Cracker of a Sale
This week, we talk about how India is going online for Diwali shopping. We also talk about the jump in inflows into mutual funds and the controversy surrounding the Burman family’s planned takeover of Religare.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
Diwali, the festival of lights, is the pinnacle of festivities across most of India. While Diwali has literally been celebrated in the Indian subcontinent for thousands of years, with the passage of time and with new technologies emerging, how consumers make their purchases has seen a dramatic shift over the past decade or so.
Almost everyone now has a smartphone and most of India is now online. Little wonder, then, that nearly 80% of customers are turning to their mobile phones for Diwali shopping this year, at least according to a report by InMobi, a provider of marketing and monetisation technology solutions for online businesses.
The InMobi report says that more than half the people it surveyed will engage in hybrid shopping, combining online and offline methods. Moreover, 84% have increased their online shopping budgets compared with last year. Among the women surveyed, 68% see themselves as the main decision-makers for festive shopping, prioritising personal needs first, followed by family and business associates.
Another survey conducted by buy-now-pay-later platform Simpl says that 40% customers plan to shop from direct- to-consumer (D2C) merchants this festive season. Simpl said that consumer optimism remains high, as 41% participants have strong online shopping plans this festive season, with 33% of the respondents planning to purchase fashion and accessories. Travel, personal care, food and beverages, and consumer electronics were other popular categories that respondents plan to spend on.
And then there’s Amazon India, which competes directly with Walmart-owned Flipkart as one of two dominant online marketplaces in India. The Jeff Bezos-led company said it saw 1.1 billion customer visits on its platform during the Great Indian Festival 2023, higher than any other previous edition. The month-long sale started on October 8. The company said 80% of the customers were from tier-2 and -3 cities.
However, none of this is to suggest that traditional markets are deserted. Far from it, news reports say leading Diwali markets across India including Sarojini Market in Delhi, Johri Bazar in Jaipur, Crawford Market in Mumbai, Rani No Hajiro in Ahmedabad, Hazratganj in Lucknow and Topkhana Market in Bhopal, have been teeming with shoppers!
And there’s more than just Diwali to keep consumers hooked. The Indian cricket team, you see, has performed stupendously well, winning all its league matches till now and storming into the semi-finals as the clear favourites to win the trophy. Irrespective of whether India continue their winning streak and get their hands on the World Cup, companies in the FMCG and consumer goods sectors have seen sales skyrocket, and that is likely to continue till the end of the tournament on 19 November.
MFs stay favourite
It is not just the average retail customer that seems to be revelling in the joyous festivity of Diwali. India’s capital markets, too, seem to be on cloud nine.
The large-cap mutual fund category, which saw five consecutive months of net outflows, finally turned the corner as it garnered Rs 723.8 crore in October, according to data released by the Association of Mutual Funds in India.
The equity MF segment was also aided by four new fund launches in October that garnered Rs 2,996 crore. None of the equity categories witnessed net outflows in October.
Overall, equity-oriented MFs recorded the 32 nd consecutive month of net inflows. Total net inflows into active equity mutual fund schemes surged 42% month-on-month to Rs 19,957 crore in October after dropping to their lowest level in six months in September as investors lapped up MF units at a lower cost amid a correction in the equity market when the Nifty 50 and the Sensex fell 2.8% and 2.9%, respectively.
The net inflows were also supported by the surge in investments coming through the systematic investment plan (SIP) route. SIP inflows, which have been surging almost every month for more than a year now, scaled a fresh high of Rs 16,928 crore in October after rising 6% from September. Over 3.4 million new SIP accounts were registered in October, according to AMFI data.
Capex concerns
Inevitably, with good news, tags along some not-so-good news. While the markets may be on a rebound, capital expenditure recovery remains uneven and is being largely driven by government orders and select sectors, wherein capex by large corporates is skewed towards brownfield capacity expansion, according to a report by India Ratings.
Indian companies have so far used increased accruals from pandemic-related deleveraging to kickstart the deferred capex, but it could overshoot cash flow generation in the current financial year resulting in leverage starting to build up again. India Ratings also said that oil and gas, power, steel, automobiles, telecom and non-ferrous metals will account for the bulk of the capex. The production-linked incentive scheme is a positive for India’s manufacturing footprint in the long term, but it may not contribute significantly to the near-term corporate capex outlook.
While rural demand outlook has improved with an increase in farm income, it remains exposed to one-off climatic risks, the ratings firm said, adding that entities reliant on asset monetisation to meet deleveraging and liquidity requirements will continue to experience pockets of stress. Further, export demand is seen muted both for merchandise and service sectors, given the global macro headwinds.
Byju’s loan saga
Meanwhile, ed-tech firm Byju’s continues to be in the news for all the wrong reasons. Byju’s lenders won a legal fight over a $1.2 billion loan default even as they took control of a unit of the education-technology provider.
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A judge in the US state of Delaware ruled this week that the lenders – which include Redwood Investments LLC and Silver Point Capital LP – were within their contractual rights to replace a relative of company founder Byju Raveendran on the board of Byju’s Alpha, a special-purpose company formed for financing purposes, with their nominee.
The ruling comes as lenders have been pushing hard for the repayment of the $1.2 billion loan amid the company’s mounting distress after a pandemic-era boom in online learning fizzled out. Byju’s has also been working to sell some of its units and deal with the loan default. It also faces a government probe while some of its investors have marked down the value of their stake in the company, making it difficult for Byju’s to raise fresh capital.
Burmans Vs Rashmi Saluja
In what promises to be another legal battle in the making, entities controlled by the Burman family (of Dabur fame), the biggest shareholders of Religare Enterprises Ltd, have written to the Securities and Exchange Board of India (SEBI), demanding a probe into trades in the shares of the financial services firm by chairperson Rashmi Saluja.
According to a report in The Economic Times newspaper, in an email sent to SEBI and the two stock exchanges this week, four Burman family entities that collectively hold 21.24% of Religare said Saluja sold a portion of her personal holdings in the company soon after a meeting with a representative of the Burmans.
The representative had informed her of the Burmans’ intention to make an open offer to acquire control of the company. However, Religare says the meeting with Burmans’ representative had nothing to do with the share sale by Saluja.
The letter to the authorities seeking an investigation comes on the heels of allegations of fraud and various other breaches made by Religare’s independent directors to financial sector regulators against the Burman family. These allegations include collusion with erstwhile owners, the Singh brothers; a pending case of fraud against Dabur India chairman Mohit Burman; questions about the source of funds to be used for the acquisition; and market manipulation, among others. The Burmans have, of course, rejected these allegations.
Religare was founded by Malvinder and Shivinder Singh. The brothers lost control of Religare in 2018 after lenders invoked the shares they had pledged to take loans. Saluja was appointed as the executive chairperson of Religare in December 2019 after a board comprising independent directors was put in place to revive the company.
Market Wrap
Stock markets ended up for the second consecutive week with the 30-stock Sensex growing 0.8% and the 50-stock Nifty notching up gains of nearly 1%.
The Nifty counters that rallied during the week included Axis Bank, L&T, Bajaj Finserv, M&M as well as government-owned energy and power companies Coal India, Power Grid Corp, Bharat Petroleum, and ONGC.
Reliance Industries, Hindustan Lever and three IT majors—Wipro, Tata Consultancy Services and Infosys—were among the Nifty stocks in the red this week.
Other headlines
That’s all for this week. Until next week, happy investing!