Facebook IPO has been without doubt one of the most hyped IPO of the past decade. The disconnect between the actual current level of economic activity and the pricing established by the company’s underwriters has been very much publicised, as a reminiscence of the dotcom craze, yet in the end, the IPO managed to be priced at the high end of the range. This initial pricing turned out to be a short-lived victory. Since Facebook's grand debut, investors’ skepticism and a difficult global economic context plagued by sovereign debt crisis and slower global economic growth have driven the price of its shares down by over 50 per cent. So to what extent will this IPO help FB to get to the next level as a company? We argue that at least three elements should be watched carefully and are likely to weigh heavily on the company’s future prospects and on its share price.First, one must realize that out of the $16 billion raised from the IPO, only $6.84 billion went to the company directly. The rest of the proceeds was used to allow investors from earlier financing rounds, to cash out a (substantial) part of their stake. So how will Facebook use these $6.84 billion? Many commentators suggest FB will embark on an aggressive acquisition strategy, supported by the company’s cash (around $4 billion) and existing $5 billion credit lines. This is probably a likely outcome, however, the true financial capacity of Facebook is going to be constrained by an upcoming tax liability linked to the settlement of restricted stocks, part of the 2005 executive compensation plan. The resulting tax liability, estimated to be around $4.6 billion, means that in the end, less than $2.3 billion out of the total $16 billion raised by the company will actually benefit Facebook’s operations.A second aspect of the IPO will probably have much influence on FB share price dynamics during fall 2012. So far, 180 million shares of the company are being publicly traded. What will happen when over 1 billion of Facebook shares, owned by early investors and employees, are no longer under lock-up provisions? Mr Zuckerberg has reaffirmed he would not sell his shares and of course investment banks will strive to support the stock price, but there is little to prevent a fall in share prices, should those restricted shareholders try to exit their positions too aggressively. The choice of those insiders may be very revealing of potential anxiety linked to thecompany’s future prospects.But what could insiders be anxious about? Is Facebook part of a new bubble, the bubble 2.0? The latest financial figures for Facebook display extremely high top line growth rates and very strong profit margins. The company has already warned such growth rates were unsustainable and are already decelerating. It is generating both net profits and positive cash flow, yet, in order justifies its IPO price or even current pricing, Facebook will have to succeed in maintaining above average growth rates and profit margins for years to come.Thus, it’s now time to explore the current business model of Facebook which is founded on a two-sided market, a very common trait for high-traffic web sites. The amount of users (free on one side) justifies a selling price for announcers. Theoretically, Facebook, by increasing its number of users, should proportionally increase its cash flow. Even though the UK market seems to have reached its growing pick, the worldwide market is still progressing. The Boston Consulting Group reckons that around 3 billion people will be online by 2016, up from 0.73 billion in 2012. On top of that, the rise of mobile will give an advantage to Facebook vs Google. But number of users is not enough to maintain such a growth.Even though Facebook highlights its main selling points (the time that internet users spend on this social network), the real indicator for announcers is the Click-through-Rate (CTR). Here, the figures speak by themselves. The Facebook’s CTR (0.051) is dramatically low compared to Google (0.4). Moreover, it’s necessary to keep in mind that the social network market is recent. It implies that challengers can make their entries at any time. Let’s remember the MySpace case, one of the pioneers in social network with Friendster from 2005 to 2007. The company has been bought by NewsCorp in 2005 for $580 million. Over the last 3 years, the social network environment has been totally metamorphosed. Only 3 of the main players have kept their top position. The worst downhill was for MySpace (9 times less unique visitors than Facebook). To survive, MySpace could move its activity to the entertainment. In June 201, MySpace was estimated at $100 million (almost 6 times less that its buying price by NewsCorp in 2005).Has Facebook reached its zenith and is now entering a phase of decline? Economics, digital or not, follows market rules. Launching a start-up without a strong business model can’t work eternally. Mark Zuckerberg says “Facebook was not originally created to be a company. It was built to accomplish a social mission – to make the world more open and connected ... Simply put: we don't build services to make money; we make money to build better services.”But, today, Facebook survival relies at 85 per cent advertising incomes. What is to be expected in the coming months for Facebook investors? The current price may represent to many an interesting entry point but new investors should keep in mind that Facebook has to meet a series of (economic) milestones and any negative surprise in its economic perspectives will be welcomed with steep reactions. (Dr Grégory Moscato, is professor of finance, program director, masters in finance at the International University of Monaco. Stéphane Cozzo is professor of digital marketing, program director, master in digital marketing at the International University of Monaco)
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CFOs in India are battling economic as well as industry level concerns, apart from facing individual organisation level challenges. Despite the uncertainty in their internal and external environment, CFOs are optimistic about future growth. In fact smaller enterprises are more optimistic about better performance in the coming year as compared to larger ones. This was the finding of the Deloitte India 2012 CFO Survey, released by Deloitte Touche Tohmatsu India Pvt Ltd. on 11 September. According to the study, a majority of senior finance executives of India Inc feel that the country's macro-economic conditions are likely to either worsen or remain the same by the end of FY’13 indicating weak business sentiments.The Indian economic outlook has taken a toll on the corporate sector. Private investors have pulled back in recent months amid increasing borrowing costs. India's industrial output has been falling on the back of declining consumer demand and corporate investments. Infrastructure projects are showing delayed timelines, and investments in these projects have significantly slowed down. This has led to CFOs identifying decreasing consumer demand, both global and domestic, as one of their organisation’s key economic challenges.The survey reveals that nearly half of the Indian CFOs expect further rise in prices, tapering of GDP growth and stagnation in industrial growth in 2012-13. It also reveals that 43 per cent of them view that political inefficiency is causing policy paralysis and hence arresting economic growth. This was substantiated with 60 per cent of the CFOs citing flawed regulatory policies, inflationary pricing and rising input cost as key deterrents to industrial growth. In contrast, a third of Indian finance heads expect stabilisation in macroeconomic factors and a mere 15 per cent expect an improvement on these counts. However, 31 per cent of the respondents believe that their organisations would perform better going forward and 35 per cent is apprehensive about poor performance due to increasing financial risks. Nearly half the CFOs surveyed said that they are more positive about their company’s future as compared to last year, mainly due to internal/company-specific factors such as products, services, operations, financing, etc., even though maintaining margins and talent management are perceived as key challenges. Other organisational challenges include maintaining consumer demand for their products/services and framing business strategies in an uncertain and dynamic global economic environment. The survey highlights that CFOs are more concerned about the state of the domestic economy rather than the global slowdown, both of which have consequently reduced their overall risk taking appetite. In line with this, key economic challenges faced by organisations today, include sustaining consumer demand, which is tending to show a declining trend, rising input costs, fluctuating exchange rates and an uncertain political environment.Key challenges continue to be growth, inflation and value of rupee. Since the global crisis of 2008, growth fell below 7 per cent year on year in the third quarter of 2011-12. Deteriorating global outlook and domestic policy missteps hampered business confidence and dragged down growth. The survey highlights that 78 per cent of the CFOs expect the GDP growth rate to be 7.5 per cent or below and almost 37 per cent foresee a growth rate of below 7 per cent by the end of FY12.Survey findings also revealed that competition was the biggest concern for technology, media and telecommunications firms, whereas industry regulations and pricing trends have come out as the top challenges for the life sciences and healthcare industry, with new FDI rules and almost 60 per cent of products likely to come under price control as per the new pharma policy. Deloitte experts also believe that the Power sector faces challenges of cost and time overruns in large scale projects, fue availability and delayed regulatory processes (such as licences issue, land acquisition, environmental clearances, etc.), whereas administered pricing is a key concern for the Energy & Resources sector.The survey further states that factors impacting the economy were also having an influence on consumer spending. Two thirds felt consumer demand would be low. Other challenges, two thirds of those surveyed felt, were domestic political uncertainties and declining export. According to Sanjoy Sen, Senior Director, DTTIPL, “CFOs are looking forward to policies that would ensure long-term economic sustenance, spur consumer growth and bolster investor confidence. As in the earlier survey, CFOs in this survey identified decreasing consumer demand as one of their organization’s key challenges. The others being fluctuating exchange rates and rising input costs.” However, in the wake of current economic downturn, 60 per cent expect more companies would access foreign market to hedge risks. As many as 136 CFOs from listed and unlisted companies in India spanning across sectors participated in the survey. A majority of CFOs share a common concern that the economic recovery is still hindered by concerns about consumer demand, squeezing margins, rising inflation and government inertia, among others. A recent few downgrades by International credit rating agencies and slew of scams have only added to the concerns. Based on the survey findings and associated sentiments on economic indicators, CFOs are faced with the need to (1) continue revenue growth/preservation, (2) as well as implement cost containment initiatives. In addition, their future strategies may include access to foreign markets to hedge risks, deliver better consumer solutions and/or products, rationalise resource and/or capacity/productivity, streamline operations and ensure prudent investments on business projects. Such practices may help them tailor business models that adapt swiftly to changes in the global economy.
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Delhi-based drug firm Panacea Biotec has entered into a 10 year collaboration agreement with Osmotica Pharmaceutical, USA, for late phase development and marketing of high end generic medicines. Eighteen products from Panacea’s research pipeline will initially be part of the pact, with a provision to add more.The products, which belong to the therapeutic categories that enjoy approximately $25-billion market in the US, will be developed and marketed on a 50:50 partnership basis, Rajesh Jain, joint managing director, Panacea said.Under the agreement, Panacea will be in charge of product identification, research, development and manufacturing while Osmotica would lead product registration, legal matters, marketing, sales and distribution in the US and key foreign markets. “The collaboration is based on a 50:50 risk, investment and profit sharing by both companies. Panacea will receive initial research fee from Osmotica and, as the research progresses, milestone payments representing 50 per cent of the development cost”, Jain said.The companies expect to file the first product in its research pipeline for regulatory approval next year. “We expect to launch the first product developed under the collaboration in 2015”, Forrest Waldon, CEO, Osmotica said.According to Jain, the partnership is unique as it is trying to develop a highly complex category of products that will require clinical trials under US law before being given marketing approval. “It is not just vanilla generic that require only bio-equivalance studies for regulatory approval. We are working on novel drug delivery systems and nanoparticle based drug delivery platforms”, he said.The research collaboration is in line with Panacea’s long-term objective to diversify its product portfolio from predominantly vaccines to other medicines. Panacea had registered a loss last year after WHO suspended its approval towards its key product, oral polio vaccine. The vaccine is expected to be back in the WHO approved list soon.Panacea shares rose to a month’s high to close at Rs 107.25 a share on Bombay Stock Exchange today after the announcement.Privately held Osmotica is a speciality pharmaceutical company focusing on neurology and central nervous system based drugs.
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The next phase of development of IT-BPO industry will be led by innovation and the industry will need to target new growth engines. As a result, despite a slowdown in the world economy, Indian engineering service providers (ESPs) will witness continued growth, focussed on innovation, says a Nasscom report. Increased digitisation and demand for mobility will drive increased engineering and R&D (ER&D) spends in several sectors. Meanwhile, increased patent filings from India indicate a rise in innovation activity. At 18 per cent, India has the second highest growth rate of patents after China (21 per cent). Also, compared to other offshore services like IT and BPO, ER&D services are much more conducive to vertical specialisation. However, in case of India, building scale while ensuring utilisation remains a challenge. Building deep domain expertise in specific verticals help build credibility and transition to high value ER&D services."ER&D is strategic to India and has the potential to bring a steep change in the Indian economy. It is important for major stakeholders of the industry to take a focused and clear approach to sustain India’s competitiveness in the ER&D services industry." says Ravi Pandit, chairman, Nasscom engineering forum, Pune and chairman & group CEO, KPIT Cummins. This and many other interesting perspectives were discussed at the Nasscom roundtable on the global ER&D landscape presided over by Ravi Pandit, Sangeeta Gupta, senior vice-president, Nasscom, and Suvojoy Sengupta, partner, Booz & Company and co-head of the India practice. The group also shared the key findings of the Nasscom-Booz & Co.Global ER&D report 2012.Key Findings • ER&D exports at $10.2 billion • CAGR of ~10.5 per cent over last 4 years • 15 per cent share in Indian IT-BPO exports • 400+ players with >200,000 engineers • 50:50 exports of service providers and GICs • 45:55 exports from Embedded and Engineering services • 90 per cent exports from North America and Europe According to the report, despite the turbulent headwinds, global ER&D spend surpassed $1.3 trillion in 2011 and is expected to $1.6 trillion by 2020. This growth was largely driven by strong recovery in corporate ER&D post 2009, reaching $541 billion in 2011. The Asiatic region is expected to contribute approximately 45 per cent of the global ER&D spends by 2020. The key verticals with the maximum share in this ER&D spend will be automotive, consumer electronics and telecom surpassing semi-conductors, computing systems, and machinery. The report also identified the themes that are driving the ER&D spends: drive towards efficiency, product localisation & innovation, mobility and digitisation.
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The Delhi High Court recently rendered a decision in the case of Nokia Networks OY (Nokia) on the issue of taxability of software embedded in GSM equipment (‘bundled software’) sold to Indian telecom operators. In simple words, bundled software means software loaded on a hardware or transferred as a component of hardware for a composite price.To provide a brief backdrop to this case, we may cast a quick glance at the provisions of the Income-tax Act, 1961 pertaining to taxation of royalty income which deals with the issue of taxation of software. As per the Act, royalty includes consideration received for transfer of rights in respect of any copyright, literary, artistic or scientific work. The definition of royalty does not explicitly include ‘use of computer software’. As the provision is silent on this issue, it gave rise to endless litigation on whether use of computer software would be tantamount to use of copyright and therefore be taxed as royalty income.To put an end to this debate, the Finance Act 2012 expanded the scope of the definition of royalty under the Act to include the use of any right in a computer software.Undoubtedly, this amendment has created major concerns for computer software providers and providers of equipments that include embedded software as they may now be required to pay taxes on the income earned from providing computer software in India.However, the amendment brought about by the Finance Act 2012 needs to be viewed in the context of tax treaties that India has entered into with several countries. This is significant in case of cross-border transactions, including use of computer software.Under the Act, a taxpayer can opt to be governed by the provisions of the Act or the relevant tax treaty, whichever is more beneficial to him. It is interesting to observe that in India’s tax treaties with countries such as USA, UK, Finland etc. it has adopted the pre-amendment royalty definition as per the Act (i.e. not including computer software), whereas it has included ‘use of computer software’ in the definition of ‘royalty’in tax treaties with certain countries viz. Malaysia, Morocco, etc.The Delhi High Court decision deals with this interplay between the provisions of the Act and the tax treaty on the issue of whether consideration for use of computer software is royalty or not.Nokia, a tax resident of Finland is a leading manufacturer of GSM equipment. During the relevant years, Nokia had a Liaison Office (“LO”) and also a 100% subsidiary in India known as Nokia India Private Limited ("NIPL"). Nokia sold GSM equipment manufactured in Finland to Indian telecom operators outside India on a principal-to-principal basis. Installation activities were undertaken by NIPL under its independent contracts with Indian telecom operators. The LO carried out advertising activities for Nokia.The main issue before the Court was whether consideration for supply of software embedded in theGSM equipment supplied by Nokia can be taxed as royalty in view of the amended provisions of the Act and the India-Finland tax treaty.It may be pertinent to note that although the amended definition of royalty under the Act includes use of computer software, the India-Finland tax treaty does not include ‘use of computer software’ in the definition of royalty.The Court relied on its earlier decision on a similar issue in the case of Ericsson A.B. and held that the payment received by Nokia towards supply of GSM equipment which contained embedded software was consideration received for supply of goods and not royalty income. The supply contract cannot be bifurcated into supply of hardware and software as the software merely facilitates the functioning of the equipment. The Court also remarked that a distinction has to be made between use of a ‘copyright’ and a ‘copyrighted article’. Finally, the Courtmade an important observation that the amendment in the royalty definition under the Act cannot be read into the treaty.Another noteworthy aspect of this judgment is that the Court struck down the attempt of the tax authorities to treat Nokia’s contract for offshore supply of equipments and NIPL’s installation contract as a composite contract. It held that when the property in the GSM equipment was transferred outside India it was not taxable in India and standalone agreements cannot be treated as composite agreements.Finally the Court ruled that Nokia did not have any tax presence in India by maintaining a liaison office for advertising activities in India.The most noteworthy aspect of the Delhi High Court’s decision is the observation that the retrospective amendment in the royalty definition may not impact the taxpayers so long as the definition of royalty in the tax treaty remains unchanged. A similar view was taken in a recent Mumbai Tribunal judgment in the case of B4U International Holdings Limitedin the context of transponder hiring charges.In a lighter vein, the never-ending litigation on the issue of taxability of software income in India may soon prove beyond doubt that taxing software is more taxing than creating software itself !!(Anita Nair is Deputy Manager, Deloitte Haskins & Sells)
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Former president of Reliance Entertainment and founder of GSF Superangels in India, Rajesh Sawhney, recently announced the launch of GSF Accelerator for startups in the country. Come October 15, and GSF Accelerator will kick-start 12 start-ups with personalised and intensive mentoring and initial funding. The Accelerator has inducted ten exceptionally motivated serial entrepreneurs with deep domain expertise in technology and start-ups as entrepreneurs-in-residence (EIR). These 10 EIRs will work with a start-up each as buddy mentors. A long-term investor, GSF Accelerator will invest with a five-year horizon in mind.GSF, a network of 30 leading digital founders and investors, will work with GenNext entrepreneurs. Its partners include Indian funds such as Kae Capital and Blume Capital. It has also tied up with the renowned 500 Startups, founded by Dave McClure, extending its reach to the Silicon Valley networks. Similarly, the leading European incubator and mentorship platform, Seedcamp will provide GSF start-ups access to Europe.A network of leading digital founders in India, GSF Superangels has made three investments so far, Autowale (radio tuk-tuk service), Biosense (non invasive hemoglobin measurement) and Chottu.in (a specialist e-commerce logistic Company). In an email interview with BW Online's Poonam Kumar, Sawhney talks about his first start-up that provides funding to wannabe entrepreneurs in Delhi, Mumbai and Banglore.What made you start the multi-city start-up accelerator?My belief is that India will add a billion new Internet users in the next 10 years and will become World's largest digital economy. Secondly, I believe that most value will be created by young companies, many of which may not yet have been born. Hence, I thought of GSF Accelerator to focus on providing mentorship capital to the young startups.Unlike the Silicon Valley, India has multiple hubs of entrepreneurship. Foremost amongst them are Bangalore, NCR and Mumbai. Each of the hubs has its unique characteristics and value proposition. We want to be closer to the eco-system in each of the city and in fact want ecosystem to support the accelerator and the start-ups. Collaboration with the local ecosystem is a deep rooted DNA of GSF Accelerator. How much you will invest in your start-up? Who are the other investors?We will invest $20,000 to $30,000 in each of the 12 startups. Additionally, at the end of the programme, we will provide seed funding to a few which will be announced at the the Second Global Superangels Forum (GSF2012). GSF Accelerator start-ups will be showcased at the GSF2012 on Nov 26-27, 2012, where they will seek further funding from over 400 of the leading early stage investors from across the world. GSF is backed by 30 founders and 5 funds. Thirty leading founders are funding GSF Superangels and GSF Accelerator. Leading Indian funds such as Kae Capital, and Blume Venture have also partnered with GSF Accelerator.GSF has tied up with the renowned 500 Start-ups founded by Dave McClure to provide access to its Silicon Valley networks. Similarly, the leading European accelerator and mentorship platform, Seedcamp will provide deep access to the GSF start-ups in Europe. GSF is proud to announce its tie-up with Singapore-based fund, Ruvento. This relationship with Ruvento will create a cross-border fertilisation of businesses and capital between India, Singapore and Russia. Which are the sectors you are going to focus on?We are focused primarily on the tech space and especially looking for bright startups in the area of mobile, local, social and cloud. The GSF Accelerator programme is built around three unique values: intensity of mentorship, deep collaboration with the ecosystem, and creation of a global springboard for the next generation of Indian start-ups. This programme is designed to create the next wave of product-oriented technology start-ups in the areas of mobile, social, local and cloud. There is no reason that Indian entrepreneurs cannot create the next Instagram, or the next twitter, or the next Inmobi. What will be the selecting criteria? OR How will you select a person or a company?We are looking for founders with big dreams and vision to build world scale businesses. The caliber and passion of the founding team are the most important criteria. We are also looking for the evidence of their passion and belief in the product/prototype they are building. We are extremely product focused. There are already a dozen accelerators running in India. What do you think of the Indian entrepreneurial scene?I think the entrepreneurial supply is increasing both in quantity and quality across different regions of India. However, there is severe drought of mentorship capital. Why is so much money backing ideas that could potentially fail?I don't think there is much money backing startups. There has been a few announcements, but not much action on ground. Last year, about 50 companies received proper seed round of financing. There is potential to fund 500. How many start-ups are you in talks with? Have you already firmed up any deal?We have met over 300 start-ups so far in the last few months. We have shortlisted 30 and will announce our final 12 in a week. What is your exit strategy?We are long-term investors. We invest with a five year horizon and may exit through M&A, PE rounds or IPO.poonam(dot)kumar(at)abp(dot)in
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A ministerial panel on 8 October gave the go-ahead to a proposal to charge mobile phone carriers a one-time fee for their existing second-generation airwave holdings over and above 4.4MHz at the auction-determined price for the balance period of their licences. The government expects to raise Rs 27,000 crore revenue from the one-time spectrum fee from existing telecom operator. However, the final decision on this is expected to be taken by the Union Cabinet next week. The move will affect older carriers including Bharti Airtel, Vodafone, Idea Cellular and Reliance Communications. The EGoM also decided to refund licence fee of companies whose telecom licences stand cancelled but have no criminal charge against them. "If there is no case or no action is going on against telecom companies for no fault on their part (in obtaining licence in 2008), then the amount (licence fee of Rs 1,658 crore) will be refunded," an official said. He said the government will adjust this Rs 1,658 crore against the final price of spectrum that companies, whose licences were cancelled, will have to pay at the end of the November auction of airwaves. The decision on the one-time fee has been delayed for quite some time. At the last meeting of the empowered group of ministers (EGoM) on October 3, no decision was taken since it was awaiting the opinion of the Attorney General on the issue. Refusing to comment on the decisions taken by the EGoM, Sibal told the media, "Till the matter goes to the Cabinet, I couldn't possibly tell you the details of the decision but all the issues placed that were placed before the EGoM have been resolved." Sibal said the timing of the Cabinet meeting depends on the Prime Minister's Office. "If the Cabinet meets on October 16, we will try that the Cabinet takes a decision on all issues... We are trying to resolve all these issues before October 19." The decision taken is different from the four suggestions provided by the Department of Telecommunications (DoT). The DoT proposals included –no charge; a one-time levy on all spectrum held by existing telecom operators; a fee on spectrum held beyond the start-up of 4.4 MHz; or levy a fee on airwaves held beyond the contracted spectrum of 6.2 MHz. The idea behind the one-time fee is to provide a level playing field to operators who will start bidding for nationwide spectrum in the November auction at Rs 14,000 crore. They will compete with existing players were allocated pan-India permits with 4.4 Mhz of airwaves at Rs 1,658 crore.The Union government hopes to raise upwards of Rs 27,000 crore by levying a one-time charge, prospectively, on telecom companies which hold over 4.4 Mhz of GSM spectrum, or over 2.5 Mhz of CDMA spectrum. (With input from agencies)
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As Ranbaxy and its parent Daiichi rely on each other's strengths to steer through troubled times, Dr Tsutomu Une, chairman, Ranbaxy Laboratories, talks to BW's P.B. Jayakumar on the hybrid model business as well as FDA issues The US FDA is yet to give a timeline related to closure of issues as per the consent decree. When do you expect this to conclude?Ranbaxy has already conformed to the consent decree. The consent decree is a fairly detailed document and it has identified all the required processes. Ranbaxy should simply follow those processes (to comply). In the meantime, a third party consultant will recommend the FDA to inspect. Then the FDA will come according to their recommendation and will inspect, to know whether Ranbaxy's operations are good enough or not. If they are satisfied, the ban will be revoked. Those processes are clearly identified in the document. It is not the timeframe issue; it is a mutual consent decree between both the parties and how you proceed with that to comply. I hope sooner or later it will happen.There is a belief among many of Ranbaxy's retail investors, analysts and general public that Daiichi-Sankyo management was not aware of the gravity of issues related to the FDA and proper due diligence was not done during the time of acquisition. Your comments...We did the due diligence, by Daiichi Sankyo, and had recognised as on date warning letters given to Ranbaxy. The FDA enforcement action came after the acquisition. We did our own due diligence and we believed Ranbaxy is a valuable company to invest and that is why we did it (the acquisition). Only after that the FDA action came and that was unexpected and unfortunate. In the pharmaceutical world, there are not many successful examples of big collaborative business between a generic company and a pure innovator company. What prompted the Daiichi-Sankyo management to try a hybrid model than allowing Ranbaxy to pursue its own growth like any other generic major?There are similarities and differences between our model and some similar innovator/generic companies' model. An important difference is that our hybrid model is looking forward to create lots of synergy across every part of the value chain from research and development, manufacturing, distribution and marketing. In each of these elements we look forward to integrate and how to optimise. In case of some others, they are totally independent. That is the difference. The similarity is that they also respect innovative and generic businesses of each other. There are many opportunities nowadays to integrate, to help, and complement each other — you can imagine in clinical development research, manufacturing, distribution. In the case of front end creation, in markets where Ranbaxy is very strong, such as emerging markets, Ranbaxy will take care of its own and Daiichi Sankyo's innovative products, both. If Daiichi Sankyo has a hold, it will take care of both. In the areas where both companies are strong and having different types of businesses — such as the US -Daiichi Sankyo will remain as Daiichi Sankyo and Ranbaxy will remain as Ranbaxy in the front end. Still, if we find some synergies in particular areas, both parties will collaborate. Back end business is also a part of the hybrid model and both companies will complement each other. Wherever, Daiichi Sankyo is strong, Ranbaxy can utilise the backend strength of Daiichi Sankyo and vice versa. In that way, we plan to integrate both businesses throughout the value chain and that is the vision on hybrid model. If you look at why we keep Ranbaxy as a listed company in India, it is because in this business model, an important element is to respect business expertise of each other - it is necessary to have some sort of good tension between the two parties. When compared to other multinational drug companies operating in India, your shareholding is much less. Do you intend to increase it in near future and de-list the company?No, we are comfortable with the current shareholding and are not planning to decrease or increase it.The share prices of Ranbaxy never reached your offer price after the acquisition. When do you consider Daiichi-Sankyo can recover the investments made in Ranbaxy?It is not appropriate to say when, but I can say nowadays Ranbaxy is a very highly critical and important asset for Daiichi Sankyo. The contribution to the top-line and bottom-line is getting bigger and bigger. So we are happy that Ranbaxy is a part of our group and we expect more contribution in the coming years.
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