Home ยป Weekly Wrap Up ยป RBI launches retail digital rupee: what does it mean for you

RBI launches retail digital rupee: what does it mean for you

by Tavaga Invest

Markets this week ๐Ÿ“Š

Spotify Wrapped 2022 is everywhere with Bad Bunny, Drake, and Taylor Swift as the most streamed artists globally, while Joe Rogan is the top podcaster. Closer home, Arijit Singh, Pritam, and AR Rahman rounded off the top three. We too had reasons to cheer as our very own podcast – โ€œWhatโ€™s up Financeโ€ was the top podcast for 62 of our fans. 

We are thankful to our listeners for motivating us to keep bringing simplified financial content to you. A big thank you folks! 

Markets remained largely upbeat except for the friday closing in red, thanks to some tangible warmth flowing all across from the US Fed. 

Crystal gazing for 2023 has already begun here are some insightful investment tips. Do give it a read.

 All you Netflix people, if you hate the ending of Netflixโ€™s next show, you might be able to change it. Netflix is planning to grow it’s Preview Club, which lets viewers watch shows and movies early and even change parts of their shows if they provide detailed feedback. 

We also take your feedback and suggestions seriously. Do you have any investment concerns? Write to us at advice@tavaga.com and we shall take it up in our next wrap with a surprise too!

Letโ€™s now dig deep into some of the important news that made headlines this week.

Adani taking the bulls by its horns ๐Ÿ˜ˆ

Gautam Adani aka our Indian Musk makes news literally every week. He however took a break from his never-ending acquisition headlines but still made news and a big one this time. Adani Enterprise, Adaniโ€™s flagship company is considering raising $2.4 billion (Rs. 20,000 crores) through a follow-on public offer (FPO), making it the biggest FPO so far. 

But, what’s the need? And why now?

The issue is a well-timed, strategic move to monetize the stockโ€™s remarkable rally. Shares of Adani Enterprises have risen about 130% YTD while the benchmark index has risen just 6% over the same period. 

The rationale for FPO are:

The issue would increase the free float and diversify the shareholder base and build the firmโ€™s credibility and all this at a small dilution of promoter’s stake. Also, Adani Group has too much debt – Rs. 1.6 lakh crores (~$20B) as on March 2022. The net debt to EBITDA for listed companies in Adani Group is 4x! So this equity infusion will help pay off some of this debt and provide funds for growth.

Mighty empire: Mr. Adani has made forays into almost everything it could lay its hands on. From airports, and metals to petrochemicals, cement, and now media. But unlike its closest competitor Ambani, it lacks cash flows and relies heavily on debt to fund its sky-high ambitions.

Our Take

At current price levels, the stockโ€™s trailing PE is 365x, many many times higher than other bluechip and conglomerates. And all this at a petty base of just Rs.7.06 consolidated FY22 EPS. That this FPO will come at a discount is anybodyโ€™s guess but even a 30-50% discount as seen in previous FPOs will still be a big ransom by all measures. Even the choice of an FPO over a rights issue or QIP raises suspicion. Are there are no institutional takers for this lofty valuation narrative? Whether Aam Aadmi get enticed by the discount carrot or stay on the sidelines, whichever way this pans out, thereโ€™s a lot at stake for Mr. Adani and his dream empire. 


Musk โ€“ choose your enemies wisely๐Ÿคฌ

If in doubt, pick a fight: That has been Muskโ€™s motto for quite some time now. After having alienated a slew of advertisers, risking relations with regulators, and mocking the news media, Musk has now started a public one-on-one spat with Apple. Maybe we just arenโ€™t smart enough to understand this business brilliance.

Whatโ€™s the problem: Musk posted a series of tweets accusing Apple of everything from threatening free speech to not being transparent about its censorship. His core issues are:

>Ad spends:  Apple has โ€œmostly stoppedโ€ advertising on Twitter. FYI, Apple was Twitterโ€™s No. 1 advertiser in Q1 2022 with a spending of $48m. After Trump and several other hate speech enthusiasts came back onto Twitter, big brands like Mondelez, Carlsberg, United Airlines, and GM have suspended advertising. And thatโ€™s a hard pinch as Musk will need every penny of this $5bn-a-year ad revenue to pay off interest payments that are loaded on his head for taking over the platform.  

>App tax: Musk also criticized Appleโ€™s ~30% cut of in-app purchases, that Apple takes across apps in its storeโ€”which could include the $8 monthly fee that Musk plans to charge for Twitter blue verification.

>Kick out:  Apple is threatening to remove Twitter from the App Store โ€œbut wonโ€™t tell us why.โ€ It typically does that when companies violate its policies. That looks sorted for now, atleast.

Our Take

Musk may well be right in his complaints about Apple. Many others like Epic Games, Spotify, have protested too. But will being right pay his bills? Even if he does win this fight (highly unlikely though) it would take several arduous years of struggle, which Musk simply canโ€™t afford as he is already fighting a revenue battle.ย 


What does eโ‚น mean for you?๐Ÿช™

Indiaโ€™s Central Bank Digital Currency (CBDC) or eโ‚น made its retail debut on Dec 1. India is one of the many countries that is experimenting with its own CBDCs. Lower operational costs, wider financial inclusion, and innovation in cross-border payments space are among the host of benefits that the RBI has cited to justify it. The use of the offline feature would also be beneficial in remote villages with limited electricity and mobile network. Letโ€™s understand the ABCD of CBDC. 

What is it?

  • Digital avatar of our cash
  • Issued in the form of digital tokens in the same denominations as paper currency and coins
  • Govt backed with a direct claim on RBI and can be freely convertible to bank deposit or cash
  • Like cash, it will not earn any interest

How will it work?

Currently, eโ‚น will be open to a closed group of people in select cities, distributed by banks. Once you install the CBDC app and link your bank account, you will be assigned a digital wallet stored on mobiles. which you can load by transferring money from your bank account. Transactions can be Person to Person (P2P) or Person to Merchant (P2M). 

How is it different from UPI?

You do not need a bank account or internet connectivity to transact in Digital Rupee, unlike UPI. Only tokens will be transferred from one wallet to another without any backend inter-bank settlement. 

Our Take

A sizeable number of Indians have shifted to digital payments whether it is shopping in a high street mall or paying for groceries in a nearby kirana store. Despite such rapid digitization, cash is still king in India and forms nearly half of all transactions – because it’s anonymous and cannot be tracked, widely accessible and there is an assurance of instant settlement. 

eโ‚น as a form of legal tender is thus unlikely to be a game-changer soon. It is going to be an uphill task to make ordinary Indians understand the benefits of a digital rupee who are accustomed to cash deposits in banks and now UPI to an extent. And unless it gains critical mass, it will have limited impact on the monetary and financial system. 

While mobile penetration in India is high, digital literacy to handle a sophisticated tool like the eโ‚น is very low. 


We have introduced a new section in our wrap where we shall take up one personal finance query we get from our readers and give our view on the same. This week we shall talk about investing strategy for 2023. 

Investing In 2023: Opportunities And Risks

As we usher into the New year, its also time for new year’s resolutions. And if you all have STILL been waiting for the โ€œright timeโ€ to start investing, it can’t be better than NOW!. So take out your planners and get going. 

Has there ever been a year like 2022. War, oil shortage, inflation, recession. Markets have kept us on the edge and given several portfolio bruises. How we miss those boring days!

We however hope your investment returns are anything but boring. Thanks to some year-end cheer, we can finally see some green tinch on our portfolios. But what about 2023? Will equities continue to rally? Or is it better to park in gold and other safe havens like FDs. Will debt mutual funds shine again as interest rate hikes slow down or fixed income is a safer bet? 

Our Take

There are no signs of a bearish phase but itโ€™s time to remain cautious as the IPO season has made a comeback, fund managers have started launching funds, and retail investors are demanding multi-bagger returns in a short time horizon. Read our newly published blog to get more investment insights . Should you need any handholding to set your financial resolutions for 2023, write to us at advice@tavaga.com and we will be happy to help!

What else made news?

๐Ÿ“ˆQ2 GDP: Indiaโ€™s GDP grew at 6.3% in the last quarter, well within the upper band of RBIโ€™s expectation in September and compares to 13.5% in the preceding quarter. 

๐Ÿ™‡Erred: Chinese President Xi looks to have bowed down to protests announcing an easing of its tough Covid-19 protocols 

๐Ÿ›ข๏ธOil cap: The 27 ER member-states have tentatively agreed to put a price ceiling of $60/barrel on Russian oil.ย 

๐Ÿ“บMedia bytes: Prannoy Roy and Radhika Roy have quit the board of RRPR Holdings, the private company through which they held shares in NDTV. Adani had already purchased 29% stake in NDTV earlier and has started an open offer for buying another 26% stake.

โ˜ฎTruce? US President Joe Biden said that he is willing to speak to Russian President Vladimir Putin about ending the Ukraine war but is this an off-the-cuff remark or has any real value. 

โš ๏ธRest in peace: Amazon India, which is shutting down delivery arm Amazon Food and edtech vertical Amazon Academy, will now shut its B2B platform, Amazon Distribution.

Hope you liked reading this weekโ€™s wrap. See you next week. Till then, hope you have a great weekend!


Ruchi Mehta


Disclaimer: This write-up is solely for educational purposes. This in no way should be construed as a buy/sell recommendation. Please consult your investment advisor before investing.

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