BQuick On Feb. 14: Top 10 Stories In Under 10 Minutes

This is a roundup of the day’s top stories in brief.

1. Supreme Court Contempt Warning Prompts Telcos To Pay Up

The Supreme Court threatened to hold India’s beleaguered telecom operators in contempt for not complying with its order to pay thousands of crores worth of dues within the deadline.

• “It appears the way in which things are happening, they have scant respect for the directions issued by this court,” a bench headed by Justice Arun Mishra said, adding that the dues on adjusted gross revenue weren’t deposited even after the review petitions were dismissed.
• The apex court summoned managing directors and directors of all telecom operators on March 17, the next date of hearing, and directed them to clear all dues by then.
• “It’s made clear that in case the order passed by this court is not complied with, the above persons shall remain personally present in court on the next date of hearing,’’ the court said.

Soon after the Supreme Court's rap, the Department of Telecommunications ordered firms, including Bharti Airtel Ltd. and Vodafone Idea Ltd., to clear AGR dues before Friday midnight.

• The DoT has started issuing circle or zone-wise demand notices to firms, according to an order seen by PTI.
• In response, Airtel in a letter to the DoT said it will deposit Rs 10,000 crore by Feb. 20, 2020, and the balance before the next date of hearing, i.e. March 17, 2020.

The top court also initiated contempt proceedings against a DoT officer for violating its orders.

2. A Double Whammy On GST Compensation

The extra tax Indian consumers pay when they buy a cola or an off-roader may increase, and continue for longer than anticipated.

• GST compensation cess, a central government tax on select ‘sin goods’, may see a rate increase and be levied for longer than the promised five years, BloombergQuint learnt from government officials in the know.
• GST took away the right of states to levy indirect taxes. Instead, the cess was brought in to compensate states for all the lost revenue by paying for five years starting 2017-18, and assuming a 14 percent increase in that revenue every year.
• With a slowing economy the compensation cess collections are lower than needed to pay states the promised amount.
• The unavailability of funds led to delayed compensation payments to states for August-September.
• The problem of insufficient collections persists, but the law requires the central government to pay up, leaving it with only a few options.

Here are the options in front of the central government right now.

3. Trade Gap At Its Widest In Seven Months

India’s trade deficit unexpectedly widened in January, as exports contracted for a sixth straight month while the decline in imports eased.

• The gap between exports and imports was at $15.2 billion last month, compared with $11.25 billion in December, data released by the Commerce Ministry on Friday showed.
• That’s the widest gap since June.
• Imports declined by 0.75 percent from a year ago to $41.4 billion.
• Exports fell 1.7 percent to $26 billion.

While gold imports fell, oil imports increased from the year-ago period.

4. Nifty Slips, U.S. Stocks Edge Higher

Indian equity indices ended lower for the second consecutive trading session, led by declines in HDFC Bank Ltd. and ITC Ltd.

• The BSE Sensex fell 0.49 percent or 202.1 points to end at 41,257.74.
• The NSE Nifty fell 0.5 percent or 61.2 points to end at 12,113.45.
• All the 11 sectoral gauges compiled by the NSE ended lower, led by the NSE Nifty PSU Bank Index’s 1.9 percent fall.

Follow the day’s trading action here.

India’s equity benchmarks scaled new highs earlier this year driven by large-cap stocks while the broader markets struggled. This polarisation sent valuations of well-performing stocks soaring. But market veterans Nilesh Shah of Kotak Asset Management and Bharat Shah of ASK Group think valuation may sometimes not reflect the true potential of a stock.

Here’s what they told BloombergQuint at this year’s edition of PMS AIF World Summit in Mumbai.

U.S. equities edged higher after steady but uninspiring figures on retail sales and as investors assessed contrasting data from China on how the coronavirus is spreading. Treasuries advanced.

• The S&P 500 Index gained 0.2 percent to 3,380.45 as of 9:35 a.m. New York time, the highest on record.
• The Stoxx Europe 600 Index fell 0.1 percent to 430.83.
• The Bloomberg Dollar Spot Index declined 0.1 percent to 1,206.53.
• West Texas Intermediate crude gained 1.6 percent to $52.23 a barrel, the highest in more than two weeks.

Get your fix of global markets update here.

5. The Hurdle Facing Yes Bank’s Capital Raise Plan

Yes Bank Ltd. put off its third-quarter earnings as the beleaguered private lender is evaluating interest from investors to raise funds. But its plan to sell stake could run into the market regulator’s pricing hurdle.

• There are two ways for the bank to raise funds—through a preferential allotment or a qualified institutional placement.
• For the first option, SEBI requires pricing to be based on historical data. The floor price of an issue could be higher than the current market price. And investors may not be willing to pay a premium.
• If a preferential allotment is not viable, Yes Bank can consider a qualified institutional placement.
• The price of shares issued in a QIP can’t be less than the average weekly high and low closing prices in the two weeks preceding the relevant date.
• And that poses another problem for the private lender.

One of the immediate triggers for the lender’s shares would be its earnings.

6. Here’s What LIC May Be Valued At...

The Modi administration’s plans to take state-run Life Insurance Corporation of India Ltd. public could propel the insurer into the league of India’s biggest companies by market valuation. But the finance ministry hasn’t yet disclosed the amount of stake it plans to sell or the valuation. So how much is LIC worth?

• Valuation experts BloombergQuint spoke with said the closest metric that can be applied to LIC, in the absence of an embedded value, is the ratio of market capitalisation to assets under management.
• That needs to factor in a break-up of assets since insurers offer market-linked and non-market linked plans that are valued differently.
• That would give LIC a market cap-to-assets multiple of 0.32 times.

Given LIC’s Rs 29.87 lakh crore worth of assets as of September, India’s largest life insurer could be valued at...

7. Promoters That Pledged The Most

Shares pledged by promoters of Future Consumer Ltd. and Wockhardt Ltd. rose the most even as the overall promoter pledges or percentage of stake offered as collateral by controlling shareholders of Indian companies fell to its lowest in at least nine quarters.

• Future Consumer and Wockhardt saw the stakes pledged by promoters jump 29.8 percent and 20.7 percent, respectively, in the quarter ended December, according to a report by Kotak Institutional Equities. Crompton Greaves Consumer Electricals Ltd., Dhanuka Agritech Ltd., and SpiceJet Ltd. follow.
• Risks related to equity pledged by promoters came into the spotlight after the troubles of debt-ridden Essel Group and Anil Ambani’s Reliance Group last year. Kotak’s report, however, clarified that pledging of shares doesn’t necessarily imply that a company or a promoter is under financial stress.
• Lenders could have sought additional security in the form of promoter shares, it said.

Still, pledged shares as a percentage of total promoter holding in BSE 500 fell to the lowest in nine quarters.

8. Amazon Gets Some Relief In India

The Karnataka High Court granted Amazon interim relief by staying the anti-trust investigation directed against it last month, lawyer representing the online retailer told BloombergQuint.

• The Competition Commission of India’s investigation against Amazon is without application of mind, perverse and unreasonable, the online retailer argued before the Karnataka High Court.
• Amazon is challenging the CCI’s January order which said the allegations of anti-competitive practices against the e-commerce marketplace deserved a detailed investigation.
• The information was filed by Delhi Vyapar Mahasangh against Flipkart and Amazon.
• In its prima facie order, the regulator had concluded that the exclusive arrangements between mobile phone brands and Amazon merit an investigation.

Amazon called the CCI’s actions as an “open-ended fishing expedition” and a misuse of its powers.

9. Facebook, Google Make $1.6 Billion From Indian Ads

Indian entities increased their digital ad spends on Facebook Inc. and Google in fiscal 2018-19, according to filings available at the Registrar of Companies.

• Online ad revenue of Facebook and Google in India rose to Rs 11,500 crore in FY19, the filings reviewed by BloombergQuint showed.
• Of this, the search engine behemoth clocked Rs 9,203 crore from ads compared to Rs 6,389 crore in the previous fiscal while the social media giant garnered Rs 2,233 crore.
• Facebook's gross advertisement reseller revenue wasn’t available for FY18 as it started reporting ad revenue from FY19. The social network said its ad revenue includes ad spends by Indian entities on Instagram, Messenger and third-party affiliated websites or mobile applications.
• With over 1.3 billion people and about 500 million internet users, digital advertising in India—the fastest-growing advertising market in the world—is expanding at a faster pace than any other medium.

Google and Facebook together had a combined market share of 68 percent in India’s online advertising space.

10. Work, Not Worship, Says The Delhi Voter

We were told ‘Work is Worship’. In Indian politics of today, however, work does seem to be paying, not worship. If there is one unequivocal message that the mandate from Delhi sends to the ‘pantheon’ of political parties in India, it is that equitable development, or even a semblance of it, gets votes, writes Tathagata Satpathy.

• This is not merely the victory of Aam Aadmi Party as a political outfit. To place all credit on stunning electoral arithmetic also is highly unfair to the discerning voter.
• The re-election of AAP is a clear indication that the people want bright policies and programmes that would help them live better and happier.
• It should be obvious now that Indians cannot be bound down with mere religious rhetoric anymore.
• They are a clever lot who think and analyse at a gut level.

It is time for all political parties to rethink their strategies that would count in the aspirations of New India.