| Trouble viewing this email? View in web browser |  | | Tuesday, 31 May 2022 | | | Company Outsider | | A weekly newsletter that keeps track of the business of companies | |  | | By Sundeep Khanna | | | | Question of the Week Airbus and Boeing dominate Indian skies, with almost all major national airlines using planes exclusively from the two companies. So which Indian airline is an exception to this? | | |  | Here's a great value proposition A digital subscription to Mint plus WSJ can be yours at just ₹292 per month. Check out the convenient and affordable plans we have for you here. | | Good Morning Prefer audio? Now you can listen to your favourite newsletter. | | The News in Summary IndiGo, the country's largest airline, posted a higher than estimated loss for the quarter, belying hopes of a recovery in the sector buffeted by rising fuel prices. However, there was some respite for its smaller rival, SpiceJet, which reached an out-of-court agreement with one of its creditors, Credit Suisse. Meanwhile, after setbacks to its disinvestment programme following the sharp fall in the share price of Life Insurance Corp. of India, the government is looking to encash its substantial residual holding in Hindustan Zinc by selling its 29.5% stake in the open market. Elsewhere, Singtel, one of the oldest and most faithful shareholders in Bharti Airtel, may sell a small 2-4% stake in the company to its founder Sunil Mittal. Finally, Infosys rewarded its CEO of five years, Salil Parekh, with another term and a bumper bonus. | | | | IndiGo Recovery Hits an Air Pocket A 68.2% increase in fuel cost, a depreciating rupee, and a covid-induced fall in demand in early January drove InterGlobe Aviation, which operates IndiGo, to a loss of Rs 1,682 crore in the March quarter. The number was much wider than the street estimates of Rs 900 crore. IndiGo's earnings also belied the signs of recovery visible in its Rs 129.79 crore profit in the preceding quarter and capped two straight years of losses at the country's biggest airline. The airline industry has been among those worst hit by the pandemic. Just when some respite seemed in sight at the beginning of the year, the Russian invasion of Ukraine sent crude oil prices soaring, leading to a surge in jet fuel costs in India. While IndiGo's revenue was up 9% from a year earlier to Rs 8,207 crore, the rebound in demand couldn't compensate for the steep rise in expenses, up 31.5%. The company's outgoing chief executive officer Ronojoy Dutta, who will make way for KLM's current boss Pieter Elbers in October this year, is confident that IndiGo is best positioned to maximize revenue in a recovering market. | | |  | | | | Disinvestment-bound Govt Looks to Cash in on HZL Stake  With global zinc prices up nearly 25% over the last year and likely to stay high through 2022, the government is looking to monetize its residual 29.5% stake in Hindustan Zinc Ltd. (HZL), among the world's largest producers of zinc, lead and silver. At HZL's current market value of Rs 1.28 trillion, the stake sale in the Vedanta Group-controlled company, which was privatized in 2002, could yield about Rs 37,700 crore for the government, which will go a long way in meeting its divestment target of Rs 65,000 crore for FY23. The sale, planned six years ago, was stuck in the courts after the company's staff union alleged that the shares were undervalued in the earlier strategic divestment. It was only in November last that the Supreme Court gave its go-ahead. With the Vedanta Group holding a 64% stake which it can up by another 5%, the government will have to sell its stake in the open market to maintain the mandatory 25% public shareholding. The HZL sale plan comes after the government was forced to call off the strategic sale of Bharat Petroleum Corp. Ltd (BPCL), with potential buyers losing interest in the country's second-largest state-run refiner. | | |  | | | | | | | | Infosys Can't Get Enough of Salil Parekh Infosys, the country's second-largest software services firm, sprang a pleasant surprise by renominating Salil Parekh as CEO for a second term. Given the company's strong turnaround over the last four years, the decision was a foregone conclusion, but by announcing it almost six months before it was due, Infosys quelled the possibility of unnecessary speculation both within and without. Parekh has been a stabilizing figure, calming nerves that were frayed following the public spat between co-founder N.R. Narayana Murthy and former CEO Vishal Sikka. In addition, during his tenure, the company has posted impressive revenue growth while maintaining margins leading to a scorching 200% rise in its stock price and an increase in its market capitalization by about Rs 5,77,000 crore (about $69 billion). As a reward for his leadership, Parekh's compensation has been revised upwards by 88% to Rs 79.75 crore per annum, the company revealed in its latest annual report. Of this, Rs 11 crore is fixed, while Rs 68.75 crore is performance-based remuneration. | | |  | | | | CEO compensation has been a hotly debated issue in India over the last two years. Here's a nuanced view on the subject by Professor Dirk Jenter from the London School of Economics: | | | | SpiceJet Settles Another Pending Dispute Six months after the Madras High Court allowed the winding-up of SpiceJet on a petition filed by creditor Credit Suisse after the airline had failed to make payments of over $24 million, the two parties ended their dispute. SpiceJet said it had already provided a bank guarantee of $5 million under the direction of the Supreme Court, which had given both parties time to settle the matter out of court. According to the company, there is no adverse financial liability on it following the settlement, which involves payment of a certain amount up front and the balance over a mutually agreed timeline. Last December, SpiceJet had settled another dispute with Canada's De Havilland Aircraft, which had sued the Gurugram-based airline in a UK court for $43 million for a contractual dispute. | | | | | | Singtel May Sell Small Percentage of its Stake in Bharti Much heat was raised when reports emerged that Singapore Telecommunications Ltd was in talks to sell 2-4% out of its 31.7% stake in Bharti Airtel to its chairman Sunil Mittal. With rising revenue and profits boosting the Indian telco's current market cap to $51.86 billion, any such sale would be extremely lucrative for the Singapore-based company, which this March partially monetized its stake in Airtel Africa as part of its capital recycling strategy. Singtel, however, dubbed reports of the stake sale in Bharti Airtel as 'market speculation' though it did not deny the news. In a statement, the company said: "We do not comment on market speculation and abide by market disclosure rules pertaining to material transactions." Singtel has been a shareholder in Bharti since 2000. While announcing its FY22 results recently, it acknowledged that its profits were "mainly lifted by Airtel's resilient turnaround." | | Last Word The pandemic may achieve what nearly three decades of efforts, including a high-profile trip by CEO Tim Cook, couldn't - get Apple to take India more seriously both as a market and now as a production base. Hit hard by the strict anti-Covid policy in China, where more than 90% of its products such as iPhones, iPads and MacBook laptops are manufactured, Apple is considering boosting production in countries like Vietnam and India. China's travel restrictions are hurting Apple. The company warned in April that the resurgence of Covid-19 threatens to hinder sales by as much as $8 billion in the current quarter. But moving production out of the country will be an arduous task. While India can match the vast pool of qualified workers that China has, there are other benefits that it will have to offer before it can lure Apple to step up local manufacturing to a significant degree. | | | | Answer to the Question SpiceJet is the only major airline in India that has the Q400 Dash 8 airliner, developed by Bombardier and sold by De Havilland, Canada, as part of its fleet for regional flights. IndiGo uses aircraft only from Airbus, while Air India has a mix of planes from Boeing and Airbus. | | | Do you have any questions? Send in your queries to sundeepkkhanna@gmail.com Were you forwarded this email? Did you stumble upon it online? Sign up here. | Please share your feedback with us What do you think about this newsletter? | | Written by Sundeep Khanna. Edited by Saikat Chatterjee. Produced by Samiksha Khanna. 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