FUND VIEW – Morgan Stanley favours Indian drug firms, shuns banks (2) August 8, 2009
Posted by dhirendra1972 in Biggest Generic Market, Lower Costs, Lower Interest Rates.Tags: Bad Loans, Bank Profitability, Blokbuster Drugs, Bond Markets, Cheap Production, Emerging Market, Generic Market, Helathcare Reforms, Increase Loans, Indian Drug Makers, Indian Firms, Loan Growth, Net Interest Margins, Pricing Power, Public Sector Banks, World Equity
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He said the U.S. generics market, the world’s biggest, will double in size to about $100 billion in five to seven years, creating at least a $10 billion to $15 billion opportunity for Indian drug makers.
U.S. President Barack Obama’s drive for healthcare reforms and lower cost can only be done by using the cheaper Indian generics, he said.
The world’s biggest drugmakers are also eyeing Indian firms to gain access to emerging markets and cheap production, as well as to retake some of the business they have lost to inexpensive copycat versions of their blockbuster drugs.
WARY OF BANKS
Gandhi said he had exited state-run banks as he expected them to underperform in 2009/10.
“You are in a situation where the profitability of banks will come under stress,” he said.
Loan growth is not picking up and banks no longer command the pricing power they enjoyed last year, with companies now able to access world equity and bond markets for funds, he said.
Corporate loans have been restructured and they now make up 5 to 7 percent of the loan book of all public sector banks, he said, adding bad loans will rise in the next 18 months.
With policymakers leaning on banks to lower interest rates and increase loans to needy sectors to boost growth, analysts fear this may saddle lenders with bad loans.
Net interest margins are under pressure and costs are rising. “From earnings point of view, banks will have significantly tough 2009/10,” the Mumbai-based executive said. – Yahoo
Nishant Kumar
