Trump Declares National Emergency, India May Levy Digital Tax, Air India and Jet Airways Get New Rescue Plans, Levi's to Go Public et al.

Trump declares National Emergency. Jet Airways' Many Rescue Plans. Levi Strauss files for IPO to return to public markets. Indian may levy Digital Tax. 

 

Moving on to the top Business stories of the week. 

 

AVIATION


Jet Airways plans to raise c. INR2,500cr through rights issue. Government proposes 100% sale of Air India ground handling unit. Airbus to stop building its A380 Superjumbo Jet.

 

A Plan: Debt-laden Jet Airways to raise c. INR2,500cr through a rights issue.
 

What’s the Plan?: Lenders of Jet are expected to participate in the rights issue along with government-owned infrastructure fund National Infrastructure Investment Fund (NIIF), which is likely to buy a 19% stake in the airline for INR1,500cr. 
 

Rescue Plans: Other plans to rescue the beleaguered domestic airline which had a net debt of INR7,299cr as of end December, 2018 include:

 

  • Lenders to convert INR1,000cr of debt into equity through issuance of fresh shares
  • Etihad Airways, which currently holds 24% in the airline to infuse c. INR1,450cr
  • Chairman Naresh Goyal to funnel in INR550cr

 

Selling OutThe government is attempting to divest its stake in Air India by selling 100% of its stake in Air India Air Transport Services Limited (AIASTL), the subsidiary which does its ground handling work. 
 

What’s The Plan?: Government seeks to offload 98% of its stake in the subsidiary through strategic sale and the remaining 2% would be offered to AIATSL’s employees.
 

Conditions Apply: An entity or individual interested in bidding for AIATSL will need to have a minimum net worth of INR200cr and does not require any prior experience in ground handling activities in order to participate in the bidding process.

Extreme Measures: Air India’s pilot union in its Central Executive Committee meeting passed a resolution to go to any extent including a strike, if needed be, to safeguard the interests of its pilots.
 

Backstory: The news comes days after Air India pilots had announced that they would not be following any changes in the duty roster system since they had not received the flying allowance (70% of the total pay package).

 

No More: Airbus to stop production of its poorly selling A380 superjumbo.

The move comes after Dubai-based Emirates Airline, the plane’s biggest customer by far, cut sharply its plans to buy more of the jets. It was further augmented by airlines increasingly opting for smaller, nimbler long-range planes.


Click here to read more on the fall of A380 Superjumbo Jet.

 

US

US President Donald Trump declares the US-Mexico border a “national emergency”. US-China close to finalizing a trade deal.

 
What We Know: President Trump on Friday declared US-Mexico border a “national emergency”.

What Does This Mean: This will allow President Trump to circumvent Congress’s constitutional powers to control spending and divert federal funds towards his much debated border wall.

What Else: Trump also signed a bipartisan spending Bill that will keep the government funded through the fall and allocated $1.38bn for 55 miles of border barriers.

Unsatisfied with the amount set aside by lawmakers for barriers, Mr. Trump plans to draw c. $6.7bn from two separate military projects that were intended to stop the spread of drugs and build infrastructure. 

 

Nearly There: China and the US move towards diffusing trade tensions, with negotiators set to meet again next week. In the latest round of talks, negotiators from both sides made progress in outlining the framework for the agreement in the form of a Memorandum of Understanding (MoU).

Some Perspective: A MoU with China could give the US a rationale to extend the deadline for lifting tariffs (March 1) on $200bn of Chinese goods, without wrestling any concrete concessions from China. 

Never Again: Analysts note, whatever the outcome of a trade deal, the uncertainty that the trade war has triggered is likely to linger for some time with US likely to further restrict Chinese investment and its access to technology and high-tech products in the country. Read more on this here.

 

RBI

Finance Ministry seeks INR27,380cr of "surplus" reserves from RBI.
 

Need More: The Finance Ministry has sought transfer of INR27,380cr of interim "surplus" retained as risks and reserves over the last two fiscals by the RBI. 
 

RBI Stalls Transfer: The RBI has however, decided to not immediately transfer the surplus capital
 

Meanwhile: The Central Bank audit committee has cleared an interim dividend of INR28,000cr based on a limited audit for the current year and the same is likely to be declared after its board meeting on February 18. 

The Central Bank has already transferred INR40,000 crore in the current fiscal.

What You Need to Know: The development comes in the backdrop of the ongoing tussle between the two, with the government arguing that the Central Bank has more reserves than many of its peers.

 

TECH

India's antitrust commission probes Google for android abuse. CBDT may levy digital tax. 


 
Not Fair: India's antitrust commission is looking into accusations of Google abusing its Android mobile operating system to block its rivals. Android, used by device makers for free, features on about 98% of the smartphones sold in India in 2018.

Watching Closely: As per a report by Reuters, the Competition Commission of India is reviewing a case similar to one Google faced in Europe wherein the giant had abused its market dominance since 2011 to force manufacturers to pre-install Google Search and its Chrome browser, together with its Google Play app store on Android devices.
 

Nothing New: This news comes only a year after the Indian antitrust watchdog had imposed a fine of $19m on Google for "search bias" and abuse of its dominant position. 

 

New Law: Central Board of Direct Taxes may impose 30-40% digital tax on tech giants like Google and Facebook for digital services offered by global firms in India from units based outside the country, depending on their user base (> 200,000) and revenues. 

New…But Old: The proposed tax is in line with the current tax structure wherein subsidiaries of foreign companies in India pay 40% tax.

Let’s be Friends: Chinese internet technology company ByteDance, owner of Tick-Tok and Helo moves to counter rather severe regulation in the Indian market.

TikTok has also acquired the services of Apurva Mehta, former legal counsel and Director, Government Affairs at Qualcomm for India & South Asia, and Rahul Jain, who was part of the Public Policy Team at Google India. 

Read more on the matter here.

 

COMPANIES

Levi Strauss files for IPO to return to public markets. Johnson & Johnson to acquire medical technology firm Auris Health. Chinese ride-sharing company Didi invests $100mn in OYO. 


Going Public: Clothing company Levi Strauss files for an IPO, as it looks to raise more than $600m. The family-controlled business seeks a total valuation in excess of $3bn.

Back in Action: The offering would mark the return of Levi's to the public markets more than three decades after it went private in a leveraged buyout in 1985. It would also give the denim maker a war chest and equity for potential deals as it tries to drive further brand and category diversification.
 

Stepping Up: Johnson & Johnson ’s subsidiary Ethicon, has reached a deal to buy medical technology firm Auris Health for c. $3.4bn in cash.

The purchase will mark J&J’s entry into robotics. Auris’s technology will help the world's largest maker of health products devise a digital solution which would cater to the different parts of lung-cancer treatment. 

Auris has previously developed the Monarch Platform, a medical device that can help physicians access nodules in patients’ lungs to diagnose and target treatment.

 

Didi Chips In: Hospitality company OYO raises $100m from Chinese ride-hailing company Didi Chuxing, bringing its $1bn financing round to a close.

Zoom Out: OYO had in September 2018 raised $800m in funding, led by SoftBank Vision Fund. Soon after, in December 2018, Singapore’s cab-hailing company Grab had invested about $100m in the company.

 

(Don't want to miss out on these End Of Week Wrap Ups? Subscribe Now to our No Nonsense Email Digest and get the day's Top 6 Business stories straight to your mailbox.)