The sun has set on Dalal Street for the day. On this podcast, we take a look at some of the biggest stories that made the most noise in India Inc.
Rakesh Sharma | Harish Puppala
- Reliance retail in play to Buy the world's oldest toymaker Hamleys
The United Kingdom is home to some of the most iconic department stores in the world. From Harrods to Selfridges to Liberty to Harvey Nichols, each one has a layered history, and a special place in the hearts of the British people. Over the years, the ownership of several of these iconic landmarks - much like some of the most sought after properties in the posh neighbourhoods of Knightsbridge, Kensington, Mayfair, and new entrant Canary Wharf - has been transferred to foreign entities. Jumeirah Carlton Tower and the Park Tower Hotel are owned by Emirati firms; the lovely Mandarin Oriental Hyde Park Hotel is owned by a Chinese group, and the list goes on. Perhaps the biggest player in the field is Qatar. Qatar does not think of selling properties. It only speaks of consolidation, according to industry watchers in London. Only a few years ago, Qatar Holding and Brookfield acquired Canary Wharf for £2.6bn - the biggest investment deal in the UK property market in a decade. Harrods, perhaps the best known of British department stores, is in fact owned by the state of Qatar via its sovereign wealth fund.
The Indian presence in the London real estate scene has been steadily growing. Indians were the second largest buyers of property in central London, accounting for 22% of sales in 2017. Lodha Developers, Indiabulls Real Estate, and others already have a growing presence in the London real estate scene. As for the Indian presence in British brands, the Tatas already moved to acquire the iconic Jaguar Land Rover, and now, the biggest name in India Inc is in play to buy one of the more landmark institutions of Britain - Hamleys.
According to a report on Moneycontrol, "If talks with the Chinese owner (C Banner International) succeed, the 259-year-old brand will end up being the plaything of Reliance Retail, India’s largest retailer." The purchase of Hamleys, which has its flagship store at 188-196 Regent Street London, will illustrate the growing international ambition of Reliance Retail, which has a target of growing at 30% every year for a decade. Reliance Retail already has a pan-India franchise agreement with Hamleys to merchandise its famous toys. Hamleys has over 120 stores globally, including in China, Germany, Russia, India, South Africa, the Middle East, among others. One source familiar with the deal told Moneycontrol, "Hamleys currently has around 50 stories in India, the plan is to ramp it up to 200 over the next three years." According to the sources, due diligence for the deal is at an advanced stage with Reliance Retail aggressively pursuing the deal.
Hamleys has been on the block since September of last year when its Chinese owner, C Banner International decided to exit the company, which it had bought in 2015 for $153 million. The past few years have not been particularly kind to the 259-year-old brand, with Brexit-related uncertainty and softening UK consumer confidence only adding to its woes. It reported a loss of 12 million pounds in 2017 and a 2.5 percent decline in annual revenues to 66.3 million pounds. However, it is still a dominant player in the $11 billion worldwide toy industry even as rivals like Target, Walmart, Amazon and Kohl’s are snapping at its heels.
Reliance, with this acquisition, hopes to expand its global footprint. But this is not the first time the Hamleys brand has been passed on to foreign entities. In 2003, Hamleys was delisted from the London stock market by Baugur Group who had paid $68.8 million for the company. In 2012, a French company called Groupe Ludendo bought it for $78.4 million. Business Standard reported, "Soon after the takeover, Groupe Ludendo hailed its takeover as a platform to accelerate its international development. But its takeover failed to and led to its sale to Chinese firm C Banner International in 2015." If the deal with Reliance Retail goes through, it would be the fourth time Hamleys has changed hands since it was taken private by an Icelandic investor in 2003.
Other than making a prestige acquisition and increasing its global presence, what might be the motivation for Reliance Retail to enter the fray? Well, the growing toy market in India, for one. According to a report by market research firm IMARC, the Indian toy market was worth $1.5 billion in 2018, and has grown 15.9 percent compounded annually, between 2011 and 2018. IMARC expects the market size to cross $3.3 billion by 2024, driven by a huge base of young population, and strong economic growth. The report lists Funskool, Lego, Mattel and Hasbro as the main players in the Indian toy market.
After Jio, Mukesh Ambani has been betting big on Reliance Retail. It has already entered into tie-ups with many other marquee international brands such as Diesel, Marks & Spencers, Steve Madden and Kenneth Cole. It reported a turnover of Rs 69,198 crore for the financial year 2017-18. As on 31st December 2018, Reliance Retail operated 9,907 stores across 6400+cities with a retail area of over 21 million square feet. Earlier in January 2019, global brokerage house CLSA said the organised and combined online and the offline retail market may grow ninefold to $550 billion in 10 years and RIL's pure retail revenues may rise nearly 12-fold to $138 billion in the same period.
As for Hamleys, the brainchild of one William Hamlety of Cornwall, churn has been as much a part of its existence as wheels have been in the toy trains it has sold for over 250 years. From 'Noah's Ark' to 'Joy Emporium' to 'Messrs Hamleys' to just 'Hamleys,' it has seen several iterations and several owners. It has seen great times - two royal warrants from Queen Mary and Queen Elizabeth II, with the royal family even using Hamleys toys as heirlooms, and becoming the byword for toys across large parts of the world. It has seen terrible times too - its warehouse burnt down in 1916; the company nearly went under in the late 1920s; was bombed five times during the second World War. It is play as usual for the company, but to Reliance Retail, this is one of many moves in the big game it hopes to play worldwide.
Meanwhile, a Reliance spokesperson responding to a query from Moneycontrol said, " "As a policy, we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations under SEBI regulations and our agreements with the stock exchanges."
2. Google and apple block Tiktok in India
Google and Apple have blocked access to popular Chinese video making phone app TikTok in India. Sources told PTI that instructions in this regard were sent to the two American companies on Monday after the Supreme Court refused to stay the April 3 order of the Madras High Court which had directed the Centre to ban TikTok over concerns about access to pornographic content.
Neither company has confirmed the move but it is being reported that the Ministry Of Electronics and Information Technology (or Meity) has directed Google and Apple to remove the social media app from their respective app stores in a bid to prevent further downloads. That basically means, while MeitY’s order will stop future downloads of TikTok, people who already have the app downloaded on their devices will be able to continue using it. A TikTok spokesperson said this is not a permanent ban, and will not impact existing users. The spokesperson said, "We welcome the decision of the Madras High Court to appoint Arvind Datar as Amicus Curiae (independent counsel) to the court. We have faith in the Indian judicial system and we are optimistic about an outcome,".
Tik Tok is owned by Chinese firm ByteDance. It was launched in India in 2018 and has 120 million active users in the country, particularly youngsters in small towns and cities. It became popular because it allows users to capture and share moments through short videos clips decorated with fun stickers and filters. The furore over TikTok emerged since it has been accused of encouraging pornography. In its April 3 order, the Madras HC said it was evident from media reports that pornography and inappropriate content were made available through such mobile applications. It had also directed the media not to telecast video clips made with TikTok.
Some experts argue that the ban is justified due to the nature of the audience. Shradha Agarwal, COO, Grapes Digital, told Livemint, “The decision to ban TikTok makes sense because it has a much younger audience which includes children who are still in school, unlike Twitter which has more mature audience.” Pavan Duggal, a leading cyber law expert, disagreed. He told the news outlet, “Banning the app is completely out of sync with today's time. Even if the app is banned, people can still download them from other sources or by changing their location. We are not understanding the bigger challenge of how to deal with the paradigm. The problem is not with the app but third-party content. Strict action needs to be taken against people publishing such content instead of asking for a blanket ban on apps.”
As of now, Tik Tok, and it’s Lite version, are unavailable for download on both mobile platforms.
3. Mindtree's Q4 results
IT firm Mindtree today reported a consolidated net profit of Rs 198 crore for the January-March quarter, a 9% rise against a year ago. The company's revenue rose 25.6% to Rs 1,839 crore during the period, according to an exchange filing.This is a bit of a leg up for the company which is facing a hostile takeover bid by Larsen & Toubro, a bid that has been approved by the Competition Commission of India.
Mindtree’s board of directors declared an interim dividend of Rs 3 per share on the face value of Rs 10 each. The company fixed April 27 as record date for payment of the interim dividend. The Economic Times reported that Mindtree also recommended a final dividend of Rs 4 per share for the financial year ended March 31, and a special dividend of Rs 20 per share (200% face value of Rs 10) to celebrate the twin achievements of exceeding the $1 billion annual revenue milestone in a fiscal as well as bringing up the 20th anniversary of the company’s founding. Livemint reported that EBITDA (earnings before interest, taxes, depreciation and amortization) was at Rs 280 crore during the quarter, up 19% year-on-year. EBITDA margin deteriorated 90 basis points to 15.2% in January-March. Mindtree's FY'19 net profit grew 32.2% to Rs 754.1 crore, while revenue rose 28.5% to Rs 7,021.5 crore from the previous financial year.
Mindtree CEO and Managing Director Rostow Ravanan said, “Mindtree has delivered exceptional performance for both the fourth quarter and the full fiscal year as we cross the historic $1 billion milestone. Over the course of two decades our strategy of being expertise-led and backed by a unique culture continues to help us attract world class people and create customer successes.”
Sameer Kalra - Equity Research Analyst & Founder Target Investing, told ET, “This is a defence tactic, which it has adopted to reduce the attractiveness for L&T’s takeover offer. We take this as a negative in mid- to long-term. This indicates that even post takeover the current promoters and management are not going to be easy to convince that buyout has been done in good faith. The cash of company reduces by Rs 440 crore, which would reduce the annual earnings by Rs 30-35 crore, which is 5% of net profit. However, on Thursday we will see a gap-up opening in the stock.” Kalra is referring to the bid by L&T to acquire up to 66.15% of the total equity shareholding in MIndtree. On March 18 this year, L&T had purchased 20.4% shares in Mindtree for Rs 3,300 crore at Rs 980 per share from Coffee Day Enterprise owner VG Siddhartha.Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.