Good morning! There’s no worse feeling than waiting for a (very delayed) order to arrive, wondering if you should just cancel instead. It’s 1000x worse when your order costs upwards of $1,000 and is more than seven years late. Indian tech/startup bros, influencers, investors, and some ordinary folks are still chasing refunds for the Teslas they pre-ordered in 2016, reports Rest Of World. Some have got them, after much chasing, but interest-free. Others are holding out. EV competitors be damned, they say, aayega toh Musk hi (only Musk will prevail). 

Pushpita Dey, Roshni Nair, and Soumya Gupta also contributed to today’s edition.

The Market Signal*

Stocks & Economy: As avenues of raising finance dried up in India, non-banking finance companies have made a beeline to offshore markets to borrow. So much so that they’ve pushed up Asian junk bond sales growth for the first time in five years. Sales of such bonds have topped $5.9 billion, 44% of which was issued by Indian companies. 

Four shadow banks accounted for $2.05 billion out of the total $2.6 billion raised by Indian borrowers, Bloomberg reported. 

Asian markets, except Singapore, were trading in the green in morning trade. Indian equities will likely open flat, the GIFT Nifty indicates. Uncertainty is building over the outcome of the elections after the third round of polls triggered speculation that the ruling BJP may not have done well.

BANKING

Too Big An Umbrella, Banks Tell RBI

Banks are resisting the Reserve Bank of India’s (RBI) plan to build bulwarks in the financial system. The central bank, in a draft proposal, has suggested keeping aside 5% of project loans as provisions to protect against defaults. Banks want it lowered to 1-2% and not applicable to existing projects. 

Banks are under pressure as their cost of funds and operations is rising. Higher provisioning will add to their woes. The RBI, however, wants to prevent systemic risk buildup. In October-December 2023, 448 infrastructure projects, each costing Rs 150 crore (~$18 million) or more, faced a cost overrun of Rs 5.55 lakh crore. 

The RBI has been cracking the whip on risky practices. The recent spate began with Paytm, whose customer verification process was found to be poor. Incidentally, the company’s lending partners, fearing loan defaults, have reportedly invoked structured loan guarantees provided by Paytm’s parent One97 Communications.

PODCAST

Tune in every Monday to Friday as financial journalist and host Govindraj Ethiraj gives you the most important take on the latest in business and economy.

In today’s episode, he asks Aviation Lawyer Nitin Sarin whether Jet Airways and GoFirst are destined to stay on the ground. Also today: Ajit Velonie, Senior Director, Crisil Ratings, talks about how Indian NBFCs are raising capital.

ARTIFICIAL INTELLIGENCE

Hire, Fire, Hire Again

Everything AI is getting so cutthroat, even Microsoft is building its own cutting-edge model that could potentially compete with partner OpenAI’s GPT-4. Not to be left behind, rival Google, which is incorporating Gemini even in cybersecurity products, is building an army of salespeople to push its large language model onto enterprise users. That includes hiring new recruits for the purpose, never mind that it recently laid off hundreds of core employees.

The Information reports that the company is also moving staff from the Google Cloud division to a dedicated AI sales team whose new objective is to promote Gemini to Workspace users. Subscriptions for this bells-and-whistles version of Google’s office software cost $20-36 a month.

For all the hype though, AI use-cases for enterprise still struggle with unmet potential. Businesses that have signed up for these office software upgrades still use the features for mundane tasks like summarising correspondence.

ECONOMY

Small Towns, Villages Get In On The Action

People are moving about, sparking economic activity in unlikely places. And hoteliers are chasing them. Major hospitality chains such as Marriott, Radisson and Indian Hotels are building properties in laid-back towns and small cities. They are expanding in pilgrimage centres such as Nathdwara, Ujjain and Guruvayoor. Tier-3 locations such as Silvassa, Rewa, and Sonepat that are barely known for anything more than a scenic spot or two are also attracting hoteliers and visitors. Some of these cities have an industrial centre nearby, which means a steady stream of business travellers.    

Last year, 128 tier-3 cities accounted for nearly half of the 30,000 hotel room sign-ups. More than half of new hotel developments in FY24 came up in small towns and cities. 

Meanwhile, after 15 months of sluggish demand, the country’s hinterland has begun to spend faster than urban areas. FMCG sales in rural areas jumped 7.6% in January-March. Rural car and two-wheeler sales perked up too. 

The Signal

Post-pandemic, workers are more reluctant to move to faraway cities in search of economic opportunity. The expansion of premium tourism and travel services from the usual destinations to newer cities and towns will help boost local economies. While the hospitality companies are lured by cheaper land and lower operation cost of tier-3 and 4 cities, more visitors will help create local jobs and entrepreneurial opportunities which, in turn, will improve incomes and boost consumption.

🎧 Today we are talking about AI and chip competitions. Also why premium hospitality chains are opening hotels in tier-3 and 4 cities. Tune in on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts.

FYI

Accusations: In an election rally, Prime Minister Narendra Modi alleged Reliance Industries’ Mukesh Ambani and Adani Group’s Gautam Adani gave illegal cash to opposition parties in India; he did not offer any evidence. 

I’m sick, *cough*: Tata Group’s budget carrier Air India Express cancelled more than 90 flights starting Tuesday night as over 300 cabin crew members reported sick at the last minute and switched off their phones; last month, sister airline Vistara had also cancelled flights as crew called in sick in droves. 

Payback: After raising Rs 18,000 crore in a public issue, telecom operator Vi has promised to clear all vendor dues by FY26 while pushing more 2G users to switch to 4G. 

Sold and caught: India’s Central Bureau of Investigation (CBI) arrested four people for duping Indian men into fighting for Russia in the Ukraine war; the suspects are allegedly linked to human trafficking networks.  

Call in the fixers: Kotak Mahindra Bank is hiring 400 engineers to upgrade its technology; last month the RBI banned it from onboarding new customers online and selling credit cards after discovering serious lapses in its IT systems. 

THE DAILY DIGIT

3,901 km

The record-breaking length of tracks laid by the Indian Railways in 2022-2023, according to a response to an RTI application by the Railways Ministry. (The Economic Times)

FWIW

Heat is a press-ing matter: If you’ve set up solar panels at home or embraced public transport to reduce your carbon footprint, the Council of Scientific and Industrial Research would like to have a word. They’re suggesting a stupid novel method for individuals to cut down on emissions: stop ironing clothes. A circular sent last week asks all CSIR employees to “refrain from wearing ironed clothes” once a week until May 15, arguing that ironing a pair of clothes is responsible for 100-200 grams of carbon dioxide emissions. CSIR is calling the campaign ‘Wrinkles Achche Hain’ (wrinkles are good). Why stop there? A 2017 study concluded having fewer children was the best way to reduce one’s carbon footprint.