Reliance Capital Shows Distress Signals, India Ready to Deal with Impact of US Sanctions on Iranian Oil, Facebook Building Cryptocurrency-Based Payments System et al.

Reliance Capital shows distress signals, left with scarcely INR11cr in cash reserves in March. India ready to deal with the impact of US sanctions on Iranian Oil. India's car stocks have lost $42bn in value in the last 16 months. Lending to auto sector put under review. Tesla plans to raise $2bn in capital through new equity and convertible notes. Tesla plans to raise $2bn in capital through new equity and convertible notes. 

 

Moving on to the top Business stories of the week.

 

 RCAP 


Reliance Capital shows distress signals, left with scarcely INR11cr in cash reserves in March. 


Running Dry: As per a CARE Ratings report, Reliance Capital (RCap), which runs one of India's top mutual funds, was left with just about INR11cr in cash reserves in March

 

Within this backdrop, creditors have asked the Anil Ambani Group's promoter entities for a share top-up.  

 

Progressive Degeneration: Anil Dhirubhai Ambani Group has from a $100bn market capitalisation in 2008 dropped down to a lowly $4bn at the moment. The market value of many of Anil Ambani’s companies are in a constant fall, and have shown no sign of halting or recovery. 

 
Headed For Default?: Moreover, in the recent times, the ratings of most of Anil Ambani's companies have been downgraded. CARE Ratings has downgraded INR12,700cr worth of Reliance Commercial Finance’s debt to “CARE D”, indicating that the instruments are in default or expected to be in default soon. Of this, INR12,500cr is towards long-term bank facilities and remaining INR200cr is towards non-convertible debentures.

 

 OIL 


India ready to deal with the impact of US sanctions on Iranian Oil.

 
Geared Up: As per Ministry of External Affairs spokesperson Raveesh Kumar, India is prepared to deal with the impact of the sanctions imposed by the US on buying oil from Iran.

 
He added that there will be additional supplies from other major oil producing countries based on India’s energy security, commercial consideration and economic interests.

 
In this respect, India is looking to secure an interest in Guyana’s oilfields, which according to energy firm ExxonMobil, have an estimated reserve of more than five billion oil-equivalent barrels in the offshore Stabroek block.

 
Hedging: India’s move comes against the backdrop of the need to find alternative sources of energy at a time when it needs to procure a total of about 12 million tonnes of extra crude over the year to bridge a supply gap that will be caused by the exit of Iran from its energy basket. Apart from Iran, the Donald Trump administration has also imposed sanctions on Venezuela’s state-owned oil firm Petróleos de Venezuela SA.

 
What You Need to Know: The US re-imposed sanctions in November on exports of Iranian oil after President Donald Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers. Washington, nevertheless, granted waivers to Iran’s eight main buyers - China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece - that allowed them limited purchases for six months. However, last month, the US announced that it will no longer grant sanctions waivers to any country that is currently importing Iranian oil. Subsequently, the six-month sanctions waiver for India and seven other countries to continue importing oil from Iran expired on Thursday, effectively shutting out Iranian crude beginning 3 May.

 

 AUTO 

 

India's car stocks have lost $42bn in value in the last 16 months. Lending to auto sector put under review.  

 
Growing Pile: A slowdown in consumption amid a cash crunch in the banking system has seemingly left carmakers with a pile of unsold vehicles in what was one of the world's fastest-growing auto market until last year.

 
As per this report, India's car stocks have lost $42bn in value in the last 16 months.

 
A gauge of automobile companies has fallen 30% since reaching a record in December 2017, and is the worst-performer among 19 sector indexes in the nation's equity market this year even as BSE Sensex Index rallied to a fresh peak last month.

 
Passenger vehicle sales in India rose just 2.7 percent in 2018-19, the slowest since 2014. 

 

Under Review: Within this backdrop, Kotak Mahindra Bank said that it is reviewing lending to the sector as it may have a significant impact on the economy. 

 

 TESLA 


Tesla plans to raise $2bn in capital through new equity and convertible notes.

 
Grand Plans: Electric auto maker Tesla on Thursday announced that it plans to raise up to $2bn through new equity and convertible notes.

 
Of the $2bn, $1.35bn will come from convertible notes and $650m from new equity, including a big purchase from CEO Elon Musk.

 
In a filing, Musk signaled his intent to buy about $10m (about 41,896 shares) of Tesla’s stock in the new offering. The total equity offering is for 2.7m shares of Tesla. Before the offering, Musk owned about 20% of Tesla’s outstanding shares, worth about $12.6bn. 

 
The proceeds will be used to continue the development of its autonomous driving offering which it sees as central to its strategy to become a $500bn company. However, most of Tesla's assumptions do not seem to hold water. Read this rather fascinating piece to know why. 

 

 TECH 


Facebook building cryptocurrency-based payments system. Verizon seeks to sell Tumblr. 

 
Project Libra: Social media giant, Facebook is in talks with dozens of financial firms and online merchants to help launch a cryptocurrency-based payments system on the back of its gigantic social network.

 
Facebook has reportedly met with Visa, Mastercard, and other financial firms, hoping to secure investments worth $1bn.

 
The super-secret cryptocurrency initiative is apparently code-named “Project Libra.”

 
At the heart of the initiative, is a digital coin that Facebook users could send to each other and use to make purchases both on Facebook and across the internet.

 
The new project by Facebook threatens to upend the entire experience of e-commerce and would likely be the most mainstream application yet of cryptocurrency.

 
In Other News…: Verizon Communications is seeking to sell its blogging website Tumblr.

 
Recap: Yahoo paid about $1.1bn for the New York-based site in 2013, when it was among a number of fast-growing startups such as online scrapbook Pinterest and news aggregation and commenting site Reddit.

 
But Tumblr struggled to generate meaningful revenue for Yahoo and was eclipsed by other social media, such as Medium, Facebook and Instagram, which Facebook bought in 2012. Yahoo wrote down Tumblr’s value by $230m in 2016.

 

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