BQuick On Oct. 11: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. IIP Falls To Its Lowest Since 2012
India’s industrial output contracted in August due to weakness in the manufacturing and electricity sectors.
- The Index of Industrial Production fell by 1.1 percent in August over a year ago, compared to an increase of 4.3 percent in July.
- A Bloomberg poll of 31 economists had forecast IIP growth at 1.7 percent.
- The fall is the steepest in the last 81 months, said Devendra Kumar Pant, chief economist at India Ratings and Research.
“Going forward, the IIP is likely to show erratic, low growth trend,” said Pant.
2. Tax Department Doubles Down On Recovering Arrears
The Central Board of Direct Taxes plans to double down on recovering pending dues, or amounts stuck in litigation, of about Rs 12 lakh crore to make up for the shortfall in direct tax collections.
- Net direct tax collections have grown by about 5 percent year-on-year to Rs 4.54 lakh crore as of Sept. 28, according to two government officials who preferred to remain unnamed.
- That compares with the government’s projection of 17 percent growth over last year for 2019-20.
- The government receives 45 percent of advance tax collections by Sept. 15 every year.
- As advance tax collections haven’t grown as projected, the government would focus on collecting pending tax arrears, one of the officials cited earlier said.
There are many challenges ahead for tax collectors to achieve its ambitious targets.
3. Infosys Meets Estimates...And Beats TCS
Infosys Ltd.’s quarterly profit met estimates and its margin expanded after five quarters as the rupee depreciated and visa costs fell. Net profit rose 6.2 percent while operating margin increased 120 basis points to 21.7 percent. It also revised upwards the lower-end of revenue guidance to 9-10 percent for the ongoing fiscal.
- That performance helped it to meet analyst estimates while its bigger rival Tata Consultancy Services Ltd. disappointed.
- Infosys did better than TCS in terms of sequential growth and margin expansion.
- Revenue growth for Infosys was over double than that of TCS.
- And while TCS' margin was higher, it actually fell despite analysts hoping for an expansion.
- Even in BFSI segment, the mainstay of Indian IT firms, Infosys recorded a much higher sequential growth.
Find out how the two IT bellwethers stacked up against each in the second quarter.
4. Nifty Gains, U.S. Stocks Rally
Indian equity indices ended higher, led by gains in Infosys ahead of its results announcement.
- The S&P BSE Sensex rose 0.65 percent or 246.69 points to end at 38,127.08.
- The NSE Nifty 50 rose 0.63 percent to 11,305.05.
- Nine out of 11 sectoral gauges compiled by NSE ended higher, led by the NSE Nifty Metal Index’s 2.27 percent gain.
- On the flipside, the NSE Nifty Media Index was the top sectoral loser, down 0.34 percent.
Follow the day’s trading action here.
Stocks rallied amid growing hopes that the U.S. and China can negotiate a trade truce as high-level talks progress into a second day.
- The S&P 500 Index headed for its biggest gain in two months, putting the gauge within 2 percent of an all-time high after President Donald Trump said that “good things are happening” at the first senior-level in-person talks since late July.
- Crude oil rose following an explosion on an Iranian tanker that reignited fears unrest in the Middle East could threaten global supply.
- The pound was set for the biggest two-day gain in a decade as the EU’s chief negotiator recommended detailed talks with the U.K. can begin in earnest.
Get your daily fix of global markets here.
5. Hindustan Unilever Cuts Prices
India’s largest consumer goods maker cut prices of soaps and detergents to drive volume growth amid a slowing economy, three distributors told BloombergQuint.
- Hindustan Unilever Ltd. lowered prices in the range of 10-12 percent for products in the home and personal care category, the distributors said on the condition of anonymity out of business concerns.
- While the company declined to comment on BloombergQuint’s emailed queries about the price cuts citing silent period ahead of its second-quarter earnings announcement, the distributors said prices were cut mid-September.
Here’s a product-wise breakup of HUL’s price cuts.
6. TPG’s Shriram Capital Stake Sale Stalled
TPG Capital has paused a sale of its stake in privately-held Indian financier Shriram Capital Ltd. as the country’s lingering shadow banking crisis hurts valuations, people with knowledge of the matter told Bloomberg News.
- The private equity’s plan to sell its 10 percent stake has been held back, and will likely resume only as soon as the next financial year starting in April, said one of the people, who asked not to be identified as the information is private.
- In August, five foreign investors, including Blackstone Group Inc and Carlyle Group LP, were shortlisted for talks to acquire a combined 30 percent stake in Shriram Capital from Piramal Enterprises Ltd. and TPG.
The sellers were seeking a valuation of Rs 8,000 crore ($1.1 billion) for the stake.
7. Singh Brothers Sent To Four-Day Police Custody
Malvinder Singh and Shivinder Singh, the former promoters of Fortis Healthcare Ltd., and three others were remanded to a four-day police custody by a Delhi court.
- Chief Metropolitan Magistrate Deepak Sherawat allowed their custodial interrogation by the Delhi Police.
- The Economic Offences Wing of the Delhi Police had over Thursday night and Friday morning arrested the Singh brothers, Sunil Godhwani—the former head of Religare Finvest Ltd.—and two others on charges of siphoning funds and fraudulently diverting nearly $337 million from the financial services company.
The arrests mark the beginning of the final act in the precipitous fall of what was once one of India’s most prominent business families.
8. Who Gains The Most If Rivals Follow Reliance Jio's U-Turn?
Reliance Jio's launch in 2016 had forced incumbents to also offer calls free and new tariff plans are based on data consumption. What if Bharti Airtel Ltd. and Vodafone Idea Ltd. were to follow Reliance Jio in charging interconnect fee for outgoing calls to other networks?
- If Vodafone Idea and Bharti Airtel start charging 6 paise a minute on outgoing calls to other networks, their revenue in the first quarter of financial year 2020 would have been 7-11 percent higher.
- Assuming that 80 percent of this increased revenue would flow to operating profit as costs won’t rise much, their Ebitda would have been 29-48 percent higher, making them bigger beneficiaries.
- In absolute terms, Reliance Jio would have earned more compared with the other two.
Mukesh Ambani has shown bruised telecom operators a way to earn more revenue.
9. Modi, Xi Take A Leisurely Stroll At The Waterfront
Prime Minister Narendra Modi and Chinese President Xi Jinping took a stroll and sipped fresh coconut water in Mamallapuram overlooking the Coromandel Coast of Bay of Bengal. Modi played host and took Xi for a guided tour of world heritage sites ahead of their informal talks aimed at resetting ties strained by border disputes and trade tensions.
- This is the second straight “informal” meeting between the leaders, after their interaction in Wuhan in April last year.
- There’s no set agenda, India’s foreign ministry said in a statement.
- New Delhi has expressed its annoyance over China’s support of neighbour and rival Pakistan regarding India’s decision to revoke the special autonomous status of Kashmir.
- Xi and Modi will talk over a one-on-one dinner Friday night without their officials, who will be briefed later by the leaders.
- The two countries will issue separate statements Saturday after another one-to-one conversation before delegation-level talks.
The priority of the meeting is likely to reset ties.
10. How The Corporate Tax Cut Could Alter The 15th Finance Commission’s Math
It was evident in July that the centre will likely miss the FY20 revenue projection of the 14th Finance Commission.
- This translates into a reduced share of devolution for the states, as has happened for a number of years now.
- Even before the centre’s corporate tax cut, states could have asked the 15th Finance Commission to increase their share, to make good the deficit of earlier years.
- Now, the corporate tax rate reduction implies a further shortfall of Rs 60,900 crore for states.
So what can be done to balance all interests? The solution may lie in the kind of approach Arun Jaitley took to the GST Council, write BMR Legal’s Mukesh Butani and Tarun Jain.