House Rentals Soar Across India with No End In Sight

On today's episode, financial journalist Govindraj Ethiraj will be taking you through Vedanta raising debts from stressed asset funds, the continuing Rs 2000 note deposit saga, house rents skyrocketing across the country and Netflix banning password sharing in 100 countries (except India)

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TRANSCRIPT

NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.

Good morning, it's Thursday the 25th of May and I'm Govindraj Ethiraj with The Core Report, coming to you from Mumbai, India's financial capital and most rocking city in the world.

Here are our two quick reports, ‘Theme of the Day' and our ‘Hmm' section lined up for you today.

1. Metals giant Vedanta joins list of Indian companies raising debt from stressed asset funds.
2. The Rs 2,000 note spend and deposit saga continues and a fundamental question, did we really have to do it?
3. House rents are skyrocketing all over the country, reasons vary but the bad news they might stay high for the next year or two.
4. Hmm..Netflix is banning password sharing in 100 countries. But India seems to have escaped again.

Vedanta Joins List Of Indian Companies Landing At Doorsteps Of Stressed Asset Lenders

Anil Aggarwal-led Vedanta group has raised an $850 million fund with JP Morgan and Oaktree, Bloomberg News has reported. The conglomerate has raised this fund after signing a five-year loan for about $850 million.

The structure of this deal is not clear but Oaktree which manages assets of $172 billion and calls itself an alternative investment manager is also believed to have bought into debt from the Adani Group in February, according to a report in Bloomberg in the first week of February this year.

Davidson Kempner Capital Management is also believed to have picked up Adani Group debt at the same time in February. Davidson Kempner, in turn did a $250 million debt deal with Byjus just two weeks ago.

So Adani, Vedanta and Byjus have something in common here. All have knocked at the doors of and managed to raise debt from a stressed asset fund or opportunistic debt fund, namely Oaktree and Davidson Kempner. The first two companies have obviously something in common here, being asset-heavy, listed companies. And Byjus is an ed-tech company.

To return to Vedanta and some numbers, the company reported an 8% fall in profits for the April quarter, because of falling metal prices. Which brings us to the interesting part.

In the past year, zinc and aluminium prices have fallen by more than 40% from record highs hit in March 2022. The falling prices have led to expenses rising and finance costs going up sharply.
Vedanta claims to be the largest integrated zinc-lead producer in the world and India's largest producer of aluminium.

The company's total expenses soared by 10.5% to 330.4 billion rupees from a year earlier. With this, its finance costs jumped by 35%, and depreciation and amortization costs surged by 16%.
The Rs 2,000 Note Saga

Yesterday we spoke briefly about how people are putting their mostly hard-earned and definitely well stored Rs 2,000 note by buying all kinds of things, from mangoes to expensive watches as opposed to what was largely expected of them, to line up at bank tellers and deposit the currency.

For those who are going to banks, confusion reigns supreme, not surprisingly of course.

Public sector banks like State Bank are evidently exchanging notes without any ask for identity or forms. Private sector banks like HDFC and ICICI are saying we won't ask for proof only if you are an account holder with us.

As logical as it sounds, this is not what people obviously heard or interpreted when they were told that their Rs 2,000 notes could be simply exchanged or deposited.

Another banker told The Indian Express, "There is no clarity from the Reserve Bank of India on the guidelines. We are collecting details as a prudent measure because we don't know when the policy will change and we will required to submit the data."

Which actually makes perfect season for anyone with even a fleeting understanding of how things work in India and the bang on point. "We don't know when the policy will change.."

Speaking on uncertainty of policy, perhaps one may pause a little bit to ask, was there really the need to pull back the Rs 2,000 note or impose a 20% presumptive tax on international credit card spends given the uncertainty in mind and paperwork in hand it is creating.

Actually, I didn't frame this question. Forbes Marshall co-chairman Dr Naushad Forbes and author of The Struggle and The Promise: Restoring India's Potential did so quite sharply and directly to Reserve Bank governor Shaktikanta Das at industry body CII's meet in New Delhi yesterday.

Governor Das responded by saying this was Dr Forbes view but RBI had taken a view that the time had come to bring down the curtains on the Rs 2,000 note for various reasons he had already stated in public domain.

Actually Dr Forbes poser which you heard, resonates quite well with the title of his book i would think, given that he is an eternal optimist about India's economic opportunity and yet is pained by the struggle in getting there.

House Rents Are Shooting Up

Last month, a techie from Bangalore made national news by holding up a placard - yes that's all it usually takes - that said "looking for a 2BHK in Indiranagar." The placard made news for the right reasons though. Rents in the once garden city have doubled in the last two years or so.

Mostly, because landlords like everywhere else in the country, are trying to recoup the losses they sustained during Covid when more than a million youngsters fled the city and rents crashed. To make matters worse, despite all the construction you see around, supply is not enough. Bangalore now has the highest rent yield in the country at 3.9%

In cities like Mumbai, there is an additional set of people house hunting. A massive spate of redevelopment projects have put owners temporarily out of their apartments and buildings in turn putting pressure on rentals across the island city.

How bad can it get and will things improve? I spoke to Vivek Rathi, Director of Research at real estate consulting firm Knight Frank and began by asking him why this was happening.

Hmm

Netflix has said it began alerting customers in some 100 countries that their password-sharing days were over. In an email to members, it said: "Your Netflix account is for you and the people you live with - your household."

Talk about straight talking.

Members can transfer a profile of someone outside of their household so that the person can begin a membership they pay for on their own. Or they can pay an extra fee - $7.99 a month - per person.

Netflix has said more than 100 million households share accounts, which is about 43% of its global user base which in turn affects, quite understandably, its ability to invest in new content.

India however does not seem to figure in this list. Either, the market has such high levels of sharing that a crackdown may see massive subscriber exits. Alternatively, there is very little of it, so Netflix could wait.

The answer is more likely somewhere in between, am sure we will find out soon.