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Tata May Fly Jet, Chinese Growth Slows et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Oct 21, 2018 12:27 PM 3 min read
Editorial

Good evening reader, 

 

News about the sliding Rupee, rising Crude Oil prices, and a Widening Current Account Deficit have repeatedly made headlines in past couple of weeks. 

 

Another recurent theme through this week has been of data privacy and security. On back of increasing number of payments platforms and players, the regulator of India recently directed all relevant providers to localise their data in India within 6 months. While some like WhatsApp were prompt to comply, some others like Visa, Mastercard and American Express have expressed their dismay towards RBI's ruling and requested for an extension. This week's LongShorts on RBI's Push for Data Localisation digs a little deeper on this issue. 

 

A story which stood out amongst others was the one on Netflix. The media services provider reported its Q3/18 results on Tuesday, beating all expectations. What drives the underlying kingpin in the global media landscape? This was discussed at length in Thursday's LongShorts.

 

Moving on to this week's Top 6 Business Stories through our End Of Week Wrap Up:

 

INDIA 

 

Tata Group wants complete control of Jet Airways, pushing out existing Founder promoter Naresh Goyal, as per reports. Jet Airways in talks to raise c. $800m from sale and leaseback of 16 of its aircrafts.

As per a story by the Economic Times, the Tata Group rejected an initial proposal for part-ownership (26%) and joint control of Jet Airways. A similar offer was rejected by financial buyer TPG Global, a US based private equity firm.

 

Facing stiff financial crunch on back of rising fuel prices and weakening Rupee, the airline is in talks with several parties for sale and leaseback of its 16 aircrafts. The cash-strapped airline has 124 aircrafts in its fleet, including 16 that it owns—10 Boeing 777, three Airbus A 330 and three Boeing 737.

 

US Payment firms seek 12-month extension to meet RBI’s data localization deadline. RBI issues guidelines for interoperability of e-wallets.

Multinational payment companies like Visa, MasterCard, Amazon etc. have requested RBI for an extension of 12 months to comply with the Data Localization Regulation. Firms that have missed the deadline have been asked to submit a timeline for compliance with the new rule. One of the reasons for their reluctance comes on back of increased costs for installing data storage operations in the country.

 

E-wallet users will now be able to transfer funds between different mobile wallets, as per RBI's new guidelines. As per RBI, in cases where Prepaid Payment Instruments (PPIs) are issued in the form of e-wallets, interoperability would be enabled through Unified Payments Interface (UPI). These guidelines denote norms for protection of customers, dispute resolution and also allow mobile wallets to issue cards in partnership with card networks such as Visa, MasterCard, RuPay etc. Consecutive phases of the same will aid interoperability between wallets, bank accounts, and cards. 

 

PM seeks review of payments with oil producers to help declining Rupee.

In a meeting with CEOs of oil companies from India and abroad, PM Modi sought help to counter the country’s falling currency by seeking better payment terms which could include a part of the import payments to be made in Rupees. Rising crude oil prices have widened India’s current account deficit.

 

Amazon may buy c. 8% stake in India’s Future Retail over next two weeks.

A cash-and-stock deal worth $338mn between Amazon and Future Retail is in its final stages. Stocks of Future Retail climbed c.15% today after reports of the deal emerged. The move comes in response to competition from Walmart-owned Flipkart.

 

US/INTERNATIONAL

 

Chinese growth slows down to 6.5% in the third quarter (slowest since Q1 2009), short of market expectations.

Growth in industrial output and consumption (9.3% YTD vs. 10.4% in prior year) slows in 3Q, pushing top regulators to launch coordinated statements to calm investors. Shanghai Composite Index down -24% YTD.

 

Exports however marginally improved to 11.7% vs. 11.5% growth in the prior quarter in light of accelerated orders ahead of trade conflict. Future exports expected to be muted.

 

Sears plans to close 142 stores, files for bankruptcy protection.

Sears Holdings, a 125-old US-based retailer, has filed for Chapter 11 Bankruptcy Protection, while planning to close 142 stores in the country. The retailer has lost more than $11bn since 2011, and has closed more than 700 stores over the last two years.

 

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