This week, we talk about India’s impressive tax-to-GDP numbers and what they mean for the economy. We also talk about what may be in store in next week’s interim budget and the big-ticket Zee-Sony deal that never was.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
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As the government prepares to present its interim budget next week, Prime Minister Narendra Modi should have every reason to smile. After estimates earlier this month showed India is likely to remain the fastest-growing major economy in the world, data this week showed the government can breathe a little easy when it comes to tax revenue.
Numbers released by the Central Board of Direct Taxes (CBDT) show that India’s direct tax-to-GDP ratio, which is the share of taxes in the overall output generated in the country, hit a 15-year high of 6.11% in 2022-23.
There was also an increase in the income tax return filers in India to 7.4 crore in FY23, up 6.3% from FY22, even as the tax buoyancy declined to 1.18 in 2022-23 from 2.52 in 2021-22 and 1.29 in the pre-Covid year of 2018-19.
The data also showed the contribution of direct taxes – which majorly comprises corporate tax and personal income tax – to total tax collections crossed pre-pandemic levels. In 2022-23, direct taxes made up 54.62% of the government’s total tax revenue, up from 52.27% in 2021-22 and 46.84% in 2020-21.
Net direct tax collections, which reflect collections after refunds, increased by 160.52% to Rs 16.63 trillion in 2022-23 from Rs 6.39 trillion in 2013-14, the CBDT, which is a wing of the finance ministry, said.
This is not all. Numbers show that the efficiency of tax collections has improved, with the cost of collection decreasing to 0.51% of total collections in 2022-23 from 0.53% the year before that.
A separate set of data released by the CBDT show that gross direct tax collections up to January 10, 2024 were at Rs 17.18 trillion, which was 16.77% higher than a year earlier. Direct tax collection, net of refunds, rose 19.41% to Rs 14.70 trillion. This is 80.61% of the total budget estimates of direct taxes for 2023-24.
So, what does all this mean? The data shows that not only has the share of taxes in India’s GDP gone up, corporate India seems to have finally emerged from the slowdown that was caused by the national and local lockdowns of 2020 and 2021, owing to the pandemic.
It also shows that more and more people are filing tax returns. So, have you done your tax planning for the year? As the financial year draws to a close, now is the time to complete all tax-related work on priority, if you haven’t done it already.
Eyes on the budget
While we must pay our taxes as responsible citizens, the government is busy preparing the interim union budget for 2024, which will lay its spending roadmap for the next few months, till the next regime taxes office after the general elections and comes up with a full set of proposals.
Now, budget-making is a secret exercise, so we cannot say with any degree of certitude what the mandarins at the finance ministry may have in store for us. But we can take some cues from what Finance Minister Nirmala Sitharaman said this week. On Thursday, the finance minister said that the Centre would orient its policies towards improving the lot of four groups — the youth, women, farmers, and the poor — identified by Prime Minister Modi.
“The youth, women, farmers, and the unfortunate poor still need some more support … Everything will be focused on their betterment,” Sitharaman said at a public event.
The finance minister will present the Interim Budget on February 1, while the Lok Sabha elections are expected in April-May. The minister said the government’s efforts extended beyond financial support and had a focus on creating opportunities, such as those for the youth, through skill training.
Meanwhile, every stakeholder, from industry bigwigs to the salaried class and from farmers to players in the crypto industry have their own litany of demands and expectations from the finance minister. How many of these will be met, we will only know next week.
The shows go on
While India media awaits Finance Minister Sitharaman’s budget speech, India’s media czars are redrawing their battle plans. Zee Group’s Subash Chandra and his son Punit Goenka were left in the cold this week after Japan’s Sony decided to scrap a deal announced two years ago.
On Monday, Sony Group Corp, the Japanese parent of Sony Picture Network India (SPNI), terminated the $10 billion merger agreement with Zee Entertainment. It also sought $90 million for breach of conditions in a claim filed before the Singapore International Arbitration Centre. Zee shares cracked nearly 30% this week after the deal collapsed.
The merger scheme had been approved by the National Company Law Tribunal in August last year. But Sony said Zee didn’t satisfy the merger conditions despite engaging in talks to extend the end date for completing the transaction. Zee, however, asked Sony to reverse the termination of the merger scheme and termed the $90 million fee legally untenable.
One immediate fallout of the deal’s collapse was that Zee Entertainment told Walt Disney it didn’t intend to move forward with a deal to pay around $1.4 billion for cricket TV rights it acquired from the US company.
Zee had signed a licence agreement with Disney in August to take over certain International Cricket Council TV broadcast rights for four years, starting in 2024, while the US company would retain streaming rights. Zee was to pay for the rights over time but it missed the first $200 million payment to Disney in recent weeks and then walked back on the deal.
The collapse of the Sony-Zee deal and Zee’s refusal to pay Disney also affected another deal that’s been cooking in India’s media and entertainment sector.
Disney has been in talks with billionaire Mukesh Ambani’s Reliance to merge its Indian entertainment unit, including Star TV channels and Hotstar streaming service. This week, reports said Disney’s India business was being valued around $4.5 billion, less than the $10 billion the US giant previously wanted. The valuation slumped because of Zee’s refusal to pay Disney for the cricket rights.
So, how will India’s media and entertainment sector will shape in 2024? We don’t know yet, but we will be keeping a close watch and promise to keep you posted!
Byju’s faces bankruptcy
Meanwhile, trouble seems to be mounting for edtech major Byju’s. Foreign lenders, who collectively extended more than 85% of Byju’s $1.2 billion term loan, have filed an insolvency petition against the online tutor in the Bengaluru bench of the NCLT.
The edtech company and lenders have been in a protracted dispute over debt repayment and the use of funds. The disagreements arose soon after Byju’s secured the $1.2 billion term loan facility from the lenders in November 2021.
The company has termed the insolvency proceedings baseless and premature. “As we have stated before, the validity of lenders’ actions, including acceleration of the term loan, is pending and under challenge in several proceedings, including before the New York Supreme Court,” the company said, according to a report, which said that the company highlighted that the timing of the lenders’ proceedings coincides with the commencement of a rights issue by it.
Paris calling
If you are an Indian parent looking to send your kids for studies abroad, the French president Emmanuel Macron has some good news for you. Macron, the chief guest at India’s Republic Day parade, on Friday announced that the country will allow more Indians to study there.
In a post on social media platform X, Macron said that France is looking to have 30,000 Indian students in the country by 2030. “It’s a very ambitious target, but I am determined to make it happen,” he said.
France will also start international classes, which will allow students who do not speak French to join the universities. “Last but not least, we will facilitate the visa process for any former Indian students who studied in France,” Macron said.
So, now you have one more destination to look forward to beyond the US, Canada, the UK and Australia.
Market Wrap
The week gone by had just three trading days. The markets remained closed on Monday and on Friday.
In the three days that the market was open for business, the 30-share Sensex rose from 70,370 points to 70,700 while the 50-stock Nifty went up from 21,238 to 21,352.
The Nifty stocks that went up the most included Bajaj Auto, Bharti Airtel, NTPC, Power Grid Corp and Coal India. Other counters that rose were Dr. Reddy’s Labs, Cipla, Apollo Hospitals, Sun Pharma, Bajaj Finserv and Britannia Industries.
Nifty counters that were most in the red in the week were Asian Paints, IndusInd Bank, HDFC Bank, Hindustan Unilever and HDFC Life Insurance. Other counters in the red were Divi’s Labs, Bajaj Finance, Axis Bank, Eicher Motors and SBI Life Insurance.
Q3 earnings snapshot
- Punjab National Bank net profit jumps three times, asset quality improves
- Cement maker ACC reports net profit of Rs 527 crore, revenue up 8.3% at Rs 4,914 crore
- Adani Power net profit jumps multifold to Rs 2,738 crore, revenue surges 67% year on year
- Vedanta net profit declines 18% to Rs 2,013 crore, revenue up 4% from a year earlier
- Bajaj Auto net profit crosses Rs 2,000-crore milestone, beats estimates
- CONCOR reports 12.7% rise in net profit
- HPCL net profit trebles to Rs 529 crore, revenue at Rs 1.18 trillion
- IDFC First Bank net profit rises 18% to Rs 715 crore, net interest income up 30.5% YoY
- Canara Bank net profit rises 27%, net interest income 9.5% higher
- Tata Technologies net profit rises 15% YoY to Rs 170 crore
- SBI Life annualised premium equivalent rises 13%, value of new business up 11%
- SBI Card net profit rises 8% to Rs 549 crore
Other headlines
- Zomato receives RBI nod to operate as payment aggregator
- JSW Defence buys majority stake in extreme offroad vehicle company Gecko Motors
- Novartis India MD Sanjay Murdeshwar resigns
- PepsiCo names Jagrut Kotecha to lead India business
- Bharti Airtel board approves Bharti Hexacom IPO
- Flipkart may let 1,000 employees go; Swiggy likely to lay off 400
- Reserve Bank of India allows Life Insurance Corp to increase stake in HDFC Bank to 9.99%
- Dalmia Group’s Jaypee Cement deal faces delays due to pending third-party approvals
That’s all for this week. Until next week, happy investing!
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