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GST Council Cuts Rates on 23 Items, Robo Advisors Hit, J&J Under Heat

Professor of Financial Economics and Part-time Value Investor, Transfin.
Dec 22, 2018 2:51 PM 4 min read

With government's coffers somewhat relieved, a GST shake-out looks doable. Perhaps time is also ripe to diversify your coffers by investing in Sovereign Gold Bonds (in case you're bank is open next week that is?!). OYO, Treebo, FabHotels are playing flip-flop. Robots may be taking over the world (barring SEC). Lastly, Johnson's Baby Powder may not be that innocent.  


Now to today's Top 6 Business Stories:  


GST Council Cuts Rates on 23 Items, Robo Advisors Hit, J&J Under Heat


GST Council meeting under way; cuts rates on 23 items.
Agenda: The GST Council met today to discuss simplification of few current systems in place. Six items, including TVs (up to 32 inches), digital cameras  and video game consoles moved from 28% to 18%.

Zoom Out: The tax reduction comes in light of PM's recent suggestion that 99% of items should attract GST of 18% and below, leaving only "sin" or "luxury" goods within the 28% bracket. The annual revenue implication of the rate cuts would be c. INR5,500cr. 

What else on the agenda?: Businesses with turnover up to INR5cr may become eligible to file quarterly returns vs. monthly returns (current threshold in INR1.5cr). Seamless payment of refunds to claimants, a major process issue (consider this: INR5,300cr of c.10% of all refund claims are presently "stuck", as per a Business Standard report).
New Sovereign Gold Bond Issuance opens on Monday. 
When?: Government's Sovereign Gold Bond 2018-19 (Series IV) is up for subscription between Dec 24-28, with price being fixed at INR3,119 per gram. Bonds to sold via banks (read "Timing"), Stock Holding Corporation of India Limited (SHCIL), designated post offices, NSE, BSE etc. 
Explain: Sovereign Gold Bonds are RBI issued financial instruments which are denominated in grams of gold and its returns are linked with the price of gold. Check out our LongShorts which gives more details on this asset class / its benefits.    
Timing: With looming economic uncertainty, its not a bad idea to park some of your assets into gold. However, do remember PSBs are on strike between Dec 21-26, barring Monday so find your closest sales point in advance. 
OYO may(?) acquire competitor Treebo Hotels.
Treebo: Is a Bangalore-based budget hotel aggregation platform and a smaller competitor of OYO. As per a Business Standardarticle, Treebo operates c.10,000 rooms across 400 properties in India (vs. OYO's 164,000 rooms across 8,700 properties). Its investors include SAIF and Matrix Partners. 
OYO's interest: OYO has been growing aggressively - adding c.50,000 keys per month and becoming the world's fastest growing hotel chain. The company's footprint in China (180,000 rooms) is even larger than in India (164,000 rooms). Treebo would inorganically help in OYO's India expansion plans. The startup raised $1bn in September from SoftBank, valuing it at $5bn. 
There's no deal till its signed: Interestingly, as late as October, there was noise around a potential merger between Treebo and FabHotels (another budget hotel aggregator) to compete against OYO. However, market sources also point that both Treebo and FabHotels have been trying to fundraise in recent months without making much headway. Their lack/deficiency of a funding war-chest comparable to OYO may be a driving force behind the OYO-Treebo acquisition rationale.
SEC hits robo adviser firms for the first time. 
The Who: Wealthfront Advisers, which manages $11bn in assets, accused of misleading clients by not avoiding transactions that could erode their tax benefits (as promised). 
Damage: The robo adviser firm agreed to pay $250,000 to settle with the SEC.
Why such a big deal?: As per a WSJ report, robo advisers now manage almost $200bn of client money in the US. This comprises the regulator's first enforcement action in this nascent but exciting fintech sector
GST Council Cuts Rates on 23 Items, Robo Advisors Hit, J&J Under Heat
Johnson & Johnson baby products under scrutiny.
Why?: Roughly 100 samples of Johnson & Johnson's baby products, including shampoo, oil, soap, baby powder etc. has been sent for testing to assess whether it complies with all prescribed regulatory and manufacturing standards, and also to check for presence of cancer causing asbestos.
Not the first time: This additional scrutiny comes in the middle of a period where the company is already under spotlight over its faulty hip implants. Johnson & Johnson also recently compensated $4.7bn to 22 women in the US, who claimed asbestos in its talc had caused them ovarian cancer.
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