Daily News Digest- 23rd Dec'13

Thought of the Day:

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Following made the Headlines:

India:

• Gaitonde’s Brush a Stroke of Luck for Indian Art: Did Christie’s first-ever auction in India produce the first sign that the Indian art market is reviving? The 23.7 crore paid for late Vasudeo S Gaitonde’s untitled minimalist work — the highest for any Indian artist — is being seen by many experts and collectors as a leading indicator of art repositioning itself as an attractive asset class. But wait a bit more before making really big punts, is what some experts say. The size of the Indian art market — around $100 million — is minuscule compared with Western markets. Just one recent Western art market sale — a Francis Bacon work that sold for $142 million — fetched more money than the Indian art market represents collectively. But small doesn’t mean moribund. The local art market grew frenetically between 2000 and 2008. The slump since then has been long. Andersen Petterson-run ArtTactic, a sort of a bible for art investors around the world, had in a November report said confidence level in the Indian art market fell by 13.6% in the six months till November. Rupee’s steep fall was identified as the main reason for this crash by ArtTactic. But Gaitonde may have lightened up the gloom in the market. Neha Kirpal, organiser, India Art Fair — the next edition is slated for January-February 2014, Delhi is the host city — says the Gaitonde sale and the Christie’s auction overall are a “great booster for the art market in India”. Total sales at the Mumbai auction were 96 crore. “The general sense,” Kirpal says, “is that the market is on an upward swing. Auction prices put art on the front page of newspapers in India, which is great for the market. If people are ready to pay so much money at an auction (it) means that price realisation in the regular market will also go up.”

• Kejriwal Wears the Cap, Chaman Lal the Crown!: If all goes as Arvind Kejriwal is planning, he will be Delhi’s chief minister soon — and Delhi’s new CM will represent a feather in Chaman Lal’s cap. Chaman Lal who? A 39-year-old small-time seller of cheap caps in Delhi’s dingy Sadar Bazaar, that’s who. But not any old cap — the cap worn by Kejriwal and thousands of Aam Aadmi Party members and supporters, the cap that symbolises, for supporters and critics of AAP, a potentially major political shift in India. Lal’s small business — Aroma Traders — has been the nerve centre for the supply chain that saw 6-7 lakh AAP caps being distributed in Delhi since AAP was formed in October this year. Lal expects orders to jump after Kejriwal takes over as CM and AAP goes national. Lal, an AAP supporter, is proud of his business for reasons other than business. AAP caps are a smallmargin venture. They sell for 3 each, and Lal’s margin, he says, is 25 paise. Lal was not inclined to share further details of the AAP cap business. But even in this story of an aam entrepreneur supplying caps for an aam leader and his party, there’s the shadow of globalisation. AAP caps were a takeoff from the caps worn during Anna Hazare’s Lokpal fast in Delhi, Lal says. But Anna caps were made of better fabric, Lal says.

• BB Plans Sales Sops to Distributors, May Cut Prices: The price of the latest BlackBerry handsets are expected to fall further as the Canadian smartphone maker plans more incentives to distributors and operators for pushing the sales of its BB10 devices. To improve sales and stimulate global demand for BlackBerry 10 devices, the company executed marketing campaigns and reduced the price on new shipments of the smartphones during the second and third quarters of fiscal 2014, the company said in an SEC filing. “The company plans to implement further sales incentives with its carrier and distributor partners to increase sell-through, which could be applicable to all BlackBerry 10 devices shipped in the second and third quarters of fiscal 2014,” the company said in the filing. The smartphone maker suffered huge loss of $4.4 billion in its third quarter ended November 30, mainly due to unsold handsets.

• Deepika Padukone to Add More Fizz For Coca Cola: Brand Coca-Cola, which continues to lag behind its sister brand Thums Up and rival Pepsi in the cola market in India, has roped in actress Deepika Padukone as its face to help boost its market share, two people familiar with the development said. An official aware of the contract details said Coca-Cola will pay Padukone a little less than 4 crore annually in fees. When contacted, Anirban Das Blah, managing director at celebrity management firm CAA Kwan that represents Padukone, declined comment. A Coca-Cola India spokesperson, too, declined comment on the brand’s association with Padukone. Aishwarya Rai was the previous top woman celebrity associated with Coca-Cola, endorsing the brand for about six years ending 2005. A face of rival Pepsi cola till 2008-09, Padukone will not be allowed to endorse an aerated beverage anywhere else in the world as long as her contract with Coke lasts, the official quoted earlier said. Padukone, who acted in back-to-back blockbusters Chennai Express and Yeh Jawaani Hai Deewani this year, also endorses Hindustan Unilever’s soap Lux, Aditya Birla Group’s premium Van Heusen Women collection that she has also designed, Tissot watches, Nestle’s Nescafe coffee, Garnier skincare brand from L’Oreal and Sony CyberShot digital cameras. India is among a small number of countries where Coke is not the leading cola despite having a presence there. Thums Up and Sprite are the firm’s top two brands in the country. Its Atlanta-based parent wants its global flagship to be ‘top priority’ in India. The company has been running various promotions, including discounts, to boost Coca-Cola sales. In a press meet in Kolkata on Sunday, Coca-Cola India & South West Asia deputy president Venkatesh Kini claimed that Coke has emerged as the number one brand by sales in some channels such as modern trade. “While Thums Up and Sprite are jostling for the number one spot, brand Coke is the fastest growing soft drink brand in India and has great potential,” Kini said. He refused to share details on when and how the company expects to make Coke amongst its top-selling brands in India.

• Indian e-Commerce Portals Aim to Hit Profit Way in 2 Years: Leading Indian online retailers, including Snapdeal and fashion portal Myntra, expect to turn profitable in the next two years, signalling a seismic shift in an industry where so far growth has been pursued at the expense of the bottomline. Pressure from risk-capital investors and growing consolidation in an industry where the leaders are outpacing the laggards is forcing online retailers to identify newer revenue streams and cut down on costs. Snapdeal, an online marketplace, expects to reach about 6,220 crore in gross merchandise sales by the next financial year, and profitability the year after. “We want to be India’s first profitable e-commerce company and its largest mobile commerce company,” said Kunal Bahl, cofounder of Snapdeal. “Mobile will be the big driver. Over the next 24 months we expect that three-fourths of our orders will be placed on a mobile.” In fiscal 2013, Jasper Infotech — the parent company that owns and operates Snapdeal — posted losses of 120.1 crore, wider than the 81.2 crore loss in fiscal 2012, according to company’s financials filed at the Registrar of Companies. The renewed focus on profitability comes at a time when the company looks to list its shares on public markets in the United States over the next 12 to 24 months. In Bangalore, fashion retailer Myntra aims to be profitable by the end of 2014. “Only at scale can you amortise technology and marketing costs,” said Mukesh Bansal, founder of Myntra. He said online retailers that have built large volumes of business can now think of profitability. “Without scale profits might be possible but is meaningless.” In the quest for profits, Bansal’s firm, which expects turnover to touch . 800 crore in fiscal 2014, has chosen not to sell fast-moving, low-value apparel that would have boosted sales but brought in lower margins. In fiscal 2013, the company had sales of 212.4 crore at a loss of 134.7 crore, according to the ministry of corporate affairs’ (MCA) website. Mukesh Bansal admitted that e-commerce companies cannot afford to take their foot off the accelerator. “But the choice is between sales at any cost or sustainable growth. We have chosen the latter.” Experts said the main reason for this focus on profits is the push from risk-capital funds. “Most investors today are looking for ventures that have real profitability-based feasibility. They do not anymore want to look at business plans and strategies that have unfeasible timelines for profitability,” said Ashish Jhalani, founder of eTailing India, a firm that tracks the online retail industry. Since 2011, equity investors have put in almost $1.2 billion (over 7,450 crore) into online product retail, according to research firm Venture Intelligence. However, this year, money has grown scarce. More than half of the over $600 million (over 3,700 crore) raised by ecommerce companies went to market leader Flipkart. The Bangalore-based company asserts that it is still focused on growth and not profits. “Our focus right now is still on investing in our growth story,” said Binny Bansal, cofounder of Flipkart.

• More tier III cities like Jhansi, Ranchi going online to shop: Even as consumers in metros are driving the traffic on e-commerce sites, tier II and III cities like Surat, Ranchi, Jhansi and Coimbatore are fast catching up. According to leading online marketplace ShopClues, while 42 per cent of its orders come from tier I cities like Delhi, Mumbai, Bangalore, etc, the remaining 58 per cent is coming from tier II and III cities. "Sales from tier III cities like Jhansi, Ranchi, Moradabad, Gorakhpur have gone up by an average 500 per cent year-on-year, while for more developed cities like Kanpur and Lucknow it has grown by 30 per cent," ShopClues Co-founder and CEO Sanjay Sethi told PTI. Consumers in these cities have high interest in fashion, footwear, kids and toys, which shows lack of choices available to them locally, he added. Besides, road-traffic congestion and absence of optimal shopping environments also means more customers are choosing to shop online, Sethi said. "Another interesting trend is that tier II-III towns are getting exposure to e-shopping because of migrant population that comes to reside in the metros and sends back gifts to people in their home towns, especially around occasions like Raksha Bandhan, Diwali, etc," he added. An indication of the trend is that during festival season ShopClues sees about 30 per cent of the orders bearing a different delivery address than the one a customer uses for his/her regular shopping, he said. ShopClues Corporate VP (Marketing and Merchandising) Radhika Aggarwal said: "62 per cent of the visits from these cities are of new customers, which means steady month-on-month increase in overall customer base fuelled by greater Internet penetration and usage of Internet-enabled devices." For ShopClues, Delhi NCR leads the top five cities by visitor traffic followed by Bangalore, Chennai, Mumbai and Lucknow, she added. The top five emerging cities include Surat, Kanpur, Ranchi, Coimbatore and Vishakhapatnam, Aggarwal said. Aided by rising user traffic from big cities as well as the medium and small towns, ShopClues expects to break even by January-March 2015 and and is eyeing revenues to the tune of Rs 1,000 crore by the 2014-15 fiscal. Launched in November 2011, ShopClues.com clocked revenue of Rs 50 crore in April 2012-March 2013. Shopping online is fast catching up in India, which has about 200 million Internet users and is expected to overtake the US as the second largest Internet user base in the world by June 2014 with 243 million users. The recently concluded four-day online shopping festival by technology giant Google, Great Online Shopping Festival, saw the number of visitors doubling to 2 million this year compared to last year's maiden edition.

• Puneet Kumar new secretary general of AEPC: Puneet Kumar, a Kerala cadre IAS officer, has been appointed as secretary general of AEPC, the country's apex body for apparel exporters. The post was vacant since April 2012 and the last secretary general was Amarendra Sahoo. Kumar, a 1993 batch officer, is a graduate in mechanical engineering, having worked in various capacities in departments like revenue, technical education, excise and agriculture in Kerala, the Apparel Export Promotion Council (AEPC) said in a statement. "He brings with him vast amount of experience in handling complex administrative, financial project management and e-governments issues," it said. AEPC provides assistance to exporters as well as importers who choose the country as their preferred sourcing destination for garments. The country's apparel exports are likely to increase to USD 17 billion this fiscal from USD 13 billion last financial year on the back of recovery in demand in the US and European markets. During April-October, 2013, the shipments grew by 15.5 per cent to USD 8.2 billion.

International:

• Microsoft’s Xbox One Sales Hit 2 Million: Microsoft said sales of the new Xbox One video-game console reached more than 2 million in its first 18 days on the market, as the company vies to keep pace with Sony’s Play-Station 4 during the holiday season. Sony said it had sold 2.1 million of its machines since they went on sale on November 15 in North America. Microsoft, which introduced Xbox One on November 22 in 13 countries, is selling pretty much every console it can get into stores and has “aggressive” plans to restock, said David Dennis, a spokesman for Xbox, in an interview. “Sales of both platforms are basically on par with each other,” said Colin Sebastian, an analyst at Robert W Baird & Co in San Francisco.  Microsoft and Sony are trying to attract gamers against a backdrop of declining console sales. From 2008 to 2012, the market shrank 32% to $13.3 billion, according to researcher NPD Group. Both the $499 Xbox One and the $399 PlayStation 4 have more powerful graphics and entertainment applications than older models. To distinguish its machine, Microsoft has been pitching its motion-sensing camera, the ability to control live television and exclusive games like Ryse: Son of Rome and Dead Rising 3. “We’re at 2 million at 18 days, and they were at about 2 million at 18 days, so we are running neck and neck,” Dennis said. He declined to provide a forecast for future sales. After replenishing initial inventories, Sony and Microsoft each may sell about 3 million consoles worldwide by the end of the year, according to projections by Sebastian as well as Michael Olson, an analyst at Piper Jaffray Cos. in Minneapolis. Jack Tretton, president and chief executive officer of Sony’s US computer entertainment division, said the Tokyo-based company is confident it can meet analysts’ sales estimates of 3 million units by year-end, and its own target of 5 million units by March. Sony expanded sales of the PlayStation 4 on November 29, and it was available in 32 countries as of December 3.

• Apple signs iPhone deal with China Mobile: US technology giant Apple has signed a deal to bring its iPhone to China Mobile - the world's largest carrier. The Chinese firm has more than 760 million subscribers and was one of three networks to be awarded China's first 4G licences earlier this month. Apple has been looking to boost its sales in China, the world's largest smartphone market, but has struggled amid growing competition from rivals. The latest deal is expected to help it increase its market share. "China is an extremely important market for Apple," Tim Cook, Apple chief executive, said in a statement. "Our partnership with China Mobile presents us the opportunity to bring iPhone to the customers of the world's largest network." Earlier this year, Mr Cook said he expected China to replace North America as Apple's largest source of revenue. The iPhone is the firm's most important product in terms of earnings power.

• Obama says 2014 will be 'breakthrough' for US economy: Citing stronger growth figures, US President Barack Obama says 2014 will be a 'breakthrough year' for the US economy. Economic growth in the US was revised upwards to its fastest pace since late 2011 on Friday. The Commerce Department said GDP grew at an annualised rate of 4.1% between July and September, up from an earlier 3.6% estimate. That gave shares a boost and the Dow and S&P 500 indexes closed at records. In his last press conference of the year, the US President highlighted the improving data as promising for the year ahead. "We head into next year with an economy that's stronger than it was when we started the year [and] more Americans are finding work and experiencing the pride of a paycheck," he said. Much of the revision was due to stronger consumer spending, which accounts for two-thirds of the economy. Business spending was also stronger than previous estimates.

• M&S apology over Muslim alcohol refusal: Marks & Spencer has apologised after a Muslim member of staff refused to serve a customer trying to buy alcohol. The retailer said it usually tried to assign "suitable roles" to staff who could not handle certain items because of their religious beliefs. It said this policy had not been followed in a case highlighted by the Telegraph over the weekend. Consuming alcohol is forbidden in Islam, and some Muslims refuse to handle it at all. An unnamed customer told the newspaper they had tried to buy a bottle of champagne in an M&S store, but the member of staff "was very apologetic but said she could not serve me" and asked the customer to use another till. A spokesperson for M&S said: "Where we have an employee whose religious beliefs restrict food or drink they can handle, we work closely with our member of staff to place them in suitable role, such as in our clothing department or bakery in foods.

• Jones Deal Receives Debt Scrutiny: The debt watchdogs are keeping a close eye on Sycamore Partners’ $2.2 billion deal to buy The Jones Group Inc. Both Moody’s Investors Service and Standard & Poor’s put their ratings on Jones’ debt on review for possible downgrade, noting the buyout could load Jones down with additional debt and lead to changes at the company. Moody’s rates Jones at “Ba3,” while S&P scores the company at “BB-minus.” The ratings are each three steps into non-investment-grade or “junk” territory. Sycamore, which is led by Stefan L. Kaluzny, agreed last week to buy Jones for $15 a share, or $1.2 billion, plus another $1 billion in debt. Kaluzny is expected to break up Jones into four parts: the legacy footwear business and the denim business; an apparel company including Jones New York; Kurt Geiger, and Stuart Weitzman. And while it’s not clear where Jones’ top leaders will stand in the new corporate structure, they will see nice payouts for their stock holdings. Chief executive officer Wesley Card holds 1.4 million shares of Jones, mostly in restricted stock, valued at $20.3 million at the takeover price, according to regulatory filings. And Richard Dickson, president and ceo of the branded businesses, holds 930,124 shares, valued at $14 million. Together the two executives own 2.9 percent of the company and agreed to vote their shares in favor of the deal. The takeover, which is expected to be completed in the second quarter, brings a good deal of uncertainty to the business.