What Jamie Dimon Said That Did Not Make Headlines
Jamie Dimon, CEO of JP Morgan Chase is in India and has good things to say about investing here including the timing of his firm's announcement of including India in its bond index
Our Top Reports For Today
- [00:00] Stories Of The Day
- [00:50] What Jamie Dimon Said But Did Not Make Headlines
- [03:58] The dollar is at its strongest in 2023 and the Rupee is fighting back.
- [08:46] Massive GST notices are being thrown at gambling/gaming companies. Is the law on course?
- [19:32] New disclosure guidelines for unicorns are likely
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.
---
What Jamie Dimon Said That Did Not Make Headlines
Jamie Dimon, CEO of JP Morgan Chase is in India and has good things to say about investing here including the timing of his firm’s announcement of including India in its bond index which promises billions of dollars of investments in India’s Government bonds.
JP Morgan Chase by the way is the largest US bank by assets. Dimon, whose roots are Greek - his father worked in the Bank of Athens - started his career in 1982 and then joined CItigroup before moving to JP Morgan Chase in 2004 becoming CEO and Chairman soon after.
Forbes says his move to unload $12 billion of subprime mortgages in 2006 buffered his bank against the 2008 crash.
He is also known to have political ambitions and has been repeatedly asked if he wants to run for office this year.
Now, here is what he said but did not get much highlighted in the reporting so far.
To a question on if India felt like China 15-20 years ago from The Economic TImes, he said India is a little more complicated. Moreover, he pointed out that China was small when it started and had a long way to go just to start. They were able to bypass it and they don’t have the sloppinness of democracy.
His words again, not mine. And something that someone should have asked him to clarify a little more since he lives in one, democracy that is. He did add that China has serious issues too whereas India has a lot you can do here.
Picking up further from the same interview on clients moving supply chains from China to India he said, they have seen some but it is not that. When you go into nations, you need things that are conducive to people wanting to do business here.
Fair regulations, not regulations that are used to defend the incumbent. Transparency, consistency of taxes, rule of law. It's all of those things that will get more people to do things here.
It is not clear whether he is saying this as a general prerequisite or pointing out a problem in India but so be it.
On policy making steps going forward, Dimon very clearly refers to things people talk about, inconsistent taxes.
I remember companies debating huge tax bills from 10 years ago. Companies avoid putting direct investment on the ground because they are not sure they can get it done properly.
Companies now in the US are cancelling projects because it is taking so long to get the permits, you know, for solar and wind. That's true for all nations. If you really want solar and wind, if you really want people to build plants, you have to have consistent rule of law. Once again, he is referring mostly to the US but could well be referring to India too.
And on the inclusion of India in JP Morgan’s bond index, he points out quite squarely that while it is great for India, he does not, i repeat, do not think its a huge material effect.
It's a sign of maturity. It's the country, it's the ratings, it's the transparency, it's the government finances, all those various things. But in general, it is a very good thing.
He also touched on the global economy, saying America was doing fine and India is obviously the fastest growing nation. But when you look at the future, it is very different because of huge fiscal deficits, quantitative tightening.
MARKETS
On the topic of financial markets, the markets were well listless on Tuesday with the BSE Sensex and Nifty50 ending on a flat note. The 30-stock BSE Sensex closed at 65,945 levels, down 78 points, while the NSE Nifty 50 closed at 19,665, down 10 points.
The action seems to be more in the forex and commodities markets right now particularly with the dollar behaving like a bull that cannot be restrained, putting pressure on currencies across the world.
It is at its strongest in 2023 driving down stocks across emerging markets, thanks to lower investor appetite for riskier assets.
Overnight on Tuesday, the yen fell to its lowest against the US currency since October, the euro slid to its lowest level since March, and the Swiss franc hit its weakest level since May.
The greenback’s rise, the fourth straight daily gain, was fueled by indications from the Fed last week that it plans to keep rates high as the surprising strength of the economy leaves inflation the central bank’s predominant concern.
Federal Reserve Bank of Minneapolis President Neel Kashkari said he expects the US central bank will need to raise interest rates one more time this year if the economy is stronger than expected.
“The appreciation of the dollar across the board is continuing on the back of hawkish remarks by Fed members, who stressed again that US rates are likely to remain on hold for a long period of time,” Bloomberg reported analysts saying.
Back home, the rupee fell again on Tuesday on the same bets that interest rates in the US will be kept higher for longer which will keep capital in the US. The rupee ended at 83.23 against the US dollar compared with 83.14 in the previous session.
To get a sense on where we are and how far the rupee could go or if it could buck the trend, I reached out to Anindya Banerjee, Head of Research for Forex and Interest Rates for Kotak Securities and began by asking him how the rupee was faring ?
---
GST Notices On Gamers Run Into Tens of Thousands Of Crores
Goods & services tax notices running into tens of thousands of crores are being served on gaming and gambling companies, or known as games of skill or chance.
In the case of one company, Delta Corp, a listed company that runs casinos that sit on ships mostly floating on a river in the state of Goa , the GST tax demand is over Rs 16,000 crore.
Either these numbers are in the realm of fantasy or they are so real that the bottom could fall away for most of these companies.
It is of course possible that the answer will be somewhere in between.
In July 2023, the Goods and Service Tax Council said it would impose the top GST slab of 28 percent on the full face value, irrespective of whether it is a game of skill or chance.
Skill gaming platforms currently pay 18 percent GST on the platform fees, also known as Gross Gaming revenue (GGR)
The Government’s Revenue Secretary, Sanjay Malhotra, according to reports however, had mentioned that GST rates on real-money gaming were always 28 percent on full face value and this amendment was only clarificatory in nature.
To understand the nature of these demands, given the massive GST notices being slapped around, I reached out to Girish Vanvari of Transaction Square, a tax regulatory and business advisory firm and began by asking him to help define the kinds of notices that were going around and for what, to understand the nature of taxation and policy approach at play as much as the specific context.
---
LEGAL BILLS ARE RISING
If I were to go by the number of startups in the legal space including those founded by those who have spun off from older companies, I would know conclusively that more money is being spent on legal costs than ever before.
Exhibit No 2 or B is clearly the number of fresh notices flying around arising from new laws and regulations, mostly in the realm of tax, both indirect and direct. If I were to project, I would say this is the hottest growth sector to be in, if you are qualified to be so.
Some of the largest tax notices running into tens of thousands of crores have been served this week, all to casinos and gaming companies. Casino company Delta Corp alone has got Rs 16,000 crore or so worth of notices. Others, even more.
Be that as it may, the companies in question are obviously going to fight back and as they say in America, lawyer up.
So it is not surprising then to learn that legal bills of India Inc are rising quite steadily.
An interesting study by Economic Times says legal expenses of some 3,972 listed companies rose around 21% to Rs 63,807 crore in the last year thanks to heavy spending on disputes and increased compliance costs.
If you obviously include companies large and small who are unlisted obviously the figure would be much higher.
Legal expenses are somewhat broadly defined on the balance sheet and could include spending on litigation and arbitration, professional fees, regulatory filings, penalties, fines and general stamp duty among others.
The fines and penalties could be a much larger component than say legal fees paid to law firms but suffice to say all of this is growing which means the cost of doing business and the complexity of it is increasing.
And here are the 5 biggest spenders on legal costs.
The top five FY23 were Reliance Industries at (₹2,916 crore), Sun Pharmaceutical Industries (₹2,312 crore), Infosys (₹1,684 crore), Larsen & Toubro (₹1,512 crore) and Fortis Healthcare (₹1,399 crore).
Two of the five are in healthcare and pharmaceuticals as is evident though Fortis’ problems might be more historical and to do with a change in management.
By the looks of it of course, this financial year might see some of the gambling, gaming or casino companies tip the sweepstakes.
GUIDELINES FOR UNICORNS
Speaking of sweepstakes, India’s Ministry of Corporate Affairs (MCA) is looking to frame new guidelines for large unlisted companies, including unicorns -- privately held startups with a value of over $1 billion, another ET report has said.
The objective of this is to ensure that the companies adhere to corporate governance standards and are under supervision, several news organisations have reported.
Under the proposed framework, the companies could be mandated to submit their quarterly filing of financial reports with the MCA.
This is interesting because the capital involved is private and the damage caused to the country is largely reputational.
Of course this is bad enough if we are touting the growing number of unicorns and some turn out to have fudged accounts or involved in some other accounting skulduggery that makes everyone look at the very least foolish.
And then, there is the issue of bolting the stable door after the horses have bolted. Either way, this is tricky territory because for example why is a company with a value of $500 million any less worthy of careful supervision.
So, wading into territory that is best managed by the owners of private capital who are paying for their excesses already may not be the best use of Government time.
Meanwhile, we have a final set of guidelines just issued for angel tax with clauses and schedules which have made the whole process unbelievably complex and pretty much against the original grain of the objective of taking a bet on a young or upcoming venture.
The Centre on Tuesday notified the final rules outlining valuation methods for non-resident and resident investors under the new angel tax mechanism based on changes made in the Finance Act 2023.
To sign off on this, angel tax (income tax at the rate of 30.6 per cent) will be levied when an unlisted company issues shares to an investor at a price higher than its fair market value, which will in effect be decided by the tax authorities. There are five valuation methods and the new rules will be effective from September 25.
And hmm…the unpaid Ambani children
Billionaire Mukesh Ambani's three children as directors of Reliance Industries Ltd will be paid only a fee for attending board and committee meetings, the company said in a resolution seeking shareholder nod for their appointment on its board, according to agencies.
The 66-year-old Ambani also drew nil salary from the company since the 2020-21 fiscal year though other executive directors including his cousins Nikhil and Hital are paid a salary, perquisites, allowances and commission.
The three children - twins Akash and Isha (both 31) and Anant (28 years) - will get only a sitting fee and a commission on the profit earned by the firm.
The terms of the appointment of the three are the same as the ones on which Ambani's wife Nita was appointed to the company board in 2014. She earned a sitting fee of Rs 6 lakh and a commission of Rs 2 crore in the 2022-23 fiscal year (April 2022 to March 2023), according to the company's latest annual report.
