Daily News Digest-18th March'14

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Following made the Headlines:

India:

• Lockout for Management Safety: Toyota: Toyota in India alleged on Monday that a “grave threat to the safety of its management” forced it to order a shutdown of its car plants near Bangalore, the latest episode in a war of words between the unit of the Japanese company and its 4,500 workers over the course of wage negotiations. The impasse with the workers led to a loss of output of over 2,000 cars in the last 25 days, as many of the “workers stopped production lines”, a senior executive of the company said. “We were left with no other option but to declare a lockout on Sunday after some workers disrupted production lines and started abusing our line supervisors,” said Shekar Vishwanathan, vice-chairman, Toyota Kirloskar Motor, or TKM. “Tempers were fraying, and, as a measure of abundant precaution, we declared lockout,” he said, declining to reveal what grave threat was posed by the workers. The management of TKM, which will meet the state labour minister on Tuesday, ruled out raising its wage increase offer of 3,050 a month to its permanent workers. “Our offer is final,” said Vishwanathan.

• Cos Look to Tap Growing Gift Cards Biz: As Indian consumers reach out for the convenience of gift cards, it is creating opportunity for a number of new ventures with services that link retailers with those looking to expedite their search for the perfect gift. These companies offer gift cards in a variety of formats — from digital cards with codes that can be presented at a merchant store to those that can be used at multiple retail locations. “Last minute gifting is always a headache for people. With solutions such as digital gift cards and Facebook gift cards, customers can send out gifts to friends and family instantaneously,” said TP Pratap, chief marketing officer at QwikCilver Solutions. The venture set up in 2008 by engineers from the Birla Institute of Technology including Pratap, Bhaskar Vasudevan and Kumar Sudarsan began with a seed investment of 30 lakh. Sales started with a trickle with a few thousand cards sold every year but as the company signed up with large retailers such as Titan, Croma as well as online retailers such as Flipkart and Myntra, the volume of cards sold has grown to four million a year. “We sell about 19,000 gift cards a year, which contribute to about 4% of our overall revenue. The gift card business for us has been growing at a rate of up to 40% every year,” said Sanjay Bhattacharjee, retail head at Titan Industries.  QwikCilver, backed by venture funds Helion Ventures and Accel Partners supplied gift cards worth over 100 crore in fiscal 2013 and expects the number to go upto 500 crore this year. The company receives a commission of anywhere between 1 to 2 % of the total gift card value. Similarly, prepaid card company Itz-Cash Card, which started its gift card operations two years ago and has raised venture funding of about $20 million expects to see business double this year. “We expect our gift card business to grow at a rate of 80%-90 % ” said Naveen Survya, managing director, ItzCash Card. The growth is expected to come from higher demand from corporates who are adopting this as a tool for large scale gifting as well as from retail demand. “Previously corporates such as HP used to pick a large set of watches from us for gifting. Now they have started buying gift cards instead,” said Titan’s Bhattacharjee.

• Gurinder Chadha to ‘Bend It’ with New VC Fund: Gurinder Chadha, director of films such as ‘Bend it like Beckham’ and ‘Bride and Prejudice’, will set up a venture capital fund in April to invest in film and television projects globally, including India. The $30-million (184.4-crore) Cayman Islands-registered Bend It Media Fund (BIMF), an open-ended investment vehicle, will invest across four platforms — films, television, live theatricals and digital. The 53-year-old Chadha will partner AVT Shankardass, a financier of a number of recent Hollywood blockbusters, such as Captain America, Superman Reboot and Man of Steel. “Whether the projects emanate from India, Spain, the US or the UK is inconsequential. We wanted to head a venture which invests in meaningful content that bond with audiences,” Shankardass, managing director of the fund, told ET. The fund will invest in small budget projects across geographies that focuses largely on content and will look to earn returns ranging between 25% and 30% from its investments, he said. The global media and entertainment market is slated to grow at a compounded rate of 5.6% for five years beginning 2013 and generate a revenue of $2.2 trillion in 2017, according to PricewaterhouseCoopers. In India, the industry may grow at 14.2% to 1.78 trillion by 2018, according to a recent report by FICCI-KPMG. BIMF plans to invest up to $10 million (. 61.5 crore) in its first year of operations, and has earmarked $4 million (24.6 crore) on film projects, $2 million (12.3 crore) each on television series and live theatricals and the rest on digital projects. “Gurinder is going through a couple of movies and we have a lot of submissions coming in. The investment model will evolve based on performances and market trends,” Shankardass said. Chadha could not be reached for her comments, as she was travelling. In 2009, the 45-year-old Shankardass, a New Delhi-based financier and producer launched Global Entertainment Partners, a $300 million (1,843.5 crore) close-ended 5-year fund that has invested in big-budget films.

• Lowe, Ogilvy to Design Myntra’s New Course: Myntra, a fashion portal, has roped in advertising agencies Lowe Lintas and Partners and Ogilvy India Worldwide to spearhead its marketing strategy in a bid to maintain its leading position as an online apparel retailer. The Bangalore-based company will also create separate brand identities for a few of its in-house labels that it plans to sell on other portals and offline stores, as these will provide higher margins. While Ogilvy will focus on the private-label branding, Lowe will handle the overall strategy for Myntra. Companies such as Flipkart and Myntra are vying for a pie of an overall online retail industry worth more than $3 billion (18,000 crore). Lifestyle, including fashion, accounted for 35% of the industry. Myntra aims to be a 10,000-crore firm in the next three to four years and is targeting 1,500 crore in sales during the next fiscal year. “A couple of our private labels have become quite large and we will now create a brand identity for them beyond Myntra,” said Vikas Ahuja, Myntra’s chief marketing officer. “They will also be available in other online and offline stores by end of the year.” Some of the private labels in the company’s stable have the potential to become a 500-crore brand in two years, Ahuja said. The company is also finalising kidswear and men’s formalwear ranges to be unveiled in the coming months.

• Dropbox Seeks Partners in India: Dropbox Inc is being positioned as the next internet sensation after Facebook and Twitter. But the online storage provider said it has no immediate plans to open an office in India, one of the fastest-growing internet markets in the world. The San Francisco-based company said it would rather partner with Indian mobile service providers and web companies that can take Dropbox to the country’s rapidly growing smartphone and internet user base. “For us, it doesn’t make sense to have a local sales team in the short term, but we’ll work through partners,” Sujay Jaswa, vice-president and business development head at Dropbox, told ET at the company’s San Francisco headquarters. Jaswa, a Harvard MBA graduate who joined Dropbox in 2010 from venture capital firm New Enterprise Associates, said the cloud storage firm is in talks with “several Indian companies, including large corporations”, which could be potential customers. He declined to name companies as the “talks are at an early stage”. Valued at about $10 billion (61,000 crore), Dropbox is one of most highly-valued technology startups backed by venture capitalists. The company has seen a steady rise in its user base in India, thanks to increasing popularity of smartphones and mobile applications in the country. That explains why senior executives like Jaswa visit India once or twice a year. India was the fastest growing smartphone market in the world during the October-December quarter of 2013, according to technology research and advisory firm Gartner. Smartphone sales in the country saw a 166.8% surge in this period followed by China and Latin American countries. The product is currently being used by wealthy Indians who have access to internet on their mobile phones but the adoption is expected to increase as the country builds better mobile and internet infrastructure, said Jaswa, who was the twenty-fifth employee when he joined Dropbox.

• Modi Revlon Targets Mass Market with New Brand: Cosmetics maker Modi Revlon will soon roll out a new brand of colour cosmetics priced about 60% cheaper than the existing Revlon range and expand its reach to smaller towns to take on bigger rivals such as Lakme and L’Oreal. The rollout, in the April-June quarter, will focus on volumes, said UK Modi, chairman and chief executive at Modi Revlon. “Our pricing and packaging was an impediment to growth…even our distribution was limited,” he said. A 74:26 joint venture between the UK Modi group and Revlon of the US, Modi Revlon is yet to establish an aggressive national presence. Modi said the brand has been developed by Revlon US for India, but declined to divulge the brand name. The brand will sell nail colour at about 60 each and lip colour at under 200, and Modi is banking on it to boost volumes and get a foothold in tier-II and -III cities. “Maybe we should have done this earlier… it required a lot of support from Revlon US and took two years to develop,” he said. For Modi Revlon, which has been operating in the country since 1995, this is a second shot at the mass market. In 2002, it had launched a brand of lip and nail colour called StreetWear for teenage consumers at about half the price of Revlon, to take on Hindustan Unilever’s Elle 18. But the brand could not make much headway because of limited focus on distribution and marketing. Modi said StreetWear would not be phased out after the launch of the new brand, at least not in the immediate months. French cosmetics major L’Oreal, one of the top two cosmetics players in India, is operating independently in the country. Japanese cosmetics firm Shiseido too reportedly plans to set up a wholly-owned subsidiary to ramp up its presence in the country. However, Revlon has so far steered clear of entering the country as an independent subsidiary.

• Hindujas among 5 clans richer than 20% Brits: London-based Indian family of Srichand and Gopichand Hinduja of the Hinduja Group, a multinational conglomerate with a presence in 37 countries and businesses as diverse as trucks and lubricants to banking and healthcare, is among the five richest families in the UK which have together amassed more wealth than 20% of entire British population. Together worth $10 billion, the Hinduja family along with four other British families have been shown to have more wealth than 12 million poorest Brits. Pointing to a worrying trend of the rich becoming richer and the poor becoming poorer, global charity Oxfam revealed on Monday that a handful of billionaires — which includes property investor Charles Cadogan, Sports Direct boss Michael Ashley and the Hinduja brothers — have amassed a combined wealth of £28.2 billion ($47 billion), more than the poorest 12.6 million people in Britain. The charity said the findings were “deeply worrying”, and that such inequality was a “sign of economic failure”. The study also warns that the UK’s wealthiest 0.1% have seen their income grow nearly four times faster than the least well-off 90% of the population. Britain’s five wealthiest people boast a collective worth of £28.2 billion, while the total accumulated by the bottom 20% sat at £28.1 billion.

• Online jeweller Bluestone gets $10m Kalaari Cap-led funding: Investors are betting on India’s internet-savvy women adding sheen to online jewellery startups. Venture capital firm Kalaari Capital is leading a $10-million investment into Bluestone, a 3-yearold e-tailer of curated jewellery. The Bangalore-based Bluestone is probably the only Indian consumer internet story integrated from manufacturing to e-tailing. Its fullyowned manufacturing unit helps deliver curated or bespoke jewellery, besides offering a longer list of collections. Kalaari is a $160-million, India-focused fund and a strong backer of e-commerce and technology startups. Gaurav Kushwaha and Vidya Nataraj co-founded Bluestone, which was funded by US investors Accel Partners, Saama Capital and local investor duo of K Ganesh and Meena Ganesh initially. It will clock Rs 40-crore sales this March and hopes to double it in the next financial year. Nataraj comes from the family that owned Landmark (a books and lifestyle retail chain acquired by Tatas). Kushwaha was a co-founder & CEO of Chakpak.com whose digital content was acquired by Flipkart. India’s organized jewellery market is estimated at $45 billion, with online sales pegged at $50 million or just 0.1%. But jewellery sales, especially bigger ticket curated pieces, are steadily mirroring online migrating trends elsewhere in the world. Bluestone will deploy the fresh funding to ramp up its marketing and invest in brandbuilding initiatives, Kushwaha, co-founder and CEO of Bluestone, said. “A significant portion would be used to establish Bluestone as the leading online jewellery store in the next two years,” he said. Co-founder Vidya Nataraj added, “Once trust is built with confidence-building measures such as international certification and easy return and buyback policies, customers are comfortable to buy online.” Bluestone hopes to show operating profit by 2015. “There is a huge potential for differentiated e-commerce. Bluestone offers a full spectrum of brand, design and manufacturing. The order value and gross margins in the business makes it an attractive model,” K Ganesh, an early investor in Bluestone, said.

International:

• Nikon Halts China Sales of Camera over ‘Flaws’ Claim: Nikon Corp will stop selling a digital camera model in China and offer free repairs, following claims on Chinese state-run television that product defects caused “black spots” on photographs. The Tokyo-based company received a Chinese government order a Monday to stop selling its D600 cameras and asked dealers to halt sales, Ryota Satake, a Nikon spokesman, said. Nikon had earlier said it would service the models even after warranties expire, after China Central Television showed hiddencamera footage of customers demanding refunds and exchanges while local service staff blamed dust and smog for the spots. Nikon's alleged defects were highlighted in a March 15 broadcast marking World Consumer Rights Day, an annual program in China that has previously targeted companies including Apple and Volkswagen AG. The show last week also said that a business owned by Gohigh Data Networks Technology helped plant software in mobile phones to collect private information without users' awareness. “I'm sure some of the big Western multinationals are breathing a collective sigh of relief that they weren't targeted,” Torsten Stocker, partner at consulting firm A.T. Kearney, said by phone.

• Alibaba to Develop ‘Smart’ Home Devices with Midea: Chinese e-commerce giant Alibaba Group Holding has joined the race to develop ‘smart’ household appliances, partnering with Chinese electronic goods maker Midea Group to produce home devices that talk to each other. Alibaba, keen to expand out of its core online retail business, said on Monday that its cloud computing subsidiary, Aliyun will set up a project with Midea named ‘Aliyun Connected’. The partnership will seek to develop smart products across Midea’s range from air conditioners to washing machines and refrigerators. Financial terms of arrangements between Alibaba and Midea, worth about $11.7 billion by market value, weren’t disclosed. Alibaba said that its long-awaited IPO, expected to be valued at over $15 billion, will take place in the US. The firm has been rapidly diversifying into business areas far removed from its main e-commerce platforms, like taxi booking apps, mobile games and mobile banking, as it seeks new growth opportunities. Smart appliances, designed to talk to each other and accessible by users via cloud computing, can help cut energy bills.

• South Africa signs 1,000-train deal to boost network: South Africa's ageing freight rail network is to get 1,000 new trains in a 50bn-rand (£2.8bn; $4.7bn) investment. The trains will be run by Transnet, South Africa's state-owned freight transport company. Transnet chief executive Brian Molefe said the deal would "transform the South African rail industry by growing existing small businesses and creating new ones". "We are going to create and preserve approximately 30,000 jobs," he said. Nearly all the trains will be built in South Africa in Pretoria and Durban. After decades of underinvestment, South Africa is scrambling to modernise its rail network and shift transport from road to rail. The trains will be mainly used for freight transport, servicing the country's ports, which take some 96% of its exports. It is the country's single biggest corporate infrastructure investment.

• Vornado Sells Beverly Connection for $260M: Vornado Realty Trust has agreed to sell Beverly Connection, a 335,000-square-foot power center in West Hollywood, Calif., to an undisclosed party for $260 million. Vornado said the property is unencumbered and that, once completed, the sale would result in a net gain of about $40 million. Among the center’s tenants are Target, TJ Maxx, Marshalls, Men’s Wearhouse, Nordstrom Rack, Old Navy and Ross. The sale is expected to close during the third quarter.

• Japan's Kosé to Acquire Tarte Cosmetics: Japan’s Kosé Corp. said Monday it is buying a 93.5 percent stake in New York-based Tarte Cosmetics for $135 million, giving the Japanese company a foothold in the U.S. market. Kosé is buying out Encore Consumer Capital’s entire stake in the American beauty firm, a mainstay on QVC, as well as most of Tarte founder Maureen Kelly’s shares. Kosé said Tarte’s existing management will remain in place. Encore Consumer Capital is a San Francisco-based private equity investment firm focused on the consumer products industry. Tarte is described as one of the fastest-growing cosmetics companies in the U.S., logging growth approaching 30 percent annually, according to sources. The company finished 2013 with revenues of $68 million. Last year, Intrepid Investment Bankers LLC’s Beauty Care M&A Report singled out Tarte as one of the industry’s takeover targets. Kelly, who founded her brand 15 years ago in her bedroom, said that “by joining the Kosé family and adding to that rich portfolio, we can build on what we’ve already accomplished with powerful products targeted at new markets.” Described as “eco-chic,” Tarte is infused with ingredients such as superfruits, plant extracts, vitamins, minerals and other naturally derived ingredients. In 2010, the company received a boost through an investment from Encore Consumer Capital, and since then, according to the brand, “Tarte has significantly expanded its footprint throughout North America open-sell environments and specialty distribution channels with market-leading retailers such as Sephora, Sephora Inside JCPenney, Ulta, QVC and Macy’s Impulse.” In addition, Tarte has also grown its international presence with Sephora in Southeast Asia and QVC U.K.