BackWelspun tanks, Urjit Patel’s promotion and new airports
Probes by US retailers drag Welspun shares down; Urjit Patel elevated to RBI's top job; 50 airports on the anvil to boost regional connectivity
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1. 50 new airports in three years
Civil aviation minister Ashok Gajapathi Raju said on Tuesday that India is set to get 50 new airports over the next three years. Ten of these are expected to be operational over the next year. India already has 30 non-operational airports and in excess of 400 airstrips dating back to World War II. The move is a bid to boost regional connectivity and will include places such as Shirdi, Solapur and Nanded in Maharashtra. India is currently the world’s fastest growing aviation market.
2. Indian Olympians and Twitter buzz
Twitter was abuzz with commentary from the Rio Olympics, which came to an end on Sunday. Interestingly, four of the top five most-mentioned Indian athletes on the social media platform were women. The athlete with the most number of tweets was unsurprisingly P.V. Sindhu. The shuttler was India’s best performer, bagging a silver medal. She had 1.48 million Twitter mentions. Sakshi Malik, who got a bronze in wrestling, had 576,000 mentions. Others on the list were gymnast Dipa Karmakar (387,000), shooter Abhinav Bindra (255,000) and tennis star Sania Mirza (143,000).
3. A mixed bag for Nestle’s growth
Nestle has managed to bounce back after the Maggi controversy took the popular product off shopkeepers’ shelves. Maggi is quickly gaining back market share, noted a Mint report on Wednesday. However, the report also pointed to lacklustre growth in other segments. The prepared dishes and cooking aids segment (which includes noodles) grew 18.4%. But other segments like chocolates have only grown 1.8%. Milk products and beverages have seen degrowth of 1.4% and 7.8%, respectively. Analysts are watching to see if there will be a pickup in the second half of the year.
4. Tata Power sees drop in profits
Tata Power recorded a 76% fall in net profit on Tuesday. The drop was attributed to one-off items and the impact of new accounting norms, which required adjustments of Rs130 crore. The company also had to adjust for one-off items related to its subsidiary Coastal Gujarat Power Ltd (Rs120 crore) and regulatory orders pending from previous years (Rs62 crore). The company’s stock fell 4.4% after the results were declared as the numbers fell short of analysts’ expectations.
5. Welspun stock’s downward spiral
The share price of textile major Welspun India nearly halved in value during the week. The selling came after American retail company Target said on 19 August that it was in the process of severing its business relationship with Welspun. The retailer had found that the company had substituted material in premium Egyptian cotton bedsheets with a cheaper variety while retaining the higher quality label. Target accounted for a 10th of the company’s business. Other large retail chains such as Wal-Mart, J.C. Penney and Bed Bath and Beyond have also announced reviews.
6. Big boost for research in India
The government said on Tuesday that it was taking steps to encourage students to pursue research in India rather than go abroad. It announced 1,000 research fellowships a year to B.Tech students from the Indian Institutes of Technology (IITs). The move is part of a larger push to encourage research in the country. A Mint story quoted a former IIT director suggesting that such moves could help these institutions become Stanford or Massachusetts Institute of Technology in the not-so-distant future. Both are famed for the quality of their research. However, the difference in capital allocated to a Stanford vs a premier Indian institution like IIT-Delhi is stark.
7. Patel to take over as RBI chief
The 24th governor of the Reserve Bank of India (RBI) will be Urjit Patel. He takes over from Raghuram Rajan, whose tenure ends on 4 September. Patel is currently serving as deputy governor in charge of monetary policy at the cental bank. The move is expected to provide continuity on policy after Rajan’s exit. The government released a statement announcing the appointment on Saturday. Rajan managed to bring double-digit inflation under control during his reign, helped by a fall in commodity prices. Interest rates too fell during his tenure, though some critics have said that interest rate cuts could have been deeper.
8. No surplus rains this year
India will receive normal, and not surplus rains, due to changing weather patterns this year. The Met department had earlier said that India would receive excess rainfall. La Nina, a weather phenomenon that causes excess rainfall has not materialized as expected, Reuters reported on Wednesday. India has so far received 2% less rainfall than normal this monsoon season, which ends next month. The country has previously suffered two consecutive years of below-normal rainfall. There has been deficient rainfall in 14 states and Union territories so far. Key states affected include Meghalaya (-46%), Kerala (-30%), Punjab (-25%) and Gujarat (-23%). Chandigarh has seen 39% deficient rainfall and Delhi 11%, among the UTs.
9. A time bomb in bank capital
Successive quarters of losses in public sector banks may create difficulties in making interest payments on instruments they issued to meet capital requirements. Rating agency ICRA’s report dated 22 August noted that banks have a thinning cushion of distributable surplus that can be used to service their obligations. Public sector banks have issued Rs17,000 crore worth of AT-1 bonds since 2007. These are used to meet capital requirements and coupons are paid on a yearly basis. Dhanlaxmi Bank deferred interest payments on separate instruments earlier this month and was promptly downgraded to junk status. A Mint report on Wednesday raised the question on whether public sector banks could see a similar fate. ICRA noted that five out of the 21 state-owned lenders that it tracks already had negative or very low distributable surplus.
10. Earthquakes strike Myanmar, Italy
Earthquakes struck Myanmar and Italy on Wednesday. The Myanmar quake measured 6.8 on the Richter scale. A similar one in Italy measured 6.2. Reports from Italy pegged the death toll at 278 on Friday. Sixty-six Buddhist shrines were damaged in Myanmar. News of four deaths was reported on Thursday. Tremors from the quake were felt in India, Thailand and Bangladesh. There have been six significant quakes measuring between 5.5 and 7.4 in the one week leading up to Wednesday’s quakes, according to the United States Geological Survey.
Graphics by Prajakta Patil/Mint.
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