Transfin.

Suzlon Energy Faces Bankruptcy, Govt Behind Disinvestment Target, RIL Shares Fall As Government Seeks to Block Its Deal With Aramco

Top news this week: Railways considering rationalising freight rates and passenger fares. BPCL and ConCor disinvestment unlikely to be completed in current FY. RIL shares fall on news that government is seeking to block its deal with Saudi Aramco. Boeing ousts Dennis Muilenburg as CEO as it deals with 737 MAX fallout. As data prices go up, streaming wars heat up. As data tariffs rise, consumers opt for monthly recharges. China to lower tariffs on 859 types of products to boost the economy and reach trade deal with the US. Chinese investment in Indian startups surged 94% this year.

 

 

INDIA

Railways considering rationalising freight rates and passenger fares.

Train Reset: The Railways is considering cutting freight rates and "rationalising" passenger fares in a bid to boost the economy.

 

"We are going to rationalise the fares and freight rates. Something is being thought about. I cannot divulge more as this is a sensitive subject. While freight fares are already high, our target is to draw more traffic from road to railways in this regard," Railway Board Chairman VK Yadav said on Thursday.

 

The economic slowdown has acutely hurt the Railways. Earnings from passenger fares in April-December of this year stood at ?40,415cr while for the same period last year it was ?51,066cr. BS

BPCL and ConCor disinvestment unlikely to be completed in current FY.

Slow and Steady Loses the Race: The government is racing against time to keep to its disinvestment commitments.

 

Ensuring that the disinvestment of BPCL and ConCor before the current fiscal ends is important for the revenue-strained government, which has also set an FY20 disinvestment target of ?1.05Lcr.

 

Such strategic transactions usually require about four months’ time once expressions of interest (EoIs) are invited. But so far, even EoIs have not been floated for the sale of the above-mentioned two PSUs (and Air India’s too). Financial Express

 

Selling its 53.3% stake in BPCL (worth ?60,000cr) and its 30.8% stake in ConCor (worth ?11,000cr) is important for the government since, so far, it has met only 16.5% of its disinvestment target. Given the decelerating GDP growth and sub-par direct and indirect tax collections, this is more bad news in an already grim situation. Livemint

 

COMPANIES

RIL shares fall on news that government is seeking to block its deal with Saudi Aramco.

Shares of Reliance Industries Ltd (RIL) fell as much as 2.8% today, erasing about $2bn off its market value on reports that the government was seeking to block its deal with Saudi Aramco. Livemint

 

Previously: The government had filed a petition in the Delhi High Court seeking to block RIL's plans of selling a 20% stake in its oil-to-chemicals (O2C) business to Saudi Aramco. The deal valued the O2C business at $75bn and was part of the plan to make RIL a zero-debt company in the next 18 months.

 

Then, on Friday, the Court reportedly asked RIL and British Gas to disclose their assets. (Since 2010, the government has been fighting an arbitration with RIL and its partner, alleging that the companies appropriated huge sums of money in violation of the production sharing contract in the PMT oil and gas fields.)

Boeing ousts Dennis Muilenburg as CEO as it deals with 737 MAX fallout.

Adios: Boeing has ousted Chief Executive Dennis Muilenburg and replaced him with David Calhoun as CEO. The leadership shake-up comes at a time when the aerospace giant is struggling with the crisis caused by two fatal crashes of its 737 MAX jetliner and disagreements with regulators over returning the grounded plane to service. WSJ

 

SUZLON BANKRUPTCY

As Suzlon Energy faces bankruptcy, Dilip Sanghvi stares at huge loss.

In Dire Straits: Renewable power firm Suzlon Energy is reportedly heading for bankruptcy courts and Dilip Sanghvi, the billionaire promoter of Sun Pharmaceutical Industries, is staring at a huge loss.

 

Suzlon had failed to come up with a debt recast plan by the December-end deadline, bankers said.

 

Shanghvi, who had invested ?1,400cr ($196m) in picking up a 23% stake in the wind turbine maker in 2014 in his personal capacity, will be one of the top losers along with the Suzlon promoter, the Tanti family.

 

In the 2019 calendar year, the Suzlon Energy stock has lost 64% of its value. As of Friday, it was worth ?1,053cr ($147m). BS

 

Highway to Hell: Defaults, high debt, buyers backing out - how and why did Suzlon Energy reach this situation? Here's some background reading.

 

DATA

As data prices go up, streaming wars heat up.

Netflix and Pay the Bill: The streaming wars are about to get even more brutal.

 

India's top three wireless carriers hiked data tariffs by c. 41% earlier this month. Coupled with the economic slowdown and dampening consumer sentiment, this means people could be less willing and less likely to spare money for over-the-top (OTT) platforms like Netflix, Amazon Prime, Hotstar etc.

 

To race ahead, streaming platforms are announcing various offers and slashing rates. To read more on how companies are dealing with the cut-throat competition and rising costs, click here.

As data tariffs rise, consumers opt for monthly recharges.

Adapt and Thrive: Indian telcos recently raised tariffs by c. 40%, and this has forced consumers to change their recharging patterns. Monthly plans are becoming more popular as money-sensitive customers embrace these relatively cheaper plans at the expense of their long-term counterparts to save money.

 

One implication of this trend is that consumers are less likely to be bound to one provider and feel more inclined to change operators given that their packages are only a month-long. This is why telcos have been offering discounts on 12-month recharge plans. ET Telecom News

 

CHINA

Tariffs on 859 types of products to be lowered as Beijing seeks to boost the economy and reach trade deal with the US.

Beijing Blues: China has had typically high tariffs in order to protect and support local industries. But now, it has said it will cut tariffs in order to protect and support the economy.

 

The Ministry of Finance said the tariff changes would be made to "increase imports of products facing a relative domestic shortage, or foreign specialty goods for everyday consumption".

 

That includes tariff rates on 859 types of products, including some semiconductors, medications, and frozen pork - due to be lowered to 8% from 12% for some countries. (FYI: China is struggling to cope with an outbreak of African swine fever, which has wiped out as much as half the country's pig population.)

 

The countries that will benefit most from the lower tariffs will include New Zealand, Peru, Singapore and Pakistan. BBC

 

Making Nice: China's announcement comes as it is in talks to sign a comprehensive trade deal with the US so that the bitter trade war - which has raged for two long years - can come to an end. Beijing has said it would purchase more American goods, including farm products. WSJ

Chinese investment in Indian startups surged 94% this year.

With Love, From Shanghai: 2019 was a year when Chinese investment in Indian startups erupted. Investments from the Middle Kingdom surged 94% this year to $3,918m from $2,020m in the previous year.

 

The nature of funding changed too. While previously it was defined by technology majors investing in unicorns, now it is led by financial investors looking to diversify their portfolio or picking up stakes in promising start-ups for long-term commitments. BS

FIN.

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