I. Economy
1. How 100 unicorns are propelling India forward
Many believe constant claims by opposition parties and leftist journals that our economy is dominated by two Modi-friendly conglomerates. Rubbish. A research paper by Neelkanth Mishra of Credit Suisse reveals that India has spawned 100 ‘unicorns’ – unlisted new companies worth over a billion dollars each.
Never before has India witnessed such a broad-based upsurge of massive new businesses unconnected with old wealth, political contacts or dirty deals with public sector banks. The unicorns have raised billions of dollars from global investors keen to invest not in venerable names but newcomers with ideas capable of dominating the 21st century. The investors know that many unicorns will fail, but enough will succeed to make their investment profitable.
There is a veritable explosion of new entrepreneurs backed by global billions.
In the bargain, they are giving opportunities unknown in history to entrepreneurs earlier shut out of big business for want of capital, contacts and bribing capacity. This does not mean the newcomers are Yudhisthirs who have never sinned. But it does mean old businesses are being challenged by a veritable explosion of new entrepreneurs backed by global billions. Earlier, challengers started small and grew slowly. Today, they can explode from nothing to a billion dollars in a few years, threatening all existing giants.
Earlier, financial experts estimated that India had 30 to 50 unicorns. Credit Suisse used a slightly different definition, including firms valued at at least $1 billion in a recent round of funding; companies where, at the average multiple of similar firms, operating profits of newcomers would justify a billion-dollar valuation; and companies where business momentum had risen so strongly since the last round of funding that a fresh round would have a valuation of one billion-plus. Credit Suisse excluded subsidiaries of existing companies and firms that once rode high but had subsequently slipped in momentum. This gives it credibility.
Some unicorns are famous. The Serum Institute of India is the world’s biggest producer of vaccines. Flipkart sold its e-commerce business for $16 billion to Walmart. But few readers know other names like Wonder Cement, GRT Jewellers, Greenko, Digit or Chargebee. Ask Credit Suisse for the full list.
Two-thirds of these unlisted unicorns started after 2005. They are very diverse, covering not just IT and e-commerce but more humdrum areas. The fastest growth is of software-as-a-service, including gaming, new-age distribution and logistics, modern trade, bio-tech, pharmaceuticals and consumer goods. Unicorns are just the tip of a fast-growing pyramid of 80,000 startups, one-tenth of the new companies formed every year.
Their ambitions are stunning. Ola Cabs, famous for transport, also plans the world’s biggest electric two-wheeler factory of ten million vehicles. The dream may fail – but what a dream!
SEBI, India’s stock market regulator, is pathetically obsolete in rules and outlook. An Initial Public Offering enables companies to list shares on stock exchanges. For this, SEBI has dozens of onerous conditions including profits in three of five preceding years. But giants like Amazon and Facebook made no profits for years even as their value soared because of their potential. Many Indian unicorns too have never made a profit and would not qualify for a stock market listing under SEBI rules.
SEBI focuses on saving Indian household investors from crooks, not on nurturing unicorns. Had India been dependent only on local money and SEBI, it would not have 100 unicorns with hundreds more raring to go. Luckily, globalisation has enabled unicorns to sidestep local rules and red tape. Brand new companies with great ideas but no profit record are viewed by global investors as potential giants rather than potential crooks (as SEBI does).
This is not a bubble about to burst. The world has created massive new pools of private capital in recent decades from venture capitalists and private equity funds. It is now witnessing the explosion of a new species – SPACs, or Special Purpose Acquisition Companies. These raise billions from private investors (including the most illustrious financial names) with no specified investment targets or strategies, which is why some call them ‘blank-cheque’ companies. They are free to search the world for good investment opportunities. In 2020, 248 SPACs in the US raised $83 billion and in January, 2021 alone they raised $26 billion. SPACs can finance promising newcomers without the onerous, expensive route of an IPO to get listed on stock exchanges. Once, a stock market listing was essential for reputation and large-scale financing. Not anymore.
Most unicorns are owned overwhelmingly by foreigners. Indian promoters typically have only a small shareholding. In the US, Facebook CEO Mark Zuckerberg issued shares to others with reduced or zero voting rights, enabling him to raise billions without losing control over his company. India needs to go the same way. Nirmala Sitharaman, please pay attention.
Source: The Times of India – S.A. Aiyar in Swaminomics – 14th March, 2021
II. Science
2. Indian researchers discover unknown strains of bacteria in International Space Station
Researchers from the United States and India have discovered four strains of bacteria in the International Space Station (ISS) and three of these strains were until now completely unknown to science. The new finding suggests that bacteria living on earth are also capable to live in low gravity environments such as the International Space Stations.
In the study report published in the journal Frontiers in Microbiology, researchers noted that the bacteria were formed on plants that astronauts were growing in space. Three of these strains were found on the surface of the ISS in 2015, while one strain was discovered long back in 2011.
Researchers revealed that one of the bacterial strains was Methylorubrum rhodesianum, a known strain. However, after sequencing, researchers noted that the remaining three strains were unknown to humans until now. Researchers have now named these three strains IF7SW-B2T, IIF1SW-B5 and IIF4SW-B5.
‘To grow plants in extreme places where resources are minimal, isolation of novel microbes that help to promote plant growth under stressful conditions is essential,’ said Kasthuri Venkateswaran and Nitin Kumar Singh, researchers at NASA’s Jet Propulsion Laboratory in a recent press release.
Researchers also noted that the International Space Station is maintaining a clean environment, but beneficial microbes should also be there in these low-gravity conditions.
Breakthrough in space farming
As humans are eyeing space tourism and space colonization, the new discovery could create revolutionary changes in plant growth and space farming. The discovery could also help humans during long space missions which include a manned Mars exploration programme that could be initiated soon by NASA.
‘This will further aid in the identification of genetic determinants that might potentially be responsible for promoting plant growth under microgravity conditions and contribute to the development of self-sustainable plant crops for long-term space missions in the future,’ researchers wrote in the study report.
Source: International Business Times – By Nirmal Narayanan – 17th March, 2021
III. News
3. RBI may have to delay liquidity normalisation amid rising Covid cases
The central bank may have to delay the start of monetary policy normalisation by three months amid rising Covid-19 cases, but barring the return of stringent lockdowns there is no significant threat to the economy’s recovery, analysts say.
Having seen a peak of daily cases of nearly 100,000 in late September, infections had been on a steady decline but have now started rising again over the last month. ‘Even as the increase in the current caseload points to the risk of a second wave, more localised and less stringent restrictions (on activity) will help contain the economic impact versus the initial wave,’ said Radhika Rao, an economist with DBS Bank.
DBS has retained its assumptions for a stronger pick-up in March quarter growth versus the December, 2020 quarter and expects a double-digit rebound in the fiscal year 2021-22. India reported 35,871 new corona virus cases on 18th March, the highest in more than three months, with the worst-affected state of Maharashtra, which houses the country’s financial capital Mumbai, alone accounting for 65% of that.
India needs to take quick and decisive steps soon to stop an emerging second ‘peak’ of Covid-19 infections, Prime Minister Narendra Modi has said. Though analysts are unlikely to rush to review their long-term growth forecasts, several believe policy normalisation on interest rates and liquidity may now take a backseat.
‘Monetary policy normalisation might be pushed back by a quarter as authorities monitor developments closely, with status quo on the cards on the repo as well as liquidity management plans for H121,’ Rao said.
The Reserve Bank of India has repeatedly assured bond markets of ample liquidity being maintained to support the recovery, but in early January said it wanted to start restoring normal liquidity operations in a phased manner.
‘Growth concerns due to rising pandemic cases amid a negative output gap could push back market expectations on the timing of policy normalisation in the near term,’ Nomura economists Sonal Varma and Aurodeep Nandi wrote in a note. Though surplus liquidity is a positive from the perspective of ensuring credit flows to productive sectors, economists fear it may add to inflationary pressures if it remains in the system for too long.
‘Although inflation has moderated from the high level, the surge in global crude oil price has added to the upside risk,’ said Arun Singh, global chief economist at Dun and Bradstreet. ‘The central bank, thus, has a difficult task of managing the inflation target while preventing a rise in borrowing cost to the government.’.
Source: International Business Times – By IANS – 18th March, 2021
4 . India now has 4th largest forex reserves behind China, Japan and Switzerland
India has become the fourth largest in the world with forex reserves at $580.3 billion surpassing Russia and behind China, Japan and Switzerland.
Emerging markets have been building reserves to guard against volatility due to Covid aftershocks.
Reserves for India and Russia have plateaued after rising for months. India pulled ahead as Russian holdings declined at a faster rate. India’s foreign currency holdings fell by $4.3 billion to $580.3 billion as of 5th March, the Reserve Bank of India said, edging out Russia’s $580.1 billion pile.
The world’s largest forex reserves league table is headed by China, followed by Japan and Switzerland. India’s reserves are now worth 18 months of imports; they have been boosted by massive inflows by FIIs into the stock market and burgeoning FDI.
According to a recent report by Acuite Ratings, the Indian rupee has strengthened in 2021 so far on healthy portfolio inflows and sharp downward adjustment in inflation. ‘We expect India to post record BoP surplus of $105 billion in FY21, followed by a healthy surplus of $55 billion in FY22.
‘While FX intervention from the central bank will continue in FY22, the pace is likely to ease with moderation in inflation. We expect gradual appreciation in the currency to play out with USD-INR at 73.0 (with downside risk) in March, 20 to 71.0 by March, 21,’ the report said.
Source: International Business Times – By IANS – 15th March, 2021
