Dr Reddy’s, Anji Reddy , Business in india, India’s second-largest pharma company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DR reddy’s

Inside Dr Reddy’s

India’s second-largest pharma company is adapting to industry dynamics and seizing new opportunities — all this, while staying true to the founder’s vision

 

DRL Over The Years

• 1984: Anji Reddy quits state-owned Indian Drugs & Pharmaceuticals (IDPL) to start DRL with Rs 25 lakh corpus
• 1986: DRL goes public and enters international markets with methyldopa exports after IDPL stops producing drug owing to technical reasons
• 1987: Becomes first Indian company to make its plant USFDA compliant, thus marking DRL’s foray into the world of generics
• 1991: Among early Indian companies to enter Russia, but opts for private pharmacies rather than traditional government route
• 1997: Licenses anti-diabetic molecule (Balaglitazone) to Novo Nordisk, validating Anji’s belief that research is the future of pharma
• 1999: Acquisition of American Remedies catapults DRL as the 5th largest Indian pharma company
• 2001: First Asia-Pacific (ex-Japan) entity to list on NYSE, helping DRL not just raise money but also improve transparency. Wins first patent challenge with 180-day marketing exclusivity for generic drug (Fluoxetine 40 mg) in the US, giving DRL confidence to build first-to-file pipeline and ushers in an era of patent challenges
• 2005: Acquisition of Roche’s API business in Mexico helps DRL turn suppliers to innovators, a difficult market to crack until then
• 2006: Crosses $1 billion in revenues with the acquisition of Betapharm in Germany, but change in regulations make acquisition unviable
• 2007: DRL sees biosimilars as a growth area, launches Reditux (Rituximab), the world’s first monoclonal antibody biosimilar. Reditux goes on to be a market leader in its segment
• 2008: Post setback in research, DRL decides to acquire technology platforms to strengthen R&D capabilities. Acquires Dow Pharma’s small molecules business in the UK
• 2009: Strategic alliance with GSK for 100 products in emerging markets validates strength of product portfolio and manufacturing capabilities
• 2011: Achieves critical size as revenues cross $2 billion, helping DRL take larger bets in product development
• 2012: Strengthens capabilities in injectables and biosimilars through acquisitions and builds an impressive product portfolio in each of its businesses following a deal with Merck Serono and acquisition of Octoplus

Stocks, sectors that will gain from a good monsoon

Monsoon seems to be the only respite that Indian companies can look forward to this year. Falling rupee, high fiscal deficit , flight of foreign funds and poor earnings, these have been the only themes in the India story for many quarters now. However, a good monsoon might bring good tidings, at least for some companies.

A monsoon is called normal when rains are 96-104% of the long-period (50 years) average, or LPA, of 89 cm between June and September. This year, the first half, that is, June and July, has been satisfactory (17% over LPA). The India Meteorological Department has predicted a normal second half as well.

WHAT IT MEANS

Above normal rains have led to 18% higher sowing of kharif crops so far, says Dipankar Mitra, senior vice president, research, Motilal Oswal Securities.

Although deficient rainfall in east India has slowed rice sowing a bit, the crop has been planted over 7% more area compared to the corresponding period last year. While the crucial sowing months are July and August, sowing across the country has already exceeded 70% of the total acreage last year.

"Monsoon has a direct impact on kharif output; thus, agriculture growth is expected to double to 3.9% in 2013-14 from 1.9% in 2012-13," says Mitra.

A good monsoon creates positive perception about the economy among investors, including foreign institutional investors, as a large part of India depends upon agriculture for sustenance.

"Also, India's economy is known to be driven by domestic consumption, which will get a big boost as rural incomes rise due to a good monsoon," says P Phani Sekhar, fund manager, portfolio management services, Angel Broking.

Although the farm sector's contribution to the country's gross domestic product has fallen from 19% in 2004-05 to 12% in 2013, it still employs half of India's population.

"Also, agriculture has strong links with industrial and services sectors, plus a direct bearing on rural economy and consumption," says Mitra.

"Not only does a good monsoon increase farm production, giving more money to farmers, it also keeps inflation in check by increasing the supply of food articles," says Dipen Shah, head, Private Client Group Research, Kotak Securities.

A fall in inflation means higher possibility of lower interest rates, which is generally supportive of industrial growth.

In fact, we have seen that sustained farm sector growth over the last five years has lowered debt levels in rural India and created job opportunities outside the farm sector. This, plus a plethora of farmer-friendly social sector schemes, is expected to increase consumption in rural areas this year as well.

SECTORS THAT WILL GAIN

There are quite a few industries that will see a rise in demand for their products and services because of this mini rural boom. Shah of Kotak says a good monsoon will benefit fast moving consumer goods companies as rural India's higher purchasing power increases the demand for their products. "Companies with wide rural footprint such as Hindustan Unilever, Dabur and Godrej Consumer Products will benefit the most," he says.

High farm production will also lower raw material costs for companies that make packaged foods, for instance, Britannia, GSK Consumer, ITC and Nestle. "Having said that, we don't expect an explosion in demand in this space. For instance, HUL's volume growth will perhaps rise from 4-6% to 6-7% leading up to the general elections next year," says Sekhar. Investors should not expect phenomenal returns from this sector considering the high valuations, he says. The sector is up 138% since 2008 while earnings have risen 75% compared to 70% growth for the market as a whole.

Data show a close link between rains and fortunes of FMCG companies. For instance, in 2009-10, the average rainfall was 22% below the LPA. HUL's sales fell 13% during the year. In 2007-08, rainfall was 6% above the LPA. As a result, HUL's sales rose 17.6%. Similarly, normal rainfall helped HUL grow sales by 12.1% in 2011-12.

"Also, during years of good monsoon , the demand for two-wheelers and low-cost four-wheelers and tractors also rises. This is expected this year as well," says Shah of Kotak.

Analysts expect M&M to grow tractor sales by 25%. The improvement in consumer sentiment in rural areas will benefit two-wheeler companies as well. However, there are chances that this may be offset by low demand in urban India due to the industrial slowdown there.

Further, if the current liquidity tightness continues and growth in bank deposits slows, lending rates may start rising, impacting demand.

Experts say that besides these, there are some sectors, for instance fertiliser and irrigation, which seem direct beneficiaries of a good monsoon but are facing a lot of other problems.

A normal monsoon usually increases the demand for fertilisers. This explains the rise in stocks of fertiliser companies Coromandel International, Chambal Fertilisers & Chemicals, Deepak Fertilisers and Rashtriya Chemicals & Fertilizers in the last one month. However, for this rally to sustain, earnings have to grow, which may not occur.

Sekhar of Angel Broking says lack of clarity on supply of gas to fertiliser companies and higher prices of gas and other inputs have led to a sharp rise in prices of decontrolled fertilisers in the domestic market. Due to this, companies are burdened with huge inventories. This has also led to an increase in consumption of subsidised urea. Hence, the performance of fertiliser companies may not improve substantially till the second half of the current financial year. Also, the large inventories of complex fertilisers may take time for liquidation and sales may remain sluggish in the medium term, he says.

Irrigation is another area which should do well. However, it comes under the infrastructure category and depends upon money provided by state governments. Although a large number of states are going to polls, which means governments may dole out benefits for farmers, the fiscal deficit situation is so bad that there may be no big bonanza on this front this year, says Sekhar.

Eurogroup: Greece may need further aid

Brussels: Eurogroup president Jeroen Dijsselbloem admitted Thursday Greece would need a third bailout, saying its problems could not be solved by 2014.

Answering questions in the European Parliament here, Dijsselbloem said it was clear Greece's situation would remain grim despite recent progress, reports Xinhua.

"In this context, the Eurogroup has indicated clearly that it is committed to providing support for Greece in the current programme and beyond until it regains market access," he said.

For the Eurozone, he said, "We have to deal with structural problems in our economies to ensure economic growth to rebound".

Dijsselbloem also answered questions on the banking union and a stress test.

Debate over new aid for Greece in 2014 has increased recently. German Finance Minister Wolfgang Schaeuble said last month Greece was not out of the woods and needed further aid.

ICICI Bank launches 'branch on wheels'

Mumbai: As part of its financial inclusion initiative, ICICI Bank on Thursday claimed to have become the first private sector lender to launch a 'branch-on-wheels' drive and will have five more such facilities in three states this year.

Maharashtra Chief Minister Prithviraj Chavan launched the branch-on-wheel in sugar hub of Kolhapur today.

"ICICI Bank has always tried to take a holistic approach to provide financial services in rural and remote areas. Accordingly, it has already launched 308 gramin branches to provide basic banking services in unbanked villages and plan to scale it up to 500 this fiscal," ICICI Bank Executive Director Rajiv Sabharwal said.

The branch-on-wheels is yet another step to expand the reach to villages devoid of banking facilities, he said, adding the bank will be launching one more such facility in Maharashtra and two each in Odisha and Chhattisgrah this year, after assessing the success of the pilot project.

On the reason for choosing Maharashtra for this pilot project, he said the bank has nearly 17 percent or 560 branches in the state, out of which 103 are in rural areas, including 43 gramin branches in unbanked villages across 10 districts. The bank operates 308 gramin branches.

Overall, one in every two branch of the bank is in rural/semi-urban areas, he said.

Under the financial inclusion drive, which started in 2010, the bank has opened 350 branches in unbanked areas and will take this number to 500 by the end of the fiscal, Sabharwal said .

These 350 branches, spanning 15,000 villages in 16 states, have 16 million accounts. These villages are served by 7,500 customer service points, he added.

On the branch-on-wheels, Sabharwal said two mobile branch will have two employees, and offers every facility that a full-fledged branch offers, such as an ATM, a cash recycler among others and will cover four villages.

On the profitability of the rural branches, he did not offer a number but said normally a branch takes 18-24 months to turn around.

Onions available online for Rs 9 per kilo

New Delhi: High prices are making people shed tears for onions before they are even chopped, but now a website is offering the bulbs at prices as low as Rs 9 per kilogram.

Beginning on Thursday Goupon India, a shopping website, which offers a daily deal on best local goods, services and events has tied up with a Delhi-based wholesaler to deliver onions for the next seven days to customers in 78 cities across the country.

"It is a very simple deal. We are a deal site and in current situation where onions prices are skyrocketing we are offering onions at Rs 9 per kg. The onions will be home delivered to buyers," Ankur Warikoo, CEO, Groupon India said.

The deal is scheduled to be online for the next seven days and customers would be able to get their onions within 10 days of placing their orders.

"We plan to sell 3,000 kilograms of fresh onions per day. This is so that we can ensure the quality of the products. We have tied up with a large onion distributor in Delhi and will be using multiple logistic partners to deliver the onions to customers," Warikoo said.

Onions, packaged in special moisture free wraps would be couriered to buyers by companies like Blue Dart, which is a partner of Groupon. Only registered users of the site would be able to avail the deal with only one deal available per user.

The company says it expects more than 20,000 people to avail of the onion promotion.

"We are fairly confident that people will buy. The offer will last till the onions last," Warikoo said.

Since the last one and half months, retail price of onions have skyrocketed up to Rs 80 per kg in most parts of the country.

Groupon India is part of a 48-country portfolio of Groupon Global spanning 200 million subscribers and over USD 5bn in annual sales.

The site, offers "collective buying power to offer unbeatable prices and provide a win-win for businesses and consumers and delivers over 650 daily deals globally."

New RBI chief Rajan raises hopes with action plan

Mumbai: New Reserve Bank of India (RBI) chief Raghuram Rajan kicked-off his term with a bang, announcing a spate of measures to support the embattled rupee and unveiling a raft of steps to liberalise financial markets and the banking sector.

In an unexpectedly detailed and wide-ranging briefing, Rajan outlined plans to attract more funds from overseas by subsidising hedging costs for banks and making it easier for importers and exporters to hedge currency risk.

He made clear his intention to liberalise markets, including pushing for more rupee trade settlement, introducing new financial products such as overnight interest rate swaps and removing curbs on opening new branches by Indian banks.

"Some of the actions I take will not be popular," said Rajan, who famously predicted the global financial crisis and took over at the central bank in Mumbai on Wednesday after nearly a year as chief economic advisor in the finance ministry in New Delhi.

His forceful debut, which contrasted with more circumspect public comments in recent months, drew rave reviews from central-bank watchers.

A. Prasanna, economist at ICICI Securities Primary Dealership, said he expects bonds, the rupee and Indian stocks, especially those of banks, to react positively on Thursday.

"Overall, the way and kind of steps he has announced will instill confidence in the market, which was in short supply."

A prominent former International Monetary Fund chief economist, Rajan, 50, succeeds Duvvuri Subbarao at the helm of the Reserve Bank of India. He enters office in the eye of a financial storm as the country grapples with its worst economic crisis since 1991, which has sent the rupee skidding by some 20 percent this year.

"The governorship of the central bank is not meant to win one votes or Facebook 'likes'. But I hope to do the right thing, no matter what the criticism, even while looking to learn from the criticism," he told reporters.

Many critics and investors have complained about what they viewed as inconsistent communication and insufficient action from policymakers as economic growth has crumbled to a four-year-low of 4.4 percent in the June quarter and as the rupee last week hit a record low.

"Expectations were quite high from him and he has gone far beyond expectations on day 1," said Barclays economist Siddhartha Sanyal. "The fact that he has come with such pointed steps in mind shows that we will see more concrete steps very soon."

Earlier on Wednesday, the rupee rallied after suspected dollar sales by the central bank and after Reuters exclusively reported that the RBI was considering a plan that would help lenders raise money from expatriate Indians. Rajan, in his remarks, outlined the plan to attract more funds from non-resident Indians (NRIs) as part of a broader push to lure inflows.

The rupee recovered sharply from a day's low of 68.62 per dollar to close at 67.065.

Under the plan, the central bank will offer a swap window to banks for fresh dollar deposits mobilised from non-resident Indians. India has the world's second-biggest diaspora, according to the Ministry of Overseas India Affairs, and the country has turned to overseas Indians for help in past financial crises.

The central bank will also offer forex swap into rupees at a concessional rate below market levels for banks who raise dollar funds through overseas borrowings.

HIGH EXPECTATIONS

Rajan's arrival has been welcomed by some traders, who hope for a fresh approach to the RBI's controversial bid to defend the rupee by tightening cash conditions and raising short-term interest rates. Those measures have pushed up borrowing costs even as economic growth sputters and have shown little success to date in braking the rupee's descent.

Among Rajan's measures, he said banks should gradually be allowed to decrease their mandatory holdings of government securities, which would free up capital for lending.

He also said new bank licences should be awarded on an ongoing basis. The central bank is now in the process of awarding the first new bank licences in a decade.

Rajan also proposed the issue of inflation-indexed bonds linked to the consumer price index, an indication that the central bank may soon shift its inflation benchmark from the wholesale price index.

"He didn't take cover saying that he will first overcome the current problems and then take steps. He thinks both can be done simultaneously," Prasanna if ICICI Securities said.

Rajan also pushed back the date of the RBI's next monetary policy review by two days to September 20. That will give the central bank more time to consider the outcome of what is expected to be a pivotal two-day meeting of the US Federal Reserve, ending on September 18.

The prospect that the Fed will soon unveil a plan to start winding down its monetary stimulus is weighing on emerging markets, with India faring worse than most because of a lack of confidence it can address its hefty fiscal deficit and its record current account deficit.

In a reminder of the uphill task Rajan faces, a report on Wednesday showed that activity in India's services sector shrank in August for the second straight month for its lowest reading in four years, the latest indication that growth in Asia's third-largest economy is still slowing.

"The biggest positive in this entire speech is the confidence. I think there will be decisiveness in the way things move, which will spread to the markets as well," said Ananth Narayan G., co-head of wholesale banking for South Asia at Standard Chartered Bank.

Parliament approves amendments to SEBI Act

New Delhi: Parliament Thursday approved amendments to the SEBI Act that will widen the pool of eligible candidates for the post of presiding officer at the Securities Appellate Tribunal.

The Rajya Sabha Thursday passed the Securities and Exchange Board of India (Amendment) Bill, 2013 which was earlier approved by the Lok Sabha.

SAT adjudicates upon appeals against the decisions of capital market regulator Sebi.

Presenting the Bill today in the Upper House, Finance Minister P Chidambaram said the post of the SAT presiding officer had been vacant for some time and the government tried to find a judge as per the qualifications but was not successful.

In this regard, the government had issued an ordinance.

Chidambaram said that after the ordinance, the position had been filled up.

The government in July had appointed JP Devadhar, a former Justice at Bombay High Court, as the SAT Presiding Officer.

The new Bill would replace this ordinance.

The post of SAT presiding officer was vacant since November, 2011. Since suitable candidates could not be immediately found, Sebi Act was amended by an ordinance to include sitting or retired High Court judges with at least seven years' experience as one of the qualifications for the post.