pg 26. interview: pankaj agrawal pg 29. indian...

16TH – 31ST Aug 2014 . Vol 1 Issue 8 . For Private Circulation Only

pg 26. INTERVIEW: Pankaj Agrawal

pg 29. Indian Economy – Trend indicators

3GROUND ZERO GROUND ZERO 16 - 31 Aug 2014 16 - 31 Aug 2014 2

VOL 1 . ISSUE 8 . 16TH - 31ST AUG 2014

Vineet Bhatnagar- Managing Director and CEO

EDITORIAL BOARD:Naveen Kulkarni Manish AgarwallaKinshuk Bharti Tiwari Dhawal Doshi

COVER & MAGAZINE DESIGN Chaitanya Modak, www.inhousedesign.co.in

FOR EDITORIAL QUERIES:PhillipCapital (India) Private LimitedNo. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400 013

RESEARCH Automobiles Dhawal Doshi, Priya Ranjan

Banking, NBFCs Manish Agarwalla, Paresh Jain

Consumer, Media, Telecom Naveen Kulkarni, Vivekanand Subbaraman, Manish Pushkar

Cement Vaibhav Agarwal

Economics Anjali Verma

Engineering, Capital Goods Ankur Sharma

Infrastructure & IT Services Vibhor Singhal, Varun Vijayan

Metals Dhawal Doshi

Mid-caps Vikram Suryavanshi

Oil & Gas, Agri Inputs Gauri Anand, Deepak Pareek

Pharmaceuticals Surya Patra

Retail, Real Estate Abhishek Ranganathan, Neha Garg

Technicals Subodh Gupta

Production Manager Ganesh Deorukhkar

Database Manager Vishal Randive

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SALES & DISTRIBUTION Kinshuk Tiwari, Ashvin Patil, Shubhangi Agrawal, Kishor Binwal, Sidharth Agrawal, Bhavin Shah, Dipesh Sohani, Varun Kumar

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GROUND ZERO - PREVIOUS ISSUES

16th June 2014 Issue 5

1st July 2014 Issue 6

1st Aug 2014 Issue 7


4. COVER STORY: The Business of Fighting Cancer

Ground Zero explores the potential opportunity in the field of oncology both in domestic as well as in international markets

26. INTERVIEW: Pankaj Agrawal

Spectrum chronicles: a bird’s eye view of the upcoming tussle for spectrum

29. Indian Economy – Trend indicators

31. PhillipCapital Coverage Universe: Valuation Summary

LETTER FROM THE MANAGING DIRECTORCancer, the killer disease, is one of the worst enemies

of humanity globally. While the developed world has

managed to curb its cancer-related deaths, India has

now emerged as the third-largest ‘cancer capital’

of the world with around 700,000 annual reported

deaths, whereas the unreported death number can

be much higher due to rampant misdiagnosis. As per

the “International Oncology Centre” the number of

new Cancer cases in India can increase to 2.0-2.5mn

per year by 2025 from 1mn currently.

In India, chemotherapy and surgery are the most

prevalent treatment options, whereas targeted

therapy is believed to be the future of the oncology

market worldwide. Due to low toxicity, and minimal

or no side effects, the targeted therapies – which

are largely biologic drugs – are better accepted by

oncologists.

From business perspective, the players in targeted

therapies / biologics see limited competition vs. tra-

ditional small-molecule cancer drugs, as the required

R&D capability and huge investment in developing

biologics is a key entry barrier for majority of players.

With the increasing usage of targeted therapy drugs,

biologics offer healthy growth visibility in the near

future. Our cover story on “The Business of fighting

Cancer” authored by Surya Narayan Patra, highlights

the potential opportunity in the field of targeted

therapies from the rising incidence of cancer in India

as well as in international markets.

This edition also discusses the issues pertaining to

the upcoming spectrum auctions in the telecom

segment, which are critical for operators to continue

their services.

As far as the investment mood goes, the collective

optimism is now palpable. Hoping for best!!

Best Wishes

Vineet

CONTENTS


Cancer Kills. How?

Cancer cells multiply quickly; form a lump at one place, creating tiny blood vessels around it for blood, oxygen and nourishment. It then starts spreading to lymph channels, then the lymph glands, to blood and then various organs killing the human being.


COVER STORY

Prevailing deficiencies in cancer care offer huge business potential

Cancer, the killer disease, has emerged globally as one of the worst enemies of humanity

in recent times. So much so that most of the western world now refers to its effort to

fight the disease as a ‘war on cancer’. While the developed world has managed to curb

its cancer-related deaths, India has now emerged as the third-largest ‘cancer capital’

of the world with around 700,000 annual deaths and huge deficiencies in terms of care

infrastructure. India’s key issues are accessibility and affordability; however, improving

diagnosis and newer treatment modalities coupled with affordable generic drug offerings

have provided a ray of hope for cancer patients. Even so, in the prevailing situation,

there is a wide demand-supply gap in the available cancer care and the ever-rising

cancer incidence in the country — this offers up a huge business opportunity for drug

manufacturers as well as healthcare service providers. Besides the opportunity in India, for

domestic pharma companies, the scope of exporting oncology drugs to advanced markets

led by generalisation and to emerging markets is tremendous. Within cancer drugs, the

increasing dominance of biologic/targeted therapy should benefit Indian peers such as Dr

Reddy’s Laboratories and Biocon.

BY SURYA NARAYAN PATRA

pg. 6 Indian Cancer Scenario For a variety of reasons, cancer in India is rising___________________________________________pg.11 DefficiencyinCancerCare Prevailing treatment practices in India___________________________________________pg.17 Opportunites Galore Cancer throws up a huge business opportunity___________________________________________pg.20 Special Rates Drives Business The ‘invisible’ drug prices – the game of ‘special rates’___________________________________________pg.22 Price control is not a big problem Challenges in the domestic oncology space___________________________________________


Cancer is a painful subject. It is pain-

ful to the people who have it and it

is painful for their loved ones. It is a

killer disease. On any given day, if

you walk through Tata Memorial Hospital,India’s

pioneer institute of cancer treatment, you will

see a familiar scene — a crowded patient pool-

waiting for their turn to have a consultation with

the oncologists, who have an almost god-like

status at least in the eyes of the waiting patients.

Their struggle for survival, the pain in the eyes of

the loved ones accompanying them — all these

scenes will make even the most hardened heart

pause and reflect on the cold indifference of this

disease and the almost near-precision with which

it is taking human lives.

It is easy to see why oncologist have an almost

supernatural status amongst cancer patients and

their loved ones – industry data suggests there are

only about 1,000 trained oncologists in India for

1.8mn cancer patients— so the ratio of oncolo-

gists to cancer patients is about 1:1,800— these

statistics are just mindboggling.

For a variety of reasons, cancer in India is rising

I N D I A N C A N C E R S C E N A R I O

Cancer is not just physically and emotionally

painful. It is also financially draining. The burden

of the huge unplanned expenditure that cancer

entails due to the pricey nature of its treatment

coupled with minimal hope of being permanently

cured (due to high mortality rates) makes it a truly

dreaded and dreadful disease. What is probably

most tragic is the premature loss of many years

of healthy life. Apart from the highest mortality

nature of the disease, cancer’s rapid progressionin

the afflicted person is truly horrifying.

Cancerhas become one of the biggest threats to

human beings globally. Every year, 8.2mn peo-

ple die of the disease and 14.2mn people are

diagnosed with it — this implies an incidence

of 20 people per 100,000 annually. Whether it

is because of rising awareness or because of

rising incidence, cancer is not just a vague notion

anymore — it’s getting too close for comfort. Ask

anybody around you — chances are they know of

somebody close who has died of cancer or is fight-

ing the disease at the moment.

Picture shows how people are struggling to have consultation in Tata Memorial Hospital


In India, it has now emerged as one of the leading

causes of deaths. The International Agency for Re-

search on Cancer estimates that cancer-led deaths

in India havemultipliedfrom 157,168 in 2000 to

about 682,800 people in 2012 — representing

about 8% of all estimatedglobal cancer deaths and

about 6% of all deaths in India. The prevalence of

cancer in India is estimated to be around 2.5mn,

with about 1.02 million new cases in a year.

Cancer statistics pertaining to the Indian pop-

ulation suggest that females are more prone to

cancer than males— female cancer cases account

for about 53% of the total reported ones. Among

them, cancer of the breast is the most common

and accounts for 27% followed by cancer of the

cervix (23%), colerectum (5%), ovary (5%) and

mouth (4%).

Among males, mouth cancer is the most predomi-

nant constituting 18% of the total cancers followed

by lung (11%), stomach (9%), colorectal (8%) and

oesophagus (6%). Overall, the incidence of breast

and cervical cancer are highest amongst the Indian

population followed by mouth cancer, lung cancer,

and colorectal cancer.

Indian statistics of cancer casesEstimated age-standardised incidence and

mortality rates: Men

Estimated age-standardised incidence and mortality rates: Women

Figu

res g

iven

in o

val s

hape

indi

cate

s pop

ulat

ion

ASR rate per 100,000



Estimated age-standardised incidence and mortality rates: Both Sexes

India cancer statistics plagued with underreportingCancer has taken India in its tight grip in recent

years. Though the incidence rate in India is lower

at 80 patients per 100,000 vs. 125-150 patients

per 100,000 in western countries, the absolute

numbers of cases in India are higher due to its

large population. Also, the incidence rate could

be artificially lower due to a high incidence of

under-reporting or misdiagnosis.

What is a definite cause for concern is that young-

er Indians are getting cancer — statistics suggest

that 80% of cases in India occur before 65 years

of age —around 15% of cases occur at early ages

(before 35). In the developed world, it is believed

to be an old person’s disease – but not in India.

The saddest fact pertains to children though —

about 160,000 children around the world are

diagnosed with cancer every year; out of these

25% are in India, says Dr. Brijesh Arora, a paediat-

ric oncologist.

So the answer to the question ‘what has caused

India to fall in the tight grip of the killer disease?’

is not an easy one to answer. The increased inci-

dence of cancer in India can be broadly attributed

to urbanisation, industrialisation, lifestyle changes,

and population growth. However, for India specif-

ically, improper diet is one of the main causes of

cancer prevalence. About 70% colorectal cancer

cases are believed to be due to imbalanced diet.

Similarly, improper lifestyle with poor dietary hab-

its has been the key factor for the prevalence of

breast and cervical cancers in the female popula-

tion in Indian cities and metros. Overall, the con-

sumption of tobacco (smoking, chewing, snuffing)

is the leading cause of cancer in India. Data points

suggest that tobacco is responsible for 65-85%

cancer incidences amongst Indian population. The

As per Mr Pradeep Jaisingh, MD & CEO of International Oncology Centre: “The reported number of cancer cases is already over one million — which in itself is high. Worryingly, these are highly under reported — if you go just about 50 kilometres away from metros such as Mumbai and Delhi, you will see rampant misdiagnosis of cancer. Doctors in small towns are neither well-equipped nor adequately trained about cancer — so if they do not diagnose cancer, the point of reporting does not arise.”

Cancer hits the gorwing age more in India



Cancer penetration into India

various cancers produced by the use of tobacco

are of oral cavity, pharynx, oesophagus, larynx,

lungs and urinary bladder.

While, cigarette/hookah/bidismoking is the main

cause of lung cancer in Jammu and Kashmir,

Himachal Pradesh, Uttarakhand, Manipur, Andhra

Pradesh, Tripura, and some parts of Sikkim, the

chewing of tobacco in various forms (including pan

masala, zarda, opium, bhang) and beetle leaves/

nuts is the key reason for oral cancer in Orissa,

Madhya Pradesh, Uttar Pradesh, and Rajasthan.

Alcohol consumption has been one of the major

causes of colorectal cancer across the world and

India is not excused. It also causes cancers of the

upper respiratory and digestive tracts, including

oral cavity, hypo pharynx, larynx and oesophagus

as well as liver, pancreas, mouth, and breast.

Few other key causes of cancer in India are – ex-

cessive use of fertilizers and pesticides (that raise

the risk of leukaemia and lymphoma and brain

tumours), environmental/air pollution (responsible

for high prevalence of lung cancers in Delhi, Kolka-

ta), and radiations from radioactive compounds/ul-

traviolet/nuclear testing (leading to cancers of the

skin, digestive system, liver and kidney). More than

anything, it is the lack of awareness, limited access

to cancer care-delivery systems, late/improper

diagnosis, and the exorbitantly high treatment

cost that is causing the increasing cancer deaths

in India.


Region-wise causes of cancer in India

Dominance of various cancers around the world


maximum market value (could be over 50% of the

total oncology market).

Due to the complexity of the disease, normally a

multimodality treatment is followed for solid tu-

mours using any two or all of the therapies includ-

ing –surgery, chemotherapy, as well as radiation.

The type of treatment is designed based on the

type of cancer, the stage it is in, and the patient’s

response to treatment. In case of hemato-lym-

phoid malignancies (or blood cancer), chemother-

apy is largely used with a limited use of radiations,

based on the stage of cancer. Due to the multi-

modality treatment practices, the treatment cost

multiplies.

The cost of cancer treatment varies significantly

from types/stages of cancer and also on a case-

to-case basis. For example, treatment of blood

cancer (Acute myeloid leukaemia (AML) or Acute

lymphoblastic leukaemia (ALL)) would costRs

500,000-600,000in Tata Memorial Hospital. In case

of low-grade lymphoma, the treatment would cost

about Rs 40,000. “If bone-marrow transplantation

is suggested, the treatment cost jumps to around

Rs 1mn”, says Dr SeemaGulia, medical oncologist,

Tata Memorial Hospital. She further adds, “In ad-

D E F F I C I E N C Y I N C A N C E R C A R E

Prevailing treatment practices in India

Currently, chemotherapy, targeted

therapy (mostly biologics), hormo-

nal therapy, surgical, radiation, and

palliative care (supportive care) are

the different types of cancer treatmentsavaila-

ble in India. Chemotherapy and surgery are the

most prevalent treatment options in India, but

targeted therapy is believed to be the future of

the oncology market (here and globally). This is

because targeted therapy, which consists mostly

of biologics, have low toxicity and low radiation

— this achieves better results with very minimum

or no side effect. Targeted therapy sees increasin-

gacceptance, but its significantly higher cost vs.

traditional therapies such as chemotherapy and

surgery make it unaffordable in many emerging

markets such as India.

Radiation therapy is less entrenched into Indian

oncology treatment due to the capital-intensive

nature of radiation devices. Amongst the indicated

treatment options, chemotherapy accounts for the

Mr Jaisingh on treatment cost: “It’s difficult to generalise the treatment cost of cancer, but the minimum expenditure could be to the tune of Rs 200,000 for single modality of treatment in any basic cancer-care centre. If there are multi-modality treatments including surgery and/or chemotherapy and/or radiation, the treatment cost would easily go beyond Rs 1mn.”

The economics of cancer treatment


vanced breast cancer, in which targeted therapy is

needed, the cost could be as high as Rs1.0-1.1mn,

but an early stage breast cancer treatment will cost

about Rs 50,000-60,000 with multi-year hormonal

therapy treatment.” All these treatment costs are

about 20-25% higher in a private cancer centre.

As per available industry facts, adjusted for

income at constant currency, the money spent on

cancer care is equivalent to 0.12% of per capita

gross national income in South America, 0.05% in

India and 0.11% in China. In the UK, Japan and

the USA, the corresponding numbers expenses are

0.51%, 0.6%, and 1.02%, respectively.

Unfortunately, a large chunk of Indian cancer

patients belong to either the below-poverty-line

category or the lower-end of the middle class —

due to this, many people do not receive appro-

priate cancer treatment. Dr SeemaGulia believes

that about 70% of the cancer care reporting for

diagnostic and treatment services is in the ad-

vanced stages of the disease, which leads to high

mortality rates amongst patients in India.

Limited infrastructure, maximum cancer

In the early 1970s, there were hardly 3-4 cancer

treatment centres — Tata Memorial Hospital,

(Mumbai), CMC (Vellore), and All India Institute of

Medical Sciences (AIIMS), which pioneered cancer

treatment in India. With the increasing incidence

of cancer in the country, the Government of India

gradually created multiple Regional Cancer Cen-

tres (RCCs) under the National Cancer Control Pro-

gramme, which started in 1975 under the Ministry

of Health and Family Welfare (India).

With the reason of non-affordability and limited cancer care infrastructure in mid-town, rural cancer patients taking shelter on footpath in front of Tata Memorial Hospital, Mumbai


These institutes function under the joint control

and funding of the Government of India and the

respective state governments. As of now, there are

about 30 RCCs in the country, but only 6-7 of them

employ adequately trained medical oncologists.

However, private companies such as HealthCare

Global Enterprises, International Oncology Ser-

vices, and Apollo Hospitals have set up multiple

cancer centres with advanced cancer-care equip-

ment. Their intent is to capture the huge growth

potential in cancer treatment delivery. Spotting

significant investment and business opportunity in

the early detection and prevention space, many

private hospitals have also developed dedicated

cancer departments in their hospitals.

According to the health ministry, India has about

300 cancer centres, of which 40% are not ad-

equately equipped with advanced cancer-care

equipment. India will need at least 600 additional

cancer-care centres by 2020. More than the limit-

ed number of cancer-care centres, it is the uneven

distribution of such centres through the country

that keeps a large chunk of Indian cancer patients

away from treatment. Also, a very small percent-

age of these hospitals provide all three areas of

oncology —surgical, medical and radiation.

In addition to deficient cancer centres, there is

huge shortage of specialized surgical and med-

ical oncologists in India. Industry data suggests

there are only about 1,000 trained oncologists

for 1.8mn cancer patients in the country — so the

ratio of oncologists to cancer patients is about

1:1,800. To put this in perspective, the US has an

estimated 12,500 oncologists to treat about 1.4

million patients diagnosed with cancer — a ratio

of about 1:100.

How to tackle and control the killer epidemic

The reason cancer has reached almost epidemic

proportions in a developing marketlike India and

the reason why we as a country are unable to

controlthe disease is mainly lack of awareness.

Ignoranceof preventive cancer care coupled with

improper dietary habit and deteriorating lifestyle

are the key culprits.

Rising affluence levels in the country and con-

sequent changes in lifestyles are also leading to

higher cancer rates. According to Mr Kiran Kalava-

dia, the head of Cipla’s oncology division, Cipla,

women are getting married later, having fewer

children, are avoiding breast feeding, and some

are smoking and drinking alcohol — all these

lifestyle changes have increased the incidence of

breast cancer.

MangalMukhiyafromaninteriorarearofBiharfightingagainstoralcancerbyhavingashelteron the foothpath in front of Tata Memorial Hospital Mumbai since last two month


Cancers: Decline in death rates

also pitching in — they have made available generic

cancer medicines domestically at affordable rates and

this has become a ray of hope for poor and middle class

patients. Players such as Dr. Reddy’s, Biocon, and Cipla-

conduct various awareness campaigns and research initi-

atives for early detection and prevention of the diseases.

The increasing focus of government agencies and pri-

vate players such as Cipla towards setting uppalliative

care and dedicated centreshas made the life of cancer

patients easier. Entrepreneurs and hospital administra-

tors in the private sector have identified the huge gap

between demand and supply of cancer care treatment

— therefore, they have started spreading their reach into

mid-sized towns, thus benefitting the rural public. With

efforts fromboth public and private players,the survival

rates and quality of life of cancer patients in India will be

definitely better.

However, even though the life expectancy and dis-

ease-free survival rate in India is improving, India will

continue to have accessibility and affordability prob-

lems— basically, even in the near term, there is still a

huge gap between demand and supply of treatment.

In advanced countries, early detection and prevention by

creating awareness has proven to be the best strategy in

controlling cancer. Focused research on various cancers

and advancement in healthcare delivery have already

started reducing the cancer mortality rate and eased the

life of patients with cancer in advanced countries. In fact

in the last decade (between 2000-2010) the decline in

death rate in the US has been particularly sharp.

In order to curtail cancer incidence, the Indian govern-

ment has started taking the following steps — creatin-

gawareness, upgrading diagnostic and laboratory and

treatment facilities at the district level, and strengthening

regional cancer centres. Indian drug manufacturers’ are

India (within five years of diagnosis)* 683,000: Deaths due to cancer in 2012* Over 1 million: Number of new cases getting added every year* 1,000: Total number of trained oncologists in the country (doctor-patient ratio of 1:1,800)* 30: Dedicated cancer hospitals in India* >15%: Indian population covered under some form of health insurance

So, what is the solution?


care is very low, which indicates India’s lack of seriousness

towards cancer-care. As per a WHO study, India requires

at least 1,000 cancer-care centres whereas India has just

about 200. On the cancer-care-access front here is an

example of how deficient it is — North India accounts for

about 30% of the million new cancer cases per annum

— so over 300,000 cases are from the North whereas in

the north all the available private as well as public cancer

care centres can treat a maximum 50,000 patients — the

infrastructural gap is huge. While the situation is similar in

southern and western India, it is worse in eastern India.

Q: What initiatives are you finding for the infrastruc-

tural progress by government/private players towards

cancer?

A: The government has already created 30 regional cancer

care centres across the country and it has been running a

national cancer control programme with objectives such as

prevention of cancer by health education and awareness

programmes and strengthening the existing cancer care

and palliative centres. However, this is not good enough to

fulfil the prevailing gaps in cancer care.

The central government is setting up a National Cancer

International Oncology is a cancer care and research

company. It has strategic collaborations with Fortis

Hospital (Noida), Dr. L H Hiranandani Hospital (Mum-

bai), and Sanchetee Hospital and Cancer Institute

(Jodhpur) to establish International Oncology Cancer

Centres equipped with technology that offers compre-

hensive cancer care under one roof. Excerpts from our

conversations with Mr Pradeep Jaisingh, MD & CEO of

International Oncology Centre, Noida.

Q: The reported number of cancer cases in India is less-

er than advanced countries as of now. Do you believe

cases are highly under-reported due to lack of aware-

ness or ignorance in rural areas?

A: The reported number of cancer cases is already over

one million — which in itself is high. Worryingly, these are

certainly under reported — if you go just about 50 kilo-

metres away from metros such as Mumbai and Delhi, you

will see rampant misdiagnosis of cancer. Doctors in small

towns are neither well-equipped nor adequately trained

about cancer — so if they do not diagnose cancer, the

point of reporting does not arise.

Q: What kind of progression (of the disease) do you see

in the next 5-10 years in India?

A: Cancer is already the fastest-growing disease in India

and the death toll by cancer in the country is higher than

that caused by HIV, malaria, and tuberculosis all put to-

gether. Because people are living longer and lifestyles are

changing, I believe the number of new cases per year will

jump to 2.0-2.5 million in 10 years from a million currently.

Q: Do you think India is well-equipped to tackle this

killer disease? What infrastructural deficiencies do you

see?

A: Not at all. The government’s fund allocation to cancer

A corporate hospital’s perspective on the Indian oncology market

Mr Pradeep Jaisingh, MD & CEO of International Oncology Centre, Noida


Institute in Haryana, which is considered a landmark in the

area of cancer research in the country and shall lessen the

deficit of tertiary cancer care in the Northern region. On

the other hand, the Rajiv Aarogyasri program of the gov-

ernment of Andhra Pradesh (that provides yearly financial

protection of up to Rs 200,000 for families living below the

poverty for the treatment of serious ailments like cancer)

and the central government’s initiative towards universal

health cover are welcome moves.

Q: What are the broad economics of cancer treatment

in India per patient?

A: It’s difficult to generalise the treatment cost of cancer,

but the minimum expenditure could be to the tune of

Rs 200,000 for single modality of treatment in any basic

cancer-care centre. If there are multi-modality treatments

including surgery and/or chemotherapy and/or radiation,

the treatment cost would easily go beyond Rs 1mn.

Q: Corporate hospitals play a great role in India’s can-

cer-care delivery system. Kindly indicate the investment

requirement for an onco-care centre per bed?

A: Since oncology is a super-specialty space and requires

huge capital investment, International Oncology Centre

ties up with hospitals and provides superior cancer care.

Basically, it’s a ”Hospital within a Hospital” model which

drastically reduces the capital commitment. With this

model, a 100-bed cancer centre needs an investment of Rs

200-250mn in tier-1 cities and Rs 100-150mn in tier-2 cities.

Compare this with setting up a new dedicated 100-bed

cancer centre in a tier-1 city — you would need an invest-

ment of Rs 1bn!

Q: What difference do you find in the cancer care in

emerging markets such as India and advanced mar-

kets?

A: Certainly there is significant difference between these

regions in terms of treatment accessibility, quality of treat-

ment, as well cost of treatment. Emerging markets have

been struggling between better cancer care accessibility

and affordability. But few countries have recognised the

importance of cancer and initiated a war against it. For

example, in Brazil, where the gap of cancer care is tremen-

dous, the government has floated a tender to set up 40

dedicated cancer-care centres. In Russia and South Africa,

there is a big gap. In India, Bangladesh, Sri Lanka, Afghan-

istan, and Indonesia, GCC countries, and many eastern Eu-

ropean countries there is a huge gap between cancer-care

accessibility and availability. I believe there are huge

unmet needs in emerging market in terms of cancer-care

access, which in turn offer huge business potential.

Q: What according to you is the outlook for Indian

oncology?

A: I think the Indian oncology market is now at the thresh-

old and can see tremendous growth in all aspects. As far

as hospital infrastructure for cancer treatment is con-

cerned, India has just about 200 cancer hospitals (which is

way below WHO standards) including all private and pub-

lic — this gives enough scope for private hospitals to fill

the gap. Similarly, we as International Oncology Centre are

getting many requests from various hospitals for our ‘Hos-

pital within Hospital’ model. Of course, in the medicine

side of the oncology market, there is tremendous growth

in new-generation medicines such as targeted therapies,

improved delivery-system-based drugs with nano-particle/

liposomal technology. Additionally, the research in the

field of genomes and MAB is the future growth area for

drug manufacturers.


O P P O R T U N I T I E S G A L O R E

Cancer throws up a huge business opportunity

India’s rank as the third-largest cancer capital

of the world, its steady rise in cancer inci-

dence,and wide unmet demand in cancer care

are unpleasant facts — but the flip side is that

because of these reasons, the Indian government

and private players have upped their efforts to

provide affordable care — this in turn has created

a huge business opportunity for both drug manu-

facturersand healthcare service providers.

With a revenue base of about Rs22bn, the

Indian oncology pharmaceuticals market is the

fourth-largest in terms of volume in the world and

the eighth-largest in value. It has seen an annual

growth of 20-25% in recent years. The market is

expected to show strong growth driven by the

continued rise in cancer incidence, better diagno-

sis, improved access to cancer therapies, better

health insurance coverage, and more importantly,

rising awareness in rural and interior areas.

Around 80% of the oncology drugs are supplied

directly to hospitals and the rest to patients and

trade (trade means independent pharmacies asso-

ciated with corporate hospitals) – so the oncology

pharmaceutical markets is largely oriented towards

hospital supply. This is mainly due to the specific

pre-requirement of cold storage and extremely

high-value inventory. Therefore, oncology drugs

are supplied directly by either the C&F agent

or specialty distributors to hospitals or patients.

As a result, the procurement and distribution of

thesedrugs follows a lean distribution structure

compared to that of ethical pharma drug distribu-

tion in India.

“Most of the leading cancer institute follow a

tender process to procure oncology drugs in India.

Specifically, the tender process in Tata Memorial

Hospital goes through a technical bid and a finan-

cial bid. The technical bids are assessed by the

drugs committee of the hospital where they scru-

tinise various parameters such as R&D strength,

manufacturing capability, GMP practice, originality

of molecule, and qualificationsof the suppliers.

Subsequently, the financial bids from qualified

suppliers are invited and finalised based on the

price of the offer,” says Dr HKV Narayan, the med-

ical superintendent of Tata Memorial hospital.

Basically, what it means is, at the end of the day,

the oncologists of a particular cancer care cen-

tre are the ones who take decisions about drug

procurement.

There are a large number of foreign as well as do-

mestic drug manufacturers in the Indian oncology

market, making it a highly fragmented one (just

like the Indian ethical pharmaceutical market)—

Lean distribution structure – the oncologist is the king


there are about 125 competitors. While majority of

this competitors are traders (who arenotallowed to

participate in many leading hospital tenders), only

about 30-35 players are actual manufacturers and

marketers of oncology drugs.

While innovative global MNCs like Roche, Novartis,

Bayer, Fresenius Kabi, Pfizer, GlaxoSmithKline, and

Sanofi-Aventis play an active role in offering cancer

treatment in India, domesticpharma peers provide

enough competition to their MNC counterparts.

Amongst Indian players, Dr Reddy’s leads in the on-

cology market, followed by Natco Pharma, Emcure,

Biocon, and IntasPharma. Other active Indian par-

ticipants include Sun Pharmaceuticals, Cipla, Lupin,

Zydus Cadila, Glenmark, and Reliance Life Sciences.

Since biologics need very specific research, devel-

opmental,and manufacturing capabilities, there are

limited players in this field. So, in India, while the

competition is stiff in the traditional cancer treat-

ment segment, it is limited in biologics. Within Indi-

an players, Dr Reddy, Biocon, Emcure, IntasPharma,

and Reliance Life Sciences are standouts. Other new

entrants (biologic/biosimilar cancer drug manufac-

turers) are Cipla, Lupin, Zydus Cadila and Glenmark.

Because biologics seems like the future of can-

cer treatment, a lot of companies are working on

developing new therapeutics, kits and drugs—

these include, Intas Biopharma, Biocon, Dr Reddy’s

Laboratories, Transgene Biotek, Inbiopro Solutions,

IMGENEX, Panacea Biotec, Mitra Biotech, Bharat

Biotech, and Shantha Biotechnics.

With the participation of many domestic companies

and major multinationals in the domestic oncology

market and their fight to strengthen their foothold

in the country has made the competition in this seg-

ment cutthroat. The price control mechanism in the

country has put additional pressure. Due to this, the

growth of the market moderated to 15-18% most

recently vs. 25% in the past.

While price control has put a bit of pressure on

growth, the growth potential is strong. Improved

early diagnosis, better access to cancer therapies,

better health insurance coverage, increasing aware-

ness in rural and interior areas, higher government

Hospitals Pharmacy in Hospitals Patients

Indian Manufacturers MNCs

C&F agent

Super Speciality Distributors

Oncologist

Its not consumer, Oncologist is the king

Competition is heating up, but holds promise for healthy growth

CONTROL THE SYSTEM


more effective) and combination therapies (existing

chemotherapy drugswith biologic drugs) which will

drive value growth for the Indian oncology market.

However, the R&D investmentneeded in developing

such differentiated delivery techniques remains a key

challenge for industry peers.

In cancer treatments, biologic products include tar-

geted therapies like monoclonal antibodies as well

as supportive therapy products like GCSF, EPO, and

interferon alfa. Normally cancer cells divide fast and

grow at an abnormal rate by overriding apoptosis

(cell death) and become immortal. Biological therapy

focuses on blocking the signal that tells the cancer

cells to grow. It makes cancer cells undergo apop-

tosis. These can also make the cancer cells more

recognizable to our own immune system, which can

then seek out and destroy the abnormal cells, says

Dr Seema Gulia. Since the biologic monoclonal

antibodies directly hit the cancer cells without having

side effects, they are called ‘targeted’ therapies.

Though the targeted therapies cure cancer patients

with minimal side effects, the complexity around de-

veloping such drugs often become a key challenge

for generic manufactures. These drugs require an

investment of over US$100mn each, years of clinical

development, and prohibitive regulatory challenges

— all these factors create strong entry barriers.

Experts believe that biologic therapies characterised

by low toxicity and better treatment results will be

the future of oncology even though chemother-

apy and surgery are the most prevalent treatment

options today. With the increasing acceptance of

targeted therapy drugs by the upper-income seg-

ment, a gradual increase in insurance coverage, and

limited price competition, biologics are currently

growing twice as fast as traditional oncology drugs.

Recent R&D developments towards combination

therapies (biologics combined with chemotherapy)

to achieve a better response rate will further ensure

long-term growth for biologics.

expenditure on health, and better access to cancer

drugs will drive growth.

According to an expert in the field, “Though the

average life expectancy and the cancer detection

rates have steadily gone up in India over the past

decade, leading to increasing number of patients on

cancer treatment, the market growth seems to have

moderated of late. The access to quality oncology

healthcare and availability of affordable medicines

to large tracts of the rural population remains a key

challenge for public health administrators. However,

this could be a big opportunity for exploring pub-

lic-private partnerships.”

According to Mr Shukrit Chimote, Vice President &

Head, Branded Formulations (India), Biocon,growth

has moderated due to increasing competition in tra-

ditional drugs and regulatory price controls in both

traditional and biologic/targeted therapy drugs.

However, the targeted-therapy-drugs segment is

growing at 20-25% and traditional small-molecule

segment at 12-15% and this trend is likely to con-

tinue. He believes that new differentiated product

launches from the R&D pipeline of leading Indian

pharma companies will fulfil unmet needs in cancer

care and drive growth for the oncology market.

Oncologists believe, since there were limited num-

berof new anticancer drug introductions in thelast

decade, the launch of existing drugs with differenti-

ated delivery techniques will drive growth in the me-

dium term. Specifically, it is the emergence of novel

drug delivery techniquessuch as nanoparticles and

liposomes (which make the existing drugs safer and

It’s a myth that MNCs dominate the Indian oncology market (Rs mn)

Biologics and targeted therapy to drive growth

Top 5 Indian players account over 50% of revenue generated by top 10 Oncology players in India


The ‘invisible’ drug prices— the game of ‘special rates’

S P E C I A L R A T E S D R I V E S B U S I N E S S

Due to the lifesaving nature of oncology

drugs, there is an inherent price-in

elasticity in demand. Price plays a very

limited role in the success of an oncol-

ogy brand, as R&D/manufacturing, capability of

the manufacturer, its quality standards, and most

importantly, the acceptance of the drug by the

oncologists matter a lot in brand creation.

Within oncology products, there is a wide gap in

the prices of similar products in a particular cate-

gory — this is primarily due to different R&D effort,

quality parameters, and documental initiatives.

But the most surprising fact of oncology product

prices is that the ‘maximum retail price’, which is

considered to be the benchmark for all industries,

is not the price at which drugs are bought and

sold!

Since hospitals account for 80% of oncology drug

purchases, it is the undisclosed ‘special rate’pro-

vided by drug manufacturers that plays an impor-

tant role in grabbing market share. Since hospitals

are major buyers, and because there are limited

number of cancer hospitals in India, the suppliers/

manufacturers have limited bargain power or none

at all. Based on the opportunity size and volume

of supply, companies offer huge discounts against

MRP.

While these special discounts differthey are as

high as 50% for traditional products where there

is relatively higher competition and about 20-

30% for biologic drugs. In differentiated products

like biologics/biosimilars and targeted therapies,

where the technical entry barrier is high, margins

are protected. Most private hospitals do not pass

on the lower drug procurement prices to patients.

Generic Name Manufacturer Brand Name MRP (Rs) Discount over innovative drug %

Trastuzumab(Breast Cancer)

Roche Herclon 75000 -

Emcure Biceltis 75000 -

Biocon Canmab 57500 -23%

Biocon/Mylan Hertraz 57500 -23%

Sorafenib(Kidney Cancer)

Bayer Nexaver 140215

Natco Sorafenat 4440 -97%

Cipla Soranib 3420 -98%

Generic drugs are available at stiff discount to innovative molecules


Traditional drug Gemcitabine (1gm/vial) face intense competitionSupportive therapy drug - filgrastim see limited competion

Oncology drugs are supplied to Hospital at special rates which is at 20-50% discounts on MRP

Generic drugs are available at stiff discounts to innovative molecules

Generic Name Manufacturer Brand Name MRP (Rs) Discount over innovative drug % Dose

Rituximab(Lymphoma Non-Hodgkins)

Roche Ristova 16000 100mg Vial

80000 500mg vial 500mg vial

Emcure Ikgdar 7500 -53% 100mg Vial

37500 -53% 500mg vial

Dr Reddy Reditux 9999 -38% 100mg Vial

39999 -50% 500mg vial

Intas Mabtas 6900 -57% 100mg Vial

34900 -56% 500mg vial

Corporate and private hospitalsenjoy maximum

discounts/margin in oncology drugs followed by

trust hospitals (who pass on a portion of the special

discount to patients), manufacturers, and distribu-

tors. Mr Mitesh Shah, Director of Milton Lifecare,

Corporate and private hospitalsenjoy maximum discounts/margin in oncology drugs

reckons that the distribution margin on traditional

oncology drugs is 8% and on biologic/biosimilar

products it is 8-10%.

Rs Rs

The above margins are pertaining to oncology drugs only; does not indicate overall profitability of various players


Challenges in the domestic oncology space

P R I C E C O N T R O L I S N O T A B I G P R O B L E M

Price controls is not such a big problem, yet

Regulatory price control seems like a big chal-

lenge— the government recently included 33

oncology drugs in the national list of essential

medicines (NELM) 2014 for price control and there

is speculation that more cancer drugs will get into

the price control list by National Pharmaceutical

Pricing Authority (NPPA). However, the reality is

that manufacturers will not be all that impacted

by price control because the transaction price for

most traditional cancer drugs is much below the

indicated MRP anyway (due to the prevalent prac-

tice of ‘special rates’). On the contrary, the margins

of corporate hospitals that make the maximum out

of drugs procurement at discounted special rates

will get squeezed.

Regulatory restrictions and loose patent pro-

tection are bigger issues

Regulatory problems such as restrictive clinical tri-

als and delays in clinical trials and drug approval-

sare the key concerns— these delay the launch of

new drugs in the market and ultimately moderate

growth. For, innovative MNCs, India’s loose patent

protection is a big concern. Recently, Natcow-

as issued a compulsory license against Bayer’s

Nexaverpatent (on the ground of affordability) and

Novartis’ Gleevec patent was invalidated (on the

ground of ever greening) — this has raised serious

List of Oncology drugs into NELMconcernsabout patent pro-

tection in India.

Due to poverty, low govern-

ment support, and a mostly

unorganised healthcare

sector, a large section of pa-

tients remains untapped and

deprived of medical treat-

ment – this makes it difficult

for the oncology marketto

expand. In such a scenario,

neither the patient nor the

manufacturer is benefiting.


Despite challenges, India offers huge business

opportunity for oncology players because of the

sheer number of people affected by cancer and its

ever-rising incidence coupled with limited access

to cancer care. Despite regulatory price control

and rising price competition, the Indian oncology

market is currently growing by 15-18% annually.

Increasing awareness about early detection and-

prevention, rising cancer-care access, and better

acceptance of biologic/targeted therapy indicat-

esthat Indian oncology market will see enhanced

growth momentum in the mediumterm.

• Introductions of innovative or differentiated

products by MNCs in the country should offer

generic opportunity for domestic players. As

per IMS Health, around 22 innovative mol-

ecules have been introduced globally over

2004-2011, but just 4 of those were launched

In the world R&D pipeline, oncology drugs dominate

in India. This leaves scope for more new

launches and generic opportunity.

• Across the world, the largest R&D pipeline

is in the field of oncology — this provides

more growth visibility for the segment. On-

colgy holds the largest innovation pipeline

(with about 550 molecules, of which a large

share, 338, are biologics molecules) implying

huge generic opportunity in the medium to

longterm.

• It is not just the domestic opportunity — the

export opportunity to emerging markets (with

a sale potential of about US$20bn and an

annual growth of 12-15%) holds big poten-

tial for Indian peers. Like India, incidence of

cancer is rising in emerging marketsdue to a

variety of reasons and many of these markets

face similar challenges such as lack of access

to information, prevention, early detection,

and treatment. According to the International

Agency for Research on Cancer, the death toll

in emerging markets will jump up to 6.8mn in

2020 from 5.3mn in 2012 — at a much higher

rate than the developed world. In just anoth-

er 10 more years, that is by 2030, they are

expected to touch 9mn.

Estimated cancer deaths

Prevailling deficiencies in caner care and huge export potential drive future growth


While the oncology business opportunity in the

emerging market is large and lucrative, these

markets have developed their own regulatory pro-

tocols, which become key challenges for product

registration. To overcome this, Indian peers such

as Natco, Biocon, and Intas Pharma, have forged

alliances with local players to deal with regulators

and penetrate these markets.

The patents of a series of oncology molecules

(with annual sales of about US$60bn) in advanced

markets such as the US and EU will expire in the

next 5-6years (over 2015-2020) — this provides

enough growth visibility for players such as Dr

Reddy, Sun Pharma, Biocon, and Natco.

• The rising dominance of biologic/targeted

therapy products in the upcoming innovative

drug pipeline as well as drugs approaching

patent expiry indicates a larger growth oppor-

tunity in the biologic/biosimilar space. In fact,

of the total 550 oncology molecules in the

global R&D pipeline over 60% (i.e. 338) belong

to biologics. Biologics also account for over

Patent expiry of Oncology drugs worth $60 bn during 2015-2020 provides enough growth visibility

70% of the total patent generalisation opportu-

nity of US$60bn in oncology over 2015-2020.

Dr Reddy, with its basket of traditional small-mol-

ecule oncology ANDA fillings for the US oncology

market and a pipeline of biosimilar cancer drugs in

alliance with Merck Serono, is best-placed to make

use of the upcoming opportunity in the oncolo-

gyspace, in traditional and new drugs. Similarly,

Biocon, with an advanced pipeline of biosimilar

cancer drugs in alliance with Mylan, and strong

biologic R&D and manufacturing capability is

well-placed to capture the biosimilar-led oncology

opportunity across the world.


Oncology segment to dominate Global Pharma industry both in terms of growth as well as market share

Source: Evaluate Pharma

Sales (2013 $mn) CAGR (2013-20) WW Market 2013

Roche 25,026 5% 34.30%

Bristol-Myers Squibb 3,279 19% 4.50%

Celgene 6,336 7% 8.70%

Novartis 7,871 1% 10.80%

Pfizer 2,947 15% 4.00%

Johnson & Johnson 3,705 8% 5.10%

Astellas Pharma 757 33% 1.00%

AstraZeneca 3,193 7% 4.40%

Eli Lilly 2,875 8% 3.90%

Merck & Co 752 28% 1.00%

Top 10 56,741 8% 77.90%

Other 16,123 19% 22.10%

Top 10 Companies & Total Worldwide Oncology Sales 2013-20

Source: EvaluatePharma® (1 JUN 2014)


Pankaj Agrawal, of Capitel Partners

Spectrum chronicles: a bird’s eye view of

the upcoming tussle for spectrum

Ground Zero interacted with Pankaj Agrawal of Capitel Partners to understand the strategies that operators may follow in the mega-spectrum-renewal auc-

tions to be held in February 2015.

BY NAVEEN KULKARNI & VIVEKANAND SUBBARAMAN


Pankaj is a Director with Capitel Partners, an investment

advisory that conducts due diligence for telecom, digital

media, and internet companies. Until recently he was

the co-head and board member of Analysys Mason India

where he was responsible for the India, Bangladesh, and

Sri Lanka markets. Before that he has worked with the

TMT strategy team at Deloitte Consulting and with BDA

China across multiple markets including the US and the

Middle East. Between 2003 and 2006, he was the nation-

al head of revenue planning and pricing management for

Bharti Airtel’s mobile business. He has had significant

exposure to corporate planning and strategy formulation,

including in investments, operating plans, and tender

offerings.

Following are excerpts of Ground Zero’s interaction with

Pankaj:

Q: The upcoming auction is seeing spectrum renewal in

18 of the 22 circles in India. How important is the auction

for the Indian telecom industry?

A: The February 2015 auctions are critical — they are do-or-

die for Idea Cellular, Reliance Communications, and Voda-

fone India, as these players will have to win back spectrum

in several circles to be able to sustain operations after their

spectrum licenses expire.

The quantum of spectrum that is up for renewal – 900MHz

– is very large. Globally, sub-1-gigahertz -frequency bands

are a vital ingredient in operators’ coverage plans and it is

the same for India. 900MHz spectrum is very important in

the upcoming auctions as the circles that are seeing licence

renewal are geographically large (unlike the metros in the

February 2014 auctions). In metros, due to high population

density, an operator with 1800-MHz spectrum is able to cater

to its customers with just 1.0-1.2x the sites that a 900MHz

operator has. But this equation changes dramatically in rural

and semi-urban areas where the site count escalates to 2x vs.

similar telecom coverage in the 900-MHz band.

And since 900MHz is likely to be used for 3G services (along

with its traditional voice usage), we might see fierce bidding

for this spectrum.

Option 1 Option 2 Option 3


Q: How does 3G over 900MHz compare with 3G on

2100MHz?

A: It is not fair to compare 3G over 900MHz vs. over

2100MHz. One must compare 900MHz with 700MHz, as

sub-GHz frequencies are far superior to other bands. Given

the lack of clarity on the availability of 700MHz spectrum,

900MHz becomes very important for the data growth pros-

pects of incumbents. Additionally, 3G over 850/900MHz has

a broad ecosystem compared to Long-Term Evolution (LTE).

Vodafone has stated that it will deploy 3G aggressively rather

than look at 4G and will use 900/2100MHz to do this —

900MHz for coverage and 2100MHz for capacity.

The price of the 900-MHz spectrum will also reflect the pros-

pects of 3G services in the respective circles.

Q: What about Reliance Jio’s (Jio) strategy for the upcom-

ing auctions? Do you think that Jio would be enthusiastic

about buying 900MHz spectrum?

A: As was the case in the February 2014 auctions, Jio is

unlikely to be aggressive in acquiring 900MHz spectrum.

At best, it will acquire this spectrum in patches. Jio would

much rather acquire non-contiguous spectrum in the 800MHz

band, combine it with RCom’s spectrum, and launch voice

and 3G services in 850MHz (option 3 of the graphic above).

Its strategy would be to use 850 3G for voice and data cov-

erage while 1800 FD-LTE and 2300 TD-LTE for data needs,

especially in urban and dense urban areas.The 850MHz

band is also likely to see FD LTE support in the future, as this

frequency band is seeing investments by global technology

vendors.

Options 1 and 2 are natural choices for incumbents result-

ing in high relevance of 900MHz spectrum for them, while

Jio would choose option 3. Jio’s economics in the 850-MHz

band are much more favourable than a business strategy

where it would have to acquire 900-MHz spectrum. This is

because there are no takers for the 800-MHz spectrum in

upcoming auctions as the spectrum is non-contiguous. Jio

can pay the discovered market rate (which will be low due to

lack of takers) for RCom’s spectrum, liberalise it, and create

contiguous 5-MHz blocks in 850MHz.

The spectrum that RCom possesses has a validity of 7 years,

unlike new spectrum from auctions that have a 20-year validi-

ty, and are therefore very expensive.

Q: You mentioned that 900-MHz spectrum will see fierce

bidding, so do you think that there could be a realign-

ment of spectrum portfolios of incumbents? What about

the role of the reserve price that the TRAI will recom-

mend soon?

A: In the 900-MHz band, supply will matter more than the

reserve price. Reserve prices are more relevant when supply

of spectrum is more than the potential demand.

Availability of 5MHz contiguous blocks of spectrum will be

a key factor in deciding the auction price. Only one circle –

Punjab, has 3 blocks of contiguous 5-MHz spectrum in the

900-MHz band. In major ‘A’category circles there are only 2

blocks of contiguous 5-MHz spectrum in the 900-MHz band

while several ‘B’&‘C’category circles have only 1 contiguous

block.

RCom and Idea Cellular could end up forsaking 900-MHz

spectrum in some circles, as their market shares do not justify

a very high bid in those circles. There is a possibility that

RCom could lose its 900MHz spectrum in MP and the C-cir-

cles; Idea might see this in Gujarat and Karnataka.

In the February 2014 auction, Vodafone bid for 2 blocks of

5-MHz contiguous spectrum in the 900-MHz band in Mum-

bai. If it were to repeat this in the upcoming auctions, then

the auction price could be very high due to the limited spec-

trum supply. Airtel, too, is likely to bid for 900-MHz spectrum

in circles where it is losing ground and where it does not

have 2100MHz spectrum for 3G services.

Q: What are the implications of the auctions for the tele-

com infrastructure space?

A: With the spectrum renewal auctions, 3G will start getting

deployed in 900MHz and 4G in 1800MHz. Operators could

shift from 900MHz to 1800MHz thereby driving tenancies,

while 3G deployments over 900MHz would largely be loaded

on existing tenancies. This could add 45,000 tenancies. The

tri-band spectrum strategy of Jio – 850MHz for coverage,

1800MHz for urban coverage, and 2300MHz for dense

urban capacity — is likely to result in 25,000 open-market

tenancies. Finally, operator consolidation could take away

20,000 tenancies. Thus, the industry tenancy growth could be

50,000-60,000 from FY14-17.


Indian Economy – Trend Indicators

Monthly Economic Indicators

Quarterly Economic Indicators

Growth Rates (%) May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14

IIP (2.5) (1.8) 2.6 0.4 2.7 (1.2) (1.3) (0.2) 0.8 (1.8) (0.5) 3.4 5.0 3.4

PMI 50.1 50.3 50.1 48.5 49.6 49.6 51.3 50.7 51.4 52.5 51.3 51.3 51.4 51.5

Core sector 2.3 0.1 3.1 3.7 8.0 (0.6) 1.7 2.1 1.6 4.5 2.5 4.2 2.3 7.3

WPI 4.6 5.2 5.9 7.0 7.0 7.2 7.5 6.4 5.2 5.0 5.7 5.2 6.2 5.4

CPI 9.3 9.9 9.6 9.5 9.8 10.2 11.2 9.9 8.8 8.0 8.3 8.6 8.3 7.5

Money Supply 12.1 12.8 12.5 12.2 12.5 13.0 14.5 14.9 14.5 14.5 14.2 13.9 13.2 12.2

Deposit 13.5 13.8 13.5 13.1 14.1 14.4 16.1 15.8 15.7 15.9 14.6 15.1 13.8 12.2

Credit 14.2 13.7 14.9 17.1 17.8 16.6 15.5 14.5 14.7 14.4 14.3 14.1 12.8 13.1

Exports (1.1) (4.6) 11.6 13.0 11.2 13.5 5.9 3.5 3.8 (3.7) (3.2) 5.3 12.4 10.2

Imports 7.0 (0.4) (6.2) (0.7) (18.1) (14.5) (16.4) (15.2) (18.1) (17.1) (2.1) (15.0) (11.4) 8.3

Trade deficit (USD Bn) (20.1) (12.2) (12.3) (10.9) (6.8) (10.6) (9.2) (10.1) (9.9) (8.1) (10.5) (10.1) (11.2) (11.8)

Net FDI (USD Bn) 1.9 1.8 1.7 1.7 3.3 1.8 2.4 1.9 0.4 (0.1) 2.9 2.2 4.8 2.4

FII (USD Bn) 6.7 (8.7) (4.7) (2.0) 0.2 (0.4) - 2.9 2.6 1.5 5.4 (0.1) 7.7 4.8

ECB (USD Bn) 2.5 2.0 3.7 2.3 3.3 1.9 2.2 4.6 1.8 4.3 3.6 3.2 1.5 1.9

NRI Deposits (USD Bn) 1.7 2.5 1.3 1.2 5.9 4.5 14.6 2.0 0.7 0.7 2.5 1.4 1.1 n.a.

Dollar-Rupee 55.1 58.4 60.6 63.0 63.8 61.6 62.6 61.9 62.1 62.2 61.0 60.4 59.3 60.2

FOREX Reserves (USD Bn) 287.9 284.6 280.2 275.5 276.3 283.0 291.3 295.7 292.2 294.4 303.7 309.9 312.4 315.8

Balance of Payment (USD Bn) Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14Exports 80.2 75.0 72.6 74.2 84.8 73.9 81.2 79.8 83.7 Imports 131.7 118.9 120.4 132.6 130.4 124.4 114.5 112.9 114.3 Trade deficit (51.5) (43.8) (47.8) (58.4) (45.6) (50.5) (33.3) (33.2) (30.7)Net Invisibles 29.8 26.8 26.7 26.6 27.5 28.7 28.1 29.1 29.3 CAD (21.8) (17.1) (21.1) (31.8) (18.2) (21.8) (5.2) (4.1) (1.3)CAD (% of GDP) 4.4 4.0 5.1 6.5 3.6 4.9 1.2 0.8 0.3 Capital Account 16.6 16.5 20.7 31.5 20.5 20.6 (4.8) 23.8 9.2 BoP (5.7) 0.5 (0.2) 0.8 2.7 (0.3) (10.4) 19.1 7.1

GDP and its Components (YoY, %) Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14Agriculture & allied activities 3.9 1.8 1.8 0.8 1.6 4.0 5.0 3.7 6.3 Industry 7.4 (0.6) 0.1 2.0 2.0 (0.9) 1.8 (0.9) (0.5)Mining & Quarrying 6.5 (1.1) (0.1) (2.0) (4.8) (3.9) - (1.2) (0.4)Manufacturing 7.5 (1.1) (0.0) 2.5 3.0 (1.2) 1.3 (1.5) (1.4)Electricity, Gas & Water Supply 7.6 4.2 1.3 2.6 0.9 3.8 7.8 5.0 7.2 Services 6.5 6.7 6.5 6.1 5.8 6.5 6.1 6.4 5.8 Construction 7.6 2.8 (1.9) 1.0 2.4 1.1 4.4 0.6 0.7 Trade, Hotel, Transport and Communications 4.0 4.0 5.6 5.9 4.8 1.6 3.6 2.9 3.9 Finance, Insurance, Real Estate & Business Services 10.9 11.7 10.6 10.2 11.2 12.9 12.1 14.1 12.4 Community, Social & Personal Services 5.5 7.6 7.4 4.0 2.8 10.6 3.6 5.7 3.3 GDP at FC 6.3 4.5 4.6 4.4 4.4 4.7 5.2 4.6 4.6


Annual Economic Indicators and Forecasts Indicators Units FY6 FY7 FY8 FY9 FY10 FY11 FY12 FY13 FY14E FY15E

Real GDP growth % 9.5 9.6 9.3 6.7 8.6 8.9 6.7 4.5 4.6 5.2

Agriculture % 5.1 4.2 5.8 0.1 0.8 8.6 5 1.4 4.0 2.4

Industry % 8.5 12.9 9.2 4.1 10.2 8.3 6.7 0.9 0.0 2.9

Services % 11.1 10.1 10.3 9.4 10 9.2 7.1 6.2 6.0 6.6

Real GDP Rs Bn 32,531 35,644 38,966 41,587 45,161 49,185 52,475 54,821 57,486 60,475

Real GDP US$ Bn 733 787 967 908 953 1,079 1,096 1,008 951 1,008

Nominal GDP Rs Bn 36,925 42,937 49,864 56,301 64,778 77,841 90,097 101,133 113,205 126,723

Nominal GDP US$ Bn 832 948 1,237 1,229 1,367 1,707 1,881 1,859 1,872 2,112

Population Mn 1,106 1,122 1,138 1,154 1,170 1,186 1,202 1,219 1,236 1,254

Per Capita Income US$ 753 845 1,087 1,065 1,168 1,439 1,565 1,525 1,515 1,685

WPI (Average) % 4.5 6.6 4.7 8.1 3.8 9.6 8.7 7.4 6.0 5-5.5

CPI (Average) % 4.2 6.8 6.4 9 12.4 10.4 8.3 10.2 9.5 7.5-8

Money Supply % 15.5 20 22.1 20.5 19.2 16.2 15.8 13.6 13.5 14.0

CRR % 5 6 7.5 5 5.75 6 4.75 4.0 4.0 4.0

Repo rate % 6.5 7.5 7.75 5 5 6.75 8.5 7.5 8.0 8.0

Reverse repo rate % 5.5 6 6 3.5 3.5 5.75 7.5 6.5 7.0 7.0

Bank Deposit growth % 24 23.8 22.4 19.9 17.2 15.9 13.5 14.4 14.6 15.0

Bank Credit growth % 37 28.1 22.3 17.5 16.9 21.5 17.0 15.0 14.3 16.0

Centre Fiscal Deficit Rs Bn 1,464 1,426 1,437 3,370 4,140 3,736 5,160 5,209 5,245 5,977

Centre Fiscal Deficit % of GDP 4 3.3 2.9 6 6.4 4.8 5.7 5.2 4.6 4.7

Gross Central Govt Borrowings Rs Bn 1,310 1,460 1,681 2,730 4,510 4,370 5,098 5,580 5,639 6,767

Net Central Govt Borrowings Rs Bn 954 1,104 1,318 2,336 3,984 3,254 4,362 4,674 4,233 4,870

State Fiscal Deficit % of GDP 2.4 1.8 1.5 2.4 2.9 2.1 2.3 2.2 2.5 2.5

Consolidted Fiscal Deficit % of GDP 6.4 5.1 4.4 8.4 9.3 6.9 8.1 7.4 7.1 7.2

Exports US$ Bn 105 129 166 189 182 251 310 307 319 328

YoY Growth % 23.4 22.6 28.9 13.7 -3.5 37.6 23.4 -1.0 3.9 3.0

Imports US$ Bn 157 191 258 309 301 381 500 502 466 500

YoY Growth % 32.1 21.4 35.1 19.7 -2.5 26.7 31.1 0.5 -7.2 7.3

Trade Balance US$ Bn -52 -62 -92 -120 -118 -130 -190 -196 -148 -172

Net Invisibles US$ Bn 42 52.2 75.7 91.6 80 84.6 111.6 107.5 115.2 118.1

Current Account Deficit US$ Bn -10 -10 -16 -28 -38 -45 -78 -88 -32 -54

CAD (% of GDP) % -1.2 -1 -1.3 -2.3 -2.8 -2.6 -4.2 -4.7 -1.7 -2.6

Capital Account Balance US$ Bn 26 45 107 8 52 62 68 89 49 64

Dollar-Rupee (Average) 44.4 45.3 40.3 45.8 47.4 45.6 47.9 54.4 60.5 60.0

Source: RBI, CSO, CGA, Ministry of Agriculture, Ministry of commerce, Bloomberg, PhillipCapital India Research


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Phill

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Note

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Mkt

Cap

Ne

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s mn)

EB

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(Rs

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Rs m

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S (R

s)

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Grow

th (%

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) P

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(x)

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Nam

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com

pany

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Rs m

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FY15

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GAIL

Oil &

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14.6


Disclosures and Disclaimers

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