In this edition, we talk about Ambani’s interest in India’s green energy sector, the US federal reserve tackling inflation, decrease sales in India’s automobile sector and more.
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?
Sun is shining, the weather is sweet, yeah
Make you wanna move your dancing feet now
To the rescue, here I am
Want you to know, y’all, can you understand?
Mukesh Ambani is no Bob Marley, but he sure seems inspired by the Jamaican Rastafari singer-songwriter. Well, in a manner of speaking.
After putting his children in charge of key verticals at Reliance Industries Ltd, the 65-year-old billionaire is now focusing on investing billions into India’s green energy sector.
News reports say India’s second-richest man will oversee the rollout of the $75 billion commitment he made last year on setting up clean energy projects over the next decade and a half.
Reliance has reportedly also approached potential investors including Middle Eastern funds. Ambani apparently wants to disrupt the sector just like he did with his mobile phone company Reliance Jio Infocomm Ltd.
Interestingly, this puts Ambani in yet another direct contest with fellow Gujarati billionaire Gautam Adani, who has plans of his own to pump billions into the country’s solar energy sector.
And when India’s two richest men are at it, how can the government be left behind? This week, the union cabinet cleared an initial outlay of Rs 19,744 crore for the National Green Hydrogen Mission, which the government had launched in August last year.
The mission is in line with the government’s target of making India energy-independent before completing 100 years of Independence. The mission will have four components that aim at enhancing domestic production of green hydrogen and promote the manufacturing of electrolysers — a key constituent for making green hydrogen.
So, all in all, it looks like, going forward, green energy will be the mantra both for India Inc and the government alike.
Now, what can be better than that?
Staying focused
While Ambani and Adani are focussed on green energy, the US Federal Reserve remains focussed on lowering inflation back toward its 2% target even at the risk of rising unemployment and slower growth.
The minutes of the Fed’s December meeting reveal that central bankers affirmed their resolve to fight inflation, cautioning that an “unwarranted” loosening of financial conditions would hurt their efforts to achieve price stability.
Quarterly economic estimates updated by Fed officials last month showed benchmark interest rates rising to 5.1% this year, according to their median projection, up from 4.6% in the prior round of forecasts in September.
The Fed raised its lending rate by half a percentage point at its December meeting, slowing down after an aggressive string of four straight 75 basis-point increases. Officials also issued fresh forecasts that showed a hawkish tilt with more hikes projected in 2023 than investors expect.
What does this mean in plainspeak and how can this stance impact India?
Simply put, this means that the Fed could raise interest rates again in the future if inflation remains a big worry for the world’s largest economy. And, if that happens in the US, the Indian central bank too may have to follow suit, although for now, it has likely taken a breather after upping interest rates for most of the current financial year.
So, if you are paying off a home or a car loan, you may just have to incur a higher EMI going forward.
Losing speed
The prospects of rising EMIs may also moderate car and bike sales in India in coming months, especially now that the festive cheer seems to be wearing off a bit.
The latest industry numbers show that Indian automobile sector’s retail sales fell 5% to 16.22 lakh units in December from 17.15 lakh a year ago, after festive season momentum drove vehicle sales higher in October and November.
The drop was led by two-wheeler sales, which slipped 11%, according to the Federation of Automobile Dealers Associations (FADA). However, sales of three-wheelers, passenger vehicles, tractors and commercial vehicles grew by 42%, 8%, 5% and 11%, respectively.
When compared to the pre-Covid month of December 2019, total vehicle retail sales were down by 12%. Here also, two-wheeler sales fell 21%. But three-wheelers, passenger vehicles, tractors and commercial vehicles rose 4%, 21%, 27% and 9%, respectively.
For the calendar year 2022, total vehicle retail grew 15% from 2021 and 17% when compared with 2020 but fell by 10% from 2019 levels. The passenger vehicle sales stood at 34.31 lakh in 2022, thanks to high demand for SUVs.
FADA, however, is a little cautious in its near-term outlook. Geopolitical headwinds, tightening monetary policy and the lingering effect of the pandemic has combined to create a gloomy global outlook, it said. And with BS-VI phase 2 norms kicking in shortly, price hikes may continue to affect sales during January-March, it added.
Warning bells
Meanwhile, there may be trouble ahead for Vodafone Idea (VI) as its promoters—the UK’s Vodafone Group and India’s Aditya Birla Group—are not willing to infuse more capital into the telecom operator. This is making it unviable for the government to convert the accrued interest on deferred adjusted gross revenue dues into equity.
The promoters are willing to infuse Rs 2,000-3,000 crore but it is too less to revive the company when it actually needs Rs 40,000 crore to Rs 45,000 crore to sustain itself.
Does this mean VI may see job losses soon? We can’t be sure about that, but what we can say is that the company is not out of the woods and that if it does not get substantial capital infusion in time, its plans for rolling out 5G services could get impacted.
While we sincerely hope no VI employees are laid off, things at e-commerce major Amazon don’t look so good. The world’s biggest online retailer is laying off 18,000 people globally, more than the initially planned 16,000. Out of these, a thousand people may be sacked in India.
Amazon chief executive officer Andy Jassey said in a blog post that it became necessary to sack 18,000 people owing to an uncertain economic climate, which made things difficult for the company.
The online retailer joins the likes of Facebook parent Meta, Google and Twitter, all of whom have let go of thousands of people across the globe, including in India.
IPO lane
Travel-tech major Oyo’s plans to go public have run into an air pocket. The Securities and Exchange Board of India has asked Oravel Stays, the parent company of Oyo, to update its draft papers for its initial public offering. The update may include revisions on the basis for valuation, key performance indicators, risk factors and litigations.
The company had filed preliminary documents in September 2021. The proposed offer was for Rs 8,430 crore, of which up to Rs 7,000 crore was for fresh issue of shares and an offer for sale of Rs 1,430 crore.
So, where does this leave Oyo’s plans? Well, the listing could be delayed by at least three months. In fact, its IPO plans were put on hold last year, too.
Oyo is not the only one waiting for SEBI’s green light. About 33 companies are awaiting IPO approvals to raise Rs 57,000 crore. In addition, more than 50 companies already have SEBI approval to raise as much as Rs 84,000 crore.
In 2022, about 40 companies raised Rs 59,412 crore through main board IPOs. A little over a third of this amount was raised by the LIC IPO. To put things in context, 63 companies had raised Rs 1,18,723 crore, an all-time high, via IPOs in 2021, according to primedatabase.com, a capital markets tracker.
So, if you are planning to invest in IPOs, you will have plenty of options in 2023, too. Unless, of course, companies change their mind if stock markets turn volatile.
Market Wrap
The stock markets ended the first week of the new year deep in the red with the 30-share Sensex down more than 1.6% and the 50-stock Nifty lower by 1.4%.
The Nifty stocks that lost the most ground this week were Indiabulls Housing, Bajaj Finance, Bajaj Finserv, JSW Steel and Asian Paints. Some others in the red were Grasim, ICICI Bank, Infosys, Coal India and Power Grid Corporation.
The companies that bucked the trend included Indian Oil, Bharat Petroleum, Yes Bank, Tata Steel and NTPC. Other counters that made their investors richer included GAIL India, Bajaj Auto, Vedanta, Axis Bank and Hero MotoCorp.
Other headlines
- Sundararaman Ramamurthy takes charge as MD and CEO of BSE
- SEBI approves reclassifying govt holding in IDBI Bank as ‘public’ after sale
- JG Chemicals files draft documents with SEBI for IPO
- Radiant Cash Management lists with 10% premium, ends debut day with 12% gain
- Andhra govt inviting Elon Musk, Tim Cook, Jeff Bezos for Investors Summit
- State-run BSNL plans to start 5G services in 2024
- PVR, INOX get relief as Supreme Court rules multiplex chains can fix food prices
- Toyota’s India unit warns of possible customer data breach
- Saudi Arabia cuts oil prices for Asia and Europe as demand begins to trickle
- War in Ukraine at a critical point, says US President Joe Biden
Until next week, happy investing!
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