On Episode 1016 of The Core Report, financial journalist Govindraj Ethiraj talks to Amit Mittal, Director at AeroIntellect Aviation as well as Saket Mehra, Partner and Automotive & EV Industry Leader at Grant Thornton Bharat.

SHOW NOTES

(00:00) The Take

(06:17) Middle East Braces For Highest Uncertainty Since War Began As Oil Prices Keep Pace

(08:20) TCS Stock, A Bright Spot In A Gloomy Market

(09:20) Domestic Air Traffic Is Falling, How Will That Affect Airlines And Aviation?

(16:35) The Story Of PHP

(18:01) Why There Are A Rash Of Automotive M&A Deals

(25:40) Why Netflix Is In Trouble

—

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 Monday, the 26th of October, and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

The Take

What was Marco Rubio really doing in Jamnagar? America desperately needs diesel. With pump prices sitting at record highs of over six and a half dollars a gallon in most places and midterm elections just days away, Washington is operating on political calculus.

So it wasn't entirely surprising last week when Secretary of State Marco Rubio touched down not in Delhi, but in Mumbai and Jamnagar, the place where Reliance has its major refineries. The diplomatic chattering classes immediately began their endless hand-wringing over the optics of an American statesman skipping the Indian capital. They shouldn't have.

There is ample precedent for this sort of protocol busting, recall when UK Prime Minister Tony Blair visited the Infosys campus in Bangalore back when the India back-office story was first wowing the world. But there was only one motive for Mr. Rubio's visit, supply chains. It is a motive that Indian diplomats must rapidly learn to emulate.

The pandemic gave us our first bitter taste of supply chain vulnerability, waking India up to the massive reliance on China. Despite years of domestic hand-wringing, we still rely on China for some 70% of our active pharmaceutical ingredients or APIs. If Beijing ever decided to throttle those exports, India's booming pharmaceutical industry, including exports, would practically shut down overnight.

Fresh tensions are now flaring on our shared border. While China hasn't cut off anything, it's already squeezing us gently elsewhere. It has made it exceedingly difficult for India to import rare earths and, crucially, tunnel-boring machines.

This silent embargo has severely delayed a slew of critical infrastructure projects across India, including right here in Mumbai, where I live. That's quite recently. A lesser reported fact is that Indian businessmen who travel to China to source materials are routinely being denied visas.

One executive who imports high-value construction equipment told me a few weeks ago his visa application had been rejected more than seven times already and he was applying again. There are similar stories, by the way, from the other side as well. The global energy shortage bringing Mr. Rubio to our shores is the product of similar geopolitical fracturing.

U.S. President Donald Trump's tariffs initiated in April as of last year were a broadside against global production networks and supply chains, but all bets truly came off the table following the war that America and Israel launched against Iran. We're now dealing with two overlapping conflicts that have crippled the supply of crude oil and refined products like diesel and jet fuel. In West Asia, Kuwait, the United Arab Emirates, and Iraq have cut back diesel exports while Houthi escalations have severely limited Saudi Arabia's exports from its Red Sea refineries, choking off Riyadh's main route to bypass the state of Hormuz.

Meanwhile, the Russia-Ukraine war, which seemed to meander for years, shifted dramatically earlier this year when Ukraine began striking Russian refineries and oil installations with deadly precision. The world was suddenly plunged into a refined products deficit. This crisis exposed a glaring structural shift.

The West has systematically starved its own refining capacity. The current Trump administration may be gung-ho on domestic refineries that's in the United States, even encouraging reliance industries to invest in one. But broadly speaking, the Western Hemisphere has been quite happy to let the Eastern Hemisphere do the heavy refining and manage the attendant pollution.

A recent Bloomberg analysis noted that Africa and the Asia-Pacific will account for nearly 95% of global net refining capacity growth through 2030, which is really the next 4-5 years. China and India alone account for 71% of total additions in 2026 and 2027, that's this year and the next. Conversely, markets like Europe and the United States are bracing for further refinery closures.

The broad numbers, global crude output combined with gas-based fuels sits at roughly 100 million barrels a day, matched by about 100 million barrels a day of refining output, or rather refined output. The US and China are the titans, each with about 18 million barrels a day of capacity, Russia sits at about 6 million and India at 5 million. India may be far behind the top two, but in this specific geopolitical moment, India possesses what Manas Majumdar of PwC described to me as the vital swing capacity for diesel.

And hence, Mr. Rubio's arrival. Diplomatic niceties aside, he came to fix a hole in America's supply chain, one largely of America's own making. He arrived as a supply chain expert looking to strike a deal with a country possessing the refining muscle to supply diesel and process Venezuelan crude, which the US now controls.

Mr. Rubio's pragmatic deal-making approach is something Delhi should study rather than frown upon. Imagine, India's external affairs minister skipping Beijing and landing directly in Changsha at the headquarters of China Railway Construction Heavy Industry, the company that manufactures our much-needed tunnel boring machines. Or imagine a targeted Indian diplomatic mission to the massive API factories in southern China.

Admittedly, all of this would be difficult to pull off, but the premise holds. India's biggest need now is affordable energy. The prospect of crude arriving from the Americas being refined here and shipping back as diesel carries an enticing sense of industrial reverse colonisation.

But we must be realistic. Prohibitive transport costs will eventually close this arbitrage window once the current desperation and, of course, the US elections pass. We must also ask ourselves whether building endless refineries to serve Western deficits truly aligns with our own green agenda.

Indian politicians regularly travel overseas seeking foreign investment. Mr. Rubio's visit offers a more sophisticated template, an executive on the road with a specific mandate to fix a specific physical problem. The statesmen of today, or perhaps the near future, will need to put supply chains ahead of almost everything else.

And that brings us to the top stories and themes…

The Middle East braces for highest uncertainty since the war began as oil prices rise.

TCS stocks a bright spot in a gloomy market.

Domestic air traffic is falling. How will that affect airlines and aviation?

The story of PHP.

Why Netflix is in trouble.

And why there are a rash of automotive M&A deals.

Markets, TCS and L'Oréal

A Middle East war that President Donald Trump said would be over in a matter of weeks now looks set to escalate as it enters its ninth month. Trump has repeatedly hinted that his forces in the Middle East would resume strikes on Iran after the US midterm elections on the 3rd of November.

And the US has already sent a third aircraft carrier strike group and about 10,000 additional sailors and marines towards the Persian Gulf to give US commanders more options if hostilities resume, according to a Bloomberg report. This week, the US Defence Secretary also made an unannounced stop in Israel. And against this backdrop, Iran is now bracing for fresh US bombing campaign around the midterms and is preparing to retaliate across the Middle East, including against Israel and the United Arab Emirates, according to sources who spoke to Bloomberg.

And on Friday, oil prices were more than $3 higher, the highest in nearly six months, after another round of Houthi attacks on Saudi Arabia. Brent crude futures were at about $116.70 a barrel or just under $117, their highest since April 29th. With all of this in the backdrop, Indian stock prices fell on Friday and logged weekly losses thanks to those rising oil prices and a potential impact on inflation and earnings of companies.

The benchmark indices were down for the fourth day, and the Centex fell 125 points to close at 73,123 and the Nifty 87 points to close at 22,600. In the broader markets, the Nifty mid cap and small cap were down 2.2 and 2.9% each. The Nifty 50 index on Friday completed its third-longest correction in terms of the number of trading sessions spent below the 200-day moving average or 200-DMA, even as the extent of this decline remains relatively shallow compared with previous prolonged market downturns, the business standards said.

An analysis of historical data quoted by them show that the benchmark index has now spent 160 trading sessions below its long-term average, marking its longest such stretch since January 2012. Among other news, foreign portfolio investors have pulled about $5 billion from Indian equities in October so far, though they turned net buyers in the last two trading sessions, signalling some slowing down there. It's not all gloomy news, though.

The surprise for last week has been IT services. TCS share price has hit an over seven-month high, rising about 5% on the Bombay Stock Exchange on Friday as AI stocks elsewhere in the region and the world came under pressure. TCS in the last month outperformed the market by rising 28% compared to a 2.8% fall in the Sensex.

Elsewhere, and a sign of strong consumer sentiment, PTI quoted French cosmetics major L'Oreal's CEO Nicolas Hydronimus, saying that its India business is doing a great turnaround, driven among other things by increasing localisation, accelerating online commerce, and rising demand for hair care and skin care products. India recorded a double-digit growth in the group's consumer products division in the September quarter. L'Oreal's Middle East and Southeast Asia region posted an adjusted like-for-like growth of about 19% in the third quarter of 2026, with India and Indonesia further accelerated, driven by skin care and hair care, L'Oreal said.

Hydronimus was in India a few weeks ago.

Domestic Air Traffic Is Falling

Air passenger traffic, already under pressure, could decline further with major airlines still raising fuel surcharges this month and adding to travel costs. The increases could range between Rs 375 on short domestic routes to about Rs 21,000 on long-haul international flights.

One analyst told New Indian Express that with domestic traffic down about 6.3% year-on-year in August and international traffic for Indian carriers declining about 21% during April to August, higher surcharges could further moderate demand. However, these declines also reflect airspace disruptions and capacity adjustments. Fares have risen at least 20-25% since the onset of the West Asia crisis, thanks to higher ATF prices or aviation turbine fuel prices, longer flight paths, and airspace restrictions.

I spoke with Amit Mittal, aviation expert and director at Aerointellect Aviation, and I began by asking him how he was seeing the outcome of falling traffic. A quick recap of some tech security news from last week.

INTERVIEW TRANSCRIPT

Amit Mittal: See the fall has mainly because of the rise in the ATF prices. Earlier the ATF was contributing to around 40% of the operational cost of the airline and now the ATF is almost around 55% of the operational cost of the airline. So because of this, the airfares have gone up, the airlines have put up a surcharge ranging from 350 rupees to 21,000 rupees depending upon how much is the sector length.

There has been a consolidation of flights. There are fewer flights and so more seats are available. Load factor is there on certain flights which are on the transports but overall the load factor has also come down to around 78.7% which is down than last year. The overall passenger traffic is around 420 million for this year projected which was supposed to be in the range of 430-435 million passengers.

Govindraj Ethiraj: Got it. Within the routes, you said trunk routes, the load factors are lower. Between trunk and non-trunk routes, how are you seeing the split in terms of both utilisation as well as capacity?

Amit Mittal: Obviously, on the trunk routes, utilisation is higher and the capacity is also higher if we talk about Delhi, Mumbai or bigger cities. But overall, the trend is that now the air traffic has kind of softened. For example, the fares have risen up.

Delhi, Hyderabad, the fares have gone up up to 55-60%. Mumbai, Bangalore, around 35-40% the fares have gone up compared to last year and this creates an impact that discretionary spending in terms of tourism or leisure travel goes down. Travel is mainly business orientated or the ones which are more necessary travel.

That is the first impact of a rise in the airfare.

Govindraj Ethiraj: Right. We've also seen so many new airports opening up and traffic to those airports going down or flights being pulled back. Are you seeing that as well?

Amit Mittal: What happens is that there is a capex, a projection of 100 crores in the airport expansion, the Greenfield, Bromfield and the expansion and modernisation of the existing terminals in the next five years. The immediate impact of higher fares and slower growth is that gestation period for the airports is longer because the revenue for the airports slows down. The cycle for recovery of the capex is slower.

The airports also see that they need to focus more on the revenue items rather than non-revenue items wherein they can recover the capex which has been spent on this in the slower growth period. So that is the immediate impacts on the airport.

Govindraj Ethiraj: Right. And let me come back to airlines and aircraft. So when you say that capacity has obviously been pulled back, even if marginally, does that mean aircraft are now sitting idle on ground or are they just flying fewer flights?

Amit Mittal: No, there are fewer flights. So what has happened is that there has been a consolidation of flights on certain sectors. So the airlines want to really make use of the aircraft fleet in a better way.

Second impact is that the absorption of aircraft fleet across the airlines could slow down because when the airfares rise and the air traffic is slower, delivery of the aircraft could also get impacted. The airlines would feel that they slow down the delivery of the aircraft and match it with the requirement of the passenger traffic. So that could be an immediate impact on the airlines.

And the airports, as I told, that capex will be on a longer gestation period and is more on the necessary items rather than ones which are more on the fancy side.

Govindraj Ethiraj: Right. You know, India has had a fairly ambitious, particularly Indigo, Air India, Akasa, among others, have had a fairly ambitious aircraft acquisition plan. Now, do you feel that we will see a pullback already or will airlines wait for a little longer to see how things pan out?

Amit Mittal: Immediately, I don't see that it will be a huge impact on the delivery of aircraft. But if this trend continues and ATF prices are not stabilised, ATF prices have gone from 120 rupees per litre to 137 rupees per litre in Delhi, for example, from June to September, October, when the operational cost goes up and the traffic comes down, airlines tend to see that because aircraft are very capital intensive assets. And India, most of the aircraft are on dry operating days or sale and leaseback.

Some of the aircraft are owned by the airlines in terms of financing or finance lease. So the airlines could wait and watch and tweak the delivery of the aircraft depending on the passenger demand.

Govindraj Ethiraj: Right. And we've spoken so far about India, but how are you seeing the conditions in India and how airlines responding versus what's happening in other regions, including rest of Asia or for that matter, even the West?

Amit Mittal: Yeah, so in Indian operators have the international capacity of the Indian operators have gone down by three to five percent. And impact of West Asia war and impact on the ATF of the ATF prices globally, there has been some kind of slowdown of the in the international air traffic as well. Air fares have gone up substantially.

And the reason for that is that some of the like for India, westbound flights, Iran and Pakistan airspace are closed. And similarly, there's a huge impact on the Indian operators. And when the leisure travel or tourism goes on globally, it has an immediate impact on the airlines and the airports.

Govindraj Ethiraj: Right. I mean, we've gone through down phases in the past. What changes do you usually see happen when there are down phases like this in terms of airport expansion and airlines?

And really the question is more about the past rather than the future.

Amit Mittal: In down phases, one of the impact is on the capital cycle of the airlines and the airport. The lease rentals go up. If there's a shortage of aircraft or aircraft are not coming off lease and newer aircraft are not inducted, the current market value of the aircraft also goes up of certain type of aircraft, which are more common like the A320, 737 or ATR aircraft.

And on the widebody side also, when the international traffic is consolidated, the airlines tend to have bigger aircraft and newer aircraft rather than fuel guzzling aircraft. So there could be a shift towards the type of aircraft used where in the fuel efficiency is one of the paramount importance to the airline.

Govindraj Ethiraj: Right. Amit, thank you so much for joining me.

Amit Mittal: Thank you.

The Story Of PHP

Government websites in Europe were taken offline on Wednesday as concerns spread about vulnerabilities in servers that host sites coded in PHP, a popular server programming language.

The US National Security Agency warned millions of organisations to either implement patches immediately or take their servers offline. The moot point here is that vulnerabilities that previously took weeks or months for hackers to find can now be, thanks to AI, exploited in a matter of hours. A CNBC report said that PHP created in the 90s is used by just under 70% of all websites with known server-side programming languages, adding that in mid-August, researchers at AI firm Caliph and Google's Wiz identified vulnerabilities in all PHP installations serving web requests.

The vulnerabilities, dubbed PHP2Shell, allow for unauthenticated hackers to remotely execute code on any PHP server, letting bad actors potentially steal data and read sensitive information. The CNBC report said the PHP Foundation was intending to release patches for the bugs on Thursday but news leaked earlier in online forums and then by the AI firm Caliph itself which accidentally posted a proof-of-concept video on Tuesday that demonstrated an exploit chain. The video was subsequently taken down, but the patches were fast-tracked and released 24 hours early by the PHP Foundation on Wednesday.

By then, of course, the code had been posted to public repository GitHub owned by Microsoft.

Why There Are A Rash Of Automotive M&A Deals

India's automotive sector recorded about 33 deals worth about $1.7 billion in the third quarter of 2026 compared to 20 transactions worth about $717 million in the previous quarter. A report from Granthamton Bharat says that electrification remained the dominant investment theme with capital flowing across EV manufacturers, battery technologies, charging infrastructure, mobility platforms, and automotive technology businesses.

Public market activity also strengthened during the quarter while M&A and PVC activity accounted for 28 transactions worth about $808 million. I reached out to Saket Mehra, partner, automotive and EV industry leader at Grant Thornton Bharat and I began by asking him what was driving this slew of transactions.

INTERVIEW TRANSCRIPT

Saket Mehra: Yeah, so I think, Govind, it's been an interesting turnaround, I would say, as far as the deal activity is concerned. I mean, just to give you some perspective, in 2025, the overall deal volume, I'm saying overall, all across the sectors, was up by 21%. Auto had almost a share of 6 to 7% of the total deal value, which took place in 2025.

Now, 2026 somehow started with some kind of, I would say, conservatism. I mean, like, if you look at sequentially between Q2 and Q3, there is a significant uptick, both in terms of volume and value. And the larger reasons is because, you know, one, as I said, what started with some kind of a conservatism has narrowed down, there is a much more broad based outlook, which the investors are now looking at, there is a much, much larger focus on the domestic story, you know, and that's what attracted most of the M&A deal which came in.

Second factor is, I think, Q1 and Q2 also had some outliers in terms of one or two deals, which really were completely outlier, both from an M&A or a P perspective, I think Q3 was much more stable that way. The focus has actually moved, I would say, from asset light model, you know, typically all the investments which are happening so far, till Q2, were majorly focused on asset light model in terms of mobility as a service, software as a service. But what has really changed in Q3 is a focus towards asset high model, more in terms of the manufacturing and the infra capability.

So that's pretty exciting to note, Govind, in my view.

Govindraj Ethiraj: And can you illustrate that a little bit, Saket, when you say asset light to more asset heavy?

Saket Mehra: I think the investors are not only looking at investments which are more tech enabled, it's more manufacturing and tech enabled. So the larger focus is now on how the digital validation would take place within the auto space. How are the companies actually moving towards software defined vehicles?

I mean, the companies were actually investing a lot on software defined vehicles, are able to attract more healthy investments, are able to attract or command a better valuation, I would say. I think these are fundamental shifts which we are seeing and which have taken place over the last one or two quarters.

Govindraj Ethiraj: Right. And between domestic and cross-border, which way are you seeing investments going? And again, more importantly, what does all of this tell us about the industry and where it's going?

Saket Mehra: So I think, Govind, there is a fundamental shift which is happening not only from an investment standpoint, but even the way how the vehicles are now getting positioned. I mean, like if you look at today, the consumer or the end buyer is more focused or more inquisitive about the connected features in a vehicle. It's not only the efficiency, which is the driving factor, it's more about convenience, the safety, more importantly, and the stability which one can expect from a vehicle.

So keeping that into consideration, a lot of investments which we are seeing are, as I said earlier, are happening in the tech enabled manufacturing space. So you talk about mechatronics, you talk about auto electronics, you talk about telematics. I think these are sub-sectors which are actually making the investments go really well as far as the Indian context is concerned.

And the Indian companies, I mean, you look at all the tier one, tier two component suppliers, are investing heavily in terms of making sure that yes, they are aligned to the global as well as the Indian OEMs requirement.

Govindraj Ethiraj: Right. And usually the vintage of companies in the automotive space, including components and other maybe electronically is old, as in companies have been around for a while, they've built up as suppliers to OEMs and so on. So do you see that changing or are you seeing that changing?

Saket Mehra: It is changing. It is changing. I would say it's not something which is changing as we see, it's been changing for quite a number of years.

A lot of tier one, tier two component players have already invested a lot in terms of these new age technologies. But I think the largest struggle, frankly, as we speak, is residing with the tier three component suppliers because somehow they've not been able to scale up further. And typically in automotive value chain, everyone plays a very significant role.

It's not only the OEMs, it's not only the tier ones, but even the tier two and the tier three play a significant role. I think that's where the focus needs to be there as to how the OEMs or the tier one component suppliers are able to handhold the tier three. You know, because it's like if somebody is just wanting to walk at a speed which you can't beat, you just cannot be there to be struggling to walk.

It's as simple as that.

Govindraj Ethiraj: So there has to be alignment between the speed. And let's say one or two reasons why this is happening. Is it something that afflicts all small enterprises in India or is it unique to automotive?

Saket Mehra: No, I think it's generally with everyone. There is a lot of ambiguity. You know, when you talk about AI, use of AI, digitisation, I think, you know, a handful of companies, at least I know, at least in the automotive space, have actually gone for a digitisation in true sense.

You know, you may be talking about shop floor automation, you may be talking about using the SCADA of the world, but very few companies are using it in true spirit in terms of the yielding benefit out of it. And this goes a long way in terms of how it can be extended to tier two and tier three players as well.

Govindraj Ethiraj: Right. And last question, how are you seeing transaction flow and trends that drive those transaction flows in the next few months or a year? Well, it's going to be a bit cautious, frankly.

Saket Mehra: I mean, I would say not only because how the global environment is settling down, it's also because how the sentiments will roll up in the in the months to come. But at the same time, we see a lot of optimism when we talk to both the investors as well as the companies, the companies are willing to invest. And I'm talking about companies who have good cash balances and healthy balance sheet.

They are willing to invest into new technologies. Every possible company, I mean, client that we've been talking about, I've been talking to, they've been pretty acquisitive in terms of identifying new technology partners where either a JV can be done or some kind of a technology alliance can be done. I think it's from both the sides.

I mean, there is an interest by the investor and there is a capability which is residing. What needs to be done by the Indian companies more particularly in the auto component or in the auto space is how do we scale up? How do we scale up?

How do we make sure that, yes, we have the capacity and the capabilities available for the future? One, how we remain technology aligned in terms of adapting and adopting the technology pretty soon. And third is in terms of sustainability, how soon can we adapt to those sustainable practises?

Because the global OEMs are really looking at suppliers who are more sustainable, who are more sensitive towards the environment. So I think these three things will really make a difference, Govind.

Govindraj Ethiraj: And if I can supplement that last question, the one or two technology trends that you see in the next year that could drive M&A or the sub-technology trends?

Saket Mehra: I would say mechatronics and telematics. Got it.

Govindraj Ethiraj: Okay. That answers that. Saket, it's been a pleasure. Thank you so much for joining me.

Saket Mehra: Thank you, Govind. Thank you.

Why Netflix Is In Trouble

Netflix reported its slowest sales gains in three years and the third quarter ended September 30th, a trend the company projected would continue for the final three months of 2026.

Bloomberg reported last week adding that the results fanned investor concern about the world's largest online TV network, whose stock has dropped nearly 28% this year. Earlier this month, Netflix said it was laying off about 6% of its staff for about 1000 people, which would be the highest since 2022. When Netflix reported its first quarterly subscriber drop in more than a decade, it also let go two prominent executives, chief content officer Bela Bajaria and film chief Dan Lin, in a signal to the market that the company's senior leadership wants to do better.

Netflix co-chief executive officer Ted Sarandos said during the third quarter earnings call that the company's success hinges on delivering ambitious, exclusive films, series, and live events.