1. Ajay Tyagi points to value erosion due to being a public sector enterprise,
... during the five-year period (FY17 to FY22), PSE index return (Nifty PSE) was less than 2 per cent compared to Nifty 50 return of over 90 per cent and Nifty 500 return of over 85 per cent. On a sectoral basis, PSU Bank index return of (-) 23 per cent during the same period was the worst among all sectoral indices; in comparison, Nifty Bank Index and Nifty Financial Services index gave a return of 70 per cent and 96 per cent, respectively, during this period.
This is a combination of actual poor governance, stigmatised perceptions of public ownership, and general valuation premia with private sector companies.
Sample these examples,
The GoI came out in 2013 with the norm for listed entities to have a minimum public shareholding of 25 per cent. The PSEs were given time till 2016-17 to meet this requirement. Unfortunately, this date was extended by the government time and again. As of end March 2022, out of the total 87 listed PSEs, 32 still do not have a public shareholding of 25 per cent... As of end March 2022, 55 listed PSEs didn’t have the requisite number of independent directors and 28 didn’t have even one woman director (independent or otherwise) on their board.
2. Martin Wolf points out that China and Russia are the biggest trading partners for many major developing countries.
India is another beneficiary because it has big refineries that can process Russian crude, turning it into diesel, some of which could end up in Europe even if the raw material came from Russia. “India is becoming the de facto refining hub for Europe,” analysts at RBC Capital Markets said in a recent report. But buying diesel from India will raise costs in Europe because it’s more expensive to ship fuel from India than to have it piped in from Russian refineries. “The unintended consequence is that Europe is effectively importing inflation to its own citizens,” the RBC analysts said. India is getting about 600,000 barrels a day from Russia, up from 90,000 a day last year, when Russia was a relatively minor supplier. It is now India’s second-biggest supplier after Iraq. But India could find it difficult to keep buying from Russia if the European Union’s restrictions on European companies insuring Russian oil shipments raise costs too much. “India is a winner,” said Helima Croft, RBC’s head of commodity strategy, “as long as they are not hit with secondary sanctions.”
6. I've been deeply sceptical of both the business model and the value addition of India's Edtech startups. They've been riding on aspirational parents weakness to provide any perceived additional edge to their children, and the pandemic provided the big boost. There are no reasonably rigorous independent studies that evaluate their efficacy. And all have resisted efforts to undertake serious independent evaluations. So the real value addition of the prevailing providers are deeply questionable.
The biggest concern, now materialising, is that these entities become the glorified version of India's tuition institutes for schools and professional course entrance examinations.
Unacademy recently announced its foray into offline learning at its upcoming new Unacademy Centres. These will facilitate offline classes for learners and will extend access to top educators in the NEET UG, IT JEE and Foundation (9-12) course categories. The firm aims to meet the growing demand for inter-personal mentoring with this new approach. The first Unacademy Centre will be operational in Kota this month, followed by Jaipur, Bangalore, Chandigarh, Ahmedabad, Patna, Pune and Delhi. Byju’s will invest upwards of $200 million to open brick and mortar tuition centres in the next 12-18 months. Based on the feedback received from the first 80 pilot centres launched since December, it will launch 500 centres in 200 cities this year.
See also this about the stress faced by Edtech firms as the pandemic eases and children return to schools.
7. It means something when Vincent Mortier, chief investment officer of Amundi Asset Management, Europe's largest asset manager, said this
"... parts of private equity look like a pyramid scheme... You know you can sell [assets] to another private equity firm for 20 or 30 times earnings. That’s why you can talk about a Ponzi. It’s a circular thing.”
PE firms have more than $6 trillion in assets under management and have raised and deployed record amounts in the first quarter of 2022.
8. The ongoing coal shortage forced the GoI to advise state generators to import and blend with 10% imported coal. Many state generators expressed difficulties and requested that the GoI organise the imports on their behalf. NTPC estimates a requirement of nearly 20 mt of imported coal to meet the 10% blending requirement.
India’s largest power generating company (genco) NTPC Limited has awarded multiple coal import contracts for 6.25 million tonne (MT) to Adani Enterprises at a cumulative value of Rs 6,585 crore... The company placed six different tenders and received technical bids from four players - Ahmedabad based Adi Tradelink, Chennai-based Chettinad Logistics, and Delhi-based Mohit Minerals Ltd along with Adani Enterprises. In March, when the coal crisis erupted, NTPChad issued five tenders for importing 5.75 MT of coal, and all the contracts went to Adani Enterprises. The cumulative amount of these tenders was Rs 8,422 crore. The technical level bidders were the same one as in the latest round... the imported coal would come from Indonesia and NTPC is not looking to import from Australia... NTPC would see its fuel cost go up to Rs 7-8 per unit from importing coal as against Rs 2 per unit from buying domestic coal from national miner Coal India Limited (CIL)... (blending) would increase the final electricity tariff of NTPC by 50-70 paisa which would be passed on to consumers. Coal price in the global market is currently five times the CIL notified coal prices.
9. On India's woefully low financial market savings,
Consider the performance of the government’s flagship Atal Pension Yojana. By January 2022, the government said that 36.8 million people had subscribed to Atal Pension Yojana. In contrast, 277 million people have registered on e-shram portal to avail of government benefits, and there are an even greater 500 million people in the unorganised sector. Even those in the organised sector do not have adequate pension coverage.
10. T N Hari in Livemint has a long read on entrepreneurship for middle-India. This is a fascinating story about how marketing based on sachets became popular.
Chinni Krishnan, a farmer turned entrepreneur in Cuddalore, noticed how the multinationals (MNCs) had neglected the low-income consumers. He had dabbled in pharmaceuticals and fast moving consumer goods (FMCG) in the first few decades following independence. Sometime in the late 1970s, a few years before his demise, he came up with the idea of selling products in small sachets. In those days, talcum powder and epsom salts were sold in tin containers or glass bottles and the minimum quantity was nearly 100 grams. He noticed that these products were not bought by the workmen in the farms and factories, or the other low-income communities, because they were considered expensive. He took a call to change the packaging and began selling talcum powder in 20 gram packs and epsom salt in five gram sachets. He soon realized that even liquid products could be packed in sachets. The idea was a huge success. Chinni Krishnan was a great innovator, but the idea of selling shampoo in sachets would be marketed and popularized by his son C.K. Ranganathan who founded CavinKare. MNCs in India were quick to copy this innovation. Chinni Krishnan and CavinKare had figured out a door into middle India through a deep understanding of the consumer—the insight was that the middle India consumer may have been poor, but was aspirational. The problem was that most low-income families had a serious cash-flow problem and, hence, could not afford to buy the large pack. Buying a regular bottle of shampoo meant carving out a significant chunk of the monthly income for a luxury product, and this was simply untenable. The small pack sizes were a good way to get first time consumers try out a product.
11. Finally fascinating story about the use of statistical techniques in forecasting the likes of trajectories of cricket match innings.
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