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Indian billionaire Gautam Adani’s ports-to-power conglomerate is “deeply overleveraged,” with the group investing aggressively across existing as well as new businesses, predominantly funded with debt, CreditSights, a Fitch Group unit, said in a report.

The aggressive expansion pursued by the Adani Group, led by Asia’s richest person, has put pressure on its credit metrics and cash flow, CreditSights said in the report Tuesday, adding that “in the worst-case scenario” it may spiral into a debt trap and possibly a default.

“We see little evidence of promoter equity capital injections into the group companies, which we feel is needed to reduce leverage in their stretched balance sheets,” the agency said, referring to fund infusions from the Adani Group’s founders, known as “promoters” in India.

A representative for the Adani Group didn’t immediately respond to a request for comment on the report. All seven listed Adani firms declined by 2% to 7% in trading Tuesday.

CreditSights’ report comes after a big few years for Adani, who’s been on a rapid diversification spree, expanding an empire centered on ports and coal mining to include airports, data centers and cement as well as green energy. The group recently pledged to plow $70 billion into renewable projects. These moves have not only boosted Adani’s stature in India, but his fortune, with his net worth surging past $135 billion this year. He’s also increasingly moving into spheres dominated by the man he replaced as Asia’s richest man, compatriot Mukesh Ambani of Reliance Industries Ltd.

Also read: Adani Group gets Sebi approval for $3.8 billion open offer for Ambuja, ACC

The report puts a spotlight on the multiple fault lines that may impede Adani’s ambitions and the stratospheric surge in the shares of his firms. CreditSights’ analysts, however, said they draw “comfort” from the group’s strong relationships with banks as well as the administration of Indian Prime Minister Narendra Modi.

Some other highlights from the report, authored by CreditSights Lakshmanan R, Rohan Kapur and Jonathan Tan:

• The Adani Group is entering new and unrelated businesses, which are highly capital intensive, raising concerns over execution oversight
• Potential strong competition between the group and Ambani’s Reliance to achieve market dominance could lead to “imprudent financial decisions”
• Adani Group is also exposed to moderate levels of governance and ESG risks
• The group has a “strong track record of churning out strong and stable companies” through its flagship, Adani Enterprises Ltd., and has built a portfolio of “stable infrastructure assets tied to the healthy functioning” of the Indian economy
• Its founder “enjoys a strong relationship” with the Modi government and has benefited from “policy tailwinds”

• CreditSights remain “cautiously watchful” of the group’s growing appetite for expansion, which is largely debt-funded

A self-made billionaire who started his business as an agri-trading firm in late 1980s, Adani has also been a busy dealmaker this year. Adani Group acquired the Haifa port in Israel in July for $1.2 billion and Swiss firm Holcim’s Indian cement units for $10.5 billion in May, besides almost three dozen big and small acquisitions. It’s also expanding into media, health care and digital services.

The group owns India’s largest private sector port operator, coal miner, city gas distributor and airport operator and is aiming to create the world’s largest renewable power generator.

‘Pull All Stops’

Investors have cheered the tycoon’s ability to rapidly scale up his businesses, spurring massive share rallies in Adani firms even during the pandemic, when most businesses suffered. Adani Enterprises and Adani Green Energy Ltd. have surged more than 1,300% since the beginning of 2020. Adani Total Gas Ltd. has rallied about 1,900% and Adani Transmission Ltd. over 900%, while the benchmark S&P BSE Sensex surged almost 42% over this period.

But it’s this breakneck growth that’s making credit watchers, including CreditSights, uneasy. The research firm acknowledges that the Adani founding family’s status as a majority shareholder in most of their listed group companies means they will go all out to support them.

The family’s “entire fortune and reputation is tied to the Adani Group companies,” it said. “Having such major ‘skin in the game’ could imply that the family would pull all stops to avoid default in any of the entities, since any material liquidity or solvency issue in one company would likely have a contagion effect on the valuation of the remaining companies too.”

Representatives from Indian Railway Catering and Tourism Corporation (IRCTC) have been called to brief a Parliamentary committee on citizens' data security and privacy.

As per a notice issued by the Lok Sabha Secretariat, IRCTC officials will brief members of the Standing Committee on Communications and Information Technology on August 26.

The call for the briefing comes days after the Indian railway's ticketing arm floated a tender to generate Rs 1,000 crore from the monetisation of its data assets.

As per IRCTC's tender, it is looking for a consultant to identify ways in which customer data like name, age, mobile number, gender, address, email-id, class of journey, and payment mode, among others, can be monetised. The tender also spoke about the selection of an entity to design and roll out the data monetisation strategy.

IRCTC, a public sector undertaking that was listed on the bourses only in late 2019, is the dominant player in the railway ticketing space.

The plan to monetise customer data has raised an outcry over the past week and invited criticism from experts given the absence of rules regarding personal data protection. Lawyers have also pointed out that the personal data provided by customers to IRCTC at the time of booking their rail tickets "was not explicitly for the purpose of monetisation".

Since then, it has been reported that IRCTC will allow passengers to opt out of the data monetisation plan, with The Economic Times reporting on August 23 that the process was only at a preliminary stage and any decision would be strictly within "the confines of the law".

Before being briefed by IRCTC officials, the Parliamentary panel will hear the views of experts and stakeholders on issues related to digital platforms, technology, and the gig economy. The committee will again seek views on citizens' data security and privacy.

Apple Inc. plans to begin manufacturing the iPhone 14 in India about two months after the product’s initial release out of China, narrowing the gap between the two countries but not closing it completely as some had anticipated.

The company has been working with suppliers to ramp up manufacturing in India and shorten the lag in production of the new iPhone from the typical six to nine months for previous launches, according to people familiar with the matter. Apple, which long made most of its iPhones in China, is seeking alternatives as Xi Jinping’s administration clashes with the US government and imposes lockdowns across the country that have disrupted economic activity.

Analysts such as Ming-Chi Kuo of TF International Securities Group have said they anticipate Apple will ship the next iPhone from both countries at roughly the same time, which would have been a significant benchmark in Apple’s efforts to diversify its supply chain and build redundancy.

Foxconn Technology Group, the primary manufacturer of iPhones, studied the process of shipping components from China and assembling the iPhone 14 device at its plant outside the southern Indian city of Chennai, said the people, who asked not to be identified because the efforts are confidential. That included looking at ways to maintain Apple’s high standards for confidentiality.

Apple and Foxconn ultimately determined a simultaneous start in India and China isn’t realistic this year, although it remains a long-term goal, said the people. The first iPhone 14s from India are likely to be finished in late October or November, following the initial September release, they said. An ambitious target would be the Diwali festival that begins Oct. 24, one person said.

A spokesman for Cupertino, California-based Apple declined to comment. Foxconn did not immediately respond to requests for comment.

Redington India Ltd., which distributes Apple products in the country, rose as much as 9.5 per cent after Bloomberg’s initial report.

Matching China’s pace of iPhone production would have marked a major milestone for India, which has been touting its attractiveness as an alternative at a time when rolling Covid lockdowns and US sanctions jeopardize China’s position as factory to the world. Assembling iPhones often entails coordination between hundreds of suppliers and meeting Apple’s infamously tight deadlines and quality controls.

Some people within Apple and Foxconn had hoped to begin simultaneous production in India this year, but that was never an official plan. To ensure a smooth launch, Apple wanted to focus on getting the China operations up to speed first and then work out the India production, one of the people said.

Apple’s partners began making iPhones in India in 2017, the start of a yearslong effort to build manufacturing capabilities in the country. Besides offering backup to its existing operations, the country of 1.4 billion people is a promising consumer market and the Modi administration has offered financial incentives for tech production under its Make in India program.

One challenge in narrowing the cap of India production is secrecy. Apple goes to extreme lengths to keep new product details confidential, and imposing the same rigorous controls in a second country would prove difficult.

Local executives in India examined entirely cornering off a section of one of Foxconn’s multiple assembly lines, sequestering workers and scrutinizing all possible ways in which the security around the device could be compromised, according to two of the people. Thus far, the drastic security controls and stringent seclusion of its China facilities would be challenging to replicate, one of the people said.

Apple has also been concerned about Indian customs officials, who typically open up packages to check whether imported materials match their declarations, another potential vulnerability for product secrecy.

Even if Apple and Foxconn intended a simultaneous launch, supply-chain challenges would have stymied the goal. China, the source of many iPhone components, has gone through successive waves of lockdowns, complicating the process of shipping components through the country.

India’s workforce and factories haven’t easily adopted the highly controlled practices that Apple requires from suppliers. Since Apple began assembling iPhones in India through contract manufacturers Foxconn and Wistron Corp. five years ago, workers have revolted over salaries and the quality of food in two prominent incidents.

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The Monetary Policy Committee's (MPC) "key policy goal" is to reduce inflation expectations closer to 4 percent, said Shashanka Bhide, one of the three external members on the Reserve Bank of India's (RBI) rate-setting panel.

"Headline inflation rate has remained above 6 percent for several months now. Bringing down the expectations of inflation closer to the target of 4 percent is the key policy goal," Bhide told Moneycontrol in an e-mail interview.

Consumer Price Index (CPI) inflation eased to 6.71 percent in July from 7.01 percent in June, although it was still above the RBI's medium-term target of 4 percent for the 34th consecutive month. Inflation has stayed above the 6 percent upper limit of the central bank's 2-6 percent tolerance range for seven straight months.

The MPC has so far only warned that inflation expectations could get destabilised. On August 5, when it raised the repo rate by 50 basis points to 5.4 percent, it said that "further calibrated monetary policy action is needed to… keep inflation expectations anchored."

Indians' three-months-ahead inflation expectations declined by 50 basis points in July to 10.3 percent, while one-year-ahead expectations fell by 60 basis points to 10.5 percent, according to the RBI's latest household survey.

The Indian Institute of Management-Ahmedabad's Business Inflation Expectations Survey showed one-year-ahead expectations of producers fell by 41 basis points in June to 5.17 percent.

Policymakers keenly eye the directional movement of inflation expectations and not the level itself because it is crucial to ensuring price stability.

Actual inflation

While inflation remains high, Bhide said July's CPI inflation data – released after the MPC'50-basis-point repo rate hike on August 5 – suggested overall price levels seemed to have stabilised, with the general index of the CPI up only 0.5 percent from June.

"The impact of the government's measures in terms of taxes and tariffs have a significant impact in the short term," Bhide said. "The other steps take longer to show the impact. The steps in the case of edible oils, for example, were effective. The broader measures relating to energy and fuels have an impact on sectors including food commodities."

However, fresh pressures keep appearing. Last week, Gujarat Co-operative Milk Marketing Federation Ltd. and Mother Dairy increased milk prices by Rs 2 per litre, citing rising input costs. According to economists, the milk price hike could raise the August inflation number by about 20 basis points, with milk and related products making up 6.61 percent of the CPI basket.

For Bhide, more than one-time price increases, the subsequent spill overs make inflation broad-based.

Given the price pressures, it is no surprise the RBI's forecast of 7.1 percent for July-September is looking par for the course. A third consecutive quarter of CPI inflation staying outside the 2-6 percent tolerance range would result in the RBI failing its mandate.

Asked whether the MPC had discussed the possibility of failure, Bhide said projections for July-September "clearly imply the likelihood of failure to meet the mandate."

The RBI must submit a report to the central government spelling out the reasons for failure, the remedial actions it proposes to take, and an estimate of when inflation will return to target.

Bhide said he wasn't sure what procedure would be followed in writing the report, but he expected the external members of the MPC to provide inputs.

Growth challenge

According to Bhide, the Indian economy appears to have sustained the projected growth momentum in April-June, data for which will be released at the end of August. The RBI expects India's GDP to grow 16.2 percent in the first quarter of FY23 due to a favourable base effect.

"While external environment is a concern, improving capacity utilisation in manufacturing and resolution of some of the supply bottlenecks are positives for sustaining growth momentum. About 7.2 percent growth in FY23 is a realistic projection," Bhide said.

However, weakening demand from overseas would adversely impact India's export performance and improvement in domestic demand may not make up for the absence of this export push.

Even when it comes to growth, the answer lies in lowering inflation expectations.

Asked about fellow-external member Jayanth Varma terming the MPC's decision to remain focused on withdrawal of accommodation as confusing, Bhide said that, to him, the stance essentially implied the committee was still focused on the need to cool down inflation pressures as inflation is "well above" the 6 percent upper bound of the tolerance band.

"Anchoring inflation expectations close to the target is necessary to achieve this target and also the goal of economic growth," Bhide said.

LIC Housing Finance increased its Prime Lending Rate by 50 basis points on Monday. With this the new interest rates on home loans will now start from 8 per cent as against 7.50 per cent earlier.

The new rates will be effective from Monday.

The move was inline with the central bank, which hiked repo rate by 50 basis points in the recent monetary policy to tame inflation that is hovering above the upper tolerance band for consecutive months.

"As expected, the RBI's decision to hike the repo rate by 50 basis points on 5th August was well measured and abreast with the global economic trend. The hike in repo rate has caused some minimum fluctuation in the EMIs or the tenure on the home loans but demand for housing will remain robust. Hence, the interest rate hike of LIC HFL is in line with the market scenario," said Y. Viswanatha Gowd, MD & CEO.

The Indian rupee's fair value is around 80 against the U.S. dollar, given the country's balance of payment challenges and the Reserve Bank of India's interventions, JPMorgan's head of emerging Asia local markets strategy said.

India's balance of payments, a measure of how much the country relies on money from abroad, has been squeezed by a record trade deficit that has prompted economists to revisit their current account deficit and balance of payments (BoP)projections.

"India's CAD (current account deficit) is tracking 4% of the GDP, historically a wide number. If left unchecked, this should reflect on the price of the rupee. But things are not left unchecked, and RBI has been managing the rupee," Arindam Sandilya told Reuters in an interview.

"Taking a holistic view on India's forex-relevant BoP position and the RBI, we reckon the fair value of the rupee is around 80."

India's foreign exchange reserves have declined to $570.7 billion from a record high of about $642 billion in September 2021 as the RBI has stepped in to bolster the rupee. Still, the local currency is down 7.5% in 2022, and on track for its worst annual performance in four years.

The rupee was trading at 79.85 per U.S. dollar on Monday, within a whisker of the record low of 80.0650 reached last month.

A rebound in inflows into Indian stocks in the past few days, with foreign investors turning buyers for the first time in nine months, has helped the rupee to an extent.

Sandilya reckons that JPMorgan's fair value was near 81-82 at the beginning of the current quarter, but the surprising turnaround in equity flows has led it to reassess its fair value to near 80.

He said that rupee's valuations remained "a little rich" relative other emerging market (EM) currencies and short rupee positions had potentially "have more runway".

Shandilya pointed out that the market's pricing of the U.S. Federal Reserve's slightly dovish path next year is contrary to what policymakers have been saying recently.

On how much the oil's recent pullback will help rupee, Sandilya pointed that when there is a demand-side fuelled drop in oil prices, emerging market currencies, including that of oil importing nations, weaken.

Imagine being a judge who is tasked with delivering a verdict in a case involving sexual harassment. Let’s say, a case of groping by a boss. The alleged offence has happened in private, and by its very nature, in the absence of eye-witnesses. There is no physical scar that the judge can at least hark back to substantiate the allegation. So, as far as the judge is concerned, it is just the accuser’s word against the accused.

While we say that we should believe all victims, almost everybody will agree that justice delivery should be on a higher footing than that. Then there are the consequences of a judgment to reckon with. Sexual offences carry typically harsher sentences. It is easy for keyboard warriors to outrage that a judge has pronounced in a certain way — but the judge has to bear a tremendous weight of conscience in cases where there is no tangible evidence to go by (as opposed to a case like murder, or fraud, where there is a body, or some proceeds of crime, to base a judgment on). Perhaps this is the reason why so often, we are left wondering why even women judges often give the benefit of the doubt to the accused in cases where the evidence is scant.

To be sure, it is not that the Indian judiciary does not convict based on the uncorroborated testimony of a complainant in cases of sexual offences — even if the complaint was made with extreme delay. It does. But in these cases, the circumstances around the alleged offence, and how convincing the witness sounds, become important.

***

If this is how a judge reasons through a conviction (assuming the judgment is a product of thorough reasoning), imagine how much more difficult it would be to decide on grant of bail. In last week’s controversial judgment, where a Sessions Judge in Kerala granted bail to accused in sexual assault cases, it might be useful to consider the scenario in which the judge did not give the reasons he did (that is, that the complainant was wearing provocative clothing, or in another case where he felt that the accused being a disabled caste activist, could not harass a Scheduled Caste woman).

What we have then is a case of groping, in layman’s language. The offences are punishable with sentences of up to three years (Section 354, if it is established, carries sentence of between one and five years), which in normal circumstances, would afford an accused a reasonable chance of bail. To argue that in sexual offences bail must not be granted, irrespective of these factors, is no different from the government legislating that in cases involving a threat to national security (under UAPA, for instance) bail should not be granted until innocence is proven. As Supreme Court Justice Sanjay Kishan Kaul said recently, bail cannot be denied merely because it is perceived that ultimate conviction is uncertain and might take far too long.

Meanwhile, in England, a Premier League footballer who is accused of rape is still playing football (presumably, as his identity cannot be revealed) because of the protections afforded under English law.

***

Pronouncements in cases involving sexual offences have yielded to controversy more often than not in recent times — for good reason. ‘Provocative clothing’ or ‘[scroll.in/latest/1010860/skin-to-skin-judgement-sc-quashes-bombay-hc-ruling-says-sexual-intent-most-important-ingredient]skin-to-skin touch’ were absolutely irrelevant considerations to the matters at hand. It is not for want of guidance. Last year, the Supreme Court laid down detailed guidelines for courts to follow in sexual offence cases. These include that “discussion about the dress, behaviour, or past “conduct” or “morals” of the prosecutrix, should not enter the verdict granting bail”.

This judgment concludes saying that “Judges play – at all levels – a vital role as teachers and thought leaders. It is their role to be impartial in words and action, at all times. If they falter, especially in gender-related crimes, they imperil fairness and inflict great cruelty in the casual blindness to the despair of the survivors”.

So it is not that judges don’t have bright-lines they are forbidden from crossing. But moralistic notions are perhaps imprinted so deeply that mere diktats of law, or common sense, pale. Remember, these attitudes affect not only cases involving sexual offences. The Supreme Court judgment calls for the National Judicial Academy to speedily devise inputs for judges’ training so as to avoid stereotyping and unconscious biases that can creep into judicial reasoning.

However, it is foolish to assume that these values will be adopted by the judicial hierarchy smoothly. A society that is deeply patriarchal should not expect its judges to be suddenly egalitarian. In fact, the more the outrage machinery reduces issues of gender justice to black and white boxes of woke sensitivities, judges will feel obliged to take a conservative view to ensure they are not being misled.

When the Reserve Bank of India adopted a formal retail inflation target and turned into an inflation-targeting central bank just like its developed economy peers, little did it anticipate a potential failure only six years into the job. To be fair, pretty much every inflation-targeting central bank globally is staring at an embarrassing failure this year and some have even tasted it already.

The RBI is mandated by law to keep retail inflation in a 2-6 percent band and it will fail to do so if retail inflation averages above 6 percent for three consecutive quarters. The odds of this happening are high after the inflation print of 6.7 percent for July.

Most private economists have pegged their forecasts at around that of the RBI or slightly below. But none expects Consumer Price Index inflation to slip below the 6 percent mark.

FY24 could be a lot more forgiving on the inflation front as the base effect itself could bring down progressive readings. Economists expect average inflation to be about 5 percent for the next year.

While that would bring inflation within the mandated band, in spirit the RBI would consider a win only when the coveted 4 percent medium-term target is reached. Economists expect it will take another six quarters at least for headline retail inflation to drop to 4 percent.

Global commodity inflation would continue to weigh heavily but fiscal policy, and the strength and unevenness of economic recovery would be determinants of inflation as well, making the journey to 4 percent arduous for the RBI.

Push becomes shove

Some factors that have capped the surge in inflation are from the fiscal side. Whether it was the restriction of imports of important food grains or a cut in taxes on fuel, the government has done its bit to keep retail prices from rising unbridled in the wake of the global surge in them.

Rahul Bajoria, chief India economist at Barclays, pointed out that a lot of what the RBI can do depends on how much the government reverses its fiscal policy measures.

“There are a lot of fiscal tools at play in managing inflation. Some of these tools may have to be reversed,” he said.

The government plans to bring most goods under the ambit of the goods and services tax. GST has been increased for several items, which may feed into inflation as manufacturers hike market prices to absorb the tax impact. Then there is the government’s fiscal deficit itself, which needs to be brought down.

Bad side of good news

India’s economic recovery has gained traction, in a relief to policymakers. Under the pleasing recovery is weak consumption demand, which prevents demand-led inflation.

However, this has to be seen through the lens of pricing power. Companies have been able to increase prices and prevent a sharp erosion of their profit margins despite weak consumption demand.

The uneven K-shaped economic recovery has meant that large listed manufacturers dominate the pricing decisions of items while the universe of small businesses buckles under pressure.

“The companies that are big and dominate industry also supply much of the consumption goods and services while a large part of small business are involved as suppliers to big companies. So a few large companies determine the pricing of goods and they can easily hike prices,” said an economist at foreign bank, requesting anonymity.

The upshot is that even if consumption demand isn’t as robust as it was before the pandemic, there is no guarantee that prices will come down. Eventually, demand for higher wages will feed into inflation.

That brings us to inflation expectations, something the RBI must monitor at all times. Household inflation expectations have cooled off in recent months, but they remain elevated. Confidence that prices may come down is shaky yet. Until expectations show a sustained drop, the outlook on retail inflation is likely to remain clouded.