Current Events: Business & Economy

Future Group turns focus on building private labels

Private labels provide better margins

The Future Group has marked an investment of Rs 200 crore towards building its private

labels business with intentions of reaching a revenue sales turnover of Rs 10,000 crore by the

year 2012. Its flagship company Pantaloon Retail is expected to become a full fledged

'consumption'-oriented company with an increased focus on building private labels through

the group's vertical — Future Brands.

India is still an unbranded country with only 8 per cent of goods being branded. For retailers,

building private brands is now a strategic approach as it would drive their margins and give

them better negotiating powers with manufacturers.

Taking on the might of MNCs with its private brands, the Future Group is now poised to pit

itself against the companies manufacturing similar products in categories ranging from

FMCG to consumer durables. The Kishore Biyani promoted company expects its private

labels to contribute an additional 10 per cent to its existing margins.

Currently some of the group's consumer brands are John Miller, Indigo Nation, DJ&C in

apparel and FMCG brands such as Tasty Treat, Care Mate, Fresh 'n Pure followed by

consumer durable brands such as Koryo and Sensei.

ASCI not impressed with P&G, HUL face cream ads

ASCI directed withdrawal of the ads as the claims made were unsubstantiated

Face creams promising anti-aging miracles and flawless skin were under Advertising

Standards Council of India (ASCI) scanner. P&G's Olay Total Effects, with claims of being

"India's best anti-aging cream", was made to withdraw its TV commercial (TVC) as it was

"completely unsubstantiated and unqualified and a mere attempt to mislead consumers".

The complaint received by ASCI stated that it was unclear on what basis the claim was being

made by the MNC and that substantiating such a strong claim would amount to disparaging

all other anti-aging products sold in India.

Meanwhile, HUL's Fair & Lovely TVC showed shots with a central focus on an unbranded

jar which clearly resembled P&G's Olay Total Effects jar.

 

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Considering the P&G brand was being targeted by HUL quite blatantly, the advertiser

decided to take it off the air before ASCI asked the FMCG major to withdraw its ad.

HUL's other skincare brand, Ponds Flawless White, also came under the scanner as its claim

was highly exaggerated, unsubstantiated and would mislead consumers. The fact that HUL's

Ponds 'flawless white' was expected to completely erase dark spots and scars and all other

facial skin imprecations was not a credible claim ASCI felt, and the advertiser has assured

appropriate modification in its ad.

The claim by HUL's other brand, Ponds Age Miracle, of performing a "miracle" on the

consumer's skin within a 7-day period was also not accepted by ASCI. In fact, realising the

false claims made by its brand, HUL decided to take it off the air before ASCI could send it a

notice. Even L'Oreal-owned Garnier skincare brand's claim of making skin tones fairer in

just 7 days was considered to be misleading to consumers.

In the ad, a fairness scale is used to show different scales or shades of fairness where

individual results may vary after using Garnier Light Fairness and dark spots prevention daily

moisturiser. The ad, created by Publicis India, was not seen as credible by ASCI. The

advertiser has assured appropriate modification of the claim.

DoT unveils roadmap for number portability

Invites bids from tech companies to set up the system.

Kick-starting the process for implementing mobile number portability (MNP), the

Department of Telecom has invited bids from technology companies which will set up the

system in the country. Number portability allows subscribers to retain their existing telephone

numbers when they switch from one operator to another. A recent study pointed out that

having to give up their mobile numbers was the top reason that subscribers did not want to

change their operator despite poor quality of services.

The move to introduce MNP will now force cellular operators to offer better quality of

services in order to keep the churn rate low. Number portability will benefit the new mobile

operators, who can hope to take away some of the subscribers from the existing operators,

without having to change the user's phone number.

Once number portability is introduced, a mobile subscriber on Airtel network can go to

Vodafone without having to give up the phone number. Once Vodafone gets a request from

the subscriber, it is then routed through the MNP service provider, which then informs all the

other operators about the switch of operator by the subscriber.

 

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Anil Agarwal is E&Y Entrepreneur of the Year

Hotelier PRS Oberoi wins the Lifetime Achievement Award

Anil Agarwal, executive chairman of the London Stock Exchange-listed Vedanta Resources

(pictured), is the Ernst &Young (E&Y) Entrepreneur of the Year. Agarwal will now represent

India at the E&Y World Entrepreneur of the Year Award in Monte Carlo, Monaco in May

2009. The 10th edition of the E&Y awards in India was decided by a six-member jury headed

by KV Kamath, managing director and chief executive of ICICI Bank.

Lifetime Achievement Award went to PRS Oberoi, chairman and chief executive of the

Oberoi group. AM Naik, chairman and managing director, Larsen and Toubro was the

Manager Entrepreneur of the Year while Start-up Entrepreneur of the Year award went to

Arvind Rao, CEO and co-founder of OnMobile Global.

Category wise award winners include:

􀂙
Entrepreneur of the Year (infrastructure and construction): Jaiprakash Gaur, founder

chairman of Jaypee Group

􀂙
Entrepreneur of the Year (manufacturing): Gautam Thapar, chairman and CEO of

Avantha Group

􀂙
Entrepreneur of the Year (Services): Rohinton Screwvala, CEO of UTV Software

Communications

􀂙
Entrepreneur of the Year (business transformation): Sanjeev Bikhchandani, CEO and MD

and Hitesh Oberoi, director and COO of Info Edge

􀂙
Entrepreneur of the Year (health care and life sciences): P Namperumalsamy, chairman of

Aravind Eye Care Systems.

Entrepreneur of the Year award winner Anil Agarwal has proven his ability to build from

scratch and compete in the business world as a global player. From

humble beginnings as a metal trader in Patna, Bihar, he has certainly

come a long way to head Vedanta Resources, one of the biggest metal

and mining companies in the world.

Agarwal has transformed Vedanta Resources into the largest integrated

producer of zinc and the second-largest producer of aluminum in India.

Under his leadership, the group adopted the strategy of inorganic growth

and with its recent acquisition of Sesa Goa, Vedanta has become the largest private sector

producer-exporter of iron ore in India. Being a visionary, Agarwal fully utilised the

government's privatisation policy to his advantage and acquired companies such as BALCO

and Hindustan Zinc Limited.

 

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He is renowned for turning around non-performing assets and successfully integrating them

into his group. Agarwal has expanded Vedanta's operations beyond the Indian shores to

Zambia and Australia. He also got the company listed on the London Stock Exchange.

Agarwal plans to venture into new segments such as power generation and mining. Having

acquired an allotment of coal mines and reserves of more than 320 million tonnes, the

company targets an installed capacity of 10,000 MW by 2012. Vedanta runs literacy and

healthcare camps in 70 villages across Rajasthan under an integrated village development

programme.

India Inc: Greasing palms is a way of business

India remains one of the five worst bribe-payers in the world

Indian companies have been perceived as one of the worst bribe-payers while engaging in

business abroad, ranking along with firms in other BRIC countries — Russia and China —

according to anti-corruption organisation Transparency International (TI) 2008 Bribe Payers

Index (BPI).

Though India has improved its BPI score of 6.8 out of 10 this year compared to the last BPI

survey in 2006, when it was ranked last with a score of 4.62, it still remains one of the five

worst countries in the world, as bribery by emerging exporters is still on the high side. The

lower the average score, higher the corruption. "The BPI provides evidence that a number of

companies from major exporting countries still use bribery to win business abroad, despite

awareness of its damaging impact on corporate reputations and ordinary communities," said

the TI Chairman.

BRIBE PAYERS INDEX (BPI) SURVEY

Top five 2008

Country Score

Belgium 8.8

Canada 8.8

Netherlands 8.7

Switzerland 8.7

Germany 8.6

Worst five 2008

Brazil 7.4

India 6.8

Mexico 6.6

China 6.5

Russia 5.9

The BPI also shows that public works and construction companies are the most corruptionprone

when dealing with the public sector, and most likely to exert undue influence on the

policies, decisions and practices of governments. In the first of two new sectoral rankings,

 

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companies in public works contracts and construction; real estate and property development;

oil and gas; heavy manufacturing; and mining were seen to bribe officials most frequently.

Transparency International recommends the Indian government to sign the international anticorruption

conventions, ratify the United Nations' convention against corruption and also

exhorts it to pass laws like the US Foreign Corrupt Practices Act of 1977.

The BPI is a ranking of 22 of the world's wealthiest and most economically-influential

countries according to the likelihood of their firms to bribe abroad. The survey asked two

questions: whether the respondents had business dealings with companies in the list of 22

countries. If so, how often the companies, having their headquarters outside, pay bribes in

their own country. The index was then composed based on the reply to these two questions.

Around 2,742 executives in 26 countries were part of the latest survey.

IOC unveils India's first hydrogen fuel pump

Hydrogen fuel is superior to CNG in terms of cost and mileage efficiency

While conventional fuels are derived from crude oil or gas, the hydrogen fuel will use

atmospheric air to synthesise pure hydrogen. Indian Oil Corporation (IOC), the country's

largest oil marketing company by sales, will open the country's first hydrogen fueldispensing

station in New Delhi in February.

While conventional fossil fuels like petrol, diesel and CNG are derived from raw materials

such as crude oil or gas, and mostly imported, the hydrogen fuel to be dispensed at this pump

will use atmospheric air to synthesise pure hydrogen, which will be used to fuel vehicles. The

process is called "electroliser" technology.

Further, hydrogen-fuelled cell cars emit only water, while CNG vehicles emit noxious oxides

that have been a concern to authorities ever since CNG was introduced as an automobile fuel

in the capital.

The fuel pump, according to the company, will be set up at a cost of Rs 5 crore, with the

Ministry of New and Renewable Energy and the Ministry of Petroleum and Natural Gas

funding the project in equal measure. In 2006, the government unveiled its National

Hydrogen Energy Roadmap, outlining an ambitious target of converting one million vehicles

to run on hydrogen.

The hydrogen fuel pump will dispense a mix of hydrogen and CNG roughly in the ratio 20:80

to a group of test vehicles comprising three-wheelers and passenger vehicles, mainly drawn

from the government's fleet.

 

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General Motors' next-generation fuel car— the Equinox, which is a hydrogen-powered fuel

cell car — has been sounded out by IOC as a possible test vehicle in India in the coming

months.

In the initial phase, IOC plans to target current CNG vehicle-owners in the capital — public

transport vehicle operators, goods carriers or passenger car owners because these vehicles can

be run on hydrogen fuel mix with a little modification. But use of 100 per cent pure hydrogen

as auto fuel, will require a completely new engine.

Automobile manufacturers like Bajaj Auto, Tata Motors, Ashok Leyland, Eicher Motors and

Mahindra & Mahindra have been involved in IOC's efforts to test hydrogen fuel as a

commercially viable fuel option in the country since 2006. In 2005, talks were conducted

between IOC and Bangalore-based Reva Electric Car Company (RECC) to fine-tune the

hydrogen fuel technology for large-scale commercial use in the country. No progress was

made on the joint venture, says RECC.

In terms of mileage efficiency, cost of fuel and emissions, hydrogen is superior to CNG. "It

depends on how you use hydrogen fuel. If used in a fuel cell car, the mileage efficiency

obtained is twice that of a conventional internal combustion (petrol) engine," says Chetan

Maini, deputy chairman and chief technical officer, RECC.

ADB offers loan for khadi revival

Fashion designers will be roped in to add glamour to the fabric

The Khadi and Village Industries Commission (KVIC) will soon get a $150-million aid by

the Asian Development Bank (ADB) as the Khadi Reform Development Package (KRDP).

The bank would route the funds over three years to the commission through the central

government. The aid would assist in replacement of obsolete looms used by poor weavers,

artisans and spinners and strengthen the grassroots khadi societies. The new looms will have

the capacity to prepare 200 metres of khadi fabric per day.

The commission is roping in top Indian fashion designers to add glamour to the fabric and

has collaborated with reputed institutes, such as the National Institute of Fashion Technology

(NIFT), the National Institute of Design (NID) and the Indian Institute of Handloom

Technology (IIHT).

The KVIC plans to invite bids from fashion designers and event managers to organise fashion

shows, exhibitions and other programmes to popularise khadi among the masses, especially

youth.

 

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Meanwhile, a Khadi Design Centre will be set up in Mumbai this year, to help the budding

fashion designers focus on khadi to hone their skills and showcase their talent. KVIC is

running a scheme known as Product Development, Design Intervention and Packaging

(PRODIP) to encourage institutional and individual research on khadi apparels and novel

marketing ideas. There are about 7,000 KVIC outlets in the country and the commission is

modernising them at a cost of Rs 175 crore. The commission provides Interest Subsidy

Eligibility Certificate (ISEC) to select weavers and artisans, who get working capital at a

mere 4 per cent interest. Such artisans are shortlisted by the State Level Budget Team

(SLBT), which clears their proposal.

New Companies Bill to fix responsibility at top

Removes the grey areas in the existing Companies Act

The new Companies Bill 2008, which is before the standing committee of Parliament, seeks

to fix responsibility and accountability on the top management. The draft Companies Bill

2008 has identified the three key managerial positions as chief executive officer (CEO), chief

finance officer (CFO) and company secretary (CS). By recognising these three key

managerial positions, the Bill is fixing responsibility to bring out a system which is more

accountable, transparent and workable. It would be mandatory to mention the names of

people holding these three positions in the annual report of the company. In the present

system, it is the 'officer in default' who is held responsible for offences committed by a

company. However, the definition of 'officer in default' is so vast in the Companies Act of

1956 that it is virtually impossible to put the blame on anyone. Besides bringing

accountability and transparency in companies, by recognising the three key managerial

personnel, the draft Bill has provided relief to the honorary directors and independent

directors and the non-executive members of the company.

In the existing Companies Act, the term 'officer in default' encompasses all the senior

officials in a company, which include all directors (executive, non-executive and

independent). In case of any offence or lapse, any one of them could be made responsible

even if they have nothing to do with the actual business of the company. In cases where

companies have not filed their returns, action can be taken against anyone in the company

under the definition of 'offer in default'. Hence the new draft Bill will give respite to

companies from such incidents.

The draft Bill aims to ensure financial integrity, corporate governance and risk management

in the companies. Experts say that the bill is a good step in bringing corporate responsibility

by giving statutory recognition to the role of CFO. Another important step that the draft Bill

has proposed is doing away with the need for Union government approval for appointments

and fixing remuneration of the key managerial positions. It also envisages removal of the

ceiling on managerial remuneration based on net profits.