MANAGEMENT DISCUSSION AND ANALYSIS GLOBAL ECONOMY The global economy continued to expand in 2014 at a moderately uneven pace, as countries remained saddled with post-crisis adjustments. Global recovery was hampered by some new challenges, including a number of unexpected shocks, such as heightened geopolitical conflicts in various areas. WGP (World Gross Product) growth was estimated at 2.6% in 2014, marginally better than 2.5% in 2013, but lower than the projected 2.9%. (Source: United Nations) High-income countries are likely to see a growth of 2.2% in 2015-17, up from 1.8% in 2014, on the back of gradually recovering labour markets, ebbing fiscal consolidation, and receding financing costs. As domestic headwinds that held back growth in the developing countries ease and recovery in high income countries strengthen, growth is projected to accelerate, rising from 4.4% in 2014 to 4.8% in 2015 and 5.4% by 2017. (Source: World Bank) INDIAN ECONOMY India reported a stable rupee, decline in inflation, increased domestic demand, growing investments and a declining oil bill. This reality was in contrast to the situation of the earlier years, marked by erstwhile inflation, high fiscal deficit, dwindling domestic demand, external account imbalance and an oscillating rupee. The decline in inflation during the initial months of the year under review was faster than anticipated. A decline in the price of crude and tradable commodities helped moderate headline inflation. A tight monetary policy helped contain demand brssures, creating a buffer against external shocks and moderating rupee volatility vis-a-vis other currencies. The latest estimates of national income indicate that growth revival, which had commenced in 2013-14, gained vigour in 2014-15. From a macroeconomic perspective, it is then increasingly evident that the worst is over. (Source: Central Statistics Office) India is estimated to grow 7.4% in 2014-15 (6.9% in 201314). India grew 7.5% during the October-December quarter, exceeding China's 7.3% during the same period, making India the fastest-growing major economy in the world. The brvailing economic optimism could catapult India towards double-digit growth across the medium-term. (Source: Economic Survey 2015) ANIMAL VETERINARY VACCINES MARKET The veterinary vaccines market accounts for around 20% of the total vaccines market. The global market of animal vaccines is estimated to be worth USD 5.8 billion by 2013 and is expected to grow at a healthy CAGR of 8.1% and to reach USD 8.6 billion by 2018. The veterinary vaccines market is estimated to be worth USD 7,179 million by 2020 from USD 5,507.3 million in 2015 growing at a CAGR of 5.5%. INDIAN VETERINARY VACCINES MARKET Currently, veterinary biologicals constitute around 28-31% of the overall animal health market in India and this segment is expected to be growing at around 10% annually. The opportunity in the large animal vaccines vertical in India is pegged at around H1,200 crore with a growth rate of 15-20% which is four times the size of the poultry health product market. ANIMAL HEALTH MARKET SIZE IN INDIA The global market size of animal health products is approximately USD 22 billion, while currently the Indian size is just USD 375 million but it is growing at a very fast pace. The animal health industry in India may not be large as compared to the global standards, but it offers a good scope for the future. With the overall economic recovery taking longer than expected, annual revenue growth in pet products and services is anticipated to clock in at some 4.4% through 2016. Indian Poultry Sector The total poultry vaccines market in India is around H300-350 crore, growing at 15-20% per annum. • India's poultry sector is likely to see double-digit growth because of stable feed prices and encouraging rural demand, notwithstanding local and global challenges. • India is the second largest egg and third largest broiler chicken producer in the world 65,000 million eggs and 3.8 million tonnes of poultry meat a year. • The market is estimated to be worth about H90,000 crores. • Per capita chicken consumption in India has been on the rise, with eating habits changing brdominantly in the metro cities. • At brsent, urban markets account for about 80% of demand but analysts and industry players project rural demand to pick up significantly, thanks to lower chicken prices, improving prosperity and changing lifestyles, helping the sector post at least 8-10% expansion. • Profitability of Indian poultry sector saw significant improvement in the third quarter driven by good broiler prices and softer feed prices. The current price of H50-70 per kilogram for live birds should trigger better demand among rural population. • The positive trends of rural demand pickup and stable input costs, we now expect the industry to see some 8-9% growth next year. • The rural demand is picking up, which can also support the overall demand in the coming years. Lower prices would support demand expansion. (Source: Economic Times) Taking wings 65,000 million - India's egg production per year 3.8 million tonnes - Broiler chicken production per year Rs.90,000 crore - India's estimated poultry market Poultry industry's consumption per year 12 million tonnes - Maize 4 million tonnes - Soyameal 80% of chicken consumption comes from urban India THE NEED FOR PPR VACCINE One of the major factors restricting efficient livestock production is the brsence of infectious diseases with high mortality rates. This is particularly a serious problem in the developing world, where the capacity to cope with the cost and logistics of controlling such diseases is often limited. Diseases such as Peste des Petits Ruminants (PPR) are endemic to some of the world's high livestock population countries inAfrica and Asia. The disease impedes safe trade and deprives the poor. The disease PPR, also known as sheep and goat plague, is a contagious viral disease affecting small ruminants (sheep and goat). Once introduced, the virus can infect up to 90% of a flock. The disease can kill anywhere from 30 to 70% of the infected animals. In the last 15 years, PPR has sbrad to brviously uninfected regions. Consequently, PPR is now endemic to large parts of the Middle East as well as Central, Southern and Eastern Asia and is expected to sbrad into Southern Africa and South Eastern Asia. Socioeconomic impact of PPR PPR is brsent in around 70 countries in Africa, the Middle East and Asia, threatening more than 1.7 billion of the total global population of 2.1 billion sheep and goats, as well as the livelihoods, food security and nutrition of more than 330 million people in these regions - mainly poor farming communities that rely solely on small ruminants for their survival. Another 50 countries are at risk from incursions of the disease into neighbouring areas, threatening an additional 167 million sheep and goats. PPR causes an estimated USD 1.45-2.1 billion in economic losses annually due to reduced production, increasing mortality rates and the high cost of caring for sick animals, including vaccination. The global demand for meat and dairy products is expected to more than double by 2030. That means that the production of livestock and livestock products will have to increase substantially to keep up with market and nutritional requirements - something that will be difficult to achieve if livestock-producing countries continue to struggle with diseases like PPR, which directly affect production efficiency and sustainability. PPR eradication The OIE and the FAO have together taken up the responsibility to wipe out PPR. Two earlier such initiatives have led to the eradication of small pox in humans and rinderpest in cattle. This PPR eradication project will induce a high demand for the PPR vaccine thereby growing the PPR vaccine market by leaps and bounds. It is estimated that during the eradication programme the vaccination costs will amount to USD 7.23 billion over a 15-year period. Hester and the PPR vaccine Globally, the Nigerian strain of the PPR vaccine is brferred while in India the Sungri strain gains brcedence. Hester is geared to manufacture the PPR vaccine from the Sungri strain in India and from the Nigerian strain at its Nepali plant, which would go on stream in October 2015. This makes Hester the only company in the world, at the moment, to have the ability to manufacture PPR from Nigerian as well as Sungri strains, thereby having an ability to address the entirety of the demand for PPR vaccine. Hester will also play a pivotal role in the eradication of the disease in collaboration with the Government of India as well as with the OIE and the FAO. Globally, the total targeted population of sheep and goat for PPR vaccine is 1.7 billion. In India, the targeted population is 200 million. Going ahead, Hester is in the process of developing a thermostable PPR vaccine to overcome the cold chain challenges in rural areas worldwide. Hester is also working on a low-cost intra-nasal delivery system. (Currently the vaccine is delivered subcutaneously.) |