Top Business News of the Week: Jet Airways News, Facebook Cryptocurrency News, Fed Interest Rate Decision

Lenders of Jet Airways led by SBI to take the carrier to NCLT, seek resolution under IBC. Facebook announces its own digital currency - Libra. US central bank leaves benchmark rate unchanged. Qatar’s sovereign wealth fund in talks to invest in ed-tech start-up Byju’s. Paytm Money plans to raise c. $1.2bn in a mega funding round, set to enter the unicorn club. Amazon in talks to invest in grocery supply chain platform NinjaCart. PE investors seek details about Yes Bank.

 

Moving on to the top Business news of the week.  

 

 JET 

Lenders of Jet Airways led by SBI to take the carrier to NCLT, seek resolution under IBC. Jet Airways share price falls to an all-time low. ED to question Founder Naresh Goyal in the Jet Airways privilege case.

  

Weighing the Options: Lenders of the grounded Jet Airways are set to meet today in order review a possible resolution for the private carrier and also discuss whether bankruptcy may be the most viable option as no serious proposal has not been received so far. 

 

Lenders also have the option to pay INR200cr to the US Exim Bank and take charge of six Jet Airways planes, but as per experts, they are unlikely to opt for such a plan.

 

 The Burden of Debt: After running out of cash and failing to raise interim loans from banks, the airline suspended all flights on April 17. Jet has accumulated debt of nearly INR8,500cr on its books with total liabilities of around INR25,000cr.

 

Share Plunge: Jet Airways share price fell to an all-time low of INR69.75 before closing at INR66.95 (-18%).

 

 
Not So Privileged: The Enforcement Directorate (ED) is likely to question Jet Airways Founder Naresh Goyal in relation to stake sales in the unit that ran the grounded carrier’s loyalty programme, Jet Privilege. 

 
Other Charges: ED is also examining allegations of tax evasion of more than INR650cr made against Jet Airways and its units.

 
Jet Airways incorporated Jet Privilege Pvt Ltd (JPPL) as a wholly owned unit in 2012. After Etihad bought a 50.1% stake, it was hived off as an independent entity. 

 
More on this here.

 
 
 FUNDING 
 
Qatar’s sovereign wealth fund in talks to invest in ed-tech start-up Byju’s. Paytm Money plans to raise c. $1.2bn in a mega funding round, set to enter the unicorn club. Amazon in talks to invest in grocery supply chain platform NinjaCart. PE investors seek details about Yes Bank.
  
 
 
Arabian Delights: Bengaluru-based educational start-up Byju’s is reportedly closing a $200-250m round of funding from Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA). 
 
 
The deal will reportedly lead to QIA acquiring a 5% stake in Byju’s. This is the first tech-based investment for the Middle-eastern nation in India. Earlier, it had invested in Airtel, RMZ Corp and Flipkart. 
 
 
Valued at over $5.4bn, Byju’s is already the most-valued ed-tech company in the world.
 
 
“The Next Big Thing”: Paytm Money, the wholly-owned subsidiary of Paytm that runs mutual funds, insurance, forex, and other financial services on the platform is planning to raise as much as $1.2bn in a mega funding round at $5bn valuation.

 
The deal, if it goes through, will make Paytm Money the third unicorn of Paytm family. This would also make Paytm Money the most valued startup in the country right below BYJU’s.
 
 
Fresh Produce: Amazon is reportedly in talks to invest in NinjaCart, the Bengaluru-based start-up that connect farmers directly with businesses. 
 
 
Ninjacart had recently raised $89.5m from US-based venture capital firm Tiger Global, and talks with Amazon have been reportedly going on since then.
 
 
Grocery services are of major interest for the US e-commerce giant, with 10% of its $5bn investment in India committed to food retail. Its own NinjaCart equivalent, Amazon Fresh, is unavailable in India.
 
 
Details Before Dollars: Top private equity investors Blackstone Group, Apax Partners and Warburg Pincus might commit to an equity infusion into Yes Bank. But before doing so, they are seeking more details about the bank’s exposure to stressed loan accounts. 
 

Yes Bank is reportedly courting a $500-750m equity infusion to boost investor confidence and improve its loss-absorbing capacity. However, the US-based investment firms seeking details could delay the bank’s fundraising plans.
 
 
 
 TECH 

Facebook announces its own digital currency. The crypto world’s reception to Libra has been lukewarm. Will Facebook cause a “crypto Cambridge Analytica”? Facebook cryptocurrency Libra may not be available for launch in India. Slack closes 48.5% up in public debut.
 

Foray into Fintech: After months of build-up, Facebook finally revealed its digital currency, Libra. Pitted as the first mainstream global crypto-currency, it will be launched in the first half of 2020. Libra would then be available to anyone with an entry-level smartphone and an internet connection.


The virtual currency can be bought by users using fiat money, which adds to the reserve assets (along with investors’ contributions) that Libra is backed by. This is what sets it apart from, say, Bitcoin or Ether, which are speculative assets and are thus prone to wild fluctuations.


Facebook rushed to assure the public that data security and user privacy would be taken care of. An independent Libra Association (of which Facebook will be one of 100 members) will be established to govern all aspects of the currency.


Are you Crypto Enough?: Crypto enthusiasts are divided on Libra. Many are optimistic – and proud. Just a few years ago the world was mocking the crypto community, dismissing them as naive and impressionable. Today, one of the biggest companies in the world is investing in a crypto-currency, and the concept in mainstream, discussed by everyone from news anchors to policymakers.


 Many allude to the project’s potential. For example, Changpeng Zhao, CEO of the crypto-currency exchange Binance, wrote that Facebook has a chance to “reshape the payment industry” and start the “un-dollarisation of the world”.


On the other hand, many are decrying Libra as a betrayal of blockchain technology. Crypto-currencies usually have a decentralised structure and are borderless, censorship-resistant and open to public verification. Libra’s reliance on reserve assets and the composition of the Libra Association have led to some commentators concluding that it will be able give competition to banks, not Bitcoin.  


But will Facebook be Facebook?: Libra was also met with suspicion – given Facebook’s tarnished record on data security and compromising users’ privacy.


Additionally, there are fears that Libra’s Achilles’ heel won’t be Facebook itself, but its developers. According to the company’s white paper, the currency will be based on Libra Blockchain, which will be an open source platform that “any consumer, developer or business” can build on.


In 2013, a data scientist at the University of Cambridge was able to access numerous Facebook accounts after the company allowed him to harvest data for his third-party app (this was thanks to “Open Graph”, a feature on Facebook that was launched in 2010). A political consultancy firm, Cambridge Analytica, bought this data, accessed even more, and used it to chart users’ political preferences and target political ads accordingly. The resulting data breach affected 87 million users.


Now, given that Libra’s barriers to entry for research and innovation are practically zero, could Cambridge Analytica happen again? If it does, this time it won’t be usernames and passwords that will be compromised. It will be crores of digital currency that will be stolen.
 
 
The What: As per reports, Facebook cryptocurrency, Libra, which is to be launched by the social media giant next year may not be available in Indiasince the current regulations do not permit use of the banking network for blockchain currency transactions. 

 

Zuck Wants Your Buck: Libra is a virtual currency that can be bought by users on platforms like Messenger and WhatsApp (owned by Facebook) and stored in a digital wallet called Calibra, which would be a standalone app.

 

Some Perspective: RBI had last year announced a ban on cryptocurrency in India, restricting any regulated entity from conducting business with its proponents. The draft Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019 seeks to jail anyone who “mine, generate, hold, sell, transfer, dispose, issue or deal in crypto-currencies”.

 

A Loophole: However, peer-to-peer transactions of bitcoins are allowed. As per experts, If Facebook were to design the Libra to be a closed system, only to be transacted on its network and not beyond, RBI should ideally be less concerned.

 

Up & Up: Workplace communication software Slack, which debuted on the New York Stock Exchange yesterday, closed 48.5% up at $38.50 supported by reports that the giant had agreed to a reference price of $26 per share.

 

Slack’s market cap now sits well above $20bn, nearly 3 times its most recent private valuation of $7bn.

 

 INDIA 

Some progressive reforms the government could push in its upcoming budget 2019. FM Sitharaman expected to discuss single point refund system at GST Council meet.

 

It’s Always the Right Time for Reforms: Very soon, the re-elected Modi government will present the first budget of its second term. Under the new Finance Minister Nirmala Sitharaman and five full years ahead, it is presented with an ideal opportunity to push significant reforms.

 

Many of these reforms, commentators hope, will be in the income tax regime, beginning with revising tax rates, which, though reduced recently for the INR2.5L-5L income bracket jumps abruptly to 20% for the next income slab (INR5L-10L).

 

Other possible reforms include incentivising individual investments by raising the cap on deductions, increasing HRA exemptions in metros, and boosting deductions for home loan interests and saving bank account interests.

 

Goods & Services Talk: When FM Sitharaman chairs her first GST Council meet tomorrow, she is expected to extend the tenure of the body by a year. The Council had been established in 2017 originally for a period of two years.
 
 
It will be the body’s 35th meeting and it is expected to discuss the adoption of a single point refund system. The present system gives refund-sanctioning authority to both central and state officials. But the new model being developed by the Revenue Department would see refunds sanctioned by a single jurisdictional officer.
 
 
The Council could also debate a bill that seeks to amend GST law to permit businesses to rectify mistakes made during tax payments.
 
 
Integrating e-way bills with the National Highway Authority of India’s (NHAI) FASTag mechanism could also be deliberated on. This would allow officials to monitor how many times a vehicle crosses NHAI’s toll plazas.

 

 US  

US central bank leaves benchmark rate unchanged. This will again anger Trump, who has been attacking the Fed for not slashing interest rates.

 

Steady Does It: The US Federal Reserve today left interest rates unchanged at the 2.25-2.5% range, where it has been since December last year.

 

The Federal Open Market Committee voted 9-1 in favour of keeping the benchmark rate unaltered.

 

The central bank noted that while economic indicators painted a largely mixed picture, the state of the economy remained strong.

 

The Donald Will Be Displeased: The decision to keep rates unchanged will likely irk the White House. President Trump has been pushing the Federal Reserve to slash rates to stimulate economic growth, which has been gradually stalling.

 

In his press conference, Chairman Jerome Powell said that the bank would like to wait and “see more data before moving rates”. However, he did not rule out the possibility of a rate cut in the near future, predicting at least one or two cuts - but not until 2020.

 

And in its statement, the central bank dropped the word “patient” when talking about its approach to policy. This gives it plenty of wiggle room to change its stance should the economy go awry this year (or should Trump’s tirades actually dent the Fed’s independence).

 

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