Friday, August 31, 2012

INDIA INC.: Q1 RESULTS

Slowdown is over and the outlook is bright. Still, India Inc.’s profitability has taken a hit in the very first quarter of the fiscal when the country is expected to grow at 9.4%. Avneesh Singh analyses the reasons for the dismal show

Nevertheless, it will certainly be unfair to say that everyone in India Inc. is a culprit of poor performance. A sectoral view of the results indicates that while sectors like Banking and Metals have posted brilliant report cards during the quarter, sectors like Oil and Gas and Telecom have turned out to be the spoilsports. A resilient job market, improving real estate sector and low lending rates certainly added to the performance of Indian banks in Q1. As pointed out by Rajat Rajgarhia, Director – Research, Motilal Oswal Securities Ltd, “For large banks (except ICICI Bank), loans grew above industry average of 20% y-o-y.” Overall PAT performance of the banking sector remained above expectations led by a strong core operating performance by state owned banks in particular. A y-o-y analysis of top 20 banks suggests a 30.3% growth (15% q-o-q) in aggregate PAT in the last quarter. Talking to B&E O. P. Bhatt, Chairman, State Bank of India points out, “Increase in net interest margin and decrease of high cost deposits were the main reasons for such increase in profits.” Moreover, the sector is expected to carry on its good work for the rest of the year as well. Commenting on the reason for the same Chandan Taparia, Banking Analyst, Anand Rathi, says “Demand for all kind of loans is growing with the growth in the Indian economy, so it is all positive for the banking sector going ahead.” But then, there is a word of caution as well as he further adds, “The only obstacle visible for the sector at present is RBI’s rate hikes to control inflation.” Also, if new industrial houses are given banking licences in this year itself, then the ride may not be as smooth as it looks at present as renewed competition and pressure on margins come into the picture.

What may be a possible dampener for the banking sector in the latter half of the fiscal was witnessed as a problem for Indian telecom companies in the first quarter itself. The ongoing tariff wars proved really fatal for telcos like Reliance Communication, which saw a mind-boggling 233% y-o-y decline in its profits for the first quarter. The company posted loss to the tune of `4.90 billion as compared to a profit of `3.70 billion in Q1 last year. Overall, the industry (analysis of top 4 telecom service providers, which control nearly 67% of the market share) has reported erosion of more than half of its reported profit in Q1FY’10. The IT biggies had a better time in comparison. While Infosys net profit declined by 2% yoy, TCS and Wipro posted a robust yoy rise in PAT by 22% and 31% respectively. However, fears of global uncertainity remain, particularly in Europe.


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Thursday, August 30, 2012

IN THE INSURANCE IMBROGLIO, THE COMMON MAN IS THE SCAPEGOAT AGAIN!

Since the past two weeks, insurance companies proffering health insurance (18 major ones, including four public sector entities) have announced their decision to discontinue the cashless facility. Their argument – the bills from the bigger hospitals are inflated, which in turn is hitting their bottom lines! Reports indicate that the annual premium collected by the health insurers is around `8,000 crore whereas the outflow in terms of settlements is around `12,000 crore. Their biggest contention is that certain hospitals do not subscribe to the package rates provided by the insuring companies. And so, as a result, insurance companies have de-listed almost 150 hospitals in Delhi and NCR alone from their list and have also stopped giving cashless facilities to the insured, as of now.

In fact, there are four key stakeholders to this current imbroglio. The first is the group of insurance companies; the second are the large hospitals; the third are the state governments (as health is a state subject!); and the last – and the most significant – are the insured individuals, that is, the common man! Let’s analyse each of these stakeholders and evaluate them in the context of the current crisis.

Let us first start with the insurance companies. Considering that filing of inflated medical bills – by increasing the stay of patients, requesting unnecessary medical tests, multiple visits by consultants, differential pricing, expensive disposal items et al – has been an issue with the large and renowned hospitals since a long time, why wasn’t the same addressed by the insuring companies much before and that too within the actuarial, while drafting the health based premiums? Today, when bottom lines are put to test on account of the faulty modeling of premiums by insurance firms themselves, why should one be allowed to spoil the boat of the common man – especially when the common man initially signed up for health insurance on being promised advantages like cashless facilities?

Coming to the second stakeholder – that’s the group of hospitals, who are accused of errant and inflated pricing! Now, if hospitals were/are charging that kind of price, it is just because of the existing asymmetries in the health market. Looking at health completely dispassionately, these hospitals would not even have existed had the state government (the third stakeholder) been responsible enough to create adequate health infrastructure. In the absence of the same; and in the absence of quality health facilities, all leading hospitals enjoy that position of being able to charge premium pricing. As far as quota for treating the poor free of cost is concerned, we all know how unsuccessful both the government and these hospitals are in their own respective ways.

Finally, coming over to the fourth and the most significant stakeholder – the common man. Like always, in this moment of crisis, he is the biggest loser! Health expenses are the single-most reason to drive maximum people to poverty in this country. The out of pocket expenditure on health expenses accounts for a staggering 90%! All this because the government has miserably failed to create adequate health infrastructure; and thus, most of the health market is catered to by private players. In the given scenario, health insurance – aka cashless facility – is the only recourse for the common man. And to take that away is the most illogical thing to do! One doesn’t need to be a nuclear scientist to understand the kind of problems faced by an average Indian family during hospitalisation. Don’t insurance companies realise these issues? Don’t they know that the problem here is of a lack of liquid disposable cash with families? Don’t they know that in the absence of the same, there is no other alternative that is left with such families? And if the insurance firms know all this, then they should also know that reimbursement is not a solution! A cashless facility allows a family to proceed with hospitalisation without any hassle. If the patient or his family had enough cash to be paid at time of hospitalisation, they would not have had to run behind companies for insurance. A scenario of reimbursement would only come into the scene if the family is able to pay the bills in the first place. Secondly, when a family member is critical, no one feels like running through the list of hospitals and getting the patient admitted in a listed one; in general, one would rush to the nearest hospital.


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Wednesday, August 29, 2012

Resurrecting the Indian pharma growth saga

Ever since the growth models of the 1990s began to elude the big guns of Indian pharma, a sordid phase of consolidation seems to have set in; raising fears of total disaster for the players. However, there is a light at the end of the tunnel with an interesting clutch of mid-sized players showing the way towards future sustainability and growth.

It was a hot sunny afternoon in the summers of 1984. R. C. Juneja (now MD & CEO, Mankind Pharma) was roaming around the streets of Meerut district selling medicines in his capacity as a medical representative of Lupin. He was surprised to see that a majority of doctors in small villages were not visited by drug manufacturers. Suddenly, an idea struck his mind that led him to quit Lupin. In the same year, he started a company named BestoChem Formulations along with his brothers Rajeev and Girish. After going through the usual ups and downs through which any other startup would go, Juneja shut down operations and in 1995 went on to establish Mankind Pharma with the aim to provide society access to quality medicines at affordable prices. Today, his dream has become an undeniable reality and Mankind Pharma is ranked no. 1 in terms of prescriptions and doctors per month across India. The pharma giant generated a turnover of `12.5 billion in FY 2009-10 and is planning to take this figure to `16 billion in the current fiscal.

If Mankind Pharma's success story was that of inspiration, persistence and perseverance, Arch Pharmalabs was about a well-timed and precise business decision. Three friends – Ajith Kamath, Manoj Jain and Rajendra Kaimal laid the foundation of Arch in 1999 by acquiring an SME called Merven Drugs. They subsequently brought down the product count of Merven Drugs from 10 to just three Active Pharmaceutical ingredients (APIs) – Atrovastatin, Clopidogrel and Isoxazole Penicillins. Many criticised them for their move, but with a turnover of `12 billion, Arch Pharmalabs is today one of India's most sought after and largest contract manufacturers for global pharma companies.

While on one side, industry watchers view with dread a trend of sorts where Indian pharma companies capitulate in front of the competition (with Ranbaxy, Piramal Healthcare, Shanta Biotech, Dabur Pharma and Matrix going for sell off), the mid-sized pharma success story seems to provide a welcome sign of relief. But the question remains, what is it that has suddenly catapulted these companies into the limelight? And is their success story sustainable?

To answer this, we first need to look into what's going on with India’s big daddies. Further consolidation is anticipated in the Indian pharma industry as even some of the larger players view stake sales to global giants as a very lucrative option. There are a number of reasons for this on either side. Firstly, given the limited growth opportunities in their home markets and the slew of patent expiries, global pharma players are looking for opportunities in the international domain and are willing to shell out the dough quite generously if needed. Moreover, Indian pharma players have been strong competitors for Big Pharma in the past; both in the markets and in the corridors of law. Secondly, given the patent regime that came into power in 2005 and the fact that the big Indian pharma companies have expanded in a crowded market, there is little room to grow. Also the growing competition has driven margins down to quite discomfiting levels in the generics space; particularly in the lucrative American and European markets. On the R&D front too, the cost of inventing a new molecule is anywhere between $1.5-2 billion and 12-15 years, and Indian companies haven’t achieved much success in this area either. They did make some attempts at growing faster, including sizeable overseas acquisitions, but the lure of the exit route seems to have been to strong to resist ultimately.


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Friday, August 24, 2012

$1 trillion? Sure...

The US has announced the discovery of minerals apparently worth $1 trillion in Afghanistan – the IIPM Think Tank believes much of this made up value is balderdash and pure hogwash forwarded by the US

Have you heard about the jungle gold digger who announced to the world that he’s found the biggest gold horde underground? Never? That’s not too surprising, as not even a sophomoric mercenary would make the mistake of letting the world onto El Dorado if he found it first – unless, of course, he didn’t find it and simply wanted to conjure one up in order to boast to grandma back home. Or, of course again, the protagonist in question were the conscientiously incorruptible and trustfully industrious United States.

If those adjectives sounded oxymoronic, that’s basically the simple crux of this article’s argument. The recent June 2010 announcement by the US geological survey – a Pentagon study, if anyone expected any less – that they have stumbled onto $1 trillion and beyond of “untapped” mineral deposits (ostensibly iron, copper, cobalt, gold and lithium) in Afghanistan reminds one of the Great Game that was played between the British and the Russians for gaining influence in central Asia in the early phase of the 19th century.

The US is an old hand at peddling such so called discoveries for its mutual convenience – or at not peddling them. During the period that US took over Iraq, did one wonder even once that the Bush regime never gave official confirmation of the oil reserves in Iraq that the US was directly controlling and extracting? Rarely, as it was a given fact that US will siphon off oil money to pay for its war expenses and claims. The truth is, in February 2010, Agence France Presse had already quoted Karzai brandishing a US Geological Survey report that Afghanistan had $1 trillion mineral reserves. The flop attempt at global media publicity went unnoticed then. Clearly, Pentagon’s spin doctors were not too impressed by the February achievement, and re-branded the effort, training Karzai to repeatedly mention that the reserves were between $1 trillion to, hold your grandma’s horses, $3 trillion!

Read more....



 
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Wednesday, August 22, 2012

Lonely up there!

African Americans still struggle

What Obama achieved 18 months before (first Presidential win of an African American) was a historic moment. But the expectation that his win will usher a new era and lead to the emergence of African Americans in to US offices may prove to be a misplaced hope. African Americans are in fact struggling too much to survive in the major state wide offices, with their number going down to a disappointing three. Newspapers like Washington Post are suspecting a bleak picture ahead with the possibility of having no black governors or senators by next year.

Historically, since 1870, 123 African Americans have served in the US Congress. Only two blacks, including Patrick and David Paterson have been elected to governorships. And only six blacks – Obama, Burris, Carol Moseley Braun, Edward Brooke, Blanche Bruce and Hiram Rhodes Revels have served in the US senate. A few are in office; but the way they are trapped in scandals indicates that they may not stay in office for long. While New York’s David Paterson (one of the nation’s only two black governors) decided not to run for the next election due to ethics scandals, the only black senator Roland Burris made the same decision.


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Tuesday, August 21, 2012

Your butt is my smokin’ problem

Smoking regulation has achieved some success; but it is pathetic that governments don’t have the honesty and sincerity to completely ban cigarette production globally – it’s clear how well money and lobbying works

It is appalling that despite all the medical advances mankind has made, the twenty first century still grapples with diseases that are perhaps even deadlier than those in the dark ages and have killed millions. The least we can do is to not add to the already depressing statistics through a social ill like smoking.

Innumerable researches have concluded that cigarettes contain 11 different known compounds that cause cancer. And almost everyone in any corner of the world – smoker or a non-smoker – is quite convinced that there are enough reasons to quit smoking irrespective of age, wealth, colour of skin or region where they live. Nearly every nation on this earth has realized the need for policy interventions and have gone some distance as well. They have achieved some success too, especially in the developed part of the world. As per data provided in Tobacco Yearbooks by Economic Research Service, US Department of Agriculture, during the 17 years between 1990 and 2007, while production and export of cigarettes in the US dropped by about 34%, consumption decreased by 31%. In 1990, cigarette production was 709.7 billion units, which came down to 471.6 billion in 2007. While the consumption was around 487 billion units per year in 1990, it came down to 360 billion in 2007 in the US. The picture is pretty similar in other developed nations of the world.

However, this does not mean that the job is done. Data on a global scale presents a horrifying picture today – more than ever before. There are 1.1 billion smokers in the world, and if current trends continue, the number is expected to reach 1.6 billion by 2025. More horrifyingly, of these, about 80% live in the low or middle-income countries. There are over 300 million smokers in China itself; consuming over 1.7 trillion cigarettes a year, which means 3 million cigarettes a minute. Researches further show that approximately 10 million cigarettes are purchased every minute; 15 billion are sold each day, and over 5 trillion are produced and used annually.


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Monday, August 20, 2012

DELL INC.: THE NEW GAMBIT

Michael Dell is betting big on smartphones to make up for the lack of any ‘killer app’. Is this a two-years-too-late strategy?

From a strategic perspective however, this diversification of Dell isn’t an option, it is a necessity as the world heads faster towards convergence. Even the once-famed semiconductor wars that were once rumoured to remain in the PC domain at large, is being increasingly fought on mobility devices. Dell needs a new revenue generator, especially after its server business is likely to sink faster than imagined before, in the face of higher competition (the latest being Cisco’s entry into the server business with its next-gen Unified Computing System). Michael Dell may have found his revival kid. But the search wasn’t easy; he’s had his own share of initial jitters. Earlier, the company had planned to launch its first smartphone in February 2009. But amidst low economic activity and disinterest on the part of the prospective carriers for the prototypes thereof, Dell had to adjourn its plans. But it’s a new revival plan from Dell, and markets like China, India & Brazil will certainly play a big role. The company recently signed a pact with China Mobile, which has a subscriber base of 500 million and has a strong network of retail outlets. Dell has also signed a deal with service provider Claro, which covers over 2000 cities in Brazil nationwide.

There are however two challenges ahead of Dell. First is its weak distribution network, as industry sources confirm, “The company’s support system of minuscule count of vendors will only lead to a bad memory for the company in the long run.” Second, Intel (which is scouting for vendors to source its latest Medfield and Moorestown chips in smart phones) is reportedly in the final stages of talks with Nokia, to team up for smart phones to be launched by the end of 2011, which again is some blow to Dell’s ambitious plan to join hands with the largest chipmaker in the world. With the financial performance of Dell falling constantly since 2007 – significantly due to the economic slowdown – Dell might still make it through to better times simply because of the upswing. But for whatever it is worth, Michael has to take more such gambles on ‘killer apps’... sooner than later!




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Tuesday, August 14, 2012

A look for every Mausam

Shahid Kapur doesn’t shy from experimenting with his looks. After the tanned and long-hair look in Kaminey, spiked hair was next for Shahid. And now he was recently spotted with a beard, and while he is finding it a bit uncomfortable, it is one of the looks being considered for his dad’s film Mausam. He will apparently carry off two or three different looks in this film. We can’t wait to see Shahid in all of his new avatars!


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