News As We Read- 6th June'13

Thought of the Day:

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Following made the Headlines:

India:

• The Man who Just Dialled into Hundreds of Crores: Shares of Justdial closed at 611 apiece after listing on Tuesday, a premium of 15% over the issue price. That pegs founder VSS Mani’s wealth — he netted 87 crore by selling 15.57 lakh shares in the IPO and now holds 30.28% equity valued at 1,241 crore — at 1,328 crore. But more than the wealth created, Mani is savouring the end of a 14-year long wait to get Justdial listed. Since 1999, when he took his first tentative steps towards a listing, Mani has taken at least six shots at the bourses — he tried Nasdaq twice, filed for an IPO in India twice in August 2011 and August 2012. Once, he even toyed with the idea of listing on a smaller exchange. His sixth attempt finally led to a May IPO that has since become a roaring success. Justdial’s 950-crore IPO — a pure offer for sale in which Mani and investors, including Tiger Global, Sequoia Capital and SAP Ventures, sold 1.75 crore shares — is the largest on Indian bourses this year and one of the biggest by an Indian Internet company. It was oversubscribed 12 times. The PE investors earned 850% re turns on their investments by sell ing the shares in the IPO. “When I started, people questioned my ideas; they were sceptical about this service. When I moved to the Internet, people rubbished it. When I decided to go public, many questioned the timing in a slowing economy, later doubted the offer price and finally feared the stock will open lower,” Mani says, recalling his arduous path to the IPO. Hours after the listing, he is proud…and tired. “I came home, had lunch and slept,” he says. Shailendra Singh, managing director at private equity investor Sequoia Capital in India who invested twice in the company in 2009 and 2012, says, “We knew then that in Mani we had a special founder. He has the same DNA that we have seen in successful technology entrepreneurs around the world — he had thought through the little details in order to make the product and user experience exceptional.”

• Slim & Chic, Mannequins Bring the Shop Floor Alive: Local authorities in Mumbai may have banned skimpily clad mannequins on the bizarre ground that they may trigger sexual abuse on women, but Indian retailers are lapping up these life-size toys for their uncanny ability to sell fashion. Retailers say garments displayed on mannequins sell much faster than others; hence they want to display all their styles on perfectly shaped, tall and modern lay figures. “Garments displayed on mannequins sell 43% faster,” says Anuraag Singhal, visual merchandiser at Allen Solly, a Madura Fashion & Lifestyle brand. “Earlier brands used to change the look once in a month, but now it’s being done every three days and even daily by some retailers to ensure that windows look fresh,” he says. Sanjeev Mohanty, managing director at Benetton India, says the number of mannequins the fashion brand has in a store has doubled in about five years. “They play a very crucial role in sales,” he says. A flagship Benetton store houses up to 40 mannequins, while smaller stores have around 10. Mannequin sellers say demand grows around 30% every year. Shop owners across the country now demand tall, modern mannequins. They call it Zara mannequin because one dummy the Spanish fast fashion brand imported found its way into the domestic market and copies of it are now being made in bulk and sold in hundreds. “Zara has very stylish and eye-catching mannequins,” a mannequin maker said on condition of anonymity. “The copies have huge demand, especially coming from Indian brands and fashion designers, boutique owners,” the person added. The fast fashion brand that has proved a roaring success in India seems to be setting the benchmark even for dummies. That means mannequins in Indian stores are no longer short, stout and voluptuous; they are rather tall, chic and in perfect shape. “With the craze for size-zero figure growing among Indian women, even a mannequin is not voluptuous anymore,” says Pradeep Hirani, chairman at Kimaya, a nationwide multi-brand ethnic fashion retail chain. It is extremely critical they possess the desired body, grace and attitude, he adds.

• Amazon Debuts in India with ‘Marketplace’ Model: Amazon’s India launch is expected to add to the pressure on incumbent online retailers which are cutting costs after a spending spree to win new customers. The world’s large online retailer formally set foot in India on Wednesday with a ‘marketplace model’ that it hopes will help it overcome regulatory binds on foreign e-commerce providers. “The launch of Amazon.in is definitely good news for the e-commerce sector. The market is huge in India and there is opportunity for all players who create a huge customer proposition,” said Ashish Bhinde of Avendus Group. With about 130 million internet users, India is regarded as a virtually untapped market for online retail; but those that operate in the space have been losing money in their rush to add customers. The online retail market at the end of fiscal 2013 was around $1.5 billion (8,400 crore) and is expected to grow by nearly 100% every year. Among the main players in India are Flipkart, Snapdeal (in which eBay has invested), Jabong and Indiatimes Shopping, which is part of the Times Group that publishes this newspaper. In recent weeks, Flipkart and Jabong have retrenched several dozen staff as they attempt to control costs amid intensifying competition. Amazon’s India manager Amit Agarwal said the model adopted by the company is fully compliant with all Indian laws. Regulations do not allow foreign online retailers to have a fully-owned Indian arm selling directly in India. Legal experts said that by literally interpreting the definition of online retailing, Amazon has created a “very clever model” where they claim not to be buying or selling anything themselves. “Even in invoicing, they are making it very clear that the seller is not them,” said Sajai Singh, a partner at J Sagar Associates. Amazon will not own any of the merchandise sold through its website, but be an aggregator to all the retailers exhibiting their products on its site. Amazon India already operates Junglee.com, a price-comparison portal. Junglee will continue alongside Amazon.

• LinkedIn Books Office Space in Bangalore Technology Park: California-based social networking site LinkedIn recently booked 74,341 sq ft of office space in Prestige Technology Park in Bangalore at 43 per sq ft, people familiar with the transaction said, establishing the fact that leading technology firms are investing in additional space in Bangalore. “The new office space in Bangalore will house employees across functions, including customer service, engineering, sales and marketing,” said LinkedIn India Country Manager Nishant Rao. The company has taken up space for consolidating its existing offices while the rest will be used for growth. “The new facility can seat 750 people and will be mostly used for expansion. It has also taken into account growth for three years,” said a person having direct knowledge of the transaction. LinkedIn has 150 employees in India as on December 2012. The transaction was handled by property consultant DTZ. LinkedIn India is headquartered in Mumbai with two offices in Gurgaon and a technology centre in Bangalore, the first outside the US. Situated at the Bagmane Technology Park, the LinkedIn Technology’s R&D centre is its fourth office in the Indian market. The world’s largest professional networking site, with over 20 million users in India, has added five million more users in the past 12 months ended March 2013. India, with 100 million Internet users, provides the second largest user base for LinkedIn, after the US, where it has 74 million users. LinkedIn has launched a series of new products to make things easier for users and its premium offerings in India. ING Vysya, HCL Technologies and WABAG are among the companies that are extensively using LinkedIn Talent Solutions to establish an employment brand, develop their career pages and boost their recruiters’ ability to identify and connect with the best talent.

• Snapdeal Raises 280-cr from 3 VC & Angel Investors: Online retailer Snapdeal has raised money from three venture capital firms and angel investors to close a $50-million (280 crore) round of funding that began in April with investment by eBay. Intel Capital, Russian venture fund ru-Net and Saama Capital are the three new investors in this round of funding that values the online marketplace company at over . 1,000 crore. Early investors Bessemer Venture, Nexus Venture Partners and Indo-US Venture also participated in the investment along with a few angel investors. “We split the investment into two parts. The first part was led by eBay and Japan’s Recruit Co and this time we have three venture funds that have invested,” said Kunal Bahl, cofounder of Snapdeal-.com. This is the largest institutional funding in India’s e-commerce sector this year, and coincides with the entry of Amazon into the Indian market. Owned by Jasper Innovative Marketing Solutions, Snapdeal has now raised a total of $90 million (500 crore) in equity from the two strategic investors — eBay and Recruit Co — and six venture funds and other individual investors. Snapdeal, which expects to record turnover of 2,000 crore in 2014, will use the latest round of funding to grow the technology backbone for its business. “eBay is now the lead investor in the company,” said Bahl, who along with cofounder Rohit Bansal owned a majority share, that has now been diluted. Bahl declined to discuss specifics of the promoters’ ownership. “I would rather own a very small part of a billion-dollar company than 100% of something that is worth nothing,” he said. Snapdeal has also roped in a number of wealthy angel investors, including the founders of US-based gourmet supermarket store Freshmarket. The deal underlines renewed interest by global investors in the Indian online retail space, which Avendus estimated was worth more than 8,000 crore in the 2013 fiscal. Last month, online apparel retailer Myntra secured $25 million (140 crore) in investment from existing investors Tiger Global and Accel Partners. “There have been challenges to profitability in this business. However, sustainable and scalable ecommerce players will keep on attracting investments,” said Raja Lahiri, a partner at tax and advisory firm Grant Thornton.

• M& M enters hatchback stable with Vibe: Utility vehicle market leader Mahindra & Mahindra (M& M) today launched its first indigenously developed premium hatchback, Vibe, to challenge market leader Maruti Suzuki. The Mumbai- based company has priced Verito Vibe on par with Marutis best- selling premium hatchback Swift at ₹ 5.63 lakh (ex- showroom Mumbai, without octroi). Swift’s entry- level model is priced at exactly the same price point in the city. The top- end version of the Vibe is priced at ₹ 6.49 lakh. Predominantly a utility vehicle maker, Mahindra has little experience in the car segment. But the Vibe’s launch has opened a path for the company to get back at Maruti Suzuki, which challenged M& Ms dominance when it launched the Ertiga, a multi- seater utility vehicle. The Vibe, which is a re- engineered Verito with an integrated boot, provides M& M a chance to address the 1.3- million units a year hatchback market, which is about 50 per cent of the domestic passenger vehicle market. Due to lack of a small petrol engine option, the Vibe will be available only with a diesel model with three variants. The engine is the same 1.5- litre dCi engine bought from Renault, which also powers the Verito sedan. M& M claims 20.8 kmpl on the Vibe. The company is not looking at a petrol engine for the Vibe for the time being. Work on the Vibe started nearly two years ago, a year after M& M bought its partner Renault’s stake in the joint venture company Mahindra Renault (MRPL), which used to make the Logan sedan. About 80 per cent of the parts of the Vibe and the Verito (formerly Logan) are common. M& M made an overall investment of ₹ 60 crore in developing the Vibe, said a senior executive. Only the high mounted vertical tail lamps on the Vibe, which were developed by an Italian company, are different from the Verito. Pawan Goenka, president (automotive and farm equipment sectors), Mahindra and Mahindra said, “We are entering into a larger volume segment with the Vibe. We are a UV (utility vehicle) player with six to eight models and one car. The Verito matches our company’s DNA of being rugged, stylish, reliable and a boot to go with.” Under the time- bound agreement with Renault, which allows M& M to develop derivatives of the Logan sedan platform, M& M had been working on few concepts of compact car models including a compact sedan. The agreement with Renault stretches for a ‘few more year’ with an option open to buy- out the platform itself, said an official. “Our agreement with Renault is to have a sedan and a compact car and not anything more. We will have to go back to Renault and have fresh discussion with them if we have to do anything more with this platform,” added Goenka.

International:

• Ikea founder steps down as son takes reins of Swedish firm: The founder of Swedish furniture giant Ikea is to step down from the board of the firm, with his son taking on the role of chairman. Ingvar Kamprad founded the flat-pack furniture company in southern Sweden 70 years ago. His youngest son, Mathias Kamprad, has been appointed chairman of Inter Ikea Holding SA, the company that owns the Ikea brand. The news came as Ikea announced a sharp rise in profits for 2012.

• Tesco shares hit by drop in sales: Shares in Tesco have fallen over 5% after the supermarket giant reported a drop in UK sales over the past three months. Tesco said the horsemeat scandal had a "small but discernible impact" on frozen and chilled convenience food sales. Like-for-like UK sales, excluding petrol and VAT, dropped by 1% during the 13 weeks ending 25 May 2013. Tesco said it would cut back on its range of consumer electronics goods. The firm added it was making the change as electronic goods "take up a lot of space and don't make much money". It plans to refocus, selling more home items, cooking products and clothes, which take up less room in its stores and can be sold for a higher profit.

• Luxottica Signs Union Deal: Luxottica is expanding its welfare program. On Wednesday, the Italian eyewear manufacturer giant signed an agreement with trade unions updating the welfare system for the company’s 8,000 employees working in Luxottica's seven factories and in its Milan headquarters. “This agreement represents an additional step toward the introduction of innovative and flexible methods to protect employees,” stated Piergiorgio Angeli, Luxottica human resources operations and industrial relations director. “When companies and trade unions collaborate to benefit both the employees and the company, to improve people’s lifestyle and work, it’s always possible to find a proper meeting point.” Established in 2009, the welfare program now includes an increased support to young people living in the areas where Luxottica operates. Among the different activities, the company will double the number of scholarships annually offered, increasing their value by 60 percent; it will reimburse university tuition fees to all employees whose college-enrolled children have a 29/30 grade point average; and it will finance credit recovery classes for the all students attending schools in Luxottica’s area. The updated welfare program also reinforces the health care system, introduces a psychological counseling service for employees and their families, and establishes a micro-credit project for employees in financial difficulty. In addition, Luxottica has recently introduced a new public transportation service for the employees working in the Agordo factory and has offered workers the chance to pay their bus passes through installments.

• J. Crew Leases Store Space in Brooklyn: J. Crew is Brooklyn bound. The retailer has leased a 2,400-square-foot, two-level store at 151 Court Street, a thoroughfare that passes through three Brooklyn neighborhoods, Brooklyn Heights, Cobble Hill and Carroll Gardens. It will be J. Crew’s first store in the borough. The company expects the store to open in early 2014. Brooklyn has been booming in recent years as more and more retailers discover the borough, an epicenter for the cool and hip in terms of restaurants, bars and independent shops, and with pedigreed neighborhoods that attract the stroller set. If the area were an independent city, it would be the fourth-largest in the U.S., with a population of 2.8 million. The fact that Brooklyn is considered understored is another strong inducement for retailers.

• Saint Laurent Opening in SoHo: Saint Laurent has bookended Manhattan with stores. The brand operates an uptown store on East 57th Street, and now it’s opened one downtown, in SoHo. Brant Cryder, president of the Americas for Saint Laurent, calls the units “two halves of the whole new story we want to tell.” The 4,000-square-foot store that opens tomorrow at 80 Greene St. attracted Saint Laurent creative director Hedi Slimane for its historic SoHo architectural elements such as skylights, columns, tin ceilings and concrete floors, which the retailer kept intact. Cryder explained the personalities of the two New York stores, comparing the 57th Street flagship’s luxury to the couture house of Yves Saint Laurent, founded in 1961, and the Greene Street unit to Yves Saint Laurent Rive Gauche, a now-defunct label launched in 1966, with the arty and bohemian threads that run through SoHo.  The company has an ambitious expansion and renovation program. The East 57th Street flagship will be remodeled next year, while a store on Rodeo Drive in Beverly Hills is in the process of being renovated. “We’re really excited about telling the other [luxe] part of the new story,” Cryder said. So far, Slimane’s new retail design can be seen in the U.S. in four in-store shops at Bergdorf Goodman and Saks Fifth Avenue and new stores in Bal Harbour, Fla., Dallas and Short Hills, N.J. The brand has been absent from the Chicago retail scene for several years, but in the fall will open a store on Rush Street. Also in the fall, the first men’s store in the U.S. will bow on Post Street in San Francisco.

• Topshop to Bow in Hong Kong: Topshop will open its first store here Thursday.  The 14,000-square-foot store is on Queen’s Road Central, across the street from H&M’s flagship and down the street from The Gap, Abercrombie & Fitch and The Body Shop. The new store will offer about 20 to 25 percent of the brand’s collections, including trends, footwear, boutique, denim, petite and beach. There will also be some special merchandise available only in Hong Kong — namely some dresses, recycled merchandise and T-shirts. Sir Philip Green, the retailer’s owner, said three out of five of Topshop’s top-performing stores are currently in the region — two in Australia and one in Tokyo. “This is a fashion-conscious community,” said Green. “In each of the markets, there are slight differences in weight of fabrics, seasonality, but we’ve found our way.” For the Hong Kong store, Topshop partnered with the Lane Crawford Group. Green said the whole process took about half a year. “They’ve got the location, we’ve got the goods. That makes a good team,” he said.