A pharmaceutical entity specialising in medical research and production of medicines was seeking to expand its business and operations in Asia. India, being a hub for pharmaceutical research, along with a large pool of human resources in both the medical and pharmaceutical industries, was the first choice for them to kick start their operations in Asia. Given various options (in terms of form of entity, capital contribution, repatriation, etc.) available for a global entity to set up their operations in India and also taking into consideration the elaborate regulatory & compliance procedures, they approached us, Advith Consulting LLP (ACL), to assist them in setting up their operations in India. Let us have a look at the steps we undertook in this process, the challenges faced, and the mechanism adopted by us to mitigate the same.
 

Determining the form of entity to be established
A global entity in India can be incorporated as a liaison office, branch office, or a subsidiary. In order to determine the most suitable structure for the entity, we engaged in deliberations with the management of the Client, in order to understand the following:

1. Need for setting up of an entity in India

2. Nature and scale of operations that will be carried out by the India entity

3. Global group organisation and operating structure

4. Significance of Indian entity in the global structure

Based on responses received and considering our evaluations and the provisions of various laws such as the Companies Act, 2013; Income Tax Act, 1961; Foreign Exchange Management Act, 1999; and allied laws, we concluded that a private limited company in the form of a wholly owned subsidiary was the most suitable form of entity in the given scenario.

We also assisted them in identifying the quantum of initial capital contribution needed to set up the required infrastructure and working capital requirements.

Human Resource Planning & Management

Human Resource planning & management does not just entail hiring the required human resources but also includes the following:
 

Advith Consulting implemented a comprehensive HR planning and management strategy that enhanced operational efficiency, improved employee engagement, and ensured legal compliance. While designing this, ACL took the overall global HR policy and aligned it to suit the Indian employee and regulatory needs. This ensure a balance between overall group policy with local customisation.

Infrastructure & Asset Management

ACL implemented a tailored approach to identify and set up the various operational units in a Industrial hub, ensuring that maximum benefits that can accrue to a pharmaceutical company are leveraged. We were a part of the client’s project management team right from evaluating locations to setup, advising on the most optimum structure for acquiring the space and negotiating with potential vendors.

Putting in place SOPs for routine operations

In addition to the initial hurdles in establishing the operational setup, a number of processes were to be put in place for the smooth functioning of its day-to-day operations. Some of the major areas of concern that were faced by our Client and were taken care of by Advith Consulting while streamlining the India operations, are given below.

Some of the above mentioned concerns were managed by us with the following approach adopted

Setting up a tool for Accounting, Payroll & Compliance Management

An ERP to cater to the requirements of Accounting, Payroll & Compliance (APC) Management were set up keeping in mind the chart of accounts required to be maintained for Group Reporting as well as to be compliant with Indian Generally Accepted Accounting Principles (GAAP). The system was set up in a manner to reduce and remove redundancies, ensure accuracy and improve efficiency. Further, a Standard Operating Procedure (SOP) was also set up for tasks like vendor payments, employee reimbursements, and revenue recognition, which were integrated with the chosen ERP. Here as well, a localisation of the SOPs from the global SOPs were done to suit the needs of Indian requirements.

Transfer Pricing Benchmarking

Being a service provider to a related party, transfer pricing norms as per the provisions of the Income Tax Act, 1961, were applicable for the company. A “Function, Asset & Risk Analysis” was performed in order to determine the most appropriate method and to determine the transfer pricing margin.

Expense Management and Reporting

A significant portion of the transactions for a global company providing services to its group entities are of the nature of expenses. By implementing a robust, cost centre and project-wise system to analyse and report the relevant metrics through the MIS, we ensured precise tracking of both fixed and variable expenses for the client, leading to effective expense management. A detailed report was prepared after analysing the expenses, cash flow trends, and profitability, enabling the client to make informed decisions. This preemptive approach enabled the client to optimise their resources to the maximum and achieve consistent growth in the ever-competitive Indian market.

Cash Flow and Treasury Management

A system for continuous analysis of cash flow requirements was put in place. A treasury policy was implemented that continues to serve as a guideline for managing the cash flow and investments of the company, ensuring that only optimal risks are taken and returns are maximised. A periodic update to the management on the various aspects of Cash Flow and Treasury Management through the MIS is also adhered to, ensuring informed decision-making.
 

Outcome and Impact

Advith Consulting’s approach led to the development of a transparent and efficient framework that not only facilitated seamless functioning of the organisation but also enhanced efficiencies for our client. Our reporting systems enabled informed decision-making and improved the financial health of the company. For a global entity, ensuring that they have visibility and control over the operations of its subsidiary is of utmost importance. A transparent and streamlined reporting mechanism, in addition to the presence of robust systems and processes helps in providing them the required visibility, enabling the formation of a strong and vigorous global network. Through our proactive approach, we were able to deliver to this client and continue to do for many more.

Contributors

Sharanya Sundar linkedin
Priyank Parekh linkedin 
Rakshitha Prabhu linkedin
Kuldeep Sarma linkedin
Poonam Vernekar linkedin