HUL Q1 sales disappoint as volume growth slows

Personal care products unit has been a laggard for the firm while packaged food and beverages businesses were the best performers in terms of both sales and margin growth.

The country’s top FMCG company Hindustan Unilever Ltd reported 7 per cent net sales growth in the first quarter ended June 30, 2013 accompanied by slower volume growth both sequentially and over the year ago period. Net sales grew to Rs 6,787 crore for the quarter led by 16 per cent growth in beverages business as also 8 per cent growth in its key soaps & detergents business.

The firm also announced a top management shuffle 

Its domestic consumer business grew 7.1 per cent with 5.9 per cent growth in home and personal care unit and 12.5 per cent growth in food business.

Overall volume stood at 4 per cent as against 6 per cent year-on-year growth clocked in Q4 FY13. The company's operating profit was up 12 per cent with 70bps margin expansion.

HUL scrip tanked over 5 per cent ahead of the results announcement only to recover partially and was quoting at Rs 661, down 3.7 per cent as of 3.30 PM on the BSE in a weak Mumbai market on Friday.

The firm saw net profit skid 23.4 per cent to Rs 1,019.25 crore over the year ago period. However, the firm’s profit in the same quarter last year was boosted by an exceptional item from sale of assets worth Rs 607 crore which shrunk to a one-time gain of Rs 106 crore last quarter. Profit after tax from ordinary activities before exceptional items net of tax and prior period adjustments for the quarter stood at Rs 885.13 crore, up 3.6 per cent over Q1 of FY13.

Soaps & Detergents which contribute around half of total business of HUL, reported 8 per cent growth in sales and improvement in margins. The firm said Skin Cleansing sustained its strong performance, registering another quarter of double digit volume growth. Lifebuoy, Breeze, Dove and Lux delivered robust volumes. The quarter witnessed price deflation as the benefit of lower commodity costs were passed on to consumers.

In laundry, Surf and Rin maintained double digit growth as they continue to drive category upgradation. The liquids portfolio was expanded with the launch of Surf Excel Detergent Liquid. Household care grew in double digit and Vim Anti Germ Dishwash and Domex acid based toilet cleaners were introduced.

Personal care products grew 2 per cent in a slowing market though the firm reported double digit growth in hair, oral & colour cosmetics business. The unit, however, saw margin pressure last quarter.

In Skin Care, Ponds, Lakmé and Dove delivered double digit underlying volume growth. Fair & Lovely maintained its strong position in the mass skin lightening segment. However, it was impacted by a challenging market context and a strong base effect according to the firm.

Hair care had another good quarter with volume led double digit growth. Sunsilk and Clinic Plus sustained robust growth momentum and Dove growth was led by bottles.

Oral care segment registered double digit growth driven by the Close Up and a step up on Pepsodent Expert Protection.

Colour cosmetics did particularly well, delivering stepped up double digit growth across both Lakmé and Elle 18 brands. Lakmé continues to strengthen its position in premium make up driven by the growing momentum on Absolute and ‘9 to 5’ which nearly doubled sales last quarter.

In skin care, Ponds BB Cream and Lakmé CC Cream were introduced and the facial cleansing portfolio was further strengthened with a new Lakmé Fresh Fairness Clean up range. Hair care saw the launch of Sunsilk Radiant Shine, Dove Cellular Repair and TRESemmé Keratin Smooth.

Beverages & Packaged Food

Beverages grew 16 per cent with tea delivering one of its strongest quarters with double digit growth across all key brands. Taaza in particular had one of its best performances last quarter, on the back of a reinforced marketing mix.

Packaged Foods grew 5 per cent driven by double digit growth in Kissan and Knorr Soups. The Knorr portfolio was expanded with the launch of the ‘Easy to Cook’ range of meal makers. Kwality Walls grew modestly, impacted by a slowdown in the ice cream market.

Overall both the packaged foods and beverages unit, which are smaller part of the business mix of HUL, saw sharp margin expansion.

Harish Manwani, chairman commented: “While there are near term concerns particularly around slowing market growth, we are confident of the medium to long term growth prospects of the FMCG sector and our strategy of driving growth and profitability through innovation and operational excellence.”

Apurv Bhansali

apurv15@ediindia.org

"The Secret of Leadership"

Have you heard the story of the Zen master and the dogs in the temple? It has a message that has changed lives.

While travelling through a little Himalayan kingdom,the master decided to visit the temple there.As he walked in through the temple gates with his local guide,he saw two large,ferocious dogs chained to the iron grilles at the entrance.They were straining at their chains,their tongues were wagging,the saliva was dripping and they were barking non-stop.Just the kind of sight that could instill fear in anybody's mind!

Don't worry,master! said the helpful guide.'I know they look really scary.But the chains are very strong and there is no way the dogs can break free!" The master continued to walk down the long courtyard towards the main temple.Even as he tried to concentrate on the temple's history that the guide was narrating,he kept looking back at those dogs.The sound of their barking seemed to be echoing in his ears.

And as he looked back one more time,he could not believe what he saw.The dogs had broken free from their chains and were running towards him.Instantly the master started to run too directly towards the dogs! Yes he began to run not away from the dogs,but towards them! And guess what happened? The dogs were so surprised to see the master running towards the gate!

Think of those ferocious dogs as symbolizing the biggest fears in your life.What do we all tend to do? We tend to run away from our fears.Confront your fears,embrace them and you will find that you can conquer them!

Source of the article:

From the book "The Secret of Leadership" by Prakash Iyer (Foreword by Rahul  Dravid)

Amarnath Shetkar

amar15@ediindia.org

Big Data intelligence startup Minetta Brook raises $2M from Naya Ventures & TiE Angel Group Seattle

Minetta Brook Inc, a Big Data intelligence startup, has come out of stealth mode and announced it has raised $2 million (Rs 11.8 crore) in seed funding from TiE Angel Seattle or TAGS, an angel investment group, and naya ventures LP, an early-stage venture fund. TAGS led the seed funding round. The company also closed a convertible note round in February this year, which was led by Keiretsu Forum Northwest , an investment community comprising angel investors.

As part of the investment, Gowri Shankar, venture partner at Naya Ventures, will join the board of Minetta.

Company Abstract

Founded in 2011, Naya Ventures is a $50 million early-stage investment firm that invests in India and US-focused companies operating in mobile and cloud space. It invests anywhere between $250,000 and $3 million in startups and has already funded companies such as BoxFish, GlobalOutlook, Glympse and Zoomingo. Headquartered in Dallas, the company has its India office in Hyderabad. Naya Ventures was founded by Dayakar Puskoor, executive chairman at Motivity Labs and at GlobalOutlook; Prabhakar Reddy, an active angel investor and board director at GlobalOutlook and Motivity Labs; and Gowri Shankar, former president and CEO at SinglePoint.

Commenting on the investment, Shankar said, “We are focused on investing in early-stage companies that can use our operational expertise and ecosystem knowledge. Minetta Brook’s team developing a Big Data intelligence platform was the perfect fit for us.”

“The investment allows us to bring to customers our intelligence engine with applications across multiple sectors. Our first application targets the financial sector and will change how news, market and reference data are synthesised to provide hyper-relevant, real-time information to traders and analysts,” said Deepak Bharadwaj, co-founder and CEO of Minetta Brook.

The Seattle-based startup was founded in early 2011 by Bharadwaj and Prabhu Venkatesh (president). Prior to setting up Minetta, Bharadwaj had founded Aelego, a global services firm where he also served as MD and CEO. Earlier, he had served in senior roles at Aqva Group (president) and Microsoft (general manager), and also worked at companies such as Sun Microsystems and Axil. He holds a BS degree in Electrical Engineering from Birla Institute of Technology and an MS degree in Computer Science from University of Oklahoma.

Venkatesh had earlier worked at several companies including Banc of America Securities LLC, GemStone Systems, Bloomberg, Salomon Brothers, Sound Financial Technologies, Telekurs Financial, Convergent Technologies and Fortune Systems, LLC. He holds a BS in Electrical Engineering from Birla Institute of Technology and an MS in Aerospace Engineering from Indian Institute of Science.

The company’s core technology is its Big Data intelligence platform that enables fast discovery of relevant information from streaming structured and unstructured content. The technology development has taken around two years and the company is now planning to transition from beta to revenue mode. Minetta will be shortly announcing its first product running on its Big Data intelligence engine to rope in paid customers.

Apurv Bhansali

apurv15@ediindia.org

Industry wants seed culture, SEBI prefers venture capitalism

In the current economic situation, where the government is trying hard to push for reforms, it is important to appreciate the role played by angel investors in promoting a culture of entrepreneurship.

In recent years, the creation of a viable ecosystem for startups has been a key agenda of the government and the regulators alike. The notable initiatives in this regard include the framing of an umbrella regulation for alternative investment funds – the SEBI (Alternative Investment Funds) Regulations, 2012 (SEBI AIF Regulations) – aimed at providing tailor made concessions to different categories of investment funds, the grant of tax pass through status to venture capital funds (VCFs) and the recognition of contributions made by companies to certain technology incubators as corporate social responsibility expenditure under the proposed Companies Bill, 2012.

Yet the run up to the recognition of angel investors as a special class of investors has been full of surprises for the angel investor community, perhaps the biggest being the introduction of a provision in the Income Tax Act, 1961 to tax funds received by unlisted companies from residents at a premium as income from other sources, unless such funds were raised from a VCF. The intention of the provision was to curb circulation of unaccounted for money; however, the same had an unintended adverse effect on the ability of startups to raise funds from angel investors. Subsequently, it was acknowledged by the government that angel investors bring both experience and capital to new ventures and accordingly, in the budget speech of 2013-2014, it was announced by the finance minister that SEBI would prescribe requirements for angel investor pools by which they could be recognised as VCFs.

In line with such an announcement, SEBI in its board meeting on June 25, 2013, has approved amendments to the SEBI AIF Regulations, permitting the inclusion of angel funds within the definition of VCFs. This move has been largely welcomed by the investor community as a positive step towards recognising angel investors as a distinct asset class and providing them with special concessions as are available to other categories of investors, which are registered with SEBI as alternative investment funds (AIFs). However, the salient features of such amendments contained in the press release issued by SEBI suggest that it may well fall short of industry expectations, as it appears that pooling of funds by angel investors would be a pre-requisite for availing of benefits proposed by SEBI.

In this context, it may be worthwhile to point out that angel investors are generally understood to mean high net worth individuals, who provide initial capital to startups or persons with innovative business proposals and assist them in implementing their business proposals. Apart from providing the initial risk capital, the essential characteristic of an angel investor is the mentoring and guidance provided to startups, by bringing on board industry experience, domain knowledge and industry connections to help the startup mature into a viable business venture. Further, the key difference between a pooled fund and an angel investor is that the decision to invest is taken by the angel investor alone and investments are made by the angel investor solely out of its own funds.

As per the release, angel funds proposing to seek registration with SEBI, as a sub-category under Category 1- Venture Capital Funds, would be required to have a corpus of at least Rs10 crore (as against Rs 20 crore for other AIFs) and minimum investment by an investor shall be Rs 25 lakh, which may be accepted over a period of maximum three years. Since SEBI envisages a pooling of funds, like other AIFs, SEBI expects such angel fund to have a sponsor/ manager, which will have a continuing interest in the angel fund of not less than 2.5% of the corpus or Rs 50 lakh, whichever is lesser.

The release further mentions minimum qualifications and net worth requirements for individual angel investors and corporate angel investors. Individual angel investors would be required to have net tangible assets of at least Rs 2 crore, whereas corporate angel investors would be required to have a minimum net worth of Rs 10 crore or be a registered as an AIF/VCF. Further, individual angel investors would be required to have early stage investment experience, experience as a serial entrepreneur or be a senior management professional with 10 years’ experience.

Accordingly, it appears that SEBI’s intention is to limit the participation by individual angel investors and corporate angel investors in angel funds registered with SEBI, with their attendant benefits, to only those investors that fulfil the aforesaid eligibility requirements. Angel investors that do not qualify for participation in such funds may invest in startups directly without the tax and other benefits. While the intent behind drawing such distinction between different sets of angel investors seems clear, the rationale behind imposing such net worth and qualification requirements, thereby limiting access to capital, may be clarified given the (relatively smaller) minimum investment for angel investors and experienced fund managers to oversee investments by the angel fund.

Similarly, the proposed amendments place several restrictions on the nature of the investee companies in which angel funds may invest. For example, angel funds can only invest in companies, which are incorporated in India and are not more than three years old, have a turnover not exceeding Rs 25 crore and are unlisted. It is appreciated that SEBI is seeking to provide adequate safeguards to ensure that only those enterprises, which inspire growth potential but do not have easy access to capital should be permitted to raise capital from angel funds. However, certain other investment conditions and restrictions applicable to angel funds, as per the release, appear to curb the investment freedom an angel investor would reasonably expect.

To illustrate, angel funds cannot invest in companies in which they have a family connection. This requirement is somewhat flawed inasmuch as being the initial round of funding, the chief source of funding for a startup generally comprises family and friends. Furthermore, in the context of pooled funds, it may be noted that the SEBI AIF Regulations provide for restrictions on investments by AIFs in associate companies to avoid any conflict of interest vis-à-vis the investors in a particular AIF. That said, such restriction is subject to waiver by 75% of investors by value of their investment in such AIF. Hence, it is not quite clear why angel funds should be made subject to a more stringent requirement in respect of investments in related entities.

Again, the minimum investment threshold of at least Rs 50 lakh and an upper ceiling of Rs 5 crore appear to be against the investment strategy of angel investors. Angel investors typically provide initial capital to operationalise the project and not for purposes of expansion, which requirement is typically met through venture capital and private equity funding. Further, such investments are required to be held for three years, as per the proposed amendments. In this regard, it may be mentioned that often, if a startup performs well, it is in a position to access venture capital funding within one to three years of the angel investor funding and inter alia provide an exit opportunity to angel investors.

In view of the above, it is important that SEBI acknowledges that the mere ability to set up a pooling vehicle with a relatively smaller corpus and minimum investment threshold may not necessarily encourage angel investors to come forward and set up angel funds (as opposed to VCFs, for instance), particularly given the investment conditions and restrictions applicable to angel funds, including the conditions pertaining to the investment size and lock-in restrictions.

One would need to await the final text of the proposed amendments to the SEBI AIF Regulations to understand better the extent to which SEBI seeks to regulate angel investor funding. Needless to say, in the current economic situation, where the government is trying hard to push for reforms and promote a culture of entrepreneurship, it is important to appreciate the role played by angel investors in promoting such culture and to repose necessary confidence in the angel investor community, which remains the mascot of innovation, entrepreneurship and excellence for aspiring entrepreneurs

Apurv Bhansali

apurv15@ediindia.org

Pearson and Village Capital have entered into a partnership to support and fund EDUpreneur's in India

Pearson and Village Capital have entered into a partnership to support and fund education ventures in India. The initiative tries to support entrepreneurs who provide education solutions to the less privileged students. Winners would be entitled to $75000 and would be selected through the peer review model developed by Village Capital.

Pearson, had launched a $15 Mn Pearson Affordable Learning Fund which invests in quality education for poorest families in the world last year. It had made its first investment last year by investing in Omega Schools, a privately held chain of affordable, for-profit schools based in Ghana.

The fund in collaboration with Village capital will offer Indian entrepreneurs to receive seed investment through a programme. The programme involves participation by 16 startup companies who would be offered mentoring advice from other entrepreneurs, investors and professionals. These entrepreneurs will then assess one another against six criteria, with the top two ranking companies receiving up to $75,000 each.

The winners would receive the capital from the corpus created by Pearson and Village capital that have committed $100000 and $50000 respectively.

Village Capital, based in the US, specialises in using the power of peer support and mentoring to build investment-ready companies and to allocate capital through peer selection.Village Capital has supported nearly 300 mission-driven entrepreneurs across six continents worldwide. It has raised more than $30 million, created over 5,000 jobs, and served over four million customers. It has supported 60 entrepreneurs through four programs in India, investing in eight innovative enterprises.

Village Capital has also teamed up with Arohan Ventures to form the Centre for Innovation, Incubation and Entrepreneurship at IIM- Ahemdabad to accelerate ventures operating in 5 sectors namely mobile/IT, health, agribusiness, education and livelihood enhancing technologies.

Pearson is a global learning company, providing educational materials and services, business information through the Financial Times Group, and consumer publishing through the Penguin brand. Pearson serves learners of all ages around the globe, employing 41,000 people in more than 70 countries.

It publishes across the curriculum under a range of respected imprints including Scott Foresman, Prentice Hall, Addison-Wesley, Allyn and Bacon, Benjamin Cummings and Longman.

Recently in this space; Pearson had fully acquired TutorVista; Digital learning solutions provider - Learnpedia Edutech Solutions raised undisclosed amount of angel investment from Ixora Ventures and a consortium of angels; Kaizen and German Media Company – Bertelsmann co – invested R22 Cr in Authorgen Technologies which operates WizIQ.

Apruv Bhansali

apruv15@ediindia.org

Social Tech Firm - Gram Vaani Raises Funds

Gram Vaani, a social tech company has raised $500,000 from undisclosed investors. The funds will be used to expand the team of the company.

Iamwire stated the  funds have been invested by Indian angel investor  along-with few other investors.

Founded in 2009 by Aaditeshwar Seth and Mayank Shivam, Gram Vaani is a social development organization building open-source technologies for community media in rural areas. Its flagship product is a radio automation system called GRINS - Gramin Radio Inter-Networking System. The GRINS box is a plug-n-play server to run a community radio station.

It also has vAutomate suite of voice applications which is being used by several partners, including PATH (community mobilization), CEDPA (health accountability), Inventure (financial profiling of people), Video Volunteers (self help group surveys). Its Mobile Vaani network which according to the company has seen huge uptake in Jharkhand and has found several sponsors, including Sesame (education) and Oxfam (gender equality).

The company caters to more than 2 Mn users in over 15 Indian States, Afghanistan, Pakistan, Namibia and South Africa.

Indian Angel Network has funded 50 start-ups across multiple sectors like IT, mobile, Internet, healthcare, e-commerce, gaming and education. Its portfolio includes - Aurus Network, Alma Mater, Vienova, Druvaa Softwares, Kwench, Gamiana among others.

Recently, it announced setup a base in Kolkata to fuel startup ecosystem in the east. 

Compiled by 

Apruv Bhansali

apruv15@ediindia.org

The DICCI SME Fund, a venture capital fund initiated by the Dalit Indian Chambers of Commerce and Industry has received SEBI’s approval to raise R500 Cr for 10 years through close ended fund, Indianexpress states.

According to DICCI President, Milind Kamble, SIDBI has already committed R10 Cr while talks with other banks and financial institutions are on. The plan is to create entrepreneurial role models within SC/ST communities that will attract educated SC/ST youth to the entrepreneurship.

The Varhad Group is the fund manager of DSF. Prasad Dahapute is the founder of the Varhad Group and MD of Varhad Capital.

Fund plans to raise money from banks and HNIs.This fund for Dalit entrepreneurs follows the new public procurement policy of the government which mandates that 4% of all procurement by public sector undertakings and government departments must be from SMEs owned by scheduled caste and scheduled tribe entrepreneurs.

This is Category-I SME Fund and aims to raise R160 Cr in the first closure.It aims to finance around 25 Dalit entreprenuers initially. Along with financing their projects, it would also support them to grow and exit when they become of running the business smoothly.Fund is looking forward to create four kinds of social impacts while generating internal rate of return of over 25%: Financial inclusion for SC/ST SMEs through access to equity capital markets, economic empowerment through wealth creation, employment creation for SC/ST youths and capacity building through the investee companies.

Business houses like Tata Group, Thermax, Godrej, and Forbes Marshall were keen to help DICCI in setting up the fund. A number of companies including a pipe manufacturing unit have approached DICCI for funds.

Compiled by 

Apurv Bhansali

apruv15@ediindia.org