Year: 2008

AOK (Allgemeine Ortskrankenkassen), German group of public health insurer, has indicated partial (44 APIs out of 64) results for the recent bidding for its two year tender. Amongst Indian players, DRL (Betapharm) has the highest interest in AOK business.

According to DRL, it has won 29 contracts so far (out of 220 awarded so far), which relate to seven APIs (out of 33 APIs bid by DRL). In our view, what matters is the value of contracts won (rather than the number of contracts), price compression.

We await results of the AOK tender for the balance of 20 APIs and disclosure by DRL on the net impact of AOK tender on its German business.

November was a disappointing month for the two-wheeler sector. Bajaj put up a dismal performance, which was significantly impacted by weaker retail demand and correction of dealer inventories. Bajaj’s domestic volumes declined by 51% YoY. Hero Honda performed above our expectations in November (flat YoY vs. -3-4% expected) and gained 30 bps market share MoM over Bajaj Auto. TVS’ domestic volumes also declined by 28% YoY.

Maruti Sales was down 25%. Domestic sales were down 27% YoY, driven by a 27% YoY decline in A2 segment volumes. We believe that Swift and Dezire volumes continued to hold out in this challenging environment, but demand for old models was extremely disappointing.

Mahindra & Mahindra November sales declined 38% YoY, driven by weak UV (- 41% YoY) and tractor sales (-32% YoY). Domestic tractor sales declined 33% YoY, reflecting a sharp reduction in dealer inventories to match the slowdown in retail off-take.

Here is an excerpt from the Conference Call with the Management of Infosys Technologies held on the 28th of Nov,

• Mr Gopalakrishnan sai that near-term visibility remained low, with 2009 budgets expected to decline YoY
• The company indicated that IT budgets of financial sector could have stabilized while retail could be under pressure
• Management agreed that there could be pricing pressure in 2009
• On the other hand, the company is highly focused on reducing costs to maintain margins. Travel budgets and new investments could be reduced now and company could limit employee variable wages if margins come under severe pressure.
• Finally, if margin performance comes under pressure, the pain would be shared
  between employees, business investments and shareholders in the ratio 50:25:25

Is Gopalkrishnan’s strategy right in sailing through difficult times ?