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India’s Manufacturing Sector Activity Falls to Lowest Point on Record, Trump Threatens to Cancel US-China Trade Deal

Professor of Financial Economics and Part-time Value Investor, Transfin.
May 4, 2020 3:06 PM 6 min read
Editorial

India’s manufacturing sector activity falls to lowest point on record. US firm Silver Lake to invest ₹5,655.75cr ($752m) in Reliance Jio Platforms. Cryptocurrency exchanges seek clarity on status and taxability. Grofers in talks to raise $60-$70m in new funding. Byju’s in talks to raise up to $400m in fresh capital at a valuation of $10bn. Trump threatens to kill US-China trade deal.

 

 

COMPANIES

US private equity firm Silver Lake to invest ₹5,655.75cr ($752m) in Reliance Jio Platforms.

Show Me the Money 

US private equity firm Silver Lake will invest ₹5,655.75cr ($752m) in Jio Platforms, a wholly-owned subsidiary of Reliance Industries Ltd for a 1.15% stake at an equity value of ₹4.90trn ($65bn) and enterprise value of ₹5.15trn ($68bn), subject to regulatory and other customary approvals.

 

The news comes shortly after tech giant Facebook invested $5.7bn into the platform. 

 

The deal represents a 12.5% premium to the equity valuation of the Facebook investment into Jio Platforms. [Livemint]

 

Facebook might lose a key seal of approval that reassures advertisers on spending effectiveness.

The Seal of Approval

As per a WSJ report, Facebook is at risk of losing a key seal of approval that gives companies confidence they are getting what they pay for when advertising on the social media platform.

 

The Media Rating Council, a media industry watchdog on measurement, says Facebook could lose accreditation because of deficiencies in its reports on ad effectiveness.

 

Now while losing the certification wouldn’t have any formal consequences, it is likely to influence how some brands allocate money to Facebook in the future. [WSJ]

 

REGULATIONS

About 99.2% of depositors of CKP Co-operative Bank to get their full deposits back.

Not Fit

The RBI on Saturday cancelled the licence of Mumbai-based CKP Co-operative Bank Ltd for reasons including the lack of any viable revival plan and functioning “in a manner detrimental to the public interest and interest of the depositors".

 

In its order, the Central Bank has maintained that the CKP Co-operative Bank was not in a position to pay its present and future depositors due to its financial instability.

 

However, under the Deposit Insurance and Credit Guarantee Scheme (DICGC), every depositor is entitled to repayment of his/her deposits up to ₹5L ($6,653). As per this scheme, about 99.2% of the 1,32,170 depositors of CKP Co-op Bank will get their full deposits back. [Moneycontrol]

 

Cryptocurrency exchanges seek clarity on status and taxability.

Hit Refresh

In a circular dated April 6th 2018, the RBI had made it illegal for all the financial organisations working with it to partner with cryptocurrency startups. However, the apex court, in March 2020, quashed the RBI’s order. 

 

Is That a Commodity? A Good? A Service?

But with no clarity on aspects like whether cryptocurrencies would be categorised as either a commodity, currency, good or a service, platforms are still not able to capitalise on the apex court’s decision. Moreover, lenders continue to deny banking services to them due to lack of clear instructions from the regulator.

 

Therefore, cryptocurrency exchanges have written to the Central Bank seeking clarity on their status. They have also sought directions on their categorisation - either a commodity, currency, goods or a service - as this will decide how they are taxed under GST framework. [ET Tech]

 

MANUFACTURING

India’s manufacturing sector activity falls to lowest point on record.

Dire Straits

To no one’s surprise, India’s manufacturing activity witnessed an immense contraction in April. After all, the entire month was spent in a nationwide lockdown that saw new business orders collapse and companies shut operations.

 

The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) fell to 27.4 in April down from 51.8 in March. It also pointed to the worst deterioration in business conditions on record since the index began to be compiled 15 years ago. [Firstpost]

 

BHEL invites multinational companies to Make in India.

Make in India

Bharat Heavy Electricals Limited (BHEL) has reportedly floated an expression of interest (EoI) inviting global companies to use its facilities to carry on their manufacturing and supply chain activities. The state-run company said the coronavirus pandemic has shed light on the dangers of concentrating manufacturing facilities in a single location (aka China) and added that there is a need to diversify supply chains. [Financial Express]

 

CAPITAL

Grofers in talks to raise $60-$70m in new funding.

Funding Begins at Home

Online grocery delivery startup Grofers is reportedly looking to raise up to $70m in new funding from existing investors SoftBank, Apoletto Asia, Sequoia Capital and Tiger Global.

 

The news comes in the wake of the platform recording a major surge in demand as more and more people turn to online shopping for essentials amid the nationwide lockdown. [ET Tech]

 

Byju’s in talks to raise up to $400m in fresh capital at a valuation of $10bn.

Racing Ahead

Ed-tech platform Byju’s is in talks to raise up to $400m in fresh capital at a valuation of $10bn, as per a TechCrunch report. 

 

The additional capital would be part of Byju's ongoing financing round that has already seen Tiger Global and General Atlantic invest between $300-$350m into the platform. 

 

The deal, if it goes through, will make Byju's the second most valuable startup in India, joining hotels and hospitality startup OYO - also valued at $10bn. At present, Paytm is the most valued Indian startup with it’s $16bn valuation. [TechCrunch]

 

US-CHINA

Trump threatens to kill US-China trade deal if China doesn’t buy $200bn more in American goods and services.

Shots Fired

Earlier in January, the world’s two largest economies – the US and China – signed a “Phase One” trade deal to pause a prolonged tit-for-tat tariff war. Many thought this would be the beginning of the end for a long and brutal trade war that had dragged down global economic growth for months.

 

But since then, things have changed – and for the worse. The COVID-19 pandemic has severely hurt the Chinese economy, which has suffered its first economic contraction since 1987. Thus, there are concerns that Beijing will be unable to keep its end of the bargain – to buy $200bn more in American goods over two years than it did in 2017, including about $40bn in agricultural goods.

 

US President Donald Trump, at least, has left nobody guessing about what Washington’s response to noncompliance will be. “[China] took advantage of our country. Now they have to buy and, if they don't buy, we will terminate the deal. Very simple,” he said at a recent virtual town hall. [SCMP]

 

US considers measures to remake global supply chains away from China.

Tenstions A-Brewin’

Besides resurgent trade frictions, US-China relations have nose-dived in recent days due to the Trump administration taking the Chinese government to task over their handling of the coronavirus in late 2019 when it was still an epidemic in China. The US accuses Beijing of covering up the severity of the original outbreak, stifling whistleblower accounts of COVID-19 and withholding virus samples from outside experts.

 

To this end, the US government is considering sanctions on China and policy measures to lure companies away from the world’s second-largest economy and remake international supply chains. [Reuters]

FIN.

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