BQuick On Jan. 23: Top 10 Stories In Under 10 Minutes

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

1. Ajay Singh Sees Better Days Ahead For SpiceJet

SpiceJet Ltd. expects a turnaround in its cash flow in the last four months of 2020 once Boeing Co.’s grounded 737 Max aircraft returns to the fleet by mid-year, according to Chairman Ajay Singh.

• “Privately, what we’ve been told is that they’re going to have a test flight in February, and they expect that certification will happen by April. After that, there’s a small process of pilot-training. With all that, we expect that the aircraft should return to service in May or June of 2020,” he said in an interview with BloombergQuint on the sidelines of the World Economic Forum in Davos.
• Boeing said yesterday that its clients should expect a return of 737 Max by mid-2020.
• SpiceJet grounded 13 737 Max planes in March 2019 after technical faults led to two crashes involving Lion Air and Ethiopian Airlines flights, leaving 346 people dead.
• The effect on the domestic carrier has been “very, very painful”, Singh said, without quantifying it.

Singh said the company has come back from a shutdown, so the current slowdown, while painful, presents an opportunity.

2. Mahindra Group = Berkshire Hathway?

Mahindra & Mahindra Ltd. likens its structure to Berkshire Hathaway Inc.- it is more a federation model than a conglomerate, said Managing Director and Chief Executive Officer-designate Anish Shah.

• “We are a federation and not a conglomerate and that’s a very important distinction,” Shah told BloombergQuint in Davos, Switzerland.
• “As a federation, we don’t get into the details for operating companies as they are listed. From a governance standpoint, their boards run them,” he said.
• The model is similar to Warren Buffet's Berkshire Hathway, he said.
• "The difference though is, there are significant synergies across these companies," Shah added.

Watch the interview to see what the incoming Mahindra boss had to say on M&M’s federation structure, holding company discount, CFO hunt and more.

India’s information technology industry is set to undergo a change in the structure of its deals where companies make a series of technological spends instead of “big bang deals”, according to CP Gurnani.

• Most of the larger technology companies have already taken this into account, Tech Mahindra Ltd.’s CEO and MD told BloombergQuint.
• “Wherever there’s a large deal, yes the revenue realisation may happen in the same year, but the profit realisation happens in the second and third years.”

However, he doesn’t expect this shift to have a significant impact on the company’s operating margin or yields.

3. No Action Against Telecom Firms If They Fail To Pay AGR Dues...For Now

The Licensing Finance Policy Wing of the telecom department on Thursday directed all departments concerned to not take any coercive action against telecom operators if they fail to clear additional gross revenue dues until further orders by the Supreme Court of India.

• The Director of Licensing Finance Policy Wing has issued direction that concerned departments should not take any coercive action against the licensees in case they fail to comply with the Supreme Court order, until further orders, an official source told PTI.
• The direction has been issued following approval of the member finance, who heads all DoT departments that deal in matters related to revenue.
• Bharti Airtel and Vodafone Idea have communicated to the telecom department that they will not pay AGR dues of Rs 88,624 crore, the deadline for which ends on Thursday, and will wait for the outcome of modification petition listed for hearing before the Supreme Court next week, according to the official sources.

Today is the deadline to pay AGR dues.

4. RBI Expands Debt Investment Limits Under ‘Voluntary Retention Route’

The Reserve Bank of India reopened a window of foreign investment in local debt via the “voluntary retention route”, which allows investors easier rules in return for a commitment to remain invested for a longer period. The central bank raised the limit for investments via this route from current Rs 54,606 crore to Rs 1.5 lakh crore, according to its press release.

The statement issued by the RBI also said:

• The investment limit available for fresh allotment, after adjusting for existing investments, shall be Rs 90,630 crore.
• The minimum retention period shall be three years.
• Investment limits shall be available “on tap” and allotted on “first come, first serve” basis.

The route has seen considerable success, particularly in the corporate debt segment.

5. Nifty Rebounds From Two-Week Low

Indian indices recovered from a two-week low, led by the gains in Infosys Ltd. and L&T.

• The S&P BSE Sensex rose 0.66 percent to close at 41,386.40.
• The NSE Nifty 50 rose 0.61 percent to end at 12,180.35.
• The broader markets represented by the NSE Nifty 500 Index rose 0.75 percent.
• The 30-share index and the 50-stock gauge had ended yesterday at 41,115.38 and 12,106.90 respectively, their lowest since Jan. 8, 2020.
• While the Sensex halted its three-day losing streak today, the Nifty halted its four-day losing streak—the longest stretch of losses in over three months.
• Ten out of 11 sectoral gauges compiled by NSE traded higher.

Follow the day’s trading action here.

U.S. stocks slumped following losses in Europe and Asia amid growing concern that a virus spreading from China could drag on global growth. Treasuries climbed and crude oil dropped.

• The S&P 500 Index fell 0.3 percent as of 9:32 a.m. New York time.
• The Stoxx Europe 600 Index fell 0.5 percent.
• West Texas Intermediate crude decreased 2.8 percent to $55.18 a barrel.

Get your fix of global markets update here.

6. Reliance Capital, Reliance Home Finance's Auditors Under Scanner

The National Financial Reporting Authority is probing the role of auditors of Reliance Capital Ltd. and its subsidiary Reliance Home Finance Ltd. after irregularities were pointed out by the companies’ statutory auditor—Price Waterhouse & Co Chartered Accountants LLP, according to a senior government official.

• The audit regulator has sought audit files of the two Reliance Anil Dhirubhai Ambani Group firms, and information on audit and non-audit revenue, the official said on condition of anonymity.
• Price Waterhouse & Co and Pathak H.D. & Associates were the two auditors of the Anil Ambani group firms.

Before resigning, Price Waterhouse & Co wrote to the companies under a legal provision that pertains to fraud. Read more.

7. The Impossible Trinity Of Lending

While studying the credit growth by an individual lender or the whole system two other parameters have to be carefully watched in addition to growth, writes Harsh Vardhan.

• Growth, margins, and risk present an impossible trinity – a lender cannot optimise all three at the same time.
• If it seeks to maximise growth while keeping its margins then it inevitably will be taking on a higher risk.
• On the other hand, if a lender seeks to maximise growth and not increase risk, then it must sacrifice margins.

The logic of this impossible trinity holds important lessons for all stakeholders in the credit system.

8. Déjà Vu For India’s Fiscal Roadmap

The Bharatiya Janata Party-led government, when it was first voted to power in 2014, outlined fiscal prudence as a cornerstone of its economic policies. In the early years, the BJP-led government stuck to this but in more recent years this government, just like its predecessors, has resorted to off-budget spending to meet fiscal goals in letter but not in spirit.

• As the government prepares to submit its seventh full budget, concerns about off-budget spending and the ‘real’ fiscal deficit have peaked.
• Most recently, former Economic Affairs Secretary Subhash Chandra Garg noted that the real deficit in 2018-19 was 4.6 percent compared to the stated deficit of 3.4 percent.
• Concerns over understatement of fiscal deficit have raised a familiar question for the Indian economy: Is it time to once again alter the fiscal path?

Should the government choose to reset the fiscal clock, it would not be the first time.

9. Budget 2020: Doing More With PM-Kisan In Its Second Year

The number of transfers, seemingly impressive at first glance, belie a programme design riddled with contradictions, hobbled by weak data, and beset by a bewildering implementation choice, writes Saksham Khosla.

• There are more beneficiaries in states like Assam and Punjab today than the number of landholdings.
• Government officials have noted that the target of 14 crore beneficiaries was a significant overestimate.
• Newly-registered farmers miss out on the previous period’s instalments, blunting the transfer’s effectiveness.

Odisha is an ambitious example of where to take PM-Kisan next.

10. Inside China’s Virus Zone

In Wuhan, the central Chinese city that’s ground zero of the deadly new virus spreading through the country, a sense of fear is rapidly taking hold.

• On Thursday morning, the city’s some 11 million residents woke to learn it’s now in lockdown, with public transport halted, flights out cancelled and trains not running right on the eve of the Lunar New Year holiday that traditionally unites families for days of feasting.
• It’s a dramatic escalation for Wuhan, which has found itself at the epicentre of a potentially global health crisis after a market selling freshly slaughtered meat and live animals were identified as the source of an outbreak that’s killed 17 people and infected hundreds.
• With the death toll from the virus rising markedly last weekend, and more cases identified, life in Wuhan has gone from normal to fraught in a matter of days.

Residents are questioning their every move.