News As We Read- 5th Aug'13

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Following made the Headlines:

India:

• Hero Shakes Up Top Deck to Boost Biz: Hero MotoCorp has set up separate divisions for international business and spare parts as part of a widespread top level restructuring effected to help win back its lost market share in the domestic market and boost exports. In an internal email to employees, Pawan Munjal, managing director and CEO of the world’s largest two wheeler maker in volumes, said Anil Dua, senior vice-president — marketing & sales, will now focus completely on domestic market while Deepak Mokashi will head a separate division called international business. “I am asking Anil Dua to completely go after this (domestic) market with full vigour…and not only win back the lost market share, but also take it to higher levels,” Munjal wrote in the email sent on August 1, a copy of which has been reviewed by ET. Mokashi, who in his earlier role as head of national sales and exports used to report to Dua, will now report directly to Munjal. Sanjay Bhan, who was earlier the head of marketing, will now head the new spare parts business unit of the 25,000-crore Hero MotoCorp and report directly to Munjal, instead of Dua. The company is setting-up an integrated global parts centre (GPC) at Neemrana in Rajasthan at an initial investment of 160 crore.  When contacted, a Hero MotoCorp spokesperson declined to comment on this development, saying, “This is an internal matter and, therefore, we would not like to make any comments on this at all.” A top industry observer who is close to the company, said, “This strategic restructuring across the marketing, sales, customer care and spare parts functions was long overdue with Hero increasingly turning global in its expanding footprint and operations. This will now help the company give undivided focus to both domestic as well as international businesses.” The positions vacated by Mokashi and Bhan are being filled by A Srinivasu and Sanjeev Shukla, respectively. Bhan’s earlier position of marketing head has now been bifurcated into two — one for the domestic market and the other for international markets. Srinivasu, who was the zonal head for South, now moves into the corporate headquarters of Hero MotoCorp at Delhi, as head of national sales.

• Advertisers Reach Out to Kids with Remote Control: When Lata Diwan went shopping for the household, her 5-year-old daughter Tanya suggested her to choose a certain brand on mosquito repellent. “It will drive the mosquitoes out as well as leave a fragrance around,” the young scholar told her mother. Tanya’s knowledge about mosquito repellents comes from an advertisement she watches in between her favourite programmes on cartoon channels, where it’s no longer just toymakers and children’s product brands that advertise. An increasing number of nontraditional advertisers including Maruti Suzuki, Honda bikes and Samsung is advertising on kids’ channels as more children participate in their parents’ purchase decisions and more parents watch television with their children. “While traditional advertisers such as GlaxoSmithKline, Hindustan Unilever, Cadbury, Mattel, Kellogg, Perfetti and ITC are amongst our top spenders, close to 50% of our revenues now come from non-traditional advertisers,” says Juhi Ravindranath, ad sales vice-president for South Asia at Turner International India, which owns Pogo and Cartoon Network channels. Most houses in India have one television set and it’s common that children and adults watch it together, and often the younger ones hold the sceptre – the remote control – and decide what to watch. So advertisers targeting parents too are turning to kids’ channels. “Advertisers do not want to miss any opportunity of reaching out to their target audience, whether it is mothers, fathers or grandparents,” says Rahul Johri, senior vice president and general manager, South Asia, at Discovery Networks Asia Pacific, which owns Discovery Kids. The maximum growth in terms of ad spend on these channels has been observed in fast-moving consumer goods. A spokesperson of Pogo channel says unconventional advertisers on the channel include Maruti Suzuki, Honda bikes, Hero Moto-Corp, Micromax, LG, Samsung and Hitachi. “We expect the number of new categories and advertisers to only grow,” the person adds. That’s because it’s seen as a win-win. While the kids’ channel gains from the increased advertiser base, the non-traditional advertiser benefits from the huge secondary target audience of parents and grandparents.

• Malted Drinks to Boost GSK’s Long-term Prospects: The performance of the Indian unit of the British foods company — Glaxosmithkline Consumer Healthcare, or GSKCH — in the second quarter, following its successful open offer when it managed to raise its promoter stake to 72.5%, has been fairly consistent. Thanks to higher spending on its brands, the company has managed to keep its revenue growth high at 17%. While the company has not disclosed the volume growth for the quarter, analysts expect volume growth to be 8%, in line with what it posted in the preceding quarter to March. The marketer of products such as Horlicks and Boost malted food drinks, Sensodyne toothpaste and Eno has had a strong growth during the quarter from most of these products. GSKCH enjoyed the advantage of benign raw material costs and channelised the savings towards higher spending on its brands. While raw material cost increased 10.5% over the previous year, lower than the revenue growth, selling and administrative expenses grew by a much higher rate of 18.5%. Increased spending on advertising, coupled with higher other expenses, led to a 80-bps drop in operating profit margin to 18.3%. Higher depreciation and tax also impacted profit growth. However, the consistent performance does not augur well for a large number of investors who have since tendered their shares in the open offer in January this year. The company’s stock price has appreciated 24% since the close of the open offer. Non-institutional public shareholding has fallen from 25% before the open offer to 15.2% now. While stretched valuations of 42 times its trailing four quarter earnings is a concern in the near term, the company’s strong growth prospects in its categories of malted food drinks, where it is a market leader with strong brand positioning of Horlicks and Boost, offer enough incentives to other shareholders of the company, to stay on from a long-term perspective.

• Quick Heal Plans Initial Public Offer: Security software maker Quick Heal Technologies, in which venture capital fund Sequoia Capital is an investor, is preparing for an initial public offering in India to aid its expansion into new markets and product lines. Quick Heal, which expects to file DRHP and begin the listing process next year, will be the first Indian anti-virus software company to go public. And, if no other technology product firm beats it to the bourses, the first software product company to list in India after iFlex—now Oracle Financial Services—went public in 2002. “We’re looking at appointing independent board members as we prepare to list, within the next 18 months,” Sanjay Katkar, co-founder and chief technology officer of Quick Heal, told ET. The company is also beginning to identifying industry benchmarks to determine its market valuation. Given the limited number of product companies that have listed in India, determining a market valuation will be more complicated as there are no precedents, especially in the security software space. “Valuations and multiples depend on what similar companies have received at their listing, but we do not have any similar company that has gone public in India,” said Sharad Sharma, former head of research and development arm of Yahoo in India, and part iSpirt, the industry thinktank for Indian software product companies. In 2010, the company was valued at 600 crore, when Sequoia invested 60 crore for a 10% stake. Sales have grown from 10 crore a decade ago, to over 200 crore this year. The company, which is expanding in Japan and the US, hopes boost its revenue to 500 crore in three years. QuickHeal, which claims a 35% market share in India’s consumer anti-virus market, was founded by Pune-based brothers Kailash Katkar and Sanjay Katkar.

• Delhi leads world in real estate price rise: Study: India has witnessed the sharpest appreciation in real estate prices in the last couple of years, according to data from the Global Property Guide, an organisation which collates real estate data from across the world. Property prices in Delhi witnessed the steepest rise of roughly 60%, when compared to cities from 43 other countries, for which figures were available from that organisation. Interestingly, while this data set has information only for Delhi in India, official data on Indian cities suggests that Jaipur has seen an ever faster rise in residential property prices of 67% over this period. Delhi’s 60% rise in property prices over the past two years is nearly 20 percentage points higher than Brazil’s Sao Paulo, which is the second fastest rising international property market. From the first quarter of 2011 to Q1-2013, Sao Paulo, the largest city in the Americas in terms of population, witnessed a 43% increase in real estate prices. Hong Kong, the third fastest rising market for the same period, saw its property prices going up by 33%. Dubai also appears to be in a recovery phase after the bust of its early 2000s property bubble.

International:

• IBT Media buys Newsweek from Diller’s IAC after online shift: IBT Media said it’s buying Newsweek from IAC/ InterActiveCorp, splitting it from the Daily Beast brand, and plans to make it profitable. IBT, owner of the International Business Times, is acquiring Newsweek after the 80- year- old magazine shifted to online- only in January and lost its chief executive in June. Terms of the deal weren’t disclosed, according to a statement from IBT on Saturday announcing the transaction. “With our knowledge of building digital brands and with the power of the Newsweek brand we think we can build it and definitely be profitable,” Etienne Uzac, co- founder and chief executive officer of IBT Media, said in an interview on Saturday. “There are revenue models that Newsweek has that are different from what IBT is doing, so bringing the two together there’s a lot of opportunity to grow.” IAC, run by Barry Diller, purchased Newsweek as part of an agreement with the late Sidney Harman in November 2010 and combined it with the Daily Beast news website. The billionaire this year said he regretted the move and started looking for buyers. “I wish I hadn’t bought Newsweek,” Diller told Bloomberg Television in an interview in April. Publishing a weekly magazine at a time when news has become instantaneous is a “fool’s errand,” he said. Uzac declined to comment on the terms of the deal. Harman had acquired Newsweek from the Washington Post for $ 1 plus assumption of liabilities. Tina Brown, editor- in- chief of Newsweek/ Daily Beast Co, will remain at The Daily Beast, Uzac said.

• Amazon debuts Pinterest competitor Collections on down low: Amazon Collections, a Pinterest-like list-making feature, has launched. The feature allows users to collect images under categories and share them with others. Amazon had been quietly testing Collections, gathering input from bloggers. Customers can access the feature through their Amazon account.

• Little Chef in £15m Kuwaiti sale: The Little Chef restaurant chain has been sold to a Kuwaiti-owned business. The BBC understands that Little Chef, which employs 1,100 people, was sold for about £15m. It has been taken over by the UK arm of Kout Food Group, which already runs more than 40 Burger King and KFC outlets in the UK as well as the Maison Blanc brand. Turnaround specialists RCapital put the company up for sale in April and had warned about its future. Little Chef serves more than 6 million customers a year.

• Retailers Still Finding Footing for B-t-s: Retailers can only hope the early stages of back-to-school aren’t a harbinger of holiday. As stores resort to virtually every device in their promotional toolboxes to build buzz for the b-t-s season, what had been already modest expectations are becoming even gloomier. Researchers note the strength of year-ago sales as just one of several challenges faced by stores looking to move healthy amounts of apparel, footwear, computers and tablets and more algorithmic school supplies. Customer Growth Partners’ Craig Johnson compared consumer spending to “a car stuck between first and second gear” in projecting a seasonal increase of 3.4 percent for traditional b-t-s categories, below the 4.2 percent gain registered last year. On Friday, IHS Global Insight forecast a 3.2 percent gain, below the 3.6 percent advance to $40.9 billion logged by U.S. retailers during the 2012 season and also below the 4.1 percent gain expected for total retail sales during the third quarter.

• Sequential Buys Revo Brand From Oakley Inc.: Sequential Brands Group Inc. has acquired the Revo sunglass brand for $20 million in cash from Oakley Inc., which is owned by Luxottica Group SpA. The cash transaction, which represents the fourth deal Sequential has completed so far this year, will be funded through cash on hand. Earlier in the year, the brand management firm picked up Heelys, Ellen Tracy and Caribbean Joe. The firm has a total of seven brands in its portfolio. The other brands are William Rast, People’s Liberation and DVS Action Sports. The purchase includes Revo’s intellectual property plus certain other assets. Revo is a high-end performance line that contains the same technology NASA uses for satellites to deflect radiation. The glare-blocking feature via high-contrast polarized lens technology is ideal for outdoor sports and activities as it blocks 100 percent of UVA, UVB and UVC light.

• Randa to Invest $25M in Infrastructure, Close Swank Facility: Randa Accessories expects to boost its output and efficiency as it expands its footprints in Reno, Nev.; New Orleans, and Toronto and closes the Swank distribution center in Taunton, Mass. The firm, the largest U.S.-based men’s accessories supplier, has earmarked $25 million for, among other purposes, a second facility in Reno, a 275,000-square-foot edifice that will add 120 jobs to its head count and go online with LEED, or Leadership in Energy & Environmental Design, Silver certification, and an upgrade of its logistics facility in New Orleans that, with the addition of a new conveyor system and logistics software, will elevate its accessories capacity, with an emphasis on belt shipments, to more than 30 million units a year. The New Orleans complex, picked up as part of Randa’s 1997 acquisition of neckwear supplier Wemco, will include an independent power supply. Reno’s output is expected to grow to more than 40 million units a year and be spread throughout its entire product range, including neckwear, belts, wallets, luggage, jewelry and footwear. It’s also been approved for free-trade-zone status, the company said.