It’s back to school for retail head-hunters in India

THE retail sector's hunt for manpower is leading players to hitherto uncharted territory. Now, school students (Class X and XII passouts) are being roped in to help the sector satisfy its insatiable appetite for skilled workforce. So, companies such as Reliance Retail, Pantaloon and Godrej Agrovet are going to schools to scout for talent. Reliance Retail, which plans to recruit around 5 lakh employees for its venture over the next five years, expects to hire around 60-70% of its front-end staff from government schools. These Class XII passouts then undergo a sixmonth training programme before getting on to the shop floor. Similarly, Pantaloon Retail hires as many as 300 school passouts from both government and private schools, out of the 600 it recruits every month. The retail major also gives them an option of pursuing a BBA in Retail through distance-learning programmes at Madurai Kamaraj University and pays half the fee on completion of one year of the course. It currently has on its rolls around 3,500 school passouts, picked up from various schools in the country. "The distance-learning BBA programme offers these youngsters a chance to chart out a career path of growth and an opportunity to become more than mere shopfloor attendants," says Pantaloon Retail HR head Sanjay Jog. The retailer has a five-week operations and sales training programme for its recruits and a week-long training on self-development. On the other hand, Godrej Agrovet, the Rs 870-crore rural retail initiative of the Godrej Group, trains Class X passouts under its sixmonth ‘Godrej Aadhaar Krishi Gurukul’ programme. It has so far trained 85 students in the field of agricultural advisory services, apart from personality development, computer skills and sales. It will train another batch of 120 students by May this year and plans to train about 1,000 such students by March 2008. According to CII, the retail sector can absorb 90 lakh people over the next five years. Ma Foi Management Consultants has been recruiting Class XII passouts for retail players and expects this trend to catch up as organised retail goes on an expansion spree. Says the HR consultancy’s chief operating office, E Balaji, "Both employee development and retention are on the agenda of retailers who are hiring in bulk, in anticipation of their massive expansion exercise."

courtesy:economictimes

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Retail’s own private mandi house

RETAIL majors are warming up to the idea of setting up private mandis, a critical link to procurement, as they hungrily add shelf space. While several retailers and exporters are linking up to the backend supply chain through direct marketing and contract farming, they are now ready to roll up their sleeves to set up private mandis, a platform where farm produce is traded. India has about 7,500 mandis with about 10-12 per district. Some of the big mandis conduct business worth Rs 20 crore a day. Typically, mandis are platforms where farmers sell their produce directly or through intermediaries to buyers. With reforms in Agriculture Produce Marketing Act at the state level, transactions would be allowed outside the governmentowned mandis and the sector would be open for private players. Most states, which have amended APMC Act, including Andhra Pradesh, Madhya Pradesh, Tamil Nadu, Himachal Pradesh, West Bengal and Bihar allow companies to set up and operate mandis. Players like Subiksha, Field Fresh and Heritage Foods are drawing plans to set up private mandis while several others are bullish on this procurement channel. ITC’s commodity division had submitted its expression of interest to Centre’s terminal market scheme. In the next six months to a year, there is lot of action expected in this space. Talking to ET, Subiksha MD R Subramanian says, “setting up private mandis is part of our plans. Our commodity division is talking to potential partners to enter this space.” The Chennai-based discount retailer is also looking at investments in warehouses, sheds and cold chain to complement the mandi. Subiksha, which intends to have 750 stores by end of the fiscal, promises products 10% below MRP and is increasingly looking at enhancing its private label portfolio. Hyderabad-based Heritage Foods, in which former Andhra chief minister N Chandrababu Naidu’s immediate family owns over 30%, too is planning to set up private mandis in the state. According to a company official, it would help it for procuring commodities for its retail venture, Fresh@. “We need to shell out a lot of money to procure commodities from local mandis as they charge fee on volumes. By setting up private mandis we can save on procurement cost,” he said. Heritage is planning a store count of 45 this year. Typically, mandis charge a fee on transaction that could go up to 4% of the volume traded. In the case of private mandis, these companies would end up saving on the costs/fees and also get a fix on quality and reliable supply via the disintermediate route. Along with private mandis, retailers and large traders are expected to build warehouse and cold chain capabilities. Field Fresh, a joint venture between Bharti and N M Rothschild, CEO Rohtash Mal told ET, the company was looking at formalizing its plans of entering the private mandi space in the next three months. Field Fresh, which is looking at investing Rs 1,000 crore in the backend, will also supply fresh produce to the Bharti-Wal-Mart retail venture.

courtesy:economictimes

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Reliance Retail to expand footprint in AP

Reliance Retail, which kickstarted its ambitious Rs 25,000-crore venture from Hyderabad, is now planning to further expand its footprint in Andhra Pradesh. As part of this plan, the company has added four new outlets in the city taking its store tally to 25. Last month, the company had forayed into tier II cities. "Currently, we have 35 stores in the state including 10 stores in Vijaywada, Visakhapatnam and Guntur," said K S Venugopal, chief executive (customer operations- Andhra Pradesh), Reliance Retail, in a release on Friday. With the new stores in place, Reliance Retail has 63 outlets in India. "In Andhra, we have 35 stores and recently we opened 9 outlets in Delhi. We also have seven stores in Jaipur and 12 outlets in Chennai. The average area of a Reliance Fresh store ranges from 2,200 square feet to 4,000 square feet," the release said. Following a farm-to-fork model, the company procures commodities from various parts of the country. For example, it gets apples from Himachal Pradesh and onions from Karnataka. In Andhra Pradesh alone, it has 30 procurement centres.
courtesy:economictimes
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Cess on rental to hit retailers' profit

Retail chains are ruing the levy of 12.36 % service tax-cum-education cess on rentals for retail space and warehousing as it is expected to put marginal pressure on their profit earnings. Quick back-of-the-envelope calculations indicate retailers’ profitability may take a knock of less than 1%. While profit margins of large-format stores and stores operating out of malls will dip by 0.75 %, that of medium-sized ones like the neighbourhood grocery chains will be down by 0.25 %. Elaborating, Landmark chief operating officer Himanshu Chakrawarti said: “These calculations of a drop in profit holds true only if all outlets and warehouses are on lease. In most cases, retailers opt for a mix of leased and owned properties for its outlets. Therefore, the impact will vary from one player to another and will depend on the ratio of leased-owned properties.” While the grocery outlets and neighbourhood chains claim rent accounts for about 2-3% of total sales, it hovers around 6-8% for large format stores. “Hence, large format stores as well as mall outlets will be worst hit. The market is so price-sensitive that we will have to absorb this additional burden,” R Subramanian, managing director, Subhiksha, said. “While the impact of the new service tax on value retailing (hypermarket) properties will be Rs 6-7 per square feet a month, it will Rs 9-10 per sq ft a month on lifestyle retailing. Therefore, for a chain operating with 10 lakh sq ft of leased properties, the impact will be Rs 12 crore a year. Retail business being competitive as it is, recovery of this is going to be very difficult,” said Sumantra Banerjee, president & chief executive, RPG Retail. ET spoke to a cross-section of retailers who claimed that they will not be able to pass on the increased overhead costs to consumers primarily because of the competitive market scenario. “In an MRP-based regime, there is practically no scope to pass on this additional burden to consumers. However, retailers dealing with a large bouquet of private labels have the flexibility to marginally increase their product price,” Mr Chakrawarti added. Industry circles suggest warehouse rentals typically account for some 15% of the retailer’s occupancy costs. “Since these warehouses are located in suburban areas, the rentals are low. Stores with warehouses adjacent to outlets in high-street locations and malls will feel the pinch more because of high rental rates,” said Gibson Vedamani, CEO, Retailer’s Association of India. Incidentally, rentals for retail space have shot up significantly in the last couple of months. “Rental costs in metros have increased by 30-35% on an average and by about 50-55% in high-street locations like Mumbai’s Linking Road and Kolkata’s Camac Street. Tier II cities too have seen rental costs escalating by 20-25% over the last couple of months,” Mr Vedamani said.
courtesy:economictimes
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Emotionally engaging the customers key to be successful in Retail

HE CALLShimself an unashamed designer of shops. The CEO of one of the world’s best known design agencies — Fitch, UK — Rodney Fitch, was in India recently. He spoke with Surbhi Goelon his expansion plans in India and the importance of incorporating design in retail stores. Excerpts:
When is Fitch, UK coming to India? I keep wondering how could we miss India. It is so diverse with abundance of opportunities to work. We are currently present in 12 countries with 22 studios. And we will open our first studio in Mumbai in March. We will start our designing business with clients such as Asian Paints, Godrej, Aditya Birla and Reliance. How important is designing for a retail store? In order to increase the footfalls, display of products is very important. Ease of browsing, showcasing of products, change in style and adopting anti-formats are the other key differentiators. Retailing is the largest selling industry and for that to flourish, customer shopping experience is paramount. In January alone, Wal-Mart refurbished its 70 stores emphasising on the layout of stores and networking space. In a retail store, every touch point is important and thus constant improvement is required from time to time to sustain a brand presence in this competitive industry. Consumer environment include brand identity and communications including live, digital and packaging; product development and future insight. The design of live brand communications provides a highly engaging point of interaction for many audiences — from consumers to brand stakeholders. It is thus an integral part of our redefinition of retail as designing a store. What are the other things important for the retail sector to make a mark? Tectonic plates of retail worldwide is shifting very fast. So change in style like stylised interiors is becoming imperative in this competitive scenario. Moreover, consumers are increasingly becoming inclined to buy online that is compelling retail stores to move towards designed formats. In UK alone, online shopping has moved to 50%. Presently, the move is from command to demand. Examples like Dubai where the focus has shifted to development of tourism and shopping-led economy give us a clear picture of the strength of the consumers and the effect of their buying habits. Factors like technology, globalisation, consolidation, consumer experience and value for money would bring rapid growth in retail. We have worked with Vodafone, Tesco, Selfridges and Target and have found that purchasing decisions are much more interactive and participative. Only low prices do not generate sales. Coupling it with superior quality is important. Do not interpose the brand image with the brand displaying inside. An innovative design is the expression of innovation in thinking. Do you think consumer behaviour has changed and has led to changes in the retail business too? Absolutely. The world of retailing is becoming hugely more competitive and more influential, both with consumers and manufacturers. Significantly, today it is the consumer who is taking control. Empowered by a wealth of readily available knowledge and an extraordinary set of choices, consumers often have all the material possessions they need, and now seek a different way of engaging their time with brands. They are seeking products, services and environments that connect with them emotionally; that enhance their lives beyond functionality, and deliver experiences that match their aspirations. Retail now is about putting ideas and experiences of products, services and environments into context and circulation, in ways that are innovative and convincing to today’s savvy consumers. As a result, we at Fitch, create distinct and active experiences that engage consumers emotionally rather than treating them as passive recipients. What are the new trends you have come across in retail designing? There are environmental changes, i.e., architecture, brand communication, packaging, product designs. Across countries, Paris has seen trend insights getting changed and Europe has shifted to minimalist approach and more stylised participation. And more importantly, there is greater consumer participation in making the choices and the process work.
courtesy:economictimes
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Marketers must tap into consumers’ herd instinct

Most Important Relationship Is Not Between Company & Consumer, But That Between Consumer & Other Individuals
Mark Earls
IF MARKETERS want to wield greater influence over consumer behaviour, they must learn to accept that people do not act autonomously but largely follow what other people do. Over the past 10 years or so clusters of cellophane-wrapped bunches of flowers seem to have appeared with increasing frequency on Britain’s roadsides. It is a phenomenon that satirical magazine Private Eye has dubbed the ‘cellotaph’ syndrome — the setting up of floral shrines to the victims of traffic accidents. But how did these shrines start? And how did they spread and the practice become ‘just what we do’ when a few years ago it was not? One line of explanation is that each flower is the result of an independent decision based on some cost-benefit trade-off, or is driven by a desire to express an individual’s grief. This is what we assume when we conduct marketing research: we ask individual consumers what they do now, why, and what they might do in the future. We also work on the basis that individuals decide what they do independently of others and can tell us about it. Almost everything of worth in our world — including the power we have over the future of the planet — comes from this herd nature and our ability and passion for social interaction and collaboration. The same is true of the technologies that are reshaping the media environment: SMS and the internet are built on our species’ inherent desire and need to interact with others. Recognising the herd instinct has important consequences for marketers. For a start, it explains why mass behaviour is so hard to change. Most public-policy initiatives struggle to demonstrate any long-lasting change in citizens’ behaviour, while most change programmes within companies fail to produce the radical alterations in employee behaviour specified in the objectives. In theory, marketers should be experts at changing mass-behaviour: after all, we have the experience, analytics and practical tools to understand, describe and reshape it. Putting the consumer at the heart of business is supposedly our raison d’être. And yet, despite the rightly-praised exceptions — Tesco, Dove, Innocent and iPod — most marketing activity struggles to demonstrate the kind of significant sustainable change in customer behaviour that we imagine is our right. Moreover, this has been the case for as long as most of us can remember; marketing scientist Professor Andrew Ehrenberg once suggested that keeping things the same would represent a reasonable success for most promotional campaigns. We may have become better at managing things well at the edges in the short term. After all, much of the appeal of the revolution in one-to-one marketing over recent years seems to lie in harvesting marginal opportunities — the ‘low-hanging fruit’. But in the main we are no better at creating sustainable changes in mass behaviour than our peers in other disciplines; the changes we do create are minor and fleeting. The next step is to look at marketing as consumer-toconsumer, rather than business-to-consumer. This means recognising that the most important relationship is not between the company or brand and any given consumer, but between the latter and other individuals. What matters in real life is what matters to or between them. The acceptance of our herd nature is changing the way some media players are evaluating media channel options. While most of the media world is getting excited about moving on from counting audiences and weighting them according to their wallets, to counting them according to how ‘engaged’ they are with the medium, agencies such as Naked have proposed that the real currency of the media world should be the extent to which an audience passes messages on to others beyond it; the ‘propagation’ value. For example, in terms of sales or readership a brand may only reach half the number of people through an ad in The Guardian than in The Daily Telegraph, but each Guardian reader might influence several times the number of people their Telegraph-reading counterpart does. This is significant, and represents the first major shift away from thinking about media as ‘channels’ down which we tip messages and information; media become important only in so far as they serve and help advertisers access and harness the power of the social networks which lie behind them. At the same time, the dubious idea of exploiting the most valuable customers must be ditched. This kind of micro-targeting has no impact on the mechanisms of mass behaviour and risks letting the market move away, suddenly and rapidly. Instead, marketers should focus on the most influential customer; that is the consumer who holds the greatest sway over the majority of his or her peers. Marketers must understand the types and sources of influence that shape customers’ behaviour both positively and negatively and think about how their opinions, and more importantly, their actions, can fuel this.
courtesy:economictimes
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Blogs boost up bike sales in India

BLOG POSTS are now finding their way into the marketing strategies of motorcycle makers. What started as platforms to share passions and frustrations of bikers are now being tracked by corporates to fine-tune their offerings. Instead of tedious market surveys and data crunching, companies now get reviews within hours of product launch, courtesy blogs. “The first review of our latest Pulsar was on our table within three hours of its launch in Chennai thanks to bloggers,” Bajaj Auto VP (marketing-two wheelers) S Sridhar told ET. A dedicated team at Bajaj Auto now regularly tracks discussion-boards and review section of blogs and online biking groups and provides feedback to company’s marketing and product development group. The influence of internet is maximum in case of premium bikes such as Bajaj Pulsar, Hero Honda CBZ and TVS Apache, Being a lifestyle product targeted at 18-25 year old urban college goers or those in their first jobs, premium bikes is a hot topic on the internet. Pulsar and Apache in fact have their own fan clubs and groups on the internet. Some of the popular internet sites and blogs on the radar screens of bike marketers include xbhp.com, mouthshut.com, bikenomads.com, bajajpulsar.org, and yahoo groups for Royal Enfield, Hero Honda Karizma group and TVS Apache. “Online groups and product review sites are now the first point of reference for a prospective Apache buyer. If he reads a positive review, there’s a great probability of him purchasing our product or viceversa. As such, we have to be alive to the reviews and discussions posted on these sites and incorporate these in our product features and brand communication,” says Mr Narasimhan of TVS Motors. The strategy seems to have paid-off. Apache is now India’s second largest selling premium bike. Taking a cue from Apache’s success, Hero Honda incorporated internet feedback while marketing its 150cc CBZ. Prior to its launch, the company ran a teaser campaign asking prospective consumers to email their expectation from a high-performance bike. The idea was to give consumers a say in product development. Post-launch, Hero Honda created a dedicated website for CBZ to gather customer feedback on the product. “Giving the demographic profile of premium bike customers, internet has emerged as a powerful tool to connect with the consumer. Our internet initiative is still at a nascent stage and as we gain experience we will ramp it up,” says P S Sunder, head marketing, Hero Honda Motors. Corporate interest in blogs may be rising by the day, but it doesn’t translate into tons of advertising revenues for owners/creators of these sites. This is because any corporate sponsorship will compromise their biggest assets - credibility and frankness of discussion. “Advertisement will kill the impartiality and frankness of these sites. So we remain a distant observer and don’t get involved in any manner,” says Mr Prasad Narasimhan, vice-president marketing of TVS Motors. Some, however, discount the influence of blogs and internet groups on customer’s purchase decision. “Internet blogs are still a niche medium in India. My own calculation is that not more than 1% of the bike owning population refer to internet before making a purchase decision. May be its higher for performance bike customers, but they are still a minority,” says Atul Gupta, vice president Marketing, Suzuki Motorcycle India.
courtesy:economictimes
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Petro tariff cut helps put Indian inflation on the mat

INFLATION has begun to show signs of cooling off on account of cut in prices of petrol and diesel. The inflation rate fell to 6.05% for the week ended February 17 as compared to 6.63% in the week before. The government had reduced the prices of petrol and diesel by Rs 2 and Re 1 respectively on February 16. Inflation had peaked at 6.73% for the week ended February 3 after which it began to decline. Mr Saumitra Chaudhary, member, economic advisory council to the prime minister said: “While 45 basis points of the 58 basis points dip in inflation has come on account of petrol and diesel, the rest of the impact is because of the base effect”. The overall Wholesale Price Index (WPI) had gone up 196.7 in the week ended February 18, 2006 from 196.2 in the previous week of 2006. The WPI figures show that the index for fuels and lubricant group fell by 0.6% due to lower prices of petrol (4%), high speed diesel oil and light diesel oil (3% each). The index for the food articles group also declined by 0.4% due to lower prices of fish-marine and gram (4% each), fruits & vegetables and bajra (2% each) and moong and jowar (1% each). The index for manufactured group also declined by 0.1% due to 0.4% fall in prices of food products and 0.1% decline in prices of basic metals alloys & metal products. Last month, the government had cut import duty on cement, capital goods, steel, aluminium, copper and other industrial raw materials, as well as palm and sunflower oil. Economists say the fall has been triggered largely by a cut in prices of petrol and diesel.

courtesy:economictimes

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Net Ratings of India’s Budget

Courtesy: EconomicTimes
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India's budget not shocking; not rocking either

THE VERDICT is out. Doubting Thomases notwithstanding, finance minister P Chidambaram’s all-things to-all-people Budget has found favour with the aam aadmi, reports Shailesh Dobhal in New Delhi. Though not feeling exactly ecstatic, having been let down on personal income tax and spiraling prices, 86% of consumers polled by market research agency TNS India for ET’s ‘Post-Budget Survey — Mood of The Nation’, have rated the Budget as positive. The survey was carried out across metros, Hyderabad and Bangalore. In comparison, Mr Chidambaram’s last Budget was hailed as ‘pure delight’ by 91% of consumers in the ET survey. Just 12% of consumers rated the Budget as bad, with the majority of 63% rating it as average, and 23% terming it as good. And what’s best for Mr Chidambaram’s big-picture Budget — “distributing gains of growth to a large number of people” — is that almost two-thirds, or 62%, say it is a growth-oriented, pro-investment Budget. A majority, 54%, say it will help them to save/invest more — while it’s split right down the middle, almost 50:50 — when it comes to the Budget facilitating more earnings. It’s a different story though for PC’s Budget 2007-08, if you consider what 6,200-odd netizens (the khaas aadmi if it were) had to say on www.etbudget.com. On a 1 to 10 scale (1 being lowest), over 70% rated the Budget below average (5 or under). Over three-fourths rated it negative on growth, impact on prices, stock markets and personal incomes. It’s interesting to note that the consumers have not been overly influenced by opinions of motley crowd — television-friendly analysts, businessmen and talking heads — who consigned the Budget to the dustbin even before the FM was through with his 103-minute speech in Parliament. IS IT that lay consumers have been charitable with the FM or do they know better, even more than the stock markets, which tanked after the Budget presentation on Wednesday, though largely on weak global cues, only to spring back on Thursday? Why, almost half—48% consumers—voted the Budget as good for the stock markets during a day when bears held sway across bourses, globally. After all, on pure facts, this Budget has not really handed out much to consumers, either in terms of specific measures in bringing prices down or making their incomes count for more through lower personal income tax. “In a year where tax collections have been buoyant, there was not even an iota of meaningful relief to individual tax payers,” says Technopak chairman Arvind Singhal. Though he is right here, the prognosis on why consumers have reacted positively needs to be read differently. The simple fact is that FM can be blamed for everything—from tinkering with tax rates to being stingy with honest tax payers even in times of plenty—but doing anything that may have directly hurt consumer sentiment. Absence of any bad measure in itself became good news for consumers in the backdrop of palpable economic momentum. “Collective, and often unconditional optimism, has become the hallmark of the consuming classes in India, come what may,” says Partha Sinha, regional strategist (South Asia), Publics. “Though this Budget will have no big direct impact measures for consumers, it has long-term vision in terms of focus on education and agriculture, which will have a bearing on consumer markets,” says Deepak Kapoor, managing partner, PwC India.

Courtesy: EconomicTimes
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Price spiral has no way down

DESPITE timid measures in Budget 07-08 to “moderate” high inflation, the verdict of Indian consumers, much like most marketers, on price rise is a divided one. A majority of respondents (55%) feel their expenses will continue to rise. But equally, 43% say FM’s Budget proposals will bring their expenses down, though it’s anyone’s guess whether small duty cuts and the government’s move to extend the ban on commodity futures in rice and wheat (urad and tur futures were banned late January) on Thursday, will arrest soaring food & other essential goods prices. Delhiites feel most pessimistic on prices. Over 60% feel that the Budget will not be able to curtail price rise. Mumbaikars are also feeling inflation heat. Over 55% of Mumbai respondents feel that Budget measures will not hold help keep a check on their rising expenses. About 59% of Kolkatans and 61% of Hyderbadis also feel that expenses will continue to rise. Ironically, Delhi and Andhra Pradesh are both Congress-ruled states, while West Bengal is ruled by a Congress ally, which may serve as a wake up call to the government. Interestingly, ET’s ‘Post Budget Survey —Mood of The Nation’ shows that there is a divide between Socio Economic Classes (SEC) A and B on Budget’s impact on prices. While 60% of people belonging to SEC A feel that the Budget will not be able to curtail price rise, only 48% of SEC B consumers feel so. Consumers belonging to older age groups are more pessimistic on Budget. While 63% of people between age groups of 41 and 50 feel that inflation control will go in vain, younger consumers (age 18-30) are divided with about 49% tilted to each side. Female consumers, as always are much more worried about price rise in commodities. About 59% female consumers feel that expenses will continue to rise despite budgetary controls. The finance minister is however, trying his best to curtail price rise. Some Inflation reducing measures in Budget which may directly affect commodity prices are reduction in ad valorem component of excise duty on petrol and diesel from 8% to 6%. Import duty cut for non-agricultural products from 12.5% to 10% and cut on most chemicals and plastics from 12.5% to 7.5%, may also help. Biscuits with MRP less than Rs 50 per kg, food mix and instant mixes are now fully exempt from excise. Exemption limit for SSIs is raised from Rs.1 crore to Rs 1.5 crore, which may also help lower prices. The Budget has also reduced duty from Rs 400 per metric tones to Rs 350 per metric tones on cement sold in retail at not more than Rs 190 per bag. But experts feel that this measure will lead to under-invoicing by cement industry which will lead to corruption. Experts also feel that controlling market forces directly is not a very good measure. “The main instrument that the FM has used in the budget is fiscal controls which will show results in three months. Fiscal Deficit at 3.3% of GDP; is the lowest in 25 years. But price controls are measures which should be left to the market to decide,” Dr Amit Mitra, secretary general FICCI said. The survey also shows a deep gulf between respondents on whether this budget will help in a rise in incomes. While 49% feel that the budget will help them earn more, 48.7% feel it will have no impact on salaries. Delhi citizens however emerge as contrarians, again. Most (68%) Delhiites feel that the budget will not help them earn more. Only 29% feel it will help in a rise in their incomes. Thus people may have more money due to a growing economy but supply side constraints may continue to push inflation on the upside, which has touched a new high of 6.73%. ET commissioned the Post-Budget Mood of The Nation poll to TNS India, a leading provider of market information. TNS India conducted the poll using CATI (Computer-Aided Telephonic Interviewing system). Responses of more than 600 respondents were recorded within a span of 24-hours to bring our readers an exclusive peek at what the consumers have to say, post-Budget 2007 announcement. The interview was based on various quantitative (close-ended) questions to measure reactions of the respondents. The poll was conducted amongst adults aged 18 years and above, male & female from SEC A & B categories. Respondents were randomly selected basis the target group, spread uniformly across six cities, Delhi, Mumbai, Bangalore, Kolkata, Chennai & Hyderabad. Parallely, we also posted the same set (six) of questions on etbudget.com. Over 6,200 netizens from India and abroad participated in our online poll.

Courtesy: EconomicTimes
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Barista to get Italian flavour

LAVAZZA, the Italian king of espresso, is all set to take over Barista, the coffee cafe chain owned by C Sivasankaran, for about $110-125 million, people close to the development said. Senior officials from Lavazza, the storied 112-year-old coffee firm, will probably sign the deal in India some time next week. The purchase will include Barista’s cafes across the country and also Fresh and Honest, the coffee vending machine business. The combined turnover of the two businesses is estimated at about Rs 160 crore. Fresh and Honest has sold about 3,000 vending machines across the country, while Barista is believed to have about 150 cafes. Standard Chartered Bank advised C Sivasankaran, while Lazard acted on behalf of Lavazza. Mr Sivasankaran did not respond to an e-mail questionnaire on the issue. The group had put the business on the block upon realising that it needed substantial cash infusion to stay ahead of competition. Mr Sivasankaran had bought the business from Turner Morrison in April 2004 and then bought out the Tata group’s stake the same year. Though the brand had a strong recognition, the coffee cafe business struggled, especially against nimble-footed competitors such as Cafe Coffee Day. The business posted a reasonable turnover but profitability was always under pressure.

Courtesy: EconomicTimes
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India will see cheaper domestic water purifiers

Domestic water purifiers will become cheaper and it will cost less to set up water supply facilities. But the budget is dry on whether there will be more water in every home. The FM has exempted membrane-based water purification devices as well as non-electric domestic water filters from excise duties. He also offers excise exemption for pipes carrying water from supply plants to storage facilities. But, beyond this, there is little to celebrate, be it on water for drinking or irrigation. The conundrum called the National Rain fed Area Authority epitomises the confusion through which finance minister P Chidambaram proposes to steer the allocations on water. The authority formed after at least two discussions in the Cabinet and the PM's intervention to settle finally got a paltry Rs 100 crore, more as a placatory gesture than serious intent. The FM, saddled with turf wars over what is always a lucrative area of investment, was still able to push through money on several schemes, while maintaining a balance between warring ministries. On the Rajiv Gandhi Drinking Water Mission, managed by the rural development ministry, the FM declared, "I propose to enhance the allocation for the mission from Rs 4,680 crore in 2006-07 to Rs 5,850 crore in 2007-08." On the Total Sanitation Campaign, the budget proposes to increase the provision from Rs 720 crore to Rs 954 crore.

Courtesy:EconomicTimes
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Future trading ban may reduce wheat prices in India

The ban on new future trading contracts for wheat and rice announced by the finance minister has already resulted in wheat prices falling. Wheat dara (for mills) remained in negative zone and prices declined to Rs 1,000-1,005 per quintal from Rs 1,020-1,035 per quintal while wheat mp (deshi) drifted to Rs 1,200-1,550 per quintal from Rs 1,390-1,590 a quintal Analysts say that as 'badla' operators, who used to provide finance against grain stocks, withdraw from the futures market, hoarding will fall. Further with the ban, arbitrage between spot and future trading will stop taking away a lot of the demand. However, the ban would not make any impact on rice prices as there is hardly any trading in rice contracts on the commodity bourses. Large players with deep pockets used to benefit by exploiting arbitrage opportunities between different market segments. These traders buy from spot markets and hoard them while simultaneously hedging the price-risk by selling futures contracts. This practice is popularly known as 'badla' financing. The stocks held under 'badla' are immune to price volatility. Many times demand from such financiers becomes a significant portion of overall demand and skews demand-supply scenarios. The wheat price in March contracts on NCDEX on Thursday fell from Rs 975 to Rs 972 per quintal. However, the volumes of wheat contracts plunged drastically as a result of unwinding position on wheat counter. Navin Mathur, commodity head, Angel Broking said that arrival of new wheat supply in coming months will also ease out pricing pressure on wheat. As a result of the ban on futures trading in wheat, large corporates and hedgers will not come to commodity markets to hedge their position and this will affect the volumes of commodity markets.

Courtesy:EconomicTimes
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AC, fridge won't cost more so India chill out!!

It hasn't come down, but at least it hasn't gone up. The flat screen TV you wanted to own, is still within your reach. So, is the double door refrigerator and the AC you wanted this summer. For, prices of consumer durables will remain unchanged as the Budget has virtually left this sector untouched, for better or worse. The reduction in peak customs duty to 10% will not have a major impact as major players such as Samsung, LG Electronics and Videocon are engaged in local manufacture. The industry had asked for an overall reduction in tax and duties at par with those in Asian countries since India has entered into FTA with Asian countries. "The only relief that has come is in the form of the reduction in the peak rate of customs duty from 12.5 to 10%. Overall, I see no benefit for the buyer," says R Zutshi, deputy MD, Samsung India. Nilesh Gupta, managing partner, Vijay Sales, said for the first time, there was no mention of refrigerators or TVs.

Courtesy:EconomicTimes
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Tata Tele launches Rs 1,699 phone in India

Telecom service provider, Tata Teleservices on Thursday launched a Rs 1,699 single-chip ultra thin cell phone to help expand its customer base rapidly. Tata Group Company hopes to sell three million such phones in the first year, Tata Teleservices CEO Darryl Green said. "There is a robust demand. I am very bullish on the projections," he said, adding the mobile phone was mainly targeted at first-time buyers. The company expects "large momentum" building in March and April for the entry-level phone. "We will double in size during the current financial year," Green said in a news conference, adding the company expects to have a customer base of 18 million by March-end. Officials of the company said the device has voice prompts in six languages -- English, Hindi, Tamil, Telugu, Kannada and Malayalam. The new cell phone will enable customers to avail double talk time for the first six months valid for one year from the date of activation, company officials said.

Courtesy:EconomicTimes
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Indian Telecom major Airtel reduces Blackberry rental to Rs 249 per month

Bharti Airtel on Thursday said it has slashed the monthly rental for its services on business phone Blackerry by up to 75 per cent to Rs 249 per month. The company previously had a fixed monthly rental of Rs 1099 per month. The new plan, which will be effective from today, is expected to reduce the average monthly bill of the users by 40-45 per cent as the BlackBerry utilizes a high level of data compression, a Bharti Airtel statement said here. The users would now be charged only 15 paise per KB of usage, it said. It said existing Airtel BlackBerry users have the option of continuing with the old plan with a rental of Rs 1,099 per month for unlimited usage. Airtel has also reduced the price of the BlackBerry 7100g handset to Rs 10,999, the statement added.

Courtesy: EconomicTimes
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Cement prices up in west, north India

Cement makers hike prices by Rs12 per 50-kg bag with immediate effect. Avg wholesale price of cement in Mumbai will be Rs233 per 50 kg bag while the retail price will be Rs245. A day after Finance Minister P. Chidambaram slapped a 50% increase on costlier cement bags, manufacturers in western and northern India hiked prices by Rs12 per 50-kilogram bag with immediate effect. Chidambaram raised the excise duty on cement priced above Rs 190 per 50 kg to Rs 600 per ton from Rs 400 in the union budget for the fiscal year 2007-08. At the same time he cut the duty on cheaper cement bags to Rs 350. Post the hike, average wholesale price of cement in Mumbai would be Rs 233 per 50 kg bag while the retail price would be Rs 245, said Sanjay Ladiwala, President of the Cement Stockists & Dealers Association Bombay. Separately, the Government called on cement companies to cut prices. Chidambaram too reiterated his request that the Indian industry should help the Government contain inflation by holding prices. Shares of companies such as ACC, Gujarat Ambuja Cements, Grasim, India Cements and UltraTech Cement recovered from their day's lows. Yesterday, these stocks had slumped badly following the announcement of the hike in excise duty in the budget.

Short Name Close %change High(Rs) Low(Rs)
ACC 876.55 -2.61 912 841.1
Gujarat Ambuja Cement 111.75 -3.62 118.95 105.5
Grasim 2200 -0.57 2240 2052
UltraTech Cement 870.15 -2.35 909 852
India Cements 173.9 -2.88 182.5 65.9

Courtesy: EconomicTimes

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Cars prices set to zoom in India

Your dream car has just got costlier, thanks to the 1% education cess on all taxes. Honda Siel Cars India Ltd (HSCIL) has already increased the Honda CRV prices by Rs 10,000-12,000 with effect from Wednesday night and Hyundai Motors India Ltd (HMIL) is expected to announce the hike on Thursday. Maruti Udyog Ltd (MUL) has given prospective buyers a grace period of 15 days; it will implement the new prices from March 15. "Going by the 16% excise duty on cars, the prices are expected to go up by Rs 1,000," said a source. Even HSCIL is expected to hike the prices of all its models by 1% to 1.5% within a fortnight, apparently because the CST exemption of its Greater Noida plant ends in two weeks. "With HSCI now set to pay CST to the UP government, the burden will have to be passed on to the consumers," a source said.

Courtesy: EconomicTimes
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Bark, but retail not wagged

Shoppers, it's still stop. This year's Union Budget was expected to revisit the controversial issue of allowing Foreign Direct Investment (FDI) in retail. The other was the issue of granting one of the economy's fastest growing sectors an industry status. Both these were given a miss by the Finance Minister. In fact, apart from the imposition of service tax on rentals, a move that is expected to hike costs for retailers, the sector was completely ignored. While the tax rate was not disclosed, the move is expected to hit the sector hard. Said Govind Shrikhande, CEO, Shopper's Stop, "For the Retail Industry there are no positive Signals. In fact Service Tax on Rentals, would further impact the Occupation Cost," he added. There was talk that the Budget would announce initiatives allowing higher FDI in sectors that do not directly affect smaller domestic retail companies like sports goods, electronics and building equipment. These sectors were to be allowed a higher FDI cap. Currently the government permits 51% FDI in single-brand retail through FIPB. For multi-brand, there is 100% FDI in cash-and-carry through the automatic route. The organized retail industry in India is currently on a fast track growth path and is expected to clock 25-30% growth per annum over the next 5-6 years. By 2010, the industry is expected to triple its current revenues to Rs 1,095 billion.

Courtesy: EconomicTimes
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Bharat finally gets a taste of branding

Companies selling packaged and branded consumer goods expect to benefit from the sops for agriculture and rural sectors announced in the Union Budget. Said Bharat Patel, chairman, Procter & Gamble Hygiene & Healthcare,” Increased spending in agricultural, rural and social sectors will definitely help raise the standard of living for the masses, which in turn should help boost the demand for daily consumption products." As affluence and exposure to urban centre grows, rural India is predicted to be one of the largest consumption markets. "The inclusive growth policy of the government could translate into improved quality of life at the bottom of the pyramid. This will increase disposable income, consumption and FMCG demand," said Marico Ltd CMD Harsh Mariwala. A reduction in customs duty on plastics would also help in overall cost efficiencies and savings. There would also be a marginal impact because of the removal of product sampling and in-store displays expenses from Fringe Benefit Tax. Dabur India CEO Sunil Duggal said that the reduction in central sales tax by 1% will serve to bring down costs. Industry analysts say that such cost savings could either lead to higher spends on advertising and promotion or price reductions for consumers. Since FMCG products have witnessed rising input costs which have in turn resulted in price hikes at the consumer end, savings on costs would stabilise inflationary pressures. What will help the sector is the likely rise in disposable incomes as a result of Income Tax exemption limits going up. This could lead to higher per capita consumptions too. The Rs 80,000 crore FMCG industry thrives on supply chain efficiencies necessary to make these products relevant to even a person earning Rs 3,000 per month.

Courtesy: EconomicTimes
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Perfetti’s Indian offerings on global trip

CONFECTIONERY player Perfetti Van Melle has joined the ranks of global food majors borrowing products from their Indian subsidiaries. After Frito-Lay and McDonald’s, now it’s Perfetti whose local formulations are staging entry in global markets. Three of the company’s home-grown products — Alpenliebe Creamfills, Cofitos and Sour Marbels — are making inroads in European and South East Asian markets. While Perfetti’s China subsidiary began production of Alpenliebe Creamfills last month, parent company Perfetti Van Melle S.p.A has handpicked the coffee-flavoured candy brand Cofitos for the Italian and Poland markets. Another brand, Sour Marbels, has already been taken to Indonesia. “At most, other markets are tweaking grammage and flavours. But the basic formulation remains locally-developed,” said Perfetti India’s marketing head Sameer Suneja. The Rs 600-crore company has stepped up efforts to further localise and develop regional flavors of most global brands in its basket including flagship Alpenliebe, Center Fresh, BigBabol, Happydent White, Chlormint and Mentos. According to an AC Nielsen report released two weeks back on the global food industry, Asia Pacific and Latin American countries are the fastest growing markets in the confectionery sector. The confectionery, sweet biscuits and snacks sector recorded 6% growth in the Asia Pacific region, compared to a meager 2% growth in Europe. The report, which provides detailed insights on growth in the food and beverages sector, states that Asia Pacific, with its combination of mature markets like Australia and Japan, and developing markets such as China and India, provided a mix of high and low growth through last year. Among all markets that the Italy-based Perfetti operates in, India occupies the third slot in terms of consumption – after Italy and China. The sector is estimated at Rs 1,800-2,000 crore, according to Indian industry estimates. Perfetti’s third manufacturing facility in Uttaranchal is slated to begin production in April.

Courtesy: EconomicTimes

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Moser Baer products to be sold via Pyramid Saimira in India

Moser Baer, India's largest optical storage manufacturer has tied up with Pyramid Saimira theatre chain for retailing the former's home video products in the latter's complexes. The tie-up also offers the exclusive marketing rights, in a short period from the date of re-lease, to Moser Baer for all new films brought out by Pyramid Saimira. Moser Baer Home Entertainment recently entered the southern film market and has launched its home video products in Tamil and Kannada languages. In the first phase, it launched 110 Tamil film titles on DVD and Video CD formats.

Courtesy: EconomicTimes
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Pepsi India launches new cola for World Cup

Soft drink giant PepsiCo India on Tuesday launched Pepsi Gold, a premium cola, to commemorate ICC World Cup cricket tournament beginning March 13 this year. "It is a limited edition premium cola launched exclusively for the World Cup. It is a tribute to the gold colored World Cup trophy," company executive director (marketing) Punita Lal said here on Tuesday. The product will hit the shelves in Mumbai in the next couple of days and by March 7 it will be available all across the country. A new TV commercial will be on air from March 7. Also, there will be multi-packs consisting of four Pepsi Gold bottles, available at all large format grocery stores. The company plans to focus outside the carbonated drinks, which includes juices and flavored drinks in the next two years. "The company will focus towards having a balanced portfolio. We will try to present products those ad-dress different needs," Lal said.

Courtesy: EconomicTimes
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Carrefour in talks with 6 groups for India Retail foray

French retailer Carrefour said on Tuesday it was in talks with as many as six potential partners to open retail stores in India and could sign a deal soon. “We are close to signing an agreement. We are in talks with five or six Indian groups,” said Dominique Coulombel, India-based sourcing manager for Carrefour. “It is a matter of months.” The comment was the first direct confirmation by Carrefour, after months of press speculation that it was talking to potential partners in India. Most of the reports centered on a possible deal with the Wadia family. To counter weakening domestic sales, retailers such as Wal-Mart, France’s Carrefour, Germany’s Metro and Britain’s Tesco have pushed to enter India. Metro already has several wholesale stores in the country.

Courtesy:EconomicTimes
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Hershey to buy Godrej Beverages

AMERICA’S largest chocolate and confectionery-maker Hershey is acquiring majority stake in the food and beverage business of the Godrej group. Hershey is acquiring 51% equity stake in Godrej Beverages & Foods for Rs 238 crore or about $54 million. This would mark the exit of financial investor IL&FS from the venture while the holdings of Godrej group and that of an individual investor A Mahendran would come down. The deal would value Godrej Beverages & Food at Rs 466 crore. EThad first reported on Hershey close to picking a substantial equity stake in Godrej Beverages & Food in its edition dated January 26. According to a source close to the transaction, $5-billion Hershey would be picking the majority stake through multiple transactions. This would include acquiring the 40% equity held by IL&FS, acquisition of the convertible preference shares held by IL&FS, Godrej Industries and Mr Mahendran as also subscription to fresh issue of capital in the company. At the same time Hershey would license Godrej Beverages & Food some of its trademark rights for a lump sum payment of about $2 million in addition to royalty payments of 5% for domestic sales and 8% for exports. Post acquisition, Hershey would hold 51% equity while Godrej Industries would hold 43% stake with the remaining 6% to be held by A Mahendran, a senior executive with the Godrej group. The deal would value the equity stake of Godrej Industries, a listed arm of the Godrej group, at Rs 200 crore. Godrej Beverages & Food represents the foods and beverages business of the Mumbai-based Godrej group. It was formed last year when Godrej Industries transferred its foods division to another group company Godrej Tea. The combined entity was renamed as Godrej Beverages & Food Ltd. With a turnover of around Rs 400 crore, the company is engaged in categories such as tea, edible oils, health drinks including soymilk, tomato puree, fruit drinks and bakery fats. Its brand portfolio includes Jumpin range of fruit drinks, Xs fruit juices, Sofit Soymilk, Sofit Ready to Eat Cereals, Godrej Tea, Godrej Vanaspati, Cooklite Sunflower Oil and Godrej Tomato Puree. However, the main attraction for Hershey would be the confectionery business where at one shot it would become the largest player in the domestic confectionery market. Godrej Beverages & Food had acquired Nutrine, the largest domestic confectionery brand, along with its assets in June last year in a deal worth Rs 250 crore from the South based Reddy family. This deal brought under its fold strong confectionery sub-brands such as Maha-Lacto, Koko Naka, Milk Eclairs, Honey Fab, Aam Ras and Gulkand. Nutrine is a 100% subsidiary of Godrej Beverages & Food. While this deal would mean Godrej group losing control of their foods business, for Hershey — which has in the past also considered a possible alliance with Amul — it would mark a significant entry into the Indian market. Hershey retails brands such as Hershey’s, Reese’s, Hershey’s Kisses and Ice Breakers. Apart from confectionery products, it is engaged in product categories like baking ingredients, chocolate drink mixes, peanut butter, dessert toppings and beverages. Hershey had only recently formed a manufacturing joint venture with Korean confectionery major Lotte to produce Hershey and Lotte products in China for the Chinese market. With the Godrej deal it would create a significant business in the two largest emerging markets.The USbased Hershey had recently also announced a major restructuring programme for its production facilities and supply chain over the next three years. This included cutting the number of production facilities by one-third to boost capacity utilisation, outsource production of low value-added items and construct a flexible, cost-effective production facility in Mexico to meet current and emerging marketplace needs.

Courtesy: EconomicTimes
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HK fund ADM to invest $107m in S Kumars, Indian retail subsidiary

TEXTILE and apparel company S Kumars Nationwide (SKNL), along with its retail arm Brandhouse Retail, has tied up private equity investment of $107 million from the Hong Kong-based investment company ADM. ADM will invest $82 million to acquire a 10% stake in SKNL and the remaining $25 million will be invested in Brandhouse Retail for a similar stake in that company. “We will issue warrants to ADM Capital which can then be converted into equity. For the purpose of issuing the warrants SKNL has been valued at Rs 82.5 per share while Brandhouse Retail have been valued at Rs 85 per share,” said Nitin Kasliwal, MD and vice chairman of SKNL. SKNL will utilise $30 million to pay off lenders while $52 million will be used to fund its capital expenditure plans. SKNL operates under various brands like S Kumars, Reid & Taylor, Belmonte and Carmichael House. Brandhouse Retail which plans to invest Rs 400 crore to open 1,000 stores across the country over the next 3 years will utilise the entire $25 million to fuel its growth plans. Brandhouse Retail owns and operates SKNL’s apparel and textile showrooms and manages international brands like Dunhill and Escada. SKNL is in the process of giving its retail business a boost by demerging it from the parent and listing it separately on the bourses. The textile and apparel company’s board approved the proposal to demerge Brandhouse Retail in January 2007. The swap ratio has been fixed at 5:1, 5 shares of SKNL will be traded for one share of Brandhouse Retail. The demerger process has been kicked off and Brandhouse Retail is expected to be listed on the exchanges as a separate entity in 3-4 months. As part of its business plan Brandhouse Retail is looking at setting up large format textile and apparel stores in future which will house all its brands. Besides this, the company may also look at tying up with other domestic companies to manage their retail activities.

DRESS CODE

ADM will invest $82 million to acquire a 10% stake in SKNL and the remaining $25 million will be invested in Brandhouse Retail.

SKNL will utilise $30 million to pay off lenders, while $52 million will be used to fund its capital expenditure plans.

Brandhouse Retail will utilise the entire $25 million to fuel its growth plans .

Courtesy: EconomicTimes

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India Inc's wish-list Vs FM's reality

Here's a wrap up of the wish list versus what actually took place in the Budget 2007.While, India Inc wanted customs duty rate to be reduced from the peak rate of 12.5% to 10%, the peak rate of customs duty reduced to 10% with few exceptions. Thus the impact is positive.
Automobile: Expectation: This sector wanted excise duty rate across passenger vehicles – passenger cars (excluding small cars) and UVs (6-12 seater) to be reduced to 16% from the existing 24.5% duty.
Reality: No change took place. Thus the impact is neutral.
Cement: Expectation: This sector wanted specific excise duty on cement to be reduced from Rs 408/tonne to Rs 300-350/tonne.Reality: Excise duty has been reduced from Rs. 400 per tone to Rs. 350 per tone for cement of declared retail sale price not exceeding Rs 190 per 50 kg. bag or per tone retail sale price equivalent not exceeding Rs 3800. Thus positive for regions where prices are below Rs 190 per 50 kg bag. However, excise duty has been increased from Rs 400 per tone to Rs. 600 per tone for cement of declared retail sale price exceeding Rs. 190 per 50 kg bag or per tone retail sale price equivalent exceeding Rs. 3800.Thus negative for regions where prices are above Rs 190 per 50 kg bag.
FMCG: Expectation: Sector wanted excise duty on ready to eat packaged food and instant mixes to become zero from 8%.Reality: Excise duty has been fully exempted on food mixes (including instant food mixes)Thus the impact is positive.
IT: Expectation: The sector wanted excise duty on packaged software to be withdrawn / reduced.
Reality: There has been no change.Thus the impact is neutral.
Media & Entertainment/Radio Industry: Expectation: Wanted a duty waiver and service tax holiday for five years.
Reality: There has been no change.Thus the impact is neutral.
Film Industry: Expectation: The sector wanted zero customs duty on the import of digital exhibition equipment and service tax exemptions for the digital cinema companies.
Reality: Digital Cinema Development Projects have been notified under Project Imports Scheme, under Heading 98.01. Thus the impact is positive.
Animation Industry: Expectation: Removal of service tax, scrapping sales tax on software and a ten year exemption from import duty on hardware.
Reality: No change. Thus the impact is neutral.
Metal Industry: Expectation: Excise duty should be reduced to 8% in the case of steel industry from the prevailing rate of 16%.
Reality: No change.Thus the impact is neutral.
Oil & Gas: Expectation: Custom duty on LNG import should be reduced from 5% to nil. And custom duty on crude oil should be reduced from 5% to Nil
Reality: No change. Thus the impact is neutral.
Expectation: Ad Valorem rates in the case of petrol and diesel should be reduced from 8% to 6%.
Reality: Ad Valorem rates in the case of petrol and diesel has been reduced from 8% to 6%. Thus the impact is positive.
Textiles: Expectation: Cut in excise duty on man-made fibres and yarns from 8% to 4%.
Reality: No change. Thus impact is neutral.

Courtesy: EconomicTimes
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Excise logs on to retail prices in India

On the excise front, the government has introduced another new window by ushering in retail sale price (RSP)-based assessment for computers and a number of other hardware items. This system is similar to the MRP-based assessment introduced earlier for pharmaceuticals, a host of consumer goods and food products. Instead of the factory gate price, the industry was asked to pay excise on the basis of MRP, thereby exerting pressure on trade margins. The MRP-based assessment also led companies to think twice before printing the price tag — a move which is expected to be consumer-friendly. The new RSP-based system covers printers, monitors, computer key boards, scanners, mouse, plotter, fax machines, modems and set-top boxes. The distribution channel for these items is different, and that was the reason for introducing an RSP-based framework, say tax experts. Central excise rate of 16% and service tax rate of 12% are unlikely to be merged into a unified rate of 14% in the near future. The government seems to be holding back the alignment for the impending introduction of a goods and services tax (GST) in 2010. Instead of amending both rates now, it’s a simpler option to let the convergence happen when GST is ushered in. Hopes of GST replacing excise, service tax and state-level VAT by 2010 have been revived with the central government and the states agreeing to work on a roadmap for the composite levy. Only two years remain before the scheduled deadline for introduction of GST, and the government is likely to wait till then, focusing on CST phase out in the interim. Besides taxing only the value-added, the GST may be friendlier to India Inc than the current structure of multiple taxes. While a cut in CENVAT to 14% is acceptable to India Inc for obvious reasons, there is resistance to a hike in the service tax rate to 14%. Fears of higher service tax incidence fuelling inflation could be another factor behind the excise-service tax alignment getting postponed. There was a lot of speculation before the 2007 Budget that the excise and service tax rates may be aligned.

Courtesy: EconomicTimes
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Wal-Mart buys 35% in China retailer

Wal-Mart Stores, the world’s biggest retailer, agreed to buy 35% of Trust-Mart, a hypermarket operator in China, to expand in the world’s fastest-growing major economy and challenge Carrefour. The investment may lead to Wal-Mart taking ownership control of the operator of 101 hypermarkets in China, the Bentonville, Arkansas-based Company said in a statement on Tuesday. Wal-Mart didn’t release financial details. Buying Trust-Mart would more than double Wal-Mart’s stores in China and allow it to win customers from Carrefour, operator of more than 1,000 supermarkets in the world’s most populous country. On October 17, a person familiar with the negotiations said Wal-Mart planned to acquire the entire Chinese retailer in a deal that valued it at about $1 billion. “Wal-Mart’s expansion in China is too slow, compared with that of Carrefour,” said Hu Hongke, a Shanghai-based analyst at China Merchants Securities. “Expanding through acquisitions would be a growth short-cut in China, where good retail locations are limited. Trust-Mart, a closely held chain of grocery and appliance stores with more than 31,000 employees, will continue to operate under its own brand, according to the statement. Wal-Mart is buying the stake in Trust-Mart through purchasing shares in owner Bounteous, registered in the British Virgin Islands. Founded in 1997, Trust-Mart has expanded to more than 20 provinces in China, the company said on its Web site. It sells about 20,000 items, including groceries, home appliances and clothing, in stores with total space in excess of 400,000 square meters. Wal-Mart, which entered China in 1996, operates 73 stores in 36 cities in China. “Through this investment in Trust-Mart we have the opportunity to expand our presence in China,” Wal-Mart vice chairman Michael Duke said in a statement. “This is an important step in bringing additional scale to our China retail business.” He Delai, assistant president of Trust Mart, declined to give financial or other details when contacted by telephone today. Credit Suisse Group said in a statement it advised Wal-Mart on the purchase. Wal-Mart’s overseas ambitions were thwarted last year by its withdrawal from Germany and South Korea, and after Japan’s Aeon won exclusive rights to acquire the supermarket company Daiei last October. China’s retail sales grew 13.7% last year to $770 billion last year, equivalent to one quarter of the US market.

Courtesy: EconomicTimes
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ICRIER to study impact of big retail on mom-’n’-pop stores

Following directions from the Prime Minister’s Office (PMO), the commerce & industry ministry has mandated Icrier to prepare a study on the domestic retail sector, specifically to see if the emergence of large, organised retailers would displace mom-’n’-pop stores. The development is significant since Congress president Sonia Gandhi has called for an assessment of the future of small vendors if multinational retail giants such as Wal-Mart are allowed to set shop here.The study will look at the impact that domestic retail chains have already had as well as the likely effect of allowing foreign-owned retail chains in the country, the commerce & industry minister Kamal Nath said on Tuesday.It is expected to be a multi-dimensional study with focus on impact on farmers, employment, dislocation, prices and the small-scale segment. “Icrier has been asked to take into account various aspects of the retail industry and its affect on several elements of the economy. It is essentially a study on big-versus-small rather than foreign-versus-domestic retail,” Mr Nath said.Last week, the PMO had written to the department of industrial policy & promotion (DIPP), seeking a study on the points raised by Ms Gandhi over the livelihood concerns of small vendors hawking fruit and vegetables. The letter had essentially asked the DIPP to consider the impact of both multinational retail giants and domestic retailers on small-scale entrepreneurs and mom-’n’-pop stores in the country.The study is supposed to take into account the impact of retail chains such as Pantaloons, Shopper’s Stop and Reliance, apart from multinationals such as Wal-Mart. A number of players including Tesco and Watson are keen to tap the Indian market.The minister also declared record FDI inflows of $2.04 billion in December 2006, which is 480% higher than the inflow of $0.35 billion in the same month of the previous year. Large chunk of the investments came in textiles, business services, chemical products and ceramics. Huntsman Investments of the Netherlands made the largest investment in textile sector. The company had earlier received a nod from FIPB to invest Rs 122.50 crore for acquisition of its existing Indian company. The other big investment came from Cairn, which invested in business services.We expect total FDI inflows of $12 billion this year against $5.5 billion in 2005-06, the minister added. Total foreign equity investments were recorded at $9.3 billion during April-December 2006-07 against $3.5 billion in 2005-06.The index of industrial production showed a growth of 11.1% in December 2006 against the same month the year before. Manufacturing recorded a growth of 11.9% in December 2006. “We are expecting 11% industrial growth this fiscal and a 12% in growth in manufacturing,” Mr Kamal Nath said. The industries that have shown an upward performance in December 2006 include wood and wood products, basic metal and alloy industries, metal products and parts, cotton textiles and leather.
courtesy:economictimes
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Politics may slow down FDI in retail in India

The commerce & industry ministry may have complied with Congress president Sonia Gandhi’s directive to study the impact of entry of foreign players in the retailing arena but the political furore may end up slowing down its plans to permit 51% FDI in retailing of specialized products like electronics, electricals and sports goods. Commerce & industry minister Kamal Nath, whose ministry is the nodal agency for FDI policy, said on Tuesday that Indian Council of Research in International Economic Relations (Icrier) has been asked to do a “holistic study” to determine the impact of entry of big players on not just the neighborhood stores but also on consumers, farmers, pricing and dislocation. “We then need to do trade-offs to come to the final conclusion. The study should be done in three to four months,” Nath said. “The question is always big versus small. It’s not FDI versus domestic. FDI is only the colour of the money,” he said. Earlier this month, the Prime Minister’s Office had written to Ajay Dua, secretary in the department of industrial policy and promotion, seeking a comprehensive impact assessment of not just transnational players like Wal-Mart but also of large Indian corporate houses. This was the second letter from the PMO in a span of a month and was prompted by Sonia’s concerns over Wal-Mart’s tie-up with Bharti for cash-and-carry wholesale trading, logistics and back-end operations. Sources said Nath had committed himself to a study conducted even before the latest missive from the PMO when he told the consultative committee earlier this month of his department’s intent to get an impact assessment carried out. Asked about his ministry’s proposal to allow 51% FDI in specialized retailing, Nath said, “I don’t think that the purchase of a hockey stick from one such store affects a kirana store. But then there is no rush to allow them. They can wait for some time.” The statement indicated the government’s willingness to wait for a few months before opening the next retail window for foreign investors due to lobbying to block the entry of large players — both domestic and foreign. Armed with an independent study, UPA may be hoping to argue the case for FDI more strongly. The move to allow FDI in retail, a contentious issue even during NDA’s regime, got a fillip around the time UPA came to power thanks to an earlier report by Icrier which suggested that the entry of large players could be beneficial for the consumer as well as vendors and suppliers.

Courtesy:EconomicTimes
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Get ready for 'anywhere' ticketing in India

Jousting for space in serpentine queues might well be a thing of the past with rail travel set to become a more relaxed affair. That elusive reserved train ticket can now be purchased from the local post office, petrol pumps and even ATMs. The new budget also envisions setting up passenger reservation system (PRS) facilities at all non-suburban stations under group D and E. As far as unreserved tickets go, about 6,000 automatic ticket vending machines will be installed in all major cities. PRS-cum-UTS (unreserved ticketing system) counters will be provided at post offices as well as defence organisations.In another welcome measure, central railways will also start a pilot project for issuing tickets through multi-purpose smart cards from Mumbai, followed by Chennai and Kolkata. The smart cards can be both bought and recharged at various designated points and they will be readable on touch by hand-held terminals provided to TTEs.To prevent reserved berths from remaining unoccupied due to passengers not turning up, the hand-held terminals provided to TTEs will note current vacancies and transmit them to the PRS for allotting the berths to waitlisted passengers at ensuing stations. These terminals will be made available on a pilot basis on select Shatabdis.Train enquiry call centres will start operating in the four major railway hubs between June and September this year, providing information on departures, arrivals and seat availability. They will also provide value-added services like SMS, railway ticketing and taxi booking in the near future.Physically challenged people too might finally get an easier ride. More than 1,200 special coaches with wider doors and greater aisle passage for handicapped passengers will also be introduced in mail and express trains over the next two years.There’s more: To make travel more easy for vendors, custom-designed vendor coaches will be built for milk, vegetable and fruit sellers. In addition to all that, a certain number of lower berths will be reserved for senior citizens and women aged above 45.
courtesy:economictimes
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Kishore Biyani, MD, Pantaloon Retail (India),conferred 'international retailer of the year' award

Apex US retail body, National Retail Federation (NRF), has conferred 'international retailer of the year award' on Kishore Biyani, managing director, Pantaloon Retail India Ltd.
The award was presented to Biyani at NRF's 96th annual convention and expo on 16 January in New York.NRF is the world's largest retail trade association with a membership that comprises all retail formats and channels of distribution and its award is traditionally given to companies that achieve an international reputation for creative genius, inspirational leadership and distinguished service to the retail industry.
Previous recipients of this award are Metro AG (Germany), Carrefour (France), Ito Tokada Group (Japan), Zara (Spain) and Boticario (Brazil).Accepting the award Biyani said, "It would have been more appropriate if we had got the award after global retailers have stepped into India. We are in a no-competition scenario currently but we excel in what we do to delight our Indian consumers."
Biyani also said, "We can take a person out of India but not India out of a person. We have a deep understanding of Indian consumers and we offer everything they need every time, everywhere through every format of retailing". According to Farooq Kathwari, chairman, NRF, "Pantaloon Retail India Ltd is the unanimous choice of the jury for the International Retailer of the Year Award this year. We applaud the impressive growth of the organisation whose turnover is poised to become $6 billion by 2010".The other awardees were Reed Hastings, founder chairman and CEO of Netflix, who received NRF's innovator of the year award and Millard Drexler, chairman and CEO, J Crew Group, Inc, who received NRF's gold medal for retailing excellence.

Courtesy:domain-b.com

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India Retail PC market crosses 5mn shipments mark in 2006

In a year that witnessed all-round economic growth, the India Client Personal Computer (PC) market witnessed a 25% year-on-year growth in unit shipments (CY2006 over CY2005), according to IDC's India Quarterly PC Tracker, 4Q 2006, February 2007 preliminary release. Commenting on these findings, Kapil Dev Singh, Country Manager, IDC India said, "The 5 million PC shipments and 25% growth of the Indian PC market indicate the maturity it has attained. The market is characterized by the emergence of clear-cut segments, vendors running segment specific marketing programmes and the market ceasing to be just price driven. The future of the PC market depends on how quickly and strongly new need drivers evolve." In the overall Client PC (Notebooks and Desktops combined) market the rankings remained unchanged. HP retained the top spot with a market share * of 21%, followed by HCL at 14%, and Lenovo at 9% in terms of unit shipments. In the total desktop PC market, HP led the market in CY 2006 followed by HCL and Lenovo. In terms of total commercial desktop PC shipments, HCL and HP jointly shared the number one position in CY 2006 followed by Lenovo. In terms of total consumer desktop PC shipments HP led the market in CY 2006 followed by HCL and LG Electronics. In the total Notebook PC market alone, HP retained the top spot with a market share of 38% in CY 2006 in unit shipments. Lenovo and Toshiba were at second and third spots with market shares* of 17% and 10%, respectively.
The key market highlights were:
–Positive growth in Desktop PC average selling values (ASVs)
– Notebook PC shipments doubling within a year
– Client PC shipments expected to witness increased traction in 2007, as IT retailing undergoes widespread experimentation.

Desktop PC average selling values (ASVs) grow :
According to Piyush Pushkal, Manager, PC Research, IDC India , "The year 2006 witnessed a 3% growth in average selling values ( ASVs) of desktops*, thanks to increased adoption of LCD/TFT monitors and other accessories, by users seeking to future-proof their investments as well as experience enhanced functionality." In fact, as per IDC's India Quarterly Monitor Tracker, 4Q 2006, February 2007 preliminary release, LCD/TFT monitor shipments grew more than 200% on a yearly basis (2006 over 2005) for branded desktop PC players.

Notebook PC shipments double :
The notebook PC market continued the growth momentum during CY 2006. Coupled with aggressive marketing by vendors, the notebook PC segment as a whole witnessed a massive growth of 104% year-on-year*, touching a landmark of nearly 1 million unit shipments . "With the falling prices of notebook PCs and increasing culture of mobility, the market witnessed a significant shift of consumer and commercial desktop customers opting for notebook PCs instead", stated Piyush Pushkal, Manager, PC Research, IDC India.
The Notebook PC market growth was contributed in large measure by the buoyant Education segment buying, individual consumer/SOHO purchases and increased traction from the SMB segment. With higher education institutes such as Engineering Colleges and Management Schools aggressively adopting the concept of Wi-Fi campuses and usage of notebook PCs in their learning tools and methodologies, a healthy surge in shipments was seen.

Client PC shipments to gain traction in 2007, as IT retailing undergoes widespread experimentation :
2007 is also expected to be the year when overall PC shipments through retail outlets, especially the Notebook PC form factor would see a higher traction. "The year will see IT vendors trying out many new approaches and go-to-market strategies for product retailing. The efforts will focus on wooing SOHO and individual/home customers for converting them into impromptu buyers. Experimentations will also be seen in retail formats, in-store and on-site promotions, product bundling, and alternate payment options. IT retail outlets of HP, HCL Info systems ¢ Digi-Life stores and multi-brand IT product retail stores like Sahara's 'IT Junction' initiative, Pantaloon Retail's 'e-zone', Big Bazaar etc. are already functional. Other big Indian retail players are expected to quickly follow suit, trying to reposition their offerings to customers by segmentation and a competitive approach", commented Piyush Pushkal, Manager, PC Research, IDC India.
Courtesy:Moneycontrol.com
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In India, New Retail Chains Are Shaking Up The Traditional Markets

At a time when the average Indian consumer is crying hoarse against price rise and inflation, a cry that has woken up even the Kumbhkarnas in the government, it would be a positive thought to recall that the attempt to set up retail chain stores could help in controlling prices. With retail sale being encouraged by setting up of shops and counter under the umbrella of Reliance Fresh, now numbering 70 in different parts of the country out of which 20 are in the National Capital Region, the organizers and promoters of retail selling a optimistic, even positive, that the retail sales depots can help contain prices that at present are soaring. Very soon the nation wake up to a new set of economic possibilities with the presentation of fresh budget proposals by the Finance Minister P Chidambaram. It is being stated after making a calculated assessment that Budget 2007-08 may give a boost to linkages between rural Bharat and shining India. Organized retail, farmers and urban consumers stand to gain while a chain of intermediaries in the present system of distribution of rural produce to urban markets could lose out. Key policy has been initiated by the Centre outside the Budget. Recognizing warehouse receipts as negotiable instruments and setting up terminal markets as the cornerstones of the strategy, to transform farming at the margins of subsistence into an agri-business that is integrated into the rest of the economy. The Budget may complete the process. The aim is to permit the private sector to operate a variety of market activities: washing grading, cold storage, temperature controlled warehouses, ripening chambers, pack houses, quality testing facilities, real-time e-auctioning information, banking facilities, settlement of payment, sorting, multi-modal transport, advisory on inputs and collection of produce through collection centers at the base of terminal markets based on the hub and spoke format. To give an example of a successful example and experience in the private sector : it seems ITC’s International Business Division (ITC-IBD) , part of the $ 3.5 billion ITC Ltd, is no more dependent on local mandis for procurement of commodities. In an effort to bring down procurement costs and ensure quality standards, ITC-IBD is almost totally depending on its Web-enabled channel e-Choupal. News reports from different parts of the country in recent weeks have confirmed that new retail chains like Reliance and corporate agri-buyers like ITC are shaking up the traditional fruit and vegetable markets. By buying in bulk directly on the farmers’ doorstep, and booking future harvests as well, they are taking business from the traditional mandis. This has caused a sharp drop in supplies to the traditional wholesale markets and driving prices there.
Courtesy :EconomicTimes
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