Intellectual Thoughts by Sanjay Panda: 2007

Rising Rupee hutrs exports- Pharma ( case -I)

The weakening dollar has taken a serious toll on India's pharmaceutical exports, which generate revenues estimated at around Rs20,000 crore and have been a key source of foreign exchange for the country.
Pharma exports have seen a drop of 20% in value during the April-June quarter with total exports, at Rs5,054 crore, not only missing the 14% growth that the industry had expected, but falling well below the year-ago period's Rs6,069 crore in export revenues. The quarter marked the first time in five years that pharmaceutical export revenues have declined. With the rupee, which has appreciated by 12% in the last six months, staying strong, India is likely to miss its export target for the year by more than 25%, predicts industry lobby, Pharmaceuticals Export Promotion Council, or Pharmexcil.

It's time for the industry as well as government to devise some mechanism to help exporters balance the revenue loss. It could be either an interest subsidy or an aid to explore non-conventional markets for encouraging non-dollar currency exports though it might not work in long run. Cipla Ltd, the largest drug exporter from India, says its export revenue in the first six months have shown a 10-11% decline due to a weak dollar.

Shifting the focus to other markets will not be of much help to these companies as majority of the export markets still trade in dollar terms. Though cost savings on imports and foreign spend would help balance the cost, a 12% rupee appreciation will remain an impact on their topline.
India's domestic pharmaceuticals market, valued at $8.16 billion (Rs37,528 crore then) in 2006-07 by sales, grew at an annual rate of 12.4% in the past five years even as exports grew at a higher rate of 20% to reach $6.15 billion. While the domestic market is expected to scale up to $14.5 billion by 2011-12 at an annual growth rate of 16%, exports were projected to increase much faster, at 35%, and reach $25 billion in the same period. That would have meant exports contributed some 63% to the sector, up from 43% in 2006-07, according to a previous projection by Pharmexcil.

The rupee-dollar equation is now expected to impact the industry beyond exports. Indian drug makers are anticipating potentially huge opportunities for their generics business outside the country as patents are set to expire on at least half a dozen blockbuster drugs by 2012. But they are unlikely to meet their revenue targets, despite massive capacities being built both in India and abroad, in part because of the appreciating rupee.

Malaysia- Truly Racist

For a country that abhors public protests and suppresses them with strict rules against illegal assembly, Malaysia has had two big demonstrations in Kuala Lumpur just this month. Two large street rallies within a month by Indian ethnic group may be a sign that the 50-year-old code defining the rules of engagement between the state and the minority ethnic groups.

The biggest source of discontent is “race” since the minority Chinese and Indian communities are disenchanted with economic policies that favor heavily to the majority Malays.

Free-trade talks with the U.S. and Australia have been delayed and the ones with New Zealand have had to be suspended primarily because Malaysia's policy of discouraging non-Malays “including foreigners” from bidding on government tenders is unacceptable to these countries. The same issue might also jeopardize a free-trade deal between the Association of Southeast Asian Nations of which Malaysia is a member and the European Union.

When non malay ethnic groups protested against the preferential treatment for Malays in every walk of life they were brutally harassed & supressed. Malaysia must give give equal rights and equal opportunity to all her citizens irrespective of their race. Unless that happens Malaysia must be isolated from all the global forum including trade and investment. As of now it seems “Malaysia is not truly Asia but truly racist”.

FIIs may face tougher entry norms

The finance ministry of Govt of India, wants to restrict investments by foreign institutional investors (FIIs) from countries whose market regulatory structure is not compliant with principles laid down by the International Organisation of Security Commissions (IOSCO).

Drawing from the Ashok Lahiri committee recommendations, the ministry, which had earlier asked Sebi to prepare a negative list of tax havens, has asked the regulator to prepare a list of non-IOSCO jurisdictions. This move by the ministry may lead to a blueprint for FII investments in the country. Sources said it was important to ensure that an entity investing in India was regulated by a credible regulator back home, which followed internationally-accepted principles of due diligence. A country becomes a tax haven only because of a favourable double taxation avoidance agreement with India. A tax haven can lose its status with changes in the tax treaty.

While a country which is not a tax haven may not necessarily have a robust security markets regulatory structure in conformity with global best practices, a tax haven, in some cases, could follow global best practices in its security market regulations.

The Spain-headquartered IOSCO is the international standard-setter for securities markets with its norms applicable in more than 90% of world’s securities markets. All IOSCO members have to sign a memorandum of understanding, follow the principles endorsed by the body and facilitate exchange of information among the international community of securities regulators.

The organisation follows a comprehensive methodology which enables an objective assessment of the level of implementation of the IOSCO principles in the jurisdictions of its members and the development of practical action plans to correct identified deficiencies.

The body aims at facilitating cross-border co-operation, reducing global systemic risk, protecting investors and ensuring fair and efficient securities markets. It has 109 ordinary members, 11 associate members and 63 affiliate members.

Incidentally, market regulators in some popular tax havens including Mauritius, Cyprus and British Virgin Islands have MoUs with IOSCO. The majority of the foreign investment into the securities market in India comes from Mauritius because of the existence of a favourable tax treaty between the two countries. While Sebi is an associate member, Forwards Markets Commission of Mauritius is an ordinary member of IOSCO which was set up in 1983.


Investors pull out $2.1 bn from BRIC funds

Stock market volatility forced investors across the world to pull out five billion dollars from emerging market equity funds last week, including over two billion dollars from funds focused on four BRIC Markets.

China accounted for more than half of the total outflow from BRIC funds, while India, Russia and Brazil together shared the remainder, according to international fund tracking firm EPFR Global.

"With sub-prime and global credit fears being fuelled by almost daily news of fresh write-downs in the financial sector and evidence mounting that the US Economy will slow going into next year, investors retreated from equity funds during the second week of November and shifted to the relative safety of money market funds," EPFR said in its weekly report.

During the second week of November, emerging market equity funds reported a net outflow of 5.58 billion dollars, while those focused on developed Markets saw an outflow of 5.07 billion dollars.

Nearly all the outflow from the developed and emerging Markets appears to have been absorbed by the money market funds. According to EPFR, the money market funds recorded a net inflow of 10.1 billion dollars during the week, taking their total inflow since the beginning of August to 100 billion dollars.

"Money market funds currently offer two things that investors like. They are very liquid, which allows investors to move rapidly back into Markets where they see value, and most of them come with an implicit guarantee that you wont lose any money something that's very attractive in the current investment climate," EPFR Global Analyst Cameron Brandt said.

CII disputes growth claims of India

Contradicting the growth numbers given out by the government, industry body Confederation of Indian Industry (CII) has on 11th Nov claimed that 17 sectors have recorded negative growth in the first half of the current fiscal."It is a matter of concern that more than 50 per cent of the manufacturing sector has recorded either moderate or negative growth," said CII Industry Council Chairman Satish Kaura while releasing the ASCON Survey conducted by the chamber.
Contradicting the government's claim that only one of the 17 industry groups (based on two digit NIC classification) recorded negative growth in April-August 2007, the survey said 17 out of 91 sectors showed negative performance during the first half of the year(April-September).The survey attributed low growth in various segments of manufacturing to rising interest rates, reduced credit availability and a strong rupee.

The Free Trade Agreements (FTAs) signed by the government with some of the countries in the last two years too have adversely affected manufacturing sector performance, the survey said, adding, "automobile industry, including motorcycles and three-wheelers, are amongst the sectors in the negative sales growth category."

The CII-ASCON survey further revealed that cement, energy meter, ball and roller bearing, polymer, utility vehicles, refrigerators, rubber footwear, bus and truck tyre etc have shown moderate growth, while fertiliser, machine tools, capacitors, motorcycles, edible oil etc are in the negative growth category.The official Index of Industrial Production (IIP), however, had said that only metal products and parts (except machinery and equipment) showed negative growth during April-August 2007.

According to the CII ASCON survey, out of 91 sectors, 15 sectors reported excellent growth rate of more than 20 per cent, 22 sectors recorded high growth rate of 10-20 per cent, 37 sectors posted moderate growth rate of less than 10 per cent and 17 sectors reported negative growth.The percentage of sectors in excellent and high growth category declined, while that for the moderate and negative category increased over the period April 2007 to June 2007.

Scooters, mopeds, electric fans, sponge iron, circuit breakers and transformers were in the excellent growth category, while those in the high growth segment included asbestos, cement pig iron, power cables, industrial valves, textile machinery, transmission line towers, air conditioners and microwave ovens. As regards exports, the survey said, five sectors have shown excellent growth, five sectors revealed high growth, eight sectors registered moderate growth and five sectors registered fall in exports.

Exports of cement, ceramics, mopeds and rubber goods fell during the first six months of the current fiscal, it added.Machine tools, air-conditioners and motorcycles registered excellent growth performance, while those in the high growth category included vehicles, three-wheelers, industrial valves and cold rolled steel, the survey said.

Indians most optimistic on economy: McKinsey

Business executives in India are the most optimistic across the world when it comes to their take on the overall economy and inflation over the next six months, according to a survey by McKinsey.According to the Economic and Hiring Outlook survey by McKinsey for the latest quarter, 77% Indian executives said they think the economy would get ‘better’ in six months. This is the highest for the executives from any other region including China, Europe, North America and other Asia-Pacific nations.

The optimism level of 77% in India is considerably higher than the global average of 36% and the Asia-Pacific average of 46%. In China, 65% executives said they expect the country’s economy to improve in the next six months, while it was just 26% in North America. On inflation, 19% Indian executives said they expect it to decline in the next six months, which was the highest for any other region and significantly above the global average of 9% and Asia-Pacific average of 4%. In China, 13% said they expected inflation to moderate.

Just 27% of the executives in India said they expect inflation rate to increase in the next six months, which was the lowest in the world. It was the highest in China at 71%, while the global and Asia-Pacific averages stood at 39% and 52%, respectively.The survey found that around 53% Indians expect inflation to remain unchanged - higher than the global average of 51% and 43% in Asia-Pacific.

"More than half of the respondents expect inflation to remain stable over the next six months. That pattern holds even in India where three months ago, only a fifth of the respondents expected inflation to remain stable, but more than half currently do," McKinsey said.


Mid Term policy review- Copious foreign flows

The surging capital inflows continue to pose a policy challenge for the Reserve Bank of India (RBI), as it undertakes its mid-term policy review on October 30, despite some measures taken to contain unregulated inflows. The central bank is unlikely to signal any easing of monetary policy with surplus liquidity in the system, as any lowering of interest rates at this point, could hold upside risks to inflation.The copious capital inflows have forced the RBI to mop up close to $43 billion of foreign exchange since April and $20.5 billion since September alone, to curb rupee appreciation. The rupee has appreciated by over 11 per cent against the dollar since January.

The Prime Minister's Economic Advisory Council had estimated that an increase in the forex reserves of the RBI of $26 billion in 2007-08 could be consistent with the current real growth of the economy, moderate monetary expansion ( 17.5 per cent) and a tolerable inflation rate (4 per cent). "In the current financial year up to early October 2007 itself, forex reserves have increased by over $50 billion and tackling this problem is the most crucial policy dilemma.Of the Rs 1,75,000 crore infused into the system on account of RBI's intervention in the forex market, the RBI has absorbed Rs 1,12,000 crore through issue of bonds under its market stabilisation scheme (MSS) and around Rs 31,500 crore through increase in cash reserve requirements, leaving Rs 30,000 crore of liquidity infused via interventions in the foreign exchange market still to be sterilized.

The central bank has in the last one year raised the CRR or the portion of deposits that banks are required to park with it, by 200 basis points to 7 per cent to absorb the surplus liquidity. The RBI in consultation with the government has also successively raised the MSS ceiling to Rs 2,00,000 crore.The outstanding MSS as of October 26 was around Rs 1,77,000 crore. Out of the margin of Rs 23,000 crore, the RBI will absorb Rs 11,000 crore under its MSS in the two days following the policy review.

The government, however, is not likely to hike the MSS ceiling further this year, considering the fiscal cost involved. At Rs 2,00,000 crore outstanding, the annual cost to the government is already around Rs 14,000. The RBI could by raising the CRR by 50 basis points, absorb another about Rs 15.000 crore.However, the RBI may not want to hike the CRR in the upcoming policy, instead awaiting further curbs by the government on capital inflows.

Sebi has imposed controls on use of participatory notes for investments in equities to stem surging capital flows and make them more transparent. These measures are however unlikely to have any significant impact on foreign portfolio inflows.The RBI Governor, in his speech at the Peterson Institute for International Economics in Washington earlier this month, said, "Risks from global developments continue to persist, especially in the form of inflationary pressures, re-pricing of risks by financial markets and the possibility of a downturn in some of the asset classes. Excessive leveraging has enhanced the vulnerability of the global financial system."

While, there has been a slowdown in credit growth to 23 per cent year-on-year, on October 12, from 29 per cent a year earlier, it is close to the RBI's projected growth of 24-25 per cent for 2007-08. With credit off take expected to pick up in the second half of the year, the RBI may not want to endanger the gains on inflation control front, by lowering either the repo or the reverse repo rate. The wholesale price index inflation stood at 3.3 per cent y-o-y for the week-ended September 29, though the consumer price index at 7.3 per cent, was seen hardening further. The high growth in money supply, at 21.8 per cent, is still above the RBI's target of 17-17.5 per cent. The concerns about overheating of the economy also persist against the backdrop of continued high growth in gross domestic product. According to the Central Statistical Organisation, during the first quarter of 2007-08, the real GDP grew by 9.3 per cent on the back of 9.1 per cent in the last quarter of 2006-07.


SEBI recommendations on P-Notes issuance

This paper sets out the proposed policy measures on Offshore Derivative Instruments (Participatory Notes).

With a view to monitoring the investment by FIIs through Offshore Derivative Instruments (ODIs) such as Participatory Notes (PNs), Equity Linked Notes, Capped Return Notes, Participating Return Notes etc., SEBI had prescribed reporting of issuance / renewal / cancellation / redemption of the ODIs on a monthly basis since October 2001. The figures submitted by the FIIs on a month to month basis showed an increasing trend.

In the latter half of 2003, a Technical Committee of SEBI Regulated Entities was constituted by the HLCCFM to examine the issues pertaining to P-Notes more closely. The Committee, comprising representatives of RBI, IRDA, SEBI and NSE met in October, 2003 and extensively discussed the issues like:

* Whether PNs should be allowed to be issued at all,

* Whether restrictive use of PNs is possible,

* Monitoring of compliance

* Phasing out of PNs that are non-compliant with new restrictions, etc.

The Committee, having examined the concerns raised by the participants, felt that while these issues and concerns would have to be addressed in the interest of the market, the measures taken should be practical, pragmatic, non-disruptive and enforceable without great difficulty. Recognizing that it may be difficult to enforce a complete ban on PNs, the Committee made certain recommendations which included issuance of PNs only to regulated entities subject to KYC requirements. The same was implemented through suitable amendment to FII regulations.

However, the year on year increase in ODIs, the anonymity that the ODI provides to the investors and the copious inflows into the country from foreign investors has been engaging the attention of the Government and the regulators such as the Reserve Bank of India and SEBI. This has been a topic for discussion in many fora such as HLCC and various committees set up by the Government/ regulators.

Current Scenario:
Currently 34 FIIs / Sub-accounts issue ODIs. This number was 14 in March 2004. The notional value of PNs outstanding which was at Rs.31,875 crores (20% of AUC [1]) in March 2004 has grown to Rs.3,53,484 crores (51.6% of AUC) by August 2007. The value of outstanding ODIs with underlying as derivatives currently stands at Rs1,17,071 crores, which is approximately 30% of total PNs outstanding. The notional value of outstanding PNs, excluding derivatives as underlying as a percentage of AUC is 34.5% at the end of August 2007.

Proposed Measures:
Following consultation with the Government, the following measures are proposed to be implemented urgently:

1) FIIs and their sub-accounts shall not issue/renew ODIs with underlying as derivatives with immediate effect. They are required to wind up the current position over 18 months, during which period SEBI will review the position from time to time.

2) Further issuance of ODIs by the sub-accounts of FIIs will be discontinued with immediate effect. They will be required to wind up the current position over 18 months, during which period SEBI will review the position from time to time.

3) The FIIs who are currently issuing ODIs with notional value of PNs outstanding (excluding derivatives) as a percentage of their AUC in India of less than 40% shall be allowed to issue further ODIs only at the incremental rate of 5% of their AUC in India.

4) Those FIIs with notional value of PNs outstanding (excluding derivatives) as a percentage of their AUC in India of more than 40% shall issue PNs only against cancellation / redemption / closing out of the existing PNs of at least equivalent amount.

Our real challenges lie at home - Internal security concerns

The internal security situation in India continues to remain a cause of concern for the Central/ state governments and all the citizens alike. Out of the many challenges we face at home, the internal security challenge is one of the key one. Violent incidents continue in some states of the North-East, particularly in Assam, Manipur and Nagaland. The ethnic overtones of violent acts in Assam are particularly disturbing. While the situation in Jammu & Kashmir has shown some overall improvement, apart from the bombings by the terrorists which are happening in several areas throughout India in regular intervals.

To control/reduce them we need better security forces, better in all senses, be it training, be it skills, be it equipment, be it resources, be it mobility or be it attitudes and the police forces should not be in control of the politicians. We need superior intelligence capabilities which can alert us to the impending threats. We need greater discipline, lesser politicisation and zero corruption.

We need to work with greater commitment for eliminating the threats posed by Naxalism. In the past that there are many dimensions to the problems of Naxalism. Concerted efforts can be made on the development front to remove any feeling of alienation, the security forces need to redouble their efforts to control the spread of this phenomenon.

Terrorism has become a global phenomenon of our times. In terrorist organisations, we face determined, committed and highly motivated adversaries working with evil design and evil intent. We need to go far beyond conventional responses in facing the severe terrorist threats. The government should work on many fronts — through dialogue processes, through development activities and through improved communication links — to tackle these problems.

Indian stock market- Has de-coupling happened???

Stock prices come tumbling down in the US, Europe and Asia, but Indian stock prices continue to climb, and the key indices are not far from their all-time highs. The financial and economic news gets from bad to worse in the United States, and the dreaded ‘R’ word (for recession) has begun to get used as the housing market tanks and employment numbers fall for the first time in four years. But Indian markets continue to bounce along, recovering by some 10 per cent from the trough it hit last month. Is it possible that the de-coupling thesis — which says that the Indian market will strike out on a different course from those in the west — is turning out to be true? If so, it would be a striking development, for until now the accepted wisdom was that the foreign institutional investors (FIIs) dictated, through their conduct, the direction of Indian stock prices. If they were investing, Indian prices went up; if they were selling, the prices fell. That no longer seems to be the case; or more correctly, the same institutional investors who are selling in other markets may be buying here. If true, that would mean, among other things, that as part of the “flight to safety”, global investors with a long-term outlook are looking for safe harbour in Indian bourses.

If these optimistic hypotheses are what explain current stock price trends in India, the underlying explanation can only be that the markets are responding to the strengths of the Indian economy. For one thing, the currency risk that is a standard element in emerging market assessments, is not the same any more as the rupee notches up gains against the dollar. But the more important reason is that the Indian growth story has so far been unaffected by the turmoil in global markets and its fall-out. The first-quarter GDP growth numbers have been flattering, industrial growth has maintained its tempo, and companies continue to do well. Exports have decelerated, but agricultural growth will be helped by the good monsoon. Such slowdown as has occurred so far has been on account of domestic factors, mainly the Reserve Bank’s response to the signs of overheating early in the year. Indeed, the onset of the sub-prime crisis in the US has helped India get rid of its problem of plenty, namely a flood of dollars that was adding to domestic money supply and making monetary policy difficult.

Of course, the current economic tempo cannot continue indefinitely; the July industrial production numbers are due this week and will give some pointers, as will the second-quarter corporate sales and profit numbers that will come early next month. But most analysts assume that even if there were to be a slowing of the current tempo, GDP growth in the year as a whole is unlikely to drop below 8.5 per cent — which would be very good going in a rocky global environment. What investors may not have fully recognised, though, is the full impact on corporate bottom line. For the moment, what seems to be true is that the hedge funds that have faced liquidity pressures overseas have been selling their Indian holdings, while long-term players among the FIIs have been busy picking up stocks. If this trend continues, the FII presence in the Indian market will have acquired a healthier hue as the role of the hedge funds gets diluted.


Yahoo Mail lets e-mailers text-message to phones

Yahoo Inc said on Sunday it was giving its e-mail users more ways to reach friends and online contacts by allowing them to trade messages with mobile phone users.The new e-mail-to-phone connection is one of the features the Internet media giant plans to add as it makes available to the more than 250 million Yahoo Mail users a new version of the world's most popular e-mail program in coming weeks.

Already this year Yahoo has been testing another feature that lets its e-mail users communicate using conventional e-mail or via instant messages using either Yahoo Messenger or Microsoft Live Messenger.( Gmail has the facility long back though..)

Yahoo is scrambling to make its services more relevant as many Internet users spend more and more time on social networks like MySpace, YouTube and Facebook and less time passing through portals like Yahoo, or Microsoft Corp's MSN.

The new version of Yahoo Mail gives users three options for communicating with contacts -- e-mail, online instant-messaging or text-messaging to mobile phone users. Users can switch between the three, depending on which is most convenient.

Initially, the text-messaging feature will be available to Yahoo Mail members in the United States, Canada, India and the Philippines. To text a friend, users simply enter a mobile phone number, type a text message in Yahoo Mail and hit send.

Yahoo Mail had 254 million users in July, according to audience measurement firm comScore Inc, while Microsoft Windows Live Hotmail had 224 million. Yahoo Messenger was used by 93 million in July.

Existing users will be prompted to upgrade, although users of slower dial-up connections or those comfortable with Yahoo's 'classic' e-mail can continue to use the older version.

The key difference with the older e-mail program is how the new service lets users 'drag and drop' e-mail into folders, speeding the time it takes to sort through incoming messages.

Search features are also improved, allowing Yahoo Mail users to narrow results to find a specific sender, folder, date, attachment type or message status. So a search can, say, find all photos in Yahoo Mail tagged with a person's name.

Powering the future,- Alternate energy

Once dismissed as kooky ideas spawned by impractical environmentalists, alternative energies are now part of the energy plans and policies of most nations. “Governments all over the world recognise the importance of renewable energy as fossil fuels are finite,” & now aggressively planning investments in renewable energy projects. “Worldwide, the renewable energy industry is growing at 20-30 per cent per annum. Demand exceeds supply in some sectors such as wind energy, and companies are generating returns in excess of their cost of capital.

Fifteen European Union nations, including Spain and Germany, who are world leaders in renewables, have committed to generating 20 per cent of the energy using alternative technologies by 2020. India has also put in place several renewable initiatives and the country is now the world’s fourth-largest generator of wind energy with an installed capacity of 7,093 MW.

Entrepreneurs are venturing into solar power because of the phenomenal growth potential. The United Nations Environment Programme Report (2007) states that renewable energy projects received a record $100 billion (Rs 4,40,000 crore then) in investment in 2006, up from $80 billion (Rs 360,000 crore then) in 2005. Interestingly, venture capitalists are now some of the biggest investors in alternative energy, and their track record of almost single-handedly creating the computer and bio-technology industries is also boosting the industry’s prospects. With glaciers melting, weather patterns changing and the hole in the ozone layer getting larger, western public opinion is increasingly pushing politicians to search for greener energy. In Asian countries such as India and China, there are also more mercantile reasons to follow suit.

India currently produces 130,000 MW of energy a year and this figure will need to double within the next decade. The cost of building the mostly coal-fired plants slated to produce this energy will be a staggering Rs 5,34,000 crore. The environmental and health costs will be even steeper. India is already the world’s fifth-largest polluter, and hospitals across the country are reporting sharp increases in lung and breathing problems, from asthma to cancer. India’s oil bill has also shot up from $7.5 billion (Rs 26,250 crore then) in 1996 to a whopping $50 billion (Rs 2,20,000 crore). By 2010, when Indian consumers are estimated to own 15 million cars, the country’s oil consumption will be twice today’s 2.1 million barrels a day, the US Energy Information Administration says. With global oil production barely 1 million barrels over the global consumption rate of 81 million barrels a day, the surge in demand from India (and China) could eventually lead global demand to outstrip supply, causing fuel prices to shoot up to $100 a barrel. This could cause India’s oil bill to quadruple to $200 billion a year by 2025! More significantly, India will be the only major economy in the world other than Japan importing 90 per cent of its oil needs, a strategic lacuna.

So why hasn’t the alternative energy revolution already happened? Until, recently, the technology just wasn’t there and the cost of producing a MW of wind or solar power was up to five times that of fossil fuels. Now, the costs are evening out, but the challenge for the alternative energy industry is to achieve the scale necessary to become competitive. Standing in the way of this is the powerful oil and gas lobby, which has consistently tried to tie down the alternative energy industry like a bonsai tree. There are only two ways of combating the environmental and human cost of using fossil fuels. “If the government levies an energy tax, like a tax on the pollution caused due to use of conventional energy, it can then try to cover the (environmental and human) cost. This is a rational option but not a social one, as the common man will suffer. The alternative is to provide renewable energy a privileged market: no taxes, zero interest rates, and a new tariff law.”

According to US media reports, the Bush administration, after a series of meetings with a group of energy industry representatives and lobbyists, drew up a controversial National Energy Plan, which doled out $33 billion in public subsidies and tax cuts to the oil, coal, and nuclear power industries. In India, the privatisation of oil exploration has also created a huge anti-alternative energy lobby led by oil companies such as Reliance, Essar Oil and Videocon, in cahoots with auto companies. A sign of their power came when New Delhi recently withdrew a Rs 1 lakh per car subsidy it was about to give the Reva, India’s first electric car.

More importantly, supporters of alternative energy insist that the “full cost” of using fossil fuels is hidden — and could even be higher than the cost of many alternative technologies — because the health, environmental, and defence costs associated with using fossil fuels are not built into their purchase cost. For example, The US-based International Center for Technology Advancement says a gallon of gasoline in the US that costs consumers about $3 (Rs 120) would end up costing the nation about $15 (Rs 600), if the full cost of the medical costs associated with treating people suffering from pollution-related illness, the economic costs of the days lost at work because of people ill with pollution-related problems, the cost of cleaning up the environmental damages caused by fossil fuels and astronomical defence costs associated with oil security were added up.

Given the oil and auto industries have more than a trillion dollars in revenues and have planned investments of nearly $50 billion by 2010, Governments are worry that hurting these industries could dampen growth and damage other industries, such as shipping and ports, steel, petrochemicals, auto ancillaries, and rubber. But supporters of alternative energy, say these losses would be balanced by the totally new industries renewables would create, in the same way that the IT revolution initially cost jobs and killed some industries, such as answering services, but went on to boost global growth.

Significantly, with renewable energy technology maturing and awareness rising, many consumers are sidestepping such policy conundrums and turning into early adopters of these technologies. Still, no alternative energy technology is even close to fulfilling its full promise. More than technological changes, consumers will have to change their attitudes and habits before alternative energy can become what it should — the only energy. Imagine mankind powered by infinite renewable energy. The benefits are driving governments, businesses and individuals all over the world to follow that dream. They know there is no real alternative.


The crisis of confidence

The old-fashioned financial system was like Old Maid, a parlour game once beloved of small children. The banks were like players, dealt hands from a pack of cards, which they swapped among each other. At the end, one player was left holding a lonely queen—a bad debt, if you will—and lost. Over the past few decades the game has changed. Securitisation has snipped the old maid into pieces; new faces, such as hedge funds, have joined the party, enabling the banks to distribute those pieces among a larger number of players. When the game is over, lots of players are left holding small losses instead of one player holding a big one.
During two exceedingly prosperous decades, that theory seemed to work just fine. But the swings in almost all financial markets this month have made dispersed risk suddenly morph into dispersed mistrust. The uncertainty has been magnified .Meanwhile, collateralised-debt obligations (CDOs), made up of clumps of those securities and laced with leverage, have become almost impossible to trade. So none of the players really knows how much he has lost. While this uncertainty lasts, investors are taking it out on the banks that peddled the securities by dumping their shares; and the banks are taking it out on those they sold them to by demanding more collateral on their loans. The banks have even grown cagey about lending to each other.
The doubts burst into the open on August 9th when central banks were forced to inject liquidity into the overnight money markets because banks were charging punitive rates to lend to each other. At first, the problems appeared more serious among European banks. The pain in America was concentrated in the largest hedge funds, including those run by Wall Street’s biggest name, Goldman Sachs. Increasingly, however, analysts worry about the exposure of American, Canadian and Asian banks.
On Wednesday August 15th shares in Countrywide Financial, a large American mortgage lender, fell 13% after an analyst gave warning of possible funding difficulties. Despite liquidity injections by the Federal Reserve on August 15th, the S&P 500 index fell 1.4%. The heavy selling spread to Asian and European stocks on August 16th.
Every crisis begets finger-pointing, and the blame now is falling on the rating agencies that helped structure these exotic instruments. Currently, they are guided by a voluntary code that aims to tackle potential conflicts of interest. The biggest is that the agencies are paid by the firms they rate. Rating CDOs was a profitable business.
If these securities are now downgraded, banks could be forced to offload lots of illiquid instruments into a falling market—one of the fastest ways to lose money yet devised. But if there are no buyers, banks may have to sell something else to shore up their balance sheets.
Something like this indiscriminate selling has been affecting hedge funds over the past couple of weeks. Faced with more demanding standards from their banks and investors, some have been forced to unwind positions in order to realise cash. That has led to unusual movements in debt and equity markets, which have only got some funds deeper into trouble. Quantitative funds have been hardest hit, as investment models that had made money for ages briefly proved worse than useless.
Since banks lend to hedge funds, any problems there quickly become their concern. On top of this, both Bear Stearns and Goldman Sachs have found that when funds bearing their name get into trouble the desire to preserve their reputations soon leads to a rescue. Sometimes risk is not as far away from the banks as it seems.
At the end of Old Maid as banks used to play it, the loser would take a big write-off and then everyone could start playing again. In the new version, the use of leverage means the game is being played with hundreds of packs of cards and by thousands of different players. Working out who has won and who has lost in this round will take a long time.

Sanofi Drug Hits New Hurdle With Indian Knockoffs

Sanofi-Aventis SA's "Acomplia" the weight- loss pill, linked to suicide, is becoming popular in generic form from India which may end the product's chances of ever reaching the U.S., where it has been delayed by regulators.

Cipla Ltd. and Ranbaxy Laboratories Ltd. are among six drugmakers exploiting a loophole in India patent laws, selling copies of the medicine under names like Slimona and Defat. The pills are sold without prescription for as little as 12 cents. Sanofi had predicted Acomplia would generate $3 billion a year. Sanofi's earnings have dropped for four straight quarters. The drugmaker is losing patent protection on older medicines such as the sleep pill Ambien. Sanofi withdrew its U.S. marketing application for Acomplia on June 29 after the FDA raised safety concerns.

Under Indian intellectual property law, pharmaceutical companies can use a process called reverse engineering to make drugs patented before 1995. The patent on Acomplia, which regulates hunger impulses, dates to 1994. Sanofi received approval to sell Acomplia in India in May, the same month as the generic-drug makers.

The Indian regulator approved rimonabant, or generic Acomplia, requiring patients get a prescription and medical advice on its risks. Those include depression and anxiety --side effects that were serious enough to prompt an FDA panel of advisers to reject the pill.

India is growing obese. Almost a third of women and more than a fifth of men living in urban areas are considered overweight, according to a government survey last year.

Obesity can lead to high blood pressure and diabetes, to which South Asians have a genetic predisposition. Indian men are three to four times more likely than East Asian, African American, Hispanic or Caucasian men to develop insulin resistance that leads to diabetes, according to a study last year in the Proceedings of the National Academy of Sciences.

Torrent Pharmaceuticals Ltd. started selling its version, Rimoslim, two months ago and aims to sell 100 million rupees' worth within 12 months. Rimoslim is an extremely affordable therapy for the masses.


Are India Inc`s global M&A's worth it?

Most of the big-ticket acquisitions made by Indian companies were through the leveraged buy-outs (LBO’s) route funded partly by private equity funds, financial institutions and, of course, through internal resources. It has to be borne in mind that for takeovers by India Inc worth several billion dollars, the outflow of dollars has been minimal. At the same time, the charge of the private equity funds and others on the profitability and assets of the merged or acquired company will be substantial, which has to be paid through the future profits or cash flow of the company.

The pertinent question is whether our corporations have overstretched themselves. First, we feel that India Inc is now in an unprecedented trajectory of growth, where it focuses on both domestic and global markets somewhat in a similar manner. The concept of a dominant leader in the domestic market will soon undergo a change thanks to a gradual reduction of the tariff wall. Sooner or later, imports are going to be cheaper than what they are now. That would mean that corporations, to stay in the race, should be competitive both domestically and internationally. The effort of India Inc to go global is not only symbolic of its strength and reach but also a calibrated policy to shore up its competitiveness by achieving economies of scale and scope.

Secondly, in many areas, especially in the knowledge-driven industry, we have to consolidate ourselves. Our IT majors are reckoned everywhere. Yet, their size and scope are small compared to Microsoft, Dell or IBM. The result is that many-a-time, we have to be content with the status of a vendor or sub-contractor to large American and European corporations. That stage should change and in certain areas, we can emerge as global players and prove our worth in executing high-end projects. M&As are the preferred route to achieve that position.

Thirdly, a paradigm shift is taking place in the image of India, which has been considered mainly as a supplier of goods and services, including software services. We have to emerge as a strong manufacturing hub, capable of producing high quality and price competitive manufactured goods. Slowly, we are making progress towards that. We are reckoned as a major player in steel, foundry, auto components and so on, thanks to some of the LBOs carried out in recent months.

That list has to expand and can be accomplished through the M&A route rather than by setting up greenfield projects in an alien land.

The flip side of the spectrum is what happens when there is a global recession? We cannot become a global player and also insulate ourselves from its fallouts. It is a cyclical reality. Fortunately, now India have enough foreign exchange reserves to bail us out in case of a global slowdown.


Free cash flow: Is it free after all?????

The best things in life are said to be free and the same holds true for cash flow! Investors love companies that produce plenty of free cash flow (FCF). It signals a company's ability to repay debt, pay dividends, buy back stock and facilitate the growth of business all important undertakings from an investor's point of view.

How and what of FCF
The formula for calculating Free Cash Flow (FCF) is as:

Net Profit + Depreciation - Capital expenditure - Changes in working capital - Dividend

FCF takes into account not only the earnings of the company but also the past (depreciation) and present capital expenditures, capital inflows and investment in working capital. Growing free cash flows are frequently a prelude to increased earnings. Companies that experience surging FCF due to revenue growth, efficiency improvements, cost reductions, share buy backs, dividend distribution (from subsidiaries) or debt elimination can reward investors in the future. Better free cash flows are therefore a reason for the investment community to cherish. On the other hand, an insufficient FCF for earnings growth can force a company to boost its debt levels. Even worse, a company without enough FCF may not have the liquidity to stay in business

From a companys point of view
A better FCF definitely indicates better efficiency on the part of the company. But what is pertinent for investors to note is that simply assessing the FCF on the basis of its absolute value is not prudent. It is imperative to also assess as to what components have contributed to the same.

Let us take a hypothetical example of two companies, A and B, both of which have garnered the same FCF for the current financial year.

Estimated free cash flow
(Rs) Company A Company B
Net profit 75 120
Add: depreciation / amortisation 20 5
Less: Capital expenditure 5 15
Add/ (Less): Decrease /(Increase)
in wkg capital
10 (10)
Less: Dividend 20 20
Free cash flow 80 80

Prima facie although appearing similar, if you delve a little deeper there is a stark difference in their performances. While company A, despite having lower earnings has benefited by adding back depreciation and decrease in working capital, company B has invested in capex and working capital. This indicates that while company B is investing for future growth, company A is not sufficiently geared up for the impending challenges. This also means that investors in company B can expect rewards in future while those in company A should sit up and take notice of what is ailing it.

From a sectors point of view
As explained earlier, cash flows are dependant on the capital expenditure and working capital liabilities borne by the company. This however, differs as per the dynamics of the sector in which the company is operating and should be seen in that light. While sectors like banking require minimum expenditure on capex (as a % of their turnover) those in pharma, engineering, FMCG or commodity sectors require to invest a substantial amount in R&D and capacity expansions.
To conclude...
FCF is not only a mirror image of the present but also a sneak preview into the future. The implications of the components of cash flow may not be explained in the annual reports, but is left to the investors prudence to diligently scrutinize the same and try to read between the lines. The legendry investor Benjamin Graham once said, The individual investor should act consistently as an investor and not as a speculator. This means that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase.

Free cash flow, is not free after all!

The educated terrorist

Doctors are supposed to heal, not kill. And architects are supposed to build, not destroy. But they have started doing just that. Mohammad Atta, the man who led the attack on the World Trade Towers, was an architect, and those who attacked the airport at Glasgow are doctors. This suggests that education is no longer a restraining influence on the use of violence. Indeed, amongst the many things that 9/11 demonstrated, the least commented upon or debated, relatively speaking, is the educated terrorist. Time was when it was only the semi-educated, brainwashed young man or woman who, wearing a belt of bombs, went and became a martyr. Not any longer. In recent years the world has seen several other instances of men and women whose education should tell them otherwise, indulging in acts of terrorism. It is instructive to examine the phenomenon.

In 2003, two Princeton economists, Alan Kruger and Jitka Maleckova, in an academic paper published in the Journal of Economic Perspectives, had said, with full support from cross-country data, that a lot of modern terrorism had nothing to do with poverty and income levels. In fact, their data showed that the suicide bombers of the Hezbollah were as likely to come from economically well-off families as from poor ones. There was also a 50 per cent likelihood of them being relatively well-educated. Similarly, members of the Israeli Jewish Underground, a terrorist group active in the late 1970s and early 1980s, were mostly well-educated and had jobs that were held in high esteem. Other studies of terrorist groups in different areas of the world, including the Red Army in Japan, the Irish Republican Army in Ireland and the People’s Liberation Army in Turkey, confirm this.

Two other economists, Charles Russell and Bowman Miller, who conducted one such study, say, “The vast majority of those individuals involved in terrorist activities as cadres or leaders, is quite well educated. In fact, approximately two-thirds of those identified terrorists are persons with some university training, university graduates or post-graduate students.” They also said that more than two-thirds of the arrested terrorists came from the middle or upper classes of their respective countries or areas. Yet another economist, Jessica Stern, who conducted a study in Pakistan, said that the madrasas are funded by many big industrialists. She also said that many of these schools trained their students to become part of extremist movements from a very early age. Thus, there seems to be little reason to believe that the alleviation of poverty and/or the education of more people will reduce the threat of terrorism. Why, they might increase it. It also seems to be the case that there is always a sub-set of the educated population that believes the end justifies the means, even if these are violent. This is not new. History is very revealing in this regard. There are scores of instances where highly-educated people have engaged in different degrees of violence and terrorism to achieve their aims. The best known was Vladimir Ilyich Lenin. A scholar in at least five languages, not including his mother-tongue, he had no qualms about using violence.

Closer home, India has had the likes of Charu Majumdar and Kanu Sanyal, the heroes of Naxalbari who enticed so many young men and women from even the stuffy Delhi University. Many members of ULFA are graduates; and so on. In the end, it would seem that some people, when they feel aggrieved at what they see as injustice, decide that violence is the answer. The problem is systemic and systematic injustice. When all else fails, violence becomes an attractive option. But is this option, really needed??? And who are to blamed fort his option ??। The indivisuals or society or who??.


Dishman buys Solvay fine chemicals

Dishman Pharmaceuticals & Chemicals has made another incursion into European assets by signing a memorandum of understanding to acquire the fine chemicals, vitamin D and vitamin D analogues business of Solvay Pharmaceuticals at Veeenendaal, Netherlands। The deal is expected to close within four months। Dishman added that the acquisition”will not only increase the basket of products of Dishman but also bring in new customer relationships”.

Indications are that vitamin D3 production will be transferred to India, thus bringing more fine chemicals expertise there, while the other products will remain in the Netherlands. For Solvay, the sale of the two businesses will enable it to focus more on its core areas of cardio-metabolic and neuroscience treatments.

More importantly, Dishman’s existing contract under to supply about 90 tonnes/year of the API for Teveten (Eprosartan Mesylate), Solvay’s anti-hypertensive drug, will not change. The contract expires in December 2008, but can be renewed annually until its patent protection ends in 2013. Since an FDA inspection at its Bavla site in 2006, Dishman has been able to supply this API for use in the US as well as Europe.Separately, Dishman has announced the integration of another of its previous European acquisitions, SynProTec DCR of the UK, into CarboGen-Amcis.

SynProTec DCR specialises in process research and custom synthesis of pharmaceutical intermediates and has capacity of up to 4,500 litres for production of early phase APIs and large-scale intermediates. Griffiths said that capacity combined capacity will increase and material produced at SynProTec DCR can be further processed at CarboGen Amcis’s Swiss facilities.

Safety & driving: Driving in flood waters

  • If you live in an area where flooding may occur, move your vehicle to higher ground if flooding is expected. As well as the risk of damage to your vehicle by leaving it in a flooded area, it may also be a hazard or cause obstruction to emergency services.
  • Do not drive unless your journey is absolutely necessary.
  • If you have to drive in a flooded area take care. Do not attempt to drive through water if you are unsure of the depth.
  • Don't drive through fast-moving water, such as at a flooded bridge approach – your car could be swept away
  • Drive slowly and steadily to avoid creating a bow wave, and allow on-coming traffic to pass first.
  • Keep the engine revving by slipping the clutch otherwise water in the exhaust could stall the engine.
  • Modern vehicles are fitted with catalytic converters in the exhaust system. The catalyst normally works at high temperatures and may crack if it is submerged in water. Replacement catalysts are expensive.
  • The air intake on many modern cars is located low down at the front of the engine bay and it only takes a small quantity of water sucked into the engine to cause serious damage. All engines are affected but turbo-charged and diesel engines are most vulnerable.
  • Be considerate – driving through water at speeds above a slow crawl can result in water being thrown onto pavements, soaking pedestrians or cyclists.
  • If your car stalls, immediately abandon it and climb to higher ground. Watch your footing. Just six inches of fast-moving flood water can sweep a person off his or her feet.
  • Test your brakes as soon as you can after driving through water.
  • If the vehicle has been stood in the flooded area for any prolonged period contact your local dealer for further advice.
  • If the vehicle has only been in a flood for a short period, drive with extreme caution and take the car to be checked at the earliest opportunity.

Loosing battle- The patent issue

The global pharmaceutical giants are increasingly getting drawn into a tangle of expensive legal challenges and strong opposition from governments of developing countries over safety of drugs and patent protection they have been enjoying for years.
These governments are also being pressurized by several patient groups and social organizations to take tough stand against pharmaceutical giants over monopoly prices. No industry is facing this kind animosity from its consumers and governments these days.
The crux of the issue is the pricing of patented drugs. Most advanced drugs for cancer, HIV, diabetes, cardiovascular diseases and neurological disorders are under patent and are blockbusters with very high price tags. As most of these life style diseases are also affecting middle class and poor people today their monopoly prices obviously come under public scrutiny. The governments of developing countries cannot ignore suffering of millions of their people afflicted by these deadly diseases when the drugs for such ailments are being sold at highly unaffordable prices.
This is exactly what has happened in Thailand & Brazil and is likely to happen in India too. The Thai government issued compulsory licenses on three drugs a few months ago. That allowed Thailand to import affordable, safe and effective generic versions of the patented drugs from other countries or produce them on their own through their Government Pharmaceutical Company. The first license was issued on November 29, 2006 for the HIV/AIDS medicine, efavirenz a patented drug of Merck and sold by the brand name of Storcin. This was followed by additional compulsory licenses on January 26, for the heart disease drug clopidogrel, a patented drug of sanofi-aventis which sells it by the brand name of Plavix and another HIV/AIDS drug, lopinavir/ritonavir sold by Abbott under the brand name Kaletra.
Thailand has made very clear to the global pharmaceutical industry that it will continue to break patents until prices for AIDS medication come down significantly. Thailand's action was followed by Brazil with the President signing a decree awarding compulsory licensing for efavirenz early this year. It is quite possible that India may also go for compulsory licensing route in case of Gleevec to make available this cancer medication affordable to several lakhs of Indian patients. Novartis is engaged in a court case over its patent.
Officials in India's health ministry are seriously considering this option in the wake of the widespread support to Thailand's steps and pressure from the public interest groups in India.Top pharmaceutical companies are furious over these developments. But they are helpless as powerful patient groups and NGOs in the US and Europe are also getting extremely vocal on monopoly pricing of essential drugs.
It is true that compulsory licensing is meant to be used only as a last resort and TRIPS allow it under limited circumstances, such as national health emergencies, and after lengthy efforts to negotiate prices with firms. And most of these life style diseases are hitting the populations like epidemics leaving no options to the governments but to act fast. That apart, a large number of patent claims for drugs are for incremental innovation. There is no justification for patent authorities to grant a 20-year patent when the product is nothing new in terms of efficacy and safety.
Ongoing patent litigations over Lipitor, Caduet, Gleevec and many others are over the novelty issue. The global pharmaceutical industry should therefore realize that their pricing of so called patented products need to be on the basis of realistic costs and reasonable profits. Otherwise, the whole edifice of patent system in pharmaceutical industry may collapse.
pharma Biz

Mylan to buy Merck Generics Unit

Mylan Laboratories Inc. agreed to buy Merck KGaA's generic-drug unit for 4.9 billion euros ($6.7 billion) in cash to become the world's third-largest maker of generics.The acquisition will create a company with 2006 sales of about $4.2 billion. Mylan has arranged debt financing from Merrill Lynch & Co., Citigroup Inc. and Goldman Sachs Group, Inc. Mylan beat a rival bid by Teva, according to several people familiar with the transaction. Darmstadt, Germany-based Merck is selling the unit to pay down debt for its $13.7 billion acquisition of Serono SA.

The purchase, the biggest in generics since Teva Pharmaceutical Industries Ltd.'s $7.6 billion takeover of U.S.- based Ivax Corp. in January 2006, brings to an end a four-month battle for the world's fourth-largest maker of generics. The price Mylan is paying is more than five times its own sales in the year ended March 2007 of $1.26 billion and more than its own market capitalization of $5.39 billion. The acquisition comes almost two years after Mylan's failed $4 billion bid to buy King Pharmaceuticals Inc., the Bristol, Tennessee-based maker of the heart pill Altace. Mylan in January completed the $560 million purchase of a controlling stake in Secunderabad, India-based drugmaker Matrix Laboratories Ltd., giving the U.S. company access to lower-cost labor and materials. Mylan was the third-largest seller of generic drugs following Teva and Sandoz respectively. Actavis, Stada Arzneimittel AG, Ranbaxy and private equity bidders including Apax Partners Worldwide LLP and Bain Capital LLC also vied for the Merck unit, according to people with direct knowledge of the process.

Global warming- Climate change

With climate change experts huddled in Bangkok over global warming, India is finally forming an experts committee that will look into this issue. The need for country-specific reports on this subject has increased after the United Nations Intergovernmental Panel on Climate Change (IPCC) confirmed earlier this year that the consequences of climate change have begun to show. The developed countries have stepped up their campaign for forcing the developing countries, such as India and China, to shoulder greater responsibility for reversing environment damage. This is sure to become a major issue when the emission reduction targets are re-negotiated for the new protocol on climate change that will succeed the present Kyoto accord once it expires in 2012.

Unless India is well-prepared with documentary evidence to present its case for continuation of emission reduction holiday, it will be caught on the wrong foot, as happened in the case of tariff reductions under the new global trade agreement, patenting norms under the trade-related intellectual property rights (TRIPs) for industrial products, and protection of plant genetic resources under geographical indications and other protocols.

Each time, our country & the thinktank had to take post-accord protective action after the global norms had already been laid down. What needs to be realised is that India is neither a major environment polluter (its contribution to greenhouse gases is merely 6 per cent) nor is it unmindful of its responsibilities. What is perhaps not duly appreciated is that India began promoting renewable energy sources by setting up an exclusive ministry of non-conventional sources of energy much before other countries thought of doing so. It is hardly surprising, therefore, that India has emerged as a leading player in the global carbon credit trading market.

Of the total 633 projects registered with the CDM Executive Board of the UN Framework Convention on Climate Change (UNFCCC), as many as 220—34.75 per cent—are from India. Notably, the bulk of these projects belong to the categories of energy efficiency and renewable energy, reflecting emphasis on the clean development mechanism (CDM). India, in its self-interest, must promote the CDM at a greater pace. But, unlike the developed countries, it has begun to industrialise in real terms only now and can ill-afford any obligation that will hurt this process at this juncture. It has, therefore, to tread with extreme caution when it comes to taking on the targeted emission reductions. What is important for India is to balance the need for development with that for containing the damage caused by climate change.

India's space mission

The flawless 11th flight of the Polar Satellite Launch Vehicle (PSLV-C8) of the Indian Space Research Organisation (Isro) is more significant than all its previous missions, though each one so far has marked a step forward in the country’s space capability. For one, the PSLV-C8 is the first purely commercial flight that has successfully put an Italian 352-kg astronomical satellite, called AGILE, into space orbit on a contract won against stiff global competition. In fact, Isro had to modify the standard configuration of the PSLV to meet the requirements of the low-weight AGILE, which, additionally, had to be placed in a low inclination orbit. For this, Isro had for the first time to do without the six solid propellant strap-on motors of the first stage and reduce the propellant in the fourth stage by 400 kg, compared to the previous PSLV flight.

Despite these design modifications, Isro has managed to recover the bulk of the PSLV cost, reckoned at around Rs 65 crore, by charging the Italian space agency a competitive price of $ 29,000 per kg. Indeed, the AGILE, too, is unique in certain respects. It is said to be the only European mission entirely devoted to high-energy astrophysics studies. Besides, it is the first satellite powered by commercially available, space-qualified rechargeable lithium-ion batteries.

As such, the country will now be viewed as a price-competitive contestant in the global satellite launch market, estimated at between $1.5 billion and $2 billion. Even if India manages to corner just 2 per cent of this market, as Isro hopes to do, it will mean substantial business in a wholly new sphere, and make Sriharikota the country’s first commercial spaceport. Considering the impeccable record of the PSLV—all its operational flights so far have been successful—and the deft design modifications to suit the customer’s needs, more orders are bound to be on their way for commercial space launches. In fact, since its first flight in 1994, the PSLV has accomplished several feats. These include launching eight Indian remote sensing satellites, an amateur radio satellite HAMSAT, a recoverable space capsule SRE-1, and six small satellites for foreign customers.
Amongst its most notable achievements is the launch of India’s exclusive meteorological satellite Kalpana-1 into geosynchronous transfer orbit. While undertaking a wholly commercial mission this time, Isro has also managed to use the spare capacity of the PSLV-C8 (which can carry a 1-tonne payload) for catapulting into space an advanced avionics module (AAM), weighing 185 kg, to test advanced launch vehicle avionics systems like mission computers, navigation and telemetry systems. Isro has so far been using mission computers developed in the 1990s. However, state-of-the-art navigational systems and computer aids have now become vital since it is the PSLV which is proposed to be used to launch India’s first spacecraft mission to the moon (Chandrayaan-1).

So great achievement & congrats to all the concerned personnel in ISRO

Pfizer Earnings Fall on Drop in Norvasc, Zoloft Sales

Pfizer Inc.'s first-quarter profit fell 18 percent and the drugmaker cut its 2007 forecast, as competition from cheaper drugs hurt two of its best-selling products, Norvasc for blood pressure and Zoloft for depression.Net income for Pfizer, the world's largest drugmaker, declined to $3.4 billion, or 48 cents a share, from $4.1 billion, or 56 cents, a year earlier.Revenue this year will be $1.2 billion less than Pfizer projected after an adverse court ruling accelerated generic competition to Norvasc, and sales of the inhaled insulin treatment Exubera missed targets, the company said. Zoloft also faces generic rivals. Pfizer has said it is cutting 10 percent of its workforce by 2008 to offset the lost revenue.

The impact of generic Norvasc, coupled with increased promotional spending around Exubera, are contributing to a greater decline.Pfizer shares fell 10 cents to $26.97 at 4:02 p.m. in New York Stock Exchange composite trading. The stock has risen 8.1 percent in the past 12 months. The shares have lagged behind the 14-member Standard & Poor's 500 Pharmaceutical Index, which has increased 20 percent in the past 12 months.

Revenue rose 6 percent to $12.5 billion on higher drug prices and an 8 percent raise in sales of its top-selling drug, the Lipitor cholesterol pill, the company said today. Profit excluding certain costs was 68 cents a share, beating the average estimate of 17 analysts surveyed by Bloomberg.

U.S. regulators today also favorably reviewed Pfizer's experimental HIV/AIDS drug maraviroc, according to documents posted on the Food and Drug Administration Web site. The agency staff report said maraviroc was effective and caused no unusual deaths A panel of advisers will recommend April 24 whether the FDA should allow the drug to be marketed.
Net income this year will fall to $1.30 to $1.41 a share from $2.66, before Pfizer sold its consumer unit, the company said. Excluding certain costs, profit will be $2.08 to $2.15 a share, lower than the $2.16 average estimate of 24 analysts surveyed by Bloomberg. Pfizer's January forecast was for $2.18 to $2.25.
The drugmaker will close two U.S. plants and five research centers in the U.S., Japan and France.
Lipitor sales rose 8 percent to $3.4 billion, beating the $3.1 billion estimated by J.P. Morgan & Co. analyst Chris Shibutani in New York.Prescriptions for Lipitor, which makes up about 40 percent of Pfizer's profit, have declined after cheaper, generic versions of a similar pill, Merck & Co.'s Zocor, became available last June and newer drugs, including Merck and Schering-Plough Corp.'s Vytorin and Zetia, have been gaining popularity.

Pfizer increased sales by raising the price 4 percent to 6 percent and offering fewer discounts, said Ian Read, Pfizer vice president of worldwide pharmaceuticals.Lipitor itself may lose patent protection as early as 2010 in the U.S. Pfizer is appealing a decision by a Canadian court to throw out its Lipitor patent. Lipitor had $800 million to $900 million in 2006 sales in Canada.
Sales of the two-year-old pain medicine Lyrica more than doubled to $395 million and sales of the smoking-cessation drug Chantix, approved in the U।S. in May, were $162 million.


Who pays for low rupee volatility?

The recent high volatility in the rupee market is likely to continue in the months to come. This is an outcome of the RBI running into its limits of sterilised intervention. As the cost of sterilisation rises, the pressure on the RBI to step away from purchasing dollars and pushing more liquidity into the system will grow. As the latest RBI bulletin shows, the biggest event on the monetary policy front in February was not the public announcements made by RBI officials. It was the currency trading done behind the scenes. The RBI purchased dollars worth $11.9 billion, thus pumping liquidity into the economy. In other words, the monetary tightening is largely lip service to the cause of fighting inflation. While firms and households will find their interest burden and credit contraction painful, it is unlikely that the rate hikes will do much to quell inflation unless the behind-the-scenes story of dollar purchases also aligns itself to the same effect.

Why should ordinary people pay the cost for exchange rate stability? Firms and exporters, who have foreign currency exposures and who would suffer if the exchange rate moves, should be encouraged to hedge their own risk। A vibrant currency futures market will help. The emergence of such a market in Dubai shows that the demand for such hedging instruments is strong. To provide low exchange rate volatility as a public good to them, paid for by the entire economy at high cost, is bad policy. Moreover, it is unsustainable, because firms and households who end up bearing the cost of ‘hedging’ on behalf of exporters are not going to endlessly accept this as a happy equilibrium state. Then argument is being made that the higher volatility in the rupee should be countered by greater capital controls which would reduce RBI intervention, its sterilisation measures included. To solve the challenges to monetary policy posed by the ‘impossible trinity’ through capital account restrictions will be a setback to reforms. India should be moving forward and developing financial markets that its globalising economy needs. It should not solve these problems by trying to go back to the past.hey will protest.


BASF sells Wibarco to Hansa Chemie

BASF has agreed to sell its Chemische Fabrik Wibarco subsidiary, which had been part of its Performance Chemicals division, to Hansa Chemie International, a Swiss-based holding company with stakes in a number of chemicals companies in Germany, Switzerland and the Netherlands। Terms were not disclosed. Once regulatory approval is granted, the deal should be completed in July.
Wibarco is based at Ibbenb├╝ren, northern Germany, and employs about 80 people, who will all transfer। It mainly produces linear alkylbenzene (LAB), a starting material for linear alkylbenzene sulphonate (LAS), an ingredient in most modern detergents.

BASF explained that it regarded Wibarco as non-strategic, because LAB is not fully integrated into its Verbund concept, although it remains a strong player in detergents and cleaners. Hansa, by contrast, will be able to integrate Ibbenb├╝ren into its surfactants value chain. It will add a new sulphation plant to the 37-year-old LAB facility at the site.

Dow Chemical May Become Takeover Target

Dow Chemical co, may become a takeover target even though Chief Executive Officer Andrew Liveris said he isn't interested in selling the largest U.S. chemical maker. Liveris fired executives Pedro Reinhard and Romeo Kreinberg yesterday for holding unauthorized talks with possible private- equity bidders. Shares of Dow jumped 2 percent yesterday, giving the company a market value of $44.1 billion. Shareholders may be open to a buyout. Dow had gained 8.5 percent in the 12 months before April 8, when the possibility of a buyout was reported in Britain's Sunday Express newspaper, trailing the 16 percent gain for the Standard & Poor's 500 Chemicals Index.
The shares trade at 10.8 times annual earnings, the lowest in the 13-member index, compared with 17 times for DuPont Co. and 37 times for Monsanto Co. Dow's profit excluding items, $3.82 a share last year, may drop to $2 to $3 a share by 2010. Sales totaled $49.1 billion last year.
U.S. buyout firms, including Kohlberg Kravis Roberts & Co., were joining with Middle East investors to prepare a takeover bid of at least $50 billion, according to the Sunday Express. Liveris, dismissed the report at the time, saying Dow had held no merger talks, and the board issued a statement saying it backed the CEO's strategy. The shares rose 4.9 percent nonetheless. The cost of five-year credit-default swaps on Dow debt more than tripled since February on investor expectations of heightened risk. Contracts on $10 million of Dow debt increased $1,000 today to $55,500, close to a two-year high, according to CMA Datavsion. Investors use credit-default swaps as an alternative to bonds to speculate on corporate indebtedness.

Kreinberg, yesterday denied the company's accusations that he held unauthorized talks with banks and foreign governments about a planned takeover, calling the claims unfounded and unsubstantiated.'' Reinhard, 61, was Dow's chief financial officer for 10 years. He said the two men were getting legal advice and declined to comment further.Dow spokesman Chris Huntley, responding to Kreinberg's comment, said, ``We have the information from a highly reliable source that would know what was going on, and who we have absolute confidence in.'' He reiterated Liveris's comments that the company has had no talks to be acquired.

A group of private-equity firms may offer to buy parts of the company, the Financial Times reported on Jan. 19. The stock surged 5.6 percent on March 15 on speculation Dow would combine assets with India's Reliance Industries Ltd. The Times of India said on Feb. 26 that Reliance may bid for Dow.

Dow may attract Middle East bidders that want to diversify away from oil and natural gas, Butler Wick's Batcheller said. The Express reported that at least half the financing for the KKR bid would come from investors in Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman.

The company's ratio of net debt to capital is 28 percent, a level that adds to its takeover appeal। Even if Dow isn't sold, the company may use the cash to expand production of faster-growing specialty chemicals.Other analysts said a takeover of Dow is unlikely. Goldman Sachs Group analyst Robert Koort said the premium a hostile bidder would need to pay for Dow wouldn't justify the returns, given that chemical profits are in a cyclical decline.