This week, we talk about the upcoming festival season and the government demanding billions of dollars in taxes from gaming companies. We also delve into Dabur promoters making a play to take a controlling stake in Religare Enterprises and pay our homage to MS Swaminathan.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
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The greatness of a culture, they say, is reflected in its festivals. Little wonder, then, that India has for millennia been considered one of the greatest civilizations on earth.
But festivals you see, also mean big money. It is a time when retailers throw everything at you to make you part with your money. They make hay and clear inventory, while you get your bargain on that fully loaded smartphone you’ve been waiting to buy for months.
In olden days, you had to flock to the market to buy whatever you wanted. Now, the tech savvy (and the not so tech savvy) among us can just flip out our smartphone, to well, buy a new smartphone (or just about anything).
And so, e-commerce retailers like Flipkart, Amazon, Meesho and almost all the others are looking to sell more than $10 billion worth of goods this festive season.
The October-December period is crucial for Indian e-commerce and retail companies, as they get a large chunk of their annual sales in these three months. And the competition is fierce.
Not surprisingly, Amazon India has rejigged the dates for its ‘Great Indian Festival’ sale to coincide with Flipkart’s, which starts on October 8.
E-commerce companies aren’t alone in hoping for a cracker of Diwali. Everyone from appliance makers to bike and car companies are hoping that an improvement in monsoon rainfall and cooling inflation would nudge people to spend a little more on discretionary items.
This consumption is critical for the overall industrial and economic growth, too. Industrial growth, for instance, accelerated to a three-month high of 5.7% in July from 3.8% in June and is expected to pick up pace.
So, will you be one of these crores of people shopping away to glory this year?
Game Over?
Festivals may be a time for fun and games, but it seems like it may virtually be game over for some gaming companies.
Shares of Delta Corp, India’s biggest casino company, tanked this week after it received a tax notice demanding Rs 16,821 crore from the Directorate General of GST Intelligence, for the period between July 2017 and March 2022. For perspective, the tax demand is four times its market capitalization!
Following this, not only did small retail investors began dumping the company, even big fish like ace stock market investor Ashish Kacholia offloaded his shares.
Delta wasn’t the only company to receive a tax notice. The directorate also issued notices to several online real-money gaming companies, including fantasy sports firm Dream11, over dues related to the goods and services tax. These dues total Rs 55,000 crore and may even touch Rs 1 trillion, media reports say. Dream11 alone received a notice to pay Rs 25,000 crore, prompting it to move court.
These notices could have far-reaching legal implications and the matter is now expected to be settled in the courts.
The dispute essentially is about whether the levy will be calculated on gross gaming value or the total value of the bet at the beginning of the game, which may include past winnings.
Incidentally, the 51st GST council meeting had clarified in August that the tax treatment for casinos will be on the total deposits at entry point and not on the gross gaming revenue or platform fee.
But we will spare you the legalese here. Let’s just say this is a very big deal not just for Delta Corp but also for the gaming industry as a whole.
On a different note, are you looking to go casino hopping this festive season? You should certainly have some fun, but as always, we say be cautious and do not end up betting away the house, please!
Burmans eye Religare
Until a few years ago, Religare Enterprises Ltd was in the news for all the wrong reasons. The company was on the brink of collapse under its erstwhile owners, the brothers Malvinder and Shivinder Singh. But Religare has turned around in recent years, so much as that the Burman family, which controls the Dabur group, wants to take a majority stake in the financial services company.
The Burman family this week made an open offer to acquire an additional 26% stake in Religare. If this open offer succeeds, it will make the Burmans the majority owners in Religare.
The Burmans are already the largest shareholders of Religare, holding 21% of the company. They are buying an additional 5.27% of the company and 5% of the expanded voting share capital from the markets, triggering the open offer.
There’s a small problem, though. You see, the open offer price marks a discount of over 13% to the closing price of Religare’s shares last Friday, which led to the stock falling during the week. Although by Friday the stock did recover a bit, it was still down more than 7% by the end of the week.
The Burmans are already present in the financial services sector through a joint venture with Aviva International Holdings Ltd, a UK-based insurance group. Religare, the family says, will now become the epicentre of their business plans in the financial services sector.
So long MS Swaminathan and Ashwin Dani
This week, India lost a renowned scientist who helped change the face of its agriculture sector. MS Swaminathan, known as the ‘father of India’s Green Revolution,’ passed away at 98.
Swaminathan, along with the American scientist and Nobel laureate Norman Borlaug, helped double India’s wheat production, making the country self-sufficient in food and reducing widespread hunger.
The green revolution, which began in Punjab and Haryana, eventually spread to other crops including rice and transformed the country from a big importer of food grains into a large exporter.
Swaminathan was the Director General of the Indian Council of Agricultural Research and also headed the International Rice Research Institute in the Philippines. The Padma Vibhushan awardee was also the first to get the World Food Prize and used the proceeds from the prize to establish the renowned MSSRF non-profit trust. He also received the Ramon Magsaysay Award in 1971.
India Inc, too, suffered a big loss this week as Ashwin Dani, part of the family that co-founded Asian Paints, passed away. He was 79.
Dani was non-executive director at India’s biggest paints company. He joined Asian Paints in 1968 and rose through the ranks to eventually become vice-chairman and managing director.
Dani was born in Mumbai in 1944 and graduated in Chemistry from Mumbai University before pursuing a Postgraduate Degree in Chemical Engineering from the University of Akron in the US. Dani was one of India’s richest, with an estimated net worth in excess of $7 billion.
May they both travel in peace.
Market Wrap
The markets were choppy this week, with both the benchmark indices swinging between gains and losses through the last five trading sessions.
By Friday though things seemed much calmer than they had been mid-week. While the Sensex ended the week down 0.4%, the Nifty did slightly better and closed just short of 0.3% in the red.
Nifty stocks that gained the most during the week included state-owned energy companies Coal India, NTPC, GAIL India and ONGC. Other counters in the green were Bajaj Finance and Bajaj Finserv, Larsen & Toubro, Maruti Suzuki and lenders such as Axis Bank and State Bank of India.
Among the Nifty losers were IT majors Wipro, Infosys, Tech Mahindra, HCL Technologies and Tata Consultancy Services. Others that lost ground were Vedanta, Titan, Asian Paints and lenders such as Kotak Mahindra Bank and HDFC Bank. Some other losers were Indian Oil, ITC, Ultratech Cement, UPL, Cipla and Dr. Reddy’s Labs.
Other headlines
- Cognizant appoints Wipro veteran Jatin Dalal as its next CFO
- Abu Dhabi’s IHC set to exit two Adani Group companies
- Yatra falls on debut, shares close at Rs 135.90 versus IPO price of Rs 142 apiece
- Signature Global gains 19%, Samhi Hotels jumps 16% in stock market debut
- JSW Infrastructure IPO covered 37.4 times; Updater Services IPO subscribed 2.9 times
- Fincare Small Finance Bank get SEBI approval for IPO
- Aditya Birla Fashion completes acquisition of 51% stake in TCNS Clothing
- Overseas remittances, foreign tours to attract 20% tax collected at source from Oct 1
- Govt may ban sugar exports in new season beginning October
- Govt likely to cut floor price for exports of basmati rice
- Govt plans to auction Jammu & Kashmir lithium reserves
- Standard & Poor’s retains India’s FY24 growth forecast at 6%
- Govt keeps Oct-March FY24 borrowing plan unchanged, to issue bonds worth Rs 6.55 trillion
- India’s external debt rises to $629.1 billion at June-end from $624.3 billion at March-end
- Current account deficit widens to $9.2 billion in April-June from $1.3 billion in Jan-March
That’s all for this week. Until next week, happy investing!
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