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Commentary

#Linkfest: PFC Buying REC, Hospitals With The Reddy Sisters, The Insolvent Fed

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At Capitalmind Premium, we have a very active Slack channel where we discuss a lot of interesting topics. In there,  a number of interesting links come our way. Here’s a list:

  1. Power Finance Corp (PFC) is buying the 53.6% government stake in REC Ltd. This way the government gets cash from PFC for the stake it has in REC and meets disinvestment targets. Both the companies are in the business of financing power utility companies. Now that government will not have any stake in REC Ltd, any credit downgrade of PFC will likely put pressures in the credit rating of REC Ltd. All these factors have spooked investors and mutual fund houses as they have been selling these bonds at a discount, thereby pushing up their yield.
    http://www.cogencis.com/newssection/india-corporate-bondspfc-rec-ylds-up-on-fears-of-rating-downgrade/
  2. India will end up in a severe crisis if macro-economic stability is sacrificed for growth, according to many economists. In fact, ex RBI governor Raghuram Rajan and IMF’s Chief Economist Gita Gopinath suggest that that’s exactly what’s happening in the country at the moment.
    https://www.bloombergquint.com/global-economics/rajan-gopinath-see-crisis-risk-if-india-focuses-only-on-growth
  3. What happens if the RBI can’t meet its financial obligations? Can that happen? How would the central bank handle that situation? How would any central bank deal with such a situation? This is a brilliant article that discusses all the possible scenarios that can occur and their risks and solutions.
    https://www.epw.in/journal/2018/48/special-articles/paranoia-or-prudence.html
  4. Speaking of RBI, here’s a brief summary about Urjit Patel’s career as the Governor of RBI.
    https://www.livemint.com/Opinion/MD7u31gNaEOOz38as20NFL/Opinion–What-the-Urjit-Patel-resignation-episode-tells-us.html?facet=amp&utm_source=googleamp&utm_medium=referral&utm_campaign=googleamp&__twitter_impression=true
  5. You may soon see Patanjali go public. Baba Ramdev hinted that this may happen soon. But they’ve clarified later that they might not actually do an IPO, but buy a listed company instead, and perhaps reverse merge into a listing.
    https://economictimes.indiatimes.com/markets/ipos/fpos/patanjali-all-set-to-announce-ipo-hints-baba-ramdev/articleshow/67072314.cms
  6. While many housing finance companies are in a chaotic mess, Asirvad Microfinance has achieved Rs. 3,000 crore micro-finance AUM. https://www.equitybulls.com/admin/news2006/news_det.asp?id=240873
  7. Sterlite Copper plant, which accounts for 40% share in India’s annual copper production of 10 lakh tonnes, was directed by the government of Tamil Nadu to shut its operations in May. However, National Green Tribunal court has dismissed the order to close this plant owned by Vedanta. But that’s not without few orders and directions to Vedanta.
    https://indianexpress.com/article/india/setting-aside-tamil-nadu-govt-decision-ngt-orders-reopening-of-sterlite-copper-plant-in-thoothukudi-5495037/
  8.  What do you do when people start getting richer and can afford better health care? You build top notch hospitals where they live. That’s what the four Reddy sisters planned on doing around a decade ago. They decided to start building hospitals on Tier II cities where people’s wealth was steadily rising. Now, all the hospitals are built and are set to cater to people’s health needs. This has made the stock bullish, due to anticipation of greater revenues and growth.
    https://www.bloombergquint.com/business/a-2-billion-health-empire-run-by-four-sisters-makes-a-comeback
  9. Remember point no. 3 above? Here’s a live case for you. The U.S. Federal Reserve is insolvent, apparently. And it’s not any insolvency. When a central bank’s net worth becomes negative it hurts the economy as well as the central bank itself. They can lower the interest only so much before it hits zero. But that would hurt the central bank itself. What about the quantitative easing program? But it’s still in debt from the last quantitative easing program. This is one hell of a jam, isn’t it?
    https://www.livemint.com/Opinion/2S2axnhQIJzbdtg7U0OT2L/Opinion–The-Feds-job-just-got-more-complicated.html
  10. Back in 2016, an antitrust lawsuit was filed by American states over two drugs. Two years later it has expanded to 16 companies and 300 drugs. The allegations were in respect of price fixation. Dr. Reddy’s is one of the companies accused in this matter.
    https://www.washingtonpost.com/business/economy/investigation-of-generic-cartel-expands-to-300-drugs/2018/12/09/fb900e80-f708-11e8-863c-9e2f864d47e7_story.html?utm_term=.15e4757ab397