Stock trading in South Asia takes a cross-country leap

It is an idea whose time may not quite have come. Yet, the first moves had been made. Stock exchanges in the South Asian region, including India, have mooted a proposal to allow cross-listing or secondary listing of a top basket of local stocks in each other’s exchanges.


The South Asian stock market is on a rise and it is the major attraction for FIIs. The stock exchanges are at the initial phase of this proposal. If this is approved it will allow companies to raise capital in a country or exchange where it has operations and it will increase the awareness among the consumers.

For any exchange the important factor is liquidity of stock. It is obvious that by cross listing the liquidity of the stocks will increase. There may be some difficulties in this process like corporate governance, listing norms, exchange control norms. The exchanges will have to harmonize all these issue in well advance time so that such problems can be avoided.

This will not only benefit the companies but also to the investors. Investors can invest in the foreign companies without any hassle. They can get the benefit of a companies profit operating in a different country. This will help companies to raise more capital and they will not have to go to NASDAQ, NYSE or LSE to raise more capital.

The stock exchanges can take the business model of Euronext. It was established to face the competition of LSE. This will enable them to strengthen their position and insure them from any competition by any foreign stock exchange.

Source: Economic Times

Aditya Birla Group joins the retail race, on its own

The fun has begun in retail. The stakes are getting bigger by the day with the Wal-Mart name causing ripples in some of the biggest Indian business houses.

It was clear that Aditya Birla Group is going for the retail business from the news which came before. The recent news regarding the Group’s entry into the retail can be seen as an impact of the joint venture between the Bharti and Wal-Mart to enter in to retail. The Birla camp may be thinking of increasing the speed of the work.

Till now four established groups have shown their interest in the retail sector of India. Among them Reliance has already opened its retail store in Hyderabad as pilot testing. That store is mainly focusing on the vegetable and fruits with the retail named as Reliance Fresh. Tata is focusing on Consumer Durables. As these two big corporate have already begun their process to open pan-India store, Aditya Birla has to speed up its work so that it should lag behind in the business.

The Rs. 40,000 Aditya Birla Group is in the business ranging from metals to BPO has good knowledge of Indian consumers. It is being expected that the group will invest Rs. 5000 crore to Rs. 6000 crore at the initial phase. For financing the project it may use the Birla TMT Holdings (an unlisted company) source and debt. Birla TMT has raised around $980 million through the sale of 33% equity stake in Idea Cellular. It shows that the group will not face problems in financing its venture.

The company is planning to enter into the second tier city at the initial phase. It has to be noted that Wal-Mart started its business with the same strategy. One reason for this is that while other players will fight for the market share in Metros it can easily expand and make its base strong in the second tier cities.

Wal-Mart was not able to capture the market in South Korea and many other countries where the local retail players has strong market base. It was because Wal-Mart has a late entry into those markets. Wal-Mart will not miss the chance in India. The $300 billion company wants a strong market in Indian retail sector whose market size is $330. When there is a huge opportunity for Wal-Mart, the local players like Reliance, Aditya Birla Group and Tata are determined to give a tough fight to Wal-Mart.

China beats the world in IPOs

The record breaking initial public offering of Industrial and Commercial Bank of China (ICBC) has powered China’s stock exchanges ahead of those in UK and US as the world’s biggest source of capital for new listings.


Till the October end this year Chinese stock exchanges raised a combined $43.1 billion, more than the exchanges in US and UK. The LSE and AIM exchange of UK raised a combined $ 40.5 billion and the exchanges in US raised a combined $ 38.3 billion. From the statistic it is clear that Chinese stock exchange is far ahead of the two developed countries exchange.

It has to be noted that Chinese exchange were not the highest raiser of fund in the world market. But the situation has changed now. One of the reason for this is the record breaking IPO of ICBC. It raised $21. 3 billion which is a world record. This year many state owned companies went for IPO in China. So this successful raising of fund can be considered as a matter of chance from one angle. Because around 50 percent of the fund was raised by a single company. Again many government owned companies went for IPO. These are highly successful company with the potential to grow further.

But one more thing is that now Chinese companies will not run to other countries to raise fund through ADR or GDR. Because there own stock exchange is able to give them right value with the ability to raise fund to the extent of $21 billion.

Indian exchanges should try to follow the Chinese exchanges. Because many of the Indian companies are moving to NYSE, NASDAQ, LSE to get a fare valuation and raise the desired fund. If they will get the right amount of fund in India they will not move to the western countries.

Wal-Mart & Bharti for Retail Run

Wal-Mart will set up its first shop in India on August 15, 2007, through a franchisee agreement with Sunil Mittal’s Bharti Enterprises.

The long wait for Wal-Mart seems to be over with the partnership of Bharti to enter into Indian retail market. In India, FDI in retail is restricted to single brand store. For multi brand retail the FDI is allowed in franchise route. In order to enter into the Indian retail market Wal-Mart had no other option but to enter through franchise. For that they have got the right partner. When Sunil Mittal’s Bharti has good knowledge about the India’s fast growing consumer market, Wal- Mart the world’s biggest retailer has extensive global retail experience.

Sunil Mittal will own the front end retail store as FDI is not allowed in these stores (For multi brand retail). But the FDI is allowed up to 100 percent in areas such as cash and carry, logistics, supply chain and sourcing. Both the companies will invest jointly in the back-end areas in which they have agreed for the joint venture.

It is going to be win-win situation for consumers. Already India’s second richest man Mr. Mukesh Ambani has entered in to this business and started opening its stores. The Birla group has also grandiose plan to invest Rs. 15,000 crore in retail sector. Now the Bharti and Wal-Mart joint venture is the third biggest retail on line. Presently Future Group (Earlier Pantaloon), India’s biggest retailer is also expanding itself to survive in its own market with the entry of the giant groups. All this is going to benefit the consumer.

This is the second business in which Sunil Mittal and Mukesh Ambani are competing with each other. Earlier it was mobile service in which Sunil Mittal was able to face the tough competition against the Reliance because of its first mover advantage to that business. Now Reliance has the same position. The future will say who is going to win this battle.

RIL plans private GSM network

Mukesh Ambanis Reliance Industries Ltd. is prepared to apply for permission to set up a nation-wide broadband telecom network for internal ( non-commercial use).


Reliance Infocomm was a part of Reliance Group before the split of the RIL. Then RIL was using the service of RIL for its internal use. After the split it is using Airtel and BSNL service. This is a cost cutting measure by the company as it is going to save on its telephone bill in the long run.

This will require an investment of up to $ 750 million. The company is looking at its need in the long run. Now it is expanding in the retail market through its Reliance Retail, Reliance Petroleum chain etc. Company will also use the network for connectivity within its planned Special Economic Zones. It is a good strategy adopted by RIL. It will easily get regulatory approval. Again the costs of equipments are decreasing day by day. Another factor is that it has the experience of this field due to Reliance Infocomm.

But one thing is quite clear from this step is that both the Ambanis brother are firm in their stands and are not going to do business with each other. It may affect both the company as well as the Indian economy. Both brothers are among the richest Indians (Mukesh Ambani is 2nd richest and Anil Ambani 3rd richest). So if they are continuing their fight it is going to affect the economy and its shareholders. Other players may be benefited in this battle. The major one can be Bharti. As Bharti is entering into retail with the collaboration of Wal-Mart (not confirmed yet) it will try to take the advantage of the battle between the two brothers.

Source: Business Standard

India Inc must foray abroad with caution

In February 1912, when the first steel ingot rolled out of Jamshedpur and the first export of steel rails was made to Mesopotamia, the then Tata head made the acerbic comment: “If Sir Fredrick had carried out his undertaking, he would certainly have had some slight indigestion.”

Indian MNC’s are expanding at a rapid pace. They are in a aggressive state of mind to increase their business to overseas market. For this mergers and acquisition is the best strategy. It gives them a new market with established company. They don’t have to spend time in entering the market and make their brand popular.

Tata’s recent bid for CSN is for Rs. 37,858 crore which is double the FDI received in 2005. If this acquisition is consolidated this would become the largest acquisition ever by any Indian company. The next big acquisition in the process is Videocon’s bid for Daewoo Electronics. The outflow is more then the inflow investment.

According to the statistics available (FICCI source) between 2000 and 2006, there were 307 acquisitions totaling over Rs. 90,000 crore. Another interesting thing about the Indian company’s acquisition is that they are expanding in well established markets like Europe and U.S. When we compared it with China, China is focusing on least developed market like Africa. The reason behind is that China is fulfilling its demand for commodities such as oil, metals and farm goods to give a boost to China’s surging economic growth.

India has to be careful as the foreign players are watching the activity of Indian corporate. India has to be ready for hostile bid and takeovers by the foreign players as Indian companies are equally attractive for foreign companies. The FII investment in companies like HDFC, Satyam and ICICI is quite significant. It is time for the Indian companies to be careful and ready to for any offer of acquisition.

SOurce: THis article is the analysis of the article by BY T.C. A. Ramanujam which came in Business Line

India should open up more to China

Everyone points out that China-India bilateral trade, at roughly $19 billion in 2005 is a far cry from $2 billion in 1999. Indeed, the increase is to be celebrated. The Chinese don’t fear Indian competition. In fact, they don’t much think about India at all, compared to the time that India spends agonizing over the Chinese threat.

India and China have made an agreement to increase the bilateral trade to $ 40 billion by 2010. This is a good step to smoothen the relationship between the two countries. There is border dispute among between the two countries and they have fought a war. Now the need of the hour is to forget all the bad experiences of past and start afresh.

Both countries have become the favorite destination for investment by foreign firms and private equity investors. Their GDP is increasing more than 8 percent per annum. The two countries have a large population who is willing to work at the lowest wage according to world standard.

When china is able to attract investors in manufacturing sector, India is favorite destination for the service sector. So the growth of one country is not affecting the growth of another. These countries can help each other by supporting the other in their weak area with their expertise workforce. Indian companies like TCS have already started its operation in china.

China is very open to India when we compared it with India. Indians were worried about the Chinese goods when they were allowed to enter into the Indian market. But they are better off now because they improved their quality of their goods in order to compete with low quality Chinese products.

Chinese are very focused in their works. Now they are learning English for the next Olympic Games as well as to attract the service sector. They are sending delegates after delegates to Nasscom’s doors to figure out the software industry. India should learn many things from China. We have water problem and we are discussing whether to go for interlinking of the river. But China had this problem and they have solved it in proper time. In China they are investing in infrastructure in a planned manner. They are able to fulfill the demand of the supply of power even when the growth is more than 10 percent.

Source: THis is the analysis of the article by Tarun Khanna which came in Economic Times

SEBI asks NSDL, CDSL & DPs to pay up Rs. 116 cr

In a first of its kind judgment that should hold promise of a level playing field for small investors in the capital market, the Securities and Exchange Board of India on Tuesday directed the major depositories- NSDL, CDSL and eight other depository participants like Karvy, HDFC Bank, ING Vysya and IDBI Bank to pay up around Rs. 116 crore as compensation to retail investor who suffered an opportunity loss in the initial public offering share allotment scam that came to light last year.

This was the first decision of its kind in order to curb scams like IPO scam. The IPO scam which came into light last year was depriving the retail investors to participate in the IPO. The retail investor suffered from opportunity loss. According to SEBI, the Depository Participants and depositories are also responsible for all this scam. This is the reason behind the fine charged to them. Karvy was the main culprit in this entire event. When this issue aroused Karvy was banned for few days. Now also Karvy has been charged Rs. 51 crore.

In IPO scam the depositories were applying for IPO’s with fake names and address to get more units of the shares. So the retail investors were getting fewer shares as the IPO was oversubscribed by many more times than the market expectations. Then they were selling those units to big corporate or FIIs. They were creating the shortage of share in the market. So on the first day of listing itself the stock price was in bull spree due to demand of that stock.

SEBI has taken many other steps which are going to reduce the chance of scams like this. Now the loan on shares has been kept at a limit of Rs. 10 lakhs. This limit is not for individual share but for the whole portfolio. This may affect the companies going for IPO. Now the oversubscription rate will reduced as the investor will have to find other source to fund their investment.

Kellog’s wants Tiger frozen

There is a new twist in the Tiger’s tale. It has now emerged as the US cereal company Kellog’s is trying to block Britannia from using the Tiger logo for products other than biscuits.

This is the second dispute over the Tiger brand for Britannia. The first dispute was with its French partner Danone where its French partner has used the Tiger brand of Britannia for marketing in various products along with biscuits in some Asian markets. Kellog’s objection is because of its own logo has Tony the Tiger in its breakfast cereal. Kellog’s is using this logo since 1952. Kellog’s had sued Exxon a decade ago for using the Tiger figure to sell food.

Kellog’s main objection is that Britannia should not use the Tiger brand in the categories where Kellog’s has presence. So it may affect the future plans of Britannia as it has planned to extend its Tiger Brand to various categories after a good success in biscuits. Britannia is facing a stiff competition in its biscuit market. ITC is competing with its brand Sunfeast. Britannia is the only growing and profitable business for the Wadia group. So the company will put all its effort to save its key brand Tiger.

The Tiger brand of biscuits account for 25 to 30% of the revenue for the companies sales annually (Rs. 1800 Crore). This brand was developed in late 90s as a rival product to Parle-G and it became a good success for the company. Now the company wants to extend this brand to various other food categories due to its popularity. Britannia has appointed IPR (Intellectual Property Right) Committee to solve the issue of its brand.

Wait & watch option for Tatas on Corus

The Tata group will be forced to play a wait-and-watch game as rival Brazilian steel firm CSN shortly begins its due diligence on Corus, the Anglo-Dutch steel giant.

The market was surprised with the announcement of CSN (Cia Siderurgica Nacional’s) regarding its bid for Corus at 475 pence per share. This offer is 20 pence more than Tatas’ bid. CSN is a Brazilian company and it had earlier made an unsuccessful attempt to acquire Corus in 2002.

CSN has just given a letter with nothing binding about it. But Corus has no other option but to but they have to fulfill the fiduciary obligations to open its books for a due diligence by CSN, just as it did for Tata Steel. It has to be noted that Corus board had strongly recommended Tata offer to its shareholders. Corus shareholders like Standard Life, have openly said that Tata has undervalued the Corus.

At the beginning of this year Corus share was trading at 300 pence at LSE (London Stock Exchange). After the CSN offer its share price has reached to 500 pence. This is a good time for Corus shareholder. At 500 pence a share the Corus will cost $9.2 billion
which could become too costly for Tata Steel.

Analyst feels that Tata Steel may get Corus by matching the CSN offer price. There are three reasons for that. First, CSN had an unsuccessful attempt to acquire Corus four years back. Second, the offer is subject to due diligence which the Tata Steel had already done. Third, the Corus board has already approved the Tata offer. But Tata Steel has to gain the confidence of the shareholders of Corus so that it can win the battle to acquire Corus.

Source: Business Standard, Economic Times

Profit rate of Indian Inc. behind MNCs’

When it comes to improving the bottom-line, Indian companies have still grown at a thing or two to learn from their multinational brethrens operating in this country.

According to the latest statistics in the first six month of this year the MNCs operating in India have seen an increase in their profit by 43% compared to 40% increase in profit of their Indian counterparts. Three percent is not much difference as Indian companies have also achieved a growth of 40 percent. But it becomes a big difference when we see the growth in sales of these companies. The Indian companies have seen a growth of around 35% in their sales where as MNCs have seen a growth of 23%. So with a lesser growth in sales they have achieved higher growth. It shows the MNCs have better profitability than their Indian counterparts.

The reason for higher profitability is that these companies are focusing on cost cutting measures. The expenditure of MNCs has seen very little growth compared to the Indian companies. The major expenses are increase in employees salary, increase in raw material price etc. Tata steel known for its low cost of manufacturing has seen around 15% growth in its expenses resulting profit growth of meager 4.4%. It affected the share price of the company also as the market was expecting a better growth in the net profit of the company. The wage bill of Tata increase by 3.4%

Reliance recorded growth less than 10%. It was due to the 42% increase in its expenditure. The wage bill of Reliance increased by 17.6% during the first 6 months of this year. Compared to this two Indian companies HLL registered 48% increase in its net profit in the first 6 months of this year. It was efficient in controlling its expenses which increased by only 1.9%. This figure looks more attractive when we see the increase in its sales figure. It increased by 10% resulting 48% net profit. So the Indian companies have to learn from the MNCs how to increase the profitability when you are not able to increase your sales at a rapid rate.

MNCs find market manna in India

India contributes 10-25% of global sales for MNCs like Suzuki, Nokia, Honda, GlaxoSmithKline, Samsung and LG. But the share of revenue is still marginal- in most cases less than 5%.

India has become a favorite destination for many MNCs to do their business here. The advantage of entering into Indian market is tremendous. First one is India is full of resources. Then the labor cost is low. India is technologically better off then any other country in the world. There is huge demand in the domestic market. The Indian market has not been explored fully. There is still growth in this market. The white goods are in boom. Because goods like TV and mobile have not still reached to all the population in India. The tele-density is below 20 ( 15.5 latest figure) but still Nokia saw the highest sell in a day in no other country but India.

The Indian car market has crossed 10 million marks. So it is growing at a rapid pace. Suzuki can see the sell of its car under Maruti-Suzuki almost equal to the sell figure in its parent country i.e. Japan. For Honda also this is equally applied. The auto industry in India is booming because of younger population. The average age of India is around 25. So people are not much conscious of savings at this age but they are going for spending their earnings. The new generation has changed the tradition of savings. They are utilizing all the financial assistance like home loans, credit cards and much more. This change in view towards life is a biggest factor in the spending behavior of Indian consumer.

The problem for the MNCs is to customizing their strategy according to the Indian market. They can not apply the same strategy which they have adopted in countries like US and Europe. The Indian consumers are very conscious about the cost. They want value for money. So it is necessary for the MNCs to ensure that their product is giving value for money invested by the consumer.

Tatas mop up Rs. 900 cr from TCS stake sale

Tata Sons on Tuesday raised about Rs 900 crore in a bulk deal that saw it selling 85 lakh shares of Tata Consultancy Services (TCS) at Rs. 1, 0589 per share, representing 8% of its equity stake in the IT Company.

TCS has ranks 5th in terms of market capitalization. Tata Sons has the majority of stake in this company. As on September the promoters held a stake of 83.64% (with Tata Sons having share of 79.5%). It is India’s largest company. Tata is expanding itself globally. Various companies under Tata have acquired companies abroad. The Tata has made a clear strategy of becoming true MNC.

To fund all the recent acquisitions it needs to raise capital. This is the best source of finance for the company. Even after selling 8% stake it will have a 71.5% stake in the company. So it will not affect its ownership in the company. The IT sector is booming and in the second quarter TCS had the highest profit among the Indian IT companies. This venture of Tata is growing at a rapid pace. TCS has also gone for acquisition of various small companies (small in compared of Tata Corus deal). Tata Tea has also acquired Energy brands of South Africa.

Mauritius based HSBC Global Investment Fund was the major buyer of the TCS shares. It bought around 70 lakh shares for Rs. 750 crore. Tata sons subsidiary Tata Steel UK will raise $5.6 billion as leveraged finance to finance the Corus deal. After buying Corus Tata will become India’s second largest company with a turnover of $22 billion.

Zee buys 50% exposure in Ten Sports for $57 m

Dubai based Taj Television owned Ten Sports and Zee Tele Films on Monday announced the acquisition of the 50% controlling stake in the Ten Sports channel for an all-cash deal of $ 57.15 million. The enterprise value stood at $114 million.

Zee Tele Films is the first private channel in India. It was the market leader in terms of viewership since its inception. Now the Indian TV market is dominated by Star Network. It is followed Sony Network. These two channels are ahead of Zee only because of variety of channels they have in their portfolio. The competition to grab the market share is throat to throat. Zee has got the right from BCCI to telecast the matches to be held in India. It has already entered in to a new segment. The Tensports partnership will giva it added advantage. The other two competitors Star and Sony telecast their programs through two channels each. That is Star Sports and ESPN for Star Network and SET MAX and SAB TV for Sony Entertainment. Now Zee would be able to telecast its program through two channels and it can go for two different sports or series at a time. Now it will not have any risk of coincidence of timing of two matches.

Dubai is a new market for India TV channels. Now the Indian channels are expanding themselves throughout Asia where Indians and Pakistani populations are staying with a considerable population. Dubai is a good market for them. The presence of Tensports in Dubai will facilitate the expansion of Zee to that country. There is news in the market that Zee may acquire the Ten Sports channel in near future. If that happens that is a good strategy by Zee Network. It will get the right to telecast all the matches which the Tensports has right to telecast. Again Ten Sports has got the right to telecast Cricket matches in Pakistan, Sri Lanka and West Indies. Again Ten Sports is one of the leading sports channel in India. This will give advantage to Zee as it will not have to put much effort to make the channel popular.

Modern retailers knock on local grocers’ stores

In a unique and interesting development that signals big change in Indian retail, modern trade formats such as Spinach, Reliance, Spencers and Food Bazar are in talks with traditional grocers (kiranas) to stock and distribute their private labels (in-store brands) in categories like food, home and personal care across the country.

Organized retail store are considered as the biggest threat to the traditional grocers. But it is not like that. The organized retailers have found a win-win solution which will benefit both of them.
Food items are the highest sold products in the organized retail store. Almost all the retail stores have their private labels (Brands owned by the Organized Retail Store itself). It brings extra revenue for them.

The private labels are usually cheaper by 20 to 25% compared with national brands. So customers prefer to buy as they trust the retail store. The margins for the private label are two and half times higher than on regular FMCG brands. The organized retailers in order to increase the sell of their private label want to sell them through the traditional grocers. It will make increase the awareness of the brand among the consumer and their brand bigger.

The retailers usually get fewer discounts on national brand. Again the margin is also low on these brands. They usually sell the local brand which is cheaper for the consumer and give higher margin to the retailer. So for traditional grocers this is a good proposal that they will sell the private labels and get good margins on that as well. This will affect the national brand adversely. As the Indian consumer is very conscious of price, there is chance of shifting preference from national brand to private labels. The national brands are already having price war among themselves in various category of products ( Like HLL and P&G on detergents). This is a threat for them from the organized sector.

SEZs can provide growth push

It was late Murasoli Maran who, as Minister of Commerce and Industry in the BJP-led NDA government, in the 200 Exim Policy allowed the setting up of Special Economic Zones with a view to providing an internationally competitive and hassle free environment for exports.


Special Economic Zone is a good concept in order to increase the growth of the economy. Basically SEZs are granted to manufacturing units which are export oriented. China has started its SEZ decade back and now it is contributing a good amount to its GDP.

China has only five economic zones but all of these are spread over a large area (150 sq. k.m.). Till now India has 14 functional SEZs and many more have been approved. The tragedy is that these zones are very small in area compared to the China’s SEZs. So it will be difficult to give the extra facility to the industries in SEZs as they are spread across the whole country.

The labor law has to be liberalized in order to make the SEZ a success. Our Industrial Dispute Act needs changes and the labor law needs to be reformed. But the political situation in India will not allow these changes to happen.

The main difference in India and China’s economy is export related growth. China was able to maintain its export growth through the special economic zone in which it was allowing duty free capital goods import, liberal hire and fire policies, tax holidays, assured quality infrastructure. But in India we are just granting the special economic zones but not doing much to help the organizations to get benefit out of that. As a result some companies are not going for special economic zones. Recently HP decided not to go for the SEZ even it had got the permission from the government.

Source: This is an analysis of an article by Mr. Nirupam Bajpai wchich came in Business Line on 10th November.

India is innovation

The last decade has seen the transformation of India. India today is at the cusp of a paradigm change in its growth trajectory. Innovation in deploying technology is now allowing Indian banks to disrupt the financial services landscape at diametrically opposite ends of the spectrum- in international markets and rural India. India is growing with its service sector boom. It is all because of our innovativeness and acceptance to change. Our knowledge sector is increasing as it requires very less capital and infrastructure is not constrained for this sector. This sector requires high intellectual capital in which India is very rich compared to other countries.

After the opening of the economy our indigenous companies had to compete with global companies. Now our domestic companies have become strong and ready to compete with any company at any place. That is clear from the mergers and acquisitions of Indian companies in overseas markets like US, Europe. We have used technology in an affective way to overcome our deficiency in infrastructure. Banks usually require large physical network. But the new generation banks have used the technology to compete with the PSBs and are increasing their market share each quarter.

Now a day Banks are serving most of the customers in technology-enabled channels rather than the traditional way of branch service. This is not only giving quality service to the customers but also decreasing the cost for the banks. The rural India has not much experienced the power of technology in banking. Now banks are moving towards rural as per the guideline of RBI. To remain profitable even by serving the rural population banks are going their with advance technological platform. This will reduce their cost-to-serve. They are innovating the way to remain profitable after serving this area which is very expensive for banks in terms of cost-to-serve.
This is the analysis of an Article by Mr. K V Kamath which came in Economic Times on 9th November,2006.

Indian drug in 4 years

Indian pharma majors may manage to market their first indigenous “blockbuster drugs” or new chemical entities (NCEs) in the next four years.

NCE is nothing but the global industry terminology for new drug. Till now Indian Pharma companies are manufacturing off-patent medicine. They are waiting for many drugs to go off-patent so that they can sell those drugs. If they are successful in developing new molecule they will have a great market and have right to sell them all over the world if they get them patented.

The major pharma companies have reached to the top position because of their NCE medicine. The Lipitor from Pfizer do a business of $12 billion per year. This is the highest selling drug of the world in terms of revenue. For the development of new molecule the Indian companies are collaborating with foreign companies. This is a good strategy as it will help them to develop the product at a lesser time. Again it will help them to trial the medicine across various region of the world.

Ranbxy is developing the medicine for malaria where as Dr. Reddy is developing medicine for Diabetes. All the medicines being developed are in their second phase. It will take 4 to 6 years to launch these medicines. Once these medicines are launched it will bring healthy revenue for the company as well as the economy. This will make the Indian pharma company strong as till now they have not developed any new medicine of their own. Our R&D industry is already booming. This will increase the pace of this sector.

FDI’s the route for foreigners in market

Cash rich foreigners are not welcome to get registered as sub-accounts of foreign institutional investors (FII).

The government is trying to solve the problem of participatory note (PN) for a long time. This step seems to solve the problem of PNs. The fall of market in May is said to be huge outflow of FII investment. The main problem with participatory note is that the investor name is not disclosed. They are registered with the FII and not with the SEBI. The FII invest on behalf of the PNs holder. So when there is any bad news in the market FIIs pullout their investment. As high net worth individuals were earlier permitted to invest through PNs the FII investment was huge. So if the huge investment is pull out the market starts falling at a rapid pace. This was the main reason for around 30% fall of market during the month of May and June 2006.

This step of government will restrict the HNIs to invest through PNs. So the FII investment will reduce. So the market will be less dependent on the FIIs. It means FII investment will have least affect on the market. Government is not baring HNIs to invest in India. They can invest directly through FDI. The FDI investment is more transparent and usually long term. So this investment will give more confidence to market.

This is a right suggestion given by the government. SEBI should accept this suggestion. The investment which is coming should come with right intension. Usually the FIIs try to book profit when the market is booming. Bu they pullout their investment when the market is falling. So the retail investors finds themselve as cheated as they are the looser in the entire affair.

Asean open sky

The proposed open skies agreement with Asean countries, scheduled to kick in from 2010, seem to be heading for turbulence even before take-off.

The Indian avian industry is an emerging industry. The air traffic is increasing with more and more people traveling through air route. This has become possible because of increasing low cost airlines and growth of service industry. Now a day’s people want to save their time by traveling by air route. Many new players have entered in this industry. Earlier it was the monopoly of Air India and Indian (Indian Air-lines). Most of the players still have to break even.

According to statistics available the Indian carriers are estimated to make losses to the tune of Rs 2,200 crore this year. It is because of stiff competition in the avian industry. The present strategy of the low cost airlines is that they want to target new customers by luring them to experience the travel in their flights. In order to reach to more and more customers they are giving huge discounts. There are many other problems at present scenario in the aviation industry. The fuel cost is the big issue for them. For carriers in other countries the cost of fuel is below 20 percent of total cost but for Indian carriers it is above 40 percent.

In India there is lack of professional pilots. Now more and more institutions are required which can fulfill the demand of pilots. Again there is a restriction on foreign pilots. The Indian carriers are not permitted to go international for the first five years of their inception. Once the international players are permitted to enter the Indian sky the competition will raise further to extreme level. The Indian carriers are already facing the problem of huge loss. If the foreign players are allowed to enter in 2010 the industry will not be in a situation to face the competition from the internationally established player.

Chattisgarh tops investment chart

If higher industrial production has raised hopes of a sustained GDP growth, its horizontal expansion must have raised the prospect of reduction in regional disparity.

Though the media is enthrall about the IT investment in the country the major investment is taking place in manufacturing sector. The major attractors of IT investment are Karnataka and Tamilnadu. But the recent statistics shows that these states are not in top 5 biggest attractor of investment in their respective states. Surprisingly the new states Chattisgarh and Jharkhand have surpassed Gujrat and Maharastra the so called “Business centre of India” in terms of investment. The investment in these states is due to the large natural resources available in the two states.

Again these are the new states formed in 2001. So such investment in these states will make them economically strong. These states are considered among the least developed states. So it is obvious revenue is less from these states. But the scenario is going to change if such investment continues in these states. If this trend is going to continue then the economic disparity will reduced to drastic level. This is good for our economy. One thing the government needs to do is that to open the new SEZs in these under developed states. So the investment in these states will be continuous and our economy will prosper through out India not limiting to a few states.

FMCGs regain speed in second quarter

The FMCG sector is living up to its ‘fast moving’ tag again, with the top 15 FMCG companies clocking net sales and net profits growth of 23% and 12% respectively.

This is the one of the biggest market in terms of the sale. This market has both organized as well as on-organized player. As the Indian consumer is very price sensitive this market is very competitive.

This is good news that the market is growing. This shows that the organized sector is capturing more and more market share. So consumer preference towards the branded products is increasing. But the increase in sale is also due to increase in export of these companies. So the credit of growth in sales does not solely goes to the Indian consumer.

The growth is not same for all the products under the FMCG category. For instance the branded food segment for ITC grew by 54% and for HLL it grew by 20%. The beverage category grew by just 6.5% for HLL and 14% for Nestles domestic market. But Nestle saw a good growth in its export. One of the reasons for growth is the rise of retail sector. The organized retail sector buys the FMCG goods in bulk. They usually tie-up with these FMCG companies. So the FMCG companies have a constant sale in these stores.

The input cost for the FMCG companies have increased. This is quite clear from the decreasing operating margin from 19% to 18%. The FMCG companies are the biggest spender in advertisements. They are trying to increase the awareness level of their products as well as they are branding themselves. Branding will help them to sell their product in high volume without sacrificing their margins.

Brand Ayurveda takes retail path

Move over wellness centers in diastant hills offering ayurvedic treatment. You can now walk into branded centers offering an array of ayurvedic remedies for all your ills.

Ayurveda is increasing at a rapid pace not only in rural but also in urban India. According to statistics provided by government it is growing at 8 percent every year.This segment has very few organized player. As the market size is Rs. 6,500 crore the organized players are eyeing to this sector. Dabur already has 150 Ayurvedic centers with qualified vaids.

The FMCG players like HLL and Cholayil are serious about this market. In FMCG products like shampoo and shops they are already offering medicated ayurvedic products. But now the demand is increasing for array of medicated products.As ayurvedic is based on traditional concept and people have more faith in traditional medicine then the new modern medicines there is a great potential in this market.

It is clear that this market is growing. Another advantage is that though people prefer traditional medicines the awareness level is low. So if organized sector enters to this market then definitely the awareness among the people will increase leading to increasing market size. Ayurvedic medicines are less harmful then other medicines. Again they cure the disease from the root. So by adopting ayurveda we can eliminate the chances of some of the disease which the government is trying to eliminate completely for years. So ayurveda will help it to achieve its target.

Source: Economic Times