PepsiCo to invest Rs. 33,000 crore in India: Indra Nooyi

PepsiCo Inc, the maker of Pepsi-Cola, Frito-Lay snacks and Tropicana juice, plans to invest Rs. 33,000 crore ($5.5 billion) in India by 2020 to expand its presence in the country, it said on Monday.

PepsiCo's plans come after rival Coca-Cola Co, the world's largest drinks maker, said in June last year it would invest a total of $5 billion between 2012 and 2020 to grow its business in Asia's third-largest economy.

PepsiCo and Coca-Cola's investments, driven by a growing middle class with higher disposable incomes, are likely to be welcomed by Indian officials who are trying to restore foreign investor confidence after growth has fallen to a decade-low.

"India is a country with huge potential and it remains an attractive, high-priority market for PepsiCo," chief executive officer Indra Nooyi said in a statement.

"We've built a highly successful business in India over the course of many years and we believe we've only scratched the surface of the long-term growth opportunities that exist for PepsiCo and our partners," said Indian-born Ms Nooyi on a visit to the country.

PepsiCo and its partners plan to invest in expanding their product range, doubling production capacity and improving their sales and distribution network, especially in rural markets, the company said.

The company has 38 bottling plants and three food plants in India, according to its website, and generates more than 10 billion rupees in annual sales from eight products including Pepsi and Frito-Lay potato chips, it said.

PepsiCo saw volumes in its snack business in Asia, the Middle East and Europe rise 4 percent in the July-September quarter, led by double-digit growth in China, Pakistan and Turkey. On the drinks side, volume rose 7 percent.

India is trying to attract more foreign investments by opening up various sectors including retail and telecoms in a bid to narrow its current account deficit.

Separately Britain's biggest clothing retailer Marks & Spencer on Monday opened its largest store in India in Mumbai, while Unilever said in April said it would raise its stake in Hindustan Unilever to as much as 75 percent from 52 percent.

However, India has also had some high-profile departures as the government has been seeing as struggling to pass reforms. India's economy also slowed to a decade low of 5 percent in the fiscal year through March, while inflation has been accelerating.

In October BHP Billiton Ltd surrendered almost all its oil and gas blocks in the country, citing an inability to carry out exploration operations.

Copyright: Thomson Reuters 2013

FLIPKART : Leading The Way

Continuing its capital-raising successes, online retailer Flipkart.com has mopped up a further $160 million (. 976 crore) from mostly new investors, taking the total in the fifth round to $360 million (. 2,196 crore). 
The latest funding values Flipkart, considered the Amazon of India, at over $1.6 billion, or . 9,760 crore. This is similar to its valuation in July, when it raised $200 million. Incidentally, Flipkart is worth more than the total market cap of all 15 listed retail companies, including Future Retail, Shoppers Stop etc. Among brand-led firms, Flipkart’s valuation is comparable with heavyweights such as P&G India and Tata Global Beverages. Flipkart Deal Shows E-Commerce Potential 
Tata Global Beverages owns Tata Tea, Tetley and Himalayan). It is also more valuable than 28 banks, including the likes of IDBI Bank, Union Bank, Central Bank of India, etc. 
Investment advisory firm Dragoneer Investment, investment bank Morgan Stanley Investment Management, private equity firm Sofina and Vulcan Capital participated in the latest round. 
Tiger Global — one of the first backers of the Bangalore-based company — also invested. 
“It’s the quality of the asset that is attracting investors,” said Raja Lahiri, partner at advisory firm Grant Thornton India. “E-commerce is a cash-intensive business. The top four-five players in this space will keep attracting investments in the next few years.” 
Experts point out that the latest fund-raising by Flipkart is an indicator of the growth potential of the . 10,000-crore online retailing industry, which is expanding at 54% annually, according to Internet and Mobile Association of India. Ecommerce is expected to grow to $200 billion (. 1.2 lakh crore) in India by 2020.
Besides Flipkart, online marketplace Snapdeal has so far raised about $50 million (. 305 crore) while fashion e-tailer Myntra received about $25 million (. 152 crore) in risk capital. “These new investors are willing to participate again if required like Naspers, Accel, and Tiger. Investor alignment with our strategy is very important,” said Sachin Bansal, 32, co-founder of Flipkart. 
Started as primarily an online book store in 2007 by two former Amazon India employees — Sachin Bansal and Binny Bansal — Flipkart has till date raised $541 million (Rs 3,300 crore). In the first phase of this round, Flipkart raised $200 million from South African Internet company Naspers, venture fund Accel Partners, and investment firms Tiger Global and Iconiq Capital. 
The company has ventured into payment gateway solutions this year by launching PayZippy. Flipkart, which employs close to 3,000 people, has close to 10 lakh visitors on its website every day. 
The company’s revenues were . 217 crore in 2011-12, according to a filing with the ministry of corporate affairs. But in 2012-13, it soared to an estimated . 2,000 crore. 
“Flipkart has got its timing, investments and vertical business strategy right,” said Rajesh Sawhney, angel investor and founder of GSF Superangels. “It will be difficult to replicate Flipkart’s success again, as that phase of scale is already over. New entrepreneurs will have to mine newer verticals.” The company changed its model from being inventory led to that of an online marketplace earlier this year. 
As per India’s current FDI rules, foreign investors are not permitted to invest in branded online retail business. Some experts feel that the change in model is also attracting foreign capital. 
The participation by San Francisco-based Dragoneer Investment Group ratifies Flipkart’s success globally. A long-term investor, Dragoneer, has backed companies such as Facebook, Alibaba and 360Buy in the past. “All our investors think long term; this is patient capital,” said Bansal. “Dragoneer also brings a network that is really helpful.” 

Source: The Economics Times

Rupee ends 0.74% lower at 62.23 after Rajan surprise

The rupee fell and bond yields surged after the Reserve Bank of India (RBI) surprised markets with an increase in the repo rate on Friday, putting its focus squarely back on managing inflation and the fiscal deficit.

The rupee extended losses after the decision, falling as much as 62.61 to a dollar, before suspected central bank intervention helped ease some of the losses. It closed at 62.23/24 to a dollar versus 61.77/78 on Thursday.

The RBI provided some reprieve to the bond market by unwinding some of the cash tightening steps undertaken since mid-July.

Still, the surprise 25 basis points increase in the policy rate to 7.50 per cent and the cautious stance on inflation, led to fears that the central bank was not done with raising the repo rate. The bond and interest rate swap curves steepened.

"We actually think the entire policy statement is slightly hawkish given the modestly greater focus on inflation over growth and the central bank's admittance that the WPI inflation is likely to be higher than originally anticipated," said Nizam Idris, a strategist with Macquarie Capital.

Bond yields rose, with the 10-year bond yield closing at the day's high of 8.58 per cent, up 39 bps on the day. The negative spread between the 1-year and 5-year OIS shrunk to 46 bps from 70 bps on Thursday.

The RBI lowered the marginal standing facility rate for banks by 75 basis points to 9.5 per cent and the minimum daily average cash balance that banks need to maintain to 95 per cent from 99 per cent previously.

The cash-tightening steps were initiated by the central bank in mid-July when the rupee began sliding to a series of record lows, to fall to as much as 68.85 to a dollar in late August.

RBI Governor Raghuram Rajan said the RBI would further ease tight cash conditions if the rupee stabilised.

The overnight rate, at which banks lend to each other, fell to 9.25 per cent from 10.25-10.40 percent levels after the RBI decision.

"It is an honourable exit for the RBI and is the best way Rajan could take a step back towards normalising things. The hike in repo rate gives the message that inflation is still high but he is trying to bring down the MSF corridor," said Manish Wadhawan, head of interest rate trading at HSBC in Mumbai.

"The bond yield curve and the OIS curve is steepening and it will steepen more until the central bank's next policy review in end-November."

Still, it gained 2 per cent during the week reflecting the recent inflows from the RBI's forex swap facilities as well as the Federal Reserve decision to continue with monetary stimulus.

It had fallen as much as 20 percent to record lows in late August, but has recovered around 9 per cent since Dr Rajan took office on Sept 4.

Sensex extended falls to nearly 3 per cent, with banking stocks leading declines before they retraced some losses to close down 1.85 per cent. The main banking index ended down more than 4 per cent.

Copyright: Thomson Reuters 2013

ADOPT AND ADAPT Starbucks Goes Plush for India, Gives its Stores a Local Flavour

  If Starbucks to you means the ubiquitous chain that sells coffee on the go through hundreds of small stores all over the US, its Indian avatar might come as a bit of a shock. 
The world’s largest coffee chain is positioning itself as an aspirational brand in this tea-drinking nation, and is going over the top with its stores, some of the plushest it’s opened anywhere in the world. “We believe a coffee house should be a welcoming, inviting and familiar place for people to connect, so we design our stores to reflect the unique character of the neighborhoods they serve,” a Tata Starbucks spokesperson said in an emailed reply. 
Starbucks entered India in October 2012 through an equal joint venture between the Seattle-based retailer and Tata Global Beverages. The alliance has opened 15 stores in India so far — in premium locations like Horniman Circle, Colaba and Bandra in Mumbai, Connaught Place in Delhi and Koregaon Park in Pune. Experts say it’s following the same strategy it adopted in China, where it opened in prominent locations to increase visibility to consumers. A person familiar with Starbucks’ India strategy, who asked not to be named explained, “Right now, the idea is to familiarise Indians with Starbucks.” 
Research on the coffee chain showed that for Indian consumers, coffee is not the primary reason to visit a café — and very few order a beverage to take away with them. Most consumers spend about 45 minutes in a café, using it as a spot to meet friends and relatives. 
So, Starbucks wanted its stores to be as appealing as possible while givingconsumers a unique “Starbucks experience”, the person familiar with Starbucks plans said. That meant stores in India don’t fit the global design template — each store has been designed differently, with “local” touches incorporated. For example, the store in New Delhi’s Connaught Place has ropes and chatai on the walls and henna patterns on the floor, with pictures of Indian spices on its walls. The store in Select Citywalk mall has locally-crafted wood paneling, while the Pune store incorporates localised railings and a rich display of antiques and copper. “The idea was to bring about the traditional elements of this country and present them in modern settings,” said the person quoted above. This is an experimentation phase, and Starbucks will eventually reach a standard format and design for its Indian outlets. Darshan Mehta, the chief executive of Reliance Brands, says he has so far visited four Starbucks outlets in Delhi and Mumbai. “They are beautiful in terms of shape, size and coziness. The Horniman Circle store is truly the high-end of Starbucks spectrum,” he says. Along with its locallysourced coffee, the outlets offer an Indianised food menu — with items like murg kathi wrap, wasabi kotumbwadi and chicken makhani pies next to the English muffins on offer. 
“Our stores are designed in-house and the mission of each designer is to create a spectacular third place that is steeped in the local culture and designed to reflect the unique characteristics of each neighborhood,” the Tata Starbucks spokesperson said. However, rival coffee chains don’t think this strategy is sustainable. “They would definitely like to make a statement through the first fifty stores. It’s very likely that later they will look at kiosks and routine stores,” says the marketing head of a rival coffee chain. “As far as their store ambience goes, they are overdoing it,” he added. 
The chief executive of another rival coffee chain agreed. “The focus and investments on ambience and store location is obvious. Many of us don’t have the bandwidth to invest so much on ambience,” he said, asking not to be named. 
Prices at Starbucks are in line with the premium store strategy: the chief executive of the rival coffee chain quoted has noted that Starbucks has increased prices for its food and beverages by as much as 20% in three months. “It’s an unprecedented move; most of us (coffee and quick service restaurants chains) are focusing on value and giving combo deals to consumers. Starbucks has done the opposite. Maybe, they can pull it off because of their deep pockets, but we can’t afford to take up prices and alienate consumers who are anyway looking a value deals,” he said, asking not to be named. 

Source: The Economics Times

Sensex soars 540 points as rupee nears 64 per dollar

The BSE Sensex surged 540 points or 2.8 per cent on Tuesday as the Indian rupee neared 64 per dollar mark. The broader Nifty traded over 160 points higher.

The trigger for sharp gains in Indian stocks was an over 1.5 per cent gain in the Indian rupee. The partially convertible rupee hit a high of 64.17 and is on track for its fourth straight day of gains after snapping a three-week losing streak.

As of 10.20 a.m., the rupee traded at 64.21 as against Friday's close at 65.24 per dollar. The rupee tracked higher euro, which gained against the dollar after disappointing US jobs data raised hopes that the Fed Reserve may be hesitant to announce tapering of stimulus as early as next week.

A surge in exports also helped sentiments. India's merchandise exports posted double-digit growth in the month of August, while imports were "contained", trade secretary S. R. Rao said on Monday, offering some respite for the troubled rupee. Official data is due later this week.

Sentiment in the currency has improved since Reserve Bank of India governor Raghuram Rajan unveiled a slew of proposals to support the rupee and open up markets on Wednesday, providing a breath of fresh air for investors unnerved by the country's worst economic crisis in two decades.

Gaurav Kapoor of RBS told NDTV that Dr Rajan has changed the thinking that central bank has a hands off approach to the rupee. He shared a vision for overhauling the financial sector and also announced two specific and unconventional measures to support the rupee, Mr Kapoor added.

Mayruesh Joshi of Angel Broking told NDTV that steps taken by Raghuram Rajan are not only aiding the Indian rupee, but also leading to a huge momentum in the Bank Nifty.

The Bank Nifty traded above the key 10,000 levels rising over 2 per cent today. The BSE Sensex, which has gained over 1,000 points in the previous three sessions, rose another 500 points in early trade today. The broader Nifty neared the 5,850 levels and is now trading above the 200 day moving average, considered to be a bullish signal.

Favourable global factors also helped sentiments on the Street today. Asian stocks rose to a three-month high on Tuesday as investors turned their attention to more data out of China,  while oil nursed heavy losses as fears of an imminent U.S. military strike against Syria receded even further.

A recent run of upbeat factory activity data from China, Europe and the United States further underlined that the global economy was on a firmer footing.

Source: NDTV Profit
(With inputs from Reuters)

Rupee Turbulence Forces Airlines to Hike Fares Ahead of Festive Season

 

In a surprise move, India’s carriers have taken away all promotional fares from their inventory, and in addition hiked prices by at least a fourth, one month before the festive season. SpiceJet, India’s second-biggest budget carrier, late on Tuesday, raised prices by up to 25%. “The rise in our operating costs has been abrupt, serious and largely driven by the rapidly weakening rupee. About 75% of the total spending is either directly or indirectly influenced by the US dollar, which has appreciated by 25% in this year alone,” said a spokesperson for SpiceJet. He added the airline “is in no position to absorb the additional burden and we are compelled to put through the fare hikes to neutralise the impact of increase in costs.” 
Most other airlines, including Jet Airways, IndiGo and Go Air, have followed suit. Air India hasn’t yet raised its fares, but is likely to soon implement a hike. “The increase of between 15% and 25% across sectors is very significant in the current economic environment, and early signs are that minor growth momentum that the air industry was seeing in July and August has been squashed. This increase has been forced upon the airlines on account of their rising input costs on account of the rupee falling, as well as the increase in the ATF,” said Sharat Dhall, president ofYatra.com. “If one carrier raises fares, we will have to match it. Also, it’s about time that we raised fares, since they were at record lows,” said an executive at a low fare carrier. 
As a result, a Delhi-Mumbai one way spot fare is now upwards of . 9,000 on almost all airlines, up 23% over last year. Prices for tickets booked even for a month in advance are about 25% higher. A one way ticket between Mumbai and Bangalore costs between . 6,793 and . 10,087 depending on how long before the actual date of travel it’s booked. 
“We were discussing a fare hike yesterday. We will likely implement them today,” said a senior executive at national carrier Air India. 
The latest fare hike comes earlier than usual, as airlines typically raise fares during the festive season, which starts in October. The hike will further hit load factors of these carriers, which have already been struggling to filling up their aircraft as a slowdown in the economy saps demand for travel. But their input costs have been steadily on the rise. State-run oil refiners recently raised jet fuel prices by 6.9% with effect from September 1. Jet fuel accounts for the biggest chunk — more than 40% — of an airline’s input costs, and was until recently the major reason for their continuous losses. 
The carriers have also been impacted by a historic fall in the rupee, which has further impacted their fuel costs, plane lease rentals and a chunk of their salary bill, which is paid to expatriate employees. The rupee has fallen about 19% against the dollar this year on fears about how India will fill the yawning gap in its current account. The airlines have, however, been unable to pass on the rise in costs, because of a major slowdown in air travel. 
Number of domestic passengers increased below 1% in January-May to 25.9 million. There is unlikely to be a substantial increase in the numbers soon. Hit by low demand, India’s carriers have been selling way below cost, cutting fares to their lowest in two years in July and August. Sydney-based CAPA-Centre for Aviation said in a recent report that Indian carriers will in the current quarter post net losses of $400 million to $450 million. “The only advice to travellers for the festive season is to plan their travel well in advance and go ahead with their bookings right away, as it is unlikely that we will see any reduction in prices from here to the end of the year,” said Dhall. He, however, added that the latest fare hike will curb demand even further, especially in the month of September. “Demand or bookings may decline by up to 5%,” he added. 
“What we have done is just gone back to levels of two months earlier. Even at this rate, considering almost 60% of our flights are booked a month in advance, we would have to fill 100% of our aircraft to make any money,” said an executive at a top budget carrier.

Source: The Economics Times

WARDING OFF FAKES FMCG Cos Take Legal Route to Bell Copycats Cos such as Pidilite, Emami, Dabur hit by trademark infringements

With smaller rivals gnawing away at their market share, India’s leading fast moving consumer goods (FMCG) companies are increasingly seeking court intervention to eliminate the possibility of any trademark infringement these days. 
Legal counsels, representing FMCG companies such as Asian Paints, Pidilite, Emami and Dabur, have in recent months approached the courts to check imitations of their products which are freely peddled in markets. “We have become more aggressive in the past couple of years. In fact, we have opened a separate division called Brand Protection Cell, which is made up of retired police officers, and works towards hunting down such counterfeit products,” says Harsh Agarwal, director of Emami India. 
Recently, Kolkata-based Emami, maker of ‘Boro Plus’ and other brands, moved the Bombay High Court and got a favourable ruling against HN Pharmacy and Nakoda Enterprises; both firms were engaged in some kind of trademark violation by trying to copy Emami’s popular Zandu Balm, used for pain relief. 
Also, the country’s largest ayurvedic medicine maker Dabur India won a case in the Bombay high court against Ahmadabad-based Bajaj Herbals regarding infringement of its toothpaste brand Meswak. The court fined the promoters of Bajaj Herbals for . 15 lakh, asking them to pay . 10 lakh to Tata Memorial Centre in Mumbai for the treatment of poor patients, and the rest . 5 
    lakh to Dabur India. 
The Burman family, promoters of Dabur India, was also engaged in a case in Delhi High Court involving its air freshener Odonil, where a local company was camouflaging its product by calling it 
    Odokill. 
“Over the years, Dabur has taken steps to protect its brand and trademark against infringement, both in India and abroad, besides taking on spurious product manufacturers and counterfeiters,” said Ashok Jain, VP-Finance & Company Secretary, at Dabur India. 
India’s largest paint company Asian Paints also had its share of trouble when lesser-known Oriental Oil and Paint tried to sell its product by calling it Jay Utsav, which comes close to Asian Paint’s Utsav. 
Pidilite Industries, the country’s largest adhesive maker, known for its popular ‘Fevicol’, had to take court’s help against Jubilant Agri & Consumer Products to protect its brands Fevicol Marin and Marin as Jubilant had applied for the registration of its Marine Plus. “As companies diversify into various product segments, in-house strategies are coined for better IP protection, particularly against the growing menace of counterfeit,” said Advait Sethna, advocate and counsel, specialising in IP Laws. 
“These proactive steps, coupled with IP raids by enforcement agencies against counterfeit, are helping to strengthen valuation of IP today, especially in the backdrop of the present economic slowdown,” he added. 
Hard times require tough steps and this is a good move by domestic consumer companies, feels a senior consumer analyst of a UK-based investment banking firm. “In the long run, such steps pay off as even consumers become aware of genuine and fake,” said the analyst, requesting anonymity. Rampant misuse of any trademark would eventually lead to its dilution, eroding the value of the brand, and companies are dead serious about protecting their intellectual property. 
Mumbai-based contract manufacturer VVF India, for instance, has approached the court to protect its bathing soap brand ‘Jo’, alleging that its brand is being compromised due to the “almost identical and deceptively similar” product called ‘Jijo’. “Companies are trying to protect their brands by taking various steps which include raids by court-appointed commissioners and police to seize the infringing products,” says Rahul Chaudhry, partner at Delhi-based IP firm Lall Lahiri & Salhotra (LLS). 

Source: The Economics Times