Daily News Digest- 16th Sept'14

Thought of the Day:

Today in History:

Following made the Headlines:

India:

• HUL in Talks with Everstone to Jointly Run Modern Foods: India's largest soaps and detergent maker Hindustan Unilever has begun talks with private equity fund Everstone Capital for a possible equity joint venture for its Modern Foods division which makes bread and rusks under the Modern brand, three people involved with the plan said. The move by the private equity fund, which jointly owns the India franchise of the American Hamburger restaurant chain Burger King, is to drive synergy from Modern Foods for the quick-service restaurant chain, these people added. “HUL wants to partner with Burger King and has approached the India franchise for a possible equity partnership,“ a person with direct knowledge of the development said. “Depending on how the talks progress, a complete sellout can't be ruled out.“ An Everstone spokesperson did not respond to an emailed questionnaire from ET. Last year, Everstone Capital, that manages more than $1 billion in Indiafocused PE fund, won the India franchise Burger King as part of its plan to invest in the Indian consumption space. The fund will soon open its first outlets in Mumbai and Delhi NCR and slowly grow the network to the Tier-II and -III cities where its rivals, McDonalds, Pizza Hut, Dominos and Yum brands have already established their presence in the $48-billion industry. “The deal values the bakery business anywhere between 200 crore and 250 crore,“ an investment banker with knowledge of the development said. “As a policy, we do not comment on future business plans and hence have no comments to offer for your query on future growth plans of Modern Foods,“ an HUL spokesperson wrote in an email. HUL's bakery business sells variants of white, brown, milk and whole grain breads along with cream rolls, fruit breads, buns, cakes, cookies and rusks. The 42-year-old brand com mands more than 45% of the market share. “Partnering with a large Indiafocused private equity fund will help the bakery business expand and increase its market share further,“ a third person involved in the deal said.

• Hero MotoCorp Plans Rs 2,200-Cr Plant in Andhra: India's largest two wheeler maker Hero MotoCorp plans to invest 2,200 crore to set up a manufacturing plant in Andhra Pradesh, according to a senior official. The state Cabinet on Monday cleared allotment of 600 acres near Sri City integrated business city in Chittoor district to Hero MotoCorp, steeling a march over neighbouring states to host the factory. Hero MotoCorp MD and CEO Pawan Munjal had said in June that the company was looking at setting up one of its largest facilities in south India for the local market. The announcement saw Telangana, Karnataka and Tamil Nadu woo the two-wheeler giant with competing incentive packages. “The top leadership of Hero MotoCorp led by Pawan Munjal met Andhra Pradesh chief minister in Delhi last week and entered into a preliminary agreement to set up the project in the southern part of the state, which may be entitled for central incentives as a part of the erstwhile AP state bifurcation Act,“ the Andhra government official said. Hero MotoCorp could not immediately be reached for comment. A top executive of Sri City, which houses corporates such as Cadbury, PepsiCo, Kellogg's, Colgate Palmolive, Alstom and Isuzu Motors, said Hero MotoCorp new plant will provide employment to around 9,000 people. “Though the land the AP government has agreed to allot is next to our integrated business city belonging to the AP Industrial Infrastructure Corporation, Hero MotoCorp would use our infrastructure for most of its operations,“ the executive said, requesting anonymity. The proposed plant, which will have a capacity of 1.8 million units, will be Hero MotoCorp's sixth facility and will take the company's overall annual capacity to 12 million units.

• JET AIRWAYS, QATAR OFFER STEEP DISCOUNTS ON BIZ CLASS: The price war in the skies has spread to the business class. Jet Airways and Qatar Airways are offering huge discounts in a desperate bid to take on Emirates and Singapore Airlines whose recently started A380 flights are scooping passengers in big chunks. Jet Airways is offering all-inclusive one-way business class fares to London at just 28,382 from Delhi and 27,727 from Mumbai, which are just one fourth of usual business class fares and almost half of regular economy fares. The offer is effective for bookings between September 16 to 18 for travel between October 16, 2014 and July 31, 2015. Under the same offer, one can fly to Singapore in business class at just 18,672 from Delhi and 18,282 from Mumbai, about one-third of normal fares. Jet, however, clarified that none of these fares are valid on flights that operate via its new international hub Abu Dhabi. The airline made Abu Dhabi its global hub after selling 24% stake to Etihad last year. Earlier in the day, Qatar Airways wrote to travel agents offering an up to 25% discount on all its 130 direct and indirect destinations from India on economy, business and even first classes on bookings made till September 17 for travel between September 21 and June 15, 2015. Industry experts said poor demand has forced airlines to this. “Demand is a problem. Business class seats for many airlines have been going empty or half full at best,” said an industry watcher who didn’t want to be named.

• IITs may Soften Admission Criteria, Tweak Top-20 Percentile Rule: The Indian Institutes of Technology (IITs) have proposed a change in admission criteria barely two years after the premier engineering schools adopted a new format at the behest of Kapil Sibal, then human resource development minister under the previous UPA government. The IITs are in favour of tweaking the requirement that candidates have to be in the top 20 percentile in their Class XII exams in order to be eligible for admission, amid criticism that the condition is shutting many deserving candidates out. The Joint Admission Board (JAB) of the IITs -comprising heads of the institutions -met last week in Mumbai and proposed to accommodate such candidates who have been rejected despite cracking the entrance test. The proposal suggests according some weightage to a candidate's aggregate marks in board exams. ET spoke to two IIT directors who confirmed this on condition of anonymity. The JAB proposal will be discussed at the meeting of the IIT Council -the highest decision-making body of the 16 engineering schools -on September 22, which will also be attended by Smriti Irani, Sibal's successor as HRD minister. If approved, though, the change won't be applied retrospectively. Currently, candidates are admitted to the 16 IITs based on their performance in the Joint Entrance Exam or JEE (Advanced) besides which they have to be in the top 20 percentile in Class XII. The second condition has often been criticised for leading to a peculiar predicament that students of school boards that are more generous with marks find themselves facing. Students from Andhra Pradesh, Tamil Nadu and Kerala are usually regarded as the worst hit as the top 20 percentile cut-off for their state boards usually hovers around, or is above, 90%. In 2013, which was the first year of the new eligibility criteria, an Andhra Pradesh student with 91.1% could not get admission to the civil engineering course at IIT Bombay because the top 20 percentile cut-off mark for the state board exam was 91.8%. According to an IIT director, about 240 aspirants could not gain entry into IIT this year despite securing an impressive all-India rank in JEE (Advanced) as they fell short of the percentile condition.

• India to be Test Bed for Google's New Projects: India will be the proving ground for many new initiatives by Google, the company's highest-profile Indian-origin executive said, highlighting the Internet giant's commitment to one of the world's biggest markets for technology. On Monday, the Chennai-born Sundar Pichai launched cut-rate smartphones based on Google's Android One software tailored for India and likened the opportunities in this country to China, the world's second-largest economy . “Like we are doing with Android One, we would want to do more such things India-specific. Just because of the scale and scope of the market,“ said Pichai, 42, a senior V-P who oversees the Chrome browser and apps. “You have seen what is happening in China, and you have seen how much investment has hap pened. I expect the same to happen for India and I expect Google to do the same.“ At present, India contributes only a tiny fraction ($330 million) of Google's $55 billion revenue, but the country is all the more important because of the company's struggles in China. The US based company has a minuscule share of the search engine market in the Middle Kingdom, and while its Android mobile operating system is popular, most apps are downloaded through third-party stores. “Soon we will be in that phase where it (India) is not just potential but a big market,“ said Pichai, pointing to the country's 500 million Internet us 500 million Internet us ers. “It is a big bet from our side. I think the thing that will really tip over is when I look at the numbers.“ As an example of an India-specific initiative, Pichai, who reports to CEO and cofounder Larry Page, cited the launch of a service to make YouTube work even when there is no Internet connectivity. Pichai, who studied at IIT-Kharagpur, Stanford University and The Wharton School, began his career at Google in 2004.He was the driving force behind Chrome, the browser which eventually became one of Google's most successful products. He then set out to build a whole ecosystem around Chrome -including Chromebooks (laptops running Chrome operating system) and applications that run on Chrome. In many markets, including India, Google has faced tough questions from regulators on issues such as privacy, taxation and alleged anti-competitive practices. Pichai defended the company against criticism, saying it is not uncommon for a large company to face such scrutiny. All the same, “We never ever forget that we exist and do well because users trust us,“ he remarked.

International:

• Heineken Leaves SAB More Vulnerable to InBev Bid: SABMiller Plc's failure to erect a defence against Anheuser-Busch InBev NV (ABI) by combining with Heineken NV (HEIA) has left the world's second-largest brewer even more vulnerable to a takeover by the industry leader. Heineken said on Sunday that it rejected an approach from London-based SABMiller, an overture that intended to help fend off a possible bid for the Miller Lite maker by AB InBev, according to people with knowledge of the matter. SABMiller is assessing its next move, the people said, yet its options are now more limited and the ball is in the Belgian giant's court to move forward with a long-speculated takeover. “That SABMiller's inorganic options have been so publicly lessened puts ABI in an even stronger position, should it choose to make a move on SABMiller,“ Eddy Hargreaves, an analyst at Canaccord Genuity, said in a note on Monday. “SABMiller shareholders may be even more likely now to welcome a bid.“ Karen Couck, a spokeswoman for AB InBev, declined to comment, as did SABMiller spokesman Richard Farnsworth. SABMiller shares surged as much as 13% in London on Monday, the most in almost 12 years, as speculation of an offer from AB InBev intensified. The gain boosted SABMiller's market capitalisation to more than 61 billion pounds ($99 billion), a valuation that would make a deal the industry's biggest ever.

• Alibaba raises IPO price range to $66 to $68 apiece: Alibaba now plans to raise up to $25.03 billion in its upcoming IPO, making what was expected to be the biggest stock market debut even bigger. The Chinese e-commerce company said it still plans to sell 368.1 million shares, but at $66 to $68 apiece, according to a regulatory filing, instead of its previously set range of $60 to $66 apiece. Alibaba Group Holding Ltd. has emerged as a hot commodity because of its e-commerce bazaar, a shopping magnet for businesses and consumers alike as China's economy steadily grows. The company's network of sites includes Taobao, Tmall, and AliExpress, as well as Alibaba. Most of Alibaba's 279 million active buyers visit the sites at least once a month on smartphones and other mobile devices, making the company attractive to investors as computing shifts away from laptop and desktop machines. Investors have been salivating over the trifecta of growth that Alibaba offers: "There are very few companies that are this big, grow this fast, and are this profitable," said Wedbush analyst Gil Luria. He initiated coverage on the company with a 12-month price target of $80. The company's revenue in its latest quarter ending in June surged 46 percent from last year to $2.54 billion while its earnings climbed 60 percent to nearly $1.2 billion, after subtracting a one-time gain and certain other items. Alibaba has been meeting with potential investors over the past week, and demand spurred the increase. Alibaba is expected to be priced late Thursday and start trading Friday under the ticker `BABA' on the NYSE. The fundraising target eclipses the $16 billion Facebook raised in 2012, the most for a technology IPO. It also would top the all-time IPO fundraising record of $22.1 billion set by the Agricultural Bank of China Ltd. in 2010, according to the research firm Dealogic.

• Jean Paul Gaultier pulls out of ready-to-wear clothes: French fashion house Jean Paul Gaultier has said it will stop making ready-to-wear clothes for both men and women. The house, controlled by Spanish perfume maker Puig, said it would instead concentrate on exclusive custom-made clothes known as "haute couture" and its perfume lines. Mr Gaultier, one of the world's best known designers, launched his business in the early 1980s. Puig bought control of the firm in 2011 from Hermes. The firm said its final ready-to-wear collection for spring and summer next year would be launched later this month. It did not comment on the reasons for the closure or how many jobs were likely to be affected.

• Air France says disruption to rise as strike continues: Air France has warned that disruption will get worse as a week-long strike by its pilots continues. It said 60% of its flights were likely to be cancelled on Tuesday as a result of the strike, which began on Monday. The pilots are protesting against a transfer of jobs by the airline to its low-cost European carrier, Transavia, which is being expanded as part of a new strategic plan. Air France is urging passengers around the world to change or postpone travel. It says customers who have booked a flight between 15 September and 22 September can "delay their trip, change their ticket free of charge or claim a refund".

• Ann Inc. Rebuffs Latest Hedge Fund Push: Neither the investment community nor the management of Ann Inc. was moved by the second push by activist investors Engine Capital LP and Red Alder to effect a sale of the retail chain. In a presentation to other Ann shareholders, the hedge funds asserted that a sale to a retailer such as Chico’s FAS Inc., Ascena Retail Group Inc., J. Crew Group Inc. or Fast Retailing Co. Ltd. could generate $60 to $65 a share in proceeds, while a sale to a private equity firm such as Golden Gate Partners, Sycamore Partners or Apax Partners could bring in between $50 and $55 a share. But unlike developments last month when the firms revealed their ideas about ways of unlocking shareholder value and the stock shot up 6.5 percent to $39.94, Ann Inc.’s shares Monday slipped 31 cents, or 0.8 percent, to $40.51 following disclosure of elements of a presentation sent to other shareholders. Ann reacted to the analysis with questions of its own and noted that its “full board has had the opportunity to review the presentation” from the two investors, who together own about 1 percent of the retailer’s shares. “While the board appreciates the input of Engine Capital and Red Alder, none of the analyses contained in their presentation is new to the board,” the company said. “The conclusions that one draws from these analyses depend heavily on various assumptions made. The board continues in a deliberate manner and on an informed basis to consider and determine the courses of action that are in the best interests of all of its shareholders.”

• Macy's Inc. Unveils String of Omni Initiatives: Macy’s Inc. keeps pumping up its omnichannel efforts. On Monday, the department store group unveiled a string of initiatives and technologies ranging from consumer-facing smart fitting rooms to operational innovations like radio frequency identification pilot programs. “We had a lot going on in our company for several years on the subject of omnichannel growth and development,” said Terry J. Lundgren, chairman and chief executive officer of Macy’s Inc. “We recognize the consumer is starting the shopping experience on her phone more and more and doing research of where she wants to shop. They want to come into our stores and try on a dress or a shoe or touch a product. They may go home and buy it on their desktop.” Lundgren said omnichannel is “becoming a bigger and bigger part of our business,” but that the company has stopped trying to break out channels “because we can’t distinguish any more what is a store sale or a mobile sale. It’s blurred. We know customers are online shopping and looking at specific items and we know that same customer used his or her Macy’s card to purchase the item in a store. “We’ve been working on so many initiatives and listening to the customer,” Lundgren added. “The technology vendors are coming to us with their ideas and thoughts because we’re one of the premier omnichannel retailers.”

• Brooks Bros. Goes Tropical for Spring: Brooks Brothers took to the beach for its spring collection. The retailer was inspired by the colors of the seashore, offering pinks, corals and varying shades of blue in its men’s, women’s and children’s offerings. And in keeping with the theme, Brooks Brothers has formed a collaboration with Reyn Spooner, the Hawaiian-based company that is credited with being among the first to develop the prints now commonly referred to as Hawaiian. Lou Amendola, chief merchandising officer, said Brooks Bros. turned to Reyn Spooner for its reverse-printed designs on cotton and is offering men’s unconstructed sport coats, shirts, hats and accessories as well as women’s dresses and skirts with the washed and faded finish. “It’s the icing on the cake for our overall theme,” Amendola said. The women’s collection is big on dresses for spring, many in tropical or poppy prints and men’s wear-inspired fabrics such as broken windowpanes. In men’s, there was more colorful sportswear than in the past, with linen shirts and chinos in equestrian and nautical prints. Seersucker, a signature of the company, showed up in different colors and items, including a slim, black tuxedo with plain-front pants for men. And suits were offered in lighter shades of gray and blue this season. “The tailored clothing business is performing quite strongly at the moment,” Amendola said, noting that young men were embracing the slimmer, more fitted silhouette. There was also an unconstructed double-breasted knit sport coat with gold buttons that Amendola called “the new navy blazer.”

Tech:

• Google launches Android One phones in India at $105: Google has launched in India the first smartphones under its Android One project, pricing them at Rs 6,399 ($105) to capture the low-cost segment of the world's fastest growing smartphone market. The Mountain View-Based company tied up with Indian mobile players Micromax, Karbonn and Spice Mobiles to launch the affordable phones, which are powered by its Android operating system and aimed at emerging markets. After launching in India, Google said it plans to expand Android One to Indonesia, Philippines and other South Asian countries by the end of 2014 and in more countries in 2015. Google outlined the pricing and expansion details in a marketing document seen by Reuters. India is seen as a lucrative market for low-cost smartphones because many people are buying the devices for the first time. Just 10% of the India's population currently owns a smartphone, brokerage Nomura said in a recent research note, and that figure is likely to double over the next four years. Google, however, is not the only company jostling for a share of the Indian market.

• Amazon Runs into Tax Tangle in Karnataka, India: Amazon is facing more trouble from tax authorities in Karnataka who have increased scrutiny of the firm's local operations and issued notices to nearly 50 merchants selling their wares on the firm's site.

• Microsoft to Buy Minecraft Maker Mojang for $2.5 billion for Xbox Play: Microsoft, maker of the Xbox video-game console, agreed to buy Mojang AB, the software company behind the popular game Minecraft, for $2.5 billion, to boost its Xbox and mobile businesses. Microsoft, the world’s largest software maker, said Stockholm-based Mojang will join its game-studio division, though the company’s founders will move on to other projects. The purchase is projected to close late this year, and will break even in fiscal 2015, Microsoft said on September 15 in a statement. Buying Mojang would be the biggest deal struck since Satya Nadella took over as Microsoft’s chief executive officer in February, succeeding Steve Ballmer. The purchase gives him a game that is popular across consoles, computers and mobile devices made by Microsoft and rivals like Apple. It also bolsters a push to woo serious gamers back to Xbox after a lackluster attempt to turn the system into an all-in-one device that serves up broader content such as movies and music. “Minecraft is more than a great game franchise — it is an open world platform, driven by a vibrant community we care deeply about, and rich with new opportunities for that community and for Microsoft,” Nadella said in the statement. Microsoft will continue to make Minecraft available across all software platforms, including personal computers, Apple’s iOS, Google’s Android and Sony’s PlayStation console.

• Adidas unveils smartwatch miCoach Smart Run priced at Rs 24999: German sportswear major Adidas has joined the smartwatch bandwagon with its 'miCoach Smart Run', priced at Rs 24,999, which will allow users to monitor heart rate and play music. The smartwatch, which will be available exclusively on Adidas website, will also allow runners to track their runs using GPS mapping. "There are no cables, straps and additional sensors with this all-in-one device -- Smart Run uses optical technology to track heart rate from wrist, an in-built accelerometer counting every step to help monitor stride rate and GPS to track speed, distance and logs," it said in a statement. The device which would have 1.45 inch color touch screen display also features a MP3 player with Bluetooth wireless audio delivers music and audible coaching guidance to solve problems of flailing headphone cables and music players, it added. Adidas already offers a miCoach app on smartphones. Smart wearables, as a category, is growing globally with the likes of Samsung, Motorola and Apple coming out with their smartphones across various price points. While smartwatches from these firms are not dedicated to healthcare or athletics, most of these support apps like pedometer and heart rate monitor to help users monitor various bodily functions.

• RadioShack CFO Resigns Amid Financial Woes: Less than one week after RadioShack warned that bankruptcy could be imminent, the crippled electronics retailer has lost the person who was supposed to navigate the company through its stormy financial seas: its chief financial officer, John Feray, has jumped ship after less than a year in the position. In a three-sentence statement released Monday morning, RadioShack announced that Feray resigned “for personal reasons” on September 12. Holly Etlin, a managing director of AlixPartners and longtime RadioShack advisor, will serve as the company’s interim CFO. It’s a familiar role for Etlin; she served as interim CFO from July 2013 until February of this year, when Feray took the reins. Feray’s appointment to the CFO position was announced less than a year ago, in January 2014. Feray, who came to RadioShack from Dollar General, where he served as senior vice president of finance and strategy, said at the time, ”I look forward to working with Joe and the entire RadioShack team on the transformation of this iconic American retailer. I believe my experience at Dollar General is directly applicable to RadioShack and I am delighted to have the opportunity to help the company accomplish the turnaround plan that is underway.”