{"id":29952,"date":"2024-04-26T19:20:31","date_gmt":"2024-04-26T13:50:31","guid":{"rendered":"https:\/\/kuvera.in\/blog\/?p=29952"},"modified":"2024-04-26T19:23:05","modified_gmt":"2024-04-26T13:53:05","slug":"the-weekly-wrap-it-aint-time-to-hang-up","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/the-weekly-wrap-it-aint-time-to-hang-up\/","title":{"rendered":"The Weekly Wrap | It Ain\u2019t Time to Hang Up"},"content":{"rendered":"

In this edition, we talk about <\/em>Vodafone Idea\u2019s follow-on public offering and its significance. We also talk about the RBI\u2019s curbs on Kotak Mahindra Bank as the central bank continues its crackdown on the banking industry, the fraud unearthed by M&M Financial and why Indian spices makers MDH and Everest Masala are in a soup.<\/span><\/i><\/p>\n

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

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

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A cat has nine lives, they say. Vodafone Idea Ltd has at least as many, if not more!<\/span><\/p>\n

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Okay, let\u2019s not joke about India\u2019s third-largest mobile-phone operator \u2013 in an industry dominated by just two players!<\/span><\/p>\n

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So, why are we talking about Vodafone Idea? You see, the telecom company this week pulled off the biggest follow-on public offering of shares in India thus far. But before we talk more about what it did and why it is important, let\u2019s go back a bit.<\/span><\/p>\n

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Vodafone Idea is barely six years old. It was formed after the merger of Vodafone India and Aditya Birla Group company Idea Cellular in 2018, after billionaire Mukesh Ambani-led Reliance Jio\u2019s brutal price war forced most telecom companies to either shut down or combine with peers. However, Vodafone Idea\u2019s origins go back almost 30 years.<\/span><\/p>\n

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In 1995, when the government first liberalised the sector, the Birlas teamed up with the Tatas and the US-based AT&T to launch a telecom venture. The same year, the Ruia family-led Essar established a mobile telephony business.<\/span><\/p>\n

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Tata Group subsequently set up its own telecom venture while AT&T exited. Idea acquired rival Spice Communications in 2008 and brought on board Malaysian telecom company Axiata as a partner. Axiata eventually exited in 2020.<\/span><\/p>\n

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Meanwhile, Essar first roped in Swiss PTT as a partner and then brought Hong Kong firm Hutchison on board at the turn of century. Hutch exited in 2007, selling its stake to the UK-based Vodafone. Essar also sold its stake to Vodafone in 2011.<\/span><\/p>\n

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Now that the history lesson is over, we come back to present. Vodafone Idea had been tottering on the brink of collapse for the past few years, especially after the Supreme Court ruled in favour of the central government in a dispute related to payments for spectrum. Last year, the government converted some of its dues into equity shares.<\/span><\/p>\n

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Now, the government effectively owns almost a third of Vodafone Idea. But this was not enough to survive given that it still has gross debt of over $25 billion. This week, Vodafone raised Rs 18,000 crore, or about $2.16 billion, via a follow-on public offering. Significantly, it got bids for Rs 88,130 crore, reflecting the investors\u2019 confidence in the company.<\/span><\/p>\n

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The company, which has more than 21.5 crore users, will use this money to roll out its 5G service and expand its 4G coverage. The share sale has given a new lease of life to Vodafone Idea.<\/span><\/p>\n

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Will it be enough to compete with Bharti Airtel and Reliance Jio? To be sure, it looks like a tough task. But India certainly can\u2019t afford to let Vodafone Idea slip into oblivion.<\/span><\/p>\n

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\"FD<\/a><\/p>\n

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Heat on Kotak Bank<\/b><\/h4>\n

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In a blow of sorts to Kotak Mahindra Bank, the Reserve Bank of India (RBI) asked the lender to stop issuing fresh credit cards and onboarding new customers via mobile banking. <\/span>As of March-end, Kotak Mahindra Bank had issued 59.54 lakh credit cards.\u00a0<\/span><\/p>\n

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Following the RBI action, the lender\u2019s shares tumbled as much as 13% on Thursday. As the largest shareholder, Uday Kotak, with a stake of almost 26%, the billionaire founder bore the heaviest brunt from the selldown, the most in four years. His wealth declined by $1.3 billion, according to the Bloomberg Billionaires Index. He was worth $14.4 billion as of April 24.<\/span><\/p>\n

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Serious deficiencies and non-compliances in the areas of IT inventory management, patch and change management, user access management, vendor risk management, data security and data leak prevention strategy, business continuity and disaster recovery rigour and drill of Kotak Mahindra Bank prompted strong action from the country’s central bank.<\/span><\/p>\n

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For two years in a row, Kotak Mahindra Bank did not meet the standards set for managing IT risks and ensuring information security, as required by the rules of the RBI. After checking again, the RBI found that the bank still hadn’t fixed these issues, despite being given specific plans to follow. The bank’s reports to the RBI were either not good enough, wrong, or could not be maintained over time.<\/span><\/p>\n

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Kotak Mahindra Bank is the most recent addition to the list of financial service entities that have been reprimanded for multiple shortcomings. There are indications that more entities may face penalties for their negligence, especially if they have ignored warnings and red flags. Additionally, Kotak is not the only one to experience a temporary prohibition on card issuance: in 2020, HDFC Bank, India’s largest bank by market capitalisation, encountered a similar restriction.\u00a0<\/span><\/p>\n

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In fact, starting from 2020 itself, RBI had <\/span>imposed operational limitations on HDFC Bank, Paytm Payments Bank, the banking arm of fintech company Paytm, and JM Financial, among others.<\/span><\/p>\n

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Hit by a Fraud<\/b><\/h4>\n

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Kotak Mahindra Bank was not the only lender in the news this week for the wrong reasons. Non-banking finance company <\/span>Mahindra & Mahindra Financial Services Ltd informed the exchanges this week that it was hit by a Rs 150-crore fraud at one of the company’s branches in the North East region.\u00a0 As a result, the company’s board meeting this week to consider earnings for the January-March quarter has now been deferred to May 30<\/span>.\u00a0<\/span><\/p>\n

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The fraud pertained to retail vehicle loans disbursed by the company and involved forgery of KYC documents, leading to embezzlement of company\u2019s funds. M&M Finance detected the fraud during the January-March quarter and it was followed by arrest of some people. The people involved included an area business manager and other employees of the concerned branch.<\/span><\/p>\n

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The matter has also been reported to the Reserve Bank of India’s central fraud monitoring cell. The company said investigations are already underway and are at an advanced stage.<\/span><\/p>\n

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Short-circuit<\/b><\/h4>\n

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The RBI was not the only regulator in action this week. The capital markets regulator, Securities and Exchange Board of India, has asked a group of global funds to defend themselves against allegations of improper disclosures and market manipulations relating to trading of Adani Group shares.\u00a0<\/span><\/p>\n

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SEBI is reportedly <\/span>probing two foreign portfolio investors, including one accused of allegedly shorting stocks in Adani Group companies prior to a report from Hindenburg Research.<\/span> The capital market regulator is seeking explanations from these two separate groups of foreign funds for \u201cpossible rule violations\u201d.<\/span><\/p>\n

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The group, facing market manipulation allegations, is suspected to have shorted stocks in firms led by billionaire Gautam Adani after getting wind that a short seller report would be published soon. The second group of investors faced scrutiny in June 2021 for investing heavily in Adani stocks.<\/span><\/p>\n

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The Adani Group has already denied any association with these funds. The market regulator will issue a final order on new probes after hearing the funds\u2019 explanations. According to reports, the SEBI has accused the funds of failing to maintain and disclose information about their \u201cultimate beneficial owners as well as for breaching investment limits in listed entities of Adani Group during certain periods\u201d.<\/span><\/p>\n

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What\u2019s cooking?<\/b><\/h4>\n

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India, the world’s largest producer, consumer and exporter of spices, this week sought details from food safety regulators of Singapore and Hong Kong, which have banned certain spices of Indian brands MDH and Everest, owing to quality concerns.<\/span><\/p>\n

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India\u2019s commerce ministry has also sought details from the Indian firms \u2014 MDH and Everest, whose products have been banned for allegedly containing pesticide ‘ethylene oxide’ beyond permissible limits. <\/span>Technical details, analytical reports and the details of the exporters whose consignments have been rejected have been sought from embassies at Singapore and Hong Kong. Details have also been sought from Singapore Food Agency and Centre for Food Safety, and Food and Environmental Hygiene Department, Hong Kong. In 2022-23 fiscal, the country exported spices worth nearly Rs 32,000 crore.<\/span><\/p>\n

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

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Both the Sensex and the Nifty rallied this week to end in the green. While the Sensex was up nearly 1%, the Nifty did better and rose by 1.2%.\u00a0<\/span><\/p>\n


\nAxis Bank, Tech Mahindra, State Bank of India, Hero Motocorp and Divi\u2019s Labs, were among the top gainers among the Nifty block. Other stocks<\/a> that also added to the rally included Eicher Motors, JSW Steel, Hindalco, Wipro, Grasim and Power Grid, among others. This indicated that the rally in large cap stocks was broad-based.\u00a0\u00a0<\/span><\/p>\n

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Nifty stocks that lost ground in this period included Kotak Mahindra Bank, Tata Consumer Products, Bajaj Finance, Sun Pharma. SBI Life Insurance, IndusInd Bank and HDFC Life.<\/span><\/p>\n

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Earnings snapshot<\/b><\/h4>\n

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