News As We Read- 13th June'13

Thought of the Day:

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Following made the Headlines:

India:

• Apollo to Buy Cooper for 14,500cr: Apollo Tyres, India’s largest tyremaker by revenues, has agreed to acquire Cooper Tire & Rubber Company of the US in an all-cash transaction for about 14,500 crore ($2.5 billion), a deal that will make the Indian tyremaker the world’s seventh largest. The acquisition, one of the biggest by an Indian firm in the automotive sector, will provide Onkar S Kanwar’s company a footprint in the Chinese and US markets. Cooper Tire & Rubber is the parent company of a global group of firms that specialise in the design, manufacture, marketing and sales of car and light truck tyres. Cooper is the largest supplier of tyres to Sears, the US retailer. ET NOW had, on October 11, 2012, first reported on Cooper Tire’s possible acquisition by Apollo Tyres, and a report was carried in ET’s October 12 edition. A wholly owned arm of Apollo Mauritius Holdings will buy Cooper Tire at $35 a share from American shareholders in an all-cash transaction, which represents a 40% premium to Cooper’s 30-day volume-weighted average price on the New York Stock Exchange.

• No Indian Summer for Factory Output, Growth Sputters at 2%: Macro-economic data released by the government on Wednesday made for gloomy reading for both policymakers and investors. India’s industrial output grew less than expected in April, renewing calls for monetary easing as economic recovery remained elusive, but high retail inflation in May dampened hopes of a rate cut next week. A 2% growth in production at factories, mines and utilities in April fell short of street expectations of a 2.4% increase, and was less than March’s 3.4% rise. Retail inflation eased to a 15-month low of 9.31% in May, but still remained significantly higher than what the Reserve Bank of India would be comfortable with. The Sensex fell 0.86%, ending the day at a two-month low, as expectations of a fourth straight interest rate cut at RBI’s policy meet on June 17 receded.

• Wadia Quietly Kneads Dough at Britannia: Quietly, and hidden from the public glare after the recent CXO-level changes in Britannia Industries, low-profile chairman Nusli Wadia is taking a hands-on role in directing the operations of the biscuit company. Sources within the company say Wadia spent a day meeting with over 200 top managers at Matthan, a luxury hotel near the Britannia office in Bangalore, on May 22, a week before he announced that Managing Director Vinita Bali would take care of international operations and COO Varun Berry would lead Indian operations. Later, in a note to managers, he called this meeting “a comprehensive exercise at understanding the company’s performance”. This is Wadia’s first intense engagement with managers since Bali took over as MD in 2005. Company sources say this conference was held at Wadia’s request. He also crafted out the agenda for the day and requested that specific presentations be made. His son Ness Wadia, who is on board of the company, was also present at the conference. Close on the heels of this meeting, Wadia sent out a note to managers outlining at least three key changes which suggest he and his son will take on greater operational involvement in the company. The mail also outlined the new roles for Bali and Berry. First, the executive committee, the apex management body of the company, which was headed by 58-yearold Bali till recently, will now be run by Wadia. Second, new CFO Vinod Menon, who was reporting to Bali, will now report to Wadia and Bali. Third, Ness Wadia, along with Ajai Puri, a non-executive director and nutrition expert, and Shombit Sengupta, a management and design consultant, have been inducted into a task force to set company strategy, drive innovation and create new products.

• Out of Tune, Music World to Shut Shop: The 14,000 crore RP-Sanjiv Goenka group is moving out of the music retailing business for good. It is in the process of shutting down all its music retail stores under the Music World brand across India. The largest of them all, the store on Park Street in Kolkata has been a crowd puller always and the highest revenue grosser in the whole chain. Even that is planning to down shutters from July 1, 2013. Top company honchos attribute the group’s decision to exit the music retailing business to the consistently falling margins and sales of pre-recorded stored music due to a variety of factors including piracy, digitisation in the industry and increasing option of being able to download music straight off the internet. “The combination has sounded the death knell for CD shops and made the whole business model itself unviable. We have therefore decided to wind up Music World outlets in the country,” said a company source. Sanjay Gupta, group corporate head, marketing, confirmed the decision to exit music retailing business. Gupta said: “Music World has for the last 16 years been India’s premier music and home video retail chain. However, in the last few years, the onset of digitisation in music and the shift in consumer preferences towards music and video downloads have rendered the business model unviable.” Information trickling in suggests that the group felt the impact more strongly over the last six months to a year, with sales dropping over 50%. Revenues dipped to 35-40 lakh a month in 2013 from 70 lakh a month in 2012. Music World outlets were all taken on lease. Therefore, the closure of these stores will not saddle the company with idle real estate. Although the stores would be closed down, the group will retain the Music World brand because of the strong brand equity among consumers. Employees of the music retailing business are being absorbed into other companies of the group. Incidentally, Music World is a whollyowned subsidiary of Spencer’s Retail which, in turn, is a subsidiary of power producer CESC, the group’s flagship. The group is now merging the bleeding music stores chain Music World with Spencer’s Retail. A formal decision to amalgamate Music World with Spencer’s has already been taken by the boards of the respective companies and necessary documents have been filed with the Kolkata High Court.

• Over 50 Top Jewellers to Participate in Jewels Exotica: More than 50 top jewellers of the country are participating in the premium jewellery exhibition-cum-sale Jewels Exotica, commencing in Bangalore on June 15. On display during the three-day exhibition at Koramangala Indoor Stadium will be an exclusive range and a variety of jewellery, Sandeep Bekal, convenor of the event and head of Expoworld, said. “This special event will have over 50 top jewellers of the country showcasing a wide variety of designs, from contemporary to classic, offering cognoscente the entire spectrum on a single platform,” he said. Some of the star attractions are handcrafted gold jewellery from Kolkata-based PC Chandra, the diamond specialist Kirtilals from Coimbatore and Muliya Jewellers from Puttur.

• HUL Wants to Up the Style Quotient for Your Hair With Premium Brand: When Hindustan Unilever’s executive director Hemant Bakshi went for a ‘complimentary’ hair cut last week, he came out of the salon 2,500 poorer. Though his hairdo didn’t cost anything at all, he splurged on almost every product used during the half an hour process — from shampoo to hair wax. And he’s excited about this unusual impulse buy, because it involves his firm’s foray into super premium hair-care business. The makeshift salon was Hindustan Unilever’s training ground for its professional hair products brand TIGI, popularly known as Toni & Guy after its founders, which will be sold to consumers exclusively through top salons that use these products. “TIGI actually allows us to tick many boxes in our strategy,” says Bakshi, who this month completes 24 years in HUL, exactly half his life. “It allows us to complete our portfolio, have a presence in the category of the future and a presence in the channel of the future,” Bakshi says. The company will enter hair colour segment in India through the new brand, and bring in other TIGI products including gel, shampoo, wax and mousse under Bed Head and S-Factor. Unilever, the Anglo-Dutch parent of HUL, acquired TIGI’s professional hair product business for $411.5 million in 2009. They carry super premium price tags, though. TIGI’s shampoo, at 700-925 for 250 ml, costs almost eight times a normal one, and over four times the FMCG giant’s premium brand Dove. And TIGI products are at least 40% costlier than most products of L'Oreal, the French cosmetics giant that controls over three-fourths of the urban salon market in the country, and other competitors such as P&G’s Wella and German brand Schwarzkopf. “We don’t want to leave any gap in our portfolio in terms of price-points and TIGI comes and play a very important part in completing our portfolio as far as beauty is concerned in hair,” Bakshi says. “We would do the same thing across all our categories.” The company will sell TIGI products through just over 40 salons in the country to start with, making its reach of 6.4 million retail outlets somewhat superfluous in this case. In comparison, L'Oreal sells its products under Professional, Matrix and Kérastase brands through more than 30,000 salons.

• Curtains Down for 160-yr-old Telegrams: Smart phones, emails and SMS seem to have pushed the humble telegram service to a quiet corner with the BSNL deciding to discontinue the 160-year-old telegraph service from July 15. Once the main source of quick and urgent communication, the service delivered many happy and sad news to people spread all over the country. But with the advent of technology and newer means of communication, the telegram found itself edged out. As per a circular issued by Shameem Akhtar, Sr General Manager (Telegraph Services) at BSNL Corporate office, New Delhi, the telegraph service is to be discontinued with effect from July 15, 2013. The circular sent to various telecom district and circle offices denotes that telegram services will be closed from 15 July and as a result all telegraph offices under the management of BSNL will have to stop booking telegrams from July 15. The circular has also directed the telecom offices to maintain the log books, service messages, delivery slips only for six months from the date of bookings. However, complaints, press reports and other messages from different consumer forum are to be kept for one year. Sources at BSNL Delhi said, “We had asked the government to support the service as it was not commercially viable and the government said the BSNL board should decide on it. We have taken a decision to close the service after consultation with the Department of Posts. They also said that there are better options available.”

International:

• World Bank cuts China growth forecast: The World Bank has cut its growth forecast for China amid warnings of slower but more stable global growth over the coming months. The bank now expects the China to grow 7.7% in 2013, down from its earlier projection of 8.4%. It also cut the forecast for global economic growth to 2.2% from 2.4%. The bank said growth in China, the world's second-largest economy, had slowed as policymakers look to rebalance its growth model. Over the past few decades China has relied heavily on exports and government-led investment to boost its economy. However, a slowdown in key markets such as the US and Europe has seen a decline in demand for Chinese exports, prompting concerns whether China can sustain its high growth rate. There have been calls for China to take measures to boost domestic demand to offset the decline in exports and rebalance its economy. While Beijing has been keen to boost domestic consumption, analysts have said that the shift in its growth model may see China's growth rate slow in the short-term.

• European Commission launches tax evasion plan: The European Commission is seeking to up the fight against tax evasion within the European Union. The Commission wants governments to automatically exchange information on a wide range of financial income earned in their countries by non-residents. This would give the EU the most comprehensive such system in the world, the EU supranational body said. Next week, the G8 major nations will meet to discuss global measures against tax evasion and money laundering. The EU said it would push at the meeting in Northern Ireland for a similar system of information sharing to be rolled out worldwide, which it said would help developing countries collect more tax. The Commission plan, which will cover all income including dividends and capital gains, will build on the existing exchange of non-residents' saving details, which is due to be strengthened by the end of the year. EU Taxation Commissioner Algirdas Semeta said: "With today's proposal, member states will be better equipped to assess and collect the taxes they are due, while the EU will be well positioned to push for higher standards of tax good governance globally.

• PVH Tops Expectations in First Quarter: Shares of PVH Corp. climbed more than 7 percent in after-hours trading after the company reported first-quarter results that substantially exceeded both Wall Street and its own expectations. Despite the sizeable beat — earnings per share on a non-GAAP basis were $1.91, 56 cents above the $1.35 consensus of analysts — PVH reiterated its full-year guidance based on “the short amount of time that has passed since closing the Warnaco acquisition and the complexity of the integration.” PVH concluded its $2.9 billion acquisition of Warnaco Group Inc. on Feb. 13 and has since said that costs for the integration and the rebuilding of the Calvin Klein jeanswear and underwear businesses previously operated by Warnaco would exceed initial projections.

• Prada Opening Store in Bari: Prada is opening its first store in Bari, capital of the Apulia region, Thursday on Via Sparano, at the center of the city’s high-end shopping district. Designed by architect Roberto Baciocchi, the 6,372-square-foot store is spread across two levels connected by a black Marquina marble staircase, and it will offer men’s wear, women’s wear and accessories, with a special area dedicated to luggage. The ground floor features Prada’s signature black-and-white checkered marble, with green fabric walls, green velvet sofas and crystal tables. In conjunction with the new opening, Prada teamed up with the Italian National Trust, a non-profit organization that aims to promote and preserve Italy’s artistic and cultural heritage, to restore two local treasures: artist Antonio Vivarini’s 1467 polyptych in the Pinacoteca Provinciale, and the well in the 12th-century Santa Maria di Cerrate abbey near Lecce. Prada is known for its support of the arts. In 2010, the Italian fashion company funded the restoration of four gypsum statues at Bologna’s Accademia delle Belle Arti, and last year it helped restore various works at Padua’s Santa Giustina abbey.

• Burch Creative Capital Invests in Consignment Site: Just eight months after launching, consignment site Bib + Tuck has secured $600,000 in financing from Burch Creative Capital. Sari Azout, who cofounded the six-person company with her childhood friend Sari Bibliowicz, said, “Chris Burch really understood from Day One what our idea was all about. We met with tons and tons of investors, but he understood the business model and brand more than all the others.” “We have 12,000 members but we have been extremely bootstrapped since we’ve been around. This will allow us to build the team, introduce an iPhone app this summer and switch from an invite-only model to a public one,” Azout said. “We’re just looking forward to building the company as a lifestyle brand. It will be a very curated experience.” They expect to have a customer base of between 50,000 and 100,000 by the end of this year. To try to cultivate more frequent shopping, there are such services as “Closets I’m Following,” which use algorithms to pair shoppers who share the same style and wear the same size. The founders are considering having a truck travel around New York City or opening a pop-up shop to give people a better understanding of their swapping site.