Will Narendra Modi Deliver on Investors' Expectations if He Wins, Kerala Lists Masala Bonds on London Stock Exchange's International Securities Market, NBFC Crisis Drags Down AUM of Debt Funds et al

 

NBFC crisis drags down assets under management of debt funds. Bharti Airtel's INR25,000cr rights issue oversubscribed. Singapore sovereign wealth fund GIC and Indian Hotels Company to set up INR4,000cr investment platform. Kerala lists masala bonds on London Stock Exchange's International Securities Market. Google to introduce new ad types through its mobile products. Apps streaming TV channel may come under regulatory ambit. Your profile may be up for sale for as little as INR140 a day in the dark web.
 

Moving on to the top Business news of the day.

 

 ELECTIONS 
  

Will Narendra Modi deliver on investors’ expectations if he retains power in elections 2019? 


As per a BBG article, “This year, overseas investors have bought about $10bn of Indian equities, the most across emerging Asia after China, on optimism that the Watchman will retain power.”
 

Will Narendra Modi deliver on investors’ expectations if he retains power in elections 2019. Read the article here to know more.

 

 ECONOMY 


NBFC crisis drags down assets under management of debt funds. 
 
 
Domino Effect: According to the latest data from the Association of Mutual Funds in India (AMFI), the share of debt schemes has dropped from 34.9% in April 2018 to 29.3% in April 2019.
 
 
To Put Things Into Perspective: The share of equity-oriented schemes was 42.4% of the industry assets in April 2019, up from 41.3% in April 2018.
 
 
AMFI data also shows that outflows from debt funds (including income and gilt funds) shot up to INR1.25L cr in FY19 as against INR9,128cr registered a year ago.
 
 
Lost and Found: Analysts attribute this fall in the share of debt funds to the NBFC crisis, emerging from the IL&FS scam, leading to the waning interest of investors in debt funds. 
 
 
Weak earnings growth in the past five years, pressure on margins, interest costs, asset quality issue of banks and overall steep valuations took shine off markets in the past five years.
 
 
Lost Sheen: As per this Livemint report, even as investors pinned hopes on the Narendra Modi-led government to take the markets to new highs with a promise of ‘achhe din’, equities did not shine as much as in the previous two governments led by the United Progressive Alliance (UPA).
 
 
Because We Love Data: Here are some rather interesting data points:
 
  • Sensex gained 57% under NDA against a 140% surge under UPA I in 2004-09 and a 98% rise under UPA?II in 2014-19.
  • BSE Midcap rallied 84% in the past five years, while it gained 104% in 2009-14 and 91% in 2004-09.
  • BSE Smallcap jumped 76% in the past five years, while it rose 84% and 127% in 2009-14 and 2004-09, respectively
  • BSE PSU index fell 5% in 2014-19 till date, while the index rose 26% in 2009-14 and 87% in 2004-09
  • Foreign investors invested $27.7bn in Indian equities in 2014-19 against $112bn in 2009-14
 
 
As per analysts, weak private capex and industry credit cycle, demand shocks such as demonetization, NBFC credit crunch, interest rate hikes by the US Federal Reserve in 2018, and stagnating earnings were challenges faced by the markets in the last five years.
 
 
 CONSUMER 
 
Google to introduce new ad types through its mobile products. Apps streaming TV channel may come under regulatory ambit. Your profile may be up for sale for as little as INR140 a day in the dark web.
 
 
May I Have Your Attention Please...: Google has announced a bunch of new ad types that will start showing up throughout its mobile products.
 
 
Viewing Disrupted: These include 'gallery' ads, which you can scroll through, ads on Google's mobile homepage, and ads interspersed between news stories in the Discover feed.
 
 
The Hit List: The Telecom Regulatory Authority of India (TRAI) is expected to issue a consultation paper on the regulation of OTT apps that stream TV channels by July-August.
 
 
This comes shortly after the regulator introduced new tariff rules for television channel earlier this year. 
 
 
Broadcasters operate under a licence which is valid for 10 years. Under the cable TV (regulation) Act, the licensee has to comply with the programming and advertising code and must adhere to guidelines set by I&B ministry. Whereas apps come under IT Act, but do not have to seek licence.
 
When apps show the same channels without paying the carriage charges and licencing fees, it creates disparity.
 
 
The Dark Web: Your profile may be up for sale for as little as INR140 a day in the dark web.
 
 
While one group of hackers leaks the data with encrypted passwords, a second group decrypts them. Hackers are estimated to have collected more than 7,000-8,000 databases from smaller websites alone, apart from data hoovered up from major sites. One is particularly vulnerable if you use a single password for multiple online accounts, or have passwords that are only slightly different. More on this here.
 
 
 
 DEALS 
 
Bharti Airtel's INR25,000cr rights issue oversubscribed. Singapore sovereign wealth fund GIC and Indian Hotels Company to set up INR4,000cr investment platform. Kerala lists masala bonds on London Stock Exchange's International Securities Market. 
 
 
Over-Subscribed: Bharti Airtel reported that its INR25,000cr rights issue was over-subscribed, with Singapore government arm GIC picking up a 4.4% stake.
 
 
The right issue, which had opened on May 3, closed for subscription on Friday consisted of an issue of fully paid-up shares at INR220 a share and a foreign currency perpetual bond issue worth INR7,000cr. 
 
 
The capital infusion is likely to help the telecom giant continue investments in future rollouts to build large network capacity and create content and technology partnerships in order to ensure a strong customer experience.
 
 
A Strategic Partnership: Indian Hotels Co. Ltd (IHCL), the owner of the Taj luxury hotel chain, has signed a strategic partnership with Singapore’s sovereign wealth fund GIC to jointly invest around INR4,000cr over three years.
 
 
The investment platform will acquire fully operational hotels in the luxury, upper upscale and upscale segments in India.
 
 
The equity contribution from IHCL will be at 30% and the balance will be contributed by GIC.
 
 
The mandate will be to acquire fully operational hotels with each purchase being made through a special purpose vehicle with its own funding. The acquired hotels will be managed by IHCL under its various brands.
 
 
In a First: Kerala has become the first sub-sovereign entity to access the international market by listing masala bonds issued through its off-budget mechanism, the Kerala Infrastructure Investment Fund Board (KIIFB). 
 
 
The bond, with a five-year tenor and a 9.723% coupon, has been admitted to London Stock Exchange's International Securities Market (ISM).
 
 
 
 DRAMA 

Elon Musk pushes for financial sustainability. Top law firms hired to fix balance of power at IndiGo.
 
 
Financial Sustainability: In an email to company employees, Musk said Tesla has about 10 months at its current burn rate to achieve breakeven. He also announced a new cost-cutting initiative in which executives including CFO Zach Kirkhorn will review every expense line in an effort to avoid unnecessary expenses. 
 
 
IndiGo co-founder Rahul Bhatia’s holding company can practically veto any decision taken by his partner Rakesh Gangwal despite the two promoters owning almost identical stakes, an examination of Interglobe Aviation Ltd’s articles of association (AoAs) reveals.
 
 
This unequal distribution of power has given rise to dispute among IndiGo promoters.
 
 
A Truce: Subsequently, Gangwal and Bhatia have hired two top law firms to settle their differences and prevent the issue from turning into a long-drawn legal battle for control of IndiGo.
 
 
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