We may end up having to do deep-sea mining but still have to weigh the environmental costs

A month ago, it seemed to be just another tale of ruthless miners and desperate, poor people conspiring to wreck the environment while slow-moving, distant regulators failed to get a grip. But it turns out to be more complicated than that, and rather more hopeful.

The mining company was called DeepGreen, but is in the process of becoming a larger entity called simply The Metals Company. The poor people are the eleven thousand inhabitants of Nauru, a tiny independent island in the Western Pacific with no visible means of support.

And the slow-moving, distant regulators are the Jamaica-based International Seabed Authority (ISA), a body created in 1994 under the UN Law of the Sea to govern activities on the seabed in the areas beyond the reach of national laws (i.e. most of the planet).

In principle, the ISA controls mining on that seabed, but so far it has only issued exploration permits. Nobody wanted to do any actual mining, and business has been slow. But vital new technologies, from mobile phones and computers to batteries for electric vehicles and energy storage, have now created a huge demand for cobalt, nickel, copper, manganese, and rare earths - all to be found in vast quantities in potato-sized 'polymetallic nodules' on some parts of the deep seafloor.

So DeepGreen partnered with Nauru's president, Lionel Aingimea, whose country has exclusive control of 75,000 sq. km. of seabed in the Clarion-Clipperton Zone of the North Pacific (between Hawaii and Mexico), and told the ISA on 30 June that it wants to start mining the area within two years.

The beauty of this strategy is that if the ISA has not completed its long-delayed 'Mining Code' within two years of getting such a request, the country making the request can just go ahead and start mining under the current (almost non-existent) rules.

You have to feel sorry for Nauru. It's only the size of Manhattan up to 42nd Street, and 80 per cent of it was strip-mined for phosphates by colonial powers. Almost half its population has type 2 diabetes (70 per cent are obese), and it has no resources left worth mentioning.

One feels less sorry for Vancouver-based DeepGreen, which just wants to make a lot of money, but CEO Gerard Barron does know how to talk the talk: "The world is on a massive push to move away from fossil fuels, and what do we need if we want to do that? We need to build a lot of batteries."

He calls the polymetallic nodules "batteries in a rock", but it's not quite that simple. The nodules would be sucked up in a seawater-sediment slurry by huge undersea machines from as deep as 6,000 metres, passed up to the surface in a giant riser, then separated from the sediment and seawater (which would be pumped back down to the bottom). "We expect most of this sediment to resettle within hours-to-days within tens to thousands of metres from origin."

Major potential customers for deep-sea metals like BMW Group, Volvo Group, and Samsung SDI (battery makers) have declared that they will not allow any seabed minerals in their supply chains until it's clear that they are environmentally defensible.

We may end up having to do deep-sea mining because shifting from fossil fuels to sustainable energy will certainly require a great deal of those metals. But there's huge room for improvement in recycling, and if that's not enough we still have to weigh the environmental costs of seabed operations vs. mining on land.

A moratorium is the right way to go, and DeepGreen has inadvertently made it more likely.

(Gwynne Dyer's new book is 'Growing Pains: The Future of Democracy (and Work)

(Courtesy: The Pioneer)

It is no exaggeration that most investment decisions were influenced by the recent rally in the stock market, not by the fundamentals of companies

The economy contracted in 2020-21 owing to the nationwide pandemic lockdown last year and resulted in a higher unemployment rate in both the formal and informal sectors.However, interestingly, during the same period, there was an unprecedented surge in trading and investment in the stock market.

Both benchmark Sensex and Nifty clocked in their highs during the pandemic period rising from the low that they hit in March 2020. The new entrants are retail investors with their participation booming amid the pandemic situation. According to the data from the Securities and Exchange Board of India (SEBI), the new Demat accounts rose to an all-time high of 10.7 million between April 2020 and January 2021. The recent data from the National Stock Exchange (NSE) shows that retail participation in the stock market's equity division constitutes 45 per cent of trading turnover.

What was the reason behind such an influx of these new retail investors (a major chunk is the GenZ and millennials) in the stock market? Of course, the influence of Warren Buffet, Rakesh Jhunjhunwala, or the movies like The Wolf of Wall Street and Harshad Mehta series acted as catalysts but the major source of ignition arose from income uncertainty due to a significant number of job losses. Many opened their Demat accounts during the pandemic, reminding us of the Warren Buffet quote that "If your salary is your only source of income, you are one step away from poverty".The ease of opening these accounts also boosted the process. Discount brokerage firms like Zerodha, Upstox, etc., helped the emerging investors to open the accounts in a few hours. The investment awareness campaigns also promoted the account opening with different sharebrokers.

Another reason for such a high influx is the increase in liquidity in the market because of Foreign Institutional Investors (FIIs). After withdrawing about $6.4 billion in the March 2020 quarter, FIIs re-entered the Indian equity markets in the June and September 2020 quarters. The value of FII investments in Indian equities reached $450 billion at the end of the third quarter of 2020. At this point the overall spending on consumables was low and the additional inflow of foreign currency increased the liquidity in the market. So, for the middle-income group, investment in stocks was an attractive option.

It is no exaggeration that most of the investment decisions were influenced by the recent rally in the stock market and not driven by the fundamentals of the companies. The surge in the stock price of Bombay Oxygen Investments Ltd (BOM) was one of the prime examples of herding behaviour in the stock market. The price of BOM skyrocketed when there was high demand for medical oxygen across the country but the fun fact was that BOM was just a chemical company, not a producer of oxygen.

Companies aiming to raise finance through Initial Public Offerings (IPO) took advantage of the increase in the number of account holders in the stock market. This is because the number of active investors increases the probability of bidding which would further improve the probability of oversubscription, and eventually, the listing will occur at the highest price. From the new investors' point of view, an IPO is a faster profit-making option and requires much less research for bidding. Only the general market sentiment is enough to anticipate listing gains. The phenomenal participation of retail investors led to almost every IPO getting oversubscribed from the retail category. During the pandemic period, a large number of Indian companies raised ?20,350 crore and ?31,265 crore in financial years 2020 and 2021, respectively, through IPOs.

The trending craze of IPOs was peculiar last year (the same trend is following this year though). From a general, preconceived notion, we can justify our rationale that those companies with good financial records and future growth opportunities should get impressive responses from the primary market. But if we look at recent IPO data, the retail subscription was almost 68 times for a loss-making company like Burger King or BBQ Nations (with 13 times oversubscription), and the same was only about 3.6 times for Indian Railway Finance Corporation (IRFC) thatmakes profit year-on-year and is expected to improve its profitability further. Interestingly, even after 1.5 years, IRFC shares have not picked up in the secondary market whereas the RailTel IPO, despite being a government-backed company, performed quite well both in the primary and the secondary markets.

It is very difficult to formulate any strategy for the companies launching an IPO, as decrypting the mindset of the retail investors is almost impossible. But each IPO was the talk of the town every time. Maybe because the new investors are very tech-savvy and they always kept an eye on the review and financial analysis of these IPOs through different mediums. Hence, the overall response from the primary market was beneficial for the issuing companies.

But what about the gain of the investors (the retail investors, as they are the prime focus of the discussion)? Well, it was a win-win situation for both the investors and the companies. Talking about the listing gains, 29 out of 40 companies (excluding the recent IPOs that are not listed yet) gave an average of 42 per cent returns. And all the 11 companies that couldnot generate listing gains are already giving returns (as of July 15, 2021). This means every listing of last year gave at least some returns (the minimum profit figure is 29 per cent; SBI Cards).  The one-year return from the IPOs will be difficult to measure, as only one company came up with an IPO in the first six months of last year. So, if we consider last year's IPOs, the average return is 202 per cent. But it is unfair to assume everyone got the allotment of all these IPOs. So, from the listing price, if we calculate the return, it is roughly 118 per cent.

An interesting inference that can be drawn is that last year those companies which were listed with a higher price than the IPO price are all generating positive returns as of July 16,2021. So, from a value investing point of view, investors feel, these companies are a good bet for them in the long term.

However, there is a propensity for retail investors who get IPO allotments to square off the position on the listing day itself with a moderate listing gain. With news spreading of some supernatural listing gains of some companies, for example,Indigo Paints, which was listed with 109 per cent return, or Happiest Minds Technologies, which was listed with 123 per cent returns, potential investors get the motivation to enter the equity market. At the same time, some active investors tend to bid furiously for the next IPO without proper analysis. The first outcome is good for the economy. But the second scenario is detrimental to investors' mindset and leads to a gambling outlook towards the IPOs. So, the education on personal financing and the stock market, interpretation of the balance sheets of companies for fundamental analysis, and understanding the due diligence of companies across sectors is something that the retail investors must know thoroughly. 

(Arnab Sarkar is PGDM Student, Great Lakes Institute of Management, Chennai. Ranjitha Ajay is Assistant Professor of Finance at GLIM, Chennai. The views expressed are personal.) 

(Courtesy: The Pioneer)

The former Minister is upset after being ousted from the Modi Cabinet in the recent reshuffle

Babul Supriyo, a former BJP Minister, has announced on Facebook that he is quitting politics. The two-time MP from Asansol and the face of the BJP in West Bengal has finally said adieu to the party that once banked upon his charisma as a singer to garner votes. He said he was leaving politics after due consideration with his family and that he would quit politics itself, not just the party or his Parliament seat. He also wrote that he would not join any other party but later deleted that part. Babul has been candid in admitting that his decision has a lot to do with him being dropped from the Modi Cabinet. The party saw it coming or not, but the BJP’s Bengal unit is in disarray. It does not have any popular face to portray. Babul had joined the BJP just before the 2014 elections and was the blue-eyed boy of the Prime Minister. He served as a Minister of State with important portfolios in both terms of the Modi Government. People often leave and join parties but Babul’s resignation is different as he made no bones that he was upset about being dropped from the Cabinet.

Babul had it rough with the BJP’s State-level unit as well. He was not on good terms with State chief Dilip Ghosh and, indeed, the State unit of the party. Often he would be on social media airing his views, which were embarrassing for the central brass as well. Known for his short temper, Babul has courted controversy several times. Once he was caught on camera slapping his own party worker and, on another occasion, threatening a guy to break his leg at a function for the differently abled. He defeated Moon Moon Sen in the 2019 general elections but lost the Assembly elections by 50,000 votes. His opponents have called his resignation a “drama”, saying if he had to resign as an MP he should have written to the Speaker. Instead, he took to Facebook to create a storm in a teacup. Indeed, that might be the case as Babul may try to throw his weight around and bargain to retain his position. At the moment, it is a developing story. If it happens, it is indeed bad news for the BJP. Babul made little difference in the Assembly polls but his replacement would be harder to find. 

(Courtesy: The Pioneer) 

The AICTE plans to do away with mandatory maths and physics for the engineering exam

A development in the field of education is raising some concern in the minds of people. The NITI Aayog has backed the proposal of the All India Council for Technical Education (AICTE) to revamp the national engineering entrance examination that no longer requires mathematics and physics as mandatory subjects in plus-two. Students will need to pass any three of 14 subjects, including mathematics, physics and chemistry, in their plus-two examination. The logic given is that the industry and a section of the students want the option to pursue technical programmes like agriculture, biotechnology, electronics, or IT engineering that do not depend on physics and mathematics. The AICTE idea applies to the affiliated technical colleges and not to universities, IITs, NITs or IISERs. The move has been met with consternation. The alarmist view is that a section of the students may benefit from this rule but it would destabilise the approach to technical education in the country, that there is no engineering without mathematics and physics, that bridge programmes make poor substitutes. Some even recalled how zero, trigonometry and some aspects of calculus were invented in ancient India, wondering how such a legacy could be junked. The critics view the idea as a move to ensure the survival of engineering colleges in the country. Private engineering and other technical institutes are closing down by the hundreds every year because the seats are not getting filled.

Students do not opt for colleges where minimum standards of learning and infrastructure are not maintained and the graduates do not get jobs. Thirdly, as aspirations grow, the students prefer either nationally acclaimed engineering institutes or diversify into new technical fields. Critics feel that the AICTE proposal can breathe new life into these colleges, though the question mark remains about the quality of education imparted. The debate about the relevance of super subjects — mathematics and physics — can continue. The world is changing fast and technology is speeding it up. The focus of education, especially in the formative years, should emphasise on the applicational along with the theoretical. Technical education programmes are diversifying to as innovative as wine taster, cybersecurity specialist, processed food specialist, site reliability engineer and growth manager. Linkedin came out with a list of emerging industrial jobs in India for 2020, only some of which have to do with engineering but with tangential links to mathematics or physics. The India Skills Report for 2021 says the employability of India’s youth has decreased of late, making it imperative that higher and technical education equips them with skills necessary for in-demand career opportunities. Technology is a double-edged sword. It encourages automation. As it grows, jobs become obsolete. Elitist views about education are becoming archaic. A skills-based ecosystem is needed. A better move than the AICTE proposal, for instance, is to introduce a system of apprenticeship that makes the private sector responsible for imparting skills to the workers depending on the basis of an annual revision of the skills shortage list.

(Courtesy: The Pioneer)