MONDAY, 18 NOVEMBER 2019

20 pages in 1 section www.business-standard.com

MUMBAI (CITY)
~9.00
VOLUME XXIV NUMBER 67

How markets performed last week

% chg over Dec 31, ‘18
Index on *One- --————————————————————————————————————————————————————————

Nov 15, ‘19 week Local currency in US $

Sensex 40,357 0.1 11.9 8.7
Nifty 11,895 -0.1 9.5 6.4 COMPANIES P2 COMPANIES P2
Dow Jones 28,005 1.2 20.1 20.1
Nasdaq
Hang Seng
8,541
26,327
0.8
-4.8
28.7
1.9
28.7
1.9 FMCG, RETAIL STAND HOME PRICES WILL REMAIN FLATTISH
POLES APART IN Q3 FOR ANOTHER YEAR:PIROJSHA GODREJ
Nikkei 23,303 -0.4 16.4 17.4
FTSE 7,303 -0.8 8.5 9.8
DAX 13,242 0.1 25.4 20.9
*Change (%) over previous week Source: Bloomberg PUBLISHED SIMULTANEOUSLY FROM AHMEDABAD, BENGALURU, BHUBANESWAR, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI (ALSO PRINTED IN BHOPAL), NEW DELHI AND PUNE

GOTABAYA RAJAPAKSA
ELECTED PRESIDENT
OF SRI LANKA
Deposit insurance may Corporate India’s
Q2 profit at 15-yr
Sri Lanka’s former wartime defence
minister GOTABAYA RAJAPAKSA, part of the
country’s most powerful political dynasty,
has been elected president, raising fears
about the future of human rights and
religious harmony in the region. Rajapaksa,
be hiked to ~5 lakh
New scheme likely for wholesale at ~25L; proposals could figure at RBI board meet
low on telco losses
the candidate for the SLPP, the Sinhalese-
Buddhist nationalist party, claimed an easy RAGHU MOHAN
COMBINED EARNINGS NET SALES DOWN
victory in the presidential election held Mumbai, 17 November
RBI turns down
on Saturday, which had PLUNGE 68% YoY TO 0.8% YoY — WORST

B
been fought against the ank deposit insurance in the coun-
backdrop of some of the try may be split into two categories,
worst political instability with retail cover being raised to
and violence the
country has seen
~5 lakh, from the current level of
~1 lakh; and a new scheme being introduced
since the end of for wholesale depositors at ~25 lakh.
the civil war a When given effect, it will be the first
decade ago. upward revision in deposit insurance after
1993. The last reset was on May 1, 1993, after
Page 12 the Bank of Karad went down in the securi-
China, Sri Lanka join hands ties scam of 1992. The reset prior to this at
>
to take on IFC ~30,000 was given effect to on July 1, 1980.
A well-placed regulatory official said he
> Debt trap and ethnic divide await
“more than hoped the Ministry of Finance
Gotabaya Rajapaksa will hike the deposit insurance limit. It is
long overdue”, but added he was not aware if
the new scheme for wholesale depositors
COMPANIES P13 would also be announced along with the
Bharti Airtel withdraws hikeindepositinsurance(asweknowitnow)
bid for RCom assets
to ~5 lakh. It was, however, made clear that “it
isunlikelythatthepremiumpaidper~100by
Telecom operator Bharti Airtel has banks for deposit insurance to the Deposit
withdrawn its bid to purchase assets of InsuranceandCreditGuaranteeCorporation
Reliance Communications after terming
the move of committee of creditors to
(DICGC) at 10 paise will be raised so as not to
increase their burden”.
extend the bid submission deadline on It was pointed out that the matter might
the request of Reliance Jio as figure when the Reserve Bank of India’s
“extremely unfair” and “biased”. (RBI’s) central board met on December 13 in
Bhubaneswar. There are two other proposals
which may be up for consideration by the
Ministry of Finance. One, that banks be
ON allowed to obtain additional deposit insur-
ance — over and above the proposed
MONDAY enhanced limits — be it for individuals or
SPECIALS institutions by payment of an additional
premium. Two, that the DICGC — a wholly-
BANKER’S TRUST: owned subsidiary of the RBI — create a
banks’ plea to relax
June 7 circular ~36,500 CRORE SHOWING IN 3 YEARS
With no resolution in sight for
nearly ~3 trillion of stressed assets,
KRISHNA KANT
Mumbai, 17 November
NET SALES: FALLING
banks seem to be reaching a OFF THE CLIFF
dead-end with respect to Trend in quarterly net sales growth for
India’s listed companies, excluding listed firms (YoY change in %)
inter-creditor agreements signed financials and oil and gas, reported a
for these loans. Sources said combined net loss for the first time in
banks had sought some relaxation at least 15 years, while their net sales
from the RBI on timelines and contracted for the first time in four
DEPOSIT modalities for reaching a years in the July-September quarter
resolution under the regulator’s (second quarter, or Q2).
INSURANCE January 1, 1976 June 7 circular on prudential While the bottom line slipped into
AT A GLANCE ~20,000 framework for resolving stressed the red due to record losses posted by
assets. HAMSINI KARTHIK writes 4 > mobile operators
January 1, 1968 July 1, 1980 during the quarter,
~5,000 ~30,000 Opinion the decline in sales
PAGE 13
April 1, 1970 May 1, 1993 premium (RBP) for deposit insurance. If is attributed to
EDIT: SAVING demand contraction
~10,000 ~1,00,000 implemented, it could lead to a situation
wherein depositors may opt to move their THE TELECOM in the domestic
MAJOR CUTS IN
deposits to safer banks if the RBP paid out is SECTOR economy. This, PRE-TAX PROFITS
PREMIUM RATE made public; or gets leaked. analysts say, also Trend in quarterly net sales growth for
listed firms (YoY change in %)
PER DEPOSITS (paise per ~100)
It may be recalled that RBP found men-
tion in the Jagdish Capoor Report in 1999,
clouds the earnings outlook for the
forthcoming quarters.
Jan 1, Oct 1, July 1 April 1, April 1, and later in the Committee on Credit Risk Listed companies, excluding
1962 1971 1993 2004 2005 Model (2006) set up by the DICGC. The most financials and oil and gas (whose
5 4 5 8 10 recent one — the Jasbir Singh Committee earnings are volatile), reported a
(2015) on Differential Premium System for combined net loss of ~16,000 crore
Banks — was discussed at the central bank’s in Q2 of 2019-20 (FY20), against a
separate reserve to protect the interests of board meeting held on October 16, 2014. net profit of ~73,000 crore during
depositors of banks which fail due to frauds
like in the case of the Punjab & Maharashtra
It was decided then that “DICGC could
explore the possibility of putting in place a
the same period last year. This is
the first time in many years where
Co-operative Bank (PMC Bank) and the differentialpremiumwithintheco-operative companies (excluding energy and
PenCo-operativeUrbanBank.Itcouldnotbe sector linking it to governance and risk pro- financials) ended a quarter with a
Note: Net sales is net interest income in case of
ascertained if North Block and the central file of co-operative banks”. There was little loss on a combined basis. banks and non-bank lenders
bank will examine the concept of risk-based forward movement on this subject until now. Turn to Page 13 > Source: Capitaline

All you wanted to know

about banking frauds 10 >

How FedEx cut its tax bill to $0

Bankers feel inhibited talking about
frauds for fear of loss of reputation. Large
frauds usually come to light after 54 HIGHER INCOME GROUPS
months. TAMAL BANDYOPADHYAY writes SPENT LESS AFTER NOTE BAN The company, like much of Corporate America, has not made good on its
POLITICS & PUBLIC Top income earners cut down sharply on their
AFFAIRS: Murkier expenditure, dragging consumer spending down promised investment surge from President Trump’s 2017 tax cuts
beneath the surface 16 > for the first time in India in over four decades,
PF trusts allegedly bent rules to leading to a decrease in income inequality.A class- JIM TANKERSLEY/PETER EAVIS & the effects of the tax cuts were
wise analysis of the National Statistical Office’s BEN CASSELMAN undercut by uncertainty from
invest ~4,122 crore in crisis-hit DHFL; consumer expenditure survey showed the gap between the Washington, 17 November Mr. Trump’s trade war, which is
parked 99% of corpus in three NBFCs. rich and the poor coming down in the six-year period till 2017-18. slowing global growth and
VIRENDRA SINGH RAWAT writes SOMESH JHA writes 20 > In the 2017 fiscal year, FedEx prompting companies to freeze
owed more than $1.5 billion in projects. Other economists say
STRATEGY: taxes. The next year, it owed the fizzle is predictable because
nothing. What changed was the high tax rates were not holding
Chip of a
new block 15 >
Intel is working
NEP to be umbrella plan Trump administration’s tax cut
— for which the company had
lobbied hard.
back investment.
“It did provide a short-term
boost, but it wasn’t the big

for energy ministries

on the next set
of innovations.
NEHA ALAWADHI
writes
THE SMART INVESTOR:
Robust outlook for life insurers,
but valuations very pricey
Good growth in high-margin products,
persistency, and reach augur well; risk-
averse investors could buy the
dips. SHREEPAD S AUTE writes
PERSONAL FINANCE:
Golf gear to tee off
in style 14 >
Moving up the ladder as a
professional requires the
very best equipment.
NAMRATA KOHLI writes
SHREYA JAI & SANJEEB MUKHERJEE
New Delhi, 17 November
The National Energy Policy (NEP),
being drafted by the NITI Aayog, will
18 > become the guiding policy for all
energy ministries.
Encompassing regulations for
coal and mines, renewable energy, oil
and gas, and the environment, the
NEP will be put up for the Union
Cabinet soon.
This could be the first time that a
single integrated policy would cover
half a dozen ministries.
People involved in the drafting
said all energy ministries and
also energy-consuming departments
would have to follow the NEP in for-
mulating their own policies and reg-
READY RECKONER
| NITI Aayog’s National Energy
Policy to be overarching guiding
policy for all energy, energy
consuming sectors/ministries
| To focus on clean energy,
reduce fossil fuel dependence
| Suggestions hint at no reduction
in domestic coal production
| Long-term plan suggestions till 2030
| Energy framework aimed at
global investors
ulations. “The manner in which each
department designs its policy should
be consistent with that of others,” said
a government official. Turn to Page 13 >
The public face of its lobby-
ing effort, which included a tax
proposal of its own, was FedEx’s
founder and chief executive,
Frederick Smith, who repeated-
lytooktotheairwavesto cham-
pion the power of tax cuts. “If
you make the United States a
better place to invest, there is
no question in my mind that we
would see a renaissance of cap-
ital investment,” he said on an
August 2017 radio show hosted
by Larry Kudlow, who is now
chairman of the National
Economic Council.
Four months later, President
Trump signed into law the $1.5
trillion tax cut that became his
signature legislative achieve-
ment. FedEx reaped big sav-
ings, bringing its effective tax
rate from 34 percent in fiscal
year 2017 to less than zero in
fiscal year 2018, meaning that,
overall, the government tech-
nically owed it money. But it
FedEx’s financial filings show that the law has so far saved it at
least $1.6 billion. Its financial filings show it owed no taxes in
the 2018 fiscal year overall
past 10 years.
As for capital investments,
the company spent less in the
2018 fiscal year than it had pro-
jected in December 2017,
before the tax law passed. It
spent even less in 2019. Much
of its savings have gone to
reward shareholders: FedEx
spent more than $2 billion on
stock buybacks and dividend
increases in the 2019 fiscal
year, up from $1.6 billion in
2018, and more than double
the amount the company
spent on buybacks and divi-
dends in fiscal year 2017.
A spokesman said it was
unfair to judge the effect of the
fall by 10 points or more. Nearly
three dozen, including FedEx,
saw their tax rates fall to zero or
reported that tax authorities
owed them money.
From the first quarter of
2018, when the law fully took
effect, companies have spent
nearly three times as much on
additional dividends and
stock buybacks, which boost a
company’s stock price and
market value, than on
increased investment.
The law cut the corporate
rate to 21 percent from 35 per-
cent, and allowed companies
to deduct the full cost of new
equipment investments in the
response that many people
expected,” said Aparna
Mathur, an economist at the
conservative American
Enterprise Institute, who
recentlyconcludedthatthe2017
law has not meaningfully
changed investment patterns in
America.
Mr. Smith, 75, a former
Marine who built FedEx from a
small package delivery service
into a global logistics giant, was
no stranger to pressing for low-
er taxes. He tried, without suc-
cess, to get President Barack
Obama to cut the corporate rate.
ButwithMr.Trump’sascension,
the corporate chief began a one-
man campaign to convince
Washington that now was the
moment. He met with the pres-
ident-elect at Trump Tower on
November 17, just days after the
election, and appeared along-
side the president at official
events. In a conference call with

Coming soon: UPI, mobile wallets, did not increase investment in

new equipment and other
assets in the fiscal year that fol-
tax cuts on investment by look-
ing at year-to-year changes in
the company’s capital spending
year that they make them.
Those cuts stimulated the
American economy in 2018,
analysts the month after Mr.
Trump’s election, Alan Graf,
FedEx’s chief financial officer,

credit cards for paying taxes

lowed, as Mr. Smith said busi- plans. helping to push economic called the prospect of a 20 per-
nesses like his would. “FedEx invested billions in growth to 2.5 percent for the cent corporate tax rate “a
Nearlytwoyearsafterthetax capital items eligible for accel- year and fueling a boost in mighty fine Christmas gift.”
law passed, the windfall to cor- erated depreciation and made hiring. Business investment Mr. Smith teamed up with
THE FUTURE IS DIGITAL
IMAGING: AJAY MOHANTY
DILASHA SETH porations like FedEx is becom- large contributions to our rose at an 8.8 percent rate in his competitor, David Abney,
New Delhi, 17 November ing clear. A New York Times employee pension plans,” the the first quarter of 2018, and the chairman and chief execu-
Popular e-payment methods in October* analysis of data compiled by company said in a statement. was nearly as strong in the sec- tive of UPS, to push for a tax
Paying your income-tax (I-T) may soon % of total Bank Others Capital IQ shows no statistically “These factors have temporari- ond quarter.But the impact overhaul, including jointly writ-
become as easy as swiping a card at a transactions transfer 0.79 meaningful relationship ly lowered our federal income dwindled quickly. ing an op-ed in TheWallStreet
shop or a restaurant. The government is on Razorpay 1.67 between the size of the tax cut tax, which was the law’s inten- In the summer, the econo- Journal.
planning to extend the electronic modes platform that companies and industries tion to help grow G.D.P., create my grew at just 1.9 percent and “Fred and I even jointly had
of tax payment to its own payments plat-
Wallet 1.90 received and the investments jobs and increase wages.” business investment fell 3 per some meetings about this with
form, Unified Payments Interface (UPI), Netbanking 9.48 UPI they made. If anything, the FedEx’s use of its tax savings cent, including a 15.3 per cent key people, and we were both
credit cards of banks, or even a mobile 50.49 companies that received the is representative of corporate plunge in spending on factories pushingprettyhard,”Mr.Abney
wallet like Paytm. Card 35.67 biggest tax cuts increased their America. Companies have and offices. Over the spring, said in a recent interview.
In line with the Digital India initia- *on Razorpay’s platform Source: Razorpay capital investment by less, on alreadysavedupwardof$100bil- companies spent less on new FedEx spent $10 million on
tive, the move is aimed at improving average, than companies that lion more on their taxes than investments, after adjusting for lobbying in 2017, in line with
compliance by simplifying the process working on this. Today you can pay only let,” said a government official. “We are got smaller cuts. analystspredictedwhenthelaw inflation, than they had in the previous spending, with much
of e-payment of taxes, which has, so far, through netbanking and debit cards. going to define ‘electronic payments’, FedEx’s financial filings was passed. Companies that winter. of it focused on tax issues,
been limited to only netbanking and the We would definitely like to use UPI. which could be a wallet, a credit card or show that the law has so far make up the S&P 500 index had Overall business investment according to federal records. Its
debit cards of a handful of banks. This may be allowed as soon as possible,” UPI,” he added. UPI is an instant, real- saved it at least $1.6 billion. Its an average effective tax rate of during Mr. Trump’s tenure has team pushed hard to shape the
Confirming the development, he said. time payment instrument developed by financial filings show it owed 18.1 percent in 2018, down from now grown more slowly since bill behind the scenes, meeting
Revenue Secretary Ajay Bhushan “The idea is to give more electronic the National Payments Corporation of no taxes in the 2018 fiscal year 25.9 percent in 2016, according the tax cuts were passed than regularly with House and
Pandey told Business Standard that payment options for tax payment. If it India. It works by instantly transferring overall. Company officials said toananalysisofsecuritiesfilings. before. Senate committee staff who
UPI as a mode of tax payment would be is a small tax amount, it may be conven- funds between two bank accounts on FedEx paid $2 billion in total More than 200 of those compa- Some conservative econo- were writing the provisions.
introduced as soon as possible. “We are ient for people to even use a mobile wal- a mobile platform. Turn to Page 13 > federal income taxes over the nies saw their effective tax rates mists and business leaders say ©2019 The New York Times News Service
2 COMPANIES
>
MUMBAI | MONDAY, 18 NOVEMBER 2019 1

IN BRIEF

FESTIVE
Homecoming costs Mittal ~49,670 cr
ISHITA AYAN DUTT Bankruptcy Code (IBC), a promoter
STORYBOARD High-margin plates produced by

ADVERTISING Kolkata, 17 November of an insolvent company is not eligi-

ble to bid for another insolvent com- SO FAR
its plant are used in submarines.
Additionally, it has a pellet-making

VOLUMES W ~42,201.77 cr
hen ArcelorMittal in pany capacity of 20 million tonnes, split
October last year revised its “It’s an expensive buy but getting over 8 million tonnes in Visha-
bid for debt-laden Essar an asset like Essar is virtually impos-
resolution amount khapatnam and 12 million tonnes in
DECLINE Steel to ~42,000 crore, steel prices
in the domestic market were peak-
sible. The asset is top of the line,”
said Ankit Miglani, promoter of
~7,469 cr
dues on account of Uttam
Paradip. Currently 6 million tonnes
is operational in Paradip but last-
ing, with the benchmark hot-rolled Uttam Galva Steels. mile funding would take it to 12 mil-
coil price hovering close to ~46,000 According to Miglani, the addi- Galva Steels and KSS Petron lion tonnes.
India’sfestiveseasonstretchingfromthefirstweekendof
AugusttillendofOctoberisanimportantindicatorof a tonne. tional payment on account of Uttam FUTURE The acquisition would immedi-
consumptionintheeconomy.Ananalysisusingdatafrom Thirteen months later as the Galva and KSS dues was a painful ately make the combine of
theBroadcastAudienceResearchCouncil(BARC)andTAM cloud over the deal is clearing, prices cover charge to enter India. “Though ~18,649 cr ArcelorMittal and Nippon, the joint
have tumbled by close to 25 per cent. I am grateful, it’s not fair to capex over six years venture partner, the fourth-largest
AdEx,donebymediaagencyveteranShripadKulkarni,
In February last year, when the ArcelorMittal.” player in India. “Arcelor and Posco
showsthatadvertisingvolumesinkeycategoriessuchas
world’s largest steel maker threw its ICRA Assistant Vice-President ~1,700-2,500 cr have tried for more than a decade to
print,television,radioandoutdoorhasdeclinedsharply hat in the ring for Essar, steel prices (corporate sector ratings) Ritabrata cost of acquiring slurry set up a steel plant in India.
duringtheperiodthisyearoverlastyear.Kulkarniattributes were at ~43,000 a tonne, much high- Ghosh, however, pointed out that pipeline in Odisha if Greenfield projects come with their
thedeclinetosmallercompaniesoptingnottoadvertisein er than its current level of ~34,000- Essar had an effective steelmaking own sets of challenges,” said Ghosh.
it decides to
aslowdown.Healsosaysthatlargercompaniesarerationa- 35,000 a tonne, and the bid amount capacity of 9.6 million tonnes. ArcelorMittal, however, will have
lisingtheiradspends.Half-pageads,hesays,havedoubled lower at ~35,000 crore. “Even if the payment for Uttam to make capital expenditure once it
intermsofrateofgrowthyear-on-year,whilefull-pageads But the bid submission set off a Galva and KSS at ~7,469 crore is million for the third quarter, which Indian steel market had grown 17- takes over. Its resolution plan has
havedeclinedby18percentandsmalladshavefallenby28 chain of court battles and finally loaded, the cost increases to around happened to be the second straight fold compared with the growth of indicated a capital expenditure plan
percentfromayearagoinprint. COMPILED BY VIVEAT SUSAN PINTO ended in a revised bid of ~42,000 ~50,000 crore. The per tonne cost of quarter in the red. According to four times for the world, including of ~18,697 crore, to be implemented
crore. In the interim, the steel cycle acquisition would be $730 per tonne, reports, it had idled a series of plants China. in two stages over six years.
AMOUNT OFAD SPEND DECLINE INAD SPEND BY turned. Add to it, the ~7,469 crore which compares favourably with in Europe and recently said it would Even in the worst of times, steel Ghosh, however, said the imme-
RIDING ON FESTIVE VOLUME IN AUG-OCT 2019 that Arcelor had to pay to become Bhushan Steel at $886 per tonne and retrench nearly 1,000 workers and demand is growing by 5-6 per cent, diate capex requirement in the near
eligible for the bid under India’s Bhushan Power (yet to be complet- shut down its Saldanha plant in said Ghosh. term could be around ~3,000 crore,
SEASON ANNUALLY (~ cr) (% YoY growth)
insolvency law, and it adds up to ed) at $925 per tonne,” he said. South Africa, which has lost its com- Mishra also added Essar’s Hazira which would help Essar bring down
Print -12 nearly ~49,670 crore. The high value of stressed steel petitive advantage. plant was a world-class asset. He had operating costs, start operations at
TV -6 ArcelorMittal didn’t comment. assets also reflects the uncertainty of Industry sources, however, point- advised Essar Steel for a year. the previously won Odisha iron ore
Under the law, Arcelor had to pay putting up greenfield projects in ed out that the Indian market was The last two years have been good mine, and fully operationalise the
18,750 Radio -20
25,000 Aug-Oct*
~7,469 crore to the financial credi- India, apart from the cost, which is different. It is a growing market with for Essar Steel. In 2018-19, Ebidta 12-million-tonne Paradip pellet
Aug-Dec Outdoor -8 tors of Uttam Galva Steels and KSS $1 billion for a million-tonne capac- a low per capita consumption of (earnings before interest, tax, depre- plant.
*Digital 15 Petron — both defaulting firms — ity. steel at 70.9 kg against the global ciation, and amortisation) stood at Also, it would have to settle issues
75% of total festive advertising done Digital's rate of growth between August
to be considered eligible for Essar The acquisition, however, is average of 224.5 kg. ~4,400 crore; in the first quarter of around the Odisha slurry pipeline.
between August and October and October 2019 has halved Steel. At the time of paying the being taken to a logical end at a time Sanak Mishra, who was chief this year, it was ~1,100 crore and in Sources indicated that it could
Uttam Galva debts, ArcelorMittal when ArcelorMittal, which produces executive officer of ArcelorMittal’s the second quarter ~750 crore. extend the lease or a buyout was also
DECLINE IN PRINT FESTIVE DECLINE INTVFESTIVE had said it was considering taking around 5 per cent of global steel, has India projects when it was still pur- Essar has an effective steelmak- possible if debts were paid. The
ADVOLUMES (% YoY drop) ADVOLUMES (% YoY drop) ownership of the company. forecast a contraction in demand. suing its greenfield plants, said in ing capacity of 9.6 million tonnes pipeline’s debts could be in the
Under the Insolvency and Arcelor reported a net loss of $539 the past 50 years up to 2018, the with a rich product profile. region of ~2,000-2,500 crore.
Colcm -11.60 Duration -20.0
No.ofads -12.20 Frequency -17.0

FMCG, retail stand poles apart in Q3 MMT raises focus on

Col cm stands for column centimetre Analysis: Shripad Kulkarni;
Data: TAM AdEx; BARC

‘Golden age’ for India’s civil homestay segment

Outlook for staples FMCG MARKET DOWN…
aviation sector: IndiGo chief
NEHA ALAWADHI
bleak, discretionary % Growthrate (YoY) New Delhi, 17 November
Volumegrowth Price-ledgrowth
Withstrongfundamentals,India’scivilaviation confident To compete in a growing market, online trav-
sectorisinits‘goldenage’andthereisalso Total value growth el agency MakeMyTrip is raising focus on its
healthycompetitionamongdomesticcarriers, VIVEAT SUSAN PINTO 13.4 10.0 7.3 3.0 homestay segment, as more and more group
IndiGoCEORonojoyDutta(pictured)hassaid. Mumbai, 17 November travellers prefer booking such accommoda-
Interestingly,thecountry’scivilaviationsector 3.6 tions on a holiday.
hasbeenexperiencinglowergrowthintraffic Companies selling everyday 3.8 Classified as ‘Villas and Apts’ (villas and
comparedtopreviousyearsandtherehasalsobeensoftnessin household items and discretionary 9.9 3.4 apartments) on the MakeMyTrip (MMT) plat-
faresinOctober,accordingtoindustryexperts.Thetrafficgrewjust products have differing points of 6.2 form, the firm has around 170,000 properties
1.18percentinSeptember,asperthelatestavailableofficialdata. view on performance of their cate- 3.9 1.0 2.0 listed globally, of which 20-25,000 are in India.
IndiGo,ownedbyInterGlobeAviation,isthecountry’slargest gories in the October-December This number is likely to increase.
Q4FY19 Q1FY20 Q2FY20 Q3FY20*
airlinewithamarketshareof48.2percentinSeptember.Whileac- (Q3) period. “We’re seeing one or two mega trends in
knowledgingthatthereareproblems,includinghightaxesonjet While the outlook remains *Estimated figures Source: Nielsen/industry the (travel) market. One or two big vacations
fuel,Duttasaidtherearehugeopportunitiesgoingforward. PTI< bleak for staples or fast-moving are being replaced by four smaller vacations.
consumer goods (FMCG) owing to RETAIL And, the profile of travellers is becoming
14.0
14.0
13.0
13.1

Essar Steel, Adani, NCLAT rejects PepsiCo unseasonal rains and slowdown in
MARKET UP…
wider. It is no longer young people but also
12.0

12.0
9.0

rural areas, consumer discre- senior professionals, women solo travellers

plea for release
10.4

GAIL, HPCL buy bulk

10.3
10.0

7.0

tionary companies like multiplex and so on. Therefore, the choice that cus-
6.5
6.1

SSG of keyfashion
of its machinery
5.2
5.2

of Reliance gas players, food service operators, and tomers are demanding is becoming wider,”
4.1

retailers (% growth
4.0
3.7
3.5

fashion retailers remain confident. says Vipul Prakash, chief operating officer.
3.0

rateYoY)
2.0

Essar Steel, Adani Group and TheNationalCompanyLawAp- Mohit Malhotra, chief execu- Sometimes, he
1.0

state-owned GAIL have pellateTribunal(NCLAT)hasrej- tive officer, Dabur India, said, Q4FY19 Q1FY20 adds, the reason to A growing number,
bought majority of natural gas ectedthepleaofPepsicoIndia “This seems to be a long and pro- Q2FY20 Q3FY20* choose a homestay over millennials in
from Reliance Industries’ seekingreleaseitsmachinery tracted slowdown. Consumer a hotel could be eco- particular, is looking
-4.4

-1.0

newer fields in the KG-D6
block at an indicative price of
$5.04 - 5.16 per unit, sources
said. Essar Steel picked up 2.25
million standard cubic meters
per day or about half of the
available volumes in the day
long auction conducted on
November 15. PTI<
Signature Global to
invest ~400 cr in
2 housing projects
RealtyfirmSignatureGlobalon
Sundaysaidthefirmwould
invest~400croretodevelop
twoaffordablehousingprojects
inGurugramunderaHaryana
governmentscheme.TheCen-
trehasreducedGSTonaffor-
dablehousingto1percentonly
andisprovidinganadditional
deductionof150,000on
interestpaidonhomeloans
underincometaxlawforflats
pricedupto~45lakh,aspartof
itseffortstoboostproperty
demand. PTI<
fromOceanicTropicalFruits,
whichisundertheinsolvency
process.Pepsicohadmoved
theNCLATagainsttheorderpa-
ssedonMay28bytheChennai
BenchoftheNCLTdenyingper-
missiontoPepsiCototakeback
itsmachinerythatwaslyingat
OceanicTropicalFruits. PTI<
Kia to expand sales
network to over
300 touchpoints
AutomajorKiaMotorsplansto
expanditssalesnetworktoover
300touchpointsinIndiabythe
endofthecurrentfinancialye-
ar,asitlookstobolsterpresence
inareaswhereitisnotthatwell
representedcurrently,asenior
firmofficialsaid.Thefirmaims
toaddsalesoutletsinsmaller
citiesinordertobenearertoits
prospectivecustomers.This
wouldalsohelpthefirmrakein
additionalnumbersasitreadies
todriveinitssecondproductin
thecountryinFebruary. PTI<
incomes have gone down. There
is a severe liquidity crunch in the
market, coupled with unseasonal
rains that have impacted farm
incomes.”
Malhotra was speaking to ana-
lysts last week when he gave his
outlook for the future. But most
other CEOs from FMCG companies
endorse this view, saying these are
challenging times for the market.
Sumit Malhotra, managing
director, Bajaj Consumer Care,
said, “The growth engine for the
FMCG market used to be rural
areas. However, for the first time,
rural growth has been negative (in
Q2). Urban has been outgrowing
rural. And if this continues, we will
see a long-term period of flat
growth for the overall market in
the coming quarters.”
Research agency Nielsen has
already lowered its growth forecast
for the FMCG market in the
October-December period to low
single-digit from mid-single-digit
in July-September.
Food service operators have a
different story to tell though.
Estimated figures;
Source: Analysts; SSG is
same-store sales growth BrandFactory
Executives at Westlife Develop-
ment and Jubilant FoodWorks,
which run McDonald’s and
Domino’s stores, respectively, said
the month of October that coin-
cided with the festive period was
strong for them. The momentum
has continued into November,
they added, led by a focus on value
meals and online deliveries.
Both players reported same-
store sales growth (SSG) in the 5-7
per cent brackets in Q2 in an oth-
erwise weak market. The trend was
no different for multiplex opera-
tors such as PVR and Inox who
reported strong double-digit gro-
wth in footfalls in Q2, increasing
box office as well as food and bev-
erage revenues in the period.
Fashion retailers such as Brand
Factory, Pantaloons, Central, and
Westside, too, saw SSG in Q2 in the
region of 6-14 per cent, the highest
in three quarters. However,
Central Pantaloons Westside V-Mart ShoppersStop
Shoppers Stop and V-Mart saw a through our McSavers programme.
weak SSG in Q2. According to We also focused on different day
experts, this happened because of parts such as mornings and even-
Shoppers Stop’s strategy shift and ings with breakfast and evening
V-Mart’s small town focus affect- meals, improving sales growth.”
ing growth. Ashish Dikshit, managing
“During a slowdown, people director, Aditya Birla Fashion and
escape from hardship, watching Retail, which runs the Pantaloons
movies or shopping for low-ticket chain, said, “The fundamental
discretionary items. This explains shift from unbranded to branded
why the multiplex operators have wear remains. Fashion retailers
done well in Q2, so do the food have also improved their go-to-
service operators and fashion market strategies, using both
retailers, who focus on affordable online and offline channels to
wear,” said Abneesh Roy, execu- drive sales. All this is contributing
tive vice-president, research (insti- to growth in the market.”
tutional equities), Edelweiss. “I see Most fashion retailers have also
these companies continuing to do launched labels in the October-
well in Q3,” he said. December period, targeting mass
Amit Jatia, vice-chairman, as well as premium consumers.
Westlife Development, said, “The- Some have refurbished their stores
re was a concerted strategy by us to to lure consumers. Multiplex oper-
understand what we could do to ators have a strong line-up of films
ride out of the slowdown. So, the in Q3 to keep the pace of growth
emphasis was on value meals going.
nomics. Instead of for alternatives to
booking, for example, hotel bookings
two rooms for a family when planning
of six, people prefer a holiday
booking a more luxuri-
ous villa or apartment that they can have to
themselves and also pay much less.
MMT has to ensure that basic security and
cleanliness are provided by a homestay. Other
amenities can be discussed by the traveller
with the person booking the accommodation
directly. “We try to provide as honest an
assessment of what the property facilities
are...but, as you are looking at a property or
homestay, you can directly reach out to the
host through the app and have your questions
answered,” explains Prakash.
Last month, a survey by the Gurugram-
based entity had 48 per cent of the 3,000
respondents saying they were most likely to
book alternative accommodation — villas,
apartments, homestays, hostels, cottages,
farm stays — for their next trip. The trend is
led by millennials (roughly, those born
between 1981 and 1996), who show higher
propensity for doing this. While US-based
Airbnb clearly leads the homestay segment,
the other big player in online travel,
Booking.com, has also been adding alternative
accomodations to its listings.

‘Home prices will remain flattish for another year’

Godrej Properties has lined up over a dozen new housing launches and wishes In our view, that counter- the investments we are doing, important that the sector is
to buy distressed projects from other developers. PIROJSHA GODREJ, chairman, cyclical investment strategy the quality and so on, we do brought back to life.
tells Raghavendra Kamath the company is following a counter-cyclical strategy when others are not investing believe there should be some
when the realty sector is going through a prolonged slowdown. Edited excerpts: makes a lot of sense. When a sec- premium for our projects. Do you think the real estate
tor is going through a bad period, market will go from bad now to
You recently talked about scaling We are seeing it for the opposite it is not so bad for companies How many new launches in the worse?
up the business and increasing side because for most players in which have a good track record. remainder of the year? It is going to be worse before it
the market share. How do you the industry, the cost of funds The absolute growth and market Thirteen, fourteen. It includes gets better. It will be six to 12
plan to do that? have gone up and the ability to share of the top ten players is new projects and new phases in months before it bottoms out.
More than half the real estate raise it has been challenging. quite decent. existing projects.
market in the country is in four But, our cost of funds has been Has the liquidity scenario for
cities we are in — Mumbai, Pune, the same, at eight per cent. We What are you doing to get buyers That would be the highest in the developers in general improved,
NCR (National Capital Region) believe it is an opportunity to who are sitting on the fence? history of the company? after the NBFC liquidity crunch?
and Bengaluru. The market is so grow the company, to take over We have been realistic on pric- Yes. No, it is still pretty bad. The
fragmented, with 10,000 devel- projects from other players. We ing. The markets are not in a economy is going through a
opers in the country; indi- have strengthened the state to absorb price rises. We Your take on the fund announced tough patch and until that starts
vidual developers’ share balance sheet to do that. are trying to enter the right proj- by the central government for showing some signs of recovery,
is very small. Our main We did a QIP (Qualified ects, avoid markets with over- stalled projects? the sector will not come out of
goal is that in the four Institutional Placement) supply and maintain appropri- I don’t think the fund is so large problems . You cannot de-link
cities we are in, we want in the first quarter of the ate pricing. that it will change the situation the sector from the economy.
to add more projects in year and raised ~2,100 overnight. Of course, ~25,000
micro markets and, by doing crore. It was to gain the firepower Are you looking, in the current crore is a good amount of money. Where are housing prices
that, take up our market share. and acquire new projects. ects is not very easy, unlike in of oversupply. When things are market condition, to change the But, at the same time, Godrej headed?
We don’t want to do it by enter- manufacturing. In real estate, bad, like now, you can’t get into perception that you are a Properties’ sales in the past four- Prices have been quite flattish for
ing new cities. You talked about investing you have to buy land, design the oversupply — the number of premium developer? five years would be that much. If 12 months. My sense is that it
~5,000 crore in the next two project, get all government developers launching new proj- Project by project, we always look you look at the market as a will continue to be flattish for
Any tweaking in your years. Could you tell us more? approvals and launch these, and ects is almost zero, as they are at what is the right pricing but, at whole, it is not that much. Even another 12 months. After that, if
borrowings or finances in the It is a logical thing we believe. so on. When things are good, sorting out their own financial the same time, we would like to so, the government has taken a my expectation of the market
one and a half years since the Real estate is a cyclical industry many developers launch proj- problems, liquidating assets and be at a premium to the market. good step. A lot of customers are going up is correct, volumes and
ILF&S issue came to the fore? and adjusting the supply of proj- ects and you get into a position so on. With the kind of brand we are, suffering out there and it is prices would move up.
.
MUMBAI | MONDAY, 18 NOVEMBER 2019 COMPANIES 3 <

JAYPEE INFRA INSOLVENCY

NBCC offering more land,

benami flats to lenders
Willtakeresponsibilityforselling~1,750crworthofunsoldflatsofJaypeeInfratech
PRESS TRUST OF INDIA in June this year. This was one of the
New Delhi, 17 November demands by bankers then.
Moreover, the company has provided

S
tate-owned National Buildings Con-
struction Corporation (NBCC) on
Sunday sweetened its bid to acquire
bankruptcy-bound Jaypee Infratech, by
offering lenders 1,426 acres instead of 950
acres and providing half the 3,000 benami
flats to them, sources said.
The company, which submitted its res-
olution plan on Sunday, is also believed to
have offered 75 per cent of the 858 acres
expected to be transferred back to Jaypee
Infratech from parent company Jai-
prakash Associates, they added.
NBCC has also taken the responsibility
for selling ~1,750 crore worth unsold flats
of Jaypee Infratech instead of offering
them to lenders, sources said, adding that
the Yamuna Expressway, which connects
Noida and Agra, would also be transferred
to financial creditors.
NBCC and Suraksha Realty were asked
to submit their revised offer by Jaypee
Infratech’s Interim Resolution Prof-
essional (IRP) Anuj Jain, according to the
direction of the Supreme Court. Suraksha
Jaypee Infratech has about 3,000 benami
flats that have no claimants, say sources
Realty has also submitted its bid but its
details could not be ascertained.
A meeting of Committee of Creditors
(CoC) is scheduled for November 18, to
discuss the resolution plans of both the
contenders.
According to sources, the NBCC has
offered 1,426 acres worth ~5,000 crore to
financial creditors as against 950 acres in
the earlier bid that got rejected by the COC
75 per cent of 858 acres, which is likely to
be transferred to Jaypee Infratech.
Sources said Jaypee Infratech had
about 3,000 benami flats, which have no
claimants and NBCC is ready to give 50 per
cent of these units to bankers. These flats
are estimated to be worth ~2,500 crore.
In its last resolution plan submitted
in May-June 2019, the NBCC had pro-
posed infusion of ~200 crore equity capi-
tal and transfer of 950 acres worth ~5,000
crore as well as Yamuna Expressway to
banks in order to settle an outstanding
claim of ~23,723 crore of financial credi-
tors, including banks and home buyers.
Jaypee Infratech owed nearly ~10,000
crore to bankers. Anuj Jain, the IRP, has
sought revised bids from the NBCC and
SurakshaRealtyandcalledtheCoCmeeting
as per the direction of the apex court.
On November 6, the Supreme Court had
directed completion of Jaypee Infratech’s
insolvency process within 90 days and said
the revised resolution plan will be invited
only from NBCC and Suraksha Realty.

PromoterpledginginApolloHospitals
may come down to 20-25%, says CFO
GIREESH BABU
Chennai, 17 November
The promoter entity’s pledged
shares in Apollo Hospitals Ent-
erprise (AHEL) will come down
to a manageable level.
It rose above 70 per cent a
couple of quarters before, rais-
ing concerns in the market. At
the end of September, the pro-
moter group shareholding was
30.8 per cent, of which about
66 per cent was pledged,
according to a regulatory filing
“The Apollo Munich transac-
tion (stake sale in it) is expected
to fructify over the next one
month — a final leg of regula-
tory clearances is awaited. Once
that (happens), we hope to see
the promoter pledge also come
down to a manageable 20-25
per cent. That would be a com-
fortable number,” said A
Krishnan, chief financial offi-
cer of AHEL. He was speaking
after the announcement of the
September quarter results.
Of the 51.2 per cent stake by
Apollo Hospitals Group (and a
few employees) in Apollo Mun-
ich Health Insurance to HDFC,
for ~1,347 crore, the listed enti-
ty, AHEL, holds 9.96 per cent.
The sale is expected to bring
the listed entity ~261.5 crore in to 30.8 per cent.
cash (subject to indemnity The firm is also awaiting
related and other contractual- final regulatory approval for the
ly agreed deduc- hiving-off of the
tions) and ~38.2 Of the 51.2% stake front-end of its
crore from Munich by Apollo Hospitals pharmacy business.
Health Holding AG Group in Apollo It expects to make
as joint venture ter- Munich Health that a separate enti-
mination fee. The Insurance to HDFC, ty by end-January.
promoters recently for ~1,347 cr, the Apollo Health
sold five million listed entity, AHEL, and Lifestyle, its
shares through sec- holds 9.96% retail health care
ondary placement services business
to institutional investors, rais- arm, achieved break-even on
ing a little over ~700 crore to earnings before interest, tax,
reduce the pledged shares. depreciation and amortisation
With this, the promoter share- during the quarter, as earlier
holding fell from 34.4 per cent expected.
4 ECONOMY & PUBLIC AFFAIRS
>
RBI rejects plea to relax June 7 circular
Loans of ~1.8 trillion, for which agreement has been signed by banks, are likely to be referred to IBC
HAMSINI KARTHIK
Mumbai, 17 November
W
ith no resolution in sight for
nearly ~3 trillion of stressed
assets, banks seem to be
reaching a dead end with respect to
the inter-creditor agreements (ICAs)
signed for these loans.
Sources said banks had sought
some relaxation from the Reserve
Bank of India (RBI) on timelines and
modalities for reaching a resolution
under the regulator’s June 7 circular
on a prudential framework for
resolution on stressed assets.
However, highly placed sources said
the regulator was unwilling to budge
on its stand.
“As banks aren’t making much
progress on ICAs signed under the
circular, there was another
representation made to the RBI
asking for an extension in timelines
and allowing all categories of lenders,
including mutual funds and pension
funds, to form part of the ICA.
But, the RBI has made it clear that
the circular will be upheld in its
original form,” said a top official of
large bank.
‘Will step up recoveries, increase provisions in H2’
The September quarter saw an uptick in slippage in micro,
small, and medium enterprises (MSMEs) and agriculture
loans. Union Bank of India Managing Director and Chief
Executive Officer RAJKIRAN RAI G tells Nidhi Rai about the
lender’s plan to recover loans and how it envisages the asset
quality after merger. Edited excerpts:
There is a slight increase in your
non-performing assets (NPAs)
from agri and medium and large
industry. What is the reason, and
what is the outlook on these?
The outstanding NPAs in large
corporate category have
declined while that of MSME
rose marginally. The increase
in outstanding NPAs in
agriculture sector is higher than
that of the previous quarter,
and concentrated in a few
geographies. We have put in
place robust monitoring systems
to proactively prevent new
slippages and are positive
on recoveries in the coming
quarters.
Large borrowers’ exposure has
come down substantially.
Are you being conservative in
your approach?
The decline in exposure to
large borrowers was marginal
and limited to specific sectors.
Apart from construction and
trade, which saw a slight decline,
exposures in all other sectors
have increased or remain at
the same level during the
September quarter.
For start-ups,
compliance
time may be
1 hr a month
PRESS TRUST OF INDIA
New Delhi, 17 November
The department for promo-
tion of industry and internal
trade (DPIIT) has proposed
significant cut in the compli-
ance time to just one hour per
month for start-ups as part of
measures to ease regulatory
requirements for budding
entrepreneurs,anofficialsaid.
The proposal is part of the
Start-up India Vision 2024,
prepared by the department
to promote the growth of bud-
ding entrepreneurs.
Under this vision docu-
ment, the department has
also proposed several other
measures such as facilities of
debt financing, setting up of
500newincubatorsandaccel-
erators, creating innovation
zones in urban local bodies,
deployment of entire corpus
of~10,000crorefund offunds,
operationalise credit guaran-
tee scheme, and establish-
ment of a seed fund.
The department has float-
ed a note seeking views of dif-
ferent ministries on this doc-
ument. Currently, start-ups
comply with a plethora of
requirements such as GST fil-
ings, tax returns and other
local laws every month, the
official said. Compliance to
these processes takes a lot of
time and cost.
Further, it has proposed
providing work orders and
pilot projects from the Centre,
ranking of ministries and cen-
tral public sector undertak-
ings for their increased
engagement with start-ups,
and organising a global
start-up event in the country. StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines
MUMBAI | MONDAY, 18 NOVEMBER 2019 1
Odd decisions and
the consequences
sion has now been reversed
with retrospective effect.
KEY FEATURES OF JUNE 7 CIRCULAR terminated ahead of its deadline,”
said a person working closely on
For deemed export to be
made, domestic producers
Once a borrower is reported to agreed by 75% of lenders by resolving stressed loans. will henceforth be better
be in default by any of the lenders, value and 60% by number will This implies that while banks may placed to compete with
all lenders will have to undertake be binding on all the lenders have to make additional provisioning duty-free import. The
a review of the borrower's in the March quarter of this fiscal requirement of making
Resolution plan should be year, the provisioning could be sub- drawback claims only on the
account within thirty days implemented within 180 days
sequently reversed in the same quar- basis of documents evidenc-
from such default from the end of review period ter and/or in the June quarter of the ing payment will not be
During the review period,
lenders may decide on the
If resolution plan is not
implemented within time, all
next fiscal year, as and when IBC pro-
ceedings are invoked and the case EXIM MATTERS there in the coming days. To
that extent, the latest
resolution strategy admitted in the courts. T N C RAJAGOPALAN change will help domestic
lenders are required to make
Bankers, however, believe that the producers.
In case where resolution plan is additional provisions of 20% June 7 circular isn’t a total failure However, it is doubtful if
set to be implemented, all lenders within 180 days from the end with respect to resolution, as some The commerce ministry has most deemed exporters could
will enter into an inter-creditor of review period loans to the power sector may find restored the benefit of duty claim the benefits for supplies
agreement (ICA) during the Additional 15% provisioning is success. “For companies, which have drawback at All Industry made between December 5,
review period required in 365 days from the long-standing power purchase and Rates (AIR) to deemed export, 2017, and October 31, 2019.
fuel supply agreements, banks are with retrospective effect from For, they had taken note of
Any decision under the ICA commencement of review period
willing to restructure these loans. December 5, 2017. A welcome the denial of drawback at AIR
Problem is with companies with development but it raises and did not bother to do the
The timeline for implementing Bankers say the provisioning olution plan isn’t implemented and weak balance sheets and those who some questions. documentation that would
the resolution plan under the burden would be huge if the resolu- within a year another 15 per cent, tak- have suffered impairment losses in Deemed export refers to have enabled them claim the
circular would lapse, on a case-to- tion plans aren’t implemented with- ing the burden of additional provi- the recent quarters,” said a senior supplies within India of benefit at a later date. In fact,
case basis, from early January. It is in time. To mitigate the immediate sioning burden to 35 per cent. The executive of a private bank. goods made in India for spec- many, with the denial of
estimated that loans worth provisioning burden, banks are circular, however, allows for reversal “Their ability to function as a ified purposes or to specified drawback at AIR, were not
~1.8–2 trillion or nearly two-thirds of looking at resolving these loans of this provisioning if resolution is going concern has come under entities. price-competi-
the ~3-trillion stressed assets under under the IBC. pursued under the IBC. threat. No amount of handholding The objective is What caused the tive and lost
the purview of ICAs, may be referred According to the June 7 circular, “Banks will, therefore, prefer to can help them and these cases have a level playing ministry to deny their orders
for resolution under the Insolvency banks have to make an additional opt for resolution outside the June 7 to be referred to the IBC,” the field for domestic the drawback at against cheaper
and Bankruptcy Code (IBC). provisioning of 20 per cent if the res- circular, though ICAs might not be executive said. manufacturers in AIR for deemed duty-free
specified cases. export in 2013? import.
For example, an And, what has Also, many
export oriented now happened in were denied
unit may import 2019 to restore the their drawback
its requirements benefit with at AIR even
duty-free. retrospective for supplies
A domestic effect? The made between
The Supreme Court set aside a manufacturer can reasons are far October 30,
verdict by the National Company compete with from obvious 2013, and March
Law Appellate Tribunal in Essar such duty-free 31, 2015.
Steel case. How much recovery imports if relieved of the The policy allowed the
you are expecting from this case? tax/duty burden on inputs benefit but a policy circular
We are expecting recovery of and finished products. So, denied it.
~2,000 crore. On account of this, the deemed export provi- Another issue is the time
Credit cost has increased. What’s there will be unlocking of provision sions, besides other dispen- limit of 12 months from date
the reason? to the extent of ~850 crore. Besides, sations, allow drawback i.e of supply for making the
Credit cost up to the June quarter there will be positive impact of refund of the taxes/duties drawback claim.
has been in line with our guidance. another ~250 crore on profit and paid on the inputs. The entitlement is now
However, for the September loss account of the bank. The notified AIR for vari- restored with retrospective
quarter, the bank had to provide ous export products is based effect. So, quite a few claims
higher provisions on accounts Post merger, how do you envisage on the weighted averages of to be submitted in the coming
identified under divergence and the asset quality of the merged the consumption of import- days will be time-barred. Will
fraud provisioning on one major entity to be like? ed/indigenous inputs of a the entitlements be cut due
iron and steel account. We expect We are just half way in FY20 and it cross-section of exporters and to the late submission? The
our credit cost to be around would be too early to comment on the average incidence of DGFT should clarify.
3 per cent for this fiscal year due to the asset quality of amalgamated duties suffered on these. What caused the ministry
elevated provisioning for Q2FY20 entity. We, however, shall assess Deemed export is eligible to deny the drawback at AIR
and other normalised ageing and the position at an appropriate time for claim of drawback at AIR, for deemed export in 2013?
normal provisioning for fresh to have a realistic view on without furnishing any evi- And, what has now hap-
slippages in the first half. business/asset quality of the dence of actual duty inci- pened in 2019 to restore the
combined entity. dence. In 2013, the benefit with retrospective
How comfortable are you with “We are very much active in lending to viable infrastructure Directorate General of effect? The reasons are far
lending to infrastructure finance, projects and NBFC/HFC segments. Our exposure to these How many people you have hired Foreign Trade issued Policy from obvious.
and housing finance firms? Are segments increased, in absolute terms, in the September in the past two quarters and how Circular 9/(RE-2013)/2009-14, It is also interesting that
you comfortable with the loans quarter, while exposure to infra stood above to that of in the many more you are planning to dated October 30, 2013, deny- the benefit was restored when
you have already given? June quarter, albeit marginally” hire this fiscal year? ing drawback at AIR on an additional secretary in the
We are very much active in lending Man power planning is an annual deemed export; it allowed ministry was holding tempo-
to viable infrastructure projects and viable infrastructure projects. The average PCR of peer exercise for us. We expect this to be drawback of only basic cus- rary additional charge as
and NBFC/HFC segments. Our PSBs stood at 75 per cent and we more important and critical toms duty, against evidence Director General of Foreign
exposure to these segments When most of your peers are at 67.7 per cent as of the considering the amalgamation of actual duty incidence. The Trade (DGFT), and just a day
increased, in absolute terms, in have pushed their provision September quarter. For the process that is underway. We need next Foreign Trade Policy or so before another officer,
the September quarter, while coverage ratio (PCR) to nearly forthcoming quarters in FY20, to assess the position, keeping (FTP), notified on April 1, already appointed as DGFT
exposure to infra stood above to 80 per cent, yours is much lower. we aim to reach the PCR of the requirements as a combined 2015, gave legal effect to the a week earlier, was to
that of in the June quarter, albeit Does this indicate the remaining about 70 per cent by way of entity post merger. We may have a decision. take charge.
marginally. We will continue to two quarters will also be providing appropriate clear view on this aspect probably That position was reiter-
take exposure in NBFCs, with consumed by provisions for provision according to the in the last quarter once we work out ated in the FTP revision on E-mail:
strong parentage and financials bad loans and write off? laid down rules. finer details. December 5, 2017. That deci- tncrajagopalan@gmail.com
STATSGURU 1: RAIL FREIGHT EARNINGS CRASH
Growth in earnings Passengers Freight (%)
2: DEMAND FOR AIR TRAVEL SLOWS
Growth in air passengers (%)
8.8 9.1
Deepening 7.4
6.6 6.2
5.6
6.2
slowdown
4.3 4.3
3.3
1.8 2.8 3.0
3.9
1.2
-0.6 -5.0 -7.7 1.2
ECONOMY OBSERVERS 0.1 -4.5
are finally spelling out
the gravity of the
slowdown India finds
itself in. Before the
financial year began, the
Jan Feb Mar Apr May Jun Jul Aug Sep
Reserve Bank of India thought the Indian
Apr ‘19 May ‘19 Jun ‘19 Jul ‘19 Aug ‘19 Sep ‘19 ‘19 ‘19 ‘19 ‘19 ‘19 ‘19 ‘19 ‘19 ‘19
economy would grow 7.4 per cent in FY20.
Source: Indian Railways Source: Directorate General of Civil Aviation
Over eight months, it gradually revised
the estimate downward to 6.1 per cent.
Last week, State Bank of India projected 3: DIESEL CONSUMPTION COLLAPSES 4: STRESS VISIBLE ACROSS MULTIPLE SECTORS
FY20 growth at 5 per cent, and a top Growth in consumption Diesel Petrol (%) Growth in index of industrial production (%)
Delhi-based think tank expects the 11.4 10.9 Textiles Petroleum products Pharma
economy to grow only 4.9 per cent. 8.9 9.0 8.9 Chemical products Electricity
What could be the reason for these 20
7.7 Machinery Automobiles
successive downward revisions across 6.3
the board? Some key indicators make
it evident. 3.4 3.9
2.9
Earnings from rail freight are 2.1 1.5
gradually reducing and contracted 4.1 -1.3
by 7.7 per cent in September 2019 -1.2 -3.3 -7.4 10
6.0
(chart 1). This indicates declining -1.4
industrial demand. Air travel did
pick up in FY20, but is now looking
down, showing slackening demand
(chart 2). While petrol consumption
seems on track, diesel consumption Apr ‘19 May ‘19 Jun ‘19 Jul ‘19 Aug ‘19 Sep ‘19 0
has tanked, reaffirming industrial Source: Petroleum Planning and Analysis Cell ILLUSTRATION BY AJAY MOHANTY
slowdown (chart 3). -0.9
The index of industrial production 5: PRICING POWER IN INDUSTRY DETERIORATES 6: DEMAND REFUSES TO SHOW GREEN SHOOTS
(IIP) shows the areas of stress in the Consumer inflation (%) Growth Exports Imports (%)
economy (chart 4). Even pharma has
-5.0 -5.3
6.0
6.1
come under pressure. -10
Core inflation is a measure of 2.8
3.7
inflation without volatile components -2.6
3.1
-10.4
-13.8
-16.3
1.7
-13.5
-6.6
-8.6
-6.1
0.4
-7.8
-1.1
like food and fuel. It represents
business demand and pricing power
of companies. While it was driving
-18.1
overall inflation up until recently -20
(strong demand), it has now fallen
below the level of overall inflation
(weak demand) (chart 5). On the -24.8
external front, while exports remain
poor, imports are increasingly falling
in FY20, showing deepening economic -30
stress (chart 6). Apr ‘19 Sep ‘19
Apr ‘19 May ‘19 Jun ‘19 Jul ‘19 Aug ‘19 Sep ‘19 Oct ‘19
ABHISHEK WAGHMARE
Source: National Statistics Office
Compiled by BS Research Bureau
.
MUMBAI | MONDAY, 18 NOVEMBER 2019 ECONOMY & PUBLIC AFFAIRS 5 <

‘Unlike Centre, Chhattisgarh’s India offers visa on arrival for UAE citizens
India has granted visa-on-
arrival facility to the citizens of
facility for the nationals of the
UAE came into effect from
poses, a government official
said.Thisfacilityisaimedatfur-

put money in people’s pockets’

theUnitedArabEmirates(UAE)
with an aim to enhance people-
to-people contacts and trade
relations, officials said on
Sunday. The visa-on-arrival
Saturday.
It will be available for a peri-
od of up to 60 days with double
entry for business, tourism,
conference and medical pur-
ther strengthening people to
people contacts and trade rela-
tions as well as strategic ties
between the two countries.
PTI

As the Congress prepares to launch protests against economic slowdown, Chhattisgarh Chief Minister BHUPESH BAGHEL tells Archis Mohan that his state has
escaped its effects as his government has pursued policies that have put money in the pockets of workers, farmers, housewives, and tribals. Edited excerpts:

It is nearly a year since your We procure with the support of

government was formed. What do
you think are its achievements?
Our two principal promises in the
election were farm loan waiver and
purchasing paddy from farmers at
~25 per kg (~2,500 per quintal). We
won 68 seats, a three-fourths
majority. We have delivered on both
of our promises.
The biggest achievement has
been a drop in Naxal violence by 40
per cent. We had said we will have a
dialogue, not with the Maoists but
with our people — with tribals, with
traders and businessmen, with social
activists and journalists. The result is
that we now have a better
understanding of their needs. Our
slogan is vishwas (trust), vikas
(development), and suraksha
(protection).
To win trust, we returned 4,200-
acre land of 1,700 farmers in Bastar,
purchased tendu leaves at ~4,000
(from ~2,500) per standard sack, and
launched the chief minister’s
Suposhit Yojana to increase
nutrition levels. The CM Haat Bazaar
clinic scheme has meant OPD has
increased 10 times in Bastar. This
year, not a single death has been
recorded because of gastroenteritis.
We have opened 105 schools
in the heart of the Naxal
territory, which were closed
for the past 13 years. Naxals
are finding it difficult to
recruit people, as a letter that
we intercepted from a Naxal
recruiter to his commander has
revealed, which is evidence that our
policies have worked. Farmer
suicides have dropped.
Your party (the Congress) is
planning protests on economic
slowdown. What is the situation
in your state?
Chhattisgarhhasescapedtheill-
effectsofslowdown.Purchasing
powerhasincreasedinthestate.We
havespent~20,000croretopurchase
paddyat~25perkg.Thismoney,the
benefitofloanwaiver,halvingof
electricitybillsupto400units,35kg
riceperfamilyeachmonth,~4,000for
tenduleavessack—allthesedecisions
haveputmoneyinthepocketsof
workers,tribals,farmers,housewives,
allsectionsofthesociety.
Thecountrycouldhave
escapedtheslowdownifthe
NarendraModigovernment
hadadoptedthisChhattisgarh
model.Thereismoneyin
people’shandsinthestate,whichhas
increasedsalesoftextiles,footwear,
motorcyclesandcards,fans,coolers
andair-conditioners.Saleof
submersiblepumpsinChhattisgarh
hasincreasedtwofold.Thereisan84
percentincreaseinthesaleofgold
andjewellery.
Thepointtorememberas
policymakersisthatfarmersand
workersdonotkeepmoneywith
themselves.Theyspend.Moneygiven
tocorporatesectorisusedbythemto
firstrepaytheirloansandonlythen
thinkaboutsettingupnewprojects.
TheModigovernmenthasgiven
corporatestaxcutsworth~1.74trillion.
Ithasbeennearlytwomonthsnow,
butthereisnopositiveimpactinthe
market.Weimplementedourpolicies
inDecemberandautomobilesector
sawanincreaseof36.5percentinsales
byMarchinChhattisgarh.Inthepast
quarter,revenuefromlandregistryin
Chhattisgarhincreasedfrom~92crore
to~152crore.
Chhattisgarh government has
launched a new industrial policy.
Wehaveannouncedseveralsteps,
includingturningleaseholdlandto
freeholdandsettingupofagemsand
jewellerypark.Thefocusisonnon-
coresectors,likefoodprocessingand
thoseassociatedwithminorforest
produce,includingpharmaceuticals
sincewehavejungles.
You have threatened protest if the
Centre does not buy paddy at
~2,500 per quintal? What if it does
not agree?
The Centre announces the
procurement policy, not the states.
marketing federations. If we need
rice, the Centre allots it to us. Now,
the Centre says it will not procure
rice from Chhattisgarh if we give
bonus to farmers. This is not based
on any law passed in Parliament,
but a circular from June 2014 after
the Modi government assumed
office at the Centre. The Centre
relaxed this order (for Chhattisgarh)
in 2017 and 2018, so why can’t it do
now? Is it that only elections are
important? Chhattisgarh’s case is
different. They relaxed it then,
given Chhattisgarh’s unique
situation. How has the situation
changed now?
However, I am an optimist. I
have met union food minister and
also written to the PM. I raised the
issue during the NITI Aayog
meeting. In Chhattisgarh, paddy is
the only crop. Our irrigated area is a
mere 31 per cent, and 44 per cent is
jungle. Our farmers cannot be
compared with Punjab and
Haryana. There each acre yield is 20
quintals, while its just 8 quintals in
Chhattisgarh.
The biggest achievement (of this
bonus) is the 40 per cent drop in
Naxal violence. Either give plough
in the hands of the youth, or give
them guns. If we don’t motivate
them to hold the plough, naxals will
give them guns.
Nyay, or minimum income
guarantee, was the Congress
manifesto promise. We hear that
Rahul Gandhi wanted it to be
implemented in Chhattisgarh.
What is the situation now?
We are waiting. As soon as the high
command (of the Congress) orders,
we will implement it.
Before forming the government,
you had demanded transparency
in mining contracts. Now activists
have alleged…
Tell me one mine where work has
started in the past 11 months, aarop
lagane se kya hota hai (it is easy to
fling allegations).
6 ECONOMY & PUBLIC AFFAIRS
>
MUMBAI | MONDAY, 18 NOVEMBER 2019 1

Backed by tech, banks beat slowdown blues by hiring more

NIDHI RAI our Fed Recruit Solution; it has stream- to job creation across the spectrum.” seeing a positive trend in Karnataka,
Mumbai, 17 November lined our hiring and recruitment by giv- Online job portal Shine.com has with the number of jobs on Shine.com
ing us access to some of the best talent reported a spike in job postings for the from this southern state at par with
Though economic growth has slowed, using an AI-driven algorithm. Our cam- sector, with Maharashtra leading other Maharashtra, especially for mid-level
banks have not reduced hiring. Backed pus recruitment cycle for 2019-20 is in states. hiring. This is positive news for mana-
by technology they are expanding the full swing and we have released 300-plus Says Zairus Master, its chief execu- gerial-level candidates in these two
branch network — and adding more to offers in two months, using Fed Recruit.” tive: “Over the past three months, the states, as well as anyone open to re-loca-
the workforce. The additions are across levels, skill number of jobs posted on Shine.com in tion, as banks and financial institutions
Rajkamal Vempati, head of human sets and job profiles. the BFSI (banking, continue to strengthentheir ranks.”
resources (HR) at Axis Bank, told Rajeev Ahuja, execu- financial services, Head hunters also believe this
Business Standard: “We have hired six tive director at RBL “Banks are fully aware insurance) sector have momentum will continue and the next
times more of employees this financial Bank, says: that customers today shown a stable trend. year will see higher hiring.
year (FY) as compared to last year. Going “We expect to be at have higher bargaining The majority of jobs Rituparna Chakraborty, co-founder
forward, we are expanding our branch 380 to 400 branches in power. Hence, to (43 per cent) are at the of TeamLease Services, says: “Banks are
network; therefore, we will need more metro and urban cen- capture the market, mid-level (four to eight fully aware that customers today have
people at different levels, with specific tres by the end of one needs to strengthen years experience). higher bargaining power. Hence, to cap-
skill sets. We are investing in workforce FY20. Going by that the last-mile reach to Nearly 40 per cent of ture the market, one needs to strength-
GROWING STRENGTH backed with technology.” number, we do expect customers, as well as BFSI jobs on the en the last-mile reach to customers, as
FY18 YoY chg (%) FY19 YoY chg (%) Some are using artificial intelligence to go strong on hiring engage with them platform for this well as engage with them better. Future
(AI) to identify the right candidate. as well. We recruited better” experience range have prospects seem bright for a sector
KotakMahindraBank 35,717 8.2 41,753 16.9 Federal Bank, for instance. around 1,800 employ- a salary bracket of which boasts of being the fourth largest
RITUPARNA CHAKRABORTY
YES Bank 18,238 -9.4 21,136 15.9 Ajith Kumar K K, executive vice-pres- ees last fiscal year and ~10-15 lakh (annually). retail credit market, as it is steadily
co-founder, TeamLease Services
ident and HR head, says: “We are plan- will be looking to con- With Mumbai being growing.”
HDFC Bank 88,253 4.7 98,061 11.1 ning to grow by 800-plus people by the tinue the same the banking hub, it was “Hence, it is not surprising that BFSI
IndusInd Bank 25,284 -0.1 27,739 9.7 beginning of the next FY. The core of the momentum in this fis- expected that continues to invest in hiring. There
hiring plan is to get 700-plus on board cal. We are seeing growth at every level Maharashtra would lead this trend for seems to be little impact (of a
RBL Bank 5,330 8.7 5,843 9.6 through the campus recruitment chan- for our retail, branch banking, financial BFSI.” slowdown) on their future hiring
Compiled by BS Research Bureau Source: Capitaline nel. This year, we have (also) deployed inclusion and cards businesses, leading Master adds: “However, we are also outlook as well,” Chakraborty adds.

Rescue financiers
IN BRIEF
MFs give FEMA reporting call for ministry’s
a miss, await govt clarity
Mutual funds have to adhere to restrictions applicable to foreign investment
protection in IBC
RUCHIKA CHITRAVANSHI
New Delhi, 17 November
ASHLEY COUTINHO norms classify MFs that
Mumbai, 17 November invest more than 50 per cent The government is examining
in equity as ‘investment the demand of last-mile

N
one of the foreign- vehicles’. financiers to be given priority
owned or controlled Downstream investment in insolvency and bankruptcy
Prime Minister Narendra Modi, Home Minister Amit Shah, mutual funds (MFs) by such funds by way of sub- proceedings, a senior
Congress leader Ghulam Nabi Azad, and others attend an have fulfilled their reporting scription or acquisition of government official told
all-party meeting a day before the Winter Session of obligations as mandated by shares is considered ‘indirect Business Standard.
Parliament, in New Delhi on Sunday PHOTO: PTI the new Foreign Exchange foreign investment’ if the The ministry of corporate
Management Act (FEMA) investment manager or spon- affairs (MCA) has representa-
norms notified a month ago, sor is owned or controlled by a tions from fund managers and LAST-MILE FUNDING
At all-party meet, PM says pending clarity from the gov-
ernment on the issue.
non-resident.
Mirae Asset and Principal
private lenders providing res-
cue financing to stressed proj-
| The MCA has
representations from fund
open to discuss all issues “There was a reporting
deadline that ended on Friday
MF are the two foreign fund
houses, which may immedi-
ects. They want protection if
an entity lands into the
managers and private
lenders providing rescue
Ahead of Parliament’s Winter Session, Prime Minister financing to stressed
Narendra Modi on Sunday assured an all-party meeting that the
and the funds had to report
according to the changed law.
THE FEMA SAGA ately get impacted by the new
FEMA norms. These fund
Insolvency and Bankruptcy
Code’s (IBC’s) net even after projects
government was ready to discuss all issues, while the opposition Every day that we don’t report „ Centre amends FEMA economic affairs department houses have equity assets in their assistance.
norms on October 17 | They want protection if an
raised concerns over economic slowdown and farm distress is technically a breach of the „ Sebi writes to FinMin excess of 50 per cent of the “We come as a knight in
and strongly demanded that detained Lok Sabha MP Farooq new guidelines,” said a senior overall portfolio, the data shining armour and then that
entity lands into the IBC's
„ MFs classified as flagging the issue net even after their
Abdullah be allowed to attend the House. At the government- fund official, on condition of from PRIME Database shows. armour is taken away if a
investment vehicles „ Fund houses given assistance
convened meeting attended by almost all major political parties, anonymity. Nippon India MF, Franklin company goes into IBC,” said S
Prime Minister Modi said the most important job of the House is Fund houses have decided „ Industry body Amfi raises verbal assurances that Templeton, HDFC Mutual Sriniwasan, managing direc- | Private investors are sitting
to discuss and debate and this session should also be as to maintain status quo follow- concerns with Sebi issue will be addressed Fund, and ICICI Prudential tor, Kotak Investment advisors. on billions of dollars of
productive as the last one, Parliamentary Affairs Minister ing assurances from the „ Fund houses make „ MFs give reporting
MF are some of the other fund Private investors are sitting funds due to a constraint in
Pralhad Joshi told reporters. The Opposition demanded that the Securities and Exchange houses that may be on billions of dollars of funds this regard in the IBC law
issues of economic slowdown, job loss, farm distress and Board of India (Sebi) as well
representations to the deadline a miss considered foreign-controlled due to a constraint in this
pollution must be discussed during the session, Congress leader as custodians that the guide- or owned under FEMA. regard in the IBC law. Kotak
| Due to the high levels of
in Lok Sabha Adhir Ranjan Chowdhury said. A number of leaders lines impacting MFs would be norms, foreign MFs have to ment of equity instruments. The rules could put these alone is looking for opportuni- risk, interim financing
raised the issue of detention of National Conference leader amended soon. The Associ- adhere to sectoral caps and According to the fund offi- funds at a significant disad- ties to invest $1.2 billion (~8,600 comes at an interest rate
Farooq Abdullah and said he should be allowed to attend ation of Mutual Funds in restrictions currently applica- cial, if the existing guidelines vantage vis-a-vis domestic crore) through its special situa- that is higher than the
Lok Sabha. Sources said there was no definite response from India, an industry body, had ble to foreign investment in remain unchanged, the gov- funds, limiting their invest- tion fund and real estate cor- prevalent market rate
the government on the issue. "Government is ready to discuss asked Sebi to look into the Indian equities. ernment will have to come up ments in stocks with sectoral pus. “We are unable to provide
all issues within the framework of rules and procedures of the matter a few days ago, post MFs making downstream with additional clarifications, caps and dragging down over- capital because of our appre- official said.
Houses," the prime minister was quoted as saying by Joshi. which the regulator wrote to investments have to furnish specifying the conditions and all returns, said experts. hensions about treatment Investors have sought
Constructive discussion in Parliament also keeps the the finance ministry on the details of their equity invest- the manner in which funds The restrictions may also under the insolvency process,” MCA’s intervention to have
bureaucracy alert, the prime minister said at the meeting. PTI< issue. Several fund houses also ments to the Department for have to meet the sectoral caps. make it difficult for their Sriniwasan says. provisions in the IBC which
made representations to the Promotion of Industry and “What happens to existing exchange-traded funds to Due to the high levels of recognise an ICA as valid and
economic affairs department. Industrial Trade within 30 investments in certain stocks? invest as per the assigned risk, such interim financing binding upon the Committee
“The reporting obligations days of investment even if the Assuming several funds are in weightage of the underlying comes at an interest rate which of Creditors (C0C). “This could
Sena effect? NDA Fadnavis heckled have kicked in, but the fund equity instruments have not breach of the caps, which ones benchmarks, and put the is higher than the prevalent be one of the solutions.
allies pitch for at Bal Thackeray's houses seem to have taken a been allotted. will be required to offload brakes on fresh money com- market rate. It is paid off before Currently, a CoC is formed (if
call not to go ahead with the MFs also have to file form their holdings and in what ing into their fund of fund all other loans on the books of IBC is invoked) and ICA
better coordination death anniv function same,” said a second person. DI with the RBI within 30 proportion?” he said. schemes, which invest in oth- the company. The IBC process, becomes a thing of the past.
The shadow of an imminent Former According to the new days from the date of allot- The amended FEMA er mutual fund schemes. however, does not give any pri- We want the law in this regard
divorce between the BJP and Maharashtra ority treatment to these to be unambiguous, to avoid
the Shiv Sena loomed large chief minister lenders. “Funds are wary of litigation,” Sriniwasan said.
over an NDA meeting on Devendra investing more than before. Earlier this month, the gov-
Sunday ahead of the
Parliament session, with
allies pitching for a
Fadnavis was
on Sunday
heckled by
India has potential for rapid growth: Gates There is no clarity over the
finality of IBC and cases are not
resolved within the specified
ernment announced a dedi-
cated fund to provide last-mile
financing of ~25,000 crore for
mechanism to improve some slogan-shouting workers India has the potential for when it is reeling under major time frame. The biggest source completion of ongoing hous-
coordination and Prime of the Shiv Sena as he left “very rapid” economic growth slowdown amid apprehensions of FDI (foreign direct ing projects. To be imple-
Minister Narendra Modi Shivaji Park after paying tribute over the next decade to lift that the cycle may last for a longer investment) is coming in the mented through the
describing the ruling alliance to Bal Thackeray on his seventh people out of poverty and allow period. country through these funds Alternative Investment Fund
as "one big family." In his death anniversary. Some the government to invest in “I don't have any knowledge and is getting stuck,” says structure, it would place the
remarks at the meeting, not workers of the Shiv Sena, which health and education priorities about the near term, but I’d say Saumil Shah, partner, Dhruva fund ahead of other creditors
attended by the Sena, Modi recently snapped ties with the in an “exciting way”, billionaire over the next decade, there’s Advisors. in terms of claims. The last-
said NDA allies might have BJP, standing close to the philanthropist and Microsoft potential for very rapid growth, Investors have demanded mile funding will be treated as
different ideologies but they former CM's convoy shouted in co-founder Bill Gates has said. which will lift people out of protection in the pre-IBC stage priority, under the waterfall
are like one big family and Marathi Fadnavis' assembly Gates, the world’s richest per- poverty and allow the govern- itself, via agreements with mechanism (the order of pri-
should not get unsettled by poll campaign slogan: 'I will be son, specifically complimented ment to invest in health and edu- lenders about treatment of ority in which the proceeds
small differences. Various back' along with the Sena's India’s Aadhaar identity system cation priorities in a really excit- “senior debt” in the event of from sale of liquidation assets
NDA allies, including newly traditional 'Chhatrapati Shivaji and the country’s performance ing way,” he said. insolvency or liquidation. are distributed).
appointed LJP president Maharaj ki jai' war cry. Fadnavis in the financial services and On Friday, Gates, with a net “There can be an inter-credi- “Today, any vendor can
Chirag Paswan, desired to and his entourage, which pharma sectors. worth of $110 billion, regained the tor agreement (ICA) to secure take a (defaulting) company to
have a convener or included several senior BJP The positive outlook by Gates position of the world’s richest Microsoft Co-founder Bill Gates and Bihar Chief Minister the rescue-financiers. How the IBC. Seniority in waterfall
coordination committee to leaders, moved on without for the Indian economy, Asia's person surpassing the Amazon Nitish Kumar during the launch of a book titled ‘Routine tenable it will be will have to be has to be ensured in case this
sort out differences. PTI< reacting to the jeers. PTI< third largest, comes at a time Inc's Jeff Bezos. PTI Immunization’, in Patna on Sunday PHOTO: PTI tested,” the senior government happens,” Sriniwasan added.

MSME ministry may streamline schemes for better results

SUBHAYAN CHAKRABORTY
New Delhi, 17 November
The government is drawing up
plans to streamline existing
schemes for micro, small, and
medium enterprises (MSMEs),
with an aim to combat liquidity
crisis, low professional exposure,
and low skills that the sector
continues to face.
Central schemes enabling
cluster-based development, those
promoting new business, and skill
training programmes may be
significantly modified to maximise
returns on fund allocation and
speed up industrial output.
Prime among these is the
Cluster Development Program that
provides common physical
infrastructure facilities in a fixed
geographic area to a set of small
businesses with the same
requirements. Currently, the
ministry runs 75 Common Facility
Centers (CFCs) across the country
with work ongoing to establish
66 more. Central grant for CFCs
goes up to 70 per cent of total cost of
a maximum ~20 crore, a crucial
amount in many backward areas.
More research
However, the arbitrary allocation
of clusters to various states and
regions, often due to political
reasons, have resulted in
chronically low productivity and
stretched resources. “It’s surprising
that it took so long but the
government has started evaluating
the entire cluster map and will have
a comprehensive model to
distribute clusters in various areas
from now on,” a senior MSME
ministry official said. As a result,
some clusters may even be closed
down, he added.
A detailed research focusing on
FY20 TARGETS
„ 10 of 100 planned Export
Facilitation Centers, which help
integrate MSMEs in global chain
„ 10 new tool rooms/technology
centres, costing ~115-145 cr each, for
high-end skilling and consulting
„ 20 of planned 500 Enterprise
Development Centres to develop a
cadre of indigenous entrepreneurs
„ 10 solar charkha clusters, each
providing jobs to 2,000 artisans
„ 100,000 youngsters to be
skilled through all existing
and upcoming centres
the business prospects and socio- The move is part of MSME
economic effects on nearby Minister Nitin Gadlari’s push to
demographics have been raise the sector’s contribution in
mandated before approval is given exports from the current 49 per
to any new cluster. cent to 60 per cent as well as its
share in industrial growth to 49 per
cent from 29 per cent now.
Through the initiative, the
government is trying to address a
key concern for policymakers, the
lack of businesses in the “small”
category, the official added.
According to the existing
definition, which relies on self-
declared investment on plant and
machinery, “small” firms are those
with investment between
~25 lakh and ~5 crore.
These efforts are expected to be
supplanted by the upcoming
National Resource Centre, which
will assist in export strategy
development, implementation,
and mobilisation of technical
assistance to organisations in the
MSME ecosystem.
MSME incubators
The ministry aims to launch
enterprise development centres
(EDCs) in every district, senior
officials said. Aimed at developing
a cadre of indigenous MSME
entrepreneurs, the EDCs will be
similar to incubators for start-ups
and have been in the planning
stages for two years now, according
to official documents reviewed by
Business Standard.
“For the first time, an integrated
unit will help new and existing
businesses develop by providing
services such as management
training, and office space,” another
official confirmed. Ultimately
planned for every district, the
ministry is targeting the launch of
20 EDCs out of a planned 500 by
the end of the current financial
year, another senior official said. As
of now, MSME Development
Centres in various states have
begun the EDC initiative on a small
scale, some of which may be
expanded, they added.
The centres will be broad-based
and shall be run by special purpose
vehicles in partnership with the
private sector, business manag-
ement organisations, local industry
associations and would also aim to
plug the financial difficulties faced
by MSMEs, which have continued
to suffer from a liquidity crisis since
the demonetisation exercise. In the
distant future, incentives and loans
by the government for the sector
will also flow through the EDCs,
after determining the capabilities of
the firm through set parameters,
the official added. The centres
would offer credit facilitation and
syndication, export promotion
and supplier inclusion.
The EDCs will also have
“enterprise clinics” for struggling
firms, which the government hopes
will reduce the number of small
businesses falling into a debt trap
financed by bank loans.
10 ISSUES AND INSIGHTS
>
MUMBAI | MONDAY 18 NOVEMBER 2019

> CHINESE WHISPERS

Mendeleev’s Periodic Table
It remains an invaluable resource for classification in its 150th year
Little was then known about molecules,
or atoms, and the existence of funda-
mental particles had not even been sus-
pected. Despite that, Mendeleev had dis-
covered what are called the Periodic
Laws: He found that elements arranged
in order of their atomic weights, could
be grouped in terms of similar properties
at regular intervals.
Mendeleev’s original table contained
TECH-ENABLED just 63 entries. But he predicted that new
elements would be discovered, and left
DEVANGSHU DATTA gaps in the table where he guessed that
those elements would occur. He also pre-
dicted what the chemical properties of
hydrogen, has the atomic weight 12.
(Carbon is the modern standard for
atomic weight.)
Later discoveries would lead to the
understanding that most hydrogen
atoms consist of just one proton. Other
elements have higher atomic weights,
because their atoms possess more pro-
tons and neutrons.
It was only in the 1930s, after the dis-
covery of the neutron and proton, that
elements started being classified accord-
ing to the number of protons, rather than
the atomic mass.  Nowadays, the Table
uses atomic number — this is the num-
with the respective atomic weights of 1,
2 and 3. All the isotopes have an atomic
number of 1.
Many elements are hard to find in
nature due to being radioactive. Radio-
active elements emit particles and trans-
form into more stable elements. Many
radioactive elements have brief half-
lives — within a few minutes or seconds
half the mass on average, will be trans-
formed into a more stable element
through decay.
The Earth has existed for over 4.6 bil-
lion years. Many elements with relatively
short half-lives may have been present
but have decayed to the point where they
can no longer be found. Such highly
radio-active elements can be synthesised
by pumping protons into the nucleus of
more stable elements.
Meitnerium for example, is a synthet-
ic element with a half-life of just 4.5 sec-
covered in nature.  
From 95 (Americium) onwards, all
the elements have to be synthesised. The
first element discovered via synthesis Queen of controversies
was Technetium (At no: 43) in 1937.
Mendeleev had predicted its existence
Uttar Pradesh
Minister of
and called it “Ekamanganese”. It does State for
occur naturally. The first completely syn- Women’s
thetic element was Curium , discovered Welfare Swati
in 1944 by bombarding plutonium with Singh
alpha particles.  (pictured) is
The most recently discovered ele- in the news
ment was Tennessine (At no: 117) which again. Singh,
was found in 2010 by American-Russian who had
collaboration.  Researchers at the Joint courted
Institute for Nuclear Research in Dubna controversy in May 2017 after a video
(Russia) bombarded Berkelium (At Wt showing her inaugurating a beer bar
97), itself a synthetic element, with
Calcium (At Wt 20) beams to force the
in Lucknow went viral, is in the dock
again after an audio clip surfaced, in
Calcium protons to merge into the which she was heard admonishing a
Berkelium atoms. Similar bombardment senior police official for registering a
led to the earlier discovery of Oganesson case against realtor Ansal

I
n March 1869, Dmitri Ivanovich
Mendeleev presented a chart to the
Russian Chemical Society. This is
generally considered to be the first
Periodic Table. It was a spreadsheet list-
ing all the known elements in groups.
The Table remains a basic tool of chem-
istry. The latest new entries were added
in the 21st century, almost 150 years after
the first table was prepared.
It was an incredible achievement.
the new elements would be.
The Table was built upon the calcu-
lations of atomic weights, also often
called the relative atomic mass. In the
19th century, chemists measured the
mass of equal volumes of various ele-
ments and compared those masses rel-
ative to the mass of hydrogen, which is
the lightest element. Hydrogen was
assigned the value of 1. Thus, carbon,
which is about 12 times as heavy as
ber of protons in each atom.
The atomic number is unique to
every element, since the number of pro-
tons in the nucleus will be the same.
The atomic weight may differ for dif-
ferent isotopes of the same element,
since there may be a different number
of neutrons. Hydrogen for example, has
three naturally known isotopes. These
are naturally stable hydrogen
(“Protium”) Deuterium and Tritium
onds. It can’t be found in nature. Many
isotopes of common elements such as
oxygen -12 and hydrogen -7 are also fleet-
ingly seen in labs because they have half-
lives of just fractions of a second.
As chemists started to hunt for new
elements, the Table was gradually filled.
All the elements between Hydrogen
(Atomic no 1 ) and Plutonium (94) occur
naturally on Earth. But many of these
were synthesised first, before being dis-
(At Wt 118) in 2002.
Very little is known about the prop-
erties of the transuranic elements
(beyond At Wt 92) because most are syn-
thetics with short half-lives. Studying
them in labs to discover their chemical
properties is hard. At the same time,
researchers are trying to find elements
at 119 or beyond. The Table remains an
invaluable resource for classification in
its 150th year.
Developers. In the audio, Singh is
purportedly instructing the woman
cop to drop the case, or else face the
music. Her aide misbehaved with
the media when reporters sought
her response on the controversial
audio. Thereafter, Singh was
summoned by Chief Minister Yogi
Adityanath, who has also sought a
detailed report from UP Director
General of Police O P Singh on
the episode.

All you wanted to know about banking frauds
Bankers feel inhibited talking about frauds for fear of loss of
reputation. Large frauds usually come to light after 54 months
organisation that offers training to detect
frauds, is observing Fraud Week between
November 17 and 23 to create anti-fraud
awareness. It’s time to take a close look
at what’s happening on the fraud turf in
Indian banking and finance.
For the record, ~71,500 crore worth
of frauds involving 6,801 cases were
detected in financial year 2019 — little
more than what the government of
BANKER’S TRUST India wants to spend on the merger of
Bharat Sanchar Nigam Ltd and
TAMAL BANDYOPADHYAY Mahanagar Telephone Nigam Ltd as
well as the latest recapitalisation pack-
age for public sector banks (PSBs).
So far this year, the RBI has
penalised banks ~123 crore for non-
reporting or delaying in reporting 76
frauds. The list includes 11 banks that
were penalised ~8.5 crore for not com-
plying with the norms to classify the
now-defunct Kingfisher Airlines Ltd
account as fraud and report to the reg-
ulator despite being advised by the RBI
to report the fraud “immediately” after
the CBI initiated criminal proceedings.
Most frauds are related to credit; the
share of frauds originating from the
misuse of credit cards and internet is
minuscule. In many cases but not all,
bills and letter of credit help such frauds.
The borrowers can also route their
export proceeds through other banks.
The banks are normally hesitant
about talking about the frauds, fearing
reputational risks. There are those odd
Rein in the enthusiasm
Too much enthusiasm can ruin one’s
electoral prospects. A former Delhi
Municipal Corporation councillor of the
Bharatiya Janata Party (BJP) has learnt
this the hard way. Last week, one of the
senior-most leaders of the Delhi BJP was
hosting a bunch of party leaders for an
informal meeting when the ex-
councillor reached uninvited and started
discussing the possibility of getting a
ticket for the upcoming Assembly
elections in Delhi. Now, lobbying for
tickets is not unusual but the party
leaders were of the view that the
aspirant had chosen the wrong forum
and timing. Despite many of them
dropping hints that the aspirant should
leave, he stayed on, infuriating them
further. It is learnt that the party leaders
have decided that this person is not to
be given the ticket because he failed to
present his case in the right manner.

M
any of us have seen different
versions of a funny television
ad promoting men’s deodor-
ant brand Fogg. The settings of the ad
vary from a grocery store to a hospital,
café and even the India-Pakistan border
but the conversation between two char-
acters remains unchanged: “Kya chal
raha hai?” (What’s new?) “Fogg chal
raha hai” (Fogg is new).
Change the ‘F’ word — Fogg to fraud.
This has been playing out in Indian
banking and finance for quite some
time. In the first week of November, the
Central Bureau of Investigation (CBI)
carried out searches at close to 200 loca-
tions across 16 Indian states and Union
Territories. At least 1,000 officers of the
agency were involved in the action,
making it one of the largest coordinated
searches this year, a PTI report said. The
CBI did so after registering 42 fresh cas-
es, involving at least ~7,000 crore worth
of fraudulent transactions. In at least
four cases, the siphoned off funds
crossed ~1,000 crore.
The Association of Certified Fraud
Examiners, the world’s largest anti-fraud
Incidentally, at least 92 per cent of these
frauds in value involved the PSBs that
have around 55 per cent share in the
volume of such frauds.
Going by numbers, it’s just about 15
per cent more than the previous year
but, in value terms, 80 per cent higher.
Around 73 per cent were large-ticket
corporate frauds worth over ~100 crore
each. One such case involved designer
jeweller Nirav Modi and his uncle
Mehul Choksi, who, with the help of
Gokulnath Shetty, a retired deputy
manager of Punjab National Bank’s
(PNB’s) foreign exchange department
at the Brady House branch in Fort,
Mumbai, siphoned off ~13,000 crore.
Of course, not all frauds happened
last year. Like many other things in the
financial sector, here too we see the so-
called lag effect. Typically, frauds are
detected on an average after two years
and, going by the Reserve Bank of India
(RBI) estimates, large frauds worth
more than ~100 crore each usually get
detected in 54 months on an average.
The PNB fraud was done over a period
of at least 84 months.
“insiders” (read bank managers) played
a role. The corporate-banker nexus may
not be rampant but it does exist.
Let’s take a look at the various types
of bank frauds in India.
n
Fund transfer through RTGS and oth-
er clearing platforms: Typically, money
is taken out of a customer’s account
through fake/cloned cheques. It also
involves, at times, fraudulent collec-
tions of demand drafts, issued by a
third party.
n
Dormant accounts: The branch bankers
play a key role to make such accounts
active by issuing new ATM cards and
cheque books to perpetrate withdrawal
of money from such accounts.
n
Home loans: There are multiple ways
of defrauding banks. For instance, the
builder can sell one flat to many cus-
tomers; the borrower can take a loan
for a property already sold to another
person; a person can be given loans
more than what s/he can service either
by forging earnings statement or with
the help of branch bankers; the prop-
erty value can also be inflated.
n
Advance against bills: Forged export
n
Gold loans: The borrowers can get
higher loans inflating the value of gold
pledged to the lender or even against
spurious gold with the “help” of the val-
uer and branch bankers.
n
Kisan credit cards or KCC: Such loans
can be sanctioned without checking the
KYC of the borrowers and the authen-
ticity of the land records. Many a time,
the borrowers are not traceable.
n
ATM: Money is withdrawn using
cloned ATM cards.
n
Cash credit: Frauds involve falsifica-
tion of the books of accounts and
removal of goods and property hypoth-
ecated to the banks without their
knowledge.
n
Term loan: This is the biggest contrib-
utor to the frauds. The borrowers at
times raise more money than they
should, forging financial statements;
they divert funds; they route the sales
proceeds of their companies through
banks outside the consortium (which
has lent to them), and raise export cred-
it through fake export orders. Among
others, non-existent collaterals com-
plete this list.
cases when they are caught between
different agencies and regulators. The
Kingfisher episode is one such. The fear
of being dragged into fraud cases and
punished also slows down the decision-
making process and credit flow.
The Central Vigilance Commission
in August, in consultation with the
RBI, reconstituted the Advisory Board
on Bank, Commercial and Financial
Frauds, renaming it Advisory Board
on Banking Frauds to address this.
This board will be the first stop for all
large fraud cases before recommen-
dations are made to the investigative
agencies by the PSBs. It won’t deal
with cases that involve senior bankers
of the rank of general managers
and above.
While this may encourage banks to
talk about frauds and feel less inhibited
to take credit decisions, tackling the
frauds is a much tougher task.
The writer, a consulting editor with Business
Standard, is an author and senior adviser to
Jana Small Finance Bank Ltd.
Twitter: @TamalBandyo
Real pollution, fake picture
As the pall of polluted air continued
to shroud Delhi and other parts of
north India, a viral photograph
purportedly showing the Paribesh
(environment) Bhawan in Kolkata,
which houses the office of the West
Bengal Pollution Control Board,
threatened to rake up a storm. The
photograph showed the outside walls
of a building which had rows and
rows of air-conditioning machines.
Many started criticising the West
Bengal government, saying how the
picture represented a contradiction —
the institution that is supposed to
fight pollution was actually
contributing to it! Within days the
picture was busted as fake but not
before conspiracy theorists pointed
out how the photo was manufactured
to take attention away from stubble
burning on the outskirts of Delhi.

INSIGHT > LETTERS

Can empathy reduce the probability or impact of crisis?
Picking out the emerging risks, planning for a quick response and packing empathy in the
response are the three must-dos to protect reputation
the form of reputational loss along with
extreme business implications. Even
in the case of Aviva Life Insurance, pos-
sibly the final outcome may not be as
grave as it seems yet the apprehensions
developed in the interim in the minds
of various stakeholders will cause a sig-
nificant loss to the company’s reputa-
tion. Thus, it is time that the corporates
have a detailed understanding of this
MITU SAMAR changing landscape and make crisis
management an important part of
their strategy document.
empowering provisions like whistle-
blower policy, Prevention of Sexual
Harassment Act, appeal to NCLT can-
not be ignored. Earlier it was a known
fact that if an individual or even a
group of individuals were fighting
against an organisation, the power
equation mismatched. However, now
scenario is changing with the world
digitally connected and individuals
voicing their opinion through their
own social media platforms. The power
of one cannot be ignored.
trend. Contours of risks are changing
and more importantly, moving towards
human emotion driven risks. All the
cases mentioned above are outcomes
of human behaviour guided by emo-
tion. The need to forge the numbers or
keep financial records sub-par, the
impatience to the path of success, the
ego to not treat fellow human beings as
one or the lack of agility to adhere to
regulatory requirements and so much
more. Each of these is an outcome of
human emotion or intention. In fact,
Sooner than later
(November 14). In recent times, the gov-
ernment's decision of passing the
Financial Act 2017 as a Money Bill in
This refers to "SC order to get smooth passage in
junks Rafale review Parliament has come under much scruti-
pleas..." (November ny. A Money Bill can only be introduced
15). The unani- in Lok Sabha and Rajya Sabha doesn't
mous decision by have the power to block the passage of
the Supreme Court the Bill once the Lok Sabha passes it.
bench on the Many in the Opposition believe that the
Rafale deal is wel- government declared it as a Money Bill
come and should on purpose to avoid voting in the Upper
now put everything straight. Hopefully, House as it does not have a majority in
we will see the complete fleet of Rafale the Rajya Sabha.
fighter jets at the earliest in our Air Force. Our Constitution gives supremacy to
What is really heartening is that not only the Lower House when it comes to pass-
this bench dismissed the review petition ing a Money Bill. It is felt that declaring a
but also the allegations that the govern- particular Bill as Money Bill by the Lok
ment was responsible for the inclusion of Sabha Speaker must not leave any scope
Anil Ambani's Reliance Defence as an off- for doubt. The constitutional provision
set partner. in this regard may need to be altered, if

W
hile flipping through the
newspapers something
unusual caught my eye:
“NCLT orders insolvency proceedings
against Aviva Life Insurance”. I hadn’t
heard of any major controversy around
the company, hence was shocked to
know about this development. On
reading the details, I discovered that
there was a dispute of around ~27 lakh
with the Apeejay Trust, which had
leased its Mumbai-based commercial
premise to the company. The trust
reported the matter to the National
Company Law Tribunal (NCLT) and
eventually insolvency proceedings
were ordered. This piece of informa-
tion set me thinking. Keeping business
differences and the probable reasons
for the dispute aside (especially as I
have access to only publicly available
information), this episode seems
unheard of. Both the disputed amount
and the outcome seem to be at
extremes.
This reaffirmed my belief that the
risk landscape of corporates worldwide
is undergoing a complete transforma-
tion and it is pertinent for them to be
mindful of this transformation.
Otherwise, the price is being paid in
Another telling example is the
recent development when WeWork IPO
was stalled. WeWork was considered
among the most valued start-ups. But
now the situation has completely
reversed. The gaps identified through
the financial submission of IPO docu-
ments highlighted huge discrepancies.
When this information became public,
investors became more cautious and
deeper investigations threw up an ugly
picture. The founder CEO was ousted
and the new leadership team was in
place. Its biggest investor, Softbank, has
now taken the centre stage and is
implementing various measures to
bring the company back on track. But,
the loss of reputation is not reversible.
Tighter regulatory scrutiny has become
a reality and companies can no longer
get away with books and records that
are not up to the standards. The speed
with which information travels now, no
one including regulators has ample
time to explain their side of the story.
Hence abundant caution has become
a norm, which while undoubtedly has
it's own merits, has also added new
dimensions to business risks that were
missing earlier.
In addition to business risks,
For instance, the famous case of
racial discrimination Starbucks faced in
April 2018 when in one of its stores in
Philadelphia two black men were arrest-
ed while waiting for a friend. They were
taken in police custody and held for
hours before they were released without
being charged. What could have been
otherwise a local episode soon became
global. Social media lit up, pointing out
how white people were treated differ-
ently in similar circumstances. Many
past incidents were raked up and
Starbucks was labelled as a biased
organisation. Being a global B2C com-
pany this was a huge challenge for the
company. It immediately accepted the
responsibility, apologised and took
quite a few corrective actions that
proved effective in showcasing their
genuineness. A letter from the chief
executive officer to employees and cus-
tomers was posted online. They closed
8,000 stores worldwide for a day to pro-
vide racial bias training for their 1,75,000
employees. While this caused the com-
pany an estimated loss of business of
more than $12 million, it helped the
company gain a positive association.
These challenges and anecdotes
clearly point towards the changing
simple cases where a customer gets
irked at the company is not because his
or her issue was not solved but due to
the tone that the service executive
adopted. Similarly, during lay-offs, the
tone or the message that the organisa-
tion adopts is extremely critical for the
employees to not get emotionally
affected and bad mouth the company.
Companies have to recognise this. In
this world of digital solutions and vir-
tual connects, emotions are taking a
back seat. And that is exactly what is
sowing the seeds of potential crises. The
recent apology of Vodafone CEO,
Nicholas Read is another classic exam-
ple that highlights the significance of
an organisation’s ability to distinguish
between the issue and the emotions
and sensitivities associated with it.
Is this transforming corporate risk
landscape all that complicated to man-
age? Not really. Picking out the emerg-
ing risks and listing them, planning in
advance for a quick response and pack-
ing empathy in your response are the
three must-dos to protect your repu-
tation in this viral world.
The author is founder, Eminence, a
reputation management company
Though Congress leader Rahul
Gandhi’s unconditional apology saved
him from contempt charges, the party
is again trying to create a storm out of
nothing by asking for a joint parliamen-
tary committee probe. If the Congress
wants to put the ruling party BJP under
the cosh, there are other grave issues like
the slowdown in the economy and
unemployment. If the Congress still does
not learn its lessons, then it will have to
pay a price sooner than later.
Bal Govind Noida
Alternative solution
This refers to "Apex court strikes down
Finance Act rules on tribunals"
>
HAMBONE
required, so as to put any dispute to rest
at the initial stage itself. The Speaker may
be mandated under the revised provision
to seek advice from the Supreme Court
before certifying a Bill as Money Bill.
Alternatively, a panel comprising the Lok
Sabha Speaker, the Rajya Sabha
Chairman and a sitting Supreme Court
judge may decide the same. This will
avert any constitutional crisis.
Sanjeev Kumar Singh Jabalpur
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
 >
OPINION 11
STAY INFORMED THROUGH THE DAY @ WWW.BUSINESS-STANDARD.COM.

Volume XXIV Number 67

MUMBAI | MONDAY, 18 NOVEMBER 2019
HEADLINE INFLATION MONTH-ON-MONTH INFLATION look back at the performance of the MPC, it is easy to
know when the MPC got it right versus when the MPC
Y-o-Y growth (%) Figure 1 M-o-M SAAR (%) Figure 2 got it wrong, by looking at inflation outcomes about

Saving the telecom sector

one to two years after the decision. As an example, the
Indian MPC had two episodes in Figure 1 where the
inflation rate was at the bottom end of the range: this
shows that a year or two prior to these events, monetary
Govt should prevent a near-monopolistic situation policy was too tight.

T
he telecom industry is under severe stress — evident in the second When we look at the economic situation today, par-
quarter results of the two leading players. While Vodafone Idea has ticularly when we look beyond the GDP data, we are not
posted the biggest loss that corporate India has ever seen in a quar- in buoyant business cycle conditions. It is unlikely
that there will be a resurgence of utilisation of capaci-
ter, for Bharti Airtel the loss was the highest in its 24-year history.
ty, and tightness in the labour market, which can kick
Together, the two top telcos’ July-September quarter net loss ballooned to off inflation. Hence, our view of inflation at future
~74,000 crore due to the provisioning they had to make for the adjusted gross dates (of about one to two years into the future) should
revenue (AGR) dues. According to a recent Supreme Court judgment uphold- be relatively benign.
ing the government definition of AGR, telecom service providers must pay up In fact, our problem today is not that the policy
their past dues on licence fee as well as on spectrum usage charge (SUC) by the rate is too high. Our problem is that it has not filtered
end of January 2020. The Department of Telecommunications (DoT) has through most of the economy. Under normal condi-
asked all service providers to calculate their respective dues and pay up in three tions, the Indian bond-currency-derivatives nexus
works poorly, which gives a weak monetary policy
months as directed by the apex court. Estimates suggest a total payout of
transmission. On top of this, right now, many financial
around ~1.33 trillion by telcos, including by those who have been acquired or firms are impaired; they are focused on their own sur-

What should
gone out of business. vival and not on business opportunities. Lenders have
As both Bharti Airtel and Vodafone Idea have raised doubts over contin- pulled back from many sound borrowers. Under these
uing as “going concerns” in the backdrop of huge losses, piling debt, and conditions, the reality of access to credit and the price
pending AGR dues, the government has to step in fast. Union Finance Minister of credit, for a large number of people in the economy,
Nirmala Sitharaman has shown the way by saying that she doesn’t want any is very different from the picture seen in the 91-day

monetary policy do?

telecom firm to shut down and would like each of them to flourish. That
should translate into concrete action soon.
Without any relief from the government, British telecom major Vodafone
may decide to exit the India market. This would adversely impact the overall
business sentiment, especially the foreign investment climate. The company
has been among the biggest sources of foreign direct investment for India.
Vodafone Chief Executive Nick Read told the media last week that “if you’re not
a going concern, you’re moving into a liquidation scenario — can’t get any clear-
treasury bill rate (which is the de facto indicator of
monetary policy).
At the same time, the solution does not lie in gov-
ernment fiat, in orders to financial firms to change
interest rates in certain ways. We have to look deeper.
The recent inflation data is not a serious problem for the There are reasons why the financial firms are behaving
as they are. What is required is deep knowledge about
Monetary Policy Committee financial sector policy, and financial reforms that go to
the root cause of the problems in the financial system.

F
er than that’’, while blaming the regulatory environment for much of the woes. rom the viewpoint of the accountability of the
Reserve Bank of India (RBI) to Parliament and
Subsequently, he wrote to Prime Minister Narendra Modi, saying he was quot-
the public, it makes sense to
ed out of context and that Vodafone wanted to stay invested in India. However, focus on year-on-year
the numbers tell the real story, and indeed the road ahead for not just Vodafone changes of the consumer price index
but the entire telecom industry hinges on a potential relief from the govern- (CPI). This is comprehensible for a
ment. So far, the indications are that the government may lower the licence fee non-technical audience. This “head-
and also give a moratorium on paying spectrum charges. The industry expects line inflation” has accelerated from
the option of a long-term staggered payment of the AGR dues, besides a waiv- the bottom of 1.97 per cent in January
2019 to 4.62 per cent in October 2019
er on penalties and interests. Although it may be a challenge for the govern-
(see Figure 1). In October 2019, this
ment, facing a revenue shortfall, to allow such concessions to telcos, not doing went above the inflation target of 4
anything is no longer an option. per cent, though it must be noted that
It is correct that the incumbent telcos in the past indulged in high bidding the RBI is required to hold headline
during spectrum auctions, hitting their bottom line. Pricing by competition inflation in the range 2-6 per cent. SNAKES & LADDERS
pulled them down further, leading to a situation where only two private telcos Some people are concerned that
may remain with only one holding on as a strong player. It is equally true that the inflation rate has accelerated and AJAY SHAH
the telcos failed miserably in providing for the potential liability in their bal- there may be a case for rate hikes by
the RBI. It is important to observe that when the head-
ance sheet over the years. But to prevent a near monopolistic situation, further
line inflation rate dropped to 1.97 per cent for one
job losses, and erosion of business confidence, the government, which appro- month, this was outside the targeted range, which
priates about a third of the revenues of each player through various levies and runs from 2 to 6 per cent. When the inflation target is
taxes, must act. 4 per cent, we should be happy that we have stepped
away from breaching the targeted range (1.97 per cent)
to being back near the target (3.99 per cent in
Data credibility at stake September and 4.62 per cent in October).
Looking beyond the black box accountability, we
must switch from headline inflation to month-on-
Unfortunate fiasco over consumer spend survey month changes, computed using seasonally adjusted
beyond practical problems like the Kharif harvest and
Diwali demand; we get to see the underlying reality
after these ephemera have been
removed from the data. Each value of
year-on-year inflation is the average
of the latest 12 values of month-on-
month inflation. Perusing the latest
value of year-on-year inflation shows
us what was going on in the economy
in the past one year. Looking at
month-on-month inflation shows
what is going on in the economy right
now. The month-on-month inflation
rate peaked at 8.84 per cent in
September and actually declined to
7.09 per cent in October.
As Figure 2 shows, a value of 7.09
per cent for one month is not an
unusual value in the month-on-month inflation expe-
rience. In the past, individual months have seen bigger
values such as 10 per cent or worse, while the overall
performance of headline inflation was under control,
i.e. within the range from 2 to 6 per cent.
The task of the monetary policy committee (MPC)
is to look deeper, at the underlying economic condi-
tions. Monetary policy is hard because there is a lag
between the move by the MPC and its impact upon the
economy. Every MPC has to peer into the future, have
a sense of the forces at play, and anticipate how infla-
As an example, administered interest rates are an
important problem. When the inflation rate is at 4 per
cent, the interest rate of 8-9 per cent for the Employees’
Provident Fund (EPF) or Public Provident Fund (PPF)
works out to 4-5 per cent in real terms. In the past, the
real rate of return for the EPF or PPF was about 1 per
cent. There is a need to bring down the EPF/PPF rate
to about 5 per cent in nominal terms, in this new envi-
ronment.
Some people think that given the difficulties in the
economy, it is time to abandon the inflation target and
crashing the policy rate. A little institutional memory
will help. We should recall the hardship of economic
policymakers of the past — fighting high inflation. Of
the many problems that we see in India today, it is a
relief that inflation surges are not one of them. When
the full institutional power of the RBI is devoted to
one thing — delivering a headline inflation rate of
about 4 per cent — this removes one element of uncer-
tainty from the picture.
To earn the respect of the people in fiat money, we
have to do the right thing, over and over, for long peri-
ods of time. We are now standing on about 3 years of
sound money. This is not a time to rock this boat. Every
year that goes by, with monetary stability, we get a
deepening of the trust. We should hang in there, and we
will gradually reap the gains.
The writer is a professor at National Institute of Public

T
he credibility of the Indian statistical system has come under scruti-
ny yet again, after the government on Friday decided to scrap the
consumer expenditure survey, conducted by the National Statistical
Office (NSO) during 2017-18, because of “data quality issues”. The
decision came after the findings of the withheld report were published in this
newspaper. According to the survey, compared with 2011-12, monthly per capi-
ta consumer expenditure fell by 3.7 per cent in 2017-18 — the first decline in at
least four decades. While spending in urban areas went up by just 2 per cent,
it registered a massive 8.8 per cent decline in rural areas. The government’s deci-
sion to reject the report means India will not have a new poverty estimate until
the next survey is undertaken. The revision in the gross domestic product (GDP)
base year would also have to wait.
The findings of the survey and the way the government handled the
issue have raised several concerns. First, since overall economic growth has
slowed significantly since 2017-18, it is likely that consumption expenditure
in rural areas might have slipped further. This is worrying and indicates a
reversal in poverty reduction. Second, the government seems to have no
faith in the data presented by the NSO. Simply rejecting the survey has raised
questions over whether the decision was prompted by the government’s
unwillingness to accept data that doesn’t suit its narrative. It is possible that
the results were significantly affected by demonetisation and the introduction
of the goods and services tax. The government had also withheld the period-
ic labour force survey, which showed the unemployment rate at 6.1 per cent,
a 45-year high. The report was released with the same data after the general
election results were announced.
Third, as this newspaper has reported, there is a significant difference
between the Central Statistics Office and NSO estimates of consumption. While
the difference itself is not new and unique, the widening divergence deserves
attention. Since the CSO and NSO data on consumption presents a completely
different picture, it is bound to raise questions about the efficiency of the sta-
tistical system. Therefore, it is time to revamp India’s statistical system and enable
it to collect, process, and disseminate information with speed and accuracy. The
GDP data, for instance, comes with a significant lag and is subject to large revi-
sions, which affects decision making.
At a broader level, the importance of credible and timely data cannot be over-
stated. Decision making in both the government and the private sector depends
on the state of the economy. It is important to note that the GDP data is already
under a cloud because it doesn’t match high-frequency indicators. Withholding
data and rejecting official survey results will further damage the credibility of the
system. Non-availability or the unwillingness of the government to accept sur-
vey findings will hurt its ability to make policy decisions. Further, the private sec-
tor would be reluctant to invest if it doesn’t have a clear picture of the economy
and suspects official data. The government would be well advised to address the
problems in both the economy and the statistical system. Being in denial mode
is no solution.
data (see Figure 2). Seasonal adjustment helps us look
Reflections on RCEP and FTAs
I
ndia has decided not to join the 16-member
Regional Comprehensive Economic Partnership
because of concerns regarding sensitive sectors, the
liberalisation of the services sector, mode 4 relating to
movements of professionals, in particular, and the
large trade deficit with China as well as with countries
of the Association of Southeast Asian Nations (Asean).
We are now thinking of negotiating free-trade agree-
ments (FTAs) with other countries as well as under-
taking a review of the India-Asean FTA. At this point
it may be useful to reflect on some aspects of FTAs, in
general, and the Regional Comprehensive Economic
Partnership (RCEP), in particular.
First and foremost, it needs to be
accepted that mega regional trade
agreements are inevitable in Asia.
These agreements are used by like-
minded countries to align common
interests and evolve rules and disci-
plines to facilitate multiple crossings
of intermediate and final goods, which
is essential to global value chains
(GVCs) activity. The RCEP is one such
mega regional trade agreement and
entry into it would have been the AMITA BATRA
means for India to participate in
regional and global value chains. East
Asia has been the most dynamic hub of GVC activity
after the global financial crisis and, in fact, GVC activ-
ity for both Europe and North America with the Asian
GVC hub has also increased in this period.
Secondly, trade agreements work on the principle
of reciprocity. While it is true that preferential access to
the participating countries is inherent and basic to an
FTA, this holds true for all member countries. If we give
some preferences, we also get some preferences. While
existing (static) comparative advantage is the basis of
an FTA negotiation for preferential access, we must
also provide for dynamic comparative advantage. As
we participate in GVCs, the scope for developing com-
parative advantage in smaller intermediate tasks (as
against products) increases. So, newer comparative
advantages in manufacturing and accompanying serv-
ice tasks may develop and evolve in the process. It is
essential, therefore, that FTA negotiations be based on
tion is going to shape up over a year or two. When we
dynamic comparative advantage estimations rather
than solely on static considerations.
In the process of evolving comparative advantage,
some sectors will lose out. This, however, is not typical
of FTAs but of all trade. Trade liberalisation and, in
particular, preferential liberalisation under FTAs need
to be accompanied by policies and programmes to
assist labour in adjusting to trade-induced displace-
ment in the losing sectors. Countries like Japan, South
Korea, and Vietnam have implemented specific trade
assistance programmes such as retraining, relocation
allowance, education, and financial assistance as well
as support to small and medium enterprises and their
workers to cope with the consequences
of FTAs, trade, and economic reforms.
Thirdly, as regards trade deficit, it
may be worthwhile to consider that in
an age of GVCs, simple export-import
calculations that do not account for
third-country participation in pro-
ducing goods may not be the most effi-
cient estimates of bilateral trade
deficits. Given that China is both an
assembly and re-export base for many
countries, a trade balance estimation
based on value added may be a useful
exercise that we could undertake to
get a more accurate picture of our trade imbalance with
the country. Also, increase in exports and trade re-bal-
ancing, while desirable objectives, are not ex ante
assured outcomes. Enhanced competitiveness of
domestic industry, major factor market reforms, and
establishing a conducive trade and investment climate
are necessary for India to take advantage of FTAs.
Smaller countries like Vietnam have sought member-
ship in a higher grade Comprehensive and Progressive
Agreement for Trans-Pacific Partnership, aimed at far
deeper integration relative to the RCEP, with the moti-
vation of locking-in domestic economic reforms.
Fourthly, it may be useful for India to think beyond
mode 4 liberalisation in services sector negotiations.
Asean’s limited internal services sector liberalisation
and the fact that the India-Asean FTA in services has not
yet been implemented should have been sufficiently
indicative, a priori, of the difficulty in getting Asean on
Finance and Policy, New Delhi
board. Services that accompany or are necessary to val-
ue-chain production such as business, financial, trans-
port and logistics, or even high-end services like research
and design may provide us with newer opportunities
after entry into the RCEP. Identifying our potential com-
parative advantage in these areas will, therefore, equip
us with some flexibilities in the negotiation process.
Fifthly, a low utilisation rate, as is true of India’s FTA
with Asean, is not necessarily indicative of FTA ineffec-
tiveness or its limited potential to impact trade. It could
also be on account of limited understanding of the FTA
by business people. In addition to preferential margins
and rules of origin, government initiatives and sup-
porting consultations for industry, particularly SMEs,
have helped raise FTA utilisation rates in countries like
South Korea, which, like India, has been a latecomer to
the FTA process. Doubts of trade creating and enhanc-
ing benefits of FTAs have been countered by government
support mechanisms that include educational courses
for companies, information dissemination through FTA
portals, workshops, facilities for daily consultations, etc.
Sixthly, FTAs with the US and the EU are not sub-
stitutes for the RCEP as currently these are not the
most dynamic regions in terms of growth or GVC activ-
ity. Trade negotiations by the US with other countries
have followed the most unpredictable trajectory under
the Trump presidency. In India’s case, FTA negotia-
tions have yet to begin. With the EU, FTA negotiations
started in 2007. Over 12 years and many rounds, the
FTA has not been finalised and issues that have been
hardest to resolve are, as in the case of the RCEP, lib-
eralisation of agriculture, services mode 4, dairy sector,
and intellectual property rights, among others.
Lastly, and perhaps most importantly, foregoing the
opportunity to participate in the Asean-centric RCEP
may make the case for establishing our relevance in the
Asean-centric strategic construct of the Indo-Pacific
that much more difficult.
So, some rethink on joining the RCEP and using the
next couple of months to work on a multi-pronged
strategy with the help of trade experts and implemen-
tation of economic reforms is the need of the hour.
The author is professor, School of International Studies,
Jawaharlal Nehru University.

How to beat the market Simons first began investing as a

ket indexes like the S&P 500, now hold
$4.3 trillion (yes, trillion) in assets, it’s
that millions of investors have come to
realise that the “efficient market hypoth-
esis” Malkiel popularised is essentially
correct. Emphasis on “essentially.”
BOOK REVIEW Jim Simons is not a blindfolded mon-
key. A former code-breaker for the United
JOE NOCERA States government and a brilliant math-
ematician, he founded the most success-
human judgment, to make trading deci-
sions. But we don’t know much else. The
81-year-old Simons can be engaging in
person, with a wry sense of humour (he
may also be the last man in America who
still smokes in his office). But on the sub-
ject of his investing success, he is secretive
to the point of paranoia. Employees sign
ironclad nondisclosure agreements, and
are told to avoid media appearances and
young man after receiving $5,000 as a
wedding gift. He was a commodities spec-
ulator for a short time; watching soybean
futures soar “was kind of a rush,” he told
Zuckerman. But within a few years, he
and several colleagues were thinking
seriously about how they might create a
computerised stock trading system that
could search “for a small number of
‘macroscopic variables’ capable of pre-
dicting the market’s short-term behav-
ior.” In 1978, Simons left Stony Brook
University, where he had built its math
that the machines found profitable cor-
relations no human could ever suss out,
much less understand.
Zuckerman does a fine job of bringing
not just Simons to life but most of the
other “quants” who played key roles in
creating Renaissance’s system. For the
politically inclined, one of the most inter-
esting was the firm’s former co-chief exec-
utive, Robert Mercer, the conservative bil-
lionaire who funded Breitbart News and
Cambridge Analytica. Zuckerman por-
trays Mercer as “a peculiar but largely
benign figure within the company” who
You can certainly argue, as one for-
mer Renaissance executive does, that
hedge funds are “a game in which rich
people play around with each other, and
it doesn’t do the world much good.” You
could also argue, as another former exec-
utive guiltily put it, that working for
Renaissance “helped provide Mercer with
the resources to put Trump in office.”
But since this is a book about invest-
ing, I’ll leave you with one of Zuckerman’s
final thoughts: “For all the unique data,
computer firepower, special talent and
trading and risk-management expertise

T
here are few books in the investing
world as well known as Burton
Malkiel’s A Random Walk Down
Wall Street. First published in 1973, it has
never been out of print, and is now in its
12th edition. Its thesis is that “a blind-
folded monkey throwing darts at a news-
paper’s financial pages could select a
portfolio that would do just as well as one
carefully selected by the experts.”
To put it another way, the market is so
efficient that even professional investors
have little chance of beating it on a regu-
lar basis. If there’s one reason index funds,
which replicate the performance of mar-
ful investment firm the world has ever
seen. As Gregory Zuckerman notes in The
Man Who Solved the Market, even Warren
Buffett’s track record — 20.5 per cent
annualised returns since 1965 — doesn’t
approach Simons’s average of 39 per cent
gains over a three-decade span. And
that’s after his company has taken a 5 per
cent management fee and 44 per cent of
the profits.
The question has always been: How
does Simons do it? We know that his firm,
Renaissance Technologies, helped pio-
neer quantitative investing, relying on
complex computer programs rather than
industry conferences.
Zuckerman, a writer for The Wall
Street Journal, says he became fixated
with cracking the Simons code. And
though he doesn’t entirely succeed, he
divulges much more than anyone has
before. More important, despite the ten-
dency to dot his book with such daunting
phrases as “combinatorial game theory”
and “stochastic equations,” he tells a sur-
prisingly captivating story. It turns out
that a firm like Renaissance, filled with
nerdy academics trying to solve the mar-
ket’s secrets, is way more interesting than
your typical greed-is-good hedge fund.
department into one of the best in the
country, to start the firm that we now
know as Renaissance Technologies.
The story Zuckerman tells is about
how Simons and the mathematicians and
programmers he surrounded himself
with found those variables. They collect-
ed incredible amounts of historical data
— not just about stocks and bonds, but
about currencies, commodities, weather
patterns and all sorts of market-moving
events. They made plenty of missteps
along the way. But in time, they had gath-
ered so much data — and had computers
powerful enough to ingest that data —
liked to zing his liberal colleagues, but
mostly kept his own counsel. When his
role in conservative politics caused an
outcry, Simons felt he had to ask his long-
time partner to step down as co-CEO.
When you get right down to it, Simons
makes money because human behaviour
will never be completely “efficient.”
Those short-term anomalies Simons —
and other quants — unearth exist because
humans have always acted emotionally.
Those little inefficiencies are what emo-
tionless computers take advantage of.
Renaissance just happens to be better at
finding them than any other firm.
Renaissance has gathered, the firm only
profits on barely more than 50 percent
of its trades, a sign of how challenging it
is to try to beat the market — and how
foolish it is for most investors to try.”
In other words, stick to index funds.
© 2019 The New York Times News Service
THE MAN WHO SOLVED THE MARKET
Gregory Zuckerman
Portfolio/Penguin
359 pages; $30
12 POLITICS & PUBLIC AFFAIRS
>
MUMBAI | MONDAY, 18 NOVEMBER 2019 1

Sri Lanka steers towards China as China, Sri Lanka join

hands to take on IFC
Rajapaksa wins presidential poll SUBHOMOY BHATTACHARJEE
New Delhi, 17 November
incorporated in 2006 and is listed on
the Hong Kong and Shanghai Stock
Exchanges, with over 120,000 employ-
Competition to India’s international ees and a presence in 145 countries, its
Gotabaya oversaw the military defeat of Tamil separatists under his brother Mahinda 10 years ago financial centre in Gandhinagar has website says. The agreement for the
become magnified with Sri Lanka decid- transfer of the land was signed in the
SHIHAR ANEEZ & RANGA SIRILAL key positions, are also seen as closer to China, ing to collaborate with China to develop presence of Sirisena and the Chinese
Colombo, 17 November which has invested billions of dollars building a rival financial centre. ambassador to Sri Lanka, Cheng
ports, expressways and power stations. At the end of October, Sri Lanka Xueyuan.

S
ri Lanka’s former wartime defence chief But these projects have also led to high debt President Maithripala Sirisena handed Chinese news agency Xinhua quoted
Gotabaya Rajapaksa is set to become pres- levels for Sri Lanka. over the deeds for the transfer of 116 Sirisena as saying “the project was a
ident after his main rival conceded defeat In his first comments, Rajapaksa struck a con- hectares in Colombo Port City to China valuable long-term investment for the
on Sunday in an election that came months after ciliatory note, suggesting he would be a leader of Harbour Engineering Company Sri Lankan economy and expressed
bombings by Islamist militants threw the coun- all Sri Lankans, regardless of their ethnic and (CHEC) on a 99-year hope that the Port City
try into turmoil. religious identities. lease to build the finan- would attract higher
Rajapaksa oversaw the military defeat of "As we usher in a new journey for Sri Lanka, cial centre. volumes of foreign
Tamil separatists under his brother and then we must remember that all Sri Lankans are part China is present in a direct investment”.
president Mahinda Rajapaksa 10 years ago. He of this journey. Let us rejoice peacefully, with dig- big way in Sri Lanka However, other details
has promised strong leadership to secure the nity and discipline in the same manner in which despite earning criti- of the plan are not yet
island of 22 million people, the majority of whom we campaigned," Rajapaksa said in a tweet. cism for the unviable public. For instance, it
are Sinhalese Buddhists. Tamil political parties are strongly opposed cost of signature proj- is not clear on what
Rajapaksa, 70, would be the latest nationalist to Rajapaksa, who has faced allegations of wide- ects like the proposed terms Chinese finan-
leader swept to power across the world, tapping spread human rights violations of civilians in Hambantota port, for „ In October, Sri Lanka cial entities can set up
into the anger and fears of majority communities. the final stages of the war against the sepa- which it captured, President Maithripala shop in the CHEC proj-
He and his brothers, who are expected to get ratists in 2009. REUTERS again, a 99-year lease. Sirisena handed over the ect.
It is also building power deeds for the transfer of While major
projects and an airport 116 hectares of land in economies of the world

Debt trap and ethnic divide await Gotabaya

ADITI PHADNIS
New Delhi, 17 November
With Gotabaya Rajapaksa of the Sri Lanka
Podujana Peramuna (SLPP) winning the
election for the presidentship of our
southern island neighbour decisively (in
the first round of voting itself in a single
preferential vote system), the world is
agog about what this means for the
country’s future.
The biggest concern is the economy.
After the Easter bombings by radical
Islamists in April killed more than 200
people and injured over 400, the
prediction of every multilateral financial
agency was that the country’s GDP growth
would slip below the International
Monetary Fund's (IMF’s) 2019 forecast of
3.5 per cent and the Asian Development
Bank's (ADB's ) prediction of 3.6 per cent.
After the blasts, the minister of state for
finance, Eran Wickramaratne, said GDP
growth would be around 3 per cent. Polls in
May showed it could fall to 2.5 per cent. It
was a crisis for the country and the central
bank cut rates twice between May and
November to shore up the economy.
This was not the only problem. The
general impression is that degree of
indebtedness of Sri Lanka to China
because of loans taken as part of Chinese
Belt and Road Initiative (BRI) investments
in infrastructure development is extensive
— from 2008 to 2012, approximately 60 per
cent of foreign borrowings were from
China. But before that, Sri Lanka had
already walked into a debt trap of
commercial borrowings.
The largest portion of the country’s
foreign debt is international sovereign
bonds — 39 per cent of the total foreign
debt as of 2017. Besides loans have been
obtained from international capital
markets since 2007, and such bonds have
resulted in soaring external debt servicing
that does not enjoy the luxury of deferred
or relaxed payment schedules.
It didn’t help that the country’s political
leadership was at sixes and sevens, with
outgoing President Maithripala Sirisena
and Prime Minister Ranil Wickremesinghe
fighting each other at every step, and this
led a virtual standstill in the bureaucracy.
Now, a similar policy paralysis can be
expected for the next 12 months until the
parliamentary polls are held in November
2020. In Parliament, it is the United
National Party (UNP), led by Ranil
Wickremesinghe, that has a majority. In
the Sri Lankan system, while the president
has the right to appoint and dismiss
ministers and control over the armed
forces and national security, the prime
minister, through a recent constitutional
amendment, is empowered to take
decisions on the economy and allied
matters.
Other challenges persist, too. The
election results show that while Rajapaksa
had a landslide victory in the Sinhalese-
dominated southern districts (in Gampaha
and Galle, for instance, he got upwards of
60 per cent of the vote), opposition leader
Sajith Premadasa won a majority of votes
in the Tamil and Muslim-dominated
northern and eastern districts like Jaffna
and Batticaloa. This is a searing reminder
of the deep ethnic and racial divide
between the majority Sinhalese and the
minority Tamil/Muslim communities.
From India’s point of view, the new
in the country. Colombo Port City to CHEC have tried to develop
Colombo has for to build a financial centre international financial
some time been plan- centres, success has
ning to use reclaimed „ China is already been elusive. Rajesh
president’s foreign policy moves will be land from its port, the present in the island Chakrabarti, professor
crucial. “Gota will play the China card, but largest in South Asia, to nation despite earning and dean of Jindal
Beijing is now less inclined to repeat the develop an internation- criticism for the unviable Global Business
large financial investments it did five or 10 al financial centre, cost of signature projects School, says scale is
years ago because of growing domestic which, it says, will be necessary to develop
„ Colombo has forquite
opposition and international scrutiny,” located midway such a centre. “An
said Constantino Xavier, a foreign policy between Dubai and some time been expanding economy
fellow at Brookings India was quoted as Singapore. It is a proj- planning to use needs more avenues to
saying. But one thing is clear: National ect steered by Prime reclaimed land from its source finance, but
security and domestic law and order will be Minister Ranil port, the largest in South unless there is ade-
the new president’s foremost priority. In Wickremasinghe with Asia, to develop an IFC quate depth in the hin-
the current circumstances, will Sinhala- the expectation of “real- thatit claims will be terland, an IFC is diffi-
Buddhist organisations like the Bodu Bala ising financial assets located just midway cult to build up.” As an
Sena which were set up with moral and worth 10 per cent of Dubai and Singapore example, he says both
material help from the Rajapaksa family, GDP within the next Dubai and Singapore
especially when it was in the Opposition, five years”. depend on easy access
now become stronger? Or will they recede The GDP of the nation, according the to the rest of Asia.
to the background? This holds the key to World Bank data, is $88.9 billion (2018). About Sri Lanka’s proposed IFC,
stability on the island. The agreement reached between the experts said China was clearly explor-
This time, unlike the previous Sri Lankan government and CHEC Port ing ways to provide finance to its wave of
presidential election when India’s City Colombo notes of the 269 hectares infrastructure businesses from an off-
opposition to the Rajapaksas was the of reclaimed land in the port owned by shore base. Since many of its neighbours
world’s worst kept secret, the country has the Sri Lankan government through its run trade deficits with Beijing, those
stayed scrupulously out of the power urban development authority, 116 countries are reluctant to be financed
game, opting to be an observer rather than hectares will be on a 99-year lease for from markets like Shanghai or even
a commentator. In the process, it can count “further development”. The rest would Hong Kong, one of them said.
many in both camps as its friends. In the be for public and commercial use as part The expert who has been involved
end, what happens in the parliamentary of the financial centre. with GIFT in India said there will be
election in 2020 will be crucial: Whether India’s GIFT city, at 359 hectares, is competition. “The Indian government
the Rajapaksa family with Mahinda bigger than the Colombo centre. should move faster with the develop-
Rajapaksa as the SLPP’s prime ministerial CHEC is a subsidiary of China ment of GIFT, to keep this competition
candidate will dominate Sri Lanka’s Communications Construction at bay. We had factored in Singapore and
political landscape? Company. The parent company was Dubai but this is a new one.”
.
MUMBAI | MONDAY, 18 NOVEMBER 2019 COMPANIES 13 <

Voda Idea must better services Airtel, Voda Idea put the
brakes on costs in Q2
to plug user churn, say experts While the sector awaits a lifeline, a sharp reduction in
capital and opex has aided cash flows
Analysts say make customer centricity a priority to RAM PRASAD SAHU
Mumbai, 17 November
improve performance and reassure stakeholders
Bharti Airtel and Vodafone
ROMITA MAJUMDAR soon, with the company introducing a Idea saw some improvement
Mumbai, 17 November Rs 45 recharge to entice this base. in the September quarter, led
Amit Pau, a long-time former by a fall in operating and cap-

I
n the wake of the huge losses report-
ed last week by Vodafone Idea, ana-
lysts tracking its stakeholders and
employee sentiment say the manage-
ment must take a stronger customer-
centric approach.
The company is exploring ways to
monetise 160,000 km of optic fibre, as
well as its data centre business — apart
from seeking relief measures from the
central government. Chief executive
Ravinder Takker has also welcomed
potential moves by the telecom regula-
tory body to review floor pricing, as
something that could help the sector.
In the September quarter, its sub-
scriber base slipped by another nine
million, a reduced churn rate from ear-
lier, to 311.1 million. In comparison, at
the close of the same quarter a year
before, the number was 422 million.
And, average revenue per user (Arpu)
was ~107, compared to Rs 108 in the ear-
lier June quarter.
Sector analysts noted that apart from
exceptional items in the balance sheet,
the company had performed fairly in-
line with estimates.
“The good news is that the churn on
4G (fourth-generation technology) sites
(the high value customer base) for the 4G
customer base is actually significantly
lower than non-4G,” said Takker. He
added that churn is higher in the 2G
base but they expected this to stabilise
Vodafone managing director, currently
operations chief at Accloud, notes:
“Since the merger (of Vodafone with
Idea) the operator has lost over 100 mil-
lion subscribers. What might have hap-
pened is that when you merge two com-
panies, people end up focusing on cost
synergies and network rationalisation,
while losing focus on customer cen-
tricity and allowing competition to
storm the market."
Pau adds that in a highly competitive
market, Vodafone Idea has fallen behind
its rivals on 4G coverage and network
performance.
During the quarter, the company
added 5.5 million 4G customers (from
4.1 million at the close of the June quar-
ter), taking its 4G subscriber base to 90.3
million. Data usage volumes, while
improving, are still behind Airtel and Jio.
A significant chunk of both Vodafone
Idea and Airtel’s capital expenditure out-
go goes to telecom equipment providers.
While their largest such providers,
Ericsson and Nokia, did not respond to
queries on the future of their partner-
ships with the operator, industry sources
have confirmed that the companies held
internal meetings to assess the scenario.
And, found their engagement with
operators to be stable at present.
On the employee front, however,
there is significant uncertainty. Accor-
ding to reports, Takker addressed the
10,000-odd employees, mentioning
their outreach to the government for
relief.
Kris Laxmikanth, chief executive at
Head Hunters India, said: “Telecom
operators have already rationalised their
workforce over the past year; they have
the best resources in the sector, at pres-
ent. Given the fact that there are few
opportunities in the sector, it is not like-
ly for companies to start layoffs."
This lack of opportunities would
mean that voluntary attrition is not like-
ly to jump, he added.
Rituparna Chakraborty, executive
vice-president at TeamLease Services,
estimates around 150,000 profession-
als directly employed with the sector,
after the rationalisation over the past
three years. “The core network profes-
sionals will continue to be relevant, as
network operations will be in demand.
But, the replaceable skill sets like those
in front office roles face some uncer-
tainty,” he added.
ital expenditures.
Airtel reported a steep 51
per cent dip in consolidated
capex over the year-ago quar-
ter. Even on a sequential basis,
capex was down by a quarter.
The sharp reduction in capex
and an increase in operating Sharp reduction in capex and an increase in operating profit led
profit led to a 49 per cent jump to a 49% jump in operating free cash flows on a sequential basis
in operating free cash flows
on a sequential basis. four consecutive quarters of Suisse believe a two-year
RESULTS AT A GLANCE The savings on the capex decline. moratorium on spectrum pay-
Q2 performance front was largely because of Vodafone Idea’s opex has ment would significantly help
India operations where capex been coming down for each Vodafone Idea, as the compa-
„ Vodafone Idea „ Bharti Airtel „ Reliance Jio
is down by over 60 per cent of the past four consecutive ny would be able to sustain
from ~7,000 crore a year ago to quarters. On the user front, with existing and annual
Subscriber -8.9 less than ~2,800 crore in the the management indicated operating cash flow for the
addition 2.6 September quarter (Q2). the performance in next 18-24 months.
(mn) 24 Vodafone Idea’s India capex September and October is The reduction in licence
decline was similar. The com- encouraging with strong fee would also help sector
Broadband pany’s capex at ~2,140 crore momentum on 4G and newer profitability improving the
subscriber in the quarter is down 35 per additions that is boosting rev- medium- to long-term sector
112.2 124.2 355.0 cent from the year-ago levels. enues. outlook, they add.
addition
(mn) Vodafone Idea has revised While the capex and opex Maintaining the interconnect
its capex guidance down- cuts have helped Airtel and usage charge (IUC) at 6 paise
Data 10.4 wards to ~13,000 crore in FY20 Vodafone Idea in the Q2, ana- per minute for off net calls will
from the earlier guidance of lysts believe with incumbents also help the incumbents as
usage 13.1
~17,000 crore for the financial trailing Jio in their 4G roll- they are net gainers in IUC.
(Gb/Sub) 11.7 year. The cut in guidance is outs, curtailing capex may However, if a package does
because of better pricing, increase the gap between Jio not materialise, Vodafone
107 supply chain efficiencies, and and the incumbents further. with a net debt to operating
ARPU reduction in planned 4G foot- Analysts at Jefferies say Jio profit of over 24 times is at a
128
(~) print in non-priority areas. has twice the 4G base trans- risk of closing down. Analysts
120
The telco has also deferred ceiver stations as that of at SBICAP Securities say even
Sources: Companies, Bank of America Merril Lynch
some capex to FY21 as it Airtel, which in turn has twice if a package is announced,
believes that capacity require- that of Vodafone. The (AGR) subscriber loss for Vodafone
ment in the current financial payments will put further Idea is unlikely to stop any
year would be lower than esti- pressure and may force time soon. Even as Jio and

Airtel withdraws bid for purchase of RCom assets
PRESS TRUST OF INDIA Jio, Bharti Airtel Director
New Delhi, 17 November (Finance) Harjeet Kohli, in a
letter to resolution profes-
Telecom operator Bharti Airtel sional Anish Niranjan
has withdrawn its bid to pur- Nanavaty, said his company’s
chase assets of Reliance request to extend the dead-
Communications (RCom) line was turned down by the
after terming the move of the CoC of RCom but surprisingly,
committee of creditors (CoC) the dates have been extend-
to extend the bid submission ed to accommodate submis-
deadline on the request of sion by a bidder.
Reliance Jio “extremely “Given the complexities
unfair” and “biased”. involved in the proposed trans-
Without naming Reliance action, vide our letter dated
October 31, 2019, we request-
ed for an extension of time to
submit the resolution plan
from November 11, 2019, till
December 1, 2019...
Disappointingly, our request
for extension was rejected by
CoC,” Kohli said.
Bharti Airtel, Bharti Infratel
and private equity firm Varde
Partners have already submit-
ted their bids for assets of
Reliance Communications,
while Reliance Jio has sought
extension of the asset sale deal
deadline by another 10 days.
Airtel has placed a condition-
al bid to buy spectrum of
RCom, while Bharti Infratel
has submitted bids for mobile
towers.
The CoC extended the
deadline by 10 days and has
decided to open bid now on
November 25.
“To our utter shock, we
have learnt that the CoC has
now decided to extend the sub-
mission timeline to November
25, 2019, until 1200 hours, sole-
ly based on the request of
another potential bidder,”
Kohli said.
He said that since Bharti
Airtel's request was formally
declined by the CoC, the com-
pany was constrained to sub-
mit the bids under due haste
without the benefit of suffi-
cient time to complete the res-
olution plan within the set
deadline.
mated earlier. incumbents to curtail 4G roll- Airtel added 24 million and
The other gains came from outs, which will impact addi- 2.6 million subscribers in the
operational improvement, tions and long-term prof- September quarter, respec-
especially for Airtel. While itability, they say. tively, Vodafone Idea lost
revenues came in line with For now, the sector is nearly 9 million users.
expectations, a 35 per cent awaiting policy steps, which Most analysts say the sec-
reduction in sales, general, could alleviate the stress both tor is headed for a duopoly.
and adminstration expenses on account of a competitive Experts at Emkay believe that
in India operations led to 7 per environment as well as its anticipated weakening of
cent sequential gains in con- debt load. A government pan- Vodafone Idea’s financial via-
solidated operating profit. el is expected to recommend bility after AGR penalties
Even as average revenue per reduction in licence fee by 3 offers an opportunity for
user at ~128 was flat, it was the per cent, stagger the AGR pay- Airtel and Jio to gain market
subscriber base, which grew 1 ment over the next 5-10 years share. Eventually, two large
per cent sequentially that and offer a two-year morato- players controlling the mar-
helped the top line. The sub- rium on spectrum auction ket could result in tariff rise
scriber numbers went up after payment. Analysts at Credit from FY22, they add.

FROM PAGE 1

Corporate India’s Q2 profit at comparison, the top line had grown by 13.1 per cent YoY a year
ago.
power sector as well.
Changing the energy mix with a rising share of renewable
15-yr low on telco losses Excluding telecom, the combined profit of the sample
companies was up 20.3 per cent YoY during Q2, driven by
sources, climate change concerns, abundance of natural gas
supply, and volatility in the oil market form part of this long-
gains from a cut in corporate tax rates earlier this year and term outlook.
some help from lower input costs. The official said global investors wanted a stable and long-
Excluding tax gains, PBT was up only 3.8 per cent YoY, term energy outlook for India, and such a policy, keeping the
growing at its slowest pace in the last three quarters. latest scenarios in mind, “has never been drafted in this coun-
Experts, however, are most worried about the contraction try”.
in companies’ net sales during the quarter. “Losses in telecom Following the targets set under climate-change consulta-
sector are exceptional in nature and could reverse, but con- tions, the NEP is looking at “reducing the consumption of fos-
traction in corporate revenues is a bigger worry and is a neg- sil fuel but not coal”, said a senior executive who is part of the RIGHT SWIPE · Tax Administration
Reforms Commission
ative operating leverage for companies. If it persists, corporate consultations. · Some developed
earnings could remain depressed for some time to come,” During climate-change negotiations, India has stated it had recommended in
countries such as the UK
says Dhananjay Sinha, head research and strategy at IDFC will have 40 per cent of its energy from non-fossil fuel sources, 2014 that the use of
and Canada allow the
Securities. but cannot commit itself to reduction in using coal. multiple platforms for
payment of taxes via
According to Sinha, earnings in many sectors were aided The tariff policy, which has been pending for more than tax payment should be
credit cards
by lower commodity and energy prices, besides cut in corpo- seven months, will also be based on the NEP, official sources implemented ‘using
rate tax during the quarter that cushioned the blow. These said. This, they said, is to address the worsening condition of · Canada also allows the credit or debit cards, e-
one-off gains may dissipate in a few quarters unless there is state-owned power distribution companies (discoms). use of mobile wallets like banking as well as
pick-up in demand and volume growth. “The Centre can’t keep pushing the same set of financial PayPal mobile platforms’
Analysts say that unlike 2015 when a decline in revenues restructuring again. It is not a solution. The functioning of the
was largely restricted to oil and gas companies and metals pro- discoms needs to evolve and be efficient,” said an official.
ducers, it is now widespread, with the exception of informa- The NEP has proposed that any funding by the Centre to
tion technology (IT) services exporters and fast-moving con- the states should be linked to their quality of power supply. It to generate a challan number and BSR (basic statistical
sumer goods (FMCG) companies. has also reiterated the need for direct benefit transfer (DBT) returns) code immediately and then report it in the I-T return,”
“In the past few years, the terms of trade had moved in of subsidy in power rates. he added.
favour of the corporate sector, in general, and the non-farm “Tariffs should be market-driven and the mentality among The Tax Administration Reforms Commission had rec-
sector, in particular, due to lower commodity and food prices. consumers that electricity is free or should be subsidised ommended in 2014 that the use of multiple platforms for tax
This has begun to shift as indicated by the recent rise in food should change. It’s an economic product and needs to be payment should be implemented ‘using credit or debit cards,
and farm produce prices. This could potentially hit corporate treated as such. We have suggested the means to make tariffs e-banking as well as mobile platforms
margins and urban demand, adversely affecting earnings in market-linked,” said a senior officer.
the forthcoming quarters,” added Sinha. The NITI Aayog has introduced two chapters in the draft
Their combined profit before tax (PBT) was also down 71 per Other experts also sound cautionary. NEP — ‘Subsidy and taxation reforms’ and ‘Restructuring of
cent year-on-year (YoY) to ~32,000 crore, against ~1.13 tril- “While the overall net profit growth (for our universe) was energy sector governance’.
lion a year ago, and a similar level of profit during the first 10 per cent above our expectations, primarily due to the cor- Domestic fuel sourcing is also one of the pillars of the NEP,
> BS SUDOKU # 2898
quarter of the current financial year. porate tax rate cut and low raw material prices, sales contin- which favours enhanced domestic coal production, and man-
The combined net sales for companies, excluding finan- ues to drag, due to widespread domestic and global slow- ufacturing in the renewable sector.
cials and oil, were down 0.4 per cent YoY — their worst quar- down,” said Pradeep Kumar Kesavan and Anushka Chhajed of
terly showing in at least three years. In comparison, their top Elara Securities in their Q2FY20 earnings review.
line had grown by 13.1 per cent YoY a year ago and by 4.7 per
cent YoY during the April-June 2019 quarter.
Banks and retail non-banking financial companies, includ-
ing insurance companies, were the top performers during the
Coming soon: UPI, mobile
Excluding telecom, India Inc’s combined PBT was still
down 11.3 per cent YoY to ~1.04 trillion, from ~1.18 trillion a
quarter, with double-digit growth in net interest income and
PBT. Their combined profit was higher by at least ~28,000
wallets, for paying taxes
year ago, indicating a weak economic environment. The com- crore in Q2, compared to the year-ago period. India also has a handful of
bined net profit though was up 15.5 per cent YoY during Q2 to FMCG companies, such as Hindustan Unilever and Nestlé, mobile wallet services, includ-
~89,000 crore, but mainly due to the change in taxes. and IT services exporters, such as Tata Consultancy Services ing Paytm, Amazon Pay, CASHING IN ON
The listed mobile operators, such as Bharti Airtel and and Infosys, reported between 5 per cent and 8 per cent YoY OlaMoney, among others. At CASHLESS
Vodafone Idea, together reported a net loss of ~1.05 trillion dur- growth in net sales, but PBT underperformed, with 2-4 per present, one can pay tax using Share of non-cash
ing the quarter, compared to a net loss of ~4,100 crore a year cent YoY growth due to poor pricing power in the face of glob- the debit cards of only six transactions (%)
ago. The industry has now been losing money for 11 consec- al demand slowdown. banks — State Bank of India,
utive quarters, beginning April-March 2017. In the last 33 In comparison, oil and gas, metals and mining compa- HDFC Bank, Canara Bank, ICI- Sweden 59
months, the industry has cumulatively lost ~1.75 trillion, nies, and automakers reported a contraction in the top line CI Bank, Indian Bank, and France 59
equivalent to nearly 50 per cent of its cumulative revenues in and the bottom line during the quarter. Punjab National Bank. Canada 57
the period. Some developed countries UK 52
If the entire sample of 2,493 companies (including telcos, such as the UK and Canada SOLUTION TO #2897 Medium:
financials, and oil), whose numbers for Q2FY20 are available,
is considered, India Inc reported a combined net profit of
NEP to be umbrella plan for allow the payment of taxes via
credit cards. Canada also allows
USA
Australia
45
35

~36,500 crore — the lowest quarterly figure in at least 15 years.
The combined earnings were down 68 per cent YoY, from
energy ministries the use of mobile wallets like
PayPal.
Germany 33
Japan 14
Solution
tomorrow
~1.13 trillion a year ago. The sample companies’ combined Archit Gupta, founder and
China 10 HOW TO PLAY
PBT was down 35 per cent YoY to ~1.13 trillion, from ~1.74 tril- Earlier, the FAME (faster adoption of manufacturing electric chief executive officer, Fill in the grid so that
lion a year ago. vehicles) scheme called for an inter-ministerial action plan. ClearTax, said that adding Russia 4
every row, every col-
The contrasting growth in PBT and post-tax profit is attrib- The validity of the NEP has been suggested to be till 2030. more channels of tax payment Note: All figures are for 2017
Source: Forex Bonuses umn and every 3x3
uted to a sharp jump in deferred taxes led by mobile operators. Officials said it had been sent to the Prime Minister’s Office would give taxpayers more box contains
The combined sales (net interest income in case of lenders) already. options to choose from and the digits 1 to 9
for these 2,493 companies were down 0.8 per cent YoY during India’s apex think tank has been drafting the NEP since make their payments quickly and easily. “It is important that
the quarter — their worst showing in at least three years. In 2017. Officials say it will address some of the latest issues of the these methods function smoothly, so that taxpayers are able
14 PERSONAL FINANCE MUMBAI | MONDAY, 18 NOVEMBER 2019

VALUE OF ~1 LAKH SENSEX

1-YEAR
GOLD SILVER FD (SBI) PPF
INVESTED IN VARIOUS ASSET 1,14,453 1,23,398 1,21,456 1,06,650 1,08,000
CLASSES 1-YEAR 1,14,453* 1,16,379 1,15,019 1,04,655 1,08,000
POST-TAX RETURNS
*Note: Cumulative equity gains up to
~1,00,000 in a financial year are tax-free. 5-YEAR 1,43,891 1,44,292 1,20,467 1,50,366 1,51,757
All post-tax returns are calculated for an
individual in the 30 per cent tax bracket, 5-YEAR 1,43,891* 1,39,863 1,18,420 1,33,507 1,51,757
without considering the indexation benefit POST-TAX RETURNS
As on November 15, 2019, in ~; compiled by BS Research Bureau
> .

Deploy VRS money in both equities and debt

While equities will help your portfolio combat INVEST IN THEM FOR REGULAR INCOME Name emergency corpus equal to at least 12
months’ household expenses, including
inflation, debt will generate a regular income Rate of return (%) Maximum amount Taxation EMIs, insurance premiums and school
you may invest (~) fees, as it is hard to tell how long the job
BINDISHA SARANG & SANJAY KUMAR SINGH years left until retirement. Senior Citizens 8.6 15 lakh per person 80C benefit. search will take during a slowdown.
Savings Scheme Interest taxable According to M. Barve, a Mumbai-based

A
s the impact of the economic
slowdown hits home, it is fast
turning into a season of pink
slips. Information technology
(IT) majors like Cognizant, Infosys and
Capgemini have announced retrench-
ment plans. The automobile sector has
witnessed mass lay-offs. Meanwhile,
media reports suggest that over 80,000
employees of Bharat Sanchar Nigam Ltd
(BSNL) and Mahanagar Telephone Nigam
Ltd (MTNL) have opted for the voluntary
retirement scheme (VRS) offered by the
public-sector duo. If you are among those
who have been laid off, or intend to avail
of your company’s VRS scheme, here is
what you need to know about the com-
pensation you will receive, and how you
should deploy the considerable corpus.
Compensation depends on period of
employment: When an employer
retrenches employees, it needs to pay
them compensation if they fall under the
purview of the Industrial Disputes (ID)
Act, 1947. Says Anuj Shah, Mumbai-based
certified financial planner: "Under the ID
Act, an employee is eligible for retrench-
ment compensation amounting to 15
days' (last-drawn) salary for each year of
service completed." Employees who have
worked for more than a year must be giv-
en a month's notice, or salary in lieu.
The law does not prescribe any limits
on how much should be paid in a VRS.
Companies usually compute the compen-
sation based on the number of years for
which the employee has worked, and the
Who qualifies: A person doing skilled,
technical, unskilled, or manual job qual-
ifies as a "workman" under the ID Act,
1947. The nature of work is typically rou-
tine and repetitive. “Those in adminis-
trative and managerial tasks do not qual-
ify,” says Nand Kishore, advocate, DSK
Legal.
Persons in jobs that require creativity
or innovation also do not qualify as work-
men and hence fall outside the ambit of
the ID Act. The IT-ITES industry is a case
in point. Some think that highly-qualified
software professionals, for instance,
should not qualify as workmen while BPO
employees, who undertake mostly rou-
tine jobs, should.
There is, however, some ambiguity
around this position. A labour court in
Madras recently took the view that IT-
company employees are covered under
the definition of workmen, and their
employers should not have retrenched
them without following the procedure
under the ID Act.
Due to the uncertainty in the law,
experts say it is prudent to take the con-
servative view that so long as the job
undertaken is skilled, unskilled, manual,
or technical, such employees would be
workmen and hence entitled to benefits
under the ID Act.
Tax implications: There's some good
news on this count. Section 10 (10B) of
the Income Tax (I-T) Act provides that
retrenchment compensation received by
a workman under the ID Act, 1947, or any
other Act, is exempt to the extent of the
least of the following: actual amount
received; 15 days’ average salary for every
completed year of continuous service, or
part thereof in excess of six months; or ~5
lakh. Hence, if a worker gets ~10 lakh, he
will be exempt from tax up to ~5 lakh and
will have to pay it only on the balance.
The compensation that people in
managerial or supervisory positions get
is taxable as salary under Section 17(3) of
the Act. Under Section 10 (10C) of the I-T
financial advisor, "Younger people with
Pradhan Mantri Vaya 8 (monthly); 8.3 15 lakh per person Income taxable have many working years left may use a
Vandana Yojana (annual payout) part of the compensation to re-skill them-
Public Provident Fund 7.9 1.5 lakh per annum 80C benefit. selves. Some part may also be used to
Interest tax-free repay high-cost debt.” If money is still
left, invest it in equity funds to meet long-
GoI Bonds-7 year 7.75 No limit Interest taxable term goals. Instead of making a lump-
Annuities Varies widely sum investment, use the systematic
depending on age transfer plan (STP) route.
of buyer and People who are close to retirement and
do not intend to go back to full-time work
nature of annuity No limit Interest taxable
again should deploy a part of their VRS
Source: Indiapost; LIC; companies money in equities so that it keeps growing
at a faster rate and helps them combat
ENTER EQUITY FUNDS FOR AT LEAST 7 YEARS inflation (see: Invest in equity funds for at
least seven years). The balance should be
Category average
invested in a variety of debt instruments
SIP return (%) 5-year 7-year 10-year (see: Invest in them for regular income) to
Large-cap 9.09 11.02 11.21 generate a regular income for meeting
Multi-cap 8.30 11.35 11.96 monthly expenses. Of the debt portion, a
part should go into buying annuities for
Mid-cap 5.83 11.86 13.51
a regular income in retirement. “Buy an
Small-cap 3.37 10.1 11.41 annuity plan without the return of pur-
Data as on November 14, 2019 Source: mutualfundindia.com chase price option for better returns. And
the later you buy it, the better will be the
returns,” says Deepesh Raghaw, founder,
Act, 1961, VRS compensation of up to ~5 under Section 89(1) read with rules 21A PersonalFinancePlan.in, a Sebi-registered
lakh is also tax-exempt. in respect of increased effective tax rate investment advisor. The balance of the
The good part is that if you end up get- on account of inclusion of retrenchment debt portion may be invested in schemes
ting a compensation amount that pushes compensation in his total income.” like Senior Citizens Savings Scheme,
you into a higher tax slab, you don't need Section 89 (1) provides relief to employees Prime Minister Vaya Vandana Yojana
to worry about the extra tax. Says on taxation of arrears. To claim relief (PMVVY), and so on.
Mumbai-based chartered accountant N. under this section, an employee needs to Given the 25 years or more that people
A. Shah: "If an employee has been in fill Form 10E and file it at are likely to spend in retirement, they
employment for at least three years prior www.incometaxindiaefiling.gov.in should also attempt to generate some
to termination and his balance period of income through part-time work to sup-
employment on the date of termination Making the money last: A part of the plement the income from their
is also three years, he can claim relief money received must go into creating an investments.

Tough call for RBI SHOP AROUND FOR BEST CAR LOAN OFFER
The deal being offered at the car
On one hand, growth is slowing down, while CAR LOAN- RATES AND CHARGES
on the other, inflation is inching up showroom may not be most attractive Bank Interest EMI (~) Loan Processing Loan limit Maximum
BINDISHA SARANG such a loan. rate (%) amount: ~5 lakh; fee (~) tenure
Tenure: 5 years (yrs)
cards. If the global economy does n When you go car shopping, n Use your pre-existing
slow down, it’s quite possible the Fed
car dealers offer you a loan State Bank of India 8.75- 12.1* 10,319-11,148 Nil till Dec. 31, 2019 Up to 90%**
will cut rates again. The European relationship with your
through a pre-existing tie- (Up to 100% under
Central Bank could also ease, given bank to get a car loan at
up with a financier. specific schemes) 8
impending Brexit and flat growth concessional rates.
across the rest of the European Remember, dealers usually Axis Bank 8.95 -11.20 10,367-10,921 3,500–5,500 Up to 100% ** 8
Union. The People’s Bank of China get 1-2 per cent n Remember, interest rates
can differ for different car HDFC Bank 9.50-10.25 10,501-10,685 3,000-10,000 Up to 100% ** 7
(PBoC) has held its policy interest commission on your loan.
rate so far, despite a slowdown in models even if the loan is Punjab National Bank 8.55-9.00 10,270-10,379 Up to 1,500 Up to 90%** 7
n It makes sense to shop taken from the same bank.
MARKET INSIGHT China. But the PBoC could also cut
if the trade war, and protests in Hong around by checking out This can impact your Union Bank of India 8.20-8.70 10,186-10,307 Up to 15,000 Up to 85%** 7
DEVANGSHU DATTA Kong continue, since both are drag- what other lenders are overall budget. Allahabad Bank 8.55-10.00 10,270-10,624 Up to 8,696 Up to 85%** 7
ging down growth. offering—your bank, other
Most available data points suggest The other major factor driving banks, and NBFCs. n Bank employees have to Canara Bank 8.45 -11.05 10,246-10,884 1,000 - 5,000 Up to 90%** 7
that GDP growth slowed further dur- equities is the absence of attractive meet month-end targets UCO Bank 8.35-8.60 10,222-10,282 Up to 1,500 Up to 85%** 7
ing July-September 2019. The State alternative investments for Indian n Many times, your bank and may get frantic to close
Bank of India (SBI) says that out of investors. Debt and real estate are may offer you a pre- the deal around that time. Indian Overseas Bank 8.7 10,307 500-10,000 Up to 90% 7
26 indicators that it tracks, as many two “go-to” assets for Indian approved loan. Find out if Use it to pressurise them to Oriental Bank of
as 21 slowed down. For example, tax investors. A breakdown in those you have this offer. You can give you better terms — a Commerce 8.05-8.50 10,150-10,258 2,500-7,000 Up to 85%** 10
collections were down, automobile assets has meant cash flowing out of negotiate with your bank processing fee waiver, *Additional concession of 0.25% on application through the SBI YONO app. Concession of 0.20% available on purchase of electric vehicle,
sales were down, the Index of these, and into equities.
to give you a better rate on perhaps. **Percentage of vehicle's on-road price. Rates as on November 14, 2019 Source: Paisabazaar.com
Industrial Production was down, Normally rate cuts are good for
and imports and exports were down. debt instruments. But the continu-
Most estimates for Q2 GDP ing trend of defaults has made

Golf gear to tee off in style

growth range between 4.2-4.7 per Indian investors wary of debt. The
cent with estimates for the full year real estate market is down and even
2019-20 also getting scaled down. the recent ~25,000 crore support for
The pessimistic forecasters include real estate may not be enough to
the SBI, the Reserve Bank of India turn things around quickly.
(RBI), the International Monetary Another traditional asset – pre- Moving up the ladder as a professional requires the very best equipment
Fund, the Asian Development Bank, cious metals – has done better. Gold
World Bank, etc. In addition, and silver have both seen bull runs
Moody’s has downgraded the in the past six months to a year. But
NAMRATA KOHLI Rub of the ‘green’
sovereign credit rating outlook to both metals have also corrected After retiring from cricket, leg- Golf gear Premium brands Price range Other brands Price range (~)
“negative”. slightly in the past month. This does, endary all-rounder Kapil Dev Golf apparel* Taylormade, Callaway, Titleist, 3,000-10,000 Inesis, Reebok, 1,000-3,000
However, major market indices to some extent, suggest there’s been took up golf and even emerged
Nike, Mizuno Under Armour Adidas
remain up. The Nifty gained 4.7 per slow demand during the festival sea- champion in a few prestigious
cent in the past month or so. So, son, when Indians traditionally buy tournaments. The former Indian
who’s doing the buying? Foreign gold. Ideally, however, November captain feels that a game of golf Golf shoes Footjoy, Ecco, Under armour 8,000-27,000 Inesis, Reebok, Adidas 3,000-10,000
portfolio investors (FPIs) data will be required is far more engaging for the mind,
Golf caps Taylormade, Callaway, 500-2,000 Inesis, Reebok, Adidas 200-1,000
have bought over ~35,000 Among before we can de-season- body and soul than cricket, and
crore in rupee assets in traditional alise across the entire fes- also helps you forge deeper bonds
Titleist, Nike, Mizuno
October and November tive period from “Sradh” with people. Nothing else Under Armour
(until November 14), with
assets, only to Diwali. describes the essence of the game Golf kit ** Taylormade, Titleist 80,000-2.5 lakh Inesis, Chinese brands 60,000-80,000
about ~27,000 crore in gold and silver Despite the strong FPI as aptly as this saying: “To find a
equities. Domestic insti- have done well inflows, and a lower man’s true character, play golf
Golf ball Callaway, Taylormade, Titleist 400-4,000 Inesis, Srixon 50-400
tutions have been net over the past trade deficit, the rupee with him.” And, the golf course is Golf gloves Mizuno, Callaway 600-4,000 Viper Golf, Inesis 200-500
equity sellers, to the tune has declined. Moreover, universally known for being a
six months to (*Shorts/Trousers/Tshirts with collar) **Comprising a driver, 1 -2 Fairway woods, Hybrid, 5-6 different Irons, Pitching Wedge, Sand Wedge and
of about ~900 crore in inflation has risen, to 4.6 great networking place for build- Putter in a Golf bag. Source: Companies
October and November. one year per cent year-on-year in ing business and social contacts.
Mutual funds have October. This is largely and pick up a set for intermediateTaylormade is the most pre- one needs. Retailers say
seen inflows of about ~6,200 crore due to higher food prices. However, Is golf expensive? You need to golfers, which could cost any- ferred, irons from Mizuno, gloves there is a great deal of cus-
into equity schemes in October. The core inflation (ex-food and ex-fuel) invest in equipment and lessons, thing between ~50,000 and from FootJoy, balls from Titleist, tomisation in golf equip-
bulk of that has come from retail is running at 3.5 per cent. and several rounds on the course ~80,000. Once he gets to the pro- and wedges from Cleveland rule ment – from head angle of
investors. The positive inflows into This makes for an intriguing sit- before you get recognised as a fessional level, he could end up their respective segments. But the club, to flex, shaft and
equity mutual funds indicate strong uation ahead of the RBI’s next policy serious golfer. The game is essen- spending between ~80,000 and you also have new entrants like loft, and kits that cater to the
retail sentiment. This is reinforced review in early December. Growth is tially the rich man’s preserve. In ~2.5 lakh or above. Trolleys Axglo, which has dented right-handed or left-handed –
by gains in small cap and midcap down – so there’s an argument in fact, several clubs that are “by the market by offer- manu-
indices in the past month. Those favour of yet another rate cut. But invitation only” and cater exclu- The gear: The kit typ- Prominent brands ing high quality at facturers
indices are also largely driven by the repurchase (repo) rate is at 5.15 sively to the affluent. Despite all ically consists of a in golf gear include affordable prices. are will-
retail attitude. per cent with the CPI running at 4.6 this, you can make your way into driver, one or two fair- Taylormade, Says Garg of ing to go
Is all the optimism justified? per cent. Due to lower core inflation, the circuit even on a low budget. way woods, hybrid, Callaway, Titleist, Golfoy.com, “All the extra
Corporate results have not been there may be room for another cut. “A new entrant to the game can five-six different Nike, Mizuno, major golf brands mile to cre-
strong. Revenue growth has been That would put the real repurchase start training with just a single irons, pitching wedge, Under Armour, invest a lot in ate bespoke equipment that pos-
low, though the cut in the corporate rate (net of inflation) into zero terri- iron and golf gloves that would sand wedge and a put- FootJoy, Inesis, research and devel- itively impacts a golfer’s swing The shoes are made of soft
tax rate seems to have boosted prof- tory. So, the RBI has a difficult together cost him less than ter in a golf bag. Reebok and Adidas. opment to see how speed, distance, and straightness. spikes. Take the case of ECCO
itability. Inflows are being driven to decision. ~5,000,” says Sanchit Garg, co- Depending on the There are favoured they can improve shoes, a brand that makes golf
a large extent by liquidity, and the Based on a recent compilation of founder, Golfoy.com, an online brand and the materi- brands in each their equipment, Specific clothes and shoes: Golf shoes costing between ~ 18,000
hopes of greater liquidity. Q2 results for 1,697 companies, net portal that sells golf gear. al used, such as steel product category. and make the ball go shirts are collared, and the fabric and ~ 27,000. Says Liam Maher,
Global growth is in slowdown profits increased by 22.5 per cent, According to him, once the or graphite, you could fastest and longest. is largely polyester with some bits global creative director, ECCO,
mode and central banks are expect- while revenue fell 0.2 per cent. (This person is adequately trained to spend anything from So, every year they of cotton, says Zubin Bhaseen, “Our golf range provides the per-
ed to ease through the next year. set excludes Vodafone and Airtel.) If start playing on the course, he a few thousand to a few lakh come out with something unique. India director, golf distribution, fect balance of style, cushioning,
America’s Federal Reserve has cut financials are excluded, net profit needs to put in something like rupees. And anything that boosts the Mizuno. “The apparel is able to rebound and stability.” Adds
rates thrice in 2019 and the RBI has growth is 11.3 per cent and revenue ~30,000-40,000 to buy a full golf Prominent brands in golf gear golfer’s performance generates soak in the sweat as players nor- Aashish Mashruwala, CEO of the
cut rates five times. Lower rates fos- is down 3.3 per cent. Sector-wise, IT, set for beginners worth ~25,000- include Taylormade, Callaway, high demand. Currently, the mally walk 8-10 kilometres under company in India, “If you see the
ter a risk-on attitude and create pharma, private banks, and FMCG 35,000, and basic accessories like Titleist, Nike, Mizuno, Under recently launched C3i sand the sun. So sweating is inevitable. outsole, there are two points – the
room for stocks to sustain higher are the best performers. Precious gloves, tees and balls that would Armour, FootJoy, Inesis, Reebok wedge is a bestseller for its ability The material is synthetic and toe and the ankle – where the
valuations. metals and forex assets continue to cost him another ~2,500. The and Adidas. There are favoured to get out of the bunkers.” lightweight, with loose sizing, so pressure comes when you swing,
More liquidity is certainly on the look like the best options. player can then upgrade the set brands in each product category. The more one plays and prac- that golfers can swing the clubs and these two parts are rein-
to the next level once he is ready, So, while a driver from tises, the better one knows what easily,” says Bhaseen. forced in our golf shoes.”
 MUMBAI | MONDAY, 18 NOVEMBER 2019
“Future Group’s partnership with the iconic
brand 7-Eleven will build new pathways to
offer convenience and choice to consumers”
KISHORE BIYANI
Founder & chief executive officer, Future Group
> .
Chip of a new block
Here's how Intel is
working on the next
set of innovations
NEHA ALAWADHI
I
ntel knows how to change with the
times. As the component markets
looks ready to splinter into pieces,
Intel — which had faced a similar
existential threat in the post-PC era — is
ready to change tack. It is targeting every
corner of the data centre, with products
aimed at storage, network services, IoT
devices and infrastructure and AI accel-
eration systems. India happens to be a
key pivot of its new strategy.
The average Indian consumer con-
sumes 13 gigabytes (of data) across
devices a month. For businesses looking
to harness the true potential of this data,
leveraging technologies such as AI and
5G is crucial.
In its revamped avatar as a data centric
company, the world’s largest chipmaker
Intel is working on the next set of innova-
tions piggybacking on 5G network deploy-
ment and on newer ways to store and
process data. Its local arm, Intel India, has
aligned itself with this goal, and hopes to
leverage investments lined up by the par-
ent and the research and development
(R&D) capacities developed over the past
many years.
The crux of Intel’s India strategy rests
on providing customised solutions for
data storage, developing application-
based AI research models across domains
such as health care and education and
tapping the business opportunities arising
from the 5G rollout. Nivruti Rai, country
Haier looks for glamour
away from the spotlight
With three women sportspersons as endorsers, the Chinese consumer
electronics brand is tapping into the appeal of underdog branding
ARNAB DUTTA
In a strategy markedly different
from that of other Chinese brands
in the country, One Plus, Vivo and
Oppo in smartphones or MG
Hector in the automobile sector,
consumer electronics brand Haier
is keeping away from cricket and
the A-list of endorsers. It has
signed on sportspersons Hima
Das, Dipa Karmakar and Simranjit
Kaur as ambassadors for a cam-
paign for its newly launched
range of washing machines, hop-
ing thereby, to tap into the wide-
spread appeal of underdog brand-
ing, said experts.
Underdog branding is broadly
understood as a strategy where
the brand adopts the story of a
protagonist who has struggled
against the odds to rise to the top,
as its own. It particularly res-
onates with consumers during
tough economic times. Haier has
used the three ambassadors and
The battle is outside, not within
Bhadkamkar tells Viveat Susan Pinto what
his priorities are as the ad industry grapples
with a slowdown
What is Slingshot, launched by
DAN recently?
The creative agencies need an arm
to think digital. While you may
argue that we have all the
necessary digital capabilities
within our digital agencies so why
the launch of another digital unit,
the point here is that
creative agencies require
assistance on digital
strategy. Digital agencies
tend to be very outcome-
focused and are
champions of their digital ANAND
skills. Their pace of BHADKAMKAR, of next year. E-
activity is different from CEO, DAN India
the pace of creative
agencies. There was
requirement therefore for a digital
unit that sat with the creative
teams on strategy. That is where
Slingshot steps in. It is the digital
arm of Dentsu India. Two guys
from Flipkart — Kunal Dubey and
Lucky Saini — are leading
Slingshot and will report to Simi
Sabhaney, who is the CEO of
Dentsu India.
The general economic slowdown
5th GEAR
WITH 5G, AREAS like autonomous
driving, industrial automation and
smart city management systems are
expected to see huge demand
worldwide and in India
5G VALUE CHAIN INTELINTENDS
is expected to to focus more
on 5G
generate $3.5 trillion
in output and technology
generate 22 million for non-
smartphone
jobs by 2035 globally
applications
THE CHIPMAKER as it looks at a
with a data-centric world full of
focus has teamed up connected
with NITI Aayog and things than
Kerala government one with just
to provide both connected
hardware and smartphone
software support users
WHILE INTELIS bullish on 5G in India,
experts fear that with two of the
three top telcos posting heavy losses,
the investment for the technology
may get adversely impacted
head, says, “The US is the largest design
house for us, India is the second. We’ve
spent more than $5 billion in India over
the last 20 years. That is, every four years
we have spent $1 billion and that's the dif-
ference between many other MNCs and us
— we actually invest,” says Rai.
This, she adds, has enabled it to focus
on emerging segments like autonomous
their fight to get to the top to
stand for its brand promise, which
is to work silently for customers,
the company said.
According to N S Satish, senior
vice-president, Sales & Marketing,
Haier Appliances India, the theme
and the concept of the campaign
was clear to the company from the
beginning. “We did not want to
hard sell our product. The concept
was to convey the message
through brand ambassadors who
are hardworking people, who have
excelled in their respective field
by working quietly,” he said.
The ads barely talk about the
product. The focus is on the life
stories of the three athletes.
Sprinter Hima Das from Assam
and her first gold medal at the
World Under-20 Championship at
Finland and subsequently, the
Arjuna Award for outstanding
achievements in sports. Boxer
Simranjit Kaur from Chakar
(Punjab) and her perseverance
has impacted advertising spends.
How long do you see it lasting?
Will you continue with
acquisitions during this phase?
Acquisitions are something we
will continue to look at. However,
this will be to either acquire scale,
fill a gap or get a new skillset,
innovation or
technology such as
marketing technology.
While the current
slowdown is challenging
for the ad industry, I see
the tide turning middle
commerce has also been
a bright spot in the midst
of this gloom. So I remain
optimistic overall.
What would be your agenda for
DAN in these tough times?
I plan to stay the course. Digital
remains our top priority. Almost
50 per cent of our business is
digital and my focus would be to
maintain our growth in the area
even as we move forward. We
acquired a series of businesses in
the last few years. So consolidation
“We look at cities as independent units. Over
the next three-four months, all our 10 tier-I
cities will break even operationally”
HARI MENON
Co-founder & chief executive officer, BigBasket
driving, programmable chips, analytics,
industrial automation, Internet of Things,
and smart city management systems, all
of which are expected to see huge
demand in the future. She says it is the
same vision of the future that has steered
the company’s global focus beyond just
chips and semiconductors.
Underlying most of these is the evolu-
that got her the bronze medal at
the Women’s World Boxing
Championship. Much like Das, her
years of hard work, unsung and
unrewarded did finally bear fruit,
but not before she had put in the
years in service of the game. And
Gymnast Dipa Karmakar is one of 3 endorsers for the company’s washing
machines, the others are Hima Das (athlete) and Simranjit Kaur (boxer)
Dipa Karmakar, her fight against
the odds to win a bronze medal at
the Commonwealth Games at
Glasgow and subsequently, the
Padma Shri.
“We targeted 7-8 sports
women, who have come up from
an unknown background without
much help or support, financially
and/or technologically,” said
Satish. The films dramatise their
journey, snapping up their big
moments in a sharply cut short
video. Emotional and inspiring
videos are being increasingly used
by brands as it is a form of con-
tent that is believed to appeal the
most to women viewers, accord-
ing to the 2019 Adobe Brand
Content Survey.
is another area of focus for me. We
are bringing together support
functions such as finance and
human resources at the network.
The number of legal entities we
have, thanks to our acquisitions,
will also be whittled down in the
future. We are optimising office
space, moving people from
multiple offices into one
campus. We have
done that in
Bengaluru. We
propose to do the
same in Gurugram
by next year. In
Mumbai, we are
working out a co-
location model.
tion of 5G technology. A 2017 research
report by market research firm IHS
showed the global 5G value chain will gen-
erate $3.5 trillion in output and generate 22
million jobs by 2035. In addition, the glob-
al 5G value chain, it estimated, will invest
an average of $200 billion annually to
build and expand the 5G technology base.
“4G connected everyone that had a phone,
According to the company, the
campaign is a reflection of Haier’s
philosophy of performing silently
while becoming an inspiration for
many without any immediate
recognition, applause or atten-
tion. Raj Kamble, founder and
CCO, Famous Innovations, the
agency that worked on the cam-
paign said, “We were working
with a very simple yet innovative
product, a washing machine that
does what it does in the most effi-
cient way possible.”
For many brands, short, online
videos are now an indispensible
element of their campaigns, given
its increasing popularity.
According to ‘The trillion (and
What are you doing to improve your
creative credentials. The tag of being
a digital agency simply isn't going…
I would describe it as perception,
nothing else. The fact is that we've
been investing heavily behind our
creative product. However, our
delivery mechanism will be new-
age. A classic example of this model
is Dentsu Webchutney. It is a digital
agency that has done mainstream
advertising work as well as digital
campaigns. The agency bagged
six lions at the Cannes Ad Fest
this year. At the Spikes Asia
Festival of Creativity, held in
Singapore in September, Dentsu
Webchutney was the Indian
“Agency of the Year”, surpassing
mainline ad agencies.
We couldn't have
achieved this
without investing
in our creative
product.
But what are you
doing specifically
for your creative
agencies within
DAN?
We’ve hired senior
creative talent across
DAN offices in addition
to setting up a Creative
Council that monitors and
guides the creative output
STRATEGY 15
“Voot may go behind the paywall early next
year. You will have the option of watching it free
but premium content will have to be paid for”
SUDHANSHU VATS
Group chief executive officer & managing director, Viacom18
5G will connect everything. Everything map of traffic and dynamically slow
that is smart can be connected,” Rai says. down traffic signals to manage conges-
Earlier this year, Intel sold its smart- tion. “We started thinking of how to
phone modem business to Apple for about leverage some of the solutions we have
$1 billion, and made its intention to focus developed to create value,” said Rai. The
on building 5G technology for non-smart- result is for all to see.
phone applications clear. “If there is one She says 5G is one technology where
technology that has the capability to the government, industry, academia have
almost double the world economy it is to come together to make investments
5G,” says Rai. because the expected outcome for indus-
Her optimism is not misplaced. The try is huge.
march of 5G is expected to be accompa- Policy support, that is, how AI and
nied by constant data generation, which is allied technologies are governed and facil-
fuel to its growth plans. itated will be just as crucial
“By 2025 the world will and for this, Intel India has
have more than 100 already started engaging
WE’VE SPENT MORE
zetabytes of data. And with potential partners. “AI
the bulk of this data was THAN $5 BILLION IN policies are very impor-
created in the last five INDIA OVER 20 tant. For example, if an
years. If we don’t work autonomous driving car is
towards smart storage YEARS. THAT’S THE involved in an accident,
solutions, cities and DIFFERENCE who is to blame? What we
cities will be wasted to started doing was develop
store this kind of data.
BETWEEN MANY something called ICTAI —
Intel has come up with OTHER MNCs AND the International Centre
what is called a 3D cross US — WE ACTUALLY for Transformative AI in
point storage technolo-
INVEST India,” Rai said. The ICTAI
gy. This will enable you is a partnership among
to store huge amounts of NITI Aayog, Intel and Tata
NIVRUTI RAI
data in a pen drive like Institute of Fundamental
Country head,
form factor,” says Rai. Research to come up with
So what are the appli- Intel India
application-based AI solu-
cation areas? tions needed for critical
Take India’s urban domains such as health
transportation needs care, agriculture, and
that are a function of smart mobility.
both how automobiles In February this year,
work and the condition Intel partnered with the
of roads. Intel is using government of Kerala
tools like road experience management through UST Global, to launch a new lap-
and advanced driver assistance systems top brand, Coconics. Coconics is a public-
to localise vehicles within digital maps private venture to manufacture afford-
relative to various landmarks as well as able laptops.
other vehicles, traffic lights and even pot- But will the turmoil in the telecom-
holes. 5G provides technologies that will munication sector throw a spanner in the
enable super fast applications to establish works? Or will telecom companies gradu-
these connections. ally becoming more software centric
Another area where Intel is hoping to (which Intel’s CEO Bob Swan had earlier
reap the early mover advantage is data called another focus area) open up new
and analytics. In analytics, for instance, opportunities for the firm?
Intel has technology that can draw a heat Watch this space.
QUIZ 640
1 Connect the Aurora Borealis phenomenon with a popular
2
Internet tool/product and what do you arrive at?
Every year on a particular day in February this state in India
celebrates the bus day. EG Salter was responsible for it 77 years
ago. Name state and mention the reason..
3 Whose famous quote is this: "The Hot line which used to
connect the Kremlin with the white House, has been replaced
by the Help line, which connects everyone in America to call
centres in Bangalore?"
4 Way back in the mid-2000s in the Indian market, chocolate
chip cookies were launched using an Australian cricketer's
name. Who was he?
growing) touchpoint story–recog-
nising the monetisation conun-
drum’, a BCG-CII report the report, 5 Name this entity that was founded in the late 1920s to carry
mail between the US and Cuba.
the average Indian’s digital video
consumption has grown 2x in the
past two years, on the back of surg-
ing smartphone adoption and
6 Connect a Chinese car manufacturer and the TX4, a purpose-
built taxicab and what to you arrive at?
ubiquitous low-cost high-speed
mobile internet, coupled with
industry’s initiatives. “The Indian
7 When Microsoft released Internet Explorer 5 in 1999, what
was created or supported for the first time?
consumer is becoming increas-
ingly engaged with the stories
being told. This is evident, given 8 The Namiki Manufacturing Company is better known as what
now?
we are witnessing a rise in both,
the number of sessions as well as
the time spent per session,” said
Kanchan Samtani, managing
9 One of this brand's latest ad films is titled "Act of God", name it.
director and partner, Boston
Consulting Group India. 10 This is one of the first logos
of a global brand. Name it.
of the group. Malvika Mehra COMPILED BY GAURAV SRI KRISHNA, www.facebook.com/gaurav.s.krishna
(earlier with Ogilvy and Grey) has
joined us in Mumbai. She is the
chief creative officer of Dentsu ANSWERS TO THE STRATEGIST QUIZ 639
India. Mahendra Bhagat has
joined Happy mcgarrybowen,
1. The banner was called flight she took in October
Oriflame. a treat is Hershey's 1908 with Wilbur Wright
another creative agency within the
network that services clients such
Cookie's and Crème at Le Mans in France.
as Flipkart, as national creative candy bar. 6. Bosch.
director. We have Soumitra Karnik 2. The Advertising agency 7. Corbesity. (Corporate Obesity)
and Titus Upputuru, both senior Publicis that was founded by
creative hands, at our Gurugram 8. Quora. (Qu) or (or) answer (a).
Marcel Bleustein-Blanchet.
office. Karnik is the chief creative It was co-founded by two
3. Sir Thomas Lipton. The former Facebook employees,
officer of Dentsu Impact and
founder of the Lipton tea Adam D'Angelo and
Happy mcgarrybowen, while
Upputuru is the national creative brand. He raced his Charlie Cheever.
director of Dentsu One, which is shamrock yachts
9. The dockless electric scooter
the northern office of Taproot unsuccessfully for 5 times.
sharing company Bird.
Dentsu. Agnello Dias and Santosh 4. India Cements set up by
Padhi of Taproot Dentsu are of 10. These are shoe charms that
the Tatas. are sold on the website of
course advertising legends and we
are happy to have them in our 5. The Coca-Cola bottle is often Kathrine Switzer who
midst. Dias heads the Creative referred to as the Hobbleskirt became the first woman
Council at DAN in addition to bottle. It refers to a skirt to run the Boston Marathon
being the chief creative officer and designed Paul Poiret, a as a numbered entrant (261)
co-founder of Taproot Dentsu. I French fashion designer. He in 1967 and officials try to
believe our strategy is in place to was influenced by observing stop her from running
take our creative agencies forward. the behaviour of Mrs. Hart O since women were not
Berg upon the first aeroplane allowed to run.
Given that you have 23 agency
brands in the market, how do you
deal with competition within the One lucky winner will receive a cheque for ~2,000. Send your entries to
group? strategist@bsmail.in. All entries must carry the postal address of the
The strategy is to be collaborative contestant. Last date for receiving entries is November 19 till 8 pm.
and meet often to discuss ideas. Previous winners and employees of Business Standard and their families
Apart from the Creative Council, are not eligible to participate. The winner is chosen on the basis of the
first correct entry received.
we also have a Digital Council and
an India Executive Council that I There was an inadvertent error due to which answers to Quiz number
head. The battle for us is outside, 639 were published below the questions in the November 11 issue.
not within. We have to be Thus that edition of the quiz stands cancelled. The error is regretted
cognisant of this all the time.
16 POLITICS & PUBLIC AFFAIRS MUMBAI | MONDAY, 18 NOVEMBER 2019 1
“The BJP has been campaigning that it is “Now, it has been proved that disruption “The allegation of corruption in Rafale
the only party blessed by Shivaji Maharaj. of Parliament over #Rafale was a sham. deal was nothing but an attempt to
Despite that, BJP candidate Udayanraje The time could have been better utilised malign the clean and honest image of
Bhosale, lost the Satara Lok Sabha bypoll” for the welfare of people” Prime Minister Modi and his government”
SANJAY RAUT AMIT SHAH RAJNATH SINGH
Shiv Sena leader Home minister Defence minister
> .

IIUP PROVIDENT FUND SCAMII

Murkier beneath the surface

PF trusts allegedly bent rules to invest ~4,122 crore in invested in PNB Housing’s term deposit
INVESTMENT scheme. While Gupta proposed the invest-
crisis-hit DHFL; parked 99% of corpus in 3 NBFCs 99% of corpus of UP power
ment route, Dwivedi and Mishra allowed
the proposal.
employees’ PF trusts invested in DHFL, However, in March 2017, when the gov-
VIRENDRA SINGH RAWAT that the Bombay High Court had passed PNB Housing, and LIC Housing ernment transition was taking place in the
an order restraining the company from state after the Bharatiya Janata Party
65% of corpus ~2,267cr

T
he arrest of five people, including
three serving and retired Uttar
Pradesh Power Corporation
(UPPCL) officials, in connection
with alleged irregularities in parking the
state electricity body’s employee provident
fund (PF) notwithstanding, the saga is only
getting murkier by the day.
While investments by the UP State
Sector Employees Power Employees’ Trust
and the Provident Fund Trust in Dewan
Housing Finance Corporation (DHFL) are
worth ~4,122 crore, part of that money —
~1,855 crore — was repaid, leaving ~2,267
crore to be recovered.
While the alleged unauthorised invest-
ments were made in instalments from
March 2017 till now, unsecured term
deposits were parked with two other non-
banking financial companies (NBFCs) —
PNB Housing Finance and LIC Housing
Finance.
Given that the DHFL deposit alone
accounted for 65 per cent of the investment
by the two trusts, the net corpus of the trusts
is calculated to be approximately ~6,300
crore. The trusts invested 99 per cent of
their corpus in these three NBFCs.
With trust officials keeping mum and
the investigative agencies sealing their
offices and confiscating records, more such
investments by bending rules in the past
cannot be ruled out. In fact, the two trusts
have not held mandatory meetings every
three months for the past several years.
Recently, DHFL, in a statement, claimed
repaying any of its secured/unsecured cred-
itors, including fixed deposits.
While investigators are still investigat-
ing commissions or kickbacks in the alleged
scam, those arrested are being subjected
to intense interrogation. This is perhaps
the first major instance when the Yogi
Adityanath government is fighting corrup-
tion charges.
DHFL is being probed by the
Enforcement Directorate (ED) in connec-
tion with money laundering rackets of fugi-
tive gangster Iqbal Memon, alias Iqbal
Mirchi, besides other irregularities.
So far, former UPPCL managing director
A P Mishra — in whose tenure’s fag-end,
the suspected “unauthorised” investments
in DHFL began in March 2017 and contin-
ued until December last year — has been
arrested. The other arrested individuals
include two suspended employees of the
power utility — the UPPCL general man-
ager and the trusts’ secretary, Praveen
Kumar Gupta, and UPPCL Director
(Finance) Sudhanshu Dwivedi.
Besides, Gupta’s son Abhinav and his
aide Ashish Chaudhary, the owner of a
suspected bogus brokerage firm, were
rounded up.
Only when Principal Secretary (Power)
and UPPCL Chairman Alok Kumar and
Power Secretary and UPPCL Managing
Director Aparna U were removed did the
episode begin to make headlines.
Energy Minister Shrikant Sharma, who
is on the radar of the Opposition, had com-
was invested in outstanding
DHFL alone with DHFL
AS IT HAPPENED
MAY 8, 2013: The trusts decide to invest in
term deposits of PSBs
APRIL 21, 2014: They decide to explore
other avenues giving higher returns
OCTOBER 2016: The two invest in PSBs’
term deposits
DECEMBER 2016: They park funds with
PNB Housing
MARCH 2017: Start investments in DHFL,
which continue until December 2018
JULY 10, 2019: The UPPCL receives a
complaint about investments in DHFL
JULY 12: A probe committee is set up; it
submits a report on August 29
NOVEMBER 2: The UP government
recommends a CBI probe
plained to the chief minister against Alok
Kumar that he allowed “unauthorised”
investments to take place and not apprised
him of the case.
On July 10 this year, UPPCL received a
complaint alleging fraudulent investments
in DHFL, following which Alok Kumar set
up an investigation committee on July 12.
Its report on the matter was submitted on
Alleged irregularities in investing provident funds are the first major instance when
the Yogi Adityanath government is fighting corruption charges
August 29.
However, it was after the matter became
public that the government ordered the
arrest of Gupta and Dwivedi; a police case
was filed on November 2. A CBI probe was
recommended and the case handed over
to the UP police’s economic offences wing
(EOW) until the central agency took over
the investigation.
PHOTO: PTI
According to the FIR, on May 8, 2013,
the trustees adopted a resolution to invest
in term deposit schemes for public sector
banks. At another meeting on April 21, 2014,
the trustees decided to explore other invest-
ment avenues offering higher returns. In
October 2016, the trusts invested in the
term deposits of nationalised banks.
In December 2016, the two trusts
emerged victorious in the Assembly polls,
the trusts allegedly started investing in
DHFL without the approval of the UPPCL
chairman/MD.
The trusts’ meeting on March 24, 2017,
passed a resolution that “the board of
trustee agreed to consider the investment
proposals as per government notification
dated March 2, 2015, in the securities with
higher security and high interest rates other
than deposits of nationalised banks Triple
A-rated companies as per prevailing prac-
tice further investment in securities will be
decided by secretary (trust) on a case-to-
case basis with the consent/approval of
director (finance) UPPCL trustee”.
On condition of anonymity, a former
chairman of UPPCL said if decisions on
investing PF funds had been made and the
investments continued for almost two
years, the chairman of the Corporation,
who is also ex-officio chairman of the two
trusts, could not claim immunity for acts
of omission or commission.
Meanwhile, the power utility’s employ-
ees have declared a 48-hour boycott of work
on November 18-19. They are demanding
the arrest of Alok Kumar since more than
~4,000 crore worth of investments in DHFL
took place under his nose.
The convener of the UP power employ-
ees’ joint action committee, Shailendra
Dubey, demanded that the Yogi Adityanath
government issue a gazette notification
undertaking for repaying PF money to
nearly 45,000 employees.

STORY IN
consensus over the political and
NUMBERS NEWSMAKER/ RAGHUBAR DAS administrative “stability” he
brought to the fledgling state. “He’s

An ‘outsider’ on test again

RADHIKA RAMASESHAN
Like a constellation of stars, circum-
stances conjugated to anoint
Raghubar Das sixth chief minister
of Jharkhand, on December 28,
but classified among the OBCs.
“The BJP wanted to break the estab-
lished matrix of tribal dominance
that came into being ever since
Jharkhand was formed (in 2000),”
noted the observer.
ister in June 2010, he was accused
of colluding with a Singapore firm
and allegedly granting “undue
favours”. A high-powered commit-
tee constituted by the Jharkhand
legislature indicted Das for award-
Jamshedpur East over Dinanath
Pandey, the sitting legislator. Those
days, Govindacharya was prabhari
(minder) of undivided Bihar. Das
won, albeit by a narrow margin,
which improved thereafter.
the first chief minister to complete
a five-year tenure,” said Shivpujan
Pathak, the state BJP’s spokesper-
son, adding, “after the various
aborted coalition experiments, our
slogan (in 2014) was no develop-
ment is possible without a majority
sarkar. Of course, we had a coalition
with a smaller party (the All
Jharkhand Students Union, or

LIFE ON THE LINE 2014. Two of his predecessors from

IN POLICE CUSTODY
As many as 100 people were
reported to have died in
police custody in 2017,
according to the National
Crime Records Bureau (NCRB)
data. Of these, 58 people
were not on remand — they
had been arrested and not
yet produced before a court —
while 42 were on police or
judicial remand.
In 62 cases of custodial
deaths, 33 policepersons were
arrested, 27 were charge-
sheeted, four were acquitted
or discharged, and none
convicted. “One hundred
custodial deaths in one year,
in my view, point to serious
cause for concern. It indicates
that conditions in custody are
not conducive to keeping
people safe and alive,” said
Devika Prasad, programme
head, police reforms, at
Commonwealth Human
Rights Initiative. “Police must
be made to answer for
someone turning up dead
while in their custody.”
“Every custodial death,
every case of torture is to be
condemned, analysed and
investigated properly to come
up with findings, which then
have to be put in ameliorative
action,” said Yashovardhan
Azad, former chief
information commissioner
and IPS official. “The basic
directions of the Supreme
Court (on police reforms) need
to be followed, infrastructure
needs to be ramped up,
capacities should be built,
and manpower investment is
required.”
The health and safety of
any person in custody is the
responsibility of police,
Prasad said, adding, “this is
why the law mandates a
judicial inquiry to be carried
out when a person dies in
custody. And also why the
police are to report a custodial
death to the National Human
Rights Commission within 24
hours of occurrence, which in
turn propels other
accountability measures such
as a videographed
postmortem.”
Custodial deaths reported
in India increased 9 per cent
from 92 in 2016 to 100 in 2017,
the NCRB data showed.
Andhra Pradesh reported the
most deaths (27), followed by
Maharashtra (15) and Gujarat
(10) in 2017. These three states
accounted for more than half
the custodial/lockup deaths
reported. TEXT: INDIASPEND
the Bharatiya Janata Party (BJP) —
to which Das belongs — were out of
the reckoning: Babulal Marandi quit
and floated his own outfit while
Arjun Munda lost the election that
year. By conventional yardsticks,
Das was an audacious choice by
Prime Minister Narendra Modi and
the BJP President Amit Shah, like
Devendra Fadnavis was in
Maharashtra and Manohar Lal
Khattar in Haryana.
According to a Ranchi-based
political observer, “the choice was
part of the politics that the BJP pur-
sued at that point, to bring the non-
tribals under one umbrella”. The
tribals constitute a little over 25 per
cent of Jharkhand’s population and
the upper castes, Other Backward
Classes (OBCs), Dalits, and Muslims
and Christians the rest. In the non-
tribal spectrum, the OBCs form the
largest chunk. Like Modi, Das is
from the Teli caste. In Jharkhand,
the Telis are traders by occupation
Senior leader and MLA Saryu Rai
might have been considered but he
is from an upper caste with little
experience in administration.
Unlike Khattar, Das was a seasoned
hand at exercising authority. He was
urban development minister in the
BJP-led government headed by
Munda in 2005 and deputy chief
minister in a coalition of the
Jharkhand Mukti Morcha (JMM)
and BJP with Shibu Soren as chief
minister. While Rai won his first
election only in 2005, Das has been
an MLA from Jamshedpur East
since 1995 — an achievement for an
“outsider” who hails from
Chhattisgarh and not Jharkhand.
While Khattar and Fadnavis —
who, like Das, are part of the BJP’s
new leadership line-up — recom-
mended themselves to the top jobs
because they were believed to start
off on a “clean slate”, without car-
rying an inconvenient baggage,
Das courted controversy as a
minister. As deputy chief min-
ing a contract worth ~200 crore to
the Meinhardt Group to renew
Ranchi’s sewerage infrastructure.
Agitational politics was his meti-
er from the start and that’s what
caught Govindacharya’s attention.
AJSU) and later we took away all the
six MLAs of the JVM (Marandi’s
Jharkhand Vikas Morcha-
The project was a no-go.
The stars were benevolent
In 1994-95, under the banner of the
Basti Vikas Samiti, he led protests
Prajatantrik). With a BJP govern-
ment at the Centre, a neglected state
towards Das from the to claim ownership rights for 86 was fuelled by double-engine
start. He was anoth- slums located outside the Tata growth.” For Pathak, Das’ “greatest”
er BJP karyakar- Steel command areas and suc- achievements were “eliminating”
ta (worker) and ceeded. Das never let the suc- the Maoist insurgents through
an employee of cess slip away from public “encounter killings, surrender or
Tata Steel, consciousness. In 2018, he cooption”, refurbishing Jharkhand’s
Jamshedpur, in got a law passed to legalise image as “corruption-free” (howev-
the labour the lease “bandobasti”, er, he admitted while there were no
department which guaranteed lease “mega” scams, it was not possible
when K N rights over government land to uproot petty corruption), and
Govindacharya, to the occupants for 30 years, supplementing and augmenting the
a former BJP subject to renewal but with- Centre’s welfare schemes such as
general secretary, out allowing for transfer. Ujwala and PM-Kisan with parallel
chose him to con- Opinion was divided over state projects.
test from Das’ tenure as the head The negatives? In adhering to the
of the Jharkhand “Gujarat model of governance”, Das
government. centralised power in the chief min-
There ister’s office, which he allegedly
was an packed with loyal apparatchiks from
over- his caste. With less than a month
all before he faces the people again, will
Das be second-time lucky?
SANJAY K SHARMA
First, the amount being demanded by The state’s finances aren’t the only reason
Punjab’s paddy farmers would mean a dole for such low penetration of these machines.
out of over ~2,000 crore — a hard task for a Punjab’s farmers see little sense in subsidy
state, the fiscal condition of which has been for high-cost machines like happy seeders.
classified as “critical” by the NITI Aayog. In “We have a one-month window between har-
2018-19, Punjab’s debt stood at ~2.12 trillion or vesting paddy and sowing wheat during
40 per cent of its GSDP. The NITI Aayog in a October-November. We cannot sow wheat
December 2018 report stated: “Punjab’s debt properly with happy seeders as paddy straws
and deficit situation will remain precarious aren’t completely uprooted. Rats eat the
in the absence of strong fiscal measures. Our seeds and the risk of crop failure is high. For
analysis of Punjab’s future debt (2016–17 to farmers with small landholdings, these
2036–37) at the aggregate and disaggregate machines are practically useless. Most trac-
level suggests that its debt is weak- tors we use are 20 horsepower. To
ly sustainable. From the scenario use happy seeders, you need a
analysis, it was observed that tractor with at least 50 horsepow-
adverse economic shocks such as er,” said Lakhowal.

1
Injuries sustained prior
22
Burning a hole a rise in the real interest rate can
steadily increase the debt/gross
domestic product ratio of the state.
Third, the Punjab government
acting on the NGT’s order has spo-
radically imposed fines on those

in the pocket
Others Shocks of a more permanent found to be burning stubble. But
to police custody 37 nature can render the state into many who have been fined have
Suicide macroeconomic instability.” refused to pay. Many others have
3
Second, the National Green paid the fine because the quantum
While escaping
Tribunal (NGT) in its 2015 order of these fines hasn’t been a deter-
from custody
Providing financial support to farmers to stop them from asked states to provide machines rent against crop burning. The
like happy seeders, the market NGT had ordered imposition of
Road accidents/
4
CUSTODIAL lighting stubble is a tough ask for the debt-ridden state price which is around ~1.5 lakh, fines ranging from ~2,500 to
free to farmers having holdings of ~15,000 depending on the size of a
journey during DEATHS IN SAI MANISH after harvesting the crop. So far, farmers less than 2 acres. Those with a landholding of farmer’s landholding. Farmers claim that it
investigation 2017 haven’t received anything. Instead, the gov- 2-5 acres would be charged ~5,000, while costs them less to burn the stubble and pay
5 Punjab’s precarious finances have put Chief ernment is asking us to buy machines cost- those with even bigger farms were to be pro- the fine than buy, store and maintain
Injuries in custody Minister Amarinder Singh’s government in a ing lakhs of rupees at subsidised prices,” said vided happy seeders for ~15,000. In effect, the machines that serve little purpose.
because of spot as it battles criticism over its failure to Harinder Lakhowal, general secretary of the richest of farmers in Punjab were expected to Amarinder Singh recently said his govern-
police assault stop stubble burning — a leading cause of Bharatiya Kisan Union. be subsidised by the state government by ment received complaints against 20,729
the catastrophic pollution witnessed in Delhi In many ways, Amarinder Singh’s gov- bearing 90 per cent of its cost — again a farmers this year and fined 2,923 of them.
28 and adjoining areas. ernment, which had already placed the tough proposition given the state’s finances. Any wide-scale imposition of fines could be a
Death due to illness/death in hospital “We had asked for ~3,000 an acre or ~200 state’s Budget under tremendous pressure The chief minister was reported to have said political landmine for the Congress in Punjab
Source: National Crime Records Bureau report 2017 during treatment for every quintal of paddy so that we could through farm loan waivers, may find it hard his government had provided 28,000 such — one of the few states where the party put
employ more people to uproot the stubble to bring the matter under control. machines in 2018. up a decent show in the general election.
.
MUMBAI | MONDAY, 18 NOVEMBER 2019 BUSINESS LAW 17 <

BRIEF CASEN l M J ANTONY

Judiciary plays hardball
various tribunals must be commen-
surate with that of judges, points out
A weekly selection of key court orders Tine Abraham, partner at Law firm,
Trilegal.
‘Full and final voucher’ no bar to arbitration Butani, however, is more opti-
The discharge voucher demanded by mistic of change. “One can expect
insurers and government entities
before disbursing amounts due came
up again in the Supreme Court and it
dismissed the appeal of Oriental
Insurance Co against the ruling of the
Bombay High Court on this issue. The
in making of tribunals that the process for appointment of
tribunal members would be stream-
lined and made transparent to
ensure talented experts are appoint-
ed,” he adds.
Experts argue that the amend-
case arose when there was a dispute Experts feel ideal solution is having a tribunal commission, with no side reigning supreme ments suggested in the Finance Act,
between the insurer and Dicitex Furnishing, which was in 2017, were expected to streamline the
financial distress following a fire that razed its three SUDIPTO DEY process and qualification of various
godowns. The company’s claim was rejected after two years, tribunal members and fast-track

T
based on repeated survey reports of insurers which put the here was a sense of deja their appointments. “It appears
losses far below the claim. Owing to financial distress, the vu when the Supreme the selection rules were formu-
company signed a discharge voucher to get whatever was Court struck down lated in a zeal to ensure that tri-
offered. The voucher stated that the payment was “full and a rule framed by bunals are expeditiously
final settlement” voluntarily given, settling “all claims, the Centre to reg- manned and a major cause for
present or future, arising directly/indirectly in respect of the ulate the appointment of delay in justice dispensation is
loss/accident and subrogating all their rights and remedies members to tribunals and addressed,” says Butani.
to the insurer". When the company sought arbitration, the appellate tribunals, with a direc- Given the current state of
insurer argued that since the company had signed the tion to the government to refor- redundancy and delay in
discharge voucher and accepted the amount offered, there mulate them. various tribunals, consoli-
was no arbitrable dispute. The high court rejected that The apex court’s observa- dation of tribunals is as a pos-
contention, leading to the appeal. The Supreme Court tions reflected the findings of itive step forward, Abraham
dismissed the appeal, stating that there was an arbitrable a Law Commission of India points out.
dispute and there was prima facie ground to examine “the report (Assessment of Kumar concurs with the
genuineness or credibility of the plea of coercion.” Statutory Frameworks of apex court’s view that a judi-
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Tribunals in India) that was cial and financial impact
Chit fund subscriber’s default serious submitted to the government in assessment ought to be car-
If a subscriber in a chit fund scheme October 2017. Two years later, ried out before tribunals are
defaults, the firm is entitled to recover the Supreme Court voiced similar merged, given the implications of
the consolidated amount of future concerns that were raised in the such a merger. Among other things,
subscriptions from her in a lump sum. Commission’s findings. the Commission had noted that cur-
This is because the relationship Legal experts say striking down Illustration: Binay Sinha rently there is no uniformity in the
between a chit subscriber and the chit of the rules that regulate appoint- age of retirement of tribunal
ments in tribunals is unlikely to members.
foreman is a contractual obligation,
which creates a debt on the day of impact their functioning. However, WHAT SUPREME COURT WANTS Judiciary’s long-standing concern
One of the key findings in the Law
the apex court has clearly thrown the over composition of tribunals: Commission’s 2017 report was that
subscription, the Supreme Court ruled in its judgment in n Government must frame of all tribunals to analyse
gauntlet at the Centre to get its act “The central government is the the high pendency of cases in some
Oriental Kuries vs Lissa. “The stipulation of empowering the fresh rules to regulate ramifications of changes in
foreman to recover the entire balance amount in a lump together on how tribunals are set up largest litigant before the tribunals tribunals indicates that the objective
and run. appointment of members to their framework of setting them up has not been
sum in the event of default is to ensure punctual payment by tribunals and appellate constituted under various statutes.
each individual subscriber,” the judgment clarified, adding “This does not necessarily create nApex court recommends Allowing the executive a controlling achieved. The Commission, too, had
a vacuum as the earlier provisions tribunals setting up of an independent suggested the involvement of gov-
that “without punctual payments, the system would authority over diverse facets of the
become unworkable, and the foreman would not be in a relating to the appointment of tribu- n New rules should ensure statutory body, ‘National tribunals would be destructive of ernment agencies in the appoint-
position to discharge his obligations to the other members nal members would continue to non-discriminatory and Tribunals Commission’, to judicial independence which ment of members should be minimal
apply,” says Mukesh Butani, founder- oversee the selection process constitutes a basic feature of the since the government is typically a
of the chit fund". The Kerala High Court had ruled that by uniform conditions of
entering into a chitty agreement, debt is not created by the partner, BMR Legal. Constitution….” party in litigation.
service of members, fixing criteria
subscriber with respect to the amount of all future So, until the government formu- Butani agrees with this point of
lates fresh rules, all appointments n Government must conduct for appointments and JUSTICE D Y CHANDRACHUD view. “It is apparent that with the
instalments. Invoking the central law, Chit Funds Act, 1982, service rules
the Supreme Court set aside the high court judgment. would be made according to the judicial impact assessment Supreme Court judge government being the largest liti-
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
applicable law prior to the enactment gant, it must neither be allowed nor
of the Finance Act, 2017, say experts. perceived to have a vital play in the
Bad cheque after Lok Adalat is offence The SC ruling has again put the judicial process. The executive held of tribunals. so in accordance with the judgments appointment of the tribunal mem-
A cheque issued following a settlement spotlight on a long-standing tussle that tribunals help address delays in “We have seen multiple judg- of the court,” says Alok Prasanna bers via these Selection
before the Lok Adalat is meant to between the executive and the judi- disposal of cases in courts. ments of the Supreme Court on tri- Kumar, senior resident fellow at Committees,” he says.
discharge a liability and if it is ciary on the efficacy of the tribunal Legal experts are divided over the bunals which have tried to change Vidhi Centre for Legal Policy. Most experts feel the ideal solu-
dishonoured by the bank, the drawer system. Judiciary has been of the question whether the current ruling the way the government sets up and Since tribunals replace courts for tion is having a tribunals commission
can be prosecuted again under the view that tribunals -- a quasi-judicial by the apex court would have any runs tribunals, but again and again, specified disputes, the Supreme and giving neither the judiciary nor
Negotiable Instruments Act, the institution --have been used to impact on the government’s position the government, irrespective of party Court has opined that the qualifica- the government final say in the
Supreme Court has ruled in its undermine the independence of the vis-à-vis setting up and functioning in power, has shown reluctance to do tion and acumen of the members of matter.
judgment, Arun Kumar vs Anita Mishra.
In this case, Arun received a cheque from Anita which was
dishonoured. She was prosecuted and sentenced to six
months of prison and a fine of ~3.3 lakh. Later, the dispute INSOLVENCY RULES FOR FINANCIAL SERVICE PROVIDERS
was taken to Lok Adalat. According to the settlement, she
was to pay ~3.51 lakh on the same day. She gave a post-
dated cheque according to the settlement. But it also
bounced, leading to a second round of criminal case. When
the magistrate dismissed her petition to quash prosecution,
‘Regulator has more control than the CoC’
she moved the Madhya Pradesh High Court. It set aside the SUDIPTO DEY a close involvement of financial view is that the Reserve Bank of complementary roles for the has better control over the resolution
prosecution on the ground that the cheque was not issued sector regulators in order to address India should directly deal with regulator, creditors, and the process than the CoC does.
to clear a debt or liability towards the payee. It was to fulfil a The government last week came up depositor protection issues, as well financial stress in the banking adjudicating authority (for instance, Given that the resolution of
settlement. The Supreme Court asserted that there was a with an interim framework for as resolve matters on account of the system. the NCLT). The Rules require the financial firms must be undertaken
clear liability on account of the settlement. Moreover, the resolving financial stress in financial interconnectedness of financial appropriate regulator to initiate swiftly, a concept of “deemed” no-
first round of litigation clearly showed that the cheque was service providers (FSPs) through a firms,” says L Viswanthan, partner at How is the initiation of resolution resolution (as distinct from objection has been built in within 45
issued on account of liability. structured resolution and Cyril Amarchand Mangaldas. for FSPs different from the one for individual creditors initiating days of submitting the application
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> liquidation proceedings. Experts The IBC has been appropriately corporate persons, limited liability resolution). to the appropriate regulator, says
decode the implications of the modified by the FSP Rules to allow partnerships, and partnership “Retaining the trigger to initiate Viswanthan.
Adulteration of oil in ‘critical’ category insolvency rules for debt-laden for a combination of regulator- firms? insolvency with the regulators will
Adulteration of petrol and diesel is a financial entities, and how their driven and creditor-participative Under FSP rules, only the also minimise disruption to How will the process help to avoid
“critical irregularity” according to the treatment would be different from resolutions, with the final sanctity of appropriate regulator FSPs,” says Viswanthan. litigation?
Marketing Discipline Guidelines issued that of the corporate insolvency the approval of the tribunal, he adds. initiates the Experts point out Experts say the FSP Rules provide
by public sector oil marketing resolution process for “Financial institutions resolution process, that under the FSP for instituting an interim
companies. It called for the termination manufacturing or services outfits. are generally a fiduciary business taking into account Rules, the regulator moratorium, which is crucial to
of the contract between an oil company that requires extra care,” says Abizer systemic is more involved avoid multiple proceedings at the
and a dealer, the Supreme Court stated Why is there a need for a separate Diwanji, partner and national implications of the with the resolution filing stage.
in its judgment in Indian Oil framework under the Insolvency leader, financial services, EY. resolution of such process. The “Since the regulator can initiate,
Corporation vs R M Services Centre. It set aside the ruling of and Bankruptcy Code (IBC) to deal firms, and the regulator appoints or the blessings of the regulator are
the Gauhati High Court, which maintained that the variation with insolvency and liquidation Why have banks been kept outside impact on the an administrator to required for initiating, this should
in quality was not critical and termination was not justified. proceedings for FSPs? the ambit of the interim wider financial oversee the avoid unnecessary litigation,” says
In this case, the dealer was allotted the contract as a Financial service  entities, generally mechanism? system. operations of the FSP Karan Mitroo, partner, L&L Partners.
handicapped person. On inspection of the premises, it was banks, have a profile of creditors This framework has not been made This is a major during the resolution
found that the diesel was adulterated and there was stock different from that of applicable to banks, which are departure from IBC process. There are provisions What are some of the loose ends that
variation. In the latter case, the punishment was warning manufacturing or services concerns. governed by the Banking Regulation provisions for manufacturing and for constituting an advisory need more clarity?
and suspension. But in case of adulteration, termination They don’t necessarily have Act, 1949. Experts say this law services entities, which allow committee in the operations of the The Rules regarding the role of the
was justified according to the guidelines, the judgment said. financial creditors, but deal with provides for an enabling mechanism financial and operational creditors FSP to assist the administrator. advisory committee are to be issued
The court also rejected the argument of the dealer that there retail providers of capital, or for resolving stress in scheduled to invoke the Code and initiate the With the centrality of the by the regulators. Experts say there
was a delay of five days in testing the sample. It said that the fiduciary deposits of the commercial banks. insolvency resolution process. Committee of Creditors (CoC) are several unanswered questions
10-day timeline was not mandatory and not to be strictly government. The government is also looking reinforced, their approval is required around the composition of the
adhered to. The quality does not vary in such a short period. Experts say a separate framework at re-introducing the Financial What is the role of the regulator, for the resolution plan. However, Committee of Creditors, and the
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
for financial service providers is Resolution and Deposit Insurance creditors, and the adjudicating such approval has to be backed by a powers of different operational and
IBC resolution does not free guarantor required to protect retail investors, (FRDI) Bill in Parliament with authority under the resolution and no-objection certificate by the financial creditors of FSPs. The
and for systemic reasons. “The adequate safeguards to protect bank liquidation framework for FSPs? regulator. Diwanji points out that government is yet to notify the
The liability of a guarantor of a debt of a
resolution of financial firms requires deposits. The generally accepted The FSP Rules envisage distinct, yet under the FSP Rules, the regulator category of FSPs to be covered.
corporate debtor is not extinguished
upon an insolvency resolution plan in
respect of the corporate debtor. The
Calcutta High Court held so last week in
its judgment in Gouri Shankar vs
Punjab National Bank. In this case, the
director of a company stood a personal guarantee for bank
loans. When the company defaulted, the bank moved the
A blockchain, data protection conundrum
ARUSHI GOEL Right to be forgotten think of a blockchain providing a ledger of does it mean for data to be erased? Does it
National Company Law Tribunal, Kolkata, which approved a
Second, the challenge arises with respect to medical records to allow easy portability across mean that the data should cease to exist on
resolution plan under the Insolvency and Bankruptcy Code.
The Holy Grail for both blockchain and the Article 17 of the GDPR, which is the right to be hospitals, doctors, insurance companies and the platform or mere inaccessibility to data
The dues were paid according to the plan after a haircut.
General Data Protection Regulations (GDPR) forgotten. This right entails that a data subject the patient. In this blockchain, X logs her med- would render the compliance sufficient? These
However, the plan did not deal with the personal guarantee
enacted by the European Union remains the should have the right to have her personal data ical records voluntarily in the blockchain for are some of the questions that will need to be
of the director. When the bank turned to the director
control of user upon her own data. However, erased, where the personal data is no longer the purpose of obtaining health insurance answered in due course of time.
demanding payment according to the guarantee, he argued
the implications of the use of blockchain on necessary in relation to the purposes for which from a private health provider. This validated
that his liability is co-extensive with the debtor and, Going forward
data ownership, control, and its monetisation the data was collected or where the data subject record is available to the insurance company
therefore, he was free from the guarantee. The court
conflicts with the GDPR in its implementation withdraws consent to the processing of her after she provides it with the necessary access. In order to make the blockchain compliant
dismissed his petition stating that the insolvency code “does
in two significant ways. personal data, or where the pro- Let’s say, after a few years she desires with the GDPR, there have been attempts to
not allow personal guarantors to escape their liability".
cessing of personal data does to have her medical records taken off use a model wherein the data is stored off-
Citing judgments on contracts and insolvency, it said: “The Identification of data controller not comply with the GDPR. the blockchain as she wants to move chain while only the hash and metadata of the
corporate debtor in a proceeding under the code may stand
First, under the GDPR, a data controller is The right to be forgotten is not to another insurance company. personal data is stored on the blockchain.
discharged of its liability to its creditors but the same does
assumed to be a centralised an absolute However, the very nature of While this means that personal data can be
not absolve the surety of the liability".
authority responsible for deter- right, but is blockchain does not allow her to modified/erased at will, it reduces the account-
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
mining the purposes/means for The very exercisable by remove her records. How can she ability that is in-built in a blockchain.
Forfeiture of equipment upheld the processing of personal data. In technology that a data subject then realise her right to be for- Balancing trust and privacy is a tight rope that
a permissioned blockchain, there sought to under certain gotten? Given the stage at which blockchain solutions will need to walk in the
The Supreme Court has upheld the
may exist a centralised authority maintain the specific cir- the technology exists, it coming years. It is, therefore, a conundrum
forfeiture of security deposit and
that can control the way the data integrity of data cumstances as appears that it would be diffi- that the very technology sought to maintain
equipment of a contractor whose
is fed and processed on the chain is at odds with outlined in cult for her to remove her the integrity of data is at odds with the law that
performance was poor. In this case,
and therefore, the identity of a data the laws that Article 17. medical data from the endeavours to protect personal data. Is the
Vijay Trading & Transport vs Central
controller or a data processor is endeavours to In a blockchain though she is free answer then centralised databases where the
Warehousing Corporation, the firm was
easier to comprehend. The situa- protect personal blockchain, it is to move to another company GDPR is far easily implementable? But isn’t
given a contract for handling and
tion, however, is more complicated data difficult to realise for her insurance needs. In that exactly what blockchain intended to
transportation at Inland Clearance
Depot, Varanasi. However, the contract was terminated by in a public blockchain when there such rights as by a permissioned avoid? Centralised authorities? With the enact-
the government corporation because of poor performance is no controlling authority or even a clearly its very nature, a blockchain is blockchain, removal of ment of GDPR and similar laws across the
and consequent deterioration in the situation in the depot. identified set of entities who take responsibil- an immutable ledger of informa- records is also a chal- globe, it appears a Rubicon has been crossed,
The contractor protested and took the issue to arbitration. ity for the data. In a scenario of a data leak in tion. Any change purported to be made lenge, albeit but how it will engage with existing and future
The award was against him. He challenged the award in the the bitcoin blockchain, for example, it would in one block will also lead to change in Fundamentally, technologies, only time will tell.
Delhi High Court without success. The Supreme Court not be possible to hold the developers of bit- the preceding blocks and therefore, destroy there needs to be
dismissed the appeal. coin responsible. the integrity of the data. As an illustration, clarity about what The writer is ex-judge and technology lawyer
 18 THE SMART INVESTOR
BSE 200: TOP 5 GAINERS OF LAST WEEK
BSE price in ~
Edelweiss Financial Services
AU Small Finance Bank
Amara Raja Batteries
Reliance Nippon Life Asset Manangement
Cholamandalam Investment and Fianance
Robust outlook for life insurers
but valuations extremely pricey
Good growth in high-margin products, persistency and reach augur well; risk-averse investors could buy the dips
SHREEPAD S AUTE
Mumbai, 17 November
A
t a time when the economy
is sagging, the robust out-
look for life insurance com-
panies has found good support of
investors. The stocks of three major
life insurers — SBI Life Insurance
Company (SBI Life), HDFC Life
Insurance Company (HDFC Life)
and ICICI Prudential Life
Insurance Company (ICICI Life) —
have surged by 49-60 per cent in
the last six months. While Max
Financial Services (holding com-
pany of Max Life Insurance) under-
performed its peers with around 19
per cent gains in its stock price, it
was because of factors such as
overhang related to distribution
tie-up with Axis Bank and pledged
shares. Still, all these stocks have
outperformed the Nifty Financial
Services index and Nifty50, which
are up by 15 per cent and 7 per cent,
respectively, in the same period.
With the sharp rally, these
stocks are currently trading at high
valuations as compared to their
global peers. One reason for such
high valuations is the underlying
PHOTO:ISTOCK
Fund managers buy Infy, sell RIL in Oct
SAMIE MODAK
Equity fund managers increased
their exposure to Infosys in
October amid a sharp slide in the
software exporter’s share price
following whistle-blower
allegations. On the other hand,
they pruned their exposure to
Reliance Industries (RIL), taking
advantage of sharp gains in the
stock, which saw the oil-to-
telecom major’s market value go
past the ~9-trillion mark. Both
‘Too early to say that the financial
sector is out of the woods’
Indices have gained steady ground since the government cut corporation tax in September, despite global and domestic headwinds.
MANISHI RAYCHAUDHURI, head of equity research for Asia Pacific at BNP Paribas, tells Puneet Wadhwa that the present liquidity-driven rally
does generate some concerns about the market moving ahead of fundamentals. Edited excerpts:
Has the rally since
September put the
markets much ahead of
fundamentals?
In the context of continu-
ing macro-economic slow- MANISHI RAYCHAUDHURI possibility of a wider fiscal
down and declining cor- Head of equity research for
porate earnings estimates, Asia Pacific, BNP Paribas
the present liquidity-dri-
ven rally does generate some concerns
about the market moving ahead of fun-
damentals. That said, the equity mar-
kets have been strong over the past
five-six weeks all across emerging mar-
kets, not only in India. The rally has
been driven by strong inflows into
emerging markets —engendered by
increasingly benign monetary policy
stance by global central banks and
declining concerns about key geopo-
litical issues like the US-China trade
conflict and a no-deal Brexit.
Can the mid- and small-cap segments
outperform their large-cap peers in
the next one year?
We have a BSE Sensex target of 40,500
by 2019-end. It’s difficult to paint the
entire mid-/small-cap universe with the
same broad brush, but we think select
mid-caps could outperform because of
the valuation support they have. We
look for steady positive free cash flows,
steady generation of “excess return” i.e.
return on equity (ROE) exceeding cost
Nov 8, ’19 Nov 15, ‘19 % chg
110.8 129.1 16.5
688.9 800.7 16.2
654.0 746.2 14.1
318.9 358.0 12.2
296.5 329.0 11.0
growth potential. The other reason,
according to Deepak Jasani, head
of retail research at HDFC
Securities, is: “There is flight to
quality stocks in the market which
is lifting the valuations of life insur-
ers.” However, the outlook for prof-
itable growth remains strong,
Jasani adds. The inclusion of SBI
Life and ICICI Life in the Morgan
Stanley Capital International
(MSCI) index, recently, also high-
lights the sturdy growth outlook,
and has added to the demand for
the stocks. There are factors point-
ing to a strong outlook for life
insurers’ profitability, which is
measured in terms of value of new
business (VNB) margin. This, in
turn, will improve shareholders’
value. For instance, embedded val-
ue (EV) of all the four listed insur-
ers is expected to increase at an
annual growth rate of 15-20 per
cent over the medium term, esti-
mate analysts. EV is the present
value of shareholders’ interest in a
life insurer’s retained earnings.
Besides expectations of good
premium growth, there is rising
traction for high-profitable busi-
nesses, such as annuity and pro-
TOP BUYS & SELLS OF MFs
Amount
invested
(~ cr)
MOST-BOUGHT
Infosys 2,116
ICICI Lombard 1,619
UltraTech Cement 692
Hindustan Unilever 621
State Bank of India 602
Amount
divested
MOST-SOLD
ICICI Bank 1,399
TCS 1,052
Zee Entertainment 553
IndusInd Bank 501
Reliance Industries 470
Amount invested/divested and price change
for the month of October; Source: Edelweiss
the bets seem to have paid off for
money managers as shares of
Infosys have rebounded 10 per
cent off their October lows. Shares
of RIL have been soft after
climbing 25 per cent since the
surprise cut in corporation tax.
ICICI Lombard was another stock
that saw aggressive buying by
mutual funds (MFs) in October.
State Bank of India, Ultratech
Cement, and Hindustan Unilever
were the other top buys. MFs sold
TCS, ZEE and IndusInd Bank shares.
of equity (COE), and good
management quality and
corporate disclosures.
Are they factoring in the
deficit going ahead?
The government’s budget-
ary divestment target of ~725
billion seems set to be met. However,
to partly neutralise the revenue short-
fall from the corporation tax cuts and
any other fiscal stimulus to support
consumption, a higher quantum of
divestment could be necessary. The
market is watching whether such an
outcome is feasible.
Your key takeaways from the
September quarter results season?
As of now, the September quarter looks
better for India than the past three-four
quarters. The situation is similar in the
rest of Asia. In India, in the July-
September quarter, overall revenues
have been in line with consensus expec-
tations, while aggregate earnings have
been 4 per cent to 5 per cent higher.
Positive surprises have been led by con-
sumer discretionary, consumer staples,
materials, and select healthcare com-
panies. While this is partly because of
beaten-down expectations on part of
analysts, margin improvement because
of beaten- down raw material cost —
MUMBAI | MONDAY, 18 NOVEMBER 2019
QUICK TAKE: EXPANSION, LOWER COSTS TO HELP JK CEMENT “INVESTORS ARE EXPERIENCING FOMO – THE
JK Cement is trading near its 52-week high. The company FEAR OF MISSING OUT – WHICH HAS
reported a healthy performance in September quarter PROMPTED A WAVE OF OPTIMISM AND JUMP
with net profit growing 68 per cent year-on-year due to
healthy realisations and cost savings. Analysts expect the
IN EXPOSURE TO EQUITIES AND CYCLICALS”
company to benefit from capacity expansions even as MICHAEL HARTNETT,
lower input costs drive its operating performance. Chief investment strategist, Bank of America Merrill Lynch
<
STREET
SIGNS
Nifty to consolidate at current levels
The Nifty has formed a doji candlestick for
a second consecutive week, indicating
indecisiveness among the market
participants. It has to hold above 11,850
COSTING A LOT levels to witness an upmove towards
FY21E Region 11,950, and then 12,000 zones, say
analysts. On the downside, major
Valuation (x)
support is seen at 11,780 levels.
China Life 1.2 China Derivative analysts believe that it is
Samsung Life 0.4 South Korea better to take stock specific
AIA Group 2.1 Hong Kong positions now rather than bet on
Zurich Insurance 1.6 Switzerland the index. The Bank Nifty, on the
ICICI Prudential 2.6 India other hand, has been forming
HDFC Life 4.6 India higher highs and higher lows from
SBI Life 3.2 India the past five weeks. It has to continue
Max Financial Ser. 1.1 India to hold above the 30,800 zone to
E: Estimated; For Indian players it is based on price to embedded witness an upmove towards 31,250, and
value and price to book value for rest; Source: Brokerage reports
then 31,500 zones, while on the downside
tection products, which should of protection products in the over- Life, and SBI Life garnered over 50 major support is seen at 30,400 levels.
continue. Lower penetration and all annual premium equivalent or per cent of their businesses from Among banking stocks, State Bank of
rising awareness about the impor- APE of ICICI Life expanded by 690 banking channels. Improvement India, HDFC Bank and ICICI Bank could
tance of life insurance as a protec- basis points year-on-year in in persistency ratio, which indi- prove good bets, said Chandan Taparia,
tion channel rather than a savings H1FY20, it was 50-150 basis points cates the stickiness of customers, derivative analyst at Motilal Oswal
product is also benefiting insurers. (bps) up for others. For SBI Life, is another profitability booster for Financial Services.
According to Edelweiss, the the share is based on new business insurers. “Persistency ratio should ASHLEY COUTINHO
protection part is 10-20 per cent for premium as the APE-based data is improve with rising financial liter-
the Indian life insurance business not available. For these life insur- acy,” says an analyst with a domes- CSB commands grey market premium
and the rest is investment/savings ers, VNB margin, too, expanded by tic broking house. Prem Watsa's Fairfax-backed CSB Bank
management and the protection up to 350 bps year-on-year in Overall, life insurance stocks (formerly Catholic Syrian Bank) is likely to
component is far lower in India H1FY20. offer an opportunity for investors. extend the trend of good listings, if grey
than peer nations. This is where Strong distribution franchise However, risk-averse investors market premiums are to go by. According
the huge opportunity lies. with bank branches should make may want to wait for some correc- to market participants, shares of the
The April to September period protection products sales easier, tion before entering these coun- private sector lender are changing hands
or H1FY20 numbers show compa- mainly for the top three insurers ters. ICICI Life and SBI Life are at a premium of 35 per cent in the grey
nies are continuously pushing pro- with banking parentage. According among top picks of analysts in the market. CSB Bank’s ~450-crore IPO opens
tection products. While the share to H1FY20 data, ICICI Life, HDFC life insurance space. on Friday. The shares are likely to be
priced in the range of ~190 and ~200
apiece. The grey market premium
currently is ~75 per share. The previous IPO
Sturdy volumes to boost
to hit the market of state-owned IRCTC has
proved to be a bumper for investors. Its
Price shares have nearly tripled since listing
change
Dalmia Bharat’s prospects
about a month ago.
(%) SAMIE MODAK
-14.9 MSCI tailwind for DLF
UJJVAL JAUHARI Shares of DLF have
10.9
Mumbai, 17 November
STRONG EARNINGS AHEAD surged nearly 50 per
-4.6 In ~ crore FY19 FY20E FY21E cent in the past five
9.8 Dalmia Bharat’s recent Net sales 9,484 10,305 11,872 weeks amid positive
15.4 announcement of the restruc- % change y-o-y 10.5 8.7 15.2 calls from analysts. The
Price turing of its operations and Ebitda 1,942 2,240 2,636 latest up move in the
change
bringing its refractory under Ebitda margin (%) 20.5 21.7 22.2 stock, however, has
a single entity is a positive come on account of its
Net profit 308 390 630
6.8 one, for the cement maker. surprise inclusion in the
% change y-o-y 5.5 26.5 61.6
8.1 But, apart from this, and more
E: Estimates; Ebitda: Earnings before interest, tax, depreciation,
MSCI India index, which
-1.9 importantly, the company has and amortisation; Source: YES Securities Research is widely-tracked by
-5.1 continued to expand capaci- global investors. The
9.9 ties, a key factor driving its marginally lower than ~340 a year, but down 27 per cent up, while the eight MT of stock wasn’t considered to be an inclusion
fortunes. This has also helped year ago. South India saw sequentially. expansion plans in East India candidate. Interestingly, DLF was among the
Dalmia Bharat post volume steeper decline with the While one is hopeful of a are also on track too. Analysts few stocks which had corrected more than 15
growth of 8 per cent year-on- prices averaging ~345 a revival in demand during sec- at JM Financial say that post per cent even after the tax cut
year to 4.47 million tonnes
(MT) in the September quar-
bad, versus ~365 in the previ-
ous quarter but a tad better
ond half of FY20 and even the
management is expecting the
expansion, Dalmia Bharat will
become a major player in East
announcement. “Not many were expecting
DLF to benefit from either the tax cut nor was
ter (Q2), thereby beating the than ~340 a year ago. same, analysts at Anand Rathi with a combined capacity of it speculated to be part of the MSCI index. As
trend of declining volumes Consequently, blended say that with fresh capacities 18.2 MT per annum with a result, the sharp gains made in recent
seen by many of India’s lead- cement realisations declined coming up and prices in the capacity-based market share weeks have surprised the Street,” said an
ing cement manufacturers. 1.6 per cent year-on-year to East rising, they expect vol- of 20 per cent. analyst. Some are expecting the stock to
While the company could ~5,002 a tonne, say analysts. ume and revenue growing The capacity expansions extend gains as the MSCI inclusion will be
grow volumes, a weak Declining costs of energy well over FY19-21. and market share gains is effective from November 27, which will lead
demand environment meant (pet coke) and logistic Post the National keeping analysts positive on to some passive inflows.
a decline in realisations. The (diesel), coupled with volume Company Law Tribunal the company. Those at SAMIE MODAK
company’s key markets such growth meant that operating (NCLT) approving resolution Motilal Oswal Financial
as East and South India saw margins could still grow 260 plan for three MT capacity Services, for instance, main- > EVENTS THIS WEEK
the steepest sequential basis point (bps) year-on- of Nagpur-based Murli tain their positive view on the
decline in cement prices. The year; sequentially margins Industries, this plant is company due to reasonable
50 kg bag price in East India fell by 500 bps. Hence, prof- expected to revive by first half valuations and an estimated Date Particulars
averaged ~339, much lower itability per tonne at ~1,063 of FY21. The Kalyanpur one 26 annual growth in earnings 18-Nov US - NAHB housing market
than ~359 in June quarter and was up 13 per cent year-on- MT plant is already ramping over FY19-21. index
UK - Rightmove house prices
19-Nov Eurozone - ECB current balance
21-Nov US - initial jobless claims
the problem of non-performing assets
for NBFCs, but also depressing the
broader consumer sentiment. Investors
should watch out for some resolution
What’s your view on global events?
While investors were severely con-
cerned about geopolitical issues
(Brexit, the US-China trade spat, a pos-
US - Leading index
US - FOMC meeting minutes
UK - public finances figures
22-Nov US - Markit PMI service,
of unfinished projects in the property
sector and the kind of solution pro-
posed by court verdicts on some of the
assets in the metals and mining sector.
sible recession in the US) about a
month ago, they are now less worried
as the possibility of a “Phase-1” deal
between US and China and the proba-
composite & manufacturing
Eurozone - Markit PMI service,
composite & manufacturing
Source: exchange/websites/Bloomberg
bility of avoidance of no-deal Brexit Compiled by BS Research Bureau
What’s your view on the consumption appear bright.
segment?
In the consumer staples sector,
especially for consumer staples and dis- investors have to be cautious about val- > COMMODITY PICKS
cretionary — has been a notable driver. uations because many frontline stocks’
valuations don’t leave much room for GUAR SEED
What are your overweight and error. That said, that’s the only sector
underweight sectors? that has had significant EPS estimate
Earnings per share (EPS) growth for upgrade of late — driven by margin
the frontline Indian indices shall be in expansion — and that tailwind could
low single digits in FY20\ and n low-to- continue as long as commodity prices
mid teens in FY21. The current consen- remain benign.
sus estimate for FY21 seems to indicate
EPS growth in early 20’s but we are How are foreign investors viewing
apprehensive of some decline in earn- India as an investment destination Guar seed is trading at ~4,333 per quintal in
ings estimates in a few sectors. We amid slowdown concerns? Jodhpur. Prices are expected to trade higher
remain overweight on consumer sta- While foreign investors are posi- towards ~4,500 per quintal over the next couple
ples, private banks, insurance, and tive on India over the long term, of weeks following lower than estimated
energy in India and have a neutral in the near term, they are con- production and steady domestic as well as
stance on information technology (IT). cerned about the likely extent export demand.
of the economic slowdown and
Is the financial sector out of the woods? the valuation premium that CHANA
It’s too early to say that the financial most sectors are trading at.
sector is out of the woods. Over the past Most investors are looking at
several years, public-sector banks the quantum and form of
(PSBs) were afflicted with the bad asset consumption-supportive
problem — that problem has now shift- measures that the govern-
ed to non-banking financial companies ment could engage in and the
(NBFCs), particularly those that lent to steps that the government
the real estate and the infrastructure and the central bank could Chana prices are likely to move up on the back
sectors heavily. The problem of unfin- take to resolve the bad assets of delayed sowing due to prolonged wet
ished properties is not only adding to problem in the financial sector. weather conditions. Chana prices in the Delhi
market are likely to move higher towards
WHILE FOREIGN INVESTORS ARE POSITIVE ON INDIA OVER THE LONG ~4,675/~4,700 per quintal from the current
TERM, IN THE NEAR TERM, THEY ARE CONCERNED ABOUT THE LIKELY price of ~4,625 per quintal.
EXTENT OF THE ECONOMIC SLOWDOWN AND THE VALUATION Prerana Desai,
PREMIUM THAT MOST SECTORS ARE TRADING AT Research Head - Edelweiss Agri Services
and Credit
20
>
MUMBAI | MONDAY, 18 NOVEMBER 2019 1

HONG KONG COP WOUNDED WITH ARROW AT CAMPUS STAND-OFF; UNIVERSITY UNDER SIEGE Aramcovaluationfalls
below$2-trilliontarget
Hong Kong
protesters shot
arrows and hurled
petrol bombs from a
barricaded
university on Sunday
at police, who in
IPOsharepriceout,valuingthecompanyatupto$1.7trillion
return fired tear gas HADEEL AL SAYEGH, SAEED AZHAR Aramco kicked off its IPO
and water cannon in & RANIA EL GAMAL on November 3 after a series of
one of the worst Dubai, 17 November false starts. Crown Prince
violence in the Mohammed bin Salman, who
city since anti- Saudi Aramco is worth up to floated the idea nearly four
government unrest $1.7 trillion at the price range years ago, is seeking to raise
erupted five months set by the oil giant on Sunday, billions of dollars to invest in
ago. Several below the $2 trillion sought by non-oil industries, create
protesters took up Saudi's crown prince but put- WORLD'S BIGGEST employment and diversify the
positions on the
rooftops of Hong
ting it in the running to become
the world's biggest IPO.
IPOs ($bn) world's top crude exporter
away from oil.
Attop end of therange,
Kong Polytechnic Aramco cannot sell its In its original prospectus,
University, armed shares directly to investors in
Aramco's IPOwould be published on November 9,
with bows and the United States and other bigger than Alibaba's Aramco said the domestic IPO
arrows, as unrest markets, as the initial public Saudi Aramco 25.6 would be made to institution-
spread across the offering (IPO) will be restrict- al investors outside the United
territory’s central ed to Saudis and those for- AlibabaGroup(2014) 25.03 States according to Regulation
Kowloon district. A eign institutions permitted SoftBank (2018) 21.14 S of the United States
police officer was to invest in the kingdom's Securities Act of 1933, and
wounded in the stock market.
AIA Group (2010) 20.39 inside the United States under
arrow attack The oil giant said it plans to Visa (2008) 19.65 the Rule 144A of the US
PHOTO: REUTERS sell 1.5 per cent of the compa- General Motors (2010) 18.14 Securities Act.
ny, or about 3 billion shares, But on Sunday in an
at an indicative price range of
30 riyals to 32 riyals, valuing
PROFIT KING addendum to the IPO prospec-
tus Aramco said that it had
the IPO at as much as 96 bil- Saudi Aramco profit = Apple + removed any reference to such
Google + Exxon Mobil

NSO’s junked consumer survey

lion riyals ($25.6 billion) and regulations, which three peo-
giving the company a poten- ple familiar with the matter
tial market value of between 2018 net income ($bn) said suggested there would
$1.6 trillion and $1.7 trillion. Saudi Aramco 111 not be any international road-
This could just beat shows to market the shares.
Apple 59.5

shows inequality gap declining

Alibaba's record $25 billion
New York stock market debut
in 2014. Aramco's IPO size
could be bigger if there is
enough demand for it to use a
15 per cent "greenshoe" over-
allotment option. "We are
Ratio of top and bottom 10% declined sharply to 5% in 2017-18 from 5.9% in 2011-12 in rural areas planning to subscribe to the
IPO in two funds that we man-
SOMESH JHA
New Delhi, 17 November
BRIDGING THE INCOME GAP foundthetrendperplexing.Whilethosebelongingtothe
(%) bottom of the income pyramid spent a lot more in 2017-
age," said Zachary Cefaratti,
chief executive officer of
Rural Urban 18 than they did in 2011-12 (when the previous round of
"I expect this is a reflection
Samsung 35.1 of poor international
demand," said Rory Fyfe,
Alphabet 30.7 managing director at MENA
JPMorgan Chase 30.7 Advisors.
"It was not worth it from
Source: Bloomberg
their view. If there's no sub-
Dubai-based Dalma Capital stantial value or demand why
Management Ltd, adding that do it and take additional legal
the preliminary valuation was
"in line with our expectations".
risk?," a banker familiar with
the matter told Reuters.

T
op income earners cut down sharply on their
expenditure, dragging consumer spending
down for the first time in India in over four
decades, leading to a decrease in income inequality.
A class-wise analysis of the National Statistical
Office’s (NSO’s) consumer expenditure survey showed
the gap between the rich and the poor coming down in
the six-year period till 2017-18.
The government on Friday termed the NSO’s survey
report “Key Indicators: Household Consumer
Expenditure in India” “draft” and said it had decided
not to release it owing to “data quality” issues. This
was after the findings of the survey report were made
public by Business Standard on Friday.
The survey was conducted between July 2017 and
June last year and was approved by a National
Statistical Commission-appointed committee for
“immediate” release on July 19 this year.
It showed the ratio of the top and bottom 10 per cent
of the economic group declined sharply to 5 per cent in
2017-18 from 5.9 per cent in 2011-12 in rural parts of the
country — it was mainly because of a sharp decline in
expenditure by the relatively affluent class. In 2009-10,
the ratio stood at 5.6 per cent.
In rural areas, the bottom 10 per cent of income
earners spent ~500, on average, in a month in 2017-18 —
1 per cent less than six years ago. This was mainly
because of a dip in expenditure on food items even as
the non-food overheads rose. Spending cuts grew pro-
portionately as one moved up the income ladder in
villages. The top10per cent earners cut down on spend-
5.6 9.8 5.9 9.7 5.0 7.9
2009-10 2011-12 2017-18
Note: The NSO survey categorises the per capita expenditure data into
various class divisions, each known as a fracticle/decile, depending
upon money spent on food and non-food items. The ratio is of the top
10 to bottom 10 decile, in terms of consumption.
Source: NSO's Key Indicators: Household Consumer Expenditure Survey,
2017-18
ing by 17 per cent to ~2,478 a month, on average, as
they spent equally less on both food and non-food
items. Overall, consumer spending in rural areas
declined 9 per cent in 2017-18 over 2011-12.
“Rich farmers were the most impacted by demon-
etisation and that’s one reason why their expenditure
cut is relatively sharp. The rural poor are mostly land-
less labourers, who were paid in kind in the aftermath
of demonetisation and were less impacted because
their overall consumption basket is mostly food items,”
former chief statistician Pronab Sen said.
In urban areas, the story was different and experts
theNSOsurveywasconducted),theaffluentsectioncut
down on their expenses sharply.Asaresult, the income
gap shrank more in urban areas and the ratio of top 10
percentoftheeconomicgrouptothebottom10percent
Google enters
fellto7.9in2017-18from9.7in2011-12and9.8in2009-10.
It was only the top 10 per cent of earners who saw a
battle for cloud
fall in consumer spending due to less expenditure on
non-food items, such as clothing, conveyance, and
gaming market
durable goods. It was exactly the opposite in the case of Ever-expanding Google
comparativelylow-paidgroups.Peoplebelongingtothe becomes a gaming compa-
bottom 30 per cent of the economic group saw an ny Tuesday with the launch
increase in spending in the range of 11-13 per cent as of its Stadia cloud service
their non-food expenses grew by around 20 per cent that lets people play con-
between 2011-12 and 2017-18. “Looking at these num- sole-quality video games
bers, rural distress is quite evident. The impact of on a web browser or smart-
demonetisation on the rural poor was less than on the phone.
richer ones as the former usually spends less and the The internet giant hopes
trend is on expected lines. But it’s difficult to give a to break into the global video
coherent explanation as to what may have triggered a game industry expected to
divergent trend among rich and poor in urban areas,” top $150 billion this year, with
said Amit Basole, associate professor of economics at cloud technology that could
Azim Premji University. He added the NSO surveys broaden audiences attracted
did not capture the top income earners as well, as they by rich new features as well
mapped the lower-income groups. as ease of access with no
The survey showed the average amount spent by a more need for consoles.
person in a month fell by 3.7 per cent to ~1,446 in 2017- But analysts say Stadia's
18 from ~1,501 in 2011-12. The figures for monthly per outlook is uncertain as its
capita consumption expenditure (MPCE) are in real faces rivals such as
terms, meaning it has been adjusted for inflation keep- PlayStation Now in an
ing 2009-10 as base year. In 2011-12, the real MPCE had emerging and highly-com-
risen 13 per cent over two years. petitive market. PTI

Ayodhya verdict: AIMPLB

says it’ll file review petition
VIRENDRA SINGH RAWAT
Lucknow,17November
The All India Muslim Personal
Law Board (AIMPLB) said it had
decided to file a review petition
against the Supreme Court ver-
dict in the Ayodhya title suit.
Addressing journalists after
its working committee meeting
here, AIMPLB counsel Zafaryab
Jilani said the members had
collectively resolved to do so,
since the order did not do jus-
tice to the Muslim parties.
He said 35-40 of the Board’s
51 members were present when
the resolution for a review was
approved. He declined to com-
ment on any dissenting opin-
ion.JilanicitedIslamicjurispru-
dence as prohibiting any
acceptance of other land in lieu
of the disputed site. Which, he
asserted, legitimately belonged
AIMPLB counsel
Zafaryab Jilani
to the mosque demolished on
December 6, 1992. The Board
has said under Shariah or
Islamic law, Muslims may not
accept any compensation for
the mosque, whether land or
other forms.
Jilani referred to the
Sabarimala case from Kerala,
wherein the SC had recently
referred its earlier verdict in the
case — pertaining to entry of
women within a specified age
group inside the shrine — to a
larger seven-judge bench, Jilani
said the Ayodhya case similarly
merited a review, to dispense
justice for Muslims.
Also, that no single party
could claim to be the main
plaintiff, as there were a total of
nine parties to the title suit case.
Some of those plaintiffs,
apart from some prominent
Muslim figures, have recently
advisedagainstfilingofareview
petition, to foster communal
harmony. Instead, they have
advised,focusonotherpressing
issues facing the community,
includingeducationandhealth.
“TheBoarddoesnotindulge
in any kind of politics and we
are only trying to fight for the
fundamental rights as guaran-
teed under the Indian
Constitution,” Jilani said.

Curbs on royalty payment for

tech transfer likely to be back
PRESS TRUST OF INDIA technology transfer or percentofexports.
NewDelhi,17November collaboration involving Butthefinanceministry
foreign entities either directly hadraisedobjectionsoverthe
The government is or indirectly through any firm proposalsayingitcouldsenda
considering to re-introduce in India. negativesignalto
restrictions on royalty Asimilar foreigninvestors.
payments for technology proposalwas The finance The increase
transfer in view of excessive mootedbythe ministry had raised in outflow of
outflow of such funds to departmentlast objections over the these payments
overseas companies, year.Thattimeit proposal saying it started after the
sources said. hadproposed could send a government
Aproposalinthisregard thatroyalty negative signal to liberalised the
willsoonbecirculatedbythe payments foreign investors FDI policy in
DepartmentforPromotionof shouldbe 2009. It had
IndustryandInternalTrade cappedat4per removed the cap
(DPIIT)forinter-ministerial centofdomesticsalesand7 and permitted Indian
consultation,sourcessaid. percentofexportsforthefirst companies to pay a royalty to
According to the proposal, fouryears;andforthenext their technical collaborators
limits could be imposed on threeyearsthelimitshouldbe without seeking prior
royalty payments in case of 3percentoflocalsalesand6 government approval.