BQuick On April 22: Top 10 Stories In Under 10 Minutes
Introducing Election Soundtrack, a daily podcast that’ll get you up to speed with everything that you need to know about Elections 2019.
This is a roundup of the day’s top stories in brief.
1. Blackstone Strikes Deal With Essel’s Ashok Goel
Blackstone Group will buy a controlling stake in Essel Propack Ltd., a company promoted by Ashok Goel, the younger brother of Subhash Chandra who’s the promoter of Essel Group companies such as Zee Entertainment Enterprises Ltd.
- Funds managed by the private equity company have entered into an agreement to buy 51 percent stake in Essel Propack at Rs 134 a share from Ashok Goel Trust, controlled by Goel’s family.
- The trust and its affiliates hold around 57 percent equity currently.
- The takeover will also trigger a mandatory open offer for an additional 26 percent shares of the company. The open offer price has been fixed at Rs 139.19 apiece.
- That’s a 5 percent discount to the current market price. Based on the open offer subscription, the total consideration of the deal will vary between Rs 2,157 crore and Rs 3,211 crore.
- Following the open offer, Ashok Goel will retain 6 percent stake in the company and continue in an advisory capacity.
It’s not clear whether the proceeds of the sale will be shared with other family members, including Chandra.
2. Air Passenger Growth Slowest In 20 Quarters
Passenger growth in the world’s fastest growing aviation market slumped in the March quarter.
- Passenger growth rose 4.9 percent – the slowest pace in the last five years – as Jet Airways (India) Ltd. and SpiceJet Ltd. grounded as many as 50 aircraft.
- Cash-strapped Jet Airways grounded planes due to non-payment to lessors, while SpiceJet had to ground aircraft due to an order passed by the Directorate General of Civil Aviation.
- The monthly data released by DGCA showed that the cumulative traffic of 11 domestic airlines stood at 11.59 million in March compared to 11.58 million passengers a year ago.
The industry had been growing at over 20 percent for more than four years in a row.
3. SpiceJet Signs Deal With Emirates
SpiceJet Ltd. said today that it has signed a codeshare agreement with Emirates, allowing passengers of the budget carrier to fly to destinations across America, Europe, Africa and the Middle East.
- This is the first such agreement signed by the Dubai-based airline with an Indian airline.
- It could lead to incremental revenue for SpiceJet from passengers travelling to these destinations—dependent on a revenue-sharing agreement between the two carriers.
- Nearly 30.7 lakh passengers flew between 20 destinations in India to Dubai in the three months through December 2018.
The agreement could bode well for SpiceJet. Here’s how.
4. Nifty’s Worst Fall Of 2019
Indian equity benchmarks registered their worst fall in 2019 due to concerns over rising crude oil prices. Brent crude prices hovered near a six-month high of $74.31 per barrel.
- The S&P BSE Sensex ended 1.26 percent lower at 38,645.
- The NSE Nifty 50 fell to 11,594, down 1.35 percent.
- Ten out of 11 sectoral gauges compiled by NSE ended lower, led by the NSE Nifty Realty Index’s 2.5 percent fall.
- The rupee too weakened to the lowest level in more than a month and bonds fell due to the jump in oil prices.
- The currency slid as much as 0.8 percent to 69.8775 per dollar.
Follow the day’s trading action here.
U.S. Stocks Slip As Oil Rallies To Six-Month High
Most U.S. equities fell in light volume as investors prepared for a deluge of earnings news. Oil jumped after the White House said it will scrap waivers that allow the purchase of some Iranian crude.
- The S&P 500 Index fluctuated between small gains and losses, hovering about 1 percent below its all-time high.
- Tesla fell after Elon Musk began a Twitter dispute with the carmaker’s main lithium-ion battery supplier.
- The dollar was steady as 10-year Treasury yields inched up.
Get your daily fix of global markets here.
5. Ripple Effects Of Trump-Iran Feud
Six months after the U.S. rocked oil markets by letting Iranian exports continue, its decision to end sanctions waivers that allowed shipments is also set to reverberate across the globe.
- The Trump administration said it won’t renew waivers that let countries buy Iranian oil without facing U.S. sanctions, a move that risks upsetting major importers such as China and India.
- “This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” White House Press Secretary Sarah Sanders said in a statement Monday.
- The move threatens to squeeze supplies further in a market that’s already facing supply disruptions from Venezuela to Libya and Nigeria, and extend this year’s rally in global benchmark Brent crude above $70 a barrel.
- Prices are still below the four-year highs of over $86 they hit in October before the U.S. issued its waivers.
Here are some of the potential implications.
6. Five Reasons Behind Tata Motors’ Rally
Tata Motors Ltd. has been the year’s best-performing Nifty 50 stock after Yes Bank Ltd., recovering from the slide after posting the biggest quarterly loss by an Indian company. Shares of the owner of Jaguar Land Rover have jumped 38 percent compared with Nifty 50’s 8 percent rise so far in 2019.
- One reason is that parent Tata Sons Ltd. has bought 3.16 crore shares, or 1.1 percent stake, after the record loss, boosting confidence in the company.
- The other reason is because JLR's five-year credit default swap maturing in December 2023—a contract that covers the risk of a possible default in debt—has fallen 33 percent after hitting an all-time high in February.
There are three more reasons behind the stock’s surge.
7. Easier Shareholder Nod On Royalty Payouts?
The market regulator’s move to defer tougher shareholder approval rules on royalty payments to overseas parent has triggered fears that it may lead to a rush of such resolutions during the three-month window. Heads of shareholder advisory firms don’t think so.
- Amit Tandon, managing director of proxy advisory firm IiAS expects the impact to be marginal. Most companies will adhere to the spirit of the regulations when they approach shareholders even before the revised dates, he said.
- SEBI’s changed norms stem from suggestions of a committee on corporate governance led by veteran banker Uday Kotak.
- The Kotak committee felt that royalty payments are a special case of related-party transactions that aren’t in the normal course of business, and hence recommended that companies seek shareholder approval, said Shriram Subramanian, managing director of proxy advisory firm Ingovern.
Subramanian agrees SEBI deferring the deadline doesn’t amount to providing companies a window under easier norms.
8. P&G’s Rs 250-Crore Undue Profit
The government’s Goods and Services Tax probe body has charged Procter & Gamble Co. with undue profiteering to the extent of Rs 250 crore by not passing benefit of tax rate cut to consumers, according to a person familiar with the development.
- The Directorate General of Anti-Profiteering has submitted a report to National Anti-Profiteering Authority, which has already started hearing the case, a senior government official told BloombergQuint.
- According to the official, the consumer goods company hasn’t passed benefits of lower tax on products like detergents and shampoo on which GST was reduced from 28 percent to 18 percent in November 2017.
The maker of Tide and Head & Shoulders says it has passed on the benefit.
9. Don’t Bank On Banks For Education Loans
Indian banks, which have chased growth across most retail credit segments, continue to shun education loans as delinquencies remain high and processes prove inadequate to track borrowers.
- The result — financing for higher education remains a challenge despite attempts by successive governments to fill the gap.
- The ruling Bharatiya Janata Party, through its tenure, has continued with the Indian Banks’ Association model education loan scheme which offers subsidy on loans to students from lower-income families.
- Ahead of the upcoming general elections, the Indian National Congress has promised a single window clearance for education loans and claimed that it will waive interest on student loans issued before March 31.
Despite all the attention, the availability of education loans is low and declining. Here’s why.
10. RBI’s Sandbox Maybe Too Cramped
The Reserve Bank of India’s proposals to spur innovation in financial technologies may end up excluding smaller startups and discourage those who cannot take on legal or customer liabilities that may emerge during early testing of a product.
- The draft guidelines for a ‘regulatory sandbox’ were released by RBI on Thursday after consultations which have lasted more than two years.
- A ‘regulatory sandbox’ is a commonly used framework which allows innovators to test products and services without regulatory restrictions for a period of time.
- While experts and executives at fintech firms welcomed the setting up of a sandbox in India, they pointed to certain proposals as being restrictive.
Another significant concern is the limited legal support provided.