Daily Pulse India: “Debt Is Dynamite,” A Boardroom Battle Is Brewing At Air Asia, Investor Activism At Suzuki

Moderation Is Key: The Reserve Bank is fretting about corporate debt if Governor Rajan’s remarks at a Kolkata college are any indication. He’s right to worry. India Inc’s debts have doubled in the last five years as companies bet on an economic recovery to help them service debt. Foreign borrowings have risen even faster and some companies have neglected to hedge their foreign exchange risk, a big deal if the Fed goes ahead and raises interest rates as many expect. An RBI report in September puts 37 percent of Indian corporate debt as risky. A heavy debt burden will limit Indian companies’ ability to raise money and invest more as the recovery picks up.

“Debt is dynamite, It is an instrument which is very useful in right places and explosive in others.” RBI Governor Raghuram Rajan

 Boardroom Wars: A battle has sprung up between Air Asia India’s Malaysian parent and its local partner Arun Bhatia, who is accusing the southeast Asian airline of mismanagement. Bhatia owns about 10 percent in the India airline, while the parent own 49 percent (the maximum allowed under Indian rules) and Tata Sons owns 41 percent. Air Asia India reported a loss of 650 million in the September quarter and Bhatia is opposing a proposal by the board to invest another $22 million in the Indian operations. This could add spice to the two-year old lawsuit challenging Air Asia’s clearance.

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At Suzuki too: Talk about investor activism. Five Indian mutual funds have opposed a plan by Suzuki to set up a plant in Gujarat, which they feel could skew the balance in favour of the Japanese parent. These five funds together own a little over 14 percent in the Indian carmaker, so it wouldn’t be too hard for the company to win the 50 percent approval it needs to greenlight the project. But, the implications of such a move over investor opposition are loud and clear.

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After airlines and coffee chains, come the hospitals and drug companies. In the IPO market, that is. Sales by Alkem Labs and DrLal PathLabs closed successfully even as Narayana Hrudayala, a hospital chain, gets set to hit the market next week.

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Hyperlocal continues to rule among startups as UrbanClap, which aggregates domestic and personal care services brought in Ratan Tata as an investor. Last month, the company raised $25 million from VCs.

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The cabinet has cleared a $14.7 billion proposal by Japan to build India’s first bullet train line, between Mumbai and Ahmedabad, as Japanese Prime Minister Shinzo Abe’s visit begins today.

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Cover Image: Bollywood star Salman Khan has been acquitted in a 2002 hit and run drunk driving case, potentially saving 5 billion rupees that are riding on his films, television shows and endorsements. Of course, the Twitterati weren’t as pleased as his producers. That’s him leaving the courthouse after the verdict. 

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