Daily News Digest- 13th Dec'13

Thought of the Day:

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Following made the Headlines:

India:

• Retail Inflation at Record High, IIP Shrinks: India’s industrial production growth shrank for the first time in four months in October while consumer price inflation raced to its highest ever in November, sharpening the dilemma for RBI Governor Raghuram Rajan ahead of next week’s monetary policy announcement. He signalled a further rise in interest rates to rein in prices even as the economy struggles to rise from the bottom. Factory output growth, as measured by the Index of Industrial Production (IIP), contracted by a more-than-expected 1.8% in October, the statistics office said in a statement on Thursday, sending out a reminder to the exuberant markets that economic revival prospects face the risk of wilting under inflation heat. The consensus was for a 1.2% decline. The high base of last year also contributed to the steep drop.

• Debt-Laden GMR Set to Exit Istanbul Airport JV: GMR Infrastructure, India’s largest private airport developer, has entered into a definitive agreement with Turkey’s TAV Airports Holdings to sell its 40% stake in Istanbul’s Sabiha Gokcen International Airport for €200-250 million (approximately 2,500 crore), but it needs the approval of its partners in the airport for the transaction to go through. Malaysia Airports Holdings owns 20% in the Istanbul Airport while Limak Holdings has 40% stake. Both hold rights of refusal over GMR’s holding.

• Jet-Etihad Deal Hits Double Air Pocket, Turbulence Likely: Air India’s former executive director Jitender Bhargava has filed a petition against the Competition Commission of India’s approval to the Jet-Etihad deal, almost a month after its completion and even as the two get ready to roll out their combined network expansion plan. In a separate development, the CCI recently issued show-cause notices to the airlines asking them to explain why they implemented certain parts of their commercial agreement before the regulator gave its approval to the deal. In its petition to the Competition Appellate Tribunal, Bhargava called the CCI’s approval to the deal “bad in law, fraught with inconsistencies and issued without proper analysis of market conditions.” The CCI approved Jet’s proposal to sell 24% stake to the Abu Dhabi-based carrier on November 12. The two carriers closed the 2057.67 crore deal on November 20. The petition seen byET, criticises the approval on several counts such as “failure to conduct an independent analysis of the amended transaction documents”, “failure to consider third-party concerns”, “incorrect analysis of the relevant market”, “incomplete competition analysis of the proposed combination” and “no assessment of barriers to entry” According to Bhargava, if the proposed combination is permitted, passengers are likely to be deprived of airline choices on key routes and may have to pay higher prices with fewer options on planes, timings and service quality. He said the CCI has committed statutory breaches in clearing the deal. He alleged that the antitrust body has failed to assess the relevant market in case of the deal and that it cleared the deal depending on “assumptions and surmises”. Air India had opposed the deal saying it would divert outbound traffic from India to a foreign carrier. The tribunal will hear the case on December 19, Bhargava said. “We have passed an order. The appellate tribunal will decide the appeal,” Ashok Chawla, chairman of the CCI told ET. He didn’t elaborate. Spokespersons at Jet and Etihad didn’t immediately respond to texted and emailed queries. It is unclear where the deal will go if CCI is made to review its decision. Separately, the CCI recently sent notices to Jet and Etihad asking why they had gone ahead with transactions such as Jet’s sale of its Heathrow airport slots before they approved the deal.

• Import Permit has AirAsia India’s Operations Plans Flying High: AirAsia India has received permission from the Ministry of Civil Aviation to import aircraft. This is seen as a step closer for the tripartite joint venture between Tata Sons, Malaysian budget carrier AirAsia and Arun Bhatia’s Telestra Tradeplace to securing an air operator’s permit. Persons in the know at the civil aviation ministry said the airline has been allowed to import 10 aircraft over the next year. This includes the three aircraft that came with the no-objection certificate AirAsia India received in September. The import permission is required before the Directorate General of Civil Aviation can issue an air operator’s permit. DGCA officials will also evaluate AirAsia’s training facilities in Malaysia later this month. One of the officials in the know said the airline is expected to bag the permit in January. “But after this, they will need to go to airport operators for slots and route clearances. So, realistically, AirAsia India will only take to the skies by end of March 2014, which is also when the summer schedule begins,” the official added. When contacted by ET, AirAsia India confirmed the development but added, “We would only like to comment on launch of operations once we get the air operator’s permit.” Last month, DGCA director general Arun Mishra said they would be able to give the permit to AirAsia India by January, next year. The tripartite joint venture has 49% ownership by AirAsia, 30% by Tata Sons and 21% by Arun Bhatia. AirAsia’s investment proposal received the clearance of the Foreign Investment Promotion Board in March and it received the no-objection certificate by the Civil Aviation Ministry in September. The airline had applied for an NoC in early July. Already, the airline’s initial launch plans have been delayed. At the time of forming the venture in February 2013, AirAsia’s group chief executive officer Tony Fernandes said that the airline would aim to launch the airline by the fourth quarter of the calendar year 2013. The airline’s chief executive officer is Mittu Chandilya and in June the airline appointed Ratan Tata as the chief advisor to the board while roping in S Ramadorai as the executive chairman. The airline initially plans to operate out of Chennai connecting Tier II and III cities of India. AirAsia India had already completed the hiring of 300 people for starting the operations which also paved the way for the permission of the aircraft import to be granted.

• EU ends sops for Indian textile, engg exports: In a twin blow to local exporters, the European Union has given special preference for imports from Pakistan, which will allow duty-free access into 27 markets, while withdrawing the concessions for several Indian goods, including textiles and engineering. And, it’s the Indian government, not EU, to be partly blamed, for creating this disadvantage for exporters. While India had managed to block similar concessions nearly a decade ago after a challenge at the World Trade Organization, this time the sops have been given to deal with floods that hit Pakistan and have been given after the move was backed by New Delhi. The GSP-plus benefits will kick in from January 1. The new concessions to Pakistan, known as GSPplus or those above the Generalized System of Preferences, come at a time when the Indian textile sector was looking up, with exports and employment on the rise. “Pakistan stands to gain on products on which it gets duty concessions and to that extent the competitivenss of Indian products gets eroded,” said Abhijit Das, who heads the Centre for WTO Studies. While Apparel Export Promotion Council chairman A Sakthivel said garment exports will not be hit, Das identified products such as bed linen where Indian exports may be impacted. The list of 75 goods on which Pakistan will enjoy duty concessions was not immediately available but exporters said textiles will be a major product. Although the concessions have been discussed for several weeks now, the European Parliament approved the package for Pakistan on Thursday, raising expectations of a $1 billion gain for India’s neighbour. From the same date, Indian exporters of several products ranging from chemicals, textiles, leather goods, motor vehicles, bicycles, aircraft parts and shipbuilding and components will lose 6-12% advantage. “When it comes to bicycles, GSP benefit to China too has been withdrawn. So, we can compete there but life will be tougher for several other segments,” said Anupam Shah, chairman of the Engineering Export Promotion Council.

• Government may go slow on FDI in e-commerce retail: With the political fortunes of Congress taking a beating in state assembly elections, the government is unlikely to move forward on the proposal to allow FDI in e-commerce at retail level. At present, 100 per cent foreign direct investment (FDI) is allowed in business-to-business (B2B) e-commerce but not in retail trading. "The Commerce and Industry Ministry has planned to float a discussion paper on the matter to engage with stakeholders. However, in view of the current political situation, the government is likely to go slow on this," a source said. The decision to allow 51 per cent FDI in multi-brand retail, which generated lots of controversies, has not yielded any investment in the sector, the source added. This decision was announced in September last year and the ministry has not yet received any proposal from foreign players to open super market stores in the country. The US retail giant Walmart, who was in partnership with Bharti Group, has also ended its joint venture. Congress lost the recent assembly elections in four states - Delhi, Rajasthan and Madhya Pradesh and Chhattisgarh. The state elections were billed by some as the semifinal before the final battle in the Lok Sabha elections due by April-May 2014. Meanwhile, the Indian IT-ITes industry body Nasscom had favoured FDI in e-commerce in the retail sector, but wants the government to make some amount of local sourcing mandatory. The Commerce and Industry Ministry has prepared a draft discussion paper on allowing FDI in e-commerce activities, which will also include selling of insurance and shares, besides retail. Global online retailers such as Amazon.com has sought relaxation in the FDI policy which restricts such companies from offering services directly to retail consumers. As per the foreign direct investment policy for multi-brand retail trading, at least 30 per cent of the value of procurement of manufactured/processed products shall be sourced from Indian 'small industries'.

International:

• Ford to hire 11,000 workers in US and Asia in 2014: As part of its efforts to expand globally, Ford announced plans to hire 5,000 workers in the US and 6,000 workers in Asia in 2014. It represents an increase of close to 7% of Ford's total workforce and the biggest hiring push the firm has made since 2000. The company has plans to open two new plants in Asia as well. Ford has said it will release 23 new vehicles around the world next year, the most in its history. Ford's president of the Americas, John Hinrichs, made the announcement at an event introducing a new research vehicle testing driverless technology. Among Ford's new offerings in 2014 are a revamped Mustang sports car, which is celebrating its 50th anniversary next year, and a Lincoln MKC small utility.

• Barcelona FC signs deal with Intel for shirt logos: Spanish football giant Barcelona has signed a deal with Intel to allow the chipmaker's logo to appear on the inside of players' shirts. The Intel logo would be revealed when players lift their shirts to celebrate scoring a goal, Barcelona officials told a news conference on Thursday. It will make its debut on Saturday during the La Liga match at home to Villarreal, the club said. Intel will also provide technology to the players and coaching staff. Players, who include Lionel Messi, Neymar and Andres Iniesta, would not have to wear the "Intel Inside" logo, said Barcelona. Intel paid $25m (£15m) for the deal, according Forbes magazine. Chief marketing officer at Intel, Deborah Conrad, said she chose Barcelona as it had an active social media community and hundreds of millions of fans globally. She said: "We did not want to put the players under any obligation to show the logo a specific number of times but we do know that such goal celebrations are a big part of the culture of the sport." The football club is also sponsored by Nike, Audi, and Qatar Airways. The airline's logo will stay on the outside of the players' shirts.

• Google to charge advertisers viewed for seen ads: Google announced Thursday that it will only charge advertisers for ads that have been seen by users. More than half of all ads bought online are not seen by anyone, because they appear too far down the page, or for other factors. Google says an ad is considered "viewed" only if 50% or more of it is visible for more than one second on the page. It is the first major digital ad network to announce such a move. "Even the jingliest, jolliest ad of the season can't work its magic unless it gets seen," wrote Google in a blog post announcing the change. "Today, we're taking an important step towards this goal by making it possible to buy based on viewability — in real time — across the more than two million sites in the Google Display Network... "In other words, you can now choose to pay for only those impressions where your ad has a chance to be seen." Digital analysis firm eMarketer says Google accounted for 32.84% of all digital ad spending worldwide in 2013. That translates to more than $38bn of the estimated $117.6bn global digital advertising market.

• Mindy Meads Named Calypso CEO: Mindy Meads, who resigned as Aeropostale Inc.’s co-chief executive officer in 2010, has been named ceo of Calypso St. Barths. She has been a consultant since leaving the teen retailer and has served on the board of The Wet Seal.  Calypso has had a tumultuous time in the last few years. Robert Grayson and Kevin Mullaney of The Grayson Company, a retail consultancy, were hired in April 2008 to lead Calypso on an interim basis. Jennifer Foyle was named president in January 2009, but left in July 2010 to join American Eagle Outfitter’s aerie division. Stefanie D. Smith, co-president since August 2011, has also resigned.

• Lululemon Shares Drop 10% on Q4 Guidance: Lululemon Athletica Inc.'s shares drop 10.6 percent in mid-morning trading after the company, whose third quarter results beat Wall Street's consensus by 4 cents, provided fourth quarter guidance below analysts' expectations. For the three months ended Nov. 3, net income rose 15.3 percent to $66.1 million, or 45 cents a diluted share, from $57.4 million, or 39 cents, a year ago. Wall Street was expecting EPS of 41 cents. Net revenue rose 20 percent to $379.9 million from $316.5 million, with comparable store sales rising 5 percent.  The firm said direct to consumer revenue jumped 37 percent to $62 million, or 16.3 percent of total company revenues. Christine Day, Lululemon's chief executive officer, said, "This so far has been a year of challenges, learning, and growth for Lululemon, and while our outlook for the fourth quarter is being impacted by both macro and execution issues, I believe that the investments we are making in the business combined with the team in place create a strong platform for growth in the years ahead." Day is set to leave the company at yearend. She made known her plans to resign in June. Laurent Potdevin was named her successor on Tuesday. Potdevin was president of Toms Shoes and before that president and ceo of snowboarding firm Burton. His technical apparel expertise and global experience are expected to help the company expand on an international basis. In addition, Tuesday's announcement said company founder Chip Wilson will step down from the chairmanship role in June 2014 when the next annual shareholders meeting will be held, with Michael Casey, a board member since 2007, taking on that role. Neither Day nor Wilson were participants in the conference call to Wall Street analysts. The company guided fourth quarter diluted EPS in the range of 78 cents to 80 cents, on a net revenue range of between $535 million to $540 million. It also forecasted flat comps for the quarter on a constant-dollar basis. For full fiscal year 2013,  Lululemon expects diluted EPS between $1.94 to $1.96 and net revenue essentially flat at $1.61 billion compared with a year ago. Shares of Lululemon were trading in the $61.12 range shortly after 11 a.m.