Indian Inc Is Holding Strong In Revenues And Profits, Latest Results Show

On today's episode, financial journalist Govindraj Ethiraj talks to Bank of Baroda Chief Economist Madan Sabnavis, as well as Deepak Shenoy, founder and CEO of portfolio management company CapitalMind.

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• <00:41> Indian Inc is holding strong in revenues and profits, latest results show
• <09:30> Byju's takes another knock as it refuses to repay a loan.
• <19:06> Hmm..Bajaj Finance says it will cut back on telemarketing calls

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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 Wednesday morning, the 7th of June and I'm Govindraj Ethiraj with The Core Report, coming to you from Mumbai, India's financial capital and of course the most rocking city in the world.

Indian Inc is holding strong in revenues and profits, the latest results show.
Byju's takes another knock as it refuses to repay a loan.
Hmm... Bajaj Finance says it will cut back on telemarketing calls.
And the link between a $1 trillion market cap company and a long-ago visit to Lamington Road, Mumbai.

India's Companies Are On Strong Footing

India's macro GDP numbers may have grown slowly over the last three years but India's companies have done well, particularly in the last quarter of the last financial year 2022-23.

A study of 2,096 companies by Bank of Baroda research shows that growth in sales slowed down from 21% in Q4Fy22 to 12% in Q4FY23.

Net profits moved from 26.1% to 17.3% in the same period.

Within this, however, banks and financial companies or BFSI as they are called have done much better.

Banks, insurance and finance did well. As did services thanks to pend up demand in hospitality, diamonds, jewellery and logistics.

Speaking of diamonds and jewellery for a moment, the Aditya Birla Group is the latest big entrant in the large format retail store and in-house branded jewellery business with a Rs 5,000 crore investment and a company called Novel Jewels.

Returning to what did well in the last quarter, within manufacturing it was auto and construction material, power and industrial gases.

What did not see good growth were textiles, plastic products, mining, gas transmission, iron and steel and alcohol, yes alcohol.

Across the board though, premium products did well, a recurrent theme we are now hearing across product segments where companies are lining up new premium brands or focussing on them.

Bajaj Electricals CEO Anuj Poddar, for instance, told me in an earlier episode of The Core Report that their strategy was to launch a new brand Nex last month targeting upscale urban consumers. Most Bajaj brands in kitchen and home appliances are in the mid-market category.

The one thing to worry about looking ahead is that cost of borrowing is now rising for companies as interest rates have. BOB says the weighted average lending rate on fresh loans increased from 7.63% in March 2022 to 9.32% in March 2023. And yet or perhaps not, growth in credit was higher at 15% compared to 9.6% in the previous year.

I spoke to Bank of Baroda chief Economist Madan Sabnavis on this report, the trends he is seeing and asked him why the banks and finance sector were doing so well in contrast to the rest.

BYJU TAKES ANOTHER KNOCK

In what must be one of the firsts for an Indian company, ed-tech company Byju says it is challenging the acceleration of a $1.2 billion term loan repayment and seeking the disqualification of the lender, Redwood, who it says purchased a significant portion of the loan while primarily trading in distressed debt.

Byju which has raised some $6 billion in all in equity and debt says it had to take these measures following a series of predatory tactics by its lenders, led by Redwood.

The lenders also apparently seized control of Byju's Alpha and appointed its own management, said the company. "Not resting content with this, the TLB lenders (acting through their agent, GLAS Trust Company) commenced litigation in Delaware in an attempt to lend credence to these actions."

Byju's has said it will not be making any further payments in the term loan as legal proceedings are now ongoing in both Delaware and New York. "Byju's cannot be expected to and has elected not to make any further payment to the lenders, including any interest, until the dispute is decided by the court."

It added that it is willing to continue making payments under the term loan if the lenders withdraw their ill-conceived actions and honour the terms of the agreement.

At the crux of the current flareup is a $40 million payment that was due on Monday.

The $1.2 billion debt is believed to be the largest unrated loan by a startup ever and even as Byju has been trying to restructure the loan, creditors are trying to accelerate the repayment.

To understand what is going on here and more importantly, what this means for the funding ecosystem, I am joined by Deepak Shenoy, founder and CEO of portfolio management company CapitalMind.

Meanwhile, venture capital giant Sequoia said it is separating China and India and Southeast Asia businesses into independent firms. Sequoia said the China and India and Southeast Asia businesses will become completely independent partnerships and become distinct firms with separate brands no later than March 31, 2024.

Sequoia China will retain its current Chinese name and adopt the name HongShan in English, while Sequoia India and Southeast Asia will become Peak XV Partners, the firm said.

This does come at a time when funding is slowing down and capital flows into high-risk venture capital, and by extension wild all-or-none technology bets, have reduced.

Hmm...

Almost everyone I know has complained about telemarketing calls and have threatened to do various things to Bajaj Finance over time. My sense is the best they have done is come up with really funny memes.

Be that as it may, the company seems to have heard the complains and says it will respond. Sanjiv Bajaj, chairman of Bajaj Finserv, said at a conference that it aims to bring down the value of loans pushed through phone calls to less than 10% of its business, according to the website Moneycontrol referring to a press conference he addressed yesterday.

Apparently, Bajaj wishes to reach a point where they will no longer call people and ask them if they wish to take a loan.

"Our aim would ideally be to bring this business down to 10%, and then to 0%… so that our calls will only be service calls," said Bajaj.

"All promotional activity will happen through our digital channels; that is where we want to go."

More importantly, he said in three months' time, Bajaj Finserv's website and its mobile application will have an option where borrowers and investors and clients can choose to never be "bothered again".

"We want to give people the right to be forgotten by us," said Bajaj. Bajaj also said fake call centres are also responsible for pushing such calls. We recently busted 400-member organized fraud call centre, just outside of Mumbai," he said at the conference.