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FRIDAY, 2 A U G U S T 2 0 1 9
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M U M B A I (CITY)
~8.00
V O L U M E XXIII N U M B E R 251

THE MARKETS ON THURSDAY Chg#

Sensex 37,018.3T 462.8

10,980.0T 138.0
Nifty
COMPANIES P20 COMPANIES P20
Nifty futures* 11,015.3 L 35.3
Dollar
Euro
~69.1
~76.2
~68.8'
T76.7' EX-McKINSEY EXECTURNS FAILED BUSINESS FAILURES SHOULD NOT
63.4" 64.1 * *

BE LOOKED DOWN UPON: FM

Brentcrude ($/bbl)»
Gold (10 gm)«» ~34,482.0T
*(Aug.) P r e m i u m o n Nifty Spot; **Previous close;
~301.0
BIZ INTO$535-MN START-UP
# O v e r previous close; # # At 9 pm IST;
# # # M a r k e t rate exclusive of VAT; Source: IBJA P U B L I S H E D S I M U L T A N E O U S L Y FROM A H M E D A B A D , B E N G A L U R U , B H U B A N E S W A R , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K A T A , L U C K N O W , M U M B A I (ALSO P R I N T E D I N B H O P A L ) , N E W D E L H I A N D PUNE

FOREIGN BOND ISSUES

TO BE IN TRANCHES,
SAYS FINMIN
Fed's hawkish cut sends
markets into a tailspin
The government will go ahead with its
plan to issue overseas sovereign bonds.
It will do so in tranches after wider
consultations w i t h all the regulatory and

Auto sector
marketstakeholders,aseniorfinance
ministry official said on Thursday. The
official said the first tranche was unlikely
to be 'humongous', even as discussions
Sensex, Nifty close attheir lowest levels in five months

slowdown 'Current tech

on the shape and structure ofthe bonds
are still beingdiscussed. The official also
said thatoverseas bonds would be SUNDAR SETHURAMAN
NEW MONTH, OLD STORY

worsens doesn't enable

issued in differenttenors - from those M u m b a i , 1 August SENSEX
w i t h a five- to seven-year maturity to % Chg -1.2 37,600
long-term bonds above 20 years. 4 • he domestic equity and Global markets

Unnao rape: SC transfers

all related cases to Delhi
T currency markets

production of
dropped along with
their emerging market A S I A
peers after the US Federal T a i w a n TAIEX T a i w a n
Country Aug1,
2019

10,732
1-day
chg(%)

-0.9
Jul 31
37-018
Augl
36,600

small e-cars'
Reserve cut interest rates but S h a n g h a i Se NIFTY SALES SLUMP
Tighteningthegripon now-expelled said the move was not the start C o m p o s i t e China 2,909 -0.8

Bharatiya Janata Party (BJP) legislator of a long-running rate-cut cycle. H a n g S e n g H o n g K o n g 2 7 , 5 6 6 - 0 . 8 % Chg-1.2 11,150 •Jul'18 "Jul'19 % c h g YoY
Kuldeep Singh Sengar, the Supreme Court The comments saw the bond Kospi S o u t h Korea 2,017 -0.4 TOTAL 249,336 172,992 -30.6
(SC) on Thursday ordered transferring all yield and the E U R O P E *
five cases in connection w i t h the Unnao dollar rise, FTSE100 10,850 Maruti Suzuki 152,427 ^ ^ m
^ " - 3 6 . 3
rape incidentto a court in Delhi from a PAGE 10 triggering Britain 7,585 -0.03 96,478 ^ ^ m Maruti Suzuki announced yet another month of drop in
court in Uttar Pradesh. A three-judge ANALYSTS SAY risk-aversion DAX G e r m a n y 1 2 , 2 5 4 0 . 5 3 H y u n d a i M o t o r 4 3 , 4 8 1
-10.0 sales on Thursday after June quarter net profit slipped by
Bench, led by Chief Justice Ranjan Gogoi, MORE PAIN among CAC40 France 5,557 0.70 R U P E E VS D O L L A R
3 9 , 0 1 0 H 27 per cent. Chairman R C BHARGAVA talks about the reasons
also said the Delhi court would hearthe AHEAD FOR investors. AMERICA**
( I n v e r t e d scale)
H o n d a Cars 19,970 • forthe slump and challenges for e-cars in an interview
matter on a daily basis and finish The bench- D o w J o n e s % Chg-0.38 68.70 10,2501
-48.0
with Surajeet Das Gupta. Edited excerpts:
it in 45 days.
INDICES
mark Sensex I n d u s . A v g US 26,864 -1.2 68.80 Mahindra 19,781 •
fell as much S & P 5 0 0 16,831 •
-15.0 Your sales have been falling month-on-
as 787 points, or 2.1 per cent, in * A t 9 : 3 5 p m IST; * * aUSs o f J u l y 31 2,980 -1.1
^ M l P ^ month and there is stress on profitability.
intra-day trade before recoup- S o u r c e : B l o o m b e r g
T o y o t a K i r l o s k a r 1 3 , 6 7 7 1
COMPANIES P2 69.18 -24.0 ™ Youhadsaidtheslowdownwouldbecorr-
ing some of the losses, helped
Ul 31 Augl
Buy now, pay later at Future
10,4231
ected after the elections, yet it goes on. What is the reason?
C o m p i l e d b y BS R e s e a r c h B u r e a u

by short-covering and a rebound Itisarealsurprise,as there is nothing in the government's

Source: Companies

Group retail outlets soon in shares of Reliance Industries, The Sensex ended 463 points, shed 138 points, or 1.24 per cent, SHALLYSETH MOHILE policy that will stop customers from buying a car. We are
AspartofKishore Biyani's digital the country's second most or 1.23 per cent, lower to close at to close at 10,980. M u m b a i , 1 August checking data on whether the same trend is there in
valued company. 37,018, while the 50-share Nifty discretionary consumer spending across sectors like

Private sector going through

transformation strategy, Future Group is Turn to Page 23 •
trying to make a fresh attemptatextending Auto sales in July continued to go down as com- FMCG and brown goods. I am on the board of Dabur, and
loans. The company is planningto give a panies curtailed dispatches to dealers owing to they seem to have grown by 10 per cent.
poor demand, showed the monthly sales data Both first-time buyers and those looking for

challenging times: L&T's Naik

short-term credit facility, or loans, to its
customers through a 'digital' n o n - b a n k i n g released by auto companies on Thursday. replacements are deferring purchases. We can only
financial services company (NBFC), two Auto companies in India count dispatches guess what's on their minds. Maybe they are expecting
sources in the know ofthe plans told to dealers as sales. c armakers to go for a fire sale and offer huge discounts
Business Standard. YUVRAJ MALIK writes Cumulative sales of India's top five manu- on BSIV cars, as no such
facturers of passenger vehicles — including car can be registered
Maruti Suzuki India, Hyundai Motor India, from April 1,2020, when £• ^• I eD Ov N(WAGON
'TTHINKTHE
ECONOMY & PUBLIC AFFAIRS P4 AMRITHA PILLAY annual general meeting on lenging times in terms of invest- Mahindra and Mahindra, and Toyota the BSVI emission norms R)
Steel companies push M u m b a i , 1 August Thursday. "I think the government ment; only one third is able to Kirloskar Motor — fell by 30.6 per cent to kick in. Or, consumers WILL BE LESS THAN
knows the economy is slowing." keep what they have. A number 172,992 units over the same month last year. feel they should wait, as ~10 LAKH. EVEN THE
exports to clear stock India's gross domestic product He added: "It is going to take a of companies now need to sell The sharp decline in sales, for the ninth low-coste-cars are round ELECTRIC BATTERY FOR
Apoorofftakefromalmostall (GDP) growth will be 6.5 per cent year or a year and a half before what they have to repay debt." consecutive month, has heightened the pitch the corner and they will
this year, and accelerated spending accelerated spending for devel- He doubted the data on the for a fiscal stimulus in the form of a GST (goods have a lot of choice.
® segments is prompting steel THIS WILL HAVE TO BE
companies to divert material to is unlikely to happen in the next 18 opment comes." He said he was capacity utilisation level for and services tax) rate cut. IMPORTED. EVEN IF I
export markets to clear stocks. months, according to A M Naik, cautiously optimistic about this industry the Reserve Bank of Auto companies are expected to keep a tight How far has Maruti PRICE I T A T ~ 8 LAKH,
At least fwo majorsteel producers chairman of Larsen & Toubro estimate. India (RBI) has been quoting. leash on dispatches in the months ahead even responded to the
said the stock position was around 45 days (L&T), the country's largest engi- On the debt burden Naik questioned the veracity as they expect sales to recover, though mar- government's aggressive TELL ME HOW MANY
against15 days that the industry generally neering conglomerate. of Indian companies, of data points and statistics on ginally, with the onset of the festive season. electric vehicle (EV) INDIVIDUALS WOULD
carries. Mostofthe producers said they were "Growth is going to be not Naik said: "The pri- India's economy. Turn to Page 23 • push, especially on small BUY IT"
exporting more to bring down the more than 6.5 per cent this vate sector is in chal- Turn to Page 23 • cars that comprise the
inventory. ISHITAAYAN DUTT writes year. My feeling is that A I R T E L POSTS F I R S T Q U A R T E R L Y LOSS n
majority of the market?
though they (government) IN 10 Y R S , A T ~ 2 , 8 6 6 C R O R E
The fact is that the current battery tech does not enable
P 2

claim it is 7 per cent plus, if " I T IS GOING TO TAKE AYEAR OR AYEAR A N D A Bharti Airtel onThursday slipped into
producing an electric small car. Such a car will require
ECONOMY & PUBLIC AFFAIRS P6
we can maintain 6.5 per HALF BEFORE ACCELERATED SPENDING FOR the red asthetelecom company posted its
range and meet customer expectations, like charging
Renewable power may cent, we will be DEVELOPMENT COMES"
first quarterly net loss, of?2,866 crore, in over
time and affordability. I expect in 5-8 years there will be
get cheaper by 25p/unit lucky," said Naik a decade, battered mainly by stiff
a significant breakthrough—like solid state lithium
at the company's A M N A I K , chairman,L&T competition from RelianceJio.
batteries or batteries made of other material. Also, in
Thelatestbiddingforpower terms of charging infra, unlike two-wheelers, you need
i
transmission projects to three-phase power to charge a car at home. The question
connect renewable energy . . . B U T FUTURE HOLDS HOPE is how many customers have it at home.
with the national grid saw
Banks are tightening inventory financing and that will
leading private companies bring
down project costs by 40-50 percent. Adani GST COLLECTION OVER TRILLION MONSOON IN AUGUST-SEPTEMBER have an impact on your dealers. Is it a right move?
There is some justification for what banks have done.
DESPITE SUBDUED CGST, SGST EXPECTED TO BE NORMAL: IMD
Transmission, Sterlite Power, L&T, and Tata
Power were in the race for ~1,500 crore There have been a lot of defaults because dealers took
worth of projects. SHREYAJAI writes money for working capital but diverted it elsewhere. If
Collection f r o m t h e GST M O P - U P The India Meteorological Department (IMD) in its 22 per cent of our dealers have done this, it is clearly
goods a n d services tax forecast f o r t h e second half of the monsoon has widespread. We have suggested dealers sign an affidavit
stating they will take working capital loans from one
COMPANIES P2 July'19:
(GST) rose above T1
~1.02 trillion said rain in August and September is expected
ED raids premises of Singh trillion in July mainly to be100 percent of t h e Long-Period Average bank, so the company and the lender can monitor in a
brothers in PMLA case o n account of a June'19: (LPA). This should come as a big relief for better way. Monitoring has been lax but we have asked
higher m o p - u p ~99,939 crore farmers. The LPAforAugustand September, our field force they should get deeper into the financial
The EnforcementDirectorate (ED) on under t h e integrated t h e last t w o m o n t h s o f t h e southwest management of the dealers. Without this, you cannot be
a global company. It has been a big learning.
July'18:
Thursday raided multiple premises linked to GST. However, t h e
~96,483 crore monsoon season, i s a r o u n d 42.83 cm, w h i c h is
the erstwhile Religare promoters, brothers central and state 49 per cent o f t h e precipitation f r o m June to
Malvinder Mohan Singh and Shivinder portions r e m a i n e d more t h a n 2 p e r c e n t September, w h i c h is estimated at 89 cm. 6 • But do you think banks have been harsh?
Mohan Singh, and others in connection with s u b d u e d , posing a challenge higher t h a n the f 99,939 Banks should realise that a majority of the dealers have
a money-laundering case, officials said. They for t h e revenue t a r g e t for t h e crore in June a n d 5.8 per c e n t
MANUFACTURING SECTOR G R O W T H not defaulted. The action needs to be customised. Don't
said the raids were conducted atseven loca- fiscal year. GST c o l l e c t i o n at~1.02 h i g h e r t h a n t h e ? 9 6 , 4 8 3 crore
INCHES UP TO 52.5 IN JULY: PMI
punish the honest ones by imposing 50 per cent collateral
tions in Delhi, includingthose connected to t r i l l i o n in t h e m o n t h w a s s l i g h t l y in July l a s t y e a r . 7> before lending to all. If someone is guilty, we will cancel
his dealership and appoint a new one.

DSPMFinitiates legal action againstDHFL to recoverdue

the Singh brothers, former CMD of Religare Turn to Page 23 •
Enterprises (REL)SunilGodhwani,REL
executivesN KGhoshal,HemantDhingra.

COMPANIES P2

NCLATsets aside order

on Jaypee Infra land circular, banks are mandatorily required to DHFL had bank loans of ~40,600 crore and

o
BREWING TROUBLE
Litigation may delay housing sign on the ICA to mark their consent to work debt securities of ~45,380 crore to be repaid as
The National Company Law Appellate
financier's resolution plan on a resolution process between lenders and of March 31,2019. Its assets stood at ~98,000
Tribunal (NCLAT) on Thursday setaside a the defaulter. crore, of which about~35,000 crore is
National Company LawTribunal's Allaha-
• DSP M u t u a l Fund holds NCDsof
It is understood that DHFL, along with key wholesale loans. Over the next two months,
bad Bench's May18,2018, order, which had
DHFL, e s t i m a t e d at~169 crore
HAMSINI KARTHIK& SURAJEET DAS GUPTA lenders led by Union Bank of India, is in the DHFL has an interest obligation of ~440 crore
directed Jaiprakash Associates (JAL) to • DHFL resolution plan • The h o u s i n g f i n a n c e M u m b a i / N e w Delhi, 1 August final stages to wrap up the resolution plan and to meet towards secured lenders (those
return a land b a n k o f 8 5 8 acres toJaypee will be placing it before the holding NCDs) against a
consortium of lenders. A resolution principal outstanding of
may allow repayment companymaygetfresh
Infratech(JIL).The land pool, which belo- In a move that might disrupt the resolution
process being worked out for Dewan Housing committee has been formed by ~4,770 crore.
t o i n d i v i d u a l unsecured m o n t h l y credit As p a r t o f t h e
nged to JIL, was pledged by JAL w i t h various
Finance Corporation (DHFL), DSP Mutual DHFL for this. As part ofthe Sources added that in the
creditors oversecured lines o f ~ 1 , 0 0 0 - resolution p l a n ,
banks as collateral for the loans ittook. lenders 1,500 crore
Fund (DSP MF) has initiated legal action resolution plan, sources said DHFL D H F L w o u l d pay
process of resolution, banks
against the housing finance company for would pay individual unsecured individual
might also provide a
• RESULTS RECKONER
• Tenure o f existing loans m a y be e x t e n d e d
recovery of its dues. creditors fully, which would be unsecured creditors
moratorium of 6-12 months
"As mutual funds are not formally bound by followed by secured creditors. fully, w h i c h w o u l d
towards the principal loans due
However, no final decision has for repayment. "If there are
• DHFLmayget6-12 months' moratorium
the inter-creditor agreement (ICA) signed by be f o l l o w e d by
Quarter ended Jun 30,2019; common sample o n principal r e p a y m e n t
banks, they can take legal recourse to been taken on it. secured creditors.
other repayment obligations
of 535 companies (results available of 605)
strengthen their position," said a person in the According to the terms However, no final
that arise for DHFL during this
SALES
• NCD o b l i g a t i o n s have t o be
know. DSPMF had an exposure of about suggested in the resolution plan, decision has
period such as NCDs, these
Jun 3 0 , ' 1 8 22.0% ~8.54trillion •
m e t irrespective o f t h i s
~169 crore, largely as non-convertible the company will get fresh monthly been taken
obligations will be met by the
leeway
debentures (NCDs), as of April 30, according to credit lines of ~1,000-1,500 crore a company," said a senior
Jun 30, '19 9.2% ~9.33 t r i l l i o n •
the data published by Value Research. month and the tenure of the existing loans may executive at a public sector bank. In such a
NET PROFIT The DSPMF spokesperson could not be be extended if found suitable. Banks may also case, mutual funds due for repayment of NCDs
4 . 8 %
reached for comment. A spokesperson for convert part of their outstanding into equity need to be repaid on the date of maturity,
Jun 30, '18 ~69,218 crore Q
DHFL did not respond to a query on the issue. capital, if required. Sources, however, say that he added.
Jun 3 0 , ' 1 9 3.0% ~71,303 crore H According to the resolution mechanism laid the total debt likely to be converted into equity
out by the Reserve Bank of India in its June 7 may be restricted to 10 per cent. With inputs from Jash Kriplani

• • •• • • •• • • •• • • ••
Companies w h i c h have reported zero sales are excluded
Data compiled by BS Research Bureau; Source: Capitaline

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2 COMPANIES MUMBAI | FRIDAY, 2 AUGUST 2019

STOCKS > Zee Entertainment Enterprises

Invesco Oppenheimer
> CARE Ratings
Q1 net profit down
> Delta Corp
Smaller Cap World
> Trent
Q1 standalone net profit
> UPL
Q1 net profit down
IN THE NEWS buys 11% stake in the 47% at ~13 cr YoY Fund sells 1.59 million rises 51% to ~58 cr YoY 65% at ~178 cr YoY
company for ~4,224 cr shares at ~144 apiece

~346.70 CLOSE ~608.35 CLOSE ~145.80 CLOSE ~421.05 CLOSE ~576.90 CLOSE
* OVER PREVIOUS CLOSE  4.08% DOWN*  19.28% DOWN*  4.46% DOWN*  5.98% UP*  3.12% DOWN*
> .

IN BRIEF
Lenders unwilling to provide NCLAT sets aside order on Jaypee Infra land
extra funds to Jet Airways NCLT had directed Jaiprakash Associates allegation made by the resolu-
tion professional,” a Bench said.
Insolvency Resolution Process
(CIRP) period of Jaypee
to return 858 acres to the company In its judgment, the appel- Infratech for 90 days during
Lenders have expressed their late tribunal also said it was not which fresh bids for the compa-
inability to provide further capital AASHISH ARYAN on May 18 last year set aside the open to the NCLT to hold that ny can be submitted. Though
to pay one month’s salary of Jet New Delhi, 1 August deal and said the transaction the said mortgage deeds were fresh bids can be submitted by
Airways employees following a was “fraudulent” and “under- made by way of transactions NBCC, Adani Infrastructure and
recommendation from the The National Company Law valued”. It had then also asked which come within the meaning Development, among others,
National Company Law Tribunal Appellate Tribunal (NCLAT) on the parent company Jaiprakash of fraudulent trading or wrong- the NCLAT had said Jaiprakash
(NCLT). A proposal was submitted Thursday set aside a National Associates to release and dis- ful trading. Jaiprakash Assoc- Associates would not be eligible
by the resolution professional to Company Law Tribunal (NCLT) charge the interest created over iates had created these mort- to place new bids.
the committee of creditors in its Allahabad Bench’s May 18, 2018, the patch of land to lenders. gages to secure a total loan of Jaypee was taken to the
second meeting on Thursday. The order, which had directed Challenging the NCLT order, ~20,510 crore. NCLT by an IDBI Bank-led con-
committee took a sympathetic view of the request but is unwilling Jaiprakash Associates to return a consortium of banks, includ- On Thursday, Jaiprakash sortium for failing to repay debt
to provide further capital, a source said. An amount of ~90 crore a land bank of 858 acres to ing the State Bank of India, Axis Associates separately moved the worth ~24,000 crore. In the first
was sought to pay salary to around 8,000 Jet employees. In the Jaypee Infratech. Bank, ICICI Bank, among oth- Jaiprakash Associates was taken to NCLT by a consortium led by Supreme Court against a round of proceedings conduct-
first meeting, lenders had agreed to release around ~70 crore The land pool, which ers, as well as Jaiprakash IDBI Bank for failing to repay debt of ~24,000 crore NCLAT’s July 30 order that ed last year, the ~7,350-crore bid
to the airline for asset preservation purposes but the amount is belonged to Jaypee Infratech, Associates had subsequently barred it from placing fresh bids of Lakshdeep, part of Suraksha
yet to be processed. Jet was referred to the bankruptcy court on was pledged by Jaiprakash approached the NCLAT, which “We have held that the trans- dence to show that they were for Jaypee Infratech. The top Group, was rejected by lenders.
June 20 by State Bank of India after bankers failed to find any Associates with various banks on Thursday said “the transac- actions were made in the ordi- made to defraud the creditors of court will hear the case on In October 2018, the RP started a
takers despite months of negotiations. Jet stopped flying on April as collateral for the loans it took. tions were made in the ordinary nary course of business in the Jaypee Infratech or for any Friday. The NCLAT had on July second round of bidding to
17. The deadline for submitting expressions of interest for Jet ends The NCLT Allahabad Bench had course of business”. absence of any contrary evi- fraudulent purpose, on mere 30 extended the Corporate revive the debt-laden realty firm.
on August 3. However, sources said the resolution professional had
not got any bids for the airline so far. The deadline for submission
of bids may be extended beyond August 3 if no bids are received
within the period. ANEESH PHADNIS & SUBRATA PANDA< N CORPORATE SCORECARD N ED raids Singh
Cognizant net up 11.6%, brothers,
Amazon to expand
fulfillment centre
in Hyderabad
Sales hit, Ashok
Leyland cuts cost
to save ~500 crore
Airtel posts first cuts revenue guidance
ex-Religare
executives in
quarterly loss in
Amazon on Thursday annou- Commercial vehicles major
nced a lease with GMR Hyde-
rabad Airport City to expand its
Ashok Leyland, which is taking a
hit on sales, is cutting costs to
GIREESH BABU & DEBASIS MOHAPATRA
Chennai/Bengaluru, 1 August
JUNE QUARTER FINANCIALS PMLA case
largest fulfillment centre in the save around ~500 crore. Parameter YoY
country. With this, Amazon has However, the company said it Despite posting largely in-line sec- growth PRESS TRUST OF INDIA

over 3 fulfilment centres in
Telangana with processing area
of over 8.5 mn sq ft. "We are
excited to create more hundreds
of skilled jobs in the region and
empower thousands of local
sellers to use the local infrast-
ructure," Amazon-Asia Cust-
omer Fulfilment Vice-President
Akhil Saxena said. BS REPORTER<
MG Motor India
sells 1,508 units
of Hector in July
MG Motor
India on
Thursday
said it had
retailed
1,508 units
of SUV Hector in July. The
company had launched the
model on June 27 but deliveries
began in first week of July.
Commenting on the sales
performance MG Motor India
Chief Commercial Officer
Gaurav Gupta said, the firm
remains strongly focused on
timely vehicle deliveries and
seamless assistance. MG Motor
India has temporarily stopped
bookings for the SUV after
bagging 28,000 bookings for
the model. PTI<
Biocon and Mylan
launch cancer drug
Ogivri in Australia
Biocon and its exclusive partner
Mylan launched their cancer
drug Ogivri (trastuzumab), a
biosimilar to Hoffmann-La
Roche's Herceptin, in Australia.
The drug is for the treatment of
HER2-overexpressing breast
cancer and metastatic stomach
cancer. Ogivri is the first trastu-
zumab biosimilar approved
and launched in Australia and
available on the pharm-
aceutical benefits scheme (PBS).
Mylan and Biocon's trastu-
zumab biosimilar is approved in
more than 65 countries around
the world. BS REPORTER<
would continue with its
important capex plans, which
would entail ~1,700-2,000 crore.
Ashok Leyland’s Director and
Chief Financial Officer Gopal
Mahadevan said the cost-
cutting measures were being
taken up in administration,
manufacturing, travel, comm-
unication, and consulting.
Asked whether the firm reduced
manpower, he said instead of
hiring people "we are looking
at optimising the existing
resources". BS REPORTER<
Fiat Chrysler India
chief Kevin Flynn to
head Australia ops
Auto maker Fiat Chrysler
Automobiles (FCA) said on
Thursday its
Indian arm
head Kevin
Flynn
(pictured) had
been made
chief of the
company's
operations in Australia. Flynn
has assumed the charge of his
new position from August 1, the
firm said in a statement. He
will, however, continue his
responsibility as president and
managing director of FCA India
in addition to this. PTI<
Affirma Capital to
invest $50 million
in Tirupati Group
Affirma Capital, a newly formed
independent private equity (PE)
firm to be managed by the team
from Standard Chartered Private
Equity, has agreed to invest in
the Tirupati Group, a leading
nutraceuticals-focussed
contract research and manuf-
acturing company in India.
Affirma will invest $50 million
to support the organic and inor-
ganic growth initiatives of the
company. Affirma Capital is one
of the three PE firms that hold
a stake in CCD. BS REPORTER<
10 yrs, at~2,866 cr
MEGHA MANCHANDA
New Delhi, 1 August
harti Airtel on Thursday slipped into
B the red as the telecom company post-
ed its first quarterly net loss in over a
decade at ~2,866 crore, battered mainly by
stiff competition from Reliance Jio, besides
depreciation of 3G network equipment and
operating costs on network refarming.
However, the company’s average revenue
per user (ARPU) was the industry’s best at
~129 for the June quarter on a subscriber base
of 320 million.
The company was able to retain its top
spot in the market in terms of revenue as its
top line was up 2.8 per cent at ~15,345 crore.
Vodafone Idea posted revenue of ~11,269.9
crore in the June quarter and Reliance Jio’s
revenue was ~11,679 crore.
Airtel’s India revenue is an integrated
number comprising wireless, landline, and
broadband services.
During the first quarter of the current
financial year, Airtel’s mobile revenue saw
year-on-year (YoY) growth of 3.7 per cent.
Mobile 4G data customers increased by 63.3
per cent to 95.2 million from 58.3 million in
the corresponding quarter last year.
“The first quarter of the financial year
has begun with a healthy and equitable
growth across all our lines of businesses.
Headline pricing remained stable, albeit at
low levels,” said Gopal Vittal, managing
director and chief executive officer, India &
South Asia, Bharti Airtel.
Airtel had logged a net profit of ~97 crore
in the same period of the previous year. “We
have re-farmed spectrum from 3G networks
to 4G across both the 900 as well as 2,100
bands and begun the process of shutting
down 3G networks in India,” Vittal said.
The overall revenue of the Sunil Mittal-led
firm, including non-mobile businesses, rose
4.7 per cent to ~20,738 crore during the first
quarter ended June 30 as against ~19,799
crore in the year-ago period.
For the June quarter, Airtel’s India ARPU,
a key performance metric of mobile phone
operators, stood at ~129 against ~123 in the
March quarter. Vodafone Idea’s ARPU during
the same period was ~108, while that of
Reliance Jio was ~122.
“Exceptional hit during the quarter end-
ed June 30 was ~1,445.4 crore (net of tax),
POOR SIGNAL
~20,738 cr: Consolidated
revenues, up 4.7% YoY
~8,493 cr: Consolidated Ebitda
41%: Consolidated Ebitda margin,
up 6.4%
~5,047 cr: Capex for the
quarter
94%: Mobile data traffic growth
~129: India mobile ARPU
"The first quarter of the financial
year has begun with a healthy
and equitable growth across all
our lines of businesses.
Headline pricing
remained stable,
albeit at low levels"
GOPAL VITTAL
MD and CEO (India and
South Asia), Bharti Airtel
mainly due to a charge of ~142.7 crore towards
accelerated depreciation of 3G network
equipment/operating costs on network
refarming and upgradation programme,”
Bharti Airtel said in a statement.
While Reliance Jio posted a profit of
~891 crore, Vodafone Idea posted a net loss of
~4,873.9 crore in the June quarter.
Consolidated earnings before interest,
taxation, depreciation, and amortisation
(Ebitda) at ~8,493 crore increased
24.2 per cent year on year.
Consolidated Ebitda margin increased
by 6.4 per cent to 41 per cent in the quarter as
compared to 34.5 per cent in the correspon-
ding quarter last year mainly due to the adop-
tion of new accounting standards in India.
The consolidated net loss after excep-
tional items for the quarter stands at ~2,866
crore. “Airtel’s net profit has been narrowing
ever since Reliance Jio entered the market
and in this quarter loss was almost
inevitable,” said an analyst.
Airtel had posted a surprise profit of ~107.2
crore in the quarter ended March because of
a one-time gain of ~2,022.1 crore.
ond quarter numbers, IT services
major Cognizant on Thursday fur-
ther revised its revenue growth
downwards for the whole year as
the Teaneck-based company
continues to pursue cost optimi-
sation measures.
For the whole year, the compa-
ny guided for a revenue growth in
the range of 3.9-4.9 per cent in con-
stant currency terms, which was
lower than its previous guidance of
3.6-5.1 per cent issued in May.
For the second quarter ended
June 30, Cognizant posted growth
of 11.6 per cent in its net profit at
$509 million as compared to the
corresponding period in the previ-
ous year. The revenue at $4.14 bil-
lion grew 3.4 per cent on year-on-
year (YoY) basis while in constant
currency terms, the growth rate was
4.7 per cent.
In comparison, larger peer Tata
Consultancy Services' revenues
grew 10.6 per cent YoY on constant
currency term, while Infosys
reported 12.4 per cent growth dur-
ing this period. “We are taking the
necessary steps to position
Cognizant for improved commer-
cial and financial performance,”
said Chief Executive Officer Brian
Humphries. “While there is lots of
work ahead, I am encouraged by
what I have seen to date and am
optimistic on our future.”
The company said that it was
planning to hire over 500 cus-
tomer-facing and sales support pro-
fessionals who will help expand
Tata Power profit drops
86% to ~231 crore in Q1
Tata Power’s consolidated net prof-
it declined by 86 per cent to ~230.80
crore in the quarter ended June 30
(Q1), due to exceptional gains in the
same quarter of last year, according
to a regulatory filing.
The company had posted a con-
solidated net profit of ~1,735.12 crore
for Q1 in 2018, boosted exceptional
gains of ~1,897.24 crore from the
sale of non-core investment.
Tata Power said the consolidat-
Revenue $4.14 bn 4.7%
Netprofit $509 mn 11.6%
Operating 14.9% 180 basis
margin points
Source: Company
existing accounts and generate new
ones in coming quarters.
“We are implementing actions
in the second half of the year that
we expect will lower our existing
cost structure and allow for greater
investment in growth, talent, and
digital solutions,” said Karen
McLoughlin, chief financial officer
at the company.
Among verticals, the growth in
financial services segment was rel-
atively flat at 0.3 per cent YoY, while
the segment accounted for 35.6 per
cent of total revenues.
“Segment revenue growth was
driven by modest improvement in
banking, though it was partially off-
set by continued softness with a
few of largest banking and insur-
ance clients,” the company said.
In July 2019, the firm offered
retention awards to certain key
employees, which would result in
additional realignment charges of
$48 million during the remainder
of the year. In February, the
Nasdaq-listed company which has
huge delivery presence in India,
appointed Brian Humphries, a for-
mer top Vodafone executive, its
new CEO, replacing Francisco
D'Souza, who is now the vice-chair-
man of the company.
ed net profit before exceptional
items stood at ~254 crore in Q1
against ~252 crore in the year-ago
period due to lower losses in
Mundra on account of lower price
of coal, capacity addition in renew-
ables, favourable regulatory order
in Maithon and steady operational
performance across all segments.
Total income during Q1 rose to
~7,874.64 crore from ~7,404.97 crore
in the year-ago quarter. PTI
New Delhi, 1 August
The Enforcement Directorate
(ED) on Thursday raided mul-
tiple premises linked to erst-
while Religare promoters,
brothers Malvinder Mohan
Singh and Shivinder Mohan
Singh, and others in con-
nection with a money laun-
dering case, officials said.
They said the raids were
conducted at seven locations
in Delhi, including those con-
nected to the Singh brothers,
former CMD of Religare
Enterprises (REL) Sunil
Godhwani, REL executives N
K Ghoshal and Hemant
Dhingra after an Enforcement
Case Information Case (ECIR),
the police equivalent of a case,
was filed by the agency.
The ECIR has been filed
under criminal sections of the
Prevention of Money Laun-
dering Act (PMLA) after tak-
ing cognisance of a Delhi
Police Economic Offences
Wing (EOW) complaint filed
in December.
REL’s subsidiary Religare
Finvest had filed the com-
plaint with the EoW, alleging
fraud and misappropriation
of funds to the tune of ~740
crore and had named the
Singh brothers and others.
On their part, the Singh
brothers had blamed
Godhwani for the troubles
faced by the group.
The EoW FIR had been
registered for offences,
including cheating, criminal
breach of trust, misappropri-
ation, fraud and forgery and
criminal conspiracy. The REL
was controlled by the Singh
brothers until February, 2018.
After their exit from the board
of REL in February 2018, the
boards of REL and RFL have
been re-constituted.
The ED is probing alleged
misappropriation of over
~2,397 crore funds in this case
and is probing companies like
Arch Finance and RHC,
officials said.

Buy now, pay later at Future Group retail outlets
YUVRAJ MALIK
Bengaluru, 1 August
As part of Kishore Biyani's digital
transformation strategy, Future
Group is trying to make a fresh
attempt at extending loans. The
company is planning to give short-
term credit facility, or loans, to its
customers through a ‘digital’ non-
banking financial services company
(NBFC), two sources in the know of
the plans, told Business Standard.
This is not the first time the
group is testing waters in the
credit business. In 2007, the group
set up Future Capital Holdings,
which had a major play in wholesale
loans and mortgages. But five years
later, that business was sold to
Warburg Pincus for ~800 crore as
part of the group’s strategy to off-
load non-core business.
This time around, the company
is riding on extensive data and
analytics to extend credit, the
people in the know said. The firm is
creating a repository of consumer
data, seeded from its retail touch
points, for profiling, targeted
marketing, and cross-selling.
“Biyani’s vision is to focus on the 20
million customers that come to his
stores, and drive ~100,000 worth of
business from them every year,”
a source in know of the group’s
digital strategy said.
Initially, the NBFC, which is
learnt to have got an approval from
the Reserve Bank of India already,
will offer up-front credit to
customers walking into Future
retail outlets. Only those customers
who are on Future Pay app will be
able to make cashless check-outs by
scanning a QR-code. They can then
pay the dues at the end of the
month. “It’s a ‘buy now pay later’
facility,” said one of the persons
cited above.
In the first leg of the roll out,
expected soon, buyers will be
offered credit. Later, working
capital credit is likely to be extended
to small vendors and suppliers, too,
sources said.
Future Group did not respond to
a request for comment.
Sources said the group wants to
envelop customers by bringing
them onto Future Pay, a captive
payments app-cum-wallet
launched in 2018.
Digital payments not only
creates a hook for customers but
brings in valuable data — spending
pattern, preferences, age and so on
— to the company as actionable
insights, said Arvind Singhal,
chairman, Technopak Advisors.
“Retails businesses know very
PHOTO: BLOOMBERG
little about their customers. But we
have seen online-first ventures
creating successful businesses
on the back of data,” said Singhal.
“Offline retailers are now playing
catch up.”
The group had hinted at a
massive digital push when it
unveiled Future Retail’s 2018-19
annual report. “A data-led digital
platform is being built that world
can emulate,” read a statement in
the report. In June 2018, the group
set up a unit called Tathastu, led by
Vivek Biyani, to work on advanced
technologies in retail innovation.
Vivek, son of Kishore Biyani, is a
director at Future Group and head,
digital business initiatives.
Tathastu is currently working on
features like mobile point-of-sale,
e-Bill, smart self-checkouts, chat
bots, and virtual reality-enabled
experiences, among others.
Future Group owns Big Bazaar,
fbb, Central, Brand Factory, Easy
Day, and a dozen brands in fashion
and consumer-packaged goods
categories. Its three listed entities —
Future Retail, Future Consumer
and Future Lifestyle Fashion —
together posted ~63,500 crore
revenue in 2018-19.
Flipkart and Amazon, which
operate PhonePe and Amazon Pay,
respectively, crunch peta-bites of
consumer data every day. This helps
them in everything from inventory
management to reducing delivery
times and predicting what the
customer will buy next.
Xander buys ~900-cr
office property in Pune
RAGHAVENDRA KAMATH
Mumbai, 1 August
In one of the largest commer-
cial property deals in the coun-
try this year, Xander Inves-
tment Management (XIM), the
private equity (PE) real estate
arm of global investment firm
The Xander Group, has bought
an office property in Pune from
another PE firm New Vernon
for ~900 crore ($130 million).
The property named
Weikfield IT-CITI Infopark is
spread across 1.1 million square
feet and has clients such as
Maersk, WNS, Whirlpool, PTC,
Nihilent, Tavisca, and others.
“The asset complements
our existing, 100 per cent
owned and operated portfolio
across key Indian cities, and
enables us to offer a strategic
Pune location to tenants,”
said Arpit Singh, principal at
XIM, Singapore.
Xander has an office prop-
erty portfolio of 7 million sq ft
in Bengaluru, Delhi, and
Chennai. Besides, it has also a
mall joint venture with Dutch
pension fund APG.
Recently, property fund
Ascendas India Trust said it
had agreed to buy IT-focused
special economic zone Blue
Ridge phase III with leasable
space of 1.8 million sq ft in
Pune’s Hinjewadi area.
The deals in leased and rent
yielding office properties have
gone up in the recent past.
Blackstone bought major por-
tion of One BKC building in
BKC area of Mumbai for ~2,600
crore. In another deal, K Raheja
Corp emerged final bidder to
buy Citibank’s former head-
quarters in the same area for
~400 crore.
The Xander Group has
committed over $3 billion to
the Indian market across pri-
vate, public, credit and venture
investments since 2005.

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4 ECONOMY & PUBLIC AFFAIRS MUMBAI | FRIDAY, 2 AUGUST 2019

“The passing of the Bill is indeed a “The Indian electorate tells the ruling party, I am giving you “We have received a proposal from Pakistan. We are
great moment in India’s legislative enough seats to form the government but please remember evaluating it (Pakistan's offer of granting consular
history. It is a major social reform you do not have our total mandate. That means you have to access to Kulbhushan Jadhav) in the light of the ICJ
that will go a long way in ensuring carry along those who have not voted for you because they judgment. We will maintain communication with
justice for Muslim women” are the people of this sovereign democratic republic” Pakistan in this matter through diplomatic channels”
M VENKAIAH NAIDU, vice president
PRANAB MUKHERJEE, former president RAVEESH KUMAR, external affairs ministry spokesperson
on Triple Talaq Bill
> .

National Medical Commission

Bill cleared in Rajya Sabha
The Rajya Sabha on Thursday passed the National Medical
Commission Bill for replacing the MCI with a new body.
Doctors at several government hospitals across the country
boycotted work, held marches and raised slogans to
protest the Bill PHOTO: PTI
IN BRIEF
BSNL, MTNL fail to pay July
salary to 198,000 employees
Loss-making telecom PSUs Bharat Sanchar Nigam (BSNL) and
Mahanagar Telephone Nigam (MTNL) have failed to clear salaries of
their 198,000 employees for July, a Union leader said on Thursday.
There is no assurance from the management on when the salaries
would be paid which are usually credited on the last day of every
month, All India Unions and Associations of BSNL Convenor P
Abhimanyu said. “Salary for the month of July has not come. There is
also no information when will it be credited,” he said. BSNL has 176,000
employees across India while MTNL has around 22,000 employees. This
is for the second time the two companies have defaulted on payment
of salaries this year and for the first time after the new government took
charge. The two PSUs had delayed payment of salaries for February
until mid-March due to a financial crisis.
Steel companies push exports to clear stock
ISHITA AYAN DUTT
Kolkata, 1 August
Poor offtake from almost all segments is prompt-
ing steel companies to divert material to export
markets to clear stocks.
At least two major steel producers said the
stock position was around 45 days against 15 days
that the industry generally carries.
Most of the producers said they were export-
ing more to bring down the inventory. Also, they
were planning to advance maintenance shut-
downs. Some cold rollers, on the other hand, have
resorted to a production cut by around 50 per
cent over the past few months.
Senior Vice-President, ICRA, Jayanta Roy,
pointed out that JPC figures show that the total
finished steel stock at the end of April 2019 was at
9.93 million tonnes compared to 7.49 million
tonnes in the previous year. At the end of May
2019, it was at 10.1 million tonnes vis-a-vis
7.4 million tonnes in 2018.
According to producers, demand has tapered
across segments. Auto sales have been skidding
for almost four quarters now. Passenger car sales
— an important indicator for the segment and the
economy — have continued its downward trend
Foreign bond issues to be
in tranches, says FinMin
PTI< Govt to proceed with
plan following wider
with a 4.6 per cent drop in June.
Consumer durables which had seen a good
summer is also sluggish. “People are curbing on
discretionary spending,” a steel producer said.
Monsoon is typically a slow phase for the con-
struction sector and whether it picks up after the
season will have to be seen. Industry sources said
steel demand for auto had dipped by 20 per
cent, which for yellow goods is down by 40 per
cent and construction 25 per cent.
The demand from shipbuilding is at a five-
HRC prices have dipped by $20-$25 a tonne over
FINISHED STOCK the past three months, whereas Indian HRC prices
(in million tonnes) have declined by close to $35 over the same peri-
April May 9.93 10.10 od. Amid the slowdown, producers are pointing
fingers at rising imports from FTA countries.
7.49 7.40 Imports from Japan and Korea accounted for 49
per cent of total imports in FY19, compared to 45
per cent in FY18.
The silver lining, however, is that raw materi-
al prices, especially coking coal, has come off its
high. Coking coal prices are now hovering around
$170 a tonne. Roy said international coking coal
prices have softened by over $30 in the last
2018 2019 three months, providing a cushion to Indian
blast furnace operators.
“However, given the lead time for procure-
year low and general engineering at three-year, ment of imported coking coal, the full benefit of
said one of the major producers. The weak dem- lower coal cost is unlikely to be realised by steel
and is telling on prices in both flat and long steel. players in the second quarter. Consequently, the
Prices of hot rolled coil (HRC) in May was at margin outlook in the second quarter for many
~40,250 a tonne and is now hovering at ~38,000. domestic steel companies is weaker than the same
Prices of TMT bars have seen a deeper dive from in the first quarter, if domestic steel prices remain
~35,000 a tonne at the end of May to ~30,000 now. subdued in the next two months,” he said.
One of the producers said even at lower prices Domestic steel producers are not expect-
there were hardly any takers. ing a recovery till November, which is when
Though prices have softened globally, the
decline in India appears to be sharper. Roy said
government spending on infrastructure is like-
ly to be visible.
Manufacturing
PMI inches up
to 52.5 for July
INDIVJAL DHASMANA
New Delhi, 1 August

Ashutosh Karnatak Delhi makes power consultations: Official After a weak core sector data,
the widely tracked purchasing
assumes charge as free for usage up ARUP ROYCHOUDHURY managers’ index (PMI) gave
GAIL chairman & MD to 200 units New Delhi, 1 August some relief on the manufac-
turing side.
Ashutosh Delhi Chief Minister Arvind he government will go ahead with The manufacturing sector
Karnatak on
Thursday
assumed
Kejriwal on Thursday
announced that consumers
consuming up to 200 units of
T its plan to issue overseas sovereign
bonds. It will do so in tranches after
wider consultations with all the regulato-
activities improved in July as
new work orders and output
strengthened from the previ-
charge as electricity won't need to pay ry and market stakeholders, a senior ous month, leading to increase A BREATHER
chairman and their power bills. Those finance ministry official said on Thursday. in employment at the fastest
managing consuming 201 to 401 units of The official said the first tranche is pace in five months, according 56
director of GAIL (India). electricity will continue to get unlikely to be ‘humongous’, even as dis- to PMI survey. 51.0
54
Karnatak carries an 50 per cent power subsidy from cussions on the shape and structure of the PMI rose to 52.5 in July
experience of over 37 years in the government, Kejriwal said. bonds are still being discussed. The official from 52.1 in June as companies 52
the hydrocarbon sector and The government will have to also said that overseas bonds will be issued scaled up production in
50
was also concurrently serving spend ~1,800 crore to ~2,000 in different tenors — from those with a response to a quicker upturn in
crore on power subsidy five- to seven-year maturity to long-term factory orders. In PMI parl-
52.5
as the company’s director 48
(projects) since March 2014. annually, according to the chief bonds above 20 years. ance, a print above 50 means
BS REPORTER< minister. PTI< “There needs to be credibility around expansion, while a score below 46
the government. The investors are going to that denotes contraction. Apr ‘13 Jul ‘19
Note : A figure above 50 means
question your Budget announcements if process of consultation is ongoing, and ment banks from August onwards to get On the price front, the sur- expansion; below that signifies
28,000 more troops RBI advertises for you don’t fulfil them. We can’t brush those the details will be finalised at a later date,” a better understanding of the global vey said the overall rate of contraction
Source : IHS Markit
being deployed deputy governor’s aside. We need to build credibility to said the official. bond markets. The contours of the inflation was at a three-month
ensure we do what we say,” the official told According to the existing plan, the instrument will be finalised by October, low and well below its long-run
in Kashmir Valley position reporters, adding, “The ideal way to do bonds will be issued in the second half of including the currency these bonds will average, which may prompt industry core sector output
Over 280 companies of security The Reserve Bank of India (RBI) this would be in different tranches and 2019-20. Government officials have clar- be pegged at — whether dollar, euro, the RBI’s monetary policy was almost flat in June. Core
forces are being deployed in on Thursday advertised tenor, in an order to develop the market.” ified that 10 per cent of the year’s yuan or others. committee (MPC) to go for sector industries grew by 0.1
the Valley, sources said. About applications for the post of The official said that people in the total gross borrowing requirement will Since the Budget announcement, the another rate cut in its meeting per cent in the month, down at
28,000 troops, mostly CRPF deputy governor, as the central government were aware of the benefits be raised overseas. That amounts to Narendra Modi government has not only next week. a 50-month low. However,
personnel, are being bank has now three deputy as well as the drawbacks of issuing over- roughly $10 billion. received criticism on the matter from for- “The relatively negligible PMI gave some sort of relief on
deployed in vulnerable spots governors, instead of four, seas sovereign bonds, and There were reports that the mer Reserve Bank governors Raghuram increases in input costs and the manufacturing front.
across the Valley. However, no following the departure of Viral there will be consultations The official said the Centre was considering the Rajan and Y V Reddy, and others like output charges, signalled by “Following a slowdown in
reason was given for the move Acharya on July 23. with all stakeholders. This first tranche is option to raise $10 billion in Rathin Roy of the Economic Advisory the PMI survey in July, suggest growth in the opening quarter
late in the evening. PTI BS REPORTER< was an indication that in unlikely to be one go from its first overseas Council to the Prime Minister, but also that we are likely to see a fur- of the 2019-20 fiscal year, some
spite of widespread criti- ‘humongous’, even bond sale as early as October. from its affiliates like the Rashtriya ther reduction in India’s momentum was regained in
cism, the Centre would go as discussions on Also, the government Swayamsevak Sangh and Swadeshi Jagran benchmark interest rate as the July. Measures for factory
ahead with its plan as the shape and favours a long- term tenor for Manch, that are learnt to have called for a RBI continues its effort to sup- orders, production and
announced in the Budget. structure of the the bonds — no less than 20 rethink on the matter. port economic growth,” said employment improved in the
Finance Minister Nirmala bonds are still years — and top officials will The government has maintained that Pollyanna de Lima, principal latest month, although rates of
Sitharaman, in her maiden being discussed embark on roadshows to drum not only the decision to raise debt over- economist at IHS Markit. expansion remained below
Budget speech on July 5, had up investment once the con- seas will reduce the cost of borrowing The next MPC meeting will trend,” said Lima.
announced: “India’s sovereign external tours are finalised. The roadshows to and take advantage of excess liquidity begin on August 5. In the According to the survey, the
debt to gross domestic product is among major financial cities to meet big institu- in global markets, but will also create June review meeting, the main factor boosting produc-
the lowest globally, at less than 5 per cent. tional investors could include Sitharaman, additional space for corporate bonds in RBI had cut key lending rates tion was a sustained rise in new
The government would start raising a part Minister of State for Finance Anurag the Indian markets. by 0.25 per cent for the third work inflows.
of its gross borrowing programme in exter- Thakur, Reserve Bank of India (RBI) The government has maintained that time this year to spur eco- “Survey participants linked
nal markets in external currencies. This Governor Shaktikanta Das, Chief not only the decision to raise debt over- nomic growth, which the uptick in growth to a pick-
will also have a beneficial impact on the Economic Advisor Krishnamurthy seas will reduce the cost of borrowing declined to 6.8 per cent for up in demand, mostly stem-
demand situation for the government Subramanian and others. and take advantage of excess liquidity 2018-19, the lowest in the Modi ming from successful market-
securities in the domestic market.” Unlike the domestic bonds issues by in global markets, but will also create government’s first tenure. ing efforts, competitive pricing
“The relevant paragraph in the Budget the RBI, the finance ministry issuing additional space for corporate bonds in Official data released on and favourable public poli-
External Affairs Minister S Jaishankar (centre) on Thursday remains our reference point for this. The these bonds will start talking to invest- the Indian markets. Wednesday showed that eight- cies,” Lima added.
held a series of bilateral meetings in Bangkok with his counter-
parts from Thailand, New Zealand, Japan and the European
Union, during which he discussed a host of issues,
including Indo-Pacific and maritime partnership PHOTO: PTI

Vande Bharat goes slow, Train 20 may be shelved

CIL to spend ~700 cr SHINE JACOB
New Delhi, 1 August
cancelled. Of the ~100-crore spent
on the first rake, about ~35 crore was BRAKES ON
Bharat series is likely to be launched
soon from New Delhi to Katra. For

to buy rail wagons The ambitious aluminium-bodied

AVISHEK RAKSHIT
Kolkata, 1 August
Coal India (CIL) has decided to
invest ~700 crore to procure 40
rakes, which will enhance its
evacuation capability by 56 mil-
lion tonne (mt). The move will
allow the state-owned miner to
have control over moving coal
to desired power plants and he-
lp debottleneck pithead stocks.
“These rakes will be owned
by CIL and dedicated only for
transport of our own coal. In
turn, it will help us in pushing
higher volumes of coal to the
power sector,” a company
executive said.
The public sector unit can
also enhance allocation of rakes
to its non-power clients.
According to a company offi-
cial, one rake comprises of 59
wagons and a back of the enve-
lope calculation indicates that
one rake can move 1.4 mt of
coal per annum. Last month,
Coal Minister Pralhad Joshi
had said there have been spo-
radic instances of resistance
from local population for
movement of coal through road
due to various issues including
environmental concerns.
The life span of these wag-
ons, the latest addition in
Indian Railways, is expected to
be 35 years. As against conven-
tional carrying capacity of 70
tonnes, the new wagons have
capacity to carry 80 tonnes of
load. However, initially, these
wagons will not be able to carry
the maximum designated load
as the bearing capacity of rail-
way tracks needs to be
increased, too.
Train 20 project — considered the
successor to Vande Bharat Train or
Train 18 — is likely to be shelved by
the Indian Railways. This comes at a
time when two consecutive bulk
tenders for the propulsion systems
of Train 18 got cancelled recently,
citing technical reasons.
A third tender, estimated around
~1,300 crore for 37 trains, is likely to
be floated soon. Sources said the
plans for Train 20, on the other
hand, were shelved as the features
were already incorporated in Vande
Bharat, except the aluminium body
that helps in attaining better speed
for high-speed trains.
Though bids for 43 Train 18 sets
were invited first, orders for only
three were given, including one for
Spanish major CAF and Medha
Group that supplied for the first
Vande Bharat Train. Following this,
a second tender was floated for 37
Train 18 propulsion systems that got
on the propulsion system.
“Train 20 is almost shelved.
However, for Train 18, a third tender
may be coming up for more partici-
pation from the multinational
majors,” said a person privy to the
development. Two other persons
involved with the project confirmed
the information.
“The comparison between Train
18 and Train 20 is not justifiable,
and the latter was supposed to be
having additional safety features
and had aluminium body too. The
derailment of the Train 18 tender
too may not help the entire concept
of Make in India in the long run,”
said an industry veteran. Sources
also indicated that an Indian com-
pany had declined the two trains
allotted to them during the first ten-
der because of the small size of the
deal. Both Train 18 and Train 20 had
got their names because of the year
in which the government wanted to
launch them, 2018 and 2020,
respectively.
FANCY RAKES
~1,300 cr Size of fresh
tenders to be launched for
37 new Vande Bharat
propulsion system
The engine-less Train 18 has the
advantage of attaining a maximum
speed of 130 km/hour within 45 sec-
onds, compared to 5 minutes by a
this, the railways ministry is report-
edly awaiting the final nod from the
Prime Minister’s Office (PMO). After
the bids got derailed, plans for 45
new Vande Bharat trains by 2021-22
by the ICF board may get delayed.
Union Railway Minister Piyush
Goyal had earlier said there was a
plan to have 100 such train sets, aft-
er the launch of the first indigenous
semi-high speed trainset Vande
Bharat Express from New Delhi to
Varanasi on February 15. The train
that was considered to be a Make in
India success has around 80 per
cent of indigenous components.
According to an initial plan
lined up by the ICF, it wanted to
~1,000 cr New Delhi come up with one trainset every
Cost of making to Katra alternate month till March 2020,
first Vande Expected route for and one rake per month from April
Bharat train the second train 2020. Another source said the rail-
ways was in the process of identify-
normal train. Train 20 was expected ing fresh routes for new Vande
to have a sleeper facility too, advan- Bharat trains, which are supposed
tageous for long distance travel. to replace Shatabdis and Rajdhanis
The second train in the Vande in the longer run.

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6 ECONOMY & PUBLIC AFFAIRS
>
Zero-deficit monsoon likely in
second half of season, says IMD
Better rain will help
improve yield in crops
planted, say experts
SANJEEB MUKHERJEE
New Delhi, 1 August
he India Meteorological
T Department (IMD) in its forecast
for the second half of the mon-
soon has said rain in August and
September is expected to be 100 per
cent of the Long-Period Average (LPA).
This should come as a big relief for
farmers.
The LPA for August and September,
the last two months of the southwest
monsoon, is around 42.83 cm, which is
49 per cent of the precipitation
from June to September, which is esti-
mated at 89 cm.
The Met said rain in August was
expected to be 99 per cent of the LPA.
Both the forecasts have set a model
error of plus and minus 8 per cent and 9
per cent, respectively.
The Met also retained its monsoon
forecast at 96 per cent of the LPA, which
is normal.
“Currently, the sea surface tempera-
tures (SSTs) as well as the atmospheric
conditions over the equatorial Pacific
Ocean indicate El Nino Southern
Oscillation (ENSO) neutral to borderline
El Niño conditions. The latest forecasts
indicate that these conditions are likely
to continue during the remaining part of
the monsoon season,” the Met said.
Rain in June was almost 33 per cent
less than normal, which is among its
worst performances in the past five years.
The amount of rain was small
because the monsoon arrived late in sev-
RBI allows Bank of China to offer services in India Bank credit up 12%, deposits 10.6%
The Reserve Bank of India (RBI) on Thursday
allowed the Bank of China to offer regular
banking services in the country. All
commercial banks, like SBI, HDFC Bank,
Punjab National Bank and ICICI Bank, are in
the Second Schedule. Banks falling under
this schedule have to adhere to the
norms of the RBI.
“We advise that the ‘Bank of China
https://t.me/SSC4Exams
eral states and set in over the Kerala coast
with a time lag owing to cyclone ‘VAYU’
and its after-effects.
A big monsoon break in August and
September would have spelled havoc
for the already delayed kharif crops and
affected their yields.
Officials said good rain in August —
though it might not improve acreages
much for most crops except urad,
moong, and paddy — would help in
improving yields in the crops planted.
“In the case of arhar, I don’t see any
big improvement in acreage because in
most places sowing is over, but the show-
ers should boost the acreage of urad and
moong, which are usually planted in late
July and early August,” N P Singh of the
Indian Institute of Pulses Research,
Kanpur, told Business Standard.
He said the moong acreage would
go up owing to good rain in the
latter half of the monsoon because it
was a short-duration crop and matured
in 60-65 days.
“In places where farmers could not
plant arhar, they could go for moong and
urad,” Singh said.
Limited’ has been included in the Second
Schedule to the Reserve Bank of India Act,
1934...,” the central bank said.
In another notification, the RBI said
‘Jana Small Finance Bank Limited’ too has
been included in the Second Schedule.
Further, the name of ‘The Royal Bank of
Scotland plc' has been changed to ‘NatWest
Markets Plc’ in the Second Schedule.
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MUMBAI | FRIDAY, 2 AUGUST 2019 1
Renewable power may
get cheaper by 25p/unit
Bidding sees 50% price cut for new green energy corridors
OVER THE YEARS SHREYA JAI
New Delhi, 1 August
2017 witnessed no deviation
from normal levels The latest bidding for power
Monsoon departure transmission projects to con-
Year from normal (%) nect renewable energy with the
national grid saw leading pri-
2014 -23 vate companies bring down
2015 -3 project costs by about 40-50 per
cent. Adani Transmission,
2016
2017
2018
1
0
-7
Sterlite Power, L&T, and Tata
Power were in the race for
~1,500 crore worth of projects.
2019 -9 This is estimated to bring
down the cost of renewable Project cost Final bid Winning
Source: IMD
power by 25 paise a unit (kilo- Project name (in ~ cr) (in ~ cr) company
watt hour). State-owned Power
The data sourced from the depart- “Farmers may opt to take advan- Grid Corporation also partici- GEC
ment of agriculture shows that till tage of this pickup in rainfall to sow pated in these tenders and won WRSS21 (A) 147.05 95.12 Adani
July 26, because of the delayed onset of short-duration crops ... However, the two projects. A new entrant, Transmission
the monsoon in several rainfed areas, late pickup in sowing is likely to weigh India’s leading clean energy WRSS21 (B) 317.05 178.9 Sterlite Power
pulses were sown in around 8.29 mil- upon yields. This may also have company, ReNew Power, also
lion hectares, which was around some impact on food prices, which is bid for the transmission proj- Rajasthan SEZ 232.05 122.06 PowerGrid
18.58 per cent lower than in the same an emerging concern related to the ects. However, it didn’t win any. Rajasthan SEZ 205.36 100.05 Adani
period last year. outlook for food inflation,” ICRA said Company executives said diver- Transmission
The biggest drop was in the area in a report. sifying into transmission is a
under moong and arhar, where the Shubhada Rao, chief economist, YES natural progression for ReNew; Bhuj-II 170.51 123.67 Power Grid
acreages fell by 24.74 per cent and 14.73 Bank, in a note said if the pace of rain sus- it already has an extensive net- Non-GEC
per cent, respectively, till July 26 as com- tained through much of August, there work of generation projects. Udupi-Kasargode 107.1 84.74 Sterlite
pared to the same period last year. was a likelihood that for the season as a Of the five green energy cor-
“These acreage numbers will change whole, there could be only a minor short- ridors (GEC) offered, Adani UP Obra Transmission 144 84.35 Adani
in the days to come,” Singh said. fall in precipitation vis-à-vis the Met’s Transmission got two, Power- UP Jawaharpur 99 53.81 Power Grid
All kharif crops have been sown in forecast of a 4 per cent deficiency. Grid two, and Sterlite Power Total 1,422.12
around 68.87 million hectares till last Since July the rains picked up pace bagged one. These corridors are
GEC= Green Energy Corridor; Non-GEC
week, which was 6.43 per cent less than and covered the country faster than in the western Indian states,
last year and 7.87 per cent less than the expected. The deficit narrowed to 9 which host the maximum COMPARATIVE CHART
normal acreage, which is the average for per cent by the end of July. Experts renewable energy projects.
the last five years. said this deficit might disappear in the GEC is an alternative trans- Project Estimated cost Final bid Difference
“Not only pulses, even paddy will next few weeks. mission system for renewable name (in ~ cr) (in ~ cr) (in %)
benefit due to the late surge in rain while The improvement in rain boosted the energy projects. The first phase Rajasthan SEZ 205.36 100.05 51.28
in South and Central India a good late water level in the 91-odd reservoirs of of GEC was constructed by Rajasthan SEZ 232.05 122.06 47.40
monsoon could translate into healthy the country from 26.94 billion cubic PowerGrid; the second phase is
rabi crops,” said P K Joshi, former direc- metres (BCM) on July 4 to 40.83 BCM in now being awarded through UP Jawaharpur 99 53.81 45.65
tor of the International Food Policy July 25, an increase of 51.5 per cent in competitive bidding. WRSS21 (B) 317.05 178.9 43.57
Research Institute (IFPRI). less than a month. Senior industry executives
UP Obra 144 84.35 41.42
said on an average, 41 per cent
reduction was achieved in the WRSS21 (A) 147.05 95.12 35.31
project cost, with the highest Bhuj-II 170.51 123.67 27.47
reduction of up to 51 per cent
from these bids. “These states Udupi-Kasargode 107.1 84.74 20.88
Bank credit and deposits rose by 12.01 per cent and 10.59 per cent to ~96.57 would have paid ~1,200 crore Source: Industry
trillion and ~126.491 trillion, respectively, for the fortnight to July 19, shows the for these transmission lines for
Reserve Bank of India (RBI) data. In the year-ago fortnight, bank credit 35 years. But now with reduced dered, of which one was won by construction of a 765 kilovolt
stood at ~86.09 trillion while deposits were at ~114.371 trillion. In the previous bids, they would end up paying Adani, the other by PowerGrid. (kV) line and 400 kV sub-sta-
fortnight ending July 5, bank loans had grown by 12.02 per cent to ~96.97 ~700 crore,” said the executive. The average cost reduction was tion to support increasing pow-
trillion and deposits by 10.32 per cent to ~126.746 trillion. Non-food credit, on a Apart from GEC, four proj- 45 per cent in these two proj- er demand in the region. Given
year-on-year basis, increased 11.1 per cent in June same as the year-ago period. ects were offered as part of the ects. Another corridor connect- that the two state-level projects
Loans to agriculture & allied activities was up by 8.7 percent in June 2019 as transmission expansion and ing Karnataka and Kerala was witnessed such high interest,
PTI compared with an increase of 6.5 per cent in June 2018. PTI strengthening across the coun- won by Sterlite Power, quoting two more such system-streng-
try. Two projects in Uttar Prad- 21 per cent lower tariff. thening ones will be bid out
esh totalling ~350 crore were ten- Both these projects involve soon, said a government official.
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.
Sebi warns MFs on
23 lapses in FY17
Repetitionof
breacheswillbe
viewedseriously,
fundhousestold
JASH KRIPLANI
Mumbai, 1 August
T
he Securities and
Exchange Board of
India (Sebi) sent a letter
to the mutual fund (MF)
industry body — Association
of Mutual Funds in India
(Amfi) — raising concerns
with 23 irregularities that its
inspection team found short
of the best-industry practices
or in breach of the existing reg-
ulatory framework.
“Sebi, after considering the
observations of the inspection
team for the period April 1,
2016, to March 31, 2017, and
the comments of asset man-
agement companies (AMCs)
and trustees thereon, has tak-
en adverse view of the follow-
ing additional observations
with respect to the practices
for MFs,” the regulator’s let-
ter read.
Further, the regulator
directed MFs to take corrective
action in respect of the adverse
observations mentioned in its
letter. “Any repetition of the
violations or non-compliance
… would be viewed seriously,”
Sebi’s letter said.
Some of the practices
pointed out by the regulator
showed instances where
investors’ interests were get-
ting compromised.
The market regulator
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MUMBAI | FRIDAY, 2 AUGUST 2019
pointed out instances of mis-
leading the investors by
reporting incorrect data on
investor complaints, instances
of inappropriate utilisation of
funds meant for investor edu-
cation, such as spending on
programmes meant for finan-
cial advisors, charging of
expenses to the said funds for
stationery items such as note-
books, planners and calen-
dars, and charging of expens-
es without adequate records.
“To be sure, the inspection
is for 2016-2017, but MFs must
make sure investors’ interests
are protected and they are not
misled in any way. Keeping
investors’ interest central to
all transactions is important
as they are critical to the
growth of the industry,” said
an MF advisor.
In another observation, the
regulator pointed out failures
to liquidate equity portfolio of
close-ended schemes on or
before the maturity date. Sebi
also pointed out lapses to
ensure direct plans have a low-
er expense ratio than regular
ones, so that the difference is
as much as the distribution
commission expenses.
Inter-scheme transfers of
debt securities continued to
be a concern. According to
Sebi, there have been
instances of non-disclosure of
transactions of debt and mon-
ey market securities (includ-
ing inter-scheme transfers).
“Inter-scheme transfers
have always been under Sebi
lens. That is also the reason
why regulator clamp-down of
the practice where MFs used
valuations from inter-scheme
transfers to value the debt
securities on their schemes,”
said senior executive of a
fund house.
Some of the other observa-
tions raised concerns over
MFs’ dealings with distribu-
tors. The regulator said there
were instances wherein the
AMC continued to accept busi-
ness from distributors, who
were suspended by Amfi.
Further, AMCs also failed to
ensure no commission is paid
to the distributors when they
are suspended.
Sebi also highlighted fail-
ures to identify and appropri-
ate all the expenses in the indi-
vidual scheme, according to
the regulatory requirements.
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ECONOMY & PUBLIC AFFAIRS 7 <
GST collection
over ~1 trillion
despite subdued
EAC-PM sets up task force on jobs
The Economic Advisory
Council to the Prime Minister
and NITI Aayog member
Bibek Debroy, EAC-PM mem-
(EAC-PM) has set up a task ber Rathin Roy, among others.
CGST and SGST force on employment. The
task force had its first meet-
ARUP ROYCHOUDHURY
ing on Thursday and its brief More on business-standard.com
DILASHA SETH will be to present to PM former EAC-PM member
New Delhi, 1 August Narendra Modi a note or
statement on what the gov-
Collection from the goods and ernment can do to alleviate
services tax (GST) was above growth slowdown, and
~1 trillion in July, mainly on
account of higher mop-up
hence, create jobs, Business
Standard has learnt.
under the integrated GST.
However, the central and
The members of the task
force are EAC-PM Chairman
state portions remained sub-
dued, posing a challenge for
the revenue target for the fis-
cal year.
GST collection at ~1.02 tril-
lion in the month was slightly
more than 2 per cent higher
than the ~99,939 crore in June
and 5.8 per cent higher than
the ~96,483 crore in July last
year. However, Central GST
collection was just ~17,912
crore in July, down from
~18,366 crore in June.
State GST collection too
was lower at ~25,008 crore in
the month against ~25,343
crore in June.
It was the IGST that rose
to ~50,612 crore against ~47,772
crore in this period.
Subdued revenue collec-
tion poses challenges for
Finance Minister Nirmala
Sitharaman with a growth tar-
get of 16 per cent for the cen-
tral GST in 2019-20, reinforc-
ing the need for emphasis on
data intelligence and policies
to plug leakages.
The CGST collection tar-
get was revised downwards
to ~5.26 trillion for the fiscal
year from the ~6.1 trillion esti-
mated in the Interim Budget,
following a 9 per cent short-
fall in collection in the previ-
ous year.
Read full report on
www.business-standard.com
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8 ISSUES AND INSIGHTS
>
Business ‘institutions’ essential for India’s growth
Like brakes and shock absorbers in a car, society needs cushioning from shocks and volatility
INNOCOLUMN
R GOPALAKRISHNAN
R
eading recent books on business
— pharma, financial services,
technology firms — it appears
that we love to hate business. The truth
is that we just cannot do without them.
So we mock them, criticise them.
Listening to populist politicians,
economists, academics and journalists,
one could conjure up a vision of the
inhabitants of the commercial world as
greedy, power-hungry megalomaniacs.
It would not be an incorrect vision,
but it would be a seriously partial one.
It would be as true and as valid as damn-
ing all politicians, bureaucrats, journal-
India-UK relations need a reboot
Is Boris Johnson the man to do it?
HASAN SUROOR
B
oris Johnson’s elevation to
Downing Street has evoked con-
flicting reactions ranging from
a mixture of barely-suppressed
ridicule and concern in Europe and
Russia to hoops of joy in the White
House with Donald Trump hailing it
as “excellent” news for US-UK rela-
tions. Prime Minister Narendra Modi
confined himself to a bland tweet say-
ing he looked forward to working with
Johnson to “further strengthen India-
UK partnership”.
Currently, for all the apparent bon-
homie, the “partnership” is not exactly
flourishing. The two countries are just
about muddling through, avoiding any
major crisis but showing little sense of
urgency to reboot a flagging relation-
ship. Will things look up now that
there’s a self-proclaimed Indophile
(calling himself India’s “son-in-law”)
in-charge at No 10?
At the heart of the problem is a lin-
gering colonial mindset that still
informs British foreign policy treating
former colonies simply as markets to
be mined. The reality that countries
Is economics enamoured by taboos?
SOUMYA KANTI GHOSH & SAMIR K JHA
S
ince the global financial crisis,
there have been serious doubts
about the theory that the econ-
omy functions best with “invisible
hand” and it should not be jeopardised
through government “intervention”.
In particular, the discipline (read eco-
nomics) has somehow rejected the
pattern of simple policy prescriptions
— that any standard economics text-
book imbibes.
At the outset, it can be put on
record that just as it is important not
to overstate what economics can do,
it is critical not to understate it. After
all, who would expect to predict glob-
al outcomes that depend on the indi-
vidual actions of about five billion
working-age individuals, not to men-
tion the intervention of natural and
man-made disasters? While this is
true, it is also true that economics
provides the essential tools for under-
standing, and to some degree, shap-
ing those events.
Herein lies the crux of the problem.
Such understanding often results in
economists limiting their options by
reducing their subject to a set of issues
that could be modelled. In the process,
they are committed to their methods
and beliefs that any further movement
in the economy, new problems or new
topics of interest, are more likely to sit
outside their self-defined purview
than within. Most of the times, the
experts get tempted, therefore, to bang
such new problems into shapes to
redefine them as per their own prede-
https://t.me/SSC4Exams
ists and social sector people through
examples of the venal among them. In
my last column, I concluded with the
statement that there is a difference
between a company and an institution,
and that, more and more, India needs
institutions to realise her potential.
Business and entrepreneurship can be
soul-elevating, I know that. Atomic
physicist, Niels Bohr, said many decades
ago, “The opposite of a truth is not a
falsehood. It may be yet another truth.”
Business makes most of the stuff
that we enjoy, it gives the nation jobs
and is a synonym for both opportunity
and for prosperity. Business deserves a
high status in society and should be
respected for its virtues, while striving
to reduce its vices. Business is human.
The frauds by corrupt business are an
extension of the propensity of society.
Business practitioners stand as much
on a pedestal as educationists, doctors,
administrators and the defence forces.
Society needs aggressive,
entrepreneurial people, they are like
the fuel in the car. Second, business
energy must be guided with capabili-
ties and infrastructure (education,
like India are now major economic
powers in their own right and expect
to be treated as equal partners in accor-
dance with their new status has not
fully sunk in.
Here’s what British Parliament’s
influential Foreign Affairs Committee
said in a report only a few weeks ago:
“India's place in the world is changing
fast and the UK government needs to
adjust its strategy to fit India’s
enhanced influence and power; the UK
cannot afford to be complacent or rely
on historical ties.”
It warned that Britain risked being
left behind in the global race to engage
with India and called for an urgent
review of its current approach. Is the
Johnson administration willing to take
up the challenge? It will mean ditching
successive Tory governments’ policy
solely focused on pressuring India into
opening up its economy to British busi-
nesses while offering little in return.
Johnson’s predecessors, David
Cameron and Theresa May, talked a
good talk describing India-UK ties as
one of the “most important relation-
ships of the 21st century” but then went
on to take decisions that directly hurt
Indian citizens — like retrospective
changes to residency rules for high-
skilled immigrants that forced many
legally settled Indian migrants to return
home. Indian protests were ignored.
Indians have also been affected by fre-
quent tightening of visa rules for stu-
dents and intra-company transfers.
Indian businesses find visa rules a
major hindrance to trading with Britain.
Will Johnson be more accommo-
INSIGHT
termined mindset.
Another difficulty that impacts eco-
nomics as a subject is the fact that the
future is inherently uncertain: it can-
not be calculated. A lot of human
behaviour and some fundamental eco-
nomic institutions — the desire to hold
money, for example — are the result
of this fact.
Let us again begin with what hap-
pened after the financial crisis. In 2011,
when the unemployment rate was 9
per cent, Reinhart and Rogoff had
explained that “current debt trajecto-
ries are a risk to long-term growth and
stability, with many advanced
economies already reaching or exceed-
ing the important marker of 90 per cent
of GDP”. However, even eight years
down the line, there has been no such
tipping point.
However, that did not stop one
from arguing that the main threat to
the economy was spiralling debt and
a resulting spike in interest rates
that would lead to the crowding out
of private investment and a stagfla-
tion crisis of the type experienced in
the 1970s. Such warnings miserably
failed to come true but it did not
stop the misplaced policies of fiscal
austerity. If we look at Greece, it is a
classic example of secular stagna-
tion. In fact, Greece were to undergo
heavy austerity but did not walk
down that path and currently yields
are at 2 per cent.
Sadly, this crowding out argument
has gained enormous precedence in
India too. This was clearly evident in a
speech by former RBI Deputy Governor
Viral Acharya just a few days back. As
economists, we have been now follow-
ing this debate for ages that combined
savings of the government is crowding
out private sector investment in India.
At the same time, we are also witness
to the rising noises about slowing down
of growth in India due to falling
demands. Simple economics suggests
these two cannot co-exist. If growth is
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health, housing and communications
being the gear). Third, like brakes and
shock absorbers in a car, society
needs cushioning from shocks and
volatility (regulations, surveillance).
The three components of a whole-
some society are business, infrastruc-
ture and governance.
For the first 35 years after indepen-
dence till liberalisation, Indian busi-
ness was regarded by society with huge
suspicion. Over the next couple of
decades since liberalisation, Indian
business spread wings in India as well
as globally. For sure, some over-
stretched, a few shockingly so.
However, this is a phase in larger eco-
nomic development.
India needs great business institu-
tions, not just companies. Institutions
have durability, philosophy, talent and
structures, leading to dependable per-
formance. The building of companies
as institutions is at a nascent stage in
India. Creating and celebrating strong
business institutions must become a
national priority.
Business is a fabulous force for good
in society, conducted by good people
Looking for clues to Johnson’s India policy in his rhetorical flourishes and
cabinet choices is to ignore the real issues that divide the two countries
dating given his much-adumbrated
“India connection” (through his
estranged wife Marina Wheeler’s
Indian ancestry), and his personal
chemistry with Narendra Modi. He has
called him a “firecracker”, and a “polit-
ical phenomenon”.
His appointment of Priti Patel, a
Modi supporter, as home secretary (one
of the three great offices of state), and
promotion of Alok Sharma and Rishi
Sunak to senior positions are seen as a
nod towards the BJP/Modi leaning sec-
tions of the Indian diaspora.
But looking for clues to Johnson’s
demand constrained, increase in pri-
vate investment will only lead to higher
output. And, a part of the higher output
will be saved and, in return, will be suf-
ficient to support private investment.
Fact is, only when growth is capacity
constrained, which apparently is not
the case right now in India, any idea of
crowding out can be deemed relevant.
Similarly, government borrowings
pushing up interest rate is also being
pointed out, again mostly by the same
set of experts who are making the
noises about crowding out. But again,
we need to keep in mind the fact that
the government borrowings are the
additional flow demand, while inter-
est rates are, primarily determined by
stock demand and supply of funds.
Instances like the above, quite justi-
fiably, force those with not much
interest in the debate to conclude
(rightfully?) that economics is just a
way for the economists and their
brethren to rationalise what they
already believe.
However, the problem is also in the
other direction, that is, misguided fis-
cal adventurism that had played spoil-
sport in a country like India. But again,
the link between a higher fiscal deficit
and inflation or CAD seems to have
broken down in recent years.
Importantly, Dr Acharya’s paper
rightfully argues that market players
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with good results for the national good.
For example, Unilever and Tata have
been highly ethical and responsible
companies for over a century, and they
have done so with occasional displays
of the human frailties that all of us are
prone to. In fact, it is those occasional
frailties that remind the observer that
there are no gods in society — there are
some outstanding people, many good
people, with a small number of misdi-
rected people.
As some scholars have pointed out,
society has three types of people, all
operating in the same cauldron. There
are “the fearful”, who are people with
wealth and status but who are afraid of
losing them swiftly. Think of zamindars
and the princely states from before
Independence; think of the wealthy,
slow-growing Japanese or European
countries, which are anxious that their
future generations may be worse off
than their own generation. Then, there
are “the tormented” who seek to estab-
lish themselves as equal members of
society — a position that they have
failed to achieve because of the histor-
ical malpractices of the privileged.
India policy (to the extent that he
might have a cogent policy given his
reputed impatience with details) in his
rhetorical flourishes and cabinet
choices is to ignore the real issues that
divide the two countries. The most
contentious of these is immigration
with India pressing for a preferential
visa regime for its citizens on the lines
of the one China enjoys to facilitate a
“grand” post-Brexit trade deal Britain
is seeking.
The May administration’s response
was a blunt “no”. Adding insult to
injury, it excluded India from an
pick up government debt when private
debt is risky; that is exactly what is hap-
pening now. However, this cannot be
called crowding out as claimed in the
paper. Additionally, a jump in govern-
ment debt results in a decline in pri-
vate debt, clearly implying we are in a
demand constrained economy.
Let us also consider the example of
monetary policy. Even after years of
quantitative easing (QE) and ultra-low
interest rates, advanced economies —
particularly the Eurozone — have con-
tinued to undershoot even the mini-
mum inflation targets. Thus the long-
standing assumptions about
downward nominal wage rigidity of
the 60s and 70s when organised labour
were much stronger is clearly not in
vogue now. Employees are willing to
work even at a lower wage rate explain-
ing much of the slower growth in
labour productivity and a breakdown
of the Phillips curve. We are witnessing
similar situation in India right now
with minimum wage growth and
declining productivity.
Another big theoretical assump-
tion, particularly at the micro level, is
how strong profit growth will attract
new entrants to the market, encourag-
ing more investment. But in recent
times, corporate profits and market
concentration are both on the rise.
To sum up, knocking economics
has become a popular sport, even with-
in the profession. But the world would
be much poorer without its contribu-
tion to understanding how societies
function and without economists’ sug-
gestions as to how politicians might
improve them. And economists them-
selves could do wonders by simply
incorporating the country-specific fac-
tors in their econometric models rather
than just applying them in toto.
(The authors thank Prof Sabyasachi
Kar for his comments)
Ghosh is group chief economic advisor and
Jha AGM, SBI. Views are personal
MUMBAI | FRIDAY 2 AUGUST 2019
> CHINESE WHISPERS
Recall the tribal and Dalit communities
in India, or the Arabs in the world eco-
nomic order, as examples of the tor-
mented. Lastly, there are “the aspi-
rants”, the people who fight with
industriousness and hard work to win
a better life for themselves and their
descendants. Think of the South Asian,
Chinese and Indian economies. Just as
the nurturing and support of the south
eastern, Chinese and Indian economies
have been important for the global
economy, business and enterprise, the
aspirant class in the Indian economy
needs growing and legitimate nurtur-
ing in the coming years.
Business and entrepreneurship can
do what governments and infrastruc-
tures cannot. Business and trade alone
can create wealth, growth and jobs. I
feel optimistic that this distinctive role
for business in the national economy
will be supported by society in the that
is developing. Business management
is a great career for young people — for
at least the next 50 years!
The author is a corporate advisor and
Distinguished Professor of IIT Kharagpur. He
was Director of Tata Sons and Vice
Chairman of Hindustan Unilever
rgopal@themindworks.me
expanded list of countries from which
student visa applicants require
“reduced level of documentation”. A
decision described by Lord Bilimoria,
Chancellor of Birmingham University,
as “another kick in the teeth for India”.
The May government also tried to
arm-twist India into taking back thou-
sands of people who it says are Indian
citizens living in Britain illegally. But
India has questioned the figure. Modi
declined to sign an MoU on the issue
during his UK visit last year for the
Commonwealth conference.
During the Brexit referendum cam-
paign, Johnson promised to open up
immigration from Commonwealth co-
untries once free movement of workers
from the European Union stopped.
Now, however, he’s touting an
Australian-style points system to be
applicable to all applicants with no exe-
mptions for Commonwealth citizens.
Priti Patel, in-charge of immigra-
tion, has made clear that only those
with “highest skills” would be consid-
ered — and that too “only if they have
a job offer from an employer registered
with the Home Office and if they can
speak English”.
So, as of now, the prospects of
improved India-UK relations don’t look
too promising. But the threshold is so
low that even a slight bounce might
seem like a great leap forward.
Assuming of course that Johnson him-
self survives the Brexit turmoil.
The writer is based in London. His new book,
Who Killed Liberal Islam, is published
in August
> LETTERS
CAG’s imputation wrong
This refers to “2 years after roll-out, GST
glitches still exist, says CAG report” (July
31). The Comptroller and Auditor
General of India (CAG) in his report on
GST for 2017-18, which was tabled in the
Parliament on Tuesday, pointed out that
“the invoice matching system has not
kicked-in”. The CAG also said, “Invoice
matching is a critical requirement that
would yield full benefit of this major tax
reform”. The report’s indirect implica-
tion that a slowdown in tax collection is
because of not matching 100 per cent of
invoices, isn’t correct. Such an imputa-
tion is based on the presumption that
evasion is taking place because of not
matching. The reason why it is not cor-
rect is that an overwhelmingly large per-
centage of tax payers are not evaders.
Government-owned companies which
manufacture a very large amount of
goods and services do not evade. Large
companies having excellent reputation
and big service sector companies (such
as Tata, Mahindra and Mahindra and
Infosys etc) do not evade either.
There is already a huge audit system
which conducts auditing with the help
of computer system installed in the
department. Training from Canadian
Government for systemic auditing has
also been very effective. Then there is
an anti-evasion organisation looking
into the evasion aspect of companies
prone to it. They depend on collecting
intelligence. Matching of raw materials
with the final production of goods is con-
ducted by the audit parties of individual
> HAMBONE
https://t.me/UPSC4Exams
Gehlot makes a point
While Union Social Justice Minister
Thaawar Chand Gehlot is the leader of
the House in the Rajya Sabha, Home
Minister Amit Shah is the person BJP
ministers and floor strategists turn to for
guidance whenever he is present.
However, on Thursday Gehlot had his
opportunity to assert his position. As the
Rajya Sabha reconvened after lunch to
continue the debate on the National
Medical Commission Bill, the Opposition
protested that neither Health Minister
Harsh Vardhan, nor his deputy Ashwini
Kumar Choubey was present in the
House. It is customary for at least one
minister of a department to be present in
the House when it is discussing a Bill
moved by the department. Deputy
Chairman Harivansh had to adjourn the
House for 10 minutes. A message was sent
to the two ministers. As the two ministers
reached the House nearly out of breath,
Gehlot scolded them: “What is this
tamasha? Neither of you were here and
the House was adjourned.”
English versus Hindi
Marumalarchi Dravida
Munnetra Kazhagam
(MDMK) leader and Rajya
Sabha Member Vaiko
(pictured) on Thursday
rattled everyone — from
Treasury Bench
members to the
Opposition, including the ally Dravida
Munnetra Kazhagam (DMK). As Union Health
Minister Harsh Vardhan began his reply on
the National Medical Commission Bill in the
evening, Vaiko demanded the minister
speak in English since the issue was a
national one. While the Chair said an
interpretation facility was available, MPs of
the Bharatiya Janata Party and the Janata
Dal (United) tried to shout Vaiko down and
demanded the minister speak in Hindi.
When Harsh Vardhan, who had switched to
English, reverted to Hindi, Vaiko protested.
When the Congress’ Jairam Ramesh and the
DMK’s Tirushi Siva tried to mollify him, Vaiko
shooed them away. Harsh Vardhan was
rattled enough to tell Union Home Minister
Amit Shah that he was unsure as to which
language he should speak in. The MDMK
leader has championed the anti-Hindi
movement in Tamil Nadu, and, during
slogan shouting in the Rajya Sabha, makes it
a point not to add his voice to Hindi slogans.
Tug of war
An upcoming mega convention centre was
allotted land in the capital’s south-west
sub-city of Dwarka last year and
construction was expected to be completed
by the end of 2019. Now the department
executing the project is believed to be
lobbying for extra land beyond the allotted
perimeter while the Delhi Development
Authority (DDA), the city’s land-owning
agency, is trying hard not to cede ground
beyond what it has allotted. The reason, say
top DDA officials, is that the land at the
location comes at a huge premium. Now the
DDA has intensified efforts to auction the
patches adjoining the allotted land because
it fears that high-profile people involved in
the project may use their clout to get what
they wanted, said sources.
manufacturers. So the slowdown in the
collection of revenue is not because of
evasion. A 100 per cent matching of
invoice is never done in any country.
They all depend on audit and intelli-
gence gathered by the department con-
cerned. So the CAG could better advice
that the whole idea of 100 per cent
invoice matching should be given up
straightaway. As an ex-insider having
knowledge about invoice matching, also
having experience derived from other
countries, I can definitely say that
attempt to match 100 per cent invoices
should be given up immediately. It will
never succeed. Nobody is willing to say
so but that is a fact. Matching should be
done only for suspected companies. GST
is an amalgamation of central excise, ser-
vice tax and state VAT. Since for all these
three taxes no 100 per cent of matching
of invoice was being done, there is no
logic in introducing 100 per cent match-
ing for GST.
Sukumar Mukhopadhyay
via email
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
 https://t.me/TheHindu_Zone_official

>
OPINION 9
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Volume XXIII Number 251 ILLUSTRATION: BINAY SINHA

MUMBAI | FRIDAY, 2 AUGUST 2019

Fear on D-Street
Tide of bad news has spooked the market state governments pay for them. When elections are

A
n interest rate cut by the US Federal Reserve, the first since 2008, held simultaneously, such expenses are shared
should have brought cheer to the equity markets. Instead the between the Union and states. In brief, both Union
Indian markets saw huge swings on Thursday and settled lower and states have respective needs on account of
defence and internal security, respectively.
in line with other Asian bourses. Though the Fed highlighted
It is hoped that the XV Finance Commission will
global growth concerns, it did not signal the beginning of a rate-cut cycle, consider these fundamental issues apart from oper-
leading to nervousness. As a result, the BSE Sensex, which had declined 2.1 ational problems and, in any case, it is not obliged
per cent in intra-day trade, staged a partial recovery, closing the day 1.2 per to give its recommendations on each and every ToR.
cent lower. The broader market has been under stress for quite some time On the process of consultation with states in
now, with the BSE MidCap and SmallCap indices down 26 per cent and 37 finalising the ToR of the Finance Commission, the
per cent, respectively, from their peaks. The Nifty is down about 9 per cent Sarkaria Commission observed: "Any consultation

Risks to fiscal
to be meaningful should be adequate." This partic-
from its peak, but that’s because of a handful of large-cap stocks only.
ular ToR has serious implications for the Union-
For the Indian market, the global economy is only one of the concerns. state relations. Have states been consulted or will
It’s the local condition that is worrisome with a consistent flow of bad news. they be consulted on the additional ToR?
Since the IL&FS crisis erupted, non-banking financial companies have been The Constituent Assembly in its deliberations

federalism
badly affected. The new bankruptcy law, which was supposed to find quick concluded that the acceptance of the recommen-
resolutions, is still seeing a majority of the cases dragging on for two years. Jet dations should not be left only to the Parliamentary
approval since the recommendations affect both
Airways ended up in insolvency after being unable to find any suitor. Auditors
the Union and state governments. Hence, the
and rating agencies are under the government’s scrutiny. Further, the Budget Constitution provides for placing of the action taken
did little for industry, and the super-rich tax has spooked both the C-suite and To minimise risks, the president may consider seeking response from on every recommendation together with an explana-
foreign investors, some of whom will have to bear the additional burden. tory memorandum by the president of India before
Other reports such as core sector growth slowing down to a four-year-low, an states and the Centre on the 15th Finance Commission’s suggestions Parliament. The assumption is that the president
earlier-than-expected shift to electric vehicles, more powers to customs and will exercise his discretion and act not merely as

T
he government has proposed to the president
excise officers, the amendment to the Right to Information Act, and the
to extend the 15th Finance Commission's term
prospect of a jail term for violations of corporate social responsibility guidelines by a month, and mandate the panel to suggest
are not something that investors were looking for. ways for allocation of non-lapsable funds for defence
Fundamentals, liquidity, and sentiment — three of the key factors that and internal security.
drive stock markets — are all in short supply at present. First-quarter earnings Under the terms of reference (ToR) of the
have been disappointing across most sectors because the economy is in the Commission, it is proposed to ensure an assured
allocation of resources towards defence and internal
midst of a severe slowdown and consumption is now sputtering. Automobile
security imperatives. “The amendment provides
sales have been falling year-on-year for several months and growth in con- that the XV Finance Commission shall also examine
sumer products is also slowing. With a slump in assets across equities and whether a separate mechanism for
real estate, the wealth effect has disappeared altogether, as domestic investors funding of defence and internal
are seeing a large fall in their net worth. In such a scenario, they are going to security ought to be set up and if so
hesitate before investing in equities. Foreign portfolio investors, who brought how such a mechanism could be
operationalised," an official state-
in net inflows of ~79,000 crore in the first six months of 2019, pulled out
ment said.
~12,000 crore in July. Domestic institutions have been buying for the last The proposed additional ToR
three months, but if flows into mutual funds slow, even they would not be raises a number of questions. First,
able to provide liquidity. Under the current scenario, a 25 bps rate cut in the how does it fit into the overall
policy next week from the Reserve Bank of India will not do much for the scheme of fiscal federalism, Budget
Indian markets. and financial management, as per
our Constitution? The taxes collect-
Till there are clear signs of an earnings revival, investors may not commit
fresh funds. But since the economy is slowing, an earnings revival may not
ed by the Union government to be
shared with states are distributed
WHAT NEXT
happen fast. At this point, the best that the market can hope for is government between the Centre and states after Y V REDDY
action in terms of reforms that will help bring back investor confidence. deducting the collection charges
attributable to states. The respective shares are allo-
cated to the consolidated fund of India for the Union
an increase in defence revenue expenditure (includ-
ing salaries) of 30 per cent in 2016-17 which will
incorporate the Pay Commission impact, with a sta-
ble growth rate of 20 per cent per annum in the
remaining years (Para 6.35).”
“Much of the demand on resources from the
Ministry of Defence has been in the nature of capital
expenditure, which is beyond the scope of our (FFC)
assessment. Recognising that revenue expenditure
is critical for defence preparedness and mainte-
nance, we (FFC) have kept the
defence revenue expenditure-GDP
ratio constant during our projection
period, instead of allowing growth
to decelerate as was the case in the
past. In other words, the rate of
defence revenue expenditure has
been allowed to increase at the
same rate as the GDP, which is sub-
stantially higher than the past
growth of defence revenue expen-
diture (Para 6.36).”
Yet, it was the Union govern-
ment that has been empowered by
the Constitution to make an actual
allocation to defence. Is it appropri-
ate for a body like Finance Commission to suggest
specific allocation for an important sector with
head of the Union, but as head of the Republic of
India consisting of the Union and state governments.
In view of recent developments, the practice of
keeping the recommendations of the Finance
Commission confidential until the decisions are tak-
en and action taken placed before Parliament has
implications for the fabric of Indian fiscal federalism.
To minimise risks, the president may consider plac-
ing the report of the XV Finance Commission in the
public domain and also seek specific responses from
state governments and the Union government before
a final view is taken on the recommendations.
In this connection, it may be useful to quote
extracts from the Republic Day speech of a chief
minister in 2012:
“There is even larger destruction of the federal
structure in fiscal areas. In the name of ‘public good’
or ‘people’s rights’, more and more funds are making
their way to New Delhi. The Finance Commission
allocated substantially lesser resources to states
keeping the lion’s share of funds with the Centre.
The Centre has become adept at passing populist
schemes but there is no financial support given to
states for their execution. Adequate central funds
are not an obligation from New Delhi but the right
of every state to pursue development.”
“These concerns I am sharing today are not only
as a chief minister but also as a common citizen of

Taxation blues government and the consolidated fund of the respec-

CAG raises valid issues on revenue system inadequacies
tive states. Grants-in-aid, as recommended by the
Finance Commission, are transferred out of the
resources of the Union government which includes
the Union government's share of taxes.
implications both for the spirit of Parliamentary
control over expenditure allocations and the chang-
ing demands of security considerations?
Third, internal security to a substantial extent is
the responsibility of state governments since law
India. Why is it that chief ministers cutting across
party lines are expressing serious apprehensions on
these repeated attacks on India’s federal structure?
It is high time the Centre realises that giving to the
states what rightfully belongs to them will not weak-

M
anaging government finances in India is becoming increasingly Second, the allocation for defence is entirely the and order is their responsibility. In fact, when the en the Centre. The states must co-ordinate with the
difficult with lower revenue collection and higher spending responsibility of the Union government. In fact, the services of the Central Reserve Police or the Border Union government and not remain subservient to
commitments. If corrective measures are not taken immediately, 14th Finance Commission (FFC) had recognised the Security Force are requisitioned by state govern- it. Co-operative and not coercive federalism must
it would continue to affect economic growth. On the revenue inadequate allocations in the past, as the following ments, they have to be paid for out of their Budgets. be the norm in our country."
side, the inadequacy of the tax administration, particularly in the context of extracts will show: Further, when their services are utilised by state
“...Accordingly, its projections have provided for governments for the purpose of elections exclusively, The writer is former governor, Reserve Bank of India
the goods and services tax (GST), is severely affecting collections. As a recent
report of the Comptroller and Auditor General of India (CAG) showed, the
GST, which is rightly seen as one of the biggest reforms in recent history, is

Financial markets: Gatekeepers of money

not working as desired, and some of the implementation issues remain unad-
dressed. For instance, as the CAG noted, even two years after the roll-out, sys-
tem-validated input tax credit by invoice matching is still not in place.
Predictably, the inadequacies of the system have had a direct impact on

A
revenue collection. For example, growth in indirect tax collection fell to 5.8 per ccording to the Bank of England, financial
markets exist to bring people together so
cent in 2017-18, compared to a growth rate of over 20 per cent in the previous
money flows where it is needed the most.
year. The estimated collection was revised lower even for the last fiscal year. Businesses in need of capital should be able to raise
Also, the insufficiency of the system has not allowed the appropriate settlement it from these markets and repay when no longer in
of the integrated GST (IGST). Therefore, instead of lowering GST rates randomly, need. In theory, financial markets act as gatekeepers
the GST Council would do well to work on improving the system. of people’s money. But as Yogi Berra famously said:
The government’s auditor has also highlighted some structural issues in “In theory, there is no difference between theory
the direct tax administration. While collection and compliance have increased, and practice. In practice, there is.”
there is again a need to improve the administration. For instance, the arrears of Of late, the situation in India has
been the opposite. Businesses find
demand at the end of 2017-18 were in excess of ~11 trillion, and the tax department
it difficult to raise capital as debt is
thinks that over 98 per cent of this would be difficult to recover. Further, there funding personal consumption and
are plenty of tax cases stuck in different courts. Clearly, there is a case for sim- equity funds invest in businesses
plifying tax rules, which will help reduce litigation and improve collection. with strong cash flows. The genesis
Hopefully, the task force working on the new direct tax code will recommend of this situation can be traced to
ways to reduce litigation. banks slowing loan growth after
Therefore, aside from the government’s expenditure commitments, subdued being forced to recognise bad loans,
revenue collection is affecting the fiscal balance. According to the calculations and the meteoric rise and subse-
quent collapse of non-banking
made by the CAG and presented before the Fifteenth Finance Commission, the
financial companies (NBFCs). The
fiscal deficit of the Centre in 2017-18 was 5.85 per cent of gross domestic product flow of credit to the economy has JIGAR MISTRY
and not 3.46 per cent as shown by the government. This basically includes bor- slowed considerably. The equity
rowing by public sector undertakings to cover government expenditure. market’s conundrum is of too much
At a broader level, what this means is that the central government, central money chasing fewer companies, partly due to
public sector undertakings, and state governments are using the entire pool change in the mandate and largely because ‘nothing
of household financial savings. This also explains the overall approach of succeeds like success’.
increasing borrowing from abroad, both at the government and corporate It started with the massive surge in private invest-
ments in India during 2006-08 when global eco-
levels, which has its inherent risks.
nomic growth was strong. Bad loans (non-perform-
The government should work on addressing the issues raised by the CAG ing assets or NPA) at the time were below 3 per cent.
on the tax administration, especially the GST system, and reassess its expendi- However, the 2008 global financial crisis marked
ture. Though it is correct that rationalising expenditure would be difficult the turning point. Growth slowed materially and
during a slowdown, reservations about Budget numbers and an unsustainable rendered many projects, which previously looked
level of public sector borrowing can be more damaging in the medium term. If attractive, unviable. In the absence of effective
necessary steps are not taken in time, a course correction would become increas- bankruptcy code, Indian banks resorted to many
ingly more painful. schemes (JLF, SDR and S4A) to combat rising bad
loans, but failed. By 2015, NPA rose over 4 per cent,
but the Reserve Bank of India (RBI) still believed
that banks were not recognising all bad loans; an
asset quality review (AQR) was conducted.
Banks were forced to recognise bad loans and
NPA started piling up (it would eventually rise to
11.5 per cent by 2018). Banks curtailed loan growth
and focussed on personal loans. Industry, which
had about 44 per cent of all bank loans in 2015,
received only 9 per cent of incremental loans
between 2015 and 2019; personal loans (at 19 per
cent of loans in 2015) got a whopping 41 per cent.
Industry’s appetite for loans had
waned, but banks left even those
wanting to invest credit-starved.
NBFCs, which were glad to fill the
void left by banks got the ammu-
nition when the currency was
demonetised (in 2016). This took
the shine off of real estate invest-
ments and households started
moving from physical to financial
savings. Mutual funds’ non-equity
assets under management (AUM)
jumped from ~5.8 trillion in 2015 to
~12.2 trillion in 2019, a majority of
which was invested in NBFC debt
(commercial papers and non-convertible deben-
tures). Between 2015 and 2018, mutual funds
became the largest suppliers of credit to NBFCs (42
per cent of funding), replacing banks (37 per cent)
and insurance firms (21 per cent).
NBFC loans, which were at about 15 per cent of
banking loans in 2014, garnered a third of incre-
mental loans between 2015 and 2019. Nevertheless,
asset quality was often poor and many NBFCs turned
a blind eye to matching asset and liability durations.
This and the subsequent IL&FS collapse in
September 2018 created a liquidity crunch. Credit
markets froze, making it challenging for all NBFCs
to raise fresh debt; and a few could not even refi-
nance their loans. Low liquidity has taken a toll on
consumer sentiment — sales of discretionary goods
(vehicles, white goods) are down and even staples
sales are now at threat.
Equity mutual funds did little to counter this. In
2014, about 60 per cent of domestic equity invest-
ments (mutual fund and insurance) were in the top-
50 companies by market cap. Between 2014 and
2019, three-fourths of incremental money went to
these 50 companies, with the other listed companies
receiving little investment.
The Securities and Exchange Board of India
(Sebi) categorising mutual fund schemes by market
cap in 2017 forced them to sell some mid-caps in
existing funds. By 2018, provident and pension
funds had decided to invest up to 15 per cent in
equity, but in the same 50-stock index. Supply of
new paper is limited, and it is quickly becoming a
case of too much money chasing a few stocks. The
Nifty50 index is down about 5 per cent from its all-
time high, but more than 80 per cent of stocks are
down more than 20 per cent and 50 per cent stocks
have halved. A stock that has halved will face a
tough time raising equity.
But it’s not all bad — India now has a bankruptcy
code and resolutions have started. A few battered
NBFCs could end up with new managements or
with stronger partners, thereby stemming the rot.
Nevertheless, the cost of capital in India is too high.
Despite policy rates falling 75 bps, the borrowing
cost has not come off. The small savings rate still
yields over 7.5 per cent; it needs to come down. Also,
Sebi should allow mutual funds to invest a larger
proportion of their funds across market caps and
provident funds must consider investing in a broad-
er index.
If financial markets fail to help businesses raise
money, economic growth will suffer. Participants in
financial markets are the gatekeepers of people’s
money; a more frequent reminder will help.
The writer is director at Buoyant Capital

Anatomy of a flood
that more than extreme weather it was
administrative apathy that worsened the
situation. This is not a fact of which we are
unaware but are often reluctant to
acknowledge.
In the Prologue of the book, “How On
BOOK REVIEW Earth Did This Happen to Us” (the title is
acknowledged to be inspired by Haruki
UTTARAN DAS GUPTA Murakami’s Underground: The Tokyo Gas
Attack and the Japanese Psyche), Ms Ge
living there vulnerable to such a weather
event. “If you live in urban India and find
your home and your city sinking, it’s prob-
ably because of the mismanagement of
water bodies,” she writes, “because rivers
remember”. They remember their old
homes and courses, even if people who
have encroached upon them forget all
about it. This forgetfulness and apathy on
the part of the citizens expose them to the
On the day of the flood, her parents’ home 800-odd people stuck in Urappakkam or Jayalalithaa’s health… over 200 such cases
— in which she and her brother grew up of Dr Bala, a gynaecologist whose private were filed by the AIADMK between 2011
— is inundated. After the flood waters hospital and pregnant patients were and 2016.” The same lack of transparency
withdraw, when her family returns, they marooned in the flood. The inclusion of plagued information about the floods. “I
find their home washed away: “…it looks some others, such as that of Anantha filed a query under the RTI Act to find out
like a war was fought in there. A battle Narayanan, a resident of Keezhkattalai, the exact number of casualties due to the
with the Adyar River… What no one tells and his family, seem a little random. Chennai floods… The reply (was)… 38 per-
you about floods… is that it is not water Having said that, it must be acknowledged sons. …Thirty-eight is the official num-
that comes into your home… what flows that every narrative — of the lucky sur- ber… Not 512 as the newspapers had report-
into your home when it floods vivors and those not so ed. Not 269 as the home minister had
is sewage… Mostly human Ms Ge seems to have lucky — is acutely claimed.” In a note of despair, she writes:
waste….” conducted an endless poignant. “I, unfortunately, failed… to find out just
Her family is, of course, not number of interviews Another subject that which of these numbers was real.”
the only one that’s affected. Ms and she painstakingly the book explores is the Amartya Sen has asserted in his writ-

O
n December 1, 2015, a record down-
pour of 490 mm — often described
as “once in a 100-year” rainfall —
inundated Chennai, killing hundreds and
displacing thousands of its citizens. It also
exposed how Indian cities are ill-prepared
for such extreme weather events, which
are likely to become more and more com-
mon as the climate change situation wors-
ens. In Rivers Remember, Ms Ge — a writer,
editor and citizen of Chennai — investi-
gates what caused the calamity in her
hometown and arrives at the conclusion
writes: “My conversations and investiga-
tions uncovered that the floods of 2015 in
Chennai were a manmade disaster; that
the Tamil Nadu government had played
an undeniable role in drowning clueless
citizens without any warning… it had also
played an active role in sabotaging the
city’s water bodies.”
As she demonstrates through her
research, the administration had over the
decades mismanaged the uncontrolled
expansion of the city, permitting construc-
tion on lakes and riverbeds, making people
vagaries and fury of nature at times of such
calamity.
The floods in Chennai were widely
reported on in the national and interna-
tional media, but Ms Ge abandons the crit-
ical distance expected from traditional
journalism and plunges into a personal
narrative — of her home, her family, and
her city. In doing so, there a recognition
of privilege and vulnerability: “There’s a
creeping sense of discomfort in the air,
which is new to those of us cushioned till
now by the privileges of the salaried class.”
Ge seems to have conducted reproduces them in role played by journalism ings that famines cannot occur in coun-
an endless number of inter- her book. This is a in reporting the floods — tries with a free press. After reading Ms Ge
views and she painstakingly powerful narrative and how it was prevented book, we can also assert that floods cannot
reproduces them in her book. technique, from doing its job. She occur in a country with a free press — and
This is a powerful narrative pitchforking the writes in detail about how the absence of one makes us vulnerable.
technique, pitchforking the reader into the the overtly centralised gov-
reader into the calamity calamity through its ernment of former chief RIVERS REMEMBER: #Chennai
through its recollection. Why recollection minister J Jayalalithaa pre-
she chooses some narratives vented the free flow of Rains and the Shocking Truth
over others is not always clear. Some are information, not only about the floods, but of a Manmade Flood
obvious, such as that of engineer and vol- also about the incumbent’s failing health.
unteer Muhammed Yunus, who gets “Many newspapers were sent criminal
Krupa Ge
together a contingent of boatmen to rescue notices for just speculating about Context (Westland); ~499; 218 pages

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QUICK TAKE: PRESSURE ON RUBBER PRICES TO STAY
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Surcharge to hit global fund entry ‘India witnessing a

ASHLEY COUTINHO
Mumbai, 1 August
ILLUSTRATION: BINAY SINHA

Fund officials in India Lehman-like crisis’

feel the pinch RAJ BHATT, vice-chairman and chief excutive officer (CEO) of Elara Capital, says that India is in a similar

T
he recent hike in surcharge may
dissuade overseas money man-
agers from shifting to India and
result in a flight of senior fund profes-
sionals who advise global private equity
players to countries such as Singapore
and Hong Kong, which have far lower
personal income tax rates.
Several offshore fund managers of
Indian origin, who manage the India
units of their global portfolios, have been
keen to shift to the country as it will
enable them to locally connect with
bankers, analysts, institutional investors,
as well as the company’s management.
The shift was not possible because of
the adverse tax impact, given that the
presence of a fund manager in India
could entail business connection, per-
manent establishment, and tax resi-
dence risks for offshore funds.
To address this gap, the Finance Bill,
2015, had introduced section 9A in the
I-T Act, 1961, to provide a safe harbour
regime for the onshore management of
offshore funds. Despite the onerous
rules, the government has been giving
concessions to make the shift practically
feasible.
In May this year, the Central Board
of Direct Taxes (CBDT) had clarified that
asset management companies (AMCs)
approved under Sebi regulations would
be considered eligible fund managers
under section 9A. This allows Indian
AMCs to directly conduct fund manage-
WORST JULY SHOWING IN 17 YEARS
IMPACT ON SUPER RICH (in %) adversely impact fund managers plan-
ning to shift to India to benefit from the
n Income (~2-5 crore) section 9A regime, because the compar-
n Income (>~ 5 crore) ative cost of moving to India will rise fur-
ther," said Rajesh Gandhi, partner at
Earlier surcharge 15.00 Deloitte Haskins & Sells.
15.00 Gandhi added that the personal tax
rates in India were, in any case, higher
Present surcharge 25.00
than those Singapore and Hong Kong
37.00 even before the surcharge.
Effective tax rate 39.00 Further, several fund professionals
based in India could relocate to other
42.74 jurisdictions, resulting in a brain drain.
Source: Budget announcement
Many of the top global PE firms such as
ment activity for offshore funds. Blackstone, KKR, and Warburg Pincus
The government also provided some have advisory entities based in India
relief in the Budget by relaxing two minor comprising senior fund professionals.
conditions under section 9A. A few funds These are relatively mobile and may look
were recently granted approvals under to provide such services from Hong Kong
this regime. The surcharge hike could, and Singapore, said experts.
however, undo the progress made so far.
"The increase in surcharge will More on business-standard.com
Senior officials of domestic asset situation as the US after the 2008 Lehman Brothers crisis. In an interview with Sundar Sethuraman,
managers have historically drawn high Bhat says that the government should take steps to address the risk aversion among banks and financial
salaries and will be hit hard. For institutions. Edited excerpts:
instance, HDFC MF managing director
Milind Barve and chief investment Why are the markets weak despite a stable
officer Prashant Jain’s annual government at the Centre?
remuneration for FY19 stood at Globally, the US-China trade war is a
~7.2 crore each. sentiment dampener. Europe is going
ICICI Prudential through a challenging time, and the interest
MF’s MD and CEO rate in the US is indicating that it is going into
Nimesh Shah took recession. Domestically, we have a liquidity
home ~6.25 crore. crisis: Banks are not lending and companies
The industry also are struggling to find growth capital. Banks
routinely gives one- are not lending because they have burnt their
time payments and
fingers in the past. They are playing safe due
ESOPs that could to fears that their lending decisions may be
amount to a sizeable questioned at a future date.
amount in a
particular year. What should be done to tide over this
For instance, liquidity crisis?
Motilal Oswal Asset I think we are in the same situation the US
Management MD was in during 2007-08, after the Lehman correction in the valuations. Over the last 10
and CEO Aashish crisis. Banks were not lending to each other years, a lot of money came through the
Somaiyaa’s total and so the credit market was jammed. We exchange traded fund (ETF) route. ETFs look
remuneration for need to do something drastic like the US’s at the index returns and invest. ETF money
FY19 was ~39.6 crore. Milind Barve Troubled Asset Relief Program (TARP) will move out when the prices start falling. If
This included a (top) and scheme. The US government created a TARP the markets fall, they exacerbate the fall. We
one-time payment Nimesh Shah of $400-$500 billion as the banks were not have to create some optimism in the market
owing to cumulative lending, and there was no trust from so that investors believe that your long-term
vesting of equity shares earned over the investors. The government needs to create a story is intact.
last 6.5 years, which materialised in FY19. special situation fund to take all the toxic
Experts believe the tax impact could assets out of the system. Right now, printing How do you navigate in this market? What is
be reduced if the one-time payments money is not a bad option. We need at least ~5 your advice to investors?
are deferred and vested ESOPs are not trillion, anything less than that is Investors will make gains if they
exercised. dribs and drabs. invest for the long term. India is not a
ASHLEY COUTINHO market for someone who cannot see
FPIs are on a selling spree after the losses. The demography of India will
Budget. Do you think the whole make sure companies will do well.
surcharge issue could have been handled
differently? How concerned are institutional investors
The surcharge issue has affected sentiment. about volatility in the market? What is the

Analysts say more pain ahead for indices
PUNEET WADHWA
New Delhi, 1 August
The tax on foreign portfolio
investors (FPIs) proposed in the
Union Budget, weak corporate
earnings amid a slowing econ-
omy, and falling consumption
dented the market sentiment
in July, causing benchmarks
Sensex and Nifty to slip close
to 6 per cent.
This was the worst July for
the indices in nearly 17 years.
On Thursday, the Nifty slipped
below the 11,000-mark and has
so far dropped around 9 per
cent from its 52-week high of
12,103.05 hit on June 3.
Analysts say there is more
pain in store, as both global
and domestic cues are likely
to further dent sentiment.
Over the next few months, the
progress of monsoon — which
will have a bearing on infla-
tion and the interest rate tra-
jectory — corporate earnings,
and the overall health of the
economy, besides global cues,
are factors that will have a
bearing on the markets.
“The short-to-medium term
outlook is clouded by what’s
happening globally and at
home. We did not see as dovish
a commentary as was expected
from the US Fed when it cut
rates by 25 bps for the first time
in a decade, on July 31.
Economic data in India, too,
has been weak and there are
issues with the new FPI norms.
All this is making sentiment
weak. That said, we remain
constructive and bullish on the
markets from a long-term hori-
zon,” says Vaibhav Sanghavi,
co-chief executive officer,
Avendus Capital Public
NIFTY HEADS SOUTH
Source: Exchange
Markets Alternate Strategies.
Among sectors, the PSBs,
autos, metal, and infrastructure
were the top losers on the NSE.
The negative sentiment also
did not spare the FMCG, phar-
ma, and IT segments — con-
sidered defensive and safe-
haven bets in a volatile market.
The respective indices lost
between 1 and 2 per cent in July
on the NSE.
“The Nifty has broken a
number of key support levels.
It could slide another 3-5 per
cent from here. Investors need
to be careful as the newsflow is
not too encouraging. The FPI
taxation issue needs resolution.
It is not the government’s job
to tell FPIs how to structure
themselves. In essence, the gov-
ernment is doing what it should
not be doing,” says U R Bhat,
MD of Dalton Global.
The fall in the mid- and
small-cap segments has been
higher. The Nifty Smallcap lost
11 per cent while the Nifty
Midcap shed 8 per cent in July.
As regards corporate earnings,
28 Nifty stocks had reported
their respective June quarter
numbers till July 31.
The government should exempt funds from
it. How can you create a corporate structure
when the funds usually are unit trusts. Why
should you force this surcharge when the aim
feedback you are getting from your clients?
They are hoping that this government will do
something to improve sentiment. Corporate
governance issues are a significant concern.
“On an aggregate basis, the
performance recorded by 28
was to tax the super-rich. And, even the
super-rich, who are corporates in India, does
Institutional investors are cautious and
that’s why they do not invest in small
firms showed that while the top not have to pay the surcharge. However, the companies. They invest in index stocks. This
line grew 8.2 per cent, the bot- real reason for the FPI sell-off is lack of change happened over the last few years as
tom line fell 2.2 per cent. The confidence in the market. All the headline one scandal after the other shocked
performance by 21 non-BFSI numbers are not positive, whether it is auto investors. Liquidity stress is also bothering
entites suggests net revenue sales, jobs, or earnings. It will take time to them. Lack of continuity in policy is another
growth of 7.3 per cent year-on- stabilise. Even marquee stocks are hit in this dampener. Now, the time has come where a
year, while net profit fell 11.1 per downturn. Right now, moderation in corporate contract with a state government
cent,” says Jagannadham valuation will take place. The valuations were should be honoured regardless of which
Thunuguntla, senior vice-pres- at elevated levels. Now, there is some party comes to power.
ident and head of research
(wealth), Centrum Broking.
As a portfolio strategy,
Surendra Goyal, MD and head
(India equity research) at Citi,
increased his overweight
stance on financials, primarily
through the addition of SBI Life
in his model portfolio.
His overweight sectors
includ healthcare/agrochem,
financials, utilities, while mate-
rials and consumer staples
remain underweight sectors.

THE COMPASS

Promotional offers dent Godrej Consumer’s Q1 show

Investors should SHREEPAD S AUTE
wait for good The June quarter (Q1) performance of
Godrej Consumer Products (GCPL) was
earnings trend above expectations on the earnings front.
despite attractive Though consolidated net profit of
~407.6 crore remained almost flat as com-
valuations pared to the year-ago quarter, it was more
than analysts’ expectations of ~315.3 crore.
Base=100 120 However, GCPL missed estimates on
the top line front, given the price cuts and
discounts. In order to push up volumes,
Sensex the company reduced prices of products
100 and introduced promotional offers, which
weighed on sales realisations.
In the domestic (India) business, sales
and trade promotion spends as a percent-
80 age of sales rose by 128 basis points year-
on-year (YoY) to 6 per cent in Q1.
Godrej Consumer Therefore, despite a 5 per cent volume
Products growth in domestic business (54-55 per
60 cent of overall revenue), domestic sales
Jul 2,‘18 Aug 1,’19 of ~1,289.8 crore increased by just 0.9 per
Compiled by BS Research Bureau
cent on a YoY basis.
The company indicated price drops
across the categories with soaps, liquid
vaporiser and hair colour (Crème brand).
The muted top line growth of the India
business, coupled with a 0.6 per cent YoY
decline in revenues from Africa, weighed
on the overall consolidated top line.
GCPL reported close to 5
per cent YoY decline in net
sales to ~2,330.6 crore in the
quarter, against estimates of
~2,482.7 crore.
Yet, a 5.4 per cent revenue
growth from the Indonesia
business capped the overall
top line fall.
While Africa has over 20 per cent rev-
enue share, Indonesia accounts for 14-16
to GCPL’s consolidated top line. The trend
of chasing volumes with higher promo-
tional spends is likely to persist in the
near-to-medium term.
The management, during its analyst
call, highlighted that volume growth will
improve hereon mainly from the
December quarter onwards.
What helped on the profit front was
benign input cost.
GCPL’s gross profit margin and Ebitda
(earnings before interest, tax, depreciation
and amortisation) margin improved by
147-148 basis points YoY to
56.8 per cent and 19.4 per
cent, respectively.
Though the management
expects overall performance
to improve, including its
Africa business, this should
reflect on the financials of the
company if there is to be a re-
rating of the stock, says an analyst at a
domestic broking house.
Though valuations are attractive,
investors should await a positive earnings
growth trend. The stock currently trades
at 32 times its FY21 estimated earnings,
which is at a 41 per cent discount to peer
Hindustan Unilever.

Agile models support Shriram Transport, Chola Finance

Both were quick HAMSINI KARTHIK what has helped the two funding for replacement of Increasing loan exposure to
financiers is that they were tyres, insurance premium, fuel light CVs, two-wheelers, and
to adapt to a Much to the surprise of quick to adapt to the changing costs — which would enable used CVs has helped Chola
investors, results posted by environment. For instance, the fleet operator for seamless Finance in Q1. This strategy
changing Shriram Transport Finance Shriram Transport has functioning of business — has has also led to market share
environment Corporation
Cholamandalam Investment
and increased its focus on used
vehicle credit, which formed
helped Shriram Transport,
though they make up only a
gains in segments in which it
wasn’t very dominant earlier.
and Finance Company (Chola about 83 per cent of its loan small proportion of its loan The problem for both CV
Finance) exceeded expecta- book in the June quarter. book, says the management. lenders is that of cost of funds.
Base=100 tions. While loans to used vehi- Analysts at Edelweiss say At about 9.0-9.5 per cent, ana-
120
Both managed reasonable cles carry lower value against Shriram Transport’s niche lysts say costs have almost
profit growth in the June quar- loans to new vehicles in a mar- positioning and sustained petered out and therefore net
Sensex ter (Q1) and kept a neat check ket where demand for used investment in building fran- interest margin (NIM) should
100 on costs. Loan growth held up vehicles is marginally better, chise should lead to a relatively stabilise at 6.5 per cent for
reasonably well, too. Shriram the company’s ability to switch better H2FY20. Chola Finance and 7.5 per cent
Transport grew its loan book focus has helped mitigate the Chola Finance, whose loan for Shriram Transport.
by 4 per cent year-on-year slowdown in the commercial book is smaller than Shriram Consequently, Rajiv Mehta
80 (YoY) in Q1, though overall dis- vehicles (CV) space. Transport’s and traditionally of YES Securities says that the
bursement fell 8 per cent. The firm also increased its caters to heavy CVs and cars, two stocks are attractive at cur-
Shriram Growth was faster for Chola preference towards funding altered its focus, which helped rent levels — Shriram
Transport
Chola Finance Finance, which saw loans swell light CVs, demand of which is its loan disbursements grow 22 Transport for trading at 1.2
Investment 60 23 per cent YoY in Q1. better compared to other seg- per cent YoY in the quarter. times its FY21 book value, and
Jul 2,‘18 Aug 1,’19 Even if the growth rates sig- ments. Increasing focus on This is the highest growth Chola Finance for its ability to
Compiled by BS Research Bureau
nificantly trail the past trends, working capital loans such as posted by an NBFC so far. ride out a tough pace.

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.
MUMBAI | FRIDAY, 2 AUGUST 2019 THE SMART INVESTOR 11 <

No relief in sight for Zee Entertainment Don’t permit

broker to trade
Stake sale meets only 38% of outstanding loans of promoter group
RAM PRASAD SAHU
MFs’ Essel exposure on your behalf
Mumbai, 1 August

The stock of Zee Entertainment

may see 30-50% fall SANJAY KUMAR SINGH

A Delhi-based broker, Allied Financial Services, is

Enterprises (ZEEL) declined by 4 per JASH KRIPLANI Zee shares, a few had also lent against Dish in the news for the wrong reasons. Its activities
cent on Thursday, despite a stake Mumbai, 1 August TV shares, combined with the pledging of have allegedly triggered a default by its clearing
sale by the company’s promoters. Zee shares. In such cases, the fund houses member, IL&FS Securities Services. Odisha
The promoter pledge and stake sale Mutual fund (MF) players are expecting the concerned may not benefit to the same extent Cement, a client, has alleged that mutual fund
were key overhangs for the stock, proceeds from the Zee-Oppenheimer deal to as others, from the Oppenheimer deal,” said (MF) units worth ~344 crore were transferred by
but the announcement of the deal significantly reduce their outstanding debt a fund manager. the broker from the demat account of one of its
failed to trigger a rally. exposure to Essel Group entities. According “We understand that the group will subsidiaries. While the courts and the regulator
Including Thursday’s loss, the to people in the know, the deal could poten- engage with lenders in the coming weeks to probe deeper into the case, let us focus on some of
stock has shed over a third of its value tially reduce MFs’ exposure to the group com- release their pledged shares, which will be the mistakes investors must avoid in their relation-
over the past one year. panies by 30-50 per cent. transferred to Oppenheimer,” Citi analysts ship with their broker.
While the ~4,200-crore deal with The sources said a fall in exposure would said in a note. According to the management The first lesson, according to experts, is that
Invesco Oppenheimer — for a 11 per depend on whether the MFs’ exposure is of ZEEL, once the pledged shares are trans- clients should confine their relationship with their
cent stake in ZEEL — does allay near- pledged by shares of Zee or ferred to an escrow account, broker only to broking. Brokers are meant to only
term concerns, brokerages say it is any other group company. Oppenheimer will pay for the facilitate buying and selling of securities. They are
not enough to repay ~11,000 crore in “We will see our expo- RECOVERY PANGS shares. Earlier in the year, also permitted to offer advice on which stocks the
outstanding loans against shares of sure to Essel Group reduce MFs and other lenders had client should buy or sell. “Regulations do not per-
all listed entities of the group. by half, as our exposure Mutual funds with exposures entered into a ‘standstill’ mit brokers to manage customers’ money,” says
Parag Gupta and Sulabh Govila of EASING THE DEBT BURDEN was pledged by Zee shares. to Essel group entities agreement with promoters Nithin Kamath, founder and chief executive offi-
Morgan Stanley say the stake sale From ~1,500 crore, we *(~crore) of Essel Group to give them cer, Zerodha.
meets 38 per cent of the promoter
(in ~crore) should see it fall to ~750 Fund time till September to repay Allowing your broker to buy and sell on your
Exposure as
debt obligation. The balance needs Loans against shares 11,000 crore as a result of this deal. house of June-end* their dues. behalf can spell trouble. All is well in such a rela-
to be met through sale of non-media Our full exposures will get Most MFs entered into tionship so long as the broker makes profits and
assets, failing which a further stake Stake sale (11% in ZEEL) 4,224 cleared once the promoters Birla Sun Life MF 2,670 the agreement as they took gives the client the promised return. But once he
in Zee may need to be sold. They sell the balance stake in Zee HDFC MF 750 the stand that selling the makes losses, he may not
believe this is the first of many steps, Residual debt 6,776 as was envisaged,” said A pledged shares would lead only fail to pay the promised
but it doesn’t remove the overhang OPTIONS FOR PROMOTERS Balasubramanian, chief ICICI MF 718 to ‘sub-optimal’ recovery, returns but even the princi-
on the stock yet. executive officer, Aditya Franklin and was not in the best inter- pal. “If you get a call from a
Further, the deal was done at a Dish TV (57.5% stake) 2,700 Birla Sun Life MF. Templeton MF 613 ests of investors. However, broker saying ‘give us the
10.6 per cent premium to the closing The fund house would markets regulator Securities shares lying in your demat
price on Wednesday, whereas the ZEEL stake (25% stake) 8,324 be among major benefici- SBI MF 260 and Exchange Board of India account and we will earn
Street was expecting a premium of aries given the size of its UTI MF 98 pulled up fund houses and returns for you on it’, that
Infra (non-media) business* 8,000
15-20 per cent. The other expectation
was the best-case scenario of getting * equity value Source: Analyst reports
exposure.
In response to an email
Kotak MF 65 questioned the legal basis for
such arrangements with
YOUR should set the alarm bells
ringing. Stay away from such
a strategic investor on board, which query on how the deal pro- Baroda MF 43 promoters. MONEY brokers,” says Kamath. He
did not happen. ceeds will be shared with Source: Value Research, * exposure may On Wednesday, Essel adds that clients who want
have reduced in recent weeks
The management indicated that latest transaction, the promoter assets has been going on for quite lenders, a company Group said it was offloading an entity to manage their
the need to close the deal by the end group still needs to pay about ~6,800 some time, analysts believe that mon- spokesperson for Zee said: 11 per cent of the nearly 36- If you want to money should invest with a
of July prevented them crore through the sale of etisation of the same is unlikely to “The value generated from ZEEL’s (Zee per cent promoter stake in ZEEL to the exist- make money by licensed portfolio manage-
from exploring the option After the latest road and solar assets, or a take place before the September Entertainment’s) 11-per-cent promoter stake ing investor, Invesco Oppenheimer, for a lending shares, ment service or MF house.
to scout for a strategic transaction, the stake sale in Dish TV. deadline. sale to Invesco Oppenheimer Developing consideration of ~4,224 crore. According to use the Sometimes brokers also
investor. Analysts at ICICI promoter group Given that the current Deepti Chaturvedi and Akshat Markets Fund will reduce the exposure of the management, the deal proceeds would exchange ask for the shares or MF units
Securities say that the still needs to market capitalisation of Dish Agarwal of CLSA believe that the MFs and non-banking financial companies. amount to ~4,000 crore after adjusting for platform meant lying in a client’s account and
stake sale to a global tech- pay about TV (the stock fell over 6 per chance of an asset sale closing in At this stage, we cannot comment on the pro- tax liabilities. The promoters aim to close for this purpose promise to pay a regular
nology/media player ~6,800 crore cent in trade on Thursday) two months is bleak, and a further portion.” the deal by August. interest on it. “The broker
could have added value in through the is close to ~4,700 crore, a 57.5 8-18 per cent stake sale in ZEEL is a The MF industry had ~5,000-6,000 crore “The promoters are backing up their res- uses those shares for his own business activities.
expanding its digital sale of road and per cent stake will fetch the likely outcome. exposure to Essel Group firms, which were olution plan with action. They are looking The risk in such arrangements arises if the broker
reach, and the failure to solar assets, or promoters close to ~2,700 The current stake of promoters, loan against share exposures. HDFC MF (~750 at resolving the situation by monetising their becomes insolvent,” says Shrey Jain, founder, SAS
do so has dampened a stake sale in crore. This is close to 24.5 per following the recent deal, stands crore exposure as of June-end), ICICI MF (~718 assets in a phased manner,” added Online, a Delhi-based discount broking firm.
sentiment. Dish TV cent of the promoter debt. reduced at 25 per cent. If there is fur- crore), Franklin Templeton MF (~613 crore), Balasubramanian. As the Oppenheimer deal Clients often fall for these schemes because of
The biggest worry for The equity value of the ther dilution, the promoters could SBI MF (~260 crore), UTI MF (~98 crore), and could potentially ease the overhang on the the desire to make some extra money on an ‘idle’
the Street, however, is the need for infrastructure assets could range end up being minority shareholders, Kotak MF (~65 crore) are among other fund schemes exposed to the group, ICICI MF asset. But such arrangements can be perilous. “If a
further dilution in ZEEL and a possi- from ~8,000-9,000 crore. However, putting the continuation of the cur- houses exposed to Essel Group entities. and Birla Sun Life MF sounded-off the dis- person is trading himself, he will probably under-
ble change in management. After the given that the process of selling the rent management in doubt. “While most fund houses had lent against tributors on the Essel development. stand the risks of what he is doing. But when he
lends his securities to a broker, he does not know
how much risk the latter will take with them,” says
Vikas Singhania, executive director, Trade Smart
> TODAY’S PICKS BY DEVANGSHU DATTA Online.
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Stop long positions at 10,925 . Stop short Stop long positions at 28,400. Stop short Keep a stop at ~212 and go long . Add to Keep a stop at ~228 and go short. Add to Keep a stop at ~132 and go short. Add to you have not sold shares, complain immediately
positions at 11,125. Big moves could go till positions at 28,700 . Big moves could go till the position between ~216-~217 . Book the position between ~221-~222. Book the position between ~126 -~127. Book to the exchanges and to the Securities and
10,825, 11,225. A long Aug 08, 10,900p (48), 28,000, 28,850. Trend remains negative. profits at ~218. profits at ~220. profits at ~125. Exchange Board of India,” says Kamath. If you are
short 10,800p (29) could gain 10-15 If the not savvy enough, do not trade in the futures and
index drops below 10900. options segments and do not let any other entity
do so on your behalf, as leveraged bets in these
segments can result in massive losses.
Retail investors, who want to lend their shares,
should use exchange-based platforms like the
security lending and borrowing mechanism.
Borrowers and lenders both place bids and trans-
actions happen if there is a price match. The
Target prices, projected movements in terms of next session, unless otherwise stated
exchange charges a small margin.

COMMODITIES1
>

Old gold selling by Indians UP asks mills to clear

cane dues byAug 31
at 7-year high, says WGC VIRENDRA SINGH RAWAT
SWEETENER
Duty hike to hit demand INDIA’S GOLD ACCOUNT Lucknow, 1 August
Crushing season n 2017-18 n 2018-19
Payment (%) 68 75
only in short term; WGC Demand With the 2019-20 sugarcane crushing
cycle barely two months away, the Yogi
retains annual forecast
24,291

In tonnes Q2CY18 Q2CY19 % change

24,792

Adityanath government has set an

> PRICE
35,452

CARD
33,047

Jewellery 149.9 168.6 12.5 August 31 deadline for mills in Uttar

DILIP KUMAR JHA Bar & coin 39.3 44.5 13.2 Pradesh, the country’s top sugar pro-
11,161

As on Aug 1 International Domestic Mumbai, 1 August ducer, to settle farmer dues, of more than
8,255

------------------------------------------------------------------------------ ------------------------------------------------------------------------------
Total 189.2 213.1 12.6 ~8,200 crore, for the current season.
Price %Chg# Price %Chg#
Consumers in India are selling old gold Against total cane payables of ~33,047
METALS ($/tonne)
to benefit from high prices. The same Supply crore, UP mills have, so far, paid 75 per
Aluminium 1,776.5 0.1 2,041.7 -4.7 is reflected in the data for the June Q2CY18 Q2CY19 % change cent or ~24,792 crore to farmers, thus Total cane Total payment Total
Copper 5,926.0 -7.4 6,458.2 -5.6 quarter that the World Gold Council Net imports 193.1 247.4 28.1 leaving 25 per cent or ~8,255 crore in
dues (July 31) by mills outstanding
Zinc 2,425.5 -16.5 2,751.2 -15.3 released on Thursday, in Gold Demand arrears for the 2018-19 season. Note: Figures in ~crore Source: Industry
Trends. Scrap 32.0 37.9 18.4 During the corresponding period last
Gold ($/ounce) 1,403.5* 9.9 1,553.0 9.4 The report stated consumers during year (2017-18), the unpaid component
Domestic supply 2.6 3.2 23.1
Silver ($/ounce) 16.0* 9.0 18.0 8.1 the quarter sold 37.9 tonnes of old gold, stood at ~11,161 crore or about 32 per cent Commodities Act (ESA), 1955, and
Total 227.7 288.5 26.7
ENERGY which is the highest quarterly sale after of the amount payable. issuance of recovery certificates (RC),
Source: World Gold Council Compiled by BS Research Bureau
Crude Oil ($/bbl) 64.0* -11.5 63.5 -11.9 September 2016, when old gold sale, or The central and the state govern- which authorise district administra-
scrap supply, was 39 tonnes. ments had announced separate soft loan tion to seize a plant and the stock for
Natural Gas ($/mmBtu) 2.3* -11.8 2.3 -14.5 Gold jewellery sold and repur- after August 2016”, said the WGC’s Gold Robust trade promotion and a high schemes for helping private sugar mills auctioning, if farmer dues were not
AGRI COMMODITIES ($/tonne) chased, or remaking gold, is not calcu- Demand Report. number of auspicious days helped pay farmers in the backdrop of sugar paid on time.
Wheat 178.1 -15.5 300.5 10.6 lated as part of old gold sale. The discount in spot prices over occasional gold buying. market glut, export market squeeze and In fact, Chief Minister Adityanath
Sugar 326.2* -1.7 477.0 1.0 In June, the gold price crossed the cost of import comes to ~500 per However, the price rise in June and falling sugar prices. had asked mills to settle their outstand-
$1,400 an ounce in global markets, 10 gm. expectations of an import duty cut The state cane commissioner, ing and stressed any delay in clearing
Palm oil 515.0 -1.0 825.4 -3.2 which was a six-year high, and since Somasundaram PR said, “We do not brought demand to a virtual standstill Manish Chauhan, holding a meeting arrears would not be tolerated.
Rubber 1,814.5* 8.2 2,143.1 16.5 then has remained above that. In addi- expect the hike in customs duty to have when the quarter ended. with the representatives of private mills “Sugarcane payment is incumbent
Cotton 1,390.7 -16.9 1,758.9 -6.9 tion, import duty has been raised by a long-term impact on gold in India, Purchases by central banks globally here on Wednesday, had issued stern on the liquidation of stock and it is the
* As on Aug 01, 19 1800 hrs IST, # Change Over 3 Months
2.5 percentage points, making gold although it will have a dampening and increased buying by financial directives for ensuring full payment by responsibility of the government to facil-
Conversion rate 1 USD = 69.1& 1 Ounce = 31.1032316 grams. even costlier. impact on demand in Q3. We continue investors who opt for gold-backed August 31. They were also instructed to itate the sale. We have been given limited
Notes: On an annual basis, the supply of to estimate India’s full-year gold exchange-traded funds have supported complete their annual repairing and quota for selling sugar and are facing the
1) International metals, Indian basket crude, Malaysia Palm oil, Wheat
LIFFE and Coffee Karnataka robusta pertains to previous days price.
scrap gold in India is likely to be at a demand to be in range of 750 to 850 demand, said the Gold Demand maintenance at the earliest, so that mills double whammy of maintaining inven-
2) International metal are LME Spot prices and domestic metal are seven-year high and may rise to 100 tonnes in 2019.” Trends. could start operations on time for the tory and not able to sell as well,” an offi-
Mumbai local spot prices except for Steel. tonnes, according to P R India’s gold demand in 2017 was 771 Central banks bought 224.4 tonnes upcoming sugar season (October 2019- cial with a leading sugar company told
3) International Crude oil is Brent crude and Domestic Crude oil is Indian
Somasundaram, managing director tonnes and in 2018 was 760 tonnes. in April-June, taking their first-half September 2020). Business Standard.
basket.
4) International Natural gas is Nymex near month future & domestic (India) of the World Gold Council. India’s gold demand went up by 13 buying to 374.1 tonnes, the largest net Private mills account for nearly 95 He lamented the government was
natural gas is MCX near month futures. In 2012, the supply of scrap gold per cent to 213.2 tonnes for April-June H1 increase in global gold reserves “in per cent of total arrears in the state at not extending any support to mills in
5) International Wheat, White sugar & Coffee Robusta are LIFF E future stood at 118 tonnes because people this year compared to 189.2 tonnes in our data series. In a continuation of ~7,800 crore, followed by UP cooperative the present crisis and private millers
prices of near month contract.
6) International Maize is MATIF near month future, Rubber is Tokyo-TOCOM encashed their jewellery owing to a the corresponding period last year. recent trends, buying was spread units at ~430 crore. Among top cane pay- have been ‘bluntly’ told to explore other
near month future and Palm oil is Malaysia FOB spot price. surge in local prices. “The increase in India’s gold across a diverse range of — largely ment defaulters are Bajaj Hindusthan sources of funding for settling outstand-
7) Domestic Wheat & Maize are NCDEX future prices of near month After the Union Budget, the flow of demand during April-June can be emerging market countries”, said group mills (more than ~2,800 crore out- ing. “We have apprised the state gov-
contract, Palm oil & Rubber are NCDEX spot prices.
8) Domestic Coffee is Karnataka robusta and Sugar is M30 Mumbai local
smuggled gold to India increased and attributed only to the price decline in the report. standing), Simbhaoli (~600 crore), Modi ernment of the tight liquidity situation
spot price. traders holding cheaper gold started April and May, when consumers found Gold-backed exchange-traded (465 crore), and Dhampur (~354 crore). with us, which is primarily responsible
9) International cotton is Cotton no.2-NYBOT near month future & selling. The spot gold market in an opportunity to accumulate their funds’ holding grew 67.2 tonnes in the Last month, the government had for arrears.”
domestic cotton is MCX Future prices near month futures.
Source: Bloomberg Compiled by BS Research Bureau
Mumbai was quoting at a discount of metal holding,” said P R April-June period to a six-year high of warned defaulting mills of filing of cas-
$23-25 per ounce, “which is the highest Somasundaram. 2,548 tonnes. es under Section 3/7 of the Essential More on business-standard.com
https://t.me/SSC4Exams https://t.me/Banking4Exams https://t.me/UPSC4Exams
 https://t.me/TheHindu_Zone_official
20 COMPANIES
>
MUMBAI | FRIDAY, 2 AUGUST 2019 1

N CRISIS AT CCD N
EV firms trim prices
Biz failures should Complex holdings
mayhitfundraising
after GST breather
not be taboo: FM
SHALLY SETH MOHILE

plansofCoffeeDay
Mumbai, 1 August

Owning an electric car and two-wheeler will now

be easier on the wallet. With a steep reduction in
IBC Amendment DEBASIS MOHAPATRA
Bengaluru, 1 August
sures about these entities,” said
a Mumbai-based trader.
the GST (goods and service tax) rate taking effect,
manufacturers of EVs have reduced prices of
Bill gets cleared For instance, the holding
Investors, especially institu- entity is home to a range of
their models — up to ~80,000 for e-cars and up to
~9,000 for e-two-wheelers.
in Lok Sabha tional, were never keen on businesses such as its logistics In a bid to spur the EV demand, Union
owning Coffee Day Enter- business Sical; tech park devel- Finance Minister Nirmala Sitharaman had
INDIVJAL DHASMANA & PTI prises stock since its listing in opment unit Tanglin; and announcedareductioninGSTonEVsfrom12per
New Delhi, 1 August late 2015 despite the compa- financial services firm cent to 5 per cent in her maiden Budget.
ny operating a successful cof- Way2Wealth, among others, Sohinder Gill, director general at Society of

R
eacting to the death of fee retail chain, which had a making it impossible for an Manufacturers of Electric Vehicles (SMEV), said
Café Coffee Day significant brand recall. investor to understand where EV makers, which mainly include eight two- PRICE CUTS
founder V G Siddha- A complex holding struc- the value is being created, the wheeler makers, carmakers and three-wheeler
rtha, Finance Minister Nirm- ture and unrelated businesses trader said. makers, have passed on the benefit of the
Tata Motors
ala Sitharaman said business clubbed under one roof could “When a private equity (PE) reduced GST rate. Sells the electric version of Tigor and has
failures should not be a taboo. have been the reasons that firm says it holds this much in “While it may not have much impact on the reduced prices by up to ~80,000 across
Responding to the debate prompted investors to shun Coffee Day, it is only related to demand as the benefit from affordable two- its variants, with effect from August 1
on the amendments to the the stock, experts say. These the listed entity. Nobody actu- wheelers will only be ~4000-5000, it will boost
Insolvency and Bankruptcy are likely to impact the com- ally knows the exposure and sentiment,” said Gill. Hero Electric, too, has Mahindra & Mahindra
Code (IBC) in Lok Sabha on pany’s ability to raise funds, stake holding of the PE firms reduced prices across its range, he added. Prices of eVerito will come down by
Thursday, Sitharaman said, too, they add. in the group entity,” said an Tata Motors that sells the electric version of ~80,000 and cost ~10.71 lakh (including
“Business failures in this coun- Finance Minister Nirmala Sitharaman in the Lok Sabha “If you see the size of the investmentbankingsource.“In Tigor has reduced prices by up to ~80,000 across FAME benefits, on-road in Delhi)
try should not be a taboo, or during the ongoing Budget Session, on Thursday PHOTO: PTI company, mutual funds hold a this scenario, raising funds its variants, with effect from August 1. Tigor EV,
looked down upon. On the miniscule stake in the firm. FIIs from the market is likely to be which was earlier priced between ~12.35 lakh and
The price of Treo three-wheeler will go
contrary, we should give an Airways, Sitharaman said the respond to issues of financial (foreign institu- difficult because ~12.71 lakh (ex-showroom price in Mumbai) and down by up to ~20,000 and will now
honourable exit or resolution stakeholders were free to work creditors in the wake of a recent tional investors) financial institu- will now be available to customers between ~11.58 start at ~2.05 lakh (on-road)
to the problem in letter and out a resolution plan and they ruling with respect to financial only own very tions will be lakh and ~19.20 lakh. Hero MotoCorp-backed Ather Energy
spirit of the IBC.” were not obliged to use the IBC, and operational creditors. small percent- keen to know “In light of the recent announcement made
In the letter, purportedly which is optional. Recently, the National age. So, the the overall liabil- by the government to slash the GST rate for all Premium electric scooter firm also
written by Siddhartha, there Later, Parliament approved Company Law Appellate management ity of the firm.” electric-poweredvehiclesfrom12percentto5per announced a price cut of ~9,000 on
was mention of harassment by changes in IBC, providing Tribunal (NCLAT) had ruled in hasn't done a The ambigu- cent,thepriceofTataMotors’EVswillbereduced its flagship model Ather 450
the Income Tax Department. greater clarity over distribution the Essar Steel's case that the good job at sim- ity has also by up to ~ 80,000, starting 1 August 2019,” said
The I-T department has denied of proceeds of auction of loan- committee of creditors (CoC) plifying the impacted the Shailesh Chandra, president –Electric Mobility
the charges. defaulting companies. had no role in distribution of business struc- performance of Business and Corporate Strategy, Tata Motors, in down by up to ~20,000 and will now start at ~2.05
Telugu Desam Party MP The amendments give cred- claims and brought lenders ture and the stock. Coffee a statement. These prices, he added, do not lakh (on-road), the company said.
Jayadev Galla said businesses itors to a loan-defaulting com- (financial creditors) and ven- explaining it to Day Enterprises include the FAME subsidy and TCS (tax collect- Hero MotoCorp-backed Ather Energy that
may fail because of economic pany explicit authority over the dors (operational creditors) on a investors,” said shares have nev- ed at source). makes the premium electric scooter also
downturn or busi- distribution of pro- par. Sitharaman quoted a Shriram er crossed its Mahindra Electric, the EV-making arm of announced a price cut of ~9,000 on its flagship
nesscycle.Gallaalso On Jet Airways, ceeds and fix a Supreme Court judgment to say Subramanian, The share price of issue price of Mahindra & Mahindra, also announced price model Ather 450. At present, Ather scooters are
said that accounta- Sitharaman said timelineof330days thatwithimplementationofthe founder of cor- Coffee Day Enterprises ~328 per share cuts. “Mahindra will pass on the benefits to cus- available in Bengaluru and Chennai. Ather also
bility of banks need the stakeholders for resolving cases IBC, a defaulter's paradise no porate gover- plummeted 42.4% in since its 2015 tomers across our entire product range with plans to begin operations in major cities like
to come under were free to work under IBC, includ- longer exits. nance advisory the past three sessions public listing. immediate effect. This tax cut, along with the Mumbai, Hyderabad, Delhi NCR and Pune, and
scrutiny.“Signingof out a resolution ing time taken for Referring to the issue of firm InGovern. to close at ~110.50 The share price strong FAME II policy, will see the adaption rate 30 other cities by 2023, it said in the statement.
personal guarantee plan and they litigation. homebuyers, raised by some “Investors on Thursday of Coffee Day in EV going up drastically with a boost to India’s India sold close to 126,000 EVs in 2018-19; a
(by industrialist to were not obliged The amend- Opposition members, Sitha- have difficulty Enterprises has last- and first-mile mobility,” said Mahesh Babu, majorityweretwo-wheelers.Asofnow,Mahindra
take loan) is leading to use the IBC, ments, Nirmala ramansaidtheprovisionsofthe in understanding the company plummeted 42.4 per cent in CEO Mahindra Electric. and Tata Motors are the only two companies that
to (them) taking an which is optional said, would also Bill strengthen the hands of due to its complex structure.” past three trading sessions to After the reduction, prices of Mahindra sell EVs. Last month, Hyundai Motor India
extreme action like bring in more clari- homebuyers and the govern- According to the share- close the trade at ~110.50 on eVerito will come down by ~80,000 and cost launchedthepremiumelectriccarofferingKona.
suicide,” he said. ty on various provisions, ment would endeavour to do holding pattern of the compa- Thursday. ~10.71 lakh (including FAME benefits - on-road in Pricedat~25lakh,thecompanyclaimstohavegot
Biju Janata Dal MP Pinaki including time-bound disposal full justice to them. ny as of June 2019, while mutu- “With a total debt of ~6,547 Delhi). The price of Treo three-wheeler will go an encouraging response to its offering.
Misra referred to the death of at the application stage for res- The government, she said, al funds held 0.12 per cent, crore in Coffee Day Enter-
the coffee tycoon, saying it is olution plan and treatment of was also looking at ways to foreign portfolio investors had prises, along with the person-
unfortunate that the insolvency financial creditors. resolve the issue concerning 5.57 per cent stake. al liabilities of V G Siddhartha,
law “should continuosly con- Among others, the app- buyers of flat from JP Group
tinue to grow and expand in our roved resolution plan would be companies. She said the issueof
country”. He said it does not binding on Central and state inclusion of cross- border insol-
“Given the size of the com- the company’s capacity to
pany, institutional holding raise capital for debt servic-
should have been a lot higher. ing will be critical at this junc-
Now, #ZomatoUninstalled,
bode well for the country governments as well as statu- vency under the IBC was under
because “that is not how you tory authorities.
reach the $5-trillion mark”.
examination and the govern-
Sitharaman said the pro- ment would take a view after
But a mixture of various busi- ture. In that perspective, a
ness, unrelated to each other, simple structure will definite-
have been put under one ly help,” said the investment
#BoycottUberEats trend
On issues concerning Jet posed amendments also consulting stakeholders. umbrella without much disclo- banking source. NEHA ALAWADHI social media divided, the examples of complaints where
New Delhi, 1 August Jabalpur police in Madhya Zomato did not take a similar
Pradesh sought an undertaking stand. The tweet that began the

HCseeksgovt,RBIrepliesonPEseyeingassuredreturns A day after Zomato snubbed a

DEV CHATTERJEE
Mumbai, 1 August
The Calcutta High Court has sought
replies from the Reserve Bank of India
and the government on contracts signed
by private equities (PEs) with Indian pro-
moters, which give PEs guaranteed
return on equity (RoE) investments.
The litigation assumes significance
following the death of Coffee Day
Enterprises founder-chairman V G Sidd-
hartha, who complained of harassment
from a PE investor seeking guaranteed
RoE investments. Though Siddhartha
has not named any PE, KKR and Stan-
Chart PE were the two prominent
investors since 2010 and hold stakes.
The public interest litigation was filed
by a Kolkata-based lawyer, Sanjib Kumar
Dan, and was last heard on July 15 when
the Centre’s reply was sought.
The petition said several firms
received investments from foreign PEs,
which invested as equity but had clauses
proving that the investor can exit the
equity investment with assured rate of
return, thus, providing the investment
the character of a debt instrument.
“The foreign investors are tacitly
using the related mode of equity invest-
ment to garner the benefits associated
with debt instruments through such
agreements,” said the petitioner. Such
illegal clauses are being regularly
enforced by investors taking recourse to
international commercial arbitration.
“Such clauses also threaten the unequiv-
ocal enforcement under the enacted
IBC,” the petitioner said.
In January 2014, the RBI had banned
such equity investments that give gua-
ranteed returns to an investor. In the case
of Tata DoCoMo, the RBI said, according
to the law, guaranteed returns were not
allowed. Hence, DoCoMo cannot seek
guaranteed returns on its investments
in Tata Teleservices.
According to the pact between
DoCoMo and Tata Sons, the Tatas had
given a guarantee that DoCoMo can exit
the company with at least 50 per cent of
its investment even if the company fails
to make money. DoCoMo later moved
the London Court of International Arbit-
ration and moved Delhi High Court to
enforce the award.
The petitioner said the route taken by
investors under the garb of equity share-
holding not only flouted external com-
mercial borrowing norms, but also he-
lped them mop up an exorbitant rates of
return, ranging between 15 per cent and
30 per cent. “These are artificially struc-
tured transactions, which need to meet
the fait accompli of not being in conso-
nance with the Indian Contract Act.
The Securities and Exchange Board
of India had also banned such transac-
tions on October 3, 2013, except for
spot-delivery contracts or contracts on
cash or contracts in derivatives to
which the Securities Contracts
(Regulation) Act is applied.
The petitioner said various Indian
regulatory authorities like the RBI are
sending conflicting signals on the guar-
anteedinternalrateofreturnsandhence,
the court should ask them to give clear
guidelines on this. The optional clauses,
providing assured RoE investments, by
their very nature have been illegal in
India. And even if there is an assured
RoE, it has to be lower than the present
sovereignyieldcurve,i.e.,therateoffered
bythegovernmentonitssovereignbond.
customer who refused an
order from a non-Hindu rider,
#ZomatoUninstalled trended
on Twitter on Thursday, with
many accusing the online
food delivery platform of bias.
#BoycottUberEats also caught
on after UberEats backed its
rival’s “Food has no religion”
comment.
Even as the incident had
from the Zomato customer that
he would not spread religious
hatred. The controversy began
on Tuesday when a Zomato
customer tweeted: “Just can-
celled an order on @ZomatoIN
they allocated a non-Hindu rid-
er for my food they said they
can't change rider and can't
refund on cancellation. I said
you can't force me to take a
delivery. I don't want don't
refund just cancel.”
In response, the official
Twitter handle of Zomato
tweeted, “Food doesn’t have a
religion. It is a religion.”
Zomato founder Deepinder
Goyal tweeted: “We are proud of
theideaofIndia—andthediver-
sity of our esteemed customers
and partners. We aren’t sorry to
lose any business that comes in
the way of our values.”
While several Twitter
users came out in support of
Goyal, others agreed with the
customer and pulled out
entire issue was, however, delet-
ed by Thursday morning.
Hashtagslike#boycottzoma-
to trended on Wednesday,
#ZomatoUninstalled gathered
steam on Thursday.
"Bye bye Zomato, you lost
one precious customer, many
more to come… Don't support
one side if you can't resolve the
issue. #Zomato Uninstalled,”
tweeted one user. Many unin-
stalled UberEats’ app as well,
and tweeted #BoycottUberEats
for supporting Zomato.
This is not the first time reli-
gious issues have prompted
users to uninstall an app.
#BoycottAmazon had trended
on Twitter in May after toilet
seatcoversandotheritemswith
images of Hindu gods were
spotted. In 2015, Snapdeal
faced #BoycottSnapdeal after
its then brand ambassador
Aamir Khan said he may con-
sider moving out of India with
his family.

Ex-McKinsey executive turns failed business into $535-mn start-up

BLOOMBERG
Bengaluru, 1 August
WhenIndiandinersorderbiryanionline
fromRebelFoods,they’regreetedwitha
culinaryhistoryofthefragrant,slow-
cookedricedish.“Therecipewaslost
foreverwhenKingCyruslaidsiegeto
Behrouzuntilitwasdiscoveredamongst
theruins,”thestoryreadsinpart.“With
thisbiryani,wehavebroughtbacktolife
thislostrecipe.”Dinersareinvitedtoread
theentireaccount,whichextendsto
14chaptersanddescribesaprotractedwar
betweentwoancientPersiankingdoms.
Thewholethingismadeup—acanny
exerciseinmyth-makingthathashelped
turnthemeal(namedBehrouzafterthe
fictionalconflict)intoatop-seller.
RebelFoodscallsitselftheworld’s
largestinternetrestaurantcompany,a
boastthat’shardtodisprovebecausethere
aren’tmanychainsquitelikeit.Founded
byaMcKinsey&Coalumnusnamed
JaydeepBarman,thecompanyservesa
dozendifferentmenuswitheverything
fromcheese-loadedItalianpizzasto
99variationsofthedosa.
Allofthefoodiscookedinmorethan
200cloudkitchens,so-calledbecause
thesecentralisedoperationsservefar-
flungcustomerswhohavenoideawhere
theirfoodiscomingfrom—muchlike
cloudcomputingservices.It’sbecomethe
go-tobusinessmodelforfooddelivery
firmslookingtoside-stepthecostsof
runningtraditionalrestaurants.
BackedbySequoiaCapital,Mumbai-
basedRebelFoodsinJulyreceiveda
$125millioninjectionfromCoatue
Management,GoldmanSachs,the
IndonesiandeliveryserviceGojekand
others.Thecompany,whichisvaluedat
$525million,saysitmorethandoubled
saleslastyearandisnowexpandinginto
SoutheastAsiaandtheWestAsia.Over18
months,RebelandGojekwillbuild100
Indonesiancloudkitchensdishingout
biryani,pizza,Chinesefoodandlocalfave
NasiGoreng.Rebelplanstoopen20
kitchensintheUAEbyyear-end.
“Cloudkitchensareredhotbecause
theyaddafast-deliverylayerontopof
restaurantbrands,allowingthemtoscale
quickly,”saysGVRavishankar,managing
directorofSequoiaCapitalIndia.Hesays
RebelFoodsiswellpositionedbecause
youngdinersinIndiaandbeyondare
eagertotrynewfoodsandflavors.
Aroundtheworldinrecentyears,a
cropoffooddeliverycompanieslike
Munchery,Sprig,MapleandSpoonRocket
raisedtensofmillionsofdollarsonlyto
fail.Therewasnoshortageofdemandfor
theirservices;manymillennialswould
ratherorderinthancookathome,and
UBS’sEvidenceLabpredictstheglobal
fooddeliverymarketwillgrowtenfoldby
2030to$35billion.Thefirstwaveoffood
deliverystart-upswerefelledbysteep
operationalcostsanddiscounts.
Barman,whois45,runsRebelFoods
fromanofficeparkintheBhandupWest
areaofMumbaiandgrewupinthefood-
madcityofKolkata.Hiscareertookhimto
Switzerland,theUKandFrance,andhe
realisedthat,despitethefar-flungpopul-
arityofthecuisinefromhishomecountry,
(Top) Rebel Foods cloud kitchen in Mumbai.
(Right) Jaydeep Barman, 45, runs Rebel Foods
from an office park in the Bhandup West
area of Mumbai and grew up in the
food-mad city of Kolkata PHOTO: BLOOMBERG
thereisn’tasingleglobalIndianfoodbrand.
Thetriumphant2010IPOoftheIndian
operatoroftheDomino’spizzachainwasa
signthatitwastimetoreturn.Hequit
McKinseyjustafewmonthsfrom
becomingafullpartner.BackinIndia,
BarmanteamedupwithINSEADbusiness
schoolclassmateKallolBanerjeein2012
andstartedabrick-and-mortarrestaurant
chaincalledFaasosthatsoldkebabwraps.
WithSequoiaasanearlybacker,they
openedabout50locations.Butcrippling
rentspromptedtheduotoshutdownthe
operationthreeyearslaterandswitchto
cloudkitchens.“Wewentcompletelydark
andsawthelight,”Barmansays.
Ghostkitchenshavealsocaughtonin
theUSandEuropeandhavevarious
permutations.Uberco-founderTravis
KalanickownsCloudKitchens,which
doesn’toperateanyrestaurantsbutrents
cookingspacetothelikesoffast-casual
chainSweetgreen. London-based
Deliverooplanstousesomeofan
Amazon-led$575-millionfundinground
toexpanditsnetworkofcloudkitchens.
OnRebel’shometurf,Swiggy,backedby
NaspersandTencentHoldings,isbuilding
outitsownghostcookingoperation,
SwiggyAccess.LikeKalanick,Barman
wantstoupendadiningbusinessmodel
inventedcenturiesagoandforge
somethingbettersuitedtothetimes.
RebelFoodssaysits235kitchensin20
citiesproduce2millionordersamonth.
Mostarelocatedinindustrialcomplexes,
firstfloorwalk-upsorsidealleyswhere
rentsarelow.AkitcheninMumbai’s
Vikhroliindustrialsuburbiscrammed
into800squarefeet.Everysquareinchof
thespaceisfilledwithfreezers,shelves
brimmingwithkitchenequipmentand
preppedingredients.Duringthelunch
rushonerecentday,abouttwodozen
apron-cladmenandwomenarepreparing
orders(twoshahibiryani,fourpaneer
piquantepizza,bhunachickenwrap,
butterchickenroyalmeal)streaminginby
phoneandapp—allthewhiletryingnotto
collidewithoneanother.
Witheachorder,thekitchenbecomes
morefrenzied.Thefinisheddishesarrive
inbowls,traysandsmallcartonsatasmall
pickupcounter,wheretheyarewhisked
awaybyanendlessstreamofdelivery
boys,whoroaroffonafleetofmotorcycles
andscootersandfanoutacrossthe
neighbourhood.Thekitchenproduces
about60lunchordersduringtheweek
andtriplethatonweekends.Theentire
RebelFoodsoperationrunsthe
“equivalentof1,600restaurants”,says
AnkurSharma,RebelFoods’sseniorvice-
presidentofproductandsupplychain.
Besidesharnessingthecost-saving
powerofcloudkitchens,Barmanandhis
partnerleanedheavilyonmarketing
lessonsfrombusinessschool.Eachof
RebelFoods’sdozenbrandshasaback
story—themorekitschythebetter.
ChinesedishesfromMandarinOakwere
supposedlycreatedbyamonkwholived
inanoakforestinChina’sShaanxi
province.Slogan:ExploreHeavenly
ChinesefromaWiseMonk’sWok!Firangi
BakesellsIndianversionsoflasagna,
quesadillasandmaccheese,lovingly
preparedby“mysticalchef”GuruFiranga
“withflavorsfromaroundtheglobe”.
Theexpansionhasn’tbeenwithout
challenges.Indiandishesvaryfromone
regiontothenext—biryanirecipeschange
every100milesorso—forcingBarmanto
setupafoodlabandstandardisethemenu
inawaythatprovidesconsistencywhile
cateringtoregionalsensibilities.The
qualityofingredientsalsovarieswildly
acrossthecountry;paneer,acottage
cheesefoundinmanyPunjabidishes,can
bemoreorlessfattyandsugary.SoRebel
selectedonepaneersupplierandhelped
thecompanyexpandIndia-wideto
feeditskitchens.
Gig-economyfirmssufferhigh
employeeturnover,andRebelisno
exception.Toensurethatkitchenstaff
maketheindividualdishesconsistently
nomatterhowlongthey’veworkedthere,
foodengineerscreatedpre-prepitems
suchasa36-spicebiryaniblend.“That
takesthejudgementout,”Barmansays.
Eachdishhasbeendeconstructedto
createanexacttimeline;forinstance,
workerscanchurnoutdosaseverytwo
minutes.Inateam-buildingexercise,the
cookshuddlethreetimesadayand
scream:“Tastytasty,freshfresh,that’s
whyRebelisbestbest.”

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MUMBAI | FRIDAY, 2 AUGUST 2019 BRAND WORLD 23 <

Pfizer clears the decks

for a fresh start
WithsixbigbrandsthatneverhitthehighnotesinIndia,bundledintoits
venturewithMylan,thepharmamajorlookstoenergiseitsbestsellerlist
SOHINI DAS blockbusters that didn’t quite
MUMBAI, 1 August
PFIZER’S TOP 5 set the Indian drug stores on fire
off its deck, the company

A
merican pharma major
Pfzer is unclogging the
marketing lines for its
band of bestseller drug brands
in the country. Following the
transfer of six old global block-
busters that never really set the
Indian market ablaze to an
entity formed as a result of the
merger between Upjohn
(Pfizer’s off-patent branded
drugs division) and primarily
generic drug maker Mylan, the
company is hoping to flex
some marketing muscle and
galvanize brands that have
worked well in the country’s
price-conscious and competi-
tive drug market.
Pfizer’s Upjohn used to
package old products like
Lipitor and Viagra (whose
patents have either expired or
are about to) with its generic
business. In the Indian mar-
ket, the six brands transferred
into the Pfizer Upjohn Mylan
venture include Lyrica (used
as an anti-neuropathic pain
drug), Amlogard (anti hyper-
tension), Dilantin (anti-
seizure), Viagra (erectile dys-
function), Fumycin
(anti-fungal), Daxid (anti-
depressant).
Pfizer sells around 150
brands in India, with multi-
vitamin Becosules, antacid
brand Gelusil, cough syrup
Corex being among the top ten
contributorstoitstopline.These
brands have managed to hold
their own even as the compa-
ny’s global marquee brands
havewitheredundertheglareof
domestic competition.
Consider the example of
anti-erectile dysfunction brand
Viagra. Launched towards the
end of the 1990’s Viagra was a
SLOW STARTERS
Pfizer’s global blockbusters failed to make much headwayin India
except a fewthatrose to the top, but grewat a snail’s pace
Brand
Manforce (Mankind)
Penegra (Cadila Healthcare)
Viagra (Pfizer)
Stamlo (Dr Reddy's)
Amlodac (Cadila Healthcare)
Amlong (Micro Labs)
Amlogard (Pfizer)
Lyrica (Pfizer)
Maxgalin (Sun Pharma)
Pregalin (Torrent Pharma)
*Market Share (%) as on June 2019, Source: AIOCD AWACS
runaway hit and soon became a
billion dollar brand for Pfizer. It
is also one of the most counter-
feited drugs across the globe.
However, in India Manforce by
Mankind Pharma is the market
leader in the category, with a 56
per cent share of the market.
Viagra at third spot is way
behind with 7 per cent share.
Anti-hypertension drug
BRAND CONTRIBUTION expects to spend more time and
TO REVENUE(%)* money on its profitable brands.
BECOSULES 9.58 Still, sceptics ask, given its fail-
MAGNEX 6.18 ure to leverage the big names,
DOLONEX 4.95 can it really up the ante now?
GELUSIL MPS 4.93 Ranjit Kapadia, senior phar-
ma analyst tracking multina-
MUCAINE 4.46
tional drug firms in India
Source: AIOCD AWACS , *MAT 2019
explained that the fault lay in
the pricing strategy that had
been adopted for the drug in
India. “Pfizer imports Viagra
hereandthusitspricingisnotat
par with the Indian counter-
parts. Also, before 1995, Indian
laws allowed making patented
drugs here if a different process
PHOTO:iSTOCK (other than the patented
process) was used. This led
to copy-cat drugs.”
He believes that the com-
pany has a window of oppor-
tunity here, as it needs to fix a
few minor quibbles to get the
Market topsellingbrandstheirduein
Category Rank Share (%)* the country. Pfizer India,
Erectile dysfunction 1 56 which posted an annual sales
Erectile dysfunction 2 11.6 of ~2,030 crore as on March
Erectile dysfunction 3 7.15 2019 (a 5.5 per cent year on
Anti hypertension 1 19.3 year rise) has also lately
2 17.1 focused on its profitable
Anti hypertension
brands. Although its FY19
Anti hypertension 3 14.1 turnover is lower than its
Anti hypertension 9 4 turnover as on March 2016
Anti neuropathic pain 1 28.3 (~2,072 crore) and has been
Anti neuropathic pain 2 19.5 falling for two consecutive
Anti neuropathic pain 3 13.7 years, profits have grown
consistently. From ~305 crore
inMarch2016to~429crorein
Amlogard, is another example. March 2019, reflecting the
Once one of the most recalled impact of its sharper focus on
brands in India, it has been cast popular brands.
in the shadows by the Kapadia felt that the transfer
Hyderabad-based Dr Reddy’s will not dent Pfizer’s India rev-
Laboratories’s Stamlo, which is enues as these cumulatively
the market leader in the cate- contributed around ~144 crore
gory (amlodipine) with 17 per to its topline, about 4.8 per cent.
cent share. Pfizer’s Amlogard Instead, it could free up
has just 4 per cent share here. resources for brands already
But now with the six global doing well in the country.

slowing economy and a liquidity crisis have should replicate his earlier Gujarat model to
FROM PAGE 1 kept buyers from purchasing vehicles. expedite clearances for industry.
Reflecting the broad-based slowdown, “There should be a special desk to clear
Fed’s hawkish cut... domestic passenger-vehicle sales at Maruti
Suzuki India fell by a sharp 36.3 per cent to
all industrial permissions. A lot of open-
ness and reforms are required,” he said.
Both the indices closed at their lowest lev- 96,478 units in July over the same month a
el in five months. The rupee ended at one- year ago — one of the steepest declines seen
month low of 69.06, down 0.38 per cent — by the market leader in many years. ‘Current tech...
most since May 23 — over the previous Volumes at the Indian subsidiary of the
day’s close of 68.8 against the dollar. Japanese carmaker were dragged down by Does sales fall impact employment?
Most EM currencies weakened against a sharp fall of 38 per cent in mini and com- Of course, there is bound to be a down-
the greenback, with the South African rand pact car models, including the WagonR, stream impact on the number of jobs that
and the Indonesian rupiah dropping 0.9 Baleno, Swift, and Dzire. each car generates. We have started laying-
per cent and 0.7 per cent, respectively. Hetal Gandhi, director (research), off temporary workers, but there has been
OnWednesday,theFedcutinterestrates CRISIL, said passenger-vehicle volumes no action on permanent workers. The
by 25 basis points and said the rate cut was duringJulywereestimatedtohavedeclined Gujarat plant is working at much lower
a mid-cycle adjustment to policy. Market by ~27-31 per cent year-on-year. She said capacity than we had envisaged. Also, you
players said the comments made by Fed the fall was on account of manufacturers must remember that the auto industry is a
Chairman Jerome Powell were confus- aligning production to demand and ratio- large contributor of taxes — that will go
ing.“Sentiment is quite negative at the nalising stocks. down, too.
moment. It’s a bit confusing what Fed Chair Though much smaller than those of
wants to do,” said Andrew Holland, CEO, Maruti Suzuki, volumes at Hyundai Motor Maruti said it would be launching
Avendus Capital Alternate Strategies. India dropped 10 per cent to 39,010 units an e-car in 2020.
The hawkish stance by the Fed couldn’t over the same month last year. Sales at util- Yes, but the sales target we were looking at
have come at a worse time for the Indian ity vehicle market leader Mahindra & before the GST (goods and services tax)
markets, which have hit a downward slope Mahindra, too, dropped 15 per cent to 16,831 reduction is not more than 5,000, and that
since the Union Budget on July 5. The units over last year. is very small. Though I cannot tell you the
benchmark indices have corrected close to The trend was no different at the local price now, I don’t think the EV (WagonR)
6 per cent in one month amid a sharp sell- arms of Toyota and Honda. While dis- will be less than ~10 lakh. Even the electric
off by foreign portfolio investors (FPIs). patchesatHondadroppedbyasharp48per battery for this will have to be imported.
A lack of stimulus to prop up the econ- cent to 10,250 units over last year, at Toyota Our target audience for the product is car
omy, increase in income-tax surcharge on they were down 24 per cent to 10,423 units aggregators. We are not even looking at
FPIs, and taxes on buybacks announced in Honda attributed the drop to the high individual car buyers. Even if I price it at
the Budget have disappointed investors. baselastyear,whichwasinturnproppedup ~8 lakh, tell me how many individuals
FPIs have sold shares worth nearly ~14,000 by the launch of the second-generation would buy it?
crore in the past one month. Amaze, which was in its third month of
launch and garnered high volumes. But your firm is setting up an e-battery

Auto sector slowdown... Honda is witnessing a lot of deferment

in purchases because the July 2019 decline
Auto sales in India have been in reverse was more severe than the June quarter
gear for 11 of the past 12 months because a decline and that too when the industry had
declined in July last year too.
CRISIL has pared its estimate
of India’s gross domestic product
> BS SUDOKU # 2806 growth by 20 basis points to 6.9
per cent for 2019-20, following a
triangulation of downside risks:
Weak monsoon, slowing global
growth, and sluggish high-fre-
quency data for the first quarter.
factory in a JV. What will it be for?
Incentives are being offered to those
who set up mega battery plants here.
Our capacity is very small, I think some-
thing that can power 10,000-200,000 cars
and is meant for use in our hybrid cars,
which require a different battery chemical
compositionfromanEV.Whyshouldafirm
put in big money in setting up a mass lithi-
um battery plant when it knows tech might
change in the next few years? Without mak-
ing batteries in India, how can you have
mass-scale EVs?

Private sector... So, where do you think e-cars will

“The situation is challenging
…How much to believe what the
government is saying … it is a
judgement that one has to make
and decide … that is what we are
doing at L&T.”
NaikaddedIndiahadsofarnot
been able to capitalise on oppor-
tunities arising from the US-China
trade war. “In the trade war
between the US and China, a
number of industries have shifted
SOLUTION TO #2805 Very easy: to Thailand and Vietnam, but why
not to India?” he asked.
Solution “For two years, the US
tomorrow President is talking about moving
industries out of China … how
HOW TO PLAY many have come to India? We
Fill in the grid so were busy with elections, (and) we
that every row, did not do anything, (but) we
every column should do something now,” he
and every 3x3 added. Naik said the government
box contains should now keep its promises
the digits 1 to 9 made during the elections. The
chairman said the prime minister
make a beginning in India?
It will be the big cars. And, we don’t have
any. So, Suzuki and Toyota are working on
some e-cars. Selling big e-cars makes sense
— the owners don’t live in flats, so they
have infra to charge at home. The impact of
the GST reduction is more pronounced on
big cars than in small.
Many say we have to quicken the
EV adoption because of the
growing pollution.
Reports by IIT-Kanpur and TERI have
shown that cars contribute to only 2-3 per
cent of the pollution. In Delhi, it is the sand
that contributes most to the pollution. But
the focus seems to be always on cars as the
big polluters. Though with Bharat Stage VI,
their share will come down even more.
Are you looking at any cost-cutting
measures?
There is only that much you can do in cost
cutting, and that the lack of demand is
reflected in our financials clearly. Demand
has to pick up.

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24
>
MUMBAI | FRIDAY, 2 AUGUST 2019 1

AROUND THE WORLDN

Intradewar,Indiaisonly
majorAsiannationthat’s
growingitsexportshare
RONOJOY MAZUMDAR
Mumbai, 1 August
The only major Asian econo-
mythat’sgrownitsexportshare
since the start of the tariff wars
in 2018 is the one with the
fewest trade links to China.
India’s share of world
exports rose to 1.71 per cent in
the first quarter of 2019 from
1.58 per cent in the fourth quar-
ter of 2017, data compiled by
Bloomberg show. The share of
every other economy among
Asia’s 10 biggest exporting
nations fell in the same period.
Part of the reason for India’s
outperformance is that it’s not
as integrated into global man-
ufacturing supply chains as
peers, which means exporters
are cushioned from rising trade
tensions in the region.
It’s a sentiment that was
flagged by central bank
Governor Shaktikanta Das in a
recent interview.
“India is not part of the
global value chain,” he said.
“So, US-China trade tension
does not impact India as much
as several other economies.”
China is the biggest buyer
of goods from South Korea and
Japan, whose share of world
exports have fallen the most in
Asia. For India, China is the
third-largest market, after the
US and the UAE.
“Our biggest advantage is
that our product basket and
market basket are both quite
diversified,” said Rakesh
Mohan Joshi, a professor at the
Indian Institute of Foreign
Trade in Delhi.
Trade tensions between the
U.S.andChinahavegivenIndia
an opportunity to ramp up
exports to both countries,
according to Ajay Sahai, direc-
tor general and chief executive
officer of the Federation of
Indian Export Organisations.
India’s exports to the US
grew at the fastest pace in six
years in the year ended March
2018, while exports to China
surged 31 per cent, the second
highest annual pace of growth
in more than a decade, data
from India’s Ministry of
Commerce show.
“China is more willing to
give market access to India
than ever before,” said Sahai,
pointing to increased access
for products such as rice,
fruits and vegetables, with
potential for greater exports
of pharmaceuticals and auto-
mobile components to China.
BLOOMBERG
Osama bin
Laden’s son
Hamza killed:
US media
AFP/PTI
Washington, 1 August
Osama bin Laden’s son
Hamza, chosen heir to the
leadership of Al-Qaeda, has
been killed, US media report-
ed on Wednesday citing
American officials.
NBC News said three US
officials had confirmed they
had information of Hamza
bin Laden's death, but gave
no details of the place or date.
The New York Times sub-
sequently cited two US offi-
cials saying they had confir-
mation that he was killed
during the last two years in an
operation that involved the
United States.
Questioned by reporters in
the Oval Office, President
Donald Trump did not con-
firm or deny the NBC report.
“I don't want to comment
on it,” he said.
Both reports suggested
that bin Laden may have been
killed well before the US State
Department announced a $1
million bounty on his head in
February 2019.
The 15th of Osama bin
Laden's 20 children and a son
of his third wife, Hamza,
thought to be about 30 years
old, was “emerging as a leader
in the Al-Qaeda franchise,”
the State Department said in
announcing the reward.
Sometimes dubbed the
“crown prince of jihad, he had
put out audio and video mes-
sages calling for attacks on the
United States and other coun-
tries, especially to avenge his
father's killing by US forces in
Pakistan in May 2011, the
department said.
Jeff Bezos sells $2 bn
of Amazon stock
M
acKenzie Bezos is offi-
cially Amazon.com’s
second-largest indi-
vidual shareholder.
About 19.7 million shares are
now registered in 49-year-old
MacKenzie’s name, according
to regulatory filings detailing
stock sales by her ex-husband,
Jeff Bezos (pictured). The trans-
fer is a rare disclosure for a
divorce whose financial terms
have otherwise been shielded
from the public. A King County,
Washington, judge had signed
an order formalising the sepa-
ration on July 5.
Bezossold968,148sharesfor
about $1.8 billion between July
29 and July 31 as part of his
stock-sale plan, the filings show.
Oil crashes 6% as Trump announces
additional tariffs on Chinese imports
Oil prices plummeted more than 6
per cent on Thursday, declining for
the first time in six days, after US
President Donald Trump said he
would impose an additional 10 per
cent tariff on $300 billion worth of
ChineseimportsstartingSeptember1.
has fallen by $1 billion since
April, when the settlement was
first disclosed. Bezos, 55, the
founderandchiefexecutiveoffi-
cer of the world’s largest online
retailer and web-services com-
pany, retains a 12 per cent stake
worth $109 billion and remains
the world’s wealthiest person.
The value of the transfer
makes it the world’s most
expensive divorce. While Oracle
Corp.’s Larry Ellison has been
through multiple breakups,
none has affected his owner-
MacKenzie’s4percenthold- ship in the software maker.
ing is worth $37 billion, enough Likewise, Google co-founder
to place her 23rd on the Sergey Brin’s stake remained
Bloomberg Billionaires Index, a unchanged after he and Anne
ranking of the world’s 500 rich- Wojcicki divorced in 2015.
estpeople.Thevalueofherstake BLOOMBERG
A prolonged trade war between
the world's two largest economies has
triggered worries about oil demand.
Brent crude, the international
benchmark,fell$3.85,or5.9percent,to
$61.20 a barrel by 1:46 p.m. ET (17:46
GMT),havingdroppedaslowas$61.03.
U.S. West Texas Intermediate (WTI)
crudewasdown$4.09,or7percent,at
$54.49 after sinking to a low of $54.34.
"Oil prices have fallen consider-
ably, today, done in by a one-two
punch of the underwhelming Federal
Reserve easing moves and the
announcement by President Trump
that more tariffs will be placed on
imported Chinese goods," said John
Kilduff, partner at Again Capital
Management. REUTERS

Number of sellers on
govt e-marketplace
double of Flipkart’s
2.1 mn orders worth ~28,000 cr have been placed on GeM
SUBHAYAN CHAKRABORTY
New Delhi, 1 August

T
he Centre’s e-commerce platform, gov-
ernment e-marketplace (GeM), was
launched in 2016 with an ambitious goal
to become the 'Flipkart' — then the byword for
large-scale e-commerce in India — of govern-
ment procurement. Three years and ~28,710
crore worth of transactions later, it has more
than double the number of sellers than Flipkart.
According to official statistics, the portal,
under the commerce and industry ministry, has
259,000 sellers and service providers combined.
Flipkart — currently the second-largest
e-marketplace by gross sales — doesn't sell
services. But it advertises to potential sellers
that 100, 000 sellers showcase their goods
on the platform.
However, GeM is yet to catch up on its basic
task of digitising government transactions, esti-
mated at an annual ~5.5 trillion. The official
target remains ~50,000 crore for 2019-20, and ~1
trillion worth of procurements by 2021.
More than 2.1 million separate orders have
been placed on the portal till now, with 1.7 mil-
lion orders in 2018-19 itself, up from 300,000
orders in the preceding year.
All public sector agencies are mandated to
directly purchase common-use goods and serv-
ices through the online portal. While most
states have signed a memorandum of under-
standing (MoU) with the GeM authority, Uttar
Pradesh, Maharashtra and Madhya Pradesh
remain the largest buyers.
Start-up angle
The number of products on the portal has also
jumped exponentially, now featuring more
than 1,113,000 products, from office stationery
to vehicles. Automobiles, computers and office
furniture are currently the top product cate-
gories. Also, 14,147 separate services, including
transportation, logistics, waste management,
web casting and analytical, among others are
listed on the portal. Cloud computing and man-
agement services, security and catering serv-
ices are the top focus of government buyers.
Many of these services and products have
now been open to the more than 15,000 start-
ups recognised by the Department for
Promotion of Industry and Internal Trade (DPI-
IT), and other start-ups keen to be a part of
this ecosystem. More than 2,500 start-ups are
on board, sources said.
Interested start-ups had been asked to pro-
vide their products and services free of charge for
a fixed period of about two-three months.
Response from buyers on the platform will deter-
mine their long-term approval on the platform.
According to DPIIT officials, the move favours
smaller start-ups over those that have been in the
news for their marquee fund-raising.
After an increasing number of buyers com-
plained of being sold faulty or decoy products by
distributors or re-sellers, the government part-
nered more than 100 major brands such as HP,
WHO’S SHOPPING ON GeM
BJP states major buyers
Stateswith highest procurementin 2018-19
(in ~cr)
Uttar Pradesh 2,252
Madhya Pradesh 1,652
Maharashtra 1,226
Gujarat 1,028
Chhattisgarh 838
Ministries on buying binge
Central ministrieswith highest procurements
in 2018-19 ( in ~cr)
Home 2,626
Defence 2,299
HRD 1,184
Communications 983
Power 866
Source : Government e-Marketplace
Infosys, TCS and Wipro, etc., senior officials said.
Other companies such as Godrej also figure on
the list. Cases of fraud dealerships and re-sellers
are now taken up by the original equipment
manufacturer concerned, officials added.
MSME push
Expandingtheoutreachofmicro,smallandmedi-
um enterprises (MSME) on the platform remains
the first priority, a senior GeM official said.
The government has started offering cred-
it facility to MSMEs on GeM through the Trade
Receivables Electronic Discounting System
(TReDS), seen as a step to woo small firms.
It is a bill discounting service supported by
Small Industries Development Bank of India
for pre- and post-shipment of products. As
small enterprises find it difficult to deal with
payment delays, GeM is ensuring that this issue
is resolved for MSMEs, which can now avail
the TReDs facility. Currently, 44,317 such firms
doing business on the portal.
The GeM platform is also being used to place
orders for World Bank projects. MoUs have also
been signed with 12 banks to facilitate pay-
ments. The platform is also closely monitored
by the Prime Minister's Office, with the Cabinet
Secretary holding a review meeting every three
months with the committee of secretaries.

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