Mukesh Ambani’s Reliance Retail has put in bids to acquire two of Henkel India’s soap brands, a sign of the big ambitionsit has in the fast-moving consumer goods (FMCG) business. Any deal for the male deodorant soap Aramusk and Moloy sandalwood soap, put up for sale late last year, is estimated to be worth about Rs 10 crore. The Henkel brands are unlikely to generate significant revenues at the national level, but they are attractive buys locally, especially in the eastern part of the country.

Reliance Industries (RIL), the parent of Reliance Retail, has identified the FMCG sector as the next big growth area, and is planning to set up two or three subsidiaries to manage the business. What started as a private label initiative for Reliance Retail has now grown into a large business idea, said two persons close to the development.

They said the entire business (manufacturing and distribution) will be operated through third parties with Reliance controlling the brand and the technology behind it. The plan is to create consumer brands, acquire them and get into joint ventures with existing companies, a top company official said.

Chennai-based Henkel had earlier put four non-core brands on the block, that included Maha Bhringol hair oil and Tuhina skin cream. ET has learnt that Reliance is not interested in acquiring the hair oil brand and Henkel has decided to retain Tuhina as its core brand.

The Emami group is also in the race for the Henkel soap brands, but a person close to the deal process said Reliance has bid higher. Mumbai-based consumer goods firm Jyothy Laboratories also considered acquiring the brands, but it couldn’t be ascertained if it is still in the race. Mape Advisory Services is the investment banker for the deal. Aramusk and Moloy were owned by Shaw Wallace India before Henkel acquired them in 1999. Reliance Retail and Henkel India declined to comment.

The FMCG sector has coped with the slowdown better than most others, growing by 18-20% in the past 5-6 quarters, helped mainly by price hikes, increased consumer promotions, new product launches and smaller packs. Though growth slowed down in April and May, FMCG companies are aggressively gunning for volumes, and are optimistic that growth will rebound.

For Reliance, the FMCG business is unlikely to attract negative publicity — unlike its retail venture — since it would involve small manufacturers and not compete with them as was the case with its retail unit. FMCG is also a business where overhead costs are low, and outsourcing is common. Reliance plans to enter into agreements with manufacturers and the FMCG business would get a captive audience at the 750-odd Reliance Retail stores and give the retail venture the margins the company would otherwise have paid to a distributor.

Among the categories that Reliance proposes to enter include foods such as staples and snacks, and personal care products including soaps, detergents, shampoos and hair oils. In January this year, Henkel, a 51% subsidiary of German consumer products company Henkel KGaA, had decided to divest its non-core regional brands. Henkel wants to prune its portfolio to focus on flagship brands Henko and Mr White (both laundry care brands), Pril dishwasher,
Margo soap and Fa deodorants.

Other brands in the Rs 600-crore Henkel India’s portfolio include Neem toothpaste and haircare brands Igora, Bonacure, Glatt and Palette. In addition to deodorants, the Fa franchise includes soap, talcs, shaving cream and after-shave lotions. Furthermore, Henkel introduced its Bref surface cleaners last year.

Source:http://economictimes.indiatimes.com/

Driven by customer demand, Indian IT firms such as TCS, Infosys, and Patni are enhancing their ‘near-shore’ delivery capabilities in Latin America.

This would also help them explore the emerging markets in the region.

Last week, TCS opened its seventh Latam delivery centre at Queretaro, Mexico, where Patni Computers also chose to locate its first centre that was launched on Monday.

“We are seeing increased demand from our client base for near-shore resources. Our investment in Mexico allows us to deliver on these demands,” said Mr Jeya Kumar, CEO, Patni Computers. The company initially plans to have a 100-seat facility.

TCS plans to hire some 500 people this fiscal at its Queretaro facility that would provide advanced IT services, consultancy, testing factory, BPO and IT infrastructure solutions. Besides serving its US customers from near-shore locations in Brazil, Argentina, Uruguay and Mexico, TCS also caters to some 30 local clients in sectors such as telecom, banking, finance, manufacturing and retail.

Infosys, which employs some 250 people at its Mexican subsidiary in Monterrey, plans to expand to Brazil and expects to set up a centre in Belo Horizonte over the next three-four months.

Wipro runs a BPO facility in Curitiba, Brazil, from where it serves customers such as AmBev, and also has a facility in Mexico.
Local business too

“The main objective of locating delivery capabilities in the Latam would be to act as near-shore centres for North American customers. However, the smaller focus would be to get local business,” said Mr Vinu Kartha, Principal at Tholons Inc, which helps customers with their outsourcing strategies.

While stating that the delivery cost-structure in the Latam is similar to India or marginally higher, Mr Kartha said some US customers are keen on outsourcing to near-shore locations where they can visit and review the progress often.

“If some thing goes wrong, they can always switch the work back to US because of the near same time-zones,” Mr Kartha added.

While the average cost per employee for IT services in the US is $150,000-175,000 a year, varying with the skillsets, there is a clear 50-60 per cent cost arbitrage when a customer near-shores , said Mr Praveen Bhadada, engagement manager at Zinnov Consulting.

One of the key disadvantages for offshore locations such as India and China is the management and communications overhead.

“So customers are looking to reduce their overheads by having a presence in near-shore locations, which can be reached in four to six hours,” Bhadada said.

According to Gartner, IT spending in the Latam is expected to grow at 4.4 per cent in 2009, spurred by continued IT expansion in key countries such as Brazil, Mexico, Peru and Chile among others, while the worldwide spending is expected to remain flat.

“We are looking for targeted acquisition with specific criteria in Mexico,” said Mr Dheeshjith V.G., Head, New Markets and Services, Infosys, stating that the company was interested in firms that own intellectual property relevant to these markets, or in firms that have large clients headquartered in either Brazil or Mexico. Capabilities in Spanish, which is spoken in Mexico, and Portuguese, which is spoken in Brazil, are one of the key considerations as well.

Source:http://www.thehindubusinessline.com

Indian companies made 143 acquisitions across various sectors in the United States over the last two years, bailed out many companies on the brink of closure and created some 30,000 jobs, according to a seminal new study.

In 2007-08 alone, 94 deals between the range of $0.8 million and $1,005 million were concluded with the disclosed value in 55 deals totalling $4,432 million, according to the joint study released by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst and Young.

In 2008-09, Indian companies were involved in 49 US-bound acquisitions. Of these, deal values were disclosed in 24 cases and their value totalled $960 million. The size of the deals were in the range of $0.70 million and $172 million, the report noted.

Indian Ambassador to the US Meera Shankar released the study titled “India Contributes to Employment, Capital Growth and Tax Revenues in the US - Direct Investment by Indian companies in 2007-2009″ at a function at the East West Centre here Tuesday.

Speaking of a transformation that the India-US bilateral relationship had witnessed in recent years, Shankar highlighted the complementarities and convergences in the relationship.

The US being the largest economy in the world was naturally a key economic partner for India, she said pointing out the growing two-way investment between both countries.

FICCI President Harsh Pati Singhania and Secretary General Dr. Amit Mitra also spoke about the developing economic ties between India and the US and the numerous opportunities for further cooperation.

The study shows that IT&ITeS (information technology and information technology enabled service), consumer products, pharmaceutical and manufacturing are the key sectors where companies are active in outbound acquisitions.

However, the IT&ITeS sector is the sector where a majority of the deals took place. The IT&ITeS sector, in fact, accounted for 50 per cent of the total number of deals in 2007-08 and 40 per cent of the total number of deals in 2008-09.

The report attributed the rise in Indian outbound investments to the US to strong economic growth, and easy availability of debt finance for companies.

Several Indian multinationals are still looking at acquiring US companies, despite the economic downturn which has raised the cost of overseas acquisitions.

Source:http://sify.com/finance/fullstory.php

Saritha Rai visits Infosys’s giant Mysore training centre to gauge how outsourcers are using education to maintain their edge in challenging economic times.

Just before nine o’clock every morning, thousands of twenty-somethings stream across an expansive landscaped campus - past the Domino’s Pizza, the 24×7 library, the official merchandise store - and into large classrooms. A hundred or so file into one room, firing up their computers as their lecturer clips on his microphone and gets started on a two-hour session about Java technologies.

This could be a university classroom anywhere in the world but it isn’t. It is the sprawling training centre of India’s second-largest outsourcing company, Infosys Technologies, which boasts $4.6bn in revenues and 104,000 employees, at last count.

The 336-acre expanse, with its capacity to train 14,000 people, is likely to be the largest dedicated corporate training centre in the world. Even global outsourcing rivals would find it hard to replicate this scale in other offshore centres like Ireland, Russia or Vietnam.

But despite its grandeur, the campus has not been able to insulate itself from the effects of the global recession.

Given Infosys’s extensive hiring - peaking to 10,000 or more new hires during some quarters - it has no option but to take on fresh university graduates. And the chosen ones are not handed an appointment letter and herded to their work desks. Instead, they are bussed off to the training campus in Mysore, a three-hour drive from Infosys’ headquarters in Bangalore.

Infosys executives say intensive employee training gives the company an edge over its rivals. “It helps us meet and exceed customer expectations while maintaining our competitive edge,” says Mohandas Pai, director of human resources at Infosys. “When a global customer is experiencing different suppliers, our employees come out differently,” adds Girish Vaidya, senior vice president and head of the Infosys Leadership Institute.

At Mysore, first-time visitors to the training centre may think they have walked into a corporate Disneyland. The campus features a geodesic dome-shaped three-cinema multiplex, a vast palm-tree-lined swimming pool, an eight-lane bowling alley, a floating restaurant and a huge gym. The residential quarters are laid out in letter shapes that spell ‘Infosys’ from an aerial view.

One awestruck recent hire gushed that his first visit to the campus was like “entering the gates of heaven”.

The buildings have a Las Vegas-style showiness. The largest of them, a Greco-Roman edifice, can train 9,500 individuals on any given day. One of the two Infosys global education centres on campus, the building houses one million square feet of training facilities, including 84 100-seater classrooms, three 200-seaters (named after Silicon Valley luminaries such as Moore, Chambers and Jobs), five examination rooms, an induction hall for 300 trainees, a library with 60,000 books, a cybercafé for 230 and a basement food court that can seat 1,700 diners.

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China may be rising as an offshoring destination, but many companies are outsourcing to multiple countries rather than just choosing between China and India.

Market saturation and rising prices in India have helped spur multinationals to offshore to other countries as well, including China, Brazil, and Vietnam, said Jim Longwood, research vice president at Gartner.

Many companies also aim to tap the different expertise available in different regions by outsourcing to multiple countries, said Michael Rehkopf, North Asia director for Technology Partners International (TPI), an outsourcing consultancy.

Such is the case for U.S.-based Hanover Insurance, which uses India as just one of three outsourcing sites abroad. The company has outsourced to India for over five years, but it also uses Canada and has turned to China in the last year the ability to adjust the size of its workforce rapidly for some tasks, said Michael Clifton, chief technology officer at Hanover.

Each site offers unique skills, Clifton said. Hanover has partners in India maintain its mainframes because the required expertise is common there, Clifton said. Parts of Hanover applications that must be developed on mainframes are also programmed in India. Mainframes still support much of the operations at the 150-year-old company.

Indian outsourcers gained “massive” experience with mainframes by working on Y2K issues for customers a decade ago, said Rehkopf, the analyst.

Meanwhile, Hanover’s Canadian partners do research and development consulting, such as analyzing how younger generations think of insurance, said Clifton.

Hanover uses its China site for quick scaling and for work on application interface design.

One application Hanover has developed at its China site is a tool for sales agents. It can be used to modify Hanover insurance plans and produce price quotes according to the needs of potential buyers. The application, built with a service-orientated architecture and based on Adobe Flex, runs through a browser window but looks like a resident program, said Clifton.

Service-orientated architecture development and user interface design for multiple devices are two of China’s engineering strengths, he said.

China also offers expertise in embedded application design, perhaps because products like mobile phones and cameras that run such software are so often made in China, said Rehkopf. India offers contrasting expertise in business office systems, he said.

Development of Web applications is also a strength for China, though the country does not have a definite advantage over India in that area, Rehkopf said.

Hanover has found scaling easy in China, said Clifton. The number of people at Hanover’s China site has usually run between 50 and 75, but that number can fluctuate by the month and reach 100 if needed, he said.

“I have the ability to dial up really great expertise and literally hundreds of people if I needed it,” he said.

But while scaling is possible for software development in China, India may retain the advantage when those projects require several hundred people, said Rehkopf. Established Indian outsourcers like Infosys Technologies dwarf their Chinese counterparts.

Huge populations give China and India unmatched scaling potential. But many other countries are grabbing from the outsourcing market pie as well, said Rehkopf. Language needs might draw a Spanish or Portuguese company to South America, for instance, or another company to eastern Europe rather than Asia, he said.

Hopes of avoiding geopolitical risk have also pushed multinationals to outsource to multiple destinations. In India’s case, the terrorist attacks in Mumbai last November may have pushed companies to consider moving their outsourcing, said Longwood, the Gartner analyst.

One advantage for China is that many companies see outsourcing as a step toward cracking the huge local market, said Brian Keane, CEO of Dextrys, the U.S.-based outsourcing vendor that Hanover works with in China.

Many of the vendor’s customers are either overexposed to India or hope to sell their services in China, said Keane.

Source:http://www.pcworld.com/businesscenter/article