Roundup: 22 to 26 June
It is perfectly excusable if you miss some of our emails that come during the week. Hence, we thought it makes sense to send you a weekly roundup on Saturdays.
India's largest company doesn't want to owe money
While Ambani has declared that RIL is debt-free, a statement that perhaps led to the recent bull run, analysts are not so sure. For one, most of the funds will only be received in the next financial year. Moreover, in his statement, Ambani may not have taken into account some liabilities.
In any case, it’s important to remember that there already exists a wide gap between RIL’s reported net debt and estimates of its net debt by credit rating agencies and brokerage analysts.
Analysts at CLSA, Bernstein, Kotak Institutional Equities, Goldman Sachs and Nomura pegged the company’s net liabilities at between ₹2.4 trillion and ₹2.6 trillion in FY20.
Vod an Idea!
The merger took place in the middle of a massive price war launched by Reliance Jio (which has been in the news recently for lining up investor after investor), which launched operations in 2016.
The merger, like many other mergers between massive companies, didn’t go well. Between September 2018, when the merger was finalised, and November 2019, the merged entity lost one-fourth of the 400 million plus users it had at the time of merger.
As if the tax troubles faced earlier by AT&T and Vodafone were not enough, Voda-Idea was hit with a fresh claim in October 2019, with the Supreme Court of India demanding it pay up ₹400 billion (around $6 billion) as license fee and spectrum usage charges.
Are the shoots really green?
From this pair of stories, what is clear is that while demand has started returning on account of opening up, the levels are likely to remain muted compared to pre-pandemic levels.
Credit rating agency Moody’s has forecast that India’s GDP growth rate for the April 2020-March 2021 financial year will be “Zero”. The Reserve Bank of India (RBI, India’s central bank) has said that the GDP growth rate will actually be negative. Based on the evidence from some of India’s largest consumer goods companies above, there is no reason to doubt that. Also, we are already through one quarter of the financial year.
Speaking of the RBI, the monetary policy committee hasn’t been able to agree on how quickly India’s demand will recover after the crisis is over.
India raises the wall
There are calls to boycott Chinese made goods, and for labelling products on e-commerce websites by country of origin.
[…]
Then, imports from China are now being subjected to “100% customs inspection”, from the normal practice of random inspection.
Three senior industry executives said supplies will be impacted for brands such as Apple, Xiaomi, Oppo, Vivo, OnePlus, RealMe, Lenovo and several online focused brands, as consignments for most of them are currently stuck at customs. Most of these brands work on extremely lean inventory levels.
It was a dark & lovely night
[…]the market for fairness creams in India is undergoing an upheaval now. In the wake of the Black Lives Matters protests, Johnson & Johnson decided to withdraw their Neutrogena and Clean & Clear fairness creams.
Unilever has now followed. It’s not discontinuing Fair & Lovely - the brand brings in an estimated ₹41 billion ($550 million) a year. However, the word “Fair” is going to be knocked off its name. So we will have a fairness cream that will not be called “fair”.
Unilever has denied that this change of branding has anything to do with Black Lives Matter, and J&J’s announcement.
See you again with a fresh story on Monday