News As We Read- 1st May,2013

Thought of the Day:

Did you know?

Following made the Headlines:

India:

• Good Report Card Prompts Parent to Raise HUL Stake: Anglo-Dutch company Unilever has offered to pay $5.4 billion (over 29,000 crore) to increase its stake in Hindustan Unilever to 75%, the largest acquisition deal in India’s consumer goods sector that comes at a time India’s lustre has dimmed for many foreign investors. The maker of Rin detergent, Lux soap and Knorr soups said the deal was driven by its desire for a bigger pie of HUL’s dividend outflow, and it had no intention of delisting its Indian unit. “Unilever has no intention to delist the Indian unit,” said Lucila Zambrano, a spokeswoman for Unilever, replying to ET’s queries. “Indeed, the purpose of the offer is partly to increase Unilever's share of the HUL dividend flow,” she said. The parent company plans to buy over 487 million HUL shares at . 600 each in a public offer, to raise its holding to 75% from 52.48% at present. The offer represents a 20.6% premium over Monday’s closing share price and a 26% premium to the one-month average price. The acquisition is Unilever’s biggest since its 2000 purchase of Best Foods for $23 billion and is the largest offer announced in the history of Indian capital markets. It becomes the second multinational to spend big money to hike its stake in its Indian unit after GlaxoSmithKline spent over $1 billion (. 5,222 crore) in February this year to raise its stake to over 70% from 43%, marking a break in a narrative of doom and gloom about the Indian economy. The Unilever move, which sent HUL shares surging 17%, is part of the MNC’s plan to increase its presence in emerging markets such as India, where HUL brands are market leaders in most of the categories they operate in.

• Jet-Etihad may’ve to Tweak Deal to Avert Open Offer: The Securities and Exchange Board of India (Sebi) may ask Jet Airways and Etihad to rework certain portions of their landmark agreement as the Middle-Eastern carrier’s joint control of the domestic airline under the terms of the deal could trigger an open offer to the public. A key Sebi official told ET that Etihad’s investment is not a passive one and that it has significant joint control over Jet Airways, including a say in the appointment of key personnel like the CEO and CFO. The regulator will be discussing this issue with Jet officials when they meet in the next few weeks. The development is significant as it would mean that two airlines would have to rework the terms of the over . 2,000-crore deal and may also have to make an open offer if Sebi is dissatisfied with the response and wants an open offer. A top Jet official said the company does not feel the need to make an open offer as there is no change in control. “As per our understanding, there is no control that would be ceded to Etihad. The board will be expanded to 14 and Etihad will have the right to appoint three directors,” said Ravishankar G, chief financial officer, Jet Airways.  According to Ravishankar, the co-operation is purely commercial in nature (as airline code share for synergising and strengthening commercial relationship). “Etihad will have no special rights and there will be no situation where one airline is controlling the other. The three board nominees cannot veto the 11 directors and we will make a representation to Sebi on this,” he said. The Sebi official said control does not have to be examined from a narrow perspective. A partner with a significant minority stake and without veto rights can also acquire indirect control if the deal leads to joint decision making and a say in the appointment of key personnel.

• FM Rolls Out the Red Carpet for Foreign Investors: Finance Minister P Chidambaram sought to woo foreign investors by clarifying that a tax residency certificate (TRC) will be sufficient to claim tax concessions on investments routed through countries such as Mauritius while cutting the rate of withholding tax on interest payments on government and corporate bonds to 5% from 20%. Lok Sabha passed the finance bill without a debate after most of the Opposition decided to walk out over the Supreme Court’s observations on alleged government interference in the functioning of the CBI. The minister, however, stood his ground on the commodities transaction tax while offering some relief by allowing losses from commodity futures trading to be set off against gains from underlying market transactions and vice versa. He also turned down demands for rollback of increase in excise duty on diesel SUVs. Chidambaram also clarified that the government did not intend to levy wealth tax on agricultural land. “There was an apprehension that wealth tax was being imposed on agricultural land. Let me make it absolutely clear that the policy of the UPA government is not to impose wealth tax on agriculture land,” he said. The apprehensions arose on account of Punjab and Haryana High Court rulings, the minister said.

• Vodafone Pips Airtel to No. 1 Slot in Rural Markets: Vodafone has for the first time overtaken Bharti Airtel to become India’s leading mobile phone company in rural India, according to the latest rural subscriber numbers collated by Cellular Operators Association of India (COAI), the industry body representing GSM operators. The Indian arm of Vodafone, which recently tweaked its distribution model to boost sales in the villages, now has the biggest rural customer base at 82.24 million, a shade above Bharti Airtel, whose total rural customer base is for the first time a tad lower at 82.16 million. Bharti Airtel, however, remains India’s leading mobile phone company by revenue and customers. According to the latest COAI data, its total customer base as on March 31, 2013, stood at 188.20 million, translating in a 28.47% market share. Vodafone India’s total customer base as on March 31, 2013 stood at 152.35 million, resulting in a 23.05% market share. Bharti Airtel and Vodafone’s pan-India subscriber base grew by 0.84% and 1.65% respectively in March. GSM operators collectively added 5.35 million customers in March and the pan-India GSM customer base on April 1 stood at 660.94 million. Vodafone India added 4.9 million rural customers during February and March 2013, stealing a march over its closest rivals Bharti Airtel (2.57 million) and Idea Cellular (2.75 million), according to the latest COAI rural customer growth numbers reviewed by ET. More than 50% of the company’s 152 million customers live in rural areas.

• Rasna Enters ‘Ready to Drink’ Space with Juices: Fruit drink concentrates maker Rasna has entered the ready-to-drink beverages segment by launching Rasna Ju-C juices on Tuesday, and plans to follow it up with other high margin ready-to-drink beverages such as fortified water and energy drinks. The company has formed a subsidiary, Rasna Beverages, to make, distribute and market juices and other beverages either on its own or in tieup with global brands. “The new subsidiary will be the arm through which we plan to form brand licensing and collaboration arrangements,” Rasna chairman and MD Piruz Khambatta said, announcing the launch of Rasna Ju-C. The juice has been launched in four flavours acoss the country. It is available in one-litre and 250-ml PET bottles. While the juices are contract manufactured now, Khambatta told reporters that the company plans to erect its own plant over the next six months for an investment of 50-60 crore. He hoped Rasna Beverages will grow into a 500-crore entity in three years. Rasna Beverages will operate independently of the juice concentrate business, with separate sales, marketing and distribution verticals. The Indian juice market is estimated at 5,000 crore, Khambatta said. Rasna, which debuted in 1985, pioneered the powdered drink category in India. It leads the category with a dominant 80% share of the roughly 600-crore market, ahead of Kraft Foods’ Tang and new entrant Tropicana powders from PepsiCo.

• Petrol Price Cut by 3/L: Oil firms have cut petrol prices by 3 per litre, the biggest cut in more than four years, bringing more relief to motorists as the fuel’s price has dropped 10 since May last year. Global crude oil prices have fallen 6% in April, helping companies cut prices. “Petrol price has been reduced due to softening of international oil prices and marginally favourable exchange rates,” IOC Chairman RS Butola said. Oil companies have regularly cut petrol prices in recent months, while diesel prices, which are still below market rates, have been raised by about 50 paise a month, except in the past month. Petrol prices were cut by a higher amount only in 2008-09 after global crude oil prices crashed from the record of nearly $150 to less than $40. The prices of petrol was last cut by about 1.20 per litre two weeks ago. Since then, the international prices of petrol have fallen to $107 per barrel from $116/ bbl. The currency has also appreciated by 25 paise to 54.26 per dollar, further reducing the price in India. Meanwhile, the price of non-subsidised cooking gas was cut by 54 per cylinder with effect from midnight tonight. The price of a 14.2kg LPG cylinder that consumers buy beyond their quota of 9 subsidised cylinders has been reduced to 847 from 901.

• IKEA Can’t Use Exports to Meet Sourcing Norms: IKEA cannot use its global procurement of products to satisfy the Indian demand of mandatory sourcing from the country, a government department has said, giving a signal to the Swedish retailer that India does not intend to whittle down its policy for global retailers planning to set up shop. Many global retailers have been lobbying the government to consider exports they undertake out of India for their global operations to fulfill the 30% local sourcing conditions for their single-brand retailing ventures here. “Sourcing of the IKEA entities from India or the Indian entity of the IKEA Group, cannot be included for compliance of IKEA India,” the Department of Industrial Policy and Promotion (DIPP) has said in a note to the Cabinet Committee of Economic Affairs (CCEA). ET reviewed the note. DIPP has reaffirmed that the 30% of the products sold in India by companies like IKEA must be purchased and sold within the country. The CCEA is expected to take up IKEA’s proposal seeking to invest 10,500 over a period of 25 years in India on Wednesday. Any FDI proposal exceeding 1,200 crore needs CCEA nod. In its note to the committee, DIPP — which is the first port of call for single brand retailers seeking to invest in India — has said that as part of its single brand retailing plans IKEA must operate two separate entities in India: one for retailing and the other for sourcing products to be sold only in India by the single brand retail firm. “The sourcing will be done entirely through an entity incorporated and established in India, only for the purpose of sourcing,” it said, adding that the company will only source for the single brand venture in India. The note said IKEA has agreed to comply with the 30% local sourcing for its stores in India in about five years from the date the Swedish retailers bring its first trench of the foreign capital into the country. It clarified that IKEA will not undertake business in any form of electronic commerce, used furniture or sell any food products other than the designated cafes it is allowed to run as part of its large hypermarkets. Also, the firm cannot carry out any financial business that comes under the purview of non-banking finance companies. And it will restrict publications to catalogues and pamphlets and will not be allowed to publish any periodicals or magazines as part of its India operations, the note said.

• Godrej Consumer, Dabur, Marico Post Healthy Q4 Profits: Homebred packaged consumer products makers Godrej Consumer Products, Dabur and Marico on Tuesday reported healthy results for the quarter ended March despite a slowdown in consumer spending on non-essential items, and said they expected strong growth this quarter on predictions of a normal monsoon. Analysts expressed surprise that there was no sign of slowdown in the company results. “What’s been surprising in the fourth quarter is that numbers reflect no visible signs of slowdown as far as consumption of essential items is concerned, as consumer goods companies have focused on volumes,” Shirish Pardeshi, co-head, research, at brokerage firm Anand Rathi Financial Services, said. “With a normal monsoon prediction, volume growth should continue with momentum,” he added. Boosted by doubling of its rural reach over the past 18 months, Dabur India reported its highest volume growth in 11 quarters at 12%. The maker of Fem bleach and Vatika shampoo posted 17.6% year-on-year increase in its net profit at 200.55 crore for the fourth quarter, up from 170.51 crore a year earlier. Net sales of the company rose to 1,531.09 crore for the fourth quarter, 12% more than 1,363.58 crore a year earlier, Dabur India said in a statement. Company CEO Sunil Duggal partly attributed the rise in profits to higher advertising spends at 13%, about 1.5% higher than the previous year. Rival Godrej Consumer Products reported 73.5% jump in its consolidated net profit for the fourth quarter at 334 crore, largely helped by a one-time exceptional gain of 129 crore from the sale of its Indonesian arm's foods business.

International:

• Bloomingdale's CEO turns to Mandela for inspiration: The book "Mandela's Way -- Fifteen Lessons on Life, Love and Courage" is required reading for Bloomingdale's executives, who take lessons from the book about Nelson Mandela to improve service at the retailers' 40 department stores. Service has been a key value at Bloomingdale's since its 1860 founding, and long-time CEO and retail veteran Mike Gould upholds that value, maintaining a culture in which all associates are empowered to deliver quality customer service.

• Eurozone unemployment at record high as inflation drops: Unemployment in the eurozone has surged to a fresh record high, while inflation has fallen to a three-year low, boosting expectations that the European Central Bank will cut interest rates. Unemployment in the 17 countries using the euro hit 12.1% in March, up from February's 12%, according to official figures from Eurostat. In total, 19.2m people are now out of work in the region. Separate Eurostat data showed that inflation slowed to 1.2% in April. Greece and Spain recorded the highest unemployment rates in the eurozone, at 27.2% and 26.7% respectively, while Austria, at 4.7%, and Germany, at 5.4%, had the lowest rates. Youth employment, defined as those under 25, hit 3.6 million in the eurozone. In Greece, 59.1% of under-25s were unemployed as of the end of January, while in Spain, 55.9% were unemployed.

• Alibaba buys stake in China's Twitter-type Weibo service: Alibaba, China's biggest e-commerce group, has bought an 18% stake in Weibo, China's largest Twitter-like service, as it looks to tap into the fast-growing social media sector. Alibaba will pay $586m (£378m) for the stake, valuing Weibo at over $3.2bn. The deal is expected to help Alibaba drive traffic from Weibo, which has more than 500 million users, to its e-commerce sites such as Taobao. It will also help generate additional advertising revenue for Weibo. According to the two firms, the partnership will bring in $380m more in advertising and social commerce services revenue for Weibo over the next three years. "We believe that this strategic alliance helps to create a stronger Weibo," said Jack Ma, chairman of Alibaba. "It affirms our view of the vitality and importance of social media in unleashing value in e-commerce activities."

• Ford announces entry into Burma market: US carmaker Ford has become the latest foreign company to announce plans to enter Burma, after investment sanctions against the country were suspended. Ford has signed a deal with Burmese conglomerate Capital Diamond Star Group to open a showroom in Yangon. Various countries suspended their sanctions against Burma last year as it introduced democratic reforms. Foreign firms have been keen to tap into the Burmese market, un-serviced for years in wake of the sanctions. Ford said it would offer a range of cars and trucks across various vehicles segments in Burma, which is also known as Myanmar. "We see tremendous potential and opportunity for Ford in Myanmar, and we're looking forward to serving customers in this exciting market," said David Westerman, regional manager, Asia Pacific, Ford Export & Growth Operations. "We're also committed to making meaningful contributions and investments that will support the country's ongoing economic and social development."

• Victoria's Secret Vet Sharleen Ernster Lazear Moves to Guess: Guess Inc. has filled one of two remaining vacancies in its executive ranks with the appointment of longtime Victoria’s Secret executive Sharleen Ernster Lazear as chief design officer of the Los Angeles-based jeanswear and sportswear company. Lazear will be responsible for all categories of merchandise for the Guess and Marciano brands, including licensed products, and will report to Paul Marciano, cofounder and chief executive officer. “We are very happy to welcome Sharleen to guide a strong vision for Guess brands, and I will work side-by-side with her,” Marciano said. “She understands the Guess aesthetic and the importance of creativity and innovation at Guess as well as how important our design heritage is to us for the last 30 years. She brings a new level of leadership in design, beginning with concept all the way through to market. She has a successful track record of designing brand-right product that captures the emotions of the consumer.” Lazear’s appointment is the second of two planned by the company following the departure in March of Nancy Shachtman as president of North America. In April, Hillary Super joined the company as senior vice president and general merchandise manager. Separately, Marciano said during the company’s first-quarter earnings call on March 20 that the firm would hire a new chief operating officer to succeed Michael Prince, who resigned from the post in November. Lazear has spent 13 years with Victoria’s Secret, a unit of L Brands Inc., formerly Limited Brands Inc., most recently as executive vice president of design.

• Uniqlo's U.S. Push: Uniqlo is revving up its U.S. expansion timetable. In August 2012, Shin Odake, who was then the retailer’s U.S. chief executive officer and is now overseeing its efforts on the East Coast, said the company was shooting for 10 to 20 stores in two years. Larry Meyer, Uniqlo’s new chief operating officer, said Tuesday that the retailer will open 20 or more stores in 2014 alone. “Once we get the scale, we can accelerate that. We have a vision of multiple hundreds of stores in the U.S.,” said Meyer, who joined the Japanese retail giant after 11 years as executive vice president at Forever 21. “We haven’t done anything yet. We only have seven stores in the U.S. This is just the beginning.” Growth will radiate from two hubs, New York and San Francisco. “There’s always opportunity in Manhattan,” Meyer said.