sapm report (pancholi chirag)

7/31/2019 Sapm Report (pancholi chirag)

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ECONOMIC ANALYSIS


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1.GDP:

Gross domestic product (GDP) is the measure of national income. Its trend shows the

actual picture of countrys economy. It is a measure of wealth and health of economy.

India is one of the fastest growing economies in world today. Everybody is looking at

India. Its GDP is higher than most countries in the world.

Source: CMIE

The Goldman Sachs has projected long term trend in GDP, which is

expected to be higher than other developing countries like china and Brazil.


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Above is the long term forecast of GDP we can see that GDP of India

is expected to grow at a consistent rate where as mighty Chinese GDP is expected to fall

in coming years and will remain around 2%.

2.MONSOON AND AGRICULTURAL PRODUCTION :

India is an agriculturist country. More than 70% of population of India depends on

agriculture for their livelihood. And Indian agriculture depends mainly on monsoon

because there is no proper irrigation infrastructure. If monsoon is below average it can

negatively affect Indian economy at large. So, monsoon has direct impact on

performance of any industry. The trend of monsoon over the years and its relationship

with GDP has been given below:

From chart we can see that both lines move simultaneously in same

direction. So, there is a strong relationship between monsoon and growth in GDP. But

our agriculture production depends upon rain there are no proper irrigation facilities, if

India wants to be world leader than it should have irrigation infrastructure.


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Total Foodgrain production is expected to remain 220 Mn tons which is

5% more than previous year with projected rainfall of 80%.

Table: Foodgrain production versus monsoons

Exhibit: Total Foodgrain production in the country


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3.SAVING AND INVESTMENT

The latest estimates for saving and capital formation pertain to 2003-04.The CSOs quick

estimates indicate that the rate of Gross Domestic Saving (GDS) rose to 24.2 per cent of

GDP at current market prices in 2003-04, entirely due to reduction in the public sectors

dis-saving. Households - the mainstay of overall saving in the economy - recorded a

decline in terms of financial saving which, in turn, marginally reduced the rate of

household sector saving. There was also a marginal decline in the rate of private

corporate sector saving in 2003-04.


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4.INDUSTRIAL PERFORMANCE

The strengthening of industrial growth in India was broad-based and occurred in an

environment of accelerating industrial activity in various parts of the world, especially in

East Asian economies. External demand embodied in exports provided a boost to a

spectrum of manufacturing industries, supported by improvement in domestic demand

conditions and reductions in excise duties on a

host of intermediate inputs.

Growth of Index of Industrial Production

The CSOs advance estimates indicate a distinct pick-up in the growth

of real GDP originating in industry from the second quarter that was sustained in the third

quarter of 2003-04. The upturn was evident as early as May 2003 in terms of the index of

industrial production (IIP) (Chart). Over the period April 2003-February 2004, industrial

production rose faster than in the preceding year on account of higher growth in the

manufacturing sector .The CSO has placed the growth of real GDP originating in

manufacturing at 7.1 per cent in 2003-04 as against 6.2 per cent in the preceding year.


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5.INFLATON

High inflation can adversely affect Indian economy. It is a high inflation period in India

due to increase in crude oil prices in international market and below average monsoon in

India this year.

Exhibit: inflation during July-August 2004

inflation (WPI) in july-August 2004

7.617.96 7.94

8.17

7

7.5

8

8.5

31-Jul 07-Aug 14-Aug 21-Aug

week ended

percent

Source: RBI

Inflation, measured in movement in wholesale price index (WPI), has

increased from 7.61% during week ended 31 July to 8.17% during week ended 21.

August 2004.rising crude oil price in the international market is the min reason behind

the recent spurt in inflation. In the mean time government has shown its sincerity in

containing inflation within manageable limit.

High inflation discourages deposits especially long term. Because the

real increase in deposit will be negligible if there is high inflation. So, people invest their

money in mutual funds and stock market to earn higher return.


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6.CURRENT ACCOUNT

As in the preceding two years, the invisible surplus was able to fully offset the

merchandise trade deficit. The surplus in the invisible account increased from US $ 12.6

billion in April-December 2002 to US $ 18.2 billion in April-December 2003, mainly on

account of higher receipts from software services, private transfer receipts and tourism

earnings. A revival of international interest in India as a tourist destination was reflected

in an increase of 18.5 per cent in tourist arrivals in 2003-04. Exports of software and IT-

enabled services have been growing at an average rate of 46 per cent since the mid-

1990s. Despite the global slowdown, Indian IT industry raised its share in global IT-

spending from about one per cent at the end of the 1990s to about three per cent

currently. India is one of the most preferred destinations for outsourcing of IT services.

With buoyant invisible receipts, the current account surplus increased to US $ 3.2 billion

during April-December 2003 from US $ 2.9 billion during the corresponding period of

the previous year

Exhibit: Current Account Balance


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6.STOCK MARKET

Recently there is a bullish trend in stock market. Sensex is going to touch 6000 points.

Most of the shares are at their historic high positions. Investors confidence in stock

market has increased. They expect this trend to persist for a long time. This also has

boosted new issues in primary market. This has affected positively all industry. People

has attracted toward direct investment in shares as they are giving higher return than any

other investment opportunity. Mutual funds are performing best, so all these factors have

contributed toward fall in deposits.

Primary Market trends:

After a long period of lacklustre activity, the public issues market experienced a

revival. Resource mobilisation in the public issues market (excluding offers for

sale) amounted to Rs.7,190 crore through 35 issues during 2003-04, as against only

Rs.4,867 crore raised through 17 issues during 2002-03 (Chart 53). Out of the

issues floated in 2003-04, 28 were equity issues accounting for 40.5 per cent of

resource mobilisation. Public sector entities accounted for 55.4 per cent of total

resources mobilised in the primary market.

Trend in Public issue

01000200030004000500060007000

1997

-98

1998

-99

1999

-200

0

2000

-01

2001

-02

2002

-03

2003

-04

Public issue(Pvt. Sector) Public issue(Public sector)

Non-Government public limited companies (private sector) garnered

Rs.3,210 crore through 27 issues during 2003-04 as compared with Rs.1,878 crore raised

through nine issues during the previous year. In 2003-04, 24 equity issues aggregated to

Rs.1,959 crore as compared with five equity issues aggregating Rs.460 crore during the


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previous year. Equity issances surged during the second half of 2003-04 (Chart 54).

There were three debt issues of Rs.1,251 crore (all from ICICI Bank) during 2003-04 as

compared with four bond issues of Rs.1,418 crore during 2002-03.

7.INTEREST RATE

By monetary policy 2004-05 RBI kept interest rate unchanged at 6%. Before that Interest

rate was decreasing. This will lead to increase in demand for loans because if the loans

are available at cheaper rate then people will ask for more loans to make investments.


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INDUSTRY ANALYSIS: PHARMACEUTICAL

INTRODUCTION:

The Indian pharmaceutical industry, which was operating in a

protectionist regime, is now gearing to face competition emerging from product patents

in a WTO era. Pharmaceuticals being essential items for humans, the industry is

protected from cyclical fluctuations.

The shift towards product patent era in 2005 has made the domestic

industry conscious of the need to increase expenditure in Research. Hence, the market

leaders' earnings are likely to show consistent growth, but for temporary aberrations

resulting from increased R&D and global marketing expenses. However, globally as well

as domestically, the industry is witnessing large-scale mergers and acquisitions, that will

have drastic implications for the Indian market.

With quality human resources, low cost of research and world wide

opportunities, the industry is keen on replicating the success of IT in the global pharma

industry.

The Indian Pharmaceutical industry is highly fragmented with about 10,000

manufacturing units (300 in the organized sector). The top ten companies make up

for more than third of the market. The revenues generated by the industry are

approximately US$ 5 bn and growing at an average rate of 9% over last five years.

While formulations account for around 35% of this industry, bulk drugs make up for

the balance. The Indian pharma industry accounts for about 1% of the world's pharma

industry in value terms and 8% in volume terms, which suggest that it has a huge

potential to grow in value term. However, the annual per capita drug expenditure is

still amongst the lowest in the world.

Per Capita Health Per 1000 people


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Expenditure (US$)

India 94 0.8

Brazil 453 3.1

China 143 2.9

Malaysia 189 2

USA 3950 3.7

Source: World Bank

In recent past Indian companies have targeted international markets and have extended

their presence there. While some companies are doing bulk drug exports some have

moved up in the value chain and export formulations and generic products. The total

exports from the country stood at Rs 141 bn in the year 2003. The country also offers

excellent exports opportunities for clinical trials, R&D, custom synthesis, technical

services like Bioinformatics.

The drug price control order (DPCO) continues to be a menace for the industry. The

pricing authority arbitrarily sets prices of drugs that fall within its ambit without giving

due consideration even to the costs of production. There are three tiers of regulations -on

bulk drugs, on formulations and on overall profitability. This has made the profitability of

the sector susceptible to the whims and fancies of the pricing authority. Consequently,

MNCs show reluctance in launching patented drugs from their parent's product portfolio,

thereby, affecting their market share. Although government has brought down the DPCO

cover from 74 to 25 drugs in the new DPCO, the same has not been brought into effect due

to impending litigation. However, once implemented, this could increase profitability of

companies having relatively older portfolios, particularly MNCs.

INDUSTRY STRUCTURE:

The industry comprises about 18000 players, of which 250 leading

players control almost 70% of the market. The domestic formulation market grew by

modest 6.3% to Rs 18212 crore in the twelve months ended Feb'03 as per ORG MAT


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Feb'03. The growth rate in the industry has come down considerably from around 16% in

the 90's particularly in view of the hectic competition from generic generics.

Domestic players account for over 70% market share and the rest is

accounted for by MNCs. The leading domestic companies are Dr. Reddy's

Laboratories (DRL), Ranbaxy Laboratories (RLL), Sun Pharmaceuticals, Cipla, Lupin

Laboratories, Orchid Chemicals and Wockhardt while the leading MNCs are

Glaxosmithkline, Pfizer, Aventis Pharma and Merck India.

If one considers the entire healthcare scenario, allopathy accounts for

50% of the overall Indian market, ayurveda accounts for 30% and sidha, unani, homeo

and other systems share the rest.

Financial Year '04

FY04 was relatively a good year for the markets in India for domestic and to extent

MNC pharma companies also. ON back of low growth rate last the market grew by

about 7.3% this year in value terms. However, severe competition led to significant

price erosion to an extent of 2%, which led to lower growth in value term.

Commoditisation of the domestic pharma market severely impacted the anti-infective

segment, which grew only by 5%. The point to note here is that anti-infective segment

constitutes about 17% of the pharma market. However, new product launches

contributed significantly in the growth of the market.

In view of the intense competition in the domestic markets, Indian pharma majors are

increasingly tapping the export market for growth. Export revenues now contribute

more than two third of the revenues of Dr. Reddy's and about 80% of the revenues of

Ranbaxy. Apart from export of formulations and bulk drugs, Indian companies have

also entered into contract manufacturing. Though exports are providing growth impetus

and size to Indian majors, it will be a while before Indian majors can make their

presence felt in the global markets.


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The research initiatives of the pharma industry have been commendable. It is not only

the majors who are committing substantial research efforts but also the comparatively

smaller companies like Glenmark, Lupin and Cadila. The country now boasts of several

state of the art pharma research centers dedicated to basic research.

PROSPECTS:

While FY04 recorded a good growth and the markets grew by about 7.3% mainly

driven by high growth in lifestyle segment such as CVS (17%), CNS (9%), anti-

diabetic (12%) and respiratory (9%) therapeutic segments. However, intense

competition ensured that the values of the products to decline. In fact the growth in

volume terms was about 2% more than growth in value terms. In the year while

Indian companies performed very well both in exports as well as the domestic

markets, performance of the MNC's was not very impressive. However, in the longer

run, Indian companies would face fresh competition from MNCs, as they would make

aggressive new launches once product patents are recognized post 2005.

The DPCO is likely to be significantly diluted soon though there is litigation pending

over it in supreme court. In case the new order is passed the pressure on pricing of

MNC pharma products is likely to go away. Companies with high DPCO coverage

currently and strong brands in place are expected to benefit.

The penetration of health insurance is abysmally low in the country. The entry of

private players would not only bring in quantum leap in the health insurance business


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but also increase capital inflows into this sector. With drug prices expected to increase

post 2005, health insurance could provide a cushion against it and thus maintain the

demand for drugs.

On the exports front, the global generics market is growing at the rate of 10% to 12%and drugs having estimated sales of over US$ 55 bn expected to go off patent in the

next few years. This coupled with the fact that the US government is facilitating a

speedy introduction of generic drugs into the market, increasing the number of

generics drugs in its Mediclaim policy, bodes well for generic exporters. However the

opportunity here may not be as big as stated above, because the prices fall drastically

once the drug goes off patent.

CRITICAL SUCCESS FACTORS:

Investment in R & D (especially basic research), an extensive

distribution network and marketing strategies, new product introductions, penetration into

global generics markets, effective anti-dumping duties, logistics management and brand

building are critical.

Compliance with international GMP is critical to expand the marketsbeyond the domestic market. Likewise, compliance with domestic GMP, which will

become mandatory from Dec'03 will be critical for sustaining in the domestic market.

Domestic pharma companies which target global generics and in US in

particular, have to gain vast expertise to challenge the patent holders, that are likely to

take the generic firms to court, just to protect their patents even after their expiry.

Likewise, innovations are also likely to be challenged before court, and the home grown

companies need to specialise and gain expertise in dealing not only with chemicals but

also on and off the court, to reap benefits from their research.


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DEMAND DRIVERS :

An increase in coverage (currently at 35% of the population), opening

up of health insurance, becoming global sources for MNCs and the growing global

generics segment are demand drivers. An increase in health consciousness and growingadvertising and marketing efforts by corporates will boost the demand for the OTC

segment. Lifestyle diseases are increasing at a fast pace, consequent to the fast changing

life style of Indians.

The huge and growing generics opportunity and the regulatory

compliance by domestic firms have resulted in wider acceptability of pharma products

from India, as could be guaged by increased exports. Hence, low cost quality production

and regulatory compliance have also become demand drivers for the domestic industry,

for increased pharma exports.

Pharma: Through Porters eyes

Today's business environment is extremely competitive and in

economics parlance where perfect competition exists, the profits of the firms operating in

that industry will become zero in long run. However, this is not possible because, firstlythere is no perfect competition and no company is a passive price taker (i.e. no company

will operate where profits are zero). Secondly, they strive to create a competitive

advantage to thrive in the competitive scenario. Michael Porter, considered to be one of

the foremost gurus of management, developed the famous five-force model, which

influences an industry. In this article, we apply this model for the Indian pharma industry.


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INDUSTRY COMPETITION:

Pharma industry is one of the most competitive industries in the country with as many as

10,000 different players fighting for the same pie. The rivalry in the industry can be

gauged from the fact that the top player in the country has only 6% market share, and the

top five players together have about 18% market share. Thus, the concentration ratio for

this industry is very low. High growth prospects make it attractive for new players to

enter in the industry.

Another major factor that adds to the industry rivalry is the fact that theentry barriers to pharma industry are very low. The fixed cost requirement is low but the

need for working capital is high. The fixed asset turnover, which is one of the gauges of

fixed cost requirements, tells us that in bigger companies this ratio is in the range of 3.5

to 4 times. For smaller companies, it would be even higher.


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Many smaller players that are focused on a particular region, have a

better hang of the distribution channel, making it easier to succeed, albeit in a limited

way. An important fact is that pharma is a stable market and its growth rate generally

tracks the economic growth of the country with some multiple (1.2 times average in

India). Though volume growth has been consistent over a period of time, value growth

has not followed in tandem.

The product differentiation is one key factor, which gives

competitive advantage to the firms in any industry. However, in pharma industry product

differentiation is not possible since India has followed process patents till date, with laws

favouring imitators. Consequently, product differentiation is not the driver, cost

competitiveness is. However, companies like Pfizer and Glaxo have created big brands in

over the years, which act as product differentiation tools. This will enhance over the long

term, as product patents come into play from 2005.

BARGAINING POWER OF BUYERS:

The unique feature of pharma industry is that the end user of the product is different from

the influencer (read Doctor). The consumer has no choice but to buy what doctor says.

However, when we look at the buyer's power, we look at the influence they have on the

prices of the product. In pharma industry, the buyers are scattered and they as such does

not wield much power in the pricing of the products. However, government with its

policies, plays an important role in regulating pricing through the NPPA (National

Pharmaceutical Pricing Authority).

BARGAINING POWER OF SUPPLIERS:

The pharma industry depends upon several organic chemicals. The chemical industry is

again very competitive and fragmented. The chemicals used in the pharma industry are

largely a commodity. The suppliers have very low bargaining power and the companies

in the pharma industry can switch from their suppliers without incurring a very high cost.


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However, what can happen is that the supplier can go for forward integration to become a

pharma company. Companies like Orchid Chemicals and Sashun Chemicals were

basically chemical companies, who turned themselves into pharmaceutical companies.

BARRIERS TO ENTRY:

Pharma industry is one of the most easily accessible industries for an entrepreneur in

India. The capital requirement for the industry is very low, creating a regional

distribution network is easy, since the point of sales is restricted in this industry in India.

However, creating brand awareness and franchisee amongst doctors is the key for long-

term survival. Also, quality regulations by the government may put some hindrance for

establishing new manufacturing operations. Going forward, the impending new patent

regime will raise the barriers to entry. But it is unlikely to discourage new entrants, as

market for generics will be as huge.

THREAT OF SUBSTITUTES:

This is one of the great advantages of the pharma industry. Whatever happens, demand

for pharma products continues and the industry thrives. One of the key reasons for high

competitiveness in the industry is that as an on going concern, pharma industry seems to

have an infinite future. However, in recent times, the advances made in the field of

biotechnology, can prove to be a threat to the synthetic pharma industry.

CONCLUSION

This model gives a fair idea about the industry in which a company operates and the

various external forces that influence it. However, it must be noted that any industry is

not static in nature. It's dynamic and over a period of time the model, which have used to

analyse the pharma industry may itself evolve.

Going forward, we foresee increasing competition in the industry but

the form of competition will be different. It will be between large players (with


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economies of scale) and it may be possible that some kind of oligopoly or cartels come

into play. This is owing to the fact that the industry will move towards consolidation. The

larger players in the industry will survive with their proprietary products and strong

franchisee. In the Indian context, companies like Cipla, Ranbaxy and Glaxo are likely to

be key players. Though consolidation within the current big names is not ruled out.

Smaller fringe players, who have no differentiating strengths, are likely to either be

acquired or cease to exist.

The barriers to entry will increase going forward. The change in the

patent regime, will see new proprietary products coming up, making imitation difficult.

The players with huge capacity will be able to influence substantial power on the fringe

players by their aggressive pricing which will create hindrance for the smaller players.Economies of scale will play an important part too. Last but not the least, in a vast

country of Indias size, government too will have bigger role to play.

Indian Pharma Industry: SWOT analysis

It is often said that the pharma sector has no cyclical factor attached toit. Irrespective of whether the economy is in a downturn or in an upturn, the general

belief is that demand for drugs is likely to grow steadily over the long-term. True in some

sense. But are there risks? This article gives a perspective of the Indian pharma industry

by carrying out a SWOT analysis (Strength, Weakness, Opportunity, Threat).

Before we start the analysis lets look a little back in the industrys last

six years performance. The Industry is a largely fragmented and highly competitive with

a large number of players having interest in it. The following chart shows the breakup of

the growth (YoY) of Indian pharmaceutical industry in last six years.


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*Volume growth of existing products

The SWOT analysis of the industry reveals the position of the Indian

pharma industry in respect to its internal and external environment.

Strengths:

1. Indian with a population of over a billion is a largely untapped market. In fact the

penetration of modern medicine is less than 30% in India. To put things in

perspective, per capita expenditure on health care in India is US$ 93 while the same

for countries like Brazil is US$ 453 and Malaysia US$189.

2. The growth of middle class in the country has resulted in fast changing lifestyles in

urban and to some extent rural centers. This opens a huge market for lifestyle drugs,

which has a very low contribution in the Indian markets.

3. Indian manufacturers are one of the lowest cost producers of drugs in the world.

With a scalable labor force, Indian manufactures can produce drugs at 40% to 50%

of the cost to the rest of the world. In some cases, this cost is as low as 90%.


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4. Indian pharmaceutical industry posses excellent chemistry and process

reengineering skills. This adds to the competitive advantage of the Indian

companies. The strength in chemistry skill help Indian companies to develop

processes, which are cost effective.

Weakness:

1. The Indian pharma companies are marred by the price regulation. Over a period of

time, this regulation has reduced the pricing ability of companies. The NPPA

(National Pharma Pricing Authority), which is the authority to decide the various

pricing parameters, sets prices of different drugs, which leads to lower profitability

for the companies. The companies, which are lowest cost producers, are at

advantage while those who cannot produce have either to stop production or bear

losses.

2. Indian pharma sector has been marred by lack of product patent, which prevents

global pharma companies to introduce new drugs in the country and discourages

innovation and drug discovery. But this has provided an upper hand to the Indian

pharma companies.

3. Indian pharma market is one of the least penetrated in the world. However, growth

has been slow to come by. As a result, Indian majors are relying on exports for

growth. To put things in to perspective, India accounts for almost 16% of the world

population while the total size of industry is just 1% of the global pharma industry.

4. Due to very low barriers to entry, Indian pharma industry is highly fragmented with

about 300 large manufacturing units and about 18,000 small units spread across the

country. This makes Indian pharma market increasingly competitive. The industry

witnesses price competition, which reduces the growth of the industry in value

term. To put things in perspective, in the year 2003, the industry actually grew by


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10.4% but due to price competition, the growth in value terms was 8.2% (prices

actually declined by 2.2%)

Opportunities

1. The migration into a product patent based regime is likely to transform industry

fortunes in the long term. The new patent product regime will bring with it new

innovative drugs. This will increase the profitability of MNC pharma companies

and will force domestic pharma companies to focus more on R&D. This migration

could result in consolidation as well. Very small players may not be able to cope up

with the challenging environment and may succumb to giants.

2. Large number of drugs going off-patent in Europe and in the US between 2005 to

2009 offers a big opportunity for the Indian companies to capture this market. Since

generic drugs are commodities by nature, Indian producers have the competitive

advantage, as they are the lowest cost producers of drugs in the world.

3. Opening up of health insurance sector and the expected growth in per capita income

are key growth drivers from a long-term perspective. This leads to the expansion ofhealthcare industry of which pharma industry is an integral part.

4. Being the lowest cost producer combined with FDA approved plants, Indian

companies can become a global outsourcing hub for pharmaceutical products.

Threats:

1. There are certain concerns over the patent regime regarding its current structure. It

might be possible that the new government may change certain provisions of the

patent act formulated by the preceding government.


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2. Threats from other low cost countries like China and Israel exist. However, on the

quality front, India is better placed relative to China. So, differentiation in the

contract manufacturing side may wane.

3. The short-term threat for the pharma industry is the uncertainty regarding the

implementation of VAT. Though this is likely to have a negative impact in the

short-term, the implications over the long-term are positive for the industry.

POLITICAL-LEGAL FACTORS:

There are so many government rules and regulations for

pharmaceutical industries in India. Government has played supportive role in the

development of pharmaceutical industry in India. Because pharma products is basic or

necessity for human beings. As Indian population touches to 120 crores in these days it is

very necessary product. There are so many ways pharma industry can be affected by

political and legal factors.

1.LIBRALISATION POLICY:

Through libralisation policy 1991, government made it easy for private companies

to start their business by deregulation and delicencing measures. Now, There is

need for few statutory requirement to start a pharma company. so any person with


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limited capital and expertise and skill can start new business. Government also

provides many types of facilities for new entrepreneur.

2. Goverment has established many special economic zones where pharma

companies are provided with infrastructural facilities like rail, road, drainage,

desposal of hazards, etc. with tax holiday for some period. So any existing

company can expand their business because all supported facilities are available at

one place with tax benefits .

3 multinational companies are allowed to carry on their business &Indian companies

can globally compete. There are so many multinational companies in India are

working because they see India or big market place . there is no competition for

pharma company.

TAX STRUCTURE:

Pharmaceutical companies have to pay excise sales tax and corpate

tax according to law. But they pass all this to their customer as this is necessity

&no perfect subsidies is available customer pay price.

ECONOMICAL FACTOR:

1) High inflation rate negatively affect pharmaceutical industrys life saving

drugs become costlier people tend to be consume less. Even if they are

unavoidable & basic basic commodity the demand is negatively

2) Insurance protection can positively affect pharmaceutical industry. People

have enough money to spend on. It there was no insurance and if any major

surgery is to be taken place turn and people can not afford & get died.

3) Compare to develop countries people spent less proportion of their income on

health.


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4) Saving can positively affect Parma industry if people have enough saving they

can afford costly treatment and get well soon many people died off due to

improper treatment while in critical situation.

5) 70% of Indian population depends on agriculture for their livelihood. There is no

proper infrastructure for irrigation so people have to depend on rain. If monsoon

remain below average then people will suffer and try to spend less on their health

by using home made medicine.

SOCIO-CULTURAL FACTORS:

1) Demographic: its population explosion in India population of India is increasing at

a accelerated rate and is compounding. Population touches 120 crores it is a matter

of serious concern for any economy but pharma industry gain positively because it

is necessity to survive.

2) Culture, Taboo, Customs of India are so strong and prosperous. They affect

adversely. Indian culture is oldest one it has Vedas . Means how to maintain good

health how to cure your disease and people have been using there for themselves

effectively.

3) In India there are still many village where doctors have not reached there .so,

people treat their daises by traditional way by using home made medicine& taking

treatment from vidhya. A traditional professional person who cures people &

without getting degree.

4) People of India are very religious especially in village. They take bhoova & leave

everything on god pledge for quickly recovery.

5) Literacy level in India is very low compare to developed country. People do not

know effectiveness of medicine and put more trust on traditional way of curing

disease.


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6) life style of people of India is very poor . They spend less too many on their health.

CEMENT

INTRODUCTION

One of the oldest of brick and mortar industries, the Indian cement sector is now hogging

the limelight as leading players are gearing to face the new economy. The cement sector

has undergone a veritable metamorphosis after the decontrol. Further, it witnessed a

blistering pace of growth in the succeeding years and now the industry is estimated to

have a turnover of Rs 25,000 crore.

Virtually thrown open to market forces, the sector stands witnesses to

large-scale consolidation moves via acquisitions, mergers or hostile takeovers. However,

the domestic players appear to have successfully scuttled the MNC players from playing

a greater role in the domestic cement industry. Aditya Birla group will eventually emerge


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as the largest player in the domestic cement industry, with the proposed take over of the

cement business of Larsen & Toubro. Earlier, Gujarat Ambuja had acquired 14.43%

strategic stake in ACC. In the process, Grasim Industries will control about 22% of the

domestic large plant capacity while Gujarat Ambuja will control about 20%. As a result,

these two players alone control over 42% of the capacity of large cement plants in India.

The Indian cement industry with a total capacity of 144 m tonnes (including mini plants)

in FY04, has surpassed developed nations like USA and Japan and has emerged as the

second largest market after China. Although consolidation has taken place in the Indian

cement industry with the top six players controlling almost 60% of the capacity, the

remaining 40% of the capacity remains pretty fragmented with around 40 players in the

fray.

Despite the fact that Indian cement industry has clocked a production of more than 100 m

tonnes for the second year in succession, the per capita consumption of 110 kgs

compares poorly with the world average of 260 kgs. This, more than anything underlines

the tremendous scope for growth in the Indian cement industry in the long term.

Cement, being a bulk commodity, is a freight intensive industry and transporting cement

over long distances can prove to be uneconomical. This has resulted in cement being

largely a regional play with the industry divided into five main regions viz. north, south,

west, east and the central region. While the southern region is excess is capacity owing to

the availability of limestone, the western and northern region are the most lucrative

markets. Therefore, players like Grasim, L&T and Gujarat Ambuja enjoy high price

realisations compared to the all India average.

Given the high potential for growth, quite a few foreign transnationals have been eyeing

the Indian markets and are planning to acquire domestic companies. Already companies

like Lafarge and Italicementi have made a couple of acquisitions and other majors like

Holcim and Cemex are waiting for a favorable opportunity to do the same. However, the

transnationals will find the going tough since cement is a game of volumes and with the

median capacity of fragmented players being just about 1 m tonne, the transnationals will


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have to acquire capacities piecemeal and this route is fraught with a lot of uncertainties.

Although the government has reduced the import duty on cement, imports do not pose a

threat since prices of cement in India are lower than those prevailing in the international

markets. Moreover, the storage facilities on the Indian ports are inadequate for large-scale imports.

Financial Year '04In FY04, the cement sector grew at a slower rate of 5.5% as compared to 8% last year

owing to prolonged monsoons, which affected cement demand in the first half of the

fiscal year. To put things in perspective, in 1HFY04, the cement sector grew by an

estimated 4.4% as compared to almost 7.1% in 2HFY04. As is evident from the graph

below, after a slower growth in revenues in the first half of the fiscal, the second half of

the year witnessed a recovery. Cement prices also followed suit.

Although the demand grew by only 5.5% y-o-y, there was a 5% growth in industry

realisation owing to the fact that the demand-supply situation is slowly improving. The

price realisation also has to be viewed in the context of additional supply of around 2

MT with the commissioning of the Sanghi Cement facility. Had the demand grown at a

faster rate, the improvement in price realisation would have higher. In effect, we

believe that FY04 was a positive year for the industry.

While cement prices, on a YoY basis, were higher by around 5% for the industry, the

rise in prices was higher in the western and the northern region as compared to the

southern market. The pricing scenario is relatively unfavorable in the southern market

given the fact that this region has an excess capacity of close to 11 MT, the highest


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among all the regions in the country.

PROSPECTS:

The industry is likely to maintain its growth momentum and continue growing at

around 8% in the medium to long term. Government initiatives in the infrastructure

sector (such as the commencement of second phase of NHDP, rural roads, 10,000 kms

of additional highways as announced in Finance Budget) and the housing sector are

likely to be the main drivers of growth for the industry.

The acquisition of L&T's cement division by Grasim has changed the landscape of the

entire cement industry and in one fell swoop has catapulted Grasim to the leadership

position. This is a healthy sign for the industry, as this would result in consolidation

and would give significant pricing power to the bigger players. With consolidation

taking place at the lower end also, the unviable units will be forced to shut down thus

benefiting the long-term interests of the industry.

With no major capacity expansion in the pipeline, the demand supply level is expected

to achieve parity on a macro level by FY07 and this will help in the improvement of

prices. However, since the level of demand supply mismatch is higher in the southern

region, it will take longer to achieve demand supply parity.

The industry worked at estimated 84% capacity in FY04 and given the current growth

rates and also assuming no major capacity expansion in the near future, the capacity

utilisation is likely to go up significantly in the future. This will help in improving the

margins of all the major players and will lead to higher profitability.


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Despite these positives, the possibility of interest rates heading north and the

consequent impact on housing demand remains to be seen. While infrastructure

spending was a boon, there was a strong cushion from the steady growth of the

construction sector. the hike in prices of coal and petroleum products could impact

cement companies margins (account for around 40% of sales). Though the pricing

cushion exists, the margin rise will be mitigated to this extent.

CRITICAL SUCCESS FACTORS:

Better cost control, lowering debt-equity ratio caused by funding of

acquisitions and Greenfield projects primarily through borrowings and better capacity

utilization is critical success factors. Freight and transport costs being significant in

cement industry, efficient logistics management is equally critical.

With power and fuel costs exceeding 21% of the sales, units with

captive power plants have a distinct advantage. This is particularly because of unreliable

supply from SEBs that comes at a huge cost, as against reliable and relatively low cost

captive power plants.

With growing interests shown by MNCs in the Indian market, the

competitive milieu is shifting towards companies with deep pockets who can absorbtemporary losses.

DEMAND DRIVERS

Indias per capita consumption is about 90 kg compared to the world

average of 250 kg. This implies great growth potential for the domestic industry. With60% of the demand coming from the housing sector, the fortunes of cement industry are

closely linked to it. The soft interest rates prevailing in the country, and ever increasing

need for housing and easy availability of finance have enabled strong growth in the

housing construction sector, thereby leading to improved demand for cement.


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Further, the huge investment flows into the roadways and highway

projects have stimulated demand growth for the cement industry. The roadways and

highways project in general, and the golden quadrilateral project in particular, has

generated significant demand for cement in the last couple of years and continues to

propel demand for FY 2002-03 also.

Greater thrust on continued investments in new infrastructure projects

like ports, roads and highways will power the demand growth for cement for next few

years. With nearly Rs. 8,00,000 crore worth of investments likely in electricity generation

in the coming decade, the overall prospects of the growth in demand appears bright.

Of late, exports are also increasing at impressive rates. The

export of cement and clinker, together, rose from 3.14 million tonne in 1999-00 to

6.92 million tonne in 2002-03. The cement and clinker exports grew by impressive

37.8% in two months ended May03 to 1.35 million tonne. If the tempo of growth

is maintained, the industrys cement and clinker exports can even cross 8 million

tonne in the current year.


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PORTERS FIVE FORCE ANALYSIS:

Supply There is an oversupply situation in the industry due to capacity additions

by the major players in the industry. The situation is likely to improve,

as there is no major Greenfield expansion in sight.

Demand Housing sector acts as the principal growth driver for cement. However,

in recent times, industrial and infrastructure sector have also emerged as

demand drivers for cement.

Barriers to entry High capital costs and long gestation periods. Access to limestone

reserves (principal raw material for the manufacture of cement) also acts

as a significant entry barrier.

Bargaining

power of

suppliers

Licensing of coal and limestone reserves, supply of power from the state

grid and availability of railways for transport are all controlled by a

single entity, which is the government.

Bargaining

power of

customers

Cement is a commodity business and sales volumes mostly depend upon

the distribution reach of the company. However, things are changing and

few brands such as Gujarat Ambuja and L&T have started commanding

a premium on account of better quality perception.

Competition Due to large number of players in the industry and very little brand

differentiation to speak of, the competition is intense with players

resorting to frequent price cuts in order to gain market share.


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COMPANY ANALYSIS


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ABBOTT INDIA

BASIC INFORMATION:

Incorporation year 1949

Ownership Private (Foreign)

Main activity Drug formulations

HISTORY:

Abbott India Ltd (formerly known as Knoll Pharmaceuticals Ltd) is one of the largest

MNC Pharma company operating in India. The company has presnt in both OTC drugs and

formulations(dosage form). Further it has also have a number of best selling and well

known brands in its portfolio. Digene, Creamafin and Brufen are some examples.

The company incorporated in 1944 became the subsidiary of Knoll AG,

Germany following the integration of the Pharmaceutical activities of Boots worldwide

with those of BASF, Germany(the parent company of Knoll AG). Subsequent to this the

name of the company has got changed to Knoll Pharmaceuticals from Boots

Pharmaceuticals. Abbott Laboratories based in Illinois, USA acquired the pharma business

of BASF South East Asia Pvt Ltd on Dec 2000. Abbott Laboratories have increase its stake

in the company to 58.2 % by acquiring another 7.2% via mandatory open offer made to theIndian public. The name of the company has also changed to Abbott India Ltd w.e.f July

2002. .

Knoll Pharma's revenues largely come from insulin and formulation

sales. In fact, the biggest contribution comes from insulin, where the company has a


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marketshare of over 60%. Other products like Brufen and Digene are leaders in their

respective therapeutic segments. Besides these, the CNS (central nervous system) range is

one of Knoll's core focus areas. It has also launched Ganaton,own research product for

gastric motility disorders, in 2001-02. The company has commenced marketing various

products such as Lucrin,Norvir,Klacid IV,Forane and Sevorane,which are imported from

the parent company. .

The company is in the process of amalgamating its wholly owned

subsidiary Lenbrook Pharmaceuticals Ltd with itself. It has obtained the approval of H'ble

High Court of Bombay for its scheme of amalgamation.

BOARD OF DIRECTORS:

NAME POSITION

Munir Shaikh CH

D M Gavaskar MD & President

R A Shah Director

Thomas Chen DirectorDavid Wardell Director

Ashok Dayal Director

G S Kurmi Co. Secretary

EQUITY HOLDING INFORMATION:


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Type/Name of holder No of shares % of total

shares

Foreign Promoters

Lupharma UK Holding One Ltd 82,62,000 54.07Abbott Equity Holdings Ltd 11,66,184 7.63

Mutual Funds And Uti

Unit Trust of India 3,35,100 2.19

BANKS,FI'S,INSURANCE COS.

National Insurance Company Ltd 8,11,806 5.31

Life Insurance Corporation of India 2,34,766 1.54

United India Insurance Company Ltd 1,69,514 1

About 54% of the shares of Abbott are held by Lupharma UK Holding

One Ltd which is UK based Company. UTI has about 2% holding and insurance companies

hold about 8% of total shares. Mutual funds have not purchased this companys shares.

This may be weak side otherwise fundas of this company is very good. It is consistently

increasing its scope in Indian market.

FUND FLOW ANALYSIS:

200311 200211 200111 200012 199912


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Sources of funds

Cash profit 70.61 61.16 52.66 75.27 71.59

Increase in other networth 0 1.5 1.06 0 0

Increase in loan funds 0 0 0 1.76 0

Decrease in gross block 0 0.36 0 0 0

Decrease in investments 0 0 0 47.22 0

Decrease in working capital 36.6 4.86 0 0 66.11

Total Inflow 107.21 67.88 53.72 124.25 137.7

Application of fund:

Decrease in networth 34.45 0 0 21.59 5.62

Decrease in loan funds 0.15 0.03 1.66 0 0.18

Increase in gross block 0.69 0 1.91 1.05 1.87

Increase in investments 18.44 48.41 3.96 0 64.42

Increase in working capital 0 0 29.99 28.71 0

Dividend 53.48 19.44 16.2 72.9 65.61

Others 0 0 0 0 0

Total Outflow 107.21 67.88 53.72 124.25 137.7

INTERPRETATION OF FUND FLOW STATEMENT:

Profit of the company is increasing at a consistent rate. It was 52.66 crores in 2001, Rs.

61.16 Cr. In year 2002 and was increased by Rs.9.45 Cr.to Rs.70.61Cr. in the fiscal year


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2003. so. Cash profit is increasing at 15% every year. On the other hand companys

investmet has decreased. In the year 2002 investment was Rs.48 crores which was

decreased to 18 in the previous year. It means company is not finding enough investment

opportunities and its distributing most of earnings to its shareholders in the form of

dividends.

So, company need to find good investment opportunities. It should

invest in increase its scope rather than distributing as dividends.

CASH FLOW ANALYSIS:

Abbott India Ltd.

Dec

1999

Dec

2000

Nov

2001

Nov

2002

Nov

2003

Rs. Crore (Non-Annualised) 12 mths 12 mths 11 mths 12 mths 12 mths


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Net profit before tax & extra ord.

Items 46.37 71.51 64.57 84.77 95.06

Add: depreciation 5.09 5.33 4.48 5.32 4.39

Interest payable 0.32 1.46 0.12 0.12 0.1

Gain or loss on forex

transactions 0 0.03 -0.01 0.01 0

Write offs / amortisation 0 0 0 0 0

Profit on sale of investments -0.63 -18.45 -5.69 -3.62 -11.28

Profit on sale of assets -0.38 -0.24 -0.27 -0.72 0.18

Interest income -1.2 0 0 0 0

Dividend income 0 -3.48 -2.06 -0.84 -2.86

Other income / provision

adjustments 0.44 0.51 0.01 0.15 0.67

-

Cash flow before working cap.Changes 50.01 56.67 61.15 85.19 86.26

Trade receivables 23.56 -1.59 -1.75 -1.7 1.46

Inventories 1.11 -16.45 4.28 9.29 14.35

Trade payables 9.26 19.55 -16.56 -6.2 -16.97

Others 0 0 0 0 0

-

Cash flow from operations 83.94 58.18 47.12 86.58 85.1

Interest paid -0.32 -1.46 -0.12 -0.12 -0.1

Direct taxes paid -12.99 -13.84 -13.43 -22.4 -30.57

Dividend tax paid 0 0 0 0 0

-Cash flow before extra ord. items 70.63 42.88 33.57 64.06 54.43

Extraordinary items 0 0 0 0 0

-

Cash flow from operating

activities 70.63 42.88 33.57 64.06 54.43

-

Net cash used in investing

activities -60.49 79.89 2.43 -47.13 -1.6

Purchase of fixed assets -3.54 -3.07 -2.09 -6.46 -2.31

Sale of fixed assets 6.08 13.82 0.73 3.28 0.31

Acquisition / merger of cos. 0 0 0 0 0

Purchase of investments -93.89 -123.01 -57.76 -148.39 -204.29

Sale of investments 29.66 188.67 59.49 103.6 201.83

Dividend received 1.2 3.48 2.06 0.84 2.86

Other income 0 0 0 0 0


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Net cash used in financing

activities -11.64 -126.67 -26.78 -16.23 -53.04

Proceeds from share issues 0 0 0 0 -32.2

Total proceeds from

borrowings 0 0 0 0 0Proceeds from long term

borrowings 0.05 0 0 0 0

Proceeds from short term

borrowings 0 0 0 0 0

Repayment of long term

borrowings 0 0.1 0 -0.03 -0.15

Repayment of short term

borrowings 0 0 0 0 0

Share issue expenses 0 0 0 0 0Dividend paid -11.69 -126.77 -26.78 -16.2 -20.69

Other cash from financing

activities 0 0 0 0 0

-

Net cash flow -1.5 -3.9 9.22 0.7 -0.21

-

Opening cash balance 6.17 4.67 0.77 9.99 10.69

Closing cash balance 4.67 0.77 9.99 10.69 10.48

INTERPRETATION OF CASHFLOW ANALYSIS:

The cash flow analysis show the liquidity position of the firm. The profit of the company is

in dec 99 is 46.37 cr. Ids increase to 95.06 cr. In November 2003 the cash flow before

working capital IN NOV. 99 is 50.01 cr. Is increased in nov. 2003 is to 86.26 the cash flow

from operation is 83.26 cr. In dec. 99 is increased to 85.26 in nov. 2003.


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RATIO ANALYSIS:

Profitability Ratios % Period EndedDec2003

(11 Months)

Period EndedDec2002

(9 Months)

Period EndedMar2002

(12 Months)

Operating Profit Margin -22.93 -3.02 4.84

Gross Profit Margin -23.53 -1.74 5.14

Net Profit Margin -24.97 -4.42 3.53

Inventory Turnover Ratio 3.60 2.97 8.59

Debtor Turnover Ratio 8.92 6.39 12.19

Fixed Asset TurnoverRatio 2.17 2.63 5.55

Current Ratio 1.64 2.59 2.52

DebtEquity Ratio 0.71 0.02 0.00

Interest Covering Ratio -11.78 -12.39 21.95

Return On Investment -18.00 -4.00 13.00

Return On Networth -33.00 -5.00 9.00

Dividend Yield 0.00 0.00 0.00

Debt Equity Ratio 71.00 2.00 0.00


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PROFIT AND LOSS A/C

. PeriodEnded

Mar2004

% PeriodEnded

Mar2003

%

Sales 5018.82 +98.65 2556.39 +99.54Other Income 68.60 +1.35 11.91 +0.46

Total Income 5087.42 2568.30

Raw Material Cost 2553.67 +50.20 1216.69 +47.37

Excise 290.28 +5.71 208.22 +8.11

Other Expenses 631.67 +12.42 501.29 +19.52

Operating Profit 1611.80 +31.68 642.11 +25.00

Interest Name 31.71 +0.62 50.58 +1.97

Gross Profit 1580.10 +31.06 591.53 +23.03

Depreciation 138.53 +2.72 120.17 +4.68

Profit Bef. Tax 1441.56 +28.34 471.36 +18.35

Tax 228.08 +4.48 118.53 +4.62

Net Profit 1213.49 +23.85 352.82 +13.74

Other Non-Recurring Income 33.24 +0.65 5.91 +0.23

Reported Profit 1246.73 +24.51 358.73 +13.97

Equity Dividend 100.00 +1.97 0.00 0.00


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BALANCE SHEET

LIABILITIES

PeriodEnded

Mar2004

PeriodEnded

Mar2003

PeriodEnded

Mar2001

Share Capital 500.00 18.38 15.00

Reserves & Surplus 4,916.31 1,248.72 565.10

Net Worth (1) 5,416.31 1,267.10 580.10

Secured Loans (2) 646.91 685.65 343.00

Unsecured Loans (3) 0.00 0.00 38.90

Total Liabilities (1+2+3) 6,063.23 1,952.75 962.00

ASSETS

PeriodEnded

Mar2004

PeriodEnded

Mar2003

PeriodEnded

Mar2001

Gross Block 1,912.29 1,555.46 786.70

(-) Acc. Depreciation 471.20 335.56 164.10

Net Block (A) 1,441.09 1,219.90 622.60

Capital Work in Prgs. (B) 543.12 79.84 25.20

Investments (C) 89.33 84.83 0.60

Inventories 839.52 466.96 217.60

Sundry Debtors 1,159.64 737.47 391.70Cash And Bank< 3,175.11 10.22 0.10

Loans And Advances 287.27 156.84 59.90

(i) 5,461.54 1,371.48 669.30

Current Liabilities 1,329.09 777.58 355.70

Provisions 142.77 25.72 0.00

(ii) 1,471.86 803.30 355.70

Net Curr. Assets (i - ii) (D) 3,989.68 568.18 313.60

Misc. Expenses (E) 0.00 0.00 0.00Total Assets (A+B+C+D+E) 6,063.23 1,952.75 962.00


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BIOCON

BASIC INFORMATION:


Ownership Private (Foreign)

Main activity Bio-tech base drugs

Subsidiary/ies Biocon Biopharmaceuticals Pvt. Ltd.

Clinigene International Pvt. Ltd.

Syngene International Pvt.

Ltd.

HISTORY:

Biocon is India's largest biotech company with a presence in bio-pharmaceuticals,

enzymes, customs research and clinical research. Chairman Kiran Mazumdar Shaw

promoted the company as a joint venture with Ireland-based MNC Biocon Biochemicals.

Later, Unilever Plc acquired Biocon Biochemical's stake in February 1995, but sold it to

the current promoters in June 1999. .

Kiran Mazumdar Shaw is a first generation entrepreneur with over 25

years of experience in biotechnology. She is the recipient of several awards, the most

noteworthy being the Padmashri, conferred in 1989; the Ernst & Young Entrepreneur of the

Year Award in 2002 for the Healthcare & Lifesciences category; and, more recently, in

2003, the BioSpectrum Person of the Year award. She heads several biotechnology task-

forces including the Karnataka Vision Group on Biotechnology, an initiative by the

government of Karnataka, and the National Taskforce on Biotechnology for the

Confederation of Indian Industry. .

Key management personnel of the company include Arun Bhardwaj,


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Arun Chandavarkar and Shrikumar Suryanarayanan, apart from Mr and Mrs Shaw. Arun

Bhardwaj is the group's marketing president and has nearly 20 years of experience in direct

marketing, sales and strategy and served as project engineer in Max India prior to joining

Biocon. Dr Chandavarkar is the group's president - manufacturing and has over 13 years of

experience in manufacture and scale-up of fermentation process, projects, maintenance and

quality assurance. Suryanarayanan is the group's R & D president with about 20 years of

experience in research of fermentation-based manufacturing techniques and was

instrumental in the company's R & D functions. .

Biopharmaceuticals (biopharma) and enzymes together constitute about

90 to 93% of the group revenues. But Biocon has been progressively increasing the share

of biopharma from 61% in FY 2001 to 64% in FY 2002 to 71% in FY 2003 and to 81% in

the nine months ended December 2003 in the total group revenues.

Biopharmaceuticals has been and will continue be the mainstay of

Biocon it promise exciting growth opportunities. This segment is involved primarily in

manufacture and marketing of active pharmaceutical ingredients (API) that require

advanced fermentation and other skills and offer significant market potential in the

regulated markets once the product goes off patent. Within this segment, statins constitute

major products. Statins are a group of popular cholesterol-lowering drugs.

The significant growth in sales in the recent past has resulted in full

utilisation of capacity in the existing manufacturing facilities. A number of generic

companies who are in the process of registering their formulations in the US and Europe

for sale (upon expiry of patents) have evinced interest to use Biocon's statins. The company

has already filed 8 drug master files in the US and 7 in the Europe for its various products.

To cater to this increased demand, it plans to invest Rs 413.4 crore over a period of time up

to FY2006 towards setting up a new fermentation and chemical synthesis facility as a

100% EOU. .

In March 2004, the company tapped the capital market through 100%


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book building method. The IPO comprises of 10 million equity shares of Rs 5 each with a

price band of Rs.270 -Rs.315 per equity share. The proceeds from the book building will be

utilised for setting up a new facilities and chemical synthesis operations with an estimated

fund of Rs.413.40 crores.

BOARD OF DIRECTORS:

NAME POSITION

Kiran Mazumdar-Shaw CH & MD

John Shaw Vice CHNeville Bain (Dr.) Director

Charles L Cooney (Prof.) Director

Suresh Talwar Director

Ravi Mazumdar (Prof.) Director

Catherine Rosenberg (Prof.) Director

Ada K H Tse (Ms.) Director

FUND FLOW STATEMENT:

200403 200303 200203


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SOURCES OF FUNDS

Cash profit 138.47 47.82 41.68

Increase in equity 48.16 0.02 1.82

Increase in other networth 252.41 3.39 63.39

Increase in loan funds 0 2.1 66.46Decrease in investments 0 0 0

Decrease in working capital 0 0 0

Total Inflow 439.04 53.33 173.35

APPLICATION OF FUNDS

Decrease in networth 0 0 0

Decrease in loan funds 3.87 0 0

Increase in gross block 82.25 33.94 127.17

Increase in investments 0.45 0 8.48

Increase in working capital 342.15 19.12 37.7Dividend 10 0 0

Others 0.32 0.27 0

Total Outflow 439.04 53.33 173.35

INTERPRETATION OF FUND FLOW:

Cash profit of the company was about Rs. 138 Crores which is thrice than previous year. It

means company has enough liquidity. But still it did not find good investment

opportunities. In the previous year company made investment of Rs.45 lacs. only. there

was huge increase in working capital of the company, it was increased to Rs. 342.15 Crores

in the financial year 2003-04 from Rs. 19.12 crores in the year 2002-03.

RATIO ANLYSIS:

Profitability Ratios % Period EndedDec2003

(11 Months)

Period EndedDec2002

(9 Months)

Period EndedMar2002

(12 Months)

Operating Profit Margin -22.93 -3.02 4.84

Gross Profit Margin -23.53 -1.74 5.14

Net Profit Margin -24.97 -4.42 3.53

Inventory Turnover Ratio 3.60 2.97 8.59

Debtor Turnover Ratio 8.92 6.39 12.19

Fixed Asset TurnoverRatio 2.17 2.63 5.55

Current Ratio 1.64 2.59 2.52


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DebtEquity Ratio 0.71 0.02 0.00

Interest Covering Ratio -11.78 -12.39 21.95

Return On Investment -18.00 -4.00 13.00

Return On Networth -33.00 -5.00 9.00

Dividend Yield 0.00 0.00 0.00Debt Equity Ratio 71.00 2.00 0.00

P& L A/C

. PeriodEnded

Dec2003

(11Mnts.)

% PeriodEnded

Dec2002

(9Mnts.)

% PeriodEnded

Mar2002

%

Sales 300.02 +98.67 414.25 +98.50 991.96 +99.48

Other Income 4.05 +1.33 6.30 +1.50 5.22 +0.52

Total Income 304.07 420.56 997.18

Raw Material Cost 179.84 +59.14 250.78 +59.63 490.11 +49.15

Excise 32.15 +10.57 8.63 +2.05 60.66 +6.08


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Other Expenses 156.84 +51.58 167.36 +39.80 393.23 +39.43

Operating Profit -64.75 -21.29 -6.21 -1.48 53.18 +5.33

Interest Name 5.84 +1.92 1.01 +0.24 2.18 +0.22

Gross Profit -70.59 -23.21 -7.22 -1.72 51.00 +5.11

Depreciation 14.62 +4.81 7.89 +1.88 10.56 +1.06Profit Bef. Tax -85.21 -28.02 -15.12 -3.59 40.44 +4.06

Tax -10.28 -3.38 3.18 +0.76 5.37 +0.54

Net Profit -74.93 -24.64 -18.30 -4.35 35.06 +3.52

Other Non-Recurring Income

-42.17 -13.87 -6.82 -1.62 -22.90 -2.30

Reported Profit -117.09 -38.51 -25.12 -5.97 12.16 +1.22

Equity Dividend 0.00 0.00 0.00 0.00 0.00 0.00

BALANCE SHEET

LIABILITIES

PeriodEnded

Dec2003(11

Mnts.)

PeriodEnded

Dec2002(9

Mnts.)

PeriodEnded

Mar2002(12

Mnts.)Share Capital 26.10 26.10 26.10

Reserves & Surplus 199.74 321.22 346.34

Net Worth (1) 225.83 347.31 372.44

Secured Loans (2) 4.00 6.96 0.00

Unsecured Loans (3) 155.94 0.64 0.96


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Total Liabilities (1+2+3) 385.77 354.91 373.40

ASSETS

PeriodEnded

Dec2003(11

Mnts.)

PeriodEnded

Dec2002(9

Mnts.)

PeriodEnded

Mar2002(12

Mnts.)

Gross Block 229.33 233.66 257.99

(-) Acc. Depreciation 90.82 76.42 79.13

Net Block (A) 138.52 157.24 178.86

Capital Work in Prgs. (B) 0.00 3.29 3.29

Investments (C) 0.00 0.00 0.15

Inventories 102.58 143.71 109.86

Sundry Debtors 33.62 64.85 81.35

Cash And Bank< 4.77 1.23 73.44

Loans And Advances 70.18 106.79 51.95

(i) 211.14 316.58 316.60

Current Liabilities 125.33 117.14 117.23

Provisions 3.65 5.07 8.27

(ii) 128.98 122.21 125.50

Net Curr. Assets (i - ii) (D) 82.16 194.38 191.10

Misc. Expenses (E) 165.09 0.00 0.00

Total Assets (A+B+C+D+E) 385.77 354.91 373.40

ACC

BASIC INFORMATION:


Ownership ACC Group

Main activity Cement

Subsidiaries A C C Machinery Co. Ltd.

A C C-Nihon Castings Ltd.


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Bargarh Cement Ltd.

Bulk Cement Corpn. (India) Ltd.

Cement Marketing Co. Of India

Damodhar Cement & Slag Ltd.

Everest Industries Ltd.

HISTORY:

Associated Cement Companies (ACC), one of the leading Cement producer in

India came into existence consequent to the amalgamation of ten cement

companies in 1936. Manufacturing and marketing of cement, redymix concrete,

refractories and refractory products are the main business of ACC. Further the

company is also into consultancy and engineering services.ACC's manufacturing

base consists 14 cement plants spread well all over India, two refractory plants one

each at maharashtra and MP and 6 RMC plants near to four metros of India and

Bangalore. The total cement capacity of ACC stands at 161.47 lakh tonnes at

March 31, 2003. .

In Jan. 1999, the company came out with a rights issue to fund its

capex projects involving modernisation/ expansion of existing plants and creation

of new capacity at Wadi. The company meets around 83% of its power

requirements from its captive power plants. The captive power plant at Jamul and

Kymore with an capacity of 25 MW each was commissioned in Nov 1999. The 15

MW capitive powerplants at Chanda, Tikaria and Madukkarai were commissioned

during the year 2002-03. .


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In 2000, Tata group has exited from the company by divesting

their 14% equity stake in favour of Gujarat Ambuja group. Notably, Gujarat

Ambuja group is the most efficient and aggressive cement group in India. The

disinvestment was done in phases at Rs 370 per share. ACC has completed themodernization and expansion of the Chanda and Madukkarai cement plants for

increasing their capacities to around 1 MTPA each. These plants started

production from 1 September 2000 and 1 October 2000 respectively. The de-

bottlenecking at Chanda, Gagal and Madukarrai plants have added 1 MT to ACC's

installed capacity. The 2.6 MTPA Cement plant at Wadi with largest Kiln in the

country has started its commercial production from Oct 2001.

The company has decided to exit from the non-core businesses in

an optimal manner. The company has completed divestment of its stake in

Floatglass India Ltd([13% stake] in 2001-02), International Ferrites Ltd.([35%

stake] in 2002-03) and Bridgestone ACC India Ltd.([19% stake] in 2002-03).

Further it has also sold its stake(5,00,000 E.Shares) in Tata Industries in 2001-02.

The company is making all efforts to hive off the ACC Nihon Casting, a 100%

subsidiary of ACC manufacturing alloy steel casting but has not met success yet.

.

At the same time of existing from non-core businesses the

company has not failed to invest in core activities it has acquired 76.01% stake in

Eternit Everest from Etex Group in Feb 2002. Consequent to the acquisition the

Eternit everest became the subsidiary of ACC w.e.f from Feb 12, 2002.


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OARD OF DIRECTORS / KEY PERSONNEL:

NAME POSITION

Tarun Das CH

Narotam Sekhsaria Deputy CH

M L Narula MD

A K Jain Exec. Director

N A Soonawala Director

O P Dubey Director

A L Kapur Director

Cyril S Shroff Director

Amitabha Ghosh Director

A Anjeneyan Director (UTI)

Naresh Chandra Co. Secretary

R K Vashishtha Director


Banks, FIIs and mutual fund companies have holdings in ACC.

This shows that this is considered to be fundamentally strong company and it has

good prospects. They have about 35% of total holding in this company. So, it is

horse of long race. Every professional institution is keeping eyes on this company.


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Type/Name of holder No of shares % of total

shares

MUTUAL FUNDS AND UTI

HSBC Equity Fund 31,32,771 1.76

UTI - Master Share Unit Scheme 18,31,622 1.03

BANKS,FI'S,INSURANCE COS.

Life Insurance Corporation of India 2,84,49,758 15.97

New India Assurance Company Ltd 33,33,612 1.87

Oriental Insurance Company Ltd 22,49,247 1.26

FII'S

Small Cap World Fund Inc 71,50,000 4.01HSBC Global Investment Funds A/c 56,93,500 3.2

Government of Singapore Investment

Corporation Pte Ltd 26,22,675 1.47

Capital Research & Management

Company A/C New World Fund Inc 25,00,000 1.4

Merrill Lynch Capital Markets Espana

SA SVB 19,17,207 1.08

PRIVATE CORPORATE BODIES

Ambuja Cement India Ltd 2,46,70,000 14

ANY OTHER

Shares underlying GDRs 28,50,000 1.6

Shares held by Pakistani Citizens 3,85,965 0.22

FUND FLOW STATEMENT:

200403 200303 200203 200103 200003

SOURCES OF FUNDS

Cash profit 345.95 265.36 289.87 174.75 58.8

Increase in equity 6.27 0.14 0.11 0 34.04

Increase in other net worth 140.83 0 0 5.56 147.24


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Increase in loan funds 0 0 0 231.62 49.8

Decrease in investments 0 47.57 6.14 0 0

Decrease in working Capital 49.81 104.94 278.47 3.72 53.71

Others 17.23 21.44 0 17.15 0

Total Inflow 560.09 439.45 574.59 432.8 343.59

APPLICATION OF FUNDS

Decrease in net worth 0 4.38 211.23 0 0

Decrease in loan funds 78.94 92.11 130.65 0 0

Increase in gross block 162.3 300.23 177.93 387.9 253.19

Increase in investments 247.97 0 0 9.27 25.49

Increase in working capital 0 0 0 0 0

Dividend 70.88 42.73 51.24 34.14 15.65

Others 0 0 3.54 1.49 49.26

Total Outflow 560.09 439.45 574.59 432.8 343.59

Fund flow statement is very useful to know application of funds in particular period

and also from where those funds came.

Cash profit of the company is increasing at a consistent rate. In the

year 2003-04 the cash profit of the company was Rs. 345.95 Cr. Increase in net

worth was RS. 140.83 Cr. In the financial year 203-04 there was decrease in

working capital. These were sources of funds.

Company also paid back its loan of Rs.78.94 Cr. And paid dividend to

its shareholders in current financial year due to increase in net cash profit. So, company is

earning good cash profit and repaying its long-term obligations. Company has also

invested Rs. 248 Crores. And a company has enough investing opportunities.


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CASH FLOW STATEMENT:

200403 200403 200303 200303 200203

Cash Flow Summary

Cash and Cash Equivalents at

Beginning of the year 34.82 27.49

Net Cash from Operating Activities 478.29 442.04

Cash Flow From Operating Activities

Net Profit before Tax & Extraordinary

Items 264.16 135.14 200.33

Adjustment For

Depreciation 176.85 164.56 151.14

Interest (Net) 92.91 103.91 139.95

Dividend Received -37.6 -0.39 0

P/L on Sales of Assets -4.38 -5.19 -2.74P/L on Sales of Invest 0.05 -50.36 -9.13

Prov. & W/O (Net) 57.25 45 43.02

P/L in Forex -20.44 -2.18 0

Fin. Lease & Rental Chrgs 0 0 0

Others 0.83 -5.22 -0.03

Total Adjustments (PBT & Extraordinary

Items) 265.47 250.13 322.21

Op. Profit before Working Capital Changes 529.63 385.27 522.54

Adjustment For

Trade & 0th receivables -64.22 13.67 24.11

Inventories -33.5 -47.67 12.68

Trade Payables 95.29 74.57 3.92

Others -10.15 -10.3 0

Total (OP before Working Capital

Changes) -12.58 30.27 40.71

Cash Generated from/(used in)

Operations 517.05 415.54 563.25

Interest Paid (Net) 0 0 0

Direct Taxes Paid -38.76 26.5 -44.61

Advance Tax Paid 0 0 0Total-others -38.76 26.5 -44.61

Cash Flow before Extraordinary Items 478.29 442.04 518.64

Extraordinary Items

Payment Towards VRS 0 0 -28.4

Others 0 0 -6.26

NET CASH USED IN INVESTING ACTIVITIES 415.45 159.33

Net Cash Used in Financing Activities -58.15 275.38


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Net Inc/(Dec) in Cash and Cash

Equivalent 4.69 7.33

Cash and Cash Equivalents at End of the

year 39.51 34.82

Cash flow statement is very useful to know the liquidity position of the

company. Which activity produced how much cash. It bifurcate cash in three ways cash

flow from financing, operation and investing activities.

Net cash used in investing activities in the year 2002-03 was

Rs. 159.33 Crores which was increased to Rs.415.45 crores in the financial year

2003-04. it means company is expanding its capacity and investing in valuableprojects. Net cash used in financing activities was 58.15 Crs . it indicates company

has borrowed from outside in form of debt to invest in new projects. Cash Generated

from Operations was also increased to Rs.517.05 Cr. In the year 2003-04 from

415.54 in the financial year 2002-03. it was increased by 23%.

So, cash flow from operation is increasing which is very good.

The revenue is increasing and profitability is also increasing. on the other handcompanys investment has also increased they are trying to increase their capacity.


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RATIO ANALYSIS:

Ratios

Profitability Ratios % PeriodEnded

Mar2004(12

Months)

Period EndedMar2003

(12 Months)

Period EndedMar2002

(12 Months)

Period EndedMar2001

(12 Months)

Period EndedMar2000

(12 Months)

Operating Profit Margin 13.26 11.74 15.90 14.20 8.16

Gross Profit Margin 12.61 8.81 11.54 8.85 2.76

Net Profit Margin 4.64 1.59 3.84 2.15 -3.18

Turnover Ratios

Inventory TurnoverRatio

7.54 7.40 7.88 7.07 7.46

Debtor Turnover Ratio 18.01 15.90 12.98 10.40 9.28

Fixed Asset

TurnoverRatio

1.38 1.22 1.27 1.38 1.28

Solvency Ratio

Current Ratio 0.82 0.85 0.94 1.37 1.45

DebtEquity Ratio 0.98 1.30 1.48 1.44 1.27

Interest Covering Ratio 3.88 2.47 2.86 1.96 1.21

Performance Ratio %

Return On Investment 16.00 14.00 18.00 13.00 8.00

Return On Networth 11.00 4.00 11.00 5.00 -7.00

Dividend Yield 0.40 0.25 0.30 0.20 0.09

Debt Equity Ratio 98.00 130.00 148.00 144.00 127.00


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PROFIT AND LOSS A/C:

Profit & Loss Accounts (Rs.in Millions)

. Period

EndedMar2004

(12Mnts.)

% Period

EndedMar2003

(12Mnts.)

% Period

EndedMar2002

(12Mnts.)

%

Sales 3,2839.80 +97.31 2,8944.10 +98.21 2,8106.30 +9

Other Income 908.10 +2.69 527.00 +1.79 339.60 +

Total Income 3,3747.90 2,9471.10 2,8445.90

Raw Material Cost 1,2183.00 +36.10 6870.90 +23.31 6960.60 +2

Excise 6150.40 +18.22 5013.80 +17.01 4292.80 +1

Other Expenses 1,0152.90 +30.08 1,3662.00 +46.36 1,2384.60 +4Operating Profit 5261.60 +15.59 3924.40 +13.32 4807.90 +1

Interest Name 1121.70 +3.32 1373.00 +4.66 1564.70 +

Gross Profit 4139.90 +12.27 2551.40 +8.66 3243.20 +1

Depreciation 2071.80 +6.14 1941.10 +6.59 1816.70 +

Profit Bef. Tax 2068.10 +6.13 610.30 +2.07 1426.50 +

Tax 543.20 +1.61 150.90 +0.51 347.00 +

Net Profit 1524.90 +4.52 459.40 +1.56 1079.50 +

Other Non-Recurring Income 477.50 +1.41 579.50 +1.97 224.80 +

Reported Profit 2002.40 +5.93 1038.90 +3.53 1304.30 +Equity Dividend 708.80 +2.10 427.30 +1.45 512.40 +


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BALANCE SHEET:

Balance Sheet (Rs.in Millions)

LIABILITIES

Period

EndedMar2004

Period

EndedMar2003

Period

EndedMar2002

Share Capital 1,779.40 1,711.40 1,710.50

Reserves & Surplus 11,757.90 9,056.00 8,488.20

Net Worth (1) 13,537.30 10,767.40 10,198.70

Secured Loans (2) 10,401.30 12,874.20 11,054.00

Unsecured Loans (3) 2,871.10 1,173.30 4,048.70

Total Liabilities (1+2+3) 26,809.70 24,814.90 25,301.40

ASSETSPeriodEnded

Mar2004

PeriodEnded

Mar2003

PeriodEnded

Mar2002

FIXED ASSETS

Gross Block 37,897.50 36,369.90 33,260.60

(-) Acc. Depreciation 14,141.40 12,684.30 11,069.60

Net Block (A) 23,756.10 23,685.60 22,191.00

Capital Work in Prgs. (B) 1,161.00 981.70 1,245.70

Investments (C) 3,757.40 1,277.70 1,753.40

CURRENT ASSETS, LOANS & ADVS.

Inventories 3,780.10 3,453.90 3,001.20

Sundry Debtors 1,823.70 1,820.90 2,165.00

Cash And Bank< 395.10 348.20 274.90

Loans And Advances 4,352.10 3,726.10 3,719.60

(i) 10,351.00 9,349.10 9,160.70

Current Liab. & Provs.

Current Liabilities 10,939.60 9,825.30 8,712.70

Provisions 1,625.40 1,175.40 1,072.60

(ii) 12,565.00 11,000.70 9,785.30

Net Curr. Assets (i - ii) (D) -2,214.00 -1,651.60 -624.60

Misc. Expenses (E) 349.20 521.50 735.90

Total Assets (A+B+C+D+E) 26,809.70 24,814.90 25,301.40


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JAIPRAKASH

BASIC INFORMATION:

NAME: Jaiprakash Associates Ltd.


Ownership Jaiprakash Group

Main activity Ordinary Portland cement

HISTORY

Jaiprakash Associates (JAL), promoted by erstwhile Jaiprakash

Industries was incorporated on 15th Nov. 1995 under the name Bela Cement. Its name

was changed to Jaypee Rewa Cement w.e.f 30th Aug 2000 and then to Jaypee Cement

w.e.f 3rd Jan 2002. The company was a wholly owned subsidiary of erstwhile Jaiprakash

Industries and was engaged in manufacturing and marketing of cement.

Pursuant to the Scheme of Amalgamation of erstwhile Jaiprakash

Industries with the company, the name has been changed to present one w.e.f 11th March

2004. JAL is presently engaged in the business of manufacturing and marketing of

cement, construction of infrastructure projects like Dams, Barrages, Tunnels,

Underground Power Houses, Highways/Express way etc. and Hoteliering.


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BOARD OF DIRECTORS:

NAME POSITION

Jaiprakash Gaur CHManoj Gaur MD

P V Vora Director

Ranvijay Singh Director

Rahul Kumar Director

V K Jain Director

R S Kuchhal VP & Secretary


Type/Name of holder No of shares % of total shares


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INDIAN PROMOTERS

Jaypee Ventures Ltd 4,74,32,830 26.92

Jaiprakash Enterprises Ltd 1,17,24,262 6.65

FII'S

GMO Emerging Markets Fund 1,46,35,020 8.31

Merrill Lynch Capital Markets Espana

SA SVB

46,93,921 2.66

Arisaig Partners (Asia) Pte Ltd A/C

Arisaig Fund Ltd

40,00,000 2.27

UBS AG A/c Long - Term India

Investments Fund Ltd

18,29,784 1.04

PRIVATE CORPORATE BODIES

HB Stockholding Ltd 29,32,135 1.66

Har Sai Investments Ltd 22,40,267 1.27

Matchless Investments Ltd 19,20,000 1

ANY OTHER

Shares in transit / Pool a/c 16,62,592 0.94

Jaiprakash is fundamentally strong company. When you see its equityholding information you will find that about 15% of its total shares are held by FIIs.

foreign institution put trust on this company .about 27% of holdings are with Jaypee

Ventures Ltd and 7% with Jaiprakash Enterprises Ltd.

BALANCE SHEET

Annual Unaudited Results (Rs. in Millions)

.Period Ended

Mar2004(12 Months)

Period EndedMar2003

(12 Months)% Change

Sales Turnover 2,3860.00 2,5150.00 -5.13

Other Income 1320.00 880.00 + 50.00

Total Income 2,5180.00 2,6030.00 -3.27


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Total Expenditure 1,9190.00 2,0520.00 -6.48

Operating Profit 5990.00 5510.00 + 8.71

Interest 2050.00 2050.00 0.00

Gross Profit 3940.00 3460.00 + 13.87

Depreciation 1270.00 1080.00 + 17.59Tax 970.00 1260.00 -23.02

ReportedPAT 1700.00 1120.00 + 51.79

sapm report (pancholi chirag)

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