News As We Read- 31st May'13

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Following made the Headlines:

India:

• Bharti Set to Sell Stake in Landline, Enterprise Biz: Bharti Airtel, India’s largest mobile phone company by subscriber numbers and revenues, plans to sell minority stakes in its landline and enterprise businesses as part of an exercise to cut debt, two executives with direct knowledge of the development said. The company is learnt to be looking at an enterprise valuation of about 17,000 crore for its fixedline unit and about 6,500 crore for its enterprise business. The Sunil Mittal-promoted telco has already sounded out potential investors, but is yet to sign non-disclosure agreements with either strategic or PE investors, one of the executives quoted above said. The exact quantum of the stake sale has not been decided yet, but it will be less than 50%, this executive added. The executive said the stake sale in the fixedline business will happen first and the enterprise unit much later, maybe after 12-18 months. The Bharti spokesperson said the company will not comment on selling stake in its fixedline business, but has no plans to offload stake in the enterprise arm. Bharti, the world’s fourth-largest mobile phone company in terms of customers, will offload stakes in these two businesses only after it completes the sale of a 25% stake in its DTH arm. It is in talks with several private equity funds to sell up to 25% in its DTH venture for about $250 million. One of the executives quoted above said Bharti’s recent decision to terminate its JV with Alcatel-Lucent for managing its fibre optic cable, fixedline and broadband business was on account of its plans to have 100% control of this business before selling a minority stake. One option being considered is to invite rival mobile phone firms Vodafone and Idea to create a consolidated entity.

• Retailers Make Emergency Call on Online Offers: Electronics retail chains such as Future Group’s eZone and Reliance Digital say heavy discounting by online retailers on popular smartphones and tablets such as the iPhone 5, Galaxy S4 and iPad is hurting them, and have asked manufacturers to take measures to stop such deals. Chains such as The Mobile Store, Reliance Digital, Future Group and Next Retail have approached brands like Apple, Samsung, Nokia and BlackBerry, asking them to impose strict pricing policies on shopping websites such as Flipkart, Infibeam and Snapdeal. “Indiscriminate discounting by online stores affects our sales to quite an extent,” says Rajan Malhotra, president at India’s largest listed retailer Future Group, which runs 38 eZone stores. “If we get pushed due to such discounting, we definitely have to push back with the brands,” he says, confirming that the firm has taken up the issue with manufacturers. The Apple iPhone 5 16GB, for example, is available online for 40,950 while at retail chains and Apple stores it is sold for 45,500. The BlackBerry Z10 is selling at less than 40,000 online against the retail price of 42,499. Such discounts are available on products such as the iPad, Samsung Galaxy S4 and Nokia Lumia. Brian Bade, CEO at Reliance Retail’s electronic retailing format Reliance Digital, says brands have to take a tough stand against such online deals that hurt the business. “Consumers often come with the online discounted price in mind and leave the store without concluding the purchase,” he says. As per industry estimates, modern retail contributes around 12% of the 37,000-crore mobile phone and tablet market in India while online retailers make up around 4-5%.

• Entertainment Channels Hike Ad Rates by 20-30%: With the Telecom Regulatory Authority of India (TRAI) holding firm on its recent cap that limits the amount of advertising TV channels can carry to 12 minutes per hour, the four leading general entertainment channels (GECs) have decided to increase their advertising rates by 20-30%. Raj Nayak, CEO of Colors, which will raise its rates by almost 30%, said, “As a broadcaster, we have still not seen the full impact of digitisation in the form of either a fair share of reduction in carriage fees or subscription revenues. Given that we are a responsible broadcaster and intend to follow the guidelines set by the regulator, we believe that to stay on course and meet revenue objectives, we are left with no option but to increase the ad rates.” Nayak adds that in the current scenario there is already a shortage of ad inventory on GEC channels, and he sees changes in the supply-demand dynamic ahead. One problem that broadcasters might face, points out Manjit Singh, CEO of Sony, is that most channels have signed long-term contracts with advertisers. “While we are evaluating how much we will increase, those whose contracts are made on low budgets will not get renewed,” he said.

• Electronic Goods Need to Have BIS Safety Standards by July: By July, 15 categories of electronic and IT products would be barred from selling in the Indian market if they fail to meet the safety standards set by the Bureau of Indian Standards (BIS). This will apply to both goods manufactured in the country as well as imported goods. The product list includes laptops, tablets, notebooks, plasma/LCD/ LED televisions, optical disc players, set top boxes, microwave ovens, scanners and printers among others. “Department of Electronics and Information Technology brought out this notification in the wake of substandard electronic products — mostly from China — flooding the Indian market,” said a senior BIS official. Poor quality products are causing health issues and there are safety concerns as well, the official said. Of late, there have been several complaints against sub-standard products that are causing hazardous accidents. BIS has designed a new set of ‘Indian Standards (IS)’ that enlists norms for consumers’ safety and health. This standard is different from the usual ISI marks BIS has for several products. “No person shall by himself or through any person on his behalf manufacture or store for sale, import, sell or distribute goods, which do not conform to the specified standard and do not bear the words ‘self declaration’ – conforming to IS (relevant Indian Standards) on such goods after obtaining registration from the bureau,” said the BIS notification to all electronic and IT goods manufacturers. Manufacturers would need to get a sample of these fifteen products tested at BIS accredited labs and get a safety clearance certificate. “Products would bear a self declaration from the company that they meet the safety criteria set by BIS,” said the official. 

• TVS Logistics Buys US Co for 50cr: TVS Logistics Services has acquired US-based supply chain provider Wainwright Industries in a deal valued at 50 crore. This would be the second acquisition for the Chennai-based TVS group company in the United States, after it acquired Manufacturers Equipment and Supply Company in 2011.

• Coke takes e-com sip, starts online home delivery store: Coca-Cola India has piloted an online store for home delivery of all its products in an attempt to tap the burgeoning e-commerce market — a first of its kind move by an FMCG company. Launched by Hindustan Coca-Cola, the company-owned bottling entity of the Atlanta-based beverage giant, Coke2Home.com went live recently and is being tested in the Ahmedabad region, a company executive told TOI. With online retail growing rapidly, many brick-and-mortar businesses have joined the e-commerce bandwagon hoping to cash in on growing number of consumers making purchases over the internet. While many egrocery stores have come up over the last year, none of the FMCG majors have initiated a standalone portal to sell their wares in India. “The objective of this initiative is to take advantage of the rapid growth of e-commerce and provide consumers an added avenue of choosing and ordering our beverages. This is a step which is in keeping with Coca-Cola India’s efforts of being within easy reach of the consumers,” said T Krishnakumar, CEO, Hindustan Coca-Cola Beverages. “Our entire suite of products become available to the consumer to choose from and a significant drop size provides us with a viable model for door-todoor delivery.”

• Spencer’s Retail to invest ₹ 600 crore in new stores: Spencer’s Retail, an RP- Sanjiv Goenka Group company, is chalking an aggressive growth strategy, with a focus on hyper- format stores. It plans to invest about ₹ 600 crore in setting up new stores. The company also plans to come out with branded and cobranded products in the food and beverage segment. Speaking to Business Standard, Shashwat Goenka, sector head, Spencer’s Retail, said the company would set up 80 hyper stores in the next 48 months. As of now, the company has 132 stores, including 26 hyper stores, 14 super market and 92 daily (convenient) stores. Goenka, here to inaugurate the city’s first hyper store at Velacherry, said the new stores would predominantly be located in tier- I and tier- II cities. The company would focus on the North ( Uttar Pradesh & the Delhi- National Capital Region), the East ( West Bengal and Chhattisgarh) and the South ( Andhra Pradesh, Tamil Nadu and Karnataka). “We will open 12 stores this year and 15 next year; the rest would come up in the following two years,” Goenka said. The company has already signed property agreements for 68 stores. The investment would primarily be funded through internal accruals. The ₹ 1,400- crore company would turn earnings before interest, tax, depreciation and amortisation- positive by the third quarter this financial year and full- year cash profit would be seen in 2014- 15, Goenka said. The company expects by the end of this financial year its turnover would stand at ₹ 1,800 crore. Owing to the planned new stores, the revenue is expected to touch ₹ 2,800 crore in 201415, said Mohit Kampani, chief executive, Spencer’s Retail. In 2011- 12, the company reported 15 per cent growth; in 2012- 13, growth stood at 16 per cent. Kampani said in 2011- 12, the industry grew 12- 14 per cent, while last financial year saw single- digit growth. Hyper stores, which contributed 58 per cent to the turnover in 201213, are expected to contribute 70 per cent this financial year and 85 per cent in 2014- 15. Spencer’s Retail is also reworking its store format. “We made a mistake of having too many formats in many areas. Basically, retail is a local business, not national,” Kampani said. Since the company faced hurdles, in terms of cost structure in its convenient store model, it has decided to go slow on expanding the format. In the last three years, the company shut 64 such stores. However it had been decided the two major issues — cost structure and assortments — would be addressed, Kampani said, adding, “We may go for a franchisee model. Currently, we are studying various options.” The company is also streamlining its distribution system and putting in place a new network strategy. Goenka said the company would increase the share of unique commodities in the food and beverage segment from about five per cent to 30 per cent. These products might be company- made, produced along with another manufacturer, or sourced from other companies. Spencer’s is also set to introduce its own wine, bottled in Argentina. It is working with Ambika Appalam to introduce the latter’s products, as well as various types of ready to eat food in north India. On foreign direct investment, Goenka said the company was exploring various possibilities. “Our first intention is to make the business profitable. We also have plans to come out with an initial public offering, before which we may look for private placement by roping in a strategic partner,” he said.

International:

• Ryanair 'may have to cut Aer Lingus stake': Ryanair may have to reduce its stake in Irish carrier Aer Lingus, the UK Competition Commission has said. The commission said it had concerns Ryanair's 29.8% stake could reduce competition on routes between the UK and Ireland. Ryanair said the Competition Commission's findings were "unfounded" and "in breach of EU law". The findings are a further blow for Ryanair, which has made repeated attempts to buy Aer Lingus. The Competition Commission's provisional findings said that Ryanair's shareholding in Aer Lingus gave it the ability to influence the commercial strategy of the Irish carrier, potentially affecting competition on routes where the airlines compete against each other.

• Japan's Nikkei dives a further 5%: Japan's Nikkei index dived a further 5% on Thursday to hit a five-week low, amid predictions of a bigger correction from some analysts. The fall means the Nikkei has lost 8.3% since reaching a five-and-a-half-year high just a week ago. Trading in Tokyo has been volatile amid concerns over global growth and the future of US stimulus measures. Japanese government officials have played down the significance of the falls, suggesting they are "temporary". "Share prices appear to have been undergoing temporary adjustment over the past week," Japan's chief cabinet secretary, Yoshihide Suga, told reporters. "A rise in share prices over the past month has been extremely rapid... In that regard, it would be unnatural if adjustment did not occur." Other traders suggested investors were still on edge following a 7% fall in stocks in a single day last week, as well as concerns that the yen is rising again, potentially hurting Japanese exporters. Massive stimulus measures introduced by the Japanese government initially caused big falls in the yen against other currencies.

• Guess Stock Jumps on Hints of Optimism: Shares of Guess Inc. jumped more than 10 percent in after-hours trading late Thursday following disclosure of a smaller-than-expected first-quarter earnings decline and a hint of optimism about the company’s North American retail and European operations. Both business units suffered operating losses and revenue declines in the first quarter ended May 4, when the company saw net income drop 62.8 percent to $9.9 million, or 12 cents a diluted share, from $26.6 million, or 30 cents, in the year-ago period. Adjusted earnings per share were 14 cents, 6 cents better than Wall Street expected and above the range of 5 to 10 cents projected by Guess in March. Revenues were off 5.2 percent, to $548.9 million from $579.3 million, with North American retail net sales off 5.4 percent, to $238.3 million, and same-store sales in the U.S. and Canada down 9.8 percent. European sales were down 12.9 percent to $165.4 million.

• Tracy Gardner Named Delia's CEO: Tracy Gardner’s climb up the corporate ladder at Delia’s Inc. has been swift — moving to chief executive officer from chief creative officer in a month. The former J. Crew executive, who joined the company May 1, will assume the reins on Wednesday, taking over from Walter Killough, who will remain with the specialty retailer as chief operating officer under his existing employment agreement. “While developing and executing a strategic plan will take time, I look forward to working with the team to build Delia’s into the brand we all know it can be,” Gardner said. As incoming ceo, Gardner has her work cut out for her. The retailer’s first-quarter net losses widened to $9.2 million, or 29 cents a diluted share, from $3.7 million, or 12 cents, a year earlier. Sales for the three months ended May 4 fell 14.6 percent to $35.2 million from $41.2 million. Shares of the retailer fell 8 percent to 92 cents Thursday. Delia’s is working with Janney Montgomery Scott to explore the possible disposition of its Alloy brand.

• Boucheron Unveils New Look Paris Flagship: Boucheron has moved into the light with its new boutique concept built on crystal-flecked white marble on walls and tabletops, champagne-colored silk in display cases and pale Chantilly parquet dressing floors. The narrow yet airy 1,500-square-foot unit on the Rue due Faubourg Saint-Honoré opens to the public on Saturday, revealing a dramatic overhaul from the previous concept rooted in moody shades like deep purple. The retail concept is the latest plank in the brand renewal spearheaded by chief executive officer Pierre Bouissou and embedded in the jeweler’s rich history. “The concept is based on the Parisian hôtel particulier,” Bouissou said, using the French term for town house. Indeed, with its sweeping staircase punctuated by a railing of wrought iron, the store incorporates elements of grand Parisian homes. Up one flight is a sleek VIP room appointed with low-slung seating and a stone fireplace, all in shades of white, powdery beige and warm grays. Books tucked into wall niches heighten the residential feel. The store exalts Boucheron’s ideal placement on the Place Vendôme since 1853, when its founder spied the potential of the location and became the first of many jewelers to arrive on the sun-drenched square.