Arvind's Newsletter-Weekend edition

1.India’s Tamil Nadu State To Pull Out All Stops To Attract Musk reported Bloomberg

Often called the Detroit of India for its auto-making prowess, Tamil Nadu has the nation’s 'best electric vehicle policies and ecosystem', said the state's minister for industries.

Chennai, the capital city of Tamil Nadu is wooing Tesla considering it’s already home to the manufacturing facilities of Nissan Motor Co., Renault SA, Hyundai Motor Co. and BMW AG and the auto parts supply chains that feed them. But it’ll face stiff competition from other Indian states that are also petitioning Musk.

India, which is also the world’s most populous nation, is seen as a potential new growth driver for Tesla as electric car sales growth in China and the US wavers. Demand for EVs in India, by contrast, is still on the rise.

2.How India’s imports of Russian oil have lubricated global market; The Economist

In February America slapped new sanctions on Sovcomflot, a Russian state-owned shipping firm responsible for carrying around 15% of Russian oil exports to India. Almost immediately, Indian importers stopped taking shipments from Sovcomflot tankers. But that did little to stem the flow of Russian crude to India, the world’s third-biggest consumer of oil.

Deliveries increased by 6% in March, compared with February. Exporters arranged alternative transport to India—probably through the shadow fleet that helps them bypass sanctions. India has also bought Russian crude at prices below the $60-per-barrel price cap imposed by the West. Taken together, these purchases have helped make India the second-biggest importer of Russian oil, behind China.

The immediate impact has been to help India to meet demand at a lower cost. In 2023 nearly 90% of India’s oil consumption was sourced from abroad. Roughly 34% of those imports came from Russia. The discount on Russian crude has narrowed over time, from 20% at the start of last year to around 5% in December, but it still yields significant savings on India’s oil imports, which were worth $181bn last year, around 27% of the country’s total import bill.

Cheaper imports have helped India’s Bharatiya Janata Party (bjp) government. On the government’s instructions, oil firms kept the prices of petrol and diesel unchanged in 2022, even as global oil prices surged in the aftermath of Russia’s invasion of Ukraine. The price freeze helped insulate India from the type of fuel inflation that ravaged neighbouring Pakistan and Sri Lanka. Last month, with an eye on the upcoming general election, retailers cut petrol and diesel prices for the first time since the war began. Less costly oil has also given the BJP more fiscal room by shrinking the fuel-subsidy bill. That has helped it extend a popular subsidy for liquefied petroleum gas by a year.

Globally, Indian buying of Russian oil has been important. It has helped prevent a supply crunch. India’s petroleum ministry claims that global oil prices could have shot up by about $30-40 per barrel were it not for India’s trade with Russia. On April 4th an American official visiting Delhi encouraged India’s imports of discounted Russian oil, as it was important to “keep oil supply on the market” while ensuring the Kremlin’s profits were being hit.

India has also rewired energy markets by processing Russian crude and shipping it back to the West. European countries have led the enforcement of sanctions on Russia, but remain connected to Russian oil. In 2023 they imported roughly 225,000 barrels per day (b/d) of Indian petrol and diesel products, up from an average of 120,000 b/d in the previous five years,according to the International Energy Agency (IEA). These exports have boosted India’s trade balance and are another illustration of India’s growing clout in the market. In 2023 oil-related exports were worth $85bn, around 60% more than in 2021.

India’s influence on global oil markets will only increase. The iea expects India to be the single largest source of growth in global demand between 2023 and 2030. Growth and urbanisation are expected to drive oil consumption up by 20% by 2030, to roughly 1.2m barrels per day, accounting for more than a third of the projected global increase. To meet the boom in demand, Indian refineries are expected to increase processing capacity faster than any country in the world besides China.

Much of the oil will have to come from abroad. Production from Indian oil reserves is declining. It accounted for just 13% of the country’s supply in 2023. An import-dependent strategy is always vulnerable to risks, such as a wider conflict in the Middle East.

Ultimately, the most powerful way to reduce India’s oil imports is to reduce demand for the stuff itself. In last year’s budget India allocated $2.6bn towards programmes in green sectors. But that is a trifle compared with the $20bn annually that the Council of Energy, Environment and Water, a think-tank, estimates is needed for India to reach net-zero emissions by 2070, as it has promised to do.

3.Humane’s AI Pin struggles with the most basic tasks. It’s seriously unlikely to replace a smartphone any time soon.

Humane has spent the last year making the case that the AI Pin is the beginning of a post-smartphone future in which we spend less time with our heads and minds buried in the screens of our phones and more time back in the real world

For $699 and $24 a month, this wearable computer promises to free you from your smartphone. There’s only one problem: it just doesn’t work reports The Verge.

4.80 Percent of Global CO2 Emissions Come From Just 57 Companies, Report Shows

A new analysis released last week by the international non-profit InfluenceMap reveals an overwhelmingly unequal share of fossil fuel pollution worldwide. 

From 2016 to 2022, 80 percent of global carbon dioxide emissions were produced by just 57 companies. Many of these companies increased their fossil fuel production after the Paris Agreement was signed in 2016.

5.Moscow destroyed Kyiv’s largest electricity plant in overnight missile attacks, cementing Ukrainian fears of Russian progress. 

Ukraine intercepted dozens of missiles and drones but several still managed to strike the facility, the largest power supplier to Kyiv and surrounding regions. The strikes came with U.S. aid for Ukraine bogged down in Congress, despite warnings from the top American general in Europe that Kyiv will be outgunned “10 to one in a matter of weeks.” Ukraine’s president said the West was “turning a blind eye” to his country’s plight, while U.S. and European leaders scrambled for ideas given the delays in Washington: Among them is an American proposal to raise debt against frozen Russian state assets/

6.Private Equity’s latest trick is to buy and hold, reports Lex column in Financial Times

Investors should be asking what distinguishes private equity from other, more traditional, investment strategies

Warren Buffett famously said that when he owns outstanding businesses with outstanding management teams, his favourite holding period is “forever”. Fix-and-flip private equity bosses have come round to his way of thinking.

Evergreen funds, which do not need to return money to investors within the decade or so of the traditional closed-end fund, are taking off. Their number has doubled over the past five years and they now account for $350bn of net asset value, according to Preqin. That is still small beer, and largely focused on real estate, private credit or buyout strategies that piggyback on existing traditional funds. But the industry hopes it will grow into a standalone asset class.

It is not hard to see why. The time constraints of closed-end funds are increasingly onerous. Raising a fund and then looking for companies to buy means that a lot of cash is sitting on the sidelines, damping overall returns.

The past two years have highlighted the flipside of the equation. The private equity industry has $3tn of unsold assets — more than 40 per cent of which it has held for more than four years. Investors are clamouring for promised returns and distributions. But being a forced seller into a choppy market is no fun. Hence the growth of secondary deals and continuation funds that allow firms to sell assets to one other, and themselves.

There is a more fundamental problem. Private equity strategies have evolved in a way that is ill-suited to the life cycle of the closed-end fund.

Buying banged up companies to restructure and sell was a good way to make a quick buck, especially when debt was cheap. Now there are not as many fixer-uppers to be had, and leverage is expensive. Roll-ups — buying a platform company and using it to consolidate an industry — are longer-term propositions. Average holding periods have risen; funds are often extended beyond their standard 10-year life.

Open-ended funds raise their own crop of issues. Investors will put money in — and take limited quantities out — at the net asset value at that time. Without periodic disposals to provide a reality check, the firms need to find a way to inspire confidence in how net asset value is calculated.

Investors should be asking what distinguishes private equity from other, more traditional, investment strategies. Taken to its extreme, the open-ended fund converges with, say, Berkshire Hathaway, arguably the world's original evergreen vehicle, or even buying and holding the S&P 500 on margin.

Neither approach generates private equity-style returns, or charges private equity-style fees — two areas in which convergence is also likely to apply.

7.India needs more leaders like Manmohan Singh to propel growth momentum, opines Mihir Sharma in Bloomberg.

When former Prime Minister Manmohan Singh was disparaged by the mainstream as a weak leader, he had calmly said “History will be kinder to me than the media”. As he retires from public life, a profile of his career by Mihir Sharma reiterates just that. 

“As prime minister, Singh successfully managed an unwieldy coalition that was rarely in sympathy with his aims. On multiple occasions, he defied those erstwhile allies to ram through changes — opening up domestic sectors to foreign investment, signing a landmark nuclear deal with the US — that pushed India closer to the vision he had for the country.

Nor does Singh’s personal story — he walked miles to an Urdu-language school, studied by the light of a kerosene lamp, and eventually won a place at Oxford and an economics doctorate — speak to any sort of weakness. It would be truer to say he was cautious and careful about wielding power.”

“Most importantly, Singh was mindful of the brittleness of Indian political consensus in a way only someone born before Independence in 1947 could be. He was the last of that generation in power; our political class no longer carries within it a sense of the fragility of India’s growth story and political unity.”