Indian drug outlook favourable: ICRA & Moody's

Ahmedabad: Outlook on the Indian pharmaceutical industry remains favourable, says ICRA & Moody report released on Wednesday. Domestic formulation market grew by 13-16% per annum in last five years.

According to the report, domestic formulation market size stood at Rs 58,300 crore, ranked third in terms of volume and tenth in terms of value, globally. The domestic growth was driven mainly by expansion in volumes and new introductions. Lifestyle-related disorders are driving growth at faster pace in chronic segments along with increasing healthcare spending.

Product patent regime was not a major constraint currently, as companies have however, not been affected as existing products continue to exhibit extended life cycle and companies continue to launch novel combinations to support growth. Lastly, limited number of products have been launched under patent protection in India. Compulsory licensing route also provides faster access to market

However, domestic companies will face challenges and competition from regulatory driven price cuts, smaller players aggression and MNCs generic majors are setting an eye on the $12-13 billion market growing at 14-15% per annum.

From 2011, trends are changing, MNCs has stepped up their focus on the Indian market as they are pursuing a comprehensive strategy. They are focusing on chronics, branded generics and launching patented products from portfolio of parent companies. Expanding their field force and focusing on Tier -II as well as Tier - IV towns. Domestic market grew at 15%, while MNC pharma revenue grew at 18.7%.

For Indian companies eyeing US generics market, seven out of the top 20 innovators products will face generic competition in 2012 with $35 billion in value. Key products losing patent protections in 2012 include - Lexapro, Geodon, Seroquel, Plavix, Tricor, Singulair and Actos. Branded drugs worth $70 billion are likely to loose patent protections between 2013-17, the report indicates.

Malaysia and India bi-lateral trade at an all time high

The growth in the merchandise trade between Malaysia and India has reached an all-time high, with over US$10 billion worth of trade transacted for the year 2011. Total trade between Malaysia and India for 2011 was US$12.54 billion, an increase of 40% compared to US$8.98 billion in 2010. This impressive growth has been predominantly attributed to the burgeoning economies of both nations and the strengthening of bilateral trade between the two countries.

Beginning with an exponential rise in the tourism, the relationship between the two countries has been further enhanced, opening new avenues for Malaysia and India to benefit mutually from each other's economies. Over the past 10 years, trade between Malaysia and India has seen a healthy average growth rate of over 15.6% p.a.

In spite of a slowdown in the global trading scenario, Malaysia has shown signs of rapid growth, recording a total trade value of US$415 billion in 2011 - the highest ever achieved. For the 14 thconsecutive year, Malaysia has recorded a trade surplusfigure of US$39 billion - a growth rate of 9.4% for the year 2011. The merchandising trade has registered an impressive growth of 8.7% p.a. with exports from Malaysia growing to US$226.98 billion, while imports recorded a figure of US$187.66 billion - an 8.6% rise. This notable feat is at par with other developed countries in the region, like Singapore and ROK, which have registered similar records.

According to the World Competitiveness Yearbook 2011 Report by the Institute for Management Development (IMD), Malaysia has been ranked among the Top 5 countries in terms of international trade, after Singapore and Hong Kong. Malaysia has now surpassed most of the developed countries such as the USA, Switzerland, Australia, Canada and the United Kingdom, in terms of international trade

Leaders agree policies must shift to boost growth: PM

Los Cabos: India today said the heads of G-20 nations agreed policies in these countries must target growth. It also expressed satisfaction on the fact that the leaders agreed to India’s appeal to augment resources of multi-lateral development banks to fund infrastructure needs in developing and poor countries.

Prime Minister Manmohan Singh said, “My overall assessment of the meeting is there was a general agreement that policies in all countries must shift to strengthening growth. There are many things that have to be done to achieve this. There was also a general agreement that the most urgent problem we must tackle is reducing uncertainty about the Euro zone.”

He said the G-20 summit was held amid very difficult circumstances. “Faltering growth in most countries was overshadowed by the threat of uncertainty in the Euro zone, arising from a combination of excessive sovereign debt and banking weakness. The summit provided a very valuable opportunity for G-20 leaders to share their concerns.”

The prime minister said the Los Cabos Declaration fully reflected India’s demand that infrastructure investment in developing countries could play a major role in stimulating a global recovery. The declaration indicates multilateral development banks should be strengthened for this purpose. “We would work with G-20 countries to transform their commitment to specific action,” Singh said.

At the opening of the summit on June 18, Singh had suggested resources of multi lateral development banks be enhanced for lending to infrastructure needs of both poor, as well as developing countries to stimulate growth there, as the Euro zone crisis had choked capital inflow into these nations.

He said Euro zone leaders had assured other G-20 countries they were committed to protecting the integrity of the Euro zone. “They recognise the need to move beyond the present monetary union towards unified banking supervision and adoption of common and enforceable fiscal rules,” he said.

However, this would be a gradual process.” Making changes in treaties involving 17 parliaments (for the Euro zone) and 27 (for the European Union) is a time-consuming process,” Singh said.

Euro zone leaders indicated a strong commitment to take whatever action was needed to protect the Euro area, as long-term institutional structures were built, Singh said, adding they would be able to give more specific indications after the European Summit.

He added India’s contribution of $10 billion to the International Monetary Fund reflected its recognition of the fact that it should play its part as a responsible player in the global community.

The IMF has assured contributors it would be available whenever needed, he said, adding, “It will, therefore, continue to form part of our reserves.”

Many leaders had also emphasised the importance of accelerating governance reforms in the IMF, including a change in the quota formula to reflect economic weight, he said.

He added the summit also reiterated the stand against new protectionist measures.

“This is an important statement of intent by G-20 leaders to resist protectionist tendencies, which, typically, increase in periods of high unemployment and low growth,” he said.

Diabetes, skin care will hold key for drug makers' growth: Credit Suisse

Mumbai: The next round of growth for Indian pharma companies will be driven by the fastest growing molecules in the diabetes, skincare and eye care segment according to a report by research firm Credit Suisse.

The market share of a drug company is directly related to the number of fast growing molecules in the company's pipeline, the report said.

"Every company wants to be present in the fastest-growing and high-margin molecules and launching products in the high growth segment in India is not difficult. However, in our view, execution on high growth molecules holds key" said Anubhav Agarwal, research analyst Credit Suisse in the report titled 'Does bottom analysis matter?'

According to the report 15% of sales of Indian drug makers is driven by molecules which are growing at less than 5% , and 1/6 thof sales are contributed by molecules that are growing at more than 30%, these are primarily the diabetes and cardiac products.

Credit Suisse is betting on the diabetes therapy that would play significant role in pushing the company's revenues. It says that half of diabetes segment in India is growing is a rate of 30% with maximum chunk of revenue coming from the high growing molecules. This is followed by dermatology where 70% of sales come from molecules that are growing above 15% followed by eye care molecules.

The report has given a buy call on Sun Pharma, Lupin and Glenmark, as according to the firm these companies have the best overall portfolio in the fast growing segments.

BhartiSoftBank ,Yahoo! Japan tie-up to provide mobile internet

New Delhi: BhartiSoftbank (BSB), a 50:50 joint venture (JV) between Bharti Enterprises and SoftBank, on Tuesday partnered with Yahoo! Japan for developing mobile internet portal for the Indian market.

The companies have formed a JV company christened BSY Pte Ltd for this purpose. The new company would combine Bharti’s Indian market with SofBank group’s (Japan) experience in internet portal space.

BSB was launched in October 2011 to focus on mobile internet in India.

“This will be an important piece in our strategy to drive the uptake of mobile internet and data services,” Mr Kavin Bharti Mittal, Head of Strategy & New Product Development, BSB said.

Yahoo! Japan, with over 84 per cent internet users using it, has largest user base on mobile in Japan driven by its mobile internet portal.

“The Indian market will see growth of data usage on mobile. Through this partnership we hope to contribute to enhance people’s lives through mobile internet,” Mr Shin Murakami, Chief Mobile Officer of Yahoo! Japan said.

Tommy Hilfiger on expansion spree in India; other retailers entering the market through joint ventures

New Delhi/Bangalore: American apparel-maker Tommy Hilfiger plans to add 500 stores in India over the next five years to capitalize on the brand's surging popularity, the company has told the Department of Industrial Policy and Promotion (DIPP), the nodal agency that clears such foreign investments.

Tommy Hilfiger Arvind Fashion Pvt Ltd, a 50:50 joint venture between the US premium lifestyle brand and Ahmedabad-based Arvind Ltd, will invest Rs 60 crore in 45 company-owned stores; a significant number of the stores will be opened through franchisees, according to a foreign investment application filed by the company and reviewed by ET.

Currently, Tommy Hilfiger operates 58 franchisee outlets and over 60 shop-in-shops in other department stores. The expansion will take Tommy Hilfiger's presence to 631 points of sale by 2016-17.

Both partners will invest Rs 15 crore each, whilst Rs 30 crore will come from the company's internal accruals, the alliance said in its application to the DIPP.

"Engaging in retail operations directly would enable the applicant company to set up retail stores in locations all over the country including in those which at present are found commercially unfeasible by our franchisee partners," the application said.

"The company will announce its concrete plans in due course," Jayesh Shah, director & CFO of Arvind said, without commenting on specific queries.

A year ago, Tommy Hilfiger had bought out the 50% stake of the Murjani group in a joint venture called Arvind Murjani Brands, which owned the franchisee rights for the American brand in India. The Murjani group held the Tommy Hilfiger trademark licence in India.

In 2011 the JV applied to the Registrar of Companies for a change of name from Arvind Murjani Brands to Tommy Hilfiger Arvind Fashion with an authorized share capital of Rs 20 crores. Now, the alliance has filed an application with the DIPP seeking approval to open Tommy Hilfiger branded stores in India via the window for single-brand retailing.

Tommy Hilfiger Arvind Fashion is bullish on India as the brand has shown "robust financial performance" over the years and clocked total sales of Rs 80 crore for the fiscal year ending March 2011. Revenue is expected to have swelled four times to Rs 320 crores for the fiscal year ended March 2012, the documents filed by the company to the DIPP said.

Nearly 17 per cent of the $40-billion Indian apparel market is organised, management consulting firm Technopak Advisors estimates.

The $4.6-billion Tommy Hilfiger, a unit of PVH Corp, also owns brands such as Calvin Klein, Van Heusen (the Indian rights are owned by Madura Fashion & Lifestyle), and operates more than 1,000 stores in over 90 countries in North and South America, Europe, Asia Pacific among others.

Tommy Hilfiger has been one of the early movers among international lifestyle brands, having entered India in 2003. "It has stayed away from much discounting and created a loyal following across metro cities," Arun Sirdeshmukh, former CEO of Reliance Trends and co-founder of portal Fashionara, says. "But given their premium positioning it remains to be seen if there is a market for an additional 500 stores," he adds.

Meantime, in a separate DIPP application, French fashion brand Promod SAS has filed for a 51 per cent stake in a joint venture with local Modex Trading Pvt. Ltd. Modex is co-owned by Tushar Ved, the promoter of Major Brands, which currently owns Promod's franchisee rights in India.

Retail analysts say the brand had low recall value before it launched in India and a limited footprint, which is slated to change with the JV. "Promod has done fairly well in India also on the back of its mall locations, being a part of Major Brands' portfolio that includes Mango, Charles & Keith and Aldo," a rival retailer, said seeking anonymity.

The four-decade old brand, which claims to refresh its collection with 100 new products every two weeks, competes with women-centric, trendy brands such as Zara, s.Oliver and Esprit.

Incidentally, Madura Fashion & Lifestyle (MF&L) too is in the process of converting the distribution agreement it signed with Esprit in 2005 into a joint venture. "We have been in talks with Esprit and are trying to fine-tune things," Ashish Dikshit, CEO of MF&L said, without divulging details. "Our approach is to look for deep and long-term alignments," he added.

A study by management consulting firm Booz & Co revealed that around 100 multinational retail & consumer companies had entered India between 1990 and 2010. As many as 86 companies entered before 2009, and a little over a fifth of this lot (or 18 companies) changed their partnership model.

"Over the past few years, consumer brands that had followed the low-risk and low-return model through franchisees and distribution agreements, have gained confidence in the market and increased commitment," Raghav Gupta, principal at Booz & Co, says. Take for instance, UK-based retailers Clarks, and Marks & Spencer, which extended their distribution or franchise agreements into joint ventures with Future Group and Reliance Retail respectively.

India's economic outlook is positive: Zinnov

Zinnov Management Consulting, a market globalization Advisory firm, today presented a positive & robust outlook on the Indian economy as opposed to the sentiments that are doing rounds in the industry. In a striking contrast to Fitch's recent downgrade of India's credit rating outlook to negative, Zinnov believes this to be a momentary phase and showcased reasons for it to be a promising decade.

Praveen Bhadada director (market expansion) Zinnov said, India is no longer an emerging market but a happening one, where such market ups and downs should be acceptable. Both multinationals as well as Indian companies aspiring for growth should continue to take focus on the long-term view, with which they established their presence in country.

"While quarterly numbers are important, it is also equally essential to focus on market creation activities and opportunity realization to reap benefits in the next five-year horizon. With the rapidly growing internet and mobile user base and increasing demand for services through new technology challenges, investors should not be deterred by a temporary phase when the fundamentals continue to remain strong," he added.

Showcasing and listing some of the strong reasons why various spokes of the ecosystem need to keep faith in these turbulent times, Zinnov brought to light some of the factors on which, we should be betting high on:

India technology consumption is exploding:India currently has over 123 million internet users, over 600 million people use mobile phones, 15 million people do online transactions and over 51 million people log on to Facebook. Over 170 million UID numbers have already been allocated to Indian residents. The $30 B+ domestic IT market is growing at a much faster rate than the exports market. India is already seeing $B+ start-ups emerging. E-commerce market is expected to reach $23 B+ in the next 4 years. Cloud computing is expected to see revenues of the order of $5 B in the next 5 years.

GST implementation will accelerate economic growth:While GST implementation has been long delayed, but once implemented, GST is expected to increase India's GDP by 0.9% to 1.7% as per NCAER. This will also result in export gains of 3.2-6.3% and import gains of 2.4-4.7%. GST along with FDI in retail segment will increase the FMCG industry size by $50 Billion.

Indian MNCs and vast base of SMBs will be impossible to ignore:61 Indian companies feature in the Forbes list of top 2,000 global companies. Over 175 companies can potentially feature in the list by 2020. India also has 45 million SMBs, making India the second-largest country in terms of SMB potential, next only to China.

Large states in India are already booming: India's top 5 most populous states can hold the combined population of Brazil, Mexico, Philippines, Vietnam and Egypt. Maharashtra's GDP is equivalent to that of Singapore. GDP of states such as Delhi, Bihar, Chattisgarh, and Goa has grown over 10% in FY12. Over 2,700 investor MOUs were signed in Gujarat in just one day as part of the global investors' summit in 2012.

Govt to promote IT SEZ in smaller towns

New Delhi: The government is likely to announce incentives to promote IT-related export hubs in small towns as part of its effort to woo back investors to special economic zones.

The commerce ministry is amending the rules for special economic zones (SEZs), which have become unattractive to investors following imposition of minimum alternative tax (MAT) and dividend distribution tax (DDT) in 2010-11. Earlier, SEZs were exempted from most levies.

While SEZs across sectors will benefit from the new rules, IT SEZs stand to gain the most as their contribution to exports is more than that of others, an official said.

"As IT accounts for more than a fourth of the exports from SEZs, the reforms will have a special dispensation for the sector," the official said, adding, "It would streamline incentives in a way that it encourages such zones to come up in tier-II and tier-III cities."

After imposition of MAT and DDT, growth in exports from SEZs slowed to 15.4% in 2011-12, from 43.1% in 2010-11 and 121% in 2009-10.

The proposals being considered include a sharp reduction in the mandatory minimum area requirement for different categories of SEZs, easier norms for building social infrastructure like schools, shopping complexes and residential blocks in SEZs in smaller cities, besides relaxation in vacancy and contiguity or continuity norms that have often proved to be hurdles for proposed zones.

The government may also allow broadbanding of sectors, which will allow ancillary units to come up in sector-specific SEZs. To factor in more certainty for investors, the government is also planning to issue clarifications in advance on investment and regulatory issues.

"Investors got a jolt when the finance ministry decided to impose minimum alternate tax and dividend distribution tax on SEZs in 2011, as the investment decisions had been taken keeping the initial tax-free status in mind," the official said.

The incentives, however, will mostly be aimed at simplifying rules for setting up SEZs and not have any direct revenue implications. "The revenue department has made it clear that it does not want to take on additional financial burden. We respect that and are ready to stay within the mandate specified by the SEZ Act," the official said.

Interestingly, the revenue department had given a list of objections to the proposed changes, many of which the commerce department has chosen to ignore. However, experts say the SEZ Act gives the commerce department enough powers to make significant changes in rules.

"The SEZ Act allows the government to make amendments, either for all or a particular class of zones, and it can come out with notifications on provisions that it finds appropriate," said Hitender Mehta, co-chairman of industry body Assocham's SEZ council. Plans are afoot to simplify contiguity or continuity norms, which often require developers to build infrastructure to by-pass public structures.

"IT SEZs need not have the same nature of physical fencing as required for a manufacturing SEZ. Even for manufacturing SEZs, contiguity issues can be examined on a case-to-case basis," the official said.

Several developers in the country have already written to the government for relaxation in these rules.

Air Works, Empire Aviation team up to service business jets

New Delhi: Owners of private business jets in India can soon look forward to a one-stop shop for meeting all their travel needs. This follows Air Works making a Rs 120 crore strategic investment in Dubai-based private aviation company Empire Aviation Group. The new company will offer end-to-end aircraft asset management services for private business jet owners.

The strategic investment is through a mix of internal accruals and structured debt finance of Rs 120 crore from KKR & Co, officials said.

“If there is a owner of a private business jet who does not want to have the headache of maintaining a staff for managing the aircraft we can help them not only operating their flights but also getting clearance for the operations,” officials said. The new company expects to open the first office in the next 30-45 days in Bangalore followed by Delhi and Mumbai. Initially staff will be brought from the UAE base, officials said.

Declining to give details of the companies that have already signed up with Empire Aviation, officials said, “In the United Arab Emirates we operate for some former prime ministers and wealthiest of the wealthy.”

On how much a business jet owner would have to pay for the services, officials said: “The management model will depend on the type of aircraft. You might have some one who flies 20 per cent of the time and offers the aircraft for charter services 80 per cent of the time. The amount such a customer will pay will be different from what another customer pays,” officials said.

Air Works may look to raise between $ 35-50 million capital but there is no talk to divest at the moment, officials said. While GTI has a stake holding of about 25 per cent, Punj Lloyd holds about 19 per cent stake in Air Works. The funds will be raised primarily to create an engine Maintenance, Repair and Overhaul facility, officials said.

PowerGrid plans to diversify into distribution abroad

New Delhi: Power transmission monopoly PowerGrid Corporation of India is planning to get into distribution business. The company that cannot directly trade power in the domestic market due to regulatory restrictions, is scouting for power distribution opportunities overseas. Besides, it is trying to branch into EPC (engineering, procurement and construction) business in other countries.

The company currently has 19 overseas projects that mainly involve consultancy in power transmission. It has international projects of around Rs 10,500 crore under execution.

Chairman and Managing Director R N Nayak told Business Standard that they were not only looking for transmission, but also distribution business. “We have executed around 33 per cent of rural electrification where we are distributing power as franchisee. Though we have experience, we can enter distribution business provided we are able to buy and trade power in the domestic market,” he said.

Nayak said the company wanted to expand its overseas portfolio by going beyond consultancy. Besides consultancy, the company’s international foray is also focusing on asset management, EPC and joint venture/acquisition. The consultancy business contributes about Rs 290 crore to the company’s overall income of Rs 10,785 crore at the end of financial year 2011-12.

PowerGrid already offers consultancy services in overseas markets, such as Nepal, Bangladesh, Sri Lanka, Afghanistan, Nigeria and Bhutan, among others. The company is still exploring opportunities in this sector in other countries.

The company’s focus areas outside India are SAARC (South Asian Association For Regional Cooperation), Africa and Gulf countries. It has added four new countries — Myanmar, Kenya, Ethiopia and Tajikistan — in the last financial year. The number of orders from international sector increased to nine in FY12 from six in FY11.