RBI kneecaps Paytm

Also in today’s edition: Disney India has a new owner; A Ram-Sita budget; BRICS gets new inductees; No smoke without Modi family fire

Good morning! Not all change is bad. Just ask the carpet weavers of Kashmir. The ancient art of handwoven carpets is getting a helping hand (no pun intended) from AI. According to the BBC, makers are incorporating an AI software that is trained on talim, the code used to design carpets and guide weavers. The software notifies weavers of potential errors in design beforehand, thus saving them time and money. Now that’s a disruption we can all get behind. 

Soumya Gupta and Adarsh Singh also contributed to today’s edition.

The Market Signal 

Stocks & Economy: Indian investors and share traders treated the interim budget for what it was—a vote-on-account. The two benchmark indices closed lower, mostly because the event was already priced in on Wednesday. 

Bank stocks got a boost after the government reduced the size of its borrowing programme, vacating space for them to lend to others. Now all eyes will be on the Reserve Bank of India’s rate-setting meeting next week. While a cut might be too much to expect, investors and analysts will watch for softer language. 

US equities bounced back on Thursday after tech giant Meta announced a dividend for the first time and a $50 billion share buyback plan. Retail major Amazon’s strong fourth quarter showing helped too. The positive sentiment in the US percolated to Asia too, with major indices trading in the green zone on Friday morning. The GIFT Nifty indicates a flat or lower opening for India.

FINTECH

RBI’s Hammer Falls On Paytm

On Wednesday, the Reserve Bank of India (RBI) dealt a body blow to Paytm Payments Bank’s future. 

The regulator directed the Bank to stop most transactions from its products after February 29, while also mulling punitive steps including revoking Paytm’s payments bank licence. Unsurprisingly, Paytm shares took a shellacking in the market on Thursday.

The crux: To quote The Ken, the move “nukes” Paytm's wallet, FASTag, and UPI ecosystem. Expect Paytm to take a substantial hit on its payments business (approx. 50% of total revenue), with the company estimating a worst case hit to its EBITDA at up to ₹500 crore (~$60 million).

Collateral damage: This could snowball into an optics issue for its other verticals such as financial services. Paytm does not have an NBFC licence and partners with other lenders. The latter could turn sceptical of allying with Paytm post RBI’s directive, some brokerage firms say.

🎧 RIP Paytm Payments Bank. Also in today’s edition: Interim Budget lowdown. Bonus: Gen Z is reinventing the language of money. Tune in to The Signal Daily on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts. 

ENTERTAINMENT

House of Mouse Gets New Owners

The Disney-Reliance deal is inching close to a finish. Viacom18 has signed a prelim agreement to buy 60% of Star India at a $3.9 billion valuation, a fraction of what it was in 2019 when Disney acquired it. Reliance will take a controlling 51% stake, while Bodhi Tree Investments will own 9%.

As Sony and Zee sue and countersue each other over their failed merger, the Disney deal will help Viacom and Star cement a massive lead in India’s TV business, estimated to be worth over $8 billion (pdf) while also gaining a lead in streaming and film production and distribution. 

New slate: Meanwhile, Disney+ Hotstar is commissioning adult animation shows based on Indian mythological epics. This, after the platform’s third season of animated series The Legend of Hanuman released to great acclaim last month. 

UNION BUDGET

All In On A Win

Finance minister Nirmala Sitharaman delivered an ideal interim Budget (pdf) for a lame duck government getting ready for elections with the full belief that it is returning to power.  

Key numbers: Fiscal deficit for FY24 at 5.8%; FY25 target at 5.1%.

Capital outlay up 11.1% at ₹11.1 lakh crore (~$133 billion). The targeted spend for FY24 of ₹10 lakh crore will fall short by about ₹50,000 crore.

Tax: Barely any changes. Tax breaks, which were ending on March 31, 2024, for startups and sovereign wealth funds, will stay for another year.

The Signal

The Bharatiya Janata Party has been building up the “Modi’s guarantee” narrative to lend weight to its promises and plans. Sitharaman’s budget speech was in sync with that: social justice delivered through governance; focus on “four castes”—poor, youth, women, and farmers. The message is that irrespective of their social status at birth, these four categories’ “needs, aspirations, and welfare” will be the government’s top priority. There was no acknowledgement of rural distress in the speech but the hike in the allocation of the rural jobs guarantee scheme showed the minister was aware of it. The Ram Temple found a mention though.

The big positive is the government borrowing plan at ₹14.13 lakh crore (gross), less than FY24’s ₹15.4 lakh crore. That would ease pressure on the banking system without the Reserve Bank’s help. It also opens up room for foreign bond investors.

GEOPOLITICS

Will There Be Order In Chaos?

Saudi Arabia, the UAE, Iran, Egypt, and Ethiopia have joined BRICS, about a year after an invitation to do so was extended to them. A significant achievement, not least because foes Saudi Arabia and Iran—between whom an uneasy peace was brokered by China—will be part of the same bloc that sees itself as (a) a voice for the Global South, and (b) an alternative to the West/developed nation-centric G7.

Argentina, which had requested to be part of BRICS during the pre-Javier Milei administration, rescinded in December last year.

Too many cooks?: BRICS is devising a framework to allow members’ local currencies for trade in order to challenge the US dollar hegemony. But as Forbes argues, BRICS doesn’t have the geopolitical and economic homogeneity G7 does (read: the India-China rivalry), and it’s likely that China will inevitably dominate the grouping’s strategy because let’s face it, it’s BRICS’ beefiest member.

SUCCESSION

(Not) Mama’s Boy

Former IPL chief Lalit Modi is probably having the last laugh. Once the sole dissenter in a dispute with mother Bina Modi over a ₹11,000 crore ($1.32 billion) inheritance, he’s now got the backing of brother Samir Modi.

What’s happening?: The Modis are the promoters of Godfrey Phillips, maker of Marlboro and India’s oldest cigarette maker. Before he passed away in 2019, patriarch KK Modi had willed that the inheritance be split equally between wife Bina, Lalit, Samir, and their sister Charu. He’d also weaved in a caveat allowing the family trust to be dissolved if a family member wanted it. With others backing Bina’s decision to continue the trust, Lalit, who approached an arbitration tribunal in Singapore, became the only outlier.

The Economic Times now reports that Samir Modi has taken the legal route against their mother for not distributing funds equally.

Now, over to Charu.

FYI

Shot down: Less than a year after it launched, news website The Messenger has shut down. It had raised $50 million to build a news business hinging on social media and search traffic.

War chests: Private equity major KKR has raised $6.4 billion for an infrastructure-focused fund for the Asia Pacific region. Bain Capital will invest $7 billion in India over the next three to five years.

Street cred: The co-ownership of six Indian Street Premier League franchises fetched ₹1,165 crore ($140.4 million). Team Srinagar, co-owned by filmstar Akshay Kumar, received the highest bid of ₹251 crore ($30.2 million) from Sanjay and Rohan Gupta’s SG Sports Pvt Ltd.

Pack up?: Days after a Delaware judge voided his record pay package, Elon Musk is planning a shareholder vote to decide Tesla moving its state of incorporation from Delaware to Texas. Users on his platform X voted in favour of the shift.

More pink slips: Video conferencing company Zoom has trimmed 150 jobs (~2% of its workforce). Identity management company Okta will lay off 400 employees or 7% of its workforce. Crypto company Polygon Labs will cut 60 jobs (~19% of its workforce) globally. . 

Change in the air?: Several investors of Indian edtech BYJU’s have called for an extraordinary general meeting to vote on removing the founders and changing the leadership. 

Maybe, maybe: Struggling telco Vodafone-Idea plans to finally launch 5G services in the next 6-7 months as the company scouts for much-needed funding. 

THE DAILY DIGIT

418.77

The Reserve Bank of India’s Digital Payments Index in September 2023. The index, with a value of 100 in the base year 2018, captures the extent of digitisation of payments in India and is published with a four-month lag. (Reserve Bank of India) 

FWIW

Wanted: Russia going after its dissidents is a tale as old as time and its latest victims are an Olympian couple. Sergey and Violetta Bida are fencers by profession and represented their homeland, Russia, in the 2021 Tokyo Olympics. Sergey won a silver medal in that competition and was awarded the Order of Merit for the Fatherland by no less than Vladmir Putin. So when they decided to leave Russia for the USA in 2023, they knew things were about to get serious. And boy it did! The couple were publicly announced as fugitives in a wanted list by Russia’s state news agency TASS after they renounced the war against Ukraine. Russian officials have warned them of ‘consequences’ and one politician even hinted at possible assassination. Yikes!  

Costly job: Heavy is the head that wears the crown and there’s mounting evidence of that. Multiple surveys have come out indicating the ill-effects of taking on the crown. 19 CEOs died in office in 2023, the most since 2010, and close to 2,000 were fired, as per a survey by outplacement firm Challenger. A 2021 study by the US National Bureau of Economic Research, revealed that industry recessions can reduce CEOs’ life expectancies by 1.5 years. So, how are the bosses dealing? Most brush it under the rug; but then there’s former Best Buy CEO Hubert Joly, who prioritises his health and teaches new chief executives about personal well-being at Harvard Business School. Feels like a corporate-version of Sophie’s Choice. 

Infinity gauntlet: No, this isn’t a piece on MCU but it does involve a gauntlet that lasted for infinity… or rather, 600 years, so it kind of feels like infinity. Evacuators in Switzerland have stumbled upon an extremely well-preserved right-handed iron glove from the 14th century. This makes it the oldest and most complete iron glove found in Switzerland. Though its origins are still muddy, there are clues that it might’ve belonged to a knight. The craft and materials used are of the highest quality, indicating the high status of the owner. Looks like cheese isn’t the only thing the Swiss-land can preserve.