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Page 1: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest
Page 2: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest
Page 3: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Planning Commission, Reserve Bank of India, Aranca Research

Note: R&D - Research and Development

Eighth-largest R&D

investor

• In 2013, India had the world’s eighth largest annual R&D investment, accounting for 2.7

per cent of global R&D expenditure; this is expected to increase to USD44 million by 2014

from USD40 billion in 2012

Pharma sector driving

R&D growth

• India’s pharmaceutical industry, which accounts for about 1.4 per cent of the global

pharmaceutical industry in value terms and 10 per cent in volume terms, is expected to

remain a major R&D growth driver

Rapidly growing

overseas investment

• Cumulative overseas direct investments by India has expanded at a CAGR of 43.5 per

cent to USD183 billion during FY14 from USD21 billion in FY08

World’s sixth most

innovative country

• India stood sixth in terms of the most "innovative" country in General Electric's Annual

Global Innovation Barometer in January 2013

Page 4: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest
Page 5: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Growing demand

Source: R&D spending estimate by Battelle and R&D Magazine, Aranca Research

Notes: F: Forecast, IPR - Intellectual Property Rights, CoE - Center of Excellence, PPP - Public Private Partnership, TRIPS - Trade Related Aspects of Intellectual

Property Rights, NMITLI - New Millennium Indian Technology Leadership Initiative, F - Forecast, NIC - National Innovation Council

Robust demand

• Rising income and evolving lifestyles have led to higher demand for aspirational products

• Indian companies’ investments in R&D is not surprising given the importance of innovation to sustain competitive edge

Attractive opportunities

• Vast opportunities in IT, pharmaceuticals, automobiles, biotechnology and agriculture

• India is the largest exporter of IT products and has the third largest pharma sector with a fast growing contract research segment

Policy support

• PPP for promoting exchange of scientific knowledge and R&D

• Strengthening educational infrastructure

• Amendments to the Patents Act (1970) to make it TRIPS-compliant

• Setting up of NIC in 2010

• Adoption of Science, Technology and Innovation Policy 2013

High ratings

• Establishment of CoEs in various areas; NMITLI initiative on PPP basis

• Increased investments by private players; setting up of R&D centers

• During FY07–13, IPR applications increased at a CAGR of 11.8 per cent from 137,900 to 269,500

2013

R&D

spending:

USD42

billion

2014F

R&D

spending:

USD44

billion

Advantage

India

Page 6: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest
Page 7: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Zinnov, Korn/Ferry International, Asia-Pacific Research center, Stanford University, Aranca Research

Notes: TRIPS - Trade Related Aspects of Intellectual Property Rights, WTO - World Trade Organisation

• Indian Patents

and Designs Act

(1911)

• Dependence on

bulk imports

• Establishment

of CSIR, DRDO,

ICAR, ISRO and

IITs

• Patents Act (1970)

• Recognition of

process patents only

• Restricted foreign

ownership in Indian

companies

• Focus on ‘reverse

engineering’ among

pharmaceutical

companies

• TRIPS under WTO

(1995)

• Amendments to the

Patents Act (1970) to

make it TRIPS

compliant

• Reintroduction of

product patents

• Reduction in tariff and

non-tariff measures

• Easing FDI norms

• Shifting focus in

pharma towards

clinical research and

new drug development

Before 1970

Introductory Stage

1970 to early 1990s

Indigenisation Stage

Early 1990s to 2005

Liberalisation and

Transition Era

2005 onwards

Growth Era

• Augmentation of network of

centrally-funded institutions

and universities

• Increase in R&D and exports

in sectors such as IT, pharma,

electronics and automobiles

• Innovations in automobiles

such as Nano, the world’s

least expensive car

• Numerous innovations from

rural India

• Setting up of National

Innovation Council

• Adoption of Science,

Technology and Innovation

Policy 2013

• About 45 per cent of the Top

500 R&D spenders have a

center in India

Page 8: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Department of Industrial Policy

and Promotion, Aranca Research

Intellectual

Property (IP)

Patents

Trademarks

Geographical

indications

Industrial designs

Layout designs

Plant variety

protection

Copyright

Page 9: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Battelle, Aranca Research

Notes: GERD - Gross Domestic Expenditure on R&D,

R&D - Research and Development

Forecasted expenditure of world’s leading R&D

investors in 2014 (USD Billion)

In 2013, India was the eighth-largest country in terms of

R&D investments, retaining its 2012 position

It is expected to retain its eighth position in 2014, with R&D

investments increasing to USD44 billion from USD42 billion

in 2013

33

40

44

44

52

63

92

165

284

465

Brazil

Russia

India

United Kingdom

France

South Korea

Germany

Japan

China

United States

Page 10: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Battelle, Department of Science and Technology, Aranca Research

Notes: CAGR - Compound Annual Growth Rate;

PPP - Purchasing Power Parity, F - Forecast

R&D spending in India (USD Billion) India’s share of global R&D spending rose to 2.7 per cent in

2013 from 2.6 per cent in 2012 and is forecasted to be at

2.7 per cent in 2014

India’s R&D investment growth is likely to outpace overall

GDP growth. During 2012–14, R&D spending (in terms of

PPP) is expected to expand at a CAGR of 4.9 per cent to

USD44 billion, while GDP (in terms of PPP) would increase

at a CAGR of 4.4 per cent

The Planning Commission of India expects to double the

government’s R&D spending from the current 0.9 per cent

of GDP to 2 per cent by 2017

In developed and emerging economies, the ratio of private

and public sector investments in R&D is generally around

2:1. However, in India, this investment is lower thereby

indicating huge potential for private players.

40

42

44

0.84%

0.85%

0.85%

0.81%

0.84%

0.87%

38

40

42

44

46

2012 2013 2014F

R&D expenditure (PPP) As a % of GDP -RHS

Page 11: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Reserve Bank of India, Battelle, Aranca Research

Cumulative overseas direct investment

(USD billion)

Cumulative overseas direct investments increased to

USD183 billion in FY14 from USD21 billion

This has led to significant amount of technology transfer

through industrial acquisitions

For instance, Tata Steel’s takeover of Corus brought with it

more than 80 patents and 1,000 researchers

21 38

56

100 125

146

183

FY08 FY09 FY10 FY11 FY12 FY13 FY14

Page 12: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Department of Industrial Policy and Promotion

Aranca Research

Note: FY14* - Up to December 2013

Break-up of Intellectual Property Rights (IPR)

applications (FY14*)

During FY14*, the total patent applications stood at 186,000

Trademark applications accounted for the largest share (79

per cent) of total applications at 147,174 in FY14*

Patent and design applications accounted for 17.4 per cent

(32,425 applications) and 3.4 per cent (6,410) share,

respectively

17%

4%

79%

Patent

Design

Trade markapplication

Page 13: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Department of Industrial Policy and Promotion

Aranca Research

Note: FY14* - up to 31st December 2013

Intellectual Property (IP) applications (‘000) During FY07–13, intellectual property rights (IPR)

applications increased at a CAGR of 10.1 per cent from

137,913 to 246,240. There were around 186,071* IPR

applications in FY14

Trademark applications expanded at a CAGR of 11.1 per

cent over FY07–13 to 194,216. There were around

147,174* trademark applications in FY14

Patent and design applications rose at a CAGR of 7.1 per

cent each, during the same period

Growing IP application activity indicates increased in-house

R&D and innovation in India

0

56

112

168

224

280

0

50

100

150

200

250

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14*

Patent-LHS Design -LHS

Trade mark application -LHS Total IPR applications -RHS

Page 14: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

191

297

517

699

780 871

1,031

Pre 2000 2002 2004 2006 2008 2011 1H2013

Source: Zinnov Consulting, The Indian R&D Landscape, 2012 and Attrition,

Hiring and Salary Increase Study, 2013, Crossing the value chasm

Notes: CAGR - Compound Annual Growth Rate,

R&D - Research and Development

MNC R&D centers in India The number of MNC R&D centers in India has grown at a

CAGR of 14.4 per cent to 1,031 over 2000-13, with an

overall employment base of 244,000

Around 30 per cent of the top 1,000 global R&D spending

organisations have centers in India

MNC captive centers in India along with Indian providers of

engineering R&D outsourcing account for nearly 23 per cent

of the overall global engineering R&D outsourcing market

Most of the centers are located in metro cities – Bengaluru,

Delhi, Mumbai, Chennai and Hyderabad. However, MNCs

have begun spreading out to tier-2 cities after 2005

India’s robust talent pool of over 200,000 engineers has

grown at an average rate of 9 per cent over the last five

years; this has been supporting increased R&D activity

45 per cent of the world's top 500 R&D spenders invest in

India

CAGR: 14.4%

Page 15: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Zinnov Consulting, Attrition, Hiring and Salary Increase Study, 2013

Notes: CAGR - Compound Annual Growth Rate,

R&D - Research and Development, YoY- Year on Year

MNC R&D centers distribution in India (2013) Bengaluru (erstwhile Bengaluru) has 39 per cent of MNC

R&D centers, followed by Mumbai and Pune at 19 per cent

Until 2005, Tier-1 cities were the favorite destination for

MNCs due to the availability of rich talent, favorable

policies, and better quality of life

However, post-2005, MNCs have started expanding to Tier-

2 cities, as they offered benefits such as higher catchment

area, lower attrition, and cost arbitrage

Total R&D talent pool in 2013 stood at 244,000 having a 11

per cent YoY growth

Bengaluru 39%

Mumbai/ Pune 19%

Hyderabad 12%

NCR 13%

Chennai 11%

Others 6%

Page 16: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Financial Express, Value Notes, Aranca Research,

Notes: R&D - Research and Development, IT - Information Technology;

CAGR - Compound Annual Growth Rate

R&D outsourcing in India (USD Billion) R&D outsourcing has increased at a CAGR of 28.8 per cent

during 2003–13 to USD16.3 billion

Companies across sectors (such as IT, consumer

electronics, personal devices, medical electronics, telecom

and automobiles) are now offshoring complete product

responsibility

India has become one of the most preferred location for

engineering offshoring

By 2020, USD42 billion worth of work related to R&D of

product engineering is expected to be outsourced to India

1.3

16.3

2003 2013

CAGR: 28.8%

Page 17: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Zinnov - Crossing the value chasm

Note: R&D - Research and Development

Number of R&D centers for global 500 companies Only four of the top 50 global companies do not have R&D

presence in India, Apple being one of the four

The top 500 R&D spenders contribute over USD577 billion

with the top 100 R&D spenders alone contributing 66 per

cent to the global R&D spend

46

83

52 45 28 20

4

17

48 55 72 80

Top 50 Top 100 100- 200 200-300 300-400 400-500

Present Not present

Page 18: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Encouraging the private

sector

• The benefit of section 10 (23 G) of the IT Act has been extended to financial institutions

that provide long-term capital to hospitals with 100 beds or more

• Government is encouraging the PPP model to improve availability of healthcare services

and provide healthcare financing

Encouraging

investments in rural

areas

• The benefit of section 80-IB has been extended to new hospitals with 100 beds or more

that are set up in rural areas; such hospitals are entitled to 100 per cent deduction on

profits for five years

• Government has allocated USD550.81 million for agriculture research in Union Budget of

2013-14

Source: Union Budget 2013-14, Health Ministry, Aranca Research

Tax incentives • Customs duty on life-saving equipment has been reduced to 5 per cent from 25 per cent

and exempted from countervailing duty

• Import duty on medical equipment has been reduced to 7.5 per cent

Incentives in the

medical travel industry

• Incentives and tax holidays are being offered to hospitals and dispensaries providing

health travel facilities

Page 19: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Organisational websites, IP India, Aranca Research

Notes: R&D - Research and Development; IP – Intellectual Property

Organisation Business description

Council of Scientific and Industrial Research (CSIR)

• CSIR is India’s largest R&D organisation, with 39 laboratories and 50 field stations. In FY12, CSIR had over

1,872 active patents in India, 813 in the US, 328 in the EU, 147 in Japan and 829 in other countries

• It is engaged in scientific industrial R&D for economic, environmental and societal benefits for the country

• Its research areas span across aerospace, biotechnology, chemicals, energy, foods, information

dissemination, leather and metals, minerals and manufacturing etc.

• It has filed highest number of patents in FY2013

Defence Research and Development Organisation (DRDO)

• DRDO is engaged in design and development of weapon systems and equipment in accordance with the

requirements of the military services

• In 2012, DRDO had a network of 50 labs and establishments to carry out research. It has over 5,000 scientists

and about 25,000 other scientific, technical and supporting personnel

• Its research areas include aeronautics, armaments, combat vehicles, electronics, instrumentation engineering

systems, missiles, materials, naval systems, advanced computing, simulation and life sciences

Indian Council of Agricultural Research (ICAR)

• ICAR is one of the largest national agricultural organisations in the world. It consisted of 99 institutes and 53

agricultural universities across India in 2012

• It is the apex body for coordinating, guiding and managing research and education in agriculture, including

horticulture, fisheries and animal sciences in India

*This list is indicative

Page 20: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Organisation Business description

India Space Research Organisation (ISRO)

• ISRO is engaged in development of space technology and its application to various national tasks

• The organisation has 19 centers across India to pursue R&D activities

• Its research areas include communication satellites for television broadcast, telecommunications and

meteorological applications, and remote sensing satellites for management of natural resources

Indian Council of Medical Research (ICMR)

• ICMR is the apex body in India for the formulation, coordination and promotion of biomedical research and

one of the oldest medical research bodies in the world

• The council has a fleet of 21 institutes, six regional medical research centers and five units engaged in

medical research

• The council’s research priorities encompass the areas of communicable diseases, fertility control, maternal

and child health, nutritional disorders, and non-communicable diseases such as cancer, cardio-vascular

diseases, blindness and diabetes

Centre for Development of Advanced Computing (C-DAC)

• C-DAC is a premier R&D organisation of the Department of Information Technology (DIT)

• It is engaged in research in the areas of supercomputers, applied electronics, technology, applications and

health informatics

• CDAC has filed 16 patent applications in FY12

Source: Organisational websites, Aranca Research

Note: R&D - Research and Development *This list is indicative

Page 21: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Organisation Business description

Indian Institutes of Technology (IITs)

• It is a group of autonomous engineering and technology oriented institutes of higher education

• In FY13, IITs filed the highest number of patent applications amongst all the institutes and universities in India

with 205 applications

National Dairy Research Institute (NDRI)

• NDRI is engaged in research, teaching and extension activities in areas of dairy production, processing,

management and human resource development

• Its research activities focus on improving dairy productivity, innovating milk processing technologies and

disseminating information to the various stakeholders in dairy business to make dairying a self-sustaining

business

• In 2012, R&D activities comprised 71 in-house and 46 externally funded research projects, including 20 NAIP

projects in consortium mode with financial outlay of USD7.1 million

Indian Institute of Science (IISc)

• IISc is one of the earliest instances of PPP for a research institute in India

• It is engaged in research in various departments of science such as biological, chemical, electrical,

mathematical, physical and mechanical sciences

• In FY13, the institute filed the third highest number of patent applications amongst all the institutes and

universities in India with 31 applications

Source: Organisational websites, IP India, Aranca Research

Notes: R&D - Research and Development; IP- Intellectual Property *This list is indicative

Page 22: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Organisation Business description

The Energy and Resources Institute (TERI)

• TERI is engaged in developing solutions to global problems in fields of energy, environment and sustainable

development

• The important research areas include biotechnology, earth science and climate change, technology

development, social transformation, and modelling and economic analysis

Institute of Life Sciences (ILS)

• ILS undertakes basic and translational research in frontier areas of life sciences

• The institute’s research interests are in the areas of infectious disease biology, gene function and regulation,

and translation research and technology development

Indian Institute for Advanced Studies (IIAS)

• IIAS is a residential centre for advanced research in humanities, social sciences and natural sciences

• Its major research areas include social, political and economic philosophy; comparative studies in philosophy

and religion; education, culture and arts; natural and life sciences; and national integration and nation building

Source: Organisational websites, Aranca Research

Note: R&D - Research and Development

*This list is indicative

Page 23: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Organisation Business description

Hindustan Unilever Limited

• HUL is credited with innovations in product areas such as structured bar soap, fairness cream, zero alcohol

soap, poly-coated scouring bar for dishwashing, fortified salt, instant tea, critical components for a water

purifying device, and value-added (nature care) tea

• Worldwide, HUL has over 20,000 registered patents and patent applications

• The company filed 57 patent applications and was one of the top Indian patentees in FY11

Tata Steel Limited

• Tata Steel undertakes research in areas such as raw materials and coke, iron and ferro alloys, steel making,

coated products, materials characterisation and joining, materials modelling and product design, and

refractory technology

• The company filed 42 patents in FY12, taking its IP portfolio (filed and granted patents and copyrights) from 32

in FY2000 to 493

Cipla Limited

• Cipla’s R&D division focuses on new product development and new drug delivery systems across a range of

therapies

• In FY13, the company’s total R&D spending stood at USD71 million, a growth* of 31 per cent from a year ago

• In 2011, Cipla filed 260 patent applications across the globe of which 13 were filed in India

Source: Organisational websites, Aranca Research

Notes: R&D - Research and Development, Growth* - In terms of INR *This list is indicative

Page 24: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Reaper windrower

machine

• For easy and timely

harvesting of

soybean crop

• Prevents shattering

of soybean pods due

to non-availability of

labourers for

harvesting the crop

in time

Hand operated water

lifting pump

• For convenient

water-lifting at a

good discharge rate

and low cost

• The pump was built

in response to a

dearth of available

pumps that could be

afforded by small

farmers

Bamboo lathe machine

• For stripping off the

outer covering of

bamboo to develop

a smooth surface for

making interior

decoration and utility

items

• Reduces the time

and labour required

to do the job

manually

Pedal operated

washing machine

• For washing clothes

while exercising on

a pedal machine

• An affordable and

convenient way of

washing clothes in

rural India which

experiences

frequent power

shortages

Source: Rediff Business, Aranca Research

Page 25: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Times of India, Economic Times, The Hindu, Defence Now

Notes: ICBM - Inter-Continental Ballistic Missile, DRDO - Defence Research & Development Organisation, HSL - Hindustan Shipyard Limited

INS Vikrant

• India Indigenous

Aircraft Carrier (IAC)

• Total displacement

of over 40,000

tonnes

• Being built by

Cochin Shipyard

Limited

• To be inducted by

2014-16

Agni-V missile

• Successfully test

fired in April 2012

• India joined an elite

group of nations

having ICBM

technology

• Indigenously

developed by DRDO

• To be inducted by

2014-15

Arihant Class

Submarines

• With its launch in

2009, India joined

an elite group of

nations having

nuclear-powered

submarines

• Developed by HSL

Tejas

• Second supersonic

aircraft to be

developed

indigenously by

Hindustan

Aeronautics Limited

(HAL)

• To be inducted by

2015 at a cost of

USD103.1 million

Page 26: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest
Page 27: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Aranca Research

Note: R&D – Research and Development

Competitive Rivalry

• In a bid to discover the next block buster drug, competition between

the pharma companies are intense

• In addition, expiry of patents will also lead to further competition from

generic drug manufacturers

Threat of New Entrants Substitute Products

Bargaining Power of Suppliers Bargaining Power of Customers

• Huge R&D expenditure

requirement reduces threat of

new entrant

• Government regulation is

strict for this industry

• Bargaining power of suppliers

in this industry is high because

quality of products and timely

delivery matter and there is less

number of quality suppliers in

this industry

• Bargaining power of customers

is low due to undifferentiated

products

• Cheaper generic formulations

pose a threat to healthcare

companies

Competitive

Rivalry

(High)

Threat of New

Entrants

(Low)

Threat of

Substitute

Products

(Low)

Bargaining

Power of

Customers

(Low)

Bargaining

Power of

Suppliers

(High)

Page 28: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Aranca Research

Note: R&D – Research and Development

Competitive Rivalry

• High entry barriers due to the capital-intensive nature of the industry

has reduced competitive rivalry

• Entry of new players in the market has led to increased competition.

However, given the low success rate, rivalry is low

Threat of New Entrants Substitute Products

Bargaining Power of Suppliers Bargaining Power of Customers

• Capital intensive nature of

industry reduces the threat of

new entrants

• Strict government regulation

• Suppliers’ power is low

because the raw materials are

largely undifferentiated

• Individual buyers do not have

influence on pricing

• However, government price

control enhances buyer’s

power

• Patent protection stops the

threat of alternative drugs and

chemicals for a period of time

Competitive

Rivalry

(Moderate)

Threat of New

Entrants

(Low)

Substitute

Products

(Low)

Bargaining

Power of

Customers

(Low-Moderate)

Bargaining

Power of

Suppliers

(Low)

Page 29: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest
Page 30: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Company website, Aranca Research

Note: R&D – Research and Development

• Private players in the industry are making their supply chain efficient and leveraging

economies of scope to reduce cost. One such example is Narayan Hrudayalaya (NH)

where health care is provided at affordable cost. NH reduces cost by

• High procurement of medical supplies

• High-volume by high capacity utilisation and staff productivity

• Good human capital management (i.e. training)

• Leveraging the benefit of Information Technology to reduce cost and improve healthcare

delivery

• Developing new and innovative healthcare services will help players in differentiating

themselves from others

• Healthcare providers are also trying to provide better services to differentiate themselves

• Certain players in industry focus only on providing one kind of health care service to its

customers and gain expertise through research in the area. This also helps them to be the

leader in that service. One such example is Tata Memorial hospital which is focused on

treatment of cancer and provides leading cancer treatment in India

Cost leadership

Differentiation

Focus

Page 31: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Company website, Aranca Research

Notes: R&D – Research and Development,

* - Number is taken from an Panacea Annual Report 2012-13

• Higher emphasis on technological innovations that will improve efficiency and help in

achieving cost leadership. For example, Panacea Biotec has been providing innovative

vaccines at affordable prices across globe

• Investing heavily on R&D to create new and innovative products. For example, Biocon’s

strong commitment to research has enabled it to bring ‘first-in-class’ biologic drugs that will

change the treatment of psoriasis and other autoimmune diseases

• Companies are creating barriers by applying for patents to curb replication of the drug by

other manufacturer. For example, Panacea has been granted 400* patents in India and

worldwide

Cost leadership

Differentiation

Creating barriers

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Page 33: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Battelle, Electronics for You, Organisational websites, Aranca Research

Notes: PPP - Public Private Partnership, R&D - Research and Development, NMITLI - New Millennium Indian

Technology Leadership Initiative, CoE - Centre of Excellence, NIC - National Innovation Council

Policy support

PPP in R&D

Strengthening educational

infrastructure

Amendments to the Patents Act &

Setting up of NIC

Inviting Resulting in

Growing demand

Evolving consumer lifestyles

Liberalisation and increasing competition

Proximity to future

growth markets

Increasing investments

Establishment of CoEs, NMITLI initiative

Providing support to global projects from

India

Increasing corporate R&D investments

Page 34: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Aranca Research

R&D spending by top six pharma giant in FY13

(USD million)

India’s pharmaceutical market is highly fragmented, with

300 large and 18,000 mid-sized and small companies

The country’s pharma industry accounts for about 1.4 per

cent of the global pharma industry in value terms and 10 per

cent in volume terms

Indian healthcare sector, one of the fastest growing

industry, is expected to advance at a CAGR of 17 per cent

during 2011–20 to reach USD280 billion

This would help drive R&D growth in India; the average

R&D expenditure by Indian pharma companies is close to 6

per cent of total revenues

In FY13, total R&D spending by top six pharma companies

was USD560.9 million

142 141

83 78 69

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Page 35: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

PPP in R&D

• Exchange of scientific knowledge between research centers, national laboratories,

institutes of higher learning and the industry

• The Indian Government plans to involve the private sector in R&D mainly for sectors like

vaccines, drugs and pharmaceuticals, super computing, solar energy and electronic

hardware

• The Indian government has shell out a USD1.1 billion public-private partnership fund to

support research and development in India

Funded institutions and

foreign universities

• Increasing the number of Indian Institutes of Technology (IITs) to 16, establishing 3 new

Indian institute of Science Education and Research (IISER) and 30 central universities

• Foreign universities permitted to enter the higher education system in India by establishing

their own campuses or joint ventures with existing universities

• The Indian government allocated a sum of USD762.42 million for medical education,

training and research under the Union Budget 2013-14

Tax incentives

• The Indian government offers 200 per cent deduction for capital and revenue expenditure

incurred by manufacturing companies with in-house R&D

• Income tax exemption of 125 per cent to 175 per cent on donations made to universities,

colleges and other scientific associations

Source: Battelle, Electronics for You, Union Budget 2013-14,

Organisational websites, Aranca Research

Note: PPP - Public Private Partnership

Page 36: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Patents Act • Amendments to the Patents Act, 1970 to make it TRIPS compliant

• Increased incentives to domestic firms to conduct R&D

• Increased likelihood of technology transfer from developed nations

National Innovation

Council (NIC)

• In 2010, NIC was set up to implement strategies for inclusive innovation in India and

prepare a roadmap for innovation over 2010-20

• Tasks of NIC include creating a framework to encourage innovation by central and state

governments, universities, R&D institutions and SMEs

Source: Battelle, Aranca Research

Note: SMEs - Small and Medium Enterprises

Page 37: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Aranca Research

Introduction of STI

Policy 2013

• In January 2013, the government of India introduced the Science, Technology and

Innovation (STI) policy 2013 at the centenary sessions of the Indian Science Congress

held at Kolkata

Vision of STI Policy • The STI policy is aimed at helping India become one of the top five global scientific

powers by 2020

Rising involvement of

the private sector

• STI aims to boost innovation through Research and Development (R&D) led by the Public-

Private Partnership (PPP) mode thereby increase the investments on Research and

Development (R&D) to 2 per cent of GDP by 2017 from current 1 per cent

Increase in human

resources

• The policy seeks to increase the number of full-time R&D personnel by 66 per cent over

2013–17 and expand the number of publications from the current 3.5 per cent of global

share to around 7 per cent by 2020

Page 38: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: India Electronic News, Moneycontrol, CNBC, Economic Times, Appliancemagazine.com,

Business Standard, The Hindu, Company websites, Aranca Research

Note: R&D - Research and Development

• Jan 13: DuPont is planning to

double their R&D activities in

India

• Apr 13: Yamaha announced the

establishment of a R&D centre

in India

• Jun 13: Huawei will be setting

up a new research and

development (R&D) centre in

Bengaluru with an investment of

USD150 million

• Jul 13: OneOcean Corporation

has set up ClipCard Technology

(R&D) centre in India

• Oct 13: Carraro India has set up

a new R&D centre in India

• Mar 12: Aditya Birla Group

launches R&D centre at Navi

Mumbai, developed at a cost of

about USD52 million

• Apr 12: Maruti Suzuki

announces an investment of

USD500 million to set up an

R&D facility at Rohtak

• Jun 25: Chinese equipment

maker Huawei will invest USD2

billion to set up global R&D

center

• Nov 23: General Electric will

invest USD60 million to expand

its R&D facility; it is expected to

develop 30 new products by

2015

• Jan 22: Intel India to invest over

USD120 million to expand its

Bangaluru R&D center

• Mar 07: BASF opens global

R&D center in Mumbai

2014 2012 2013

Page 39: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

2011

• Apr 11: Hitachi to invest

USD400 million to set up

R&D center in Bengaluru

• May 11: ISRO announces

setting up of spacecraft

R&D center on 530 acres

land at Chitradurga

• Oct 11: Saab AB and

Mahindra Satyam open an

R&D center in Hyderabad

for conducting research in

aerospace, defence and

civil security

2010

• Jan 10: Huawei allocates

USD500 million investment

for R&D center in

Bengaluru

• May 10: Bridgewater

opens center of Excellence

in Gurgaon for telecom

software R&D

• Aug 10: Alstom earmarks

USD39 million to establish

R&D center for power

products at the Infosys

campus

2009

• Jun 09: LG Electronics

doubles its annual R&D

investment outlay to

USD83 million

• Oct 09: Tata DoCoMo sets

up R&D center for value-

added services (VAS) and

mobile applications

• Oct 09: Hyundai sets up

R&D center at Hyderabad

at an investment of USD25

million

Source: India Electronic News, Moneycontrol, CNBC, Economic Times, Appliancemagazine.com,

Business Standard, The Hindu, Company websites, Aranca Research

Note: R&D - Research and Development

Page 40: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: India Electronic News, Moneycontrol, CNBC, Economic Times, Appliancemagazine.com,

Business Standard, The Hindu, Company websites, Aranca Research

Note: R&D - Research and Development

Centers of Excellence

(CoEs)

• The government has set

up CoEs based on the

PPP model for technology

development and transfer,

scientific research, human

resource development and

economic outreach

• CoEs have been set up in

the areas of telecom,

wireless technology, bio-

informatics, lasers and

optoelectronic devices and

nano-electronics

NMITLI

• The programme identifies

areas for development

based on national

consultation and invites

best partners from

institutions, academia and

private sector to play a role

in the process

• NMITLI has initiated 60

largely networked projects

in diverse areas involving

85 industry partners and

280 R&D groups from

different institutions with

investment outlay of

USD114 million

Centrally funded institutes

• The government proposes

to establish 8 new IITs, 3

IISERs, 10 NITs and 20

IIITs

• These institutes together

account for over 80 per

cent of the total PhDs in

engineering in India

• The institutes are also

amongst the top Indian

applicants for patents from

the ‘institutes and

universities’ category

Central and foreign

universities

• Government is expected to

have set up 30 new central

universities by 2012

• New universities in 16

uncovered states

• The remaining 14 new

Central Universities will be

set up as world class

centers of excellence at

different locations

• Foreign universities

permitted can enter higher

education system in India

by having their own

campuses or joint ventures

with existing universities

Page 41: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest
Page 42: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: ARAI, Business Standard, India Law Office, Deloitte, Aranca Research

Notes: IT - Information Technology, ARAI - Automotive Research Association of India,

NVH - Noise, Vibration and Harshness

Pharma and healthcare

• Indian healthcare sector, one of the fastest growing industry, is expected to advance at a

CAGR of 17 per cent during 2011–20 to reach USD280 billion

• Contract research is a fast growing segment in the Indian healthcare industry

• Indian pharmaceuticals market is anticipated to expand at a CAGR of 17.2 per cent over

2011-2016 to touch USD27.3 billion

• India’s huge population places it among the world’s largest markets for vaccines and

drugs

Information Technology

(IT)

• India is increasingly seen as a product development destination

• Companies are now offshoring complete product responsibility including complex services

like product management

Automobiles

• Research is being carried out by individual companies as well as industry associations

such as ARAI in various areas such as structural dynamics, safety, NVH and electronics

• India is the sixth largest auto market globally and is poised to become the third largest by

2020

Page 43: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: ARAI, Business Standard, Planning Commission, India Law Office, Aranca Research

Notes: IT - Information Technology, ARAI - Automotive Research Association of India, NVH -

Noise, Vibration and Harshness, DBT – Department of Biotechnology

Biotechnology

• By FY17, India’s biotech industry is estimated to increase to USD11.6 billion from USD4.3

billion in FY13

• Protein and antibody production, and fabrication of diagnostic protein chips are promising

areas for investment

• Stem cell research, cell engineering and cell-based therapeutics are other areas, wherein

India will cash in its expertise

Agriculture

• India has the potential to become a major producer of transgenic rice and several

Genetically Modified (GM) or engineered vegetables

• Hybrid seeds, including GM seeds, represent new business opportunities in India based

on yield improvement

• In 12th Five-Year Plan, DBT has proposed to support 10 agricultural universities through

R&D grants to promote R&D on agriculture

Page 44: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Zinnov - Crossing the value chasm

Note: G500 - Global 500 companies

There is a potential to create 200,000 R&D jobs by Global

500 companies in the next five years

During 2013-18, R&D headcount is expected to increase at

a CAGR of 15.8 per cent

176

366

313

229

489

595

2013 2018

R&D headcount Remaining addressable population

R&D headcount by G500 (‘000)

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Page 46: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Lupin website, Lupin reports

Notes: API - Active Pharmaceutical Ingredient,

CNS - Central Nervous System, NSAIDS - Non-Steroidal Anti-

Inflammatory Drugs, TB - Tuberculosis, NCE - New Chemical Entity

Patents filed by Lupin Lupin is a renowned pharma player having a wide range of

quality, affordable generic and branded formulations and

APIs

Lupin has emerged as the fifth largest and among the top

five fastest-growing companies in the US

It is one of the world’s largest manufacturers of TB drugs

and has significant market share in the cardiovascular,

diabetology, asthma, paediatrics, CNS, Anti-infectives and

NSAIDs therapy segments

By FY13, Lupin’s total patent filing reached 1,181 up from

600 in FY08

The Company is amongst the fastest growing large generic

pharmaceutical player in Japan and South Africa

Expenditure on R&D for FY 2013-14 amounted to 8.4 per

cent of net sales as against 7.5 per cent of net sales for FY

2012-13

38

26

75

42

60

26

84

42

12

41

5

14 17

43 47

FY09 FY10 FY11 FY12 FY13

Formulation Patents API/Process patents NCE patents

Page 47: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

822 1,007

1,271

1,474

1,742 1,839

FY09 FY10 FY11 FY12 FY13 FY14

Source: Lupin website

Notes: CAGR - Compound Annual Growth Rate,

* - Growth in INR terms

Lupin net sales (USD million) Its revenues increased from USD822.5 million in FY09 to

USD1.8 billion in FY14, at a CAGR* of 24 per cent

India formulations business grew by 5 per cent* recording

revenues of USD 414 million for FY 2013-14 as compared

to USD 435 million for FY 2012-13.

CAGR*: 24%

Page 48: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Office of the Controller General of Patents,

Designs and Trademarks 2012-13 Annual Report,

Company Annual Reports, Aranca Research

Indian IT patent applications (FY13) Infosys has the 3rd highest number of patent applications in

India

Research activity for different areas is allocated amongst

dedicated labs such as Software Engineering lab,

Convergence lab, Security and Privacy lab, Distributed

Computing lab and E-Com lab

36

40

81

135

162

HCLTechnology

TejasNetwork Ltd.

Infosys

SamsungIndia

TataConsultancy

Page 49: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Source: Company Annual Reports, Aranca Research:

Notes: CAGR - Compound Annual Growth Rate,

*Calculated in INR terms

Income and net profit (USD billion) During FY10-14, the company’s revenues increased at a

CAGR* of 21.84 per cent to USD8.3 billion from USD4.8

billion

During the same period, net profit expanded at a CAGR* of

14.41 per cent to USD1.8 billion from USD 1.32 billion

Infosys spent USD168 million in R&D expenses during

FY13, up 38.3* per cent from the USD141 million spent in

FY12

Consequently, total R&D spending during FY13 accounted

for 2.5 per cent of total revenue

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0

1

2

3

4

5

6

7

8

9

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Sales Net Profit - RHS

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Source: Company Annual Reports, Aranca Research:

Notes: CAGR - Compound Annual Growth Rate,

*Calculated in INR terms

Income and net profit (USD billion) During FY11-14, the company’s revenues increased at a

CAGR of 29.9* per cent to USD13.57 billion from USD8.18

billion

During the same period, net profit expanded at a CAGR of

29.6 per cent to USD3.2 billion from USD1.94 billion

TCS spent USD132 million in R&D expenses during FY13,

up 36.6* per cent from the USD112 million spent in FY12

Consequently, total R&D spending during FY13 accounted

for 1.48 per cent of total revenue 0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8

3.2

3.6

0

2

4

6

8

10

12

14

16

FY11 FY12 FY13 FY14

Sales Net Profit - RHS

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19 22

34

21

FY10 FY11 FY12 FY13

Source: Economic Times, Company Annual Reports,

Company website, Aranca Research

Notes: CAGR: Compound Annual Growth Rate,

*CAGR calculated in Indian Rupee terms

Strong research and development (USD Million) Incorporated in 1933, HUL is India’s leading company by

sales in the Fast-Moving Consumer Goods (FMCG) sector

in India. British-Dutch company Unilever owns a majority

stake of 52 per cent in HUL

In 2012, Forbes recognized HUL as the world's sixth most

innovative company; it was the highest ranked FMCG

company in the list

Silver Award for DuPont Global Packaging Award in 2012

for reduction in plastic packaging

Eighteen of HUL’s brands featured in the ‘100 Most Trusted

Brands’ 2012 survey carried out by Brand Equity

HUL was felicitated for receiving the highest number of

patents in 2009 at the Annual Intellectual Property Awards

2010

The company has over 20,000 registered patents and

patent applications worldwide

HUL is also driving innovation in various categories such as

oral care, personal products and soaps & detergents etc.

CAGR*: 8.1%

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Page 53: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Automotive Research Association of India (ARAI) Survey No 102, Vetal Hill, Off Paud Road, Kothrud,

Pune - 411 038

Tel: 91-020 30231111

Fax: 91-020 25434190

E-mail: [email protected]

Website: www.araiindia.com

Indian Society for Clinical Research (ISCR) c/o Pfizer center, 5, Patel Estate, S.V.Road, Jogeshwari(West),

Mumbai - 400 102

Tel: 91-022 26774140, 66932028

E-mail: [email protected]

Website: www.iscr.org

The South India Textile Research Association (SITRA) 13/37, Avanashi Road, Coimbatore - 641 014

Tel: 91-422 2574367, 6544188

Fax: 91-422 2571896

Email: [email protected]

Website: www.sitra.org.in

Page 54: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

API: Active Pharmaceutical Ingredient

ARAI: Automotive Research Association of India

CAGR: Compound Annual Growth Rate

CoE: Center of Excellence

DRDO: Defence Research and Development Organisation

FDI: Foreign Direct Investment

FY: Indian Financial Year (April to March)

So FY10 implies April 2009 to March 2010

GDP: Gross Domestic Product

GERD: Gross Domestic Expenditure on Research and Development

HAL: Hindustan Aeronautics Limited

HSL: Hindustan Shipyard Limited

Page 55: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

IAC: Indigenous Aircraft Carrier

ICBM: Intercontinental Ballistic Missile

IT: Information Technology

NMITLI: New Millennium Indian Technology Leadership Initiative

NVH: Noise Vibration and Harshness

PPP: Public Private Partnership

PPP: Purchasing Power Parity

R&D: Research and Development

TRIPS: Trade Related Aspects of Intellectual Property Rights

USD: US Dollar

WTO: World Trade Organisation

Wherever applicable, numbers have been rounded off to the nearest whole number

Page 56: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

Year INR equivalent of one USD

2004-05 44.81

2005-06 44.14

2006-07 45.14

2007-08 40.27

2008-09 46.14

2009-10 47.42

2010-11 45.62

2011-12 46.88

2012-13 54.31

2013-14 60.28

Exchange rates (Fiscal Year)

Year INR equivalent of one USD

2005 43.98

2006 45.18

2007 41.34

2008 43.62

2009 48.42

2010 45.72

2011 46.85

2012 53.46

2013 58.44

Q12014 61.58

Exchange rates (Calendar Year)

Average for the year

Page 57: Note: R&D - Research and Development - IBEF · 2016-02-22 · Source: Planning Commission, Reserve Bank of India, Aranca Research Note: R&D - Research and Development Eighth-largest

India Brand Equity Foundation (“IBEF”) engaged Aranca to prepare this presentation and the same has been prepared

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