News As We Read- 22nd July'13

Thought of the Day:

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Following made the Headlines:

India:

• Etihad may Have Pilot’s Seat in Jet After Deal: Sebi: Capital markets watchdog Sebi has written to the Foreign Investment Promotion Board (FIPB) expressing concern that control of Jet Airways, India’s largest private airline by revenues, could pass into foreign hands because of the manner in which its 2,000-crore deal with Etihad Airways has been structured. Sebi’s communication could queer the pitch for the biggest foreign investment in India’s aviation industry after the sector was opened up to foreign carriers last year. “Sebi has given its views on effective control. It has raised concerns on the issue of control being passed into the hands of the acquirer,” said a senior government official privy to the development. The regulator has also told Jet and Etihad that the right to appoint board members should be proportionate to shareholding and that the foreign investor should not enjoy powers such as the right to appoint a vicechairman and automatic representation on the audit committee, according to people familiar with Sebi’s thinking on the matter. “Etihad can’t insist that certain decisions be taken only with their consent,” said a person familiar with the discussions. “During the normal course of business, if Jet requests for Etihad’s representative on any committee to share its expertise, it is fine. But they can’t have it as a right.” In general, the market regulator has expressed its reservation over various veto powers and special rights enjoyed by Etihad as these signified an element of control, said the persons familiar with Sebi’s views. Indian rules define control as the right to appoint the majority of directors on a company’s board or have a say in the management either directly or along with persons acting in concert by virtue of their shareholding or shareholder/voting agreements. The troubles being experienced by Etihad are likely to strengthen the perception that India remains profoundly ambivalent in its attitude to foreign investment despite the professed eagerness of its policymakers to attract overseas capital.

• Twitterati Turn TV Heroes as Parties Plan Multistarrers: In June 2012, when Mumbai homemaker Priti Gandhi was travelling to Ahmedabad to visit the Akshardham temple, she called Gujarat Chief Minister Narendra Modi’s office and requested an appointment, which was promptly granted. On the appointed day, when Modi’s secretary told him he had a 2pm appointment with Mrs Gandhi, the CM looked up in surprise, and said a background check be done on the visitor. He was kidding, of course. Modi knew his guest from Twitter. The conspicuous catchiness of a handle named @MrsGandhi vigorously supporting Modi and BJP, and taking on Congress supporters in the frequently messy high-decibel battles on Twitter, had helped Gandhi gain numerous followers. Her effectiveness was noted by BJP’s communication cell, which reached out to her and enlisted her to volunteer. Gandhi now appears on TV debates representing the party, works with the local BJP corporator and is planning to organise a rally for professionals in Mumbai, featuring Narendra Modi. “From a very normal background, social media has helped me reach a stage where I’m doing active work for BJP. I’m visiting slums to understand voting patterns. Now Twitter is only a small part of what I do,” Gandhi said.

• Quarterly sales grow for readymade apparels by 10% on stable cotton price & removal of excise duty: Readymade apparel sales have bounced back after two years of flat growth with brands, retailers, manufacturers reporting more than 10% growth in last quarter. A stable cotton pricing coupled with removal of 10% excise duty has worked in favour of apparel industry bringing consumers back to the market at a time when inflationary pressure and rising product prices are pinching their pockets.  The rising domestic demand has prompted the country’s textile industry to increase production of apparel and also look at Bangladesh to build up sufficient inventory for the festive season which is expected to drive sales further in the second half of the current fiscal. “The domestic apparel industry is once again back in the growth mode after a lull of two years. In the first quarter there has been an overall growth of around 10% even though the economic parameters are not very bright. The growth has come because consumers are not willing to hold back their purchases any further,” said Rahul Mehta, president of the Clothing Manufacturers Association of India. Apparel makers and retail chains like Turtle, Madura Fashion, Future Group and Spencer’s Retail say steady apparel prices this year has induced consumers to undertake purchases and the wedding season too has helped the industry. Apparel brand Turtle director Amit Ladsaria says the brand has grown by 31% in the first quarter (April-June) of this fiscal as compared to the same period last year. “The best part of this growth in sales is that it happened on full price, without any discounts or consumer offers,” says Ladsaria. Allen Solly brand head Sooraj Bhat adds that more serious shoppers are in the market. “The growth is coming from higher conversions and triggered by regular customers who account for almost 40% of the sales. Footfalls are yet to pick up completely,” he says, adding the brand has grown sales of like-to-like stores by 26% in the last quarter over same period last year. Prices have played a key role in bringing back customers to the market. Though the production cost has gone up but the apparel makers have not passed it to the customers bringing them much relief.

• India to See M&A Activities in FMCG Space, says PwC: India will continue to see merger and acquisition (M&A) and private equity activity within the FMCG sector both on a domestic and cross-border basis, notwithstanding the global economic slowdown, according to a report by consulting firm PwC. “The fast growing and differentiated Indian FMCG sector will continue to receive interest from financial investors, who will remain focused on the demand being created by Indian consumers, and western corporates who need to look at emerging markets to meet wider growth aspirations,” said the report. As per the report titled ‘The Indian Consumer Sector: What's the deal?’, it established that Indian corporates will continue to seek out acquisitions in overseas markets. Acquirers can gain significantly from choosing to follow an inorganic growth route, said PwC.

• Assam to ban manufacture, sale, use of smoking products: After the passage of the anti-tobacco bill in the Assembly, the Assam government is now planning to bring in a new legislation to curb manufacturing and selling of all forms of smoking products in the state. "Our first aim is to implement the anti-tobacco bill for all forms of smokeless products. After this, our next mission is to ban smoking tobacco... One day we will ban smoked tobacco also," Health and Family Welfare Minister Himanta Biswa Sarma said. He, however, did not give a timeframe on introduction of the bill to ban smoking tobacco saying the government at first wants to be successful in implementing the 'Assam Health (Prohibition of Manufacturing, Trade, Advertisement, Storage, Distribution, Sale and Consumption of Zarda, Gutkha, Panmasala etc. Containing Tobacco and/or Nicotin) Act, 2013'. "I do not know when it will happen, but I want to begin the banning of smoking tobacco in the country from Assam," Sarma said. Last week, the anti-tobacco bill was passed in the Assam Assembly unanimously with some amendments. "The existing act in the country prohibiting smoking at public places leaves the onus on the consumer. However, in our bill, we have shifted the focus and now the onus is on the manufacturer," Sarma said. He said when this bill comes into force, there will be pressure on all other states. "The Assam government is very serious about this bill. That is why we have brought one amendment to include nicotine along with tobacco and have changed the name of the bill accordingly," Sarma said. The bill provides for prevention of manufacturing and usage of tobacco products in non-smoking form.

International:

• Google Search Returns Attract Eye of Industry: Apparel is the fastest-growing category in terms of shopping search volume on Google, and for retailers and brands, one of the biggest sales-driving opportunities is Google’s product listing ads, or PLAs. “Ninety percent of media time is now spent in front of screens. I’m not saying it’s killing print, but it’s pretty clear people are searching more,” Google industry director, branded apparel, Brian Zeug told WWD.  This metric has caused brands to come to terms with the reality that potential shoppers spend such an abundance of time online, and data continues to illustrate exactly how consumers spend this time. Now, organizations are intersecting their brand message to play to that, Zeug said. “Consumers spend about 5 percent of their time in the search box, but that’s it. What’s fascinating is they spent about 10 percent of their time buying — and that’s where we help bridge the gap,” he explained.  Clothing and shoes is the top PLA category for advertisers in the U.S. — and companies like Wal-Mart, eBay, Macy’s, Amazon and even Etsy have become increasingly aggressive in this space. Etsy’s project manager, ads, Jay Bergensen, told WWD that PLAs have resulted in 40 million visits directly to listings since the marketplace began utilizing the ad format in September. About a third of these visitors were new to Etsy’s, home to more than 900,000 businesses.

• RetailMeNot's IPO Raises $191M: Google-backed RetailMeNot Inc. has raised $191 million in its initial public offering. The provider of online coupons was priced at $21 a share, at the middle of its $20 to $22 range, and sold 9.1 million shares. It quickly shot up 35 percent to hit an intraday high of $28.45 on Friday before closing at $27.70 in its first day of trading. Shares of the company trade over-the-counter under the symbol “SALE.” Filings with the Securities and Exchange Commission said net income for 2012 was $26 million, compared with just $2.3 million in 2010. Its chief executive officer and founder Cotter Cunningham celebrated the IPO by ringing the Nasdaq opening bell at the Moody Theater in Austin, Tex., Friday. The company was founded in 2007 and began operations in the digital coupon space in 2009. It includes as one of its investors Google Ventures, the venture capital arm of Google Inc. Other investors in its last round of funding in 2011 include J.P. Morgan Chase & Co. RetailMeNot has under its umbrella mobile apps, plus Web sites in several countries that provide digital coupons. In the U.S., coupons recently available on the site include ones for Kate Spade, Target, Kohl’s, Macy’s, Sports Authority and Lands’ End. The listings contain information on how to activate the coupons, plus their expiration dates. Some offers are for $5 off shipping, while others could be a certain percentage off a single item or an extra percentage off a category, such as a summer clearance sale. The company said it had more than 450 million visits to its sites last year, and that its mobile apps have been downloaded by consumers more than six million times. The firm’s business model provides for it to receive a commission when a purchase is made from a coupon that is clicked on its site. One key difference between it and some of the other coupon sites, such as daily deal firms LivingSocial or Groupon, is that RetailMeNot’s offers are from national retailers versus local proprietors.

• VF's North Face Combats Warm-Weather Concerns: Retailers’ memories of a warm winter are continuing to haunt VF Corp.’s The North Face brand during a sweltering summer. Reporting second-quarter results that beat analysts’ estimates Friday even as revenues fell slightly shy of them, VF indicated that North American stores are taking a conservative approach to cold-weather oriented merchandise as they plan for fall. That’s hurt North Face’s advance orders for the season in the Americas, even though second-quarter global volume for the brand rose 5 percent. The brand’s sales were up 40 and 10 percent in the less penetrated markets of Asia and Europe, respectively, despite a “modest decline” in the brand’s wholesale business in the Americas. “Retailers who’ve been hurt with inventory in the last two winters are buying cautiously and closer to need, taking delivery later,” Eric Wiseman, chairman, president and chief executive officer of VF, told WWD Friday, adding that a 53-week fiscal calendar this year will push the brand’s biggest shipping week into the first week of October, the start of VF’s fourth quarter, from the last week of September, when the third quarter ends.

• Starwood Capital Emerges With Bid for Saks Inc.: Saks Inc.’s stock spiked Friday on news that Starwood Capital made an offer for the luxury chain following an earlier bid from Hudson’s Bay Co. While some reports have Starwood bidding in the $17 to $18 range, financial sources believe it is a longshot that Saks sells at that high a price and that $15 to $16 is more likely based on the company selling at $11.50 prior to putting itself into play. Sources also said a small private equity firm was seriously interested in Saks and could also bid. Qatar Holding, an investment company linked to the royal family of the Gulf state, could be looking at Saks as well to bolster its growing luxury portfolio. Qatar Holding has been buying up Tiffany stock, and bought Printemps in Paris earlier this year and Harrods in London in 2010. In addition to Qatar, private equity firms such as Thomas Lee, KKR & Co. and Leonard Green & Partners are considered possible suitors, though many firms, including retailers, have kicked the tires at Saks. Saks Inc. stock surged late Friday on a New York Post report that Starwood had put in a bid for the company. The surge brought the stock to a new 52-week high of $17.51, before shares faded back to close at $15.89, up $1.21, or 8.2 percent. Volume was 7.7 million shares, about three times the average pace. The Post reported that Starwood bid somewhere between $17 and $18 a share. Based on 152.8 million shares outstanding, a price range of $17 to $18 would value Saks at $2.6 billion to $2.75 billion. Saks has been a challenged business for many years, struggling to grow its profitability and widely believed to have a challenging future unless it becomes part of a retail conglomerate enabling consolidations, cost savings and synergies and increased buying power. It’s been in play from time to time over the years, and on a couple of occasions considered a merger with the stronger Neiman Marcus Inc. In May, Saks was put in play again, after the luxury chain gave Goldman Sachs the green light to try to sell the company. 

• Optical Express saved by founder David Moulsdale: Laser eye surgery firm Optical Express has been saved from collapse by its founder, preventing the loss of 1,600 jobs in the UK and Ireland. David Moulsdale has bought all the debt that the firm owes to the Royal Bank of Scotland and injected more money into the High Street chain. The bank had refused to lend Optical Express any more money. The Glasgow-based firm said it was now in a "highly secure position for continued growth". The intervention by chairman Mr Moulsdale, who founded the firm in 1991, has saved Optical Express from being another High Street retail casualty, following the high-profile deaths of Comet, Jessops, Clinton Cards and others in recent years. Optical Express - which has about 93 stores and 54 consultation centres - owed more than £30m to RBS and asked for a further loan in order to pay staff, according to the Sunday Times. The largely state-owned bank refused and threatened to seize the firm and sell it to recoup its debts. "David has agreed to acquire the entire debt owed to RBS by Optical Express and will inject significant working capital into the group, positioning it in a highly secure position for continued growth," a spokesman for the company said. "We anticipate completing the transaction by Monday morning, however it's business as usual in all of our stores and clinics as we work through the final documentation." As well as laser eye surgery, Optical Express offers other healthcare services including dentistry and cosmetic surgery. It also operates in the US and the Netherlands.