QBiz: High Oil Prices May Stoke Inflation; Jet Staff Offer Bailout

1. High Oil Prices May Stoke Inflation, Hurt Companies’ Earnings

A surge in crude oil prices threatens to stoke inflation, derail earnings growth of companies, and hurt India’s economy in the year ahead.

As the world’s third largest importer of oil, India is among the most vulnerable to rising energy costs. It imports more than 80 percent of its oil requirements. With Brent crude at a six-month high, it poses a clear risk to India’s fiscal health.

Last week, Brent crude oil rose above $75 per barrel for the first time in 2019 in the wake of tighter sanctions on Iran.

Analysts said rising crude prices may hurt the margins of Indian companies amid growing expectations of an earnings revival, which is very critical to sustain Indian markets rally in this year as the country is electing its new government in May.

(Source: Livemint)

2. India Notifies Pact with US to Check Tax Evasion by MNCs

India has notified the inter-governmental agreement with the US for exchange of country-by-country (CbC) reports on multinational companies regarding income allocation and taxes paid in order to help check cross-border tax evasion.

The agreement, which was signed by Central Board of Direct Taxes Chairman PC Mody and US ambassador to India Kenneth Juster in March, was notified by the revenue department on 25 April.

This agreement for exchange of CbC reports, along with the Bilateral Competent Authority Arrangement, will enable both the countries to automatically exchange CbC reports filed by the ultimate parent entities of multinational enterprises (MNEs) in the respective jurisdictions, pertaining to the years commencing on or after 1 January 2016.

(Source: The Economic Times)

3. Jet Staff Offer to Arrange a Billion-Dollar Bailout

In an attempt to salvage Jet Airways, the company’s employees have put forth a proposal to take control of it by infusing Rs 7,000 crore. Under a proposal submitted to SBI, the lead lender, the employees plan to put up capital through stock options worth Rs 4,000 crore and another Rs 3,000 crore raised from external investors.

On 17 April, the airline announced a temporary shutdown due to lack of funds.

The employees’ letter, addressed to SBI Chairman Rajnish Kumar, said: “We would like to suggest that Jet Airways be taken over by a consortium of employees and external investor(s)...the contribution of the employee group over a hypothetical over-five-year Employee Stock Ownership Programme (ESOP) is likely to be upward of Rs 4,000 crore. In addition, we are confident of securing up to Rs 3,000 crore from outside investors.”

(Source: The Hindu Business Line)

4. R-Cap Looks to Raise Rs 10,000 Crore Through Stake Sale to Pare Debt

Reliance Capital Ltd (R-Cap) has drawn up plans to raise up to Rs 10,000 crore through stake sales as the diversified financial services company seeks to cut its debt amid a string of rating downgrades.

The Anil Ambani group firm plans to sell up to a 51 percent stake each in its wholly owned non-banking financial companies—Reliance Home Finance and Reliance Commercial Finance as well as in two media companies—Codemasters and Prime Focus, said Amit Bapna, R-Cap group chief financial officer.

In addition, it plans to divest as much as a 49 percent stake in two wholly owned insurance firms – Reliance Insurance and Reliance General Insurance, Bapna said.

He said the proposed deals are expected to infuse fresh equity in the company and help reduce the debt at R-Cap.

(Source: Livemint)

5. Spotify Tops Estimates with 100 Million Paid Subscribers Worldwide

Spotify has reached 100 million paid subscribers, a first for any online music service, adding more customers in the latest quarter than analysts expected and boosting confidence the company has lots of room to grow.

Spotify Technology SA took on 4 million customers in the quarter, compared with the 3.3 million forecast by analysts. But its first-quarter loss was 79 cents a share, wider than the 41-cent loss analysts expected. After a brief rise, the stock fell as much as 2 percent to $135.50 in New York trading.

Competition from Apple Inc, Amazon.com Inc and YouTube has done little to slow Spotify’s growth around the world, and the company has relied on its independence from some of the world’s largest companies to its advantage. It has boosted its customer base through promotional deals with Hulu, Samsung and even Alphabet Inc’s Google (YouTube’s parent company).

(Source: Business Standard)

6. Zomato to Launch 20 Hyperpure Warehouses in 18 Cities by Next Year

Online food ordering app Zomato is expanding the reach of its online business-to-business (B2B) food ingredient ordering platform, Hyperpure, to 16 more cities, taking the total to 18 cities including Bengaluru and New Delhi. The restaurant search and discovery app aims to offer more services to restaurants across India over the next two years.

Zomato opened its second Hyperpure warehouse on Monday, 29 April, in New Delhi and is set to add 20 more warehouses in India by end-2020 with an estimated investment of Rs 55 crore, said a top company executive.

“For restaurants, Zomato has become a very holistic provider for delivery orders, of customers who want to dine out and, now, as a raw material supplier to them," said Gaurav Gupta, co-founder and chief operating officer, Zomato.

(Source: Livemint)

7. Govt May Debar Deloitte for Five Years over Alleged Misconduct In IL&FS Case

Even as Deloitte Haskins and Sells remains perched precariously on the high wire over its questionable role in the IL&FS audit process, it appears that the Ministry of Corporate Affairs may invoke section 140 (5) of the Companies Act to debar the firm for alleged malpractice in IL&FS accounts.

This extreme action is being warranted after Deloitte's alleged misdemeanours and conduct in the IL&FS case.

“The investigations on the company IFIN are in progress and we are cooperating fully. We reaffirm that we have conducted our audits in accordance with the Standards on Auditing and applicable laws and regulations,” Deloitte spokesperson told IANS.

(Source: The Economic Times)

8. Reliance Jio Plans Super App with over 100 Services, Experts Bullish

Taking the WeChat model ahead, Reliance Industries’ online-to-offline (O2O) retail plans include providing all services in one app.

After the likes of Snapdeal, Freecharge, Flipkart, Paytm, and Hike, Reliance Jio would be launching its ‘Super App’, which will have more than 100 services in one app, it is learnt.

While most others have not been able to replicate the WeChat model successfully, experts expect Jio to be able to score on its 300 million plus new mobile phone users.

(Source: Business Standard)

9. IBBI Gives Defaulting Promoters a Last Chance

Promoters — who were forced to cede control of their companies owing to trigger of IBC process — may get a window of opportunity to make a comeback at the liquidation stage, if the Insolvency and Bankruptcy Board of India’s (IBBI) proposed draft regulations on changes in ‘liquidation process’ are anything to go by.

Draft regulations allow a ‘corporate debtor’ facing liquidation to file for a ‘compromise or arrangement’ scheme under the Companies Act that would enable the debtor to continue the journey as a going concern.

Stakeholders’ and public can send in their comments latest by 19 May. The aim of the proposed regulations is to help avoid closure of a viable corporate debtor (CD) or business of the CD and expedite liquidation process, both of which promote the objective of maximising the value of the assets of the CD.

(Source: The Hindu Business Line)

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