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Vodafone Idea AGR Dues May Rise Further, Airtel Withdraws Bid For RCom Assets, Govt Considering Increasing Insurance Cover On Bank Deposits

Professor of Financial Economics and Part-time Value Investor, Transfin.
Nov 18, 2019 1:05 PM 6 min read

Govt considering increasing insurance cover on bank deposits. India Inc reports a combined net loss for the first time in 15 years. Vodafone Idea estimated AGR dues may rise significantly. Airtel withdraws bid for RCom assets. Saudi Aramco sets $1.7tr valuation. At $25.6bn, IPO could be biggest in history. US air-safety regulators considering overhauling aircraft certification process.




Government considering increasing insurance cover on bank deposits.  

Hope For A Better Tomorrow: The government is considering increasing the insurance cover on bank deposits from the current INR1L to anywhere between INR2L - INR3L under a modified Financial Resolution and Deposit Insurance (FRDI) law. 


The news comes at a time when customers of fraud-hit Punjab and Maharashtra Co-operative (PMC) Bank have been demanding their money back, other than lifting the daily withdrawal curbs. 


Good to Know: The government has kept the deposit cover unchanged at INR1L since May 1993, when it was raised from INR30,000 after the security scam in 1992 had led to the liquidation of Bank of Karad in Maharashtra. Financial Express

Govt may ease restrictions on FDI by JVs of Indian companies.

The government may soon ease restrictions on foreign direct investment (FDI) by joint ventures (JVs) or wholly-owned subsidiaries (WOS) of an Indian company without categorising such investments as "suspect" involving 'round tripping' of funds.


The move is perhaps an attempt to ease the flow of foreign funds into legitimate business activities.


Digging Deeper: The existing legal framework under FEMA does not permit FDI by an overseas JV or WOS of an Indian party without the prior approval of RBI. Similarly, there are restrictions on Indian entities to undertake overseas direct investment (ODI) in a foreign entity which already has existing FDI investment structures in India. Livemint


India Inc reports a combined net loss for the first time in at least 15 years in Q2.



India Inc reports a combined net loss for the first time in at least 15 years in Q2. 

Unforseen: India Inc has reported a combined net loss for the first time in at least 15 years in Q2 on the back of the record losses posted by telecom operators. 


Net sales contracted for the first time in four years during the same period due to demand contraction in the domestic economy. 


Listed companies, excluding financials and oil and gas, reported a combined net loss of INR16,000cr in Q2 FY20 vs a net profit of INR73,000cr last year. The combined net sales for companies, excluding financials and oil, were down 0.4% YoY - their worst quarterly showing in at least three years.


The listed mobile operators, such as Bharti Airtel and Vodafone Idea, together reported a net loss of INR1.05L cr during the quarter, compared to a net loss of INR4,100cr a year ago. BS

Flipkart and Amazon clock $4.3bn in festive sales.

Tears of Joy: Ecommerce giants Flipkart and Amazon had together raked up sales worth whopping $4.3bn during the 15-day festival period in October, as per a report by RedSeer Consulting. However, the number still fell short of analyst expectations of $5bn in sales. ET Tech


The average order value for Flipkart stood at INR1,976 vs INR1,461 on Amazon. Flipkart led with 64% share of the combined gross sales while Amazon continued to fare higher in net promoter score (NPS). NPS measures the loyalty of customers to a company.



Vodafone Idea's estimated AGR dues may rise significantly.

Adjusted For Loss?: Vodafone Idea’s estimated AGR-related dues of INR44,200cr could rise sharply if the methodology adopted by the telecom department to compute such liabilities is different, noted analysts.


Financial services company Credit Suisse said if the telco’s total AGR dues work out higher at “INR54,200cr as per DoT’s internal estimates basis a report, the company would have to make additional provisions of INR10,100cr”. ET Telecom News

Airtel withdraws bid for RCom assets.

We Scream Foul!: Bharti Airtel has withdrawn its bid for the acquisition of the assets of Reliance Communications after lenders agreed to extend the deadline for submitting the bids by 10 days.


As per Airtel, this move was unfair and biased as the Committee of Creditors had earlier rejected its request to extend the deadline from November 11 till December 1, following which it was forced to submit its bid in haste to meet the deadline. 


However now, the CoC has agreed to extend the deadline to November 25 after Reliance Jio sought 10 more days to submit its bid.


While Airtel has withdrawn its bid, it has not ruled out submitting a fresh resolution plan within the new deadline. Hindu BusinessLine



Day One of Dubai Air Show closes with only one deal signed, indicating tough market conditions.

Not Flying High: Indicating tough market conditions, Day One of the Dubai Air Show closed with only one deal announced. The deal - which involved the sale of two Boeing 787-9 Dreamliners to Biman Bangladesh Airlines - was worth $585mn, a far cry from 2017's Day One sale of jets worth $15.1bn or 2013's record-setting $192bn. 


The biennial aerospace expo will run till Thursday, November 21. The order book could still grow significantly. CNBC

US air-safety regulators considering overhauling aircraft certification process.

Intervention: In the wake of Boeing's 737 MAX crisis, US air-safety regulators are reportedly considering ways to overhaul how they certify aircraft. Among the measures the Federal Aviation Administration is considering are more dialogue between the organisation and plane makers over the course of development of a new jet and ensuring that "human factors," like pilot reaction time are priorities when jets are designed.  WSJ


Accommodation: Speaking of Boeing's 737 MAX grounding, the two deadly crashes associated with that aircraft shifted investors' attention on how companies manage the weakness in demand for larger planes, such as the 777 and A330, that remain their most profitable products. And the slowing passenger growth and slump in air cargo traffic are making airlines turn away from big jets. WSJ


Saudi Aramco sets $1.7tr valuation. At $25.6bn, IPO could be biggest in history.



Saudi Aramco sets $1.7tr valuation. At $25.6bn, IPO could be biggest in history.

Aramco Has Arrived: Saudi Aramco has set a $1.6-$1.7tr valuation target. This is below the $2tr valuation sought by the Saudi Crown Prince but still in the running to become history's biggest IPO.


Oil Be Buying Aramco Shares: The world's most valuable company plans to sell about 3bn shares at an indicative price range of 30-32 riyals. Selling 1.5% of the oil giant would value the IPO at about $25.6bn, above the $25bn Chinese e-commerce giant Alibaba raised in its record-setting 2014 New York IPO. Moneycontrol


The More You Know: Aramco sits on 260.2bn barrels of oil equivalent in 2017, larger than Exxon Mobil Corp, Chevron Corp, Royal Dutch Shell Plc, BP Plc and Total SA combined. Its production cost is the world's lowest, and it pumps 10% of the world's oil supply. More facts and stats about Saudi Aramco can be read here. Reuters


What If: Besides investor apprehensions over its valuation and threats of terror attacks on oil facilities, a major concern hanging over Saudi Aramco is existential in nature. The tide of history is shifting slowly but surely against oil companies. As the world embraces renewable and cleaner alternatives to energy and awareness about climate change spreads, the public's perception of oil has changed drastically. Twenty years ago, investors would have tripped over each other to buy the shares of a colossus like Aramco. It’s a much tougher sale now. BBG 


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