Daily News Digest- 8th Nov'13

Thought of the Day:

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Following made the Headlines:

India:

• Another IMF Man to be Eco Advisor: The government is likely to appoint Siddharth Tiwari as the chief economic advisor, replacing Raghuram Rajan, who became the governor of Reserve Bank of India in September this year. Tiwari, a senior IMF official, will have a tenure of three years, said people involved in the appointment process. Tiwari is currently director of the strategy, policy and review department, according to the IMF website. The department is responsible for developing IMF policies and overseeing their implementation at the country level, said the website. Tiwari is also responsible for coordinating IMF’s activities with bodies such as the G8 and G20. While the appointment is for three years, there could be some uncertainty over his tenure if the Congress-led UPA loses the elections scheduled for May 2014. The chief economic advisor (CEA) heads the finance ministry’s economic division.

• Mars may Start Making Chocolates Here Soon: Mars Inc, the world’s biggest chocolate maker, plans to start local manufacturing in India within 15 months as it gradually increases its scale of operations to challenge Cadbury Kraft and Nestle in the country. According to MV Natarajan, general manager - chocolates at Mars International India, the chocolate market in India is growing upwards of 20% despite the overall slowdown. At 15 per bar, the $30-billion American firm’s Snickers and Galaxy brands in India are possibly the lowest-priced in the world.

• Kedaara raises India’s largest maiden PE fund: Kedaara Capital, a private equity firm co-founded by former Temasek boss Manish Kejriwal and General Atlantic Partners MD Sunish Sharma, has closed a $540-million (Rs 3,200-crore) fund, making it the largest independent first-time fund ever raised for India. The fund topped the initial target of $500 million, signaling that long-term providers of global risk capital were beginning to re-enter India. Kedaara has also roped in former Hindustan Unilever CEO Vindi Banga, ex-Genpact CEO Pramod Bhasin and former Idea Cellular boss Sanjeev Aga as operating partners. Kejriwal, along with Sunish and Nishant Sharma of General Atlantic, floated the firm — which focuses on both buyout deals and large minority investments — after quitting their jobs in end 2011.  Banga, Bhasin and Aga will take on the role of executive chairmen in Kedaara’s investments involving controlling interests. Kedaara has a partnership with Clayton Dubilier & Rice (CD&R), an operationally focused buyout fund. The entry of three veteran CEOs reflects Kedaara’s plans to blend investing and operational capabilities, like the CD&R way. Ontario Teachers’ Pension Plan (OTPP), which is Canada’s third-largest pension fund managing assets worth $120 billion globally, was the anchor investor. Kedaara received a robust response from global pension funds, sovereign wealth funds and family offices, and had to turn away some international investors. ChrysCapital raised their latest fund of $500 million last year, according to a JM Financial note on Indian private equity industry. In November 2011, former ICICI Venture boss Renuka Ramnath raised $450 million for her maiden fund, Multiples. Earlier, former Citigroup veteran Ajay Relan’s CX Partners showed up with a $515-million maiden fund.

• SpiceJet posts worst quarterly loss of 559cr on fuel, weak Re: Low-cost carrier SpiceJet on Thursday reported a record loss of Rs 559 crore in the three months to September, hit by high fuel prices and a weak rupee. The airline, controlled by media baron Kalanithi Maran’s Sun Group, had reported a loss of Rs 164 crore in the year-ago period. The airline’s previous biggest loss was Rs 327 crore in the September quarter of FY08. The airline, which has been headless since late July after CEO Niel Mills quit, in a late night media statement said its income rose marginally to Rs 1,246 crore from Rs 1,173 crore in the year-ago period. The finance cost rose to Rs 33 crore during the July-September quarter from Rs 31 crore in the same period of last fiscal. The airline attributed the record high loss to higher fuel prices, which accounted for 56% of the total operational expenses, up from 54% in the year-ago quarter. A weakening rupee against the US dollar, coupled with a massive spike in aircraft maintenance cost that jumped to Rs 78 crore in the reporting period added to the airline’s woes.

• Uninor CEO Malik quits: Uninor, Norwegian telecom giant Telenor’s India unit, on Thursday said its CEO Yogesh Malik has quit due to personal reasons. In the interim, Sigve Brekke, who currently heads Telenor Group’s Asia operations, has been named as the acting CEO of the Indian subsidiary. The company has started the process of selecting a new CEO to take up the position, Uninor said in a statement. Uninor’s prepaid GSM services are available in the six circles of UP (West), UP (East), Bihar (including Jharkhand), Andhra Pradesh, Maharashtra and Gujarat.

• Sanjeev Kapoor to open eatery in Abu Dhabi: Indian celebrity chef Sanjeev Kapoor will launch his restaurant in Abu Dhabi early next year. "I hope to have it open in time for the Gourmet Abu Dhabi festival in February," Kapoor said in a statement. He also said that the restaurant will serve Indian food and dishes associated with Signature by Sanjeev Kapoor. With an eclectic menu, he hopes to attract tourists as well as residents. "We have seen growing numbers of Abu Dhabi residents travelling to Dubai to dine at our restaurant there, so we decided the market in the UAE capital was promising. "The trend, complemented by the vibrant Abu Dhabi dining scene and the increasing number of Indians now visiting the city prompted the decision to open here," he added. He was recently on a visit to the UAE capital for the F1 Etihad Airways Abu Dhabi Grand Prix where he was hosted by Abu Dhabi Tourism and Culture Authority.

International:

• Nestle to Sell Most of Jenny Craig to North Castle: Nestle SA, the world’s largest food company, agreed to sell its Jenny Craig diet business in North America and Oceania to private equity firm North Castle Partners for an undisclosed amount. Jenny Craig's French business is not part of the transaction, the Vevey, Switzerland based said today in a statement. The new owners will offer employment to Jenny Craig staff in its operating regions. Nestle last month said it was drawing up a shortlist of businesses it is looking to sell after identifying laggards that it cannot fix. Aside from Jenny Craig diet centers, analysts have identified PowerBar energy snacks and Lean Cuisine frozen meals as possible candidates to be jettisoned. Nestle bought Jenny Craig in 2006 for about $600 million.

• #Twitter #IPO makes a #splash on #NYSE: A decade ago, a tweet was something essayed by a bird, hashtag (#) was the battleground for o’s and x’s, and the only time you worried about 140 characters was if you wrote an epic play. Some 18 months after markets signaled a “like” for the Facebook’s initial public offering (IPO), pumping it up to a $100-billion company, Twitter, its contemporary, made a splash in the New York Stock Exchange (NYSE) on Thursday, racking up a $25 billion market cap within an hour of opening. Shares of Twitter nearly doubled to $50 on Thursday morning from its IPO price of $26, making it the biggest technology debut since Facebook announced its status on the market last year. Coming amidst a renewed tech boom (advertising tech company Rocketfuel opened 104% up on its IPO in September), the event sparked fear that the sector was inevitably headed for another bust. Among the skeptics was Anant Sundaram, finance professor at Dartmouth’s Tuck School of Business, who tweeted that the true measure of Day 1 “pop” would be where it ends the day. Like many of its tech peers and predecessors that went belly-up, Twitter, described as SMS of the Internet, does not make money; on the contrary, it has burned up nearly $300 million. Yet such is the social networking and microblogging mania sweeping the world — everyone from the US President to the Pope to India’s PMO is on Twitter—that nearly 50 million shares changed hands within the first hour of its market debut; frenetic, but nothing compared to the 80 million Facebook shares that traded within the first minute.  Created and launched by Jack Dorsey, Evan Williams, Biz Stone and Noah Glass in 2006, Twitter has more than 500 million registered users who post more than 350 million tweets (short message of less than 140 characters) per day. The service also handles 1.6 billion search queries per day, making it one of the ten most visited websites in the world. But it is yet to make money out of this traffic, and experienced market mavens are warning that one should not confuse its shareprice with value.

• Adidas pins hopes on soccer World Cup in Brazil as its profit, sales stumble: Adidas said it was looking ahead to the sales opportunities offered by next year's soccer World Cup in Brazil, after third quarter results showed it continued to lose ground to larger rival Nike in Europe. Adidas, the world's No. 2 maker of sports gear, said third quarter operating profit dropped 6 percent while sales fell 7 percent, hit by distribution problems in Russia, currency effects and poor sales of golfing products. Last year, results were boosted by the Olympics and the European soccer championships. But Adidas has struggled to maintain momentum, warning on sales and profit in September. Adding to its woes, Nike has outperformed on its home turf. Nike reported an 8 percent rise in sales in western Europe in its first fiscal quarter to the end of August, compared with a fall of 6 percent for Adidas at constant currencies in its third quarter. Adidas Chief Executive Herbert Hainer said next year's World Cup and positive feedback for its upcoming collections meant growth would return.

• Amazon teams up with its rivals to sell Kindle tablets: Amazon has announced plans to work with independent booksellers and other retailers on sales of its Kindle tablets, offering the merchants a share of ebook revenues. The programme called Amazon Source allows the retailers to earn a profit on Kindle sales and provides the option of receiving 10 percent of the price of Kindle books purchased on devices sold by the store for the first two years after a customer buys a device. "We believe that retailers, online or offline, small or large, should be striving to offer customers what they want -- and many customers want to read both digital and print books," said Russ Grandinetti, vice president of Amazon Kindle. "For many years, bookstores have successfully sold print books on Amazon -- now Amazon Source extends this opportunity to digital. With Amazon Source, customers don't have to choose between e-books and their favorite neighborhood bookstore -- they can have both." The programme is based on one launched with the British retailer Waterstones in 2012. The move teams brick-and-mortar merchants with Amazon, which has been accused of driving many stores out of business. Amazon said the first order by retailers would be "worry-free" because it would buy back the inventory for up to six months.

• Carrefour in talks to buy around 100 shopping malls from Klepierre: Europe's largest retailer, Carrefour, is in advanced talks to buy over 100 shopping malls in France, Spain and Italy owned by real estate group Klepierre for 1.7 billion euros, French daily Le Figaro said on Thursday. Carrefour and Klepierre could not be immediately reached for comment. The move, if confirmed, would be a reversal from a deal in 2000 that had seen Carrefour sell over 150 of its shopping malls to Klepierre to cut debt and fund an expansion spree abroad. Since the arrival of new CEO George Plassat in May 2012, Carrefour has sold non-core assets abroad to cut debt and fund the revival of its French business and growth in its core emerging markets of China and Brazil. Plassat has stated repeatedly that there is value to generate from operating shopping malls. According to the paper, which did not cite its sources, Carrefour could fund half of the deal with loans from banks and try to secure the remaining 850 million euros from institutional investors. "Carrefour would like to attract five or six investors that would buy a 100-200 million euro ticket each," the paper said, adding that Carrefour had mandated BNP Paribas and Kempen to find these investors. 

• Chinese Luxury Market Poised for Uptick: The luxury market in China is expected to regain momentum in 2014 as Mainland consumer tastes and spending habits continue to become more sophisticated, according to a new luxury forecast released by communications agency Ruder Finn in partnership with Ipsos Group, a market research firm. The sales of luxury goods have slumped in China in recent months amidst slowing economic growth in the country and a government-led antigraft campaign, which has curtailed the purchase of high-priced goods as bribes between officials and their business associates. Mainland Chinese are willing to spend more on fashion and beauty, a trend that will “likely increase in the year 2014,” the forecast said. The study predicts that consumption for watches, bags, jewelry and shoes will remain the same as in 2013. “The luxury market in Hong Kong continues to be a challenge because the consumption intention in 2014 remains the same as in 2013,” said Simon Tye, executive director of Ipsos. “The Hong Kong consumer continues to challenge the retailer in providing value when shopping for luxury, whereas in China, the demand for luxury is still strong, particularly in fashion and beauty.” Chinese consumers increasingly care less about brand names and more about the uniqueness of products, the study said. It also found that Mainland shoppers care more about customer service, with 92 percent of those surveyed expressing dissatisfaction with service offered by luxury brands within China, which is fueling more purchases overseas.

• J.C. Penney Encouraged by Oct. Sales Gain: J.C. Penney Co. Inc.’s 21-month-long top-line losing streak is over, but the quest for profitability continues. The company said Thursday that in October, it experienced its first month of positive comparable-store sales since December 2011, a 0.9 percent advance that was supported by a 37.6 percent upswing in online sales. December 2011 same-store sales rose 0.3 percent. The company discontinued reporting comps on a monthly basis immediately afterward and has since reported them in tandem with its quarterly results. From a sales perspective, those results have declined at a double-digit rate since. Comps for 2012 were off 25.2 percent, slightly greater than the 24.8 percent decline in net sales, to $12.99 billion. This year, first-quarter comps dropped 16.6 percent and the number moderated further, to an 11.9 percent decline, in the second quarter. Penney’s September comps declined 4 percent. The performance update provided by Penney’s — on the same day that stores still tied to the ritual of monthly reporting checked in with stronger-than-anticipated results — was hardly a celebration. Average unit retail prices and traffic were down last month, although the troubled midtier retailer did register year-over-year improvements in average transaction value and units per transaction. Gross margins remained depressed by significant amounts of clearance merchandise, the company said, but improved throughout the just-completed third quarter.

• Hermès Sees Strong Growth in U.S., China: Birkin and Kelly bags — the most emblematic styles of Hermès International — are taking a backseat to other handbag models and a craze for the brand’s belts, shoes, costume jewelry and other fashion accessories. What’s more, the French company’s men’s product universe headlines robust growth in the U.S. and China — and accounts for roughly half the total business. “It’s one of the singularities about Hermès: We’re one of the only companies equally balanced between men’s and women’s,” co-chief executive officer Patrick Thomas told WWD on Thursday, elaborating on third-quarter results that were released late Wednesday showing revenues improved 5.5 percent to 895.5 million euros, or $1.19 billion. Reflecting strong currency headwinds, Hermès reported leather goods and saddlery sales dipped 0.5 percent in the three-month period. At constant exchange, the category gained 8.4 percent. Thomas said building production capacity for leather bags is a gradual process as it involves training skilled artisans, capping its near-term growth at around 9 percent in volume terms. He noted that sales growth for four popular bag styles — Lindy, Double Sens, Toolbox and Jypsiere — is outpacing the Birkin and Kelly. The executive reiterated the bullish stance that prompted Hermès to lift full-year sales guidance to north of 11 percent, making it one of the rare luxury players to maintain a double-digit pace amidst a slowdown in the sector.