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The slump's beginning to hurt bad: M&M boss sends out an SOS

Posted on Monday August 19, 2019

Weak demand has led Mahindra & Mahindra, India’s largest tractor maker, to retrench about 1,500 temporary workers this fiscal. The company has also decided to defer 15-20% of its Rs 12,000-crore investment plans. Managing director Pawan Goenka speaks to Ketan Thakkar about the demand environment and says M&M is pinning its hopes on the festive season.While there are a very few green shoots on the horizon, says Goenka, more job losses can be expected, especially on the dealer and vendor front, if demand does not pick up during the festive season. Some of them may even go bankrupt. Edited excerpts.The festive season starts with Onam, but looks like it is going to be a washout. How is the rest of the season looking?Two days ago, I was at our tractor dealer meet. Most dealers appeared to be fairly positive about the upcoming season. They felt the rains were better late than never, and that despite floods being very bad in some areas, entire states had not been affected. They expect buying to pick up in the festive season. We are expecting 6-8% growth in the last eight months of this financial year, as I had mentioned during the first quarter earnings conference. Based on what I heard from the dealers, I am confident this figure will be achieved. On a full year basis, 0-2% growth is likely.I feel the positive sentiment in the tractor segment will rub off on the rural auto segment. However, at present, I don’t see any specific factors to help us out of the demand slump. The industry body (Society of Indian Automobile Manufacturers) has spoken to the finance minister about our concerns and she (Nirmala Sitharaman) has said she will look into our needs. But I believe some kind of subvention or stimulus package will be required now for a real turnaround of the auto industry. The government may consider various levers — a GST cut, removal of cess, rollout of insurance premium to one year or rollback of 1% tax deducted at source.How are you dealing with the slowdown?This is the fourth slowdown I have witnessed in my career — 2001-02, 2008-09, 2014-2015 and now. I have always said one should not resort to knee jerk measures at a time like this because one is mortgaging one’s future that way. Bad times never last and good times will return. If we do not prepare for the good times with products or capacity, we will miss out when the market revives. We (M&M) have never slowed down or reduced our capex on products during any slowdown. (However,) slowdown is a good time to cut the flab, which is what we are doing. Efficiency of travel, dealer programmes, suppliers — we find quite a bit to reduce. No matter how well you manage a company, you can find ways to avoid some expenses.Have you been compelled to lay off?Yes, we have removed some temporary workforce. From April to the present, we have removed about 1,500 workers. We are trying to keep it to a minimum. The concern is not at the OEM (original equipment manufacturer) level; it is more at the dealer and supplier ends. OEMs will tend not to remove people as we are expected not to be harsh, but if things don’t improve, you will see more job losses among dealers and suppliers.How long do you expect it to continue?We have seen the market decline for 12 month already. We would like to see a turnaround this festive season, but if we miss it, I think you will see a fairly significant negative impact in terms of job losses and investments at the end of the supplier or dealer. There may even be bankruptcy at suppliers as not many have the ability to withstand such a prolonged slowdown. I am more concerned about dealers and suppliers, not OEMs.Right now, there is nothing that I can pinpoint and say it will lead to a bounce back. The only thing that can make a huge difference is if the Centre deems it fit to support the industry for the next four to six months. Then the market may bounce back very quickly.Are investments being deferred at M&M?What is being deferred is what I would call the discretionary investment — repairs or enhancement that may not be urgent; 15-20% of investment is getting deferred.Is the shift from diesel to petrol a worry?One thing we got right was that we saw the move towards petrol and started working on a range of engines. Our smaller petrol engines are all new. We will hopefully have better engines. We have also focused on making petrol versions performance engines that are similar in characteristics to diesel ones, with good low-end torque that will make our petrol engine more fun to drive. The switch is not a disadvantage. We (have been) known for diesel engines; now we have to prove we make very good petrol engines as well.(The writer travelled to Colombo at the invitation of Mahindra & Mahindra)

Coke may be the saviour Coffee Day needed

Posted on Monday August 19, 2019

MUMBAI | BENGALURU: The promoters of the Coffee Day Group plan to restart talks with Coca-Cola for selling a chunk of their stake in the Café Coffee Day (CCD) chain in a bid to cut the group’s debt further, said people with knowledge of the matter. Group company Sical Logistics is also seeking to divest assets, they said.The late VG Siddhartha, the founder of Coffee Day Group, had been in talks with the beverage giant as of June last week. ET had reported on June 27 that Coca-Cola was in exclusive talks with CCD.The negotiations stalled as Coca-Cola was keen on buying a controlling stake in the firm that runs 1,750 CCD outlets in the country while Siddhartha was looking at divesting only a minority stake and wanted to retain control, said the people.Seeking FootholdThe late entrepreneur was seeking a valuation of between Rs 8,000 crore and Rs 10,000 crore, they said. 70730588 Coca-Cola is trying to get a significant foothold in the fast-growing cafe space as its core carbonated drinks segment is seeing a slump in consumption as consumers cut down on sugared drinks.A spokesperson for Coca-Cola refused to comment on what he termed “speculative news”. Coffee Day Enterprises Ltd (CDEL) didn’t respond to queries from ET. If successful, a transaction with Coca-Cola will be incrementally value-accretive to the Coffee Day Group, dubbed India’s answer to Starbucks, but currently under financial stress.The latest move follows CDEL signing an agreement with the world’s largest alternative asset manager Blackstone Group to sell software technology park Global Village Tech Park in Bengaluru for about Rs 3,000 crore. Separately, CDEL subsidiary Sical Logistics is also working on the divestment of certain assets, the proceeds of which will pare debt.CDEL’s debt is expected to drop to about Rs 1,000 crore on conclusion of the sale of Global Village, the company had said on Friday. “The company is expected to have a comfortable position to service the reduced debt obligations,” it had said.A person privy to negotiations between Coca-Cola and Coffee Day in June had told ET at the time that CDEL’s promoters were seeking a valuation four-five times that of sales in the coffee business on the basis of valuation trends in the industry.The group’s coffee business is expected to close the year ended March 2020 with sales of about Rs 2,250 crore, a senior executive has said. The business, which includes some coffee bean exports, had recorded revenue of Rs 1,777 crore and Rs 1,814 crore in FY18 and FY19, respectively, regulatory filings said.Apart from 1,750 stores across India, Café Coffee Day has 60,000 vending machines. It has outlets in Vienna, the Czech Republic, Malaysia, Nepal and Egypt as well. Industry experts believe the deal, if it goes ahead, will fit in with the strategy of Coca-Cola to diversify into other products considering that there is growing awareness about sugared and carbonated drinks. Coca-Cola announced last year that it was buying the Costa Coffee cafe chain for about $5 billion.

Why you should be tracking the bond market

Posted on Monday August 19, 2019

Domestic bond markets have rallied sharply on account of rate softening by RBI as well as a rate cut by the US Fed. India’s sovereign bond yield recently dipped to a 10-year low. Is there trouble for investors ahead? Should you take your flight to safety? These graphical analyses will give you a clearer picture of the scenario. The Reserve Bank of India has cut policy rates to the lowest since 2010 70711822 Domestic interest rates have been cut by 110 basis points to a nine-year low of 5.4%. The central bank has embarked on a rate softening regime to boost slowing economic growth.The US Federal Reserve has also cut rates after a long time 70711823 The US Fed cut rates taking into account muted inflation and global developments that threaten to hurt growth prospects. It has left doors open for more rate cuts in the future. This has boosted sentiment and fuelled bond market rallies worldwide.India’s sovereign bond yield recently dipped to a 10-year low 70711831 Bond prices and yields move in opposite directions. India’s benchmark government bond yield has dropped to its lowest since the subprime crisis of 2008.Domestic bond markets have rallied sharply on account of rate softening by RBI as well as a rate cut by the US Fed. Trimming of fiscal deficit target by the government and planned shift in part of government’s borrowing to overseas markets (leading to lesser domestic supply of government bonds) has also led to euphoria in the bond market.Widening of bond yield spreads signals flight to safety 70711834 The gap in yield between highest grade corporate bonds over comparable government securities has increased. As credit events singed bonds of even the highest grade companies, investors flocked to the safety of government debt. This also means that borrowing costs of corporates have not come down in proportion to drop in interest rates.The gap between bond and equity earnings yield is narrowing 70711841 The lower yield from the Nifty index relative to government bond yield typically means the stock market is expensive. However, narrowing of this gap indicates that risk-reward situation has improved in favour of equities. The bond-equity earnings yield gap indicates how the risk-reward ratio is tilting in terms of macro asset allocation. Earnings yield is the inverse of price-earnings ratio and calculated by dividing earnings per share by the market price of the stock.Central banks worldwide are on the rate cut path 70711850 As economic slowdown grips nations globally as a fallout of trade wars and protectionism, central banks have had to ease interest rates in an attempt to revive growth.Yields in the negative elsewhere10-year government bond yield-Switzerland: -0.98Germany: -0.58Denmark: -0.54Netherlands: -0.46Austria: -0.34Finland: -0.32France: -0.28Sweden: -0.26Belgium: -0.23Japan: -0.23Investor concerns about slowing global growth and easing of monetary policy in the world’s largest central banks have sent bond yields tumbling in many countries. A negative interest rate means you have to pay to keep your money in the bank. Investors in such bonds are not receiving interest but must pay more than the face value of the bonds to acquire them. This is a deliberate policy designed to spur economic growth by forcing people to spend and invest rather than keep money idle. It also incentivises banks to lend more aggressively. However, this is a new phenomenon and no evidence exists supporting its utility.Inverted or near-inverted yield curves in global bond markets spell trouble 70711860 ^as on 14 Aug | # as on 16 AugWhen longer tenure bonds yield lower than shorter tenure bonds, it results in inversion of the yield curve.Inverted yield curve is considered a leading indicator of impending recession. In the US, since 1967, every major recession has been preceeded by inverting of the yield curve. Typically, investors demand higher yields from longer-term bonds to compensate for the higher risk of keeping their money tied up for a longer period. But when yields on shorter term bonds rise above longer term bonds, it signals that the bond market is expecting trouble ahead.Source: Bloomberg | Compiled by ETIG Database | Data as on 12 August

Amazon, Flipkart bet big on festive sales spike

Posted on Monday August 19, 2019

KOLKATA | NEW DELHI: Several electronics, smartphones and fashion brands said festive season orders from Amazon and Flipkart have surged up to 80% over last year in the expectation that consumer spending will revive during the Navratri-Diwali period. For online-focussed brands, festive orders have doubled, three senior industry executives said.Executives of leading brands said the marketplaces have projected a surge of over 40% in consumer traffic during the festive season, which is the largest shopping period for Indian consumers. The marketplaces expect much of these will be converted into actual sales led by discounts and first-time online shoppers, they said.‘Steepest Discounts of the Year’Two executives said consumers can look forward to some of the highest discounts this year during festive season sales, which will be led primarily by online-exclusive brands, with sellers pushing them to pare margins. The first major online festive sale is likely to begin from end-September this year during Navratri and there will be multiple such promotions until Diwali toward the end of October. 70730621 Smartphone maker Realme India CEO Madhav Sheth said sales during Diwali are likely to go up by 8-10% compared with 5-6% growth expected during all of 2019. “We expect migration from feature phones to smartphones will drive sales, while for us festive orders have doubled over last year,” he said.Executives at online-focussed electronics brands such as TCL, Kodak, Thomson and iFFalcon said their festive orders have increased 80-100%. For instance, TCL and iFFalcon together sold 225,000 televisions in the last festive season whereas this year marketplaces are stocking more than twice that number.“While Independence Day sales was good for televisions after a bad June-July boosted by discounts, consumers can look forward to the steepest discount of this year during the festive season,” said Avneet Singh Marwah, CEO of Super Plastronics, licensee of Thomson and Kodak.Smartphones, consumer electronics and apparel are the three largest contributors to ecommerce sales in India, accounting for around 80% of business.On average, online discounts have come down this year after the government tightened norms for foreign-funded online marketplaces. But studies have indicated that ecommerce’s contribution to total sales is going up due to convenience, the wider variety available and new shoppers who are coming on board as internet access gets cheaper.A Flipkart India spokesperson said the marketplace was reporting “very good growth” and was confident of “continued growth” during the festive season. “We are a value player in ecommerce,” he said. “The Flipkart marketplace does more listings at a time when the market seems to be bit slow. So, we do not see a slowdown in that climate.”Amazon India didn’t respond to queries.Electronics brand BPL’s chief operation officer Manmohan Ganesh said festive orders this year have gone up by 55% over last year when it had gone up by 25%. “The marketplaces are bullish since consumer sentiments tend to improve during Durga Puja, Dussehra and Diwali and it’s not that people have less cash, nor is there any salary cut,” he said.Apparel brand Biba’s MD Siddharth Bindra said the marketplaces are hoping and planning for a good Diwali and confirmed there is a surge in orders. The CEO of a leading apparel maker that sells multiple brands online also said the same was happening, led by Flipkart, but declined to give any numbers.Electronics and smartphone industry market researcher GfK India’s MD Nikhil Mathur said value growth will improve during the festive season led by the purchase of premium models with several new launches by smartphone brands and lucrative schemes by electronic brands.

Developers may face liquidity crisis on NBFC woes: Fitch

Posted on Friday August 16, 2019

MUMBAI: Liquidity risk is increasing for Indian-based real-estate developers, as non-bank financial institutions (NBFI; including housing finance companies) are shying away from lending to the sector, said Fitch Ratings.Developers that rely on refinancing from NBFIs, particularly those with weak financial profiles, will be affected the most should conditions persist. The availability of unencumbered assets among large developers may be of limited use, as NBFIs are looking to shed their already-high exposure to the sector, especially to large borrowers.NBFIs have disproportionately increased their share of real-estate sector credit in the previous few years, owing to heightened risk aversion by banks; banks have been cutting exposure due to their own funding challenges that began in late 2018, which have become more acute in the previous few months; domestic bank exposures fell to 2.3% of loans in the financial year ending March 2019 from 2.8% in 2015-16.NBFIs are now also shying away from refinancing maturing debt of even large, proven developers to limit concentration risk to the sector. This is pushing developers towards alternative funding channels, such as private equity. The availability of such funding could be more limited than the value of maturing debt and may only be available to established developers with sufficient unpledged assets. It would also come at a higher cost. We believe banks may still consider exposure to quality real estate, but overall exposure continues to decline.Developers that are focused on high-end projects may face higher risk, as sales of such projects have slowed in the last two years. We believe these developers would be wary of taking sharp price corrections on unsold inventory to boost sales, except in extreme circumstances, as this could diminish the value of unsold inventory and weaken collateral cover for existing lenders.In addition, any boost in sales would be temporary. Meanwhile, developers with substantial exposure to affordable housing may still benefit from marginal access to lenders in light of healthy pre-sales growth, supported by India's substantial housing deficit and government incentives for buyers via the credit-linked subsidy scheme as well as for developers, including tax deductions and grant of infrastructure status, which entitles companies to some benefits and concessions.The government has announced measures to improve NBFI-sector liquidity, but their efficacy remains to be seen. For example, we believe the government's July 2019 announcement to provide a first-loss guarantee of 10% on securitised assets issued by NBFIs to banks could ease funding pressure for NBFIs in the short term. However, the provision refers only to financially sound issuers and there is a lack of clarity about the duration of the guarantee and the definition of what comprises a 'financially sound' entity. In addition, most of the actions by the authorities to alleviate the liquidity squeeze will benefit the largest and least risky NBFIs and is unlikely to address the pressure on the more property focused players.Defaults by two NBFIs - Infrastructure Leasing & Financial Services Ltd (IL&FS) in September 2018 and Dewan Housing Finance Corporation Ltd (DHFL) in June 2019 - have contributed to the sector-wide liquidity squeeze, as investors have become more risk averse. Banks' low appetite for lending to real-estate developers is evidenced by the usually high risk weights attached to such loans. These are due to developers' typically low credit ratings amid high leverage, making exposure to the sector an inefficient use of banks' already-limited capital.Substantial bank recapitalisation to increase lending capacity could benefit NBFIs as well as real-estate developers, subject to the banks' risk appetite. Although a structural improvement in NBFI asset books would take time. Nonetheless, even under better conditions we expect NBFI's to tighten credit standards, with developers facing funding pressure until there is a broader improvement in their operations, with better end-user demand and pricing support.

China to destroy three lakh maps that show Arunachal as part of India

Posted on Tuesday April 02, 2019

Customs officials in China have ordered the destruction of three lakh more maps for not mentioning Arunachal Pradesh and Taiwan as part of its territory and decided to file a lawsuit against four persons for trying to export them to the Netherlands, according to a media report.Last month, officials in China have destroyed 30,000 world maps printed in the country for incorrectly showing the borders with India and depicting Taiwan as a separate country.China claims the north-eastern Indian state of Arunachal Pradesh as part of South Tibet. China routinely objects to Indian leaders visiting Arunachal Pradesh to highlight its stand.India says the State of Arunachal Pradesh is its integral and inalienable part and Indian leaders visit Arunachal Pradesh from time to time, as they visit other parts of the country.The two countries have so far held 21 rounds of talks to resolve the border dispute covering 3,488-km-long Line of Actual Control.China also claims the estranged island of Taiwan as its part.The Global Times reported on Tuesday that customs officers in South China's Guangdong Province will destroy more than three lakh world maps with boundary mistakes and file a lawsuit against four suspects for intending to export the maps to the Netherlands.The customs bureau at the port of Wenjindu in China's Guangdong Province recovered 264,983 incorrect world maps in English for export to the Netherlands on January 17, an employee surnamed Wang from the customs' press office told the Global Times.The maps were printed by a company in Dongguan in China's Guangdong province.In total the company had printed 306,057 problematic maps, which will all be destroyed."Those maps jeopardised China's territorial integrity and will be destroyed soon," Wang said.

India becomes Bacardi's second- largest rum market by volume

Posted on Monday August 19, 2019

MUMBAI: India has outpaced Mexico to become Bacardi’s second largest market for rum by volume, as consumers gradually shift to pricier products across the spirits segments in a largely whiskey-dominated market.Bacardi sold about 1.7 million cases of its eponymous brand in India, compared with 1.4 million in Mexico in 2018. A year earlier, both countries had similar volume sales at 1.4 million cases, according to the International Wine and Spirits Research (IWSR). The US remained the largest market for the Bermuda-based company with rum sales of 6.4 million cases.“We see lot of consumers upgrade to higher-priced rum and other spirits which helped us grow about 19% last year since most of our brands are into premium segments. India is also a top priority market for us globally, and we have been investing in bringing newer brands and supporting infrastructure last year,” said Sanjit Randhawa, the managing director at Bacardi India. "The market also bounced back after highway ban and regulatory issues a year ago.”With sales of Rs3,215 crore, or 6.1 million cases, the maker of Bombay Sapphire gin, Grey Goose and Dewar’s Scotch, is the third largest international spirits company in India, after Diageo and Pernod Ricard.The volume has nearly doubled over the past three years, after it launched a slew of products, especially in non-rum segments such as William Lawson's Scotch, Dewar's 15- and 18-year-old, Star of Bombay gin and sparkling wine brand Martini Prosecco.Whiskey accounts for nearly 70% of India's overall spirits market of 343 million cases in volume.Bacardi doesn't want to restrict its rum portfolio and is planning to launch higher priced versions — it has recently launched Reserva Ocho, an eight years aged rum in India and has plans to introduce four years and 10 years aged rum.“Rum as a category is gradually shifting to aged products globally, similar to whiskey or the scotch segment where consumers like their drinks on the basis of maturation age. The trend will not be different in India which is premiumising rapidly,” added Randhawa.Rum sales in India have historically been driven by the Canteen Stores Department or army canteens and consumers in southern and eastern India, mostly dominated by mass brands. Also, for older consumers, the category is seeing a slow ebb to whisky.“The category is likely to premiumise given consumer sentiment and the increasing interest among local producers to launch premium products,” said the latest IWSR report.Bacardi's rum portfolio grew 22%. In comparison, Diageo, which owns McDowells No1 Celebration and Captain Morgan rum, saw a 3% decline in 2018 in the segment at a much higher base. Mohan Meakin's Old Monk grew 7%, while sales of Khoday expanded 5%, said the report.

US healthcare BPO may be valued at $225 million: PE firms in race to acquire emids Technologies

Posted on Monday August 19, 2019

MUMBAI: In a sign of continued M&A activity in the healthcare technology sector, a bunch of private equity firms including home grown funds Everstone Capital and ChrysCapital Advisors, and global funds such as KKR & Co and Baring Private Equity Asia are in separate talks to buy a controlling stake in Nashville-based healthcare IT services firm emids Technologies in a deal worth $200-225 million.Multiple people aware of the development said through the proposed deal, both promoters and existing US-based PE investors—Baird Capital, Council Capital and Union Grove Venture Partners — will sell their stakes.At present, the three PE funds hold together about 65% stake, promoters hold 23% and the rest of the stake is held by friends and employees. In this proposed deal, promoters are likely to hold about 10% stake in the company.“Promoters demand a price of $225 million, while a couple of bids were submitted at $200 million range,” said one of above mentioned persons.70730650 emids Technologies provides Healthcare Information Technology and BPO services to the healthcare industry. Investment bank Credit Suisse is running a formal process to find a buyer.Spokespersons with KKR, ChrysCapital and Everstone declined to comment while mails sent to Saurabh Sinha, founder & CEO of emids, spokespersons with Baring PE Asia, Baird Capital, Council Capital and Union Grove Venture Partners did not elicit any responses till the press time on Sunday.Founded in 1999 by former Wipro Technologies engineers Saurabh Sinha and Arnab Chatterjee, emids’ business process outsourcing services include electronic health record (EHR) application deployment & management, analytics, data integration & governance, software development & testing, and business intelligence. India is one of the largest markets for emids through its operations in Bengaluru and Hyderabad offices.In 2013, emids Technologies had raised $13.3 million from Baird Capital and Council Capital to meet its organic growth plans and pursue selective acquisitions. In 2017, emids expanded the business with its acquisition of Texas-based healthcare information analytics company Encore Health Resources, which also added about 200 consultants to emids’ base of 1,500 employees in the US.emids’ client base across the US, Europe and Asia include hospitals, medical insurance providers, healthcare technology firms, healthcare software vendors and medical device producers. IT services and technology was among the top three sectors that saw major M&A activities during the first half of 2019 in India, according to data compiled by Thomson Reuters. The sector saw deals worth $5.3 billion, up more than two-fold from the year earlier, the data showed. However, overall M&A activity was down 51.5% compared to the first six months of 2018, it added.Last month, Baring Private Equity Asia had acquired healthcare analytics firm CitiusTech from PE investor General Atlantic and promoters in a deal valuing the company at $1billion.

MNS Chief Raj Thackeray gives support to South Mumbai fishmongers

Nida (2019/IB/FB/02) - Bureau Chief India July 19, 2019

What is black money, and why is it so difficult to quantify it?

Nida (2019/IB/FB/02) - Bureau Chief India July 19, 2019

Nadeem Saifi and his unique piece Dilbar win billions of heart

Nida (2019/IB/FB/02) - State Bureau Chief - Maharashtra July 01, 2019

RSS chief Mohan Bhagwat, six top sangh leaders join Twitter - Read Now

Nida (2019/IB/FB/02) - State Bureau Chief - Maharashtra July 01, 2019

Add these sustenances to your eating routine and keep your liver solid.

Nida (2019/IB/FB/02) - State Bureau Chief - Maharashtra July 01, 2019

Super 30, featuring Hrithik Roshan and Mrunal Thakur, is set to hit screens on July 12, 2019.

Nida (2019/IB/FB/02) - State Bureau Chief - Maharashtra July 01, 2019

One Minute It Was an Afghan Wedding. The Next, a Funeral for 63.

Posted on Monday August 19, 2019

In Afghanistan’s protracted war, weddings have provided a rare respite from the violence. On Saturday, a bomber took away even that.

Hong Kong Protesters Defy Police Ban in Show of Strength After Tumult

Posted on Monday August 19, 2019

After days of violence and warnings from the Chinese government, organizers estimated at least 1.7 million people had turned out, making it the second- largest march of the protests.

Women Are Fleeing Death at Home. The U.S. Wants to Keep Them Out.

Posted on Monday August 19, 2019

Violence against women is driving an exodus of migrants from Central America, but the Trump administration is determined to deny them asylum.

India Plans Big Detention Camps for Migrants. Muslims Are Afraid.

Posted on Sunday August 18, 2019

Four million people in one state are at risk of being denied citizenship in a government campaign critics say is driven by a Hindu nationalist agenda.

Teenage Brides Trafficked to China Reveal Ordeal: ‘Ma, I’ve Been Sold’

Posted on Saturday August 17, 2019

With women far outnumbered by men in China, some Chinese men are importing wives from neighboring countries, and using force to do so.