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Issue #1

Good Morning player!

Today is launch day - Issue #1 of EveryFin's weekly newsletter is here.

Equity and gold markets rattled investors this week. If you were struggling to get a good night's rest, you were not alone.  Someone else who was also struggling to sleep this week was Virat Kohli - dropped 2 catches, scored ONE run in five balls, was fined for slow-over rate on thursday..! Rattled himself! I have only one thing to say to both Virat and you - One week, one match, don't matter. Long-term is the mantra.

IN TODAY'S NEWSLETTER

• Market update & news in brief
• Banks suffer a big dent cuz' of FinCEN
• India's Rs.100 Trillion Debt 'not-a-problem'
• Cover story - BCCI, IPL and Cricket in India

QUIZ

The circular building in this picture is the Indian Parliament.

What is the triangular one right next to it?

MARKET UPDATE

NEWS IN BRIEF

1. CBI registered a case against Kwality ltd, one of India's most popular dairy products maker, for cheating 10 different banks to the tune of Rs.1,400 crores. The list of accusations is long - diversion of bank funds, fabricated documents, false accounting and so on. KKR, a global private equity firm, which lent money to Kwality in 2016 has already dragged it to court for non-repayment. And now this. Looks like nobody is getting anything of good quality from Kwality.
2. Airbus this week introduced 3 concepts for the world's first Hydrogen powered zero emission commercial aircraft code named, rather unimaginatively, ZEROe. Prototypes are due to be ready in another 5 years with commercial service planned by 2035. Glenn Llewellyn VP at Airbus said, "We can't do this on our own. We need regulators, airports, energy suppliers, technology partners...". He forgot one group - The Passengers, and they are missing.
3. Route Mobile listed in the stock markets this week after its hugely oversubscribed IPO. Listing day gains were a mind boggling 86%, but still behind Happiest minds IPO that listed at a premium of 111% last week. Primary markets have been so full of merry recently across the world. Some say that this year is on pace to be the best year for US IPOs since the dot-com bubble. Not exactly sure that is a good thing.
4. SEBI tweaked its guidelines for investment advisors (IA) this week. Going forward - 1)IAs cannot offer both advisory and distribution services to the same client. They can only offer 1 of the two. 2)Their fee is being capped at 2.5% of assets under advisory or a fixed maximum fee of Rs.1.25 Lakhs. Something to keep in mind before you write that cheque.
5. UTI AMC, India's 8th largest mutual fund house, opens its IPO for subscription next week. UTI's revenue declined from Rs.1,150 crores in FY2018 to Rs.890 crores in FY2020, profit declined from Rs.405 crores to Rs.276 crores during the same period. The issue is priced at 25X FY20 earnings. Its listed peer and the second largest AMC, HDFC is trading at a PE of 35X. Doesn't matter what we think, it'll probably list for a silly premium.

IN LESS THAN 200 WORDS (1/2)

Banks suffer a big dent cuz' of FinCEN

Here is what it is - Let's say an Indian diamond merchant transfers USD $200M from India to UK. In this transaction, an Indian, a British and an American bank are usually involved. And everytime an American bank facilitates a US dollar transaction like this from an originator or to a receiver of suspicious background, they file a report at the US Financial Crimes Enforcement Network (FinCEN) called suspicious activity report (SAR). A former official at FinCEN leaked data from over 2,100 SARs and these SARs show banks willingly facilitating transactions involving money laundering worth over USD 2 trillion.

DATA SHOWS THAT OVER 3,200 TRANSACTIONS FROM DODGY SOURCES VALUED AT OVER $1.5B WERE FACILITATED BY INDIAN BANKS.

The biggest culprit of all? HDFC. It sent >$350M outside the country. Who is involved? We don't have the full list. But the usual suspects are all there - companies involved in 2G scam, Rolls Royce bribery case, Aircel-Maxis case, infamous diamond merchant and a sponsor of an IPL team. But most of these are already on the roasting grill with CBI/ED. So we have learnt nothing new. But what is surreal is this - With all the paperwork involved, it feels as if it is harder to send $1,000 outside the country than $300,000,000.

IN LESS THAN 200 WORDS (2/2)

India's Rs.100 Trillion debt 'not-a-problem' 

Indian government debt crossed Rs.100 Trillion at the end of Q1 FY20. That sounds like a lot of money, but it isn't. First up, most of the money the government owes is internal debt (95%) - owed to its citizens as against external debt which is owed to foreigners. Math says that the government owes each Indian ~Rs.70K. Compare that with India's per capita income of ~Rs.1.2 Lakhs/year - That 70K payment is only 0.6X our average annual income. The same figure for the United States of Amrika is 1.3X. Now compare that again with the Indian central government's total revenue per capita (total receipts/total population) last year of ~Rs.16K - If the government spent money on nothing else, it would pay its debt all back in about 5 years. The same figure for the US government is 8 years. A full 60% more than our Bharath Sarkar. Not bad, is it?

At a household level, debt is usually paid back by spending less & saving more. The governments also have to do the same. However, they have one special privilege that we dont have - The ability to create money out of thin air through central banks and pay the debt back. This is called debt monetisation and it usually leads to inflation, depreciation in currency value and a loss of trust amongst investors. As I write this, the US government is increasing money supply like never before.

COVER STORY

BCCI, IPL and Cricket in India

The IPL has literally been a game changer for world cricket and one of BCCI’s proudest achievements. Just 2 years into the IPL series, Sports magazine valued the league at $1.6Bn. Today that figure has quadrupled. The media broadcast right for IPL was won by Sony Max & World Sport Group for Rs.4,000 crores for a period of 5 years in 2007. This was resold in 2012 for Rs.8,000 crores and then in 2017 for a staggering sum of Rs.16,000 crores.

But with more money in its coffers, the BCCI became a far more powerful and aggressive agency. For years, it has refused to pay taxes claiming it is a charitable organisation. It is fighting legal battles with at least 15-20 different former partners. It is mired in politics and characterised by utter chaos internally. Today's cover story takes you through a journey, one seen from the perspective of an outsider about an agency that is trying to use its money power to become more and more assertive.

IN CASE YOU MISSED IT...

A FASCINATING Drama on Investing - In 3 Scenes

Let us assume that you had Rs.1 Lakh saved up on the 1st of January 2010. There are 3 people you are taking advice from on where to invest.

• Your dad – Who says, “Beta, put it all in fixed deposit at SBI. That is the best way to secure your future.”
• Your mum – Who says, “Putthar, you must buy gold. Rekha aunty’s son bought a lot of gold 10 years ago and its value has gone through the roof now.”
• Prashant Jain, Chief Investment Officer, HDFC – Who says, “You should invest in the HDFC top 100 mutual fund. Our RSI indicator suggests that there is deep value in the market right now, stocks are making a come back…(and some more unintelligible financial terms)”.

A decade later, who was right? Hit the link to find out.

ANSWER TO QUIZ

The NEW Parliament

building coming up in 2022. Tata Projects won the contract earlier this month to construct it a cost of Rs.862 Crores.

READ/WATCH/LISTEN

• Beyond a point, more money does not make us happier. We have all heard about it. Then, what does? Research suggests that there are 3 things - Relationships, exercise and a short commute to work. Inc

• Imagine there is a pizzeria where you are not charged per pizza, but charged per bite. The amount you pay will directly depend upon the number of bites of pizza you have had. How would that affect your pizza eating experience? Daniel Khaneman explains it on this video. Youtube
• The Kalsis had to rebuild their leather footwear business Overdrive from ground zero when a fire brought their factory in Agra down. The founder and family patriarch was devastated and died soon after. But the family came together in style to build the whole thing up again and young Arushi now is spearheading the effort. Forbes

From the writer in me, to the reader in you ♥

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