Showing posts with label IIPM POWER JOBS. Show all posts
Showing posts with label IIPM POWER JOBS. Show all posts

Monday, October 08, 2012

Indian firms more so!

CEOs have ripped apart shareholders’ wealth globally under the guise of M&As; Indian firms more so! B&E’s Manish K. Pandey, Deepak R. Patra and Karan Mehrishi undertake the most radical analysis of the recent past and destroy age-old perceptions!

But Indians, as we said before, never learn! But hey, isn’t India too supposed to grow on the back of mega-merger deals? Isn’t L. N. Mittal, who succeeded in merging his company with Arcelor (the world’s largest steel corporation), the new purveyor of the rise of Indians? Aren’t flamboyant Indian companies like Tata Steel, Suzlon, Aditya Birla Nuvo, GMR Infra, TCS, Ranbaxy, Apollo, Videocon, ONGC and many more – which have accounted for multi billion dollar M&A deals in the last three years while taking over foreign and domestic corporations – sparkling benchmarks of corporate excellence?

And what about the paeans being sung in the praise of indisputable leaders like Tata Coffee (which bought off 30% of Energy Brands Corporation in the US for an unbelievable $677 million), Dr. Reddy’s Labs (which snapped up Germany’s Betapharm for a gigantic $576 million), Ranbaxy (which gobbled up Terapia of Romania for a smothering $324 million) and innumerable more? Are we simply supposed to believe that most of these Indian M&A deals are, er, stupid? Considering shareholder value, revenue growth, cost synergies, and almost everything a company could have stood for, the answer is yes!

We started with the May 2008 BCG report (The Return of the Strategist) where this former supporter of M&As confirms, “The key question is not whether deal volumes and values will fall or rise, but whether it is still [ever] possible to generate [any] value from [M&A] transactions!... More than half of mergers destroy value for acquirers’ shareholders!” The May 2007 research (Why M&A Deals Are Bad For Shareholders) of the motherlode of all institutions, HBS, quotes, “Most M&A deals destroy shareholder value!”

How has the thinking been a few years back? The April 2004 HBS paper (Should We Brace Ourselves For Another Era Of M&A Value Destruction?) states eloquently, “In the end, M&A is a flawed process, invented by brokers, lawyers and CEOs with super-sized egos!” MarkSirower, author of the famous book Synergy Trap, shows how, on an average, 2/3rds of all deals end up destroying shareholder value. Even the famed McKinsey, once a fanatic supporter of M&As, had to accept that in the US & UK, only one quarter of all M&As even recovered the merger costs.

Their November 2001 hallmark paper (Why Mergers Fail) stated prophetically, “The belief that mergers drive revenue growth could be a myth!” In that paper, McKinsey showed how a massive 78% of companies failed to manage significant growth over a period of three years post the M&A! Professors Weber and Camerer of Carnegie Mellon University, in April 2003, statistically showed in their benchmark thesis (Merger Failure...) that “a majority of corporate mergers fail!” The Economist reported in 1999,“Study after study has shown that 2/3rd of all deals haven’t worked!” CEO Magazine reported similarly, “75% of M&As are disappointing or outright failures!” BCG’s sparkling July 2007 report, The Brave New World of M&As, documents, “Larger deals destroy progressively more value!... Deals that are above $1 billion destroy nearly twice as much value as those under $1 billion!” The hugely referenced Business Strategy Review‘s 2005 paper (Merging on the Miraculous) had the first line, “More than 2/3 M&As fail to create meaningful shareholder value.” The Gartner/Forbes Executive Survey of February 2007 asked top global executives to rank various business issues. ‘Managing M&As’ came last on the 25 factor list! Factors like ‘Attracting and retaining skilled workers’, ‘attracting new customers’, ‘Increasing market share’ etc. were ranked miles above M&As! The Economist Intelligence Unit’s outstanding briefing (Corporate Priorities For 2007) goes better! When more than 1,000 global CEOs were asked, “Which forces will have the greatest impact on the global marketplace in the coming 3 years?,” they ranked ‘M&A activity’ sixth from the bottom! Hilariously, below this were only factors like ‘Catastrophic events (eg. terrorism, natural disasters)’, ‘Advances in back office technologies’, and of course, ‘Others’.

The NYSE CEO Report 2008 put the final nail in the M&A coffin by giving the empirical evidence that “most CEOs think revenue growth in their own companies will be driven far more from organic growth than M&A activity!” It also shows how there is a direct correlation between organic growth and a company’s market capitalisation! Global M&A deals touched $4.48 trillion in 2007 (from $3.61 trillion in 2006); Indian deals touched $51.11 billion in 2007 (from $20.30 billion in 2006).


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Saturday, October 06, 2012

We’re Doomed!

If This is the Best The US has Against us, The World is...!

It’s amazing how one woman, who apparently could well become the next Republican presidential candidate, has the capacity to continuously churn out one gaffe after another, giving fright-nights to global leaders about the fact that the lady lacks factual command of international issues and might even bomb the wrong nation one fine day. Here’s a look at some of her rib-tickling output:

October 1, 2008: In an interview with Katie Couric of CBS News, she was asked to name a few newspapers she reads. Unable to name any, she said, “All of ‘em, any of ‘em that have been in front of me over all these years.”

November 5, 2008: In an interview in Fox News, she said, “We spend a lot of time talking about Africa, as we should. Africa is a nation that suffers from incredible diseases.”

July 18, 2010: “Ground Zero Mosque supporters: doesn’t it stab you in the heart, as it does ours throughout the heartland? Peaceful Muslims, pls refudiate,” Palin tweeted, inventing a new English word.

November 22, 2010: In an interview with Sean Hannity, she commented on her role to media, “I want to help clean up the state that is so sorry today of journalism... I have a communications degree.”

November 24, 2010: In an interview on Glenn Beck’s radio show, commenting on the Korean tension, “But obviously, we’ve got to stand with our North Korean allies.” Later, she corrected herself.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Monday, September 10, 2012

“The few defaults are due to Migration & Natural Calamities”

M. R. Rao, CEO, SKS Microfinance Ltd.

Launched in 1998, SKS Microfinance is one of the fastest growing Micro Financial Institutions (MFIs) in the world, which has served more than 5 million women members in poor regions of India till date. Of course, the company has been in the news for the wrong reasons following the unceremonious exit of its ex-CEO Suresh Gurumani. Current CEO M. R. Rao talks about the company’s business model and challenges it faces:

B&E: Tell us about SKS’ entire delivery mechanism. What are your other major business growth drivers?
MR: SKS targets the poor and upper poor class. The upper poor class consists of families earning Rs.25,000-Rs.50,000 per annum like medium farmers, small entrepreneurs and families falling just above poverty line like landless laborers. This is the segment of the poor that can most benefit from microfinance. Overall, SKS’ target constitutes of rural (74%) and urban (26%). Through its NGO, Swayam Krishi Sangam, SKS works with the ultra poor or the destitute who need far more intense involvement and a kind of spoon feeding to nurture them and make them use their loans effectively. SKS provides the ultra poor with vocational training, social awareness and health awareness over an 18-month period and also provides these families with assets, which they are taught to manage.

Apart from income generating loans, SKS also offers insurance products jointly with Bajaj Allianz. We have covered nearly 2 million lives across our network with this product. SKS also provides life enhancing products like water purifiers, mobile phones and solar lights at a better prices than the existing market price. Also, SKS is providing housing loans and education loans, which are in the pilot phase. This February, SKS has tied-up with Metro Cash & Carry to supply inventory to SKS members who have Kirana stores.

B&E: How does SKS Micro Finance define its eligibility criteria?
MR: SKS follows the peer-lending model developed by the Grameen Bank of Bangladesh. There are two parts involved – formation & administration of the group. A group is a collection of five individuals who come together to gain access to credit. Groups are the building blocks of the peer-lending model, and strict credit discipline starts with strong groups. SKS uses five-member groups. Experience has shown that a five-member group is small enough to effectively enforce group peer pressure and collective responsibility on a unanimous basis. Groups must be self-chosen as only then will members be able to serve as guarantors to each other. Groups must have the following characteristics: Poor, close proximity of members, no close relations in order to avoid personal problems, mutual trust and the adult members should not be above the age of 55 years.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Saturday, September 08, 2012

CANADA: DECELERATING GROWTH

After growing at a red hot annualised rate of 5.8% in Q1 2010, Canada’s Economic growth has come down to just 2% in Q2, 2010. Canadian policymakers now need to look beyond the ‘short cuts’, be it interest rates or output, if they want the Economy to sustain its growth momentum.

Even net exports made a 4.5 percentage point drag on overall GDP growth. Result: In July, Canada’s trade deficit widened to $2.69 billion, the biggest gap since records began in 1971. What’s more? Net exports have not been a positive contributor to GDP growth since Q1 2009. While it does not appear that the drag from net exports will slow down anytime soon, what’s more confusing is the continuing soft inflation (at 1.7%) amid weak productivity growth (0.6% yoy as of August 2010), fast wage gains, and a closing output gap. So, with fragile economic recovery underway and inflation rate at the bottom of its target range, is it appropriate on the part of BoC to further increase the interest rates after already having raised them thrice in 2010?

There are still many who don’t see this as a threat to the sustainability of the Canadian economy in the long run. Jimmy Jean, the US based economist at Moody’s Economy.com tells B&E, “The housing retrenchment was long expected and has not been excessively severe, even showing signs of recent stabilisation. The cooling observed in consumer spending ties in closely with the housing slowdown, which again makes sense and is not overly worrying in light of still-healthy income growth.”

But then, income growth is likely to slow further considering the impact of the weak GDP growth on employment (unemployment rate is already at 8%) and, in fact, one can already see it happening. Second quarter GDP data already indicates a slowdown in consumer spending growth to 2.6% (yoy) from 4.3% in Q1 2010. Though BoC had not replied back to B&E’s queries till the time the magazine went to print, it, however, in its latest press release, accepts that the recovery in Canada will be slightly more gradual than it had projected in its July Monetary Policy Report.

No doubt, looking ahead, the IMF too expects Canada’s economic recovery to be among the strongest of the G-7 countries over the next two years. But, at the same time it should not forget that when an economy is not working normally (as is the case with Canada), one cannot rely on the ‘short cuts’, be it interest rates or output. In other words, policymakers should leave the overnight rates at 1% during their next policy decision on October 19, 2010. Rather, they now need to work towards developing models that have a better understanding of money and credit flows at a more disaggregated level and that include the key institutional features of banking and capital markets. If Canadian policymakers look only at interest rates, inflation, and output, they might miss out on the bubbles that perhaps might be in the making. If that happens, it could spell a disaster for the Canadian economy. Well, they say, it’s always better to be safe than sorry!


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face


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Tuesday, September 04, 2012

It pays at times to stay married!

Speculations abound on the probability of the Hero Honda JV heading for a sudden break up. B&E’s Pawan Chabra does a speed-check on the repercussions of such an event for both players

August 26, 2010. Venue: Taj Palace Hotel, New Delhi. SIAM’s 50th annual convention was in its last session before the day was called off. The theme of the session was crystal ball gazing for the Indian automotive industry, and the panel had eminent names of the industry like Anand Mahindra, Vice Chairman & MD, Mahindra & Mahindra, Abhay Firodia, Chairman, Force Motors, Ravi Kant, Vice Chairman, Tata Motors and Venu Srinivasan, CMD, TVS Motors. As the session was in its question and answer round, Madhur Bajaj, Vice Chairman, Bajaj Auto pointed out that it is somehow difficult to predict the future; as an example, Madhur forwarded the example that in the early 1980s, no one could have predicted that scooters will be replaced by motorcycles. Before Madhur could complete his statement, Abhay Firodia gesticulated towards the much respected Brijmohan Lall Munjal, Chairman, Hero Honda Motors (sitting next to Madhur Bajaj on the same table), giving a repartee, “He predicted it!” The statement consolidated the emotion of the event – that not only had the Munjals forecasted correctly the change, they had also acted on the same in a brilliant manner, by forging one of the most successful JVs in Indian corporate history with Honda Motor Corporation in 1984.

It was at a period when the country saw many JVs and alliances happening in the domestic circuit – be it Kinetic joining hands with Honda or TVS and Suzuki getting into an alliance. But the fact is that most of these alliances ended sour – including all those mentioned above; all except the Hero Honda JV.

But apparently, corporate history is set to be re-written. The technological agreement between Honda and the Hero group was due to expire in 2014, but reports are now filtering out that Honda is attempting to move away from the relationship by attempting to sell their stake in the JV, The day these yet unconfirmed reports hit the stock bourses, Hero Honda saw its share price falling by over 6%. But that’s clearly not the worrying part for the Hero group. It’s quite evident that the parting of ways could inflict much more damage to the Hero group; which will be left lagging on the technology front.

In reality, even till last month, there was no such talk, report or discussion about any future breakup. When B&E met Anil Dua, Senior VP – Marketing & Sales, Hero Honda, in August 2010, he had enthusiastically commented, “Honda has had the most profitable JV with the Hero Group in India and as the companies have been launching right products at the right time, the strategy has paid off very well.” On the contrary, sources in the industry are of a view that the main issue of dispute between the two giants is on royalty payments. In case such a breakup does occur, the option of getting a new technology partner, developing its own R&D or continuing with Honda’s support are the most probable choices for the Hero group. For the uninitiated, the Hero Group owns a majority stake in the JV (see chart) and with Honda moving out, it would not only take a huge pile of cash reserves from Hero (to acquire the stake, if it wants to stop others from buying into the company) but the company could also take a temporary blow on volumes (due to supply issues). The market leader is already facing supply constraints and has seen its market share fall from over 50% since time immemorial to 44% in September 2010; and competitors like Bajaj Auto & TVS Motors have been quick to build on the opportunity.



 
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Monday, September 03, 2012

US: Pranab is still the External Affairs minister

Secretary of State Hillary Clinton’s State Department considers Pranab Mukherjee to be India’s foreign minister! More similar gaffes inside...

Truth is stranger than fiction, but fiction does appear to have an irresistible appeal for two of the world’s largest administrative agencies, the US State Department and CIA. The official web portals and communiqués of the US State Department and CIA are splattered with notable misinformation and errors that would be necessarily considered highly affronting at a diplomatic level.

Last week, we showed how both the State Department and CIA confidently misrepresented India’s map (and showed Kashmir as part of Pakistan) on their websites. We had no idea there was more to come – perhaps even ‘the’ reason for why the Americans seem to be making no headway with India on foreign affairs. The US State Department’s official website mentions that the Minister of External Affairs of India is (still) Pranab Mukherjee! S. M. Krishna, the current Foreign Minister of India since May 2009, has been notably left out of the State Department’s official communiqués. Incidentally, Krishna has also met Barack Obama in various forums, including at New York in September 2009. Not all listed information is wrong, though. Some US government letters are thankfully still reaching the right addresses in India. The Home Minister of India is correctly named as P. Chidambaram; and so are some other Indian politicians.

Mistakes on the CIA and State Department’s websites are not only India-centric but can be found in the case of other countries too. What’s interesting is that, in spite of the official websites of these respective countries portraying genuine information, the US has failed to recognise the same in its own records. First, the comical. In South Korea, three years ago, a series of protests against the CIA finally forced the agency to correct the information about South Korea’s origins (CIA had earlier amusingly stated that “South Korea has been a nation for a millennium;” South Korea, apparently a stickler for dates, protested en masse as this nation has been in existence only since the last 4000 years).


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Friday, August 31, 2012

BUSINESS BEYOND PROFITS!

As the world emerges from global recession, businesses should focus on restoring their profitability. But only short-sighted businesses do so at the expense of the pursuit of a broader purpose, writes Amit Bhatia, scion of the l. N. Mittal group, founder of Mittal Champions Trust and Swordfish Investments

The past few years have seen growth rates drop everywhere – even in emerging economies like India and China. That process has not only affected nations and businesses but also lives of ordinary people. As the focus of governments, businesses and the ordinary man turned to survival, many personal aspirations were put on hold and major infrastructure projects, such as the construction of new roads and hospitals were shelved or not built as quickly as they might otherwise have been.

As the world starts to readjust to the new normal of a period of prolonged economic austerity, it might be tempting for companies to reign in programmes that make no discernable contribution to the bottom line as they come under pressure from investors to increase profitability. But now is exactly the time when companies must stay true to the ambitions they laid out in more prosperous times and remember that, over the long term, companies with a purpose beyond profitability will enjoy the greatest success.

There are many who would argue that by simply producing its product, being profitable and providing jobs, a business is already making a substantial contribution to an economy. But over the years the accepted view has become more sophisticated. Business, it is often argued, is in a unique position to help make a broader contribution. As part of its license to operate, it should act responsibly at all times and seek to actively engage with the communities in which it is present. This, advocates of corporate responsibility claim, will generate long-term and sustainable advantages for the business in terms of growth and profitability.

I agree. Of course profitability is crucial. A business has no future if it cannot be profitable, something that will have severe consequences for all stakeholders. But equally businesses must look beyond profit, and also pay attention to the quality of life, in the broadest sense, of the communities in which they work.

I have actually always been very impressed by the emphasis leading Indian companies place on Corporate Social Responsibility. The winner of the Corporate Responsibility Award at the Financial Times/ArcelorMittal inaugural Boldness in Business Awards in 2008 was Selco, an Indian social enterprise that provides sustainable energy solutions and services to under-served households and businesses.

There are many examples of leading Indian companies who make a healthy profit, but utilise a proportion of this profit to make a meaningful contribution where they believe they can have a positive impact such as education and health.


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Thursday, August 30, 2012

H. W. Park, MD & CEO, Hyundai Motors India talks to B&E on the present challenges

H. W. Park, MD & CEO, Hyundai Motors India talks to B&E on the present challenges – both internal and external – and the plans of his company for both the domestic and export markets

B&E: The company has been experiencing labour issues for the past many years in the Chennai plant. In fact, this very year, there have already been three such incidents reported. What is the current state of affairs at the plant?
HWP: The factory is now in a relatively safer state and we are currently in a review stage with the labour committee at the plant. We will be in a better position to comment about it after the review stage is over.

B&E: The overwhelming growth in the domestic market has brought about problems of production shortages for many companies. Is Hyundai one amongst them as well?
HWP: Not really. The impact has been minimal and the shortage lag only lasts for a day or two at worst. That is manageable.

B&E: So you do agree that there are shortages. Do you believe that the company will be able to recover from the situation of component shortage anytime soon?
HWP: Surely we will be able to do so. But it also depends on the health of the overall auto industry in India. The industry is growing at a fast pace, something which wasn’t initially expected by anyone. Hence, there has been a minor shortage from the component supplier side, but because we are a big player in the Indian automotive industry, we can handle the problem by adjusting our exports and domestic ratio.

B&E: If the company had been in a situation with no production constraint, would you have produced more cars?
HWP: No. As mentioned before, even today, the production constraint problem is very much negligible, as the lag only appears for a day or two.

B&E: There have been reports of Hyundai India manufacturing electric i10 for the parent company. Your comment...
HWP: For the electric i10, we are only providing parts for the chassis and the engine. This is because chassis for the model can not be locally assembled for the product that will be sold in Korea.

B&E: Initially, Hyundai focussed heavily on exports. So are your views changing in favour of the domestic market?
HWP: We at Hyundai enjoy such a liberty. If the demand in the local market is high, we can always adjust it by reducing the export volumes. As the Indian market is getting bigger, we are gearing up to cater to this rising demand of the Indian consumers.



          
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Wednesday, August 29, 2012

Have movie-makers ended up distorting

Image is to the mind what perception is to the soul. Have movie-makers ended up distorting both in an attempt to deliver ‘happy’ stories?

If one reads the research papers by anthropologists like Desmond Morris and by authors like Barbara & Allan Pease, one can draw how these movies are an additional burden for the already-very-different-species called men and women! According to their researches, men and women have evolved differently. “Nest-defenders, to safeguard their family’s survival, needed to be able to pick-up small changes in the behaviour of their offspring that could signal pain, hunger, injury, aggression or depression. Males, being lunch-chasers, were never around the cave long enough to learn to read non-verbal signals or the ways of interpersonal communication,” as quoted in one of Allan and Barbara Pease’s books, Why Men Don’t Listen & Women can’t Read Maps.

While the above may be true, it’s difficult to ignore in the film the tender moments, the glances and words, and even more difficult to deny oneself the possibility of a life so complete. After all, dreaming is the first step towards fulfilling a dream! But living and working towards just one dream (of love) isn’t the brightest idea either!


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Tuesday, August 21, 2012

The intrigue of the islands

A mysterious and fascinating set of islands lie in the Bay of Bengal, ready to give your most adventurous imagination wings…

The British came here and so did the Japanese, but the mystery of the group of islands that is Andaman and Nicobar islands was never quite unravelled. Even after years of studies and observations, practically little is known of the origin and the people of these islands and this sense of intrigue and the feeling of a mysterious air about the place will overwhelm you if you happen to land on these islands – any of the 572 of them cradled perilously in the Bay of Bengal.

There is a sense of the primordial among the flora, fauna and the indigenous people of the islands – the most fascinating bit about exploring the Andamans. Always inhabited by aboriginal tribes, many of whom still live the lives of hunters and gatherers, the inaccessibility of the islands had made them an object of fascination. The existence of the islands had been known for centuries (they find reference in early historical writings of Roman geographer Ptolemy) but the first attempt at an outside settlement on the islands was by the British in 1789. They had to abandon it seven years later because of the inhospitable locals and the immense logistical challenge of connectivity to the mainland.

Oddly, they returned in 1858, this time establishing a penal settlement – the dreaded and the feared ‘Kaala Paani’ or the Cellular Jail. The jail held mutineers from the First War of Indian Independence, even some criminal tribes and refugees from erstwhile East Pakistan apart from other freedom fighters later on. My visit to the jail was a unique experience because a first-hand experience of the conditions there is enough to make your hair stand on its end. You can go around the courtyard, see the cells and the gallows and also look over the horizon from atop the wings. One bit of trivia I got to know was that the sight of the lighthouse and the island imprinted on our twenty Rupee notes is a view from the top of the wing facing the sea. The prison initially had seven wings, with the watch tower at the centre. Today, only three remain (the rest had been destroyed by the Japanese during World War II), and it has been branded a national monument. The Japanese briefly controlled the islands from 1942-1945, a period in which though innocent blood was shed, there was development of the basic amenities, especially in Port Blair.


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Monday, August 20, 2012

The strange cases of Benjamin Buttons!

While drug makers around the world are lamenting the death of their patent rights on many blockbusters, there is a certain tribe smiling about it – the Indian generic tribe

A year back, when John Lechleiter took charge as the CEO of the $21.8 billion-a-year earning US pharma giant Eli Lilly, he decided to send his top executives a gift. It was a digital clock, which counted backwards, second by second. The clock was programmed to stop ticking precisely 48,384,000 seconds later. The deadline – October 23, 2011, the day when Eli Lilly’s top-selling (which raked-in $4.9 billion in 2009) schizophrenia pill Zyprexa would go off-patent, setting-off the alarm for generic drug companies to work double-time. This is however, not the only heartache in store for Lechleiter. Besides two more blockbusters losing their exclusivity rights by 2016 (its second-best selling Cymbalta expires 2013 and its third-best Alimta in 2016 – two drugs that make for another $4.8 billion-a-year), two of its most promising compounds failed the final clinical trials last year. Result: Lilly’s stock could not withstand the shock that the company had no new compound ready to hit the global market, while standing to lose close to $10 billion (of its $21.8 billion revenues FY2009) by 2016. It became the worst performer amongst the eleven S&P pharma stocks, and fell by 11% in just the year 2009. This is however just the beginning of the landslide for Eli Lilly, and much remains to be seen. As for the clock, it has started ticking backwards, and it’s the generic challengers that are waiting for the time, to make most of the misery of the once-proud patent holders, Lilly being just an instance.

When shareholders don’t like you, they let you go sans remorse. Much as this sounds a “generic” take on shareholder activism, it is true. Jean-Paul Garnier was voted out despite trying hard for seven-and-a-half years to revive the GlaxoSmithKline stock. Busy ensuring delivery of drugs at cost and selling 90% of its vaccines at not-for-profit prices in developing economies, it lost focus on new drug discovery. During his tenure, the GSK stock had fallen by 41%. He got the boot in May 2008. His successor Andrew Witty hasn’t made amends yet. Since February 2009, the company has enforced price cuts on its patented versions, in more than 50 countries, while winning just one patent (on a vaccine for H1N1 influenza). Witty is dreading the day when the second-highest selling drug in history, the $7.8 billion-a-year earning Advair, expires on April 1, 2011. Pfizer, the biggest pharma giant is no exception. CEO Henry McKinnell was booed-out in June 2006, following a stagnant stock price. His successor Jeff Kindler hasn’t been an exception. Under him, Pfizer’s stock has touched the sub-$18 level for the second time in over a decade and its bottomlines for 2009 have shown a drop of 57% as compared to pre-Kindler days. Worse, despite losing patents on 14 big drugs by 2014 (representing 70% of its annual revenue for 2009), its new launches have simply been shadows. Of the biggest setbacks will be the losses of Lipitor’s patent (the largest-selling drug ever) in 2011, and that of Viagra in 2012 and Celebrex in 2013 – add the losses from these two, and you would have Pfizer’s revenues being reduced by an alarming $13.74 billion (as per Evaluate Pharma, loss of revenues, post-patent expiry, is estimated at 85%). “Pfizer has a number of downward revenue revisions. You have to believe board members are scratching their heads,” says David S. Moskowitz, Analyst at Friedman, Billings, Ramsey Group Inc. The company has 148 compounds in the early developmental stages, but hopes of producing another blockbuster drug remains a fantasy.

Time is running out fast for these Benjamin Buttons of the pharma world, and of the lot most hated by them, the Indians are definitely on top of the list! But the volume-playing generic players in the country won’t mind it. The potential that lies in wait to be tapped by the Indian players can be imagined by the fact that despite being the third largest player in terms of volumes in the world, the Indian pharma market is still 14th in terms of value ($21.04 billion, as per Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers). A market which was written-off about half-a-decade back, when the world was heaving forward at a great rate of knots to catch the patent blockbusters bus, is now chugging ahead faster than imagined before. While the domestic market alone is expected to grow at a CAGR of 12-15%, as opposed to a global average of 4-7% during 2008-2013 (according to an October 2009 report released by research firm IMS Health), Indian pharma companies are finding the proposition of lapping up the opportunities granted by the patent expiries simply irresistible. Over the next two years, more than 26 bestsellers, with an annual value of $70 billion (Rs.3.1 trillion) are going off-patent, representing 240% of the current Indian pharma space. This justifies well why despite struggling to win approvals for generic versions from the USFDA, Indian drugmakers are filing for generic licences at a brisk pace. Indian companies have filed for approvals to market 11 of 15 drugs that go off-patent by 2010 and 22 of the 26 that expire by 2012. “These developments present large opportunities to the Indian pharma companies and with their low-cost manufacturing capabilities India is well-positioned to tap the opportunities,” says Animesh Kumar, Principal Consultant, Datamonitor Healthcare to B&E.

Explaining his company’s outlook in the generics space, Ramesh Adige, President, Ranbaxy tells B&E, “Ranbaxy is today well positioned in the global generics space and is amongst the top 10 generic companies globally offering products in over 125 countries. With over $80 billion of drugs going off patent by 2012, the generics market will continue to provide attractive growth opportunities in future.” Even Uday Baldota, VP – Investor Relations, Sun Pharma tells B&E, “In our view, generic drugs is a significant, growing and profitable opportunity, worldwide. We are working towards getting a meaningful presence in the worldwide generic industry over the longer term.” As per a report by HDFC Securities, 34 Indian players are looking ahead to play this game. While Dr. Reddy’s stands to gain the most, there are others like Ranbaxy and Sun Pharma (despite their troubles with USFDA), which are amongst the top gainers. Even Cipla, which has so far avoided the US market, has filed for permission to market generic/low-cost editions of drugs that make over $45 billion annually! While 10 Indian firms have seeked permission to sell generic versions of the highest-selling Lipitor, in US alone, it is Merck’s Cozaar (anti-diabetic drug) and Astra Zeneca’s Arimidex (anti-cancer), which have received the maximum number of applications from the country.


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