1. Debashis Basu describes the 1993-93 equity market IPO deluge,
January 1995 saw 145 equity issues open for subscription. A spate of mega issues like Reliance Capital, Essar Oil, Jindal Vijaynagar, MS Shoes, and others hit the market in the first two months that year. In one frenzied week in February 1995, 78 companies went public, crowning a financial year of 1,400 IPOs. You begin to understand the farce of 1994-95 when you consider that between 1998 and 2001, only 219 companies raised public money.
2. As inflation looms large, FT article draws attention to the contrasting labour market trends in US/UK and elsewhere.
In the US, where more than 4m workers have left the labour force since the start of the pandemic and the participation rate is still stubbornly 1.7 percentage points below its level in early 2020 — which is the equivalent to more than four million people. Similar pressures are visible in the UK, where the Institute for Employment Studies estimates that, due to a combination of population change and higher economic inactivity, there are now almost a million fewer people in the workforce than there would have been if pre-pandemic trends had continued... The Federal Reserve Bank of St Louis estimates that excess retirements — those that would not have happened through natural population ageing — totalled some 2.4m from the start of the pandemic up to August, accounting for more than half of those who left the labour force...
In the eurozone, in stark contrast, employment has almost regained its pre-pandemic level and labour force participation has rebounded rapidly — so that in France and Spain it is already higher than it was before the crisis... The EU has seen no wave of early retirements during the pandemic because in many countries this is already the norm... (in Australia) inflation could be less problematic there than in the US, because labour participation was returning towards record highs, in common with Japan and other countries in the region, with little pressure on wages.
Government policies may have played important role in this divergence. Specifically the nature of stimulus programs and restrictive migration policies in US/UK,
The difference was due to the high incidence of infection in the US, to school closures and to its policy of channelling income support directly to workers, rather than through schemes that preserved links between businesses and employees... In the UK, while labour shortages predate Brexit, they have undoubtedly been exacerbated by the sudden stop in inflows of EU workers. In the eurozone, labour shortages are most visible in Germany, which previously relied on a steady inflow of migrants to replace an ageing population. Diane Swonk, chief economist at the audit firm Grant Thornton, says the US is now “two million people short of where we should be” due to restrictive immigration policies in place since 2016, even before the pandemic closed borders. “It’s very hard to make up the gap in ageing demographics without a major catch-up in immigration,” she says.
Apart from this the wealth effect from rising asset prices and the general increase in household savings in the US too may have prompted people from exiting or not search for jobs.
3. Ruchir Sharma writes that the world is struck in a debt trap and therefore markets are pre-empting any rise in long-term rates,
Surging short-term rates are putting the world’s government bond markets on track for their worst year of returns since 1949. Yet the yield on 10-year government bonds is now well below the rate of inflation in every developed country. The market is likely intuiting that, no matter what happens in the near term to inflation and growth, in the long term interest rates can’t move higher because the world is far too indebted. As financial markets and total debts grow as a share of GDP, they become increasingly fragile. Asset prices and the cost of servicing the debt grow more sensitive to rate rises, and now represent a double threat to the global economy. In past tightening cycles, major central banks typically increased rates by about 400 to 700 basis points. Now, much milder tightening could tip many countries into economic trouble. The number of countries in which total debt amounts to more than 300 per cent of GDP has risen over the past two decades from a half dozen to two dozen, including the US. An aggressive rate rise could also deflate elevated asset prices, which is usually deflationary for the economy as well. Those vulnerabilities would explain why the market appears so focused on the “policy error” scenario, in which central banks are forced to raise rates sharply, tripping the economy and eventually pushing rates back down.
4. Dani Rodrik examines the adverse effects of globalisation with specific reference to the channel of trade and its distributive consequences. His summary,
Redistribution is the flip side of the gains from trade, and it becomes larger relative to net gains from trade in the advanced stages of globalization. Compensation is difficult for both economic and political reasons. International trade often differs from other market exchanges, raising fairness concerns in ways that domestic markets do not. The economic benefits of deep integration are generally ambiguous. Dynamic or growth gains from trade are uncertain.
5. Livemint points to the sharp rise in India's edible oil imports,
India’s edible oil import bill shot up 63% to ₹1.17 trillion during oil year 2020-21 from ₹71,625 crore the year before. The volume of imports remained the same—at about 13 million tonnes—but the value rose sharply due to a spike in the international prices of palm and soy oil. The global price surge was driven by the pandemic-induced labour shortages, higher demand from China, and the diversion of oilseeds for biofuel production.
6. Much has been written about the PayTm fiasco. A less discussed factoid,
Of the Rs 18,300 crore raised by the company, Rs 10,000 crore was raised to allow an exit to existing investors, including the CEO Vijay Shekhar Sharma. In Paytm’s case, these investors happened to be Chinese.
From a Livemint article
Global brokerage firm Macquarie Research’s coverage of the company sums up the problem: “Paytm has a history of spinning off several business verticals without achieving market leadership or profitability. Paytm has been a cash burning machine, spinning off several business lines with no visibility on achieving profitability. Despite factoring in an aggressive ~50% CAGR increase over the next five years in non-payment business revenues led by distribution business, we expect Paytm to generate positive free cash flow only by FY30E."
PayTm is also a great example of how much damage one greedy company can do to a market as a whole.
Ashneer Grover, the co-founder of fintech BharatPe, said Paytm had “spoiled” the Indian market. “Nothing can come in this market,” he told the website Moneycontrol.
This puts things in perspective of valuation,
An analysis by Goldman Sachs found that those Indian companies that are potential IPO candidates had an average price-to-sales ratio, one metric used to value companies, of 21 over the past three years, compared with three for groups across India’s benchmark Nifty index.
7. This is a stunning factoid about the nature of private capital markets today,
The IT services exporter Infosys took 12 years to go public. At the time of its IPO in 1993, it was a sub $100 million company. On the other hand, Zomato took almost the same time to list (13 years) but its market cap on listing was 130 times that of Infosys.
8. Never mind the perception of lack of objectivity with the opinion, former Chairman Coal India Parthasarathi Bhattacharya has some important home truths
If India has to develop it has to have more power, it has to generate that power, and that is not possible without depending on coal. Coal has to be there, particularly for the base load. Now tomorrow, let us say storage costs come down (a lot). And solar plus storage is the cheapest. Even in that situation, how much share of the total requirement can solar meet, even if the share increases, the power demand also increases faster? If you ask these questions I’m quite sure you will come to the conclusion that much of this will have to be borne by coal, and that’s the reason coal-based power will have to continue for quite some time in this country... you can’t shed away coal in the next 25, 30, 40 years.
9. John Thornhill writes about venture capital fund Tiger Global's capital spraying approach to investing,
In the third quarter, Tiger made 86 investments around the globe, about 1.3 deals every business day. Having raised a $6.7bn fund in March, it had invested most of it by June... While traditional VC funds can take weeks to agree term sheets, Tiger concludes deals in days. The fund mostly outsources its due diligence to management consultants, turning a fixed cost into a variable cost. It is extremely aggressive in winning deals and is happy to overpay because it is willing to accept lower returns. Tiger does not meddle with the management of start-ups or take seats on their boards.
10. From MoSPI data on time and cost over-runs for infrastructure projects
11. Snapshot of India's universe of intelligence agencies
12. Latest on profit concentration within corporate India.
India’s 20 most profitable companies accounted for nearly 65 per cent of all corporate profits in the listed space in the first half of 2021-22 (FY22)... reported a combined net profit of Rs 2.49 trillion in the first half of FY22, up 78 per cent from around Rs 1.4 trillion in the first half of FY21... Reliance Industries (RIL) was the most profitable company in the first half of FY22 with a net profit of around Rs 26,000 crore (adjusted for exceptional gains and losses). It was followed by Oil & Natural Gas Corporation (ONGC) at Rs 24,000 crore and State Bank of India at Rs 21,700 crore. In all, there were three public sector companies among the 10 most profitable companies in H1FY22, and seven PSUs among the top 20 profitable companies. RIL has been topping the profit chart every year since FY14.
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