Of Elections & Inflation....

Global Retail Development Index 2013

India drops 9 spots in a year!

India (14th) dropped nine places in the ranking. The global slowdown did not spare India, whose GDP growth rate slipped to 5 to 6 percent. Same-store sales volume growth slowed in 2012 across all retail segments. High operating costs, low bargaining power with vendors, and a need to discount heavily to improve sales have put pressure on margins and, therefore, retailers’ expansion plans. Real estate cost and space availability have been important issues as well. Many players are actively looking at improving sales productivity, cutting operating costs, and reducing store size to improve profitability.
Despite these declines the long-term fundamentals for India remain strong. With a large population coupled with an increasingly brand- and fashion-conscious population of young Indians, India's retail sector remains attractive. Retail growth of 14 to 15 percent per year is expected through 2015.

Of Market Cap to GDP ratio

The Indian benchmark index’s recovery from 2008 lows is the second-best in the world after the US. But its market cap has failed to keep pace with the country’s GDP, which has almost doubled in the past five years. Indian markets’ current equity capitalisation is about 61% of India’s GDP and lags developed countries and emerging ones such as Taiwan, Malaysia, South Africa and the Philippines. India’s m-cap to GDP ratio was 96% in December 2010 and 146% in December 2007. India’s GDP, on the other hand, has risen from $ 950 billion to $1.8 trillion. The percentage of market cap to the gross domestic product gauges the degree of financial maturity and the economy’s dependence on capital markets. The most obvious reason behind the decline lies in the depth of market performance since then. Since December 2007, the BSE’s market cap has declined 1% from around 71.51 lakh crore to 71.04 crore. A few sectors such as consumer goods, pharmaceuticals and IT have been the big gainers in the rally. The remaining sectors have grossly underperformed. At the peak of the equity boom in late 2007, the ratio was 146%. In fact, post the 2008-09 global economic crisis, the earnings have improved, but valuations are still low.

Holi Cow!

The Directorate General of Civil Aviation issued a show-cause notice to SpiceJet, citing three key safety issues after its cabin crew were caught on video dancing in the aisles of flights. They were the pilot leaving the cockpit for nonessential purpose, the performance affecting the preparedness of crew, and the most bizarre of them — “frequent movement of the dancing crew” disturbing the aircraft’s centre of gravity.
SpiceJet also said what it did was nothing new in the airline industry. “The dance was professionally choreographed and a Holi delight for passengers, much as is done by several airlines around the world to celebrate special occasions,” its official statement said. “The cockpit was manned at all times as per DGCA regulations that govern situations when one pilot is outside, for instance, to use the toilet,” it added. Nevertheless, SpiceJet said it was working in cooperation with the DGCA. The airline suspended two of its pilots, who will stay away from work until the DGCA completes its investigation.
As per the guidelines of the International Civil Aviation Organisation (ICAO), when a pilot leaves the cockpit during noncritical phases, cabin crew must ensure that the entry to the flight deck is blocked off from passenger access. According to one of the videos gone viral on YouTube, a SpiceJet pilot can be seen standing in front of the cockpit door, filming the performance.
As per DGCA's initial investigation, SpiceJet crew carried out Holi performances on flights between Delhi and Goa as well as on the Jaipur-Mumbai-Delhi, Mumbai-Bangalore-Kolkata and Bangalore-Pune-Ahmedabad routes.

SpiceJet’s performance and the DGCA action subsequently have also generated a lot of interest on micro-blogging website Twitter. SpiceJet was one of the trending topics Thursday morning, but most tweeters came out in support of the airline with a few also questioning whether SpiceJet followed safety standards.

Tirumala Forest inferno tamed

The unprecedented inferno in the Seshachalam biosphere was brought under control through ground and aerial fire-fighting measures involving two MI-17 V5 helicopters, dozens of fire engines and over 1,000 personnel drawn from police, fire services, armed forces and Tirumala Tirupati Devasthanams.
Air-based fire-fighting operations are likely to continue on Friday. This is the second time ever that helicopters have been used in the country to fight forest fires. Last month, MI-17 V5 copters were used to douse flames in the jungles around Mt Japfu in Nagaland.
A well-coordinated effort by several government departments brought the flames under control. The fire, allegedly triggered by red sanders smugglers on Wednesday, threatened the Seshachalam ranges, where the famous shrine of Lord Sri Venkateswara is located. Officials, however, heaved a sigh of relief as the fire threat began to recede by Thursday noon. A probe will be conducted into the cause of the forest fire.
As a precautionary measure, the TTD closed pedestrian pathways to Tirumala besides the road link to Papavinasanam. Army and Indian Air Force worked together to prevent spread of the fire. The IAF conducted continuous aerial recce to ascertain the extent of damage and spread of fire.
Following the recce, two MI-17 V5 helicopters with Bambi buckets with a capacity of 4,000 litres of water each tried to douse the fire. The helicopters carried out four sorties to extinguish the fire. They drew water from Kumaradhara and Pasupudhara projects. 

Reliance Retail

Billionaire Mukesh Ambani's Reliance Retail is poised to perform a rare feat in India's notoriously complex retail market by finally turning a profit.The time and cost involved, however, could put off global and local rivals from even trying to copy it.
It took Reliance Retail, part of Ambani's conglomerate Reliance Industries (RIL), seven years of losses, bruising trial-and-error and over $1 billion in investments to find a formula that works for India, the world's fifth largest retail market and one of its fastest growing.
This seemingly inexhaustible combination of financing and patience has given Reliance an edge over smaller local rivals that lack its deep pockets, and global chains like Carrefour SA and Wal-Mart Stores Inc which would have to invest vast amounts of capital, time and energy to set up retail shops in India but reap miniscule initial returns.
With 1.2 billion people and a rapidly growing middle class, India's potential has long beguiled retailers but regulatory uncertainty, poor infrastructure and opposition from politically powerful small traders has kept most global chains at bay.
The federal government gave foreign supermarket chains the green light in September 2012, but then left it up to individual states to enact the legislation. Many didn't, fearing a backlash from local traders.
So far, only Britain's Tesco has announced it would make a relatively modest $110 million foray into two states. Executives at Wal-Mart and Carrefour, which operate wholesale outlets in India, have said they are awaiting regulatory clarity and the outcome of national elections next month before setting up retail shops.
Ambani, India's richest man and majority shareholder of a company with a $15 billion cash pile and the world's largest oil refinery, took advantage of this absence of major league competitors to set up his own version of a global retail chain.
Since it was established in 2006, Reliance Retail has revamped its supply chain and decentralised decision-making to ensure flexibility. From September, it has opened stores at the rate of almost one a day even as India's economy grows at its weakest pace in a decade.
Reliance Retail, which at end-December had 1,577 stores, expects to post a profit by the end of fiscal 2014 partly due to stronger sales at its grocery business, the largest contributor to revenue.
The retailer posted an operating profit of 1.06 billion rupees ($17.3 million) for the three months ended Dec. 2013, its first ever quarterly profit. Revenue grew 38 percent year-on-year in the same period and same-store sales also rose by just over a fifth.
Reliance Retail's quarterly revenue was $641 million, almost twice as much as Future Retail's revenue for the same period and far more than Trent's $45.7 million. Same-store sales at Future Retail, majority owned by Future Group, rose 3.3 percent during the December quarter, while analysts said Tata Group's Trent saw an increase of less than 10 percent for the quarter.
Reliance's growth has turned it into a formidable competitor for any global retailer that ventures into India, and regulations that currently favour local companies mean it is likely to keep its edge.
Foreign retailers must partner with a local company, and can own a maximum 51 percent stake in the joint venture. They must also source at least a third of their products locally, conditions which have spooked several global retailers.
Even with these comparative advantages, Reliance Retail faces an uphill battle for growth.
When Ambani first set up the company, he envisioned a $20 billion business by 2011, a goal that proved wildly ambitious. Last year, Reliance Retail set a target to grow revenue to a more modest $6-$8 billion by 2016-2017.
Reliance generated just $1.8 billion in revenue in the nine months through December, a tiny fraction of India's $500 billion retail industry which is dominated by small, mom-and-pop shops.
The growth of a Westernised, and more affluent, middle class that prefers hypermarket-style shopping is likely to favour Reliance.
As it built up its network, Reliance Retail went through several management reshuffles - it is about to have the fourth head for the grocery business - and several executives said it has also gained expertise.

About two years ago, Reliance rolled out technology that gives hourly updates on margins and revenue by store, city and region, along with data on how products are selling. Such systems are standard in developed markets, but new to India.

Previously, Reliance relied on weekly supply chain reports.

Reliance now intensifies its research before choosing locations, and tests product line-ups locally before opening stores, executives said. Earlier, it would often test items after a store opened, which meant frequent and costly tinkering.

Inventory decisions once set at Reliance's massive Mumbai headquarters are now made by individual store managers, enabling them to customise their stores to local preferences.

And while Indian retailers often lease warehouses to save costs, Reliance is building its own so it can customise them.

Its 400,000 square foot warehouse near Pune, which opened a year ago, has a translucent roof that lets in sunlight, saving electricity costs, and automated doors that allow machines, not labourers, to unload goods, company officials said. This model will be replicated in all the company's warehouses, they added.

Xi's historic mission

Chinese president Xi Jinping said he regarded improving India-China relations as his “historic mission”. He described himself an “advocate of furthering the India-China strategic partnership”.
 Xi made these remarks after the recently appointed Indian ambassador in China, Ashok Kantha, presented his credentials to the Chinese president at a ceremony held in Beijing along with 14 other envoys.
The president, who also had a separate meeting with Kantha after the ceremony, said that India-China relations went beyond the bilateral context. He called for greater cooperation between the two neighbours on regional and global issues.
Xi is expected to visit India later this year. He said he looked forward to deepening engagement with India during 2014, which is being celebrated as the “year of friendly exchanges”.