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Govt Tightens FDI Guidelines for E-Commerce Sector, Recapitalisation of Banks, SpaceX’s New Starship to be Built Out of Stainless Steel et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Dec 27, 2018 3:51 PM 4 min read
Editorial

A six member commitee led by ex-RBI Governor Bimal Jalan setup to determine what quantity of Surplus can been deemed as "adequate" for the Central Bank. FedEx appoints Indian-American Rajesh Subramaniam as President and CEO. In other news, SpaceX’s new Starship to be built out of stainless steel.

 

Now to today's Top Business Stories:

Govt Tightens FDI Guidelines for E-Commerce Sector, Recapitalisation of Banks, SpaceX’s new Starship to be Built Out of Stainless Steel et al. 

 

POLICY

Ex-RBI Governor Bimal Jalan to head panel of six set to review its Economic Capital Framework. Govt to inject INR28,615 cr in seven PSBs. 

 

Hit Refresh: RBI ‘Surplus’ reserves has been a perennial bone of contention with the govt. The Committee of six will decide whether the Central Bank holds excess provisions, reserves and buffers, which could be remitted back to the govt.

 

Who Gets to Decide?: Rakesh Mohan, a former deputy governor, will be the deputy chairman. Bharat Doshi and Sudhir Mankad, Directors in RBI’s Central Board, NS Vishwanathan, a Deputy Governor at RBI, and Economic Affairs Secretary Subhash Chandra Garg are other members of the committee.

 

Also: Government is likely to infuse INR28,615 crore in seven public-sector banks through recapitalization bonds by the end of December including United Bank of India, Central Bank of India, Oriental Bank of Commerce and UCO Bank.

 

Zoom Out: The government had earlier announced an infusion of INR65,000cr in PSBs in 2018-19, of which INR23,000cr has already been disbursed while INR42,000cr is remaining.

 

ECOMMERCE

Govt tightens FDI guidelines for e-commerce sector.

 

Rules first: New FDI guidelines out, stating that:

  • Gist: Govt cracking a whip on Flipkart, Amazon - restricting them from giving out discounts/cash backs. 
  • Secondly: Flipkart and Amazon have to follow a “marketplace” model in India (where you just connect sellers with buyers) rather than the “inventory” mode (where the platform holds its own inventory e.g. Amazon in US). Till now they were bypassing by creating legal entities which first buy from vendors (i.e in a way keep inventory). New rules place more controls. 
  • Conclusion: Bad for ecommerce, good for brick and mortar retail. Prices on e-commerce may align with brick and mortar over the medium term, though subject to full policy guidance.

 
The new framework will come into force on February 1, 2019.

 

COMPANIES

Chinese e-commerce giant JD.com plans $1bn share buyback. FedEx appoints Indian-American Rajesh Subramaniam as President and CEO. Anand Rathi Wealth Services withdraws proposed INR425cr IPO. 

 

What you need to know: JD.com’s shares have slumped nearly 16% in the two days after recent rape allegation against CEO Richard Liu, and 50% in the past one year. The buyback program is worth about 3.5% of the company’s market capitalization.

 

The Big Picture: Shares of JD.com and other Chinese tech companies have plunged this year on back of an investor base worried about a slower economic growth in China, tightening government regulations and an ongoing trade war with US.

 

What else?: Rajesh Subramaniam appointed as President and CEO of FedEx. He is an IIT-Bombay graduate from Thiruvananthapuram, and is currently the Executive Vice President, Chief Marketing and Communications Officer of the co. He has been with the co for more than 27 years. 

 

The Last Word: Anand Rathi Wealth Services , the wealth management arm of Mumbai-based financial services group Anand Rathi had filed its initial share sale documents in September. The company however is preferring to watch and watch in the backdrop of market volatility.

Govt Tightens FDI Guidelines for E-Commerce Sector, Recapitalisation of Banks, SpaceX’s new Starship to be Built Out of Stainless Steel et al. 

 

STARTUP

FabAlley parent co High Street Essentials raises $8.5m in Series B funding from SAIF Partners.

 

The What: Online fashion store High Street Essentials is the parent company of western wear brand FabAlley and ethnic-fusion brand Indya.

 

Up Close: The company will deploy the fresh capital towards product expansion, increasing distribution, brand-building initiatives and strengthening technology infrastructure.

 

Zoom Out: FabAlley had earlier this year raised INR5cr in venture debt from Trifecta Capital following its $2m Series A funding in 2016 led by India Quotient.

 

SCIENCE

SpaceX’s new Starship to be built out of stainless steel.

 

Straight out of a Sci-fi movie: SpaceX’s new Starship is made out of stainless steel, according to the tweet by Elon Musk.

 

How will things change?: Stainless steel handles extreme heat very well. Its mirror-like finish will reflect thermal energy far better than the carbon-based materials used for many rockets.

 

What’s new?: The choice came as a surprise to many because modern spaceflight has for long been dependent on advanced composite materials like carbon fibre, which is known to combine desirable physical properties with low weight.

 

 

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