QBiz: Walmart Buys Flipkart; Airtel to Pare $4.6 Bn Debt
Here’s a roundup of the top business stories.
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1.Walmart Buys Flipkart for $16 Bn, Shifts Battle with Amazon to India
Walmart Inc has agreed to pay $16 billion for a 77 percent stake in Flipkart, valuing India’s largest start-up at about $21 billion in what is one of the biggest acquisitions in the country.
The deal will redraw the retail landscape in India as Walmart takes its battle in the US with arch-rival Amazon to the world’s fastest growing major economy. It will also give a massive boost to entrepreneurship and the start-up ecosystem in India, which has struggled to provide exits.
The buyout, which is Walmart’s biggest acquisition and the biggest e-commerce deal globally, marks the end of an era as Flipkart co-founder and chairman Sachin Bansal will leave the company and sell his 5.5-6 percent stake in the company. Flipkart’s other founder Binny Bansal will continue as Flipkart group CEO and Kalyan Krishnamurthy will retain his position as Flipkart CEO.
(Source: Livemint)
2. eBay to Sell Stake in Flipkart for About $1.1 Bn, to Relaunch eBay India
US-based eBay on Wednesday, 9 May, said it plans to sell its stake in Flipkart for about $1.1 billion, and will relaunch eBay India focusing initially on cross border trade opportunity.
The statement by eBay came after Walmart Inc announced that it is buying 77 percent stake in Flipkart for about $16 billion, and also within a year of Flipkart acquiring eBay India.
"eBay has notified Flipkart and Walmart that it intends to sell its holdings in Flipkart, which will represent gross proceeds of approximately $1.1 billion," the eBay statement said.
Following the close of the transaction, eBay said it will also be ending the current strategic relationship with Flipkart, which includes unwinding commercial agreements with Flipkart and terminating Flipkart's licence to use the eBay.in brand.
(Source: The Economic Times)
3. India Recovering from Dual Shock of Demonetisation, GST: IndRa
Even though the economy has gradually weathered the twin shock of demonetisation and goods and services tax (GST), widening current account deficit (CAD) and rising crude oil prices continue to create pressure, India Ratings said.
“Our research has shown that major macro parameters like manufacturing, capital goods production, non-food credit and consumption are showing signs of recovery,” India Ratings chief economist Devendra Pant told PTI.
Surging bond yields which indicate potential slippages on the fiscal front constitute the areas of concern on the monetary side. “Things are improving now. If things behave as they are now and the policy remains conducive, growth in current fiscal is expected to be 7.4 percent”, Pant said.
He said it was unlikely that the government would go ahead with big bang reforms due to the 2019 Lok sabha elections.
(Source: Financial Express)
4. Airtel Plans Paring $4.6 Bn of Debt in Three Years
Bharti Airtel Ltd is looking to pare $4.6 billion from its net borrowings over the next three years by listing its African unit and potentially selling some stake in its tower business, according to a person with knowledge of the matter, in a bid to safeguard its investment grade ratings.
India’s top wireless operator plans to raise as much as $1.5 billion by listing a quarter of equity in its Africa unit by early 2019 in either London or South Africa, the person said, asking not to be identified as the information isn’t public. The parent will also look to sell part of its stake in the $14.6 billion tower giant after Bharti Infratel Ltd merges with Indus Towers Ltd.
The twin deals will help the billionaire Sunil Mittal-controlled carrier improve its balance sheet after net debt rose almost 45 percent to $14.6 billion over four years as the company borrowed to buy spectrum and defend its position against disruptive upstart Reliance Jio Infocomm Ltd.
(Source: BloombergQuint)
5. Oil Companies See Limited Impact of US-Iran Sanctions
State-owned oil firms, having learnt their lessons during the previous sanctions against Iran three years ago, aren’t too worried this time about losing oil supply or facing hurdles in paying for Iranian oil after the United States resurrected sanctions.
Following Trump’s announcement on Iran sanctions, crude oil prices shot up to the highest levels in three years, crossing $77 a barrel in Wednesday’s trade on fears sanctions could cut global supply. For India, which imports nearly 83 percent of the oil it consumes, such a surge could hurt currency, expand current account deficit and stoke broader inflation in the economy.
But state refiners expect prices to stabilise soon. “The paper trading is substantially higher than physical trading right now. And so prices may cool down at some point. If you look at fundamentals, a price below $70 looks more reasonable than the current range of $70-80 a barrel,” said MK Surana, chairman of Hindustan Petroleum Corporation.
(Source: The Economic Times)
6. Dalmia Bharat Alleges Ultratech Legally Ineligible to Bid for Binani Cement
On the eve of the crucial meeting of Binani Cement’s Committee of Creditors (CoC) on Thursday, 10 May, Dalmia Bharat Cement has written to the lenders and the company’s resolution professional alleging that UltraTech Cement is disqualified to bid for Binani Cement under Section 29 (A) of the IBC.
The aforesaid section deals with various ineligibility parameters for resolution applicants. As per Section 29 (A) (c) of the IBC, any person or promoter who is managing a company classified as non-performing asset for a period of one year till the commencement of insolvency proceedings stands disqualified. The provision mentions that any other person acting jointly or in concert with the ineligible resolution applicant also stands disqualified.
As per a source in Dalmia Bharat, the primary reason for their claim rests on the fact that UltraTech had tried to financially back the promoter of Binani Cement – Braj Binani – for an out-of-court settlement with the lenders.
(Source: Business Standard)
7. Hope Order for Fighter Jet is Actually Placed, Says Boeing
Boeing, which is competing with several global majors to clinch the Indian Air Force’s order for 110 fighter jets, is investing millions of dollars to create an ecosystem for making its product – F/A-18 Super Hornets – in India. The US-based company hopes that the order is actually placed, as it could otherwise derail the government’s plan of indigenising its defence programme.
Building a modern weapons system like a fighter aircraft is a very complex endeavour, Boeing India president Pratyush Kumar said in an interview.
“Firms pitching for the product need to work for few years to build partnerships, stitch together an ecosystem, to be able to build the product in the country. This costs millions of dollars,” Kumar said.
“Major companies (pitching products) will be frustrated if the order does not happen, though the actual investment will be made only after the order is in place,” he added.
(Source: Livemint)
8. 15th Finance Commission Forms Panel to Advise on Terms of Reference
After continued criticism from several states and union territories on its Terms of Reference, the 15th Finance Commission on Wednesday, 9 May, set up a panel that would advise it on related matters.
The panel will advise the Commission headed by former bureaucrat NK Singh on matters related to the Terms of Reference and assist in research study, the finance ministry said in a statement. It will also help the Commission to understand national and international best practices on devolution of taxes and improve enforcement of its recommendations.
Six states and union territories, including Andhra Pradesh, West Bengal, Delhi, Punjab, Kerala and Puducherry, had opposed the use of 2011 census data for devolution of taxes between the Centre and states – part of the current Terms of Reference of the Commission.
(Source: BloombergQuint)
9. Coca-Cola Taps Pharmacies for Its New India Health Drinks
After a herbal tea in Thailand, cocktail-mixers in Spain, and its first alcoholic drink being tested in Japan, Coca-Cola has launched nutrient-based and rehydration drinks in India as the world’s largest beverages maker continues to look beyond sugary sodas.
The maker of Coke last week launched Minute Maid Vitingo, a Rs 5 sachet of an instant drink mix fortified with vitamins and micro-nutrients “to address the issue of malnutrition”; and Aquarius Glucocharge, a glucose drink to combat exhaustion and dehydration, priced at Rs 10 for a 200 ml pack.
For about two years, Coca-Cola has been globally expanding beyond sugary aerated drinks as consumer preferences change towards healthier options. The sales of sodas in the world’s second-most populous nation and a Rs 33,000-crore market are expected to grow at an annualised rate of 3.4 percent by 2022, according to Euromonitor International.
(Source: BloombergQuint)
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