In fact, the industry expects the launch of about 25 new channels in the current year. More than the new channels, the recently announced concessions to TV software exports under section 80 HHF of the Income Tax Act would fuel the growth in the demand for TV software/programming. The Electronics and Computer Software Export Promotion Council expects TV software exports to balloon to Rs 1,000 crore in the next two years. There is a huge and fast growing demand for TV programmes in regional languages. Nimbus Communications, a leading content provider, has exported its Malayalam TV serials worth Rs 2.5 crore to the UK.

The future earnings and competitive advantage of content providers would depend upon the available infrastructure in terms of production facilities, quality of content library and the ability to continuously churn out quality TV software/programmes. Leading content providers like Nimbus, UTV, Shri Adhikari Brothers, Cinevista and the like are gearing up to meet the huge future demand for original television software. Given the present market conditions, the TV software producing companies are looking at stock markets to raise resources to meet their expansion plans. The IPO by Cinevista would be followed by public offerings from UTV and Galaxy Media. Cinevista has earmarked nine crore out of 45 crore from the IPO for its proposed 4,000 sq ft studio with the latest production equipment. UTV, which already has state-of-the-art offshore production facilities, plans to further upgrade its production facilities in India.

Zenith Computers
Despite growing sales, higher profits and improving profitability, Zenith Computers has failed to attract as much market attention as its software counterparts. Not that the company's stock has not been appreciating. In the last 12 months, the stock has more than doubled. But then, the growth in profits has been far higher and the stock that enjoyed a discounting of 70 a year ago, currently trades at a P/E of around 35. While the company saw a 730 per cent growth in its net profit for the nine-months ended December, its market cap has grown by just 330 per cent. Most software companies, on the other hand, have seen their market cap grow at a much quicker pace than their net profit. Silverline Industries and Sonata Software, which are of a similar size as Zenith as far as their topline is concerned, saw their market cap grow by 820 per cent and 620 per cent in response to a net profit growth of 65 per cent and 115 per cent respectively.

Perhaps the most plausible reason for this phenomenon appears to be that the market does not see as much value in hardware stocks as it does in software stocks. This is despite the encouraging growth estimates of hardware demand in India put out by the International Data Corporation (IDC). According to IDC estimates, the installed personal and network computer base will grow at 44 per cent annually to 8.2 million in 2002. India is already the fourth largest buyer of personal computers (PCs) in the Asia-Pacific after China, Korea and Australia. The fact that the hardware industry does not enjoy the kind of government patronage as the software industry could help explain at least in part, the relatively low discounting for hardware stocks. Although the domestic market has been growing and will continue to do so, domestic manufacturers are not in an advantageous position owing to low import duty on finished goods. The excise duty on domestically assembled products, together with the import duty on key componentsis almost comparable to the import duty on these products. Hardware manufacturers like Zenith Computers are pinning their hopes on a favourable budget.

Glaxo
Glaxo's results for the year ended December 1999 have not been on expected lines. Net profit declined by 11 per cent to Rs 77.06 crore whereas turnover increased by 11 per cent to Rs 885.50 crore. The net profit of Rs 77.06 crore also includes a profit of Rs 21.87 crore received from sale of property. It means that the actual profit received from the operations and other income was only Rs 55.19 crore. Out of this, the other income is Rs 45.21 crore which is 30 per cent higher than Rs 34.78 crore in the previous year. Against an 11 per cent growth of sales, total expenditure increased by 16.48 per cent to Rs 821.52 crore which resulted in low operating margins.

Operating profit margin has declined from 14.88 per cent to 11.73 per cent and net profit margin has fallen from 8.1 per cent to 5.9 per cent.

The fall of the overall profitability has been the result of slack market, high selling cost and higher customs duty. The company is a market leader in the anti-ulcerant and vitamins for which there is no growth in the domestic market. It also maintains a leading position in anti-infectives for which the demand is flat. However, the company is likely to benefit from the recent revision of bulk drug prices of Betamethasome Velerate by 17.89 per cent to Rs 224 per gram and Betamethasome Phosphate by 11.5 per cent to Rs 185 per gram. But the advantage from the price revision will be reflected during the current fiscal year. The company has a leading brand of Anovate in the generic group of Betamethasome which is used as drugs acting on colon and rectum. The company also make large range of different kind of ear and nose drops in different variation of Betamethasome.

The company recently revamped its marketing systems and divided its field force of 1,350 sales representatives into seven groups. They will be further supported by 400 medical representatives. The forming of separate division is based on different therapy areas like gastroenterology, dermatology, respiratory, paediatrics & neurology, gynaecology & surgery, intensive care and cardiovascular & diabetes. This will enable the company to have a focussed approach in each therapeutic class. The company has many generic compound in each therapeutic segment and each generic compound has many brands. Therefore, it is very essential to know the competitors and the latest drugs coming into the market and this can be made possible only when their are a separate group handling for individual therapy class.

Though the marketing cost will escalate, the market share in each class can see a rapid increase which will further help them in brand-building. For an instance, the market share of Glaxo in respiratory therapy at present is very low as compared to Astra-IDL and Cipla. Cipla has successfully clinched the market share of Astra-IDL and Glaxo in last five years by introducing large range of drugs of asthama and bronchitis. Cipla has introduced largest range in tablets, syrup, drops, inhalers and rotocaps of respiratory drugs by aggressive and focussed marketing. By adopting a new strategy, Glaxo should be able to capture its lost market share.

Emcee (with contributions from Gaurav Dua, Sarad Saraf and Dhruv Rathi)