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India’s manufacturing sector is revving up to meet festival demand, pushing the IHS Markit purchasing managers index (PMI) up to among the strongest in Asia. The PMI came in at 53.7, higher than August’s 52.3 figure. That’s a far better showing than China’s performance with its PMI declining to 49.6 in September, signalling a contraction. This is the latest confirmation that China’s economy is slowing down. That may continue as the Evergrande crisis has cast a shadow over its property sector.
India’s GST collection numbers for September support the PMI report, with gross collections at Rs 1.17 lakh crore, up by 23 percent over a year ago and up 4.5 percent sequentially. One worry for investors could be the surge in oil and gas prices. In today’s FT selection, the Lex column argues that Opec+ may open the oil taps to cool down prices (free to read for Moneycontrol Pro subscribers).
News reports say that the Tata group has emerged as the winning bidder for Air India. There will be much to say about what lies ahead for the group. Once the joy of fulfilling Ratan Tata’s dream of owning Air India settles, the hard work of turning around the airline will begin. There is one clear beneficiary of this acquisition and that’s the government.
For decades now, it has struggled to turn around Air India, a company weighed down by problems on several fronts. It no longer needs to worry about funding the airline or its losses. Once the deal’s details are known, the final one-time hit the government may have to take will become known. Then, it’s over to the Tata group. Thankfully, for investors in the Tata group’s listed companies, since the acquisition is being done by Tata Sons they are not at risk from a direct exposure to Air India.
India’s IPO machine continues to run on high speed, with Oyo’s owner, Oravel Stays, filing a draft red herring prospectus with Sebi for an Rs8430 crore offer, of which Rs 7000 crore is fresh money being raised and the rest by way of an offer for sale by existing investors. True to the growth-chasing ambitions of unicorns, the company incurred a loss from continuing operations of Rs 4102 crore in FY21, down from a loss of Rs 11080 crore in FY20.
But the pandemic has dealt a blow to its growth ambitions, with revenue dipping to Rs 3962 crore in FY21 from Rs 13168 crore a year ago. But as you can see, losses have not widened as much due to cost cutting. If Oyo is still coming out with an IPO with these weak numbers, it’s perhaps because market conditions are right for fund-raising, with public investor risk appetite for start-ups at a high level. The progressive opening up of the service economy, including tourism, also provides visibility on revenue growth scaling back to FY20 levels.
Before we go: Here’s an interesting snippet from a book, The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion, a book written by Eliot Brown and Maureen Farrell.
“Not long into the dinner, [SoftBank chief Masayoshi] Son clicked on a video. The WeWork crew watched as a flat-screen monitor flashed a promotional presentation from SoftBank-backed OYO Hotels, run by the wiry twenty-four-year-old CEO Ritesh Agarwal. OYO had been expanding rapidly all over the world, and its revenue growth rate—the key indicator for Son—was even faster than [WeWork chief Adam] Neumann’s.
“Your little brother is going to beat you,” Son told Neumann. “He is being bolder than you.”
Neumann’s reaction was muted, but to the others sitting there on the WeWork team, it was clear what Son was doing. Neumann was not only highly competitive but deeply insecure. Now a father-figure type was goading him—telling him he wasn’t good enough and his “little brother” was doing even better. It was almost like bullying, they thought.” (The brackets with names mentioned is our addition).
Investing insights from our research team:
What else are we reading today?
Will the next web be built on ethereum? (republished from the FT)
Ravi AnanthanarayananMoneycontrol Pro