This story first appeared in DNA Money edition on Thursday, June 27, 2013.
Tata Housing, Tata Projects and Tata Realty & Infrastructure, the Tata Group’s unlisted infrastructure entities, are on course for a four-fold increase in order book over the next five years.
The current order book (fiscal 2014) stands at Rs 15,000-20,000 crore and the goal is to ratchet this beyond Rs 70,000 crore in the next five years.
The Tata Group, operating in the Indian infrastructure space since 1910, has eight companies across sectors like energy, telecom, realty, transportation, infrastructure, project execution, project consultancy.
They contributed $12.5 billion, or 12.4%, to the group’s overall revenues in 2011-12.
Siddhartha Roy, economic advisor to the group, said the ratio of private and public sector in the country’s infrastructure spend used to be 25:75 in the 10th Five Year Plan, which increased to 36:64 in the 11th and is almost 50:50 in the 12th.
“What this basically means is that a very large part of the investment or the funding for this investment has to come from the private sector. The group has already made significant investments in the area of power, telecom, housing, infrastructure (roads, airports, urban transportation) etc and will be aggressively building the pipeline across infrastructure projects in the coming years,” said Roy.
Of the envisaged Rs 70,000 crore orderbook, the share of Tata Projects Ltd will be about Rs 25,000 crore, while it will be Rs 24,000 crore and Rs 22,700 crore from Tata Housing Development Company and Tata Realty & Infrastructure, respectively.
Sanjay G Ubale, managing director and CEO, Tata Realty, said investments will be in areas like road projects (Rs 7,500 crore), airport (Rs 5,000 crore), urban transportation (Rs 3,000 crore), industrial park (Rs 3,000 crore), real estate (Rs 4,000 crore) and hospitality (Rs 200 crore).
“We are looking at three airport projects of which work on the Jamshedpur site has already started. We will also bid for the Goa and Navi Mumbai airport projects as and when they are invited. On the roads front, there are 10 projects for which bidding is likely to happen and we should get at least two projects if not more,” Ubale said.
The commercial real estate space currently offers huge potential for inorganic growth and the company should be concluding a few deals in the coming few quarters in addition to taking the organic approach to building up portfolio, he said.
As for Tata Housing, the company has been growing at almost 100% compounded annual growth rate (CAGR) over the last 4-5 years and currently has 26 signed projects at various stages of planning and execution.
With approximately 704 acres of landbank, the company currently has 55 million sq ft under development across 10 states across including eight major cities and 11 locations.
Brotin Banerjee, managing director and CEO, Tata Housing, said growth this year might be relatively slow mainly because of delayed approvals and general slowdown in the market.
“Having said that we have over 90 million sq ft in the pipeline under various stages of approvals. We are hoping to sign a very big private-public partnership project in Sri Lanka which should happen in the next couple of months.”
Saturday 29 June 2013
Cable TV user data deadline extended
This story first appeared in DNA Money edition on Wednesday, June 26, 2013.
The Telecom Regulatory Authority of India (Trai) has extended the June 25 deadline for submission of television customer application forms (CAFs) by cable networks to July 10.
Multi-system operators (MSOs), or mega networks that deliver cable and satellite television channels to homes via neighbourhood allies, pleaded that since compiling CAFs is an enormous and complex task, a deadline extension is necessary, Trai said.
The extension was also done to minimise consumer inconvenience. If the new deadline is not complied with, subscribers’ existing connections via set-top boxes (STBs) would be disabled, Trai said.
Ashok Mansukhani, executive director of IndusInd Media and Communications, an MSO, welcomed the deadline extension. “Each MSO has given individual deadline to Trai. I’m sure they will do their best to achieve it.”
Trai said the number of identified subscribers has increased, but there are still a large number of television subscribers whose details are not yet available with cable operators and MSOs.
Industry sources said some 70% of CAFs may have been submitted so far under the new ‘digital addressable cable TV systems’ regime. “Certain operators will have to finally select which MSO to go with,” said Mansukhani.
But Roop Sharma, president of the Cable Operators’ Federation of India (COFI), said, “The extended period is not adequate. There are unresolved issues like the nature of deals between MSOs and broadcasters. MSOs are keen on offering bouquets or packages of channels, while the government is talking of an a la carte rates.”
Most of MSOs have begun offering a la carte pricing. “A la carte may not have caught on yet with consumers in India, but bouquets tend to be cheaper worldwide,” said an MSO official.
The Telecom Regulatory Authority of India (Trai) has extended the June 25 deadline for submission of television customer application forms (CAFs) by cable networks to July 10.
Multi-system operators (MSOs), or mega networks that deliver cable and satellite television channels to homes via neighbourhood allies, pleaded that since compiling CAFs is an enormous and complex task, a deadline extension is necessary, Trai said.
The extension was also done to minimise consumer inconvenience. If the new deadline is not complied with, subscribers’ existing connections via set-top boxes (STBs) would be disabled, Trai said.
Ashok Mansukhani, executive director of IndusInd Media and Communications, an MSO, welcomed the deadline extension. “Each MSO has given individual deadline to Trai. I’m sure they will do their best to achieve it.”
Trai said the number of identified subscribers has increased, but there are still a large number of television subscribers whose details are not yet available with cable operators and MSOs.
Industry sources said some 70% of CAFs may have been submitted so far under the new ‘digital addressable cable TV systems’ regime. “Certain operators will have to finally select which MSO to go with,” said Mansukhani.
But Roop Sharma, president of the Cable Operators’ Federation of India (COFI), said, “The extended period is not adequate. There are unresolved issues like the nature of deals between MSOs and broadcasters. MSOs are keen on offering bouquets or packages of channels, while the government is talking of an a la carte rates.”
Most of MSOs have begun offering a la carte pricing. “A la carte may not have caught on yet with consumers in India, but bouquets tend to be cheaper worldwide,” said an MSO official.
Now, Ranbaxy's Mohali unit under FDA cloud
This story first appeared in DNA Money edition on Tuesday, June 25, 2013
Ranbaxy Laboratories seemed to be getting into more trouble on Monday after its stock tanked 6.8% to a almost 4-year low following reports that the US drug regulator had issued Form 483 to the pharma company’s drug manufacturing unit at Mohali in Punjab.
Responding to queries on the US Food and Drug Administration (FDA) issuance, a Ranbaxy spokesperson said, “We continue to make regulatory submissions from Mohali and as and when we get approvals we will commercialise products from Mohali.”
A Form 483 is issued by the FDA at the conclusion of an inspection to notify the company of objectionable conditions that might be in violation of the US Food, Drug and Cosmetic Act and related laws. However, it does not prevent a company from making regulatory filings from that unit.
Analysts said the implication of the fresh development on the business was not clear.
“There is no clarity from the Ranbaxy management on Form 483. We don’t know if the US FDA has actually issued anything like that,” said an analyst with a domestic brokerage.
“The stock has fallen almost 20% in the last four weeks owing to various negative developments. I think the Ranbaxy management doesn’t want the stock to go into a free-fall by acknowledging the US FDA move,” said another analyst, adding that development may not impact the stock significantly if the situation is not so critical.
“The management will, however, have to clarify the situation and its magnitude to avoid further damage,” the analyst said.
Earlier in April, the US FDA has issued a similar Form 483 to one of Wockhardt’s facilities at Aurangabad in Maharashtra. This led to the FDA issuing an import alert on that plant just last month. The Wockhardt stock had fallen 20% on both occasions and is currently trading at Rs 1,004.55, down 2.54% from Friday’s close of Rs 1,030.70. The stock was trading at Rs 1,229.7 a month ago.
Ranbaxy has been going through a tough phase for sometime. Last week, the EU antitrust regulators fined Ranbaxy to the tune of euros 10.3 million (the company management plans to appeal against the decision).
Ranbaxy Laboratories seemed to be getting into more trouble on Monday after its stock tanked 6.8% to a almost 4-year low following reports that the US drug regulator had issued Form 483 to the pharma company’s drug manufacturing unit at Mohali in Punjab.
Responding to queries on the US Food and Drug Administration (FDA) issuance, a Ranbaxy spokesperson said, “We continue to make regulatory submissions from Mohali and as and when we get approvals we will commercialise products from Mohali.”
A Form 483 is issued by the FDA at the conclusion of an inspection to notify the company of objectionable conditions that might be in violation of the US Food, Drug and Cosmetic Act and related laws. However, it does not prevent a company from making regulatory filings from that unit.
Analysts said the implication of the fresh development on the business was not clear.
“There is no clarity from the Ranbaxy management on Form 483. We don’t know if the US FDA has actually issued anything like that,” said an analyst with a domestic brokerage.
“The stock has fallen almost 20% in the last four weeks owing to various negative developments. I think the Ranbaxy management doesn’t want the stock to go into a free-fall by acknowledging the US FDA move,” said another analyst, adding that development may not impact the stock significantly if the situation is not so critical.
“The management will, however, have to clarify the situation and its magnitude to avoid further damage,” the analyst said.
Earlier in April, the US FDA has issued a similar Form 483 to one of Wockhardt’s facilities at Aurangabad in Maharashtra. This led to the FDA issuing an import alert on that plant just last month. The Wockhardt stock had fallen 20% on both occasions and is currently trading at Rs 1,004.55, down 2.54% from Friday’s close of Rs 1,030.70. The stock was trading at Rs 1,229.7 a month ago.
Ranbaxy has been going through a tough phase for sometime. Last week, the EU antitrust regulators fined Ranbaxy to the tune of euros 10.3 million (the company management plans to appeal against the decision).
Sunday 23 June 2013
Prime Focus World secures Rs 313 cr from Macquarie Capital
Prime Focus World NV (PFW), the creative services division of Prime Focus Ltd (PFL) has raised Rs 313 cr in private equity investment from Macquarie Capital. To be deployed in two phases the first tranche of Rs 224 cr has already been rceived in the first phase signed and Rs 89 cr in a second transactional phase, both of which are designated for strategic growth. This investment now places an enterprise valuation of Rs 1770 cr on PFW.
The capital raised will be used for the build out of the global creative services platform, near-term strategic acquisitions and deleveraging debt in the parent company, Prime Focus Limited, with the combined emphasis of expanding PFW's position as a global leader providing visual effects, animation, and stereo "3D" conversion services to major studios and filmmakers around the world.
Namit Malhotra, founder and chief executive officer-PFW and founder-PFL, said, “In the past five years, our business has gained tremendously through expansion of our product offerings and entrance into new markets. Combined with the backing we have received from our other financial partners AID Partners Capital and Suntrust, the investments will allow Prime Focus World to continue to expand and diversify our creative and technological offerings around the globe.”
Macquarie Capital, the advisory, capital raising and principal investing arm of Macquarie Group, made the investment to PFW and provided advisory services to its parent company, PFL. In addition to the funding from Macquarie, PFW also secured $10 million from China’s AID Partners in March. Coupled with a recent investment of $70 million from Standard Chartered Private Equity in PFL, these investments illustrate strong confidence in the business strategy and growth prospects for the overall group.
Namit added, "After having made an initial investment of $43million in 2008 to build out our global platform, we have transitioned and become a business where today our shareholders are seeing a seven times increase in value, while most companies have found it hard to keep pace with the changing times. The investments validate our global ambition to become a world leader while continuing to create greater value for our shareholders.”
PFW has brought its expertise to many wide release Hollywood films, including most recently Baz Lurhmann's The Great Gatsby and Paramount’s World War Z, and upcoming releases such as Sony Pictures’ White House Down. Previously released films that the company contributed to include Men in Black 3, Star Wars: Episode One – The Phantom Menace, Dredd 3D, Total Recall, Tim Burton's Frankenweenie, Harry Potter and the Deathly Hallows: Part 2, Narnia: The Voyage of the Dawn Treader, Resident Evil: Retribution, Green Lantern, Immortals, Wrath of the Titans, Mirror Mirror, Transformers: Dark of the Moon and Avatar.
The capital raised will be used for the build out of the global creative services platform, near-term strategic acquisitions and deleveraging debt in the parent company, Prime Focus Limited, with the combined emphasis of expanding PFW's position as a global leader providing visual effects, animation, and stereo "3D" conversion services to major studios and filmmakers around the world.
Namit Malhotra, founder and chief executive officer-PFW and founder-PFL, said, “In the past five years, our business has gained tremendously through expansion of our product offerings and entrance into new markets. Combined with the backing we have received from our other financial partners AID Partners Capital and Suntrust, the investments will allow Prime Focus World to continue to expand and diversify our creative and technological offerings around the globe.”
Macquarie Capital, the advisory, capital raising and principal investing arm of Macquarie Group, made the investment to PFW and provided advisory services to its parent company, PFL. In addition to the funding from Macquarie, PFW also secured $10 million from China’s AID Partners in March. Coupled with a recent investment of $70 million from Standard Chartered Private Equity in PFL, these investments illustrate strong confidence in the business strategy and growth prospects for the overall group.
Namit added, "After having made an initial investment of $43million in 2008 to build out our global platform, we have transitioned and become a business where today our shareholders are seeing a seven times increase in value, while most companies have found it hard to keep pace with the changing times. The investments validate our global ambition to become a world leader while continuing to create greater value for our shareholders.”
PFW has brought its expertise to many wide release Hollywood films, including most recently Baz Lurhmann's The Great Gatsby and Paramount’s World War Z, and upcoming releases such as Sony Pictures’ White House Down. Previously released films that the company contributed to include Men in Black 3, Star Wars: Episode One – The Phantom Menace, Dredd 3D, Total Recall, Tim Burton's Frankenweenie, Harry Potter and the Deathly Hallows: Part 2, Narnia: The Voyage of the Dawn Treader, Resident Evil: Retribution, Green Lantern, Immortals, Wrath of the Titans, Mirror Mirror, Transformers: Dark of the Moon and Avatar.
Prime Focus to launch ops in China
This story first appeared in DNA Money edition on Thursday, June 20, 2013.
Prime Focus (PF), a provider of media and entertainment (M&E) services, is making a foray into China and will set up operations by the third quarter of this fiscal, said Ramki Sankaranarayanan, CEO.
PF’s initial bouquet of services in China would include visual effects and 2D-to-stereo-3D conversion. The company will also explore hybrid cloud technology-enabled asset and workflow management solutions for broadcast industry.
The move to set base in China follows the joint venture (JV) formed by PFs, AID Partners Capital and Zhejiang Jingqi Wenhua Chuanbo in March.
Sankaranarayanan said, “The decision to enter China was a mutual understanding between partners. A key construct of AID Capital’s investment in PF was that PF bring its creative and technology expertise to benefit the M&E market in China.”
A promising 3D market opportunity and the overall M&E industry prospects in China, one of the world’s largest content markets, were key factors that propelled PF into China.
Namit Malhotra, founder of PF, said, “After India, Europe and North America, China was the growth story waiting to happen. The AID Partners relationship has gone beyond investment in a formal market entry vehicle to expand our footprint into one of the most influential markets in the world.”
According to the Chinese State Administration of Radio, Film and Television, China’s 2012 box-office receipts increased 30%, thanks largely to imported films, placing the People’s Republic as the world’s second-largest box office next to the US (surpassing Japan).
It was too early to decide on a greenfield set-up of PF in China as details about the size of infrastructure, office space and employee strength are yet to be determined, said Sankara narayanan.
“As of now, we are opening a marketing and sales office in Beijing. We will offer a complete suite of creative and technology services. Our investment in the JV is $3 million, which will be deployed for future investments,”said Sankaranarayanan.
Market accessibility and client intimacy will be key focus areas versus cost arbitration, he said.
Prime Focus (PF), a provider of media and entertainment (M&E) services, is making a foray into China and will set up operations by the third quarter of this fiscal, said Ramki Sankaranarayanan, CEO.
PF’s initial bouquet of services in China would include visual effects and 2D-to-stereo-3D conversion. The company will also explore hybrid cloud technology-enabled asset and workflow management solutions for broadcast industry.
The move to set base in China follows the joint venture (JV) formed by PFs, AID Partners Capital and Zhejiang Jingqi Wenhua Chuanbo in March.
Sankaranarayanan said, “The decision to enter China was a mutual understanding between partners. A key construct of AID Capital’s investment in PF was that PF bring its creative and technology expertise to benefit the M&E market in China.”
A promising 3D market opportunity and the overall M&E industry prospects in China, one of the world’s largest content markets, were key factors that propelled PF into China.
Namit Malhotra, founder of PF, said, “After India, Europe and North America, China was the growth story waiting to happen. The AID Partners relationship has gone beyond investment in a formal market entry vehicle to expand our footprint into one of the most influential markets in the world.”
According to the Chinese State Administration of Radio, Film and Television, China’s 2012 box-office receipts increased 30%, thanks largely to imported films, placing the People’s Republic as the world’s second-largest box office next to the US (surpassing Japan).
It was too early to decide on a greenfield set-up of PF in China as details about the size of infrastructure, office space and employee strength are yet to be determined, said Sankara narayanan.
“As of now, we are opening a marketing and sales office in Beijing. We will offer a complete suite of creative and technology services. Our investment in the JV is $3 million, which will be deployed for future investments,”said Sankaranarayanan.
Market accessibility and client intimacy will be key focus areas versus cost arbitration, he said.
Abbott entity sues Reddy's over patented thyroid injection 'Zemplar'
This story first appeared in DNA Money edition on Thursday, June 20, 2013.
US-based AbbVie Inc, a spun-off entity of of Abbott Laboratories, has dragged Dr Reddy’s Laboratories (DRL) to court over its patented thyroid injection Zemplar.
AbbVie has alleged that DRL infringed its patents on six counts.
“DRL committed an act of infringement by filing an ANDA (Abbreviated New Drug Application) with a Paragraph IV Certification that seeks FDA-marketing approval for DRL generic versions of AbbVie’s paricalcitol injection products prior to expiration of the patents-in-suit,” goes the petition filed by AbbVie along with Wisconsin Alumni Research Foundation (WARF) in the US District Court for the District of Delaware.
Zemplar (generic paricalcitol) is a drug used for the prevention and treatment of secondary hyperparathyroidism (excessive secretion of parathyroid hormone) associated with chronic renal failure.
According to its annual report, AbbVie made $383 million from Zemplar sales in 2012, including $230 million from the US.
As per the petition, DRL filed an ANDA with the US Food and Drug Administration (USFDA) seeking approval to sell a generic copy of Zemplar injectable products in 2 microgram/ml and 5 microgram/ml formulations prior to the expiration of the patents owned by and exclusively licensed to the complainants.
A Dr Reddy’s official called it a routine matter with no additional information to share.
Analysts tracking the developments echoed the sentiment, terming it positive for DRL and cited the infringement case as part of the patent challenge in US generic filing process.
“Typically, a drugmaker files with the USFDA for approval to market a product and if the patent is existing, the company has to challenge it. DRL has just challenged the patent and as per law, AbbVie has responded within 45 days, else it would have been understood that the drug inventor agrees the patent is not valid and is giving it away. Suing DRL is nothing but a routine matter and part of business,” said a pharma analyst with a leading international brokerage.
Now that the complainants have filed a suit, as per US law, a 30-month stay gets levied on the DRL filing. Once the stay period gets over, the parties involved will start litigating over the patent. The matter is likely to take over 3-4 years to get sorted out.
The alleged infringement relates to three patents – patent numbers 799 and 758, which Abbott had transferred to AbbVie and which will expire on April 8, 2018, and patent number 815, which WARF holds the rights to and which will expire on July 13, 2015.
US-based AbbVie Inc, a spun-off entity of of Abbott Laboratories, has dragged Dr Reddy’s Laboratories (DRL) to court over its patented thyroid injection Zemplar.
AbbVie has alleged that DRL infringed its patents on six counts.
“DRL committed an act of infringement by filing an ANDA (Abbreviated New Drug Application) with a Paragraph IV Certification that seeks FDA-marketing approval for DRL generic versions of AbbVie’s paricalcitol injection products prior to expiration of the patents-in-suit,” goes the petition filed by AbbVie along with Wisconsin Alumni Research Foundation (WARF) in the US District Court for the District of Delaware.
Zemplar (generic paricalcitol) is a drug used for the prevention and treatment of secondary hyperparathyroidism (excessive secretion of parathyroid hormone) associated with chronic renal failure.
According to its annual report, AbbVie made $383 million from Zemplar sales in 2012, including $230 million from the US.
As per the petition, DRL filed an ANDA with the US Food and Drug Administration (USFDA) seeking approval to sell a generic copy of Zemplar injectable products in 2 microgram/ml and 5 microgram/ml formulations prior to the expiration of the patents owned by and exclusively licensed to the complainants.
A Dr Reddy’s official called it a routine matter with no additional information to share.
Analysts tracking the developments echoed the sentiment, terming it positive for DRL and cited the infringement case as part of the patent challenge in US generic filing process.
“Typically, a drugmaker files with the USFDA for approval to market a product and if the patent is existing, the company has to challenge it. DRL has just challenged the patent and as per law, AbbVie has responded within 45 days, else it would have been understood that the drug inventor agrees the patent is not valid and is giving it away. Suing DRL is nothing but a routine matter and part of business,” said a pharma analyst with a leading international brokerage.
Now that the complainants have filed a suit, as per US law, a 30-month stay gets levied on the DRL filing. Once the stay period gets over, the parties involved will start litigating over the patent. The matter is likely to take over 3-4 years to get sorted out.
The alleged infringement relates to three patents – patent numbers 799 and 758, which Abbott had transferred to AbbVie and which will expire on April 8, 2018, and patent number 815, which WARF holds the rights to and which will expire on July 13, 2015.
Wednesday 19 June 2013
Rupee skating down, Glenmark, Ranbaxy feel the heat
This story first appeared in DNA Money edition on Wednesday June 19, 2013.
The depreciating rupee is set to negatively impact the profitability of pharma companies like Glenmark and Ranbaxy this quarter.
Going by Barclays Capital, the two companies are set to take a hit of 38% and 11%, respectively, in their earnings per share (EPS).
“We expect Glenmark and Ranbaxy to observe net forex losses due to high forex loans and significant amount of outstanding hedges,” Balaji Prasad and Rohit Goel, analysts with Barclays Capital, said in a note.
“We expect Ranbaxy to be impacted the most on a cash EPS basis due to derivative losses on its $962 million of derivatives at the end of the quarter ended March. In addition, Glenmark’s cash EPS is also expected to be affected largely due to interest liabilities on its foreign currency debt,” the duo noted.
EPS serves as an indicator of a company’s profitability and is calculated as net income minus dividend on preferred stock divided by average outstanding shares.
Glenmark officials did not respond to a questionnaire emailed on Monday.
Ranbaxy refrained from sharing company specific information, but said the rupee depreciation would improve the competitiveness of the Indian pharmaceutical industry where exports are concerned. “However, in the immediate future, companies that have relied on dollar financing will need to consider the impact of the depreciation in its financial statements,” said Indrajit Banerjee, president and chief financial officer, Ranbaxy.
In case of a net rupee depreciation of 11% (60/$) in this quarter, the analysts said the pecking order would remain the same. However, the negative impact for Glenmark and Ranbaxy would increase to 17% and 58%, respectively.
Among companies that are expected to see a gain in EPS due to a the rupee fall this quarter are Sun Pharma (5.5%), Cipla (3.3%), Dr Reddy’s (1.9%) and Lupin (1.7%).
“At a broad level, the weakening of the rupee is a sign of the pressures we are facing on the fiscal and trade deficit front; it does weaken the government’s efforts at increasing foreign inflows and could impact overall economic health,” said Ramesh Swaminathan, chief financial officer, Lupin Ltd.
The Barclays analysts noted that Lupin continues to perform with a 59% year on year growth in April on the back of market share gains across key products like Cefdinir and Lamivud, in addition to sustained share in key products like Fenofibrate and Ziprasidone. “Eleven Abbreviated New Drug Application approvals in the last three months reaffirm our confidence on Lupin’s strong future product pipeline.”
Swaminathan added that whilst the rupee weakening in general helps exporters achieve better realisations, the fact remains that this volatility takes most of them by surprise since they would have covered their exposures to some extent only; and that hedge might not ultimately result in gains.
“At Lupin, we have been prudent in achieving a balance between hedge and exposures and have calibrated our approach to ring-fence ourselves from this volatility. Our hedge percentage will pay dividends were this depreciation to continue,” said Swaminathan.
Barclays’ coverage group (comprising Ranbaxy, Glenmark, Sun Pharma, Cipla, Dr Reddy’s Laboratories and Lupin) generated 34.2% of sales from the US region last fiscal and the analysts expect it will continue to be in the same range in the current one. The report said these companies also incur considerable operational expenditure in foreign currency, particularly dollar, and that a falling rupee versus the dollar has a positive impact on the sector, which is a net exporter.
The depreciating rupee is set to negatively impact the profitability of pharma companies like Glenmark and Ranbaxy this quarter.
Going by Barclays Capital, the two companies are set to take a hit of 38% and 11%, respectively, in their earnings per share (EPS).
“We expect Glenmark and Ranbaxy to observe net forex losses due to high forex loans and significant amount of outstanding hedges,” Balaji Prasad and Rohit Goel, analysts with Barclays Capital, said in a note.
“We expect Ranbaxy to be impacted the most on a cash EPS basis due to derivative losses on its $962 million of derivatives at the end of the quarter ended March. In addition, Glenmark’s cash EPS is also expected to be affected largely due to interest liabilities on its foreign currency debt,” the duo noted.
EPS serves as an indicator of a company’s profitability and is calculated as net income minus dividend on preferred stock divided by average outstanding shares.
Glenmark officials did not respond to a questionnaire emailed on Monday.
Ranbaxy refrained from sharing company specific information, but said the rupee depreciation would improve the competitiveness of the Indian pharmaceutical industry where exports are concerned. “However, in the immediate future, companies that have relied on dollar financing will need to consider the impact of the depreciation in its financial statements,” said Indrajit Banerjee, president and chief financial officer, Ranbaxy.
In case of a net rupee depreciation of 11% (60/$) in this quarter, the analysts said the pecking order would remain the same. However, the negative impact for Glenmark and Ranbaxy would increase to 17% and 58%, respectively.
Among companies that are expected to see a gain in EPS due to a the rupee fall this quarter are Sun Pharma (5.5%), Cipla (3.3%), Dr Reddy’s (1.9%) and Lupin (1.7%).
“At a broad level, the weakening of the rupee is a sign of the pressures we are facing on the fiscal and trade deficit front; it does weaken the government’s efforts at increasing foreign inflows and could impact overall economic health,” said Ramesh Swaminathan, chief financial officer, Lupin Ltd.
The Barclays analysts noted that Lupin continues to perform with a 59% year on year growth in April on the back of market share gains across key products like Cefdinir and Lamivud, in addition to sustained share in key products like Fenofibrate and Ziprasidone. “Eleven Abbreviated New Drug Application approvals in the last three months reaffirm our confidence on Lupin’s strong future product pipeline.”
Swaminathan added that whilst the rupee weakening in general helps exporters achieve better realisations, the fact remains that this volatility takes most of them by surprise since they would have covered their exposures to some extent only; and that hedge might not ultimately result in gains.
“At Lupin, we have been prudent in achieving a balance between hedge and exposures and have calibrated our approach to ring-fence ourselves from this volatility. Our hedge percentage will pay dividends were this depreciation to continue,” said Swaminathan.
Barclays’ coverage group (comprising Ranbaxy, Glenmark, Sun Pharma, Cipla, Dr Reddy’s Laboratories and Lupin) generated 34.2% of sales from the US region last fiscal and the analysts expect it will continue to be in the same range in the current one. The report said these companies also incur considerable operational expenditure in foreign currency, particularly dollar, and that a falling rupee versus the dollar has a positive impact on the sector, which is a net exporter.
Giving teeth to modern dental care business
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| Vikram Vora |
An edited version of this story first appeared in DNA Money on Tuesday June 18, 2013.
A production engineer armed with a masters in management studies (MMS) in marketing from Mumbai University, Vikram Vora slogged it out for over three (2005-2009) in his family business selling dental materials like any other management graduate. He would wait for hours at the dental clinics for his turn to make a sales pitch and in the process identified a huge gap -- lack of transparency between patients and doctors -- that left a lot of patients dissatisfied with the treatments rendered.
Vora also realised that the awareness level about dental treatments among patients was very low. Adding to their confusion (before committing for a particular treatment) was the fact that doctors would very rarely educate them about various aspects related to the treatment. His analysis of the situation brought out the fact that in the entire process, the patient would not get to know what was the problem, why it happened, what are the optional treatments, what is the best and least expensive procedure, what is the right (affordable) option to go for, how much time will it take to heal etc.
"I believed if somebody could create a service and bridge this gap, it would be a great success. And that is how the entire idea of Mydentist evolved and achieved the current status in the market today," said 34 year old Vora who co-founded Total Dental Care Pvt Ltd (TDC) with his brother Parth. With 45 dental clinics in Mumbai and Pune, TDC is India's largest multi-speciality dental clinic chain.
What sets Mydentist clinics apart from other standalone dental centres is the fact that it offers a standardised and published rate card for all its services - something that was not standard practice in India untill recently. Dentists are employed on monthly salaries (Rs 16,000 for entry level), instead of the usual profit-sharing model, and work in shifts of four hours each.
"We started the trend of offering quotations for every treatment being offered. The approach initially received negative feelers from the industry but that's not the situation now. People have matured and have accepted that it's here to stay. In fact, a lot of doctors have started following the quotation approach and standards of treatments have improved to a great extent," said Vora.
As a result of this the pricing gap between a standalone dentist and Mydentist has decreased though the later would still be marginally lower in pricing as compared to a grade B dentist. The charges at Mydentist (price list also displayed on the company website) range from Rs 300 for cleaning per sitting to Rs 90,000 for clear aligners (clear removable cosmetic appliance designed for minor teeth movement of patients).
Elucidating the different category of doctors in the dentistry field, Vora said there are grade A doctors focusing only on the elite clientele and hence quote exorbitantly high charges. "Then there is grade C catering to larger number of people in the lower middle-class category at a significantly lower cost than the grade A practitioners. Then there are the likes of charitable trusts and government hospitals that operate at an almost negligible cost. So we target the audience between the average middle-class and the charitable trust," said Vora.
Interestingly the venture was never envisaged with the idea of making it the largest dental clinic chain in the country. The six clinic chain (undisclosed funding from family) was earlier operated under the banner Total Dental Care and sometime in January 2010, Vora's ex-employer Anand Lunia (angel investor and founder of IndiaQuotient) suggested taking the private equity route if he wanted the business expand from six to 100 or more clinics.
An introduction to Seedfund was facilitated by Lunia post which the angel investor incubated the idea. The first thing Seedfund did was to get on board book evangelist, mentor and business consultant R Sriram (erstwhile CEO & MD of Crossword Bookstore). During his six months with TDC, Sriram structured the entire business, design as well as coined the brand name Mydentist.
"There was a complete change from pre-incubation stage. The entire language and communication was framed early-on post the incubation including the logo and the brand name," said Vora.
The existing six clinics thus had to shut down to bring in the consistency in offerings and brand standards being laid down under the new identity. The first Mydentist branded outlet was opened in Vile Parle (Mumbai) in April 2011.
"Pre-incubation, I don't think we had the structural knowledge to run a business that would grow to this magnitude. Today we have around 250 doctors, 60 consultants, over 200 support staff. We'll be adding 5 clinics to the portfolio taking the total number to 50 clinics to by the end of this month. This concrete business as is visible to the market today would not have been possible without inputs from the fund, consultants and individual mentors," confesses Vora.
A 300 square foot Mydentist clinic calls for an overall investment of Rs 35 lakh of which majority (Rs 20 lakh) goes into buying imported equipment (from vendors in India). Two doctors work three shifts in the day. On an average the Mydentist chain gets close to 8,000 patients every month and the number is set to reach 10,000 patients per month by June end. Each centre will take 18-20 months to breakeven. The nature of treatments sought by most patients are pretty much the same -- root canal, scaling, polishing, crowns and bridges and other common treatments -- as any other standalone dental clinic would provide. The clinic has started offering orthodontics services and has tied-up with financial institutions to offer and EMI scheme as orthodontics tend to be expensive.
Not sharing commercial details of the business, Vora said that revenues have increased over three times when compared with the peak revenue figures of the pre-incubation stage.
Seeing potential in the business idea, a new fund - Asian Healthcare Fund by the Burman family, promoters Dabur Group - has invested Rs 40 crore in Mydentist. As a result, the ownership of TDC is now equally shared between the promoters and the two angel investors.
The funds raised will largely be used for growth as the company is targeting 100 clinics by March 2014 and 150 clinics in another 18 months from now. The new additions will also happen in Mumbai and Pune while cities like Ahmedabad and Surat are being considered as well.
A production engineer armed with a masters in management studies (MMS) in marketing from Mumbai University, Vikram Vora slogged it out for over three (2005-2009) in his family business selling dental materials like any other management graduate. He would wait for hours at the dental clinics for his turn to make a sales pitch and in the process identified a huge gap -- lack of transparency between patients and doctors -- that left a lot of patients dissatisfied with the treatments rendered.
Vora also realised that the awareness level about dental treatments among patients was very low. Adding to their confusion (before committing for a particular treatment) was the fact that doctors would very rarely educate them about various aspects related to the treatment. His analysis of the situation brought out the fact that in the entire process, the patient would not get to know what was the problem, why it happened, what are the optional treatments, what is the best and least expensive procedure, what is the right (affordable) option to go for, how much time will it take to heal etc.
"I believed if somebody could create a service and bridge this gap, it would be a great success. And that is how the entire idea of Mydentist evolved and achieved the current status in the market today," said 34 year old Vora who co-founded Total Dental Care Pvt Ltd (TDC) with his brother Parth. With 45 dental clinics in Mumbai and Pune, TDC is India's largest multi-speciality dental clinic chain.
What sets Mydentist clinics apart from other standalone dental centres is the fact that it offers a standardised and published rate card for all its services - something that was not standard practice in India untill recently. Dentists are employed on monthly salaries (Rs 16,000 for entry level), instead of the usual profit-sharing model, and work in shifts of four hours each.
"We started the trend of offering quotations for every treatment being offered. The approach initially received negative feelers from the industry but that's not the situation now. People have matured and have accepted that it's here to stay. In fact, a lot of doctors have started following the quotation approach and standards of treatments have improved to a great extent," said Vora.
As a result of this the pricing gap between a standalone dentist and Mydentist has decreased though the later would still be marginally lower in pricing as compared to a grade B dentist. The charges at Mydentist (price list also displayed on the company website) range from Rs 300 for cleaning per sitting to Rs 90,000 for clear aligners (clear removable cosmetic appliance designed for minor teeth movement of patients).
Elucidating the different category of doctors in the dentistry field, Vora said there are grade A doctors focusing only on the elite clientele and hence quote exorbitantly high charges. "Then there is grade C catering to larger number of people in the lower middle-class category at a significantly lower cost than the grade A practitioners. Then there are the likes of charitable trusts and government hospitals that operate at an almost negligible cost. So we target the audience between the average middle-class and the charitable trust," said Vora.
Interestingly the venture was never envisaged with the idea of making it the largest dental clinic chain in the country. The six clinic chain (undisclosed funding from family) was earlier operated under the banner Total Dental Care and sometime in January 2010, Vora's ex-employer Anand Lunia (angel investor and founder of IndiaQuotient) suggested taking the private equity route if he wanted the business expand from six to 100 or more clinics.
An introduction to Seedfund was facilitated by Lunia post which the angel investor incubated the idea. The first thing Seedfund did was to get on board book evangelist, mentor and business consultant R Sriram (erstwhile CEO & MD of Crossword Bookstore). During his six months with TDC, Sriram structured the entire business, design as well as coined the brand name Mydentist.
"There was a complete change from pre-incubation stage. The entire language and communication was framed early-on post the incubation including the logo and the brand name," said Vora.
The existing six clinics thus had to shut down to bring in the consistency in offerings and brand standards being laid down under the new identity. The first Mydentist branded outlet was opened in Vile Parle (Mumbai) in April 2011.
"Pre-incubation, I don't think we had the structural knowledge to run a business that would grow to this magnitude. Today we have around 250 doctors, 60 consultants, over 200 support staff. We'll be adding 5 clinics to the portfolio taking the total number to 50 clinics to by the end of this month. This concrete business as is visible to the market today would not have been possible without inputs from the fund, consultants and individual mentors," confesses Vora.
A 300 square foot Mydentist clinic calls for an overall investment of Rs 35 lakh of which majority (Rs 20 lakh) goes into buying imported equipment (from vendors in India). Two doctors work three shifts in the day. On an average the Mydentist chain gets close to 8,000 patients every month and the number is set to reach 10,000 patients per month by June end. Each centre will take 18-20 months to breakeven. The nature of treatments sought by most patients are pretty much the same -- root canal, scaling, polishing, crowns and bridges and other common treatments -- as any other standalone dental clinic would provide. The clinic has started offering orthodontics services and has tied-up with financial institutions to offer and EMI scheme as orthodontics tend to be expensive.
Not sharing commercial details of the business, Vora said that revenues have increased over three times when compared with the peak revenue figures of the pre-incubation stage.
Seeing potential in the business idea, a new fund - Asian Healthcare Fund by the Burman family, promoters Dabur Group - has invested Rs 40 crore in Mydentist. As a result, the ownership of TDC is now equally shared between the promoters and the two angel investors.
The funds raised will largely be used for growth as the company is targeting 100 clinics by March 2014 and 150 clinics in another 18 months from now. The new additions will also happen in Mumbai and Pune while cities like Ahmedabad and Surat are being considered as well.
Expanding in a phased manner is a key discussion point in our partnership with IMAX: Ajay Bijli
An edited version of this Q&A first appeared in DNA Money edition on Monday June 17, 2013.
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| Actor Aamir Khan inaugurating PVR Imax theatre along with Ajay Bijli, CMD, PVR Ltd, and Sanjeev Bijli, JMD, PVR Ltd |
I noticed, your IMAX screens in Bangalore and Mumbai have Pepsi and Kotak as title sponsors. What is the rational behind this approach?
Film exhibition business primarily has three revenue streams viz theatrical, food and beverage and, sponsorship and advertising. We look at properties and opportunities wherein we can get a sponsor associated with anything that we do onscreen advertising. One such opportunity came post signing up with IMAX and we took it to a sponsor to see their reaction.
Worldwide, corporates, banks, beverage brands seek associations that offer a very unique experience. Since our investment is large and if we could get a sponsor it will eases off the pressure to some extent. But we pursue this approach property by property like for the IMAX Bangalore property we have Pepsi as the title sponsor while it's Kotak for IMAX at Phoenix Mills. The tenure for such deals is five years, I cannot share the commercials associated with it though.
Is there a commitment from PVR in terms of the number of IMAX screens in India?
We will set up IMAX screens wherever there is an opportunity. We can go up to 10 screens but I'm very particular about where these screens come up. Besides a perfect location we look for things like right demographic profile, liking for Hollywood films etc. We are primarily an exhibitor but wherever we feel can add value and give a much better experience by adding another attraction we'll do it.
In phase I, the potential exists only in those catchments where Hollywood films are well received and we represent about 45% of such films in India. However, I think IMAX has a great future and with Indian films also getting converted (into IMAX) there will be a huge propensity of people to watch such films. So phase II might see a much larger footprint with huge pipeline of Indian films. In fact, expanding in a phased manner is a key discussion point in our partnership with IMAX.
Cinemax recently got merged with PVR, could you throw some light on how are we going about the two brands now considering both enjoy great equity in certain key markets?
We are looking at economies of scale at different levels. There is no hurry for us to convert everything into PVR as conversion is an expensive proposition as well. We have done audits and are now looking at those areas where consumer experience can be improved first. People need to feel the presence of PVR even though name is not PVR.
So from projection, sound systems, food and beverage and online initiatives, box-office experience, advertising and marketing etc will have to be upgraded and extended to all locations to bring them at par with PVR. We are cherry-picking properties that have not been renovated for a long time. These I believe can be converted into PVR provided they are in the right catchments. Then there are certain brand new properties with PVR level standards like the five-screen Cinemax at Pacific Mall (Subhash Nagar, New Delhi) that has already been converted to PVR at a cost of Rs 67 lakh.
What are the possibilities of brand Cinemax getting completely phased out over 3-5 years from now? Or Cinemax could become a sub-brand?
Not really. I'm finding that Cinemax is also in great locations so we'll have to be very careful how go about it. I don't think the brand will get phased out completely as it is very expensive to change. Looking at economies of scale from a stakeholders perspective having one brand will be very fantastic but we will have to see how it goes. We might look at a prefix / hybrid option for some while others could be completely PVR. We are still thinking along those lines.
You are also adding a good number of screens organically. What are the plans like in this fiscal?
We have been consistently adding 50-60 screens in the last couple of years and the target for this fiscal is 90-odd screens. We adopt a very cautious approach to capital deployment and certainly not in a big hurry. We are pretty much on track and have already opened 25-odd screens. In another fortnight we will be opening 17 screens taking the total to 382 screens. We should be 500 screens in total by 2015.
On the revenues streams you'd mentioned earlier, what is the ratio like between the three to the company's overall revenues?
Films contribute the largest at 67% followed by 23% from food and beverage and 10% from advertising. Profitability-wise advertising is number one contributor to company's bottom-line. And with new screens getting operational, we see advertising contributing close to 15% to the overall revenues in the future. Interestingly, we probably have the highest (across the globe) per screen revenue generated from advertising.
People have expressed displeasure on facebook and twitter on the long duration advertising when watching a movie.
Advertisers look for big blockbuster releases and it largely happens with such films. So when Yeh Jawaani happened people have carried back that impression. I agree it was very long.
In fact, some people posted that it was 45 mins of advertising...
No no... 45 minutes to I will never allow... I've seen Ye Jawaani twice and I think maximum it was 12-14 minutes of advertising in the pre-movie stage and another 8-9 minutes in the interval. So all in all it would have been 20-22 minutes of advertising. One needs to understand that the company has been promoted by movie-buffs and I'd personally hate if there was advertising beyond a limit.
Also, there was a certain pent-up demand already in the market. Ye Jawaani came after IPL which already had a issue. So the pent-up demand was from everyone; consumer were dying to see a good movie, advertisers wanted to go back to the medium of cinema and exhibitors wanted to maximise the number of shows. So we were all basically waiting from something big to happen and that's why the increase in duration of advertising.
Could you throw some light on the ticket pricing trends, how's it looking like in this fiscal?
I think it would be the usual 10-12% hike in ticket rates mainly due to inflation. People take the highest ticket price paid over the weekend or the price for the last row as the benchmark. I'd look at the average ticket price (ATP) -- morning, evening, weekday, weekend -- and that is still low at Rs 175.
The F&B part of your business is also getting bigger by the day.
The F&B vertical has now reached Rs 300 crore in overall revenues and we believe it should really be PVR's focus along with cinemas especially something that's a very natural extension to the cinema business. So we won't do a standalone restaurants. The F&B eco-system will be built around the multiplexes and our intention is to have F&B outlets for pre- and post-movie viewing experiences especially in the newer multiplexes.
We may also end up creating a few brands in the quick service restaurants (QSR) on our own. The first one (a polished casual dining restaurant with an average per cover charge of Rs 1,100) we have done is our own brand. Others in the pipeline will be a mix of outsource, joint ventures and franchise. It will be too early to disclose details as talks are still on and we are evaluating the viability / feasibility.
How is the leisure vertical shaping up? Are there more concepts in the offering?
We have joint venture company that operated five bowling centres already and will be opening three more this year. The unit level profitability here is very good. Ice skating was something being explored but our market research showed that too many accidents would happen hence the idea was dropped.
You now have significant backing from L Capital and Renuka Ramnath's Multiples private equity fund holding 15.8% stake. So any future funding requirement will be done through them are some new names could join in?
I doesn't look like there will be any further funding requirement as of now. Also we work on negative cash flow and have close to Rs 300 crore in operating revenues (ebitda) which is good enough to meet any funding requirements. Unless there is another acquisition we may plan which is very unlikely. Cinemax was a very big deal and we need to digest it properly. So we need to be sensible about how to grow the company and there is no such hurry. We are already growing by 30-40% annually which is more than enough.
Sunday 16 June 2013
Swiss Sotax plans India plan, acquires Dr Schleuniger Pharmatron for $15 million
This story first appeared in DNA Money edition on Saturday, June 15, 2013.
Sotax AG, a Swiss dissolution systems maker, is setting up a unit in India to make affordable systems for the pharmaceutical market here.
The company is scouting for a location which most likely would be in Navi Mumbai.
Jean-Louis Raton, head of business units-Europe and Asia-Pacific, Sotax, said the company has been looking at a few places in Mumbai/Navi Mumbai and soon finalise the location soon.
"The India unit will help us reduce the price gap between locally-made dissolution systems that are priced seven times lower than Sotax's. The India facility will manufacture 400 units in the first year, which would be increased gradually to 1,000 units," said Raton.
Sotax AG, a Swiss dissolution systems maker, is setting up a unit in India to make affordable systems for the pharmaceutical market here.
The company is scouting for a location which most likely would be in Navi Mumbai.
Jean-Louis Raton, head of business units-Europe and Asia-Pacific, Sotax, said the company has been looking at a few places in Mumbai/Navi Mumbai and soon finalise the location soon.
"The India unit will help us reduce the price gap between locally-made dissolution systems that are priced seven times lower than Sotax's. The India facility will manufacture 400 units in the first year, which would be increased gradually to 1,000 units," said Raton.
The company plans to start the facility by August 2014.
Being Swiss-made, the dissolution system attracts 30% customs duty in India.
So, while a basic Sotax dissolution bath (manual) is priced Rs 12 lakh the locally made system costs Rs 3 lakh.
The Sotax's India-made systems will cost Rs 4 lakh.
"Despite being made in India, the systems will still be over 30% premium to the local systems," said L Ramaswamy, managing director, Sotax India.
While the company did not share investment, official said it will be not be very capital intensive as the facility will be more of an assembly line.
"Approximately 60% of the parts would be sourced from India and the balance will be imported. The India facility will only focus on assembling the system. Set-up cost will not be high because we will be hiring and leasing the machinery," said Ramaswamy. The company will, however, continue to import the semi-automatic and fully-automatic dissolution systems from Switzerland.
In another development, Sotax has acquired another Swiss firm Dr Schleuniger Pharmatron, a maker of physical test equipment for solid dosage and specialists in complete tablet hardness testing solution, for $15 million.
Sotax registered global revenues of $48 million and with the acquisition of Dr Schleuniger Pharmatron it is expected to swell to $58 million.
Holger Herrmann, vice president-sales and marketing, Dr Schleuniger Pharmatron, said the company has over 800 installations in India.
Sotax's India manufacturing facility will also manufacture Dr Schleuniger Pharmatron products / solutions and would also cater to overseas markets.
Foreseeing significant growth opportunities, Sotax will also relocate its headquarters from China to India in July.
Sotax has set up a R&D centre at Navi Mumbai to develop an indigenous system and plans to set up a contract lab in India to cater to testing requirements of European pharma companies.
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