (LinkedIn)
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