Is Royal Enfield worried about competition from Bajaj’s Dominar?

Bajaj’s entry into the fast growing 350cc plus motorcycle market has not left the market leader Royal Enfield worried. The company said it will continue to engage with its target segment and expand reach to grow volumes.
“When one succeeds in a segment, others try to enter and take a bite. Of course, there will be competition but we are not worried,” Siddhartha Lal, managing director and chief executive officer of Eicher (the owner of Royal Enfield) told Business Standard when asked about the entry of Bajaj Auto. Bajaj launched Dominar, a 373cc premium sports bike in December, at Rs 1.36 lakh.
Rajiv Bajaj, managing director said at the launch that the company is entering a “segment that has an existing tall leader (Royal Enfield)”.
“This segment is not open for anyone to simply enter and walk away with the market. One has to be opposite of what the market leader is,” he added. Listing design, performance and price as three critical factors for any motorcycle, Bajaj said the Dominar would create a differentiation in all three.
Deliveries of Dominar started in January when the company sold 3,000 units. The company hopes to sell 4,000 units in February and then gradually ramp it up to the stated monthly target of 10,000 units by September.
Lal, whose company sells 48,000 motorcycles a month, including the iconic bullet, said Royal Enfield enjoys 95 per cent of the 350cc plus motorcycle market in India. “It is important for us to grow the size of the market. If others want to grow it, it is good,” he added.
The country has seen an entry of premium global two-wheeler players like Harley Davidson and Triumph in recent years but their volumes remain tiny compared to Royal Enfield. Harley sells about 280 units a month while Triumph does 90. Luxury car maker BMW is working on a powerful sports bike with TVS Motor and it could be launched later this year.
Eicher chief said Royal Enfield offers a typical style of motorcycle which is not for everybody. “People who like us will come to us. We will continue to work on the brand, retail and marketing. People, who are part of the Royal Enfield family, continue to stick to the brand. They like what we do after we sell them the motorcycle, referring to the rides and activities around the brand,” he said.
Lal said the company is adding about hundred new sales outlets a year to reach out to more and more buyers, especially in tier III towns. The current store strength is at 650. Royal Enfield was among a handful of two-wheeler makers which continued to grow sales even after demonetisation. Its motorcycles enjoy a waiting period of two-three months and the plants operate at full capacity. The company is investing to set up a new greenfield manufacturing unit that will almost double the annual capacity to 900,000 units by 2018.
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Is Royal Enfield worried about competition from Bajaj’s Dominar?

Emirates cuts travel agents’ commission citing volatility in aviation

Emirates has slashed agents’ travel commission from three to one per cent as it looks to reduce its sales and distribution costs.
With over 180 weekly flights, Emirates is the largest foreign airline operating to India and it has over 10 per cent market share of India’s overseas air traffic.
Emirates said that it decided to cut commission owing to volatility in global aviation. “Our trade channel will continue to be our prime strategic distribution channel. However, volatility has become the new normal in global aviation. Market, industry and customer dynamics add to complexities of our business. So, as the world economy and industry changes so are we,” Emirates Vice-President (India and Nepal) Essa Sulaiman Ahmad said in a letter to travel agents. The revised rate will be effective from April 1.
Travel agents earn a basic commission on sales and productivity linked bonus. Air India and Jet Airways have already reduced basic commission to one per cent. Etihad too gives one per cent basic commission, while many European airlines and Singapore Airlines only pay productivity bonus and do not give basic commission.
Emirates’ half-year profit in FY17 reduced by 75 per cent due to overcapacity, a rising dollar and economic slowdown.
Emirates cuts travel agents’ commission citing volatility in aviation

Reliance Jio tariff very aggressive, unsustainable: Airtel’s Sunil Mittal

India’s largest mobile operator Bharti Airtel has said the new tariff announced by Reliance Jio is very aggressive and unsustainable, and the industry will respond to it with more competitive plans and additional data offerings.
Airtel had yesterday waived roaming charges to compete with free voice calls and roaming offered by Jio. The Mukesh Ambani-controlled company has not only promised to match the best mobile data usage plan in the market but add 20 per cent more data to it.
“Tariffs that they (Jio) have announced are still very aggressive, which means you got to respond. You got to do more packages… You have to throw in more data. All those things need to be done,” Bharti Airtel Chairman Sunil Mittal told reporters here.
Jio, which has spent USD 25 billion on its 4G wireless data network, will terminate free data plans from April 1 but has offered customers the option of signing up for a Jio Prime membership for Rs 99 to continue using unlimited services for a year by paying Rs 303 every month.
In a free-wheeling chat on the sidelines of the Mobile World Congress, Mittal, who is also the Chairman of global industry body GSMA, strongly advocated consolidation for the Indian telecom industry to “get the economic case back”, pitched for affordability in spectrum pricing that has gone “out of control” in the last few years, and said the spectrum surplus industry will not need an airwave auction, at least in 2017-18.
The Indian telecom czar said Bharti Airtel’s balance sheet remains “healthy and strong”, and that he does not think Bharti will go into losses under competitive pressure although one can “never say never”.
Mittal categorically ruled out an exit from Africa operations, but said Bharti will explore merger and consolidation in certain African markets where it is not amongst the top two players.
Admitting that Jio’s decision to start charging customers from April 1 was “good news” for operators, he said it however, would not signal the end to tariff war.
“First of all, good news is that eventually they have announced that they will charge from April 1. But yes, still to our mind, it is the pricing which is unsustainable. 1GB a day (of data) for that price is pretty low. It is better than zero (free services),” he said.
Bharti Airtel had reported over 54 per cent fall in net profit to Rs 503.7 crore for October-December quarter of 2016 due to what it had at the time termed “turbulence” from “predatory pricing by a new operator”.
Asked how long will his company continue to feel the impact of Jio on its earnings, Mittal said that overall, he expected that by March 2018, the “dust will settle down” for the entire industry.
Reliance Jio tariff very aggressive, unsustainable: Airtel’s Sunil Mittal

OECD sees India’s growth at 7% due to note ban, bats for inheritance tax

The Organisation for Economic Co-operation and Development (OECD)  has projected India’s economy to grow 7 per cent in the current financial year and rise gradually to 7.3 per cent in the next year and 7.7 per cent in 2018-19.
In a report titled, ‘Economic Surveys India’ released on Tuesday, OECD says implementing the demonetisation has had transitory and short-term costs but should have long-term benefits.
It prescribes that India should bring down corporate tax rate to 25 per cent, introduce inheritance tax and provide certainty in rules.
The Central Statistics Office will release second advance estimates for gross domestic product (GDP) for 2016-17 and actual figures for the third quarter of the year. It had projected the economy to grow 7.1 per cent during the current financial year in its first advance estimates against 7.9 per cent in the previous financial year.
OECD says the temporary cash shortage and wealth destruction have affected in particular private consumption as fake currency and part of the illegal cash will not be redeemed.
The shift towards a less cash economy and formalisation should, however, improve the financing of the economy
and availability of loans (as a result of the shift from cash to bank deposits) and should promote tax compliance, it says.
The Organisation says private consumption in urban areas has been buoyed by prospects of higher public wages and pensions while government investment and consumption remained strong. The return to a normal monsoon in 2016, after two consecutive years of bad weather, is supporting a recovery in agricultural income and rural consumption.
Despite the sustained public investment, total investment declined in real terms in the first half of 2016, it points out.
The investment to GDP ratio has been on a downward trend for some years. Recently, low capacity utilisation and the weak financial position of some corporations have dampened corporate investment.
Several factors have added to these cyclical factors. First, the banking system has been weakened by poorly performing public banks, which suffer from high non-performing loans.
Alternatives to bank funding, in particular, a corporate bond market, are underdeveloped in India, OECD points out.
Second, infrastructure bottlenecks (e.g.frequent power outages) coupled with the often long land acquisition process, have held back investment, in particular in the manufacturing sector. Third, taxation is an issue, with relatively high corporate income tax rates combined with frequent and lengthy tax disputes, it says.
Overall, chronically low investment, were it to continue, would eventually result in weaker productivity and growth, the Organisation says.
However, it says private investment will pick up to some extent as excess capacity diminishes, deleveraging by corporates and banks continues and infrastructure projects mature.
It says the implementation of the Goods and Service Tax (GST) from FY 2017-18 according to the government plan, will support investment and competitiveness over the medium-term even though it may have short-term adverse effects on inflation and consumption.
It warns that India faces risks, some of which are hard to quantify. Further structural reform is a clear upside risk for growth. Some states (including Maharashtra, Madhya Pradesh and Rajasthan) have taken the lead in reforming land and labour market regulations but it is still unclear whether others will follow up.
There are also downside risks. Although the government is hopeful, rolling out the GST by April 2017 is an ambitious objective. Any slippage would risk delaying the investment recovery.
The increase in public wages entails a risk for inflation, although this risk is limited given the small share of employees in the public administration in total employment (less than 2%) and the fact that implementation at the state level can be expected to be spread over some time.
Risks to the banking sector remain elevated due to continuous deterioration in asset quality, low profitability and liquidity. Slower efforts to clean up banks’ balance sheets and recapitalise public banks would raise uncertainties and have bearing on investment.
Some risks are interconnected. If the Reserve Bank of India increases interest rates to address the inflation risk, the sustainability of corporate debt could be affected, it warns.
India is not immune to external shocks and vulnerabilities in the global economy. An increase in commodity prices could raise inflation, dampen private consumption and weigh on both the current account and fiscal deficit, the Organisation cautions.
Pointing out that the new monetary policy framework and a more prudent policy stance have served India well so far, OECD says reaching the inflation target remains a challenge going forward, especially if public sector wage rises spill over to other sectors or if commodity prices rebound.
Bringing down inflationary expectations further and establishing a solid nominal anchor to the Indian economy require
monetary policy to continue erring on the prudent side until inflation is arrested.
It says since 2014 lending rates have adjusted only partially to the decline in policy rates, the  impact of monetary policy on real activity is reduced by weaknesses in the transmission mechanism, including administrative measures such as the requirement for banks to hold government bonds (SLR), credit quotas for priority sectors and caps on deposit rates.
Several measures have recently been taken to improve monetary policy transmission including: the deregulation of interest rates offered on small saving schemes, incremental cuts in the SLR, the reduction in the daily cash reserve ratio that banks must keep with the central bank, and regulatory changes to force banks to rely more on the marginal cost of funding when calculating lending rates, the OECD report says.
Despite liberalisation of foreign direct investment regime, restrictions on FDI were relatively stringent in 2016 compared to other BRIICS and OECD countries.
OECD sees India’s growth at 7% due to note ban, bats for inheritance tax

Tata, Docomo to bury the hatchet

Tata Sons on Tuesday announced that it has reached an agreement with NTT Docomo to settle its long-pending dispute to buy back the Japanese company’s shares in their joint venture – Tata Teleservices. The statement, however, is silent on how the Indian company will circumvent the Reserve Bank of India (RBI) guideline that bans any pre-determined valuation of shares.
In a statement, Tata Sons said in the larger “national interest” of preserving a fair investment environment in India, it has reached an agreement with NTT DOCOMO on a joint approach to enable enforcement of the 22nd June, 2016, London Court of International Arbitration (LCIA) award. “As a gesture of good faith and in accordance with the Tata group’s long-standing record of adherence to contractual commitments that it has always enjoyed both in India and abroad, the Board of Tata Sons has decided to withdraw its objections to the enforcement of the Award in India,” it said.
The RBI had earlier made asked the Finance Ministry to clear the transaction stating the  “national interest” and “better business relations with Japan” reason, but it was rejected by the finance ministry as the current laws do not allow any pre-determined valuation of shares. If the Finance ministry changes its rules allowing pre-determined valuation of shares then it would benefit many other MNCs who are waiting in the queue to cash in on their India investments.
Both parties have jointly applied to the Delhi High Court, requesting that it accept their agreed terms of settlement, subject to such further orders as the Court sees fit. The settlement terms, if approved by the Delhi High Court, clear the way for the $1.18 billion already deposited by Tata Sons with the Delhi High Court to be paid to DOCOMO, and would allow DOCOMO to transfer its 26.5% stake in Tata Teleservices. The RBI told the court that it would get back to the Delhi HC on March 8th after seeking the guidance from the central bank.
As part of this joint application, and in anticipation of the matter being finally resolved in India, DOCOMO has agreed to suspend its related enforcement proceedings in the United Kingdom and the United States for a period of time, Tata Sons said.
This agreement between the parties is a significant step towards resolution of this dispute, and both Tata Sons and DOCOMO are hopeful that they will continue to work together constructively to achieve a resolution of this case as well as will look to further collaboration in the future, it added.
Tata, Docomo to bury the hatchet

UP elections: 53 seats to go for polls in fourth phase on Thursday

Fifty-three constituencies will see polling on Thursday in the fourth phase of staggered Assembly elections in Uttar Pradesh.
A total of 1.84 crore people will be eligible to vote in the election, whose main players are the Bharatiya Janata Party (BJP), Samajwadi Party-Congress alliance and the Bahujan Samaj Party (BSP).
In 2012, the Samajwadi Party won 24 of the 53 seats, the BSP 15, the Congress 6, the BJP five while three seats were bagged by the Peace Party.
There are 680 candidates in the fourth phase, including 61 women in UP elections.
Prominent personalities include Utkarsha Mishra, son of former opposition leader in the outgoing assembly Swamy Prasad Maurya, independent Raghuraj Pratap Singh aka Raja Bhaiyya, Aradhna Mishra, daughter of Rajya Sabha member Pramod Tiwari, and Ujjwal Raman Singh, son of Samajwadi Party leader Rewati Raman Singh.
Around 1 crore of the voters are males and 84 lakh women. The third gender includes 1,034 voters.
The constituency with most candidates is Allahabad North (26) and the constituencies with the least number of nominees are Khaga and Kunda (six each).
In 17 constituencies, more than one woman is contesting, an Election Commission official said.
Lalitpur has the largest electorate (453,162) and Ayahshah the least (260,439). There are 19,487 polling stations in this phase.
UP elections: 53 seats to go for polls in fourth phase on Thursday