Finally we have a Gold, again!
Today was the last day of Tokyo Olympics and India showed their best ever performance at Olympics with 7 Medals!
We have some interesting topics to discuss but first let’s get an overview on the Stock markets this week!
After losing for 2 weeks, the markets seem to have recovered on the last day of the week. And finally Nifty breached the 16,000 levels in an Historic move.
The big stocks seem to fairing well compared to the Midcap and Smallcap, which is sort of bucking the trend seen for a long time now.
Gained 8.2% and seems to be moving up in the following week
Given the higher disbursals by the company
After the news of K Birlas stepping down and uncertainties lying ahead for Vodafone-Idea, a duopoly situation is very likely in the minds of investors. This could shift the subscriber base (268 mn) of Vi to Airtel and Jio, which can gain from it
Very Sharp decline on Tuesday and Wednesday - rebounded by almost 19.33% on Friday to Rs 7.10. Kumarmangalam Birla has stepped down. It has a consolidated debt of around Rs 1.8 lakh crore. Although, after the news of the change in the Retrospective Tax Policy by the GOI, the stock seems to have rebounded.
IDFC First Bank
Reliance was down this week - this also brought down Nifty 50 (Reliance being a heavyweight)
Reason: Supreme Court gave the judgment in favour of Amazon and said, Reliance cannot go ahead and complete the deal
Banks have gained overall given that, the Actual Asset Quality Deterioration is lower than expected, but few banks like, RBL Bank has slipped due to sustained impact of the asset-quality on their books
The performance of the banks on the market is closely related to the situation of CoVID-19 and the subsequent impact on the economic activity
Sectors to look forward to in near future- Banks Power PSUs
The overall outlook seems to be in favour of investing in the short and medium-term whereas, minor corrections may prove to be healthy in the long term
Financial stimulus by the government and Central Bank policy may put inflationary pressure on the economy, which requires us to invest in sectors and companies which can handle it better in the long term.
The Real Cost of Olympics!
The 2020 Tokyo Olympics ended today amid a world pandemic. This was one of the most challenging and expensive Olympics ever conducted, kudos for the IOC and Japanese Government and Administration for successfully executing it!
India At Olympics
India showcased some exceptional performances and missed out on some close encounters. We were able to improve our medals tally from Rio 2016 with 1 Gold, 2 Silver, and 4 Bronze medals we have bagged a total of 7, this was India's best-ever performance at Olympics. Neeraj Chopra getting the first Gold after 13 years, the Indian Men's Hockey team winning a medal after whooping 41 years, Indian Women's hockey team missed out on the bronze but upped their performance significantly, from not winning a single match in Rio to Getting into the Semi-Finals, it was a “Chak De Indian” moment for India! Aditi Ashok missed out by a whisker on India's first-ever Medal at Golf! And many more spectacular performances show India has a bright future at Sports and who knows we might be challenging the mighty Americans and Chinese in the medals tally!
Olympics but at What Cost?
Olympics is an extravaganza of sports held every 4 years sports at a new location, almost every time. Tokyo Olympics was not different but, Covid added a lot of obstacles and expenses to an already expensive and difficult to manage event!
No spectators allowed, covid 19 precautionary measures and a delay of 1 year added millions of dollars to the Tokyo Olympics expenses. The total cost went to a whopping $ 15.4 Billion for a 16-day event, so on average, it cost $1 Billion to run the event for a single day!
But it's not all waste, right? You get world-class stadiums, effectively planned townships, and some high-tech transportation systems too! But the bigger problem is their usage and maintenance. Many past Olympic cities are now ghost towns, many stadiums used in Rio and Beijing Olympics are not used anymore. Making the situation even worse is the Olympics Committee has increased their ticket share from a mere 4% in the 90s to a large cut of 70%. This makes the Olympics a very very very Expensive business, and very likely to end up in a loss!
So What, should we end the Olympics?
In recent times the popularity of the Olympics has fallen, revenue streams have also decreased, many people even think the Olympics won't last with the current trajectory! Lately, IOC has been finding it difficult to find the next host of the Olympics, as countries have started to realise it, this event is nothing but a big loss-making machine. All these indicators might say that Olympic's end is near. But will an event that started almost 120+ years old will end just because the cost of operating it is too high?
We as a human civilisation have solved problems that we never thought even existed. And this problem can also be solved, in the words of
"Mushkil nahi kahe sakte lekin thoda Tough jarur hoga!"
What can be the solutions?
IOC can create a pool of fixed Olympic villages in the last 20-30 years, and a round-robin method can be applied to decide who hosts the next Olympic. As the Olympic village is already constructed, only renovation costs will be incurred in maintaining them. Seeing the scale and frequency they will not be less but surely cheaper than building a completely new Olympic Village. And if a new Country want's to host it's well and good, a new member is a part of the group!
A collective calendar can be created by taking all the sports federations into consideration so that events are happening regularly at the Olympic villages. They are built for the Olympics but they can surely be used for other events. This will keep generating revenue and at the same time keep them in good condition due to regular usage and maintenance.
When is it coming to India?
India did great at Olympics this year, but it doesn't look that India will be hosting the Olympics any time soon! The next 3 Olympic hosts decided as Paris, Los Angeles and Brisbane. India might bid at 2040 or the later ones if the Indian economic situation improves and most importantly the economics of the Olympics improves.
Byju's or Buy-ju's
World's most valued Ed-tech startup, Byju's is currently valued at $16.5 billion. It has now turned into Buy-ju's from Byju's.
It's not a secret that it is acquiring ed-techs one by one and so far it has already made 7 acquisitions in 2021.
We are listing all acquisitions one by one:
Byju's acquired this augmented reality (AR) startup for an undisclosed amount.
This startup helps developers to create immersive apps, products, and experiences.
This startup was acquired at a hefty amount of $600 million by Byju's in the month of July. This platform currently has more than 1.5 million learners in 170 countries.
It is a US-Based digital reading platform that focuses on kids under the age of 12.
Currently, it claims to have over 50 million students and 2 million teachers on the platform.
Aakash Educational Services
Aakash is one of the oldest networks with 200 coaching institutes, which offers tutoring to students from 9th to 12th and competitive exams like JEE and NEET.
This was acquired at $1 billion by Byju's in the month of April.
This deal is yet to be announced officially but Byju's have done the paperwork for this.
This startup was quite similar to Byju's as they offered courses for classes 5-12 and exams like JEE & NEET.
This startup was a mobile tutoring app that offered tutoring for exams like JEE & NEET.
It was also acquired by Byju's.
It provides video solutions for classes 6-10 students to solve doubts across subjects like Maths, Physics, Maths, and Biology.
Byju's already has startups like Whitehat Jr in its bucket and it is trying to make a deal with Vedantu as well (as per the sources).
Whatever the case, looking at these acquisitions we can predict that Byju's has disrupted the Ed-Tech sector in India and is now aiming for countries across the globe.
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Withdrawing Retrospective Tax - Government's big U-turn!
Retrospective tax is in the news again after the Union Government's decision to abandon it. The background seems to be recent actions by Cairn Energy taking orders from foreign jurisdictions to cease Indian assets overseas.
What's a Retrospective Tax?
In India, the government can make laws, that are applicable from the date before on which the law is passed (given that it is not a Criminal Law). Using this power government could tax a transaction that took place before the law was passed. Sovereigns can use it to correct any unintended anomalies in the taxation policy
In 2007, Vodafone bought stakes in Hutchison Whampoa and took control of it. But, the transaction took place in tax heaven and thus was outside the ambit of Indian laws. But after the government demanding tax over that transaction, Vodafone went to Supreme Court which rules in its favour and prevented the government from charging tax. This should've been an end to it, but GOI brought an amendment to the Income Tax Act, 1961 with retrospective effect from 1962. This brought the transactions of Vodafone and Cairn Energy under the ambit of the law.
Why the change now?
After its introduction, the law was challenged by both the companies in the international arbitration and won. But meanwhile, the Indian government had confiscated the assets of Cairn Energy in India. This gave them the right to confiscate Indian assets overseas, for example, Cairn Energy wanted to use Air India as an 'alter ego' to recover the assets seized by the Indian government. Recently, the French court allowed Cairn Energy to take over Indian assets based in Paris.
"The road to disaster is paved with good intentions" GOI was right in its principle that a sovereign should be able to levy taxes on acquisition which derives its value from the assets based in India. But loopholes in the tax law proved to be an obstacle. This tax law although termed by the opposition at the time as "tax terrorism", continued for nearly a decade under many finance ministers due to political considerations. Any government which was seen as favouring the MNCs was bad news for their politics.
The current move by the government is certainly a welcome step and shows the ability of course correction. But the timing of this on the background of Cairn Energy pursuing Indian assets overseas will showcase limited foreign investor confidence in India.
See you until next time!
-The Smarter Indian Team