Business Standard Podcast

According to Arvind Gupta, the head of Digital India Foundation, a public platform is something that is built around the concept of openness, standard and trust. It is backed by the government and not by any private entity. There are about nine platforms with billion plus users each across the world. Five of them are in the US and four in China. And none of them are government backed. With Aadhaar, India built the world’s first and largest public digital platform. It is now being used in banking, KYC and several other fields. It led to some sort of digital revolution, like the birth of UPI which ended the duopoly of two international operators in India. It allows you to send or receive money irrespective of the payment platforms on which you are registered. And now, Nandan Nilekani -- who helped the government create the biometric identification for almost 1.4 billion people after co-founding Infosys -- believes that Open Network for Digital Commerce or ONDC meets all the criteria for the next revolution and disruption in India. It has the government’s commitment, the market condition is rife and there is a massive shift to e-commerce after the pandemic. ONDC seeks to level the playing field for small merchants in the country’s fragmented but fast-growing $1 trillion retail market. While addressing a conference, Nilekani recently said that ONDC is very similar to National Payments Corporation of India (NPCI) -- which is also a non-profit section 8 company. Giving some details, Nilekani said that ONDC will put in place the ground rules, the network participation rules, the obligation and dispute resolution. It will have set of top class protocols to govern the online trade. It will lead the country towards transaction-led internet from the western model of advertisement-led internet. The small-scale implementation of ONDC kicked off on Friday last week. This pilot is being conducted across Delhi, Bengaluru, Coimbatore, Bhopal and Shillong. It will be later launched in 100 cities over a period of six months. ONDC will set protocols in critical areas like price discovery, vendor match, and cataloguing, ostensibly in open source. So, you ideally get an open network with open specifications and protocols. Clearly, there's a lot of stress on the ‘open’ part. Although, not everyone agrees on calling ONDC a public good either. All of this is in the service of one goal -- to change the e-commerce market’s fundamental structure by moving from the current platform-centric model to an open-network model. For instance, leather jacket seller Karan is only registered on Amazon. Meanwhile, Arjun, a prospective buyer who has heard of Karan's quality jackets, is registered on Flipkart alone. Arjun will first look for Karan on Flipkart. After failing to find him there, Arjun will have to register for an Amazon account. However, once ONDC is implemented, Arjun can directly purchase Karan's leather jackets without registering on Amazon.       Why is this such a big deal, though? There's no prohibition on Karan also registering as a Flipkart seller. Meanwhile, buyers shop across platforms as a matter of routine. With an account only on one e-commerce site, Arjun is probably an outlier.     Clearly, the real benefit would come in the form of future offerings that could be built on top of this platform-agnostic approach.     Once ONDC gets implemented, all e-commerce companies and online businesses in India will have to operate using the same processes and standards, as in the case of android-based mobile devices from different brands. According to reports, this could mean a complete revamp of systems for e-commerce players. They could end up losing control over their user interface, and, even more importantly, consumer behaviour insights. Basically, their competitive advantages. All of this amounts to a far-reaching and difficult reconfiguration. ONDC’s may also erode Amazon and Wa

The Airports Authority of India successfully conducted a light trial using the GAGAN satellite navigation system for the landing of an ATR72 aircraft belonging to IndiGo at the Kishangarh Airport in Rajasthan last week.  GAGAN is a system jointly developed by the Airports Authority of India and the Indian Space Research Organisation (ISRO) in collaboration with US defence contractor Raytheon at an estimated cost of Rs 774 crores. It provides a very accurate and high-level of satellite signals for precision air navigation over the entire Indian airspace, with the capability of expanding to nearby regions. It is capable of providing navigation services for departure, en-route and landing operations to equipped planes. The DGCA had issued a mandate, directing that all aircraft registered in India after July 1st 2021 to be fitted with GAGAN equipment.  Simply speaking, GAGAN is a Satellite Based Augmentation System or SBAS, which is a regional network of ground stations and satellites that provide GPS signal corrections, giving a better position accuracy.  GPS is the most prevalent Global Navigation Satellite System (GNSS) and is owned by the US government. GAGAN is the fourth such SBAS system that has been operationalised after the US’ WAAS, European Union’s EGNOS an d Japan’s MSAS and it is interoperable with the other three.  The GAGAN system consists of 15 earth-based reference stations, two master control centres, three land uplink stations and three geostationary satellites. The reference stations gather GPS satellite data and the master control centres collect data from reference stations and create GPS correction messages.  Through this, errors caused by ionospheric disturbances, satellite orbit errors and inaccurate clocks are corrected. And through the uplink stations, the corrected messages are sent to the geostationary satellites which then broadcast them to the aircraft.   India is the first country in the Asia Pacific Region to trial indigenous SBAS for landing.  According to SV Satish, former executive director (Air Traffic Management), AAI, GAGAN opens a gateway for all airports to have low visibility approaches. It will bring down diversions, save fuel and boost efficiency. He says, GAGAN can serve smaller airports effectively, and older aircraft have to be upgraded with GAGAN receivers.  GAGAN will help airports which are currently devoid of precision approach capability equipment and have higher visibility requirements. It will reduce flight delays, save fuel, and improve flight safety. Now, aircraft will be able to land at airports not equipped with expensive Instrument Landing Systems, which include many small regional airports.  At present, IndiGo, SpiceJet, Air India, Go First and AirAsia India have aircraft that are capable of carrying out these satellite-based procedures. As GAGAN’s footprint expands from Africa to Australia, India is in a position to offer its service to neighbouring countries.  Though primarily meant for aviation, GAGAN’s capabilities can be utilised in many other user segments such as intelligent transportation, maritime, highways, railways, surveying and the telecom industry. GAGAN Message Service (GMS) can relay alerts to deep-sea fishermen, farmers, and disaster affected people at the time of natural calamities.  Watch video

Record high inflation and the growing hawkish tones of global central banks, including the Reserve Bank of India, has derailed recovery in the equity markets. The benchmark Sensex, for instance, had jumped about 15% from its March lows to hit a high of 60,612 on April 4.   However, the RBI’s hawkish policy, along with the US Fed chairman’s hint at a 50-bps rate hike in May weakened the bulls. Besides, persistent geopolitical tensions and lower-than-expected Q4 result of India Inc, so far, also dented the sentiment.   Consequently, the benchmarks fell about 6% from their April highs and ended the previous month with a loss of 2.5% on a month-on-month basis. Now, as we head in May, the old adage of ‘Sell in May and Go away’ is unsettling investors. To be sure, this saying has often proved true for the US and European markets.   Data since 2010 shows Indian frontline indices have given positive returns on seven occasions in the month of May. Last year, Nifty50 and S&P BSE Sensex rose 6.5% each during the period as global central banks continued with their dovish stance. However, the May of 2022 may be different. Global central banks are withdrawing liquidity, and China is seeing its worst Covid outbreak yet. Analysts believe that if China – known as the factory of the world -- continues with its ‘zero-Covid policy’, it will aggravate global supply chain disruptions further.   Speaking to Business Standard, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, monetary policy tightening, soaring inflation are likely to keep markets volatile. He suggests investors should avoid buying aggressively amid uncertainty, and use sharp correction to buy high-quality names.  Back home, indicators aren’t favouring the bulls as well. Resurgence of Covid-19 and rising inflation are the immediate threats. While India’s biggest initial public offer of LIC may bring short-term respite for investors, analysts caution that markets cannot be immune to the pain seen in global markets.   According to Ambareesh Baliga, independent market analyst, LIC IPO is likely to act as a catalyst to ‘Sell in May and go away’; He expects Rs 21,000-crore liquidity drain due to the IPO, but muted earnings growth, rate hike likely to dull markets in May.   Against this backdrop, technical charts indicate that the Sensex could move in a broad range of 54,500 to 60,500. Investors can expect significant support around 55,650-odd levels, and resistance around 59,350.   Nifty50 is expected to move in the range of 16,200 to 18,300, with a support at 16,000 levels and resistance at 17,550. Meanwhile, investors will track Q4 report card of HDFC, Britannia Industries, Tata Consumer, Inox Leisure, Hero MotoCorp, Tata Steel, Titan Company, and Tata Power in the holiday-truncated week. They will also await the launch of LIC’s mega IPO due on Wednesday. Globally, US Federal Reserve and Bank of England will announce their interest rate decisions. Watch video

A severe heatwave that is sweeping through large swathes of India has pushed temperatures above 45 degrees Celsius in several places in north and central India.  Heatwaves have caused 24,223 deaths from 1992 to 2015 across the country, as per official records. The India Meteorological Department qualitatively describes heatwave as a condition of air temperature which becomes fatal to the human body when exposed. Quantitatively, it is defined based on the temperature thresholds over a region in terms of actual temperature or its departure from normal. A heatwave is considered if the maximum temperature of an IMD weather station reaches at least 40C or more for plains and at least 30C or more for hilly regions. A 4.5 to 6.4-degree departure from normal is considered to declare a heatwave and a more than 6.4-degree departure for a severe heatwave. And, when the maximum temperature is equal to or above 45°C, it is a heatwave, while if it's 47°C or above, it is a severe heatwave. The above criteria should be met at least in 2 stations in a Meteorological sub-division for at least two consecutive days to declare a heat wave. Heat waves usually occur in the months of March to June and in some rare cases even in July. The peak month of the heat wave over India is May. Heat waves generally occur over plains of northwest India, Central, East and north Peninsular India. It covers Punjab, Haryana, Delhi, Uttar Pradesh, Bihar, Jharkhand, West Bengal, Odisha, Madhya Pradesh, Rajasthan, Gujarat, parts of Maharashtra and Karnataka, Andhra Pradesh and Telangana. Sometimes it occurs over Tamilnadu and Kerala also.   However, maximum temperatures more than 45°C are observed mainly over Rajasthan and Vidarbha region. IMD’s network of surface observatories covering the entire country measure various meteorological parameters like temperature, relative humidity, pressure, wind speed and direction etc. Based on daily maximum temperature station data, climatology of maximum temperature is prepared for the period 1981-2010 to find out the normal maximum temperature of the day for a particular station. Thereafter, IMD declares a heatwave over the region as per its definition. The health impact of heat waves typically involves dehydration, heat cramps, heat exhaustion and heat stroke. The IMD uses four colour codes for weather warnings. Green means no action needed, yellow refers to watch and stay updated, orange means be prepared while red alert means take action. Watch video

Roiled by domestic shortage of edible oils and protests over it in the run up to Eid, Indonesia has put a halt on export of palm oil -- the mainstay of its economy. Its ripples will soon be felt in India, which imports almost half of its palm oil from there. Prices of edible oils will be on boil. And combined with an increased fertilizer subsidy bill, soaring fuel prices and coal shortage, it may widen the country's current account deficit.  India Inc is also facing the heat. Rise in prices of commodities and disruption in the supply chain is increasingly eating into its profit margin. In an interview with Business Standard’s Arup Roychoudhury, CII president and global CEO and MD of Tata Steel, TV Narendran, tells why he believes that it may not derail the growth in the long term. Meanwhile, contact-sensitive sectors like hotel and airline industry and cinemas have been seeing an impressive turnaround for quite some time as the economy emerged from Covid-19 induced lockdowns. But the recent uptick in cases across the country are worrying the industry again.    After the markets, let us turn to personal finance. It is often said that your scores are a reflection of your abilities. And you just cannot outrun them. While the college scorecard in a way helps you land a job, there is another score that helps you later -- to tide over the financial challenges. So when you turn to a lender for a loan or a credit card, the lender falls back on your credit score to know more about your credit history. Delve into the details of credit score and more in this episode of the podcast.  Watch video

It is not just a cooking oil confined to kitchens. Its derivatives are almost omnipresent. From cakes, biscuits and chocolates that you relish, to the beauty products. From cleaning agents to laundry detergents to margarine. No wonder, shares of fast moving consumer goods (FMCG) companies dropped up to 6 per cent on Monday when the news flashed that Indonesia was putting a halt on export of crude and refined palm oil. Higher prices will increase margin pressure for consumer goods companies like Hindustan Unilever and ITC.  The ban by the world’s biggest palm oil producer and exporter came into effect on Thursday. It could further inflame surging global food inflation. India is the world’s biggest importer of palm oil as well as edible oils in general.  Palm oil is preferred in India’s foodservice industry as it is relatively cheaper, lasts longer and is more stable at high temperatures than other oils.  Indonesia has said it will revoke the export ban once the domestic prices of bulk cooking oil come down by around 30%. It consumes less than 40% of its annual palm oil production of 48 million tonnes and the rest is exported.  Industry officials don’t expect the ban to last long due to limited infrastructure to store the surplus oil and mounting pressure from importers.  India consumes around 24 million tonnes of edible oil annually. About 10.5 million tonnes of demand is met through domestic production whereas the rest of 13.5 million tonnes is imported.  More than 60% of this, around 8-8.5 million tonnes, is palm oil and 45% of that comes from Indonesia and the remaining from neighbouring Malaysia The prices of vegetable oils like mustard oil, soya oil, sunflower and palm oil have gone up by as much as 25% over the past year. Sudhakar Desai, CEO of Emami Agrotech says, Indonesia has been trying to control edible oil prices. Its total production is 40 lakh tonnes per month, where 12 lakh tonnes is used for local consumption and making biofuel. The present export ban cannot sustain more than 10-12 days, he believes, and indicates that palm oil prices in India can go up another Rs 5 per litre. The current situation has also highlighted the need for self-sufficiency or at the least to reduce import dependence. The self-sufficiency in oilseeds attained through the “Yellow Revolution” during the early 1990s, could not be sustained beyond a short period.   Several steps to boost oilseed production have been taken since then. One of them is the recently-launched Oil Palm mission with the objective of producing 2.8 million tonnes of palm oil locally by 2025-2030. However, even if the mission succeeds, it will not significantly lower import dependency. Despite all the measures, India’s reliance on imported edible oils continues to grow. It is also possible to reduce the consumption of vegetable oils by creating awareness among the consumers about optimum and healthy oil consumption habits. As per nutritional requirements, 12-13 kg per person per annum is sufficient, while an average Indian is consuming more than 18 kg per annum. Desai says India’s edible oil consumption has been falling marginally over the last two years and is expected to fall 2-3% in the current year. He added that high prices are already encouraging farmers to grow more oilseeds.  Emami Agrotech's Sudhakar Desai says results from Oil Palm Mission will be seen in medium term. High prices will also give the right opportunity to cultivate oilseeds in India. Soybean and mustard crop has gone up by 25-28% in last two years, he says.  India’s vegetable oil import bill jumped 63% in the 2020-21 marketing year ended October 31 to a record $15.7 billion. The volume of imports remained roughly the same as the previous year at around 13.5 million tonnes but the value spiked as overseas prices surged. The import bill may go up slightly this year.  The crude oil import bill doubled last fiscal to $119 billion and

Q: What is your assessment for FY23 at a time of volatile commodity prices and disruption in supply chain? Ans: >Corporates should bring in resilience and agility in the way they work >CII toned down the growth forecast a bit, but overall sentiment among corporates is positive >CII’s 7.5 to 8% growth estimate makes India one of the fastest growing large economies  >Corporates keen to spend more capex and hire more people than they did in the past >The existing headwinds are not expected to derail the growth trajectory of India Inc   Q: More than growth, the concern this year is inflation. We know how inflation will impact households. How will it impact corporates? Will corporates pass on all of their input cost increase to customers?   Ans: >Some of the input cost increase will be passed on to the consumers >Many corporates exploring export markets to absorb some of the inflationary pressures >There will be margin compression, but that won’t translate into losses >High commodity prices are encouraging companies in the commodity space to invest more >Govt’s focus on infrastructure spending will sort out supply-chain issues >With contact sectors (like hospitality and tourism) coming back, household incomes will stabilise     Q: Will a hit on margins due to inflation impact private-sector capex just as it is picking up? Ans: >Sectors that announced their capex programme will continue to spend >Sectors that have announced capex are mining, chemicals, electronics manufacturing, warehousing etc >Investments will continue in newer areas like climate economy and renewable energy >A lot of investment is happening in airport privatisation and ports because volumes are going up     Q: While the employment situation is better than 2020, it is still a problem. Millions are reportedly leaving the job market, especially women. How bad do you think is the unemployment situation right now? What more can be done from the government’s side and the private sector side? Ans: >Employment situation has been tough for many, like migrant workers and women >Data reveals employment in agriculture has gone up. This is because agriculture has had strong growth >While we are obsessed with education, there needs to be a greater obsession with skilling >Government should ensure more sector-specific upskilling of the workforce >Private sector should also do more towards skill development of workforce >Private sector needs to work through its contractors to drive that ecosystem >To bridge that talent gap, the private sector and the government need to work together

India on Thursday reported 3,303 fresh Covid-19 cases, the most in over a month, as infections continue to increase across countries led by the spread of the new Omicron XE sub-variant.  With the uptick in cases, risks of a possible fourth wave and subsequent lockdowns continue to linger. But, market analysts believe the outlook for relevant sectors remains strong as the current situation is not alarming. According to Sachin Shah, Fund Manager, Emkay Investment Managers, the recent spurt in Covid cases is not serious. He is bullish on sectors that are part of the reopening. He says most companies are now running at full capacity and high occupancy, and consumer sentiment continues to be strong.    From the pack, stocks of hotel companies such as Lemon Tree, Restaurant Brands Asia, Mahindra Holidays and Taj GKV have gained 4 to 14% so far this month as occupancy levels are healthy with wider vaccination coverage and ease in restrictions. Rating agency CRISIL expects a sustained recovery to result in a gradual improvement in the hospitality sector’s financial leverage over the medium term.  “Strong pent-up demand for leisure travel, opening up of international and corporate travel, and wide vaccination coverage should catapult the revenue of the Indian hotel industry by 45% from a decadal low last fiscal, and almost match the pre-pandemic levels,” reports CRISIL.  The agency further expects rebound in revenue and leaner cost structures to drive up operating profitability of the sector by 200-400 bps points this financial year vs FY2020.  Apart from hotels, analysts are also upbeat on quick-service restaurants that have seen robust sales recovery in the last few months. Recent channel checks by brokerage Motilal Oswal indicated strong sales growth momentum for quick-service restaurants across all brands, similar to trends in February and March.   “Reversal of restrictions continues to boost mobility, contributing to the healthy recovery in dine-in for both high-street as well as mall outlets. Dine-in players are doing better, as expected, while delivery has not only sustained at much higher levels than pre-Covid but has also received a sequential fillip in April,” reads a Motilal Oswal note.    That said, a trend of revenge travelling is also being seen across the board, which has improved prospects for airline companies as well. As per the Directorate General of Civil Aviation, around 1.06 crore domestic passengers travelled by air in March, nearly 38% up from February. The passenger load factor, which means occupancy rates, was also above 80% for all domestic private carriers during the month.   Gaurang Shah, Vice-President, Geojit Financial Services, says he is bullish on Indigo from aviation and PVR from multiplex sectors. Airlines are passing on high ATF costs to consumers, he says. Inclination for binge travel is visible in high occupancy rates, while multiplexes across all cities are seeing better realisations, he says.    Therefore, the outlook for contact-intensive sectors remains robust as the economic impact of each Covid-wave has been milder than earlier. However, the Street will monitor Q4 results of related companies in the days ahead to have a better understanding of the earnings recovery. Meanwhile, on Friday, big corporate names are slated to release their March quarter results including Maruti, Wipro, IndusInd Bank, SBI Cards, Ultratech Cement and Tata Chemicals. In addition, investors will closely monitor the US personal consumer expenditures index, and other global cues for market direction.   Watch video

The State Bank of India recently announced interest rate on home loans at just 6.65%. But not everyone can avail the loan at such a low rate. For that, his or her credit score has to be excellent. The country’s largest lender is providing home loans at attractive interest rates for those with good credit scores. And not just loans, a decent credit score will also help you get credit cards too. So a good credit score helps you avail personal, consumer and other types of loans and credit cards easily. But, what exactly is the concept of credit score? Let us find out. There are four credit information companies or credit bureaus in India whose credit scores are popular with both lenders and borrowers. These are TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. A borrower’s credit score ranges between 300 and 900. For a bank or lender, your credit score reveals your creditworthiness as a borrower. Scores that are at least 750 or above are deemed to be good. Your credit score is based on your credit history, which encompasses whether you have been making timely repayments, the number of times you have borrowed, the amounts you have borrowed, the type of loans you have availed of, and other relevant factors. Timely repayment of EMIs on loans as well as credit card bills is also an important factor.     The score is assigned to you based on your data mentioned in the Credit Information Report, or CIR. For example, Experian’s CIR has detailed information of the concerned person's credit and loan history, including identity information, credit cards, credit accounts, loans, payments, and recent enquiries. Experian updates this CIR every month based on the consumer credit information its member banks and other institutions send it once a month. This data considers the number of times you have applied for credit cards and the number of requests you have made for different loans. Lenders might seek such information, including the credit score, before approving any card or loan. Such requests from lenders are called hard inquiries. Note that a higher number of hard inquiries can lower your credit score because you will be considered a credit-hungry borrower with a greater risk of default.  The percentage of credit limit utilised on your credit card also affects your credit score. It is advisable to only utilise around 30 to 40 percent of your credit card spending limit each month to keep your credit score high. Having multiple credit cards or outstanding unsecured loans can also impact your credit score. A healthy credit score will ensure that loans are available to you at more benign terms with lower interest rates, which will save your money. On the other hand, an unhealthy credit score could lead to your loan or credit card application being rejected or being approved on not-so-favourable terms.     Watch video

Life Insurance Corporation’s much-awaited IPO is finally opening on May 4. But much like the initial euphoria around it, its size also looks diminished. Its current valuation is now Rs 6lakh crore, less than half of the expected value of around Rs 13lakh crore. Three years ago, the government had faced backlash for underpricing the IRCTC IPO. So is the government undervaluing another state-run behemoth? Or has it taken this call after due diligence?  LIC IPO may well attract a fresh wave of investors into the markets. Something similar had happened with OTT platforms during the lockdown, when people of all ages turned to it. In 2020, Netflix had added 36 million subscribers. But the streaming giant saw its customer base shrink by 200,000 during the January-March quarter. And it has projected a loss of another 2 million subscribers in the current quarter. Netflix is now mulling a low-cost subscription supported by advertising. What it would mean for it and for the Indian OTT ecosystem? After Netflix, let us move on to markets. It has been a rollercoaster ride for investors during the April F&O series, with bears having the slight edge. Will they triumph? Or will the bulls fight back today?  Russia-Ukraine war is not just shaping the markets. It is forging ties between countries too. India and the European Union (EU) agreed to establish a Trade and Technology Council early this week. What it is and what both the sides will gain from it, listen to this episode of the podcast to know.  Watch video

The Initial Public Offering (IPO) of India’s largest life insurer LIC is finally here, albeit at a reduced size. The IPO is a pure offer for sale where the government is selling a 3.5% stake, down from its earlier plan to sell 5%.   It plans to raise Rs 21,000 crore at the upper end of the price range of ₹902-949 per share.           That will still overshadow Paytm’s Rs 18,300 crore issue. The IPO price values LIC at around Rs 6 trillion or 1.12 times its embedded value of Rs 5.4 trillion at the end of December.  The embedded value is a measure of future cash flows in life insurance companies and a key financial metric for insurers. When LIC filed the draft red herring prospectus (DRHP), experts had pegged its valuation at two to three times its embedded value, based on the valuation of its domestic private sector peers. However, market volatility due to the Russia-Ukraine war may have changed the dynamics.  Listed private life insurance companies like HDFC Life, SBI Life and ICICI Prudential Life trade between 2.1 to 3.1 times their embedded value. The average market cap to EV ratio of the three is 2.6 times. If we apply the average multiple, LIC’s value would be Rs 14 trillion.  The IPO valuation is almost 60% below this level. However, it is in line with the multiples commanded by global peers which are anywhere from 0.21 to 1.89. Analysts highlighted that LIC had a lower Value of New Business (VNB) margin of 9.9% in FY21 compared with private players, who have VNB margins of 22-27% due to higher share of participation and group products. Disinvestment secretary Tuhin Kanta Pandey justified the valuation and timing of the IPO at Wednesday’s press conference. IPO is the first step of long-term value creation for shareholders, he says. The 3.5% is an optimal size in current market conditions, he said, adding that the valuation flows from optimised positioning, marketing strategy, accessing investors and market window.  While the government said it has decided to go ahead with the IPO in May due to strong market demand and a "solid" anchor investor base, there also might be another reason.  It has time till May 12 to launch the IPO without filing fresh papers with Sebi. If this window is missed, LIC would have to update the offer documents with the latest results and embedded value. The government was previously criticised for under-pricing the October 2019 IPO of the Indian Railway Catering and Tourism Corporation, popularly known as IRCTC. At the top end of the price range, IRCTC fetched a market value of Rs 5,120 crore.   The government divested around 12.5% of its stake in IRCTC during the IPO and sold another 20% in December 2020. Today IRCTC is valued at almost Rs 60,000 crore, an increase of 1070% since the IPO. Does the government risk a repetition of the IRCTC episode? According to Ashish Gumashta, CEO, Julius Baer India, govt is eyeing price discovery for LIC and it can't think of a better defensive bet than this at this time. He believes this size will not disrupt the primary market, and the valuation leaves something on the table for investors. Market strength of LIC and private players vary.  Another expert echoed similar  views. Deven Choksey, Managing Director, KR Choksey Investment Managers says the govt wants investors to come again for FPOs. He believes the valuation is sensible in current situation, but price to EV ratio could have risen to 2 if market conditions were right.  The share price performance of India’s current IPO record holder also offers a lesson on what happens when an issue is overpriced. Shares of Paytm, which listed in November last year, are down 73% from their IPO price.  Experts feel that the conservative valuation for LIC at this stage is a sensible approach by the government, which has to consider global and local market conditions, long-term return expectations of retail investors and the nature of LIC’s business c

Two years ago, people across the world found themselves locked inside their homes amid the Covid-19 pandemic, and desperately seeking diversions. Not surprisingly, Netflix saw its fortunes skyrocket. The OTT giant reportedly saw an addition of 36 million subscribers in 2020. This was the highest annual growth the company had seen, since its video streaming debut in 2007. But, that was then. Multiple factors, ranging from increasing inflation to, even the Russian invasion of Ukraine, have been playing spoilers for it now. These pushed Netflix to consider rolling out affordable subscription plans that would be supported by advertising. While revealing the plan, Netflix Co-CEO Reed Hastings said that the company would look into the details involved over the next one year or two.   How big a change this is for the company, after years of offering commercial-free content, was reflected in Hastings observation on the topic. He hadn’t been in favour of advertising in the past. But catering to consumers who were willing to tolerate advertising in return for lower prices made a lot of sense, Hastings said. Basically, this is Netflix’s AVOD play. The acronym AVOD stands for a business model associated with online video on demand, like SVOD and TVOD. SVOD is subscription-based video on demand, AVDO is advertisement-based video on demand and TVOD is transactional video on demand.   On the face of it, this might seem counterintuitive, at least where India is concerned.   According to a recent report by CII and Boston Consulting Group, over the past few years, India has seen a remarkable surge in SVOD content. Furthermore, the Indian OTT industry has been transitioning from the AVOD to the SVOD model. So, why such a move? It appears, there’s still a lot of money to be made with the AVOD model. Last November, analysts at Media Partners Asia’s APOS India conference reportedly said that among OTT services, AVOD would continue to garner more revenue than SVOD. In fact, India’s AVOD market size is estimated to grow from 1.1 billion dollars in 2021 to 2.4 billion dollars in 2026, according to a Deloitte 2022 prediction report. Now, what would such a move mean for Netflix? Would Netflix have to change its content strategy to grow its ad business in India? At the moment, Netflix is identified by its premium content. Would that focus shift to more mass-oriented, local content? After all, mass reach is essential if it wants to capture the advertisers’ interest. Karan Taurani, senior vice-president, Elara Capital, says 60% AVOD revenue is dominated by aggregation and sports content, and AVOD market is focused on masses in terms of content. Entering AVOD market will be tough for Netflix, he believes. And, does this move by Netflix indicates that the future of the Indian OTT market is freemium?   According to Karan Taurani of Elara Capital, Indian OTT’s future will be a mix of AVOD and SVOD. "SVOD base necessary for producing large-scale, expensive content and platforms transitioning to SVOD as consumers demand quality content," says Taurani. SVOD will grow at a faster pace going ahead and 'freemium' will be the way to go for next 5 years, he says. At present, Netflix has no presence in the sports domain anywhere in the world. Considering that IPL has had a large hand in Disney+Hotstar’s success in India, can Netflix afford to ignore this area, especially given the love for cricket that Indians have?   Watch video

Equity markets have been volatile of late, given the turmoil in global markets. The ongoing Ukraine crisis, high commodity prices and a likely onset of higher interest rate regime have kept bulls on the sidelines.   Back home, disappointment on the earnings front have also plagued select stocks, thus adding to the woes. So far in April the NSE Nifty has swung in a wide range of nearly 1,300 points. From a high of 18,115, the index dropped to a low of 16,825, before recouping some of its lost ground. Still, the index is down over 3 per cent on a month-to-date basis. Among the Nifty 50 stocks Mahindra & Mahindra, Adani Ports, NTPC, Eicher Motors and Shree Cement have been the major gainers so far, while Hindalco, Tech Mahindra, Infosys, Wipro and Bajaj Finserv are the major losers. According to Kunal Shah, Senior Technical & Derivative Analyst, LKP Securities, April F&O series was one of the most volatile series in recent times. It saw selling pressure at higher end on Nifty and Nifty Bank, while Lower Top, Lower Bottom formation was seen on charts. Now, the stage is set for a tug-of-war between the bulls and bears on the expiry day. As per the options data, the highest open interest is seen in 17,500 Call and 17,000 Put. Higher open interest in Call indicates resistance and vice versa in case of the Puts. On Wednesday, the 17,000 and 17,100 Calls saw significant build-up in open interest. And, at the same time, the 17,000 Put saw heavy addition. This trend suggests investors should brace themselves for a fierce tug-of-war in the range of 16,950-17,150. A significant breakout on the lower side of the range can trigger a sharp sell-off. On the other hand, a sustained trade above 17,150 can trigger a short-covering rally. According to Manojh Vayalar of Religare Broking with FIIs focussed more on index options, volatility could be high today.  A close above 17,250 on the Nifty and above 36,500 on the Bank Nifty can lead to over 400 points and 1,200 points rally on both the indices during the first week of May. Meanwhile, apart from the F&O expiry induced volatility, markets may eye global cues for further trajectory. Moreover, stock specific action amid Q4 results season will remain high. Shares of Ambuja Cements, Axis Bank, Bajaj Finserv, Biocon and Vedanta are likely to be in focus as the companies are scheduled to announce their Q4 earnings. The primary market, too, will see some action with the ongoing IPOs of Campus Activewear and Rainbow Children’s Medicare. Further, the mega 21,000 crore rupees LIC IPO shall open for subscription on May 4, next week. Watch video

Over 15 years and 16 rounds of talks later, India and the European Union finally decided to launch a joint trade and technology council. And it comes at a time when the EU and India are not at the same page over the Russian attack on Ukraine. But they agreed on other issues which were dragging the launch of the trade mechanism for years. The deal was signed during the visit of President of the European Commission, Ursula von der Leyen on April 25.    The importance of the agreement can be gauged from the fact that the United States is the only other country that has a technical agreement with the EU similar to the one signed with India.   And for India, the decision to set up such a council will be the first with any of its partners. This strategic coordination mechanism will allow the two partners to address challenges in trade, trusted technology and security, deepening cooperation in these fields. This trade mechanism will allow both sides to work on fields such as 5G, artificial intelligence, climate modelling and health-related technology.   The 27 member EU is India's third-largest trading partner, accounting for €62.8 billion worth of trade in goods in 2020 or 11.1% of total Indian trade, after China at 12% and the US at 11.7%. The EU is the second-largest destination for Indian exports (14% of the total) after the US.    Between 2007 and 2013, both the sides held 16 rounds of formal talks for the free trade agreement but a deal could not be agreed upon due to stark differences on several issues.   They have now agreed that rapid changes in the geopolitical environment highlight the need for joint in-depth strategic engagement.    The Trade and Technology Council will provide the political steer and the necessary structure to operationalise political decisions, coordinate technical work, and report to the political level to ensure implementation and follow-up in areas that are important for the sustainable progress of European and Indian economies.   The council will comprise working groups led or co-led by relevant departments, services or agencies to operationalise the political decisions into deliverables.   For instance, the US and the EU have established 10 such Working Groups, which are chaired by relevant US agencies and European Commission services.  These working groups focus on tech standards, climate and green tech, secure supply chains, export controls and investment screening amo

Securities and Exchange Board of India (SEBI) had given a nod to the initial public offering proposal of LIC last month. While the price band of the issue is expected to be announced today, reports suggest that the offer will run between May 4 and May 9. LIC’s management and investment bankers will likely embark on road shows in six cities across India where they will meet potential investors and analysts. The cities include Mumbai, New Delhi, Bengaluru, Ahmedabad, Rajkot, and Kolkata. The government has nearly halved its fundraising goal for LIC's IPO to $3.9 billion, having had to cut its valuation estimates after feedback from investors. Yet, analysts don’t expect the issue to see a blockbuster response from investors amid uncertain market conditions. Gaurang Shah, Vice-President at Geojit Financial Services says he expect LIC IPO to sail through but not with whopping subscription numbers. He expects tp see decent demand for LIC IPO from HNIs and retail investors Ajit Mishra of Religare Broking, too, expects the IPO to enjoy decent traction given its dominant market share in the insurance space. Business Standard spoke to Ajit Mishra, VP-Research at Religare Broking. According to a Business Standard report, most large global investors that the Centre was wooing for the initial public may give the issue a miss. Earlier, the Centre had reached out to 180-200 large investors that included sovereign wealth funds, and those who make investment decisions based on environmental, social, and governance (ESG) track record. These investors are learnt to have committed to consider investing in the insurer’s future offerings, based on its performance as a listed entity. This comes as the Ukraine war dynamics have made foreign investors skittish. They now see currency risks and anticipate embargoes while considering investing in emerging markets.  The US Federal Reserve’s hawkish stance has further made them choose a safe haven. But an impressive response from domestic investors and some foreign investors have made the government go ahead with the IPO.  Analysts believe that it will lead to a fresh wave of investors entering the market. The public issue is likely to reserve 35 percent of its offer for retail investors, 10 per cent for policyholders and 5 per cent for LIC employees.  Going forward, the government will look at an additional stake dilution in LIC only after a year of the insurer’s listing.  Watch video