India Markets open in 3 hrs 19 mins

BQuick On Dec. 4: Top 10 Stories In Under 10 Minutes

The Smarter way to get your business news - Subscribe to BloombergQuint on WhatsApp

This is a roundup of the day’s top stories in brief.

1. Why R Chandrashekhar Quit Yes Bank’s Board

It was clear in November itself that R Chandrashekhar’s exit from the Yes Bank board was no ordinary exit. Most independent directors cite shortage of time, other commitments or such generic reasons for stepping down even when the real reasons may be quite different.

  • But Chandrashekhar, in a comment to Bloomberg soon after he stepped down as an independent director on Nov. 19, said, “I wasn’t happy with the developments taking place in the recent past and the way it was handled.”
  • BloombergQuint now has a copy of the full resignation letter and it doesn’t paint a pretty picture of the events that preceded the veteran bureaucrat’s resignation.

"...I have been deeply concerned about recent developments at Yes bank and dismayed at the manner in which they have been dealt with. It is even more distressing that all this should have occurred during a critical transition period when tact, wisdom and purposeful, well considered actions were called for." - Chandrashekhar’s Resignation Letter - MCA Website

Appointed for a five-year term, Chandrashekhar’s exit in seven months is an alarming turn of events.

2. Direct Listing of Indian Companies Overseas?

A panel set up by the market regulator suggested allowing Indian companies to directly list on overseas stock exchanges, a move that will pave the way for foreign investors controlling Indian startups to exit or unlock value.

  • The committee, constituted by the Securities and Exchange Board of India in June, recommended that Indian companies should be allowed to list in 10 countries without first listing in India, according to the recommendations uploaded on SEBI’s website.
  • As of now, locally incorporated companies can list overseas only after going public in India first.
  • Listing of Indian shares on a foreign stock exchange will be governed by the framework of that country and India’s Companies Act.

"It’s time that the Indian companies in newer emerging areas like technology, digital, internet with global aspirations and scale they want to reach and seeking access to low-cost capital are able to list overseas in the permissible jurisdictions." - Ranu Vohra, Head, SEBI Expert Committee 

Watch what SEBI-appointed panel members Ranu Vohra and Cyril Shroff had to say.

3. World’s Costliest Facelift

The Flipkart-Walmart deal is one of the most expensive facelifts in history, said Aswath Damodaran, professor of finance at NYU Stern School of Business.

  • “Walmart invested in a company which is burning cash over the last 10 years with no end in sight,” Damodaran said in a presentation at the Nordic Business Forum 2018, which was held on Sept. 26-27. “With such expenditure, Walmart, a retail giant that was founded over 50 years ago, is trying to look young again.”
  • Damodaran said that most value is destroyed when companies don't act according to their age.
  • He said that there is a whole ecosystem that feeds these companies—consultants, bankers—which he called plastic surgeons.

Read Damodaran’s views on the myths surrounding the laws of valuation.

4. Indian Markets Snap Six-Day Rally

Indian equity benchmarks snapped their longest run of gains in four months on higher crude prices amid weakness in HDFC twins.

  • The S&P BSE Sensex Index fell 0.3 percent or 107 points to 36,134.
  • The NSE Nifty 50 Index declined 0.13 percent or 14 points to 10,869.
  • Twelve of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Realty Index’s 0.6 percent decline.
  • On the flipside, the S&P BSE IT Index was top gainer, up 1.7 percent.

Follow the day’s trading action here.

The rally in risk assets sparked by the trade truce faded as investors grew skeptical that the U.S. and China made any meaningful breakthrough.

  • The greenback weakened a second day as the euro and pound rallied after an adviser to the EU’s top court said the U.K. should be allowed to reverse its so-called Article 50 notice, which triggered the Brexit process.
  • The yield on 10-year Treasuries fell less than one basis point to 2.96 percent, the lowest in almost 12 weeks.
  • West Texas Intermediate crude climbed 1.4 percent to $53.71 a barrel, the highest in almost two weeks.

Get your daily fix of global markets here.

5. IL&FS To Slash Jobs

The government-appointed board at the insolvent Infrastructure Leasing & Financial Services Ltd. plans to slash two-thirds of the jobs across the group as it aims to revive the systematically important conglomerate.

  • The cost cuts initiated by billionaire banker Uday Kotak-led board will lower manpower by 65 percent and reduce its Rs 1,066-crore wage bill by half, according to the company’s exchange filing.
  • The group will also cut salaries and discontinue consultancy services of retired employees, helping it save another Rs 100 crore a year.
  • While IL&FS hasn’t publicly disclosed the size of its workforce, a person aware of the matter said on the condition of anonymity that the group employs about 4,500 people.

Here are the other cost reduction measures it will undertake.

6. Get Ready To Pay More For Your RedBull

The government is considering imposing a higher tax and a cess on energy drinks that contain caffeine, according to two officials aware of the development, to bring brands like Red Bull and Monster Energy on a par with sugary sodas.

  • The plan is to impose a compensation cess of 12-15 percent on caffeinated drinks classified as other non-alcoholic beverages, the officials said on the condition of anonymity as they are not authorised to talk to the media.
  • The Finance Ministry is also considering increasing the goods and services tax rate to 28 percent from 18 percent on such drinks, the first of the two officials said.
  • The proposals, if accepted, will remove the anomaly of caffeinated beverages being taxed less than carbonated drinks like Coca-Cola and Pepsi that invite a total levy of 40 percent (28 percent GST plus 12 percent compensation cess), the official said.

A higher tax rate is also warranted as energy drinks pose a health risk.

7. Nervous Companies Are Going For Short-Term Debts

Corporate treasury departments in India have become so concerned about credit risk they’re increasingly parking their cash in securities maturing overnight.

  • Assets with overnight funds soared to Rs 12,300 crore ($1.8 billion) last month, from Rs 3,900 crore in September, as companies chose safety over returns in the wake of a rare debt default, data from Morningstar Investment Adviser India Pvt. show.
  • Strong demand has seen five firms, including Reliance Nippon Life Asset Management Ltd., lining up offerings.
  • Overnight funds could gain more heft if the regulator tightens rules for money-market funds, which in September suffered the worst outflows since at least April 2007 amid defaults at the IL&FS Group.

The IL&FS stumbles were a reminder that money-market funds are also fraught with risk.

8. Taxman Says No To Corporate Tax Cuts...For Now

India can’t reduce the corporate tax rate without backing it with strong anti-evasion measures, and a cut by the U.S. or talks to lower rates by the European Union nations shouldn’t result in a knee jerk reaction, according to the head of the task force constituted to redraft income tax laws.

  • “A mere reduction in (corporate) tax rate cannot happen, it has to be accompanied by a host of measures,” said Akhilesh Ranjan, member at the Central Board of Direct Taxes. “Most importantly, it has to be accompanied by very strong anti-avoidance mechanisms.”
  • Finance Minister Arun Jaitley, in the budget for 2015-16, promised to lower the corporate tax rate from 30 percent to 25 percent in four years after phasing out exemptions and incentives since they created pressure groups and led to avoidable discretion. That cut hasn’t materialised yet.

Corporate tax rate must be decided by each country according to its own needs, said Ranjan.

9. Goldman Predicts A Lousy 2019

Slowing economic growth, shrinking central bank balance sheets and continued bouts of volatility will help make 2019 another poor year for risk-adjusted investment returns, with few obvious havens, according to Goldman Sachs Group Inc.

  • “Expect better but still low returns in 2019” for multi-asset global allocation portfolios, Goldman strategists including Christian Mueller-Glissmann wrote in a note Monday.
  • While the decline in valuations across asset classes has improved the medium-term outlook, “we see a weaker expected macro backdrop in 2019 as likely to limit return potential,” they wrote.

The gloomy outlook matches the experience of what’s been a rough year for financial markets.

10. Is Rajasthan Failing Its Women And Children?

One out of three girls in Rajasthan are married off before they turn 18. The females in the state are among the least literate in the country. The desert state also has one of the highest rate of infant deaths.

These are just some of the long-standing problems any government of Rajasthan—whether led by the Bharatiya Janata Party or the Congress—has failed to address. Rajasthan goes to vote on Dec. 7. Irrespective of who comes to power, these are the chronic issues they will have to tackle.

  • Educating the girl has been a long-standing problem with the gender gap literacy being highest in Rajasthan.
  • Women are not safe either with Rajasthan having one of India's lowest sex ratios and highest number of rapes.
  • Rajasthan has also performed miserably when it comes to providing sufficient nutrition and vaccination to their children.

Here are charts that show the scale of the challenge in Rajasthan.

. Read more on Business News by BloombergQuint.