LIC files draft IPO documents to sell 5 percent stake
The Life Insurance Corporation of India filed its draft red herring prospectus with the Securities and Exchange Board of India on Sunday. The government will sell 5 percent of its stake that would fetch it between Rs 600 billion and Rs 750 billion, thus valuing the insurer between Rs 12 trillion and Rs 15 trillion. The market regulator is expected to approve of the IPO in three weeks.
Why it’s important: The long-anticipated IPO offer size is likely to break all records of total funds raised by an Indian company by a wide margin. The proceeds from the sale will help the government meet its trimmed annual asset sales target of Rs 780 billion by the end of March.
Revenues rise for India Inc, but margins squeezed on higher costs
Indian companies continued to report double-digit annualised expansion in revenue and net profit for the fiscal third quarter to December, although an increase in input costs has continued to pare operating profit, resulting in low margins. While the pressure on margins is expected to continue in the fourth quarter of the financial year to March, there could be a gradual improvement in demand in the medium term after the government announced higher capital outlay in the budget.
Why it’s important: The business growth of Indian firms has not been dented by the rise in input costs due to disruptions caused by the coronavirus pandemic. Margin pressure is expected to continue as most companies have optimised costs. Things will only improve on increased demand, which continues to remain muted.
The same individual will not lead both Tata Sons and Tata Trusts
The board of Tata Sons, the holding company of the Tata group of firms, has passed a special resolution that its chairman and the chairperson of Tata Trusts cannot be the same individual. The resolution was passed at the same meeting that approved another five-year term for chairman N Chandrasekaran. Ratan Tata, chairman emeritus of Tata Sons, attended the meeting as a special invitee.
Why it’s important: The two posts will be led by different individuals in order to ensure better corporate governance. The move is also seen as a part of succession planning at Tata Trusts so that the Tata family continues with its association with the bunch of charities that control the Tata Group.
Lenders of Future Group halt sale of small-format stores
The consortium of lenders to the Future Group has agreed to stop the sale of Future Retail’s small-format stores until the Supreme Court gives its verdict in a case between Amazon and the founders of Future Group over the latter’s sale of assets to Reliance Industries. Only movable assets and fixtures of the small stores could be auctioned if the lenders enforce their recovery rights after Future Retail defaulted on its Rs 35 billion repayment.
Why it’s important: Future Retail needs the money from the Rs 247.13 billion deal with Reliance to repay its dues. A Singapore arbitration tribunal has blocked the sale on Amazon’s complaint that Future cannot do so without Amazon’s consent. The Supreme Court is hearing the matter.
No delay in proceeding against India’s biggest bank swindle
The State Bank of India has clarified that the lender consortium was not responsible for the delay in the filing of a first information report against ABG Shipyard. On Friday, the Central Bureau of Investigation had booked ABG Shipyard and its former chief Rishi Kamlesh Agarwal, along with others, for allegedly cheating a group of banks led by ICICI Bank for as much as Rs 228.42 billion.
Why it’s important: A political storm has broken out over what could be the biggest swindle in Indian banking history. The loans turned bad in November 2013, and efforts to revive the company failed. A fraud was declared after a forensic audit.
Government spends only 20 percent of allocation in electric vehicle scheme
The central government has spent only about Rs 14 billion so far out of the Rs 100 billion allocated under the second phase of its Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) scheme. After the government increased the incentive in June last year, there has been a healthy expansion in demand for electric vehicles and disbursement of incentives, heavy industries secretary Arun Goel said.
Why it’s important: The FAME-II scheme was designed to support the electrification of public shared transport and help create charging infrastructure. It was supposed to end on March 31 but was extended by two years because the program failed to create the anticipated consumer demand for electric vehicles.
Reliance’s entry into satellite broadband may spark another telecom battle
Jio Satellite Communications, a unit of Reliance Industries, has applied for a global mobile personal communication by satellite licence. The corporate behemoth will be locking horns with its chief telecom rivals such as Sunil Mittal-backed OneWeb, which was the first to apply for the licence, among other firms.
Why it’s important: The business of satellite broadband services is heating up. There are many companies, including multinational firms, who want to participate in one of the world’s biggest telecom markets. They include Canada’s Telesat, Google’s Kuiper and Elon Musk’s Starlink.
Sale of electronic good rise above pre-pandemic levels
India’s consumer electronics and appliances market, from smartphones to washing machines to wearable accessories, grew as much as 9 percent in the 2021 calendar year compared with 2019, which was before the Covid-19 pandemic. Sales of mobile phones, laptops, refrigerators, washing machines, ACs, food processors and wearables rose more last year than 2019, according to market intelligence firm GfK India. Computer sales expanded by a whopping 87 percent.
Why it’s important: The coronavirus pandemic and the culture of working from home that it helped spawn has spelled a bonanza for consumer electronics and appliances firms. Customers increasingly bought premium products despite higher prices.
New excise duty on unblended fuels to raise diesel prices
The budget has proposed an additional excise duty of Rs 2 per litre on unblended fuels from October 1. The current biodiesel blending levels with diesel are nowhere near the targets prescribed in the National Policy on Biofuels of 2018, oil ministry officials said. As a result, if the additional levy is imposed, the prices of diesel will rise across the country.
Why it’s important: The high levels of central and state levies have led to higher auto fuels prices in recent years, which has had an impact of fueling inflation. Geopolitical tensions are already moving up crude oil prices. The additional levy will only add to the volatile mix.
Cost of forex hedging fall on Reserve Bank’s dovish stance
The Reserve Bank of India’s announcement that it will continue with its ultra-loose monetary policy has led to a sharp decline in forex hedging costs. Forward premiums across maturities fell as much as 0.6 percentage point in just two trading sessions.
Why it’s important: Lower hedging costs would potentially benefit foreign investors in Indian markets ahead of the mega IPO of LIC. The lowered costs will also help domestic companies and importers who have overseas liabilities.