Aditya Birla Group promoted retail venture in the supermarket format, More Retail opened 15 stores in AP most of them at Hyderabad. They are not new openings but renovated and refurbished stores of Trinethra Retail which the Birlas took over earlier this year.Mr Murti, COO of More Retail said,
In all we are planning to setup 150 stores or so in the coastal region and parts of Rayalasema and 150 more in the rest of the state by the end of this financial year. In Karnataka we are starting from Mysore.To establish one supermarket store it costs anywhere between Rs 40 lakh to Rs 90 lakh. Aditya Birla group has set an ambitious target of investing Rs 15,000 crore in the venture of which they have invest Rs 3,000 crore so far. Aditya Birla group is very well known to divert money from group companies for new ventures.
Sunday, November 30, 2008
Modern retail offers wide choice, farmers want to exercise it all
When he has a ready crop, Dnyaneshwar Nikam’s day would often start with a phone call, typically to the local wholesale agricultural produce marketing committee (APMC) market, which has for decades been the only wholesale buyer of his produce.
These days, his phone list is a lot longer. It includes officials of Godrej Agrovet Ltd, Aditya Birla Retail Ltd and Reliance Retail Ltd and he carefully compares prices before promising delivery of his ripe but unharvested crop that day.
Nikam, who has a 10-acre farm in Pune’s Ranjani village, has heard Subhiksha Trading Services Ltd may also start buying from around here and is excited because, he says, “The more companies there are, the better it is for us because we can choose where we will get better rates and want to sell our produce.”
The next day, when the Godrej officials land up at his farm, Nikam makes sure he lets them know that Birla offered Rs7 for a kg of cucumber and ITC offered him Rs8 for it, while Godrej offered just Rs6 the previous day. The key to selling to modern retail is to ensure that he sells to more than one retailer, he says. But also letting them know that.
Nikam grows tomatoes, watermelons, onions, brinjals, capsicum and chillies on his farm, apart from oranges and chickoos. He sold several of these vegetables to Godrej the previous day.
Driving past the procurement offices that dot that landscape around rural Pune’s vegetable farming strip, it is clear that change is in the air.
For the first time in India’s history, modern retailers are offering farmers a choice of a buyer other than the traders at government-controlled APMC markets. But some farmers also say this may be something of a limiting choice because they could end up selling to the only buyer who comes to them rather than selling through the APMC’s open auction system that ensures several buyers bid.
As Indians prepare for the army of retailers, who are drawing up plans to open stores in all sizes and price-ranges for them to buy from, the nascent industry is offering selling choices for farmers as well—from cooperatives to big retail firms to higher rates from APMC traders and even farmer-owned stores.
And the way they choose to sell is changing rapidly.
One recent winter day, Godrej Agrovet’s eight gourmet food and grocery stores, Nature’s Basket, paid less than the rate in Mumbai’s wholesale market for beetroots, peas and cabbage; matched rates for brinjals and tomatoes; and paid higher rates for cauliflower and cucumber.
These days, his phone list is a lot longer. It includes officials of Godrej Agrovet Ltd, Aditya Birla Retail Ltd and Reliance Retail Ltd and he carefully compares prices before promising delivery of his ripe but unharvested crop that day.
Nikam, who has a 10-acre farm in Pune’s Ranjani village, has heard Subhiksha Trading Services Ltd may also start buying from around here and is excited because, he says, “The more companies there are, the better it is for us because we can choose where we will get better rates and want to sell our produce.”
The next day, when the Godrej officials land up at his farm, Nikam makes sure he lets them know that Birla offered Rs7 for a kg of cucumber and ITC offered him Rs8 for it, while Godrej offered just Rs6 the previous day. The key to selling to modern retail is to ensure that he sells to more than one retailer, he says. But also letting them know that.
Nikam grows tomatoes, watermelons, onions, brinjals, capsicum and chillies on his farm, apart from oranges and chickoos. He sold several of these vegetables to Godrej the previous day.
Driving past the procurement offices that dot that landscape around rural Pune’s vegetable farming strip, it is clear that change is in the air.
For the first time in India’s history, modern retailers are offering farmers a choice of a buyer other than the traders at government-controlled APMC markets. But some farmers also say this may be something of a limiting choice because they could end up selling to the only buyer who comes to them rather than selling through the APMC’s open auction system that ensures several buyers bid.
As Indians prepare for the army of retailers, who are drawing up plans to open stores in all sizes and price-ranges for them to buy from, the nascent industry is offering selling choices for farmers as well—from cooperatives to big retail firms to higher rates from APMC traders and even farmer-owned stores.
And the way they choose to sell is changing rapidly.
One recent winter day, Godrej Agrovet’s eight gourmet food and grocery stores, Nature’s Basket, paid less than the rate in Mumbai’s wholesale market for beetroots, peas and cabbage; matched rates for brinjals and tomatoes; and paid higher rates for cauliflower and cucumber.
Aditya Birla Retail plans a store a day
Even as branded retailers face various protests and some political backlash, Aditya Birla Retail Ltd is stepping up its roll-out plans, and hopes to have about 150 stores in New Delhi and its suburbs, dubbed More, in the next six months, according to a company official and a supplier.
“They plan to open one store a day after January,” said one of the persons familiar with the situation, who didn’t want to be named as he is not authorized to speak to the media.
The Aditya Birla Group said it wants to invest around Rs8,000-9,000 crore in the retail venture in the next five years and plans to open 1,000 supermarkets and an undecided number of hypermarkets. It currently has about 300 supermarkets countrywide and a hypermarket in Hyderabad.
The conglomerate already has 20 More grocery stores in various localities within the Capital such as Hari Nagar, Pusa Road, Janakpuri, Patel Nagar and Jagatpuri. The firm may add another half a dozen such stores in the Capital in a couple of weeks, said two people familiar with the plans.
Also, the company has leased around 125,000 sq. ft in Parsvnath Developers Ltd’s Metro Mall in the Capital’s Seelampur area to open its hypermarket there and another 15,000 sq. ft in Parsvnath’s mall in Rohini Metro station to open a supermarket there.
A spokesperson for Aditya Birla Group declined to provide any details of More’s expansion. The group’s plans illustrate a continuing surge in retailing despite protests by small retailers and their employees, local bans in some states, including Uttar Pradesh that have affected some chains such as Reliance Fresh and political uncertainty spurred by a long pending study that the government ordered on quantifying the impact of organized retail on so-called mom-and-pop stores.
That study was started in March by the Indian Council for Research on International Economic Relations (Icrier) at the behest of the commerce ministry. It stems from a letter that Congress party president Sonia Gandhi wrote to the Prime Minister’s Office, expressing concern over the seeming impact of multinational retailers on India’s small retailers. It is unclear when Icrier plans to submit its report.
In New Delhi, the group is playing catch-up with Reliance Industries Ltd’s Reliance Retail, which is planning to open around 600 stores in the city and its suburbs in the next three years with hundreds of Reliance Fresh grocery stores, at least two dozen hypermarkets and several other formats, including apparel, shoes, jewellery, health and wellness.
Marketers say New Delhi is the country’s biggest consumer market with an annual market size of about Rs64,039 crore at the end of 2006, compared with Mumbai, the second biggest one, with Rs53,071 crore, according to research group Indicus Analytics.
“They plan to open one store a day after January,” said one of the persons familiar with the situation, who didn’t want to be named as he is not authorized to speak to the media.
The Aditya Birla Group said it wants to invest around Rs8,000-9,000 crore in the retail venture in the next five years and plans to open 1,000 supermarkets and an undecided number of hypermarkets. It currently has about 300 supermarkets countrywide and a hypermarket in Hyderabad.
The conglomerate already has 20 More grocery stores in various localities within the Capital such as Hari Nagar, Pusa Road, Janakpuri, Patel Nagar and Jagatpuri. The firm may add another half a dozen such stores in the Capital in a couple of weeks, said two people familiar with the plans.
Also, the company has leased around 125,000 sq. ft in Parsvnath Developers Ltd’s Metro Mall in the Capital’s Seelampur area to open its hypermarket there and another 15,000 sq. ft in Parsvnath’s mall in Rohini Metro station to open a supermarket there.
A spokesperson for Aditya Birla Group declined to provide any details of More’s expansion. The group’s plans illustrate a continuing surge in retailing despite protests by small retailers and their employees, local bans in some states, including Uttar Pradesh that have affected some chains such as Reliance Fresh and political uncertainty spurred by a long pending study that the government ordered on quantifying the impact of organized retail on so-called mom-and-pop stores.
That study was started in March by the Indian Council for Research on International Economic Relations (Icrier) at the behest of the commerce ministry. It stems from a letter that Congress party president Sonia Gandhi wrote to the Prime Minister’s Office, expressing concern over the seeming impact of multinational retailers on India’s small retailers. It is unclear when Icrier plans to submit its report.
In New Delhi, the group is playing catch-up with Reliance Industries Ltd’s Reliance Retail, which is planning to open around 600 stores in the city and its suburbs in the next three years with hundreds of Reliance Fresh grocery stores, at least two dozen hypermarkets and several other formats, including apparel, shoes, jewellery, health and wellness.
Marketers say New Delhi is the country’s biggest consumer market with an annual market size of about Rs64,039 crore at the end of 2006, compared with Mumbai, the second biggest one, with Rs53,071 crore, according to research group Indicus Analytics.
Retailers seek discounted rentals as prices of real estate decline
With realty prices sliding, retailers are looking to renegotiate rentals signed in better times. In some cases, they are even shutting and relocating stores to offset the drag on profitability.
Kishore Biyani, managing director of Pantaloon Retail (India) Ltd, India’s biggest publicly traded retailer, said store rentals are down by 25-50%. “We are renegotiating the rentals in some cases,” he said, but declined to elaborate.
However, Thomas Varghese, chief executive officer of Aditya Birla Retail Ltd, which operates the More retail chain, said while rentals have softened for big stores, they remain unchanged for smaller shops.
The latest to join the pack is The MobileStore Ltd, a venture of the Essar Group that sells telecom products such as mobile phones.
“We have signed deals on high rentals a year back and now the rentals are coming down by almost 50%,” said chief executive officer Rajiv Agarwal. “We are renegotiating with the owners and whoever is refusing to revise the prices, we are relocating the store to a viable location having lesser rentals.”
The company currently operates some 1,200 stores and plans to shutter 5% of those — primarily in metros — if rentals can’t be renegotiated, Agarwal said. Three stores have already been shut, even as the company plans to add another 600 shops across India, because volumes have gone up, he said.
The company is not alone in walking away from contracts signed at a time when the economy looked better, oil had yet to cross $100 (Rs4,640) a barrel and inflation was in single digits.
Rentals typically are 15% of gross revenues for small properties, 5% for hypermarkets and 7% for departmental stores, said Shubhranshu Pani, Mumbai-based managing director of retail services at real-estate consulting firm Jones Lang LaSalle Meghraj.
Other retailers Mint spoke with also said they were trying to take advantage of cheaper commercial space and moving to more affordable places when renegotiations fail.
“We have started renegotiating the rentals with property owners where it is unreasonable, especially in places like Bangalore, Chennai and other metros,” said Suresh J., chief executive officer of Arvind Brands Ltd, which operates the Megamart retail chain. Rentals have come down by around 50-80% depending on location, he said.
However, the company will not close shops should negotiations fail, since they have long-term agreements with property owners and could face lawsuits if it terminates such deals, he clarified.
Samar Shiekhawat, vice-president of marketing at Spencer’s Retail Ltd, an RPG group company, said that since rentals have started declining by around 20-25%, the company is renegotiating with owners.
The retailer plans to relocate some 46 stores this year, of which 20 have already been shuttered, a key reason being high rentals, Shiekhawat said.
However, the company will continue with plans to have 300 more stores by next March, in addition to the 365 small and 35 large shops it now runs.
Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj, agreed rentals are falling in select malls and smaller stores.
“Only in those malls where the turnover was less, the rentals are coming down,” he said. “However, rentals in malls like Select Citywalk in Delhi, Inorbit and Phoenix in Mumbai and a few others in Bangalore are not coming down since the sales turnover is very good in these malls.”
For smaller stores, rentals are down by 15-20%, he said, adding that prices are likely to be stable and unlikely to fall further.
Puri said retailers who got small stores in malls last year typically paid between 35% and 40% more than the anchor — the largest store in a mall. These rents are now coming down by 25-30%, effectively reducing the gap between the smaller stores and anchors.
But the profits of retailers that are relocating will be impacted negatively, he said.
“Already, the margins are squeezed and to continue with high-rental outlets does not make sense. With the rentals coming down by around 40-50%, I want the reduced rentals,” said Agarwal of MobileStore. “Why should the company carry on with properties which have been signed at unreasonable rentals?”
Kishore Biyani, managing director of Pantaloon Retail (India) Ltd, India’s biggest publicly traded retailer, said store rentals are down by 25-50%. “We are renegotiating the rentals in some cases,” he said, but declined to elaborate.
However, Thomas Varghese, chief executive officer of Aditya Birla Retail Ltd, which operates the More retail chain, said while rentals have softened for big stores, they remain unchanged for smaller shops.
The latest to join the pack is The MobileStore Ltd, a venture of the Essar Group that sells telecom products such as mobile phones.
“We have signed deals on high rentals a year back and now the rentals are coming down by almost 50%,” said chief executive officer Rajiv Agarwal. “We are renegotiating with the owners and whoever is refusing to revise the prices, we are relocating the store to a viable location having lesser rentals.”
The company currently operates some 1,200 stores and plans to shutter 5% of those — primarily in metros — if rentals can’t be renegotiated, Agarwal said. Three stores have already been shut, even as the company plans to add another 600 shops across India, because volumes have gone up, he said.
The company is not alone in walking away from contracts signed at a time when the economy looked better, oil had yet to cross $100 (Rs4,640) a barrel and inflation was in single digits.
Rentals typically are 15% of gross revenues for small properties, 5% for hypermarkets and 7% for departmental stores, said Shubhranshu Pani, Mumbai-based managing director of retail services at real-estate consulting firm Jones Lang LaSalle Meghraj.
Other retailers Mint spoke with also said they were trying to take advantage of cheaper commercial space and moving to more affordable places when renegotiations fail.
“We have started renegotiating the rentals with property owners where it is unreasonable, especially in places like Bangalore, Chennai and other metros,” said Suresh J., chief executive officer of Arvind Brands Ltd, which operates the Megamart retail chain. Rentals have come down by around 50-80% depending on location, he said.
However, the company will not close shops should negotiations fail, since they have long-term agreements with property owners and could face lawsuits if it terminates such deals, he clarified.
Samar Shiekhawat, vice-president of marketing at Spencer’s Retail Ltd, an RPG group company, said that since rentals have started declining by around 20-25%, the company is renegotiating with owners.
The retailer plans to relocate some 46 stores this year, of which 20 have already been shuttered, a key reason being high rentals, Shiekhawat said.
However, the company will continue with plans to have 300 more stores by next March, in addition to the 365 small and 35 large shops it now runs.
Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj, agreed rentals are falling in select malls and smaller stores.
“Only in those malls where the turnover was less, the rentals are coming down,” he said. “However, rentals in malls like Select Citywalk in Delhi, Inorbit and Phoenix in Mumbai and a few others in Bangalore are not coming down since the sales turnover is very good in these malls.”
For smaller stores, rentals are down by 15-20%, he said, adding that prices are likely to be stable and unlikely to fall further.
Puri said retailers who got small stores in malls last year typically paid between 35% and 40% more than the anchor — the largest store in a mall. These rents are now coming down by 25-30%, effectively reducing the gap between the smaller stores and anchors.
But the profits of retailers that are relocating will be impacted negatively, he said.
“Already, the margins are squeezed and to continue with high-rental outlets does not make sense. With the rentals coming down by around 40-50%, I want the reduced rentals,” said Agarwal of MobileStore. “Why should the company carry on with properties which have been signed at unreasonable rentals?”
Aditya Birla Group's retail arm seeks to expand 'More'
The retail arm of Aditya Birla Group, Aditya Birla Retail Ltd (ABRL) has announced plans of investing Rs.250-300 crore to expand its retail business and set up at least a dozen hypermarts across the country under the brand name More Megastore in the coming financial year.
"We will probably open a dozen hypermarkets in the country in 2008-09. The hypermarket offers a seamless shopping experience offering 60,000 products from over 500 suppliers," said Russell Berman, head of ABRL's hypermarket division, on the sidelines of inaugurating the first of such hypermarket in Vadodara in Gujarat.
"Our mission at Aditya Birla Retail's More stores - be they super marts or hypermarts, is to change the way people shop and to make the entire shopping experience, a fun-filled enjoyable process for the whole family from the husband, to wife, to kids and to parents," said Aditya Birla Group chairman, Kumar Mangalam Birla.
"While our conveniently located neighborhood super marts all over the country provide all the daily and weekly shopping needs, our destination hypermarkets will cater to monthly and event-based shopping requirements. The More Megastore is a one-stop shop for the entire family. Here we offer an extensive range of 60,000 products catering to every need of a household," Birla said.
"As you walk through the Megastore, you will find an excellent toys and stationery mart for children, every household product for the woman of the house, furniture, electronics, mobiles, apparel and what-have-you for the husbands and wives to shop together, a live bakery and a cozy caf for parents to relax," he added.
"We have now 430 super marts across the country and this is our second More Megastore which is a hypermarket. We will end the year with 500 super marts so it has gone very much as per our expectations," Birla said.
"We have enough funds for our retail plans through internal accruals and won't be raising money from the capital market. As for the investment, it depends on the scale of rollout in the country. However, it will be substantiative enough for a national presence," he added.
Overall, the group plans to invest Rs.10000 crore in retail business and open nearly 1,500 supermarket and 100 hypermart stores in the next five years.
In a separate development, ABRL, maintaining a low profile, has launched five More outlets in Kolkata, West Bengal, taking the total number of smaller version of the hypermarket to nine.
By end March, there will be at least 30 More stores in the state, each of around 2000-2500 sq ft, a senior executive of ABRL said.
"We will probably open a dozen hypermarkets in the country in 2008-09. The hypermarket offers a seamless shopping experience offering 60,000 products from over 500 suppliers," said Russell Berman, head of ABRL's hypermarket division, on the sidelines of inaugurating the first of such hypermarket in Vadodara in Gujarat.
"Our mission at Aditya Birla Retail's More stores - be they super marts or hypermarts, is to change the way people shop and to make the entire shopping experience, a fun-filled enjoyable process for the whole family from the husband, to wife, to kids and to parents," said Aditya Birla Group chairman, Kumar Mangalam Birla.
"While our conveniently located neighborhood super marts all over the country provide all the daily and weekly shopping needs, our destination hypermarkets will cater to monthly and event-based shopping requirements. The More Megastore is a one-stop shop for the entire family. Here we offer an extensive range of 60,000 products catering to every need of a household," Birla said.
"As you walk through the Megastore, you will find an excellent toys and stationery mart for children, every household product for the woman of the house, furniture, electronics, mobiles, apparel and what-have-you for the husbands and wives to shop together, a live bakery and a cozy caf for parents to relax," he added.
"We have now 430 super marts across the country and this is our second More Megastore which is a hypermarket. We will end the year with 500 super marts so it has gone very much as per our expectations," Birla said.
"We have enough funds for our retail plans through internal accruals and won't be raising money from the capital market. As for the investment, it depends on the scale of rollout in the country. However, it will be substantiative enough for a national presence," he added.
Overall, the group plans to invest Rs.10000 crore in retail business and open nearly 1,500 supermarket and 100 hypermart stores in the next five years.
In a separate development, ABRL, maintaining a low profile, has launched five More outlets in Kolkata, West Bengal, taking the total number of smaller version of the hypermarket to nine.
By end March, there will be at least 30 More stores in the state, each of around 2000-2500 sq ft, a senior executive of ABRL said.
Reliance Retail recasts operations to cut losses
Reliance Retail Ltd, an arm of Reliance Industries Ltd (RIL), India’s biggest company by market value, has embarked on a restructuring exercise that involves shutting, relocating or resizing at least 200 of its smaller stores, said two persons familiar with the development.
Most of the stores are part of Reliance Fresh, the supermarket chain, said one of them who did not want to be named.
The firm has also temporarily shelved expansion plans to focus on making existing stores profitable. It currently has 816 stores in 60 cities.
“The company will relocate some unprofitable stores and even close down a few, and some of the smaller stores will be integrated into the larger hypermarket format,” the same person said.
A supermarket typically ranges between 1,000 sq. ft and 5,000 sq. ft in size, while a hypermarket can be between 100,000 sq. ft and 200,000 sq. ft. As part of the restructuring, Reliance Retail plans to reduce the size of some stores. It recently cut the size of its Ahmedabad hypermarket to 100,000 sq. ft from 165,000 sq. ft. In the smaller supermarket format, too, some stores have been reduced in size, the person added.
Neucom Consulting, the company’s external public relations firm, declined comment on the development.
The second person familiar with the development, a company executive who did not want to be named, said such resizing and restructuring is happening across cities, and expansion plans are either being put on hold or significantly reduced. For instance, an initial plan to have 70 small stores in Pune, which already has 20, has been pared to about 30. The company is cancelling realty agreements now considered expensive and not in sync with current times.
Even in Mumbai, the initial target of opening 100 stores has been scaled down to around 70. Mumbai currently has about 40 outlets.
“The company will shut down stores that are not viable, bring down the present size of the stores and also cancel some of the agreements that were signed when rentals were high,” the executive said.
The restructuring comes at a time when the entire organized retail industry is scaling back expansion plans.
“If Reliance Retail is restructuring, it is nothing out of the ordinary. Recently, even Future Group and Spencers have made changes in their strategies as they understood the business better with time,” said Arvind Singhal, chairman of management consultancy firm KSA Technopak Advisors. “Reliance Retail started just 18 months back and they are likely to experiment with the formats for quite some time, and certain amount of changes will keep happening” Singhal said. “Closing stores and relocating in viable locations is done by most of the retailers across the world and Reliance will also consider it.”
In a 30 October research report, investment research firm Clear Capital Ltd, an associate of UK-based Noble group, said falling margins were affecting the profits of retailers. “The minimal cash generation and wafer thin operating margins in the range of 4-14% (average of ~7%), in what is considered to be a highly cash-rich business the world over, a lack of cash generation, alongside the high leverage levels (average debt to equity of 1.1x), have left the retailers looking exposed,” its analyst Jaibir Sethi wrote.
At RIL’s annual general meeting in June, Mukesh Ambani, chairman and managing director of the company, spoke about the retail business being on track to “create a significant value-creating platform.”
The retail business of the company continues to open new stores in the smaller formats and the recently unveiled Reliance Footprint, which sells footwear. According to the company executive, Reliance Retail is looking to consolidate its back-office operations as well. About six months ago, it closed down a collection and processing centre in Pune.
In a related development, the company is reopening some stores in Uttar Pradesh that were earlier selling vegetables and grocery items. These stores, which were asked to be closed by the state government following protests, will now retail non-food items. For instance, its outlet in Noida’s Shopprix Mall that opened on Thursday is now selling home furnishings
Most of the stores are part of Reliance Fresh, the supermarket chain, said one of them who did not want to be named.
The firm has also temporarily shelved expansion plans to focus on making existing stores profitable. It currently has 816 stores in 60 cities.
“The company will relocate some unprofitable stores and even close down a few, and some of the smaller stores will be integrated into the larger hypermarket format,” the same person said.
A supermarket typically ranges between 1,000 sq. ft and 5,000 sq. ft in size, while a hypermarket can be between 100,000 sq. ft and 200,000 sq. ft. As part of the restructuring, Reliance Retail plans to reduce the size of some stores. It recently cut the size of its Ahmedabad hypermarket to 100,000 sq. ft from 165,000 sq. ft. In the smaller supermarket format, too, some stores have been reduced in size, the person added.
Neucom Consulting, the company’s external public relations firm, declined comment on the development.
The second person familiar with the development, a company executive who did not want to be named, said such resizing and restructuring is happening across cities, and expansion plans are either being put on hold or significantly reduced. For instance, an initial plan to have 70 small stores in Pune, which already has 20, has been pared to about 30. The company is cancelling realty agreements now considered expensive and not in sync with current times.
Even in Mumbai, the initial target of opening 100 stores has been scaled down to around 70. Mumbai currently has about 40 outlets.
“The company will shut down stores that are not viable, bring down the present size of the stores and also cancel some of the agreements that were signed when rentals were high,” the executive said.
The restructuring comes at a time when the entire organized retail industry is scaling back expansion plans.
“If Reliance Retail is restructuring, it is nothing out of the ordinary. Recently, even Future Group and Spencers have made changes in their strategies as they understood the business better with time,” said Arvind Singhal, chairman of management consultancy firm KSA Technopak Advisors. “Reliance Retail started just 18 months back and they are likely to experiment with the formats for quite some time, and certain amount of changes will keep happening” Singhal said. “Closing stores and relocating in viable locations is done by most of the retailers across the world and Reliance will also consider it.”
In a 30 October research report, investment research firm Clear Capital Ltd, an associate of UK-based Noble group, said falling margins were affecting the profits of retailers. “The minimal cash generation and wafer thin operating margins in the range of 4-14% (average of ~7%), in what is considered to be a highly cash-rich business the world over, a lack of cash generation, alongside the high leverage levels (average debt to equity of 1.1x), have left the retailers looking exposed,” its analyst Jaibir Sethi wrote.
At RIL’s annual general meeting in June, Mukesh Ambani, chairman and managing director of the company, spoke about the retail business being on track to “create a significant value-creating platform.”
The retail business of the company continues to open new stores in the smaller formats and the recently unveiled Reliance Footprint, which sells footwear. According to the company executive, Reliance Retail is looking to consolidate its back-office operations as well. About six months ago, it closed down a collection and processing centre in Pune.
In a related development, the company is reopening some stores in Uttar Pradesh that were earlier selling vegetables and grocery items. These stores, which were asked to be closed by the state government following protests, will now retail non-food items. For instance, its outlet in Noida’s Shopprix Mall that opened on Thursday is now selling home furnishings
Saturday, November 22, 2008
Subhiksha not paying some bills
Subhiksha in Sanskrit means “the giver of all good things in life”. Just don’t tell that to some vendors in the Capital’s largest wholesale market for fruit and vegetables, who allege that the no-frills discount retailer, Subhiksha Trading Services Ltd, hasn’t paid them their dues for the past several months.
As a result, many wholesale suppliers in Azadpur mandi, or market, say they have stopped supplying to various Subhiksha outlets in the National Capital Region (NCR) as Delhi and its environs are collectively called, after their payments were held up for anything between two and six months. As a rule, bulk buyers pay up suppliers within a month.
A senior office bearer of Vegetable Traders Association of Azadpur put the amount due to suppliers at around Rs2 crore. He didn’t wish to be identified. At least half a dozen other fruit and vegetable sellers in the mandi, however, said it could be as high as Rs3 crore.
A trader, who did not wish to be named, said: “I will stop supplying to Subhiksha the day I recover my dues.” He claimed his outstanding against the firm was more than Rs30 lakh. “If I stop supplying to them, they may withhold my previous dues.”
A Subhiksha official, however, downplayed the issue.
“If you are doing business and someone’s payment is delayed, it could be for several reasons. It could be because of supply issues, quality issues, or billing issues,” said Ashu Phakey, president (Delhi region) at Subhiksha. He said he was unaware of the payment-related problem at Azadpur even as wholesalers maintained they called on him at his office as well as spoke to him on phone. “Since they are not organized kind of vendors, they, at times, have problem in being able to reconcile their accounts because they don’t operate with all the invoices…so some guys may have problems.”
R. Subramanian, managing director of Subhiksha, said he was also unaware of such a problem at Azadpur. “We work in a completely decentralized system...we do not really handle payments to vendors centrally at all,” he said. However, he admitted that there are some “reconciliation issues” and said Subhiksha’s “team in Delhi was going through a large-scale reconciliation of accounts in Azadpur market”.
Mint couldn’t immediately ascertain whether alleged payment delays were restricted to NCR, or were broader.
But in NCR, many vendors, who have not been paid their dues, say they have stopped their supplies to the retailer.
Sujeet Kumar of Sujeet Ajeet and Co. said he stopped supplying to the retailer two months ago after unpaid dues amounted to around Rs25 lakh.
As a result, many wholesale suppliers in Azadpur mandi, or market, say they have stopped supplying to various Subhiksha outlets in the National Capital Region (NCR) as Delhi and its environs are collectively called, after their payments were held up for anything between two and six months. As a rule, bulk buyers pay up suppliers within a month.
A senior office bearer of Vegetable Traders Association of Azadpur put the amount due to suppliers at around Rs2 crore. He didn’t wish to be identified. At least half a dozen other fruit and vegetable sellers in the mandi, however, said it could be as high as Rs3 crore.
A trader, who did not wish to be named, said: “I will stop supplying to Subhiksha the day I recover my dues.” He claimed his outstanding against the firm was more than Rs30 lakh. “If I stop supplying to them, they may withhold my previous dues.”
A Subhiksha official, however, downplayed the issue.
“If you are doing business and someone’s payment is delayed, it could be for several reasons. It could be because of supply issues, quality issues, or billing issues,” said Ashu Phakey, president (Delhi region) at Subhiksha. He said he was unaware of the payment-related problem at Azadpur even as wholesalers maintained they called on him at his office as well as spoke to him on phone. “Since they are not organized kind of vendors, they, at times, have problem in being able to reconcile their accounts because they don’t operate with all the invoices…so some guys may have problems.”
R. Subramanian, managing director of Subhiksha, said he was also unaware of such a problem at Azadpur. “We work in a completely decentralized system...we do not really handle payments to vendors centrally at all,” he said. However, he admitted that there are some “reconciliation issues” and said Subhiksha’s “team in Delhi was going through a large-scale reconciliation of accounts in Azadpur market”.
Mint couldn’t immediately ascertain whether alleged payment delays were restricted to NCR, or were broader.
But in NCR, many vendors, who have not been paid their dues, say they have stopped their supplies to the retailer.
Sujeet Kumar of Sujeet Ajeet and Co. said he stopped supplying to the retailer two months ago after unpaid dues amounted to around Rs25 lakh.
R. Subramanian, managing director of Subhiksha, claims that the retail firm is on an extremely high growth path
Discount retailer Subhiksha Trading Services Ltd has been in the news lately. In early September, there were allegations that the firm was not paying its suppliers (Mint, 5 September), and reports that the firm had sold a 10% stake to billionaire Azim Premji for Rs230 crore. Then, the company said that after its merger with Blue Green Constructions and the subsequent renaming of the firm as Subhiksha India, the merged entity would seek a listing (Blue Green is already listed on the exchanges).
Last week, employees at some Subhiksha stores in New Delhi and its environs told Mint that the retailer had not paid them salaries for August.
R. Subramanian, managing director of Subhiksha, spoke to Mint over the telephone on Wednesday to specifically counter the allegations regarding salaries and also commented on the general perception that his firm is facing a cash crunch. Edited excerpts:
Some employees say they haven’t been paid August salaries. What has caused the delay?
There is no delay at all. I don’t know who you spoke to (and) whether they are our employees. I have no clue.
Let me be very clear: As an organization, we have 5,500 or so (employees) across the country and every single employee has been paid whatever salary is due and payable for the month of August in the month of September. There is not a single employee that has not been paid by us.
Is your company going through a financial crisis?
I think that was the theme of the last story you wrote and this story that you are trying to write now. I think we clarified the same thing last time as well.
The reality is that we are on an extremely high growth path. We are doubling turnover from last year to this year and we are also sort of investing in new projects and are sort of well on our way to setting up 2 million sq. ft of space by June of next year. Basically, the point is, we are expanding.
So, obviously, we don’t have any financial crunch and if we are having a financial crunch then we won’t be allocating funds for the expansion. We are in the middle of the year and we have already completed a reasonable 40% of the expansion planned for the year and we are reasonably hopeful that the balance 60% of the expansion plans will be completed. So, whatever targets we set out for ourselves we are moving on that.
When a company is going through a rapid expansion...a company in any business will allocate its money. I am saying... as a newspaper you will decide you will pay your newsprint vendor 15 days late or...pay printing and vendors 10 days late. Those sort of things happen in a bad market when vendors desperately need money—every retailer will find ways to squeeze the various suppliers and sort of vendors for best possible deals whether it’s discounts or whether it’s in terms of trade margin or whether it is in terms of credit. I am saying we are not sort of (Mahatma) Gandhi and (Gautama) Buddha to say that we are sort of completely not enchanted by the profit from whoever we deal with.
We are tempted to get better deals from whoever we deal with and, therefore, we would push to get the best deal we can and we do it. The fact is that we pushed for the best deal does not mean we are facing a financial crisis. We are exploiting the weak market for getting the best deals for us.
If you visit any Subhiksha store in Delhi or the National Capital Region, many of them are partially empty—with empty racks. Any reason for this?
We constantly sort of look at our merchandising strategy and inventory turnover strategy. Our inventory is in line with what sales we want to achieve and whether stores will be larger or the stores might have more racks, we might be following a particular strategy in terms of what we want to do. Fundamentally, the key piece, as far as we are concerned, is we have sales target for the stores. Our stores will achieve 90% to 100% of our sales target. The inventory is in line with the sales target we look for. Just because we have racks doesn’t mean that we have to fill the racks and I don’t think that is a strategy a retailer would want to work on.
Of course, we can fill the racks if that will give an impression that we are not in a financial crunch. But that’s not the basis on which we operate. We operate our business on the basis of what stocks are required to sell, what we want to sell... We supply our stores every day and need only so much inventory to be able to manage whatever sales we want to manage.
Last week, employees at some Subhiksha stores in New Delhi and its environs told Mint that the retailer had not paid them salaries for August.
R. Subramanian, managing director of Subhiksha, spoke to Mint over the telephone on Wednesday to specifically counter the allegations regarding salaries and also commented on the general perception that his firm is facing a cash crunch. Edited excerpts:
Some employees say they haven’t been paid August salaries. What has caused the delay?
There is no delay at all. I don’t know who you spoke to (and) whether they are our employees. I have no clue.
Let me be very clear: As an organization, we have 5,500 or so (employees) across the country and every single employee has been paid whatever salary is due and payable for the month of August in the month of September. There is not a single employee that has not been paid by us.
Is your company going through a financial crisis?
I think that was the theme of the last story you wrote and this story that you are trying to write now. I think we clarified the same thing last time as well.
The reality is that we are on an extremely high growth path. We are doubling turnover from last year to this year and we are also sort of investing in new projects and are sort of well on our way to setting up 2 million sq. ft of space by June of next year. Basically, the point is, we are expanding.
So, obviously, we don’t have any financial crunch and if we are having a financial crunch then we won’t be allocating funds for the expansion. We are in the middle of the year and we have already completed a reasonable 40% of the expansion planned for the year and we are reasonably hopeful that the balance 60% of the expansion plans will be completed. So, whatever targets we set out for ourselves we are moving on that.
When a company is going through a rapid expansion...a company in any business will allocate its money. I am saying... as a newspaper you will decide you will pay your newsprint vendor 15 days late or...pay printing and vendors 10 days late. Those sort of things happen in a bad market when vendors desperately need money—every retailer will find ways to squeeze the various suppliers and sort of vendors for best possible deals whether it’s discounts or whether it’s in terms of trade margin or whether it is in terms of credit. I am saying we are not sort of (Mahatma) Gandhi and (Gautama) Buddha to say that we are sort of completely not enchanted by the profit from whoever we deal with.
We are tempted to get better deals from whoever we deal with and, therefore, we would push to get the best deal we can and we do it. The fact is that we pushed for the best deal does not mean we are facing a financial crisis. We are exploiting the weak market for getting the best deals for us.
If you visit any Subhiksha store in Delhi or the National Capital Region, many of them are partially empty—with empty racks. Any reason for this?
We constantly sort of look at our merchandising strategy and inventory turnover strategy. Our inventory is in line with what sales we want to achieve and whether stores will be larger or the stores might have more racks, we might be following a particular strategy in terms of what we want to do. Fundamentally, the key piece, as far as we are concerned, is we have sales target for the stores. Our stores will achieve 90% to 100% of our sales target. The inventory is in line with the sales target we look for. Just because we have racks doesn’t mean that we have to fill the racks and I don’t think that is a strategy a retailer would want to work on.
Of course, we can fill the racks if that will give an impression that we are not in a financial crunch. But that’s not the basis on which we operate. We operate our business on the basis of what stocks are required to sell, what we want to sell... We supply our stores every day and need only so much inventory to be able to manage whatever sales we want to manage.
Friday, November 21, 2008
सिटी ग्रुप बेहाल, शेयर एक दिन में 26% डाउन
अमेरिका के दूसरे सबसे बड़े बैंक सिटी ग्रुप के शेयर गुरुवार को 26 परसेंट लुढ़क गए। शेयर का भाव इस समय 15 साल के लोएस्ट लेवल पर है।
सिंगापुर में सिटी ग्रुप के बोर्ड के सामने रेड सिग्नल। (Reuters)एक समय इस बैंक का एसेट 270 अरब डॉलर था। आज ये बैंक सिर्फ 25 अरब डॉलर का रह गया है। निवेशक डरे हुए हैं कि क्या बैंक के पास अपने अरबों डॉलर के घाटे का बोझ उठाने के लिए कैश है। सिर्फ इस हफ्ते में सिटी ग्रुप के शेयर 50 परसेंट गिर चुके हैं और अब ये खुद को बचाने के लिए तमाम ऑप्शन तलाश रहा है। इन ऑप्शन्स में किसी और कंपनी के साथ मर्जर शामिल हैं। जानकार बताते है कि मर्जर के लिए एक कंपनी के साथ शुरुआती बातचीत शुरू भी हो गई है। वाल स्ट्रीट जर्नल ने इस बारे में खबर देते हुए साफ किया है कि जिस कंपनी से सिटी ग्रुप की बात चल रही है वो मॉर्गन स्टेनले नहीं है। हालांकि सिटी ग्रुप का कहना है कि उसके पास काफी कैश हैं और कुछ समय में वो फिर से मुनाफा कमाने लगेगा। गुरुवार को सऊदी अरब के प्रिंस अलवालीद बिन तलाल ने कहा कि सिटी ग्रुप के शेयर बेहद नीचे चल रहे हैं और वो बैंक में अपनी हिस्सेदारी 4 परसेंट से बढ़ाकर 5 परसेंट करना चाहते हैं। सिटीग्रुप के सीईओ विक्रम पंडित ने पिछले ही हफ्ते कहा था कि बैंक के 52,000 कर्मचारियों को काम से निकाला जाएगा और 20 परसेंट खर्च घटाए जाएंगे। लेकिन एनालिस्ट कह रहे हैं कि इन उपायों से भी बैंक को बचाना शायद आसान नहीं होगा क्योंकि 2009 में उसे कमर्शियल रियल एस्टेट, क्रेडिट कार्ड और इमर्जिंग मार्केट के बिजनेस से 20 अरब डॉलर का नुकसान होने वाला है।
सिंगापुर में सिटी ग्रुप के बोर्ड के सामने रेड सिग्नल। (Reuters)एक समय इस बैंक का एसेट 270 अरब डॉलर था। आज ये बैंक सिर्फ 25 अरब डॉलर का रह गया है। निवेशक डरे हुए हैं कि क्या बैंक के पास अपने अरबों डॉलर के घाटे का बोझ उठाने के लिए कैश है। सिर्फ इस हफ्ते में सिटी ग्रुप के शेयर 50 परसेंट गिर चुके हैं और अब ये खुद को बचाने के लिए तमाम ऑप्शन तलाश रहा है। इन ऑप्शन्स में किसी और कंपनी के साथ मर्जर शामिल हैं। जानकार बताते है कि मर्जर के लिए एक कंपनी के साथ शुरुआती बातचीत शुरू भी हो गई है। वाल स्ट्रीट जर्नल ने इस बारे में खबर देते हुए साफ किया है कि जिस कंपनी से सिटी ग्रुप की बात चल रही है वो मॉर्गन स्टेनले नहीं है। हालांकि सिटी ग्रुप का कहना है कि उसके पास काफी कैश हैं और कुछ समय में वो फिर से मुनाफा कमाने लगेगा। गुरुवार को सऊदी अरब के प्रिंस अलवालीद बिन तलाल ने कहा कि सिटी ग्रुप के शेयर बेहद नीचे चल रहे हैं और वो बैंक में अपनी हिस्सेदारी 4 परसेंट से बढ़ाकर 5 परसेंट करना चाहते हैं। सिटीग्रुप के सीईओ विक्रम पंडित ने पिछले ही हफ्ते कहा था कि बैंक के 52,000 कर्मचारियों को काम से निकाला जाएगा और 20 परसेंट खर्च घटाए जाएंगे। लेकिन एनालिस्ट कह रहे हैं कि इन उपायों से भी बैंक को बचाना शायद आसान नहीं होगा क्योंकि 2009 में उसे कमर्शियल रियल एस्टेट, क्रेडिट कार्ड और इमर्जिंग मार्केट के बिजनेस से 20 अरब डॉलर का नुकसान होने वाला है।
प्रॉपर्टी: 2009 में 25% गिरावट का अंदेशा
भारतीय प्रॉपर्टी बाजार में अगले साल 25 परसेंट तक गिरावट आ सकती है। इसकी वजह ग्लोबल फाइनांशियल क्राइसिस की वजह से घर खरीदने वालों के
भरोसे में आई कमी है। इससे डेवलपर्स की हालत और खराब होगी, क्योंकि पहले से ही उनके पास फंड की भारी कमी है। एशिया में सबसे बड़े प्रॉपर्टी मेले MIPIM एशिया कॉन्फ्रेंस में आए प्रतिनिधियों का मानना है कि आने वाला समय प्रॉपर्टी के लिए बुरा बीतने वाला है। भारत में प्रॉपर्टी का बूम पिछले एक साल से उतार पर है और 2007 के सबसे ऊंचे लेवल से जमीन की कीमत 15 परसेंट तक नीचे आ चुकी हैं। प्रॉपर्टी कंसल्टेंसी फर्म DTZ के अंशुल जैन का कहना है कि वो 2009 को बेहद बुरा वक्त मानकर चल रहे हैं। कीमतों में गिरावट के संकेत दिखने लगे हैं और इस बात के संकेत भी हैं कि इसमें और गिरावट आ सकती है। एक और प्रॉपर्टी कंसल्टेंसी फर्म कुशमन एंड वेकफिल्ड के ज्वायंट एमडी अनुराग माथुर कहते हैं कि भारत में प्रॉपर्टी प्राइस में 20 से 25 परसेंट का करेक्शन हो सकता है। उनके मुताबिक कीमतों पर काफी दबाव है। 2005 में कंस्ट्रक्शन कंपनियों में निवेश के नियम आसान बनाए जाने के बाद के दो साल में कई इलाकों में प्रॉपर्टी की कीमत दोगुनी हो गई थी। इससे विदेशी फंड में भी भारत में प्रॉपर्टी खरीदने का जोश जगा। कई डेवलपर्स ने मार्गन स्टेनले, सिटीग्रुप और मेरिल लिंच जैसे विदेशी फंड के साथ मिलकर प्रॉपर्टी में खरीदारी की। डीएलएफ और पार्श्वनाथ जैसे बिल्डर्स ने बड़े-बड़े प्रोजेक्ट्स अनाउंस किए। लेकिन कीमतों में तेजी और इंटरेस्ट रेट में बढ़ोतरी से घरों की बिक्री पर ब्रेक लग गया। महंगाई रोकने के लिए सरकार और आरबीआई ने होम लोन को महंगा और मुश्किल बना दिया। इसके बाद आई ग्लोबल मंदी ने माहौल बिगाड़ने में बड़ी भूमिका निभाई। इस दौरान प्रॉपर्टी कंपनियों के शेयर भी जमीन पर आ गए। मिसाल के तौर पर सेंसेक्स इस साल 58 परसेंट गिरा, जबकि डीएलएफ के शेयर 80 परसेंट तक गिर गए। हालांकि डेवलपर उम्मीद कर रहे हैं कि इनफ्लेशन काबू में आने के बाद इंटरेस्ट रेट भी घटेंगे और इसका फायदा प्रॉपर्टी सेक्टर को मिलेगा। साथ ही इस बात की भी पहल हो रही है कि डेवलपर सस्ते घरों पर जोर बढ़ाएं।
भरोसे में आई कमी है। इससे डेवलपर्स की हालत और खराब होगी, क्योंकि पहले से ही उनके पास फंड की भारी कमी है। एशिया में सबसे बड़े प्रॉपर्टी मेले MIPIM एशिया कॉन्फ्रेंस में आए प्रतिनिधियों का मानना है कि आने वाला समय प्रॉपर्टी के लिए बुरा बीतने वाला है। भारत में प्रॉपर्टी का बूम पिछले एक साल से उतार पर है और 2007 के सबसे ऊंचे लेवल से जमीन की कीमत 15 परसेंट तक नीचे आ चुकी हैं। प्रॉपर्टी कंसल्टेंसी फर्म DTZ के अंशुल जैन का कहना है कि वो 2009 को बेहद बुरा वक्त मानकर चल रहे हैं। कीमतों में गिरावट के संकेत दिखने लगे हैं और इस बात के संकेत भी हैं कि इसमें और गिरावट आ सकती है। एक और प्रॉपर्टी कंसल्टेंसी फर्म कुशमन एंड वेकफिल्ड के ज्वायंट एमडी अनुराग माथुर कहते हैं कि भारत में प्रॉपर्टी प्राइस में 20 से 25 परसेंट का करेक्शन हो सकता है। उनके मुताबिक कीमतों पर काफी दबाव है। 2005 में कंस्ट्रक्शन कंपनियों में निवेश के नियम आसान बनाए जाने के बाद के दो साल में कई इलाकों में प्रॉपर्टी की कीमत दोगुनी हो गई थी। इससे विदेशी फंड में भी भारत में प्रॉपर्टी खरीदने का जोश जगा। कई डेवलपर्स ने मार्गन स्टेनले, सिटीग्रुप और मेरिल लिंच जैसे विदेशी फंड के साथ मिलकर प्रॉपर्टी में खरीदारी की। डीएलएफ और पार्श्वनाथ जैसे बिल्डर्स ने बड़े-बड़े प्रोजेक्ट्स अनाउंस किए। लेकिन कीमतों में तेजी और इंटरेस्ट रेट में बढ़ोतरी से घरों की बिक्री पर ब्रेक लग गया। महंगाई रोकने के लिए सरकार और आरबीआई ने होम लोन को महंगा और मुश्किल बना दिया। इसके बाद आई ग्लोबल मंदी ने माहौल बिगाड़ने में बड़ी भूमिका निभाई। इस दौरान प्रॉपर्टी कंपनियों के शेयर भी जमीन पर आ गए। मिसाल के तौर पर सेंसेक्स इस साल 58 परसेंट गिरा, जबकि डीएलएफ के शेयर 80 परसेंट तक गिर गए। हालांकि डेवलपर उम्मीद कर रहे हैं कि इनफ्लेशन काबू में आने के बाद इंटरेस्ट रेट भी घटेंगे और इसका फायदा प्रॉपर्टी सेक्टर को मिलेगा। साथ ही इस बात की भी पहल हो रही है कि डेवलपर सस्ते घरों पर जोर बढ़ाएं।
RBI makes recast of realty loans tougher
India’s struggling real estate sector is set to come under further pressure in the coming weeks as the Reserve Bank of India (RBI) has made
it tougher for banks to ‘restructure’ loans, forcing them to cut house prices or risk being starved of bank funding. Banks often resort to restructuring loans — a practice aimed at preventing loans from being classified as bad — when they sense their borrowers are facing difficulties in repaying loans. In a typical restructuring, banks give borrowers more time to repay the loan by extending the loan tenure, and sometimes, even at reduced interest rates. Such an exercise enables banks to keep their non-performing assets (NPA) ratios under check and their books clean of the stigma of dud loans. But in a little-known directive issued earlier this year, the central bank has ordered that the moment a loan to a builder is restructured, banks must classify the account as an NPA. However, for restructured loans in all other sectors, the account can continue to be treated as a so-called ‘standard asset’ , thus sparing banks from having to make large provisions in their profit and loss accounts. The inability to restructure loans easily is forcing banks to put pressure on builders to cut prices, sell properties and service loans. Builders are usually left with little choice as an NPA tag will make it difficult for them to approach other banks for funds. “We are putting pressure on the real estate sector to reduce property prices. In such times, even if they are able to keep their head above water, it would be fine. They have all had a good innings so far. Now, they have to learn to live with thin margins,” said TS Narayanasami, chairman & managing director of state-run Bank of India, and the chief of industry body — Indian Banks’ Association. “Just banks reducing interest rates will not help in reviving sentiments; builders will have to bring down prices for buyers,” Mr Narayanasami added. Bankers say demand for home loans has fallen because buyers are waiting for property prices to fall. “Banks have taken the initiative by cutting home loan rates. Prices of cement and steel too have fallen, but builders have not reduced property prices,” said MV Nair, CMD of Union Bank of India. Although the RBI relaxed some bank lending norms for the building sector last weekend, it has remained quiet on the issue of restructured loans of builders. Analysts have expressed concerns over the financial health of the real estate sector. City-based retail broking firm, India Infoline , fears the liquidity situation of developers could worsen further if banks refuse to refinance maturing debts of real estate companies and maintain the credit freeze on their accounts. “We reckon that debt maturing over the next 12 months for developers like Unitech, Sobha and Puravankara is higher than our estimate of these companies’ revenues over the corresponding period. The situation with Omaxe, Parsvnath and Ansals also remains precarious, owing to large land advances and high receivables” , it said in a research note. The building sector has seen a raft of credit downgrades amid refinancing concerns and bankers say the sector has little choice but to cut prices. “If a builder does not pay, banks would either initiate a recovery proceeding or restructure the loan. A recovery proceeding often results in lower realisation. This, hopefully, should indirectly put pressure on builders to bring down price and go for negotiated sales,” said SA Bhat, CMD of Indian Overseas Bank.
it tougher for banks to ‘restructure’ loans, forcing them to cut house prices or risk being starved of bank funding. Banks often resort to restructuring loans — a practice aimed at preventing loans from being classified as bad — when they sense their borrowers are facing difficulties in repaying loans. In a typical restructuring, banks give borrowers more time to repay the loan by extending the loan tenure, and sometimes, even at reduced interest rates. Such an exercise enables banks to keep their non-performing assets (NPA) ratios under check and their books clean of the stigma of dud loans. But in a little-known directive issued earlier this year, the central bank has ordered that the moment a loan to a builder is restructured, banks must classify the account as an NPA. However, for restructured loans in all other sectors, the account can continue to be treated as a so-called ‘standard asset’ , thus sparing banks from having to make large provisions in their profit and loss accounts. The inability to restructure loans easily is forcing banks to put pressure on builders to cut prices, sell properties and service loans. Builders are usually left with little choice as an NPA tag will make it difficult for them to approach other banks for funds. “We are putting pressure on the real estate sector to reduce property prices. In such times, even if they are able to keep their head above water, it would be fine. They have all had a good innings so far. Now, they have to learn to live with thin margins,” said TS Narayanasami, chairman & managing director of state-run Bank of India, and the chief of industry body — Indian Banks’ Association. “Just banks reducing interest rates will not help in reviving sentiments; builders will have to bring down prices for buyers,” Mr Narayanasami added. Bankers say demand for home loans has fallen because buyers are waiting for property prices to fall. “Banks have taken the initiative by cutting home loan rates. Prices of cement and steel too have fallen, but builders have not reduced property prices,” said MV Nair, CMD of Union Bank of India. Although the RBI relaxed some bank lending norms for the building sector last weekend, it has remained quiet on the issue of restructured loans of builders. Analysts have expressed concerns over the financial health of the real estate sector. City-based retail broking firm, India Infoline , fears the liquidity situation of developers could worsen further if banks refuse to refinance maturing debts of real estate companies and maintain the credit freeze on their accounts. “We reckon that debt maturing over the next 12 months for developers like Unitech, Sobha and Puravankara is higher than our estimate of these companies’ revenues over the corresponding period. The situation with Omaxe, Parsvnath and Ansals also remains precarious, owing to large land advances and high receivables” , it said in a research note. The building sector has seen a raft of credit downgrades amid refinancing concerns and bankers say the sector has little choice but to cut prices. “If a builder does not pay, banks would either initiate a recovery proceeding or restructure the loan. A recovery proceeding often results in lower realisation. This, hopefully, should indirectly put pressure on builders to bring down price and go for negotiated sales,” said SA Bhat, CMD of Indian Overseas Bank.
November may be worse, say car firms
With banks refusing to reduce interest rate on auto loans, car sales are expected to fall by 15 per cent in November — one of the worst monthly falls, at least in the last four years.
Reluctance on the part of leading private banks to either soften interest rates on car loans or ease the stringent lending criteria even after RBI aggressively pruned its key lending rates in the last two months, has led to a major slump in demand for automobiles.
Car makers say the situation has worsened of late with the consumers postponing purchases on the expectation that prices will come down over Finance minister P Chidambaram's recent appeal to the automobile industry to slash vehicle prices.
Last month, the car sales recorded a fall of nearly 10 per cent when compared to the same month of the previous year. "The going has become extremely tough, we do not expect the industry to record any growth this month. We are trying to avoid being in the red too. However, I expect the rest of the car industry to be in the negative in the current month," said Arvind Saxena, senior V-P (marketing and sales), Hyundai Motor India.
Recently, some of the leading auto makers, including Maruti Suzuki, had announced production cuts at its plants. Auto dealers are also at the receiving end of the slowdown. In many parts of the country, dealers, saddled with a huge inventory of unsold cars, are forced to shell out huge discounts, generally from their own account, in order to clear stocks.
"Things have surely started to take an ugly turn. Not only bookings have fallen dramatically, but in some markets they are facing cancellations also. There should be a fall of 15 per cent in overall sales this month. We fear that customers will hold back their purchases to March next year with a hope of an excise duty reduction in the upcoming budget," said S P Shah, president of Federation of Automobile Dealers Association, which is the apex body of dealers in the country.
The car segment posted growth of 3.5 per cent from April to October this financial year as against 13.4 per cent recorded during the seven-month period last year. Apart from October, the segment recorded fall in August and July. Jnaneswar Sen, vice-president of Honda Siel Cars India, said, "All our models, except the new City, are not doing well. Sales have been down drastically, well-to-do consumers are coming into showrooms but are disappointed due to lack of adequate financial provision. We do not foresee a helpful period."
The recent announcements about price hikes by two of the leading car-makers — Maruti Suzuki and Hyundai — have only deterred prospective buyers, believe analysts. Maruti had hiked prices by 1 per cent, while Hyundai had said it will look at a 2- per cent hike, although there has not been any upward revision yet.
The monthly sales numbers, which are handed out by auto companies, display wholesale dispatches from their factories and not the actual retail numbers. Manufacturers have been pushing inventory till the end of last month. Many analysts feel that the current month will pull out a much clearer picture of the turmoil.
"Baring two-wheelers, which may report healthy sales in the northern market, the four-wheeler industry will report flattish to negative growth this month. Last year in the same month, the segment reported good sales, which means that there will be high base to match with," said S Ramnath, auto analyst, SSKI Securities.
Reluctance on the part of leading private banks to either soften interest rates on car loans or ease the stringent lending criteria even after RBI aggressively pruned its key lending rates in the last two months, has led to a major slump in demand for automobiles.
Car makers say the situation has worsened of late with the consumers postponing purchases on the expectation that prices will come down over Finance minister P Chidambaram's recent appeal to the automobile industry to slash vehicle prices.
Last month, the car sales recorded a fall of nearly 10 per cent when compared to the same month of the previous year. "The going has become extremely tough, we do not expect the industry to record any growth this month. We are trying to avoid being in the red too. However, I expect the rest of the car industry to be in the negative in the current month," said Arvind Saxena, senior V-P (marketing and sales), Hyundai Motor India.
Recently, some of the leading auto makers, including Maruti Suzuki, had announced production cuts at its plants. Auto dealers are also at the receiving end of the slowdown. In many parts of the country, dealers, saddled with a huge inventory of unsold cars, are forced to shell out huge discounts, generally from their own account, in order to clear stocks.
"Things have surely started to take an ugly turn. Not only bookings have fallen dramatically, but in some markets they are facing cancellations also. There should be a fall of 15 per cent in overall sales this month. We fear that customers will hold back their purchases to March next year with a hope of an excise duty reduction in the upcoming budget," said S P Shah, president of Federation of Automobile Dealers Association, which is the apex body of dealers in the country.
The car segment posted growth of 3.5 per cent from April to October this financial year as against 13.4 per cent recorded during the seven-month period last year. Apart from October, the segment recorded fall in August and July. Jnaneswar Sen, vice-president of Honda Siel Cars India, said, "All our models, except the new City, are not doing well. Sales have been down drastically, well-to-do consumers are coming into showrooms but are disappointed due to lack of adequate financial provision. We do not foresee a helpful period."
The recent announcements about price hikes by two of the leading car-makers — Maruti Suzuki and Hyundai — have only deterred prospective buyers, believe analysts. Maruti had hiked prices by 1 per cent, while Hyundai had said it will look at a 2- per cent hike, although there has not been any upward revision yet.
The monthly sales numbers, which are handed out by auto companies, display wholesale dispatches from their factories and not the actual retail numbers. Manufacturers have been pushing inventory till the end of last month. Many analysts feel that the current month will pull out a much clearer picture of the turmoil.
"Baring two-wheelers, which may report healthy sales in the northern market, the four-wheeler industry will report flattish to negative growth this month. Last year in the same month, the segment reported good sales, which means that there will be high base to match with," said S Ramnath, auto analyst, SSKI Securities.
Booming Retail Sector in India - www.companiesandmarkets.com adds new report
India is one of the most attractive destinations for retailers from all across the globe. Thanks to the entry of corporate, changing consumer behavior & lifestyle, increasing influence of western culture and rising income, the Indian retail industry has seen phenomenal growth in the last five years (2001-2006) and organized retailing has finally emerged from the shadows of unorganized retailing and is contributing significantly to the growth of the overall retail sector. The research report helps the client to analyze the opportunities and factors that will make the Indian retail industry a success.Key FindingsOrganized retail market in India is expected to reach US$ 50 Billion mark by 2011. Number of shopping malls is expected to increase at a CAGR of more than 18.9% from 2007 to 2015. Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50%.Organized retailing of mobile handset and accessories is expected to reach close to Rs. 5000 Crore by 2010. Driven by the expanding retail market, third party logistic market is forecasted to reach US$ 20 Billion by 2011. Apparel, along with food and grocery, will lead the organized retailing in India. Key Issues AnalyzedWhat is the market size and scope of the retail industry in India?What are the current market trends
?What are the growth prospects and issues related to the industry?What is the segment-wise size of the organized market and what are the growth prospects of the market?What are the opportunities and challenges faced by the industry?Who are the major players in the Indian retail industry and what are the latest developments?Key Players AnalyzedThis section covers the key players currently operating in the Indian retail industry, including Subhiksha, Reliance Retail Ltd, Pantaloon Retail (India) Ltd., etc.Research Methodology UsedInformation SourcesInformation has been sourced from books, newspapers, trade journals, and white papers, industry portals, government agencies, trade associations, monitoring industry news and developments, and through access to more than 3000 paid databases.Analysis MethodThe analysis methods include ratio analysis, historical trend analysis, linear regression analysis using software tools, judgmental forecasting and cause and effect analysis.
?What are the growth prospects and issues related to the industry?What is the segment-wise size of the organized market and what are the growth prospects of the market?What are the opportunities and challenges faced by the industry?Who are the major players in the Indian retail industry and what are the latest developments?Key Players AnalyzedThis section covers the key players currently operating in the Indian retail industry, including Subhiksha, Reliance Retail Ltd, Pantaloon Retail (India) Ltd., etc.Research Methodology UsedInformation SourcesInformation has been sourced from books, newspapers, trade journals, and white papers, industry portals, government agencies, trade associations, monitoring industry news and developments, and through access to more than 3000 paid databases.Analysis MethodThe analysis methods include ratio analysis, historical trend analysis, linear regression analysis using software tools, judgmental forecasting and cause and effect analysis.
Price cut is must in order to gain and maintain customer
Union Finance Minister P Chidambaram had on Tuesday asked Indian companies to cut prices to boost demand and tide over the economic slowdown. "The classic response to a demand slowdown is to cut prices," Chidambaram had said at the India Economic Summit in New Delhi.
However, many companies have ruled out a cut in the prices of their goods and services.
So even with most of the developed world in the grip of recession and the rest of the world witnessing economic slowdown, Corporate India is openly disagreeing with the Finance Minister.
Although they have turned down Chidambaram's request for price cuts, many wonder if price-cuts is really the only and best solution to beat slowdown?
CNN-IBN’s show Face the Nation debated: Is price cut the best solution to beat a possible slowdown?
The panellists included Vice-Chairman of Mercury Travels, Ashwini Kakkar and the Managing Trustee of Consumer Voice, Sri Ram Khanna. The debate was moderated by Senior Editor Sagarika Ghose.
Sri Ram Khanna began the debate by saying that the prescription given by the Finance Minister P Chidambaram was indeed the cure for slowdown in India.
“I agree with the Finance Minister that if you don’t bring the prices down, the consumers are not going to come back to the markets. They are going to save, they are going to hoard because they will think that a bigger storm is in the offing. Psychologically and sociologically there has been a negative impact of the western recession. We believe that the western recession will stay on for at least two and a half to three years and it will have a negative impact as is visible in the export-oriented industries. It is visible in the stock markets where the flight of capital has taken place and taken the dollar price to Rs 50. People are saving and going for bank deposits. They are not spending money. Thing are not as bad as it could be because we are still going to end up with 6.5 to 7 per cent growth rate as compared to the minus rate predicted for the USA, Europe and Japan,” argued Khanna.
So why doesn’t the aviation sector bring down prices of travel and consignments even though aviation turbine fuel prices have been cut. Afterall, the situation is not yet as bad as it is in the US.
Kakkar, too, responded by claiming the if the aviation industry lowers price, it will tide over the slowdown and also come out of the red.
“It is true that in traditional economy everybody says that the demand and supply curve should decide prices. But this is a unique situation and globally we are witnessing a socialistic response to a capitalistic problem. To me it seems that the Finance Minister sitting on his higher perch can probably see further than all of us. He is putting everybody in the country in one basket. He is saying ‘I am willing to look at tax cuts, I am looking to boosting of exports, I am willing to see that easy credit is available, I am willing to put money behind the rupee in terms of the dollar-rupee exchange rate’. He is trying to do a lot of things on his own but also on the other side asking the industry for a price cut,” Kakkar said.
“Looking at airlines, he first cut the taxes on aviation turbine fuel and then he gave them extended credit period. After that the prices of fuel were brought down by the oil companies, which was an inter-ministerial debate. Despite that, the airlines did not cut down the price. Clearly he is a bit miffed about that. Also the airlines are in a conundrum over the situation as by the end of this year they are going to show a loss of Rs 6000 crore. Even if they lower prices, the seat load factors aren’t going up and demand is stuck. We have been seeing this month after month. This is a great dilemma and I think the best solution to this might be for the airlines to start cutting their prices and see an increase in their seat load factor which will help them to come out of red,” he added.
However, many companies have ruled out a cut in the prices of their goods and services.
So even with most of the developed world in the grip of recession and the rest of the world witnessing economic slowdown, Corporate India is openly disagreeing with the Finance Minister.
Although they have turned down Chidambaram's request for price cuts, many wonder if price-cuts is really the only and best solution to beat slowdown?
CNN-IBN’s show Face the Nation debated: Is price cut the best solution to beat a possible slowdown?
The panellists included Vice-Chairman of Mercury Travels, Ashwini Kakkar and the Managing Trustee of Consumer Voice, Sri Ram Khanna. The debate was moderated by Senior Editor Sagarika Ghose.
Sri Ram Khanna began the debate by saying that the prescription given by the Finance Minister P Chidambaram was indeed the cure for slowdown in India.
“I agree with the Finance Minister that if you don’t bring the prices down, the consumers are not going to come back to the markets. They are going to save, they are going to hoard because they will think that a bigger storm is in the offing. Psychologically and sociologically there has been a negative impact of the western recession. We believe that the western recession will stay on for at least two and a half to three years and it will have a negative impact as is visible in the export-oriented industries. It is visible in the stock markets where the flight of capital has taken place and taken the dollar price to Rs 50. People are saving and going for bank deposits. They are not spending money. Thing are not as bad as it could be because we are still going to end up with 6.5 to 7 per cent growth rate as compared to the minus rate predicted for the USA, Europe and Japan,” argued Khanna.
So why doesn’t the aviation sector bring down prices of travel and consignments even though aviation turbine fuel prices have been cut. Afterall, the situation is not yet as bad as it is in the US.
Kakkar, too, responded by claiming the if the aviation industry lowers price, it will tide over the slowdown and also come out of the red.
“It is true that in traditional economy everybody says that the demand and supply curve should decide prices. But this is a unique situation and globally we are witnessing a socialistic response to a capitalistic problem. To me it seems that the Finance Minister sitting on his higher perch can probably see further than all of us. He is putting everybody in the country in one basket. He is saying ‘I am willing to look at tax cuts, I am looking to boosting of exports, I am willing to see that easy credit is available, I am willing to put money behind the rupee in terms of the dollar-rupee exchange rate’. He is trying to do a lot of things on his own but also on the other side asking the industry for a price cut,” Kakkar said.
“Looking at airlines, he first cut the taxes on aviation turbine fuel and then he gave them extended credit period. After that the prices of fuel were brought down by the oil companies, which was an inter-ministerial debate. Despite that, the airlines did not cut down the price. Clearly he is a bit miffed about that. Also the airlines are in a conundrum over the situation as by the end of this year they are going to show a loss of Rs 6000 crore. Even if they lower prices, the seat load factors aren’t going up and demand is stuck. We have been seeing this month after month. This is a great dilemma and I think the best solution to this might be for the airlines to start cutting their prices and see an increase in their seat load factor which will help them to come out of red,” he added.
Saturday, November 15, 2008
iPhone disconnects in India
India may have the world’s fastest growing wireless market, but Apple (AAPL) didn’t set its hopes particularly high when it launched the iPhone 3G there in August. It reportedly shipped only 50,000 units to its partners on the subcontinent, with plans to double that number by the end of the year.
If so, those partners may have a lot of unsold iPhones on their hands come January. According to a long postmortem published this week in the Delhi-based newspaper Mint, Apple has sold only 11,000 iPhones in India, a country of 1.14 billion that buys 8 to 10 million cellphones a month.
“IPhone’s launch in India has been dubbed the biggest failure of a top-notch brand from a well regarded company in recent times,” wrote Priyanka Mehra and Shauvik Ghosh in a piece that underscores the difficulty of adapting Apple’s U.S.-based smartphone strategy to markets around the world.
Price, according to the authors, is only part of the problem. Although most Indians buy cheap cellphones on a pre-paid basis, there were plenty of potential customers who could afford the 31,000 rupees ($716 at the time) that Bharti Airtel and Vodafone Essar were charging for the 8GB iPhone. According to Mint, Nokia (NOK), Samsung and RIM (RIMM) are all doing good business in India selling smartphones that cost even more.
But Steve Jobs had announced before the launch that Apple would be priced at $199 globally — less than 10,000 rupees — a promise he couldn’t deliver on in India because local cellphone companies don’t subsidize cellphones with lock-in clauses the way carriers routinely do in the United States and Europe.
“This built a false hope in the minds of those consumers who wanted to buy it and turned away those who could have actually bought it,” Prathap Suthan, creative director of advertising agency Cheil Communications India, told Mint.
Moreover, he says, Bharti and Vodafone, lacking experience in the complex Indian retail environment, dropped the ball in terms of marketing and distribution. By selling iPhones exclusively at their own outlets, they’ve antagonized the big retail chains that dominate the market in India.
“A brand like Apple need not be told that an iconic product needs iconic advertising, a solid marketing push,” says Suthan, “The company failed to strike a connect with Indian consumers.”
If so, those partners may have a lot of unsold iPhones on their hands come January. According to a long postmortem published this week in the Delhi-based newspaper Mint, Apple has sold only 11,000 iPhones in India, a country of 1.14 billion that buys 8 to 10 million cellphones a month.
“IPhone’s launch in India has been dubbed the biggest failure of a top-notch brand from a well regarded company in recent times,” wrote Priyanka Mehra and Shauvik Ghosh in a piece that underscores the difficulty of adapting Apple’s U.S.-based smartphone strategy to markets around the world.
Price, according to the authors, is only part of the problem. Although most Indians buy cheap cellphones on a pre-paid basis, there were plenty of potential customers who could afford the 31,000 rupees ($716 at the time) that Bharti Airtel and Vodafone Essar were charging for the 8GB iPhone. According to Mint, Nokia (NOK), Samsung and RIM (RIMM) are all doing good business in India selling smartphones that cost even more.
But Steve Jobs had announced before the launch that Apple would be priced at $199 globally — less than 10,000 rupees — a promise he couldn’t deliver on in India because local cellphone companies don’t subsidize cellphones with lock-in clauses the way carriers routinely do in the United States and Europe.
“This built a false hope in the minds of those consumers who wanted to buy it and turned away those who could have actually bought it,” Prathap Suthan, creative director of advertising agency Cheil Communications India, told Mint.
Moreover, he says, Bharti and Vodafone, lacking experience in the complex Indian retail environment, dropped the ball in terms of marketing and distribution. By selling iPhones exclusively at their own outlets, they’ve antagonized the big retail chains that dominate the market in India.
“A brand like Apple need not be told that an iconic product needs iconic advertising, a solid marketing push,” says Suthan, “The company failed to strike a connect with Indian consumers.”
Ambani brothers stay mum amid conflicting cases
Estranged billionaire brothers Mukesh and Anil Ambani may have fought over the inheritance of their father, the late Dhirubhai Ambani, a gas-rich river basin and global acquisitions, but the two have, so far, pulled their punches on one issue that could trigger future business conflicts.
Companies owned by the sibling rivals have applied for a raft of trademarks in the past three years that are markedly similar to the other’s already established brands. Besides the similarity in names, the applications also suggest they are looking at the possibility of entering businesses that could potentially put them in direct competition.
Information available on the website of the Controller General of Patents Designs and Trademarks shows that elder brother Mukesh Ambani’s Reliance Industries Ltd (RIL) and its associates have filed for a bevy of trademarks such as Reliance Big Boy, Reliance Big Lots, Reliance Big Box and Reliance Big, among others.
The Reliance-Anil Dhirubhai Ambani Group (R-Adag) of Anil Ambani has, in turn, filed for names such as Big Reliance, Big Fresh Mall, Reliance Big Retail and Reliance Fast Retail.
R-Adag uses the ‘Big’ moniker for its entertainment and media businesses. While its FM radio business is branded Big FM, its chain of mulitplexes has recently been rebranded Big Cinemas from Adlabs Cinemas. The group’s direct-to-home television service is called Big TV, the movie rental venture is named Big Flix and its film production company is registered as Big Pictures.
The younger brother, in the past, fended off a trademark filing by Mumbai-based Apricot Media Pvt. Ltd. The company had sought brand protection for the ‘The Big TV’, but R-Adag opposed the move in the trademark office.
However, so far, the group is conspicuously quiet over the applications filed by the elder brother in the trademark office.
Similarly, the Mukesh Ambani group has kept quiet over the younger brother’s move to register Reliance Big Retail and Reliance Fast Retail. RIL operates a multi-billion-dollar retail venture under a company called Reliance Retail Ltd.
The trademark office, after receiving an application for a trademark, puts it in the public domain for three-four months, to give parties that perceive a conflict of interest an opportunity to protest. The two parties have, so far, not raised any objections against each other.
RIL, India’s largest company by market value, has also filed for brand protection for ‘Reliance Magicplex’ and ‘Qwikrent Books.Movies’ for providing retail services and entertainment, sporting and cultural activities.
The firm has created a spate of fully-owned subsidiaries whose stated business objectives could overlap with some existing R-Adag companies operating in the same space.
The moves also raise questions about the so-called non-compete clause in the family de-merger pact under which the brothers carved up the Reliance empire in June 2005. While the scheme of de-merger that split the Reliance empire was put to all the shareholders, the family agreement remains shrouded in mystery.
Some trademarks experts who Mint spoke with differed on the issue. While some said the two parties may have agreed on some sort of a “co-existence” pact, others said it was unlikely because similar brand names are bound to create confusion among consumers.
Pratibha Singh, a New Delhi-based trademarks and patents attorney, agreed that the “phenomenon was strange”, noting that avoiding public confusion about identities of products or entities is one of the main objectives of trademark law.
“We don’t know the origin of the word ‘Big’ within the Reliance group. If it came from a common pool of assets and marks that were meant to be shared, then it is okay, but if that is not the case, then prima facie it is a case for filing an opposition,” Singh said.
Trademarks lawyer H. Subramanium said the two parties could have common brands if they had “an internal agreement” that allowed them to do so. “Trademark law allows for an honest, concurrent user,” he said, adding that while tangible assets can be divided in a de-merger, it is difficult to split intangible assets and some parties may decide to share them.
It is, however, not clear whether such an agreement exists between the two Ambani brothers.
Responding to a detailed questionnaire sent by Mint, an RIL spokesperson said: “The names mentioned in the list were part of a comprehensive set of names, which was filed as a pre-emptive step with the authorities over two years ago. This exercise was undertaken prior to the finalization of the brand names of our various retail formats. As you will appreciate, since then we have pruned the actual list of brand names, which we would like to be registered.”
The trademark website, however, doesn’t say if the applications have been withdrawn. The website shows the brand name Reliance Big as registered by RIL. The RIL spokesperson added that the company was “committed to protect our trademarks and acknowledge the right of other corporates to protect their trademarks”.
An R-Adag spokesman didn’t respond to Mint’s questions.
Three years after their father died in 2002 without dividing the empire he built, the brothers agreed to split businesses with a 10-year non-compete agreement.
This implied one will not enter the business in which the other is already present. There is no clarity on whether the agreement puts restrictions on entering existing businesses at the time of the de-merger, or applies to new ventures as well.
Companies owned by the sibling rivals have applied for a raft of trademarks in the past three years that are markedly similar to the other’s already established brands. Besides the similarity in names, the applications also suggest they are looking at the possibility of entering businesses that could potentially put them in direct competition.
Information available on the website of the Controller General of Patents Designs and Trademarks shows that elder brother Mukesh Ambani’s Reliance Industries Ltd (RIL) and its associates have filed for a bevy of trademarks such as Reliance Big Boy, Reliance Big Lots, Reliance Big Box and Reliance Big, among others.
The Reliance-Anil Dhirubhai Ambani Group (R-Adag) of Anil Ambani has, in turn, filed for names such as Big Reliance, Big Fresh Mall, Reliance Big Retail and Reliance Fast Retail.
R-Adag uses the ‘Big’ moniker for its entertainment and media businesses. While its FM radio business is branded Big FM, its chain of mulitplexes has recently been rebranded Big Cinemas from Adlabs Cinemas. The group’s direct-to-home television service is called Big TV, the movie rental venture is named Big Flix and its film production company is registered as Big Pictures.
The younger brother, in the past, fended off a trademark filing by Mumbai-based Apricot Media Pvt. Ltd. The company had sought brand protection for the ‘The Big TV’, but R-Adag opposed the move in the trademark office.
However, so far, the group is conspicuously quiet over the applications filed by the elder brother in the trademark office.
Similarly, the Mukesh Ambani group has kept quiet over the younger brother’s move to register Reliance Big Retail and Reliance Fast Retail. RIL operates a multi-billion-dollar retail venture under a company called Reliance Retail Ltd.
The trademark office, after receiving an application for a trademark, puts it in the public domain for three-four months, to give parties that perceive a conflict of interest an opportunity to protest. The two parties have, so far, not raised any objections against each other.
RIL, India’s largest company by market value, has also filed for brand protection for ‘Reliance Magicplex’ and ‘Qwikrent Books.Movies’ for providing retail services and entertainment, sporting and cultural activities.
The firm has created a spate of fully-owned subsidiaries whose stated business objectives could overlap with some existing R-Adag companies operating in the same space.
The moves also raise questions about the so-called non-compete clause in the family de-merger pact under which the brothers carved up the Reliance empire in June 2005. While the scheme of de-merger that split the Reliance empire was put to all the shareholders, the family agreement remains shrouded in mystery.
Some trademarks experts who Mint spoke with differed on the issue. While some said the two parties may have agreed on some sort of a “co-existence” pact, others said it was unlikely because similar brand names are bound to create confusion among consumers.
Pratibha Singh, a New Delhi-based trademarks and patents attorney, agreed that the “phenomenon was strange”, noting that avoiding public confusion about identities of products or entities is one of the main objectives of trademark law.
“We don’t know the origin of the word ‘Big’ within the Reliance group. If it came from a common pool of assets and marks that were meant to be shared, then it is okay, but if that is not the case, then prima facie it is a case for filing an opposition,” Singh said.
Trademarks lawyer H. Subramanium said the two parties could have common brands if they had “an internal agreement” that allowed them to do so. “Trademark law allows for an honest, concurrent user,” he said, adding that while tangible assets can be divided in a de-merger, it is difficult to split intangible assets and some parties may decide to share them.
It is, however, not clear whether such an agreement exists between the two Ambani brothers.
Responding to a detailed questionnaire sent by Mint, an RIL spokesperson said: “The names mentioned in the list were part of a comprehensive set of names, which was filed as a pre-emptive step with the authorities over two years ago. This exercise was undertaken prior to the finalization of the brand names of our various retail formats. As you will appreciate, since then we have pruned the actual list of brand names, which we would like to be registered.”
The trademark website, however, doesn’t say if the applications have been withdrawn. The website shows the brand name Reliance Big as registered by RIL. The RIL spokesperson added that the company was “committed to protect our trademarks and acknowledge the right of other corporates to protect their trademarks”.
An R-Adag spokesman didn’t respond to Mint’s questions.
Three years after their father died in 2002 without dividing the empire he built, the brothers agreed to split businesses with a 10-year non-compete agreement.
This implied one will not enter the business in which the other is already present. There is no clarity on whether the agreement puts restrictions on entering existing businesses at the time of the de-merger, or applies to new ventures as well.
Indian auto firms hit by slowdown
The economic slowdown has started taking its toll on the Indian auto industry. With retail sales hit hard, big auto companies have started defaulting on payments to component suppliers. As a result, the $18-billion auto-parts industry is fearing huge production cuts and layoffs.
The poor sales in October have created a virtual panic, with most players slashing production to cope with the weak demand. Along with this, many component makers have decided to halt production temporarily, while many have decided to cut back output and even lay off contractual staff.
In October, sales were down 9% this year for cars, utility vehicles and multi-purpose vehicles. That's the sharpest drop this financial year and among the steepest monthly slide in the past 12 to 18 months. Industry experts say this will pull down cumulative growth for the fiscal to around 4%.
The passenger vehicle tally in October was down to 124,000 units compared to around 136,000 units last October and 140,000 units in September this year. Worse, the gloom isn't limited to cars alone. Truck sales, always the first telltale indicator of the health of the economy, have started sending out some panic signals.
Until just before Diwali, the inventory pile-up at the dealer end was a staggering 19,000 vehicles, with another 6,000 trucks stuck with private banks and financiers due to defaults by transporters, according to a study by the Indian Foundation of Transport Research and Training (IFTRT).
The financing bite is beginning to hurt now, as more defaults and fewer footfalls take the life out of auto sales. In !the first half of the current fiscal year, passenger-vehicle sales grew by a respectable 7.5%, mostly on account of robust growth in utility vehicles. With sales of market leader Maruti turning flat and now negative, the car industry is stuck in first gear. And trucks are on skid row.
Two-wheelers, which had bucked the slide so far, have also hit skid row. The country's largest two-wheeler maker !Hero Honda Motors Ltd (HHML) posted a 3.44% decline in total sales in October to 352,000 units against 365,000 units last year. Several vendors say that auto companies are now deferring payments by many days.
"On an average, we used to receive payments in a time span of 30 to 60 days. However, companies are now de!ferring this and some have even held back the payments by even 100 days or more, which is really hitting us hard," said a vendor, who declined to be named.
Auto companies blame the poor demand at the retail end for this. "They are telling us that the vehicles are not selling and most of them are becoming their inventories or inventories of dealers. So how do they pay us?" the vendor !asked.
J.S. Chopra, president of the Automotive Component Manufacturers Association (ACMA), who also is head of the component company Delphi-TVS, confirmed that vendors are under a huge financial stress. "The crippling liquidity crunch has slowed down vehicle demand, especially in commercial vehicles. Payments from auto companies are getting delayed, loans for capacity expansion are difficult to secure and even disbursement of loans already approved by banks are being deferred," he said.
While there are 575 component suppliers registered with ACMA, more than 1,000 companies from the unorganised sector are also catering to the auto industry, giving direct employment to about 250,000 people. A worrying trend is that the component industry's growth has come down from more than 20% between 2002 and 2007 to a poor 6% in the April-September 2008 period.
ACMA's executive director Vishnu Mathur said not only the domestic market, but exports are also in doldrums because of the downturn in US and European markets. Analysts, however, feel that exports may revive fast, as companies abroad would be looking at cost-cutting that could send business to low-cost markets such as India.
The uncertain outlook is forcing companies to go slow on new investment plans. The ACMA had earlier forecast that the annual investments would be as much as $ 1.5 billion, though Mr Mathur now cautions that this may not be so.
N.K. Minda of Minda Industries said his company is contemplating delaying fresh investment plans by at least six months. "The situation is tough and we !have reduced production days to four days from six," he said.
Jayant Davar, managing director of Sandhar Technologies that supplies a range of components to two-and four-wheel companies, said companies are only undertaking mandatory or unavoidable capital expenditure plans. "Companies are telling us not to stock inventory. Component makers are now actively looking at cutting costs. That includes laying off temporary workers," he said.And the situation seems to be getting worse for auto companies. After announcing a block closure at its Jamshedpur plant, Tata Motors is shutting commercial vehicle production at its Pune and Lucknow factories for six days this month. Component supplier sources point to production slowdowns in other companies, including the utility-vehicle major Mahindra and Mahindra (M&M).
Tata said it is shutting production to avoid inventory buildup. The Pune plant will be shut from next Friday to Nov 26, while output was halted at Lucknow from last Monday to today.
Unavailability of finance, coupled with high interest rates, is forcing customers to postpone purchases, the company said. "This will call for appropriate action from Tata Motors from time to time, to match production with demand and avoid unnecessary buildup of inventory in the company or with the company's dealers," the spokesperson said.
Vendor sources said Mahindra had slowed down production with expected weak sales forecast. The company shut down its plant for the first week of this month. Rajesh Jejurikar, chief of operations for Mahindra's automotive sector, said the !company was closely watching the market situation and will keep production in line with demand.
The poor sales in October have created a virtual panic, with most players slashing production to cope with the weak demand. Along with this, many component makers have decided to halt production temporarily, while many have decided to cut back output and even lay off contractual staff.
In October, sales were down 9% this year for cars, utility vehicles and multi-purpose vehicles. That's the sharpest drop this financial year and among the steepest monthly slide in the past 12 to 18 months. Industry experts say this will pull down cumulative growth for the fiscal to around 4%.
The passenger vehicle tally in October was down to 124,000 units compared to around 136,000 units last October and 140,000 units in September this year. Worse, the gloom isn't limited to cars alone. Truck sales, always the first telltale indicator of the health of the economy, have started sending out some panic signals.
Until just before Diwali, the inventory pile-up at the dealer end was a staggering 19,000 vehicles, with another 6,000 trucks stuck with private banks and financiers due to defaults by transporters, according to a study by the Indian Foundation of Transport Research and Training (IFTRT).
The financing bite is beginning to hurt now, as more defaults and fewer footfalls take the life out of auto sales. In !the first half of the current fiscal year, passenger-vehicle sales grew by a respectable 7.5%, mostly on account of robust growth in utility vehicles. With sales of market leader Maruti turning flat and now negative, the car industry is stuck in first gear. And trucks are on skid row.
Two-wheelers, which had bucked the slide so far, have also hit skid row. The country's largest two-wheeler maker !Hero Honda Motors Ltd (HHML) posted a 3.44% decline in total sales in October to 352,000 units against 365,000 units last year. Several vendors say that auto companies are now deferring payments by many days.
"On an average, we used to receive payments in a time span of 30 to 60 days. However, companies are now de!ferring this and some have even held back the payments by even 100 days or more, which is really hitting us hard," said a vendor, who declined to be named.
Auto companies blame the poor demand at the retail end for this. "They are telling us that the vehicles are not selling and most of them are becoming their inventories or inventories of dealers. So how do they pay us?" the vendor !asked.
J.S. Chopra, president of the Automotive Component Manufacturers Association (ACMA), who also is head of the component company Delphi-TVS, confirmed that vendors are under a huge financial stress. "The crippling liquidity crunch has slowed down vehicle demand, especially in commercial vehicles. Payments from auto companies are getting delayed, loans for capacity expansion are difficult to secure and even disbursement of loans already approved by banks are being deferred," he said.
While there are 575 component suppliers registered with ACMA, more than 1,000 companies from the unorganised sector are also catering to the auto industry, giving direct employment to about 250,000 people. A worrying trend is that the component industry's growth has come down from more than 20% between 2002 and 2007 to a poor 6% in the April-September 2008 period.
ACMA's executive director Vishnu Mathur said not only the domestic market, but exports are also in doldrums because of the downturn in US and European markets. Analysts, however, feel that exports may revive fast, as companies abroad would be looking at cost-cutting that could send business to low-cost markets such as India.
The uncertain outlook is forcing companies to go slow on new investment plans. The ACMA had earlier forecast that the annual investments would be as much as $ 1.5 billion, though Mr Mathur now cautions that this may not be so.
N.K. Minda of Minda Industries said his company is contemplating delaying fresh investment plans by at least six months. "The situation is tough and we !have reduced production days to four days from six," he said.
Jayant Davar, managing director of Sandhar Technologies that supplies a range of components to two-and four-wheel companies, said companies are only undertaking mandatory or unavoidable capital expenditure plans. "Companies are telling us not to stock inventory. Component makers are now actively looking at cutting costs. That includes laying off temporary workers," he said.And the situation seems to be getting worse for auto companies. After announcing a block closure at its Jamshedpur plant, Tata Motors is shutting commercial vehicle production at its Pune and Lucknow factories for six days this month. Component supplier sources point to production slowdowns in other companies, including the utility-vehicle major Mahindra and Mahindra (M&M).
Tata said it is shutting production to avoid inventory buildup. The Pune plant will be shut from next Friday to Nov 26, while output was halted at Lucknow from last Monday to today.
Unavailability of finance, coupled with high interest rates, is forcing customers to postpone purchases, the company said. "This will call for appropriate action from Tata Motors from time to time, to match production with demand and avoid unnecessary buildup of inventory in the company or with the company's dealers," the spokesperson said.
Vendor sources said Mahindra had slowed down production with expected weak sales forecast. The company shut down its plant for the first week of this month. Rajesh Jejurikar, chief of operations for Mahindra's automotive sector, said the !company was closely watching the market situation and will keep production in line with demand.
Consumers Slash Spending
Consumers, taking a beating from the worst financial crisis in 70 years, sharply cut back spending in October, pushing retail sales down by a record amount.The Commerce Department reported Friday that retail sales fell by 2.8 percent last month, surpassing the record 2.65 percent plunge in November 2001 following the terrorist attacks.The October sales decline was led by a huge fall in auto purchases, but sales of all types of products suffered as consumers, worried about their jobs and market turbulence, reduced spending.The dismal report on retail sales was worse than the 2 percent decline that analysts expected. It marked the fourth straight decrease, the longest stretch of weakness on record.
Retailers are braced for what could be the worst holiday shopping season in decades with economists forecasting a recession that could turn out to be the steepest since the 1981-82 downturn.A survey of the nation's big chain retail stores found that retailers suffered through the weakest October in at least 39 years even though they tried to gin up more sales through frenzied price-cutting.Connecticut retailers aren't suffering as much as those in other parts of the nation, said Peter Gioia, who tracks the economy for the Connecticut Business and Industry Association, but some smaller stores are struggling even as the holiday shopping season begins. "I don't think it's going to be a total bust, but a lot of local retailers are going to feel it," Gioia said. "The situation is worse in Fairfield County. There are a lot of people who work in New York City, and right now New York is a basket case. They're cutting back."In the 2001 recession, the consumer did not go into recession. Consumer spending was there. Manufacturing and IT got clobbered, but the consumer didn't."As President George W. Bush and other world leaders gathered for a weekend summit to search for ways out of the current financial crisis, Federal Reserve Chairman Ben Bernanke hinted at another interest rate cut.Bernanke said financial markets remain under "severe strain" in a speech to a central banking conference in Frankfurt, Germany. He pledged to continue working with other countries to deal with the crisis and left open the door to a fresh interest rate cut to help brace the sinking U.S. economy.Bush is hosting a leaders' summit of the Group of 20, which includes not only the world's wealthiest nations but also major developing countries such as Russia, China, Brazil and India. The G-20 leaders are meeting in Washington for two days of talks that will wrap up Saturday.
Retailers are braced for what could be the worst holiday shopping season in decades with economists forecasting a recession that could turn out to be the steepest since the 1981-82 downturn.A survey of the nation's big chain retail stores found that retailers suffered through the weakest October in at least 39 years even though they tried to gin up more sales through frenzied price-cutting.Connecticut retailers aren't suffering as much as those in other parts of the nation, said Peter Gioia, who tracks the economy for the Connecticut Business and Industry Association, but some smaller stores are struggling even as the holiday shopping season begins. "I don't think it's going to be a total bust, but a lot of local retailers are going to feel it," Gioia said. "The situation is worse in Fairfield County. There are a lot of people who work in New York City, and right now New York is a basket case. They're cutting back."In the 2001 recession, the consumer did not go into recession. Consumer spending was there. Manufacturing and IT got clobbered, but the consumer didn't."As President George W. Bush and other world leaders gathered for a weekend summit to search for ways out of the current financial crisis, Federal Reserve Chairman Ben Bernanke hinted at another interest rate cut.Bernanke said financial markets remain under "severe strain" in a speech to a central banking conference in Frankfurt, Germany. He pledged to continue working with other countries to deal with the crisis and left open the door to a fresh interest rate cut to help brace the sinking U.S. economy.Bush is hosting a leaders' summit of the Group of 20, which includes not only the world's wealthiest nations but also major developing countries such as Russia, China, Brazil and India. The G-20 leaders are meeting in Washington for two days of talks that will wrap up Saturday.
Spencer’s ties up with international apparel brand
Retail chain Spencer’s has signed an exclusive tie-up with international apparel brand Beverly Hills Polo Club (BHPC) and their collection will be available at Spencer’s stores located in 66 cities.“BHPC epitomises refined comfort and stylish elegance for today’s successful and confident Indian youth and we are very proud to associate with them,” Sanjiv Goenka, vice chairman of RPG enterprises said here at a press conference Friday.
Spencer’s, which is a part of the RPG group, already has a private label programme in fashion that has internationally acclaimed brands like Island Monaks and Mark Nicolas.
Goenka said: “BHPC covers a wide range of lifestyle clothing for both men and women. Fashion has been a significant segment in the evolution of Indian retail industry; not due to its size but the way it has influenced lifestyle.
“It was apparel that led multi- national brands to explore and invest in the Indian market, which set the ball rolling towards organised retailing,” he added.
Referring to the growing importance of fashion in Spencer’s retail business, Goenka said: “Fashion currently contributes 10 percent to the company’s revenue which is expected to increase to 25-30 percent in the years to follow.”
BHPC’s fall/winter collection comprises polo t-shirts, sweat shirts and sweat pants, casual shirts and trousers for both men and women. The merchandise starts at Rs.399 and goes up to Rs.1,499.
Spencer’s, which is a part of the RPG group, already has a private label programme in fashion that has internationally acclaimed brands like Island Monaks and Mark Nicolas.
Goenka said: “BHPC covers a wide range of lifestyle clothing for both men and women. Fashion has been a significant segment in the evolution of Indian retail industry; not due to its size but the way it has influenced lifestyle.
“It was apparel that led multi- national brands to explore and invest in the Indian market, which set the ball rolling towards organised retailing,” he added.
Referring to the growing importance of fashion in Spencer’s retail business, Goenka said: “Fashion currently contributes 10 percent to the company’s revenue which is expected to increase to 25-30 percent in the years to follow.”
BHPC’s fall/winter collection comprises polo t-shirts, sweat shirts and sweat pants, casual shirts and trousers for both men and women. The merchandise starts at Rs.399 and goes up to Rs.1,499.
RPG faces slowdown music in retail bazaar
NEW DELHI: RPG Enterprises, which runs Spencer’s, Music World and Books and Beyond retail stores, has slashed revenue target by 16-22% for its
retail business from Rs 1,800 crore to Rs 1,400-1,500 crore this fiscal on store closures and ‘challenging’ retail environment. “We closed 56 non-performing stores. Either the location of such stores was not good or we were paying very high rentals for the stores,” RPG Enterprises vice-chairman Sanjiv Goenka said, adding that the company didn’t intend to close down more stores. Spencer’s currently has 400 stores, including 32 large-format stores. Mr Goenka said company’s expansion plans remained intact, as it would spend Rs 2,500 crore on taking the total number to 750 stores by March ‘10. The company plans to add 50 stores by the end of the current fiscal. “The retail environment is challenging and the period up to March ’09 will be difficult,” Mr Goenka said, adding that a decline in inflation may prompt RBI to cut interest rates further fuelling demand from the beginning of the next fiscal. A stock market
turmoil, high rate of inflation and recent reports of job cuts have forced Indian consumers to defer purchases, putting pressure on retailers’ top line in the past six months. Diwali sales were weak at Spencer’s this year. “Earlier we used to have bumper sales on all 7-8 days leading up to Diwali. But this year, we saw such sales only on Dhanteras (two days before Diwali),” he said. Meanwhile, Spencer’s also announced a franchisee agreement with US-based apparel brand
retail business from Rs 1,800 crore to Rs 1,400-1,500 crore this fiscal on store closures and ‘challenging’ retail environment. “We closed 56 non-performing stores. Either the location of such stores was not good or we were paying very high rentals for the stores,” RPG Enterprises vice-chairman Sanjiv Goenka said, adding that the company didn’t intend to close down more stores. Spencer’s currently has 400 stores, including 32 large-format stores. Mr Goenka said company’s expansion plans remained intact, as it would spend Rs 2,500 crore on taking the total number to 750 stores by March ‘10. The company plans to add 50 stores by the end of the current fiscal. “The retail environment is challenging and the period up to March ’09 will be difficult,” Mr Goenka said, adding that a decline in inflation may prompt RBI to cut interest rates further fuelling demand from the beginning of the next fiscal. A stock market
turmoil, high rate of inflation and recent reports of job cuts have forced Indian consumers to defer purchases, putting pressure on retailers’ top line in the past six months. Diwali sales were weak at Spencer’s this year. “Earlier we used to have bumper sales on all 7-8 days leading up to Diwali. But this year, we saw such sales only on Dhanteras (two days before Diwali),” he said. Meanwhile, Spencer’s also announced a franchisee agreement with US-based apparel brand
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