https://t.me/TheHindu_Zone_official MONDAY, 5 AUGUST 2019 20 pages in 1 section www.business-standard.com MUMBAI (CITY) ~8.00 VOLUME XXIII NUMBER 252

How markets performed last week % chg over Dec 31, ‘18 Index on *One- --———————————————————————————————————————————————————————— Aug 2, ‘19 week Local currency in US $ Sensex 37,118 -2.0 2.9 3.2 Nifty 10,997 -2.5 1.2 1.5 COMPANIES P2 START-UP CORNER P11 Dow Jones 26,485 -2.6 13.5 13.5 Nasdaq 8,004 -3.9 20.6 20.6 Hang Seng 26,919 -5.2 4.2 4.2 MOST PHARMA CEOs FOUR TEA START-UPs Nikkei 21,087 -2.6 5.4 8.4 FTSE 7,407 -1.9 10.1 5.0 TOOK A PAY CUT IN FY19 AIM FOR PERFECT BREW DAX 11,872 -4.4 12.4 8.9 *Change (%) over previous week Source: Bloomberg PUBLISHED SIMULTANEOUSLY FROM AHMEDABAD, BENGALURU, BHUBANESWAR, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI (ALSO PRINTED IN BHOPAL), NEW DELHI AND PUNE 30 KILLED IN TWO SEPARATE MASS Govt seeks SC Ikea’s big idea is to go small SHOOTINGS IN US SURAJEET DAS GUPTA showcase some limited furniture New Delhi, 4 August and storage too. At least 30 people were killed and several Consumers will also now have the others injured in two separate mass Swedish giant Ikea is coming to a option of booking online from the store, shootings within 24 hours in the US. Ten help to reduce neighbourhood near you soon. As part seeing the product digitally on the people, including the shooter, were killed of a major change in its strategy, the screen, and consulting experts on their and at least 16 others injured on Sunday in company is scouting for locations needs. Ikea has identified Mumbai Dayton’s Oregon district. The incident took in Mumbai to set up five to six as the first city where it will place hours after a 21-year-old gunman smaller format stores. begin its online service and is armed with an assault rifle opened fire at a delays in NCLT These smaller outlets will expanding the reach of crowded Walmart store in the southern offer a more limited array of products The company plans to have home delivery border town of El Paso in Texas, killing and services. smaller stores in the range through its 20 people and wounding 26 others. 20 > Asks for court approval on rules to The stores will be in the range 50,000-150,000 sq. ft, pilot launch. make NCLT judges accountable 50,000-150,000 square feet, one-third one-third to a tenth of the The products to a tenth of the size of their flagship size of their flagship stores will either be ECONOMY & PUBLIC AFFAIRS P19 RUCHIKA CHITRAVANSHI stores, which go up to 500,000 square supplied from Kashmir on edge: Crucial New Delhi, 4 August feet. The Navi Mumbai store is over possibly later this year. its Hyderabad centre or through 400,000 square feet. The smaller stores, apart from stock- its distribution centre in Pune. Ikea Cabinet meet today he government has sought If the experiment works, the ing products which are smaller in size, will also launch online services in The Union Cabinet is set to meet on Monday the Supreme Court’s (SC’s) small format stores will be opened such as furnishings, lighting, and Hyderabad and Pune. morning and is expected not only to take approval to frame rules INITIATION in other locations in India, kitchen products, will also Turn to Page 6 > stock of the situation in Jammu & Kashmir T for making judges of the (J&K) but policy decisions concerning the National Company Law Tribunal OF CIRPs state. Regional parties in J&K on Sunday (NCLT) accountable in ensuring unanimously resolved to fight any attempt corporate insolvency cases are to abrogate the constitutional provisions disposed of in time. Q1 Q2 Q3 Q4 Embassy may call off deal with Indiabulls

that guarantee the state special status or In the latest amendments to 373

any move to trifurcate the state. the Insolvency and Bankruptcy Code 286 HAMSINI KARTHIK right direction between Embassy 275 (IBC), the government has made it & RAGHAVENDRA KAMATH and IBREL. The deal was called off EMBASSY OUT, 246 241 mandatory for all corporate insolvency 233 Mumbai, 4 August a few days ago,” said a person aware BLACKSTONE IN

procedures, including litigation, to 195 of the development. However, an be wrapped up in 330 days. The proposed stake-purchase Embassy spokesperson said the deal 147

ON The Bill, passed in both Houses 129 deal between Embassy Property was still under consideration. MONDAY of Parliament, has put the onus Developments and Indiabulls Real While the reasons for this could SPECIALS on the NCLT Benches to increase Estate (IBREL) may be called off, not be ascertained, sources said it their productivity. 37 it is learnt. was Embassy’s hesitation in load- NA BANKER’S TRUST: Hobson’s “It is out of despair that the govern- NA According to the earlier ing up too many commercial real- choice before the RBI… 12 > ment has taken this action. We had to 2017 2018 2019 agreement, Embassy was supposed estate assets on its books that led to | Embassy may not acquisition in 6–8 …between a harder forward premium set a time limit and draw a line some- to buy an additional 14 per cent the deal being abruptly called off. acquire more weeks from June and a sharp decline in domestic rates. where. The delays have a huge cost and CASE FILES stake in IBREL from its promoter While the Bengaluru-based share in IBREL, | IBREL now in talks TAMAL BANDYOPADHYAY writes time is of essence when it comes to the Status of CIRPs as of June 2019 Sameer Gehlaut and his group Embassy Group is a specialist in as planned with Blackstone to IBC,” a senior government official said. Admitted 2,162 companies, following the first commercial real estate, the deal fell | The deal is offload 50% stake Justice G S Singhvi, a retired judge of tranche of 14 per cent it acquired through because the environment believed to have in commercial Ongoing 1,292 the SC, said such a deadline for courts in June. and valuations were not conducive been called off properties had never been imposed before. Liquidation 475 The second tranche was expect- to it. It is learnt that promoters of However, he said it was important to ed to conclude in six-eight weeks. IBREL weren’t very happy with the last week | Deal likely to understand why there was delay. “You >270 days 445 Sources in the know said this trans- valuations offered in the second | Embassy to have fetch valuation of have one person doing the job of four. >90<180 349 action was unlikely to go through. tranche that should have concluded concluded second ~4,800 crore, may Everyone wants the judge to apply >330 days 335 “Talks haven’t progressed in the a week ago. Turn to Page 6 > round of stake conclude by Sept his mind, and give a reasoned order. But you need to build capacity as well,” <90 277 said Justice Singhvi. >180<270 221 The government is concerned about Closed on appeal 174 BUSINESS LAW: Taming the cost that the delay in the resolution process is causing. A set of rules in this Resolution plan of the unscrupulous 17 > 120 regard has been proposed by the approved The rules under the Unregulated Ministry of Corporate Affairs to the SC, Withdrawn 101 Deposit Schemes Act may hold the it is learnt. The government, if it finds key to its implementation, say experts. CIRP: Corporate insolvency resolution process anything untoward in a preliminary Source: Insolvency and Bankruptcy Board of India APOORVA writes enquiry, will approach the Chief Justice of India to appoint an SC judge to POLITICS & PUBLIC Capacity building AFFAIRS: A concoction initiate a larger enquiry in accordance with the proposed rules. The ministry is planning to build a 18 > of crime, caste In fixing accountability, Justice more democratic system for the NCLT The incidents related to the rape of a Singhvi said: “Those dishonest should and part with some control by minor in Unnao and the support that be held liable and there are many creating five posts of regional accused Kuldeep Singh Sengar instances where the SC has taken vice-president across the country. enjoys show the worst of UP politics. action against judges and allowed They will take over most of the admin- RADHIKA RAMASESHAN writes enquiries... Procedures may be istrative duties, giving the Benches STATSGURU: MPC to tread different for tribunals because there more time for their judicial work, the are retired judges there.” senior official said. Turn to Page 6 > on multiple pain points 4 > > RESULTS RECKONER DEFENCE SHIPYARDS BAG 85-95% Quarter ended Jun 30, 2019; common sample of 658 companies (results available of 748) WARSHIP ORDERS WITHOUT TENDER SALES  The Federation of Indian Chambers of Jun 30, ’18 20.3% 7.93 trillion Commerce and Industry has written a Jun 30, ’19 5.6% 8.38 trillion  strongly-worded note to Defence Minister NET PROFIT Rajnath Singh, asking the Ministry of Defence to  end the practice of ‘nominating’ defence public- Jun 30, ’18 3.2% 71,208 crore sector shipyards to build warships for the Navy and Jun 30, ’19 14.2% 81,343 crore  Coast Guard. ‘Nomination’ involves placing orders for Companies which have reported zero sales are excluded warships on chosen public-sector shipyards, without Data compiled by BS Research Bureau Source: Capitaline competitive tendering. AJAI SHUKLA writes 6 > CEOs bank on festive cheer Situation challenging, but India Inc hopes for improvement in second half DEV CHATTERJEE Mumbai, 4 August QUOTE, UNQUOTE

While top India Inc leaders have raised FEELING GOOD FEELING NOT SO GOOD concerns about the economy in the I REMAIN VERY OPTIMISTIC THERE IS NO DEMAND past week, a large number of chief ABOUT THE LONG-TERM AND NO PRIVATE GROWTH PROSPECTS OF INVESTMENT. WHERE executive officers (CEOs) expect THE INDIAN ECONOMY AS WILL GROWTH COME growth to improve around the festival WE SET SIGHTS ON THE FROM? IT DOESN’T FALL season, starting next month, due to $5-TRN ECONOMY TARGET” FROM THE HEAVENS” falling interest rates, increased KUMAR MANGALAM BIRLA, RAHUL BAJAJ, government spending in social CHAIRMAN, ADITYA BIRLA GROUP CHAIRMAN, BAJAJ AUTO schemes, and infrastructure projects. This would positively impact THE FIRST HALF OF 2019 HAS EVEN IF WE CAN MAINTAIN consumer demand, they said. BEEN CHALLENGING. BUT 6.5%, WE WILL BE LUCKY. WE EXPECT THE ECONOMY IT IS GOING TO TAKE A YEAR Last week, three stalwarts of TO PERFORM BETTER IN OR A YEAR AND A HALF Corporate India, Housing Development THE SECOND HALF OF BEFORE ACCELERATED Finance Corporation Chairman Deepak THIS FINANCIAL YEAR” SPENDING FOR Parekh, Bajaj Auto Chairman Rahul T V NARENDRAN, DEVELOPMENT COMES” Bajaj, and Larsen & Toubro Chairman CEO & MD, TATA STEEL A M NAIK, CHAIRMAN, L&T A M Naik warned about the present state of the economy. Bajaj was critical of the state of before accelerated spending for the risk-averseness should taper off.” the economy: “There is no demand development comes.” He added that re-instilling confidence and no private investment. Where Parekh said banks’ reluctance to in lenders to support growth in the will growth come from? It doesn’t lend to non-bank financial companies economy was critical. fall from the heavens.” (NBFCs) had led to access to credit being Other CEOs also expect things to Naik said, “Even if we can maintain choked. He added, “One is hopeful that improve in the festive season and the 6.5 per cent, we will be lucky. It is normalcy will be restored soon. By the second half of the financial year. going to take a year or a year and a half time the festive season sets in, some of Turn to Page 6 >

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official 2 COMPANIES MUMBAI | MONDAY, 5 AUGUST 2019 1 >

IN BRIEF DLF settles ~3,100 crore with Most pharma CEOs took a pay cut in FY19 SOHINI DAS bers were strong, with the US business Singapore investment JV Mumbai, 4 August PAY SLIP delivering a strong 41 per cent growth. DRL’s G V Prasad’s Cipla’s MD and global CEO Umang Realty major DLF has settled ~3,100 crore As the pharmaceutical sector is going remuneration Vohra’s remuneration was down 20 per amount payable to its joint venture (JV) through a slow growth phase, be it grew as his share cent. His salary component remained with Singapore investment firm GIC by in the US market or the Indian of profits doubled more or less flat in FY19 at ~6.3 crore, so transferring Noida shopping mall and domestic market, chief executives was the bonus (~5.5 crore). However, some land parcels. At the end of 2018, DLF (CEOs) of the top drug firms either CEO/MD Nilesh Gupta G V Prasad Dilip Shanghvi Umang Vohra Sharvil Patel Samir Mehta the stock options exercised during FY19 owed ~8,700 crore to DLF Cyber City have taken a pay cut or have taken were less than what was exercised in Lupin DRL Sun Pharma Cipla Cadila Torrent Developers (DCCDL), which is a joint venture between DLF and home a flat package in 2018-19. Company FY18. The 2018-19 remuneration Singapore sovereign wealth fund GIC. “DCCDL payable reduced The country’s largest drug firm, Sun Healthcare Pharma included a stock option of ~2.97 crore as from ~8,700 crore to ~5,600 crore by July 1," DLF said in an investors Pharmaceutical Industries, which bat- Salary (~cr) 2.4 1.8 Re 1 6.3 24.7 — against ~7.1 crore exercised in FY18. presentation. Updating settlement status, DLF said its Mall of India tled allegations of questionable corpo- Perquisites (~lakh) 68 28 2.6 — 22 0.4 Cadila Healthcare’s Sharvil Patel project at Noida, Uttar Pradesh has been transferred to DCCDL at an rate governance practices through the and Torrent Pharmaceuticals’ Samir enterprise value of ~2,950 crore. The realty firm has also trans- year, saw its founder and managing Incentives (~cr) -1.3 10** — 5.5 — 15 Mehta’s remunerations remained flat ferred 3.05 acres land parcel at Gurugram. In December 2017, DLF director (MD) Dilip Shanghvi took Total (~cr) 1.8* 12.3 # 0.02 15.0 *** 25 15 during the financial year at ~25 crore entered into this joint venture with GIC when DLF promoters sold home a ~1 salary in FY19 apart from and ~15 crore, respectively. While Cadila their entire 40 per cent stake in DCCDL for nearly ~12,000 crore. This perquisites of ~262,000, a 99 per cent % change -80 60 -99 -20 — — Healthcare posted a 4 per cent rise in deal included sale of 33.34 per cent stake in the DCCDL to GIC for pay cut. This is despite Sun Pharma profits, Torrent’s net profit was down 35 YoY change -32.1 92.0 27.2 5.3 4.1 -35.7 about ~9,000 crore and buyback of remaining shares worth about registering 27 per cent year-on-year in net profit (%) per cent in 2018-19. ~3,000 crore by the DCCDL. DLF holds 66.66 per cent while GIC holds (YoY) growth in consolidated net prof- Dr Reddy’s Laboratories MD and co- *Nilesh Gupta did not receive any PLI in FY19. There was a reversal of ~1.3 crore of excess incentive provided for FY18; ** Commission as percentage of profit; 33.34 per cent stake in the JV firm DCCDL. PTI< it for the year under review. # Includes company car and contribution to PF; *** Includes stock option of ~2.97 crore exercised during FY19 and ~7.1 crore in FY18 Source: Companies chairman G V Prasad is perhaps the The company, which is a market only exception among the sector CEOs leader in the domestic space (with an where the market leader, too, has post- Companies, however, are taking a cau- by 32 per cent and the remuneration of who took a 60 per cent jump in his JM Financial arm to Soon, use Flipkart 8.2 per cent market share), saw its rev- ed muted growth. In the January to tious approach when it comes to Gupta dropped by 80 per cent. In FY18, remuneration as his incentives (com- enue from the Indian branded generic March quarter, the domestic market launching products in the US as a slow he earned ~9.1 crore, of which ~2.08 mission as percentage of profits) dou- raise up to ~500 cr voice commands business decline by 8.5 per cent to saw a meagre 0.1 per cent growth in domestic market has taken away the crore was performance-linked incen- bled in FY19. Prasad got a commission by issuing bonds to order groceries ~7,348.3 crore. Sun Pharma reasoned volumes. Volumes have been in the comfort of sacrificing margins for vol- tives. The company follows a market- of ~10 crore in FY19 as against ~5 crore in JM Financial said its subsidiary Online shoppers will soon be that the dip was due to one-time adjust- slow lane for the past six months and ume growth in the US. linked remuneration policy and Gupta FY18 as DRL’s net profit grew 92 per cent JM Financial Products will raise able to order vegetables and ment related to transitioning its distri- the new financial year, too, is not show- The CEOs’ salaries also have taken did not receive any incentive for FY19. during the year. The company’s profits up to ~500 crore by issuing other groceries through voice bution business to a wholly-owned sub- ing signs of revival. In fact, during a brunt. A quick analysis shows that In fact, there was a reversal of ~1.3 crore soared mainly because of new launch- bonds. JM Financial Products commands on Flipkart app. sdiary, excluding that the business April-June, the volume sales in the while Shanghvi took a whopping 99 excessive incentive provided in FY18 es, optimisation of cost structures, has filed the Tranche II prosp- According to sources, the would have grown by 5 per cent. market are down by 0.8 per cent. The per cent pay cut, Lupin’s MD Nilesh from Gupta’s salary. This brought his divestment of non-core assets etc. ectus for its non-convertible feature will be rolled out after Analysts, however, see this as an US market also has seen pricing pres- Gupta took an 80 per cent year on FY19 remuneration down to ~1.8 crore. Annual reports for Aurobindo debentures, with the Registrar Big Billion Days, Flipkart's indication of the overall slowdown in sure in the generics segment. It has year cut. Cipla saw a 5.3 per cent rise in net Pharma and Glenmark for the year of Companies, BSE and Sebi, JM annual sales event, in Septe- consumption in the domestic market eased out in the recent quarters. Lupin’s net profit for FY19 declined profit in FY19. Its fourth quarter num- 2018-19 were not yet available. Financial said in a filing. "The mber. Using voice, app users said Tranche II prospectus is will be able to search for items dated July 31, and pertains to and add them to the cart the public issue of secured NCDs through spoken commands. with a base issue size of ~100 It will initially support inputs Equitas likely crore with an option to retain in English, sources say the oversubscription up to ~400 tech is being trained to unde- 200,000 jobs lost in 3 months crore aggregating up to ~500 rstand local dialects and to take bonus crore," JM Financial said. PTI< Hindi terms. BS REPORTER< Cairn CEO says will Leisure Hotels to across auto dealerships: FADA route to list SFB reinvest in India if invest ~160 cr to HAMSINI KARTHIK retro tax resolved add 9 properties Industry body chief says technical jobs will also be affected if the slowdown continues Mumbai, 4 August Britain’s Cairn Hospitality firm Leisure Hotels PRESS TRUST OF INDIA we did not touch manpower till With just a month left for Equitas Holdings to list Energy, which Group is looking to invest New Delhi, 4 August March and almost mid-April.” its banking arm Equitas Small Finance Bank gave India its ~160 crore to add nine Ruing the loss of jobs, he said, “It (ESFB), sources say the company is working on biggest properties across the country to round 200,000 jobs have is the last resort because it is difficult ways to ensure that its shareholders do not suf- onshore oil its portfolio by the end of 2021, been cut across automobile to get those manpower. We invest a fer huge dilution in the listing process of ESFB. discovery and Director Vibhas Prasad has said. Adealerships in India in the lot on training them because it is a To do so, it is learnt that ESFB may issue a gas find that The group currently operates past three months as vehicle retailers peculiar industry, whether it is a bonus shares to its 100 per cent holding com- opened the KG 27 boutique properties with take the last resort of cutting man- technical or a field job.” pany — Equitas Holdings — in the ratio of 1:1. basin, is keen to reinvest in the around 875 rooms in India. PTI< power to tide over the impact of the According to the Society of According to the current structure, ESFB would country if a retrospective tax unprecedented sales slump, accord- Indian Automobile Manufacturers issue bonus shares to Equitas Holdings and the issue it is facing is resolved, its ing to the Federation of Automobile (SIAM) figures, vehicle wholesale holding company will, in turn, transfer the rights Chief Executive Officer Simon Hyundai’s Venue Dealers Associations (FADA). across all categories declined by on bonus shares to its shareholders. Thomson (pictured) said. Cairn becomes leader With no immediate signs of 12.35 per cent to 60,85,406 units in By this, the shareholders of Equitas Holdings was in 2014 slapped with a tax recovery, FADA feared that the job April-June against 69,42,742 units will automatically become shareholders of demand of ~10,247 crore over in UV segment cuts may continue with more show- in same period of last year. ESFB. When ESFB goes for listing, shareholders an internal business reorga- rooms being shut in the near future OUT OF GEAR According to the data based on of the holding company can opt for an exit. nisation it did of its India and sought immediate government registrations collated by FADA, auto- With reverse merger not being an option as  According to SIAM, vehicle  In July this year, Maruti Suzuki business years back. The tax intervention such as reduction of mobile retail sales in Q1 declined by per Reserve Bank of India department confiscated its GST to provide relief to the auto wholesale declined by 12.35% reported a 36.3% drop in its 6 per cent to 51,16,718 units in the (RBI) norms, this may ESFB may issue dividend income, stopped tax industry. “The majority of job cuts to 60,85,406 units in Q1 as domestic passenger vehicles first quarter of FY20 as against offer the best exit for bonus shares refund and sold its shares to have happened in the past three against 69,42,742 units in sales. Hyundai saw a dip of 54,42,317 units a year ago. shareholders of Equity to its 100% recover the tax demand months...It started around May and the same period last year 10% in PV sales Passenger vehicles (PV) segment Holdings. “Equitas Hold- holding which was raised using continued through June and  The data by FADA shows  While Mahindra & Mahindra’s has been the worst hit with sales con- ings has sought the con- company in the 2012 retrospective Hyundai Motor India's Sports July,” FADA President Ashish automobile retail sales in Q1 sales declined 16%, Tata tinuing to decline for almost a year sent of Securities and the ratio of 1:1 tax legislation. PTI< Utility Vehicle (SUV) Venue has Harsharaj Kale said. dropped by 6% to 51,16,718 Motors’ PV sales fell 31%, now. In July, market leader Maruti Exchange Board of India become the highest-selling car He said: “Right now most of the units as against 54,42,317 and Honda Cars India saw Suzuki reported a 36.3 per cent drop (Sebi) and RBI to go ahead with this structure,” in the segment, overtaking its cuts that have happened are in front- units in the year-ago period a 48.67% drop in its domestic PV wholesales, while a source aware of the development says. Maruti: Softening in competitors Maruti Suzuki and end sales jobs but if this (slowdown) Hyundai saw a dip of 10 per cent. People in the know say Equitas Holdings has local demand may Mahindra & Mahindra, despite continues, then even the technical M&M sales were down 16 per cent, applied for an extension of deadline to list ESFB, downturn in the automobile jobs will be affected because if we are across 271 cities in the 18-month ting down on costs other than man- Tata Motors’ PV sales fell 31 per cent though RBI is yet to grant permission. “The hit value creation industry. Hyundai's SUV market selling less then we will also service period ended April this year, he said. power...Till March this year none of while that of Honda Cars India also response from Sebi is expected by early Maruti Suzuki India has said share has grown to 21 per cent less, so it is a cycle.” Stating that more dealerships the dealers went for any manpower fell 48.67 per cent during the month. September,” says a highly placed source. headwinds like softening of with the combined sale of the When asked how many jobs have have closed in the past three correction because we thought this Seeking immediate government According to the original timeline, Equitas demand in the domestic Venue, Creta, and Tucson, said been cut across the dealerships in months, Kale said, “We are collat- was a temporary slowdown and it intervention, Kale said, “We are hop- has time till September 4 to list the small finance market and protectionist the company. The Venue has India, he said: “Close to about ing the figures again...In a few cases will soon recover,” he said. ing, from whatever we are hear that bank (SFB). This is according to the licensing measures abroad may impact overtaken Maruti's Brezza in 200,000.” “It is a guesstimate that some (dealers) have gone for closure However, he said, “The way the the government has taken note of norms governing SFBs, which require the parent its ability to create value in the July. The sale of Venue grew by our members have already cut 7-8 of outlets, not the main outlets but first quarter has panned out despite the serious situation that is going on company to list the SFB within three years from short term. The firm, which has 9.3 per cent to 9,585 units in per cent of the jobs in most of the those which were put up anticipat- good election results and the in the overall economy, specifically the commencement of banking operations. over 50 per cent market share in July, as compared to 8,763 dealerships as the degrowth has ing some geographic reach.” Budget, the degrowth continued. It with the auto sector. We are hoping Going by this, listed peer Ujjivan Financial the domestic passenger vehicle units in the previous month. been very high,” he added. Elaborating reasons for taking the is clear now that a proper slowdown for some support for the auto sector Services has time till January 31, 2020, to industry, has been hit by slu- Brezza has seen a decline of 40 Around 2.5 million people were drastic step of cutting jobs, he said has hit us. Now dealers have resort- in the next few days or week or two.” list its SFB. “If the regulators permit the struc- ggish offtake and has seen total per cent in sales in July to 5,302 employed directly through around the ‘margin of error’ in the business ed to cutting manpower.” He said the industry had put out ture proposed by Equitas, Ujjvan may also fol- sales drop 33.5 per cent in July at units compared to 8,871 units 26,000 automobile showrooms in the past few years has really gone Terming manpower as ‘the most a request for GST cut. “It is not a per- low suit, given that both the holding compa- 1,09,264 units. “India has in the month of June. Mahi- operated by 15,000 dealers. Another down with cost almost doubling in precious resource of dealers’, Kale manent demand. We know GST is nies have a similar structure,” says a highly become the fifth-largest car ndra's XUV, which has been in 2.5 million are indirectly employed the last three to four years. said, “That is the last thing we try to such a huge developmental agenda placed source. market in the world, though car the third position in the space, in the dealership ecosystem, he said. “The margin that we earn overall cut down. When the slowdown start- for the government, but at the same Equitas is a widely-held company, with no penetration rate remains has seen a decline of 6.82 per The 200,000 jobs cuts in the past as a business has not gone up. ed we first decided that we should go time (it is needed for) reviving the traceable promoters. CDC and International reasonably low at 3 per cent, cent in July, to 4,464 units, three months are over and above the Therefore, if we go into a degrowth for stock reduction. Most of OEMs industry. We re almost 8 per cent of Finance Corporation are the major foreign with the country's population against 4,769 units in the 32,000 people who lost employment situation we get into cash loss. So to have supported us. While cutting the GDP and 49 per cent of manu- shareholders in Equitas Holdings, according to exceeding 1.3 billion people. PTI< previous month. BS REPORTER< when 286 showrooms were closed avoid that, dealers have been cut- other variable expenses that we can, facturing GDP,” Kale said. the June 2019 shareholding filings. Mutual funds and foreign institutional investors hold 37 per cent and 20 per cent shares, respectively. Sources also state that while issue of bonus shares may help provide a good exit for Equitas Vinod Khosla bets on Client risk a trip factor for IT firms Holdings’ shareholders, ESFB will still have to list itself in the bourses to comply with licensing reg- DEBASIS MOHAPATRA ulations. Equitas Holdings published its June Bengaluru, 4 August quarter results on August 2. Net profit at ~62 innovative start-ups crore grew by 75 per cent helped by 38 per cent Client-specific issues have started to growth in loans and advances. There was, how- PEERZADA ABRAR tion services company SpaceX. Khosla also show up in the information techn- ever, no mention on listing its SFB, while Ujjivan Bengaluru, 4 August sees the area of AI-led drug discovery being ology (IT) services sector, and these Financial Services which also reported its Q1 dominated by start-ups, not large pharma- may create growth bumps. numbers on the same day said they will list the Billionaire venture capitalist Vinod Khosla ceutical companies. Analysts said the decision of SFB within the scheduled timelines. (pictured) is betting on start-ups aiming at “In most cases, the innovation came from Deutsche Bank to exit most of its Equitas and Ujjivan were unavailable for radical innovation in the use of technology in somebody who had never worked in that investment banking business, apart comments. areas such as transportation, housing and area,” he said. “Like Elon Musk (co-founder from uncertainty over the business construction, and food and health care. and chief executive at Tesla) hadn’t worked in prospects of Huawei, were some of Khosla Ventures, his venture capital enti- cars and the automakers sort of laughed at his these client-specific events that will ty, invests in experimental tech- Silicon Valley start-up with no have significant adverse impact on Poor Mumbai airport nology such as robotics and bio- experience in automotives. He many big Indian IT firms. Analysts say slow spending by marquee clients, Deutsche Bank, and Huawei medicine.It believes technology made lots of mistakes but fixed Sources say Deutsche Bank’s will translate into business loss for top players infra may impede such as artificial intelligence (AI) these quickly, figured out a bet- annual IT outsourcing spending, and 3D printing are becoming the ter way than they would have by around $6 billion a few years before, Bank. HCL had a joint venture with Indian IT firms had also flagged $5-trillion plan: DHL new platforms, offering a huge applying conventional wisdom.” has come down due to insourcing. the German bank to transform the softness in the capital markets and opportunity to create an impact. After a degree in electrical The German bank still outsources $1 latter’s cheque processing operations European banking business as they Global logistics major DHL Express is con- “One of my favourite start-ups engineering from IIT-Delhi, billion of its IT service work to global late last year. announced first quarter earnings. cerned about lack of adequate infrastructure at right now is trying to do 3D print at Khosla failed at starting a vendors, including Indian ones. “No “Like Morgan Stanley or Bank of As for Huawei, global provider of the Mumbai airport, warning this may be a much lower cost and in 24 hours. soymilk company and came to player is exempt from the secular America, Deutsche Bank is one of the communications infrastructure and detrimental to the country’s $ 5-trillion growth But, more important, its environ- the US to study further. He co- industry trend towards digitisation. big spenders for Indian IT firms. With smart devices, it has uncertain aspiration as well. mental footprint is much better,” founded Sun Microsystems in In a period of such unprecedented closure of capital market operations, business prospects due to the US’ The company said there was only a single slot Khosla told co-panelists (Infosys 1982 and helped incubate the change, client-specific issues can the bank is shutting down 25 per cent reservations regarding its operations. for all air freight operators and there is no scope co-founder) Nandan Nilekani and (technolo- idea and business plan for Juniper Networks. cause blips in quarterly results,” said of its business, which definitely will Cognizant and Tech Mahindra have for expansion at the nation’s second largest air- gy think-tank iSpirt founder) Sharad Sharma He has invested in companies focusing on a Chirajeet Sengupta, partner at global translate into some business loss for meaningful exposure to Huawei. L&T port. Anywhere where there are restrictions of at an event. range of areas — solar, biofuel-to-energy stor- consultancy Everest Group. “Under domestic IT firms,” said Pareekh Technology Services, Mindtree, slots for landing or network to be able to build Looking back 40 years, Khosla said he had age and even makers of wearable devices to such scenarios, enterprises are likely Jain, an IT outsourcing advisor. As Infosys, and Wipro have some level our network in terms of services which we are been unable to find any major innovation increase energy and lower stress. to either go through a rationalisation part of a global restructuring, of engagement. able to give our customers, be it exports or from large companies. These are mainly cre- One venture is Impossible Foods, which of their supplier portfolio or witness a Deutsche Bank decided to slash “Client-specific risks have always imports, global CEO John Pearson said. ated by start-ups. He said automobile giants develops plant-based substitutes for meat temporary curtailment in demand.” 18,000 jobs. It plans to exit most of its been around. But, most Indian Managing director for India RS Subramanian General Motors and Volkswagen couldn’t and dairy products. “It makes a vegetarian Among Indian companies, investment banking activity to vendors have been good at reducing said all the other major airports in the country design an electric car. Large plane makers burger that tastes the same as meat. Most Everest, HCL Technologies, TCS, and enable focus on the corporate, private excess exposure to a limited have dedicated space allotted for operators like Boeing and Airbus were not able to create a people cannot distinguish between this and Infosys Technologies have banking and asset management clientele,” said Hansa Iyengar, senior it, but despite privatisation, the Mumbai airport venture like Elon Musk’s space transporta- the real meat burger,” says Khosla. significant exposure to Deutsche segments. analyst at Ovum Research. lacks the same. PTI

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official MUMBAI | MONDAY, 5 AUGUST 2019 COMPANIES 3 . < CCD group firms have no dues: Tata Capital

The company says it had a maximum exposure of ~165 cr to CCD group in FY18, and that the entire amount had been repaid by March 2019

PRESS TRUST OF INDIA New Delhi, 4 August

Amid talk of financial stress driving founder V G Siddh- artha to allegedly end his life, the coffee tycoon had repaid all the loans taken from Tata Capital Financial Services (TCFS) and has no outstand- ing dues to the entity. According to TCFS, it had a maximum exposure of ~165 crore to Café Coffee Day (CCD) group in FY18, and that the entire amount had been repaid by March 2019. “The maximum exposure of TCFS to the CCD group during FY18 was ~165 crore. In March 2019, TCFS’ expo- sure has completely been repaid,” said a company statement emailed to PTI. Currently, TCFS, a sub- sidiary of Tata Capital, has no exposure to Coffee Day Ent- erprises (CDEL) or any of the companies within the Café Coffee Day group, it added. CDEL promoter and cof- fee tycoon V G Siddhartha is said to have been under severe financial stress before his death, with his flagship cafe chain’s liabilities dou- bling to over ~5,200 crore by the end of March 2019. His unlisted ventures for realty and hospitality had also availed loans from various entities, as per regulatory fil- ings with the corporate affairs ministry. Siddhartha, whose body was recovered from a river near Mangalore on Wed- nesday after going missing on Monday, had struggled with mounting financial bur- den and a letter purportedly written by him had hinted at his war with “serious liquid- ity crunch” and “tremen- dous pressure” from lenders and an unnamed private equity investor. Filings with the corporate affairs ministry showed him trying to raise funds by pledging shares of his listed and four unlisted firms to pay off personal and compa- ny loans. Siddhartha and promoter group entities had pledged over 75 per cent of their shares in the BSE-listed CDEL as on March 31. Siddhartha had several entities that borrowed mon- ey from a gamut of organi- sations, including banks and financial institutions, for his non-coffee businesses.

NCLAT stays eviction of Sterling Biotech from its premises

The National Company Law Appellate Tribunal (NCLAT) has stayed eviction of Sterling Biotech from its premises as the company was going under the insolvency resolu- tion process and was under the moratorium period. A two-member Bench upheld the order passed by the Mumbai Bench of the National Company Law Tribunal (NCLT), which had asked Srei Infrastructure Finance, a financial creditor, to hand over the possession of the A and B wing premises of Laxmi Towers. The appellate tribunal observed that although Ster- ling Biotech is not the owner of the premises it cannot be ejected or disturbed during the moratorium period as it has to remain as a going con- cern. “We hold that the NCLT has rightly directed the appe- llant to hand over the posses- sion of ‘B’ Wing premises of Lakshmi Towers and rightly prohibited the Appellant from evicting the ‘corporate debtor (Sterling Biotech) from ‘A' Wing premises of Lakshmi Towers,” said NCLAT. PTI

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official 4 ECONOMY MUMBAI | MONDAY, 5 AUGUST 2019 1 > CAG, finance ministry spar CAG flags deficiencies in functioning of GST

to some extent. self-assessed ones). Introd- over off-Budget financing However, a system-validat- uction of GSTR-3B resulted in ed ITC mechanism through filing of returns with ITC claims ‘invoice matching’ is not in which could not be verified and ARUP ROYCHOUDHURY & vations made by the CAG. place. A non-intrusive e-tax sys- that appears to have encour- SUBHOMOY BHATTACHARJEE According to India’s supreme audi- tem remains elusive. aged non-filing of GSTR-1, says New Delhi, 4 August tor, the push for off-Budget borrowings The return mechanism’s the report. has risen because the government is complexity and technical It acknowledges that tax- he Comptroller and Auditor trying to meet both, a rising demand glitches resulted in rolling back payers, especially exporters, suf- General (CAG) has told the gov- for subsidy and for capital expenditure. of invoice matching, rendering fered due to GST refunds being T ernment that off-Budget liabili- The carry forward liability for just food the system prone to ITC fraud. held up on account of faulty ties such as the raising of money by enti- and fertiliser subsidy since 2011-12 has Thus, on the whole, the planning of the refunds mod- ties like IRFC, Power Finance ballooned and is averaging 0.5 per cent EXIM MATTERS envisaged GST tax compliance ule. And, says the inadequacies Corporation (PFC) and Food Corporation of the GDP. (see table) T N C RAJAGOPALAN system is not functional. Also, show a failure in not only sys- of India (FCI), and special banking While the finance ministry has gone the system deficiencies point to tem design but its testing by arrangements for fertiliser companies, some way to meet the same in Budget The recent report of the Union a serious lack of coordination GST Network (the system’s IT totalling about ~3 trillion, should be 2019-20 showing for the first time, Comptroller and Auditor between its developers and the backbone) and acceptance by included in Budget numbers. some of the extra-Budget borrowing, General (CAG) on executives. the tax departments before a The numbers, once added to the fis- Extra-budgetary resources Market borrowing for GoI it has been conservative. It has also the goods and serv- Revenue analy- pan-India rollout. It censures cal deficit, expand it close to 6 per cent of informed the CAG that “all off-Budget ices tax (GST) does Revenue analysis sis by the CAG the executives who endorsed gross domestic product (GDP) for 2019- (~ crore) 129,446 programmes* (~ crore) 200,187 borrowings remain within the scope of praise its rollout as by the CAG shows shows the growth the system as being equally 20, instead of 3.3 per cent, as shown by 90,485 93,393 Union Budget since both the provi- a landmark achi- the growth of of indirect taxes accountable for the problems. Finance Minister Nirmala Sitharaman 72,172 96,710 sioning of repayment of principal and evement. And, indirect taxes slowed to 5.8 per It also notes that import 58,170 @ in the Budget papers tabled in 53,000# 70,000 of interest of off-Budget borrowings is points at several slowed to 5.8 per cent in 2017-18 data is not being utilised dur- Parliament on July 5. 9,086 being made through the Budget”. deficiencies in its cent in 2017-18 over 2016-17, from ing settlement of Integrated The issue has been flagged in audit On the impact of food subsidy, the implementation. over 2016-17, 21.3 per cent the GST (IGST) due to non-inte- reports by the CAG tabled in CAG observed that the Centre has GST, it says, was from 21.3 per cent earlier year. The gration of the GST system with Parliament in February this year, as ‘11-12 ‘12-13 ‘13-14 ‘14-15 ‘15-16 AIBP** FCI FCI IFCI PFC forced the FCI to borrow through gov- rolled out with the the earlier year Centre’s revenue the ICEGATE ones used by well as in its recent presentations to *Since 2016-17; **Accelerated Irrigation Benefit Programme; # Bonds and short-term loans; @ from NSSF ernment-supported bonds, unsecured objective of reduc- on goods and serv- Customs. The report also deals the 15th Finance Commission. India’s Source: Comptroller and Auditor General short-term loans and even through ing the cascading of tax, usher- ices (excluding central excise with a number of other issues supreme auditor has advised the gov- financing, or extra budgetary resources, work clearly includes extra budgetary dipping into the National Small Savings ing in a common market for on petroleum and tobacco) fell such as registration and pay- ernment to “consider putting in place a out of the fiscal deficit calculations. resources in debt, and excludes them Fund, which risks the returns on them goods and services, and bring- 10 per cent in FY18 as com- ment modules, transfer of rev- policy framework for off-Budget “The CAG’s assessment is a subjec- from fiscal deficit,” the person said. meant for providing safety net to those ing in a simplified, self-regulat- pared to the revenue from the enue to States, IGST settle- financing, which, among others, tive one. One can debate and argue at a In its assessment, the CAG has stat- with fixed income. ing and non-intrusive compli- subsumed taxes in FY17. ment reports, system design should include disclosure to theoretical level on off-Budget financ- ed that the key element of the disclosure “It is evident that there was increase ance regime. It appreciates that It was expected that com- deficiencies and so on. Parliament”. It has also pointed out that ing, as part of fiscal deficit, but an audit to the legislature should be — the of about 350 per cent in carried over multiple central and state taxes, pliance would improve as the Overall, the report is soft on this is not a one-off development and needs to be formally done against a rationale and objective of off-Budget subsidy arrears in the five years pre- barring a few goods/sectors, system stabilised but all the government and hard on has been rising in scale for almost a framework, which is the FRBM law in financing, the quantum of such financ- ceding 2016-17, which require financing have been unified, Input Tax returns showed a declining the GST Network, instead of the decade. Since aggregate numbers are this case. And the law clearly tells us ing and the extent of budgetary sup- from a number of methods, including Credit (ITC) is available across trend of filing from April to other way round. It blames the hard to come by, the CAG has instead that debt includes off-Budget financing port and details during a financial year very high interest cash credit facility, the entire value chain. December 2018. latter for not mapping the busi- provided illustrative figures since 2011- and extra budgetary resources, and fis- through all state-owned agencies. which increases actual cost of this sub- In two years, a multiplicity The filing percentage of ness rules correctly but says lit- 12 to prove its point. cal deficit does not,” a senior govern- The 15th Finance Commission is sidy substantially,” it has said. of tax rates was eliminated to GSTR-1 returns (monthly ones tle about the government fre- Finance ministry officials said the ment official told Business Standard. expected to take a sympathetic view of The auditor has also pointed to the a large extent. And, the objec- on outward supplies) was quently changing the rules. legal framework of the Fiscal “To say the government is wrong is an the CAG’s observations. Earlier too, a huge market borrowing by Power tive of a single information throughout less in comparison Responsibility and Budget Management incorrect assessment, because it is right revision in the two-decade-old FRBM Finance Corporation of over ~2 trillion technology-based interface to the corresponding filing of E-mail: Act empowers them to keep off-Budget according to the law. The legal frame- Act was made on the basis of the obser- by the end of 2016-17. for the taxpayer also achieved GSTR-3B returns (summary [email protected] Time to reinforce transmission Slowdown cyclical, Signalling only via rate cuts is not enough, liquidity is also necessary growth will pick up mission is most effective via and guidance (signal). Weak further cuts could enhance Liquidity has a behavioral including a shift towards an the interest rate channel global demand, weak mon- transmission. effect too. At a time when risk external benchmark-based in 1-2 yrs, says Jalan (financial market rates) and soons and still-tight domestic Second, this signaling premium is high and financial lending rate system, encourage then the credit channel (via credit conditions should be comple- stability risks are prevalent, pos- banks to offer floating rate PRESS TRUST OF INDIA the situation today is very bank lending/ deposit rates). weigh on consump- mented with the itive liquidity can lower deposits, faster reset period on New Delhi, 4 August different from 1991 when the The former is working well, tion, suggesting that RBI’s liquidity liquidity premia and gradually banks’ floating rate loans, country faced a severe but the latter (credit channel) growth has weak- stance. To its credit, narrow credit spreads as liquid- improving banks financial The current slowdown in the economic crisis on the exter- faces challenges. The fragile ened further in Q1 the RBI has already ity slowly trickles down the risk health, among others. Indian economy is cyclical and nal front. non-bank finance companies FY20 (Apr-Jun). shifted banking sys- curve (from AAA to AA, etc). One concern is that excess growth will pick up in one or “India is in a very strong (NBFC) mean banks need to Even with a recov- tem liquidity into A third option is to liquidity can trigger risky lend- two years, former RBI Governor position today, unlike in 1991. SONAL VARMA step up, but despite policy rate ery in the second surplus. We believe announce counter-cyclical ing. However, if indeed we see Bimal Jalan said on Sunday. If you look at our inflation cuts banks have tightened their half, we expect GDP there should be a fol- macroprudential norms for signs of growth/inflation Jalan further said the gov- rate, it’s quite low. If you at Despite the 75 bp in cumulative lending standards for the growth to moderate RUN-UP TO low-up commit- specific sectors to offset higher resurface, then liquidity may ernment has already look at our reserves, it's quite repo rate cuts so far, growth demand-hit segments such as to 6.5 per cent y-o-y BI-MONTHLY ment to keep bank- credit risk premium. also be quickly withdrawn, in announced many reforms, and high,” he asserted. momentum continues to flag. small- and medium-sized in FY20, below the MONETARY ing system liquidity Finally, to address confi- our view. it is now a question of imple- Last month, the IMF and Are rate cuts not enough or are enterprises, auto dealers and Reserve Bank of POLICYREVIEW positive for the fore- dence issues, we think an To summarise, the process mentation, particularly in Asian Development Bank they not working? Both issues real estate, raising credit risk pre- India’s (RBI) projec- seeable future. asset quality review of the of transmission, which has just terms of investment. (ADB) had cut India’s growth need consideration. mium and partly muting the tion of 7 per cent. A Past evidence NBFC sector should be per- started, needs to be reinforced “The slowdown in the forecast, citing global and Monetary policy works benefits of lower rates. negative output gap should has proven that transmission formed and revealed. through liquidity. Only signal- growth is cyclical. In one or domestic headwinds. Acco- with long transmission lags. We believe there are multiple keep inflation under 4 per cent works best when there is posi- In addition to the above, ing may not be sufficient. two years, I am sure, there will rding to IMF’s latest projection, In India it typically takes two ways to enhance monetary pol- and support lower rates. In tive banking system liquidity there are many structural be a turnaround,” he told PTI the Indian economy is estimat- to three quarters for rate cuts icy transmission. addition, forward guidance during rate cuts and tight liq- impediments to transmission (The author is Chief Economist – in an interview. ed to grow at 7 per cent in 2019 to affect growth and trans- First, through policy action that does not rule out uidity during rate hikes. that need resolving over time, India and Asia ex-Japan at Nomura) Jalan also pointed out that and 7.2 per cent in 2020.

ACB notice to 1: GROWTH CONCERNS, INFLATION EDGING UP 2: PRODUCTION IN CORE INDUSTRIES STAGNATES STATSGURU (% YoY) Core sector growth (% YoY) Mehbooba 7.8

MPC to tread 6.3 for J&K Bank 7.3 5.8 4.8 appointments 4.7 4.3 on multiple 4.3 3.3 2.2 pain points 2.1 1.5 THE RESERVE BANK OF

INDIA’S Monetary Policy 0.2 Committee (MPC) will Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun meet this week, and is 2018 2019 likely to reduce policy The Anti-Corruption Bureau rate further to help Sources: RBI, National Statistics Office Source: Department of industries (ACB) of Jammu and Kashmir revive the economy. Benign inflation has issued a notice to former and falling economic growth, as shown 3: AUTO SALES ON A SECULAR 4:GOOD MONSOON 5: BUDGET ANNOUNCEMENTS 6: MONETARY TRANSMISSION NOT IN SIGHT chief minister Mehbooba in Chart 1, are the basic indicators that DECLINE IN 2019 COULD SPRING HOPE BREAK EQUITY INFLOW STREAK Mufti (pictured) asking her make the case to continued easing of Auto sales growth (%) (Rainfall as % of normal) Equity FII flows (~ cr) whether she had verbally or monetary policy. 100 otherwise endorsed the rec- High frequency data point in the ommendations made by same direction. Production in core 89 some ministers in the PDP- industries such as steel, cement, oil and BJP government for appoint- coal grew at a paltry 0.2 per cent in June, -3.6 65

ments in J&K Bank. lowest in more than four years (Chart 2). -4.6 “During the course of inves- There is no growth in sight in auto sector tigations of case FIR No either (Chart 3). A rate cut with monsoon

10/2019 police station ACBK getting better by the day (Chart 4) could -8.6 dated 08/06/2019, it has sur- help improve consumption. faced that some appointments Further, following the Union -14.2 -15.9 were made by chairman J&K Budget’s announcement of income tax -12.3 Bank on references of recom- surcharge on foreign portfolio investors Jan Feb Mar Apr May Jun Up to end Up to end Forecast for mendation of few ministers. It (organised as trusts) sent foreign capital 2019 of June of July Aug-Sept may please be clarified that packing in July, after pouring in for five WALR: Weighted average lending rate Source: RBI Source: SIAM Source: IMD * Up to August 3, 2019 Source: NSDL whether such references had months (Chart 4). Loosening of credit your endorsement, verbal or channels can potentially improve 7: RUPEE STEADY AFTER CLIMBING UP 8: GLOBAL PRESSURES TAME OIL 9:…AND RUPEE GETS OVERVALUED FURTHER otherwise, for appointments business sentiment and reverse this Exchange rate (~ vs $ inverted scale) Brent crude ($/bbl) REER-36 country trade-based weights in J&K Bank,” read the ACB capital outflow. notice to Mehbooba issued on In addition to the fact that monetary Saturday. policy is inherently limited in its efficacy Mehbooba posted the to boost growth, monetary transmission notice on Twitter, saying she has been poor in this cycle. Lending rates was not surprised by the did not move down much after the first development. “Not surprised two rate cuts of 2019 (Chart 5). to receive a letter from the On the external front, the rupee has Anti-Corruption Bureau. largely strengthened since October 2018 Concerted efforts are being (Chart 6), one of the principal reasons made to browbeat main- being favourable to oil prices (Chart 7). stream leaders & thwart But the strength of the rupee has made potential efforts for a collec- it more overvalued than before (Chart 8), tive response. I am too small affecting exports, which are a crucial an entity vis a vis the cause catalyst for economic revival. that unites us today. Such ABHISHEK WAGHMARE Source: Bloomberg Source: Bloomberg tactics won’t work,” she REER: Real Effective Exchange Rate Source: RBI wrote. PTI StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines Source: Bloomberg; Compiled by BS Research Bureau

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official MUMBAI | MONDAY, 5 AUGUST 2019 COMPANIES 5 . < Deloitte quits as auditor Vodafone Idea needs to raise opex savings target: Analysts of cash-strapped DHFL SOHINI DAS gration, capacity expansion Mumbai, 3 August and merger synergies are expected to boost the 4G cov- Deloitte Haskins & Sells writes to MCA citing reasons for giving up the account As shares of Vodafone Idea, erage to 90 per cent. “However, SUDIPTO DEY the auditor. the country’s second-largest until then, the subscriber New Delhi, 4 August Deloitte’s move to resign telecom operator, continue to churn coupled with cash flow from DHFL comes at a time fall on the bourses, analysts crunch could risk the operat- eloitte Haskins & Sells, when all the Big Four audit say the firm’s operational ing capability of the company,” one of the joint audi- firms, and the credit rating expenses (opex) savings target said Aliasgar Shakir, research D tors of the cash- agencies, are under the scan- will have to be raised higher analyst at Motilal Oswal. strapped housing finance ner for their role in the IL&FS than the guided ~8,400 crore BALANCE SHEET Voda Idea’s wireless rev- company DHFL, is believed to crisis. In June, auditors of as cash losses remain at ele- enue decline in the June quar- have put in its papers. In a Reliance Capital and Reliance vated levels. FY19 FY20E FY21E ter was affected by continuous communication to the Home, too, had resigned from The firm hired one of the Total revenue (~cr) 37,092.5 44,182.9 44,678.5 down trading by high average Ministry of Corporate Affairs, the companies. Big Four consultants to take a Ebitda (~cr) 4,043.0 5,362.2 10,542.3 revenue per user (ARPU) cus- the auditor has cited repeated Markets regulator Sebi re-look at its opex and drive Ebitda margin (%) 10.9 12.1 23.6 tomers and subscriber churn failure on part of the company (Securities and Exchange additional cost savings. on minimum recharge plans. to provide them with sufficient Deloitte’s move to resign from DHFL comes at a time when the Board of India) has recently Analysts at Emkay Global Subscribers (mn) 334.1 317 317 “The shrinkage in subscriber explanation or information Big Four, and the credit rating agencies, are under the scanner proposed stricter disclosure said despite aggressive cost Net adds (mn) 139.58 -17.1 0 base by 102 million over the last about certain unsecured for their role in the IL&FS crisis norms for auditors of listed synergies, recent fundraising ARPU (~) 112 105 109 three quarters is higher than borrowings. companies. and partial revenue recovery, E: estimated; ARPU: Average revenue per user; Ebitda: Earnings before interest, tax, estimated. Minimum recharge However, the other joint accounting. “We are unable to larities are unfounded and In a consultation paper, net debt to Ebitda ratio for FY21 depreciation and amortization Source: Emkay Research plan-led subscriber loss seems auditor, Mumbai-based Chatu- comment on the company’s malicious. The company is Sebi proposed that if the audi- (estimates) remains at an largely behind, while down- rvedi & Shah, continues to compliance of the covenants currently going through a plan tor of a listed entity has signed uncomfortable level of 10 now, there are no plans to estimated annual cash trading may continue in the service the company, sources in respect of all borrowings to restructure its debt and the audit report for all the times. Emkay revised its target accelerate the site reduction requirement of ~28,200 crore ensuing quarters,” said Emkay. added. and consequential implica- inject fresh capital into the quarters of a financial year, price for the stock to ~5 and plan,” the report said. The firm (capex of ~12,000 crore, debt Analysts said in some large Earlier, both the joint audi- tions,” the auditors had said. business through a stake sale. except the last quarter, maintained a sell rating. had indicated in its earnings repayment of ~4,200 crore and circles, data market share is 20 tors had noted in DHFL’s Earlier, the auditors citing When contacted, a DHFL the auditor should finalise In its note after the earnings call on Monday that it hired the interest cost of ~12,000 crore) per cent while user market financial results for FY19 that Section 143 (1) of the Com- spokesperson said they were the audit report for the call, Emkay noted that the opex consultant to work over the next two share is 30 per cent. The com- there were irregularities in panies Act had sought addi- not aware of the latest devel- said financial year before savings target will have to be with it on cost syner- The firm hired financial years. pany is targeting subscriber granting of certain loans and tional information from the opment. According to Com- such resignation. In all other raised higher than the guided gies. It is hopeful that one of the Big Four Thus, the current conversion to data to boost rev- that they had reservations company on certain transac- panies law and Sebi-listing cases, the auditor shall issue ~8,400 crore as cash losses rem- it would be able to consultants to cash plus addi- enue growth. about management preparing tions. provisions, a company is sup- limited review/audit report ain at elevated levels. It went on take out substantial take a re-look tional monetisa- Revenue in Q1FY20 the statement of accounts DHFL management has posed to inform the regulator for that quarter before such to add that the company hired amount of cost fur- at its opex and tion opportunity declined 4.3 per cent sequen- using a going concern basis of held the allegations of irregu- any instance of resignation by resignation. one of the Big Four consult- ther. drive additional could optimisti- tially to ~11,270 crore (7 per cent ants to re-look into its opex and Motilal Oswal ana- cost savings cally suffice for below estimates), led by con- drive additional cost savings. lysts said that an addi- the next 4-5 tinuing high subscriber churn “The management will tional ~10,000-12,000 crore quarters,” it said. (it lost 14 million subscribers highlight this aspect in the next could be raised through mon- Voda Idea’s Indus tower over the previous quarter). JioPhone loses ground in rural areas quarter. Out of the 22,000 site etisation of the Indus Towers stake is roughly valued at However, it was partly offset by reductions it planned, stake sale and fibre assets and ~6,160 crore while its fibre a rise in ARPU of 4 per cent SOHINI DAS & ROMITA MAJUMDAR merce companies in this space Sources in Jio said Jio- market fell 39 per cent. The Vodafone Idea has so far cut another ~5,000 crore through assets are currently valued at QoQ to ~108 (against an esti- Mumbai, 4 August as well, it is not the only reason Phone contributed 30-40 per decline was due to inventory 14,000 sites (10,000 in Q4FY19 cash flow from operations. ~11,850 crore. By June 2020, the mate of ~115) due to the mini- for the lower demand. There cent of their overall monthly build-up for Jio, besides the and 4,000 in Q1FY20). As of “Against this, Voda Idea has efforts towards network inte- mum recharge plans. Reliance Jio, now largest tele- is a pricing shift, with rural addition. “The market share year-before period seeing very com operator in the country phone customers also upgrad- loss that Counterpoint data strong demand for JioPhone. by subscriber volume, is seeing ing to phones in the ~6,000- shows could be due to the fact “Featurephone demand is a slowdown in sales of its flag- 8,000 and ~10,000-12,000 that imports from earlier have back to the 2017 (pre- ship offering, JioPhone. range as the demand for pre- sold over a longer period of JioPhone) level but it remains Chinese firms work hard to be Indian The JioPhone is fourth- mium specifications grows,” time. Usually, phone buying is to be seen if entry-level smart- Facing severe backlash from the gov- couple of years, many Chinese e-com- generation technology. she said. also seasonal, skewed around phones in the coming quarters ernment, trader organisations, and merce firms are working hard to make Industry insiders feel used Another analyst festivals and harvest are able to attract the hun- independent bodies over time, their online marketplace more inclu- smartphones are gaining pop- said the used smart- Share of seasons,” said an dreds of millions of feature- Chinese digital commerce and social sive. Therefore, instead of having just ularity in the hinterland, the phone market was JioPhone in the official, who did not phone users,” it said. media firms are working hard to products from China, many of them main market for JioPhone. highly fragmented, featurephone wish to be named. Of late, Jio's subscriber change the narrative. such as Club Factory are working with Recent data from Counter- with no credible market has Jio says the addition momentum has From setting up their second office a host of Indian sellers. point Research showed the source of informa- shrunk from JioPhone launch slowed. In a recent note (after in India to bank-rolling onshore data Club Factory, which has close to share of JioPhone in the fea- tion on size and 47% in the had kept in mind the Telecom Regulatory Authority centres, Chinese firms are going above 50 million Indian users on its plat- turephone market had shrunk growth. “Used smart- second quarter 500 million feature- of India subscriber numbers and beyond even US tech firms to form, is planning to add 10,000 sellers from 47 per cent in the second phones are definitely of 2018 to 28% phone user base at for May were issued), show they are as Indian as other play- in India. It has an office in Gurugram quarter of 2018 to 28 per cent a eating into the mar- a year after that time. It has, it Edelweiss has noted Jio's sub- ers in the country. After facing flak and plans to open offices in Bengaluru year after. ket share of says, no plan for a sciber addition dipped from from trader organisations over the last and Mumbai. BS REPORTERS Anshika Jain, analyst at JioPhone. However, this cheaper smartphone anytime an average of 10 million a Counterpoint, said introduc- should not be a matter of con- soon, as cheaper variants of month in 2018-19 (April 2018 tion of a number of phones cern for Jio, as long as their net its LYF did not see much off- to March 2019) to 8.1 million priced below ~1,000 — by iTel, subscriber additions remain take. However, the feature- and 8.2 million in April and Lava and Samsung, among steady,” he said. phone market is witnessing May 2019, respectively. others — was a reason. The JioPhone was sub- some slowing. Counterpoint Analysts expect the “While the second-hand sidised, he added, and hence said in the second quarter of JioPhone base to touch around and refurbished phone mar- as long as Jio continues to sell 2019, the smartphone market 127 million over the next one ket is growing, thanks to the SIMs, it is a positive for the showed growth over a year; year. At present, it is estimated entry of a few large e-com- company in revenue. however, the featurephone to be 60-65 million.

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official 6 ECONOMY MUMBAI | MONDAY, 5 AUGUST 2019 1 > Defence shipyards bag 85-95% 12 mn families may be warship orders without tender out of poverty, thanks Ficci asks Defence Minister Rajnath Singh for level playing field for private shipyards to reskilling initiative AJAI SHUKLA bined value of production in 2017-18 of SANJEEB MUKHERJEE New Delhi, 4 August MDL, GRSE, GSL and HSL added up to New Delhi, 4 August just ~7,600 crore. Yet they were “nomi- he Federation of Indian nated” during the last two decades for The central government, Chambers of Commerce and warship orders worth ~2.23 trillion. though it is not planning to TIndustry (Ficci) has written a “With this rate of execution, gross end the Mahatma Gandhi strongly worded note to Defence delays are inevitable in liquidation of National Rural Employment Minister Rajnath Singh, asking the min- existing order book thus affecting war- Guarantee Act (MGNREGA) istry of defence (MoD) to end the practice ship induction plans and force readiness soon, is working on an initia- of “nominating” defence public sector levels of the Indian Navy,” said Ficci. tive to move 10-12.5 million undertaking (DPSU) shipyards to build Citing a report that the Prime families within the ambit of warships for the Navy and coast guard. Minister’s Office has mandated that all the MGNREGA out of poverty “Nomination” involves placing future warship contracts will be com- by imparting skills and creat- orders for warships on chosen public petitively bid, Ficci has requested that ing durable assets. sector shipyards, without competitive no new orders should be “nominated” to This will be done in five- tendering. Ficci’s note asks for a level PSU shipyards. Further, ongoing “nom- six years and lessen the bur- playing field for private shipyards by inated” procurements in which con- den on the scheme. permitting them to participate in all war- tracts have not yet been awarded must Under the MGNREGA, 50- ship tenders. be re-categorised and re-bid, with pri- 55 million families seek jobs Private defence shipyards are in dire YEAR 2000 TO 2010 YEAR 2011 TO 2019 vate shipyards participating. for 100 days a year. However, straits, with two of them — Bharati and Value of warships Value of warships As a key enabler for private ship- the average number of work- BUILDING LIVES ABG Shipyards — facing foreclosure; building, Ficci has requested that the days is fewer than this. Competitively won  Every year one member spend ~500-1,000 crore and sparse order books for the others, Competitively won by Strategic Partnership (SP) procurement Officials said some changes Programmes by private yards private yards from almost 400,000- from MGNREGA budget despite L&T’s ~3,500 crore construction Programmes model be fast-tracked for Project 75-I, in the relevant legislation nominated 3.0% (~2,446 cr) 4.6% (~7,842 cr) on skilling every year of a Greenfield shipyard at Katupalli, nominated which involves constructing six con- might be considered to ensure 500,000 MGNREGA to DPSU/PSU Tamil Nadu, and Reliance Naval and to DPSU/PSU ventional submarines for the Navy. That that a portion of the labour families will be skilled  So far, under the existing yards Engineering’s ~2,000 crore purchase of Competitively yards Competitively would require the MoD to choose an budget was spent on semi- over the next 5 years Project-LIFE of MGNREGA 95.1% 85.0% Pipavav Shipyard. won by won by Indian private shipyard to build the six skilled workers too.  (~76,794 cr) (~146,261 cr) DPSU/PSU yards About 12.5 million for skilling, 1.5-1.6 million Ficci has presented figures to high- DPSU/PSU yards submarines in India in technology part- Forty per cent of the MGN- families are expected to families have benefitted, 1.9% (~1,500 cr) 10.4% (~17,916 cr) light that, over the last two decades, the nership with a global “original equip- REGA budget is spent on be pulled out of poverty but it will be scaled up four DPSU shipyards — Mazagon Dock , No. of warships No. of warships ment manufacturer” (OEM). materials and the rest on through durable assets Mumbai (MDL), Garden Reach Ficci has cautioned against allowing wages.  The Centre has allocated Nominated Nominated Shipbuilders & Engineers (GRSE), Goa DPSU yards into SP projects, which the In the 2019-20 Budget, the creation in next 5 years ~60,000 cr for MGNREGA DPSU/PSU Competitive DPSU/PSU Competitive Shipyard (GSL) and Hindustan MoD is considering. Instead, the MoD is government allocated ~60,000  in the 2019-20 Budget yards bidding yards bidding Every year, 50-60 million Shipyard, Visakhapatnam (HSL) — along 38% 62% 49% 51% urged to stick with the “original intent of crore, the same as in 2018-19, households seek work  60% of this budget is with Kerala state’s Cochin Shipyard SP model being reserved for participa- for the MGNREGA. (for 56 (for 90 (for 69 (for 73 under MGNREGA spent on wages and rest (CSL), garnered all the high-value orders tion by the private sector only.” “The MGNREGA is not a warships) warships) warships) warships)  through “nomination”. The original SP concept that the pension scheme and, as the Government plans to on material component Between 2000 and 2010, PSU yards Dhirendra Singh Committee (2015) Act categorically says, it is were “nominated” for over 95 per cent by and V K Aatrey Task Force (2016) envi- meant to improve the liveli- may arise. Under the Livelihoods in value of all warship orders, amounting to Consequently, private shipyards had to leading. During 2011-19, contracts to sioned has the primary objective of hood security of poor house- Training will be within the Full Employment (LIFE) proj- ~76,794 crore. Only 4.9 per cent of orders resort to “gross underbidding just to build 73 warships were awarded after developing private sector capabilities holds in rural areas. This is mandated 100 days (of MGN- ect of the MGNREGA, started were competitively tendered. Of those, remain in business,” says Ficci. competitive bidding, while 69 warships in defence manufacturing. However, something that is being tried REGA) and conducted under in 2015-16, the government PSU yards won 1.9 per cent (worth ~1,500 In November 2010, then defence were “nominated” to public sector yards. the SP policy that the MoD eventually out by imparting additional skill-development initiatives provides training to eligible crore) while private yards won the minister A K Antony had pledged: However, the latter included all the drew up for the Defence Procurement skills to MGNRE- such as the Deen workers in the age group 15-35 remaining 3 per cent, worth ~2,446 crore. “From January 2011 onwards, the lucrative warship contracts, leaving pri- Procedure of 2016 (DPP-2016), left the GA workers,” a The workers will Dayal Upadhyaya years. However, this is restrict- The MoD counters that most war- Defence Acquisition Council vate shipyards to compete only door open for DPSUs to compete in SP senior official also be attached to Grameen ed to MGNREGA workers who ship orders are competitively tendered. (DAC) will not give any nomina- in orders for low-value, auxil- category procurements. said. Krishi Vigyan Kaushalya Yojana have completed 100 days’ It says PSU yards were “nominated” to tions to the defence shipyards for iary vessels. Ficci argues that private shipbuilders Of the Kendras and (DDU-GKY), self- work. build only 56 ships, while the private naval projects and they will have Ficci has also raised anoth- cannot compete on level terms with PSU approximate 2 trained in grafting, employment pro- The government’s claim is sector was allowed to participate in the to compete with the private ship- er point with operational yards. The latter have benefited from million unskilled horticulture, grammes run by that 1.5-1.6 million families tendering for 90 ships — 62 per cent of yards for the tenders.” implications: The large volume hundreds of crores of government funds MGNREGA and growing banks, and the have received training under the total numbers. Yet, little changed in practice. of “nominated” orders placed spent on their modernisation and on households, the fruit-bearing crops National Rural LIFE. However, in a mid-term While that is so, the 38 per cent of Between 2011 and 2019, PSU ship- SHIPYARD on PSU shipyards has created technology transferred over earlier government has Livelihood Mission review of the initiative, a lot of orders that were “nominated” to PSU yards were “nominated” for 85 SERIES such a huge order backlog that “nominated” contracts. planned to make at least one (NRLM). states complained of slow yards included all the high-value war- per cent by value of shipbuild- the navy and coast guard will “In case [the Project 75-I procure- member of each semi-skilled. The workers will be progress. ships, adding up to 95 per cent of the ing contracts, constituting Part-I have to wait many years for ment on the SP model cannot be The livelihood of another 2.5 attached to Krishi Vigyan Candidates’ demand for monetary value. The 62 per cent, where ~146,261 crore. The private sec- delivery of warships. restricted to the private sector], the com- million families is to be Kendras (KVKs) and trained in stipends (for loss of wages due the private sector competed involved tor participated in just 15 per cent of the Last week, Business Standard peting DPSU bids must be loaded for improved by creating durable grafting, horticulture, growing to engagement in skilling), small, low-value auxiliary vessels. tenders, worth ~25,758 crore. reported (July 30, Garden Reach builds the cross-subsidy arbitrage in the form assets. fruit-bearing crops, etc. along with ineligibility for Ficci further contends that, with PSU With huge contracts already in hand, 100th warship; order book full for next of free access to government funded As part of the initiative, The government is plan- skilling due to the age criteri- yards having pocketed 95 per cent of says Ficci, “The PSUs began resorting to 20 years) that GRSE would take 20 assets and past repeated ToTs (transfer each year one member of ning to spend ~500-1,000 on, was one of the main com- orders through “nomination”, they pos- rampant cross subsidisation to win 10.4 years to discharge its order book of of technology),” says Ficci. 400,000-500,000 families will crore every year on this and it plaints of the states. sessed ample resources to cross-sub- per cent programmes, leaving a meagre ~27,500 crore, at its current annual get training for 30-45 days. will not be limited to those The present proposal does sidise their bids in the remaining orders 4.6 per cent for the private sector.” turnover of ~1,386 crore. Part 2: PSU shipyards: A record of Stipends will compensate who completed 100 days of away with several of the anom- that were competitively tendered. Once again, absolute figures are mis- According to MoD figures, the com- delivery delays them for any loss in wages that work under the MGNREGA. alies in LIFE.

FROM PAGE 1 Norms for Govt seeks SC Embassy may call off... CEOs bank on festive cheer re-insurers “IBREL’s market price has signifi- expected to conclude by September Their optimism comes from a further help to reduce cantly fallen since the first deal lead- and may be valued at about ~4,800 decline in interest rates, which, they | Successive interest rate cuts to boost to set shops ing to differences on valuations crore. If this transaction materialises, said, would spur consumer demand WHY IS demand delays in NCLT between Embassy and IBREL,” said a IBREL’s debt — at ~4,590 crore on from September. | Good monsoon to boost rural demand at IFSC eased highly placed source. IBREL shares March 31 this year — may signifi- On August 7, the Reserve Bank of INDIA INC Countries such as the UK, the US, traded at ~80.8 apiece on August 2, cantly reduce. India will be taking a decision on rate | Increased government expenditure to PRESS TRUST OF INDIA Canada, and Australia have creat- while the transaction in June con- In December last year, IBREL also cuts, with most experts expecting a OPTIMISTIC? reflect in second half New Delhi, 4 August ed dedicated organisations to sup- cluded at at a weighted average price sold 50 per cent in two Gurugram 25-basis point cut. If a cut does come | Corporate credit to grow by port the judiciary. of ~150.45 a share. office assets to Blackstone for ~464 through on Wednesday (August 7), it 12% in rest of FY20 In a bid to promote The government wants the It also needs to be seen if Embassy crore. Sources also said Blackstone would be the fourth consecutive rate International Financial NCLT to keep the process time- will continue to hold the 14 per cent in might acquire the assets of IBREL, cut of 2019. This would help demand Services Center (IFSC) as an bound and avoid ‘frivolous litiga- IBREL. After this transaction, Gehlaut including residential properties, in from customers who have postponed attractive destination for tion’. Another senior government and his group companies’ stake in 2019-20. “If this happens, the their decision to buy cars, motorcy- investment for global re- official said, “The NCLT can reject IBREL fell to 23 per cent. Indiabulls group could exit the real- cles and homes, say CEOs. insurers, the government a plan if there is something highly Meanwhile, IBREL, after selling estate business,” said the source. “The first half of 2019 has been has relaxed norms for setting objectionable, but it should not get 50 per cent in its two commercial proj- Blackstone and IBREL did not challenging, but we expect the econ- up shops at Gandhinagar into commercial issues.” ects in Mumbai for an enterprise val- comment on the developments. omy to perform better in the second International Financial However, a retired judge who ue of ~9,500 crore to Blackstone in An equal JV between Indiabulls half of this financial year,” T V several growth-promoting and slow start, monsoon has picked up Services Centre. was on an NCLT Bench said while March last year, has resumed talks and Blackstone has completed assets Narendran, CEO and managing reformist measures without compro- in different parts of the country and The notification of the committee of creditors was with the private equity major to sell of 3.3 million square feet, with an director (MD), Tata Steel, said. mising on fiscal discipline. I remain there is rural push, which the gov- Finance (No. 2) Act, 2019, within its rights to apply commer- the remaining 50 per cent. annuity income of ~670 crore, while “In the last few months, especial- very optimistic about the long-term ernment is giving to get rural areas on has paved the way for cial wisdom, the tribunal was not a “As talks with Embassy fell 800,000 square feet is under con- ly around election time, India saw growth prospects of the Indian econ- the growth path. I don’t think there is reduction on the require- rubber-stamp. through, IBREL has resumed negoti- struction as of June this year. significant slowdown, but we expect omy as we set sights on the $5-tril- a need to be despondent.” ment of the Net Owned “Maximising asset value is one ations with Blackstone to offload the Indiabull Housing Finance is economic activities to gather lion economy target,” Kumar Since the Budget announcement Funds (NOF) for opening of the main objectives and we remaining 50 per cent stake in the looking to merge itself with Lakshmi momentum as India moves ahead. Mangalam Birla, chairman, Aditya last month, which imposed super- branches of foreign re- question when that does not hap- joint venture (JV),” said a person Vilas Bank and exiting real estate will The government’s continued push Birla Group, said. The Birla Group rich tax on foreign portfolio investors, insurers in IFSC to ~1,000 pen, such as when banks opt for aware of the development. be critical for the merger to secure for investments in the infrastructure was one of top business groups to the Indian stock markets have lost crore from ~5,000 crore. liquidation when they can get According to the source, the deal is regulatory approval. sector, along with several social and have invested over ~40,000 crore in close to ~12 trillion of market capital- The significant reduction more through a resolution plan,” economic measures, will have a pos- cement, telecom, and financial serv- isation. Besides, the negative mes- in NOF requirement, with the he said. itive cascading effect across sectors of ices, apart from acquiring companies sage from the finance ministry has amendment in the Insurance There are 16 Benches of the development,” added Narendran. overseas in the last five years. further dampened the mood of cor- Act 1938, is expected to attract NCLT, a quasi-judicial body, in the Ikea’s big idea is to go small While auto sales have been under “The slowdown being experi- porate leaders. Biocon Chairperson global re-insurance compa- country. As of June this year, 335 “As part of entering Mumbai, Ikea prompted the decision to go online tremendous pressure, Narendran enced right now is driven majorly by and MD Kiran Mazumdar-Shaw said nies operating in financial corporate insolvency cases have has done a detailed analysis of the and opt for smaller outlets. said he expects demand to pick up in cyclical and sentimental factors and sending company officials for default- centres like Singapore, Dubai, gone on for more than 330 days dynamics of Mumbai and looked at There is also competition from the upcoming festive season. “We the economy is structurally robust ing on corporate social responsibility Hong Kong, Malaysia, and have to be completed in the ‘life at home’ in the city to enable us Landmark’s Home Centre, Future also expect the rural demand to pick and on course to reach $5 trillion in (CSR) spending is a regressive move. London etc. to set up branch- next three months. to provide innovative multi-func- Group’s HomeTown, and Godrej, up as we had a good monsoon. The the next five years, with a stable gov- “Criminalising CSR is wrong. Why is es in IFSC in India. Former judge M M Kumar, tionality solutions for Mumbai,” amongst others, which all have action being taken to improve liq- ernment at the Centre,” said Rao. the government scoring self goals?” The amendment is thus president, NCLT, said while the said an Ikea spokesperson. stores within cities. Arvind Singhal, uidity in the system should also have Bankers said corporate credit is she asked on Saturday. expected to increase the constitutional validity of the 330- He added that, since consumers chairman of Technopak, a retail a positive impact in the months expected to go up on average by 12 per Analysts at Kotak Securities say number of foreign re-insur- day deadline could be decided are getting busier, they are look- consultancy firm, said that build- ahead. Overall, despite the chal- cent in the rest of FY20 as they pass the reasons for the slowdown are ance players in IFSC, only by the SC, “it is not difficult to ing for ‘faster gratification for most ing a large format store like Ikea lenges, we are optimistic about the on the benefits of lower interest rates more structural in nature than cycli- Gandhinagar and lead to achieve it if we have the full of their purchase takes years, extensive planning, economy and its growth potential,” to consumers. “We should not be that cal. “As such, the solutions to reverse on-shoring of internation- strength, infrastructure, and tri- journeys’. and a lot of land, which means it’s said Narendran. negative on the economy side. The the current slowdown will also have al insurance transactions, a bunal staff”. The decision to opt for smaller hard to expand fast. Other CEOs concur. “The revival infrastructure sector is seeing good to be structural, which would entail senior finance ministry A discussion paper by the stores is a change from its earlier “We believe Ikea sees a boom in monsoon, easing of interest rates, investment. Our economy will surely tough economic reforms,” wrote official said. National Institute of Public strategy to stick to giant, sprawling and a large consumer base, espe- higher government spending on bounce back,” said Union Bank of Sanjeev Prasad, Suvodeep Rakshit, State-owned reinsurer Finance and Policy has said the stores and open 25 such stores cially among the young, and they infrastructure is strong stimulators India MD and CEO Rajkiran Rai G. and Sunita Baldawa from the bro- General Insurance problem of judicial delay cannot across the country in a decade. clearly want to reach them faster for pump-priming the Indian econo- The optimism of top CEOs comes kerage. “We put the current slow- Corporation of India in 2017 be solved by just increasing the However, with the new plan, the than they can by just setting up a my in the second half of 2019-20 against the backdrop of the Indian down in the economy in a simple opened its IFSC Insurance number of judges. Instead, the pro- company is looking to set up 49 few large format stores,” said (FY20). The expected resolution of government increasing its spending gross domestic product (GDP) con- Office at IFSC Gandhinagar ductivity of judges should be stores in 10 years. Singhal. large pending non-performing assets, in rural infrastructure, housing and struct (consumption — slowing, in Gujarat, the first and only improved, it has said. It’s taken only one year of oper- He also pointed out that, in the coupled with proposal for further electricity for all schemes, and health investment — challenged, govern- IFSC so far. Justice S J Mukhopadhyay, ations at its first store in Hyderabad last decade, the average age of recapitalisation of banks and facili- care benefits to the poor. With mon- ment spending — slowing, net Opening an office in chairman, National Company Law for the company to change tack. homebuyers, who look for furni- tating availability of credit to NBFCs soon picking up pace, the fortunes of exports —questionable), which IFSC would allow global Appellate Tribunal, stressed the Experts say that growing competi- ture and furnishings, has moved and housing finance companies, is consumer products companies like should dispel any notions about a players to cater to the needs need to understand the IBC. “It is tion from online stores such as from 20-30 to 40-plus and this old- also a booster for revival of lending to Hindustan Unilever (HUL), Patanjali quick and sustainable recovery in of customers outside the not litigation, it is adjudication.” Urban Ladder and Pepperfry, er age group prefers to have stores the industry,” said JSW Steel Joint Ayurved, and Dabur are set to the economy and higher GDP growth jurisdiction of the domes- “A law passed in Parliament is which also have an offline pres- nearby. MD and Group Chief Financial improve. HUL Chairman Sanjiv rates,” they added. tic economy. Such centres binding on us... We can explain the ence, and the fact that consumers Ikea’s goal remains the same: To Officer Seshagiri Rao. Mehta said: “We remain optimistic deal with flows of finance, law. It is on the basis of our judg- do not have the time — or even a reach 100 million people in India in “The finance minister in her that the second half of the current With inputs from Aditi Divekar financial products and serv- ments that the amendments have car — to travel to the outskirts, three years. maiden Budget speech announced financial year will be better. After a & Subrata Panda ices across borders. been made.”

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official MUMBAI | MONDAY, 5 AUGUST 2019 1 START-UP CORNER 11 > Getting the right brew Four tea start-ups talk to Pavan Lall about their business models and profitability, and what is leading them to growth

Following the proliferation of coffee in the market, the last few years have witnessed a Indian homes, as well as being able to consistently scale up and become a lifestyle choice. Dugarr, says revenues are growing handful of entrepreneurs attempting to brand, premiumise, and build both online and Food habits take a long time to change, which is why most 45-year-olds prefer Thums Up year-on-year, but declines to offline retail models around tea, noting that India has been a tea-drinking nation. But over Coke, says Abheek Singhi, senior partner at Boston Consulting Group."The brand has disclose the exact financials. The that's a double-edged sword. The pro is that there's little need for educating the Indian to have mass appeal to make a profit in a business like this because the retail economics Tea, single company retails a range of 200 consumer — be it a ~5 cutting chai or a ~300 per cup first flush from a single estate grade in are driven by throughput as opposed to gross margins," he says. Here's how four recent different teas that start at ~4,500 Darjeeling. The challenge, however, is putting a premium on what is a staple item in players are tackling the business: per kg (Darjeeling black) and go up to around ~2 lakh a kg malt style (Badamtam). Dugarr has sold 200,000 kg or a billion cups since the company started six years ago; From point to Packaged in India, sold in NYC he sees most of his business come from offshore clientele. "I ahdam Teas, which was launched four years ago, from foreign markets. “In India, garden-owners have would say around 70 per cent of Chai Point V primarily built its business model on cutting out started their own brands, so there is no middle man to our customers are outside India," the middle man in the tea business by sourcing cut out. But for us, the middle man we are cutting out he adds. muleek Singh, the founder of Chai Point, says: “In the directly from a collection of around 100 assorted tea is the auction house, the importer, the trader and so That, however, doesn't mean A long term, any tea company will have to go gardens from across the nation. The company is on a on," Sarda says, adding that he's clear that he won't he's profitable and to boost sales omnichannel.” Chai Point started its business in 2012, and run-rate of $10 million a year, touch brick-and-mortar retail for now. and profitability, Dugarr took a today it has 150 stores across metro cities. Singh claims to according to industry sources, and Vadham Teas are premium-positioned call to set up a network of offline be the largest hot beverage chain in the nation and has expects to be profitable by the end with prices starting at $10-$15 per 100 or bricks-n-mortar stores, starting received ~200 crore in funding, so far, from Eight Road of this year. Bala Sarda, the BALA gm, and a box of teabags for anywhere with Bengaluru international Ventures, Paragon Partners and more. entrepreneur whose firm's name is SARDA, between $4 and $6. airport. That will be followed by The business model works thus. “We are an a reverse anagram for the name of Vahdam Sarda says his inventory cost is around half a dozen stores at omnichannel beverage brand that also caters to walk in, as his father Madhav, set up its Teas around two-and-a-half months of the Mumbai international airport, the well as delivery,” Singh says, warehouses in New Delhi for two revenue. His biggest cost beyond tea as Orion Mall in Bengaluru, the adding that the company specific reasons. "One that the of now is marketing. His biggest upcoming Maker Maxity Mall in has 3,000 dispensers that airport in New Delhi has direct and quicker access to challenge is the fact that being an Indian brand how to Bandra Kurla Complex in dispense coffee and chai foreign airports for export, and the second, its dry stay relevant in the US market. To that end, his office Mumbai, and other places. and are being used across 14 climate is better suited to the longevity of tea as in NYC has half a dozen employees, in addition to 120- Teabox is witnessing as much as different cities. These are distinct from Kolkata, where it is much more humid. plus in India. A secret recipe that Sarda shares? “It’s ~1.2 lakh in daily sales at its first Android-driven IoT- Vahdam has a 25,000 square foot warehouse in Okhla, not a bad thing to have the made in India-label on your retail location at Bengaluru enabled dispensers. It has Delhi. The start-up, so far, has raised around ~30 crore product,” Sarda says. He’s got a good reason to say KAUSSHAL DUGARR, Teabox airport. “From a demand around 2,000 customers from investors, which include Fireside Ventures. The that. Last year, media mogul Oprah Winfrey added perspective, there is no challenge under the dispenser company gets around 99.99 per cent of its revenue Vahdam Teas to her list of favourite things. eabox, one of the earliest to jump to premium tea,” Dugarr adds, indicating channel. A dispenser T into the space, has received around that tea brands like the Singapore-based machine customer charges $10 million from investors, including PWG have logged $100 million revenues monthly maintenance of Ratan Tata, Accel and RB Investments. in just 12 years of operation. Does Dugarr around ~2,000 plus ~160 per beverage, playing at a lower price and Teabox decided it would retail online, not see selling large quantities of tea at consumables. The average Serving your cuppa consumer category when compared to Starbucks, focus on international markets, and play lower prices a faster route to growth? He is 2.5 cups per employee and where the cheapest coffee beverage starts at ~220. at the top of the pricing pyramid right answers that he doesn't see that model that translates to around tep inside any of its 60 stores across the country and The company — backed by Tiger Global, Saif Partners from the get-go. Its founder, Kausshal alone as being profitable. ~27,000 in revenue per Sa loud “Welcome to Chaayos” is how you will hear and Integrated Capital — was launched in late 2012 and month."It is a good margin store employees greet customers. has raised around $17 million in funding. Its officials say AMULEEK SINGH, business and is much more Nitin Saluja, the founder of tea-house chain that they see all its stores performing to expectation, > BS SUDOKU # 2808 Chai Point scalable," Singh says. Food Chaayos, owned by Sunshine which means all are "profitable". Saluja contribution is around 37 Teahouse, based in Gurugram, doesn't specify which store it is but his best Medium: per cent. Singh gets his tea from Assam, Darjeeling and the thinks that you can't reinvent an performing location is logging around ~4 ««« Nilgiris, and also allows customers to order online through intrinsically Indian tradition like crore a year. All stores are company-owned Solution SOLUTION TO #2807 tomorrow channels that include Uber Eats, Zomato, and Swiggy. Chai tea. “Talk to anyone who is a tea- and company-operated and use teas that Point sells around 400,000 cups of tea a day with prices drinker and ask them how they like NITIN are a proprietary Assam CTC blend. HOW TO around ~80 a cup and lower for the vending machine model. their cuppa in the morning and you SALUJA, Chaayos pulls cash in from another PLAY The challenge is staying true to the course. Indian customers will get answers that range from Chaayos revenue stream — foods and snacks — Fill in the grid are evolving and have aspirations and Chai Point will have to kadak chai with less milk, tulsi and that includes items such as vada pav, egg so that every remain fresh as a brand. From iced teas to hibiscus tea, one no sugar or black tea with honey and ginger,” he says. bhurji, and sandwiches. Food accounts for about 40 row, every has to have it all. Singh plans 200 more stores and says that “Meri waali chai" is the core driving philosophy at the per cent of Chaayos revenue, meaning its contribution column and while he is not profitable yet, the milestone isn't far away. company. "That's the model that Chaayos is built can't be underestimated. The Chaayos model, every 3x3 box Last year, the company closed at around ~150 crore. around. We try to give customers what they want therefore, is built on snacks and chai. Chaayos' plans contains the "The category and the audience in which we play are not because everyone drinks tea differently." It's also done include launching 240 more stores in five years digits 1 to 9 going to stop consuming our product," he says. at a mid-level price point that ranges between ~60 and through a combination of debt and equity.

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official 12 ISSUES AND INSIGHTS MUMBAI | MONDAY 5 AUGUST 2019 >

> ambitious and unrealistic, not recognis- to be favouring the big business, as this CHINESE WHISPERS ing the slowing growth trend in the econ- can upset its voters base, composed of Three contradictions omy and, therefore, in tax collections. At the ordinary middle class and the poor another level, the government has also people. Thus, taxes are raised on the rich The Modi regime wants a bigger role for the government but it does begun exploring options of sequestering and the reports of committees that rec- Expose corruption, get notice a part of government revenues in a way ommend a more friendly or lower taxa- A case of “shooting the messenger” has not have the comfort of having enough financial resources that these do not have to be shared with tion system for India Inc do not see the raised questions about the Uttar the states. The growing incidence of sur- light of day. Pradesh administration’s willingness to line number for the government’s fiscal Add to these the many other welfare charge and cess on taxes, which are not The third contradiction is seen in the clean up the system. Recently, a police deficit does not tell the entire story. Yes, schemes like subsidised gas connection shared with the states, and exploring a manner in which it has tried to revive sub-inspector on duty at the state the fiscal deficit in 2018-19 was 3.4 per for the poor, affordable housing and the separate mechanism for funding investment. Recognising that the gov- secretariat in Lucknow was caught on cent of the gross domestic product (GDP) rural employment guarantee scheme defence and internal security to ensure ernment or the Indian private sector is camera taking a bribe of ~100 to allow a and is projected to be 3.3 per cent in 2019- that was started by the Manmohan Singh an assured allocation of finances for facing a resources crunch, it is increas- contractor to enter the premises 20. But these figures mask the real stress government, it becomes clear why the them are among such disturbing trends. ingly relying on foreign inflows to fuel without a valid pass. The clip became in the government’s finances. With a fiscal burden on the Centre’s finances The second contradiction arises out an investment drive in the country. But viral, following which the police person substantial amount of off-Budget bor- has been rising at a disconcerting pace. of the Modi government’s political there is no simultaneous attempt to pro- was suspended and an inquiry into the RAISINA HILL rowing and slowing tax collections, the Ideally, welfare schemes should not stance. The results of the general elec- mote exports to prevent any adverse matter was ordered by the UP actual gap in the government’s revenues be questioned. But when the govern- tions in 2019 showed that the Modi gov- impact such foreign inflows can have on secretariat’s administration. Now three A K BHATTACHARYA and expenditure is much higher than ment’s finances are under stress, the con- ernment has grown its political capital the country’s balance of payments. And government employees have been what the headline number of the fiscal tradiction between the growing burden by a huge margin. Not only has it won instead of fixing the flawed exchange served notice for video-graphing the hree broad contradictory trends deficit indicates. of welfarism and the government’s tight more seats in the Lok Sabha, but it has rate policy to eliminate the negative fall- incident and making it public on social have marked the government’s Yet, the government has gone into fiscal situation becomes acute. In short, vanquished the opposition political par- out of an overvalued currency on media. When an employees’ body Tmanagement of the Indian econ- overdrive with its welfarism. Such a the Modi regime wants that the govern- ties in almost all the states, barring a few exports, the government appears to have flayed the action against the three, the omy in recent months. The contradic- direction means that the government ment should play a bigger role, but it in southern India. It faces very little embarked on a path of import substitu- head of the department expressed tions have made the policy challenge to has to provide for more resources from does not have the comfort, let alone the opposition in getting virtually any leg- tion, a signal of which is evident from ignorance about this, adding that he overcome the current economic slow- the exchequer to finance a host of wel- luxury, of having enough financial islative bill passed by Parliament. the manner in which import duties have would “look into the matter”. down even more formidable. How soon fare schemes. If it is the piped water sup- resources with the exchequer. But the irony is that the Modi regime been raised successively in the last cou- the Modi government can resolve these ply scheme for all in the latest Budget, The consequences are evident in the is not willing to use its huge political ple of Budgets. contradictions is difficult to say, but their then the interim Budget in February this way tax collection departments of the capital for taking any economic policy The short point is unless these con- Kishor missing in action early recognition at least will perhaps be year talked about the scheme for income government have become overactive, measure that it fears might undermine tradictions are resolved over the next few the first step towards a resolution. transfer to farmers. A year ago, there was with complaints of harassment of cor- that political strength. It appears to be months, there is very little chance of the The first contradiction stems from a massive scheme for health insurance porate taxpayers rising. Tax collection reluctant to initiate any economic policy government coming to grips with the the Centre’s stressed finances. The head- for over half of India’s total population. targets have been set at levels that are move that might show the government challenges of an economic slowdown. Hobson’s choice before the Reserve Bank...... between a harder forward premium and a 68.27 in the first half of July. Had the RBI not bought dollars from the mar- sharp decline in the domestic rates ket, the rupee would have appreciated The Janata Dal (United), or JD(U), has more, hitting exporters hard. started preparing its strategy for next from banks and releasing money into If the RBI does not buy dollars, the year’s Assembly elections in Bihar, but the system. Besides diversifying its liq- rupee will appreciate further; if it does its professional poll strategist, Prashant uidity management toolkit, the central not sterilise the rupee liquidity (gener- Kishor, is busy elsewhere. Kishor is on a bank has also infused around ~69,500 ated out of dollar buying) through sell- professional assignment with West crore through three-year US$/INR buy- buy swaps, and postpones the rupee Bengal Chief Minister Mamata Banerjee. sell swap auctions in two tranches in liquidity infusion, the flood of liquidity Sources say the JD(U)'s centre of action March and April. will pull down domestic rates. The 10- has shifted to Delhi, where Rajya Sabha Finally in June, the central bank cut year government bond yield, which was MP Ram Chandra Prasad Singh has its policy rate yet again, the third in a 7.5 per cent in the third week of April, started working on two crucial aspects – row; changed the stance of the mone- dropped to 6.25 per cent in mid-July. — identifying the probable candidates BANKER’S TRUST tary policy and committed to ensure (It has risen from that level for different and balancing the equations with the “adequate” liquidity for all productive reasons.) The RBI has a Hobson’s Bharatiya Janata Party (BJP), an ally. TAMAL BANDYOPADHYAY purposes. A series of RBI actions has choice: Between a harder forward pre- JD(U) sources say Kishor’s designated changed the liquidity scenario — from hedging cost for two years and beyond exchange rate, an open capital market mium and a collapse in the domestic number two status in the party is largely deficit to a zone of surplus. has gone up more than half a percent- and independent monetary policy, tar- rates. It has opted for the first. symbolic; after President Nitish Kumar, ill Reserve Bank of India (RBI) Till now, the narrative is quite age point in the past two months. geting inflation? First, through OMO buy- The other option could have been a Singh’s writ runs in the party. Given Governor Shaktikanta Das said straightforward. It takes a new turn with An unstated objective of the three- ing and US$/INR buy-sell swap auctions, sale of bonds through OMO to suck out Kumar’s fast-changing preferences of T in his recent interviews that the RBI starting to intervene in the for- year $10 billion US$/INR buy-sell swaps the RBI had sent signals that they were liquidity but that would send a wrong allies and key aides within the party, shifting of the stance of the monetary eign exchange market to mop up dollar was to bring down implied INR rates relevant options before the central bank signal to the market because till recent- one really doesn't know... policy from neutral to accommodative flow. This is adding to the liquidity in and hedging costs so that it makes the to infuse liquidity. When the dollar flow ly, the RBI was buying bonds. Yet itself meant a rate cut of 25 basis points the system as for every dollar bought, external financial window more acces- strengthened, it started buying the green- another option is stamping out liquid- (bps) at least and, therefore, effectively, an equivalent amount of rupee flows in. sible to borrowers. The recent RBI back. But if it does not sterilise the for- ity through short-term cash manage- the rate cuts have been 100 bps, every At the same time, the RBI has also been actions have negated the gains from the ward liabilities, it would end up injecting ment bills under the so-called market analyst and his aunt were penciling yet conducting sell-buy swaps, postponing buy/sell swaps. further liquidity when the system is stabilisation scheme (MSS). The RBI Laddoos for breaking rules? another rate cut on August 7. the rupee liquidity infusion. To be sure, the spike in the forward already in surplus. Till April, the system has used this in the past. That could be Motorcycle riders in Palakkad, Kerala, Even now, against the backdrop of Simply put, on the one hand, the premia is also being caused by the new was in a liquidity-deficit mode. In May, a sore point. Since the RBI is concerned were in for a treat last weekend. The the US Federal Reserve’s rather hawk- RBI has been injecting rupee liquidity large exposure framework or LEF it turned surplus by an average of ~25,000 about monetary transmission, it can traffic police in the city distributed over ish rate cut, a 25 bps drop in policy rate through OMO purchases and US$/INR guidelines, effective April 1. The LEF crore daily, which crossed ~1 trillion in also raise the acceptable threshold limit 300 laddoos among them. No, there was could be on the table in India as core buy-sell swap auctions and, on the oth- requires banks to limit their exposure June and went close to ~1.5 trillion in July. for systemic liquidity. no festival; it wasn't even a traffic inflation is modest, overall retail infla- er, it is “sterilising” any rupee liquidity to individual entities. This constrains We get to know the figures of the While the RBI's actions are disrupt- department party. In fact, the tion remains below 4 per cent and there infusion following its dollar buying in inter-bank trading activities and RBI’s dollar buying from the market ing the foreign exchange market in two-wheeler riders got a warning after are telltale signs of growth slowing the spot market. What is the result? A reduces market liquidity, especially at with a lag. In January, the amount was sync with the market dynamics, the they enjoyed their sweet treat. "It is down. Had Das not made this com- rise in forward premia and a spike in quarter ends. $293 million which rose to $825 million strategies need to change to deal with laddoos today but if you do not pay heed ment, the expectation was building up the implied INR rates that drives up the While bond yields are going down, in February and crossed $9 billion in shocks. Ideally, the RBI should junk the to traffic rules, you will have to pay for a 50 bps rate cut. One bps is a hun- hedging cost for importers. This starkly forward premiums are rising. The rise March. In April, it was close to $5 billion OMO calendar and conduct such auc- ~1,000 as fine," the riders not wearing dredth of a percentage point. contrasts the fall in yields of govern- in hedging costs may inhibit the and, in May, half of that. tions nimbly, say, at a two-day horizon. the helmet were told. This was part of an Let’s shift the focus from the policy ment bonds and other instruments. importers from taking cover. It can also As a result, the RBI’s foreign Will the RBI use the latest monetary awareness campaign highlighting the rate and monetary transmission or the To put things in perspective, the make life difficult for those who want exchange reserves rose from around policy as a platform to deal with this? need to follow safety rules. The state has lack of it to the recent liquidity conun- implied INR rates (annualised hedging to borrow overseas. $412 billion in March-end to $430.4 bil- made mandatory that pillion riders on drum in the Indian financial system. cost) crossed 7 per cent briefly, up from Is the RBI sending conflicting signals? lion in mid-July. The local currency, The columnist, a consulting editor of two-wheelers wear the helmet and The RBI has pumped in ~52,500 6.25 per cent, and is currently veering To be fair to the regulator, the RBI is fac- which hit an intra-day low of 70.64 to a Business Standard, is an author and senior those sitting in the back seat of a car crore through the so-called open mar- around 6.6 per cent while the one-year ing the classic impossible trinity or dollar in mid-May, is trading at 69.60 adviser to Jana Small Finance Bank Ltd. wear the seat belt. ket operation (OMO) — buying bonds treasury bill yields have fallen. The trilemma: Can it have a fixed foreign (August 2 closing) after dropping to Twitter: @TamalBandyo

AS I SEE IT Siddhartha refused trappings of power Why fix something that is not broken? K P NAYAR chided them for doing so and when the ents. At the end of a bad day, Krishna officials said a government vehicle laughed about his son-in-law’s pas- G Siddhartha was one VIP with would be picking them up at John F sion for coffee. The government's decision to amend the Right to Information Act high political connections who Kennedy airport on arrival, he told That passion was evident the V abjured India’s notorious VIP them that he would take a taxi to reach moment Siddhartha came to know doesn't make sense; it also creates suspicion about the actual motives culture. Once he was visiting New York the New York Palace hotel where his that this writer has family connec- along with his wife Malavika on holi- father-in-law was staying. tions in Slovakia. Cafe Coffee Day had Election Commissioners at the central cannot be treated on par with the day. Their visit coincided with the At the New York Palace hotel, a already made a roaring success of two level and the Chief Secretaries at the Election Commission, a constitutional presence in Manhattan of Malavika’s suite larger than most Manhattan its four outlets in Austria. Building state level. Hereafter, both salaries and body. After all, it argues, Information father, S M Krishna, who was then apartments, complete with a living on that success it ventured into Czech tenures will be “for such term as may Commission judgments can be app ea - India’s External Affairs Minister. room, dining area and a conference Republic where it opened nine cafes. be prescribed by the central govern- led in a High Court so how can Commi- Prime Minister Manmohan Singh room, in addition to one bedroom But Slovakia, a smaller and much ment”. In other words, they’re left to the ssioners have the status of Supreme had decided that year not to attend the and another with a connecting door, more competitive market, was turn- arbitrary choice of the executive. Court judges? United Nations General Assembly is normally reserved ing out to be a bigger This could lead to several undesir- These are poor excuses and not good owing to preoccupations at home. So for the head of the challenge. Yet, able outcomes. Different people could reasons. More importantly, they overlo - automatically Krishna became the Indian delegation. Siddhartha was deter- be given different lengths of service and ok the fact that the Election Commi ssion head of the Indian delegation to the Needless to say, mined to enter the KARAN THAPAR salary whilst those the government con- judgments are often appealed at the General Assembly, which gave him the Siddhartha and Bratislava café scene, siders “loyalists” granted lengthier High Court level, yet that doesn’t con - notional status of head of state or gov- Malavika booked their especially because t’s never wise to mend something tenures and heftier salaries. In fact, an stitute grounds for rethinking its status. ernment under UN protocol. stay elsewhere in the there was no restau- that ain’t broke. Not only does it not amendment to the rules could arguably So why has the government done Traffic in Manhattan is a night- city. rant in the city which I make sense but it also creates permit the government to alter tenures this? Why has it emasculated the mare during the third and last week Siddhartha’s innate did justice to Indian understandable suspicion about your and salaries after appointment. Commission in complete disregard of of September when an average of sense of humour stood cuisine despite the actual motives. I’m afraid this is Collectively, this will ensure the RTI sys- the fact the RTI system has added enor- 100 heads of state or government, those he associated fascination of urban unequivocally true of what the govern- tem does not stand up to the executive mous weight to India’s democracy? One including the American President, with in good stead even Slovaks to everything ment has done to the Right to but buckles under pressure. If that hap- can only guess but perhaps the best land up for the “general debate” in adversity. Krishna Indian. In the end, Information (RTI) Act. pens, the Commission’s independence informed has come from Congress which marks the start of the General became a teetotaler the When word got around in Cafe Coffee Day was The Act has perhaps done more to will suffer. Rajya Sabha MP Jairam Ramesh. He Assembly every year. But as head of day he was sworn in the MEA that Siddhartha frustrated in these deepen and strengthen Indian democ- Two other consequences might fur- believes the government’s decision to delegation, Krishna could sail Karnataka Chief and Malavika were going efforts because of racy than any other measure in the last ther undermine the Commission. First, shrink the Commission is revenge for through New York streets with out- Minister in 1999 and to New York and would Bratislava’s high real 15 years. By giving citizens the right to these amendments amount to a serious five decisions which have embarrassed riders and other security detail and remained so for more be with Krishna, protocol estate costs owing to inquire into decision-making and, thus, downgrading of RTI Commissioners Narendra Modi. all traffic would be stopped to let the than a decade. One of officers went to Delhi its proximity to the very exercise of power it has sub- and in a hierarchical country, where em - That could be true in two cases. First External Affairs Minister’s cavalcade the worst days of airport to see off the Vienna. stantially increased transparency whilst oluments and position determine influ- is the RTI revelation that Mr. Modi’s pass unimpeded. Krishna’s public life couple. Siddhartha When Cafe Coffee fundamentally shifting the balance ence and effectiveness, they will demote claim that 40 million bogus ration cards In order to make their passage was when he read chided them for doing so Day’s first outlet between citizen rights and the execu- Information Commissioners and dimin- have been eliminated by his govern- easier, Krishna used to ask another foreign minis- opened near the tive. In the process, it’s become a pow- ish their power. The other impact will ment is untrue. The actual number is Siddhartha and his wife to travel with ter’s speech in the UN Security University of Vienna, Siddhartha told erful weapon against arbitrariness, priv- be on the sort of people who seek to 23 million. More embarrassing is the him in the custom-secured SUV pro- Council. He was lampooned in the this writer that he modelled it on the ilege and corrupt governance. This is become Information Commis sioners. Commission’s decision to disclose the vided by the government. One day media and the Pakistanis at the UN success of the Indian Tea Board’s tea exactly what India needs and, no doubt, Anyone with a higher income and status Prime Minister’s educational qualifica- the son-in-law wanted to go to the went to town over the Indian minis- room in Cairo which became a lead- explains why as many as 6 million peo- will be uninterested. Once again, the tions against which he has appealed to UN to watch the External Affairs ter’s gaffe. ing hangout for Cairo University stu- ple file RTI applications every year. quality of the Commission could suffer. the Delhi High Court. It seems Mr Modi Minister address the General That night, a very upset Krishna dents in the 1980s. Cafe Coffee Day’s At first sight what the government So when the government claims it’s has something to hide but the Assembly. Not only on this occasion, went to the iconic Smith and daring foray into this market with its has done seems innocuous but that’s only acted to strengthen the Com - Commission won’t let him. but invariably, Siddhartha preferred Wollensky restaurant, a walking dis- unalloyed loyalty to Austrian coffee misleading. It has amended Sections 13 mission that’s baloney. Not a single Ramesh says the RTI amendments to walk to such venues and refused tance from the UN, and got off the and Sachertorte is probably the only and 16 of the Act which determine the Information Commissioner I’ve met, are “to make sure that these types of all trappings of his reflected power. wagon, ordering a large Oban 14 single example of an Indian company suc- tenure and salaries of Chief Information past or present, accepts this. The pre- embarrassments don’t repeat them- When word got around in the malt, which was his old favourite. cessfully selling coal in Newcastle, Commissioners and Information sent ones may not be affected but they selves”. Is he right? I can’t say for sure Ministry of External Affairs that After the dinner, he called his son-in- proverbially speaking. Commissioners at both the central and know their successors will be badly hit. but it seems to add up. In fact, I’m not Siddhartha and Malavika were going law to tell him that he had a drink after state levels. They will no longer have The government also has a technical unwilling to accept this is why the gov- to New York and would be with 10 years. Siddhartha’s reply was that The author was a resident correspondent at fixed five-year terms nor will their explanation. It says the Information ernment has amended an institution Krishna, protocol officers went to Delhi he hoped it was Black Russian or the UN in New York when the events salaries be linked to those of the Commission is a statutory body and that wasn’t broke. Now, of course, it is! airport to see off the couple. Siddhartha Kahlúa: both have coffee as ingredi- described in this article took place.

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Volume XXIII Number 252 ILLUSTRATION: AJAY MOHANTY become more frequent and more intense. MUMBAI | MONDAY, 5 AUGUST 2019 India accounts for about 5 per cent of greenhouse gas (GHG) emissions at present and China for about 25 per cent. However, looking ahead at 2030 each of them will account for 20-30 per cent of incremen- Beyond the rate cut tal GHG emissions and the pressure on them for more vigorous action for mitigation will mount. RBI alone will not be able drive economic recovery Given the erosion of multilateralism, this may well take the form of unilateral or plurilateral pressures he Monetary Policy Committee (MPC) of the Reserve Bank of India exercised through trade, technology transfer or glob- (RBI) is widely expected to cut the repo rate once again this week. al capital markets. India and China should respond, Although the inflation rate based on the consumer price index inched not just defensively by referring to historical respon- up in June, it is unlikely to cross 4 per cent in the near term. However, sibility, but by projecting themselves as leaders in T climate action. the bigger question at this stage is: Will another rate cut be enough to revive eco- 3 nomic activity? The Carbon Action Tracker rates India's Paris commitment as being in line with its fair share of The Indian economy is in the midst of a severe slowdown and indicators what it needs to do in the global cooperation towards such as vehicle sales, corporate results, and the latest core sector data suggest that the 2°C goal, though it considers China’s commitment growth in the first quarter of the current fiscal year might have slipped below 5.8 to be “highly insufficient”. Both countries are on track The geopolitics of for meeting their Paris commitments and may even per cent, registered in the January-March quarter. Further, there is absolutely no fiscal space to support growth. In fact, the data on tax collection indicates that end up doing better than promised. A recent study meeting Budget targets will not be easy and may require expenditure compression. even suggests that China’s emissions may peak up to a decade earlier than their Paris promise.4 An adjustment to accommodate higher spending would not be advisable, because When it comes to climate geopolitics, the two coun- the combined public-sector borrowing is already on the higher side. climate action tries have a lot in common. Both have an interest in The Indian economy is also unlikely to get support from the rest of the world. The command of climate-friendly technologies will become continuing to press the case for recognising respon- The global economy is losing momentum. The US Federal Reserve reduced sibility for past emissions and the needs of develop- interest rates last week for the first time since the global financial crisis. The the source of geopolitical power in the future ment in determining fair shares in the available carbon space. Both are oil deficient and see solar and wind ongoing US-China trade war, uncertainty around Brexit, and geopolitical tension une and July this year have been some of the would evolve.2 The first, quite implausible, envisages power not just as a carbon mitigation options but as in West Asia are risks for global growth. hottest months in recorded history and 2015- deep cooperation amongst countries on burden-shar- an instrument for energy security. Both depend heav- In the given economic backdrop, it is worth asking whether the monetary J2019 was also the hottest five-year period on ing, finance market-driven marginalisation of fossil ily on coal and have an interest in countering the policy will need to do the heavy lifting in terms of reviving growth. In the June record. In India, Delhi recorded a record temperature fuel companies and emergence of green technology demonisation of coal use. They have a shared interest meeting of the rate-setting committee, Governor Shaktikanta Das had noted: of 48°C on June 10 this year at Palam and tempera- giants, and a vigorous pursuit of the UN’s sustainable in developing technologies like carbon capture and ° “Keeping in view the evolving growth-inflation dynamics, there is a need for tures in excess of 50 C were recorded in Rajasthan. development goals by all countries. The second sce- reuse, which can provide them a mitigation option Europe and the United States sweltered in unprece- nario envisages a technological breakthrough that that can make coal use acceptable in a more stringent decisive monetary policy action.” The growth outlook has only worsened since dented heat. changes the economics of clean energy dramatically. global environment for climate control. then. Thus, aside from the rate cut this week, all stakeholders would look for cues “The extraordinary heat was accompanied by dra- A comparable example would be the mobile phone The fact that domestic development needs and for the extent to which the central bank is prepared to support growth. Since the matic ice melt in Greenland, in the Arctic and on technology, which revolutionised telecommunica- the demands of effective climate action happen to primary objective of the RBI is to keep inflation around 4 per cent (midpoint of European glaciers. Unprecedented wildfires raged in tions. But these technology-driven scenarios also pro- coincide, except of course for the coal dependence, the target range), it would be important to see how the MPC expects inflation the Arctic for the second consecutive ject technological dominance and makes it possible for both countries to pursue cli- and growth to move in the coming quarters. If it expects growth to slow signifi- month, devastating once pristine rivalry between a couple of countries mate-friendly growth with vigour and press for forests which used to absorb carbon (No prizes for guessing who these more effective action by the laggards in the devel- cantly, more space could open up for monetary easing. Prices are unlikely to go dioxide and instead turning them could be!). This cannot be ruled out oped world. But what can give them a true leader- up sharply with a slowdown in economic activity, as is being reflected by the into fiery sources of greenhouse gas- but there is no sufficient evidence ship position is something rather different. It is the decline in the core inflation rate in recent months. es. This is not science fiction. It is the for it to be the basis for action today. space that they have to develop and implement at Further, the MPC would do well to articulate the level of real interest rate it reality of climate change. It is hap- The third scenario paints the dire scale climate-friendly technologies in areas like intends to maintain, and in what circumstances it could be reduced. This will pening now and it will worsen in the consequences of rising populist motorised transport, building design, urban plan- give confidence to the system that the central bank will not deviate from its infla- future without urgent climate action,” nationalism which puts an end to all ning, energy efficiency in manufacturing, power said the Secretary General of the cooperative mitigation efforts. The systems that can accommodate large volumes of tion-targeting mandate and help anchor longer-term inflationary expectations. World Meteorological Organization, fourth scenario involves what we are renewables, and much more. They are better placed It is also important to not disincentivise and discourage financial savings. To 1 Petteri Taalas. NITIN DESAI doing now, which is muddling to do this as the bulk of their buildings, urban ensure that the economy benefits from policy accommodation, the central bank These heatwaves are a small sam- through with weak agreements like spaces, manufacturing capacity and power systems would need to work on the transmission of rates. ple of what is in store for us if we fail the Paris accord. This would moder- have yet to be built. What it requires is the recogni- But monetary accommodation can work only up to a point and won’t be su f - to tackle the threat of climate change. ate some of the potential impacts of tion that the command of climate-friendly tech- ficient for a meaningful recovery. The government will have to play its part. Some We will see more droughts, more floods, more rain on business as usual, but, judging by current trends, it nologies will become the source of geopolitical pow- fewer days, storm surges and saline intrusions in would take us to a world where the temperature rise er in the future. China is already on this path and of the recent steps, such as a higher rate of income tax for the super-rich, hig her coastal areas, reductions in agricultural and biotic pro- would be about 3°C rather than the 1.5-2°C, which was India must follow suit if it is not to become the fall import duty, additional powers to the bureaucracy, etc have significantly af fected ductivity, particularly in the tropics, more climate- the goal set at Paris in 2015. guy of global climate geopolitics. business confidence. Reassessing some of the recent decisions and the way the related disasters and increases in climate-related health Unfortunately, right now we seem to be moving economy is being handled would be a good starting point for the government. stresses. No country can tackle this on its own since out of the muddling through to the populist national- 1Climate sceptics may wish to see the scientific studies reported the consequences of greenhouse gas emissions are ism scenario with the Trump administration denounc- at the website worldweatherattribution.org inherently planetary in nature. That is why the geopol- ing the Paris agreement, the rise of nativism in Europe, 2Model and manage the geopolitics of energy, Andreeas itics of who does what and who is forced to do what which is shifting its attention to immigration, the rejec- Goldthau et al, Nature 569, 29-31 (2019) 1 May 2019 are now becoming a central concern in climate diplo- tion of globalism in many countries in Latin America 3See country profiles for India and China at The monsoon recovery macy. The debate on climate change in the United and Europe, much of it driven by obscurantist rightist https://climateactiontracker.org Reservoirs are still not adequately restocked Nations General Assembly in September 2019 will give parties that are quite ready to reject the scientific con- 4See https://www.carbonbrief.org/chinas-emissions-could- some indication of what we can expect. sensus on human-induced climate change. Yet, the peak-10-years-earlier-than-paris-climate-pledge he way the monsoon has recovered this year after a delayed and A recent article in Nature outlined four possible public pressure to act on climate change will continue weak start to near-normal in the very first half of its four-month scenarios of how the geopolitics of climate action to mount as instances of extreme climate events [email protected] run (June to September) does not have many parallels. A scary Train deficit of 33 per cent at the end of the first monsoon month of June shrank dramatically to below 9 per cent in just four weeks, thanks to copious precipitation in July. This, coupled with the weather office’s pre- diction of 100 per cent normal rain in August and September, has swung Don’t hope for a structural change the outlook for monsoon-dependent sectors, chiefly agriculture and hydel power, and rural demand from despair to cautious optimism. t has been an eventful last week. The founder of no demand and no private investment. So where will in jobs and taxes comes from them. The least the The lag in crop planting, which had mounted to over 30 per cent by June- Café Coffee Day, V G Siddhartha, killed himself, growth come from? It doesn’t fall from the heavens.” A gove r n ment can do is not increase despondency and end, has, by and large, been made up. More sowing is expected in the next I leaving a note. The note confessed to large-scale M Naik of Larsen & Toubro said we should feel lucky anger by calling everyone a crook and unleashing week or so, because over 66 per cent of the country has already received but unspecified wrongdoing and a hint of harassment even if GDP growth comes at 6.5 per cent, adding that mindlessly co ercive actions. After all, we know who by the revenue authorities. His suicide note catalysed he did not believe in the government data anyway (his the real crooks are among netas, babus, and the aam normal or excess rain. The anticipated continuation of the monsoon’s good a chain of reactions that covered politics, words were the “situation is challenging” on data cred- aadmi. Without the first principles in place, we will showing in the latter half of the season may ensure better crops and higher entrepreneurship, risk-taking, and excessive debt. ibility) and so one has to use one’s judgement to get a have cyclical ups and downs but no fundamental and yields. But the fingers still need to be kept crossed. The intense bouts of rain, Most of those we re tinged with strong emotion and sense of actual growth. Economic growth has slipped rapid change, whi ch is defined by higher productivity as has been the hallmark of this year’s monsoon, are seldom without a down- hence misplaced. (For a more rational understanding, to a five-year low of 5.8 per cent in the March quarter. of capital and labour. side. Parts of Maharashtra, Gujarat, Bihar, and Assam have seen devastating one must remembe r that suicides are not always cor- Amusingly, just a few months ago in March, Mr Pai floods. Similar deluges may damage crops, property, and infrastructure, and related to a physical st ate but to a mental one. After was one of the 131 chartered accountants who trashed What’s your plan? take human and animal lives in other parts of the country as well. all, many people who have lost vir- the concerns of 108 scholars who had I see a lot of discussion on what the government should This apart, the upswing in the rains does not reflect adequately in the tually everything, including their questioned India’s economic data and do. Like the story of seven blind men, each expert sees loved ones, don’t commit suicide.) had alleged political interference in one part of the problem and prescribes a solution that restocking of reservoirs. Till July 25, nearly 75 per cent of the major dams have The fallout of his death has been the country’s statistical bodies. The he thinks will work for the whole. Someone thinks a got filled only up to 40 per cent of their capacity. The overall water stock in all a re-examination of the current eco- chorus of disappointment has become drastic cut in interest rates will solve all problems, some- the reservoirs taken together, being 63 per cent of capacity, presented a slightly nomic slowdown. Maruti Suzuki, so loud that a few English TV channels one else wants personal income tax abolished. On better picture, though even this is below last year’s corresponding level of 71 which produces about 50 per cent that set new lows every day in giving Friday, Amitabh Kant, chief executive officer of the per cent. The river basins in the southern region, including those of the Krishna, India’s domestic passenger vehicles, sycophantic publicity to this govern- NITI Aayog, blamed the “economic reforms” for the Mahanadi, Godavari, and Cauvery, are particularly short of water. Some of reported a 33.5 per cent decline in ment’s agenda while trashing the non- current slowdown! The problem is much deeper. While the dams in Kerala, which brimmed over to cause catastrophic flooding in sales in July this year over July last existent opposition, have suddenly the prime minister called himself a pradhan sevak in August last year, are not even half-full as yet. The silver lining, however, is year and cut its temporary workforce flipped. They are now giving airtime 2014, almost all the current leaders appear as adamant that there is still time for replenishing these dams. The current vigorous phase by 6 per cent. Air travel to and from to disaffected businessmen. and arrogant as those of the previous dispensation. A India during the January-March IRRATIONAL CHOICE businessman described a minister (whom he met of the monsoon and the projected normal showers in the next two months quarter of this calendar year grew at DEBASHIS BASU From the fire to the frying pan…: recently as part of a delegation) as “combative, unsym- can normalise the situation. Restoring water reserves is essential to meet the 3.8 per cent, the slowest pace in the The UPA rule of 10 years was char- pathetic (about) the slowdown, and not keen to listen”. needs of irrigation, industry, hydel power production, and the domestic sector last four years. More such depressing acterised by two memorable expres- There is little hope that issues that affect the sub- in the post-monsoon period right up to the next summer. bits of data are splashed all over the media. sions: Policy paralysis and crony capitalism. Nobody jects will reach the rulers. Clearly, practical people Significantly, the unconventional track record of this year’s monsoon has The slowdown is so severe that businessmen, 90 mentions these expressions any more. You can accuse should not expect the government to do anything been attributed by weather experts largely to the interplay of two counteracting per cent of whom have been gung-ho about this gov- this government of many things but not these two other than minor tinkering. It is meaningless to dis- meteorological phenomena — El Nino (monsoon-inimical warming of the ernment’s intent and execution since 2014, have started ills that sapped the Indian economy for decades. Far cuss what the government can do. The road map is Pacific Ocean) and the Indian Ocean Dipole, or IOD (monsoon-friendly tem- voicing their frustration. T V Mohandas Pai, until from paralysis, this is a hyperactive government that unknown, the first principles are missing, and the recently an aggressive champion of every move of this has unleashed hundreds of legal changes and eyes and ears of policymakers are shut. The current perature gradient in the Indian Ocean). While El Nino, which affected the government, has come out all guns blazing. “Tax ter- schemes. Why then do we have such poor outcomes? economic slowdown will turn on its own, in the next monsoon in June, is said to have turned neutral and lost its sting, the positive rorism has gone rampant. Compliance burden has few years, but the structural issues that have pre- IOD continues to favour the monsoon. Unlike most other weather watchers gone up massively. There is a fear psychosis. There is …But no first principles: The reason is simple — its vented a rapid improvement in the quality of life at who were uncertain about the progress of El Nino this year, the India a feeling among government officials that all busi- policies and actions are not founded on fundamental the bottom of the pyramid and rapid economic Meteorological Department (IMD) was spot on to foresee that it would not nessmen are crooks and we must go after them. I have principles. The first principle of growth and justice is growth will remain. endure long enough to undermine the Indian monsoon. The IMD will, hope- never seen mood and morale so down in Mumbai. to reduce the intrusion and domination of the state. fully, prove correct in predicting normal rain in the rest of the season as well. Businessmen have given up hope.” It is too much to expect the state to have empathy for The writer is the editor of www.moneylife.in Rahul Bajaj, chairman of Bajaj Auto, said: “There is businesses and citizens, although almost all growth Twitter: @Moneylifers

age for all communities, which has amaz- Fernando’s voyage of re-discovery of the and foreign tourists in the line of duty. ingly survived years of war. There’s a land of his birth is the elephant in the He is also brave, as he describes the Satire in the Sri Lankan soul poignant prayer engraved below her stat- room: India. He makes no comment rise and rise and sudden fall of ue. It says, simply: “Grant our country whatsoever about Sri Lanka’s neighbour Hambantota: the constituency of former the government, which were never influ- diary by a Sri Lankan-born cricket jour- permanent peace”. that has been such a source of tribulation President Mahinda Rajapaksa (“personal enced by the fact that the government nalist who grew up in New Zealand and Fernando also chronicles the arrival for the island in the recent past. Many motto: making Sri Lanka wildly prosper- owned the paper for which he worked; has returned to Sri Lanka to report. If, of the Muslims — the Marrakalayo, from attribute to India the distortions in Sri ous, one immediate family member at a and Mervyn de Silva’s satirical pieces like many of us, you were wondering how the Tamil ‘maran’ for wood and ‘kala’ for Lanka, the rise and development of its time”). Anyone who has been to under the pseudonyms Daedalus and The Sri Lanka manages to function, in fact vessel — on the island. Muslims and large ( and now, unnecessary?) military- Hambantota knows the silent but empty Outsider (nobody knew why he needed thrive, despite its dysfunctional political Sinhalese enjoyed rare cordiality during industrial complex and its compulsive grandeur of enormous stadia and vast BOOK REVIEW pseudonyms, because everyone knew he class, its entitled bureaucracy and inces- the medieval era, but British policies of need to ensure a balance of power in the airfields (built in anticipation of a huge was the author and if you had a beef with tuous elite, the answer lies in a haiku writ- divide and rule caused suspicion and ill Indian Ocean by a China tilt (so that there influx of tourists, especially from China). ADITI PHADNIS him he could be found every day at the ten by Fernando that is at the heart of the will. As Muslims moved from Colombo, is no Indian-fuelled Tamil nationalism Nothing has moved in Hambantota after Taprobane hotel for his lunchtime beer). country’s political culture: what he calls further north to Batticaloa they found ever in the future, only Sinhala national- Rajapaksa was ousted from power and ri Lanka has a tradition of satire as His son Dayan, an important pillar of the “Sri Lanka’s great propensity to quietly themselves fighting a two-front war: the ism). If a visitor to Sri Lanka were to read these facilities now represent capacity journalism that is unparalleled in establishment now, but an influential tolerate inconvenience”. The haiku reads: Liberation Tigers of Tamil Eelam on the this book as the first introduction to the created using public money that no one Sthe subcontinent. Barring possibly, commentator on Sri Lanka’s society and Yes, I’m unhappy/But I’m too scared to one hand and the Sinhala Buddhists on island, the impression he would get is is using: yet another example of the way Pakistan (The Diary of a Social Butterfly), politics in his own right, keeps the irony complain/Can’t somebody else? the other. Both wanted them to take that India has played no role in Sri Lanka Sri Lanka’s ruling class works. Everyone there is no country in South Asia that can sheathed these days but when the flashes The book chronicles travels through sides, they stayed indifferent to both. at all — which, we know, is not true. who is interested in social processes in match the wit and wordplay of Sri Lankan show, they are blindingly brilliant. Indian some of the former hot spots on the island Now, the LTTE may have been demol- But that is the only missing element South Asia must read this book. Move journalists. There were the greats of the journalism seems earnest and positively but its gaze lingers on aspects ignored by ished but extremist Sinhala Buddhists in a book that is utterly engaging, over Bill Bryson: Andrew Fidel Fernando 1950s such as Tarzie Vittachi whose week- stodgy by comparison. the professional war correspondent. In have powerful patrons. Among the wickedly funny and actually quite hero- is the new kid on the block. ly column “Bouquets and Brickbats” had The Sri Lankan tradition of sardonic Mannar, other reporters might have seen (largely) Sunni Muslim community, Sri ic: Fernando battles attacks by packs of many shifting uncomfortably in their comment on its bureaucracy, politicians remnants of the Sinhala-Tamil conflict. Lanka is waging its own quiet battle stray dogs, wild chattering monkeys, ele- UPON A SLEEPLESS ISLE chair every Sunday morning. And in the and Important People, is kept alive, we Fernando describes the origins of against the rise of Wahhabism. Same war, phants in rut (though his preoccupation 1970s and 1980s there were Denzil Peiris’s report thankfully, by Andrew Fidel Catholicism on the island: the Church of different names, different actors…. with animal copulation is, frankly, a bit Andrew Fidel Fernando biting comments on the functioning of Fernando in Upon a Sleepless Isle, a travel Our Lady of Madhu, a centre of pilgrim- What seems to be missing from tedious), three-wheeler and bus drivers Pan Macmillan; ~599; 256 pages

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14 PERSONAL FINANCE MUMBAI | MONDA Y, 5 AUGUST 2019 VALUE OF ~1 LAKH SENSEX GOLD SILVER FD (SBI) PPF INVESTED IN VARIOUS ASSET 1-YEAR 99,874 1,19,199 1,07,561 1,06,650 1,07,600 CLASSES 1-YEAR 99,873* 1,13,439 1,05,293 1,04,655 1,04,655 POST-TAX RETURNS #Silver prices suffered losses; *Note: Cumulative equity gains up to 5-YEAR 1,45,671 1,25,923 90,768 1,50,366 1,51,757 ~1,00,000 in a financial year are tax-free. All post-tax returns are calculated for an 5-YEAR 1,45,671* 1,23,331 NA# 1,33,507 1,51,757 individual in the 30 per cent tax bracket, POST-TAX RETURNS without considering the indexation benefit As on Aug 2 2019, in ~; compiled by BS Research Bureau > .

Should I change my fund? Many investors are seeing another fund within the same category doing better and are wondering if they should shift to it. Experts It’s not the time to stop your SIPs say if you had chosen your fund manager carefully, there is no need to change your fund even if it is lagging currently. Different If you do so, you will forego the benefit of rupee-cost averaging fund managers follow different investment styles. In a given market, one investment SANJAY KUMAR SINGH style will do well while others will not. Investors need to be patient to reap the aril Kohli, a Gurugram-based benefit of their fund manager’s style. graduation student and part- Change your fund only in a few circum- time worker at an advertising stances. “If the fund manager based on Hfirm, has been running system- whose record you had invested has quit, atic investment plans (SIPs) in a couple of the fund is not being true to its mandate, equity funds for the past two years. With or the fund house is in trouble, then you the markets in correction mode, news of may change your fund,” says Agarwal. If the economic slowdown dominating the your fund is underperforming, give it time. headlines, and the SIP returns of his funds “If your SIP has been running for one year entering negative territory, Kohli is think- “Investors have no option but to “I know that equities are meant and the fund is underperforming, give it ing of stopping his investments. “Going by stay long-term oriented for the long term. But given one more year,” says Dhawan. the current state of the market, I don’t think Morningstar conducted a study in the my funds will give the kind of returns I was during downturns. And as the state of the market, the US and several other developed markets expecting from them,” he says. The BSE long-term investors, they funds I have invested in recently covering 15 years up to 2018. It Sensex, Midcap and Small-Cap indexes are should, in fact, be happy that may not give the expected mapped the outperformance of active down 6.47 per cent, 9.01 per cent, and 12.51 they are able to buy units at returns. I may, therefore, funds vis-à-vis their indices for each of the per cent respectively over the past month. lower prices in this market” stop my SIPs” 180 months. “We found that just 5 per cent Kohli is not alone. “We hear more of of the total months accounted for the bulk direct investors stopping their SIPs. RADHIKA GUPTA HARIL KOHLI of an active fund’s outperformance over its Investors who have financial advisors are Chief Executive Officer, Edelweiss Mutual Fund Student who works part-time at an ad agency index. If an investor was not present in a still holding on,” says Radhika Gupta, chief fund during those months, he would have investment officer, Edelweiss Mutual fared no better than if he were in an index Fund. Even other fund managers say this could continue to remain difficult for some EQUITY FUND: ONE-YEAR SIP than mid- and small-cap funds. So, investors should increase exposure to the fund,” says Belapurkar. When you shift to has been happening. While the July num- time. Investors have no alternative but to investors are asking if they should shift large-cap category. “There may also be an a fund that has been doing well lately, you bers are still not out, SIP contribution has remain long-term oriented in equities,” RETURNS IN NEGATIVE ZONE from the latter to the former. The answer investor who had booked profits and may be entering one whose strong run is fallen marginally from ~8,238 crore in April says Gupta. One-year SIP return (%) depends on your existing portfolio. “If at moved out of the mid- and small-cap cate- behind it and exiting one whose perfor- 2019 to ~8,122 crore in June, according to Category Maximum Median Minimum the time of investing, you had assessed gories in the latter part of 2017 because he mance may be poised for a take-off. data from the Association of Mutual Funds Should I stop my SIP? The answer is an your return profile and done proper cate- found them to be overheated. He may have in India. Investment advisors are feeling unequivocal no. SIPs in equity funds are Large-cap 5.7 -3.9 -11.3 gory allocation, there should be no need moved completely into large-cap funds. Should I invest more now? This is a good the pressure too. Many say they are inun- for the long haul, at least 7-10 years. Large and mid-cap 3.6 -7.5 -13.7 for large-scale shifts from one category to Such an investor can now add mid- and idea. However, avoid lumpsum invest- dated with queries from clients. Here are Investors should not change their horizon another,” says Kaustubh Belapurkar, direc- small-cap funds to his portfolio,” says Vivek ments. If the markets fall, the value of your answers to some of the questions playing now. “You choose the SIP mode of invest- Multi-cap 4.3 -6.5 -14.7 tor-manager research, Morningstar Inv - Agarwal, co-founder, Upwardly.in, an investment will erode. “Stagger your havoc with the investors’ peace of mind. ing to be able to buy units cheaper when Mid-cap -5.2 -13.5 -20.1 estment Adviser India. Ideally your port- online advisory and investment platform. investments over 6-12 months,” says the markets are down and reap the benefit Small-cap 1.9 -21.2 -36.5 folio should have some exposure to all the Adds Gupta: “The risk-reward for the mid- Belapurkar. How long will the downturn last? This of rupee-cost averaging. By stopping your market caps. “Shift not because a particular and the small-cap categories is better today Having an allocation to debt to make Source: mutualfundindia.com. A few funds showing positive returns is the foremost question on every investor’s SIPs, you will forgo this advantage,” says category is doing better but to make your than for large-caps.” your portfolio more stable. Buy a US- mind, but no one has an answer to it. The Vishal Dhawan, chief financial planner, portfolio more balanced,” says Dhawan. The bottomline: Build portfolios diver- focused fund to diversify internationally. Budget did not provide a fiscal push to Plan Ahead Wealth Advisors. to remove the need for such market tim- In 2017, mid- and small-cap funds had sified across categories to be able to capture Get an investment advisor if you need one growth. The higher income tax surcharge Some investors are asking if they ing,” says Dhawan. outperformed in a big way. Many investors returns across years. “There will be some to handhold you during turbulent market has led to foreign portfolio investors (FPIs) should stop their SIPs now and restart who entered the market that year put all years when large caps will outperform mid- conditions. Finally, remember that pulling out ~11,341 crore from the Indian them when the market becomes cheaper. Should I change my category? Until their eggs in the mid- and the small-cap and small caps, and others in which the investors who keep investing during down- equity markets since the Budget. “Things “The whole purpose of running an SIP is recently, large-cap funds were doing better baskets, creating high-risk portfolios. Such latter will do better,” explains Gupta. turns make money over the long term.

Two ways to PAY MAXIMUM DOWN PAYMENT ON CAR LOAN This will help you reduce your interest CAR LOAN: RATES AND CHARGES evaluate a firm outgo over the total tenure Bank Interest rate EMI (~); loan amount Processing fee Financing limit Use Altman’s Z-score and Montier’s C-score as % -~5 lakh, tenure-5 yrs (~) State Bank of India 9.15- 12.50 10,415-11,248 500-3,750 Upto 90%** (Upto 100% in basic hygiene before buying any company specific schemes) Axis Bank 9.05 -11.30 10,391-10,946 3,500–5,500 Up to 100% ** Assets, C) Ebitda/Assets, D) Market Cap/Total Liabilities and E) Sales/ HDFC Bank 9.65-10.6 10,537-10,771 3,000-10,000 Up to 100% ** Assets. His suggested weights were Bank of India 9.20-9.60 10,427-10,525 500 Up to ~10 lakh : 100% on Ax1.2+1.4B+ 3.3C+ 0.6D and 1E. The ex-show room price. Above higher the score, the stronger the bal- ~10 lakh: Up to 85%** ance sheet. A cumulative score of 3- plus is safe, while a score of less than Punjab National Bank 8.9-9.35 10,354-10,464 Up to 1,500 Up to 90%** 1.8 is considered dangerously close to United Bank of India 8.95-9.75 10,367-10,562 600-11,800 Up to 85%** bankruptcy. As a further refinement, MARKET INSIGHT Altman’s Z Score Plus methodology Allahabad Bank 8.8-11.05 10,330-10,883 Up to 8,696 Up to 85%** compares Z-score to credit ratings. SANJAY KUMAR SINGH within the dealer's premises Canara Bank 8.9 -9.55 10,354-10,513 1,000 - 5,000 Up to 90%** DEVANGSHU DATTA As the weights of the Z-Score indi- cate, profitability is considered to be nTry to limit the loan to an may not be the most UCO Bank 8.8-9.05 10,330-10,391 Up to 1,500 Up to 85%** The early results of Q1, 2019-20 are the key factor for financial health. amount such that the EMI attractive. Scout around for Indian Overseas Bank 9.15 10,415 500-10,000 Up to 90% of vehicle's cost better deals on your own depressing. Consumption demand High retained earnings (equating to does not exceed 15-20 per Oriental Bank of Commerce 9.05-9.15 10,391-10,415 500-7,000 Up to 85%** has slowed. The auto industry, and higher reserves) is the second-most cent of your take-home despite pressure from the auto-ancillaries, are in the doldrums. important factor. A drop in earnings salary. dealer to take a loan from one **Percentage of vehicle's on-road price. Maximum tenure is 7 yrs for most players, except UBI (6 yrs), Axis (8 yrs), and OBC (10 yrs) Source: Paisabazaar.com FMCG growth rates are low. before interest, tax, depreciation and n of his lender partners. nThis will reduce your interest nKeep in mind the foreclosure Salaried people do not enjoy Construction major Larsen & Toubro amortisation (Ebitda) means a sharp Remember that you would n says conditions are difficult. deterioration in the Z-Score, and low- have other loans also and the Many public sector banks cost over the tenure of the charge. If it is high, you will this benefit. Above all, there’s an ongoing er profits leads to lower retained EMIs of all of them should offer attractive interest rates loan. It will also allow you to have difficulty in closing your nSometimes, you can get a financial crisis. Both banks and non- earnings. together not exceed 50 per (see table) starting at below opt for a lower tenure or loan early. better deal if you approach a banking financial companies The past three quarters has seen cent of your take-home 9 per cent. lower EMI. nBusiness owners can deduct bank towards the end of the (NBFCs) are in trouble. Among banks, falls in profitability across most sec- salary. nPay the maximum down nUse online tools to compare the interest paid on a car loan month, when they have their PNB has declared profits, and so has tors. Under the circumstances, defa - n payment you can afford. car loan rates. when filing their tax returns. monthly target to meet. Bank of Baroda. But both big PSU ul ts are more likely and it’s not surpri - The car loans available banks have massive non-performing ing that the financial crisis has br e wed assets (NPAs) and the gross NPA sit- up. If we go by Z-Scores, a lot of cor- uation has not really improved. porates have slid closer to the bank- Among private sector banks, Yes ruptcy zone. Any investments made Bank is in deep trouble while the rest now need to pass the Z-Score test. are chugging along, with marginal Another interesting metric is the Can you handle an education loan? deterioration in NPAs and higher pro- C-Score, which was developed by visioning for many. behavioural economist, James Mon - In the NBFC sector, the problems tier. This consists of the following six It cuts both ways — you can build your credit score and get tax benefit, but defaulting will make life difficult with Dewan Housing and IL&FS are questions which have binary answers ISTOCK now known and largely discounted. with 1 point awarded for “yes”, zero SARBAJEET K SEN er’s credit history also gets affect- Should you pre-pay? The But there are rumours of problems in for “no”. ed. “Co-borrowers have equal lia- answer to this question depends many other NBFCs, including of co - Is there With the cost of education rising, bility and will get into difficul- on multiple factors. The com- ur se, Indiabulls. Bajaj Finance has be- n Growing divergence between net many students are likely to start ties. In the case of guarantors, mon-sense approach says if you en sold down due to a massive jump income and cash flow? their first jobs with an equated lenders will pursue them for pay- have excess money, you should in provisioning for its insurance arms. n Increasing receivable days? monthly instalment (EMI). A ments,” says Chawla. If property consider some pre-payments. “It There are rumours, and factual n Increasing inventory days? two-year programme at a leading has been pledged as collateral, it is definitely wise to pre-pay an reports of defaults, and likely liquidity n Increasing other current assets? Indian management institute may be attached by the lender to education loan to counter the issues in multiple sectors. Bank lend- n Declines in depreciation relative to can cost above ~25 lakh. A similar recover its dues. prolonged debt burden. The ing to the NBFC sector is now con- gross fixed assets? course at a good foreign univer- interest paid will also be signifi- strained by fears. The effect on stock- n Total asset growth above 10 per cent? sity today costs ~1 crore or more. Enjoy tax benefits: Section 80E cantly lower if you pre-pay,” says market values is obvious. The C-Score is designed to flag Such high costs leave the stu- of the Income Tax Act specifies Aditya Kumar, founder & CEO, A rough calculation suggests that manipulation of accounts. A transpar- dent, or her family, with no that interest paid on an education Qbera.com. However, lenders 20 per cent of all listed companies are ent balance sheet has a low C-Score. option but to avail of an educa- loan is eligible for deduction from often levy a penalty for pre-pay- trading below their respective face The rationale for each question is tion loan. one’s income. This deduction is ment of education loans, espe- values. That’s a lot higher than the obvious. Higher profits matched to Lenders are willing to fund allowed for eight years from the cially in the first six to twelve historical ratio of about 15 per cent. lower cash flow indicates a problem only select courses and may ask year in which the student starts months from the date from The policy response is likely to be a somewhere. Increases in receivables for a guarantor and even collat- repaying the loan or for the tenure which repayment begins. This combination of rate cuts and other and inventories indicate unduly accel- eral to cover the amount. If you PLAN YOUR MOVES CAREFULLY of the loan, whichever is lower. must be accounted for if you plan liquidity-enhancing measures. erated revenue recognition, and slow- are one of those who have been One needs to obtain a certificate to pre-pay. A combination of low profits and ing sales growth, which can mean liq- able to convince a lender to nChoose institution and course nExplore scholarship and from the lender, specifying the Sometimes students opt for high tax rates could lead to further uidity problems in an apparently extend a loan to fund your study, carefully teaching options interest repayment clearly, as the long tenures. Education loans are problems with debt-servicing. In this profitable entity. Rising current assets your financial journey has just n Find out the type of job you n Ascertain the approximate EMI consists of principal repay- typically available for as long as situation, a long-term investor must is similar to higher receivables. Lower begun. And you will be home could get on course completion EMI and divide the burden ment also. Parents who are co- 15 years. However, the tax benefit se ek to identify and avoid corporates depreciation can be caused by only after paying the last rupee. and likely salary borrowers can also avail of tax on interest repayment is avail- with likely future debt-servicing attempts to report higher net profits. But such a start has its advan- n If parents repay just the benefits. No tax benefit is avail- able for only eight years. problems. Mergers and acquisitions can obfus- tages, too. nCalculate the cumulative cost interest during study period, it able on principal repayment. Sometimes fast career growth There are many different methods cate profitability, or the lack of it. over the course period will reduce student’s burden leaves a lot of surplus in the for analysing a balance sheet for debt- Given that accounts manipulation Helps build credit history: The Makes you disciplined: If you hands of the borrower. In such servicing ability. One of the best, and accounts is common in India, and credit score ranges from 300 to repay your education loan EMIs circumstances, it makes sense to easiest, is the Altman Z Score. This is also that profitability has been low for 900. It takes 18 to 36 months to default on your repayments, your says Rachit Chawla, founder and on time, it will teach you a sig- repay the education loan towards a weighted set of five balance sheet a while, using the C-Score can be use- build a good score. A number in credit score goes for a toss, mak- CEO, Finway. nificant financial lesson that will the end of the eighth year since ratios created by Professor Edward ful. These two scores are not hard to excess of 750 is considered good. ing life difficult. “If a student come in handy when you avail of tax benefit will not be available Altman of the Stern School, NYU. calculate and both should be applied When you repay your education defaults on his education loan, it Co-borrowers also affected: large loans later. A youngster thereafter. Finally, do not forget Altman’s ratios were A) Working as basic hygiene, before one buys into loan on time, your score will affect his credit score and When the loan amount is large, who starts earning a salary and to obtain the no-dues certificate Capital/ Assets, B) Retained earnings/ any company, especially now. improves, and so does your credit make it difficult for her to get lenders ask for co-borrowers. In paying EMIs from day one learns from the lender once you have profile. On the flip side, if you other loans and credit cards,” case of a default, the co-borrow- to manage his cash flows. prepaid your entire dues. https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official

MUMBAI | MONDAY, 5 AUGUST 2019 STRATEGY 15

“Current battery technology does not “Invesco is a pure financial equity investor. “Flipkart Samarth is part of our strategy enable production of a small electric It has no rights other than those of a to grow our micro, small and medium car. I expect that in five-eight years, shareholder; it has no board seat. The enterprises’ seller base. We’re trying to there will be a breakthrough” agreement does not restrict us” democratise opportunity” R C BHARGAVA PUNIT GOENKA KALYAN KRISHNAMURTHY Chairman, Maruti Suzuki MD & CEO, Zee Entertainment Enterprises Ltd Group chief executive officer, Flipkart > .

TOGETHER QUIZ WE CAN 625 Why co-working works Top co-working leases in 2019 Connect the names of these products that were available 1 during the mid-1930s onwards and what do you arrive at: DALIP KUMAR  WeWork leased Finance, Inflation, Big Business and New York? Cost efficiency tops 250,000 sq ft space at Budweis or Budweiser variety of beer which originated in the the list of reasons, Vaishnavi Signature in 2 city of Bud?jovice now in Czech Republic. This city is the setting Bengaluru and was the working title for the play "The Misunderstanding" networking  Skootr leased 22,000 sq ft by Albert Camus opportunity comes office space at DLF Square in The Chinese term "benfen" which means one's duty or willing Gurugram 3 to take responsibility. A popular brand that sells its products in next. But there are  GoHive leased 50,000 sq ft India has included this as one of its values. Name it. shortcomings, too space in Udyog Vihar Some time back this brand challenged its competing ice in Gurugram 4 cream brands vertisements by asking them if they were  Hong Kong-based Garage using vegetable oils or milk based cream. Now it is KARAN CHOUDHURY Society leased nearly challenging cookie companies with a similar advertisement asking its competition if their butter cookies sold in the eWork came in first with its 19,000 sq ft space at Cybercity in Gurugram Indian market contain real butter or vegetable oil. co-working space, and a Name this brand that has recently launched cookies as a Wtrickle of local players fol-  Delhi-based Smartworks new product line. lowed. That has now turned into a signed 8 lease agreements equ- deluge, with mainstream real estate alling approx. 800,000 sq ft This company's first product was launched players such as DLF Ltd, the across Bengaluru, Chennai, 5 Hiranandanis and the Embassy at the St.Louis World Pune and Noida in the first half Group getting into this business. Fair in 1904. It was According to ANAROCK of 2019 served along with hot research, driven by the information Sources: ANAROCK Property Consultants dogs and from then on technology companies and start- it has become an ups, the co-working space segment For many companies, it is not such spaces are great for freelancers Sequeira of VistaPrint. But co-working spaces do have essential condiment for grew 23 per cent growth in the sec- just the ease of operation that a co- and women employees seeking flex- The Ritesh Agarwal-led some shortcomings. Companies dressing hot dogs. This ond quarter of this year over the pre- working space offers. The immense ibility and for those looking to be Workspaces is set to open the doors might save on their overall costs but week the same company has launched an ice cream made ceding quarter. Bengaluru record- networking opportunities hold the stationed at prime locations with to its 21 plus co-working work- co-working can expose an organi- out of the same ingredient which is a part of its flagship ed the maximum leasing activity in key. Marcel Hoover, founder at easy connectivity and faster com- spaces, with 15,000 seats across 10 sation to several risks. “For compa- the segment during the period, fol- Openjamm, which operates out of mute options. “Awfis is well-known cities in India. It hosts over 6,000 nies dealing with high volumes of product. Name the brand and the ice cream flavour. lowed by Hyderabad, Chennai, the WeWork, says from a business per- for its affordability along with a employees from brands including confidential data, sharing spaces Name this global brand that created a seismographic national capital region and the spective, a co-working space has thriving culture. It aids ample net- Swiggy, Paytm, Pepsi, Nykaa, OLX, can be potentially challenging. 6 reading caused by a bite of its product. It wanted to Mumbai Metropolitan Region. given the company an opportunity working opportunities with other Lenskart, among others. Cyber security is a major strategic communicate its product's crispiness to its customers. So why this rush for plug-and- to host a lot of gigs in-house at var- members of the,” Samiksha The cost benefit also plays a key challenge for organisations today play type work spaces? Anuj Puri, ied locations and get direct feed- Ghadigaonkar, founder & director, role. Real estate experts say such and efficient co-working spaces Apart from the US flag, which other flag was carried by John chairman, ANAROCK Property back from the audience. “The cul- Ngage Media Services. places work out to be 15-25 per cent need to help mitigate these con- 7 Glenn on the first US orbital space flight in 1962 and taken Consultants, says besides saving on ture keeps us motivated and we Some others love the idea of cost efficient vis-a-vis permanent cerns,” Puri adds. to the moon by Apollo 11 astronauts in 1969? a company’s infrastructure cost, feel connected to the space. The being away from drab offices. “The offices. They cut down rental costs, He says co-working spaces must The Great Fire of 1835 razed nearly seventeen blocks in the these spaces offer the benefit of community team regularly organ- OYO Workspaces team regularly fixed capital investments and prop- move away from the current lease- 8 business district of New York City. The most fortunate were accessibility to teams. On the supply ises events such as workshops, organises engaging events, which erty maintenance costs. “WeWork based model to a revenue-share one, the policy holders of the Aetna Fire Insurance Company. The side, there are more than 200 co- panel discussions and other events are real stress busters and we get to has turned out to be cost-effective, developed in partnership with the company made good on each and every claim and its working players — both branded that are useful for startups like learn new things. I learned to play flexible and has helped me meet land-owner, developer and even the founder went on to build a great reputation. Who was its and non-branded — operating ours,” he adds. the guitar, which has been on my some amazing people,” said Rohaan space-provider to minimise risks for founder? across the country. According to industry experts, mind for a long time,” says Marlyn Aditya Dang, founder Artifold. the entire ecosystem. Whose baseline found under its logo reads "Efficient, 9 Transparent, Inclusive? Connect the images and arrive Digital turns the tables on taboo conversations 10 at the name of an entrepreneur? COMPILED BY GAURAV SRI KRISHNA, www.facebook.com/gaurav.s.krishna the subject. The brand roped in pop- Brands that once beat around the bush on mainstream ular personalities with a prominent media are shattering the silence around digital footprint such as Pooja Bedi, ANSWERS TO THE STRATEGIST QUIZ 624 Swara Bhaskar, Kaneez Surka, Aditi 1. Tom Peters, he co- strategies are based on forbidden topics, on social media Mittal, Aparshakti Khurana among others to share their point of view. authored this report titled the example of a three- ROMITA MAJUMDAR & URVI MALVANIA hygiene products, recently intro- The campaign, which included a "Excellence" when he legged stool. was with Mckinsey duced a campaign called #real- TVC, reached 7.1 million users (at 8. Mary Kay Ash, the ime was when television ads womenrealpads. Show it and say it last count) with over 14,000 conver- 2. Sheraton Hotels, founded founder of the famous would have people believe like it is, the brand says, as it takes sations tapped around it. in 1937, is now a part of Mary Kay Cosmetics Tthat periods are all about on TV commercials where men- “Orgasm is still considered as a Marriott International women hopping around in white struation ads shy away from show- tabooed topic in Indian society, to 9. Tiger Shroff clothes; and condoms, solely about ing the product or blood. Other san- come up with a film talking contex- 3.The top 100 brands in 10. The North Eastern Space safety and family planning. Not any- itary product brands like tually and visually about it was no India ranked by Brand Application Center, (NESAC) more. A slew of new brands in the Ecofemme, Floh Heyday and easy task. The driving force behind Finance space are changing the conversation Nuawomen are also walking the “Digital is the perfect the campaign is the philosophy that located in Shillong about all that was once banned at talk, using influencers, memes and channel. Our sex and pleasure are great when 4. Nokia's 5110 handset in Meghalaya and National the dinner table—from period posts to speak their mind. customers discover equal, fair and mutual,” said Bobby the year 1998 Atmospheric Research cramps to orgasms, all thanks to the Some brands use humour to dis- all our products Pawar, chairman & chief creative Laboratory (NERAL) located 5. Chocolate Industry, all the digital platform. pel the unease around such topics. through this medium officer, Havas Group that created in Tirupati, AP. They both more used by Artisan Going online has helped brands Sirona, the company that has come our products through as they can learn as media isn’t enough the TVC. are a part of the Indian Chocolate manufacturers drop their inhibitions and talk to up with India’s first portable, dis- this medium as they much as they want, without a relevant con- Interestingly the focus for these Space Research their young customers, not always posable female urination device, can learn as much as th- keep it private and tent strategy. brands is no longer how to skirt 6. Rupa Innerwear. Organisation (Isro) and afraid of breaking the taboo around PeeBuddy uses memes and jokes ey want, keep it private explore at leisure” Another way to around a difficult topic, but rather play a very important role such issues. Besides, many (young to normalise discussions about and explore at leisure,” DEEP BAJAJ break the taboo is to how best to reach the target group. 7. Both of their core business in Isro’s operations and old) users of social media have gynaecological issues and products said Deep Bajaj, Foun- use digital influencers. “As existing brands have been ‘whis- Founder, PeeBuddy also found it easier to speak up on that cater to regular (but unspoken) der, PeeBuddy & Sirona. This works best for pering’ about periods and conven- & Sirona One lucky winner will receive a cheque for ~2,000. Send your entries to such subjects, even if they hesitate to bodily functions. Bajaj added that dig- brands that deal with ient feminine hygiene solutions, we [email protected]. All entries must carry the postal address of the engage with them outside the vir- “Our products solve issues faced ital also offers the possibility of the sexual health. Recently, Durex India can create a good buzz around the contestant. Last date for receiving entries is June 11 till 8 pm. Previous tual world. And the medium and the by women which are unaddressed, content going viral, which results in initiated a campaign called topic by using a language that works winners and employees of Business Standard and their families are not message are feeding off each other to due to the sheer nature of the prob- great sales while it is actually impos- #OrgasmInequality by leading a well with millennials, who are a eligible to participate. The winner is chosen on the basis of the first create new ways of branding and lem which makes it almost a taboo sible to address the same discussions conversation to rally public opinion major part of our target audience,” correct entry received. promoting age-old products. to talk about it. Digital is the perfect on mainstream media. However, he towards having a healthy, positive said Gauri Singhal, founder of There were four correct entries to quiz number 624. The winner is Carmesi, a brand of sustainable channel. Our customers discover all cautions, that just being on social and important conversation around FLOH Tampons. S Venkatesan from Chennai Shift focus from buyer to user ing, making certification mandatory like Germans. You have always said don’t target the buyer, target the user. Can you explain this in the While charting uncertain times, the key is not to look at daily Indian context? In services, we have always targeted the user. In changes in weather, but to look at changes in the season, the digital world, it is not so much the buyer but how the product is used, which is more important JAGDISH SHETH tells Ranju Sarkar because people post their experiences with the use of the product than the way I bought the prod- How should business leaders deal with Are you listed on major stock exchanges — New uct. The market will continue to shift from focus uncertain times? York, Frankfurt and London and have a presence in on buyer to focus on user. The key is not looking at daily changes in weath- these capitals? How do you propagate your story er but looking at the change of season. If you look here, which is the CFO’s role? So, HR and finance are In some sense, both are the same. If a cellphone at the trends, there’s predictability. One, India two aspects which have not transformed from eth- buyer, I am a user too… will never go back to the licence raj which means no-centric to truly transnational. Yes, but that’s a smaller percentage of the universe. competitive markets are here to stay. There’s a now concerted effort from In a family, the user could be a child. The buyer in Two, competition will not just be traditional manufacturing industry America is the husband, and the budget controller domestic but it will be global. Global from India to go global. Ratan Tata did is the wife. R&D always focuses on the user. multinationals are here to stay. Sixty it. Aditya Birla has been systematic; years back, Japan was the first to go they bought the aluminum business Many consumers are buying online. How are into emerging markets. It was dis- JAGDISH SHETH (Novelis) that is located in Atlanta; they companies adopting to the change in buying placed by Korea which is now being are quiet about it but it is a massive behaviour. Do you find Asian companies to be displaced by China. Charles H Kellstadt piece of business. They have done a more nimble than companies in the West? Professor of Business similar thing in carbon black — they The Asian companies are more nimble. They Indian multinationals (the few we at Emory University are now a truly global player with a leapfrogged the PC evolution by going for the cell- Goizueta Business have) have not been able to get this global footprint in India, China and the phones. This gave them the volume and the scale. School part of their game correct… US, the biggest markets. and PCs. IBM sold the PC business to Lenovo. Three, we need to start looking at discretionary The US and the Western worlds are stuck in the We have Indian multinationals in the IT incomes, and not just incomes. Today, a fresh soft- legacy technologies. The software designed for services. They are truly global, some of them are in These two acquisitions were initially a drain on What other interesting trends you see in India? ware engineer in Bengaluru will get about ~60,000; the cellphone is much more nimble; other one is 70 countries. But there are two key issues. Their these groups. How do you justify it internally? The discontinuity: Generation gap is only eight at the end of the month, he has no cash flow. talking to the legacy system. culture is still ethno-centric. They have never made They did this at that time because they felt that years. The younger sister cannot relate to the old- Contrast him with the crane operator in the port of the transition to be truly multinational. What does the domestic markets had saturated, and they er sister in styling, which is creating a new gener- Mundra. He makes about ~80,000 a month now, How are companies adopting to people ethno-centricity mean? You have leadership not had to show growth. I don’t think they paid a ation and new buyer in the market place. None of married, only 10+2 with a certification training. buying online? just from India but from wherever they come from. very high price (for Novelis); it was a major them want to live with their families if they can Vocational technical people are making more mon- Most companies are not able to adopt. They have None of them have done it. American and British strategic asset. Eventually, they came out very afford it. They are starting new households; look ey than degree people. So, we need to watch discre- created two parallel divisions. M&M created an corporations are beginning to think on these lines — well from it, prices have gone up. Carbon black out for the growth in households. tionary income, and not incomes. He has more buy- online website for parts, and then they said, why not so you have Satya Nadella at Microsoft. Two, they is doing well from the beginning. America has Two, the rural-urban divide is getting lesser. If ing power. He buys a motorcycle, then he says where sell the whole car online. They sold 600 cars online. have not been able to understand how to raise cap- learnt through market process, not policy, to you are retailer in small town, bigger FMCG firms can I put in my money — buys life insurance, gets Because people who can afford these cars have no ital from capital markets. You may have the ADR but exit low-margin industries. They are absolute would not care. But for Flipkart and Amazon, the advisory to invest. I strongly advocate that India as time. Every one of the retailer (in the US) has creat- it’s a minor detail; it is not true institutional capital. great sellers. They got out of television, watches biggest growth has come from these small towns. a nation invests more in vocational technical train- ed an online platform but has not integrated yet.

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16 THE SMART INVESTOR MUMBAI | MONDAY, 5 AUGUST 2019 BSE 200: TOP 5 GAINERS OF LAST WEEK QUICK TAKE: VALUATIONS LIMIT UPSIDE FOR SYMPHONY “IT’S HARD TO SEE AN ARGUMENT FOR THE DOLLAR BSE price in ~ July 26, ’19 Aug 02, ‘19 % chg A strong performance by Symphony in Q1 was due to TO BE WEAKER FROM HERE OVER THE NEXT MONTH. Cholamandalam Investment 245.5 266.8 8.7 sales doubling over the year ago quarter led by BEING THE LEAST DOVISH CENTRAL BANK IN THE Kansai Nerolac Paints 404.0 434.1 7.5 demand for room coolers and normalisation of Avenue Supermarts 1,424.3 1,513.3 6.3 inventory. Analysts feel that positive trade PACK MEANS CURRENCY STRENGTH” Ajanta Pharma 900.3 955.8 6.2 sentiment and new launches should drive growth. EIMEAR DALY, Muthoot Finance 590.6 621.7 5.3 But premium valuations may limit upside Currency strategist, Macquarie Bank <

STREET Passenger vehicles best SIGNS

Equity MFs cut exposure to banking Domestic mutual fund (MF) managers are pruning their exposure to the banking placed in auto sector sector, especially private sector banks. Many believe prospects may not be as strong as Cost increases will hit other segments harder; some have forecast. “We have been cutting our exposure to some private sector banks, Maruti is the favoured pick in the listed space where valuations had not corrected despite the market fall,” said a fund manager. A RAM PRASAD SAHU while there could be some pres- third of equity MFs' ~8.3 trillion assets are Mumbai, 4 August sures on volumes over the next invested in banking stocks. Some fund few months, valuations may not LAGGING Further, the medium and managers said they prefer moving to cash uly was the ninth consec- correct significantly from these THE MARKET heavy commercial vehicle seg- until there is a clarity on growth. Over the utive month of falling levels. Margins, too, have likely MUTED VOLUMES IMPACT VALUATIONS ment is in a cyclical downturn past month, the Nifty has slipped 8 per cent, (in %) 1 yr return J sales, with most automo- bottomed out and may not fall Volumes (% ch) Price in ~ 1 yr return (%) P/E (x) and given the excess supply, while the Bank Nifty is down 10 per cent. bile companies reporting a slide much from these levels. Auto -34.9 Ashok Leyland -11.8 64 -46.4 15.7 funding constraints for fleet HAMSINI KARTHIK in domestic volumes upwards Basudeb Banerjee of Ambit Metal -27.3 Bajaj Auto 3.1 2,601 -2.9 14.1 operators, weak freight demand of 15 per cent. The lower sales Capital said: “The positive for Telecom -20.8 Eicher Motors -19.4 16,941 -37.2 19.2 and change in axle load norms; Companies query on buyback price in July were on account of the the sector is that companies the segment will see a double- A handful of companies have written to the economic slowdown, higher have managed to deliver Infrastructure -13.8 Hero MotoCorp -14.6 2,401 -26.5 13.9 digit fall in volumes in FY20.” Securities and Exchange Board of India (Sebi) vehicle prices and inventory margins which are not below Oil & gas -13.8 Mahindra & Mahindra -10.1 556 -38.9 12.8 Within the passenger vehicle on whether they can change their share correction by automakers. The Street expectations and, Sensex -0.1 Maruti Suzuki -21.8 5,692 -37.8 19.4 space, analysts are betting on buyback price following the introduction of auto sector has been the worst thus, one can say margins are at Nifty -2.2 Tata Motors -19.7 131 -50.0 8.5 Maruti Suzuki, which is the only the new tax on buybacks. Most of these performer among sectoral the bottom.” TVS Motor -4.3 372 -27.4 17.8 pure-play passenger vehicle companies had already set the buyback price indices (see table) over the last While analysts expect a dou- 40 30 20 10 0 company. Two-thirds of the com- before the 20 per cent tax on buybacks was Volume change is for year to date auto numbers year, shedding 34.5 per cent, ble-digit decline in volumes for Source: BSE Compiled by BS Research Bureau P/E: price to earnings ratio based on FY21 estimates Source: Analyst reports pany’s largely petrol-driven port- introduced in the Budget. “Some companies while the Sensex and the Nifty most segments even in August, folio is already compliant with want to cut the buyback price so that the tax were down marginally. Despite they believe that there may be and during September. We, of Reliance Securities. The sec- whereas the increase in costs for the BSVI emission norms. It is can be passed on to investors. They have record low volumes in July some pick up in September therefore, expect some improve- tor is expected to see an increase passenger vehicles, which pre- also expected to price its vehicles asked for special dispensation from the and muted June-quarter num- ahead of the festival season. ment in demand from the cur- in costs due to multiple regula- dominantly run on petrol, will competitively and should be able regulator,” said a banker, who added that bers, auto stocks rebounded Hetal Gandhi, director, CRISIL rent levels.” tory changes, including the be in single digits. to retain a 50 per cent-plus mar- Sebi’s stand is unclear. About three dozen over the last two sessions with Research, said: “Considering Within the various segments, implementation of the BSVI An analyst at a domestic bro- ket share in the passenger vehi- companies, including Wipro and Adani Ports, the BSE Auto gaining over 2.3 that Dussera and Diwali are both the passenger vehicle segment norms. Analysts believe that kerage said: “Growth rates for cle segment. Given that the had launched buybacks prior to the new tax . per cent. in October this year (last year is expected to come out of the changes in safety features, BSVI the two-wheeler sector in the stock, which is trading at 19 SAMIE MODAK Analysts say that the worst they were in October and slowdown ahead of the two- norms, and insurance costs are medium term would be muted times its FY21 estimates, is not was probably factored in the November, respectively), OEMs wheeler and the medium and expected to lead to a 15 per cent given the higher penetration exactly in the attractive category, IPO grey market activity muted valuations. Mitul Shah of should be able to push sales heavy commercial vehicle hike in costs of commercial levels, while that is not the case investors could look at the same The activity in the grey market is muted even Reliance Securities said that from the second half of August (M&HCV) segments, said Shah vehicles and two-wheelers, with passenger vehicles. on sharp corrections. as two big initial public offerings (IPOs) hit the market this week. Sources say operators are not assigning a high premium to the shares of Sterling & Wilson Solar and microfinance company Spandana Sphoorty. “While these two are good quality companies, not much ‘Downside protection is priority in this environment’ action is seen in the grey market. Given the weakness in the market, traders are staying The markets are in a downward spiral since the presentation of the Budget in July, with foreign portfolio investors (FPIs) on a selling spree. MAHESH PATIL, chief away from taking bets,” said a broker. Both investment officer for equities at Aditya Birla Sun Life AMC, tells Puneet Wadhwa that investors are looking for some clarity on whether the market has bottomed out Sterling & Wilson and Spandana Sphoorty or there is still a risk of a significant downside. Edited excerpts: have cut their issue size to align to the market conditions. In the current environment, down- June 2019 quarter results have kets have bottomed out or if there SUNDAR SETHURAMAN side protection has become a pri- failed to enthuse the markets. is still a risk of a significant down- ority and we are positioning our What are your key takeaways? side. To their credit, retail investors portfolio accordingly. Over the past Considering the slowdown in the have been patient and disciplined year, we were underweight on a economy, earnings growth in the — as is evident in stable SIP inflows. > EVENTS THIS WEEK MAHESH PATIL few of the heavyweight names in June quarter was expected to be We are not seeing any significant Chief investment officer for equities at the large-cap space and have cor- subdued. Based on the companies redemption pressure so far and Aditya Birla Sun Life AMC rected the same. We continue to which have reported Q1FY20 have between 3 per cent and 10 per Date Particulars maintain an allocation to mid-caps results thus far, profit growth has cent cash in various schemes. Do you think selling in the and expect them to do well. been in the high single digits, Aug-05 India-Markit PMI services & markets since the Budget has Currently, we are overweight on which is in line with the muted How have SIP flows been over composite been overdone? pharmaceuticals and health care, expectations. As expected, the auto the past couple of months? UK-Markit/CIPS PMI services & The market sentiment has soured low-ticket consumer durables, sector results have been lacklustre. The domestic SIP inflow in equities composite after the Budget. There are con- industrials and cement. We remain But sectors such as consumer sta- has been stable at around ~8,000 China-Caixin PMI services & cerns about a gradual slowdown in underweight on information tech- ples and consumer durables, bank- crore per month for the past six composite consumption. The slowdown is nology (IT), oil and gas, and auto ing and finance, pharma, and months, which is a positive sign. Aug-06 Results-Titan, REC, Pidilite, likely to continue in the near term, and auto ancillaries. media have delivered a reasonable We remain constructive on the Indiabulls Housing as the government has not set of results. Indian equity market outlook from Aug-07 India-RBI monetary policy announced any direct short-term Has the liquidity situation in the a medium-to-long-term perspec- UK-Halifax house prices index measures, so far, to boost con- financial space improved? … And expectations for FY20? tive. The next six-12 months would Results-M&M, Lupin, sumption. This has impacted the System liquidity has reversed Q2FY20 earnings growth may also be a good time for investors to con- Cummins India, Cipla, Voltas, market sentiment negatively. The from a deficit a couple of months be subdued. We may see an upturn solidate their portfolios. We expect HPCL, Petronet LNG, Tata Steel, market may remain subdued for back to a surplus of more than ~1 in earnings only in the third and SIP inflows to remain stable in the Adani Ports & SEZ, Aurobindo some time until we see signs of a trillion now, as the Reserve Bank the fourth quarters of the current remaining part of CY19. Pharma, HCL Tech & Siemens recovery in the economy, as well of India (RBI) has allowed liquid- fiscal. Overall, for FY20, earnings Aug-08 US-jobless claims as the resolution of some of the ity to remain in the system after growth for the Nifty, excluding cor- How many rate cuts do you UK-RICS house price index issues related to non-banking the Lok Sabha election. The gov- porate banks, is projected to be in expect from the RBI in FY20? China-import, exports & trade financial companies (NBFCs). ernment also announced meas- low double digits. Headline FY20 We are currently in an environ- balance figures ures like a liquidity backstop for earnings growth for the Nifty, ment of easy monetary policy, Results-Page Industries & How have you positioned your NBFCs and ~70,000 crore for including corporate banks, is which is in line with the govern- UltraTech Cement portfolio thus far in CY19? public sector bank (PSB) recap. expected to be over 20 per cent. ment’s objective of lowering the Aug-09 India-IIP figures Corporate banks will be in cost of capital. The RBI has already UK-GDP figures a better position to lend and Are you facing any redemption cut its policy rate by 75 bps this year UK-industrial & WE REMAIN CONSTRUCTIVE ON THE INDIAN focus on growth now. However, pressure in any of the schemes and there are expectations of two- manufacturing Production EQUITY MARKET OUTLOOK FROM A MEDIUM-TO- risk aversion towards NBFCs you handle? three additional rate cuts in the UK-import, exports & trade LONG TERM PERSPECTIVE. THE NEXT 6-12 remains high leading to high Considering the decline in the mar- current fiscal year. Hence, even as balance figures MONTHS WOULD BE A GOOD TIME FOR INVESTORS credit spreads. There is a clear kets over the past month, investors we face some near-term issues, China-CPI & PPI figures divergence between strong and are understandably trying to get lower rates should aid economic China-BoP CAD figures TO CONSOLIDATE THEIR PORTFOLIOS weak NBFCs. some clarity on whether the mar- recovery in the medium term. Results-Shree Cement, Britannia Industries, GAIL India, Cadila Healthcare, Hindalco, MRF, BHEL & BPCL Source: Bloomberg/exchanges/websites Spandana Sphoorty: A Worst post-Budget show in Compiled by BS Research Bureau promising revival story 18 years for markets > COMMODITY PICKS HOW THEY STACK UP HAMSINI KARTHIK OFFER DETAILS STRONG GROWTH Budget Nifty returnsFinance Mumbai, 4 August Opens 05-Aug-19 (~ cr) FY19 FY18 Growth (%) date 15-days 1-mth 3-mth Minister Gross AUM 4,437 3,166 40.15 While evaluating the initial public Feb 28, 2001 -10.7 -10.7 -11.7 Yashwant Sinha Disbursements 4,969 3,858 28.80 offering (IPO) of microfinance player Closes 07-Aug-19 Jul 05, 2019 -4.7 -6.9 NA Nirmala Sitharaman Spandana Sphoorty Finance, the Total revenue 1,048 587 78.53 Price band (~) 853-856 Net profit 320 188 70.21 Feb 28, 2003 -2.5 -5.9 -6.8 Jaswant Singh question is whether there is appetite Feb 29, 2000 -3.9 -5.8 -20.8 Yashwant Sinha for businesses which have bounced Size (~cr) 1,200 AUM: Assets under management year-on-year growth Source: Red herring prospectus CHANA back from a major crisis. Examples Feb 29, 2008 -6.6 -5.4 -7.4 P Chidambaram Demand for Chana is expected to improve such as Suzlon haven’t demonstrated overall stake may reduce to 47 per interest margin at 16.8 per cent in Feb 01, 2018 -5.8 -5.1 -2.7 Arun Jaitley ahead of the festive season. Government success in doing so post the corporate cent from over 60 per cent now, FY19 is quite impressive, though asset Source: Exchanges; Note: Data for budgets since 2000; Compiled by BS Research Bureau selling is also slower than expected which will debt restructuring (CDR) exercise. though it will retain its position as quality may need monitoring. While support prices at lower levels. Dips to ~4,300 But the differentiating factor is the largest shareholder. The holding there was no net non-performing will be a buying opportunity for an upside that unlike other businesses, micro- of promoter Padmaja Gangireddy, a asset (NPA) in FY19, gross NPA ratio SUNDAR SETHURAMAN of 20 per cent tax on domestic equities since towards ~4,400/~ 4,450 in the Delhi market. finance has retained its sheen as a first-generation entrepreneur, will was 7.9 per cent in FY19, largely owing share buybacks, and the the Budget. Though the promising space in India. Post the get diluted to 16 per cent from 20 per to region-specific issues. The stock markets have move to increase free surcharge was aimed at 2010-11 crisis, regulations have been cent post the IPO. Currently, The IPO demands 2.7 times FY19 logged their worst post- float in all listed the super rich, FPIs with SOY BEAN strengthened and more importantly, Spandana has 929 branches, spread estimated book value, which analysts Budget one-month companies by 10 per non-corporate organised microfinance institutions across 16 states. at Sharekhan view positively. performance since 2001. cent to 65 per cent. structures have been (MFIs) have vacated the Andhra It plans to raise ~400 crore of fresh Considering peers trading at 1.2-1.5x The benchmark Nifty Moreover, the caught in the crosshairs. Pradesh/ Telengana region. capital through the IPO to plough into FY20 estimated book, Spandana’s has declined 7 per cent government’s focus on In 2001, the markets had To that extent, Spandana’s busi- the business — largely to scale up asking rate is a tad steep given there since July 5, when fiscal prudence over tumbled more post the ness is a new one, with almost no bag- branches. Among others, its focus on is a scope for improvement, particu- Finance Minister stimulus package at a Budget. However, it was gage of the past. The business strate- lending to economically active larly concerning branch utilisation. Nirmala Sitharaman time when economic largely on account of a gy, growth, scalability and women and dual-income houses Its average branch-level disburse- presented her maiden growth is slowing has scam involving Ketan Soy bean prices at the benchmark Indore underwriting practices have been ensure relatively high recoverability. ments at ~470 crore is lower than its Budget. The fall in the led to further Parekh. On most markets are trading at ~3,633 per quintal. For largely boosted in its new avatar. Still in the early phase of new set peers’ ~910 crore per branch. market has been disappointment. What occasions, the market the week ahead prices are expected to head High concentration in united up, FY17-19 has been the fast growth MFIs also remain susceptible to triggered by a bunch of has hit the sentiment performance post- towards ~3,575 per quintal. Expectations of Andhra Pradesh had created a huge periods for the MFI. Yet, in a space socioeconomic issues that crop up in Budget proposals, such the most is the higher budget — including in higher acreage, enough stocks to keep the financial crisis for Spandana, as was not densely populated by listed play- states, including farm loan waiver. as the increase in tax tax surcharge on 2000 (dotcom bust) and prices under pressure for the week ahead. the case with most MFIs. In 2014, it ers, Spandana ranks third, next to Unsecured nature of the business also surcharge on foreign overseas investors, who 2008 (Global Financial exited the CDR and nearly three years Satin Credtcare, with the leader being tends to impact asset quality in the portfolio investors have pulled out nearly Crisis) – are largely Prerana Desai, later, Kedaara Capital pumped in CreditAccess Grameen. Financials, near to medium term should there be (FPIs), the introduction ~15,000 crore from linked to global events. Research Head - Edelweiss Agri Services equity into the company. Kedaara’s too, have improved in this period. Net any default. and Credit

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official MUMBAI | MONDAY, 5 AUGUST 2019 BUSINESS LAW 17 . <

BRIEF CASEN l M J ANTONY THE BANNING OF UNREGULATED DEPOSIT SCHEMES ACT, 2019 A weekly selection of key court orders Arbitration clause goes after compromise Once two disputing companies settle their differences and sign a compromise Taming of the unscrupulous agreement, neither can invoke an arbitration clause that existed in an earlier contract, the Supreme Court ruled The rules under the Act may hold director, Vinod Kothari Consultants, “An inter- last week while setting aside the pretation is deposits taken to finance a real busi- judgment of the Gauhati High Court. In the key to its implementation, ness activity. While this interpretation seems to this case, Zenith Drugs & Allied Agencies vs Nicholas Piramal say experts be the intent of Section 41, it should be remem- India, the high court had referred the disputes between the bered that all the chit fund companies of West two to arbitration. The original agreement with an arbitration Bengal took deposits under the pretext of some clause was between Zenith, a clearing agency, and Rhone ILLUSTRATION: AJAY MOHANTY ostensible business transaction.” Poulene, which later merged with Piramal. Disputes arose Kothari said if unincorporated businesses are between the two and the contract was cancelled. Later there allowed to take deposits for the purpose of busi- was a compromise. Still, disputes erupted and the matter was ness, it will create the scope for a regulatory arbi- taken to a civil court and the high court. The Supreme Court trage. “The Ordinance was extremely stringent observed that once a compromise is signed, the previous and non-permissive. Section 41, on the other agreement does not exist. The previous arbitration clause hand, grants a major escape route and it might cannot be read into the terms of the compromise as it is a new end up defeating the objective of the law.” agreement.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Serving depositors’ claim The Act is being appreciated for giving priority Venue of arbitration only at place named to depositor claims over all other debts. However, When an arbitration contract specifies there is a catch. Though this provision is giving the jurisdiction of the court at a an upper hand to those who suffered from the particular place, only such court will fraud of unregulated deposits against the gov- have the jurisdiction to deal with the ernment dues and debts, this will only be possible matter because the parties intended to in cases where there is no case pending under exclude all other courts. In one case, the Securitisation and Reconstruction of Brahmani River Pellets vs Kamachi Financial Assets and Enforcement of Security Industries, the parties had agreed that the “venue” of Interest Act, 2002 or the Insolvency and arbitration shall be at Bhubaneswar. When disputes arose, Bankruptcy Code, 2016. “In those cases, deposi- one party moved the Madras High Court for the appointment tors will be below secured financial creditors and of an arbitrator. It appointed a former judge of the high court may become parallel operational creditors/unse- as the sole arbitrator. Its view was that mere designation of cured financial creditors,” said Daizy Chawla, “seat” by parties did not oust the jurisdiction of other courts. It APOORVA CHECKING senior partner at law firm Singh & Associates. further stated that in the absence of any express clause According to Parag Srivastava, leader, private excluding the jurisdiction of other courts, both the Madras fter being unanimously passed by FRAUD: SALIENT equity and M&A at Nishith Desai Associates, High Court and the Orissa High Court will have jurisdiction over Parliament, the Banning of Unregulated FEATURES OF translating this provision into reality appears the arbitration proceedings. On appeal, the Supreme Court set A Deposit Schemes Act, 2019 (the Act), got THE NEW LAW challenging. “The moment there will be a provi- aside that ruling, observing that the intention of the parties the president’s assent on July 31. Given the extent sional attachment order, or as a matter of fact was to exclude all other courts. The contract might not have of unregulated deposits and lending that have nA ban on all deposit-taking schemes, nCreation of an online central database for any order issued against the deposit taker, all the used expressions like “exclusive jurisdiction”, “only”, been part of the country’s informal economy, except those regulated by the nine collecting information on deposit-takers other creditors (whether financial or non-finan- “exclusive”, “alone”, but that did not make any difference, this law has been brought to protect the interests regulators mentioned in the Act and their businesses cial), government agencies, etc may get involved the Supreme Court said and asked the parties to go before the of depositors and holding deposit-takers account- nPowers to the competent authority for nProvides punishment for offences of running and try to seek injunctions or initiate other pro- Orissa High Court, if advised. able. The government had passed an Ordinance provisionally attaching the property of unregulated deposit schemes, fraudulently ceedings against the deposit taker,” he said. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> in February to deal with this issue. The Act aims to curb unregulated and fraud- unregulated deposit-takers, including all defaulting on regulated deposit schemes and Punishment for misleading ads Amalgamated company cannot be taxed ulent deposit-taking schemes, providing succour deposits received wrongful inducement of depositors The Act seeks to punish wrongful inducement The Supreme Court has upheld the to depositors. nConstitution of designated courts in specific nExemption for deposits taken in the concerning unregulated deposit schemes. MoS judgment of the Delhi High Court in the “While the objective is to control deceitful areas to speedily decide cases filed under the Act ordinary course of business for Finance, Anurag Thakur claimed in the Rajya case, CIT vs Maruti Suzuki India. The practices carried out through unregulated Sabha that this will also cover celebrities endors- high court had agreed with the schemes and chit funds, the implementation ing such schemes. However, according to experts, decision of the Income Tax Appellate depends on a lot of information collection, ily deciding cases and creating the infrastructure Ordinance was passed, businesses felt that it was this may not entirely play out as intended. This Tribunal. The tribunal had held that the reporting, sharing of information between to implement this law in its letter and spirit, other going to impact any fund they raise in the ordi- is because the relevant provision in the Act uses assessment made in the name of income tax authorities, regulators and investi- issues might arise when it is operationalised. nary course of their business. An improvement the term “knowingly” which means that celebri- Suzuki Powertrain India was a nullity since it had been gating agencies, in order to unearth, probe and in the Act is the clarity brought in by excluding ties can still get away scot-free by showing that amalgamated into Maruti Suzuki India and was not in take appropriate action,” said Upasana Rao, part- Defining the ordinary course of business such deposits from the scope of unregulated they did not know about the fact that the scheme existence. The Supreme Court dismissed the appeal of the ner at law firm Trilegal. On the practical side, this For one, there is a crucial difference between the deposits,” noted Rupali Singhania, partner and was unregulated or fraudulent. Commissioner of Income Tax. Its judgment asserted that the is difficult to achieve and increases the adminis- February Ordinance and the Act. The Act intro- founding member at Areete Consultants. Experts said that how the Act will play out on legal question raised in this case had already been settled. It trative burden on these agencies, she said. duces Section 41, which says that the provisions However, experts said that what is meant by the ground depends a lot on the rules that shall observed: “Despite the fact that the assessing officer was Besides major challenges of making people of this law shall not apply to deposits taken in “deposits taken in the ordinary course of busi- be framed under it. They hope the rules will informed of the amalgamating company having ceased to aware, appointing competent authorities, speed- the ordinary course of business. “When the ness” is left vague. According to Vinod Kothari, impart more clarity on these issues. exist as a result of the approved scheme of amalgamation, the notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to IDENTIFYING SIGNIFICANT BENEFICIAL OWNERS exist upon the approved scheme of amalgamation.” The judgment stressed that there should be certainty in matters of tax. Otherwise, “it will only result in uncertainty and displacement of settled expectations. There is a significant Why lifting corporate veil may not be easy value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted SUDIPTO DEY control the company,” says Pingle. Experts and business decisions are made in the expectation of complain the SBO rules do not provide for a consistency, uniformity and certainty. To detract from those The Companies (Amendment) Bill, 2019, has WHO IS AN SBO mechanism for identification of an SBO. principles is neither expedient nor desirable,” the judgment cast specific responsibility on companies to An individual who alone, or Kumar points out that the concept of emphasised. identify significant beneficial owners (SBOs) as together, or through one or more “significant influence” is not very clear. “It says >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> part of measures to strengthen the governance persons/trust, holds one or more of anyone who has the power to participate in the Charity dries up after change in IT Act framework for businesses. the following rights/ entitlements financial and operating policy decision. The While this is not a new provision — a similar in the reporting company: concept of participation is not clear because by Donations to charitable trusts to claim provision was included by the amendment to mere participating, it would mean the person deductions from total income dry up the SBO Rules in February 2019 — earlier there nDirectly or indirectly 10% of has a significant influence. This needs some when the government changes rules. were no corresponding penalty provisions for the shares clarity,” he adds. Trusts cannot challenge the new rule; it is non-compliance. Also, the latest amendment nDirectly or indirectly 10% of the Arnav Dayal, partner, Trilegal, says there is the donors who have the locus to oppose puts the onus on the company to take voting rights ambiguity around what constitutes “necessary the withdrawal of the tax benefit, the “necessary steps” to identify an SBO. steps”. According to the existing provisions, the Supreme Court stated in its judgment, “The object is very clear that an individual nThe right to participate in 10% of reporting company is already obligated to issue Prashanti Medical Services & Research Foundation vs Union of needs to be identified who is the significant distributable dividends or any other a notice to a person whom it believes is an SBO. India. Prashanti charitable trust received donations for three beneficial owner of the company. The distribution during the financial “Post the amendment, if a reporting years to build a hospital. Though it received a substantial companies should implement the Rules in year, whether directly or indirectly company is expected to go over and above these amount in the first two years, a change in rule in the last year spirit, and not only in letter of law,” says Lalit requirements, then guidance should be n almost dried up donations. The trust challenged the changed Kumar, partner, J Sagar Associates. The right to exercise significant provided on the actions expected to be rule under Section 35AC of the Income Tax Act in the Gujarat According to Sampath K Rajagopalan, influence or control, in any manner undertaken,” he adds. Experts say a few High Court. It dismissed the petition. Its appeal was also partner, entity compliance and governance, EY other than via direct-holdings alone definitions are open for interpretation as some dismissed by the Supreme Court observing that other trusts India, the introduction of penalties on firms for firms have complex shareholder structures. getting donations had not approached the court nor the failure to take adequate steps to identify their Under the amendment, for non- donors who are the real aggrieved persons, who despite SBOs and make them report underscores the some complex shareholding pattern, a and suspension of rights attached to the shares. compliance, the company, and every officer of paying donations were not allowed to claim the deduction. importance of this responsibility. company may not be aware of the shareholder's According to experts, there could be the company in default is punishable with a fine Moreover, there was no question of equity or promissory “Companies must initiate enquiries shareholding. “All this will ultimately give rise implementation challenges in the of between ~10 lakh and ~50 lakh (continuing estoppel in tax matters, the judgment asserted. wherever the facts are unclear or unknown, to litigation,” says Gaurav Pingle, a practising identification of an SBO, defining 'indirect failures attract an additional fine of ~1,000 per

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> review all such facts in detail and prudently company secretary. shareholding' of an individual, and identifying day of default). The Bill also prescribes other interpret the qualifying conditions before If the SBO does not provide the necessary “majority stake”. penalty provisions for the failure of an SBO to Niggardly towards lifetime disability concluding on their SBOs,” he says. Tests must information or gives inadequate information, For instance, “acting together” is defined in make a declaration with the reporting company. The Supreme Court last week criticised be run up to the level of ultimate shareholding the company could apply to the National the Bill, but could be difficult to interpret and However, experts note that the the Calcutta High Court for dismissing in the investment structure. Company Law Tribunal (NCLT) for putting apply. “Acting together focuses on the intent commencement date of the penalty provision the appeal of a woman without giving However, that is easier said than done. In restrictions concerning the transfer of interest and the objective of two or more persons to has not been notified yet. reasons. She had appealed on behalf of her 10-year-old son who suffered a permanent disability of 70 per cent in a road accident. The motor accident compensation tribunal awarded ~2 lakh to him. The mother appealed to the high court against the miserly Tax administration to be both strict and liberal amount. But the high court summarily dismissed it. Allowing her appeal, Rupa Roy vs New India Assurance, the the evil people.” This is perennially In fiscal law, this sort of situation When the question is whether a sub- from a government department “at Supreme Court observed that “in the absence of any the perfect principle of general happens quite often. Once an issue ject falls in the notification or in the the time of importation”, could be discussion and reasoning, we are at a loss to know as to administration and obviously also of arose whether the exemption for the exemption clause, then it (exemption) allowed to be availed of if the what persuaded the high court to dismiss the appeal". It tax administration. It has been desir- manufacture of soap where rice bran being in the nature of an exception, is importer is not able to produce it at stated that in view of permanent disability and the expense able that the finance minister empha- oil had been used would be available to be construed strictly and against the time of import but produces it and agony involved in looking after the boy, it would be sised on this fundamental principle. even if the rice bran oil was pre-treat- the subject but once the ambiguity or later. The Supreme Court allowed “just and proper” to raise the compensation to ~10 lakh It is quite often that officers of the ed into fatty acid and then brought doubt about the applicability is lifted the production of the certificate even with 6 per cent interest. department are either too strict or too to the factory for mak- and the subject falls in later. The Supreme Court said: “The

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> liberal irrespective of whether taxpay- ing soap. The Revenue the notification, then eligibility clause in relation to an ers are evaders or complainant. That department denied The classical full play should be giv- exemption notification is given strict Right to wage till retrenched sort of attitude leads to a disaster or, the exemption by controversy between en to it and it calls for meaning, that is, the notification has An employer cannot dispute his EXPERT EYE in any case, a delay in conducting adopting a very literal strict approach and a wider and liberal to be interpreted in terms of its lan- liability to pay wages because of the business. An example that comes to and strict interpreta- liberal approach has construction. guage. Once an assessee satisfies the sickness of the unit or pendency of a SUKUMAR MUKHOPADHYAY my mind is when some raw jute con- tion. But the Supreme now, with judicial Over a period of eligibility clause, the exemption BIFR rehabilitation scheme. The signment came to the Calcutta port Court went into the approval, been time, there has been clause therein may be construed lib- proceeding for the recovery of wages and it was found that the loading of object and purpose of replaced by an controversy over the erally.” under the UP Timely Payment of I have chosen this subject because of several bags took place before the the notification being approach which is applicability of strict The conclusion about interpreting Wages Act cannot be stopped on those its contemporaneous importance. midnight of March 31, 1967 (which the encouragement of both strict and liberal or liberal approach in an exemption or administrative pleas. The Allahabad High Court stated so in its judgment, Finance Minister Nirmala was the deadline), but a few contin- the use of rice bran oil at the same time tax administration. action is the following: The classical Modi Rubber vs State. The company was not functioning Sitharaman, in a recent speech on the ued getting loaded after the mid- and allowed the One of the latest controversy between strict approach after a strike in 2001. Later, there were two settlements occasion of Income Tax Day celebra- night. We in the Customs department exemption [Tata Oil Supreme Court judge- and liberal approach has now, with with one group of workers. The labour commissioner tion, said that “those gaming the sys- realised that the transgression of time Mills Company vs CCE- ments in the case of CC vs. Tullow judicial approval, been replaced by issued a recovery order in favour of workers. The company tem are the ones taxmen have to keep was only marginal and not intention- 1989(43)ELT183(SC)]. India Operations Ltd. – 2005 (189) an approach which is both strict and challenged it in the high court, arguing that it was before a watch on ... but if the assessees are ally carried out to violate the time In another case, U.O.I. vs. Wood ELT 401 (SC) has now enunciated liberal at the same time. Taxmen BIFR. Dismissing the petition, the court stated that “the not avoiding or evading taxes, the tax- limit of loading indicated in their Papers Ltd, 1990 (47) ELT 500 (SC), the and emphasised a point of view, should be strict with the lawbreakers employer cannot dispute its liability because of the men owe them good service”. It is a license. So we took a liberal attitude Supreme Court has enunciated this which is a synthesis of the two anti- and liberal with the compliant. sickness of the unit. The relationship between master and gem of an administrative principle without penalising them for the principle very clearly. It observed that thetical approaches. In this case, the servant continues until employee is retrenched or which dates back to Mahabharata. minor violation. This helped the jute liberal and strict construction of an issue was whether an exemption The writer is member, Central Board of terminated. The workers who are not signatories to the Lord Krishna is supposed to have industry, which even otherwise was exemption provision is to be invoked notification, which requires the pro- Excise & Customs (retired) settlements can enforce recovery.” said: “Protect the good and destroy under serious stress. at different stages of interpreting it. duction of essentiality certificate Email: [email protected]

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18 POLITICS & PUBLIC AFFAIRS MUMBAI | MONDAY, 5 AUGUST 2019 1

“Willingly create a sense of panic & distress “...modification, abrogation of Articles 35A and "A lot of rumours are spread but don’t bother giving Kashmiris a sense 370, unconstitutional delimitation or trifurcation here, do not pay any heed to of relief or security. Kahan gayi insaniyat, of the state would be an aggression against the them. Everything is fine, kashmiriyat aur jamhooriyat?” people of Jammu, Kashmir and Ladakh” everything is normal" MEHBOOBA MUFTI, PDP president FAROOQ ABDULLAH, National Conference chairman SATYAPAL MALIK, Jammu and Kashmir governor

> . A concoction of crime, caste CONSIDER THE EVIDENCE

Virendra Pratap Shahi to undermine The incidents related to the rape of a minor in Unnao and the support that accused the power of Brahmin gangsters Hari Kuldeep Singh Sengar enjoys show the worst of UP politics, writes Radhika Ramaseshan Shankar Tiwari and Shiv Pratap Shukla whose word was law. Sengar started his politics in the n Uttar Pradesh, Raghuraj Congress but abandoned it for the Pratap Singh alias Raja BSP in 2002. He won his first assem- Bhaiyya, Akhilesh Singh, bly election from Unnao Sadar on a I Dhananjay Singh, Mukhtar BSP ticket. Before the 2007 election, Ansari and Atique Ahmed jostle for he defected to the SP, helped by space and attention in a bizarre roll Arvind Singh Gope, a former MLA of honour that valorises the and MP who is also Sengar’s brother- bahubali-turned-neta who noncha- in-law. He won the 2007 election from All set for another lantly murder, abduct for ransom, Bangermau and the one in 2012 from attempt rape (a crime that Bhagwantnagar on the SP’s symbol. Dhananjay, a former Bahujan Samaj Sengar had a brush with Akhilesh Party or BSP MP of Jaunpur, is Yadav, SP president, who was the term but what accused of) and breach peace, know- then chief minister. He wanted to ing well that the Robin Hood aura field his wife, Sangeeta, for the post they carry and the power they exude of zilla panchayat president in the next for Nitish? have the administration’s hands tied. local elections but Akhilesh had To these bullies, Kuldeep Singh another candidate in mind. Irked at AJAY SINGH of the Rashtriya Janata Dal Sengar was small change because he Sengar’s insubordination, Akhilesh (RJD) is unlikely to get a drew his notoriety from allegedly used his political and administrative In the 2020 Assembly polls, reprieve from jail. What makes patronising illegal sand mining and resources to defeat Sangeeta, but she Bihar will be sitting on the cusp the situation worse is the fact the operation of dagga mari or unli- won. “Sengar reinforced his clout. of a profound social and politi- that his political legacy is get- censed passenger buses; these Akhilesh quickly made up with cal transition. Its impact will ting debilitated every day as the offences are glossed over because him,” an SP source said. The cama- transcend the geographical Yadav clan gets embroiled in they bring in the green stuff that raderie was short-lived because, by boundary of the state: Perhaps internecine feuds. Lalu’s two politicians and police personnel han- 2017, Sengar figured the BJP was the Bihar will be the weathervane sons — Tejashwi Yadav and Tej ker after. rising star and he should hitch his to indicate if India is heading Pratap Yadav — are fighting it Until Sengar was arraigned and bandwagon to it. Hridaynarayan towards a long spell of single out in open. His daughter Misa jailed in April 2018 for allegedly rap- Dixit, the Assembly speaker, ensured party-dominance. Bharti is also a claimant to her ing a minor, he meant little to UP’s his passage, principally because he Politics in Bihar is more father’s legacy, though she is Rajputs although he was politically required Sengar’s help to win his than just caste arithmetic. The hardly a leader of consequence. successful in his home turf, Unnao, election from Bhagwantnagar. National Democratic Alliance The RJD, which appeared a near Kanpur. The rape was followed Until Kuldeep Singh Sengar was jailed in April 2018 for allegedly raping a minor, he meant little to UP’s Rajputs Sengar fought again from (NDA), headed by Nitish Kumar powerful regional outfit when by the alleged assault on the victim’s Bangermau and won. in Bihar, appears all set to win it aligned with the JD(U) in the father by Sengar’s younger brother, Brahmins in Unnao,” a long-time one’s honour is supreme even on the Party (SP) functionary said. On win- “Winning is all that matters to the the election. The Janata Dal 2015 state election, is gradually Atul, his arrest and death in police Lucknow political observer noted. peril of shedding blood.” ning the parliamentary election, BJP. The leaders were warned that (United)-Bharatiya Janata becoming a caricature of a polit- custody, the girl’s attempted self- Shailendra Singh Shailu, Sengar’s Housed in Sitapur jail, prison Sakshi’s first mission was calling on Sengar was an undesirable character Party-Lok Janshakti Party ical party. immolation in front of Chief Minister brother-in-law and BJP legislator protocol was thrown to the wind for Sengar and publicly proffering but they said look at his victory mar- (Paswan) is a formidable social Tejashwi has neither shown Yogi Adityanath’s residence and the from Gainsari (Balrampur), spoke for this privileged inmate. Local TV thanks to him. gin,” an insider said. combination and can overpow- the astuteness nor the grit of his conviction of her uncle who is in a the Rajputs, saying; “The BJP decided channels played footage of Sengar’s Who is Kuldeep Singh Sengar and Two of Sengar’s peers, Babu er any other alternative. father to infuse confidence Rae Bareli prison. Recently, the vic- to expel him (Sengar) in its wisdom. callers allegedly bribing why did the BJP give Singh Kushwaha and Gayatri But politics is never as easy among party workers and lead tim was seriously injured in a mys- But the community is watching. We the guards to reach him. The law never him a long rope before Prajapati, were also embroiled in as it looks. The trust deficit the party. On the other hand, terious road accident. The car, car- know what the truth is and who has Though sequestered 157 caught up with the court intervened and unlawful sand mining and have between lower-rung leaders of his name, along with sister rying the victim and her aunts from been wronged.” km away from Unnao, Sengar as long as constricted the political either served or are serving jail sen- the BJP and the JD(U) persists. Misa, figured in corruption cas- their home to Rae Bareli, was A Rajput businessman from Sengar “worked hard” to he allegedly mined leeway? “Yogi tences. The law never caught up with Junior leaders of the BJP are es related to the dubious sale of smashed by a truck with a blackened Faizabad, who claimed he knew the ensure that the BJP’s and transported Adityanath may be a Sengar as long as he allegedly mined encouraged to take periodic railway properties in Patna and number-plate. The aunts died and Sengars “fairly well”, said: “The stars candidate from the Lok sand illegally from mahant but he’s as caste- and transported forbidden sand from potshots at Kumar, evoking Ranchi. The Central Bureau of the victim is battling for life. conspired against Kuldeep. The Sabha constituency, the banks of the obsessed and pro-Rajput the banks of the Ganga in unlicensed quick retributions. The BJP Investigation (CBI) and the In UP, the events are shrouded in events are an outcome of 40-year- Sakshi Maharaj, won. Ganga as his predecessors at the trucks. Slapped with the amended camp has been giving the Enforcement Directorate (ED) silence. “The past few months have long bad blood between the Sengars “Sengar has a network Gorakhpur monastery, POCSO (Protection of Children impression that have been prob- brought out the worst in our politics. and the victim’s clan, which turned of loyalists in almost every village in Avaidyanath and Digvijaynath, were,” against Sexual Offences) Act, which the party is capa- Assuming that ing these cases. Caste has validated a heinous crime violent. The provocation was as triv- Unnao district. He earns by ques- said a political source. Yogi’s fore- prescribes a death sentence for sex- ble of winning on Kumar leads the These corruption because no Rajput is willing to believe ial as a fight over the spoils from ille- tionable means but he spends mon- bears, as political as he, leveraged ual assault on minors, Sengar’s polit- its own; the party NDA in the 2020 charges were the that Sengar raped her. There’s not a gal sand mining or rivalry in a local ey on poor people. He’s accessible their influence in eastern UP to nur- ical career may have come to a full had won all the 17 election, it will ultimate reason murmur from anyone, including the body election. To us Rajputs, keeping and available to them,” a Samajwadi ture a Rajput mafioso such as stop. seats it contested be probably his for Kumar break- in the state in the last election for ing ranks with the Lok Sabha polls. the CM’s RJD and aligning The BJP has, of position with the BJP to STORY IN late, has signifi- form the govern- cantly expanded ment in July 2017. NUMBERS its social base in Bihar. That Tejashwi in his role as leader of becomes formidable in the the Opposition in the Assembly, company of Kumar, who too, has turned out to be ama- GREAT EXPECTATIONS: ANDHRA’S STEEP REVENUE TARGETS retains his charm as a mass teurish and ill-prepared to take ABHISHEK WAGHMARE A PEEP INTO JAGAN REDDY'S BUDGET BOOKS leader by roping in subalterns. on veterans like Kumar and Though the BJP has made Deputy CM Sushil Kumar SHAKY BUDGETING (~ cr) (% growth in bracket) ALL BETS ON GRANTS-IN-AID (~ cr) (% growth in bracket) PRECARIOUS The new government formed in Andhra inroads in the social base of oth- Modi. The RJD might have n2017-18 A n2017-18 A n2018-19 RE n2017-18 A n2017-18 A n2018-19 RE FISCAL POSITION er backward classes (OBCs), the fared much better if the lead- Pradesh by Y S Jaganmohan Reddy presented n n2018-19 BE n2018-19 RE n2019-20 BE n2018-19 BE n2018-19 RE n2019-20 BE Revenue deficit party is largely seen as repre- ership had been assigned to vet- a full Budget for FY20 in July. The revenue nFiscal deficit senting the interests of upper erans like Jagtanand Singh or targets and expenditure goals, however, are 146,944 146,944 162,134 49,813 49,813 58,125 (% of GSDP) Expenditure State's own -2.01 castes and dominant OBCs. Raghuvansh Prasad. But like too steep, possibly even unachievable, 191,064 (30) 162,134 (10) 227,975 (41) tax 65,535 (32) 58,125 (17) 75,438 (30) 2017-18 A -4.03 Kumar’s presence as the leader other regional parties, the RJD, judging by the Budget balance sheet. 105,062 105,062 114,962 Share in 28,675 28,675 32,711 0.6 fills that vacuum. too, is a running personal fief- State Finance Minister Buggana 2018-19 BE -2.78 Assuming that Kumar leads dom of Lalu’s clan. Revenue 156,007 (48) 114,962 (9) 179,297 (56) central taxes 33,930 (18) 32,711 (14) 34,833 (6) Rajendranath has projected that the revenue -1.27 the NDA in the 2020 election, In the 2020 polls, Kumar, at 2018-19 RE (tax, non-tax and central transfers) will reach 28,433 28,433 38,246 Grants-in- 22,761 22,761 19,457 -3.66 it will be probably his last elec- in later half of his career, is ~ 1.8 trillion in 2019-20 (Budget Estimate), Borrowings 33,461 (18) 38,246 (35) 46,921 (23) aid from 50,696 (123) 19,457 (-15) 61,072 (214) -0.16 tion for the chief minister’s unlikely to venture into any the Centre 2019-20 BE growing a whopping 56 per cent over 2018-19 -3.26 position. He will be entering 70s juvenile political experimenta- Growth in 2018-19 BE over 2017-18 Actuals, Growth in 2018-19 RE over 2017-18 Actuals, Growth in 2019-20 BE over 2018-19 RE; RE: Revised estimate, GSDP: Gross state domestic — not the age to take up new tion with the RJD’s leadership (Revised Estimate). This was done to budget BE: Budget estimate; Sources: PRS, RBI, Govt of Andhra Pradesh product for 40 per cent growth in expenditure for the challenges. Being an astute or a marginalised Con gress. leader, Kumar knows only too Though a group of state BJP current fiscal year, which too, is ~19,000 crore to ~61,000 crore. This appears used for three specific purposes: To bridge prevalent, or met. For example, local body well that his party like any other leaders does claim of “fighting unprecedented for any state, or the Centre. contradictory, as the Centre's transfers to the revenue deficit, to provide for disaster grants are much higher in an election year. regional party is individual-cen- it alone” in Bihar, it has not been An analysis of the state’s Budget data, states are set to grow slower than before this relief, and to strengthen urban and rural In addition, the state budget also expects tric. In such a setting, it is ap p - taken seriously by the BJP’s maintained by PRS, a think tank, shows that year, according to Union Budget documents. local bodies. the state’s own tax revenue from excise, ears too hard to retain a distinct central leadership. Rajendranath has factored in in his calcul - These funds are one part of the overall It is possible that the grants budgeted by goods and services tax, and value-added tax identity in alliance with a pow- Bihar could be an instruc- ations the highest growth in “grants-in-aid” transfers from the Centre to states, apart from the state government are on the higher side. to grow 30 per cent this year. This is nearly in erful national party like the BJP. tive lesson for regional parties from the Centre. These funds are set to more fiscal devolution, according to the Finance Moreover, these grants are tied funds: They line with the Centre’s ambitious revenue If one looks at the available — that they would survive only than triple this year from 2018-19 — from Commission formula. Grants-in-aid are are transferred only if certain conditions are budgeting. option to Kumar, the situation in the embrace of the BJP, how- looks even bleaker. Lalu Prasad ever stifling it may appear.

but those anti-social elements who per cent, which means for every are disrupting domestic water cusec of water released, only 0.67 Building dams against water theft distribution under local cusecs reach farms. Moreover, the administrative bodies,” Bavaliya computer-controlled system has VINAY UMARJI have laid down the level of told Business Standard. not reached all the micro canals of punishment for water thefts. For Experts say the state’s water the state. The water debate in Gujarat is instance, the Bill on domestic water management and distribution “It is an advanced irrigation meandering into various channels. includes setting up a water efficiency need to improve. management system for computer- After a delayed and deficient appellate authority, which would Y K Alagh, former Union controlled canals but one-third of monsoon, coupled with sub- be the custodian of all water minister and former head of the farmers are yet to get micro-canals normal groundwater tables and sources and have the powers of a Sardar Sarovar Dam project, says embedded in the SCADA system. reservoir levels, created civil court. On the other hand, the the extent and efficiency of the They are still dependent largely on acrimonious spats, two amended Bill on irrigation and drainage Supervisory Control and Data groundwater and local reservoirs,” Bills on water, passed enhances the Acquisition System (SCADA) under said an official. recently in the punishment and fine for the mega dam project, aimed at If the state government data on Assembly, have lent those stealing water computer-controlled water water storage level is anything to go their mite to them. from canals, which, distribution to even micro and sub- by, Gujarat is behind last year’s The Assembly on many argue, happen to micro canals, needs to be levels year-to-date (YTD). July 26 passed the be farmers themselves. enhanced. According to the Narmada, Water Gujarat Domestic Water “The availability of Apparently, the Sardar Sarovar Resources, Water Supply and Supply (Protection) Bill, water is dwindling every dam’s Narmada Planning Group Kalpasar Department data, as of 2019, and the Gujarat day and it is the need of document “Planning for August 2, 2019, gross water storage Irrigation and Drainage STATE the hour to conserve and PM Narendra Modi during the inauguration of a section of the Sardar Sarovar project in 2016. Prosperity”, published by the levels in North Gujarat, Central (Amendment) Bill, 2019. save as much as possible The project is the lifeline of Gujarat PHOTO: PTI government when Alagh was Gujarat, and Saurashtra, excluding While the state SCAN and use the available vice-chairman of the project, had Sardar Sarovar dam, are short by government says the water judiciously, or else to protect the water infrastructure. provide water for domestic use and against industry for water thefts, laid out a plan to ensure 321 million cubic metres (mcm), amended Bills have GUJARAT some areas in the state “Is it not the duty of the irrigation. On its part, the state whereas so many cases have been computer-controlled last-mile 232.78 mcm, and 743.24 mcm, been passed with the may not have enough for government to ensure that the government is wasting water on registered against farmers,” said water distribution. However, respectively, compared to the same only aim of reducing water thefts in irrigation and domestic use,” infrastructure meant for the seaplanes and similar projects. The Manish Doshi, spokesperson for experts have argued the SCADA day last year. both domestic water supply and Gujarat Energy Minister Saurabh beneficiaries is not destroyed or two pieces of legislation are aimed the Gujarat unit of the Congress. system's efficiency is nearly less This puts farmers, especially in irrigation, others, including Patel had said while tabling the misused?” Patel asked. at hiding the government's failures According to the state minister than half, for want of a the Kutch, North Gujarat, and opposition parties and farmers, are Gujarat Irrigation and Drainage However, parties in the in water management and for water, Kunvarji Bavaliya, contractual agency to run it. Saurashtra regions in the quandary wary of the legislation's intent. (Amendment) Bill, 2019. opposition have been crying foul. distribution and to create an however, it is not the government’s According to the project because rain in these regions has The two amended pieces of However, Patel stressed the “The government has brought environment of fear. In fact, from aim to harass anyone. “It is not our document, the SCADA system’s not been optimum, forcing them to legislation, among other things, responsibility of the government in the legislation after failing to 2001 to 2019 no action was taken aim to harass citizens or farmers efficiency has been assessed at 67 steal water.

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official MUMBAI | MONDAY, 5 AUGUST 2019 ECONOMY & PUBLIC AFFAIRS 19 . < We’re under house arrest: Omar, Mehbooba Crucial Cabinet meet today Army asks Pak military to take back bodies of their personnel Shah holds security meet Security beefed up at vital installations PRESS TRUST OF INDIA been visible outside shops Srinagar, 4 August and fuel stations. Former India all-rounder Kashmir remained on the edge Irfan Pathan, the mentor of on Sunday as authorities Jammu and Kashmir state stepped up security deploy- teams who was in Srinagar to ment at vital installations and oversee the trials for the U-16 sensitive areas amid height- (Vijay Merchant Trophy) and ened terror threat and flare up U-19 (Cooch Behar Trophy) of hostilities with Pakistan squads, has left Srinagar, along along the Line of Control (LoC). with the young players. After the Jammu and Various educational insti- Kashmir administration cur- tutions also directed their stu- tailed the Amarnath Yatra dents to vacate hostels. and asked pilgrims and Additional paramilitary tourists to leave the valley at forces, which arrived here last the earliest on Friday, anxious week, have been deployed residents continued to throng across the city and in other markets to stock on essentials vulnerable areas of Kashmir and serpentine queues have Valley, the officials said.

Railway stations witnessed a rush in Kashmir on Sunday as visitors, students and many officials left the place following directions from the authorities. (Right) NC President Farooq Abdullah, PDP President Mehbooba Mufti and other leaders at an all-party meet in Srinagar, hours before some leaders tweeted that they had been put under house arrest PHOTOS: PTI

ARCHIS MOHAN & PTI row. It’s going to be a long night,” offered to return to its Pakistan Congress, Muzaffar Beig (PDP), queues were visible outside New Delhi/Srinagar/Islamabad she said. counterpart the bodies of the Sajad Lone and Imran Ansari shops and fuel stations. Srinagar-Delhi 4 August “To the people of Kashmir, intruders slain during an attack (Peoples Conference), Shah Home Minister Amit Shah we don’t know what is in store in the Keran sector of Jammu Faesal (J&K Peoples Movement) met top security officials on flights: Air India, he Cabinet will meet on for us but I am a firm believer and Kashmir, official sources and M Y Tarigami (CPI-M) Sunday afternoon. Shah met Monday morning and is that what ever almighty Allah said. The attack was mounted attended the meeting. Home Secretary Rajiv Gauba, IndiGo slash rates Texpected not only to take has planned it is always for the by Pakistan’s Border Action Farooq Abdullah said the National Security Advisor Ajit As Amarnath pilgrims and stock of the situation in Jammu better, we may not see it now Team (BAT) and was foiled by meeting agreed that modifica- Doval, Intelligence Bureau chief tourists continue to leave and Kashmir but policy deci- but we must never doubt his the Indian Army. tion, abrogation of Articles 35A Arvind Kumar and Research the Kashmir Valley, Air India sions concerning the state. ways. Good luck to everyone, There has been speculation and 370, unconstitutional and Analysis Wing’s (RAW’s) said on Sunday that it This comes as NC’s Omar stay safe and above all please that the Centre is considering delimitation or trifurcation of Samant Goel. had reduced its maximum Abdullah and PDP President stay calm,” Omar tweeted. trifurcating the state. After the the state would be an aggression The BJP has issued a whip fare on flights connecting Mehbooba Mufti tweeted that “How ironic that elected rep- meeting of the Kashmir-based against the people of Jammu, to its members in the Rajya Srinagar to Delhi to they believed that they had been resentatives like us who fought political parties, National Kashmir and Ladakh. Sabha for the rest of its three sit- under ~7,000. "Air India put under house arrest. for peace are under house arrest. Conference patron Farooq The resolution was tings this week. The Rajya Sabha has further reduced the “I believe I’m being placed The world watches as people & Abdullah read out a resolution it described as “Gupkar would take up a Bill on Monday fare from ~9,500. It is under house arrest from mid- their voices are being muzzled adopted. It said the parties have Declaration” as the meeting was that Shah would introduce, to holding maximum fare at night tonight & the process has in J&K. The same Kashmir that decided to send delegations to held at Abdullah’s residence in provide 10 per cent quota for ~6,715 for Srinagar-Delhi already started for other main- chose a secular democratic meet the president, the prime the Gupkar area of Srinagar. The economically weaker sections route and at ~6,899 Delhi- stream leaders. No way of know- India is facing oppression of minister and leaders of various meeting, scheduled at in jobs and education. Srinagar route till 15th ing if this is true but if it is then unimaginable magnitude. Wake political parties to apprise them Mehbooba’s residence, was held On Sunday, Pakistan Prime August," an Air India I’ll see all of you on the other up India.” tweeted Mehbooba about the consequences of any at Abdullah's residence due to Minister Imran Khan chaired a spokesperson said. side of whatever is in store. Allah Mufti a little after midnight. attempt to abrogate Article 370 his ill-health. meeting of the National Security Low-cost carrier IndiGo save us,” tweeted Omar Regional parties in Jammu and Article 35A of the After the Jammu and Committee to hold consulta- also said it would cap fares Abdullah. and Kashmir on Sunday unani- Constitution or carry out delim- Kashmir administration cur- tions with the country’s top civ- at ~6,000 for travel for flights Mehbooba tweeted that she mously resolved to fight any itation of constituencies or tri- tailed the Amarnath Yatra and il and military leadership over travelling up to 500 km from was hearing reports about inter- attempt to abrogate the consti- furcating the state. asked pilgrims and tourists to the sudden spike in tensions the Srinagar airport till net being snapped soon includ- tutional provisions that guaran- Apart from Abdullah, leave the valley at the earliest on with India. In a series of tweets, August 10. For travel up to ing cellular coverage. “Curfew tee the state special status or any Peoples Democratic Party’s Friday, anxious residents con- Khan said that it's time for US 501-750 km from the airport, passes being issued too. God move to trifurcate the state. (PDP’s) Mehbooba Mufti, Omar tinued to throng markets to President Donald Trump to the fare would be capped at knows what awaits us tomor- The Indian Army on Sunday Abdullah, Taj Mohiuddin of the stock essentials and serpentine mediate on the Kashmir issue. ~7,500, IndiGo said. PTI

Make in India Pay up interest for NO RELIEF! IMD WARNS OF MORE RAIN IN MUMBAI boost? Tenders worth ~25K cr delay in paying were modified Government tenders worth GST refunds: HC over ~25,000 crore were either cancelled or modified INDIVJAL DHASMANA is entitled to receive interest and re-issued after the New Delhi, 4 August on such delayed payment. Department for Promotion of However, the authorities Industry and Internal Trade The Gujarat High Court has — the revenue department, (DPIIT) stepped in to change directed the authorities to the Central Board of Indirect their conditions in order to pay interest for delay in pay- Taxes and Customs (CBIC) promote “Made in India” ing GST refunds. and the GST Network — sub- goods, a top official said. The authorities were mitted that there was no “The department is tak- asked to pay the interest at express provision made for ing every step for effective the rate of nine per cent per entitlement of interest to the implementation of public annum. firm and hence there was no procurement order, 2017, to Saraf Natural Stone, a merit in this petition. promote Made in India prod- partnership firm, had filed a The high court held that ucts,” the official said. claim of GST refund. the position of law is quite The government issued However, there was substan- well settled wherein the pro- the order on June 15, 2017, to tial delay by the authorities visions relating to interest on promote manufacturing and in granting of refund. delayed payment of refund production of goods and serv- Following have been consistently ices in India and enhance this, the firm held as beneficial and income and employment in approached non-discriminatory. the country. A tender worth the high Hence, it ~8,000 crore was withdrawn court by said the and re-issued with modified way of writ authori- conditions after the interven- and demanded ties are tion of the DIPP. The project interest from the liable to pay was related with setting up of authorities for the simple interest on a urea and ammonia plant for delay. It submitted that the the delayed payment at gasification. Similarly, a ten- authorities are required to the rate of nine per cent per der for procurement of train grant a provisional refund of annum. set coaches was cancelled as 90 per cent of the amount Harpreet Singh, partner at the tender had certain claimed within seven days of KPMG, said, “This is an restrictive conditions which filing of the claim. important development as were discriminatory against The firm said the author- often pending refund claims domestic manufacturers and ities have not provided any adversely impact working favoured foreign players. The reason for the delay and it capital of exporters.” project cost was ~5,000 crore. was never in receipt of any He said the ruling should A tender for ~8,135 crore deficiency notice, which open doors for claimants was modified with revised could have transpired such a who can now rightfully Four people were killed on Sunday as rain continued to batter Mumbai. An IAF helicopter, on a eligibility criteria for setting delay. demand interest from sortie to rescue flood-affected people in Maharashtra’s Palghar district, had to return due to up of a 3x800 Mw project. A It further submitted that authorities where there has heavy downpour and poor visibility. Train and flight services were disrupted and several power tender worth ~3,000 crore for the delay has impacted its been a substantial delay for cuts were reported across the city. The Met department has forecast heavy to very heavy rain in Mumbai Metro was also working capital and hence it no fault of the assessee. Mumbai and its suburbs on Monday PHOTO: PTI modified. PTI Win over those who didn’t vote for you: Modi to MPs

PRESS TRUST OF INDIA to give ample time to their families The prime minister asked the MPs earlier as Gujarat chief minister and New Delhi, 4 August but shun “parivarvaad” (dynasty pol- to focus on people's participation and now as prime minister. itics), they said. pro-people policies, while overlook- He asked the MPs to stand in Prime Minister Narendra Modi on Parliamentary Affairs Minister ing politics, in the interest of their queues with the public and speak Sunday asked BJP MPs to shun any Pralhad Joshi told reporters that Modi constituencies and the nation, Joshi appropriately. negativity and work with a positive asked MPs to not entertain negative said. Modi chose to sit among the MPs mindset so as to win over even those thoughts about their rivals or those A BJP MP said Modi spoke like a in one of the back rows during the who did not vote for the party. who did not vote for them. “guardian” and touched on issues meeting. In his address at the concluding He asked them to work and con- related to political, ideological as well BJP vice-president Vinay session of the two-day training pro- duct themselves in such a way that as personal aspects of their lives. Sahasrabuddhe conducted a session gramme for over 380 party lawmak- even those who did not vote for them Turning his attention to the next on self-development for the lawmak- ers, he also referred to the next Lok are won over. Lok Sabha polls, he asked MPs to ers while Defence Minister Rajnath Sabha elections, scheduled for 2024, “You should work for everybody's identify booths where they did not Singh spoke on the party's contribu- and told them to nurse their con- welfare. You should be positive and fare well and work to strengthen their tion to the country. stituencies in a way that they can shun any negative thoughts about presence there. Shah, who is the Union Home retain them on the strength of their keep their personal and professional those who did not vote for the party. His speech, the sources said, also Minister, did not attend the meeting work and conduct, sources said. conduct above board, according to Looking at your work and conduct, focused on proper conduct by MPs, as he remained busy with official He cited his own clean record to MPs who attended the meeting. they will get closer to you,” he quoted and Modi in this context mentioned work related to Jammu and Kashmir, urge the members of Parliament to The prime minister asked the MPs Modi as saying. his own long tenure in government, the sources said.

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams https://t.me/TheHindu_Zone_official 20 MUMBAI | MONDAY, 5 AUGUST 2019 1 >

N AROUND THE WORLD N EARTH AS SEEN BY CHANDRAYAAN - 2 Rising incidents of 30 dead in US mass shootings mass shootings 522 people dead in 20 people dead, 26 injured in About 13 hours after Walmart mass shootings this year in the US and 2,040 a mass shooting at a Walmart incident, another shooting injured, according to store in Texas city of El Paso killed nine in Dayton, Ohio the data by Gun Violence Archive  A 21-year-old gunman armed with an assault rifle opened fire inside a SUNDAY'S ATTACK was the Walmart store in Texas, 21st mass killing in El killing 20 people and Paso this year, according wounding 26 others to a database compiled by the Associated Press,  Police are investigating Northeastern University In a series of tweets, Isro shared the Earth’s pictures clicked by LI4 camera of Chandrayaan-2’s whether the attack, and USA Today which happened a few Vikram lander on Saturday. The pictures show the Earth in different hues PHOTO: ISRO/TWITTER miles from the PRESS TRUST OF INDIA country’s second Moon After the launch of US-Mexico border, Several law enforcement New Delhi, 4 August mission launched a Chandrayaan-2, there were was a hate crime agencies respond to an active fortnight ago. several pictures which were  In the second shooting shooter on Saturday at a The Indian Space Research The pictures were cap- claimed to have been taken incident, which Walmart store in El Paso Organisation (Isro) on tured by L14 camera on by it. However, the space happened about 13 Sunday released the first set board Chandrayaan-2. The agency had said the images hours after the first one, of pictures of the Earth cap- pictures show the Earth in were not taken by tured by Chandrayaan 2, the different hues. Chandrayaan-2. 9 people were killed and 26 injured in Ohio. The shooter was gunned DRDO test-fires down by security forces two quick reaction  The El Paso attack was surface-to-air missiles the second shooting in The Defence Research and less than a week at a Development Organisation Walmart store in the US conducted two back-to-back flight tests of its state-of-the- art quick reaction surface-to- CCTV images said to be air missiles (QRSAM) against of the gunman on the live aerial targets from a base Walmart premises Police at the scene of the mass shooting in Ohio AP in Odisha on Sunday. PTI

Iran seizes third foreign ship in less than month Iran has seized a foreign tanker in the Gulf, state media said on Sunday, in what would be the third such seizure in a month. The Islamic Revolutionary Guard Corps “seized this ship around Farsi Island which was carrying around 700,000 litres of smuggled fuel”, said a Guards statement quoted by the official news agency IRNA. Seven foreign crew were arrested in the operation carried out on Wednesday night, said Fars news agency, which is considered close to the Guards. AFP/PTI

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