News As We Read- 27th June'13

Thought of the Day:

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Following made the Headlines:

India:

• Bharti Walmart Head Raj Jain Walks Out Amid Flurry of Probes: Bharti Walmart’s chief executive Raj Jain has left the company, his sudden albeit long-rumoured departure once again putting an unwelcome spotlight on the high-profile retailing venture that has struggled to recover from the paralysis induced by investigations into bribery allegations and alleged violation of India’s foreign exchange laws. Walmart, the Arkansas, USbased world’s biggest retailer, said in a terse statement on Wednesday that Jain is “no longer” with the company and named Ramnik Narsey, a senior vice-president at Walmart International, who joined it last month from Australian retailer Woolworths, as the interim head of Bharti Walmart. The statement, issued out of Hong Kong, did not share any further details and a Bharti Walmart spokesperson declined to elaborate. A spokesperson for Walmart’s Indian partner, Bharti Enterprises, also declined comment on the issue. Jain, 54, who spearheaded Walmart’s entry into India in 2007 with a wholesale retailing JV, worked with the company for the past seven years, and speculation of his likely exit had been doing the rounds ever since it became caught in the global internal investigation into whether Walmart units, including in India, paid bribes as part of their business operations.

• Cornered Jewellers Push Diamonds: International gold price has tumbled again, but jewellers, facing conflicting pressures and volatility after a 12-year bull run, are recrafting retail strategy and pushing the sale of diamonds to ensure better returns. The precious metal has dropped 23% this quarter, but the gain for Indian consumers has been limited as the rupee fell about 10% during the same period. The curbs on gold, part of the efforts to control the current account deficit, have added to the costs. The trade is also stressed by aggressive customers who, unaware of the taxes, import duties or the rupee’s depreciation, demand cheaper gold.  Several jewellers, including Gitanjali, Orra, C Krishnaiah Chetty and Popley & Sons, say they plan to hard sell diamond jewellery and innovative products that will ensure value addition of 25-30%. Although this may hurt sales to an extent, the change in strategy is attractive as the margins in gold are much lower — about 6-14%, the jewellers said. “The drop in international prices is confusing consumers. They are asking us why jewellers are not offering them gold at a lower price. They are not taking into consideration the falling rupee which is making gold costlier here,” said Rajiv Popley, director of Mumbai-based jewellery firm Popley & Sons. International gold on Wednesday fell to $1,250 per ounce — its lowest in nearly three years, while silver dropped to the August 2010 level of $18.90 per ounce.

• Manu Anand May Join Mondelez in Asia-Pacific Role: Manu Anand, former region president, India and South Asia, at beverage and snacks firm PepsiCo, may be joining chocolate and confectionery giant Mondelez in an Asia-Pacific role, two officials with direct knowledge of the development said. Messages to Anand, who quit PepsiCo last week in what was seen as a sudden and abrupt move, remained unanswered. A Cadbury India spokesperson said, in response to an email query by ET that it would not comment on speculations. When his exit was announced last Thursday, Anand had told ET that he wanted ‘time out’, after working 19 years with the company. “I have decided to opt for early retirement from PepsiCo,” he had said. “PepsiCo saw Anand’s move to Mondelez as that of joining a rival firm, because both firms sell overlapping products like packaged snacks in many world markets. It did not go down well with the management, hence, his abrupt exit,” one of the officials added. According to the two officials in the know, a combination of factors at PepsiCo India, including lack of clarity over whether to focus on gaining market share or pushing profitability, and an unwieldy top-deck management structure, has led to instability and created dissonance in the company. PepsiCo’s falling market share in beverages – in April 2013, retail audit numbers sourced from Nielsen show PepsiCo India’s share was 29.7%, compared to 32.1% in April 2012 — and lukewarm response to its expensive IPL sponsorship and ad campaign, are additional factors that may have played a role.

• Carrier Midea Plans to Expand Kitchen Appliances Range: Consumer goods maker Carrier Midea India on Wednesday said it is planning to expand its offering in the kitchen appliances segment by bringing Midea's products in the domestic market. The company, a 40:60 JV between US-based Carrier Corporation and China's G D Midea, sells water dispensers and microwave in India apart from the its core presence in the air conditioners segment. It is looking to clock a turnover of 1,000 crore in 2013.

• India Value Fund to buy denim- maker Spykar: India Value Fund Advisors ( IVFA), a India focused private equity ( PE) fund, with a corpus of $ 1.2 billion, is set to acquire a controlling stake in Spykar Lifestyle, a leading maker of denim in India. In this secondary transaction, where one PE investor sells to another, Avigo Capital Partners will sell their 60 per cent stake in Spykar to IVFA, sources in the know said. The deal is likely to be announced by next month. The enterprise value of Spykar would be ₹ 280 crore. It is learnt IVFA will pay half of this upfront and the rest later. A valuation mismatch is learnt to have a caused a long delay in closing the deal. Avigo was looking for an enterprise valuation of ₹ 350- 400 crore for Spykar. Another contender in the race for Spykar’s control was Future Group, owned by Kishore Biyani. It is learnt Future withdrew last month. Spencer’s Retail of the RP- Sanjiv Goenka Group, the Aditya Birla Group and Everstone Capital were also interested in acquiring Avigo’s stake in Spykar. When asked, Avigo’s managing director, S Harikrishnan, refused to comment. A mail sent to Vishal Nevatia, managing partner of IVFA, did not elicit a response till the time of going to press. In 2011, Avigo, after bringing in its global investor, Metmin Investments, had acquired about 30 per cent in Spykar by investing about ₹ 30 crore. Metmin is owned by Raj Bagri, a non- resident Indian tycoon, earlier a chairman of the London Metal Exchange. In 2007, Avigo had invested about ₹ 25 crore in Spykar. Spykar’s founder, Prasad Pabrekar, holds 40 per cent in the company. The products of Spykar, established in 1992, are sold through 1,000 multi- brand and 200 exclusive brand outlets. According to persons in the know, its revenue last year was ₹ 180 crore. A recent report by retail consultancy Technopak Advisors says denim is the fastest growing apparel segment, with a compounded annual rise of 16 per cent. The denim market in India is pegged at ₹ 8,000 crore. “Despite the not so optimistic economic scenario of 2012, the demand for denim is growing among men, especially the younger generation. The market in India hinges around the men’s denim segment”, said the report; this is about 80 per cent of the total. The domestic apparel market was worth ₹ 2.07 lakh crore ($ 38 billion) as of 2012. It is expected to grow at a compounded yearly average of nine per cent over the next decade. On the back of the successful exit from Spykar, Avigo has readied exits from other portfolios, too, of its SME Fund- II. Sources say it has started early stages of discussion with PEs and other strategic investors to sell its stake in Rinac India, the Bangalore- based air- conditioning solutions provider. According to VCCEdge, the PE sector has made 51 exits worth $ 1.8 billion till date in 2013. There were 24 open market exits worth $ 1.1 billion during the period.

International:

• Oprah tops Forbes list of most powerful celebrities: TV mogul Oprah Winfrey has reclaimed the number one spot on Forbes magazines annual most powerful celebrities list ahead of Lady Gaga, Steven Spielberg and Madonna. The billionaire TV star is said to have made earnings of $77 million between June 2012 and June 2013. She was also credited for her prominence on TV, on social media and in the press. Forbes writer Dorothy Pomerantz, said, “ She still wields an enormous amount of power, which is really what we look for in our fame matrix. She is taking this cable network and turning it around just through the sheer force of her will, her connections and her ability.” The 59- year- old star, who has topped the list on four previous occasions, is one of three celebrities who featured on the prestigious list every year since its inception in 1999. Oprah Winfrey is said to have made earnings of $77 million between June 2012 and June 2013.

• US growth rate revised down to 1.8%: The US economy grew by less than previously estimated in the first quarter of the year, the Commerce Department has said. Gross domestic product - which measures annual economic output - grew at an annualised pace of 1.8%, down from an earlier estimate of a 2.4% rise. Weak business investment, a slowdown in consumer spending and falling exports led to the downward revision. In the final quarter of 2012, the annualised growth rate had been 0.4%. The revised figure surprised analysts, who had expected it to remain unchanged at 2.4%. US stocks rose as analysts said the revised figures could alter the Federal Reserve's intention to slow down its $85bn-a-month bond purchases, which was based on its anticipation that the economy will strengthen. "If we end up with three consecutive quarters of sub-2% growth, the Fed won't taper under those conditions. They need convincing signs of a pick-up before they turn the taps," said Jennifer Lee, senior economist at BMO Capital Markets. The Dow Jones closed up 150 points at 14,910. Global stock markets had dropped sharply at the end of last week after Fed chairman Ben Bernanke said on Wednesday that the US central bank could start reining in its quantitative easing programme later this year and wind it up completely by mid-2014.

• Rudd sworn in as Australian prime minister: Kevin Rudd returned as prime minister of Australia on Thursday, three years after being replaced in the office by his then-deputy Julia Gillard. Rudd challenged Gillard for leadership of the Labor Party on Wednesday and won a 57-45 vote among fellow Labor members of parliament. In the Australian parliamentary system, the leader of the governing party assumes the position of prime minister and on Thursday morning, in Canberra, Rudd was sworn in for a second time. Gillard resigned after the party vote on Wednesday night and announced she will leave politics. A major factor in Gillard's demise -- and in Rudd's Phoenix-like return -- is the election Australia has to hold by the end of this year. Under Gillard's leadership, Labor was facing overwhelming defeat, according to opinion polls. But the same polls show a Rudd-led Labor Party would fare much better at the ballot box. Australian Governor-General Quentin Bryce oversaw the swearing-in ceremony at Government House in Canberra. The governor-general represents Queen Elizabeth II as head of state.

• U.S., EU Agencies Seize Counterfeit Web Sites: Authorities in the U.S. and European Union seized 328 domain names associated with Web sites selling everything from counterfeit Nike and Tiffany & Co. products to National Football League merchandise in two joint operations on Wednesday. U.S. Immigration and Customs Enforcement’s Homeland Security Investigations unit joined several law enforcement agencies in Europe, coordinated by the European Police Office, in the two operations. One, dubbed “Project American Icons” resulted in the seizure of 177 domain names for Web sites selling counterfeit trademark goods manufactured by U.S.-owned companies. As part of that operation, authorities made numerous undercover purchases from nine U.S. trademark holders from the sites, including Nike, Tiffany, NFL, National Basketball Association and National Hockey League merchandise. Once the trademark holders confirmed the goods were counterfeit, authorities obtained seizure orders from federal magistrate judges. In the second operation, dubbed “Project Transatlantic Two,” Europol participated along with several European member states such as Belgium, France, Romania and the U.K., and seized 151 foreign-based domains. Both operations were coordinated by the HSI-led National Intellectual Property Rights Coordination Center in Washington. “American Icon/Transatlantic Two is a great example of the tremendous cooperation between ICE, our international partners at the IPR Center and the Department of Justice,” said Mark Witzal, deputy director of the IPR Center. “In order to go after these criminals who are duping unsuspecting shoppers all over the world, these international partnerships are vitally important. Counterfeiting is a global problem that affects us all.” Rob Wainwright, director of Europol, said, “It is important to stop the sale of counterfeit products over the Internet as it undermines legitimate businesses and also often causes health and safety risks to consumers. This successful transatlantic operation sends an important message to the criminals, showing them that they cannot hide despite the fact that they are operating via the Internet.” In addition to the domain name seizures, officials seized $150,000 in PayPal accounts used by the infringing Web sites.

• Mir Capital, LVMH Eyeing Pianoforte Holding: Mir Capital, a private-equity fund formed by Gazprombank and Italian bank Intesa Sanpaolo to support the expansion of medium-sized Italian and Russian companies, and LVMH Moët Hennessy Louis Vuitton’s private equity fund L Capital Asia, are said to be eyeing Pianoforte Holding with the goal to buy a stake in the company. The Italian group comprises fast-fashion accessories brand Carpisa, innerwear and beachwear brand Yamamay and swimwear brand Jaked. As reported, Pianoforte Holding is aiming at raising its presence abroad, especially in Russia, the Middle, Central America and the Far East, over the next three years. “The deal hinges on the support a new partner could contribute to the group’s plans to expand outside Italy, especially in Asia,” said a source. Gianluigi Cimmino, company board member and Yamamay and Carpisa chief executive officer, has said that Pianoforte may publicly list in 2015. In 2012, Pianoforte posted sales of about 300 million euros, or $396.2 million at average exchange, up from 280 million euros, or $389.2 million, in 2011. Yamamay represented nearly half of the company’s sales last year. While Intesa Sanpaolo has a 10 percent stake in Pianoforte, the Cimmino and Carlino families control the group (Maurizio and Raffaele Carlino founded the Carpisa brand). Yamamay is based in Gallarate, a 30-minute drive from Milan, and Carpisa is based in Nola, near Naples.

• Smythson Opens First Asia Store: Smythson, the British stationery and luxury leather brand, will today mark the opening of its first stand-alone store in Asia, a 500-square-foot space at Hong Kong’s Pacific Place shopping center. As part of the celebration, Smythson’s design director, Rory O’Hanlon, has married a piece of Smythson tradition with a Chinese one: The designer has updated a letter carrying case from 1908 from the brand’s archive and transformed it into a red python clutch. The new clutch is Smythson’s nod to the local traditions of calligraphy and letter writing, and comes in a limited edition of eight numbered bags. A further 18 bags, made from purple baby buffalo leather, will also be sold exclusively at the Hong Kong store. The former is priced at 1,295 pounds, or $2,000 at current exchange, while the latter costs 795 pounds, or $1,227. The original Smythson letter bag has been on display inside the store, which had a soft opening earlier this month, and forms part of an exhibition of more than 40 archival pieces, and examples of new merchandise inspired by them. The exhibition is set up in the atrium of Pacific Place, where a party, cohosted by Smythson and Chinese Vogue editor Angelica Cheung, will take place later today. Those expected to attend include British First Lady Samantha Cameron, a creative consultant at Smythson, as well as David Tang, Bao Bao Wan, Dee Poon, Fiona Kotur, Barney Cheng and Simon Birch.