BANGALORE | WEDNESDAY, 11 JUNE 2014 COMPANIES 3 . < RAGHUVIR BADRINATH Bangalore, 10 June The stock price of UB Holdings (UBHL), the princi- pal holding company of the Vijay Mallya-led UB Group, hit a fresh 52-week high at ~49.80 a share on Tuesday, a day after it breached the upper circuit at ~47.30 on Monday as vol- umes spurted 7.38 times on the BSE. On Tuesday the vol- umes spurted 3.68 times and closed with gains of 2.12 per cent at ~48.15 a share. One trigger for this move- ment is UBHL’s bid to release some of the pledged shares of its group companies — United Spirits and Mangalore Chemicals & Fertilizers (MCF) — even as global spirits major Diageo opened its second offer from June 6 to mop up an additional 26 per cent in United Spirits at ~3,030 a share. In the past few trading sessions, UBHL shares have gained 25 per cent. UBHL, which had pledged a part of its holdings in United Spirits as well as MCF to raise resources to fund its now-grounded Kingfisher Airlines, has over the past two weeks been slowly releasing a part of these. UBHL has released shares worth about ~150 crore of United Spirits and addi- tional shares of MCF worth ~55 crore. According to information avail- able, UBHL is try- ing to pay back some of its debtors from the proceeds of the sale of a part of its shares of USL to Diageo. As part of the ~5,500- crore transaction, sealed dur- ing July 2013, in which UBHL sold a part of its holding in United Spirits, there was an inflow of about ~2,000 crore into UBHL. Bulk of this was paid to lenders to facilitate the share sale to Diageo. “UBHL is continuing this process as it is managing to slowly untangle various issues with lenders,” a senior man- agement official of UB Group told Business Standard. An official spokesperson offered no comment. Despite these moves, Vijay Mallya might have to shortly work out ways on how he intends to square up against a possible over-arching move by Kingfisher Airlines’ lenders, who are mulling var- ious options to get back the ~6,000-crore of dues, after many of their moves have so far failed. UB Holdings’ stock on fire Shares at 52-week high as company starts getting back pledged shares BS REPORTER Mumbai, 10 June A day after some Indian com- panies spoke out against 100 per cent foreign direct invest- ment (FDI) in the defence sector, the Confederation of Indian Industry (CII) and BSE-listed Pipavav Defence have endorsed the Modi gov- ernment’s reported move to allow it. CII said FDI was directly linked with core national priorities such as raising manufacturing growth to 25 per cent of the gross domes- tic product, significant job creation and bringing high- end technology into the country. The associated benefits are the spinoffs for the civilian market. “Opening various sectors have helped Indian indus- try grow and become glob- ally competitive,” said Ajay Shriram, president, CII. On Monday, L&T said 100 per cent FDI should not be allowed in India unless backed by transfer of technol- ogy and giving access to Indian companies in foreign markets. Tata, Reliance and Mahindra were non-commit- tal on allowing 100 per cent FDI in the sector. “We welcome 100 per cent FDI in defence as it will help India to get crucial technolo- gy to build our own capabili- ties,” said Nikhil Gandhi, chairman of Pipavav Defence. Pipavav has invested ~8,000 crore to set up a state-of-the- art shipyard in Gujarat to con- struct ships for Indian navy and coast guard. CII, Pipavav back 100% FDI in defence BS REPORTER New Delhi, 10 June A stable government at the Centre seems to have lifted consumer senti- ment, with sales of passenger vehicles in the domestic mar- ket increasing three per cent to 207,953 units in May, the first increase in eight months. However, while buyers seem to be returning to showrooms, a definite turnaround in vehicle sales might be some time away. The previous time passen- ger car sales had risen was in August 2013, increasing 4.47 per cent to 190,053 units. Vishnu Mathur, director- general, Society of Indian Automobile Manufacturers (Siam), said, “The sentiment seems to have improved in the market. Enquiries are now being converted into sales. The formation of a stable govern- ment at the Centre, coupled with a fall in the cost of cars due to a cut in excise duty, has brought back positive senti- ment.” However, he clarified it was too early to assume this was a turnaround in the market. Much depends on whether the excise duty cut announced in interim Budget 2014-15 finds favour with those in the new regime. “We hope the govern- ment will retain the current excise rate beyond June 30. Also, we are looking forward to the rollout of the GST (Goods and Services Tax and environ- mental clearances for industri- al projects to kick-start the economy,” Mathur said. In the interim Budget, then finance minister P Chidam- baram had cut excise duty on small cars, scooters, motorcy- cles and commercial vehicles from 12 per cent to eight per cent; on sports utility vehicles from 30 per cent to 24 per cent; on mid-sized cars from 24 per cent to 20 per cent and on large cars from 27 per cent to 24 per cent. Mathur said predictions of a below-normal monsoon this year might put a spanner on auto sales. “The government has already spoken of contin- gency plans and if these are effective, we hope there won’t be much impact. Otherwise, in case of a poor monsoon, the demand for two-wheelers and small cars in rural markets could be affected.” In May, vehicle manufactur- ers sold 148,577 passenger cars in the domestic market, an increase of 3.08 per cent com- pared with 144,132 units in the year-ago period. Owing to new models, carmakers such as Maruti Suzuki (Celerio), Hyundai (XCent, Grand and Santa Fe), Honda Cars (City), Ford (EcoSport) posted good growth in volumes. While Maruti Suzuki’s sales rose 16.37 per cent to 90,560 units, sales of rival Hyundai Motor increased 12.78 per cent to 36,205 units. By contrast, domestic automobile majors Tata Motors and Mahindra & Mahindra (M&M), with no new vehicles in their portfolios, con- tinued to see sluggish demand. While sales of Tata Motors fell 29.54 per cent to 12,103 units, those of M&M decreased 21.36 per cent to 19,470 units. Mathur said the slight trac- tion in passenger vehicles was- n’t seen in the commercial vehi- cle category, which recorded its 19th consecutive monthly sales decline in May — total sales of commercial vehicles fell 15.28 per cent to 46,986 units from 55,458 units in the year-ago peri- od. Siam said in May, sales in the two-wheeler segment rose 16.3 per cent to 1,402,830 units from 1,206,173 units in the cor- responding month last year. While motorcycle sales rose 11.71 per cent to 984,469 units, sales of scooters increased 34.48 per cent to 357,564 units. Overall, sales of vehicles across categories registered growth of 13.22 per cent at 1,698,138 units, against 1,499,893 units in the year-ago period. Car sales rise 3% after eight months, on stable central govt However, growth will stay only if excise duty cut of interim Budget continues, experts say Consumer sentiments in the automobile sector have improved, with customers returning to showrooms. But experts say a definite turn- around in sales may be some time away BACK ON TRACK AUTO SALE WATCH AUTO SALES Category May ‘13 May ‘14 % Change Passenger vehicles 202,358 207,953 2.76 Passenger cars 144,132 148,577 3.08 Utility vehicles 42,335 44,267 4.56 Vans 15,891 15,901 -4.92 CVs 55,458 46,986 -15.28 MHCVs 18,519 16,572 -10.51 LCVs 36,939 30,414 -17.66 Three-wheelers 35,904 40,369 12.44 Two-wheelers 1,206,173 1,402,830 16.3 Scooters 265,892 357,564 34.48 Motorcycles 881,288 984,469 11.71 Mopeds 58,993 60,797 3.06 TOTAL 1,499,893 1,698,138 13.22 Domestic sales only Source : Society of Indian Automobile Manufacturers (Siam) SOHINI DAS Ahmedabad, 10 June Car makers have started hir- ing from Gujarat's industrial training institutes (ITIs) for their factories across the country. Maruti Suzuki India Ltd last year administered tests to 1,100 candidates at the Kubernagar ITI in northeast Ahmedabad. "Maruti Suzuki had recruited 40-45 candi- dates here for their Gurgaon plant. It has indicated it will test candidates again this month. Accordingly, we have prepared a list of around 1,000," said A J Pandey, place- ment coordinator for the Kubernagar ITI. A senior Maruti Suzuki executive confirmed the devel- opment and said the compa- ny was committed to its long- term relationship with Gujarat. Maruti has adopted five ITIs in Gujarat where it works with the faculty to train students. The company had signed an agreement with the Gujarat government for adopting ITIs at Viramgam, Becharji, Detroj, Kadi and Mandal last year, a senior state government offi- cial said. All of them are locat- ed near Maruti Suzuki’s pro- posed manufacturing facility in Gujarat. The first batch of trainees signed up at these institutes in March 2013, and 400 local youths are expected to receive training here. This will ensure availability of skilled man- power for Maruti Suzuki’s plant at Mandal. Honda Cars and VE Commercial Vehicles, a joint venture between Volvo and Eicher Motors, have also visit- ed ITIs in Gujarat. Pandey said Honda Cars recently hired 85 ITI students for its factory in Tapukara, Rajasthan, and indi- cated earlier this month that it planned to recruit around 1,000 more by the end of 2014- 15 for a second shift. VE Commercial Vehicles recruited a handful of candi- dates for its Pithampur plant in Madhya Pradesh. A senior official in the com- missionerate of employment and training of the Gujarat labour department confirmed that car makers had visited the state last year scouting for tal- ent. The department does not have data on the number of recruitments by the automo- bile industry from ITIs, but the official said the trend was clear. "According to feedback we get from individual ITIs, diesel and motor mechanic courses have gained popularity, apart from other automotive cours- es. Around 80-85 per cent of the students taking these courses are placed on average," he said. "Companies that set up facilities in the state start- ing with Tata Motors and Ford India began recruiting from ITIs. The trend caught on as Gujarat was positioned as an automobile hub," he added. The fact that companies like General Motors, Tata Motors, Maruti Suzuki and Ford had collaborated with the state’s ITIs to bridge the skills gap had helped, said another official in the state’s labour department. Car manufacturers flock to Gujarat ITIs BS REPORTER Ahmedabad, 10 June A lower annual bonus for 2013- 14 declared by the Anand-based Kaira District Co-operative Milk Producers’ Union Ltd, popular- ly known as Amul Dairy, led to a showdown between milk pro- ducers and the dairy manage- ment on Tuesday. Annual bonus is declared by cooperative diaries after calcu- lating the profits for the finan- cial year. The Kaira Union is a member of the Gujarat Cooperative Milk Marketing Federation. As many as 2,000 milk producers and members of the dairy had organised a sit-in protest out- side the dairy prem- ises, demanding higher annual bonus. Some of the protesters and dairy officials entered into altercation lead- ing to a scuffle. Some protest- ers entered the premises and ransacked the chairman's office and caused damage to the prop- erty. Police was called in to control the crowd, as the agita- tion turned violent. Police used lath- icharge to control the crowd and detained half a dozen persons. The com- motion resulted in about a dozen sustaining minor injuries. Superintendent of Police, Anand, R V Asari, said: “Some people have been detained and a case has been registered against them.” One of the protester Kirit Patel said the dairy was being mismanaged by the present management, headed by Ramsinh Parmar, the Congress MLA from Thasra. He said the management of Amul Dairy was trying to suppress the voic- es of the milk producers. Showdown over annual bonus at Amul Dairy The fact that companies like General Motors, Tata Motors, Maruti Suzuki and Ford has collaborated with the state’s ITIs to bridge the skills gap has helped, says a government official ~49.80 Price per share of UB Holdings Limited on Tuesday 3.68 Tuesday’s volumes growth of UBHL 2.12% Value the firm gained over a day ~205 cr Total number of shares released by UBHL, comprising both United Spirits and MCF RETURN OF GOOD TIMES UBHL’s bid to release some of the pledged shares of USL and MCF is one reason for the sudden spurt in market value Some protesters entered the dairy premises and ransacked the chairman's office and caused damage to the property BS REPORTERS Bangalore/Pune, 10 June Infosys, the country’s second biggest information technology company, going through a troubled leadership transition, has sent legal notices to three Indian newspapers for the first time in its history since seven entrepreneurs, including N R Narayana Murthy, set it up. Monday’s notices seek dam- ages of Rs 2,000 crore each from The Times of India and The Economic Times, both owned by Bennett, Coleman & Co, and The Financial Express, owned by the Indian Express group, alleging some of their articles defamed Infosys. It asked the newspapers to withdraw the articles and offer an unconditional apology. Legal notices to the media are not uncommon in India. But the move by a media-friendly company like Infosys has sur- prised many, who believe this could be part of a crisis man- agement strategy over specula- tion regarding its senior man- agement. “I think it is an employee communication problem they are trying to address through this. It is very different from th- eir old strategy, which is the media is a friend. I was very sur- prised when I saw it,” said Jessie Paul, a marketing expert and CEO of Paul Writer Strategic Ad- visory, a marketing advisory firm. Lulu Raghavan, managing director, Landor Associates, a global strategic brand co- nsulting and design firm, says, Infosys as a company has the prerogative to respond to any- thing that is negative for its brand. “We live in a very trans- parent and digital age and it is a difficult environment for cor- porate brands to operate in. Mo- re so for a firm like Infosys that is undergoing restructuring.” Vaidehi Thakar, director of The Indian Express Limited, said, “While we will send an appropriate response to the Infosys notice, we do not wish to comment on this matter.” Ravi Dhariwal, CEO, publishing, at Bennett Coleman & Co, did not reply to an email from Business Standard. Infosys, too, did not reply to an emailed query. Infosys is understood to have objected to nine articles in Economic Times and six in The Times of India and has pointed out inaccuracies. Most of the articles dealt with a series of exits at Infosys and its revival strategy under Narayana Murthy, who returned from retirement last year. Infosys is searching for a replacement to CEO S D Shibulal, who wants to step down before January 2015. The company is understood to have interviewed internal as well as external candidates and is expected to announce a name soon. The departure of a few senior executives, notably B G Srinivas, a former president in contention for the CEO’s job, has triggered speculation of more exits at Infosys. “It is okay to speculate on a company. But when you start speculating about an individual — whether he will stay in a com- pany or not — two things hap- pen. Even if a person has not thought of leaving, people will assume he is going to leave. Second, that person will also get targeted by head-hunters,” said Paul, who has worked as chief marketing officer for infotech company Wipro and global brand manager for Infosys. “I think, it (the notices to media companies) is a ploy to clamp on speculative stories, and to try to send a message that if you do not have the facts do not publish,” she added. Media-darling Infosys fights bad press