News As We Read- 3rd July'13

Thought of the Day:

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Following made the Headlines:

India:

• Ambuja, ACC to be Merged in Holcim Rejig: Holcim, the world’s fourth largest cement producer, plans to carry out a substantial restructuring of Indian operations that could include a much-anticipated merger between its two local subsidiaries — Ambuja Cements and ACC. In both these entities, Holcim owns a little more than 50%. The Swiss giant has tasked a global investment bank with evaluating various options on how the two operations could be combined, said multiple sources aware of the developments. But they added the exercise is at a preliminary stage and cautioned that there is still no certainty about the shape of the eventual outcome. One option could be to merge both the firms. Yet another option could be to create a new company and then issue shares of the new entity to the shareholders of both. The second option, say the sources quoted earlier, is a more complex and expensive one. It is, however, almost certain that Holcim will maintain both the existing brands in India, even post-merger. “The initiative is being spearheaded from Holcim’s headquarters for the past few months. This is part of a bigger strategy that has been underway to optimise operations through common synergies, cost controls, etc,” said one of the officials mentioned above.

• IT Cos Snapping up Startups to Innovate Product Lines: The hunt for the next growth driver brought top IT companies — Infosys, Tata Consultancy Services, Cognizant, Wipro and MindTree — to a Nasscom matchmaking event last week, where they were serenaded by about a dozen technology startups hoping to be bought by one of them. The event — the first of its kind in India — signals a growing trend of large IT companies based out of India turning to startups for innovative ideas and technologies. It also gave the young ventures a chance to sell their ideas to the bigger firms, which are otherwise not easy to approach. “We are looking for partnerships as well as mergers and acquisitions with startups,” said Srinivas Seshadri, an associate vicepresident at Infosys, which in April set up a 593-crore fund to back innovation. Seshadri, who sold his startup Injoos to former Wipro chief executive officer Vivek Paul in 2010 before joining Infosys, is now scouting for cloud computing and enterprise mobility companies. For their part, tech startups were upbeat about the four-hour session. “It’s tough to reach large companies directly,” said Manjunath Gowda, chief executive of enterprise software solutions maker i7Networks. The 43-yearold entrepreneur is in talks with all five IT companies. This growing tango between outsourcing giants and startups is driven by mutual need.

• Panel Gives Green Light to 100% Telecom FDI: The Telecom Commission, the highest decision-making body of the department of telecom (DoT), on Tuesday approved 100% foreign direct investment in the telecom sector. Once ratified, the new policy will allow foreign telecom operators to buy out existing Indian partners, as they will no longer need to have a minority shareholder in the country. This was one of the recommendations of a high-powered committee chaired by Arvind Mayaram, secretary in the department of economic affairs in the ministry of finance, which suggested more liberal FDI norms for various sectors, including aviation and telecommunications. The decision comes even as the home ministry warned against removing any restrictions on FDI in certain critical sectors, citing security concerns. The Telecom Commission has allowed up to 49% FDI through the automatic route, with further investments subject to approval by the Foreign Investment Promotion Board, a senior government official said. The decision will come into force once the Cabinet approves it. At present, FDI in the sector is permissible only up to 74%, of which 49% is under automatic route while the remaining is subject to an approval from the FIPB. While doing away with FDI curbs will help all telcos in raising money, the news will bring cheer especially to foreign operators, who have minority partners in India.

• Look Good, Feel Good: There’s No Slowing Down the Beauty Biz: Spencer’s Retail CEO Mohit Kampani was surprised to see Olay Regenerist, a premium skin care product priced between 2,200 and 2,600 per pack, become one of the top-seller brands at its supermarkets last month. “Even two years back, we would have thought twice whether to stock such a highend brand,” Kampani says. “It is a good indicator of premiumisation in beauty care.” At a time when slowing consumer spending on aspirational products has impacted industries like auto and consumer durables, the beauty and grooming business has become an antithesis of the economic slowdown with personal care goods makers and salon chains raking in the moolah. At Spencer’s outlets, the average selling price in skincare products has grown 20% in the last one year. “Around 6-7% of the value growth can be linked to inflation with the balance coming from shoppers upgrading their purchases,” Kampani says. Leading retailers and marketers say there is increasing demand for premium skin and hair care products and services, electronic personal care products such as hair straighteners and body shavers, and high-end grooming packages priced above 10,000 at wellness and grooming chains. Social watchers and psychologists say people want to look and feel good when there is gloomy environment all around.

• AirAsia India Targets to Launch Ops by October: AirAsia top brass and Ratan Tata, their advisor, on Tuesday met several ministers here in an effort to speed up clearances for their proposed low-cost airline venture, saying they aimed to launch it by October. Besides Tata, who is the Advisor to AirAsia India, AirAsia Group chief Tony Fernandes and AirAsia India’s newly appointed CEO Mittu Chandilya held separate meetings with Finance Minister P Chidambaram, Home Minister Sushilkumar Shinde, Civil Aviation Minister Ajit Singh and Commerce and Industry Minister Anand Sharma through the day. The series of meets came over three months after AirAsia got the FIPB nod to establish the JV for the proposed airline. The company is a 49:30:21 joint venture partnership between Malaysian carrier AirAsia, the Tata Group and Arun Bhatia of Telestra TradePlace. As per procedures, the joint venture has applied for a No-Objection Certificate (NOC) from Civil Aviation Ministry and submitted documents, including names of the new airline’s Board, its CEO and other top officers, which were now being scrutinised for security clearance by the Home Ministry. “They came here for security clearance for AirAsia. We will examine (their application) and take a call as soon as possible,” Shinde said. The Civil Aviation Minister saying that his ministry would give NOC as soon as the Home Ministry clears the names.  Exuding confidence that NOC “isn’t far away”, AirAsia chief said, “Once we get that, the Scheduled Operator’s Permit (flying licence) application moves fairly forward and we have to just submit it. I keep repeating that in October I hope that would be the time we would like to start.” Also, excited over “huge opportunities” for maintenance, repair and overhaul (MRO) business in India, Fernandes said he was in talks with Airbus for setting up regional MRO centres in the country.

• MNC Retailers May Get to Enter Smaller Cities Too: The government may allow foreign multi-brand retailers to set up stores in cities with a population of less than a million, a measure that is part of the possible relaxation of norms that the department of industrial policy and promotion (DIPP) is examining. A senior official said the commerce and industry ministry might approach the Cabinet with a number of changes in the foreign direct investment norms, including on allowing the foreign chains to continue sourcing from the small enterprises even after they become large.  “They (foreign supermarkets) want to open stores in cities with population less than a million. They are saying this is important to spread network and to make their business viable. We may have to approach the Cabinet on a few things,” said the official, who did not wish to be named. Foreign retailers are allowed to open front-end stores in cities with population over one million, except in hilly states such as J&K and Assam. Commerce and industry minister Anand Sharma last week held a meeting to hear the concerns of the foreign retailers. Chains such as Walmart and Tesco said the 30% mandatory sourcing from small enterprises be made ‘preferred’, just as in the case of single-brand retail, a request that an official said was being considered. Several suggestions have been put forward on the 30% sourcing from the MSMEs (micro, small and medium enterprises), the official said. The government is also looking at another suggestion on allowing foreign firms to put only 50% of the first tranche of $100 million investment in back-end infrastructure.

International:

• Chinese Malls Waive Rents as Vacancies Loom: Chinese landlords are forgoing rent and paying to outfit stores for mass-market fashion brands including Zara and H&M, a bid to blunt the impact of a boom in shopping-mall construction that threatens to push up vacancies. Preferential leasing terms were reserved until recently for luxury brands such as Louis Vuitton and Gucci, which are coveted because they bring shoppers into malls. Now moderately priced labels are being enticed with offers as landlords work harder to fill shops, according to Cushman & Wakefield and RET Property Consultancy. Consumer demand is cooling as China’s economy slows and President Xi Jinping reins in lavish spending by officials. Big mall operators, including China Resources Land and Hang Lung Properties, can withstand the slowdown at the expense of smaller ones such as Golden Eagle Retail Group, according to Credit Suisse Group AG and Haitong International Securities Ltd. Landlords focused on lower-tier markets will be under more pressure as smaller cities add retail space at a faster rate than larger ones. “Competition in China’s commercial property market is very fierce, especially at those new malls at non-central locations in second- and third-tier cities,” said Carrie Liu, Shanghai-based general manager for development at Shui On Development Ltd., a subsidiary of Shui On Land. The company, which built the city’s Xintiandi restaurant, bar and retail district, has never offered subsidies such as free rents, Liu said.

• James Petty Tapped as Vestis CEO: James Petty has been appointed chief executive officer of Vestis Retail Group LLC, operator of Bob’s Stores and Eastern Mountain Sports, effective July 8. As ceo, Petty, who was most recently president of retail stores for Carter’s Inc., succeeds Mark Walsh, who will continue to serve as chairman. Vestis is owned by affiliates of Versa Capital Management LLC, the private equity firm of which Walsh is a managing director. Petty will be based at Vestis’s headquarters in Meriden, Conn. EMS, focused on outdoor equipment and apparel, operates 68 stores in 12 states. Bob’s, a family apparel and footwear retailer, operates 35 stores in six states in the Northeast. Prior to joining Carter’s in 2007, Petty held executive positions with Limited Too and Gap Inc. Limited Too later became Tween Brands and its stores, now known as Justice, are part of Ascena Retail Group Inc. Gregory Segall, ceo of Versa, commented, “This is a long-planned and natural leadership transition at this stage of Vestis’s development. Over the past five years, Mark has done a tremendous job in realizing the potential at Bob’s and he led the acquisition and initial transformation at EMS, positioning it for growth. We’re looking forward to Mark’s contributions to our existing and future investments in the Versa portfolio of companies.” Versa acquired Bob’s from The TJX Cos. Inc. in 2008 and EMS from an investment group that included former ceo Will Manzer in November.

• L Capital Invests in CellularLine: L Capital is entering the mobile devices market — or at least the products that carry them. The private equity fund backed by LVMH Moët Hennessy Louis Vuitton has acquired a 53 percent majority stake in CellularLine, an Italian company that designs and distributes accessories for smartphones, tablets and other mobile devices. The agreement was signed by L Capital and CellularLine’s founding Foglio and Aleotti families, who still retain a 40 percent stake in the company. The remaining 7 percent was acquired by Milan-based merchant bank DVR Capital. “We decided to invest in a very dynamic and successful company and a strong management team to build a leader of the industry,” said L Capital senior partner Philippe Franchet, referring to CellularLine, which is expected to generate revenues of 140 million euros, or $182 million at current exchange, in 2013. “I am very satisfied about the opportunities that this partnership will bring to CellularLine, both in Italy and abroad,” stated CellularLine chairman Piero Foglio. “We share a common growth strategy which is very motivating, both for us and for CellularLine’s management team, which is a guarantee for our current success.”

• Acne Studios Plans String of Store Openings: A clutch of boutique openings in Europe and Asia should push Acne Studios past the revenue threshold of 100 million euros, or $130 million, this year. Detailing its development plans, Acne chairman Mikael Schiller noted the Swedish fashion firm is already close to blanketing Scandinavia. It counts eight locations in its hometown of Stockholm, for example. “But in the other markets, there’s a lot of growth potential,” he said. The coming months will see a second store open in London, a third in Paris, three units in Seoul with partner Shinsegae, and a boutique in Japan in Osaka.

• Australia's Seafolly Opening First U.S. Store: Australian swimwear company Seafolly will open its first U.S. store in Newport Beach's Fashion Island mall in October. The brand, which began wholesaling in the U.S. five years ago, is available at Everything But Water, Diane's, Anthropology, Zappos and Amazon and has an exclusive line for Nordstrom. The 1800-square-foot California location will be Seafolly's 40th store worldwide after 36 in Australia and three in Singapore. In addition to its core line of swim separates and limited edition swim collection, two ranges that represent major growth are apparel and accessories. All four collections will be sold in Newport. "Orange County is a logical place for us to start to learn the U.S. market," said chief executive officer Anthony Halas, who took over in 1998 at the company his parents founded in 1975. The brand will show its latest collection this month at the Miami Swim Show, featuring fluorescent colors, minimal floral prints and Palm Springs-inspired sunset prints. French model Camille Rowe is the current face of the brand.