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Daily news about the podcasting,investment analysis and advice on stocks and the markets. Scannable and informative, with a truly global view.

Business Standard

    • Jun 27, 2022 LATEST EPISODE
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    Latest episodes from Business Standard Podcast

    TMS Ep202: Economic recovery, philanthropy, crude oil, anti-defection law

    Play Episode Listen Later Jun 27, 2022 23:18

    An Oxfam survey revealed that the income of 84% of Indian households dropped in 2021. And in contrast, the rank of billionaires swelled from 102 to 142 during the same period. Clearly, the pandemic wasn't that bad for those with a cushion of wealth. And the effect of this trend was clearly visible in key sectors of the economy. In the auto sector, sales of two-wheelers have nosedived, while SUVs are selling like hotcakes. FMCG is struggling due to weak demand, but the aviation sector is seeing a jump in traffic. Take a dive into the key sectors to find out how the Indian economy is trying to get back on its feet.   Pandemic also reinvented philanthropy in India. Asia's richest man, Gautam Adani, last Thursday pledged to donate $7.7 bn to social causes. With that, he joins the global league of philanthropists. But is the family philanthropy by ultra-rich Indians making the desired impact? And if so, in which areas? And are there areas that are not receiving enough attention? Should the billionaires be donating more to address funding gaps and how can they ensure their wealth makes a mark?  Individual donations jumped by 43% during pandemic years. Meanwhile, during the same period, prices of crude oil also climbed drastically. According to Reuters, in mid-April 2020, the price of a barrel of West Texas crude went below $0 and sellers had to pay to get rid of it. It is beyond $100 now, thanks to the Russian war also. Companies across the value chain, especially crude refiners, have seen material gains in tandem with record high prices of crude oil. Our next report throws light on companies that are likely to seize the most gains. After the markets, let us move on to the ongoing political turmoil in Maharashtra. The ruling Maha Vikas Aghadi government -- led by Shiv Sena -- is in crisis as one of their own leaders, Eknath Shinde, has rebelled. Reports say that he is claiming the support of at least 40 MLAs. In the entire political drama, anti-defection law has come into focus. This episode of the podcast explains it in details.  Watch video

    What is the shape of India's economic recovery?

    Play Episode Listen Later Jun 27, 2022 6:37

    Many who had their jobs, incomes, and savings ravaged by the pandemic are still trying to recover. Retail inflation, which was making their lives a tad more difficult, eased marginally in May after touching an eight-year high of 7.79% in April. But it is still above the RBI's tolerance band of 2-6 per cent for a fifth month in a row. Most companies too are feeling the heat of soaring input costs. Hindustan Unilever Chairman Nitin Paranjpe last week said that India is currently going through “probably the most difficult economic situation”. He also said that the company would continue to increase prices even as FMCG market growth rates moderate and volume growth rates become negative in the short term. A closer look at the sales of products across different price ranges throws a disturbing trend. HUL, Dabur India, Asian Paints, and Parle Products have all seen consumers buying cheaper and smaller packs. Meanwhile, according to Bloomberg, HUL saw its premium portfolio grow at twice the pace as the rest of its portfolio in 2021-22. Marico Ltd's premium personal care range also grew in high double digits in FY22.   HUL, Britannia, and Parle Products get 30 per cent, 55 per cent, and 70 per cent of their business, respectively, from one, five and 10 rupee packs. As a result, FMCG firms have opted for making products smaller while still maintaining the same price -- a phenomenon called 'shrinkflation'. A NielsenIQ report has also found that the FMCG industry saw a decline in volume in the January-March period. In fact, rural India witnessed a 5.3 per cent fall in volume, the highest consumption slowdown in the last three quarters. The report said that a decline in consumption was echoed across all zones and the town classes, but was more prominent in rural markets. Meanwhile, a national daily reported that 12 million passengers took domestic flights in May, almost six times the number for the same month last year that was hit by the second wave of Covid-19. ICRA said that domestic air travel in May was only 7% lower than pre-Covid levels. ICRA also said that international air traffic has surpassed pre-Covid levels by around 24 per cent, with fares seeing a spike. The number of domestic and international flights operated by Indian airlines is also back to pre-Covid levels. All of this has come against the backdrop of several rounds of airfare hikes due to all-time high jet fuel prices. Let us now gauge the trend in auto sector. The Federation of Automobile Dealers Associations has said that passenger vehicle retail sales in May 2022 were 11 per cent higher compared to the pre-Covid month of May 2019. But, two-wheeler sales in May 2022 were down 13.91 per cent compared to May 2019. However, according to FADA, the two-wheeler segment has seen a slight improvement in overall sales when compared with April this year. According to Maruti Suzuki India Executive Director Shashank Srivastava, the sale of SUVs and MPVs is expected to jump 63.93% in FY23 from FY19. The real estate segment also showed a divergent trend. According to ANAROCK Research, there has been a 230% jump in new launch supply in the luxury real estate segment, priced over 1.5 crore rupees, across India's top seven cities in Q1 2022 as against Q1 2020. Out of the overall housing sales in the top seven cities in Q1 2022, the luxury segment's share was nearly 12 percent compared to about seven per cent back in the pre-Covid period of 2019. ANAROCK Research added that before Covid, the affordable and mid segments were the most in-demand categories. However, given that the pandemic affected the affordable buyer-class the most, sales in the category went down from their earlier peak.   Clearly, the divergent performances in various sectors is betraying the K-shaped recovery in the Indian economy. The pandemic seems to have no effect on the affluent class, which continues to splurge. While those at the bottom of the pyramid don't have m

    What has been the impact of family philanthropy in India?

    Play Episode Listen Later Jun 27, 2022 6:31

    Asia's richest man celebrated his birthday a bit differently this year. To mark his 60th birthday, Adani Group Chairman Gautam Adani and his family, whose net worth is estimated at $98.1 billion by Forbes, have pledged to donate Rs 60,000 crore or $7.7 billion to a series of social causes. The donation will be managed by the Adani Foundation, which is led by his wife Priti Adani.  With this Adani joins the ranks of billionaires like Mark Zuckerberg and Warren Buffett, who have committed large parts of their wealth for philanthropy. Philanthropist Azim Premji said this should set an example that entrepreneurs can try to live Mahatma Gandhi's principle of Trusteeship of Wealth at the peak of their business success. Indeed, the average age of giving in India is dipping every year and stands at 66 now. In FY21, Premji donated $1.3 billion or Rs 9,713 crore to charity. His foundation has an endowment estimated at $21 billion. The family of HCL Technologies founder Shiv Nadar was the second biggest donor according to a 2021 Hurun India report. Adani's pledge is almost half of what Bill Gates and Melinda French Gates donated to their foundation in 2021, while the former couple's total donations are valued at $74.6 billion.  Jamsetji Tata, who set up Tata Trusts, is the most generous individual of the last century, with total donations of over $102 billion at current value. Private giving in India stems from four sources -- foreign, corporate, retail and families. CSR, family philanthropy and retail giving account for approximately 84% of overall private giving, with foreign contributions making up the rest, according to the India Philanthropy Report 2022 by Dasra and Bain & Company. Family philanthropy overall forms about one-third of total private giving and is expected to grow at a robust 13% per year until FY26, driven by increasing wealth and a rise in the number of technology entrepreneurs. Family philanthropy has fewer constraints than other sources, enabling a broader impact on the social sector. These donors have a greater ability to innovate, influence public policy, build institutional capacity, and experiment with new forms of funding. They can also go far beyond grant-making as most funders come with extensive and technical knowledge in their respective fields, and have deep networks across functions and industries. But family philanthropy has its biases. Of the three major sources of private giving, CSR is the most widely distributed across sectors, while family giving is majorly concentrated in education and healthcare even as India lags in several other sectors. India also lags on gender equality indicators than on indicators related to health and education. Similarly, funding is concentrated in Tier-1 cities. Adani's donation will be utilised in the areas of healthcare, education and skill development with a special focus in rural regions.  India's ultra-rich could potentially increase their donations by 8 to 13 times if they can match the giving as a percentage of wealth of their UK, Chinese and US counterparts. Anant Bhagwati, Partner, The Bridgespan Group says, over the next 5 years, family philanthropy could grow to 40% of total private giving. Unlike CSR or retail, family giving can back causes that deliver long-term results, he says.  How the Adani family deploys its large $7.7 billion donation is also key. While a good number of family philanthropists engage with NGOs through grant-making, not all NGOs can absorb scale funding of the sort offered by these families.  Gautam Adani has said that three expert committees will be formed to formalise strategy and decide allocation of funds, with a plan to add one or two more focus areas in the coming months. Adani Foundation will have to build the right talent, enhance its institutional capabilities further, and develop strategies to drive change in the targeted areas.

    What is an anti-defection law?

    Play Episode Listen Later Jun 27, 2022 3:00

    Defection in politics predates Gaya Lal -- the Haryana MLA who switched party thrice in a day in 1967. After finally securing his loyalty, senior Congress leader Rao Birender Singh had then famously told a press conference in Chandigarh, ‘Gaya Ram ab Aaya Ram hai'. Little did Singh know that the phrase, with some changes in word orders, will turn into a cliché in Indian politics. About 18 years later, In 1985, in a bid to curb defection, the then Rajiv Gandhi government had brought the anti-defection law through the 52nd Amendment Act of 1985. This amendment is known as anti-defection law. An anti-defection law calls for disqualification of elected representatives if they switch political parties on the lure of executive office or other gains. The aim is to bring political stability and demand accountability from the legislatures. Under the anti-defection law, members of a political party can be disqualified and removed from the membership of the House if they voluntarily resign from the party after being elected or defy the direction or whip of the party leadership in the House. Independent lawmakers may also stare at disqualification for switching political parties. However, if two-thirds of members of a political party intend to shift to another party, the law exempts them from disqualification. In 2021, 12 out of 17 Congress MLAs jumped ship to join Trinamool Congress in Meghalaya and were exempted from the anti-defection law. Despite the anti-defection law, political defections are a common phenomenon and related proceedings have been going on in various courts. The role of the adjudicating authority --- usually the speaker of the House --- is under scrutiny in most of the anti-defection cases. There were several instances of delays in the disqualification process as the speaker is not time bound to decide on any case. For instance, during 2014-18, multiple opposition MLAs defected to the ruling TRS party and no action was taken by the speaker against these defectors. Experts argue that the speaker may not be the objective authority to decide on anti-defection cases. And also, the whip of a political party forces lawmakers to toe the party line and undermines their judgement on important issues. This essentially kills inner-party democracy. Given numerous loopholes, experts have urged the government to revisit and reform the anti-defection law.  

    TMSEp201: Sri Lanka crisis, crypto, housing finance cos, President election

    Play Episode Listen Later Jun 24, 2022 19:26

    Sri Lanka's economy is in a free fall for a while now, it is hurtling fast towards bankruptcy. Its food inflation has soared to 57%, and the nation is left with no reserve to import essentials. This crisis is having a crippling effect on its apparel and famous tea industries also -- the mainstays of Sri Lanka's economy. Meanwhile, traders in India are looking to fill the void left by the South Asian neighbour. But some spillover of the Lanka crisis is hurting Indian businesses too, like the auto sector. Try to gauge the overall effect of the crisis on India.   The trouble in Sri Lankan economy had started with the onset of pandemic. A large number of people who anticipated this crisis had started exploring options to stay afloat. Some even turned to cryptocurrency too, which is still unregulated in Sri Lanka. Meanwhile, India too is slowly but firmly moving ahead to regulate it. Recently it had announced to impose 1% TDS crypto assets. And on Wednesday, the government came out with a detailed clarification to address concerns raised by the industry. So as the TDS regime is slated to come into effect from July 1, will it be smooth sailing for domestic crypto exchanges and traders?  Like the cryptocurrencies, the shares of housing finance companies have been falling for quite some time now. And most of them nosedived after the RBI hiked repo rate on May 4. While analysts believe that robust real estate demand may outweigh rate hike impact, there's a section of firms that may be vulnerable to interest rate hikes.  After Dalal Street, let us now turn our focus to the President's Estate in Delhi. The race to Rashtrapati Bhavan has become interesting. NDA's presidential nominee Draupadi Murmu is facing opposition's Yashwant Sinha. She has an edge over Sinha due to the support of a majority in the electoral college. But how does India elect its President? This episode of the podcast shares more.    Watch video

    How the economic crisis in Sri Lanka is affecting Indian businesses?

    Play Episode Listen Later Jun 24, 2022 4:22

    Sri Lanka is in a crisis. Covid-19 has sent the economy into a tailspin, and it is in free fall now. Its Prime Minister Ranil Wickremesinghe recently said that the country's economy has “collapsed”. The spillover of the crisis has reached Indian shores too. ITC has said that its first foreign venture in the hotel space has been hit. Earlier, the 300-million-dollar project in Colombo saw construction being impacted due to the 2019 terror incidents and then the pandemic. In April, a financial daily had reported that automotive firms like Tata Motors, Mahindra & Mahindra, Ashok Leyland, and TVS Motors had stopped exports of vehicle kits to Sri Lanka and halted production at their Sri Lankan assembly units due to its precarious forex reserves and fuel shortages.   According to an India Briefing note by Dezan Shira & Associates, instability in Sri Lanka could affect Indian Oil, Airtel, Taj Hotels, Dabur, Ashok Leyland, Tata Communications, Asian Paints, and State Bank of India. Meanwhile, Sri Lanka's share in India's total exports has declined from 2.16 per cent in FY15 to just 1.3 per cent in the first 10 months of FY22. India's export to Sri Lanka is now nowhere near the 6.7 billion dollars seen in 2014-15. Till January 2022, it stood at 4.49 billion dollars in FY22.   But there is a silver lining too. Since Sri Lanka has been the world's largest supplier of orthodox tea, calls to Indian planters and exporters from foreign buyers of the commodity are pouring in. Big Sri Lankan importers from Iran, Turkey, Iraq, and Russia are reportedly visiting Kolkata and tea plantations in Assam. As a result, at recent Kolkata auctions, the average price for orthodox leaf saw an increase of up to 41 per cent compared to corresponding sales last year. And, the fuel shortage in Lanka is crippling its apparel sector too. According to the US International Trade Administration, the apparel export industry accounts for about 44% of the country's total exports. Many apparel orders from the UK, EU, and Latin American countries are now being diverted to India. Several orders have been given to companies in Tirupur, the hub of the textile industry in Tamil Nadu. Sri Lanka has been a strategically important partner for India. Even as some of our businesses are hit, and some try to fill the void created by the Sri Lankan crisis, India's assistance in this time of need will only lead to better ties with the island nation that has long been leaning towards the Chinese camp.  

    After govt clarity on TDS, will it be smooth sailing for crypto in India?

    Play Episode Listen Later Jun 24, 2022 5:27

    The troubles for India's crypto industry seem to be never-ending. On February 1st, in the Union Budget, the government decided to impose a 30% tax on income from cryptocurrencies from the new financial year and a 1% TDS on all crypto transactions starting July 1st. The move in a way quelled the uncertainty surrounding the fate of cryptocurrencies in India, and suggested that it may not be banned as feared earlier. But, by then, cryptocurrencies had already entered the bear market territory.  The crash was worsened by the recent collapse of algorithmic stablecoin TerraUSD. Now, the oldest and the largest cryptocurrency Bitcoin is trading at its lowest level in 18 months after falling 70% from its record highs in November 2021. The overall crypto market capitalisation is roughly $914 billion, down from a peak of $2.9 trillion. Globally, crypto exchanges are trimming their costs and laying off hundreds of employees as trading volumes take a major hit. Amid these trying times, Indian exchanges have a reason to cheer. While the government disregarded the demand to lower the TDS rate to 0.01% or 0.05%, the Central Board of Direct Taxes on Wednesday came out with long-awaited clarifications over the applicability of the TDS provisions.  It addresses some of the concerns raised by the industry and helps exchanges and traders navigate the burdensome TDS provisions, removing the cloud of uncertainty. The 1% TDS is applicable on payments toward cryptocurrencies beyond Rs 10,000 in a financial year or Rs 50,000 a year for specified persons, which includes individuals and HUFs who are required to get their accounts audited. Amanjot Malhotra, Country Head - India, Bitay says the biggest point of concern has been addressed regarding crypto-to-crypto trades. It's good for user experience but exchanges will have a lot of work to do, he says. People will move towards long-term investing. In a peer-to-peer transaction, the buyer is required to deduct the tax before paying the consideration. In case the transaction is taking place through an exchange, the exchange can deduct the TDS.  Exchanges are required to furnish a quarterly statement for all such transactions and include them in their income tax returns. CBDT also removed doubts on how crypto-to-crypto trades are treated for TDS. In such cases, the exchange will have to deduct 1% TDS on both the assets in the pair. The tax deducted in kind must be immediately converted into either bitcoin, ethereum or stablecoins namely tether and USD Coin. This accumulated balance should then be converted to Indian rupee at midnight every day.  The trail of transactions for every TDS deduction on crypto-to-crypto trades must be maintained by the exchange. The compliance burden for exchanges as well as taxpayers is bound to go up.  Speaking to Business Standard, Meyyappan Nagappan, Leader, Digital Tax, Nishith Desai Associates says, good clarification, lets ecosystem be legally compliant. Whether TDS provision applies to foreign exchange is not known. TDS on products like P2P transfer over a platform needs addressing. Enforcement against decentralised exchanges is still a big issue Compliance requirements going up for exchanges should provide comfort to banks, which have been reluctant to work with crypto companies. They have in many instances denied services to crypto businesses as RBI remains vehemently opposed to cryptocurrencies.   Bitay's Amanjot Malhotra says it's surprisng that banks are still not comfortable doing buinsess with crypto companies despite a taxation regime setting in and regulations evolving for the asset class.  He says one will find compliance to be very strong with crypto exchanges in India.  It is hoped that the latest clarifications on TDS and the soon-to-be-issued FAQs on crypto taxation will bring a sense of stability to traders and domestic exchanges in a turbulent year.

    Mid, small-sized HFCs may bear the brunt of rising interest rates

    Play Episode Listen Later Jun 24, 2022 3:17

    Markets have been on a wild ride ever since the Reserve Bank of India announced a surprise rate hike on May 4.  While the benchmark Nifty50 index has shed around 9% since then, individual housing finance companies have cracked up to 36%. Investors have shunned housing finance companies, or HFCs, amid fears that sharp rise in interest rates, and higher inflation can dent the housing demand in the near-term. This, in turn, may have a trickle-down effect on the demand for home financing. Yet, analysts believe fundamentally strong HFCs would be able to tide over the rate hike cycle better even as they partially absorb increased interest rates.  Speaking to Business Standard Parag Jariwala – Director (Investments), WhiteOak Capital Management] said, bigger HFCs like HDFC, LIC Housing have pricing power. They can pass on rate hikes as cost of funds stay competitive. Some HFCs have floating rate assets and fixed rate liabilities, he said. Margins may be protected.  Home loan rates stood at around 6.5% in April 2022, and have risen above 7% now.  However, analysts believe they are still within comfortable limits, thus protecting buyers' interest. That said, analysts warn that HFCs, which cater to the price-sensitive segment of affordable housing, may see some margin erosion in the short-to-medium term. Ashish Khandelia, Founder, Certus Capital & said, home loan business is highly competitive. Many players shift their books towards retail from corporate lending, he said. Some HFCs may partially absorb rate increase, impacting margins.   Kotak Institutional Equities expects affordable HFCs under their coverage to witness 10 to 70 bps YoY decline in net interest margin in FY23, and further 20 to 100 bps in FY24. According to the brokerage, “While there is headroom for increased rates, most affordable HFCs did not pass on the benefit of lower rates to borrowers. Hence, they may be slow in passing on rate hikes” Overall, financials will remain on investor radar in the immediate future, as credit recovery will be a keenly watched to gauge the health of the economy. On Friday, Japan's inflation data, US home sales data and stock-specific action, back home, will guide the markets.

    How is the President of India elected?

    Play Episode Listen Later Jun 24, 2022 2:38

    NDA's presidential nominee Draupadi Murmu met Union home minister Amit Shah on Thursday. If elected, 64-year-old Murmu will become the first tribal President of the country. And the second woman president after Pratibha Patil. President Ram Nath Kovind's tenure is coming to an end on July 25. And an election to fill his post will be held before that, on July 18. And we will know the name of the new President on July 21 if an election takes place at all. So how is the President of India chosen? Unlike that of MLAs and MPs, it is not a direct election. The President is elected by an electoral college. And who all are the members of this electoral college? They are from Lok Sabha and Rajya Sabha, Legislative Assemblies of the states and Legislative Assemblies of the Union Territories of Delhi and Puducherry. Nominated members to Rajya Sabha and state legislative councils are not part of the electoral college. The votes of electoral college members have a certain larger value. For instance, each MP's vote carries a value of 700.  In the case of MLAs, the value of vote is calculated based on the population of each state and the value differs from one state to another. In highly populated states like Uttar Pradesh, an MLA carries a vote value of 208, while less populated states like Arunachal Pradesh and Sikkim, the value of vote for an MLA is 8. According to the Article 55(2) of the Constitution, every elected member of the Legislative Assembly of a State shall have as many votes as there are multiples of one thousand in the quotient obtained by dividing the population of the State by the total number of the elected members of the Assembly. To win the Presidential election, the candidate has to bag over 50% of the votes. The Presidential candidate filing for the nomination has to secure signed approvals from 50 proposers and 50 seconders. The proposers and seconders could be members from the electoral college.

    TMSEp200: Single-use plastic, IT workers, Nilesh Shah, twin deficit problem

    Play Episode Listen Later Jun 23, 2022 26:33

    We always took them for granted. They were the sidekicks in tetra packs, glued somewhere on the back. But, suddenly, the humble straw has taken the centre-stage. If the government doesn't relax its July 1 deadline to phase out single-use plastic from the country, you are going to miss the straws badly. And so will FMCG companies-- which are now scrambling to find a replacement, their paper version. Our next report offers an insight into the world of plastic straws and tells why small packs of your favourite Frooti and Real juice might disappear from markets for now  Meanwhile, let us turn our focus to a case which might turn out to be a straw in the wind. A labour court in Chennai recently asked IT giant Tata Consultancy Services to reinstate a former employee and clear all his past dues of seven years. Some experts believe that this case could become a reference point in performance-related unlawful terminations in the IT industry.  After the labour laws, let us move on to markets. Will the policy-makers in a move to catch up with reality and surging inflation may overdo things and cause much more damage to the economy and markets than what is needed? Will the next six months be even more painful for the Indian economy and markets? Business Standard's Puneet Wadhwa caught up with Nilesh Shah, Group President & MD, Kotak Mahindra AMC on his interpretation of the developments and how investors should approach the markets. Like the markets, some dark clouds of uncertainty are hanging above the country's economy too. But, beams of sunlight shining through the cracks are offering hope too -- that good days are ahead. The finance ministry recently said that India is at low risk of stagflation. But it also cautioned about a twin deficit problem that the country may face. This episode of the podcast tells more about it.    Watch video

    Can an IT sector employee be classified as a workman?

    Play Episode Listen Later Jun 23, 2022 5:55

    Thirumalai Selvan Shanmugam was told to leave TCS in 2015. The reason cited for his termination was underperformance. But Shanmugam wasn't convinced. He moved the labour court in Chennai against the IT giant, seeking reinstatement. And after seven years of trial, he got what he wanted. Principal Labour Court in Chennai, directed TCS to reinstate Shanmugam. This case might have some long-term effect. It shows that unions and workers are evolving in the new set up and asserting their rights in IT companies too. And, as a result, the IT firms could face greater push-back from employees in future cases of performance-related or large-scale terminations. In setting aside Shanmugham's termination, the Chennai court did not accept the IT giant's argument that he was not covered under the Industrial Disputes Act's ‘workman' definition because his role had been supervisory in nature. A legal expert told a financial daily that the Shanmugham ruling suggests that employees of IT companies are not automatically exempt from the purview of the Industrial Disputes Act. Another legal expert said that the law has quite a wide definition of workman. This definition does not change under the new labour codes and exclusions to this definition are also limited. At present, the IT industry is more concerned with incredibly high attrition rates. Retaining talent is the topmost priority. However, there are many who have not forgotten the mass layoffs seen in the past decade.   In 2021, the Indian IT sector employed around 16 million workers. As recently as June last year, the National Association of Software and Services Companies had to allay fears of job losses in the IT sector.  In response to a report projecting massive IT job losses, the IT industry body had said that the sector would continue to be a net hirer of skilled talent and that the top five IT firms had plans to add over 96,000 employees during FY22. A Bank of America report had said that with automation taking place at a much faster pace across industries, Indian software firms would slash jobs by a massive 3 million by 2022.   So going forward, this Chennai court ruling, combined with the upcoming labour codes, will make the employees' position in IT companies much stronger. It will also force IT firms to improve their handling of performance-related exits or mass layoffs in a better way.

    Will your Frooti & Maaza packs go off the shelves from July 1?

    Play Episode Listen Later Jun 23, 2022 6:38

    The impending ban on single-use plastic will deal a death blow to the humble straws from July 1. And it has left FMCG companies selling small packs of juices and dairy products in a tizzy. With just a week to go for the ban to come into effect, intense lobbying is still underway by some stakeholders to get the deadline extended.  Every year, six billion small packs between sizes of 75-250 ml with juice, milk, coffee, buttermilk, lassi and other beverages are sold with plastic straws attached to them, a market that's estimated to be worth Rs 6,000 crore.  Such integrated plastic straws account for just 0.05% of the total single use plastic in terms of volumes. Yet, the stark reality is that plastic straws take up to 200 years to decompose, and they break into smaller plastics and can be ingested in marine life. In contrast, paper straws decompose within two to six weeks. The companies that are impacted most are the big ones like Coca-Cola, PepsiCo, Parle Agro and Dabur India. Their concern is that India does not produce the required paper straws. Action Alliance for Recycling Beverage Cartons or AARC, an industry group that represents some of the major beverage producers, had demanded that plastic straws be exempted from the ban on single-use plastics from next month but changed its stance in May. Still, it sought an extension of 18 months for the transition. Most consumers are familiar with the experience of using paper straws for cold coffees and milk shakes. They become soggy even before the drink is over. So making resilient paper straws of smaller diameters is another challenge.  Companies are compelled to import paper straws, which are four to seven times more expensive than their food-grade plastic counterparts. Frooti and Appy maker Parle Agro's CEO Schauna Chauhan said that extending the deadline by six months was “critical” for developing local manufacturing capacities. While the company has started importing paper straws for now, she said it's an unsustainable option and the “economics just does not match up for a Rs 10 product”. She said that 80% of integrated straws are recycled, and countries like China and Thailand have allowed their use. Chauhan further said it was not clear what would happen to the current stocks if the ban was enforced. Dairy giant Amul, which clocked sales of Rs 61,000 crore in FY22, also urged the government to delay the ban by one year saying the move will have a “negative impact” on farmers and milk consumption, while also warning of sales disruption. Citing global capacity constraints and logistical drawbacks, Parle Agro warned that that the industry might have to close factory operations if the deadline is not extended. There is a global shortage of paper straws. Only China, Indonesia and some European countries make paper straws and India comes low on their priority list. And for those who are trying to import machines to make paper straws locally, it is a one-year wait. The CEO of Action Alliance for Recycling Beverage Cartons (AARC), Praveen Aggarwal, estimates that imports can meet only 25% of the country's demand by this year's end. Can companies choose to ship the products without a straw or change the packaging to spout pouches instead? AARC's Aggarwal says there is going to be massive disruption if deadline isn't extended. He says, changing packaging design is a time-consuming and costly process. Shipping products without straw compromises hygiene.  Environmentalists on the other hand argue that ample time has been given to the industry to find the appropriate substitutes for plastic straws. The phasing out of these straws was initially notified by the Central Pollution Control Board way back in 2018, fixing 2020 as the deadline for doing so. The present deadline of July 1 was set almost a year ago in August 2021. Compostable straws made of paper and corn starch-based polylactic acid are now being commonly used in ma

    What is Nilesh Shah's take on investors' approach to markets?

    Play Episode Listen Later Jun 23, 2022 7:15

    Q: Do you think the policy-makers in a move to catch up with reality and surging inflation may overdo things and cause much more damage to the economy and markets than what's needed? Ans: >Policy action will be in two parts. Part 1 - liquidity management, inflation and demand control; Part 2 - support growth >Hope and pray regulators know when to take the step off the pedal   Q: So in other words, can the sell-off we have seen across equity markets will be in two phases? Or will the second phase see a relief rally that the first phase has ended? And: >Equity markets react in anticipation; they're reacting to the first part of the movie now >Pricing in tightening liquidity, rising rates, slowing growth, demand-related issues, recession >Markets will react to the possibility of rising liquidity, falling interest rates and pro-growth measures Q: On a scale of 1 - 10, 1 being the biggest spot of bother, how would you rate the Indian economy: 6 months ago and now? Do you think the next six months will be even more painful for the Indian economy and markets? Ans: >We're looking at an oasis in the desert >Our (Indian economy's) rahu kaalam has started; rise in oil prices will hurt growth >Growth will be taking a hit right now because of triple-digit oil prices, higher inflation and FPI outflows  >Six months from now we can be in a better situation if we have a scenario where Russia-Ukraine dispute is settled, oil prices are in double-digit, central banks globally have controlled inflation >If situation continues to deteriorate six months from now, we could be in a more serious situation than what we are in today Q: There was a time when diversification into other geographies and markets was being advocated to investors to catch the rising stars globally. Yet, Kotak's Global Innovation Fund has seen dismal return over the past one year. What went wrong here?  Ans: >Tied up with Wellington Asset Management for this fund >Fund faced turbulent times that no one had anticipated >After launch of the fund, China cracked down on tech stocks, US inflation and interest rates went up  >Investors should treat Kotak's Global Innovation Fund as a high risk, high return offering >Those who have an appetite for risk can average (this fund) at the current levels

    What is a twin deficit problem?

    Play Episode Listen Later Jun 23, 2022 2:48

    The Russian invasion of Ukraine entered its 119th day on Wednesday. The epicentres of the war are in tatters, and casualties mounting. But beyond the borders of the region, countries are engaged in a different kind of war. A war to save their economies. Crude oil prices are hovering above $100 a barrel for a while, supply chain is disrupted, inflation in most countries is above their comfort level and the world's largest economy, the US, is staring at recession. India too couldn't remain untouched. The country's finance ministry -- in its recent ‘Monthly Economic Review'-- has struck a note of caution on the twin deficit problem. Which is an increase in both fiscal deficit and current account deficit at the same time. But before we explain what it could mean for the economy, let us have a brief look at these two deficits. In simple terms, fiscal deficit is a scenario where the government spends more money than the revenue it gets. The government fills this void by borrowing -- mostly from the markets. A current account deficit is the shortfall between the money received by selling products to other countries and the money spent to buy goods and services from other nations. So what happens when the twin deficit problem strikes? And why we may be staring at it. The Ukraine war has led to the supply shortages, leading to higher commodity prices and increased subsidy burden on the government. Adding to that, the duty cuts on petrol and diesel mean the government may have to forgo Rs 85,000 crore in revenue for the current fiscal. As the war lingers, there is every chance the government may miss the fiscal deficit target for FY23. Which is 6.9 percent of GDP. The increase in the fiscal deficit may cause the current account deficit to widen.  The twin deficit problem, especially the worsening current account deficit, may compound the effect of costlier imports, and weaken the value of the rupee thereby further aggravating external imbalances. This creates the risk --- even though admittedly low at this point of time --- of a cycle of wider deficits and a weaker currency.

    TMSEp199: Economy's direction, hard times for fintechs, Airtel, Voda stocks

    Play Episode Listen Later Jun 22, 2022 18:30

    The finance ministry on Monday struck a note of caution about the re-emergence of the twin deficit problem. It was also the first time the government explicitly spoke about the possibility of a fiscal slippage in the current financial year. So have the amber lights started flashing? What is the ground situation like?    The Reserve Bank of India (RBI) has, meanwhile, barred all non-bank prepaid payment instrument (PPI) issuers from loading credit lines-- a move which will impact fintech players. Of late, the central bank has been coming down heavily on fintechs. RBI's 2025 vision document talks about the need to regulate fintechs in the payments space. So what is the road ahead for fintech firms? After the fintech firms, let us move on to telcos. Shares of Vodafone Idea and Bharti Airtel have mostly been in the red for quite some time now. Despite news flow around 5G auction, and digital transformation, the shares have not generated expected returns. Lets delve into the issues denting the sector, and how investors can play the theme. A brief respite from the spell of negative cues gave the markets a reason to cheer -- as Indian equities saw an upward march for the second day running on Tuesday. However, experts are seeing bad days ahead. In a Reserve Bank of India paper, writers allude to the risk of black swan event, saying that it may lead to outflows of Rs 7,80,000 crore from India. So what exactly is black swan event? Listen to this and more in this episode of the podcast.  Watch video

    Where is India's economy headed after FinMin's twin deficit warning?

    Play Episode Listen Later Jun 22, 2022 3:56

    The World Bank recently cut its FY23 real GDP growth forecast for India to 7.5 per cent from 8 per cent, which is slightly more bullish than the Reserve Bank of India's forecast of 7.2 per cent. S&P and the IMF have also recently cut their FY23 forecast for India.   Amid these signs of slowing growth, further shocks could be in store. The finance ministry has warned of a twin deficit problem, with higher commodity prices and rising subsidy burden leading to an increase in both the fiscal and current account deficits. According to the ministry's latest Monthly Economic Review, an increase in the fiscal deficit might cause the current account deficit to widen and weaken the value of the rupee. This could further aggravate external imbalances, creating the risk, which is admittedly low, at this time, of a cycle of wider deficits and a weaker currency. But, at the same time, the report also said that even as the world was looking at a distinct possibility of widespread stagflation, India was at low risk due to its stabilisation policies. Meanwhile, Indian financial markets have witnessed hefty foreign investment outflows the past eight months. A weak GDP growth outlook has exacerbated the situation. However, a paper co-authored by Reserve Bank of India's deputy governor Michael Debabrata Patra says that there is only a five per cent chance of portfolio outflows of up to 3.2 percent of GDP in a year in response to a Covid-type contraction in growth.   In a black swan event comprising a combination of shocks, there is a 5 percent chance of outflows under portfolio investments of 7.7 per cent of GDP and short-term trade credit retrenchment of 3.9 percent of GDP. Create the graphic of a torn scrap of paper with the following text in it: “A black swan event could be characterised by a combination of all adverse shocks experienced in Indian history coming together, leading to a perfect storm.” The warning about a twin deficit begs the question -- Will the government have to prioritise macroeconomic stability over near-term growth going ahead?

    With RBI acting tough, are fintech companies staring at tough times ahead?

    Play Episode Listen Later Jun 22, 2022 4:41

    In a move that could have huge ramifications for India's fledgling Buy Now Pay Later market, the RBI has asked non-bank prepaid payment instrument (PPIs) issuers to not load these instruments through credit lines.  Issued in the form of wallets or prepaid cards, PPIs facilitate purchases against the value stored on them. They can be loaded by cash, debit to a bank account, credit and debit cards. Fintechs in the pay later card business like Slice, Uni, LazyPay, PostPe etc make use of bank-issued PPIs and partner with NBFCs to offer credit lines to customers. In some cases, the credit line is provided by the NBFC subsidiaries of the fintech companies. For example, Slice's prepaid cards are issued by SBM Bank while Uni's cards come from SBM and RBL Bank.  According to RBI, there are 37 non-bank PPI issuers, including Amazon Pay, Ola Financial Services and Bajaj Finance -- one of the biggest NBFCs. RBI rules say that PPIs are permitted to be loaded or reloaded by cash, debit to a bank account, credit and debit cards, PPIs, and other payment instruments issued by regulated entities in India but do not permit loading from credit lines. RBI's move has given rise to some confusion even as the industry is still evaluating the impact of its clarification, which is not in the public domain yet.  Macquarie Capital said it could impact credit card challengers like Slice and Uni, who were adding lakhs of customers every month.  PPI is meant to act as a payment instrument and not a credit instrument, it said, adding that many customers were also unknowingly taking a line of credit through their wallets at the point of check-out and some of these practices may not have gone down well with RBI. But given that RBI's letter is addressed to non-bank PPI issuers, Nomura analysts believe there will not be any restrictions on such pay later players unless a similar letter was also sent to bank issuers.  Fintech startup RedCarpet's Founder Sandeep Srinivasa said that all BNPL products in India work on PPIs and the fintech lending ecosystem works on the principle of credit lines through wallets and built on top of PPIs.  Jaikrishnan G, Partner & Head of Financial Services Consulting, Grant Thornton Bharat says, this will impact everyone in the BNPL space. Banks are allowed to top up PPIs through credit line, he says. With PPI out of equation, borrowing experience for customers will be impacted. This is a clear shock to the industry, will have a heavy impact, he says.  Macquarie said that risks are increasing for the fintech sector, for which regulations have been light-touch so far. With the regulatory arbitrage now being plugged slowly, it is expecting a slowdown in growth and profitability prospects for the fintech sector in India.  According to the brokerage, RBI has been coming down heavily on fintechs. Given the increasingly dominant role of fintech companies in the payments ecosystem, RBI's Payments Vision 2025 states that a discussion paper on the need for proportionate regulation for them encompassing domestic incorporation, reporting, data use, etc., will be published. It also talks about looking at the various charges for payments in such a way that it further encourages digital adoption. Nomura also says the RBI may want the underlying lender to formally issue a credit card by tying with card networks instead of creating a quasi-product for which customer ownership, and the responsibility of ensuring data privacy and security, are not always clearly defined. Jaikrishnan G of Grant Thornton Bharat says RBI strives to address regulatory arbitrage between banks and non-banks. We must not be under the impression that fintechs are not regulated by RBI, he says.  With RBI not keen on the idea of issuing licences for digital-only banks, Grant Thornton Bharat's Jaikrishnan G said that neobanks and fintechs are under pressure to reinvent their business models, as they were hoping to even

    How may Bharti Airtel and Voda Idea stocks perform in the near term?

    Play Episode Listen Later Jun 22, 2022 4:44

    Despite an on-going recovery in the telecom sector, analysts believe the stock performance of Vodafone Idea and Bharti Airtel may remain sluggish in the near-term. Their shares have cracked around 8-14% in the past three months as the benchmark Nifty50 shed 7.5%. Going forward, likely heavy investment in the upcoming 5G auction, coupled with flat subscriber growth, may act as overhangs in the near-term. Telecom Regulatory Authority of India's data showed that industry-wide active subscriber base dipped by 7.8 million month-on-month in April 2022. While Bharti Airtel lost 3.1 million customers, Reliance Jio lost 0.1 million, and Vodafone Idea 3.8 million. Meanwhile, the industry-wide mobile broadband subscribers remained flat at 760 million. Analysts at JM Financial feel the broad-based active subscriber decline suggests that the November, 2021 tariff hike-led sim consolidation is not over yet. The other near-term hiccup, in terms of higher-than-preferred spectrum prices, may result in excessive capital outgo. Pricing concern, the nascent 5G ecosystem, and evolving use cases could also make 5G rollout granular. Rating agency ICRA pegs capital outlay of around Rs 1-1.1 trillion. Of this, the upfront payment will be 10,000 crore rupees if telcos opt for a 30-year payment plan. However, debt levels could increase with addition of deferred payment liabilities of this auction. That said, near-term pain points are expected to be compensated by long-term growth. ICRA expects the industry to report a growth of 10-12% in its operating income in FY23, which will translate into operating profit before interest and tax expansion by 15-18%. Industry consolidated revenues are estimated at Rs 2.6-2.7 trillion with operating profit before interest and tax of around Rs 1.2-1.3 trillion. Meanwhile, stock-specific action and global triggers will continue to dominate Wednesday's trading session.

    How may Bharti Airtel and Voda Idea stocks perform in the near term?

    Play Episode Listen Later Jun 22, 2022 4:44

    Despite an on-going recovery in the telecom sector, analysts believe the stock performance of Vodafone Idea and Bharti Airtel may remain sluggish in the near-term. Their shares have cracked around 8-14% in the past three months as the benchmark Nifty50 shed 7.5%. Going forward, likely heavy investment in the upcoming 5G auction, coupled with flat subscriber growth, may act as overhangs in the near-term. Telecom Regulatory Authority of India's data showed that industry-wide active subscriber base dipped by 7.8 million month-on-month in April 2022. While Bharti Airtel lost 3.1 million customers, Reliance Jio lost 0.1 million, and Vodafone Idea 3.8 million. Meanwhile, the industry-wide mobile broadband subscribers remained flat at 760 million. Analysts at JM Financial feel the broad-based active subscriber decline suggests that the November, 2021 tariff hike-led sim consolidation is not over yet. The other near-term hiccup, in terms of higher-than-preferred spectrum prices, may result in excessive capital outgo. Pricing concern, the nascent 5G ecosystem, and evolving use cases could also make 5G rollout granular. Rating agency ICRA pegs capital outlay of around Rs 1-1.1 trillion. Of this, the upfront payment will be 10,000 crore rupees if telcos opt for a 30-year payment plan. However, debt levels could increase with addition of deferred payment liabilities of this auction. That said, near-term pain points are expected to be compensated by long-term growth. ICRA expects the industry to report a growth of 10-12% in its operating income in FY23, which will translate into operating profit before interest and tax expansion by 15-18%. Industry consolidated revenues are estimated at Rs 2.6-2.7 trillion with operating profit before interest and tax of around Rs 1.2-1.3 trillion. Meanwhile, stock-specific action and global triggers will continue to dominate Wednesday's trading session.

    What is a black swan event?

    Play Episode Listen Later Jun 22, 2022 2:35

    In the Reserve Bank of India's latest bulletin, an article titled ‘Capital Flows at Risk: India's Experience' cautioned about an event -- comprising a combination of shocks -- which might lead to portfolio outflows of about $100 billion or Rs 7,80,000 crore. Authored by RBI Deputy Governor Michael Debabrata Patra, along with Harendra Behera and Silu Muduli, the report called for maintaining liquid reserves to deal with the event which is known as black swan. The theory of black swan was first floated by finance professor and former Wall Street trader Nassim Nicholas Taleb in 2001. Taleb went on to write a book on it titled, 'The Black Swan: The Impact of the Highly Improbable'. So what exactly is black swan event? It is a rare and unpredictable event with potentially has severe consequences. In his book, Taleb says that there are three attributes of the event. The first is that it is an outlier and cannot be predicted. The second is that it has an extreme impact and the third is the human nature to try to concoct explanations once it has happened. It can be characterised by a combination of all adverse shocks experienced in the history coming together, leading to a perfect storm. What are some of the recent examples of black swan events? In hindsight, the global financial crisis could be termed as a black swan event as the sudden collapse of the US housing market led to a severe global economic crisis. The 26/11 terrorist attacks, the burst of bubble in 1990s are the some other examples of black swan events. In the context of capital flows, the RBI report says that capital outflows, particularly, portfolio flows are driven by global risk aversion and they are sensitive to shifts in risk sentiment globally. So, if there is an adverse event like “Covid-type contraction in real GDP growth” or “global financial crisis type decline in interest rate differentials”, India could see capital outflows to the tune of 3.2% of GDP or approximately $100 billion.

    TMSEp198: Bird strike on planes, ex-servicemen jobs, markets, IPO vs FPO

    Play Episode Listen Later Jun 21, 2022 20:25

    Three aircraft made emergency landings in parts of India on Sunday, giving some frightening moments to hundreds of passengers and crew members on-board. Two of them were hit by birds, while the third one reported low cabin pressure soon after taking off. These back-to-back freak incidents also offered a moment of reckoning to the aviation sector -- which is seeing a continuous rise in traffic. Two more airlines -- Akasa Air and Jet -- are all set to add to the existing fleet. So, in today's episode we ask what led to these incidents? And what can be done to avert a recurrence?  After the Indian skies, let us turn our focus to a row surrounding the hiring in the country's armed forces. Prime Minister Narendra Modi on Monday defended the ‘Angipath' scheme amid ongoing protests against it. The government has been maintaining that the soldiers -- who will be disbanded after four years -- will get jobs in government and private sectors. But, an analysis by Business Standard, suggests something else. The punishing stretch for markets continued amid the ongoing global selloff. But, amid this mayhem, analysts believe positive domestic factors can help a reversal in the current down cycle. Take a look at these supporting factors, which have kept experts positive on the markets. Public issue of shares or issuance of equity is an effective tool for companies to raise capital when they do not wish to avail of debt instruments. An initial public offer (IPO) and a follow-on public offer (FPO) are two types of public issues available to investors. This episode of the podcast breaks down the differences between the two. Watch video

    How have ex-servicemen fared in finding government jobs so far?

    Play Episode Listen Later Jun 21, 2022 4:54

    Ten percent of vacancies in central government jobs in Group C and 20 per cent in Group D are reserved for ex-servicemen. For public sector banks, central public sector units and CAPFs, the reservation is 14.5 per cent in Group C and 24.5 per cent in Group D. But, Directorate General Resettlement data shows that states, central public sector units, and Central Armed Police Forces have failed to recruit against the vacancies reserved for ex-servicemen. Only 2.4 per cent of veterans who applied for a job could get one because of that. As of June last year, ex-servicemen constituted only 1.15 per cent of the Group C strength and 0.3 per cent of the Group D strength in 94 of the 170 CPSUs. Between 32 central ministries, only 1.60 per cent of the 22,168 positions reserved for veterans have been filled. The Indian Railways could only fill 1.4 percent of the positions reserved for retired armed forces personnel.   A spokesperson for the Indian Railways has said that recruitment for around 24,242 vacancies of ex-servicemen was currently underway. For the ten defence PSUs, where the Centre has announced a 10 per cent reservation for the Agnipath scheme, veterans comprised only 3.45 per cent and 2.71 per cent of Group C and Group D posts, respectively. As of June 2021, only 0.62 percent of positions reserved for veterans have been filled by paramilitary forces, which are made up of the BSF, CRPF, ITBP, SSB, and CISF. Meanwhile, the central government has announced that 10 percent of vacancies in the CAPFs would be reserved for Agniveer. This graphic should reveal itself category by category, like Central Public Sector Units first, and then in order. It should be matched to the script above in VO3, where CPSUs come first, followed by central ministries and then paramilitary forces, in that order.    By the end of 2020, Bihar, UP, Punjab and Haryana, which cumulatively account for 80 per cent of the Indian armed forces, had given jobs to only 1.5 percent out of the 200,000 veterans who had registered for a job. Officials of state Sainik Boards say that while most states have reservations under the ex-servicemen quota for all positions, they are reluctant to recognise the graduation certificate issued by the military. Under the Agnipath Pravesh Yojana, young candidates will be recruited for four-year tenures of service in the military. As many as 46,000 Agniveers are to be recruited this year. From each batch of Agniveer, the government will retain the best. Up to 25 per cent of each year's intake will be chosen to remain in service. While the government has announced reservations across sectors for the Agniveers, the hiring trend of ex-servicemen in government sectors does not paint an optimistic picture. The morale of those who secure our borders is just as important as the weapons we arm them with. The government should consider the following question -- if the Agniveer find themselves worrying about an uncertain future, will that bode well for the country?

    As air traffic increases, what can be done to prevent bird hits?

    Play Episode Listen Later Jun 21, 2022 5:58

    Two bird strike incidents 1000-kilometre apart on Sunday prompted the aviation regulator DGCA to shoot off a letter to airports across the country, asking them to strictly implement guidelines pertaining to wildlife hazard management. A SpieceJet Boeing 737 plane flying on the Patna-Delhi route on Sunday afternoon with 185 passengers on-board landed back minutes after take-off after experiencing a bird strike.  The hit led to sparks and fire in one of the engines, prompting the pilots to turn off the affected engine before making the emergency landing. Modern-day airliners are built to operate even with a single engine.  Bird and animal movement goes up around airports particularly during the monsoon season because of increased insect breeding in the nearby fields. In the second incident that occurred hours later, a Delhi-bound IndiGo Airbus A320neo was forced to return to Guwahati airport due to a bird hit. Here too, the pilots shut down the affected engine. The aircraft was at 1,600 feet when its left engine suffered the impact. Most strikes occur below 3,000 feet above ground level. In both the events, the pilots made safe landings and nobody was hurt. The presence of birds and animals on and in the vicinity of an airport pose a serious threat to aircraft operational safety.  The most serious strikes are those involving ingestion of birds into an engine or windshield strikes. They can result in emergency situations requiring prompt action by the pilot. Engine ingestions may result in sudden loss of power or engine failure. According to DGCA data, there were 1,466 bird strike incidents last year across Indian airports, a 27% increase from 2020. This translates to about 4 bird strike incidents per day.  Government officials said that airports were quieter than usual due to limited number of flights amid the second wave of the COVID-19 pandemic and quieter airports attract more birds and animals. [Byte of Mark Martin, Founder & CEO, Martin Consulting] The risk of bird hits at Patna airport, where the SpiceJet plane made the emergency landing, is higher due to the presence of an open abattoir and butcher shops around the airport. The Aircraft Rules 1937 prohibit dumping of garbage and slaughtering of animals in a way that could attract birds and animals within a 10 km radius of airports. Airports can employ various methods to keep birds away from their vicinity.  The measures include trimming of grass, spraying of insecticide, frequent runway inspections, deployment of bird chasers, noise makers, reflective tapes, laser beam guns and regular garbage disposal. The DGCA also said that there should be no water concentration and open drains. Further, constant surveillance of the airports by their respective wildlife control units is necessary. While pilots are trained in managing bird-strike events, clearly more needs to be done on ground by airport operators with the help of local authorities to reduce the occurrence of bird and animal strikes.

    Is there any silver lining for the markets amid current turmoil?

    Play Episode Listen Later Jun 21, 2022 3:25

    The BSE Sensex and the Nifty50 indices rose for the first time in seven days yesterday, as markets looked to stabilise after last week's blow. The indices, however, succumbed to the global doom in 2022 amid rising rates and hot inflation. The Nifty is nearing a bear market, having declined 17% from its lifetime peak. However, when compared with global peers, Indian markets have been resilient.  According to Motilal Oswal Financial Services, the MSCI India index has gained 7% in the past year whereas the MSCI emerging market index has corrected 22%. Analysts attribute this outperformance to the unshaken confidence of domestic investors. DIIs, for instance, have pumped in around 2.15 trillion rupees, so far this year, as against FPI outflow of around 3 trillion rupees. Naveen Kulkarni, Chief Investment Officer, Axis Securities says DIIs are positive as India has seen high inflation previously. Sticky inflation a challenge for the West, he says. Unexpected rise in inflation in developed markets making FIIs jittery.  Kulkarni expects equity markets to reverse the current downbeat trend once the global turmoil settles. Kulkarni says corporate earnings looking strong, and investors are waiting for global events to cool down. Once interest rate hikes settle, focus will shift to domestic front, he says.  Another silver lining is the attractive market valuation. At the end of May, the Nifty was at a one-year forward price-to-earnings ratio of 18.7 times, down from 23 times seen in October 2021. The current valuation is a 4% discount to its 10-year average.  "Markets often need trigger events to comply with the universal law of mean reversion and the Russia-Ukraine war is one such event this time," says Santosh Meena, Head of Research, Swastika Investmart. Meena recommends investors lap up stocks with good fundamentals and robust financials, using the buy-on dips strategy. That said, the risk of inflation continues to shadow near-term prospects. According to Kotak Institutional Equities, "Peaking of inflation could put a cap on bond yields and a floor on equity valuations. However, if inflation were to surprise on the upside, the already high yield gap may become more negative and likely result in a further correction in market multiples” - Kotak Institutional Equities Against this backdrop, the markets are likely to continue to be range-bound today given a lack of domestic triggers.

    What is the difference between an IPO and FPO?

    Play Episode Listen Later Jun 21, 2022 3:00

    An initial public offering is the issuance of shares for the first time by a private company, which is not listed on the stock exchanges. Post the issuance of such shares, the company gets listed on the bourses and its shares are then traded publicly. Such a company issues equity to investors in exchange for capital. With this, its ownership also gets diluted. On the other hand, a follow-on public offer, as the name suggests, is a subsequent or second-time issuance of shares after the initial IPO. Only those companies, which have been listed on the exchanges before, can go for an FPO. There are two types of FPOs known: dilutive and non-dilutive. A dilutive FPO is where new shares are offered to public investors, which leads to an increase in the company's outstanding shares. This dilutes its existing shareholding pattern. On the other hand, a non-dilutive FPO entails the issuance of shares that are already in existence. This means that directors or founders sell their privately held shares in the market. This way, there is no increase in the number of shares for the company. Dilutive FPO is generally undertaken to raise additional capital to fund growth or expand the equity base. In some cases, it has been taken up to meet SEBI's rule that mandates a listed company to have a minimum of 25% public float. Ruchi Soya came out with the dilutive FPO as the Patanjali Group owned about 98.9% stake in the company while public shareholders owned only 1.1%. After the issue, the public shareholding rose to 19%. For instance, the FPO by FMCG company Ruchi Soya was taken to raise its public shareholding to meet SEBI's requirements. Besides, among other differences between an IPO and an FPO, a company going for an IPO sets a price band for investors to bid and the issue price is then fixed after gauging investor demand. While the issue price for an FPO is mostly fixed lower than the prevailing stock price. This is done to drive higher participation. That said, an IPO is believed to be more profitable than an FPO as investors participate in the expansion phase of the company. Earnings per share decreases due to the issuance of new shares in a dilutive FPO. An IPO, hence, also comes with higher risk as investors can only use the information provided by the company to gauge its growth prospects.  

    TMSEp196: Airfare hike, Shankar Sharma, markets, Sec8 of Companies Act

    Play Episode Listen Later Jun 17, 2022 25:53

    At a time when airports across the country are seeing a jump in the traffic, the soaring prices of fuel are threatening to skid the airline business off the runway. Oil marketing companies raised the price of aviation turbine fuel (ATF) by a steep 16% on Thursday. It leaves the pandemic-ravaged airlines with no other option, but to pass on some burden to fliers. It seems that the worst is not over yet for airlines and the travel and tourism industries. Find out how an upcoming hike in airfares -- which looks imminent now -- will impact these industries. Markets too are passing through turbulent weather. And stocks are falling like ninepins. So, with the US Fed and the RBI making their priorities clear, how should investors approach the markets? How is market veteran Shankar Sharma, founder, First Global tackling ongoing headwinds? Business Standard's Puneet Wadhwa caught up with him to understand his interpretation of the recent developments and find out his investment strategy. Meanwhile, the benchmark S&P BSE Sensex and the Nifty50 indices hit 52-week lows on Thursday, as economists feared a recession could be around the corner for the United States. And even though the US Fed raised its key rate by 75 basis points to curb inflation, markets watchers see more pain ahead for the US and Indian markets. Apart from private firms listed at stock exchanges, there is another set of companies which are formed for charitable purposes only. Both of them have at least two shareholders and two directors -- but their objectives are completely opposite. While a private listed company is formed for profit, a company formed under Section 8 -- erstwhile Section 25 -- of the Companies Act 1956 are for charity purpose only. Find out about the latter in this episode of the podcast amd more.  Watch video

    How 15% hike in airfares will impact air travel, tourism and hospitality

    Play Episode Listen Later Jun 17, 2022 7:39

    Are you planning to jet off for a vacation? Then you might have to shell out more from your pocket. Or, are you set for a business trip? Then the duration of your stay might get shorter.   Why? You ask. As most us are too restless to stay put at home after a prolonged restriction on movement during the pandemic.   Here's why. SpiceJet boss Ajay Singh on Thursday warned of an increase in airfares as jet fuel prices have shot up by almost 16 per cent. Prices of Aviation Turbine Fuel, or ATF in short, have been hiked to Rs 141,232.87 per kilolitre in Delhi. Why are we telling you this specific number? Because it is an all-time high. On top of this, a weakening rupee has doubled the challenge for airlines because key cost items like fuel, maintenance, lease rentals, and overhaul costs are billed in US dollars. ATF prices account for 40 per cent of an airline's cost, and these have increased by close to 55 per cent since 1st January. Ajay Singh has said that domestic airlines have been left with little choice but to raise fares immediately and that a minimum 10-15 per cent increase is required.   But there is obviously a catch. Airlines are concerned that any increase in fares could lead to a decline in passenger numbers. With two previous rounds of fare hikes, there has already been a decline in passenger numbers from 407,975 fliers on 17th April to 339,175 on 14th June. The impact is being felt. IndiGo, the market leader, posted a loss of Rs 1,681 crore in Q4FY22 as it took a severe hit due to the rise in jet fuel prices and higher exchange rate. The fates of the airline, travel and tourism, and hospitality industries are intertwined. So, how will the upcoming fare hike affect them?  Gaurav Patwari, Vice-President- Air, at Cleartrip told Business Standard that there wasn't much impact in the last 2 months of summer holiday season. But, the impact was more prominent now as bookings were slowing down, he said. Meanwhile, luxury bespoke travel is back in a big way and companies catering to the niche segment are witnessing demand that is higher than pre-Covid levels. The demand centres around exotic locations like the Arctic and Antarctica, as well as cruises and domestic road trips to Lahaul and Spiti Valley and Ladakh. Another interesting format is road trips in foreign countries like Turkey or drives that cover routes in Jordan, Morocco, Oman and Kyrgyzstan. The well-heeled customers in these cases might not be swayed by price movements.   Apparently, it will be tough time for the budget travelers. But a hike in airfares may not have an adverse effect on tourism and hospitality sector. However, it is worth asking: Could that change if such hikes coincide with an increase in prices across the hospitality sector too?

    What is First Global's Shankar Sharma investment strategy?

    Play Episode Listen Later Jun 17, 2022 7:50

    Q: A little birdie told me that Mohd Rafi is one of your favourite playback singers. One of his songs is: “Aai dil hai mushkil jeena yahan, zara hatke, zara bach ke, ye hai Bombay meri jaan.” Do you think that quite sums up the market mood right now – a bit nervous and a bit cautious? Ans: >Difficult to escape the pain; most investors would have been hurt     Q: Do you think that the damage done to the markets in terms of levels and the overall investor sentiment - be it FII and/or first time retail investors is irreparable or will take a long time to mend? And: >Difficult to say the pain/ market downside is over at the global level >No evidence that bear market will be short-lived >Bounce-back due; can be led by a fall in crude oil prices >Macros and global developments will not resolve quickly     Q: Are the markets overdoing the nervousness? The sharp fall from the top is nothing that the markets/ investors have not seen earlier. And: >Most ‘new' investors would not have seen anything like the recent market crash >Most investors put in money at the right time; made good money >Quick returns made them bullish; a lot of pain still to be endured   Q: Where do you see the maximum pain coming from, in terms of sectors, right now and 3-6 mts down the line? Ans: >Banking sector will see more pain >Rising interest rates and inflation, shrinking household expenses are not good for lenders >Discretionary spending will fall     Q: Where do you find comfort while investing at the current levels? And: >Small companies will ride out the current scenario better than their large-cap peers >20% of the Nifty stocks will not perform for the foreseeable future >65 - 70% of the stocks will give 15% compounded growth >Best returns from the Nifty are behind us for the next 12 months >Markets can remain flat, or fall more from the current levels   Q: So is there any silver lining amid all this gloom and doom? How are you approaching the markets now – buying selectively or remaining a fence-sitter? And: >Great time to buy selectively; easy money and return phase is over >Markets are now making me work hard in identifying investment-worthy stocks     Q: But retail investors do not have access to company management. So, how do they research and invest the way you do? And: >Fair amount of information available on the internet >Investors need to be disciplined; understand risk and portfolio construct >Smart stock-picking alone cannot make you rich

    Why US Fed's rate hike failed to calm markets?

    Play Episode Listen Later Jun 17, 2022 6590:30

    Thursday's steep sell-off from morning highs reflect the bearish undertone in the Indian equity markets.  Despite a rate hike on anticipated lines by the US Federal Reserve, investors sold rallies and pushed the benchmark indices to fresh 52-week lows intra-day. While the S&P BSE Sensex slumped nearly 1,050 points, the Nifty50 index dropped 332 points to end at 51,496 and 15,361 respectively. With this, the 50-pack index has broken its crucial near-term support of 15,500, and could be heading towards its next support level of 14,911, which is followed by 13,099.   UR Bhat, Co-Founder & Director, Alphaniti Fintech, Nifty has broken crucial support of 15,700. Fall from here on will be brutal, he says. Next support is nearly 1,000 points away. Only a healthy bounce back can save investors, he says. According to analysts, the Federal Reserve's biggest increase in interest rates since 1994 and signs of weaker consumer spending indicate that inflation is winning the battle.  Further, they fear that the world's biggest economy could be hit by a recession as early as 2023. The Fed, on Wednesday, too, cut its economic growth outlook for 2022 to 1.7% from 2.8% projected in March. According to the latest estimates by Bloomberg Economics, a downturn by the start of 2024, barely on the radar just a few months ago, is now close to a three-in-four probability. Against this backdrop, analysts feel the US Federal Reserve's policy action on Wednesday fell short on liquidity tightening. G Chokkalingam, Founder, Equinomics Research & Advisory, says US has reached mid-point of rate hike cycle. Markets need two more cycles to fully discount hike cycle, he says adding that however, Balance Sheet reduction is nowhere near mid-point. Downside bias for US, Indian markets exists. Apart from these imported headwinds, India is facing domestic concerns such as boiling oil prices, higher inflation, weaker currency, and FPI outflows. UR Bhat, Co-Founder & Director, Alphaniti Fintech, says inflation is out of control and India has negative real interest rates. He says, once to expect faster-than-anticipated interest rate hikes. Markets should expect substantial correction. Going forward, analysts at UBS suggest Indian investors trade with caution as it expects the Indian rupee to weaken to 80 against the US dollar, with risks skewed to the upside. That apart, it also sees yield on the 10-year govt bond topping the 8% mark before the end of the current fiscal. Further, the brokerage expects DII inflows to moderate, in addition to sustained FPI selling. Lastly, UBS expects the RBI to raise repo rates to 6.25% by March 2023.  Clearly, a high inflationary environment for an extended period is blowing up market returns as fears of recession loom large over the US economy, coupled with concerns over a slowdown elsewhere in the world. 

    National Herald case & Section 8 of Companies Act

    Play Episode Listen Later Jun 17, 2022 4:01

    Before we delve deeper into the specifics of the Section 8 of the Companies Act, let us first skim through the case which brought it into the news. Congress chief Sonia Gandhi and party MP Rahul Gandhi were recently summoned by the Enforcement Directorate for questioning in a case of money laundering registered against them. Sonia could not appear as she was admitted to Delhi's Ganga Ram hospital due to Covid-19 complications. But Rahul did. So what is the case? In 1938, Jawahar Lal Nehru had founded a newspaper called National Herald-- which went on to become a prominent voice against British rule. Its publishing company, Associated Journals Limited or AJL, also used to take out Hindi paper Navjivan and Urdu daily Qaumi Awaz. But, over the years, it lost steam. And about 70 years later, in 2008, AJL stopped publishing the papers due to continued losses. Meanwhile, to save the paper, Congress had given interest-free loans to AJL reportedly from the party funds. By 2008, AJL -- which had about 1,000 shareholders -- owed about Rs 90 crore to Congress. It was then that AJL stocks were transferred to Young Indian (YIL) -- a private charitable company formed by Gandhis in 2010 under Section 25 of the Companies Act. In 2013, BJP MP Subramanian Swamy filed a complaint alleging corruption. He asked how AJL -- which had assets worth Rs 2,000 crore in prime locations-- can be bought for just Rs 50lakh? Congress rejected the charges. It said that YIL was a not-for-profit company, and no profit or dividend can be doled out to its shareholders or directors – in this case the Gandhis. The party also insisted that AJL continues to be the owner of National Herald and there is no transfer of property. So what is Section 8 of Companies Act and why firms are floated under this provision.   If a company is being floated to promote social welfare, it can either get itself registered as a trust under the Trust Act, 1882 or the Societies Registration Act, 1860. Or it can choose to register itself as a not-for-profit organisation under Section 8 of the Companies Act, 2013 -- previously under Section 25 of the Companies Act, 1956. A company is registered as a non-profit organisation (NPO) under the Section 8 to promote education, charity, religion, arts, commerce, environment, sports, science, research, social welfare. And the profit earned by the organisation cannot be used for paying out dividends to its members. It can only be used to promote the purpose it has been set up for. The licence for such companies is issued by the central government. While the authorization for the trust is given by state governments.  And these companies can get the tax benefits if it gets registration under section 80G and 12AA of IT act. Some examples of Section 8 companies are Azim Premji Foundation, Reliance Foundation, Reliance Research Institute, Coca Cola India Foundation and Amazon Academic Foundation. 

    TMSEp195: 5G auction, Agnipath scheme, markets, Udyam registration

    Play Episode Listen Later Jun 16, 2022 28:41

    The government on Wednesday morning set the rollout of 5G services in India in motion by giving a nod to conduct spectrum auction from July 26. And brushing aside the concerns of telcos, the Union cabinet -- led by Prime Minister Narendra Modi-- sanctioned direct allocation of airwaves to enterprises, giving them the right to operate private 5G networks. It also didn't heed to another demand of telcos to slash the reserve price of airwaves by 90% from the 2018 levels. So how will all this impact the rollout of 5G, telcos and industry 4.0?  The wind of change is not just blowing through the country's airwaves. It is breezing past the Indian armed forces too. The government on Tuesday unveiled a new scheme to recruit soldiers across the three services. Under the ‘Agnipath' scheme, around 45,000 soldiers will be recruited every year. Of them, only 25% will be retained after four years of service. The move is likely to bring down the pension budget of the army -- and the freed fund may be diverted for its modernisation. But the scheme is also drawing some criticism. It is not just the Indian army, but countries all over the world are trying to cut the extra flab as inflation soars past comfort level. The US Federal Reserve announced its second consecutive rate hike last night, while the Reserve Bank of India pushed up the repo rate last week. Rising interest rates, along with elevated raw material cost, are hitting the building material sector hard. Our next report tells about the near-term sore points for related industries, and how should investors play the theme? Away from the upmarket stock exchanges -- where negative sentiments are weighing heavy-- a sense of positivity is returning in lanes of towns dotted with small enterprises. According to a recent survey, loan demand from micro, small and medium enterprises (MSMEs) was back to 99% of pre-pandemic levels in non-metro cities by March 2022. But how do one register to set up an MSME? For this the government had launched an online system called Udyam. Let us know more about it in this episode of the podcast.  Watch video

    How will 5G auction effect telcos and industry 4.0?

    Play Episode Listen Later Jun 16, 2022 8:33

    India came one step closer to rolling out 5G service on Wednesday, as the government announced the schedule for the auction of spectrum. The Digital Communications Commission (DCC) had approved the 5G spectrum auction according to Telecom Regulatory Authority of India's recommendations on May 17th this year. The proposal was sent to the Union Cabinet then.   In its meeting on Tuesday, the Cabinet approved the Department of Telecom's proposal for the auction of 72 GHz of spectrum for a 20-year period. And to the shock of telecom operators, it has allowed the development and setting up of private captive networks with the aim of ushering in a wave of innovations in Industry 4.0 applications. It is said that the 5G speed will be ten time faster than its predecessor.   The department of telecom has notified that the auction of 5G airwaves will begin on 26th July. The government said that the payments for spectrum can be made in 20 equal annual installments, which will be paid in advance at the beginning of each year. The government said that it is expected to significantly ease cash flow requirements and lower the cost of doing business in the sector. The bidders will also be given the option to surrender the spectrum after 10 years with no future liabilities with respect to balance installments.   In what appears to be a setback for telcos, the Notice Inviting Application, or NIA, issued on Wednesday showed that the Cabinet has left the reserve price of 5G airwaves unchanged. In May, the Digital Communications Commission had approved the auction of 5G airwaves. Mobile service providers had asked for a 90 per cent cut in the base price.  However, accepting the suggestion of the Telecom Regulatory Authority of India, it only recommended a 36 per cent reduction. However, there was one piece of good news for telcos. Prashant Singhal, the EY Global TMT Emerging Markets Leader, said that one of the key highlights of the 2022 spectrum auction NIA was abolishing the spectrum usage charges, or SUC, for this auction.   Singhal explained that at present, the SUC paid by operators varied between 3-5 per cent of the Adjusted Gross Revenue depending on the year of acquisition. Thus, according to him, the zero per cent SUC would be a welcome relief to operators and enable a faster 5G rollout. Another setback for the telcos was the government move to allow private network. Leading up to the Cabinet nod, telcos had opposed any move to set aside spectrum for captive private networks at an administered price. On the other side of the fence were the likes of the Tatas, ITC and the Broadband India Forum, which had argued that assigning spectrum directly to enterprises was the only way to enable Industry 4.0.     The Cellular Operators Association of India, or COAI for short, had recently sent a letter to Communications Minister Ashwini Vaishnaw. The letter said that there would be "no business case for rollout of 5G networks” by telcos if captive private 5G networks were to be permitted. COAI is the apex body of telecom operators with Reliance Jio, Bharti Airtel, and Vodafone Idea as its key members. The COAI letter also said that in regions where 5G had been rolled out, there had hardly been any gains in revenue from the retail segment. Instead, revenue and efficiency enhancement could only happen in the enterprise segment. Telcos have argued that based on global trends, 40 per cent of the revenues from 5G come from the enterprise segment. On Wednesday, the Broadband India Forum hailed the Cabinet's decision to enable private 5G networks as a step that would give a boost to Digital India. It noted that all the four methods of allocating spectrum for private 5G networks as recommended by TRAI, including the option of enterprises obtaining spectrum directly from the DoT, have been permitted. Thus, the Forum said that enterprises would be able to develop private 5G networks for specialised captive use and march t

    Cement, steel, paint firms eye painful quarters ahead

    Play Episode Listen Later Jun 16, 2022 4:45

    Equity markets are expected to remain on choppy on Thursday as investors digest a second consecutive interest rate hike by the US Federal Reserve. Back home, the Reserve Bank of India had pushed up repo rate last week. However, rising interest rates, along with elevated raw material cost, pose a challenge to the building material sector, which includes ceramics, paints, pipes, cement and steel. Related companies felt the pain of mounting input costs in the fourth quarter of FY22, and analysts expect subdued demand in the coming months due to higher raw material prices and rising borrowing costs. Ronald Siyoni, AVP - Research, Sharekhan by BNP Paribas says building material space witnessed margin pressure during Q4FY2022. Demand remained healthy from government infrastructure projects and urban housing. Slackness was seen in tier-III and below, and rural segments, he says adding that margin pressures to continue till H1FY23. The sector, as a whole, should see improvement from H2FY2023 as energy costs recede Analysts have downgraded related sectors, and have cut earnings estimates to factor-in near-term challenges.  Nirmal Bang has cut its FY23 and FY24 Ebitda estimates for cement sector due to aggressive capacity expansion plans by multiple players, cost inflation environment etc, which will affect the sector's earnings in the medium-term.  Nirmal Bang, for instance, has cut its FY23 and FY24 Ebitda estimates for cement sector due to aggressive capacity expansion plans by multiple players, a prolonged cost inflation environment, lack of pricing power given the elevated competition, and deteriorating demand drivers. Meanwhile, ICICI Securities is ‘cautious' on the paints sector due to similar reasons. As regards steel and ceramics sectors, Anil Rego of Right Horizons PMS believes near-term pain clouds sector outlook. Speaking to Business Standard, Anil Rego, Founder and Fund Manager, Right Horizons PMS says coking coal prices impacting steel industry. Steel companies expected to be under pressure on account of export duty hike, he says. Sector has been de-rated; outlook weak. However, soaring gas prices to dent margins of ceramic companies. Kajaria, Somany have taken multiple price hikes. Margins are expected to normalise by Q3FY23.  That said, analysts don't see any significant impact on real estate demand or construction activity in the long-term. Ram Kalyan Medury, Founder & CEO of Jama Wealth, says high interest rates may defer second home's buying. But commercial construction may not be hugely impacted. Real estate a safe haven bet; will keep demand buoyant for some time, he says. Sector has seen recovery and global factors may not dampen this.  Analysts suggest investors avoid taking fresh positions in related counters for the time being.  However, a robust long-term view given strong real estate sector bookings; govt's focus on infrastructure creation; easing commodity prices from H2FY23; and lower valuations make them attractive from two-three years perspective.   Brokerages are bullish on UltraTech Cement, Asian Paints, Kajaria Ceramics, Century Plywoods, Greenply Industries, and APL Apollo Tubes.

    How will Agnipath affect the army's modernisation drive?

    Play Episode Listen Later Jun 16, 2022 8:42

    Putting yet another status quo to rest, the government announced a big structural reform in the armed forces this week. The consequences of this shake-up will take a few years to manifest, but the radical move has taken even defence experts off the guard. On Tuesday afternoon, fresh from a meeting of Cabinet Committee on Security -- which was led by Prime Minister Narendra Modi -- a beaming Rajnath Singh dwelled into the details of the project before media persons. He was flanked by chief of three Services – who head the world's second largest standing defence force.   Under the scheme, named ‘Agnipath', Defence Minister Singh said that “patriotic and motivated” youth will be given the chance to serve the three forces for a brief period of four years. Starting this year, about 45,000 youths between the age of 17.5 and 21 years will be recruited. They will almost hit the ground running after a basic training of six months. After completion of their four years of service, 25% of the ‘Agniveers' will be selected for regular cadre, where they will serve for another 15 years before retiring with pension and other benefits. The remaining 75% ‘Agniveers' will be demobilised with an exit package of about 12 lakh and a certificate. About half of the exit package money will come from their own contributions as a portion from their salary which will be between Rs 30,000 to 40,000. Those who join the services after Class 10 will get the certificate of 12th standard after the job completion. But they will not be entitled to any pension or other post-retirement perks which regular soldiers avail. Currently there are about 1.4 million personnel on active duty. In their first year, ‘Agniveers' will be paid a customised package of Rs 30,000 per month, rising incrementally each year to Rs 40,000 in the fourth year. In addition, they will be paid risk and hardship allowances on a par with the three services. Throughout their service, 30 percent of their salary – a sum of Rs 9,000 per month in the first year, rising incrementally to Rs 12,000 per month in the fourth year – will go into Agniveer corpus fund. So why did the government take this step? In this year's Union Budget, India allocated ₹5.25 trillion for military spending. And in this ₹1.19 trillion went towards paying the pensions of ex-servicemen. According to experts, over 70% of the defence expenditure goes into salary and pension. As of 2020, India has about 32 lakh defence pensioners and every year this number goes up by 55,000. It leaves little room for the army to spend on capital expenditure, including buying of big-ticket weapons, modern military systems, fighter jets etc. In 2015, the government gave the nod to implement one-rank-one-pension scheme. It ensured equal pension to military personnel retiring from the same rank with the same years of service, irrespective of the date of their retirement. The then defence minister Manohar Parrikar had said that it added a “huge fiscal burden” on the state. So through the ‘Agneepath' scheme, the government obviously wants to cut the pension budget in the long run. Another benefit of the scheme, cited by the government, was that it will bring down the average age of the army. India has the world's largest youth population. About 40% are between 13 to 35 years. Rajnath Singh said that with the scheme, the average age of soldiers will gradually come down to 24-26 years from the existing 36. But the scheme drove a wedge between defence experts. Some are favouring it, while others saying that it may hit the combat effectiveness of the armed forces. Meanwhile, according to some reports, there was a sense of gloom among army aspirants across the north Indian towns. Most of them asked what they would do after four years of service. In rural belts of UP, Haryana, Punjab, Bihar etc. an army job is tied to honour. Job security and pension after retirement offered youth some sola

    What is Udyam registration for MSMEs?

    Play Episode Listen Later Jun 16, 2022 3:20

    Udyam is an online system for registering micro, small and medium enterprises launched by the Union MSME Ministry on July 1, 2020. The government had also revised the definition of MSMEs from the same date. More than 88 lakh MSMEs have successfully registered themselves to date through the Udyam registration portal.  Any person can avail a free Udyam registration for their enterprise through a fully digital and paperless process based on self-declaration. Udyam registration is a prerequisite for availing the benefits of schemes or programmes of the Ministry of Micro, Small & Medium Enterprises such as Credit Guarantee Scheme, public procurement policy, additional edge in Government Tenders and protection against delayed payments etc.  An e-certificate called the “Udyam Registration Certificate” is issued online on completion of the registration process. This certificate has a dynamic QR Code through which the web page of the registration portal and details about the enterprise can be accessed. Aadhaar, PAN and GST numbers are required for registration. The Udyam portal is seamlessly integrated with Income Tax and GST Identification systems along with the government e-marketplace. The details on investment and turnover are taken automatically from government databases.  The Aadhaar number shall be of the proprietor in the case of a proprietorship firm, of the managing partner in the case of a partnership firm and of a ‘karta' in the case of a Hindu Undivided Family. In case of a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with the Aadhaar number. Misrepresents or attempts to suppress the self-declared facts and figures appearing in the Udyam Registration or updation process is liable to penalty under section 27 of the Micro, Small and Medium Enterprises Development Act, 2006. No enterprise is allowed to file for more than one Udyam Registration. However, any number of activities including manufacturing or service or both may be specified or added in one registration. The registration is permanent and acts as the basic identification number for an enterprise and there will be no need for renewal of registration.  MSMEs also become eligible for priority sector lending from banks. All bank loans to MSMEs conforming to the RBI guidelines qualify for classification under priority sector lending.

    TMSEp194: Job announcement, food delivery apps, markets, economy categories

    Play Episode Listen Later Jun 15, 2022 26:27

     Amid fears that India's demographic dividend may turn into a demographic threat after years of high unemployment rates, Prime Minister Narendra Modi on Tuesday announced to recruit 10 lakh people in different Central government ministries and departments in the next 18 months. And on the same day, the government also announced a radical recruitment plan for armed forces -- under which 45,000 youth will be inducted for four-year tenure. So, will these steps help address India's unemployment problem?  The government is also working on a mission mode to address the problems faced by consumers. On Monday, it asked food business operators like Zomato and Swiggy to submit a proposal on improving their consumer grievance redress mechanism and reveal breakups of all the charges, including the surge pricing, to consumers.  After food business operators, let us move on to markets and economy. With a stronger-than-expected surge in headline US inflation at 8.6% in May, the US Federal Reserve is likely to march towards aggressive monetary tightening policy at the end of its two-day June meeting. However, the inflation punch coupled with recession fears poses a dilemma before the US Fed on the quantum of rate hike without derailing growth. This podcast takes a dive on what to expect from the US Fed meet and whether investors would be able to withstand the likely market rout. Investors looking for an international exposure need to understand various categories of economies and the inherent risks involved. In this podcast we explain what the various categories of countries are and the things to keep in mind before investing there.   

    Difference between developed, emerging and frontier economies?

    Play Episode Listen Later Jun 15, 2022 4:43

    A diverse portfolio helps investors hedge concentration risks. And while portfolio or investment diversification is important, locations or economies where you put your money is equally crucial. And when you turn towards international markets, you have the options of investing in developed markets, emerging markets, and frontier markets. Let us understand what each of these markets are, and how can one invest in them?   While there's no one standard definition of each of these markets, experts point out that there are a number of characteristics that are hallmarks of each. For instance, developed nations usually have more advanced economies, better-developed infrastructure, and higher per capita income. Western economists consider $15,000 to $20,000 per capita GDP to be a sufficient range for developed status. That apart, developed economies are also characterised with highly developed capital markets, regulatory bodies and high household incomes. However, a high per capita GDP alone does not confer developed economy status without other non-economic factors such as the infant mortality rate and life expectancy. For example, the United Nations still considers Qatar, which had one of the world's highest per-capita GDP in 2021 at around $62,000, a developing economy. This is because the nation has extreme income inequality, lack of infrastructure, and limited educational opportunities for non-affluent citizens. Overall, various organisations including World Bank, the United Nations, MSCI, FTSE, and Standard & Poor's consider about 25 nations as developed economies.  Australia, Austria, Belgium, Denmark, Canada, France, Germany, Hong Kong, Italy, Japan, New Zealand, Norway, Portugal, Singapore, Spain, Switzerland, the US, and the UK These include Australia, Austria, Belgium, Denmark, Canada, France, Germany, Hong Kong, Italy, Japan, New Zealand, Norway, Portugal, Singapore, Spain, Switzerland, the US and the UK. According to the World Bank, countries with low, middle, and upper-middle incomes per capita, relative to incomes in other countries around the globe, are labeled as developing, or emerging. Developing countries or economies are those which do not enjoy the same level of economic security, industrialization, and growth like the developed countries. It includes the nations that do not have the economic strength of developed nations, but are in the process of becoming developed economies. It pegs per capital income for emerging markets between at $4,095 or less. But for investors, the emerging markets offer a greater amount of liquidity as well as stability. Emerging market countries include BRICS countries -- Brazil, Russia, India, China, and South Africa. Besides, Mexico, Pakistan, and Saudi Arabia are other developing economies. The third one is frontier market. They are somewhat less advanced capital markets in the developing world. These markets are in a country that is more established than the least developed nations. It is still less established than the emerging markets because it is too small, carries too much inherent risk, or is too illiquid to be considered an emerging market. That's why they are sometimes called as pre-emerging markets. So, based on these criteria, frontier markets include the likes of Colombia, Indonesia, Vietnam, Egypt, Turkey and Nigeria. One of the easiest ways to incorporate stocks from various markets is to purchase shares in managed funds. Secondly, bear in mind the risks, liquidity, and growth potential of a given country before investing. That apart, investors must balance the strengths, weaknesses, opportunities, and threats before investing in a particular country. They should also make tradeoffs and place bets among debt, equity, domestic, international, growth and safer options.

    Will 75 bps US Fed rate hike trigger another market selloff?

    Play Episode Listen Later Jun 15, 2022 0:17

    As consumer inflation race d to a 41-year high in May, the US Federal Reserve will be determined to increase interest rates by at least 50 basis points at the end of its two-day policy meeting later today. FOMC minutes in May, too, signaled commitment to raise interest rates, reduce balance sheet and move into the ‘restrictive' territory.    Analysts at HSBC believe the Fed will launch three series of 50 bps rate hike in June, July, and September, global investment bankers like Barclays and Jefferies make the case for 75 bps rise in interest rates.  However, if the US Fed raises the benchmark rate by 75 bps, it would be the biggest hike seen since 1994. Analysts fear this would ultimately unsettle global investors and fuel steep declines in the US equity as well as bond markets. As far as this week's policy is concerned, markets are baking in 65 per cent chances of a 75-bps rate hike. But, analysts believe that an extremely hawkish commentary from the US Fed would roil the markets going ahead. Vineet Bagri, Managing Partner, Trustplutus Wealth India, food, fuel prices driving inflation, US Fed in dilemma whether to front load rates now vs months ahead. Markets baking-in 65% chances of 75-bps hike in June and one can expect steeper hikes ahead as well. He says an extremely hawkish commentary will trigger broad-based fall in asset prices. Kunal Valia of Waterfield Advisors, too, believes that the 75 bps rate hike would trigger a broader market selloff.  Kunal Valia, Chief Investment Officer - Listed Investments, Waterfield Advisors, said US Fed may announce 50-bps rate hike, and may announce several hikes over the next 2 years. QE tightening programme to gather pace and expect extremely hawkish commentary. He said 75-bps hike will dent market sentiment further; trigger broad-based sell-off Historically, the US Fed has kept interest rates in the range of 2 to 4 per cent to balance growth.  The global central bank started to raise interest rates from January 2022 to tame the red-hot inflation. Till now, it has launched three-series of rate hikes, totaling to one per cent.    Given this, the tech-heavy NASDAQ Composite has bled the most, sinking over 31 per cent so far in 2022.  VO continues>Meanwhile, the S&P 500 and Dow Jones have slipped over 21 per cent and 16 per cent, respectively, during the same period. Moreover, the US 10-year treasury yields have climbed over 1 per cent this year. Overall, an unexpected rate hike may send markets into a tailspin, casting a spillover effect over others as well. 

    Will PM Modi's 'one million job' drive help ease the employment crisis?

    Play Episode Listen Later Jun 15, 2022 7:35

    Battered by demonetisation, pandemic and subsequent lockdowns, the Indian economy has started showing some signs of revival now. In May, the number of employed people jumped by one million. It resulted in a drop in unemployment rates from 7.83% in April to 7.12% in May. Economists, however, are sceptical. Some say that it is difficult to get the real picture of unemployment from the methodology used by the Centre for Monitoring India Economy or CMIE. The same CMIE, however, recently conceded that more than half of the 900 million Indians of legal working age -- roughly the population of the US and Russia combined – are not looking for a job at all.   And amid these hopeful and gloomy numbers, Prime Minister Narendra Modi on Tuesday announced to give central government jobs to 1 million people in the next year and a half. But in February this year, the government had told Rajya Sabha that there were over 872,000  vacant posts in central government departments as on 1st March 2020. As many as 910,153 vacancies existed as on 1st March 2019 and 683,823 as on 1st March 2018.   The government had also said that the Staff Selection Commission, the Union Public Service Commission, and the Railway Recruitment Boards had recruited 265,468 people during 2018-19 and 2020-21. India is still far behind the US, China and others in public sector employment. In 2015, there were nearly 39 million public-sector employees in China. This would mean 5 per cent of China's workforce had public sector employment. The corresponding figures for the UK in 2021 were 17 per cent, and for the EU, it was 18 per cent. In the US, 6.9 per cent of the total workforce was employed in the government in 2020. This does not include state government employment. If we were to assume that state employment is four times that of central government and armed forces employees, India's total public sector employment would be in the vicinity of 20 million. Even after an addition of 1 million, India will still have only 2.2 per cent of its total workforce employed in the public sector.   In August of 2020, a McKinsey Global Institute report had said that India needed to generate 90 million non-farm jobs between 2023 and 2030 in order to absorb new workers and an additional 30 million workers who could shift from farm work to non-farm sectors. The report had said that to absorb this influx, India would need close to 12 million additional gainful non-farm jobs every year starting in financial year 2023. This would be triple of the four million non-farm jobs created annually between 2012 and 2018.   The government on Tuesday also announced a major reform in how soldiers will be recruited for the army, navy and airforce by way of the new Agnipath scheme. Under the model, soldiers will be recruited from those between the ages of 17.5 to 21 years. These 'Agniveers' will serve for four years. Defence Minister Rajnath Singh has said that this scheme will increase employment opportunities with new skills in different sectors. Under this scheme, most soldiers will exit the service in four years. Out of the 45,000 recruited annually, only 25 per cent will be allowed to continue under permanent commission. According to one report, the model will make the permanent force levels of the country's armed forces much leaner. So, its net impact on employment generation remains to be seen.     As reported by Business Standard, an urban job scheme along the lines of MNREGA is back in debate after a report commissioned by the Prime Minister's advisors recommended it. The report, commissioned by the Economic Advisory Council to the Prime Minister, has recommended such a scheme based on its assessment that a gap between the labour force participation rate in rural and urban areas is widening.   The government also has an ambitious target of generating over 6 million jobs in five years from the production-linked incentive schemes. Meanwhile, i

    TMS Ep193: IPL media rights, Bankruptcy Code, markets, weather and economy

    Play Episode Listen Later Jun 14, 2022 27:58

    The fight to clinch the media rights of Indian Premier League for the next five years was no less intense than the matches itself. And the money put on the auction table made the IPL world's number two sports league, with only America's National Football League ahead of it in terms of per-match value. So why has the race to grab the TV and digital media rights become so intense despite a dip in IPL viewership? And what do the winners stand to gain?   But not all business models are as lucrative as IPL. Scores of companies are floated every year and some return to the pavilion without playing a long innings. Ravi Mittal, chairperson of the Insolvency and Bankruptcy Board of India (IBBI), recently said that there should not be any stigma attached to genuine business failure and companies should be given honourable exit. The Insolvency and Bankruptcy Code, 2016 was introduced in May, 2016 to tackle bad loan problems. But it has been plagued with high haircuts for banks and delays in the resolution process. So what can be done to achieve quicker resolution? Markets too take a beating when a big company falls. Meanwhile, key benchmark indices cracked around 3 per cent on Monday. The Indian Rupee, too, recorded a new all-time low. Against the backdrop of the yesterday's fall and overhang of global sentiment, our next report tells what lies ahead for the markets, and what are the key support levels to watch out for? Not just scorched earth and people living on it, a good monsoon also soothes the economy and markets too. Weather and economy are closely linked. In this episode of the podcast, we explain how nature still rules over us, despite all the technological advances. 

    Why is the race for IPL media rights still intense?

    Play Episode Listen Later Jun 14, 2022 8:23

    It had all the ingredients of a racy cricket match -- something which we usually see during IPL sessions. And a lot was at the stake. Global tech majors Amazon, Alphabet and Apple Inc were among the giants vying for the media rights to broadcast IPL matches for the next five years. But on Friday, the three US giants dropped out of the race, leaving seven competitors in the fray. And of them, Viacom18, Disney-Star, Sony and Zee were involved in the bidding war for the Indian Premier League's 2023-27 cycle. In Monday morning's session, the IPL TV and digital rights auction had closed at a total value of Rs 43,255 crore, which translated to Rs 105.5 crore per match. That value subsequently increased to Rs 44,075 crore. Meanwhile, the revised per-match value stood at Rs 107.5 crore. A Business Standard report, while citing sources, said that there was an incremental bid of 50 lakh rupees placed in the television category, thus taking the per-match value for TV to Rs 57.5 crore from Rs 57 crore, which was the figure at the close of bidding on Sunday. The total value of IPL TV rights now stands at Rs 23,575 crore for 410 matches. Meanwhile, the digital rights have also increased to Rs 50 crore per match, or Rs 20,500 crore overall, from Rs 48 crore per match or Rs 19,680 crore earlier. And the winner were Viacom 18 and DisneyStar. While Viacom 18 bagged the digital rights for IPL, DisneyStar got the television rights. These numbers have propelled IPL to the spot of the number two sports league in the world. The per-match value of the IPL has touched Rs 107.5 crore. This is second only to America's National Football League, which costs a broadcaster Rs 132.26 crore per match. The English Premier League costs Rs 85.58 crore per match. Let's put the growth in valuation in perspective. Disney-Star had bagged the combined digital and TV rights for the IPL in 2017 for Rs 16,347.50 crore. Back then, the per-match value stood at Rs 54.5 crore. These numbers will also come as a big relief for the IPL and BCCI. In recent weeks, a sharp fall in IPL's TV viewership had led some to question the base price set for the media rights. Sony Pictures Networks India's MD and CEO NP Singh had told a financial daily that the reserve price needed a reality check amid this decline in viewership.  Compared to last year's figures, IPL's viewership fell by 30-35 per cent in the first four weeks of the 2022 season. In fact, with viewership falling consistently, reports said that some advertisers had even asked Disney-Star to make good their losses by offering them spots on alternate high-impact properties. So, what explains the premium that IPL still commands? Also, what will be the impact of TV and digital rights going to different players? The BCCI and IPL franchises are the biggest gainers from the auction. The money involved in the auction has also made a few things clear -- IPL is still a hot property for both media houses and advertisers. It is still a one-of-a-kind asset that helps broadcasters gain an additional user base and gives advertisers sway over hundreds of millions of viewers. But, there is one concern that needs to be addressed. In May it was reported that the CBI has started a country-wide probe into the alleged fixing of IPL matches. There is even a Pakistan angle to it. Were the IPL's credibility to be damaged, it would be a huge step back after Indian cricket's giant leap on Monday.   

    Where does IBC stand five years after RBI's 'dirty dozen' announcement?

    Play Episode Listen Later Jun 14, 2022 7:38

    Before Insolvency and Bankruptcy Code, 2016, the insolvency and bankruptcy laws in India were multilayered and fragmented. IBC created umbrella legislation for insolvency resolution of all entities in India -- both corporate and individuals.  IBC's journey so far has been a mixed bag. In the last two years, the debt resolution of sick companies slowed down considerably after initial euphoria saw several successful acquisitions by top companies, including the Tatas, Reliance, and the world's largest steelmaker, ArcelorMittal. The problems include a very high haircut-- as much as 95% in some cases for banks-- and delays in the resolution process. The provisions of the code, that came into effect in December 2016, aimed to serve two purposes. To save businesses that are viable and facilitate the exit of those that are not. Since then, as many as 5,258 insolvency cases have been filed by lenders. Of these, 3,403 cases have been closed until March this year. Of the 3,406 resolved cases, nearly 47% of companies were liquidated and 17% were withdrawn after 90% of lenders agreed, following an offer made by the promoter. Around 22% of the cases are still ongoing, while in 14% of the cases, the resolution plan has been approved. Apart from overburdened courts, a serious problem faced by lenders was that asset reconstruction companies (ARCs) are not allowed by the RBI to bid for bankrupt companies.  Legal experts say that frivolous challenges and interference by erstwhile promoters -- directly or indirectly-- to delay the resolution process must not be entertained. The IBC prescribes a time limit of 180 days for resolution, extendable by another 90 days. However, an outer limit of 330 days has also been prescribed for the completion of the resolution process, including the time taken for litigation. The 480 cases which yielded resolution plans took on average 450 days for the conclusion of the process. And of the ongoing cases, 66% have been pending for more than 270 days.  But the IBC's track record has been better than the earlier laws. The realisable value of the assets available with the 480 companies rescued was only Rs 1.31 trillion though they owed Rs 7.61 trillion to creditors. The resolution plans realised Rs 2.34 trillion, which is around 178% of the liquidation value of the corporate debtors. Financial creditors recovered 32.89% of their claims, which only reflects the extent of value erosion by the time the companies entered the insolvency process. Yet it is the highest among all options available to creditors for recovery.  [Byte of Sonam Chandwani, Managing Partner, KS Legal & Associates] June 13th marked the completion of five years since the RBI identified 12 highly stressed debtors for insolvency resolution under the IBC.   These 12 accounts were popularly referred to as the ‘dirty dozen'. They had an aggregate outstanding claim of Rs 3.45 trillion as against a liquidation value of Rs 73,220 crore. Out of these, the resolution plan has been approved for eight, two are still undergoing insolvency proceedings, and liquidation has been ordered in the case of the other two. The recovery ranged from 115% to 387% of the liquidation value for the eight cases that were rescued through resolution plans.  Bhushan Steel's resolution was done and dusted in under 300 days, Essar Steel's took a gruelling 865 days because of litigation.  Meanwhile, the lofty haircut taken by banks in several cases like Siva Industries and Videocon Industries came up for criticism by the lower courts, the Supreme Court made it clear that if lenders, in their commercial wisdom, think the offer is good for all stakeholders, then the NCLT and the NCLAT must not interfere. Courts have played a pivotal role in modelling the IBC and paved the way for evolving jurisprudence. As the insolvency law matures, one can expect the average time for a resolution to shorten. One should judge the success of IBC not

    Where will Sensex, Nifty seek support after Manic Monday?

    Play Episode Listen Later Jun 14, 2022 3:39

    With the consumer price inflation coming in hotter than expected in the US, at 8.6% annually, market concerns have resurfaced that action from the Federal Reserve and other central banks could risk tipping the economy into recession. The fears resonated in the markets yesterday as equities crashed, emerging markets' currencies hit fresh lows, while bond yields rose world over.    Back home, too, stock markets cracked heavily with the S&P BSE Sensex dropping 1,457 points to end below 53,000 level. The Nifty50, meanwhile, tanked 427 points to give up 15,800.  The Nifty Bank index, also, dropped over 1,000 points to settle near 33,400. Investors now fear that inflationary concerns have broadened in the US, going beyond the known drivers such as supply chain bottlenecks and energy shocks.  Back home, market participants are worried that India's sticky retail inflation in May could turn the Reserve Bank of India even more hawkish.   Going forward, experts see a hazy near-term trajectory. Gaurang Shah, Head Investment Strategist, Geojit Financial Services, rate hikes by US Fed, RBI already dicounted. However, exit of FIIs, global sell-off are sore points and downtrend in markets may persist in near-term. Technical charts, too, indicate around 2% downside potential in benchmarks as they hover around crucial support levels after Monday's mayhem. Avdhut Bagkar of Business Standard said Sensex, Nifty may seek support at 100-WMA, near-term support at Sensex 51,249 and Nifty 15,318. Nifty Bank, too, lingering around 100-WMA (33,100) and Nifty IT can fall another 3-4% if it fails to hold 100-WMA. Against this backdrop, Tuesday's market session will be guided by global cues, trajectory of bond yields and rupee, crude oil prices, and India's retail and wholesale inflation data.     

    How weather impacts the economy

    Play Episode Listen Later Jun 14, 2022 5:11

    The Reserve Bank of India had come out with a study in April, 2020 on the effect of weather on the economy. The report explained how GDP growth is connected with temperature and humidity. The RBI report had also said that rainfall has a larger impact on the economy in comparison to the changes in temperature. As the country gets warmer or when more than expected rains are received, the manufacturing and the service sectors tend to decelerate. The RBI study came about five years after an overwhelming majority of countries had adopted the Paris Agreement in December 2015. The pact had called for pursuing efforts to limit global temperature rise to 1.5 degrees Celsius. Human-induced warming has already reached 1.1 degrees Celsius above pre-industrial levels. Each of the last four decades was hotter than any decade since 1850. Changing weather patterns and an increase in average global temperature are emerging as a key risk to the macroeconomic outlook of both advanced and emerging economies. India too has witnessed significant changes in climatic patterns. Last year's monsoon had managed to deliver statistically normal rain even though its distribution over time and space was highly erratic. Short but intense downpours, interspersed with longish dry spells, have been the distinctive feature of that monsoon.  India's growth and inflation outlook continue to be influenced by the amount of rainfall received from the southwest monsoon (SWM) season between June and September and its distribution. The country receives around 75% of its annual rainfall during these four months, which is vital for the agricultural sector, as 65% of the gross cropped area in India still remains unirrigated. Besides precipitation, temperature and its variability are other key indicators of changing climatic conditions. During the last two decades, the mean annual temperature in India has witnessed a significant rise. So far, as per the India Meteorological Department, 2016 has been the warmest year on record for India. While the gradually rising average temperature is a long-term feature of changing climatic conditions all over the world, extreme/volatile weather events like changing rainfall patterns, its skewed distribution, increasing frequency and intensity of floods, unseasonal rainfall, heatwaves and droughts pose serious macroeconomic risks.  During the last two decades, floods followed by cyclones, unseasonal rainfall and heat waves have been the major extreme weather events. India is also witnessing rising sea levels and melting of glaciers, which can be attributed to global warming.  An earlier IPCC report had pointed out that if mercury were to increase by 1.5 degrees Celsius, hot temperature events would increase by 4.1 times in a decade; heavy precipitation events would rise by 1.5 times, and the likelihood of agricultural ecological droughts would double. An International Monetary Fund working paper released in 2018 found that increases in temperature have uneven macroeconomic effects, with adverse consequences concentrated in countries with hot climates, such as most low-income countries. In these countries, a rise in temperature lowers per capita output, in both the short and medium-term, through a wide array of channels like reduced agricultural output, suppressed productivity of workers exposed to heat, slower investment, and poorer health. In an unmitigated climate change scenario, and under very conservative assumptions, model simulations suggested the projected rise in temperature would imply a loss of around 9% of output for a representative low-income country by 2100.   The negative impact can be seen in total trade as well. Increase in temperature causes the demand for electricity to increase as the requirement for air-conditioners, coolers and refrigerators tend to rise. Tractor sales are positively impacted by the rainfall received. Also, an increase in rainfall tends to accelerate automobi

    TMS Ep192: US recession, influencer marketing, markets, global min corp tax

    Play Episode Listen Later Jun 13, 2022 28:58

    Voices warning of a possible recession in the United States are growing. Several economists and business leaders have joined the chorus, claiming the country could see a negative growth for the second quarter in a row. But there are disagreements too. US treasury secretary Janet Yellen has said that there is nothing to suggest that a “... recession is in the works”. But what if sceptics turn out to be true? A recession in the US would have far-reaching consequences for the Indian economy-- especially for the country's information technology sector. Examine how badly the Indian IT industry will be hit if the US indeed goes through a recession. IT services exports to the US surged during the pandemic, offering respite to the domestic economy. Meanwhile, pandemic also gave birth to a fresh crop of social media influencers -- whose clout continues to grow. People turn to them for tips on a host of subjects including health, latest fashion trends, gadgets etc. But, of late, credibility of some influencers has come into question. E-commerce company Meesho sent legal notices to some social media influencers for allegedly tarnishing the image of the company. Take a peek into the world of influencer marketing.     Internet commerce platform Meesho is reportedly eyeing early 2023 IPO. Meanwhile, equity markets snapped their three-week winning streak last week after the Reserve Bank of India hiked repo rate to bring down inflation. Our next report delves into the key global events that investors will track this week, and key levels to watch out on the benchmark indices. After the markets, let us move on to a global tax agreement signed to end the world's tax havens. The pact was signed by over 137 countries to enact global minimum corporate tax on multinational companies to discourage them from shifting profits to low-tax countries. But a recent UN report claims that the tax will reduce the effectiveness of low tax rates and fiscal incentives to attract investment in developing countries. Watch this episode of the podcast to known more.  Watch video

    Can US recession slam the brakes on Indian IT sector's dream run?

    Play Episode Listen Later Jun 13, 2022 8:39

    While addressing the 27th annual general meeting of Tata Consultancy Services, Tata Sons chairperson N Chandrasekaran recently warned of a “stagflationary impulse” in the backdrop of the ongoing Russian invasion of Ukraine. However, he said that TCS was well positioned to leverage the demand for digital solutions in the present environment and that the company was engaging in India and across the globe to tap opportunities.  Not everyone in the industry is so sanguine. In late May, Zoho Co-Founder and CEO Sridhar Vembu told a news channel that the prospect of a recession in Europe and the earnings misses by American retail giants like Target and Walmart should have Indian IT services firms worried. Vembu explained that since the IT industry was dependent on the US and European markets, it was very concerning to see recessionary winds. So, what is this exposure like? The US market contributes anywhere between 40 per cent to 78 per cent of the revenues earned by Indian IT companies. Tata Consultancy Services, Infosys, Wipro, HCL Technologies, and Tech Mahindra, which are the top five firms, have more than a 50 per cent exposure to it. On 19th May, JP Morgan downgraded the Indian IT sector to ‘underweight' as it believes that the sector's heydays are over. The report said that rising margin headwinds in the near-term and revenue headwinds in the medium-term due to a potential macro slowdown meant that the sector's earnings upgrade cycle was behind us. At the same time, Kotak Institutional Equities had suggested that the recent correction in the sector had been mostly driven by three factors, which were increase in interest rates, fears of recession in key client geographies, and the risk to margins. The Kotak Institutional Equities note had said that what was priced into stock was risk to margins, but what was not priced in was economic recession. The markets have also reacted. Indian IT stocks have seen a sharp correction in 2022, in part because of worries over the drawn out slowdown in IT spending in the US. In fact, the Nifty IT index has plunged around 25 per cent so far this year. In particular, May turned out to be bad for IT stocks.   Speaking to Business Standard, Omkar Tanksale, Senior Research Analyst, Axis Securities says Indian IT services don't have a problem on the revenue front due to the multi-year contracts they have signed. There has been a correction in the valuations of Indian IT firms. Correction in valuations is likely to continue with the falling markets unless there is stability in macro conditions. Investors should go for value investing instead of investing across the sector. He says, look at companies with higher revenue growth momentum, look at companies that are successful at execution, look at companies that are controlling the attrition rate and maintaining margins and look for stocks that are undervalued compared to peers) On their part, IT companies see the pipeline for digital transformation deals staying strong for several years. Note that these deals have been driving the order books since the Covid-19 pandemic began.  So, is the relatively strong 2022-23 growth guidance put forward by IT companies under threat now? DD Mishra, Sr Director Analyst, Gartner says Indian IT firms don't face US recession challenge in the short to medium term due to their pipeline being full. IT firms are not expressing significant concerns about a possible recession. He says, we need to keep a close watch on how things unfold. As of now we believe that a recession in the US would have a minimal impact on Indian IT firms. It will not significantly impact their guidance and forecast.  Gaurav Vasu, Founder & CEO, UnearthInsight says FY23 H1 will be robust and similar to what was seen last year. FY23 Q3 and Q4 might see some guidance revision by some players for the full year, and FY24 guidance will also see some revision at that time. He says, inflation-led wage-hike pr

    Has the Meesho incident highlighted the flip side of influencer marketing?

    Play Episode Listen Later Jun 13, 2022 9:47

    Social media platforms drastically altered the way we socialise. But in recent years their role has expanded beyond that of connecting us with our  friends. Consumers are now exploiting these platforms for other use cases - like keeping up with news on Twitter, getting product reviews on YouTube or gaining an inside view of celebrity and influencer lives on Instagram.  In fact, a study by US influencer marketing intelligence platform Sideqik revealed that 50% of millennials feel that they know the influencers they follow on social media better than their friends. At least 78% of consumers said they discovered a new brandor product from an influencer. And, according to an October 2020 survey by Rakuten Insight, about 72% of the respondents from the age group of 25 to 34 years in India admitted to following at least one influencer on social media. While there is no rigid classification, the category in which an influencer falls in is typically defined by the number of followers. Nano influencers are those with a few thousand to as much as 10,000 followers while micro influencers have up to 100,000 followers. For macro, this number goes to a million. A mega influencer would be someone with a million or more followers. They may not necessarily be celebrities.  Brands leverage influencers to not only promote their products, but also to get their messaging across to consumers in an engaging visual format. Influencers have a big impact on consumers, especially millennials. And influencer marketing has democratised digital marketing. It is not just TV ads anymore. The time spent on social media platforms is going up, and so is the clout of influencers. They command a higher engagement rate than celebrities, and enjoy people's trust too. And brands know it very well. But, off late, a flip side of influencers marketing also seems to be emerging. Allegations are surfacing that brands are using influencers to not just to mould their better image, but to pull down their competitor too. As with any industry, there are a few bad apples here too.  For such agencies, it is just another service they offer to brands for money.  SoftBank and Meta-backed e-commerce startup Meesho recently got a taste of it. It took note of this after a startup executive on Twitter pointed out earlier this month that several influencers -- in a seemingly coordinated manner -- tweeted negatively about the company while tagging its investors. These posts accompanied a link to a news article about Meesho's cost-cutting strategies. Meesho claimed that some influencers acknowledged that the tweets were paid promotions while others deleted their posts. It has now asked the marketing agency's CEO to disclose on whose behest it was working and issue an unconditional apology.   Two more startup executives revealed they were approached earlier this year to make negative comments about Meesho in lieu for money.  A journalist shared her observation that articles on Meesho often receive coordinated abuse from verified accounts on Twitter. Meesho Founder and CEO Vidit Aatrey claimed that paying influencers to peddle rumours against the startup has been happening for the last many months. The agency which engaged the influencers for this alleged smear campaign and to whose CEO Meesho has sent a notice is reportedly based in Ahmedabad. It is one among the scores of such influencer marketing agencies that have cropped up across the country as brands look to reach 400 million social media audiences.  Balasubramanian, co-founder of Bengaluru-based influencer marketing firm Greenroom, says that smaller influencers sometimes get paid through free products in return for promotional posts talking up a product or sharing their opinions after using a product.  She says nano influencers can get paid as little as Rs 500 for a post that can go up to Rs 5,000 whereas a micro influencer can make as much as Rs 15,000 per post.  Lakshmi Balasubram

    What are the key global events markets will track this week?

    Play Episode Listen Later Jun 13, 2022 2:54

    Markets snapped their three-week winning run last week, marred by increased volatility, after the RBI hiked repo rate by 50 basis points and raised inflation target for FY23. The sentiment weakened further as global markets tumbled ahead of the US Federal Reserve's monetary policy meeting this week. Meanwhile, last week the BSE Sensex touched a high of 55,832 early in the week, and thereafter drifted to a low of 54,206, and finally ended the week with a loss of 1,466 points or 2.6 per cent. The NSE Nifty shed 2.3 per cent to 16,202, and the Bank Nifty dropped 2.2 per cent. This week, all eyes will be on the US Fed's two-day monetary policy meeting on June 14 and 15, where investors will track Fed chair Jerome Powell's outlook on energy prices, inflation and economic recovery.   According to a Reuters poll, the US Fed is expected to hike interest rate by 50 basis points in June and July, with higher probability of a similar rate hike in September. That apart, Bank of England and Bank of Japan are also slated to take interest rate decisions on Thursday and Friday, respectively. Back home, markets will take note of crucial inflation numbers. The Consumer Price Index-based inflation for May will be announced on Monday, followed by Wholesale Price Index-based inflation on Tuesday. Technically, weekly trend for the Nifty has turned bearish with its 20-Weekly Moving Average slipping below the - . The broader trend indicates that the index could slide towards 15,800 - 15,300 if the 50-pack index fails to cross 16,900 level.   Against this backdrop, the NSE Nifty may test its support at 16,000-mark, below which the next significant support is at 15,800. Similarly, the BSE Sensex may swing in a range of 53,300 to 55,300, with support expected around 53,950 and resistance at 55,050. Among individual stocks, Bajaj Auto will be in focus ahead of its board meet on June 14 to consider share buyback. Besides, recently listed LIC India and Prudent Advisory will be on investor radar as the compulsory 30-day lock-in period for anchor investors will end on June 13 and June 17, respectively.  

    What is global minimum corporate tax?

    Play Episode Listen Later Jun 13, 2022 4:27

    Corporate tax avoidance costs countries anywhere from $100 billion to $240 billion annually, equivalent to 4-10% of global corporate income tax revenues, according to estimates from the Organisation for Economic Co-operation and Development or OECD. Developing countries are disproportionately affected because they tend to rely more heavily on corporate income taxes than advanced economies.  The existing international tax rules are based on agreements made in the 1920s and are today enshrined in the global network of bilateral tax treaties. But they present two problems.  The first is that the old rules provide that the profits of a foreign company can only be taxed in another country where the foreign company has a physical presence. But in today's digitalised world, multinational enterprises often conduct large-scale business in a jurisdiction with little or no physical presence there.  The second problem is that most countries only tax the domestic business income of their MNCs, but not foreign income, on the assumption that foreign business profits will be taxed where they are earned. The growth of intangibles, like brands, copyright and patents, and companies' ability to shift profits to jurisdictions that impose little or no tax, means that MNC profits often escape taxation.  This is further complicated by the fact that many jurisdictions are engaged in tax competition by offering reduced taxation -- and often zero taxation -- to attract FDI. The OECD/G20 Inclusive Framework, which has 140 members, was mandated to provide a solution to these two problems in 2021. And in October 2021, 136 countries and jurisdictions representing more than 90% of global GDP, including India, agreed to a landmark deal in October 2021 on a global minimum tax rate for companies. Known as the Two Pillar Solution, it ensures that large MNCs pay taxes where they operate and earn profits.  Each pillar addresses a different gap in the existing rules that allow MNCs to avoid paying taxes. Members of the Inclusive Framework have set an ambitious deadline of 2023 to bring the new international tax rules into effect.  Under Pillar One, 25% of the residual profits of about 100 of the largest and most profitable MNCs will be reallocated to market jurisdictions where the companies' users are located. Residual profit is defined as the profit in excess of 10% of revenue. Pillar One applies to multinational groups with an annual global turnover exceeding 20 billion euros, which can be potentially reduced to 10 billion euros, and profit before tax greater than 10% of revenue. Each year, taxing rights on more than $125 billion of profit are expected to be reallocated to the countries where MNCs sell their products and provide their services, where their consumers are. Pillar One also entails the removal of Digital Services Taxes (DST) and similar relevant measures, to prevent harmful trade disputes. Meanwhile, Pillar Two provides a global minimum tax of 15% on corporate profits.  This will apply to multinational groups with annual global revenues of over 750 million euros and, as such, thousands of companies will be subject to it. Governments across the world will impose additional taxes on the foreign profits of MNCs headquartered in their jurisdiction at least to the agreed minimum rate.  This means that if a company's earnings go untaxed or lightly taxed in one of the tax havens, their home country would impose a top-up tax that would bring the effective rate to 15%. Governments could still set whatever local corporate tax rate they want. A carve-out allows countries to continue to offer tax incentives to promote business activity with real substance, like building a hotel or investing in a factory. The global minimum tax is expected to generate around $150 billion in new global tax revenues annually. The cumulative impact of the two pillars means that tax havens would no longer exist since taxes avoided in the h

    TMS Ep191: 5G rollout, apparel industry crisis, bond markets, tax exemption

    Play Episode Listen Later Jun 10, 2022 27:44

    The government is keen on rolling out 5G services this year. Some reports say that it wants to launch 5G by the upcoming Independence Day. The decks were cleared for its auction in early May. But will the country get the high-speed network anytime soon? A telecom industry body has now told the government that there will be no business case for roll-out of 5G networks if operators' concern on private captive networks is not addressed. So will it affect the 5G rollout in the country? It is not just the telecom operators who are staring at depleting revenue. Ludhiana's apparel industry, which churns out most of the country's readymade garments, are also in a similar situation. Two months of lockdown in China's Shanghai has brought the industry on its knees. China's lockdown and Russia's war on Ukraine has pushed inflation not just beyond the RBI's tolerance level, but that of people too. The central bank is preparing the markets for aggressive rate hikes in months ahead. While this has already pushed bond yields to their highest level since 2019, experts anticipate further hardening of yields on government securities. Our next report takes a dive into where the bonds and equity markets are headed. We also take a look at investment strategies for the next 3-6 months. Like the income from the markets, taxes are levied on earnings made from sale of residential property too. It is known as capital gains tax. But did you know that in some cases you can save yourself from this tax? Let us know more about it in this episode of the podcast.  Watch video

    Will the fall in IPL viewership impact the big media rights auction?

    Play Episode Listen Later May 31, 2022 8:35

    The 15th edition of the Indian Premier League came to a close on Sunday. The debutant Gujarat Titans was crowned the winner after it defeated Rajasthan Royals by seven wickets.  All eyes are now on the upcoming e-auction of the league's media rights, which is set to commence from June 12. It promises to be a high voltage event. Rs 32,890 crore - Reserve price of Indian Premier League for 2023-27 cycle Indian cricket's governing body BCCI has set the reserve price at Rs 32,890 crore for the 2023-27 cycle of the IPL.  This is nearly double of the Rs 16,347 crore that Star India, now part of The Walt Disney Company, shelled out for the last five years for consolidated TV and digital bid. Sony Pictures Networks India held the media rights for the first 10 years, for which it paid about Rs 8,200 crore.  For the next 5-year cycle, the rights will be sold in four buckets and interested parties have to bid separately for each.  The four categories are >Television rights for the Indian subcontinent >Digital rights  >Non-exclusive digital rights for a set of 18 matches, which include the season opener, four playoffs and evening games of weekend double-headers, and >Rest of world At least ten companies have reportedly picked up the bid documents by paying the BCCI a non-refundable fee of 29.5 lakh rupees including GST.  These include Disney-Star, Sony, Zee Entertainment, Amazon, Apple, Google, Sky Sports UK and South Africa's SuperSport. Amazon's Prime Video recently began live-streaming cricket matches and reportedly wants to win the IPL rights to expand its user base. However, a sharp fall in IPL's TV viewership has led some in the industry question the base price for media rights. Sony Pictures Networks India's MD and CEO NP Singh told a financial daily earlier this month that the reserve price needs a reality check amid the decline in viewership.  IPL's viewership fell by 30-35% in the first four weeks of the 2022-season compared to last year's figures.   With viewership falling consistently, some advertisers had reportedly asked Disney-Star to make good their loss by offering them spots on other high-impact properties. Maruti Suzuki Executive Director Shashank Srivastava had on May 1st said that in the first 25 matches, television ratings for the company's target group of males, between 22 and 40 years of age, dropped by around 58%. He added, the carmaker was in discussions with Star for additional Free Commercial Time on ‘live' matches so that the overall reach numbers and commitments that were made could be met. Harsh Goenka tweet screenshot (on screen for 3 or 4 sec only) Experts pointed to possible reasons for the viewership fall, including audience fatigue given this season was the longest ever – lasting 65 days and 74 matches with two new teams. Chennai Super Kings and Mumbai Indians, which are among the most consistent sides with large loyal fan-bases, displayed poor performance. They ended the season at the bottom of the points table.  The performances of big names like RCB's Virat Kohli, CSK's MS Dhoni and MI's Rohit Sharma were also lacklustre. With zero super overs this season, the audience also did not get to witness the kind of nail-biting finishes they seek.  Santosh Desai, MD & CEO of Futurebrands Consulting says too much reshuffling happens in IPL, teams need some stability. As the pandemic waned, people spent more time outside.Fundamentally, Indian Premier League or cricket has not lost its charm, he says. K Madhavan, President of The Walt Disney Company India and Star India, had said Disney-Star will not engage in a bidding war and pay multiple times more even though it is looking at retaining the media rights. He told Business Standard that it will only go for bidding if it makes for a viable business. “If someone offers 10-times for the property, we are not there,” he said. However, cricket has proved to be a winner for s