News As We Read- 14th June'13

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Following made the Headlines:

India:

• As Murthy Walks into C-Suite, Infosys goes for a Hike: NR Narayana Murthy has made his first significant move upon returning to Infosys by effecting an unexpected round of wage increases for the company’s 1.5 lakh employees. By doing so, analysts said, the Infosys chairman is trying to kill several birds with one stone, displaying tactical finesse that has earned him a reputation as one of India’s canniest entrepreneurs. On Thursday, less than a fortnight after Murthy came back to helm the company, Infosys announced an average increment of 8% for India employees effective July 1. For employees outside India, the company said the increments will be 3%, albeit with some riders. The biggest push was reserved for its global sales force which will get a raise of 8% effective May. The populist move — a certain vote winner among staff — could raise morale, enhance Murthy’s stock of goodwill and send out a message to all stakeholders and rivals that the Infosys co-founder is back and means business. “By announcing wage hikes, Infosys wants to calm down anxiety among its employees and stabilise things within the organisation. It is a smart move; however, we do not expect more bold moves from Murthy,” said Manish Bahl, country manager at Forrester Research. “He will be focused on getting things aligned, talking to clients and creating expertise on the product innovation side.” Murthy, 66, retired from Infosys in 2011 but returned on June 1 after halting performances for two years by a company that had earned a reputation as the industry’s leader for both growth and profitability. Infosys has guided for revenue growth of 6-10% for fiscal 2014, compared with the 12-14% prognostication by industry grouping Nasscom. He will have by his side as executive assistant, his son Rohan, 30, an alumnus of Harvard and Cornell Universities, as well as Massachusetts Institute of Technology. Soon after the news of the pay raise, Murthy spoke at a packed ‘town hall’, where he told employees that his son’s role would be circumscribed, addressing criticism from several observers.

• A Ferrari of Reforms Coming on Slow Road to Growth: FM: Finance Minister P Chidambaram has promised to roll out a series of reforms over the next two weeks to stem the tide of despondency that has gripped markets and investors because of the plunging rupee and continued sluggishness in industrial growth. The measures include lifting caps on FDI in various sectors, easier entry norms for portfolio investors, a framework to set the price of coal and gas, and to allocate coal mines. Chidambaram also promised to nudge banks to pass on interest rate cuts to consumers, which could help lift plummeting sales of passenger cars and consumer durables and boost growth. The immediate impact was less than impressive. The BSE Sensex ended 213 points lower while rupee ended at 57.99, down from Wednesday’s close of 57.79 to the greenback. The fall in Indian markets, however, ought to be seen in the backdrop of a worldwide collapse in stocks on Thursday. Japanese stocks entered a bear market, with the Nikkei down 22% from its early May peak because of concerns the US Fed Reserve would start tapering its quantitative easing (QE) programme. All major Asian markets fell in tandem. Chidambaram’s statement came in the wake of the rupee slipping to its lifetime low of 58.98 to the greenback this week. Industrial production for April came in below market expectations at 2% on Wednesday, though this was revised upwards to 2.3% on Thursday. And the retail inflation number for May at 9.31% remained much above the RBI’s comfort level, dashing hopes of a rate cut. “We need to get our domestic act together. Today’s announcement is an attempt to put our house in order,” said Abheek Barua, chief economist, HDFC Bank.

• Today, Music Shops Across all of India Singing Yesterday: Book-music-movie retailing in India is in the middle of a shakeout with almost all the major chains either shutting down shops or diversifying to other segments such as toys and gadgets as digital music, movies and books catch up in the country. After RP-Sanjiv Goenka Group decided to shut down all Music World stores, Reliance Retail now plans to close standalone books-music-movie stores christened TimeOut, in a development that has also triggered the exit of Bijou Kurien as the firm’s president and CEO (lifestyle). Other national chains such as Tatas’ Landmark, Videocon’s Planet M and Shoppers Stop’s Crossword, too, have decided to significantly reduce footprint in book-music-movie retailing and instead focus on toys, lifestyle products like mobile phones, kids books and stationery, even as they are shutting down unviable stores. Experts point to rampant movie and music piracy and their free availability on the Internet, increasing popularity of digital books and e-readers and heavy discounting by online retailers for the declining fate of high-street book and music sellers, which is a global phenomenon. “Even though we started out big time in entertainment, the business mix is now changing to meet the changed market realities,” says Landmark COO Ashutosh Pandey.

• Amazon to Launch Kindle Range in India by Month-end: Online retailer Amazon, which recently announced its foray into India, said on Thursday it will introduce its Kindle range of products, including Fire and Paperwhite in the country by the end of this month. E-readers Kindle Fire and Kindle Paperwhite will be available on Amazon.in, as well as at 100-odd retail outlets in the country, including Croma, Reliance Digital, E-Zone and Vijay Sales, the company said. Kindle Fire HD (7-inch and 8.9-inch variants) will be available starting June 27 for customers in India, giving them access to over 1.9 million apps and games and more than 3.25 lakh books that are exclusive to the Kindle Store, it added. The 7-inch version will be available for 15,999, while the 8.9-inch variant will cost 21,999.

• Facebook Adds 'Hashtag' Feature to Take on Twitter: Social networking giant Facebook is now adopting the ‘hashtag’, a distinctive feature of rival Twitter, to help members keep track of popular topics being discussed on the social network. “Starting today, hashtags will be clickable on Facebook. Similar to other services like Instagram, Twitter, Tumblr, or Pinterest, hashtags on Facebook allow you to add context to a post or indicate that it is part of a larger discussion. When you click on a hashtag in Facebook, you’ll see a feed of what other people and pages are saying about that event or topic,” Facebook said in a statement.

• Done & Duster: Renault Plans to Storm Entry-car Segment: French carmaker Renault, which had a rather modest start in India, made some significant headway in the market in 2012, driven mainly by its popular compact SUV Duster. Buoyed by the success, the company has now set its sights on having a portfolio of 7-8 cars in India in the next five years, with an entry-level car at the centre of its strategy. Carlos Tavares, COO of Renault, said the work on the small entry-level car is progressing well and India’s frugal engineering is playing a key role in creating the product. “We really love this market. I think people here have such a high level of demand and such an accurate value evaluation system that making something for this country is always very challenging. But it is always very rewarding too, if you hit the right product. So, we have to be very sure and identify the right attributes for a product for India,” said Tavares. The second in command at Renault after Carlos Ghosn, Tavares says the fact that competitors are making “tonnes of money” at the entry level, makes sense for Renault to enter the segment. However, he admits that the company will have to bring out something different that appeals to the Indian eye and is profitable for the company.

• Kotak Mahindra Prime sells 8 lakh Tata Coffee shares for Rs 71 cr: Kotak Mahindra Prime, a shareholder of Tata Coffee, today offloaded over eight lakh shares of the company for nearly Rs 71 crore through open market deals.  Kotak Mahindra Prime sold three lakh shares on the BSE and another 5.05 lakh shares on the NSE, as per the bulk data available with the stock exchanges. The shares were sold at an average price of Rs 880.71 apiece, taking the total value of the transaction to Rs 70.95 crore. Separately on the BSE, another Tata Coffee, shareholder, Sharad Kantilal Shah, offloaded 1.08 lakh shares of the firm for Rs 9.72 crore. Besides, Reliance Mutual Fund today acquired one lakh shares of Tata Coffee amounting to Rs 8.8 crore, on the BSE. Meanwhile on the NSE, Reliance Regular Saving Fund bought two lakh shares of Tata Coffee in a transaction worth Rs 17.61 crore. During the quarter ended March, 2013, Kotak Mahindra Prime held 5.10 lakh shares of Tata Coffee representing 2.73 per cent stake in the company. In the same quarter Shah held seven lakh shares (3.76 per cent stake) in the company. Shares of Tata Coffee today plunged 6.43 per cent to close at Rs 1,029.45 apiece, on the BSE.

• Jet Airways Names Toomey as New CEO: India’s second largest airline by market share, Jet Airways, on Thursday said that the company has appointed Gary Kenneth Toomey as its new Chief Executive Officer. The appointment came nearly a week after its former CEO, Nikos Kardassis, quit the airline. “Toomey, 58, an Australian national and an airline executive with extensive experience at the highest levels of the international, domestic and regional aviation sectors and has previously served as president and chief executive officer of the Air New Zealand Group and as chief executive officer of Airlines PNG in Papua New Guinea during their periods of major expansion,” Jet said in a statement. Meanwhile, Toomey is expected to face major challenges in the coming months as Air Asia, the region’s biggest discount carrier, enters Indian market later this year. Capt Hameed Ali, currently acting Chief Executive Officer of Jet Airways, will continue until the airline receives regulatory approval for Toomey’s appointment, the airline said. Following a stake sale deal between Jet Airways and Abu Dhabi -based Etihad in April, industry was abuzz with speculation that Jet was likely to see changes in its top management team. Foreign Investment Promotion Board will meet today to decide on the 2,058 crore Jet-Etihad deal, the largest foreign investment in the Indian aviation sector.

• Air India to tie up with hotel chain, Amex to boost loyalty: In a bid to increase revenue, Air India has proposed tying up with an international hotel chain and a bank to boost its frequent- flyer programme. "We will partner with an international hotel chain and launch a co- branded credit card with a bank with a nation- wide presence. These features have been missing from our programme, said Air India’s commercial director, Deepak Brara. Currently, the airline has a co- branded credit card with American Express Bank, but its card membership is low. Globally, airlines enter into partnership with other companies offering “earn and burn incentives in the form of free miles and discounts in purchase and hotel stays, but the national carrier’s scheme has lacked these features. The airline is also looking at different ways of communication and launched a Facebook page last month to connect with its young flyers. It will come out with television commercial soon. Air India earns about ₹ 10 crore annually from the frequent flyer programme — also called loyalty programme — but has not been aggressive in promotions and partnerships with other companies. Australias Qantas Airlines, which earns $56.21 as ancillary revenue per passenger (the highest per passenger revenue), relies heavily on the sale of frequent- flyer miles or points to its partners to increase revenue. "We are launching a campaign regarding our frequent flyer programme. Currently, it has 1.1 million members and 500 members are being added each day. In fact, the membership has grown from 750,000 last year to over a million members now, said Brara. Also on the cards is upgrade of Air India holidays, which will allow travellers to make tour bookings directly on the airline website. Currently, it is a business to- business platform and only travel agents can sell the tour packages. Air India has tied up with a portal for the scheme and earns a per passenger royalty from the portal. Air India estimates its total revenue would go up 20 per cent by the end of the current financial year. The carriers total revenue is expected to rise from ₹ 16,130 crore in 2012- 13 to ₹ 19,393 crore in 2013- 14. The airline has six Boeing 787s at present and it has ordered another 27. The Boeing 787s operate on domestic routes between Delhi- Chennai and Bangalore- Kolkata routes, besides international operations to London, Frankfurt and Paris. Boeing has indicated that the eight aircraft will be delivered till December 2013. Air India plans to launch flights to Sydney- Melbourne and Birmingham by August end with Boeing 787s.

International:

• Airbus A350 set for maiden flight: The newest aircraft from European planemaker Airbus is due to take off on its maiden flight later. The Airbus A350 is designed to be more fuel-efficient, and a direct competitor to US rival Boeing's 787 Dreamliner. It is seen as vital to the future of Airbus, which competes with Boeing to supply the majority of the world's airlines with new planes. It is due to take off from the French city of Toulouse, where the A350 is assembled, on Friday morning. The Dreamliner has proved popular since its first flight in 2009, despite recently being grounded by regulators over safety fears relating to its batteries.

• US retail sales beat forecasts in May: US retail sales rose more than expected last month, helped by a jump in car sales, government data has shown. Retail sales increased by 0.6% in May from April, the Commerce Department said. Analysts had forecast a rise of about 0.4%. Car sales rose by 1.8%, the biggest gain in six months. The retail sales data is the government's first look each month at consumer spending, which makes up 70% of economic activity in the US. Retail sales account for about 30% of all consumer spending. Sales at hardware stores increased 0.9% while sales at sporting goods and general merchandise stores also rose. But sales fell 0.8% at furniture stores and 0.4% at electronics and appliance stores. Core sales, which exclude vehicles, fuel and building supplies, rose by 0.3%. The data suggests that consumers remain resilient despite recent tax rises and belt-tightening in Washington. "Households may... be getting over the tax hikes and spending some of the savings from the recent fall in gasoline prices," Paul Dales, US economist at Capital Economics, said. The sales report may also add to the debate on when the Federal Reserve might start reining in its bond-buying programme. "These data were strong and confirmed the Fed has the leeway to signal it's ready to pull out," said Robbert Van Batenburg, director of market strategy at Newedge USA.

• PVH Zeroes In on Calvin Klein Jeans Turnaround: PVH Corp. is decentralizing the design functions of Calvin Klein Jeans and cleaning up its distribution as the company seeks to return the division to acceptable levels of profitability in the U.S. and Europe. In separate comments Thursday at the Piper Jaffray Annual Consumer Conference in New York and on a call to discuss first-quarter results reported late Wednesday, Emanuel Chirico, chairman and chief executive officer of PVH, noted that jeanswear was “the only difficult business” within the Calvin Klein brand. On the call, he said Calvin Klein Underwear, acquired along with the Klein jeans business as part of its purchase of Warnaco Group Inc. for $2.9 billion in February, is “profitable” and “working well.” While the Calvin Klein business overall exceeded sales and profit expectations in the first quarter, the jeans business under the designer brand has been unprofitable in North America and Europe, with sales continuing to trend downward. “We are not looking for any significant improvement in the trends of that business through…fiscal 2013,” he told analysts on the call.

• Emilio Pucci Opens in Miami's Design District: Emilio Pucci continues to invest in its retail network and has opened a 1,728-square-foot boutique in Miami’s Design District, which follows the unveiling of a Manhattan flagship in November. This is the brand’s third location in Southern Florida. “Florida has historically been a strategic market for us, so we’re especially happy to have such a unique store in this very singular neighborhood,” said Emilio Pucci president and chief executive officer Alessandra Carra. “The new opening is an important step in the development of our business in the U.S.” In the region, the company has six monobrand boutiques and the brand is carried at Bergdorf Goodman, Neiman Marcus, Saks Fifth Avenue and Nordstrom, as well as a large number of high-end specialty stores. Art Deco-era pastel and tropical hues evocative of Pucci’s prints stand out on furnishings and decor in the new venue. Brass “totems” spelling Pucci — an homage to props the namesake founder of the brand used in one of his first fashion shows — mark the store, as well as high-gloss brass fixtures and distinctive, purple-veined Breccia dei Medici marble reminiscent of Palazzo Pucci in Florence.

• Greats Footwear to Launch Via E-commerce: The direct-to-consumer efficiencies of e-commerce have become the go-to business model of many a fashion start-up. Following in the well-trod footsteps of companies like Everlane, Flint & Tinder and Harry’s shaving products comes Greats, a new men’s footwear concept that launches in August. Founded by two footwear industry veterans, Jon Buscemi and Ryan Babenzien, the company will offer classic shoe styles, beginning with retro-looking sneakers, with high production values and accessible prices. “The footwear industry is incredibly inefficient. By disrupting the traditional retail and e-commerce model, Greats will be able to make a premium-quality shoe and offer it to the consumer at a much lower price,” said Babenzien, who has been the chief executive officer of tennis apparel maker Boast since last year, but is stepping down from that position this month. Apart from its founders’ own seed money, Greats has been funded by a small group of angel investors, including New York-based High Peaks Venture Partners and NFL player Adrian Wilson of the New England Patriots. The company has tapped Nickelson Wooster as “stylist in residence” and a member of its advisory board. Wooster exited his role as senior vice president of product development and design of J.C. Penney Co. Inc. earlier this year. The initial launch at Greatsbrand.com will offer two sneaker styles, each in three color options. The Wilson, priced at $59, is a low-top retro basketball sneaker in cotton canvas based on the silhouette of the Converse Chuck Taylor shoe, available in red, white or blue. “We’ll be working on the most classic men’s sneaker silhouettes and reinterpreting them in a hyper-relevant way,” explained Buscemi. The Wilson is actually priced higher than the basic version of the Converse Chuck Taylor All Star, which starts at $50. The price of the Wilson is reflected in premium materials and construction, such as a synthetic pigskin foot bed, leather toe cap and an innovative elastic shoelace with a toggle closure that eliminates the need to tie your shoes, said Babenzien.