News As We Read- 23rd May'13

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Following made the Headlines:

India:

• Deal Between Jet, Etihad Flies into Sebi Air Pocket: The Securities and Exchange Board of India (Sebi) has written to Jet Airways, raising questions over parts of the agreement signed by the Indian carrier with Etihad Airways last month as they appear to confer substantial management rights to the Middle-Eastern airline. Sebi’s concerns might lead to a reworking of the over 2,000-crore deal to secure regulatory approval. In a recent communication to Jet Airways, the regulator expressed reservations regarding the shareholders’ agreement entered into by the two partners that gives Etihad the right to nominate three directors on the board of the Indian carrier and to decide senior management positions. The letter, sent earlier this month, was described to ET by people familiar with its content. The essential point of the letter is that Jet Airways has to convince the regulator that Etihad’s rights do not amount to joint control alongside promoter Naresh Goyal. Shortly after announcing the strategic alliance with the Abu Dhabi-based airline on April 24, Jet Airways had said there would not be any change in control. A statement issued by the company said Goyal would continue to hold a 51% stake in the company. A person with direct knowledge of the developments said Sebi will vet key documents, including the shareholders’ agreement, to ascertain if there are clauses or provisions that indicate the acquirer or the foreign partner is in a position to influence or control key management policies or operations. The person declined to be named given the sensitivity of the case. If the regulator is not satisfied with Jet’s response, it can even direct the company to rework certain provisions of the shareholders’ agreement with Etihad to ensure it conforms to both the letter and spirit of the regulations. Jet did not respond to requests on email or phone calls seeking comments on these issues. "If Sebi believes that some of these clauses amount to Etihad having control, those clauses may have to be rewritten or renegotiated… as long as it doesn't disturb the commercial agreement between the parties,” said a senior lawyer with a leading law firm. Jet had signed an agreement with Etihad to sell a 24% stake through a preferential offer.

• CSK Head Under Lens for Links to Vindoo Dara: The Mumbai Police is preparing to summon the head of top IPL team Chennai Super Kings for possible questioning, potentially escalating the ambit of its investigations into spot fixing, so far focused on marginal players and bookies, into the top echelons of India’s cricket establishment. Officials with the Mumbai Police, which has arrested the son of late wrestler-cum-actor Dara Singh, Bollywood B-lister Vindoo Dara Singh, for alleged links with bookies, said on Wednesday they would call Gurunath Meiyappan, the team principal and CEO of CSK, to record his statement in the spot-fixing case and possibly even seek to question him. A top official of the Mumbai Police’s Crime Branch said Meiyappan, who is the son-in-law of BCCI President N Srinivasan, could be asked to come to Mumbai in the next few days. Police officials, requesting anonymity because of the sensitivity around the latest twist in the case, attributed Meiyappan’s likely summoning to claims by Vindoo Dara Singh that he was in close contact with the CSK principal in the latest season of Indian Premier League. Singh, these officials said, claimed his entry at many IPL matches held in Chennai was arranged by Meiyappan and a police scrutiny of his call records show several conversations between the two. The Crime Branch raided Singh’s residence on Wednesday afternoon and confiscated several mobile phones and a laptop.

• Sony Six Bags Rights for Euro 2016: Sports channel Sony Six has bagged the broadcast rights for the UEFA EURO 2016 across the Indian subcontinent and will telecast live all the 51 matches of the tournament. In what was a battle for one of the most illustrious international football competitions, the channel emerged as the winner for these rights and this would be its first entry into international football, the channel said in a statement. Having broadcast 2014 FIFA World Cup Qualifiers, this will be the first successful acquisition of a major professional football competition by the channel. The UEFA EURO 2016 will be the 15th edition of the tournament and is provisionally scheduled to be held from June 10 to July 10, 2016. For the first time in the tournament’s history, it will be a 24-team tournament, having been expanded from the 16-team format that had been used since 1996.

• As Luxe Buyers Pick ‘In’ Colours, Classics are Out: A Delhi dude trading up his Ferrari doesn’t want the newer, souped-up model in red again. He’s aiming for blue this time. Why? Because he’s ‘done’ the usual, now he wants something unique. The same goes for ladies who have been picking up their logo-ed summer arm candy in lime, lemon and tangerine. And even moms may not want to borrow their stash of brown, beige and black monogrammed classics any time soon. From cars and clothes to accessories and homes, it’s springtime in India, as luxury buyers splurge on bright shades instead of sticking to timeless (usually sober) classics. It has forced international luxury brands to rethink strategies for this growing market. Notably, the percentage of ‘fashion’ — read bright — hues in the merchandise selection is increasing steadily. After all, picking up items in colours that are not ‘classic’ and may not even be ‘in’ next season indicates a market has matured from mostly first-time buyers to ‘regulars’ not averse to spending anew every few months. “Luxury customers are becoming more aware and hence more open to the idea of investing in seasonal pieces,” says Deepika Gehani, creative director of Genesis Luxury Fashion that has tie-ups with Burberry, Bottega Veneta and Paul Smith in India. “India now has serious fashion consumers who don’t think twice before splurging on an expensive luxury product. Some come to our stores every season to buy the same bag or shoes in different colours which proves that luxury is becoming a way of life,” says Priya Sachdev, creative director of TSG International Marketing, whose multi-brand chain Kitsch stocks only 10-15% classics from labels such as Dolce & Gabbana and Stella McCartney. “The percentage of classics used to be much higher earlier, but with shoppers demanding the ‘in’ products, the ratio has changed.” 

• AirAsia Says COO, CFO will be Indians: Malaysian budget airline AirAsia has conveyed to the civil aviation ministry that the CFO and COO for its Indian arm are both going to be Indians and it has submitted the names of its six directors for obtaining security clearance from the home ministry. A security clearance for the board of directors is a prerequisite for AirAsia India to receive a no-objection certificate (NoC) from the aviation ministry to launch operations. The security clearance could take anywhere between a month to three or more months. AirAsia India appointed an Indian CEO, Mittu Chandilya, to head AirAsia India on May 15 but the names of the CFO and the COO have not been decided yet. “They have conveyed to us that the CFO and the COO are going to be Indians. But board of directors names need security clearance irrespective of nationality. We have to submit this list to home ministry and we plan to do it on Wednesday,” a senior aviation ministry official told ET. Post the security go-ahead, AirAsia India would require a raft of clearances from the government, including a flying licence or what is called in industry parlance an 'air operating permit'. It also needs basic infrastructure at airports, including parking bays, landing slots etc but only after getting a no-objection certificate (NoC) from the aviation department. AirAsia India had filed an application on April 23 with the civil aviation ministry seeking the NoC. Industry sources inform that AirAsia promoter Tony Fernandes along with the newly-appointed Chandilya could be making a trip to India as soon as next month. Fernandes has not yet met aviation minister Ajit Singh ever since March when his airline formed a JV with the Tata Group and relatives of steel baron LN Mittal to launch a new budget airline in India's aviation market. After getting the initial NoC from the aviation ministry, AirAsia India will have to present its plan of operations to sector regulator Directorate General of Civil Aviation (DGCA) detailing manpower preparedness, operational plan and safety arrangements through various manuals. This could take a minimum of a month at its fastest. The JV, where AirAsia will hold 49%, received prompt clearance from various government arms despite opposition from the aviation ministry on April 4. AirAsia plans to start operations by December with 3-4 A320 aircraft from its base in Chennai and would scale up quickly.

• Marquee brands set to jazz up fashion street: A number of marquee fashion brands such as H& M, Uniqlo and GAP are waiting to take a plunge in the Indian market with the government allowing 100 per cent foreign direct investment in single- brand retailing. And domestic and global brands, which are already present in the casual- wear segment in India, admit they are getting ready for tougher competition. “The game will change substantially for brands selling products in the ₹ 2000- plus bracket. Brands such as Lee and Wrangler will see a new set of competition and private label brands of department stores will see new rivals,” says Darshan Mehta, chief executive of Reliance Brands, a unit of Reliance Industries which has agreements with international brands such as Diesel, Paul & Shark, among others. Department stores such as Pantaloons and Tata- owned Westside have private label- led strategy wherein over 80 per cent of their merchandise comes from private labels. About 15 per cent of Shoppers Stop’s revenues come from private labels. Jaideep Shetty, chief executive of fashion chain Mineral, says the entry of new fashion chains will open up new markets, forcing Indian retailers to review their strategies. “Most Indian retailers have diffused positioning today whereas chains such as H& M, Zara, Uniqlo have crystal- clear positioning. That’s why when Zara came in, women were forced to go and shop at its stores,” Shetty adds. Arch rival of Zara, and known to replace fashion frequently like its competitor, Swedish retailer H& M Is known for competitive pricing and tieups with fashion designers and celebrities for new lines. H& M has already applied for a single brand retailing operations in India and believed to have booked stores here. H& M, which opened its first store in the same year when India got independence, runs 2,800 stores spread across 49 markets. The H& M Group includes H& M and H& M Home as well as COS, Monki, Weekday, Cheap Monday and &Other Stories. Uniqlo, owned by Japan listed Fast Retailing, is known for basic, functional and technologically advanced clothing and new clothing materials such as HEATTECH and Silky Dry. It rose from roadside chains to one of the biggest apparel retailers in Asia. Uniqlo runs 2327 outlets worldwide. Though not announced, Uniqlo is believed to be in talks with textile and apparel company Arvind for Indian entry. Gap Inc, one of the largest casual- wear brands is also believed to be entering India next year. It has brands such as Gap, Banana Republic, Old Navy, Piperlime, Athleta and INTERMIX – and runs 3,100 stores world over. Incidentally, Zara, the global rival to H& M, Uniqlo and Gap, already runs 10 stores in the country in a joint venture with Tata’s Trent. The Spanish brand has already achieved profitability despite being here for just three years. Prashant Agarwal of Wazir Advisors says: “ The existing retailers have to catch up with the new chains in terms of better ambience, compeititive pricing, better service, otherwise they are dead.” But Indian retailers say they are ready for the challenge. “The strong and established brands will have to consistently strengthen their core positioning while upgrading retail experience,” says Sooraj Bhat, brand head at Allen Solly, a brand of Madura Fashion & Lifestyle. Bhat says as a part of brand enhancement, Madura has created a new retail identity ayear ago. This was followed by Allen Solly’s new logo and brand identity. “ And we will continuously come up with the latest products that are in trend such as the ‘ Colour Lab’ launched for Spring Summer 13 season,” Bhat says. Others are looking at business opportunities when the new chains come in. Adds Govind Shrikhande, managing director of Shoppers Stop: “If single brands like Uniqlo comes in, we would be happy to create a shop- in- shop for them. We do not see them as counter competition but as co- competition,” Shrikhande adds. Retailers such as Shetty say mall developers will bend over backwards to lease their space to brands such as H& M and Uniqlo which have high brand recall. Zara gives a percentage of sales to mall owners wherever it is present and never gives fixed rent. I believe even its rivals get good rates from malls,” Shetty says. According to industry sources, Zara pays 6to 7 per cent of its sales to mall owners as rent.

International:

• Twitter tightens security after recent hacking spate: Micro-blogging site Twitter says it is bringing in an optional two-step login for users to beef up security following recent high-profile breaches. The company said it would introduce the new system "to make sure it's really you" when a user signs in. Recent attacks broke into news organisations' accounts, such as the Financial Times and the newswire service the Associated Press (AP). One tweet sent from AP's hacked account said President Obama had been injured. Some attacks have come from political organisations, notably the Syrian Electronic Army, which appears to act in support of President Assad's government. It claimed credit for hacking several news organisations, including AP.

• Survey: Teens' enthusiasm for Facebook is waning: There's fresh evidence that American teenagers may be growing weary of Facebook. They don't like the fact that their parents, grandparents and other adults are also there, diluting Facebook's "cool" factor. They complain about their friends' oversharing, and about too much "drama" on the site. And they're increasingly flocking to other social platforms, such as Twitter. These are some of the findings of a new Pew Research Center survey of U.S. teens' social media use. Released Tuesday, the survey finds that teens are sharing more personal information on social media, but are also taking a variety of steps to manage their privacy online. But it was the Facebook stuff that generated the most headlines. According to Pew, focus-group discussions with teens revealed "waning enthusiasm" for Facebook for the reasons cited, including feeling "drained by the 'drama' that they described as happening frequently" on the site. "The stress of needing to manage their reputation on Facebook also contributes to the lack of enthusiasm," the survey said. The Pew survey found that 24% of online teens now use Twitter, up from 16% in 2011. Other social platforms such as Tumblr, Instagram (which is owned by Facebook), YouTube and Snapchat also have seen big growth among young users in the past year. "Those teens who used sites like Twitter and Instagram reported feeling like they could better express themselves on these platforms, where they felt freed from the social expectations and constraints of Facebook," the Pew survey said. "Nevertheless, the site is still where a large amount of socializing takes place, and teens feel they need to stay on Facebook in order to not miss out." Facebook has 1.1 billion users worldwide and remains the most popular social network among U.S. teens. A Facebook spokesperson declined to comment specifically Wednesday on the Pew report but pointed to statements by CFO David Ebersman in a recent conference call about quarterly earnings, in which he emphasized Facebook's popularity among users under 25.

• ESPN says layoffs will make company more competitive: Sports media giant ESPN gave some of its 7,000 employees pink slips on Tuesday, the network said in a statement. The Bristol, Connecticut-based company said it was looking at the financial bottom line. "We are implementing changes across the company to enhance our continued growth while smartly managing costs. While difficult, we are confident that it will make us more competitive, innovative and productive," the statement said. Some media reports placed the number of affected employees and open positions that would go unfilled as high as 400. ESPN had no comment on how many people would be let go. ESPN, which operates eight domestic networks and 27 around the world, is 80% owned by Disney. It reported higher revenues from its cable networks in the last fiscal year. But it also said that increased programming costs were due largely to the rising costs of the rights to cover sports such as college and professional football. The sports website Deadspin, which first reported the story, said many of the layoffs are in the technology department but quoted a source that said all departments are "under review."

• Gilt Names Joanna Dubin Japan CEO: Gilt Japan has tapped Joanna M. Dubin as chief executive officer and representative director effective June 1, replacing Peter Glusker who will rejoin Gilt in the United States and become vice chairman of Gilt Japan. Dubin has been general merchandise manager of Gilt Japan since November 2010. “We have seen tremendous growth of the Japan business over the last few years,” said Michelle Peluso, ceo of Gilt. Gilt Japan is Gilt’s sole stand-alone international site, launched in March 2009, two years after the core U.S. business. In October 2011, New York-based Gilt entered into a 50/50 joint venture agreement with SoftBank Group for the Japanese unit. Dubin, who is based in Tokyo, was earlier in her career a senior director of merchandising for online at Coach and a senior director of merchandising for Japan and Southeast Asia at Ralph Lauren.

• Kenneth Cole Names Helaine Elias: Kenneth Cole Productions Inc. has tapped Helaine Elias as president of Kenneth Cole men’s and women’s wholesale apparel, a newly-created role. Most recently, she was president of contemporary at Jaya Corp., where she was in charge of such brands as Elizabeth and James, Textile by Elizabeth and James and PJK. Before, she was president of sales and merchandising at Elie Tahari. Earlier in her career, she served in senior roles at Donna Karan International and Calvin Klein Inc. She also once ran her own contemporary brand called Catalyst New York. At Kenneth Cole, Elias will oversee all areas of sales and merchandising for both men’s and women’s Kenneth Cole and men’s Kenneth Cole Reaction. “The opportunity to further develop the wholesale business is tremendous, and Helaine’s combination of experience, both as a leader and an entrepreneur, gives her a unique perspective on how to grow the business most effectively,” said chairman and chief executive officer Kenneth Cole, to whom Elias will report.

• J.C. Penney Raises Additional $500M: J.C. Penney Co. Inc. has an extra $500 million to play with. The troubled retailer finalized a five-year $2.25 billion term loan, which was arranged by Goldman Sachs and is secured by its real estate. The loan is $500 million bigger than the financing package Penney’s laid out on April 29. The funds will be used for general corporate purposes and to pay off $242.8 million in debt coming due in 2023. Penney’s needed to clear that debt to make way for the larger loan and agreed to pay bondholders $1.45 on $1 of principal outstanding. “We appreciate the strong demand from investors and their confidence in J.C. Penney’s future,” said Ken Hannah, chief financial officer. “This new funding gives us the financial flexibility to pursue our plans to put the company back on a path to profitable growth."