Company or country: Corporate India’s conundrum

Good morning. It’s Friday the 13th, but I’m feeling lucky to have received all of your feedback and suggestions after Tuesday’s inaugural newsletter. Thank you for the messages, and please keep them coming.

For today: should India Inc look beyond the balance sheet and contribute to nation building? Finance minister Nirmala Sitharaman urges companies to blend commercial considerations with the nation’s priorities. I am also keeping an eye on the winter session of parliament, where chaos continues with the BJP and opposition parties butting heads on the political situation in Manipur, as well as the role of American billionaire George Soros in “destabilising India”. Plus, how will Adani Group pay its big bills?

Corporate India to co-operate

In a familiar admonishment, the finance minister told Indian CEOs this week that their commercial considerations should blend with the nation’s priorities and strategic needs.

While she elaborated on the requirement for large corporates to work with small and medium enterprises and focus on job creation, her primary bugbear is capital expenditure. In public and private, Sitharaman has expressed her frustration that Indian companies are not investing enough, and that the responsibility for capital expenditure is overwhelmingly carried by the government (although this has recently slowed; official figures showed that government capex grew only 5.4 per cent in the second quarter, a further drop from 7.5 per cent in the previous quarter). 

Corporations are not going to be let off easily. According to several news reports, the government has asked the National Statistical Office to conduct a survey of private capex, the results of which will be published in March. With high inflation and low GDP growth, the Indian economy is in a tight corner and the government needs all the help it can get. But shaming corporations into increasing their capital expenditure is not a sustainable way to grow the economy. It is the government’s responsibility to ensure that conditions are favourable enough for private capital to be deployed.

The government wants India Inc to step up on the demand side, too. Last week, chief economic adviser V Anantha Nageswaran urged companies to hire more and pay better. Listed companies are making higher profits while their wage costs are shrinking. It’s self-destructive that there isn’t adequate demand in the economy for the companies’ own products to be bought, he pointed out. 

Corporate pay scales are determined by market forces and the low wage scale is a reflection of high unemployment. Even if they are responsible citizens, CEOs are paid to focus on their balance sheets and it is inevitable that if they can reduce wage costs, they will. You can either be a capitalist or socialist; it is difficult to be both. 

Do you think companies have a responsibility to the nation and not just their shareholders? Write to us at [email protected] or hit reply.

More news you should know

1. The US stocks rally is set to slow. Wall Street strategists forecast the S&P 500 will rise just 8 per cent by the end of 2025, after surging 28 per cent this year. On a related note, accurately predicting the next crash is impossible, Jonathan Guthrie writes, but we can learn to weather downturns better.

2. Donald Trump has promised speedy approvals for anyone investing $1bn or more in the US. 

3. Google has launched an advanced version of its AI assistant, Gemini.

4. For the weekend, I recommend reading about the airlines you should pick if you want to fly first-class. Also, I plan to take a deep dive into the messy saga of Rupert Murdoch’s succession.

5. Saudi Arabia will host the 2034 Fifa World Cup.

Adani: Finding the money

This week Adani Group said it would no longer tap $500mn in US development financing for the port the conglomerate is building in Sri Lanka, and will instead use internal accruals and its capital management plan to fund the construction. Adani had secured support for the project from the US International Development Finance Corporation in November 2023, after the short seller Hindenburg Research published its report accusing the company of manipulating its stock price. A US federal agency’s backing was seen as a ringing endorsement of the company and its business practices. 

A year later, Adani is in even bigger trouble after US prosecutors announced their decision to indict Gautam Adani and seven others. The big question now: how is Adani Group going to raise money? It has significant debts to service, with $1.7bn reportedly due in March, as well as high working capital requirements.

Last month, after the news of the indictment broke, the company abandoned its $600mn bond offering for Adani Green Energy and reassured investors that the group’s companies have enough cash to service their debts for the next 12 months. Infrastructure projects are expensive businesses to fund and even if the group has enough internal accruals to continue the port project and service its debts until March, it will have to find ways to raise funds soon. Watch this space.

Catch up on our recent Adani coverage:

• Jefferies and Adani: Due Diligence on the love affair between a US bank and an Indian business empire (sign up for the newsletter here).

• Solar saga: The US corruption case has cast a pall over a sector vital to the Indian government’s efforts to boost renewable energy.

• Africa ambitions: The charges are also threatening Adani’s plans in the continent, after Kenya reversed its support for a $1.85bn airport project.

Go figure

This week Omnicom announced its decision to buy Interpublic to create the world’s largest advertising agency. Here are some important post-merger facts.

Read, hear, watch

Bryan Adams is touring India, with performances in four cities and Goa. I expect I’ll be spending the weekend watching my friends endlessly scream ‘18 til I die’ on my Instagram feed. When I tire of that, I’ll switch screens and watch Netflix’s newest hit, Black Doves, a spy thriller starring Keira Knightley. 

Former SoftBank president Alok Sama’s book The Money Trap: Grand Fortunes and Lost Illusions Inside the Tech Bubble is all over the airwaves. I might give it a go. Have you read it? Let me know what you thought of it.

Buzzer round

Nothing to cheer about. Which “asset class” plunged 40 per cent in value this year because of a weakening global economy? 

Send your answer to [email protected]m and check Tuesday’s newsletter to see if you were the first one to get it right.

Thank you for reading. India Business Briefing is edited by Tee Zhuo. Please send feedback, suggestions (and gossip) to [email protected].