📶 GDP contracts, Vodafone Idea spectrum & Legal Heir vs Nominee.
Orowealth Weekend Reads: September 6, 2020
LAST WEEK MARKET MOVES
|Sensex||Nifty||Nifty Midcap 100||Nifty Smallcap 100|
|38,357.18 (-2.81%)||11,333.85 (-2.69%)||16,926.20 (-2.55%)||5,678.90 (-3.21%)|
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NEWS WE HAVE BEEN FOLLOWING
#India’s GDP contracts
Strict lockdown measures put in place to check the spread of the novel coronavirus pummelled the Indian economy with the output declining by 23.9% in the April-June quarter. Data from the Ministry of Statistics and Programme Implementation showed that while real Gross Domestic Product (GDP) fell to Rs 26.9 lakh crore in constant terms, the nominal GDP declined to Rs 38.08 lakh crore, down 22.6% from a year ago. Meanwhile, in gross value added terms, the economy contracted 22.8%. This decline in economic output marks the fourth time India has entered recession since independence and the first time since liberalization. While manufacturing contracted by 39.3%, construction dropped by 50.3%; trade, hotel, transport, communication also declined by nearly half at 47%. Agriculture was the only major sector that reported a gain; activity there rose by 3.4%. Consumption, which forms the backbone of economic output, dived and so did investments. Private consumption, as measured by private final consumption expenditure, fell 26.7% while investments, as measured by gross fixed capital formation, plummeted by 47.1%.
Even though this decline in GDP seems bad, it may be revised down even further as more official and complete data come in.
Former chief statistician of India Pronab Sen views the sharp decline in output in the first quarter as indicative of a much sharper contraction in the full-year output compared to the 5% estimated by many experts.
The Supreme Court, in a vital decision, has directed the National Company Law Tribunal (NCLT) to take a call within two months on whether the telecom spectrum can be sold by companies who have not paid government dues and have filed for bankruptcy. This ruling by the apex court has come as a relief for both the Insolvency and Bankruptcy Code (IBC) and banks. The verdict comes on the matter of payment of adjusted gross revenue (AGR) of telecom companies. Insolvency proceedings have already been initiated against Aircel and Reliance Communications by banks. But the department of telecommunications (DoT) has the final authority to approve the transfer of licenses and spectrum and it is opposed to monetizing spectrum. This ruling gives NCLT to take a decision on the same.
The Supreme Court has allowed telecom companies to pay their dues over 10 years starting with 10% to be paid by March 31, 2021. Companies will need to report the compliance of paying their annual installments on April 7 every year. The 10-year payment period may be a problem for Vodafone Idea as it would need to raise funds to pay the Rs 50,400 crore it owes.
If it can’t raise funds, Vodafone Idea would need to triple its EBITDA and increase its ARPU apart from cutting Capex.
FROM OUR BLOG SECTION
Is Legal heir and Nominee the same? Will your Nominee get the money on your death? Did you think that your nominee is the person, who will get all the money legally from your Life Insurance Policy and Mutual funds’ investments?
QUOTE OF THE WEEK
“Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case.” – Jeff Bezos
Chosen by Krishma – Orowealth.