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Nothing cheerful in Q3 GDP figures

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While government data claims that GDP growth in the third quarter has stayed at 7%, a closer look at the figures brings to fore the adverse effects of demonetisation

[vc_row][vc_column][vc_column_text]7 per cent growth rate new bottom line

By Parsa Venkateshwar Rao Jr

It is surprising that anyone should be surprised, shocked, elated, satisfied that that Quarter 3 economic indicators have not really gone down, and therefore infer that the November 8, 2016 demonetisation has not had any negative impact on the economy. A closer look at the figures shows that the numbers reveal no good news.

First, Q3 figures are lower than those of Q1 andQ2 for 2016-17. At constant prices (2011-12), the growth rate for Q 1 was 7.2 per cent, for Q2 it was 7.4 per cent and for Q3 7 per cent. At current prices, the figures are: Q1 (10.8 per cent), Q2 (11.8 per cent), Q3 (10.6). The sense of relief seems to arise from the fact that it was not as bad as expected. But in absolute terms, there is a distinct slip in Q3 compared to Q2, and a little less when Q3 figure is juxtaposed with Q1. To infer from this that demonetisation has not dampened growth figures is permissible indulgence but it does not speak well for the economy.

There is also need to compare the figures with 2015-16. The revised growth rate for 2016-17 is projected to be 7.1 per cent, compared to 7.9 per cent for 2015-16. The new measure for growth rate, the Gross Value Added (GVA) figure at constant prices shows that the projected growth rate for 2016-17 will be 6.7 per cent compared to the GVA growth rate of 7.8 per cent in 2015-16. It can once again be argued that this has nothing to do with demonetisation.

The other crucial indicators also show that the economy is not really picking up, demonetisation or no demonetisation. The mining and quarrying sector is set to grow at a GVA of 1.3 per cent in 2016-17 compared to 12.3 per cent in 2015-16. In the manufacturing sector, the estimated GVA growth rate for 2016-17 is 7.7 per cent compared to the 2015-16 growth rate of 10.6 per cent. The wholesale price index (WPI) for manufactured has moved from the negative territory of – (1.3) per cent in April-December 2015-16 to 2.3 per cent in April-December 2016-17.

The only positive growth figures, apart from agriculture, are in electricity, gas, water supply and other utility services, where a 6.6 per cent growth rate is expected for 2016-17 compared to the 5.1 per cent growth rate figure for 2015-16.  The Index of Industrial Production (IIP) figure for electricity for April-December 2016-17 is 5.1 per cent compared to 4.5 per cent for April-December 2015-16.

Construction, one of the drivers of growth, is expected to grow at GVA rate of 3.1 per cent in 2016-17 compared to 2.8 per cent in 2015-16. Cement consumption during April-December 2016-17 has increased by 2.8 per cent, and steel consumption by 3.3 per cent. It can be seen that there is no great spurt in growth as such.

In the service sector, comprising trade, hotels, transport and communication as well as broadcasting, the GVA growth rate for 2016-17 is expected to be 7.3 per cent compared to 10.7 per cent in 2015-16. The figure of 10.7 per cent growth in the sales tax collection in the states’ accounts between April-December 2016-17 is neither here nor there.

Growth in financial, insurance, real estate and other professional services is estimated to grow at the GVA basic prices (2011-12) by 6.5 per cent compared to 10.8 per cent growth rate in 2015-16.

The only area where there has been a spurt in growth in government spending (public administration, defence and other services) where it is expected to grow at 11.2 per cent in 2016-17 compared to 6.9 per cent in 2015-16.

The difference in growth rates in Q3 of 2016-17 compared to Q3 of 2015-16, especially in case of Private Final Consumption Expenditure (PFCE) and Government Final Capital Formation (GFCF) for Q3 in 2015-16 and 2016-17, is interesting but not puzzling. The PFCE in Q3 of 2016-17 stood at 58.7 per cent compared to 57.1 per cent in 2015-16, and the GFCF for Q 3 in 2016-17 is 29.1 per cent and in Q3 of 2015-16 it stood at 30.0 per cent.

The expectation that the effects of demonetisation should have been conspicuously evident in the Q3 figures is slightly misplaced. Demonetisation came into effect on November 9, 2016 and as Q3 is concerned its effects till December 31, 2016 are to be measured. But remember that Q3 begins on October 1, 2016, and a lot of expenditure would have occurred in the festival month of October, and whatever the downward slide in the second half of Q3 will not be too visible. We need weekly measures between November 9 and December 31, 2016, to get a measure of the effects of demonetisation.[/vc_column_text][/vc_column][/vc_row]

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Adani, Torrent compete to purchase Gujarat Titans from CVC Capital

The probable sale of the Gujarat Titans, with the lock-in period coming to a close, will therefore be a defining moment in the changing face of IPL investments.

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The Adani Group and Torrent Group are currently negotiating a deal with private equity firm CVC Capital Partners to offload a controlling stake in the Indian Premier League franchise Gujarat Titans. According to sources, close to the development, reports say CVC Capital Partners will be looking to sell a majority interest while retaining a minority share in the franchise.

This becomes important because it is aligned with the end of the lock-in period by the Board of Control for Cricket in India (BCCI), which restricts any new teams from selling stakes until February 2025. The three-year-old franchise Gujarat Titans is reportedly worth $1 billion to $1.5 billion. CVC Capital Partners had paid ₹5,625 crore for the franchise in 2021.

A source close to the development pointed out that IPL franchises have attracted many investors’ interest since the league has proved an asset with a good reputation for money-making capabilities and cash flows. This growing interest of investors embodies the financial value and stability that come with the IPL franchises.

Gautam Adani, who owns teams in the Women’s Premier League and UAE-based International League T20, is understood to be one of the serious buyers. In 2023, Adani’s group won the Ahmedabad franchise in the WPL with a bid of Rs1,289 crore, the highest offer. His interests in this potential deal signal his commitment to expanding his footprint in the cricketing world.

Arvinder Singh, COO of Gujarat Titans, exuded confidence in the financial future of the franchise. He said the team was confident of turning profitable in the next media rights cycle, referring to even the original ten IPL franchises that took four to five years to turn profitable. He added confidently that the Gujarat Titans would not only turn profitable but significantly enhance in brand value.
 
This surging interest of investors in it is evidence of the growing financial attractiveness of IPL franchises, driven by healthy revenue streams and an increasing global footprint. The probable sale of the Gujarat Titans, with the lock-in period coming to a close, will therefore be a defining moment in the changing face of IPL investments.

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PayTm share price slips 2 per cent over SEBI warning

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Paytm

The share price of PayTm fell by nearly 2 per cent on Tuesday following a warning from the the Securities and Exchange Board of India (SEBI).

PayTm’s parent One 97 Communication had got SEBI’s administrative warning letter on some transactions involving the PayTm Payments Bank during fiscal year 2021-2022. The bourses reacted strongly leading to PayTm shares falling by 1.88% to Rs 460.80 per share on the Bombay Stock Exchange.

SEBI said it had noted the violation with concern and said these matters are being viewed very seriously. The regulator warned the company to exercise caution going forward and improve compliance to rules to prevent similar incidents in the future.

The markets regulator added that failure to comply with rules may force it to invoke enforcement actions as per the law.

In its response to SEBI, PayTm said in a media release that it has always followed listing regulations, as well as any change to these rules over time. The company said it would keep up its commitment to maintain and follow high standards of compliance. Paytm said it intends to provide an adequate response to SEBI on this matter.

PayTm said it has always followed Regulation 23 along with Regulation 4(1)(h) of the SEBI Listing Regulations, without including any change made to these rules over time. Paytm added that the letter from  SEBI has no influence on its finances, operations or other activities in any way.

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Zomato, Swiggy hike platform fee by 6% 

After the hike, the platform fee would be Rs 6 per order from an earlier Rs 5 per order.

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The food delivery majors, Zomato and Swiggy, have recently increased their platform fee by 6 per cent for food orders initially in Delhi and Bengaluru.

The food giant is currently charging in the national capital and IT hub, Bengaluru, the platform fee is distinct from delivery fee, goods and services GST, handling charge and restaurant charges.

After the hike, the platform fee would be Rs 6 per order from an earlier Rs 5 per order. Gradually, the higher platform fee is expected to roll out to other cities as well.

Notably, this fee is applicable universally to all food orders, irrespective of customer enrollment in loyalty programmes offered by both food giants. The charges directly contribute to the companies’ revenue streams and cost management efforts. The platform fee goes to the food aggregators to apparently control costs and increase revenues.

In April, they charged Rs 5 per order, but now it’s been increased by Rs 6 per order. That’s a 20% increase in fees for food delivery. This change in their strategy to adjust the price in a market as they expand their services.

Increase in platform fees, impacting how much customers pay for their food deliveries across the board. When customers order food using the app, they will notice different charges, besides the platform fees. These include delivery fees, handling fees, GST (Goods and Services Tax), and charges from the restaurant.

The charges earned by the platform, directly go to the food delivery app, helping to manage all expenses and boost their wages. The food delivery platform aimed to make between Rs 1.25 to Rs 1.5 crore per day through the fee, the app charges.

In August last year, Zomato introduced platform fees of Rs 2 per order for the first time. In October, they raised their platform fees from Rs 2 to Rs 3 in most and in major cities. Additionally,  Zomato is a quick commerce platform.

According to reports, Zomato stock reached its highest price of Rs 232 on the Bombay Stock Exchange. This achievement has made Zomato founder and CEO, Deepinder Goyal, a billionaire. The company has experienced a strong upward trend over the past years, driven largely by the expansion and success of its quick commerce subsidiary in Blinkit.

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