Business Today

Going Global

Even though Gangwal stands on thin ice if the powers entrusted in the shareholders' agreement are considered; Bhatia has much more to lose if this matter escalates further
twitter-logoManu Kaushik | Print Edition: November 17, 2019
Going Global

The fight between IndiGo's co-founders - Rakesh Gangwal and Rahul Bhatia - has gone global. In the latest salvo fired by Bhatia, he has accused Gangwal of breaching the shareholders' agreement and causing loss to him by making the dispute public. For this, Bhatia has knocked on the doors of London Court of International Arbitration (LCIA). It seems that Bhatia's move is aimed at resolving the issue in the short-possible time, avoiding public attention on the matter, and creating pressure on his friend-turned-foe who just refuses to smoke a peace pipe with him. Going to London also means that Bhatia also wants to stay away from the scrutiny of public authorities - SEBI, corporate affairs ministry - who would possibly intervene if the matter is contested in NCLT (National Company Law Tribunal) given that Gangwal has already written to them alleging corporate governance slippages in the airline. Even though Gangwal stands on thin ice if the powers entrusted in the shareholders' agreement are considered; Bhatia has much more to lose if this matter escalates further.- Manu Kaushik

Open To Fuel

It's a case of increased competition in fuel retail. The petroleum ministry is working on a strategy to set up 78,493 more fuel retail in the outlets in next few years, more than doubling the existing 64,624 outlets. It has for the first time opened fuel retail to non-oil companies and lowered the net worth restrictions to Rs250 crore. The state-owned oil marketing companies -IndianOil, Bharat Petroleum and Hindustan Petroleum could face renewed competition over a period of time from the new entrants.

What this means is that like in the developed world, one could see large retailers set up fuel outlets at their large stores. More importantly, as the focus shifts towards electric vehicles, these outlets could offer fast charging facilities too which the current fuel outlets do not offer. All said, there could be a sharp change in the way fuel is retailed in India over the next few years.- Anilesh S. Mahajan

Investors Avoid Expensive Scrips

Are companies failing retail investors or are retail investors failing themselves? Latest shareholding pattern data suggests retail holding in 81 of the top 100 companies by market value is less than 10 per cent. Some companies such as Avenue Supermarts, Kotak Mahindra Bank, the Bajaj twins and Nestle India have been consistent performers in earnings over the last few years, and their stocks have also been rewarding - rising up to 95 per cent in the last one year. Yet retail investors find them expensive. Instead, they chased companies where news commentary has been detrimental. Cox & Kings, DHFL, Kwality, Reliance Infra and YES Bank have seen retail holding rise at least 10 per cent in a year even as these stocks have fallen 60-95 per cent in the same period.

Not every stock is a turnaround story. Investors need to distinguish whether the fall in prices is a sign of a permanent derating or a lucrative opportunity. A recent study by ICICI Securities suggested that only eight of 228 stocks that corrected more than 75 per cent from their peaks over a two-year period since 2010 have returned to their previous high levels. At the end of the day, fundamentals are what matter. The concept of what is 'cheap' needs to be understood, else professional advisers are always there to help out. - Aprajita Sharma

No Real Benefit

The government move to merge state-owned telecom service providers Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) is a classic case of doing too little, too late. The merger is unlikely to revive the former Maharatna. The merger plan is supplemented with administrative allocation of spectrum for 4G services. That again is happening at a time when private operators have already rolled out 4G and are looking to start 5G services. However, the contentious proposal relates to reducing employee costs through a VRS (voluntary retirement scheme). That's key since employee costs account for more than 75 per cent of its revenues. It could also become an issue with the powerful trade unions. It remains to be seen whether the government can push through the proposal. But, one thing is sure, BSNL is not getting out of the hole.- Anup Jayaram

Contentious Issues

The Insolvency and Bankruptcy Code (IBC) has been tested many times in different courts, since its inception in 2016. But the move of the Enforcement Directorate (ED) to attach the plant and property of Bhushan Power and Steel (BPSL), for which JSW Steel emerged as the lead bidder in the resolution process, has bewildered investors in distressed assets. ED had attached the assets worth Rs4,025 crore under Section 5 of the Prevention of Money Laundering Act, 2002, for alleged loan fraud and money laundering, involving earlier promoter Sanjay Singhal. Eventually, it has become a battle of commercial law and criminal act. The Delhi High Court, in its ruling in April, had held that relevant laws on money laundering take precedence over the bankruptcy law. If that is so, why should any buyer take up the financial risk of acquiring a bankrupt asset, in which criminal investigations are on? Here, lenders should be blamed for taking such cases to resolution.- Nevin John

Monsoon Pick-up

Thanks to an extended monsoon, drug sales in India are on the recovery path, while leading companies are struggling with sales in major export markets, especially the US. Domestic pharmaceutical sales recorded a growth of 11.5 per cent during July-September, the best growth in the past four quarters as local drug sales stagnated to single-digit growth. While sales grew 3.2 per cent in volume terms, price wise growth was 5.5 per cent, said drug sales tracking agency firm AIOCD Awacs. Leading drug maker Sun Pharmas domestic sales grew over 11 per cent during the period, compared to a 3 per cent negative growth in the corresponding quarter of last year. Domestic sales of Dr Reddys, Torrent and Lupin grew 10 per cent, for Glenmark it grew 12 per cent. Anti-diabetic drugs sales grew the most at 14.2 per cent, followed by cardiac drugs at 13.7 per cent, pain and analgesics at 12.6 per cent, neuro-central nervous system drugs grew by 11.9 per cent and anti-infectives by 10.9 per cent.

Post GST, drug companies had to revise labels, affecting sales for months. - P.B. Jayakumar

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