Daily News Digest- 9th Dec'13

Thought of the Day:

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Following made the Headlines:

India:

• Many Netas Now Aam Aadmi: BJP has secured emphatic victories in Madhya Pradesh and Rajasthan, a narrower one in Chhattisgarh and emerged as the single largest party in a hung Delhi assembly, its 4-0 rout of Congress giving the party and its leader Narendra Modi confidence and momentum going into next year’s general elections. While BJP exulted at its complete sweep, its thunder appeared somewhat stolen by political rookie Arvind Kejriwal with his fledgling Aam Aadmi Party, which confounded skeptics to win 28 seats in the 70-member Delhi assembly, denying BJP, which won 31 seats, an outright victory. AAP’s victory, which also included Kejriwal trouncing Delhi’s three-time CM Sheila Dikshit, heralds a new chapter in Indian politics with the audacity of its ambition together with innovative approaches to political funding, transparency and candidate selection. BJP, which won 407 of the 589 seats — nearly 70% — in all the four states put together, bagged 165 seats in the 230-strong Madhya Pradesh assembly, overriding anti-incumbency and giving Shivraj Singh Chouhan the halo of a third-time CM like Modi. For some observers, Chouhan’s convincing win by bettering his previous victory pitchforks him as a possible counterweight to Modi in the party. In Rajasthan, its leader Vasundhara Raje looked set to lead the party to a convincing 162-21 rout of the ruling Congress led by Ashok Gehlot, while in Chhattisgarh, BJP led by CM Raman Singh held on to power with 49 seats in the 90-member house, a slender 10-seat lead over Congress. The results of these elections, dubbed by many as a semifinal contest, were being closely watched as a test of Modi’s popularity to be its PM face in 2014.

• Boardroom Battle may Disrupt Marketing of Amul and Sagar Brands: The boardroom battle in the milk federation that sells Amul and Sagar brands can disrupt the marketing of the popular dairy products as these brands are owned by district unions, whose leaders are among the warring board members. The Gujarat Cooperative Milk Marketing Federation, whose board voted out Chairman Vipul Chaudhary, comprises various milk unions. These include the Mehsana union which is also headed by Chaudhary and owns the Sagar brand. In 2006, when the federation was gripped by another power struggle, Chaudhary had begun talks to sell his district union’s Sagar brand products with Reliance Retail instead of the federation. Similarly, the Amul brand actually belongs to the Kaira union headed by Ramsinh Parmar, who is supporting Chaudhary. The district unions allow the apex federation to use their brands against a token payment of one rupee per year. The federation has an annual turnover of 13,700 crore. Chaudhary and his supporter Parmar, whose unions account for about one-third of the milk purchased by the federation, walked out of the meeting in which board members voted for the removal of Chaudhary. “Federation directors should understand that it is just a marketing agency and brands Amul and Sagar are owned by two of the district unions. It is mere a licensee to sell our brands,” a top source in the federation told ET. He said the issue of brand ownership and its use by the federation did not come up in the stormy meeting on Thursday, but it is inevitable in coming days.  Majority of the federation directors voted for a no-confidence motion against Chaudhary Board members are approaching Gujarat High Court to get its approval to remove Chaudhary who moved his plea through senior counsel Harish Salve in the Supreme Court to challenge the validity of the board meet.

• Citrus Payment Raises 33.9 Cr: Mumbai-based mobile payment solutions company, Citrus Payment Solutions, has raised $5.5 million (33.9 crore) in its series B round of equity funding from two strategic investors, a transaction that highlights the growing attractiveness of the sector for global players. The new investors include Japanese online payments company econtext Asia and Beenos Asia, a wholly-owned subsidiary of Japanese e-commerce and incubation major Netprice. Existing venture capital backer, Sequoia Capital, has also participated in the latest round. “The size of the Indian market is a very attractive incentive, given that China is the only comparable market,” said Satyen Kothari, managing director at Citrus Payment Solutions. The investment is the latest one to be announced in India’s digital payments sector, which has seen significant interest from global payment firms over the last 12 months. In November, multinational engineering and electronics conglomerate Hitachi agreed to buy Chennai-based payment solutions firm, Prizm Payment, for an undisclosed sum, giving exits to Sequoia Capital, Winvest Holdings, among others. Separately, global payments firm Boku, which is backed by marquee investors such as Netscape co-founder Marc Andreessen and Sun Microsystems co-founder Vinod Khosla, acquired Mumbai-based mobile payment startup, Qubecell, in the same period. “Google and PayPal have not really managed to crack this (Indian) market yet. But the opportunities to grow in India are immeasurable,” Kothari said. Citrus Payment Solutions, which was founded by entrepreneurs Satyen Kothari and Jitendra Gupta in 2011, will use the proceeds to continue developing its mobile payment technology, and expand its presence in global markets.

• Bangalore Real Estate Gets Maximum PE Investment: Bangalore’s realty market received the maximum private equity investment of nearly 2,000 crore in the country during January-September 2013 with increased demand for leased office assets from institutional investors, according to property consultant Cushman & Wakefield. Private equity (PE) investment in Bangalore rose by 79% to 1,979 crore during the first three quarters of 2013 calendar year as compared to 1,106 crore in the year ago period, C&W said in a report. “Bangalore witnessed the highest level of announced investment value in 2013 at Rs 1,979 crore ($317 million). This was due to a commitment by a sovereign fund into a platform focused on leased office assets,” C&W said. Explaining the reason behind Bangalore emerging on top in PE investment, C&W Executive Managing Director South Asia Sanjay Dutt said: “Bangalore is an IT capital and hub for south India. Profile of developers in the city is very good.” He also attributed higher PE investments in Bangalore to availability of properties across all segments at reasonable and attractive valuations. Sobha Developers, Puravankara Projects, Prestige Estates and Brigade group are the major developers in Bangalore. According to the report, PE investment in Pune jumped more than three-fold to 780 crore during January-September against 234 crore in the same period last year. National Capital Region's (NCR) realty market got 612 crore as PE investment, up by 20% from 512 crore during the period under review. In NCR, all the investments were made in the residential asset class. Mumbai, which traditionally attracted the maximum investments in the country, was the only city to witness a decline of 43% in PE investments. The financial capital received 720 crore during the first three quarters of 2013 compared with 1,262 crore in the year ago period.

• Sensex may hit new high on BJP win: The state election results that gave BJP a strong mandate are expected to take the sensex to a new lifetime high when the markets open on Monday. The poll results lived up to Dalal Street’s expectations of a win for the pro-growth BJP, which could also prompt foreign fund managers to bet on the return of the NDA-led coalition at the Centre after the Lok Sabha elections next year. Together, these developments are seen as taking the sensex to around the 22,000 mark over the next few sessions, even if the economic fundamentals remain unchanged. Last week, after exit polls on Wednesday evening predicted a win for the BJP, the benchmark index inched up over the next two sessions and closed just a tad off the 21,000 mark and about 300 points (less than 1.5%) off its all-time high of 21,294. “With the final results showing an even stronger mandate for the BJP, something that the market was rooting for, I think the index will open at a new lifetime high on Monday,” said Arun Kejriwal, director, KRIS, an investment advisory firm. Now with the expectations met, Dalal Street would extrapolate these state poll results as a trend for the Lok Sabha elections next year. “The market is comfortable with the state poll results and would now factor in the 2014 polls. A new high is not difficult, but sustaining the same may be difficult because of the headwinds that the economy faces,” said Deven Choksey, MD, K R Choksey Shares & Securities. Among other factors, “sustaining the market at higher levels would require FII money”, Choksey said. The current headwinds that market players point out include some domestic ones and some global ones. The global factors that could impact the market include the possibility of a tapering of the easy availability of funds in the US, popularly called QE3. Another factor that could turn out to be a negative is the government’s divestment plan. “Usually, during divestments, the market shows a muted trend. One reason is that divestments lead to an excess supply of money. It also refrains most domestic firms and some FIIs from buying in the secondary market as money is preserved to invest in the divestments,” said Choksey. Kejriwal said the market would also look at the RBI credit policy by the end of the month for further cues — in addition to third quarter results in about a month’s time — and try to interpret what the extremely strong jobs data in the US, published last week, means for emerging markets like India.

• LG to launch curved smartphone in India on Dec 11: LG is slated to unveil its curved screen smartphone G Flex in India on December 11. The company has sent press invites for a launch event to be held in New Delhi. Though the G Flex made its debut in October, its sales had been restricted to South Korea only. Last week, LG announced the international launch dates for the smartphone, though it did not revealed when the device will hit the Indian market. LG G Flex is the second smartphone in the world to have a curved screen, next only to Samsung Galaxy Round. LG G Flex has a 6-inch flexible OLED screen that is curved along the horizontal axis. The phone's 3,500mAh battery is also curved. Though the screen is flexible by itself, the glass casing does not allow it to be bent at will. However, the phone still bends if sufficient pressure is applied on it as the glass film is thin enough to be bent slightly. The G Flex's curved screen provides the same viewing experience from 1 feet away that a 55-inch HDTV does from 10 feet, LG claims. Apart from the curved display, this phone has another unique feature - a self-healing back. LG has used a self-healing technology on the phone's back, which allows it to heal small scruffs and scratches on the rear panel within 5 minutes. This self-healing is due to a molecular substructure coating on top of the phone's back panel and depends a lot on the room temperature; hotter the room, faster the healing. However, deep cuts that pierce through the coating will not be healed. Key specs of LG G Flex include a 720 display, 2.2GHz quad-core Snapdragon 800 processor, 2GB RAM and 32GB internal storage. Just like LG G2, the new G Flex has the power key and volume buttons on the back, positioned below a 13MP camera with LED flash. Earlier, LG said that the G Flex will be available for pre-orders in Singapore from December 8 and Hong Kong from December 13. It will hit other "key markets" of Asia by the end of the year. The smartphone will be available in Europe early next year and hit the US market thereafter. It is rumoured that the successor of LG G Flex, expected to hit the market next year, will have a screen that will bend at 90-degree angle with ease. Samsung has also revealed that it will launch its first phone with a bendable screen next year.

International:

• Chinese export growth accelerates in November: China's exports rose more than expected in November adding to signs of a rebound in the world's second-largest economy. Shipments rose 12.7% from a year ago, up from a 5.6% rise in October. Most analysts had forecast a growth of 7%. Last week, data showed manufacturing activity in China grew at its fastest pace in 18 months in November. The jump in exports was triggered by strong demand from important markets such as the US and European Union. "There are signs that the global activity and trade cycle is gaining momentum, driven by the recovery in high income countries," said Louis Kuijs, an economist at Royal Bank of Scotland. "China's exporters are benefiting from that." Mr Kuijs added that China's export growth was likely to get a further boost in coming months from improving global demand. Over the past few months Beijing has also announced stimulus measures aimed at helping exporters and boosting domestic demand. These include tax breaks for small businesses and reduced fees for exporters, which some analysts said had also started to have an impact on the trade numbers. Meanwhile, data released on Sunday showed that imports rose 5.3% during the month, from a year earlier. While that was weaker than forecasts, analysts said it was not a cause for concern.

• WTO agrees global trade deal worth $1tn: Ministers from 159 countries have reached a deal intended to boost global trade at a meeting in Bali, Indonesia. The World Trade Organization's first comprehensive agreement involves an effort to simplify the procedures for doing business across borders. There will also be improved duty-free access for goods sold by the world's poorest countries. The deal, which could add about $1tn to world trade, gives developing nations more scope to increase farm subsidies. "For the first time in our history, the WTO has truly delivered," said WTO chief Roberto Azevedo, as the organisation reached its first comprehensive agreement since it was founded in 1995. "This time the entire membership came together. We have put the 'world' back in World Trade Organization," he said. Indonesian Trade Minister Gita Wirjawan said the deal would "benefit all WTO members". UK Prime Minister David Cameron said the "historic" agreement could be a "lifeline" for the world's poorest people, as well as benefiting British businesses to the tune of more than $1bn (£600m). However, the "Bali package", as the WTO calls the agreement, was criticised by some development campaigners who said it was not going far enough.

• American Eagle Q3 Profits Drop 68.3%: Shares of American Eagle Outfitters Inc. fell 9.5 percent Friday after the company reported declines in third-quarter results and updated fourth-quarter guidance below analysts’ consensus estimates. For the three months ended Nov. 2, net income was down 68.3 percent to $24.9 million, or 13 cents a diluted share, from $78.6 million, or 39 cents, a year ago. EPS on a GAAP basis includes a non-cash charge of 6 cents a diluted share in connection with the plans to close its Warrendale, Pa., distribution center after the chain opens its new facility in Hazelton, Pa. Total net revenues also fell by 5.8 percent to $857.3 million from $910.4 million. Consolidated comparable-store sales, including its direct channel, fell 5 percent versus a 10 percent gain last year. Robert Hanson, chief executive officer, said during a conference call to Wall Street analysts, “We continue to operate in the most challenging sector of retail where there has been intense promotional competition and tepid consumer spending. This has led to weak store traffic and the high level of promotional activity…In the third quarter, good expense management was offset by top-line pressure and weak merchandise margins.”

• L'Oréal Stock Climbs on Nestlé-Givaudan News: L’Oréal stock rose strongly Friday following news that Nestlé will sell its 10 percent stake in Givaudan, the Swiss fragrance and flavors supplier. The French beauty giant closed the day up 3.6 percent to 126.80 euros, or $173.64 at current exchange, as market speculation percolated yet again that Nestlé could divest its 29.3 percent stake in L’Oréal in April, once a shareholder pact expires. As reported, Goldman Sachs is managing the sale of 926,562 shares of Givaudan through an accelerated book-building transaction. The stake is valued at about 1.1 billion Swiss francs, or $1.23 billion. Nestlé acquired the company’s shares in 2002, when it sold the food ingredient concern FIS to Givaudan for a combination of cash and stock. “Nestlé has been very satisfied with its holding, but believes now is the appropriate time to divest,” the company said. “It was not a strategic investment,” said Patrick Hasenböhler, an equity analyst at J. Safra Sarasin. In a note, the bank said Nestlé’s investment in Givaudan was a “success” and deemed it an appropriate time to sell the stake, since the company’s “valuation appears rather rich now, so the stock’s potential for making further gains appears limited, at least in the near term.” Givaudan, meanwhile, closed down Friday 2.1 percent to 1,210 Swiss francs, or $1,354.35. Nestlé is Givaudan’s second-largest shareholder, and the company recently sold most of its stake in Jenny Craig to North Castle Partners for an undisclosed sum. The news regarding Givaudan reignited speculation for some that Nestlé could sell its stake in L’Oréal. “Nestlé has announced that it will make a decision in 2014 for its L’Oréal stake. However, we would read nothing from this sale [of Givaudan shares] into a possible decision concerning what Nestlé will do,” said J. Safra Sarasin in the note. “Sale to L’Oréal or maintenance of status quo are the likeliest scenarios.”

• Aéropostale Gets Behind Bethany Mota Launch: Aéropostale is stepping up its fight to reverse its negative performance and win over teens. On Sunday, the chain will launch The Bethany Mota Collection in all its stores and on aeropostale.com, partnering with the 18-year-old social media celebrity on a holiday line. WWD also learned that on Jan. 5, Aéropostale will introduce a Pretty Little Liars Collection, in partnership with Warner Bros. and Mandi Line, the costume designer for the “Pretty Little Liars” show on ABC. The company declined to give details of the Pretty Little Liars Collection, until closer to the launch. The moves follow a reengineering of the collection this year whereby the $2.4 billion youth brand shifted design efforts to target 16-year-olds; reduced product cycle times; added details, fabric combinations and trendier fits; expanded footwear, and launched activewear. There’s less dependence on logo-ed items and basics, and a deepening involvement in social media. Aéropostale is waging a tough battle. Across the industry, mall traffic is down, discounting is rampant and teens seemed turned off by much of what’s offered at specialty chains. Aéropostale has been under pressure to consider selling itself, and recently adopted a poison pill. The retailer’s turnaround efforts have yet to bear fruit, though officials contend that the reengineered merchandise has only been on the shelves for three-and-a-half months and that the process of making customers aware of the changes is also new. The company had a $25.6 million loss and a 15.1 percent sales decline in the third quarter.