It’s black...& it’s not gold!
Long gone are the days when petroleum was considered to be a pain for the Indian economy. In the new era of liberalised economic system, oil is more of an asset than an impediment...

The maintenance of 15% of the world’s population with only 0.5% of the reserves is apparently giving the Ministry of Oil and Gas sleepless nights... or is it? The CAGR for oil consumption is about 5.9%. According to a study carried out by PricewaterhouseCoopers, although the demand for oil & gas in the country is large, India accounted for just 0.3% of the overall deals. At present, India is the 11th maximum consumer of oil & gas and but aims at becoming the 5th maximum in 20 years.

The exploration & production of oil and gas is dominated by ONGC (78%) followed by Oil India Ltd. (9%). The private sector contributes the remaining 13%. Lately, the sector is facing a lot of challenges. Rohit Nagraj, Research Analyst, Angel Broking, comments, “Crude oil volatility and government intervention in public sector undertakings are the primary concerns hovering on the oil & gas sector. For attaining self sufficiency in crude oil supplies, the companies are investing in acquiring oil blocks...” Now, with the increase in infrastructure, the demand for oil is constantly rising and so is the competition in the sector. According to Virender Singh Saini, Technical Directorate, Indian Institute of Petroleum, “The availability of crude oil is decreasing and globalisation has led to a rise in competition. The volatile price has proved to be expensive and due to the government regulations on the retail price of the fuel, the margins in refining industry have dwindled.”

The sector, which for long had been dominated by the public sector, seems to be getting a taste of private players. Currently, the demand of 128 MMT falls short of domestic supply by 95 MMT. But with their forays, private players have proved wrong the concerns revolving around diminishing stocks. New discoveries in the Krishna-Godavari basin and in the Mahanadi Basin are already attracting a lot of foreign attention. Global deals in the oil and gas sector stood at a whopping $291 billion in 2006, growing by 16% over last year. Some of the major developments seen during the year are BPCL’s takeover of KRL, Cairn’s pre-IPO placement and ONGC-Cairn’s Rajasthan oilfield. ENI also signed an agreement with ONGC for a 35% stake in its proven gas field, Mahanadi Basin.

Apart from all the aforementioned developments made on the international front, top companies like Indian Oil and Reliance Industries achieved phenomenal growth as well. Angel Broking’s Nagraj shares, “Reliance Industries achieved an all time high GRM of $11.7/bbl during 2006-07, which led to it crossing the coveted Rs.100 billion net profit mark.” Indian Oil, on the other hand, sold 54.8 million tonnes of petroleum products in 2006-07 (an annual increase of 2.8 million tonnes). Furthermore, GAIL which dominates the gas sector, recorded Rs.23.8 billion profit after tax. Considering the international attention these companies are receiving, it seems that oil is on its way of divorcing its ‘unsustainable burden’ status soon.

Back to the drawing board
India desperately needs organisations that can help India scale global standards & newer heights in international chemical industry marketplace

From a modest beginning in the early 1960s with the setting up of Union Carbide India Ltd., the Indian petrochemical industry remained largely insulated against global cycles. Thanks to the economic reforms which brought about delicensing & deregulation and allowed market forces to determine growth, the industry has been exposed to the global trends through lowering of tariff barriers, as a consequence of which, the Indian petrochemical manufacturers now find their profitability subject to the same cyclicality as their global counterparts.

Though India’s petrochemical production (India accounts globally for 2.1% of ethylene capacity and 2% of propylene capacity) and consumption is small, it is definitely amongst the fastest growing markets of the world. According to an analysis of KPMG, based on a survey of the industry, chemical industry in India has potential to grow to around $100 billion by 2010. That’s smashing!

With organisations like ICI, Pidilite Industries and Jubilant Organosys, companies in this segment are eyeing for a greater market share in the global chemical industry, valued at around $2 trillion. The Indian chemical & petrochemical industry currently contributes $9.08 billion to exports and is growing at the rate of 8.9%. The trio of cost effective R&D, availability of raw materials and technically efficient manpower, has played a pivotal role in the competitiveness of the industry. From being just a plain vanilla chemical company, over the years, Indian companies have diversified into businesses like paints, pharma, life sciences products (PLSP) and others.

The paint industry continues to be the main driver of the industry, as there exists a strong demand from both industrial and decorative segments. ICI (India) – a paints, specialty chemicals and performance materials company – topped the sector list with net profits of Rs.4.48 billion, followed by Jubilant Organosys with net income of Rs.2.31 billion. “While our industrial chemicals and other businesses continue to do well, the PLSP operation will be the lead driver of our performance going forward,” shared Shyam Bhartia, CMD, Jubilant Organosys Ltd..

With introduction of new products and a fast growing domestic economy, the petrochemical and chemical industry will have a chemistry that will be worth watching in the times to come.

Art of ‘healthy’ living...
No doubt, at relative per capita levels, the healthcare & the pharmaceutical sectors provide perhaps the cheapest products and services; but that’s not all...

Providing people adequate healthcare was never as important as it is today, as we need an able population for our socio-economic sustenance. Considering the fact that India spends only 5-6% of its $720 billion worth GDP on healthcare, wonder why we do not talk about health so much?

According to the India Brand Equity Foundation, in a country of 1,000 million people, there are only 870,161 hospital beds in a meagre 5,097 hospitals. Well, if you think that all is lost and nothing can save Indians medically, then wait for some more surprises. On a totally contrary plain, India is home to the best medical facilities in the world. Growing at an enviable 25% annually, medical tourism in India is worth an ever burgeoning $350 million and is expected to reach an estimated $2 billion within the next six years. Riding on unbelievable cost advantages over its developed cousins, India has obliterated competition with skilled and contemporary manpower-technology combination. Considering a cost advantage of a mindnumbing 361.5% for a bypass surgery over USA, the foreign demand for Indian healthcare has been on a relentless surge. Capitalising on the opportunity, a number of high profile foreign-domestic investors are making a beeline for the Indian healthcare sector. Indian heavyweights like Wockhardt, Ranbaxy (Max Healthcare, Fortis), Apollo & now the Hindujas have big investments to the tune of $1 billion lined up. Besides, companies are all set to go global and on the radar are destinations as far as the US, the UK and Mauritius, with countries in West and southeast Asia in between.

With such huge investments in the pipeline, it is expected that total healthcare market in the country could reach $53-73 billion in the next five years. Pharma companies too are already raking in record moolah. Dr. Reddy’s saw its revenue for the year 2006-07 climb up to Rs.65,095 million ($1.5 billion), as against Rs.24 billion ($563 million) in FY05-06, an increase of 168%.

Overseas markets, especially the US, continue to be the main drivers of sales of Indian companies. All frontline Indian drug companies are stacked with fl asks full of USFDA approvals. It is also evident from the fact that over 40% of total drug master fi les – applications seeking permission to market raw materials for making generic medicines – filed in the US are by Indian companies. But what about India? Oh, that’s an easy one. With 400 million plus below the poverty line, the lesser said the better...