News As We Read - 22nd Aug'13

Thought of the Day:

Did you know?

India:

• Mistry Bets on Urban Youth to Revive Nano : Tata Nano will be repositioned as a “smart city car” with power steering option and several other improvements as Tata Motors bets on “customer centricity” to revive its sales in the country, chairman Cyrus Mistry said. Addressing Tata Motors shareholders for the first time, Mistry on Wednesday said, “We are focusing on making Nano a smart city car. We will introduce a power steering option, improve interior and exterior of the car, improve fuel efficiency and target young customers.” He said the company will increase the “perceived value” of the car with every subsequent model launch.

• Def Colony Lane Joins Elite List of High Streets : A street in Defence Colony, a tony Delhi locality, is fast emerging a high street where one can buy a Stella McCartney runway piece for . 14 lakh, crystal chandeliers priced more than . 50 lakh and many more luxe items. Many top brands and designers including Kitsch, Nirav Modi, Swarovski, Tarun Tahliani and Rohit Bal have found a new address at D Block, a leafy if often crowded bylane off the Defence Colony flyover, saying it offers greater footfalls, brand visibility and accessibility than high-rent premises of exclusive malls. “People are tired of going to the malls now,” says Radhika Gupta, director at Moonriver, a lifestyle store on this lane that sells premium fashion, fragrances and home décor. “This lane may not be like the Bond Street or Madison Avenue of the West, but it is definitely transforming into an upscale shopping and lifestyle destination,” she adds. Kitsch, a high-end store that retails brands such as Dolce & Gabbana, Stella McCartney and Alexander McQueen, recently shut its 2,000-square feet store at the Vasant Kunj luxury mall Emporio and shifted to an old bungalow in D block. “The rent is half of what we were paying at Emporio,” says Priya Sachdev, who runs Kitsch. Naresh Kumar, an executive at property brokerage Roots Realty, says rentals in the street range between . 150 and . 250 per square feet per month compared to DLF Emporio’s . 500-1,500 per sq ft range. “The demand for stores and spaces (at D block) is growing rapidly. Last three years have seen a lot of action,” he says.

• Two fashion giants put off India entry : Global fast fashion giants Hennes & Mauritz and Uniqlo have put off opening their first stores in India, citing volatile foreign exchange, said people directly aware of the matter. The rupee’s sharp fall against the dollar and other major international currencies significantly dents their business model driven by imported merchandise. H&M and Uniqlo want to put off the first stores to 2015, with a one-year window after the elections.

• Nishi Vasudeva first woman to head oil firm : Nishi Vasudeva, who in 2007 became the first woman to get on the board of an oil PSU, is set to make history again next year when she takes over as CMD of Hindustan Petroleum Corporation Ltd.  Vasudeva is currently marketing director in the company and will succeed Subir Roychoudhury, who retires on February 28. The IIM-Kolkata graduate began her career with state engineering consultancy firm Engineers India Ltd and has some 36 years of experience in the industry.

• Court rejects Colgate’s plea against HUL’s adblitz : The Delhi High Court has dismissed the injunction petition filed by Colgate-Palmolive (India) against HUL’s Pepsodent Germicheck comparative advertisement. The advertisement in question claims that Pepsodent Germicheck has 130% germ attack power as compared to the 100% effectiveness of Colgate Strong Teeth, after four hours of brushing. When contacted, a Colgate spokesperson confirmed having received a copy of the Delhi high court judgment. “We are examining the judgment and will take appropriate action,” the Colgate spokesperson said. With the Delhi high court dismissing Colgate’s petition, an HUL spokesperson said the company would continue to air the Pepsodent Germicheck superior power advertisement “as per the original plan”. “Advertisements that compare the product of a trader with the product of a market leader can offer the consumer better information about the product. They can also help to improve the overall quality of like products in the market and, in that process, the product of the market leader,” justice S Muralidhar said in his order.

• Maruti drives in WagonR Stingray at 4.1L : As the car industry passes through one of its worst slowdown in a decade, Maruti Suzuki drove in a new version of its WagonR compact, called Stingray, pricing the vehicle between Rs 4.1 lakh and Rs 4.67 lakh (ex-showroom Delhi). The Stingray will cost about Rs 20,000 more than the WagonR and Maruti is hoping to attract young customers in metros with the new model. The Stingray debuts weeks ahead of the festive season, the time when companies expect a return of demand in the market. Stingray is powered by a 998cc petrol engine, and Maruti will roll out a CNG model soon. The company will continue to sell the WagonR.

• Earning income 10 crore? Get ready for 35% income tax : The Union Cabinet might pave the way for imposition of a higher tax rate of 35 per cent on the ‘ super rich’  those with income of more than  10 crore a year as it takes up the amendments to the Direct Taxes Code ( DTC) Bill, 2010, on Thursday. If the Cabinet gives its goahead, the much- awaited amendments could be tabled in the ongoing session of Parliament.The amendments seek to have four tax slabs for personal income. Taxpayers might not get any breather in the form of higher exemption limit, as the proposal of the standing committee on finance to widen tax slabs has not been incorporated. The Parliament panel had suggested raising the exemption limit to 3 lakh, from the current 2 lakh ( excluding senior and very senior citizens). The finance ministry’s worry is that raising this limit will not only lead to loss of revenue but will take many people out of its scrutiny, thereby eroding the tax base, already low at 34 million. If the slab is increased to 3 lakh, 87 per cent of the taxpayers will escape tax net. The current slabs are  25lakh,  5- 10 lakh and 10 lakh & above. The standing committee on finance had suggested three slabs 310 lakh, 10- 20 lakh and  20 lakh & above and said these should move with inflation. But the proposed amendments are not likely to include that. The current rates of 10, 20 and 30 per cent on income- tax might not be changed. In Budget 2013- 14, Finance Minister P Chidambaram had imposed asurcharge of 10 per cent on those earning at least ₹ 1 crore in a year. He had said this was a one- time tax on the wealthy to help the economy tide over a difficult fiscal situation. There are only 42,800 people in the country who earn more than 1 crore; those earning over 10 crore ayear would be even fewer. Officials said the DTC Bill was likely to give an impetus to growth and investment by the corporate sector, but might not have much for individual taxpayers, because of the limited fiscal space available with the government. 

• Airlines fear worst September quarter in recent times : With nearly 70 to 75 per cent of their operational costs tied to the dollar, most Indian air carriers say the September quarter could be the worst in recent times, in the wake of a sharp depreciation of the rupee, while competition and anon- peak travel season stopped them from raising fares. Around 50 per cent of the operational costs of most airlines, especially the low- cost carriers ( LCCs), belong to aviation turbine fuel ( ATF), imported and pegged to the dollar. Another 20 to 25 per cent of their operational costs belong to lease rentals for the planes, which have to be paid in dollars, and spare parts for maintenance, also imported. “What we are seeing is worse than 2008 because at that time, the rupee was around ₹ 43 against a dollar, though ATF fuel prices had hit a high of $ 140 a barrel, which is now around $ 110. But with the rupee at 63 and expected to fall to even 70, our fuel costs, as well as the cost of paying lease rentals and importing spares, could be higher than 2008 levels,” says a top executive of a leading LCC in the country. “This quarter (JulySeptember) would be the worst in recent times,” added the official, who did not want to be named. Airlines have to fork out $350,000 to $ 400,000 every month for lease rentals on each aircraft. They also have to import spares of around $100,000 each month to keep the planes going. In simple terms, based on the fact that the rupee has depreciated, airlines have to fork out over 16.5 per cent more to pay lease rentals and spares, compared with what they did in January this year. On January 2, the rupee value was 54.36 against a dollar, while it closed at 64.04 on Wednesday. The Indian Oil Corp ATF price has gone up six per cent during the same period. So, if both are bundled, the overall increase in airlines’ operational costs are around seven per cent, compared with what they were paying in January this year.

• As even NRIs shy away, deposits decline 16% : The rupee is in a free-fall and everyone is shying away, including non-resident Indians (NRIs), who are expected to reap a bounty from the currency’s plunge. Though NRIs’ investments in dollars are expected to fetch them higher returns, banks reported a dip in flows of NRI deposits by 16% to $5,497 million in April-June against $6,553 million a year-ago, according to data released by the Reserve Bank of India. Bankers said inflows were higher last year, as interest rates on NRI deposits were hiked from 3% to 9%. “Flows were higher last year because of high rates offered by banks as a result of deregulation of interest rates on such (NRI) deposits,” RK Bansal, executive director, IDBI Bank, told Hindustan Times. Following the rupee’s fall in December 2011, the RBI had deregulated interest rates on NRI deposits, after which banks hiked rates on such deposits up to 9 % from 3% earlier. The deregulation resulted in a surge in inflows in the January-May period of 2012. Though the flows came down during the quarter but outstanding NRI deposits went up to $71,079 million at the end of June 2013 from $60,874 million a year ago. NRIs might be holding on to the money and waiting for the rupee to fall further so that they can maximise their gains, said  A Surendran, head, retail and international banking, Federal Bank.

International:

• IPad Loses Market Share in China : Apple’s share of the Chinese tabletcomputer market plunged in the second quarter as Samsung Electronics and dozens of local makers built on gains in smartphones to curb growth in iPad shipments. Apple accounted for 28% of tablet shipments during the period, down from 49% a year earlier, Dickie Chang, a Hong Kong-based analyst, said on Wednesday. Samsung surged to second with 11%, while half of shipments were generated by producers with 1% or less each in market share, he said. Consumers in China are turning to cheaper tablets using Google’s Android operating system, following a trend in smartphones that saw the iPhone’s market share almost halve. Local brands including Ramos and Teclast are joining Samsung and Lenovo Group in capturing sales once dominated by the iPad. “Apple has lost its luster in China and is no longer the must-have product in any category,” said Shaun Rein, MD of China Market Research Group.

• Subway plans 1,000 new outlets in Europe : Subway, the closely held restaurant chain with more outlets than McDonald’s Corp, plans to pick up the pace of openings in Europe by adding as many as 1,000 new locations in 2014. The sandwich shop operator has 4,018 stores in Europe, where it has continued to grow during the continent’s recession and wobbly recovery, Assistant Regional Director Mike Charest said in an interview. The Milford, Connecticut- based company has opened about 500 stores a year in Europe for the past two years, and may add 800 to 1,000 next year. “Europe is the strongest, fastest- growing international market for Subway outside of North America, and will continue to be,” Charest said by phone from his Amsterdam office on August 13. Subway’s strategy “ works for us regardless of economic situation” by balancing affordability with high- quality food. The U. K. is at the “ top of the list” for growth in Europe, with a goal to have 2,000 outlets by 2015, the executive said. Subway has added 63 locations in the U. K. in 2013 to take the number to 1,544, up from 59 openings in 2012. Growth may also quicken in the Netherlands, Finland and Sweden, where at least 20 stores have been opened in each country in 12 months. The company aims to be in Latvia, Lithuania, Georgia and Ukraine by the end of this year. Ukraine has similar growth potential to Romania, which has 16 stores after the first opened in April 2012, said Peter Mompalao de Piro, a Subway spokesman.

• Ferrari NART Spyder breaks auction record, sold for $ 27.5 million : A 1960s Ferrari convertible sold for a record $ 27.5 million in California, where classic- car sales were dominated by rarities from the Italian maker. The 1967 Ferrari 275 GTB/ 4* S NART Spyder’s price at RM Auctions on August 17 was the most paid at auction for a car by the Italian manufacturer anywhere in the world and the most for any car bought at a US public sale. It beat, among others, a 1997 McLaren F1 roadster that made $8.5 million at Gooding & Co. “The NART Spyder is a very special car,” said the UK- based dealer John Collins, one of the underbidders at the RM Auctions event. “ They’re so rare. They’re among the most beautiful of all Ferraris. Some of the biggest collectors in the world own one, and Steve McQueen tried to buy this one after he crashed his,” said Collins, of the Talacrest dealership. A prewar Bentley “ Blower” sold for $ 4.6 million at Bonhams in the bellwether weekend sales that showed strong demand for the most desirable lots. The West Coast events timed to coincide with the annual Pebble Beach Concours d’Elegance raised a record $ 301.9 million, the highest total for a series of classic car auctions anywhere in the world, according to the Michiganbased Hagerty database. Ferrari claimed the top three prices, led by the NART Spyder convertible. One of just 10 built, it sold to a buyer in the room identified by dealers as the Canadian fashion entrepreneur Lawrence Stroll. An after hours call to Stroll’s New York office to confirm the purchase was not returned. Stroll built Tommy Hilfiger into a global brand in the 1990s.

• FB aims to get more of world’s people online : Facebook wants to get more of the world’s more than 7 billion people all of them, actually online through a partnership with some of the world’s largest mobile technology companies. Facebook Inc. announced Internet.org on Wednesday. In addition to the world’s biggest online social network, the group includes South Korean electronics giant Samsung, Finnish handset maker Nokia and wireless chip maker Qualcomm Inc. Facebook said the group’s goal is to “make Internet access available to the two-thirds of the world who are not yet connected” about 5 billion people. Google Inc., which is not a part of the Internet.org effort, launched a similar undertaking earlier this year with the goal of getting everyone on Earth online. Called Project Loon, the project launched Internet-beaming antennas abroad giant helium balloons into the stratosphere. Internet.org’s plans include developing cheaper smartphones and tools that would reduce the amount of data required to run apps. For Facebook, the move would add more users to its current 1.15 billion, but CEO Mark Zuckerberg paints it as something bigger.

• Can captain Chou safely lead sinking HTC ship to shore? : Now in his tenth year as CEO of HTC, Peter Chou is lauded as the architect of the Taiwanese firm’s award-winning smartphones. But as the company’s fortunes have dived, some insiders say he’s now an obstacle to any revival. Rocked by internal feuding and executive exits, and positioned at the high-end of a smartphone market that is close to saturation, HTC has seen its market share slump to below 5% from around a quarter five years ago; its stock price is at eight-year lows, and it has warned it could make a first operating loss this quarter. Chou has said publicly he has no intention to stand down, and executives none of whom wanted to be named because of the sensitive nature of the issue said HTC has no clear internal successor. “Part of the weakness is there is no obvious successor, and that’s not been good for morale,” one said. Chou declined to be interviewed for this article, but in response to Reuters queries, the company said: “HTC’s board and broad employee base remain committed to Peter Chou’s leadership. The (flagship) HTC One product family  which has been met with accolades by media and consumers alike  was a result of Peter’s vision and leadership, and speaks for itself.”

• Microsoft offers ad-free 'Bing for Schools' for the classroom to battle Google : The long-running rivalry between Microsoft Corp and Google Inc is turning into a schoolyard brawl. Microsoft on Wednesday opened a new front against the world's No 1 search provider by piloting an ad-free offering for educational users of Bing, its search engine that for years has trailed Google. Under the free program called " Bing for Schools," students in participating school districts will no longer see ads or adult content when they do Internet searches. Microsoft, which has signed up the Los Angeles Unified School District and Atlanta Public Schools among other school districts, has pitched Bing as an alternative at a time of rising public concern over how Internet companies are tracking their users' every move to target the ads they display. As part of the program, Microsoft will also offer free Surface tablets and course materials for teaching youngsters about Internet use. Stefan Weitz, Microsoft's director of search, said the program would help expose young users to Microsoft products. "We hope that we demonstrate the quality of Bing to teachers and students and also their parents, and once they see how good it is, we hope to see increased usage outside of schools too," Weitz said. Bing, with 18 percent of the search market share, has long trailed Google, at 67 percent, according to data from ComScore, despite an aggressive effort to close the gap.

• How Birchbox invented a new e-commerce model for selling makeup : Birchbox founders Hayley Barna and Katia Beauchamp devised the online cosmetics seller's subscription model while students at Harvard Business School, and launched a beta test that attracted about 600 people willing to pay a fee for monthly deliveries of new beauty products. Investors followed in the fall of 2010 and today the company boasts more than 400,000 paid subscribers, half of whom now shop at the Birchbox website in addition to paying for monthly packages.

• Michael Relich Promoted at Guess : Guess Inc. has completed a series of executive appointments with the promotion of Michael Relich, its chief information officer, to chief operating officer. Relich joined Guess in 2004 as chief information officer and added responsibility for logistics and other operations areas last Novemberwhen J. Michael Prince, the former chief operating officer, left the firm. He will continue to report to Paul Marciano, co-founder and chief executive officer of Guess. “I believe, more than ever, that the integration of technology, speed and brand synergy is vital for our success,” Marciano said. “Michael’s proven experience in these areas makes him a great fit as our new chief operating officer.

• Target Facing Difficult Headway in Canada : Target’s well-known reputation for style and design might be getting the best of it in Canada. Rather than drawing customers into stores, shoppers may perceive prices to be higher. “We know there is a gap in guest awareness of how low our prices really are,” said Gregg Steinhafel, chairman, president and chief executive officer. “We’re deploying multiple tactics. Our efforts will drive greater awareness.” Chains such as Wal-Mart, Best Buy, Canadian Tire and Loblaws No Frills and Real Canadian Superstore offer price-matching guarantees against competitors, while Drug Mart and Loblaws full-line stores don’t. Target’s prices in Canada were higher than Wal-Mart’s, according to a price study by Kurt Salmon & Associates, which said pricing is a sensitive issue for Canadian consumers. KSA said some shoppers were surprised that Target’s new stores weren’t on par with the retailer’s pricing in the U.S.

• Vince Eyes Retail Growth as IPO Looms : With its impending initial public offering, Vince is in a quiet period. But executives aren’t shy about discussing their stepped-up retail program. The fashion firm today will open a sun-drenched, 3,050-square-foot flagship in SoHo here with soaring 22-foot-high ceilings and ample space to display the entire collection. The flagship, along with other retail plans, will no doubt be called out in the road show to underscore the brand’s accelerating brick-and-mortar strategy and evolving collection. While Vince’s owner, Kellwood Co., has not revealed a timetable for the IPO, it could happen as early as this year.

Currency: