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

Morning Scan

#1. Advent International may launch $400 million IPO for portfolio firm Manjushree Technopack

Private equity firm Advent International is mulling an initial public offering in the range of $300-400 million for its portfolio company Manjushree Technopack with a valuation of $1.5-2 billion, the Hindu Businessline reported. The US-based investor in 2018 acquired 40 percent stake in the packaging firm from Kedaara Capital, then valuing Majushree around Rs 2,400 crore (about $289 million).

Why it’s important: Advent is looking for an exit for Manjushree. Although Manjushree has a strong presence in the rigid packaging sector, Advent might face challenges in the valuation it is seeking.

#2. Private equity firms looking at acquiring cardiac stent maker Sahajanand Medical Technologies

KKR, TPG Capital and Apax Partners are among the private equity firms that are evaluating a buyout of Sahajanand Medical Technologies, valuing the company at about Rs 3,500-4,000 crore, the Economic Times reported. Morgan Stanley PE Asia and Samara Capital collectively own 49 percent of India's largest cardiac stent maker while Kotak Pre IPO Opportunities Fund holds 6 percent. The Kotadias, the company’s promoters, own the remaining 45 percent.

Why it’s important: There has been recent investor interest in the medical equipment space. KKR recently acquired surgical sutures maker Healthium. Sahajanand is the largest drug-eluting stent manufacturer in India with 31 percent market share and is expanding in Europe as well.

#3. US government wants L&T chief to depose in Cognizant office campus case

The US government has sought the deposition of Larsen and Toubro chair S N Subrahmanyan to ascertain if Cognizant Technology Solutions routed illicit payments through L&T to government officials between 2013 and 2015. Subrahmanyan was the head of L&T’s construction business when some of the company’s employees are alleged to have bribed officials in return for faster approvals to build Cognizant’s office campuses in Chennai and Pune.

Why it’s important: This is an interesting turn to the case as Cognizant has already agreed to pay $25 million to the US Securities and Exchange Commission to settle the bribery charges. L&T has said it did not have proof of any executive’s involvement in the alleged bribes to Indian officials.

#4. Shapoorji Pallonji forms new holding company to house realty assets ahead of monetizing

The Shapoorji Pallonji Group has formed a new holding company called Shapoorji Pallonji Real Estate to consolidate its real estate assets spread across key cities, the Economic Times reported. It would pave the way for monetization of a portfolio that comprises land parcels spread over 2,000 acres across key property markets. The value of the assets is estimated to be around $6 billion (Rs 50,000 crore).

Why it’s important: Creating a unified holding company and consolidating assets is aimed at unlocking value and streamlining operations. The conglomerate may take the new company public in two years.

#5. Crypto exchange WazirX blames wallet provider Liminal Custody for $230 million heist

Nearly a month after an investigation into a security breach that led to a loss of $230 million at WazirX, the embattled crypto exchange has claimed that a separate forensic analysis found no compromise of its IT systems and blamed its wallet service provider Liminal Custody for the cyberattack, the Business Standard reported. The investigation was led by cybersecurity firm Mandiant Solutions, a unit of Google. Liminal Custody has clarified that its systems were not compromised after the cyberattack was first detected.

Why it’s important: The allegation aimed at Liminal, blaming it for the cyberattack that brought WazirX to its knees, is denied by the wallet provider. The case has turned murkier and may end up in the courts.

#6. Top indirect tax authority steps in to stem the flow of big-ticket notices to corporates

When taxmen and taxpayers interpret the same law differently, or industry practice differs from the official view, field officers who investigate the matter must sound out the top authority before issuing showcause notices, the Central Board of Indirect Taxes and Customs said, the Mint reported. There has been a flurry of tax notices to high-profile companies, which include Infosys (Rs 32,400 crore), HDFC Bank, Go Digit, Star Health and Policybazaar (Rs 2,250 crore), and a set of foreign airlines (Rs 10,000 crore.)

Why it’s important: The authority’s reminder to follow instructions to maintain ease of doing business while engaging in investigations signifies that greater attention being paid at the highest level to the sustainability of tax notices issued to many companies.

#7. Slow revenue growth in listed Indian companies starts hurting net profit growth

Corporate India has managed to sustain net profit growth that outstripped revenue expansion over the past several quarters, buoyed by favorable credit conditions and lower input costs, but that could be ending, the Business Standard reported. The average year-on-year net profit growth for BSE 500 companies, excluding oil marketing and fertilizer firms, over five quarters from March 2023 to March 2024 stood 20 percent. This contrasts sharply with revenue growth, which averaged 9 percent during the same period. Historically, profit margins and revenue growth move in tandem.

Why it’s important: The convergence is worrying for India Inc, which now needs a resurgence in topline growth to sustain bottom line improvements. Margins may face further headwinds ahead.

#8. Sharp differences rise between automakers and dealers on inventory amid sales slowdown

Carmakers and their dealers are battling each other over inventory levels amid slowing demand, the Economic Times reported. The Federation of Automobile Dealers Associations has said their members are carrying stock equivalent to over two months of sales, which translates to 730,000 units. Carmakers argue it’s about half that, which is equivalent to around 410,000 units. The dealers association has written to the Society of Indian Automobile Manufacturers twice in two months, protesting stock being dumped.

Why it’s important: Passenger vehicle sales in India contracted for the first time in more than two years in July on sluggish demand that led to a buildup of inventory at dealerships, forcing carmakers to curtail dispatches. The industry needs to settle its differences quickly and focus more on improving sales.

#9. Proposed market share cap of 30 percent in UPI transactions unlikely ahead of deadline

A proposed 30 percent market share cap in the UPI segment is unlikely, the Economic Times reported, citing industry executives. There’s only a little over four months to the deadline. Several UPI newcomers have been told informally that the limit is unlikely to be put into effect and have started redrawing growth and investment plans. At least four recent entrants have confirmed.

Why it’s important: New entrants in the UPI space have been withholding major investments, waiting to get a sense of the market share rule. The dominance of PhonePe and Google Pay is unlikely to end soon.

#10. Diamond houses, miners and retailers determined to win back Chinese consumers

An ad blitz is about to begin as diamond houses, miners and retailers are putting out all stops to win back choosy Chinese consumers at a time when the world of natural diamonds is at a crossroads, the Economic Times reported. During the pandemic years, Chinese households, which had been buying diamonds over the decade, discovered that unlike gold, the precious stone did not fetch the resale value when they needed it the most.

Why it’s important: As more Chinese consumers have turned towards a more fungible asset like gold, diamond demand has contracted. Now, efforts are underway to woo them back.