In this edition, we talk about Kishore Biyani’s Future Retail going into insolvency and the exit of HDFC Mutual Fund’s CIO Prashant Jain. We also take a quick look at corporate earnings for the first quarter.
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Everybody loves a good comeback. Everybody loves a second comeback even more. But not everybody can pull themselves up from the depths of failure once, leave alone twice.
In 2012, Kishore Biyani—once the poster boy of Indian retail—sold his fashion store chain Pantaloons to Aditya Birla Group as he struggled with a pile of debt amassed while building India’s answer to Walmart. He then staged a comeback few businessmen in India have managed to achieve.
Now, after riding India’s retail boom for close to two decades, he is in worse shape than ever before and sitting on a $4-billion mountain of debt. And the chances of a second comeback are slim to none.
This week, the National Company Law Tribunal allowed a plea by state-run Bank of India to start insolvency proceedings against Future Retail. This comes after Future’s deals with e-commerce giant Amazon and Mukesh Ambani’s Reliance Retail fell through and after the three sides fought a long drawn-out and a very messy fight in the courtroom and outside.
Biyani now has few choices but to let the insolvency process reach its logical conclusion. But if reports are to be believed, he is planning a comeback.
Will he manage to turn his fortunes around once more? We aren’t clairvoyants, so we won’t hazard a prophecy, but we’ll certainly tell you if, and when, he does. So, keep watching this space!
So Long, Ford
Talking about another comeback that wasn’t, US carmaker Ford is finally exiting India after two attempts to stay on failed within two years.
Ford had, in late 2019, proposed to form a joint venture with Mahindra & Mahindra for the Indian operations. That deal collapsed in early 2021. Ford then weighed the possibility of making electric vehicles in India and even became eligible to receive incentives under a government scheme. But it gave up on that idea, too.
So, two-and-a-decades half after Ford entered India, the US carmaker is bidding adieu to India as part of a global restructuring process. Ford is shutting down its factory in Tamil Nadu which rolled out its last car this week.
Ford will sell its second factory, at Sanand in Gujarat, to Tata Motors. The Indian automaker will need this excess capacity as it gets ready to take a bigger pie out of the burgeoning electric vehicles market.
India’s EV dream though, seems to be souring a wee bit. Roads minister Nitin Gadkari said this week that the government had sent notices to all EV scooter manufacturers whose vehicles caught fire in recent times. The sector could face a lot of heat from the government and regulators if companies do not solve this issue soonest.
The Value Investor Exits
HDFC Mutual Fund’s Chief Investment Officer, Prashant Jain, has resigned after working with the company for 19 years. Jain is one of the world’s longest-serving fund managers and is among the biggest proponents of value investing in India.
He had been managing HDFC Balanced Advantage Fund and HDFC Flexi Cap Fund, which have bounced back in recent years and generated returns of 17.8% and 18.2% since launch. He also managed the HDFC Top 100 large-cap fund, which has been a big underperformer.
The IIT-Kanpur and IIM-Bangalore alumnus had previously worked with Zurich AMC and SBI Mutual Fund.
HDFC MF hasn’t yet named Jain’s successor but has appointed Chirag Setalvad as head of equities and Shobhit Mehrotra as head of fixed income.
Billionaires On The Cloud
Ace stock market investor Rakesh Jhunjhunwala’s dreams are finally taking wing. His new airline, Akasa Air, is set to take to the skies from August 7 and opened bookings this week.
Akasa will operate its first flight on the Mumbai-Ahmedabad route using Boeing 737 Max aircraft. This will be followed by other routes including Bengaluru-Kochi. The airline has ordered as many as 72 Boeing 737 Max aircraft, of which 37 will be inducted by December 2024.
The other billionaire whose fortunes seem to keep rising higher and higher is Gautam Adani, who overtook Microsoft founder Bill Gates to become world’s fourth richest with total wealth of $115.5 billion. Gates is worth $104 billion.
More importantly for Adani though, he leaves Mukesh Ambani, with a net worth of $90 billion, behind by a mile, at the tenth spot!
Back To The Ground
Jhunjhunwala and Adani may be on cloud nine, but the Indian rupee continued to decline against the US dollar this week breaching the psychologically important mark of 80 to the greenback.
Significant dollar demand from oil importers amid elevated crude oil prices and concerns about swelling trade deficit have also been key catalysts behind the rupee’s steep descent.
The Indian currency has now fallen by more than 7% since January this year, raising concerns of imported inflation.
The rupee, however, has appreciated against other major currencies like the euro and the Japanese yen. However, there is nothing home to write about it since the rupee gained not on its strengths but because the euro and the yen have fallen comparatively more against the dollar.
And there is more weakness on the horizon. Many analysts are already hinting at the rupee falling to 82 against the dollar and possibly lower. So, brace for the impact!
Earnings Watch
Several marquee companies announced their first-quarter results this week. Hindustan Unilever, India’s top FMCG company, beat Street estimates with an 11% rise in its Q1 net profit to Rs 2,289 crore. IT major Wipro, however, missed forecasts as its Q1 net profit dropped 21% year-on-year to Rs 2,564 crore. Its revenue rose 16%.
Other companies that reported healthy profit numbers included Hindustan Zinc, UltraTech Cement, multiplex chain PVR, IndusInd Bank, RBL Bank and IDBI Bank.
UltraTech’s Q1 profit fell 7% from a year earlier to Rs 1,582 crore but still exceeded estimates. Hindustan Zinc’s profit climbed 56% to Rs 3,092 crore, riding on a 45% spike in revenue.
PVR swung to a profit of Rs 68 crore from a year-earlier loss as cinema halls reopened. IDBI Bank’s profit rose 25% to Rs 756 crore as provisions fell. IndusInd Bank’s profit rose 60.5% to Rs 1,631.1 crore, topping forecasts. RBL Bank swung to a net profit of Rs 201 crore from a year-earlier loss as asset quality improved.
While the results seem healthy, dig a little deeper and the fault lines begin showing. HUL’s profit, for instance, came on the back of price hikes and volume growth slowed as high inflation damped consumer demand.
Most companies also benefitted from a low base because India was battling the deadly second wave of Covid-19 in the first quarter of the last fiscal year.
Still, the solid set of results and no negative surprises pushed stock markets higher. The 30-stock Sensex and the Nifty 50 gained almost 3.3% each this week. IndusInd topped the Nifty, gaining almost 15%. UltraTech jumped almost 10%, while its group companies Grasim and Hindalco were also among the top gainers.
Other Headlines
- European Central Bank raises interest rates by 50 basis points in first hike in 11 years
- Draupadi Murmu becomes India’s first tribal and second woman President
- Govt imposes 5% GST on pre-packed food items like rice, wheat, curd, paneer
- Hotel and hospital rooms, several household goods to also get expensive as govt revises GST rates
- Reserve Bank of India reschedules next policy meet to Aug 3-5
- RBI prepared to spend $100 billion more to defend rupee, reports Reuters
- Govt cuts windfall tax on local crude sales, fuel exports
- India May FDI inflows fall to $8.07 billion from $12.32 billion a year ago
- India to import 76 million tonnes coal to meet shortfall, power tariffs to go up
- ADB slashes India growth forecast to 7.2% for FY23, sees higher inflation
The Week Ahead
- A number of big banks and blue-chip companies will disclose Q1 earnings. These include ICICI Bank, Axis Bank, Yes Bank, Kotak Mahindra Bank, Tata Steel, Infosys and Asian Paints.
- All eyes and ears will be on the US Federal Reserve’s monetary policy meeting, where it is widely expected to increase interest rates by at least another 75 basis points.
Until next week, happy investing!
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