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
Entrepreneur of the Year (Services): Rohinton Screwvala, CEO of UTV Software
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
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
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
Worst five 2008
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
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
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
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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.