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LEADER The Right Prescription The coming drug policy could put an end to pharma majors' controversial reliance on the small-scale sector to make and hawk their products.
Johnson & Johnson (J&J) too did so with Coldarin, a brand it had acquired from Knoll Pharma three years ago. But if a petition filed before the Monopolies & Restrictive Trade Practices Commission (MRTPC) is to believed, J&J violated DPCO provisions by assigning the brand to small scale units in which J&J had substantial shareholdings. If this is correct, J&J has clearly violated the price control order, which doesn't exempt a small scale unit that's a subsidiary of a large pharma company from price control. A J&J spokesman told BT that he wasn't in a position to comment, as he had not received a copy of the petition.
If loopholes exist, there will always be someone to exploit them. And the only way to nip this practice-which could result in substandard products hitting the market-is to amend the highly growth-constricting DPCO. Of course, those who take recourse to this exercise point out that outsourcing is a better alternative than withdrawing the product altogether from the market, which is what most multinationals will do if they aren't making money on their brands. This, in turn, spurs the growth of spurious me-too products. Mercifully, as was evident in the finance minister's Budget speech, the government will soon announce a new, improved DPCO as a part of the new drug policy. While the final touches are still being applied, BT got a glimpse of what the new pricing policy would look like: Only those molecules with sales of Rs 25 crore-plus, and enjoying a market share of 50 per cent or more will come under the purview of price control. What this means is that the new policy will reduce the span of control to just around 30 drugs, as against the current 73. Significantly, all the three industry bodies-the Indian Drug Manufacturers' Association, the Organisation of Pharmaceutical Producers of India, and the Indian Pharmaceutical Alliance-have reached an agreement on these proposals. Coldarin, for its part, appears to be finally headed for decontrol, for it doesn't command 50 per cent of the market, nor does it have a Rs 25 crore annual turnover. So it will no longer have to take recourse in the small-scale sector. Now, only if this had happened earlier. -Brian Carvalho AIRLINES A booming business has the foreign airlines scrambling to do more flights into and out of India.
It used to be called the spring cleaning time for foreign airlines operating in India. But ask anyone who travelled to or from the country during February-March this year, and they'll tell you how the mad rush for seats meant there was no dust to settle. In fact, some go as far as saying that the current air rush is unprecedented. Declares Henry Moses, Sales Manager (North), Malaysian Airlines: ''There are no peak or off-peak periods in India anymore.'' Foreign airlines that ply the India-sector have been witnessing upto 30 per cent increase in the number of passengers. Small wonder, then, there is a mad scramble to increase capacity (See Soaring Capacity). And with new players like Virgin Atlantic, United Airlines (re-entering after a gap of two years), and Cathay Pacific entering, the summer could be action-packed for the airlines. In fact, India today is seen as one of the largest growth markets for international air travel. Says Subhash Goyal, CEO, Stic Travels and President of IATO (Indian Association of Travel Operators): ''As on date, I would estimate a shortage of at least one million seats.'' Two of the major reasons cited for the surge in travel are easier availability of visas (especially to the US) and the promotion of eastern countries as tourist destinations. Countries like Malaysia, Thailand, and Sri Lanka are today offering packages at par or even lower than Indian packages. Points out Goyal: ''For a lower cost you can get a five-star holiday in these countries.'' But is there enough demand to fill up the coming boom in capacities? Yes, says a British Airways spokesperson. ''Passengers are required to go via transit points rather than go direct to their destinations because of the imbalance in the demand and supply. There is enough demand to fill new capacity entering the Indian market,'' says the executive. The icing on the cake for jetsetters will, however, be the price war likely to follow the increase in capacities. -Seema Shukla ENTERTAINMENT In many ways, the Indian moviegoer is several cuts ahead of her western counterpart.
Indians like their action spiced with a generous helping of soy. We couldn't figure out the run t2 enjoyed in India, but chances are that the number is of a far less magnitude than the 35-odd weeks a motion picture by the name of The Thirtysixth Chamber of Shaolin did in a Chennai theatre. Bruce Lee was a bigger hit in the sub-continent than he was in the US. The formula that worked so well with Indian audiences failed, for many years, to tickle the tastebuds of Western ones. Americans and the English, one theory went, liked their violence at a distance; weapons of mass-destruction were the preferred instruments for dealing death. The HK-genre, went another, lacked the plot so essential to appeal to refined Occidental audiences. Still, scholars owing affiliation to this school would do well to realise that most movies that came out from HK, especially the John Woo ones, weren't exactly duds. As Salon magazine said in a review of the Woo-directed, Travolta-starring Face/Off: ''It's also the first of Woo's American movies to match the flipped-out exhilaration, the rippling looseness, of the marvelous action movies he directed in his native Hong Kong, like The Killer and Hard Boiled.'' ''John Woo,'' says self-confessed fan B. Narayanaswamy, who doubles up as an executive director of consumer research firm Indica Research, ''is a Nineties kind of man: exposed to the world, educated in the art of cinema both western as well eastern and with a unique format of delivery.'' QED. The success of motion pictures like MI-2, Charlie's Angels, and, now, CTHD, means the preferences of American audiences have changed. Film critics like Bhaskar Ghose, the host of The Bhaskar Ghose Show, believe that this has to do with directors like Woo realising the importance of the story line. But maybe, posits an emerging hypothesis, the preferences of Indian and American audiences aren't very different. Living, as we do in an information-heavy environment, it is easy to opt for form over tangled content. In plainspeak, the escapist fare everyone talks about in the context of Indian cinema seems to have become a universal phenomenon. That could mean it won't be long before Indian film-makers look Westward. ''Bollywood has its unique form of expression. Instead of apologising for this, we have to market it the way it is,'' says Amit Khanna, Chairman, Reliance Entertainment. Cut to the core, though, and it's there: a similarity, at a visceral level, between audiences here, and those elsewhere. ''It's what I would term appealing to the least common denominator,'' chuckles Adrian Mendonza, Vice-President & Creative Director, Rediffusion DY&R. Which just goes to prove what we suspected all along: deep down every man is a gunslinger. -Shamni Pande SMALL BUSINESS A growing band of upscale caterers are firing up Mumbai's belly. At 24, he chucked up a job at Citibank in New York to launch Chibs Food And Drink Co in Mumbai. Five years on, Nikhil Chib represents the new breed of successful corporate caterers growing in India's financial capital. There are an estimated 5,000 caterers in Mumbai alone-employing between three and 15 people each-and generating a revenue of Rs 750 crore per annum. The customers range from consulates, corporates, and foreign banks to individual homes. ''There are several characteristics of catering business that should appeal to budding entrepreneurs,'' says Chib. The biggest, of course, is that it is recession proof. The business thrives even in the worst of times. The margins are high-between 50 per cent and 70 per cent. It requires no capital investment. You can be in business with as little as Rs 1 lakh. It is cash intensive. You can, in fact, use credit as an additional source of income because you buy on credit and sell for cash. The only catch? You need to have a passion for food. The corporate caterer of today is nothing like any of his predecessors in the line. For one, he's a specialist. In Mumbai, there are caterers who only offer desserts. Chib himself is an expert in Thai cuisine, and imports all ingredients from Thailand. And the package deal is customised. Says Farrokh Khambata, 31, a graduate of the Institute of Hotel Management at Mumbai who did a stint at a hotel in France before setting up Catering And Allied in Mumbai in 1991: ''Apart from basic food, we offer a variety of value-added services.'' Even things like high-end cutlery and crockery, full bar services, waiters in attendance, and décor are all handled by the caterers. Sure, a speciality lunch can set you back by Rs 175, and a party catering to a group of 50 by Rs 25,000. But for hyper execs keen to move up the social and career ladder, networking-and hence entertaining-is seen as an integral part of the game. Says Vinod Dham, a leading caterer in Mumbai: ''Entertaining is no longer seen as a cost. It is an investment which offers huge returns.'' Surely, the caterer would know. -R. Chandrasekhar STOCKMARKETS Shocking ineptitude and insouciance could be behind the crisis on the Calcutta Stock Exchange. Deena N. Raval's visit to the Calcutta Stock Exchange on a recent weekend would have gone unnoticed any other time. But this time, her visit brought with it all the nail-biting suspense the 92-year-old exchange's beleaguered brokers could stand. As the Securities and Exchange Board of India (SEBI) representative looking into the affairs of the Calcutta Stock Exchange, Raval may well be the catalyst for triggering an new era of corporatisation on Lyons Range. As most traders on the exchange would agree, it's high time the CSE was cleansed. March has been one of the worst months in the history of the stock exchange, and that's not just because one of its sub-brokers, Abhishek Banga, killed himself and his young wife. The CSE's governing body-made up of active brokers-could well be responsible for the deaths. It chose to sit and watch even as the badla rate soared. As against the official rate of 11 per cent, the yearly rates on the CSE are as high as 32 per cent. Therefore, the liability shouldered by the brokers as they carryover their positions from one settlement to another is far more than what is reflected on their books. The result: any default sets off a spiral that usually takes a whole group down. People in the know say that the simmering crisis would not have boiled over had not the badla financiers called in their loans for the year closing. The CSE President Kamal Parekh admits to the mismatch in the badla rates, but at the same time defends it by saying that the mismatch had always been there. ''While it is a concern, it is not the end of the world at CSE,'' rationalises Parekh. It's precisely that attitude, which is symptomatic of what ails the CSE. For, the rot is high up. No less than Dinesh Singhania, a leading broker and member of the governing body, defaulted on his payments and then went on to send in a cheque that bounced. Singhania, a close associate of Ketan Parekh, along with his two associates Ashok Poddar and Harish Biyani, had consistently supported the ''KP scrips'' (including Himachal Futuristic Communications Ltd. (HFCL), DSQ Software, SSI, and Global Trust Bank) through the badla rate and carryover system. And not once did the exchange feel the need to probe the sky-high multiples of these scrips. Points out Jawahar Chaudhury, a former vice-president of the CSE: ''It's a sorry state of affairs. How can a company like DSQ lend Rs 54 crore to a broker (V. Ajmera) to help him complete the pay in facilities? This is not cricket.'' Just the same, SEBI's Raval has sent the CSE's current governing team off packing. That should put Lyons Range on an even pitch. -Debojyoti Chatterjee STOCKMARKETS The city's distraught stockbrokers are ready to call it a day.
According to the HSE President, N. Ranga Prasad, at least 10 per cent of the 300 brokers on the exchange have evinced interest to hang up their boots. Even that may be an understatement, considering that more than half of the brokers are inactive. While the reasons for that are many, the recent carnage on the market seems to be the trigger for this round of exodus. ''This has shaken the confidence of investors in the market,'' says N. Sujani, a 31-year-old member of the HSE and professional chartered accountant, who finds herself disillusioned by the ''high risk in the stock broking business today''. While the setting up of trade guarantee funds by exchanges has reduced the settlement risks and the introduction of demat shares has reduced the risks of bad deliveries and fake and stolen shares, the problem today is one of extreme volatility. Prices at some counters go up and come down by as much as 16 per cent on a single day and increase the risk of default. Furthermore, brokerage rates have fallen substantially from about 1.5 per cent of the value of trade 3 to 4 years ago to 0.5 per cent for delivery and a meagre 0.1 to 0.25 per cent for square up business (buying and selling in a particular settlement period). All this has led to brokers finding the profession increasingly unattractive. Some of the brokers have sought the exchange's permission to start other businesses, or return to their previous jobs as, say, company secretaries or chartered accountants. HSE, whose 100 per cent subsidiary company HSE Securities already has an NSE membership, has applied for a BSE membership, all in the hope that a bigger trading platform and better liquidity will stem the flood of its brokers. But that may not be enough to charm back doctor-turned-brokers like Raju. -E. Kumar Sharma
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It's one
of the oldest ruses in the pharmaceutical industry. Shackled by price
controls, drug companies have over the years tried virtually every trick
(many of them not in the book) to break free. One of the more popular ones
has been to outsource the manufacture and marketing of formulations to the
small-scale sector (after transfering the trademark to the small-scale
unit), which doesn't fall within the ambit of the Drug (Price Control)
Order. The outsourcer charges a royalty-say, 10 per cent of the product's
sales-or a technical or licence fee, thereby making it a win-win situation
for both parties. Pfizer was the first to exploit this loophole when DPCO
1987 exempted the small scale sector from price control. Six formulations,
including Pfizer's best-selling Becosules, were outsourced to SSI
manufacturers. Other companies like Novartis, Ranbaxy, and Abbot
Laboratories, to name just three, followed suit.
..and have you seen Chow Yun Fat in John
Woo's Killer? At least, I think that's the pic's name...'' The speaker is
an Indian in his early-thirties, a self-confessed action-movie freak-he
claims to have seen t2 (Terminator 2) over 30 times-and he's discussing
the action-genre. He's garrulous, and his monologue is filled with
superlatives, but the man's just come out from a screening of Ang Lee's
Crouching Tiger, Hidden Dragon (CTHD), so all's excused.
The only trade N. S. Raju, 48, seems to be
interested in these days is squaring up a deal to get rid off his
Hyderabad stock exchange membership card. ''The high volatility and the
current trading trend does not suit my mentality,'' says a distraught Raju,
a doctor by education and who has ''lost heavily'' in the bear rampage. He
isn't the only one to think of quitting. Sunil A. Hinduja, an HSE member
of 11 years, wants to get out the first opportunity he gets to sell his
card at a ''reasonable price''.