Month: May 2018

Air India sale bombed. So what happens now?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Narendra Modi government’s ambitious plan to sell Air India to private parties has bombed, with not a single bid coming in till this evening, when the deadline for expression of interest expired.

For months, industry has been abuzz with theories about a large business conglomerate and a domestic airline which were two of the interested parties. But both apparently developed cold feet at the last moment.

The failed attempt not only puts a question mark over fixing the debt-heavy airline, but also the government’s larger plan to see stakes in companies it owns significant stakes.

Road Ahead

So what is the road ahead for the Air India sale? Will the disinvestment be scrapped? Is it the end of the road for the much-hyped sale of the struggling airline?

Not necessarily.

The process now involves going to the evaluation committee and a  core group on the divestment process headed by the cabinet secretary and the finance minister-led alternate mechanism or group of ministers.

Chances are that there will be a rebid, but that will be painful because the entire process must be repeated, with fresh terms and conditions.

What we know is that the path ahead for Air India will be decided by four of Modi’s trusted ministers – Arun Jaitley, Suresh Prabhu, Nitin Gadkari and Piyush Goyal.

The quartet forms a group called the Air India Specific Alternate Mechanism (AISAM) which will take a call on the future of the disinvestment process, after the bid situation becomes clear today.

It may decide to scrap the process, call for a rebid or decide not to sell the airline after all.

Obviously then, the future course of action on Air India may be an entirely political call.

Remember, there has been enough opposition to the sale of the Maharaja. The RSS has hinted opposition against any move to sell the airline to foreign carriers, BJP’s own Subramanian Swamy alleged a “scam” in the entire process and employee unions are totally opposed to the sale.

This evening, a source close to developments told CNBCTV18.COM that the government needs to come back with absolutely no conditions and let the market decide the price at which the airline should be sold, if it still wants to sell the airline that is.

But perhaps this person was being too optimistic – price and bid conditions certainly proved to be a detriment, but this is not the only problem which plagued the Air India sale.

The disinvestment never really got off to a flying start. First, it was tepid response from potential bidders, with a prominent airline even walking out of the entire game early on.

Next, remaining bidders began clamoring for tweaking bid conditions, objecting to many of the basic premises which form the Expression of Interest (EoI) document.

There has been widespread skepticism about government’s toehold, since it proposes to retain 24% stake even after the disinvestment process has been completed.

The bidders’ complaints were followed by a veiled threat by the powerful Sangh lobby against selling off Air India to foreigners.

The Air India disinvestment process began on March 28 this year and has been billed as the largest strategic disinvestment in Independent India.

The government proposes to offload 76% of its stake in carrier and its low cost international arm, Air India Express, besides all of its 50% stake in ground handling joint venture Air India SATS Airport Services Private Limited (AISATS).

Any prospective bidder would want some of these sops: complete control with government relinquishing its 24% stake as well, lower debt liability and clarity on manpower issues post the disinvestment.

The Swadeshi Jagran Manch is preparing a roadmap for the airline to continue with government ownership and employee unions are opposed to the sale.

Remember, a non-airline company, with no experience in running an airline, could have also placed a bid for Air India as per conditions set out till now.

This, more than anything else, shows all that is wrong with the AI sale and is a possible pointer to why the sale may eventually get stymied all together.

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SoftBank investment in GM Cruise could speed self-driving cars

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a landmark deal that could accelerate wide-scale deployment of self-driving cars, General Motors Co said on Thursday that Japan’s SoftBank Group Corp will invest $2.25 billion in GM Cruise Holdings LLC, the carmaker’s autonomous vehicle unit.

GM shares jumped more than 10% in pre-market trade.

It is one of the largest investments to date in self-driving cars. In a media briefing early Thursday at GM headquarters in Detroit, President Dan Ammann said the investment by SoftBank’s $100-billion Vision Fund will enable GM to deploy self-driving vehicles “at massive scale.”

Chief Executive Officer Mary Barra said the company is still “on track” to begin deploying its Cruise AVs in commercial ride sharing fleets in 2019.

GM will also invest $1.1 billion in the unit after the deal closes, the company said.

SoftBank Vision Fund will own a 19.6% stake in GM Cruise once the transaction is completed.

The partners agreed not to cash out their investments in Cruise for at least seven years, said Michael Ronen, managing partner of SoftBank Investment Advisers.

Barra sidestepped a question about whether GM intends to spin off GM Cruise Holdings as a separate entity, saying GM would “do what’s best for shareholders.”

Ronen soft-pedaled a related question about whether SoftBank intends to consolidate its massive investments in some of the world’s largest ride services companies, including Uber, Didi, Ola and Grab, saying such a decision would be up to each company.

GM holds a sizable stake in Uber rival Lyft.

The SoftBank investment comes at a time when rivals Tesla Inc, Alphabet Inc’s Waymo unit and Uber Technologies Inc are stepping up efforts to gain the first-mover advantage in the autonomous vehicle market.

GM Cruise Holdings was set up recently and its assets include Cruise Automation, which heads up GM’s self-driving vehicle development and is based in San Francisco, and Strobe, a small self-driving sensor developer that Cruise acquired last year. The No. 1 US automaker – which views electric and autonomous vehicles as the keystones of future transport – has focused on rolling out self-driving cars since its estimated $1 billion acquisition of Cruise Automation in early 2016.

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Setback for BJP in by-polls as united opposition garner more seats

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the by-polls to four Lok Sabha seats and ten assembly constituencies across 10 states wind up today, the ruling party, BJP, has suffered a setback.

Out of the four Lok Sabha constituencies, BJP only won Palghar seat. BJP’s Gavit Rajendra Dhedya defeated Shiv Sena’s Shrinivas Wanaga by 29,572 votes.

Rashtriya Lok Dal (RLD) candidate Tabassum Hasan defeated BJP’s Mriganka Singh by over 55,000 votes to win Kairana Lok Sabha bypoll.

In Bhandara-Gondia Lok Sabha seat, National Congress Party (NCP) candidate Madhukar Kukde defeated BJP’s Hemant Patel.

Naga People’s Front (NPF) candidate C Apok Jamir defeated ruling Nationalist Democratic Progressive Party (NDPP) nominee Tokheho Yepthomi in the Nagaland Lok Sabha bypoll.

Coming to assembly by-polls, the ruling Trinamool Congress candidate Dulal Das won the Maheshtala seat in West Bengal, by defeating the BJP candidate Sujit Ghosh by a margin of 62,831 votes.

Seema Devi of Jharkhand Mukti Morcha (JMM) defeated Sudesh Mahto of All Jharkhand Students Union (AJSU) for Silli assembly seat in Jharkhand by 13,510 votes.

Babita Mahto of JMM also managed to defeat AJSU candidate Lambodar Mahto in Gomia, with a margin of 1,344 votes.

In Tharali assembly seat in Uttarakhand, BJP candidate won by over 1,900 votes.

Lalu Prasad Yadav’s Rashtriya Janata Dal (RJD) won Jokihat assembly seat in Bihar defeating JD (U) by a huge margin of 41,000 votes.

Congress candidate Hardev Singh Ladi wrested Shahkot assembly seat from Shiromani Akali Dal (SAD) by defeating Naib Singh Kohar with a margin of 38,802 votes.

The Congress retained the Rajarjeswari Nagar assembly seat in Bengaluru with N Muniratna winning the by-poll by a margin of 25,492 votes against his nearest BJP rival, P Muniraju Gowda.

Samajwadi Party (SP) candidate Naimul Hasan won Noorpur assembly by-poll in Uttar Pradesh by trouncing his nearest rival Avni Singh of BJP with a margin of over 5,678 votes.

The Left Democratic Front (LDF) candidate Saji Cherian won a landslide victory with a margin of 20,956 votes, by defeating D Vijayakumar of the United Democratic Front (UDF) in Chengannur, Kerala.

Congress candidate, Miani D Shira, won the Ampati assembly seat in Meghalaya by defeating C G Momin of the ruling National People’s Party (NPP), with a margin of 3,191 votes.

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India’s infrastructure output grows 4.7% in April

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s annual infrastructure output grew 4.7% in April from a year ago, government data showed on Thursday.

The growth in output compares with a upwardly revised 4.4% year-on-year growth in March.

Infrastructure growth slowed to a three-year low of 4.2% in 2017/18 fiscal year, indicating Prime Minister Narendra Modi faces a tough challenge to boost investment ahead of general elections due early next year.

Infrastructure output, which comprises eight sectors such as coal, crude oil and electricity, accounts for nearly 40% of India’s industrial output.

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No one bids for Air India

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian government’s offer to sell stakes in debt-laden Air India has failed to draw a single bid, underlining challenges faced in fixing the state carrier, as well as meeting a broader target of stake sales in government-held firms.

The alternative mechanism for Air India, a group of ministers formed to overlook the divestment process and headed by the finance minister, is likely to meet soon to decide the next course of action, sources said.

Aviation secretary R.N. Choubey, DIPAM secretary Atanu Chakraborty and  accounting firm Ernst & Young are also likely to meet soon to decide future course of action, the sources added.

Factors such as high debt, retention of employees and the stance of the govt about eventually retaining a 24% stake in the new company emerged as points of concern for the investors, people with knowledge of the matter told CNBC-TV18.

The government was looking forward to better participation in the stake sale, said India’s civil aviation secretary, R.N. Choubey.

New timelines will be decided based on the course of action decided by the alternate mechanism, and various options are available, he added.

The current bid process will not reach the request for proposal (RFP) stage, due to lack of interested parties, Choubey said.

The government also made its stand on the ownership of the future company, and said, the control of the company will lie solely with the buyer.

The transaction advisor is expected to talk to companies and probable probable investors regarding the issues flagged so far.

The government felt that there was no ambiguity on any points, Choubey said, and added that the process had been a great learning experience for the centre, and that it was now in a better position to judge what the market wants.

The aviation secretary further added that the government intended to signal to the market that complete freedom would be given to the buyer of Air India, but said he could not comment on whether the end of 2018 would continue to remain the target for the stake sale.

The current bid process cannot proceed further due to the lack of interest, he further added.

The aviation secretary on Wednesday said the government was unlikely to further extend the May 31 deadline. The government had expected bids to come in at the last minute.

Prime Minister Narendra Modi’s government announced a plan in March to divest a 76 percent stake in Air India and offload about $5.1 billion of its debt.

The government, which is looking at divesting 76% of its stake,  had eased some terms and extended the period to make bids earlier this month.

Air India flies some lucrative routes but also has one of the industry’s highest employees-per-aircraft ratios.

Air India, known for its Maharaja mascot, has some of India’s most lucrative international and domestic landing and parking slots that are key for airlines.

While the buyer would have management control and gain access to more than 2,500 international slots and over 3,700 domestic slots, it would also need to take on Air India’s 27,000 employees, 40 percent of whom are permanent staff.

The terms also stipulate that the government would continue to hold a 24 percent stake, and the winning bidder would need to abide by conditions, not yet detailed, designed to safeguard employee interests.

The government had also restricted merging the airline with the buyer’s existing businesses, but later relaxed the rule to allow some integration for business efficiency.

India’s IndiGo Airlines and Jet Airways, which had initially shown interest, opted out of the race for Air India after the initial terms were disclosed. They have not made any comments since the clarification was issued by the government earlier this month.

Steel-to-autos conglomerate Tata Group, widely seen as a potential suitor for Air India, was also unlikely to consider a bid as the terms were too onerous.

Tata already operates two airlines in India, including Vistara with Singapore Airlines.

Singapore Airlines has in the past said it was keeping an “open mind” about Air India, but three sources close to the company have played down the carrier’s interest, despite its previous public comments.

Read our complete coverage of the stake sale here.

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US dollar ends sharply lower against rupee

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The US dollar ended sharply against the rupee at Rs 67.40 per dollar and the pound sterling also ended lower than rupee at Rs 89.93 in the interchange forex markets.

Following are the Interbank forex and RBI rates: (In Rs per unit) Unit Interbank RBI reference US dollar Rs 67.40

US dollar Rs 67.40 Pound Sterling 89.94 Euro Rs 78.90 Japanese Yen(100) Rs61.99

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India continues to be world’s fastest growing major economy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Central Statistics Office (CSO) on Thursday said that Indian economy grew  at 7.7% in the fourth quarter ended March 31, 2018 making it the fastest growing major economy in the world.

CNBC-TV18 poll suggested that the economy would grow at 7.4% in the given quarter.

India’s GDP for the full year ended March 31, 2018 stood at 6.7% beating a poll of 6.6%.

Manufacturing GDP grew at 9.1% as against CNBC-TV18’s estimate of 9%. Mining growth stood at 2.7% as against CNBC-TV18’s poll of 1%.


source: tradingeconomics.com

Agriculture in the last quarter of past fiscal grew at 4.5% as against poll of 3.2%.

Ashima Goyal, member of Prime Minister’s Economic Advisory Council, said, “This agricultural growth projects that there is diversification to other high valued items and other income sources. Construction doing so well again suggests that maybe low income housing and the radar has settled and so there is a source of employment which is also a good number.”

Finance grew short of estimates, at 5% versus an expectation of 8%.

GVA or gross value added, growth stood at 6.5% in the quarter, CSO data showed.

With this GDP growth rate, January-March quarter became the fastest expansion since before the government’s surprise decision in November 2016 to scrap high-value currency notes and a botched implementation of a goods and services tax (GST) in July last year stalled growth, Reuters said.

According to CSO’s second advance estimates, for the entire FY18, the GDP growth was expected to be 6.6%.

DK Joshi, chief economist, Crisil said, “GDP growth at 7.7% in the fourth quarter of last fiscal was driven by a 11.5% surge in construction (over a weak base) and above-trend growth in agriculture. Investments expanded at 14.4%- supported by govt as pvt corp sector is still deleveraging and faces capacity overhang.”

Hasmukh Adhia, finance secretary, Government of India, said, “The constant increasing trend of quarterly GDP numbers in the four quarters of 2017-18 at 5.6%, 6.3%, 7% and 7.7% indicates that the structural measures of reforms undertaken by Government is now bringing rich dividends in the form of higher GDP growth rate.”

Subhash Garg, secretary, Department of Economic Affairs, said, “We have maintained Q4 GDP growth will be better. Good growth in capital goods, construction, manufacturing indicates a turnaround in the economy.”

He further said that the government is retaining its GDP forecast at current levels despite Moody’s take on oil price impact.

On Monday, Economic Affairs Secretary Subhash Chandra Garg said growth in Asia’s third largest economy was expected to grow 7.3-7.5%.

Rating agency ICRA has estimated the GDP growth rate for India in Q4 of FY18 is expected to be at 7.4%.

The research report released by State Bank of India (SBI) expects a growth rate for Q4 FY18 to be around 7.6% and, subsequently the FY18 growth to be at 6.7%.

In the previous quarter (October – December 2017 (Q3 FY18), India registered a 7.2% GDP growth as compared to 6.5% and 5.7% growth in the Q2 FY18 and Q1 FY18, respectively.

A Reuters poll had suggested that the economy grew at 7.3% in the given period ensuring the country remained world’s fastest growing major economy.

The May 24-29 poll of 55 economists predicted that GDP expanded an annual 7.3% in the first three months of 2018, a touch faster than the 7.2% achieved in the last three months of 2017 — and well above China’s pace of 6.8% for the quarter ending in March.

Forecasts ranged from 6.9 to 7.7%.

GDP is sum total of all goods and services produced in a country in a given period.

Industry chambers Confederation of Indian Industry (CII) on Monday said that it expects India’s economy to grow at 7.3-7.7% in 2018-19 on the back of “sustained structural reforms”, recovery in global markets and a normal monsoon.

“The impact of sustained structural reforms is now being felt on the ground as a mammoth economy is turning around,” CII President Rakesh Bharti Mittal was quoted as saying in a statement.

Adhia also said, “What is most noticeable is the increase in the growth rate of GVA of manufacturing sector in the last two quarters of 2017-18 at 8.5% and 9.1% at constant price. We would like to believe that GST has given a big boost to the industrial sector.”

Read our full coverage on India’s GDP numbers here.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow