Namaste! Aaj ka news roundup, Newswala style!

MARKETS

Markets: Indian benchmark indices rebounded strongly on July 1, with the Nifty closing above 24,100 and the Sensex gaining over 400 points, driven by robust performance in IT and media stocks. The markets erased previous session losses to start July on a positive note.

BUSINESS

Tight Liquidity Drives Surge in Bank Debt

What happened

Banks are facing a cash crunch like never before, prompting them to turn to debt markets in record numbers. From April to June, bank borrowings through money markets and bonds surged by 60% compared to last year. This sudden shift comes after years of easy access to funds, which have now become scarcer and more expensive. The merger between HDFC and HDFC Bank also contributed significantly to this spike in borrowing figures since mid-2023.

Why it matters

Why should we care about banks borrowing more money? Well, it’s not just about banks getting cash—it’s about the bigger picture of our economy. 

• The Reserve Bank of India's latest data shows that average bank borrowings were at a whopping ₹7.71 lakh crore in April-June, up from ₹4.80 lakh crore a year ago. 

With government spending restricted during the Union election in May and other factors like the RBI's actions in the forex market, the cash crunch worsened. Plus, the higher borrowing costs are squeezing banks' net interest margins, impacting their profitability.

Zoom out

With liquidity tighter than a new pair of shoes on a hot day, banks are feeling the squeeze. As banks navigate these challenges, the implications extend beyond their balance sheets to impact lending practices and economic stability. Consumers may experience shifts in loan availability and interest rates as banks adjust to these new financial realities. 

BIG MONEY MOVES

Indian spending abroad soars while remittances hit high notes

Over the past decade, Indian spending on foreign exchange has skyrocketed, ballooning from a modest $1.1 billion in FY14 to a whopping $31.7 billion in FY24. This surge, driven primarily by travel expenses, marks a nearly 29-fold increase.

Meanwhile, remittances from overseas Indians also saw substantial growth, climbing 71% from $70 billion to $120 billion over the same period. This financial boom abroad contrasts sharply with the global average, showcasing India's robust economic connections and wanderlust-driven expenditures.

Patanjali Foods spices things up with Patanjali Ayurved's HPC business buy

Patanjali Foods Limited is shaking up the FMCG landscape with a bold move—acquiring Patanjali Ayurved's Home and Personal Care (HPC) business for a whopping ₹1,100 crore. This strategic purchase aims to bolster Patanjali Foods' existing product portfolio with top-notch brands in dental care, skin care, home care and hair care.

The deal covers everything from assets and liabilities to Baba Ramdev's brand magic. With this acquisition, Patanjali Foods expects not just growth, but also synergies like enhanced brand power and operational efficiencies. 

BUSINESS

ITC Lights Up Plans to Double Tobacco Exports to BAT

What happened

ITC Ltd, India's tobacco titan, is gearing up to flood British American Tobacco (BAT) with raw tobacco. By 2025-26, ITC plans to ship tobacco worth a staggering ₹ 2,350 crore to BAT, aiming to more than double its previous exports. Last fiscal, ITC sent ₹1,071 crore of tobacco to BAT's UK arm and ₹299 crore to their Russian cousin, JSC-British American Tobacco-SPb.

Why it matters

After a downturn in exports last year, ITC is now looking to light up the market with a fresh strategy. The move not only aims to bounce back from recent export woes but also capitalizes on BAT's recent business reshuffle in Russia.

With projected exports for 2025-26 soaring, ITC is banking on its long-standing tobacco rapport with BAT to keep its crown as India's top tobacco exporter. The scale of this deal necessitates shareholder approval, making it a hot topic under SEBI regulations and ITC's in-house policies.

Zoom out

ITC's plan to double down on tobacco exports to BAT is not just smoke and mirrors—it's a serious bid to reclaim lost ground. As shareholders weigh in on this billion-rupee deal, ITC is betting big on its tobacco ties to ignite future growth. 

With BAT holding onto its stake in ITC (25.51%) after a recent trim of 3.5%  this deal instills confidence in ITC’s ventures.

Kuch gyann ki baat, Newswala ke saath!

BIG PICTURE

Boeing buys Spirit Aero for $4 billion to fix safety woes

Boeing has agreed to acquire Spirit AeroSystems in an all-stock deal valued at over $4 billion, offering $37.25 per share. This move aims to address Boeing's ongoing safety issues, which were brought to light by a door plug mishap on a 737 MAX 9 jet.

Spirit AeroSystems, the manufacturer of the problematic door plug, will see some of its assets transferred to Airbus as part of the agreement. This strategic "ex-relationship rekindling" hopes to mend Boeing's tarnished safety record and revitalise production.

Saudi Aramco makes $25 billion gas gamble

Saudi Aramco, the world’s largest energy giant, is on a spending spree, splashing out $25 billion in contracts to turbocharge its Jafurah gas project. With $12.4 billion to boost production at the Jafurah gas field and $8.8 billion to expand its master gas system, Aramco is ensuring gas reaches every nook and cranny of the nation.

With 200 trillion cubic feet of gas reserves, Aramco aims to boost production by over 60% by 2030.

BUSINESS

Aviation Industry Pushes for Policy Reforms and Tax Cuts

What happened

As Finance Minister Nirmala Sitharaman prepares to unveil the Union Budget 2024-25, the aviation industry has come forward with a detailed wishlist, hoping for policies that would make their lives a little easier and their pockets a little heavier. Private airport operators and airlines are seeking a rationalized tax structure and policy changes to ease business operations. 

Key requests include excluding user development fees from tax deductions, increasing duty-free allowances and including aviation turbine fuel (ATF) under the goods and services tax (GST) regime. 

Why it matters

The aviation industry is grappling with high operational costs, primarily due to the steep price of aviation turbine fuel (ATF). ATF accounts for nearly 40% of an airline's total expenses in India, compared to a global average of 20-25%. Rationalizing the tax on ATF and bringing it under GST could significantly reduce costs, making air travel more affordable and sustainable. 

• Currently, ATF in New Delhi is priced at ₹94,969.01 per kilolitre, a reduction of 6.5% from previous months but still much higher than the pre-pandemic levels of around ₹64,000 per kilolitre. 
  

In addition, airport operators are advocating for an increase in duty-free allowances from the current ₹50,000 to ₹100,000. They also seek clarity on the 2.5% import duty for non-scheduled aircraft operations, a tax that's been in place for 15 years.

Zoom out

On top of that, the air industry is also demanding permission to sell domestic Indian liquor tax-free at departures, aimed at boosting foreign earnings. In parallel, the emerging drone industry is lobbying for policy support, including an expanded production-linked incentive scheme, a dedicated R&D fund and a uniform 5% GST rate on all drone components. The aviation sector is clearly banking on the upcoming budget to provide the much-needed financial lift-off.

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