Monday, March 16, 2009
While merger-mania is gripping the global pharma industry, a similar trend may soon spill over to the Indian market, with pharma companies quoting at low valuations and saddled with huge debt.
Recently, there have been a spate of deals in the pharma space led by Pfizer Inc's acquisition of Wyeth for $68 billion, followed by the merger of Merck and Schering Plough. Experts believe that Bristol-Myers Squibb may be the next target of an acquisition, and many more deals are inevitable. Back home, there has been speculation about Wockhardt and Piramal Healthcare being potential acquisition targets.
The Times Of India
Monday, March 09, 2009
Indian economy will grow 6.7% in fiscal year 2009-10, pushed by a healthy increase in consumption even as private investment will moderate, information services provider Dun & Bradstreet (D&B) has projected.
In its Economy Outlook 2009-10, D&B said the economy will pick up in the medium to long-term when the policy responses of the government and Reserve Bank of India will come into play and the external situation will stabilise.
The Financial Express
India’s passenger-car sales climbed for the first time in five months in February as lower auto-loan rates spurred demand for the hatchbacks of Maruti Suzuki India Ltd., Hyundai Motor Co. and General Motors Corp.
Sales rose 22 percent from a year earlier to 115,386, the Society of Indian Automobile Manufacturers said in a statement today in New Delhi. Ten of 13 carmakers posted a gain while Renault SA, France’s second-largest carmaker, and Volkswagen AG’s Skoda Auto AS reported a drop.
India's local car sales posted their biggest percentage gain in two years in February because of an improvement in retail financing and of a lower sales base in the year-earlier period.
Sales rose 22% to 115,386 cars from 94,757 a year earlier, data issued Monday by the Society of Indian Automobile Manufacturers showed. The sales growth is the first since September 2008 and the highest since February 2007.
The Wall Street Journal
Sunday, March 01, 2009
- UNCTAD declares India as the second most-preferred global location for foreign investments.
- PwC urges Engineering and Construction companies to look to India for growth.
- Investments of more than $500 billion planned to flow into India's infrastructure by 2012.
- India registered a 45% growth in FDI during April-December 2008
Money will continue to chase growth prospects and the global investors are realizing the fact that India offers an excellent opportunity for them even at a time of global recession. Apparently that’s the reason why growth/emerging markets such as India and China continue to be the most attractive markets for the European family office investors, according to an informal survey conducted by London-based Somerset Capital, a leading independent private market placement firm.
The survey has also highlighted the fact that 63% of Somerset’s top 50 European family offices are ‘active’ in 2009 making new investments. If we extrapolate the same trend to the entire set of global investors, we get the reason why India continues to attract billion-dollar plus foreign direct investments (FDI) even in the recent months that are marked by heightened economic crisis globally. The invest-worthiness of India has been acknowledged by the United Nations Conference on Trade and Development (UNCTAD), which declared India as the second most-preferred global location for foreign investment in 2008.
A similar view was expressed in a recent report released in Toronto by PricewaterhouseCoopers (PwC), the world’s largest professional services firm, which has urged the Engineering and Construction (E&C) companies to look to India for growth as domestic markets contract. “Foreign companies who do not acknowledge the opportunity now may miss out on a critical opportunity to establish a long-term presence in one of the world's largest growth markets”, warns PwC.
PwC estimates that India will become the world's third largest economy by 2050. Similar projections have earlier been made by Goldman Sachs and CLSA. Despite the recent slowdown, PwC expects the Indian economy to grow at 7%-7.5% annually. The reason why PwC has emphasized on Engineering and construction (E&C) sector is the fact that more than $500 billion worth of investment is expected to flow into India's infrastructure by 2012. Projected spending from now until 2012 is $167 billion in electricity, $92 billion in roads and $65 billion in railways. The liberalization of government regulations and a deliberate strategy on the part of the Indian Government to develop infrastructure and promote foreign direct investment (FDI) spells opportunity for foreign E&C companies, the report says.
India’s Interim Budget for the Financial Year 2009-10 by the Finance Minister on February 16 informed the parliament that the government has accorded approval to 37 infrastructure projects worth $14.4 billion (Rs.70,000 crore) from August 2008 to January 2009. Under the Public Private Partnership (PPP) mode, in-principle approval has been given to 54 Central sector infrastructure projects with project cost of $14 billion (Rs.67,700 crore) and final approval to 23 projects for viability gap funding amounting to $5.75 billion (Rs.27,900 crore) between August 2008 and January 2009.
Not surprisingly, India received FDI worth $23.3 billion during April-December 2008, registering a growth of 45% when compared to the same period in the previous year. In the fiscal year 2007-08, India’s FDI was a record $32.4 billion. Although the government of India has acknowledged a slowdown in FDI post September 2008, the country is still receiving one billion dollar plus foreign direct investments every month. Considering the global liquidity crunch, this figure is not disappointing. FDI inflows in to India till September 2008 averaged between $2.5 billion and $3 billion a month. Despite the recent slowdown, India is attracting much more FDI compared to a few years back. The country had received $3.13 billion FDI in the entire fiscal year of 2003-04.
Apart from Engineering & Construction (E&C), other sectors such as IT, Telecom and real estate have attracted large investments from the foreign investors. During April-September 2008, FDI inflow in IT sector (including computer software and hardware) has reached $1.4 billion, which is equal to the investments during the whole financial year of 2007-08. The telecommuncation sector has attracted FDI of $5.8 billion in the calendar year 2008.
The Indian government has been actively facilitating the foreign investments with its continuous efforts in policy reforms and simplifying approval routes. Recently, in a welcome move, it has further simplified the rules by restricting the cascading effect of foreign shareholding in an Indian company on its downstream investments. As per the new FDI rules, the foreign investment through the investing Indian company would not be considered for calculation of the indirect foreign investment in case of Indian companies which are ‘owned and controlled’ by resident Indian citizens and/or Indian Companies that are owned and controlled by resident Indian citizens. Certain sectors such as telecom, broadcasting and insurance, however, will continue to be covered under the method of calculation of total foreign investment outlined in their sector-specific regulations.
The Government of India permits FDI up to 100% on the automatic route in most sectors/activities. Some of the sectors such as Defence, Aviation, Print Media and Telecom have been classified as sensitive sectors.
FDI is allowed up to 26% in defence production subject to licensing and certain guidelines. In the aviation sector, FDI up to 49% and investment by Non-resident Indians (NRI) up to 100% is allowed on the automatic route in Domestic Scheduled Passenger Airline Sector, while FDI up to 74% and investment by Non-resident Indians (NRI) up to 100% is allowed on the automatic route in Non Scheduled airlines, Chartered airlines, and Cargo airlines as well as Ground Handling Services. FDI up to 100% is on the automatic route in Maintenance and Repair organizations, flying training institutes, technical training institutions, and helicopter services/seaplane services. Although the foreign airlines are disallowed to participate directly or indirectly in the equity of an Air Service Undertaking, the Indian Minister for Civil Aviation Mr. Prafull Patel has indicated that the government is considering a relaxation on this front.
In the Telecom Sector, 74% foreign investment (Including FDI, Foreign Institutional Investment (FII), Non-Resident Indian (NRI), Foreign Currency Convertible Bond (FCCBs), American Depository Receipt (ADRs), Global Depositary Receipt (GDRs), convertible Preference shares, and proportionate foreign equity in Indian promoters/ Investing Company) is allowed in Basic and cellular services, Unified Access Services, National/International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added telecom services. Similarly, 74% FDI is permissible for ISPs with gateways, radio-paging and end-to-end bandwidth, while 100% FDI is allowed for ISPs without gateway and infrastructure companies providing dark fibre, right of way, duct space and tower (Category I). Companies offering electronic mail and voice mail services, and Manufacture of telecom equipments also allowed to have 100% FDI.
Print media has a cap of 26% FDI for publishers of newspaper and periodicals dealing with news and current affairs. Publication of Indian editions of foreign magazines dealing with news & current affairs also has a similar cap of 26% FDI including Investments by NRIs/PIOs/FIIs. The government, however, allows 100% FDI for publishing of facsimile edition of foreign newspapers and scientific magazines/specialty journals/periodicals.
The much talked about recessionary pressures haven’t deterred ambitious Private Equity (PE) firms that raised $400 billion globally. An assessment of the investment climate in the backdrop of unfavorable economic trends indicate that majority (63%) of the investors continue to pursue their search for profitable investment avenues this year, according to a survey of the top European family office investors conducted by Somerset Capital, a London-based investment advisory firm.
Among these active investors, 71% confirm their continued interest in the emerging markets of China and India, the economies with relatively firm footing (See Issue 4 | Volume 1; India: Power House of Global Growth), as investment destinations. See Special Report on the investment trends in India.
The Government of India has yet again unfolded the red carpet to Foreign Investments by augmenting its Foreign Direct Investment (FDI) guidelines to provide the much needed capital injection to cash-starved sectors, such as retail, real estate & infrastructure, telecommunication, among others, that need capital infusion of more than $600 billion over a period of five to 10 years.
The new guidelines state that foreign holdings in a company with majority control of Indians will not be treated as indirect foreign investment in any downstream subsidiary, thus expanding investment opportunities for global investors seeking to be a part of the growth story of the world’s second fastest growing economy.
The easing of FDI norms fall in line with other growth initiatives and stimulus packages announced by the government last year, which have started showing revival trends in key sectors like steel, cement, automobile, food and beverages and fast moving consumer goods (FMCG).
The cement sector grew 10% in December 2008 as compared to November and the year on year increase of 11%. Steel declined steadily through September, October and November last year. The sector recovered in December 2008 and January 2009 touching the May 2008 figure of 22.86 metric tonnes when the sectoral growth rate was 4.1%. The automobile sector grew too, with the January 2009 figures in the passenger vehicles sales showing a 32% rise over December 2008 and commercial vehicles at 23% over a similar time frame. FMCGs and food & beverages have recorded a year on year growth of 26.4% and 28% respectively for the quarter ended December 31, 2008. Such growth trends across sectors send assuring signals of economic revival and corresponding profitable investments for investors.
India’s Interim Budget for the Financial Year 2009-10 by the Finance Minister on February 16, heralds the government’s spotlight on Infrastructure Development as a means to counter the prevailing economic woes. The minster responded to an urgent demand for new infrastructure, announcing that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. Estimates suggest that a third of this investment will come from private companies, paving the way for unprecedented investment opportunity in a sector that has the appetite to absorb as much as $500 billion over the next five years.
Extending its visible hand to the sector, encouraging the public-private partnership (PPP) model, the government has already cleared 54 Central Sector infrastructure projects with an outlay of $14 billion in the financial year 2008-09 and spent an equal amount on 37 infrastructure projects so far while other 23 projects amounting to $6 billion approved for viability gap funding. Further, the corpus for the Rural Infrastructure Development Fund (RIDF) was increased to more than three times to $4 billion over the last five years.
However these initiatives pale when compared to China that spends about 11% of its GDP for infrastructure development, indicative of the scope and extent of scaling up needed in infrastructure development in India to match global standards.
Even as the rupee hovers at a new lifetime low of Rs 51.1 to a dollar, did you know that the Indian currency has been among the more resilient in 2009?
Taking the recent slide into account, the Indian rupee has depreciated only by about 4.7 per cent so far in 2009. After clinging to an exasperatingly narrow range between Rs 48 and Rs 49 since the beginning of 2009, the rupee took a decisive step lower on February 17.
But many of the other Asian currencies have been weaker and have been steadily depreciating since the beginning of 2009.
The Hindu Business Line
The General Election related expenditure could impart a much-needed spending stimulus of about Rs 15,000-16,000 crore to the economy.
The 2009-10 Budget has allocated Rs 9,700 crore for it. To this must be added the spending per constituency by parties and candidates. If there are two serious candidates, the average spending could be as high as Rs 5 crore to Rs 12 crore per constituency per candidate, say political parties. Each candidate is allowed to spend only Rs 35 lakh but there is no limit on how much his or her friends, and the party, can spend.
The Hindu Business Line
India’s media and entertainment industry is expected to touch Rs 1,05,000 crore by 2013 driven by increasing media penetration reaching out to more among the country’s huge population
India added new mobile phone subscribers at a furious pace in January after telecom service provider Reliance Communications launched a new network. The nation increased its mobile subscriber tab by a monthly record high 15.4 million people in January, up from the previous record, 10.8 million, in December, according to the Telecom Regulatory Authority of India (TRAI).