INDIA TO INVEST $18 BN IN PORTS OVER NEXT 5-7 YEARS

India is likely to invest $18 billion in ports and over $4 billion in its ship building industry in the next five-to-seven years, shipping industry players said at a meet here. Shipping Corporation of India's Chairman and Managing Director, S Hajara, who spoke at the meet, said that shipping should be brought under the infrastructure ambit. He called for a relaxation in the present cabotage law to allow shipping into the infrastructure sector.

The Economic Times

INDIAN AUTOMOBILE SECTOR: GOING AT STEADY PACE

The website of Tata Nano, the world’s cheapest car, recorded more than 20 million hits in merely 15 days since its launch on March 23, 2009. Between April 9, 2009 and April 25, 2009 Tata Motors Ltd, the manufacturer of Nano and India’s largest commercial vehicle company, received 203,000 orders for its much-awaited car.

The strength of India’s automobile sector is not just limited to the success of a single wonder-car. Contrary to the global automobile sector, Indian automobile companies have continued their growth even in the current situation of economic slowdown. Indian automakers sold 929,596 vehicles in May 2009, up 8.86% compared to the corresponding month of year 2008, according to the Society of Indian Automobile Manufacturers Association (SIAM), the apex Industry association representing 44 leading vehicle and vehicular engine manufacturers in India. This is in sharp contrast to the U.S. automobile market, which recorded 33.7% decline in May 2009, when compared to the corresponding month a year ago with sales sliding to 925,824 vehicles. There are certain sections in this sector, which are feeling the pinch of economic slowdown. But the Indian auto companies are seeking only some tax cuts from the government to run their business smoothly, not bailout packages.

India: An Attractive Market For Global Companies

Toyota Motor Corporation, the largest automaker of the world that has relatively smaller presence in the Indian market so far, has recently brought its Sports Utility Vehicle (SUV) model Toyota Land Cruiser in the car market of India with a price tag of about $170,000 (Rs.80 lakh). The success of SUVs such as BMW X5, Audi Q7, Porsche Cayenne etc. offered by other global competitors signaled Toyota that it can no longer afford to avoid this segment of the Indian market. So it decided to face the challenge with no other model but its flagship SUV brand Land Cruiser.

Toyota has a joint venture in India named Toyota Kirloskar Motors Private Limited, in which 89% stake is owned by Toyota and Kirloskar Group, one of India's largest Engineering and Construction Conglomerate, holds the rest. With the demand getting better, Toyota Kirloskar has decided to raise its production. During 2008, it sold 51,800 units that include the models such as Innova, Corolla Altis, Camry and SUV Prado.

Global automotive companies are also using India as a manufacturing hub for their exports market. Toyota Kirloskar is identifying export markets for the small cars produced by it in India. The company is setting up its second plant at Bidadi near Bangalore, the capital of the south Indian state of Karnataka, with an investment of about $680 million (Rs.3,200-crore), which is expected to produce about 100,000 units per year. Toyota might export these small cars to Russia, Brazil and China in the initial stage.

Another Japanese company Suzuki Motor Corp, which specialises in small cars, holds more than 54% stake in India’s largest carmaker Maruti Suzuki India Ltd. Suzuki had identified the opportunity in India as early as in 1981 when it partnered with the Government of India and formed the joint venture company in the following year as Maruti Udyog Ltd. In 1983, it brought Maruti 800, a 796 cc model that was dubbed as India’s first affordable car. The model became so successful that even after 26 years; it is one of the best-selling cars in India, although the company plans to gradually phase it out now. Suzuki got the majority control of this company in 2002 with 54.2% stake, when the Government of India sold its stake to Suzuki as part of its disinvestment strategy.

Relying on the Indian market is now paying off to Suzuki a handsome reward. Today, Suzuki not only controls 62% market share in India’s domestic car market (and about 50% share in the total car production of India), but also getting a much needed cushion for its global operations contributing almost half of the Suzuki’s global consolidated profits. Maruti Suzuki’s share in Suzuki’s profit moved up to 46% in 2008-09 from 30% in 2007-08. At a time when Suzuki is facing a downturn in all of its key markets such as Japan, the U.S. and Europe and a 14% fall in its net sales in 2008-09, Maruti Suzuki posted 14% increase in its net sales. Now, in order to save costs and ease its burden, the Japanese parent is considering shifting a major portion of its small car manufacturing activities to India.

The dominance of Suzuki in the small car segment in India has forced Japan’s second-largest carmaker Honda Motor Co. to introduce its first small car named ‘Jazz’ in India on June 11, 2009. It aims to sell 20,000 units of its first small car in India, in the first year. Honda has invested about $345 million (Rs.1,620 crore rupees) in the country and has plans to invest another $210 million (Rs.10 billion) for its second plant, which will increase its production capacity in India to 160,000 vehicles annually by 2010.

Renault-Nissan Automotive India, a 50:50 JV between Nissan Motor Company, Ltd of Japan and Renault S.A. the French automaker, has targeted to gain 5.7% of the total market share in the passenger cars segment of India by 2012. Nissan has allocated 350 billion yen for its global investment plans in 2009 and India will likely receive the largest share of the amount. It has set up a car manufacturing plant in Chennai, the capital city of the Indian state of Tamil Nadu, that will cater to the exports market also. It plans to export 110,000 units by 2011. Nissan Motor India will begin its exports to Europe from the second half of 2010. Nissan’s light commercial vehicle project with the Hinduja Group’s, the London headquartered diversified conglomerate, flagship company Ashok Leyland is also expected to take off in 2011.

General Motors Corporation, the world's second-largest automaker, which filed for Chapter 11 bankruptcy protection in the U.S., has its Indian operations that continue to grow at healthy pace, hence are not being included in the U.S. filing for Chapter 11. Expansion plans of GM India are intact. The company is going ahead with its plans to introduce three new cars this year. GM India has invested more than $1 billion in India over the past 14 years. Its manufacturing facility in Gujarat, the western state of India has an annual capacity of 85,000 vehicles, while its facility in the state of Maharashtra produces 140,000 vehicles per year. To compete with Tata’s Nano, GM India plans to introduce a new mini car by the end of 2009. One can expect that if General Motors emerges from bankruptcy in the next 2-3 months, its India operations would have a more effective role in the reshaped GM.

Indian Automobile Market: Going Strong Even In Tough Environment

Indian automobile sector’s growth is primarily driven by the two-wheeler segment, which continued its fast pace in May 2009 with sales reaching at 727,937 units, 12.5% higher than the sales in May 2008. In the two-wheeler market, the motorcycle segment grew by 12.34% at 576,000 units compared with 513,000 units in May 2008. Passenger car sales grew a bit slow, but remained positive, with 2.47% growth at 113,490 units. The one segment, which is not having good performance, is the commercial vehicle segment comprising of trucks and buses. This segment reported a drop of 13% in sales to 60,642 units last month.

Maruti Suzuki, the largest car manufacturer of India, registered a 10% growth with its sales reaching at 62,878 units during May 2009 when compared to the corresponding month in the previous year. Earlier, in April 2009, the company had sold 64,857 cars with a growth of 9% over April 2008. Hero Honda Motors Ltd, the largest two-wheeler manufacturer of the world, sold 359,000 motorcycles with year-on-year growth of 21%. It is noteworthy that Hero Honda, a joint venture of India’s Hero Group and Japan’s Honda Motor Co. Ltd., is the world’s largest two-wheeler company for the past seven years primarily on the strength of domestic consumption, because it exports only to those countries where Honda is not present due to non-compete arrangement with Honda Motor.

Trends In The Recent Years:

If we look at the production figures of Indian automobile sector in the recent years, it’s quite visible that the growth continued to be very strong till 2006-07 with annual growth in the range of about 14%-17%. For the last two fiscal years, production has stagnated, particularly due to pressure on commercial vehicle segments. This segment has suffered due to two reasons, a) very high interest rates, and b) slowdown in the economy. Now, with the banks easing the interest rates again and an improvement in the economic outlook, it is expected that sales of the commercial vehicle segment would start picking up in the next few months.

India Emerging As A Prominent Force In Global Auto Market

Indian auto companies have started increasing their presence in the global auto market. For this purpose, these companies are not only focusing on increasing their exports, but also acquiring companies, brands and assets overseas. The most prominent example of a foreign acquisition by an Indian company was the acquisition of the U.K. based Jaguar and Land Rover, two iconic British brands by India’s largest commercial vehicle manufacturer Tata Motors Ltd in March 2008. Tata Motors had acquired these two brands from Ford Motor Company for a net consideration of $2.3 billion.

The company has just introduced the Jaguar and Land Rover (JLR) brands in the Indian market giving the discerning Indian customer direct access to these prestigious brands. The launch of JLR by Tata Motors in India mirrors the growing aspirational value among consumers in the Indian market - not only to own a car, but also associate with a brand and upgrade to a luxury car, a segment that is growing at more than 25% annually. Such aspirations have seen more than 7,500 luxury cars added to the Indian roads in 2008, up from 5,000 in 2006, according to estimates.

In fact, Tata Motors had started looking beyond Indian markets quite early, when it set up its first assembly operation in Malaysia in 1974. Currently it has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and Senegal. In 2004, Tata Motors acquired Daewoo Commercial Vehicle Company, South Korea’s second largest truck maker, which has got rechristened as Tata Daewoo Commercial Vehicles Company now. Thanks to this acquisition, two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors had acquired a 21% stake in Spanish bus and coach manufacturer Hispano Carrocera with an option to acquire the remaining stake as well. Tata is using Hispano’s presence to expand its reach in other markets. In 2006, the company formed a joint venture with Marcopolo, a Brazil-based company specialising in body-building for buses and coaches. In the same year, Tata Motors entered into another joint venture with Thailand-based Thonburi Automotive Assembly Plant Company to manufacture and market the company’s pickup vehicles in Thailand.

Bajaj Auto, the second largest two-wheeler manufacturer of India, registered 25% increase in its exports during 2008-09. It has set up a manufacturing facility in China to cater to the exports market.

Overall, India exported 1.53 million vehicles in 2008-09, up 23.6% from the previous fiscal year. A segment-wise break-up of India’s exports suggests that passenger vehicles segment registered the highest 53.7% growth in 2008-09, followed by 22.5% growth in two-wheeler segment.

Better Times Ahead For The Indian Auto Sector

The coming months are set to be exciting for the Indian auto sector with a series of new models being introduced, both by domestic and foreign companies. With the inflation touching almost zero, the Indian banks are expected to cut their lending rates sooner or later. India’s finance minister Mr. Pranab Mukherjee, in an attempt to spur the growth rate again, has already urged the banks to reduce interest rates. Indian auto industry is set to benefit from the lower rates, as it will increase the demand for vehicles.

Rural initiatives of the new government will have a positive impact on the rural demand. The benefit of rural demand getting stronger will spread across segments including tractors, commercial vehicles, two-wheelers, multiple-purpose vehicles and small cars. With the low penetration level of two-wheelers in the country, the companies still have a sizable potential upside left. Once the industrial production starts improving, which is expected by July or August 2009 according to economists, the commercial vehicle demand will also pick up.

INDIAN AUTO SECTOR: MOVING INTO HIGH GEAR

The Indian automotive sector aptly showcases the country’s prowess in manufacturing, indicative of a marked shift from the earlier perception of outsourcing and services based economy, such that some of the leading global automotive companies plan to make India their manufacturing and exports hub.

The country’s automotive sector that has grown at about 15% over the past five years is projected to grow to $145 billion by 2016 from $35 billion, according to the Automotive Mission Plan (AMP) 2006–2016. India will emerge as the destination of choice for design and manufacture of automobiles and auto components during the period involving investments worth more than $40 billion.

While the Indian auto sector has witnessed steady growth as domestic and global companies launch new models and increasing capacities, global automobile manufacturers in their home countries are seeking bailout packages and reporting bankruptcies. For instance, the Indian unit of the U.S.-based General Motors Corporation, which filed for Chapter 11 bankruptcy protection in the U.S., continues to grow at a healthy pace and is not being included in the U.S. filing for Chapter 11.

And Tata Motors, part of India’s largest diversified Tata Group, launched models of its U.K.-based marquee brands Jaguar and Land Rover that it bought from U.S.-based Ford Motor Co., into the Indian market on June 28. See our Special Report that outlines the current state of India’s automobile sector and how it is emerging as a manufacturing hub for the global companies.

GOVT MAY INCLUDE EUROPE, US IN FOCUS MARKET SCHEME

With India's exports declining for the eighth month in a row in May and the need to arrest the decline assuming urgency, the Government may convert the US and Europe into focused markets.

"We have been trying to help exporters diversify their markets in the last few months. There is a need to arrest decline in exports...we may have to convert the US and Europe into our Focus Market Scheme," Director General of Foreign Trade, R S Gujral, told exporters in an open-house meet organised by the Federation of Indian Export Organisations (FIEO), here today..

The Economic Times

INDIA’S MARKET OUTPERFORMS CHINA

While investors hope that consumer spending growth in China will eventually balance its export dependence, in the short term it is India that presents more opportunity.

Economists crow over the long-term domestic growth prospects in both emerging Asian giants, which is likely to be led by a young generation of spenders eager to buy clothes, computers, cars and other goods.

Until recently, China’s massive government stimulus spending worth 6% of gross domestic product was the biggest draw in Asia for investors chasing growth. However, last month’s stunning election victory by India’s Congress-led coalition, which allowed the grouping to secure a parliamentary majority, has turned the heads of some fund managers to the consumer-oriented sectors in India.

In addition, India’s valuations are cheaper, suggesting more upside potential for any investments...

Livemint

INDIAN PHARMACEUTICAL: RIPE FOR CONSOLIDATION

· India’s Pharmaceutical Sector Growing Fast Both In Domestic And Exports Markets

· Up To 50% Lower Costs Make India An Attractive Production Hub

· A Highly Fragmented Domestic Market Calls For Consolidation In The Industry

The Indian pharmaceutical industry is characterised by the twin benefit of strong domestic consumption growth on the one hand and robust export opportunities on the other. At the same time, the intense competition in a highly fragmented market is posing a great challenge too. The stage is set for the next phase of growth accompanied by consolidation. This stage will see traction owing to the global meltdown of equity markets that has brought the valuations at very attractive levels.

With the increasing need of capital for sustaining the growth momentum or even sustaining in the business due to the highly competitive environment and limitations on the ability to introduce new drugs due to the new patent regime, a number of Indian pharmaceutical companies will find it difficult to pursue the growth path on their own. Such companies will be ideal candidates to join hands with strong multinational companies. The acquisition of India’s largest drug-maker Ranbaxy Laboratories by Daiichi Sankyo Company Limited, one of the largest pharmaceuticals companies of Japan last year is an apt example in this context.

The foreign pharma companies already operating in the Indian market are also trying to increase their stakes in the domestic subsidiaries, which indicates the growing importance of this market for them. In the last week of March, Swiss firm Novartis International AG and Pittsburgh-headquartered Mylan Inc announced plans to significantly hike equity stakes in their Indian subsidiaries. The leading multinational pharmaceutical companies are increasing their focus on emerging markets such as India and China in their growth plans, as pointed out by a global survey of top 15 pharmaceutical companies conducted by Ernst & Young, one of the largest professional services firms.

Export Becoming Major Growth Driver

Pharmaceutical industry in India is showing a good resilience in the current phase of slowdown both in the domestic and export markets. But export has become an important growth driver for this industry in the recent years with more than 50% of the revenues coming from overseas markets, particularly the U.S. and Europe. The Global recession has impacted India’s drug exports only marginally, which is estimated to reach at $8.25 billion in the financial year 2008-09 against the earlier estimate of $8.97 billion, according to the Pharmaceutical Export Council of India – an organisation set up by the Government of India. The growth rate of pharma exports in 2008-09 was estimated at 23%. The industry, however, is expected to have slightly lower growth in exports as revealed in a survey by the Federation of Indian Chambers of Commerce and Industry (FICCI), one of the oldest industry chambers in the country with a nationwide membership of more 1,500 corporates and 500 chambers of commerce and business associations. The FICCI survey has predicted a 16% increase in India’s pharmaceutical exports, while most of the other industrial sectors expect a negligible growth or contraction during 2009-10.

Exponential growth for Indian pharma exporters is expected as many high value drugs are going off-patent. It’s estimated that over the next five years, the global pharmaceutical companies are set to lose about $100 billion in sales due to such drugs going off-patent. Indian companies are well poised to take advantage of this situation, owing to the competitive advantage in generic drugs business. Basic production cost of drugs in India is up to 50% lower compared with the established markets such as the U.S. and the costs of U.S. Food and Drug Administration (FDA or USFDA) approved plants in India are 30%-50% lower.

Indian companies are continuously increasing their presence in the U.S., a $440 billion market that constitutes around 47% of the global pharmaceutical market. In February 2009 alone, the Indian companies (along with their subsidiaries) large and mid-sized, together have secured approvals for 15 Abbreviated New Drug Applications (ANDAs).

Global rating agency Fitch Ratings Ltd., recently commented that the exports of low-cost Indian generics are going to benefit due to the weak global economic environment and the weaker rupee. Similar factors will also generate greater demand for low-cost contract research and manufacturing activities (CRAMS) of the Indian firms.

Strong Domestic Growth

Drug sales to retail consumers in India grew by 9.8% to $6.98 billion (Rs.34,000 crore) in the calendar year 2008, according to research firm ORG IMS Research, a joint venture of AC Nielsen ORG-Marg and the U.K.-based IMS Health. The growth rate in 2008 was lower than 13.4% registered in 2007, due to a dip in the second half of 2008. These figures are compiled from the data collected from wholesalers and don’t include the drug sales through hospitals estimated at about $1.4 billion (Rs.7000 crore) per annum. After a decline of 1.2% in October 2008, the monthly retail drug sales has improved significantly in the following months with the growth rate of 6.8% in November 2008, 13.3% in December 2008, 14.4% in January 2009 and 13.3% in February 2009, respectively.

The domestic market of Indian pharmaceutical industry is likely to register 12%-13% growth in 2009, only marginally lower than the earlier projections of 15% as an impact of macroeconomic conditions, according to ORG IMS Research. The impact of macroeconomic factors is much less on the Indian companies compared to the global peers. In the next 4-5 years, this industry is expected to continue to grow at more than 10% to touch the $30 billion mark by 2020. In the long term, the domestic consumption is expected to keep growing at a healthy pace, because currently India’s healthcare spending is only 5.6% of the country’s gross domestic product (GDP), which is among the lowest globally.

The domestic consumption of drugs is bound to increase as the necessity of drugs will increase with time and they will become more affordable for a larger population. The necessity will increase with the rising population and lifestyle disorders making people more vulnerable to ailments such as cardiovascular diseases and diabetes. Secondly, medicines will become more affordable to a larger number of people as the size of India’s 300 million middle class is rapidly increasing and the income levels are also going up.

Highly Fragmented

The domestic pharmaceutical market is quite fragmented with the top five companies commanding only 22% market share. Cipla Ltd, has become the largest and the fastest growing company among the top five companies, outclassing Ranbaxy Laboratories Ltd. Even the top 20 companies have a total market share of about 57% only in contrast to the global drug market dominated by the 10 largest companies that account for about 40% of global sales.

India’s Domestic Pharmaceutical Market (12 Months Ended January 2009)
Company	Size ( $ Billion)	Market Share (%)	Growth Rate (%)
Total Pharma Market	6.9	100.0	9.9
Cipla	.36	5.3	13.4
Ranbaxy	.34	5.0	11.5
Glaxo Smithkline	.29	4.3	-1.2
Piramal Healthcare	.27	3.9	11.7
Zydus Cadila	.24	3.6	6.8
Total of Top 5	1.53	22.1	--
Source: ORG IMS

An Active Sector For M&A And Private Equity Deals

Pharmaceutical, Healthcare & Biotechnology was one of the busiest sectors on the deal street of India in 2008. It was second in terms of total value with $5.57 billion, marginally below the Telecommunication sector which had total transactions worth $5.78 billion, according to a report of consulting firm Grant Thornton. In terms of volume, the Pharma sector had 57 deals, second to 102 deals in Information Technology & IT-enabled Services sector. The $4.60 billion acquisition of Ranbaxy Laboratory, India’s largest drug-maker, by Japanese firm Daiichi Sankyo Co., Ltd was on the top of the table of India’s largest deals in 2008. Out of the total 57 M&A deals in the sector, 17 deals were domestic.

Private Equity (PE) firms have also been active in the pharma sector in 2008 with total 22 PE deals worth $337.41 million. The average PE deal size for the sector in 2008 was estimated at $15.34 million, 20% higher than $12.82 million in 2007. Narayana Hrudayalaya, one of the world's largest pediatric heart hospitals, which received a funding of $100 million, was on the top of PE deals chart of 2008 for the sector.

G-20 LONDON SUMMIT: EMERGING ECONOMIES FOCAL POINT

The G-20 London summit on April 2, 2009, part of the annual forum of the 20 largest economies that convenes to review the global trade and economic scenario, marked the recognition of the central role that the emerging economies will play in the revival of the global economy.

The financial crisis that gripped the global economy since last year is expected to result in a drop of 9% in global trade in 2009, according to the World Trade Organisation estimates. The developed countries’ exports are set to fall by as much as 10%, while developing countries will see a marginal contraction of 2%-3% in their shipments.

The G-20 shunned protectionism across the board to promote global trade and investment. The forum extended a $1.1 trillion for international credit and additional $250 billion through the International Monetary Fund (IMF) as part of the few decisive steps to revive the global economy. This capital infusion will benefit the emerging economies like India and China, particularly in the services exports. The two countries figure among the top 10 in services exports, with China contributing 3.7% at $137 billion closely followed by India contributing 2.8% at $106 billion of the world’s total in 2008.

G-20 itself is a manifestation of emerging economies with more weightage in the global economic affairs, as compared to the G-8, a group of eight largest industrialized nations. Some assertions, however, such as the regulations to curb tax havens, could negatively impact capital flows into emerging economies.

INDIAN RUPEE STAYS MORE RESILIENT IN 2009

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

GOVT ANNOUNCES STIMULUS PACKAGE, INCLUDING TAX CUTS

The government on Sunday announced major tax cuts across the board to boost demand and allocated additional funds and incentives for exports, housing, textile and infrastructure to stimulate the economy, hit by the global financial crisis.

Livemint

GEMS & JEWELLERY EXPORTS TO GROW BY 15-20%

India’s gems and jewellery exports is likely to grow by 15-20 per cent this fiscal.

“We are expecting the whole gems and jewellery basket to grow by 15-20 per cent this year with gold export forming the major chunk of total exports,” Gems and Jewellery Export Promotion Council (GJEPC) Vice-Chairman Vasant Mehta told reporters in Mumbai.

The Financial Express

Maruti eyes 1 mn sales by 2010, bigger role in Suzuki’s global operations

‘We want to make small cars exclusively in India for export to Europe; our R&D has shown huge potential with contributions to Swift & Concept A-Star’….As for my main targets for the future, firstly, we will stay focused on the goal of achieving 1 million sales by 2010. This will require capacity expansion and upgradation of manufacturing facilities, for which we have already announced an investment of Rs 9,000 crore. The expansion of our sales and service network is underway for the 1 million target.

The Indian Express

http://www.indianexpress.com/story/253556.html