Success in my Habit

Saturday, February 4, 2012

P&G to lay off 1,600 non-manufacturing staff to cut costs

HOUSTON, FEB 4:
As part of cost-cutting due to flat market shares and growing investor pressure, Procter & Gamble Co plans to eliminate about 1,600 “overhead” or non- manufacturing jobs — including some in marketing — banking on digital marketing to help contain long-term media spending.

The plan was announced by executives at the company’s earnings conference. Reality appears to have finally dawned at Procter & Gamble, the world’s largest marketer, whose $10 billion annual ad budget has hurt the company’s margins.

Earlier this month, P&G announced that it would outsource in-store merchandising work covering about 2,700 employees, most of them part-time, to brokerage firms and expand a programme put in place for some categories two years ago.

That reduction affects about 3 per cent of P&G’s non-manufacturing workforce of about 50,000.

The Chief Financial Officer, Mr Jon Moeller, said P&G would rely on a combination of attrition, “selective hiring” and restructuring to get to the reductions, which will result in $240 million in annual savings, in line with what P&G typically generates through annual restructuring spending.

Meanwhile, social networking site Facebook has claimed it managed to boost sales of a Procter & Gamble deodorant, underlining its growing significance in the retail industry.

As part of its IPO filing this week, Facebook highlighted a case study involving women’s deodorant, ‘Secret’, saying a dedicated page related to anti-bullying helped boost sales of the brand by 9 per cent.

P&G chose to advertise on the site to generate awareness for the ‘Mean Stinks’ campaign and selected a female audience likely to be receptive to the campaign.

The sales growth was reported in the first 26 weeks after the campaign was launched in the US, Facebook claims.

This claim has led to a trend in which more companies will move their advertising dollars from the traditional to the digital media for convenience, more exposure and ease of usage.

According to a marketing expert at Washington University in St Louis, Procter & Gamble is banking on digital marketing to help contain media spending in the long-term.

Company CEO Mr Bob McDonald said he expects its advertising costs to moderate as it moves into the digital arena, citing the billions of free impressions generated by Internet-only ad campaigns, like P&G’s Old Spice commercials in recent years.

“With the advent of digital ad tracking software and digital ad shops like Google, companies are able to track the effects of digital ads in real time in a fine-grained manner,” said Seethu Seetharaman, PhD, the Patrick W McGinnis Professor of Marketing at Olin Business School.

“Companies can quickly monitor who is clicking on an ad, with whom they are sharing the link to the ad and what that second person is then doing,” he said.

Piramal picks 5.5% more in Vodafone India for Rs 3,000-cr

MUMBAI, FEB 4:
The cash-rich Piramal Healthcare has agreed to purchase an additional 5.5 per cent of the issued equity share capital of Vodafone India Ltd from ETHL Communications Holdings Ltd for a cash consideration of approximately Rs 3,007 crore (approximately £385 million).

This takes Piramal Helathcare’s total shareholding in VIL to approximately 11 per cent.

The transaction follows the settlement between Vodafone and Essar over the sale of Essar’s approximately 33 per cent stake in VIL, announced in July 2011, and the purchase by Piramal of approximately 5.5 per cent of the issued share capital of VIL from Essar in August 2011, for over Rs 2,800 crore.

In 2010, Piramal Healthcare had sold its domestic formulations business for Rs 17,000 crore.

The Vodafone transaction contemplates various exit mechanisms for Piramal, including both participation in a potential initial public offering of VIL and a sale of its stake to Vodafone, the company said.

Maruti Suzuki yet to firm up land requirement for Gujarat plant

The country's largest car-maker Maruti Suzuki is yet to firm up the land requirement for its proposed new manufacturing plant in Gujarat.

"We do have plans to go to Gujarat and preliminary talks have been already held with the state government. But nothing has been decided on when and how much land will be acquired there," Managing Executive Officer (Engineering) of Maruti Suzuki I V Rao told reporters here today.

He said that the idea behind the Gujarat plant was to serve export markets through the Mundra port.

"The matter has not been placed before the board for approval yet," Rao said at the launch of new Swift Dzire sedan here.

Rao said the Gujarat idea was floated in May, 2011, when the industry was growing at a healthy rate of 18 per cent.

But with the slowdown in car sales subsequently, no progress had been made in this regard, he said.

With SIAM predicting annual growth of 10 per cent in the automobile segment next few years, the Gurgaon and Manesar plants would suffice to meet the demand.

Post completion of the third plant at Manesar, Maruti's annual production capacity would touch 1.75 million units.

He said that steps were also being taken to reduce the waiting period for diesel cars by increasing production.

Samsung slashes dealer margins, LG to follow suit

KOLKATA | NEW DELHI: Electronics and consumer durables makers are cutting dealer margins or rolling back schemes for retailers to protect their profitability as costs increase due to higher input prices and weaker rupee - a move that some retailers say will make their business unviable.

While Samsung India has slashed dealer margins by 3-6% across categories, market leader LG India will follow suit within 10 days as makers of televisions and refrigerators stare into a tough year because their sales have slowed and consumer sentiment remains low, two senior industry officials said.

"We have to correct imbalances to stay afloat," one of them said on condition of anonymity.

LG India VP-Marketing L K Gupta and Samsung spokesman refused to comment for the story. The two Korean firms together account for more than 45% of the country's consumer durables market estimated at 40,000-45,000 crore.

Consumer durables and electronic makers are battling rising prices of raw materials such as copper and aluminium as well as higher import costs due to a weakening rupee. They wouldn't want to increase prices further because sales have slumped after Diwali with November-December being the hardest months. Japanese firm Panasonic said it may consider margin cuts if things get worse.

"So far we have not reduced trade partners' margins or rolled back schemes. But if costs go up further, there is a possibility that we might," Panasonic India Director (Sales and Marketing) Manish Sharma said. "We will review everything in the coming fiscal," he added.

Panasonic raised prices by 4-5% last month to deal with higher costs. Other such as Philips India and Hitachi too increased prices in January, but not enough to protect their profitability.

"The overall effect of input costs and the like on the end product has been as much as 15-20% for the companies," said KS Raman, director of India's largest durables retailer Next Retail. "The impact has been loaded onto customers only partially."

RETAILERS WORRIED

A Kolkata-based retailer, on condition of anonymity, claimed that certain companies including Godrej and Whirpool have rolled back certain schemes they offered earlier.

Typically, schemes offered by companies include discounts on bulk buying for dealers, and annual tie-ups wherein dealers or retailers surpassing certain targets get extra discounts.

"If you factor these in, our margins have gone down that way as well. It's just that companies like Samsung have been more direct," said the retailer.

Nitesh Giria, director of South Indian durable chain Girias, which has 25 outlets across Tamil Nadu and Karnataka, said it will be hard to survive if margins are cut.

"We operate on 2-3% net margin and our overheads are high. If this (low margins) continues our business will become unviable," Giria said.

Retailers said brands such as Hitachi and Whirlpool now insist that trade partners can sell their product only at the market operating price, or MOP, which means there is no room for double discounting.

"This seems to be a precursor to margin cuts, since in this way, we can maintain the same profitability levels as before and generate a higher turnover because of the increased product prices," Pulkit Baid, promoter of Kolkata's leading high street durable outlet Great Eastern Technocity, said.

When contacted, however, several companies, including Akai India, Philips India and Godrej, denied margin cuts.

"We are not in favour of cutting trade margins to support profitability...If there is pressure on margins, we operate through lean management or if it is not possible, then we pass it on to customers," said Kamal Nandi, Godrej Appliances vice-president (sales and marketing).

GMR Infrastructure withdraws bid for Brazil airport project

BANGALORE: GMR Infrastructure has withdrawn its bid for contracts to modernise three airports in Brazil, but is planning to participate in the second round of privatisation there, a top company official said.

GMR, a developer of airports, power stations and roads, had said in December that it had bid for renovation and expansion projects at Sao Paulo's Guarulhos airport, Viracopos airport near Sao Paulo, and Brasilia airport, which serves Brazil's capital. Over 10 consortiums participated in the bidding, which ended on Thursday.

"We entered the country fairly late and started looking at these opportunities only about four months back. When it came to the final stage, we felt that we are not fully prepared," said Sidharath Kapur, chief financial officer of GMR's airport business.

The company, however, plans to participate the second round of bidding, which is expected in June. "The next round is expected to include a project to modernise and expand Rio deJaneiro's airport, and we are working to participate in it," Kapur said.

GMR Infrastructure's shares closed 1.16% lower at Rs 29.70 on the Bombay Stock Exchange on Friday. The Bangalore-based company, which operates the Delhi and Hyderabad airports in India, is currently upgrading the international Airport in Male, Maldives.

The infrastructure company had earlier abandoned two airports privatisation projects in Spain and Croatia because of the Euro zone crisis. GMR's airport division posted a secondquarter loss of Rs 165 crore, hurt by delays in tariff revision at its Delhi project.

Sahara India ends ties with BCCI, withdraws sponsorship & pulls out of IPL

NEW DELHI: In a surprise development, the Indian cricket team's longtime sponsor Sahara India today ended financial ties with the BCCI and also pulled out of the IPL by withdrawing from Pune Warriors' ownership just hours before the players' auction.

Sahara, which has been the team sponsor for 11 years, signed a renewed agreement with the BCCI on July 1, 2010 till December 31, 2013.

Sahara was paying Rs 3.34 crore per Test match, one-day international and Twenty20 International under the new terms.

"...after an 11-year journey as sponsors, we can say with surety that cricket has become very rich. Many rich people are there to support cricket with a strong will to do so. So, with absolute peace of mind we can exit from cricket under BCCI and are exiting with a heavy heart," Sahara India said in a statement.

"It was an emotional decision for us to start this sponsorship but our emotions were never appreciated and many genuine situations were not given due consideration at all," the statement read.

Sahara, which entered the cash-rich IPL bandwagon last year along with the now-disbanded Kochi Tuskers Kerala, complained that several requests put forth by it with regards to players and the number of matches were not accepted by the BCCI.

"Our first entry into IPL was thwarted in 2008 when we were disqualified, owing to a small technicality on the whims and fancies of BCCI. Yet our Bid was not opened," the statement said.

"Last year, Sahara entered the IPL on the basis of information in the media and everywhere else that 94 matches will be played among 10 teams. The bid price was accordingly calculated, but only 74 matches were played. We are still pursuing continuously with the BCCI to refund the extra bid money proportionately. It has been denied on the basis of strict rules.

"In the interest of the tournament, we repeatedly tried our best to pursue the BCCI for open auction of all players so that we achieve level playing field and all teams are equally balanced from the quality players' point of view. Again, as per BCCI's strict rules it was denied and again, we were deprived of natural justice. 12 of the best players were retained by the existing teams then," it added.

"The two new teams then requested for allowing us at least one extra foreign player but that too was denied, quoting rules."

Sahara's marquee player in the IPL is skipper Yuvraj Singh, who is currently recovering from tumour in the lungs.

His unavailability in the IPL this season prompted Sahara to ask the BCCI that the price of the batsman be added to their overall purse for the players auction but the request was turned down.

"Yuvraj Singh, who is truly like one of our family members, is, quite unfortunately, passing through a bad phase health wise, undergoing treatment for critical illness, overseas.

"Our duty is to take care of him, so Sahara has decided to pay him his full fee this year with condition as a Guardian that his priority should be health care and he should not play till he has fully recovered," the company stated.

"We requested the BCCI on the basis of the fact that we have only one Indian marquee player, that we be allowed to add price of Yuvraj Singh in our auction purse, during the February 4 auction because we had later taken Sourav Ganguly at 0.4 million.

"Again, we have been denied on the basis of the rule book. Yet again, a case of being denied natural justice. We think this peculiar situation of Shri Yuvraj Singh is silent in the rule book because it probably talks only about players who are temporarily injured."

Sahara is apparently also unhappy with the fact that Royal Challengers Bangalore were allowed to buy

2G: Dreams of outsourcing vendors like Tech Mahindra, Wipro turn sour?

MUMBAI: It is a dream turned bitter for many outsourcing vendors that signed deals with new telecom licensees hoping to replicate the phenomenal success of the IBM's outsourcing contract with Bharti Airtel, which grew into a multibillion dollar bagger for the firm.

With the Supreme Court order cancelling all licences issued after 2008, the future revenues that the outsourcing vendors were banking on to recover their initial investment and turn in big profits is now mostly just a dream.

Etisalat DB India has outsourcing contracts with Tech Mahindra that were estimated to grow to $400-500 million while Wipro has an outsourcing contract with Uninor estimated to grow to $500 million. Other than Wipro and Tech Mahindra, back office providers such as Firstsource Solutions, Spanco, Aegis and Intelenet Global Services have customer service contracts with the new telecom operators.

In 2004, telecom operator Bharti Airtel and multinational IBM inked a 10-year outsourcing deal that created business history by growing to $2.5 billion in five years. The deal also brought two more lucrative IT outsourcing contracts into IBM's kitty from Vodafone and Idea, and yet another from Bharti's Africa operations.

Wipro and Tech Mahindra, which were also in the fray in 2004, found the model too risky because it involved upfront investment from the IT vendor and revenues that were linked to subscriber growth. Several years later, hoping to replicate the same success Wipro and Tech Mahindra signed outsourcing contracts with Uninor and Etisalat DB, as did several back office providers.

Wipro's contract with Uninor was to be a showcase transformation project, helping it win global deals. On Thursday, most of these companies only issued brief statements saying they needed to assess the impact. Wipro's chief financial officer Suresh Senpaty said, "We have not studied the impact so it's early to comment on what will happen. Everyone is still trying to understand what this means."

A Tech Mahindra spokesperson said, "We are aware of this and are closely monitoring the development. At this point in time, we would not be able to offer any comment. Furthermore, as a policy, we do not comment on any details pertaining to client specific engagements."

However, people familiar with the fierce competition that went into winning some of these contracts said outsourcing firms had agreed to extremely risky clauses to bag them. For instance, the initial investment made by one of the outsourcing vendors was covered by a bank guarantee that was renewable every few months.

"The bet was the future revenue inflows would be sufficiently high to recover the costs and more," a senior industry professional requesting anonymity said. For business process outsourcing (BPO) firms that had customer service contracts for these circles, cancellation of the licences means even current revenue flows could be impacted.

The impact could vary depending on their exposure to the new telecom licences that were issued. Spanco, for instance, does work with Videocon. All of Videocon's licences, except for Punjab, have been cancelled. Intelenet and Aegis do work with Uninor and Firstsource does work with Idea in some of the affected circles. Both Firstsource and Aegis issued statements saying that the revenue impact would be less than 1%.

Fortunately for most of the BPO providers, they have large customer service contracts even with incumbents such as Vodafone, Bharti and Idea, which has 22 circles in all (nine have been cancelled). BPO contracts are typically covered by a minimum guarantee clause, which means customers have to mandatorily pay them for the minimum volume business even if it is not there.

The telecom sector, which was the largest or second largest business for most of these BPO players, it's a rude awakening. "They may now have to deploy these people in other projects. There could be a glut of people with telecom skills both in IT and BPO," said an industry executive requesting anonymity.

Welspun Group's bid for Vizhinjam Port to be opened on Monday

The Kerala state government will open the bid submitted by the consortium led by Welspun group on Monday to decide the operator for the country's deepest port, when operational.

"The bids will be opened on Monday and the International Finance corporation will ascertain the bid. Then it would be sent to the empowered committee for final approval", said a senior officials of the port.

Welspun is the lone bidder for the project after Adani ports were rejected security clearance by the home ministry in January. In recent times, the cost of developing the port rose by as much as 60% due to escalating land and infrastructure costs.

The port, planned as a container transshipment hub with a capacity to handle 4.1 million TEUs a year, will be built on the landlord model, where the state government will set up the infrastructure and invite an operator to run the port.

While the Kerala government will raise Rs 800 crore through a bond issue, developer VizhinjamInternational has engaged SBI Caps to mop up Rs 800 crore from leading financial institutions such as HUDCO and LIC.

Besides, a consortium led by State Bank of Travancore will bring in Rs 300 crore while the state government has allowed a budgetary allocation of Rs 250 crore every year.

Until 2010, the state government made two unsuccessful attempts to develop the port and bids were invited for developing the entire port project.

In 2006, a consortium of infrastructure firms led by Mumbai-based Zoom developers and three Chinese companies were picked by the state to develop the port.

While the central government rejected Zoom's bid on security grounds, the state government later appointed Hyderabad-based Lanco Infratech to develop the port, but it withdrew from the project after Zoom filed a petition at the Supreme Court challenging the decision.

Tuticorin Port gets new trans-shipment processing, gate module

TUTICORIN (TN): An electronic trans-shipment processing and gate module for movement of containers from the Tuticorin Port to container freight stations and an inland container depot were launched today by Customs Commissioner C Rajendran.

The launch was held on the occasion of the 50th year of the Customs Act, 1962, and International Customs Day.

Rajendran said the effort would reduce time during trans-shipment of containers and also help decongest traffic at the port. A fixed container scanner would be installed in 15 months to make the port a secured one, a port press release quoted him as having said.

Earlier, Collector Ashish Kumar, the chief guest, launched the web site of Tuticorin Customs House, thoothukudicustoms.in.

He said on average, four lakh containers of import and export cargo transited through the port. Until December, 2011, 3.16 lakh containers were moved, he said.

About 91 per cent of import bills of entry and 99 per cent of shipping bills had been processed electronically by the Customs Department, he said.

Tuticorin Customs has collected Rs 2,042 crore till January, 2012, a 9.5 per cent growth compared to last year. During the year, Rs 965 crore was granted as duty drawback and Rs 62 crore as refunds, he said.

A series of interactive sessions and open houses with the Customs House Agents Association, container freight station operators, shipping house agents and terminal operators were organised to address the problems of importers, exporters and service providers, he added.

Dinesh Trivedi meets PM, seeks fund for railway modernisation plan

Ahead of rail budget, Railway Minister Dinesh Trivedi today met Prime Minister Manmohan Singh seeking adequate financial support for the modernisation of the national transporter.

Trivedi had prepared a blueprint for railways modernisation plan envisaging Rs 14 lakh crore investment in the next 10 years which include automation of signalling system, strengthening of the track and installation of safety device to prevent accident.

"He explained to the PM about the dire need of modernisation of railways and submitted the blueprint to him," said sources in railways.

Currently, railways is facing financial crunch and many of its projects are being held up due to the crisis.

Trivedi emphasised on the need for a separate safety plan and sought a liberal grant from the general exchequer outside the rail budget, they said.

The safety plan involves speedy installation Train Protection warning System, upgradation of signal and telecommunication system and mechanised maintainance of tracks.

Besides, the ambitious safety plan also envisages induction of crash-worthy LHB coaches and locomotives as a long-term measure and elimination of unmanned level crossings to do away with mishaps on the tracks.

The last few years have seen minimal investment in the safety infrastructure due to poor financial health of the railways.

As per the safety plan, all electric locomotives are to be equipped with Vigilance Control Device (VCD) to prevent accidents in case the driver is incapacitated during the run.

So far, only 749 locomotives out of 4,147 electric ones have been equipped with VCDs.

There is growing concern about the maintenance of railways' vast network of tracks and the slow pace of installation of anti-collision devices and train protection warning systems.

The Railway Minister had said yesterday that "the present railway system has outlived its utility. We are in some kind of Victorian age as far as the railways are concerned. Signalling is archaic. We have to embark upon a new generation."

He had said there is a requirement of Rs 14 lakh crore for the next 10 years for modernisation of rail network which include automation of signalling system, strengthening of track and procurement of modern rolling stock