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Future of retail with RIL

In big news yesterday, the Reliance group refused to let much time pass before hogging the news cycle. This time though, instead of selling stake they are the ones on the buying side. Talks are at an advanced level for Reliance Industries to buy out the merged entity of Future retail (parent company of retail brands like Big Bazaar, Food Hall and Central), Future Lifestyle Ltd and Future Supply Chain Solutions. If reports are to be believed, Reliance is keen to ink the deal before their upcoming AGM on 15th July. With this deal, Reliance will add almost 1500 stores to their existing 11,000+ store footprint in the country, cementing their lead in retail.

Why the sale? As per Business Today, the debt owed by Kishore Biyani owned-and-run Future group stood at a mind-boggling figure of Rs. 12,778 Crores as of September 2019. The share prices of Future Retail started tumbling down from early this year which compounded issues for Biyani. Known for his claim that Indians like the familiarity of “butt brushing effect” in narrow retail aisles, coronavirus lockdown with it’s gift of social distancing came like a double whammy. On 30th April, Future Retail defaulted on an interest payment and thus began the hunt for a buyer to complete the sale before moratorium end in August. While Premji Invest and Amazon with existing stakes expressed interest earlier, as of now giddy-with-cash RIL seems to be power charging ahead. Separately, the Future insurance arm of the JV with Italian insurance firm Generali is also up for grabs.

What went wrong for the poster child of Indian retail? Modern retail in India is still nascent and a difficult cash-intensive business to be in. Unlike D’Mart which focussed on the basics and kept the company debt-free, last year at a retail summit Biyani admitted to having his fingers in too many pies too soon.

Government initiates move to allow private investment in Railways

First the numbers. 151 modern passenger trains. 109 Origin Destination (OD) pairs of routes. Rs. 30,000 Crore investment. Late last evening, the Railway ministry invited RFQ or Request for Qualification so private partners could queue up to partner in the world’s largest rail network.

Ambitious expectations calling: Just to be clear, there is a long list of check marks that the partnership is aiming to tick off. “The objective of this initiative is to introduce modern technology rolling stock with reduced maintenance, reduced transit time, boost job creation, provide enhanced safety, provide world class travel experience to passengers,” said Railways. As we said, all birds, one stone.

How will the partnership work? The private entity will be responsible for the procurement, financing, operation and maintenance of mostly “Made in India” trains with maximum speed of 160 kmph. They will also be required to pay a fixed haulage charge and energy charges on the basis of consumption. Operations and employee roll will remain with the rail ministry, retaining the tag of India’s largest employer. In return, the private entity would get a pre-fixed percentage of the revenue earned. This move could turn out to be a double edged sword – much required upgrade of the infrastructure along with an inescapable upgrade on the prices.

Goldman Sachs may succeed again in walking guilt-free

Goldman Sachs is reported to be close to resolving it’s biggest legal battle since the 2008 Great financial crisis. The firm had been on the backfoot after Tim Leissner, a former high-ranking employee pleaded guilty to the case, in 2018. With the case at the higher ranks of the Justice Department in United States, it looks to be getting resolved in their favour. With or without a guilty plea, the decision could still come with a hefty bill to the tune of $2 Billion.

What’s the deal here? The crux of this matter involves a fund called 1MDB which was later discovered to be tangled in a complex web of corruption and money laundering, resulting in GS being probed by regulators of about 14 countries on their role! The fund raised $6.5 billion through bond sales which were meant for strategic state initiative in Malaysia, pocketing a neat sum of $600 million. Now, the country is demanding $2.7 Billion which seems to be the amount siphoned off along with a return of the fees earned.

What’s the bigger deal? In 2015, the-then Malaysian prime minister Najib Razak was accused of channeling the said $2.7 Billion from the state-run 1MDB fund to his own bank account. Looks like we Indians do not have the monopoly on inter twining of politics and financial fraud.

IN SNIPPETS

GST revenue gets the power of Boost in June: The government released encouraging figures of GST collection which show 41% drop in Q1 compared to last year but (wait for it…) consistent improvement through the months to close June numbers at Rs. 90,917 Crore. We started April with a plummet of 72%, closed May with a shorter gap of 38% while we brought in the quarter at a whisker margin of 9%, in comparison to the collections last year.

Carlyle group comes shopping to India again: After picking a 20% stake in Piramal Pharma, Carlyle group will now own 25% of Bharti Airtel’s data centre business Nxtra Data for a price tag of $235 million or approximately Rs. 1774 Crore.

Aviation industry cries out for help: As per CAPA Centre for Aviation in Sydney, Indian aviation industry is at risk of a systemic failure. It needs a whopping figure of $2.5 billion to continue surviving, and that figure also may help survival only till year-end. The report laid the blame on Modi government for not bailing out private-backed airlines.

Remdesivir all stocked up: Generosity and Donald Trump have always been at odds with each other and sometimes Trump goes to great lengths to keep reminding the world. In the latest such instance, he has bought almost the entire global supply of Remdesivir, the drug which could reduce coronavirus recovery time by four days.

Volvo’s biggest car recall: Auto manufacturer Volvo announced their biggest ever recall impacting 2.2 million cars over a faulty seat belt cable “resulting in reduced seat belt restraint function.” The recall includes seven car models produced between 2006 and 2019. 

MARKET PULSE

Sensex and Nifty both ended the day at a slight high buoyed by the optimism that investors seemed to sniff in the air. Some of the reasons were the encouraging numbers rolling in from June, be it PMI in other countries or even the GST collections for India. Meanwhile, global markets displayed more of a mood swing balancing out the positive with the fear of a second wave.

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