Provogue to enter FMCG market; will tie up with JL Morison

Provogue India is signing a joint venture deal with FMCG distributor JL Morison for the distribution of its body-care products

Apparel retailer Provogue India is all set to enter the fast-moving consumer goods (FMCG) market with its body-care products and will soon sign a joint venture agreement with FMCG distributor JL Morison (India) Ltd, said Salil Chaturvedi, promoter- director, Provogue.

During the first two years, Provogue will invest about Rs10 crore in the joint venture, Mr Chaturvedi said. Provogue is likely to hold more than 50% stake in the joint venture.

Provogue will not manufacture the body-care products, but will only be branding them. The products will range from deodorants, perfumes, skin care and other personal care products.

“We are in talks with JL Morison for body-care products. JL Morison will help in sourcing and will front-end distribution of the product,” said Mr Chaturvedi.

The company is planning to sell the products through the mass-market channel and is looking at reaching 12,000- 15,000 outlets. “We are pricing the products at a little premium. We are planning to stock at least 30 products and we are targeting a turnover of Rs50 crore in the next three to five years,” Mr Chaturvedi added.

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    Will the T Rowe Price-UTI synergy work?

    The past performances of global funds have been modest in India. They cannot help Indian funds raise money abroad either because an alliance between a foreign and an Indian fund is of limited value

    Almost all top foreign fund houses are vying for a share of the investors’ money, but their average assets under management (AUM) and performance are nothing to write home about. One area where foreign funds could have made a difference is giving the Indian consumers an option to get exposure to global markets through funds that invest in foreign securities.

    However, a cursory glance through the track record of some of the global funds launched in the past reveals a lack of substantial AUM and poor fund performance.

    Out of 19 global funds launched since 2006, eight funds have underperformed and seven have outperformed while the remaining four funds have a benchmark for which data is not available in the public domain.

    Kotak Global Emerging Market (Rs242 crore in corpus) and Fortis China-India (Rs97.28 crore) have been the worst performers. The net asset values (NAVs) of these funds, since inception, have declined 4% and 7% respectively. Their respective benchmarks, the MSCI Emerging Markets Index, was up 17% while the BSE 200 has declined 2%. The NAVs of DSP BlackRock World Gold (Rs1,455.52 crore in corpus) and DSP BlackRock World Energy (Rs394.31 crore) have gained 13% and 9% respectively, while their benchmarks—prices of gold and MSCI World Index—have gained 28% and 14% respectively. The performance and growth of some foreign controlled funds such as JP Morgan, Principal and Fortis has been rather poor. Recently, the Japanese bank, Shinsei Bank, has decided to exit from India.

    If this is the result of foreign funds’ expertise, the question that remains is what difference can a global fund company make to Indian investors’ investments? Certainly, bringing in fund management expertise to managing the money of the Indian masses is not what we can look forward to. This assumes significance after the latest entry of a foreign fund company into India, when T Rowe Price (TRP) finalised the acquisition of 26% stake in UTI Mutual Fund.

    One other way a foreign fund company can help an Indian fund is to market Indian offshore funds to overseas investors. UK Sinha, chairman of UTI, believes that this strategic tie-up with T Rowe UTI will be able to market the ‘UTI India Fund’ which is not very well known overseas, in a better way. UTI is also planning to launch an ‘Emerging Markets Fund’ which will be marketed by Rowe globally while domestic operations will be under UTI. But the days of offshore funds are over long ago, after India allowed foreign investors to come directly into India through the FII (Foreign Institutional Investor) route. TRP’s investors are all already in India through a variety of means.

    UTI is the oldest and one of the largest mutual funds in India with average Assets Under Management aggregating to Rs78,203 crore ($16.96 billion) in December 2009. It’s the first AMC in the Indian MF industry to have crossed 1 crore investor accounts. TRP’s transaction values UTI at Rs2,500 crore, roughly 3.5% of the AUM. During the boom, Indian funds were valued at more than 6% of AUM.

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    1 decade ago

    I am afraid this 'contract' or 'convenience' marriage will not suit our taste.Basically, I am not in favour of investing thru MFs. I prefer direct investment in the market that has given me much superior returns. I maintain, if I lose money,it is because of my decision, if I make money, it is my money. why Fund Manager live n enjoy on my money? If he fails I have no way to punish him. How many sc hemes of UTI have been closed n investors suffered? See US 64, only when there was furore (even my Left Friends suffered) and there was bailout for it.So I follow my own path. F.Manager can be lured to pickup something by vested issuers, that is not possible with me. So I say "no thanks".

    Markets to head further down

    Weak global cues coupled with disappointing December quarter results from major companies pulled markets down

    Indian markets continued their downward fall, following weak global cues even as bullish economic data from China further raised concerns of policy tightening. Disappointing December 2009 quarter results from L&T also pulled Indian indices down further.

    The Sensex declined a massive 423 points from the previous day’s close ending the day at 17,051, while the Nifty closed at 5,094, down 127 points.

    Last week we had said: “The market’s trading band has narrowed down to an extreme. This usually presages a major move. We can’t say at this moment whether the market will end higher or lower but a big move is certainly coming.” (see here)

     Today’s move has been the big move which we were talking about.

    On Wednesday, 20 January 2009, the Dow Jones Industrial Average lost 122 points while the S&P 500 and the Nasdaq Composite fell 12 points and 29 points. In premarket trading, the Dow was trading 2 points lower.

    During the day, Asia’s key benchmark indices in Hong Kong, Singapore, and Taiwan were down by between 1.03%-1.39% while those in Japan, South Korea and China were up 1.22%, 0.45% and 0.22% respectively.

    Chinese data released today showed that fiscal and monetary policy tightening could be forthcoming. According to official data, China’s gross domestic product expanded at a rapid rate of 10.7% in the fourth quarter of 2009 from the year-earlier period, pushing the full-year economic growth rate to a better-than-expected 8.7%.

    At 11:00 hrs IST, the Sensex was trading 124 points lower from the previous day’s close at 17,350, while the Nifty was trading at 5,192, down 30 points.
    By 14:00 hrs IST, the Sensex was trading at 17,212, down 262 points, and the Nifty was trading 94 points down at 5,127.

    During trading hours, L&T posted a 6% decline in sales growth and 29% rise in operating profit growth for the December 2009 quarter against the December 2008 quarter. At the end of the day, the stock tanked 7%.

    Bharat Heavy Electricals Limited (BHEL) posted 18% growth in sales and 36% growth in operating profit for the December 2009 quarter over the December 2008 quarter. However, the stock declined by 4%.

    Cairn India fell 3% on reports that the Comptroller and Auditor General of India, the country's statutory auditor, had sought government intervention to access financial records of the company's Rajasthan oil fields.

    Jindal Poly Films rose 3% after the company’s board approved buyback of up to 22 lakh equity shares at a ceiling price of Rs450 per share. The announcement was made after market hours on Wednesday, 20 January 2010.

    Dredging Corporation plunged 11% after the shipping secretary said that there were no plans to divest stake in the company. Mercator Lines shed 2% despite the company bagging a $225-million contract.{break}

    During trading hours, the Indian government said that the food price index rose 16.81% in the 12 months to 9 January 2010, while the fuel index was up 6.34%. The rise in food price index was lower than an annual rise of 17.28% in the previous week.

    Yesterday, Sharad Pawar, Union food and agriculture minister, said that the prices of milk and related products were set to rise because of the demand-supply mismatch.

    The performance of India Inc on the earnings front has been robust with aggregate results of 324 companies showing a 90.2% surge in net profit and 13.8% rise in sales in the December 2009 quarter over the December 2008 quarter.

    As per reports, excise duty collections between April to December 2009 were down by 13% at close to Rs70,000 crore, whereas revenues via customs duty were also down by a whopping 28% at around Rs59,000 crore. Service tax collection was also down over 6% with the government collecting slightly over Rs36,000 crore. Ergo, the total collection of indirect taxes in the first nine months is about Rs1,66,000 crore, down by 18% as compared to the last fiscal. The government has set itself a target of around Rs2,70,000 crore by the end of the fiscal year ending March 2010.

    Meanwhile, the government has reportedly proposed to ease the norms for foreign direct investment (FDI) approval. Currently, projects worth more than Rs600 crore require the final approval of the Cabinet Committee on Economic Affairs (CCEA). As per reports, the department of industrial policy and promotion (DIPP) has proposed that this ceiling be raised to anywhere between Rs1,000 crore and Rs1,500 crore. The new norms are likely to be notified after the introduction of a consolidated FDI policy framework on 1 April 2010.

    FDI inflows increased to $27 billion in 2008-09 from $3.20 billion in 2004-05. During this period, April-September 2009-10, FDI inflows reached $15 billion. The government has set an annual FDI target of $50 billion by 2012 and $100 billion by 2017.

    As per reports, the World Bank raised its forecast for global growth in 2010 but warned that the recovery may lose momentum in the second half of the year as government stimulus programs wind down and unemployment persists. The bank said that growth may reach 3.2% in 2011 and the world economy will expand 2.7% this year, compared with an estimate in June of a 2% expansion. The bank also said that the growth in emerging nations is expected to reach 5.2% this year, compared with a June estimate of 4.4% while China will expand 9% this year and India at 7.5%. The World Bank also raised its forecast for US growth in 2010 to 2.5%, after predicting a figure of 1.8% in June. Japan’s gross domestic product will expand 1.3% this year, the institution said, more than the 1% predicted in June. The euro area’s economy is forecasted to grow 1%, compared with the earlier estimate of 0.5% expansion, the bank said.

    Tomorrow the market may bounce back a bit, but may go down again over the next few days.

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