Adidas files police complaint on Reebok India ‘irregularities'

Vidya Ram

http://www.thehindubusinessline.com/industry-and-economy/marketing/article3412760.ece?homepage=true

London, May 12: 

The crisis at Adidas' Indian operations deepened as the German sports titan announced that it had called for Indian authorities to launch a criminal probe into the commercial irregularities at Reebok India.

“Based on the commercial irregularities we have uncovered at Reebok India, we have now filed a criminal complaint with the Indian law enforcement authorities in order to start the formal investigation,” the Adidas group said in a statement on Saturday, declining to give any further details on the matter. “The matter now rests with the Indian law enforcement authorities.”

Details yet to emerge

Adidas is yet to give any detailed picture of what the irregularities at Reebok India are, which prompted it to announce a change of management — including the replacement of Mr Subhinder Singh Prem by Mr Claus Heckerott as Managing Director of Adidas India at the start of May.

It has also announced plans to close up to a third of the 1,000 franchise stores that Reebok has in the country, as part of a €70-million restructuring plan.

It warned that the identified irregularities could result in changes to the group's consolidated results from previous years to a pre-tax maximum of €125 million — a figure that has concerned the analyst community, given that this is a large figure against the size of the company's Indian operations (estimated to be no more than $300 million).

Adidas' Chief Executive, Mr Herbert Hainer, has signalled he is eager to get the matter resolved as quickly as possible, pledging on a recent conference call with analysts to “begin 2013 with a clean sheet in this market”.

vidya.ram@thehindu.co.in