SM-mess, rising borrowing costs, Future chips and other news
Business news and insights to jump start your day
“The successful warrior is the average man, with laser-like focus.”
- Bruce Lee
Good morning! 😀
In today’s edition, we take a look at:
The OTP mess
Centre struggling to control rising borrowing costs
PVR - “Picture abhi baaki hai mere dost”
Let’s get started…
📈 How did the markets fare
BSE Sensex - 50,441.07 | +0.07% ⬆
NSE Nifty - 14,956.20 | +0.12% ⬆
10-Yr Bond Yield - 6.223% | -0.010⬇
S&P 500 - 3,821.35 | -0.54% ⬇
USD/INR - ₹ 73.25 | +0.33% ⬆
Shares of state-run defence equipment maker BEML Ltd were up 20% yesterday after reports emerged of six companies including Tata Motors, M&M and Ashok Leyland being interested in picking up a 26% stake in the company.
Just Dial was up 10% yesterday with talks of Tata Group being interested in forming a strategic alliance or picking up a stake in the company as the salt-to-software conglomerate expands its presence in the e-commerce space.
📰 What's happening around us
Telecom
If you had trouble receiving OTPs (one-time passwords) yesterday, it isn’t just you. People were struggling to get OTPs from banks, e-commerce companies and other services after a new system to filter out spam from SMS messages was implemented on Monday as per TRAI (Telecom Regulatory Authority of India) guidelines.
To control SMS frauds and spam messages, TRAI had asked telecom operators to implement the process of scrubbing, which essentially means that every SMS is verified with a registered template before it is delivered. But the implementation left a lot to be desired as it caused massive disruption in services and inconvenience for users.
Officials at banks and other companies were quick to blame the telecom operators for faulty implementation whereas telcos attributed the disruption to laxity among companies (including banks) in adopting regulatory standards.
Markets
The sell-off in the bond markets is increasingly becoming a cause of concern for the government who is struggling to raise money in the markets at reasonable interest rates. For the fifth consecutive time, the weekly bond auction on Friday had to be rescued by underwriters because there weren’t enough takers for them at interest rates acceptable to the government (underwriters are institutions that buy the unsold portion of an issue for a fee).
So what are the reasons behind this? The huge borrowing programme announced by the government in the Union Budget and the subsequent bond market sell-off (also influenced by global cues) have prompted traders to demand higher bond yields. As result, the benchmark 10-year bond yields have shot up from 5.95% to 6.22% after the Budget.
Bond yields are the annual rate of return a trader would receive if they were to buy the bond now and hold it till maturity. It is also indicative of the rate of interest the government would have to pay for borrowing money from the markets. Interest payments are the biggest component in government expenditure and around 52.4% of the central taxes are likely to be spent on interest payments in FY22, which is a bit concerning.
The Reserve Bank of India has announced multiple measures to bring down yields but so far they have remained stubbornly high. Let’s hope they’ll find more success in the future so that the Centre can spend money on more productive items than interest payments.
Entertainment
The multiplex industry has been one of the worst impacted segments due to the outbreak of the COVID-19 pandemic. However, with many states allowing 100% occupancy in theatres and a strong line-up of movies, multiplex chain PVR is gearing up for the long road back to normalcy.
After adding 9 new screens last week in Mysuru and Kanpur, the company plans to invest Rs 150 crore to open up 40 screens across the country in the next financial year. New cities identified for entry include Thiruvananthapuram, Nizamabad, Bhubaneshwar, Patna, Patiala, Ajmer, Dhanbad, Jamnagar and Rourkela.
PVR which currently operates over 844 screens at 177 properties in 71 cities across India and Sri Lanka, had a target of 1,000 screens in 2021-22. But with COVID-19 playing spoilsport, the target has been pushed by a year to the end of fiscal 2022-23.
The resurgence in COVID-19 cases and the continuous threat from the rapid growth of over-the-top (OTT) platforms like Netflix and Amazon Prime are concerns for the pace of business recovery.
🎯 News Bites
Along with decade low home loan interest rates, there are new reasons to cheer for prospective new home buyers. Karnataka has slashed stamp duty charges on homes valued at Rs 35-45 lakh to 3%. Maharashtra also announced a reduction in stamp duty charges by 1% for women homebuyers.
Starting April 1, 2021, the government has made e-invoices mandatory for businesses with annual revenue of over Rs 50 crore. GST e-invoicing system was implemented from October 1, 2020, for businesses with an annual turnover of Rs 500 crore or more. It was later extended to businesses with over Rs 100 crore turnover from January 1, 2021.
US-based cosmetics maker Estée Lauder is in talks to take control of a homegrown personal care brand Forest Essentials. Launched in 2000, the Delhi-based brand caters to over 120 countries via its e-commerce platform and recorded net sales of Rs 253 crore during FY20.
Future Group may be struggling to make debt payments amid the whole Reliance-Amazon saga, but Kishore Biyani is not sitting idly. Future Consumer will soon launch ‘Made in India’ versions of the popular US chips brand Terra chips.
Two of the world’s biggest aircraft financiers could join to form an aircraft leasing behemoth as General Electric nears an agreement with Ireland’s AerCap Holdings.
That's all for today. Have a good day!