Indias Emerging Competiton

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					India’s Emerging Competition

          Sunil V. Patel
         Bangalore, India



         9th January 2010



                    cpcon.blr@gmail.com
         This Presentation


• Background
• Some of India’s top companies
• Successful companies
   • Overview
   • Strategy
             Indian companies

              Rank by sales                   Listed   Unlisted


Largest Government owned (US$ bn.)
(IOC/LIC)                                      49        37
Largest private (US$ bn.) Reliance/Hyundai)    29         2
Sales > US$ 1 bn.                              55        17
Sales US$ 0.5 – 1 bn.                          81        37
Sales < US$ 0.5 bn.                             864      296
Total number in lists                         1,000      350
           Growth Influencers
•   Innovation

•   De-regulation

•   Inbound foreign investment

•   Capital markets

•   Foreign and local Venture/PE funds

•   Indians returning from abroad

•   Outbound investments

•   Foreign consultants

•   Government
            Management Style
•   Concept of “Promoter”

•   Usually “hands on” management

•   Professional management

•   Wealth creation objective

•   Employee recognition

•   Global aspirations

•   Foreign/ local education and experience

•   Family management accepted
                      Evolution
• Earlier domination by old established groups eg Tata, Birla

• New companies now emerged (eg Reliance, Infosys)

• Top companies now combination of “old”, “new” Government owned

• Local to international scale

• Governance improvements

• Social / national/ status objectives

• Government – industry links
          “Sensex” Companies (1)
      Company           Industry      Market Cap US $ bn.
Reliance        Oil, chemicals                75
ONGC (Govt.)    Oil exploration               53
NTPC (Govt.)    Power                         41
Infosys         IT Services                   31
TCS             IT Services                   31
SBI (Govt.)      Financial Services           30
Bharti Airtel   Telecom                       26
BHEL (Govt.)    Engineering                   25
Wipro           IT Services                   21
ICICI Bank      Financial Services            21
       “Sensex” Companies (2)
      Company              Industry     Market Cap US $ bn.
L&T                Engineering                  21
ITC                Consumer Products            20
HDFC               Financial Services           16
HDFC Bank          Financial Services           15
Sterlite Industries Metals                      15
DLF                Real Estate                  13
HUL                Consumer Products            12
Tata Steel         Steel                        12
Maruti Suzuki      Automobiles                  10
Tata Motors        Automobiles                  9
         “Sensex” Companies (3)
         Company             Industry       Market Cap
                                             US $ bn.
Reliance Communications Telecom                 7
Hero Honda              Automotive              7
Tata Power              Energy                  7
Sun Pharma              Pharmaceuticals         6
Jaiprakash Industries   Construction            6
Mahindra                Automotive              6
Hindalco                Aluminium               6
Reliance Infra          Energy                  5
Grasim                  Cement/ Chemicals       5
ACC                     Cement                  3
    Outbound Investment (1)

    Indian Company                Target       Value
                                              US $ bn.
UB Group (Liquor)       White & Mackay          1.0
Suzlon (Wind Turbine)   REPower                 0.5
Suzlon (Wind Turbine)   Hansen Transmission     0.6
Dr. Reddy (Pharma)      Betapharm               0.5
Hindalco (Aluminium)    Novelis                 6.4
Tata Motors (Auto)      Jaguar Land Rover       2.5
Tata Steel (Steel)      Corus                  12.1
      Outbound Investment (2)

      Indian Company               Target       Value
                                               US $ bn.
Tata Chemicals (Soda Ash)   General Chemical     1.0
Tata Tea (Tea/coffee)       Energy Brands        0.7
Tata Tea (Tea/coffee)       8 O’Clock Coffee     0.2
GHCL (Textile)              Dan River            0.1
HCL (IT services)           Axon                 0.7
Reliance ADAG (Media)       Dreamworks SKG       0.3
Wipro (IT Services)         Infocrossing         0.5
Rain CII Carbon (Coke)      CII Carbon           0.6
         Successful Companies


                Company                        Sector
Bharat Forge Ltd.                        Engineering
Glenmark Pharmaceuticals Ltd.            Pharmaceuticals
Biocon Ltd.                              Biotech Pharma
Sasken Communication Technologies Ltd.   Telecom software
Mindtree Ltd.                            IT Services
Bharti Airtel                            Telecom
OnMobile Global Ltd                      Telecom VAS
    Bharat Forge - Background
•   Products:       Auto parts (forgings)
•   Established:    1961
•   Sales:          > US$ I bn. (global)
•   Market cap:     US$ 1.3 bn.
•   Clients:        Toyota, Ford, Volvo, BMW
•   Sales Growth:   12% (2005-2009)
•   Employees:      7000
•   Plants:         4 – India, 8 – overseas
                    (USA, Europe, UK, China)
•   Global rank:    # 1 – Axle component
                    30% share
                    # 2 - Engine component
        Bharat Forge - Strategy

•   Small Indian auto industry – no design, focus on production

•   Entry of multinationals into automotives 1990s

•   Domestic sourcing

•   Technology improvement

•   Design skills over production

•   Focus on engineering hire and training

•   Capacity increases

•   Overseas acquisitions from 2004 onwards

•   Raised US$ 160 mn. in equity to date
       Glenmark - Background
•   Products:            Pharmaceuticals
•   Established:         1977
•   Sales:               < US$ 0.5 bn. (global)
•   Market Cap:          US$ 1.6 bn.
•   Product range:       Formulations, API, Generics,
                         NCE,NBE
•   Therapeutic areas:   Dermatology, Diabetes,
                         Oncology, others
•   Sales Growth:         35% (2004-2009)
•   Sales Coverage:       Latam, EU, CIS, Africa
•                        Asia-Pac, US
•   Employees:           5,000
•   Plants:              9 – India, 3 – overseas
                         (Czech Rep., Arg, Brazil),
•   Research labs:       6 (2 overseas)
           Glenmark - Strategy
•   Started by individual with one dermatology product
•   IPO 1999 for US$ 22 mn.
•   Expanded to 60 products upto 2000
•   Research focus since 2000
•   Moving up/down value chain into API, NCE, generics, in-
    licensing, out- licensing to US, Japanese majors
•    Wide therapeutic coverage
•   Geographical coverage: 20 subsidiaries overseas for marketing
•   IP protection for NCE, NBE
•   IP challenge in developed markets
•   Strategy for regulated, semi-regulated markets
•   Matching products with markets
          Biocon - Background
•   Products:            Bio-tech Pharmaceuticals
•   Established:         1978
•   Sales:               < US$ 0.4 bn. (global)
•   Market Cap:          US$ 1.2 bn.
•   Product range:       Formulations, API,
                         NCE, Clinical research
•   Therapeutic areas:   Diabetes, Cardiovascular
                         Oncology, Nephrology, others
•   Sales Growth:         25% (2005-2009)
•   Sales Coverage:       Latam, US, EU, Asia- Pac
•   Employees:             3500
•   Plants:              3 – India, 2 – overseas
                         (Germany, Switzerland ),
•   Research labs:       1 – clinical, 1 - pre-clinical
•   Global rank:         # 20 biotech company
                         # 7 biotech employer
              Biocon - Strategy
• Started by an individual making enzymes with own fermentation
  technology
• Funded by Venture Fund, IPO in 2004 for US 66 mn.
• Sold enzymes business 2007
• Strong alliances: BMS, Mylan
• Covers API, NCE, generics, formulations
• Oral insulin in Phase III trial
• Clinical research focus helps in discovery and enhances revenue
• Geographical coverage: 3 subsidiaries overseas for production/
  marketing
• Looking for overseas acquisitions
• Acquiring technology from USA, Cuba
• Pre-clinical and research in subsidiaries which could be listed
• Competitive edge through cost effective manufacture (lower by 30-
  50% than domestic brands)
          Sasken - Background
•   Products:                  Embedded communication
                               solutions (telecom)
•   Established:               1989
•   Sales:                     < US$ 0.15 bn. (global)
•   Market Cap:                US$ 0.1 bn.
•   Product range:             Software/products for mobile
                               handsets, networks, wireless semi-
                               conductors
•   Sales Growth:               30% (2005-2009)
•   Sales Coverage/ Offices:   India, China, Mexico, Sweden,
                               Finland, UK, USA, Japan,
•   Employees:                 3200
•   Clients:                   Nokia, Motorola, Intel, Nortel
•   Development centers:       5- India, 4 Finland, 1 - Mexico
               Sasken - Strategy
•   Started by a three engineers in the USA
•   Started in India on a larger scale
•   VC Financed by Intel Capital
•   IPO for US$ 28 mn. in 2005
•   Concentration in one vertical, but serving in all segments
•   Focus on products as well as services
•   Holds over 40 IPRs
•   Geographical coverage: follows the customer
•   Royalty income as well as service income
•   Top international mobile manufacturers as clients
•   75% of sales outside India
        Mindtree - Background
•   Products:         IT services, R&D Services
•   Established:      1999
•   Sales:             < US$ 0.3 bn. (global)
•   Market Cap:       US$ 0.6 bn.
•   Product range:    Consulting, Software, Testing,
                      Wireless Products, Infrastructure
                      Management
•   Verticals:        Financial services, energy, telecom,
                      Others
•   Sales Growth:     48% (2004-2009)
•   Sales Coverage:   EU, North America, Japan,
                      Singapore
•   Employees:        8100
•   Offices:          India (4 development centers)
                      Other countries 17 offices
•   Clients:          AOL, TI, Volvo, P&G, American
                      Airlines
            Mindtree - Strategy
•   Started by 10 experienced professionals
•   VC / PE financed by Walden and foreign/ Indian fund US$ 23.5 mn
•   IPO for US$ 51 mn. in 2007
•   Differentiation through “Consulting led IT services”
•   Outsources routine work
•   Strategy of small but important acquisitions 2004/5/7/8 (eg
    Aztechsoft)
•   Kyocera Wireless acquisition for US$ 6 mn.+ amounts depending
    on next two years revenue)
•   Started with telecom and e-business vertical which suffered in
    2000
•   Attempting IP as well as services: 25% R&D, 75% services
•   Partnering IBM, HP, SAP, Microsoft
•   Employee centric (95/95/95 rule)
•   95% of sales outside India, 66% in the USA
       Bharti Airtel - Background
•   Products:                 Telecom Services,
•   Established:              1992
•   Sales:                    > US$ 7 bn.
•   Market Cap:                US$ 26 bn.
•   Product range:    GSM Mobile, wireless, landline networks,
                      local and international calling, Broadband,
                      Internet, Enterprise telecom
• Sales segments:              82% mobile, 18% others

• Sales Growth:                32% (2005-2009)
• Sales Coverage:             India- 22 “circles”, 83% population
                               coverage, Seychelles, Sri Lanka
• Employees:                   18,000
• Customers:                   113 mn.
• Market share (wireless):     23%
• Global Rank:                 #3 in single country wireless,
                               #6 in integrated telecom
          Bharti Airtel - Strategy
•   Modest start in push button telephones
•   Obtained Delhi circle, 1 out of the 4 mobile licenses in initial round of
    bidding (1995)
•   20% acquired by Telecom Italia – later bought by Singtel (1996), 21% by BT
    (1997 later bought back)
•   Acquired licensees in Karnataka and elsewhere
•   IPO 2002 US$ 172 mn.
•   Focused on brand building, advertising
•   Developed “Indian” low cost model: Network management outsourced to
    Ericsson/ Nokia-Siemens, Data processing outsourced to IBM and Indian
    companies, mobile towers shared with other operators,
•   New tower design/ construction by vendors
•   Pre-paid mobile connections 95% of total
•   Profitable in spite of low revenue per minute of US$ 0.12 and ARPU of US$
    6.50/ month
•   Looking for overseas acquisitions as domestic market getting saturated –
    large deal with MTN South Africa failed
         OnMobile - Background
•   Products:              Value Added Services (VAS) for mobile
                           telephony
•   Established:           2000
•   Sales:                 < US$ 0.1 bn. (global)
•   Market Cap:            US$ 0.6 bn.
•   Product range:         SMS, Ringback Tones, Contests, Voice
                           Portal, Download, Missed Call Alert,
                           Payments, Music, Sports, Marketing
•   Verticals:             Telecom, Media, M Commerce, Data
                           Services, Phone back-up
•   Sales Growth:          77% (2005-2009)
•   Sales Coverage:        India, EU, Far East, North America,
                           (22 countries in total)
•   Market Reach:          India: 400 mn. users, overseas 190 mn.
•   Unique Users:          56 mn./month
•   Employees:              1200
•   Offices:                India, other countries 11 offices (including
                            2 overseas subsidiaries)
•   Development Centres:   4 including 2 overseas subsidiaries
•   Clients:                Airtel, Vodafone, Maxis, ESPN,
                           Cingular, BellSouth
            OnMobile - Strategy
•   Started in the USA, incubated by Infosys
•   Moved to India in 2000
•   First to third round financing for US$ 46.5 mn. (foreign funds)
•   IPO for US$ 102 mn. in 2008
•   Acquisitions:
     • IT Finity (WAP Software -India),
     • Vox Mobili (Push Mail/Storage - France)
     • Telisma (Speech Recognition Software – France)
•   Revenue from India is 77%, ROW 23%
•   Sales from top 5 customers: 70%
•   Revenue share or contract billing model
•   Only listed company in this space in India
•   Low cost structure
•   First mover advantage in India and similar markets
•   Has to exploit IP acquired: goodwill cost US$ 45 mn.
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Description: An overview of India's corporate structure and studies of some high growth innovators