Barely three months after reporting a net debt of some USD 21 billion, India's billionaire businessman Mukesh Ambani-owned oil-to-telecom conglomerate Reliance Industries announced its debt-free status in June this year -- all thanks to an unprecedented fundraising spree that helped cheer up the country's bourses amid Covid.
Reliance had, in fact, raised USD 15.2 billion by selling stakes in its telecom unit Jio and another USD 7 billion through rights issue just in the first quarter of this fiscal that saw the shares of the conglomerate hitting an all-time high and helped both the benchmark indices, Nifty and Sensex, shrug off weak global cues during the Covid-induced slowdown.
“I am both delighted and humbled to announce that we have fulfilled our promise to the shareholders by making Reliance net debt-free much before our original schedule of March 31, 2021," Ambani, the chairman and managing director of Reliance Industries, had said at the virtual shareholders' meet in July, while announcing the first quarter results.
But the haste at which Ambani had signed of the back-to-back deals with some US-based firms between April and June -- which also fuelled Reliance's market capitalisation to cross USD 150 billion, the first Indian company to reach this milestone -- can be attributed to its "hard efforts" to list Jio as a separate digital company on the country's bourses next year.
Jio has attracted some 370 million subscribers to its network since its mega launch in 2016, despite being a late entrant to India's telecom sector. By offering free voice calls and data at the world's cheapest price, it has already changed the country's digital landscape that was earlier dominated by the duopolies of domestic Airtel and British MNC Vodafone.
UNB has learnt that the top management of Reliance Industries is aggressively planning to take Jio public in the second half of the next fiscal, given the fact that the parent company has already managed to cut its net debt to zero. "By that time, the proceeds from the rights issue will be entirely received from retail and institutional investors," sources said.
The rights issue was structured in such a way that investors paid only 25% of the value of the shares they applied for, while they would have to cough up the remaining in two equal instalments in the first quarter of the next fiscal. "So, once all the funds are in, time will be right for Reliance to take Jio public as a separate entity," the sources said.
Reliance Industries has traditionally been in the oil and gas sector and chemicals business, both highly cyclical as compared to the defensive consumer and digital plays. And experts say the idea behind taking Jio public stems out of the fact that the pandemic has increased digital adoption across the world, including in India.
"Over the years, Reliance has become a conglomerate by diversifying into telecom and retail businesses, which have turned the tide for the company. In fact, the consumer-facing businesses now contribute nearly 35% of its operating profit. By listing Jio, Ambani wants to cash in on the growing digital dependence," said Delhi-based economist Nayana Singhal.
Stocks like Amazon, Netflix, Apple, Facebook, Google have all seen strong buying interest due to their digital capabilities and lower impact on the business during the Covid pandemic.
Some of these tech titans have also invested in Jio platforms, between April 22 and May 8, notable among them being Facebook. The social networking giant has become the Indian conglomerate's largest minority shareholder, with a 9.99 per cent stake, by investing USD 5.7 billion in Reliance.
"Also, talks are ongoing between Reliance and Saudi Aramco over the latter's USD 15 billion investment. All these indicate that we would see Jio on the country's bourses in the next fiscal. Moreover, being the cheapest data seller in India, Jio could well dislodge the other two telecom companies," said Ajai Misra, a telecom veteran based in Delhi.
India has the cheapest mobile broadband prices in the world. As per an international study, users in India pay USD 0.26 for 1 gigabyte (GB) of mobile data as compared with USD 12.37 in the US, USD 6.66 in the UK, and a global average of USD 8.53.
Leading consulting firm PricewaterhouseCoopers estimates the number of internet users in India is likely to grow to 850 million in 2022. So, if Jio, said to be the cheapest data seller in the world, becomes public next year, it could well change the dynamics of the telecom sector in the Indian equity indices too, say experts.
"India is one of the world's largest telecom markets. But neither Vodafone nor Airtel is in a good financial position, grappling with financial constraints to cough up AGR or adjusted gross revenue dues to the government. Jio, on the other hand, being a late entrant is more or less saved from paying huge AGR dues. It's a win-win for Jio," Misra said.
It may also be mentioned here that Reliance is already in talks with a number of fast moving consumer goods companies in this country to deliver daily-use domestic essentials at the doorsteps of consumers via Jio's e-commerce venture JioMart. Facebook's chat service WhatsApp has tied up with JioMart to make consumers connect with local groceries.
Foreign Direct Investment (FDI) flows to developing economies decreased by 16 percent, less than expected, Unctad said on Tuesday.
The FDI flows were 28% lower in Africa, 25 percent in Latin America and the Caribbean and 12 percent in Asia, mainly due to resilient investment in China, according to United Nations Conference on Trade and Development (Unctad).
In the first half of 2020, developing Asia accounted for more than half of global FDI.
FDI flows to transition economies were down 81 percent due to a strong decline in the Russian Federation.
Despite the 2020 drop, FDI remains the most important source of external finance for developing countries.
Other sources, including remittances and official development assistance – relatively more important for LDCs – are also falling.
The overall decline can add to external payments problems in developing countries.
Global foreign direct investment (FDI) flows in the first half of 2020 were down 49 percent compared to 2019 as lockdowns around the world slowed existing investment projects and the prospects of a deep recession led multinational enterprises (MNEs) to re-assess new projects.
The decline cut across all major forms of FDI. New greenfield investment project announcements dropped by 37 percent, cross-border mergers and acquisitions (M&As) fell by 15 percent and newly announced cross-border project finance deals, an important source of investment in infrastructure, declined by 25 percent.
Developed economies saw the biggest fall, with FDI reaching an estimated $98 billion in 2020 H1 – a decline of 75 percent compared to 2019.
The trend was exacerbated by sharply negative inflows in European economies with significant conduit flows.
FDI flows to North America fell by 56 percent to $68 billion.
Cross-border M&A values reached $319 billion in the first three quarters of 2020.
The 21 percent decline in developed countries, which account for about 80% of global transactions, was checked by the continuation of M&A activity in digital industries.
The value of greenfield investment project announcements – an indicator of future FDI trends – was $358 billion in the first eight months of 2020.
Developing economies saw a much bigger fall (-49%) than developed economies (-17%), reflecting their more limited capacity to roll out economic support packages.
The number of announced cross-border project finance deals declined by 25 percent, with the biggest drops in Q3, suggesting that the slide is still accelerating.
Prospects for the full year remain in line with earlier projections of a 30-40 percent decrease.
The rate of decline in developed economies is likely to flatten as some investment activity appears to be picking up in Q3. Flows to developing economies are expected to stabilize, with East Asia showing signs of an impending recovery.
The outlook remains highly uncertain, depending on the duration of the health crisis and on the effectiveness of policy interventions to mitigate the economic effects of the pandemic.
Geopolitical risks also continue to add to the uncertainty.
Chairman of South Korea's technological giant Samsung Electronics, Lee Kun-hee, who transformed Samsung into a world-leading innovator and industrial powerhouse from a local business, died. He was 78.
Lee died in Seoul on Sunday, according to a statement released by Samsung, reports Xinhua.
It said Lee's family, including his son Lee Jae-yong, who is Samsung's vice chairman, were by his side when he passed away.
"Our deepest sympathies are with his family, relatives and those nearest. His legacy will be everlasting," said the statement.
Lee had suffered a heart attack and had been hospitalized and bedridden since 2014, when Lee Jae-yong began to take the helm and become the de facto leader of the multinational gaint.
Lee, the son of Samsung Group's founder Lee Byung-chul, was born in Uiryeong County in South Gyeongsang Province of South Korea on Jan. 9, 1942.
He graduated from Japan's Waseda University in 1965 and finished his MBA program at George Washington University in the United States in 1966.
Lee has successfully transformed Samsung into a global electronics Titan and one of the world's largest producers of smartphones, televisions and memory chips.
The International Monetary Fund (IMF) on Wednesday revised down its 2020 forecast for the Asian economy to a contraction of 2.2 percent, reports Xinhua.
The latest forecast is a downgrade compared with the projection of a 1.6-percent contraction in June.
The IMF's latest Regional Economic Outlook shows that a recovery started in the third quarter, though growth engines are not all firing with the same strength across all countries, leading to a "multispeed recovery," Jonathan D. Ostry, acting director of the IMF's Asia and Pacific Department, said during a virtual news conference.
Advanced economies (Australia, South Korea, Japan and New Zealand), while still in recession, are expected to do somewhat better than expected in 2020, reflecting a faster pickup in activity following earlier exit from lockdowns, Ostry noted.
China, which suffered from the COVID-19 pandemic's blow earlier than other countries, has seen a strong recovery after the first quarter lockdown, with growth revised up to 1.9 percent this year, "a rare positive figure in a sea of negatives," the IMF official said.
Ostry said China experienced the COVID-19 pandemic first and dealt with it vigorously quite early, which allowed it to reopen much earlier than other countries.
"We've now seen two quarters, the second and third quarter of 2020 with a very impressive growth from China," he told reporters.
China's growth, given its role in the region, "is having positive spillovers, for the region and for commodity prices and for broadly participants in the global value chains that China is a big part of," he said.
The IMF official noted that a lot of China's exports have been related to medical equipment and home electronics amid the pandemic, and the global demand for these products will eventually "peter out."
Ostry said China is in the process of its multi-facet "rebalancing," from a more export- and investment-led growth to a more consumption-driven growth, and is expected to have "a smooth handover" from a publicly generated growth to private demand-driven growth beyond the near term.
The multilateral lender expects the region to grow by 6.9 percent in 2021. But even with this boost, output will be lower at the end of 2021 than the IMF's pre-pandemic projection, Ostry said, noting that the "scars will be deep."
"With declining labor force participation and weak confidence dimming private investment, potential output by the middle of the decade could be some 5 percent lower than before the pandemic," he said.
The IMF official highlighted three lessons the world can learn from Asia's experience. First, an early public health response; second, relaxing containment measures only after the virus has been suppressed and with appropriate post-lockdown policies in place; third, fiscal support has also been critical to reduce economic costs and underpin the recovery.
Ostry also pointed out risks ahead as prospects for a global trade-led recovery look dim, because of weak global growth, closed borders, and festering tensions around trade, technology and security.
Rising inequality is antithetical to sustainable inclusive recovery and high indebtedness makes the region vulnerable to financial turbulence, he noted.
"Policymakers must not lose sight of the fact that this health crisis is far from over," Ostry told reporters. "Job one is therefore to sustain strong health policies until the pandemic is well under control."
"Countries need to plan now to secure and distribute vaccine supplies quickly as they become available, and in some cases with multilateral support," he said.
The IMF official warned that fiscal and monetary support should not be withdrawn prematurely, urging countries to better target fiscal support, especially to youth and women, who have taken the biggest hit.
Noting that policymakers should enable structural change, he suggested facilitating corporate restructuring and resource reallocation, including to sectors that will pave the way for stronger medium-term inclusive green growth.
Jack Ma, founder of e-commerce giant Alibaba, held onto his status as China’s richest tycoon this year as surging demand for online shopping and other services during the coronavirus pandemic swelled the fortunes of internet entrepreneurs, according to a survey released Tuesday.
Ma’s fortune rose 45% percent over 2019 to $58.8 billion, according to Hurun Research Institute, which follows the country’s wealthy.
Ma Huateng, founder of Tencent, which operates the popular WeChat messaging service, was No. 2 at $57.4 billion, up 50%. Debuting at No. 3 was Zhong Shanshan, chairman of bottled water brand Nongfu Spring, with $53.7 billion following his company’s Hong Kong stock market debut in September.
Rising share prices created an average of five new Chinese entrepreneurs worth at least $1 billion every week over the past year, according to Hurun’s founder, Rupert Hoogewerf.
“The world has never seen this much wealth created in just one year,” said Hoogewerf in a statement. “China’s entrepreneurs have done much better than expected. Despite Covid-19 they have risen to record levels.”
The richest woman on the list was Yang Huiyan of real estate developer Country Garden. She was No. 6 at $33 billion, up 29% from last year.
Rankings of China’s richest change abruptly from year to year as real estate, technology and other industries rise and fall in the fast-evolving economy.
This year, the coronavirus boosted the fortunes of Alibaba’s Ma and other internet entrepreneurs as the shutdown of the Chinese economy to fight the virus propelled demand for online shopping and business tools.
Eric Yuan of California-based video conference platform Zoom rose more than $10 billion to $16.2 billion. Li Yongxin of Offcn, an online work training platform, more than doubled to $20.6 billion. Chen Xiangdong of tutoring platform Genshuixue rose eightfold to $11.8 billion.
Ma, 56, retired as Alibaba chairman last year and also is a shareholder in Ant Group, a payments service spun off from Alibaba. It is preparing for a public share offering after being valued at $150 billion in a 2017 private financing round, which will add to Ma’s fortune.
Entrepreneurs in electric cars, an industry the ruling Communist Party is promoting, also saw their fortunes swell.
Zeng Yuqun of battery producer CATL tripled to $17.6 billion. He Xiaopeng of electric car brand Xpeng, rose 80% to $6.6 billion following a stock market debut in New York. Li Bin of NIO rose 300% to $3.5 billion.
Business leaders who tumbled down the list included Ren Zhengfei, founder of Chinese tech giant Huawei. U.S. export controls imposed in a feud with Beijing over technology and security threaten to cripple its sales of smartphones and switching equipment. Ren’s net worth declined 10% to $2.8 billion, according to Hurun.
Lei Jun of rival smartphone brand Xiaomi saw his fortune more than double to $25 billion as its share price surged, possibly boosted by expectations sales will benefit from Huawei’s troubles.