Govt Counters Former CEA's Claim on Incorrect GDP Growth Numbers, Rise of Patanjali and Subsequent Fall, Superflares Could Damage Electronics and Other Top Business News Today

After auditors, SFIO hunts down top rating agencies in IL&FS scam. Patanjali’s sales plunge, inconsistent quality due to sudden growth cited as reason. TPG Capital, Manipal set to announce purchase of Medanta next week. Govt counters former CEA’s claim that GDP growth of India has been overestimated by around 2.5 percentage points between 2011-12 and 2016-17. Powerful superflares produced by the sun could damage electronics across the world.

 

Moving on to the top Business news today: 

 

 MISGOVERNANCE 


After auditors, SFIO hunts down top rating agencies in IL&FS scam.  


What: The then CEO of IL&FS group’s financial service arm, IFIN, provided villa at subsidized price to a senior director of a leading rating agency when a circuitous deal was underway with a defaulter, as per an investigation by the Serious Fraud Investigation Office (SFIO). 
 

The Action- Section: Following a probe by the Serious Fraud Investigation Office (SFIO) into top rating agencies ICRA, CARE Ratings, India Ratings and Brickwork Ratings, it has come to light that the agencies had maintained a stable rating for IFIN despite weak financials. Intervention by the top officials is being suspected. 


Subsequently, the Ministry of Corporate Affairs may invoke Section 447 against these agencies in order to impose a penalty and suspend them.


Preventive measures: The Government will soon introduce an exam on Law, Ethics and Capital market norms, which the company directors will have to clear in order to be appointed. 


The move comes on back of multiple lapses recently identified in the Indian banking and NBFC sectors.

 

 PATANJALI 

 

Patanjali’s sales plunge, inconsistent quality due to sudden growth cited as reason.

 
Despite Baba Ramdev’s declaration that Patanjali’s sales would double from INR10,000cr in 2017 to INR20,000cr in 2018, according to its annual financial reports, sales actually plunged 10% to INR8,100cr and have probably deteriorated further in the last fiscal year.
 
 
According to employees, suppliers, and other sources, Patanjali’s sudden expansion led to inconsistent quality.
 
 
Other issues included a lack of long-term deals with transporters, no proper software to effectively track sales, prioritisation of scale over quality, leading to farming out of production to third parties, and some unpaid suppliers turning their backs on the company.
 
 
Flashback: Read our article here about the rise of Patanjali to revisit its astounding growth.
 
  
 MEDANTA 
 
 
TPG Capital, Manipal set to announce purchase of Medanta next week.
 
 
Binding Offer: In one of the largest acquisitions in the Indian healthcare industry, TPG Capital and Manipal Hospitals are set to announce the purchase of Dr. Naresh Trehan’s Medanta chain of hospitals next week, with the transaction ascribing an enterprise value of INR5,800-6,000cr to the latter.
 
 
The INR5,800cr valuation will be an earnings before interest, tax, depreciation, and amortization (EBITDA) multiple of about 24 times for Medanta which is estimated to have posted an INR240cr EBITDA for FY19.
 
 
United, We Prosper: Together, Manipal and Medanta are estimated to have a bed count of about 7000-8000 beds once their individual ongoing expansion projects are completed. This will allow the Manipal investors to make an exit as the hospital grows in scale.
 
 
Manipal, which recently lost the bid for Fortis Healthcare to Singapore's IHH Healthcare despite making multiple bids, has not made any acquisitions since 2013.
 
 
The two will also help in expanding each other’s footprint, with Medanta having a strong presence in the North and Manipal having one in the South.
 
  
 PEOPLE 
 
 
Govt counters former CEA’s claim that GDP growth of India has been overestimated by around 2.5 percentage points between 2011-12 and 2016-17.

 
The Argument: In a recent paper, former CEA Arvind Subramanian has claimed that India did not grow at the heroic 7% per year between 2011-12 and 2016-17, as we were officially informed. He noted that the Actual growth was around 4.5 per cent.

 
How: Subramanian’s research indicated that the change in the Government’s GDP calculation method led to GDP growth being overstated by about 2.5 percentage points per year between 2011/12 and 2016/17.

 
India had started measuring GDP by market prices instead of factor costs, to take into account gross value addition in goods and services as well as indirect taxes. And the base year was shifted to 2011/12 from 2004/05 earlier.
 
 
Defending the Existing Methodology: Defending itself the Ministry of Statisticsand Programme Implementation said that India objectively measures the contribution of various sectors in the economy and the country’s gross domestic product (GDP) estimates are based on accepted procedures and methodologies.

 
Bonus Read: Former RBI Governor Raghuram Rajan is among the top contenders for the high-profile Bank of England governor's job. Many suggest Rajan, particularly due to his empathy for the United Kingdom's dilemma over Brexit, is a perfect fit for the top job at the 325-year-old institution. However, the question remains whether Brexit Britain is ready to hear them from another foreign governor.
 
  
 EARTH 

 
Powerful superflares produced by the sun could damage electronics across the world.
 
 
Capable: According to a study published in The Astrophysical Journal in which 40 sun-like stars were observed, it was found that older stars like the 4.6 billion-year-old sun are capable of producing superflares every few thousand years, a phenomenon previously thought to have only taken place on younger and more active stars.

 
Superflares are explosive galactic events in which stars emit extremely powerful and sudden bursts of energy, thousands of times stronger than normal solar flares. 

 
Impacts: A superflare in the near future could adversely affect electronics, with the potential consequences being blackouts around the world and malfunctioning of satellites, which would disable communications technologies, global positioning systems and more.

 
The Paper: Read the abstract of the paper published by The Astrophysical Journal here.
 

 

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