BQuick On Jan. 21: 10 Stories In Under 10 Minutes

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

1. Baba Kalyani’s Conviction And Aidar Turner’s Reality Check

For industrialist Baba Kalyani, there’s only one indicator which gives him the conviction that the worst is over for India’s automobile industry: consumer demand.

• “I think the worst is behind us. I think we’re already beginning to see growth come back,” Kalyani, chairman and managing director of Bharat Forge Ltd., told BloombergQuint on the sidelines of the World Economic Forum 2020 in Davos, Switzerland.
• “It’s based on what demand we’re seeing from customers. Give two quarters more and we should be getting back to normalcy in the automotive industry,” he said.
• Kalyani is of the view that this is not a structure slowdown but a cyclical downturn.

Here’s what Kalyani expects to see from the upcoming Union Budget.

India’s policymakers should “wake up to the severity” of the structural challenge posed by the growing working-age population amid rising automation, according to Adair Turner.

• The labour force will continue to expand for the next 20 years, and it will be “incredibly difficult to absorb in an era of increasing automation possibilities”, the chairman of the Institute of New Economic Thinking and co-chair of the Energy Transitions Commission told BloombergQuint.
• India needs to accept that even its world-class companies in manufacturing sector, information technology and pharmaceuticals won’t create the required number of jobs.

Turner said that India’s economic slowdown is more concerning than that of China.

2. What The Phase One U.S.-China Deal Lacks And The Future Of Oil

The first phase of the U.S.-China trade deal won’t contribute much in reducing the world’s largest economy’s trade deficit with its second-placed Asian peer as the pact covers primary goods and not advanced goods, according to the Chinese economist Fan Gang.

• “An agreement is better than none, but I don’t think this will solve all the problems between the two countries,” Fan, director of National Economic Research Institute at China Reform Foundation, told BloombergQuint
• “You (the U.S.) aren’t selling us your advanced goods being a technologically advanced country,” he said.

According to Fan, trade war isn’t the biggest reason for the downturn in the Chinese economy.

Iraq is the single largest threat to an otherwise stable oil market, according to Fatih Birol, executive director at the International Energy Agency.

• Birol warned that if any incident happens in Iraq—the Middle East’s second-largest oil supplier—which affects the stability of the country or disrupts oil supplies, it could have serious implications on oil markets and oil security.
• Oil prices have averaged at $64.49 per barrel over the last one year amid disruptions.
• “If only one of those incidences had happened in the past, we would’ve seen oil prices rise substantially,” Birol said.

Find out what Birol thinks about the future of oil and climate change.

3. Can Vodafone Idea Be Saved?

If billionaire Kumar Mangalam Birla’s worst fears come true, India’s telecom industry could see another shakeup, turning it into a duopoly. BloombergQuint analyses if it is the end of the road for Birla-Vodafone controlled operator and what can help it survive.

• There are two ways of saving Vodafone Idea from shutting down: relief from the government or steep tariff hikes.
• Saving the operator from bankruptcy may be in the government’s interests because statutory dues contribute 80 percent of its debt.
• If it fails, the government could lose bulk of that, besides adding to non-performing assets of Indian lenders yet to recover from one of the world’s biggest bad-loan crises.

Otherwise, a combination of tariff hike and staggered payments will be required.

4. Dish TV ‘s Talks With Airtel Digital Stall

Dish TV India Ltd.’s talks to merge with Airtel Digital TV have stalled on differences over the deal’s structure, according to people with knowledge of the matter.

• Essel Group’s Dish TV has opted to explore a sale of the business for cash instead of an all-stock merger, said the people, who asked not to be identified as the discussions are private.
• The direct-to-home arm of Bharti Airtel Ltd. remained committed to offering shares, contributing to the stalemate, the people said.
• Subhash Chandra and his Essel Group have been selling assets to pare debt at the conglomerate, whose businesses span media to entertainment and education.

No final decision has been made yet, and discussions could still be revived.

5. Nifty Falls For Third Trading Session

Indian indices ended lower in today’s session led by losses in metal stocks such as Tata Steel and Vedanta Ltd.

• The S&P BSE Sensex fell 0.49 percent to 41,323.81.
• The NSE Nifty 50 declined 0.45 percent to 12,169.85.
• The broader markets represented by the NSE Nifty 500 Index fell 0.38 percent.
• Nine out of 11 sectoral gauges compiled by NSE traded lower, led by the NSE Nifty Realty Index’s 1.43 percent fall.
• On the flipside, the NSE Nifty Media Index was the top sectoral gainer, up 2.2 percent.

Follow the day’s trading action here.

Zee Entertainment Enterprises Ltd.’s quarterly profit missed estimates as its revenue from advertisements dropped.

• Net profit fell 38 percent year-on-year to Rs 349 crore.
• Revenue declined 5.5 percent over last year to Rs 2,049 crore.
• Advertising revenue for the three-month period fell 15.8 percent to Rs 1,230.80 crore.
• The subscription revenue, however, rose 15.4 percent to Rs 713.4 crore.

Here’s why advertising revenue is expected to under severe pressure.

6. Disruptor Divi’s Labs Is Now Challenging Dr Reddy’s For No. 2 Spot

When the U.S. drug regulator effectively barred exports from Divi’s Laboratories Ltd.’s biggest facility in Visakhapatnam in March 2017, the maker of pharma raw materials wiped off half of its value in five months.

• The U.S. Food and Drug Administration cited improper controls, falsified or poor documentation and R&D that was inconsistent with good manufacturing practices for the import alert for Visakhapatnam Unit 2 that contributes 70 percent of the company’s business.
• The company swung into action to fix things. In September that year, the U.S. FDA again inspected the unit and cleared it by November, and the shares have more than doubled since then.
• Barring that blip, the maker of active pharma ingredients has risen steadily in the past decade.
• It now vies with Dr. Reddy’s Laboratories Ltd. to be India’s second-largest pharma company with a market valuation of more than Rs 50,000 crore ($7 billion).

Here’s what sets Divi’s Labs apart from its peers.

7. The World’s Most Active Derivatives Exchange

India’s National Stock Exchange has surpassed America’s CME Group Inc. to become the world’s largest derivatives bourse by volume.

• Mumbai-based NSE traded the most contracts in the world last year, the exchange said in a statement, citing data from the Futures Industry Association.
• Volume on the Indian exchange grew 58 percent to about 6 billion derivative contracts in 2019, surpassing CME’s 4.83 billion, according to FIA’s website.
• NSE added that the growth in volumes has come on the back of new investor registrations and as derivatives to cash market turnover ratio has consistently remained around 3 times.
• India’s stock market value of $2.2 trillion pales in comparison with the U.S.’s $35.5 trillion.

Could this, though, be an indication of increasing speculation among investors?

8. Zomato Buys Uber Eats

Uber Technologies Inc. will sell Uber Eats in India to local rival Zomato in a $172 million deal, according to a person familiar with the transaction, underscoring the ride-hailing giant’s effort to cut back on loss-making operations.

• Uber agreed to offload the business in return for 9.99% of the Indian startup, maintaining a foothold in one of the world’s fastest-growing internet arenas, the companies said in a statement.
• As part of the deal, the U.S. company will shutter operations but direct all restaurants, delivery companies and diners to Zomato.
• Neither company offered up financial details but the person said the value of the Zomato shares Uber gets is estimated at about $172 million -- the Indian startup was last valued at $2.2 billion.

The deal marks yet another leg in a wave of consolidation sweeping the food delivery sector.

9. Focus On The Compass Not The Speedometer, Says Uday Kotak

Asia’s richest banker Uday Kotak has warned against pushing loan growth “for the sake of loan growth”, at a time when growth in the economy is slow and asset quality worries have not abated.

• Kotak, speaking to analysts on Monday, struck a cautionary note after Kotak Mahindra Bank Ltd. reported loan growth at a multi-quarter low of 10 percent in the October-December 2019 period.
• The bank’s net profit for the third quarter rose 28 percent year-on-year.
• While the slower-than-expected loan growth spooked markets, Kotak’s commentary suggests the lender is treading cautiously in a tough environment.
• The bank is focusing on the compass rather than the speedometer, Kotak said.

The banker continues to see challenges for a few financial sector entities but believes they are “controllable”.

10. The Great Divide: Chair And CEO Roles

It is not the idea of separation itself, but its form as a mandate for all manner of large listed companies that resulted in the miscarriage of SEBI’s present attempt, writes Umakanth Varottil.

• Indian legislators and regulators distrust the voluntary ‘comply-or-explain’ approach to corporate governance.
• There is a risk that SEBI’s mandate might result in compliance in form rather than in substance.
• The separation formula has touched a raw nerve among India’s family-owned companies

SEBI would do well to adopt a risk-based approach rather than a universal approach. Here’s why.