AP pharmaceuticals, IT industries excel, finds CII survey

The findings of the bi-annual Industry Monitor survey conducted by the Confederation of Indian Industry (CII) – Southern Region (SR) for October 2007-March 2008, revealed an impressive growth of pharmaceuticals and information technology industry in Andhra Pradesh.

CII?s Industry Monitor survey of the five southern states of Andhra Pradesh, Karnataka, Kerala, Puducherry and Tamil Nadu were carried out with the objective of analyzing the performance of top five sectors in each of these states during October – March of the financial year 2007-08, providing an outlook for April 2008 – September 2008 and identifying their issues and concerns.

The survey captured the views of the senior executives of the leading companies in each of these five sectors. The top five sectors for the survey were identified on the basis of their contribution to State Gross Domestic Product (SGDP). The top five sectors surveyed in Andhra Pradesh were agro, manufacturing, pharmaceuticals, information technology and textile industry.

The pharma industry performed well during October 2007-March 2008. Compared to that of April 2007 – September 2007, the production, sales grew by 20% and 15-20% respectively. The exports increased by 10-15% during the period.

The capacity utilization levels increased by 10-25% and the inventory levels remained unchanged. The pricing and the profit margins recorded a 2-3% and 5% growth, respectively.

The pharmaceutical industry is predicting a better performance during the period April 2008 – September 2008. Compared to October 2007 – March 2008, the industry demand is expected to increase by 15-20% and the production in turn is expected to increase by 10-15%. The capacity utilization levels are likely to increase by 3-5% and the sales are projected to increase by 5-10%.

The increasing competition in the industry is also constraining the small units. The industry suggests for making suitable changes in the policy of tax-free zones, so that the price of drugs manufactured from such locations are not unduly competitive.

Meanwhile, the information technology sector recorded a better performance during October 2007 – March 2008. Compared to April 2007 – September 2007, the revenue and the overseas billing went up by 10-15% and 15-20%, respectively. Despite a 10-15% decline in pricing, the profit margin went up by 5%. And the employment levels also increased by 40%, as per the survey report.

The industry expects a better performance during April 2008-September 2008, as compared with October 2007-March 2008. The expected growth in the industrial demand is 5%. The growth in the order book position of 10-15% is likely to result in a 5-10% increase in revenue. The overseas billing is also projected to increase by 15%. Despite an expected decline in price (5%), the industry is likely to register a 5% growth in profit margins.

However, the industry is seriously concerned with the lack of availability of right talents. The industry expressed that measures may be introduced to impart the required skills to the students at college-level to make them industry-ready.

The manufacturing industry grew significantly during October 2007 – March 2008 compared to that of April 2007 – September 2007.

Though the production levels and sales increased by 8-10%, the exports declined up to 20%. The capacity utilization levels and inventory levels went up by 10% and 5-10% respectively.

The industry is expecting a positive growth in most of the parameters for industrial performance during April 2008 – September 2008. Compared to October 2007 – March 2008, the production and sales levels are likely to go up by 15 – 20% and 4% respectively. The exports and value of production are expected to increase by up to 5% each.

But the shortage in raw materials supply and increasing input prices are some of the major concerns of the industry. The quality, availability and distribution of coal are also expressed as major concerns. The industry wants improvement in the power availability and quality. It also recommends for providing speedy environmental clearances for projects.

The agro-based industry in Andhra Pradesh saw mixed trends in its performance parameters during October 2007 – March 2008 compared to the immediate previous half year (April 2007-September 2007). The industry?s production and sales went up by 5-10% and 8-15% respectively. The value of production registered a 3% growth. However, the exports have declined by 10%.

During April 2008 – September 2008, this sector expects a 5% growth in demand. The production and sales may not increase and the exports are likely to decrease by 3-5%. The industry does not foresee any change in the capacity utilization. The industry leaders suggest that the transport infrastructure should be improved for timely delivery of highly perishable raw materials.

The textile industry registered a mixed performance during October 2007 -March 2008 compared to April 2007-September 2007. The production and sales went up by 5-10%.

However, the exports came down by 10-15%. The capacity utilization levels increased by up to 5%, while the inventory levels remained unchanged.

The textile industry foresees a good performance during April 2008-September 2008. A 20% demand is expected and this increase will fuel the production at least by 3-5%. The sales are expected to increase by 5% and the exports by 10%. However, despite a likely increase in price of up to 3%, the profit margins are expected to remain the same.

However, industry leaders feel that the rising raw material cost especially cotton prices impacts industry?s competitiveness. The industry seeks government?s support to increase the production of cotton.