Q3FY11 preview: Good growth in pharma-III

As the rush of third quarter results picks up this week, we take a look at how the big names in some major sectors are expected to fare. This is the concluding part of a three-part series


Good topline growth is expected. Contract research and manufacturing companies would not have done very well. MNC pharma companies will do slightly better than the big four Indian generic companies. 

Dr Reddy’s Laboratories

The branded generics and regulated markets business is expected to come strong for the country’s No.2 drug maker by sales. This segment of its German operation suffered losses in the previous corresponding quarter. The December quarter should see some gain in market share in Prevacid, Allegra and Prograf generic sales in the US. 

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Sun Pharmaceuticals

The company’s topline will gain substantially from its subsidiary Taro. Domestic formulations and exports will probably grow by around 13%. Taro is expected to cause a sharp margins decline. 

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Formulations and growth from advanced markets such as Japan should be substantial. The US generics business should sustain strong momentum (branded business revival, especially Antara, would be key to growth). The domestic business will be helped by steady new introductions. 

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It’s a Brave New World out there on the oceans. . .

If you thought everything was ship-shape in the sea-transport business, you have another think coming

Here's another simplified statistic, where all the numbers have been reduced to one parameter and length. If placed stern to bow, touching each other, in line, then the large bulk carriers- (Capesize ships and similar vessels), presently anchored off the coal and iron-ore loading ports of Queensland, flooded Australia-they would stretch for over 60 kilometres.

In double file.

One reason for this is the bad weather and climate-change induced floods currently swamping an area in this part of Australia-which is larger than France and Germany put together.

BHP-Billiton and Rio Tinto, the largest and second-largest mining companies respectively in the world, have already declared 'force majeure' in this part of the world-thereby taking advantage of conditions permitting them to legally back out of contracts.

Another reason is, simply, is that there doesn't seem to be enough cargo going around for so many ships. With large numbers of new ships ordered during the boom periods a few years ago now being delivered worldwide, often going straight from shipyard into lay-up (storage), there is no denying that excess tonnage far exceeding demand exists afloat and in new building yards, mainly in the Far East. Read: China.

M2M Management Ltd, a hedge-fund group, had to actually pay a charterer to use its Capesize bulker (that's a capacity of over 100,000 tonnes) to move coal from the Asia-Pacific region to the Atlantic Europe region. Something like you and I being paid by a car-rental company to hire a chauffer-driven car-and all we pay for is the actual-stuff like insurance, fuel, parking and tolls.

So why, then, are the fluctuations in ocean freight rates so important to the world's economy? The answers are complicated, but here are a few reasons that try to explain the larger 'macro' picture.

Alan Greenspan used to, famously, watch the shipping freight indicators as a means to predict future trends. Today, it is simply not so easy-smaller ships, like Panamax and Handy Sized bulkers, for example, command better freight rates than do the larger Capesize bulkers.

Piracy surcharges and insurance rates, as well as costs of providing security, are loaded directly on to the shipper. Oil-pollution indemnities running into billions of dollars are covered under conventions and funds which are-you guessed it-pulled out of the pockets of the rest of the world.

Simultaneously, with prices for commodities of all sorts going through the roof, insuring cargo and carrier has become another money-spinner. Even fuel prices have to be hedged-so there are fuel surcharges and then there are further insurance covers on the fuel in the bottoms, and the environmental risks from them.

What fun. But freight rates in the negative? For some reason, ship-owners don't seem too perturbed. And justifiably so-large parts of the world's fleet are now owned and controlled not by ship-owners-but their banks and insurance companies. Who then will give those ships back to the ship-owners to operate these vessels?

So, it's the rental car for negative sums vaalaa example again-the guy who owned the rental car company has now become an employee on sub-contract in what is now owned by the bank.

Is shipping, then, about to become a game, where the ship itself is operated at a notional loss so that the owners, who increasingly are in hock to the banks and insurance companies can actually make more money, but for the banks and those who back the banks?

That, actually, is not such a strange idea. Nor is it, for that matter, a fresh one.

Merchant shipping, till about a few decades ago, and most certainly in the centuries when the colonial powers went about conquering the 'New' Worlds, the 'Old' Worlds and also the unknown worlds, was by definition and actual truths, an extension of the red ensign, the ruler's sword and the religious evangelists.

Not to forget the financiers. Even today, the actual financial returns on owning and operating ships are not really anywhere close to what investors would make in other commercial ventures, especially those involving international trade.

The deeper reason for owning and operating ships internationally is today rapidly returning to dominance. That's from where the word 'dominion' was derived, incidentally, and rightly so too.

That's why 'domination' now rules the game. Consider the flow of information, for example, nobody knew better than the (dominant) ship-owner-who was in the thick of reality-on what was really happening in a far-off country. It was again domination that ruled the exchange of all sorts of commodities worldwide-salt for diamonds, slaves for gold, tea for opium, silks for cotton-and all the rest of it which we were not taught in our history books.

Today, the routes are the same, but the commodities have changed-they dominate the flow of large sums of money, it could be from the narcotics-oil-weapons triangle, via the other beneficiaries of 'hot' money, and there are no taxation standards or money-laundering processes which can even get close to trying to control ocean ship monetary conversion methods.

And the most important dominate, certainly, the 'National Interest'-where beneficial and despondent ownership are hidden behind layers of secrecy but end up in the clutches of a handful of countries.

Think of how 'National Interest' ensured that international entities like the Vatican, DuPont, IBM and Ford-amongst others-happily played both sides of the Allied and Nazi interests, till clarity was reached on which side would win-at which time National Interest quickly aligned itself.

So is the fact that a large ship is currently steaming across oceans at a notional loss any stranger than a similar expedition made by merchant ships centuries ago to "discover" and "conquer" other countries, in the "National interest"? Not really.

Look at it this way-it is now well-established that China controls the fastest-growing mercantile fleet, as well as the shipbuilding industry, worldwide. It is also known that many other "developed" countries are certainly not comfortable with such a situation-after all, what half-a-dozen merchant ships did and can do to change the political equilibrium of a distant "dominion", cannot be done with an armada of fighting ships. Even today. See China in Africa, for example.

Now consider a "what-if" scenario-what if "they" manoeuvred things in such a way that the banks and insurance companies made all the money, while the ship-owners and shipyards were bled dry? After all, 'they' control the banks and the insurance companies, so 'they' can certainly do so. Not very farfetched, and certainly in line with the way things were explained to me, and easy to understand if you also have a mosaic background as well as understanding of shipping and financial numbers.

Ocean freight rates are likely to dip even further in the days to come.

The eventual cost to a customer for transporting goods is not going to dip, however, by a long shot. What a strange thing. Not, actually, if you know the score.

Go back to the free rental car hypothesis laid out at the beginning of this article. Now put some numbers to it-a rental car that would cost, say, Rs1,000 a day, is now available to you for Rs50 payback to you. But the insurance and other sundry costs, not including high fuel costs, would be, say, Rs5,000 a day.

And eventually, the insurance company owns the taxi. Or ship.

Statistics can be explained so simply, that is, if you have a vivid imagination, and were always interested in the numbers that went around behind making ships move worldwide.

A pity about the rains in Australia, though, and the effect on their shipping. If it hadn't been for those ships that came from Europe a few centuries ago, Australia would have been something else. And their coal as well as iron ore would have been happily resting under the ground.

(Veeresh Malik started and sold a couple of companies, is now back to his first love-writing-and is also involved actively in helping small and midsize family-run businesses re-invent themselves).


Hike in petroleum prices was logical: IOC chairman

Mumbai: State-run refining and marketing major Indian Oil Corporation (IOC) on Sunday said the decision to hike oil prices was logical, as crude oil prices had skyrocketed in the international market, reports PTI.

“The current increase in the retail price of petrol was necessitated. Based on current price levels in the international oil market, the desired increase in the retail selling prices of petrol in New Delhi market should have been Rs3.72 per litre,” IOC chairman B M Bansal said in a statement.

IOC has chosen to soften the impact by increasing the price by Rs2.50 per litre only and not passing on the balance required increase of Rs1.22 per litre, Mr Bansal said.

Public sector oil companies on Saturday announced a Rs2.50 per litre hike in the price of petrol. Petrol at IOC filling stations in Delhi will now cost Rs58.37 per litre, up from Rs55.87 a litre.

This is the second hike in petrol prices in a month as crude oil prices have skyrocketed to $92 a barrel in the international market.

He said due to the persistent rising trend in the international oil prices, average prices of the Indian crude basket have gone up from $87.83 a barrel during the earlier petrol price revision in December to the current level of $92.31 per barrel amounting to an increase of $4.48 per barrel.

Owing to the substantial increase in oil prices, oil marketing companies are continuing to incur huge amounts of under-realisations on the sales of other petroleum products like diesel, PDS kerosene and domestic LPG, he said.

“Indian Oil is currently incurring an under-realisation of about Rs159 crore per day on the sales of these three sensitive products,” he said.



Shadi Katyal

6 years ago

Unless Govt takes its hand off and let the market and private industry compete, the price will be flucuting with World Prices. Only thing is that these go up and never come down when the oil prices fall.
One wonders how long the nation must suffer with such controls on every aspect of economic life.
Can anyone please explain what is EXCISE TAX as we see that an aspect of one of the taxes.???
Has anyone breakdown on how much taxes are involved in such imports and any breakdown will be helpful. I understand that thee is an import duety and excise duty and many others.

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