The pharmacy educational institutions teach the basics required for the industry, so any pharmacy graduate has to start from scratch. That's why we set up the Skilling Institute in Telangana. What's unique is the government thought of it just three months ago. The chief minister had the idea, and we're offering skilling degrees of a very high standard so that people everywhere, not just qualified graduates but also diploma seekers, can be certified to work as operators with high skills for international standards. That skilling is strategic. For collaboration, industry leaders get together not only for good policies but also for development activities. The collaboration has continued after the original three founders who had a personal relationship. One theme is the tension between innovation being high risk, high reward, long-term, needing deep pockets, and affordability. How do you see affordability and innovation? That's a really good question. Let me take it in two parts. On the generic side—active ingredients and formulations—the business is to be first in the market to challenge the innovator in the US or launch a brand in India. Cost is important from API to formulation to be competitive. Companies like us are always on top of this because we can't survive otherwise. Even though Chinese have displaced us in many APIs, for important ones like oncology we still have no competition because we continuously innovate on the process. There's a second part: true innovation or discovery, where the tension comes in. For example, investors questioned when we licensed our discoveries; share price went up but first failure pulled the company down. Our R&D spending was 14% of sales, and investors said we couldn't sustain it. Today our valuation for 20 original discovery products carries no valuation. The average R&D spend in top Indian pharma is 8-10%, and the book shows the dismal nature of R&D spend in India—a meager 3% from public institutions, while multinationals spend 15-20% of sales because they can afford billions. We only have a handful of billion-dollar turnover companies in India. The tension is between making money from generics—a highly competitive space—and investing in discovery for the next level. The government also has to do its part, not just expect industry to do it. Industry and academia must collaborate, but that's non-existent in pharma today.
So industry and academia gives me a good segue. Before I open to the audience, one thing that stood out is the company has been very proactive on sustainability, diversity, and inclusion. We had a conversation on gender, and you have set a 35% target for women in leadership. Maybe talk a little about the sustainability journey of Dr. Reddy's, then we'll come to giving back.
To set the context, we started as a bulk drugs company, and Dr. Reddy inculcated responsibility for the environment. He paid attention to effluent treatment; we were one of the first to set up zero liquid discharge, reusing water. That consciousness was practiced strongly. In Hyderabad, where we have our largest manufacturing footprint, inspired by the Tatas, we left large space for green cover. On ESG, the society part was about caring for stakeholders and encouraging employees to volunteer. Dr. Reddy led by example, actively promoting Dr. Reddy's Foundation, which I now chair, focusing on education and livelihoods. Governance was strong; we set high standards when listing on NYSE, with independent directors and women before it was mandatory. We published the first sustainability report by an Indian pharma company in 2004, ahead of mandatory disclosures. We believe in triple bottom line: people, profits, and planet.
Right, so I have addressed groups of women leaders in Dr. Reddy's; they're really well integrated. What have you done to create that inclusive environment?
Part of it is making amends for the past. For a long time, the proportion of women in the workforce was below 5%. There were excuses: third shift night work, difficulty finding women for manufacturing. We actively started changing norms—one of the first in Hyderabad to have night shifts for women, taking care of safety and changing the law, offering higher pay. We set targets and performance links. Once change happened, it brought sensitivity and improved productivity. Women in certain responsibilities are more diligent and can multitask. Then came leadership; we had a woman independent director long before regulation, who pushed for progress. When we hired an HR leader, we made sure she was on the management council. Now we have set a target that 35% of the leadership team by 2030 will be women.
I'll open to the audience quickly, but first a segue on education. I've seen you passionate about CSR and education. Your father speaks in the book about how your US educational experience was different from your Indian experience. Maybe share a bit about that, then we'll segue to Nalanda.
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