Indian gaming Industry. Outlook

Indian gaming industry is estimated to be $30 million in 2005, according to Nasscom. By 2009, the Indian gaming development industry is expected to grow to $300 million, at a CAGR of 78 per cent.

The numbers, while impressive, hide an important fact. For close to a decade, gaming development in India has held immense promise. Unfortunately, it still continues to do so. In the same period, the IT services industry has grown at 32 per cent from $13 billion to $17.2 billion. In the past two years, the number of gaming development companies in India has gone from 14 to just 20. It is, in fact, one of the rare software-related areas where India has not yet been able to make a significant mark globally. Not for lack of trying, though.

Gaming companies like Indiagames, Mobile2Win and Dhruva Interactive have striven long and hard for success against huge odds: lack of a gaming culture and skilled professionals, low funds and some heart-rending near misses.

For instance, a chance meeting with gaming legend and Infogrames Studios (now Atari) co-founder Eric Mottet in December 1998 offered Rao, and Dhruva, an opportunity to make a mark on the global stage. Infogrames selected Dhruva to work on parts of the PC game version of the movie Mission: Impossible. For over a year, Dhruva worked on the project, but when the time came for its release in the market, Infogrames backed out. By that time it was gunning for the licence of Mission: Impossible II and the film’s promoters didn’t want to publicise the earlier movie.

Despite the disappointment, Dhruva did not falter but took the services path and ventured into product development.” Dhruva’s fortitude is symptomatic of the industry. Pitted against the might of the Americans, Koreans and several others, and the general apathy of the Indian authorities, the Indian gaming development community has only had its passion and will power to sustain it. And while it will still take a momentous effort to attain Nasscom’s projections, things are beginning to change on the ground. Slowly.

The prospects of the gaming industry in India has been bolstered by the entry of animation companies like DQ Entertainment, Animation Bridge, Paradox Studios, ColorChips, Toonz Animation and Ittina Studios.

Why animation companies like Toonz should enter gaming in a big way is not difficult to understand. For one, it is easy for them to tweak existing resources (employees with skills in animation development) to make capital of a new opportunity. For another, the industry is slated to grow at twice the pace of animation, both in India and globally .

For both animation and gaming companies, a major source of revenues is outsourced services. For instance, it takes $6 million-7 million to develop a PC game in the US, compared to just $0.5 million-3 million in India. There is also the matter of reducing development time. A PC or console game takes two years on an average to reach the beta stage.

It, therefore, made sense for game publishers to outsource development to low cost destinations. In 2000, companies like Microsoft, Electronic Arts, UBSoft, Konami, Activision and Take 2 Interactive outsourced select modules to small firms (with teams of just 15-30 developers) in countries like the Philippines, South Korea, Singapore, India, Taiwan and China. This lowered development costs and brought down production time to 18-19 months by leveraging on the global delivery model.

For the past two years, Indian companies have also been trying to move up to the next level by developing their own intellectual property. For instance, come early 2007 and console game Archie’s Riverdale Run will hit the market. Developed by India’s FXLabs Studios, the game would have undergone its entire development lifecycle — from concept creation to final testing — in India. DQ Entertainment has formed a joint venture with French studio Onyx Films to produce three animation feature films — Skyland, Night of the Child King and The Enchanted Boy —and develop games around them for $89.5 million. The first movie, Skyland, and its game version will hit the market in early 2008.

Then, the success of Hanuman (developed by Percept Pictures and Sahara India Group), India’s first local content animation blockbuster, has spurred gaming developers to explore the rich repertoire of Indian content. Bangalore-based Ittina Solutions is likely to launch titles for mobiles and PCs in the next couple of years. Mumbai-based Indiagames, Paradox Studios and Fantasy Labs are also betting high on local content development not just for mobiles but for PCs and console games.

As mobile mania in India keeps moving north (it is the world’s fastest growing telecom market), consumers have shown a surprisingly high propensity for value-added services like game downloads. Riding this momentum, mobile gaming is expected to constitute 70 per cent of the overall gaming market by 2009 (it’s at 53 per cent now), according to Nasscom. Gaming companies have already benefited. For instance, mobile gaming constitutes 60 per cent of DQ Entertainment’s gaming revenues, and 40 per cent of Dhruva’s.

In mobile gaming, local content has already made its appearance. Thiruvananthapuram-based Toonz Animation launched its flagship animation title Tenali Raman as a mobile game and licensed it to Tata Teleservices across the circles it is operating. Going further, the company intends to launch games titles like Geeth Mahabharat and Hanuman.

Mobile gaming is also seeing new players planning to display their wares. For instance, Virgin Animation & Comics India, a JV between filmmaker Shekhar Kapoor, self-help guru Deepak Chopra and Virgin’s Richard Branson, has firmed up plans to venture into mobile gaming. Sharad Devarajan, managing director of the firm, says, “Our first phase into gaming would be through the mobile platform by end-2006, followed by other access platforms. Mobile gaming may be growing fast, and may constitute a large chunk of the industry’s revenues, but the margins for developers are wafer thin. For instance, a premium mobile game can be downloaded for Rs 150, and a standard one, Rs 50 upwards. Margins for these games can be 20-25 per cent for game developers. Indian telecom operators like Reliance have even introduced price-per-session concept, where a game could be priced as low as Rs 2 and Rs 4 per session. On the other hand, games on PCs and consoles come at a minimum Rs 350 and Rs 600, respectively. Premium PC and console games could get you down by Rs 2,500 and Rs 3,500, respectively. And margins, at 40-60 per cent, are healthy. Says FXLabs’ Garcia, who was one of six professionals who started GameStudio at Microsoft: “PC and consoles are attractive markets over mobiles both in terms of margins and to experience the game’s liveliness.” But while margins are healthy, PC and console games are far more expensive to produce. So, it may take even more time before Indian companies make a mark.

If there’s one thing that can wreck the aspirations of this budding industry, it is a shortage of skilled people. The problem has been around for ages, but not much has been done about it. India has 4,000-odd game developers right now. The demand is for 10,000 professionals in animation and 2,000 in gaming. Governments in states like West Bengal have initiated training programmes, but they produce just about 100 professionals a year. In comparison, Korea has about 60 colleges dedicated to animation education and has a game academy producing 250 professionals a year. (In 2005, it had 25,000 professionals.)

Then, the Chinese government is expected to spend up to $240 million to finance domestic game development over the next three years, according to Piper Jaffray, an investment bank and institutional securities firm. There is no such commitment from its Indian counterpart. Some companies are trying to make the best of the situation by setting up in-house training divisions. They are also trying to work with state governments to design a curriculum for gaming development. For instance, Toonz-Webel Academy in Kolkata is an animation school set up by the West Bengal government with Toonz Animation. The National Institute of Design, Ahmedabad, is also slated to introduce a game development course. Still, these efforts are far short of what is needed to propel the industry into the global league.

This is not to say that there is no hope. There is, but it will take a concerted effort from all parties involved. Of course, Indian consumers can change things themselves. Their growing numbers will give gaming companies reason to smile.

Pharma- The biogenerics opportunity

The 30-year-old biologicals industry is over $50 billion in size. At 15 per cent growth rate, it is also the fastest growing category of drugs in the global pharma market. Of course, conventional pharma, at $500 billion, is 10 times as big, but it is growing at about 8 per cent.

Today, biologicals present another opportunity for Indian pharma — in the form of biogenerics (also called biosimilars) or generic copies of biologicals.

Here’s how. In the last few years, new filings of conventional drugs have shrunk. So, there are fewer drugs to make copies of. Stricter regulations, higher failure in clinical trials, and longer time taken for approval of generics are other dampeners. Meanwhile, development of new biologicals has been on the rise. Besides, biologicals worth $14 billion are expected to go off patent by 2010. While insulin and erythropoietin are already off patent, products like interferon (Schering-Plough, Biogen) and granulocyte colony stimulating factor or G-CSF (Amgen) are scheduled to go off patent soon.

Even assuming a 50 per cent price erosion (since biopharmaceutical companies, creators of original biologicals, slash prices at the first sign of a biogeneric), it is a $7 billion-$9 billion opportunity for generic players. And, unlike in conventional pharma, Indian companies are on par with global ones to make good of this opportunity.

Roadblocks Galore

Cracking biogenerics is easier said than done, though. First, programming microbes to secrete a specific drug is much tougher than stringing together a group of chemicals to create a copy of a drug.This makes developing a biogeneric a more time-consuming affair (5-7 years) than a conventional drug (2-5 years). Also, controls over manufacturing conditions are far more stringent, leading to high investment.

But, perhaps, the biggest obstacle is that in lucrative markets like the US and EU, regulatory bodies (US FDA and EMEA or European Medicine Evaluation Agency, respectively) have not defined standard procedures for approving biogenerics, unlike conventional pharma generics. In a conventional pharma generic, provided you create the same molecule, and do a clinical trial to show that it works as well as the original, you are through.

In the case of biogenerics, biopharmaceutical companies contend that when the manufacturing process of a biological is changed, it may not be as effective or even similar. So, innovators’ data cannot be used to get regulatory approval. A biogeneric, thus, has to generate its own data through extensive clinical trials on far more patients before approval is given.

Fortunately for companies eyeing biogenerics, in 2005, EMEA defined a regulatory pathway for four biogeneric products — insulin, erythropoietin, human growth hormone (hGH) and G-CSF. The FDA, though, has approved only one — Sandoz’s Omnitrope (human growth hormone) — that, too, after prolonged litigation. But it has clarified that a standard regulatory pathway has not been defined for biogenerics.

All these factors have restricted pharma companies worldwide from getting into biogenerics. So, unlike the pharma space where western companies like Teva and Mylan had a headstart of more than a decade over Indian companies, in biogenerics all players are starting off on the same footing.

Revving Up Biogenerics in India

Mostly, Indian companies have preferred products that are relatively easier to make, like insulin or even erythropoietin. Few companies have chosen to tackle products like hGH and G-CSF, which are tougher to make but offer higher margins.

Things first started happening in the 1990s. First off the blocks was Dr. Reddy’s in 1994 (with a biologics department that was converted into a full-fledged division in 1999). It launched its first product, filgrastim (a G-CSF) in 2001, which was re-launched earlier this year in India and Brazil as Grafeel.

Then came Wockhardt in 1998. It launched its Hepatitis B vaccine in 2002, insulin in 2004 and erythropoietin in 2005. Also, in 2005, it created a separate division for biologicals R&D as well as manufacturing. They were followed by Biocon, which announced its plans for entering the market through insulin in 2002, and launched the product in 2005.

Strategy of Indian companies :

Dr. Reddy’s has chosen to focus on its areas of strength, oncology and related products, even in biologics. Brand building and marketing will be much easier because the products will move across the same channel. Wockhardt, on the other hand, is looking at products like insulin for India, developing countries as well as regulated markets. The strategy is to first enter the European market with products that have a defined pathway, and then look at the US once the pathway is clear.

And Biocon is initially targeting the biogeneric opportunity for its human insulin. The company is filing forapproval of its insulin in the regulated markets starting with Europe.Some companies, including Ranbaxy, are looking at taking biogeneric products developed by other companies and selling them in India and other less regulated markets. The idea is to take good products from small companies and use the bigger company’s marketing muscle to sell them. Some, of course, plan to eventually crack the US and European markets.

For instance, Concord Biotech, in Ahmedabad. Besides being the world’s only biogenerics company to manufacture all four immuno-suppressants, Concord also undertakes custom synthesis projects. In November 2005, Hyderabad-based Matrix Laboratories acquired majority stake in Concord. The products from Concord’s stable will be marketed in Europe through Docpharma (a generic company in Belgium that Matrix acquired last year) and then in the US.

Then, Ranbaxy has tied up with Hyderabad-based Zenotech Technologies to inlicense and market its products. Companies like Shreya Life Sciences, Intas, Cadila and Emcure also have well-defined marketing programmes. Shreya, which started as a distribution company in Russia and the CIS, is looking at products that can be imported and launched in India. Indus Biotherapeutics, a subsidiary of Intas, has developed human GCSF and recombinant erythropoietin for its parent. Cadila has launched Streptokinase under the brand name STPase. And Pune-based Emcure started by inlicensing biogenerics, and its current pipeline of products focuses on nephrology, oncology, cardiovascular diseases and gynaecology.

Brand Is The Key
Unlike generic pharma, in biopharmaceuticals, marketing is driven by brands simply because it is important for a company to establish that it has the capability to create a biogeneric successfully. Maximum value can be realised only from a finished formulation.” That’s because while raw material is cheap, the development process is long and expensive, making the final product almost as expensive as the innovators’. So, it makes sense to market under ones own brand name.

Aware that post approval, biogenerics will require extra promotion to sell in a new market, Indian companies are already setting up marketing front ends in Europe. Dr. Reddy’s plans to leverage its German acquisition, betapharm, to position its biogenerics in Germany and the UK. Others following suit include Ranbaxy in Germany, France, Belgium and Romania, and Wockhardt in the UK. Indian companies plan launches across the world. “India, rest of the world, Europe and the US, in that order. Wockhardt’s planned launch path is similar to Dr. Reddy’s.

so the race is on.

source BW

Acquisition & Merger - India's overseas acquisition spree

Indian companies are in an expansive, acquisitive mood. For example, Tata Steel, India's largest private-sector steelmaker, that it is on he process of acquiring Corus, a much larger Anglo-Dutch rival. If the deal came off, it would be worth several billion dollars, by far the largest foreign purchase ever made by an Indian firm. In the first three quarters of this year Indian companies announced 115 foreign acquisitions, with a total value of $7.4 billion, a huge increase on previous years, and almost as much as foreign firms have invested in Indian purchases.

The shopping spree spans industries from information technology (IT) and outsourcing to liquor. Wipro, for example, one of the country's big three IT firms, has this year acquired technology companies in Portugal, Finland and California. In pharmaceuticals Ranbaxy, an Indian maker of generic drugs, bought Ethimed of Belgium and Mundogen, the Spanish generics arm of GlaxoSmithKline. Bharat Forge, the world's second-biggest maker of forgings for engine and chassis components, based in the Indian city of Pune, has since 2004 bought six companies in four countries—Britain, Germany, Sweden and China. Suzlon, another Pune firm, which makes wind turbines, this year bought Hansen, a Belgian gearbox-maker. And United Breweries, a booze conglomerate from Bangalore, has made an unsolicited bid for Whyte & Mackay, a Scottish whisky distiller.

Behind this push overseas lies a combination of forces: a domestic boom; the availability of credit; a rush to achieve global scale; and a new self-confidence about Indian business's ability to add managerial value. India's economy is in its fourth successive year of growth at around 8%. In the first two quarters of this year GDP grew at rates of 9.3% and 8.9% respectively over the same periods in 2005.

With strong balance sheets, finance is not an obstacle. The stockmarket has been booming. Rupee interest rates, although they have been edging upwards for the past two years, are still, in real terms, at about half their levels of a decade ago. And, despite capital controls that place limits on external borrowings, India's big companies can raise huge amounts of money abroad. In August Reliance Petroleum raised the largest-ever syndicated loan for India, of $1.5 billion. Tata Steel is reported to have secured financing commitments of $6.5 billion for its putative bid for Corus.

Going global

That an Indian firm should even be contemplating borrowing so much for an acquisition shows how much corporate India has matured since 1991. That was when the government began to dismantle the “licence raj” of bureaucratic controls that had hobbled Indian business.

Tata Steel is emblematic of the successful parts of Indian manufacturing. It is known as the lowest-cost producer in the world. It is one of the firms that thrived in the more competitive marketplace that emerged in India after the 1991 reforms, and have since been able to take on the best in the world. What is noteworthy about many of them is that the root of their success is not India's obvious competitive advantage: its vast, low-cost labour force. In the IT and outsourcing industries, lower salaries for college graduates are an important reason behind Indian firms' rapid growth. But in manufacturing the stars tend to be experts in automated, capital-intensive production. Bosses who have flourished in such businesses in India, with its poor infrastructure and still-daunting regulatory environment, understandably feel confident that they have lessons to teach their new purchases in other countries. to be contd....