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									                                                       India Economic News
No. 5/10                                                                                                       May, 2010
                                                                 IMF PEGS INDIA GROWTH AT 8.75% IN 2010

IMF Pegs India Growth At 8.75%                          On the back of strong domestic demand and robust business
In 2010 ......................................... 1     confidence, the Indian economy is projected to grow at 8.75 per cent in
                                                        2010 and 8.5 per cent in 2011. According to the World Economic
Core Sector Grows 7.2 % In                              Outlook report (2010) by the International Monetary Fund (IMF), the
March .......................................... 2      Indian growth story will be supported by resurgence in demand from
                                                        the working class on the back of resilient business confidence that will
India And China To Contribute
Significantly To Global                                 result in more investments.
Recovery: IMF ............................ 3
                                                         ―Domestic demand will strengthen as the labor market improves, and
AAI To Spend Over $ 1 Bn On                             investment is expected to be boosted by strong profitability, rising
Non-Metro Airports .................... 3               business confidence and favorable financing conditions,‖ it said.
Govt Policy To Boost Ports'
                                                        Moreover, the report stated that strong domestic demand in the
Capacity: Vasan ......................... 4
                                                        economies of India and China is expected to have positive spillovers
India's Wind Power Draws                                for other Asian economies, particularly exporters of commodities and
Global Majors ............................. 4           capital goods. The overall growth of the Asian economy is expected to
                                                        expand by 4.5 per cent in 2010 and 5 per cent in 2011. The projected
Tn To Tap Wind Energy............. 5                    growth rates will be a significantly robust compared to a slow growth of
CLP India Aims To Set Up 200                            0.25 per cent in 2009 primarily due to adverse global economic
Mw Wind Power Projects Every                            conditions.
Year ............................................. 5
                                                        ―This reflects (growth in China and India) not just strong export growth
L&T Expands Nuclear Footprint
With Rolls-Royce Joint Venture 5                        but also a continued boost from inventory cycle and a boost in
                                                        business investment in response to high capacity utilization and strong
India To Produce More MNCs                              business confidence,‖ the report adds. These factors are expected to
Than Any Other Country: PwC . 6                         cushion the impact of the expected withdrawal of fiscal stimulus in
                                                        2010. (Business Standard: April 22, 2010)
India's Drug Market To Be Worth
$50 Billion ................................... 6                   RBI ANNOUNCES REFORMS ROADMAP
Cipla Ties Up With Stempeutics
For Stem Cell Therapies............ 7                   Dealing with inflation might be the top priority for the Reserve Bank of
                                                        India (RBI) at the moment, but that did not deter it from announcing a
Ranbaxy To Launch 100 New                               detailed reforms road map. The road map includes issuing licenses to
Products This Year .................... 7               new players, easing rules for the entry of foreign banks, enhancing
                                                        infrastructure finance and developing the market for bonds and other
Renault To Invest In Car Engine                         financial instruments.
Facility In India ........................... 8
                                                        The RBI unveiled a roadmap for the entry of new players, starting with
                                                        a discussion paper by July. This will be followed by discussions
                                                        (continued on next page)
2                                                                                              India News

                                      can be as a branch, as is the         securities and 91-day treasury
with     stakeholders     before      case now, or as a wholly owned        bills.
guidelines are issued. In             subsidiary. The paper is
addition,    RBI     said    the      expected       by  September,         The third element of the
applications for new bank             though the government will            derivatives strategy – credit
licenses would be referred to         need to amend the laws to             default swaps for corporate
an external expert group.             provide more voting rights and        bonds – is also expected to be
                                      also provide a level-playing          in place soon. By July, RBI is
The Annual Policy Statement           filed on taxation.                    planning to make public the
once again focused on holding                                               draft report of an internal
companies     for  banks,    a        The other focus area was              working group. The instrument,
proposal that has been on the         infrastructure,    where    RBI       which is a derivative contract
backburner for at least two           announced        a   range   of       based on a loan or a bond of a
years. At present, banks or           measures, ranging from lower          financial institution, will help
finance companies are working         provisioning requirements to          lenders hedge their portfolio
as holding companies and the          easier      rules   for    bank       risks.
proposal involved setting up a        investments.
holding company, with the bank                                              Besides,       to    help    the
being an operating company            There were also steps on the          development of the corporate
under it.                             development of the financial          bond and repo markets, RBI
                                      markets, and RBI, which has           has sought the development of
Similarly, the review to allow        often been criticized for being       a reporting platform. A similar
greater play to foreign banks in      conservative,        shed       its   initiative has been proposed in
India -- which was deferred, last     conservatism on derivatives.          case of certificates of deposit
year in the wake of the global        Not only did it allow options in      and       commercial      papers.
financial crisis – will start soon.   currency futures, it also decided     (Business Standard: April 21,
While the regulator is planning       to introduce interest rate futures    2010)
a discussion paper on the             (IRFs) on five-year and two-
mode of their presence – which        year notional coupon bearing

                                 CORE SECTOR GROWS 7.2 % IN MARCH

Six      major     infrastructure     (IIP), had grown at 4.7 per cent      ―The core sector data are quite
industries, which constitute the      in the previous month and 3.3         encouraging, especially the
core sector, registered robust        per cent in the corresponding         performance of the sectors of
growth of 7.2 per cent in March,      month       of    2009.     The       steel, power and cement. This
the highest in 2009-10.               infrastructure in March has           will keep the overall IIP strong
                                      fuelled the expectation of a          and, given the bump up in
The growth was primarily on           sustained high growth in overall      industrial production in March,
account of increase in steel,         industrial output, which has          the IIP growth will be
cement        and      electricity    shown double digit growth             impressive,‖ said YES Bank
production. The cumulative            since October. The average            Chief Economist Mr. S. Rao.
growth for the entire financial       growth in industrial output, as
year stood at 5.5 per cent,           measured by IIP, for the first        Electricity generation, coal and
significantly higher than the 3       eleven months of 2009-10              cement production grew at 7.8
per cent last year.                   stands at 10 per cent. Analysts       per cent each during March,
The core sector, which has a          expect the March figures to           against 6.3 per cent, 5.3 per
26.68 per cent weight in the          sustain the high growth rate.         cent and 10.1 per cent,
Index of Industrial Production                                              (continued on next page)
India News                                                                                               3

respectively,       during     the   -0.4 per cent during the month,      at the highest average annual
corresponding month in 2009.         compared to -2.3 per cent and        rate of 10.5 per cent, while
Finished      steel     production   3.3 per cent, respectively,          growth in petroleum refinery
increased during the month,          during the corresponding period      products output was the least,
growing at 9.2 per cent,             last year.                           at -0.4 per cent. (Business
compared to a decline of 1.8                                              Standard: April 28, 2010)
per cent in March 2009. Crude        On a cumulative basis, for the
oil and petroleum refinery           April 2009 to March 2010
output grew at 3.5 per cent and      period, cement production grew


India and China will witness         deepest recession in recent          was present at the steering
steady high growth rates of 8.8      history globally, it was a known     committee meeting of the 186-
and 10 per cent respectively, in     fact that Asia was leading this      nation International Monetary
2010 and Asia will continue to       global recovery. In fact, activity   Fund (IMF), also said that
lead the global recovery despite     in Asia rebounded fairly swiftly     current estimates of real GDP
challenges of inflation and          over the past year and in the        in India had grown at 7.2 per
excessive      capital    flows,     first quarter of 2010.               cent during the just completed
according     to    the   latest     A common trend witnessed             fiscal year 2009-10, up from 6.7
communication by International       over Asia has also been that         per cent during 2008-09. He
Monetary Fund (IMF) officials.       strong recovery with upturns         further added that in view of the
                                     though varied, was witnessed         inflation risk, RBI had begun a
Addressing the press, Mr.            by both economies such as            calibrated      exit  from    the
Anoop Singh, IMF Director of         China, India and Indonesia,          expansionary monetary policy,
Asia-Pacific department, said        having     orientation towards       while the central budget of
that by the end of 2009, output      domestic markets and export-         2010-11 had begun the process
in most of Asia returned to pre-     oriented nations too.                of fiscal consolidation by
crisis levels even in those                                               planning reductions in the
economies that were hit              Reserve Bank of India (RBI)          revenue and fiscal deficits.
hardest by the crisis. After the     Governor D Subbarao, who

                      AAI TO SPEND OVER $ 1 BN ON NON-METRO AIRPORTS

The Airports Authority of India      2010 trade fair organized by         such as Kannur (Kerala), Mopa
(AAI), the agency responsible        PDA Trade Fairs in association       (Goa) and Navi Mumbai have
for civil aviation infrastructure,   with Airports International and      been identified to decrease
is likely to spend over $ 1 bn on    the    Society     for    Indian     passenger load on existing
modernization of non-metro           Aerospace     Industries    and      airports. Kolkata and Chennai
airports this year, primarily to     Technologies (SIATI).                are being taken up as mega
reduce load on busy metro                                                 projects for modernization,‖ Mr.
airports.                            AAI is planning the city-side        Seth said.
―However, this spending, if          development of 24 airports
complemented by investment           across the country, including        Noting that the airports selected
from the state governments and       Amritsar   and     Ahmedabad.        for upgrade such as Goa,
the public sector would speed        About 10 of these airports have      Jammu and Bhopal have a
up the process,‖ said Mr.            been identified for the first        passenger share of 21 per cent,
Praveen Seth, Member -               phase, which will begin shortly.
Operations, AAI.        He was       ―Besides, 11 new Greenfield          (continued   on    next   page)
speaking at Aerodrome India          airports, which include sites
4                                                                                          India News

Mr. C G Krishnadas Nair,            services and increasing direct      non-metro airport has traffic of
Managing Director, Cochin           connectivity between metros         less than 300,000 passengers
International Airport (CIAL),       and non-metros.‖                    per annum and the longer
said:    ―The   objective   of                                          break-even periods make it
decongestion of metro airports      Mr. Ravi Radhakrishnan, GM-         unattractive     for      private
and development of hinterland       Business          Development,      investors.            (Business
can be met by extending air         Reliance Infrastructure, said a     Standard: April 09, 2010)


The Centre is in the middle of      Mr. Vasan said the capacity of      policy would boost capacity
formulating a comprehensive         all major ports had increased to    expansion,‖ he said. He added
policy for ports‘ capacity          574.77 million tonnes in 2008-      there        was        timely
expansion     through     public-   09. ―We propose to raise the        implementation of the National
private    partnership    (PPP).    capacity of the major ports to      Maritime          Development
Shipping Minister Mr. G K           over 825 million tonnes by          Programme (NMDP). It was
Vasan said the proposed policy      2011-12.      With     additional   aimed at a comprehensive
would help raise the capacity of    capacity of 500 million tonnes      development of ports, shipping
ports to 1.25 billion tonnes by     at minor ports, the total           and inland water transport.
the end of the 11th Plan.           capacity of all ports in the        (Business Standard: April 07,
                                    country is projected to reach       2010)
                                    1.25 billion tonnes. The PPP

                          INDIA'S WIND POWER DRAWS GLOBAL MAJORS

It‘s the latest and among the       and has immense opportunities
fastest growing sectors within      in India due to cheaper costs,‖     Cheaper tariffs will be the
global energy today, and has        Areva Renewables global CEO         driving force for building
already made its presence felt      Mr. Anil Srivastava said.           offshore wind projects as prices
in India. A long coastline, low     ―Faster project building time       of electricity are expected to
installation costs and ready        and lower costs will make it an     grow due to tight coal supplies
local availability of key raw       attractive option in India,‖ he     and surging demand. ―Such
materials have all made India a     said, adding that his company       projects will also not have the
favorite destination for offshore   was currently studying the          tricky issue of acquiring land
wind power, with global majors      possibilities for such a venture    and if the cost parameters work
such as Areva, Siemens and          in India.                           out, then it‘s a great option,‖
GE queuing up to explore                                                said Mr. Kuljit Singh, a partner
opportunities in the country.       Areva, the world‘s largest          with Ernst & Young.
                                    nuclear plant builder, has
High-profile investors such as      already built 600 megawatts of      Typically, in offshore wind
private equity major Blackstone     offshore wind projects in           projects, a large part of the
and new clean technology            Europe and has estimated that       offshore area will be offered to
funds have already invested in      installation costs in India could   developers, who will build a
offshore        wind       energy   be 30-40% less than that in         minimum of 200-400 mw of
companies planning for India,       Europe, where it is about $2.2      wind power projects. Each such
as this sector is expected to       for every megawatt of offshore      project will have a height of
offer electricity tariffs at 40%    wind built. Like Areva, other       over 80 metres using about
less cost than that from            majors such as Siemens and          600-900 tonnes of high-grade
traditional sources. ―Offshore      GE have been exploring similar      steel. This steel can be sourced
wind is the new growth area         opportunities in the country.       locally. (contd. on next page)
India News                                                                                                  5

Since offshore wind projects          areas,      the     long   western   western coast. (The Economic
can be built close to big             coastline   will suit such a model   Times: April 26, 2010)
consumption centers that are          as most      large industries are
typically located in coastal          situated    along the country‘s

                                      TN TO TAP WIND ENERGY

The Tamil Nadu Energy                 be set up. Of this, 26 have          organized by Assocham and
Development Agency (Teda) is          been exhausted.                      the Madras Chamber of
looking at enhancing wind-                                                 Commerce and Industry. This
based power generation in the         Mr. Deepak Gupta, Secretary          apart, the state also has the
state. It has already achieved        for Ministry of New and              potential to generate power
4,889 Mw of wind energy in            Renewable Energy, said for the       through waste. ―Salem and
March of the estimated around         next five years, Tamil Nadu          Namakkal alone can produce
5,000 Mw. According to Mr. R          was likely to add 500 Mw of          150 Mw by using waste,‖ said
Christodas Gandhi, Principal          wind power every year. He was        Gupta.                (Business
Secretary, Teda, the state has        speaking at a conference on          Standard: April 30, 2010)
41 sites where wind farms can         ‗Mainstreaming Green Energy‘,


After having operationalised          operationalised 181.5 Mw wind        capacity of its Bharuch plant by
five winds farms in India, CLP        power plants in India. The           additional 1050 Mw. "We will go
Power India Private Ltd aims to       company further plans to set up      ahead with the expansion
develop wind power projects to        another wind power project of        subject to availability of gas for
the tune of 200 Mw every year.        not less than 50 Mw in               the power project," he added.
Apart from this, it is also mulling   Rajasthan as well.                   "We have decided to put up our
to set up its first ever solar                                             first solar power project in India,
power project in India.               "Typically, we aim to develop        location of which has not been
                                      wind power projects to the tune      identified. It would be a small
As part of its strategy to have       of 200 Mw in India every year,"      solar power unit of around 5-10
total 446 Mw of wind power            said    Mr.     Rajiv    Mishra,     Mw," added Mr. Andrew
capacity, CLP India is currently      Managing Director, CLP India,        Brandler,      Chief    Executive
executing wind power projects         which        already        has      Officer, CLP Holdings Ltd.
with a cumulative capacity of         commissioned 655 Mw gas-             (Business Standard: April 30,
around 263 Mw in Gujarat,             fired power plant at Paguthan in     2010)
Karnataka, Tamil Nadu and             Gujarat. The company has
Mahashtra, while it has already       permission to expand the


Larsen & Toubro‘s (L&T) heavy         Russia have already signed           nuclear instrumentation and
engineering skills have already       Memoranda of Understanding           controls, reactor components,
made it the partner of choice for     (MoU) to partner L&T in              in-service reactor support and
the nuclear power reactor             building reactors in India.          waste management. L&T will
manufacturers that are eyeing                                              obtain these capabilities for
the Indian market. Industry           L&T further expanded that            light water reactors, which
leaders Westinghouse-Toshiba          potential role by signing an         currently comprise 60 per cent
and GE-Hitachi of the US, AEC         MoU with the UK company              of the world‘s installed nuclear
of Canada, and Rosatom of             Rolls-Royce to collaborate in        capacity. (contd. on next page)
6                                                                                           India News

Rolls-Royce already has a           of       engineering     [nuclear
nuclear-certified supply chain of   reactors]‖,      L&T‘s     heavy     L&T is currently the only Indian
more than 260 companies. The        engineering chief, Mr. M.V.          company that is globally-
company provides advice and         Kotwal, said. ―Typically, nine       certified  for    manufacturing
technical engineering support       per cent by value of a nuclear       nuclear    power     generation
to governments and reactor          plant          consists         of   equipment, having obtained the
operators in Europe and the         instrumentation and controls.        American        Society        of
US, including all 58 operating      The L&T-Rolls-Royce          joint   Mechanical Engineers‘ nuclear-
nuclear reactors in France.         venture (JV) will start by           stamp. Rolls-Royce‘s existing
                                    fabricating these for nuclear        presence in the international
―Rolls-Royce is a global major      utilities abroad, such as EDS in     nuclear industry would offer
in instrumentation and controls     France; and for nuclear plants       L&T the marketing partnership
for nuclear power generation        in India when the business           for supplying nuclear plants
plants and this dovetails           opens up, perhaps 12-18              outside India.        (Business
perfectly with our core business    months from now.‖                    Standard: April 05, 2010)


India is expected to produce        markets choosing to set up           Mr. Jairaj Purandare, India
the highest number of new           operations      abroad       has     Leader     for   Markets      and
multinational      companies        increased in the past five years,    Industries, PwC, said: ―It is
(MNCs), emerging as the             partly due to the rapid pace of      encouraging to know that India
world‘s largest such source.        globalization and the revolution     will replace China as the largest
Over 2,200 Indian companies         in        information        and     source of new multinationals in
are likely to open operations       communication      technologies.     the emerging world from 2018
outside the country over the        This trend is expected to            onwards. The key drivers for
next 15 years, says a new           continue over the next 15            this are the relative increase in
report                     by       years, as new MNCs from              both investment intensity and
PricewaterhouseCoopers              emerging economies rise in           openness that the Indian
(PwC) on emerging MNCs.             prominence on the global             economy offers.‖        (Business
                                    economic stage.                      Standard: April 30, 2010)
The report says the number of
companies    from    emerging

                         INDIA'S DRUG MARKET TO BE WORTH $50 BILLION

India is likely to be one of the    pharma     looks     to    India:    generic or off-patent drugs and
top 10 drug markets in the next     Prospects for growth‖—says           vaccines‖.     India     already
10 years and will be worth at       Indian industry is likely to         produces at least 20% of the
least $50 billion by then, a        become a competitor to global        world‘s generics. It also says
report has predicted. The           drug makers in certain areas         foreign firms will increasingly
country is now the 14th largest     and a potential partner in many      explore              investment
market in the world with annual     others   such     as    contract     opportunities    in   India   in
sales of $19 billion as of March    manufacturing, clinical trials       outsourcing production and
2009.                               and drug research.                   services, setting up research
                                    The report noted that India has      centers and licensing products
The report by consultancy           ―considerable           contract     and technologies.
company Price waterhouse            manufacturing expertise, and
Coopers     (PwC)—―Global           leadership in the production of      (continued on next page)
India News                                                                                              7

―We could see an increased           substantial share of generic        and Dr Reddy‘s Laboratories
momentum       in     dialogues      medicines to support the $70        Ltd. ―PwC‘s projection is very
between foreign and local            billion global market being         optimistic, considering the short
industries    not    only    in      created as patents expire for       time span. The projected
pharmaceuticals, but also in         several widely sold drugs. achievable, but may
other areas such as diagnostics                                          take some more time,‖ said
and medical devices, in the          In     manufacturing,     pharma    R.D. Joshi, senior consultant,
past six-seven months,‖ said         companies      are     deepening    knowledge          management,
Mr. Sujay Shetty, Associate          relationships with Indian firms     Interlink Marketing Consultancy
Director, Pharma and Llife           to service global markets           Pvt. Ltd, a drug retail and
Sciences, PwC India. The             through marketing alliances         marketing           consultancy.
report also says India is            such     as   the     partnership   ( April 13, 2010)
capable of manufacturing a           between Glaxo SmithKline Plc


Cipla, the largest domestic drug     Clinical trials, involving human    pre-clinical studies, large scale
manufacturer, has tied up with       volunteers, are to test drugs in    up scaling and conducting multi
the Manipal Group-promoted           human beings for ensuring           centric clinical studies as per
Stempeutics      Research      to    safety and efficacy and to          international standards,‖ he
market       stem     cell-based     detect side effects. Stem cells     said.
therapies.                           would be a major branch of
                                     medical treatment and would         The expected current stem cell
Cipla will fund the conduct of       be a standard of cure and           therapy market in India is about
clinical trials over the next two    practice in the years to come       $540 million and will grow
years and further develop two        and this would be an ideal          rapidly, said Mr. Jaideep
products being worked on by          supplement for existing medical     Gogtay, Medical Director, Cipla.
Stempeutics. Cipla will further      treatments, said Mr. Amar           Stempeutics      is    currently
invest      to   develop     more    Lulla, Joint Managing Director      developing eight stem cell
products and in return will get      of Cipla.                           based therapies. Of this, two
marketing rights on a transfer                                           products are under clinical trial
pricing         basis      during    ―We chose Stempeutics for           in India and another two in
commercialization, said Mr. B N      their strength in developing        Malaysia.             (Business
Manohar,                President,   world-class stem cell products,     Standard: April 28, 2010)
Stempeutics.                         starting from basic research,


Ranbaxy Laboratories Ltd, the                                            intends to grow it to 25–30 per
country‘s biggest drug maker         Mr. Atul Sobti, chief executive     cent by 2012. The 30–40 per
by revenues, has announced           officer and managing director of    cent jump in product launches,
aggressive growth plans for the      Ranbaxy, said the company‘s         compared to 60- 70 product
domestic    market.    It  has       India specific growth plans         launches annually in the
increased its sales teams in         were all about ―new products,       previous years, is also central
specific       areas        like     new people and custom               to its growth strategy.
cardiovascular, diabetics and        marketing strategies‖.
dermatology and plans to                                                 (continued on next page)
introduce    over   100    new       Ranbaxy, with about 20 percent
products by the year-end.            of its revenues from India,
8                                                                                           India News

―While cardiovascular, diabetics                                         consultancy                firm
and dermatology products will        India has been a top priority for   PriceWaterhouseCoopers
be targeted in the metros and        Ranbaxy ever since Japanese         (PWC) estimates India‘s drug
bigger cities, mass products or      drug major Daiichi Sankyo           market to touch $50 billion by
medicines      such    as   pain     acquired a majority stake in the    2020, a 163 percent increase in
relievers will be aggressively       company two years ago.              the next 10 years, to become
marketed in the smaller towns,‖                                          one of the world‘s 10 largest
Mr. Yugal Sikri, Country Head –      Ranbaxy is among the growing        pharmaceutical         markets.
India    region,    said.   The      list  of    companies,    both      (Business Standard: April 28,
company aims to become the           domestic       and     foreign      2010)
biggest player in domestic           multinational drug firms that
sales with a six per cent market     seek a pie of India‘s growing
share in the next three years.       drug      business.     Global


French auto maker Renault is         When      asked,     a    Renault   Both companies will also look
planning to set up an engine         spokesperson stated, ―Having        to share vehicle platforms and
and transmission facility in India   an engine and transmission          technology to save on costs.
with Nissan, its partner. This       plant in India is a part of         The south India plant of the
new plant is expected to come        Renault‘s long-term strategy.       joint venture company will have
up adjacent to the vehicle           This plan was put on hold when      a total capacity of 400,000 units
manufacturing    complex        of   the financial environment had       per year.
Renault-Nissan at Oragadam,          deteriorated but now it has
near Chennai.                        been revised. However, there is     M&M, market leader in the
                                     no final decision taken on the      utility vehicle segment, is
A powertrain plant will allow        time line for the new facility.‖    planning to make multiple use
Renault to locally supply the        This new plant will cater to        of the platform on which the
engines and transmissions for        Renault, Nissan and M&M             Logan sedan is based to make
the Logan sedan to erstwhile         when it comes on-stream in the      it more commercially viable.
partners Mahindra & Mahindra         next few years.                     Though the Mumbai-based
(M&M) when the latter launches                                           company lacks expertise in
a new version of the car. This       Although Nissan and Renault         making cars (which includes
would drive down the cost of         would largely make use of           design, engineering and total
the Logan substantially and          similar      engines,       both    development of the vehicle
make it more competitive, as         companies will have the liberty     from     scratch),      company
the engine and transmission          to tweak the engine power           executives say it is in talks with
unit accounts for 35-40 per cent     according to their requirements.    Renault for this. (Business
of the total cost of the car.                                            Standard: April 24, 2010)

Edited by Mr. Ashok C. Kaushik, Marketing Officer, Embassy of India, Buitenrustweg 2, 2517 KD The
Hague. Tel: 070-3469771; Fax: 070-3462594;
E-mail:; Web:

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