News As We Read- 19th April'13

Thought of the Day:

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Following made the Headlines:

India:

• KYC Sets Off a KBC-Type Rush as Banks go Address Hunting: If you get a phone call from your longtime banker asking you to resubmit your name and address proofs, don’t be surprised or irritated. It is the fallout of the Reserve Bank going beyond the cobrapost.com expose on unethical practices of banks, forcing them to go back to the drawing boards to weed out bogus and wrong documentation that allowed many people to open accounts and launder money. RBI, which probed the cobrapost-.com charges of bank staff helping in tax avoidance and money laundering, has stumbled upon incidents beyond what the sting operation revealed. It has widened the probe to cover social media such as Facebook and Twitter. Also, the central bank is asking banks to submit all adverse reports about them in print to probe into specific events. “Although RBI audits and supervises banks, it wants to ensure that it does not receive any more shock or surprises,” said a banker who has received a letter from RBI seeking details of complaints in other media. The RBI probe found that staff at ICICI Bank, HDFC Bank and Axis Bank may have violated KYC norms and helped clients evade taxes.

• Retail Giant H&M Sees a Big Market in India, Seeks Nod for ‘Own’ Co: Swedish fast-fashion retail giant Hennes and Mauritz, or H&M, has sought permission from the Foreign Investment Promotion Board to invest 720 crore (approx € 100 million) in India to start a fully-owned company that will open 50 H&M stores. Faced with stagnating or slowing sales in key European and US markets, the world’s second-largest apparel retailer by sales, has been eyeing emerging economies, including India, for a while. If the proposal is approved, India will be the 50th market for H&M that had sales of $18 billion in 2012 from its over 2,800 stores globally. The application was filed with FIPB, a unit of the finance ministry that clears foreign direct investment proposals, on Thursday through law firm Titus and Co. The retail giant says in its application it will fulfil all conditions of the country’s single-brand retail policy that includes sourcing locally 30% of the total value of the goods purchased. It also assured it will not retail goods using the e-commerce platform. During his visit in February, while meeting commerce and industry minister Anand Sharma, H&M chief executive Karl-Johan Persson labelled India as a “very interesting” market. “It’s a huge market. We are not there yet. More than a billion people live in India and in Sweden we are only 9 million but we have 150 stores (in Sweden),” Persson had said. H&M will engage in import, export, marketing, distribution, warehousing, manufacture, production and retail trade of products carrying the H&M brand. If its application is approved, it will sell 10 categories of products in India such as clothes, footwear, cosmetics, handbags and fashion accessories, home furnishing, home decoration, toys, kitchen utensils and cutlery among others. In India, H&M’s biggest rival and world leader in sales, Zara achieved break-even within the first year of its launch and has annual sales of 260 crore from nine stores. Several other brands such as Levi’s haven’t been so lucky and are still reeling under losses despite their decade old presence.

• Etihad seeks 42k more seats to and from India: Days after prospective partner Jet Airways sought 42,000 more seats a week to Abu Dhabi, the Gulf state’s airline Etihad has sought same enhancement in its flying rights to and from India. A team of aviation ministry officials will be in Abu Dhabi early next week to finalize the new bilateral. Aviation secretary K N Shrivastav took a meeting to get the views of other airlines and airports here on Thursday and the request for enhancement of flying capacity between India and Abu Dhabi met with opposition. The Air India representative said approving this kind of enhancement would hurt the airline. AI’s basic contention was that airlines of India and Etihad currently have 13,000 seats per week each, of which about 40% remains unutilized. “In this situation enhancing the flying right by 42,000 for Jet and a like amount by Etihad would mean creating another Dubai in Abu Dhabi as the passengers would mostly be transiting between India and rest of the world,” said an official. The AI official said after massive flying rights given to Emirates, the enhancement to Jet-Etihad — if granted — would mean the national carrier’s nonstop flights to US will soon turn unviable and it would be forced to shut them down. Air India is the only one to be affected on longhaul routes as it is the only Indian carrier, apart from Jet, that flies to Europe and North America. A Jet statement said: “Jet has evaluated the business, tourism and travel potential of the Indian market and has accordingly applied for the grant of additional capacity entitlements to increase services to Abu Dhabi.” Low-cost carriers SpiceJet and IndiGo supported AI’s contention. While SpiceJet has withdrawn its application for almost 6,000 weekly seats to Abu Dhabi, IndiGo is going to recalibrate its demand of 5,000 seats due to the massive capacity the Jet-Etihad combine plans to deploy on the route.

• Political consensus reached over land acquisition Bill: The government today achieved a consensus with Opposition parties on the land acquisition Bill, at an all- party meet here. This would enable it to introduce the revised Bill in Parliament during the ongoing session, which resumes on Monday. It would also mean scrutiny of all private purchase of land between 2011 and 2013, besides a provision to enable state legislation on leasing in place of acquisition of land. The Bill, which places resettlement and rehabilitation on the same footing as acquisition for the first time, is to replace the Land Acquisition Act, 1894. The Bharatiya Janata Party ( BJP) today agreed on tabling of the Bill, saying 12 of the amendments proposed by it had been accepted by the government. One of these is, instead of acquisition, land should be leased to developers, so that the ownership remains with farmers and provides them a regular income. The government has agreed to amend the Land Acquisition, Rehabilitation and Resettlement Bill, 2011, to provide for an enabling provision to states for enacting laws in this regard; leasing of land is a state subject under the Constitution. Another concern raised by BJP leader Sushma Swaraj was about the acquisition of 1,000 acres of land between 2011 and 2013, during the drafting of the Bill and its revisions. She said land mafias were trying to acquire land cheaply before the Bill came into operation. The government has agreed to scrutinise all sale of land after September 5, 2011, and ensure payment of 50 per cent of compensation to farmers in all cases till May 2013. However, Left parties like CPI( M) maintained they still had differences with the government and insisted the revised Bill be sent to a standing committee or select committee of Parliament. It was, they said, very different from what the recommendations of the earlier standing committee report had said. It is a totally new Bill, said CPI( M) head, Basudeb Acharia. “There was a secret agreement between the Congress and BJP,” he said. “While BJP had been vocal in demanding the Bill be referred to a standing committee at the previous all- party meet, it was silent on this today.” Rural Development Minister Jairam Ramesh said the Left parties should table amendments to the Bill, which Parliament could vote on.

• AirAsia will bank on Expedia to push ticket sales: AirAsia is expanding its distribution network and will rely on online travel portal Expedia to push sales. The airline plans to start domestic service from Chennai with three or four Airbus A320s from the last quarter of the current year. Vikram Malhi, country head of Expedia India, said, “ As per our joint venture agreement with AirAsia, Expedia will have exclusive online distribution of AirAsia tickets. The availability of AirAsia tickets on any other online portal is temporary and the contract will expire in June 2013.” The development has led to a disquiet amongst other Indian portals, which had partnered the Malaysian airline to sell its inventory on India- Kuala Lumpur and India- Bangkok flights. "This relationship will also help Expedia, in both the inbound as well as outbound sector, with the airline’s Indian arm connecting to the various smaller cities in the country and taking the Indian traveller to many great destinations in and beyond South East Asia, along with the widest hotel availability support across the globe,” added Malhi. AirAsia runs a joint venture portal with Expedia and it is an exclusive online distribution channel for the airline. Last week, AirAsia- Expedias CEO Kathleen Tan was in Delhi to discuss the development plans and strategies for the portal in India. Tan, who took over recently, was the commercial head of AirAsia earlier, responsible for its sales and marketing initiatives. She is also credited with launching mega discount offers, which the airline uses from time to time to push sales. "We have been strengthening our reach and visibility in the Indian market since the brand launch, with 360 degree brand campaigns and have been fairly successful, with over 200 per cent yearonyear growth since 2011, said Malhi. About 85 per cent of AirAsias global sales take place through its own website. In India, with web penetration being low, airlines rely on offline travel agents and portals. AirAsias travel trade partners have increased 30 per cent over the past few months, sources said. AirAsia runs a joint venture portal with Expedia and it is an exclusive online distribution channel for the airline.

International:

• PepsiCo Profit Tops Analysts’ Estimates: PepsiCo Inc, the world’s largest snack-food maker, reported first-quarter profit that topped analysts’ estimates as global snack sales increased. Net income fell 4.6% to $1.08 billion, or 69 cents a share, from $1.13 billion, or 71 cents, a year earlier, Purchase, New York-based PepsiCo said in a statement. Profit excluding some items was 77 cents a share, beating the 71-cent average of 14 analysts’ estimates compiled by Bloomberg. Chief executive officer Indra Nooyi, working to boost snack sales, has increased marketing spending in the past year on a dozen key brands including Lays potato chips and Quaker oatmeal. Nooyi has also put more emphasis on soft drinks in the US to regain market share from Coca-Cola. Global drink sales volumes, excluding the effects of acquisitions, divestitures and foreign-currency fluctuations, rose 1%, while snack sales volume on that basis advanced 4%.

• Google and Microsoft see a jump in profits: Technology giants Google and Microsoft have both reported rising profits. Google's net profit climbed to $3.35bn (£2.19bn) in the first three months of the year, up 16% from a year earlier, boosted by online advertising revenue. Microsoft said it made $6bn in profit during the same period, a jump of more than 17% from a year ago. Its earnings, which beat market forecasts, came despite a lukewarm reception for Windows 8 and a decline in global PC sales during the period. Analysts said that Microsoft's profits were boosted in part by changing the way its sold its products to corporate clients, as well as cost-cutting measures. "Microsoft has successfully transitioned into an enterprise software company and these results show that," said Kim Caughey Forrest, a senior analyst at Fort Pitt Capital. "The strength of server and tools, and the actual way they sell licenses to business, is making up for the missing PC sales."The margins are fantastic and the online services division seems to lose less money each quarter," she added. Meanwhile Google's profits were driven up by growing income from online advertising, which helped boost overall revenues to nearly $14bn for the quarter. That is up from $10.7bn during the same period last year. The results also suggested that Google may be beginning to build confidence with advertisers. The amount paid per advert is still declining, but at a slower rate than last year.

• Japan reports record annual trade deficit: Japan, the world's third-largest economy, has reported a record trade deficit for the year to 31 March. The deficit hit 8.17tn yen ($83.4bn; £54.5bn) as a slump in global demand hurt exports, while greater domestic consumption of fuel boosted imports. A weak yen, which has dipped nearly 20% against the US dollar since November, also boosted the value of the imports. Analysts said the deficit was likely to shrink in the coming months as the weaker yen will help Japan's exports. The yen has dipped after policymakers introduced aggressive measures aimed at spurring a fresh wave of economic growth and stoking domestic demand.

• Retail sales for March slip on bad weather: Retail sales in March were 0.7% lower than in February because of bad weather, according to the Office for National Statistics (ONS). The ONS also said retail sales volumes last month were 0.5% lower than a year earlier. The decline was in line with economists' expectations. However, in value terms, retail sales were 0.1% higher. Non-food sales plunged 4% in March, their largest monthly fall in more than three years. But consumers turned to the internet in the cold weather, with "non-store" retailing seeing its biggest rise since March 2009. "Feedback from department stores, clothing stores and household goods stores suggested that sales were dampened by the weather, as they prepared their stores for the spring season," the ONS said. Analysts had broadly predicted the fall.

• Gap outlines global growth plans, may franchise Old Navy: Gap may franchise Old Navy stores in some markets as it works to expand the global footprint of its brands, a plan also likely to include additional company-owned Old Navy and Banana Republic stores in China. The chain has seen its profits improve for three consecutive quarters as it engineers a turnaround that includes scaling back on brick-and-mortar stores at home and strategically expanding abroad. CEO Glenn Murphy outlined these and other plans, including the strategy to build newer brands Athleta, Piperlime and Intermix, at a Wednesday meeting with investors.

• Uniqlo gets artsy to win over New York residents: Fast-fashion retailer Uniqlo has signed on as the exclusive sponsor of Free Friday Nights at New York City's Museum of Modern Art. Visitors will have free access to the museum and all exhibits from 4-8 p.m. each Friday, starting on May 3 when the first 1,000 will receive Uniqlo tote bags.

• Alber Elbaz Hits Hong Kong for Lanvin Opening: Jet-lagged but chatty and in good spirits, Alber Elbaz visited Hong Kong for a few days to oversee and celebrate the opening of Lanvin’s new flagship, located in the city’s Central district. Lanvin already has six other boutiques in the city, more than it does in Paris. The new store, at 5,380 square feet, carries a more comprehensive assortment of Lanvin’s offerings, including men and women’s ready-to-wear, accessories, men’s made-to-measure, bridal and children’s wear. Like many other boutiques in densely packed Hong Kong, Lanvin’s new store is tucked away on the second floor. There is a generously sized entry area at street level with an Art Deco chandelier, wooden staircase and playfully arrayed mannequins that were, on opening day, arranged on shelves. “Every store we have, we try to keep some of the DNA there, but we also try to bring a little bit of the city. None of our stores are similar. Here in Hong Kong, we have this entry and store upstairs. I tried to create differences between the men’s and the women’s,” Elbaz said in an interview the day before the festivities.