Daily News Digest- 16th July'14

Thought of the Day:

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Following made the Headlines:

India:

• Airfare war: Fresh round for Aug-Sept: In the latest limited period flash sale, low-cost carriers IndiGo, SpiceJet and GoAir are offering domestic tickets starting from an all-inclusive fare of Rs 1,999. The tickets under this scheme will have to be booked by Thursday for travel between August 18 and September 30, 2014. The offer, launched by SpiceJet, was quickly followed by IndiGo and GoAir with fares plummeting by anywhere between 50% and 80%. IndiGo, for instance, is offering fares of Rs 1,999 to Rs 3,999 on certain sectors; in some others, fares begin from as low as Rs 1,699. “The sale aims at boosting travel during the lean period,“ Yatra president Sharat Shall said. This is an excellent of fer for someone who wants to take a quick break before the high fares of the festive season kick in,“ Shall added. MakeMyTrip CEO Rajesh Magow said: “Travellers can receive discounts ranging from 50-80% depending on the sector.“ SpiceJet has been coming out with such a discount offer every few weeks with other airlines quick to follow it. “This is a sign that some carriers are desperate to raise funds by any means. The losses of airlines will compound thanks to these frequent offers, which for the first time were given during peak travel season also (earlier this year),“ said an airline official.

• Apple's Record iPhone Discount: Apple is offering record margins of 13-15% to retailers and resellers for its flagship iPhone 5s as it aims for the 1-million-unit-sales mark in India by the time its fiscal year closes in September. The usual Apple and industry trade margin is 6-9%. The unprecedented margin is being offered to retailers ordering more than usual, such as online sellers and large stores, report Writankar Mukherjee & Sagar Malviya.

• AB Group Likely to Merge Retail Biz, Create One Listed Company: Kumar Mangalam Birla has embarked on a large plan to restructure the retail business of Aditya Birla Group and create one listed behemoth for this vertical. Sources with direct knowledge share that KM Birla aims to de-merge Fashion & Lifestyle vertical from Aditya Birla Nuvo and create a retail umbrella company led by Madura Garments. Sources share that Madura Garments, Pantaloon Fashion & Retail, Jayashree and More are likely to be merged as part of the process. Aditya Birla Group in an e-mail response to ET NOW's query said, “We do not comment on market speculation.“ Aditya Birla Group has already initiated the first step to unlock value in the retail business. The Group is in talks with large private equity players like KKR, Carlyle, Apax, Temasek, Blackstone to sell a minority stake in the company. A source indicates that KM Birla's company may be expecting to raise about 3,000 crore by selling close to 20% stake in the retail busi ness to at least two private equity firms. The PE deal is expected to set the valuations for the de-merger of the Fashion & Lifestyle vertical from Aditya Birla Nuvo. “AB Nuvo shareholders will get shares in the retail company as part of the de-merger“ a source pointed out. None of the private equity firms mentioned above offered a comment on the development. Aditya Birla Nuvo is set to see big changes with the current developments at the Group. Sources say that Aditya Birla Group thinks that the time is right to unlock value in the retail business. Fashion & Lifestyle vertical of AB Nuvo had clocked revenues of 6,048 crore in FY15 which is 29% of AB Nuvo's total revenues. EBITDA for FY15 in the verti. 573 crore, contributing 15% to cal is at the company's total EBITDA.

• World Cup Takes Social Media by Storm, India Fifth on Twitter: Twitter and Facebook have scored new records during the FIFA World Cup, as soccer fans and others got into the social media to discuss everything from Robin van Persie’s magic goal to Neymar’s injury and Lionel Messi’s miss in the final. As many as 672 million tweets related to the tournament were sent out in the past one month. And on Facebook, during the June 12–July 13 World Cup, more than 350 million people had conversations around the topic, generating three billion interactions, including posts, comments and likes. Sunday’s final generated 32.1 million tweets. But there were more tweets — 35.6 million – during the Cup-defining Germany-Brazil semi-final game, making it the most-discussed event in sporting history, said the microblogging site. Aneesh Madani, head of sports at Twitter India, told ET: “India is a top 10 global market for Twitter and this was reflected in activity around the World Cup as well.“ From Mario Balotelli's cheeky tweet to Lukas Podolski's selfie after the final, the live, public conversation allowed football fans to get up close and personal with all 32 teams and more than 300 players who were engaging on the Twitter platform. “India was responsible for nearly 3.2% of the entire buzz on Twitter and came in at the fifth position when it came to discussing the final,“ said Bangalore-based Bhupendra Khanal, chief executive of social media aggregation company Simplify360. Argentina's Messi was the most discussed player, while Germany was India's choice for the final.

• AI's Operating Loss Narrows to Rs. 2,120 crore: Air India almost halved its operating loss last year and the state-owned carrier's financial performance is continuing to improve, the government said on Tuesday. Air India, with a share of around 20% of the Indian airline market, made an operating loss of 2,120 crore ($353 million) in the 2013-2014 fiscal year, down from 3,800 crore a year ear 5,140 crore in 2011-2012. Total postlier and tax losses at the indebted airline, however, came in at 5,380 crore, down slightly from a year earlier. All but one of the country's main carriers are losing money.

• IndiGo's Rs. 2,404-cr IPO Moves Closer to Takeoff: Low-fare carrier IndiGo has finalised seven banks to raise up to $400 million Rs. 2,404 crore) via its maiden public sale of shares, two sources in the know said. It aims to sell 25% stake while being valued at $1.6 billion to $2 billion (9,600 crore to 12,000 crore), they added. The banks include Citigroup, Deutsche Bank, JP Morgan, UBS, Standard Chartered, Morgan Stanley and Kotak Mahindra. ET had reported on July 3 that nine banks had shown interest in managing the offer. The company aims to list towards the end of the current financial year. Senior executives at the airline didn't respond to queries. “An IPO brings a certain sense of prestige and accountability which will make it easier for IndiGo to go for future rounds of fundraising. Also the widely held ownership reduces individual risk,“ said Pranav Haldea, managing director of Prime Database, which tracks India's primary markets. IndiGo's planned valuation is slightly higher than Jet's, which was valued at $1.58 billion (9,500 crore) by Etihad, which last year bought a 24% stake in it for $379 million. The shares were valued at a 32% premium to their market price. Jet's market cap as of end Tuesday was 2,863.2 crore. In 2010, when media baron Kalanithi Maran bought 58% in SpiceJet 38% and a further 20% through an open offer -he valued the airline at over $400 million. Since then the airline has lost millions, announcing record losses during the last financial year. Its market cap as on Friday close was 960.3 crore. Experts have said IndiGo can't be valued using the same benchmarks as its peers. The airline is part of, but exceptional, to an industry which is reeling under losses and bleeding cash, making it extremely difficult for most players to get investment or attractive valuations. The Rahul Bhatia-controlled carrier has weathered the downturn much better than its peers notching a net profit of 787 crore for the fiscal year 2012-13, up six times over the previous year. Revenue rose 65% to 9,458 crore. It hasn't de crore. It hasn't declared its results for the fiscal year ended March 2014, but experts said bottom lines would be impacted primarily due to price wars with competitors such as SpiceJet, which would have dented margins.

• HK fund backs furniture e-tailer Urban Ladder: Bangalore-based online furniture store Urban Ladder has raised $21 million (Rs 120 crore) in a funding round led by Hong Kong-based Steadview Capital, which recently invested in taxi service startup Olacabs. Other existing investors SAIF Partners and Kalaari Capital have also participated in the e-tailer’s latest fund-raise as it looks to aggressively expand its presence from seven cities to about 25 over the next one year. Urban Ladder competes with other online furniture retailers including Pepperfry and Rocket Internet-backed FabFurnish in a category which is growing steadily and has attracted interest from ecommerce biggies like Flipkart and Snapdeal. The impending launch of Swedish furniture and homeware giant IKEA is likely to stir up the largely unorganized furniture market estimated to be $8-10 billion strong. Founded by IIT & IIM graduates Ashish Goel and Rajeev Srivatsa two years ago, Urban Ladder had so far raised $6 million through two rounds of funding. Besides expanding across multiple cities and launching adjacent categories like lighting, floor and wall solutions, the online retailer is in the process of setting up what it calls UL Labs. “We want to make that transition from selling products to offering technology-driven, user-curated solutions to make spaces more beautiful for home owners. It’s like an R&D team that we have set up to give customers more than just products,“ Goel, CEO & cofounder, Urban Ladder, told TOI. “We believe Urban Ladder is well positioned to leverage technology in order to become the leading furniture company in India,“ said Ravi Mehta, MD at Steadview Capital, which is an India-focused investor backing the country's new-age entrepreneurial stories.

• E-retailers blend it right for tea connoisseurs: For most Indians the day cannot begin without a steaming cup of chai. Yet very little has changed in the way tea has been sourced, delivered or branded in the country over the past hundred years. A small group of online retailers are out to change this, giving discerning Indian consumers access to exotic varieties like China's oolong and South Africa's rooibos. "Our philosophy is to celebrate Indian teas and introduce different types of teas to consumers," said Snigdha Manchanda, founder of Goa-based Tea Trunk that started retailing tea blends online last year. "In India, the legacy has been around tea trading and not around building a tea brand." So far, tea has been a legacy industry in India with the British starting cultivation in the 1820s. It is also among the oldest organised industries in the country with an established distribution network of producers, auctioneers, wholesalers, exporters and distributors. Yet, the industry has remained almost in a time-warp. Globally, companies like Teavana have been catering to an online clientele. Teavana, which was acquired by coffee chain Starbucks for $620 million in 2012, runs an online store apart from offline retail outlets. In India, companies like Tea Trunk, World Tea Room, Goodwyn Tea, Beveragewala and Teaamo have all turned to the online channel to reach out to a niche but growing base of online tea buyers. What binds them together is a passion for speciality teas.

• Reviews42 raises second round of funding; rebrands itself as “Zopper”: Online consumer products research platform Reviews42 has raised 5 million of Series B funding from Tiger Global Management LLC and Nirvana Venture Advisors. The funds will help the company in further development and innovation in products, building the team and enhancing infrastructure. Apart from raising their second round of funding, the company has rebranded itself to 'Zopper', signifying the broad capabilities offered by their platform across comprehensive price comparison, product discovery and user reviews. The company raised an undisclosed amount in the previous round of funding from Nirvana Venture Advisors, Blume Ventures & others in April last year. Speaking on the funding Neeraj Jain, co-founder, Zopper, said, "This round of funding would be utilized to build up our products, team and technology to seamlessly integrate offline retailers.""Our potential for growth is immense. The total addressable product related retail market is around $100 billion. With increasing smartphone penetration and trends like ROPO (Research online, Purchase Offline) and Showrooming on the rise, we are bullish on further growth. I feel we are at a vantage point of connecting online with offline. This round of funding enables us to get associated with the leading international investor, Tiger Global. The association will help us to get a wider exposure, which will be the biggest value for us. " said Surjendu Kuila, co-founderZopper. Since its inception in 2011, Zopper has encouraged users to share their product experiences with the community, which consists of shoppers and product experts.

International:

• US Retail Spend, Factory Data Hint at Recovery: A gauge of US consumer spending rose solidly in June, in the latest sign that the economy ended the second quarter on a firmer footing. The momentum appeared to have carried into the third quarter, with other data on Tuesday showing factory activity in New York state having expanded sharply in July. The commerce department said core sales, which strip out automobiles, gasoline, building materials and food services, increased 0.6% last month after rising an upwardly revised 0.2% in May. Core sales were previously reported as being flat in May and economists expected them to rise 0.5% in June.

• Hewlett-Packard interim chairman Whitworth resigns: Hewlett-Packard's interim chairman Ralph Whitworth has resigned from the company's board to concentrate on personal health issues. Whitworth's resignation is effective on Wednesday. Personal computer maker HP said that its board will discuss appointing a new chairman at its next meeting. Whitworth became HP's interim chairman in April 2013 after former chairman Ray Lane stepped down from his post. At the time that Lane stepped down, HP also announced that directors John Hammergren and G Kennedy Thompson were leaving the board. The shake-up was spurred by disgruntled stockholders unhappy with HP's performance. Whitworth, an activist shareholder, has served as an HP board member since 2011. He is also taking a leave of absence from the privately held investment company he co-founded, Relational Investors. Hewlett-Packard Co. is based in Palo Alto. Its stock fell 14 cents to $34.01 in premarket trading on Tuesday.

• Yahoo profit declines due to disappointing ad sales: Internet giant Yahoo reported that profit decreased by 18% to $270m (£157m) during the three months to the end of June. Revenue also fell, dropping 3% to $1.08bn. Most of the decline was due to a sharp drop in digital display advertising, which plunged 8% in the second quarter. Our top priority is revenue growth and by that measure, we are not satisfied with our results," said chief executive Marissa Mayer in a statement. The price-per-ad - that is, the amount Yahoo charges advertisers for digital display advertisements - fell 24%.

• H&M N.Y. Flagship to Sell All Offerings: When the world’s biggest H&M opens Thursday, at Fifth Avenue and 48th Street in Manhattan, customers will see all the retailer’s product categories under one roof for the first time in the U.S. The offerings include men’s and women’s sportswear and ready-to-wear, lingerie, underwear, accessories, children’s wear, newborn apparel, special sizes, maternity apparel, cosmetics and the home collection. The flagship weighs in at 57,000 square feet. But it will be unseated as the biggest store later this year when a 63,000-square-foot unit opens in Herald Square. On Tuesday, construction crews, painters and merchandisers were putting the finishing touches on the store. Cleaners were wiping the escalator steps, and visual-display staffers were giving the main floor’s 100 mannequins a once-over. The 45-foot atrium features mannequins clustered in groups and dressed in black or white, for impact. On the 470-square-foot LED screen, images flashed of Jeff Koons’ balloon dog with the message, “Fashion Loves Art.” The new H&M flagship is closely associated with Koons, whose current retrospective at the Whitney Museum of Art is sponsored by H&M. The artist designed a limited-edition handbag featuring his iconic Balloon Dog (Yellow). Two balloon dogs also grace the facade of the building. The retailer said they would remain in place for about another week.

• Fred Segal Headed to Tokyo: Fred Segal has found its Tokyo home. The company’s “international lifestyle center” format, featuring a cluster of stores, will open in three buildings in a converted railway site at 13 Daikanyama-cho Shibuya-ku, Tokyo in spring. This will be Fred Segal’s first move outside the U.S. The stores will sell luxury men’s and women’s apparel and accessories, and home and lifestyle categories. The assortment will include Fred Segal’s own merchandise and outside brands leaning toward local and international up-and-coming designers to “engage Japan’s trendsetters,” the company said. There will also be a spa and a café to further reflect Fred Segal’s connection to Southern California culture. The store is the first in a long-term partnership between Sandow, the owner of Fred Segal, and Mark Styler Co. Ltd., to launch Fred Segal throughout Japan. “The original Fred Segal stores in L.A. have always appealed to the Japanese consumer who has an appreciation for cutting-edge style and Southern California culture,” said Paul Blum, chief executive officer of Fred Segal.  Additional retail locations in other Japanese cities in the form of flagships, lifestyle centers or branded boutiques within major, high-end department stores are being planned. Fred Segal, known for its innovative merchandising and celebrity clientele, has three L.A. locations, and will open seven stores in Las Vegas in August. Fred Segal is majority-owned by Sandow, along with minority investor Evolution Media Partners, which is a venture of Hollywood talent agency CAA, private equity firm TPG Growth and Participant Media.

• U.S. Retail Sales Rise in June: Sales at specialty chains, department stores and general merchandisers rose across the board in June, in line with a modest increase in retail sales in the overall economy, the Commerce Department’s monthly report showed Tuesday. Apparel and accessories stores posted a seasonally adjusted 0.8 percent increase in sales to $21.2 billion last month, while department store sales gained 0.2 percent to $14.1 billion. Sales at general merchandise stores, a category that includes department stores, rose 1.1 percent to $56 billion in June. “It was clearly a good month for apparel and accessories stores, up 0.8 percent,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics. “Things seem to be picking up for this segment.” Hoyt noted that year-over-year sales growth was 2.9 percent, the strongest uptick since October. “The trend is very favorable for apparel and accessories stores, which have had three big months of growth out of the last four,” Hoyt said. The same trend holds true for general merchandise stores, which posted a 3.4 percent sales gain compared with June 2013, Hoyt said. Although department stores saw a 0.1 percent year-to-year decline, it is an improving trend because the pace of declines is slowing, he noted. “June retail sales reinforce the renewed strength of consumer confidence and marked increases in retail employment over the last few months,” said Jack Kleinhenz, chief economist at the National Retail Federation. “The upward revisions in April and May have provided positive signs of momentum for second-quarter growth after a dismal first quarter.” In the overall economy, retail sales rose 0.2 percent to $439.9 billion in June, falling slightly below economists’ expectations.

• Alibaba's Jack Ma Thinking (Really) Big: Jack Ma, executive chairman and founder of Chinese e-commerce giant Alibaba Group, is known for thinking big and attendees at a business conference here got a sense of just how audacious his ambitions are: He wants to be bigger than Wal-Mart Stores Inc. “I remember seven or eight years ago, maybe six years ago, I was drinking and chatting with a senior executive of Wal-Mart. I said that in 10 years, Alibaba’s sales revenues will surpass Wal-Mart’s. He said, ‘Young man, you have a vision, but take it slow. It will probably take at least 50 years.’ Today, we are getting closer and closer,” Ma said, speaking at a conference organized by Japanese telecom and technology company SoftBank Corp., which is also a significant Alibaba shareholder.  Alibaba, a company that values itself at $130 billion, is gearing up for a stock market listing in New York later this year that could raise as much as $20 billion, making it one of the biggest initial public offerings in history. Its revenues for the year ended March 31 grew 52 percent to $8.44 billion (with profit of $3.6 billion). Wal-Mart, the world’s largest retailer, saw its sales for the year ended Jan. 31 grow 1.6 percent to $473.1 billion. “I did not expect that today we have the similar scale as Wal-Mart. But think about it, in the next 10 years, there will be one company in the world whose gross merchandise volume will first surpass $1 trillion. In the past, people did not expect Wal-Mart’s sales revenue could reach $500 billion. It is scary. [Wal-Mart’s] $500 billion would require several million staff. It’s huge. Alibaba probably only needs 30,000 employees to create sales revenue as big as Wal-Mart’s. In order to have 10,000 more customers, they need to buy a big piece of land and buy a lot of equipment and stuff. We only need three more servers,” he told the crowd assembled at SoftBank World 2014. Alibaba’s model is distinct from other digital powerhouses, including Amazon, eBay and Twitter. It controls a series of companies that play an important role in the Chinese digital consumer’s life, yet it has no physical infrastructure, unlike Amazon. It doesn’t own any inventory, warehouses or manage shipments, but it connects consumers with brands via its various subsidiaries, Taobao, Tmall.com and microblogging site Weibo. It also has its own payment system, Alipay. The company’s cash flow comes predominantly from advertising. Ma, who addressed the crowd in Chinese, stressed the importance of not being afraid to think big and take risks. He recalled the struggles he faced in the early days of founding his own company.