Given the benefits of a weaker rupee and robust US pipeline, Lupin will not see any adverse effect on its earnings during FY14, says Nomura
Slowdown in India during the FY14F, is unlikely to have a material impact on earnings of Lupin given the benefits of the weaker rupee and robust US pipeline, says Nomura Financial Advisory and Securities (India) Pvt Ltd in a research note.
Nomura, following a meeting with Nilesh Gupta, managing director (designate) of Lupin, said the company does not expect market dynamics to change materially with changes in regulations and price controls.
According to management of Lupin, the industry is facing challenges in the near term due to the implementation of the new pricing policy in India. There is a tussle with the trade as they are not accepting lower margins on NLEM (National List of Essential Medicines) products proposed by the pharma companies. The industry as of now is not relenting but the issue is likely to be resolved in the near term.
Nomura said, the company management expects to sustain sales growth in the generic business at over 20% in the near to medium term. As per the company, the base is still low and hence growth is not a challenge. The management expects to maintain sales/ANDA as in the past.
In the US market, which is the most important driver of growth, Lupin expects to launch 15-20 products during FY14. The key launches for FY14 include Zymaxid, Trizivir, Niaspan, Lutera and Yaz. Zymaxid’s approval and launch is expected by management in the near term. For Trizivir, a district court decision is likely in the near term as per the company.
According to Nomura, the attrition in the sales force for Lupin is less of a problem today. It is currently at 15%-20%, compared to around 30% two years ago. The growth prospects from a longer-term viewpoint remains. The smaller players in the market place face bigger challenges but Lupin does not see that resulting in inorganic consolidation in the near term.
According to Nomura, TCS expects the bulk of rupee depreciation benefits to flow through to margins in second quarter of FY14F, given that depreciation has been too sharp too soon
Tata Consultancy Services (TCS), India’s largest software company sees revenue growth during FY14 on better pick up in project-based business in the US. The company expects the bulk of rupee depreciation benefits to flow through to margins in 2QFY14F, given that depreciation has been too sharp too soon, says Nomura Financial Advisory and Securities (India) Pvt Ltd, in a report.
Nomura says, TCS expects FY14F revenue growth to be better than constant-currency (CC) growth achieved in FY13. In FY13, the company grew about 16% in CC terms and 13.7% in USD terms. However, the company does not expect runaway growth in FY14F.
According to the report, over the long term, TCS continues to see increased consolidation of the industry, with market share gains from local and regional players. “TCS categorizes discretionary demand as the more project-based business, and it sees a broad-based improvement on this type of business in the US. However, in Europe, demand remains dominated by traditional outsourcing deals. The improvement in demand on project-based business in the US is driven by clients moving from a cost-reduction to a growth-oriented mindset, with decision-making focussed on increasing competitiveness, driving growth, and creating differentiation. Absence of a cost-cutting mindset and a shift to a growth-oriented mindset could reflect in better budgeting in FY15F, in the company’s view,” says Nomura.
In terms of market segments, which show promise for TCS, the Tata group company continues to see stronger growth in retail and manufacturing and in smaller underpenetrated verticals such as energy & utilities and healthcare. Banking financial services and insurance (BFSI) would largely decide the company’s average growth, and telecom could be softer, the research note says.
According to Nomura, over the longer term, the company will decide on the proportion of benefits to be reinvested on driving a higher growth by (a) increasing sales spends, (b) chasing deals with front-loaded transition costs, and (c) geographical expansion. Nomura analysts hasten to add that while rupee depreciation could provide some near-term quick wins, the market is likely to adjust itself to the new INR situation.
A little investigation reveals that a lot more actually needs to be done for UMPPs, mainly about clearances from the environment ministry that are pending since ages. Why can't the MoEF come out with a list of pending cases, and explain?
The cabinet committee on investments (CCI) has requested the ministry of environment and forests (MoEF) to expedite clearance of various power projects in its purview. These have been pending for clearance for some time now and so CCI has given these ultimatums to MoEF to sort out the pending cases within six months. Why MoEF should need this reminder and cannot act on its own?
In fact, it would be legitimate to ask MoEF to list out the projects under its purview and clearly state why a project is not given clearance. They could go one step further and detail the reasons for such delay and lay the bare facts before the public if the project promoters have failed to perform. And, if so, where? And what needs to be done?
The tendency to pass the buck of delays in clearance to MoEF has to stop; and it can only do so, when the ministry itself makes the reasons for such delays public. The public are left in the dark, and this should stop.
It now remains to be seen how the MoEF responds to CCI's call to expedite the clearance of pending cases. Of course, we all know that Jayanthi Natarajan, the minister has no pending papers on her table, but, they are somewhere down the line, and this is the best opportunity to call a spade a spade! She must take such hurdle masters to task.
The bidding process for ultra-mega power projects (UMPPs) have been under scrutiny for some time that would be used for greenfield mega projects. The revised, improved version, establishing the standard bidding documents have now been approved by the Empowered group of ministers, (EGoM) led by defence minister AK Antony. The power ministry will now start the application process in the next 30 days.
Armed with the new bidding documents, which will be applied for two new projects of 4000MW each at Bedabahall in Odisha and Cheyyur in Tamil Nadu, the union government hopes to generate more power in the years to come in these power starved states.
It may be remembered that Power Finance Corporation is the nodal agency for setting up UMPPs.
Although the request for qualification (RfQ) for the Odisha project was done one year ago, and 20 companies had shown interest, as the bidding norms were not ready (why?) there was no progress. Now that the revised bidding norms are ready, the process of request for qualification or RfQ will start.
Why should there be such a waste of time and process? Why not the pending applicants be asked to revalidate the information given by them earlier and then supplement the additionally required information, as per new norms, to avoid the prospective delays in the process? We seem to spend a lot of time in process wastage that needs to be curtailed to the minimum, if stopping them altogether is not practical.
In the case of Tamil Nadu, for instance, it has been found that the Expert Appraisal Committee (EAC) of the MoEF has reiterated its recommendations, given three years earlier, for granting environmental clearance for the 4,000MW power project at Cheyyur. Yes, three years ago!
The Coastal Tamil Nadu Power Ltd (CNTP), at Cheyyur, was originally estimated to cost Rs15,000 crore, depending upon imported coal, and produce power under Rs2 per unit. Land acquisition was already underway at that time. We are awaiting further details of the progress they have made in this regard. The present announcement gives estimated cost at Rs40,000 crore. Why has this gone up, practically three times? Will ministry of power explain why this should be so?
CTNP is to set up a nodal plant, where ‘ecology and development exist in harmony’. Also it would adopt three fishing villages for development, take care not to contaminate soil, ground water or surface water to sea water in and around the site.
Of equal importance is the mandatory requirement under the new bidding process that the required power generating equipments must be sourced from domestic manufacturers. This will give a great boost to the indigenous industry, and an encouraging step in the right direction. In addition, the government must direct lenders/ banks to make available funds at the most competitive rates possible.
Even before the bidding process starts, what comes to our mind is the assumption of dependence of imported coal. Why can't the project be given a captive indigenous mine to develop? Secondly, in the event this is not possible, why not to make available gas from Hardy Oil's expected gas supplies from recently discovered field off Puducherry? Thirdly, issues relating to environmental clearance have been in ‘process’ for some three years now, and what has CTNP done so far? Have they acquired the land completely as required for the project? Have they taken up clearance issues with Tamil Nadu Pollution Board (TNPB) for possible hurdles, so as to plan methods to overcome them?
These are questions that Coastal Tamil Nadu Power Ltd has to answer apart from the most important announcement of target date (or year), when power is expected to be generated from this plant?
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)