Services PMI at 7-year high as orders pick up€¦ · RBI TO GET MORE TEETH TO SUPERVISE...
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RBI TO GET MORE TEETH TO SUPERVISE CO-OPERATIVE BANKS The Reserve Bank of India (RBI) is set to get more auditory and supervisory powers over urban and multi-state co-operative banks, with the Union Cabinet approving the Banking Regulation Amendment Bill, 2020, on Wednesday. “Like commercial banks, multi-state and urban co-operative banks will be brought under the RBI regulations. These changes will be only for the banking side and administrative rights will continue to remain with the registrars,” said Information and Broadcasting Minister Prakash Javadekar. 6 > > RESULTS RECKONER Quarter ended Dec 31, 2019; common sample of 760 companies (results available of 875) SALES Dec 31, ’18 22.1 % ~11.49 trillion Dec 31, ’19 1.9% ~11.70 trillion PROFIT BEFORE TAX Dec 31, ’18 -20.0% ~99,761 cr Dec 31, ’19 56.7% ~1.56 trillion NET PROFIT Dec 31, ’18 -32.6% ~62,164 cr Dec 31, ’19 84.0% ~1.14 trillion Companies with zero sales excluded; Given the change in corporate tax rates, to give a fair comparison the profit before tax has been considered; Compiled by BS Research Bureau; Source: Capitaline THE SMART INVESTOR II, 1 Sebi tweaks rules for IPO documents nod The Securities and Exchange Board of India on Wednesday set rules under which it could hold back approvals for proposed share sales by firms that are under investigation for possible violations. The markets regulator said for current investigations, “observations” on the draft offer may be kept in abeyance for 30 days from filing of the draft offer. Bharti Airtel pitches for Voda Idea’s survival Bharti Airtel on Wednesday pitched for a healthy telecom sector with three players and said Vodafone Idea’s survival will be good from the ‘investment and reputation’ point of view for India. In the company’s post earnings conference call, Badal Bagri, chief financial officer, Bharti Airtel, said the telecom sector was large enough to accommodate three players. ECONOMY & PUBLIC AFFAIRS P4 15th FC to form panel to draw up road map The Fifteenth Finance Commission will set up a panel later this month to examine the fiscal and debt situation of the Centre and states and present a road map, on the lines of the erstwhile Fiscal Responsibility and Budget Management panel, the Commission’s chairman, N K Singh, said on Wednesday. Correction The report — “Companies may change dividend policy after Budget changes” – published on February 3, had suggested that Sunil Mittal would be impacted by the abolition of dividend distribution tax. Bharti Airtel has clarified that no individual promoter holds shares or receives dividend from the company, and hence, the change in dividend policy is not relevant. The error is regretted. THE MARKETS ON WEDNESDAY Chg# Sensex 41,142.7 353.3 Nifty 12,089.2 109.5 Nifty Futures* 12,086.3 2.9 Dollar ~71.2 ~71.3 ** Euro ~78.5 ~78.8 ** Brent crude ($/bbl) ## 54.7 ## 53.1 ** Gold (10 gm) ### ~40,049.0 ~394.0 ECONOMY & PUBLIC AFFAIRS P8 MODI TARGETS $5 BILLION OF DEFENCE EXPORTS IN 5 YEARS COMPANIES P3 www.business-standard.com *(Feb.) Premium on Nifty Spot; **Previous close; # Over previous close; ## At 9 pm IST; ### Market rate exclusive of VAT; Source: IBJA PUBLISHED SIMULTANEOUSLY FROM AHMEDABAD, BENGALURU, BHUBANESWAR, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI (ALSO PRINTED IN BHOPAL), NEW DELHI AND PUNE TATA POWER MOVING AWAY FROM GENERATION: CEO THURSDAY, 6 FEBRUARY 2020 26 pages in 2 sections MUMBAI (CITY) ~9.00 VOLUME XXIV NUMBER 124 SHRIMI CHOUDHARY New Delhi, 5 February Within eight months of challenging the National Company Law Tribunal’s (NCLT’s) order giving a green signal to Reliance Jio Infocomm’s proposed demerger, the income-tax (I-T) depart- ment is learnt to have found merit in the appellate tribunal’s December rul- ing, which dismissed the I-T petition. The tax department shared its opin- ion and the rationale in a communique to the law ministry 10 days ago, where it sought the ministry’s legal opinion on the matter to decide further course of action, said an official privy to the development. The National Company Law Appellate Tribunal (NCLAT) had dis- missed the I-T department’s petition objecting to the proposed demerger of Jio’s tower and fibre optic network assets into two infrastructure trusts. According to sources, the depart- ment is of the view that the NCLAT order, which had cited multiple verdicts by the Supreme Court, including the Vodafone-Essar tax avoidance case, needs to be taken into consideration. “Some of the instances quoted in the appellate order apply to the Jio case as well. So an appeal against the existing verdict may not stand legal scrutiny in the apex court,” said a tax official. Turn to Page 17 > High-powered jury to select BS award winners today BS REPORTER Mumbai, 5 February A power-packed jury comprising leading decision-makers of India Inc will meet in Mumbai on Thursday to select the winners of Business Standard’s annual awards for corporate excellence for 2019. Aditya Birla Group Chairman Kumar Mangalam Birla is the chair- man of the eight-member jury. The other jury members are JSW Group Chairman Sajjan Jindal, KKR India CEO Sanjay Nayar, EY India Chairman Rajiv Memani, Omidyar Network India MD Roopa Kudva, McKinsey & Company Senior Partner Noshir Kaka, Cyril Amar- chand Mangaldas Managing Partner Cyril Shroff, and Bain Capital Private Equity MD Amit Chandra. The jury will select the best in Corporate India, from a long list of names and data com- piled by Business Standard Research Bureau, to name the “CEO of the Year” as well as achievers in other cat- egories — public sector undertakings, multinational firms, and small and medium enterprises. The jury will also choose the “Company of the Year” and “Start- up of the Year”, as well as announce the “Lifetime Achievement” awards. Turn to Page 17 > EVALUATING LEGAL STANDPOINT | Tax dept is to decide on whether to challenge NCLAT order in SC or not | Decision likely by Feb-end, based on law ministry opinion | NCLAT upheld tribunal order clearing Jio's proposed demerger plans | I-T contested NCLT order, saying it would reduce Jio Infocomm’s profits ‘Father believed three engines can never run a company successfully’ The question many are asking is why are you pushing for an outright sale of all assets (Godfrey Phillips India, Indofil Industries, and Modicare) when the trust deed provides the option of sale of some assets, and the running of some companies as well as all the companies together? Any sale short of all trust assets will be unfair to other share- holders and will be in con- travention of the provi- sions of the restated trust deed. Therefore, I have no option but to reject this. The choice, however, is not mine to make; it is clearly set out in the trust deed. In case there is no unanimity amongst the four family members, a fact which was triggered in the November 30 meeting, it automati- cally leads to sale of the entire trust funds and family-controlled busi- ness. The process dictates that all assets will be put for sale by an investment banker. While external bids will come in, family members have the right to match the bid. You have said family members can match the bid and keep the company. Will you do so and match it? My father was clear that share- holder value is primary. He was clear that three engines can never run a company successfully. He was also of the view if family members want to acquire, then they can acquire the entire stake. Turn to Page 8 > "THE REASON WHY I PUT MY WEIGHT BEHIND (ASSET) SALE IS BECAUSE I DON’T BELIEVE THAT ANY MEMBER OF THE TRUST HAS THE ABILITY, VISION OR AMBITION TO CONTINUE" Just months after his industrialist father K K Modi’s death, Lalit Modi is embroiled in a bitter battle with his family, which includes his mother Bina, brother Samir, and sister Charu, on what course the ~10,000-crore group should take. In an e-mail interview, LALIT MODI explains to Surajeet Das Gupta why he is pushing for an outright sale of assets. Edited excerpts: JIO DEMERGER CASE I-T dept now finds merit in NCLAT order Seeks law min opinion on course of action Services PMI at 7-year high as orders pick up SUBHAYAN CHAKRABORTY New Delhi, 5 February The services sector began the year with a bang as new orders in January rose at the fastest pace in seven years, dwarfing December’s five-month high growth, according to a survey released on Wednesday. The widely tracked Nikkei India Services Purchasing Managers Index (PMI) stood at 55.5 in January, up from 53.3 in December. In PMI parlance, the 50-mark threshold separates exp- ansion from contraction. New international business also pushed the sector’s output to a sim- ilar seven-year high dur- ing the month. This wo- uld allow firms to recuperate from the high volatility in 2019, when the sector saw the PMI contract during three months, industry insiders said. Services growth had peaked to a 43-month high of 54.7 in August, fol- lowed by two straight mo- nths of contraction. Howe- ver, this has been followed by steady growth since November. This has been in line with manufactur- ing activity, which mir- rored a steep upward mo- ve of the growth curve in January when the PMI reached 55.3, the highest in nearly eight years, according to a survey released earlier this week. For services, total sales expanded for the fourth consecutive month in January. Consumer serv- ices growth was the most marked, after transport and storage firms had seen the biggest boost in the previous month. The zooming rate of growth in January was largely due to favourable market con- ditions and better underlying demand, said survey participants. Turn to Page 17 > SIGNS OF GREEN SHOOTS PMI services trend Source : IHS Markit Market sentiment gets boost SENSEX Sources: Exchange/Bloomberg 353.3 pts 0.87 % PHOTO: SANJAY K SHARMA Maruti’s EV plans take a back seat SHALLY SETH MOHILE & ARINDAM MAJUMDER Greater Noida, 5 February T he country’s largest carmaker, Maruti Suzuki India, will not be launching an elec- tric vehicle (EV) anytime in the foreseeable future, as issues like range anxiety and the high cost of acquisition will put off buy- ers, Kenichi Ayukawa, its man- aging director and chief execu- tive, told Business Standard. Maruti has decided to put its EV plans on the back burn- er even as most other passen- ger vehicle makers such as Tata Motors, Mahindra & Mahindra, Renault India, MG Motors, and Kia Motors are going full throttle with their plans, nudged by the govern- ment’s policy push. Maruti will instead focus on other alternative technologies, including compressed natural gas (CNG) and hybrid, to reduce the overall carbon foot- print to meet advance emis- sion norms. “This is not a good time to bring an electric vehicle to the Indian market. Looking at mar- ket conditions and customer expectations, we will decide,” said Ayukawa. Considering the fact that the government does- n’t support subsidy for person- al EVs, Maruti will have to “examine ways to provide an affordable electric product in the personal space”, he added. “There is no parking space or charging space. Infrast- ructure hasn’t developed at all. Under these conditions, it is very difficult to make a busi- ness case. Only limited people are interested,” said Ayukawa. Turn to Page 17 > Carmakers like Tata Motors and M&M bet big on e-mobility WHAT MAKES MARUTI WARY OF EVs? | High acquisition cost | Range concerns | Lack of infrastructure | Emission due to charging of EVs from coal-based power defeats purpose of clean mobility THE MARKET AND INFRASTRUCTURE CONDITIONS ARE NOT RIGHT TO LAUNCH AN ELECTRIC VEHICLE IN INDIA KENICHI AYUKAWA, MD & CEO, MARUTI SUZUKI ‘WILL DECIDE ON DIESEL CARS AFTER SIX MONTHS’ SLOWDOWN PLAYS SPOILSPORT AT EXPO VIRUS SCARE MAY HIT CHINA CARMAKERS’ INDIA INVESTMENTS AUTO EXPO 2020 PAGE 18 INDIA OUTLOOK STILL CRITICAL: VODAFONE >P2
Transcript of Services PMI at 7-year high as orders pick up€¦ · RBI TO GET MORE TEETH TO SUPERVISE...
RBI TO GET MORETEETH TO SUPERVISECO-OPERATIVE BANKSThe Reserve Bank of India (RBI) is set to getmore auditory and supervisory powers overurban and multi-state co-operative banks,with the Union Cabinet approving theBanking Regulation Amendment Bill, 2020,on Wednesday. “Like commercial banks,multi-state and urban co-operative bankswill be brought under the RBI regulations.These changes will be only for the bankingside and administrative rights will continueto remain with the registrars,” saidInformation and Broadcasting MinisterPrakash Javadekar. 6 >
> RESULTS RECKONER
Quarter ended Dec 31, 2019; common sampleof 760 companies (results available of 875)
SALESDec 31, ’18 22.1% ~11.49 trillion �
Dec 31, ’19 1.9% ~11.70 trillion �
PROFIT BEFORE TAXDec 31, ’18 -20.0% ~99,761 cr �
Dec 31, ’19 56.7% ~1.56 trillion �
NET PROFITDec 31, ’18 -32.6% ~62,164 cr �
Dec 31, ’19 84.0% ~1.14 trillion �
Companies with zero sales excluded; Given the change in corporatetax rates, to give a fair comparison the profit before tax has beenconsidered; Compiled by BS Research Bureau; Source: Capitaline
THE SMART INVESTOR II, 1
Sebi tweaks rules forIPO documents nod The Securities and Exchange Board of India onWednesday set rules under which it couldhold back approvals for proposed share salesby firms that are under investigation forpossible violations. The markets regulator saidfor current investigations, “observations” onthe draft offer may be kept in abeyance for 30 days from filing of the draft offer.
Bharti Airtel pitches forVoda Idea’s survival Bharti Airtel on Wednesday pitched for ahealthy telecom sector with three playersand said Vodafone Idea’s survival will begood from the ‘investment and reputation’point of view for India. In the company’spost earnings conference call, Badal Bagri,chief financial officer, Bharti Airtel, said thetelecom sector was large enough toaccommodate three players.
ECONOMY & PUBLIC AFFAIRS P4
15th FC to form panel todraw up road mapThe Fifteenth Finance Commission will set upa panel later this month to examine the fiscaland debt situation of the Centre and statesand present a road map, on the lines of theerstwhile Fiscal Responsibility and BudgetManagement panel, the Commission’schairman, N K Singh, said on Wednesday.
Correction The report — “Companies may changedividend policy after Budget changes” –published on February 3, had suggestedthat Sunil Mittal would be impacted bythe abolition of dividend distribution tax.Bharti Airtel has clarified that noindividual promoter holds shares orreceives dividend from the company, andhence, the change in dividend policy isnot relevant. The error is regretted.
THE MARKETS ON WEDNESDAY CChhgg##
Sensex 41,142.7� 353.3Nifty 12,089.2� 109.5Nifty Futures* 12,086.3� 2.9Dollar ~71.2 ~71.3**Euro ~78.5 ~78.8**Brent crude ($/bbl)## 54.7## 53.1**Gold (10 gm)### ~40,049.0� ~394.0
ECONOMY & PUBLIC AFFAIRS P8
MODI TARGETS $5 BILLION OFDEFENCE EXPORTS IN 5 YEARS
COMPANIES P3
www.business-standard.com
*(Feb.) Premium on Nifty Spot; **Previous close; # Over previous close; ## At 9 pm IST; ### Market rate exclusive of VAT; Source: IBJA PUBLISHED S IMULTANEOUSLY FROM AHMEDABAD, BENGALURU, BHUBANESWAR, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI (ALSO PRINTED IN BHOPAL) , NEW DELHI AND PUNE
TATA POWER MOVING AWAYFROM GENERATION: CEO
THURSDAY, 6 FEBRUARY202026 pages in 2 sectionsMUMBAI (CITY)~9.00VOLUME XXIV NUMBER 124
SHRIMI CHOUDHARY
New Delhi, 5 February
Within eight months of challenging theNational Company Law Tribunal’s(NCLT’s) order giving a green signal toReliance Jio Infocomm’s proposeddemerger, the income-tax (I-T) depart-ment is learnt to have found merit inthe appellate tribunal’s December rul-ing, which dismissed the I-T petition.
The tax department shared its opin-ion and the rationale in a communiqueto the law ministry 10 days ago, where it sought the ministry’s legalopinion on the matter to decide furthercourse of action, said an official privy tothe development.
The National Company LawAppellate Tribunal (NCLAT) had dis-missed the I-T department’s petitionobjecting to the proposed demerger ofJio’s tower and fibre optic network assetsinto two infrastructure trusts.
According to sources, the depart-ment is of the view that the NCLATorder, which had cited multiple verdictsby the Supreme Court, including theVodafone-Essar tax avoidance case,needs to be taken into consideration.“Some of the instances quoted in theappellate order apply to the Jio case aswell. So an appeal against the existingverdict may not stand legal scrutiny inthe apex court,” said a tax official.
Turn to Page 17 >
High-poweredjury to selectBS awardwinners todayBS REPORTER
Mumbai, 5 February
A power-packed jury comprisingleading decision-makers of IndiaInc will meet in Mumbai onThursday to select the winners ofBusiness Standard’s annual awardsfor corporate excellence for 2019.
Aditya Birla Group ChairmanKumar Mangalam Birla is the chair-man of the eight-member jury. Theother jury members are JSW GroupChairman Sajjan Jindal, KKR IndiaCEO Sanjay Nayar, EY IndiaChairman Rajiv Memani, OmidyarNetwork India MD Roopa Kudva,McKinsey & Company SeniorPartner Noshir Kaka, Cyril Amar-chand Mangaldas Managing PartnerCyril Shroff, and Bain Capital PrivateEquity MD Amit Chandra.
The jury will selectthe best in Corporate
India, from a long list ofnames and data com-piled by Business
Standard ResearchBureau, to name the“CEO of the Year” as wellas achievers in other cat-
egories — public sectorundertakings, multinational
firms, and small andmedium enterprises.
The jury will alsochoose the “Companyof the Year” and “Start-up of the Year”, as wellas announce the“Lifetime Achievement”awards. Turn to Page 17 >
EVALUATINGLEGALSTANDPOINT| Tax dept is to decide
on whether tochallenge NCLAT order in SC or not
| Decision likely byFeb-end, based onlaw ministry opinion
| NCLAT upheld tribunalorder clearing Jio's proposeddemerger plans
| I-T contested NCLTorder, saying it would reduce JioInfocomm’s profits
‘Father believed three engines cannever run a company successfully’
The question many are asking iswhy are you pushing for an
outright sale of all assets (GodfreyPhillips India, Indofil Industries,and Modicare) when the trust
deed provides the option of sale ofsome assets, and the running ofsome companies as well as all thecompanies together?
Any sale short of all trust assetswill be unfair to other share-
holders and will be in con-travention of the provi-
sions of the restatedtrust deed.Therefore, I have nooption but to rejectthis. The choice,however, is notmine to make; it is
clearly set out in the trust deed. Incase there is no unanimityamongst the four family members,a fact which was triggered in theNovember 30 meeting, it automati-cally leads to sale of the entire trustfunds and family-controlled busi-ness. The process dictates that allassets will be put for sale by aninvestment banker. While externalbids will come in, family membershave the right to match the bid.
You have said family memberscan match the bid and keep thecompany. Will you do so andmatch it? My father was clear that share-holder value is primary. He wasclear that three engines can neverrun a company successfully. Hewas also of the view if familymembers want to acquire, thenthey can acquire the entire stake.
Turn to Page 8 >
"THE REASONWHY I PUT MYWEIGHT BEHIND(ASSET) SALE ISBECAUSE I DON’TBELIEVE THATANY MEMBER OFTHE TRUST HASTHE ABILITY,VISION ORAMBITION TO CONTINUE"
Just months after his industrialist father K K Modi’s death, Lalit Modi is embroiled in a bitter battlewith his family, which includes his mother Bina, brother Samir, and sister Charu, on what course the~10,000-crore group should take. In an e-mail interview, LALIT MODIexplains to Surajeet Das Guptawhy he is pushing for an outright sale of assets. Edited excerpts:
JIO DEMERGER CASE
I-T dept nowfinds merit inNCLAT order Seeks law min opinion on course of action
Services PMI at 7-year high as orders pick up SUBHAYAN CHAKRABORTY
New Delhi, 5 February
The services sector beganthe year with a bang asnew orders in Januaryrose at the fastest pace inseven years, dwarfingDecember’s five-monthhigh growth, according to a survey released onWednesday.
The widely trackedNikkei India ServicesPurchasing ManagersIndex (PMI) stood at 55.5in January, up from 53.3in December. In PMIparlance, the 50-markthreshold separates exp-ansion from contraction.
New internationalbusiness also pushed thesector’s output to a sim-ilar seven-year high dur-ing the month. This wo-uld allow firms torecuperate from the highvolatility in 2019, whenthe sector saw the PMI contract duringthree months, industry insiders said.
Services growth hadpeaked to a 43-monthhigh of 54.7 in August, fol-lowed by two straight mo-nths of contraction. Howe-ver, this has been followedby steady growth sinceNovember. This has beenin line with manufactur-ing activity, which mir-rored a steep upward mo-ve of the growth curve inJanuary when the PMIreached 55.3, the highestin nearly eight years,according to a surveyreleased earlier this week.
For services, total salesexpanded for the fourthconsecutive month inJanuary. Consumer serv-ices growth was the mostmarked, after transportand storage firms hadseen the biggest boost inthe previous month. Thezooming rate of growth inJanuary was largely dueto favourable market con-
ditions and better underlying demand,said survey participants. Turn to Page 17 >
SIGNS OFGREEN SHOOTSPMI services trend
Source : IHS Markit
Market sentimentgets boostSENSEX
Sources: Exchange/Bloomberg
353.3 pts0.87%
PHOTO
: SA
NJA
Y K
SHAR
MA
Maruti’s EV plans take a back seatSHALLY SETH MOHILE &
ARINDAM MAJUMDER
Greater Noida, 5 February
The country’s largestcarmaker, MarutiSuzuki India, will notbe launching an elec-
tric vehicle (EV) anytime in theforeseeable future, as issues likerange anxiety and the high costof acquisition will put off buy-ers, Kenichi Ayukawa, its man-aging director and chief execu-tive, told Business Standard.
Maruti has decided to putits EV plans on the back burn-er even as most other passen-ger vehicle makers such asTata Motors, Mahindra &Mahindra, Renault India, MGMotors, and Kia Motors aregoing full throttle with theirplans, nudged by the govern-ment’s policy push.
Maruti will instead focus onother alternative technologies,including compressed naturalgas (CNG) and hybrid, toreduce the overall carbon foot-print to meet advance emis-sion norms.
“This is not a good time tobring an electric vehicle to theIndian market. Looking at mar-ket conditions and customerexpectations, we will decide,”said Ayukawa. Considering thefact that the government does-n’t support subsidy for person-
al EVs, Maruti will have to“examine ways to provide anaffordable electric product inthe personal space”, he added.
“There is no parking spaceor charging space. Infrast-
ructure hasn’t developed atall. Under these conditions, itis very difficult to make a busi-ness case. Only limited peopleare interested,” said Ayukawa.
Turn to Page 17 >
Carmakers like Tata Motors and M&M bet big on e-mobility
WHAT MAKES MARUTI WARY OF EVs?| High acquisition cost| Range concerns| Lack of infrastructure| Emission due to charging of EVs
from coal-based power defeatspurpose of clean mobility
THE MARKET ANDINFRASTRUCTURECONDITIONS ARENOT RIGHT TOLAUNCH ANELECTRIC VEHICLE IN INDIAKENICHI AYUKAWA,MD & CEO, MARUTI SUZUKI
‘WILL DECIDEON DIESELCARS AFTERSIX MONTHS’
SLOWDOWN PLAYSSPOILSPORTAT EXPO
VIRUS SCARE MAY HIT CHINACARMAKERS’ INDIAINVESTMENTS
AUTO EXPO 2020 PAGE 18
INDIA OUTLOOK STILL CRITICAL: VODAFONE >P2
2 COMPANIES MUMBAI | THURSDAY, 6 FEBRUARY 2020
> .
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* OVER PREVIOUS CLOSE
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>Zee Entertainment EnterprisesMinistry of CorporateAffairs orders inspectionsof the company’s books
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> BPCLRussia’s largest oilproducer Rosneft keen to bid: Report
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IN BRIEF
It’s too early to take a call onAir India: Tata Sons chairmanTata Sons Chairman N Chandrasekaran said on Wednesday it is ‘too early’to take a call on Air India, in which the government has decided to sell itsentire 100 per cent stake. “It is too early...” Chandrasekaran said whenasked if Tata Group would be putting bid for the Air India stake purchaseat the Auto Expo. The comments came in the wake of reports in a sectionof media saying that Tatas appear to be moving closer to a decision to bidfor Air India in partnership with Singapore Airlines. PTI<
Instamojo buysGetMeAShop fromTimes InternetFin-tech start-up Instamojo onWednesday said it had acquiredGetMeAShop, a Gurugram-bas-ed start-up owned by Times In-ternet, in a deal that will see Ti-mes Internet further invest inthe combined entity. The valueof the deal is $5 mn, InstamojoCEO Sampad Swain said, wit-hout breaking down the valueof the acquisition.BS REPORTER<
KKR clarifies on ED propertyattachmentShah Rukh Khan-owned Kolk-ata Knight Riders (KKR) has clar-ified Rose Valley had paid KKR of~ 11.87 crores as sponsorship fe-es. Rose Valley Hotels was one ofKK’s IPL jersey sponsors for 2012and 2013 seasons. “KKR had noother dealings with Rose ValleyGroup, including Rose Valley’smicro-finance business,” thecompany said. BS REPORTER<
VINAY UMARJI
Ahmedabad, 5 February
Average salary offered by recruitersrose by eight per cent to ~24.30 lakh perannum while the highestinternational offer stood at~58.5 lakh per annum in therecently concluded recruit-ment process at XLRI —Xavier School ofManagement.
XLRI-Xavier School ofManagement said onWednesday that it achieved100 per cent placements forall 359 candidates of theoutgoing 2018-20 batch of postgraduatediplomas in the streams of humanresource management and business
management.The final recruitment process at the
B-school saw participation of 108recruiters with 362 domestic and inter-national offers, including 24 new
recruiters. Median salary,on the other hand,increased by 9.5 per cent to~23 lakh per annum thisyear, compared to ~21 lakhper annum in 2019.
Consulting firms con-tinued to lead, extending26 per cent of total offers,followed by sales and mar-keting at 21 per cent andbanking, insurance &
financial services (BFSI) with 17 percent roles offered.
Overall, KPMG and Pricewaterhouse
Coopers made the highest number ofoffers among regular recruiters.
According to the institute, the batchalso received the highest number ofoffers through pre-placement offers
(PPOs) with 43 per cent being placedvia the route.
New recruiters included companiessuch as Arga Investment Company,Tolaram Group, M H Alshaya, Myntra,
Delhivery, JCB, Thoucentric, Welspun,Diageo, Varroc, and CK Birla, amongstothers, while PSUs included PowerFinance Corporation and GAIL.
Other top recruiters in consulting,
FMCG, telecom and pharma includedthe likes of McKinsey & Co, Bain & Co,The Boston Consulting Group,Accenture Strategy, P&G, HindustanUnilever, ITC, Colgate Palmolive, Cipla,Dr. Reddy’s, Astra Zeneca, andGlaxoSmithKline, among others.
Marquee recruiters from BFSI, ITeS,e-commerce and analytics includedCitibank, J.P Morgan Chase, GoldmanSachs, Microsoft, Amazon, Ola,Media.net, Google, Flipkart, TechMahindra and TCS, among others.
Meanwhile, J Christie, director ofthe institute, said interest in XLRI’s stu-dents was “tremendous” with top com-panies coming for recruitment. “Weattribute the excellent placements thisyear as an affirmation by the industryof the high standard of management-centric education that we strive todeliver to our students.”
Average salary increases by 8% as XLRI wraps up placements43% of candidates recruited via pre-placement offers
AGENCIES
New Delhi, 5 February
The Vodafone Group onWednesday said the outlook forVodafone Idea remains criticalas the firm seeks relief from theIndian government in the wakeof an “adverse judgement” bythe Supreme Court on the issueof adjusted gross revenue (AGR).
“In October, the SupremeCourt gave an adverse judge-ment in [AGR] case against theindustry. The outlook for Voda-fone Idea remains critical,” reada statement issued by the com-pany, which revealed its earn-ings in the December 2019 quar-ter. “Vodafone Idea is activelyseeking various forms of relief
from the Indian government toensure that the rate and level ofpayments it makes… is sustain-able and it can meet its othercommitments as they fall due,”it added.
The British telecom giantsaid the Department of Tele-communications had in Nove-mber granted a two-year spec-trum moratorium. “In January,the Supreme Court rejected thereview petition filed by VIL andother industry participants inrelation to the AGR judgement.Both VIL and Bharti Airtel havesubsequently filed modificationpetitions, which are expected tobe heard imminently, to requestthe Court to order the DoT todetermine a payment schedule
in relation to AGR dues and oth-er reliefs,” it said.
Vodafone revealed Wednes-day that it would cost about^200 million ($221 million) overfive years to remove Chinesegroup Huawei’s equipmentfrom core 5G European activi-ties. “We have now decided, as a
result of the EU (recommenda-tions) and the UK government’sdecision, to take out Huaweiequipment from the core,”Vodafone CEO Nick Read saidin a third quarter conference callto reporters.
“It will take around five yearsto implement at a cost ofapproximately ^200 million,”he added, stressing that the costwould mostly apply to itsEuropean activities outside ofBritain. The UK governmentdecided last month to excludeHuawei from core parts of the5G network and also to cap itsshare of the market at 35 percent, insisting that “high riskvendors” would be excludedfrom “sensitive” activities.
New recruitersincluded firms suchas Arga InvestmentCompany, TolaramGroup, M H Alshaya,Myntra, Delhivery,JCB, Thoucentric,Welspun, Diageo,Varroc, and CK Birla,among others
DEBASIS MOHAPATRA
Bengaluru, 5 February
The downturn in the automo-tive industry continued to adv-ersely impact auto componentsmajor Bosch’s performance asthe firm posted a decline bothin its net profit and revenues inthe third quarter endedDecember 2019 (Q3FY20).
The Bengaluru-headquar-tered firm posted 27.5 per centdecline year-on-year (YoY) basisin its profit before tax (PBT) at~347.5 crore for Q3. Net profitdeclined 43 per cent at ~190.33crore, during this period.
As the automotive industrygoes through major disruption,Bosch also witnessed 15.7 percent fall in its revenues fromoperations at ~2,537 crore, com-pared to ~3,007.8 crore a yearago. “The entire automobile
industry is in the gripof a slowdown with amajor technologyshift from BharatStage (BS)-IV to BS-VI on the horizon.
Together withOEMs (original equi-pment manufactur-ers), Bosch has beenworking relentlesslyto meet the April 1,2020 deadline for theimplementation ofBS-Vl technologies,”said Soumitra Bha-ttacharya, MD, Bos-ch. “At the same time,we are continuing toinvest in electrifica-tion and other mobility solu-tions,” he added.
According to the company,there was no let-off in the down-turn, caused by cyclical and
structural factors,mainly in the com-mercial vehicle andtractor segments. InQ3, firm’s revenuesfrom mobility solu-tions decreased by26 per cent asPowertrain Solu-tions division wereaffected by the slow-down.
Similarly, Bos-ch’s business bey-ond mobility solu-tions sector posteda decline of 13.9 percent on account ofdecline in solar ene-rgy division.
In Q3, the firm made anadditional provisioning of ~207crore towards various restruc-turing and transformationalprojects initiatives.
AMRITHA PILLAY
Mumbai, 5 February
Tata Power, which is into gen-eration for more than a century,is making a conscious effort tomove away from it.
The company plans tomake just 20 per cent of its prof-it through generation over aperiod of time with the remain-ing planned from transmission& distribution (T&D) andrenewable energy.
“Right now, the share isroughly 30 per cent each, wh-ich will move (over a period oftime) to 40 per cent, 40 per centand 20 per cent (T&D, renew-able and generation). Thiswould be in terms of profitabil-ity,” said Praveer Sinha, chiefexecutive officer (CEO) andmanaging director (MD) of TataPower.
More than a year ago, TataPower clubbed its businessesinto separate clusters – its ther-mal assets are under the gener-ation cluster. The other twomain clusters are T&D andrenewable, which also includessolar manufacturing.
Sinha said that in the ab-sence of any major capital ex-penditure in generation, invest-ment made and planned in theT&D business and renewablewill start showing returns.
For the T&D business alone,the company expects profits todouble over the next few years.The company’s generationcluster does not include CoastalGujarat Power (CGPL), the sub-sidiary which houses theMundra power plant.
Sinha expects losses fromthe Mundra power plant to beone of its lowest in the currentfinancial year. Mundra’s annu-al loss in FY20, he said, is
expected to be ~900 crore. In FY19, this loss was ~1,700
crore. “The nine month lossfor Mundra was at ~650-700crore. Better fuel manage-ment, blending of coal andcoal prices falling have helped.This will be one of the lowestannual losses for Mundra,”Sinha said.
The company is also in theprocess of renewing its mininglicence in Indonesia. Sinhasaid the renewal applicationwill be filed next month; thelicence for the PT Kaltim PrimaCoal expires in 2021.
The company does notexpect any significant changein the terms and conditions ofthe licence. The Mundra plantis also awaiting clearance frommultiple states for a revised tar-iff, which will help the planthalf its losses. “We continue topursue CGPL tariff revisionwith the state government,”Sinha said.
Tata Power is also in theprocess of monetising non-coreassets. Sinha said that in thenext one year, Tata Power plansto divest $1 billion worth ofassets. These include Indon-esian coal mine PT BaramultiSukses Sarana Tbk (BSSR).
As part of its divestmentplan, Tata Power is exploringvarious financial instruments,including the infrastructureinvestment trust (InvIT) mod-el. “We definitely look at vari-ous financial models, whichwill help us grow and at thesame time does not over-leverage us. These are newmodels. With changes in theBudget, one needs to under-stand what the impact is.These are things which arestill under discussion. We willlook at it,” Sinha said.
“Right now, the share is 30%each, which will move to 40%,40% and 20% (T&D, renewableand generation). This would bein terms of profitability”PRAVEER SINHACEO & MD, Tata Power
For Tata Power,generation maytake a backseat
Auto slump drags BoschDecember profit, revenue
THE RESULTQ3 ofFY20
PBT~347.5 crYoY growth
-27.5%
PAT~190.3 cr
YoY growth
-43%
Revenue~2,537 crYoY growth
-15.7%
India outlook still critical: Vodafone
MEGHA MANCHANDA
New Delhi, 5 February
Bharti Airtel on Wednesday pitchedfor a healthy telecom sector withthree players, and said Vodafone
Idea’s survival will be good from the‘investment and reputation’ point of viewfor India.
In the company’s post-earnings confer-ence call, Bharti Airtel’s Chief FinancialOfficer (CFO) Badal Bagri said the telecomsector was large enough to accommodatethree players. “On Vodafone, I think myview is that they will remain and I wish thatthey thrive. India needs a three-player mar-ket and it’s a large-enough market place toabsorb three players. I think it will be goodfrom all perspectives — investment, jobsand reputation that Vodafone survives andthrives and I have no doubt that they will doso,” he said.
Airtel also said it would not buy the 5Gspectrum in the upcoming auctions as theprice is “too high.”
According to the price recommendedby the Telecom Regulatory Authority ofIndia (Trai), the cost of 100 megahertz of5G spectrum would be close to ~50,000crore. “We believe the price is too high.So, we will not pick it up at those prices,”Bharti Airtel’s Chief Executive Officer(CEO) Gopal Vittal said in a post-earnings
call with investors on Wednesday.In December 2019, the Digital Com-
munications Commission (DCC), the apexdecision-making body in telecom, gave itsnod to spectrum auction plans, entailing8,300 MHz of airwaves pan-Indian at areserve price that adds up to ~5,22,850 crore.Meanwhile, Airtel said it would shut downits 3G network in 11 circles across the coun-try. “We have completed 3G shutdowns in 11circles and reformed spectrum to 4G,” saidVittal. The company said capex would beutilised towards re-farming the 3G spec-trum for 4G services as the consumption of
the latter has increased.Bharti Airtel on Tuesday posted a net
loss of ~1,035 crore for the quarter endedDecember 31, 2019 (Q3), as it provisioned forthe interest accrued on account of adjustedgross revenue (AGR) payment. This is thecompany’s third consecutive quarterly loss;it had recorded a profit of ~86 crore in theyear-ago quarter. On the operational front,the company posted an improvement inaverage revenue per user (ARPU) from ~128to ~135, sequentially.
Mobile revenues have witnessed year-on-year (YoY) growth of 9.6 per cent on theback of focus on quality customers, up-trading and the recent tariff actions in someparts. Liabilities and provisions as of Sep-tember 30, 2019, aggregated to ~34,260 crore(comprising principal of ~8,747 crore, inter-est of ~15,446 crore, penalty of ~3,760 crore,and interest on penalty of ~6,307 crore).
On October 24, 2019, the SupremeCourt delivered a judgment upholding theview of the Department of Telecom (DoT)in respect to the definition of AGR. Theapex court has allowed three months tothe affected parties to pay the amount dueto the DoT.
A review petition in this regard, too, wasrejected in January. Thereafter, the telecomoperators have filed an application for mod-ification of the supplementary order beforethe Supreme Court, which is pending dis-posal. As on December 31, Airtel had 419million customers, an increase of 3.7 percent from 403.7 million in the correspon-ding quarter in the last financial year.
Bharti Airtel pitches forVodafone Idea’s survival
AMRITHA PILLAY
Mumbai, 5 February
Adani Gas expects to close its deal with Frenchoil major Total by the end of the currentfinancial year, company officials said onWednesday. The company reported a profitbefore tax (PBT) of ~143.62 crore, witnessing amore than double-digit growth.
On the Total deal, Adani Gas said, “The pri-mary part of the deal is closed and one of thenominee of Total is a member on Adani Gasboard. The secondary part of the deal is nowgoing on, hopefully, which should be over in thenext couple of weeks.” The executive said thecompany was hopeful to close the deal by theend of the current financial year. Adani Gas in aJanuary 14 statement said the Board of Directorshas appointed Alexis Thelemaque as anadditional director. In October last year, Totalsigned a definitive agreement to acquire 37.4 percent stake in Gautam Adani-led Adani Gas forabout ~5,700 crore. Part of the process, Total wasto purchase shares in Adani Gas through a ten-der offer to public shareholders to acquire up to25.2 per cent shares and purchase the residualshares from the Adani promoter family.
VINAY UMARJI
Ahmedabad, 5 February
Adani Enterprises’ (AEL’s) consolidated profitbefore tax (PBT) for the quarter endedDecember 31 grew 317.8 per cent to stand at~440.16 crore. The company’s consolidated PBTin Q3 of the previous financial year 2018-19 was~105.35 crore.
The consolidated total revenue for AEL in Q3of FY20 grew marginally by 4.99 per cent to~1,1075.32 crore, with contributions from itsintegrated coal management (ICM), miningservices and solar manufacturing businesses,among others. The company’s consolidatedtotal revenue in the third quarter of previousfinancial year was ~1,0548.14 crore.
In Q3, AEL’s ICM volume grew by 24 per cent inQ3 of FY20 to stand at 20.42 million metric tonnes(mmt) as against 16.41 mmt in Q3 of FY19 while itsmining services production rose by 28 per cent to4.77 mmt, up from 3.74 mmt in Q3 of FY19. Its solarmanufacturing volume, on the other hand,doubled from 140 Mw in Q3 of FY19 to 283 Mw inQ3 of FY20. Group Chairman Gautam Adani hassaid the firm continues to focus on incubatingassets in transportation and utilities space.
Adani Gas to closeTotal deal by March
Adani EnterprisesQ3 PBT up by 318%
A NEW HIGHAverage salary up by 8% to~24.30 lakh
perannum
Highestinternational offerat~58.5 lakh
perannum
Median salary up by9.5% to ~23 lakh
perannum
Highest share ofbatch placed viaPPOs at43%
Consulting picks 26%of batch, sales and marketing 21%
Says three players will behealthy for the sector
Airtel’s CEO Gopal Vittal says the cost of100 MHz of 5G spectrum will be close to~50K cr. “We believe the price is too high.So, we will not pick it up at those prices.”
INDIA EIGHTH LARGEST ADMARKET IN 2020: GROUPM
GLOBALvs INDIAN AD GROWTH RATE
TOP-10 GLOBALAD MARKETS
BREAK-UP OFAD SPENDS IN INDIA
INDIA
GLOBE
10.79.0
5.13.7
� 2019* � 2020* Figures in %
2018
2019*
2020*
� TV � Print � Internet � Outdoor+Cinema � Radio (Figures in $ bn)
CONTRIBUTION TO TOTALAD SPEND� TV � Print � Internet � Outdoor+Cinema � Radio (Figures in %)
(*figures are estimates) Source: GroupM
The country’s top media agencyGroupM on Wednesdaysaid India would move two places up the pecking order ofglobal advertising marketin 2020, standing ateighthposition this year versus 10th lastyear. The overall size ofIndia’s ad marketwill be $13.2 billion or ~94,000 crore,growing at10.7 per centfrom lastyear, when the overall sizewas $11.9 billion or ~84,917 crore. COMPILED BY VIVEAT SUSAN PINTO
($ billion) % YoYRank Country
2019* 2020* growth
1 US 227.0 246.0 8
2 China 89.0 90.0 1
3 Japan 41.0 41.0 2
4 UK 29.0 31.0 7
5 Germany 21.0 21.0 1
6 France 15.0 15.0 4
7 Brazil 14.0 15.0 5
8 India 11.9 13.2 11
9 Canada 12.0 12.0 4
10 Australia 11.0 12.0 2
4.8
5.1
2.65
2.61
2.49
3.17
0.57
0.61
0.31
0.4
5.48 2.61 4.0 0.66
0.43
2018 44
24
2323
5 4
43
22
27
5 3
42
20
3
2019* 2020*30
5
MUMBAI | THURSDAY, 6 FEBRUARY 2020 COMPANIES 3. <
Dalmia Cement (Bharat) subsidiary,Calcom, and GuarantCo, a financial cred-itor, have settled all claims and counterclaims amicably, a statement from DalmiaBharat Group said. The settlement alsoincludes claims/ counter claims that were
before the Guwahati Bench of the NationalCompany Law Tribunal (NCLT). Calcomwas admitted to the tribunal following anappeal from Mauritius-based GuarantCo.However, according to the settlement, theparties shall not claim any dispute against
each other relating to the petition. Sourcessaid, the settlement amount was under~100 crore. The parties are taking steps forcompletion of formalities for withdrawalof the petition before the NCLT, Guwahati.
ISHITA AYAN DUTT
INDIVJAL DHASMANA
New Delhi, 5 February
The Delhi High Court hasissued notices to Infosys andTech Mahindra on a petitionregarding technical flaws inthe online portal systemevolved by the Goods andServices Tax Network (GSTN).
The two firms are IT sup-port contractors for the por-tal. The court said their pres-ence was needed “to betterappreciate the intricacies, andto ensure the grievancesraised by the taxpayers andour orders are understood andimplemented in true per-spective”. Harpreet Singh,partner at consultancy KPMG,said the petitioner had raisedthe issues of non-availabilityof annual forms under theGST system for 2018-19,among others.
Disney Plus set for Indiadebut onMarch 29 PRESS TRUST OF INDIA
February 5, 2020
Disney has announced thatits subscription-based stream-ing service Disney Plus, whichlaunched in the US in Nove-mber last year, will arrive inIndia on March 29 through itsHotstar app.
The announcement wasmade by Disney CEO RobertIger during the company'squarterly earnings call onTuesday. "We're excited toannounce that we will belaunching Disney Plus inIndia through our Hotstarservice on March 29th at thebeginning of the IndianPremier League cricket sea-son," Iger said.
Though the Disney topboss didn't go into thespecifics, he said the companywill rebrand the Hotstar appto "Disney Plus Hotstar".
"We see this as a greatopportunity to use the provenplatform of Hotstar to launchthe new Disney Plus servicein one of the most populouscountries and fastest growingeconomies in the world," headded.
Disney had acquiredHotstar streaming service in2017 as part of its acquisitionof Fox Studios, which alsoincluded the entire Star Indiagroup. As of now, most of thepremium Disney content isavailable on Hotstar app.
But the decision to clubDisney Plus with Hotstar willenable the Indian subscribersto finally watch some of thenewer content from the stu-dio's streaming service, mostnotably "Star Wars" spin-offseries "The Mandalorian"which is currently only avail-able on Disney Plus.
Iger said the company isyet to finalise the pricingaspect of the rebrandedstreaming service, but it willbe offered in two categories.
"One will be more premi-um in nature that will includethe entire library, so with theoriginal programming and theother one will be more basicthat will have the library andnot the original program-ming," he said. The DisneyCEO also revealed that thecompany hopes to capitaliseon the Indian PremiereLeague as Star India is the offi-cial broadcaster of the league."Priced for the market andlaunched at a very peak peri-od of time for the IPL, thecricket league.
Dalmia Cement subsidiary and GuarantCo settle claims
Infosys,TechM getHC notices
TDS on e-com transactions‘unnecessary papercut’ NEHA ALAWADHI
New Delhi, 5 February
The proposed levy of 1 per cent taxdeducted at source (TDS) on e-commerce transactions, anno-
unced in the Budget this year, couldimpact the working capital of smallbusinesses, said Amit Agarwal, countryhead of Amazon India, on Wednesday.
He was speaking at the 14th IndiaDigital Summit of the industry bodyInternet and Mobile Association ofIndia, where he is also the chairman.
“Just look at the recent Budget. Thereis an introduction of tax collected atsource. These seem like harmless paper-cuts, but they impact the working capi-tal of small businesses. If you look athow businesses have to register at eachand every stage in the country to dobusiness, this is just an unnecessarypapercut,” said Agarwal.
He added that a lot more can be doneif the country focused on removing fric-tion in business transactions.
Agarwal was talking about theBudget proposal to introduce a new sec-tion in the Income Tax Act.
Experts have said that the proposalhas the potential to affect working cap-ital of e-commerce companies andreduce cash flows for e-sellers. Somehave pointed out that the TDS will leadto cash being stuck with the governmentin the refund system.
In the Budget, the explanation for theproposed levy said the e-commerce oper-
ator, defined as an entity owning, oper-ating or managing the digital platform,will have to deduct 1 per cent TDS on thegross amount of sales or service or both.
This provision will not apply in cas-es where the seller’s gross amount ofsales during the previous year throughe-commerce operator is less than ~5 lakhand the seller has furnished hisPermanent Account Number orAadhaar.
Given the wide definition, the pro-posal will impact not just e-commercemarketplaces but also all kinds of digitalbusinesses such as Oyo, Uber, Ola,Urban Company, MakeMyTrip, Myntra,
Zomato, Swiggy and so on. Both Amazon and Walmart-owned
Flipkart have said they would reach outto the government for clarifications onthe proposal, given it has a directimpact on the sellers and medium andsmall enterprises listed on their plat-forms.
At the event, Agarwal also spokeabout the importance of skilling, grass-root entrepreneurship, driving equalopportunity through greater women’sparticipation in the workforce, betteruse of artificial intelligence-backedsolutions, and the need for having sta-bility and predictability in policies.
“THERE IS AN INTRODUCTIONOF TAX COLLECTED AT SOURCE.THESE SEEM LIKE HARMLESSPAPERCUTS, BUT THEY IMPACTTHE WORKING CAPITAL OFSMALL BUSINESSES. IF YOULOOK AT HOW BUSINESSESHAVE TO REGISTER AT EACHAND EVERY STAGE IN THECOUNTRY TO DO BUSINESS,THIS IS JUST AN UNNECESSARYPAPERCUT”AMIT AGARWALCountry head, Amazon India
4 ECONOMY & PUBLIC AFFAIRS MUMBAI | THURSDAY, 6 FEBRUARY 2020
> .
“Dear PM, The economy has imploded & you mustbe racking your brains on how to avoid theblame. Use the useless Budget presented byclueless Nirmala Ji. Sack her and dump theblame on her”RAHUL GANDHI, Congress leader
“We have readied a scheme for thedevelopment of Ram Temple in Ayodhya.A trust has been formed, it is called ShriRam Janambhoomi Teertha Kshetra"
NARENDRA MODI Prime Minister
“A scare is created as if the CAA is a threat toMuslims. CAA is no threat to Muslims, ifthey face trouble (due to the law), I will bethe first person to raise voice for them”
RAJINIKANTH Actor
654 Indian-ownedfirms employ over174,000 in UK: ReportIndian diaspora-owned firmsin the UK with a combinedrevenue of £36.84 billionemploy over 174,000 peopleand pay over £1 billion incorporation tax, according to afirst-of-its-kind research. PTI<
Govt to finalise PSUinsurers’ merger byMarch: Finance secyThegovernmentaims tocompletemerger ofthree state-ownedgeneral insurance firms —National Insurance, UnitedIndia Insurance, and OrientalInsurance — by the end ofMarch, Finance Secretary RajivKumar said. PTI<
Govt: Surplus landof CPSEs to be soldat market rateThe Centre on Wednesdaysaid the disinvestmentprocess of Central PublicSector Enterprises (CPSEs) willbe done in a transparentmanner and surplus land ofsuch units would be sold atcommercial rates to states orany private party. PTI<
$118.3 bn receivedin remittances since2018-19: CentreAn estimated13.62 millionIndians arestayingabroad and$118.3 billionhas been received asremittances since April 2018up to September last year,the government informedLok Sabha on Wednesday.PTI<
50 mn farmers yetto get 3rd paymentof PM-Kisan: Data Over 50 million farmers wereyet to get the thirdinstalment of money underthe Centre's ambitious PM-Kisan scheme, aimed atproviding direct support of~6,000 annually to them,according to data. The totalamount is to be paid in threeequal instalments of ~2,000every four months. PTI<
Middle class ‘trainedenough’ to pick rightoption: Rajiv KumarNITIAayog ViceChairman RajivKumar said themiddle class is“trainedenough” todecide which personalincome tax option is good forthem and exuded confidencethat their propensity to savewill not come down. PTI<
Fitch says Budgetwas light on newstructural reforms The Union Budget for 2020-21was light on new structuralreforms, Fitch Ratings said onWednesday, adding it has notmaterially altered its forecastsfor India's growth to rise to5.6 per cent in FY21, from 4.6per cent in 2019-20. PTI<
Hopeful of listingLIC next fiscal year,says DEA secyThegovernmentis hopeful ofsellingminoritystake in LICin the nextfiscal year, Economic AffairsSecretary Atanu Chakrabortysaid. It would take 8-9months to prepare accountsand do the required legaltweaking before an IPO couldbe launched, he said. PTI<
Fairfax-backedCSB Bank to open100 branches a yearFairfax Holdings-backed CSBBank will open about 100branches each financial yearin the medium term, C VRajendran, its MD and CEO,told Business Standard. Thesewill be opened in areas withgold loan, agri & MSME, andcurrent and savings accountpotential. ABHIJIT LELE<
Indiabulls Housingpre-tax profitfalls 55% in Q3Indiabulls Housing Financereported a 55 per cent fall inpre-tax profit at ~613 crore inQ3, against ~1,387 crore in theyear-ago period as both netinterest income and revenuesaw a decline. BS REPORTER<
Unemployment rate at6.1% in 2017-18: Govt
Unemployment rate in thecountry, according to a newsurvey, was 6.1 per cent in 2017-18, the government informedthe Rajya Sabha on Wednesday.Minister of State for LabourSantosh Gangwar said thegovernment is conducting a
new Periodic Labour Force Survey with new parameters andbigger sample size, and its results cannot be compared withprevious surveys in this regard. "As per the new Periodic LabourForce Survey being conducted by the government, the labourforce participation is 36.9 per cent and the rate of unemploymentfor 2017-18 is 6.1 per cent," he said. PTI<
FC to setup panel on debt,fiscal situation this monthARUP ROYCHOUDHURY & INDIVJAL DHASMANA
New Delhi, 5 February
The Fifteenth Finance Commission(15th FC) will set up a panel later thismonth to examine the fiscal and debtsituation of the Centre and states andpresent a road map, on the lines of theerstwhile Fiscal Responsibility andBudget Management panel, theCommission’s Chairman N K Singh saidon Wednesday.
The panel may include or seek inputsfrom former Reserve Bank of IndiaGovernor Urjit Patel, former chief economic advisor ArvindSubramanian, Sajjid Chinoy of thePrime Minister’s Economic AdvisoryCouncil, Rathin Roy of NationalInstitute of Public Finance and Policy,and Prachi Mishra of Goldman Sachs,among others.
“One of the terms of reference of theCommission is to address the issue ofgeneral government, the consolidatedfiscal deficit and debt and so on. So,after my meeting with the 15th FC’s eco-nomic advisory council on February 13,I intend to constitute a committee undermy chairmanship, since I had thechairmanship of the FRBM Committee,”Singh said.
Singh said the panel will include rep-resentatives from the Controller Generalof Accounts, the Indian Civil AccountsService, state expenditure departments,and other central and state bodies, aswell as domain experts.
“The aim will be to come up with areport to address the terms of referencegiven to the Commission,” said Singh.
The terms of reference say: “TheCommission shall review the currentstatus of the finance, deficit, debt levels,cash balances and fiscal disciplineefforts of the Union and the states, andrecommend a fiscal consolidationroadmap for sound fiscal management,taking into account the responsibilityof the central government and state gov-ernments to adhere to appropriate levelsof general and consolidated government
debt and deficit levels, while fosteringhigher inclusive growth in the country,guided by the principles of equity, effi-ciency and transparency.”
The panel will submit its report to the15th FC, which may include those rec-ommendations in its second report,expected to be submitted in October, andwill make recommendations for the peri-od financial year 2021-22 (FY22) to FY26.
“The panel will see whether we arecompliant with terms of reference. Oneof the overarching issues that theCommission is expected to weigh in onis the path, issues and factors of thedebt and fiscal deficit of Centre andstates to be compliant with the FRBMAct,” Singh said.
The panel, and hence the 15th FC, is
also expected to take a look at Article293(3) of the Constitution, which says astate cannot raise any loan without theCentre’s consent if there is an outstand-ing loan made by the Centre to the state.
“I did not touch upon this in theFRBM Committee because that mostlyfocused on the Centre’s finances,” Singhsaid. When asked if he would invite hisformer colleagues from the FRBMCommittee to be part of the panel, Singhreplied in affirmative.
“Roy is here in Delhi, Subramanian isabroad, but has views on fiscal consoli-dation. I might want to hear Patel, andsome experts like Chinoy and Mishra,”Singh said.
The FRBM Committee comprised ofSingh, former finance secretary SumitBose, Patel, Subramanian, and Roy. Thecommittee, which submitted its reportto former finance minister Arun Jaitleybefore the 2017-18 Budget, had recom-mended a fiscal deficit target of 2.5 percent of gross domestic product, and rev-enue deficit of 0.8 per cent for fiscal year2022-23.
Other recommendations includedsetting up a fiscal council and givingthe government tightly defined escapeclauses to enable any deviation from theroadmap. Subramanian had drafted adissent note, which was part of the pan-el’s report.
Finance Minister NirmalaSitharaman used the escape clauses torevise the budgeted fiscal deficit targetof 2019-20 and the medium-term fore-cast for 2020-21 by 0.5 percentage pointseach. The Centre now sees fiscal deficitat 3.8 per cent of GDP for FY20 and 2.5per cent for FY21.
In its first report – for FY21 – the 15thFC has recommended the creation of anoverarching legal fiscal framework toimprove and overhaul budgeting at thecentral and state level, as well as providegreater budgetary transparency.
Mirroring the FRBM Act, this wouldalso define the roles and responsibili-ties of key stakeholders, as well as thebudgeting, accounting, internal controland audit standards to be followed atall levels of government. The first reportwas tabled in Parliament on February1, along with the Budget.
MFs and traderslook for cues onOperation Twist
JASH KRIPLANI
Mumbai, 5 February
Debt fund managers andtraders will closely monitorthe Reserve Bank of India(RBI) for cues on OperationTwist as factoring in timingand quantum of these marketoperations has become key tooptimising portfolio returnswith long-term yields suscep-tible to sharp easing fromthese measures.
Operation Twist is a mar-ket term for special open mar-ket operations (OMO) con-ducted by RBI, where it buyslong-term government bondsand sells short-term ones.
RBI has conducted theoperation four times so far.However, the central bankbought more bonds than itsold, which is akin to the tra-ditional OMO purchases inwhich it directly buys datedbonds from the secondarymarket. The first such specialOMO operation wasannounced on December 19.
“This is the first monetarypolicy after Operation Twistwas announced. So far, RBIsintervention has not beenanchored to any stated objec-tive — targeting yield curve orspread compression. This can
lead to sharp variations in per-formances between fundswith higher exposure tolonger-tenure governmentsecurities (G-secs) and thosewith lower exposure," saidArvind Chari, head-fixedincome and alternatives,Quantum Advisors.
Fund managers say the RBIintervention in markets will beeasier to monitor if it is peggedto reaching a particular thresh-old on absolute long-termyields, or alternatively focusedon bringing down the spreadsto a level such as 100 basispoints (bps), from 135 bps atpresent.
“With RBI’s routine OMO,markets have some pre-dictability as these are usuallylinked with structural liquidi-ty. But, with Operation Twistthere is not yet any quantifi-able measure to gauge theinterventions,” said a fundmanager.
“Some participants expectoperations to continue, somehave doubts. RBI’s post-policycomments will help take aninformed view,” said APrasanna, head of research atICICI Securities PrimaryDealership.
Anup Roy contributed to the story
Bill to resolve tax disputes tabled in Lok SabhaDILASHA SETH
New Delhi, 5 February
Finance minister NirmalaSitharaman on Wednesday intro-duced a Bill in the Lok Sabha to giveeffect to the Budget announcementto resolve direct tax disputes involv-ing an aggregate ~9.32 trillion as onNovember 30, 2019.
The Direct Tax Vivad se VishwasBill, 2020, offers waiver of interest,penalty and prosecution for settle-ment of these disputes. They willhave to be pending before the com-missioner (appeals), Income TaxAppellate Tribunals (ITATs), highcourts or the Supreme Court as onJanuary 31, 2020.
While a complete waiver of inter-est and penalty will be given in caseof payment made by March 31, anadditional 10 per cent of the disput-ed amount will have to be paid afterthat. The scheme will apply to cas-es irrespective of whether demand
in such cases is pending or has beenpaid. The pending appeal may beagainst disputed tax, interest orpenalty in relation to an assessmentor reassessment order or against dis-puted interest or fee. In fact, theappeal may even be against taxdetermined on defaults in respect totax deducted or collected at source.
In case of tax arrears pertainingto only disputed interest or penalty,25 per cent of the disputed penaltyor interest will need to be paid whilesettling appeals up to March 31. Itwill be 30 per cent if the payment ismade after that.
The Budget scaled down thedirect tax collection target to ~11.7trillion in the revised estimates forFY20 from ~13.35 trillion given inthe Budget estimates. Even thiswould require a 2.9 per cent growthyear-on-year. Introducing the Bill,Sitharaman said the scheme willreduce litigation expenditure for thegovernment and may help in gen-
erating some revenue. She addedthat the Bill emphasises on trustbuilding and provides a formula-based solution without any dis-crimination.
In her Budget speech onFebruary 1, Sitharaman hadannounced a scheme to resolve483,000 direct tax disputes pendingin various tribunals.
Sitharaman had similarly
announced the scheme – SabkaVishwas Scheme – in her firstBudget last year to reduce litigationin indirect taxes. It resulted in set-tling over 1,89,000 cases.
Preparing groundwork for thedirect tax resolution scheme, theCentral Board Of Direct Taxes(CBDT) asked its offices across thecountry to provide data on pend-ing appeals in high courts by next
week. “In order to implement thescheme, the CBDT needs databaseon such litigations pending at thehigh court level,” the communica-tion to the commissioners read.
It is, therefore, requested thatdata on pending appeals at highcourts, as on January 31, 2020, beobtained with the help of the courtregistry. The amount of ~0.32 tril-lion in tax disputes as on November
30, 2019 (cited above), almost equalsdirect tax collections of ~11.37 trillionin 2018-19.
The Bill says that tax disputesconsume copious amounts of time,energy and resources both on thepart of the government as well astaxpayers and deprives the govern-ment of timely collection of rev-enue. “Therefore, there is an urgentneed to provide for resolution ofpending tax disputes. This will notonly benefit the government bygenerating timely revenue but alsothe taxpayers. They will be able todeploy time, energy and resourcessaved by opting for such disputeresolution towards their businessactivities.”
The scheme will not apply toprosecution cases under the IndianPenal Code (IPC), the Prevention ofMoney Laundering Act (PMLA) andthe Prohibition of Benami PropertyTransactions Act. Besides, the dis-puted tax amount should not relate
to undisclosed foreign income,assets, assessment or reassessment.
Rakesh Nangia, chairman,Nangia Andersen Consulting, said itcan be a beneficial scheme for set-tlement of cases such as addition ofunexplained cash deposited duringdemonetisation.
He added, “It would be beneficialto such taxpayers, to pay the taxamount and settle the disputes with-out imposition of interest and penal-ty.” Neeru Ahuja, partner, DeloitteIndia, said that the timelines seemquite sharp and the workings willneed to be done at the earliest tomeet the March 31 deadline.
Amit Maheshwari, managingpartner, Ashok Maheshwary &Associates, said the order passed bythe designated authority determin-ing the amount payable will be final.
No further recourse in terms of appeals, arbitration, mediationor conciliation will be available tothe taxpayer.
Exposure to governmentsecurities has impacted scheme returns
Note: Dynamic funds take exposure across durationSource: Value Research, factsheets, as of December 31, 2019
Dynamic funds 3-month G-secs return (%) (% of NAVs)
ICICI Pru All Seasons 3.10 34.97Axis Dynamic Bond Fund 2.93 22.57Quantum Dynamic Bond Fund 2.73 25.17IDFC Dynamic Bond Fund 2.66 98.91SBI Dynamic Bond Fund 2.45 18.45DSP Strategic Bond Fund 2.31 78.8Kotak Dynamic Bond Fund 2.24 33.67
LEADING GAINERS
IN BRIEF
YESBank CEO taps ‘mentor’ to raise $2 bnBLOOMBERG
5 February
YES Bank has picked CantorFitzgerald, IDFC Securitiesand Ambit to help the lenderraise as much as $2 billion forbolstering capital buffers,people with knowledge of thematter said.
The bank, staggering underthe weight of soured loans, hasbeen plagued by worries aboutits asset quality and uncer-tainty about efforts to raisenew capital. It’s trying to shoreup a core equity capital ratiothat’s barely above a regulato-ry minimum of 8 per cent.
The lender’s shares surgedthe most since November 27 onWednesday as investors wereencouraged by the move to pickbankers, while its 2023 dollarbond gained the most sinceJanuary 15. YES Bank, led byChief Executive Officer RavneetGill (pictured), has lost more than80 per cent of its market value inthe past year on concerns aboutits ability to raise funds.
“As credibility and senti-ment get eroded, time is run-ning out for the bank to raisecapital,” according toBloomberg Intelligence ana-lyst Diksha Gera.
“With the bankers for fundraising in place YES Bankneeds to move quickly toavoid panic among creditinvestors, which could causeunwanted liquidity pressure.”Cantor Fitzgerald is led byAnshu Jain, the former co-chief executive officer ofDeutsche Bank AG until 2015,while Gill headed the Germanbank’s Indian operationsbefore he joined YES Banklast year. The Economic Timesreported the appointment ofthe banks earlier.
A spokesman for YESBank and spokeswoman forAmbit declined to commentabout the fund raising plans.A representative for IDFCSecurities and spokeswomanfor Cantor didn’t immediate-ly respond to emails seekingcomment.
40
38
36
34Feb 4,’20 Feb 5,’20
34.95
37.60
HOW THE STOCKMOVED ON BSEIntra-dayprice in ~
May include members offormer FRBM committee
HPCL reports144% rise inpre-taxprofitAGENCIES
New Delhi, 5 February
Hindustan Petroleum Corp(HPCL) on Wednesday report-ed a 144 per cent increase inprofit before tax at ~1,150.84crore in the quarter endedDecember 2019 (Q3FY20) overthe same period in FY19. It sawits net profit treble in the quar-ter as inventory gains made upfor lower refinery margins.
Net profit in October-December at ~747 crore washigher than net profit of ~248crore in the same period a yearback, HPCL Chairman andManaging Director Mukesk KSurana told reporters here.
“In Q3 of the last fiscal wehad an inventory loss of~3,465 crore. As compared,we made an inventory gainof ~343 crore,” he said,adding the inventory gainswere partly offset by lowerexchange gains.
Who will escape scrutiny
� Scheme, open till June 30, offerscomplete waiver of interest andpenalty, if payment made by Mar 31
� Additional 10% of tax amount to bepaid if payment made after Mar 31
� For tax arrears pertaining to interestand penalty, 25% of disputedpenalty/interest will have to be paidby March 31 and 30% if paymentmade after that
Won’t apply to...
� Tax arrears relatedto assessments innature of searchand requisition
� Cases where prose-cution has beeninstituted
� Tax amount relatedto undisclosed for-eign income, assets
THE LOWDOWN
| Committee may recommend fiscalroad map for Centre and states
|May include or take inputs fromUrjit Patel, Arvind Subramanian,and others
|Will have representatives fromCGA, ICAS
|Panel will submit its report to the15th Finance Commission
THE ROAD AHEAD
N K Singh, chairman of the 15th FinanceCommission, will head the panel
PRESS TRUST OF INDIA
New Delhi, 5 February
Former YES Bank independentdirector Uttam Prakash Agarwalhas demanded appropriateaction against the lender's CEOand MD Ravneet Gill forallegedly violating variousregulatory norms. Agarwal, whowas independent director in2018, resigned from the board ofYES Bank last month citingdeteriorating standard of
corporate governance at theprivate sector lender.
In a letter to RBI GovernorShaktikanta Das, Agarwalalleged breach of governance,non-compliance, undueinfluence and control on themajority members of the boardby Gill through quid pro quo.
The letter also alleged therehas been substantial erosion inthe market capitalisation (m-cap) of about ~40,000 croresince Gill took over as the
managing director.The m-cap of the bank was
~55,000 crore on March 1, 2019,the date when Gill joined. Them-cap as on January 29, 2020, is~11,000 crore, it said.
By use of various unethicalmeans, Gill has been able toeffectively control the majorityof board members and KeyManagement Personnel (KMP).
The CEO seems to beknowing the weak points ofKMP of the bank, it said.
Ex-directorwrites to RBI, seeks Gill’s removal
Rosneft to supplycrude to IOC; India& Russia talk BPCLJYOTI MUKUL
New Delhi, 5 February
After getting a foothold inthe Indian petroleummarket by buying out
Essar Oil in 2017, Russia’s state-owned Rosneft on Wednesdaysigned an agreement withIndian Oil Corporation for pro-viding 2 million tonnes of Uralsgrade crude oil to the latter.
The oil will be shipped toIndia this year. Rosneft is alsoexpected to bid for the govern-ment-owned Bharat PetroleumCorporation (BPCL).
The Russian major alreadyholds 49 per cent in NayaraEnergy, the erstwhile Essar Oil.Nayara owns a 20 million tonnerefinery in Vadiar, Gujarat, andhas a network of 5,600 petrole-um retail outlets across India.
The crude purchase agree-ment with Indian Oil wassigned during a meetingbetween Union Minister ofPetroleum and Natural Gas andSteel Dharmendra Pradhan andRosneft chairman and chiefexecutive officer Igor Sechin.
The long-term contract is apart of India’s strategy for diver-sifying the country’s crude oilsupplies from non-Opec coun-tries. It is also a part of the five-year roadmap for bilateral coop-eration in the hydrocarbonssector. A pact in this regard wassigned during Prime MinisterNarendra Modi’s visit toVladivostok last September, saida press release from the ministryof petroleum and natural gas.
“The addition of Russia as anew source for crude oil importsby India’s largest refiner will goa long way in mitigating the risksarising out of geo-political dis-ruptions. The new arrangementwould also usher in price stabil-ity and energy security for India,
which is witnessing robustgrowth in demand for petrole-um products. It will also openup avenues for other public sec-tor undertaking (PSU) oil refin-ers to enter into similar termcontracts for import of Russiancrude oil,” said the release.
Both sides agreed to takeforward mutually aligned pri-orities, including preparing aroad map for Indian invest-ments in the Eastern Clusterprojects of Russia.
It was noted that the fourIndian oil and gas PSUs havealready submitted the expres-sion of interest to Rosneft to par-ticipate in the project.
In order to negotiate theterms of Indian companiesentering Vostok Oil in the short-est time possible, it was agreedto create a working group of rep-resentatives of Russian andIndian companies.
During Wednesday’s meet-ing, both the countriesreviewed the ongoing invest-ments between Indian oil & gasPSUs and Rosneft. They calledfor enhancing energy coopera-tion further and strengtheninghydrocarbons engagement,both on the investment front aswell as sourcing natural gas and
crude oil. Pradhan said thathydrocarbon is an importantpillar of the bilateral strategicpartnership. “Indian oil and gascompanies value their associa-tion with Rosneft, one of theimportant companies partner-ing India’s energy securityobjectives,” he added.
Both sides agreed to take for-ward mutually-aligned priori-ties discussed during Pradhan’svisit to Russia in September lastyear. This includes preparing aroadmap for Indian invest-ments in the Eastern Clusterprojects of Russia, especially inthe Arctic.
Pradhan said Indian com-panies, especially EngineersIndia, have considerable expert-ise in providing engineeringconsultancy as well as execut-ing mega projects across thehydrocarbons value chain.
Sechin indicated his readi-ness to intensify cooperation tostrengthen India’s energy secu-rity and work jointly withIndian oil and gas companies.
The crude oil, being sourcedunder the contract, will beloaded in Suezmax vessels atthe Novorossiysk port of Russiaand come to India, bypassingthe Straits of Hormuz.
RBI to get more control over co-op banksSOMESH JHA
New Delhi, 5 February
The Reserve Bank of India(RBI) is set to get more audito-ry and supervisory powers overurban and multi-state co-oper-ative banks, with the UnionCabinet approving the BankingRegulation Amendment Bill,2020, on Wednesday.
“Like commercial banks,multi-state and urban co-oper-ative banks will be broughtunder the regulations of theRBI. These changes will be onlyfor the banking side andadministrative rights will con-tinue to remain with the regis-trars,” said Information andBroadcasting Minister PrakashJavadekar.
The Union Cabinet waschaired by Prime MinisterNarendra Modi.
Javadekar added that theaudit of such co-operativebanks will be according to RBIregulations and the best man-agement practices laid downby the regulator will also applyto them. Further, the RBI willbe allowed to set the minimumlevel of qualifications for theboard members of such lenders
which will need the consent ofthe regulator to appoint a chiefexecutive officer.
The managements of suchbanks are elected through co-operative bodies at present andthe RBI has limited control overtheir appointments.
“If the situation gets worse,the RBI will get powers to super-sede the board. All these meas-
ures will give financial stability tothe sector and protect the depos-itors’ interests. The RBI will bringthe co-operative banks under itscontrol in a phased manner,” theminister said.
The move is the fallout of afraud unearthed at Punjab andMaharashtra Co-operativeBank whose management hadallegedly handed over ~6,700
crore worth loans to real estatefirm HDIL.
There was a dual control ofthe RBI and respective statesand the central governmentsthat restricted timely regulatoraction against co-operativebanks. However, even after therecent proposed changes inlegislation, the RBI will be gain-ing control over a small frac-
tion of co-operative banks.As of March 2019, 1,544
urban co-operative banksaccounted for merely 1.6 percent out of the 97,792 co-opera-tive banks. In fact, 96,248 ruralco-operative banks accountedfor around 65 per cent of theassets of co-operatives and werecontrolled by the respectivestate government legislation.
Javadekar said co-opera-tive banks had 86 milliondepositors with total depositsof around ~5 trillion. While theregistrars under the state andcentral governments havecontrol over incorporation,registration, management,recovery, audit, supersessionof board of directors and liq-uidation, the RBI is “investedwith regulatory functions”,according to the RBI’s Trendsand Progress Report 2018-19.
The RBI is also responsiblefor the supervision of urban co-operative banks, empowered togive suggestions on prudentialnorms for capital adequacy,income recognition, asset clas-sification and provisioning,liquidity requirements and sin-gle or group exposure norms.
Maharashtra to have India’s 13th major portMEGHA MANCHANDA
New Delhi, 5 February
The Union Cabinet onWednesday approved the set-ting up of the country’s 13thmajor port at Vadhavan inMaharashtra at a total cost of~65,544.54 crore.
The Vadhavan port will bedeveloped on “landlord model”(where infrastructure is leasedto private firms or industriesand chemical plants). A specialpurpose vehicle (SPV) will beformed, with the governmentplanning to hold 51 per centstake in the project.
The SPV will develop theport infrastructure includingreclamation, construction ofbreakwater, besides establish-
ing connectivity to the hinter-land. All the business activi-ties would be undertakenunder the private-public part-nership mode.
Currently, India has 12major ports – Deendayal,Mumbai, Jawaharlal NehruPort Trust (JNPT), Mormugao,
New Mangalore, Cochin,Chennai, Kamarajar, V OChidambaranar,Visakhapatnam, Paradip andKolkata (including Haldia).
“Setting up a major port is abig task and takes time but Iam hopeful that we should beable to start work on the proj-
ect soon,” shipping ministerMansukh Mandaviya said.
The reason behind settingup another major port on thewest coast is because of theexhaustion of container cargocapacity of the JNPT, which is10 million TEUs (twenty footequivalent unit). On the westcoast, this capacity is 18 mil-lion TEUs while the totalrequirement will increase to 25million TEUs in 2030.
With development of theVadhavan port, India willbreak into the countries withtop 10 container ports in theworld, Mandaviya said.
The central governmentfelt the need for a deep draftport to accommodate thelargest container ships in the
world. The new port will alsocater to the spillover trafficfrom JNPT once its plannedcapacity of 10 million TEUs isfully utilised.
The Vadhavan port has anatural draft of about 20metres close to the shore, mak-ing it possible for it to handlebigger vessels. Development ofthis port will enable cargo con-tainer vessels of 16,000-25,000TEUs capacity, giving advan-tage of economies of scale andreducing logistics cost.
The demand for containertraffic will further accelerateafter the plans for improvinglogistic infrastructure fructifyand the ‘Make in India’ pushdrives greater exports, an offi-cial statement said.
WHAT’S IN STORE|Boost for port-led development
and reduction in logistics cost|New port to give tribal area
development a boost|Higher cargo movement from
south Gujarat, Indore (MadhyaPradesh), Maharashtra,Telangana, north Karnataka andland-locked states of North India
MORE TEETH BUT... Even after the changes in thelegislation, the central bankwill gain regulatorycontrol over onlya small fraction ofco-operative banks
35.364.7
1,54
4
Asset size
(% share)
4.84Deposits
3.03Advances
5.99Total assets
No. of co-operative banks
Figures in ~ trillion
Source: Trend and Progress of Banking inIndia, 2018-19 (RBI)
Urban co-operative banks
�Urban �Rural
96,2
48
6 ECONOMY & PUBLIC AFFAIRS MUMBAI | THURSDAY, 6 FEBRUARY 2020 1>
N CABINET DECISIONS N
The contract is part of India’s strategy to diversify the country’scrude oil supplies from non-Opec countries
8 ECONOMY & PUBLIC AFFAIRS MUMBAI | THURSDAY, 6 FEBRUARY 2020 1>
CORONAVIRUS OUTBREAK
UK claims breakthrough, WHOsnubs it as death toll nears 500Outbreak won't impact China-India trade ties, says Chinese ambassador
World Health Organization officials havedamped down expectations of imminentbreakthroughs in the development of vac-
cines or treatments for the outbreak. “There are noproven, effective therapeutics” for the novel coron-avirus, Mike Ryan, executive director of the WHO’sHealth Emergencies Program, said on Wednesday ata press conference in Geneva.
The UN agency plans a systematic review of all ther-apeutics, Ryan said. The organization will share clini-cal trial protocols around the world, he said.
An antiviral drug from Gilead Sciences is expectedto start testing in China in the coming days. A ChineseTV report said researchers at Zhejiang University hadfound an effective drug for the virus, while Britain’s SkyNews said researchers had made a “significant break-through” in developing a vaccine. Oil prices jumped onthe reports.
Trade relations with IndiaIn an interview to PTI, Chinese Ambassador SunWeidong said China's foreign ministry and local gov-ernments are working hard to ensure the safety ofIndians and people working in Indian diplomatic mis-sions in China.
Admitting that there could be a short-term impactof the epidemic on China's economy, he said the coun-try's internal resilience is growing and it has ampleresources and policy tools to cope with economicvolatility. “I am confident that it should not and will notbe hindered by short-term difficulties. We should notsuspend but expand the economic and trade coopera-tion between the two countries,” he said.
No sign of a slowdown The death toll from the monthlong coronavirus out-break has continued to climb in China, rising to 490.New cases have surged by double-digit percentages inthe past 11 days. More people have now died in this epi-demic than in the SARS outbreak of 2002-3 in mainlandChina. During that outbreak, 349 people died in themainland.
The new figures from China’s Health Commissionon Wednesday showed that 65 people died on Tuesdayand that 3,887 more people had been infected. So far,24,324 people are known to have been infected. Healthexperts say the death toll is likely to rise because of thelarge number of infections.
More American evacuees arrived in California,and were quarantinedHundreds of Americans who had been in Wuhan as theoutbreak worsened arrived in California on Wednesdayon two evacuation flights arranged by the United Statesgovernment. It was a second wave of American evacu-ations; an earlier flight arrived last week.
US President Donald Trump has pledged to work
with China on the outbreak, while cruise ships get newscrutiny after infections are found on two.
Cruise ships in Japan and Hong Kong being scrutinised after infectionsNine passengers and one crew member on a cruiseship quarantined in Yokohama, Japan, have testedpositive for the coronavirus, the cruise line, PrincessCruises, said on Wednesday. The ship, carrying 2,666passengers and 1,045 crew members, arrived inYokohama on Tuesday, but the authorities did notallow anyone off. In all, 273 passengers were tested for
the virus after everyone on board underwent an initialhealth screening. Twenty-one people were cleared,and officials were awaiting the other results.
Hong Kong imposes 14-day quarantine Hong Kong said that it will begin requiring people whoarrive from mainland China to undergo a mandatory14-day quarantine, as it tries to reduce the potential forimported cases of the coronavirus.
©2020 The New York Times News Service
With inputs from agencies
Surat diamond industrystares at ~8,000-cr lossThe Surat diamond industry islikely to face a loss of around~8,000 crore in next twomonths as Hong Kong, which isa major export destination, hasdeclared a state of emergencydue to the coronavirus outbreakin China, say experts.
Hong Kong is a major busi-ness hub for the Surat dia-mond industry, but schoolsand colleges have been closedthere till the first week ofMarch and even the business-
es are seeing a dip in view ofthe outbreak of the novel coro-navirus.
According to Gems andJewellery Export PromotionCouncil (GJEPC) regional chair-man Dinesh Navadiya, polisheddiamonds worth around~50,000 crore are exported fromSurat to Hong Kong every year.
"That's around 37 per centof the total exports from here.Now, due to coronavirus scare,Hong Kong has declared a
month-long vacation. Gujaratitraders having offices there arecoming back to India," he said.
If the situation does notimprove, it will have a hugeimpact on the Surat diamondindustry, which polishes 99 percent of all rough diamondsimported in the country, hesaid. “The Surat diamondindustry is staring at a loss ofaround ~8,000 crore forFebruary and March,” headded. PTI
Cipla sees opportunityfor its anti-HIV drug SOHINI DAS
Mumbai, 5 February
With anti-HIV drugs beingconsidered a possible line oftreatment for the novel coron-avirus that is spreading acrossthe globe, companies likeCipla that make a particularanti-HIV drug combinationsee an opportunity.
Kedar Upadhye, globalchief financial officer of Cipla,said: “Within the next fewweeks or so, if scientific datashows that the two antiretro-vial medications — lopinavirand ritonavir — can be usedeffectively to tackle coron-avirus, we do see an opportu-nity there.”
Later in the day, the DrugController General of Indiaapproved the “restricted use”of the drug combination.According to governmentsources, apex health researchbody Indian Council ofMedical Research had soughtan emergency approval fromthe DCGI for the medications.
Upadhye said the drugcombination (which Cipla sellsunder the brand Lopimune)has protease inhibitors thatare designed to block HIV viralreplication. It is being consid-ered a line of treatment for the
novel coronavirus, which hascaused the deaths of about500 people globally.
However, this is yet to beestablished scientifically.Doctors are scrambling for apotent treatment for the virus,which is spreading fast andhas no vaccines available yet.Traditional flu medication,and even Tamiflu, is not likelyto contain the spread.
About a few weeks back,Chinese doctors said they sawpositive response in patients(in Beijing) who were admin-istered a drug cocktail com-prising the anti-HIV combina-
tion and an anti-flu medica-tion (oseltamivir).
Cipla can supply the drugglobally if needed as italready has approvals inmany countries. The compa-ny also hopes that in case of aglobal health emergency,approvals would not takemuch time. Cipla has alreadyreceived queries from Chinafor supply of the drug.
It has sufficient raw mate-rial to make about 10-12 mil-lion tablets of Lopimune. Itmakes these drugs at multiplesites in India, and sells it at aprice of ~2,000 for 60 tablets.
A woman with her child outside the special isolation ward setup for coronavirus patients, at Kochi medical college PHOTO: PTI
Officers spray Indonesians with antiseptic at Hang Nadim Airport in Batam (Indonesia) as they arrive fromWuhan, before transferring them to the Natuna Islands military base to be quarantined PHOTO: REUTERS
| Baby tests positive for China virus just 30 hours after birth
| WHO issues appeal for $675 million to fight novel coronavirus
| Bill & Melinda Gates Foundation pledge tocommit up to $100 million for the globalresponse to the epidemic
| Coronavirus vaccine hopes guide Britishstocks higher —FTSE 100 up 0.6%, FTSE 250 up 0.4%
| Central Hubei province reported 3,156 newinfections, its biggest single-day jumpduring the outbreak
| Cathay Pacific asks staff to take unpaid leave,Airbus shuts plant
| Three foreign nationals among 2,528 underobservation in Kerala
| 46 under watch in Gujarat
| Delhi govt sets up 24x7 control room for anyquery related to virus
| Tamil Nadu procures 5,000 additionalpersonal protection equipment forhealthworkers, says state health secretary Beela Rajesh
| 104 kept at Indo-Tibetan Border Police facility test negative
490 DEATHS AND 24,324 CONFIRMED CASES
Modi targets $5 bn of defence exports in 5 yrsAJAI SHUKLA
New Delhi, 5 February
Inaugurating the 11th DefenceExposition (DefExpo 2020) inLucknow on Wednesday, PrimeMinister (PM) Narendra Modicalled on international defencemanufacturers to “Make inIndia, for India and for theworld”. In his 35-minute inau-gural speech, Modi listed out astring of defence productionsector reforms his governmenthad put in place since 2014,which he said had set the stagefor making India a major global“defence manufacturing hub”.
“How long can the world’ssecond-largest population, sec-ond-largest military, and largestdemocracy remain reliant onimporting all its weaponry?” hewondered aloud.
“Terming the opportunity toparticipate in the Indian defencemanufacturing ecosystem “anunparalleled opportunity for theworld”, Modi stated: “When theworld talks about the 21st cen-tury, attention naturally turnsto India.” The PM claimed thedefence economy had already
picked up due to measures tak-en by his government. “In 2014,defence exports were ~2,000crore. Now we have exported~17,000 crore worth of defenceequipment. In the next fiveyears, we must ensure defenceexports cross ~5 billion, or~35,000 crore,” said Modi.
Pointing out that his govern-ment had liberalised foreigndirect investment (FDI) intodefence, Modi stated: “In the lastfive years, ~1,700 crore in FDIhas flowed into defence manu-
facture.” He pointed to theinvestment in Korwa, nearAmethi, where Kalashnikov hadset up a joint venture with theOrdnance Factory Board, India-Russia Rifles, to manufactureAK-203 rifles in India.
However, most foreigndefence firms regard a 49 percent FDI cap unattractive forinvestment, since that does notprovide control over the tech-nologies they bring into India.On Tuesday, US envoy to India,Kenneth Juster stated in
Lucknow: “If you’re trying toattract investment into yourcountry, I think having FDI capslimits that degree of flexibility.”
Modi also claimed the pro-cedure for issuing defence pro-duction licences to private firmshad been eased greatly, statingthat the overall number oflicences issued had doubled inthe last five years to 405.
The PM said: “Appointing aChief of Defence Staff and set-ting up a Department of MilitaryAffairs has eased the purchase
and manufacturing processes.”Modi also dwelt on one of hispet themes: Innovation. Citingadvanced technologies such asInternet of Things, and Big Dataanalysis, the PM pointed to theInnovations for DefenceExcellence (iDEX) scheme, float-ed by his government.
“To flesh out and scale upthe iDEX scheme, we have set anaim of creating 200 new defencestart-ups. It is our endeavourthat this would lead to the cre-ation of 50 new technologiesand products,” he said.
Setting a new target that allthis innovation would fuel, Modisaid: “We aim to have 15,000micro, small and medium enter-prises in the defence sector with-in the next five years.”
Modi suggested that indus-try bodies like Confederation ofIndian Industry and Federationof Indian Chambers ofCommerce and Industry, whichcurrently have their owndefence sub-committees,should work in coordination.
Modi’s ambitious target set-ting at DefExpo 2020 mirroredhis speech at Aero India 2015 in
Bengaluru in February 2015.There he had noted that a
20-25 per cent reduction indefence imports could createadditional 100,000-120,000highly skilled jobs in India. Henoted that raising domestic pro-curement over the next fiveyears from 40 per cent to 70 percent of overall procurementwould double India’s defenceindustry output. However, thattarget has not come close tobeing realised.
In 2015, Modi had also enun-ciated a clear aim for offsets: “Toacquire state-of-the-art tech-nology and skills in core areas ofpriority”. That did not happen,and offsets are flagging today.
In 2015, the PM had alsoraised hopes by calling for a spe-cial financing system for thedefence industry, where “capitalinvestments are large and therisks are high”. However, highfinance costs continue to hobbleprivate defence industry.
Uttar Pradesh (UP) ChiefMinister Yogi Adityanath, whoalso attended the inauguration,spelt out a target of ~50,000crore investment in UP.
Prime Minister Narendra Modi during the inauguration of the11th edition of DefExpo 2020 in Lucknow PHOTO: PTI
MoD procurement chief talks up cooperation with IsraelAJAI SHUKLA
Lucknow, 5 February
In an unusual endorsement thatillustrates Israel’s value as India’sthird-largest defence supplierafter Russia and the US, theMinistry of Defence’s (MoD’s)weapons procurement chief,Apurva Chandra, publicly statedthat Israel is the key contributorto India’s readiness to face mili-tary challenges.
Chandra, who holds the postof director general (acquisitions)in the MoD, also acknowledgedthat Israel has been always forth-coming in sharing high-end mil-itary technologies with India.
He was speaking at a semi-nar on India-Israel defencecooperation at DefExpo 2020 inLucknow on Wednesday.
Chandra hoped that India’sdefence partnership with Israelwould continue to grow, statingthat all the contracts the MoD
has entered into with Israel wereconcluded on time. The overallexperience with Israel has been‘highly satisfying’, he stated.
Chandra listed outunmanned aerial vehicles(UAVs), border management,after-sales support, andmaintenance and repair ofequipment as the new focusareas of India-Israel defencecooperation.
Since Israel does not buildand sell major defence plat-forms such as aircraft or ships,its high-tech defence companies— many of them privatelyowned — focus on the lucrativeIndian market for upgradingIndia’s predominantly Russianplatforms. Israel retrofitted itscutting-edge avionics into theRussian Sukhoi-30 fighter,enhancing its capabilities andconfiguring it into the purpose-designed Sukhoi Su-30MKI.
Over the years, Israel has
upgraded India’s MiG-21 fight-ers; ship-borne missiles and T-72tanks. Having accumulated thisexperience at India’s cost, Israelifirms can theoretically upgradesome 30,000 T-72 tanks in serv-ice worldwide.
Similarly, Israeli industryworked with Russian equip-ment to build India’s Phalconairborne warning and controlsystem — an airborne radarmounted on a Russian IL-76 air-craft. India paid about $1.1 bil-lion to Israel AerospaceIndustries and Elta for this.
In recent years, Israelidefence firms have entered intoco-development projects withIndia’s Defence Research andDevelopment Organisation tobuild advanced systems such asthe eponymous long range sur-face-to-air missile that protectsIndian warships.
And Israeli firms are increas-ingly entering into joint ven-
tures with Indian defence com-panies to provide an indigenousscreen for what remains heavilyIsraeli equipment.
Underlining the continuingbelief on India-Israel coopera-tion, Hindustan Aeronautics(HAL) and Israeli firm, ElbitSystems, signed a memoran-dum of understanding (MoU)on Wednesday for joint devel-
opment of a UAV.HAL and Elbit are assessing
the possibility to jointly devel-oping, manufacturing, andmaintaining a vertical take-offand landing (VTOL) helicop-ter-style UAV that can operateon land and at sea. They intendto address the entire globalmarket with this 2,000-kiloclass rotary wing UAV.
“The proposed VTOL UAVshave a tremendous potentialin carrying out maritime mili-tary missions with higher effi-ciency compared to a mannedhelicopter. Deploying a VTOLUAV will bring down the hugecosts associated with induct-ing operating and maintainingmanned helicopters on the(ship’s) deck,” HAL stated afterthe signing.
Deploying VTOL UAVs forroutine surveillance missionsin unsafe areas would also ben-efit the armed forces by avoid-ing casualties and increasingendurance. In the absence of aVTOL UAV, manned helicop-ters would be needed for suchmissions, both during day andnight.
HAL and Elbit signed a sec-ond MoU on Wednesday tocooperate in promoting andmarketing digital head-up dis-plays to global customers.
Army personnel during the Defence Expo 2020 in Lucknow PHOTO: PTI
“HOW LONGCAN THE
WORLD’SSECOND-LARGESTPOPULATION,SECOND-LARGESTMILITARY, ANDLARGEST DEMOCRACYREMAIN RELIANT ONIMPORTING ALLITS WEAPONRY?” NARENDRA MODIPrime Minister
N DEFEXPO 2020 N> FROM PAGE 1
The reason why I put myweight behind sale is becauseI don’t believe that any of themembers of the trust has theability, vision or ambition tocontinue.
Why did your father saythree engines when the trusthas four members?He did not consider his wife asan option, maybe. Maybe only‘he’ (Lalit) was expected to bethe engine.
Don’t you think the trustdeed has not taken care ofthe interests of minorityshareholders, as it was notdisclosed to them? I have been pushing the trust,and it’s indeed the duty of thecompany to disclose this as itis appropriate. Remember, Iam not on the board. My sonRuchir who is on the GPIboard has also told the com-pany to disclose this. He evenapprised me of this and hisapprehensions about non-disclosure.
Considering the ban on FDIin tobacco and thegovernment policyto discourage a newplayer in this space,do you see potentialof any player to buy GPI?Also, Phillip Morris (having25.1 per cent shares) canalways block a specialresolution for sale of thecompany. Do you have anNOC from Phillip Morris?The global company hasdiluted its stake in the com-pany after attempts to take amajority stake did not workout. Sometimes there is a ten-dency to look at our compa-nies, as if there was just one –only a tobacco company. Weare also a gigantic distribu-tion systems company withmultiple touch points andmultiple consumers acrossthe country. The logistics andmarketing capability is alsovaluable and unlocking its
value for shareholders isimportant. Our value is notbased on just products, butalso our market reach in thehinterland of India, which wehave serviced for threedecades.
On the question of PhillipMorris — on the compliancesas well as the statutory regu-lations — we and our legalteam will work within theframework of what is appro-priate and comply with thelaws which are applicable. Webelieve that Phillip Morris, as
shareholders andpartners, will also liketo see fair valuation,as it would also standto benefit if a suitablebig investor, global or
local, was to step in.
What about IndofilIndustries? Indofil has a strong domesticbase and a well-recognisedinternational presence. It willfetch a high price as we aretop global player in the busi-ness. Many investors haveshown interest in it.
Will the asset sale includeIPM India WholesaleTrading Pvt Ltd, a JVbetween Phillip Morris, GPIand K K Modi investmentcompany which is involvedin wholesale trading ofMarlboro cigarettes? Yes, it will.
‘Father believed threeengines can never run acompany successfully’
> CHINESE WHISPERS
10 ISSUES AND INSIGHTS>
MUMBAI | THURSDAY, 6 FEBRUARY 2020
> LETTERS
This might be first timethat the Union Budgetspeech mentioned quan-
tum computing and also pro-posed an outlay of ~8,000 crorespread over five years for anational tech centre focused onthe area. It appears that aheadof the Budget, Prime Minister
Narendra Modi had, in a meet-ing with the council of ministersand secretaries, discussed therelevance of quantum comput-ing, artificial intelligence, inter-net of things, drones and dataparks in relation to technologi-cal innovation. That idea fromthe top found its way into theBudget.
That’s not the only proposalin Finance Minister NirmalaSitharaman’s Budget that hadan imprint of the prime minis-ter, according to people who’veattended some of the meetingsin December-January. In fact,three Ts — technology, tradeand tourism — have been thefocus of deliberations in manyof these meetings.
Among others, the proposalon a National Technical TextilesMission at an outlay of ~1,480crore might also have been abrainchild of the prime minis-
ter, who batted for textile man-ufacturing parks and textilemachinery manufacturingparks in one of the meetingsclose to the Budget.
In the speech, Sitharamansaid, "In dia imports a significantquantity of technical textilesworth $16 billion every year." Toreverse the trend and put Indiaon the global map in technicaltextiles, the finance ministerannounced the textiles mission.
Promoting exports has beena core subject in the prime min-ister’s interactions with minis-ters and bureaucrats. He hasbeen pressing for regular meetings with top staterepresentatives to identify a listof products from across thecountry with export potentialand to execute the plan so thatquality issues, often raised byother countries, can also beaddressed. That too was reflect-
ed in the Budget presented lastweek. Referring to the primeminister’s call for quality, theFM said she had asked formandatory technical standardsand their effective enforcement. "All ministries,during the course of this year,would be issuing quality stan-dard orders."
Staying with theexport theme, theBudget announced anew scheme —NIRVIK — to pro-vide for higherinsurance cover,reduction in premi-um for smallexporters and sim-plified procedure forclaim settlements. Sitharaman’sspeech, which acknowledgesthe PM’s vision and goals severaltimes, speaks of it in relation toexports as well.
"It is the vision of the PM thateach district should develop asan export hub. Efforts of theCentre and state governments
are being synergised for that,"she said.
While tourism has alwaysbeen close to the PM’s heart, heonce again sought ideas frombureaucrats in the past coupleof months to make it a vibrantsector. The latest Budgetspeech that ran close to threehours, however, has only sixparagraphs on culture andtourism. An official pointed outthat the PM perhaps didn’twant a tourism overkill in the
Budget at a timewhen economicslowdown hasalready hit the sec-tor hard. In herspeech, the FMasked the state gov-ernments to devel-op a road map forcertain destinationsand also formulate
financial plans after whichgrants would be given.
Almost the entire Part A ofthe Budget speech dealing withmacro themes, and which tookup more than half the time, issprinkled with PM’s ideas andvision, those reading the fineprint point out.
Whether it’s about the neweconomy or agriculture, aspira-tional districts or electronicmanufacturing, in essence it’sthe PM’s Budget, even as thegeneral narrative has been thatit was possibly drafted by thePrime Minister’s Office.
Now that the Budget is done,the government is believed to bepreparing for the next big show.No, not the next Budget inFebruary 2021, but big-ticketannouncements on key eco-nomic issues over the next cou-ple of months. The thinking isthat the Budget is not the onlyeconomic event for the country.It’s better to have a series ofannouncements throughout theyear. Several big announce-ments were made before theBudget as well to tackle the over-all demand slowdown andfinancial stress in some difficultsectors.
The buzz is that the nextround of big bang announce-ments will be about employ-ment creation and skill develop-ment, while the country aims toreach the 25th rank in WorldBank’s Ease of Doing Businessby 2025, from 63rd now.
Top-down BudgetA whole host of Budget announcements has a distinctimprint of the Prime Minister
Double talk or honest mistake? Take a look at theCongressmanifesto. It saysif voted to powerin Delhi in theupcoming polls,it would spend25 per cent of the citygovernment’sBudget (eachyear) on fightingpollution and improving transport. Itscampaign advertisement puts the figureat 20 per cent. Not just that. There are ahost of other points in which the twodiffer. The manifesto says the party willensure each family, including tenantsand owners in JJ clusters, get a flat of 350sq feet at the same place. In thehoardings and other advertisingcollateral, the party promises 269 sq feetflats. The manifesto promises 15,000electric buses, but in the ads the figurereads 10,000. On clearing loans of thoseplying three-wheelers and e-rickshaws,the party's ad says it would write offsuch loans if voted to power; themanifesto talks about a one-timesubsidy to the owners of such vehicles.The manifesto talks about fillinglanguage teachers’ vacancies ingovernment schools within 100 days; theadvertisement does promise to clear thebacklog of 11,000 teachers, includinglanguage teachers, but doesn't give atime frame. Is the party serious in its bidfor the state?
Akhilesh clutches at straws Samajwadi Party (SP) president AkhileshYadav would never let go of anopportunity to take a swipe at the rulingBharatiya Janata Party (BJP). Now withcampaigning in Delhi hitting acrescendo, the former Uttar Pradeshchief minister has attacked BJP leadersover their alleged inflammatory andinappropriate statements duringinteractions. Yadav, who is known forhis strident criticism of Uttar PradeshChief Minister Yogi Adityanath, said theBJP leaders were giving such statements"in desperation" because the party wasfast losing its support base in Delhi.While the SP has no stake in theupcoming Delhi polls, any electoralreverses for the BJP in the nationalcapital, which has a sizeable workingclass population from UP, would be amorale booster for the party that hassuffered serious erosion of its appeal inits home state in recent years.
The long and short of itWhen Finance Minister NirmalaSitharaman began her address at FICCI'spost-Budget industry interaction, shesaid she was not keen on giving a longspeech. She had already delivered thelongest Budget speech and would bemore interested in taking the industry’sfeedback, she added. Having said that,she took about 15 minutes to go throughher opening address. At the end of it,Sitharaman said, “Though I had said inthe beginning that I am not going to do along one, it’s always a temptation tospeak as I have been trained as aspokesperson as well.” The guests burstinto peals of laughter.
Ease of paying taxThe changes proposed in Budget to thepersonal income tax system — simpli-fied for incomes up to Rs 15 lakh perannum, the taxpayer’s charter, thereduced interface with tax bureaucracy— indicate a welcome move towardseasier compliance that could widen thetax net. Taxpayers with an annualincome of Rs 5 lakh to Rs 15 lakh willnow have an option of paying taxes ata lower rate provided they forgo assort-ed exemptions. The government’sintention could be to move taxpayersto a low-tax regime with few exemp-tions, which explains the nudge —doing away with 70 of the 120 exemp-tion categories that income tax payerscan currently use to lower their tax lia-bility. I think that the ease of payingtaxes is an important consideration indetermining ease of living and doingbusiness. The measures mark an effortin this direction. Nobel prize-winningeconomist Richard Thaler wouldapprove — if you want people to dosomething, make it easy, he said.
Tarique Anwar Bengaluru
Lottery strategy This refers to the report “Govt likelyto introduce lottery system to boostGST compliance soon” (February 5).One ingenious way of ensuring taxcompliance is to follow the exampleof countries that have thought outsidethe box. They have turned salesreceipts issued by retailers into lotterytickets and seen a phenomenal jumpin tax collection. Consumers willinsist on receipts as there is a chanceto win. But the government will haveto ensure protection from counterfeit-ing of sales receipts. In the last 10years, countries like China, the CzechRepublic, Lithuania, Portugal,Romania and Slovakia have done this.This will ensure retail businesses can-not circumvent taxes.
Being a large country implement-ing this on a national scale willinvolve logistical problems, but withtoday’s technology that can beresolved. Many retailers do not issuereceipts and it is the government thatsuffers in terms of loss of revenue.The finance minister and the financepanel should look into implementingsuch schemes for credit-debit cardusers as well as to usher in the long-term goal of transitioning into a cash-less economy.
H N Ramakrishna Bengaluru
Abuse of child rightsPolice interrogation of children asyoung as nine in a school inKarnataka’s Bidar district in connec-tion with a play enacted to denouncethe Citizenship (Amendment) Act con-stitutes a flagrant abuse of child rights.It is an act of inhumanity a civilisedsociety cannot countenance in any cir-cumstance. Interrogating childrenintimidates them and may cause themirreversible psychological damage. Thepolice tried to justify that on theground that they need to collect evi-dence against parents and teachers.
The BJP government is so intoler-ant to criticism that it does not evenspare children. The Bidar incidentshows that the government would goto any length to stifle dissent. It is par-ticularly worrying that the KarnatakaHigh Court and the Supreme Courthave turned a blind eye to the gross
violation of child rights. If the courtsdo not intervene and protect childrenfrom police high-handedness, who elsewill? It is some consolation that theState Child Rights Commission hassought an explanation from the police.
The courts have ruled time andagain that a speech or action intendedto influence the government to changea policy or law does not amount to sedi-tion. A country that cherishes democ-racy cannot let the ruling dispensationscare children and slap seditioncharges on adults on flimsy grounds.
G David Milton Tamil Nadu
Letters can be mailed, faxed or e-mailed to: The Editor, Business StandardNehru House, 4 Bahadur Shah Zafar Marg New Delhi 110 002 Fax: (011) 23720201 · E-mail: [email protected] letters must have a postal address and telephonenumber
> HAMBONE
There is a lot that needs to be fixedin Indian economy. Nirmala Si tha -raman’s second Budget spee ch
was never going to provide a solution toall problems. In fact, some of the mostpre ssing structural reforms relate to thefactor markets — amending land acqui-sition laws, changing labour codes andre booting the banking system. The firsttwo are clearly off Budget. The third hasbeen addressed through recapitalisationbut the key to reform is more structural,requiring ei ther divestment or genuineautonomy, neither of which can be dealtwith in the Budget.
The 16-point plan for agriculture whi -ch took considerable time and space alsobelongs off Budget as the key to it is stru -ctural market reform. There are othermatters the Budget must deal with, mostobviously those that relate to governme -nt expenditure and revenue. As thesehave implications beyond just balancingthe books, the Budget cannot also beseen merely as an accounting exercise.
The Budget for 2020-21 was presentedin a scenario of stalling economic gro -wth, the lowest in a decade. There arema ny reasons for this slowdown, someexternal, some internal, some cyclical,some structural, some legacy. Whatever
the reasons, expectations were height-ened because stakeholders expected thegovernment to respond radically. Andon that metric, the Budget fell short.
Realistically, the only radical re s po -n se that the government could havechosen was to loosen the purse stringsin a strong counter-cyclical fiscal policy.The fact that it deviated from its fiscaldeficit target of 3.3 per cent of GDP (for2019-20) by 0.5 per cent is not an indi-cator of a fiscal stimulus but a stretch.Shortfalls in revenues, taxes and non-tax receipts, like disinvestment, in themidst of slow growth meant that thegovernment had no choice but to let thedeficit grow by a quantum permitted bythe FRBM Act. If off-Budget borrowingsare taken into ac c ount, the deficit iseven higher. So, a re al fiscal stimuluswould have required the government tolet the on-Budget fiscal deficit grow toaround 5 per cent of GDP.
There are good reasons for the gov-ernment not to have chosen that path.Ad ditional government spending andtherefore more borrowing would onlyput upward pressure on interest ratesand crowd out the private sector fromaccessing resources. The direct contri-bution of government spending to In di -a’s GDP is only around 12 per cent where-as private investment is 30 per cent (butought to be more than 35 per cent). It isalso well known that private investmentis more efficient than government spe -nding. So the government’s commitme -nt to maintain a semblance of fiscal re -straint may be good for revival in themedium term.
The FM should have tied in this logicwith her exhortation of wealth creatorsand wealth creation. She could have ar -ti culated a clear vision for private sec-
tor-led growth where government wouldonly play a supporting role in creating aconducive environment through struc-tural reforms which will continue to hap-pen off Budget.
That may not have squared well withthe government’s political intent to focuson welfare. It could have. The FM alludedto former PM Rajiv Gandhi’s famous ad -mission of leakages in government spe -n ding. The Modi government has seri-ously reformed delivery systems so anemphasis could have been laid on get-ting more bang for the buck. The FMcould have also been forthcoming on theinability of certain government depart-ments and agencies to spend their Bu d -get allocations. When fiscal space is ti -ght, the allocations to such departmentscould have been cut while rewardingthose which spend efficiently. In otherwords, the overall expenditure, even ifonly nominally increased could havebeen deconstructed.
On the revenue side, the FM couldhave made out a case for no changes giv-en the fiscal situation. A complicatedopt-in system through which an individ-ual could potentially get a small tax con-cession did not seem worth the effort.Instead, she could have laid down a path-way over the next five years in which per-sonal income tax rates would be ratio-nalised as growth recovers.
In the end, a do-little Budget was per-haps the best option for the FM. If onlyher Budget speech was structured to ex -plicitly note the economic context andde tail the government’s strategy. For -tunately, the economic cycle is not coin-ciding with the political cycle. The gov-ernment has over four years left.
The author is chief economist, Vedanta
The great expectations challenge
DHIRAJ NAYYAR
INSIGHT
NOT FOR PROFITNIVEDITA MOOKERJI
Instead of grand visions and big announcements, the Budget should havefocused on managing expectations around the current economic cycle
A K BHATTACHARYA
The Union Budget for 2020-21 hasbeen criticised for presenting taxrevenue numbers that are not
realistic. How justified are thesecharges? Are there any early warningsignals from the government’s officialfigures to suggest that the governmentmay not achieve those revenue targets?
Let us begin with the Centre’s nettax revenue numbers, which accountfor more than half of the government’soverall receipts and impinge on its abil-ity to keep the fiscal deficit at therevised target of 3.8 per cent of grossdomestic product or GDP. For the cur-rent year (2019-20), the Budget hasalready slashed the net tax revenue fig-ures by ~1.45 trillion in its RevisedEstimate to ~15.04 trillion, down from~16.49 trillion given in July 2019 in theBudget Estimate.
This nine per cent reduction hasalready raised questions about the gov-ernment’s ability to project revenuenumbers realistically,keeping in mind the stateof the economy and thetax department’s efficien-cy in collecting the taxesthat it had promised at thestart of the year. But themore worrying questionis: Do these alreadyreduced numbers have toundergo another down-ward revision?
The provisional unau-dited numbers for net taxrevenues collected from April 2019 tothe end of December 2019, or about ninemonths of 2019-20, show that theCentre’s net tax revenues are only ~9.05trillion. This is about 60 per cent of the
total net tax revenues that will have tobe collected, according to the RevisedEstimate put out in the Budget onFebruary 1.
In other words, another 40per cent, or about ~6 trillion,has to be collected in theremaining three months of thefiscal year. This is about dou-ble the average monthly rateof collections achieved in thefirst nine months of the year.
Government officialshave stated that these num-bers are achievable and thelast three months of thefinancial year have in thepast seen a smart rise in col-
lections to justify such optimism. Arethese assumptions correct?
Consider what happened in 2018-19.The government collected ~9.36 trillionin April-December 2018, or about 71 per
cent of the full year’s actual net tax rev-enue collections. This meant that just29 per cent of the full year’s actual nettax revenues were collected in the lastquarter of the year.
Raising that target rate to 40 per centthis year would be quite a task. Thenominal growth in the GDP in 2018-19was 11 per cent, boosting buoyancy intax collections. But in 2019-20 the nom-inal growth rate is just 7.75 per cent. So,what will the tax department do toachieve this goal?
Indeed, only once in the last fiveyears have the Centre’s net tax collec-tions in the last quarter of the year beenas high as 40 per cent of the full-yearcollections. That was in 2014-15. Thatwas the year when the governmentbenefitted from higher duties onpetroleum products, following a dropin international crude oil prices. Inaddition, the nominal economic
growth rate was about 11 per cent.In 2017-18, only about 28 per cent of
the full-year actual net tax collectionswere achieved in the last quarter. In theprevious two years, that performancewas somewhat better at 32 per cent in2016-17 and 34 per cent in 2015-16, butnowhere close to 40 per cent as requiredin the current year (see table).
Assume, for instance, that the nettax collections in the last quarter of thecurrent year do as well as they did inthe same period of 2018-19 or 2017-18.Net tax collections for the Centre inJanuary-March 2020 would rangebetween ~4.2 trillion and ~4.4 trillion.Thus, the full-year net tax collectionsduring 2019-20 will come to about ~13.3trillion or ~13.4 trillion.
This will mean a further tax revenueshortfall ranging between ~1.6 trillionand ~1.8 trillion. The only way the taxdepartment can avoid any further short-
fall is to repeat the performance of 2014-15. But that performance was achievedonly once in the last five years.
Any further shortfall in tax revenuecollections will have an adverse impacton the revenue targets for 2020-21, whenthe net tax collections are expected togrow to ~16.36 trillion. As shown earlier,if in the last quarter of the current year,net tax collections maintain the samepace as Q4 of 2017-18 or 2018-19, totalcollections in 2019-20 would be only~13.26-13.41 trillion.
As a consequence, the net tax rev-enue collections growth target for 2020-21 would go up to 22-23 per cent, com-pared to the nine per cent growthassumed now. Imagine the plight of thetax department, if that were to happen!Taken together with the 223 per centrise in disinvestment revenues project-ed for next year, the Budget assump-tions for 2020-21 will become evenmore challenging.
This problem with the government’stax revenue estimates is not new. But itgot worse when the interim Budget waspresented in February 2019. At that time,the target set in the revised estimate wassignificantly higher than what the taxdepartment could reasonably hope tomeet. The actual net tax collection fig-ures for 2018-19, released a year later,show that instead of the promised ~14.84trillion, they were actually 11 per centlower at ~13.17 trillion.
To be sure, the revised estimate onnet tax collections presented for 2019-20was relatively closer to the reality. Thegovernment had scaled down the Budgetestimate for net tax collections of ~16.49trillion by nine per cent to ~5.04 trillionin the Revised Estimate for the currentyear. The embarrassing issue that thegovernment faces now is whether a fur-ther downward revision in the samenumber will be needed by next year.
Early warning signals on tax revenueOr why the government’s target for 2019-20 may have to be revised downwards a second time
TAKETWOANALYSIS BEHIND THE HEADLINES
LONG JUMP Why tax revenue estimates can go awry
Gross tax Gross tax Net tax Net taxrevenue revenue revenue revenue
(full year) in April-Dec (full year) in April-Dec Nominal GDP growth in %
2014-15 12.45 7.96 (64) 9.04 5.46 (60) 11.0
2015-16 14.56 9.63 (66) 9.44 6.22 (66) 10.5
2016-17 17.16 11.39 (66) 11.01 7.52 (68) 11.8
2017-18 19.19 13.37 (70) 12.42 9.00 (72) 11.1
2018-19 20.8 14.24 (68) 13.17 9.36 (71) 11.0
2019-20 21.63 13.83 (64) 15.04 9.05 (60) 7.75
All figures in ~trillion, except those in brackets, which are per cent of total revenue collected in full year;Nominal GDP growth in per cent; 2019-20 full-year figures are Revised Estimates; 2019-20 April-Dec figures areProvisional Actuals; for all other years, full-year figures are Actuals and April-Dec figures are Provisional ActualsSource: Budget documents, Controller General of Accounts and CSO
Referring to theprime minister’scall for quality, theFM said she hadasked formandatorytechnical standardsand their effectiveenforcement
OPINION 11> STAY INFORMED THROUGH THE DAY @ WWW.BUSINESS-STANDARD.COM
On Saturday, Finance Minister Nirmala Sitharaman tabled the firstreport of the Fifteenth Finance Commission in Parliament for thefinancial year 2020-21 alongside her presentation of the UnionBudget. The Finance Commission’s terms of reference had become
something of a controversy, given that they departed in several importantcriteria from previous iterations. Among the states’ concerns were that theCommission was told to stop using population weights from the 1971 Census,and instead use more recent relative population numbers — which significantlydisadvantages those states in the south that have done better on family planning.It was also suggested that funds for defence and internal security be put into aseparate fund from the divisible pool of taxes, and that “populist” policies bedisincentivised for the states.
Given these constraints, the Finance Commission’s interim report chartsa middle path between the demands of the states and the Union government.Although it no longer uses the 1971 Census numbers, it has tweaked the formulaby which taxes are divided among states in a manner designed to partiallycompensate for this change. For example, the population weight has beendecreased to 15 per cent from 17.5 per cent, and the weighting given to demo-graphic performance has been hiked from 10 per cent to 12.5 per cent. Theweighting given to relative income has also been decreased by five percentagepoints. However, the southern states of Tamil Nadu, Telangana, Karnataka andKerala will still see their relative share in the states’ tax haul decrease. Thoughthe Finance Commission has recommended a special grant to some states toovercome this sharp decrease, the Union government has frowned upon thisgrant. The Kerala finance minister tweeted that the Union Budget slashed therevenue deficit grant recommended by the Commission from ~74,000 crore to~30,000 crore. This will no doubt become a serious issue going forward, andthere is little justification for this move on the part of the Union. The Unionfinance ministry should seek to implement the Commission’s recommendationsin the right spirit, especially since transfers to states in the ongoing fiscal yearhave been lower by more than ~1.5 trillion and there is an ongoing disputeabout the status of the goods and services tax compensation.
The most important aspect of the Commission’s award, however, is thestates’ total share of taxes, which was fixed at 42 per cent by the FourteenthFinance Commission and has only been reduced by 1 percentage point bythe Fifteenth Finance Commission on account of the reorganisation of Jammuand Kashmir. This should not be tinkered with further in the final report ofthe Commission.
It is correct that the Union government is in a difficult fiscal situation, butshifting the burden to states will not solve the problem. There is a need forbringing in more efficiency in fiscal management. The Finance Commission isa constitutional body which must consider the long-term importance of Indianfederalism, not the short-term fiscal concerns of the government of the day. Itsfinal report should reflect that high duty as much as the interim report.
Long on ideas
The 16-pronged action plan mooted in the Union Budget 2020-21 tospur growth in agriculture and allied fields and bolster farmers’income is a pack of small, but fairly significant, measures aimed atmeeting the needs of stakeholders in this sector. But the way these
proposals are sought to be implemented — through state governments orwith public-private participation (PPP) — makes their outcome dicey. Thestates’ track record in carrying out Central sector schemes is quite uninspiring.The PPP is also a, by and large, failed model of development. The fundingarrangement for the envisaged activities, too, seems problematic. The allocatedfunds are not only inadequate but also vaguely targeted. These are clubbedunder the two broad heads of agriculture and allied activities (~1.60 trillion);and rural development (~1.23 trillion).
Finance Minister Nirmala Sitharaman has rightly pointed out in herBudget speech that the farmers’ prosperity warrants competitive and liberalisedfarm markets, greater investment in logistics and agri-services, and substantialsupport for agriculture’s allied activities such as animal husbandry, beekeepingand fisheries. But the Budget has failed to conceive sound strategies to meetthese imperatives. Amendment of state laws governing agriculture marketing,contract farming and land leasing — the three areas specifically mentionedin the Budget for legal reforms — can be the case in point. This issue has beenkept on the top of the agricultural agenda, but it is sought to be carried outonly through persuading the states — something that has already been triedout without much success. The states are reluctant to give up control overfarm markets because of the political clout and the revenue they generate forthem. Kerala, in any case, has been quick to announce that it would not allowcontract or corporate farming. The prospects of legalisation of land leasingare also quite dim as there are not many takers for the Model Land LeasingAct circulated by the Centre in 2016. Land leasing is a means of making thecountry’s small-farm agriculture viable by facilitating adjustments in the oper-ational control of land without affecting its ownership. It allows the tillers ofuneconomical landholdings to either expand them by hiring-in more land orquit farming by renting out their land to others. The absence of legal sanctityto land leasing deprives the large number of tenant farmers of several facilities,services and other doles available to landowner cultivators. The only way theCentre can nudge the states to come on board for such reforms is by linkingCentral grants with result-oriented action on these fronts.
The Budget has another welcome proposal to expand the much-neededwarehousing and cold storage capacity by offering viability gap funding. Still,the ultimate goal of having proper warehouses at the block level may not befully achieved because the land for these godowns has to be provided by thestates and the projects are stipulated to be implemented in the PPP mode.Similar may be the fate of another well-advised proposition of starting refrig-erated rail and air services — Kisan Rail and Krishi Udaan — for speedy trans-portation of perishable farm produce, including milk, meat and fish. Theiroperations, too, have been subjected to the availability of PPP arrangements.These snags need to be addressed to make the Budget’s agricultural agendatruly beneficial for the farmers.
Volume XXIV Number 124
MUMBAI | THURSDAY, 6 FEBRUARY 2020
It’s not obvious why we function the way we do inIndia, and who gains from it — considering thatwe are able to go just about anywhere in the world
and thrive, but unable to manage too well on our ownshores. Could it be because of the operating conditionshere apart from the facilities, the prevailing systemsand procedures in our environs, and the organisation,structure, and processes? When we go elsewhere,those places have their own systems and procedures,and it appears we are able to adapt and function well.In India, our constraints of systems and proceduresin our environs include the full rangeof our population, just as elsewhere.The sheer number of people with var-ied levels of education, competencies,process orientation, and expectationsis something that those who go awayto other environments are not con-strained by.
There are other easily recognis-able elements of constraints. Thereare the post-colonial institutions,structures and methods that havebeen retained in government withoutmodification for a self-governing,democratic society. Another set con-sists of the underpinnings of a feudal structure thatmanifests strongly in political processes. The predom-inant motivation of both is, to put it crudely, exploita-tion for the governing entity’s gain. Historically, thegain has been for imperial/colonial/exploitative ends,and after the first, largely well-intentioned post-Independence phase, appears to be focused on per-petuating the power of incumbents, or the position ofthose controlling government (barring exceptions).The fact of governing entities being locally electeddoes not appear to make any difference. The essentialattribute is of otherness, of “us” (those in power) versus“them” (those governed).
The laws and the justice systemLatterly, our preoccupation with economic, social,
and political pressures has left the serious institu-tional constraints of our legal system somewhatunattended. There are several dimensions ofreforms needed in the legal system. One of thesepertains to aspects of law and changes to them,another to the judicial system and its dilatoryresponses. There is also a third aspect, of approachand motivation, i.e., of a systemic perspective andphilosophy, which can be minimalist or the oppo-site, or something in between.
Too many lawsA major encumbrance is the pletho-ra of laws. In December 1993, theMinistry of Finance undertook aproject with the United NationsDevelopment Programme on eco-nomic and commercial legislation,to make it more market friendly.Called Project LARGE (LegalAdjustments and Reforms forGlobalizing the Economy), the firstphase from December 1993 untilDecember 1997 dealt with centralgovernment legislation comprisingabout 450 of around 3,000 central
acts. The second phase was on state legislation con-centrating on government orders, rules and regula-tions relating to land and labour, and other matterssuch as dispute resolution and competition policy.
While the material is in the public domain, inpractice, it is a bear to find it. For those who wantto track it, the reports were published in September1998 as the “Report of the Commission on Review ofAdministrative Laws”, Volumes I and II.1 Threearticles by the Director of Project Large BibekDebroy sum up the process, including the laterwork of the Ramanujam Committee and successiveLaw Commissions. They are epitomised by hisquotation of Tacitus: The more the corruption, themore the laws. The articles are:“Why We NeedLaw Reform”, “Justice For All: Need Better, Fewer
Laws”, and “Old But Not Gold” (links below).2
Another by Vagda Galhotra rounds out the set:“Why We Need To Repeal More Criminal Laws”.3
Too much government litigationGovernment litigation expenditure increased three-fold from 2016 to 2018, with government being aparty to around 46 per cent of lawsuits in July 2018,despite its stated intent of reducing litigation. Quiteapart from this, government litigation and some ofthe disruptive rulings have created chaotic conditionsin the economy, such as in coal mines and spectrumafter the 2G licence cancellations. This has had achilling effect on policies facilitating resource use,whether it is coal for electricity, or spectrum for con-nectivity at a time when there is global advancementin high-speed wireless shared use. The most recentshock to India’s economy was the Supreme Court’sreversal of previous rulings on telecom companies’adjusted gross revenues. Other disruptive claims,without going into the merits, have been the retroac-tive tax case against Vodafone, the Tamil Nadu gov-ernment’s tax claim against Nissan, and the earlierdunning of Nokia.
In 1998, there were an estimated 25 million casespending in various courts, each taking up to 20 yearsfor resolution, and this increased between 2006 andApril 2018 by over 8 per cent. Much of governmentlitigation apparently comprises appeals against lowercourt judgments, with decisions to appeal taken atthe lowest levels of government, whereas decisionsto not appeal have to be at the top.
There are many areas we have to work on tomove from our present level to being able to growat a sustainable high rate for any length of time.Beginning from early school, with systems think-ing for every child, process discipline and stan-dards, and collaboration and teamwork in lessonplans and play, continuing into work life and poli-ty. Equally, there is a real need for establishingsound institutions. Included in these is a func-tioning, efficient set of laws and justice system.The discipline and efficient enforcement of con-tracts, payment terms, and delivery standards toensure smooth cash flows is critical for marketsto function well. This is why reforms on systematicrationalisation of the laws and justice delivery areessential, although such activities do not lendthemselves to hoopla and staging events with pop-ular appeal. The talent and experience available-can contribute significantly to systems and organisation in the public interest. The constitu-tion of the 22nd Law Commission is long overdue,with the 21st Law Commission having ended inAugust 2018.
[email protected]:https://darpg.gov.in/sites/default/files/Review_Administrative_laws_Vol_1.pdfhttps://darpg.gov.in/sites/default/files/Review_Administrative_laws_Vol_2.pdf2: https://www.india-seminar.com/2001/497/497%20bibek%20debroy.htmhttps://indianexpress.com/article/opinion/columns/old-but-not-gold/https://www.businesstoday.in/magazine/cover-story/justice-for-all-need-better-fewer-laws/story/227497.html3: https://thewire.in/law/why-we-need-to-repeal-more-criminal-laws
In the space of three days, two significant speecheswere delivered, one in the world’s largest democ-racy and the other in the world’s most powerful
one. Both took place against the backdrop of height-ened political challenges for the incumbent govern-ment. Both will be remembered for reasons other thanthe content of the speeches. And both point to adepressing decline in the standardsof public oratory.
The first by Finance MinisterNirmala Sitharaman presenting thesecond Budget of Narendra Modi’ssecond term when economicgrowth has dwindled was a recordtwo hours and 43 minutes long,would have been longer had thedeliverer not taken ill, and wasnotable for one thing: It failedexpectations all round.
Three oceans away, theimpeached US President DonaldTrump took 78 minutes to deliverthe final State of the Union (SOTU)of his first term, marginally shorter than his 82-minute2019 harangue. The duration of SOTU 2020 took inover 100 interruptions for applause (from Republicansonly) and some orchestrated reality TV moments (anAfghanistan veteran’s “surprise” return to his wife andchildren). But Mr Trump’s calculated theatrics, includ-ing the studious non-mention of impeachment, cameto nothing. It was a fuming Nancy Pelosi, dressed inher trademark suffragette-white pantsuit, who stolethe show by conspicuously tearing up her copy of thespeech on the podium behind the president. That’swhat you get for dissing the House Speaker by ignoringher handshake.
No one dissed Ms Sitharaman, with many opposi-
tion MPs swarming around her in concern as she fadedout with two pages to read. And she certainly did herbest to deliver a stirring message. Wearing a stunninggold-yellow sari, she quoted, within the hour, anexcerpt from a Kashmiri poem (adroitly avoiding thepoet’s Urdu nom-de plume, as my colleague AditiPhadnis pointed out), one saying from a “wise old
Tamil Woman Saint Poet” and aKural or Tamil sacred verse. She evenmanaged to throw in Kalidasa in thebusiness end of the speech, univer-sally known as Part B, which coversthe tax proposals. Each literary ref-erence was explained, painstakingly,each proposal and achievementrepeated at least twice. But if therewas an overarching significance tothis hard-working hard-sell it was loston her exasperated auditors.
The finance minister’s school elo-cution-contest cadences bears a goodpart of the responsibility for the
aching boredom. But TV failed us too.The Congress has chosen to absent itself so theDoordarshan camera people had few options to offerthe watching public. They couldn’t pan out for longshots because that would have revealed the yawninggaps on the opposition front benches. In Budgets past,it was possible to take a break from ministerial into-nations about helping farmers, poor, women, lowercastes and other worthy tokenism with some minordistractions. Sonia Gandhi’s unerring taste in saris,for example. Her son’s struggles to look intelligent.The thickness of the late Sushma Swaraj’s hair despitethe Formula 1 track of sindoor . The sadhus and sadhvis.Turbans and hats. Yawning backbenchers. The con-stant procession of transcribers and translators under
the Speaker’s platform. This time, apart from MsSitharaman’s emphatic and interminable repetitions,we were treated, mostly, to close-ups of the prime min-ister’s expressionless face.
About an hour in and the going got tough for thoseof us at the coalface of the Budget speech. Economicjournalist Puja Mehra tweeted that the Budget wascertainly stimulating coffee consumption. An hourlater, even multiple caffeine fixes failed. By the timePart B came round, the flagging pens and empty note-books were marshalled wearily, but the minor excite-ment over the income tax reconfiguration soondescended into confusion (which continues today).The finance minister said she was offering charteredaccountant-mukt tax proposals. If her tax proposalshave stimulated demand at all, it’s for CAs.
Successive finance ministers have chosen to makean annual report on the state of the Union’s financesinto the equivalent of a SOTU because, like the latter,it enjoys a captive audience. But SOTU is recognisedas a political progress report that the country’s chiefexecutive delivers to Congress (interestingly, Houserules stipulate that each address must contain a Budgetmessage).
This year, the US fact-checkers’ toothcomb dis-covered more misleading statements in Mr Trump’sSOTU rather than the outright whoppers of earlierspeeches (though he didn’t disappoint on that fronteither). Ms Sitharaman’s problem is that the manydocuments that accompany every Budget will offergrist for the sceptics’ mill for much longer.Manmohan Singh said the Budget was so long hecould not absorb anything (it is unclear if the taci-turn former finance minister and prime ministerwas making a joke). But rest assured, despite nearlythree hours of rhetoric, it is the numbers that will,ultimately, speak for themselves.
The scope of V P Menon: TheUnsung Architect of ModernIndia is vast. The author,
historian Narayani Basu, introduces thereader, first, to a young boy “Kuttan”,and demonstrates how his definingcharacter traits are evident from earlyon. Through short descriptions, apicture of Vappala Pangunni Menon orVP, as he is called through the book,starts to develop. We are told about hiseidetic memory, his Machiavelliantactics that would harden over the years,and love for studying. We see how anincident from his boyhood days in Kolar,
shaped his dislike of delegating work toothers, and “preferring to do everythinghimself”. We learn “hard headedperhaps and illogical most certainly, VPwas nothing if nor persistent.”
A small act of kindness by a strangerat the Old Delhi Railway Station changesthe course of his life. Employed as atemporary clerk, VP between 1914 and1915 shuttles within the HomeDepartment, usually as a typist, andsometimes a stenographer. VP becomesclose friends with Kottieth P Anantanwho is also an early mentor, and his wifePankajam, who would later become VP’spartner. He gets married and hispersonal life descends into a scandal.Circumstances play “the role of kindlyfairy godmother to VP” when EdwinMontagu is appointed Secretary of Stateof India, and VP is recruited to theEmergency Branch of the HomeDepartment to assist Montague — thefirst time he enters the world of Indianpolitical and Constitutional reform, a
world he does not leave until hisretirement.
Within the course of a night, VPMenon presents Mountbatten with theMenon Plan, the first official draft of theterms of India’sindependence,which becomesthe catalyst forIndia’stransformationinto anindependentdemocraticrepublic. As theReformsCommissioner tothe last threeviceroys of India, and as Secretary, StatesMinistry, Menon played a pivotal role inmanoeuvring the integration of 565states into the Indian Union — includingJunagarh, Hyderabad, and Kashmir —each of which came with its own set ofdifficult characters and unique
situations. Finally, we witness VP’scareer change course after Sardar Patel’sdeath, and his eventual retirement intoobscurity.
The book, written by Menon’s greatgranddaughter,follows thoseevents of Indianhistory to whichMenoncontributeddirectly andsignificantly. Italso explores theinterpersonalrelationshipsbetween theprotagonists who
shaped independent India. Menon isconsidered Sardar Patel’s right handman, but the author emphasises that VPwould never be anyone’s “man” but hisown, and that he was loyal to thegovernments for he which he worked. Itwas this along with his other qualities
that made Sardar Patel rely on him. VP’srelationship with Nehru remainedfraught throughout his career, especiallyafter Mountbatten instructed VP to nottell Nehru about Plan Balkan, theoriginal Mountbatten plan thatproposed that India would be vivisectedinto dozens of countries. This laid thefoundations for Nehru’s profoundmistrust of VP.
These days, we find Nehru and Patelblindly pitted one against the other, andthe cracks within their relationshipmanipulated to augment partisanpolitics. But just as no two people remainthe same through the course of theirlives, no relationship between twostrong personalities can be static,especially if the national interests of anindependent India are at stake. NarayaniBasu’s narrative attempts to explore thenuance as well as the evolution of thevery complex relationship between thetwo men. The dynamics of thisrelationship also plays an important rolein VP’s career.
The book claims that Nehru’s firstofficial list of the people he wanted inindependent India’s first Cabinet
excluded Patel. It was Mountbatten, whoat VP’s insistence, met Gandhi and hadPatel’s name included. Another instanceshe mentions is the serious rift thatdeveloped between Sardar Patel andNehru over Kashmir, with Nehru’sinsistence on making Kashmir a part ofIndia, whereas Sardar would havepreferred to hand Kashmir off toPakistan or see to its partition. In thecourse of the discussions, Patel sentNehru his resignation and, in response,Nehru offered to resign. This situationwas resolved after Mahatma Gandhi’sintervention.
According to Campbell Johnson,press attache to Mountbatten, “… eachhad what the other had not. Nehru hadthe sweep and range of imagination andworld policy. Patel was a highly practicalman, who would say, “All right we aregoing to do this”.“ Through the course ofthe biography, Sardar Patel isomnipresent as VP’s mentor and as thepragmatic in India, while Nehru isviewed, often critically, through VP orPatel’s perspectives — revealing howprivate perspectives and interpersonaldynamics shaped Independent India.
Speaking volumes
A draughtsman of independent India
BOOK REVIEWSARAH FAROOQUI
FC’s final report should mirror the interim award
Stay the course
Ever wondered who gains from the way we work?
Why India functionsthe way it does
Budget falls short on farm reforms execution
SWOTKANIKA DATTA
V P MENON: THEUNSUNG ARCHITECTOF MODERN INDIAAuthor:Narayani Basu
Publisher:Simon & Schuster
Price: ~799
Pages: 448
ILLUSTRATION: BINAY SINHA
SHYAM PONAPPA
The portfolio turnover ratio indicates how much buying andselling a fund manager does. A turnover of 100 per cent meansthe fund manager has changed his entire portfolio once in a
year. A turnover of 50per cent means hehas changed half hisportfolio in a year,and so on.
Many investorsthink a high turnoverratio means the fundmanager is veryproactive inmanaging it. This is amistaken belief. Too
much churn raises costs. If one is looking for a stable fund, gowith one where the turnover ratio is below the median level(see table). A lower turnover ratio means a buy-and-holdkind of fund manager who is sure of his picks and has thepatience to wait till value is realised.
TIPPINGPOINT
14 PERSONAL FINANCE>
MUMBAI | THURSDAY, 6 FEBRUARY 2020
SARBAJEET K SEN
With interest rates comingdown on most debtinstruments, only a few aregiving good returns. TheReserve Bank of India’s (RBI’s)Savings Bond is one of them.A fall in retail domestic termdeposit rates is discernibleacross all tenors above oneyear and till 10 years.Currently, the SBI fixeddeposit rate is 6.10 per cent fortenors in the range of 5 to 10years while it is 6.60 per centfor senior citizens.
In comparison, RBISavings Bonds carry a couponrate of 7.75 per centcompounded/payable half-yearly. “RBI bonds score overbank FDs on return. Theirappeal becomes even more
pronouncedwhen theyield curve isdownwardsloping,” saysRajiv Bajaj,chairman andMD, BajajCapital.
Thestipulatedlock-in is
seven years while for seniorcitizens it is lower. Theminimum investment is~1,000 and there is nomaximum limit oninvestment.
“At present, the interestrate is low on most savingsinstruments like fixeddeposit, National Savings
Certificate, Postal Deposits,etc. Interest rates will likelymove southward for sometime. In such a situation, RBIbonds is attractive forinvestors. The interestpayable on a half-yearly basistakes the yield to 7.9 per cent,”says S Sridharan, head,financial Planning, Wealth
Ladder Investment Advisors.However, these bonds are
taxable in the investor’shands. He has to pay tax onthe marginal rate of tax. Also,a 10 per cent tax is deductibleat source if the interestincome from these savingbonds exceeds ~10,000 in ayear. “In case of the non-
cumulative option, the TDS islevied at the time of makingpayment to investors. In caseof the cumulative option, TDSis levied on the interestportion at the time ofpayment of maturityproceeds. No TDS will,however, be levied onexempted investors. They areexempt from wealth tax too,”says Bajaj.
Though these bonds scoreon returns and safety, adrawback of RBI bonds is thatthey lack liquidity. “The RBIbonds have a lock-in of sevenyears, and there is no way aninvestor can exit. They arealso not transferable. If some -one needs liquidity withinseven years, he should skipthis product,” says Sridharan.
Premature encashment isallowed for investors of 60years and above, subject to theminimum lock-in period. Forinvestors in the age group of60-70 years, the minimumlock-in is six years, for 70-80years it is five years, while it isfour years for investors of age80 years and above.
While RBI bonds are agood investment option forthe risk-averse, they areideally suited for seniorcitizens. “RBI Bonds are agood investment option for aconservative investor seekingstable returns along withsafety of capital. This isparticularly true of seniorcitizens who tend to be risk-averse. They normally preferassets that are immune tomarket gyrations. Forinvestors who want a regularincome, non- cumulativeoption is a prudent choice. Ifsomeone prefers thecumulative option and doesnot need a regular income, hecan opt for these bonds afterexhausting his Section 80Climit,” says Bajaj.
YOURMONEY
I am 42 and have two debt fund schemes. Ican invest ~25,000 a month for the rest ofmy life. I want to build wealth. Should Iinvest in an active or passive equity fund?The suitability of an active or passive equityfund depends on your risk appetite. An activefund usually carries some amount of addi-tional risk as investment decisions are takenby a fund manager. In contrast, a passive fundinvests in stocks in the same proportion asthe underlying index with a tracking error sig-
nifying the difference in returns. To get thebest of both the strategies, splitting yourmonthly investments between passive andactive funds.
Keep in mind your age and asset allocationmix as you grow older. At 42, you are capableof taking higher equity exposure. However, asyou grow older, consider switching to less riskyinvestments, such as hybrid funds that allo-cate between equity and debt, and even gold(in some hybrid schemes). Closer to retirementor post-retirement, invest in safer debt-orient-ed mutual funds.
I am 40. I want to save ~20 lakh in the nextfive years. I also want to save income tax.Can I use multi-caps for both these goals?Since you have an investment horizon of fiveyears for a goal of ~20 lakh, multi-caps couldbe a good choice as they invest across marketcaps. They aim to create a balance betweenlarge-cap stocks, which are relatively more sta-ble, and mid- and small-cap stocks, whichtend to generate higher returns over the longterm. Being equity funds, returns from multi-cap funds are tax efficient.
However, to save taxes, consider investingin an equity-linked saving scheme. Theyinvest in equities and also enjoy tax deductionunder Section 80C up to ~1.5 lakh. They canhelp build wealth over a long period. ELSS hasa lock-in period of three years.
I am 32, and I want to have internationalexposure in my portfolio. How can I do that?It is advisable to invest in the internationalmarket once you have enough investments inthe domestic market to capture its growthpotential. Assuming you have enough invest-ments in domestic funds, you can take inter-national exposure either by investing in a fundthat invests directly in international equities,or a feeder fund that invests in funds in othercountries or markets. Some feeder funds orfund-of-funds could invest in one or moregeographies.
The advantage of investing in the interna-tional market is that it gives a broader expo-sure to the investor in regions they might oth-erwise not have any exposure to. However,investors need to be aware that these fundsrun currency risk. They invest in an interna-
tional currency even though investors investin them in their local currency.
I want to go to the US to study. I can save~50,000 a month. Which scheme should Iinvest in?Assuming your plan to study in the US is anear-term goal (that is within three years orless), you could consider investing in debtschemes. Near-term or short-term goals
should be ideally met by investing in debtfunds, as these funds aim to protect capital.Equity funds tend to be comparatively riskyin the short-term and are, therefore, not rec-ommended for goals that have to be realisedin the short run. However, you must note thatwithdrawals from debt schemes in the short-term (three years or less) attract short-termcapital gains tax. This tax is calculated basedon your income-tax slab. In case you can investfor more than three years, go for hybrid fundsor large-cap funds.
The writer is MD & CEO, SBI Mutual Fund. Theviews expressed are the expert’s own. Send yourqueries to [email protected]
Avg price (~/sq ft) Avg unit size (sq ft)
BHOPALHoshangabad Road 3,510 1,823 Kolar road 2,640 2,412 Salaiya 3,571 1,804 Ayodhya Bypass 2,948 1,872 Bawadiya Kalan 3,891 1,852 Misrod 3,000 1,984 Airport Road 3,583 1,615 Shahpura 2,930 1,900 COIMBATORE Trichy Road 5,025 1,483 Vadvalli 4,587 1,403 Saravanampatty 4,052 1,626 Peelamedu 5,009 1,308 Ramanathapuram 5,170 1,469 Ganapathy 4,704 1,448 GN Mills 3,600 1,527 Selvapuram (South) 4,100 1,351 INDORENipania 3,471 1,989 Bicholi Mardana 3,216 2,035 Snehlataganj 3,178 1,845 Piplyahan 3,988 2,047 Ring Road 3,586 2,017 Sanwer Road 3,290 1,898 Vijay Nagar 3,084 1,788 Bicholi Hapsi 3,300 1,955 LUCKNOW Vrindavan Yojna 3,792 1,669 Gomti Nagar Extension 4,108 1,597 Gomti Nagar 7,391 1,005 Faizabad Road 3,514 1,697 Sushant Golf City 4,231 1,621 Bijnor Road 3,052 1,888 Sitapur Road 4,151 1,568 Arjunganj 4,000 1,410 SURAT Vesu 4,376 1,622 Palanpur 3,642 1,788 Mota Varachha 3,732 1,696 Pal Gam 3,340 2,414 Sarthana 3,265 1,932 Althan 3,800 1,906 Uttran 3,637 2,058 Adajan 4,819 1,547 VADODARA Vasna Bhayli 3,135 2,236 Sama-Savli Road 2,857 2,043 Bhayali Road 2,513 2,230 Note·The ticket price range considered for the above data points is between ~50 lakh and ~1 crore
·All the data points discussed in the above table refer to primary market only
·Above residential data set comprises of residential apartments only
·Above residential data is representative of organised real estatedevelopers only
·The top performing micromarkets based on sales during last year(December-2018 to November-2019) is represented on the above table
·Data points are updated till November 2019
Source: PropEquity
BUDGET: ~50 LAKH -~1 CRORE
REALTYCHECK
Business Standardbrings you a snapshot of averagecurrent rates and unit sizes in localities that offerproperty in the price range of ~50 lakh and ~1 crore. If you are looking at buying real estate, an idea aboutprevailing rates would come in handy
Is portfolio turnover important?
SANJAY KUMAR SINGH
For quite some time, employ-ees of start-ups have com-plained about a provision inthe income-tax law that
caused them hardship. Stock optionsare taxed in their hands as perquisiteat the time of exercising (allotment),creating a liquidity problem for them.In Budget 2020, finance ministerNirmala Sitharaman has announcedthat the time when start-up employ-ees will have to pay tax on their allot-ted stocks can be deferred. While theirliquidity problems have been takencare of, youngsters joining start-upsneed to pay heed to the risks they runwhen they participate in an employeestock option plan.
Tax liability deferred: ESOPs arecurrently taxed first at the time ofexercise of shares. The differencebetween their fair market value (FMV) on the date of exercise and theexercise price is taxed as perquisite.The employer deducts tax at source.Esops are also taxed at the time of saleof shares. The employee's capital gaingets taxed, the amount being the dif-ference between the sale price andthe FMV (on date of exercise).
Now, for employees of specifiedstart-ups, the payment can bedeferred. The tax can now be paid notat the time of allotment, but when-ever one of three events occurs first:One, the date the employee leaves thecompany; two, when the share is sold;or three, after five years from the
financial year in which it was exer-cised. The tax rate that applies will beof the year in which the option wasexercised.
At the time of allotment, the
employee only gets shares, not hardcash. “Start-up employees facedhardship because while a tax liabilityarose at the time of allotment ofshares, there was no monetary gainfor them to pay the tax. The proposedchange will help them deal with theircash flow issues,” saysShalini Jain, tax partner,people advisory services,EY India. Employees willalso benefit if they havemoved into a higher taxbracket. “You will pay taxat the rate that applied toyou when the shareswere allotted,” says HomiMistry, partner, DeloitteIndia.
This benefit will onlybe provided only to start-ups that meet certain cri-teria (see box). “Ideally, itshould have been provid-ed to a wider range ofstart-ups,” says Jain.
Next, let us turn tosome of risks employeesopting for Esops run.
Valuation risk: This isthe biggest one.“Employees give up onsomething tangible —the cash component intheir salary — based onthe belief in their ability to contributeto the company’s growth story. Butwhile opting for Esops, it is impossi-ble to tell which side valuations willtilt,” says Winnie Shekhar, partner,IndusLaw.
If the valuation declines betweenthe time of exercise and that of sale,the employee could end up overpay-ing tax. “Defer exercising your options
until you are close to the sale ofshares,” says Rupali Singhania,Partner, Areete Consultants LLP.
Opt for Esops based on your ageand risk-taking ability. “So m e body inhis 20s can take greater risk thansomeone in 40s or 50s. Older peopleal so have more obligations. Theyshould opt for a bigger cash compo-nent in their salary,” says Mistry.
Liquidity risk: Start-ups are unlisted,so there is no ready market for theirshares. Employees can only exit at thetime of IPO, if the company isacquired by a new investor, or if itdoes a buyback.
Check the Esop agreement close-ly: When an acquisition take place,will employees will be treated at parwith promoters? “Some times, pro-
moters are able to encashtheir shares whileemployees are not giventhe same opportunity,”says Singhania. Stu dy theEsop plan for exitoptions. Some compa-nies set up trusts to buyback shares, which pro-vides comfort that em -ployees will be able to sellshares in an emergency.
Know the vestingschedule: Employeescould lose their shares ifthey do not spend theirentire vesting period (thetime after which theyacquire a right over theshares) with the compa-ny. Suppose that thevesting period is fouryears and 10 per cent ofEsops vest in the firstyear, 20 per cent in thesecond, 30 per cent inthe third, and 40 percent in the fourth. The
bigger tranches vest later on. If anemployee quits early, he would for-feit those shares.
Employees are given time to exer-cise vested shares. “The exercise peri-od is shortened to 60-90 days fromthe date of leaving the company, ifemployees quit. Be aware of such con-ditions or else you could lose out,”says Singhania.
FM encourages start-ups withcash flow relief for employees Now, they can take the risk of joining without having to pay taxes on Esops immediately
The Finance Minister’sUnion Budget 2020 containsproposals that will benefitexpatriates working in India.The most notable one is thechange in tax residency pro-visions. Expatriates will nowbe able to stay longer inIndia before taxation of theirglobal income gets trig-gered.
Prior to this proposedchange, they were able tostay in India only for two-three years before globaltaxation was triggered, butnow they can stay up tofour-five years. The new op-tional concessional taxregime will alsofavour expatri-ates as most ofthem generallydo not claim de-ductions or ex-emptions. Theonly deductionsthey take areunder Section80C towardsProvident Fundcontribution and/or tuitionfees of their children.
Another proposal is totax the employer’s contri-bution towards Providentfund, National PensionScheme and Superannua-tion Funds, exceeding~7,50,000. Even the inter-est on such excess contri-bution will be taxable in amanner to be prescribed.The stated objective is totax highly-paid employees,who by structuring theircompensation package,park their funds in theseretirement schemes andsave taxes.
Expatriates, particularlythe highly-paid ones, will behit by this. Rather, the bur-den will fall on the Indiancompanies that hire them.Generally, such employeesare tax equalised and em-ployers bear their tax liabil-ity in India.
For expatriate employ-
ees who qualify as interna-tional workers, employersare required to mandatorilycontribute to the IndianProvident Fund at the rateof 12 per cent of their salaryunder the Employees’Provident Funds and Mis-cellaneous Provisions Act,1952(PF regulations). Thesalary here is high as expa-triate employees do nothave structured packages.Almost the entire salary(except performance bonusand benefits) comes underthe ambit of PF. Even thesalary cap of ~15,000 permonth is not applicable tothem. On the one hand,there is the legal obligationto contribute to PF underthe PF regulations and onthe other, they will be re-quired to pay tax on contri-butions beyond ~7,50,000under the Income-tax Act,1961 by virtue of this pro-posed change.
Even where employerswant to reduce their contri-bution to bring it downbelow ~7,50,000, they can-not do so as it would be a vi-
olation of PFregulation. Theg o v e r n m e n tshould reconsiderthis tax proposal,especially for ex-patriate employ-ees. They are notputting in moremoney out ofchoice but tocomply with PF
regulations. This proposal will hin-
der Indian industry fromhiring the requisite talentand special skill sets thatmay be important, particu-larly for the manufacturingsector. It won’t affect com-panies that have expatriateson secondment from coun-tries with which India has atotalisation agreement (SSAcountries). They generallycontinue to contribute totheir home country’s socialsecurity instead of Indianprovident Fund. But corpo-rates hiring expatriates di-rectly on their payroll orexpatriates from non-SSAcountries will get impactedadversely. One hopes thegovernment will reconsiderthis proposal to protect theinterests of industry.
The writer is Partner andLeader Personal Tax, PwCIndia. Views are personal
Expatriatesinvest a highamount tocomply with PFregulations. Thegovernmentshould considerexempting themfrom the ~7.5 lakh limit
Hiringexpatriates toturn costlier
TAXING MATTERSKULDIP KUMAR
RBI Bonds: Good option forrisk-averse investorsGo for half-yearly payouts if you seek regular income
READER’SCORNER
ASHWANIBHATIA
MUTUAL FUNDS
Investment alternatives
Fixed RBI Debt MF Hybrid deposit bonds (floater fund) equity
Risk Low Very low Moderate High
Min investment (~) 10,000 1,000 5,000 5,000
Returns 6.10% 7.75% 7.99% 10.02%
Who can invest RI RI RI/NRI RI/NRI
Demat required No Yes No No
Can they avail loan Yes No No No
Liquidity Immediate 7 years Immediate Immediate
Taxation Taxable Taxable Indexation LTCGbenefit
Investment (~) 1,00,000 1,00,000 1,00,000 1,00,000
Tenor 7 7 7 7
Capital gain (~) 51,359 70,275 67,314 95,120
Indexation cost (~) — — 1,27,273 1,00,000
Gains after index (~) 51,359 70,275 40,041 —
Indvidual tax rate 30% 30% 30% 30%
Tax on return 30% 30% 20% 10%
Tax payable (~) 15,408 21,082 8,008 0
Net gain (~) 35,951 49,192 59,306 95,120
Final value (~) 1,35,951 1,49,192 1,59,306 1,95,120
Net return 4% 6% 7% 10%RI is resident Indian. Source: Wealth Ladder Investment Advisors
FOCUS ON POST-TAX RETURNS
WHO CAN AVAIL OFTHIS CHANGE?nShould be an eligible start-up according to Section 80-IAC
nShould have beenincorporated after April 1,2016 but before April 1, 2021
nTurnover should not exceed~100 crore
nShould hold a certificatefrom the Inter-MinisterialBoard of Certification
HIGH CHURN CAN HARMLarge-cap Turnover funds ratio (%)
Maximum 217.0
Median 71.5
Minimum 10.0Source: mutualfundindia.com
“Start-upemployees facedhardship becausewhile a tax liabilityarose at the time ofallotment ofshares, there wasno monetary gainfor them to pay thetax. The proposedchange will helpthem deal withtheir cash flowissues” SHALINI JAIN Tax Partner, PeopleAdvisory Services, EY India
Students turning up late is acommon problem in govern-ment schools in Chennai.With students meandering inat various times of the day,
teachers waste a lot of time checkingattendance during different periods.Now, in a pilot project at a school inTriplicane in Chennai, the momentpupils arrive, an AI-enabled facialrecognition system marks their arrivaland the time. The school has seen an85 per cent fall in stragglers.
A brainchild of the Tamil Nadu e-Governance Agency or TNeGA, thepilot, tested in several schools, willnow be implemented in 3,000 gov-ernment schools across Tamil Nadu.
Tamil Nadu has also started rollingout an AI-based crop pest detectionand mitigation solution to help farm-ers address crop disease.
It is also exploring the use of aPredictive Services Delivery usingblockchain technology to provideservices to citizens when they needthem, such as a reminder of a baby’sfirst vaccination — rather than wait-ing till citizens seek out these servic-es themselves.
These are just a few examples ofthe innovative solutions that TNeGAis pursuing for a digital future andbacking the efforts is Chief Minister KPalaniswami’s decision to increase thebudget for e-governance initiativesfrom ~25 crore last year to around~400 crore.
“Low cost, indigenous, scalablesolutions for improved governance isour motto,” said Santhosh K Misra,CEO, TNeGA and commissioner of e-governance. An IAS officer and an IITKanpur alumnus, Misra is leading ateam of a dozen professionals at thenew Centre of Excellence in EmergingTechnologies which is developingthese new systems.
Their mandate is simple: Useevery new age technology rangingfrom AI, machine learning,blockchain and the Internet of Thingsto help the government perform bet-ter. Part of this involves steering thegovernment towards evolving poli-cies that are based more on data andanalytics than on unproven assump-tions and guesswork.
While TNeGA is working on manyideas, some have already been imple-mented, such as the facial recogni-tion system for student attendance.
This indigenously developed solutioncosts only ~3,000, including the hard-ware. So far, it has shown 99.5 percent accuracy.
“It is saving nearly an hour everyday that used to be wasted by teach-ers doing periodic attendance checksand freeing up that extra time for thecore educational activities inschools,” said Misra.
Identifying pests in 24 hoursThe Pest Identification System devel-oped by TNeGA aims to mitigate agri-cultural losses by offering farmersfaster pest diagnosis and solutions.The interface of the system is an appcalled Uzhavan. A farmer can photo-graph a pest-infected crop on hismobile phone and upload it throughthe app.
The system at the backendprocesses the picture using an AI-enabled image processing algorithmto identify the pest or disease. A mes-sage is sent to the farmer suggestingwhat he can do to get rid of it in lessthan 24 hours.
Every day about 500 farmers post
requests on Uzhavan for help. The appis currently being used by over500,000 farmers. Its usefulness ishuge given than nearly 70 per cent ofTamil Nadu’s population depends onagriculture.
As to the rest of the coun-try, its possible usefulnesscan be gauged from the factthat India’s per hectare cere-al productivity is almost halfthat of China and the UK(around 3,000 kg/ha vs6,000 kg/ha) owing to cropdiseases causing a signifi-cant loss of productivity.
Chat Bot Anil One of the first things thatTNeGA did was to try andunderstand why citizensdid not access government servicesdigitally. It roped in IIMTiruchirappalli for this purpose andthe findings showed that mostcitizens are simply not familiar withkeyboards.
TNeGA collaborated with AnnaUniversity to launch “Anil”, an auto-
mated virtual assistant which can talkto people in Tamil. The smart assis-tant guides people step-by-step onhow to apply electronically for birth,income, or community certificates. Inthe future, TNeGA hopes to make the
process voice-based.
Getting futuristic withblockchainOne of the state govern-ment’s most futuristic proj-ects is the BlockchainBackbone infrastructure toimprove the efficiency of e-governance services.TNeGA has earmarked ~40crore to build thisblockchain platform whichwill be offered to all gov-ernment departments.
Known as Nambikkai Inaiyam (whichroughly translates to Trust Link), theplatform is a state-wide infrastructurethat can be leveraged by all govern-ment departments for intra-depart-ment exchanges and for providingservices to citizens.
Alongside this, TNeGA is also cre-
ating a Zero Knowledge Proof-BasedPredictive Services Delivery platformfor all government services. The ideais to provide these services in advanceof when citizens are likely to needthem, obviating the necessity ofapplying for them.
“For example, when a child’s birthcertificate is issued, the system at ourend will send the vaccination infor-mation through an SMS when shebecomes six months old. Likewise,when she turns five, her parents will bealerted through mobile message to cre-ate her Aadhaar card,” said Misra.
The application software used forissuing certificates will be suitablymodified so that the document issuedwill electronically hit the makkal num-ber (citizen number) already createdby TNeGA for 70 million people in thestate and electronically reach a ‘CitizenVault’ — a kind of storage folder— tobe created for each resident.
People can view their certificates ordocuments in their “vault” using theirmobile number and user ID. Frombirth to death and all the other docu-ments a person needs in betweenthese two events — proof of educa-tion, caste, income etc — a system onblockchain will, without human inter-vention, prompt the software of eachdepartment to issue the relevant doc-ument as and when appropriate.
“The state’s mission is very clear. Asa government, we have to offer citi-zens convenient procedures and serv-ices that ease their life and not makethem run from pillar to post seekingessential certificates or documents,”said Misra.
The state has allocated a budget of~90 crore for the Predictive ServicesDelivery project which is presently inthe blueprint stage but is likely to takeconcrete shape over the next year.
Vittal Raj, founder and senior part-ner at Kumar & Raj and an expert oncyber security and business technolo-gy, praised TNeGA’s work. “A good gov-ernance model, technology architec-ture and human capital are amongstthe critical success factors for suc-cessful e-governance, not to forget theneed for political and administrativewill,” he said.
Raj added that TNeGA’s plans forNambikkai Inaiyam which will digi-tise all services on a blockchain back-bone-based trust platform, was a clas-sic example of how emergingtechnology can be applied to lay a“robust foundation to achievingvisionary goals for good governance”.
Still more ideas are being formu-lated such as using technology todetect internal bleeding from CTscans, a blockchain-based solution fortamper-proof preservation of registra-tion documents, and an Internet ofThings-based monitoring of the drink-ing water supply in rural areas.
16 TECHNOLOGY 4.0 MUMBAI | THURSDAY, 6 FEBRUARY 2020 1>
The decade ahead forthe government willhave more technology-based services than everbefore.
The Budget announ-cements made byFinance MinisterNirmala Sitharamanindicate that the gov-ernment is ready toembrace the benefits oftechnology in diverseroles and sectors. The
focus on technology includes agriculture, textiles,urban renewal, ports and healthcare.
Phrases like Internet of Things and machine learn-ing, which were alien to the government, are now partof official lexicon.
This is an important shift for governments since itmust counter the perception that higher use of tech-nology is at the cost of employment and job creation.
“The new economy is based on innovations thatdisrupt established business models. Artificial intelli-gence, Internet-of-Things, 3D printing, drones, DNAdata storage, quantum computing, etc., are re-writingthe world economic order. India has already embracednew paradigms such as the sharing economy withaggregator platforms displacing conventional busi-nesses. Government has harnessed new technologiesto enable direct benefit transfers and financial inclu-sion on a scale never imagined before,” the Budget says.
The Budget has also announced investment in thefuture. It has promised to set up data centre parks anda National Mission on Quantum Technologies andApplications with a fund of ~8,000 crore for a five-year project. “Quantum technology is opening up newfrontiers in computing, communications, cyber secu-rity with wide-spread applications. It is expected thatlots of commercial applications would emerge fromtheoretical constructs which are developing in thisarea,” the Finance Minister announced.
The government has also provided a much need-ed ~6,000 crore boost to provide rural regions withBharat Net fibre-to-home connectivity.
Realising the importance of artificial intelligence inmanaging data, the gov-ernment is now ready todeploy analytics for offi-cial statistics. A new policyon official statistics woulduse AI for data collection,integration, assessmentand dissemination.Hopefully the archaic,flawed and poor data col-lections systems would bereplaced rapidly with newAI-led processes.
India is a laggard ininvesting in new technologies. Government bodiesand private enterprises have not invested enough indeveloping and enhancing emerging technologies.Small and smart start-ups are doing a better job ofdeveloping and deploying such technologies. But it isbetter late than never in this field where there is abreakthrough almost every six months.
Focus on local development is important.Hindustan Aeronautics, for instance, is moving tomanufacture unmanned combat aerial vehicles withan Israel Aerospace Industries.
Linked to the use of emerging technologies is theoft-repeated need for revamping education. Instead ofobsolete four-year degrees, the government must con-sider a life-long learning approach for students andprofessional. Short courses that are linked to marketneeds and breakthrough technologies will be far moreuseful than degrees that are outdated from day one.Perhaps the better encouragement of technology is itsusage. Even as the government allocates billions fordevelopment, it must also change its rules so that it canutilise the services of young tech companies.
Government rules still focus on legacy, size andprecedence for granting work to private companies. Asthe delivery of government services depends increas-ingly on technology, the government will have to con-sider ways of involving small and smart companies.Such changes should be done before the rollout ofhigh-speed connectivity promised by 5G mobile serv-ices. China’s investment in technology has outshoneeven the US. India has a responsibility to protect itsinterests by investing, encouraging and deployingemerging technologies.
The Budget announcements are a good start andwill bear fruit for the country once related efforts aremade simultaneously.
Short coursesthat are linkedto market needsandbreakthroughtechnologies willbe far moreuseful thandegrees that areoutdated fromday one
Budgetingfor the futureof tech
KRANTI NATIONPRANJAL SHARMA
Heard of Black Edge? In her famous bookon the hedge fund industry which has thesame title, Sheelah Kolhatkar describesBlack Edge as the “most valuableinformation of all” in that it is proprietary,non-public, and certain to move markets.
No doubt, securities regulators aroundthe world are putting in huge efforts toprevent the flow of such information, aswell as to punish those making illicit gainsusing these insights. But it is not as easy asit may sound in an era when WhatsApp,Instagram, LinkedIn, Facebook andTelegram have almost become primarymediums of communication.
Given this, Indian market regulatorSebi (the Securities and Exchange Boardof India) is going all out to embrace newage tools and technologies to analyselarge-scale data to prevent marketmanipulation such as insider trading.
Sebi has drawn up a four-year road-map for beefing up its technologicalprowess with a ~500 crore budget. It islooking at building a “data lake”, a vastrepository of both structured andunstructured data, and creating datamodelling and analytical capabilities on
top of it through the use of AI andMachine Learning. A tender to this effectwas launched last November.
Presently, several industries includinge-commerce, telecom, banking, andfinancial services are using data model-ling by leveraging new age tools andtechnologies to gain business insightsand make faster and smarter decisions.
Several global regulators across thebanking and securitiesmarkets have also startedusing data analyticsextensively to stay ahead ofthe curve when it comes tounscrupulous activities.
“By creating a data lakearchitecture, Sebi can useanalytics to identify a patternto detect instances of marketmanipulation. Using a combination ofthese can make the analysis sharper andbring actionable insights,” said KunalPande, partner, KPMG India.
Getting access to the data andacquiring the ability to harness it, headded, will boost Sebi’s confidence.
At present, Sebi’s surveillance
architecture is designed to act on what iscalled “structured data”, that is, the dataobtained from market intermediariessuch as stock exchanges, brokers,depositories and mutual funds.
It also has access to ‘semi-structureddata’ in the form of bank statements andincome tax filings which are alsorelatively easy to process. But where Sebilags is in the handling of “unstructured
data” which could be blogs,videos, and even randomchatter posted online.
“Structured data analysisis not helping much andmanipulators are using allkinds of techniques to evadethem,” said Sebi chairmanAjay Tyagi. “The analysis of
unstructured data and language proce-ssing is a must in addition to analysingchanges in prices and volumes. We intendto acquire new technology to do this.”
Gaining access to information postedon social media is also a key part of thisstrategy. There have been several ordersissued by Sebi which have establishedlinks through matrimonial apps and
Facebook or through using in-housetechnology. However, industry playerssay that in the absence of a data modellingplatform or analytics tools, Sebi’scapabilities could be limited.
At present, a huge amount of stockmarket-related information is shared anddistributed by individuals as well ascompanies on social media anddiscussion forums. Monitoring the flow ofthis information is critical to prevent
insider trading and ensure transparency.The implementation of data lake
capabilities will arm Sebi to scrutinisesuch data. This ability, combined withSebi’s traditional surveillance tools, canact as potent tools to catch violators.
For example, scores of alerts on stocksthat see unusual volumes or pricemovements are generated by stockexchanges daily. While these alerts drawSebi’s attention, it has to establish if any
participant made unlawful gains.By leveraging the “data lake”, Sebi will
be able to comb through social media,news websites, discussion forums, videosand podcasts, to find any potentialpattern. If, for instance, the results showthat a company insider passed keyinformation illegally, Sebi can hold thecompany accountable.
Also, listed companies are supposed todisseminate sensitive and credibleinformation on the stock exchangeplatform in order to ensure all investorsget uniform access to it. However, somecompanies tend to give out informationon Twitter or television news channelswhich could be prohibited under the law.
A famous example was Telsa boss ElonMusk’s tweet in August 2018 that thecompany had secured funding to goprivate. The US market regulator, theSecurities and Exchange Commission,later pulled up Musk for giving infor-mation without authorisation. The casewas settled last year after Musk agreed tofollow Twitter usage guidelines in future.
Industry players say such instancesare possible in India as the use of Twitter ison the rise. Regulators will need to deploytechnology to ensure that informationthat is passed on is not in violation ofdisclosure norms.
The regulator will use data analytics to scrutinise what it finds in its ‘data lakes’and monitor information on social media, writes Samie Modak
Sebi embraces new age tools to prevent market manipulation
A leap into digital life
ALGO RHYTHM
EYE ON THE OPERATING SYSTEM
Source: Statcounter
Recently, as US-China tensions escalated, a tech companygot caught up in the storm. Chinese firm Huawei, theworld’s biggest telecom equipment maker and a leadingsmartphone maker, was barred from using Googleservices. The result: It had to forgo Google Androidoperating system and develop its own.
Pulling the plug on Android is a big blow to Huawei, asAndroid (with 90 per cent market share in India andsimilar share across the globe) is the dominant mobileoperating system and a funnel for all other mobile services(through app store). Though Apple, which locks its users inits own operating system iOS, is the only other dominantforce in OS, a few Indian upstarts are working to end thisduopoly. Indus OS, a start-up from Bangalore, has anIndianised operating system for mobiles, used by phonemakers like Karbonn and Micromax, among others.Another player on the block is Total, which is developed bysocial media company Hike.
Not just with new launches, OS itself is changing theway it is served. Recently, InMobi, a mobile advertisingnetwork, struck a deal with smartphone companies toshow its content on users' lock-screens. In time, this lock-screen will become a place to feature entertainmentcontent, news as well as ads. COMPILED BY: YUVRAJ MALIK
0.4Others
13.2Others
77.8Windows
0.2Windows
0.4Tizen
89.9Android
5.0KaiOS
2.7Apple
0.8Nokia
0.6 Samsung
0.1Chrome
4.3Linux
4.6Apple
MOBILEOPERATINGSYSTEMMARKETSHARE ININDIA (%)
DESKTOPOPERATINGSYSTEMMARKETSHARE ININDIA (%)
A school in Triplicane, Chennai, where the moment pupils arrive, an AI-enabled facial recognition system marks theirarrival and the time
Monitoring the flowof information onsocial media iscritical to preventinsider trading and ensuretransparency
Part of thestate’s digitalinitiativeinvolves steeringthe governmenttowards evolvingpolicies that arebased more ondata andanalytics thanon unprovenassumptions andguesswork
Tamil Nadu is pioneering the use of AI and blockchain to help the state provide better service tocitizens, writes T E Narasimhan
MUMBAI | THURSDAY, 6 FEBRUARY 2020 BRAND WORLD 17. <
Maruti’s EV...A hybrid can be a stepping stone towardselectric mobility till an ecosystem for the lat-ter evolves, he pointed out.
Ayukawa’s counterparts think other-wise. “I don’t think we can ask for morefrom the government. The onus is no longeron the government, it’s on us,” said PawanGoenka, managing director at Mahindra &Mahindra, referring to the policy measurestaken and incentives doled out by the gov-ernment.
Tata Motors, too, has stepped on the gas.The company plans to have half a dozenEVs in its portfolio over the next two to threeyears. It has taken up the mission “to beahead in terms of EV technology”, TataMotors President (electric mobility busi-ness) Shailesh Chandra said.
To avail of the benefits and make EVsfinancially viable, Mahindra has taken astrategic call to focus more on the sharedmobility space. At the 15th edition of theAuto Expo, which got underway at GreaterNoida on Wednesday, EVs took the centrestage at most of the pavilions. Automobilemakers unveiled over a dozen EVs, includ-ing ready-to-launch models and concepts.Even new entrants from China, includingFAW and Great Wall Motors, plan to haveEVs as their centrepiece. At the Auto Expo,the company showcased a concept EV car,electric three-wheelers and a prototypefour-wheeler called Atom.
The government is banking on EVs toreduce the dependency on fossil fuel andcurb emissions in a country which is hometo the world’s most polluted cities. Over the
last couple of years, it has introduced a raftof policy measures and incentives to pro-mote EVs under the FAME scheme. Lastyear, it reduced the goods and services taxon EVs to 5 per cent from 15 per cent andalso announced income-tax benefits for thebuyers. All the sops, however, are directedat the commercial segment.
Elaborating on the reasons for Marutigoing against the trend, C V Raman, exec-utive director (design and engineering) atMaruti, said, “Volumes are not motivatingenough. Price point where Maruti operatesis where the volume is.”
The company strongly believes in bring-ing affordable products and so far, the costdynamics of EVs is not working. If the priceof the internal combustion engine vehicle is~5-6 lakh, the EV version becomes almostdouble of that. The high cost makes it unvi-able, he added.
Jio caseThe final decision on whether to challengethe appellate tribunal order in the SupremeCourt would, however, depend on the lawministry’s response, which is expected intwo weeks, said an official.
An email sent to the Reliance group didnot elicit any response.
The NCLAT in its December 20 orderdismissed the objection raised by the I-Tdepartment over the approval granted toReliance Jio Infocomm’s scheme by theNCLT, Ahmedabad, to reduce debt by trans-ferring the telecom tower and the fibre busi-nesses into two separate entities. The I-Tdepartment had raised concerns over avoid-ance and evasion of taxes.
“Mere fact that a scheme may result inreduction of tax liability does notfurnish a basis for challenging thevalidity of the same… We are notinclined to interfere with thescheme of arrangement asapproved by the tribunal. Both theappeals are dismissed,” the appel-late tribunal had said in the finalorder. The NCLAT had also ques-tioned the basis of the tax depart-ment interference in the scheme ofarrangement when approved by theNCLT. “While sanctioning thescheme, it is observed that the saidsanction shall not defeat the right ofthe income-tax department to takeappropriate recourse for recoveringthe existing or previous liability ofthe transferor company,” it had saidin the order. The appellate tribunalquoted the Supreme Court order inthe Vodafone-Essar case, where itstated, “We are not inclined to enter-tain the special leave petitions… I-Tis entitled to take out appropriateproceedings for recovery of any taxstatutorily due from the transferoror the transferee company or anyother person who is liable for pay-ment of such due,” the NCLAT said.
BS award...The jury consists of the who’s whoof India Inc. Besides running the
diversified group, which ranges fromcement to finance, Birla is known to be anastute industrialist who has taken thegroup to greater heights following a com-bination of organic and inorganic growthstrategy. Jindal bet on the future of theIndian steel industry and made JSW Steelthe number one player with a capacity of18 million tonnes per annum, for whichhe was awarded Business Standard CEO ofthe Year in 2017. Noshir Kaka ledMcKinsey India as its managing directorfrom 2011 to 2016, and founded the firm’sglobal outsourcing and offshoring prac-tice and the business technology officein India. He is now the co-lead ofMcKinsey’s analytics practice globally.Memani joined EY in the mid-1980s androse to become its India chairman and amember of EY’s global executive boardand chairman of EY’s global emergingmarkets committee.
As CEO of KKR India since 2009, Nayarhas been involved in several marquee pri-vate equity deals in the country. Prior toKKR, he headed Citibank India. Kudva,former CEO of Crisil, is on the boards ofseveral marquee Indian companies andIIM Ahmedabad. Shroff, managing part-ner of Mumbai-based Cyril AmarchandMangaldas, has a vantage view of Indiancompanies as a top lawyer. Chandrafounded Bain Capital Private Equity’sIndia office in 2008 and was managingdirector, DSP Merrill Lynch, prior to that.
Services PMI... New work intakes also expanded to thegreatest extent in seven years. Policymakerswould be happy to note that most new workorders came from the domestic market,thereby hinting at resurgence in domesticdemand after a long period of economicdecline over 2018.
As opposed to the latest trend, the PMIsurvey noted that most growth over 2019originated in the international markets. Butin January, services exports suffered adecline, after rising for 11 months on thetrot, the survey showed. A number of pan-ellists mentioned weaker demand fromChina, Europe, and the US.
High growth in new business alsobrought equally high input inflation, withaverage input costs rising at the fastest pacein seven years. Input inflation has solidlyincreased last year.
Survey respondents mostly attributedhigher cost burdens to rising beauty prod-ucts, food, freight, fuel, and maintenance.“Firms mostly absorbed the added cost bur-dens themselves instead of fully passingthese on to their customers. This may trans-late into quicker increases in selling pricesin the months to come, which may curbsales. Firms could also choose to restricthiring in order to protect profit margins,”said Pollyanna De Lima, principal econo-mist at IHS Markit and author of the report.However, average prices charged for serv-ices increased less dramatically. Chargeinflation was the strongest since February2018. December saw the current run of infla-tion to 36 months. This meant that the gapbetween rates of input cost and outputcharge inflation still hasn’t closed.
SOHINI DASMumbai, 5 February
Virat Kohli is theshiniest star on thecelebrity list as he
holds on to the top rank,third year in a row, in thelatest brand valuationstudy by Duff & Phelps.Released on Wednesday,the report shows that Kohlihas increased his brandvalue by 40 per cent to$237.5 million in 2019 andcracked a huge lead withhis closest rival, AkshayKumar. The latter hasclimbed a rung up the lad-der to second spot, dis-placing Deepika Padukone,
Barring this, the top fivelist remains largelyunchanged. In a year whencouple endorsers havebeen popular, the title forthe first such goes toPadukone and RanveerSingh, who share the third spot.The brand value of the top 20celebrities in 2019 is estimatedat $1.1 billion, an increase of 25per cent from last year, it said.
Among the veterans ShahRukh Khan and Salman Khanstayed the course, ranked at 5and 6 respectively while risingstar Alia Bhatt has improvedher ranking one notch to takethe seventh spot. Surprisingly,M S Dhoni (Rank 9), who manyhad predicted would drop offthe charts as his career wounddown has improved his ranking, going up three placesfrom the previous year.
The annual parade ofcelebrity endorsers largelystuck to the script and theincreasing sway of actors andsportspersons on the endorse-ment circuit is evidence thatIndia continues to remain a
star-struck nation. The cumu-lative number of product brandendorsements by top 20celebrities increased from 235in 2016 to 370 in 2019, repre-senting a CAGR of 16.3 per centover the last 4 years. And estab-lished actors and sportspersonscontinued to rule the roost. Butthe emergence of new starssuch as Ayushmann Khurrana(Rank 10), Tiger Shroff (Rank17) and cricketer, Rohit Sharma(Rank 20) indicates that theyear ahead may well see a fewupsets in the league table.
Varun Gupta, managingdirector and leader, Asia Pacific,valuation advisory services,Duff & Phelps, said, “We wit-nessed a shift in focus fromestablished celebrities to newfaces across the advertising andmedia industry over the pastyear. And not just new faces:
2019 also saw the emergence ofnew brands and new platformstargeting and growing theIndian millennial ecosystem.”
The rise of young celebritiesgoes hand in hand with the risein digital media. Market size fordigital as a percentage of filmsincreased from 47 per cent inFY16 to 95 per cent in FY19.“Given this unprecedentedgrowth rate, digital is expectedto soon overtake films to be thethird largest segment in themedia and entertainmentspace. Resultantly, celebrityendorsements have witnessed agreater push towards use of dig-ital advertising as a means offocused communication,”Vibhor Nayar, CFA, vice-presi-dent, valuation services, Duff &Phelps, said.
As brands have leaned heav-ily into digital media to pro-
mote their labels, thenature of advertising andendorsements has trans-formed rapidly. Even whenusing familiar faces thathave established theirmark over the mass mar-ket, advertisers are devis-ing new ways to use theirstar appeal — at times bybeing a part of their Twittertimelines or securing anendorsement on theirInstagram stories.
“In real terms, the def-inition of a celebrity haschanged. Today, anyonewith a substantial socialmedia following can bedubbed a celebrity — atleast for endorsement pur-poses. What businessesare looking for are influ-encers and having a 5-mil-lion strong Twitter follow-ing surely makes you one,”said Sandeep Goyal, chiefmentor, Indian Institute of
Human Brands.Celebrity endorsers have
also become more consciousof the brands they back, per-haps on account of the threatof greater scrutiny from regu-latory authorities or becausesocial media has made themmore vulnerable to criticismand censure. This is reflectedin the kind of brands celebri-ties choose to lend their namesto; the report found that thehealth and wellness brands areseeing a steady spread in thepie of categories that useendorsers. At the same time,“With celebrities endorsingand investing in the brandsthat correlate with their socialimage, advertising has evolvedin terms of platform, contentand engagement of thecelebrity with the brand,” thereport said.
Virat stays on top, Akshaymoves up a notchKohli outshines all with 40% jump in brand value, holds the top spotand earns 50% more than Kumar at No. 2: Duff & Phelps
Celebrity Rank Brand value
2019 2018 (2019), $mn
Virat Kohli 1 1 237.5
Akshay Kumar 2 3 104.5
Deepika Padukone 3 2 93.5
Ranveer Singh 3 4 93.5
Shah Rukh Khan 5 5 66.1
Source: Duff & Phelps
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18 AUTO EXPO 2020 MUMBAI | THURSDAY, 6 FEBRUARY 2020
> .
ARINDAM MAJUMDER & SHALLY SETH MOHILE
New Delhi/Mumbai, 5 February
As China struggles to contain the Wuhan-centred coronavirusoutbreak, the resulting shutdown of factories and logisticshubs in the country is slowly constricting the business ofChinese auto majors, which have recently entered India.
The consequent pressure on supply chain, in which mostChinese companies depend on the Indian market, is likely tolead to delayed deliveries for some and postpone launchesfor others. “It’s an unfortunate development. Since we aredependent on China for supply of major components, wewill be impacted for a while. So, deliveries for our MG Hectorin February will be delayed. We have relayed that to our cus-tomers,” Gaurav Gupta, chief commercial officer at MGMotors told Business Standard.
The firm — a unit of SAIC Motor Corp — had launched themid-sized SUV, Hector, in June. Soon, it overtook most com-petitors with retail sales of more than 3,000 units per month.
The government of China-owned Haima Automobile,which has planned an India launch of its first electric vehicleby 2021, said it is gauging the impact of the viral outbreak onits strategic plan. “Since we will be importing a completely-knocked-down version of the vehicle, we may expect somedisruption due to closure of many supply chain points.
However, as of now, there is nochange of plan,” said a senior execu-tive of Bird Electric with which thefirm has partnered for its India foray.
The auto maker, on Wednesday,showcased two of its globally mostsuccessful passenger vehicles – 7X and8S – at the Auto Expo 2020. It is yet tofirm up its investment plan for India.
The outbreak of the deadly diseaseis also likely to hit plans of Great Wall
Motors, which had entailed an investment of $ 1 billion forthe Indian market, said Kaushik Ganguly, director strategyand planning of the company.
Great Wall plans to enter the Indian market by bringingpremium SUVs under the Haval brand in the next calendaryear. The company announced its India entry plans with theacquisition of General Motors’ Talegaon plant last month. Itis presently in talks with various suppliers in China andIndia to firm up a sourcing strategy.
After years of giving free passes to counterparts fromKorea, Japan, US in the Indian auto market, Chineseautomakers had planned a major push to grab the fifthlargest car market in the world. SAIC Motor Corp, Great Walland FAW have unveiled cars packed with technologies,including artificial intelligence and Internet of Things.
According to the company’s president, Rajeeb Chaba, ithas planned an investment of ~5,000 crore in India till 2021.
GWM unveiled the Haval brand of SUVs and vehicle con-cept 2025 to mark its presence in the Indian market. Thecompany unveiled four SUVs at the event which includesHaval H9, Haval F7X, Haval F7 and Haval F5.
However, it’s not only Chinese firms whose operationshave been hit due to outbreak of the disease. Global carmak-ers with a sourcing network that expands across various con-tinents, too, are worried. “Cornavirus will have an impact oncommercial production as everything in China is closed. It’stoo early to predict the impact it will have on our global sup-ply chain,” said Matthias Leuhrs, head region, overseas, atMercedes Benz. Mercedes sold a record 690,000 cars inChina last year, a 5 per cent growth year-on-year, he said.
Hyundai has suspended production in South Korea — itsbiggest manufacturing base. SS Kim, managing director ofHyundai Motor India told Business Standard that his com-pany has been in talks with suppliers in the global sourcingnetwork to take stock of the situation.
Virus scare may hitChina carmakers’ India investments
MG Motor India on Wednesday unveiled its futuristic concept car Marvel X — theworld's first mass-production vehicle to achieve Level-3 Intelligent Driving
Tata Motors showcased electric concept of its Sierra SUV. The homegrown automakeralso displayed the HBX and the Hexa Safari edition PHOTOS: SANJAY K SHARMA
You have exited thediesel segment, whileothers are going aheadwith their BS-VI dieselmodel launch plans. Areyou re-thinking dieselstrategy?
The diesel models arenot affordable any more.Other players havelaunched various models at a com-petitive price. We have to see theresponse. We will take a call onwhether we develop it further.
Hyundai is projecting itself as thesole manufacturer of diesel cars.
Aren’t you giving away a big chunk of themarket?
We will try to capturethe other portion. We willtake a call (on bringingdiesel models) after sixmonths. It has to be along-term strategy. Maybe some regulations
change after two years. We have todecide the powertrain options in aphased manner, systematically.
When do we see the conceptFuturo-e that you unveiled today(Wednesday) defining your future
line-up? It will take time. It is a concept
design that will underpin variousmodels of the future and can be usedfor hybrid, electric or internal com-
bustion engine (ICE).
When do you see the tide turningfor the auto industry?
The months of February and
March are going to be very toughdue to the transition from BS-IV toBS-VI. The grade VI diesel is still notavailable. We will have to see howthings pan out from April onwards.Typically, demand picks up duringthe festive season. We hope to seethe trend even this year.
How do you see the partnershipwith Toyota panning out?
Now, we are supplying one mod-el — the Baleno. We will add moremodels. We will start developingmodels for markets outside India.They have a strong knowledge forhybrids, so we will collaborate andproduce more models that can besold by both the companies.
‘Will take a call on diesel after six months’
CONCEPT OF FUTURE
1. Hyundai Le Fil Rouge (HDC- 1) concept car
2. KIA Motors’ concept Sonet.Kia Sonet will be launchedin the Indian market in thesecond half of 2020
3. Mahindra Funster EVconcept. With a top speed of
200 kmph, it clocks 0 to100 kmph in 5 seconds4. PPeerrssoonnaall mmoobbiilliittyy iiss
tthhee ffuuttuurree:: AnshumanSinghania (R), deputyMD of JK Tyre, andAnkur Bhatia, MD ofBird Electric, onhoverboard scooters
1
3
2
4
PHOTOS: SANJAY K SHARMA
PHOTO
: SA
NJA
Y K
SHAR
MA
PHOTO
: PT
IPH
OTO
: PT
I
Maruti Suzuki India (MSI), which sells every second car in the market, took a call toexit the diesel segment last year. The carmaker has instead chosen to bet big oncompressed natural gas (CNG). Over the past decade, the maker of Brezza andBaleno has sold close to 520,000 CNG models. In an interview, KENICHI AYUKAWA,managing director (MD) and chief executive officer (CEO) of MSI, tells SHALLY SETHMOHILE and ARINDAM MAJUMDER that the company will take a call on dieselvehicles after seeing the response of the recently launched models by rivals.Edited excerpts:
KENICHI AYUKAWAmanaging director,Maruti Suzuki India
ARINDAM MAJUDMER
& SHALLY SETH MOHILE
Greater Noida, 5 February
A t the 15th edition of theAutoExpo that kick-start-ed on Wednesday, the
mood was sombre and the decibellevels of new launches muted,compared to the previous editions.They reflected the prolonged slow-down that has gripped India’s auto-mobile market for the past one anda half years.
The absence of various manu-facturers from the show was com-pensated by the Chinese automak-ers, including MG Motor, GreatWall Motors, and FAW GroupCorporation — they unveiled theirfuture line-up for the Indian Smarket.
A banner outside the venue atGreater Noida’s Global Expo Martproudly proclaimed India as the
largest two-wheeler manufactur-er in the world.
However, none of the country’smajor two-wheeler producers par-ticipated in what is Asia’s biggestautomobile exhibition.
Such contradictions hungheavy on the auto show as thepall of a prolonged slowdown andfear of a viral outbreak loomedlarge on the world’s second-largest auto show.
“Start of the decade has beenmuted due to high transition costand low demand. However, I amconvinced this decade will take usto new heights,” Kenichi Ayukawa,managing director and chief exec-utive officer of India’s largest car-maker Maruti Suzuki, summed upthe mood. Maruti had the day’sfirst unveiling.
The number of participatingautomakers has fallen from 50 in
2018 to 30 this year. The count ofexhibitors, including technologycompanies, has come down from119 to 112. Showstopper luxury andsupercar brands, including Toyota,Jeep, Lamborghini, Porsche, andVolvo, were missing.
Commercial vehicle makersalso gave the show a miss — a pro-longed economic slowdown hasdented their fortunes and dimmedchances of any recovery.
Globally, auto shows are losingsheen as high cost of participationdeters automakers from big par-ticipation; they instead have theirown periodic launches. However,Ayukawa of Maruti said that acountry like India, where car own-ership is still low, such shows helprevive the market.
The theme for this year’s showwas electric mobility as mostlaunches were geared towards that,led by Chinese auto majors.
After the successful debut byChina-owned British automakerMG Motor’s Hector sport utilityvehicle (SUV), China’s largest SUVand pick-up maker Great WallMotors showcased its Havalcrossover. Its compatriots FirstAutomobile Works or Haima,Changan, and BYD will also dis-play their line-ups.
Even as the displays by Chinesecompanies took centre stage,home-grown automakers TataMotors and Mahindra & Mahindra(M&M) turned up the decibel levelsby showcasing a raft of new mod-els, primarily their electric vehicle(EV) portfolio. Tata Motors show-cased the Sierra EV Concept, whileM&M launched the eKUV100.
“At this Auto Expo, we areshowing products which showcaseour responsibility and emphasison sustainability and cleanliness,”said Group Chairman N
Chandrasekaran, adding four moreEVs will be launched in two years.
“The displays by the new play-ers Kia, MG, and Great Wall werequite striking,” said Jnaneswar Sen,partner at consulting firm, MavenPartners.
The real test will be after theshow opens to the general public.According to Sen, people in Indiastill aspire to own a car, and a showlike this adds to the excitement.
Notwithstanding India’s slug-gishness to push battery-poweredtransport and dearth of infra-structure like charging stations,the EV rush is still charged up. Thegovernment, however, is lookingto boost adoption by taxing EVs ata lower rate. It also launched thesecond phase of a scheme toincrease the share of EVs in sharedmobility to curb pollution in anation that has cities with theworld’s dirtiest air.
Number of launches falls; luxury and supercar brands give the largest auto show of the country a miss
Slowdown plays spoilsport at ExpoTHE NEWLAUNCHES TATA MOTORSSierra EV, HexaSafari edition,
Harrier SUV
MAHINDRA &MAHINDRA
eKUV, Atom EV
MARUTI SUZUKI Electric vehicle
concept Future-e
HYUNDAITucson SUV
Great WallMotors
Haval brand
MG Motors MarvelX SUV
“FEBRUARYAND MARCH ARE GOINGTO BE VERYTOUGH DUE TO THETRANSITION FROM BS-IV TO BS-VI”
Delivery andlaunches may bedelayed as mostfirms depend on China forsourcingmaterials
WORLD CAR AWARDS MAKE A PIT STOP AT THE EXPO Hyundai Sonata, Land Rover Range Rover Evoque and Mercedes-Benz CLA are among the top 10 cars competing this year for thecoveted World Car Awards.The World Car Finals countdown officiallybegan on Wednesday at the Auto Expo in Greater Noida with theannouncement of the top 10 and top five finalists for five World CarAwards categories. The 2020 World Car of the Year winner will beselected from 10 finalists chosen from an initial list of 29contenders. Kia Soul EV, Kia Telluride, Mazda3, Mazda CX-30,Mercedes-Benz GLB, Volkswagen Golf and Volkswagen T-Cross arethe other finalists for World Car of the Year. “The Indian car marketis already the fourth largest in the world, and projected to becomethird largest by 2022. India is therefore a crucial contributor to ourannual process...,” Siddharth Vinayak Patankar, juror and directorof the World Car Awards programme said. PTI
Jio showcases connected vehiclesolutions at the auto showTelecom major Reliance Jio is showcasing its connected vehicle solutions that can help users get insights into vehicleperformance and other metrics at the Auto Expo. The solutionsinclude components like hardware, connectivity and platform,which will allow scaling based on user-requirement as well assecurity of the data involved. The telecom major is said to be indiscussions with vehicle manufacturers and fleet managementcompanies for installation of these solutions. Reliance Jio,however, declined to comment. The platform allows users inmultiple areas like route management, vehicle telematics anddiagnostics. PTI
EV demand maynot grow in next2 fiscals: GoenkaGrowth in electric vehicles(EV) demand is unlikely toreach a significant level formajor players at least in thenext two fiscal years, and inpersonal electric mobilitysegment it may take evenlonger, M&M ManagingDirector Pawan Goenka saidon Wednesday. PTI
Tata Motors plansexclusive outletsfor EV portfolio Tata Motors is activelylooking to set up exclusiveoutlets for its electric vehicle(EV) portfolio but has not yettaken a final call over theissue, a top company official said on Wednesday.The homegrown auto major recently ventured intothe personal electric mobility space with thelaunch of the electric versionof its most-selling compactSedan Nexon recently.Besides, the carmaker alsoplans to roll out four more electric models in the nexttwo years. PTI
ON THE SIDELINES
20 MUMBAI | THURSDAY, 6 FEBRUARY 2020 1>
A Parliamentary panel hasrecommended that not onlyclose relatives but any womanwho is “willing” should beallowed to act as a surrogate.
The 15 major changes sug-gested by the 23-memberselect committee of RajyaSabha to the Surrogacy(Regulation) Bill, 2019, alsoinclude deleting the definitionof ‘infertility’ as the inability toconceive after five years ofunprotected intercourse onthe ground that it was too longa period for a couple to wait fora child. The committee hasalso advocated that ‘singleIndian woman’ like a widowor a divorcee in the age groupof 35 to 45 years may also beallowed to avail surrogacy.
Noting that restricting thesurrogate mother to be a ‘closerelative’ potentially limits theavailability, affecting the gen-uinely needy persons, thepanel has recommendedremoval of this requirementfrom the Bill. PTI
IT major Wipro onWednesday moved out of thelist of top 20 most valuedcompanies by market capi-talisation, giving way toAvenue Supermarts, whichruns the D-Mart supermar-kets chain.
At close of trade, the mar-ket capitalisation (m-cap) ofAvenue was at ~1.41 trillion,which was ~2,777 crore morethan that of Wipro’s ~1.38 tril-lion valuation on the BSE.
Reliance Industries is thecountry’s most valued firmwith a m-cap of ~9.17 trillion,followed by TCS at ~8.04 tril-lion. The m-cap figures offirms change daily withstock price movement. PTI
PRESS TRUST OF INDIA
Washington, 5 February
In a dramatic gesture, Nancy Pelosipublicly tore up her copy of DonaldTrump’s annual State of the Union
address, signalling the worsening rela-tionship between the House Speaker andthe US President.
Pelosi has been one of Trump’s fiercestcritics and the top Democrat was the onewho first launched a formal impeachmentprocess in the House of Representativesagainst the president last year. Trump hasfrequently taunted the 79-year-old law-maker as “Crazy Nancy”.
The mutual snubbing began themoment Trump, seeking re-election,walked into the House chamber onTuesday night for his third State of theUnion address, in which he touted hisadministration’s achievements duringthe past three years.
It was the first time the two had comeface-to-face since she stormed out of aWhite House meeting four months ago.
On Tuesday night, the sour dynamicwas on display to all from the start, TheNew York Times noted.
The tensions over impeachmentappeared to surface early on, however,as Pelosi refused to introduce Trump bysaying it was her “distinct honour” and“high privilege” to do so, as is tradition.Instead, she simply introduced him asthe President of the United States, FoxNews reported.
When the 73-year-old Republican pres-ident stepped up to the rostrum in theHouse of Representatives and handed herhis speech, Pelosi rose and extended herhand to shake his.
Trump turned his back, and Pelosiquickly withdrew her hand.
The interaction between Trump andPelosi was one of the most anticipated
moments of the president’s appearanceat the Capitol before the Senate is expect-ed to acquit him on Wednesday in hisimpeachment trial, The Times noted.
When the president accused theDemocrats of planning to force Americantaxpayers to provide unlimited free healthcare to undocumented immigrants, Pelosiwas observed twice mouthing: “Not true.”Pelosi repeatedly shook her head duringTrump's 78-minute speech which also sawRepublican lawmakers chanting, “Fourmore years!” The veteran Democrat, thefirst woman in US history to hold the postof the Speaker, stuck to it until the very endof Trump's address and then she stood up,picked up her copy of his speech and toreit neatly in half.
“It was a dramatic gesture, caught oncamera, that encapsulated a tumultuousyear in the relationship between the speak-er and the president,” The WashingtonPost commented.
India improved its score in the latestedition oftheInternational IP Index, while its position dropped from 36 in 2019 to 40 in 2020. India scored 38.46% in2020, as against36.04% in lastyear’s edition. Thisyear’s annual IP Index, broughtoutbythe USChamberofCommerce Global Innovation PolicyCenter (GIPC),included 53 countries, against50 in 2019. The reportnoted that“to continue this upward trajectory, muchworkremains to be done to introduce transformativechanges to India’s overall IP frameworkand takeserious steps to consistentlyimplementstrong IPstandards”. Commenting on India’s performance,PatrickKilbride, senior vice-presidentofGIPC, said: “Asthe USand India lookto conclude a trade deal in thecoming weeks, we hope itwill pave the wayforinnovation-focused partnerships.”
| Barriers to licensing and technologytransfer, including strict registrationrequirements
| Limited framework for protection ofbiopharmaceutical IP rights
| Patentability requirements outsideinternational standards
| No patent term restoration for
biopharmaceuticals
| Lengthy pre-grant oppositionproceedings
| Previously used compulsory licensingfor commercial and non-emergencysituations
| Limited participation in internationaltreaties
Sources: International IP Index, Art of the Possible CCoommppiilleedd bbyy SSuuddiippttoo DDeeyy
State of the Union tensionA bitter feud between US President Donald Trump and Democrat Nancy Pelosi boiled over at his State of the Union speech, with Trump denying her a handshake and Pelosi ripping apart a copy of his remarks behind his back PHOTOS: AGENCIES
GIPC’S INTERNATIONALIP INDEXINDIA IMPROVES SCORE, RANKS 40thAMONG 53 COUNTRIES
INDIA RANK
36/50 countries in2019 (7thedition)
40/53 in 2020 (8th edition)
6.71% India’s relative score increased India’s absolute score increased from36.04% (16.22 out of 45) in the seventhedition of the Index to 38.46% (19.23 out of 50) in the latest edition
WHERE INDIA SCORED| Strong efforts to combat
copyright piracy throughissuing of “dynamic”injunction orders
| Setting case law on onlinetrademark infringement and damages
| Generous R&D-based and IP-based incentives
| Targeted administrativeincentives for the creation and use of IP assets for SMEs
| Strong awareness-raisingefforts on negative impact ofpiracy and counterfeiting
WHERE INDIA LAGS
WAR AND TEAR
Wipro outof top 20 onm-cap basis
RS committeesays surrogatemother neednotbe relative
DMart set to raise~4,000 cr via QIPSAMIE MODAK
Mumbai, 5 February
Avenue Supermarts haslaunched its qualified insti-tutional placement (QIP) pro-gramme to raise at least~4,000 crore.
The country’s most valu-able listed retail chain willissue 20 million fresh sharesat a base price of ~1,999.Avenue Supermarts’ boardwill meet on February 10 toapprove the QIP price.
Shares of the companyrose 4.35 per cent to close at~2,249 on Wednesday. Thecompany is currently valuedat ~1.41 trillion and is amongtop 20 most valued firms inthe country.
The QIP will help promot-ers of the company, led byRadhakishan Damani, paretheir holdings, which current-ly stands at 79.73 per cent.
Holding in the DMartretail chain operator has toreduce to below 75 per centby March 20, to meet the min-imum public shareholdingrequirement.
The QIP could lead to dilu-tion in promoters’ stakes by2.8 per cent. The promoterscould be required to diluteanother 1.9 per cent, which
bankers said could be donethrough the offer for sale(OFS) route.
For the quarter endedDecember 2019, AvenueSupermarts had reported a 53per cent year-on-year jumpin net profit to ~394 crore, sur-passing Street estimates.
Its net sales for the periodhad increased 24 per cent to~6,752 crore despite weak con-sumer sentiment.
ASHLEY COUTINHO
Mumbai, 5 February
The Securites and ExchangeBoard of India (Sebi) onWednesday set rules under
which it could hold back approvals forproposed share sales by companiesthat are under investigation for possi-ble violations.
The capital markets regulator hassaid that for current investigations,“observations” on the draft offer maybe kept in abeyance for 30 days fromfiling of the draft offer. If Sebi is unableto conclude its investigation, the doc-ument may be kept in abeyance for afurther 30 days. If the delay is onaccount of conduct of the entitiesunder investigation, the documentmay be kept in abeyance till such timethe enquiry is concluded.
Issuance of observations regardingthe offer documents by Sebi is akin togetting the green light to conduct theshare sale. The rules apply to issuersor promoters, directors, and groupcompanies against whom an investi-gation, enquiry, adjudication, prose-cution, disgorgement, recovery or oth-
er regulatory action is pending, theSebi chairman said in a general order.
For show cause notices pertainingto fraudulent and unfair trading, theperiod of abeyance couldbe extended up to 90 days.If the regulator is unable toconclude its proceedingsbecause of reasons beyondits control or due to con-duct of parties other thanthe entities, this periodcould be stretched byanother 45 days.
If the show cause notice has beenissued to the entities in an adjudicationproceeding, the regulator may processthe draft offer document and issue
observations after advising the entitiesto make necessary disclosures andstatements in the offer document.Under the erstwhile regulations, the
period was 90 days.Where the regulator has
initiated proceedings forrecovery against the enti-ties, or when an order fordisgorgement or monetarypenalty passed against theentities has not been com-plied with, observationscan be kept in abeyance till
the conclusion of such proceedings. Incases where the issuer has beenrestrained by a court or tribunal frommaking an issue of securities, the
observation will be subject to the ordersof such court or tribunal.
The issuance of observations on thedraft offer document, when an inves-tigation or enquiry is pending, doesnot indicate that the party has beenexonerated in such proceedings, theregulator clarified.
There have been instances when ashare sale has been kept in abeyanceowing to past violations. Share sales ofHDFC Asset Management and RBLBank were kept in abeyance becauseof this reason.
Experts said the new set of guide-lines will provide clarity to the issuersand investment bankers, and help timetheir listings accordingly.
Sebi tightens DRHP framework
MUMBAI | THURSDAY, 6 FEBRUARY 2020 InvestorWWW.SMARTINVESTOR.IN FOR INFORMED DECISION MAKING <
The Smart The Bajaj Electricals stock gained 3 per cent onWednesday. Besides bullish market sentiment,robust show by the consumer products businessin Q3 and reduction in debt led to the gains. Itsplan to cut debt further should support near-term profitability and cash flows
QUICK TAKE: BETTER OUTLOOK FOR BAJAJ ELECTRICALS “Tesla now valued at $160 bn. In a month, Tesla has added market cap that is more than the total market cap of India’s auto sector, including 2-wheelers, private and commercial vehicles''SUNIL SINGHANIA, Founder, Abbakus Asset Manager
Companies underinvestigation forpossible violationscould face delays
THE COMPASS
Falling raw material costs drive Apollo Tyres’ marginsWeak demand,high competitioncould weigh onstock in near term
RAM PRASAD SAHU
Apollo Tyres recorded a better-than-expected performance in the Decemberquarter (Q3), notwithstanding pressureon the demand front. The gains camein largely on the operational front, withmargins being aided by a fall in rawmaterial costs.
The company posted an operatingprofit margin of 12.1 per cent, whichwas 80-120 basis points (bps) higherthan what the Street had estimated. Itindicated that raw material costs fell3.5 per cent in the quarter — a trendexpected to continue this quarter.
While natural rubber prices havebeen steady, a fall in crude oil pricesshould help bring down raw materialcosts of derivatives such as carbonblack and synthetic rubber. Rubber
accounts for 40 per cent of expenses.Price decline in the raw material
basket in the current quarter is expect-ed to be 1.5-2.0 per cent. With volumegrowth remaining a challenge, thiscomes as a shot in the arm.
In Q3, volumes in the domestic busi-ness — which account for over 60 percent of revenues — fell 13 per cent. Thisled to a decline in consolidated rev-enues to the tune of 7 per cent.
While volumes in the replacementsegment continue to be strong — espe-cially in the passenger vehicles busi-ness — it is supplies to auto makerswhich has been weak. Volumes in thetruck and passenger vehicle businesssegments continue to be weak with adecline of 35-50 per cent. Revenue con-tribution from supplies to auto makerswhich is normally around 30 per cent
has now dipped to 20 per cent.Demand in Europe has also been
weak impacting its revenues from thatgeography. The company however hasbeen able to grow at a higher pace thanthe market gaining market share.Improving product mix with a highershare of ultra-high performance tyresshould aid in revenue and margingrowth. Margins in the business shouldalso improve as the Hungary plantscales up over the next couple of years.Near term volume gains could alsocome from lower imports intoEuropean market from China due toCoronavirus.
While the stock gained over 4 percent in trade post the results, the weak-ness in demand and higher competi-tion are expected to weigh on stockprices in the near term.
Lack of US drug approvals ails Cipla’s Q3 performanceNiche productlaunches key toboost sales inNorth America
UJJVAL JAUHARI
Cipla’s lower-than-expectedperformance for the Decemberquarter (third quarter, or Q3)disappointed investors. Itsstock, which has already lostmore than 7 per cent sincemid-January, fell another 0.4per cent on Wednesday, evenas the broader markets endedon a bullish note.
While the Indian market,which contributes about 40per cent to Cipla’s overall rev-enue, is now seeing nor-malised growth with reboundin trade generics segment fol-lowing a restructuring of thebusiness, it reported flat num-bers on a sequential basis.
On a year-on-year (YoY)basis, however, domestic salesgrew 13 per cent, led by 14 percent growth in prescriptionbusiness, and trade genericsgrew by 7 per cent.
North American sales(slightly more than a fifth of
revenue), though up 14 percent YoY, were still down by aper cent sequentially. Whilethe absence of stimulus fromsales of thyroid drug Sensipargenerics on exclusivity basishas impacted US growth, ana-lysts also point to the limitednumber of new productlaunches which are impactingthe revenue of NorthAmerican operations.
Overall, Cipla’s revenue at~4,234 crore was marginallylower on a sequential basisand up a mere 8.4 per centYoY. It fell short of theBloomberg consensus esti-mate of ~4,366 crore.
The company made someadjustments for overheadcharges on finished goodsinventory in Q3. However,even adjusted for the same, itsmargins stood at 18.5 per cent— lower than analysts’ expec-tations. Analysts at MotilalOswal Securities, for instance,had pegged margins at 19.2per cent. Net profit at ~351crore, too, was short of theestimated ~431 crore.
Moving forward, whileCipla’s India business isexpected to see better trac-tion, other important geogra-phies, such as South Africa,are also expected to sustain
their good show. The SouthAfrica private business grewby 20 per cent YoY in constantcurrency terms in Q3.
In the near-term, if Cipla’soffering to cure the coron-avirus is accepted by the WorldHealth Organization and oth-ers, it could also provide freshtriggers. But, for the US busi-ness, the launch of significant-ly larger products is crucial.The company expects the USbase business to maintainquarterly revenue run-rate of$120-$130 million.
Hence, niche productlaunches would be required toboost sales. While Ciplaexpects limited competitionlaunches to start by the end of2019-20, the Street will bewatchful of its progress. On thisfront, the progress on thelaunch of respiratory productslike Albuterol and Advairgenerics, and pain relief drugTramadol generics, hold keyfor the company’s US business.
Two barredfor insidertrading in IVL
The Securities and ExchangeBoard of India (Sebi) onWednesday barredIndiabulls Ventures’ (IVL)non-executive director PiaJohnson and her husbandMehul Johnson from access-ing the capital markets for aperiod of one year.
Further, the two individ-uals have also been barredfrom dealing in shares of IVLfor a period of three years.
In addition, the marketsregulator said that the ~87lakh it had impounded,belonging to the two individ-uals, stands disgorged andwould be remitted to theInvestor Protection andEducation Fund.
The case date backs to2017, when Pia Johnson andMehul Johnson had alleged-ly traded in the shares ofIndiabulls Ventures whilebeing privy to inside infor-mation. SAMIE MODAK
MCA inspection may spoil the show for ZeeRAM PRASAD SAHU
Mumbai, 5 February
The Zee Entertainment stockhas shed close to 15 per centfrom its highs over the last twotrading sessions.
The sharp correction fol-lowed reports that the Ministryof Corporate Affairs (MCA) hadordered an inspection of thefirm’s books on allegations ofcorporate governance lapsesand also because of the resig-nations of some of its indepen-dent directors.
In a clarification to theexchanges, Zee acknowledgedthat it had received a letter fromthe MCA, seeking informationand inspection. The company,however, clarified that the samewas available in public domain,and also that it was collatingthe information and would co-
operate with the inspection. Further, it indicated that the
link between the enquiry andresignations of independentdirectors a few months ago wastenuous. Independent direc-tors Subodh Kumar andNeharika Vohra had quit the
Zee board last year, citing mul-tiple issues including filmadvances to the tune of over~2,000 crore and receivablesfrom related parties.
After the December quarterresults, the firm indicated thatreceivables were at ~2,330 crore.
Within this, receivablesfrom related parties DishTVand SitiCable stood at ~750crore, of which ~350 crore wasoverdue. The two account for27 per cent of domestic sub-scription revenues.
Zee Entertainment indicat-
ed that it would be able torecover its dues from Siti Cableover the next year, and fromDishTV over the next 24 months.
A head of research at adomestic brokerage indicatedthat the correction over the lastcouple of trading sessions hadfactored in the informationrelated to the MCA.
Analysts are advisinginvestors to avoid the stock asthere is no clarity on how longthe enquiry of the MCA willlast, as well as on its findings.
Worries pertaining to achange in management con-trol, high investments in a weakdemand environment, moneti-sation of content, as well as reg-ulatory changes, are factorsexpected to keep the Zee stockunder pressure over the near term.
Independent directors Neharika Vohra and Subodh Kumar hadquit the Zee board last year, citing multiple issues PHOTO: COMPANY
ZEE ENTERTAINMENT BSE price in ~
Source: Exchange
For show causenotices pertainingto fraudulent andunfair trading, theperiod of abeyancecould be extendedup to 90 days
AVENUE SUPERMARTSBSE Price in ~
2,300
2,100
1,900
1,700Jan 1,’20 Feb 5,’20
1,827.00
2,249.30
| For firms underinvestigation,observations on draftoffer may be kept inabeyance for 30 daysfrom filing of papers
| Could be extended byfurther 30 days ifregulator is unable toconclude its probe
| Issuance ofobservations by Sebiis akin to gettinggreen light to
conduct IPO
| IPOs of HDFC AssetManagement, RBLBank were kept inabeyance because of past violations
| Experts say new set of guidelines willprovide clarity toissuers andinvestment bankers,and help time their listingsaccordingly
UNDER SCANNER
Financial sector: Subsidiaries in focusSHREEPAD S AUTE
Mumbai, 5 February
Not long ago, even as the corebusiness of financial con-glomerates such as Housing
Development Finance Corporation(HDFC), State Bank of India (SBI), andICICI Bank was doing well, the Streethad turned increasingly bullish ontheir subsidiaries, and pondering howtheir contribution would boost theoverall valuation of their parents.
While some Budget proposals mayhave cast a shadow of scepticism interms of the future performance ofsubsidiaries/other businesses andtheir ability to contribute to their par-ent’s stock valuation, the jury is out onthis. Among key announcements ofthe Budget is removal of tax exemp-tions, including on home loans andinsurance premiums, under the pro-posed new income-tax regime.
Given the potential impact forinsurance companies, some analystshave started reducing their targetprices for listed life insurers. This, inturn, could have implications on stockvaluation of finance majors, as roughly14-16 per cent of their valuation, basedon sum of the parts, is contributed bytheir insurance businesses (see table),according to brokerage estimates.
Having said that, investors neednot be alarmed as clarity is required
on the quantum of long-term impacton insurers. Besides, these playerswould also have some time to reworktheir business strategies.
Nitin Aggarwal, analyst at MotilalOswal Securities, for instance, esti-mates a marginal impact on valuationsof the insurers’ parent companies dueto the new tax regime. “If these lenders(parent companies) continue to reportstrong operating performance, theirvaluation would get good support,
even if their insurance business seessome disturbances,” adds Aggarwal.
Wide distribution franchise, scopefor efficiency enhancement, and likelyimprovement in overall credit costsare some other factors suggesting thatthe core business performance ofthese financiers would remain strong.In fact, after the December 2019 quar-ter results, the Street was looking atcorporate banks like SBI positively,mainly due to asset quality improve-
ment. Some tweaks though may benecessary on growth expectations.Under the proposed new tax regime,exemptions for interest paid on homeloans has also been excluded, whichcould hurt the retail loan book growthof lenders.
According to Kajal Gandhi, analystat ICICI Securities, “Though it is diffi-cult to assess the impact on home buy-ing due to removal of 80C tax exemp-tion, it disincentivises home buying
by borrowing funds, which was lucra-tive earlier.”
This becomes a concern, givenmany banks have already started scal-ing up their retail loan portfolio. SinceMarch 2019, shares of SBI and ICICIBank’s retail loans in their overall loanbook has gone up by 300-400 basispoints to 61-63 per cent as of December2019. Retail home loans account for 76per cent of HDFC’s loan book. Therecould be an impact on their feeincome, too, as these lenders also earnsome income from cross-selling insur-ance and other investment products,say analysts. Gandhi, thus, believesthat strong core performance of thesefinanciers would be key for their valu-ation, even if the contribution fromother businesses fall marginally.
Positively, analysts also say that lifeinsurance is now being consideredmore as a protection product ratherthan a savings option and believe thatlife insurance penetration wouldimprove further. In that case, if insur-ers are able to drive their high-marginprotection offerings, it could help thegrowth top line as well as profits.
Likewise, individuals are also focus-ing on securing products, such ashealth insurance, to protect their fam-ilies from adverse medical situations,rather than as a tool to save taxes.
More on business-standard.com
SAMIE MODAK
Mumbai, 5 February
Gravity-defying rally inshares of Indian RailwayCatering and TourismCorporation (IRCTC) hashelped the railway ticketingcompany climb the leaguetable for the most-valuedpublic sector undertaking(PSU).
In the past 10 trading ses-sions, shares of the state-owned company have shotup more than 50 per cent.Currently, IRCTC ranks 23 interms of the most-valuedPSUs, with a market capital-isation (m-cap) of more than~24,000 crore. At the time ofits initial public offering(IPO) in October 2019, it did-n’t even feature in the top 50.
Currently, it is valuedmore than other marqueePSUs, such as The New IndiaAssurance Company, BharatElectronics, Oil India, andBharat Heavy Electricals.
In the past fortnight,IRCTC has seen its m-capswell by over ~10,000 crore— more than the combinedmarket value of the bottom20 listed PSUs.
On Wednesday, shares ofIRCTC closed at ~1,509, up6.8 per cent over the previ-ous day’s close and 52 percent over its January 23 closeof ~995.
The rally would be musicto the ears of the govern-ment, which holds 87.4 percent stake in the company.
IRCTC made its stockmarket debut in October lastyear. Shares of the companywere priced at ~320 in theIPO. The stock had soared2.3x on listing day itself,breaking the record for thehighest gain on debut.
The latest jump in sharesof IRCTC comes a weekahead of its December quar-ter result announcement.
Market players sayinvestors need to be cau-tious, as the company’s val-uations have reached loftylevels. At the current marketrate, the stock is valued atnearly 80x its trailing 12-month earnings.
Analysts at PrabhudasLilladher believe the compa-ny will be able to log a com-pound annual profit growthrate of a whopping 49 percent between 2018-19 and2021-22 (FY22). According tothe brokerage, the stock isvalued at a reasonable levelof 20x and 18x its projectedearnings estimate for 2020-21 and FY22, respectively.
“IRCTC is a monopolisticentity authorised to providepackaged drinking water,catering, and online ticketbooking services to passen-gers travelling by IndianRailways. It has a dominantposition in online rail book-ings and packaged drinkingwater. Being a regulatedmonopoly acts a strong moatand limits competitiverisks,” said the brokerage ina note.
IRCTC: DalalStreet’s newbullet train
While lack of clarity on outlook of insurance has weighed on valuations, income needs to be watched
Stock surges 50% in a fortnight
COMMODITIES>
Dairy sector hopes toattract ~60K cr in 5 yrsDILIP KUMAR JHA
Mumbai, 5 February
The country’s dairy sector hopes to seeup to ~60,000 crore of new investmentand creation of 10 million jobs in fiveyears, in the wake of the Union Budgetproposals.
The finance minister hadannounced a target of doubling theannual milk processing capacity to 106million tonnes, from the existing 53 mil-lion tonnes (or from 140 million litres aday to 300 million) in five years.
“To process this massive capacity,the industry requires between ~20 and40 crore investment for every 100,000litres of processing. Thus, the sectorwould attract a fresh investment of atleast ~60,000 crore. As every 100,000litres of milk production creates 6,000new jobs, the sector will see 10 millionnew jobs by 2025,” said R S Sodhi, man-aging director, Gujarat Cooperative MilkMarketing Federation, holder of theAmul brand.
The Karnataka Milk Federation(‘Nandini’ brand) has begun examiningthe potential for a processing unit in the
Mumbai area, setting aside ~200 crorefor the proposed expansion. “We recent-ly launched the Nandini brand ofcheese to institutional buyers likehotels, restaurants and other bulk con-sumers in Maharashtra. We have startedlooking for sites near Mumbai (for amilk processing unit) to support supplyof our Nandini brand, of milk and pro-cessed products, from local sources.Currently, we supply milk and itsderivatives from Karnataka to con-sumers in Maharashtra,” said B CSateesh, managing director.
The Centre has also proposed thesetting up of a national cold supplychain for perishables and to eliminatefoot and mouth disease in cattle.Coverage of artificial insemination isproposed to be increased from the pre-sent 30 per cent to 70 per cent. Also,fodder farms and to link farming ofgrass to the rural employment guaran-tee scheme. “FMD reduces milk pro-duction capacity by at least 25 per centin animals. So, eliminating it wouldautomatically increase India’s milk pro-duction by 25 per cent,” said DevendraShah, chairman, Parag Milk Foods.
eNWR, eNAM integrationset to conclude in 2 mthsRAJESH BHAYANI
Mumbai, 5 February
Integration of NegotiableWarehousing Receipts (eNWR) withthe Electronic National Agriculture
Market or eNAM, as announced by thefinance minister in her Union Budgetspeech on Saturday, is expected to becomplete in one or two months.
Warehouse receipts are issued byrepositories, which keep electronicrecords of goods deposited and sub-sequent transfers, the way deposito-ries operate in the capital market.Receipts for warehoused goods nowcan also be negotiable and, hence,tradeable. Central Depository Serviceshas set up a CDSL CommodityRepository which has completed theintegration mentioned earlier andbegun issue of eNWRs for goods trad-ed on eNAM.
Another repository, the NERL, setup by the National Commodities andDerivatives Exchange, is in the processof integration. Kedar Deshpande, theformer's chief executive, said: "Doingso will help farmers participate in auc-tions by storing quality produce in reg-istered warehouses, which will thusbecome market yards. This will be thebeginning of warehouse-based sales inIndia and would make eNAM a coun-try-wide success.”
The eNWR will be useful whenfarmers deposit their produce in a reg-ulated warehouse (as certified by theWarehousing Development andRegulatory Authority). Th that ware-house would have to be notified as amandi or market yard. The centralgovernment has already asked statesto follow its model AgricultureProduce Market Committee (APMC)law, which provides for this.
Andhra and Telangana have sonotified a little over 40 warehousesand 15 other states have told the Unionagriculture ministry that they are con-
sidering doing so.The eNAM is a national networked
platform connecting mandis orAPMCs electronically, for helpingfarmers to realise the highest price for produce in the state from where he is selling. In physical mandis, farmers get the prevailing price there,where he has brought the produce.The eNAM connects all mandis in the state and all states in a nationalnetwork.
The Centre is in discussion withmarket participants to promote the useof eNWRs on eNAM platforms. Afarmer would simply have to depositthe e-receipt, against the goodsdeposited by him in a regulated ware-house. Based on this receipt, his goodswill be up for sale and he will hopefullyget the best price; the buyer gets thereceipt and the repository will debit thefarmer and credit the commodity in thebuyer’s name. A farmer can use thisreceipt for getting bank finance againstit and wait to sell those goods till hegets a better price, avoiding any distresssale at mandis.
PMI, global cues lift indicesSUNDAR SETHURAMAN
Mumbai, 5 February
The benchmark indices roseon Wednesday mirroringgains in the global marketsafter news of a breakthroughin coronavirus vaccine andoptimism over positive eco-nomic data at home.
The Sensex closed at41,143, up 0.9 per cent, or 353points, extending its three-day rally to 1,407 points, or 3.5per cent. The Nifty rose 110points, or 0.94 per cent, toclose at 12,089.
Most equity markets ral-lied by over a per cent onhopes that the impact of thecoronavirus on the globaleconomy won’t be as severeas anticipated. Moreover,news reports suggested scien-tist in the UK made a signifi-cant breakthrough in the raceto develop a vaccine.
Market players alsorejoiced positive domesticeconomic data, as the servicesPurchasing Managers’ Index(PMI), released Wednesday,rose to a seven-year high at55.5 in January. Earlier, themanufacturing PMI had shotup to an eight-year high at 55.3
in January from 52.7 inDecember.
Analysts said underlyinggrowth dynamics for theeconomy appeared to be bot-toming out with some high-frequency indicators showingpositive trends.
“Rural consumption is onthe way to recovery, given theincrease in food inflation,improving farm economicsand high reservoir levels.Moreover, monthly autonumbers are showing stabili-ty. Select sectors with betterearnings visibility will contin-ue enjoying valuation premi-um over the broader markets,”said a note by Motilal Oswal.
Foreign portfolio investors(FPIs) were net buyers for thesecond consecutive day onWednesday. They bought
equities worth ~249 crore.Domestic institutionalinvestors were net buyers tothe tune of ~263 crore.
Some believe the marketscould benefit from the out-break of Coronavirus, whichhas hit economic activity inregional peers such as Chinaand Southeast Asia.
Brent crude hit a 52-weeklow on Tuesday at $53 per bar-rel. Though prices rose nearly3 per cent on Wednesday, theywere still 18 per cent belowearly 2020 levels. Experts saymarkets are keenly eyeingThursday’s RBI monetary pol-icy meeting.
While the RBI is expectedto keep rates unchanged,investors will take cues oneconomic growth and infla-tion projections.
ITI withdraws FPO aspoor demand weighsSUNDAR SETHURAMAN
Mumbai, 5 February
Poor response has promptedITI to withdraw its ~1,300-crorefollow-on public offer (FPO), amove that is unprecedented bya government company.
ITI is a technology solutionsprovider to the telecom sector.
While the FPO wasn’t partof the government’s disinvest-ment programme, it under-scores the challenges when itcomes to diluting stakes inpublic sector undertakings thatare not in the limelight.
“The company has decidedto withdraw the issue, due tothe prevailing market condi-tions,” ITI said in a statement.The FPO had garnered only 62per cent subscription, data pro-vided by stock exchangesshowed. ITI had extended theclosing date twice and also hadlowered the price band toattract investors. The FPO, wasto originally close on January28. The closi n g date was firstextended to Ja n uary 31 and lat-er to Feb r u ary 5. The price
band was lowe r ed to ~71-~77 pershare from ea rlier band of ~72-~77 per share.
Shares of ITI rose nearly 5per cent to end at ~84 onWednesday as the share saleoverhang ended. Through theFPO, ITI was looking to issue181.8 million fresh shares. Theissue would have led to dilu-tion of 20 per cent, weighingon the secondary market price.
The government holds 90per cent stake in the company.ITI is valued at ~7,550 crore,currently.
BOB Capital Markets, KarvyInvestor Services and PNB
Investment Services were theinvestment bankers to the FPO.
In the past, government-owned entities such as LifeInsurance Corporation (LIC)and State Bank of India (SBI)had bailed out PSU after ashare sale. The failure of ITI’sFPO indicates that the govern-ment wanted to raise fundssupported by organic demand,said bankers. Analysts saidsteep pricing and uncertainbusiness outlook could havehurt investor demand.
“Besides the pricing,investors were concernedover the drop in profitabilityof the company in the lastfinancial year and the busi-ness outlook falling. Most ofITI’s business comes fromstate-owned telecom compa-nies which aren’t in greatshape,” said an analyst.
ITI was looking to utilise theFPO proceeds to retire debtand fund its working capital.
Analysts said ITI will haveto look for other means offundraising, such as privateplacement.
THE IMPLICATIONS| eNAM, department of economicaffairs, agriculture ministry, and tworepositories discussing integration
| One repository integrated with network; another in advance stage
| States have to notify regulatedwarehouses as APMCs
| AP, Telangana already notified 40 warehouses as mandis
| Farmers depositing commodities insuch warehouses will get eNWR
| Farmers then can deliver such eNWRinstead of delivering their produce
| Farmers can get finance and wait for right price to sell
| As on December 31, 2019, NERLgenerated over 1.8 lakh eNWRs/eWRs
500
400
300
200
100
0
200
160
120
80
40
0‘10-11 ‘11-12 ‘12-13 ‘13-14 ‘14-15 ‘15-16 ‘16-17 ‘17-18 ‘18-19
Sources: Basic Animal Husbandry Statistics, DAHD&F, GoI
121.
8
281 290
127.
9
132.
4
137.
7
146.
3
155.
5
165.
4
176.
3
187.
7
Production (mt) LHS Per capita availability (gm/day) RHS
299 307 322 337 355375
394
Production and per capita availability in IndiaTHE MILKY WAY
CATCHING INVESTORS’ FANCYMonth Market cap (~ cr) Ranking*
October 2019 5,120** 56
January 2020 15,723 31
February 2020 24,145 23Note: *For most-valued PSUs in terms of market value; **At IPO price; Source: Capitaline
VALUATION MIXContribution (%)n Core business n Insurance arms nOthers*(Figures in brackets SOTP value in ~/share)
*Includes other business such as mutual funds, bank (for HDFC), cards, etc;SOTP: Sum of the parts
SIZEABLE SHARE OF HOME LOANSHome loan exposure (%)n Share of retail loans in total loans n Home loans as % of retail loans
State Bank of India HDFC ICICI BankSource: JM Financial
61
36
76
63
49
100
78(531)
14 (94)11 (75)
ICICIHDFC
38(1,029)
16 (423)
54(1,464)
SBI
69 (292)15(64)
34 (144)
2 THE SMART INVESTOR> l
MUMBAI | THURSDAY, 6 FEBRUARY 2020
INVESTOR OPTIMISM12,200
12,000
11,800
11,600Feb 1,’20 Feb 5,’20
11,662
12,089
> PRICE CARD
As on Feb 5 International Domestic ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
Price %Chg# Price %Chg#
METALS ($/tonne)
Aluminium 1,687.0 -7.0 2,021.9 6.7
Copper 5,652.0 -3.9 6,304.4 2.9
Zinc 2,217.5 -14.5 2,471.2 -11.3
Gold ($/ounce) 1,553.7* 4.7 1,749.0 3.1
Silver ($/ounce) 17.6* 0.1 19.9 -2.9
ENERGY
Crude Oil ($/bbl) 54.6* -13.4 58.0 -6.4
Natural Gas ($/mmBtu) 1.8* -35.7 1.8 -35.9
AGRI COMMODITIES ($/tonne)
Wheat 196.1 8.6 291.4 -5.0
Maize 186.5* 7.3 267.8 -7.2
Sugar 415.5* 19.5 490.3 -0.7
Palm oil 690.0 14.5 1,151.4 19.7
Cotton 1,501.4 6.7 1,603.2 -0.7* As on Feb 05, 20 1800 hrs IST, # Change Over 3 MonthsConversion rate 1 USD = 71.2 & 1 Ounce = 31.1032316 grams.
Notes:
1) International metals, Indian basket crude, Malaysia Palm oil, Wheat LIFFE andCoffee Karnataka robusta pertains to previous days price.
2) International metal are LME Spot prices and domestic metal are Mumbai localspot prices except for Steel.
3) International Crude oil is Brent crude and Domestic Crude oil is Indian basket.4) International Natural gas is Nymex near month future & domestic natural gas
is MCX near month futures.5) International Wheat, White sugar & Coffee Robusta are LIFF E future prices of
near month contract.6) International Maize is MATIF near month future, Rubber is Tokyo-TOCOM near
month future and Palm oil is Malaysia FOB spot price.7) Domestic Wheat & Maize are NCDEX future prices of near month contract, Palm
oil & Rubber are NCDEX spot prices.8) Domestic Coffee is Karnataka robusta and Sugar is M30 Mumbai local spot
price.9) International cotton is Cotton no.2-NYBOT near month future & domestic
cotton is MCX Future prices near month futures.
