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RBI Cuts Repo Rate, Softbank's “Vision Fund” Running Out, Record LPG coverage Under Pradhan Mantri Ujjwala Yojana, Amazon's Cloudtail Makes a Comeback et al.

Professor of Financial Economics and Part-time Value Investor, Transfin.
Feb 7, 2019 2:32 PM 3 min read

RBI cuts repo rate by 25 basis points to 6.25%. Softbank's $100bn “Vision Fund” running out. India achieves record LPG coverage under Pradhan Mantri Ujjwala Yojana (PMUY). Revamped Cloudtail makes its online return.


Now to Today's Top Business News Stories in Our End Of Day Wrap Up:



RBI cuts repo rate by 25 basis points to 6.25%.

As Per Popular Expectation: RBI today announced a 25 basis points rate cut to 6.25% in a 4-2 vote, changing its stance to “neutral” from “calibrated tightening” on back of a global economic slowdown, inflation hovering at an 18-month low below the Central Bank’s 4% +/- 2% target, amongst others. This is the first rate cut since August 2017.


Taking a U turn: This was the first policy meeting since Shaktikanta Das took over as the Governor, and marks a dramatic shift in RBI’s stance, providing it with more flexibility to meet growth challenges. 


Strengthen Private Investment Activity and Buttress Private Consumption: Read the RBI Press Release here. View the MPC conference video here.



India achieves record LPG coverage under Pradhan Mantri Ujjwala Yojana (PMUY). Also, set to overtake China as the second biggest importer of oil.

Beating Records: The Pradhan Mantri Ujjwala Yojana (PMUY) has so far provided over 6 crore free LPG connections since its launch in May 2016. The target has now been increased to 8 crore connections by March 2020 (c. 90% coverage).


Rapid Increase in LPG Imports: India imported over 9 million mt of LPG in the April-December period in the current FY and the number is estimated to go up to 12 million mt for the entire fiscal vs 11 million mt imported in the previous year. This demand is projected to further rise 34% by 2025.

In Other News: India may soon overtake China as the second largest oil importer, after US, accounting for 14% of 2018's global demand growth for oil.


Factors that augment this growth include increase in commercial vehicle sales, GST tax regime which has affected operational efficiencies and the lack of alternatives to conventional fuels.



Softbank's $100bn “Vision Fund” running out.

Is Softbank Running Dry?: Japanese Tech Giant Softbank has invested more than 40% of its $100bn target Vision Fund in less than two years. With around $7bn per quarter spending rate, the fund is likely to last only another year and a half.


Softbank Rallies: The Company’s stock surged more than 17% after CEO Masayoshi Son announced massive stock buyback following robust quarterly earnings. The Group announced repurchase of 112 million shares worth 600 billion yen (approx. $5.46bn) in the next 11 months.


Also this: The Group also sold off its $3.6bn stake in California based chip manufacturer Nvidia which was held through the Vision Fund.



Etihad infuses INR252cr in Jet Airways.

Etihad injects INR252cr into Jet Airways by pre-purchasing tickets through its loyalty program Jet Privilege.

Jet Continues to Lag: However, the infusion might not be enough to repay Jet’s debts considering that loan repayment for this FY alone exceeds INr1,700cr.


Zoom Out: Jet is currently in talks with Etihad for an equity infusion. Etihad, however, has put forward stringent conditions including a price not more than INR150 for each of Jet’s shares.


Meanwhile...: Pilots of Jet Airways likely to take a call on the staggered disbursement of their salaries amidst the financial crisis next week. Read more on this here.



Revamped Cloudtail makes its online return.


Cloudtail Makes a Comeback: Cloudtail, the largest seller on Amazon India returned a week after suspending operations. During this time, Cloudtail underwent major restructuring with NR Narayana Murthy’s Catamaran Ventures increasing their hold to 76% from 51%, and reducing JV partner Amazon Asia’s stake to 24% from 49%.


The Bigger Picture: With this change in ownership Cloudtail ceases to be an Amazon Group company, hence eligible to be sold on the marketplace. 

If You Recall: This restructuring comes in lieu of the new FDI in ecommerce rules announced on December 26 which prohibits marketplaces and their group companies from equity participation in any of their sellers or control over inventory.

Flipkart Cofounder Binny Bansal also critisised the revised framework stating that while giants such as Amazon and Flipkart are likely to navigate around the new policy, small startups and early-stage companies will be adversely hit. 

Will Walmart Exit Flipkart?: Analyst predict that such framework for foreign investment might discourage investors from entering the market. Rumours also predict Walmart’s exit from Flipkart, though it may be more difficult than it sounds. 


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