Advertising Industry 2014-15

Advertising growth to nearly halve to 9.6% this year

The growth rate of the advertising industry is expected to nearly halve to 9.6 per cent this year at Rs 40,658 crore over the previous year, says a report.

The growth this year will be largely on account of the ongoing Cricket World Cup and spends across sectors, it said.

Driven by the massive election-related spends, the advertising industry grew at an impressive 16.4 per cent in 2014 to Rs 37,104 crore.

"A stable government focused on growth, positive market sentiment, upbeat consumer confidence will be the leading contributors to growth. The overall market is expected to grow by over Rs 3,500 crore to reach Rs 40,658 crore, a growth of 9.6 per cent over 2014," the Pitch-Madison Media Advertising Outlook said.

The report noted that the biggest contributor to growth will be organic spends across sectors and the Cricket World Cup.

The report also observed that in terms of absolute numbers the industry increased by over Rs 5,200 crore in 2014.

Advertising spends by political parties on account of the LokSabha and assembly elections contributed as much as Rs 2,300 crore, it noted.

"It is significant to note that of 16.4 percent growth, 7.2 per cent was on account of elections and 3.6 per cent through e-commerce players. Other categories contributed to only 5.6 percent," the report said.

The report however said the expected growth of 9.6 per cent in 2015 cannot be directly compared to the growth registered in 2014, as political parties contributed a major chunk with the elections.

"The 9.6 per cent growth estimate should be compared with the like-to-like category growth of 5.6 per cent achieved in 2014 and not the overall growth of 16.4 per cent. That is because, though the market grew by 16.4 per cent in 2014, growth was driven by elections and the money accounted from this will diminish in 2015," it said.

PRINT:

The print media is likely to grow 5.3 per cent on the back of increased government spending and advertising by e-commerce players and the size of print ad industry to be close to Rs 16,086 crore, up from Rs 15,274 crore last year.

"Print should continue to be the largest contributor in the overall advertising pie with a share of around 40 per cent," the report said, observing that its share has fallen from 47 per cent in 2008 to 41 per cent in 2014.

TELEVISION:

The share of television space in the overall advertising pie is expected to remain static at 38 per cent and is expected to grow 9.5 per cent to touch Rs 15,500 crore, up from Rs 14,158 crore.

"One of the drivers of growth will be the ongoing the Cricket World Cup, expected to earn revenue of around Rs 1,000 crore, of which around Rs 500 crore is likely to be additional revenue. The balance will be part of organic growth across sectors, mainly banking, financial services and insurance, telecom, consumer durables, auto mobile and others," the report said.

It noted that new channel launches from existing networks will lead to increased inventory supply, which in turn will lead to a hike in advertising revenues.

The phase III of digitization will also lead to increased revenues as most channels sell HD content separately, which will attract premium advertisers.

"With the government extending the deadline for Phase III of the digitization drive to December 2015, the increased penetration of digitization will lead to increased spending on niche, SD and HD channels. HD channels are now being sold separately and the facility of geotargeting ads on TV will attract more premium, local and retail advertisers," the report said.

DIGITAL:

Digital advertising is expected to grow 30 per cent with revenues expected to reach Rs 5,135 crore. "An idea of the phenomenal growth of the sector can be assessed by the fact that the medium which drew revenues of Rs 470 crore in 2008, is expected to cross the Rs 5,000 crore mark in 2015," it said.

Digital's share in the overall advertising pie has also increased from just 2 per cent in 2008 to over 10 per cent in 2014 and in 2015 it is expected to be 12.6 per cent. E-commerce players are expected to be the drivers of growth for the category, the report added.

RADIO:

The radio sector is expected to grow 6 percent to Rs 1,362 crore. "With confidence that the government will finally launch Phase III expansion by September, a large number of stations are expected to open and the new stations should pull in at least Rs 70 crore of additional ad revenue in the last quarter of the year," the report said.

Radio was used extensively by political parties during elections and this is expected to continue in 2015. E-commerce advertisers have also used the radio medium extensively for all their tactical offer-based campaigns and will continue with heavy spends on radio this year also, it noted.

OOH:

It expects the outdoor media to grow 6.2 percent to Rs 2,371 crore. Last year the medium grew by 13 per cent to touch Rs 2,233 crore again driven by the elections.

This year the growth of this medium will depend on spends by e-commerce companies, retailers, telecom, apparel and jewellery marketers handsets mobile manufactures and infrastructure companies."

The report expects a growth of 9.2 percent in cinema space taking the total revenue to over Rs 200 crore. it grew 10 percent in 2014 and contributed 0.5 percent of the ad pie.

It noted the rapid expansion of multiplexes in small towns cities is a big reason for the growth of cinema advertising. "Fuelling the growth of cinema advertising will be digitization. Multiplex screens are expanding across the country and big movie releases playing on the screens are expected to attract a lot of national and local advertisers ," it said.

SOURCE:ET

Online Advertising

Online advertising market to touch over Rs 3,500 crore by March 2015 

Rising marketing spend in sectors like e-Commerce, telecom, FMCG and consumer durables will help the online advertising market in India, which is projected to grow at 30 per cent to touch Rs 3,575 crore by March 2015, a IAMAI-IMRB study today said. 

According to the study, the online advertising market has grown from Rs 1,140 crore in 2010-11 to Rs 2,260 crore in 2012-13 and was estimated to be worth Rs 2,750 crore in 2013-14. 

The online ad segment is expected to grow at a compounded annual growth rate of 25 per cent between FY'2011 to FY'2013. 

The overall ad spend in the country across all media is Rs 38,598 crore as of 2013 with a year-on-year growth rate is 12 per cent, with television accounting for 44 per cent of the spend. 

"The gradual increase in adaptation of Internet has opened the door to the marketers to go online and spend on digital advertisement.With mobile devices becoming a predominant mode of Internet access among the users in India, this number is expected to increase (further) 

"Although traditional media still holds strong ground in the Indian ad space, digital advertising is catching up fast and is expected to overtake traditional media within the next 5-10 years," Internet and Mobile Association of India (IAMAI) and IMRB International said. 

The high growth can also be attributed to increasing advertisement measurability, which is both quick and effective, it added. 

"In addition to the increasing adoption of mobile devices, the increasing connectivity and improvements in broadband infrastructure will lead to increased investments in more content rich advertisements viz video and social media advertisements," it said. 

Digital ad spend on mobile devices stood at 14 per cent, whereas on desktops and laptops at 86 per cent. 

As of June 2014, there were 243 million claimed Internet users in India out of which 192 million are active users (use Internet at least once a month). 

The growth in e-Commerce industry and their ad-spend in digital media is the highest, contributing close to 20 per cent, followed by telecom and FMCG & consumer durables. 

The digital ad spends by the e-Commerce industry has been growing at a CAGR of 59 per cent since 2011 and stood at Rs 495 crore at the end of March 2014. 

Spend by telecom stood at Rs 413 crore, followed by FMCG & consumer durables (Rs 385 crore), BFSI and travel (Rs 303 crore each). 

Currently, search and display contribute 38 per cent of the overall ad spends, followed by display ads (29 per cent) and social media (13 per cent). 

"It is estimated that the proportion of spends on search advertisements will reduce and spends will increase on email, video and mobile ads," it said. 

SOURCE: Economic Times

Media & Entertainment

Introduction

The Indian M&E sector is making significant space for itself on global canvas owing to which many international production houses and business conglomerates are venturing into the country. For instance, Disney’s big stake buy in UTV Software Communications majorly drove the foreign direct investment (FDI) in 2011-12 in the sector, which stood at Rs 32.64 billion (US$ 588.95 million) 72 per cent higher than Rs 18.87 billion (US$ 340.86 million) received in 2010-11.

Television

Healthy advertisement spends coupled with increased penetration in rural and semi-urban areas are propelling the growth of the television sector in India. Emergence of direct-to-home (DTH) technology in a big way has made the television industry mark a value of US$ 7.1 billion by the end of 2011, which was 14 per cent higher than that in 2010.

A report prepared by KPMG, along with an industry body, has stated that while the current level of penetration is estimated at around 60 per cent, there is still a room for expansion in the Indian TV landscape. The report estimates that pay-TV subscription revenue will increase from 65 per cent in 2011 to 69 per cent by 2016.

Radio

While TV is a captive medium, radio allows freedom of movement. Other than being a popular medium with the youth, radio has far-reaching impact on people in remote places.

Recently, Yashwantrao Chavan Maharashtra Open University (YCMOU) has launched an interactive live web-radio from its campus studio in Nashik, Maharashtra. Through this technology, the university intends to connect students from anywhere in the world to experts of various subjects and enable them to listen to lectures, hold discussions and interviews.

Online and Mobile Entertainment

Internet has emerged as one of the strongest mediums to reach out to people, due to better broadband speeds, easy availability and reasonable pricing of internet-enabled devices and awareness among today’s youth. The online viewership of video content is on an upsurge – be it for news or for entertainment (social networking, shopping, et al). Due to this increased popularity, mobile phones have become the second most-viewed screen for Indian consumers. About two crore internet users in India are opting for the service over their mobile phones, according to a study by online audience and ad measurement platform Vizisense.

Social networking sites have also gained a lot of attention over past few years. They reach to about 82 per cent of the world’s online population and the numbers are increasing day by day. India’s small and medium enterprises (SMEs) are also looking to capitalise this medium as social media in the country is growing at 100 per cent and 129.3 million Indians are anticipated to join the forums. SMEs are looking forward to reach and develop a strong consumer base through social networking sites. An industry body has even joined hands with Facebook to organise road shows to spread awareness among SMEs about the benefits of using social media for business transformation.

Films

The Indian film fraternity will complete its century in 2013. The industry is anticipated to grow by 9 per cent per annum till 2015 to reach US$ 2.8 billion, according to Deloitte.

In an effort to make India a hub for international films, the Ministry of Information and Broadcasting (I&B) is contemplating to establish a Film Commission that will initially act as a single-window clearance agency to grant permits for shooting. If the initiative gets materialised, international production houses will save a lot of time and energy which are currently diverted in seeking multiple approvals.

Investments

The Indian advertising industry clocked revenues worth Rs 25,594 crore (US$ 4.62 billion) in 2011, which were 8 per cent higher than the figures achieved in 2010, according to a report by Pitch Madison India.

• The fast moving consumer goods (FMCG) sector has numerous brands and categories to offer to consumers. The sector players keep introducing new products and hence, seek sales-support with ads and promos. The industry segment contributes more than half to TV advertising and 9 per cent to the print media.
• In order to target multi-tasking and busy viewers, M&E industry major Zee Entertainment Enterprises has launched its over-the-top (OTT) distribution platform called Ditto TV. The new service, which facilitates live TV channels and on-demand video content to users on their mobile phones, tablets, laptops, desktops, entertainment boxes and connected TVs, was launched in Februry 2012 and also offers features such as adaptive streaming, an electronic program guide and a content recommendation application.
• Aegis Group has acquired Communicate 2 to merge it with its iProspect global network. Communicate 2 is a specialist performance marketing firm that counts search marketing, digital strategy consulting, social media and digital content production as its forte.
• Getit, pioneer of the concept of Yellow Pages in India, has appointed Aidem ventures to handle its corporate advertising sales for next 5 years. Getit has upgraded itself into a digital media firm that specialises in local search and classifieds. It is India’s leading ‘directional media’ service provider that facilitates quality prospects to businesses and brands across the categories. Aidem is an independent media consulting, marketing and advertising, sales company.

Government Initiatives

Apart from setting up a Film Commission, the Ministry of I&B is also working on an incentive package in co-operation with the Ministry of Tourism wherein they would promote film tourism.

Ms Ambika Soni, Minister for I&B, India and her counterpart, the Poland Minister for Culture and National Heritage, Mr B Zdrojewski, will sign an audio-visual co-production agreement. The two ministries would also hold discussions on how to preserve film heritage at the National Film Archives of Poland.

Road Ahead

Indian animation industry is at a very nascent stage and is expected to grow in the recent future. Indian players are majorly acting as ‘service providers’ wherein they are involved with labour-intensive production and post-production activities. However, they are increasingly adapting to international animation standards and are learning modern techniques to come at par. Industry experts, considering the potential in Indian participants, expect the country’s animation industry to grow at a compounded annual growth rate (CAGR) of about 23 per cent to reach US$ 961 million by 2013.

Exchange Rate Used: INR 1 = US$ 0.01805 as on September 13, 2012

References: Media Reports, Press Releases, Deloitte Report

India's pharmaceutical sector - A Complete Study

India's pharmaceutical sector is gaining its position as a global leader. The pharma market in India is expected to touch US$ 74 billion in sales by 2020 from the current US$ 11 billion, according to a PricewaterhouseCoopers (PwC) report.

Growth of Indian pharma companies will be driven by the fastest growing molecules in the diabetes, skincare and eye care segment, as per a report by research firm, Credit Suisse. The market share of a drug company is directly related to the number of fast growing molecules in the company's pipeline, the report highlighted.

The Indian pharmaceutical market is poised to grow to US$ 55 billion by 2020 from the 2009 levels of US$ 12.6 billion, as per a McKinsey & Company report titled "India Pharma 2020: Propelling access and acceptance realising true potential". The industry further holds potential to reach US$ 70 billion, at a compound annual growth rate (CAGR) of 17 per cent.

Sector Structure/ Market Size

The Indian pharmaceutical market is expected to grow at a CAGR of 15.3 per cent during 2011-12 to 2013-14, according to a Barclays Capital Equity Research report on India Healthcare & Pharmaceuticals.

The outlook on the Indian pharmaceutical industry remains favourable, according to a report by ICRA and Moody's. Domestic formulation market stood at Rs 58,300 crore (US$ 10.54 billion) and has been ranked third in terms of volume and tenth in terms of value, globally. From 2011, trends are changing, MNCs are focusing on chronics, branded generics and launching patented products, besides expanding their field force and focusing on tier-II as well as tier-IV towns. Domestic market grew at 15 per cent, while pharma multinational companies (MNCs) revenue grew at 18.7 per cent.

Exports

India's exports of drugs, pharmaceutical and fine chemicals grew by 27 per cent to Rs 60,000 crore (US$ 10.85 billion) for the year ended March 2012, according to data compiled by Pharmaceutical Exports Council of India (Pharmexcil). Moreover, the size of the Indian formulations market, which currently stands at around Rs 62,000 crore (US$ 11.21 billion), is growing at 15-20 per cent annually.

"India-Brazil health and pharmaceutical collaboration holds the potential of being key contributor for assuring affordable healthcare for our people," as per Mr Anand Sharma, Union Minister for Commerce, Industry and Textiles. Mr Sharma further called for better understanding between the pharmaceutical regulatory regimes in the two countries.

The Export-Import (Exim) Bank of India has agreed to provide loans to fund the setting up of common infrastructure facilities at Sriperumbudur, Tamil Nadu, which will help boost exports of medicine products from India.

Growth

India will see the largest number of merger and acquisitions (M&As) in the pharmaceutical and healthcare sector, according to consulting firm Grant Thornton. A survey conducted across 100 companies has revealed that one-fourth of the respondents were optimistic about acquisitions in the pharmaceutical sector.

The cumulative drugs and pharmaceuticals sector attracted foreign direct investments (FDI) worth US$ 9,596 million between April 2000 to May 2012, according to the latest data published by Department of Industrial Policy and Promotion (DIPP).

Generics

India tops the world in exporting generic medicines worth US$ 11 billion. Currently, the Indian pharmaceutical industry is one of the world's largest and most developed, according to Mr Srikant Kumar Jena, Union Minister of State for Chemicals and Fertilisers.

Generics will continue to dominate the market while patent-protected products are likely to constitute 10 per cent of the pie till 2015, according to McKinsey report 'India Pharma 2015 - Unlocking the potential of Indian Pharmaceuticals market'. Hyderabad-based generic drug maker, Natco Pharma Ltd has launched a cheaper generic version of Bristol Myers Squibb's blood cancer drug Sprycel at a fraction of the innovator pricing. Natco launched Dasatinib at a pricing of Rs 9,000 (US$ 162.75) for a month's supply against Bristol pricing of around Rs 160,000 (US$ 2,893.31).

Multinational drug companies are showing a healthy growth in the Indian market setting a new trend. Out of 25 top medicine brands by sales last year, 13 were global drug major such as Pfizer, GSK and Novartis. Brand-building exercise is fast becoming more evident in a predominantly generic Indian medicine market, as per a market research entity AIOCD AWACS' report.

Diagnostics Outsourcing/ Clinical Trials

"The Indian healthcare devices market is part of our focus on emerging markets. The Hyderabad centre will enable us to improve product time to market and create valued-innovation," highlighted Robert Frechette, Vice-President (Engineering Services), Covidien. The value of the Indian medical devices market is estimated at US$ 4 billion, and is clocking a growth rate of 15 per cent annually, he added.

The Indian pharmaceutical companies can be of immense value in providing affordable healthcare, especially in countries such as Japan. India also has a vast pool of trained pharmaceutical scientists, doctors and researchers, which opens up avenues for joint collaborative research for new drug discoveries along with joint intellectual property rights (IPRs).

The clinical pharmacology unit of GVK Biosciences at Ahmedabad has cleared an audit conducted by US Food and Drug Administration (FDA). The facility carries out important scientific studies related to drug development for pharma customers (drug companies, research institutes, etc).

Investments

• Suven Life Sciences Ltd has got four product patents one each from Australia, Canada, Korea and New Zealand for their new drug molecules (New Chemical Entities). The new drug molecules are used for disorder treatment related to Neuro-degenerative diseases
• Aurobindo Pharma has received USFDA approval to manufacture and market montelukast sodium tablets and montelukast sodium chewable tablets for treatment of asthma in the US market
• US-based drug development player, CritiTech Inc has joined hands with Hyderabad-based formulation development services company, Finoso Pharma Pvt Ltd to set up a 50:50 joint venture (JV) - Finotech Pharma. The JV company is being set up with an initial investment of US$ 1 million
• Venus Remedies has secured its third US patent for its novel antibiotic product Potentox. The new drug is an antibiotic adjuvant entity and is considered effective in case of hospital acquired pneumonia and febrile neutropenia infections
• Israel's Teva Pharmaceutical Industries and Procter & Gamble (P&G) plan to enter India through a joint venture (JV) by setting up their first manufacturing facility at Sanand, Gujarat, with an initial investment of Rs 250 crore (US$ 45.21 million)
• Onco Therapies, a wholly owned subsidiary of Strides Arcolab, has received two USFDA approvals for 'Fluorouracil Injection USP'. Fluorouracil is a chemotherapy drug which interferes with cells making DNA and RNA, and stops the growth of cancer cells
• Mankind Pharma Ltd is set for a major turnaround over the next two to three years. "We are planning to launch 15-16 products in the chronic therapy segment this financial year", as per R C Juneja, CEO and Chairman, Mankind Pharma
• Venus Remedies Ltd has launched a nanotechnology based 'ready-to-use' single vial Docetaxel in the domestic market. The medicine will be an important tool in the cancer drug industry

Government Initiatives

The Union Budget for 2012-13 was announced by Mr Pranab Mukherjee, the Union Finance Minister. Highlights of Union Budget 2012-13:

• It is proposed to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/CVD to six specified life-saving drugs/ vaccines. These are used for the treatment or prevention of ailments such as HIV-AIDS, renal cancer, etc
• Probiotics are a cost-effective means of combating bacterial infections. It is proposed to reduce the basic customs duty on this item from 10 per cent to 5 per cent
• Basic customs duty and excise duty reduced on Soya products to address protein deficiency among women and children. Basic customs duty and excise duty reduced on Iodine

Furthermore, a 'Pharma Vision 2020' has been prepared by the Department of Pharmaceuticals, for making India one of the leading destinations for end-to-end drug discovery and innovation and for that purpose, the department will provide requisite support by way of world class infrastructure, internationally competitive scientific manpower for pharma research and development (R&D), venture fund for research in the public and private domain and such other measures.

Road Ahead

On the back of increasing middle-class population base, improvements in medical infrastructure and the establishment of IP rights, the Indian pharma industry is estimated to grow manifolds.

"India is a unique market, always very intriguing. India presents challenging paradigms and gives tremendous opportunities. I see the healthcare sector as one of the biggest business opportunities," as per Terri Bresenham, President and CEO, GE Healthcare India, and MD, Wipro GE Healthcare. India is the first country to have a large number of multinational healthcare providers, added Bresenham.

Pharmaceutical companies such as Cipla, Ranbaxy, Dr Reddy's Labs and Lupin might soon be part of the government's ambitious 'Jan Aushadhi' project. In an attempt to commercialise the project, the government is likely to rope in the private sector to bulk-procure generic drugs from them. There are 117 Jan Aushadhi stores across the country and the plan is to expand to at least 600 in the next two years and 3,000 by 2016.

Exchange rate used INR 1= US$ 0.01808 as on August, 2012

References: Consolidated FDI Policy, Department of Industrial Policy & Promotion (DIPP), Press Information Bureau (PIB), Media Reports, McKinsey Report, Pharmaceuticals Export Promotion Council

Doing Business in Singapore: Guide for Indian Entrepreneurs!

India and Singapore are on a path of increasing economic integration. The ties that bind these countries have a long history – they are rooted in a common culture and a shared legacy of being former British colonies.

Since 1991 (as a result of India’s Look East trade policy), cultural exchange, immigration and military links between both countries have increased dramatically. By 2001, Singapore-India bilateral trade had increased to S$2.65 billion. In 2005, both countries signed the India-Singapore Comprehensive Economic Cooperation Agreement (CECA). By the next year, total trade grew four-fold to approximately S$11 billion.

Existing India Singapore Business Relationship

According to International Enterprise Singapore (the national agency responsible for spurring Singapore’s external economy) India became Singapore’s 10^th largest trading partner in 2010, registering S$30.7 billion in total trade, up from S$21.6 billion in 2009. Data from the Singapore Indian Chamber of Commerce and Industry (SICCI) shows that as of June 2011, Singapore’s Indian business community has become the single largest country-based business community in Singapore, having grown by 25% within less than a year.

The reasons for this deepening trade relationship are multi-fold. Singapore has long been an attractive business destination as companies and investors recognize the value of its unique geographical and political environment. Firms can access most of the major Asian markets from Singapore.

Singapore’s responsive government and efficient legal system results in a pro-business environment which offers low tax rates, sophisticated infrastructure, strong IP protection, progressive immigration policies and an abundance of skilled labour force. Together, these factors have continued to entice entrepreneurs and multinationals to set up business ventures in Singapore.

Many Indian firms and entrepreneurs have done so in recent years. In 2009, Bangalore-based infrastructure giant, GMR Group; and K S Oils, India’s leading integrated edible oil FMCG company set up their regional and international offices respectively in Singapore.

In the same year, August Media was founded in Singapore and within a year, had scored a $60 million deal with US animation giant Classic Media. In September 2010, rope wire manufacturer Usha Martin announced its plans to make Singapore its corporate engineering knowledge center as well as international headquarters. In May 2011, Tata Communications named Singapore as its official international headquarters.

For many Indian entrepreneurs and businesses, Singapore holds a cultural attraction as well. It represents harmonious balance between the East and West and offers a culture that is familiar and comfortable for many Indians. Singapore is a clean, well-functioning cosmopolitan city with low pollution levels, reliable public transportation, high quality educational institutions and increasingly colourful entertainment, dining and arts scene. The recent uptrend in the purchasing of property by Indian expats also demonstrates that many find Singapore an attractive place to live.

How to start a Business in Singapore

If you are considering Singapore as the location for your business, there are some important considerations that you should keep in mind. First of all, you must carefully consider the type of company you plan to setup. For individual foreign entrepreneurs, the clear choice is to incorporate a private limited Singapore company. Foreign companies on the other hand, have a choice of setting up a branch office, a subsidiary company or a representative office in Singapore.

Singapore law allows 100% foreign ownership of Singapore companies. A Singapore company can be registered with a minimum of one shareholder, one director, and a paid-up capital of $1 only. Each company must appoint a Singapore-based company secretary and registered address and file its annual return with company registrar and income tax authorities. Since most of the work in Singapore is computerized, it hardly takes 1 day to register a company in Singapore.

If you are a foreign entrepreneur, you must bear the following in mind as well. If you plan to relocate to Singapore to run your business, you must secure a relocation visa of type EntrePass(Entrepreneur Pass) or EmploymentPass. These two types of visas do not come under any quota system however they are subject to the applicant satisfying the necessary qualification criteria. Each application is reviewed and approved by authorities based on its own merits. Once your relocation visa is approved, your spouse and children can also relocate to Singapore on Dependant Passes and you are eligible to apply for permanent residence in due course.

Overall, setting up a business in Singapore is quite easy and simple. The country has consistently been ranked highly in international business surveys and reports. Just last year, Singapore was named the city with the highest ease of doing business ranking, highest quality of life ranking in Asia for expatriates, most competitive economy and most efficient bureaucracy by institutions such as the World Bank, ECA International, Gallup and World Economic Forum. To become a part of this growing and dynamic environment, consider setting up your business in Singapore.

Ina Jasni works for Janus Corporate Solutions - a leading Singapore-based firm that offers full-range of cost-effective Singapore company registration, relocation visa, accounting and ongoing compliance services to businesses worldwide. For additional information on the topics discussed here, you can visit Janus’s website

Toys Market

Toy market on a growth trajectory

The industry is growing at 30 per cent every year; more than 55 per cent of the Rs 6,000-crore Indian toy industry is still accounted for by imports, as projected by Toy Association of India, TAI.

Drivers

The burgeoning growth in organised retailing has helped domestic and international toys and games manufactures to target tier two and tier three cities and expand their market base deeper into India. The health hazards that cheap Chinese toys can pose has also made people aware and grow even more conscious. Both these factors helped domestic organised toy suppliers to grow in prominence in the Indian market through their innovative and quality toys and games. Also, the perception towards toys as a necessity for all round development of child will help in further driving this market. Growth in preschool, large population of children, increasing awareness of quality issues are other factors that is leading to the growth.

In 2010, the toys and games market was valued at INR 40 bn. The market is likely to grow with increased per capita income of Indians and the increased availability of world class toys. Health concerns associated with cheap materials are likely to reduce the popularity of cheaper imports and this is likely to help local toys manufacturers further.

Toy makers go green

Toy manufacturers in India have embarked on a green drive by initiating a recycling process and the use of non-toxic raw materials. In line with this green commitment TAI has recently launched its ‘We Care’ campaign. The campaign is designed to spread awareness among small toy manufacturers about the health hazards associated with using toxic materials in toys and also encouraging them to initiate recycling process.

A study by Delhi-based Centre for Science and Environment showed that 45 per cent of the toys made in India contain dangerous phthalates, a group of chemicals. Regular exposure to phthalates can cause asthma, skeletal defects, damage the male reproductive system and impair the lungs in children. Raw materials like high-density polyethylene (HDPE), styrene acrylonitrile (SAN) and acrylonitrile butadiene styrene (ABS) can be used instead which are less harmful.

The department of industrial policy and promotion (DIPP) is also coming up with guidelines for the industry in a month or two. “We are trying to create awareness among small manufacturers of this unorganised sector now. We have already urged all our 600-odd members to adopt non-toxic materials only and if possible, to recycle toys too,” said Raj Kumar, president of the Toy Association of India (TAI).

Looking ahead...

Growth in demand from relatively new sectors of toys and games such as video games, infant games and pre-school games is expected to steer the toy market in the years to come. Local manufacturers have to find out new means to tackle the Chinese challenge and build up more innovative products that will help grow this market. To do this, they are to do away with obsolete designs and old technologies.

Indian Insurance Industry: An Outlook

Insurance industry in India - Brief Introduction

The Indian insurance sector has witnessed significant growth - the number of life policies in force has increased nearly 12-fold over 2000-2010, and health insurance policies nearly 25-fold. Factors like better terms, availability of a wide variety of products (like unit-linked insurance products, whole life, maximum net asset value (NAV) guarantee etc), and government incentives have boosted the growth of the industry.

Data released by the Insurance Regulatory and Development Authority (IRDA) indicates that 23 life insurers registered Rs 18,282.86 crore (US$ 4.1 billion) by writing new policies during April-June 2011. State-owned Life Insurance Corporation (LIC) of India, collected premiums worth about Rs 13,341.97 crore (US$ 3 billion), while its private peers collected 4,940.89 crore (US$ 1.1 billion) as new first-year premium during the period.

In June 2011, industry collection stood at Rs 6,022.98 crore (US$ 1.35 billion). Revenue earned by selling new policies increased by 15.13 per cent in FY11, amounting to Rs 1,25,826.03 crore (US$ 28.24 billion) against 1,09,290.38 crore (US$ 24.53 billion) in FY10.

Insurance in India - Market Dynamics

Currently, the insurance industry, including life and non-life companies, has deployed a capital of about Rs 35,000 crore (US$ 7.8 billion) out of which Rs 26,000 crore (US$ 5.8 billion) comes from the life insurance segment. Foreign players have contributed about Rs 9,000 crore (US$ 2 billion).

General Insurance

The General insurance industry registered 22.35 per cent growth during the first quarter (April-June) of FY12 in terms of gross written premium.

Public sector player New India Assurance Ltd. grew 15.97 per cent during the first quarter of FY12 by collecting US$ 520 million through new policies.

Health Insurance

The second largest vertical under non-life insurance umbrella, health insurance is witnessing significant growth from the last two fiscals. The growth in premium is expected to continue at a compound annual growth rate (CAGR) of around 28.5 per cent during FY12-FY14. Rising healthcare costs and awareness, along with government support and incentives have attracted many private players in the sector. The huge demand supply gap in the industry provides large scope of growth and progress in the coming years.

Private and public players witnessed an increase of 33 per cent in terms of gross health insurance premium collected for FY11. Increase of insurance premium rates (in both retail and group insurance segments) by almost 30 per cent in last couple of years has boosted the industry growth, according to Sanjay Datta, Head of customer service for health and accidents, ICICI Lombard. Further, government-endorsed insurance schemes like Rashtriya Swasthya Bima Yojana and support from state governments have strengthened premium collections in the sector, as per Virendra Kumar, General Manager, health insurance, New India Assurance.

Indian Insurance Sector - Key Investments

• Hewlett-Packard (HP) owned IT services company Mphasis has acquired US-based software vendor Wyde Corporation. With this acquisition, Mphasis intends to align its applications and business process outsourcing (BPO) operations with Wyde’s insurance software platform Wynsure. The acquisition is the second one in insurance segment by Mphasis, which bought AIG’s captive unit in India in 2009.
• The Competition Commission of India (CCI) has given its nod to Reliance Industries Ltd. (RIL) to buy Bharti Group’s 74 per cent stake in each of Bharti AXA life and general insurance companies. Bharti Enterprises and French insurer AXA Group were in 74:26 joint venture (JV). While RIL will acquire 57 per cent of the pie, Reliance Industrial Infrastructure Ltd (RIIL) will buy the remaining 17 per cent held by Bharti in the two companies.
• India’s second largest public sector lender Punjab National Bank (PNB) is set to form a strategic alliance with insurance firm Metlife for its proposed life insurance business, wherein the bank would buy 30 per cent stake for an undisclosed amount. PNB also agreed to enter into a 10-year distribution tie-up with Metlife India. The deal is expected to close by the end of 2011.
• Cigna Corporation, American health insurance major, is planning to form a Joint Venture (JV) with an Indian company by August 2011 to mark its presence in the country's fast-growing health insurance sector.

Government Initiatives

IRDA has recently hinted at mandatory listing of insurance companies. Though the insurance Act doesn’t stipulate companies to go public, the regulator might make amendments to it to facilitate capital raising by the players. Initial Public Offer (IPO) guidelines for the insurance sector are also being worked upon. According to the draft guidelines released, only those players that have 10 years of operational experience and strong financial performance would be allowed access to the capital markets.

IRDA has also announced the release of much-awaited health insurance portability scheme across non-life insurance companies to be done on October 1, 2011. The proposed scheme would give policyholders discretion of moving to other insurer of their choice, whom they think is providing better product and service, while continuing with their policies. The launch of the scheme has been postponed from July 1 to October 1 so that the insurers are completely prepared to adopt the new concept.

Paving way for consolidation in general insurance sector, IRDA has notified merger & acquisition (M&A) guidelines for the players. The IRDA Scheme of Amalgamation and Transfer of General Insurance Business Regulations-2011 would apply with immediate effect to all private general insurance companies. Along with IRDA, the buyer would be mandated to receive nods from the Reserve Bank of India (RBI) and finance ministry, in case foreign direct investment (FDI) is involved. It would also require having approvals from the Securities and Exchange Board of India (SEBI) and CCI.

To improve the level of penetration in Indian markets, the sector regulator is contemplating allowing banks to sell products of two insurance companies each in life and non-life categories. The recommendation over bancassurance for such a move was made by a committee set up by IRDA itself. As per the current practice, a bank is allowed to sell products of one each in a life insurance company, a general and a health insurance firm.

Insurance in India - Road Ahead

India’s insurance industry is anticipated to reach US$ 350-400 billion in terms of premium income by 2020, making it among the top three life insurance markets, according to a report by a leading industry body and US-based Boston Consulting Group (BCG). India is expected to be one of the top 15 non-life insurance markets by 2020. The report further stated that penetration of the insurance industry, premium as percentage of the country's gross domestic product (GDP), has improved from 2.3 per cent in 2001 to 5.2 per cent in 2011.

(Exchange Rate Used: INR 1 = US$ 0.02244165 as on August 4, 2011)

References: IRDA publications, IBEF,press reports, media releases