As 2018 comes to a close, here are some stories that we liked primarily due to their significant impact in defining Indian businesses and economy.
Unicorn Rising: Eight Indian firms storm into the Unicorn club in 2018. Swiggy, Zomato, Oyo Rooms, Udaan, Paytm Mall, Byju’s, Policybazaar and Freshworks all generated a $1bn+ valuation, consequently finding their way into the prestigious Unicorn Club.
A Big Deal This: Walmart’s purchase of 77% stake in India’s largest online retailer, Flipkart for $16bn was the world’s largest e-commerce deal and India’s biggest acquisition. Not only did it endorse potential “exits’ in the Indian private equity space, but also served as a nod of approval for the entire start-up ecosystem.
Deadly Cocktail: The economy came under intense scrutiny thanks to a sliding Rupee, exacerbated by volatility in crude oil prices and generally rising US interest rates. India's dependency on oil imports and a fickle foreign investor base which leapt to the US markets in a classic case of "flight to quality", further weakened the Rupee, hitting the domestic financial markets.
Autonomy Spat: Starting from discussions around adequate "Surplus" to opening up an entire philosophical ‘autonomy’ debate, the RBI and Government's disagreement ultimately led to the resignation of Urjit Patel and subsequently making way for Shaktikanta Das, ex bureaucrat as the new RBI Governor. Stressed loans and a depressed credit cycle (read PCA norms) played their own roles in the saga. Watch out for more debates around this in 2019 as general elections loom large.
Stressed Assets and Scams: It was ironic that even with average NPAs keeping consistently above 10%, bad loans were just one of the issues faced by Indian banks in 2018. The year kicked-off with the Nirav Modi-PNB scandal bringing flak to the humble "Letter of Intent", virtually killing export finance overnight. Biggest shocker however was the IL&FS fiasco, where a systemically important quasi-sovereign financial institution got bailed-out by the exchequer.
Too late still to avoid a liquidity crunch for other NBFCs, thereby serving a double whammy to lending, already suppressed thanks to the NPA unwind. No wonder the government got so worked up that a change in the RBI leadership got forced, leading to a potential relaxation in PCA norms.
Telecom Consolidation: Reliance Jio and its aggressive go-to-market strategy had an unmissable role in lowering mobile data prices across the country. However, what is somewhat missable is that Jio's rise also brought about industry restructuring none of which is as eye-catching as the merger of Vodafone and Idea. The Vodafone-Idea merger as such turned India from a four-player telecom market into a three-player market. Airtel, Jio and Vodafone-Idea, between them, account for an estimated c. 90% of industry revenues and hold over c. 80% of spectrum.
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