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“Ask and it will be given to you; seek and you will find; knock and the door will be opened to you. For everyone who asks receives; the one who seeks finds; and to the one who knocks, the door will be opened. Matthew 7:7-8

30 Jan 2016


Hi Friends,   In the present share market condition it is better to invest in good cash rich Pharma shares which have good R & D facilities and American FDA approvals.  Because their quality medicines have expected higher sales in foreign countries so as to enable them to earn the profits in foreign currency.  They will not affect by any depreciation of Indian Currency.  Demand of medicine is always increasing year by year even though the modern science & technology developed.  Ancient diseases are vanishing and new type of diseases is increasing in different parts of the world.  So R & D will help to discover new medicine and also open new market there.  One way to increase the sales of Drug Companies is to take over suitable pharmaceutical companies there.  Because these companies are sitting with huge cash balance.  Please see the cash flows of 10 firms grew in the past four years.

Name of the Company         2011        2012           2013               2014           2015 ( crore)

Sun Pharma                        1477.00   1690.10     2691.16         4465.80       4465.80
Dr.Reddy Lab                       799.90        201.30    1221.10         1945.50       2090.30
Lupin                                     635.50       668.90       588.10         1146.80        2536.20
Aurobindo Pharma                742.30       445.10       382.90           763.90         1330.00
Cipla                                      942.30       959.60     2115.40         1291.10        1338.20
Cedilla Health Care               510.50     1370.90       889.20           374.10          642.50
Gel mark Pharma                  495.00       443.00        843,20          755.10          680.90
Jubilant Life                           998.00     - 181.60        520.10          357.90         280.60
Torrent Pharma                     326.90        293.00        173.20           685.80        2022.40
Wockhardt                           7195.90     8215.70      8711.60       12668.20     15666.20    

At the end of the last financial year, the above top ten Indian Pharmaceutical Companies had been cash flow of Rs.15666 crore  i.e. more than double from Rs.7,195 reported 5 years before.  In the same period, the 10 year US Treasury yield dropped 2.18% from 3.87% bringing down the cost of finance for doing acquisition in the US substantially.  Lupin acquired US based Gavis Pharmaceuticals and Nobel Laboratories for $880 M.  Cipla acquired another company in US for 550 M $ recently.  Aurobindo Pharma acquired during 2014 a US Company for $ 132.5 million.

Today Newspaper reported sun Pharma is set to acquire US based eye-care company Insite Vision Inc, becoming the 3rd Indian Drug maker to execute a major transaction in the US in less than two months.  This is all cash transaction at $48M in aggregate equity value, on a fully diluted basis.

From the above it is clearly understood that our Indian Pharma Companies are very confident in their business growth.  So investors can consider these companies for their portfolio except Jubilant Life & Wockhardt. Dollar currency is stronger in the world and the above Pharma companies are exporting major products to US. That will also increase their net profit margin.

Good Luck.                                                                                See You Later.  

Tokyo: The Bank of Japan on Friday adopted a negative interest rate policy to spur lending and help drive inflation towards its two-percent target.

The -0.1 per cent interest rate introduced by the BoJ means that banks parking their money with the central bank are actually charged for doing so.

By penalising the banks for hoarding their cash, the BoJ is giving them the incentive to loan the money out, thereby pumping more cash into the economy and, hopefully, boosting economic activity.

In 2014, the European Central Bank (ECB) became the first major central bank in the world to use negative interest rates.

The BoJ had already kept its key interest rate at near zero as part of the country's easy money policy - a key weapon in Prime Minister Shinzo Abe's "Abenomics" economic revival programme.

Low interest rates mean businesses and households are less inclined to leave their money in the bank, while at the same time more likely to borrow to spend and invest. This theoretically boosts economic activity and eventually pushes up prices.

Japan has suffered from years of deflation and Tokyo's efforts to pump up the economy have had limited results so far.

While falling prices, or deflation, might appear to be good for consumers, if they become entrenched buyers could delay purchases in the hope of even lower prices later. That in turn prompts companies to hold off investment.

Deflation is a trap that is very difficult to get out of, as demonstrated by the case of the Japanese economy, which has fought it off and on for two decades.


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