Thinkpad: Signed, Sealed, Delivered

Happy Sunday.

This week will undoubtedly go down in history. Decades in the making, the government finally found a buyer for Air India.

The process which began in June 2017, concluded with the national carrier being bought for Rs 18,000 crore in enterprise value terms. Air India had a total debt of Rs 61,562 crore at the end of Aug. 31. Tata Sons will assume Rs 15,300 crore while Rs 46,262 crore will remain with government entities. Sajeet Manghat explains the math behind the deal here.

For the government, the deal takes a large burden off the books. At a spend of Rs 1.10 lakh crore over the past decade and a daily loss estimated at Rs 20 crore, Air India has perhaps been the second-largest burden for the government. Public sector banks being the biggest but we won't go there right now.

With the divestment done, Air India is now the Tata Group's problem. And it won't be a small problem, says former executive director Jitender Bhargava in this piece.

Whether buyer's remorse follows or not, Air India is now back with the Tatas.

♫Signed, sealed, delivered, I'm yours!♫

Before we move on, we'll leave you with a question: If (A big IF) the government manages to complete the Life Insurance Corp. of India IPO and perhaps the IDBI divestment (if not the two public sector banks as detailed in the budget) over the next few months, could this be one of the more important years in India's economic history?

There was another decision that was signed, sealed and delivered this week. Not a pleasant one, though.

The Reserve Bank of India superseded the board of two Srei Group non-bank lenders.

Financial sector watchers will know that concern around these lenders has persisted for some time. The group, which has been notorious for challenging everything from rating downgrades to bad loan classification, went to the Bombay High Court to challenge the regulator. The challenge didn't prevail and the two firms—Srei Infrastructure Finance and Srei Equipment Finance—have now been admitted for insolvency, reports Vishwanath Nair. But the petition laid bare all that had gone wrong at the firm over the years.

The list of lenders that haven't survived the last few years, or have been forced to moderate aspirations, is not short. For investors, creditors and retail depositors, the lesson that higher return comes with higher risk has been reinforced a number of times in this cycle now.

Finally, this week delivered the beginning of monetary policy normalisation that many, including Thinkpad, had called for.

The Reserve Bank of India kept rates on hold but stopped calendared government bond purchases and signaled that it will absorb more liquidity through its variable rate reverse repo operations, perhaps even for longer durations. Bond yields, which have been inching higher, rose back to pre-Covid levels in response.

The RBI still isn't withdrawing liquidity but they have signaled a move in that direction. The next big move—a hike in the operative reverse repo rate—may follow in December, said economists.

If you haven't ODed on monetary policy yet, you can get into the weeds of the decision by listening to this conversation.

We leave you with an exceptional read from the Businessweek stable. We have all heard that stablecoins are supposedly safer country cousins of cryptocurrencies. Some of them, such as Tether, are supposed to backed by real dollars.

Are they? Has anyone seen Tether's $69 billion? We won't kill the suspense. This is a #mustread.

Till next week.