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Swiggy to Launch Local Commercial Services, Nissan’s Board Removes Carlos Ghosn et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Nov 23, 2018 11:36 AM 4 min read

Good evening reader,


"Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes."

- Benjamin Franklin, in a letter to Jean-Baptiste Leroy, 1789


The landmark quote has numerous nuances. The Government of India has certainly taken the very last part (in bold underline for convenience ;) of it in zest over the past few years.


No, we won't talk of the much discoursed GST, but its relatively obscure cousin by the name of Angel Tax. 


"Oohh Angel Tax, sounds so mysterious. Say that to a start-up Founder and you risk getting a mouthful."


Enough build-up, what is it?: The first set of investors in a start-up are often called Angels. The "valuation" at which they invest let's just say is a wee bit subjective. The company has just started and values itself based on the present value of its future cash-flows. Without any track record, any forecasts are basically just...forecasts. 


Some time goes by. The company raises another round...this time at a lower valuation than earlier (may be due to changed prospects, lack of product-market fit etc.). In comes the tax man calling out Angel number one questioning why was the money raised at a higher valuation earlier, now that the "fair value" of the company is lower. Pay up. Angel number one never invests again. 


The Angel Tax showed its head around two years back. It has shown up again, this time through the MCA who issued notices to over 2,000 startups


Its a retrograde concept which needs urgent reform. Wish the World Bank includes it in its Ease of Doing Business ranking. That may help. 


Now, today’s Top 6 Business News Stories through our End of Day Wrap Up:


Vodafone Idea and Bharti Airtel to switch off subscribers who spend less than INR35 a month.

Perspective: The move comes shortly after both telecos announced various recharge plans beginning at INR35.


Zoom out: Airtel and Vodafone Idea currently have about 100 million and 150 million users respectively who are below INR35 a month bracket.


The Bigger Picture: According to officials, even if half the subscribers remain on the network and move to the new minimum INR35 a month plan, the revenue accrued will be a higher number.


Heads of PSBs can now issue look-out circulars (LOCs) against wilful defaulters.


The government has authorized chiefs of PSBs to request for look-out circulars (LoCs) against wilful defaulters in an attempt to prevent them from fleeing the country in cases when an FIR is yet to be filed.


Swiggy set to launch local commerce services.


As per a Business Standard report, the Bengaluru-based food tech company is gearing up to launch its local commerce services on December 15.


What’s the plan: Swiggy is likely to tie up with supermarket chains, pharmacies, meat shops, pet stores, flower vendors and others, charging vendors a commission of 2-3% and also levying a delivery fee on every order.


The Bigger Picture: The move will help Swiggy utilize its fleet in between meal times when the demand is low.


RBI applies Basel-III guidelines to all scheduled commercial banks in India, rejects govt’s proposal to restrict guidelines to four banks; Govt to push for more representation in key Committees ahead of Dec 14 Board meeting. 


The What: The govt has been pushing for the application of BASEL-III norms to be restricted to four “internationally active” banks only, including State Bank of India, Bank of Baroda and ICICI Bank. The RBI on the other hand, wanted the implementation of capital adequacy norms to all commercial banks in a bid to maintain the same set of standards to prevent build-up of risk in the banking system.


Zoom Out: The govt had previously moved a proposal seeking restructuring of 3 of RBI’s key Committees – Board for Financial Supervision (BFS), the Board for Payment and Settlement Systems (BPSS) and the Committee of the Central Board (CCB).


Nissan’s board removes Carlos Ghosn as Chairman following his arrest.


Nissan reported misconduct committed by Mr. Ghosn including underreporting his compensation and using company funds for personal expenses.


Zoom Out: Mr. Ghosn, one of the car industry’s most powerful leaders is credited with turning around Nissan and forging strategic alliances with Renault and Mitsubishi Motors boosting the company's sales. Nissan-Renault partnership under duress.


US asks allies to avoid use of telecommunications equipment from China’s Huawei Technologies.


According to a WSJ article, US has cautioned allies including Germany, Italy and Japan against a potential cyber security risk from Huawei. The telecom gear maker is under scrutiny for its alleged ties to the Chinese government and the possibility its equipment could be used for espionage.


Perspective: US is reportedly concerned about use of Chinese telecom equipment in countries that host American military bases where sensitive communication also travels through commercial networks other than the Defence Department’s own satellites and telecom network.


Other Stuff: Washington is also considering increasing financial aid for telecommunications development in countries that reject Chinese-made equipment.


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