India’s trade deficit widens to record $25.6 billion in June
India’s merchandise trade gap rose to a new high of $25.6 billion in June amid slowing demand for Indian exports and rising imports of gold, coal, and crude oil. Exports grew 16.8 percent on an annualized basis to $38 billion in June while imports rose 51 percent to $63.6 billion, according to the commerce ministry.
Why it’s important: The widening trade deficit will add pressure on the rupee, which has been sliding continuously in recent months. The gap is expected to remain high throughout the current financial year.
Byju’s set to acquire US edtech firm 2U for $2.4 billion
Byju’s wants to purchase American edtech company 2U for $2.4 billion. Think and Learn, which operates Byju’s, has launched a massive fundraising operation to finance the acquisition. It has approved a Rs 55.47 billion private placement of shares and has separately secured a $2.4 billion acquisition financing commitment from JPMorgan, a US lender.
Why it’s important: If the acquisition goes through, it would be the largest in the edtech space. It may open up a major revenue channel for Byju’s since the US market offers better user revenues than India.
Government queries Vedanta-Foxconn semiconductor joint venture on technical expertise
The central government is not sure if the joint venture between Vedanta and Foxconn has the appropriate technical knowhow for semiconductor manufacturing and fabrication. The ministry for electronics and information technology wants the two firms to provide more details on how they plan to acquire the required expertise or get a third partner with demonstrated technical capability.
Why it’s important: Companies need to demonstrate expertise in semiconductor manufacturing to qualify for incentives under India’s Rs 76,000 crore scheme to create a semiconductor ecosystem. The incentives could make up for half of the investments made by the fab applicants.
Promoters of Manipal Hospitals seek to raise $500 million to buy back shares
The Pai family, promoters of Manipal Hospitals, are in talks with a group of banks led by Barclays to raise $400-500 million as they want to buyback half the shares held by TPG Capital in India’s second-largest hospital chain. Deutsche Bank, DBS, Nomura, and Standard Chartered Bank have also been approached.
Why it’s important: The buyback deal is aimed at providing a partial exit to the Texas-based TPG Capital. The proposed transaction will likely value Manipal Hospitals at around Rs 180 billion. If the deal takes place, it will yield a near threefold return for the US firm on its seven-year-old investment.
Industry groups protest 5 percent GST on hospital room rent
Industry and trade chambers have voiced concern at some of last week’s decisions of the GST Council such as taxing hospital room tariffs. The Federation of Indian Chambers of Commerce and Industry has written to finance minister Nirmala Sitharaman to ask for zero rate GST for healthcare services to enable service providers to claim input tax credit.
Why it’s important: The industry will pass on the increased cost to customers, raising healthcare costs. It could also create confusion as room rent is currently part of the package rate for treatments.
Reserve Bank wants New Development Bank to issue rupee bonds
The Reserve Bank of India has suggested that the government should approach Brics Bank, now known as New Development Bank, to sell rupee-denominated bonds in overseas markets. Selling rupee bonds will help India tap foreign savings amid the government’s record borrowing program and rising yields in local markets.
Why it’s important: Record borrowings by the central and state governments in this financial year could make fundraising costly for companies. This may slow down India’s economic growth. Rupee bonds could offer a solution.
Government confident of meeting 2022-23 fiscal deficit target of 6.4 percent of GDP
The central government is confident of meeting its fiscal deficit goals in 2022-23 after recent measures such as imposition of windfall tax imposed on the exports of petroleum products and increase in import duty on gold. The government expects revenue gain from these measures to meet additional expenditure on account of subsidies and loss in revenue due to excise duty cuts.
Why it’s important: India’s fiscal deficit has risen to over 6 percent in recent years due to macroeconomic conditions and disruptions caused by the coronavirus pandemic. Although it might not be able to contain the current account deficit due to soaring crude oil prices, arresting further widening of the fiscal deficit is possible.
FMCG sales in cities fell faster than in rural areas in June
FMCG sales continued to be lower in June compared to May, with urban sales seeing a steeper decline than rural, according to data by Bizom. Rural sales in June declined 0.2 percent compared to May. However, urban sales declined 3.1 percent in June compared to May, largely driven by weakwer demand in smaller cities.
Why it’s important: Sales of goods from shampoos to biscuits continue to be lower due to higher input costs that forced companies to raise prices, thus impacting consumer demand in a high inflation scenario.
Tata Steel unit acquires state-run Neelachal Ispat Nigam for Rs 12,100 crore
Tata Steel Long Products has completed the acquisition of state-owned Neelachal Ispat Nigam for Rs 12,100 crore. The strategic divestment of the Odisha-based steelmaker was underway since January last year. The takeover has been completed after the transfer of 93.71 percent shares of all the joint venture partners to the Tata Group firm.
Why it’s important: Weak market sentiment and adverse macroeconomic conditions has made it unlikely for the government to meet its asset-sale target for the current financial year. The divestment of Neelachal will provide a breather as the government looks for avenues to sell state assets.
HDFC Bank gets Reserve Bank approval to merge with parent HDFC
HDFC Bank has received approval from the Reserve Bank of India for its merger with parent HDFC. The bank had applied to the central bank in April. It is expecting to complete the merger in the next 12-18 months.Why it’s important: The approval is conditional, HDFC Bank has said, without elaborating. The merger will create a financial services behemoth of Rs 13 lakh crore.