The New Torrent

Perestroika, meaning ‘restructuring,’ was launched in the erstwhile Union of Soviet Socialist Republics (USSR) or the Soviet Union, by its then Communist Party leader and later President Mikhail Gorbachev in mid-1980s. It was expected to transform the USSR’s stagnant economy. The movement failed and the economy plunged into deeper turmoil. USSR disintegrated into 15 independent countries by 1992. Nearly 4,700 kilometres from Moscow, in Ahmedabad, perestroika brought a leading pharmaceutical company, Torrent Pharmaceuticals, near bankruptcy.

Sitting on the patio of his lush green riverfront farmhouse and gazing into the gushing muddy Sabarmati on the outskirts of Ahmedabad on a wet monsoon morning, Samir Mehta, executive chairman of healthcare to energy major Torrent Group, shrugs off that misadventure with a laugh. “He (Gorbachev) may not have known us, but perestroika almost broke us, as 90% of our business was coming from USSR,’’ he says. Bringing the business back on track meant years of lost opportunities. Torrent Pharmaceuticals missed the ship to U.S., the biggest market for generic drugs, when peers Ranbaxy and Dr Reddy’s were building presence there. Torrent entered power in 1996 but restricted itself to distribution and transmission when peers Adani Power and Tata Power were setting up big greenfield coal power plants. The group, in fact, had to sell a greenfield power plant in 2000 soon after construction. The foray into financial sector did not work out. In 1998, founder U. N. Mehta passed away and Sudhir Mehta, elder brother of Samir Mehta, took charge as chairman of Torrent Pharmaceuticals and Torrent Power.

Over the years, the brothers focused on acquisitions, expansion and margins to make Torrent Pharmaceuticals India's fifth largest pharmaceutical by revenue and among the top 3 by market capitalisation. They also turned Torrent Power into one of the country's largest power distribution companies (it operates in 12 cities and caters to over 4.13 million customers) with better operational efficiency, fuel management and long-term returns than peers such as Tata Power and Adani Power. Until 2017, pharmaceutical revenues were ₹5,857 crore and power revenues just over ₹10,000 crore. That was also the take-off year for the group.

Sudhir and Samir have two sons each. With all four joining the group, their contribution catapulted businesses into a fast growth orbit. In 2018, Torrent entered the natural gas business. Six years later, Torrent Gas is one of India's top five natural gas companies with ₹3,100 crore-plus revenues. Torrent Pharmaceuticals’ revenues have jumped to over ₹10,500 crore while Torrent Power clocked ₹27,000 crore in FY24. “We plan to grow group revenues to ₹1 lakh crore and double profits within next five years,’’ says Samir Mehta.

Torrent Group is diversifying into adjacencies—hospitals and diagnostics in healthcare and renewables, thermal, pumped hydro storage (PHS) and green hydrogen in energy. It is also pivoting its cables company into an electrical FMCG business. Torrent Power alone plans to invest around ₹1 lakh crore in solar and wind hybrid renewables, green hydrogen & its derivatives and pumped hydro in next eight years.

The Mehta brothers (15th among India’s billionaires with ₹1.42 lakh crore wealth as per Fortune India 2024 ranking) and their sons spoke exclusively with Fortune India about vision, ambition, succession and future growth. Here’s an account of the transformation at one of India’s most prominent business groups.

Gas Expansion

In 2012, energy major British Gas decided to sell Indian arm BG India’s Gujarat Gas Company (GGCL), then the country’s largest private sector natural gas distribution company by volume. Adani Group and Torrent were front runners. However, when state-owned Gujarat State Petroleum Corporation's arm Gujarat Gas came as a serious bidder, Torrent did not participate in bidding, say industry insiders.

After that, Torrent entered gas business only in 2018, but went aggressive, with Sudhir Mehta’s eldest son Jinal Mehta (41) leading the charge.

Revenues have grown at 180% compound annual growth rate (CAGR) and demand at 108% CAGR over last six years. Torrent Gas is now one of India’s top five city gas distribution (CGD) companies. The unlisted firm reported ₹3,154 crore revenues in FY24. It has won authorisation for 17 geographical areas (GAs) in seven states and one union territory. After 12 CGD bidding rounds covering almost all cities in India, Adani Total Gas and Adani-Indian Oil joint venture IOAGPL have 19 GAs each. India’s largest CGD company Gujarat Gas has 27 GAs while GAIL Gas has 16 GAs.

Torrent has invested ₹5,000 crore to build 25 city gas and 447 CNG stations, issue 1.32 lakh piped natural gas domestic connections and lay 1,600-km steel pipelines and 5,900-km MDPE (plastic) pipelines. July gas sales were 1.81 MMSCMD (million metric standard cubic metres per day) with 75% coming from compressed natural gas (CNG). Out of total sales, 0.4 MMSCMD went to 800 industrial and commercial (I&C) customers. ‘’Looking at the potential in GAs like Pune, Jaipur and Chennai, we expect to sell 1.5 MMSCMD to I&C segment within next five years, a CAGR of around 30%,’’ says Jinal Mehta. He adds the company will invest another ₹5,000 crore in next five years with sales target of 2.5 MMSCMD by March 2025 and five MMSCMD after five years. Revenues are expected to grow at 25% CAGR to ₹10,000 crore in five years. Torrent Gas will fund capex through debt and equity and may look at an initial public offer in FY25 or FY26, he says. ''Now, the firm can be valued equal to top peer group gas companies,’’ says Santosh Zope, a former senior executive with Gujarat Gas and a veteran gas industry expert. Torrent Power also has an agreement to use Petronet LNG-owned import terminal in Dahej, Gujarat, to ship one million tonnes LNG every year for Torrent Gas and meeting internal demand.

Torrent Power: Tapping Renewables

Torrent Power’s generation capacity of 4,328 MW is split between gas-based (2,730 MW), renewable (1,236 MW) and coal-based (362 MW). Gas-based power plants across the country are going through tough times over last few years with nearly 24 GW capacity stranded due to gas shortage and volatile LNG prices. Experts say Torrent failed to add capacity in coal and other fossil fuels like lignite over last two decades when peers Tata Power, Adani Power and JSW Energy and new entrants Reliance Power and GVK Power were on an expansion spree.

Jinal Mehta disagrees and says Torrent’s focus was on gas and distribution. “In hindsight, I won’t say we missed out on power sector opportunity since most companies that aggressively added thermal in last one-two decades went into financial difficulties.’’ He says Torrent Power is the only company in India that has successfully run gas-based generation capacity. This has been possible due to high efficiency of plants, location advantage (closer to LNG terminals), ability to source LNG directly from international market and access to one million tonnes per annum regasification capacity on a long-term basis at Petronet’s Dahej Regas terminal.

Though operating at a relatively low plant load factor (which shows a plant’s productivity), nearly 76% of its 1,530 MW plant in Surat is under long-term power purchase agreement. It can also sell spare capacity in the merchant market. Due to cost efficiencies, the 1,200 MW plant in Dahej has also been able to operate in the merchant market. Between Surat and Dahej plants, Torrent has 1,500 MW capacity for the merchant market, says Jinal Mehta. “Torrent has consistently outperformed peer group on return on equity and return on capital employed,’’ he says.

Torrent had entered power in 1989 by taking over Mahendra Electricals and renaming it Torrent Cables; it was merged with Torrent Power in April 2014. Torrent Power forayed into power distribution with acquisition of Surat Electricity Company in 1996. Two years later, Torrent Power acquired Ahmedabad Electricity Company (now 111 years old) and commissioned a greenfield 655 MW gas and naphtha-fired project named Gujarat Torrent Energy Corporation (GTEC), with equity participation from Siemens, in Bharuch district of Gujarat. However, in 1999-2000, Torrent sold its entire 74% stake in GTEC to Powergen India for ₹1,065 crore. Within months, Powergen sold the plant to Hong Kong-based China Light & Power International.

In 2006, Torrent became India’s first private power distribution franchise by taking over the Bhiwandi circle of Maharashtra State Electricity Distribution Company. Now, Torrent Power claims to be the leading private power distributor in India by selling nearly 30 billion units to over 4.13 million customers in 12 cities — Ahmedabad, Gandhinagar, Surat, Dahej SEZ and Dholera in Gujarat, Union Territory of Dadra and Nagar Haveli and Daman and Diu, Bhiwandi, Shil, Mumbra and Kalwa in Maharashtra and Agra in Uttar Pradesh. Torrent is also expanding transmission business with two projects at Khavda in Gujarat and Solapur in Maharashtra with a combined investment of ₹1,300 crore.

“Renewable energy and power distribution are immediate growth engines of Torrent Power. We are also actively evaluating opportunities in pumped hydro, green hydrogen and energy storage,’’ says Jinal Mehta. He says their major focus is building large renewable energy capacity from current 1,236 MW (another 3,000 MW is under construction). The medium-term goal is to reach 5 GW in renewables by FY27 or FY28. The long-term aim is 10 GW by FY32. Instead of plain-vanilla solar-wind projects, the company will focus on hybrid and battery energy storage systems (BESS); government has announced viability gap funding for development of 4,000 MWh BESS projects by FY31 with financial support of up to 40% of capital cost.

At the recent 4th Edition of RE-Invest at Gandhinagar in Gujarat, Torrent Power announced its resolve via a ‘Shapath Patra’ to achieve 10 GW renewable capacity by 2030 with an investment of ₹57,000 crore. That alone will generate direct and indirect employment for around 25,000 people. It also signed an MoU with government of Gujarat to execute a five-GW solar, wind or solar-wind hybrid project at Dwarka in Gujarat.

Torrent’s energy diversification plan also involves setting up five-eight GW PHS projects entailing an investment of ₹25,000-35,000 crore. It recently received a letter of intent from Maharashtra State Electricity Distribution Co. for procurement of 1,500 MW/12,000 MWh energy storage capacity from its upcoming PHS plant being set up in Raigad district, Maharashtra. India’s PHS capacity is about 4.7 GW; 2.7 GW is under construction. Another 50 GW is under various stages of development. Installed capacity is projected to grow to 55 GW by FY32.

Sudhir Mehta’s younger son, Varun Mehta, says they also plan to tap the green hydrogen opportunity. Torrent Power is building a facility at Gorakhpur in Uttar Pradesh to produce green hydrogen and blend it into Torrent Gas’ distribution network as a pilot project. It will be one of the largest hydrogen blending projects in the country. The second ‘Shapath Patra’ announced at the RE-Invest Summit mentioned setting up 1,00,000 kilo tonnes per annum green ammonia production facility with an investment of ₹7,200 crore. It has been awarded a production-linked incentive of 18 kilotonnes under National Green Hydrogen Mission. 

Pharma Global Ambitions

When German Merck KGaA put its generics business on the block in 2007, the bidders included generic multinationals — India’s Ranbaxy, Actavis of Iceland and Teva of Israel. A comparative minnow, Torrent Pharmaceuticals, backed by a clutch of private equity players, also made a surprise bid but failed. Eventually, the business was acquired by erstwhile U.S.-based Mylan (Mylan merged with Upjohn, a Pfizer unit, to form Viatris in 2020) in a €4.9 billion ($6.7 billion) deal. Samir Mehta laughs it off saying ‘’maybe it was a premature attempt.”

But hunger for acquisition and fast expansion continues. In last 10 years, Torrent Pharma has made a big leap, especially in its domestic business with a string of acquisitions — companies and brands — spending over $1 billion. In 2013, it acquired Elder Pharma’s branded domestic formulations business in India and Nepal for ₹2,000 crore. Four years later, it acquired Unichem’s India and Nepal business and its Sikkim facility for ₹3,600 crore. Then, Unichem’s India business had 120 brands generating annual revenues above ₹850 crore. In 2022, it acquired Curatio Healthcare, with over 50 brands in the cosmetic dermatology segment, for ₹2,000 crore, helping Torrent jump from rank 21 to 10. Insiders say both Curatio and Unichem acquisitions and integration were mainly led by Torrent Pharmaceuticals director Aman Mehta.

Last year, Torrent reportedly teamed up with private equity funds CVC Capital Partners and Bain Capital to acquire India’s third-largest drug company Cipla. A few months ago, reports said Torrent was in talks with private equity KKR to acquire its majority stake in JB Chem, another leading Indian drug company. Aman says Torrent will continue to acquire companies and brands.

Of the ₹10,728 crore revenue in FY24, 53% came from the domestic market and 10% each from the U.S., Brazil and Germany. Branded generics contributed 72%. Torrent is 5th largest in the Indian pharmaceuticals market and No.1 among Indian pharmaceutical companies in Germany and Brazil. In U.S., it is the 11th-largest Indian pharmaceutical company. It entered late in U.S., in 2009; that business was flat due to lack of new product approvals in the past five years. With facilities now approved by USFDA (US Food and Drug Administration), we should see growth picking up in U.S. market as well, say Aman and Shaan, Samir Mehta’s sons.

Torrent is concentrating on chronic therapies with long-term potential and innovative products. In last two years, it has focused on penetrating non-metro markets and has deployed 5,700 medical representatives (MRs); it was 3,600 two years ago. “We have highest MR productivity among top ten domestic pharmaceutical companies,’’ says Aman Mehta. His brother Shaan, MBA from Columbia University, U.S., has joined the business and takes care of strategic planning at Torrent Pharmaceuticals. He is currently leading Torrent Pharmaceuticals' thrust on licensing and partnership deals. Over the years, it has entered into strategic alliances with multinationals, like its JV with Sanofi (Sanofi Torrent India) and marketing pacts and alliances with Novo Nordisk, AstraZeneca, Pharma Dynamics and Boehringer Ingelheim.

In healthcare, Torrent is planning diversification into hospitals and diagnostic centres. Varun Mehta says Torrent Electricals, which makes cables, will diversify to make wires, switchboards and other electrical items to evolve as an FMEG company in electricals.

Torrent Pharmaceuticals was founded by Mehta brothers’ father, the late U.N. Mehta, a medical representative who worked with Sandoz for about 15 years. He invested all his savings to start Trinity Laboratories in 1969 but a Chennai-based company sued him as it had a similar name. Trinity was named Torrent Pharmaceuticals. Though the company was on the verge of closure, in a last-ditch attempt, U.N. Mehta came up with a new product, TrinicamPlus, a combination of three drugs for mental disorders. He pioneered the concept of niche marketing for this product. This changed the fortunes of the company. Slowly, Torrent expanded the product basket to cardiovascular and central nervous systems.

Next-Gen Takeover

“Sudhir bhai and I have been working on our succession plan for last 15 years,’’ says Samir Mehta. The brothers decided to induct the next generation through a structured programme. They were absorbed one by one starting with entry-level positions. Each was given diverse responsibilities.

In 2014, Sudhir Mehta (now 70) gave up his position as chairman of Torrent Pharmaceuticals. Samir Mehta (now 60) took over as the new chairman. Four years later, Sudhir relinquished chairmanship of Torrent Power and retired from active business life. Samir took over as executive chairman of the group.

At the same time, Sudhir Mehta’s eldest son Jinal was made managing director of Torrent Power. A Bachelor of Business Studies and MBA from University of Technology Sydney, Australia, Jinal has worked with Torrent in different positions for over 17 years. He started his career by setting up two generation assets for Torrent Power. In 2014, he was given responsibility for power distribution business and is now captaining Torrent’s foray into renewables. It was Jinal who spotted the opportunity in India’s growing energy needs and led gas distribution foray in 2018. He is currently vice chairman and managing director of Torrent Power and oversees Torrent Gas.

In August 2022, Sudhir Mehta’s younger son Varun Mehta (36) was appointed director in Torrent Power while Samir Mehta’s eldest son Aman Mehta (32) was promoted to director with Torrent Pharmaceuticals. Varun is now the director in charge of new business verticals like Torrent Electricals, Torrent Hospitals & Torrent Diagnostics. Varun has a BSc (with honours) in management from University of Warwick, U.K., and MBA from INSEAD, France. He started his career with Torrent Power and spearheaded foray into renewables and operations in thermal power generation and distribution.

Aman Mehta, executive director of Torrent Pharmaceuticals, now heads India and Rest Of The World business. A Bachelor of Economics from Boston University and MBA from Columbia University, Aman led integration of Unichem, which resulted in a big jump in business for Torrent Pharmaceuticals. In November last year he married film actress Sharmin Segal, who is also Sanjay Leela Bhansali’s niece. Samir Mehta’s younger son Shaan (27) joined recently. “We believe Jinal, Varun and Aman are well prepared to take the baton further. Shaan is undergoing a similar structured induction programme,’’ says Samir Mehta.

Mehta brothers gave next generation the option of pursuing a different career. But all four decided to join Torrent. Both Samir and Sudhir Mehta also sought their opinion on splitting the group for the future. They said no. ‘’Next generation wanted to maintain the family unity that Sudhir bhai and I have built over the years,’’ says Samir Mehta.

Over next few years, necessary family settlement agreements were put in place to ensure that next-generation roles are properly defined. They have been assigned roles keeping in mind their strengths and preferences. The next-gen also expressed willingness to take on different roles in the group as and when there is a need. In future, they will switch roles and designations, indicates Samir Mehta. Torrent insiders say the next generation takes up targets, timelines and business strategy aggressively. That augurs well for Torrent Group’s fast-paced growth with experienced Samir Mehta likely to lead the group for at least a decade into the future.