Mukesh Ambani unveils plans to enter India’s e-commerce market. Flipkart Pvt Ltd reports 63% drop in losses, 42% jump in consolidated revenue. Alibaba posts 40% rise in Q2 revenue, boosted by e-commerce and cloud computing businesses. Alphabet share price dips as the company posted 23% decline in profits on the back of rising expenses. BP sees net profit fall by 41%. Twitter says it will ban political ads on the platform. WhatsApp sues Israel’s NSO Group over surveillance allegations. Govt plans to make OTC drugs available at retail outlets. For Vision Fund 2, SoftBank eyes digital pharmacies and lab-grown meat start-ups. As iPhone sales fall, Apple India profit plunges by over 70%. WTO recommends India withdraw export subsidies in case filed by US. As expected, Federal Reserve cuts interest rates for third time. EU agrees to Brexit “flextension”, new deadline is January 31, 2020.
Moving on this week's End of Week Wrap Up:
Table of Contents
Ambani Ma: Asia’s richest man is reportedly eager to build India’s answer to Jack Ma's Alibaba. Mukesh Ambani has unveiled plans to set up a $24bn digital services holding company that would aid Reliance Industry Ltd’s aim to enter and dominate India’s internet shopping space, which would involve taking on Flipkart and Amazon.
This is the latest sign of the oil-to-petrochemicals group’s pivot towards data and digital services. Back in August, Ambani had told shareholders that new businesses – including retail and telecom – would contribute to half of RIL’s earnings in a few years as opposed to the 32% today. The Print
King of the Jungle: Mukesh Ambani's Reliance Industries Limited has become the sixth largest global energy firm by market cap, overtaking British oil major BP Plc.
RIL today hit a market cap of $130.76bn vs BP Plc’s $128bn. Interestingly however, RIL’s rise in market cap was largely on the back of its retail and telecom businesses. Livemint
Content is King: Moving on to another burgeoning vertical of RIL - media. Reliance Jio has disrupted the telecom sector and is already India's largest telecom operator. With the aggressive commercialisation plans for JioFiber - the company's home poadband service - RIL is looking to lay the groundwork for its "triple play strategy". This involves offering consumers voice and data services through smartphones, high-speed home internet, and a host of digital services and content.
Jyoti Deshpande, President - Media and Entertainment at RIL, told Fortune India, “Our mandate is to consolidate the media and entertainment business, grow the sector and use it as a fuel to grow the distribution business multifold.” And to achieve this, RIL will be actively investing in content to expand its reach. Fortune India
Flipping on Cloud 9: In its first yearly performance report since it was acquired by US-based retail chain Walmart, Flipkart reported a 63% drop in losses and a 42% jump in consolidated revenue in the FY ending March 31, 2019. The company also has decreased its overall expenses from INR46,895cr to INR17,281cr, it said in its filings in Singapore.
Flipkart Pvt Ltd is the parent company of e-commerce platforms Flipkart, Myntra and Jabong; logistics firms EKart; and digital payments company PhonePe. Despite the positive numbers, three key units – Flipkart Internet, Flipkart India and PhonePe – have incurred heavy losses this year. Inc42
Chinese Juggernaut: Despite domestic consumption slowdown in China and trade doldrums apoad, Alibaba reported a 40% rise in Q2 revenue, exceeding expectations.
Total revenue rose to $16.91bn in the quarter ending in September. The company’s e-commerce business reported a 40% increase in sales while its cloud computing business posted a 64% jump in revenue.
Alibaba’s US-listed shares climbed c. 2% to $180.25 in trading before the bell.
The strong growth numbers come as China’s largest company gears for its annual Singles Day shopping gala, faces increased competition at home, and looks to launch a Hong Kong IPO. Reuters
Money and Other Things: Google's parent, Alphabet’s share price fell as much as 4% in after hours trading after it reported a 23% decline in profit, missing analyst expectations, on the back of rising expenses.
Google’s parent company posted earnings of $10.12 per share in Q3, lower than the $12.42 per share expected. CNBC
Petroleum Conundrum: Citing lower upstream earnings, weaker oil prices and maintainance and weather impacts, BP reported a 41% fall in Q3 net profit.
The oil giant posted net profit of $2.3bn. In Q2 that number was $2.8bn while in Q3 last FY it was $3.8bn.
While the numbers exceeded analysts’ expectations, the sharp drop in profits led to BP shares dipping 0.5% shortly after opening bell. CNBC
Twitter Sweet Symphony: On Wednesday, Twitter was awash with a tweet burst by the company's CEO, Jack Dorsey, when he announced that the platform will stop accepting political advertising globally. Twitter
In his long tweet thread, Dorsey said "A political message earns reach when people decide to follow an account or retweet. Paying for reach removes that decision, forcing highly optimized and targeted political messages on people. We believe this decision should not be compromised by money."
Are You On Your Mark?: Dorsey's announcement comes amidst intense scrutiny of Silicon Valley's treatment of falsehoods and fake news. Recently, Facebook CEO Mark Zuckerberg was taken to task by a US Congressional Committee over his refusal to fact-check political ads on the platform. Committee members said this would proliferate lies and mislead voters, but Zuckerberg argued that a fact-checking process would be open to bias, violate free speech rights, and deny voters the chance to judge for themselves the validity of a politician's claims. Guardian
Twitter's decision now puts the ball in Facebook's court. Zuckerberg reacted to the news by reiterating his company's stance on the matter. He said, "In a democracy, I don't think it's right for private companies to censor politicians or the news," before adding that Facebook would "continue" to evaluate whether it is beneficial to permit political ads. CNN Business
Legal Action: In what it said was the first time an encrypted message provider had taken legal action of such a kind, WhatsApp said it is seeking a permanent injunction against Israel’s NSO Group from using its service.
WhatsApp accused NSO Group of sending malware of roughly 1,400 mobile phones for surveillance. The targets apparently included 100 members of civil society from several countries, including Bahrain, Mexico, and the United Arab Emirates.
NSO Group, which makes software for surveillance, refuted the allegations and said it would “vigorously fight them”. BBC
In Other News: The government is mulling a plan to make OTC (over-the-counter) drugs available at retail stores, with their labelling containing important information — preferred dosage and side effects — in local languages.
The move shall increase availability of these drugs areas where pharmacies are rare and doctors are not easily available. BS
Whatta Vision: Vision Fund, SoftBank’s $100bn investment behemoth, sent tremors around the start-up world. Now the Japanese conglomerate is eyeing investments for Vision Bank 2, which is apparently going to be even larger than the first. Prospective candidates include a pharmaceutical delivery startup, a robotic burger-maker, and a lab-grown meat company. Japan Times
Apple Today Kept the Profits Away: In 2017, 2.3mn iPhones were sold in India. In 2018, that number was 2 million. A weakening rupee, higher import duties and economic slowdown factored in, leading to Apple India’s revenue and net profit falling for the first time in FY19.
As per regulatory filings, revenue from operations fell 19% to INR10,538cr while profit fell to INR262.3cr – a drop of over 70%. ET Tech
A Victory for America at India's Expense: A WTO panel has recommended that India withdraw "prohibited subsidies" within 90-180 days.
The case was bought by the US, which had alleged that India's export subsidy measures to exporters, worth over $7bn, were in violation of WTO norms. The US Trade Representative (USTR) said these measures were unfair on importers and that India's exemption to the WTO rule prohibiting such concessions had expired in 2015.
“... India gives prohibited subsidies to producers of steel products, pharmaceuticals, chemicals, information technology products, textiles, and apparel, to the detriment of American workers and manufacturers,” the USTR said in a statement.
These schemes include the Merchandise Exports from India Scheme (MEIS); Export Oriented Units Scheme and related sector specific schemes (EOU); Special Economic Zones (SEZ); Export Promotion Capital Goods Scheme (EPCG); and a duty free imports for exporters programme (DFIS). HT
It's A Cut: It was widely expected and it's the third time this year. The Federal Open Market Committee (FOMC) lowered its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75% on Wednesday. The easing comes as US growth numbers decrease and the global economic outlook becomes ever-so-gloomy.
The Fed's decision was received positively by markets. US equities rose, as did Asian equity markets.
Significantly, the Federal Reserve indicated further rate cuts are presently off the table. In its statement, the FOMC removed a key phrase - that it was committed to “act as appropriate to sustain the expansion” - that had been incorporated into official language since June as a way to tease the impending monetary easing. CNBC
In its place was more moderate language. “The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate,” the statement said.
Future decisions, the Fed explained, would depend on future economic numbers, news on trade tensions between US and China, and movement of inflation, which continues to run below the 2% objective.
The Central Bank also indicated that only if inflation goes past the target level will there be a case for a rate hike. This means even if a wholesome trade deal is reached between Washington and Beijing, the rates might not be increased. Such a "lower for longer" stance is particularly good news for emerging market assets - from currencies to equities. Moneycontrol
Brexit is Just A Series of Déjà Vus: The 27 European countries that aren’t planning on leaving the EU anytime soon have consented to London’s request for a three-month extension of the Brexit deadline. The new deadline will be January 31, 2020.
“The EU27 has agreed that it will accept the UK’s request for a Brexit flextension until 31 January 2020,” European Council President Donald Tusk tweeted today. “Flextension” is a portmanteau for “flexible extension”, which means Britain could leave the EU before the deadline provided if British MPs approve the deal Brussels recently signed with Boris Johnson. Reuters
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