FRIDAY, 21 FEBRUARY 2020 14 pages in 1 section www.business-standard.com MUMBAI (CITY) ~9.00 VOLUME XXIV NUMBER 135

THE MARKETS ON THURSDAY Chg# Sensex 41,170.1T 152.9 Nifty 12,080.9T 45.1 COMPANIES P2 Nifty futures* 12,079.0T 1.9 COMPANIES P2 Dollar ~71.7 ~71.6** Euro ~77.3 ~77.5** VALUATIONS OF INDIAN M-CAP SOARS 40% Brent crude ($/bbl)## 50.02## 59.1** Gold (10 gm)### ~41,575.0S ~106.0 IN 3 YRS UNDER CHANDRA *(Feb.) Premium on Nifty Spot; **Previous close; UNICORNS STAGNATE # 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), AND PUNE GOVT TAKES A CALL CAA PROTEST FALLOUT TO SAVE STRESSED GMR to sell 49% TELECOM SECTOR Govt likely to defer key After back-to-back parleys this week between the top management of telecom firms and the government, a consensus seem stake in airport socio-economic survey to have emerged on the need to save the financially stressed sector. While Vodafone SOMESH JHA Idea Chairman Kumar Mangalam Birla and New Delhi, 20 February Chief Executive Ravinder Takkar have been THE FINE PRINT OBJECTIVES doing the rounds in the DoT and North Block biz to French firm In the possible first blow to the coun- Collect info on over the last few days, Chairman try’s statistical system arising out of 78TH ROUND OF tourism expenditure Sunil Mittal joined in as well to seek relief for ~10,780 cr deal values GMR Airports at ~22,000 cr; pact the protests against the Citizenship NSO SURVEY and for developing the telecom industry, faced with a bill of ~1.47 with Tatas cancelled over airline ownership norms Amendment Act (CAA), the govern- Domestic Tourism Expenditure indicators of trillion in pending dues linked to adjusted ment may defer a key socio-economic and Multiple Indicator Survey Sustainable gross revenue. 6 > ARINDAM MAJUMDER survey because surveyors are facing Development Goals, New Delhi, 20 February the wrath of people who see it as a data PERIOD 2030 collection exercise for determining January-December 2020 Hindujas, Cerberus to place MR Group has signed an agree- their citizenship. joint bid for stake ment with Groupe ADP of France The decision to recommend the TOPICS COVERED STATUS to sell a 49 per cent stake in its postponement of the National Food insecurity, household characteristics An expert committee Hinduja Group is partnering private equity G airport-holding company. The Statistical Office’s 78th round of sur- and facilities, education and skills, migration, has recommended firm Cerberus Capital Management in group will raise ~10, 780 crore from the deal, vey on "domestic tourism expenditure" purchase or construction of a residential seeking to pick up a stake in embattled YES which will help it pare debt. The deal values and "multiple indicators", which began deferring the survey Bank, according to people familiar with GMR Airports at ~22,000 crore. last month, was taken at a meeting of place, documents such as birth certificate, due to protests against the matter. Representatives of Cerberus GMR had in March 2019 signed a defin- an expert committee, known as the use of mobile/internet connections CAA, NRC and the UK-based Hinduja group, run by itive agreement with a Tata group-led con- working group, according to three per- brothers Gopichand Hinduja and Ashok sortium to sell 44 per cent in the company. sons in the know. Hinduja, met RBI officials earlier this In January this year, it decided to divest a “An expert group met on month regarding the bid. BLOOMBERG 49 per cent stake. But despite getting clear- Wednesday and recommended defer- POWER DEMAND GROWTH LOWERED, ance from the Competition Commission ring the survey due to various chal- BUT NOTHING OFFICIAL ABOUT IT COMPANIES P3 of (CCI), the deal faced hurdles “WITH GROUPE ADP, GMR lenges being faced by field investiga- because it violated a clause that prevents WILL HAVE SMOOTHER tors in various parts of the country. The The Ministry of Power has refused to acknowledge a report by the Central GST profiteering: HC stays airline groups from holding more than a 10 government has to take the final call Electricity Authority (CEA), its technical arm, which estimates around 20 per per cent stake in Delhi International ACCESS TO GLOBAL MARKETS, now,” a person aware of the develop- cent lower growth in demand than earlier forecast, sources said. This is after the penalty against Nestlé Airport Limited (DIAL). OPENING UP NEWER AVENUES ment said. demand estimates were revised and calculated using another ‘econometric’ Coming to the rescue of fast-moving The Tatas hold a majority stake in OF BUSINESS GROWTH” Turn to Page 13 > methodology to arrive at more accurate results. SHREYA JAI writes 4 > consumer goods giant Nestlé, the Delhi Vistara and AirAsia India. GMR holds 64 High Court has again stayed a National per cent stake in DIAL. G M RAO, CHAIRMAN, GMR GROUP Anti-Profiteering Authority order to recover The new deal will give a fresh lease of ~73 crore by March, for not passing on the life to GMR Group’s debt-restructuring benefit of a GST rate cut to consumers. plan, which was held up due to the regula- FLYING HIGH tory hurdle for the Tata deal. GMR Infra AIRPORTS OPERATED BY GMR GROUP: IGI Every penny counts as GST officers has a debt of ~25,660 crore in its books. Airport (New Delhi), Rajiv Gandhi States get ~20,000 cr “The partnership with Groupe ADP is in International Airport (Hyderabad), and send demand notices to companies line with GMR’s business direction to Philippines' Mactan Cebu International as GST compensation become a global airport developer and oper- The Centre has released ~19,950 crore as ator,” G M Rao, chairman of GMR Group Airport (in partnership with Megawide) Desperate push to meet collection target; firms receive notices for as low as ~2 GST compensation to states and union said. “We have been on a journey of defining AIRPORTS DEVELOPED AND MANAGED BY territories for October. Generally, the Union airports of the future with key focus on pas- GROUPE ADP: Paris-Charles de Gaulle, DILASHA SETH TAX MOP-UP government releases compensation for senger experience by leveraging enhanced Paris-Orly, and Paris-Le Bourget New Delhi, 20 February two months and this is the first time it has technology and offering superior amenities. WOES given compensation for one month. With Groupe ADP, GMR will have smoother ~5.9858630140000004! This is not a 336.5 million CGST numbers ~5.26trn ~5.14trn access to global markets, opening up newer Combined number of passengers figure from an S Ramanujan-G H ~4.14trn avenues for business growth.” Hardy conversation but a demand (FY20) Budget estimate Revised estimate Apr-Jan collection ECONOMY & PUBLIC AFFAIRS P4 According to the company, the first handled by GMR Airports and Groupe ADP notice given by tax officials to a MPC waits for opportune tranche of ~5,248 crore will be immediate- in 2019, 'the highest across the world' company on paying interest because ly received by the company. the goods and services tax (GST) time for a rate cut “This money will help deleverage the return had overshot the deadline. When the Monetary Policy Committee group further and result in improved cash . It will be concluded during After directions from the Central 10.4% 21.0% (MPC) members met earlier this month, flows and profitability,” the company said. the upcoming months, Groupe ADP said. Board of Indirect Taxes and Customs Apr-Jan collection Required growth rate they decided to keep the repo rate The structuring of the deal will unfold in Analysts said the current deal seemed to (CBIC) to recover goods and services growth forFeb-Mar unchanged as they wanted to maximise two phases: The first phase will be realised be better than the earlier one as it would tax interest, totalling ~46,000 crore, Sources: Budget documents; govt the impact of future rate cuts, show the in the coming days for a 24.99 per cent wipe out additional corporate debt of ~18 field officials are busy sending minutes of the meeting.The MPC stake. The second phase, for 24.01 per cent, billion and would alleviate all the concerns notices for recoveries, which challenging GST indirect tax revenue Central GST collection grew by focused on letting the economy show is subject to certain regulatory conditions, surrounding the corporate debt. sometimes are in single digits. target for FY20. 10.4 per cent in the April-January signs of improvement, following the for obtaining approvals from the Reserve Turn to Page 13 > One such client in equity “Records indicate that you have period and has to grow by 21 per cent growth-supportive measures of the information services has been asked filed your GSTR 3B return for the in the last two months of the current government. has entered into an exclusive agreement with to deposit ~5 (after rounding off the period … after due dates in which you fiscal year to meet the revised AXIS BANK Max Financial Services and Max Life Insurance to explore a liability cited above) as interest, have not calculated and paid interest estimate, which was scaled down by long-term strategic partnership with the life insurance another ~2. liability under section 50 of CGST Act ~1 trillion from the Budget Estimates IN TALKS TO arm. The deal will involve Axis Bank acquiring a significant A company received notice for 2017 … you are advised to deposit (of 2019-20) in the recent Budget (of MARKETS CLOSED TODAY stake in the life insurer but the amount has not been finalised paying ~zero, which is the interest amount of ~5 ... (else) 2020-21). Stock, currency, commodities and BUY STAKE IN yet. The boards of Max Financial Services and Max Life approximate figure for its interest appropriate legal action for recovery Experts say issuing such notices bond markets will remain closed Insurance Company on Thursday gave a go-ahead to both the liabilities. of interest due to delayed filing of would make payers fearful and ease of on Friday on account of Shivratri. MAX LIFE companies to explore options with Axis Bank. 6 > The strong stance regarding interest return shall be initiated,” read one doing business would suffer. collection is aimed at meeting the such notice. Turn to Page 13 >

High-powered meet today to salvage stuck power projects DEV CHATTERJEE FEELING Mumbai, 20 February STRESSED Lenders, burdened with ~1 tril- lion of bad loans in the power sec- ~2.36 TRILLION tor, are looking forward to a new Total value of 34 government scheme, which stressed power projects could salvage stranded thermal power projects and help banks ~1.76 trn* ~60,489 cr recover their stuck capital. Stranded Equity Senior officials of the power loans value Note: Figures as of March 2018 ministry are meeting all stake- *A few projects have completed debt resolution; Source: Parliamentary holders, including executives of Standing Committee on Energy NTPC, distribution companies, report/IEEFA and banks, in New Delhi on A WIN-WIN DEAL Friday to take a call on the scheme. Floated by the new and | New scheme to renewable energy ministry, the bundle renewable scheme seeks to bundle supply energy with thermal from renewable power projects power with thermal power projects. | Scheme to help “The option being discussed banks recover debt is to bundle renewable power from thermal firms with thermal power, which will help remove difficulties of inter- | Power mittent power supply by renew- producers able power sources and, at the will have same time, salvage stalled ther- to sign mal power plants and our loans,” fresh PPAs said a banker privy to the discus- after sions. “The bundling will help all bidding stakeholders including con- sumers, power generators, distri- bution, transmission companies, and banks,” he said. Turn to Page 13 > 2 COMPANIES MUMBAI | FRIDAY, 21 FEBRUARY 2020 STOCKS >Max Financial Services > > > Escorts > Sobha IN THE NEWS Axis Bank to explore Overtakes IDBI Bank, PNB, SBI Cards’ initial public Said no investigation Slips 25% in Feb on rising long-term strategic AU Small Finance Bank in offer opens on March 2 being undertaken debt, weak operational partnership with Max Life market-cap ranking and closes on March 5 currently by ED cash flow concerns

~565.05 CLOSE ~913.30 CLOSE ~327.65 CLOSE ~877.35 CLOSE ~338.35 CLOSE p9.39% UP* p4.39% UP* p2.31% UP* q3.65% DOWN* q 4.01% DOWN* *OVER PREVIOUS CLOSE > Mediaconvergencelookssetforanewgameofthrones

SURAJEET DAS GUPTA the Jio OTT platforms. entity but is one of the most pop- helping Reliance build a content New Delhi, 20 February But the merger does include ular OTT platforms according to powerhouse to rival that of Essel. cable companies and Essel Group WAR OF TITANS Network 18 analysts, has 130-150 million active This week saw Mukesh Ambani Den Networks, which Reliance 18.2 % viewership of 13.0 subscribers but is available only for Distribution edge consolidate the media assets of had acquired earlier and which broadcasting network its own subscribers. Clearly, both Reliance is far ahead of Essel’s Siti , giving distri- will be merged into two wholly- of them are bigger than Zee5, which Networks in distribution. As a bution and its broadcasting net- owned subsidiaries of Network18. 11.3 Total number of homes 15.0 is pegged at 76.4 million. result of acquiring Hathway and work a big push. With this, the bat- The revenue of the proposed with cable (mn) The Essel Group’s OTT plat- Den, Reliance now has control tle of supremacy between Ambani new consolidated entity is pro- form has one differentiator over 15 million homes, leaving Siti, and Subhash Chandra, occupying jected to be ~8,000 crore, much 76.4 OTT active subscribers 100 though — it is moving aggres- with 11.3 million customers. the media convergence space of smaller than the ~15,400 crore sively towards subscriptions. It What’s more, the efforts of Den broadcasting, distribution, over- revenue of Chandra’s Essel Group’s (Zee5) per month (mn) (Voot) has over a million individual sub- and Hathway are being supple- the-top (OTT) channel, content, media assets. These include Zee 15,517* Revenues (~ cr) 8,000 scribers and as many as 3.5 mil- mented by Jio, which is rolling out and movies, will only intensify. Entertainment Enterprises, Siti lion B2B subscribers (through tie- high-speed fibre-to-the-home Unlike other big international Networks and Dish TV (which Subhash Chandra *Zee, Siti Cable & Dish TV Source: Companies, JPMorgan, industry estimates Mukesh Ambani ups with telcos, etc). These figures (covering over 20 million homes). players such as Disney (which has Essel wants to sell off). stem from Essel leveraging its Jio already has one million only a minority stake in DTH Tata Even in terms of market cap- massive library of 300,000 hours homes tied up (the cable com- Sky) and Sony (which does not italisation, Zee alone has a market cash are high and it boasts a debt. It hopes to manage this by share stands at 18.2 per cent. of programming. panies have around 0.5 million have a cable or DTH distribution cap of ~24,000 crore compared to stronger balance sheet. selling off half its stake in Dish TV. What’s more, given the launch Reliance knows it has some fibre broadband homes, too), but company), Ambani and Chandra ~15,000 crore of the merged In contrast, the Essel Group According to CLSA estimates, of new channels in Bhojpuri catching up to do but it has a plan. analysts say it is now also leverag- span the entire media conver- Reliance entity. has had a fraught time with the the Zee network with around 23 and Punjabi among others, It has content from Colors and ing the two cable companies so gence space. Nonetheless, in this battle, serious financial challenges it has per cent viewership share is a Zee’s share should inch up Viacom 18 Motion Pictures, which that they can upgrade their captive Reliance announced the Reliance enjoys some other key experienced in paying back the close second to Star at 26 per even further. make films. Reliance will continue customers to Jio Giga fibre to merger of its various content, dis- advantages that enable it to take debt it took to finance its foray cent. But the consolidated TV18 to own entities like Jio Studios achieve its target much faster. tribution, and media properties in on Essel. It has a captive con- into infrastructure, pledged with network share is around 12 per OTT play (making films) and the movie Siti has some catching up to do its listed subsidiary Network18 this sumer base of 375 million mobile Zee shares. cent and has a large gap to fill. In the OTT space, Voot, which is rights which it buys for OTT plat- but it also plans to invest in fibre week. The merger does not customers which it can tap for Even after becoming a minority However, JP Morgan has esti- part of the Reliance consolidated form Jio TV. broadband. With Essel planning include media assets such as Balaji media services ranging from shareholder in the flagship com- mated the consolidated company entity, claims to have 100 million That apart, it has stakes in Eros to sell Dish TV, Zee’s distribution Telefilms, Eros International, or broadcasting to OTT and even pany (with 5 per cent), Essel still to have a 13 per cent share of vie- active monthly users. Jio TV, which and Balaji and has bought over leverage, say some analysts, could Saavn (in which it has stakes), nor fixed broadband. Its stocks of has to pay over ~2,500 crore in wership and Zee insists that its is not part of the consolidated Saavn (music). Together, these are be under challenge.

IN BRIEF Apple mulls letting Victoria’s Secret to be sold Valuations of star Indian at $1.1-billion valuation users switch iPhone L Brands is close to selling a controlling stake in its Victoria’s Secret brand to unicorns hit speed bump apps to rival firms private equity firm Sycamore Partners in a deal that values the lingerie brand at $1.1 billion, Wall Street Journal reported BLOOMBERG have lacked the status of citing unidentified people familiar with Analysts say consumption has slowed down, which is hurting start-ups Los Angeles, 20 February Apple’s products. the development. Sycamore Partners is For instance, if a user clicks expected to buy 55 per cent in Victoria’s Secret in a transaction PEERZADA ABRAR & NEHA ALAWADHI lion, while consolidated losses Apple is considering giving a web link sent to them on an that with L Brands and retain 45 per cent in a separate firm that Bengaluru/New Delhi, 20 February widened to $335 million rival apps more prominence iPhone, it will automatically will include the young-adult focused Pink chain. L Brands’ because of expansion to over- on iPhones and iPads and open in Safari. Similarly, if a billionaire founder Leslie Wexner will step down as chairman and he valuations of seas markets. opening its HomePod speaker user taps an email address — chief executive, WSJ said. BLOOMBERG unicorns like Swiggy, “The overall theme playing to third-party music services say, from a text message or a T Oyo, Paytm, and Ola out both globally and in India after criticism the company website — they’ll be sent to the AG&P to invest Future Lifestyle to have remained flat even after is for companies, especially provides an unfair advantage Apple Mail app with no option $1.5 billion in raise over ~600 cr large fund-raising rounds. market leaders, to have a to its in-house products. to switch to another email pro- Analysts believe the firms are greater focus on economics The technol- gramme. The South India from promoters, IFC focusing more on building and understanding the future ogy giant is dis- company also is Singapore-based Atlantic Future Lifestyle Fashion said its robust unit economies and not value that it will create in the cussing whether considering loos- Gulf and Pacific (AG&P) has board had approved raising following the growth-at-all- ecosystem,” said Ankur Pahwa, to let users ening restrictions said that it would invest over ~600 crore from its costs model. partner and national leader, e- choose third- on third-party around $1.5 billion in South promoters and International Food delivery platform commerce and consumer party web music apps, India on various projects. The Finance Corporation (IFC) for Swiggy said on Wednesday it since the acquisition of Flipkart internet at EY India. browsers and including its top facility is expected to reducing debt and enhancing had raised $113 million as STICKY WICKET by Walmart, it was looking at a According to Harminder mail applications streaming rival commence commercial stake in subsidiaries. They also part of its Series-I funding. Its Valuation in $ bn valuation of $10 billion. Sahni, managing director of as their default Spotify, on operations by the fourth approved raising ~400 crore valuation was $3.3 billion when Current Last known The fiasco at SoftBank- retail consultancy firm Wazir options on HomePods, said quarter of 2021. BS REPORTER through non-convertible it raised its previous $1-billion funding round backed co-working start-up Advisors, the parameters on the Apple’s mobile the people, who debentures on private funding in December 2018. WeWork pushed the firm’s ini- basis of which valuations are devices, replacing asked not to be Samsung expands Paytm16.010.0 (Jan ‘18) placement basis in a year, the According to Paper.vc’s calcu- Oyo 10.0 5.0 (Sept ‘18) tial public offering (IPO) plans done are changing. “Growth-at- the company’s named discussing premium phone company said. BS REPORTER lations, Swiggy’s valuation after in the US, as investors ques- all-costs model is something Safari browser internal company the latest fund-raising would Byju’s 8.0 5.8 (Jul ‘19) tioned the $47-billion val- people (investors) are not will- and Mail app, deliberations. line-up in India HMSI launches BS-VI be around $3.4 billion. Ola 5.8 5.5(Jan ‘19) uation. Uber’s lukewarm IPO ing to fund. You can’t now say according to Apple’s closed Apple’s closed Samsung said it will bring its compliant Shine “We are seeing a lag in val- Swiggy3.3 3.3(Dec ‘18) last year also contributed to the (let me) first become profitable people familiar system to prohibit system to prohibit Galaxy Z Flip to India later motorcycle uations. There is a greater Zomato 3.0 2.8(Feb ‘19) lag in valuation trend among and then you can take me with the matter. users from setting users from setting this month for about ~1.10 emphasis at many of these Udaan2.7 1.0(Sept ‘18) the unicorns across the Indian seriously,” Sahni said. Since launch- third-party apps third-party apps lakh. The device, which was Honda Motorcycle on Thursday unicorns to focus on profitabil- start-up ecosystem. Devangshu Dutta, chief ing the App Store as defaults was as defaults was Delhivery 1.60.37(May ‘15) launched earlier this month launched BS-VI compliant ity,” said a person familiar with The WeWork debacle has executive of retail consultancy in 2008, Apple questioned by the questioned last (Brackets denote last fund-raise period) in the US, will compete in the version of its Shine bike model the development. “The macro- put pressure on SoftBank port- Third Eyesight, said the con- hasn’t allowed US antitrust panel year during a ultra-premium smartphone price starting at ~67,857 (ex- economic environment is cer- attributed to multifold increase folio companies to show prof- sumption in the country has users to replace hearing of a US category that is estimated showroom). The Shine is tainly a question and large in ad expenses, staff expenses, itability. One of these is Oyo, slowed down and is also play- pre-installed House of Repre- to be about 3 million units in powered by a BS-VI compliant funding rounds would now and delivery costs. Sriharsha whose $10-billion valuation ing a role, especially for con- apps such as these with third- sentatives antitrust panel. size in India. PTI 125cc engine, HMSI said. PTI work on the basis of how the Majety, chief executive, Swiggy, has been the subject of much sumer-focused companies. party services. That has made Lawmakers pressed the issue companies would become said the firm was laser-focused discussion, given reports of “There is a little bit of con- it difficult for some devel- of whether iPhone users can Adani Gas gets oil regulator nod profitable. In the past, it was on continuing to execute on its irregular and dubious busi- servatism in the spending sce- opers to compete, and has make non-Apple apps their more about sector euphoria.” vision while building a sustain- ness practices, and complaints nario from the consumer and raised concerns from law- defaults in categories includ- for demerger, stake sale to Total Profitability has been the able path to profitability. from hotels and customers of investor point of view,” said makers probing potential ing web browsers, maps, email biggest challenge for unicorns. Digital payments firm non-uniform service. Its Dutta. “Also macro-economic antitrust violations in the and music. Being a default app The Adani family-owned Adani Gas has secured a nod from oil Swiggy reported 500 per cent PhonePe, which was out in the aggressive expansion plans indicators are getting pub- technology industry. on the world’s best-selling regulator for its demerger from its parent and the subsequent jump in losses for FY19 at ~2,346 market for large funding into international geographies lished more. If there is a crisis The web browser and mail smartphone is valuable sale of a stake in the company to French energy giant Total SA crore against FY18, according to round, is likely to take more like the US and Japan have of confidence in the consumer, are two of the most-used apps because consumers are subtly after it made a formal application for the same, sources said. The data platform Tofler. Though time for the same as its propos- been increasingly getting even if you have money in the on the iPhone and iPad. coaxed and prodded into Petroleum and Natural Gas Regulatory Board (PNGRB) had revenue had gone up 183 times al has not evoked much questioned by the industry. bank, you would not spend it To date, rival browsers using this more-established threatened to cancel the 13 city gas distribution licences Adani Gas to ~1,292 crore, total expenses response, sources said. It was The Gurugram-based firm so easily and that has an like Google Chrome and software rather than alter- had won in the 9th bid round in 2018 for allegedly perpetrating a for FY19 remained high at in talks to raise up to $1.2 bil- reported over 4x increase in impact on the company’s per- Firefox and mail apps like natives. An Apple spokesman “fraud” by not disclosing material facts of the demerger. PTI ~3,638 crore. And, this was lion. Having grown swiftly revenue for FY19 to $951 mil- formance and valuations.” Gmail and Microsoft Outlook declined to comment. Tatagroupmarketcapsoars40%in3yearsunderChandra

Analysts say reducing dependence on Tata Consultancy Services remains a key challenge for Tata Sons chairman Jaguar shelves SHALLY SETH MOHILE TataMotors,TataPower, Tata TOP 5 & WORST 5 PERFORMERS plan to sell Mumbai, 20 February Communications,TataTele Maharashtra,whichsawsharp (Market cap in ~ cr) bonds for cash Natarajan Chandrasekaran (pic- erosionintheirm-cap. Feb 20,’17 Feb 20,’20 Change % chg tured), chairman Tata Sons, com- Theoverallhealthwas 8,432 27,408 18,976 225.0 Jaguar Land Rover (JLR) pletes three years in the corner primarilydraggedby thegroup’s TitanCompany38,486 1,17,427 78,942 205.1 Automotive has shelved plans to office of the holding company on flagship,TataMotors,whosem- issue a US dollar bond after February 21. Going by the market capmorethanhalvedto ~57,002 Tata GlobalBeverages8,930 24,014 15,084 168.9 investors demanded too high an capitalisation (m-cap) of Tata com- crorefrom~1.45trillionin 11,536 23,994 12,458 108.0 interest rate to compensate for panies, the tenure has been a February2017. TCS4,93,881 8,09,127 3,15,246 63.8 the risk the coronavirus poses to mixed bag for the man who took TataMotors’UKsubsidiary, 22,977 13,970 -9,007 -39.2 them, people familiar with the over the reins of the salt-to-soft- JaguarLandRoverAutomotive, matter, said. JLR hired Bank of ware conglomerate amid a bitter hasbeenfacingstrongheadwinds Tata Communications21,348 11,205 -10,143 -47.5 America Merrill Lynch to meet boardroom battle between Cyrus fromslowingsalesinChinaand TataTeleMaharashtra 1,259 645 -614 -48.8 investors in the US ahead of a Mistry and Tata Sons. uncertaintiesrelatedto Brexit, Tata Motors1,45,691 57,002 -88,689 -60.9 potential sale of new bonds, Inthethreeyearsunder amongotherfactors. -DVR 14,172 3,300 -10,872 -76.7 and days after warning the virus Chandra,thegroup’s overallm- The firm’s commercial and outbreak was impacting its caphassoared39.6 percentto passenger vehicles volumes in the Total group m-cap 8,61,347 12,02,325 3,40,978 39.6 supply chain. BLOOMBERG ~12trillion.Butthatishardly domestic market have also been Compiled by BS Research Bureau Source: Capitaline comforting,consideringthe hit by one of the mostprolonged performancewasdrivenby Tata slowdowns. Disruptions due to to ~13,970 crore. Accordingto Amidthegloom,someofthe ButTCS,whosem-capsawan saidMahanteshSabarad,headof focusonfinancialperformanceof ConsultancyServices(TCS), changesin emission and safety recentmediareports,thefirmis consumerfacingfirmsofthe increaseof63.8 percent,dwarfs retailresearchatSBICAP companiesunderChandra.One which,traditionally, hasbeenthe regulations and an increasein the lookingto raise~6,000crorefrom groupsuchasTitan,TataGlobal thegoodperformanceofallthese Securities.“Onehasn’tseenany can’tnottakeintoconsideration group’s cashcow. Ifanything,the costof ownership due to saleofassetsinIndiaandabroad Beverages(TGBL),Voltas,Indian companiesintermsofwealth materialchangesunderChandra. theoveralleconomicscenarioand dependenceonTCShasonly regulatory changes, too, to strengthenitsbalancesheet. Hotels(IHCL),Trent,andTata generation.Hence,reducing Beitfinancialre-engineering,the thegroup’s exposureto China— increasedsince2017—~2outof dentedsales. Paringthegroup’s debt Chemicalsgave handsomereturns dependenceonTCSremainsone groupenteringthenew oneofthegroup’s keymarkets, every~3generatedby thegroup TataPowerisyetanother remainsachallengeforChandra — to shareholders.WhileTitan’s ofthekeychallengesforChandra, businesses,cuttingexcessflabor whichwasbattlinganeconomic firmscamefromtheITfirm. companythathasstymiedthe grossdebtforthegroupwas m-capzoomed205percentto saidanalysts. consolidation,thepacehasbeen slowdownbeforethecoronavirus Theoverallwealthgenerated group’s performancedueto high unchangedat~3.05trillionin ~1.17trillion,TrentandTGBLsaw “TheTatagroupisjust slow,” hesaid. outbreak.Overall,peopleare by thegroupfirmscouldhave debtburden.Itsm-capinthepast September2019against ajumpof225percentand trudgingalongasitwasinthepre- Butmanydon’tagreewith happywithhisperformance,” beenhigherbutforcompanieslike threeyearscrimped39.2percent ~3.02trillioninMarch2017. 169percent,respectively. Chandradays,supportedby TCS,” Sabarad.“Therehasbeenasharp saidaTatagroupobserver. MUMBAI | FRIDAY, 21 FEBRUARY 2020 COMPANIES 3 . < GST profiteering: Nestlé gets stay from Delhi HC Car sales continue DILASHA SETH order on the ground that the A Nestlé India spokesper- New Delhi, 20 February NAA had passed the same suo son told Business Standard motu and not on the basis of earlier that “…the benefits Coming to the rescue of fast- written complaint, which was largely have been passed on moving consumer goods giant impermissible. Besides, it arg- by way of reduction of MRP or to slip, down 4.6% Nestlé, the Delhi High Court ued that while the matter was by way of increase in gram- has again stayed National heard by four members, the mage. On SKUs (stock-keep- Anti-profiteering Authority’s NAA order was signed by only ing units), where it was not Overall vehicle VEHICLE REGISTRATION DATA (NAA’s) order to recover ~73 three members and was practicable to pass on the ben- „Jan ‘19 „Jan ‘20 % change sales skidded by crore by March for not pass- passed beyond the mandatory efits, say for example Nescafé Two-wheelers (in units) ing the benefits of the goods period of three months. single-serve packs for ~2, or 7.13% YoY in Jan 1,389,951 -8.82 and services tax (GST) rate cut The NAA noted that the Maggi noodles ~5 packs, the 1,267,366 to consumers. methodology adopted by benefit has been passed on to 290,879 units The stay, granted through Nestlé to pass on GST rate cut other pack sizes within the Three-wheelers an order issued on February was “illogical, arbitrary, and same product category”. ARINDAM MAJUMDER 58,178 9.17 10, was given on grounds that illegal, which has resulted in The Delhi HC on Tuesday New Delhi, 20 February 63,514 Nestlé had already paid ~16.58 unfairness and inequality also stayed a show-cause crore of the total demand of while passing on the benefit The stay was given on grounds that Nestlé had already paid notice by NAA to Johnson & ales of vehicles have con- Commercial vehicles ~89.73 crore. of tax reduction”. ~16.58 crore out of the total demand of ~89.73 crore Johnson for allegedly profi- tinued to decline, with 88,271 -6.18 The NAA had in December M S Mani, partner, Deloitte teering by not passing on the S automobile dealers say- 82,817 upheld profiteering allega- India, said the absence of a relief considering the practi- “benefits of input tax credit benefit of rate cuts. J&J argued ing that confidence is yet to Passenger vehicles tions on the ground that the prescriptive methodology for cal challenges faced during should have been passed on that the calculation of profi- return among buyers as many firm had not passed on the determining profiteering had the initial period of GST intro- to the recipient by way of com- teering of ~42.7 crore was 304,929 -4.61 customers are holding back 290,879 benefits of reduction in GST made it difficult for conduct- duction,” he said. mensurate reduction in based on “arbitrary, unrea- their decision to buy cars. in respect of various products. ing businesses. According to the anti-prof- prices”. The next date of hear- sonable and capricious However, green shoots are Tractors Nestlé had challenged the “They will hope for some iteering rules under GST, ing is May 20. methodology”. visible especially in rural areas, 43,924 5.11 with tractor sales showing an 46,170 uptick. Retail sales of vehicles declined by 7.13 per cent year- TOTAL on-year (YoY) in January to 1,885,253 -7.13 290,879 units, according to the 1,750,746 data released by Federation of SOURCE: FADA Automobile Dealers Asso- ciations (FADA), the apex body of auto dealers on Thursday. units, according to FADA data. ant vehicles and gradual incr- Retail sales are typically January was the second ease in dispatches of BS-VI subdued in January after a consecutive month of decline compliant units at dealerships. brisk business in December. in showroom sales of passenger The new emission norms will However, subdued consumer vehicles after two months of be effective from April 1. sentiment and persistent slow- marginal recovery in October “With weak demand situa- down in the economy have and November, when tion, liquidation of inventory added to the drop in demand automakers had offered record of BS-IV vehicles is the top this year. discounts to entice customers. focus for dealers and FADA has “Auto sales continued to be However, with a dip in eco- already appealed to all manu- in the negative territory in Jan- nomic activity and overcapac- facturers to switch over com- uary, except for three-wheel- ity with fleet owners on pletely to BS-VI vehicles. ers, with many consumers not account of an increase in The past 14 months have buying any vehicle,” said freight carrying capacity of seen one of its toughest times FADA President Ashish Kal, trucks, sales of heavy commer- in auto sales. Therefore, FADA adding that the transition to cial vehicles slumped 6.89 per has requested original equip- BS-VI emission norms also cent to 82,187 units in January. ment manufacturer’s (OEM’s) delayed purchases. Most manufacturers wit- that any BS-IV vehicle billed Retail sales of passenger nessed decline in wholesales further, which is not against vehicles, the largest compo- last month as production was specific customer orders, to be nent of the pie, fell by 4.61 per reduced to control inventory of returned to avoid financial loss cent YoY in January to 290,879 BS-IV emission norm-compli- to dealers,” Kale said. 4 ECONOMY & PUBLIC AFFAIRS MUMBAI | FRIDAY, 21 FEBRUARY 2020 “In all fairness, the Chinese have slowed “What Sandeep Dikshit said openly is what dozens of “Army does not discriminate (against) any soldier down. It is India that is an even bigger (Congress) leaders are saying privately. I renew my appeal based on religion, caste, creed, or even gender. The problem (in climate change fight). to the Congress Working Committee to hold leadership outlook has always been like this, that’s why we Nobody is doing anything about it” elections to energise workers and inspire voters” started inducting women officers as early as 1993” MICHAEL BLOOMBERG SHASHI THAROOR GENERAL M M NARAVANE US presidential contender and ex-New York mayor Congress leader Army chief

> . IN BRIEF Westinghouse to sign N-pact MPC paused to get max impact from future cuts with India during Trump visit Minutes of the meeting show Das felt economy needs more monetary stimulus as inflation outlook remains uncertain ANUP ROY “CONSIDERING THE “THE ENDEAVOUR NOW SHOULD further monetary policy easing, while US energy firm Westinghouse is Mumbai, 20 February OVERALL EVOLVING BE TO IMPROVE TRANSMISSION elevated inflation and the highly uncer- expected to sign a new GROWTH-INFLATION SITUA- OF THE CUMULATIVE 135-BP tain inflation outlook call for a cautious agreement with state-run When the Monetary Policy Committee TION, IT WOULD BE PRUDENT RATE REDUCTION EFFECTED approach. More data are needed for Nuclear Power Corporation of (MPC) members met earlier this month TO CONTINUE THE FOCUS ON SINCE FEBRUARY 2019 AND greater clarity,” Raj said. India for the supply of six they decided to keep the policy repo Deputy Governor Michael Patra nuclear reactors during US rate unchanged as they wanted to max- GROWTH IN THE CONTEXT SEIZE THE OPPORTUNITY said there was no definitive evidence President Donald Trump’s visit imise the impact of any future rate cuts, OF THE EXPECTED WHEN IT OPENS UP TO ACT that the downturn is bottoming out. next week, officials said, show minutes of the meeting. MODERATION IN JUDICIOUSLY AND EFFECTIVELY TO According to external member aiming to kickstart a long- The MPC, which met on February 4 INFLATION” SUPPORT THE ECONOMY” Chetan Ghate, the September corpo- running project. The agreement and announced its decision on ration tax cuts did not result in any dis- SHAKTIKANTA DAS MICHAEL PATRA will lay out timelines and the February 6, focused on having banks cernible increase in net profits in the RBI governor RBI deputy governor lead local constructor for the reactors to be built at Kovvada in pass on the past rate cuts and letting the third quarter across several firms in Andhra Pradesh and also address lingering concerns over India's economy show signs of improvement RBI’s Industrial Outlook Survey. The nuclear liability law. The United States has been discussing the following the growth-supportive meas- 6 per cent, it was largely because of Governor Shaktikanta Das said inducted member in the MPC, Janak profit margin expectations for the sale of nuclear reactors to energy-hungry India since the 2008 ures of the government. onion prices rising 328 per cent, which some green shoots were visible. Raj, said the recent rise in food prices fourth quarter were also pessimistic. civil nuclear energy pact and last year the two governments Unlike the previous policies, the six alone accounted for a 210 basis-point “Monetary transmission and bank should boost rural wages and help “If growth hasn’t revived with a announced they were committed to the establishment of the members of the MPC were not unduly (bp) increase in headline inflation credit flows have improved, but they strengthen rural demand. While the 135-bp cut, and a tax stimulus six reactors. REUTERS< alarmed on the inflation front, and took despite its small weighting (0.64 per need to become stronger. While the stress in the automobile sector seems to amounting to 1.2 per cent of GDP, comfort in the fact that inflation expec- cent) in the overall bucket, the mem- macroeconomy needs further mone- be gradually receding, the real estate then the need of the hour is more tation surveys showed households bers noted. According to the RBI sur- tary stimulus, the inflation outlook con- sector remains stressed. structural reform,” Ghate said. expected moderation in prices. The vey, “the three-month ahead inflation tinues to be uncertain,” said Das. If the coronavirus crisis prolongs Another external member Pami ‘Trump’s popularity rises in India’ members also deliberated on the coro- expectation is expected to moderate He added barring the intensifica- and spreads, “it will have ramifications Dua said while there were some signs of The popularity of US President navirus outbreak and its economic risks. by 60 bps and one year by 70 bps”. tion of global risks, there was policy for the global economy and its net a modest revival, overall economic Donald Trump in India is on the rise Even though the consumer price The members also noted the gov- space that needs to be timed optimally impact on the Indian economy might activity continues to remain weak. but some of his policies and trade index inflation spiked to 7.35 per cent in ernment measures and the tax cuts and opportunistically to maximise its be negative even if oil and other global External member Ravindra attitudes do not garner the same December, much higher than Reserve would help the economy, but not in the impact on growth. commodity prices decline”, Raj said. Dholakia favoured preserving policy warm reception, a latest Pew Bank of India’s (RBI’s) comfort level of short term. RBI’s executive director and newly “Weak demand conditions warrant space for action at an appropriate time. Research survey said on Thursday ahead of his maiden presidential trip to the country. In the 2019 Global Attitudes Survey of 2,476 respondents conducted from June 24-October 2, 2019, in India, Pew said the majority DHFL reports of Indians have confidence in Trump to do the right thing when it Govt won’t make power comes to world affairs. "And while Trump himself receives positive marks from the Indian populace, Indian public opinion toward pre-tax loss of some of his specific policies and trade attitudes do not garner the same warm reception." PTI< demand data official ~167 crore in Q3 LPG prices may come India gives licences CEA report says demand is set to grow at 5%, lower than previously projected But lender sees net profit of ~934 cr down next month, for importing 500k SHREYA JAI constructing 20 Gw of coal- says Pradhan tonnes of palm oil New Delhi, 20 February based capacity. Besides, there is from tax adjustment of ~1,973 cr CRUNCHING THE NUMBERS an envisaged capacity 175 Gw of Union India has issued about 70 The Ministry of Power has renewable power that is sought SUBRATA PANDA Minister licences for importing about refused to acknowledge a report to be built by 2022. Mumbai, 20 February Dharmen- 500,000 tonnes of refined palm by the Central Electricity Investment in India’s pow- dra Prad- oil from three countries — Authority (CEA), its technical er sector is at a standstill. It is, Troubled mortgage lender Dewan Housing Finance (DHFL), han on Nepal, Indonesia and arm, which estimates around instead, saddled with ~2-trillion which is under insolvency proceedings, has reported a pre-tax loss Thursday Bangladesh, sources said. PTI< 20 per cent lower growth in worth of non-performing assets. of ~167.80 crore in the third quarter (Q3) of 2019-20 (FY20), com- said LPG demand than earlier forecast, At the same time, barely any pared to a pre-tax profit of ~471.5 crore in the year-ago period. In prices may come down next sources said. Energy demand (billion units, or BU) state has signed long-term pow- the September quarter, the company had reported a pre-tax loss month. Last week, cooking HDFC Bank’s SME book This is after the demand esti- Apr-Dec 2019-20: 950 BU er purchase agreements in the of ~7,584.43 crore. However, the company has reported a net prof- gas LPG price hiked by ~144.5 doubles to ~1.48 trn mates were revised and calcu- „2021-22 „2026-27 „2031-32 „2036-37 past decade owing to financial- it of ~934.35 crore in the quarter ended December 2019 (Q3FY20), per cylinder due to spurt in in under 3 years lated using another ‘economet- ly sick status of their power dis- compared to a net profit of ~313.6 crore in the year-ago period on benchmark global rates of ric’ methodology to arrive at 2,530.5 tribution companies (discoms). account of a tax adjustment to the tune of ~1,973 crore for the first the fuel. He also directed SAIL Private sector more accurate results. The National Infrastructure nine months of FY20. 2,047.4 1,905.4 1,886.9 3,175.4 1,776.9

to draw up an action plan to lender HDFC Under the Electricity Act, 2,976.3 Plan of the government has esti- The company, however, said it has not provided for interest of 3,049.4 1,566.0 1,477.5 1,443.5 2,691.1 enhance production and Bank 2003, the CEA is tasked with for- 1,471.5 mated ~1.5-trillion investment ~527.62 crore on borrowings since 2,378.7 2,458.9 ensure safety at its plants. PTI< doubled its mulating Electric Power Survey 2,186.7 in renewable energy and ~1.1 tril- insolvency commencement SME book to (EPS), which forecasts short- lion in thermal power by FY21. based on the opinion of legal over ~1.48 and long-term electricity “Downward revision in pow- advisors. India ranks 77th trillion by demand. Every two years, the 7.30% 8% 6.50% Last report 2018 er demand is a clear indication “Under the insolvency and on sustainability December CEA revises the demand fore- GDP growth rate of slowing economic growth bankruptcy code, the treatment 2019 from ~74,000 crore in cast in the EPS. The revisions and thereby will impact invest- of creditors under the resolution index: UN report March 2017, cornering over 9 are done based on the prevalent Peak power demand (Gw) ment in the sector,” said an plan is according to debts due as India ranked 77th on a per cent of the around ~16- economic situation in the coun- Apr-Dec 2019-20: 182,533 Mw expert, who has not read the on the insolvency commence- sustainability index that takes trillion market, at a time when try. The last EPS came in 2016 „2021-22 „2026-27 „2031-32 „2036-37 report. He, however, said the ment date and therefore, no int- into account per capita carbon credit flow to the segment has and has been revised since. peak demand would also flat- STOCK JUMPS 4.98% erest is accrued and payable after emissions and ability of been tepid. The RBI data shows The current one was sup- 370.5 ten in coming years because of this date. If the interest was - 333.2 319.8 Price in ~ posed to be released between 447.7 increasing share of renewable rued on borrowings, the profit children in a nation to live the system-wide SME loan 298.7 427.4 293.5 259.6 398.2 healthy lives and was placed book stood at ~15.7 trillion as of March-May 2019, but was 255.9 projects as they have low plant for the quarter and nine months 239.3 225.8 359.9 195.1 201.5 131st on a ranking that measures June 2019, up 10 per cent over delayed as the findings were not 202.3 load factor or operating ratio. 11.6 would have been lower by the best chance at survival and the 12-month period. With a accepted by the ministry of Clarifying on the data, the 11.39 11.4 ~392.39 crore,” said the company. well-being for children, accor- loan book of over ~1.48 trillion, power, said an official. The CEA report said while the policies The interest income of the ding to a UN-backed report. PTI< HDFC Bank is the clear No. 2. PTI< changed the methodology and and schemes such as Make in 11.2 lender declined 28 per cent to finalised it in August 2019. 7.30% 8% 6.50% Last report 2018 India, dedicated freight corri- 11.0 ~2,384.12 crore in Q3FY20, com- However, the ministry of power GDP growth rate dor, and power for all are likely pared to ~3314.49 crore in Q3 of did not make it public. Source: Long-term energy demand forecasting report by Central Electricity Authority to dramatically increase elec- 10.85 10.8 2018-19. Similarly, income of the This was a deviation from tricity consumption, rooftop Feb 19,’20 Feb 20,’20 company dropped 26.8 per cent DoT to bar foreign previous practice because in the solar programme, Perform, to ~2,436.90 in Q3FY20, com- past the ministry released the 2021-22 (FY22) to FY27. This is at brought it down to 225 Gw in Achieve and Trade (PAT), pared to ~3,331.93 crore in the year-ago period. The company has survey with the addition of its an optimistic GDP growth rate of 2022, the revised report in 2019 Bachat Lamp Yojana (BLY), and said its wholesale loan portfolio aggregating to ~48,347.57 crore has telecom vendors in own comments on the findings. 8 per cent over this period. reduced it further to 202 Gw Standards & Labeling pro- been ‘fair valued’, based on internal valuations at ~42,361.51 crore, The report was, however, The report has pegged India’s (under the optimistic scenario gramme may reduce demand thereby resulting in a fair value loss aggregating to ~5,986.06 made available on the CEA web- energy demand at 1,477 billion of GDP growth rate of 8 per for grid electricity. crore. Of the total fair value loss of ~5,986 crore, ~4,852.06 crore has tit-for-tat response site recently. “But the ministry units (BU) in FY22, and 1,905 BU cent). The ministry had attrib- “Other advanced technolo- been accounted up to September 30, 2019, and balance loss of has not acknowledged it offi- in FY27. In an earlier report, uted the fall to surplus power gies such as electric vehicles ~1,133.99 crore has been charged to the statement of profit and loss PRESS TRUST OF INDIA order sent by the DoT to all cially,” sources said. which was also not accepted by supply and lower demand from could alter demand. Also, with for the quarter ended December 31, 2019. New Delhi, 20 February central government depart- According to senior govern- the Centre, the energy demand several states. growing global concerns due to “The recoverability or otherwise of these loans is yet to be ments and public sector units ment sources, the ministry has was 1,566 BU and 2,047 BU for At a lower GDP growth rate climate change, there has been ascertained and hence, the appropriate provision has been made The Department of Telecom on February 19 said. decided not to accept the report the same period. During April- of 6.5 per cent, the peak power increasing focus on gradually as a prudent measure,” the company said in an exchange filing. (DoT) will bar telecom vendors This include wifi access as it did not want to give the December 2019, India’s energy demand is even lower at 195 Gw. reducing dependence on fossil The auditors have pointed out that with the company incur- of those countries that would points, routers, optical fibre numbers official sanction. A demand was 951 BU. India’s current installed capaci- fuels and raising the share of ring losses to the tune of ~6,089.12 crore during the nine months disallow or exclude Indian sup- cable, enterprise routers and questionnaire sent to the min- The last EPS revision in 2016 ty is 367 Gw. Advance estimates renewable energy sources in the ended December 2019, the net worth has eroded substantially. The pliers from providing network related technology, integrated istry did not elicit any response. led to infighting between for FY20 that the GDP growth of energy mix,” it said. auditors have also expressed that there exists a mismatch to the gears used for wifi, fixed line broadband systems, broad- The new report, prepared by departments as it predicted a the country will be 5 per cent. The report also cited the extent of ~3,018 crore that is yet to be identified and mapped to and cellular networks, includ- band transmission equipment, the CEA along with consultancy fall in demand. The CEA had There is no new thermal share of off-grid renewable such individual parties and the underlying securities available, if any, ing 5G services, in their respec- modems etc. KPMG, has calculated India’s then reduced the projection to power generation being as solar pumps, which would out of the available surplus security cover. tive local markets, according to The section 10 (d) of the energy requirement to grow at 239 Gw by 2022 from earlier 289 planned in the country, except decrease demand for grid elec- Also, investigations relating to financial irregularities are an official order. order states that if nodal min- 5.22 per cent from financial year Gw. While the 2018 report for state-owned NTPC, which is tricity in the future. ongoing. The SFIO and the ED are investigating the matter. The order is part of the gov- istry finds that Indian suppliers ernment’s of an item are Public not allowed to Procurement participate or (Preference to compete in Make in India) procurement ‘If all goes well, there will be a recovery by end of 2021’ order 2017 by any foreign which envis- government Private-sector lender Lakshmi Vilas Bank (LVB) is exploring avenues to raise capital. capital and funds raised have gone on to will be a recovery by the end of 2021. talks with some investors. What is ages to source then it may While reports stated that investors including DBS Bank, Capri Global, Indostar Capital meet the provisioning requirements and the status? What kind of fund domestically restrict or Finance, and Tilden Park have shown an interest in the bank, LVB interim Managing that created problems. We will be able to How much capital do you need? raising are you looking at? manufactured exclude bid- Director and Chief Executive Officer S SUNDAR told T E Narasimhan a couple of recover a substantial amount. If that We need ~1,500-2,000 crore for The board has authorised us to have products to ders from that investors had shown an interest but nothing had been finalised. Edited excerpts: happens, the NPA problem could be growth, the capital adequacy ratio, discussion with prospective investors. encourage country from arrested. Of the gross NPAs of and provisioning. Current gross These talks could cover not only rais- 'Make in India'. eligibility for T E NARASIMHAN we could not achieve that, but hope to ~4,081 crore, about ~1,400 crore NPAs are ~4,081 crore and net ing capital through rights, preferential "Any for- procurement Chennai, 20 February recover it this quarter. I am confident should be in the NCLT. NPAs ~1,463 crore. The provi- issues, or qualified institutional place- eign govern- of that item that I should be able to complete the Insolvency is a slow process, but sion coverage ratio is almost 69 ments, it can even extend to a merger, ment which is and other deal (with investors) and raise a por- media reports have stated around per cent. Going by my records, I or offering a controlling interest. not allowing items relating The fresh slippages in Q3 were tion of capital during the current year. 60 per cent of the NCLT cas- will be able to recover Either we should get a huge chunk of Indian suppli- to that nodal lower than the recoveries. es are expected to be set- more than this lev- capital coming in, or else a merger ers to partici- ministry. How do you see that? The RBI has put LVB tled in the next few el of net NPAs, could be a better proposal. That was pate and/or The If you look at the non-per- under prompt quarters. If that hap- maybe in one or why the Housing Finance compete in Department forming assets (NPAs) in corrective action pens, I will be able to two years. In two merger was considered. Had it been procurement of telecom for Promotion of Industry and the third quarter, there was (PCA). When do you recover more. I am years, these through, these problems would have equipment, provision of Internal Trade identifies DoT an addition of ~257 crore see a turnaround? confident the econ- accounts will not been solved. We are analysing all the clause 10 (d) of Public as the nodal department for and the recoveries were S SUNDAR Since 2018 the bank has omy should require me to pro- proposals. There has been a lot of Procurement (Preference to implementing the provisions ~267 crore. We were very Interim MD & CEO, LVB received ~1,435 crore as bounce back in vide further. enquiries and talks at different stages. Make in India) order 2017 be related to procurement of confident of recovering capital. Provisions for 2020-21. If every- We are trying to see some reasonable invoked in relation to the goods, services or works relat- another ~200 crore. NPAs were ~2,500 crore thing goes You have capital coming in before March 31, aforesaid telecom items," the ed to the telecom sector. Unfortunately, due to some reason, during the same period. The existing well, there been in though not the entire quantity. 6 ECONOMY & PUBLIC AFFAIRS MUMBAI | FRIDAY, 21 FEBRUARY 2020 1 > Govt takes a call to save stressed telcos Axis in talks to buy No relaxation likely on AGR, but ministries fine-tuning plans to offer relief to firms MEGHA MANCHANDA ion. In the case of Tata this week, many telcos con- New Delhi, 20 February Teleservices, DoT would ascer- ceded they should have paid stake of Max Life tain whether the full payment their dues after 2011, rather After back-to-back parleys this claims made by the company than waiting so long. In 2011, SUBRATA PANDA week between the top manage- were genuine or not. On the the matter was shifted from the Mumbai, 20 February ment of telecom companies issue of invoking bank guaran- SC to the Telecom Disputes and the government, a con- tees of the companies in case Settlement and Appellate rivate sector lender Axis sensus seems to have emerged of payment default, DoT is Tribunal (TDSAT) for interpre- Bank has entered into an on the need to save the finan- awaiting legal opinion it sought tation of the heads and com- P exclusive agreement with cially stressed sector. on the AGR issue. The depart- putation thereof. Max Financial Services and While ment, under the unified licence The AGR dispute started in Max Life Insurance to explore a Chairman Kumar Mangalam agreement, can invoke bank 2003. On October 24, 2019, the long-term strategic partnership Birla and Chief Executive guarantees and convert it into a SC ruled that AGR for telcos with the life insurance arm. Ravinder Takkar did their cash security if the service should include all revenues The deal will involve Axis rounds of the Department of provider violates any term of the accrued to carriers, including Bank acquiring a significant “The strategic interest “We have had a long- Telecommunications (DoT) licence. The ministry has sought that from non-core activities, stake in the life insurer, but the of Axis Bank in Max Life standing bancassurance and North Block over the last views on whether the guaran- upholding the DoT’s stance. quantum has not been will allow both relationship with Max Life few days, Bharti Airtel tees should be invoked before The firms paid 90 per cent of finalised yet. companies to work and the ongoing discussions Chairman Sunil Mittal joined March 17 (next date the amount due to The boards of Max Financial towards an enduring are a step further to in as well to seek relief for the of the SC hearing). Unpaid licence fee the government in Services and Max Life future for policyholders deepen and strengthen telecom industry faced with a Bharti Airtel Chairman Sunil Bharti Mittal at Telecom Minister “The govern- of telcos amounts 2003. They were Insurance Company on and other stakeholders” this strategic partnership” bill of ~1.47 trillion in pending Ravi Shankar Prasad’s office, on Thursday. Mittal said the sector ment has to to ~22,589 crore, supposed to pay the Thursday gave the go-ahead to ANALJIT SINGH AMITABH CHAUDHRY dues linked to adjusted gross required ‘rationalisation’ in levies PHOTO: PTI ensure that the while interest and remaining 10 per both companies to explore revenue (AGR). telecom compa- penalties took the cent to the govern- Founder and chairman, MD and CEO, options with Axis Bank. There’s no official word yet The Union government is of the DoT is expected to issue nies comply with total liability to ment, along with Max Group Axis Bank According to Insurance from the DoT on what meas- the view that there can be a notices to all telcos to pay their the order of the ~92,641 crore, said interest, penalty and Regulatory and Development ures were being planned to debate on the quantum of pay- dues by March 17. Supreme Court. PTI quoting sources interest on penalty. Authority (Irdai) norms, any TAKING STOCK BSE price in ~ offer relief, but a senior official ment and penalty but not on Mittal, who met Telecom They have started On February 14, entity holding more than 10 per Max Financial Axis Bank on Thursday said, “We are the fact that the companies Minister Ravi Shankar Prasad making payments and have so SC had rejected the modifica- cent stake in a life insurance doing everything to save the have to make the payments. on Thursday, said the sector far paid ~15,700 crore,’’ the offi- tion applications of Bharti and company is termed a promoter. health of the sector.” A source In fact, Tata Teleservices, was heavily taxed and cial said. The government has Vodafone Idea seeking relaxed If the stake is less than 10 per said the DoT and the Finance which paid ~2,197 crore as full required “rationalisation” in to ensure that the health of the payment scheme for the AGR cent, the entity will hold the sta- Ministry were looking at many and final in AGR dues on levies. He didn’t comment on sector is not impacted and dues. The top court directed tus of investor. steps to bring back the sector Monday, will be issued a notice AGR dues issue. that the Union government the companies to make pay- Axis Bank already holds on track and that a ‘’monop- seeking full payment of dues as To cross-check the AGR meets its obligation towards ments immediately, prompt- 2 per cent in Max Life oly’’ situation was not desir- per the Union government's dues claims of the telcos, the the customers, according to ing the DoT to issue letters to Insurance. Max Financial, able. A telecom fund to give calculation. The company’s government has decided to ver- the official. telcos last Friday that pay- which is the holding company Compiled by BS Research Bureau Source: Bloomberg loans to operators is among the dues are estimated at around ify their accounts during the It is learnt that during the ments must be made by the of Max Life, holds 72.5 per cent measures being discussed. ~14,000 crore. To press its point, last few years in a random fash- meetings with the government same midnight. in the life insurer, with Mitsui Sumitomo holding 25.5 per cent tive officer of Axis Bank, said: believe that the potential trans- stake in the life insurer. Max Life “We constantly keep assessing action will provide a fillip to the is the largest non-bank-owned strategic opportunities and we life insurance sector overall.” life insurer in the country. see a potential for greater par- The proposed transaction Axis Bank is a bancassur- ticipation in the under-pene- will be subject to regulatory IL&FS to seek lenders’ nod for road asset sales via e-voting ance partner of Max Life trated life insurance space.” approvals and corporate autho- AMRITHA PILLAY development. The person the fair market value. In said the person quoted earlier. Insurance, wherein it sells the He added: “We have had a risations, satisfactory comple- Mumbai, 20 February added: “The e-voting process October, the new management The group is now seeking latter’s products as a corporate long-standing bancassurance tion of due diligence, and exe- for some of these projects com- decided to consider monetising lender approval to finalise the agent. The new premium gen- relationship with Max Life and cution of definitive Resolution for IL&FS’s five road menced earlier this month. For the remaining nine assets under sale of these five projects, erated through this arrange- the ongoing discussions are a documentations. According to assets hangs in the balance as all five, it is expected to con- the Infrastructure Investment before the binding bids expire. ment has aggregated to over step further to deepen and sources, Max Life and Axis Bank bid validity for these projects clude before the deadline.” An Trust (InvIT) model. In October, the govern- ~12,000 crore over a period of strengthen this strategic part- had earlier approached Irdai for is set to expire by month-end. IL&FS spokesperson con- The Chenani-Nashri ment-appointed management 10 years, while maintaining nership. The successful com- a deal, but it did not materialise In a last-ditch effort to finalise firmed the e-voting. Tunnel, Hazaribagh-Ranchi committee for the group said it high persistency. pletion of the proposed trans- as the insurance regulator had the sale of these assets, the According to an affidavit, Expressway, Jorabat Shillong expected at least half the Apart from Axis Bank, Max action is expected to create some reservations. group will now seek lenders’ the group reached out to bid- Expressway, Pune Sholapur group’s debt to be resolved, Life’s bancassurance partners significant value for all stake- HDFC Life and Max Life had approval through e-voting. ders, seeking extension of bid Road Development Company, recovered, or restructured — include YES Bank and Lakshmi holders.” Max Group Founder agreed to merge in 2016, but the “The bids for the five road validity. However, they reject- and Jharkhand Infrastructure and to complete a significant Vilas Bank. Axis also has simi- and Chairman Analjit Singh deal did not go through. projects will expire on ed the proposal in the absence The bid validity for 5 projects Implementation Company portion of this by March 2020. lar partnerships with state- said: “The strategic interest of In the first nine months of February 29. As the next date of of clarity on the timeline of is set to expire on February 29 are the five assets for which A lender approval will help owned life insurance behe- Axis Bank in Max Life will lead FY20, the value of new business hearing for IL&FS at the issuing letters of intent. bids were higher than fair IL&FS’s new board to take time- moth Life Insurance to the much-awaited perma- written by Max Life stood at National Company Law In December 2018, a public bined bid value of about ~13,000 market value. ly steps to expedite the resolu- Corporation and Bajaj Allianz nence and allow both compa- ~576 crore, with year-on-year Tribunal is not before that, the bid process was initiated for sale crore. Of the 10 projects, IL&FS “The bid value for these five tion for these assets, subject to Life Insurance Company. nies to work towards an endur- growth of 24 per cent. group is trying to get lenders’ of 14 road assets. In August 2019, group decided to go ahead with projects is ~7,489 crore, against receipt of nod from retired Amitabh Chaudhry, man- ing future for policyholders and approval through e-voting,” the group received binding bids bids for only five, as the remain- a debt of ~10,500 crore and fair Supreme Court judge DK Jain, aging director and chief execu- other stakeholders. We also More on business-standard.com said a person privy to the for 10 of these assets, for a com- ing were significantly lower than market value of ~7,200 crore,” and other regulatory approvals. 8 ISSUES AND INSIGHTS MUMBAI | FRIDAY, 21 FEBRUARY 2020 >

can play an active role to reduce financial stress by calling on lenders to adopt a CHINESE WHISPERS Turningathreatintoopportunity sympathetic stance. Additionally, it is suggested that the borrowing limits should not be reduced. Special measures required for sectors affected by coronavirus procure key starting materials (KSMs) While there is uncertainty about the and APIs, permitting brown API duration of the current crisis situation, must be careful to avoid overreaction trade. In addition, cargo is stalled as units/firms with limited capacity utili- we believe that the disruption can con- and panic, as the outbreak is confined ships are not being permitted to dock sation to produce APIs which are being tinue for two quarters or so. Meanwhile, largely to China. and unload. The government should imported are some recommendations it is essential to avoid price rise owing To assess the impact and stress consider issuing an official advisory so that could help the sector. Registration to restrictions in supply of critical points across sectors, Confederation of that shipping companies can put up certificates already issued for imports goods for consumers. Once shipments Indian Industry (CII) undertook an their position as a genuine case of may be extended for delayed deliveries. are restarted, the government must extensive consultation exercise with delay in goods delivery with clients. Some factory units which have been ensure that all paperwork is conducted its members and affiliated associations The Indian aviation sector is likely shut down could be permitted to restart at great speed to clear goods at the and our office in Shanghai conducted to lose out on its gross revenue targets operations on provision of self-certifi- ports to alleviate stress on enterprises. a quick survey of Indian companies as the outbreak has led to cancellations cation for environmental clearances. The coronavirus crisis is also a operating in China. We found that with and temporary suspension of flights The Indian solar components mar- chance for India to make progress on many Indian companies spread across operating from India to China and Hong ket is dominated by Chinese com- its Make in India aspirations and also Everyone’s invited CHANDRAJIT BANERJEE major Chinese cities and provinces, Kong. To deal with the potential tourism panies, which supply around 80 per export for the world. Business con- To the question whether opposition supply chain disruptions and restric- losses, providing a limited period open cent of the requirements, including ditions must be conducive to position political leaders had been invited to the tions on people are strongly impacting skies policy to western bound destina- solar cells and modules. Indian devel- India as a viable competitive alter- Namaste Trump event to welcome US he impact of the Coronavirus, Indian companies based in China. tions till October 2020 could encourage opers are faced with shortages of raw native to China which Indian industry President Donald Trump (pictured) in now named COVID-19, is Further, in India, industries and more inflows from that direction. materials required for solar is fully capable of. Ahmedabad on February 24, the Ministry being felt globally as it has markets across the board are in a diffi- The Indian pharma industry is panels/cells due to delayed supplies by In the medium run, we must ensure of External Affairs on Thursday said the T started disrupting trade, cult position. The sectors most likely heavily reliant on imports of bulk drugs Chinese vendors. Many upcoming that Indian manufacturing can reach event at a cricket stadium was organised supply chains, and commodity to be affected by the outbreak include such as APIs and intermediates. In FY solar projects may be stalled while out- close to the price points that Chinese by the Donald Trump Nagrik demand, causing fears of a possible shipping and aviation, pharmaceuti- 2019, India imported around ~249 bil- put may also suffer. An extension of manufacturers provide. Indian industry Abhinandan Samiti. It said this economic slowdown. The International cals, mobiles, electronics and solar lion worth of bulk drugs, accounting for the timelines of projects would provide enjoys the capability inside the factory organisation would be finalising the list Monetary Fund stated that while it was power, among others. 40 per cent of domestic production. The relief to renewable energy companies. gate but outside-the-fence factors such of invitees. In Ahmedabad, Municipal too early to assess the full impact of the Tanking freight rates due to the epi- outbreak continues to disrupt supplies It is also suggested to utilise the green as ease of doing business, cost of capital, Commissioner Vijay Nehra said fewer coronavirus epidemic amidst great demic have impacted cargo movement of pharmaceutical ingredients which cess to offer incentives for domestic land availability, and others need to be than 200,000 people were expected to uncertainties, the virus may damage service providers in the Indian ship- has led to shortages and increased manufacturers of these modules till competitive. Right-pricing of transport line up along the 22-km route of the global growth in 2020. There are signif- ping industry, with dry bulk cargo prices for generic drugs in India. the crisis tides over. and energy will make Indian goods roadshow of the US president and Prime icant consequences of the outbreak for movement registering a sharp drop Fast and close coordination between For the electronics sector, enhanced more competitive in global markets. Minister Narendra Modi in the city. On the Indian economy across various sec- since January 2020. Further, realisa- various ministries and concerned availability of credit and relaxation in Tuesday, Trump had said: “He (Modi) tors, given India’s high import depend- tion per day per vessel has declined by departments to expedite approvals, NPA regulations can help avoid enter- The author is director general, says between the stadium and the ence on China. At the same time, we more than 75-80 per cent in dry bulk active measures by the government to prises defaulting on their obligations. RBI Confederation of Indian Industry airport, we’ll have about 7 million people. So its going to be very exciting. I hope you all enjoy it.” That would be the total population of Ahmedabad (7 million), a civic official said. Required: Institutional capacity House banter Amid the acerbic debates and a heated exchange of words between the The UK’s National Infrastructure Commission provides some lessons and other relevant bodies such as sector Treasury and Opposition Benches in the regulators. This is important because Uttar Pradesh legislature, occasional ment” on November 19, 2015. The com- one of the biggest problems with insti- light-hearted banter provides the mittee strongly endorses setting up “3P tutions similar to the NIC in India, has much-needed relief to House members India” which, it holds, in addition to been a lack of buy-in on recommenda- and eases the frayed tempers of the functioning as a centre of excellence in tions from external institutions by mini- policymakers. In a recent episode during PPPs, will enable research, review and stry mandarins looking to guard their the ongoing Budget session, the roll out activities to build capacity. The own turfs. Samajwadi Party (SP) expressed committee emphasises the need to The NIC has to engage with the pub- dissatisfaction at the reply of the further strengthen the three key pillars lic. It is required by its charter to engage Adityanath government to a question it of PPP frameworks, namely, govern- with the public while preparing its posed. Thereafter, the leader of the ance, institutions and capacity, to build reports. Given that the public is the big- Opposition, Ram Govind Chaudhary, on the established foundation for the gest “customer” and user of most infras- announced he would be staging a two- INFRA TALK next wave of implementation. tructure projects, this is critical in build- minute walkout in protest. Since Chief December 31, 2019: The finance min- ing consensus. The NIC is financially Minister Yogi Adityanath was due to VINAYAK CHATTERJEE ister releases the report of the task force independent. While it is technically speak shortly thereafter, House Speaker on National Infrastructure Pipeline under the Treasury, it is funded by a Hriday Narayan Dikshit advised uly 10, 2014: Finance Minister (NIP) for 2019-25. At a press conference, “multi-year financial settlement” with Chaudhary to just take a round of the Arun Jaitley’s first Union Budget she says “to achieve the GDP of $5 tril- the government which enables it to have floor of the House and return to his seat speech in Parliament. He reads lion by 2024-25, India needs to spend visibility on funding across years at a instead of walking out. This amused the J out Para 110 in Section V about $1.4 trillion over these years on time, rather than have to negotiate members across the party divide, on Infrastructure: infrastructure. The challenge is to step- budgets every year. including Adityanath and Chaudhary. “India has emerged as the largest up annual infrastructure investment so So is its operational independence. PPP market in the world with over 900 that lack of infrastructure does not infrastructure challenges and strategy. examines solutions in multi-modal terms Its charter makes it clear that it "will projects in various stages of develop- become a binding constraint on the It has a secretariat of approximately 50 with an eye for the interdependencies have complete discretion to determine Gearing up for May 2021 ment. PPPs have delivered some of the growth of the Indian economy”. staff led by a chief executive. between road, rail and metro transport. independently its work programme, The West Bengal Assembly polls are iconic infrastructure like airports, ports It has been recognised quite early It takes a long-term view. The NIC The NIC charter makes the relation- methodologies and recommendations, scheduled for May next year. The and highways which are seen as models that to push the infrastructure agenda publishes a National Infrastructure ship, rights and responsibilities with the as well as the content of its reports and opposition is looking at putting together for development globally. But we have hard as a key driver of economic growth, Assessment once every parliament government clear. The government has public statements." a “third front” in the polls against the also seen the weaknesses of the PPP it is not enough to have a visionary proj- term, setting out the long-term infras- a duty to formally respond to recom- NIC has the ability to hire good tal- ruling Trinamool Congress and the framework, the rigidities in contractual ect-pipeline and financing; there is also tructure needs of the country, spanning mendations made by the NIC and make ent. A weakness of Indian institutions challenger, the Bharatiya Janata Party arrangements, the need to develop more a need to create the required institu- a period of 30 years, along with recom- it clear which ones it accepts and rejects, has been that they have turned into (BJP). This “third front” is likely to nuanced and sophisticated models of tional capacity. mendations to the government on how along with reasons. The NIC monitors sinecures for retired bureaucrats. The comprise the Left parties and Congress, contracting and develop quick dispute Here, the National Infrastructure those needs can be met. progress on recommendations. It pub- NIC pulls in not just civil servants, which is a repeat of what happened in redressal mechanism. An institution to Commission (NIC) of the United But it also keeps an eye on immedi- lishes an annual monitoring report but also professionals from the infra 2016. In that election, this alliance had provide support to mainstreaming PPPs Kingdom, set up as recently as October, ate needs. A purely long-term blue skies which keeps track of the government’s sector, from local governments, and split the anti-incumbency vote between called 3P India will be set up with a cor- 2015, holds some lessons for India. view runs the risk that the recommen- progress made on its earlier recommen- from regulators. itself and the BJP. The effectiveness of pus of ~500 crore.” What is the charter of UK’s NIC ? dations will simply be ignored by a gov- dations. In this way, it acts as a reality Rebooting Indian infrastructure is this “third front” will be tested in the May 26, 2015: The NDA Government As an operationally independent ernment focussed not on the next 30, check on the gap between aspirations crucially dependent on building insti- upcoming civic elections in West Bengal. constitutes a nine-member committee agency under the UK Treasury, it func- but on the next five. The NIC, therefore, and actual achievement. tutions similar to the NIC in the UK. The The CPI(M) and Congress are working on headed by former finance secretary, tions as a think-tank focussed on the publishes sector-specific reports on It builds bridges with other institu- principles on which UK’s NIC was estab- fielding candidates who are below 35, Vijay Kelkar. This Committee submits long-term infrastructure priorities of the more pressing infrastructure needs. tions. The NIC is required by its charter lished show the way. and even apolitical ones who are its report “Revisiting and revitalising country and provides advice and rec- It moves beyond a narrow sector to engage with other stakeholders such popular and have a clean image. PPP model of infrastructure develop- ommendations to the government on focus. In transport for instance, it as policy makers, infrastructure experts The author is the chairman of Feedback Infra

INSIGHT LETTERS assumed sufficient stimulus for increased pri- ReformGST and the customers or cit- Argentina’s crisis vate investment and growth in an economy izens of India are paying it with high unemployment and excess capacity. This refers to "Reforming without any difficulty. The It was naïve to expect entrepreneurs to invest GST" by Naushad Forbes service providers may be The problem with Macri’s economic programme was not excessive gradualism or in an economy with such significant slack and (February 20) in which he exempted from paying GST so much relative price volatility. has observed the need to when receiving services. insufficient central bank independence but faulty design in at least three respects Misdiagnosing the cause of inflation was simplify, lower and make Hope this suggestion if also devastating to the plan.In a country as the goods and services tax accepted may reform GST CARLOS LUQUE, SIMAO SILBER & dollarised as Argentina, floating exchange or GST comprehensive to law. ROBERTO ZAGHA ARGENTINA’S PER-CAPITA INCOME AS SHARE OF US (1900-2016) rate and open capital account, inflation is fulfill its purpose. I think the S C Aggarwal New Delhi (in 2011 $) (%) not driven by excess demand, but by expec- one amendment that the n December 2019, President Mauricio tations of exchange rate devaluation. The GST law needs is to enable Improvedesign 100 Macri left Argentina in crisis. The out- 92.2 unit of account ceases to be the domestic the payer pay GST without come was unexpected. Macri was pop- 87.5 90 currency and becomes the dollar. Inflation input tax credit. Some may This refers to “A defeat or I ular at the start of his four-year man- 80.8 79.1 expectations lose their anchor and reflect argue that it will lead to tax victory for pollsters?” 80 date. His government's objectives were sound 71.7 78.4 the expected evolution of the exchange rate. on tax but I have a solution (February 19) by Atanu and ambitious: eliminate poverty, accelerate 78.5 70 Interest rates had to reach extraordinarily for that too. To avoid tax on Biswas. There are constrains 63.4 59.1 growth (cumulative 11 per cent in four years), 70.6 72.7 55.0 60 high levels to prevent depreciation of the tax, the GST rate should be which reduce the appeal 64.7 51.1 reduce fiscal imbalances, and reduce inflation 61.1 48.7 50 currency and contain inflation. High and first brought down to 2 per and validity of opinion polls from over 20 per cent to 4-6 per cent in 2019. unstable interest and exchange rates further cent or 5 per cent for man- in India. With about 900 49.0 50.4 49.1 37.2 40 His policies were orthodox: floating of the 44.5 32.9 depressed rather than stimulated private ufacturers when they pur- million voters, much would exchange rate, central bank autonomy, infla- 35.6 30 domestic investment. chase raw materials. Then depend on the reach of poll- tion targeting, fiscal austerity, and elimination 30.6 27.3 20 High real interest rates with an open cap- when the manufacturers sell sters. Second, multiplicity of of all restrictions on the capital account. ital account made it easy to attract foreign the product (except items regional parties together Macri’s programme was strongly supported 10 capital. Excessive borrowing has meant covered by a GST rate of 28 with national parties with by foreign investors, the International 1900 2014 Argentina has once again gone through an per cent), a 2 per cent GST their strength varying from Monetary Fund or the IMF, other interna- Source: Maddison Project Database over-borrowing spree. The 2017 100-Year should be added in that state to state complicates tional organisations (World Bank, Argentina bond is now trading at half its transaction. In this way, our the sample design unlike in Organisation for Economic Co-operation and under the fund-supported programme. ...these per cent of GDP in 2019 thus pressuring the value. IMF data suggests that the 50 per cent manufacturers can add the countries where the fight is Development), and the economic media. policy efforts are starting to bear fruit...” fiscal accounts. increase in external indebtedness in four cost of input tax to the cost between two main parties. The results were worse than the most pes- What went wrong? From the beginning, the Treasury years financed capital outflows of residents of manufacturing and whe- Y G Chouksey Pune simistic forecasts. The GDP growth was neg- In a recent Brookings Paper, the former opposed the central bank's anti-inflation needing to protect their assets from the never they sell their pro- ative in three of the four years 2015-19, per- governor of the Argentina Central Bank programme, arguing that the inflation tar- uncertainty brought about by high inflation duct, they can charge their Correction capita GDP in 2019 was 8 per cent below its (BCA) argues that the fiscal adjustment was gets were excessively ambitious, the required and an erratic exchange rate. customers a GST of 2 per level in 2015, unemployment over 10 per too gradual, and the BCA was not granted real interest rates excessive, inflation target- There are many to blame for this dismal cent and deposit the same In the review of Sixteen cent, and the poverty rate the highest in his- enough independence. ing ill-suited to the volatility of an economy outcome, but the burden will be borne by with the government. Stormy Days by Tripurdaman tory. From 28 per cent of GDP in 2015, the This stance is difficult to reconcile with with high inflation. Such an approach has those parts of Argentine society least able to As far as service tax or Singh (February 19), the book country’s external debt increased to 60 per the facts. Notwithstanding violent popular worked well in economies where inflation afford it. Argentina’s economic debacle came GST on services is con- details incorrectly mention cent in 2019. The government’s fiscal targets protests, in the first months of Macri’s term, has already been controlled. In addition, the from a plan whose strength was its anchor cerned, those should be kept the publisher as Harper- were not achieved and from 53 per cent of the government increased public utility economic logic of inflation targeting is to in economic orthodoxy rather than a sound out of the GST’s domain Collins. The book is pub- GDP in 2015, the public debt rose to 76 per prices by 100-300 per cent, an adjustment increase interest rates to contain demand diagnosis of the problem. Rigidity in imple- altogether. The GST rate on lished by Penguin. The error cent in 2019. Accumulated inflation during equivalent to 3 per cent of GDP over 2016- when there is evidence that the inflation tar- mentation reinforced the costs of design services should be fixed at is regretted 2015-19 reached 340 per cent. 17 even though at 53 per cent of GDP, the gets will not be achieved. With the ongoing flaws. Hopefully these lessons can inform 18 per cent with no input tax It has been difficult to accept that the public debt was moderate. The BCA freed recession, this did not make sense. It was the economic programme of the new pres- credit. It is simply a con- “right” policies generated dismal results. the exchange rate and opened the capital only after two years of dismal results that the ident, Alberto Fernández. sumption tax or an expendi- Letters can be mailed, faxed Eighteen months before the unraveling of the account rapidly leading to a 40 per cent president moderated inflation targets, ture tax which used to be a or e-mailed to: economic programme, the IMF approved a $50 devaluation in the first few weeks of Macri’s thereby ending BCA independence. Luque and Silber, both professors at the University direct tax under the The Editor, Business Standard billion loan. And a few weeks before Argentina term and unbridled external borrowing In fact, the problem with Macri’s economic of Sao Paulo, Brazil, and Zagha, a former World Expenditure Tax Act, 1957, Nehru House, made public its difficulties servicing its exter- thereafter. The BCA also had sufficient programme was not excessive gradualism or Bank Director for India and Secretary of the that was repealed in 1968 4 Bahadur Shah Zafar Marg nal debt, the IMF deputy director announced: autonomy to let real interest rates rise to insufficient central bank independence but Growth Commission, contribute opeds to the due to low collection and New Delhi 110 002 “The…authorities continue to show a strong 10-15 per cent in a world with real rates near faulty design in at least three respects. Brazilian newspaper Valor Econômico where difficulty in implementa- Fax: (011) 23720201 · E-mail: commitment to their economic policy pro- zero. The interest cost of the public debt Contraction of the public sector, supply several articles on the Argentina debacle were tion. The GST on services is [email protected] gramme, meeting all the applicable targets rose from 1.6 per cent of GDP in 2015 to 4 side reforms, and liberalised capital flows were published last December being collected at the rate of All letters must have a postal 18 per cent even at present address and telephone number OPINION 9 > STAY INFORMED THROUGH THE DAY @ WWW.BUSINESS-STANDARD.COM

Volume XXIV Number 135 ILLUSTRATION: BINAY SINHA Again, this was heavily publicised. In Bidar, children MUMBAI | FRIDAY, 21 FEBRUARY 2020 were interrogated over a school play on the citizenship laws, parents charged with sedition and women jailed, producing global outrage. As a result of all this and more, in large parts of India Taxing targets there is heavy popular mobilisation against the NPR Unreasonable I-T demands affect investment climate and the CAA. Tamil Nadu alone saw mass protests in Chennai, Tirunelveli, Vellore, Coimbatore, Thoothukudi, t has now become a regular feature of India’s fiscal management. First, Tiruchi, Madurai, Salem and Krishnagiri on February the government sets an overly ambitious target for revenue mobilisation, 18. These were protests that in many cities required the deployment of the entire police force to manage. This and when the figure falls desperately short, the taxman comes knocking. is unsustainable in a country the size of India. IWhile on the stump for the 2014 elections, the Bharatiya Janata Party The enumerators who will go door-to-door from attacked the ruling regime for unleashing “tax terrorism”, which, it argued, April 1 will be low level employees, teachers and such, not only created anxiety among the business class and affected the investment who will have little incentive to pursue the data col- climate, but also dented the image of the country. But six years later, the tradi- lection in the face of resistance and hostility. The tion continues. National Sample Survey (NSS) data is being affected by the anxieties over citizenship. In January, officials According to a report in this newspaper, the tax department is sending Why India’s census in Guntur were attacked while on a routine data col- notices to directors of private limited companies, holding them liable for pending lection exercise. The deputy director general of the dues. The number of such notices has risen exponentially in recent weeks, and NSS in West Bengal said data on education, sanitation the amount demanded is in the range of ~5 crore to ~20 crore. In some cases, and employment was difficult to gather because of directors are expected to pay within 10-15 days. The liability is being imposed is in trouble “mistrust and acrimony.” under Section 179 of the Income Tax Act. In such cases, bank accounts and prop- The former chief statistician of India Pronab Sen said that this was a new sort of problem. In an interview erties of directors can be attached if they fail to pay in time. Although the Section Opposition to additional questions on parents in the NPR exercise with The Indian Express he said that “attacks on field is meant for firms under liquidation, it can be applied to all companies. The investigators of the NSS is not new. It has happened only way out for directors, according to experts, is to prove that the non-recovery could make the data less reliable before, essentially when they asked questions on either cannot be attributed to gross neglect or breach of trust on their part. Tax notices household incomes or household assets… so, this has of this kind, and possible attachment of property, will discourage people from rom April 1, the Union government will begin Kerala has informed the Centre it will not implement happened earlier, but not too often, because over time taking up directorship in private limited firms, which constitute about 95 per an exercise that is likely to traumatise the pop- the NPR fearing law and order problems. It has also people got fairly comfortable knowing that NSS sur- ulation and exhaust the bureaucracy and the challenged the Citizenship Amendment Act in the veys happen.” He added that this time it was different. cent of all companies in India. The action of the tax department is in sharp F state. Enumerators for the National Population Supreme Court. Madhya Pradesh said this week it “First, you are going to have the population register contrast to the government’s stated objective of increasing the ease of doing Register (NPR) will fan out across India for six months would not implement it, and in Maharashtra, some starting with the (Census) house-listing operations. business. Such notices are at odds with the aim of reducing tax litigation. The between April and September to engage with 250 mil- allies such as Sharad Pawar’s the Nationalist Congress The house-listing operation is a key step in our critical government has announced a new scheme to address tax disputes, worth lion households to do the census headcount and gather Party are opposed to implementing it. analysis because that’s the basis on which the entire about ~9 trillion. Unreasonable tax demands will only increase litigation and some additional data. Other states like West Bengal have encouraged cit- country is divided into enumeration blocks and then, affect the business environment. Opponents of the NPR say that the additional ques- izens to resist the enumerator and not show them any the Census enumerators are given specific enumerator tions on parents make the NPR a lethal weapon that documents. Yet other states have said they will imple- blocks. So, the enumeration blocks are at the heart of However, the reason for tax notices can be traced to the Budget. Even will authorise low level administra- ment the NPR only partially (Odisha the Census operation. If you have problems in getting after a significant downward revision, it will be extremely difficult for the gov- tive officers to mark individuals as and Bihar), leaving out questions. that done and if you get resistance to that, the Census ernment to meet the current fiscal year’s revenue target. It needs to mobilise doubtful citizens. This will strip them Union ministers, such as Ram Vilas is in deep trouble.” about 40 per cent of the net tax revenue target in the last quarter of the fiscal of voting rights, and begin a process Paswan, have said that the NPR is He said that we “may well have a situation where year, which is a difficult job. For instance, less than 30 per cent of net tax that goes through a National Register problematic. Rajasthan Chief you are unable to do the Census properly and if the revenue was collected in the fourth quarter of the last fiscal year. of Citizens list, a Foreigner Tribunal Minister Ashok Gehlot has said that Census is not done properly, then for the next 10 and ends in a detention centre. The he will not allow citizens to be jailed years, no household survey would be reliable As the government has invoked the escape clause under the Fiscal only thing that the prime minister and instead go to jail himself first. At because all household surveys rely on the Census Responsibility and Budget Management Act and would not be in a position has said about this concern is that the federal level, then, it is clear that as the frame. If this (Census) runs into problems, to let the fiscal deficit expand more, it will have to cut or postpone expenditure the NRC has not been discussed yet, the incoming data will be incomplete and there’s a danger that it might, then for the next if the collection falls short of the target. What is worse is that things are the home minister’s many unam- and fragmented. 11 years, you are in trouble”. unlikely to change even next year. The government has assumed a revenue biguous public pronouncements on AAKAR PATEL The polarisation produced by the What is at stake is credible data for a decade. The growth rate of 12 per cent for the next fiscal year, which is again ambitious. it notwithstanding. citizenship laws has resulted in some state will exhaust itself trying to implement something Let us assume that the govern- extreme actions by the state and for which there is no demand from any section, which Instead of going through the same process year after year, it is important to ment is indeed undecided about implementing a these actions being publicised. In Hyderabad this has resistance from not just parts of the polity, includ- make realistic revenue projections and adjust expenditure accordingly. Putting nationwide NRC. And let us assume that the changes week, the officials overseeing Aadhaar exceeded their ing opposition states, but also mass mobilisation of pressure on the tax department with unrealistic targets not only results in to the NPR form have been made in good faith and brief and summoned over 100 people to their office the sort we have not seen in a long time. harassing taxpayers and litigation but also affects the business environment. that these forms, as the home minister has claimed, on February 20 to prove their citizenship. Presumably, We have not even considered the fact that powerful This is not to suggest that the government should not collect what is due. But according to news reports, cannot at this stage be all of these were Muslim individuals. After this was voices around the world, including the United Nations changed. And let us also assume that it is absolutely reported, the Unique Identification Authority of India Secretary General, elements within the European indiscriminate use of law and state power to achieve revenue targets demor- necessary to have yet another list of people in India clarified and backtracked a little, saying that the indi- Union and the United States Congress, are concerned alises businesses. (apart from the voters list, Aadhaar and the census). viduals had been asked to come to them only in May. and vocal about what is happening in India. Even if we assume all this, and give the government But the damage was done. Elsewhere, a court in Assam It doesn’t make sense for the government to push the benefit of the doubt, it is difficult to see how pro- waved away 15 different documents, including voter through with the NPR exercise in these circum- ceeding with the NPR exercise makes sense. For one, ID cards and land revenue records from the 1960s, to stances and the sooner it realises this and makes it Rocky road for highways some states have said that they will not implement it. dismiss a Muslim woman’s claim to Indian citizenship. public, the better. Financing problems hit highways and rural roads he highways construction sector was one of the successes of the first term (2014-19) of the National Democratic Alliance (NDA) govern- The math of index inclusion ment. The government took on the task of reviving the sector and largely succeeded. However, that momentum is now being lost. T he case for a capital-deficit emerging market Previously, the pace of highway construction had increased in every year of economy like India to dip into the global savings FOREIGN FLOWS the government’s term. But the data from April to January of the ongoing pool to fund its investment needs is rather obvi- Outstanding stock Potential weights T Flows ($bn) financial year suggests this pace of highway building has fallen by 9 per cent ous. You cannot, however, always choose the quality of of bonds ($bn) (% in index) in this period as compared to the previous year. While the pace, about 27 km a money you get. The relatively incremental approach Issuance options Today End JP Morgan Bloomberg Global JP Morgan Bloomberg Global Total day, remains high, this loss of momentum suggests that the current highway over the years from Indian policymakers towards global FY 21* GBI-EM Aggregate GBI-EM Aggregate building model has run into diminishing returns. This interpretation would debt portfolio capital has reflected their concerns about Introduce new special 0 45 3.8 0.08 8 2 10 series of govt bonds be supported by the fact that new projects are not being awarded at the rate the potential for such flows to engender volatility in asset prices. That the government has announced in Continue issuing FY20 bench- that they were previously. The target for new projects in the ongoing fiscal 35 80 6.7 0.14 15 3 18 the recent Budget its intention of having its bonds listed marks as special securities** year is 10,000 km and it is likely that only a fraction of that will be awarded. on global debt benchmarks is, in that context, a signifi- Reopen old securities Of the various agencies entrusted with the task of building highways, the cant and welcome step forward. It is arguably India’s as FY21 benchmarks and 50 95 7.9 0.16 18 4 22 National Highways Authority of India (NHAI) has been consistently outper- best bet to attract the relatively passive and sticky part special securities+ of global capital looking to invest in fixed income. The forming the others, and will meet its proportion of road-building target set for *Assuming the govt does 30%of the gross issuance program via special securities;** The four FY20 benchmarks taken here are 6.18% 2024, 7.27% 2026, 6.45% 2029, 7.57% this financial year. That said, other issues have emerged to cloud the NHAI’s choice, however, of a somewhat unconventional strategy 2033; +Assume reopening of 7.72% 2025, 6.97%2026, 7.88% 2030, 6.57% 2033 (liquid, issued after 2015, large outstanding; Source: Deutsche Bank, Budget, Bloomberg future. Much of the building is being financed by the NHAI using debt. This of opening up only a limited number of “special securi- ties” to foreign portfolio investors (FPIs), means it will bid-offer spreads and sufficient trading frequency to government conducted 30 per cent of its gross issuance, has led to a steady increase in its debt burden and the related interest payments. likely take a few years before India can potentially lean prevent stale price quotations. The Global Agg, similarly, including switches, via just four benchmark bonds. This burden, which is approaching ~2 trillion, is one reason why the NHAI is on index driven flows to finance a significant portion only considers bonds with minimum issue size of $300 Repurposing, and reissuing, existing bonds as “special awarding fewer projects. Indeed, interest payments account for a significant of the government’s budgetary needs. million. Both indices will take into account operational securities”, instead of issuing new bonds, could help part of the NHAI’s budgetary support. As is the case with such situations, this The math of index inclusion flows depends mainly considerations around the ease of account opening, achieve a larger weight in the benchmark indices in a means that there is even more pressure on the NHAI to borrow from the market. on the global fixed income benchmarks that could con- hedging and repatriation, among other things, while shorter period of time, and increase the potential for Naturally, as long as it is seen as a quasi-sovereign entity, it would expect to sider India eligible for inclusion; and, the scale/mode deciding on index eligibility. more substantial flows. Continuing to use the current find lenders. But the fact is that appetite on behalf of both project developers of issuance of the new “special secu- The weight for India in either of benchmark bonds from FY2019-20 as “special securi- and lenders for road projects has dried up. Banks and financial institutions are rities”. There are two relevant bond the benchmarks will be a function of ties”, for example, could help double the potential weight benchmark indices that India may be the size of index-eligible “special in the indices and the scale of index tracking flows. already struggling through a bad debt problem. And many project developers considered for. One is an emerging securities” as a proportion of the total At their full market capitalisation of around $850 have found that the shortage of cash means that their payments from the gov- markets dedicated fixed income market capitalisation being tracked billion, Indian government bonds should ultimately ernment are constantly being delayed. Given that roads are increasingly being benchmark called JP Morgan Global by the index. As a rough rule of be able to reach the individual market cap of 10 per built either through the direct procurement route or the hybrid annuity method, Bond Index–Emerging Markets (GBI- thumb, for example, every $10 billion cent in the GBI-EM Global Diversified Index, and in which the NHAI pays developers 40 per cent upfront and the remainder EM), with a market capitalisation of of index-eligible securities issued by around 1.5 per cent weight in the Global Agg Index. In over 15 years, developers are right to be concerned about the NHAI sitting on $1.25 trillion and with roughly $225 India can help get an additional 1 per turn, this could be worth potentially $60 billion plus payments. This is what threatens to reverse whatever progress has been made billion of assets under management cent weight in the GBI-EM Global of index tracking foreign portfolio inflows into the local on the highway-building programme over the past six years. The government (AUM) tracking the index, mostly the Diversified Index. In turn, this can government bond market in India, equal to almost global diversified version which caps attract just over $2 billion of index double the current outstanding holdings of offshore will have to ensure that the NHAI’s finances are sound enough for project devel- the weight for an individual market SAMEER GOEL tracking global capital from either investors. How quickly India gets to tap this scale of opers to be confident once again that they will be paid on time. at 10 per cent. The other is the passive index investors, or assuming offshore financing depends, in turn, on the choices Roads can neither be built nor maintained on the cheap. The landmark Bloomberg Barclays Global Aggregate Bond Index active managers are broadly market weight versus made about the size and mode of issuance of the new achievement of the first NDA government, under Atal Bihari Vajpayee, was the (Global Agg), which has bonds with a market capitali- benchmark. “special securities”. Given the difference in scale of rural roads scheme, which built half a million kilometres. But many of these sation of as much as $60 trillion, and with about $2.5 It would, therefore, need the government to conduct market capitalisation of the two indices, and of the roads are now in poor condition, as two-thirds of them are past the period when trillion of AUM tracking the same. In addition to free a minimum 30 per cent (an estimated $45 billion) of its AUM tracking the two, it stands to reason that inclusion the original contractor must repair them, and Union budgetary support for accessibility and absence of capital controls; the two gross borrowings for the coming fiscal year — both in GBI-EM can fetch relatively larger inflows in the their repair has declined since 2015. While this is an issue for states and local indices also have other criteria to determine the eligi- issuance and switches — via the freely accessible “special near term. The Global Agg, on the other hand, has a bility of bonds which can be included. The GBI-EM, for securities” for India to be included in at least the GBI- slower “glide path” to flows, but with potential for a bodies to resolve, it is clear that the Union government must take responsibility, example, only considers fixed-coupon bonds with out- EM benchmark, to attract an estimated $8 billion of larger total pool to capture. since local governments are usually short of funds. A direct transfer from the standing of at least $1 billion, and with minimum resid- foreign index capital, or around 10 per cent of the net Union government to local bodies is one option. ual maturity of 13 months. It also considers certain liq- funding needs of the government for the year. To be The writer is managing director, head of Asia macro uidity standards, including firm daily prices, reasonable sure, this is not unprecedented. Even in FY2019-20, the strategy, Deutsche Bank

specialised needs of a small number of The clothes available offered the cut they customers. wanted but were not suited to their body A survival manual for small businesses Embracing this way of doing business, shapes. They started a new line offering which the author refers to as “the passion precisely that and found many takers. innovative offerings. When Lance took over the reins, he successfully met the challenge posed by economy”, may require a business to shed Another story is of a North Carolina- After Albert, his son-in-law Max decided not to produce any brush that this milieu and prospered. its current customers. Mr Davidson based textile manufacturer, Glen Raven. Cheney took over the business. In the Chinese manufacturers were also capable Mr Davidson’s key recommendation is narrates the story of an accountant who Assailed by competition from cheap early part of the 20th century, the of producing. Braun would henceforth that small disliked auditing. imports, Allen Gant, Jr., the owner, American market was expanding. only produce highly customised brushes. businesses should THE PASSION But he had one transformed the company into one Virtually anything that was produced One he came up with was for a nuclear not compete ECONOMY: The New talent. By poring whose staff is constantly scouring Rules For Thriving BOOK REVIEW sold out easily. Max reduced the variety plant. The plant had been using brushes headlong against In The Twenty-First over the books of a markets across the globe for specialised of brushes and focused instead on that left tiny pieces on the floor that large ones at the business, he could needs. Glen Raven moved into SANJAY KUMAR SINGH Century producing them in larger numbers and could be dangerous. Lance’s brushes left high-volume, low- Author: tell in a trice what manufacturing specialised textiles like distributing them across the country. no residues. He developed another that margin, the business person headliners for the inside of a car’s ceiling Adam Davidson he challenges that Long Island- In the 1990s, low-priced Chinese met NASA’s exacting specifications. A commoditised was doing wrong. that were better than those available. It based Braun Brush faced at the brushes entered the US market. Initially, third one was for Frito Lay, which game. They can only Publisher: From auditing came up with a mesh for the water- T start of this century are they were of poor quality, so American wanted a brush that would not ever leave survive by using Hachette India books, he shifted to filtration industry that strained out emblematic of what many small manufacturers were not worried. But by a single hair behind. A hair in a packet of their expertise to Price: ~599 becoming a pollutants more effectively. Another businesses in America, and across the 2002, Chinese factories were churning out potato chips could result in an expensive produce value- business innovation was a polyester fabric with an globe, are confronted with today. Its brushes that were on a par with those of lawsuit for the company. Max’s clients added products that consultant. This transition, however, adhesive coating that can be applied to response demonstrates how they can American producers, at a much lower cost. willingly pay a premium for his cater to niche markets. Theproducts they meant he had to shed his old customers the walls of mines to prevent cave-ins. All find a way out of their troubles. Max’s son Lance had been warning specialised offerings. offer must demonstrably save money for who wanted accounting work from him these are not exactly a textile Braun Brush was founded in 1875 by his father since the nineties about the Cheap imports from China and other clients, help them earn more, or improve and would only pay him by the hour. He manufacturer’s bailiwick, but then Emanuel Braun, who created a brush competition from imports. He low-wage countries, robotised factories, their lives, so that they are willing to pay a had to take on new ones willing to pay him nothing focuses the mind as wonderfully that made it easy to clean milk bottles. suggested taking Braun Brush back to and global shipping have sounded the premium. By catering to a niche audience, higher rates for his strategic advice. on innovation as the fear of extinction. When these sold well, he produced its artisanal roots. His father brushed death knell of many a small business. a small business circumvents the The book is replete with fascinating Anyone who intends to start a business more varieties to meet diverse needs. aside his warnings and the company’s Adam Davidson’s book contains stories of competition altogether as large businesses stories. A couple of ladies in Vermont will gain immensely from the insights in His son Albert added to the lineup of fortunes plummeted. those like Braun Brush that have do not find it worthwhile to cater to the wanted to wear men-inspired clothing. Mr Davidson’s book. QUICK TAKE: SOYBEAN PRICES TO REBOUND “The first step towards making serious money is the The Smart Soybean prices have fallen 8 per cent over the understanding that last one month due to weak demand from the there is no easy money poultry sector on worries of coronavirus threat. in the markets” MUMBAI | Lower production estimate this year, coupled FRIDAY, 21 FEBRUARY 2020 D MUTHUKRISHNAN Investor with a revival in the poultry sector, will support Certified financial planner soybean prices in the near term WWW.SMARTINVESTOR.IN FOR INFORMED DECISION MAKING < Investors sweat as Zerodha sets sights on MF debut JASH KRIPLANI “WE WANT A PLATFORM THAT NEW FRONTIERS Mumbai, 20 February CAN OFFER DIFFERENTIATED New entrants look to take advantage of MF industry’s under-penetration The country’s largest broking house PRODUCTS. WE ARE MOST PSU stocks plunge Brazil 65 by clients, Zerodha, is looking to enter LIKELY TO BE A PASSIVE FUND- the ~27-trillion mutual fund (MF) UK 59 ILLUSTRATION: BINAY SINHA FOCUSED ASSET MANAGER. industry, with the firm putting in its WITHIN PASSIVES, WE WANT TO Germany 55 KRISHNA KANT & DEV CHATTERJEE application for an MF licence with the SouthAfrica 42 Mumbai, 20 February Securities and Exchange Board of BUILD A SUITE OF INNOVATIVE India (Sebi). PRODUCTS, WITH INTERESTS Japan 36 ith the share of “We want to create a platform that OF INVESTORS IN MIND” Korea 29 AUM as % Oil and Natural can offer differentiated products. We China 13 of GDP W Gas Corporation are most likely to be a passive fund- NITHIN KAMATH, India 11 (ONGC), one of India’s most focused asset manager. Within pas- FOUNDER & CEO OF ZERODHA Source: CAMS DRHP valued public-sector under- sives, we want to build a suite of inno- takings (PSUs) till recently, vative products, keeping in mind the The overall assets managed by and Frontline Capital Services. under-penetration, there is a huge falling to a 15-year low, the interests of investors,” said Nithin index funds have also seen a steady More recently, Sebi gave in-prin- scope for growth in the MF industry. focus has shifted to central Kamath, founder and chief executive growth in the current financial year. ciple approval for MF licence to brok- India’s penetration level is government-owned firms, officer of Zerodha. “These products From ~5,286 crore of assets managed, ing player Samco Securities and NJ significantly lower to world average which have become some could even take the form of quant- beginning of this financial year, the India. The latter is the country’s of 55 per cent. For India, the assets the biggest laggards on the PSUS LAG BROADER MARKET based funds,” Kamath added. asset base has expanded by 50 per largest MF distributor in terms of under management to gross domes- PSUs Mkt Cap Nifty Indian bourses. Ex-SBI 800 Zerodha already runs an MF distri- cent, close to ~8,000 crore in January commission received. With active tic product stands at 11 per cent. The combined market cap- bution platform Coin, which offers 2020. Further, market participants say clients of over 900,000, Zerodha is Industry body Association of 684.3 700 italisation of 62 PSUs, at direct plans to users. that Sebi’s move to enable a regulatory the largest broking house in Mutual Funds in India (Amfi) in its around ~15.4 trillion, is the 600 Kamath says that running Coin has sandbox can attract more fintech com- the country. vision document says the country’s lowest in nearly four years, 500 helped his team understand investor panies looking to build a differentiated The capital markets regulator has MF industry has the potential to and excluding State Bank of 267.8 400 behaviour and the kind of products product basket. in the past underlined the need for reach ~100 trillion of assets in next India, it has reached its mini- Indexed 300 that are suitable for investors. “While we need to see final details encouraging competition in the 10 years. This would entail an over to 100 mum level since March 2009 200 Passive funds have gained investor of how the sandbox framework will 44-player MF industry. threefold jump from its current (see adjoining chart). traction in recent months, with work, but we could tap it if it allows to Currently, MF industry is dom- industry size. 240.6 100 The PSUs’ market capita- actively managed funds facing chal- fast track the launch of new products,” inated by top-three fund managers Further, industry participants also lisation is down 17.6 per cent 0 lenges in outperforming benchmarks. Kamath said. — HDFC MF, ICICI MF, and SBI MF say that entering the MF business can in the current financial year, Mar‘04 Feb ‘20 In 2019, half of the actively man- Zerodha applied for the MF licence —which account for 40 percentage help a broking player diversify its against a 4.3 per cent rise in Compiled by BS Research Bureau Source: Capitaline aged equity schemes had underper- on February 5. Other players — whose of industry assets. business model to mitigate the cycli- the benchmark NSE Nifty50 formed returns delivered by applications are still under process — Meanwhile, industry experts had cality of broking income, which is index during the period. reason why the ONGC stock is crore in FY19, against a net their benchmarks. include Srei Infrastructure Finance said that given the high levels of linked to market sentiments. Excluding State Bank of showing a declining trend,” profit of ~65,500 crore in FY14. India (SBI) — now the largest said an analyst with a Together these lenders have PSU by market capitalisa- foreign brokerage. lost nearly ~1.34 trillion in the tion— the PSU Index is down The under-performance past five years. Industry body calls for allowing 21.4 per cent since the end of has been ascribed to a mix of Investors have also been March last year and 28 per poor earnings and negative put off by falling cash reserves bundling of MF products with loans ETF FLOWS IMPROVE IN EMERGING cent in the past three years, sentiment around govern- of non-bank PSUs and their making them some the big- ment-owned companies. growing indebtedness. The Sebi should allow bundling of MF schemes with other financial MARKETS, BUT INDIA AN OUTLIER gest wealth destroyers. “PSUs’ earnings growth combined cash reserves of products like loans as it can help in creating financial discipline SBI has been an outper- has not been very encourag- PSUs (apart from banks and in low-income households, an industry body has told Sebi. India saw pull-outs from former, with 18.4 per cent ing in the past few years, but financials) declined to a 15- Bundling, in market parlance, is a marketing method that emerging market (EM) exchange- annualised growth in market investors are avoiding even year low of ~85,000 crore at comprises firms selling several products as a single combined traded funds (ETFs) during the capitalisation in the past those with good earnings due the end of March last year, unit, mostly for a lower price than they would charge customers past week, despite flows in such three years. to negative sentiment around down 51 per cent in the past to purchase each item separately. “MF products, mainly through ETFs having shown signs of In the past three years, the government ownership,” says five years from ~1.74 trillion at the systematic investment plans route, should be available to revival. The ETFs withdrew PSUs’ market capitalisation G Chokkalingam, founder and the end of March 2014. investors along with other financial products like insurance and $31.3 million for the week ended has gone down 7.1 per cent, managing director, Many PSUs have been loans. This will help benefit all the parties concerned and create February 14. China, on the other with the reduction accounted Equinomics Research & forced to borrow either to financial discipline in low income households,” said FIA Global hand, saw inflows of $37.3 for annually, from ~19.2 tril- Advisory Services. fund capex and acquisitions Chief Executive Officer Seema Prem. PTI million. Most of the EMs saw lion at the end of March 2017 In the past five years, the of other PSUs, or pay special to ~15.4 trillion at the close of combined revenues of the dividends, leading to a Samruddha: SAT Regulator slaps positive flows, with Indonesia trading on February 18 this PSUs — including banks and steady deterioration in their the only other to see some year. In the same period, the non-bank lenders — grew at a balance sheet. backs Sebi order ban on Resurgere outflow ($5 million) during the Nifty50 index appreciated at compound annual growth The net debt-to-equity week. According to foreign fund managers, receding worries regarding a major global an annualised rate of 9.7 per rate of 4.8 per cent, from ratio of non-financial PSUs hit SAT has upheld Sebi’s move to Sebi on Thursday restrained outbreak of coronavirus led to improved sentiment. “Rising COVID-19 fears, notably cent. Shares of ONGC, which ~23.55 trillion in 2013-14 an all-time high of 0.71x at the recover over ~300 crore from officials of Resurgere Mines & around Chinese growth, led to the first cut in a survey of fund manager about global joined the club of value (FY14) to ~29.74 trillion in end of March last year, against Samruddha Jeevan Foods Minerals from accessing the growth, profits, and inflation expectations, held since October 2019,” BofA Securities destroyers this week, started 2018-19 (FY19). In the same 0.62x a year ago and 0.44x at India and its directors in a securities market for up to said in its fund manager survey note. The survey pointed out that allocation to EM falling after its acquisition period, their combined net the end of March 2014. case related to illegal three years for flouting norms equities rose 3 percentage points to 36 per cent overweight (OW), the highest OW status of profit declined from a record The net debt of PSUs more fundraising. The appeal has by manipulating the issuance since March 2019. Overall, EM ETFs saw flows of $265.8 million during the week. In Corporation (HPCL) in high of ~1.5 trillion in FY14 to than doubled in the past five been filed by the firm and of global depository receipts. previous weeks, they had seen outflows. JASH KRIPLANI January 2018. ~60,300 crore during the year years to ~6.02 trillion at the three directors, questioning It had issued 5.21 million Analysts said the main rea- ended March last year. end of March last year, against the veracity of a Sebi order GDRs in June 2010 for raising ETF FLOWS ($ MILLION) 37.3 son for ONGC’s stock fall was Public-sector banks have ~4.98 trillion a year ago and passed in November 2018, $53.75 million. Pursuant to a its weak performance in the seen the biggest decline in ~2.96 trillion at the end of through which a notice of probe, it was found that the 29.1 29.3 December quarter. “The profitability in the past March 2014. This, analysts demand to pay ~300 crore firm engaged in a fraudulent acquisition of HPCL for five years. say, has put off investors who was issued. The recovery arrangement for facilitating 1.2 ~37,000 crore in cash has not Lenders, including listed prefer low-debt or debt-free proceedings were initiated financing of its GDR issue and 7.37.5 gone down well with the NBFCs, to PSUs reported a companies in sectors such as after they failed to pay over made misleading disclosures 0.3 0.5 investors. This was the main combined net loss of ~57,000 consumer goods. ~300 crore in dues. PTI to investors. PTI

-5.2 THE COMPASS

-31.3 Indiabulls Housing: Focus shifts back to fundamentals India IndonesiaVietnamPhilippines SAfrica Taiwan SKorea Russia BrazilChina Source: Bloomberg, data for last week Key financials HAMSINI KARTHIK pated to be well off its past growth rates, needs to be seen. In Q3, gross non-per- which was upwards of 20 per cent until forming asset ratio rose to 1.9 per cent were under The Indiabulls Housing Finance stock 2018-19. Yet, it is working with banks on from 1.5 per cent in Q2, and 0.8 per cent a pressure in was among the top gainers on Thursday, co-origination of loans, securitisation, year ago. Analysts at Edelweiss feel issues rising nearly 11 per cent after the Ministry and sell-down of assets. The persistent in realty loans (developer finance and December of Corporate Affairs clarified that there issue over cost of funds loan against property) and were no irregularities in deals closed by only adds to pressure. access to liquidity in the quarter the lender. While incremental cost of current environment will This certainly puts to rest some litiga- funds fell marginally to pose operating chal- tion surrounding the firm, though it also 8.97 per cent in Q3 (down lenges. Hence, the transi- puts the onus back on an improvement 12 basis points or bps tion to an asset-light in financials for the rally to sustain. sequentially), it was still model will be arduous. In the December quarter (Q3), net higher than the blended “Emerging challenges interest income fell 50 per cent and net cost of funds at 8.85 per around realty warrant profit 44 per cent over the year-ago cent. caution on growth and period, indicating that operational con- Though its peers are asset quality,” the analysts ditions remained weak. witnessing a fall in incre- added. Net interest mar- The question is how fast they can nor- mental cost of borrowing, gin at 3.2 per cent in Q3 malise, given its business reorganisation the same isn’t true for was down for the third comes at a time when the underlying Indiabulls Housing. For consecutive quarter. After demand for real estate — residential or now, the fact that nearly a sharp drop in 2019-20, commercial — remains soft. The com- 16 per cent of its B/S is maintained as cash Edelweiss estimates earnings to fall 8 per pany has stated plans to remain asset- continues to provide comfort on the asset- cent in 2020-21. light and focus on the more-lucrative liability management front. Besides, how Therefore, for investors to remain retail home loans. its 34 per cent non-housing book takes interested, regaining profitable growth Balance sheet (B/S) growth is antici- shape with respect to asset quality also momentum is key. UPL’s debt reduction plan may fall short of target

Leverage ratios to RAM PRASAD SAHU 2020, and reduce leverage (net brokerage firm. en by favourable conditions debt to operating profit) to Half the issued instru- (rabi crop), new launches, and fall, sharper cut The UPL stock gained 17 per below the 3.5x level, which is ments are considered as high-value herbicide sales. was expected cent, spurred by a stellar show the downgrade trigger. equity, which will entail a dip Both markets are expected in its core markets of India and Given that the funds in return on equity. These two to do well, going ahead. Close Latin America (LatAm). Its raised will be a combination aspects seem to have taken to 55 per cent of revenues proposal to cut debt, coupled of debt and equity, analysts some sheen away from a comes from these two with further synergy gains expect debt to reduce by cheerful December quarter markets. On the issue of coro- from the Arysta acquisition, $275 million. for the firm, says Agarwal. navirus, the management contributed to the rise. Amit Agarwal of Nirmal Operating performance in indicated that the impact on UPL is planning to raise Bang Institutional Equities the quarter was led by the the company would not be sig- funds to refinance $550 mil- says the net debt-to-operat- LatAm market, which posted nificant, given that most of lion (~4,000 crore) of debt. Net ing profit ratio, following the its sixth straight quarter of UPL’s manufacturing footprint debt at the end of the issue, will fall from 4.47x to more than 20 per cent year- is based in India. December quarter stood at 4.1x in the current financial on-year growth. This was on Supply opportunities ~29,654 crore. year, and to 2.8 per cent in account of crop protection could, however, emerge in Moody’s views the pro- 2020-21. sales for soybean, as well as North America (13 per cent of posed issuance as credit posi- Investors, however, will market share gains in sugar- revenues) as customers look tive for the company, given it have some misgivings as net cane and cotton. The Indian for alternative suppliers to will help achieve its debt debt will be reduced by only market was another bright overcome disruptions in reduction target by March 50 per cent, says the spot, growing 42 per cent driv- supplies from China. MUMBAI | FRIDAY, 21 FEBRUARY 2020 THE SMART INVESTOR 11 > Low oil prices may benefit HPCL JanaSFBreadyto appoint bankersfor~1,000-crIPO UJJVAL JAUHARI Net sales FY20E FY21E (~cr) of its operating profit from the fuel mar- New Delhi, 20 February FUELLING THE keting business, which should supple- HPCL IOC BPCL ment its earnings in the current sub- ASHLEY COUTINHO rude oil prices are on a slip- OMC BOOKS dued GRM environment. Mumbai, 20 February pery slope as global demand Earnings recovery in FY21 At ~222.50, the stock, too, is trading Cis likely to be impacted by the at 35 per cent discount to its historical Jana Small Finance Bank outbreak of the novel coronavirus in five-year average. Valuing it at 1.3x (20 (SFB) has begun looking for China. Against this backdrop, the per cent discount to FY15-18 post- investment bankers to man- International Energy Agency has reform period; factoring in heavy cap- age its public share sale, two lowered its oil demand forecast. The ital expenditure and project execution people familiar with the mat- 3 5 0 76 8 Organization of the Petroleum 52 risk) its 2021-22 estimated price-to-book ter confirmed. 07 44 ,1 93 71 7, 3, 2,5 9, Exporting Countries (Opec) had cut 7, value multiple, analysts at Motilal The public offering could 306 30 (4.9) (-1.6) (4.1) 29 (-2.0) 53 29 its outlook for 2020 global oil (6.2) (4.7) 51 Oswal Financial Services arrive at a tar- be in the range of ~1,000 demand growth by 0.99 million bar- 8,717 13,616 23,762 35,965 12,66716,237 get price of ~340. Target prices of crore and ~1,200 crore and PHOTO: SIDDHANT MISHRA rels per day a few days ago. (-24.6) (56.2) (-32.5) (51.4) (-16.2) (28.2) Edelweiss and HDFC Securities at ~322 the bank might hit the mar- low-income segment, and Even as demand growth expecta- Ebitda and ~315, respectively, also indicate a ket in the second half of the ASSET GROWTH have grown at 26 per cent tions have been lowered — given the healthy upside for HPCL. year. The firm did not annually from 2015-16 to 3,125 6,136 9,545 18,313 6,744 8,781 OF SFBs in ~ bn fear of losing market share to the US — (-53.3) (96.3) (-45.1) (91.9) (-13.6) (30.2) For IOC, the core refining margins, respond to an email seeking 2018-19 (FY19), in terms of the Opec may not consider a produc- shutdowns at its Haldia and Mathura its response. SFBs have to list 1,433 assets under management. tion cut, keeping oil prices subdued. refineries for Bharat Stage-VI (BS-VI) within three years of reach- In the past three years, Such a scenario is a positive for domes- upgrade and weak petrochemical pric- ing a net worth of ~500 crore, SFBs have shifted their focus tic oil-marketing companies (OMCs) ing outlook remain near-term con- according to the RBI norms. from microfinance to other such as Hindustan Petroleum Net profit* cerns. During the December quarter, Jana joins the likes of products, but the core cus- Corporation (HPCL), Indian Oil % change YoY in brackets; E: Estimates; *Adjusted for one- IOC’s refining throughput had declined Equitas SFB, ESAF SFB, 733 tomer focus is unlikely to offs/exceptional items; Ebitda: Earnings before interest, tax, Corporation (IOC), and Bharat depreciation, and amortisation Source: Edelweiss Research by 7.8 per cent year-on-year because of Utkarsh SFB, and Suryoday 514 change owing to regulatory Petroleum Corporation (BPCL). BS-VI shutdowns at Haldia and SFB through this move. The 370 444 norms. Profitability of SFBs, Lower oil prices will help India’s Mathura. Refining margins though got first two have already filed a which was impacted in 2017- major fuel retailing companies better pany. However, analysts see a silver lin- Further, in the current benign oil some boost with inventory gains as draft offer with the regulator, 18 as a result of demonetisa- manage working capital requirement ing in this. price environment, structural crude oil prices continued rising. and aim to raise about ~1,000 tion and loan waivers, and improve their marketing margins. Though international oil demand changes in the pricing of liquefied However, in the March quarter, the crore each. Last year, FY16 FY17 FY18 FY19 FY22P revived in FY19 as credit Brent crude oil, which was hovering and prices may remain subdued, ana- petroleum gas and kerosene may fur- company may see inventory losses, say Suryoday announced plans costs on new loans trended Note: Advances considered for Jana SFB, around $69 a barrel at the start of 2020, lysts say they see steady demand from ther assist and the government may analysts. The weak petrochemical to raise ~1,000 crore through Utkarsh SFB, and Suryoday SFB; AUM lower. “A large part of India is now at $59-60 a barrel, and is likely India, no major market share losses, bid farewell to underrecoveries in the price scenario, too, does not inspire. an initial public offering considered for other players; P:Projected is still underbanked. Since Source: Company reports, CRISIL Research to remain subdued in future. and stable marketing margins for petroleum sector. The stock though may also see some (IPO) by mid-2020. quite a few of these SFBs The volatility in crude oil prices over OMCs. The country is expected to Among OMCs, HPCL, whose earn- rebound, supported by gains in IOC’s Utkarsh SFB plans to mop focus on microfinance as a the past one month has hurt Street sen- continue reporting oil demand ings are more dependent on fuel retail marketing segment, as analysts feel up ~500-600 crore from its In December, the ~750- big portion of their lending timent as the gross refining margin growth of 4-5 per cent over the medi- and marketing, remains the top pick of valuations are inexpensive. The news IPO. “Ideally, we are aiming crore IPO of Ujjivan SFB was business, there is a lot of (GRM) outlook has remained subdued. um term, which, along with an analysts such as Nilesh Ghuge at HDFC flow on stake sale will, however, be at listing by December 2020, well received and got scope in tier-II, -III, and -IV Stocks of IOC and HPCL are also oligopolistic structure of the retail Securities. IOC and BPCL, too, will see more important for any upside in but we have kept a buffer of subscribed 166 times the cities and semi-urban/rural down to 11-18 per cent since the start of market (OMCs control about 90 per gains in their marketing business and BPCL, and analysts say that a success- a few months, keeping in number of shares put on areas. In tier-I cities, they can 2020. BPCL though has been relatively cent), should translate into steady on working capital front, but their earn- ful sale to a strategic investor/buyer view market volatility,” said offer. The shares of the bank focus on auto, home loans, firm (down only 4 per cent) on the marketing margins of ~2.5-3.5 per litre ings are more dependent on an uptick can lead to further increase in their tar- the firm’s Managing Director rose 44 per cent over the and SME segments,” said hopes of value unlocking due to the of retail fuels (petrol and diesel) for in refining margins. get prices (up to ~609) for stock now and Chief Executive Officer issue price. Deepak Jasani, head–retail government’s plan to privatise the com- OMCs, estimate analysts. HPCL drives more than 50 per cent trading at ~471.50. Govind Singh last year. SFBs aim to cater to the research, HDFC Securities. One for the low-mileage car user Indices resume slide onmutedglobal cues ‘Pay as you go’ motor insurance also works REDUCE INSURANCE COST 8,000or10,000kilometresayear.Hecouldget aninsurancepolicyforsignificantlylower PRESS TRUST OF INDIA for people with multiple cars WITH THE SCHEME cost,atatimeforcertainkindofunderwriting Mumbai, 20 February BINDISHA SARANG scale. With the new offering, the new scale is Policy type Ordinary Pay for itcanevenbe25-50percentlowerofthe ‘vehicle mileage during policy’. Roopam policydistance currentpremium.”Ifyoucommuteusingcabs Benchmark indices resumed UndertheInsuranceRegulatoryand Asthana, CEO and whole-time director, policy orpublictransportonaday-to-day basisand their slide on Thursday as DevelopmentAuthorityofIndia’s sandbox Liberty General Insurance, says: “Pay for the rarelyuseyourpersonalvehicleoryou trading sentiment remained Yearofmanufacture 2018 2018 initiative, generalinsurancecompanieshave distance feature has been developedkeeping frequentlytravelbeyondcitylimitsandhence, at a low ebb on lacklustre startedlaunchingusage-basedmotor in mind car owners who use their vehicles less Vehicleinsureddeclaredvalue (~) 5lakh 5lakh seldomuseyourcars,thispolicymakessense. overseas cues and lack of insurancepolicies.Companieslike frequently. The new feature gives customers Payfordistanceoption(km) -3,000 AddsSrinivasan:“Customerswhohave buying triggers. LibertyGeneralInsurance,BhartiAxa even more control over their Voluntarydeduction(~) -10,000 multiplevehiclesandmaynotuseeachvehicle A depreciating rupee and GeneralInsurance,ICICILombard insurance costswith similar coverage BasicODpremium (~) 3,940 2,206 asmuchand,hence,maynothave to paya persistent capital outflows andsomeothershave startedgiving in terms of perils and claims service.” largepremiumamount.Throughthis also weighed on the bourses, theseinnovative featuresundertheir Theideabehindsuchpolicies Roadsideassistancepremium(~) 249 0 innovative offering,we expectincreased traders said. existingprivate carpackagepolicies. seemsto be‘lowerthemileage, lower OD-premiumwithadd-on (~) 4,189 2,206 penetrationofmotorinsuranceby covering After a choppy session, the Sensex pack on Thursday, “Usage-basedmotorinsuranceis istheprobabilityofanaccident’.The Basicthird-party(TP)(~) 3,221 3,221 thecustomerswhodrive lessandgenerally the Sensex settled 152.88 dropping up to 2.30 per cent. basedonthe‘pay asyougo’model— newofferingiscurrentlyapplicable CPApremium(~) 375 375 maynothave apreferenceforowndamage points, or 0.37 per cent, lower On the other hand, differentfromthetraditionalmotor onlyto theODpartofthepolicy. Most TotalTPpremium(~) 3,596 3,596 covers.’’Keepinmindthattheseofferingsare at 41,170.12. Similarly, the IndusInd Bank was the top insurance.Throughthisoffering,we YOUR insurers’ policiescomewithatop-up partofthesandboxinitiative. broader NSE Nifty slipped gainer, spurting 3.57 per cent, expectincreasedpenetrationof featurewhereinyouhave theoption Totalpremium(~) 7,758 5,802 For some reason, even if the initiative is 45.05 points, or 0.37 per cent, followed by , SBI, motorinsuranceby coveringthe MONEY ofreinstatingtheODcoverageby Goods&servicestax(~) 1,401 1,044 dropped in future, the insurer will pass on to 12,080.85. ONGC and PowerGrid. customerswhodrive lessand increasingthenumberofkilometres Finalpremiumwithtax(~) 9,186 6,847 the benefits which you have been Financial markets will Global markets stayed on generallymaynothave apreferenceforown by payinganadditionalpremium,ifyour promised. But do check out the policy’s remain closed on Friday on the backfoot as investors CPA: Compulsory personal accident; discount based on the damagecovers(OD),’’saysSanjeevSrinivasan, kilometrelimitgetsexhausted. distance limit and voluntary deductible opted has been terms and conditions. account of Mahashivratri. assessed the economic impact managingdirectorandchiefexecutive officer Howisdistancemeasured?Itdependson applied. Information is illustrative Yes,therecouldbeprivacyconcernsfor During the week, the of the coronavirus epidemic. Source: https://www.libertyinsurance.in (CEO),BhartiAXAGeneralInsurance. thecaryouhave. Asthanasays,“Atthetimeof customerswhencompaniesusetelematics,as Sensex fell 86.62 points or The coronavirus death toll proposal,thecustomerhasto declarethe atthetimeofproposal.“Fornewercars,which itwillgatherdataregardinglocation,driver’s 0.21 per cent, while the Nifty climbed to 2,118 in China. Offerings existingodometerreading,andthesamewill meansconnectedvehicles,thedatais behaviourandotherfactors.Butthere’salsoa shed 32.65 points or 0.26 per However, new confirmed When you come to the new offering with other beavailableinthepolicyscheduleatthetime gatheredusingtechnologyliketelematics. social/environmentaladvantageifthereisa cent. , HUL, TCS, cases declined to 394, regis- existing productsout there, you will realise ofclaims.Thecoveragedistancecanbe AnkitSachdeva,chieftechnologyofficer, significantadoptionofthistypeofpolicy—it Nestle, , and tering the biggest drop since that in the present, duration of the policy is checked,basedontheodometerreadingatthe Easypolicy, says:“Thereisamajoradvantage encouragespeopleto usecarsless,andnotto Reliance Industries were December when the first case monitoredby ‘time’ (annual/multi-year) as timeoftheaccidentandthereadingcollected forsomeonewhousesthecarforlessthan exceedthemileagelimit. among the top laggards in was reported in Wuhan. COMMODITIES > Govt rolls out 1% ad-hoc Apeda blacklists basmati rice brands Mohsen and incentivefor garments Avazah over defaults

DILIP KUMAR JHA Move comes at a time when benefits under MEIS have been withdrawn Mumbai, 20 February PRICE CARD T E NARASIMHAN The Agricultural and Processed Food Chennai, 20 February Products Export Development As on Feb 20, 20 International Domestic Authority (Apeda) has blacklisted two ------%% he government has introduced basmati rice brands — Mohsen and Price Chg#Price Chg# a scheme for additional ad-hoc Avazah — owned by importers in T incentive of 1 per cent of free Saudi Arabia, Iran, and the United METALS ($/tonne) on board (FOB) value for garments Arab Emirates (UAE), with immedi- Aluminium1,686.0 -3.5 1,967.68.7 and made-ups. This comes at a time ate effect. The move follows persistent Copper 5,745.5 -2.2 6,293.6 2.5 when benefits under the payment defaults on the part of Gulf- Merchandise Exports from India based importers to Indian exporters. Nickel12,700.0 -11.313,605.9-10.8 Scheme (MEIS) for exports of such Till two years ago, many Indian Zinc 2,126.5-9.9 2,386.3 -10.7 items were withdrawn. exporters were placing orders from Exporters said the incentive Iran, the UAE, Bahrain and other coun- AGAINST THE GRAIN Gold ($/ounce) 1,617.9* 9.9 1,804.5 8.8 would be added if rebate of state and tries in the Gulf and West Asia. They Basmati rice exports Silver ($/ounce) 18.4*7.2 20.76.1 central taxes and levies scheme were shipping 1,121 varieties of basmati (RoSCTL) is less than remission of rice under the two private brands. Year Quantity* $ million ENERGY state levies (RoSL) plus MEIS. Informed sources said that many ‘14-15 3,702 4,518 Crude Oil ($/bbl) 58.7*-6.255.8 -9.4 The government issued the noti- importers in West Asia and Iran had fication for the incentive in defaulted on payments to Indian ‘15-16 4,046 3,478 Natural Gas ($/mmBtu) 2.0* -23.8 2.0-23.6 mid-January, and has now issued the exporters worth $200 million. ‘16-17 3,985 3,217 AGRI COMMODITIES ($/tonne) guidelines. This is mainly to compen- Importers in West Asia and Iran have ‘17-18 4,057 4,169 sate for the loss, if any, after removal shut shop overnight, leaving Indian Wheat193.6 5.6308.4 3.5 of MEIS retrospectively from exporters in the lurch. ‘18-19 4,415 4,723 Sugar422.0*25.4 484.40.3 March 7, 2019. levies on export of the products. tronic scrip to be utilised for payment “Complaints have been received ‘19-20** 2,836 2,977 As RoSL and MEIS were simulta- In January 2020, Directorate of Customs duties and central excise. by Apeda from exporters over * Quantity in ’000 tonnes; **April-December Palm oil 667.52.7 1,065.4 5.5 neously available along with RoSCTL, General of Foreign Trade (DGFT) The scrips issued under the schemes non-payment by importers for export Source: Apeda (DGCIS); Compiled by BS Research Bureau Coffee Robusta 1,262.0* -6.4 1,800.2-3.9 many exporters factored in both in decided to withdraw benefits under will be freely transferable. of basmati rice from India in private site for shipping any agricultural con- their costing. Exporters MEIS after the introduc- The benefit of RoSCTL will be brands — Mohsen and Avazah. It signment — involving these two * As on Feb 20, 20 1800 hrs IST, # Change Over 3 Months Conversion rate 1 USD = 71.7& 1 Ounce = 31.1032316 grams. said the government The Centre issued the tion of RoSCTL. available for export of garments and has been decided to blacklist Mohsen brands. The government agency has Notes had at no point issued notification for the Under RoSL, which made-ups with ‘let export order’ and Avazah brands,” Apeda said in warned basmati rice exporters against 1) International metals, Indian basket crude, Malaysia Palm oil, Wheat LIFFE any notification on this. incentive in mid-Jan, was in operation till (LEO) dates from March 7, 2019, a statement. issuing registration-cum-allocation and Coffee Karnataka robusta pertains to previous days price. 2) International metal are LME Spot prices and domestic metal are Mumbai The government and has now issued March 2019, the rebate to March 31, 2020, while for addition- Indian exporters say they used to certificate (RCAC) for shipment of the local spot prices except for Steel. notified RoSL to miti- the guidelines. This is was provided in the al ad-hoc incentive scheme, the procure the aromatic rice from local aromatic rice under the tainted labels. 3) International Crude oil is Brent crude and Domestic Crude oil is Indian basket. gate the incidence of mainly to compensate exporter’s bank account. benefit shall be available for exports farmers and affix the Mohsen and “No RCAC will be issued by Apeda 4) International Natural gas is Nymex near month future & domestic natural gas is MCX near month futures. state value-added tax for the loss, if any, However, under RoSCTL with LEO dates from March 7, 2019, Avazah labels to the packages before for export of basmati rice in Mohsen 5) International Wheat, White sugar & Coffee Robusta are LIFF E future prices (VAT) and other state after removal of MEIS and additional ad-hoc to December 31, 2019, the MoT noti- shipping them to importers. and Avazah brands to any country of near month contract. taxes on export of gar- retrospectively from incentives schemes, the fication said. These two brands have been in the with immediate effect,” said the 6) International Maize is MATIF near month future, Rubber is Tokyo-TOCOM near month future and Palm oil is Malaysia FOB spot price. ments and made-ups. March 7, 2019 rebate will be granted in According to industry sources, the Indian government’s cross hairs for at Apeda circular. For the period between 7) Domestic Wheat & Maize are NCDEX future prices of near month contract, As certain state and cen- the form of electronic garment sector has pending dues of least three years, following reports of April 2019 and December 2019, India Palm oil & Rubber are NCDEX spot prices. tral levies did not have rebate, in duty credit scrips, similar to those around ~7,000 crore from the govern- sporadic payment defaults. exported 2.83 million tonnes of bas- 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 March 2019 the Ministry of Textiles issued under MEIS. ment under the RoSL, GST, and To avoid dissent, Apeda has direct- mati rice worth $3 billion. cotton is MCX Future prices near month futures. (MoT) notified RoSCTL for rebate on The benefit under the two Technology Upgradation Fund ed Indian exporters to not apply for Source: BloombergCompiled by BS Research Bureau various state and central taxes and schemes will be given in a single elec- schemes. registration of contract — a prerequi- More on www.business-standard.com MUMBAI | FRIDAY, 21 FEBRUARY 2020 BRAND WORLD 13 . < Shoppers to shopping Consumers look for quality, differentiated experiences better experience elsewhere and the platform is focused on con- across categories, finds a Kantar study; Amazon, Flipkart tinually developing a better experience. The Flipkart say the focus is on relationships spokesperson said they are focusing on improving efficien- T E NARASIMHAN cies in deliveries, enhancing the Chennai, 20 February search and discovery functions for its diverse customer base hat consumers want and other innovations. and how can compa- W nies cut down fric- The voice factor tion at the digital cash counters? The relationship with the These are questions that never retailer is important due to go out of fashion in the ever- shoppers being unfamiliar evolving landscape of Indian with online processes and ecommerce. However as a new many online portals are now study by Kantar eCommerce On addressing these challenges, shows, these may not be the said Balasumbramaniam. best questions to ask; instead, Voice is the game changer in consumers are saying, stop this context. treating online consumers as a Many online portals have discount-seeking universal voice assistants speaking in mass and ask what the category many tongues, simplifying the demands in terms of conven- process immensely while ience, trust and quality. addressing issues of trust. “A few years ago, prices and Flipkart has one that speaks in value were the key drivers. Hindi and English while Today, quality is as important CUSTOMER SPEAK Amazon’s Alexa too speaks in an expectation,” says Sushmita many tongues. Apart from Balasubramaniam, commerce „ Focus beyond discounts, it all comes down to product quality infusing a sense of familiarity lead, South-Asia, Insights into the retail process, vernacu- „ Set up one-stop solutions, but do not treat all consumers Division. The evaluation of lar voice assistants are also able quality (and convenience and the same to understand the nuanced intent to purchase) clearly dif- „ Behaviour changes according to the category of purchase, needs of the online buyers and fers by categories, the study follow the cues to offer customised solutions for each relay them back to the ecom- showed. For instance, for con- merce data teams. This helps sumer goods such as ‘soft and Source: Kantar fine-tune the process further. hot drinks,’ Indian shoppers are For instance, Amazon India very similar to their global sumer needs and wants but to platform with processes that found that almost 80 per cent of counterparts and treat it as a also look at each customer as a can make it possible to provide the customers who shopped on routine purchase, while they mix of mindsets and behav- great value, and ensuring fast Amazon.in during the last fes- are highly exploratory when it ioural patterns. delivery. The aim is to build tive season came from tier two comes to fashion. Flipkart and Amazon are the lasting relationships. and three towns and over 50 per Similarly, the exploratory dominant platforms for pur- Balasubramaniam said, cent of its sellers are also from mode is on for banking and chase, the study showed but after the initial growth, etailers tier two and beyond cities. financial products and within emergence of specialist players faced a challenge getting in the Hence, Amazon Pay was the category, the older group of like Nykaa for cosmetics or next set of consumers, due to developed as a one-stop pay- shoppers behaves differently BigBasket for fresh food is multiple reasons, including the ment counter, from booking gas from the rest. Groceries, the changing the game. In terms of advantages that offline retail- cylinders to bus tickets, movie next frontier for ecommerce customer satisfaction Pepperfry ers enjoy. The offline retailer tickets, flight tickets, movie giants, sees consumers seeking ranked in between Amazon and plays a focal role in many cate- recharges and more. freshness (looking for cues such Flipkart in home decor space, gories and displacing this rela- The focus is also on increas- as daily produce, quality checks while Nykaa ranked more than tionship will take much more ing affordability through serv- and freshness of delivery). But the two e-tail giants in beauty than just wooing consumers ices, the spokesperson said. The for clothes, buyers go by the and cosmetics, as per the study. (with special offers and sales, Flipkart spokesperson said that platform it is sold on and so on. A spokesperson for Amazon for instance). they have an array of fintech India said the company Amazon and Flipkart agree. solutions for the consumer and Many sizes fit one believes in three pillars of cus- The spokesperson for Amazon these serve the larger goal of on- It is not just important to treat tomer experience, building said that customers will only boarding the next 200 million the mass as a mix of diverse con- wide selections, enabling the shop with them until they find a customers.

> FROM PAGE 1 in this round of survey. Sample this: Did be collected on gross tax liabilities and not the person stay in the same place for at least on net cash liabilities despite the decision by six months? What was the last place of res- the GST Council in December 2018 to this GMR... idence? Are household members planning effect. to move out? Which country did the house- The board has taken a view that interest “We view this as positive as GMR has been hold member last live in? liabilities will be calculated on net cash lia- able to enter into a deal at a higher valuation Then, there are basic questions which bilities prospectively and not retrospec- and raising higher cash, which will be are also seen suspiciously by citizens. For tively as the change is yet to come into force utilised to eliminate entire corporate debt. instance, a question on their religion, on with amendments from Telangana and Along with sale of GMR Kamalanga, this whether they possess a birth certificate or West Bengal awaited. will wipe out the entire corporate debt. Key about a place of residence purchased after “In this regard, the provisions of Section risk is the approval of the deal by regulato- March 31, 2014. of Section 50 are very clear that interest lia- ry authorities. This is a less problematic The NSO has received complaints from bility is required to be paid on the tax lia- than the earlier transaction," said Mohit various states, including Uttar Pradesh, bility that is paid belatedly, either through Kumar of IDFC Securities. Kerala, Maharashtra, Bihar, and Karnataka. cash or through utilization of input tax cred- Groupe ADP said the acquisition fit But the most affected state is West Bengal, it (ITC). In other words, interest is required within Groupe ADP’s strategy. “This will where no household surveys are being con- to be paid on total tax amount of tax liabil- constitute a growth driver in the medium ducted at present. ity as shown in Form GSTR 3B,” the CBIC term, and also a transforming position for “The 78th round began in a few places letter said. the group in one of Asia's and the world's but the resistance started pouring in and fastest growing country," said Augustin de safety of field officers became an issue. Romanet, chairman and CEO at Groupe Surveyors were attacked and gheraoed. High-powered... ADP. Even the district administrations said it was not the right time to conduct any survey,” a If the scheme takes off, it will help banks to senior NSO officer in West Bengal said. make less provision in the coming quarters Govt likely... for the power sector loans. According to the new scheme, the One major challenge faced by surveyors is Every penny... unpredictable nature of renewable energy the lack of cooperation by households, as like solar and wind often leads to low capac- they are either being shown the door or Businesses registered under GST (other ity utilisation of the transmission system. attacked during their work, putting their than under the composition scheme) are This often leads to distribution companies lives at risk. People fear that survey officers required to file GSTR-1 for outward supplies buying balancing power for grid stability are collecting data that can be used for for a month by the eleventh day of the fol- and meet the shortfall. The scheme will determining their citizenship. lowing month, and GSTR-3B, which is a lead to “reverse bundling”, wherein high- The survey, scheduled to be conducted summary return for sales and input tax cost thermal power will be allowed to be during January-December 2020, is aimed at credit (ITC), by the 20th. bundled with cheaper renewable energy, mapping the multiple indicators of the Besides a late payment fee of ~100 a day and provide round-the-clock electricity to United Nations’ Sustainable Development for central GST and a matching amount for the distribution companies. Goals 2030 for the first time and is collect- state GST, the law provides for a levy of 18 The scheme mandates the electricity ing information on migration patterns of per cent penal interest. The CBIC has clar- producer to supply 51 per cent of the annu- citizens and purchase of houses, among ified that taxpayers can pay part of their lia- al energy supplied via renewable power and other things. bilities in cash and the rest through adjust- the rest from thermal sources. What has complicated the matters fur- ments in input tax credit. Banks, who are already taking steep ther are the questions that are being asked Rajat Mohan, partner, AMRG haircuts on power sector loans, are hopeful Associates, said: “Tax authorities that the scheme will take off. Last week, need to be cautious and con- State Bank of India-led consortium took a cerned at the plight of taxpayers 68 per cent haircut on Suzlon’s debt worth who are burdened with a new law ~11,460 crore. Banks have also sold strand- and plethora of technological ed projects by GVK in Punjab to Deutsche glitches.” Bank and GMR Chhattisgarh to the Adani The CBIC, in a letter on group – at a huge haircut after their previous February 10, had asked field offi- promoters failed to repay debt. Deutsche cials to initiate recovery proceed- Bank is also in race to takeover Jindal India ings against those who had not Power by offering ~2,400 crore to banks as cleared interest liabilities. against its debt of ~7,600 crore. At least 34 Then there is the issue power projects with 26 GW of electricity whether interest would be producing capacity are currently stranded. charged on gross tax liabilities or Bidders for the new scheme will be net cash liabilities, which take into asked to sign fresh 25-year power purchase account the ITC of the companies agreements either with the Solar Energy in the system. Corporation of India or NTPC. They will M S Mani, partner, Deloitte also sign power supply sale agreements India, said businesses would (PSAs) with customers like the distribution appreciate if clear instructions companies or bulk consumers were issued to the tax authorities When contacted, Ashok Khurana, direc- to compute interest only on the tor general of the Association of Power net amount of the GST payable in Producers, said the scheme would also help cash. “This would also be in line with the utilisation of untied thermal pow- with the recent decision of the er capacity, considering that the new super Madras High Court.” critical coal based thermal power plants The Madras High Court, in its have quite high ramp rate, which can be recent decision in the case of effectively utilised to provide combined Refex Industries Limited v. The renewable energy blended 24-hour power. Assistant Commissioner of CGST “The emphasis is not only on the green & Central Excise, held interest power but also to ensure that combined could be levied only on the belat- power generated improves the safety of the ed cash component of tax and not grid and provides clean power to the con- on ITC. sumer by optimum utilisation of the grid,” The CBIC has asked interest to Khurana said. "It’s a win-win deal for all.” 14 MUMBAI | FRIDAY, 21 FEBRUARY 2020 1 > Manufacturers, retailers flock to ministries ARNAB DUTTA sis as an excuse. A group of New Delhi, 20 February electronics manufacturers, for example, are seeking the ndustry bodies, lobby removal of bureaucratic or groups, and key players operational hurdles for incom- I are flocking to Union min- ing shipments. This, along istries and departments amid with logistical incentives from fears of disruption in business the government, they argue, across sectors. will help reduce their cost. As the government According to Avneet Singh opened its door to the busi- Marwah, chief executive of ness community, seeking Superplastronics, a brand suggestions to minimise the licensee for Kodak and impact of the impending cri- Thomson TV, they have asked sis arising out of the coron- finance ministry officials for avirus epidemic, many are fast-tracking component using this to peddle their deliveries, avoiding any hur- interests. Daegu, the fourth-largest city in South Korea, being sanitised dles at customs. “A smoother From a rollback of customs following an outbreak after 90 people, who worshipped at a transport corridor, along with duty on key electronic com- church there, showed symptoms of infection PHOTO: REUTERS, AP/PTI priority release of shipments ponents to fast-tracking the from Mumbai port, will reduce delivery of goods imported the printed circuit board lead to price escalation in the travel time by a couple of days. from China, players are look- assembly (PCBA), the display short run on products like Given the rising cost and ing for incentives. assembly, and touch panel refrigerators, ACs, coolers, crunch in supply, it is impera- Several industry bodies were raised by 10 percentage washing machines, air puri- tive the government incen- like MAIT, the Indian Cellular points. For compressors and fiers, and chest freezers. tivises local manufacturers,” and Electronics Association small motors — used in ACs, Reduction in goods and he said. (ICEA), and the Consumer refrigerators, washing service tax (GST) rates on ACs Sources said finance min- Electronics and Appliances machines, and air coolers, and large-screen TV sets (from istry officials had given a ver- Manufacturers Association among other appliances — 28 per cent to 18 per cent) will bal assurance to manufactur- (CEAMA), which represent customs duty was raised by 2.5 help manufacturers and buy- ers on the proposal. major electronics, appliances percentage points. ers absorb some of the The Confederation of All and handset players in the While some argue, with no increase in cost and spur India Traders (CAIT), which country, have made represen- local supply chain existing and demand. represents 70 million traders tations to the government for these items continue to be “The government’s of the country, is lobbying a rollback of customs duty on imported, mostly from China, approach of levying higher against e-commerce giants electronic components. higher duty on these will fur- duties on imported compo- like Amazon and Flipkart. It With the supply of compo- ther increase production cost. nents to push players towards has approached the prime nents from China in shortage The data from the department local manufacturing is flawed. minister on this. now, the groups want higher of commerce shows during Rather, it should facilitate cre- In a letter to PM Narendra duties on components post- 2018-19 mobile components ating a robust local ecosystem. Modi, CAIT has urged close poned. worth over ~50,500 crore were Manufacturers are now under scrutiny of imports of Chinese The finance minister imported from China, while pressure and it is obvious they goods by e-commerce firms. announced in the Budget a those for ACs and AC parts, will seek duty cuts,” said “Immediate steps are need- change in the duty structure the figure was ~4,000 crore. Navkendar Singh, research ed to provide a package to for a range of components for Kamal Nandi, president of director, IDC. Indian traders and small mobile handsets, air condi- CEAMA, and executive vice- However, some industry industries to strengthen their tioners (ACs), refrigerators, president of Godrej veterans said companies were production capacity so that and electric vehicles. Customs Appliances, said while the trying to influence the author- the supply chain is not dis- duty on key mobile parts like intention was good, it would ities by using the ongoing cri- turbed,” it said. India will send third flight to Wuhan to evacuate 100 more

India will be sending a third The country had recently the ministry of external affairs 'Diamond Princess', flight to Wuhan, the epicen- evacuated over 640 of its citi- (MEA) said on Thursday. which is docked off the coast tre of the coronavirus out- zens from Wuhan. Yet, an India is also awaiting a go- of Japan with hundreds of break in the Hubei province unknown number of Indians ahead from Japan to evacu- positive cases of coronavirus of China, to evacuate nearly remain in the area and their ate its 132 citizens on board infection. 100 Indian citizens. number is being ascertained, the luxury cruise liner SUBHAYAN CHAKRABORTY