| | | Question of the Week Which has been the biggest acquisition till date by Sony Group in its 77-year-old history? | | |  | | Good Morning | | The News in Summary The slowdown in the IT sector showed no signs of ending as market leaders TCS, Infosys and Wipro posted dismal third quarter numbers. Elsewhere, with barely a week to go before the extended deadline to seal their planned merger, Sony and Zee were still struggling to resolve their issues. Meanwhile, Sebi steeped into the battle at Religare with an enquiry into the sale of shares by the company’s chairperson Rashmi Saluja just ahead of the open offer announcement by the Burmans while Moody’s downgraded the corporate family rating of Vedanta Resources. Finally, Byju’s woes continued as BlackRock slashed its valuation of the edtech firm to just $1 billion. | | |  | | | | No Signs of Upturn in Latest IT Results  The country’s top two IT services firms confirmed the struggles of the sector with their third quarter results pointing to annual growth that's among their slowest. Market leader TCS reported a 1% sequential increase in revenue for the seasonally weak third quarter from the July-September period, even as its net profit improved 2.7% sequentially. A third interim dividend, though, should keep its largest shareholder Tata Sons happy. Significantly, over 40% of the company’s $206 million incremental revenue came from its India business, the bulk of it from a contract by the public sector BSNL. Infosys fared no better, reporting a sharper contraction in business, with revenue down 1.2% sequentially and just up 0.1% from the same year-ago period. Consolidated net profit for the December quarter was down 2.3% sequentially and 8.3% year-on-year. Nor are there any signs of any immediate upturn with Infosys revising its growth projection for FY24 from the 4-7% in constant currency terms that it gave in April last year to an anaemic 1.5-2%. Meanwhile, Wipro’s lacklustre financial year continued with a 1.7% sequential decline in revenue and even though it posted a surprising 1.7% increase in its net profit over the preceding three months, its operating margin fell by 10 basis points sequentially to 16%. The only one of the IT majors to buck the trend was HCL Technologies which reported a healthy 5.9% sequential growth in revenue and a 12.5% increase in net profit for the quarter even as its operating margin improved 1.3 percentage points to 19.8%. | | | | AI is increasingly impacting businesses across the world. This video from Outsource Accelerator explores how AI has affected outsourcing firms, analyzing its impact on cost, service, and process optimization. | | | | | | | | Sony Loves Zee Loves Zee Not The potential merger of Sony’s India unit and Zee Entertainment, that’s been in the works for over two years, appeared to be on the verge of being aborted with reports suggesting the Japanese major is likely to call it off before January 20, the extended deadline for its closure. The reason appears to be the failure to resolve a months-long standoff over whether Zee’s Chief Executive Officer (CEO) Punit Goenka, who is the son of its founder Subhash Chandra, would continue to lead the merged entity in the face of a regulatory probe. While Zee told the exchanges that reports of the merger being called off were “factually inaccurate”, Sony’s studied silence told a different story. The scuttling of the deal which would have created a $10 billion behemoth could send both parties scrambling for alternative partners, Zee because it needs the money to stave off a possible default and Sony as it scrambles to take on global powerhouses Netflix Inc. and Amazon.com Inc. as well as local heavyweights like Reliance which is currently negotiating to acquire Walt Disney Co.’s India business. | | | | Sebi Steps into Religare Battle The high-stakes battle at Religare Enterprises Ltd (REL) took a fresh turn with the Securities and Exchange Board of India (Sebi) starting an inquiry into a sale of shares by its chairperson Rashmi Saluja immediately before the Burman family announced an open offer for the financial services conglomerate. This came two weeks after the market regulator sought information from both parties on transactions before and after the September 25, 2023 announcement of the open offer. The Burmans had sought the regulator’s intervention calling Saluja’s sale of shares an insider trade. REL, for its part, claims that the sale of shares had been planned earlier and was not related to the open offer. Sebi’s inquiry will determine whether Saluja, who sold a big chunk of her REL shares on 21-22 September, was acting on unpublished price sensitive information (UPSI), a clear violation of the regulations and could have serious implications for her. Separately, the Enforcement Directorate (ED) conducted searches at the offices of Religare Finvest Ltd and RHC Holdings as part of an ongoing money laundering investigation into the embezzlement of over Rs 2,000 crore from Religare Finvest Ltd (RFL), allegedly by former promoters Malvinder Mohan Singh, Shivinder Mohan Singh, and their associates. | | | | Debt Restructuring Leads to Ratings Downgrade for Vedanta A week after it received investor consent to restructure about $3.8 billion of its outstanding corporate bonds, the corporate family rating (CFR) of Vedanta Resources Ltd (VRL) was downgraded to Caa3 from Caa2 by Moody’s. The classification points to poor quality and very high credit risk. Dubbing Vedanta’s debt restructuring exercise as “default avoidance” the rating agency also downgraded the company’s bonds to Ca from Caa3 while maintaining a negative outlook on the new ratings. In a highly critical assessment, the analysts further noted that the company’s ratings reflect its “unsustainable capital structure characterized by high financial leverage at the holding company and its perennially weak liquidity amid a period of continued large negative free cash flow". The downgrade comes close on the heels of a warning by analysts at S&P that once the company’s bond restructuring exercise is implemented, the company’s long-term credit rating could fall to ‘SD’ or selective default from ‘CC’ at present. | | |  | | | | No Respite for Byju’s as BlackRock Slashes Valuation Further With the world’s largest asset manager, BlackRock, further slashing the valuation of Byju’s to just $1 billion, what was once India’s most valuable startup, is teetering on the edge of collapse. BlackRock’s latest downgrade means that the edtech firm’s valuation is now down 95% from the $22 billion at its peak. It comes as no surprise though. In October 2023, the PE firm which held less than 1% stake in Byju’s, had valued the shares at around $209.6 each, a significant drop from the peak of $4,660 in 2022. Coming within months of Prosus, which holds 9% of the company, valuing the former high flier at 'sub $3 billion', it points to the alarming deterioration in Byju’s fortunes with its future looking increasingly cloudy. | | | | Last Word  The Vibrant Gujarat meet saw investments worth billions of dollars being committed to what is already one of India’s most industrialized states. Business tycoons and corporate honchos ranging from Lakshmi Mittal and Gautam Adani to Mukesh Ambani and N. Chandrasekaran competed with each other to announce ever larger sums to set up newer plants or boost the capacity of existing ones. One interesting twist came from Maruti Suzuki which said it will invest another Rs 3,200 crore to set up a fourth production line at its wholly owned subsidiary Suzuki Motor Gujarat Pvt. Ltd for boosting production of electric vehicles. The Japanese firm will also establish biogas plants in the state to mitigate the impact of carbon emissions. Add to that the Rs 2 lakh crore that Adani will pour into setting up a clean energy project and the under-construction Dhirubhai Ambani Green Energy Giga Complex over 5,000 acres in Jamnagar, and you have the makings of one of the most dense hubs for alternative energies in the world. | | | | Answer to the Question Sony’s largest acquisition to date was in 1989, when it acquired Columbia Pictures Entertainment for $3.4 billion in cash, marking its entry into the films business. It was also the first time a company from a non-English-speaking country had owned an American studio. | | | 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. | | Written by Sundeep Khanna. Edited by James Mathew. Produced by Shad Hasnain. 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