Prices Of Expensive Diabetes Drugs Are Falling And More Manufacturers Are Rushing In

• <00:51> Taiwan's Foxconn formally pulls out of Vedanta JV from a much-touted $19.5 billion semiconductor manufacturing project.
• <06:37> How India's diabetics drug market is exploding as off-patent drug prices fall with Sheetal Sapale
• <15:42> Taylor Swift Economics And A Few Lessons
• <16:53> India has an aggregate rains surplus now but crop sowing patterns have suffered

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TRANSCRIPT

NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.

Good morning, it's Tuesday, the 11th of July and I'm Govindraj Ethiraj coming to you from Mumbai, India's financial capital !

Our Top Reports For Today

• Taiwan's Foxconn formally pulls out of Vedanta JV from a much-touted $19.5 billion semiconductor manufacturing project.
• How India's diabetics drug market is exploding as off-patent drug prices fall
• Taylor Swift Economics And A Few Lessons
• India has an aggregate rains surplus now but crop sowing patterns have suffered.

Quite a few years ago, a senior journalist colleague took me along, the eager beaver, to meet Aditya Birla, the founder of the AV Birla Group for an interview we were doing for our fortnightly magazine.
Several industries were being opened up for private sector entry at the time and it had become quite fashionable to ask every industrialist which business they were considering diversifying into. And follow that up with a, how will you do it question.

Birla, if I remember correctly, talked about power, telecom and finance as areas they were looking at. To our point on whether the Birlas could manage so many diversifications, his answer was, who else will do it if we don't? These are all new areas.

Indian business has been constantly diversifying into new areas since the 1990s, either into areas that were earlier closed off to private sector participation or new areas that have opened up.

The Vedanta Group, run by Anil Agarwal, calls itself, as I have mentioned in The Core Report earlier, a global natural resources conglomerate operating in India and Africa in industries ranging from oil and gas to a range of metals from zinc to aluminium to iron ore and nickel.

I also asked in the same report, who could be setting up a semiconductor plant and wondered, aloud, why for example a software company like Infosys could not or Wipro and HCL - the last two having had computer hardware businesses some years ago.

After all, companies like Facebook and Google were venturing into Hardware. Or Uber was getting into making cars and so on. The answers were of course self-evident.

As has been speculated in the last week, the $19.5 billion Foxconn-Vedanta joint venture has been called off, apparently mutually and both will now pursue a semiconductor project independently.

The duo had signed an MoU in September 2022 with the Gujarat Government to set up the country's first semiconductor manufacturing facility. It was also touted as independent India's biggest-ever corporate investment so far.

The project also caused much heartburn in neighbouring Maharashtra which is usually in the fray for major industrial projects.

The project has had problems of various kinds and has attracted particular attention because it is, understandably, heavily dependent on Government incentives, more than half of the cost actually.

Then several reports surfaced about Vedanta's indebtedness which the group claimed was under control. There was also some vagueness in the way Vedanta talked about the project's domicile, not being clear whether it was the listed Indian company or a separate subsidiary or venture that would drive this.

We at TheCore also reported on this matter, something that led to a censure and fine from the Securities & Exchange Board of India.

All told, not very good optics.

Meanwhile, on the technical side, the duo had earlier pitched to manufacture a much higher end chip manufacturing plant whereas the Government wanted a lower end..think chips in the latest mobile phones versus chips that go into smart TVs or cars.

Interestingly, while Foxconn can claim considerable experience in electronics manufacture, like iPhones, it has no semiconductor manufacturing experience.

India's electronics minister said that it was well known that both companies had no prior semicon experience or Technology and were expected to source Fab tech from a Tech partner. While their JV VFSL had originally submitted a proposal for 28nm fab, they could not source an appropriate Tech partner for that proposal," minister Rajeev Chandrashekar said after news of the two breaking up surfaced.

In a statement, the electronic major said, "Foxconn is working to remove the Foxconn name from what now is a fully-owned entity of Vedanta. Foxconn has no connection to the entity and efforts to keep its original name will cause confusion for future stakeholders."

Foxconn said it would continue to strongly support the government's "Make In India" ambitions and establish a diversity of local partnerships that meet the needs of stakeholders," it added.

Last week, Vedanta Group had taken full ownership of the joint venture with Foxconn set up last year to manufacture semiconductors in India. The JV, Vedanta Foxconn Semiconductors Private Limited, was a wholly owned subsidiary of Vedanta group entity Twin Star Technologies Limited.

To come back to the original poster from Aditya Birla many years ago, yes, there will be no semiconductor or electronics manufacturer with the sophistication to make chips in India, there are a handful in the world as it happens.

So, the local partner will, willy nilly be someone with little or no background in this area.

But the question and answer can be nuanced a little more. Or ask the other obvious question. Why is someone like Reliance Jio, who is in downstream telecom products and services at such a scale riding on large device partnerships not venturing into this space? Or other telecom companies?

Why only a company that is into mining and smelting where there's almost a heaven and earth technology gap between an aluminium plant and a chip manufacturing facility, at least the kind that TSMC of Taiwan and Intel are putting up in different parts of the world?

Obviously, it's about entrepreneurial grit and determination to do something bigger and strike out anew. Birla could do it in his time as have many others including Anil Agarwal himself in the many other bold bets he has undertaken. Perhaps the lesson is an old one being the importance of stronger balance sheets and cash flow.

Diabetes Drugs Are Becoming Big Business As Prices Fall

The Indian pharmaceutical industry is poised to hit the $57 billion mark by fiscal year 2024-25, from around $50 billion just now.

"The Indian pharma industry has grown from $35.41 billion in FY18 to $49.78 billion in FY23 and is likely to reach $57 billion by FY25," the research agency Careedge said.

In the domestic market, one area that is growing rapidly is diabetes and the OAD or the oral anti-diabetes market.

Some 9-10% of India's population suffers from Type 2 diabetes which puts the figure much above 100 million.

Of this, some half the people don't even know they have it and are thus undetected.

It remains undetected till it goes into the final stage, which typically means insulin injections. The idea obviously is to detect and treat it earlier where possible and then treat it with oral drugs as opposed to injections.

Interestingly, many drug makers have jumped into the space, of course, because the market for diabetes is large, but equally, because many drugs have gone off-patent.

And importantly, many drugs which were expensive are now available at a lower price.

Sheetal Sapale of analytics firm Pharmarac says many high-end medicines are now available at a lower price.

From some 1,200 brands in this space 5 years ago, there are now 2,000 brands.

I spoke to Sheetal Sapale of Pharmacy and began by asking her to describe the diabetes challenge as we are looking at it from a pharmaceutical industry point of view and why there was so much action at this point.

By the way, diabetes ranks fourth in therapies after Cardiac, Anti Infectives and Gastrointestinal and is followed by Vitamins of all kinds.

Devastating Rains

India has been slammed with high-intensity rains across the country, leading to loss of life and damage to public and private property.

While this year's monsoon was delayed, the numbers show that the deficit has already been made up at the national aggregate level though the variations within and across the country are quite wide with sharp deficits in some parts of the country like east, central and south and high surpluses in others, like northern India.
But the delay has affected crop sowing patterns which will affect agricultural output and productivity down the line

A report released yesterday by Bank of Baroda research says that the overall sown area of Kharif crops declined by 8.7% compared with last year as of 7th July 2023. Kharif crops include rice, maize, bajra, ragi and groundnut among others. On the other hand, higher acreage has been registered for sugarcane (4.7%) along with jowar and bajra crops.

I will revisit these numbers in a week or so along with reservoir levels, another interesting stat worth tracking with some analysis then.

Taylor Swift

A totally unverified and I repeat unverified social media post on TikTok and then picked up all over says there were 22 million registrations for Taylor Swift's upcoming concert in Singapore.

Did you ask how upcoming? Well, this is in March next year between the 2nd and 9th and of course, tickets are already sold out.

The same post pointed out that Singapore's population is 5.5 million. This part is at least verified, so clearly almost 4 times the population of Singapore would head to the island city and country if only it could.

Unfortunately not. There were only 330,000 seats in all and tickets went on sale on Friday last week.
She is also performing in Japan and Australia but nowhere is the frenzy as much as it is in Singapore.

Much of the demand for tickets is coming from countries all across the region, including in India, which has its share of Swifties as they are called.

People will buy tickets wherever they are in South and Southeast Asia and then head to Singapore because, among other things, it has world-class infrastructure and the ability to handle events of scale. Rock group Coldplay is playing in January 2024 between the 23rd and 30th and most of those tickets are sold out too.

In addition to good infrastructure, it is easy to get visas and also offers visas on arrival.
And it's not just the obvious benefits, like hotel rooms and other entertainment-linked spending that will happen in those days.

Holders of UOB bank credit cards were given preferred access, leading to, according to resorts, a 45% surge in daily credit card applications in Singapore, Thailand, Malaysia, Indonesia and Vietnam the week after Swift announced her dates, reports Reuters.

All of these could lead to Swiflation, as billions of dollars will be spent and a billion or so earned by Taylor Swift in this Eras tour.

In considerable contrast, French band Gipsy Kings performed in Mumbai last month. This is the version featuring guitarist Diego Baliardo and they also performed in Bangalore and Pune.

I found out about it purely by chance because a friend from Delhi spotted it on a booking app.

The event was inside a mall in central Mumbai, the music was great but the rest of the experience, including a most painful drive on a Friday evening was totally forgettable. As was the venue itself, more befitting for a college band or the like. Not blaming anyone here because quite likely the economics were such.

There has been much written about India's struggling live-performance opportunity and how so many cities could do so much more, including relaxing prohibitive regulations.

There is obviously a larger tourism boost story in this. We all know this as we do the efforts of the many entrepreneurs who have struggled to do their bit but worth reminding ourselves occasionally I guess, in a more comprehensive way, rather than looking at a concert in isolation.

That's it from me for today. Have a great day ahead and see you tomorrow. Do write in with your feedback and also let me know if there is anything different you would like me to focus on, as a weekly occasional as my friend Neeraj Jha says, if not often.

You can write to me on [email protected] or connect with me on LinkedIn.