This week, we talk about the surprise pick-up in India’s GDP growth during the second quarter. We also talk about big-ticket merger and acquisition deals, and blockbuster listings on the stock market. Finally, we pay homage to Charlie Munger and Henry Kissinger, who both departed this week.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
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In November 2020, the Indian economy hit a recession for the first time in 40 years, following two consecutive quarters of contraction. Extended lockdowns owing to the COVID-19 pandemic had ravaged the economy and things were looking dismal, to put it mildly.
Exactly three years on, that dark phase seems to be a distant memory. India, the latest numbers tell us, continues to be the fastest-growing large economy in the world. And it doesn’t look like the party is ending anytime soon.
The Indian economy sprung a surprise in July-September 2023-24 as it grew 7.6%, considerably higher than the estimates of most pundits. The GDP had grown 7.8% in April-June this year and 6.2% in July-September 2022.
Growth was mainly led by the manufacturing sector, which jumped 13.9%, helped by a favourable base and improved volume growth, government data released this week showed.
The government could not but be happier, especially given the fact that in less than six months, India is set to vote for a new parliament. Chief Economic Adviser V Anantha Nageswaran said overall investment and consumer sentiment will underpin solid momentum in the current and next financial years. “These numbers impart a certain upside to 6.5% estimate for real GDP growth in the current year,” he said.
The CEA also said GDP growth could be getting understated rather than overstated, as some critics suggest. “Contrary to several prejudices which masquerade as opinions, the truth could very well be that India’s GDP growth, based on our current statistics, we may be understating it rather than overstating it,” he said.
Nevertheless, the sectoral numbers were certainly surprising. The construction sector, mining and electricity, gas, water supply and other utility services recorded a double-digit growth in the July-September quarter.
Moreover, government spending, both by the Centre and the states, seems to have played its part, too. Consumption demand, on the other hand, grew at a slower pace.
Having said that, not all is hunky dory. A slowdown in growth of the services and the agriculture sectors was visible. These sectors grew at just 5.8% and 1.2%, respectively, during the second quarter.
So, white the going may be good for now, it would be wise to watch out for what lies ahead, and not be waylaid by all the euphoria.
Blockbuster listings
The GDP numbers weren’t the only good surprise this week. Action on Dalal Street also left many people awestruck. While we will talk about benchmark indices a little later, the biggest jaw-dropping moment in the markets this week was the blockbuster listings of a couple of companies, most notably Tata Technologies Ltd.
Last week, Tata Tech and four other companies floated their initial public offerings and some of them received a massive response from investors as was evident from their subscription numbers. This week, those five companies listed their shares and the result was beyond most people’s wildest imaginations.
Tata Tech, whose IPO was covered almost 70 times, listed on Thursday at a premium of 140%, with its shares making their debut at Rs 1,199.95 against the issue price of Rs 500. The shares touched a high of Rs 1,400 and closed the first day at Rs 1,314.25, giving the company a market capitalisation of Rs 53,315 crore. That’s slightly higher than the market-cap of Tata Elxsi, another Tata Group tech company.
Another company that made a spectacular debut was state-run Indian Renewable Energy Development Agency Ltd (IREDA). Its shares listed on Wednesday at Rs 50, well above their IPO price of Rs 32, and touched a high of Rs 68.91 in early Friday trade, pushing its valuation above $2 billion. IREDA’s IPO was oversubscribed 38.8 times.
Gandhar Oil Refinery (India) Ltd, whose IPO was oversubscribed 64 times, also surpassed analysts’ expectations and listed at a premium of 75%. Its shares began trading at Rs 295.40, against the issue price of Rs 169.
Flair Writing Industries Ltd, whose IPO was oversubscribed almost 47 times, listed on Friday at a 65% premium. Its shares began trading at Rs 503 versus the issue price of Rs 304.
The only disappointment was Fedbank Financial Services Ltd, or Fedfina. The non-banking unit of Federal Bank listed at a slight discount and managed to end the first day of trading at its issue price of Rs 140. Its IPO, too, had received lukewarm response and was covered only two times.
Deal Street action
Investment bankers also remained busy this week, stitching merger and acquisition deals in healthcare, cement and automotive sectors.
In the biggest deal of the week, hospital chain Aster DM Healthcare agreed to sell a majority stake in its Gulf business to an investor group for $1 billion.
Aster DM will split its India and Gulf business and then sell a 65% stake in the Middle East business to a consortium led by private equity firm Fajr Capital. The consourtium also includes UAE sovereign wealth fund Emirates Investment Authority and some other investors. Aster’s promoter Moopen family will retain a 35% stake in the unit. The cement sector also saw consolidation activity with Aditya Birla Group’s UltraTech acquiring the cement business of Kesoram Industries in an all-stock deal worth Rs 5,379 crore.
The deal will help UltraTech, India’s biggest cement maker, move toward its goal of 200 million tons per annum cement capacity from about 137.85 million tons currently.
More importantly, it will help UltraTech stave off competition from Adani Group, which has snapped up Ambuja Cements, ACC and Sanghi Industries over the past year.
In the automotive sector, billionaire Sajjan Jindal’s JSW Group formed a joint venture with Chinese automaker MG Motor to foray into the electric vehicle segment. JSW will own a 35% stake in the new JV, which will compete with the likes of Tata Motors and Mahindra & Mahindra, the two auto companies moving the fastest in the EV race.
A billionaire and a diplomat
Two famous Harvard-educated Americans died this week, literally hours apart. One had turned 100 a few months back, and the other was about to hit the century mark in a few weeks.
While Henry Kissinger and Charlie Munger may have both spent time at Harvard Yard, the two men could not have been more different from each other.
Kissinger, former US Secretary of State and National Security Advisor, was one of the most controversial figures in global politics in the 20th century. Munger was one of the world’s most admired billionaire investors, known as much for his wit and wisdom as for the money he minted along with his more famous partner, Warren Buffett of Berkshire Hathaway.
Both Kissinger and Munger have been two of the most storied men over the last six decades or so. We’d, therefore, be wasting your time and our energy, trying to pen obituaries of them here. But as we bid them both adieu, allow us to take the liberty of suggesting two books—one each by Munger and Kissinger—that we suggest you pick as your next reads.
Our first recommendation would be Poor Charlie’s Almanack by Munger and World Order: Reflections on the Character of Nations and the Course of History by Kissinger.
We promise you won’t regret buying them, for not only will these help you become a better investor, but also a well-rounded human being.
Market Wrap
The Indian stock markets ended the week solidly in the green this week with both the Sensex and the Nifty gaining more than 2.1% each.
In fact, the last month has been especially good for the two benchmark indices, with the 30-stock Sensex having gained a shade over 6% and the broader 50-share Nifty being up by more than 6.6%.
Among the Nifty 50 counters that led the rally this week were four government companies in the oil and gas space—Indian Oil, Bharat Petroleum, GAIL India and ONGC—as well as NTPC and Coal India.
Other prominent stocks in the green were Hero MotoCorp, Axis Bank, Bharti Airtel, Adani Ports, Mahindra & Mahindra, Bajaj Auto and Tata Motors.
In the sea of green this week, IT companies Tata Consultancy Services, Infosys and Tech Mahindra were outliers as they ended in the red. Other Nifty companies that left their shareholders poorer this week were Cipla, Vedanta and Reliance Industries.
Other headlines
- India’s fiscal deficit at 45% of full-year target in April-October
- India’s November manufacturing PMI rises to 56.0 from 55.5 in October
- India’s eight infrastructure sectors record 12.1% growth in October
- Govt starts first part of critical minerals auction worth $5.4 billion
- Govt approves procuring fighter jets, helicopters worth Rs 2.23 trillion ($26.8 billion)
- Govt to spend Rs 11.8 trillion to extend free foodgrains programme for five years
- Govt approves 16 th Finance Commission to suggest sharing of taxes with states
- Whirlpool to sell 24% stake in India unit to cut debt
- Vehicle sales jump 19% in festive season: Federation of Automobile Dealers Associations
- French fashion group SMCP inks deal with Reliance Industries for India foray
- US footwear retailer Foot Locker inks deal with Metro Brands for expansion into India
- Foxconn to invest $1.5 billion to expand India operations
- Singapore’s BW LPG to invest $30 million in JV with Confidence Petroleum India
- Prosus cuts Byju’s valuation to below $3 billion
That’s all for this week. Until next week, happy investing!
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