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Tuesday, 26 March 2024
By Sundeep Khanna

Question of the Week

In 1978, two young men, Ben Cohen and Jerry Greenfield, started a tiny ice-cream business from a renovated gas station in Burlington, Vermont in the US. Where did they receive their formal training in making ice cream?

Good Morning

The News in Summary

Tata Sons sold a small part of its stake in the group’s cash cow TCS to raise over a billion dollars, coincidentally just a day before Accenture lowered its growth forecast that sent IT stocks plummeting. Elsewhere, US agencies continued their probe into Adani group companies and their chairman Gautam Adani, on the suspicion that they bribed Indian officials, while Unilever’s decision to demerge its ice-cream business worldwide left its Indian subsidiary in a quandary about what to do with its Kwality Walls, Cornetto, and Magnum brands. Meanwhile, Vedanta Ltd’s six-month-old proposal to split into six separate listed companies could face some hiccups with lenders to the company worried about how its debt would be apportioned. Finally, Zomato tried to appease the sentiments of its vegetarian customers with a segregated delivery scheme, but had egg on its face after it was forced to roll back a part of the plan.

     

Tata Sons Turns Once Again to TCS for Capital

Tata Sons, the Tata Group's holding company, has sold 0.65% of its 72.4% stake in TCS, India’s second-most valuable company, to raise over $1.12 billion. The money will come in handy at a time when the group is expanding into new areas like semiconductors, renewables, and phone assembly, while restructuring its airline and steel business. For Tata Sons which derives its income mainly from dividends and buybacks in other group firms, TCS has been the go-to source for raising capital to invest in new growth areas. Dividend payments by TCS, which has been the cash cow for the group since its listing in 2004, rose from Rs 29,148 crore in FY19 to Rs 42,079 crore in FY23. The transaction, though, doesn’t have a major impact on Tata Sons’s holding in the company, which dropped marginally to 71.7%.

Adani Faces US Agency Probe

The ghost of the Hindenburg report continues to haunt the Adani group, with US prosecutors reported to have widened their probe of the conglomerate and its chairman Gautam Adani to focus on whether its entities or affiliates bribed Indian officials to get preferential treatment for an energy project. As per US law, federal prosecutors can investigate foreign corruption allegations if they involve American markets or investors. While none of the Adani group companies are listed in the US, it does have American investors. A spokesperson for the group, however, asserted that they were “not aware of any investigation against our chairman”.

News of the probe led to a sharp drop in dollar bonds of several of the group’s firms. Adani Ports & Special Economic Zone Ltd’s 2041 bond saw the biggest drop, plunging 3.2 cents to 78.85 cents, its steepest decline since August 2023, while a bond from Adani Renewable Energy fell 3.15 cents to 82.63 cents, its sharpest decline since February. Stock prices of some of the same firms also fell up to 5%.

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Unilever Shuns Ice Creams, Leaving HUL Holding the Cone

Unilever Plc’s decision to demerge its ice-cream business comprising brands like Ben & Jerry's and Magnum from its core operations as part of a sweeping restructuring plan which will also see 7,500 jobs being cut worldwide, leaves its Indian subsidiary Hindustan Unilever with a decision to make. The $8.6 billion ice-cream business contributed a significant 13% of Unilever’s sales, but volumes have declined over the last one year. By contrast, HUL’s unit, which includes Kwality Wall’s, Cornetto, and Magnum, contributes a much lower 3% of sales, but is part of its food and refreshment portfolio which posted robust growth last year. While Unilever’s immediate plan seems to be to separate the ice-cream business into a new listed company, an eventual sale can’t be ruled out as happened with its tea business four years ago which was eventually sold to a private equity firm. That leaves HUL with the dilemma of choosing to soldier on its own or following its parent company into divesting the ice-cream business. The Indian FMCG giant said it is “evaluating various options".

Lenders to Vedanta Concerned Over Company’s Debt Split Post its Demerger

Lenders to Vedanta Ltd, led by State Bank of India (SBI) are concerned about the lack of clarity on how its debt of Rs 44,134 crore will be split among the various business units after the mining behemoth’s proposed demerger into six companies goes through. The bankers have appointed SBI Caps to examine the demerger proposal and will meet after it has assessed the same. Their clearance is required for the demerger to go through.

This comes at a time when Serentica Renewables, the renewable energy company promoted by Anil Agarwal’s Twinstar Overseas Ltd, is planning to sell a minority stake to raise around $300 million to fund its ambitious growth plan. On a fund-raising overdrive since it was founded two years ago, the company has so far raised $650 million from its co-owner private equity firm KKR, besides taking a $425-million loan in January this year from a consortium of international and domestic banks. In addition, it raised Rs 5,600 crore in debt from state-run Power Finance Corporation (PFC) and REC in September last year.

Zomato’s Pure-Veggie Turn Goes Sour

Online food delivery company Zomato sparked a social media kerfuffle after it launched a 'Pure Veg Mode' consisting of a curation of restaurants that serve only pure vegetarian food, as well as a 'Pure Veg Fleet' in green uniform for customers with pure vegetarian dietary preferences. The company’s co-founder and CEO Deepinder Goyal said the new scheme was launched based on the feedback from vegetarian customers who are “very particular about how their food is cooked, and how their food is handled." Less than 24 hours later though, after it faced a barrage of criticism, the company decided to do away with the planned "colour segregation" to differentiate the veg option from its regular red. Explaining the rationale for the partial rollback, Goyal, who married Mexico-born model-turned-entrepreneur Grecia Munoz last month, said it was done to "ensure that our red uniform delivery partners are not incorrectly associated with non-veg food, and blocked by any RWAs or societies during any special days.”

Here's a Livemint video that takes a look at the controversial move by Zomato and the subsequent roll back:

Last Word

Continuing sluggishness in the demand for IT services has led market leader Accenture to cut its fiscal-year 2024 revenue growth forecast to a range of 1% to 3%, from its prior forecast of 2% to 5%. Coming on top of the downbeat quarterly results by its Indian rivals TCS, Infosys and Wipro, it confirms the weak outlook for the sector, with analysts saying it "might take a couple of years for Accenture to return" to mid- to high-single-digit organic growth. That bodes ill for the Indian IT sector, which has already been hurt by the deceleration in demand over the last six quarters. Reflecting the bearish sentiment, stocks of the top three Indian vendors fell 5-7.5% in the days following the news.

Answer to the Question

In 1978, with a $5 correspondence course in ice-cream-making from Penn State University and a $12,000 investment ($4,000 of it borrowed), Ben Cohen and Jerry Greenfield opened their first ice-cream scoop shop in Burlington, Vermont. In 2000, they sold the company to Unilever for $326 million.

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Written by Sundeep Khanna. Edited by James Mathew. Produced by Shad Hasnain. Send in your feedback to newsletters@livemint.com.

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