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VyaparNeeti, NMIMS Indore, Indore (2026)

22/03/2022

Russia, Ukraine and Business

The war between Russia and Ukraine has now lasted over a month, and the world is witnessing its consequences. As a result, supply chain concerns and macroeconomic consequences on many industries are becoming more prevalent around the world. Both countries export a wide range of raw materials, finished goods, and services.

Russia supplies 40% of the natural gas required by European countries. Around 40% of Russia's natural gas is exported to these countries. Even if the war comes to an end, various sanctions against Russia could hit these countries because of restriction importing natural gas from Russia. Because of supply difficulties caused by sanctions on Russian banks, crude oil prices have risen. Because Russia exports 6.5 million barrels of crude oil per day, the world has been impacted by the disruption in crude oil supplies.

Ukraine exports 50% of its edible oil. Harvesting and processing of edible oil has been disrupted as a result of the war scenario, and the world is experiencing high demand and high costs. Even India is feeling the effects of the war. Companies that produce edible oil have no choice except to raise prices. 70% of India's edible oil needs are satisfied by imports.

The war is predicted to have a significant impact on the automobile industry. The industry's troubles are likely to be exacerbated by rising oil prices, a continuing shortage of transistors and circuits, and other rare earth metal shortages. Russia is one of the world's top producers of rare metals used in semiconductor manufacturing, while Ukraine is the world's largest source of rare gases used in semiconductor chip manufacture industrial lasers. Besides that Ukraine is home for many automobile companies which produces automobile parts.

Russia and Ukraine account for over 30% of global wheat trade, 32% of global barley trade, and 17% of global maize commerce. As a result of the cessation of supply from the two nations, prices have risen substantially, pushing up the cost of pantry staples like bread, pasta, and other FMCG items. Even countries that rely on food imports will feel the pain, as reduced supplies mean higher prices while demand remains inelastic.

Such conflict scenarios affect not just the countries at war, but also the countries that are not at war. Although conflict causes physical casualties, it also affects various sectors and enterprises around the world, affecting millions of people.

Author: Himanshu Kaushik

22/03/2022

What led Paytm to fall from 1955 to 540?

One97 communications Ltd AKA Paytm founded in 2000 by Vijay Shekhar Sharma is an Indian E-commerce and fintech company. It owns various businesses from various sectors such as Paytm Payments Bank, Paytm Payments Gateway, Paytm Payout, Paytm Money, Paytm Insider, Paytm Insurance, Paytm Post paid, Paytm for Business, Paytm Credit Cards, and Paytm First Games. In June 2021, Paytm was valued at $5.5 billion dollar. A variety of big venture capitalists such as Softbank and companies like Alibaba group have stakes in Paytm. Being listed as a next fortune 500 company in 2017 and listing as flop company in Indian stock market in 2021, paytm has been experiencing rollercoaster ride.

In July 2021, paytm filled for IPO for 16,000 crore approximately resulting into India’s biggest IPO in history of Indian stock market. On November 2021, it recorded highest price 1955 but could not even touch its issue price and subsequently started falling down and currently price of paytm share is around 540 that is below 75%.

Big stakeholders, huge valuation, biggest IPO in Indian stock market still the fact that is not seen is that Paytm is a loss making company. It was traded 47 times of its revenue when company was not even making any profits. The amount that is raised by company in form equity, in which 70% is used to recover losses of the company. Apart from this, Paytm is into various business. But the fact is that it is not a market leader in any of its business. No financials of any business owned by Paytm are profit making.

Paytm initially introduced its wallet facility to customers. But it was later replaced by UPI. Currently Paytm also have their UPI facility. Replacing their own business facility with another is another reason and not even a market leader in UPI is another reason for its failure.

Currently RBI banned Paytm banks from onboarding new customers. India’s central bank has accused Paytm for violation of customers acquisition and leakage of privacy data of customers which included possible data flow to Chinese companies. RBI is going to conduct IT audit of Paytm. Because of this Paytm share fell again.

Another reason for failure of Paytm is that company does not have lending license. A fintech company usually have lending business to generate revenue and to look good in books of analysts. Absence of this licence is one of the reasons behind Paytm distrust.

Bad financials , poor working of business model or bad timing of company listing? There can be many assumptions but investors have to rethink and look for financials, business models of company before investing in such companies. Hope Paytm and its shareholders recover soon.

Author: Heramb Patil

08/03/2022

WHY PNB HOUSING FINANCE IS HAVING A HORRID TIME

Punjab National Bank (PNB), a public sector lender, chose to separate its housing financing division in 2016. The housing loan segment was performing well, and PNB saw this as an opportunity to spin it off, sell a tiny portion of the company, and raise funds for its core banking operation. As a result, PNB Housing Finance debuted on the stock market in November 2016. And it had gotten off to a flying start. Its shares had increased by almost 75% in just ten months following its first public offering. PNB's stock price dropped throughout the same time period. It plummeted by about 20%. PNB Housing Finance had a bigger market value than its parent business by May 2018. Partly because of the famed diamantaire Nirav Modi's deception.

Housing financing companies' stock prices have plummeted. According to reports, PNB was in desperate need of cash and was willing to sell its assets for a pittance. This includes its investment in PNB Housing Finance. Then there was still another catastrophe. The NBFC Debacle. IL&FS, a significant non-banking financial firm, defaulted on its payments between June and September 2018, and there was widespread concern about the health of other similar companies, notably PNB Housing Finance. The corporation lost over half of its value in a month, from August to October 2018. PNB was still trying to sell its investment in the housing financing company, as did Carlyle Group, which also owned a significant portion. However, as the outlook for housing finance firms deteriorated, both sides struggled to persuade investors that the stock still had value. The stock then dropped by another 40% over the next 16 months as the company's fund-raising activities came to a standstill.

To raise much needed funds. Parts of PNB Housing Finance's loan book started being sold. Something had to be done, management realised. As a result, in August 2020, they made the decision to issue shares at a discount to current shareholders. With PNB and Carlyle's help, the idea was to raise Rs 1800 crores. However, India's Reserve Bank (RBI) intervened. PNB, it was claimed, already had enough problems. The parent business was effectively forbidden from participating in the new offering by the central bank. PNB Housing Finance was now back where it started.
But then there was a glimpse of hope. Things began to look up in May 2021, when Carlyle Group and a slew of other investors moved in. PNBHF's stock price doubled in a week. They were most likely just relieved to see money flowing in.

Others, on the other hand, were not pleased. Proxy advice services, for example, advise shareholders on how to vote on specific issues. They said that if Carlyle desired ownership of PNB Housing Finance, they would have to pay a premium - at the cost of other shareholders - rather than a discount. They said that the valuation was irrational and that treating other stockholders in this manner was unethical. SEBI, the capital markets regulator, concurred with the latter's conclusion that the value wasn't entirely accurate. It requested that PNB Housing Finance wait a little longer.

As a result, they proceeded to court, specifically the Securities Appellate Tribunal (SAT). However, in August, the SAT issued a mixed ruling.
Since no one knew how all this would turn out, the stock price began to fall gradually. PNBHF has had enough of the legal wrangling. It decided last week to cancel the proposed special share allotment. Carlyle's stock began to plummet as it became clear that it was practically out of the race. Brokerages now predict the stock to tumble another 30% or more.

PNBHF is now no closer to obtaining funds than it was in 2018. As a result, the problems persist but there are a few positives:
1. The corporation intends to try again and raise money by issuing bonds for Rs 2,000 crores.
2. PNB could re-apply to the RBI for capital infusion. Since the bank was able to raise some funds on its own.

Author: Jagriti Kachroo

22/02/2022

START-UPS ON THEIR JOURNEY OF BEING PUBLIC

Zomato, Nykaa, PayTM, Delhivery — They’re all pitching up to go public. It’s more or less as if the Indian start-up ecosystem met at formerly and decided this was the most seasonable moment to IPO in India. But why? Why now? Well, we can’t say for sure. But we can presume on the matter.

For starters, this whole IPO rush isn’t just limited to India’s coveted tech start-ups (if you can still call them that). The IPO bug has stunk everyone. Between April and May this time, 20 companies have filed their prospectus. That’s them telling the controller — “We ’re ready to go public.”

And the list includes companies from colorful disciplines. We’re talking about airline companies, quick service cafes, life wisdom companies, small finance banks, asset operation companies, and so on.

But that still doesn’t tell us why these people are so agitated. What’s so special about the present moment?

Well, one possible reason could be this — “There’s just a lot of money going around now.” And we know what you’re allowing — “ At a time when the frugality is in the doldrums, who’s got money? Where is it floating exactly”?

The answer to that's a bit complicated. But you can suppose of it this way. Central banks have been pumping new money into rotation in the expedients of easing some of the effects of the epidemic. This money enters the banking system and ultimately makes its way into fiscal requests — substantially stocks. And that means there’s ample money floating around in big institutions that have the fiscal muscle- power to invest in IPOs. So, the argument goes that start-ups are confident about generating substantial interest if they were to go public right now. The alternate argument is that we're formally in a bull run.

Stocks are on the up. They're going to the moon, some say. And if you ever wanted the Indian public to subscribe to your vision and the IPO, this seems like a veritably good time, doesn’t it?

Indeed if you’re a loss-making reality, the bull run could incentivize investors to pour in new money. They’ll go where the flow takes them. They like instigation. And if this plan works out well, perhaps these start-ups could command an indeed advanced valuation than they first anticipated.

Another proposition is that several internet startups including the likes of Zomato have served from the epidemic. Their figures are more robust now. Sure, you could argue that the first many months of the lockdown weren’t inescapably conducive for business, but also numerous start-ups have gone on to acquire new guests, bolster their financials and add a bit of steadiness on topmost. They would have done it anyway considering numerous of them have been aspiring to go public for a while now, but the epidemic expedited this action.

Eventually, there’s the nonsupervisory aspect nothing is talking about. SEBI has functioned on making it relaxed for startups to list in India. There was a time when internet start ups went to the US. And effects were looking enough bleak until SEBI introduced the Originators Growth Platform and made changes to make it easy for Indian start ups to list domestically. Rumour has it that the controller may continue to push reforms in a shot to list further Indian start ups in India.

So yeah, all in all, there may be numerous factors at play then and indeed if not all of these start-ups list in 2021, you could go that they will list sooner than latterly.

Author: Aanchal Agrawal

07/02/2022

What is stopping Tesla to enter India?

In today’s blog, we will witness why Tesla is not able to make its debut in India.

In the current scenario India is considered to be a sleeping giant in the Electronic Vehicle (EV) market, globally. This is not only because it is the world's fifth-largest auto market, but mainly because of its huge potential to grow. With Indian government finally realising the potential & importance of the EV market, our country, with huge middle class population, is attempting to lessen its carbon footprint, with inexpensive labour and raw materials to bring the tremendous benefits of EV adoption across the board.

This is why the world is surprised with the absence of Tesla from the Indian market. Tesla being the most well-known brand globally, has yet to create an impact in India. However, this absence is not due to a lack of effort.

Tesla is chasing the Indian market since 2019. To put a highlight on its efforts, the company has already registered in Bengaluru and has been hiring people in India. Moreover, seven Tesla cars have received certifications by the Indian Authorities – declaring them as roadworthy. Considering everything, Tesla cars are still not on roads yet. Adding on to this, Elon Musk – founder of Tesla, recently replied to a relevant tweet by saying, “Still working through a lot of challenges with the government”.

We don’t know if this was an honest reply or a well thought strategy, but his reply to a tweet sparked a significant political uproar. People started blaming the Indian government on social media and it was followed a dramatic stunt to get Elon Musk’s attention. Ministers from at least four major Indian states started sending invites to Musk, writing tweets to him, trying to convince him to set up Tesla’s factory in their state. They even started promising to provide land, infrastructure, a quicker approval procedure, and much more.

See how tempting this must have been for him? With just one reply to a tweet, he grabbed all the attention.

Moving forward, Elon Musk and the government have been in discussions for years, and it's unlikely that the issue originates solely from one single problem. There are several other problems as well. For instance, Import duties. Last July, he even admitted it while giving a reply to a random Twitter user.

He said, “We want to do so (launch in India), but import duties are the highest in the world by far of any large country! Moreover, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India”.

Now, let’s look at our country’s import duties.

Import duties in India are some of the highest in the world. Stating a few facts – “India currently levies a 60% tax when you import a car priced below $40,000 and 100% for above $40,000. In contrast, most western countries like US and Canada apply single-digit rates, with emerging markets like China and Brazil levying rates of 22% and 35% respectively”.

Therefore, if we look at current import duties by India, even the basic Tesla model would cost more than ₹60 lakhs, which won’t be affordable to most Indian families.

When asked by government, they say that this move helps local manufacturers of India and will provide incentives to those who manufacture within India, helping in “Make in India” campaign.

However, if we analyse Tesla’s situation, they are not ready to manufacture their cars in India yet, as they are unsure of the supporting conditions provided in India. In other words, they want to first test if Indians are ready and are accepting the idea of futuristic cars, and then enter fully and manufacture locally as well. Moreover, EV cars are not widely accepted and its sales are just around 1% of total vehicles sold in India currently. Historically as well, the US car manufacturers, such as Ford and General Motors have faced failure in terms of setting up manufacturer units in India and have already exited the market.

Therefore, Tesla is not willing to set up its manufacturing plants yet and are looking to sell imported vehicles directly to Indian market.

In the end, we can just say that the import duty is playing a critical role and it seems very difficult for Tesla cars to enter Indian Automobile market anytime soon.

Hope you liked the blog. Please like, comment, and share!

Author: Ishant Ghai

07/02/2022

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We create articles about Financial Activities, Businesses, and Startups. Since we are finance and business enthusiasts, rather than offering knowledge based on complex theories, we provide opinions and explain any issue to our audience in simple terms.

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VyaparNeeti

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