Thinkpad: Go Big, Or Go Home

Happy Sunday.

‘Big’ was a word thrown about a fair amount this week. “Big” IPOs. “Big” valuations. No “big” profits, but that’s no “big” problem.

The Zomato IPO closed this week. The IPO was subscribed 40 times. We’ll spare you a repeat of the breathless coverage around the public offering but suffice to say that the combination of easy and cheap liquidity (IPO financing NBFCs made a packet), increased direct retail investor participation and FOMO probably played a role in the kind of money put on the table. Rs 2 lakh crore in bids came in for the IPO.

No connection, but that’s higher than the government’s divestment budget. Do you think, someone, somewhere, secretly, in government is hoping it owned Zomato instead of, well, Life Insurance Corp. of India? It will be ironic if LIC, which made Rs 2,900 crore in after tax profits in FY21, compared to Zomato’s Rs 816-crore loss, gets a cold shoulder when it finally comes to market. Incidentally, that process is moving along, expectedly, at a lumbering pace.

Zomato done, the attention will likely move to Vijay Shekhar Sharma’s Paytm.

One97 Communications Pvt. filed for a Rs 16,600-crore initial public offering. The draft red herring prospectus tells us a bit more of what we know—making money from payments alone is tough. You can read about the company’s key financials here.

Yes, there is data. Yes, there is the cross-sell. And, yes, we sound hopefully outdated when we worry about profits. But the fact remains that profitability is nowhere in sight. The company says so itself. “We expect to continue to incur net losses for the foreseeable future and we may not achieve or maintain profitability in the future.” Nice pitch, huh? But, no doubt, enough investors will find reason to be interested when the issue launches.

Over, in the central banking world, after ‘going big’, some central bankers are starting to go home.

The central bank of New Zealand said this week it will halt bond buying by July 23. No taper here. Just a full stop. The central bank said that a “least regrets” policy suggests a withdrawal of support. “Least regrets” is a good way of looking at policy decisions.

The Bank of Canada is also dialing back bond purchases.

These central banks may not matter in the larger global scheme of things but the indications are clear—central banks are starting to respond to stronger growth and higher inflation.

No sign of that switch in India, so far.

Reserve Bank of India Governor Shaktikanta Das, in a recent interview to Business Standard, maintained that inflation is a “temporary hump”. The June retail inflation data this week didn’t throw up any negative surprises, coming in at 6.3%. So for now, it looks like the central bank may have enough space to stay growth supportive. Former RBI Governor C Rangarajan thinks that’s the right way to go.

The RBI monthly bulletin, which has added a poetic touch to economic analysis, had this to say on growth and inflation: “The key, as in the rest of life, is to strike the right balance.” It is only a matter of time before quotable quotes from the RBI bulletin hit the Pinterest and Instagram circuits.

We’ll leave you with this conversation with HSBC’s Chief India Economist Pranjul Bhandari. How is India’s large informal economy faring? And what does that mean for growth in the economy? Something to chew on.

For now, though, hope you have a sumptuous Sunday lunch to chew on.

Thinkpad takes a short break for the next couple of weeks. Till next time.