Morning Scan: All the big stories to get you started for the day

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#1. Spread between Sensex earnings and 10-year US treasuries narrowest since 2000

A combination of high equity valuations in India and a steady rise in bond yields in the US has led to the gap between Sensex earnings yield and US 10-year treasuries yield to its narrowest since 2000, the Business Standard reported. The spread has been in negative territory for three consecutive months. The spread was in positive territory for 188 unbroken months between January 2008 and August 2023.

Why it’s important: The narrowing of spread calls for caution as such periods have historically led to corrections in India’s equity markets. It also makes local equities unappealing for foreign investors.

#2. Everstone’s IndoSpace to launch infrastructure investment trust to raise up to $800 million 

Everstone-backed IndoSpace, which develops and manages industrial and logistics parks in India, has started work on floating an infrastructure investment trust and raise $700-800 million, the Hindu Businessline reported. Talks are on with investment bankers, including Morgan Stanley, Jefferies, and Goldman Sachs. The InvIT is likely to hit the market next year.

Why it’s important: The InvIT will be the largest in India. It will be the third in the warehousing space, after the ones by Reliance Retail Ventures NDR Warehousing. Demand for warehousing is rising rapidly in India.

#3. Saudi Aramco’s venture capital arm building India team, looking at early-stage deals

The venture capital unit of Saudi Aramco is building an India team and scouting for early-stage deals in the country, the Mint reported. Prosperity7 Ventures, a unit of Saudi Arabia’s largest conglomerate, is also in talks to hire a head for the India business. The fund has $3 billion in assets under management globally.

Why it’s important: The development is another indication that global asset managers are keen to leverage India’s robust startup ecosystem, which saw $7.2 billion invested in early-stage firms in 2023.

#4. Billionaire Ravi Jaipuria formalizes family succession plan for $3 billion RJ Corp

Ravi Jaipuria has formalized the family succession plan at the $3 billion RJ Corp, with his son Varun getting the food and beverages business, and daughter Devyani taking charge of healthcare and education, the Economic Times reported. RJ Corp runs Varun Beverages, PepsiCo’s second-largest bottler outside the US, and Devyani International, which operates KFC, Pizza Hut, and Costa Coffee outlets in India.

Why it’s important: Jaipuria has laid out a roadmap for his children, both in their thirties, take on strategic roles. It is expected to ensure continuity and stability while introducing fresh business perspectives.

#5. Offshore investor base of alternative investment funds to face more restrictions

The Securities and Exchange Board of India and Reserve Bank of India have suggested to the government that alternative investment funds, where the majority of investors are non-resident or offshore, should be treated as indirect foreign investments, the Business Standard reported. The changes in norms could take place after the general elections.

Why it’s important: The move by the market and banking regulators comes amid concerns that foreign entities are using the AIF structure to circumvent and bypass local regulations.

#6. WeWork to exit India by selling residual 27 percent stake via Rs 1,200 crore deal

US-based WeWork Inc is offloading its remaining 27 percent in Embassy Group-promoted WeWork India in a Rs 1,200-crore secondary sale, the Economic Times reported. WeWork Inc’s stake is being bought out by the Enam Group’s family office, investment fund A91 Partners, and CaratLane founder’s Mithun Sacheti, among others.

Why it’s important: The bottom has fallen out of office sharing firm WeWork, which filed for bankruptcy in the US in September. The India business, in contrast, is doing roaringly well, enabling the secondary sale by the American brand owner.

#7. Byju Raveendran takes on private debt to pay March salaries ahead of tribunal hearing

Byju Raveendran, founder of troubled unicorn Byju’s, has secured a private debt of about Rs 30 crore to pay March salaries of employees amid financial strains at the edtech company, the Business Standard reported. The development comes ahead of the April 23 hearing at the National Company Law Tribunal, whien Byju’s may request permission to use the rights issue money.

Why it’s important: The funds Byju’s raised through a recent rights issue have been locked in a separate account due to the ongoing dispute with the investors. Once India’s most valuable unicorn, Byju’s is now struggling to survive.

#8. India’s anti-trust regulator to study impact of artificial intelligence on local competition

The Competition Commission of India has invited bids for a market study on how artificial intelligence is impacting competition in the market, the Mint reported. The proposed study will develop understanding of the transformative capabilities of AI and its impact on domestic competition.

Why it’s important: AI is having a disruptive influence on virtually all aspects of business dynamics. A study on AI and local competition by the regulator could help both businesses and policymakers.

#9. ArcelorMittal Nippon Steel in discussions to raise $1 billion in debt to fund expansion

ArcelorMittal Nippon Steel India, a joint venture between ArcelorMittal South Africa and Japan’s Nippon Steel Corporation, is in talks with State Bank of India, ICICI Bank and Axis Bank to raise about Rs 8,500 crore ($1 billion), the Hindu Businessline reported. India’s fourth-biggest manufacturer of flat steel is seeking to ramp up capacity.

Why it’s important: If the deal materializes, it will be India’s largest rupee-denominated loan in 2024 so far, according to data maintained by Bloomberg. The details of the lending facility are yet to be finalized.

#10. Macquarie to invest $1.5 billion in India’s electric vehicle sector through Vertelo

Macquarie Asset Management, part of Australia’s Macquarie Group, will invest $1.5 billion in India’s electric vehicle sector through its new platform Vertelo, the Economic Times reported. Vertelo will provide end-to-end solutions for fleet electrification in India. The platform has already received anchor investment from the Green Climate Fund, which has committed to invest up to $200 million.

Why it’s important: India’s ambitious green mobility plans is attracting substantial investments. Electrification of commercial vehicle fleets is an early expansion area which Vertelo is targeting.