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Friday, October 21, 2016

It's All About Tech & Innovation This Diwali for Durables Companies

In the television space, where larger screens are getting increasingly popular, 2 major durable firms LG and Samsung are competing on viewing experience

Home appliances and electronics firms are hard-selling technology to win over consumers this festival season. As the buying extravaganza peaks ahead of Diwali, white goods companies have lined up products that they are promoting as technologically innovative.

In the television space, where larger screens are getting popular, LG and Samsung are competing on viewing experience. While LG has come up with OLED technology, Samsung is countering with quantum dot technology – both aim to provide a natural viewing experience. These TVs are distinct from typical LED panel sets. The fight intensifies as the screen size goes beyond 55 inches, where premium offerings are the most.

OLED or organic LED technology is based on an electroluminescent layer, film of organic compound that emits light. Samsung’s quantum dot works through numerous nano-particles that create life-like picture quality. On the other hand, LED works through a panel of light-emitting diodes that create the pixels.

Appliances major Whirlpool is bringing in its global range of super premium products this season. The firm has launched Europe-made front-loading washing machines first time in the country, which are based on sixth sense technology. Samsung is betting on its new ActivWash+ technology which has been conceived and developed in India. LG has come up with a twin-tub technology which allows consumers to wash clothes in two automated tubs simultaneously. 

The festive season, which typically starts from September, is the crucial part of the year when 35 per cent annual sales get transacted for most durables firms. During this season, executives are on their toes keeping up with the frenzy of supply of products, while trying to motivate trade partners with attractive schemes. The process of introducing innovative offerings for the season starts months ahead, says an executive who’s in the thick of things. 

According to Niladri Datta, head of corporate marketing at LG India, bringing in technologically innovative products and solutions has been the key to success for them in the country. Rival Samsung, which has been facing the backlash of the Note7 fiasco globally, is also talking technology and innovation. Rajeev Bhutani, vice-president, consumer electronics, Samsung India Electronics, says new and customised products for the market is considered crucial for Samsung’s growth in India.

Samsung has launched smart convertible 5-in-1 range of refrigerators which provides options like customised storage spaces, built for Indian consumers. The range has digital invertors. Whirlpool’s introduction of external sensors in refrigerators is a first in India, claims Kapil Agarwal, vice-president. External sensors allow refrigerators to judge the environment and tweak the internal cooling.

It's all about tech & innovation this Diwali for durables companies
Videocon has taken a different route, though. Apart from a new range of products, it has launched an offer under which consumers can take home their products without paying anything. The payment of equated monthly instalment would apply only from next year. “With these measures, we are targeting a 30 per cent sales growth over last year,” said Anirudh Dhoot, director.

According to Kamall Nandi, executive vice-president, Godrej Appliances, the firm is trying to leverage its brand by building an emotional connect with consumers. 

“There have been innovations in washing machines and refrigerator space. The idea is to make them available with interesting offers”, he said.
Reference -

Vishal Sikka Pays 4 Heads Million-Dollar Salaries

Their salary is an incentive to reach the company's revenue target of $20 billion by 2020

Infosys Chief Executive Vishal Sikka is paying his top managers more, as an incentive to reach the company’s revenue target of $20 billion by 2020.

Four Infosys presidents — Mohit Joshi, Rajesh K Murthy, Ravi Kumar S, Sandeep Dadlani — and the company’s general counsel, David Kennedy, will now be paid million-dollar salaries.

Their salaries included a higher variable component, Infosys said in regulatory filings. Joshi, Murthy, Ravi Kumar and Dadlani will also receive restricted stock units and employee stock options.

Sikka is confident that the company’s top three leaders in sales will be instrumental in achieving their revenue targets. “We are now approaching $10 billion in annual revenue. This quarter we will cross it. So it means three sales presidents are collectively handling more than 

$3 billion (worth) of responsibilities. In addition, they have serious global responsibilities,” Sikka said after a recent press conference.

The Infosys board had last week approved pay hikes for key executives, including Chief Operating Officer Pravin Rao and Chief Financial Officer M D Ranganath. Human resources head Krishnamurthy Shankar and company secretary Manikantha AGS will also receive salary hikes from November 1.

Since taking over as the first non-founder chief executive of Infosys, Sikka is pushing the company to transform itself to offer technology services with an additional software layer. Yet, the firm is struggling to grow faster as traditional business lags because customers are demanding more work for less.

Infosys improved operating margins in the second quarter by moving more work offshore. But it lowered its annual forecast for the second time in three months, citing an uncertain business environment. 

“There has been a restructuring of existing leaders. It is important to improve their bandwidth and agility to give them a clear focus on accountability and targets beyond revenue growth,” Sikka said last week.

“Based on fiscal 2016 performance, 27,250 restricted stock units and 43,000 stock options will be granted (to Rao) once approved by shareholders and these will vest over four years. Restricted stock units and stock options, in future periods, will be granted on achievement of performance conditions,” said the Infosys letter to the BSE.
Vishal Sikka pays 4 heads million-dollar salaries

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Wednesday, October 19, 2016

Investors, PEs are Now Opting for Hard Assets Like Apartments

Developers take a low cost loan from the fund at 12-14% rate. The fund also takes a certain number of apartments as equity kicker

At a time when developers are facing a cash crunch and exits have become difficult, investors including private equity and non-banking financial companies are opting for hard assets such as apartments besides a fixed interest rate for their investments.

When US-Based JP Morgan invested in Kanakia Paris, a luxury residential project in Mumbai's Bandra Kurla Complex area, the deal was structured in such a way that the investor also got a certain number of apartments in lieu of investments, besides a fixed rate of return.

According to sources, JP Morgan has done four-to-five such deals in the recent past. It works like this: Developers take a low-cost loan from the fund at 12-14 per cent rate. The fund also takes a certain number of apartments as equity kicker. This is a hybrid structure. "It works well for the developer as he need not borrow at 20 per cent. Some part of the inventory also goes out; if the fund is not able to sell, it is an it's headache," said the chief executive of a private equity fund.

"For the fund, it makes sense when they are not sure whether the developer would repay the entire coupon." He said besides JP Morgan, Aditya Birla Real Estate fund, ICICI Prudential, and Edelweiss do such deals. When contacted, a JP Morgan spokesperson declined to comment on the subject. Mails sent to Aditya Birla and Edelweiss did not elicit any response. ICICI Prudential could not be contacted for comments.

Amit Oberoi, national director - knowledge systems, at Colliers International, said the mechanism gives the developer the liquidity to complete the project or to use the funds to complete another project or for acquisition of land for future development. "The investor gets a decent return and in some cases a brokerage fee as well while having rights to the asset in case of a default." According to Oberoi, the key for the investor is to choose a project that is marketable and to invest at an optimum price that will ensure sales and a decent return.

"A healthy appreciation in prices is an additional upside for the investor. An investor with a good broker network has an advantage in this deal structure."

The CEO quoted above said the difference between the above-mentioned deals and bulk-buying deals were very thin.

Recently, fund house IPAL, backed by Centrum, bought 12,000 sq ft of space for Rs 26 crore in Ariisto Realtors' under-construction project, Ariisto Sommet in suburban Mumbai's Goregaon. IPAL has effectively bought space worth Rs 52 crore, but paid only Rs 26 crore to the developer. The remaining amount would be payable after the company manages to sell these apartments.

In the second transaction, IPAL bought about 8,000 sq ft for Rs 27 crore in Radius Developers' project Avenue 54, a six-acre gated community in suburban Santacruz (west).

Besides IPAL, Piramal Fund Management, Edelweiss, and Indiabulls do bulk buying deals where they buy apartments at a discount to the market price, said Ajay Jain, executive director at Centrum Investment Banking.

Piramal has an apartment fund of Rs 500 crore and 75 per cent is committed, said its managing director Khushru Jijina. "The Fund's inventory of apartments are also sold by the developer in an agreed ratio through the developers' existing channel so as not to create any competitive pricing pressure that typically happens with retail underwriters on a secondary basis."

Jain of Centrum said: "In order to complete such projects, and free up cashflow, and moving to other projects, they are doing bulk sale at a 25-40 per cent discount to market prices."

  • Developers take a low-cost loan from the fund at 12-14% rate. The fund also takes a certain number of apartments as equity kicker
  • It works well for the developer as he need not borrow at 20%. Some part of the inventory also goes out; if the fund is not able to sell, it is a headache
  • For the fund, it makes sense when they are not sure whether the developer would repay the entire coupon
  • Besides JPMorgan, Aditya Birla Real Estate fund, ICICI Prudential, Edelweiss do such deals
Reference -

Monday, October 17, 2016

Foreign Firms Lead in Asset Purchase After Essar Oil Buy

MNCs pick up Rs 1.15 lakh crore of assets since January versus Rs 35,000 crore by local firms

With Russian oil major Rosneft's acquisition of Essar Oil and related assets for a staggering Rs 86,000 crore, foreign companies are now leading in acquiring the assets of debt-heavy Indian companies. Since 2011, foreign firms have acquired Rs 1.5 lakh crore worth of assets from stressed Indian companies, compared with local companies' purchase of Rs 83,629 crore worth of assets.

Foreign companies' acquisition spree picked up pace in January this year, with Rosneft, global fund Brookfield Asset Management, and Canada-based billionaire Prem Watsa-owned Fairfax Holdings picking up Indian assets worth Rs 1.15 lakh crore (see chart). Indian companies have bought Rs 35,000 crore worth of assets so far in 2016.

“At the macro level, India currently is the best place to invest in the world right now,” said Harish H V, partner — India Leadership team, Grant Thornton India, a global consulting and audit firm. “Besides, foreign companies are ready to pay a premium for entry into the Indian market where they do not have any presence. Lower cost of funds for foreign companies compared to local companies is another big incentive why foreign companies are more aggressive in acquiring local assets.”

Foreign firms lead in asset purchase after Essar Oil buy
According to bankers, foreign companies are finding the Indian growth story attractive considering the slowdown in other parts of the world including China.  “Essar Oil is operating in the promising Indian market, one of the largest and rapidly developing economies in the world,” Ilya Sherbovich, managing partner, UCP, said about buying stake in Essar Oil along with Rosneft and Trafigura.

Local companies are happy that they’re getting attractive bids. “There were many offers from foreign companies to buy our asset. Rosneft and its partners’ offer was the best for us,” said Prashant Ruia, director, Essar Group.

Among Indian companies, the Aditya Birla Group and the Ahmedabad-based Adani Group were the most aggressive in buying assets from stressed companies. Birla Group-owned UltraTech took over Jaypee group’s cement companies for Rs 16,000 crore, while the Adanis took over ADAG Group’s transmission tower company for Rs 2,000 crore early this month after buying Lanco and Avantha’s power projects, and two port projects in Odisha and Tamil Nadu. Tata Power also took over Welspun's solar power assets for Rs 9,249 crore.

According to analysts, sale of assets is good news for both Indian banks and for the stressed companies. “Indian banks have become very forceful in addressing the problem of bad loans. Indian promoters may have little option but to sell profitable assets to reduce debt and this has been the case for the past two years,” Sanjiv Prasad of Kotak Institutional Equities wrote in a note.

In the coming months, analysts said more assets would be acquired by foreign companies. The Avantha Group is set to announce the sale of its Jhabua power project to a stressed asset fund floated by Tata Power and ICICI Venture Funds Management Company.

“We can see more such deals if banks start cooperating with the promoters of stressed assets and take a haircut. In most deals signed this year, banks had to take a significant haircut so that the transaction with a new owner could take place,” said a banker asking not to be named.

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Macro Environment, Tech Shift Main Challenges Now: N Chandrasekaran

Macro environment, tech shift main challenges now: N Chandrasekaran

 India’s largest information technology (IT) services provider, Tata Consultancy Services’ growth in the second quarter was one of the slowest in a decade. Other than macro economic factors, the company is also challenged by the technology disruption the IT sector is facing. N Chandrasekaran, chief executive officer, and managing director, however, considers it as a temporary blip. He talks to Shivani Shinde Nadhe on what makes him confident about growth and the constant need to focus on margins. Edited excerpts:

You have been at the helm of the company for seven years and seen two cycles of downturns in tech spends. Which of these seemed more challenging?

There are two things we are dealing with here —  macro environment and technology shift. I’ve seen many tech cycles in the past 30 years of my working life and the current phase is the most exciting. We’re able to participate with clients in enabling this transformation and are in a unique position. This is one-of-a-kind transformation. If you look back, you can see technology-supported business, which meant automating back-end systems to hasten processes. With digital, business is getting embedded in technology. It’s a profound transition.

Digital transformation is about building real-time, data-driven enterprises. It is about helping companies become intelligent and then using technology from machine learning to bots to artificial intelligence to response based on intelligence.

The issue is not whether it’s challenging or not; it is how we participate. And, we’ve deep relationship with clients. We’ve access to domain knowledge, we’ve talent and we’re building and training talent to interact with clients. For instance, we’re engaged with 40 banks on block-chain technology. We’re doing such exercise across retail, telecom, and health care. Overall, the digital journey has started. For the short term, we’re seeing some softness.

This quarter’s performance has been disappointing.

You have to separate the two. We had a lower growth last year that is also weighing on people’s mind. But, last year’s lower growth had nothing to do with macro; it was because we had three tough spots to resolve and took multiple quarters to do that. We continue to see slow growth. Currently, the only thing I’m saying is there is nothing structural. I’m arriving at a conclusion that, maybe, macro is playing out by the process of elimination. I’m saying I can’t find a reason for this because every customer is talking about digital.

The digital growth story was also hit this quarter. Are digital spends discretionary?

Yes. It comes with customer-spending budget but the impact of digital is so profound that customers are committed to this.

TCS has always maintained that India as a geography is cyclical in growth as it is more project-driven. But, in the recent past, the decline in Indian business has spiked.

I do not think I can still say the nature of the business will change. The size is still very small as we are building the market. I’ll be happy as long as they are in line with company growth.

You said the US elections and Brexit would not impact you. Could you elaborate?

At present, there is no clarity on Brexit. Today, it can impact me and that’s due to currency movement. From Rs 95 to £1, it has now moved to Rs 81-82. We’ve had an impact of this on margins. If Brexit were to become a reality, we need to understand what would be the additional opportunity. What are the regulatory changes that would come. But, we are prepared.

Improvement in margin is a factor of top line growth, which seems to have slowed this year. But, you have said you’ll continue to invest and maintain 26-28 per cent margin.

Do you have enough room?

We have a philosophy that we’re focused on growth but on sustainable growth and sustainable margins. I believe it’s important to operate at high-margin business because we want to have the ability to invest. Digital technology today might be a one-off but we’ve to keep innovating and changing. Hence, it is important to be able to invest. So, the 26-28 per cent band is fair and we think we can maintain that.

Managing margins will have many things like efficiency improvement, business mix, people, and location mix, automation, etc. Moreover, we are a decentralised company and  have so many leaders facing headwinds but still looking for growth.

In 2009, TCS restructured itself into smaller units to become agile and be able to grow fast, with digital becoming a reality. Do you think you need to relook at how business units need to be reimagined?

We have invested in creating several groups. For instance, for automation we created Ignio; for digital, we created a separate enterprise solutions group. We might make structural changes or consolidate some of these at some point, but not now.

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Friday, October 14, 2016

Oil Price Spike to Hit Airlines, OMCs

Crude and gas producers to gain, with oil up 18 per cent since January

The 18 per cent jump in crude oil prices since January is making some corporate leaders jittery, especially from the aviation, cement and tyre sectors, as their input costs would shoot up substantially.

However, chief executives (CEOs) of oil and gas producing companies are hoping crude oil will go back to the heady days of $100 a barrel, so they can again make super-profits.

Analysts say rising crude prices would add to the bottom line of oil and gas producers like Oil and Natural Gas Corporation (ONGC), Oil India and Cairn India. “If crude prices are going to be in the range of $55-70 a barrel, it will be good news for ONGC. Even when prices were up at the range of $100 a barrel, our returns were always subjected to the element of subsidy. We were retaining only $40-47 a barrel, even during the high-price regime,” said A K Srinivasan, director, finance, of India’s biggest oil and gas producer, ONGC. Free pricing of diesel would help the company to reduce its subsidy burden.

Analysts said the recent increase in oil prices could negate the impact of a cut in domestic gas prices for ONGC.

“At $50 a barrel for oil, ONGC’s earnings could improve to Rs 4,500 crore from the December quarter,” said an analyst with Religare.

Rising oil prices would have a mixed impact on India’s largest private sector company, Reliance Industries, that earns significant revenue from refining, exploration and production of oil and gas. Analysts said Reliance would be encouraged to make additional investment in oil and gas if prices improve.

However, the gross refining margins and petchem margins of RIL could come under pressure, due to higher input prices. Similarly, the other oil refining and marketing companies — Indian Oil, Hindustan Petroleum and Bharat Petroleum — will also take a hit on GRMs (gross refining margins, the spread between the crude oil price and the selling price of refined products).

“A higher crude price would help us in executing all our projects. This includes further development of the Aishwarya and Barmer blocks. It would help in having a healthy return of about 15 per cent in dollar terms. However, this is not good news for producers working on shale formations and deepwater blocks, as it would become more expensive,” said Sudhir Mathur, acting CEO of oil and gas producer Cairn India.

Oil price spike to hit airlines, OMCs
Early this week, Bob Dudley, CEO of global oil giant BP, said in Istanbul that crude oil would remain in the range of $55-70 a barrel for the rest of the decade. Due to falling prices, oil projects worth $1 trillion had been cancelled across the world, he added.

In the past two years, low oil prices helped many Indian companies to substantially reduce their raw material costs. Cement and tyre companies, for instance. Sale of automobiles also shot up as customers splurged on cars and motorcycles. All the gain will be lost if petrol and diesel prices rise again and negatively impact automobile sales.

The biggest loser will be the aviation sector, recording double- digit growth in recent months. GoAir chief Wolfgang Prock-Schauer warns input costs are already up. “This trend is likely to continue.  It depends on how much tax is levied on fuel, our highest cost item,” he said in Hyderabad.

Analysts say a rising fuel price brings other risks for the sector. It could impact growth plans, including those to improve regional connectivity, and lead to deterioration in service quality.

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Thursday, October 13, 2016

Piramal Aims to be Among top 3 in OTC Business

In the past two years, Piramal has made six acquisitions in the health care business, of which three are for the OTC business

Piramal Enterprises aims to be among the top three players in four years in the $2.2-billion over-the-counter (OTC) pharmaceutical products business, climbing from seventh slot at present.

This could be an ambitious target in a highly competitive market led by multinationals  GlaxoSmithKline and Reckitt Benckiser, and domestic household names like Dabur and Emami.

But with Rs 15,000 crore in cash and investments on the books of Piramal Enterprises, competition is watching the moves of Nandini Piramal carefully. Piramal scion is directly responsible for growth of this business. As an executive director, she also oversees the larger health care portfolio of the company, including contract manufacturing and critical care businesses.

She has already made six acquisitions for the health care business in the past two years, putting Rs 1,800 crore to work. Three of these were made in the OTC business. This includes baby care products from Little’s, which helped it in getting into a new segment. Besides, it acquired four gastro-intestinal products from Merck to complement its existing portfolio. It also acquired five legacy brands from Pfizer, including Waterbury’s Compound and pain reliever Sloan’s.

Nandini could be repeating what father Ajay Piramal did earlier. He bought Nicholas Laboratories in 1988, when it was ranked 48th in the domestic market and turned it into third largest company through a series of acquisitions. In 2010, he sold the domestic formulation part of the business to Abbott for $3.8 billion (Rs 17,500 crore), but retained the OTC, critical care and contract manufacturing businesses. Nandini could not have missed the lessons of value creation her father is known for delivering. Ajay Piramal continues to provide guidance as chairman of the company.

“We are ready for acquisitions — big and small,” said Nandini Piramal, saying being in the top three is only a short-term goal. “The OTC market is fragmented. There are big brands in a few categories but we believe there is a lot of room to play.” With an unparalleled war-chest, investment bankers have made a beeline to her office.

Piramal aims to be among top 3 in OTC business
But, acquisition is not the growth strategy. The company is getting into new product categories as well. It launched an anti-allergy product, StopAllerG, first such in the category. It also launched Quikkool (mouth ulcer cream) or Throatsil (throat pain spray). The company has planned several extensions for each of these brands with the aim to make them among the top two players in their respective categories.

The company started its independent OTC business in 2007 and made two acquisitions — contraceptive i-pill in 2011 and skin allergy lotion Caladryl in 2013. Its biggest brand is oral analgesic Saridon, with annual sales of Rs 131 crore. OTC is currently the smallest segment in its pharma portfolio with annual sales of Rs 393 crore in 2015-16. The company’s health care business, spread across three lines reported, Rs 3,558-crore revenue in the period, a compound annual growth rate of 17 per cent for five years.

The company operates in the self-care segment of the OTC market, pegged at Rs 12, 000 crore and growing at 12-13 per cent annually. The company says it is seventh biggest in the business. According to India Brand Equity Foundation, OTC is 21 per cent of the $20-billion pharmaceutical industry in India.

Nandini might not have an easy ride in this segment, as other heavyweights like Sun Pharmaceutical are also eyeing the OTC market with a greater focus. India’s most valued pharma company has top-selling OTC brands such as health supplement Revital and painkiller Volini. These products became a part of Sun Pharmaceutical’s portfolio after it acquired Ranbaxy two years ago. With the strength of popular brands in its kitty, the company has increased its focus on the segment by introducing new products for this segment. In June, it re-launched  dermatology prescription drug Suncros as a sunscreen product under OTC.

Another domestic rival, Cipla, spun off its consumer health business to Cipla Health, a joint venture subsidiary with private equity firm Eight Roads Ventures India. It is now aiming to build five Rs 100-crore brands in five years by tapping into the growing health and wellness consciousness among urban population. “For long, the OTC segment was largely dominated by multinational corporations. But with increasing competition in the branded generics space, Indian companies are also getting aggressive in the OTC space now,” said Sriram Shrinivasan, partner and global leader for generics, EY.

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Renault Recalls 50,000 Units of Kwid

Recall is only in India, companies say; 50,000 Kwid, 932 redi-Go called back

Kwid car and the latter's redi-GO, both made at their joint factory at Oragadam, near this city.

The French company did not disclose the number of units being recalled but sources said it would be around 50,000 Kwids. The Japanese entity said 930 of the redi-GOs were being recalled.
Renault and Nissan have started recalling some units of the former's

Renault’s is to do a “pre-emptive and voluntary inspection” of the fuel system and to add a hose clip, for the Kwid 0.8L variant, manufactured until May 18. Customers will not be charged. The Kwid was launched in September 2015 and has been a successful product for Renault in India. The company says it is approaching 100,000 deliveries.

Initially, the Kwid was available with an 800cc engine. In August, a 1,000cc engine variant was launched. It also plans to introduce one with automated manual transmission.

Nissan’s Datsun said it was conducting a voluntary recall on certain India-made redi-GOs, to inspect the fuel hose and fix a clip, also at no cost to the customer.

India, fifth largest global market for passenger vehicles (cars, vans and utility vehicles), does not have a mandatory vehicle recall policy. Yet, 2.2 million vehicles have been voluntarily recalled in the past four years, based on a code introduced in July 2012 by the industry’s apex body, Society for Indian Automobile Manufacturers. 

Early this month, Hyundai, the country’s second-biggest car maker, said it would recall 7,600 units of its Eon hatchback car, to inspect and address an issue with the clutch cable. Replacements, if needed, to be done free of cost.
  • Both cars were made at their joint factory at Oragadam
  • The French firm did not disclose the number of units being recalled
  • It is doing a “pre-emptive and voluntary inspection” of the fuel system and to add a hose clip
  • Nissan’s Datsun says it is conducting a voluntary recall on certain India-made redi-GOs
  • Customers will not be charged for this recall
  • India, fifth largest global market for passenger vehicles, does not have a mandatory vehicle recall policy
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Wednesday, October 12, 2016

Star Bazaar Slashes Jobs by a Third in FY16

Move aimed at faster profitability and cost reduction

The employee strength at Star Bazaar decreased by 675 in FY16 compared to the previous year, according to data in parent company Trent's annual report.
Star Bazaar, the hypermarket chain operated by the Tata-Tesco joint venture, shrank its staff size by a third in the financial year ended March 2016, signalling the biggest redundancy in Indian retail in recent times.

The number of employees at Star Bazaar was 1,568 in FY16, down from 2,243 a year ago, the latest annual report of Trent shows.

“We closed down hypermarkets in Mumbai and Bengaluru. Each hypermarket employed more than 200 employees,” said a Trent executive.

The executive, who refused to be named, said the chain was focusing more on small and medium stores and was taking a closer look at hypermarkets which are not making money.

“We transfer them to other stores wherever we can. But, they also leave for other opportunities,” he said.

The move was aimed at cutting costs and faster profitability of the company, which set up its first store in 2004, it is learnt.

Trent Hypermarket, which runs stores under formats such as Star Hyper, Star Daily, Star Market and others, reduced its loss before tax in FY16 to Rs 44.77 crore from Rs 65.37 crore in the year-ago period.

When contacted, a Trent Hypermarket spokesperson did not comment on redundancy but said: “As on March 31, 2016, we have an employee count of 1,566. We will grow our staff as we expand further. We aim to close this financial year with 50 stores and plan to have 200 stores in the next three years.”

Star Bazaar slashes jobs by a third in FY16
Currently, Star has 35 stores.

In 2014, UK-based Tesco signed a joint venture with Trent, becoming the first chain to apply under multi-brand retail foreign direct investment (FDI) norms. This followed United Progressive Alliance government's decision in 2012 to allow 51 per cent FDI in multi-brand retail.

Head count reduction in the Star format indicates cost rationalisation, which is critical in the low-margin grocery retailing business, says Abhishek Ranganathan of Ambit Capital in a recent report.

“In line with management guidance, we expect the JV to break even in FY19 on the back of higher store throughput (smaller stores) and better absorption of central costs due to higher scale,” he said.

Although Trent Hypermarket did not open many stores between FY12 and FY15, it is now rapidly expanding to take advantage of its supply chain and logistics set up.

The chain is looking to buy land in Bengaluru, Mumbai and other cities to build distribution centres for its stores.

Buying land will help the company meet this country’s norm of multi-brand foreign direct investment in the segment, with $50 million (Rs 330 crore) investment in new back-end infrastructure.

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Sunday, October 9, 2016

Dutch Pension Fund in Talks for Mall Stake

APG Asset in final leg of discussion to buy stake in Xander's three malls, as further evidence of global invetor interest in Indian realty

Dutch pension fund manager APG Asset Management is in a final round of negotiations to buy a majority stake in three malls of The Xander Group-owned Virtuous Retail, said a source. The deal is expected to be around $325 million (nearly Rs 2,200 crore), said the source.

The three malls are VR Surat, VR Bangalore and an upcoming one in Chennai. Virtuous Retail owns about 5.5 million sq ft of mall properties.

If the deals take place, it would be the largest in retail real estate in recent years. US-based Blackstone bought a mall in Navi Mumbai from L&T Realty for about Rs 1,400 crore early this year and the Carnival multiplex chain bought commercial space, including a mall from L&T Realty, for Rs 1,785 crore.

Mails sent to APG and Xander Group founder Sid Yog, and senior partner Rohan Sikri, did not elicit any response. The source added that Xander was in talks with global investors Blackstone and KKR for the stake sale. When asked, Blackstone and KKR said they did not comment on speculation.

"The fund life of Xander which has invested in the malls is coming to an end. They need an exit," said the source. Xander and APG already share a relationship. In 2014, both formed a $300-million fund to buy leased office assets in India. Interest from global funds is steadily increasing in Indian malls, due to steady rental income and possibility of doing a real estate investment trust (REIT) in these, analysts said. US-based Blackstone which invested a little over $3 billion in Indian real estate, has already bought four malls for a little over Rs 3,000 crore.

Recently, it bought a mall in Coimbatore for Rs 450 crore. It has set up a separate mall company, Nexus. It is looking to buy more land parcels, for developing with the land owners.

Singapore's sovereign fund, GIC, bought 50 per cent at Viviana mall in Thane for Rs 400 crore and bid for Phoenix Mills’ property in Bengaluru.

Oberoi Realty is looking to raise funds for its mall platform and is in talks with investors. Phoenix Mills is also in talks with investors to sell stake in its Bengaluru and Pune malls.

Canada's CPPIB and Australia's Macquarie are also looking to buy malls, the source said. Cities such as Bengaluru, Hyderabad, Delhi, Chennai, Mumbai and Pune are among the top 10 cities with highest retail sales growth forecast between 2015 and 2019 in a JLL Destination Retail 2016 report. India has also emerged at second position in a 2016 Global Retail Development Index by AT Kearney.

"There is little doubt that the country is becoming an attractive destination for global retailers, with further liberalisation of the foreign direct investment policy and creation of a business-friendly environment. The growing potential of the Indian retail market is already manifested by the entry of several marquee global retailers in the past one year," property consultant JLL said recently.

  • Blackstone buying Brookfields mall in Coimbatore for Rs 450 cr
  • GIC buying 50% stake in Viviana Mall in Thane for Rs 50 cr
  • Blackstone buying a mall from L& T Realty for Rs 1,400 cr
  • Blackstone buying two malls of Alpha G Corp in North
  • DLF selling a mall to its subsidiary
Reference -

Thursday, October 6, 2016

Durable Majors See Big Jump in Sales Amid Festive Cheer

Most home appliances and consumer electronics firms eye 30% growth this season

Most home appliances and consumer electronics firms are eyeing a 30 per cent growth during this festive season, compared with the low double-digit growth observed last year. According to industry estimates, the consumer durable sector is to grow 20 per cent in sales during the September-December 2016 period. Typically, this period generates above 35 per cent of sales for major companies in the sector.
After witnessing two years of subdued sales, consumer durable firms are expecting better sales this festive season. Going by the buying trends recorded in September, these firms are anticipating robust business in the coming weeks.

According to Anirudh Dhoot, director, Videocon, the firm has launched 20 new products across television, washing machine, air conditioner, and refrigerator segments to boost sales. "We will be also announcing an array of customer-centric offers and make their festive purchases worthwhile. With these measures, we're targeting an overall 30 per cent sales growth across categories over last year," he said.

While appliances major LG is expecting to grow by a healthy double-digit percentage figure, Panasonic and Haier have set their eyes on sales growth in excess of 40 per cent this season. According to Eric Braganza, president, Haier Appliances India, the firm has posted more than 50 per cent sales growth during September. "Onam gives us the indication of the sales ahead and this year sales were phenomenal," he said.

To strengthen its distribution, LG India has expanded its technology skill development programme this year to 15 cities across the country, months ahead of the festive season. Earlier, the firm used to hold one such programme in Delhi.

According to Niladri Datta, head of corporate marketing at LG India, the firm is focusing heavily on premium and super premium products. Apart from promoting products through print ads, LG has launched an experiential marketing programme for its super-premium range, under which potential consumers get to use the products before a purchase.

Sales this year started growing early thanks to a very hot summer, leading to higher sales of air conditioners and refrigerators. As the year progressed, various factors have worked in favour of the consumer market in India. A better monsoon has increased farm production and helped bring back purchasing power to rural consumer to some extent. Also, payment of arrears, salaries, and pensions according to the 7th Pay Commission scale boosted urban market sentiments.

Companies are also hopeful that the repo rate cut that has been announced recently will bring down the effective interest rate and will benefit the sector further in the coming months.

While Godrej Appliances has allocated Rs 60 crore as its promotional budget for this festive season. Japanese electronic major Panasonic allocated Rs 84 crore on that front.

Godrej is expecting to touch Rs 4,000 crore in revenue by March 2017, backed by 30 per cent growth in sales during the festive season. Godrej posted Rs 3,250 crore sales during 2015-16.

Panasonic is focusing on field-level activities based on its branded outlets in the country, apart from boarding ads and TV commercials, said Ajay Seth, head of sales and service at Panasonic India.

Small appliances player Usha International is tying up with large retail chains such as Croma and Reliance Digital. The firm has increased its retail touch points to 827 from 600 two months ago. To expand its rural reach, Usha is opening 50 new branded outlets. It has also started selling on Amazon.

The sector is to grow 20% in sales during the Sept-Dec 2016 period
  • Companies hopeful of breaking the subdued trend of the past two seasons as sales surge high in September
  • Firms hopeful of higher sales in coming months after the recent repo rate cuts which may bring down effective interest rate
  • Durable majors posted above 25% sales growth in the past weeks starting Onam
  • Better monsoon led to higher farm production and increasing purchasing power of rural consumers
  • Higher government salaries and pensions under the Seventh Pay Commission role have boosted urban-led consumption
Reference -

Tuesday, October 4, 2016

Amazon Goes Shopping for Grocery Partners

Industry insiders believe Amazon could soon be one the biggest players left in the segment, which has shrunk to just three to four firms

Amazon is quietly working on alliances and partnerships with brick and mortar retailers and hyperlocal e-grocers for its Amazon Now service.

Amazon has been scouting for hyperlocal e-grocers as well as medium to small grocers to increase its touch points and reach, and reduce the time to deliver products.
US-based online marketplace

“We have had meetings with Amazon to be part of their grocery service. We are still weighing options. If we join, it will definitely increase the number of orders we get. But we are still considering it,” said an e-grocer in the capital.

While the service is live in Bengaluru, the company recently launched it in Delhi-NCR and would start in Mumbai before Diwali.

“Almost all big format players are already on board. We have launched in two cities and Mumbai would be next. This is an organic and gradual process we follow in every city. We will keep adding new players and kirana stores to the mix,” an Amazon executive told Business Standard.

Amazon has entered a series of tie-ups with major retail chains including Big Bazaar, Hyper City, Spar Hypermarket, Reliance Fresh, Modern Bazaar, Easy Day among others. The company is scouting for more partners in Mumbai, where it plans to launch next.

“Orders would be taken on the Amazon app and website and runners would be deployed outside retailers, from there, delivery would take place. This is how Amazon plans to start the grocery service. Getting into tie-ups with physical stores it will take an omni-channel route, to provide groceries in the shortest possible time,” said a source close to the company.

The Future Group has taken the omni-channel approach quite seriously. It recently tied up with Paytm to sell products from Big Bazaar on its platform. With this, both Big Bazaar and Easy Day would cater to Amazon’s customers. Modern Bazaar also has an online portal for online ordering and delivery of groceries and other items.

Experts believe the company is taking its time to start the grocery service like it did in the US. Also, it is ensuring that maximum consolidation happens before it makes a major play.

“While Amazon as an e-commerce player made rapid strides in both the US and India, it is has taken time with its grocery vertical. In the US, Amazon launched its grocery service in 2007. Seattle tested it for almost six years before it started expanding. Even then, they have just expanded to a few other cities. They do not want to get this wrong and are doing multiple tests and getting reliable partners,” said an analyst with an international consultancy firm.

Industry insiders believe Amazon could soon be one the biggest players left in the segment, which has shrunk to just three to four firms. At present, Big Basket and Grofers are the two major e-grocers.

“They know that rapid expansion is a death blow for an e-grocer. Growth has to be in per kilometer terms and only when you have gained market share in that particular area,” added the analyst.

In the past few months, the sector has gone through tough times as about 25 players shut shop. PepperTap, which had Snapdeal as a lead investor in one of the funding rounds, raised around $50 million (Rs 332 crore) before it shut shop early this year. Many others such as Paytm, Flipkart, and Ola have all burnt their fingers in grocery.

Reference -

Sunday, October 2, 2016

Indian Carriers Struggle to Find Talent Inside Cockpit

7,000 unemployed pilots in India but airlines continue to bet on expats

Arav Joshi (26) completed his flying course from a New Zealand-based training academy in 2012. That did not translate into a job. He then did a type-rating course from a Pune-based facility in 2014. The total expenditure came to around Rs 50 lakh. He is still without a job.

A type-rating certification is an important credential for a pilot to fly a commercial jet. But despite such training, Joshi is among the 7,000-odd who hold commercial pilots licences (CPLs) but have not been able to land a job. Despite this large pool, Indian carriers say it is difficult to find suitable people to hire. They are hesitant to recruit freshers to man their cockpits.

National carrier Air India, for example, had in July advertised it would recruit 415 pilots for Airbus A320s. The airline had a requirement of more than 500 pilots, as it wanted to expand its fleet rapidly. But the hiring plan went awry, and the airline is now struggling to find suitable candidates. Only 251 candidates, less than half of those shortlisted, cleared the psychometric test. Air India is now looking to lure back pilots who had left when it had planned to cut costs. The psychometric test was made part of the recruitment process since the co-pilot of a Germanwings plane deliberately crashed a passenger aircraft in 2015, killing 144. The co-pilot had been earlier declared “unfit to work”.

Indian private airlines bank on expat pilots, though the cost of hiring them sis significantly higher.

Indian carriers struggle to find talent inside cockpit
AirAsia India, a joint venture between Tata Sons and Tony Fernandes-owned AirAsia Bhd, is looking to hire at least 30 expat pilots as it looks at fleet expansion after fund infusion from promoters. Sources said despite multiple rounds of road shows across cities, the airline has failed to find enough Indian pilots. An AirAsia spokesperson declined to comment. Jet Airways, sources said, was looking to hire 30 type-rated foreigners to fly its Boeing 737 planes.

Having an expat on board adds to the financial burden of an airline. “The salaries of expats are higher. The airline has to provide them accommodation and also bear the expense for their journey to their home country,” said a pilot with a domestic carrier. Expat pilots also require several safety approvals, which take around six months. “During that period, you have to pay them but cannot use them to fly.”

An executive of a private airline said: “While there are thousands of CPL holders in the country, getting type-rated Indian pilots becomes difficult. You have to give them additional training. No airline wants to recruit simple CPL holders and bear that cost.” At prevailing cost, training a pilot for the Airbus A320 family of planes would work out to Rs 23 lakh.

Such is the crunch for trained hands that airlines have now approached the regulator to increase the notice period of a pilot from six months to a year. Low-cost carrier SpiceJet recently gave a hike of Rs 1 lakh a month to captains of Boeing 737 aircraft. Experts said bad planning by the airlines was the reason forcing them to look for expat pilots. “An airline typically has its fleet planning done more than two years before aircraft join. It can easily recruit Indian pilots and give them suitable training,” said a trainer for a private airline.

IndiGo, the country’s most profitable airline, had its recruitment plan ready beforehand. The airline hired aggressively, as it placed its aircraft orders, though it resulted in 24 per cent higher employee cost in the April-June quarter.

In the past 18 months, it promoted 155 first officers as captains.

IndiGo President Aditya Ghosh said: "In the last 10 years, we have inducted 941 fresh CPL holders, who just had the basic flying licence, and trained them to become captains and trainers on the A-320 airplane. Quite a few of these young CPL holders are now flying as pilots and trainers in IndiGo and abroad.” As Indian aviation enters its fastest pace of growth, it remains to be seen if this will translate to more jobs in the sector.


Air India
  • Advertised in July it would recruit 415 pilots for Airbus A320 aircraft
  • It has a requirement of more than 500 pilots
  • Only 251 candidates have cleared the psychometric test
  • The airline now is looking to lure back pilots who had left when it planned to cut costs
AirAsia India
  • The JV was to hire at least 30 expat pilots
  • Looking at fleet expansion after fund infusion from promoters
Jet Airways
  • Looking to hire around 30 type-rated foreigners to fly its Boeing 737 planes
Reference -

Saturday, October 1, 2016

EXL Has $200-mn War Chest to Acquire Firms

The areas where EXL is looking to acquire companies is insurance, banking, and analytics

“We have about $200 million of cash on the balance sheet so we can use that to acquire companies. Typically, our sweet spot is to buy companies, which cost us between $25 million and $50 million, but we don’t mind doing companies which are larger in size,” EXL Chief Executive Officer and Vice-Chairman Rohit Kapoor told Business Standard. He said the areas, where EXL is looking to acquire companies are insurance, banking, and analytics.
Noida-based business process outsourcing (BPO) company EXL is looking at spending $200 million to acquire companies in the field of insurance, banking and analytics as it looks to strengthen its core verticals.

“We focus on a few core industry verticals, so we would be the market leader in insurance. We dominate that market, almost 50 per cent of our revenues come from insurance. We are very strong in banking, analytics, and health care, so those are areas where we differentiate ourselves,” Kapoor said.

The industry is changing because a lot of robotics has come in, a lot of automation, technology platforms and this move towards digital transformation is creating new types of opportunities for the company, he said.

Kapoor said under digital transformation, people are looking for two things: One, they want to enhance customer experience and second, they want to transact and do things online. “So we have started to acquire assets, which will help companies do that. At the end of June, we acquired a company called Liss Systems that has been creating a technology platform that allows you to sell insurance policies online and we are finding a lot of our clients are wanting to move in that direction,” he said.

EXL did another acquisition in July when it bought IQR Consulting, a provider of marketing and risk analytics solutions.

Asked about the political rhetoric against outsourcing in the US, from where EXL gets about 70 per cent of its revenues, Kapoor said  outsourcing will continue because that’s the only way US companies can remain competitive. “Every time there is a presidential election, the political rhetoric goes up but nobody makes any changes in the law because this is something, which works well. Remember in BPM (business process management), we don’t need immigration and we don’t need H1-B visas, that is for IT. So, if they decide to do something, they can control immigration but they don’t control trade and our work is based in India,” he said.

On a query about slowing growth in the BPM sector, Kapoor said growth has slowed down for India but the Philippines is growing rapidly. EXL started operations in South Africa and “we have opened up in Columbia, so these countries are actually taking some of the market share that India used to get but the advantage of India is analytics because of the skillset and talent pool available here,” he said.

About staff strength, Kapoor said the company has about 24,000 employees — 17,000 in India, 5,000 in the Philippines and 2,000 in the US, among other countries.

Reference - 

Thursday, September 29, 2016

Midnight Drills in War Rooms Ahead of Big fat Sale

Teams are working 24/7, reinforcing back-end systems to deal with the surge in the number of orders that would happen during the sale

As midnight drills are on, in full swing, ahead of the fest rolling out this weekend, food and drinks — mostly popular energy drinks, filter coffee, gourmet food — are all on the house. Teams are working 24/7, reinforcing back-end systems to deal with the surge in the number of orders that would happen during the sale, an executive said.
Lines have been drawn and ‘war rooms’ have been set. No, this is not about the surgical strikes that captured the imagination of the nation through the day. Rather, it’s a scene from some of the top e-commerce companies readying for the much-awaited festival sales that could see sales of around Rs 2500 crore to Rs 3000 crore.

Plenty of high-pitched marketing is around. Snapdeal, for instance, has set up special ‘war rooms’ which the heads as well as the founders would use to monitor the sales throughout, to indicate the seriousness of the matter. “Our teams work around the clock to provide the best customer experience even with the surge in orders .Teams can congregate in war rooms to collaborate and troubleshoot wherever needed,” Saurabh Nigam, vice-president, HR, Snapdeal, said.

At Gurgaon-based e-commerce player, ShopClues, as many as 600 employees are pulling in all-nighters and more would do so when the sales begin. ‘’We have an all new data-lite user interface as well, to get  faster speed on 2G network,” said Nitin Agarwal, AVP marketing at ShopClues.

Flipkart is setting up food kiosks where different cuisines would be available round the clock. “We also are big on music. Every floor has different preference, if some prefer hard rock, there are others who are all for peppy Bollywood numbers,” said a Flipkart executive. Popular food joints in Flipkart would also be serving employees round the clock.

Snapdeal has set up sleep zones for the tired employees pulling all-night shifts.

Amazon has also made arrangements for residential complexes for employees. Transport and security are among the areas that Amazon has worked on. On the menu would be healthy food to keep them going for hours.

Tata CLiQ, Tata group’s e-commerce foray, is preparing for its first festival sale — Festober — starting October 1. Prathyusha Agarwal, head of marketing, said the atmosphere in office was charged and there was genuine excitement. “We are bringing the brand story to the consumer.”

The CEOs themselves are in the thick of action and are being seen and heard on social media talking about the upcoming shopping festival, which means a lot to them all. Snapdeal’s Kunal Bahl and Flipkart’s Binny Bansal are on Twitter, telling their followers about how gung-ho they are about the sales. “The midnight readiness drills have started’’, and “everything locked and loaded at @snapdeal warehouses!.... #UnboxDiwaliSale,”  Bahl said. While Bansal promoted his Billion Day Sales.

What e-marketplaces are doing for employees

  • War room set
  • Free snacks and drinks
  • Sleep zones and sleeping bags for the ones staying in the office
  • Theme-based cuisine everyday during the sale
  • Cafeteria open round the clock
  • Snooze rooms
  • Dedicated residential complexes for male and female employees
  • Healthy food
  • Food kiosks serving international and Indian cuisines
  • Music on the floor
Reference -

Wednesday, September 28, 2016

Fairfax to Raise $500 mn For India Buys

Prem Watsa-owned group is in talks to buy 10 per cent stake in Catholic Syrian Bank

The group has already made a string of acquisitions in India, including a majority stake in travel firm Thomas Cook India, a minority stake in financial services firm, IIFL Holdings, and stakes Bangalore International Airport and Sanmar Chemicals.
Enthused with his investments giving good returns in India, Canada-based billionaire Prem Watsa-owned Fairfax Financial Holdings is raising $500 million to fund its acquisitions in the country.

According to bankers close to the development, Fairfax is in talks to pick up 10 per cent stake in Catholic Syrian Bank - a South India-based private sector bank and is in the market to raise funds for the acquisition. The bank needs Rs 500 crore of fresh capital to support its growth plan.

The latest fundraising exercise will be led by Bank of Nova Scotia as the lead manager in the offshore markets.

In India, many debt-heavy companies require urgent equity infusion to expand their operations and reduce bank loans, and bankers said Fairfax might infuse funds in these companies as a strategic investor.

The main reason for Watsa's optimism on India is the high returns generated by the group's India investments in the listed space.

Take for example, in May 2012, Watsa bought 68 per cent stake in Thomas Cook Indian for Rs 817 crore.

In February 2014, Thomas Cook expanded its presence as it took over Sterling Holidays for Rs 870 crore and Kuoni India for Rs 535 crore in 2015.

Since Watsa took over Thomas Cook, the market value of the company has increased from Rs 1,300 crore to Rs 7,300 crore - adding close to Rs 6,000 crore to the company's market capitalisation.

In December last year, the group increased its stake in financial services firm IIFL Holdings to 30 per cent for an additional Rs 1,341 crore. The 30 per cent stake in IIFL is worth Rs 2,600-crore as on Wednesday.

Bankers said Fairfax India, a subsidiary of the holding firm, had raised close to a billion dollars last year via an initial public offer in Canada and invested in a string of acquisitions.

In November 2015, Fairfax acquired 49 per cent stake in Quantum Advisors for $46 million (Rs 308 crore).

This year, the group acquired stake worth $322 million (Rs 2,157 crore) in Bengaluru airport from the GVK Group and paid another $300 million (Rs 2,010 crore) for 30 per cent in Sanmar Chemicals.

In July this year, Fairfax India acquired 51 per cent in Privi Organics for Rs 370 crore.

Just two weeks ago, Fairfax India completed a $225-million (Rs 1,500 crore) credit facility with a syndicate of Canadian banks. Fairfax is also one of the shareholders in ICICI Lombard, a general insurance company in India.

  • Thomas Cook
  • IIFL Holdings
  • BIAL (Bengaluru Airport)
  • Sanmar Chemicals
  • Privi Organics
  • Quantum Advisors
  • ICICI Lombard
Reference -

Tuesday, September 27, 2016

Lupin, Torrent Zero in on Bayer's Biz

Dermatology segment of Bayer's portfolio is valued at $1 bn

A Bloomberg report on Tuesday said the Indian drug companies are weighing offers with a view to grow their dermatology portfolio. Sun Pharmaceutical Industries, too, is in the race, along with top pharmaceutical companies and private equity firms.
Drug makers Lupin, Torrent and Cadila Healthcare are considering making bids to acquire Bayer’s dermatology business, valued $1 billion.

Bayer is looking to divest its dermatology business ahead of a $66-billion acquisition of Monsato.

Dermatology is an area of focus for top drug makers in the country. Recently, Sun Pharma announced a tie-up with Almirall for development and commercialisation of a new drug to treat plaque psoriasis. For Lupin, too, dermatology is an area of focus and the company has 20 product filings in the US.

A Lupin spokesperson declined comment. Torrent Pharma spokespersons, too, were not available for comment.

Last year, Torrent had acquired Zyg Pharma, which was a part of the Mumbai-based Emcure group. It specialises in dermatological formulations.

In January 2015, Torrent had raised close to Rs 10,000 crore by issuing securities and had said that it is open to acquisitions to fuel its growth. At the time, the company told Business Standard that funds would be used to refinance existing borrowings, as well as organic and inorganic growth.

Torrent had acquired the domestic business of Elder Pharma in December 2013, a deal which gave it access to new therapeutic areas in which it was looking to expand its presence.

Cadila Healthcare Chairman and Managing Director Pankaj Patel had, in an interview to Business Standard earlier this year, said the company is open to both product acquisitions as well as bigger acquisitions in the US market.

It has acquired the animal health business of Zoetis and some brands from Albert David earlier this year, and is making smaller acquisitions in the domestic space to plug the gaps in the therapeutic categories.

With Bloomberg inputs

  • Sun Pharma recently announced a tie-up with Almirall for development and commercialisation of a new drug
  • Torrent had raised close to Rs 10,000 cr and had said it is open to buyouts
  • Torrent had last year acquired Zyg Pharma, which was a part of the Mumbai-based Emcure group
  • Cadila Healthcare, earlier this year, said it was open to both product buyouts as well as bigger acquisitions in the US market
Reference -

Monday, September 26, 2016

Jet Plans Joint Venture with Air France-KLM

Jet Airways isn't a member of any airline alliance but has code share agreements with several airlines including Air France-KLM

Jet Airways, which is co-owned by Etihad Airways, is not a member of any aviation alliance but it has code share agreements with several airlines, including Air France-KLM.
Jet Airways is negotiating a joint venture (JV) agreement with Air France-KLM to expand its commercial co-operation with the European airline network.

If the deal fructifies, it would be Jet Airways’ first large-scale commercial agreement outside of Etihad and Etihad-owned airlines. Etihad also has strong commercial and technical support agreements with Air France-KLM.

According to airline sources, Jet signed a memorandum of understanding with Air France-KLM about two weeks ago to form a JV. The proposed JV will cover routes in India, Europe, and North America but finer details are still to be worked out, sources added.

In March, Jet shifted its European gateway from Brussels to Amsterdam (which is KLM’s hub), indicating its closeness with the two European airlines. And last week, Jet changed its schedule of Mumbai-Paris flight to provide more onward connections over Paris.

A JV mostly involves a far greater cooperation between airlines and participating airlines usually share costs, revenue and profits on routes.  Air France-KLM, Delta and Alitalia have an extensive JV, covering routes between Europe and North America and offering about 25 per cent of capacity on transatlantic routes.

On Monday, French and Dutch media reported about the signing of an in-principle agreement between Jet Airways and Air France-KLM for a JV. French newspaper La Tribune went on to say after the Rafale fighter deal, Air France is making a big impact in India. Responding to a query on proposed JV, a Jet spokesperson said “As a policy, Jet doesn’t comment on speculations.”

At present, Jet flies to Paris and Amsterdam and is now planning to resume its US service. Air France flies to three cities in India (Delhi, Mumbai and Bengaluru) and KLM flies to Delhi. The French and Dutch media reports said  network in India would be expanded next year with plans to connect Hyderabad, Chennai or Bengaluru with Amsterdam and Paris.

  • It is an advanced commercial deal between airlines
  • Under the deal, airlines collaborate on network, schedules, sales and pricing, and also share costs, revenue or profits on routes
  • It requires anti-trust approvals from regulators
  • The logic behind a JV is normally referred to as “metal neutrality” achieved via close co-operation in capacity and pricing as well as revenue management
  • Northwest & KLM signed first JV amongst airlines in 1997
  • Important JVs include Air France-KLM,  Delta and Alitalia JV; and Lufthansa group, Air Canada, and United pacts
  • Last week, Lufthansa signed a JV with Air China and the former has similar deals with SIA & Nippon Airways

“A JV agreement could help Jet deploy its wide-body planes profitably on Europe or North America routes. At the same time, this would help Air France-KLM expand its presence in India and counter Lufthansa-led Star alliance,” said an industry observer.

“Amsterdam Airport Schiphol was very pleased to see Mumbai being reconnected to our network with Jet arriving to Amsterdam. We have understood that the performance of the operation is going very well and as proof for that Jet will operate a B777-300ER on the Mumbai-Amsterdam route, instead of the A330 aircraft. Next year, the B777 aircraft could also be used on the Delhi-Amsterdam-Toronto route,” a spokesperson of the Amsterdam airport said.

“With the arrival of Jet Airways to Amsterdam, there is also a close cooperation between KLM and Delta Air Lines. The flights of Jet Airways to Amsterdam connect to 30 European destinations and 11 North American destinations. Of course, the vast network of Jet Airways in India is used to feed passengers to each other’s flights,” the spokesperson added.

Reference :

Reliance Jio in Fresh Battle with COAI

Calls the industry body biased and accuses it of serving the interests of the top three telcos

The industry body hit back by evening and termed Jio as a back door operator (BDO) in the telecom sector, as it was never an applicant for UASL or UL license but bought broadband wireless spectrum through a front entity and then had it converted into a full-blown UASL license. The war of words began on Sunday as Jio called the leading three telcos as incumbent dominant operators (IDOs) and accused COAI to be serving their interests, while reducing the other core members to nullity.
The ongoing tussle between Cellular Operators Association of India (COAI) and Reliance Jio got murkier on Sunday, with Jio calling the industry body biased and accused it of serving the interests of the top three telcos, namely Bharti Airtel, Vodafone and Idea.

"None of the half a dozen new operators who have entered in the last five years have ever accused COAI or in fact labelled the leading operators as IDO's. Despite repeated and grave provocations from Reliance Jio, COAI wishes to state that Reliance Jio which entered the sector as a BDO was welcomed by COAI as a full member," COAI Director General Rajan Mathews said.

Jio has also sought a thorough overhaul of COAI regulations by appointing three retired judges of the Supreme Court so that the industry body falls in line with democratic principles of fairness, accountability and transparency. Jio has been a core member of COAI since July 2014.

Regarding the issues raised by Jio, COAI said these are private, internal matters of the association and hence will be dealt with internally among its members. Jio is a member and this is a matter, that can easily be discussed at the association. Questioning the rules and regulations of COAI, Jio said as the three IDOs command 68 per cent of votes and any decision, including those relating to grievance of a core member are subject to simple majority which is under simple control of IDOs.

"COAI regulations are overwhelmingly biased and lopsided and have been framed to sub-serve the vested interests of three IDOs," Jio said in the letter dated September 23 to its Chairman Gopal Vittal and Director General Rajan Mathews.

However, COAI said Jio was presented with the constitution and by-laws of the Association, pursuant to their application for membership and was well aware of the governance structure and practices of the association.

"No issues were raised at this time and they agreed to abide by these rules and regulations. It is surprising that Reliance Jio now raises certain issues as something new," COAI said.

COAI further said it believes these are now motivated by a desire to tarnish the reputation and credibility of COAI in the light of certain representations made by COAI to various government agencies

COAI also wishes to state that any representation made is done after following all due processes of the association and with transparency on whether any member operator agrees or disagrees with the COAI position.

"The members of COAI will review the letter submitted by Reliance Jio and do what they believe is in the best interest of the country, the customers and the association," it added

Jio in the letter said three IDOs have 60.84 per cent market share based on revenues and command seven votes each, totaling 21 votes whereby the remaining four core members have a total of 10 votes amongst them.

"The entire decision-making power and authority rests only with the IDOs. The other core members have been reduced to a nullity and their presence or not will always be inconsequential," the letter said.

"One vote - One member" is the basic tenet for good governance of any association such as COAI, Jio added.

Citing a few instances, Jio said COAI had sent important communications such as views on interconnect usage charges (IUC) without having any debate and consensus amongst core members just by recording views of IDOs.

"This is a clear case where COAI as a body purportedly representing the interest of all the members sending out a view which will benefit only the IDOs," Jio said.

The company further said as a matter of fact, on a specific occasion, COAI had the audacity to send a mail (containing a draft letter purportedly supposed to be sent to the Government) to it to seek its views whereas the letter had already been sent to the Government even before the mail was sent to Jio.

"The COAI, in utter disregard of its charter and the mandate and powers conferred by the charter on the members and its officials went out of its way and command to take up the issue of provision of points of interconnection from the IDOs to Reliance Jio, espousing the IDOs' views as that of COAI's views, and in effect supporting the illegal acts of IDOs against one of its own core member," Jio added.

Jio sought that if there's no consensus, the communication should be voted upon and finally when the communication is sent, it should contain clearly the views of the dissenters along with that of the majority views.

"In all fairness, any dissenting views, even if it is in minority, should be recorded with the full reasons given by the dissenter. The dissenting views should also form part of the communication to the Government and Regulatory Authorities," Jio added.

It further suggested that COAI's rules and regulations should be overhauled so that its processes and procedures to fall in line with Public Law and to follow democratic principles of reasonableness, fairness, accountability and transparency.

Reference -

Saturday, September 24, 2016

Marriott-Starwood Beats Taj Group

Becomes India's largest hotel chain with nearly 18,000 rooms

The Tata-promoted Indian Hotels Company has a room inventory of 16,640, but has more hotels than anyone else in the country at 125 in four brands.
Marriott, after the buyout of  Starwood, has surpassed the Taj group to become India’s largest hotel chain with nearly 18,000 rooms.

Marriott and Starwood, with seven brands each in India, have 79 hotels in the country.

Indian hospitality companies will feel the heat of the Marriott-Starwood merger as another 79 hotels with 16,000 rooms from both chains are set to open in India over the next three years. Forty of these will be under Marriott and 39 under Starwood.

The additions will increase the number of cities Marriott and Starwood cater to from 19 to 33. Properties in the pipeline were signed deals and construction of many had begun, said a Marriott executive.

Marriott-Starwood beats Taj group
“India is the second most important market for us after China,” said  Rajeev Menon, chief operating officer, Asia-Pacific, Marriott International.

What will hurt India hospitality companies more is the Marriott-Starwood worldwide membership base of 85 million. Of these 1.5 million are in India.

Loyalty members form a major chunk of business for hotel companies, a trend catching on in India as well. “Business through loyalty memberships forms 50 per cent of our business in India and globally,” Menon added.

The combined entity has a bouquet of 30 brands. Half of them are present in India but  Marriott is open to bringing in more. Marriott’s 15th brand, W, is set to debut in Goa next month.

In the mid-market and upscale segments the combined entity has Four Points by Sheraton and Courtyard by Marriott. Indian companies in this segment have brands like Gateway and Vivanta by Taj and Welcome by ITC.

During the last two quarters Marriott and Starwood reported occupancy of 70 per cent against an industry average of 60 per cent.

“Occupancy is at the highest in the last few years. Revenue per available room in also on an upswing. The country as just 160,000 branded hotel rooms and there is need for many more,” Menon added.

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