global ambitions of Indian companies, underpinned by unprecedented
overseas acquisitions, are now playing out in the pharmaceutical
industry, says Bundeep Singh Rangar, chairman of
the UK-based IndusView Advisors.
is expected to become the world's second largest economy
by 2050. Booming technology exports, rising domestic consumption
from a burgeoning 300 million-strong middle class and
macro economic reforms are the key drivers behind the
9 per cent annual growth of India's $800-billion economy.
The Indian economy is on the threshold of unlocking huge
opportunities for international investors keen to become
part of the India growth story.
is a growing realisation across the board that economies
need to co-exist: if one segment of it serves as the market
for the other, the other serves as the source of expertise
and economical, efficient, manpower and resources.
this changing scenario, the Indian economy that has grown
at more than 9 per cent in the last couple of quarters
has been at the centre stage and focus of the governments
and global companies alike. This is the sixth quarter
out of the past seven that GDP growth has exceeded 8 per
cent and was among the strongest increases the country
has ever recorded.
exciting phase that India is going through is marked by
growth that has come about as a result of almost homogenous
contribution from across industry sectors.
vast pool of English-speaking skilled managerial and technical
manpower matches, if not surpasses, the best in the world.
These factors have led numerous multinational companies
to not only establish operations in India but also to
count it among their key markets. While overseas companies
have set up base in India, increasing number of Indian
companies are also aspiring to go global.
The year 2006 was marked by increased traction in deal
making by India Inc. The total value of deals increased
to $28 billion from $18 billion last year, a growth of
54 per cent. In the 266 cross border deals at $15 billion,
India Inc.'s growing global ambitions continued unabated
as Indian companies made more acquisitions abroad through
190 deals valued at $10 billion (outbound) compared to
just 76 acquisitions for $5.4 billion made by overseas
companies in India (inbound).
year 2007 is on track to be a year of 'mega deals'. The
deals so far have already captured around $40 billion,
twice as much as last year and 10 times more when compared
to the corresponding period. While last year the focus
was on the volume of deals, 2007 will be more value driven
and is expected to touch the $100 billion mark.
The global ambitions of Indian companies, underpinned
by unprecedented overseas acquisitions, are now playing
out in the pharmaceutical industry.
After the withdrawal of the odds-on favourite Ranbaxy,
Indian pharmaceutical companies including Cipla Ltd and
Torrent Pharmaceuticals are still among those considering
the acquisition of the generic drug making unit of Germany's
Merck KGaA's valued at about $7 billion. They join other
bidders such as US-based Mylan Laboratories Inc, Iceland's
Actavis Group HF, Switzerland based Novartis International
AG, Israel's Teva Pharmaceutical Industries Ltd and a
private equity consortium including Bain Capital and Apax
increase in worldwide M&A activity in the pharma-sector
is attributed to the expected market growth as drugs worth
$65 billion in sales go "off patent" next year.
the deal for Merck's generic drug business goes to an
Indian entity, it will be the biggest acquisition of a
pharma company by an Indian company and more than three
times the value of M&A deals in the sector in 2006.
The pharma sector accounted for second most M&A deals
worth $2.5 billion in 2006 compared with just $364 million
the previous year.
acquisition of Merck's generic drug business, the world's
fourth-biggest producer will be significant as it will
catapult the Indian company into the global league with
the unit worth as much as $6 billion, i.e. 2-3 times their
companies are strongly positioned to grab the new opportunities
in the generic drug market as they have the benefit of
low-cost manufacturing, world-class production skills
and availability of quality manpower. Domestic production
costs in India are almost 50 per cent less compared to
drug-makers are expected to acquire a 33-per cent share
of the global generic drug market in the next two years
against the current 4 per cent market share, according
to industry estimates.
India's Ranbaxy Laboratories Ltd and Dr Reddy's Laboratories
Ltd were among those who withdrew from the race to acquire
Merck's generic drug business on concerns of the valuation
of the unit being too high. This concern is reflected
in the fact that Merck's generics business is expected
to take a hit when its US subsidiary Dey loses its patent
for the profitable drug Duoneb, used to treat bronchial
spasms. It accounted for 15 per cent of the generics unit's
revenue in 2006.
prominence in the global M&A arena started with the
successful acquisition of UK's Corus Group Plc by India's
Tata Steel Ltd; India's largest non-ferrous metals company
Hindalco Industries Ltd's acquisition of Atlanta-based
Novelis Inc for $6 billion and the ongoing bidding war
for German wind turbine company REpower Systems AG between
India's largest wind turbine manufacturer Suzlon Energy
Ltd and French nuclear-reactor maker Areva SA.