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India Ranks 77 on 'Ease of Doing Business' Index, India and Japan Sign Currency Swap Agreement et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Nov 4, 2018 1:25 PM 3 min read
Editorial

Good evening reader,

 

The scuffle between the Indian government and the Reserve Bank of India (RBI) with regard to Public Sector Banks (PSBs), tightening liquidity in NBFC market etc. seems to be intensifying off late. The government, this week, sought discussions with the RBI under provisions of Section 7 of the RBI Act. Section 7, if invoked, empowers the government to instruct the RBI, threatening the Central Bank's autonomy. 

 

In other news, following the appointment of a new Board under Uday Kotak, IL&FS submitted a restructuring framework which seeks to examine potential ways to come up with a feasible resolution plan. 

 

This week's Podcast was an attempt to deconstruct these and other top stories which made it to the headlines. 

 

The festive season brings along with it the season of earnings. Check out this week's LongShorts with key takeaways from US tech companies Q3 earnings season.

 

Moving on to this week's Top 6 Business Stories through our End Of Week Wrap Up:

 

INDIA 

 

India ranks 77 out of 190 countries (vs 100 last yr) in World Bank's 'Ease Of Doing Business' Index, jumps 23 spots.

India has improved its rank in 6 out of the 10 indicators and has moved closer to international best practices on 7 out of 10 indicators. The most substantial improvements have been observed in indicators related to 'Construction Permits' and 'Trading Across Borders'. 

 

India and Japan sign a currency swap agreement of $75bn to stabilize markets.

India and Japan signed a $75bn bilateral currency swap agreement in a bid to steady foreign exchange and financial markets of both countries. This arrangement will allow India to acquire Dollar or Yen up to $75bn in exchange for Rupee, paying interest on use of funds and vice versa.

 

IL&FS Board presents revival plan to NCLT, proposes fund infusion and asset monetization.

Recently appointed IL&FS Board submitted a resolution framework to National Company Law Tribunal (NCLT), proposing “significant” capital infusion by shareholders and new investors, divestment of assets, restructuring of debt and liquidation of subsidiaries. Board proposes planning and execution to complete within 6-9 months.

 

The Tribunal adjourned the matter to December 3.

 

Paytm reports losses of INR3,393cr, up 270% driven by online retail. L&T Q2 profits exceed estimates, surge c. 23% y-o-y.

Paytm Mall - the online retail business, reported a loss of INR1,788cr on revenue of INR775cr.

One97 Communications Ltd, the flagship payments segment also recorded higher losses than last year on back of increased marketing and payment gateway expenses. However, its consolidated revenue increased 4x to INR3,315cr.

 

Larsen & Toubro reported c. 23% y-o-y growth in profit, amounting to INR2,230cr. Gross revenue stood at INR32,081cr, listing 21% yearly growth, on back of ‘better execution of project businesses, growth in service businesses and recognition of revenue on completed performances’.

 

US/INTERNATIONAL

 

US will issue c. $1.3tr as new debt in 2018, Treasury estimates. Fed likely to increase rates soon in light of solid jobs data. US trade deficit with China hit an all-time high.

US Treasury Department projections reveal a 146% hike in debt issuance from last year, highest amount since 2010. GOP tax reform law and bipartisan budget deal are credited as drivers of the hike in new debt issuance.

Addition of 250,000 jobs in October, a 3.1% rise in average hourly earnings, and a low unemployment rate of 3.7% (lowest level in 49 years) demonstrate the continued expansion of US labour market. Analysts expect benefits to trickle down towards higher inflation thereby pushing the Fed to likely pick up interest rates aggressively in the future.

 

US trade deficit with China hit an all-time high of $40.24bn despite tariffs on imports. Analysts expect international demand for US exports to subdue going forward. Imports however appear to be well supported in the medium term on the back of an upbeat domestic demand.  

 

Facebook reports revenue of $13.7bn, shares wobble on mixed earnings report. Apple reports fourth consecutive rise in revenue and profits on back of higher iPhone price and App Store sales.

Facebook beat estimates of its earnings per share at $1.76, but fell short on revenue, daily and monthly active users estimates. The company, as per Mark Zuckerberg, plans to spend more to build new products like Facebook Watch, Instagram TV etc.

 

Apple recorded its best year, as its quarterly earnings showed 20% growth y-o-y in revenue and earnings per share at $2.91 vs. an expected $2.78 EPS.

 

However, Apple’s shares were down c. 6.5% in after-hours trading as the company forecasts a lower than expected earnings for the holiday quarter.

 

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