Centuryply targets Rs 500 crore turnover from retail foray

Plywood and decorative veneers maker, Century Plyboards is targeting a turnover of Rs 500 crore in the next five years from its retail foray under the banner Nesta Furniture. The Bombay Stock Exchange (BSE) listed company launched its first home lifestyle solutions store in Bangalore with a target to reach 111 outlets. The company will invest to the tune of Rs 100 crore in the retail business.

According to Sajjan Bhajanka, chairman, Century Plyboards (I) Ltd, the company is envisaging the retail chain to occupy approximately 3.5 million square feet of retail space in the coming years. “Retail business in India is at an interesting stage. Our latest venture in the readymade furniture retail business is a move up the value chain and a natural progression in the wood products category. We are keen to leverage our experience and strengths in retailing the finished end product. We will have flagship stores in key markets and also adopt franchise model to tap other markets,” said Bhajanka. 

The company management however, did not share any information about how will it fund the retail business.

A market leader in wood and wood products in India for three decades, Centuryply has been a trendsetter and pioneer with many firsts to its credit. Leveraging on the company’s in-depth knowledge of wood and design elements, Nesta will offer stylish, authentic and exclusive wooden furniture and home decor accessories to Indian households.

Abhra Banerjee, executive business head, Centuryply, said, “There has been a sharp increase in the popularity of genuine designer furniture over the last few years and Nesta will serve to be a retail hub for quality products. We will offer the latest designs and introduce a new collection every 3 months.”

The home lifestyle solutions store will be designed in a manner that customers will be able to experience and visualise the furniture in a room. An exclusive zone created in the store would allow customers to choose colours, different options for each room to get the perfect look, furnish the room dimensions and visualize how the furniture will look in their apartment on a giant LED wall. The store will also have a mock up of an apartment with approximately the same dimensions as a typical 1BHK flat. The furniture retail chain will also put a lot of emphasis on prompt after sales and maintenance to the customers.

Alok Industries to shut 45 retail stores

An edited version of this story first appeared in DNA Money edition on Thursday, August 16, 2012.

Integrated textiles company Alok Industries Ltd is planning to cut down its retail store footprint in India as part of its business rationalisation exercise. According to company top management, the plan is to shut down some of its non-profitable stores and review profitability of the retail division for the balance part of the financial year. The company’s retail operations carried out under its wholly owned subsidiary Alok H&A Ltd, currently operates 290-odd stores (as of June 30, 2012) across the country under the H&A brand.

“We will shut down 45-odd stores that are not generating profits by September this year. If this rationalisation exercise doesn’t work out well, as in make the retail vertical profitable, we will start folding the retail division,” said Dilip Jiwrajka, managing director, Alok Industries during an analyst call discussing the company’s first quarter performance for the fiscal 2012-13.

According to Crisil Research, Alok’s domestic retail business contributes less than 1% to the company’s consolidated top line and hence no major impact is expected in the company’s operations due to rationalisation of the retail division.

 

“The retail business was less than 10% of Alok’s revenues in FY 2012. At the profit after tax (PAT) level, it incurred losses. In such a scenario, shutting down the business would reduce the top-line but would improve the bottom-line,” said Crisil Research.

This apart, intensified competition in the domestic retail industry in recent years has resulted in major retail players booking thin margins. “PAT margin for typical value retailers ranges between 1% and 3%. Taking the competitive scenario and thin margins into consideration, we do not see material impact of closing 45 stores on its overall bottom-line,” said the research firm.

Alok H&A launched retail operations in FY’07 to push the sale of its own products in the domestic market and to take advantage of the growing organised retail sector. Of the 290-odd stores the company operates 137 stores as exclusive branded outlets (EBOs) and the balance (154) are in the form of shop-in-shops (SISs) on a franchise basis.

On the performance of the retail division, the company management is of the opinion that while SIS stores breakeven faster and are profitable, it is the EBOs that are under significant pressure. “The rental component associated with EBOs is making a big dent in its profitability,” said Jiwrajka.

 

As a result, all stores that will down shutters in the next 45 days will be the EBOs. As for SISs are concerned, the company is likely to continue with that model as those are profitable. According to Crisil Research, after the non-profitable EBOs are closed, the management will not make any further investments in retail.

Spread across 800 square feet area, the H&A exclusive branded outlets sell products in home textiles, men's wear, women's wear, kids wear and accessories like ties, handkerchiefs, cuff lings etc. The company’s overall retail operations currently occupy approximately 230,000 square feet of space across the country.

The company had earlier planned to reach 500 stores by FY’14. However, the expansion plans had to be put on hold on account of a challenging macro-economic situation in the domestic market and the company will focus on its core manufacturing business going forward.

Focusing primarily on return on capital employed (ROCE) the company management had earlier initiated exiting its non-core business, primarily real estate assets. With a debt of Rs 12,900 crore sitting on the company’s books, the management is planning to raise Rs 2,500 crore over two year horizon of which a significant portion will be raised through real estate divestment in this financial year.

“Approximately Rs 1,500 crore will be raised in this fiscal. We have negotiated transactions worth Rs 600 core and received Rs 150 crore in advance payments. The balance money will be paid soon. The funds thus raised will be used to reduce the debt burden on the company,” said Jiwrajka.

During 2012, Alok Industries sold eight floors (out of 20 floors) from its largest real estate venture, Peninsula Business Park project (estimated deal size of Rs 400-450 crore and three floors (out of the eight floors) of the Ashford Centre and received a token sum of approximately Rs 50 crore.

The company is keen on selling the remaining nine floors of the PBP project (three floors will be used for own use) during FY’13 and appears positive about the same. Also, it intends to sell other real estate properties and land by FY’14. One of these is Ashford center in Lower Parel, where three out of eight floors have been sold.

FHRAI Annual Convention to chalk out roadmap for hospitality and tourism growth

Kamlesh Barot, president, FHRAI

Achieving a cumulative annual growth rate (CAGR) of 12% in the next five years, the Indian hospitality will require setting up of 23.4 lakh hotel rooms of which at least 188,000 will be required in the organised sector and the balance in the unorganised sector. According to hospitality industry's apex body, the Federation of Hotel & Restaurant Associations of India (FHRAI), building these many hotels will require an overall investment of Rs 150,000 crore in the next five years.

Kamlesh Barot, president, FHRAI, said that the Indian tourism ministry has a great vision for increasing India’s share in foreign tourist arrivals (FTA) and has all the support from the hospitality association. "The ministry wants to see foreign tourist arrivals in India reach at least 1% by end of the XII Five-Year Plan (2016) from 0.6% at present. We completely support ministry’s target to increase FTAs in 2016 by 11.37 million, domestic tourist visits by 1,496 million and create 44 million new employment opportunities," said Barot.

A discussion to this effect and an effort to create a roadmap will take place at the upcoming 47th Annual Convention of FHRAI to be held in Goa from September 6 to 8. The theme for this year's convention will revolve around employment generation in addition to various aspects of hospitality that will need huge attention in the coming years.

Currently, the size of industry is pegged at $11.2 billion with 6.29 million Foreign Tourist Arrivals (FTA) with foreign exchange earnings of $11.394 billion. The industry’s contribution in India’s GDP was 5.92% (in 2011) which is expected to reach 7.3% in 2012. The industry also contributes 9.24% employment in the country with 53 million direct and indirect employemnt opportunities.

FHRAI estimates that the government shall increase the industry’s contribution to GDP at 7.8% by 2022. Moreover, the enhanced GDP shall be creating approximately 37 million direct & indirect new jobs.

However, there are many impending issues proving to be roadblocks in the growth of the Indian hospitality industry which will be part of the various discussions during the annual convention. "Issues like high taxes on tourism and moral policing due to archaic laws are primary issues. Moreover, high interest rates, inflation, lack of provisions for hospitality under infrastructure policies, sanitation, airport and tourist services, licensing, lack of trained manpower, exporter status, visa issues and the laws pertaining to the land acquisition for projects are other areas of concern," said Barot.

Hyatt on course to take reins of Ista properties

This story first appeared in DNA Money edition on Monday, August 13, 2012.

Hyatt Hotels Corporation has emerged as a frontrunner for management takeover of Ista Hotels, promoted by IHHR Hospitality that runs the award-winning spa property Ananda in the Himalayas.

The international hotel chain is likely to rebrand Ista Hotels as simply ‘Hyatt’ with no prefix or suffix, sources said.

A Hyatt spokesperson, in an email response, said, “Currently no confirmed deal has been signed between Ista and Hyatt.”

With this development, Ista, a homegrown brand that IHHR created six years ago to enter the hospitality market, may cease to exist.

Sources said IHHR was looking for a tie-up with a foreign brand as global slowdown and increased competition from global chains were hurting business.

IHHR entered the luxury business hotels segment by opening its first Ista hotel in 2006 in Bangalore with 143 guestrooms and suites, followed by Hyderabad (165 guestrooms), Amristar (248), Pune (221) and Ahmedabad (169).

The portfolio currently comprises five hotels with a total of 946 guestrooms and suites.

Ashok Khanna, managing director, IHHR, said, “We have been exploring alliances for a while to help us compete with international chains that have the advantage of a global presence. However, nothing has been decided yet. We will make an announcement when the decision is made.”

The development could pave the way for similar deals as local brands are finding it difficult to fight global brands in a depressed economic scenario.

“The approach would largely be adopted by home-grown brands with sought-after hotels in prominent cities to take advantage of the global footprint and loyal customer base enjoyed by the international hospitality chains,” said a top official from a leading international hospitality chain.

The international hotels approached by the IHHR management include Marriott International and Starwood Hotels & Resorts.

'Global Hospitals is a large player in the niche area of organ transplant'

Dr K Ravindranath

An edited version of this Q&A first appeared in DNA Money edition on Wednesday, August 08, 2012.

Starting operations over a decade ago from Hyderabad, Global Hospitals Group is currently among the fastest growing multi super-specialty tertiary care hospital brands with state-of-the-art healthcare centres in Bangalore, Chennai and soon to open in Mumbai. Dr K Ravindranath, chairman and managing director, Global Hospitals Group, in conversation with Ashish K Tiwari, shares his views about the current scenario in the super-specialty healthcare space and their company’s plans in this direction. Edited excerpts...

 

Could you briefly take us through the journey of Global Hospitals Group? How did it really come into being? 

Global Hospitals was started way back in the year 1999. Basically, I am a gastrointestinal surgeon specialising in laparoscopic, liver and pancreas surgery. My heart lies in liver transplantation. I was in Kings College Hospital, London, UK, where several Indian patients used to come for treatments spending huge money (over Rs 70 lakh). Majority of them would die because of non-availability of organs would be first given to local patients and outside patients would always get second priority.

Over a period of time I realised that something needs to be done back in India to facilitate organ transplant. I decided to come back and since the Transplant Act took really long time to get approved in India I did not do transplant surgeries for several years. But when the Act finally came by, we decided to set up a hospital and that is how Global Hospitals was instituted.

Transplant as an area of specialisation requires dealing with a lot of complexities... 

In fact, transplant is the most complex procedure and requires significant back up from other specialties in addition to lot of cutting-edge technology. And when you put all those things, it has to be utilised properly hence we conceptualised a multi-super speciality tertiary care and multi-organ transplant healthcare services facility. We are a very comprehensive centre of excellence offering everything from routine operations, tests, to complex operations like transplants. 

What are your views on organ donations in India? 

It is a huge challenge. Organ donation has to happen and promoted in India in a big way. It is a regular practice in some of the smaller countries like Spain but there is a huge shortage in our country. Awareness about the need for organ donation has to be created with the people in India. Karnataka is the first Indian state where a declaration is made in the driving license itself that the person has agreed to donate organs post his / her death. This approach is very prominent in foreign countries and I’m told the Tamil Nadu government will follow suit soon. Organ transplant has to be done within 4-48 hours of the death of the donor depending on which organ is being transplanted. Each organ has a limitation on how long can it be kept. 

What factors differentiate the various healthcare services offered by your hospital chain? 

We started the hospital focusing on multi-organ transplant because there was no point in doing just standalone transplants. When doing a liver transplant, one should have a high-end facility with complete gastroenterology, liver, pancreas diseases centre. Same is the case with kidney and bladder diseases and transplants. We do heart and lung transplants along with bypass surgery, valve replacement, angioplasty etc. We had recently done one small intestines transplant in our Chennai hospital and that’s something we will start doing across our existing and new hospitals now. Neuroscience is another area that we specialise in and have done a lot of work on brain and spine. We have expertise in stem cell transplantation which is a huge speciality area coming up and we are a major player doing a lot of work in Bangalore and Hyderabad with plans to start soon in Chennai.

Is bone and joint replacement also part of your services offerings? 

Yes it is. In fact, we are now planning to start bone banking in Chennai. Once that happens, the patient will not have to undergo the whole joint replacement if the cartilage is gone as only the cartilage will get replaced. Tissue banking is going to be the future. It’s like a spare part to the body that is why we are creating a bone, cartilage bio, tissue, skin, blood and blood products bank. This apart, stem cell therapy is coming in a big way in the bone and joint replacement area and we will be starting that as well. Out next focus area is Cancer wherein we have started the most advanced centre in Bangalore. We are in the process of starting it in Chennai in the next couple of months and Mumbai will follow soon. In cancer, we do bone marrow transplantation and other things. 

Will it be correct to say that a niche play is what you are really banking on? 

A niche but a larger niche is what we are positioned in the market. We are a very big player in the niche area and that’s the only reason why we are not going beyond the tier I cities in India. We get lot of doctors relocated from other countries like UK, USA, Australia etc. They prefer to come to the metros as compared to small towns and cities. We are already present in three key metros of Bangalore, Hyderabad and Chennai in South India. Adding the fourth Indian metro to our network, we will soon open in Mumbai. Thereafter, New Delhi and Kolkata will happen in the next 3-5 years from now. We will be in all the six metros where we have easy access to human resources. High quality and well-trained human resources is very important for any healthcare services provider like us because only then can we deliver the best. 

What is the mix of domestic and international patients at your facilities in the country? 

The technical expertise and cutting edge work that we do is something which is not only in huge demand in India but also with a host of international countries where advanced procedures and quality healthcare services is still a distant dream. There are many countries like the Middle-East, Africa , Sri Lanka, Pakistan, Bangladesh, Malaysia and so on that lack the quality of medical services like what is offered in India that too at a fraction of the cost they would have to pay in any of the developed economies. Approximately 25% of patients visiting our healthcare facilities are foreign nationals and we see the number growing in the coming years. 

What are the most common transplants and how much do they generally cost? 

Today the number of liver transplants is high mainly because liver disease is becoming very common. Kidney is the next organ that sees large volumes followed by heart and lung. There are just 5-6 centres in the country doing such surgeries of which 3 are from the Global Hospitals’ chain as a result majority of the transplants are done by our centres in Hyderabad, Bangalore and Chennai and Mumbai will get added to this network once it gets operational. A liver transplant would cost around Rs 20 lakh, while it will be 8-10 lakh for heart and lung transplant. The cost involved in a kidney transplant is Rs 4-5 lakh. 

By when do you intend to make the Mumbai hospital completely operational? 

It will be a stage-wise launch. We will start with the out-patients-services followed by day care surgeries post which the hospital will get fully operational. All this will be done in the next 6-8 weeks. The Mumbai centre will have 450-beds taking the total number of beds in the Global Hospitals chain to 2,100.

The doctors, are they on consulting basis or full-time? 

We have partners. In the Mumbai facility, we have 7-8 top-notch doctors who are equity stakeholders-cum-partners and will be working full-time in the hospital. This apart, there will be some doctors on part-time consulting basis. Our model is such that a large number of full-timers provide continuity of care and some exclusive doctors associate with us on a case to case basis. The ratio between full-time and part-time doctors is 70:30 and that is how we drive the organisation. The advantage of full-timers is that they are here for most of the day and night. The patient gets full care and attention. Besides, transplants are such complex procedures we will require full-time doctors to do justice to the patient’s treatment. 

Are your other hospitals based on a similar (equity stake) arrangement with doctors? 

No. Mumbai is the first hospital we have experimented with this model and I am quite happy to have excellent partners. We will be exploring the same model for our Delhi and Kolkata centres when they happen in the coming years. I think this will be a model that many other hospital groups will replicate because the partnership approach gives doctors a sense of ownership. Besides, in the coming years, top-notch doctors would like to have a say in the hospitals they associate with and the partnership model works really well. 

The Mumbai hospital must have called for significant investments. What was the overall cost like? 

Putting up a hospital is capital intensive in general and the Mumbai hospital is no different. Fortunately, land for this hospital was given to us by a family trust (M/s Verma Medicine Research Trust) at a very low cost. So our land cost is very negligible allowing us to build a very high quality state-of-the-art hospital with an overall investment of Rs 350 crore. Given the fact that doctors are also stakeholders in the Mumbai hospital, the project has a debt equity ratio of 65:35.

So if you take off the land cost, Rs 70-80 lakh would be the per bed cost. I try to pursue the asset light model because the brick and mortar approach puts a lot of stress on the hospital and the doctors (management) thereby making it difficult to pass on the benefits to the patients. My view in the long-term is that hospitals should be developed through either asset light (management contract) or public private partnership (PPP) wherein land is leased to the hospital chain. 

In terms of the audience you will be catering to, will it be largely those in the upper middle-class and above? 

We will be available for all the three sections of the society as routine healthcare services will also be offered in the hospital. Our positioning in the market will be among the best in the super-specialty segment however approximately 10% of our beds will be allocated for the weaker section of the society and this is a standard practice with all our hospitals. All services to these patients will be offered at a subsidised cost though medicines and materials will have to be bought by them. In fact, this is part of our arrangement with the Verma Medicine and Research Trust. 

What is the staff strength like in your hospital chain? 

Healthcare industry offers great employment opportunities right from housekeeping boys, nurses and doctors. In fact, every bed created generates employment opportunities for 7 people. While we currently have over 5,000 employees in the hospital chain, we will very easily cross 10,000 employees in the coming 2-3 years.

Jyothy aims to treble laundry biz in two years, targets 500 garment care stores by 2015

This story first appeared in DNA Money edition on Wednesday August 1, 2012.

Jyothy Fabricare Services Ltd, India’s biggest laundry chain operator that runs 132 garment-care outlets, has set a goal of reaching Rs 300 crore in turnover by 2015 from the Rs 100 crore expected this fiscal. The subsidiary of FMCG firm Jyothy Laboratories Ltd said it currently services over 150,000 households and is looking to increase it to 1 million households by 2015.

Ullas Kamath, joint managing director, Jyothy Labs, said the turnover target will be achieved on the back of an aggressive retail expansion plan and high volume institutional business.

“We will have at least 200 outlets on our own. New stores beyond that will be franchisees. The target is to have 500 stores by 2015 under Fabric Spa (for premium catchments) and Wardrobe (for sub-premium -- SEC B and C) brands,” he said.

The company will start appointing franchisees from the next fiscal from Mumbai and Pune, which it believes hold good potential.

Laundry business in India is predominantly an unorganised sector, providing huge opportunity to organised players. According to an Insead and KPMG report, the laundry services market in India is expected to grow manifold from current size of over Rs 5,200 crore.

“We will incur a capital expenditure of around Rs 40 crore this fiscal and are targeting a turnover Rs 100 crore. Over the next two years, we will take the turnover to Rs 300 crore by 2015. It is a doable figure because the market is very big and there is enough space for players to build their business,” said Kamath, adding the business has been planned based on the private equity investment received in 2010 and any future requirements will be met through internal funds.

Jyothy Labs holds 75% stake in the Jyothy Fabricare with the balance 25% being acquired by IL&FS Private Equity for Rs 100 crore in 2010.

The laundry firm, which was started in 2009, is looking to target the entire garment care market from retail, premium, sub-premium, institutional and Railways.

Despite significant presence in the country, the laundry firm has chosen not appoint franchisees as yet. Kamath said it can be done after credibility is established and the brand is in the market for 3-4 years. “That’s when we will get a clear picture of how much money can be made. Thereafter, franchising mode will be adopted because we will be then in a position to demonstrate the business opportunity to potential franchisees,” he said.

The company is also expecting a good inflow of institutional business from various markets in the country. It caters to the institutional market selectively, focusing on good pay masters such as five-star hotels and airlines.

“A decent volume of business is coming from the 27-odd trains out of Bangalore that are being serviced by us. Another build-own-operate-transfer contract has been received from Railways in Ahmedabad for about 15 tonne capacity for 10 years. We have bagged a similar contract from Delhi International Airport Ltd for 15 years,” said Kamath.

As malls near completion, PVR lines up a big expansion

This story first appeared in DNA Money edition on Saturday August 4, 2012.

Film exhibitor PVR has earmarked Rs160 crore this fiscal to increase number of screens and open new entertainment centres this year.

Sanjeev Bijli, joint managing director, PVR Ltd, said, “Around Rs120 crore will be invested for adding 82 screens while another Rs40 crore will go in launching four PVR bluO centres. Funding will be done through a mix of internal accruals and debt as well as money recently raised from private equity firm L Capital Eco,” said Bijli. The company had added 50 screens last year.

Earlier on Wednesday, L Capital Eco signed a deal to invest Rs108 crore in PVR’s cinema exhibition and in-mall entertainment businesses. Under the agreement, L Capital will take a 10% fully diluted stake in PVR for Rs57.7 crore in PVR Ltd, launch a joint venture with PVR bluO Entertainment Ltd and invest Rs50.1 crore in various in-mall entertainment, gaming, food and leisure formats.

The PVR management said that with mall developments finally getting completed and delivered during this fiscal the targeted new screen additions will be easily met.

The company has already opened 13 screens so far and the balance 70 screens will open in the next 6-7 months. The new facilities will open in metros and larger cities like Pune (2), Bangalore (3), one each in Kochi, Chandigarh, Nagpur among others. The company also plans to add 70 screens each in fiscals 2014 and 2015, doubling the overall screen count in three years.

Bijli said while inflation in the last few years has led to 10% cost escalations, the company has done certain value engineering to ensure the incremental costs do not impact operating margins. “Our costs per screen currently is Rs1.2 to 1.5 crore for a standard facility, while a top-end screen would cost Rs1.8 to 2 crore,” he said.

With two centres and 50 bowling lanes already operational under the PVR bluO brand, Bijili said new centres would come up in cities like Bangalore, Pune, Ludhiana and Chandigarh in the current fiscal. “Being on a larger scale with over 24 lanes, these are not plain bowling centres. Being reasonably priced at Rs150 per game, the approach works well for the business as patrons do not have to queue up for their turn and the churn is much quicker,”

The bluO centres are typically spread across 30,000 square feet on an average including the F&B area. The per-lane cost (for bowling centres) ranges Rs50 – 80 lakh depending on the location and number of lanes. “Smaller the centre, higher the cost,” said Bijli.

To diversify its entertainment offerings, the company is evaluating a host of out-of-the-home entertainment options, including in the food and beverages area.

These in-mall entertainment concepts are expected to incorporate some international formats.

“These are currently in the evaluation stage and we are expecting to introduce them before the end of this fiscal,” said Bijli.

FDA plans huge fees, yet drug cos happy

My colleague KV Ramana co-authored this story appearing in DNA Money edition on Monday July 30, 2012.

The US Food & Drug Administration is set to charge up to $100,000, or over Rs50 lakh, for each abbreviated new drug application (Anda) and $35,000, or over Rs17 lakh, for drug master files (licence to make bulk drugs) from zero now.

It’s a good thing, say Indian pharmaceutical companies.

That’s because the money would be used by the FDA to reduce the time taken to approve drugs from the current 27-30 months to just 7-8.

The current timeline costs a lot to drugmakers, say analysts, because it can delay launches and manufacturing plans.

“Basically, the FDA wants to collect $299 million through Anda approvals, facility visits, inspections etc, as that is the sum it spends annually to run the department in the US. And since economic conditions are difficult in the US, it wants to collect the money from the generic manufacturers,” said Manoj Garg, analyst with Edelweiss Securities.

On an average, the FDA approves 1,500 to 2,000 applications every year.

About three quarters of the target amount will be collected from plant visits, inspections etc and the rest by way of approvals.

“So about 25% of $299 million i.e, $75 million, divided by the annual Anda applications, gives a range of $25,000 to $45,000 per application approval charges (from the generic manufacturer) depending on the complexity of the molecule,” Garg calculates.

A spokesperson for Dr Reddy’s said, “As long as it speeds up the process, the fees is not a major issue”.

“The FDA is keen on ramping up its infrastructure by deploying the funds raised through the user fees. If that happens, most of us would be willing to pay the fees in order to take the products to the market earlier. There is an opportunity cost and we don’t mind paying,” a senior official another generic drug major said.

However, analysts are not very confident about the timelines getting reduced immediately. According to them, it would take more time for the systems to set in and the results would be seen only after that.

“While FDA wants to improve on the time taken for approving an ANDA, it will not be able to do it within a year as recruiting the staff, training them enhancing the infrastructure etc will take time. As a result, it is expected that timelines will come down over a period of 4-5 years. The target, it is understood, is to bring down the timelines to 10-12 months from the current 27-30 months,” Garg said.

Dr Reddy’s has filed about 4 Andas in the first quarter of the current financial year and about 73 are pending with the regulator for approval.

“We see this as a positive development as the move is intended to speed up the process of approvals. The FDA has a significant backlog of pending approvals. Also, we feel the fees will act as a deterrent forcing a lot companies to be selective about their filings. This again will hasten the process as lesser filings will also imply quicker approvals,” Glenn Saldanha, chairman and MD of Glenmark, said.

According to him, Glenmark’s US business strategy is based on Anda filings in niche segments like dermatology, hormones, controlled substances and modified release categories.

“We intend to initiate 15-20 products filings each year. We have 38 Andas pending approval with the FDA. Hence, we view any move to speed up the approval process as a positive one. Glenmark has received close to 80 approvals till date. About 38 are pending approval with the FDA,” he said.

Bajaj Ventures' sell-off by September ‘12

Consumer electronics major Bajaj Electricals along with another Bajaj group company Baroda Industries are in the process of divesting their stakes in Bajaj Ventures Ltd. Both Bajaj Electricals and Baroda Industries hold 50% each in Bajaj Ventures. 

According to industry sources, the existing owners are currently in a fairly advanced stage of negotiations with the potential buyer and are expecting to conclude the transaction in the coming months.

Confirming the development, Shekhar Bajaj, chairman and managing director, Bajaj Electricals Ltd, said, “The deal will see both the entities divest their stakes in favour of the buyer. Discussions are currently on and a sell-off is likely by the end of second quarter this fiscal.”

While the value of investment on Bajaj Electricals’ books, according to industry sources, is around Rs 15 crore the company management is looking at a significantly higher multiple in terms of realisation from the stake sale. Shekhar Bajaj however did not share any information about the valuation expectations from this sale.

Bajaj Ventures was originally christened Black & Decker Bajaj Pvt Ltd, (Black & Decker Bajaj), which was a 50:50 joint venture (JV) with Black & Decker Corporation, United States. The company was instituted in 1993-94 to manufacture and market power tools, household appliances, and related accessories.

After seven years of operations i.e. in fiscal 1999-2000, Black & Decker chose to exit the JV and sold its 50% stake to one of Bajaj group companies (Baroda industries Ltd) post which the company was rechristened Bajaj Ventures Ltd.

While the Black & Decker brand association with Bajaj Electricals continued despite the JV being called off, the former is now looking to enter the market on its own. And since Bajaj Electricals does not consider power tools as its core business, the company management has decided to generate cash by disposing off the Bajaj Ventures business.

Lupin eyes drug brands in US, Japan

This story first appeared in DNA Money edition on  Friday, July 27, 2012.

Lupin Ltd, India’s third-largest pharma company, is looking to acquire drug brands overseas as it seeks to reduce reliance on less profitable generic medicines.

“There is an active ongoing effort and we are looking at multiple assets. We are hopeful of closing one or two opportunities within the current fiscal,” said Vinita Gupta, director, Lupin. The areas being looked at include paediatric, dermatology, ophthalmology and respiratory.

While Gupta did not specify the geographies eyed for the acquisitions, analysts said the buys will happen mainly in the US, followed by Japan and Europe.

Lupin is seeking to maintain its fastest pace of quarterly sales growth in at least three years by adding to its product portfolio in the world’s biggest drug market. The company and rivals including Ranbaxy Laboratories are shifting strategy to cut their dependence on selling generic versions of medicines as the number of formulations losing patent protection plummet from their peak in 2012.

Lupin earned more than five times as much selling branded medicines such as Antara, a treatment for reducing cholesterol, compared with average sales of all its copycat formulations, according to Fortune Equity Brokers.

In an earlier interaction with DNA Money, Ramesh Swaminathan, president – finance & planning and CFO, Lupin had said the company will invest around $100-120 million (Rs550 crore) in capital expenditure this fiscal. To be funded through internal accruals, the money would be spent across various therapeutic areas and expansion of existing units.

The funding for the international acquisitions will be over and above the capex outlay by the management for this fiscal, said an analyst with a domestic broking firm.

A company spokesperson said the June quarter results beat street estimates by 7-10% in turnover and net profit and 15% on earnings before interest, tax, depreciation and amortisation.

Lupin and larger rivals including Ranbaxy and Dr Reddy’s are trying to boost profit by offering products that are similar though not identical to those protected by patents, claiming they are not copycat versions.

The US FDA classifies such formulations as new drugs, and if approved, they can be sold exclusively for as long as three years in the US.

“If the product clicks, then you make a lot of money and your margins will be also higher,” Bino Pathiparampil, a pharma analyst at IIFL, said. “The development costs will be far higher than an ordinary generic though.”

Lupin has a network of 170 sales representatives in the US to sell its branded portfolio, its president Nilesh Gupta said, adding the company’s future acquisitions are likely to be in an area that doesn’t require a large number of sales personnel.

Lupin is focusing on brands that “don’t need 500 representatives to cover a good number of doctors,” he said. With Bloomberg