News View: Byju's panel to advise CEO; why MNCs are gung-ho on India, and more

Byju’s to form a panel to advise the CEO

On Tuesday (July 4), CEO Byju Raveendran informed shareholders that the ed-tech giant Byju’s intends to establish a Board Advisory Committee (BAC).

This committee is expected to counsel and direct the company regarding the formulation of its board and the implementation of its governance framework. According to a shareholder meeting memo that ET had access to, the BAC will operate as a panel that includes independent directors with solid reputations and relevant experience across various corporate sectors. The primary responsibility of this committee will be to offer recommendations and direction to the CEO concerning the design of the board and an appropriate governance structure, considering Byju’s growth, size, and performance goals, as stated in the memo.

Byju’s confirmed in a statement on Thursday that a special general meeting took place virtually on July 4.

What it implies: Under increased pressure from investors, the promoters have set up a panel to advise the CEO. However, this will not be enough to turn around the fortunes of the ed-tech firm. Byju’s urgently needs a change of guard and adherence to corporate governance norms to win back the confidence of the investors and the customers.

Also read: Byju’s may need a management overhaul to rescue itself

Several MNC subsidiaries outshine parents on financial metrics

An Economic Times report says the valuation of Indian subsidiaries of multinational corporations (MNCs) has surpassed that of their parent companies, with a notable increase in share prices. This has been driven by solid business fundamentals, favourable market circumstances, and public offers in the past few months.

Several MNCs, including Siemens, AstraZeneca Pharma, Colgate Palmolive, Cummins India, and HLL, are trading at a significantly greater price-to-earnings (P/E) ratio than their international parent companies. (The price-to-earnings (P/E) ratio is a commonly used financial ratio that measures the relative value of a company. It is calculated by dividing the market value per share (the current share price) by the earnings per share (EPS) over a certain period, typically the last 12 months. Investors and analysts use the P/E ratio to determine the relative value of a company’s shares in an apples-to-apples comparison.)

This indicates a high degree of investor trust in these financially robust firms.

What it implies: India is turning out to be great news for foreign multinational companies, and this trend should lead to more investments to expand their operations into India. This also suggests that Indian subsidiaries of various multinational corporations (MNCs) are performing exceptionally well in their market valuation, surpassing the valuation of their respective parent companies. The reasons behind this trend can be attributed to a few key factors:

Strong business fundamentals: The Indian subsidiaries operate effectively and efficiently, showing good financial health. This includes consistent revenues, profitability, strong balance sheets, and effective management, all of which can contribute to a company’s growth and stability, making them attractive to investors.

Bullish market conditions: A bullish market is expected to rise – a positive trend in the financial market. This optimism among investors often leads to higher share prices as they buy in anticipation of future price increases, further elevating company valuations.

Public offers: A series of recent public offers or issuance of shares can also increase a company’s valuation. These offerings indicate a company’s growth prospects, encouraging more investor participation.

The significantly higher P/E ratio of these subsidiaries compared to their parent companies suggests that investors are willing to pay a higher price for each unit of earnings generated by these subsidiaries. This is usually a sign of increased investor confidence in these companies, as they believe in the subsidiaries’ ability to sustain or grow their earnings in the future.

This confidence may stem from the subsidiaries’ strong financial performance, strong cash positions, and promising growth prospects within the Indian market. In short, the trend indicates a positive growth and performance trajectory for these Indian subsidiaries, signifying robust market confidence and a promising outlook for these companies in the Indian context.

Also read: Why signing aircraft purchase deals abroad makes sense for Indian airlines

Singapore arbitration court asks P&W to supply engines to Go First

The Singapore International Arbitration Centre (SIAC) has offered relief to budget airline Go First, which had to halt operations because of postponed aircraft engine deliveries. The SIAC has mandated engine producer Pratt&Whitney to supply a minimum of five engines per month to the airline, with this stipulation coming into effect from August 1.

What it implies: GoFirst continues to grapple with a series of crises, yet no resolution enabling the airline to resume flights is in sight. It is increasingly evident that a financially insolvent airline like Jet Airways has significantly diminished recovery prospects. Reviving the airline is highly intricate and becomes even more challenging when aircraft lessors need more authority to repossess their planes, further complicating the revival of operations.

Aster promoters in talks with private equity funds for exit from India

According to an ET report, the promoters of Aster DMHealthcare have initiated stake-sale talks with PE groups such as Blackstone and KKR, as it plans to segregate its Indian business from its operations in the Gulf Co-operation Council.

What it implies: Aster has a large healthcare presence in India and has ties with various business groups. Therefore, it can be an attractive pick for several industry players.

The monsoon picks up pace

Over the last few days, the southwest monsoon has noticeably accelerated, enveloping the country’s most significant regions, including Delhi and Mumbai. D Sivananda Pai, a scientist at the India Meteorological Department (IMD), suggests that given the monsoon’s reactivation, it will likely spread across the country by the initial week of July, which aligns with typical expectations. In the context of its effects on monsoons, an El Niño event can weaken the monsoon in south Asia, leading to lower rainfall, which can cause drought and impact agricultural output.

Conversely, a La Niña event, characterised by cooler than normal water in the same region of the Pacific, often strengthens the south Asian monsoon and leads to more rainfall.

What it implies: As the monsoon has already swept over 90 per cent of the country by Tuesday, the sowing of kharif (summer crop) activities have gained momentum. This is particularly the case in regions such as Punjab, Haryana, Uttar Pradesh, and Madhya Pradesh, where delayed rains had initially compelled farmers to postpone their sowing.

The monsoon’s advancement indicates that it may envelop the entire country about eight to nine days ahead of its expected date of July 8. This progression allows farmers to rapidly recover from any loss in acreage due to earlier delays. The IMD issued orange and yellow alerts for various regions across the country on Tuesday in response to the extensive impact of the monsoon.

The ceaseless rains have brought about a flood-like situation in Shimla district, Himachal Pradesh, disrupting daily life. If the monsoon spreads across the country within the next two days, it will represent one of the swiftest progressions in recent history, taking only about three weeks from its delayed commencement on June 8 this year. The monsoon generally begins on June 1 and covers the whole country in 38 days by July 8.

As per the monsoon progress map released by the IMD, as of Tuesday, the monsoon had extended over nearly all states, excluding parts of Rajasthan, Haryana, and Punjab.