https://t.

me/TheHindu_Zone_official
THURSDAY, 18 JULY 2019
24 pages in 1 section www.business-standard.com
MUMBAI (CITY)
~8.00
VOLUME XXIII NUMBER 240

THE MARKETS ON WEDNESDAY Chg#

Sensex 39,215.6 84.6
Nifty 11,687.5 24.9 BACK PAGE P24 COMPANIES P3
Nifty Futures* 11,675.8 11.7
Dollar
Euro
~68.8
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~68.7**
~77.1** LOUIS VUITTON’S ARNAULT UNIQLO TO DEBUT WITH
TOPPLES GATES AS 2ND RICHEST THREE STORES IN INDIA
Brent crude ($/bbl)## 63.9## 64.2**
Gold (10 gm)### ~34,452.0 ~159.0
*(July) Premium on Nifty Spot; **Previous close;
# Over previous close; ## At 9 pm IST;
### Market rate exclusive of VAT; Source: IBJA PUBLISHED SIMULTANEOUSLY FROM AHMEDABAD, BENGALURU, BHUBANESWAR, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI (ALSO PRINTED IN BHOPAL), NEW DELHI AND PUNE

PAK MUST REVIEW

JADHAV'S DEATH
SENTENCE, SAYS ICJ
Relief for banks Jalan panel proposes ‘nominal’
transfer of RBI funds to govt
as govt clears
In a major victory
for India, the
International
Court of Justice
Transfer to be done in REAPING DIVIDENDS

changes to IBC
on Wednesday
ruled that
Pakistan must
a period of 3-5 years Surplus capital transferred byRBI to govt ( in ~cr)
review the death 2016-17 65,876
sentence for SOMESH JHA
Indian national New Delhi, 17 July 2017-18 40,659
Kulbhushan
Jadhav, who has been sentenced to death Secured lenders set to get preference; resolution The Union government may not get the
2018-19* 68,000
by a Pakistani military court. Jadhav, 49, a windfall gain it was expecting from the
retired Indian Navy officer, was sentenced gets maximum 330 days including litigation Reserve Bank of India (RBI) reserves as
2019-20** 90,000
*Includes interim dividend transfer of ~28,000 crore
to death by the Pakistani military court on the Bimal Jalan committee, tasked with #Finance ministry's expectations from the RBI
charges of "espionage and terrorism" after
a closed trial in April 2017. His sentencing
RUCHIKA CHITRAVANSHI & ISHITA AYAN DUTT
New Delhi/Kolkata, 17 July
KEY AMENDMENTS reviewing the central bank’s economic
capital framework, has proposed a “nom-
Sources: Rajya Sabha, finance ministry

evoked a sharp reaction in India. 24 > | Dissenting financial creditors inal” transfer of surplus to the central dend annually,” a person close to the The report would likely include a dis-

I
n a big relief for banks, the govern-
HAFIZ SAEED ARRESTED FOR ment is bringing in multiple reforms
FINANCING TERRORISM P24 to the three-year-old Insolvency and
Bankruptcy Code (IBC), providing
clarity about preference to secured lenders
RESULTS CORNER over operational creditors, to be applicable
retrospectively; strict timelines for the res-
YES Bank net olution and litigation process; and pow-
and operational creditors to
accept liquidation value or sum
offered in the resolution plan
| Overall deadline increased to
330 days, including litigation
period
| Commercial consideration to
government in a phased manner, accord-
ing to a source in the know.
“The report has proposed a formula
for a nominal transfer of a portion of the
RBI’s reserves to the central government
in a period of three-five years. This is in
line with the current practice being fol-
lowed by the RBI for transferring divi-
development said.
The person said the panel members
might “not be unanimous” on the sug-
gestions the committee made. These will
be submitted to RBI Governor
Shaktikanta Das “in a few days”. The
RBI’s central board, headed by Das, will
take up the matter.
sent note by Finance Secretary Subhash
Chandra Garg, who is the government’s
representative on the panel.
The committee has recommended a
periodic review of the RBI’s economic
capital framework, according to the
source.
Turn to Page 23 >

profit falls 91% ers of the committee of creditors (CoC).

Lenders and legal experts say that the
drive distribution of sums
realised, and within the
in Q1 to ~114 cr amendments, especially regarding the

Review Budget plan for surplus transfer: Sebi chief

YES Bank reported a 91 per cent decline in
its net profit at ~113.8 crore in the April-
June quarter (Q1) of 2019-20 (FY20)
because of a mark-to-market
provisioning of ~1,109 crore for bad loans
and decline in non-interest income. In
the same quarter of the last financial
year (2018-19 or FY19), the bank’s profit
was ~1,260 crore. The bank had posted its
first-ever quarterly loss in the January-
March quarter of FY19 at ~1,507 crore. 20 >
WIPRO Q1 NET PROFIT UP
12.5% AT ~2,388 CR
ON
THURSDAY
SPECIALS
PERSONAL FINANCE:
File long-term capital gains
from this year 18 >
The calculation process is tricky.
However, there are service providers
available at a price. TINESH BHASIN writes
OPINION: Sovereign bonds:
The big picture 9>
India must work on a road
map towards capital account
openness, in which sovereign
bond is back-loaded, not
front-loaded.
YV REDDY writes
ECONOMY & FINANCE: And
the wheel turns full circle 4 >
50 years after 14 state-run banks were
nationalised, the debate is on whether
we should reverse it. RAGHU MOHAN writes
STRATEGY: Grofers brands
the last mile 22 >
CARE sends MD & CEO
Rajesh Mokashi on leave
After ICRA, the board of CARE Ratings has
asked its MD & CEO Rajesh Mokashi to go on
indefinite leave, pending completion of
the examination of an anonymous
complaint received by Sebi in connection
with the IL&FS case. The rating agency has
appointed Executive Director (Ratings) T N
Arun Kumar interim chief operating officer.
powers of CoC
treatment of operational creditors, will
help end the uncertainty around recovery | Liquidation after formation
for the financial creditors of Essar Steel. of CoC but before information
“The amendments aim to fill critical memorandum's preparation SHRIMI CHOUDHARY & SOMESH JHA amendment to the Sebi Act, through the remained unanswered.
gaps in the Code and clarify the intent of gets nod New Delhi, 17 July Finance Bill, could have waited until the The Sebi chairman is learnt to have
the law,” Union minister Piyush Goyal said Council's final decision. met Finance Minister
| Comprehensive restructuring,
during the Cabinet briefing on Wednesday. Securities and Exchange Board of India Tyagi argued on the ration- Nirmala Sitharaman earlier
including M&A, as part of the In a letter to the
Addressing one of the biggest criticisms (Sebi) Chairman Ajay Tyagi has written to ale for the regulator keeping this week on the issue.
resolution plan allowed finance ministry,
of the IBC, the Cabinet also approved set- the finance ministry, seeking a review of a reserve fund and its impor- “Two provisions — one
Tyagi said the
ting strict timelines for the corporate insol- | Approved resolution plan will the Budget proposal that mandates trans- tance in protecting the inter- related to the surplus transfer
proposed move
vency resolution process. From the earlier be binding on central and state ferring 75 per cent of the market regula- ests of investors.
would affect the
and the other related to seek-
time limit of 270 days set only for the CoC government tor's surplus funds to the central govern- The move has also been ing prior approval from the
functioning of
to approve the plan, the government has authorities ment, it is learnt. opposed by the Sebi finance ministry for raising
extended the deadline to 330 days includ- In a letter to the ministry on July 10, Employees Association
Sebi as well as the
expenses — haven’t gone
securities market
P2 ing the litigation and judicial process. Tyagi said the proposed move, part of the (SEA), brokers' forum, and down well with the markets
A senior State Bank of India (SBI) Finance Bill, 2019, would affect the func- many other market partici- regulator. The provision is
official said the bank would pursue tioning of Sebi as well as the securities pants, saying it potentially amounts to an under review,” said an official, request-
its petition against a National market. He said the proposal was already infringement of the independence of the ing anonymity.
Company Law Appellate being discussed by the Financial Stability regulatory body. Another argument from Sebi's side is
Tribunal (NCLAT) ruling in the
Essar Steel case, in the Supreme
and Development Council (FSDC), regu-
lator for the financial sector, and that the
An e-mail sent to Sebi did not elicit a that the new provision is like an addi-
response. A text message to Tyagi tional tax.
Turn to Page 23 >
Court. “An amendment doesn’t
make it a law immediately.
Hopefully, the SC will take cog-
nizance of today's amendment,”
the official said. The plea will come
up for hearing on July 22.
Turn to Page 23 >
CENTRE MAY BAT FOR 15TH FINANCE PANEL
FINANCIAL CREDITORS IN SC GETS EXTENSION P4
IndiGo headed for a stormy
board meet tomorrow
WHAT TO EXPECT ARINDAM MAJUMDER
New Delhi, 17 July
| Expansion of the
size of the board In normal circumstances, the meeting on July 19
would have been a happy rendezvous between the
| Appointment of
architects of IndiGo. The country’s most profitable air-
woman director line is expected to register its highest profit—more
| Rakesh Gangwal to than ~1,000 crore.
attend the But on Friday, Rahul Bhatia and Rakesh Gangwal
meeting in — the founders of IndiGo — will possibly face
person each other with deep mistrust, which the
| Rahul Bhatia
board chairman, M Damodaran, will attempt
group and
to defuse.
Damodaran has proposed to include at
directors least two of the proposed demands made
may pass a by Gangwal, according to a source in the
resolution to know. The IndiGo board meeting is likely to
question take up the proposal of expanding the size
Gangwal of the board, he said.
Also, appointing a woman director
ILLUSTRATION:
AJAY MOHANTY would be discussed.
Turn to Page 23 >

Investigators may grill banks

on Jet forensic audit closure
CLOSURE THAT WASN'T
| SBI conducted forensic audit of Jet
Airways to ascertain diversion of funds reportwiththeEnforcementDirectorate
| Auditor EY submitted its report on
March 1, pointing out issues of
provisioning and billing
| SBI said the issues were "not substantial" someobservationsmadebyEY(forensic
but sought clarifications from Jet
| On April 23, lenders discussed the
airline's view and decided to treat it
"closed" after "responses provided
were largely adequate in nature"
SOMESH JHA & SHRIMI CHOUDHARY programme. The SFIO recently
New Delhi, 17 July questioned Jet founder Naresh Goyal
after the Ministry of Corporate Affairs
Investigativeagenciesexaminingthe (MCA) referred the case to it.
booksofJetAirwaysarelikelyto A letter by SBI Chief General
seekanexplanationfromtheState Manager Partha Sen to the bank’s chief
BankofIndia(SBI)-ledconsortium vigilance officer on May 22 stated that
afterthelenders“closed”theforensic the forensic audit report by EY,
auditreportonthebasisofthe“more- submitted on March 1, “had pointed to
than-adequate”responsesbythe
groundedairline.
certain issues of provisioning, billing,
and related-party payments, which
“Bankshavesharedtheforensicaudit though not substantial, required
clarifications from the company”.
(ED)andtheSeriousFraudInvestigation “The matter was subsequently
Office(SFIO).Sincethelendersdecided discussed in a lenders’ meeting on April
toclosetheforensicauditreportdespite 23, 2019, and it was felt that the
responses provided (by Jet Airways) so
auditor),anexplanationwillbesought far were largely adequate in nature and
fromthem,”anofficialsaid. accordingly, the lenders decided to
The SFIO is probing the Jet accounts treat the forensic audit report as
for allegedly violating the Companies closed,” Sen said in the communique,
Act, while the ED is looking into the which was reviewed by Business
stake sale of the carrier’s loyalty Standard. Turn to Page 23 >

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams


2 COMPANIES
STOCKS > DCB Bank
IN THE NEWS
231.80
Jul
* OVER PREVIOUS CLOSE 10
> .
IN BRIEF
Premji helps create India’s
newest tech unicorn Icertis
Wipro Chairman and billionaire Azim Premji (pictured). Existing
institutional investors including B Capital Group, Cross Creek,
Eight Roads, Ignition Partners, Meritech Capital Partners and PSP
Growth participated in this round. It would use the funding to
scale up its operations globally. It would also invest more in
technologies such as artificial intelligence and blockchain. The
US-based company was founded by tech industry veterans
Samir Bodas and Monish Darda in 2009.
ICRA downgrades
Reliance Power
to default
Long-term rating for Reliance
Power has been downgraded
to default, ICRA said on
Wednesday. The downgrade
follows the lenders signing an
inter-creditor agreement.
“The rating which was ‘C’
Issuer Non-Cooperating has
been downgraded to ‘D’ on
confirmation of delays in debt
servicing,” ICRA said. The
agency added,” The liquidity
profile of the firm, along with
its arms, continues to remain
stretched as evident from
considerable decline in the
net cash accruals in FY18-19
and net worth erosion
due to impairment of assets.”
BS REPORTER<
Correction
AION Capital did not say that
it was not interested in DHFL
stake, as indicated in the
headline of a report yesterday
(Wednesday). What the
company had said was that it
did not have any comments
to offer on our report. The
error is regretted.
NCLAT suggests terms on fresh FMCG GROWTH SLOWS DUE TO LOWER CONSUMPTION
bidding for Jaypee Infratech goods
The ~3-trillion fast-moving consumer
AASHISH ARYAN
New Delhi, 17 July
With banks having rejected
state-owned NBCC India’s plan
for Jaypee Infratech, the
National Company Law
Appellate Tribunal (NCLAT)
on Wednesday suggested
terms for fresh bids to be con-
sidered for the latter. One of
the primary conditions, the
appellate tribunal observed,
should be that the builder-buy-
er agreements that were origi-
nally signed must not be
changed.
“All allottees will be given
flats according to their builder-
buyer agreements. The con-
tract terms cannot be changed.
If the allottee is not present,
the committee of creditors
(CoC) will decide on how the
flat is to be adjusted,” said a
two-member Bench of the
NCLAT, led by Chairperson
Justice S J Mukhopadhaya.
Other than this, the land
attached to the buildings and
the common area amenities
will also remain the allottees,
said the NCLAT. Inviting fresh
MakeMyTrip gears up to cash in on long weekends
NEHA ALAWADHI
New Delhi, 17 July
Planningtogoonashortholidayona
longweekend?MakeMyTrip(MMT)
willsoonofferconsolidated
packagesallowingyoutobooka
holidayin“justfourclicks”.
Analysingpopularsearchtrends
onitsapp,MMThascuratedalistof
domesticdestinationsonecandrive
tointhree-fourhours,or
internationalonesthatdonot
requireavisaorprovideoneon
arrival.
“Werealisedtherewasamajor
gapinthemarketwhenpeopletryto
makebookingsforlongweekends.
Manypeopledon’tevenrealisethat
thereisalongweekendcoming.By
thetimetheydo,itistoolate.Mostof
usaretime-starvedandmostofus
don’thavethetimetogetintodetails.
Soplansfallthroughbecausethereis
noreadyreckoner.With‘Weekend
https://t.me/SSC4Exams
250 Q1 loan growth at 13%
238.80
230 YoY, slowest in the
past five years
210
199.65 190
~199.65 CLOSE
2019 Jul Jul
16 17 16.39% DOWN*
Icertis, which provides
contract management
software to customers such
as planemaker Airbus and
pharma giant Merck,
announced the closing of a
$115-million Series E round.
The funding made it India’s
latest unicorn. The financing
round was co-led by
Greycroft and Premji Invest,
the family investment arm of
PEERZADAABRAR<
FDA faults Strides
Pharma for records
in scrapyard
TheUSFoodandDrug
Administration(USFDA)has
issuedawarningtoStrides
PharmaScienceastherewere
discardedCGMP(currentgood
manufacturingpractice)
documentsandrecordsinthe
scrapyardofitsplantin
Puducherry.Thewarningissued
throughalettersentonJuly1
saidthequalitysysteminthe
facilitydidnotensurethe
accuracyandintegrityofdatato
supportthesafety,
effectiveness,andqualityof
thedrugs. PTI<
GoAir hires ex-Airbus
executive Miranda
Mills as COO
TheWadiagroup-runGoAir,
whichhasbeenheadlesssince
February,hashiredindustry
veteranMirandaMills,aformer
executiveofAirbusandRolls
Royce,asitschiefoperating
officer.Millswillbeheadingthe
operationsofthethatis
reportedlyplanninganinitial
sharesalethisyear. PTI<
market is facing a slowdown as
SteadyslowdowninFMCGgrowth
bids would mean that the door
would be open for all and not
just a select few, said the appel-
late tribunal. Apart from this, it
also asked the banks, led by
IDBI Bank, to file an affidavit
listing out new terms and con-
ditions if a fresh round of bid-
ding was to be conducted.
The NCLAT will also con-
sider on July 22, the next date
of hearing, the plea of Jaypee
Infratech’s lenders to exclude a
period of nearly 250 days from
being considered a part of the
Corporate Insolvency
Resolution Process.
This period of nearly 250
days, between September 17,
2018 and June 4, 2019, was tak-
en by the National Company
Law Tribunal (NCLT) to decide
on the voting rights of the
homebuyers.
A two member bench of
NCLT had given split opinion
on whether homebuyers in the
Jaypee Infratech case should
be considered a part of the CoC
and whether they should be
construed as one or a be seg-
mented class-wise, for compu-
tation of voting share.
Getaways,’wewilltrytodoyourhard
workandheavyliftingandserveiton
aplatter,”saidVipulPrakash,chief
operatingofficer,MMT.
MakeMyTriphasdesigned400
https://t.me/TheHindu_Zone_official
MUMBAI | THURSDAY, 18 JULY 2019
> Multi Commodity Exchange of India
860 Q1 net profit at ~44 crore,
> YES Bank
105 Q1FY20 gross NPA at
> Tata Elxsi
865 Q1 net profit down
> Strides Pharma Science
380 Received warning letter
854.35
842 as against ~7 crore in the
103.90
100 5.01 per cent from 849.30 820 31 per cent to 374.90
377.80
375 from USFDA for
815.70 year-ago quarter 3.22 per cent in Q4FY19 814.95 ~49 crore YoY Puducherry facility
824 93.00 98.45 95 775 370
813.55 742.40 730 366.15 365
806 ~854.35 CLOSE 90 ~98.45 CLOSE ~ 742.40 CLOSE ~366.15 CLOSE
Jul 2019 Jul Jul Jul 2019 Jul Jul Jul 2019 Jul Jul Jul 2019 Jul Jul
10 16 17 5.02% UP* 10 16 17 5.25% DOWN* 10 16 17 8.90% DOWN* 10 16 17 3.08% DOWN*
N IT RESULTS CENTRAL N
Wipro registers tepid ‘It’s continuity and
change at Wipro
revenue growth in Q1
with Rishad at helm’
DEBASIS MOHAPATRA A change of guard is in the offing at
Bengaluru, 17 July information technology (IT) services major
Wipro — founder and Chairman Azim Premji
I
T services major Wipro contin- will step down next month and his elder
ued to witness tepid revenue son Rishad Premji will take over. Chief
growth in the first quarter of the Executive Officer ABIDALI NEEMUCHWALA tells
ongoing financial year owing to Bibhu Ranjan Mishra & Debasis Mohapatra
uncertainty in the macro environ- that a good succession plan will take the
ment apart from delay in closure of company to greater heights and Rishad has
large projects. all the values of his father. Edited excerpts:
Operating margins also dipped
becauseofrisingwagecostandhigh- What changes can be expected at
er expenses due to changing Wipro from July 31 when Rishad
onshore-offshore mix, in spite of the Premji takes over as the new
company reporting forex gains. chairman?
In the quarter ended June 30, the (From left) CFO Jatin Dalal, COO & President Bhanumurthy BM, CEO The succession planning has been
Bengaluru-headquartered compa- Abidali Neemuchwala and Chief Human Resources Officer Saurabh
ny reported a 12.6 per cent rise in Govil in Bengaluru on Wednesday PHOTO: SAGGERE RADHAKRISHNA
going on for a while. It’s a very smooth
transition. So you should not expect least once in a quarter, but operational-
consolidated net profit (at ~2,387.60 that something is going to be very dif- ly he’s not there. He has no executive
crore) compared with the corre- KEY FINANCIALS ferent after July 31. Of course, every responsibility in the company.
sponding period in the previous fis-
cal. Net profit declined 3.86 per cent Revenue (~crore) 14,716 L&T’s A M Naik to new leader brings a new energy to the
company, so I am expecting Growth seems to be missing
on a sequential basis owing to high- YoY change (%) 5.3 lead Mindtree as much more energy in the com- Wipro for quite some time now
er tax outgo apart from lesser rev- QoQ change (%) -194.00
enue from operations. Net profit (~crore) 2,388 non-executive pany. That’s the change we are
looking for.
and Q1FY20 was no different
also. You have seen decline in
Consolidated revenues of the YoY change (%)
firm rose 5.3 per cent year-on-year QoQ change (%)
12.6
-3.9
chairman How do you see Rishad as a successor
growth in most geographies
and verticals. What is holding the
(YoY) basis to ~14,716 crore while it MindtreeonWednesdaysaid to Azim Premji in the company? company back?
Operating margin (%) 18.4
declined around 1.94 per cent on a L&TGroupChairmanAMNaik Rishad has all the values of Mr Premji If you see the numbers on year-on-year
sequential term.
QoQ change (basis points) -60 hadbeenappointednon- and Wipro, and he’s also been part of basis, our BFSI segment has grown by 11
Source: Company
IT services revenue, which con- executivechairmanoftheIT Wipro for almost 12 years now. And, he per cent. I will certainly not read much
tributes more than 95 per cent of its company.Naik'sappointment understands the generation of millen- into the quarterly blip. Consumer (busi-
gross revenues, witnessed a sequen- enues grew 10.6 per cent YoY on con- issignificantastheL&Tbosswas nial. So there’s a lot of continuity in ness unit) has grown about 8 per cent.
tial decline of 0.7 per cent at $2.038 stant currency term, it was 12.4 per seenasthekeypersondriving terms of basic values and there’s also a We have a large engagement which was
billion in constant currency terms. cent for Infosys in the quarter under thetakeoverattempt.The lot of new thinking based on the gener- expected to ramp up but it is taking lit-
On a YoY basis, it grew 5.9 per cent. review. “We had a slower start to the companyreportedasharpdrop ational shift… it’s a combination of con- tle longer. Wipro has shown double dig-
The constant currency growth num- year than expected, though it (IT initsnetprofitforthefirst tinuity and change. it growth in the US. That way, the areas
bers were arrived at after adjusting services revenue growth) remained quarterofFY20,missingStreet on which we are focussed on have
the impact from the company’s within our guided range of -1 per estimates.TheITfirmon What sorts of change? shown growth. Our client mining efforts
divestment of its hosted data centre cent to +1 per cent for the quarter,” Wednesdayreported41percent It’s not any sudden change but in terms are showing dividends with growth in
business along with Workday and said Abidali Neemuchwala, chief dipinnetprofitonYoYbasisto of new thinking, on a long-term basis. $100 million clients (Wipro added 3
Cornerstone businesses. executiveofficer&executivedirector ~92.7crore,whileitsrevenues It’s around technology — how to use $100 mn client in the quarter).
IT services revenues of $2.038 bil- at Wipro. “Q1 typically is a weak grew12percentto~1,834.2crore technology and invest in technology Similarly, we are focussed on BFSI, in
lion was below Bloomberg estimates quarter for us and we entered the forthequarterendedJune30. because they are changing so fast. which we have historically under pen-
for the quarter. It had pegged the fig- quarter with macro uncertainties,” Aftertheexitofitsco-founders, etrated. Now we are gaining market
ure at $2.16 billion. Wipro's constant Neemuchwala added. thesharepriceoftheITfirmlost Will you miss the presence of Azim share in this space. So, over time, we
currency growth numbers were also For the second quarter, Wipro aboutaquarterofitsvaluein Premji to seek the guidance from, on have prioritised our growth and are the
lower when compared with larger predicted its revenue to be 0-2 per thelastfortnight. DEBASIS daily basis? taking the path that we have chosen.
peers like Tata Consultancy Services cent, translating into $2.039 billon MOHAPATRA & ROMITA MAJUMDAR He’s there on the board and he’s the
(TCS) and Infosys. While TCS’s rev- to $2.080 billion for the period. founder chairman. So he will be there at More on business-standard.com
IndiGopromoters
Volumegrowth Price-ledgrowth
pulledupforpoor
boardattendance
lower consumption in rural market (%YoYgrowth)
affected retail offtake and brought rural
growth on a par with that in urban Value growth#
16.2 15.7 13.4 10.0
areas. Further, tough market conditions SURAJEET DAS GUPTA
have hurt small manufacturers, who, in 3.0 3.8 New Delhi, 17 July
turn, have contributed significantly 3.6
(about 50%) to the sliding growth in Making a case for increasing
the sector. A drop in India’s GDP 3.8
13.2 11.9 9.9 the number of directors, espe-
growth, backed by lower spending by 6.2
cially the independent ones, on
households, and concerns over a spike the IndiGo board, proxy advis-
in inflation rate may pull the market ory firm IiAS has pointed out
Jul-Sep Oct-Dec Jan-Mar Apr-Jun that the current board is
further down. ARNAB DUTTA 2018 2019
“silent” and its “ability to pro-
tect the company from its pro-
moters is limited”.
Subdued growth inrural market Poor growth in small & medium firms Fewer number of small The firm has criticised the
contributed 57% to slowdown contributed 67% to overall slowdown manufacturers entering promoters’ low engagement in Attendance at the promoters’
Volumegrowth Price-ledgrowth (%YoYgrowth) Large(revenue>~600cr) Medium(revenue~100-600cr) marketdue to slowdown board meetings, saying this is board meeting was less than
Small(revenue<~100cr) Newentrants Exits less than acceptable and cause 40% in 2015-16, according to
Value growth# growth(in,000)
for concern. Attendance at the proxy advisory firm IiAS
14.1 9.7 20.0 10.3 27
Net gain** promoters’ board meeting was
3.7 24 2.8 0.2 less than 40 per cent in 2015-16, independent directors would
according to IiAS. also provide checks and bal-
3.2 19
13 14 13 13 12 13 5.8
This improved only slightly ances to the control rights that
10 to 63 per cent in 2017-18 as dif- the promoters have embedded
3.3 4.4 10 4.6 ferences between the two fac- in the Articles of Association.
10.9 16.3 7
6.4 tions began to simmer, despite The promoters — Rahul
5.9 7.4 6.0
the Kotak committee recom- Bhatia of InterGlobe Enterpri-
Jul-Sep Apr-Jun Jul-Sep Apr-Jun mending a harsh criterion for ses (IGE) and Gangwal — are
2018 2019 2018 2019 Apr-Jun Apr-Jun reappointing absentee direc- in dispute, with the latter
Jul-Sep Oct-Dec Jan-Mar Apr-Jun
2018 2019 tors. This shows the promoters questioning the former’s cor-
Urban (63%)* Rural (37%)* 2018 2018 2019 2019
**Net gain= new entrants-exits controlled the business and the porate governance standards,
#Value growth= Volume growth + price-led growth; *Contribution of the market to the total FMCG market in India Source: Nielsen FMCG Growth Snapshot board had a limited role, IiAS apart from raising issues on
says.Itpointsoutissuesonrela- relate-party transactions.
ted-party transactions, raised Bhatia has said his partner
by promoter Rakesh Gangwal, wants more control.
might not be material, but sta-
keholders will be wary of giving
IndiGo their money just yet —
they would want to know who
IiAS says the allegations of
due process not being fol-
lowed in related-party trans-
actions carry momentum,
whichwillstartshowinguptwo four days. wins this battle before increas- considering the composition
weeksbeforealongweekend. Ifthejourneydoesnotincludea ing their exposure. So, pur- of the IndiGo board and its
“It(theoffering)isdomesticand flight,MakeMyTripwillprovidetwo chases of new aircraft, engine board committees. Even so,
international.Itcanbetwo,threeor options—self-drivingoraninter- replacements, and any other there is an argument that they
fournights.Weexpectmostofthe citycabthroughtheapporportal. material expansion might be might not be material, given
bookingstobe(for)threeorfour Dependingonwhetherauserselects delayed. Investors might not be the size of the airline and the
nights.Fromeachofthecitieswewill todrivethemselvesortakeacab,the as concerned with related-par- fact that the Annual Reports
haveroughly30-40choicesandthey priceofthepackagewillbedecided. ty transactions as with poten- (for FY16, FY17, and FY18) have
willallbedifferent.Everythingwill Tomapthedestinationsbeing tial delays in value creation. confirmed that these were on
bewithina2-hourflightora5-hour offered,MakeMyTriplookedat The proxy advisor has an arm’s length basis. The
cabjourney.Typically,itwillbeflight historicaldata.“Welookedatlasttwo pointed out that expanding the FY17 and FY18 reports have
(orcab),ahotelandoneattractionor years’searchdataonourapp.Ifyou boardcouldallowthecompany specified that the related-par-
adventure,”saidPrakash. seelastAugust,wecheckedsearches to distance itself from the pro- ty transactions were reviewed
For example, if the user wants to forwhichareaswentup,”said moters’ dispute. With more and approved by the audit
take a trip between Delhi and Prakash. teeth, the board can give its committee, as required by the
Rishikesh, Weekend Getaway will Tokeepitinterestingforallkinds viewsintheinterestsofthefirm company’s guidelines. But
provide a package with a cab, hotel, oftravellers,80percentdestinations and its shareholders, much in IiAS says these bits are getting
and one rafting and one trek inthepackagesbeingofferedare the way Mindtree’s committee lost in the wrangle, with each
option, leaving the customer free basedonpopularsearches,and20 ofindependentdirectorsdecid- highlighting its role in build-
to do what they like on percentdestinationsprovidedare ed on the fairness of Larsen & ing the business and its brand.
packagescovering80-100 other days. offbeat,suchasAlmatyin Toubro’s offer price to share- Had the board been expanded
destinations,acrossdifferentprice Or if the user opts for a trip to Kazakhstan. holders in spite of its (Mind- and had it been more effec-
points. the wine valley in Nasik, Weekend Theofferingwillbepromotedvia tree’s) promoters’ opposition to tive, the allegations would
Theonlinetravelagentwillhavea Getaways will suggest one wine- popularsocialmediaplatformssuch the acquisition bid. It has said have been seen with more
separatelinkortileonthetheapp tasting tour on one of the three- asInstagram. an expanded board with more scepticism.
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 https://t.me/TheHindu_Zone_official

.
MUMBAI | THURSDAY, 18 JULY 2019 COMPANIES 3 <

INVESTMENT CENTRE

Ebix set to acquire ‘After deal, shopkeepers eBAY BUYS 5.5% STAKE IN PAYTM
MALL FOR $160 MILLION

Yatra for ~2,327 cr toUSsellandproducts

NEHA ALAWADHI
Europe’
from
EbixCash IPO offering,”
New Delhi, 17 July he said. E-commerce player eBay has bought 5.5 per cent stake in Paytm Mall.
The transaction has been While the deal size has been kept under wraps, sources say eBay

U
S-based software firm unanimously approved by invested $160 million in Paytm Mall, which is valued at $3 billion.
Ebix is set to acquire each of Ebix’s and Yatra’s Numbers aside, VIJAY SHEKHAR SHARMA, founder of One97
Gurugram-based on- directors and is expected to Communications, in a conversation with Karan Choudhury says while
line travel agent Yatra Online conclude in October-Decem- other e-commerce players act as proxy retailers, Paytm Mall is working
for an enterprise value of ber quarter after receiving with offline retailers. Edited excerpts:
$338 million or ~2,327.4 crore regulatory approvals.
in an all-stock deal. Assuming a value of $4.90 Whatarethebroadcontours
Once the transaction is per ordinary share of Yatra, oftheeBaydeal?Howdidit
completed, Yatra will be a the transaction implies an happen?Whendidthetalks
part of Ebix’s travel portfolio, enterprise value of $337.8 mil- begin?
EbixCash. Ebix has offered to lion at the Ebix collar price In the beginning of the year,
pay $4.90 per share of Yatra, of $59 per share and after there was mutual introduction
a premium of 26 per cent adjustment Yatra’s net equity to do things together as we had
over Yatra’s Tuesday closing ROBIN RAINA, value would be $239 million, been doing cross-border com-
price, and 32 per cent over its Ebix Chairman the companies said in a joint merce. One of our board mem-
closing price on March 8, statement on Wednesday. ber introduced us to eBay, which
when Ebix first made an offer “Over the past few “Fundraising was not the has been trying to do cross-bor-
to buy the Indian firm. months, we have objective behind the transac- der commerce with Indian com-
Ebix Chairman and Chief evolved a detailed tion,” said Dhruv Shringi, co- panies. It invested in Flipkart
Executive Officer (CEO) synergistic plan, which founder and CEO of Yatra and Snapdeal but was still look-
Robin Raina said the acquisi- once fully executed, can Online. He said Yatra would ing for a partner. eBay wanted
tion of Yatra would lend itself provide between 40 continue to exist but a deci- ustotakeitscataloguesintheUS
to significant synergies and and 75 cents of sion on merging it with other and Europe to India. We said we betterconnectwithtraders
the emergence of EbixCash accretion to the Ebix Ebix group companies in arefocusingonofflineshopsand whokeepcomplainingaboute-
as India’s largest and most non-GAAP EPS” India is yet to be taken. “We this could be a good supply commerceplayerstakingatoll
profitable travel services will be better capitalised now source for our shopkeepers. The ontheirbusiness?
company. as a part of a larger group but good thing is that our consumer Our focus has been to empower
“Over the past few 75 cents of accretion to the we will continue to take a traffic is growing rapidly, shopkeepers compared
months, we have evolved a Ebix non-GAAP EPS. We are measured approach to so eBay was interested in to other e-commerce
detailed synergistic plan, excited by the cross-selling growth. We don’t need to do becoming a strategic players who are proxy
which once fully executed, opportunities while further deep discounting to get cus- shareholder. In the last retailers themselves.
can provide between 40 and strengthening our future tomers,” he said. three months, we carved Brands love us as we are
out the finer points of the deal. driving store walk-ins and sales,
unlike other ecommerce play-
Therehasbeennewsaround ers who buy and sell themselves.
Spencer’s plans ESOP in first year of ops as separate entity PaytmMallnotdoingwell.
Howisthefirmactuallydoing?
We have much better connect
with the retailers as they do not
AfterdemergingfromCESC,Spencer'sRetailissetto shalllapseforthwith,”thenoticeread.Spencer’s I can only say that we have a see us as a threat, unlike other e-
comeoutwithanemployeestockoption(ESOP) saidESOP,besidesbeinganincentive,isalsoa rock solid business which is commerce players. Our way of
schemeinitsfirstyearofoperationsasaseparate meansforadditionalmotivationforthe spending very less money. We doing digital commerce is dif-
listedentity.Earlierthisyear,Spencer’shadgot employeesandaligninterestsofemployeeswith are doing millions of dollars in ferent from that of others and
DevendraChawla,formerchiefoperatingofficerof theinterestofthefirm. business this year. This year, we that is one of the reasons why
WalmartIndia,asitschiefexecutiveofficerand “ESOP is considered as an effective tool to have done a great job of con- research reports think that our
managingdirector. attract and retain the best talent and also serves verting our business momen- numbers are not good. They do
Anoticetothefirm’sshareholdersstatethe to attract, incentivise and motivate professionals tum into good revenue and con- not take into account the busi-
maximumnumberofstockoptionsavailablefor and reward exceptional performance. In order to sumer growth. Paytm Mall is ness done by our shopkeepers
grantundertheESOPschemewillbe3,976,711.This attract, reward and retain talented and key em- focused solely on shopkeeper via the app. The reports mostly
represents5percentequitysharesofthefirmwith ployees in the competitive environment and en- commerce. We showcase the monitor data of the courier serv-
afacevalueof~5.Eachofthestockoptions,when courage them to align individual performance supplies that they have. We sell ices. Our shopkeepers may not
exercised,willbeconvertedintooneshareofthe with the company's objectives, the firm intends for them online and also bring be always using third party logis-
company.“Ifagrantee’semploymentwiththe to implement Spencer's ESOP 2019,” it said. About customers to their shop. We tics. We are doing around 2.25
firmstandsterminatedduetovoluntary a month after Spencer’s was carved out of CESC as have the element of supplying lakh orders per day which tells
resignationonpartofthegranteeordueto a result of the demerger and subsequently listed, through the shop. me that we are in a great shape.
completionofhisdeal,thenallstockoptionsnot Chawla joined Spencer's in February after a 15-
vestedintheemployeeasondateoftermination month stint in Walmart India. AVISHEK RAKSHIT DoyouthinkPaytmMallhasa More on business-standard.com

Uniqlo set to BP, RIL investing

debut with
three stores
in India
VIVEAT SUSAN PINTO
Mumbai, 17 July
Japanese retailer Uniqlo on
Wednesday announced it was
launching three separate stor-
es in India as part of its debut
plans, coming at a time when
the government proposes to
ease local sourcing rules in
single-brand retail. On July 5,
Finance Minister Nirmala
Sitharaman had said the 30
per cent local sourcing norms
in single-brand retail would
be relaxed as she sought to
make India an attractive des-
tination for foreign players.
Retail industry sources
had said Uniqlo would be
among the first to launch out-
lets this year in a bid to capi-
talise on the environment,
accelerating its India store
plans, which have been in the
works for months now.
On Wednesday, Tadashi
Yanai, Uniqlo founder and
chairman, said the three
stores would be located in the
Delhi-NCR region and the
first outlet would open its
doors to consumers in Octo-
ber. “The opening of our first
store in Ambience Mall, Vas-
ant Kunj, followed by a sec-
ond and third store in DLF,
Saket, and DLF Cyberhub,
Gurugram, represents a sig-
nificant step in our compa-
ny’s global strategy. We will
offer affordable apparel wear,
targeting men, women and
kids,” he said.
Uniqlo has already begun
hiring staff for its first store
in Delhi and is also in the
process of putting its back-
end in place. The company
may also push its presence
into other cities once the
Delhi store launches happen,
persons in the know said.
According to experts, the
need to act quickly also
comes as Uniqlo is looking to
gain a strong foothold in India
as it competes with rivals
Inditex and Hennes & Mau-
ritz (H&M) globally. To put
things in perspective, Uniqlo
is the world’s third-largest
fashion retailer after Spain’s
Inditex, which owns Zara,
and Sweden’s H&M.
$5 bn in KG-D6
to produce
1 bcf of gas
British energy giant BP and its
partner Reliance Industries
(RIL) will invest $5 billion in
bringing to production three
sets of natural gas fields in the
Krishna Godavari basin block
in the Bay of Bengal by 2022.
BP’s Chief Executive (Up-
stream) Bernard Looney said
the partners were also dis-
cussing the development of
natural gas found in Maha-
nadi basin, off the Odisha
coast. “Together we are
spending up to $5 billion or
~35,000 crore in three gas
development projects in the
KG-D6 block and together we
are expected to bring about
one billion cubic feet per day
of new domestic gas on stre-
am by 2022,” he said.
Thethreeprojectswillhelp
reverse the falling gas output
from what was once the
biggest gas-producing block
in the country.
Last month, the two part-
ners had announced invest-
ment sanction for develop-
ment of their deepest natural
gas discovery in the KG-D6
block. The MJ, or D-55, gas
find will be developed in sync
with the previously approved
‘R-Series’ and the Satellites
Cluster development to add
30-35 million standard cubic
metres per day of natural gas
production in phases. PTI

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4 ECONOMY & FINANCE MUMBAI | THURSDAY, 18 JULY 2019

“Electric vehicles are a sunrise opportunity “The NRC is part of the Assam Accord and was also in (BJP's) “I am not in favour of continuing with
as India has over 72 per cent election manifesto based on which the government has MNREGA forever because it is for the
two-wheelers; our endeavour should be came to power. The government will identify illegal poor and government wants to
to make these electric, and also immigrants living on every inch of the country's soil and eradicate poverty from India and is
manufacture EVs for the world, in India” will deport them as per the international law” working in this direction”
AMITABH KANT, NITI Aayog CEO AMIT SHAH, home minister NARENDRA SINGH TOMAR, agriculture minister
> .

15th finance panel gets extension

IN BRIEF
India can tap London market
for sovereign bond, says May
The commission will now submit its report on separate funding mechanism on November 30, instead of October 31
India could tap London's capital market when it decides to raise its
first-ever international sovereign bond later this year, British Prime ARUP ROYCHOUDHURY included after the Cabinet decision,
Minister Theresa May has suggested. Describing India and the UK as
twin pillars of the Commonwealth built on shared values of
NewDelhi,17July
NOD TO LARGEST may or may not be examined by the
FC. It could even examine issues out of
HYDRO PROJECT
T
democracy and the rule of law, she called on the government to he Union Cabinet on the ToRs.
raise its proposed international sovereign bond later this year in Wednesday extended For example, the FC may recom-
the financial hub of London. Prime Minister May on Tuesday the term of the 15th The Cabinet Committee on Economic Affairs (CCEA) mend giving greater financial free-
announced the creation of a new 40-million pound Fast-Track Finance Commission (FC), on Wednesday cleared the decks for the dom and powers to panchayats and
Start-up Fund, focussed on India's and added a new term of ref- country’s largest hydro-electric project, urban local bodies, as reported earlier.
emerging technology enterprises as part erence, which requires the 2880 Mw Dibang Multipurpose Project To that effect, it may suggest an
of the wider UK-India Tech Partnership. commission to examine if a separate (MPP), in Arunachal Pradesh. In addition, increase in property tax rates around
The announcement came as she mar- mechanism for funding of defence and various railways projects worth over ~6,000 crore the country.
ked the 'India Day' in London. "We internal security ought to be set up. – including doubling, tripling and coming up of It is also likely to bring back per-
have opened a £40 million Fast-Track
Start-Up Fund, supported by both the
This means that the FC will submit
its report to the government on
OTHER new lines — were given nod. The CCEA approved
the expenditure on pre-investment activities and
formance-based incentives for states,
wherein they will be assessed on cer-
UK and Indian governments, to invest in
Indian start-ups focussed on
November 30 this year, instead of
October 31.
DECISIONS various clearances for Dibang Multipurpose
Project (MPP) in Arunachal Pradesh for ~1,600
tain parameters. Performance-based
incentives were recommended by the
emerging technology," “The Cabinet chaired by Prime Nod to setting up of a Panel declare them as institutions crore. The estimated cost of the project is 13th FC but omitted by the 14th.
May said in a keynote Minister Narendra Modi has approved of ministers to look into of national importance ~28,080.35 crore. Some stated parameters, howev-
address. PTI< the proposed amendment to enable closing of Indian Drugs and Approved the National The Cabinet has also given its approval to er, have been opposed by seven states
15th Finance Commission to address Pharmaceutical and Medical Commission Bill, construct a third railway line between Prayagraj- and union territories, including how
serious concerns regarding the allo- Rajasthan Drugs and Mughalsarai (now Pt DeenDayal Upadhyaya Jn) well states implement the flagship
which seeks to replace the
Finance Bill to Centre likely to cap cation of adequate, secure and non- Pharmaceuticals. The Medical Council of India Act,
covering 150 km with an estimated cost of schemes of the central government,
~2,649.44 crore. The project is expected to be
be taken up in overseas borrowing lapsable funds for defence and inter-
nal security of India,” said a statement
committee will also decide
1956, and usher in mega completed by 2023-24. Railways minister Piyush
and control or lack of it in incurring
expenditure on populist measures,
on the strategic sale of
Lok Sabha today at $5 bn in FY20: DBS after the Cabinet decision. Hindustan Antibiotics and
reforms in the medical Goyal said the move will help reduce the capacity progress made through direct benefit
FinanceBill,2019,isslatedto Singaporean “Under the Terms of Reference of education sector constraints on this route, where the current transfers and in promoting ease of
Bengal Chemicals. Earlier
betakenupbytheLokSabha bankDBSon the Commission, it is proposed to Approved a Bill to scrap capacity utilisation is 159 per cent. doing business.
onThursday,followingapp- Wednesday ensure an assured allocation of
decision to sell surplus land Amendment to Companies Act While some of the more contro-
of these 4 firms to pay dues 58 laws that have lost
rovalofdemandforgrantsfor said resources towards defence and inter- The Cabinet cleared a Bill for amendments to versial parameters like those on pop-
FY20bytheHouse.Alleyesare governmentis nal security imperatives. The amend- of employees modified their relevance Companies Act to replace ordinance promulgated ulist schemes and implementing the
onwhethertheCentrewould likelytolimit ment provides, which the 15th FC shall Approved a Bill to amend Approved Dam Safety Bill, in this regard in February. The Companies Centre’s schemes may be left out, the
tweaktheBillforsuperrich itsoverseasbondsaleat$5 also examine if a separate mechanism the National Institutes of 2019 for surveillance, (Amendment) Bill, 2019 will re-categorise 16 15th FC is likely to advise the Centre to
surchargeonforeignportfolio billionthisyear,butsuggested for funding of defence and internal Design Act, 2014, to include inspection, operation, and minor offences as purely civil defaults that will reward states based on other parame-
investorsstructuredastrustsor hikingthecaponforeignfunds' security ought to be set up and if so four new such centres and maintenance of dams de-clog special courts. SHINE JACOB ters, such as effectiveness of capital
not. ThelowerhouseonWed- investmentindomesticdebtis how such a mechanism could be oper- spending, efforts made by them in
nesdaypassedaBill,allowing abetteroptionconsideringthe ationalised,” it said. deepening goods and service taxes,
theCentretowithdraw~98.18 hugetherisksinvolvedinthe An official told Business Standard elected back to power. The official said The only ToRs mandated by the should govern the grants-in-aid of the progress in increasing revenues,
trillionfromtheconsolidated former.Thepotentialpitfallsof that this decision was informed to the the FC could examine ways to provide Constitution for the Finance revenues of the states out of the con- progress made in achieving replace-
fundtomeetitsexpenditure suchanissuanceinclude 15th FC recently, and was in line with additional funding for defence, para- Commission are to recommend the solidated fund of India and the meas- ment rate of population growth, and
duringFY20. BS REPORTER< exchangeraterisksbeingborne the ruling Bharatiya Janata Party’s military and police forces. distribution between the Union and ures needed to augment the funds of a achievements in infrastructure and
bythegovernment,smallnet stated commitment in its election The FFC’s recommendations will the states of the net proceeds of divis- state to supplement the resources of social sector schemes, said officials
savingsoncostbecauseof manifesto to provide further resources be in force from April 1, 2020 for a ible pool of taxes and the allocation panchayats and urban local bodies. aware of the work going on in the com-
Guatemala calls for hedgingrequirements, for defence and internal security, if five-year period. between states, the principles, which The other ToR’s, including the one mission.
WTO panel against exposingthedomestic
financialsystemtoexternal
India sugar subsidy volatilitiesandcannibalising
Guatemala has sought
establishment of a dispute
panel under the aegis of the
portfoliodebtflows,itsaid. PTI<
Essar Steel case: Centre likely to Betterbusinessclimate
Indian passport
&tradenormswillhelp
bat for financial creditors in SC
World Trade Organization
(WTO) in a case against India's holders to get UAE
India attract FDI: IMF
sugar subsidies to farmers. In
February, Guatemala and visit visa permit
several other countries, Indianpassportholderswith RUCHIKA CHITRAVANSHI fresh challenges and would be interesting
including Australia and Brazil theUnitedKingdomand New Delhi, 17 July to see how the courts react to the same,”
dragged India into the WTO's EuropeanUnionvisascangeta said Diwakar Maheshwari, dispute reso- PRESS TRUST OF INDIA ance sheets of banks and cor-
dispute settlement mech- visitvisapermitatalltheUAE The Ministry of Corporate Affairs (MCA) lution partner, Khaitan & Co. Washington,17July porates.
anism alleging its sugar sub- ports,theauthoritieshere is likely to implead in the Supreme According to people in the know, oper- "Improving the business cli-
sidies to farmers are incon- havesaid.TheGeneral Court (SC) against the recent ational creditors in nearly 200 cases Easing business climate and mate, easing domestic supply
sistent with global trade DirectorateofResidencyand National Company Law Appellate have approached the NCLAT to seek relaxing trade related norms bottlenecks, and liberalising
rules. PTI< ForeignersAffairs(GDRFA)in Tribunal (NCLAT) judgment in a stay on the resolution plan in the will help India attract foreign trade and investment will be
Dubaipostedavideotweeton the Essar Steel case treating hope that they would get a better investors and improve the cur- important to help attract FDI
Mondaythatlaysdownthe secured lenders and operational deal after the Essar Steel case. rent account deficit (foreign direct
Govt to prepare conditionsunderwhichthis creditors on a par, said a senior In the case of Bhushan Power situation, according investments),
national data on facilitywilloperate. PTI< government official. & Steel, some of the operational to International India’s trade improve the CA
The order, the government creditors, too, had moved against Monetary Fund barriers remain (current account)
unorganised sector said, is not in line with the the resolution plan filed by JSW Steel (IMF). significant, IMF financing mix, and
Shrinkingof Over 14.6 mn I-T Insolvency and Bankruptcy Code in the National Company Law Tribunal The IMF in its said, adding contain external
unorganised returns filed so far; (IBC). “We will clarify the intent of the in March this year. JSW had offered to India section of the steps to contain vulnerabilities," the
sectorisa law in the apex court. The latest order is official said, adding, “All options are open pay operational creditors a sum of ~350 External Sector fiscal deficit IMF said.
"positive" 9 mn file ITR-1 deviating from the Code,” said a senior in front of the government.” crore against their admitted claims of Report has said that should be Current
indicatorof Over 14.6 million income tax official. Operational creditors — supplier of ~733 crore. although progress accompanied by account deficit
development returns have been filed so far, Lenders to Essar Steel have appealed goods and services such as vendors — are The latest proposed amendment, how- has been made on measures to (CAD), which is the
andtheCentrewillpreparea of which 9 million have been against the NCLAT order in the SC, which kept at a different footing from secured ever, could put a lid on these cases. “The foreign direct invest- enhance credit net of foreign
separatedataonunorganised filed by individuals with total will be heard next week. lenders who bring in finances into the proposed clarification that how much dis- ment (FDI) liberalisa- availability exchange inflows
workersinIndia,Labourand income up to ~50 lakh. The Cabinet on Wednesday approved company and have greater risk exposure. senting financial creditors and opera- tion, portfolio flows and outflows,
EmploymentMinisterSantosh According to the data amendments to the IBC to give prefer- Experts feel that the proposed retro- tional creditors will get after comparing remain controlled. increased to $57.2
KumarGangwartoldthethe compiled by the revenue ence to secured lenders over operational spective amendment will have far-reach- under the resolution plan and in liquida- India'stradebarriersremain billion or 2.1 per cent of GDP in
RajyaSabhaonWednesday. department, a total of over creditors effective retrospectively. ing impact. “It will directly affect even tion will definitely reduce the litigation significant, it said, adding steps FY19 as against 1.8 per cent in
Thegovernmenthastaken 794000 tax returns were The MCA wants to make it ‘abundant- such plans which have long ago attained which were initiated because of issues in to contain fiscal deficit should the previous year.
severalmeasurestowards alone filed on July 16, of ly clear’ in the law, the limit to the pro- judicial finality, on merely there being an respect of distribution of value between be accompanied by measures
TRADE-WAR RISK WEIGHING
expansionoftheorganised which over 526,000 tection available to unsecured and oper- appeal pending against such finality. This the stakeholders,” said Ashish Pyasi, prin- to enhance credit availability
ON ECONOMY, SAYS IMF 24
sector,hesaid. PTI< was ITR-1 or Sahaj. PTI< ational creditors, a senior government may result in opening the floodgates to cipal associate, Dhir & Dhir Associates. through faster cleanup of bal-

And the wheel “We may examine whether

through legislation or
“If you wanted a change in the Finance
Ministry, you could have discussed it

turns a full circle

50 years after 14 state-run banks were nationalised,
the debate is on whether we should reverse it
RAGHU MOHAN
Mumbai,17July
Whatisthepointofacircle?Well,itispointless.On
themidnightofJuly19,1969,14bankswerenation-
alised;and50yearstotheday,thedebateisonifwe
aretoretracethepathandprivatiseourstate-run
banks—thewheelhasindeedturnedafullcircle.
Asanidea,banknationalisation
tickedalltherightboxes.Itwasto
shifttheconcentrationofcreditfrom
thebiggerborrowerstotheless
privileged,widenthebranchnetwork
tothehinterlandandbringthe
unbankedunderformalchannelsof
banking.Halfacenturylater,we
continuetoengageonthesubjectof
theunbanked.
Asforgovernance,thisiswhat OF BANK
thenPrimeMinisterIndiraGandhi NATIONALISATION
observedontheboardsofdirectors.
Pastchairpersonsofthebankswhichwere
nationalisedcontinuetoresideontheboards.“We
mayexaminewhetherthroughlegislationor
otherwisewecanpreventsuchpeoplefrom
continuingontheboard.Thechiefexecutivesof
thebankswillnotthenfeelobligedtotheformer
chairpersons,andtheymaybeexpectedtotakean
independentlineinregardtolending”.Well,such
“directedlending”iswhathaslandedourstate-
runbanksinthemesstheyarein.
“Straythoughtsonbanknationalisation”,a
paperbyIndiraGandhi,sowedtheseedsofbank
nationalisationduring1966inameetingofthe
Congressparty.Itwaswelcomedbyall.Italso
helpedstymiethepoliticalchallengeshefaced
fromtheYoungTurksandtheSyndicate,which
eventuallyledtothesplitofthepartyin1969,the
yearofthefirstroundofnationalisation;the
secondhappenedatadoveradecade
laterin1980.
Thepoliticsbehind
nationalisationiscapturedinMorarji
Desai’swords,whohadopposedit(he
wasreplacedasfinanceminister
whennationalisationwasgiven
effectto).“Ifyouwantedachangein
50 YEARS theFinanceMinistry,youcouldhave
discusseditwithme.Youknowvery
wellthatIneverdiscussedanymatter
withyouinanimpropermanner.
EvenwhenIhavedifferedwithyou
onsomematters,Ihaveneverbeenguiltyof
improprietyordiscourtesy.Butnowyouhave
behavedtowardsmeinamannerinwhichnoone
wouldbehaveevenwithaclerk.”
Sowhereareweonprioritysectorlending
(PSL)?Despitetheexponentialgrowthinthe
networkofstate-runbanks,andtheadventofnew
ageprivatebanksinthepost-reformperiod,we
continuetostruggle.
TheReserveBankofIndia’s(RBI’s)Reporton
otherwise we can prevent with me. You know very well that I
such men from continuing never discussed any matter with you in
on the board. The chief an improper manner. Even when I have
executives of the banks will differed from you on some matters, I
not then feel obliged to the have never been guilty of impropriety or
former chairmen, and they discourtesy. But now you have behaved
may be expected to take an towards me in a manner in which no
independent line in regard one would behave even with a clerk''
to lending” MORARJI DESAI
INDIRA GANDHI After his portfolio as finance minister was taken
Former prime minister away when nationalisation was put through
THE ROAD TO FIFTY
1969: First round of nationalisation Second The politics behind it: While the Left parties and a few
— Allahabad Bank, Bank of Baroda, round: Punjab radicals in the Congress had mooted nationalisation to prevent
Bank of India, Bank of Maharashtra, and Sind Bank, concentration of economic power in the hands of the wealth, the
Central Bank of India, Canara Bank, Vijaya Bank, Oriental political challenge faced by Indira Gandhi from the Young Turks
Dena Bank, Indian Bank Indian, Bank of India, and the Syndicate also played its part in bank nationalisation. The
Overseas Bank, Punjab National Bank, Corporation Bank, polarisation within eventually led to the split of the party in 1969,
Syndicate Bank, UCO Bank, Union Bank Andhra Bank, and the year of the first round of nationalisation; the second
United, Bank of India New Bank of India happened a tad over a decade later in 1980
TrendandProgressofBankinginIndia(2017-19) thepathofprivatisationofstate-runbanksasa Centremakesitdifficultforitpourmoneyinto
saysthatasinthepreviousyears,state-runbanks panaceafortheillsfacingthesector,itisunlikely state-runbanks,itisnotthecolourofownership
missedtheiroverallpriority-sectorlendingtargets thatwewillreachabetterormoresecureplace. whichistheissue,butgovernance.Perhaps,itis
inFY18,eventhoughtheywereabletoachieve TheLehmancrisis,anditsaftermathhaveshown timefortheCentretotransferitsstaketoaholding
varioussub-targetsexceptinrespectofmicro- thatwhenbankscomeunderstrainorcollapse, companyasrecommendedbythePJNayak
enterprises.DuringQ1FY19,bothstate-runand thegovernmentofthedayhastostepinwithtax- CommitteeReport;andalsotakeupthethusfar
privatebanksmanagedtoachievetheoverallPSL payersmoney.Thefundamentaldifference duckedissueofa“Goldenshare”instate-run
target,buttherewereshortfallsinthesub-sectors. betweenbanksandotherpartsofthecorporate banks—whereintheCentrecancontinuetooffer
Inthecaseofstate-runbanks,itwasinlendingto worldisthattheformerarecustodiansoftrustin “guidancetothesebanks”,andcanalsocareofthe
micro-enterprises,andinprivatebanks,itwasto sofarastheyraisepublicdeposits;andarealso furoreonthepoliticalturfifitweretoembarkon
agriculture,smallandmarginalfarmers;non- partofthesettlementsystem. thewholesaleprivatisationroute.
corporateindividualfarmers;andweakersections Tothatextent,adebateonwhetherstate-run AGoldenshareintheGoldenjubileeyearof
ofthesociety. banksneedtoprivatisedornotisasuperficial banknationalisationisanideawhosetimehas
Fiftyyearson,ifweareindeedtogodownon debate.Whileitistruethattheindebtednessofthe come;it’sbetterthangoingaroundincircles.

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 https://t.me/TheHindu_Zone_official
6 ECONOMY & PUBLIC AFFAIRS
>
MUMBAI | THURSDAY, 18 JULY 2019 1

Coal mine auctioning may be Bullish bonds point to

an uncertain economy
restricted to commercial use ANUP ROY & SAMIE MODAK
Mumbai, 17 July

Govt also looking to
CAPTIVE
privatise and split MINES STATUS
Bharat Coking Coal No. of
mines Total production*
JYOTI MUKUL & SHREYA JAI 3 L ess than 25%
New Delhi, 17 July
4 Between 25-50%
6 Between 50-75%
mines and blocks) could then be auc-
tioned again for commercial mining,
within six months of being returned.
A high-level committee, constitut-
ed by the government to lay out the
road map for the sector, has found that
there is discrimination between public
and private companies on various
issues, including land acquisition and
While government bonds
have rallied in the recent past
on domestic rate cut expecta-
tions and comfortable liquid-
ity, the rupee has remained
relatively choppy. The cur-
rency is mirroring the equity
market, reflecting a slowdown
in the global and domestic

W
ith miners, which took coal
blocks for own use, perform-
ing poorly, the government is
planning not to auction mines to cap-
tive users. Instead, it will allot or auction
rights only for commercial use of coal.
The allocation would be decided
based on the production plan and rev-
enue share to the government.
The Union ministry of coal is also
looking at a proposal to privatise and
split Bharat Coking Coal (BCCL) that
holds lease to the Jharia coalfields.
The lease areas of the Coal India sub-
sidiary could be divided into five to six
parts, each held by a different company.
Each of these companies could be pri-
vatised. The privatisation could take
place through a profit-sharing model.
The proposal is to ask existing cap-
tive mining lease holders, which have
not yet started production, to surrender
their blocks and pay a penalty of 10 per
cent of the bid security.
These blocks were given out
through e-auction by the earlier NDA
KARNATAKA CRISIS
government after the Supreme Court
judgment cancelled 204 coal mine allo-
cations in 2014. Of the 85 firms award-
ed through four tranches of auction,
29 were already producing coal when
their licences were cancelled.
There are only three mines that have
met their annual peak-rated capacity
in 2018-19 and only one is sticking to
its mining plan. More than a dozen had
seen zero production in the last finan-
4 More than 75%
*As a percentage of envisaged
production plan submitted to the
government. Note: Peak rated
capacity or highest annual
production achieved by only one
coal mine Source: Ministry of Coal
cial year. The companies owning these
mines — from state agencies of
Rajasthan, Telangana, and
Chhattisgarh to NTPC, and private com-
panies Balco as well as Hindalco – have
listed challenges faced by their mines at
a recent meeting with the coal ministry.
Only a three-month window could
be given to the lease holders, including
state government-owned companies, for
starting production. These (returned coal
grant of lease. It was, therefore, felt that
the Coal Bearing Areas Act, 1957, should
be amended to give private companies
a level-playing field in land acquisition.
Besides, provisions in the Minerals &
Mines Development Regulation Act and
Coal Mining Special Provisions Act that
give preference to government compa-
nies should be removed.
Prior to the enactment of Coal
Mining (Special Provisions) Act in
2015, coal mines were never given out
through bidding. The previous gov-
ernments had amended the Coal
Mining Nationalisation Act to specify
specific sectors that were given mines
attached to their units.
Companies in sectors like steel,
cement, power, coal-to-gas and coal-to-
liquid used to apply for coal blocks and
rights were given to them after scrutiny
by an inter-ministerial committee.
The committee is in favour of
only a one-stage competitive bidding
with a maximum mining lease dura-
tion of 50 years.
economies.
Indeed, global bond yields
have fallen quite substantial-
ly, with some in Europe hit-
ting sub-zero levels, an early
THE TRAJECTORY
sign of a global slowdown. 10-yr G-sec yield (%) ~ vs $
Investors rush to buy fixed (inverted scale)
income investment during 8.50 64
uncertain times. As yields fall,
prices of bonds rise. 8.00
The yields on the 10-year 68
7.50
bond fell to a 31-month low
on Tuesday, and closed at 7.00
almost same level at 6.34 per 7.33 72
cent. However, rupee fell to 6.50 65.01
6.35 68.82
68.83 a dollar, from its previ-
ous close of 68.72 a dollar, fol- 6.00 76
lowing its Asian peers. So far Apr 4,’18 Jul 17,’19 Apr 4,’18 Jul 17,’19
this year, the rupee has Source Bloomberg; compiled by BS Research Bureau
gained 1.38 per cent.
“Global dollar strength and caps performing well but mid- in a report.
weak risk sentiment amid and small-caps correcting. “The recent rally has been
escalation of trade tensions This is nothing but flight to quite fast and dramatic,” said
weighed on the domestic cur- safety. Investors are seeking Suyash Choudhary, head,
rency,” said currency consult- refuge in companies perceived Fixed Income, IDFC AMC.
ant IFA Global in a market to be relatively safe, having “The recent three rate cuts
wrap. Most of the other Asian low debt and strong corporate undertaken by the RBI and the
currencies also weakened governance practices. expectations of a further rate
against the dollar, while the Similarly, in the bond market cut in the forthcoming MPC
benchmark Sensex rose investors are buying sovereign meeting has been key factors
0.22 per cent, or 84.6 points, paper amid rising defaults,” which have pulled 10-year
to close at 39,215.64 points. said an analyst with a foreign GSec yields…,” said CARE
The bond market, mean- brokerage. Ratings.

Rebel MLAs can’t be forced to take part in trust vote: SC
AASHISH ARYAN & ARCHIS MOHAN
New Delhi, 17 July
With the Supreme Court on
Wednesday ruling that the 15
rebel Members of Legislative
Assembly (MLAs) of the Con-
gress-Janta Dal (Secular) gov-
ernment in Karnataka cannot
be forced to take part in
Assembly proceedings, the state
government led by Chief
Minister H D Kumaraswamy
looked all set to fall.
while, has fully factored in a
rate cut in the August policy,
say bond dealers. While the
So far this year, Nifty has
gained 7.6 per cent, while the
Nifty Midcap 100 and Nifty
According to Choudhary,
comparing the recent fall with
demonetisation level may not
In its interim order on be forced to take part in the pro- should be given to them that port to the coalition govern- difference between the repo Smallcap 100 have declined be the right comparison.
Wednesday, though the ceedings of the House sounded they can take part in the pro- ment. With 99 MLAs by his side, rate and bond yields has 5 per cent and 7 per cent, “…the current phase is that
three-judge Bench the death knell for ceedings or opt to remain out of it will take a mammoth effort remained around 100 basis respectively. of a synchronised global slow-
led by Chief Justice the Kumaraswamy the same. We order according- on part of the Kumaraswamy to points, the difference is about But the rally in government down, where local fiscal policy
Ranjan Gogoi said Kumaraswamy government. ly,” the three-judge Bench said. save the coalition from falling 58 basis points. bonds has surprised many. so far has been relatively dis-
that legislative govt’s fate hangs “We also make The Congress-JD (S) govern- when he takes the trust vote on Many are attributing the Since the Budget ciplined,” Choudhary said.
Assembly Speaker in the balance it clear that until ment had a total of 117 MLAs in July 18 to save his 14-month-old drop in bond yields to risk announcement on July 5, the The bond market has been
K R Ramesh after the apex further orders, the its fold before 16 of these elected government. The Opposition aversion among investors, GSec yields have declined by aided by massive liquidity
Kumar was free to court order 15 members of the representatives — 13 from the Bharatiya Janata Party has 107 while others said say this is 36 basis points, and the support by the secondary mar-
decide on the res- Assembly ought Congress and three from JD(S) MLAs in the 225-member Ho- akin to what has been playing decline in yields was 60 basis ket bond purchases by the
ignation of the 15 not to be com- — resigned about 10 days ago. use, which includes the nomi- out in the equities market points in the previous one RBI. In the last fiscal, the gov-
MLAs within a time-frame he pelled to participate in the pro- Two other independent MLAs, nated MLA and the Speaker. since last year. month (from 6.93 per cent on ernment purchased a record
considered appropriate, the rid- ceedings of the ongoing session S Shankar and H Nagesh have “Equity markets have been 17 June to 6.33 per cent on ~3 trillion of bonds from the
er that these MLAs should not of the House and an option also since withdrawn their sup- More on business-standard.com huge polarisation with large- July 16), noted CARE Ratings secondary market.

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8 ISSUES AND INSIGHTS
>
Brace for new ‘crudities and inequities’
How the IBC transformed into a tool to stigmatise business failure
WITHOUT CONTEMPT
SOMASEKHAR SUNDARESAN
T
he term “structural reform” is at
the heart of political debate -- it
is the phrase over which lead
Opposition speaker in the Rajya Sabha
and former Finance Minister P
Chidambaram and current Finance
Minister Nirmala Sitharaman sparred
after the Budget Speech. Meanwhile,
the one piece of structural reform that
the NDA government truly executed
from scratch — the Insolvency and
Bankruptcy Code, 2016 (IBC) — is once
again crying for attention.
A rail journey on an uphill track
Railways needs private investments urgently,
but few players might be interested because
of ownership and operational problems
JYOTI MUKUL
T
he Narendra Modi government
has set the Indian Railways on
course for private participation
to meet its funding needs, underlining
the long understood realisation that the
exchequer alone cannot finance infras-
tructure building and its operations.
But unlike other infrastructure sectors,
the Railways’ public-private participa-
tion (PPP) record has been patchy and
difficult to implement.
Yet the need for some
sort of partnership is becom-
ing urgent. In her July 5
Budget speech, Union
Finance Minister Nirmala
Sitharaman said the
Railways needed ~50 trillion
in five years to 2030. But she
admitted to the govern-
ment’s inability to meet the
requirement: Current rail-
way capital expenditure has
been ~1.5-1.6 trillion annually.
“Completing even all sanctioned
projects would take decades. It is, there-
fore, proposed to use public-private
partnership to unleash faster develop-
ment and completion of tracks, rolling
stock manufacturing and delivery of
passenger freight services,” Sitharaman
said in the speech.
Though the Railways is yet to
declare any five-year action plan, it is
Cake or taxes?
The size of the cake cannot increase if the makers of the cake
are squeezed into discomfort
DHIRAJ NAYYAR
A
day after the Union Budget,
while speaking in Varanasi to
an audience of BJP workers,
Prime Minister Narendra Modi was
emphatic when he said “the size of the
cake matters”. In a country whose
political economy has traditionally
been more concerned about slicing
and distributing the cake it was won-
derful to hear a Prime Minister publicly
accord priority to growth.
The comment was made in the con-
text of skepticism expressed by some
about the government’s ambition of a
$5 trillion economy by 2024. It is a
comment which also needs to be made
in the context of India’s tax policies.
Just a day earlier, Finance Minister
Nirmala Sitharaman had announced
an increase in tax rates on the “super
rich”. Also, she had not extended the
benefit of a lower corporate tax rate of
25 per cent to large companies, that is,
those with turnover greater than ~400
crore. It is likely that the government
was largely guided by arithmetic in its
tax decisions. It needed to meet its fis-
cal target of 3.3 per cent of GDP. And it
had already committed spending, both
investment and redistribution.
Revenue had to be shored up. More
taxes on the rich makes for a good
political argument and excellent polit-
https://t.me/SSC4Exams
Lauded and feted by bankers,
lawyers and judges as a “game chang-
er”, the IBC is now facing yet another
challenge. This law that was essential-
ly meant to enable smooth and non-
stigmatised death of corporates.
However, it has been transformed into
a tool of actually stigmatising business
failure, thanks to the scaling up of
non-performing assets on banks’
books. Courts have coded into the
interpretation of the IBC the Indian
social reluctance to embrace business
death. Judicial observations about the
importance of reincarnation of a mori-
bund business being preferred to an
orderly pulling the plug off the venti-
lator, abound.
The concept of “silences” in the law
has a major role to play here. Matters
that are so obvious to a society that talk-
ing about it would be unnecessary are
routinely left to resolution by common
sense, justice, equity and good con-
science. If something is so evident that
one does not need the law to articulate
it explicitly is said to have been left out
“sub silentio”. The silences in the law
can lead to judges filling in the gaps
clear the government is not in a posi-
tion to hand-hold it for any major
expansion or upgrade. The issue, how-
ever, is how far the Railways can func-
tion within the PPP format. Recent his-
tory highlights some of the challenges.
In the 90s, for instance, the Indian
Railways created partnerships with pri-
vate companies for sidings, warehous-
ing and wagons, and then extended the
tie-ups for port railway lines. But oper-
ating the service under the law
remained with the Indian
Railways.
This was the reason the
Pipavav Railway
Corporation Limited (PRCL)
was set up as a special pur-
pose vehicle (SPV) in May
2000 as a 50 per cent joint
venture between the Indian
Railways and the Gujarat
Pipavav Port Limited
(GPPL). The SPV was given
the task of converting a
meter gauge line between
Surendranagar and Rajula City to broad
gauge and extending it to the Pipavav
port. The company also manages all
operations and commercial functions
relating to freight traffic on the 271-km
line. A special dispensation from the
Cabinet Committee on Economic
Affairs allowed PRCL to undertake con-
struction, operations and maintenance
of the broad gauge railway system. It is
INSIGHT
ical optics because they can obviously
afford to pay more.
Unfortunately, the arithmetic of
Budget revenue targets is an anathema
to the Prime Minister’s philosophy of
expanding the size of the cake. The
super-rich — entrepreneurs, CEOs,
CFOs — are generators of wealth. They
already contribute their fair share of
taxes while millions of others evade or
avoid. By imposing further taxes on
this group, the government is only
penalising wealth creation and honest
paying of taxes. The super-rich are also
the most foot loose — they can shift
their residence and even business to
an overseas jurisdiction with lower tax
rates. India cannot afford a flight of its
best entrepreneurs, managers and cap-
ital. It is happening.
Large companies not only create
wealth but also good jobs. In India,
https://t.me/TheHindu_Zone_official
and bringing to bear their judicial sense
of how to resolve inequities and iron
out ambiguities.
Every trade and operational counter-
party in the running of a business (say,
the supplier of raw material or distrib-
utor of finished goods) may extend
credit or avail of credit, and thereby also
play a financial function. However, the
core cause of providing or availing of
such credit is not the provision of
finance. Such persons are operational
creditors in the eyes of the IBC.
The IBC is substantially a law that
works on the premise that financial
creditors know best as to whether to let
an insolvent business continue in a new
avatar or if it is best consigned to the
grave. In either decision, other stake-
holders such as operational creditors
would be affected, and the IBC entails
a quasi-judicial oversight of the deci-
sion of the Committee of Creditors, the
statutory decision-making forum in
which financial creditors have an over-
whelming and overriding power. This
is in sharp contrast to the role envis-
aged for operational creditors.
When any legal position looks
WHAT AILS THE RAILWAYS Even the much-touted station redevelopment could
not take off on account of low investment appetite in the construction sector
entitled to the rights, obligations and
duties of a railway administration.
These PPP initiatives were insignif-
icant when seen in the larger context
of the Indian Railways. Attempts at get-
ting big-ticket private investment in
locomotive manufacturing took eight
long years, when the Indian Railways
under Suresh Prabhu awarded two mar-
que contracts for manufacturing loco-
motives in 2015 to GE Transportation
and Alstom. Part of the reason for the
delay was lack of investor interest. The
contracts went through several rounds
of bidding because there were either no
bids or a single bid. The two locomotive
projects, however, are more in the
nature of contract manufacturing and
not equity investment in partnership
ILLUSTRATION BY BINAY SINHA
micro, small and medium enterprises
are often trumpeted as the biggest job
creators, which may be true, but these
are usually low paid, low quality,
informal sector jobs. In fact, the
biggest chunk of the MSME sector in
India is micro, not small or medium.
India’s challenge is to create good
jobs, with high wages, benefits and
security which will only be provided
by large companies and perhaps
medium-sized companies, certainly
not micro enterprises.
Also, scale matters if companies
have to compete in global markets or
in domestic markets against foreign
competition. India is absent from glob-
al and regional value chains because
it doesn’t have enough firms that have
the necessary scale to be efficient play-
ers in such value chains. For the sake
of a competitive industrial sector, tax
https://t.me/Banking4Exams
inequitable, intervention follows — at
times, politically and therefore legisla-
tively, but often, also judicially, with
creative interpretations aimed at doing
justice while administering the law.
For example, the sensitivity of the roti-
kapda-makaan concept led to home
buyers being acknowledged as not
being mere operational creditors —
first judicially, and then legislatively,
the constituency of home-buyers kept
getting addressed. Arguments can
always be found — since builders get
substantially funded by those buying
the products (homes), it was felt it
would be logical for home-buyers to
be treated as financial creditors. In
much the same way, buyers of soap
can be financiers of soap-manufactur-
ing company — but dare compare buy-
ing soap with buying homes, and you
will find the power of the sub silentio
facet in interpreting law.
The latest ironing of such perceived
inequity is a ruling of the National
Company Law Appellate Tribunal
(NCLAT) adjusting equities to make the
IBC work for the interests of opera-
tional creditors. The principle of law
with the government.
So why does the Railways struggle
with PPPs? According to Vishwas
Udgirkar, partner, Deloitte India, the
institution’s complicated and complex
structure is the principal cause. “The
proposed revenue models and the way
the Railways responds and wants to
remain in control make it difficult,”
he says.
Even the much-touted station rede-
velopment could not take off on
account of low investment appetite in
the construction sector. After altering
the terms for station redevelopment at
least twice, the Railways had to finally
sign on with government companies
for the job. There are some 22 stations
that are being taken up through Indian
policy should incentivise firms to get
bigger, not to remain micro and small.
The current regime, by giving conces-
sions to firms with a turnover of less
than ~400 crore, incentives them to
not grow beyond that.
Of course, even in the event that
firms do become large, they are still
not likely to be globally competitive
because they have to pay a higher top
tax rate than in competitor countries,
particularly in East Asia. The emer-
gence of a competitive large industrial
sector is the only route to fast growing
economy which creates productive
jobs for an aspirational population.
Now that the Modi government
has stated an ambitious goal of a $5
trillion economy — and we know the
Prime Minister is determined to
achieve targets — its tax policies must
focus primarily on increasing the size
of the cake. Obviously, this means that
both income and corporate taxes
should be lower. For individuals, the
rich will still pay a higher rate, but ide-
ally the top rate should be no higher
than the top corporate tax rate which
is 30 per cent now, but which should
be brought down to 25 per cent in the
next Budget for all firms. Surcharges
must be abolished.
The new philosophy should also
make clear to the tax administration
that it must not try to meet its targets
by trying to (unfairly) squeeze those
who already pay taxes. The harassment
of taxpayers (both individual and cor-
porate) is a deterrent to investment as
much as the high rates are. Instead, the
tax administration should be instruct-
ed at expanding the tax base and brin-
ing into the net those who have stayed
away. One way to do this is to end
exemptions of all kinds.
In the medium term, maximum
buoyancy to tax collection will be pro-
vided by a robust growth rate which in
turn requires massive investment by
the rich (individuals and firms). The
size of the cake cannot increase if the
makers of the cake are squeezed into
discomfort in the short term.
The author is chief economist, Vedanta
MUMBAI | THURSDAY 18 JULY 2019
> CHINESE WHISPERS
applicable to operational creditors is
that when resolving a company, they
ought not to get lesser than what they
would get in a liquidation. The NCLAT
has ruled that this would not mean that
operational creditors must get nothing
higher than the liquidation value. After
a strong push from the bench, the
Committee of Creditors came up with
a marginal reduction in what the finan-
cial creditors would take away and an
increase in what operational creditors
would get. The Tribunal, dissatisfied
with the equity of the proposal, reject-
ed it, and came up with a ratio of dis-
tribution that would, in its view, be fair
and appropriate.
In appeal, financial creditors would
obviously push hard for protecting
their right to determine an appropriate
distribution, as a sovereign right. Even
regulators are disrupting the IBC —
now Sebi wants to argue that dues owed
to it are not covered by resolution plans.
Whatever may happen in legal proceed-
ings, legislative intervention may even-
tually follow, in the name of structural
reform. Newer “crudities” and
“inequities” will emerge. While uncer-
tainty over viability of resolutions
would go up, one can only hope the
ecosystem will learn to embrace imper-
manence and death with grace.
The author is an advocate and independent
counsel. Tweets @SomasekharS
Railways Station Development
Corporation. NBCC and Ircon would
take over two stations. Most of the other
stations are undergoing upgrades
rather than redevelopment.
If station redevelopment projects,
which have the incentive of real estate
development attached to them, are
finding it hard to get private investors,
getting them to run rail service would
be even tougher because of legal and
operational challenges. The Railway
Act does not allow private companies
to operate, though there are reports of
the government inviting private invest-
ment in running premier trains, such
as the Tejas, Shatabdis and Rajdhanis
and tourist trains.
M Ramachandran, a former secre-
tary in the Union urban development
ministry, says since the ownership of
tracks remains with the Railways run-
ning only a passenger service even as
the same tracks are used for freight
makes the task difficult for investors.
“The Railways will need to resolve these
issues. A lot would depend on the terms
of contract.”
Rather than actually running trains,
private operators could be acting as
aggregators, taking bookings and own-
ing the rolling stock, on the lines of pri-
vate container trains. Even so, any form
of private investment will need a viable
fare model requiring tariff revisions
and bankable contracts. This, however,
raises the need to first put in place a
regulator. The fact that private opera-
tors could not run the much-smaller
metro services in Delhi and Gurugram
makes successfully-run private rail ser-
vices a distant dream.
> LETTERS
Regulate & supervise
This refers to “Not home alone” by Anup
Roy (July 17). The article has raised rele-
vant questions on the duality of control
over financial institutions including
banks and non-banking financial corpo-
rations (NBFCs) at the ground level and
answered them referring to the evolution
of the regulatory and supervisory system
in the financial sector over the years.
There is no use lamenting the omis-
sions and commissions of the past. The
FSLRC (Financial Sector Legislative
Reforms Commission) took a tangential
route trying to reinvent the central bank
and truncate its functional limbs. The
FSLRC failed to listen to professionals
among its own members. The piecemeal
approach to policy formulation affecting
the financial sector during the second
half of the current decade is attributable
to the diversion by the FSLRC from its
real mandate.
Having said that, there is no denying
that the government of India and the
Reserve Bank of India (RBI) have been
deftly building the institutional system in
the financial sector to meet the changing
needs. The setting up of IDBI, NABARD,
NHB, SIDBI and Exim Bank at the apex
level and also the SBI, the public sector
banks, regional rural banks and small
banks should be seen in this perspective.
The missing link is an HR initiative to
ensure professionalism in the functioning
of all these institutions. The RBI board's
decision “to create a specialised supervi-
sory and regulatory cadre” should be per-
ceived as a message to infuse profession-
> HAMBONE
https://t.me/UPSC4Exams
Focus on Priyanka
Consensus has eluded the Congress party
in selecting the successor to outgoing
president Rahul Gandhi. The latest
speculation now revolves around party
general secretary Priyanka Gandhi Vadra.
She is also the in-charge for Uttar
Pradesh, and several Congress leaders
from the state have pushed for her to
become the party chief. A few in the
party believe that she might take over as
the Congress faces difficult Assembly
polls in Maharashtra, Haryana and
Jharkhand. According to party sources,
with the Nehru-Gandhi dynasty and the
old guard in the Congress unable to agree
on a name, party general secretary Mukul
Wasnik continues to be the frontrunner
as the interim chief. Meanwhile,
Priyanka on Wednesday tweeted a
photograph of herself from over two
decades back. "Morning puja on the day
of my wedding (22 years ago)," she said.
While others handle Rahul's Twitter
account, and post only after he approves
a tweet, Priyanka is known to tweet
herself in Hindi and English.
‘India’s promise’
Former president
Pranab Mukherjee
(pictured) will deliver
a lecture in New Delhi
on ‘Furthering India’s
Promise’ on
Thursday. The event
will mark the first
anniversary of the
Samruddha Bharat Foundation, which
describes itself as an independent
socio-political organisation but is
ideologically inclined to the Congress
party’s worldview. The event will launch
the foundation’s monthly lecture series,
which aims to engage India’s leading
policymakers, academics, and activists
“in a dialogue on ways to safeguard and
further the constitutional idea of
India”. The foundation will also
announce the publication of 14 volumes
of more than 120 policy-oriented essays,
which Penguin Random House will
publish, to propose innovation and
disruptive ideas.
Pranab replaces Ansari
A few days after the Lok Sabha election
results were announced on May 23, Prime
Minister Narendra Modi visited former
president Pranab Mukherjee at the latter’s
residence to seek his blessings. Neither
former Congress president Rahul Gandhi
nor his sister and party General Secretary
Priyanka Gandhi Vadra has visited
Mukherjee, one of the oldest and most
distinguished of Congressmen, since the
elections. Sources said the family was yet
to overcome the souring of relations after
Indira Gandhi’s assassination, when
Mukherjee indicated that he wished to be
her successor. Now, it appears, the
Congress is keen on reclaiming Mukherjee
as an elder member of the party. So while
former vice-president M Hamid Ansari was
designated keynote speaker for Thursday’s
lecture, he had to make way for
Mukherjee. The party felt Mukherjee's
address at the Rashtriya Swayamsevak
Sangh headquarters in Nagpur in 2018
must not come in the way of this.
alism at all levels in the financial sector.
M G Warrier Mumbai
The real culprit
Another déjà
vu in Mumbai
— as usual
some buildings
will collapse
during mon-
soon. Most of
them are illegal
or tenants
refuse to
vacate. Now, in
such a sce-
nario, why
should com-
pensation be paid to the victims? These
buildings are secular vote banks spon-
sored by the local mafia and politicians.
In order to assuage their feelings and
ensure they continue to vote as before,
they have to be compensated by the
hard earned money of tax payers. Thus,
people who vote for their living are com-
pensated by those who need these votes
for their living, who in turn rob Peter to
pay Paul. And those who remain silent
on such issues, they who say they are
free and fair, and a so-called pillar of
democracy, are the biggest culprits.
T R Ramaswami Mumbai
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201 · E-mail: letters@bsmail.in
All letters must have a postal address and telephone
number
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OPINION 9
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Volume XXIII Number 240 ILLUSTRATION: BINAY SINHA

MUMBAI | THURSDAY, 18 JULY 2019

Future demographic shocks

The declining sex ratio points to behavioural regression

T
he growing prosperity of India’s population has had a mixed impact
on its demographics. The latest data from the Sample Registration kets in general is in the public domain. The size of
System shows that Indians are planning smaller families — but also the economy of India and geopolitical setting in
which India is placed makes it difficult to assume
prefer fewer daughters. The upshot is that India’s total fertility rate
that we will get adequate support in case risks on
(TFR) — or the number of children expected to be born to a woman during her sovereign debt materialise.
reproductive period — has fallen from 2.3 in 2016 to 2.2 in 2017, with both rural From a macro-economic point of view, there are
and urban Indiaregistering a steady fall. This is marginally more than the World some basic features of our economy that we should
Health Organization’s recommended replacement-level fertility of 2.1 children not ignore while considering the issue. First, we
per woman; in urban India, in fact, the TFR is well below this average, indicating have been financing our investments predominantly

Sovereign bonds:
improving education levels and access to health among urban Indian women. (well over 90 per cent) through domestic savings.
Our basic approach to the external sector has been
The obvious and encouraging implication of this is slowing population growth.
to access foreign savings to supplement and not to
As a result, projections for India’s population overtaking China have been post- substitute domestic savings. It is inconceivable that
poned by five years to 2027. sovereign bonds can make up for the shortfalls.

The big picture

This good news, however, is leavened by the alarming deterioration of the
sex ratio at birth, where Indians’ traditional preference for the male child appears
to have reinstated itself to startling effect. After steadily improving for two trien-
niums (three-year periods) between 2009-11 and 2011-13, the sex ratio has plum-
meted from its peak of 909 females per 1,000 males to 896 in the triennium
ending 2017. Behind the broad all-round deterioration is the potent point that
the sex ratio in cities is worse than in rural areas: 890 and 898, respectively, in
the 2015-17 triennium. As before, it is the relatively prosperous states that have
recorded the worst fall: Telangana, Delhi, and Kerala join backward Bihar in the
Second, there is a limit to our dependence on
foreign savings. The aggregate level of a sustainable
current account deficit of 2 per cent represents the
acceptable level of aggregate foreign savings. If this
limit is accepted, sovereign borrowings by way of
India must work on a road map towards capital account openness, bonds can only be a substitute to some other form
of foreign savings — say external commercial bor-
in which sovereign bond is back-loaded, not front-loaded rowings. Similarly, if the fiscal deficit is pre-deter-
mined, there is a substitution of funding from

A
lot has been said about the case for and
top rankings. Both the urban and state-wise data confirm the established trend against the Budget proposal to issue
that sex selection is being practised with greater frequency among affluent sovereign foreign currency denominated
Indians who have the wherewithal to use technology (illegal, legal, or semi-legal) bonds. It is difficult to add much to the debate by
to ensure the delivery of a male child. way of arguments. Yet, there is a big picture con-
sisting of bits and pieces that may help in finding
This ingrained gender prejudice has implications for the India demographic
a wise way forward.
dividend as well. With the TFR slowing and longevity increasing owing to access In global financial markets, sovereign debt is
to better health care, India’s population will also begin ageing a little over a very different from non-sovereign debt. Crucially,
decade from now. According to the Economic Survey, the share of India’s young, the sovereign is not a limited liability entity. It exists
i.e. 19 years and below, is projected to drop from 41 per cent in 2011 to 25 per cent in perpetuity and its assets are somewhat indeter-
by 2041. In the same timeframe, the share of the elderly population (60 years minate. Its liabilities to non-resi-
and above) will nearly double from 8.6 per cent to 16 per cent. Not only does this dents in global financial markets
have implications for the dependency ratio, but with fewer women producing are, in most cases, governed by laws
other than those in its own jurisdic-
fewer children the trend could worsen rapidly.
tion. (While issuing bonds, the juris-
All of this suggests the need to augment such creative missions as Beti diction is defined.) Voluntary
Bachao, Beti Padhao, designed to alter behavioural models by incentivising the agreements with debtors are not
birth of the girl child. Beti Bachao, Beti Padhao was launched in 2015 in Panipat, legally binding on all. As a debtor,
Haryana, the region with the country’s worst sex ratio. But the scheme is targeted the sovereign is vulnerable to hos-
at poorer people, for whom a girl is traditionally seen as a cost and burden. It is tile creditor legal action.
unclear why richer, more educated Indians should harbour what the Economic In short, there is no legally bind-
ing debt restructuring mechanism
Survey calls a “meta preference for boys”. These biases have deep social and
economic roots and there is an urgent need for messaging targeted at more
in respect of sovereign debt. Efforts
by the International Monetary
WHAT NEXT
sophisticated audiences so that India is able to regain some measure of demo- Fund (IMF) to evolve one have not Y V REDDY
graphic balance. succeeded.
Sovereign debt is good as long as good times
last. When they cease, a sovereign workout in the
the doctrine of odious debt, also known as illegiti-
mate debt— that is, national debt incurred by a
despotic regime. Both, international law and the
IMF, hold governments strictly liable for all debt
incurred by their predecessors.
Global finance needs some “safe assets” in its
portfolio. Financial conglomerates are willing to
subscribe to a sovereign bond of a country even if it
borrows for day-to-day expenses (revenue deficit)
and has to borrow externally to pay for its imports
(current account deficit). History is replete with
precedents. The reason is simple:
Those subscribing to sovereign
bonds are privileged creditors rela-
tive to others.
Experience shows that a
sovereign debt crisis does not hap-
pen in isolation. It is accompanied
by others, such as, banking, politi-
cal and external sector crisis. Policy-
makers’ freedom to manage a crisis
is severely constrained if the
sovereign has debt obligations to
non-residents, especially in foreign
currencies. History also shows that
recourse to sovereign foreign cur-
rency debt is seldom constrained
by prudence; especially if political economy tilts in
favour of profligacy.
domestic sources with foreign savings to the extent
of issue of sovereign bonds.
Third, there is a hierarchy of desirable sources
of foreign savings that has served us well. The most
preferred is the green field foreign direct invest-
ments. A second source is foreign direct investment
in the existing enterprises. Another is portfolio flows
in equities. The fourth is external commercial bor-
rowings by non-financial corporate sector for financ-
ing their investments. The fifth is external commer-
cial borrowings by the financial sector. Sixth, there
is surrogate sovereign borrowings—that is, borrow-
ings by public sector financial and non-financial
enterprises which involve an implicit sovereign guar-
antee. They also help establish implicit sovereign
rating for India.
Since until now sovereign bonds do not find a
place in this scheme, how will they fit into this hier-
archy? In brief, the decision on sovereign bonds in
many ways, amounts to a basic change in policy
towards a more open capital account.
The way forward
We should aim for a day when foreigners can freely
buy our sovereign paper and simultaneously our
citizens can freely buy other country’s sovereign
bonds. But that needs a road map which captures
the evolving state of global financial system and our
domestic strengths as well as vulnerabilities in fiscal,

Trade trouble existing non-system can be extremely painful for

the debtor country and its citizens. It makes no dif-
ference whether the country happens to be mid-
Lower exports reflect structural weaknesses dle-income or not, as examples of Greece, Turkey
or Argentina show.
Sovereign debt typically starts with small doses
and then becomes a dangerous addiction and often
results in repeated approaches to the IMF for suc-
finance, and external sectors. It may be wise to start
work on a road map towards capital account open-
ness, in which sovereign bond is back-loaded and
cour. The record of developing countries being dis- not front-loaded.
ciplined by sovereign debt markets is poor and

I
n yet another blow to the prospects of the Indian economy in the medium Incidentally, international law does not recognise India’s record in being disciplined by financial mar- The writer is former governor, Reserve Bank of India
term, the data released this week revealed that export growth has hit a
41-month low. According to the Union Ministry of Commerce and
Industry, exports contracted by 9.7 per cent, year-on-year, in June, after
a small increase in May.
There is no immediate concern about the external account, as imports con-
tracted by a larger amount in absolute terms, and the trade deficit thus decreased.
Europe’s 5G wake-up call
But that is not relevant. The issue is that exports are now a drag on growth, as

H
ow times change. Not so long ago, the next big
distinct from being a significant engine of economic expansion. This has been thing in telecommunications was 4G mobile
the case for some years now, with the occasional green shoots perceived by opti- networks, which promised massive data trans-
mists in the sector failing to mature. A closer study of the data does not provide fers and cheap voice calls. Now comes 5G, which will
much foundation for optimism. It is true, as officials have reportedly pointed potentially spur all sorts of new digital innovations,
out, that one major contributor to the fall was a decrease in the export of refined thanks to its greater speed (200 times faster than 4G),
petrochemicals, and that this might be temporary. Two major refineries — faster data transfers from wireless broadband networks,
Reliance’s in Jamnagar, and the state-owned one in Mangaluru — were partially and, most important, the ability to connect cyber-
physical objects in the context of the Internet of things.
shut for maintenance for some time in the relevant period.
Moreover, 5G is expected to enable the much more
However, this alone cannot explain the slowdown — non-oil exports still rapid reaction times required for driverless cars,
contracted by around 6 per cent. For example, the gems and jewellery sector advanced factory automation, smart cities, e-health,
continues to be plagued with inconsistent export growth, and the export of and many other applications.
engineering goods — one of the bright sparks in the previous financial year — But there is another key differ-
contracted by 2.65 per cent in June. ence. Whereas the battle over 4G
Part of the slide can be attributed to global headwinds for trade, and it is was essentially commercial, focus-
true that there are concerns surrounding the US-China trade war. But many ing on job creation and profits, the
ongoing 5G debate is about geopol-
peer economies correctly see this as an opportunity. Vietnam, for example, has itics, technological leadership, and
posted 6.7 per cent export growth in the first five months of 2019. Bangladesh national security. Here, Europe
clocked double-digit growth in apparel exports last financial year, while Indian must develop a much stronger com-
apparel exporters have struggled. In 2014-15, exports of textile and apparel from mon approach to the new 5G tech-
India were valued at $40.1 billion; in 2018-19, exports from this sector were nology to make itself less vulnerable
$40.4 billion. This is a sign of a failure to inject competitiveness into a crucial, to security risks.
Most of the current 5G controver-
DANIEL GROS
labour-intensive sector.
sy centres on whether US and
The government needs to acknowledge that its various trade-focused
European mobile operators should buy equipment
schemes have not worked, including sector-specific packages and higher tariffs from the Chinese telecoms giant Huawei. The US gov-
on imports. All these have done is to render Indian tradable sectors less com- ernment previously banned the firm from its telecoms
petitive. The shortage of credit and a poorly implemented goods and services market because of espionage concerns (although it
tax have further retarded growth in exports. Therefore, the first step must be to has yet to produce evidence of this publicly), and
ensure that tax procedures are simplified drastically. Instead of doing this, the strongly urged its European allies to do the same.
government has declared that “manual checks” will be reintroduced before Both the US and European positions toward
tax credit is provided to exporters, which might mean that the gap between Huawei seem to be at odds with their commercial
interests. By banning the Chinese company, US
filing a return and getting a refund would triple. For low-margin exporters,
President Donald Trump is favouring existing
this will be a further constraint on expansion. But tax issues are only part of European (and South Korean) equipment suppliers,
the story. The longer-term story is one of eroding competitiveness, aided by even as he complains about America’s trade deficit
an overvalued rupee. Challenges on the export front reflect the structural with Europe. (More recently, Trump has indicated a
weaknesses of the Indian economy and should be addressed through struc- possible softening of his stance toward Huawei.)
tural reform. Clearly, this should be one more pressing concern for the new Although European governments have differing
government to address. views, most do not want to exclude Huawei. Each
national government regards lower equipment prices
for its national telecoms operator as more important
than supporting European champions in 5G technol-
ogy (such as Nokia and Ericsson).
In any case, US and European security concerns
should extend well beyond Huawei and the Chinese
government. The new 5G networks present a unique
security challenge, because their main functions
depend on software, not hardware. This makes 5G
much faster than legacy wireless networks, but also
leaves it vulnerable to potentially malicious attacks.
Today’s information-technology systems are
highly complex: Current smartphone chips have
more than eight billion transistors, and operating
systems have more than 50 million
lines of code. Moreover, many of
these systems contain components
supplied by hardware and software
vendors from around the world. In
practice, this creates multiple pos-
sible entry points for malicious
attacks and data leaks, using “back-
doors” that can be exploited to gain
control of a device. And if backdoors
cannot be detected and monitored,
then entire 5G networks are poten-
tially vulnerable, too.
The key national-security risk,
then, is that a vendor for all or part of a 5G network (or
its national government) could vacuum up all the traf-
fic passing through, or even disrupt the operation of
the entire network with a digital kill switch. Extensive
security reviews of Huawei equipment have failed to
uncover any such backdoors. That is not surprising:
Huawei (or any other company) would be out of busi-
ness if it were caught doing this even once. But it is
also logically impossible to prove the absence of mali-
cious code.
Although Europe has its own suppliers of 5G equip-
ment and could simply shut Chinese vendors like
Huawei out of the market, such a move is unnecessary.
In many European countries, Huawei provides just
one part of the mobile network. Moreover, having mul-
tiple vendors provides some protection against a kill-
switch risk to the entire system.
Diversity also constitutes a liability, because each
European Union member state performs its own,
often quite different, security check on Huawei
equipment, with many of them having only limited
resources and experience to do so. The security of
the future 5G networks could be much better
ensured if an EU agency carried out a common check
on all equipment suppliers.
More generally, Europe’s potential 5G vulnera-
bility stems mainly from the desire of each member
state to keep its own mobile network under nation-
al control. For example, the allocation of 5G fre-
quencies has been conducted entirely at the nation-
al level, according to widely different rules and
conditions. This, of course, makes the emergence
of “European champions” in the telecoms industry
less likely.
In addition, the defence of (national) networks
against cyberattacks is also managed at the national
level. The EU Agency for Cybersecurity (ENISA), which
still has fewer than 200 staff even after a recent budget
increase, plays only a weak coordinating role.
Yet telecommunications networks within the EU
are highly integrated across national borders. Future
cyberattacks may well target more than one member
state, and a blackout in one country would severely
affect others. Europe thus urgently needs a powerful,
integrated cybersecurity agency. Over the longer
term, the entire regulatory framework for telecom-
munications networks, including spectrum auctions,
should be centralised at the EU level. This would
finally create the “single digital market” that has so
far eluded Europe.
European leaders would be wrong to regard a
Chinese supplier of 5G network equipment as the
biggest threat to the continent’s cybersecurity and to
its ability to develop telecoms champions. Europe’s
real vulnerabilities are its still-fragmented telecoms
market and its lack of a common cyber-defence sys-
tem. The looming introduction of 5G should be a wake-
up call to policymakers across the continent. One can
only hope they heed it.
The writer is Director of the Centre for European Policy
Studies. © Project Syndicate, 2019.

Scientists who broke the gender barrier

assertive about narrating their  experi-
ences.  The discrimination is so deeply
ingrained that it is utterly normalised in
the way popular culture treats women in
STEM. It shows up at school when girls
are told that they are intrinsically bad at
BOOK REVIEW maths; it shows up in poor gender ratios
in higher education. It showed up, circa
DEVANGSHU DATTA 2015 with a distinguished male scientist
“joking” that he couldn’t work in the lab
In 1964, Dorothy Hodgkin was hailed
as the “Oxford housewife and mother”
who had somehow won a Nobel Prize
for developing x-ray crystallography
techniques that helped define protein
molecular structures. Rachel Carson,
who pioneered the environmental
movement, was ridiculed as a “ romantic
writer” despite her credentials as a
marine biologist. Trudy Elion, another
thing in common,  quite apart from Although the authors say they tried
being extraordinarily gifted in their to treat their subjects as “ordinary wom-
respective disciplines:  they all pos- an” who survived family tragedies and
sessed a quality best described as disasters and did extraordinary things,
out the technique of fortifying food with bloody-mindedness.  these were obviously very unusual peo-
vitamins; Dorothy Hodgkin, crystallog- They refused to take no for an answer. ple. It is frankly, impossible to do justice
rapher (and housewife!); Gertrude Elion They smashed academic barriers by to the lives of 10 such personalities in an
who revolutionised drug design meth- insisting on learning things that women average of 30 pages each.  It is even more
ods; Rita Levi-Montalcini who worked weren't allowed to learn.  They broke difficult since it is necessary to get
out nerve growth; Chien- glass ceilings in their abstruse scientific concepts across, and
Shiung Wu who worked on Although the authors workplaces, they survived every essay involves getting into different
the Manhattan Project and say they tried to treat racial persecution and subjects at that. 
subsequently produced a their subjects as discrimination in several This book does a fair job of compress-
string of important experi- “ordinary woman” instances.  ing those lives and careers, without read-

T
his book consists of short profiles
of ten extraordinary scientists who
happened to be women. Each in
their own individual way broke through
glass ceilings and all of them changed
the world. The authors decided that they
would focus on people who were dead,
perhaps because it is easier to place a
completed life in context. In other
respects, their choice of subjects range
across different fields.   our! The reason: She was in a relationship
Gender discrimination across the
STEM disciplines  has become a “hot but-
ton” issue in the past few years as women
working in these areas have become more
https://t.me/SSC4Exams
with “ distractingly sexy” women who Nobel laureate, was denied a research mental results in physics; who survived family Meitner had to flee ing like Wikipedia entries. It is an excel-
“fall in love and cry when you criticise position literally because she was and Marie Curie, who was, tragedies and Nazi Germany; Chien lent introduction to  the lives of some of
them”.  “too pretty”.  among other things, the first disasters and did faced racial suspicion as the smartest people you might never
Each of the women profiled here had to The women profiled include anaes- woman professor in France.   extraordinary an Asian American while have heard of, written in easy prose with
deal with this all pervasive problem in thesiologist, Virginia Apgar, who invent- Given the diversity of things, these were working on a top secret reasonably lucid explanations of the sci-
their own life. To take one famous instance, ed the Apgar Score, which is used the fields and backgrounds, it’s obviously very American military pro- ence. But each of these women deserves
when the widowed Marie Curie won her world over for the instant assessment of hardly surprising that these unusual people ject. Curie’s daughter, a full-length biography to themselves
second Nobel Prize in 1911, (Chemistry for neo-natal health; Rachel Carson, whose ten women had very differ- Irene, (herself a Nobel lau- rather than this set of very brief lives.
isolating radium) the Nobel Committee bestseller Silent Spring sparked envi- ent personalities and enormous varia- reate) once lamented that her mother
actually requested her to decline the hon- ronmental consciousness; astronomer, tions in their life experiences. These live- was “a brave daughter of France” in pop-
Henrietta Leavitt, who work on cepheid ly accounts make that very evident. ular reckoning when she won interna- TEN WOMEN WHO CHANGED
with a married colleague. She was always variable stars led to methods for judging Some of them were strongly combative tional recognition, and she was a “ Polish SCIENCE AND THE WORLD
referred to in academia and media the expansion of the universe; physicist, people,  others quieter and more self immigrant” at other times, such as when
Catherine Whitlock, Rhodri Evans
as “Madame” rather than docteur or Lise Meitner, who was a nuclear fission effacing. However, despite being differ- she was refused admittance to the
professor.  pioneer; Elsie Widdowson, who worked ent personality types, they all had one Academie Francaise.  Hachette; ~599; 320 pages
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QUICK TAKE: SPICEJET FLIES HIGHER “President Aquino created a North

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FPIs net sellers since Budget... Inter-scheme

transfers see
SURCHARGE Foreign investors have pulled out close Advisors. The slowdown in the economy, including the there. If the pre-Budget tax

over 50% fall

corporate earnings and one related to FPI taxation, budgets regime is restored, you
DAMPENS MOOD to ~6,000 crore from equities in July India’s economic growth is profit-booking could contin- could see better flows to India,”
FPIs have been net-buyers on also worrying foreign ue,” added Bhat. said Andrew Holland, chief
only two occasions this month SUNDAR SETHURAMAN and 37 per cent on income investors. According to ana- The pull-out by FPIs executive officer, Avendus
n Total flows (~cr) Mumbai, 17 July above ~5 crore. While the lysts, index companies are comes amidst a decline in Capital Public Markets CUTTING DOWN ON
7/1/2019 -863 higher surcharge has been expected to report a slip in bond yields in India as well Alternate Strategies LLP. SELF-TRADES
O
verseas investors originally aimed at the ultra- earnings during the first quar- as across the developed FPIs had started to invest
7/2/2019 -1,553 have been on a selling rich, foreign portfolio ter. Moreover, a world. Typically, a aggressively in India in 2019 n FY19 n FY20 Value (in ~ crore )
7/3/2019 -1,281 spree this month. investors (FPIs), especially lack of stimulus lower return on after slamming the brakes a 46,958
7/4/2019 556 Month-to-date (MTD), they those with non-corporate package in the treasury yields year ago. Influential foreign
have pulled out ~5,673 crore structures, are caught in the Budget to revive lowers the attrac- brokerages such as Goldman 22,429
7/5/2019 600 from domestic equities, being crosshairs. Market players growth has disap- tiveness of the Sachs and BNP Paribas
7/8/2019 -330 net sellers on 11 out of the 13 said the tax proposal has pointed foreign investment in risk- upgraded their stance on
7/9/2019 -877 trading sessions. impacted FPI participation, investors. free assets, push- India in the hope of stability
They have been on an particularly those who active- “A fillip by way ing investors to in corporate profit growth (1,641) (1,185)
7/10/2019 -460 unbroken selling streak since ly trade in the futures and of a stimulus pack-
BUDGET put their money in and resolution of the non-per- Number of transactions
7/11/2019 -177 the Union Budget, spooked options segment. age expected in the IMPACT equities. This has forming asset crisis. Note: FY20 data as of May-end
Comparable data taken for FY19
7/12/2019 -723 by increase in income-tax sur- “Quite a few FPIs are inter- Budget has not hap- been seen playing “Globally, interest rates are Source: Sebi
charge, taxes on buybacks, national mutual funds struc- pened. Moreover, the valua- out in other emerging mar- falling and equity markets
7/15/2019 -190 and lack of stimulus to prop tured as trusts. The increased tions are stretched. Good kets, which have reported will get the benefit for those
7/16/2019 -358 up the economy. surcharge has affected them companies are too expensive; positive foreign flows this looking for better yields. If SACHIN P MAMPATTA above proposals,” shows a
7/17/2019 -17 The government has pro- since funds are floated based others not doing well are month. “Other emerging mar- you did not have this prospect Mumbai, 17 July statement following the Sebi
posed to levy a surcharge of on a stable and predictable hardly investment-worthy. kets with falling interests are of tax, they will be more board meeting on June 27.
MTD -5,673 25 per cent on incomes tax regime,” said U R Bhat, Till a resolution is found for getting the same benefits, and inclined to invest in India,” The mutual funds (MF) indus- The need for such transfers
Source: Bloomberg/NSDL between ~2 crore and ~5 crore director, Dalton Capital the various issues plaguing there is more incentive to go said Holland. try is witnessing a change in become more pronounced
the practice of transferring when there is a change in
securities between a firm’s own investor preferences, with peo-

...Morgan Stanley sees $25-bn inflow potential

SAMIE MODAK
Mumbai, 17 July
The domestic equities market could
expect an overseas flow bonanza to the
tune of $25 billion (~1.72 trillion at the
current exchange rate) if the govern-
ment is able to implement three key
proposals pertaining to foreign portfo-
lio investors (FPIs).
These include increasing the public
float in listed companies to 35 per cent
from 25 per cent, increasing the mini-
mum statutory limit for FPI investment
in a firm from 24 per cent to the sectoral
foreign investment, and lowering gov-
ernment holding in listed public sector
undertakings.
Foreign brokerage Morgan Stanley
says India’s weight in the MSCI
Emerging Market (EM) index could
increase by 146 basis points (bps) if all
these measures are implemented.
“In the Budget, Finance Minister
Nirmala Sitharaman made an explicit
effort to lift free float of Indian stocks.
schemes, with fewer fund ple looking to switch from one
houses doing so nowadays. scheme category to another,
Shifting securities within said Dhirendra Kumar, chief
the same fund house rather executive officer of fund track-
Illustration: Binay Sinha than selling in the open market er Value Research.
MSCI RANK VS MARKET REALITY and Switzerland have foreign free float has more than halved since last “There is a need for inter-
India’s MSCI free float market cap rank is 13, despite it being of above 90 per cent. India’s weight in year, shows the regulatory data. scheme transfers when
sixth-biggest globally in terms of aggregate market cap the MSCI EM index is 8.8 per cent, low- The value of transactions investors move their money
er than its peer group, and its market has fallen 52.2 per cent to very dramatically,” he added.
M-cap Rank Foreign free Free float GDP M-cap to
cap is not concurrent with its GDP. ~22,429 crore so far this year, This has not happened in the
($ trn) float (%) rank ($ trn) GDP (%) “This under-representation in from ~46,958 crore for the same last year. So, there has been
US 30.28 1 95 1 20.49 148 index weight versus GDP is unique to duration last year. The number limited scope, he suggested.
India and a consequence of a low for- of transactions, too, fell from Dwijendra Srivastava, CIO
China 7.10 2 34 4 13.41 53
eign free float factor of 38 per cent,” 1,641 to 1,185. Such transactions (debt), Sundaram Asset
Japan 5.75 3 74 2 4.97 116 said the report. The proposal to typically invite attention Management, said such trans-
UK 3.33 4 95 3 2.83 118 increase the free float in listed firms is because of the possibility of actions make sense on many
being examined by the Securities and malpractice, when both the occasions. They could cut
France 2.46 5 69 5 2.78 89 Exchange Board of India. buyer and seller of the security down on costs such as broker-
India 2.29 6 38 13 2.78 82 In the note, Morgan Stanley has are the same entity. age and other transaction fees
Sources: Bloomberg, MSCI, IMF, Morgan Stanley Research
highlighted key risks to its projections This decline comes during that would otherwise have to
of the $25 billion in FPI flows. Some of a period of higher regulatory be paid if securities were
them include dilution of the proposals, scrutiny. The dynamics of bought and sold in the open
The announcements, if converted into in FPI flows — $11.4 billion in active market cap, India is ranked 13th in a delay in adoption, as well as a “change investor preferences at a time market, as opposed to trans-
policy, will have a far-reaching impact and $2.8 billion in passive inflows. terms of free-float market cap. in foreign investors’ view on India’s of relative turbulence in the ferring it from one scheme that
on India’s free float, its weight in the The brokerage adds that the Switzerland and Australia have a high- growth story”. fixed income market is also needs cash to another that
MSCI indices, foreign flows, and supply increase in public float will help er weight in the MSCI global indices It says L&T, Bajaj Finance, Bajaj seen as a major factor. needs the security in question.
of equity,” said equity strategists Sheela address the mismatch between India’s despite their total market cap being Finserv and Hero MotoCorp could see The Securities and The average AUM for the
Rathi and Ridham Desai in a note. aggregate market cap rank and free- below India’s. This is on account of low the highest increase in their MSCI Exchange Board of India (Sebi) debt segment was ~12 trillion
The brokerage says the proposal to float market cap rank. ‘foreign free float’ of 38 per cent weight if the proposal to subsume FPI has, in the past, warned firms in FY19, shows Value Research
increase free float by 10 percentage Despite, being the sixth-biggest assigned by MSCI to India. investment limit with foreign sectoral against using such transac- data. This includes closed-
points itself could yield over $14 billion equity market globally in terms of total In comparison, the US, Australia limit goes through. tions for manipulative activi- ended and open-ended
ties. It moved to restrict the use schemes. Investors can exit
of such transactions for valua- when they want in the latter,

THE COMPASS Indices gain for 3rd straight session
Extending gains for the third
session in a row, the Sensex
24.9 points or 0.21 per cent up
at 11,687.50. During the day, it
tion purposes, last month.
“In order to increase the
robustness of valuation and
address possible misuse, var-
while they have a lock-in peri-
od in case of the former.
Majority of the assets are
held under open-ended

Food aggregators could keep QSRs hungry rose 85 points on Wednesday,

driven by gains in banking and
IT stocks. After a volatile trade,
hit a high of 11,706.65 and low
of 11,651.15.
Top gainers in the Sensex
ious proposals related to val-
uation of inter-scheme trans-
fers (ISTs) disallowing the use
schemes, accounting for over
~11 trillion as of March-end.
The value of inter-scheme
High competitive SHREEPAD S AUTE during the IPL — to predict the winner and
earn a huge discount if the prediction came
the index settled 84.6 points
or 0.22 per cent higher at
pack included SBI, Tech
Mahindra, HCL Tech and Kotak
of own trades for valuation,
etc, were approved. Suitable
transfers in FY19 was ~2.3 tril-
lion, shows Sebi data. The val-
pressure may hit Listed quick service restaurants (QSRs) Jubilant true — was one such offering. Though Jubilant 39,215.64. It swung 203 points Bank, rising up to 2.31 per cent. grandfathering, wherever ue of transactions account for
FoodWorks and Westlife Development are and Westlife are also expected to have benefited intra-day, hitting a high of YES Bank was the biggest loser, applicable, and adequate a fifth of the average debt
same-store sales expected to report steady growth for the June from online aggregators, these portals have 39,284.73 and low of 39,081.14. cracking 5.25 per cent ahead of time period shall be provided AUM, show back-of-the-enve-
growth of QSRs, quarter (Q1), despite moderation in consump-
tion. However, with parent Domino’s Pizza indi-
plenty of other options based on customers’
preferences and at relatively better pricing.
The broader Nifty ended its first quarter results. PTI for implementation of the lope calculations.

dent stock cating competitive pressure from online aggre-
gators, the same-store sales growth (SSG) of
performance Indian QSRs could fall short of expectations.
This could hurt their stock performance,
given SSG is a key performance measure for
retailers and restaurants. While Jubilant runs
stores of Domino’s Pizza in the country,
Westlife-owned Hardcastle Restaurants runs
Base=100 McDonald’s outlets in West and South India.
130
The Indian Premier League (IPL) and Cricket
Westlife Sensex World Cup were expected to give a fillip to the
Development 120
overall growth of QSRs over the last few months,
with support from promotional offers to aid
110
growth. This included, for instance, a 30 per
100 cent discount on online orders of Domino’s piz-
zas. Therefore, despite a high base of 24-26 per
90 cent in the June 2018 quarter (Q1FY19), analysts
expect Jubilant and Westlife to report 6-8 per
80 cent same-store sales growth (SSG) in Q1FY20.
Jubilant However, even online food aggregators such
FoodWorks 70 as Zomato were aggressive on the marketing
Jul 2,‘18 Jul 17,’19 front during the cricket tournaments.
Compiled by BS Research Bureau For example, the Zomato Premier League
As a result, rising competitive intensity for
listed QSRs is a negative. Vishal Gutka, AVP at
Phillip Capital, said that customers get a variety
of options based on their pricing and food pref-
erences from online aggregators, which have
relatively more promotional offers. This could
disturb the business of QSRs to some extent.
However, price hikes, cost efficiency, a bev-
erage contract with PepsiCo, and profit contri-
bution from Dunkin’ Donuts, should all help
on the profitability front as well as earnings of
Jubilant, despite high input prices (wheat and
cheese) and promotional spending.
Westlife, on other hand, is likely to have wit-
nessed margin pressure.
Jubilant is expected to report close to 15 per
cent year-on-year (YoY) growth in net profit in
Q1. Net profit of Westlife, on the other hand, is
expected to have declined by 41 per cent YoY,
according to IIFL.
Overall, management commentary on com-
petitive pressure and store expansion plans will
be key for the stocks.

Steel players continue to be under the pump

As realisations for UJJVAL JAUHARI
most products News of the government
recommending anti-dump-
remain under ing duty on aluminium and
zinc-coated flat steel prod-
pressure, rising ucts has failed to lift the
iron ore prices stock prices of steel majors.
Tata Steel, JSW Steel,
pose threat to SAIL, and Jindal Steel and
Power (JSPL) continued
profitability their downtrend and are
trading 11-19 per cent lower
since the end of April.
The anti-dumping duty
will be on products that
comprise a small portion of
Base=100 India’s steel consumption,
120
which only JSW Steel and
Sensex
Tata Steel produce (about
110 0.5 million tonnes or mt, say
analysts). The downward
100 pricing trend in majority of
steel product prices contin-
ues with costs down 7-15 per
90
cent since March 31, shows
data from Motilal Oswal
80 Financial Services.
With domestic steel
BS Steel Index 70 prices below ~40,000 per
Jul 2,‘18 Jul 17,’19 tonne for the first time since
Compiled by BS Research Bureau December 2017, the Street
remains cautious
prospects of the major pro-
on
ducers. What compounds
the problem is the rise in
raw material costs (iron ore),
which will put pressure on
profitability of steel compa-
nies, especially the non-
integrated players.
The near-term pricing
outlook, too, is not encour-
aging, given the weak mon-
soon and lower demand.
Global steel prices are
under pressure on account
of concerns over the trade
war. China’s inventory is
also rising, adding to worries
on realisations as well as
increasing the threat of
cheap imports into India.
China’s finished steel
inventories rose for the fifth
successive week, surpassing
12 mt yet again. The onset
of a seasonally weak period
could lead to further build-
up in inventory, according
to Edelweiss Securities.
Therefore, the only
respite for Indian steel mak-
ers may come by the end of
the monsoon season, with a
pick-up in demand. Higher
realisations are also neces-
sary for taking care of cost
pressures. Domestic iron ore
prices are expected to rise
and non-integrated players
will feel more heat.
CRISIL Research says
non-integrated steel players
are on course for a 300-400
basis point decline in Ebitda
margins, as iron ore mining
leases — accounting for 30
per cent of India’s and half
of Odisha’s production —
expire in March 2020.
This shall translate into
a price hike of 15-20 per cent
in FY21, feels CRISIL, given
that fresh bidding is likely
to be at some premium.
Among steel manufac-
turers, while Tata Steel has
captive mines, JSW Steel is
more dependent on exter-
nal ore.
Analysts, however
believe that JSPL’s earnings
improvement will continue
on account of rising produc-
tion and operating leverage.

https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams

 https://t.me/TheHindu_Zone_official

>
MUMBAI | THURSDAY, 18 JULY 2019 THE SMART INVESTOR 15

HDFC AMC rides on cost optimisation Tax heat on Cyprus,

Stock touches STRONG EARNINGS OUTLOOK
ty schemes at about ~7,663 crore,
it was still 20 per cent lower than
Singapore investors
all-time high; FY20E Growth (%) FY21 Growth (%)
the previous year. Analysts at
Emkay Global Financial Services ASHLEY COUTINHO
leadership in Total revenues 2,313 10.3 2,641 14.5 say mutual fund houses have Mumbai, 17 July
turned somewhat cautious with
retail AUMs augurs Total expenses 584 -22.6 623 5.9 cash position up to 2.3 per cent, Investors from Singapore and Cyprus,
well for firm Net profit 1,159 24.5 1,357 17.1
the highest in 10 months.
“Flows are improving, but we
who have availed an exemption or
concessional rate of taxation for invest-
E: Estimates; Growth is year-on-year; Figures in ~ crore Source: Brokerages prefer to remain cautious,” says a ments made before this financial year,
HAMSINI KARTHIK fund manager. While the larger may come under scrutiny under a
Mumbai, 17 July positives such as market global tax framework that was recently
However, HDFC AMC has For investors, the important in June, it is still far from com- positioning and tight cost ratified by India.

I
n the past four quarters since
its listing, June quarter (first
quarter, or Q1) has been the
best so far for HDFC Asset
Management Company (AMC).
While revenues from operations
grew only 7 per cent year-on-year
(YoY) to ~504 crore, the net profit
growth at 42 per cent YoY to ~287
crore in Q1 was sizeable.
Consequently, the stock of
HDFC AMC rose by 4 per cent on
Wednesday reacting to positive
numbers. The Street’s expecta-
tions have moved a notch higher,
given the company’s ability to
handle cost-related pressures
quite effectively. These pressures
cropped up, owing to the recent
changes in norms governing the
total expense ratio (TER).
been able to pass on a large part
of the reduction in TER to distrib-
utors. Most AMCs resorting to a
price hike in liquid funds had also
cushioned the impact of a TER
cut. Phasing out upfront commis-
sion expenses from HDFC AMC’s
profit-and-loss statement has also
helped the company bring in sig-
nificant cost efficiencies.
Q1’s fees and commission
expenses declined by 86 per cent
YoY, thus, explaining the
improvement in net profit,
despite only a 7 per cent revenue
growth.While higher efficiencies
are an internal factor, the asset
management company’s ability
to grow its assets under manage-
ment (AUMs) by 18 per cent YoY
in Q1 is also a positive.
takeaway is that the share of indi- forting. Reports suggest that equi- structures are a long-term posi- Last month, the Centre ratified the
vidual AUMs (retail plus high net ty inflows in Q1 (excluding those tive, sustenance of inflows is multilateral instrument (MLI) to pre-
worth individuals) rose to 59 per into arbitrage schemes and important for HDFC AMC to repli- vent base erosion and profit shifting
SHARE OF FDI EQUITY
cent, against the exchange-traded cate Q1’s performance. (BEPS). BEPS is the framework by the FLOWS FOR FY19
industry levels of 54 funds) was nearly 72 Another factor to watch out Organisation for Economic n Flows ($ billion)
per cent in Q1. It would be per cent lower than for is how the company’s bal- Cooperation and Development (OECD)
HDFC AMC lead- important to keep 2018-19 average. ance sheet exposure to Essel countries to prevent tax evasion by Singapore 16.2
ership across seg- an eye on the The industry was Group will pan out in the coming multinationals, particularly digital
ments such as equity, overall inflows faced with significant months. Fund houses’ ‘stand- companies, which could shift their Mauritius 8.1
debt, and liquid funds into mutual fund redemption of ~16,200 still’ arrangement with promot- profit to low tax countries. One of the
with 15.8, 13.4, and industry. While the crore in Q1 in equity ers of Essel Group expires on anti-abuse provisions in the MLI is the Netherlands 3.8
16.9 per cent market environment schemes, while debt September 30. Principal Purpose Test (PPT). 3.1
share, respectively, turned funds saw an outflow If the Essel entities are unable Under the domestic General Anti-
US
adds strength to its incrementally of ~14,700 crore, to meet their repayment obliga- Avoidance Rules (GAAR) norms, Japan 2.9
financials. conducive in June, according to a HDFC tions, the probability of HDFC investments before April 1, 2017, are
However, it would it is still far from Securities report. AMC taking a hit on its exposure kept out of the tax net. This is after Source: DIPP
be important to keep comforting While the June is likely; an event that will have India renegotiated its tax treaties with
an eye on the overall 2019 performance was a bearing on its financials. Mauritius, Singapore and Cyprus in
inflows into the mutual fund better than a month ago, with a Trading at 36 times its FY20 2016. Based on the new arrangement, to an approving panel comprising out-
industry. While the environment near-42 per cent month-on- earnings, there is limited scope Indian equities acquired prior to April side experts, will also not be available
turned incrementally conducive month increase in flows into equi- for any misses by the company. 1, 2017, were granted capital gains tax under the MLI, he added. Provisions
exemption. Shares acquired on or after of GAAR, for instance, do not apply to
this period, and sold before April 1, arrangements where the tax benefit in
2019, had concessional tax at 50 per the relevant assessment year does not

Six of seven 2019 IPOs trading above issue price
DEEPAK KORGAONKAR &
PUNEET WADHWA
Mumbai/New Delhi, 17 July
The initial public offering (IPO)
market may not have seen much
action in H12019, but stocks of six
of the seven companies that
raised funds via the primary mar-
ket route during this period have
given handsome returns. The
outperformance of these stocks
comes at a time when fund
mobilisation via the IPO route hit
the lowest amount raised in the
last four years at ~5,509 crore.
These stocks have beaten the
benchmark index S&P BSE Sensex
by gaining up to 61 per cent
against their issue price.
These six companies are cur-
rently valued at ~6,272 crore, 19 per
cent higher than the ~5,275 crore
they collectively raised via IPOs.
In comparison, the S&P BSE
Sensex gained an average 1 per
cent. Analysts say the outperfor-
mance has been mostly on
account of a healthy response
from institutional investors, rea-
sonable pricing, and the overall
weakness in the mid- and small-
cap segments.
“The returns witnessed by
recent IPOs are in stark contrast
to the poor performance in CY17
and CY18. This is largely on
account of recalibration of both
investor and promoter expecta-
tions to the fall in valuations in
mid- and small-caps. The margin
of safety that issuers, bankers and
investors work with has increased
significantly, which has led to the
returns that have been witnessed
in most IPOs in CY19,” explains
Munish Aggarwal, director (capi-
tal markets), Equirus Capital.
cent of the domestic rate. The MLI,
however, does not recognise these
exemptions or concessions.
And, since both Singapore and
exceed ~3 crore. There is no such
threshold under the MLI.
“Right now, there is no guidance on
the issue from the government. India
SHINING BRIGHT need to check the business
prospects and stock valuation
Cyprus are signatories to the MLI frame-
work, any exemption in capital gains or
will have to clarify that grandfathered
investments from these jurisdictions
Price in ~ before they take this call,” says G a concessional rate of tax availed by will not be additionally subject to the
Name Latest Offer % Change Chokkalingam, founder and man- investors from these regions for the said PPT test, once the MLI is enforced,”
aging director, Equinomics periods could be questioned by the tax said a tax expert. MLI could be a game
Neogen Chemicals 347.65 215 61.7 Research. authorities. The impact on Singapore changer and lead to increased litiga-
Rail Vikas Nigam 25.15 19 32.4 On a corresponding-period investors could be significant, consid- tion between investors and tax author-
basis, 18 companies had mobilised ering the country was India’s top source ities owing to its wider applicability
IndiaMart InterMESH 1,252.60 973 28.7 ~23,452 crore from the primarily for foreign direct investment (FDI) in than the domestic GAAR.
Metropolis Healthcare 1,032.75 880 17.4 market, according to PRIME the last financial year. The country put According to experts, it may be pos-
Database. an estimated $16.2 billion in 2018-19 into sible that in situations where there is
Polycab India 621.55 538 15.5 “The hangover of elections India via the FDI route compared with a conflict between GAAR and the MLI,
Chalet Hotels 310.05 280 10.7 and the Budget is behind us. $8.1 billion put by Mauritius. the latter could prevail. This is because
MSTC 98.35 120 -18.0 However, a slowdown in con- Mauritius is yet to notify its treaty GAAR provisions are triggered when
Latest price on BSE as on July 16, 2019
sumer demand has emerged as an with India as a covered treaty. So, the main purpose of an arrangement
important consideration for both investors coming from the region will is to obtain tax benefit. The PPT rule,
Neogen Chemicals is trading “There is a lot of institutional issuers and investors. We expect not be impacted under the MLI. on the other hand, is applicable even
at ~346 levels, 61 per cent higher investor interest in some of these the Reserve Bank of India to “Unlike GAAR, which does not if one of the main purposes is to obtain
as against the issue price of ~215 stocks. One also needs to see how reduce interest rates and the gov- apply to income arising from certain a tax benefit. Moreover, tax authorities
per share. Rail Vikas Nigam much floating stock is available ernment to take pro-active steps pre-2017 structures, the PPT can be could get a free hand in applying the
(RVNL) and IndiaMART with the retail investors to trade. to accelerate the gross domestic invoked for older structures as well,” latter since there is no guidance on
InterMESH are trading 32 per cent Given the run-up, it is a good time product, which should help issue said Punit Shah, partner, Dhruva how the PPT rule will be applied by
and 29 per cent higher, respective- to partially book profit in some of activity in the second half of the Advisors. Safeguards under GAAR, them and what constitutes “principal
ly, as against their issue price. these counters, but investors do calendar year,” Aggarwal says. such as a monetary threshold or access purpose.”

PRIVATE EQUITY
>

KEY DEALS LAST WEEK

Investor and target
Saama Capital II 1
Mountain Trail Foods
Amazon.com NV
Stake (%) Value ($ mn)
Advent to look for more deals, bigger investments
PAVAN LALL increased, along with allocation,” said Jalan Fullerton-India, Whirlpool’s Arvind Uppal and
NA 8.78
Mumbai, 17 July who joined in 2009. others. Care Hospitals, in which Advent invest-
One private equity analyst who did not want ed $110 million, was sold in 2012 at a value of

O
Investment Holdings LLC
ver a decade after it set up shop in India,
0.51 7.45 Boston-based Advent International is
QDigi Services
geared to accelerate the number of deals
VH Capital and size of investments across key focus areas
Evato Technology NA 2.1 such as consumer industries, financial services,
health care and information technology.
Last month, Advent closed its largest global
New Delhi Television 2 fund called “GPE IX” at $17.5 billion.
One Mobikwik Systems NA 1.27
The fund will adopt the same strategy as its
eight earlier funds — buyouts, corporate carve-
Birju Gala out, public-to-private, and growth equity trans-
Northmist NA 0.15 actions, especially in Europe and North
America, and selectively in Latin America and
1
Eight Roads Ventures India, DSG Consumer Partners I, Milestone Capital
Asia. Historically, in the subcontinent, Advent
Advisors Ltd.; 2Trifecta Capital has been cautious with its investments, some-
Advisors LLP; times only making an investment per fund. But,
Note: There were 9 PE deals worth $19.75 million with 2 private equity exit in the the number of transactions has increased in the
last seven days ended July 17, 2019
Source: VCCedge past three years.
Fund VI, for example, was small. There was
only one investment — $110 million in Care
Hospitals. Fund VII resulted in a carve-out in
PremjiInvest backs enterprise Crompton Greaves and Quest. Fund VIII accel-
erated investments in Manjushree Technopack
contract lifecycle management firm ($190 million), ASK ($130 million), and Dixcy
Scott ($125 million).
PremjiInvest, the family office of Wipro’s billionaire Azim Premji, Advent India Managing Director Shweta
and US-based Greycroft Partners, led a $115-million funding Jalan did not share how much of the global fund
round in US-based enterprise contract lifecycle management will be allocated to India, but she said the com-
company Icertis Inc. The funding has propelled it into the club of pany was “opportunistic”.
technology unicorns with a valuation of at least $1 billion. “With every passing fund, deal sizes have
to be named said the allocations for global funds
were typically between 5 per cent and 7 per cent,
but varied based on market dynamics.
Jalan said it was difficult to find $100-million
deals earlier, and the firm had reduced invest-
ments to $50 million. Now, the minimum
investment is for $100 million, and can be scaled
up to $500 million per transaction.
Globally, Advent’s speciality areas are finan-
cial services, health care, technology, telecom,
media, industry, and retail. In India, the focus
has been narrower.
Common themes for all of Advent’s deals
have been backed by consumption-driven sto-
ries in which the companies are market leaders
— Manjushree Technopak makes packaging for
consumer items, Dixcy Scott makes innerwear,
and Crompton Greaves are makers of electrical
products such as fans, pumps and light bulbs.
There’s another common thread. Most of
Advent’s India punts — which total $1 billion
— have been in companies run by promoters.
This means decision making in these firms is
highly centralised and transition to professional
management can be challenging.
Jalan said two things have to be done in syn-
chronicity for deals. “We bring in a CEO and
CFO and set up a strong board,” she added.
In the case of Manjushree, the promoter and
his brother both had sons, which meant filling
Shweta Jalan, MD of Advent India PHOTO:ADVENT
the shoes of four directors as soon as the deal
was done.
Helping Advent make all that happen are 10
investing partners and an advisory board whose
chairperson is former HSBC banker Naina Lal
Kidwai.
Senior advisors include former PepsiCo boss
Manu Anand and other operating partners who
include former Wipro executive Girish
Paranjape, Bhaskar Iyer ex-Abbott, Shantanu
Mitra, former CEO of non-bank lender
2.2 times. This is the sole exit of Advent under
Jalan till now.
Are there transactions Advent won’t consid-
er? Jalan said Advent would not chase dis-
tressed assets and deals.
PE deals have seen a surge in value, with
several transactions ranging between a half-bil-
lion and a billion dollars (Brookfield-Leela
Hotels; Blackstone-Mphasis; Brookfield-RIL
East West Pipeline; KKR-Ramky Enviro
Engineers) but typically like Advent, most
American firms such as General Atlantic, TA
Associates invest between $100 million and
$400 million. Advent's India advisory board
chairperson Naina Lal kidwai notes that one
shift over the years has also been the opportu-
nity to do larger deals, especially in areas like
pharma.
“There will be more such deals in the future.
Another area where deal sizes will be large is
the financial services space where Advent is
underinvested presently, and is interested in
investing,” she said. “Advent has both the inter-
est and the ability to do a range of both smaller
and large deals across industries.”
Is that something Advent will buck the trend
on? Jalan said, “I would like to invest at least
$500 million if not a billion but the opportunity
has to be right, and there’s lots happening in
financial services.”

Led by Tiger Global, B2B start-ups catch attention of investors

RANJU SARKAR The shift is best captured by Tiger backed Housing.com ‘‘B2C businesses market size for these businesses is
New Delhi, 17 July Global’s investments this year. require a lot of cash for building a billions of dollars. It gives a huge GAINING IN POPULARITY
The US-based investor, best known mass market brand and acquiring market size for a B2B start-up to serve B2B B2C
Last week, business-to-business (B2B) for backing and then exiting Flipkart, customers. B2B businesses are the value chain and bring efficiency
Funding % age of Funding % age
industrial goods marketplace Moglix has invested in over a dozen start-ups relatively more capital-efficient,’’ he into the system and therefore, attract # of Amount total # of Amount of total Total
raised $60 million, in a funding round till mid-July. Ten of these are in B2B says. investor attention/capital Year Rounds ($mn) funding Rounds ($mn) funding Funding
led by Tiger Global and Sequoia India. start-ups. ‘‘For Tiger Global, it majorly Sector watchers estimate food tech [logistics, retail].
Moglix is not alone. Several B2B due to a change in leadership. Lee firms Swiggy and Zomato are burning For instance, logistics is a $150-bn
2016 707 1,678 34 1085 3,238 66 4,916
start-ups — Delhivery, Blackbuck, (Fixel) used to focus a lot on consumer. $30-40 million a month, while e- market, with the long-haul market 2017 666 3,359 28 876 8,829 72 12,188
Enzen, Ninjacart — have raised good Scott (Shleifer, who now looks after the commerce firms are burning a lot alone estimated at $100 bn. 2018 561 3,153 28 732 7,966 72 11,119
money this year, on the back of Indian market) focuses more on B2B,’’ more. ‘‘The eco-system has matured
renewed interest from investors. The says ShareChat founder Farid Ahsan. ‘‘B2B businesses (enterprise enough to enable a lot of B2B 2019 YTD 218 2,257 38 318 3,648 62 5,905
total in 2019 has been $2.25 billion Fixel, who steered Tiger Global’s software makers) have the potential to companies to start finding traction in Data for 2019 till July 10 Source: Tracxn
across 218 deals — 61 per cent of the early bets in India, is leaving to start his tap a relatively more lucrative US India. Plus, the positive examples of
$3.65 bn raised by business-to- own firm. But, even Tiger Global has market or other foreign markets, in companies like Zoho, Freshworks,
consumer (B2C) start-ups across 318 been shifting gears. Four of its eight addition to the domestic market. Druva, etc, have validated that high
deals. investments in 2018 were in the B2B Besides, the prospect of a B2B business quality B2B companies are not just
B2B start-ups had also accounted space. ‘‘If you look at percentage becoming profitable relatively sooner possible but highly valuable, with
for 39-40 per cent of the money raised change, Tiger’s change in behaviour is is higher,’’ says Agarwala. strong structural advantages,’’ says
by B2Cs in 2017 and 2018, according to a key reason, as a lot of large consumer It’s not only enterprise software but Prashant Tandon, founder and chief
data from Tracxn. funding that Tiger used to do has other B2B businesses that investors are executive of online pharmacy 1mg.
B2B deals accounted for 38 per cent shifted to B2B,’’ adds Ahsan. bullish on today. Logistics firms ‘‘There is now an opportunity to
of the $5.9 bn raised by start-ups till What is driving this change? Funds Delhivery, Blackbuck and Rivigo, for develop and mature quality products
July 10 this year, up from 28 per cent in are realising that the B2C market is instance, raised a lot of capital this year for a very demanding eco-system out
the past two years . Investment in the hyper-competitive, with strategics (see table). here. When these products are
B2C space still accounts for the bulk of such as Amazon, FlipKart and Jio Supil Chachan, Director, presented to the global market, they
deal flow -- 62 per cent of the total value spending a lot of capital, says Dhruv BlackBuck, says the Indian economy have started to look highly nuanced,
this year, down from 72 per cent last Agarwala, founder and Group CEO at goes through a long value chain (B2B) plus a great value offering,’’ adds
year. PropTiger, which acquired SoftBank- before serving an end-customer. The Tandon.
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18 PERSONAL FINANCE
>
File long-term capital
gains from this year
The calculation process is tricky. However, there are service providers available at a price
TINESH BHASIN
F
or the first time, equity
investors will have to
declare details of stocks and
mutual funds sold in their
income tax returns. And calculating
the gains/losses is a tricky process,
and quite different from other
instruments. It is especially compli-
cated if you have received bonus
shares or a systematic withdrawal
plan (SWP) in a mutual fund.
In the previous financial year (FY
2018-19), the government started
imposing a 10 per cent long-term
capital gains tax (LTCG) on sale of
listed stocks and equity mutual
funds after one year. While capital
gains of ~1 lakh are tax-free, any
amount above that would be fully
taxable. “It was to ensure that long-
term investors don’t get adversely hit
due to the new regime,” says Archit
Gupta, founder and CEO, ClearTax.
For investors, the choice is to cal-
culate the gains themselves.
However, there are a slew of service
providers which help achieve the
same end, but they may come at a
price. Many stockbrokers offer this
service and also tax filing platforms.
What does the new rule entail?
There are three critical numbers in
the calculation –original cost of
acquisition, fair market value (FMV)
of the stock as on January 31, 2018,
and the selling price (See table:
Complicated calculation). According
to the formula, an investor needs
first to compare FMV and selling
price and choose the lower of the two
values. Then, take this figure and
compare it with the original cost of
acquisition and take the higher of
the two values.
Say, a person bought stocks of a
company for ~500 on January 1, 2017.
On January 31, 2018, the stock price
was ~1,000. He sells the stock for
~1,500. If the gains were to be calcu-
lated based on the original cost of
Co-branded cards provide good benefits
There are significant cashbacks, but opt for one only if you use ecommerce sites aggressively
TINESH BHASIN
Ecommerce companies are increas-
ingly offering co-branded credit
cards that offer their users dis-
counts and cashback on their plat-
forms. Flipkart is the the latest one
to join this trend. The e-commerce
platform has partnered with Axis
Bank. Before this, Paytm had
launched Paytm First
Card with Citi, Ola
joined hands with SBI
YOUR MONEY
Credit Card, and
Amazon India has
been offering a co-
branded credit card
with ICICI Bank.
So, how do these
cards work? Co-brand-
ed cards are like loyalty
programmes. The
more cardholders spend with a
company, the more benefits they
get. “Through such tie-ups, banks
get to increase their credit card base
through cashback offers and lever-
age digital footprint left behind by
newly-acquired customers to cross-
sell other products. As far as tech
companies are concerned, cashback
READER’S CORNER : GENERAL INSURANCE
ROOPAM ASTHANA
I am 38 years old and was
recently divorced. My health
insurance plan was bought in
my husband’s name. Now that
my marital status has
changed, what will happen to
my health insurance policy?
You may request the insurance
company to endorse the policy
for change in ‘proposer or pay-
er’ name by writing an email
or letter. Also, you may port
the policy to any other insur-
ance company with the
above change for continuous
policy benefits.
I live in a joint family of six
members, which includes my
working wife, two children
aged less than 10, and my
retired parents. Will a family
floater health plan be a better
option for me?
https://t.me/SSC4Exams
acquisition and selling price, the
investor would have had to pay a
higher LTCG tax. To lower the tax
outgo, the Central Board of Direct
Taxation (CBDT) introduced the
FMV. The FMV of stocks or units of
a mutual fund as of January 31, 2018,
rationalises the cost of acquisition
and, thereby, lowers the capital gains
tax.
In the example, the FMV of
~1,000 is lower than the selling price.
In the second step - when you com-
pare it with the original buying price
of ~500 – the FMV is still higher. The
cost of acquisition of the stock, there-
fore, will be the FMV. Subtract it from
the selling price, and you will get the
gains (~1,500 – ~1,000 = ~500). And
the tax, at 10 per cent, will be ~ 50
per share.
If the taxpayer incurs a loss on
selling the equity investment, he can
carry forward the loss or set it off
against the gain. If you have sold
long-term equity investments
between January 31, 2018, and
March 31, 2018, the tax liability will
offered to customers
through such tie-ups
increases their brand loyal-
ty,” says Sahil Arora, director
and group business head–
investments,
Paisabazaar.com.
In the recent partnerships
– of banks and tech platforms –
the cardholder gets a cashback on
every spend. Ola
Money SBI Credit
Card, for example,
offers 7 per cent cash-
back on cab spends, 5
per cent on flight
booking, 20 per cent
on domestic hotels,
and so on. Similarly, in
Paytm First card,
Amazon Pay ICICI
Bank card and Flipkart
Axis Bankcard, customers get
between 1 per cent and 5 per cent
unlimited cash back on every spend
on the respective platform.
Most of these co-branded cards
have a joining and annual fee,
which is waived off if a customer’s
spends cross the specified thresh-
old. Some also offer joining benefits
Buying health insurance for
your family is indeed a very
good decision. Usually a family
floater health insurance plan
available in the market allows
you to include self, spouse and
up to a maximum of three
dependent children in a single
policy. For your parents, you
should buy a separate family
floater policy. The premium of
a family floater plan is lower
than the cumulative premium
of multiple individual policies,
as the sum insured offered in
a floater policy is the maxi-
mum that can be utilised
together by all the members in
a given year. If your goal is to
buy a health insurance cover
for your family by paying a
premium that is easy on
your pocket while not
compromising on the benefits
offered, we recommend that
you go for a family floater
insurance policy.
My father had a cardiac arrest
and was hospitalised. The
treatment is over now.
However, the health
insurance company has
rejected his claim saying that
the hospital’s documentation
is not in order. Nobody is
helping me file my father’s
https://t.me/TheHindu_Zone_official
PHOTO:ISTOCK
COMPLICATED CALCULATION
Computation of long-term capital gains on equity investments. The
date of acquisition is Jan 1, 2017, and date of transfer is April 1, 2018.
Case 1 Case 2 Case 3 Case 4
Cost of acquisition higher of (a) and (b) (~)
(a) Cost at which shares
were acquired 500 500 500 500
(b) Lower of the following:
- FMV as on 31 Jan 2018 1,000 1,000 750 1,000
- Consideration accruing
arising on transfer 1,500 750 1,500 250
Cost of acquisition under
new taxation regime 1,000 750 750 500
LTCG 500 - 750 -250
Effective tax rate for shares and equity oriented mutual fund as proposed in
Budget 2019 (~) (In %)
Total Income < 50 lakh 10.40 - 10.40 -
Total Income > 50 lakh 11.44 - 11.44 - method to compute the original
Total Income > 1 cr to 2 cr 11.96 - 11.96 - price of purchase. In the LTCG for-
Total Income > 2 cr to 5 cr 13.00 - 13.00 - mula, the investor has to take the
Total Income > 5 cr 14.25 - 14.25 - purchase price as ~10 until he with-
Source: EY
be zero as the new provisions are incurred losses before the start of the
applicable from April 1, 2018, financial year 2018-19; they cannot
onwards. Similarly, if you have be carried forward or set off. For
GET A CARD BASED ON YOUR
SPENDING BEHAVIOUR
nDon’t enrol for a card and then try to
change your spending pattern
n Evaluate three-four months’
expenditure
n Co-branded cards work best if there’s
loyalty to a brand
n Many users spend based on discounts
instead of sticking with a band
n For such individuals, a card that
rewards for spending on a category works better
through vouchers, one-time dis- mostly on one e-commerce plat-
count, or free subscriptions to vari- form or with one taxi-hailing com-
ous services. The partnering banks pany. Only if the past spending
also provide extra benefits such as pattern indicates loyalty to one plat-
movie tickets and discounts on form should the user opt for these
restaurants. “Co-branded cards cards. But if there's no loyalty to one
work for individuals who are loyal brand or platform, then the individ-
to a brand. But a customer should ual should give such cards a pass.
not opt for one of these cards and “Look at whether the spends are on
then change his spending behav- a brand or a category. Accordingly,
iour,” says Navin Chandani, chief sign up for a co-branded card and
business officer, BankBazaar. segregate the spending,” says
A customer needs to first evalu- Chandani. If you are not loyal to any
ate whether he has been spending brand, but spend significantly on
claim, and the hospital to my premium?
authorities are blaming the Usually, insurance companies
insurance company. What don’t apply any loading due to
should I do? family history of diabetes.
You may handle this issue with However, if you are already
ease if you have the precise diabetic, then there are high
requirements from your insur- chances that there will be load-
ance company. Once you ing on your premium.
become aware of the gaps in
documentation based on the My father, 65, is a pensioner
list of documents that your and in good health. He has a
insurer requires, you health cover of ~1 lakh a year
can arrange for the balance from his employer, which
documents to be provided by will last until he turns 75.
the hospital and doctors. We Should I buy health insurance
can assure you that the docu- now or wait until the
ments required for claims pro- employer discontinues its
cessing are those that are cover? Are there good plans
required to be prepared by all for seniors?
hospitals during the course With medical expenses rising
of treatment. We also suggest year-on-year due to high med-
that you keep a copy of all doc- ical inflation, a health insur-
uments submitted and the ance cover of ~1 lakh is woeful-
master list of required ly inadequate. Thus, you need
documents with you for to go for a higher cover as early
future reference. as possible. Various insurance
companies offer good health
I am 40, and my parents are in insurance plans for persons up
their seventies. Both have to the age of 65 years. After the
diabetes. While filing a health age of 65, you may find it diffi-
insurance application, there cult to get him enrolled in
was a question on family equivalent plans.
medical history. Since both
my parents have diabetes, will The writer is CEO and whole-time
it affect my chances of getting director, Liberty General Insurance.
health insurance? Can t The views expressed are his own. Send
he insurer add loading your queries to yourmoney@bsmail.in
https://t.me/Banking4Exams
MUMBAI | THURSDAY, 18 JULY 2019
stocks bought from after April 1,
2018, the “grandfathering” provision
does not apply. The gains will be cal-
culated based on the buying and sell-
RBI as housing
ing price.
finance regulator
Bonus shares and stock split:
Explains Samir Kanabar, tax partner,
EY India: “For bonus and stock split,
the calculation would differ based
on the date they happened. If they
happened before January 31, 2018,
Most of the discussion around
the Union Budget has hap-
pened around the hike in sur-
charge for the ultra high net
the price on this day is considered worth individuals and foreign
as cost of acquisition.” portfolio investors. I am writ-
For split and bonus after February 1, ing about a much less noticed
2018, the calcualtion is as follow. An and talked about item – mov-
investor does not pay any money to ing the regulatory baton for
acquire bonus shares. The cost of housing finance companies
acquisition is, therefore, zero. But the (HFCs) from National Hous-
CBDT clarified that bonus shares FRANKLY ing bank (NHB) to the Reserve
would be taxed. The same formula Bank of India (RBI).
has to be followed to calculate the SPEAKING NHB as a separate regula-
cost of acquisition of bonus shares. HARSH ROONGTA tor for HFCs was never really a
The original buying price would, good idea. It doubled up as a
however, be zero. The investor has financier to the HFCs as well as was their regulator – which
to consider the lower of the fair mar- is a clear conflict of interest. Secondly, NHB just did not have
ket value and selling price to get the the size, status or heft to be able to regulate large HFCs such
cost of acquisition. as a Housing Development Finance Corporation, which are
In case of a stock split, the origi- several times NHB’s size. So the move to combine the entire
nal cost of acquisition will change regulatory regime in the hands of the RBI is a good move.
depending on the number of stocks Home loans tend to be provided
allotted. If a person had initially pur- for long tenures such as 15-20 years In the long run,
chased, say, 100 shares of a company and even though most home loans the integration
at a total price of ~10,000. Each stock are paid off early most HFCs will run of regulations
would cost ~100. After the stock split, a major timing mismatch between between banks
he has a total of, say, 500 shares. The their lending (home loan tenures) and HFCs will
cost of purchase will be divided and their own borrowing (which prove beneficial
among by the units held tends to be far shorter term in na- for the industry
(~ 10,000 / ~500 = ~20). The original ture). Most of the time the HFCs are and borrowers
purchase price for each will be ~20.
And gains on the sale of stocks will
able to roll over their shorter-term
borrowings, but in current times when the lenders are risk
be calculated, accordingly. averse, HFCs have a serious problem in their hands. Even
where the HFCs lend for the short term, they are basically
Systematic withdrawal are loans for real estate developers which are a risky bet espe-
complicated: Usually, an individ- cially in the current environment where most developers are
ual invests in mutual funds using under severe stress. Provisioning requirements for such
a systematic investment plan (SIP). types of loans to developers are likely to be made stricter by
He puts little money regularly over the RBI and in line with those prevailing for other NBFCs.
a period of time. Now, if he opts The RBI is currently in the process of overhauling the en-
for an SWP, the calculation of gains tire risk management eco-system for NBFCs and it is imper-
can be complicated and lengthy as ative that a most important segment, such as the HFCs, is
well. Say, the investor had pur- not left out of such an overhaul. This is also important con-
chased 100 units and paid ~10 for sidering the large exposure that the banking industry has on
each unit in the first month and HFCs. The integration of regulatory oversight with the RBI
~12 in the second. Later, he is with- is good as a single regulator will be responsible for entities
drawing only 30 units each month in the financial system.
through an SWP. “He needs to fol- Can home loan borrowers expect to benefit from the
low the first-in-first-out (FIFO) change in regulator? The answer is a qualified yes. In the
long run, (meaning after the crisis in NBFCs has abated and
the overhang of non-performing assets has bottomed out)
the consumer facing regulations will need to be equated
between banks and HFCs and also improved for both sets
draws the first 100 units. For the of lenders. The long standing proposal to link home loan
next 100 units the buying price will rates to an external benchmark will eventually have to be
be ~12 and so on,” says Naveen rolled out at some point of time and there will be very little
Wadhwa, a chartered accountant justification for allowing any relaxation to the HFCs on this
with Taxmann.com. score after it has been rolled out for banks. The minimum
down payment requirements are also likely to be similar
between banks and HFCs with some leeway being provided
to the HFCs.
shopping online, then get a card
that rewards online
shopping. There are a few cards that
offer higher points to the customer
All in all, while retail home loan borrowers are unlikely
to see any significant change in the immediate future, the
integration of the regulation function between banks and
HFCs will prove to be beneficial for the industry and the bor-
for spending online, irrespective of rowers in the long run.
the platform.
An individual needs to segre-
gate his monthly spending and
The writer is a Sebi-registered investment advisor
check the categories and brands
where he spends the most. Out of
the total expenditure, if 50-60 per
cent is with one brand or one cate-
gory, accordingly opt for credit
cards that help to reward the
TIPPING POINT
behaviour. If spends are on airline Are pharma funds a GOOD LONG-TERM BET
tickets and e-commerce shopping, good contra bet? Period Category average
for example, enrol for two cards Pharma funds have been return (%)
that offer higher air miles and laggards over the past year,
more points for online spending. 1 year 1.7
with a category average
If you are a big spender on both return of a meagre 1.74 per 3 years -3.2
Flipkart and Amazon, it does make cent. They have also yielded 5 years
sense to enrol for co-branded cards 4.9
meagre returns of only 4.90
on both the platforms, according 10 years 15.9
per cent compounded
to experts. Source: Value Research
annually over the past five
Experts also point out that e-
commerce players are opting for years. However, experts say
co-branded cards due to recent these funds can prove to be good contra bets for
government regulations. “Foreign- investors willing to hold them for three-five years. One
owned market places have been good reason for investing now is that the negatives are
bogged down by recent govern- already factored into the prices. Indian companies
ment guidelines, which deter them have got better at handling USFDA strictures. Moreover,
from giving deep discounts to cus- Indian pharma companies are global leaders in gener-
tomers. Tie-ups can help such ics. One in every three generic pill consumed in the US
market places skirt regulations as is supplied by an Indian company. And now they are
banks provide the cashback and also venturing into complex generics.
not the e-commerce platforms,”
says Arora.
BUDGET: ~1 CRORE - ~1.5 CRORE
Realty check
Business Standard brings you a snapshot of average current rates and unit sizes in localities
that offer property in the price range of ~1 crore-~1.5 crore. If you are looking at buying real
estate, an idea about prevailing rates would come in handy
Avg price (~/sq ft) Avg unit size (sq ft) Avg price (~/sq ft) Avg unit size (sq ft)
AHMEDABAD Narendra Nagar 6,425 1,770
Vastrapur 5,830 1,992 New Colony 6,000 2,300
Naranpura 5,654 2,059 Rambagh 7,176 1,762
Science City Road 5,121 2,453 Raj Nagar 7,500 1,896
Jodhpur Village 6,256 1,998 Dharampeth 7,965 1,566
Chandkheda 3,440 3,151 VISAKHAPATNAM
Thaltej 4,976 2,584 MVP Colony 6,200 1,897
Paldi 5,942 2,051 Madhurawada 3,700 2,820
KOLKATA Yendada 4,541 2,877
Tangra 5,730 1,975 Seethammadhara 6,000 2,170
New Town 6,249 1,944 Peda Waltair 5,600 2,000
Kankurgachi 8,215 1,396 JAIPUR
Mukundapur 7,624 1,750 Vaishali Nagar 4,843 2,455
Hussainpur 6,300 1,916 Mansarovar Extension 4,669 2,386
Beleghata (Beliaghata) 6,809 1,851 Jagatpura 6,500 1,845
New Alipore 7,148 1,870 Civil Lines 6,255 2,063
KOCHI Vidhyadhar Nagar 5,572 1,976
Kakkanad 4,851 2,554 Durga pura 6,600 1,970
Kadavanthra 6,217 1,935 Pratap Nagar 4,800 2,238
Vyttila 7,139 1,859
Note
Palarivattom 6,941 1,852 · The ticket price range considered for the above data points is between ~1 crore
and ~1.5 crore
Kaloor 5,948 1,901
· All the data points discussed in the above table refer to primary market only
Maradu 6,189 1,821 · Above residential data set comprises of residential apartments only
Edapally 5,878 1,984 · Above residential data is representative of organised real estate developers only
· The top performing micromarkets based on sales during last year (June-2018 to
NAGPUR May-2019) is represented on the above table
Gandhi Sagar Lake 8,276 1,580 · Data points are updated till May 2019 Source: PropEquity
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 https://t.me/TheHindu_Zone_official
20 ECONOMY & PUBLIC AFFAIRS
>
YES Bank net falls 91% on MTM
provisioning, lower income
Second consecutive quarter of hit on bottom line since management took charge
SUBRATA PANDA
Mumbai, 17 July
Y
ES Bank reported 91 per
cent decline in net prof-
it to ~113.8 crore in the
April-June quarter (Q1) of 2019-
20 (FY20), because of a mark-
to-market provisioning of ~1,109
crore for bad loans, and decline
in non-interest income.
In the same quarter of the
last financial year (2018-19 or
FY19), the bank’s profit stood at
~1,260 crore. The bank had post-
ed its first-ever quarterly loss in
the January-March quarter of
FY19, at ~1,507 crore.
This is the second consecu-
tive quarter the bank has shown
a big hit on the bottom line since
the new management under
Ravneet Gill took over in March
after the forced exit of promoter-
chief executive Rana Kapoor
over governance concerns by
the Reserve Bank of India.
In the quarter under review,
YES Bank’s provisions stood at
~1,784 crore. In the same quarter
of FY19, the bank provided ~625
crore. In Q4FY19, the banks pro-
visions stood at ~3,661 crore.
The bank’s gross non-per-
forming assets (NPAs) rose 5.01
per cent to ~12,092 crore. In
Q1FY19, the bank’s gross NPAs
stood at 1.31 per cent.
The net NPAs soared to 2.91
per cent in Q1FY20 at ~6,883
Fewer orders, piling losses
take toll on turbine makers
Foreign firms and Chinese imports seeing a rise in India
SHREYA JAI
New Delhi, 17 July
The troubles at Suzlon Energy,
the largest player among
domestic turbine makers, are
symptomatic of what ails the
industry.
Leading turbine manufac-
turers with more than 80 per
cent market share are staring
at weak order pipelines, losses,
and regulatory niggles. At the
same time, foreign companies
and imports from China are
increasing their footprint in the
country, sparking worries of
cost escalation among power
producers.
At the same time, commis-
sioning of wind power projects
has slowed down to a historic
low. Last financial year, 742 MW
of wind projects were commis-
sioned. This is when the Centre
has tendered out close to 7,000
Mw of wind power projects in
the past two years. Wind proj-
ects installation was 5,000 Mw
in 2016-17.
On Tuesday, Suzlon default-
ed on payment of $172 million
in foreign currency convertible
bonds (FCCBs). Inox Wind suf-
fered a net loss of ~31 crore in
the quarter ending March 2019.
Regen Powertech closed down
its Udaipur unit in 2017 and
reduced staff strength, follow-
ing slowdown in orders. It cur-
rently has no new order, said
an executive.
The Indian arm of German
major Enercon (erstwhile Wind
World), which was one of the
earliest investors in Indian
wind sector, has halted opera-
tions in India.
Wind power producers
which procure turbines from
these companies said this has
created a vacuum in the wind
energy sector.
“Policy irregularities and
retrospective changes are hurt-
ing the wind manufacturing
sector in India, especially
indigenous players. The health
of the Indian turbine makers is
in bad state and it will impact
Indians got lion’s share Safety audit: Aviation regulator
of H1B visas in last 5 yrs red flags lapses in five airlines
PRESS TRUST OF INDIA
New Delhi, 17 July
Indians received between 67
per cent and 72 per cent of the
total H1B visas issued by the
US in the last five years, the
External Affairs Ministry said.
Replying to a question in
the Lok Sabha, External
Affairs Minister S Jaishankar
said no comprehensive
changes have been made to
the H1B visa programme so
far. “The Indian government
has closely consulted all stake-
https://t.me/SSC4Exams https://t.me/Banking4Exams
MUMBAI | THURSDAY, 18 JULY 2019
NO SILVER LINING
Net profit (~ cr) (%) YoY chg
Jun ’18 1,260 30.5
Sep ’18 965 -3.8
Dec ’18 1,002 -7.0
Mar ’19 -1,507 - was 32 basis points (bps) while
Jun ‘19 114 -91.0
Compiled by BS Research Bureau
crore, compared to 0.59 per cent
in the same quarter last year. It
sold one account with an expo-
sure of ~412 crore to an asset
reconstruction company (ARC)
during the June quarter.
The bank reported gross
slippages of ~6,232 crore dur-
ing Q1FY20.
“Net corporate slippages
were entirely from the
accounts classified as ‘BB’ and
below at the end of Q4FY19,”
said the bank.
In the last quarter, the
bank had a stress book of
~10,000 crore for which it has
power production and India’s
overall renewable target as
well,” said Sunil Jain, chief
executive officer, Hero Future
Energies.
Hero and ReNew Power
recently started operations and
management of their wind
units, as turbine companies fail
to oblige contracts because of
financial stress, said industrial
sources.
The Solar Energy
Corporation of India (SECI)
cancelled a 2,000-Mw tender
owing to fewer bids of 800 Mw
against it. Andhra Pradesh has
recently decided to overturn all
the wind projects awarded in
the state, thereby impacting
investment in close to 4,000
Mw projects. Windy states such
as Tamil Nadu, Telangana and
AP also delay payment to wind
power producers, which in turn
hurts the margins of turbine
makers.
In what could be another
challenge for domestic compa-
nies, global turbine makers
such as GE Energy, Vestas and
Chinese Envision are increas-
ing footprint in India.
“Though the cost econom-
ics do not favour the low-tariff
expectations of the Indian gov-
ernment,” said a leading pri-
vate power producer, ruing a
holders and engaged with the
US administration and the
Congress on issues related to
the movement of Indian pro-
fessionals, including those
pertaining to the H1B pro-
gramme,” he said.
“Recently, issues of H1B visa
were raised during the visit of
the US Secretary of State,
Michael R Pompeo, to India on
June 26. In our engagements,
we have emphasised this has
been a mutually beneficial
partnership that should be nur-
tured,” he added.
BSE price (~)
Source: Capitaline
set aside contingency provi-
sions of ~2,100 crore. Of this,
the bank used ~1,399 crore for
specific provisioning against
NPAs in Q1FY20.
The net interest income of
the bank grew marginally by
2.8 per cent to ~2,280 crore in
Q1FY20 versus ~2,219 crore in
the Q1FY19. However, the total
income of the bank declined
9.2 per cent to ~3,553 crore
opposed to ~3,913 crore in
same quarter last year.
The non-interest income of
the bank fell 25 per cent to
~1,272 crore; in the same quar-
WIND POWER
PROJECT
INSTALLATIONS (Mw)
2013-14 2,094
2014-15 2,311
2015-16 3,423
2016-17 5,502
2017-18 678
2018-19 742
Source: Ministry of New & Renewable Energy
slow death of three-decade-old
Indian wind manufacturing
sector.
Vestas recently announced
a new nacelle and hub (a com-
ponent of a wind turbine)
assembly line in Chennai last
week. It already has a blade
plant in Ahmedabad. GE
Energy was recently awarded
India’s largest turnkey 300-MW
wind power project of ReNew
Power. China’s Envision, a fair-
ly recent entrant in India, has
around 300 MW of turbine
orders, said a source.
The Indian government in
2017 retired the 25-year-old
Feed-in-Tariff (FiT) mecha-
nism to award wind projects
and introduced competitive
bidding. The capacity addition
fell to a record low of 650 Mw
during the same period. But the
tariffs also fell by half from
existing rates to ~2.5/Mw. Under
the FiT mode, the electricity
regulator decides the tariff.
Wind turbine manufactur-
ers then declared an unsold
inventory of close to ~10,000
crore with no outlook on new
projects. Leading domestic
wind turbine manufacturers
including Suzlon Energy suc-
cumbed to cost cutting and
employee retrenchment with
dry order books.
Aviation regulator DGCA has
conducted safety audits of Air
India Express, SpiceJet,
AirAsia, IndiGo and GoAir and
it found the implementation of
their safety management sys-
tem “to be deficient,” the gov-
ernment informed Rajya Sabha
Wednesday. Civil Aviation
Minister Hardeep Singh Puri
said the audits also found that
the flight crew rostering soft-
ware was not upgraded and
untrained staff were manning
check-in counters.
The “other staff” at check-in
counters too did not have ade-
https://t.me/UPSC4Exams
1
ter of the previous financial
year, it was ~1,694 crore.
The provisioning coverage
ratio, an indicator of the provi-
sion made against bad loans
from the profit generated, stood
at 43.1 per cent. On a year-on-
year basis, the PCR has come
down significantly but quarter
on quarter, it remained the
same. YES Bank closed 5.25 per
cent lower at ~98.45 on the BSE.
The net interest margin
(NIM), a measure of profitabil-
ity of the banks, stood at 2.8
per cent. The NIM in the first
quarter of FY19 stood at 3.3 per
cent. The credit cost of the
bank during the June quarter
it was 15 bps in the June quar-
ter of FY19. In the March quar-
ter of FY19, the credit cost of
bank was 137 bps.
The capital adequacy of the
bank stood at 15.7 per cent with
total capital funds at ~50,569
crore. The bank is looking to
raise close to $1 billion to boost
the capital adequacy.
About probe into whistle-
blower complaints, the bank
said it conducted an internal
enquiry of the allegations. The
internal enquiry of the allega-
tions resulted in a report
reviewed by the board of direc-
tors. The bank further engaged
an external firm to independ-
ently examine the matter.
Punjab & Sind
Bank reports
~238-cr fraud
by Bhusan
Power and Steel
PRESS TRUST OF INDIA
New Delhi, 17 July
Punjab & Sind Bank on
Wednesday reported a fraud
over ~238 crore by Bhushan
Power and Steel, a third such
instance after similar dis-
closures made by PNB and
Allahabad Bank recently.
“On the basis of forensic
audit investigation findings
and the CBI filing an FIR on
a suo-moto basis against the
company and its directors,
alleging diversion of funds
from the banking system, a
fraud of ~238.3 crore is being
reported by the bank to the
RBI. In the accounts of the
company (BPSL), the
bank has already made pro-
visions amounting to ~189.35
crore, as per prudential
norms,” said Punjab & Sind
Bank (PSB) in a regulatory
filing. It was observed that
the company had misappro-
priated bank funds, manip-
ulated books of accounts to
raise funds from consortium
of lender banks, it added.
“At present, the case is
at the NCLT, which is at an
advanced stage, and the
bank expects good recov-
ery in the account,” it fur-
ther said.
Last week, Allahabad
Bank had reported a fraud
of about ~1,775 crore by BSPL
to the RBI, alleging diversion
of funds.
“The bank has already
made provisions amounting
to ~900.2 crore against the
exposure of the bank in
BPSL,” Allahabad Bank had
said on Saturday. Earlier,
Punjab National Bank (PNB)
had also reported a fraud
worth ~3,805 crore by the
firm. Around
85 per cent of PNB’s
~4,399-crore exposure was
siphoned off. It is
expected more banks will
report a fraud committed by
BPSL.
quate knowledge to handle
“dangerous goods” despite be-
ing trained in Dangerous Good
Regulations, he said in a writ-
ten response to a question in
the upper house. In a serious
lapse, the regulator found, th-
ere was a delay in carrying out
the corrective actions for the
“FOQA exceedances”, Puri said.
Flight Operations Quality
Assurance (FOQA) is the
process of obtaining and ana-
lyzing all kinds of data from
flights to improve the safety
and efficiency of flight opera-
tions. PTI
 https://t.me/TheHindu_Zone_official

.
MUMBAI | THURSDAY, 18 JULY 2019 WORLD 21 <

Nestlé creates chocolate Musk shows off progress on

brain-machine interface
without any added sugar
BLOOMBERG a way to alter the structure of
AFP VIA PRESS TRUST OF INDIA
17 July

Futurist entrepreneur Elon

for the high-precision task.
“They are tiny electrodes
and the robot is delicately
implanting them,” Musk said,
of next year.” An early focus
of the team is using the tech-
nology to address brain dis-
eases and paralysis, but the
17 July sugar to boost its sweetening Musk late on Tuesday noting there could be thou- longer aim is to make
power. revealed his secretive sands of the electrodes con- implants so safe, reliable and

N
estle SA has found a
way to create chocolate
without adding any
sugar, relying on leftover mate-
rial from cocoa plants for sweet-
eningasconsumerslookfornat-
ural and healthier fare.
The food company is using a
patented technique to turn the
white pulp that covers cocoa
beans into a powder that natu-
rally contains sugar. This fall in
Japan, Nestle will start selling
KitKat bars with 70% dark
chocolate under the new recipe,
which doesn’t include any
added sugar, the Vevey,
Switzerland-based firm said.
Until now, the pulp has never
been used as a sweetener for
chocolate, and usually it’s most-
ly thrown out.
These Asian Chocolatiers
Are Spicing Up the Global
Sweets Scene
Pulp-coveredcocoabeans
Nestle could use the same
process to make milk or white
chocolate in the future,
Alexander von Maillot, head of
Nestle’s confectionery business,
said in a phone interview.
The food and beverage
industry is under pressure from
consumers and governments
alike to make healthier prod-
ucts amid rising obesity and
diabetes rates. Nestle’s move
may bolster its position as a
leader in the industry, and it
comes three years after finding
The world’s largest food
company plans to use the pulp
technique for other confec-
tionery brands in additional
countries next year.
“Using pulp makes it a more
premium chocolate,” von
Maillot said. “Sugar is a cheap
ingredient.” Nestle’s new 70%
dark chocolate will have as
much as 40% less sugar than
most equivalent bars with
added sugar. Nestle’s existing
dark chocolate KitKats have 12.3
grams of sugar per serving.
“The sugar reduction is inci-
dental, not a focus,” von Maillot
said. “It’s more about a novel
way to produce chocolate and
use the best of the cocoa pod.”
Neuralink start-up is making
progress on an interface link-
ing brains with computers,
and said they hope to begin
testing on people next year.
Musk has long contended
that a neural lace meshing
minds with machines is vital if
people are going to avoid
being so outpaced by artificial
intelligence that, under the
best of circumstances,
humans would be akin to
"house cats." Musk and mem-
bers of the Neuralink team
laid out progress they have
made on their mission at an
event held in San Francisco to
recruit talent in software,
robotics, neuroscience and
more.
"Ultimately, we can do a
full brain-machine interface,"
Musk said.
"Achieve a sort of symbiosis
with artificial intelligence."
Neuralink unveiled an early
version of a tiny sensor with
hair-thin strands that could be
implanted in a brain through a
small incision by a robot built
nected to a brain.
“This is something that is
not going to be stressful to put
in; will work well, and it is
wireless.” The chip will com-
municate wirelessly with an
earpiece, which relays infor-
mation to a smartphone appli-
cation, according to
Neuralink.
For now, the goal is to let a
person with the implants con-
trol a smartphone with
thought, but the technology
could eventually extend to oth-
er devices such as robotic arms.
“This has tremendous
potential,” Musk said.
“We hope to have this in a
human patient before the end
easy that they could be elec-
tive surgery options for peo-
ple seeking to enhance their
brains with computing pow-
er, according to a neurosur-
geon on the Neuralink team.
Musk said the goal was to
make adding the brain-
enhancing implants as easy a
procedure as laser eye surgery.
“I've said a lot about AI
over the years; I think that
even in a benign scenario, we
will be left behind,” Musk said.
“With a high bandwidth
brain-machine interface we
can actually go for the ride
and have the option of merg-
ing with AI. This is very
important.”

Feeding 10 bn people 71 mn forcibly displaced New York is bracing

will require genetically globally last year: UN for hottest day of yr
modified food: Report BLOOMBERG
17 July
Venezuela.
In the US, the United
Nations classified more than
BLOOMBERG
17 July

Brace yourself for the hottest

DEENA SHANKER
New York, 17 July
Like it or not, genetic modifi-
cation is going to be an impor-
tant tool to feed the planet’s
growing population.
If we want to feed 10 billion
people by 2050, in a world beset
by rising temperatures and
scarcer water supplies, we will
needtodramaticallychangethe
wayweproducefood.Increased
public investment in technolo-
gies like genetic engineering is a
vital piece of that, according to
a report published on
Wednesday by the World
Resources Institute.
Not only must crops be
more productive, but the agri-
cultural challenges of climate
change—including disease,
pests and periods of both
drought and flooding—mean
they must be more resilient
as well.
“We have to increase yields
dramatically, at an even higher
rate than we’ve done historical-
ly,” said Tim Searchinger, lead
author of the report. “It’s got to
be done by growing smarter.”
The Green Revolution of the
20th century boosted food pro-
ductionusing manytools,some
of which are no longer available
to most of today’s farmers.
Fertilizer use has largely been
maxed out, Searchinger said,
and available water is running
dry. Now, researchers need to
find new ways to “grow
smarter,” including through the
use of genetic modification.
Whilepublicdebatehascen-
tered on its two primary uses—
in soybeans and corn for resist-
ance to the pesticide glyphosate
and production of a natural
insecticide, Bacillus thuringien-
sis (Bt), in corn and cotton—the
WRI implores us to look further.
“We do not believe that debate
over these particular GM traits
should dictate policy about the
entire technology of genetic
An Indian scientist holds a genetically modified rapeseed crop
under trial in New Delhi
engineering,” the report says.
Instead, the report points
out that genetic modification
saved the Hawaiian papaya
population from a deadly virus,
and says it may be able to do
the same for potatoes in
Uganda, soybeans in Brazil and
tomatoes in Florida.
“Everyone exaggerates the
benefits and costs of these two
traits of GMOs,” Searchinger
said. “There are so many other
things we can do, it’s hard to
imagine why we’d be against it.”
The report also emphasizes
the need for better breeding,
laying out a four-pronged
approach for increasing yields,
each of which will require more
public funding. First, breeding
cyclesneedtobespedup,focus-
ing not just on major improve-
ments but also smaller, incre-
mental ones. Second, crop
breeders should increasingly
utilize marker-assisted breed-
ing, a technology that allows
them to map crop DNA and cut
down the number of breeding
cycles. Third, research must
move beyond crops like corn,
soy and wheat, and focus on
“orphan crops” such as
sorghum, millet, peas and bar-
ley, especially because regions
in sub-Saharan Africa depend
PHOTO: REUTERS
on them for their food security.
Finally, researchers should use
genetic engineering, including
Crispr, to develop more crop
resiliency. The 500-plus page
report lays out a 22-item “menu
for a sustainable food future,”
that explores ways to reduce
demand, increase production,
restore forests and wetlands,
increase the fish supply and
reduce greenhouse gas emis-
sions from agriculture. Action
items range from reducing
meat consumption by as much
as 40% in the U.S. to improving
African women’s access to
health care and education.
But genetic modification,
according to critics, has serious
limitsandresearchfundswould
be better spent elsewhere. The
report is “too optimistic” about
the potential of the technology,
said Bill Freese, science policy
analyst at the Center for Food
Safety. As evidence that it’s both
unnecessary and too costly, he
points to a 2014 report in sci-
ence journal Nature that found
conventional breeding was
faster than genetic engineering
in developing drought-resistant
corn and a 2011 report that put
a $136 million price tag on a
genetically modified crop trait.
BLOOMBERG
Persecution, conflict, vio-
lence and human rights vio-
lations. These were the rea-
sons why 70.8 million
individuals were forcibly dis-
placed worldwide last year,
according to a UN report.
This equates to 37,000 dis-
placements daily. The num-
ber of refugees has almost
doubled over the 2008-2018
period, and 3.5 million peo-
ple were awaiting a decision
on their application for asy-
lum — a 300 per cent change
from 2008.
In 2018, displaced
Venezuelan refugees and
asylum seekers increased 2.6
million to reach 3.4 million -
- or 5% of the world’s total
Netflix earnings to prove if price hikes are working
BLOOMBERG
17 July
Netflix Inc.’s earnings should
help answer a key question for
the streaming giant: whether
customers are willing to pay
more in an increasingly com-
petitive market.
After boosting prices in
markets around the world, the
company will deliver its sec-
ond-quarter results on
Wednesday afternoon.
Analysts don’t expect much
growth at home -- they’re pre-
dicting a mere 309,240 sub-
scriber additions in the U.S. on
average -- but the hope is that
the increases and more users
overseas will let Netflix sustain
the expansion investors have
come to expect.
“Recent price increases in
multiple countries should
result in revenue acceleration
starting this quarter,” Citigroup
Inc. analyst Mark May said in a
research note.
displaced. Venezuelan
accounts for 0.4% of world
total population.
About 350,000
Venezuelans sought asylum
last year, including 227,300
in Peru and 81,000 in Brazil.
Globally, about one in five
asylum seekers come from
Wall Street is projecting
revenue of $4.93 billion for the
period, up 26%. Analysts also
will be closely watching the
growth in average revenue per
user, international profitabili-
ty, domestic streaming contri-
bution margins and user
engagement.
Netflix is the dominant
paid video streaming service,
but it has reason to shore up its
position right now. Walt
Disney Co., AT&T Inc.’s
WarnerMedia and Comcast
Corp.’s NBCUniversal are all
racing to deliver their own
online services, ushering in a
new era of intense competi-
tion.
Against that backdrop,
Netflix is building its presence
overseas. The company is
expected to report the addition
of 4.75 million subscribers
internationally in the second
quarter, according to analyst
data compiled by Bloomberg.
Shares in the company
one million as “persons of
concern” for the first time.
The U.S. figures were broken
down to 719 thousand asy-
lum-seekers and 313 thou-
sand refugees. The U.S. is
among a dozen countries
which hosted 200,000 or
more refugees last year.
Based on resettled
refugees, the U.S. ranked sec-
ond with 22,900, following
Canada’s 28,100. The U.S. is
the largest recipient of new
asylum applications, with
254,300 pending in 2018 --
about 27,500 or 11% of these
were from Venezuelan.
Salvadorans and Hondurans
accounted for 33,400 and
24,400, respectively.
have risen 36% this year, near-
ly double the gain of the S&P
500. But it’s still unclear how
many customers globally are
willing to pay for its product.
Greg Peters, the company’s
chief product officer, has hint-
ed at the need for a lower-
day of the year. It could reach
100 degrees Fahrenheit (38
Celsius) on July 20 as the
U.S. East Coast slides into the
weekend. When you add in
the humidity, it could feel
like 110.
The East Coast isn’t
alone, according to the
National Weather Service. A
“dangerous and widespread”
heat wave is forecast for two-
thirds of the U.S., with a high
pressure dome holding the
heat in place. At night, temps
will struggle to fall below 80.
The heat wave will stress
Midwest crops and boost
energy demand, including in
New York where an outage
darkened part of Manhattan
priced subscription tier for
users with less disposable
income.
SunTrust analyst Matthew
Thornton views investor sen-
timent as neutral-to-cautious
heading into earnings, partic-
ularly with the stock down as
last weekend. Anyone out-
doors should stay hydrated
and seek shade when possi-
ble, the elderly and sick
should be monitored and
pets and children shouldn’t
be left unattended in cars,
the weather service warned.
Chicago could peak at 98
degrees Fahrenheit Friday,
with New York’s Central Park
reaching that on Saturday.
Washington will touch at
least 100 this weekend.
“Excessive heat warnings
cover a pretty considerable
number of states today,” said
Alex Lamers, a forecaster
with the U.S. Weather
Prediction Center in College
Park, Maryland.
“Then we are expecting
the heat wave to ramp up on
the East Coast in the next
couple of days.”
much as 1.2% intraday. But
Netflix’s June content slate
should lift some spirits as the
bank has seen increased web
searches for original series like
“When They See Us” and
“Black Mirror,” Thornton told
clients in a note.
Things should get more
interesting for Netflix in the
second half. On the plus side,
the Los Gatos, California-based
company will get a boost from
new seasons of “Stranger
Things” and “Orange Is the
New Black.” Earlier this
month, “Stranger Things” got
off to a record start, with 40
million household accounts
watching in the first four days
of the new season.
But Disney’s highly antici-
pated $6.99-a-month stream-
ing service, called Disney+,
arrives in November. Though
no one is expecting a large-
scale defection from Netflix to
Disney+, it should shake up the
industry.

Robots scaling shelves to speed up delivery New Mini Cooper SE is BMW’s

BLOOMBERG
A logistics company partly owned by
Related Cos., the developer behind
Manhattan’s Hudson Yards, is
searching for locations across North
America to build its multistory
robotic warehouses.
Robots — and humans —started
working this month at Quiet
Logistics’ new 440,000-square-foot
(41,000-square-meter) fulfillment
center in the Los Angeles area. It’s
the firm’s first property on West
Coaast, and a model for as many as
seven more the company aims to
build near population centers by
2022, with the goal of getting goods
to consumers faster.
“Some people assume these large
facilities should be in rural areas
with more open space, but they work
better in cities that are close to more
people and more labor,” Chief
Executive Officer Bruce Welty said in
an interview.
Quiet Logistics -- which fulfills
orders for fashion and lifestyle
brands such as Bonobos, M. Gemi
and Outdoor Voices -- is scouting
locations in the U.S. Southwest,
Midwest and Southeast and also
exploring the possibility of building
in Canada and Mexico. Multilevel
construction uses less real estate
than traditional sprawling, single-
story warehouses, an advantage in
urban areas where land is scarce and
costly.
At the California center, in La
Palma, robots designed by Quiet
Logistics spinoff Locus Robotics will
be able to travel long distances
across the building and scale high
shelves that are out of reach of
humans. With the rise of same-day
and next-day delivery options made
popular by Amazon.com Inc., the
automation is necessary to meet the
expectations of the company’s
fashion clients, who have large
customer bases in the L.A. area,
Welty said.
Fast Fulfillment
That doesn’t mean robots are
taking over. In fact, the demand for
fast fulfillment will require more
human labor than ever before,
according to Welty. Quiet Logistics
aims to hire about 500 full-time
employees who will work in tandem
with the robots at the two-story La
Palma center, the company’s fifth
U.S. warehouse.
Related -- known for its $25
billion Hudson Yards project, with
office and residential skyscrapers
and a $2 billion mall -- in March
teamed up with Greenfield Partners
to buy Quiet Logistics, extending the
developer’s reach into e-commerce.
The soaring popularity of online
shopping has helped make
warehouses the best-performing
segment of the property market this
year, according to a Bloomberg
index of real estate investment
trusts.
But landlords should take
caution before expanding
aggressively into vertical fulfillment
centers, according to David Egan,
global head of industrial and
logistics research at CBRE Group
Inc. Because there are few such
properties in existence, most of the
savings and benefits are theoretical,
he said.
“We don’t know what the
economics look like,” Egan said.
“We don’t know what the rents are
going to be, and we don’t know
what’s going to happen when the
users’ lease runs out and the spaces
have to be taken over by a second
generation of renters.”
best electric effort yet
BLOOMBERG
17 July
This past Saturday in Red Hook, Brooklyn, after
the first day of Formula E races, when the heat
had so baked into the city’s asphalt it felt like
being inside a cast-iron pot, I, too, was able to get
behind the wheel of the future: the all-electric
Mini Cooper SE.
BMW Group’s next shot at the all-electric, dai-
ly-driving market for the mass-
es—their 2013 release of the i3
city car was an underpowered
flop—is positioned as a $36,400
challenger to the Tesla Model 3,
the current segment leader.
Idroveanear-productionpro-
totype for some laps on the 2.5-
mile track built to host the
Formula E cars all weekend and
can safely report: it’s a Mini. It’s
neither imposing to behold nor
bold from behind the wheel.
What you expect is what you get,
minus a bill at the pump.
With its endearing round headlights, the
miniature two-door, rear-hatch body, and the
friendly flat roof of every other Mini you’ve come
to know and love, the brand-new electric Mini
Cooper SE is as familiar as ever, down to the pre-
mium accoutrements that come standard—LED
headlamps, multi-zone automatic air condi-
tioning, auxiliary heating, electric parking, and
connected navigation looped through a futuris-
tic central and very Mini-esque round touch-
screen. Some differences: the body of the new
Mini Cooper sits 18 mm (less than an inch) high-
er than its counterparts, due to some engineering
requirements with the placement of the electric
battery and motor. And it has short overhangs
and widely set wheels to set it apart as the first
purely electrically powered Mini, though I don’t
expect you’ll notice right away—I certainly did-
n’t. The production version will offer three dif-
ferent trim levels and a host of sporty color mix-
es.
There will also be a distinc-
tive sound created especially
for the Mini Cooper SE gener-
ated via a speaker system that
guarantees “an acoustic pres-
ence on the road that is typical
of Mini,” as BMW puts it.
That evening in Brooklyn, I
didn’t hear anything. And due
to the controlled nature of the
session—it was a lead-and-fol-
low exercise with a few fellow
journalists—I can’t speak to
day-to-day nature of this little beaut. But the 181-
horsepower front-wheel-drive coupe has the
acceleration (0-62 mph in 7.3 seconds), low cen-
ter of gravity, and intense agility of a go-kart,
even if the top speed is limited to a paltry 93.2
mph. I can hit that on my buddy’s Vespa.
Speed aside, I liked how the 135kW battery sits
deep in the car, so there’s no obstructions along
the bottom center of the floor, and the luggage
compartment at the back is just as welcoming
and spacious as any other Mini.

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22 STRATEGY
>
MUMBAI | THURSDAY, 18 JULY 2019 1

GUEST COLUMN

Digitaltransformation
&employeereadiness
Successfulimplementationofanyinitiativeisonly
possiblewhenemployeesseethevalueitadds

T
oday, almost all boardroom that highlight how engaged
discussions are buzzing with employees can boost productivity,
the phrase “digital transfor- drive innovation and enhance prof-
mation”. Strategies are in place, roll- itability. And if we are talking about
outs are underway, with much focus a change that will revolutionise
on agility and speed-to-market. In every aspect of our businesses,
the recent past, what we have wit- without engaging employees, we
nessed is dispersed implementation will face the risks associated with
of technology, primarily focusing on resistance, impacting the entire
operational efficiencies. This is cer- transformation agenda.
tainly going to change at a pace only
afewcanforesee.Theseroll-outswill What needs to be addressed?
be more ambitious, changing the First, we need to help employees
business dynamics completely, fur- understand that digitisation is not

Grofers brands the last mile

therrevolutionisingthewayweinter- aboutIT,butrevisitingandredesign-
act as a customer or as a provider. ing the existing processes powered
Digital transformation will help by technology to make them more
us unlock new revenue streams, efficient in order to deliver a unique
deliveranexperience-basedinterac- customer experience. This is a criti-
tionandcreatenewbusinessmodels cal aspect to address, as a lot has
withshorterproductlife-cyclesdriv- been written and spoken about peo-
Here'showtheonlinegrocerisropinginkiranastoresinitsfightagainstharddiscounters another way — by being able to en by self-destructive ple losing their positions
push its private labels. Today, technology. To most, it and jobs, creating a hos-
SHUBHOMOY SIKDAR looked at areas where our online ing assortment. So, the money is about 15-20 per cent of the stocks soundslikeapicture-per- tile environment. These
delivery was in demand as we NEWER GROUNDS locked in that inventory and the of these kirana stores comprises fect situation. However, insecurities and uncer-

A
n alliance between small
kiranastoresandamajor
online grocer — two
competitors at extreme
ends of the fragmented universe
of Indian retail — will sound puz-
zling, more so when the former is
trying to hold its own in the face of
organised competition and the lat-
ter is trying to usurp their territory.
But by branding 100 mom-and-
pop stores already and aiming to
take that figure to 1,000 by the end
of this financial year, Grofers plans
to take on a slightly underestimat-
ed piece of the puzzle — the hard
discounters who swear by no-frills
stores, limited assortment, and do
not stock many national brands.
Grofers will help the kirana stores
with inventory management,
using its insights from online retail
trends and, in turn, leverage the
trust these stores enjoy in the local
neighbourhoods.Asub-plothereis
also to mirror the “attractive price-
points” that drives Grofers' online
business, says Grofers founder
Saurabh Kumar.
The exercise started last year
and the key criterion for the selec-
tion of stores was location. “We
understoodtheconsumerneeds.A
lot of our online volumes are com-
ing from the NCR region, such as
east Delhi, old Gurgaon or Noida,”
says Kumar.
However, the Softbank-backed
company is not looking at this
channel only as an avenue for top-
up purchases by its consumer
base. “We are looking at a future
where online and offline will co-
exist. So, our aim is to remove
channel as a hurdle, and use our
brand equity to attract higher foot-
falls for offline shops.”
As many as 200 new Grofers
stores will come up in Bengaluru
and the NCR by the end of the
ongoing quarter. Some of the run-
ning/upcoming stores have been
chosen from 6,000 partner stores
that are helping the online vertical
deliver. There is no transaction
involved — the co-operation is
based exclusively on exchange of
know-how. Additionally, Grofers
doesthemarketingfortheseshops.
Yes, that would work for
Grofers, but what does the neigh-
bourhood grocer get in return?
How easy or difficult is it to con-
vince him to come on board?
Grofers looks to push its
private labels through kirana
and add another channel in
areas where its online
business has done well
The incentives for the stores
are inventory management
and better price points
Once spruced up, it takes
three months for a store to
adapt to Grofers’ technology
Kumar says getting the shop own-
ers on board wasn’t much of a chal-
lenge as his firm explains the ben-
efits of the deal to them right
upfront. “At the end of the day,
what they want is to earn more and
using our data mining and analyt-
ics-poweredinsights,wehelpthem
get rid of dead inventory and equip
them to stock the units that sell
more in those areas. For a local
store, cash-flow management is
extremely important but is ham-
pered because the distributors
make them stock a minimum
quantity of SKUs and that restricts
their ability to add the fast mov-
space is also limited for them to
stock anything else.”
He adds that in some of these
stores,thecompanyhasmanagedto
cutdowntheinventorybyhalfwhile
increasing their turnover, though
not proportionately. Besides, the
attractivepricepointscreateavalue
propositionfortheconsumeraswell.
In other words, thanks to unhin-
deredavailabilityandbetterpricing,
thecustomerinthecatchmentarea
wouldbeinclinedtovisitthesestores
rather than, say, a D-Mart or a Big
Bazaar, says Kumar.
As things stand, modern trade
holds only a 10 per cent share of
overall retail in India (estimated at
$500 billion); about 3-5 per cent is
with the e-commerce players and
the balance 85 per cent is with the
kirana stores. So, the opportunity
forGrofersisimmense.“Thekirana
storesaremostlystagnantanddon’t
seemajormonth-by-monthgrowth
but our aim is to help them grow in
double digits in the first three
monthsafterthebranding.Thecost
of operations is reduced by 4-5 per
cent when we help them get rid of
their dead inventory.”
Grofers stands to gain in
Grofers’ labels. “The more they
sell, the more margins we make
and we are creating more brand
visibility for ourselves.”
The company wants more
stores to stock its private labels
but has no projections as far as
the revenue from these offline
stores is concerned.
Integrating kiranas in some
way is a strategy being considered
— or even employed — by most
modern retailers, including
Amazon. So what happens when
those with deeper pockets and
with a far bigger store footprint
become more aggressive in this
area?Kumarremainsunfazed,and
there is a good reason for that. As
Devangshu Dutta, CEO at consul-
tancy firm Third Eyesight, points
out, the numbers targetted by
Grofers — 1,000 stores — is a drop
intheocean.Inotherwords,there's
a huge market to be conquered.
However the company, he adds,
should aim to increase volumes
rapidly and look for dominance in
select geographies. “You have to
acknowledge you cannot domi-
nate everywhere,” he sums up the
challenge for Grofers.
who exactly is going to tainties can derail the
roll out these plans. process. Once we
Typically, digital address the “mindset-
transformation-related related” changes, this
discussion revolves transformation agenda
around technology, NIRANJANXXXXXXX needs to address
infrastructure and NADKARNISSSS “skillset-related” aspects
processes with very little TÜV SÜD with a clear roadmap of
or no mention about upskilling and reskilling
employees. As leaders, the existing employees
do we have a plan in place to get the while we hire the digital native tal-
teamsfromthetopfloortoshopfloor ent. I think the starting point is to
engaged in this entire process? Most assess our “employee readiness”
change management initiatives towards digital transformation.
revolvearoundemployeeswithwell- Successfulimplementationofany
crafted interventions to address the strategy or change initiative is only
mindsetchangerequiredandensure possiblewhenouremployeesseethe
high engagement levels. Somehow, value it adds and acknowledge that
I feel this aspect needs to be disruption caused by this change is
addressed more prominently while good for them. We as leaders under-
we talk about digitisation. stand that disruption is imperative
Companies like Apple, Netflix, and see this as an opportunity to
Google, and Dell are 40 per cent move up the value chain. But it's
more productive than the average when our employees, the key cata-
company, according to a research lysts, act as a tailwind instead of a
from the leadership consulting firm headwind,thechangetowardsdigital
Bain & Company. What sets them transformation will witness the right
apart is the engagement level of the tractionandspeedtogaintheadvan-
employees - here, I am just talking tagethatyourorganisationenvisages.
about an engaged team, leave alone
what an inspired team can do! ThewriterisCEO,SouthAsia,South-East
There are many research reports Asia,MiddleEastandAfrica,TÜVSÜD

SNIPPETS STATSPEAK
3 out of 10 consumers today are digitally 2outof10 consumers today are digitally
DIGITAL INFLUENCE
influenced for high average selling price durables influenced for comparatively lower ASP products
such as ACs, televisions, refrigerators and washing such as small appliances, water purifiers and
machines microwaves
Boston Consulting Group and
1 in 3 buys these products online 1 in 2 buythese products online
Google India recently released a
report Digital Powers Consumer
Durables: A $23 billion Opportunity 23 % Urban Digitally influenced 12.5*
by 2023 which projects healthy consumers digitally
growth in sales of televisions, influenced today Online sale in-store sale
refrigerators, washing machines, 10.4*
(figures in%) *Estimated
air conditioners, microwaves and
water purifiers. The report predicts 55 % Urban
the consumer durables industry consumers expected
will grow at a rate of 13 per cent and to become digitally
Rapid acceleration touch the $36 billion mark in the influenced by 2023
According to Gartner, Inc., the average number of next four years. But even within
artificial intelligence (AI) projects in place, in the overall optimistic 84% in-store buyers
organisations which are currently working with AI picture, it talks hadn’t decided their
and machine learning (ML), will grow nine times in about a bigger brand when they 3.0
the next three years. These are findings of The opportunity in started their search
GartnerAI and MLDevelopmentStrategies study “digitally influenced 1.7 1.7
conducted via an online survey in December 2018 sale”, that is, a sale 1.0 0.9
with 106 Gartner Research Circle Members — a where the buyer uses 74% online buyers .3
Gartner-managed panel composed of IT and internet during any stage of hadn’t decided their
IT/business professionals. The findings were brand when they 2013 2015 2017 2023
released recently and it revealed that today, the
the purchase cycle.
started their search Source: Boston Consulting Group and Google India
average number of AI projects in place is four, but
respondents expect to add six more projects in the
next 12 months, and another 15 within the next
three years. This means that in 2022, those SNEHA BHATTACHARJEE I’m sure it won more awards. I believe before approaching any campaign.
organisations expect to have an average of 35 AI or MY FAVOURITE CAMPAIGN that an award is a strong motivation for
ML projects in place. Which is your favourite campaign and both the agency and the client to push Do you remember some of the names
why? their limits and do better. who worked on the campaign?
I would name Kaun Banega Crorepati’s Some of the names associated with the

A question of answers (KBC’s) Koi sawal chhota nahi hota as

Here & now
Asian markets have demonstratedastrong
predominanceofsmartphonesasatooltosearch
andobtainonlinefinance,findsanewstudy.These
findingsfromtheinternationalfinancialholding
RobocashGrouphasbeenobtainedafterspeakingto
arelativelyhugesamplesizeofalmost1.8million
customersinthePhilippines,VietnamandIndiaand
Shariah-compliantfundinginIndonesia.This
correlationhasbeenformedbyhighpenetrationof
themobileinternetandtheintentionofonline
customerstoconsume"hereandnow"withoutany
geographicalorotherhurdles.Itisapplicablebothin
caseofunexpectedexpensesandoccasional
purchases.Itfurtherrevealsthatthepreferencefor
smartphonestoavailfinancemaycorrelatewithan
agefactorthatmayhavebiasedthefindingsbecause
oftheageprofileoftheparticipants.Theanalystsof
thecompanymentionedthattheyouthunder35
yearsarethemainpotentialcustomersofdigital
financialservices.
one of my all-time favourite cam-
paigns. While KBC had always done
good advertising earlier, this one
stands out for me because it marries
entertainment with a very strong
insight and leaves you with some food
for thought. Any question that anyone
around you asks could make you a win-
ner on the show tomorrow. So, it’s best
not to take any questions lightly. That
was projected brilliantly through
everyday characters — using human
truth with a creative twist.
On what parameters did you base your
decision?
My decision centered around four
parameters: Creativity, effectiveness,
memorability and extendibility.
What do you think was the key idea the
campaign was trying to drive home?
I believe the key idea came from the
fact that KBC is all about answering
questions. While people may say that
MY TAKE your answers matter, it is actually the
questions that matter more.
Itwascreative,effective,memorableandextendable
Do you remember the campaign
BRAND: KBC winning any advertising awards? Do
you think these awards serve any
YEAR OF LAUNCH: 2010 purpose?
AGENCY: Leo Burnett The campaign won a Silver at Goafest,
an award that I particularly remember.
Sometimesbecauseoftheemotional
elementinacampaign,thereisgreater
recallforthestorythantheproductor
serviceadvertised.Isthatarealfear,
especiallywithregardstothiscampaign?
We see that happen in a lot of cam-
paigns. However, it all depends on what
product insights you base
the campaign on. Here “Koi
sawal chhota nahi hota”
came from the product,
that is KBC and hence the
brand was not missed.
Since the time KBC was
launched in the year 2000,
it has captivated millions
not just through its quiz
format but also its innova- BRIJESH PARMAR
tive campaigns. Further, its Executivecreative
host being the biggest director, Fulcro (earlier
Bollywood star has drawn Interface Business
more viewers than ever. It Solutions)
saw Amitabh Bachchan on
the small screen become a regular affair.
The ads were socially relevant helping
them connect with the common man,
who was also a participant on the show.
Did this campaign inspire any of your
work? What are your takeaways from
the campaign?
Yes. The key takeaway from this cam-
paign was to never let entertainment take
a backseat for the sake of an insight or vice
versa. I try to keep that as table stakes
campaign include Nitesh Tiwari,
Piyush Gupta, Nikhil Mehrotra,
Shreyas Jain, and Ashwini Iyer Tiwari.
It was conceptualised and written by
Nitesh Tiwari and Nikhil Mehrotra.
The films are directed by Nitesh Tiwari
and Ashwinyer Tiwari.
What else could have been
done to make the
campaign better?
I feel that season two end-
ed abruptly since Amitabh
Bachchan fell ill. The way
Mr Bachchan connected
with the audience seemed
as real as its campaigns.
Season three saw Shah
Rukh Khan take over as
the host. The tagline for
the campaign was kuch
sawal zindagi badal dete
hain. This too again
emphasised on how a question can
change one’s life, and perhaps make you
a “crorepati”. Thereon, the show moved
to Sony and the channel waited for a few
years and brought back Bachchan with
a bang and an impressive campaign. I
believe the campaign was the best for its
time — to entertain and enthuse the
entire family to come together to watch
and play the game while delivering on
the show’s core proposition of combin-
ing knowledge with entertainment.

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.
MUMBAI | THURSDAY, 18 JULY 2019 BRAND WORLD 23 <

Sheraton turns back the

years under Marriott
The82-year-oldhospitalitychaingetsanimagemakeoverasitlookstostand
outintheclutter,withintheMarriottportfolioandoutside
SHALLY SETH MOHILE that Brand Sheraton is being
Mumbai, 17 July led through. It started with
Sheraton Saint-Hyacinthe

C
lose to three years after
Sheraton entered the
family of Marriott
International brands, as part of
the acquisition of Starwood
Hotels & Resorts Worldwide, it
is getting a new lease on life.
Marriott International is inject-
ing zest and localising the
brand ethos by adapting the
properties to the homegrown
cultures and cuisines, instead
of driving a uniform global
identity for the Sheraton brand
that has been in India, nearly
all of its 82 years.
Often perceived by trav-
ellers as tired and dated, the
world’s largest hotel chain
operator is getting a fresh and
contemporary look. It has a
new logo and a global cam-
paign aimed at defining the
new ethos kicked off in August
last year. The campaign called
the “Heart of the City,” is a cel-
ebration of communities
around the world — the diverse
people, places and cultures in
more than 70 countries and ter-
ritories where Sheraton Hotels
has a presence.
Mike Fulkerson, vice pres-
ident, brand and marketing
(Asia Pacific) at Marriott
pointed out that Sheraton has
a global heritage that dates
back to 1937 and given its
scale within Marriott, it was
inevitable that they would
look for a distinct position-
ing. “Within Marriott, it is
one of the biggest brands in
the APAC region with 122
hotels. It’s incredibly impor-
tant for us that the world is
able to differentiate this from
other brands in our portfo-
lio,” said Fulkerson.
It is not uncommon for
hotels to re-position, re-brand
(Canada) in August 2018, and
travelled to Sheraton hotels
worldwide with pit stops at
Sheraton Grand Seattle,
Sheraton Grand Sydney Hyde
Park, Sheraton São Paolo WTC
Hotel, Sheraton Cairo and
Sheraton Bengaluru
Whitefield Hotel &
Convention Center.
The seventh and final stop
will take place at a Sheraton
(Above) The Bengaluru property is part hotel in China later this year.
of a six-city brand transformation trip. Sheraton properties in each
(Right) The new logo retains the ethos of of the cities hosted engag-
the old one, but tweaks the symbol ing events in open public
spaces such as a conven-
themselves in “Within Marriott, it tion centre. The events and
entirety or choose (Sheraton) is one of campaign have been tai-
a particular brand the biggest brands lored to convey the local
within its folio to in the APAC region flavour of a global brand.
stand out and with 122 hotels. said, “We wanted The event in Bengaluru for
reflect the evolv- It’s incredibly to develop a instance, included a talk and
ing needs of the important for us vision for the stand-up comedy sketch by a
travellers. For that the world is brand. Not just city-based performer and a
instance, in 2018, able to differentiate reinvent through dance performance and work-
French hospitali- this from other repositioning but shop by Terence Lewis, dancer
ty major Accor, brands in our also raise its pro- and choreographer of The
changed its com- portfolio” file in APAC to Terence Lewis Contemporary
pany name back MIKE FULKERSON show it as our pri- Dance Company.
to Accor from ority.” Presently, The guests were also giv-
Vice-president, brand &
Accor Hotels as it marketing (Asia Pacific), Marriott en a preview of the Sheraton
wanted to reposi- Marriott International has lobby space through an inter-
tion the group as 450 hotels in 72 active transformation room
“an augmented hospitality countries and is set to expand installation. And true to the
company” focusing attention to 80 countries by 2020. The digital age that the brands live
on the significant investment ongoing transformation will in today, the occasion offered
that it had made in home and also mark the way the brand up Instagrammable vignettes
villa rentals. is modernising its design that helped spread the brand’s
Back home in India, in ethos, community connec- story through social media
March this year, Oberoi Hotels tion and service culture, he hotlines. As Brand Sheraton
& Resorts unveiled a new added. The key objective of transforms itself, the events,
brand identity and renamed the campaign is to show the the pitch and tone of the cam-
itself as “Oberoi Sun,” which new Sheraton brand promise paign and the experience will
according to the Oberoi Group and transformation. “The be sharply tuned to local
means the warmth, energy guest will be able to look, feel, tastes. Its properties too will
and sense of well-being of its touch this experience as it reflect the shift. And as the
guest experience. As part of gets carried out across all exercise unfolds in its entirety,
this, it is now focusing on its properties,” he said the brand will have to master
guest experience. A part of the ongoing cam- the art of wearing many faces
For Sheraton, Fulkerson paign is a six-city road trip under one hat.

FROM PAGE 1 Jalan panel... DEA had apparently held several rounds
of discussions with Sebi on this, without

Changes to IBC... Initially, the finance ministry had expected succeeding.

A lender to Essar Steel said the move should
plug the gaps in the insolvency process for
Essar since it would apply retrospectively.
“The amendment covers two important
aspects, that Section 53 can be applied and
it would have retrospective effect where the
resolution plan has not attained finality or
has been appealed against. Also, it clarifies
that commercial consideration in the mat-
ter of distribution proposed in resolution
planiswithinthepowersofCoC,”thelender
said.
The Cabinet decision comes days after
an NCLAT ruling, seeking to put different
classes of creditors on a par, said since it
(Essar) was not a distribution of assets from
the proceeds of sale of liquidation, the res-
olution applicant could not take advantage
of Section 53 to determine the manner in
which distribution of the proposed upfront
payment was to be made.
Anshul Jain, partner, PwC, said, “This is
a classic example where tribunals are taking
different views of interpreting laws, and
law is catching up so fast that appellate
authority (the Supreme Court) is not getting
a chance to review its decision.”
The Cabinet decided that a specific pro-
vision would be added to the IBC saying all
around ~3 trillion from the RBI’s reserve
funds, which were at the heart of a conflict
between the regulator and the government
last year.
On the insistence of the finance min-
istry, the central board of the RBI formed a
six-member committee — headed by Jalan
and co-chaired by former RBI deputy gov-
ernor Rakesh Mohan — in December to
review the central bank’s economic capital
framework.
The main difference of opinion within
the panel was over transferring the RBI’s
“excess” capital reserves. While most pan-
el members are in favour of a phased trans-
fer of the RBI’s capital reserves to the gov-
ernment over the years, the government's
view, voiced by Garg, was for a one-time
transfer.
For this financial year, the government
had accounted for around ~20,000 crore as
“additional dividend” from the RBI, a
finance ministry official said. This, the offi-
cial said, is unlikely to happen.
In the Receipts Budget, allocation
towards the “dividend or surplus of RBI,
nationalised banks and financial institu-
tions” was increased by ~23,130 crore to
~1.06 trillion in 2019-20, compared to the
Interim Budget.
IndiGo headed...
“Besides approving the results, these two
items have been included in the agenda of
the meeting. This is not because of
Gangwal’s demands but these issues have
been deliberated for a long time in order to
improve the corporate governance of the
company and meet regulatory norms.
Gangwal, who usually attends board meet-
ings through video conference, is flying
down from London to attend it in person
this time.
Indra Nooyi, former CEO of beverage
giant Pepsico, has been approached by the
company to be appointed a director on the
board, it is learnt. Nooyi is currently on the
board of e-commerce giant Amazon.
However,despiteincreasingthenumber
of directors, Bhatia-owned InterGlobe
Enterprises (IGE) will continue to hold its
controlling rights over the company. While
the chairman is expected to propose expan-
sion of the board to 12 members, the IGE
group would get the right to appoint six
directors and Rakesh Gangwal group two.
Four of the directors will be designated
independent. According to corporate gov-
ernance norms, at least one-third of the

dissenting financial creditors and opera-
tional creditors would receive an amount
notlessthantheliquidationvalueofthecor-
porate debtor or the amount in accordance
with Section 53 of the Code – whichever is
higher.Section53referstoawaterfallmech-
anism for distribution of assets in the event
of liquidation.
> BS SUDOKU
Sebi chief...
“Sebi levies fees on intermediaries for ren-
dering services but the move to transfer
funds would become an additional tax on
market participants,” said another person
aware of the development.
Sebi’s general reserve was esti-
mated at ~3,500 crore as of March
# 2794 2018 and ~3,800 crore in March
2019, according to sources.
The Finance Bill proposes a 75
per cent cash transfer from the
Sebi’s general fund to the govern-
ment’s books, after creating a
directors should be independent. “The
Article of Association (AoA) will be hon-
oured at any cost and hence IGE’s right to
appoint more directors will stay,” the source
said.
However, a person close to co-pro-
moter Gangwal said he would reiterate
his demand of amending the article of
association, which forces him to vote in
favour of the IGE’s choice of appointing
key executives. “The larger issue that
Gangwal has raised cannot be rectified
with Bhatia having all critical powers.
Gangwal would request the chairman to
include a special item to discuss the
same,” the person said.

‘reserve fund’ of the annual sur-
plus. The transfer is proposed to
take place after Sebi incurs all
expenses mandated under the law
establishing it.
Going by the provisions, Sebi
might have to transfer around
~2,800 crore to the central gov-
ernment in the current financial
year.
Finance ministry sources said
the Department of Economic
Affairs’ (DEA's) idea behind the
move was to “address the issue of
accumulation of huge surplus
SOLUTION TO #2793 Hard: funds” with Sebi. The DEA had
checked with the law ministry,
Solution which felt the funds received by
tomorrow Sebi “are public money and all
public money received on behalf
HOW TO PLAY of the government would be part
Fill in the grid so of the public account”.
that every row, Sources said it had been a long-
every column pending demand of the govern-
and every 3x3 ment to transfer surplus funds to
box contains the public account; Sebi had not
the digits 1 to 9 agreed. In the past six months, the
Jet forensic...
SBI Chairman Rajnish Kumar declined to
comment on the matter. He didn’t respond
to a set of questions sent to him over e-mail
on Tuesday.
EY had flagged the issue of unverified
invoices raised by Jet Privilege, which it
saidledto“excessbilling”ofaround~1crore,
monthly invoice of ~14.1 crore towards pro-
motional activities without supporting doc-
uments, and fraudulent JPMiles worth
~46.3 crore, among others. Jet’s loyalty pro-
gramme is managed by Jet Privilege Private
Limited(JPPL),asubsidiarywhichismajor-
ity owned by Etihad.
However, Jet Airways pointed out that
all these observations were drawn from the
internal audit report of the airline that was
provided to the forensic auditor.
Significantly, the airline accepted the obser-
vations made by the forensic auditor on
non-disclosure of related-party transac-
tions.
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MUMBAI | THURSDAY, 18 JULY 2019 1

Review death sentence of Aadhaar-like database

for health on the cards
Kulbhushan, ICJ tells Pak
AlsograntsconsularaccesstotheIndiannational;saysPakbrokeint’llaw
NEHA ALAWADHI
New Delhi, 17 July
geographic area and so on to
help in regional planning and
monitoring of health services.
The government has pro- “For the NDHM to be suc-
PRESS TRUST OF INDIA posed mapping health data of cessful, it will be important to
The Hague/New Delhi, 17 July citizens and building a undertake outreach activities
National Digital Health with public and private sector

T Hafiz Saeed
he International Court of Justice Mission (NDHM) on the lines players. The NDHM will have
(ICJ) on Wednesday ordered of the Aadhaar database, and to co-opt market players like

arrested for
Pakistantomakean“effectivereview set up ‘digital health as public medtech companies, non-gov-
and reconsideration” of the conviction and infrastructure’. ernmental organisations, foun-
death sentence of Indian national In a detailed National dations working in health
Kulbhushan Jadhav and also grant con-
sular access, in a verdict that was hailed in
financing Digital Health Blueprint,
which is open for comments
space as they build the public
utilities in the form of reg-
India as a “big victory” for the country.
In a reprieve for Jadhav, 49, a retired
terrorism until August 4, the Ministry of
Health and Family Welfare
istries, personal health record,
health ID, and health informa-
Indian Navy officer sentenced to death by a Mumbai terror attack mas- (MoHFW) has laid out stan- tion exchange, etc,” the blue-
Pakistanimilitarycourtonchargesof“espi- termind and JuD chief Hafiz dards, framework, and data print proposes. The blueprint
onage and terrorism” after a closed trial in Saeed was arrested on analytics principles for a tech- CREATING A has proposed a ‘consent man-
April2017,a16-memberbenchbya15-1vote
continued the stay on the execution and
Wednesday on terror financ-
ing charges by the Counter-
nology-based infrastructure.
Authored under the chair-
DATA VAULT ager’ mechanism, so that indi-
viduals can control the data
held that Islamabad violated New Delhi’s Terrorism Department (CTD) manship of the ex-Unique | Digital framework will they would like to be collated
rights to consular visits after his arrest. of Punjab Province, just days IdentificationAuthorityofIndia help address enormous or used for other purposes.
A Chinese judge was part of the majori- ahead of Pakistan Prime (UIDAI) chairman J amount of digital data The idea of explicit consent
ty verdict while the ad hoc judge from Minister Imran Khan’s maid- Satyanarayana, the blueprint is part of several other govern-
generated by Ayushman
Pakistan on the bench headed by President en visit to the US. proposes that the NDHM be a ment proposals, including the
oftheCourtJudgeAbdulqawiAhmedYusuf Saeed, a UN designated hybrid of the goods and servic- Bharat scheme soon-to-be tabled in
of Somalia gave a dissenting opinion. A man sports ‘India with Kulbhushan’ T-shirt in Mumbai PHOTO: KAMLESH PEDNEKAR terrorist whom the US has es tax network, UIDAI (the | Personal identifiers Parliament Data Protection Bill
Rejecting Pakistan’s objec- placed a $10 million boun- agency that administers could be a combination and Reserve Bank of India’s
tion to admissibility of the Pakistan on its part said it Jadhav, to visit him in detention and to ty on, was travelling to Aadhaar), and the National of Aadhaar number and guidelines for account aggre-
Indian application in the case, will now proceed “as per law”. arrange for his legal representation”. Gujranwala from Lahore to Payments Corporation of India, another attribute gators.
the court in its 42-page order The Bench observed that there was a get a pre-arrest bail in ter- given that health is a state sub- The blueprint has said that
held that “a continued stay of Friends and family rejoice three-week delay in informing India about ror financing cases regis- ject, and to incorporate private | Blueprint proposes this digital framework will be
execution constitutes an indis- With relief writ large on their Jadhav’s arrest on March 3, 2016, leading to tered against him there sector, including service leveraging mobile apps, designed keeping in mind
pensable condition for the faces, Jadhav’s childhood a “breach” of Pakistan’s obligations under when he was arrested, a providers and insurance. social media and call smartphones as the end device
effective review” of the sen- friends in Mumbai released the convention. CTD official told PTI. The NDHM has proposed centres for effective being used by citizens.
tence of Jadhav that had "We welcome colourful balloons. Noting that India has made a number of Saeed was sent on judi- to provide the technology plat- service delivery It also has detailed propos-
strained relations between the today's verdict At Parel in south Mumbai, requests for the consular access, the court cial remand for seven days. form for collection of core als for setting up state and
two neighbouring countries. in the @CIJ_ICJ. where Jadhav spent his child- said it was “undisputed” fact that Pakistan He was subsequently shift- health data from the providers | Proposes using open national-level repositories of
Truth and justice hood, his friends watched the did not accede to India’s appeals. The court ed to Lahore’s high-security and patients and interoper- standards, open APIs health data and methods of
India hails verdict have prevailed. ICJ proceedings live on a TV, said Pakistan has not explained how any of Kot Lakhpat jail where for- ability of health care data | Focus on security collecting data and so on.
External Affairs Minister S Congratulations to with a prayer on their lips. the wrongful acts allegedly committed by mer PM Nawaz Sharif is serv- through a unique identifier and privacy Other members of the com-
Jaishankar said he spoke to the ICJ for a verdict India may have prevented it from fulfilling ing seven years imprison- called the Unique Health mittee set up in November last
Jadhav’s family and applauds based on extensive Pakistan broke law its obligation. The judges said there was no ment, the official said. Identifier. year to propose the blueprint
their courage. “Satyameva study of facts" Recalling that it had directed basis to conclude that India abused its pro- Reacting to it, US Other components include consent, and health analytics. include Dr Manoj Singh, pro-
Jayate,” he tweeted. PRIME MINISTER Pakistan to take all measures cedural rights when it requested indication PresidentDonaldTrumpsaid: The Health Cloud, on the lines Another component is the fessor, All India Institute of
TheExternalAffairsMinistry at its disposal to ensure that of provisional measures in this case. “After a ten year search, the of the government community geographic information sys- MedicalSciences,NeetaVerma,
said the “landmark judgement” Jadhav is not executed pend- On Pakistan’s argument that India has so-called ‘mastermind’ of the cloud of the Ministry of tem or visualisation services director general of National
validatedIndia'spositiononthematter“fully” ing the final decision in the case, the ICJ failed to prove Jadhav’s nationality, the Mumbai Terror attacks has Electronics and Information that could be used to map the Informatics Centre, Alok
andaskedPakistantoimplementthedirective said Islamabad “deprived the Republic of court said it was satisfied that the evidence been arrested. Great pressure Technology, a Health Locker nearest hospital with a partic- Kumar, advisor (health), NITI
of the ICJ immediately. Opposition parties India of the right to communicate with and before it leaves no room for doubt that has been exerted over the last that will serve as a personal ular specialty, or map the Aayog and other members of
also hailed the decision. have access to Mr Kulbhushan Sudhir Jadhav is of Indian nationality. two years to find him!”. PTI health record repository with occurrence of a disease in a the MoHFW.

AROUND THE WORLDN

Trade-warriskweighingoneconomy:IMF
JEFF KEARNS
Washington, 17 July
The International Monetary Fund
(IMF) said more work is needed to fur-
ther reduce global trade imbalances
amid increasing tensions, while issu-
ing a fresh warning that such conflicts
are weighing on the global economy.
“It is imperative that all countries
avoid policies that distort trade,” the
IMF said in its annual External Sector
Report released Wednesday in
Washington. “Against a backdrop of
escalating trade tensions, greater
urgency is needed in tackling persist-
ent excess imbalances.”
The report comes as the
Washington-based fund confronts a
surgeinprotectionismaroundtheworld
China’s government said this week
‘Regulators must address risks from Libra’ that the economy eased to the weak-
est pace since quarterly data began
Facebook's planned economist said on in 1992, highlighting effects of the
cryptocurrency, Libra, Wednesday. Gita ongoing trade dispute with the US.
could help boost Gopinath (pictured) said “With prolonged trade uncertainty,
financial inclusion, but the IMF was flagging it’s weighing on business sentiment
also raises concerns risks and concerns everywhere in the world, which then
about consumer about Facebook’s plans, has implications for global demand,”
protection, data and said it was import- IMF Chief Economist Gita
privacy, and potential ant for regulators to pay Gopinath said at a press conference
“backdoor dollaris- close attention to such Wednesday. “We welcome the trade
ation,” the IMF's chief developments. REUTERS truce between the US and China that
came toward the end of June at the
that’s seen dragging on global growth, European Central Bank. G-20 meetings, and we would hope
withoutputslowinginmajoreconomies While the US trade war with China that the world would continue to work
from China to Europe and Mexico. IMF has cooled with a recent truce and cooperatively to not only not trigger
leadershipalsoisinfluxwithManaging renewed talks, the world’s second- these trade tensions but also to
Director Christine Lagarde set to suc- largest economy has slowed amid address the issues with the multilat-
ceed Mario Draghi as president of the President Donald Trump’s tariffs. eral trading system.” BLOOMBERG

Louis Vuitton’s US House slams

Donald Trump’s El Chapo sentenced
Arnault topples ‘racist’ tweets
The US House voted on
to life in US prison
Gatesas2ndrichest Tuesday to condemn com-
ments from President
Donald Trump that have
AP/PTI
New York, 17 July

been criticised as racist. The Mexican drug kingpin

Arnault’s LVMH advanced to a record, pushing his net worth
to $107.6 billion, ahead of Gates’ by $200 million PHOTOS: REUTERS
BillGateshasneverrankedlow-
er than No. 2 in the seven-year
history of the Bloomberg
Billionaires Index. That run
ended on Tuesday when the
Microsoft co-founder dropped
to No. 3 behind France’s
Bernard Arnault.
LVMH, Arnault’s luxury-
goods maker, advanced to a
record on Tuesday and pushed
his net worth to $107.6 billion
and ahead of Gates by more
than $200 million. The shares
extended their gains on
Wednesday, rising 0.7 per cent
at 1.54 pm in Paris. Arnault has
added about $39 billion to his
fortune in 2019 alone, the
biggest individual gain by far
among the 500 people in
Bloomberg’s ranking.
Arnault, 70, joined Gates
and Amazon.com founder Jeff
Bezos, the world’s richest per-
son, in the most exclusive
wealth club last month.
BLOOMBERG
The 240-187 vote backed
a resolution that “strongly
condemns Trump’s racist
comments that have legit-
imised and increased fear
and hatred of new
Americans and people of
colour.” BLOOMBERG
Amazon under
EU antitrust fire
over use of data
Amazon became the target
of an antitrust investigation
by the EU on Wednesday
over its use of merchants'
data, underlining
regulators' increasing focus
on how tech companies
exploit customer inform-
ation. US tech giants Amaz-
on, Google and Facebook
have been in the regulatory
spotlight. REUTERS
Joaquin “El Chapo” Guzman
has been sentenced to life
behind bars in a US prison, a
humbling end for a drug lord
once notorious for his ability
to kill, bribe or tunnel his way
out of trouble.
A federal judge in
Brooklyn handed down the
sentence Wednesday, five
months after Guzman’s con-
viction in an epic drug-traf-
to the US to stand trial after
he twice escaped from
ficking case. Mexican prisons.
The 62-year-old drug lord,
who had been protected in
Before he was sentenced,
Guzman, complained about
Mexico by an army of gang- the conditions of his confine-
sters and an elaborate corrup- ment and told the judge he
tion operation, was brought was denied a fair trial.
Boris smashes record for most
money raised by UK politician

PLANE FLIES LOW, PEOPLE DUCK

Google slammed
over limits on
content liability
US senators used a
Congressional hearing to
pushtheideaofoverhauling
alawthatprotectsYouTube,
Facebook and other inter-
netservicesfrombeingsued
for the content users post.
The hearing featured accu-
sations Republicans have
A British Airways plane flew perilously close to the ground at been making for months:
the Skiathos Airport in Greece. A video of the landing was that Google manipulates
uploaded on a YouTube channel which shows people search results.
ducking for cover as the plane flies over them PHOTO: YOUTUBE BLOOMBERG
REUTERS
London, 17 July
Boris Johnson (pictured) has
brokentherecordforthemost
money raised by a British
politician in his bid to become
PM, winning the backing of
eurosceptic financiers after
hardening his Brexit stance
with a "do or die” pledge.
Hedge fund managers, the
chairman of a football club, a
director of companies based
in tax havens, and a fox hunt-
ing enthusiast are among the
donorswhohavepouredhun-
dreds of thousands of pounds
into Johnson's campaign.
More than half the dona-
tions came from financiers
and businessmen who fund-
ed the campaign to leave the
European Union.

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