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India's Current Account Deficit Widens, RIL Accused of "Unfair" Natural Gas Production, Marlboro Invests in Cannabis Company et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Dec 8, 2018 2:13 PM 3 min read
Editorial

Good evening reader,

 

Consider this graphic description of a particular city:

 

"Rapid population growth placed a tremendous strain on the [city's] public services, in particular its fresh water supply, waste disposal and sewage systems and also caused a severe housing crisis. The threat of mass epidemics of diseases...never far from the surface. 

 

The foul smoke emitted by burning sea coal, and backed-up chimneys suffocated people...the smog penetrated into people’s homes, creeping through cracks and under doors. If one ventured outside, visibility was virtually non-existent. Those suffering from existing lung ailments were particularly liable to succumb to the poisonous smoke.

 

The city's river [has] became a giant sewer overflowing not only with human waste but also dead animals, rotting food and toxic raw materials from the riverside factories."

 

Wait, are we talking of Delhi? Is that river Yamuna? 

 

You wish! 

 

This is in fact Victorian-era London. The river in question is obviously the Thames.

 

So what's the point of this exercise?: Never underestimate the power of progress and time. London did change. So will Delhi. Cheers

 

Moving on to Today's Top 6 Business Stories through our End Of Day Wrap Up:

 

Current account deficit widens to 2.9% of GDP in Q2 vs. 1.1% in the previous year.

 

The What: India’s current account deficit (CAD) stood at $19.1bn in Q2 FY 2018-2019, an increase from $6.9bn (1.1% of GDP) in Q2 FY 2017-2018 on back of a large trade deficit driven by rising crude oil prices and falling Rupee. The CAD stood at USD 15.9 billion (2.4% of GDP) in Q1.

 

India received remittances worth $80bn in 2018, as per a World Bank report.

 

Zoom Out: India is the world's top recipient of remittances this year with its diaspora sending back home remittances worth over $80bn followed by China ($67bn), Mexico and the Philippines ($34bn).

 

Also, this: Over the last three years, India has reported a significant increase in inflow of remittances. In 2017, India registered remittances worth $65bn (2.7 % of the GDP).

 

The Big Picture: The increase is driven by stronger economic conditions in advanced countries. Rising crude oil prices have also positively impacted outflows from Gulf Cooperation Council countries including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. 

 

Jet Airways might rope in UAE-based Indian businessman Yusuff Ali as it tries to strike a deal with Etihad airways.

 

The What: Jet’s Promoter, Naresh Goyal is in talks with Abu Dhabi’s Etihad to get the latter to raise its stake in the airline from 24% to up to 49% in an attempt to salvage the debt-ridden domestic airline.

 

Up Close: According to civil aviation regulations, a foreign player can buy up to 49% in an Indian airline with condition that its chairman and at least two-thirds of its directors will be Indian. Further, its substantial ownership and effective control should be vested with Indian nationals.

 

What Else: Yusuffali is the Chairman and Managing Director of Lulu Group International that owns the Lulu Hypermarket chain spread worldwide.

 

Govt accuses RIL, BP and Niko Resources of “unfairly” producing natural gas from deposits belonging to ONGC.

 

The What: As per a Financial Express report, the govt has accussed RIL, UK-based BP Plc and Canada-based Niko Resources of “unfairly” producing natural gas worth over $1.7bn from deposits belonging to ONGC.

 

What You Need to Know: The case began on November 4, 2016, when the Oil Ministry claimed that RIL-BP-Niko consortium had “unfairly” produced about 338.332 million British thermal units of gas that had seeped from adjoining ONGC blocks into RIL’s KG-D6 block and demanded compensation worth $1.47bn from the consortium.

 

However, earlier this year, an international arbitration tribunal rejected the govt’s claim, and also awarded $8.3m in compensation to the consortium.

 

US/INTERNATIONAL

 

Marlboro owner Altria invests $1.8bn in Canada-based cannabis company Cronos.

 

The What: The deal will give the tobacco giant a 45% stake in the company, with an option to increase its stake to 55% over the next five years.

 

Also, this: The deal is likely help Altria grow beyond its stagnant cigarette business and open a possible channel of product development in the Canadian market. It has much to gain from Cronos’ expertise in the cannabinoid-based products. Likewise, Cronos stands to benefit from Altria’s expertise in device-technology, supply chain management, marketing, regulatory compliance and more.

 

Uber files for IPO, joins Lyft in race to tap investors.  

 
The What: As per a WSJ article, the ride-hailing firm could go public in the first quarter of 2019 at a valuation of $120bn.

 

Zoom Out: The development comes shortly after Lyft announced its IPO earlier this week.

 

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