News As We Read- 16th July'13

Thought of the Day:

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Following made the Headlines:

India:

• Walmart Forces Quitters to Stay Locked into Bribery Probe Pact: Bharti Walmart has asked departing senior executives, including former MD Raj Jain, to sign parting agreements giving their consent to appear before the US Department of Justice (DoJ) in the event of any DoJ-led probe into the company’s operations, said an executive with direct knowledge of the development. Some top executives who have recently quit the cash-and-carry joint venture between Walmart Stores Inc and Bharti Enterprises have been made to sign an undertaking called “Agreement of Cooperation” and a few of them have been asked to make themselves available before DoJ if required. The US federal authorities are currently probing allegations of Walmart executives bribing local officials in Mexico. After the Mexico scandal broke out, the retail company has on its own launched internal investigations into the business practices of its local units in a few countries, including India. So far, DoJ or any other US federal agency has not initiated a probe into Walmart India’s operations. The undertakings that former executives are being asked to sign appear to be precautionary in nature as the Bentonville-headquartered retailer prepares for the worst-case scenario. A lawyer working with an MNC said Walmart was probably trying to signal to the US authorities that it was willing to make voluntary disclosures about its business practices in India. But some executives who were asked to sign the undertakings are not too happy with this demand. “Why should I agree to depose before DoJ in the US?” a senior executive who left a few months ago said. “I told them, let DoJ write to me first, and then I will take a call,” he said, asking not to be named due to the sensitivity of the matter.

• Datsun will Ride Renault into Big League: Ghosn: Striding on to the stage with a hands-free microphone tucked behind his ear, Carlos Ghosn shone under the arc lights as he unveiled the ‘Datsun Go’, the first Datsun label to hit the roads since 1981. The president and CEO of Nissan Motor made some big claims at the launch of the hatchback. Speaking to ET, he promised a “significantly sub-. 4 lakh” price tag and outlined plans to grow the market share of the Renault-Nissan-Datsun combine from 5% to 15%.  Ghosn, who admits he was deeply involved in reviving the brand after a three-decade hibernation, believes the car will be lapped up by young buyers looking for value. Away from the glare of Ghosn’s arc lights, India’s car sales declined for the eighth consecutive month, and manufacturers have just announced production shut-downs to avoid inventory pile-ups. “Hey come on! My god,” Ghosn exclaimed, dismissing the slump. “You just wait for a few months and it will be over-…What we are seeing is a correction, not a slowdown…it will be over by the year-end.” The Datsun Go was developed for emerging markets, which Ghosn believes would make up 60% of the world car market by 2016. In India, it will compete head-on with valuefor-money cars from Maruti Suzuki and Hyundai. “Our strategy is not against competitors. Our strategy is for Indian consumers,” he said. Ghosn, who famously steered Nissan from bankruptcy to profitability early last decade, still believes an ultra-low-cost car for the masses is possible. “There’s a huge need for this car that nobody has addressed yet,” he said, discounting the Tata Nano. “I hope we would answer that in the future. We’ll continue to work on it.”

• Jet, Etihad Water Down Prickly Deal Clauses to Pacify Regulators: Jet Airways and Etihad have reworked their shareholder agreement following stiff opposition from regulators and the government regarding some provisions that appeared to give minority partner Etihad substantial say in the running of the airline. Three critical clauses in the shareholder agreement have been watered down to pass muster with markets regulator Securities and Exchange Board of India (Sebi) and the Foreign Investment Promotion Board (FIPB), which deferred approval to the investment last month. The revisions may make it easier for the partners to argue their case, and possibly secure approval. It would also help in deflecting attention from the controversy surrounding the deal, though another round of governmental scrutiny into the changes cannot be ruled out. Jet and Etihad struck a landmark agreement in April this year under which the Middle-Eastern carrier agreed to buy 24% of Jet for about $600 million. Etihad paid a premium of 34% over the market price though it was not getting control, leaving many wondering whether there was a quid pro quo in the form of additional powers in the shareholder agreement. Sebi was the first government agency to question the deal, especially the clauses in the agreement giving Etihad the power to approve a number of transactions.

• Cipla Appoints MK Hamied as Executive Vice-ChairmanDrug major Cipla on Monday announced top level management changes with Managing Director MK Hamied becoming Executive Vice-Chairman and Subhanu Saxena taking over as MD and Global Chief Executive Officer with effect from Tuesday. “Suhanu Saxena has been designated as Managing Director and Global Chief Executive Officer and appointed as an Additional Director and Managing Director of the company with effect from July 16, 2013,” Cipla said in a filing to the BSE.

• Tatas Won’t Leave West Bengal: Mistry: The new chairman of Tata Sons reiterated his commitment to West Bengal even as a legal tussle over the state government efforts to acquire 997 acres of land, leased to the Tatas for the Nano car plant at Singur, continues in the Supreme Court. “We have never left Bengal and we will never leave Bengal” Tata Sons chairman Cyrus Mistry told Tata Global Beverages shareholders at the company’s 50th annual general meeting in the city on Monday. This was Mistry’s maiden visit to the city after he took over the reins at Bombay House as the chairman of the group. His comment came on a day when Singur was voting in the panchayat polls. The Trinamool had used the Singur land issue to win the last assembly elections in 2011. The Tatas were forced to shift the Nano factory from Bengal on October 3, 2008 following intense protests against acquisition of farmlands led by Banerjee, who demanded that the then Left Front government should return 400 acres which it had allegedly taken from unwilling farmers by force. After Banerjee took charge of the Writers’ Buildings in May 2011, she passed the Singur Land Rehabilitation and Development Bill, 2011, and acquired 997 acres at Singur. Tatas then moved to the court challenging the state government’s move. The case is now before the Supreme Court and the next hearing is expected to take place on August 6. At the last hearing, the Supreme Court has asked if the Tatas would consider returning the land. Mistry avoided direct answers to questions on whether Tatas would stay in Singur or ask for compensation from the West Bengal government. “I cannot comment on it. The matter is sub-judice,” Mistry said.

• BookMyShow bags PVR’s 1,000cr e-biz: With the moviegoer in focus, multiplex pioneer Ajay Bijli has taken a leaf out of the manual of FMCG companies, to market tickets of PVR Cinemas. The cinema chain has handed online ticketing firm BookMyShow a Rs 1,000-crore contract to help manage its digital marketing efforts as consumers increasingly book movie tickets online. The largest internet strategic tie-up will see BookMyShow market and sell tickets of PVR Cinemas across its web and mobile applications for the next five years. BookMyShow already has tie-ups for more than 1,400 screens. PVR Cinemas, which has 374 screens in 84 cinemas in the country, has combined the new-age style of promotion with the traditional method of selling movie tickets at the counter. “This will help augment the box office revenues by reaching out to more consumers and achieving better penetration in our micro markets,” said Pramod Arora, president and CEO of PVR Cinemas. Industry analysts estimate 60% of filmgoers will switch to booking tickets online and via mobile in the next four-five years. BookMyShow will also help reduce box-office costs with a more targeted marketing driven by backend customer data mining. “The partnership also extends to harnessing Book-MyShow’s analytical ability to ensure targeting the right content at the right users as well as marketing initiatives around non-movies and alternative content. We hope to generate Rs 1,000-crore business for PVR in the next five years, “said BookMyShow.Com founder & CEO Ashish Hemrajani. BookMyShow has a lion’s share of India’s more than 12 million e-commerce customers, translating into about 30 million tickets annually. US venture capitalist Accel Partners backed the ecommerce engine with an $18-million investment last year, as India’s 140-million internet traffic is the fastest growing globally.

International:

• US retail sales growth slows unexpectedly in June: US retail sales grew in June, but at a slower rate than was expected by many analysts. Sales were up by a seasonally-adjusted 0.4%, half the 0.8% rate expected by the markets. Sales of building materials - often a volatile item - fell 2.2% in the month, according to the Commerce Department. The sub-par performance added to expectations that the Federal Reserve will wean the US off economic stimulus more slowly than previously indicated. Car sales - which can also vary greatly from month to month - jumped 2.1%, while furniture and household goods rose 2.4%. Total retail sales in June were 27.5% up from their level at the bottom of the recession in mid-2009. The figures come on top of weaker trade and manufacturing data, pointing to a softening in the US recovery. "The disappointing rise in retail sales values in June increases the chances that GDP grew at an annualised rate of less than 1% in the second quarter," said Paul Dales, US economist at research firm Capital Economics. "Even more worrying is that sales growth appears to be losing momentum heading for the third quarter."

• Joe's Jeans Acquires Hudson in $97.6M Denim Marriage: One of the most frequently rumored acquisition targets in the premium denim business came off the market Monday as Hudson Jeans reached an agreement to be acquired by its City of Commerce, Calif., neighbor Joe’s Jeans Inc. Joe’s, which also reported lower profits on higher sales for the second quarter Monday, said it would buy privately held Hudson Clothing Holdings Inc. for $97.6 million in convertible notes and cash in a deal expected to close by Aug. 31. Fireman Capital Partners and Webster Capital acquired a controlling interest in Hudson in 2009 and had been reported to be shopping the brand since late 2011. Webster and Peter Kim, who founded the brand in 2002, rolled their equity into Fireman prior to the deal with Joe’s.  Kim will continue to serve as chief executive officer of Hudson and will join Joe’s board. He will report to Marc Crossman, president and ceo of Joe’s.

• Mexico Aims to Boost Apparel Sector: Mexico’s textiles and apparel industry expects its 2012 World Trade Organization case against China’s unfair subsidies to importers to be settled by September, industry leaders said. They also expect a Mexican-Chinese working group, set up to improve the countries’ Customs cooperation and knowledge to counter a flood of undervalued Chinese imports to Mexico, to announce a series of actions by then. “We are looking for a very clear definition of the trade rules affecting our industries so the triangulation of subvalued products [sent from China but often with Malaysia or Vietnam origination certificates] stops,” Sergio López de la Cerda, president of apparel industry group Canaive, told WWD. His comments came after Mexican and Chinese presidents Enrique Peña Nieto and Xi Jinping signed several strategic agreements last month to bolster the nation’s trade relations. One of the agreements involved a working group comprised of Mexico and China’s economic and foreign ministries tasked to come up with a series of rules and guidelines to curtail China’s subvalued imports and widen Mexico’s access to China’s market. Experts feel Mexico has the potential to export as much as $500 million to China as a string of new value-added textile producers and fashion brands gear up to enter the Chinese market. López de la Cerda said the working group’s expected agreements and recommendations, when they are developed, should help even out the countries’ trade imbalance. In 2012, China exported $2.2 billion worth of textiles and apparel to Mexico, while Mexico exported just $150 million to China. The group’s results could come in parallel with a settlement to Mexico’s WTO dispute or without it.

• Forever 21 Teams With Marvel for Back-to-School: Forever 21 is looking to some superheroes to boost its back-to-school business. The fast-fashion retailer has teamed with Marvel to introduce more than 20 stockkeeping units of juniors apparel and accessories, priced mostly from $12.80 to $22.80, emblazoned with imagery of superheroes in Marvel’s portfolio, including Thor, Spider-Man, Hulk, Wolverine and Iron Man. The items will be placed together at the front of 450 Forever 21 stores in the U.S. this week in so-called “comic shops.” “We’ve had the superheroes on the floor and, in the last few seasons, they have done increasingly well. The consumer has already been responding to the individual product, and we have taken it to the next level,” said Betsy Zanjani, senior vice president of design product at Forever 21. She speculated a combination of interest in old-school characters, this year’s summer blockbusters such as “The Wolverine” and “Iron Man 3,” and a taste for the one-two punch of humor and action makes superheroes appealing to Forever 21’s customer base. She added that Forever 21 is betting on its particular fashion twists on the superheroes to be successful this b-t-s session. “The excitement is really in the nontraditional styles like body-con, all-over printed comic strip leggings and cotton Lycra crop tops. We are offering something a little bit different,” said Zanjani.

• H&M Sales Rise 3% in June: Hennes & Mauritz AB said same-store sales rose 3 percent in June after remaining flat in May. Sales in local currencies climbed 13 percent, an increase over May, when they gained 9 percent, the Swedish high-street retailer said. In June 2012, H&M had also reported a 3 percent rise in same-store sales and a 13 percent increase in local currencies. The retailer only releases percentage changes for monthly sales and does not break out actual sales figures. The store count stood at 2,926 doors on June 30, compared with 2,596 stores at the same time last year.