Month: February 2023

Corning-Optiemus JV to seek incentives for cover glass

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Bharat Innovation Glass Technologies, a joint venture (JV) of US-based gorilla glass maker Corning and local contract manufacturer Optiemus Infracom, will soon apply for incentives under the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS)to make finished cover glass for smartphones in the country.

The JV company is expected to start the production of smartphone cover glass in the October-December quarter of 2024. In the first phase, Bharat Innovation Glass willmake30million pieces of high-quality finished cover glassand will employ between 500 and 1,000 people, John Bayne, senior vice president and general manager of mobile consumer electronics at Corning, said in a media interaction on Thursday.

For Corning, this is the first such JV to make cover glass. Currently, the JV will be involved in finishing the cover glass sheets in India. “Over time, once we have the scale, we would consider bringing the original glass sheet manufacturing here as well,” Bayne added.

According to Bayne, it does not make sense to directly start with manufacturing of cover glass because that will lead to higher costs initially in the absence of a local manufacturing ecosystem in the country. Once there is a scale and development of the local component ecosystem, it would make sense for Corning to bring in the technology for glass manufacturing.

Optiemus and Corning announced the joint venture last month. As part of the arrangement, Optiemus will hold a 70% stake, whereas Corning will hold 30%. The companies did not disclose the investment in the facility. However, it is learnt that the companies will put in close to `934 crore. Further, the companies are yet to decide on the location of the facility and are in talks with Tamil Nadu and Telangana to occupy the land and start operations.

Even if the JV will start making cover glass locally, the same may not lead to reduction in prices of smartphones for the end consumer, according to Bayne.

“Having a local supply chain is probably a good thing and avoids a lot of logistics and shipping costs. This makes it more economical for the OEMs (original equipment makers) who are assembling their phones here,” Bayne said.

Once the company starts operations, the facility will make entry- and premium-level 2D, 2.5D and 3D glasses for the smartphone OEMs. Corning will transfer its technology to the joint venture to start the cover glass finishing operations in the country.

Creativity at a crossroads

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A week ago, multinational advertising and communications network WPP made the stunning announcement that it would merge Wunderman Thompson and VMLY&R to create a new agency, VML. The move is expected to make the newly formed VML the largest creative agency in the world with an estimated 30,000 employees across 64 markets. Both agencies interestingly were also the outcome of WPP mergers in 2018 – J. Walter Thompson and Wunderman were merged to form Wunderman Thompson, while VML and Y&R merged to become VMLY&R.

Industry veterans reacted with shock at WPP’s decision to terminate the legacy Wunderman Thompson brand that has played an influential role in shaping the industry’s growth since it entered the Indian market 94 years ago under the name Hindustan Thompson Associates.

Sandeep Goyal, CMD at Rediffusion, points out that WPP’s latest move reflects certain clear realities about the industry: “Creative agencies at current remuneration levels are unsustainable. So either clients have to pay more to receive quality services or global agencies will die. Local agencies may be better equipped with lesser hierarchy and overheads for the future. But the global agency is dying.”

Declining value of creativity

While many have fond memories of the agency, observers also claim that Wunderman Thompson’s retirement is also one of the first big signs of the demise of traditional creativity. It all started during the 1990s, when advertising agencies began what is often referred to as ‘unbundling’. While the erstwhile agency format offered brands services like media buying, creative execution, strategy and research all under one roof, the industry gradually started to see each of these functions turn into strategic business units and ultimately independent agencies. That’s when the triumvirate of media, creative and research agencies emerged.

Erstwhile JWT hand Dias says that post the unbundling, creative agencies have never been able to price their offerings independently and that was when the advertising networks started to view them as “cost centres”. It was only a matter of time before the consolidation process began. Over the last decade or so, he adds that the value of reaching people through the right media has become more important than getting the creative right. He notes, “That is why you hear people talk about the poor quality of ads today. Poor-quality ads that reach more people are preferred by brands over good-quality ads that reach fewer people. The next generation of creative talent will be people who know how to reach more people with average creative work, quickly.”

It’s not just WPP. Just about a week ago, Omnicom announced the formation of Omnicom Advertising Services in India, bringing three creative agencies together – DDB, BBDO and TBWA. Omnicom’s strategy is perhaps better than WPP’s move, say some experts, since it eliminates the challenges that come with mergers and allows individual agencies to retain their unique identity while also permitting greater collaboration across functions.

Some others have gone down the same road. Just over a year ago, Dentsu International merged its agencies such as DentsuMB, 360i and Isobar to launch a new global creative network, Dentsu Creative. Publicis too brought most of its agencies under one roof.

Like Dias, Nisha Sampath, managing partner, Bright Angles, laments the lack of value attached to creativity today. “Unfortunately, global networks are driven by profitability and not so much by creativity. The grim reality is that the people who are joining the business today are less passionate about creativity than those over a decade ago. Ogilvy and DDB Mudra are some of the agencies that still demonstrate that passion. Wunderman Thompson was the other,” remarks Sampath.

The fact that advertising revenues this year have fallen across the US, UK and Europe has also put global networks under pressure. However, while mergers look great on paper and promise better cost efficiencies, they are not easy to execute. One of the biggest challenges is culture. That apart, such drastic steps can make people insecure and inevitably, top-tier talent will be the first to exit, impacting morale. Considering this is the second merger for Wunderman Thompson and VMLY&R since 2018, it’s natural for employees to be worried.

Some are plain emotional. Tarun Rai, former group CEO, South Asia at JWT, says, “I have seen quite a few avatars of Thompson. It’s sad to hear that the brand won’t complete its century in India.”

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Harsha Engineers shares settle at 47% higher in debut trade

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Shares of Harsha Engineers International on Monday made a stellar debut on the bourses, listing at Rs 444 apiece on the BSE, a premium of 34.5% over the issue price. The shares hit a high of Rs 527 during intraday trade before settling at Rs 485.9 apiece on the BSE, up 47% over the issue price.

The total quantity traded on the NSE stood at 3.61 crore shares, while 24.9 lakh shares changed hands on the BSE.

The company had raised Rs 225.7 crore from anchor investors.

Harsha Engineers International, incorporated in 2010, is the largest manufacturer of precision bearing cages, in terms of revenue, in the organised sector in India, and among the leading manufacturers of precision bearing cages globally. It has 50-60% of the market share in the organised segment of the Indian bearing cages market and 6.5% of the market share in the global organised bearing cages market for brass, steel and polyamide cages in CY2021.

Also read: Harsha Engineers premium listing on BSE, NSE: Shares end 47% up from IPO price even as Sensex, Nifty fall 2%

The company reported a net profit of Rs 92 crore and net sales of Rs 1,321 crore in the twelve months ended March 31, 2022.

“The company has long-standing relationships with its customers, which are leading global bearing manufacturers in the automotive, railways, aviation and aerospace, construction, mining, agriculture, electrical and electronics and renewables sectors. At the offer price of Rs 330, the stock trades at a P/E valuation of 32.7x its FY2022 post-IPO diluted EPS. Given the company’s strong market share in the bearing case market and strong relationships with its customer, the company’s growth prospects look promising,” brokerage Sharekhan said in its pre-IPO note.

Cygnet introduces Cygnet Digital, an innovative framework

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According to an official release, Cygnet, a provider of enterprise transformation and IP-based solutions for smarter compliance and finance transformation, announced a transformation into Cygnet Digital, as a part of the Cygnet Infotech family. Cygnet Digital unveils the innovative framework, Cygnet COSMOS, which is a customer-first, co-ideation, co-creation, and co-innovation ecosystem.

“The digital landscape is evolving rapidly, and our commitment is to ensure that Cygnetians, customers, communities, and partners remain at the forefront of this digital revolution. Our new identity plans to include ‘Living the Trust,’ with every service, solution, and offering within this innovative framework,” Niraj Hutheesing, founder, MD, Cygnet Digital, explained.

“We aim a vision of achieving 4X growth and delivering best-in-class customer-centricity while expanding the Cygnet family internationally,” Narasimha Murthy, Chief Business and Operations Officer, Cygnet Digital, concluded.

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MCX crude oil October futures shows continuation of bearish trend, go long only above Rs 7050/bbl

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By Bhavik Patel

For the past three to four months, the oil market has been struggling to gain traction on the upside due to growing fears of imminent recessions in Europe and possibly in the United States. Since June, when the Fed started aggressively hiking key funds rates, oil prices have lost around $40 per barrel, slumping below $86 a barrel from $130 last year. Not just recession fears but demands for destruction have also soured sentiment for bulls. The zero Covid policy in China with snap lockdowns and mass mobility restrictions, coupled with concerns about the slowing growth in the Chinese economy, have also weighed on market sentiment. Oil prices have also been volatile as liquidity has dried up.

There was discord between reality and paper oil futures as demand still was holding up but speculators were pushing prices down in anticipation of a recession. OPEC+ had also said that prices are not reflecting the true picture. In fact, with supply constraints increasing due to the implantation of Russian sanctions in winter, there will be a shortage of crude as other OPEC countries don’t have enough capacity to increase production. Demand is still holding up as more demand will come for oil by switching from natural gas, whose sky-high prices have become prohibitive for many industries and power-generating units in Europe. Supply will struggle to catch up with demand once China’s economy rebounds, and possibly up to 2 million BPD of Russian crude oil and products have to find new homes outside the EU and the G7 this winter.

Also read: India’s current account deficit may rise to 3.3% of GDP in Q2FY23 on revival in demand, high commodity prices

So we conclude that oil prices have less space to fall but surely the floor is not set. Below $80, OPEC+ will come into action and start cutting production to prop up prices but slowing economies and interest rate hikes are set to keep investors and traders off risk assets like crude oil, meaning oil prices may not exceed $100 per barrel again this year. Oil prices may struggle in the short term, but once economies rebound, the world will find itself short of supply of oil and other commodities. So in the medium to long term, we are bullish but in the near term, prices are still set to trade in a range.In MCX, Oct future contract still is in a bearish trend with lower top and lower bottom formation on the daily scale.Trend line resistance comes at 7050 so break out or change in trend is only possible above 7050 closing basis. Last week we had recommended not to initiate a long position until 7100 is breached and we are again reiterating the advice to go long only above 7050. Till then the trend is bearish and will remain vulnerable to selling pressure at every bounce.

(Bhavik Patel is a commodity and currency analyst at Tradebulls Securities. Views expressed are the author’s own.)