Daily News Digest- 20th Jan'15

Thought of the Day:

Today in History:

Following made the Headlines:

India:

• Flipkart, Jabong Bet on Instant Messaging to Acquire Customers, Facilitate Payments: If you're a regular online shopper, you may soon find yourself chatting with the folks at your preferred e-tailer on smartphone messaging services such as WhatsApp, WeChat and Line, discussing new products, complaints or even paying for a purchase. E-commerce companies have started using instant messengers to reach out to millions of mobile phone users in India to widen their customer base, and in some cases, facilitate payments. Flipkart and Jabong have tied up with Chinese instant messenger WeChat to launch official accounts. The two companies also partnered with Japanese messaging app Line, which has a feature that allows users to make payments using credit cards. “WhatsApp is a bit of a walled garden but we've started experimenting on other platforms like WeChat and Line,“ said Mausam Bhatt, senior director, mobile commerce & digital marketing, at Flipkart.

• Amazon India May Emerge as Fastest E-tailer to Touch $2-B Sales Mark: Amazon India is looking to sell goods worth $2 billion (over ₹12,000 crore) by the end of the current fiscal, thereby becoming the fastest e-tailer in the country to cross this mark and moving close to Snapdeal, which is believed to have flashed past this milestone a few weeks ago. If Amazon India is able to achieve this feat, it will have taken less than half the time taken by Delhi-based Snapdeal, which had to wait for more than four years to do so, while the country's largest e-tailer, Flipkart, took almost seven years. Flipkart is expected to close the year to March with sales or gross merchandise value (GMV) of $3 billion (over . 18,000 crore). Until the middle of January, Amazon India had sold goods worth $1.51 billion, clocking GMV of $25 per week, according to executives privy to the figures. “At this rate, Amazon India can look at $2 billion by the end of March,“ said an executive, requesting not to be named. Amazon India declined to comment on the matter. Although the company, which started operations in June 2013, does not share details of sales, it is understood to have crossed the $1 billion mark in September last year. Amazon's CEO, Jeff Bezos, in his first visit to India after the company started its operations in the country, had told ET that India had surpassed his highest expectations and he had promised to keep the money tap open after first committing to invest $2 billion.

• Snapdeal eyes Rs 500 cr via a TV channel: Snapdeal, one of the country's largest e-tailers, is set to rake in Rs 500 crore in the first year from its TV-commerce channel.The channel called DEN Snapdeal TV shop is a result of a 50:50 JV (Macro Commerce Pvt Ltd) that the company formed with cable distribution company DEN Networks to sell products across home, lifestyle and electronics categories. “It had taken us around three years to reach Rs 500 crore through our online business. In comparison, our TV channel is set to touch a similar figure in just one year. Television-commerce can be the next vector of growth for e-commerce,“ said Kunal Bahl, co-founder and CEO of Snapdeal. Bahl is optimistic that television will help Snapdeal reach customers, who have limited access to internet services, particularly in tier II and III cities. Cable operators will be acting as brand ambassadors of the channel. “A lot of people have questioned this move.But, in contrast to the situation in the US where growth of sales of TV sets has stagnated due to smart devices, sales of TVs are growing here and will continue to do so for some time. So, if you have to reach people such as, elders in the family , who are not used to shopping on smartphones, TV is a great option,“ said Bahl.

• IndiGo Gains Most Share in Dec Amid Turmoil at SpiceJet: Budget carrier IndiGo gained the most with the curtailment of operations by SpiceJet, with the airline gaining about 2.4% in its total passenger carriage during December, increasing its share to 36.1% from 33.5% in November. Data released by the Directorate General of Civil Aviation (DGCA) also shows that Air India and Jet Airways Group (Jet Airways and JetLite) increased their market share by 1.15% to 18.6% and 0.3% to 23.3%, respectively. The data shows that Indian airlines flew 15.29% more passengers during December compared with the same month in 2013. The airlines flew about 6.44 million passengers during the month.During the 2013 calendar year, the airline flew 67.38 million passengers, registering an increase of 9.7% over 2012. “The biggest benefit that the airlines have got due to the SpiceJet turmoil is not of market share but of increase in average fares, which has added to all airlines' bottom line,“ said an industry executive, who did not wish to be identified. The average fares during December were up by about 30%. December also became one of those rare months, when flights by all airlines flew with over 80% loads -the highest clocked by JetLite at 89.5% and the lowest clocked by Air Asia at 81.5%.

• Renault to Recall 646 Cars on Airbag Flaw: Renault plans to recall 646 cars in India to fix faulty airbags that the French carmaker said could potentially affect passengers' safety. The recall will cover Pulse hatchback and the diesel Scala sedan manufactured between September 2011 and July 2012, the Indian unit of the carmaker said in a notice to the government. Both models are principally manufactured by its global alli ance partner Nis san Motors and sold as Micra hatchback and Sunny sedan in India by the Japa nese company. Renault re-badges them as Pulse and Scala for the Indian market.The faulty airbags were supplied by Takata, Renault said. Renault India said it has initiated the recall step voluntarily.“Renault is conducting a voluntary check on certain potentially affected Renault vehicles (620 Pulse and 26 Scala -produced between September 2011 and July 2012) which may have a possibility of driver airbag problem,“ a company spokesman said in an emailed statement to ET.

• Air traffic grows 10% in 2014 on flash ticket sales: Give low fares and Indians will fly like never before. The constant flash sales by SpiceJet last year, which forced other carriers to follow suit, has led to a record 6.7 crore people flying within India in 2014. In December, 64.4 lakh flyers took off within the country , possibly the highest ever number of people flew in a month. But SpiceJet, which started the fare war, saw itself running out of cash by November, which led to aircraft leasors repossessing many of its Boeing 737 aircraft. Since November, the airline saw its market share fall. In December 2014, its market share was 10.4%, down from 20.4% in July . The low cost carrier is now headed for a change of ownership with co-founder Ajay Singh back in the cockpit.

• Air India begins ‘ large- scale’ ATF hedging: Air India is conducting large- scale hedging of jet fuel for the the first time, as the state- run carrier seeks to take advantage of lower crude oil prices, a person with direct knowledge of the matter said. Air India was hedging two million barrels of aviation turbine fuel annually at $ 75 per barrel, which should cover more than a fifth of its fuel requirements, the person said. The company did not expect oil prices to fall any further, the person said. Crude oil prices slumped almost 50 per cent last year as the US pumped oil at the fastest rate in more than three decades while Opec resisted calls to cut supply. That resulted in boosting economies of import- driven countries, while providing a breather to airlines, which typically operate on tight margins. Cheaper oil prices could help Air India save $ 324 million for the year ending March 31, 2016, and help it break even before its target of turning aprofit by 2019. Some airlines which had hedged jet fuel prices at higher prices have failed to take advantage of the recent slump, and may actually end up losing money from the sudden drop. 

• MRF in Talks to Buy Kesoram's Tyre Unit: Madras Rubber Factory (MRF), India's largest tyre manufacturer, is in negotiations with BK Birla flagship Kesoram Industries to acquire its main tyre unit, located in Uttarakhand, for a value that's higher than the market capitalisation of the entire diversified Birla conglomerate, said multiple sources involved in the exercise. Kesoram has two factories and sells tyres under the Birla Tyres brand. The deal, if completed, will be 69-yearold MRF's first acquisition and strengthen its manufacturing presence in the north Indian market. It will also help consolidate its presence in the commercial vehicles tyre segment where it is the second-largest player after Apollo. For Kesoram, selling its principal unit in Laksar, Uttarakhand, would deleverage its balance sheet significantly. Kesoram has been burdened by ballooning debt, which stood at Rs 4,425 crore at the end of the September 2014 quarter. The tyre business contributed almost half of its FY14 EBITDA. While the discussions are yet to reach a conclusion, sources said Birlas are expecting a minimum enterprise valuation of ₹2,200 crore for this facility alone.` To put it in perspective, that's at least 75% higher than the market capitalisation of ₹1,256.33 crore for the entire company . The steep premium expectation can act as a potential road block in the final discussions as MRF is believed to have offered ₹ 1,600-1,800 crore.

• Facebook's co-founder Eduardo Saverin, VC fund invest $11 million in local e-commerce site Hopscotch: Hopscotch, the Mumbai based babycare and kids products etailer, has raised $11 million in a second round of funding led by Facebook co-founder Eduardo Saverin and Los Angeles headquartered early stage investor Velos Capital. The funding comes amidst a wave of consolidation in the nascent babycare and kids products etailing segment that has already seen a couple of players shutter operations and others seek buyers. The investment in Hopscotch marks Saverin's and Velos Partners' debut investment in India. Singapore-based Saverin, whose net worth at the time of the 2012 Facebook IPO was estimated at $4.2 billion, has been a prolific angel investor in technology startups in Southeast Asia and North America over the past few years. He is also chairman of the advisory board at Velos Partners, which primarily invests in consumer and technology companies. Apart from Saverin and Velos Partners, other investors in this round include Rise Capital, Jabbar Internet Group and existing investors LionRock Capital and Skype co-founder Tovio Annus.

• HUL Fails to Impress with Q3 Show: Hindustan Unilever (HUL) posted a third-quarter earnings performance that was below expectations and although the country's largest consumer goods company indicated it has seen a modest volume recovery in some categories over the past few weeks, the stock plunged 5.8% after the announcement. It closed 5.2% down at ₹892.8, the steepest drop in four years. Domestic sales, a proxy for consumer demand in the country, grew 8% to ₹7,774.4 crore from ₹7,223.3 crore a year ago, with volume growing at 3%.The Indian unit of AngloDutch Unilever said net profit rose 18% to ₹1,252 crore after exceptional income from the sale of properties. Excluding this, net profit rose 2% to ₹955 crore. Key categories have been tak ing a hit, an analyst pointed out, and the immediate prospects are bleak. “Growth in laundry and personal products has almost halved since last year,“ said Abneesh Roy, associate director at Edelweiss Securities. “Also, recovery in consumer demand won't likely be seen in the next two quarters for HUL.“ Analysts polled by Thomson Reuters had expected HUL to post `. 1,081 crore in profit with 6% volume growth. To be sure, HUL outperformed the broader FMCG market, which saw 6% sales growth with 1% volume growth during the quarter.

• Satbir Singh to Join FCB Ulka as CCO in Feb: Satbir Singh, managing partner and chief creative officer (CCO) at Havas Worldwide India, has submitted his resignation at the advertising and marketing agency.He will join rival agency FCB Ulka as CCO with effect from February. Confirming the development, Nagesh Alai, chairman at FCB Ulka Group, said Singh will be a great addition to FCB Ulka's leadership team. Singh will replace K S Chakravar thy, popularly known as Chax, who quit FCB Ulka as national creative director last year. He will be relo cating to Mumbai from Delhi for the new position. “FCB is amongst India's largest agencies for a reason. My mandate is to persist with the good things, sharpen the others and add digital edge to our offering,“ Singh told ET. “Clearly it's time for smart, digitally-savvy large agencies to create work that speaks to people in their preferred medium, whether it's a 30inch screen or a 4-inch one,“ he said.

• TCS now India's most profitable company: After 23 years, India has a new numero uno when it comes to profitability. Information technology major Tata Consultancy Services (TCS) posted a net profit of Rs 5,328 crore for the quarter ended December, overtaking Reliance Industries Ltd. The oil-to-telecom behemoth saw its profit dip to Rs 5,256 crore -its first decline in nine quarters -as falling crude prices hurt its core business. Though these figures are only for one quarter, it is still a significant moment as it's the first time an IT company has topped the profit charts. RIL itself had overtaken the previous leader, Tata Steel, on the back of changes in the economy unleashed by the reforms. “Being the best growth company in an industry with huge growth potential, the performance of TCS is one that is sustainable in the long run,“ Shashi Bhusan, senior research analyst at Prabhudas Lilladher said. Analysts said that though the outlook for the commodities sector in general and crude in specific is currently subdued, TCS grabbing the top spot underlines the emergence of the IT sector as force undeterred by macro-economic concerns and business cycles. Commenting on the third quarter performance, TCS CEO N Chandrasekaran said, “We have maintained our momentum in a traditionally weak quarter for the IT industry . Based on our progress this quarter, we are well on our way to post industry-leading growth for FY15.“

• Warrants to Help Marans Retain Stake in SpiceJet, to Exit When Time is Right: The Marans will stay invested as a majority shareholder in SpiceJet even after Ajay Singh takes over, waiting till the situation at the company and industry improves, so they can take a better exit. SpiceJet announced on last Friday that it will transfer ownership from Kalanithi Maran to Singh, its founder. Singh later said he will bring in JP Morgan and another Indian investor into the airline. Maran and his wife currently own just over 58% in the airline through the holding company KAL Airways. SL Narayanan, CFO of Maran's Sun Group, said the deal will lead to the entire transfer of stake. However, the Marans currently hold warrants in the airline which will be fully paid up after the deal, by investment of ₹80 crore, said Narayanan, which will give them a 23% shareholding in the company. One part of the warrant-to-share conversion will be done in April this year and the remaining, a year later. The new investors will also issue fresh shares to infuse capital into SpiceJet, Narayanan said, possibly through a rights issue, which will lead to further dilution of the stake that the Marans hold. They will hold on to that shareholding until l they get a better valuation. “We hope some sanity will return to the industry. We will wait till then (for an exit),“ he said.

• Ready to Re-train Staff on Basic Courtesy: McDonald's: McDonald's India, the country's largest burger chain, said it will re-train its employees “where required“ after a staffer in a Pune outlet asked a destitute child to leave, prompting condemnation on social media. The store was closed temporarily on Sunday after locals attacked it. McDonald's Pune is operated by Hardcastle Restaurants, which manages 202 of the fast-food outlets in the west and south and employs 7,500 people. “We shall examine if, in any manner, there has been a breach in basic courtesy and respect and take appropriate action, including re-training where required,“ a McDonald's spokesperson said in response to a query from ET. A female customer had taken a street child inside the outlet to buy him food and was standing with him in the queue when a McDonald's staffer allegedly pushed the boy out, saying: “These kind of people were not allowed inside the store.“ She managed to buy him a Fanta Float, a beverage owned by Coca-Cola, the global beverage partner of McDonald's. She subsequently posted details of the incident on Facebook. The incident allegedly took place on January 10.“This is proof that the voice on the other side is getting empowered. It's the first major example of a complaint cascading into something so big in India. In the past, brands planned a controlled message to stakeholders through their PRbrand teams. Today , every employee is a brand ambassador and the carrier of messages. Therefore it becomes imperative for every employee to live the brand,“ said Anusha Shetty , CEO of social media agency Autumn Worldwide. 

• Flipkart joins hands with online education pioneer TCYonline: Homegrown e-retailer Flipkart has joined hands with online education pioneer TCYonline to offer a wide spread of test preparation tools, the company said today. Starting January 19, products/coaching material for over 90 exam categories from TCYonline will be exclusively available for 90 days on Flipkart. The partnership will offer students across India access to an entire gamut of educational offerings from TCYonline, the company said in a release. TCYonline is one of the largest and most popular testing platforms in the country with tests from over 50,000 teachers across 90+ exam categories.

International:

• Nestle plans to invest $138 million in Egypt in next few years: Swiss food giant Nestle plans to invest about 1 billion Egyptian pounds ($137.93 million) in Egypt in the next few years and believes economic reforms could deliver results, its regional CEO said on Monday. Political and economic instability triggered by the uprising that toppled autocrat Hosni Mubarak in 2011 have not discouraged Nestle from investing about the same amount in the years since then. "Certainly the kind of investments we have made over the last three to four years are the kind of vision that we would have for this market also going forward," Suresh Narayanan, its North East Africa Region CEO, told Reuters in an interview. Nestle aims to invest in manufacturing, new products and the nutrition and health industries, he said.

• Marc Bolland's strategy in focus as Marks & Spencer's clothes lose universal appeal: For generations, British children went to school in Marks & Spencer's clothes, teenagers turned to it for first interview suits and shoppers of all ages bought its underwear. But the arrival over the last 20 years of fast, cheap fashion at one end of the market and affordable luxury at the other has left M&S struggling to recapture its universal appeal. After 14 consecutive quarterly declines in clothing, footwear and homeware sales, time could be running out for the man tasked with finding a solution - Dutchman Marc Bolland. A rising share price, a strong dividend and signs of improvement in its clothes had largely kept investors onside during his five-year tenure, but a disastrous Christmas has reignited the question of whether M&S needs a fresh direction. A change of faces at the top of several of Britain's biggest retailers in recent months could also add to the momentum.

• Moschino Opens First U.S. Boutique in Los Angeles: Moschino opened its first U.S. boutique in Los Angeles today at 8933 Beverly Boulevard. The first concept store conceived by creative director Jeremy Scott, the 3,500-square-foot space, formerly Hadid Gallery, presents Scott’s colorful, pop vision in a clean, white space with large plate-glass windows facing the manicured street, all the better to show off the large-form installations, oversize cola cans, atop which mannequins in graphic crushed can-printed dresses and separates are perched in cheeky poses. Moschino sits on a stretch of Beverly Boulevard west of fashion-heavy Robertson Boulevard, which is part of the West Hollywood Design District. Most tenants are furniture stores, showrooms and art galleries, though Stella McCartney is a few doors east and Jenni Kayne’s retail flagship and Hedi Slimane’s design studio are a few blocks west.

• Aritzia Continues to Test New Store Concepts: Canadian retailer Aritzia is planning more growth in North America as it continues to test new store concepts. “There’s definitely room for more stores in the U.S. and more in New York,” said Oliver Walsh, chief marketing officer. “We have 22 stores in greater Toronto alone. We have 49 stores in Canada and we haven’t reached a ceiling.” Aritzia in 2011 unveiled its first New York store, a 10,680-square-foot unit on West Broadway in SoHo. That location will be expanded this year to 18,320 square feet. In addition, a new unit will open in the Flatiron District. It will be Aritzia’s third store in Manhattan after a 13,500-square-foot flagship on Fifth Avenue between 48th and 49th Streets that opened in 2012. The retailer also operates stores in Chicago; San Francisco; Dallas; Portland, Ore.; Seattle; Short Hills and Paramus, N.J.; San Francisco and Santa Clara, Calif., and Troy, Mich. “Los Angeles is on the horizon,” Walsh said.

• Colors of Benetton Names Trio of Executives: Benetton Group has named three new executives to develop its United Colors of Benetton label: Marco Messini, chief distribution and sales officer; John Mollanger, chief product and marketing officer; and Piero Maldini, retail director. “We’re going through a phase in which we are very intent on keeping the company’s business focused in tough market conditions,” said Benetton Group chief executive officer Marco Airoldi. Messini, who spent a decade at VF Corp., most recently as vice president of EMEA franchising for all the company’s brands, had also worked in sales for Diadora and Invicta. Mollanger was previously director of product and marketing for Asics in Japan, and had also worked for Nike and Puma in the U.S. and in Europe.

Tech:

• Nokia to Build 4G Network for Airtel: Nokia Networks has bagged a $200-million, or about ₹1,240-crore contract from Bharti Airtel to build the country's first 4G network in the 1800 MHz band in six telecom circles. The mobile technology arm of Nokia Corporation and Airtel will soon announce the deal that will cover Mumbai, MP, West Bengal, Odisha, Punjab and Kerala circles, one person aware of the development told ET. Both the companies have not responded to ET's queries as of press time. 4G, or fourth generation mobile communication technology , currently provides the fastest wireless internet connectivity in the country , with download speeds of up to 40 Mbps and upload speeds of up to 20 Mbps. At present all 4G networks in the country run on the 2300 MHz band, which was auctioned by the government as broadband wireless spectrum (BWA) in the 2010 spectrum auctions, and use TDD-LTE technology . Airtel's 4G network in the 1800 MHz band will use the FDD-LTE technology that is older and more widely accepted globally than TDD-LTE.

• IBM unveils servers targeting eCommerce, mobile app economy: Tech giant IBM today unveiled the z13 mainframe servers, which will provide real-time encryption on all mobile transactions, targeting eCommerce and mCommerce firms in India. z13 is the first system able to process 2.5 billion transactions a day. Its transactions are persistent, protected and auditable from end-to-end, IBM said in a statement. "z13 system culminates a USD 1 billion investment, five years of development, exploits innovation of more than 500 new patents and represents a collaboration with over 60 clients underscoring IBM's singular commitment to providing higher value, innovative technologies to clients," it added. Explaining the rationale behind the creation of z13, IBM said as mobile adoption grows, consumers are driving exponentially larger numbers of mobile transactions.

• Facebook Messenger Testing Voice-to-text Conversions: Facebook is testing a new feature as part of its Messenger app that allows you to automatically convert voice messages into text. Voicetotext messenger Facebook Messenger testing voice to text conversionsDavid Marcus, vice president of Messaging at Facebook, announced the tests in a post on the social network. “We already offer a feature that enables people to send voice clips to their friends without having to type out the text. Today we are starting to roll out a small test that helps people read the voice clips they receive instead of having to play them out loud,” Marcus wrote. He added that the test is only running at a “tiny scale” right now, and that it’ll be made more widely available if it proves popular. I’d have though that being able to read the contents of a voice clip at a time when you perhaps wouldn’t be able to listen to a recording (in a meeting, for example) would prove useful to many users.

• Amazon to Push into Movie Theaters with 12 Original Titles per Year: Amazon has today announced that it will start work on making one dozen original movies for cinemas and Prime Instant Video subscribers each year. The resulting movies will still be shown first in cinemas, but will be available via its streaming service around 30 to 60 days after the theatrical premiere. The dozen movies per year goal is an ambitious one and work will start on the first of these later in 2015. The creative development process will be led by Ted Hope, Amazon said. The announcement follows news from last week that Amazon has signed Woody Allen to write and produce his very first TV show. Clearly, Amazon Studios is doubling down on its original content in 2015 in a bid to take on Netflix and other rival streaming services. Personally, I’d prefer one solid movie than 12 hurried efforts, but we’ll have to wait and see until the first one arrives before passing judgement on the quality of the content.

• Viber and Tango Temporarily Banned in Bangladesh: The Bangladeshi government placed a temporary ban on mobile messaging services Viber and Tango yesterday for undisclosed reasons, reports AFP. On orders from local law enforcement agencies, The Bangladesh Telecommunications and Regulatory Commission had shut down both services “for the time being,” according to a commission spokesman who didn’t offer any explanation for the BTRC’s decision. However, it’s likely that the services were shut down to prevent anti-government protesters from communicating freely with each other. Activists from the Bangladesh Nationalist Party and its allies are in a struggle to overthrow the current government, with recent protests turning violent and killing 27 people in the past two weeks.