{"id":25431,"date":"2023-07-22T02:07:14","date_gmt":"2023-07-21T20:37:14","guid":{"rendered":"https:\/\/kuvera.in\/blog\/?p=25431"},"modified":"2023-07-22T02:09:07","modified_gmt":"2023-07-21T20:39:07","slug":"the-weekly-wrap-the-latest-blockbuster","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/the-weekly-wrap-the-latest-blockbuster\/","title":{"rendered":"The Weekly Wrap | The Latest Blockbuster"},"content":{"rendered":"

In this edition, we talk about the Reliance-Jio Financial demerger and what it means for India\u2019s BFSI sector and the company\u2019s investors. We also talk about Sheela Foam\u2019s acquisitions and Route Mobile getting acquired, Uday Kotak\u2019s letter to his bank\u2019s shareholders and about the Tata group setting up a new EV battery facility in the UK.\u00a0<\/em><\/p>\r\n

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Welcome to Kuvera\u2019s weekly digest on the most critical developments related to business, finance, and the markets.<\/em> \u00a0<\/p>\r\n

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tl;dr<\/strong>\u00a0Hear the article in brief instead? \u00a0<\/p>\r\n

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This was a week of blockbusters, in a manner of speaking at least. While Friday saw the release of two much-awaited Hollywood movies\u2014Oppenheimer and Barbie\u2014both of which have earned rave reviews, the stock market saw the birth of what many are hoping will be a blockbuster stock in the months and years to come.<\/p>\r\n

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Just a day before the two movies released, Mukesh Ambani-controlled Reliance Industries Ltd formally demerged its financial arm Reliance Strategic Investments Ltd, which is set to be renamed Jio Financial Services Ltd.<\/p>\r\n


Jio Financial was assigned a price of Rs 261.85 per share. At this price, the financial services arm will list with a market capitalization of Rs 1.6 trillion, or about $20 billion, making it one of the biggest such listings in India\u2019s financial services sector. Reliance will announce in due course when the stock will begin trading on the exchanges.<\/p>\r\n

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If you were a RIL shareholder on the record date of July 20, you will receive one Jio Financial share for every share held.<\/p>\r\n

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What will this demerger change materially for the company and the country\u2019s non-banking financial services market as a whole?<\/p>\r\n

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Jio Financial itself is like a holding company with investments in six companies \u2014 Reliance Industrial Investments and Holdings, Reliance Payment Solutions, Jio Payments Bank, Reliance Retail Finance, Jio Information Aggregator Services and Reliance Retail Insurance Broking. This indicates Reliance aims to enter lending and eventually branch out to insurance, payments, digital broking and asset management.<\/p>\r\n

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Analysts say the demerger could pose a tough challenge to the existing non-banking finance companies (NBFCs). It is expected to become India’s fifth-largest financier in terms of capital and compete directly with the likes of Paytm and Bajaj Finance.<\/p>\r\n

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The separation of financial services from the core business could also help Reliance attract strategic or JV partners \u2014 like what it did with Jio Platforms Ltd and Reliance Retail Ltd two years ago when it sold small stakes in the two units to tech giants such as Google and Facebook as well as a host of private equity investors.<\/p>\r\n

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So, on paper at least, Jio Financial\u2019s future looks bright. But will these dreams turn into reality? Going by Reliance\u2019s past record, there should be little doubt that the new company will reward long-term shareholders handsomely over the coming years.<\/p>\r\n

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But one can never be too sure of anything. So, as always, we urge you to remain cautiously optimistic.<\/p>\r\n

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Kotak takes a back seat<\/b><\/strong><\/h4>\r\n

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Meanwhile, one of the most well-known names in the banking industry\u2014Uday Kotak\u2014is set to step down from the position of the CEO at Kotak Mahindra Bank. The billionaire banker, who will continue as a non-executive director after he steps down from the whole-time role, wrote a rather emotional letter to the bank\u2019s shareholders this week.<\/p>\r\n

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\u201cGoing forward, I see my role as a non-executive board governance member and a strategic shareholder with a long-term perspective of nurturing a world-class institution,\u201d Kotak wrote.<\/p>\r\n

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Kotak said it was unusual in today\u2019s world of banking to have an individual with around 26% skin in the game with disproportionate family assets in one stock, emotionally attached to living his dream of making India proud.<\/p>\r\n


Kotak said that he spent most of his life at the bank and recalled how he started from scratch with very little capital in 1985, three people and a 300 sq. foot office. He also said that a person who invested Rs 10,000 with the group in 1985 would be worth Rs 300 crore today.<\/p>\r\n

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\u201cWe were at the right place at the right time. We are a quintessential product of the India growth story and the financial sector evolution,\u201d he said.<\/p>\r\n

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People may come and go, but here\u2019s hoping the bank keeps scaling new highs.<\/p>\r\n

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Sleep on it<\/b><\/strong><\/h4>\r\n

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The week also saw important deals which could create market leaders in their respective domains.\u00a0<\/span><\/p>\r\n

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On Monday, Sleepwell mattress maker Sheela Foam announced two deals. It bought a controlling stake in Kurlon Enterprises Ltd, which markets the flagship brand Kurl-on, and a stake in Furlenco, the online furniture rental brand.<\/span><\/p>\r\n

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Sheela Foam is acquiring a 94.66% stake in Kurlon for Rs 2,035 crore and 35% of Furlenco for Rs 300 crore.\u00a0<\/span><\/p>\r\n

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But why is this important? The Kurlon deal gives Sheela Foam an undisputed leadership across major product categories with its flagship brand Sleepwell\u2019s strength in foam, and acquired brand Kurlon\u2019s strength in rubberised coir. Sheela Foam will now command a combined market share of around 21% in the modern mattress market in India. The Furlenco deal will help Sheela Foam gain a foothold in the online furniture rental market.<\/span><\/p>\r\n

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In another deal, Belgium\u2019s Proximus, which provides cloud-based telecom platforms for enterprises, said on Monday it would buy almost 58% of Route Mobile for about Rs 5,922 crore ($721 million). Proximus has also made an offer to buy an additional stake of up to 26% in Route Mobile.<\/span><\/p>\r\n

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Separately, Route Mobile promoters will buy a stake of up to 14.5% in a unit of Proximus for about $337 million.<\/span><\/p>\r\n

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\u201cThe partnership \u2026 paves the way for Route Mobile to achieve a billion-dollar annual revenue run-rate much sooner than the anticipated three-four-year time frame,\u201d said Route Mobile CEO Rajdip Gupta, who will lead the group\u2019s communication platforms-as-a-service activities while continuing in his current role.<\/span><\/p>\r\n

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Infosys shocker<\/b><\/h4>\r\n

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The Indian stock markets maybe climbing new highs every week but the IT sector continues to struggle.<\/p>\r\n

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On Thursday, India\u2019s second-largest IT services company Infosys reported first-quarter profit that missed analysts\u2019 estimates. More importantly, it cut its revenue forecast for 2023-24, raising concerns of slowing demand.<\/p>\r\n


Infosys said consolidated net profit rose 10.9% from a year earlier to Rs 5,945 crore for the April-June quarter. It halved its revenue forecast to 1%-3.5% on a constant currency basis from 4%-7% previously.<\/p>\r\n


CEO Salil Parekh blamed clients delaying decisions on signing new deals and starting contracts that have already been signed. “We have seen some of the deal signings and start dates being delayed, with that we see a lot of revenue from those large and mega deals towards the later part of the financial year,” he said.<\/p>\r\n

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This was not all. Infosys reported a drop of 6,940 in its headcount to 336,294. That\u2019s higher than the decline of 3,611 in the January-March quarter.<\/p>\r\n

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The results and the guidance cut caught analysts and investors off guard. Jefferies said the “drastic” revenue guidance cut was a “shocker”. It also said that the headcount drop suggested limited growth visibility in the near term. On Friday, shares of Infosys lost almost 10% in morning trade before recovering a tad.<\/p>\r\n

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To be sure, Infosys isn\u2019t the only IT company warning about slowing demand. Last week, industry leader Tata Consultancy Services as well as No.3 HCL Tech and No.4 Wipro also issued similar warnings.<\/p>\r\n

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We certainly hope this is just a passing cloud and that the sky will again be awash with bright sunlight. But until then, we will keep our fingers crossed, and so should you.<\/p>\r\n

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Tata\u2019s big EV bet<\/b><\/h4>\r\n

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While TCS may be facing headwinds, the Tata Group is, well, motoring away to new glory. The conglomerate said this week it will build an electric vehicle battery plant in Britain to supply its Jaguar Land Rover factories.<\/p>\r\n

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Under the plan, the company will build its first gigafactory outside of India in Britain with an investment of 4 billion pounds ($5.2 billion), creating up to 4,000 jobs and producing an initial output of 40 gigawatt hours.<\/p>\r\n

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The new plant is expected to be built in Somerset, south-west England, while Jaguar Land Rover’s UK factories are based near Birmingham, central England.<\/p>\r\n

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Production at the factory, which is set to supply JLR’s future battery electric models, including the Range Rover, Defender, Discovery and Jaguar brands, is due to start in 2026, the UK government said.<\/p>\r\n

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Will the Tatas also set up an EV battery plant in India? We certainly hope they do, and when it happens, we will look forward to writing about it.<\/p>\r\n

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Market Wrap<\/b><\/h4>\r\n

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The stocks<\/a><\/span> markets continued their upward trajectory this week, with the Nifty and the Sensex scaling new highs of 19,991 and 67,619, respectively.<\/p>\r\n


The Sensex closed the week up 0.94% while the Nifty gained 0.92%, even though the indices recorded a sharp correction on Friday.<\/p>\r\n


The Nifty stocks that helped the index rally included the lenders State Bank of India, Yes Bank, Kotak Mahindra Bank and ICICI Bank as well as others like ITC, Larsen & Toubro and Asian Paints.<\/p>\r\n


The counters that ended the week in the red included Titan, Infosys, Ultratech Cement, auto majors Mahindra & Mahindra, Bajaj Auto and Hero MotoCorp and JSW Steel. Some other counters that also left their investor poorer were Britannia Industries, Hindustan Unilever and Coal India.<\/p>\r\n

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Other headlines<\/b><\/h4>\r\n

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