JSW Group’s possible entry into auto market, IT hires, cola wars, and more

What’s keeping the business world abuzz on Tuesday (April 25)? The Federal brings you the latest news from corporate circles.

MG Motor in talks with JSW Group for stake sale

MG Motor India, part of China’s largest carmaker Shanghai Automotive, is in talks with JSW Group to pick up 15–20% stake in the company for Rs 2,000 crore–Rs 3,000 crore.

What it implies: JSW Group has been trying to enter the automobile market and had even bid for General Motors’ Talegoan plant in 2019. This time, the talks have progressed to the extent that the deal might eventually happen. The Chinese-owned companies have been struggling to raise funds and tapping into external commercial borrowings from the parent to sustain their India operations. JSW Group, which has a 1-million-tonne-per-annum steel plant in Tamil Nadu’s Salem, supplies auto-grade steel to automobile manufacturers. It had earlier said that it wants to manufacture electric vehicles in India. MG Motor has a couple of electric four-wheelers in its line-up.

Also read: IT hubs Hyderabad, Delhi, Bengaluru top locations for apprentice job in Q4: Report

Hinduja family feud remains unresolved

A lawyer for patriarch Srichand Hinduja told a London court on Monday (April 24) that the Hinduja family’s apparent agreement about the future of its global business company is in danger. The lawyer said there had been “threatened lawsuits” between family members. This makes it more likely that the Hinduja family, whose businesses include banking, chemicals, and healthcare, will face more cases.

What it implies: The $15 billion Hinduja empire is unlikely to be impacted because of the ongoing dispute. But the family row may also not get resolved soon, as the crossholdings among the family members go through a web of trusts and offshore entities.

Background: In June, the Hindujas’ lawyers told a judge they would end “all disputes between them in all jurisdictions.” This included a London High Court lawsuit over the Hinduja family’s assets. The judge’s decision came out in November. The crux of the problem is the legality of a 2014 agreement made by the four Hinduja brothers — SP, GP, Ashok, and Prakash — that “everything belongs to everyone, and nothing belongs to anyone.” They also agreed that each brother would execute the other’s will.

While GP, Ashok, and Prakash Hinduja maintained that the deal established the groundwork for the 108-year-old conglomerate’s succession planning, the position was disputed in 2019 by SP’s two daughters, Shanu and Veenu, and the case became public in 2020. Shanu’s son is the CEO of the privately held SP Hinduja Banque Privée SA. The girls claim their uncles have sidelined them and ‘financially squeezed” them out of the family fortune.

Shanu and Veenu are accused of “power grab” by SP’s brothers, stating that they manipulated the patriarch’s poor health to act against his desires. This has been challenged in court by the daughters. SP bought Banca Commerciale Lugano in 2013 and merged it with an existing Hinduja company, Hinduja Bank (Switzerland). The company was then renamed SP Hinduja Banque Privée SA. SP went on to become the bank’s first chairman.

Shanu was first appointed as SP’s legal guardian. Still, the lasting power of attorney was revoked in February 2021 after it was shown that SP’s resources were used to support the commercial battle before the Chancery Court in London rather than his dementia care. The daughters argued that SP’s family was deprived of income from 2014 till it completely dried up in 2018. GP Hinduja denied any financial constraints.

Also read: Reliance Retail enters JV with Haryana firm Circle E for toy manufacturing: Report

Coke chief upbeat about India operations

President and CFO of The Coca-Cola Company, John Murphy, has said the soft drinks major increased availability to over 3 lakh stores in India in the first quarter, driving approximately 3 billion transactions at affordable price points.

What it implies: Coke and Pepsi are bracing themselves for a major cola war expected to be unleashed by Reliance Consumer Products, which bought Campa Cola for Rs 22 crore from Pure Drinks last year. For Coke, India is the fifth-largest market. According to certain reports, Coke, responding to the new competition, has already reduced the price of its cheapest bottle. However, it had earlier said there wouldn’t be any changes in its pricing policy in a market dominated by Coke and Pepsi. The current market size, according to Euromonitor, is around $4.7 billion, with a growth rate of 5% every year.

IT campus hires to be 70% of pre-COVID levels

IT service companies, which had gone through a relatively poor fourth quarter and expect the same situation to continue for another four quarters, have started shedding employees and delaying fresh hires.

What it implies: With most IT service companies rationalising cost structure to brace for slower growth times and having over-hired during the pandemic, they are now cutting back on hiring. Rating agency ICRA believes attrition levels will slide further over the next two quarters because of excess capacity added during the previous year. However, TCS has said that none of the headcount reductions was because of the demand environment but because of over-hirings. Most IT service companies are expected to reduce hiring by around 40% during the year.

Also read: ICICI Bank Q4 results: Net profit beats estimates, rises by 30% to Rs 9,122 cr

Research report: Real estate consultancy firm Colliers says office vacancy levels remain stable

Office vacancy levels remained rangebound during Q1 2023, in line with the Q4 2022 levels, pointing to a resilient commercial office market. During Q1 2023, while the office market witnessed softer demand, it had little impact on vacancy levels. While 2022 saw a robust demand with occupiers going ahead with their expansion plans after a 2-year-long wait-and-watch scenario, market activity softened in Q1 2023 amid the looming recessionary concerns and economic headwinds.

New supply largely treaded alongside demand in most markets, resulting in stable vacancy levels. Compared to a year ago, vacancy levels dropped by 210 basis points, with demand making a massive comeback. Though the leasing activity in Q1 2023 witnessed a 19% YoY drop at 10.1 million sq ft, the market will likely pick up in the latter part of the year, driven by solid growth fundamentals. While the office market has a strong supply pipeline, developers will be more careful and cautious basis how the demand pans out going ahead, thereby avoiding speculative supply.

“At a time when occupiers are delaying decision-making on leasing office spaces amid continued economic uncertainties, the office market witnesses signs of stability in Q1 2023 with the vacancy levels remaining intact at 16.4% compared to the previous quarter. We expect demand and supply to move unison, keeping the vacancy and rental levels rangebound. The latter part of 2023 may see signs of strong recovery, provided the recessionary concerns lessen at the beginning of the second half of 2023,” said Peush Jain, Managing Director, Office Services, India, Colliers.

Vacancy levels in half of the top six cities across India during Q1 2023 remained aligned with Q4 2022, indicating a conservative yet strategic stance across markets. Hyderabad, Delhi NCR, and Pune witnessed a slight rise in vacancy levels due to a significant supply infusion in the respective cities in 2022. On the other hand, vacancy in Mumbai, which dropped to 15.3% by the end of 2022, remained stable in Q1 2023 due to the limited availability of new supply paired with steady demand in the city.