BQuick On July 30: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. A Vexing Mystery
V. G. Siddhartha, the man who founded India’s biggest coffee chain more than a decade before Starbucks Corp. entered Asia’s third-largest economy, is missing.
- India’s Coast Guard said it was searching for Siddhartha near the Nethravathi river in Mangaluru. He was last seen on a bridge on the river by his driver.
- Coffee Day Enterprises Ltd. released a letter purportedly written by him to the board about “succumbing to the situation” because of pressure from lenders, one of the private equity partners, and harassment by tax officials.
- In a twist, the income tax department said that the signature on the letter does not tally with Siddhartha's signature in his annual reports.
- The taxman said that Siddhartha, in a sworn affidavit, had admitted unaccounted income of Rs 362.1 crore.
Neither the board, nor the company has been able to verify if the letter was written by Siddhartha.
2. Kotak’s Sanjeev Prasad Sounds The Alarm
The Indian economy has been running on two engines over the past few years—private consumption and government spending. With private consumption growth weakening and government finances constrained, the slowdown in the Indian economy may be structural and protracted in nature, said Sanjeev Prasad, managing director and co-head of Kotak Institutional Equities, in a conversation with BloombergQuint.
- Prasad believes the slowdown in consumption that India is witnessing is a reflection of moderate growth in household income, together with higher taxes.
- Over the past few years, there has been a sharp decline in the household savings rate, as the share of consumption in household income has risen.
- Beyond a point, however, households will start to pull back on consumption as savings fall, he said.
If income is not growing fast but households continue to consume by cutting savings...then at some point of time, households will start feeling uncomfortable.Sanjeev Prasad, Co-Head, Kotak Institutional Equities
Watch the full interview with Prasad where he explains why the slowdown may last longer than expected.
3. A July To Forget
Indian equity benchmark NSE Nifty 50 ended near a five-month low, dragged by Reliance Industries Ltd., State Bank of India, IndusInd Bank Ltd. and HDFC Ltd. The continued fall means the benchmark index is set to post its worst July performance in 17 years.
- The 50-stock index closed 0.93 percent lower at 11,085, the lowest since March 8, 2019.
- The S&P BSE Sensex ended 289 points or 0.77 percent lower at 37,397.24.
- The broader market represented by the NSE Nifty 500 Index fell 1.15 percent.
- The market breadth was tilted in favour of sellers.
- Ten out of 11 sectoral gauges compiled by NSE ended lower.
Follow the day’s trading action here.
- Axis Bank Ltd.’s net profit rose nearly twofold in the quarter ended June on a low base and higher other income.
- Hero MotoCorp Ltd.’s first-quarter profit beat estimates due to a one-time gain.
- Tech Mahindra Ltd.’s quarterly earnings missed analysts’ estimates as rising wages and visa costs weighed on profitability.
Also read: Nifty Set To Post Worst July In 17 Years
U.S. stocks fell a second day amid a mixed bag of corporate results and growing speculation a trade deal with China remains elusive. Treasuries edged higher as the Federal Reserve began deliberating on the path for interest rates.
- The S&P 500 Index fell 0.6 percent as of 9:31 a.m. New York time.
- The Stoxx Europe 600 Index decreased 1.4 percent to the lowest in more than a month.
- The British pound decreased 0.4 percent to $1.2171, the weakest in more than two years.
- West Texas Intermediate crude advanced 0.4 percent to $57.11 a barrel, the highest in two weeks.
Get your fix of global markets update.
4. Fresh Bidding For Jaypee Infratech
The National Company Law Appellate Tribunal ordered a fresh round of bids for debt-ridden Jaypee Infratech Ltd., giving thousands of homebuyers hope by again saving the company from going into liquidation.
- The NCLAT extended for Jaypee Infratech the 270-day resolution period mandated under the Insolvency and Bankruptcy Code.
- The appellate tribunal deducted the 90-day litigation period, saying the extension has been granted in view of extraordinary circumstances.
- Promoters won’t be eligible for bidding.
The bidding process will be open to all the parties eligible to file resolution plans under the code.
5. Zee May Finally Have A Buyer
A consortium that includes U.S. cable giant Comcast Corp., James Murdoch’s Lupa Systems and Blackstone Group Inc. has made an offer for a stake in Zee Entertainment Enterprises Ltd., India’s largest private broadcaster, people familiar with the matter said.
- The group plans to snap up a 51 percent stake, which has a market value of about Rs 19,000 crore ($2.77 billion), said one of the people, asking not to be identified as the discussions are private.
- The bid is non-binding, the people said.
- A deal could be announced as soon as Wednesday and there could be more investors, another person said.
A deal would give Comcast, Lupa and Blackstone control of Zee’s deep library of content.
6. Failure To Disrupt A Wealth Erosion Risk: Nikhil Vora
Large listed consumer-focused businesses in India have matured and face the risk of wealth erosion as they have been found wanting in their ability to innovate and disrupt, according to investment fund manager Nikhil Vora.
- Disruption is not happening in the listed space, but only among startups, Vora told BloombergQuint on the sidelines of Alpha Ideas 20-20. “You will have exceptions, but exceptions don’t make the rule.”
I think the failure in India is the inability of the leaders to take the risk of disrupting their own existing businesses and losing what they are at today, to the obvious risk of losing the entire business tomorrow.Nikhil Vora, CEO, Sixth Sense Ventures
Vora illustrates how leaders like HUL and ITC failed to disrupt...and paid the price.
7. State PSUs… Zombieland Of Taxpayer Monies
The saga of MTNL, BSNL, Air India et al is known. What is less known is the state of state enterprises.
- Did you know that India’s states own over 1,300 PSUs?
- The losses at these PSUs are thrice that of central PSUs.
- Not a single state among 19 have PSUs making more profits than losses.
As Shankkar Aiyar discovers, in many big states, a majority of PSUs haven’t even filed finalised accounts.
8. Potential Homebuyers Should Read This...
The National Housing Bank has advised housing financiers not to grant home loans under schemes where developers offer to pay interest on behalf of borrowers till possession is handed over, saying that such offers are susceptible to fraud.
It said loan disbursal should be strictly based on the stages of construction, and mortgage lenders shouldn’t release funds upfront in under-construction projects. It warned mortgage lenders that “release of funds by the company without linkage to the stage of construction will be seen as dereliction of duty”.
- What are interest subvention schemes?
- How did homebuyers borrow money under such schemes?
- Why lending under such offers is a problem?
- How did such schemes help developers?
BloombergQuint spoke to developers, legal experts and property consultants to find out how the NHB circular will impact consumers.
9. Truecaller’s Mischievous Bug
Truecaller, a widely used mobile application to screen callers and block spammers, has rolled-back its latest app update after discovering a bug which automatically enrolled customers for its UPI-based payment service.
- Late Monday evening, several users of the application took to social media platforms to complain about the latest update of the Truecaller app, which led to unauthorised access to other apps available on the user’s phone.
- The complaints alleged that the bug had prompted an unauthorised encrypted SMS to be sent from the user’s phone to an unknown number for registration with Truecaller’s payment service.
- While users were registered with the UPI-based payment service, no actual transactions took place.
Here’s what Truecaller said, and what NPCI’s response has been.
10. Tiny Studio Wants To Shake Up Bollywood
A tiny digital studio is making a name for itself in the world’s most prolific movie industry, scoring funding from a marquee Silicon Valley investor right after nailing a deal to stream its most popular show on Netflix.
- Pocket Aces Pvt has raised $14.7 million from Sequoia Capital, DSP Group, 3one4 Capital and others to bankroll content aimed at pushing Indian shows beyond hackneyed Bollywood formulas -- like “saas-bahu” or mother-in-law versus daughter-in-law dramas.
- It’s one of a band of startups moving away from familiar staples to try and hook an exploding population of mobile viewers.
- Pocket Aces plans to use the funds to get into gaming content, make strategic acquisitions and boost production to 30 shows a year from the current dozen.
Pocket Aces uses AI and machine learning to test genres, actors and plot lines in pilots before spinning them into longer shows.