Billionaires: Kumar Birla’s Vodafone Idea rallies as investors bet on rescue

In our fortnightly roundup, stocks in the Indian billionaire’s telecom operator rally on investor optimism and as one of Rupert Murdoch’s sons leaves his father's empire

Kumar Mangalam Birla, billionaire and chairman of Aditya Birla Group, gestures while speaking during the Bloomberg India Economic Forum in Mumbai, India, on Tuesday, Sept. 18, 2018. The forum features in-depth discussions on India’s connected future. Photographer: Dhiraj Singh/Bloomberg
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Kumar Birla

For investors riding a rally in India’s wireless carriers, the best returns are coming from an operator that’s warned it may collapse without help from the government.

Although Vodafone Idea hasn’t made a profit since 2017 and ended the last fiscal year with a record $10 billion (Dh36.7bn) loss, its shares have more than doubled in the past three months. The surge has been driven mostly on optimism that the Indian government will rescue the beleaguered carrier after the Supreme Court burdened it with billions of dollars in fees.

Gains made by the penny stock outpaced the 51 per cent jump for Reliance Industries, the conglomerate behind India’s No 1 carrier, and the 3.1 per cent gain for Bharti Airtel, the No 2 rival.

The joint venture between UK-based Vodafone Group and the group controlled by Indian billionaire Kumar Birla had already been struggling in the face of a devastating price war since the entry of Mukesh Ambani’s Reliance Jio Infocomm in 2016. Vodafone Idea has shed millions of subscribers amid intense competition, and has said it may no longer be a “going concern”.

“Vodafone Idea appeals to a very different class of investor,” says Vivekanand Subbaraman, associate vice president, Ambit Capital. “It is a market way of saying that if it survives, it is going to be worth a lot more.”

James Murdoch once seemed most likely to take over for 89-year-old Rupert Murdoch as the head of the family business. AP

Rupert Murdoch

With James Murdoch severing the final ties with his family’s media empire, his brother Lachlan Murdoch - a prodigal son of sorts - is left as the last and most likely successor to their billionaire father Rupert Murdoch.

When James Murdoch announced that he was leaving the News Corp board - after clashing over the company’s editorial direction - it was just the latest step in distancing himself from the sprawling Murdoch operations.

The 47-year-old, who’d once seemed most likely to take over for his 89-year-old father as the head of the family business, is now focused on building his own collection of media and technology assets.

The split punctuated something that’s become clearer for several years: Lachlan Murdoch, 48, is poised to take the reins when the time comes.

“We’re grateful to James for his many years of service to the company,” Rupert Murdoch and Lachlan Murdoch, who serve as co-chairmen of News Corp, said in brief response to James Murdoch's departure. “We wish him the very best in his future endeavours.”

Lachlan Murdoch was named chief executive of Fox Corp after the company sold most of its entertainment assets to Walt Disney in a $71bn transaction last year. James Murdoch had run the business before the deal, when it was known as 21st Century Fox. But when Lachlan Murdoch was appointed CEO in 2018, his brother wasn’t even mentioned in the press release announcing the move.

Lachlan Murdoch has taken a roundabout route to succession. He abruptly quit the family business in 2005 and set up an investment firm in Australia called Illyria.

During the years of his exile, his younger brother climbed the ranks. He ran BSkyB in Europe and News Corp’s media assets in the region, but a phone-hacking scandal in the UK hurt his reputation.

In 2014, Lachlan Murdoch returned to the fold, taking senior positions at the newly split News Corp and 21st Century Fox. The following year, he became Fox’s executive chairman. James Murdoch was CEO of the company, but his older brother was firmly back in the family’s good graces.

When Disney agreed to buy most of 21st Century Fox, including its movie studio, James Murdoch’s future became less clear. There was speculation that he would become a Disney executive while Lachlan Murdoch ran what was left of Fox.

Instead, he left to build an empire of his own. His investment firm, Lupa Systems, is the backer of media and technology businesses - everything from a Norwegian drone company to a chain offering virtual-reality experiences in malls.

SAN FRANCISCO, CA - OCTOBER 07:  DST Global Founder Yuri Milner speaks onstage during "Are We Alone in the Universe?" at the Vanity Fair New Establishment Summit at Yerba Buena Center for the Arts on October 7, 2015 in San Francisco, California.  (Photo by Mike Windle/Getty Images for Vanity Fair)

Yuri Milner

DST Global, the investment firm headed by billionaire Yuri Milner, is close to investing $400m in Indian online education start-up Byju’s, according to a source. The deal values Byju’s at $10.5bn and could be signed soon, said the source. The transaction would make the company India’s second-most valuable start-up after Alibaba Group Holding-backed financial payments brand, Paytm.

The Russian-Israeli billionaire, one of the world’s best-known technology investors, is an early backer of the largest internet firms including Alibaba, Facebook and Twitter. DST has also funded a string of high-profile Indian start-ups such as online retailer Flipkart Online Services, ride-hailing start-up Ola, food-delivery start-up Swiggy and business e-commerce start-up Udaan.

Byju’s, whose investors include Facebook founder Mark Zuckerberg’s Chan Zuckerberg Initiative, Naspers and Tiger Global Management, simplifies maths and science concepts for K-12 students through games and videos. It was founded by Byju Raveendran, a former teacher and son of educators, who conceived the smartphone app in 2011.

The app caters to students from kindergarten through to Year 12 and has more than 57 million registered users and over 3.5 million paid subscribers. It’s adding over 300,000 new subscribers every month. Byju’s doubled revenues in the year ended March 2020 to 28 billion rupees (Dh1.4bn) from the previous financial year and is profitable, a rarity for Indian start-ups.

India’s online education segment is on fire after the coronavirus pandemic and resulting lockdowns shuttered schools across the country, prompting a never-before migration to online learning.

Byju’s has raised $400m this year alone and was last funded by Bond Capital co-founded by Silicon Valley investment guru, Mary Meeker, formerly of Kleiner Perkins.

(FILES) In this file photo taken on January 23, 2017 CEO Elon Musk listens to US President Donald Trump speak during a meeting with business leaders in the Roosevelt Room at the White House in Washington, DC. - Tesla Motors dropped in early trading on August 20, 2018 due to rising doubts about Chief Executive Elon Musk's plans to take the electric carmaker private. Shares fell 2.6 percent to $297.55 about 20 minutes into trading, continuing the company's downward trajectory after Musk surprised markets on August 7 by announcing on Twitter he wanted to take Tesla private. (Photo by NICHOLAS KAMM / AFP)

Elon Musk

Elon Musk is having a fantastic year.

SpaceX, the company he founded in 2002, blasted two American astronauts to the International Space Station in late May and brought them safely home in a historic splashdown, heralding a new age of private-sector space travel. Tesla, his electric car maker, recently celebrated its fourth straight quarter of profit and may soon join the S&P 500 Index. This year’s share rally has made the California company the world’s most valuable car maker, with a market value of roughly $267bn.

And then there’s Mr Musk himself. The 49-year-old South African immigrant is now the 10th-richest person in the world, according to the Bloomberg Billionaires Index.

While the chief executives of the Big Four tech companies - Amazon, Apple, Facebook and Google - were derided as 'Cyber Barons' during a grilling by Congress last week on antitrust issues, Mr Musk basked in Style-section treatment in the Sunday New York Times.

It’s a remarkable turnaround from the dark days of 2018, when Tesla struggled to ramp up production of the Model 3 sedan, scores of executives quit and Mr Musk was sued by the US Securities and Exchange Commission over his infamous “go private” tweet.

Since then, he’s not endeared himself to everyone. Mr Musk has come under fire for downplaying the coronavirus pandemic, tweeting in early March that “coronavirus panic is dumb” and then predicting the US would probably have “close to zero new cases” by the end of April. In California, where Tesla’s massive plant employs roughly 10,000 workers, Mr Musk defied public health authorities in Alameda County by closing down the plant late and reopening it early, daring anyone to arrest him.

Yet in a year when much of the nation is hunkered down or retrenching in the face of surging virus infections and widespread economic anxiety, Mr Musk is expanding. Tesla, which has 55,000 employees globally, is hiring and is building a new auto plant in Austin, Texas, for its forthcoming electric pick-up truck. Mr Musk suggested that Tesla’s workforce could grow to 65,000 by the end of the year.