Indian airports received 4% more international travellers from January to March
Indian airports collectively received 4% more international travellers in January to March this year, with the leisure segment driving growth by 7%, a latest study said. The study, conducted by GfK-ForwardKeys, said comparing the first three months of this year with the same period last year, all top ten inbound tourism markets for India witnessed strong growth. International visitors from the US, Saudi Arabia and United Kingdom form the top three inbound markets for the country, accounting for 37% of the total market in the first quarter of the year. “The ICC T20 World Cup which took place in March could have been a key driver of growth in the country’s tourism in the first quarter of the year,” highlighted Anant Jain, travel and hospitality industry lead, India. “There was 10% surge in tourist arrival in March this year compared to a year ago and we believe this was contributed by sports tourism to a large extent.” The four airports in Delhi, Mumbai, Bangalore and Hyderabad together contribute to over half of all travellers’ arrival in India. Current booking for the second quarter of this year showed that overseas visitors arriving at these airports are anticipated to be slower than last year, except for Bangalore, where there is already a 5% expected increase in arrivals.
Singapore’s Changi Airports International to ‘continue to explore’ Indian airport projects
Singapore’s Changi Airports International (CAI) today said that it will “continue to explore” opportunities in airport projects in India, days after its discussions with national airports operator AAI to operate and maintain two airports was terminated. “As an airport investor, manager and consultant, CAI will continue to explore opportunities in airport projects in India where we can add value and where there is a strong fit with our global strategy,” CAI spokesperson See Ngee Muoy said. CAI, an investor, consultant and manager of airports around the world, is a subsidiary of Changi Airport Group, which runs Singapore’s Changi Airport. Queried about the collaboration between CAI and AAI to operate and maintain Ahmedabad and Jaipur airports, See told Channel NewsAsia that both parties were not able to come to an agreement on the commercial terms of the proposal, hence they have decided not to proceed with the project. A senior Indian official close to the development said on Wednesday that AAI’s decision comes after its assessment that Changi Airport’s proposal would not be commercially viable. In January, Singapore Cooperation Enterprise (SCE) had nominated CAI as an expert party to cooperate with Airports Authority of India (AAI) on the maintenance of Ahmedabad and Jaipur airports. A Memorandum of Understanding was signed between SCE and AAI in November last year. Some of the areas of joint interest as outlined in the MoU included master-planning and design, traffic and commercial developments, service quality improvement and cargo handling and management. In 2015, Changi Airport handled a record 55.4 million passengers and was voted the World’s Best Airport for the fourth year in a row.
Struggling to find a buyer, Jabong slashes price tag; finds no buyer even at Rs 663 crore
Online fashion portal Jabong, which has been on the block for over a year, is struggling to find a buyer despite its investors dropping the asking price drastically, according to three people aware of the developments. The Rocket Internet-backed firm, which has posted a drop in sales and cut losses in 2015, has found no takers for even an estimated price of $100 million, said a source, a far cry from the price of around $1 billion that it sought during talks with Amazon India in 2014 that failed to result in a deal. While Jabong was founded under the banner of the German Internet incubator in 2012, the current push for a sale is being driven by Swedish investor Kinnevik, which owns a big stake in Jabong’s parent company Global Fashion Group, the sources told ET. “They (Rocket Internet and Kinnevik) just want to park the company somewhere, find a home for it,” said one person directly briefed on the matter. “But there are no buyers yet.” Earlier this month, Rocket Internet sold another of its India portfolio companies furniture portal Fabfurnish to Kishore Biyani’s Future Retail, signalling its intent to exit India. Biyani snapped up Fabfurnish for around Rs 11 crore, according to sources and company filings reviewed by ET. Jabong, too, has held talks with Biyani’s Future Retail, which made a preliminary offer for the company, said a person aware of the talks. But unlike Fabfurnish, Jabong has been able to hire top-level managers former Benetton India managing director Sanjeev Mohanty came on board in November 2015 as chief executive officer and former eBay executive Muralikrishnan B joined as chief operating officer in February. This could make it a relatively more attractive asset for overseas players looking to enter India, said experts tracking the process, especially after the government allowed 100% foreign direct investment in online marketplaces. A Rocket Internet spokesperson declined to comment. Mohanty said he would not like to comment on what he termed as “market rumours”. There were no replies to email queries sent to Future Retail and Kinnevik. QUESTION OF CHEMISTRY People aware of the developments within Jabong, which competes against Flipkart’s unit Myntra, said the problem that investors looking to sell the company face is not just about price, it is also about timing. “It’s a question of math as well as chemistry,” said one of the sources. In 2015, Jabong which has cut back on consumer discounts just as peers in the industry have done posted a 7% fall in revenue at Rs 869.1 crore but trimmed losses to Rs 46.7 crore from Rs 159.5 crore after a clampdown on discounts. Sources said that the issue with Jabong is that it has not been able to maintain growth without discounts. Gross merchandise value (GMV), or the total worth of goods sold, for the last quarter of 2015 fell by 19%. GMV for the year grew by just 13.8% in 2015 to Rs 1,502 crore compared with a 158% growth in 2014. With a pre-tax loss of Rs 426 crore, the company spent about 49 paise to get one rupee of sales compared with a 56-paise loss for every rupee earned in 2014. “Increased focus on gross profit margin, unit economics and overall profitability resulted in net revenue and GMV decline in Q4,” the company said in an investor presentation on Thursday. FRUGAL CULTURE Mohanty said in response to ET’s questions on financial performance that Jabong is “bringing in a very frugal culture and operating like how a good retail offline business should operate”. People tracking the company’s attempts to find a buyer argue that Jabong may have to bring down its valuation expectation, depending on how much cash it still has in the bank. Since August last year, its German parent company Jabong GmBH has invested over Rs 200 crore in Jade eServices, which owns and operates Jabong in India, in six tranches, according to regulatory filings reviewed by ET. This includes five infusions of around $5 million each, which is also pegged as the company’s monthly burn rate, every month from October 2015 to February 2016. Besides holding talks with Amazon India, which ended early last year, Jabong has also held discussions with other Indian online marketplaces. One of the people quoted above said an offer to buy Jabong at around $200 million in 2015 was rejected. “But if the price is right, they might take a look at the company (Jabong) once again,” this person said.
German e-commerce firm Rocket Internet vows to limit losses after 2015 cash burn
German ecommerce firm Rocket Internet said it was on track to make three of its start-ups profitable by the end of 2017, and its losses should have peaked last year when its companies burned through 1 billion euros ($1.1 billion). Revenue from its top companies, which range from online fashion to food delivery, rose 69 percent in 2015 to 2.4 billion euros. Their aggregate adjusted loss before interest, tax, depreciation and amortisation (EBITDA) was 1 billion euros, up from 600 million in 2014. However, Rocket said the average adjusted EBITDA margin improved 6 percentage points to a negative 29.7 percent. It reiterated that 2015 should represent the peak of the losses for its major start-ups and repeated a target that three of those firms should be profitable by the end of 2017. Founded in Berlin by brothers Oliver, Alexander and Marc Samwer in 2007, Rocket has set up dozens of ecommerce sites, aiming to replicate the success of Amazon and Alibaba in Africa, Latin America and Russia. Rocket Internet has seen its share price sag since it listed in Frankfurt in October 2014 on investor concern about the pace at which its start-ups are burning through cash. The volatile stock was down 4.1 percent at 0705 GMT, reversing some of the gains it made this week after it sold a stake in one of the firms making the heaviest losses – Southeast Asian online retailer Lazada Group – to Alibaba. Among its 14 biggest start-ups, Rocket Internet highlighted Middle East online fashion site Namshi and home furnishings retailer Westwing as making big strides towards profitability. Chief Executive Oliver Samwer told journalists on a conference call that firms like Westwing and Russian online fashion firm Lamoda were reining in marketing and delivery costs due to “the benefits of scale”. Rocket noted strong revenue growth at “ready to cook” meal delivery firm HelloFresh, seen as a likely candidate for a stock market listing, as well as at African online retailer Jumia, up 338 percent and 118 percent respectively. However, Samwer said that a target set last September to list one of its start ups by early 2017 might have to be pushed back due to volatile markets. Rocket said it had a cash balance of 1.8 billion euros at the end of 2015 and access to co-investment capital from a fund it set up in January, which had commitments of $742 million, up from a previous $420 million.
Gujarat e-commerce entry tax will pose challenges: Nasscom
The bill by Gujarat government to levy entry tax on interstate e-commerce transactions will pose significant commercial challenges to all stakeholders, industry body Nasscom said on Thursday “This levy of entry tax poses significant challenges both commercially and operationally for the e-commerce companies, logistics companies and the outside state sellers selling goods to customers in the state (Gujarat),” the National Association of Software and Services Companies (Nasscom) in a statement. According to the new rule, the entry tax will be paid by the consumers which will be collected and deposited by entities which bring the goods to Gujarat from any other part of India for sale and consumption. “Providing unrestricted cross border access to sellers as well as buyers is the prerogative of the government and is an important driver towards creating an ease of doing business. Such tax structures will lead to additional burden on SME traders, enhanced litigation, and also reduce business efficiencies. It will also restrict choice of the customer,” said Nasscom president R. Chandrasekhar in the statement. The industry body noted a similar tax is being collected in Assam, Odisha, Uttarakhand, Rajasthan and Mizoram and is being proposed to be introduced in Punjab, Himachal Pradesh, Uttar Pradesh and Madhya Pradesh. Nasscom said that the entry tax is flawed as it is akin to introducing trade barriers to free interstate trade, discourages SMEs to manufacture and will have a short life in view of the impending GST reform. “For collecting and depositing the tax, the deemed tax payer would be required to significantly revamp the IT systems to track the tax charged on inter-state sale of goods to Gujarat and determine the differential tax which has to be paid in the form of entry tax,” it said. Other hiccups Nasscom raised include disputes on classification as a huge number of sellers operate through the marketplaces and also resulting in burdening the service industry with administrative costs and unwanted disputes. “Cost of complying with this entry tax for thousands of sellers outside the state will be much higher than the expected outcome. Such moves will fragment the India market, severely jeopardising business case for many entrepreneurs both manufacturers and service providers,” it said in the statement, adding the entry levy is not aligned with reform and growth programmes like Digital India, Make in India and Start-up India and Standup India.
NASSCOM upset over inter-state tax levy on e-commerce transactions
Nasscom came out strongly against the decision of the state governments to levy taxes on inter-state ecommerce transactions, calling the move flawed, detrimental to growth of small and medium enterprises and would result in additional costs for them. Nasscom, the industry body representing Indian software industry, released the statement after the Government of Gujarat passed a Bill on March 30, proposing an entry tax on consumers for e-commerce transactions. “Such tax structures will lead to an additional burden on SME traders, increase litigation and also reduce business efficiencies. It will also restrict choice of the customer,” said R Chandrashekhar, president, Nasscom. “The e-commerce sector aspires to unify the country digitally into a single entity. Providing unrestricted cross border access to sellers as well as buyers is the prerogative of the government and is an important driver towards creating an ease of doing business,” Chandrashekhar said. The e-commerce industry has been up in arms about the levy of “entry taxes” being applied by different states, saying that such taxes increase cost of the goods brought into the states. Entry taxes are payable by the consumers and will be collected and deposited by entities that bring specified goods to a state from any other part of the country. The move to levy interstate taxes is “flawed”, said Nasscom, because it was “akin to introducing trade barriers to free inter-state trade thereby restricting market access within the country”. It further added that e-commerce had helped small and medium businesses grow, irrespective of their location, and that such taxes would discourage local manufacturing by SMEs. ET has earlier reported that Flipkart recently dragged the states of Uttarakhand and West Bengal to court over the issue of entry tax. It got a stay from both the governments, which is expected to act as a deterrent for other states that are in the process of imposing entry taxes on goods bought online. “The proposed levy will have a short life in light of the impending GST reform,” Nasscom added. “For collecting and depositing the tax, the deemed tax payer would be required to significantly revamp the IT systems to track the tax charged on inter-state sale of goods to Gujarat and determine the differential tax which has to be paid in the form of entry tax,” it added. Inter-state tax levies will affect logistics companies and the outside-state sellers selling goods to customers in the state, Nasscom said. The states of Assam, Odisha, Uttarakhand, Rajasthan and Mizoram have enforced such levies, and Punjab, Himachal Pradesh, UP and Madhya Pradesh have proposed similar taxes.
Flipkart to cut expenses and earn gross profit ahead of festival season
Flipkart is racing to cut expenses and earn a gross profit ahead of the festival season starting in September, when demand for big discounts will renew the fractious battle to dominate the country’s online retail market. The drive to build a self-sustaining business, being led by Flipkart’s new chief executive officer Binny Bansal, includes a series of measures from capping salary increments at 10% to giving category heads six months to become profitable at a unit level. All this while the company reduces the amount of money used to expand the business termed the burn rate by half, according to several people aware of the company’s strategy. “Increments have largely been capped at 10%, barring some technology teams where it is driven by variable targets,” said one person. At the same time, clear sales and customer experience targets to be met by September 2016 have been set for all category heads as the Tiger Global-backed company closely evaluates the long-term potential of each business unit. “The next six months will see new developments, including some categories being shut down,” said another source. A Flipkart representative declined to comment for this story. This aggressive drive towards profitability, which contrasts with the earlier model of expansion at any cost, comes at a time when money is becoming scarce for India’s top venturebacked online retail companies Flipkart, Snapdeal, Paytm and Shopclues which have soaked up about $5 billion in risk capital since 2014. The online retail market, Goldman Sachs estimates, will be worth $36 billion by fiscal 2017. Valued at about $15.2 billion in its last round of fund-raising in July 2015, Flipkart has been quickly reducing its burn rate this year, helped along by the lean season for retail sales. People aware of the details told ET that currently Flipkart has an estimated burn rate of about $50 million a month now, down from about $ 80 million in the last quarter of 2015. “The idea is to bring down the burn rate by another $10 million a month,” said a source, adding that by September the company should be at a $40 million monthly burn rate. Flipkart’s two main entities Flipkart India and Flipkart Internet reported a combined a loss of Rs 2,000 crore in FY15. The company last year told ET that it expects to close FY16 by selling goods worth $10-12 billion. All category heads have been given directions to focus on getting on board “best quality products at lowest cost” with Binny Bansal spending majority of his time with the commerce unit since becoming the CEO. At present, fashion, electronics and large appliances are the top-selling categories but Flipkart has also been making a push towards new ones like furniture and automobiles. While most large online retail companies have reduced their dependence on discounts as a growth strategy over the last few months, fixed costs at these companies remain high, especially employee costs. Flipkart has a total headcount of 35,000, out of which around 15,000 are employed by the logistics unit EKart as delivery personnel. ‘MUCH-NEEDED MOVE’ “It is a much-needed move. A lot of the investors in Flipkart are concerned by the amount of money the company is bleeding and everyone is seeking a path to being break-even positive. Flipkart’s recent valuation markdowns reflect both the margin issues and competitive pressure,” said Kartik Hosanagar, a professor of ecommerce at the Wharton Business School, referring to a 27% markdown in the value of Flipkart’s shares by a mutual fund managed by Morgan Stanley. A source aware of the details said that the company still has over $1 billion in the bank, which means that Flipkart does not need fresh capital immediately. But shoring up capital reserves further will be necessary before the festive season as it looks to defend its market leadership against Amazon and potential new entrants, like Alibaba and Rakuten. In all, Flipkart, which counts DST Global, Naspers, and Tiger Global as investors, has raised about $3.4 billion. The process of evaluating and closing categories has already started at Flipkart over the last four months, with divisions like e-books and grocery delivery being shuttered. “Every category has to stay within the guard-rails that have been set in terms of consumer experience, profitability,” said one of the sources. After replacing cofounder Sachin Bansal as CEO in January, Binny Bansal has undertaken a management overhaul at the Bengaluru-based company and hastened the process of turning the logistics business Ekart into an independent unit, in search of greater cash flows. “This is much needed for Flipkart as its ability to raise more money from either the public markets or from private equity depends on Flipkart’s ability to show sustainability,” Wharton’s Hosanagar said.
It is time for India to end patronage in aviation: AirAsia
AirAsia today asserted that effective control of its joint venture AirAsia India is with Indian parties and said “vested interests” were trying to prevent the local no-frills airline from offering competitive service and fares. The assertion comes amid concerns expressed in various quarters about effective control at the low cost airline AirAsia India – jointly owned by Malaysia-based AirAsia Bhd and Tatas. AirAsia Group CEO Tony Fernandes said it is time for India to end patronage and put people first and emphasised that Prime Minister Narendra Modi-led government has promised fairness and transparency. According to AirAsia, a provision in the brand license AirAsia India and AirAsia Bhd explicitly states that substantial ownership and effective control of the licensee remains at all times with Indian residents. “We are shocked and surprised by the unprecedented opposition we continue to face in the Indian market from vested interests that are determined to find any reason or argument to block us in our endeavour to offer Indian consumer the most competitive service and fares,” AirAsia said in a statement today. It reiterated that AirAsia India’s majority ownership and effective control are with Indian parties as per regulations. “All the important decisions concerning the day-to-day operations of the airline are taken by the management team of the airline under the overall supervision, control, and direction of the board of directors (which include a majority of Indian nationals),” the statement said. Meanwhile, Fernandes said the “constant attack on AirAsia, especially by certain members of media has saddened me but we will prevail. It is time for India to end patronage and put people first”. Last month, Tata Sons said it would hike its stake in AirAsia India to 49 per cent by buying additional shares from Arun Bhatia’s Telestra which would be exiting the airline. Telestra Tradeplace had around 10 per cent stake. While Tata Sons would buy 7.94 per cent shareholding, the remaining stake would be purchased by the carrier’s two directors – S Ramadorai and R Venkataramanan – in their individual capacities. Post deal, Tata group and Malaysia’s AirAsia Bhd would have 49 per cent stake each in the no-frills airline. Meanwhile, Fernandes today also said Modi government has promised fairness and transparency and having met the Prime Minister, “I am even more excited about our future in India”. “My father was a proud Indian and of all the things that I have done, nothing would have made him prouder than what we are trying to achieve in India. AirAsia is about creating jobs and enabling people to do things they never ever thought possible. We made Asia smaller. That’s all we want to do in India,” he noted.
Five developers approach government with SEZ cancellation plea
Five special economic zone (SEZ) developers including Abex Infocom have approached the government to surrender their IT sector tax-free zones. The Board of Approval (BoA) chaired by Commerce Secretary Rita Teaotia would take a decision on these applications in its meeting on April 28. All the five zones are from IT/ITeS sector. In all these cases, “formal approval has been granted by the Department of Commerce. However, since there is no significant progress made by the developer, the concerned Development Commissioner has proposed for cancellation of formal approval granted to the developers,” the agenda of the BoA meeting said. Last year, about 80 developers had surrendered their zones as progress made by those developers were not satisfactory. Other developers who have sought government’s approval to cancel there zones include Orion IT Parks, Salarpuria Properties, Bengal Shristi Infrastructure Development Ltd and ML Dalmia & Co Ltd. Withdrawal of incentives and imposition of taxes like MAT and DDT have impacted the development and growth of these zones. To revive investors sentiment, the Commerce Ministry is pitching for removal of minimum alternate tax (MAT) and dividend distribution tax (DDT) on SEZs. SEZs are mainly exports hubs which contribute to about 23 per cent in the country’s total exports. The ministry wants tax incentives being enjoyed by SEZs should not be abolished. In the Budget, the Finance Minister had said the income tax benefits benefit new SEZ units will be available to those units which commence activity before March 31, 2020. Exports from such zones in 2014-15 stood at Rs 4,63,770 crore as compared to Rs 4,94,077 crore. The Export Promotion Council for EoUs and SEZs (EPCES) had said that MAT and DDT on SEZs have dented the investor friendly image of these zones.
Remove all speed breakers from national highways, orders Union road transport ministry
The road transport ministry has asked state governments and agencies like NHAI, state PWDs and BRO to remove all speed breakers from highways, which hinder smooth movement of traffic apart from being a safety hazard on high-speed corridors. The ministry has sought details of action taken by next Wednesday. It has also asked for details of rumble strips that have been laid with approval. According to the Road Accident Report (2014), published by the ministry, 4,726 lives were lost in crashes due to humps while 6,672 people died in accidents caused due to potholes and speed breakers. In its recent circular, the ministry mentioned that at many places local authorities are constructing road bumps or speed breakers to check vehicular speed despite guidelines being in place. “This is undesirable, as the function of national highways is to facilitate movement of traffic. Speed breakers can be a source of serious hazards and accidents to the fast-moving traffic,” it said. Referring to its earlier circulars, the ministry said these recommendations provide for properly designed rumple strips at locations such as sharp curves on level crossings and congested or accident-prone areas where control of speed on national highways is unavoidable. “It has been noted that such rumble strips are being provided indiscriminately,” the ministry said adding that location of such traffic-calming measures must be approved by the highway agencies. It also said the agencies should explore the possibility of providing foot over-bridges or pedestrian underpasses on national highways to prevent pedestrians from coming over. International Road Federation chairman K K Kapila agreed there should be no speed-breakers on highways, but said these come up as highways pass through villages and people need to cross over to the other side. “We need to provide pedestrian and vehicular crossings to end this menace,” he said.