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Monica is a reporter at BW
Indian multinational pharmaceutical and biotechnology company, Cipla Ltd.’s recently announced acquisitions of the two US-based companies InvaGen Pharmaceuticals Inc. (InvaGen) and Exelan Pharmaceuticals Inc. are unlikely to affect its ratings, says India Ratings and Research (Ind-Ra). The two acquisitions, referred to as ‘transaction’, are subject to certain closing conditions and are valued at $550m. “The transaction is in sync with the management’s strategy to gear up and strengthen its front-end presence in the US, which is considered a high-margin geography,” says Jahnavi Prabhu, senior analyst, India Research. Cipla expects operational synergies accruing on account of this transaction to be reflected in therapy and product diversification, scaling-up of revenue, high profitability (acquired business generating EBIDTA margin of 25 per cent) and negligible debt levels of the acquired entity. The acquisition of InvaGen is likely to provide Cipla access to around 40 approved abbreviated new drug filings, 32 marketed products and a pipeline of 30 products which are to be approved over the next four years. In addition, InvaGen has filed five first-to-file products which represent a market size of around $8bn in revenue by 2018. “Cipla can also access to the government and institutional market in the US,” says Prabhu. Prabhu believes that it is also likely to provide Cipla access to large wholesalers and retailers in the US. InvaGen has three units located in Long Island, New York, with a total annual production capacity of 12 billion tablets and capsules and about 500 employees. The agency expects the acquisitions to be funded by a mix of internal accruals, existing cash balances and debt. It expects Cipla’s net leverage (adjusted net debt/EBIDTA) to increase but remain commensurate with the existing ratings. The benefits accruing on account of the to be acquired companies’ net leverage being lower than Cipla’s given their nil debt levels and higher EBIDTA margins are likely to be offset by the debt assumed for the acquisition. At FY15E, Cipla reported net leverage of 1.2x (FY14: 1.2x) and interest coverage (EBIDTA/interest) of 13.1x (15.4x). The company expects the transaction to be completed by end-December 2015, subject to the completion of certain conditions precedent and receipt of applicable regulatory approvals including the expiration or termination of the waiting period provided for by the Hart-Scott-Rodino Antitrust Improvements Act.
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The consumer durables industry is banking on the festive season to prop up growth. The industry expects demand to resume with the onset of the festive season. Consumer expenditure likely to record a 25-30 per cent growth as the consumer durable market sales is expected to be around Rs 20,000 crore this festive season.The economic reasons were also cited for the upsurge in sales: good monsoon, gold prices falling, inflation expected to fall further, companies are expected to give good bonuses and so on.“Positive sentiments are back into the market so the consumer spends on gold, durables, auto, food items, clothes will go up,” says Nitin Mathur, Research Analyst – Emerging Markets Consumer, Société Générale.As festive season in India is very vital to the consumer durable companies because around 60 per cent of the consumer durable product sales happens during this up beat selling season. Around 30 per cent of the total sales will happen during the festive season of the consumer durable market. In 2015, the industry expects a growth rate of 20-25 percent with a sales target of around Rs 20,000 crore.High-end durable products across categories of durables sell maximum (up to 60 per cent sales) during the festive season. Firms like Videocon, LG, Samsung, Sony launch their new products during this time of the year. “With the beginning of Dusshehra, we will launch our new models about 45- 50 models on the LED category- Liquid Luminous loaded with festive goodies such as three year warranty and life time subscription free,” says C M Singh, chief operating officer at Videocon.The company will spend around Rs 25 to 30 crore in its festive season marketing activities out of the total marketing budget of Rs 250 crore this year. Singh said the company will come up with discount offers and lucrative financial schemes on the products this season.LG India has recently launched its OLED TV and Smart TVs, the promotional activities of which will be buzzing during the festive along with the company’s regular discount offers and freebies. Fiat Chrysler India is planning to launch Punto Abarth, under the price of Rs 10 lakh. It will hit the Indian market during the festive season this year.With rural market comprising 70 per cent of the total market, the “festive season sale” concept is largely for the urban market. For the rural consumer, major purchases of electronic items, farm equipments happen after harvesting period and during weddings, companies with heavy promotional activities in the Tier I, II and III cities have no such proposition for the rural market. “So the marketer loses out on the rural consumer during the festive season sales on the big ticket items like a TV or two wheeler. With its savings the rural consumer would shop for clothes and food items essentially during festive,” says Pradeep Kashyap, CEO of rural marketing agency MART.With companies expected to shell out festive bonuses, there would be irrational purchasing decisions as the sense of getting an additional income above the salary in a few months would stimulate and help plan of their purchases in advance. “It is the sense of euphoria that settles in which induces to spend before the actual bonus amount comes to the account of the consumer,” says Mathur.In consumer durable the consumer buying is a lot more spread out throughout the year especially of the premium category of products but much bigger demand and market still caters to the mass product. Seasonality in consumer buying behaviour has changed in the past few years as premium or even middle-class consumers are no more waiting for the festive season purchasing or offers on the premium goods but instantly buy it as per their needs. But consumers of mass products such as direct cool refrigerator or a flat screen TV for instance will wait for offers and the auspicious time to purchase the product especially in the tier II and III cities.
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Indian educational system calls for an urgent reform. But till now, little progress has been made by the central government. It is high time the Narendra Modi-led National Democratic Alliance (NDA) government should change its focus from building infrastructure such as buildings and class rooms to 'learning outcomes'. The National Policy on Education was framed in 1986 and modified in 1992. Since then many changes have taken place that call for a revision of the policy. The Narendra Modi government promised to bring out a National Education Policy (NEP) to meet the changing dynamics of the population's requirement with regard to quality education. For the first time, the government is embarking on a time-bound grassroots consultative process, which will enable the Human Resources Development Ministry to reach out to individuals across the country through over 2.75 lakh direct consultations while also taking input from citizens online. In a country where access to education is still an issue and digital India is still to take off, the framework of NEP is yet to be structured. HRD minister Smriti Irani has, however, assured that the draft education policy shall be ready by the end of 2015. Earlier this year, the Centre said that it would also evaluate public-private partnerships (PPPs) to finance education, seek ways of upping India's spend on higher education to 1.5 per cent of gross domestic product (GDP) from less than 1 per cent now, and emphasise on research and development (R&D). "We need to increase the budget for education significantly and keep 10 per cent of the allocation in improving teachers' competence and assessing learning outcomes and we must change the way we measure progress in this area," said Anil Sachdev, Founder & CEO of School Of Inspired Leadership (SOIL). However, it is a known fact that higher education cannot sustain only through public funding. While PPPs in higher education have been pursued as a strategy, not many have shown successful results. Hence, the PPP models need to be revisited so as to allow more meaningful collaborations. Education experts believe that the public and private sectors, along with the centre and state governments should have an integrated approach to education to create an environment of financing with incentive. "The government should facilitate engagement between academia, industry and research institutes in a better way including providing incentives on research so that it grows in leaps and bounds rather than create an incremental growth," says Sachdev. On August 20, Finance Minister Arun Jaitley launched a portal —www.vidyalakshmi.com— for students seeking education loans and five banks including SBI, IDBI Bank and Bank of India have integrated their systems with the website. This is aimed to ensure that no student misses out on higher education for lack of funds, and the launch of the portal is the first step towards achieving this objective. The government has also sought suggestions on ways to rework the examination system for better assessment of students, restructure education regulators such as the University Grants Commission and the All Indian Council for Technical Education (AICTE) as present regulatory systems tend to stymie quality and growth of our institutions. The Sarva Siksha Abhiyan ensures constitutional provisions for providing free and compulsory education to all the children between 6 to 14 years of age. Even after declaring education as a fundamental right, there are numerous hurdles that prohibit a girl child from actually getting education. The biggest hurdle is the prejudices that families have about girls-like girls are slow learners, they are not rational; they are to be confined inside the domestic household, and why bother educating them. For ensuring that girls get the right kind of education, the education experts believe that the government must develop role model female teachers and involve mothers of female students in running the schools as well as recognise them for encouraging their wards to study. Further, the schools must be equipped with basic facilities to make the female students safe and comfortable. They also believe that it is important to educate "Panchayats" and "city councils" about the benefit of educating the girl child and work with NGOs to remove biases against this cause. Although the government has big plans to reform the education sector, everything remains on the policy stage as of now. Even as the country's economy has nearly stabilised, the education industry which is largely seen as a social sector should now be perceived as an industry. Educationists believe that education is very much correlated with the economic development of a country, citing examples of countries like China, South Korea, Singapore, which, in a matter of decade and a half have transformed into developed economies because of the transformational changes they have brought about in the education sector. It is now imperative for India that is undergoing demographical, economical, and digital transformation to follow the path. As Sam Pitroda in his National Knowledge Commission paper had said in 2005 that "we need generational transformation in our education system to bring about change." But it has been a decade and we are still doing incremental changes therefore we do not see the impact. Modi's Reforms In A Logjam; Read Businessworld magazine 24 September Edition
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The Maximum City is going for hi-tech waste disposal. In keeping with the spirit of the Swachh Bharat mission, the Brihanmumbai Municipal Corporation (BMC) has entered into a partnership with FMCG major Hindustan Unilever Limited for tackling the problem of burgeoning waste clearance, say sources close to the development. As a part of their Unilever Sustainable Living Plan (USLP), Hind Lever is planning to use the Incinerator technology to burn solid waste in the city of Mumbai. This will be a part of the company’s 2015 annual plan of action under SLP. However, the timing of implementation of the programme could not be ascertained. We at the Businessworld, have sent a mail to the company’s communication department vis-a-vis the development and are yet to receive a reply at the time of filing the story. The company will use incinerators to reduce the solid mass of the original waste by 80–85 per cent. Mumbai generates 9,400 tonnes of municipal solid waste while 40 per cent sewage go untreated in the city. In HUL’s 2014 annual report on USLP, the leading FMCG firm created water conservation potential of nearly 100 billion litres through Hindustan Unilever Foundation partnerships among other initiatives through its products- Lifebuoy Hand washing Programme. The critical issue of burgeoning waste, a large quantum of which finds its way into landfills, is today causing a severe strain on the ecology and threatening the very quality of life throughout India. Another FMCG major, ITC has put in place several strategies, as all their businesses are mandated to ensure ‘Resource Conservation’ by reducing specific waste generation at all ITC units through constant monitoring and improvement of efficiencies in material utilisation. Businesses are also expected to ensure maximum reuse and recycling of wastes by following ‘segregation at source’ approach. In addition, they are required to work towards 100 per cent recycling of waste by tracking of each category of waste to ensure that it can be reused wherever possible, and if not, recycled. This ensures that almost no waste from ITC’s businesses lands up in municipal or private landfills.
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Godrej Industries Limited, is concerned about the e-commerce players hiring talent from Fast Moving Consumer Goods (FMCG) sector, and is already preparing a distinctive value proposition for new hires from the B- schools and for their own employee to save them from being poached by the e commerce players. “We are careful and concerned about the e-commerce companies hiring talent at the senior and mid level from the FMCG industry, we don’t perceive them as threat now as they are yet to enter the FMCG category,” says Vivek Gambhir, managing director, Godrej Industries Limited. Claiming that the company has the lowest attrition rate of 5-7 per cent as against the industry figure of 10- 12 per cent, Gambhir still doesn’t foresee the e-commerce companies as a long term threat. “The sector will bust in the next 3-4 years reducing the presence by up to 90 per cent, therefore our concern is short term but we have a strategy in place to retain our employees,” he says adding. The company has a target to skill 1 million Indians by 2020. Speaking of the company’s HR policies and internal management, Gambhir revealed that Godrej Industries is disbanding the titles, like for instance, after the position Vice President there is no other hierarchy. “We wanted a leaner management with vertical heads but not that it was costing us but to cut down on bureaucracy and for better efficiency,” he says adding. He was talking at the launch of the fourth edition of Godrej Industries Limited and Associate Companies (GILAC) campus programme -Godrej LOUD (Live Out Ur Dream) 2015. He stated that LOUD is a platform to help young and talented Indian students realise their dreams, which might have been shelved due to career or sponsorship constraints. Launched in 2012, LOUD is Godrej's alternative to hiring through a standard summer process on campus. This year, Godrej LOUD visited 12 campuses, including the Management Development Institute, Gurgaon and the Indian Institute of Foreign Trade, Delhi. In 2014, the initiative saw a tremendous response with over 1600 applications from across 12 campuses. 14 finalists were shortlisted to share their dreams at the Godrej Headquarters in Mumbai and 7 dreamers got the opportunity to live out their dreams. Akhil Kalia, one of our LOUD winners from last year, visited the Terra-di-Motori in Italy and sketched automobiles in the factory museums of manufacturers like Lamborghini, Ferrari, Pagani and Maserati. Kurmapu Keerthi Sindhuri, another winner from LOUD 2014, installed a hygienic piping system in a temple to recover Abhishekam offerings and distribute them among the poor.
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Switzerland-based multinational food and beverage company, Nestle India, suffered a net loss at Rs 64.4 crore in Q2, hit by Maggi noodles ban. Analysts believe that the recall costs added to the woes of the company’s loss apart from the sales that were hit initially when the news of excess lead in its ready-to-eat product Maggi was exposed in early June this year. This was the company’s first quarterly loss in the last 15 years as a long drawn battle with India’s food regulator FSSAI continues. Nestle India, however, made a statement that the whole controversy disrupted its profitability this quarter. In addition, to loss of sales, the firm reversed net sales worth Rs 288.4 crore during the quarter in relation to Maggi noodle stocks already sold to retail and withdrawn from the market. It reiterated its products are safe for consumption and that it recalled Maggi because of confusion in the consumer's mind about its safety following test reports. The company has already lost money to the tune of Rs 320 crore in recalling and destroying its product from the market shelves. The ready to cook Maggi noodles contributes two thirds of sales in prepared dishes and cooking aids, which was the only category to demonstrate positive volume growth in FY14. The estimated sales value of Maggi noodles in the market was Rs 200 crore while related materials in the factories and distribution centres have an estimated value of Rs 1.10 crore, according to a recent filing with the exchange. Having been in India for over 100 years, Nestle India at present has 26 per cent of the total packaged foods industry in the country. Nestle India recently appointed Suresh Narayan as the new India chief who had to take up the baton in a challenging phase for the company. Analysts have always been of the view that an Indian should head the Indian arm of the Swiss multinational. But it hardly made a difference as the company continued to make profits before stumbling this year. But it certainly is a rough weather for the FMCG giant that needs to win back its market share and the battle with the Indian regulators.
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The government on Tuesday (21 July) gave final approval to 13 proposals for setting up of mega food parks, in it's first phase, in various parts of the country including rural areas during the current Five Year Plan period, the monsoon session of the Parliament was informed. However, challenges in terms of policy changes needs to be met first before a successful take off of these ambitious projects. What Is A Mega Food Park? The objective of the Mega Food Parks Scheme is to provide excellent infrastructure facilities for food processing industries along the value chain from the farm to the market. The scheme was originally launched as the 2008 Food Parks Scheme (FPS). The objective of this scheme was to raise the processing of perishables in the country from the existing 6 per cent to 20 per cent and increase value addition from 20 per cent to 35 per cent. Further, its objective was to increase the share of India in the global food trade from 1.5 per cent to 3 per cent by the year 2015. It will include Creation of infrastructure near the farm, transportation, logistics and centralized processing centers. The main feature of the scheme is a cluster based approach. The scheme will be demand driven; pre-marketed and would facilitate food processing units to meet environmental, safety and social standards. The expected outcome is increased realization for farmers, creation of high quality rural processing infrastructure, reduction in wastage, capacity building of the producers and processors and creation of an efficient supply chain along with significant direct and indirect employment generation. Challenges AheadHistory says that food parks in India have never been successful. The key challenge in setting up food parks lies in land acquisition. Most projects, in the past have failed to take off mainly because of the bottlenecks involved in land acquisition. "But with the Land Acquisition Bill passed, things will look up with these mega FP's," says an FMCG analyst. However, the bigger challenge also is the lack of agriculture sector reforms that many believe should run concurrently even as infrastructure for food processing is set up in the country. In the last 6 years, Food Parks in India did not take off successfully in India during the UPA government. But the Narendra Modi government has ambitious plans to set up 42 mega food parks across the country in the next 3 to 4 years announced Harsimrat Kaur Badal, Union Minister for Food Processing Industries last week. It remains to be seen how the NDA government makes it successful with its twist in policies. For instance, 70 per cent of agri business in India happens through co-operatives, they have to be integrated into this scheme of mega food parks to give a facelift to the mega FP scheme.
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The route to reaching a new India was the theme of the session that struck a patriotic chord with everyone in the audience. The audience was amused listening to the tales of Kamal Bali, Managing Director, Volvo India, who talked about Brand India’s equity touching a new zenith among its foreign counterparts. Gurbir Singh, Executive Editor, BW Businessworld moderating the session, asked the speakers how Brand Bharat is gaining momentum outside the country as much as it is within India. To this Mr Bali said, "There is a lot of optimism about India and brand India here and everywhere around the world." The panel also said that Narendra Modi’s brand equity has gone up; slogans like ‘Make in India’ and ‘Digital India’ profuse optimism and is symbolic to a positive change that India is projecting itself to be. But despite going gaga about India, the panelists were also of the opinion that India still has to go a long way in becoming the next super power, and said it can reach its goal only if it puts its basics in place and do away with the red tape that’s derailing its growth. Further, the general opinion was that the popular slogans doing the rounds like ‘Make in India’ and ‘Digital India’ should begin to yield result on the ground and India should abstain from overpromising and under-delivering, otherwise it will lose credibility in the international market. The other speaker on the panel Mr Rajesh Sud, MD & CEO, Max Life Insurance said, " India needs to grow at 9 per cent; it's a compelling need to have $7000 per capita income, otherwise the demographic dividend will become a demographic nightmare."
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In a vibrant panel discussion at the launch of the 11th edition of the Marketing Whitebook, panelists talked about how brand Bharat is gaining momentum in and outside the country despite the gloom and doom. Speaking on the paradigm shift in retail trends, Sahil Jain, co-founder, DineOut, said convenience is key for consumers both in urban and semi-urban areas. Convenience drives demand for companies to build mobile apps on various consumer products. The other convenience for consumers in smaller cities where penetration of debit and credit cards is still low, is e wallet, which is gaining traction. Bipin Preet Singh, CEO & Founder of Mobikwik said: "SMEs and consumers operate through e wallets, which are fast growing in cities like Surat, Ahmedabad and Lucknow. Incidentally, 10% of the users are above the age of 50 years." Aloke Bajpai, founder, iXigo, agreed that the main challenge was in getting the SMEs and vendors online in tier 2 and 3 cities. In the next session, talking on two Indias and the one in between, the panelists extensively discussed how marketers market their products across the spectrum from techn savvy ufban India to moffusil towns. "Digital adoption is breaking down the barrier," says Balchander Sekhar, Co- founder, RenewBuy, one of the speakers in the panelists. There was a consensus among the speakers when they agreed that young consumers today are dictating terms to marketeers. Mahesh Kanchan, Director-Marketing, Carlsberg says, "the youth is ever experimenting with the mediums to access products and they are an extremely profitable segment for us." The discussion went on to say that mobile phone is as powerful a tool for a marketer to reach their consumers today as is the television. Brand Bharat was the theme for the next panel that discussed how Brand India is gaining momentum in and outside the country. "The Narendra Modi brand equity has gone up, slogans like 'Make in India' and Digital India profuse optimism," said Kamal Bali, MD, Volvo India. But despite all the gags about India, the panelists were also of the opinion that India still has to go a long way by putting the basics in place. Rajesh Sud, MD & CEO, Max Life Insurance said, "India needs to grow 9 per cent annually. It's a compelling need. Otherwise the demographic dividend will become demographic nightmare." The last session was a fireside chat with a young successful leader Nitish Kapoor, Regional Director, Reckitt Benckiser South Asia, on trends that are changing the consumer outlook in India and their effect on FMCG business. Kapoor threw figures about his company's budget on digital advertising to its growth story to the leadership skills of Indian leaders in various multi nationals. "India has a long way to make digital advertising a main component of ots marketing spends, says Kapoor. When asked by chairman Annurag Batra what gets Indian CEOs hired globally, Kapoor said, "Indians have a lot of mental and cultural agility to deal with chaos." The mega show ended with the unveiling of Marketing White Book and a laughter riot by Papa CJ.
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Citizen volunteers play a key role in Asia-Pacific region in making their governments more accountable and responsive to their people, but governments undervalue their contributions, says a new United Nations report. The State of the World's Volunteerism Report 2015, released by the United Nations Volunteers, is the first global review of the role of volunteers in improving the way citizens are governed and engaged. It draws on evidence from around the world, including case studies from the Asia-Pacific region, and specifically India, Bangladesh, Sri Lanka and China.The report shows how volunteers are working with governments and civil society to hold those in power to account, to influence policies and laws and to represent the voices of those who are often left out of development decisions such as women, youth and marginalized groups. It calls on governments to do more to include volunteer voices in decision-making if they want to achieve more inclusive- and ultimately more effective - development. "Selfless service is the fountainhead of all moralities, all values and all virtues", said Rajeev Gupta, secretary, ministry of youth affairs and sports (MoYAS), at the launch of the report in New Delhi on Tuesday (23 June). "Volunteerism in its purest sense is selfless service - service to the community, to the nation, and to the world at large." More than 1 billion people volunteer globally and many are in the forefront of efforts to improve the way they and their fellow citizens are governed and engaged. For instance, women from villages in Uttarakhand in northern India who have become powerful voices in local decision-making by volunteering in 'Whole Village Groups', engaging with local authorities on a wide range of issues such as monitoring the performance of local schools or influencing how local forests and water resources are used. In China, grassroots activists who monitor pollution to improve air quality reporting, encouraging the government to publish the smaller particulate measures and commit to lower pollution levels by 2016. As the world's governments prepare to agree the new sustainable development goals at the United Nations in September to replace the Millennium Development Goals (MDGs), the report says there is widespread agreement that future development efforts will have to include radically different approaches in order to better engage people in their own, their communities' and their countries' development. Speaking at the launch of the report, UNV's deputy executive coordinator Rosemary Kalapurakal said, "The potential of volunteers to help create truly people-centred development is enormous, but, as yet, far from fully tapped. In order to achieve the new Sustainable Development Goals we need to see the participation of all sections of society. Volunteers have a critical role to play in representing the voices of those who are often excluded from development decisions, including women, youth and other groups who may be marginalised". The report mentions the role of 20 million volunteers in immunization against polio globally. "We are very proud that India was declared polio-free in 2014 after almost twenty years of fighting with the disease, a stupendous achievement for the country made possible with the support of more than 2.4 million Indian volunteers," said Mr. Louis George Arsenault UN Resident Coordinator. The report finds that countries that provide a supportive "enabling environment" for volunteers tend to reap the rewards of their inclusion in decision-making. It praises developing countries governments such as Peru, Mozambique and Norway who have passed laws and set up frameworks to formalise the contribution of volunteers. However, it says too many other governments are failing to acknowledge and leverage the immense potential of volunteers to help them chart a more successful development path. It calls on all governments to "go beyond the rhetoric of participation" and take concrete steps to help the world's volunteers actively contribute to the decisions that affect people's lives.
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