| | | Question of the Week Which was the only all-business class airline to be launched in India? | | |  | | Good Morning | | The News in Summary After posting bumper profits for the year, IndiGo, which championed low-cost flying in the country, shocked the market by announcing it will offer a business class on select routes starting August this year. Elsewhere, the crisis at Byju’s deepened with former SBI chairman Rajnish Kumar and former Infosys board member T.V. Mohandas Pai deciding not to continue as advisors, a year after they had been drafted in. Meanwhile, shareholders voted against a proposal by Nestle India to increase royalty payout to its Swiss parent while Paytm, which reported a fall in its fiscal fourth-quarter revenue amid mounting losses, is gearing up for the full impact of RBI’s ban on its bank, in the next quarter. Finally, the Adani group is looking to expand its global port capacity through acquisitions. | | |  | | | | IndiGo Muscles into Air India Turf With Business Class Offering  Boosted by its highest ever net profit of ₹8,172.46 crore during FY24, airline market leader IndiGo announced that it will introduce business class seating in its selected flights starting August 2024. This marks the first time in the 19 years since it was launched that the no-frills, low-cost airline is going upscale on certain routes. This will bring it in direct competition with the Tata-owned Air India and Vistara combine, where IndiGo’s cost structure allows for better margins. Since the collapse of Kingfisher followed by Jet Airways, business class offerings in India have been shrinking, though demand has been rising. With low-cost champion IndiGo venturing into the realm of business class, legacy full-service carrier Air India introducing all-economy configurations on its newer aircraft, and its own low-cost subsidiary Air India Express offering business class seats, the Indian aviation landscape reflects a dynamic industry where traditional boundaries are blurring and airlines are experimenting with diverse strategies to cater to evolving passenger preferences. | | | | Amidst Legal Entanglements Byju’s Loses Key Advisors  Former SBI chairman Rajnish Kumar and former Infosys board member T.V. Mohandas Pai will leave an advisory panel of Byju’s parent company, Think & Learn Pvt. Ltd, barely a year after they came on board to advise founder Byju Raveendran following a series of board exits and financial woes. Their exit, coming a month after the company’s CEO Arjun Mohan quit within six months of joining, is yet another sign of the edtech company’s alarming fall from grace. Once India’s most valuable startup, the 13-year-old company has been hit by a slew of lawsuits in the US and in India as investors and creditors raise questions over governance and financial management, and demand that the founding family including Raveendran, his wife Divya Gokulnath and brother Riju Ravindran steps down. Adding to the company’s woes, the United States Bankruptcy Court for the District of Delaware has imposed penalties on Riju Ravindran, for contempt of court after he refused to “disclose or ascertain the location of $533 million in term loan proceeds". | | | | | | | | Nestle India's Royalty Hike to Parent Rebuffed by Investors  Citing insufficient justification, over half of the shareholders, including 71% of larger investors, who own nearly 21% of the company's stake, voted against Nestle India’s proposal to increase royalty payout to its Swiss parent. The decision to raise the royalty payout from 4.5% to 5.25% of net sales over the next five years had been approved by the company’s board earlier this year. One large investor, Legal & General Investment Management (LGIM), said that the performance of the company did not sufficiently demonstrate the benefits of the royalty payments over the years, which have grown faster than its revenues and net profit. Others echoed the sentiment and said the move did not “protect or enhance long-term shareholder value creation. Nestle India's 4.5% royalty payout as a percentage of its revenue is lower than that of Procter and Gamble Health’s 5.35% and Colgate’s 4.9%, but higher than the 3.1% paid by Hindustan Unilever Ltd to its parent company. Significantly, royalty as a percentage of post-tax profit for all these companies, is much higher. Which is why, proxy advisory firms like IiAS suggest that royalty should be capped as a percentage of profits instead of revenue. | | | | Paytm Promises Good Times Will Return. But, First the Bad News  While the full financial impact of the restrictions placed on its bank by the Reserve Bank of India will be felt only from the first quarter of FY25, One 97 Communications, the parent company of Paytm, reported a fall in its fiscal fourth-quarter revenue with losses for the three months through March widening to ₹551 crore, compared to ₹168 crore a year earlier. The drop in sales is the company’s first since its 2021 stock-market debut and overshadowed its first full year of EBITDA before ESOP profitability (since the IPO). While maintaining that the impact of the regulatory action would be short term, the company warned of job cuts and said it would trim non-core assets, with June quarter revenues likely to range between ₹1,500 crore and ₹1,600 crore, down substantially from the ₹2399 crore it posted in the current quarter. The company’s shares which have slipped 62% in the last six months, dropped further on the announcement of the results. | | | | Adani Prepares $3 Billion War Chest for Port Acquisitions Abroad  After running 13 domestic ports in eight Indian states, the Adani group has readied a $3-billion war chest to expand its global ports capacity through a series of acquisitions, including at least three large ports on the coastal borders of Europe, Africa and SouthEast Asia. The plan is to enhance its overall port (container-handling) capacity from around 600 million metric tonne per annum (of which 420 mmt is domestic) to 800 mmt in the next two years, while upping the contribution of international ports to Adani Ports and Special Economic Zone Ltd’s (APSEZ) revenues from 10% currently to about 20-25% in the next three years. The planned acquisitions will be funded by a mix of cash, internal accruals and debt, though the group may also use a part of proceeds that are expected to come from an upcoming fundraise. A recent ratings upgrade by CARE Ratings should help Adani Ports, whose consolidated revenue in FY24 grew 28% year-on-year while net profit jumped 50%, raise funds externally. | | |  | | | | There’s a good reason why Adani is pumping billions into boosting the group’s port infrastructure. As this video shows, ports are a very important part of India’s bid to become a $ 5 trillion economy: | | | | Last Word It is ironic that the Indian IT sector's highest-paid top executive for the financial year ended March 2024 was a man who was let go with a year left for his contract to end. Wipro’s former chief executive officer (CEO) Thierry Delaporte was the country’s highest-paid top boss in the IT sector in FY24, after taking home $20.1 million (₹167 crore) during the period, more than twice the $10 million in annual compensation he earned the previous year. Delaporte’s salary increase was primarily driven by a cash severance payment of $4.33 million, and the cost of accelerated vesting of unvested stock options. While his was the highest salary among Indian IT leaders, it was still lower than the Nasdaq-listed Cognizant Technology Solutions' CEO Ravi Kumar Singisetti, who earned $22.6 million in the year ended December 2023. Both firms were relative underperformers among the top IT firms, with Wipro posting a yearly revenue decline. | | | | Answer to the Question Based in Madurai, Tamil Nadu-based, Paramount Airways was launched by its founder M. Thiagarajan in 2005 as a premium airline with an all-business class proposition flying to cities like Chennai, Cochin, Coimbatore and Thiruvananthapuram. By 2010, its load factor was one of the highest in the industry, but mounting debts and a drop in demand after the financial crisis led to its closure in 2010. | | | 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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