In this edition, we talk about how Reliance Jio and Bharti Airtel are facing off the likes of Starlink and Amazon in outer space. We also talk about how Adani is trying to capture South India’s cement market and what changes the mutual fund industry body AMFI is likely to make in large-, mid- and small-cap stocks.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
tl;dr Hear the article in brief instead?
In the mid-1950s, the US and Soviet Russia began actively competing for supremacy over the outer space, by sending unmanned and manned missions up in the skies. India was then a newly independent and much impoverished country still trying to emerge from the ravages of a bloody partition. And at the time, no one would have imagined that, almost seven decades on, a very different kind of space race would be playing out in faraway India.
Cut to 2024, and two Indian billionaires—Mukesh Ambani and Sunil Bharti Mittal—are literally jostling for space, in space (sorry, that was a bad pun, we know, but believe us, we are not ‘space-d’ out, as we write this).
But why is this important? Both Ambani and Mittal—and two American billionaires, Elon Musk of Tesla fame and Amazon’s Jeff Bezos—have been wanting to launch satellite-based internet services in India for a while now.
While Musk’s Starlink has been wanting to start services in India, Amazon too is among a bunch of other companies that are vying to get a share of India’s space internet pie.
All of this may become a reality soon. And it’s the Indian billionaires Ambani and Mittal who are leading the race, at least for now.
Orbit Connect India, a joint venture between Ambani’s Jio Platforms and Luxembourg-based satellite communication (satcom) service provider SES, has received approvals to operate satellites from the Indian National Space Promotion and Authorisation Centre (IN-SPACe). This advances Jio’s efforts in providing satcom services in India.
Besides Orbit Connect India, Amazon’s Project Kuiper and SpaceX’s satcom project Starlink are also vying for approvals to provide satellite communication services in India. But so far, the only company to have received approvals from both IN-SPACe and Department of Telecom is Bharti Airtel-backed OneWeb.
And this, ladies and gentlemen, means that a battle royale for the skies above may be in the offing.
The approval from IN-SPACe is just the first in a series of several more that Ambani’s conglomerate may need before it can begin offering commercial satcom services in India. Orbit Connect would need approval from the DoT and would have to be allocated spectrum before it can start operations.
In all of this, how do you the customer stand to gain? While large parts of urban India are already connected to the worldwide web via high-speed broadband networks, the country’s villages and far-flung mountainous regions remain out of reach. Satellite-based internet services could be a boon for such customers.
One major impediment, however, could be tariffs. If satellite-based internet service providers can make it affordable for the average rural or semi-urban consumer, they may just have a whole new market open for them to tap.
Cementing its space
Outer space isn’t the only frontier that Indian conglomerates have been trying to capture. On terra firma, too, they have been trying to spread their footprints.
A case in point is billionaire Gautam Adani-led Adani Group, which has been looking to become the most dominant player in the Indian cement market, by growing inorganically.
In a bid to gain market share in the country’s southern region, Adani Group-owned Ambuja Cement this week announced the acquisition of Penna Cement Industries Ltd at an enterprise value of Rs 10,422 crore.
Penna Cement has a capacity of 14 million tonnes per annum in Andhra Pradesh, Telangana, and Rajasthan. The acquisition will take Adani Group’s total tally to 89 million tonnes per annum. Penna Cement also has a surplus clinker at its Jodhpur, Rajasthan plant, which will support additional 3 MTPA cement grinding capacity.
Adani Group said that the acquisition will also strengthen its sea transport logistics with five bulk cement terminals at Kolkata, Gopalpur, Karaikal, Kochi and Colombo to serve peninsular India.
This is the fourth acquisition by Adani Group in the cement sector. It had bought Ambuja and its sister concern ACC Ltd in 2022. The group bought Sanghi Industries last year and followed it up with the purchase of a grinding unit from My Home Industries in Tamil Nadu earlier this year.
What do these acquisitions mean for other cement companies? Well, smaller players now have a buyer eager to snap up their assets. For Aditya Birla Group company UltraTech Cement, however, Adani’s emergence as the second-largest cement maker in just two years poses a serious challenge to its industry leadership.
AMFI changes
As the Adani Group looks to grow its footprint in the real world, several other companies are gaining heft in the volatile world of the stock market.
In fact, India’s large cap mutual fund investment universe is expected to see seven changes in the upcoming stock reclassification exercise by the Association of Mutual Funds in India (AMFI).
According to a report, Hero MotoCorp, Zydus Lifesciences, JSW Energy, NHPC, Bharat Heavy Electricals, Bosch and Samvardhana Motherson are expected to earn upgrades in the revised list of large-cap, midcap and small-cap stocks set to be released in the first week of July.
AMFI revises the list at the start of January and July every year based on the previous six-month performance of the stock.
The top 100 companies based on the average market-capitalisation in the previous six months qualify as large caps. The next 150 become midcaps and the rest small-caps. The seven stocks that are likely to earn an upgrade have gone up over 40% since January 1, 2024, taking the market-capitalisation of all of them, except Bosch, past Rs 1 trillion. In the July-December 2023 period, their average m-cap was around Rs 60,000 crore, shows AMFI data.
Their entry into the top 100 firms will lead to seven existing large-cap stocks moving to the midcap basket. These are expected to be ICICI Prudential Life Insurance, ICICI Lombard General Insurance, Polycab India, SRF, Marico, SBI Cards and Berger Paints India, according to a brokerage report.
Two of the new listings, Bharti Hexacom and Go Digit General Insurance, will also enter the midcap list.
The classification of stocks in large, mid and small-cap baskets helps fund managers to stay true to the label. Equity mutual fund categories have set guidelines on how much they can invest in these categories of stocks.
Small-cap stocks that are likely to move to midcap basket include Hudco, IRB Infra, Mangalore Refinery, Bharat Dynamics, Global Health, BSE, NLC India, Hitachi Energy, Tata Investment, National Aluminium Company, Hindustan Copper, Cochin Shipyard, ITI, Motilal Oswal Financial Services and Godrej Industries.
Musk’s mega paycheque
It is that time of the year when we all expect a pay raise. While most of us have to make do with a moderate raise, a few among us walk away with a lion’s share of the booty.
Now, if you are Elon Musk, you walk away with a multi-billion-dollar pay package. This week, Tesla shareholders approved a $45 billion pay package for Musk. This was a big thumbs-up to his leadership and an incentive to keep his focus on his biggest source of wealth, the electric vehicle maker said.
The approval underscores the support that Musk enjoys from Tesla’s retail investor base, many of whom are vocal fans of the mercurial billionaire. The proposal passed despite opposition from some large institutional investors and proxy advisory firms.
Onstage at the annual shareholder meeting in Austin, Texas, Musk described himself as pathologically optimistic. “If I wasn’t optimistic this wouldn’t exist, this factory wouldn’t exist,” Musk said to applause. “But I do deliver in the end. That’s the important thing.”
The approval does not, however, resolve a lawsuit on the pay package in a Delaware court, which some legal experts think could stretch out for months. The judge invalidated a bigger pay package of $56 billion in January, describing it as “unfathomable”.
Musk may also face fresh lawsuits on the package, which would be the largest in US corporate history. Shareholders had voted for this package in 2018.
We don’t mean to make you feel bad, but how much was your pay raise this year?
Market Wrap
This was a much quieter week for the stock markets, at least when compared to the tumult of the past week when they gyrated heavily in the wake of the election results going totally out of line with what the exit polls had predicted. Both the Sensex and the Nifty ended the week in the green, up around 0.4% and 0.7%, respectively.
Nifty stocks that lost the most ground this week included the likes of Hindustan Unilever, Tata Consumer, Hindalco, Asian Paints, Axis Bank and ICICI Bank.
On the flip side, some of the top Nifty gainers of the week were Shriram Finance, Ultratech Cement, ONGC, Tech Mahindra, Larsen & Toubro, Bharat Petroleum, NTPC, Shree Cement and HDFC Life.
Other Headlines
- Union Budget likely to be presented on 22 July
- Merchandise exports rise 9.1% to $38.13 billion in May from a year ago
- Retail inflation eases slightly to 4.75% in May from 4.83% in April
- Wholesale prices in May increase 2.61% year on year, the fastest pace in over a year
- GST Council meeting on June 22 to discuss key taxation issues, likely to give relief to foreign airlines
- FAME-III scheme for EV companies may be announced on budget day with Rs 10,000 crore outlay
- Ola Electric gets SEBI approval for $660 million IPO
- Tata Consumer to double FY25 capex to Rs 785 crore: N Chandrasekaran
- Mercedes Benz to invest Rs 3,000 crore in Maharashtra
- Vodafone Idea to offer Rs 2,458 crore stake to Nokia and Ericsson to pay dues
- NCLT directs Byju’s to maintain status quo, freezes funds raised via second rights issue
That’s it for this week! Until next week, happy investing!
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: Understanding Index Funds from experts
Start investing through a platform that brings goal planning and investing to your fingertips. Visit kuvera.in to discover Direct Plans and Fixed Deposits and start investing today.
