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Piramal Diagnostic wants to grow by snapping up smaller firms. But this strategy has not succeeded in India so far
Piramal Diagnostic Services Pvt Ltd (PDSL), the diagnostics service unit of Piramal Healthcare Ltd, is talking of acquiring small diagnostics labs across India in its quest for growth. However, the strategy of buying a large number of smaller players (called ‘roll-ups’ in the US) has not succeeded in India. PDSL may not be an exception. There are several problems with roll-ups in general and PDSL in particular.
The company made its last acquisitions in the year 2007-2008 and has been incurring heavy losses for the past three years. After that, the company has not shown any interest in expansion or acquisitions. In its annual report of 2007-2008, it had mentioned that it had acquired 16 new laboratories and completed a three-way merger between Rana Diagnostics, Dr Phadke’s Laboratories and PDSL.
PDSL thinks that there are 10 pathology labs across the country which fit in with its business model, and are ideal acquisitions to look at. It is betting at a minimum turnover of Rs5 crore through this route. Currently it has 135 service centres in the country. We will be surprised if the company succeeds in acquiring at least four out of these 10 that it is targeting.
“In the last two years, the company did not look at any acquisition because it wanted to consolidate its diagnostics business. It is now focusing on buying regional players,” said Sapna Jhawar, research analyst (pharmaceuticals), ShareKhan. “Currently, the company has acquired 20 path labs across the country. In the last two years, the company has not shown keen interest in buying the path labs. Ten is a big number for the company,” she added.
It may be recalled that Piramal tried to acquire Dr Lal’s Path Labs some years back but the deal did not work out. Indeed, Metropolis, the fastest-growing player in the diagnostics segment, is growing by continuously setting up its own laboratories in different parts of the country and even overseas. Metropolis started its operations in 1981 and has 50 plus state of–the-art laboratories across the globe. It is present in places like the UAE, Seychelles, Sri Lanka, Thailand and South Africa. According to various media reports, it is planning to add five more labs this year. Although it recently acquired a majority stake in Bengaluru-based RV Diagnostic Laboratory, Metropolis has grown primarily through its own new labs. It has made only 12 acquisitions in the past five years including a recent one.
There are several reasons roll-ups don’t work in India. First, there are often no sellers. A large nationwide player may believe that it has to only dangle cash in front of tiny players but very often, the tiny player may simply not like to sell out, because the business is not just a question of money but a life occupation.
Second, when a bigger player is looking at buying out a smaller unit, the cost of the property is also a major factor. A more preferred route is a franchise model, but that will yield lower profits for the bigger player.
Interestingly, while PDSL is talking of acquisitions, the business is running at large losses for the last three years. The losses it has incurred over the past three years were Rs3.54 crore (2007), which increased to Rs4.20 crore and Rs3.71 crore in 2008 and 2009, respectively.
According to a report by Pune-based energy group Prayas, the targets set by the National Solar Mission for 2022 are ‘unclear and challenging’ in comparison to the MNRE targets for 2009
The Jawaharlal Nehru National Solar Mission (NSM) was launched in January this year, to meet India’s power requirement and to address environment issues involved in power generation. However, according to a report released by a Pune-based energy group named Prayas, the targets set by the Mission are “unclear and challenging.”
Prayas Energy group, a Pune-based non-government organisation (NGO) actively working in the energy segment since 1990, recently released its report named ‘Need to Realign India’s National Solar Mission’. In the report, Prayas highlights that the NSM’s targets set for 2022 will be challenging given the abysmal solar power capacity that India was able to produce till 2009.
NSM has set 20 million solar lighting systems as its target for 2022 while India had 1.3 million solar lighting systems in 2009.
The report stated, “Achieving the grid-connected and off-grid solar capacity targets will be an enormous challenge given that even annual targets of NSM are several times more than the total installed capacity till 2009.”
NSM targets to achieve 20GW of grid-connected installed solar capacity and 2GW of off-grid distributed solar plants by the end of the 12th Five Year plan in 2022. As an annual target, NSM aims to achieve 331MW of grid-connected solar power and 66MW of off-grid solar power in Phase I (between 2010- 2013). The Indian government has sanctioned targets for Phase I, while the targets for Phase II (between 2013- 2017) and Phase III (between 2013- 2017) are to be fixed based on the achievements during Phase I, decline in solar energy prices and availability of international finance.
According to the solar power statistics for 2009 from the Ministry of New and Renewable Energy (MNRE), grid-connected solar power capacity was 6MW and off-grid solar power capacity was 2.4MW. The report released by Prayas pointed out that the NSM targets are quite challenging to achieve when compared to India’s 2009 solar power capacity.
In the solar-lighting segment alone, the target is hard to achieve. In order to achieve 20 million solar lighting systems, NSM would have to provide 4,250 systems every day till 2022. More details at:
There’s a high probability that the market rally will continue this week as well
The Sensex has been on a rally for six consecutive weeks now. From 15,915 on 6 February 2010, it has rallied to a high of 17,601 for the week ending 19th March.
The question that comes to investors’ minds is, how long will this rally continue? Will the seventh week also be an up-week?
A study by Moneylife has checked out the chances of the market continuing in the same direction for seven weeks once it has been on a rally for the previous six consecutive weeks. The study is based on weekly market data from 5 January 1990. Over these 21 years, there were 22 stretches when the Sensex was positive for six consecutive weeks. Interestingly, out of these 22 times, on 17 occasions, the Sensex has been up in the next week also. That is a high rate of 77% for the trend continuing in the same direction. This has a very strong statistical significance. It indicates a high probability that the rally will continue this week as well.
That’s encouraging for the bulls who still are betting big on the market. If that is so, today’s 167-point decline and a possible soft opening tomorrow morning will just be the decline investors have been waiting for to get into the market. Indeed, out of the 16 times the market has ended on a positive note for seven consecutive weeks, it has continued to rally for the eighth week as well. We will wait and see how the rally progresses.