On Episode 908 of The Core Report, financial journalist Govindraj Ethiraj talks to Garima Kapoor, Economist & Deputy Head of Research at Elara Securities (India) as well as Piyush Pandey, Senior Vice President, Lead Analyst-Institutional Equities for IT, Telecom, Internet and Power at Centrum India.

SHOW NOTES

(00:00) Stories of the Day

(00:50) Lessons From The World’s Biggest IPO

(02:17) Monsoons Have Now Recovered And Is Advancing, Says The IMD

(09:00) Near Term Risks For The Rupee Are Fading But There Are Longer Term Issues

(17:16) Alan Greenspan, The Man Behind The Famous Irrational Exuberance Term Has Died

(19:04) Where Do Analysts See Value In The Telecom Business Stack?

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Tuesday the 23rd of June and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital,

Our top stories and themes…

Lessons from the world's biggest IPO.

Monsoons are now recovering and advancing, says the Met department.

Near-term risks for the rupee are fading, but there are longer-term issues. What are they?

Where do analysts see value in the telecom business stack?

And Alan Greenspan, the man behind the famous irrational exuberance term, has died.

Markets, IPOs, and Currencies

The one thing that's consistently common in financial markets is IPO market fever. Loss-making SpaceX shares continue to fall, slipping further in pre-market trading on Monday, continuing a sell-off that has seen the stock fall in the past two full days of trading after a rally following its record-breaking initial public offer.

Shares in the company were down about 6% on Monday morning. Elon Musk's space and artificial intelligence firm became one of the world's most valuable companies after a blockbuster listing on the 12th of June. The stock price rose in SpaceX's first two full days as a public company with market capitalisation crossing Amazon and briefly Microsoft on Tuesday.

It is now back below both, CNBC reported. Adding the stock is still up 37% since its historic debut at market close on Thursday where it offers shares at a price of $135. But the average investor who bought SpaceX shares in the open market after its debut had seen nearly all of their gains disappear by the end of last week thanks to the pullback.

According to that CNBC report, SpaceX posted a $4.9 billion net loss in 2025 and it also lost $4.28 billion in the first quarter of this year. Now, this is not to suggest that upcoming IPOs back home will face a similar fate, but a good reminder that aggressive pricing which tends to leave little or nothing on the table usually backfires and quite spectacularly as we've seen in the last couple of years as the number of underwater IPOs rise. Staying with the skies but shifting our focus to clouds, a monsoon in India has been revived after its advance over western India had stalled for two weeks with rains expected to move into the country's central regions this week giving a boost to summer crops, sowing and bringing relief from a heatwave.

According to weather officials who spoke to Reuters on Monday, the June to September monsoon rains that dump about 70% of India's annual rain quota usually hit the state of Kerala around the 1st of June before covering the whole country by the middle of July. The official at the India Meteorological Department or IMD said that the monsoon is now getting momentum and has covered additional parts of Maharashtra, Telangana and Chhattisgarh as well as remaining areas of Karnataka and yes of course it was raining this morning in Mumbai or at least parts of Mumbai and I did see some minor flooding on the expressway to the airport. Monsoon rains touched southern Maharashtra on the 8th of June but their advance subsequently stalled for nearly two weeks thanks to western disturbances according to an IMD chart tracking the movement as per the Reuters report.

You may recall I was mentioning that Mumbai has cut water supplies to construction sites and reduced industrial usage by 20% thanks to reservoir levels going down. In the first 21 days of June India received a rainfall that was 42% below average and rainfall this week is also expected to remain below normal. The other important factor to consider is that reservoir levels have fallen in recent weeks.

As of 18th June current capacity as percentage of total stood at 27.7% lower than the 34% at the end of May 26. That's a month ago as well as 32% roughly a year ago. Looking at the past six years says a report from Quantico Research, 2026 marks the sharpest depletion in reserves between end May and third week of June and in terms of geographical spread the steepest decline vis-a-vis last year's reservoir levels is recorded for southern India.

Now on the other side India has improved area under irrigation and that's often seen as a bullet that can perhaps cushion the impact of El Nino and consequently the deficit monsoon. But the Quantico report points out that area under irrigation for food grains stood at about 63% as of last year which is reasonable coming a long way from 35% in 1990. But this is a lopsided macro picture argues the Quantico report as the micro picture is riddled with crop and regional variations.

According to them the area under irrigation for sugarcane is 100% given the high water intensive nature of the crop. For rice and wheat it stands at about 70% and 95% but after that the area under irrigation for most other crops is quite low. For example for coarse cereals which are not water intensive like jowar, bajra and maize area under irrigation stands at 24%, 19% and 42% respectively says that report.

Meanwhile there are developments from Switzerland. Iran said that there had been major progress in all-night discussions with the United States as they try and reach a peace deal within two months. The countries began technical talks in the Swiss resort of Bergenstock over the weekend following their interim agreement last week that led to a ceasefire extension and Iran reopening the state of Hormuz.

According to Bloomberg though several obstacles still remain including Israel's war in Lebanon against Hezbollah and Iran-backed militant group. At one stage on Sunday Iran said it would suspend talks but never actually did after US President Donald Trump threatened military action against Iran over its funding of proxy groups in the Middle East according to that Bloomberg report. Well so Brent crude was back under $80 a barrel to hover around $79.11 on Monday morning and prices dropped after US Vice President J.D. Vann said progress had been made in talks with Iran and the state of Hormuz was open.

In all of this the markets looked up on Monday maybe that morning downpour in parts of or maybe not but the nifty 50 and the sensex were up thanks also to gains in it and pharma stocks even as oil prices as we pointed out have now gone below $80 a barrel the nifty 50 was up 90 points to 24,102 and the sensex was up 291 points to 77,094. In the broader markets the nifty mid cap and small cap were also up marginally. Elsewhere the rupee broke a six-day long run of gains on Monday as the dollar moved to a near one-year peak against its peers according to a Reuters report which added that the currency ended the trading session down at 94 rupees 67 paise down 0.4 percent from its Friday close also pointing out that the rupee had risen about one percent in preceding six sessions.

Asian currencies also declined between 0.3 and 0.7 more on the rupee in a moment meanwhile the British pound reversed earlier losses to rise as much as 0.3 percent to 1.32 dollars against the pound that is the yield on UK 10-year bonds slipped four basis points to 4.8 percent after Prime Minister Kier Starmer resigned on Monday a successor will take over in September.

KIE's Crude Oil Price Assumption

With oil prices below $80 a barrel or hovering thereabouts where do analyst assumptions stand when it comes to assessing impact of oil prices on India's economy? Kodak institutional equities put out a note on Monday saying they are reverting to a crude oil price assumption of $85 per barrel from $95 per barrel for the current year while maintaining $75 a barrel for the longer term or the next year. Kodak institutional equities argues there's a clear urgency to resolve the prolonged Strait of Hormuz disruption with the US-Iran MOU in place and the US likely keen to end the conflict amidst global pressure and upcoming midterm elections they see a high likelihood of a final agreement.

According to them ONGC's fiscal year 27 earnings moderate but its outlook remains constructive and the report also says that after prolonged water negotiations the US and Iran have shown urgency in restoring normalcy to troubled waters. Of course geopolitical risks persist but the larger point here is that oil markets have been fairly well balanced or put differently things could have been much worse. The West Asia conflict led to the largest ever supply disruption and shock as we know leading to a big spike in oil prices in March but then subsequently as the disruption prolonged and inventories declined rather than rising further oil prices have been stable to declining.

What's also helped is that there were large strategic reserve releases by OECD countries and China along with reduced imports by some countries like China and Japan which also helped keep prices in check according to the Kodak report.

What Issues Does the Rupee Face Currently?

A report from Elara securities out on Monday morning says the rupee will face longer term structural issues even as the near-term risk fades. It also talks of shifting global capital flows and why that could affect anticipated foreign direct investment flows.

It also says easing middle east tensions and a rash of policy measures by the reserve bank and the government to attract debt capital flows have eased stress on the rupee as we have seen. However they add that they do remain concerned about prospects for durable capital flows that's foreign capital flows in the next year amidst a globally shrinking FDI pi tightening monetary policy in the US and possibly soft portfolio investment equity flows into India amidst concentration of tech flows into the US. I reached out to the notes author Garima Kapoor chief economist at Elara and I began by asking her why she felt that flows were slowing down and why India's latest policy intervention measures may not work over the longer term.

INTERVIEW TRANSCRIPT

Garima Kapoor: What's really happening right now is, cyclically, for near-term risks, the debt slows that we needed to fund this year's current account deficit, the balance of payment shortfall that we were staring at, is taken care of. But structurally, to be able to, year after year, fund our current account deficit, we will need a steady slow of capital. The last two years have taught you one lesson, that FDI inflows can be very, I should say, fragile, especially in the context where the global risks are rising.

So we really do not know when this AI-related cycle peaks out, unless that ensures that capital comes to India. So that means you need to depend on structural flows, which are more durable, and nothing more durable than FDI. Now, the challenge India faced in 2026 financial year was, that a gross FDI was strong, but because it was repatriation that was too strong, especially one to continue to invest in companies outside, so outward FDI was rising.

And you were repatriating profits, because now India has now started to have a stable base of manufacturing by MNCs, you usually see a repatriation of profits steadily increase. So you need a steady flow of FDI. If you have a steady state rent of 60-65 billion, that's no longer going to be enough.

It's a repatriation, FDI keeps on rising. That means inflows have to now go to a new normal of 70-80, or thereabouts, such that you can take care of a steady state increase of repatriation of outward FDI. But globally, the FDI volumes and value is shrinking.

It's shrinking for two reasons. One, it's a supply chains are now no longer getting regulated by cost concerns. They're getting regulated by resilience.

So companies are no longer looking at setting shops in low-cost sources of manufacturing, but closer to home, or perhaps even in their own country, just to ensure that the shops are limited. That means a global FDI volume and value are going to shrink. When you saw a peak out in 2016, in 2014 also you saw a degrowth.

In fact, FDI to developing Asia did grow in 2024. Now, what will happen is 2025, you saw further risks in terms of Trump tariff, and then the West Asia crisis. In my assessment, 2025 data, when it is out, for world put together, there will be a further pulldown you will see in numbers.

So structurally, funding sources are no longer as durable and resilient as they used to be maybe five years ago. And hence, the challenge of the rupee remains more structural in nature in terms of continuing sources which are not determined by interest rates, not determined by cycles like AI, not determined by literally what's happening to your valuations in terms of equity, but X of that. And that is becoming a concern that that's probably shrinking.

Govindraj Ethiraj: Right. And in your report, you've said that gross FDI inflows in the world peaked at $2.2 trillion in 2015, and are now at about $1.5 trillion, which is quite a fall. And you also pointed out that, which some of us may not know, is that the US has remained the biggest recipient of FDI flows in the world.

And in 2024, that figure was at about $280 billion. Now, let me come to portfolio investment. I know you touched upon it just now in the context of AI, but why is that looking weak too?

Garima Kapoor: See, current last two years, we've had all sorts of issues relating to the fact that we were the most favourable country economy when Trump came to power, to that we became the most least favoured country in the ecosystem of Trump. Second was the issue that, of course, your valuations were concerned. India sees a persistent inflows only when India is able to give you above average premium returns compared to emerging peers.

Now, gone is the era of seeing a high double-digit team kind of earnings growth. India's ROEs have also fallen compared to what they were two, three years ago. And we really don't have an AI play.

So the only way we can anticipate that we will be a recipient of durable flows is one, is that earnings recovers materially. Second is that the concentration risk that we're seeing in the US, because that's where the tech flows are now congregating. They're no longer even as strongly flowing to tech-related companies in Asia, but now they're flowing back to the US, because that's the source of R&D and source of spend.

And the third challenge is that we might be entering into the second half of the current calendar year or financial year with a possible rate hike scenario by US Fed. And that would change the dynamics altogether, because a rate hike cycle will not be very favourable to EMAsia. It will certainly not be favourable to EMFX, including that of Rupee.

And that means that we cannot rely very strongly on the fact that we will get FDI flows. So these measures right now are favourable because you have benefits in the form that the banks are offering you a lot of leverage. So interest rates are becoming a return on your S&R.

We are becoming favourable. Beyond these measures, you need inclusion in the bond index, Bloomberg bond index, which can bring about 25, 30 billion worth of steady flows. You need some flows on equity side as well, which are basically more continuing in nature and not fragile.

So a lot of issues and buts, which tells me that we can't generally be sure in the current environment that we are in, that we might see a turn in tide when it comes to FDI flows.

Govindraj Ethiraj: Right. And coming back to the near-term risk fading is, one is obviously the price of oil, which is at least as of Monday below $80 or back to below $80 and may slip a little further, depending on how things progress in Switzerland. But how are you seeing progress on that front from a broader India economy point of view?

Garima Kapoor: See, so far, go with, if you look at the high frequency indicators, we have held very well. Barring certain soft signs and commercial side of the economy, like air traffic movement, or probably your collections and easables, somewhat, you've held fairly okay so far. So if there is a resolution to this crisis, and assuming that the next two months, when they try to resolve the crisis, Hormuz trade remains open, then you're okay.

I don't see that it will have any permanent damage to the economy in general. But remember, there is a lag impact of all of this. The producers have taken a price hike.

Now the consumers have to take a price hike. So the next quarter or so, we'll see the pass-through effects of price hikes. We'll see the margin effects playing out.

So your earnings will remain somewhat softer than what you would have otherwise seen in the second quarter as well. And you do not know how the consumer might behave because you've added risks on end. So there are multiple factors that you need to consider.

But so far, as I said, the first quarter tells you that if there is a resolution to the vegetation crisis, and if oil prices remain in the handle of 80 to 90, and thereabouts, we might have done fairly well in managing our crisis.

Govindraj Ethiraj: Right, Garima, that was very useful. Thank you so much for joining me.

Garima Kapoor: Thank you, Govind.

Alan Greenspan Has Passed Away

The economic policymaker who popularised the term irrational exuberance is no more. Alan Greenspan the longtime federal reserve chairman also known as the maestro who became one of the most influential economic policymakers of his time and also famously warned of irrational exuberance has died at the age of 100. He died from complications of Parkinson's disease according to a CNBC report.

Greenspan was appointed fed chairman in 1987 by then president Ronald Reagan and held the position through busts and booms until retiring in 2006 and his tenure was the second longest four months shorter than that of William McChinsey Martin who chaired the central bank from 1951 to 1970 according to that CNBC report. Greenspan is remembered among other things for his frank televised speech in December 1996 which caused markets to turn over discussing the challenges of setting monetary policy he said how do we know when irrational exuberance has unduly escalated asset values which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade we should not underestimate he said or become complacent about the complexity of the interactions of asset markets and the economy the phrase irrational exuberance was interpreted as a signal that Greenspan thought the market was overvalued the Tokyo stock market which was open at that time fell three percent on comment and other markets subsequently followed then the markets quickly recovered and continued to climb until the dot-com bust in 2001 according to the CNBC report I did have the opportunity to meet shake hands and exchange a few words with the maestro in New York around 2011 at a global banking conference as it turned out even in that brief encounter he did not allow me to ask any questions but wanted to know more about me .

Where is the Value in the Telecom Business Stack?

Reliance Industries chairman Mukesh Ambani at the company's 49th annual general meeting on Friday last week announced they had filed a draft rating adding prospectus or DRHP with the securities and exchange board of India for Reliance Jio Infocom's initial public offer the IPO as we spoke yesterday as well is targeting about 3.81 billion dollars or 36,000 crore rupees according to sources who spoke to Reuters which is equal to about 2.9 percent of its post-issue equity the IPO prospectus which did not contain the fundraising target said proceeds will be used to repay an estimated 27,500 crore rupees or about 2.9 billion dollars of Reliance Jio Infocom's debt Jio's telecom arm had about 524 million subscribers as of March 31st including 268 million on its 5G network according to the prospectus I reached out to Piyush Pandey senior vice president institutional equity research and lead analyst for IT telecom internet and power at Centrum India and asked him a more fundamental question where did analysts like him see value in the telecom business and how he was perceiving the Jio IPO.

INTERVIEW TRANSCRIPT

Piyush Pandey: See, if you look at Indian context, we have plus three players with like say Realise, Jio, Vodafone India and Bharti Airtel. As the sectors become, I would say, more attractive over the last few years because of huge entry barriers, we have seen that Bharti Airtel and Jio have gained markets here at the expense of Vodafone India. So, in a way, sort of like a duopoly where the players have been taking a regular tariff increase plus they are getting markets here.

Most of their 5G capex is mostly behind, so their free cash flow has been improving over the last few years. And with their customer base, like say Jio has roughly close to 524 million customers, Bharti is around 360 million customers. So, with their huge customer base and they continue to add 4 to 5 million per quarter, but the real driver has been increased in ARPU.

So, ARPU continues to grow 2D to 4D migration, prepaid to postpaid conversion, customers moving to higher data packs. These are the organic levers and we also have a tariff increase, roughly which takes place every two years in the range of 10 to 12 percentage. So, a sector which was sort of neglected, say, 7 to 8 years ago because of hyper competition has suddenly attracted the interest of investors because of being just 2 to 3 players.

So, in a way, they are able to reap the benefits of economies of scale. Also, with capex coming down, they are generating free cash flows. This is one aspect.

Second aspect is that, like say, they are very mature companies in terms of markets here. So, for Indian telcos, the things which come next, like say, for example, getting into fixed broadband or getting into data centres or maybe getting into some AI-based apps for, like say, education, healthcare, agriculture, which are AI-based apps. They can monetise on the basis of their huge customer base.

So, these are the optionalities these companies are looking for. But most importantly, being a sort of duopoly with huge entry barriers, growing markets here, and a market which continues to grow. So, telco market today continues to grow.

So, in a way, I would say for investors, the sector has become much more attractive than it was 7 to 8 years ago.

Govindraj Ethiraj: Okay. You said that the average revenue per user for Airtel is higher than Jio. And I'll come to that in a second.

But before that, on a very broad sense, how are you seeing the Jio IPO, which is coming up in terms of possible valuation, size, attractiveness?

Piyush Pandey: So, Jio is doing this fresh issue of roughly close to 27 crores here. And that will bring about 3% equity dilution. So, I would say, see, in terms of balance sheet, they have a very strong balance sheet.

With a debt-inducing spectrum lab, debt is roughly close to 1.6 lakh crores. With this fund raised, they plan to further bring down their debt. See, in fact, most of this fresh issue will be used for repaying debt only.

A post listing, it can provide the exit opportunities for the existing investors like, say, Facebook, Google, etc. In terms of valuations, we are giving it valuation of roughly close to 130 billion dollars. That is close to say around 12 lakh crores.

And it comes at around 30 times E-U-M-A-B-T-O-M, FY27, S-T-O-X-Y. In terms of total valuation, similar to Bharatiya Airtel. So, if you compare with Bharatiya Airtel, of course, Jio has lower R2, but like a single focused company with single geography, a primary focus towards India.

And optionalities like, say, you also have apps like, say, Jio TV, Jio Savar, Jio Cloud. If they scale up, they can significantly direct growth in the medium to long term.

Govindraj Ethiraj: Right. But as you look ahead, I mean, in a rough sense, how much emphasis are you placing on infrastructure, which all these companies have, including Jio? And how much emphasis are you or would you be placing on the value adds like the app ecosystem or other AI-linked initiatives that they've been announcing?

Piyush Pandey: I would say in terms of valuations, 80-25% valuation goes to the whole telecom business. And remaining 15% goes to these apps, their cloud play and data centre play. So, as of now, they are sort of like a subscale.

Needs to be seen how they scale up. Then only I think they can get a proper valuation. But as of now, most of the valuation comes from, say, your telecom industry.

Govindraj Ethiraj: So, as you look a little ahead, what is changing or not amongst consumers or in consumer behaviour in terms of telecom usage that could help or not help these companies, including, of course, Jio, which is going to release soon?

Piyush Pandey: See, data usage has become very sticky. So, if you look at Jio, average data usage per month is close to 40 GB per month, which is humongous. One can say that the prices are extremely low because for 40 GB per month usage, they get a rpo roughly close to Rs.

213 per month. So, every quarter, if you go to the results, you will find that data usage has significantly increased, but rpo is more or less flat. Jio, they need to adopt a multi-tiered pricing structure.

Tiered pricing structure, like as a person consumes more data, he needs to shift to a higher usage plan. Currently, what is happening is that, let's say, a big number of customers who are consuming, say, 15 GB per month to, say, 40 GB per month, they are paying almost similar prices. So, which is sort of like, I would say, affecting the valuation traction by the company, because a large number of customers who are consuming, say, between 15 to, say, 40 GB, paying more or less the same price.

I would say one big default for the telcos can be like, say, if they adopt a multi-tiered pricing structure, like, say, something which happens, let's say, in Indonesia or other geographies. So, in India, I would say pricing structure is sort of like a bracket where you get there.

Govindraj Ethiraj: Right. So, are you seeing any regulatory challenges, including the many cases in various courts, which could mean a financial hit or any other clouds on the horizon?

Piyush Pandey: I would say not now, because the big issues, like, say, AGR issues and OSDC issues, they are mostly behind.

Govindraj Ethiraj: Can you just explain AGR and OSDC?

Piyush Pandey: So, AGR was like, say, for example, there was a dispute in the definition of aggregate gross revenue. And this dispute in the definition was between the government and the telcos. So, there was a certain part of revenue, like, say, interest income and connectivity revenue, which the government was taking, it comes under part of AGR.

And therefore, telcos need to pay a certain percentage of the licence fees. The telcos had a view that this other income, they don't form a part of this gross revenue. And therefore, they should not be paying in licence fees as a percentage of that revenue.

So, that dispute ran for, say, roughly close to 16, 17 years. And the budget went in the favour of the government. And we have also the condition of Vodafone India within, say, six, seven years after the AGR dues was.

So, I would say AGR dispute ran for almost 20 years. And the last resolution came maybe just three, four months ago, when the government reduced this AGR due for Vodafone India. And now we have, say, developed new, say, price of Vodafone India for the AGR.

And OSDC, like, say, for example, OTSC, like, say, one-time spectrum charge was primarily imposed by the government in 2012. Previously, spectrum was administratively allocated. And any amount of spectrum more than, say, 4 megahertz per circle, government had asked the telcos to pay a markedly determined price on those extra spectrum.

So, telcos had to do that because this was not specified in the contracts. Therefore, they were not supposed to pay these extra fees on additional spectrum. But government was, I would say, sort of rigid of its stance.

And this dispute continues to be in the courts. But it is significantly smaller amount. And even the Bombay High Court has given a distinct in the favour of the telcos.

See, also one need to understand that in those times, there were 10, 11 telcos. 10, 11 telcos, government had a chance to have such, say, disputes. So, like, say, now you have just two, three telcos.

Too difficult to disturb this structure now, I would say.

Govindraj Ethiraj: Okay. That's a good note to end on. Piyush, thank you so much for joining me.

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In 2020 Jio raised funds from global investors including Google and private equity firms Vista Equity Partners KKR General Atlantic and Silver Lake and the Abu Dhabi Investment Authority and of course Meta.

Speaking of Meta it is investing about 900 million dollars into an Indian fintech startup called Cred with plans to its founder Kunal Shah the new leader of WhatsApp according to Bloomberg that investment gives Meta roughly 20% stake in Cred a company that operates an app that rewards customers for paying their credit card bills on time.