Asian shares are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.5% while the Hang Seng is up 0.6%. The Shanghai Composite is trading up by 1.2%. US stocks closed sharply higher Friday as Wall Street shrugged off lackluster numbers in the government's monthly jobs report while shares of Apple hit an all-time high to lead the technology sector higher.
Back home, India share markets opened the day on a firm note. The BSE Sensex is trading up by 127 points while the NSE Nifty is trading up by 31 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.4%.
Sectoral indices have opened the day on a mixed note with realty stocks and consumer durables stocks witnessing maximum buying interest. While, energy stocks and pharma stocks have opened the day in red. The rupee is trading at 66.77 to the US$.
In the news from the pharma sector. As per an article in a leading financial daily, TPG-backed Manipal Hospital revised its offer to acquire Fortis Healthcare again. It has promised to infuse Rs 21 billion at Rs 160 per share, against an earlier proposal of Rs 18 billion.
TPG-Manipal used its exclusive agreement with Fortis that gave it the right to revise its proposal within five days after the bidding ends.
Reportedly, TPG-Manipal's move is triggered by at least two bidders, IHH Healthcare Bhd and a group led by businessman Sunil Munjal, who sweetened their offers for the assets of troubled Fortis Healthcare Ltd ahead of the 1 May deadline for submitting binding offers.
The Fortis board will now meet on 10 May to consider the recommendations of its external advisory committee (EAC), formed to evaluate the binding bids.
Manipal offered to subscribe to Rs 21 billion worth of shares of Fortis for "liquidity needs" like repaying existing loans and to meet working capital requirements.
Manipal also proposed merging with Fortis in a deal that would value the latter at Rs 83.6 billion. Manipal also proposed to buy stake in SRL Ltd held by private equity firms at a price that values the subsidiary at Rs 36 billion, the reports noted.
The battle to take over Fortis started earlier this year when its founders lost control of their shareholding because of mounting debts. There were five bidders in the race for the cash-strapped hospital operator.
In its revised offer, IHH Healthcare said that its proposal of immediate equity infusion of Rs 6.5 billion will now be at Rs 175 per share, higher than the Rs 160 apiece proposed earlier. The subsequent equity infusion of Rs 33.5 billion will be at a share price not exceeding Rs 175 per share.
The combine of Munjal and the Burman family have offered to infuse Rs 18 billion directly into Fortis as part of their revised offer. That compares well with the Rs 15 billion they proposed to invest earlier.
Fortis Healthcare share price opened the day up by 0.4%.
In another development, Aurobindo Pharma has submitted an initial bid to buy Novartis AG's dermatology generics drug business for about US$1.6 billion.
Hyderabad-based Aurobindo Pharma is the only Indian company that has put in a bid for the assets, which includes an array of dermatology brands, production facilities and associated infrastructure, mostly in the US.
The transaction, if it goes through, will be the second overseas acquisition by Aurobindo in less than two years.
Speaking of pharma sector, did you know the BSE Healthcare Index is down 20% over the past three years? During the same period, the BSE Sensex is up 21%.
The BSE Healthcare Index has underperformed the Sensex
And this was a sector they called 'evergreen'.
Have Investors boarded a plane that's about to crash? Or is it just turbulence on the way to a smooth and safe landing?
It's important to understand the core issues. Regulatory problems for pharma companies have increased over the past few years. The frequency of visits as well as quality expectations have increased a lot.
While we expect the pain to continue in the short-term, the long-term picture still looks bright.
Stricter norms and pricing pressure will ensure only quality players remain. Companies with strong R&D facilities and quality compliant plants will have an edge over the others.
Moving on to the news from the economy. As per Asian Development Bank (ADB), India's projected GDP growth of over 7% for the current fiscal is "amazingly fast" and if this momentum is maintained the size of the economy can double within a decade.
The country shouldn't worry about not achieving 8% growth but focus on increasing domestic demand by reducing the income inequality, the reports noted.
Growth is driven more by domestic consumption than exports. The bank has projected India to remain the fastest growing Asian nation with 7.3% growth in 2018-19, and 7.6% in 2019-20.
The Indian economy is forecast to grow at 6.6% in the 2017-18 fiscal ended March 31, slower than 7.1% in 2016-17.
The size of India's economy is about US$2.5 trillion currently, making it the sixth largest in the world. As per the reports, India is on track to doubling the size of its economy to US$5 trillion by 2025.
Further, half of India's growth is driven by private consumption followed by investment and hence domestic market seems to play a major role in growth.
Reportedly, inequality and poverty reduction would play a "very important role" in achieving higher growth because consumption can stimulate more production and that can absorb more employment.
Tapping the broadening market will be important to achieve higher growth, and services sector too would play a role in pushing up economic growth.
This article was originally published in English at www.equitymaster.com
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