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TUESDAY, 9 OCTOBER 2018
20 pages in 1 section www.business-standard.com
MUMBAI (CITY)
~7.00
VOLUME XXIII NUMBER 40

THE MARKETS ON MONDAY Chg#


Sensex 34,474.4 97.4
Nifty 10,348.0 31.6 COMPANIES P2 WORLD P14
Nifty Futures* 10,379.0 31.0
Dollar
Euro
~74.1
~85.0
~73.8**
~84.9** STIFF COMPETITION LEADS TO MIKE POMPEO HOLDS ‘FROSTY’
PRICE EROSION IN BIOSIMILARS MEETINGS WITH CHINESE OFFICIALS
Brent crude ($/bbl)## 83.7## 84.2**
Gold (10 gm)### ~31,165.0 ~85.0
*(Oct.) Premium on Nifty Spot; **Previous close;
# Over previous close; ## At 9 pm IST;
### Market rate exclusive of VAT; Source: IBJA PUBLISHED SIMULTANEOUSLY FROM AHMEDABAD, BENGALURU, BHUBANESWAR, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI (ALSO PRINTED IN BHOPAL), NEW DELHI AND PUNE

THE CMIE TRACKER


Consumer Sentiments Index
(Base: September - December 2015 = 100)
IL&FS jitters Fresh import curbs soon to
frame response to trade war
erode 12.5% SUBHAYAN CHAKRABORTY, SHINE JACOB
& ARUP ROYCHOUDHURY
India has raised import duties or
imposedrestrictivemeasuresoninbound
UNDER CONSIDERATION

of MF assets
New Delhi, 8 October goods five times this year. The latest was
Amount
on September 26, when the government Import items ( $ mn) Annual growth
The government is mulling a second set raised import duties on 19 items, includ- (%)
of duty hikes to reduce the risk of dump- ingconsumerelectronics,diamonds, jew- Iron ore 655.2 103.3
Unemployment rate (%) ing from China and curb the widening ellery, jet fuel, and leather footwear, in a
tradedeficit.BusinessStandardhaslearnt bid to curtail non-essential imports and Copper ore 4,319.1 58.4

SPEED BREAKER (~trn)


from multiple sources across central min-
istries that metals and minerals are being
bridge the current account deficit (CAD).
Officials also said a major part of any
Aluminium scrap 2,044.0
Electronics* 21,057.2
45.8
30.3
Debtschemes see an outflow considered now. These will include cer- decision on further curbs would be to
of ~2.44 trn inSeptember tain grades of iron ore, copper ore, alu- protect India’s interest from the trade war Zinc in various
827.3 17.9
minum scrap and zinc. Some other items between the US and China. “When the FY18 import figures;
*Mobiles, telephones,
including finished electronic, especially finance minister said the government components
those for which China is a major manu- would curb imports of certain items, he Source: Commerce
Department
Source: CMIE facturer, are also being considered. did so to help bridge the CAD. But part of
THE BITTER TRUTH OF FEMALE LABOUR PARTICIPATION Government officials said only cer- thethinkinghadtodowithtradewarstoo.
10 > tain qualities of these metals could be That thinking has taken centre stage,” a
subject to tariff hikes. “Take, for example, second official said. “With the US impos-
iron ore. For higher grades of iron ore ing curbs, Chinese goods meant for
~ SLUMPS 30 PAISE which are not mined domestically, a hike the US are likely to flood Indian markets.

TO CLOSE AT 74.06 will be counter-productive. But for the


grades similar to the ones mined in India,
Those will especially be electronic
items meant for holiday or Christmas sea-
Therupeeslumpedby30paise Source: Association of Mutual Funds in India there can be curbs,” said an official. son in the US.” Turn to Page 6 >
tofinishatanewlowof74.06 ~ vs $
againstthedollaronMonday (Inverted scale) JASH KRIPLANI September. “However, the outflows
amidthestrengtheningofthe Mumbai, 8 October seen in fixed-income schemes were not

4,000 cancelled NBFCs under I-T lens


greenbackandsteadycapital expected,” she said.

T
outflows.Duringtheday,the he crisis linked to Infra- The sharp downgrade of IL&FS in a
domesticcurrencyrecovered structure Leasing & Financial matter of days had raised concerns in
toahighof73.76,butfailedto Services (IL&FS) has hit the the corporate bond market, said Raj
sustainthemomentumand mutual fund (MF) industry Kumar, chief executive officer of LIC SHRIMI CHOUDHARY Further, tax officials are process of gathering the books compliant and had not fulfilled
plungedto74.10. 6> hard, with 12.5 per cent, or ~3.16 tril- MF. “Investor panic got triggered when Mumbai, 8 October examining whether the loans of accounts and financials of obligations under the Preven-
lion, of industry assets getting shaved the AAA-rated debt paper of DHFL was sanctioned by these firms have these NBFCs. According to a tion of Money Laundering Act
off in a single month. Total assets sold at 11 per cent.” The income-tax (I-T) depart- been used by their borrowers source, loan-book growth in (PMLA). The anti-money laun-
ECONOMY & PUBLIC AFFAIRS P7 under management (AUM) shrunk to Such high yield is unusual for AAA- ment is probing more than for genuine business purposes. these companies was twice that dering law imposes obligations
RBI to sell gold bonds ~22.04 trillion in September from ~25.2
trillion at the end of August.
rated papers, which typically trade
between 8 per cent and 9 per cent.
4,000 non-banking finance
companies (NBFCs) whose
The RBI last month shared the
city-wise data with the depart-
of banks, which raised doubts.
The department has also
on reporting entities, including
NBFCs, to verify the identities
at 2.5% interest rate Most of the damage was due to Industry players said investors licences have been cancelled by ment. The data has details on found asset-liability mismatch of clients, maintain records,
Thegovernmentwillbeissuinggoldbondsin record outflows from liquid and fixed- pulled out money fearing contagion the Reserve Bank of India (RBI). companies that are associ- in these NBFCs, which it will and furnish information to
fivetranchesbetweenOctober15and income schemes, where large investors risks from the IL&FS default. According to I-T sources, the ates/group firms of large state- investigate. It has information the FIU. Turn to Page 6 >
February8,anoteontheRBIsitesaid.The invested. The two schemes saw out- Theunexpectedredemptionpressure department is looking into the owned banks and corporate on this from the Financial
SovereignGoldBond2018-19willbeissuedby flows of ~2.4 trillion in September — led to liquidity crunch at fund houses. origin of assets in the balance houses, said a tax source privy Intelligence Unit (FIU). Early THE SMART INVESTOR, P12
theRBIonbehalfoftheCentre,attracting the most since at least January 2008. Some of them had to consider bank bor- sheets of these NBFCs, and to the development. this year, the FIU put up a list of NBFC STOCKS FALL ON
fixedrateinterestof2.50percentperannum. The pullout in debt market schemes rowing to honour redemption requests, whether they were disclosed. The department is in the 9,236 NBFCs that were non- STRICTER RULE FEAR
alone accounted for close to 10 per cent according to industry sources.
of August’s AUM tally. The move also caught the attention of
ECONOMY & PUBLIC AFFAIRS P4 Industry participants attribute the regulatory bodies such as the Securities
BrahMos Aerospace sharp pullout to nervousness among
corporate investors following the IL&FS
& Exchange Board of India (Sebi), which
called for an industry meeting to discuss
engineer held default, which had quasi-sovereign sta- risk management practices, sources said.
Nishant Agrawal, an engineer with the tus. The large amount of outflow has At present, MFs can borrow up to
BrahMos Aerospace’s Wardha Road facility, caught the industry by surprise. 20 per cent of their net assets for six
was arrested in a joint operation by the UP Industry had earlier estimated outflows months to meet redemptions and repur-
and Maharashtra Anti-Terrorism Squads on in such schemes at around ~1 trillion. chase, and pay interest and dividends to
Monday for allegedly leaking “technical “The pullout is higher than expected. unit holders. This allows fund houses to
information” to Pakistan, an official said. There has been a flight to safety triggered borrow from banks an amount that is
by the IL&FS event. The sale of Dewan directly proportional to their AUM in a
Housing Finance (DHFL) debt papers at particular category. This means if the liq-
COMPANIES P3 high yields has aggravated the concerns,” uid asset of a fund house is ~1 billion, the
GMR gives 5.8% stake said Swarup Mohanty, chief executive
officer of Mirae AMC.
fund house can borrow ~200 million to
meet redemption needs.
in airport firm Radhika Gupta, chief executive Industry participants add that the sit-
GMR Infrastructure will give ~35.60 billion by officer of Edelweiss MF, said the liquid uation in the industry should stabilise
way of cash and a 5.86 per cent stake in its schemes tended to have high outflows in in the coming days. Turn to Page 6 >
airport-holding company to three private
equity investors, ending two years of litigati-
on.The immediate cash payout works out to
around ~15 billion. ANEESH PHADNIS writes
AUTO, CONSUMER DURABLES BUYERS WILL
COMPANIES P2 SEE RISE IN THEIR INSTALMENT OUTGO
JLR plans two-week Besides slowing car and two-wheeler sales in the past few
months, rising interest rates are likely to further dent
shutdown of UK plant demand for manufacturers. Buyers of consumer goods, too, are
Tata Motors-owned Jaguar Land Rover (JLR) seeing an impact of rising rates along with higher input costs as
on Monday revealed plans for a two-week companies raise prices. While lenders including non-banking
shutdown of its West Midlands plant at the financial companies (NBFCs) and banks have already hiked interest
end of October to cope with weakening rates, others are monitoring the situation closely and may do it soon,
global demand for its luxury vehicles. JLR given the tightening liquidity. If anything, the recent crisis at
stressed it would not mean any job losses at Infrastructure Leasing & Financial Services would put pressure on the
the plant in Solihull, with workers contin- interest costs of NBFCs, which in turn would mean higher interest rates for buyers, said
ued to be paid during the shutdown period. executives at these firms. SHALLY SETH MOHILE, T E NARSIMHAN & ARNAB DUTTA write 2 >

Nordhaus, Romer win economics


Nobel for climate, innovation
BINYAMIN APPELBAUM theannouncement.
Washington, 8 October “Humansarecapableof
amazingaccomplishmentsif
The2018NobelMemorial wesetourmindstoit.”
PrizeinEconomicScience Nordhaus,77,graduated
wasawardedonMondaytoa fromYaleandthenearneda
pairofAmericaneconomists, doctorateineconomicsfrom
WilliamDNordhausandPaul theMassachusettsInstituteof
MRomer,fortheirwork Technologyin1967.Thatyear,
highlightingtheimportance hereturnedtoYaleasa
ofgovernmentpolicyin memberoftheeconomics
fosteringsustainable faculty,andhehasremained
economicgrowth. thereeversince.
Nordhauswashonoured In the 1960s and the
forpioneeringthe 1970s, amid rising concern
assessmentoftheeconomic William Nordhaus (left); Paul Romer PHOTO: REUTERS about pollution, economists
impactofclimatechange, began to argue that taxation
includinghisadvocacyof
WHAT THEIR WORK MEANS FOR A GROWTH-HUNGRY INDIA P10 was the most effective
governmentstaxingcarbon changereleasedareport theRoyalSwedishAcademy solution: The government
emissions.Romerwas warningofdireconsequences ofSciences.Romersaidhe should charge people for
honouredforhisworkonthe fromclimatechangeand andNordhaussharedasense polluting. Nordhaus argued
roleofpolicyinencouraging urginggovernmentsto ofoptimism.“Oneproblem the best way to limit
technologicalinnovation. respondtotheproblemwith todayisthatpeoplethink emissions was to calculate
Nordhaus,77,isaprofessorat greaterurgency. “The protectingtheenvironment the cost of a fixed level of
Yale.Romer,62,isaprofessor messageisthatit’sneededfor willbesocostlyandsohard emissions and then require
atNewYorkUniversity. countriestocooperate thattheywanttoignorethe firms or governments to pay
Theawardcameonthe globallytosolvesomeofthese problemandpretendit for those costs.
samedaythataUnited bigquestions,”saidGoran doesn’texist,”hesaidata ©2018 The New York Times New Service
Nationspanelonclimate Hansson,secretarygeneralof newsconferencefollowing Turn to Page 6 >
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.
MUMBAI | TUESDAY, 9 OCTOBER 2018 COMPANIES 3 <

GMR to give Energy demand to boost port volumes: Karan Adani


5.8% in airport MARITIME
FOOTPRINT
MEGHA MANCHANDA
New Delhi, 8 October

West Coast Ports East Coast Ports


ports, respectively.
Thebusinessopportunityfor
the private sector in the mar-
174.02 mt of cargo during the
period April to June, as against
167.48 million tonnes handled

firm to 3 PEs
The energy sector is feeding a itime space would go a long way during the corresponding
sizeable demand of both major Mundra Port Dhamra Port in achieving the Union govern- period of previous year.
and minor ports, which can be Tuna Terminal Vizag Terminal ment's goal for the sector. The highest growth was reg-
gauged from the commodity A government road map has istered by Kamarajar port
ANEESH PHADNIS tion tribunal in Singapore, mix of Adani Ports and Special Dahej Port Kattupalli Port been created for increasing the (11.93%), followed by Kolkata,
Mumbai, 8 October based on the settlement EconomicZone(APSEZ),agood Hazira Port Ennore Terminal Indian port capacity to more including Haldia (10.21%),
agreement it signed with the chunk of business generating Murmugao Port than 3,500 million metric Paradip (9%), Cochin 7.85%) and

G
MR Infrastructure will PE investors. It said the from import and export of coal, tonnes per annum (mmtpa), Visakhapatnam (7.24%).
give ~35.6 billion by way investors would acquire a 5.86 crude and petroleum products. Vizhinjam Port which would cater to the pro- The Kamarajar port growth
of cash and 5.86 per per cent equity of GAL, at an “Whether you take import or Source: Adani Ports and Special Economic jected traffic of 2,500 mmtpa by was mainly due to an increase
Zone website
cent stake in its airport holding equity valuation of ~210 bil- export, energy is one big growth 2025. For all the 12 major ports, in other liquids by 29.63%,
company to three private equi- lion, and receive payment of area and as the country keeps master plans have been miscellaneous cargo by
ty (PE) investors, ending two ~35.6 billion in lieu of the pref- growing, the energy needs will terminals — Mundra, Dahej, imported from the east coast of Becauseofadipinproductionat finalised — 112 port capacity 15.06%, POL by 7.51% and ther-
years of litigation. erence share investment. The increase whether it is coal, LNG, Kandla, and Hazira in Gujarat, the country. In bulk commodi- theCoalIndiamines,importhas expansion projects, costing mal coal by 4.93%.
The immediate cash pay- 5.86 per cent stake will be val- LPG or crude oil,” Karan Adani, Dhamra in Odisha, Mormugao ties, coal is one of the most picked up. These commodities ~696.36 billion have been iden- Commodity-wise percent-
out works out to around ~15 bil- ued around ~12 billion. chief executive officer (CEO), in Goa, Visakhapatnam in imported items, in liquid cargo are therefore driving the port tified for implementation over age share of POL was maximum
lion, as the three investors are It said the cash payment APSEZ, told BusinessStandard. Andhra Pradesh, and Kattupalli it is crude and rest is the con- business.” thenext20yearsandareexpect- i.e. 30.36%, followed by con-
to give new loans of ~20.05 bil- would be partly funded by “We are expecting a huge and Ennore in Chennai — rep- tainer traffic. Onthecompany'sexpansion ed to add 780 mtpa to the capac- tainer (20.36%), thermal coal
lion as part of the transaction. GMR's listed arm, by selling its growth in it,” he said. resenting 24 per cent of India's Former shipping secretary plan, Adani said it was develop- ities at major ports. (16.26%), miscellaneous cargo
In 2010-11 and 2011- stake in airports in APSEZ is an integration of total port capacity. Vishwapati Trivedi said, “Crude ing a trans-shipment container According to official fig- (12.41%), coking and other coal
12, GMR Group had the Philippines and three verticals consisting of Crude is always in demand imports is one of the biggest in terminal at Vizhinjam in Kerala ures, the major ports in India (7.49%), iron ore and pellets
raised ~14.78 billion Delhi Airport ports, logistics and special eco- and is mostly imported at the country and is a significant and building LNG and LPG ter- have recorded a growth of (6.47%),otherliquid(4.06%),fin-
via compulsorily Parking Services to nomic zone. It has 10 ports and India's west coast, while coal is part of the port's business. minals at Mundra and Dhamra 3.91% and together handled ished fertiliser (1.42%), etc.
convertible prefer- GAL. These transac-
ence shares from tions will be funded
SBI Macquarie, through issue of
Standard Chartered
Private Equity, JM
non-convertible
debentures to the PE Suzlon aims to nearly halve debt by March CIL, NLC join hands for solar,
Financial Old Lane
and others. The
investors.
“This is a signifi- JYOTI MUKUL capacity ahead of the SECI timelines, said the company would soon announce thermal power diversification
investment was cant positive devel- New Delhi, 8 October despite the challenges, uncertainties and a few international order wins. “We will AVISHEK RAKSHIT company in the near term.
made in GMR Airports (GAL), opment for the group. It rein- initial teething issues of the new bidding continue to remain market leader. We Kolkata, 8 October According to the agree-
which controls the airports at forces the fundamental Suzlon, this country’s largest maker of wind regime,” said Chalasani. have won orders from largescale utilities ment, this JV will have 15
Delhi and Hyderabad. strengths of the airport busi- power gear, is looking at monetising some According to him, – Sembcorp, Torrent and Coal India (CIL) has signed an months to complete the solar
In the agreement, the PE ness and paves the way for of its assets, amid an anticipated rise in Suzlon has 22-23 per cent It has 22-23 per cent ENEL." initial agreement with NLC power projects and five years to
companies were assured of an value unlocking of the airport sales volume from the next financial year, market share, amounting to market share, Suzlon has 12 G2 under India for formation of a joint finish the thermal power proj-
exit through an Initial Public business. This will act as a cat- both at home and abroad. 1,500 Mw, after the first amounting to 1,500 Mw, its service fold in India and venture (JV) company, which ects, which will be financed via
Offer of equity (IPO) or pro- alyst for potential deleverag- J P Chalasani, group chief executive, round of the SECI auction, after the first round of around 4 G2 of wind energy will generate 3,000 megawatt a debt equity ratio of 70:30,
moter buyback. Neither mate- ing of GMR Infrastructure's said: “We have an advantage due to vertical including the recently com- the SECI auction, assets outside India. It is the (Mw) of solar and 2,000 Mw of according to the Central
rialised. The PE investors had a balance sheet and value cre- integrated operations. The sector will wit- pleted project. including the recently second largest operations thermal electricity. Electricity Regulatory Comm-
right to acquire 49 per cent in ation for shareholders,” stated ness growth of 10-12 Gw volumes per “Some capacity is unde- completed project and maintenance (O&M) The agreement is part of the ission norms. A concept paper
GAL in an event of a default. In GMR Group. annum.” He said the company was on track cided as the bids happened entity, after NTPC, in the CIL’s plan to evolve into an has been initiated by both the
2015, GMR Group exercised a It had recently emerged as to reduce 40-50 per cent of its debt through just in September, in the NTPC and SECI- Indian power sector. energy company rather than companies to get a clearance
call option to buy back shares the highest bidder for the asset monetisation by end-March 2019. It 5 auction round. These are still available The group cumulative installation is just being a miner. In the pro- from their respective boards.
held by the PE investors but Nagpur airport privatisation had restructured its loans in the past and in the market. We will look at tying up for 17.9 Gw of wind energy capacity and 7,600 posed JV, both Coal India and “This is a synergistic step,
thiswassubjecttofulfillmentof project, and is expanding its had long-term debt of around ~71.4 billion these as well,” he said. The firm has also employees, of diverse nationalities. NLC will have an equal stake combining the resources of
certain conditions and regula- footprint by securing con- as of end-June. commissioned a prototype of the S120- Chalasani said they expect a rise in vol- and the total investment is esti- both the companies for a
tory approvals. As the latter did tracts in Philippines and The firm recently delivered for one proj- 140m, the country's tallest wind turbine umes abroad but do not see sales there mated to be around ~120 bil- common goal. Coal India will
not come, there was a stale- Greece. According to media ect for Sembcorp under a first round of generator with a Hybrid Concrete Tubular being more than 10-15 per cent of the total lion. If this JV generates the be riding the core technical
mate, leading to arbitration. reports, GMR is looking at bidding for wind energy capacity, con- Tower, a good fit in the new competitive business. It is looking at markets in emerg- desired solar energy, it will ful- expertise of NLC India in
GMR Group announced raising $500 million (about ducted by Solar Energy Corporation of bidding regime, where largescale utility ing economies, beside Australia. However, fil the coal ministry's target to thermal power generation
on Monday it had got a con- ~36 billion) through an IPO of India. “We partnered with Sembcorp from projects of 200-500 Mw are being this would be mainly equipment supply, Coal India which dictates it to and solar power," a company
sent award from the arbitra- its airport division. the pre-bid stage and delivered the full installed and commissioned. Chalasani not O&M, he said. become a Net Zero Energy official said.

GE Healthcare
partners
IIT lab to
develop MRI

ALNOOR PEERMOHAMED
Bengaluru, 8 October

American manufacturing
giant General Electric’s
healthcare unit has signed
pact with SAMEER, an R&D
lab under the Department of
Electronics and Information
Technology (MeitY) to co-
develop an indigenous mag-
netic resonance imaging
(MRI) machine.
GE Healthcare and
SAMEER, an independent
lab setup inside IIT Mumbai
by MeitY, will collaborate on
the research, design and
development of a 1.5 Tesla
MRI platform that will give
rise to whole-body, portable
and digital MRI machines.
The firm has supplied the
magnet, one of the critical
components, for the proto-
type MRI machine that
SAMEER is developing.
“We are delighted to share
the expertise and partnership
in this journey that will sig-
nificantly enhance India’s
capability in the field of med-
ical technology,” said Kieran
Murphy, president and CEO,
GE Healthcare.
The move to develop an
indigenous MRI capabilities
came as a mandate from the
Government of India to boost
the country's capabilities in
the medical technology
space. The government has
already provided the first $6.5
million to SAMEER to build a
prototype of its MRI machine,
for which it is seeking help
from GE.
Apart from working with
SAMEER, GE Healthcare,
through its joint venture
partnership with Wipro in
India, is also looking to grow
skilling to support the gov-
ernment's Ayushman Bharat
universal healthcare scheme.
The company expects
demand for its devices to go
up as healthcare becomes
more accessible, and is look-
ing to train people who can
operate these machines.
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4 ECONOMY & FINANCE MUMBAI | TUESDAY, 9 OCTOBER 2018

“India is one of the fastest-growing “Gujarat is a peace-loving state and a model of “I would not say that the Congress should take our
economies. From 9th, we jumped to the 6th development. Those who do not have any issue (to candidates, but it may feel bad if I say that those not
position. At this pace, India will be among criticise the state govt) spread such rumours. Those who fielded by them can join the SP. It is Cong’s responsibility
the three biggest economies by 2030” do not want development spread rumours” to bring parties with similar ideology together”
RAJNATH SINGH YOGI ADITYANATH AKHILESH YADAV
Union home minister Uttar Pradesh chief minister Samajwadi Party president
>

BrahMos Aerospace
engineer held for
Will buy Iran oil despite Price cut credit
negative for
leaking info to Pak
PRESS TRUST OF INDIA Agrawal hails from
US sanctions: Pradhan OMCs: Moody’s
AMRITHA PILLAY
THE IMPACT
Nagpur, 8 October Roorkee and got married two Delhi to push for ~ trading mechanism with Tehran, besides Russia, Venezuela Mumbai, 8 October
„ Ebitda FY2018A
months ago, he said. "He was
An engineer with the staying with his wife here and SUBHAYAN CHAKRABORTY official. India is yet to respond The government’s decision last „ Ebitda FY2019E
BrahMos Aerospace unit near had given his Aadhaar card New Delhi, 8 October to this, he added. week to reduce fuel prices „ Impact on Ebitda for FY19
Nagpur was arrested on copy and a certificate from his The previous United through state and central tax (~ billion)

D
Monday for allegedly leaking employer to me while moving espite the US press- Progressive Alliance govern- and price cuts taken by oil mar-
“technical information” to in,” he said. uring India to cease oil ment had also been able to keting companies (OMCs) may

380
364
Pakistan, an official said. BrahMos Aerospace is a imports from sanct- bypass international sanc- have far-flung impact on the
Nishant Agrawal was nab- joint venture between India’s ions-hit Iran, the government is tions led by the US after domestic oil industry, a Moo-

177
bed in a joint operation by the Defence Research and going ahead with negotiations deciding to use the euro for dy’s report has stated. The imm-

164

171
157
Uttar Pradesh and Maharashtra Development Organisation for more oil purchases from the paying Iranian producers. ediate impact, according to the
Anti-Terrorism Squads (ATS) at (DRDO) and the ‘Military West Asian nation, along with But India will not have access rating agency’s note, would be
BrahMos’ Wardha Road facility, Industrial Consortium’ (NPO Venezuela and Russia. to the European currency credit negative for the OMCs.

31

18

16
an ATS official said. Mashinostroyenia) of Russia. However, this will be done this time around as leading Moody’s in its note raises con-
The engineer was living The company was set up with an aim to create a rupee- European Union nations cerns over increased borrow- IOCL BPCL HPCL
in a rented accommodation through an inter-governmen- based trading mechanism with have also supported Trump’s ings for OMCs, rating down- A-actual; E- Expected
on Wardha Road since last tal agreement signed on these nations, so as to reduce call for sanctions. grades, further directives to Ebitda is earnings before interest, tax, depreciation
year, his landlord Manohar February 12, 1998, between the exposure of the US dollar to TOP 10 IMPORT SOURCES FOR INDIA’S On the other hand, senior absorb fuel prices and pressure
and amortisation
Source: Moody’s report
Kale said.
The police team arrived at
India and Russia. The name
BrahMos represents the fury
India’s largest import category.
At an inter-ministerial meeting
CRUDE IN 2017-18 industry insiders pointed out
that India remains among the
on upstream companies to
increase in shareholder returns not fully pass on higher crude
the building at 5.30 am and of Brahmaputra and the grace last week, Commerce and Total import bill: $87.37 bn few countries paying Vene- or subsidise crude oil prices. oil prices to consumers and
was there till 5 pm, he said. of Moskva rivers. Industry Minister Suresh Nations Amount ($ billion) zuela for oil imports through On October 4, the govern- their earnings will be negative-
Prabhu asked the commerce, the US dollar. However, the ment (“Baa2 stable”) reduced ly affected,” the note said.
revenue, and petroleum Iraq 17.54 government believes the South petrol and diesel retail selling Moody’s estimated that the
Saudi Arabia 15.26
IN BRIEF departments to work on the
possibility of a rupee trade Iran 8.97
American nation — facing an
economic crisis rife with hyper-
prices by ~2.5 per litre, through
cuts in excise duties by ~1.5 per
government’s decision will
reduce the combined Earnings
mechanism with all these inflation and food shortages — litre and asking the OMCs to before Interest, Taxation,
Data localisation: Deadline extended nations, according to senior Nigeria 8.19 will not part with a significant absorb the remaining ~1 per litre Depreciation And Amortisation
Jaitley meets RBI for filing ITR, audit source in the know. UAE 6.12 source of US dollars. “Suggesti- price cut. “The government’s of the three OMCs by ~65 bil-
dy guv, IT secy report till Oct 31 Petroleum Minister Dhar- Venezuela 5.85 ons to use bitcoins for oil pay- decision to reduce fuel prices is lion in FY19, which is around 9
mendra Pradhan on Monday ments to Venezuela have been credit negative for IOC, BPCL per cent of their total Ebitda of
Finance Minister Arun Jaitley The government on Monday said the two Indian oil refiners Kuwait 5.28 struck down as we did not find it and HPCL — because they can- ~692 billion in the 2018 fiscal.
on Monday met RBI Deputy extended by a fortnight till had contracted Iranian crude Angola 3.08 feasible to buy and sell an onl-
Governor B P Kanungo to October 31 the deadline for oil for November. India is ine currency not governed by
Mexico 2.75
discuss RBI’s data localisa-
tion norm for global financial
technology companies.
filing Income Tax return (ITR)
and audit report for financial
year 2017-18. This is the sec-
hoping to get a waiver from the
US as the sanctions are set to be
in place on November 4. “Two
Oman 2.41
sovereign laws,” a senior reve-
nue department official said.
As for Russia, New Delhi is
Oil firms threaten
The Reserve Bank in April
gave six months time to
global payment companies
ond extension within a
fortnight of the Central
Board of Direct Taxes (CBDT),
oil companies of ours have
made nominations
purchase Iranian oil in
to
rupee terms. At present, Iran is
the third-largest supplier of
crude oil to India. The rupee
past two months, Washington
DC has continued to put
pressure on governments and
open to a barter arrangement
for the two largest imports —
diamonds and oil — apart from
to cut supply to AI
to store transaction data earlier extending the November. We do not know if payment mechanism has been companies worldwide to cut a rupee mechanism. Global oil State oil marketing companies increase in fuel prices.
of Indian customers within deadline for tax payers we will get a waiver (from US suggested as the best possible their imports from the nation. prices have dropped from the have stepped up pressure on “We have paid about ~1 bil-
India. PTI< whose accounts have to be sanctions),” Pradhan said at way to cut India’s dollar As a result, the US has made highest levels they reached in Air India, threatening to sus- lion today. We are regular in
audited from September 30 The Energy Forum. India will exposure as well as shore up the the issue a part of its current the early part of the year, as pend supplies in case of default. our present day payments. We
to October 15. be buying 1.2 million tonnes of value of the rupee, which has trade negotiations with New investors focused on rising out- On Monday, the Indian Oil have also made hike in fares
Panel on SEZs PTI< Iranian crude, he said. continued to plummet. Delhi. “Senior US officials put from other producers, such Corporation threatened to snap and will be able to raise
plans continuation “We will be guided by our The Donald Trump visiting India have suggested as top exporter Saudi Arabia, to supply at eight airports over enough cash to make regular
national interest,” Pradhan Administration has cancelled they may be willing to give compensate for lower Iranian pending dues. However, sup- payments. There was no dis-
of incentives Gadkari to lay added. He said India has the nuclear deal with Tehran India a waiver on America’s supplies. Saudi Arabia said last ply was not discontinued, as continuation of fuel supplies
A commerce ministry- foundation stone for requested Saudi Arabia to and announced the re- tariff hikes on aluminium and week it plans to raise the airline made a payment of and our operations are nor-
appointed committee on increase the supply of crude. imposition of several steel imports, provided India production in November from ~1 billion. Air India group com- mal,” said an Air India official.
promoting special economic ~12bn NH projects Meanwhile, Indian Oil sanctions on the Iranian commits to significantly October output of 10.7 million panies uplift fuel around ~220- An Indian Oil official con-
zones has suggested conti- Union Minister Nitin Corporation Chairman Sanjiv regime that will target the change its sourcing pattern barrels per day, indicating 230 million daily and the firmed that a letter had been
nuation of tax incentives, Gadkari on Tuesday will lay Singh said India is considering nation’s crude oil exports with regards to petroleum,” a Riyadh will be increasing its amount has risen over last cou- issued on discontinuation of
and host of other steps to foundation stone for ~12.24 Iran crude oil payments in starting November 4. Over the senior trade department supply to the highest-ever level. ple of weeks because of fuel supplies. BS REPORTER
revive special economic bn highway projects in
zones (SEZs), an official said. Uttar Pradesh. Besides, the
With a view to focus on job highway projects, Gadkari
creation, the committee has
proposed migration of
SEZs to employment and
economic enclaves, and
will also lay foundation
stone for development of
National Waterway 40,
Ministry of Road Transport
1920 Act needs redoing to sort out bankruptcy rules
creation of link infrast- and Highways said in a VEENA MANI The Provincial Act already the IBC will soon be able to After corporate guaran-
ructure and maintenance statement. PTI< New Delhi, 8 October has sections pertaining to get better valuation for insol- tors, the government will also
for enclaves. PTI< corporate guarantors. "Once vent companies. This would make rules for proprietorship
The government will have to they are repealed, we can be so because the corporate firms and individuals.
Goldman: RBI to repeal some sections of the notify the rules,” he said. guarantor’s assets would Meanwhile, the govern-
DIPP: Taking steps up rates by 25 bps Provincial Insolvency Act, In fact, some sections of be added to the company’s ment is working on strength-
to cut time to grant in Q1 of 2019 1920, to frame rules for bank- the Act also need to be done concerned. ening Debt Recovery
ruptcy, including those for away with for rules for The rules will be so framed Tribunals in the country so
patents, trade marks The Reserve Bank of India is corporate guarantors. individual bankruptcy, said that if creditors want a better that these cases can go there.
India is taking several steps, expected to increase policy “For the bankruptcy pro- officials. valuation, they can add The IBC is in force since 2016
including hiring more rates by 25 basis points in visions, there is one hurdle. While rules for insolvency the value of the guarantor’s for corporate entities.
manpower and increasing the first quarter of the next We are working on the sec- under Insolvency and assets as well. Officials say bankruptcy is
use of technology, to reduce year, primarily led by i tions of the Provincial Bankruptcy Code (IBC) have The current insolvency still seen in India in a deroga-
time for granting patents nflationary pressures and Insolvency Act that need to been framed, those for bank- rules allow creditors to only tory sense that could affect
and trade marks, a top depreciation of the rupee, be repealed before the bank- ruptcy are yet to come. tors, proprietorship firms and guarantors are released, take into consideration the families. Hence a caution is
government official said says a Goldman Sachs ruptcy provisions are noti- Bankruptcy rules include individual insolvency. bankers dealing with compa- company’s assets and not the exercised in finalising rules
on Monday. PTI< report. PTI< fied,” said an official. those for corporate guaran- Once rules for corporate nies going insolvent under corporate guarantors. for individual insolvency.

‘National health scheme will help us improve infrastructure’


TAPAN SINGHEL, managing director and chief executive officer of Bajaj Allianz General hospitals interested. But they are public-private partnership (PPP) security cover for these illnesses. natural disaster occurs and
Insurance Company, speaks to Advait Rao Palepu on the importance of national looking for data, scale and has always been the best model Mental health is not just a customers would not need to file
health insurance schemes in improving the lives of people. He also says how simple setting up of new infrastructure. to run these programmes. clinical issue and the number of a claim in such instances. Why
solutions can safeguard the interests of homeowners and governments from In an environment where cases is reaching epidemic levels. wait for an event to happen and
catastrophic losses in the event of natural disasters. Edited excerpts: business should be given the The regulator has asked health But data is required and we are then start reacting. Why not have
right to decide and choose, it is insurance players to bring out presently conducting actuarial a cover which does not cost the
Bajaj Allianz General Insurance than that of the entire industry, okay if some hospitals do not specialised health policies to studies to understand this issue government much as individuals
has won the rights to provide on a compounded annual want to participate. At the same cover mental illness. What are the to figure out what the best policy will pay for it. In the case of
health insurance services under growth rate basis. We are under- time, there are enough hospitals challenges in designing insurance or policies could be. people who rent their homes,
the Ayushman Bharat National estimating the effects the which are willing to participate products for mental health they can negotiate with their
Health Protection Scheme in two scheme will have. I see this as a and will be creating the patients, given the subjective The recent floods in Kerala and landlord to include such a clause
states — Mizoram and Jammu phenomenal move which will necessary nature of treatments? Nagaland left a trail of in the agreement to protect their
& Kashmir. What are the transform the life expectancy infrastructure. The Initially, health covers were destruction. Both private and material goods in case of a flood,
implementation challenges? and quality of life of Indians at good part of the only for allopathic treatments, state-owned proponents have for instance. Wherever a tax is
I am a strong advocate large. As a company, we tenders is that they but insurers today are offering been damaged and some voices paid on property, including for
of the national health have had experience eliminate a huge a cover for homeopathy, in the industry are telling state those who rent, such a policy can
scheme because it is running state health amount of frauds naturopathy, or even governments to buy catastrophic be provided. We can make such
good for our country. It insurance schemes and and bring in ayurvedic treatment. This is insurance policies or issue covers mandatory for all
can raise the average our presence is very efficiency. the very stand the regulator has catastrophic bonds to take care of home or property owners, just as
life expectancy of every citizen large, including providing Therefore, the taken because one thing I see, the recovery costs. What third-party motor insurance is
by five years and bring more services in remote places like across the country insurance-led solutions can be mandatory for all vehicle
funding into the health care Barramullah or Sopore in and the world, is introduced? owners.
industry. So far, the return on Jammu & Kashmir. that as economic One solution is a parametric
infrastructure was very low for growth improves, cover. If we increase tax on Is there a concern that farmer
private players to set up a What are your thoughts on depression, houses, or the tax paid by enrolments in the crop insurance
hospital, in villages for instance. concerns surrounding the suicides and property owners is raised by ~200 scheme are falling as they allege
Today, with a ~500,000 sum lack of participation by divorces rise. It to ~400 a year, then in case there that insurers are reaping large
assured guaranteed to each private hospitals? is hard to is damage to the property premium revenues and avoiding
patient, the return on Actually, if you look at the data understand because of excess rainfall, an claim payments?
infrastructure will be much on the ground, this is not true. this earthquake or a cyclone, money The scheme is an effective
higher. If around ~200 billion is When we got the contract for correlation can be transferred instantly to distribution of subsidy by the
pumped into the system every Mizoram, eight private hospitals but it’s a the account of the customer government using insurance
year, it will have a big impact joined. It depends on individual reality. As without the need for a survey, companies. Today, the benefits
in terms of health care choices. One hospital may find an insurer, it under such a cover. This does not paid to farmers by insurance
infrastructure over the next five the price (of treatment which are is our duty cost much as most property companies are around
to 10 years. Only 15 to 20 per cent set by the government, the to ensure owners can afford to pay this 90 to 95 per cent of the premium
of those customers who cannot National Health Agency and that if this is amount, which is negligible revenue received, and at times
afford health insurance, actually insurers) too low, while others becoming an compared to the property value they are 105 to 110 per cent. Some
have it. So, for the next 10 to 15 may find the prices very issue for the or the overall property tax that is companies that are ahead of the
years, growth in health attractive. We should not society, we should paid. The money can be curve will do well, while the
insurance will be much higher generalise as I have seen many be providing a transferred as and when a laggards will lose out.
https://t.me/pdf4exams https://www.estore33.com/ https://t.me/TheHindu_Zone_official
6 ECONOMY & FINANCE
>
MUMBAI | TUESDAY, 9 OCTOBER 2018 1

THE BIG BAILOUT


NHB raises cap
MCA seeks Companies Act relaxation on refinancing
This will enable the reconstituted board to proceed smoothly and help the board to take important decisions: Ministry to ~300 billion
ADVAIT RAO PALEPU the Companies Act did not permit ~10.66 billion. In case the company de- SOMESH JHA Non-Banking Financial
Mumbai, 8 October exemptions from particular proce- faults on these payments, given that it New Delhi, 8 October Company (NBFC) space. This
dural rules. needs ~35 billion of liquidity support, move will provide some com-

T
he Ministry of Corporate Affairs The MCA argued "all procedures the MCA requested the NCLT to exem- The National Housing Bank fort to the eligible housing
(MCA) has sought relaxation in will take a lot of time, which will derail pt the new board from any regulatory (NHB) on Monday enhanced finance institutions. Though
provisions of the Companies the resolution [of IL&FS]". action or action from the authorities. the limit to refinance eligible no regulator has so far talked
Act to enable the reconstituted board The MCA requested relaxation in In a press conference last week, housing finance institutions to about a liquidity crunch in this
of Infrastructure Leasing & three aspects of the Companies Kotak said the new board would first ~300 billion for 2018-19 in the market but we have taken this
Financial Services (IL&FS) to Act. The first request involves conduct an audit of the 348 entities wake of the present liquidity step proactively,” said a senior
proceed smoothly and help it appointing Vineet Nayyar, 80, and would seek legal as well as finan- position of the sector. government official.
to take decisions regarding 348 managing director (MD) of cial advice before taking any decisions. For the present financial Shares of most of the hous-
subsidiaries of the belea- IL&FS. The MCA wants the IL&FS has defaulted on loans and year, between July 2018 and ing finance firms, including
guered firm. appointment to be expedited liabilities worth ~37.6 billion as of June 2019, the NHB had ini- DHFL, have been hammered
On October 1, by an order of IL&FS because the Companies Act September 29. Between September 30 tially set the refinance target on bourses in the past few
the National Company Law CRISIS required a special resolution to and October 4, the company defaulted at ~240 million. weeks due to liquidity con-
Tribunal (NCLT) in Mumbai, be passed by a general body provide directions to allow IL&FS' new to provide the tribunal with a road map on loans from banks, inter-corporate This refinancing is a “cred- cerns triggered by debt
IL&FS' previous board was meeting of shareholders to board to supersede the boards of all or resolution plan for “rescuing” the deposits, and commercial paper worth it flow” to the housing finance defaults by IL&FS.
superseded by a government-nomi- appoint an MD of over 75 years. For group companies, so that important company by October 31. ~3.4 billion. companies facing liquidity “Now, eligible Housing
nated board of directors, chaired by this, IL&FS needs to give 21 days' notice decisions may be taken quicker while The MCA has also sought protec- Major public and private banks, crunch following a series of Finance Companies and other
Uday Kotak, managing director and to its shareholders. finding replacements. tion (for the new board) from regula- mutual funds, insurance companies defaults by group of compa- entities will have increased
chief executive officer of Kotak The second hindrance for the new The NCLT is yet to pass a final order tory action by state authorities with and pension funds have an exposure to nies of IL&FS Ltd. availability of funds,” the
Mahindra Bank. board is with regard to the manage- in the case and will monitor the devel- respect to defaults. Over the next 30 the IL&FS group. With ~910 billion in The NHB, a principal finance ministry said in the
The NCLT, while hearing the ment and boards of the 348 entities. opments and decisions the reconsti- days the company needs to repay ~40 debt, the company needs to raise both agency to promote and provide release. Stock of housing
MCA's petition on Monday, observed The MCA requested the tribunal to tuted board takes. The new board has billion of debt, including bonds of equity and debt. financial support to 97 hous- finance firms DHFL closed
ing finance institutions, had 18.52 per cent down at Rs
sanctioned ~88.35 billion till 223.50 on the BSE.

Microfinance likely to take IL&FS defaults


date. “Housing finance com-
panies are secured assets in the With inputs from PTI

a hit due to liquidity crunch again, on ICDs Rupee slips 30 paise,


NAMRATA ACHARYA & ABHIJIT LELE
Kolkata/Mumbai, 8 October
some redemptions to happen so
that they free up their limit and
they are able to start lending
DEV CHATTERJEE
Mumbai, 8 October
LIST OF LIABILITIES
Secured Loans: ~120.8 billion
breaches 74 versus $
Growth in the microfinance sec- again. The unsecured nature of Beleaguered infrastructure fin- PRESS TRUST OF INDIA would remain cautious ahead
„ Secured Debentures: ~97.3 bn
tor might get constrained due to lending in the MFI sector is fur- ancier Infrastructure Leasing Mumbai, 8 October of the macroeconomic data, US
limited funding, as banks ther adding to their woes,” said & Financial Services (IL&FS) „ Secured Term Loans: ~23.46 bn treasury currency report and
become selective in lending. The Ajay Manglunia, executive vice- has defaulted on interest and The rupee slumped by 30 paise IMF meeting. “Correction in
Unsecured loan: ~38.5 billion
non-banking finance companies president, Edelweiss Financial principal payments on inter- to finish at a fresh lifetime low rupee may be seen if the RBI
(NBFCs) face liquidity squeeze Services. The company is corporate deposits (ICDs) of „ Inter corporate deposits: ~14 bn of 74.06 against the US dollar on permits for special dollar swap
following the IL&FS crisis. engaged in arranging funds for ~1.72 billion due last Friday. „ Commercial Paper: ~20 bn Monday amid strengthening of window with some state-run
While bigger Micro Finance financial sector players. In a statement to the stock the greenback and steady cap- fuel retailers or come up with
Institutions (MFIs) depend upon According to a recent analy- exchanges, IL&FS said the „ Other Unsecured: ~2 bn ital outflows. other options to check Rupee
banks and money market to sis by Northern Arc Capital, an interest default by the compa- Equity: Shareholders The rupee had opened low- fall,” Mukadam said, adding
raise funds, mid and smaller NBFC that connects debt lender ny on September 29 was set off Fund: ~69.5 billion er by 14 paisa against Friday’s that the expected trading range
MFIs depend on non-banking to borrowers in the financial by IndusInd Bank towards Source: Annual Report close of 73.76 in early trade as in near term is ~72.50-74.60.
finance companies. inclusion space, many large interest for ~164 million against the US dollar strength against The dollar demand strength-
The series of defaults by NBFCs that lend to NBFC-MFIs interest service reserve consolidated debt of ~910 bil- major global currencies ened after China’s central bank
Infrastructure Leasing and
Financial Services (IL&FS) and
DEEPENING CRISIS have slowed down and cut quan-
tum of disbursements.
account maintained by the
company with IndusInd Bank.
lion as in March this year.
“Asset sales like the expect-
weighed on the rupee senti-
ment. During the day, the
eased its domestic policy to sup-
port the economy, amid a deep-
its lending arm on financial | IL&FS defaults rise in cost | Boardbase “We will see NBFC-MFIs “The liability of IL&FS thus ed sale of IISL to IndusInd domestic currency recovered ening trade war with the US that
instruments almost freezed the squeezes of money sources of funds trimming their growth plans for stands cancelled to that extent Bank for ~15 billion may solve to a high of 73.76, but failed to has increased pressure on
financing of NBFCs. It has financing in | Have to rework | Temper growth the next couple of months. for IndusInd Bank for the some issues but is unlikely to sustain the momentum and growth in the world’s second
brought the issue of liquidity market While none of our NBFC-MFI month of September 2018,” it bring in new cash into the plunged to 74.10. It finally largest economy.
liquidity targets for
management to the fore, push- clients sees any risk with respect said. company as these assets may closed at 74.06, down by 30 China’s central bank said on
ing the cost of finance and hesi- | MFIs brace for management medium term to ALM, they are worried about In June this year, IndusInd be pledged for borrowings. paise, marking its fifth straight Sunday said that it was cutting
tation on lending to finance the festival season business Bank had signed a definitive IndusInd Bank has an unse- session of decline. On Friday, the reserve requirement rations
companies, senior bankers and lion over the next three years to a Kolkata-based mid-sized MFI being hit with lack of clarity on share purchase agreement cured loan of ~7.5 billion to the domestic unit plummeted (RRRs) by 1 per cent from
financial sector executives said. meet its growth plans. said, “Till now, MFIs did not face their debt pipeline. This cuts with IL&FS to acquire IL&FS Chenani-Nashri Tunnelway by 18 paise to end at 73.76. October 15, which will inject a
In September, on average, “Their (MFIs and HFCs) bor- problems in liquidity, but fund- across clients in all asset classes Securities Services (ISSL). In special purpose vehicle (SPV), “Rupee is expected to trade net $109.2 billion in cash into
the cost of funds of MFIs has rowing costs are going up in the ing from NBFCs is taking little too,” according to Kshama the last week of September, and there are chances that the with a negative bias amid the banking system.
gone up by 25-50 basis points. market. Their issuance (fund longer. We expect the situation Fernandes, CEO & MD, Northern IndusInd announced that it shares of IISL may already be strong Dollar and rising crude Markets were caught off
Capital constraints in the middle raising via market) will happen to improve in the next four-five Arc Capital. had received all regulatory pledged to lenders. The com- oil prices. Demand for dollar is guard as the RBI maintained
of festive season may dent over- but raising desired amounts weeks.” “Pricing might have gone up, approvals to take over ISSL. pany has not provided any going up on solid economic status quo on the benchmark
all growth of the MFIs this year. may become uphill task. As a Mutual funds too have especially for smaller MFIs, but The closure of the deal is information on asset pledges,” data from the US and, as US interest rate. However, the cen-
Over the last few months, the result, they will have a tough shrunk their lending to the MFIs. as of now there are no liquidity underway, the statement said. distressed debt specialist firm, Federal Reserve raised interest tral bank warned that rising oil
MFI sector has been witnessing challenge to lend at pace, which “At present, mutual funds are issues as MFI are A&L positive,” Analysts have said these REDD Intelligence, said in a rates by 25 bps and signalled prices and tightening of global
a growth of about 40 per cent on they did earlier,” a senior SBI not clear which MFIs they can said Udaya Kumar, president, asset sales will help reduce report dated September 27. further monetary tightening,” financial conditions pose sub-
a year-on-year basis. A recent executive said. lend to. With shrinkage of assets Microfinance Institutions overall debt of the company, The research firm said the said Saif Mukadam, Research stantial risks to growth and
report by credit rating agency Echoing challenges ahead under management, the sectoral Network and chief executive and but the sale proceeds would go secured loans at the parent lev- Analyst, Sharekhan by BNP inflation. Meanwhile, heavy
Icra suggests that MFIs would for MFIs Kuldip Maity, MD & limit is also a problem for mutu- managing director of Grameen to the banks that are holding el of IL&FS are less secure than Paribas. capital outflows also added
need between ~60 and ~90 bil- CEO, Village Financial Services, al funds. They are waiting for Koota, one of the biggest MFIs. charge on assets. IL&FS had a previous estimates. Mukadam said traders pressure to the rupee.

‘No time limit prescribed > FROM PAGE 1


Fresh import 4,000
in law for amendment
India's total import bill last as defaults at debt-laden going ahead given the surge in
financial year, raising ques- Infrastructure Leasing & equity market volatility.
curbs soon to tions over the efficacy of the
cancelled Financial Services have

of shipping bill’
measure. spooked the financial sector.

frame... “The hike in import duties


on the identified non-essen- NBFCs... After this, a fund house sold
short-term bonds of Dewan
Nordhaus,
Copper ore import stood at
$4.31 billion in 2017-18, up by
tial items is likely to have a
modest impact on curtailing
It classified them under the
high-risk category, seeking
Housing Finance (DHFL) at
high yields, raising fears of liq-
Romer win
0265 (Tri. Mad.), the Tribunal
held that Section 149 of the
ed 12-8-2016 and 31-8-2016,
much before introduction of
over 58 per cent from the year
before. If an import duty hike
the size of the CAD in FY19,”
Aditi Nayar, principal econo-
immediate action.
Under PMLA rules, an
uidity crunch for the sector. economics...
Customs Act, 1962 does not GST. The ROSL rates were on copper ore is considered, mist at ICRA, said on Friday. NBFC is required to appoint a The Nobel Prize committee
prescribe any time-limit for
amendment of the document.
notified through notification
12020/03/2016-IT dated 13-
from the present 5 per cent to
at least 7 per cent, and if the 2
The rating agency expects
CAD to widen to $72-77 bil-
principal officer registered
with the FIU to file tax returns
IL&FS jitters cited Nordhaus for his work in
showing that “the most effi-
The only condition is that the
document on the basis of
8-2016. In ROSL scheme, the
rebate of State levies is
per cent export incentive on
copper cathodes and rods is
lion (2.8 per cent of GDP) in
2018-19, from $48.7 billion in
on a monthly basis for cash
transactions of ~1 million and
erode 12.5% cient remedy for problems
caused by greenhouse gases is
which amendment is sought
should be available at the time
understood to comprise
State VAT/CST on inputs
reinstated, it will help govern-
ment companies like
2017-18 (1.9 per cent of GDP).
Also, despite India import-
above.
“It was observed that sev-
of MF assets a global scheme of universally
imposed carbon taxes.”
of export. Therefore, the including packaging, fuel, Hindustan Copper in improv- ing $21 billion worth of elec- eral of these NBFCs had not Nordhaus also was honored
CHATROOM amendment sought cannot be
denied on the ground of limi-
duty on electricity genera-
tion and duties and charges
ing their valuations, sources
said.
tronics in 2017-18, led mostly
by finished high-end elec-
even red-flagged the suspi-
cious transactions, which are
for his role in developing a
model that allows economists
T N C RAJAGOPALAN tation. There are other case on purchase of grid power, Also, as a large quantity tronic products, mobile in the form of cash, transfer to analyse the costs of climate
laws on the same point such as as accumulated through the of iron ore is lying idle, phones and their compo- from one account to another, change.
We made shipments in VRA Cotton Mills Pvt. Ltd. stages of production from experts said there was a nents, no tariffs has been and so on,” said another tax Romer, 62, sought to
January 2018 to June 2018 [2014 (309) ELT 0100 (Tri. yarn to finished garments. need to encourage export of announced. The commerce source. explain the role of technologi-
under advance Ahmd.)] and Parle Products The taxes like VAT/CST, pur- surplus by removing duty. ministry has pointed out to Banking experts are of the cal advances in driving eco-
authorization and now Pvt. Ltd. [2017 (358) ELT 341 chase tax etc. have been sub- “If the government allows an inter-ministerial panel on view that the central bank has nomic growth. His work was
came to know that inputs (Tri. Mumbai)]. sumed under the GST but iron ore export from CAD that the trade gap for not been supportive of “para inspired by a desire to under-
mentioned in the advance taxes on fuel etc. have not Karnataka, it will benefit electronics products has dou- banking” because they are stand the remarkable acceler-
authorization can be The exporters of readymade been subsumed under GST. public sector undertakings bled in the past five years. over-leveraged. ation in growth that began
imported duty free under garments (RMG) are granted So, the ROSL rates were like NMDC. Similarly, restart The deficit stood at $38.94 bil- “The reason is that NBFCs with the Industrial Revolution.
Free Trade Agreements. We Rebate of State Levies reduced upon introduction of Goa mining should also lion for 2017-18, compared use a lot of public funds, and Romer’s big idea was to
want to convert our above (ROSL) namely Value Added of GST through notification be considered,” said an with $18.86 billion in 2013-14. many of them are over-lever- “Some banks have already argue that policymakers
shipping bills from advance Tax (VAT) on fuel used in 14/26/2016-IT dated 27-6- expert who is part of the The domestic market aged. So it is necessary to have started returning to the liquid could foster technological
authorisation to drawback power generation duty on 2017 effective from 1-7-2017. deliberations. stands at $71 billion as of now regulatory control over such schemes. Hopefully, the situa- innovation, for example, by
shipping bills, as per Para electricity generation and The revised rates are 0.39% China has recently levied and is likely to grow to $100 practices. As far as action by tion will improve within a investing in research and
4.49 (e) of Handbook of charges on purchase of grid for ROSL and 0.23% for import duty on aluminium billion by 2020-21. The law-enforcement agencies is week,” an official of a fund development and by writing
Procedures, Vol 1, where no power, mandi tax an ROSL under Advance scrap because of which mobile phone segment, a concerned, there is a potential house said. patent laws that provided suf-
time limit for conversion is purchase of cotton, stamp Authorization-All Industry import has gone up. There is major contributor to the sec- risk of illicit transactions via However, other industry ficient rewards for new ideas
mentioned. However, the duties on export Rates (AA-AIR) combination a call to increase import duty tor, is pegged at $25 billion, these platforms as over-lever- participants believe investors without letting inventors
relevant custom circular for documents, SGST on inputs respectively. on aluminium scrap from the but is expected to grow to $80 aging leads to multiplication may take more time to return permanently monopolise
conversion of shipping bill used in production of cotton current level of 7.5 per cent. billion by 2025. of balance sheet. So it is appro- to debt market schemes. “The those rewards. He argued that
36/2010-customs dated 23rd and embedded SGST on IGST exemption on imports Another commodity that Customs duties on 43 priate to have proper checks recent revelation that as many national differences in such
September 2010 says that purchases from under advance authorisation may come under the non- broad categories of goods, and balances of these firms,” as 348 entities are part of the public policies helped to
request for conversion must unregistered dealers. Please and EPCG authorisation was essential list is zinc. According including electronics, were said Ashvin Parekh, managing IL&FS group has raised con- explain differences in eco-
be made within 90 days. confirm that the above said available till 1st October 2018. to reports, India has an extra raised in this year's Budget. partner, Ashvin Parekh cerns over the real contagion nomic growth rates. Romer
Considering the fact that levies are not subsumed in Has it been extended? capacity of 80,000 tonnes but The ballooning of the trade Advisory Services. risk the IL&FS group poses for said in an interview that the
our shipping bills are of GST. If the answer is in Yes. Notification 66/2018- still imports more than double deficit is mostly underlined The central bank cancelled the corporate bond market.” value of his work was in being
January to June 2018 and affirmative, should RMG Customs dated 26th that of refined zinc, with 70 per by a rebound in oil global more than 4,000 licences as of While debt market schemes precise about a broadly intu-
that more than 90 days have exporters continue to avail September 2018 has cent of it coming from South crude oil prices over the past September 11. Many of these saw outflows in September, the itive idea. “It helps to see con-
passed since exports, what ROSL? extended the IGST exemp- Korea. few months. A surge in NBFCs have failed to meet the equity schemes saw net inflow nections that weren’t obvious
should we do to get duty The Ministry of Textiles tion on imports under The total import bill of the inbound capital goods such eligibility criteria of having of ~111 billion, rising 33 per cent at first,” he said.
drawback? introduced the ROSL advance authorisation and items on which tariff hikes as chemicals, ores, and net-owned funds of ~20 mil- month on month. The contri- In 2016, Romer was named
In the case of Diamond Engg scheme through notifica- EPCG authorisation till 31st were imposed last month machinery inputs together lion while some of them have bution through systematic chief economist of the World
(Chennai) P. Ltd. [2013(288) ELT tions 12020/03/2016-IT, dat- March 2019. stood at ~860 billion in 2017- with consumer durables, par- surrendered the registration investment plans (SIPs) saw a Bank, a prestigious perch for a
18, according to the finance ticularly smartphones and owing to inadequate funds. marginal rise to ~77.27 billion. development economist. But
Business Standard invites readers’ SME queries related to excise, VAT and exim policy. ministry. This, however, con- luxury items, have compli- The issues around NBFCs Market players said equity and he resigned 15 months later, in
You can write to us at smechat@bsmail.in stituted just 2.8 per cent of cated matters further. have come under the spotlight SIP inflows could be impacted January 2018.
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MUMBAI | TUESDAY, 9 OCTOBER 2018 ECONOMY & PUBLIC AFFAIRS 7 <

IMF retains India’s Sovereign gold bond scheme from Oct 15


growth rate for FY19 The bonds will be issued every month from October 2018 to February 2019
PRESS TRUST OF INDIA
Mumbai, 8 October
release.
The bonds would be sold
through banks, Stock Holding
would be available for subscrip-
tion from December 24-28 and
the bonds would be issued on
The sovereign gold bond
scheme was launched in
November 2015 with an objec-
Echoes RBI on exchange rate intervention, but The government’s sovereign Corporation of India (SHCIL), January 1, 2019. tive to reduce the demand for
gold bond scheme will be open designated post offices, and Another tranche would open physical gold and shift a part of
differs on rate tightening for subscription from mid- stock exchanges — National for subscription from January 14- the domestic savings —used for
October, running up to five Stock Exchange and BSE. 18 and the issuance of bonds the purchase of gold — into
INDIVJAL DHASMANA India will continue to be the fastest- tranches till February, the The first tranche of the would be on January 22. The final financial savings.
New Delhi, 8 October growing major economy as China’s Reserve Bank of India (RBI) said scheme would be open for sub- one would be from February 4-8 Under the scheme, the bonds
growth projection was retained by the on Monday. scription from October 15-19 and and those would be issued on are denominated in units of one

T
he International Monetary Fund IMF at 6.6 per cent for FY19. For FY20, the The sovereign gold bonds the bonds would be issued on February 12. gram of gold and multiples there-
(IMF) on Monday retained eco- Chinese economic growth rate was cut would be issued every month October 23. The next tranche For the current fiscal year, of. Minimum investment in the
nomic growth projection for India by 0.2 percentage points to 6.2 per cent. from October 2018 to February would be open from November the first tranche of the sovereign bonds is one gram with a maxi-
at 7.3 per cent for 2018-19 (FY19), lower The IMF releases its annual WEO 2019 according to the calendar 5-9 and issuance would be on gold bond and its subscription mum limit of subscription of 500
than the government’s and the Reserve ahead of its meeting with the World Bank. specified, the RBI said in a November 13. The next one opened on April 16. grams per person per fiscal year.
Bank of India’s (RBI’s) forecasts. This This year, the meeting is being hosted in
is, however, noteworthy as the IMF Bali, Indonesia, since Friday.
cut global growth projections by 0.2 per- The IMF said its forecast for invest-
centage points.
In its World Economic
Outlook (WEO), the IMF said
ment growth for FY19 is
weaker than in April, despite
higher capital spending in
Personal wealth of Indians seen at $5 trn by ’22: BCG
foreign exchange interven- India, on account of con-
tions should be limited to tracting investment in PRESS TRUST OF INDIA lion by 2022. The report noted that India India's personal financial India constitutes the second- India is fifth-largest Asian
address disorderly market economies under stress, such Mumbai, 8 October constitutes the second-largest pool of wealth wealth at $3 trillion, largest pool of wealth from market in number of
conditions, something which as Argentina and Turkey, from emerging markets in the coming years, forecasted to grow to emerging markets in the affluent, HNW, and UHNW
RBI Governor Urjit Patel also which is also reflected in a The country’s personal wealth is expected to with $2.2 billion. It is the fifth-largest Asian $5 trillion by 2022 coming years individuals
talked about. The IMF wants downward revision for grow at a compound annual growth rate market in the number of affluent, high net- Personal financial wealth ($ trn) Absolute change of Affluent*
the RBI to tighten monetary import growth. (CAGR) of 13 per cent to $5 trillion by 2022, worth, and ultra high networth individuals. wealth ‘17-’22 ($ bn)
conditions, something which Acceleration in the according a report by the Boston Consulting There were 322,000 affluents, 87,000 5
22.3 4,257
it did not do in the October policy review. growth rate from 2017-18 reflects a Group (BCG). Its personal wealth was esti- high networth individuals and 4,000 ultra
For the next year (FY20), the IMF low- rebound from transitory shocks (the cur- mated to be $3 trillion in 2017. high networth individuals in the country in 3 3 1,118 1,105
999
ered India’s growth projections by 0.1 per- rency exchange initiative and imple- The country is also expected to become 2017, according to the report. 2 2.2
centage points to 7.4 per cent. mentation of the goods and services tax), the 11th wealthiest nation globally by 2022 in It observed that nearly 70 per cent of the 1.7
1.2 1.1
As such, the IMF does not see India’s with strengthening investment and terms of total personal wealth, improving country's personal financial wealth would be 322
growth reaching 7.5 per cent even in FY19. robust private consumption, the IMF said. its rank by four places from 2017, the report accessible to wealth managers in 2022.
However, the RBI pegged India’s growth India’s medium-term growth prospects said. The US leads the chart in terms of total The 70 per cent investable wealth in the 2012 2017 2018E 2022E China India South Taiwan Brazil
projections at 7.5 per cent. The govern- remain strong at 7.75 per cent, benefitting personal wealth with $80 trillion in 2017, country includes listed equity, bonds, invest- Wealth in local currency converted into USD Korea China Hong Taiwan South India
using 2017 year-end exchange rate across
ment expected the rate to exceed 7.5 per from ongoing structural reform, but have which is projected to touch $100 trillion by ment funds, currency and deposits, and oth- all time periods.CAGR = Compound annual Note: Data for specific countries based on Kong Korea
growth rate. E = Estimate For forecasting true growth without currency effect.
cent this year on the back of 8.2 per cent been marked down by just under 0.5 per- 2022. China is ranked second, with a total er smaller asset classes, while the 30 per cent details, please refer to methodology Emerging markets follow the Morgan *Individuals in thousands in2017
section.Source: BCG Global Wealth 2018 Stanley Capital Index's (MSCI) definition of
growth rate in the first quarter. India’s centage point relative to the April 2018 personal wealth of $21 trillion, which is non-investable wealth includes life insur- emerging markets
Market Sizing Database.
economy grew 6.7 per cent in FY18. WEO, the IMF said. expected to more than double to $43 tril- ance and pensions.
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OPINION 11
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Volume XXIII Number 40 ILLUSTRATION BY AJAY MOHANTY

MUMBAI | TUESDAY, 9 OCTOBER 2018 VIOLENCE IN JAMMU & KASHMIR


LoC ceasefire Militant Soldiers Militants
violations incidents killed killed
‘Managed’ deregulation 2010
2011
35
51
368
195
43
38
232
100
Govt decision to lower fuel prices rightly roils markets
2012 93 124 32 72

T
he government decided last week to lower fuel prices at the pump 2013 199 57 31 65
in India, following a prolonged period of political pressure caused 2014 153 65 31 104
by the pass-through to consumers of high global prices for crude 2015 152 48 33 101

The Pakistan Army


oil. Finance Minister Arun Jaitley said that the excise duty on fuel 2016 228 89 63 141
would be cut by ~1.50 a litre. This follows a series of hikes in duty on fuel over
2017 860 131 62 213
the period post-2014, when global crude oil prices were low. In addition,
state-controlled oil-marketing companies were asked to reduce their prices 2018* 1,128 244 46 166
* Till October 7, 2018
by ~1, meaning that the benefit to consumers nationwide was ~2.50 a litre. Sources: Army and J&K Police records and figures submitted in Parliament

conundrum
Finally, 12 states ruled by the Bharatiya Janata Party also reduced state-lev-
el fuel taxes, meaning that in many places the benefit to consumers was ~5 point, resting on the comforting presumption that
or more. The finance minister has insisted that there will be no fiscal slip- many Nice Pakistanis are forcibly counterposed
page as a consequence of this move and that the fiscal deficit target of 3.3 against All Us Nice Indians by a Bad Pakistani fringe
per cent of gross domestic product, set in the Union Budget for 2018-19, will — the army, the jihadis and the increasingly rabid
be met. The India-China model of managing a conflicted strategic relationship television media. However, for the most part,
Pakistan’s citizens adore their army. It is hard to figure
However, there are concerns on this move. The sharp downward move- provides a model to emulate in the India-Pakistan context whether this stems from a peculiarly Punjabi love for
ment in the share prices of the state-controlled oil-marketing companies — the uniform, or the absence of other functional insti-
about 20 per cent — reflects widespread fears that they will once again be

T
he crash-and-burn denouement of New Delhi’s Meanwhile, tensions on the LoC remain inflamed tutions to admire, or simply that the Pakistan Army
expected to absorb “under-recoveries” on the petrol that they sell. Private most recent attempt to resume engaging with continued incidents of mutilation of soldiers’ has channelised towards itself the fawning hysteria
marketers of fuel, meanwhile, are expected by the markets to prosper. The Islamabad is hardly tragic. If anything, the swift- bodies. India’s army chief has threatened more than once lavished on world-class cricket, hockey and
same questions that were asked of government action in previous eras in ness of the collapse of the proposed meeting between once that Pakistan’s army would pay a price for its bar- squash players that have left no successors. It surely
External Affairs Minister Sushma Swaraj and Foreign barism. However, India’s sensible restraint, given the says something that an ageing cricket superstar was
which “under-recoveries” were common must now be asked again. In par-
Minister Shah Mehmood Qureshi on the sidelines of dangers of uncontrolled escalation in a nuclear back- elected prime minister, albeit with significant help
ticular, once a public sector company is listed on the stock exchanges, can the United Nations General Assembly (UNGA) might drop, restricts the punishment that can be imposed on from men in khaki.
the government, as majority shareholder, essentially ride roughshod over make Indian and Pakistani policymakers realise that Pakistan’s military. The bottom line clearly is: We can Instead, a realistic peace process would have to
minority shareholders’ interests in this manner in order to meet its politi- fundamental contradictions in the make the Pakistan Army hurt, but evaluate and find ways to address the core concerns of
cal or electoral priorities? framework of India-Pakistan we cannot make it change. the Pakistan Army. Indian “muscularists” would argue
It is perhaps too soon to see this as a reversal of the policy of steady engagement pre-ordain the failure That raises a fundamental ques- this is a fruitless endeavour since the Pakistan Army
of every peace initiative. On one tion: Does the combination of sta- wants only to reduce India to smoking ruins, onto
deregulation that has been followed by successive governments for the hand, it is ludicrous for India to ble nuclear deterrence and the which it would stomp in jackboots and pluck off
past eight years. It is clearly a response to a specific situation in which demand perfect conditions as a pre- Pakistan military’s implacable hos- Kashmir. Even if that were true, the army remains a
crude oil prices have sharply risen. However, it does to an extent set back requisition to dialogue; on the oth- tility render inevitable the contin- popularly trusted institution that controls the levers
some of the gains made in the past of de-politicising the price of petrol and er, Pakistan tempts fate by keeping uation of the low-grade conflict of power. And General Qamar Javed Bajwa, more than
diesel. In the recent past, before the crucial assembly elections such as in Jammu & Kashmir (J&K) on the boil between the two countries? his recent predecessors, speaks like a practical man
Karnataka, the price of fuel was implicitly frozen — but on this occasion, the with talks in the balance. Well-informed observers of with more achievable objectives.
With dialogue in cold storage, Pakistan, most recently India’s for- In evaluating what could attract the attention of
government has been open about its intentions. It is worth noting that the the mood in Kashmir is bleak. mer ambassador to Islamabad, Pakistan’s generals, New Delhi could draw ideas from
arguments in favour of a de-politicised, de-regulated price for fuel have not
lost any of their weight. Allowing administrative or political concerns into
Local body elections on Monday
saw a dismal turnout. India’s army
BROADSWORD Sharat Sabharwal, have said
Pakistan is not a monolith, but an
its own strategic concerns about China. We in India
know what it is like to neighbour a giant country
the prices faced by consumers opens the door for sustained pressure on the continues combating a renewed AJAI SHUKLA amalgam of several constituencies, with an economy, defence budget and military sev-
fisc through subsidies. In addition, it harms the oil-marketing companies insurgency on the Line of Control each of which must be engaged eral times larger than our own, and which has once,
(LoC) and in the hinterland. Ceasefire violations are separately, on its own terms. There is the Pakistan not long ago, dealt us a shocking military defeat that
as well as the attempts to combat the growing import bill and thus the cur-
up almost six-fold, from under 200 in the last year of Army with its supposedly unwavering institutional still scars our collective psyche. To extend the anal-
rent account deficit. All attempts to insulate Indian consumers from high the United Progressive Alliance (UPA) to 1,128 already interest in low-grade tensions with India, in order to ogy, that country too is rapidly outpacing us and we
international crude oil prices will fail in the long term, given the fiscal this year. Compared to 2013, when 30 Indian sol- maintain its salience as the defender of Pakistan. sneakily admire its success. Providing a model for
mathematics faced by the Union government. It is to be hoped therefore that diers were killed in J&K, more than twice that num- There are the Pakistan Army’s jihadi proxies — India- emulation, we refrain from fomenting terrorism or
this indeed is a one-time action and that is not repeated. ber died in each of the last two years. This year could focused groups like the Lashkar-e-Toiba, Jaish-e- internal discord in that country and it refrains from
be as bloody. Mohammed and Hizbul Mujahideen — which do the deploying serious military force on its border with us.
Militancy, which was declining precipitously after army’s bidding; and the increasingly anti-India tele- Wisely, it refrains from issuing regular threats to

Desperate measures 2010, has revived robustly. In 2014, when the NDA
government was formed, there were only 150 armed
militants in Kashmir. But since 2016, Kashmiri anger
vision media. But there are also pro-India groups,
such as mainstream politicians that vie with the army
for political power, and business and commercial
teach us a lesson. The India-China model of manag-
ing a hotly disputed border and a conflicted strategic
relationship provides a model to emulate in the India-
Autonomy for Air India board is no longer a solution at the growing anti-Muslim climate across the coun- groups that see benefit in better trade relations. Then Pakistan context.
try and the killing of militant commander and social there are the Pakistani masses, who are not visceral- Any discussion on creating security for India would

H
aving come up empty in its disinvestment plans earlier this year, media darling, Burhan Wani, has fuelled a rush to the ly opposed to India, but who coalesce behind the mil- have to be based on creating a mutual security for
the government’s offer of quasi-Maharatna status to Air India and gun. Militancy flourishes, despite the killing of 500 itary-led “deep state” when an Indian threat arises. Pakistan — a radical idea in a relationship where both
one-time sovereign guarantee of ~150 billion resembles the last armed militants in two years. Kashmiri youngsters While this notion of “multiple Pakistans” is valid, armies expend enormous energy into creating inse-
are joining the fight knowing the odds are stacked the conclusions we draw from this are mostly fanciful. curity for each other. Broaching ways to fundamentally
throw of the dice in the gamble to enhance the national carrier’s
against them and that they cannot expect to survive They centre on the idea that India should focus on the transform this dynamic has the potential to grab the
saleability. The illogic of this position is hard to ignore. The Maharatna label six months. And when they are killed, their emo- constituencies that favour better relations with India, attention of the Pakistani corps commanders. Whose
implies board autonomy for profitable public sector undertakings. Air India, tion-charged funerals see other youngsters taking most notably mainstream politicians, the business security comes first — India’s or Pakistan’s — is a chick-
with accumulated losses of ~7 billion on revenues of ~22 billion and a debt bur- their place. Pakistan needs to do little to keep this class and the aam Pakistani. This would supposedly en and egg conundrum. But, to mix metaphors, you
den of ~465.7 billion, does not qualify for this status on any key parameter. meat-grinder churning. A Pakistan-fuelled insur- generate pressure on Pakistan’s military not to hold can’t make an omelette without breaking eggs.
The plan to transfer about ~300 billion of debt to a special purpose vehicle gency has transformed smoothly into a predomi- them hostage to its self-serving enmity with India.
nantly Kashmiri one. This is a seductive theory from the Indian stand- Twitter: @ajaishukla
creates only an illusory improvement to the profit and loss account, since the
debt, whether on the books or off it, still has to be serviced. With financials
like these, that too in an uber-competitive industry beset by rising fuel costs,

A small candle of hope


board autonomy or lack thereof is unlikely to make a major difference. ures and their struggles. Sanjeev Sanyal wrote an
Indeed, it is fair to say that since 2011-12, the government has been a rel- opinion piece in The Indian Express (“The massacre
atively generous shareholder, infusing almost ~250 billion in equity, albeit to of the Yazidis,” August 12, 2014). I learnt about the
repair the damage wrought by forcing the airline into expensive aircraft pur- Yazidis from a well-researched monograph on the
region and wrote about their plight in India Abroad

W
hen events transcending geographies and pioned them. The IS called them godless devils and
chases. Further, it is difficult to see how the board can inculcate the habits of history occur, other pressing concerns singled them out in 2014 for slaughter, regardless of (“Speak up India, and act!” August 29, 2014). A read-
autonomy when the chairman and managing director is an Indian appear routine and mundane. The 2018 age or sex, in the name of ethnic cleansing. er’s reaction to it said it all: “This is by far the only
Administrative Service Officer, and two of its members are from the ministry Nobel Peace Prize to Denis Mukwege and Nadia A large group, about 10,000-strong, was besieged news item on this tragedy on Indian news websites.”
of civil aviation. As part of the move towards autonomy, the board has induct- Murad announced on last Friday is one such, which in flight in mid-2014 on Mount Sinjar without food or Dr Mukwege is a complete unknown, much like Mr
ed four independent directors. Two issues arise here. First, only two of them should take our minds off worries about oil on the even water. Many were massacred in the most grue- Satyarthi was before he won the Prize.
have knowledge of the aviation business — Y C Deveshwar was chairman of boil, rupee on the slide and abusive election cam- some fashion. Ms Murad’s village was nearby. She was A new normal is presently emerging. A patholog-
paigns in the pits. The Norwegian Peace Prize then a 19-year-old student. She was kidnapped and ical liar, obsessive ego-maniac bully and serial abus-
Air India during 1991-94 and Ravindra Kumar Tyagi has some tangential
Committee sagaciously recognised held captive in nearby Mosul. She er of women has gained the pinnacle of power in an
connection to aviation as former chairman of Hindustan Aeronautics Ltd. The the contribution of these two indi- was among the hundreds of young otherwise liberal democracy, turning it, with some
other two are Kumar Mangalam Birla, promoter of the diversified Aditya viduals to ending sexual violence as women repeatedly brutalised and success, into an idiocracy (a new coinage accepted
Birla group, and Syed Zafar Islam, a national spokesman for the Bharatiya a weapon of war. treated as sex slaves by the rapacious most judiciously by the venerable Oxford English
Janata Party and a former investment banker. Businessmen like Ratan Tata Dr Mukwege has long worked in IS marauders. She escaped after Dictionary). The time-honoured phrase, ‘sober as a
and Rahul Bajaj had headed Air India (prior to merger) and Indian Airlines; the Congo to bring healing to the three months. Shortly thereafter, she judge,’ is in imminent danger of being rendered
poor women victims. Ms Murad is a bravely told the world her story, in a meaningless following the ascent of a beer-swilling,
Anand Mahindra too had been inducted on the board — all of it to no effect.
victim herself, a Yazidi young woman book called, most appropriately, The intemperate reactionary to a hallowed bench which
Second, as company after company, from Satyam Computer to ICICI Bank to held as a sex slave by the unspeakably Last Girl. Since then, she has found- was occupied not too long ago by such champions of
Infrastructure Leasing & Financial Services Limited, has shown, independent barbaric Islamic State (IS) in Iraq ear- ed Nadia’s Initiative, an advocacy individual liberties and freedom of thought as Earl
directors, however weighty their reputation, cannot be relied on to enforce the lier in the decade, who has now group to create awareness and docu- Warren, William O Douglas and Thurgood Marshall.
kind of hard decisions vital to turning around this ailing airline. turned into an articulate and power- mentation of the IS acts of genocide A Nobel Peace Laureate who stoically endured a
Finally, there are institutional issues. Revival is possible only if Air India ful campaigner against the horrors ET CETERA and atrocities on women. Amal tyrannical state for decades now virtually heads a
inflicted on women. In this, the Clooney is her lawyer. Ms Murad new incarnation of that regime which has turned on
ceases to be an airline for government servants and their families and if union
Committee has followed the prece- SHREEKANT SAMBRANI appeared before the United Nations a helpless religious minority. Nation-states all too
power is curtailed. The airline is overstaffed but employee cutbacks are dent it had set four years ago of Office on Drugs and Crime two years willing and eager to usher in a globalised society
invariably fiercely contested. It is also unclear whether the airline has the choosing a seasoned activist, Kailash Satyarthi, and ago. She has taken much the same road as Ms until recently are now busy firewalling themselves
wherewithal to attract managerial talent from the market. Both proved to be a young victim-turned-campaigner, Malala Yousafzai, Yousafzai before her did, at an even younger age. against the wretched of the earth fleeing the oppres-
the high hurdles during the tenure of Rajan Jetley in the late eighties. Mr in the cause of children’s abuse and their freedom of Dr Mukwege’s land and the neighbouring coun- sion and destitution of their native lands.
Jetley’s stint represented then Prime Minister Rajiv Gandhi’s experiment with education. That singular award focussed the world’s tries have long been strife-torn. Tribal violence Democratically-elected leaders and despots alike the
some degree of managerial autonomy for what was then the country’s inter- attention as never before on this often-forgotten issue peaked in 1994 in the Rwanda-Burundi genocidal world across are driving their countries into new
central to our collective future. The Committee obvi- civil war. Those scars have still not healed. After tak- Dark Ages intolerant of dissent and diversity.
national carrier (Air India and domestic airline Indian Airlines formally ously hopes that this experience will be replicated at ing his medical degree from the University of Burundi The Peace Prize honouring indomitable individ-
merged in 2007). Mr Jetley, who was famous for jettisoning the trademark present. in 1983, Dr Mukwege lived in Bukavu, close to the ual courage and moral leadership is a most appro-
Maharaja logo, did streamline operations and helped Air India turn in a The Yazidis are a minority in Northern Iraq, neither Rwanda border. Post a residency in Paris, he worked priate act of faith in these fraught times, as it was in
record profit of ~700 million in 1989-90 but the pressure of dealing with Muslim nor Christian, numbering just half a million in a Bukavu hospital. When he saw hundreds of 2014. We should all light a small candle, in the hope
entrenched interests forced him to leave before his five-year term was up. As and among the poorest. Their religion is quite simi- women suffering from trauma caused by violent sex, that the world is not rushing headlong into insanity,
such, for Air India, board autonomy is no longer a solution. lar to the sanatana dharma or ancient Hinduism, he set up Panzi Hospital in Bukavu in 1999 for them. not yet anyway.
based as it is on the worship of the Sun and other ele- It has since treated over 85,000 women.
ments. Unlike Christians of the region, no one cham- Not much is known in India about these heroic fig- The writer is an economist

The corruption poser lenge to eliminate corruption. Corruption,


argues Basu, can take many forms, but the
heart of the corruption problem is the vio-
one that shifts human behaviour by creat-
ing a new focal point in the game every
stakeholder in society plays. In other
concept that he is trying to explain. Writing
on the focal point approach, he confesses
that “though there is need to sharpen these
In his naivety, Dr Basu even posted his
paper on the finance ministry website,
only to create a furore with parliamentar-
the prism of economic theories — using lation of the law. Perpetrated either indi- words, a new law can be effective only concepts and ideas and give them more ians questioning the immorality of the
game theory in abundance, but at a philo- vidually or in league with a group of gov- when it creates a new focal point to shift formal structure, that is beyond the scope idea. He managed to ward off that contro-
sophical level these have tremendous res- ernment officials or enforcers of the law, the behaviour pattern of people. He also of the present book, which is the econo- versy through some clever phrasing of
onance in Indian society. One, India is a corruption prospers in spite of the exis- proposes the idea of a focal player, who mist’s jargon for beyond the ability of the written replies to questions raised in
developing economy and a democracy. Its tence of a legal framework. There are also can make a big difference in changing the author.” You can’t really quarrel with an Parliament. This was an example of how Dr
economic policy imperatives often put to no satisfactory answers to why some laws way people behave. A focal player is like a author whose self-deprecating humour Basu saw the need for changing the focal
BOOK REVIEW the test the durability and enforceability of work, some laws work partially and some leader who directs a group to a certain out- enlivens many of the eight chapters that area approach to law-making.
laws in far more complex ways than in a others don’t work at all. And this is one of come by asking them to behave in certain complete this monograph. In less than a decade since the publi-
A K BHATTACHARYA developed economy or a country that is the biggest failures of law and economics. ways in a situation. The role of a leader By way of entertainment, there are cation of that paper, the Indian govern-
not a democracy. That is also because So, what solution or an alternative deserves further scrutiny to determine many interesting anecdotes picked up ment earlier this year amended the cor-
When does the law become effective? Why Indians are not only argumentative by strategy does Dr Basu offer? The compli- how well it enhances the effectiveness of from his days as chief economic advisor in ruption prevention law in a bid to achieve
do some people observe the law and others nature, but also excel in ingenuity when it cating parts of the book start here. He the focal point approach in changing peo- the Manmohan Singh government. One precisely what Dr Basu had advocated.
flout them? What circumstances trigger comes to bypassing the law. Not surpris- posits that the focal point approach is a ple’s behaviour while dealing with new of them deserves to be recounted here. Perhaps Dr Basu’s contention that the dis-
such different responses to the law? How ingly, Dr Basu relies on many Indian expe- possible way out of the failure of law and laws and economic situations. Within months of joining the government, cipline of law and economics must
can we bring about a change in human riences to illustrate how there are serious economics in dealing with corruption. The Dr Basu writes simply and attractively, Dr Basu wrote a short paper on the need for embrace the focal area approach has
behaviour so that laws can be enforced problems in applying the lessons of law focal point approach is premised on the but many of the ideas are abstract. In spite amending the country’s corruption pre- already been heard!
with greater effectiveness, thereby enhanc- and economics in several economies of belief that a better-founded theory of law of his lucidity, he is clearly not at his best vention law by declaring the giving of
ing economic gains? These are some of the the world, particularly the emerging and and economics should recognise that the while explaining them. For instance, his harassment bribes a legal act. His logic was
key questions Kaushik Basu, an eminent developing ones. outcome of a law is largely determined by explanation of the way the focal area that this would encourage the person who
THE REPUBLIC OF BELIEFS
economist and former chief economic In India, for instance, the perennial its effect on the beliefs of people. But the approach functions and how it can change is being coerced to pay a bribe to spill the A New Approach To Law And Economics
advisor to the Indian government, tries to problem is how the law is impeccable on challenge is how to influence the beliefs of the behaviour of people is likely to fall short beans as he would no longer be treated the Kaushik Basu
explore in this highly readable book. paper but is often poorly implemented. An people in an effective way. of expectations of many readers. same way as the bribe receiver. And the Princeton University Press
Dr Basu presents these issues through associated problem arises out of the chal- Dr Basu argues that a successful law is Dr Basu is aware of the difficulty of the incidence of bribery would come down. 238+XVII pages; ~699
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NBFC stocks fall on stricter rule fear Titan’s jewellery sales back
THE COMPASS

Analysts expect growth, margins to come under pressure


on track in September
SAMIE MODAK
Mumbai, 8 October
TUMBLING DOWN
Share price (~) % Change
Market’s Despite a muted sentiment, it has gained market share
Oct 8, 2018 1 day YTD
end 3-day RAM PRASAD SAHU

T
he correction in non-banking Titan’s businesses, accounting for over 80
financial companies (NBFCs) DHFC 223.5 -18.5 -61.7 per cent of its sales.
extended on Monday as investors
dumped shares fearing that the pro-
Edelweiss Financial Serv.
JM Financial
151.85
73.3
-13.7 -48.9
-13.1 -53.3
losing streak Despite the muted market sentiment, the
Titan Company stock gained over 5 per cent
The company’s strong growth in the
watches segment continued in the
posed norms by the Reserve Bank of in two trading sessions on expectations of a September quarter, on the back of new
India (RBI) would impact growth and Magma Fincorp 98.5 -10.9 -38.7 pick-up in the jewellery segment sales in the designs and higher marketing spends. The
profitability. The central bank on Friday Shriram Transport Finance Co 939.65
Reliance Capital 234.8
-10.1 -36.5
-9.4 -59.4
BOUNCING September quarter. The company had company has been expanding some of the
said it was looking to strengthen norms
for NBFCs to avoid rollover risks. It also IIFLHoldings 421.35 -8.2 -36.9 BACK reported 6 per cent sales growth for the jew-
ellery segment in the June quarter, the low-
formats in the watches segment which
includes World of Titan, Fastrack, and
urged financial firms to reduce their Cholamandalam Inv. 1,049.95 -6.1 -18.9 est in about eight quarters. Helios. The watches seg-
dependence on short-term funding, and SENSEX The management, in a ment, which contributes 13
Repco Home Finance 377.45 -5.6 -44.7
instead make use of long-term funding. quarterly update, indicated per cent to Titan’s overall
Shares of Dewan Housing Finance Manappuram Finance 68.5 -5.5 -44.4 it has recorded strong sales sales, recorded a steady 15
Compiled by BSRB; YTD: year-to-date Source:Exchange
Corporation (DHFL) tumbled 18.5 per on the back of new product per cent in the June quar-
cent, extending its year-to-date (YTD) launches and studded dia- ter. In the prescription eye-
fall to 61.7 per cent. Edelweiss Financial Depending on short-term debt to more stable and sustainable funding. mond sales. The company wear segment, the compa-
Services tumbled 13.7 per cent, taking garner a bigger share of the lending mar- This would lead to a larger-than-expect- managed to gain market ny is looking to increase the
its YTD fall to 49 per cent. JM Financial, ket is a “myopic strategy,” RBI Deputy ed increase in cost of funds. We believe share despite the overall pace of sales growth by
Magma Fincorp, and Shriram Governor Viral Acharya had said at the this would have a twin impact on both muted demand and head- introducing products at
Transport Finance fell more than 10 post-policy conference on Friday. margins and growth. We expect growth winds such as higher gold affordable price points and
per cent each. “The RBI said that it would look at to taper for some of the fastest-growing prices, a decline in wedding consumer awareness cam-
CLSA, in a note, said many NBFCs measures to strengthen ALM at NBFCs NBFCs,” said Motilal Oswal in a note NIFTY 50 dates, and costlier credit for paigns. The company had
are becoming systemically important to prevent mismatches. We await details on Monday. the sector. achieved a growth of 19 per
and have a higher dependence on but this could have negative implica- The brokerage cut earnings estimate The new launches cent in the June quarter.
short-term sources such as commercial tions for loan spreads and loan growth,” for the current and next fiscal year by 4 included the Gulnaz collection in July in the Among other businesses, its Skinn brand
papers and mutual funds. The RBI said Morgan Stanley in a note. “Every 1 to 7 per cent for NBFCs. It also lowered studded jewellery segment as well as the has emerged as the largest-selling fragrance
could extend requirements such as liq- percentage point shift in mix of borrow- the price targets for NBFCs across its contemporary silver collection under the product in the department store format, both
uidity coverage ratio to NBFCs, which ings from commercial paper to long term coverage universe by 8 to 27 per cent to Mia brand. The share of studded jewellery, in terms of volumes and value. The compa-
are currently applicable to banks. non-convertible debentures (NCDs) or factor in cut in earnings and higher cost which accounts for 25 per cent of jewellery ny has launched a new variant in July.
Investor sentiment towards the bank borrowings could increase cost of of equity. segment sales is expected to increase. While Given the market share gains and 20 per
NBFC sector has been weak, following funding by 0.5 to 1 basis points, depend- JM Financial in a note said strong the sector is going through a lean patch, the cent plus revenue growth prospects, ana-
the default by Infrastructure Leasing & ing on the credit rating profile.” promoter-backed NBFCs and housing company continues to expand adding 16 lysts believe the recent correction is an
Financial Services (IL&FS). The infra- The brokerage said investors should finance companies (HFCs) will get dis- Tanishq stores year-to-date translating to opportunity to accumulate as the stock is
structure finance major’s huge depend- prefer large lenders such as HDFC Ltd, proportionate share of funding and
WIN SOME, LOSE SOME retail space addition of 35,000 square feet. trading at an attractive 38 times its 2019-20
ence on short-term funding for long- who are positioned well in terms of liq- competition from new and small Oct 8 1 Day Change % The Jewellery segment is the largest of estimates.
gestation projects is seen as the key uidity. Shares of HDFC Ltd fell 2.6 per NBFCs will come down massively. GAINERS
reason for the crisis. cent to ~1,670 on Monday. It said broker-backed NBFCs like YES Bank 220.80 7.10
The RBI has said the new stricter
regulations would be aimed at curbing
default risks arising from such asset-
“With increasing regulatory scrutiny
on ALM, we expect NBFCs to ‘nor-
malise’ their borrowing profile — that is
Edelweiss and HFCs with ALM mis-
match DHFL, PNB Housing, Repco
Home Finance will see growth slow-
Reliance Ind 1,108.00 5.50
Hero MotoCorp 2,881.80 5.10
Liquidity concerns recede
liability mismatch (ALM). migrate from opportunistic funding to down. LOSERS
Vedanta
HDFC
206.90
1,670.20 -2.60
-10.80 for PNB Housing
Markets yet to factor in state polls Axis Bank 556.50
Compiled by BS Research Bureau
-2.10 Competitive pressures to cap upsides on profitability, loans
SHREEPAD S AUTE the net interest margin in the near term,
given the stiff competition, which limits
PUNEET WADHWA
New Delhi, 8 October SHADOW OF THE BALLOT BOX anti-incumbency.
U R Bhat, managing
In a highly volatile session, value-
buying by investors in the recently-
While the non-banking financial compa-
nies are in a bear grip, the stock of PNB
the pricing power of housing companies,
says an analyst at a domestic brokerage.
Result 1-mth before (%) 1-mth after(%) director at Dalton Capital, battered banking, oil and gas, and Housing Finance bucked the trend, gain- Also, ~70-billion proposed bank borrow-
Markets have not yet fac- said the fortunes of the automobile stocks reversed the three- ing 5.8 per cent in Monday’s trading ses- ings would confine the funding cost
date Nifty Sensex Nifty Sensex
tored in a major upset for markets were linked to the session losing streak, helping the sion. Raising external commercial bor- benefits for PNB Housing.
Andhra Pradesh
the ruling Bharatiya Janata outcome in Rajasthan. Sensex and Nifty to close on a posi- rowings (ECBs) of $200 million, or ~14.7 “The bank borrowings route of hous-
Arunachal Pradesh
Party (BJP)-led National “There is nervousness in tive note on Monday. billion, and liquidity position updates ing finance companies would come at a
Odisha May 16, 2014 7.9 8.3 4.6 4.4
Democratic Alliance (NDA) the markets, as the recent The Sensex swung over 660 given by the company supported the sen- slightly higher cost and hence would
in the coming elections in Sikkim opinion polls do not suggest points both ways on alternate bouts timent for the stock. The next trigger for impact margins and return profile in the
Chhattisgarh, Rajasthan, Telangana a return for the ruling party. of selling and buying. the stock will be the ability to maintain near term. But, it will provide more sta-
Madhya Pradesh, Mizoram, Haryana Oct 19, 2014 -3.0 -2.4 6.4 6.1 In other states, it might be a The 30-share Sensex touched a profitability while bility to refinancing given
and Telangana, claim Maharashtra close fight. In a worst-case high of 34,636.43 on the back of ensuring loan growth. the current turmoil in the
analysts. scenario, the Nifty50 can sustained buying by domestic While the company money market,” said Rajesh
These state elections are Jammu & Kashmir Dec 23, 2014 -2.5 -2.9 5.9 5.3 slip to 9,700 levels,” he institutional investors, but later plans to raise ~20 billion Gupta, AVP, retail research,
being viewed as a run-up to Jharkhand added. turned choppy and hit a low of non-convertible deben- at SBICAP Securities.
the Lok Sabha elections, Delhi Feb 10, 2015 3.4 3.3 1.7 1.2 After a 2017, during 33,974.66 as selling pressure gath- tures (NCDs), it is grad- Positively, the ECBs
slated for May next year. which the 50-share ered momentum. ually reducing its along with other proposed
Experts believe these will Bihar Nov 8, 2015 -2.6 -2.7 -2.7 -3.1 Nifty rallyed 27 per cent, However, amid buying towards dependence on debt borrowing plans would
test the popularity of the Assam markets have registered a 3 the fag-end, it recovered to close the market borrowings help maintain liquidity
government and its policies Kerala per cent fall on a year-to- day higher by 97.39 points, or 0.28 (commercial papers position at satisfactory lev-
amid rising crude prices Puducherry May 19, 2016 -1.7 -1.6 5.8 5.8 date basis in 2018, touching per cent, at 34,474.38. and NCDs) from 50.5 els. “This will not only pro-
that might lead to inflation, 10,200 levels. Other emerg- The 30-scrip gauge had lost per cent as of June to vide liquidity but also
Tamil Nadu
turmoil in the banking sec- ing markets such as Brazil, 2,149.15 points in the previous three 43.3 per cent as of enhance our asset-liability
West Bengal
tor and non-banking Taiwan, and Thailand have straight sessions. December. Also, accord- management position, as
finance companies, and a Goa also seen a correction dur- The 50-share NSE Nifty, too, ing to Kapish Jain, chief the facility (recent ECB) is
falling rupee. Manipur ing this period, but outper- recovered by 31.6 points, or 0.31 per financial officer at PNB Housing, the ful- fixed for five years,” Jain added.
“The markets are grad- Punjab Mar11, 2017 3.3 3.9 1.7 1.2 formed India. cent, to end at 10,348.05. During the ly hedged cost of the recent ECBs is Analysts also believe that with the
ually realising that it will Uttar Pradesh “Recent developments, session, it moved between 10,198.4 cheaper than the domestic market. Put recent ECB, liquidity should not be a con-
not be easy for the NDA to Uttarakhand coupled with major elec- and 10,398.35. Besides value-buying, together, this should help lower the cost cern for PNB Housing, which would mit-
secure a simple majority in tions in the next nine covering-up of short positions by of funds to some extent. There would be igate refinancing risk. But, how the com-
state elections. Given Gujarat Dec 18, 2017 1.0 0.8 4.1 4.9 months, are likely to keep investors also aided the recovery in additional ECB of ~15.3 billion by the petitive intensity plays out and how PNB
domestic and global Tripura market volatility high. the market. Top gainers in the Sensex company. Housing will get affected is what the
cues, the markets are likely Nagaland Mar8, 2018 -3.2 -3.1 1.3 1.3 Despite the recent correc- kitty include YES Bank climbing 7.08 However, this is unlikely to improve Street will watch out for.
to remain choppy and are Meghalaya tion, the equity market per cent, followed by Reliance
yet to fully price in a major remains vulnerable on both Industries at 5.53 per cent.
upset for any pan-Indian Karnataka May 15, 2018 3.11 4 0.15 0.22 valuation and earnings On Monday, foreign portfolio
political party in the Data compiled by BS Research Bureau concerns. Despite a 16 per investors (FPIs) sold shares worth
coming elections,” cent correction in 2018, ~18 billion, taking their month-to-
said G Chokkalingam, the rupee remains under date selling tally to ~122 billion (about
founder and managing Pradesh and Chhattisgarh electorate in the state has pressure to depreciate. $1.6 billion). Domestic investors on
director at Equinomics after nearly 15 years. alternated between the two It can reach 78 per dollar the other hand net-bought shares
Research. Rajasthan, currently ruled parties every election. in the next six-nine worth nearly ~20 billion. In the past
A recent survey predict- by the BJP, is also likely to This time, experts claim, months,” said a recent five sessions, mutual funds have
ed that the Congress may be a tough challenge for the Chief Minister Vasundhara report from Anand Rathi invested nearly ~95 billion into
return to power in Madhya ruling party; since 1998, the Raje might be facing strong Institutional Equities. stocks. PTI

Fall in energy stocks hits CPSE ETF Sebi revises norms


for recovery of
ASHLEY COUTINHO
Mumbai, 8 October TROUBLED TIMES as Reliance Industries and ONGC.
Shares of oil marketing companies
investors’ money
also tumbled 10-20 per cent after the
Investors in the government-backed government announced a cut of ~2.50 Markets regulator Sebi has put in
CPSE Exchange Traded Fund (ETF) a litre in petrol and diesel prices. place revised norms for recovering
are deep in the red, after an 11 per Global crude oil prices are up investor money, wherein a regis-
cent fall in the last three trading ses- more than 50 per cent in the year to tered insolvency professional will
sions, following the government’s date. Brent has been hovering above be appointed as administrator to
decision to make the companies $85 a barrel, the most since undertake the sale of assets.
absorb the rise in fuel prices. November 2014, on fears that the The regulator has revised the
The ETF has a skewed weightage impending sanctions on Iran’s petro- procedures to be followed for
towards energy and oil marketing leum industry would lead to con- refunding investors’ money pur-
companies, and is down 17 per cent in stricted supplies. suant to the failure of complying
Compiled by BS Research Bureau
the past one year. Oil and Natural Gas Bharat 22 ETF, another public sec- with disgorgement or refund
Corporation, Coal India, Indian Oil tor ETF launched in November last orders passed by it.
and GAIL (India) together constitute The government’s recent move year as part of the Centre’s 2017-18 In case an entity is not trace-
more than 75 per cent of the CPSE asking OMCs to bear ~1 per litre on disinvestment programme, is down able or is not complying with Sebi
ETF. In the past year, CPSE ETF petrol and diesel may indicate its 12 per cent since inception. directions, the recovery officer can
has shed 20 per cent, compared inclination to go back on oil and gas More than 50 per cent of the fund appoint an administrator for the
to 8.25 per cent gains made by reforms which were instrumental in is made up of ITC, L&T, SBI and Axis purpose of selling the properties
the Sensex. re-rating of OMCs in the past couple Bank. The government, which has attached, the regulator said in a
“The government recently asked of years, say analysts. raised ~229 billion through two notification dated October 3.
Bharat Electronics to sacrifice mar- “We cut our FY19/20E earnings for tranches of the ETF, reportedly plans Only an entity registered with
gins and the OMCs to absorb the fuel OMCs by 12-37 per cent and target to list Bharat-22 ETF on an overseas the IBBI as insolvency resolution
price burden. Unless the government prices by 39-52 per cent as ~1 burden stock exchange to raise foreign professional would be considered
gives confidence to investors that on downstream companies gives an capital. eligible for appointment as admin-
they will not go back on reform in the indication of partial controls in oil ETFs are traded on stock istrator.
real sense the CPSE ETF is unlikely to and gas sector in a rising crude envi- exchanges, with stocks, bonds or The Insolvency and Bankruptcy
outperform in the near term,” said G ronment,” said a recent note put out commodities as the underlying prod- Board of India (IBBI) is imple-
Chokkalingam, founder and manag- by Prabhudas Lilladher. uct. An ETF's portfolio exactly mim- menting the Insolvency and
ing director, Equinomics Research & Last Thursday’s sell-off in the ics the securities in its underlying Bankruptcy Code.
Advisory. market was led by energy stocks such index, in the same weightage. PTI
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.
MUMBAI | TUESDAY, 9 OCTOBER 2018 THE SMART INVESTOR 13 <

128 IPOs garner


$5.2 bn till Aug
Vedanta trips on pricing, supply worries
Correction in aluminium prices, concerns on increase in future zinc supplies affect investor sentiment
this year: Report UJJVAL JAUHARI
Mumbai, 8 October
plete closure of Alunorte
Alumina refinery last week
Vedanta remains the rising
crude oil prices. With prices
PRESS TRUST OF INDIA came to an end with the refin- expected to remain firm, prof-

A
New Delhi, 8 October fter continued gains in ery getting go-ahead to resume itability of its oil and gas
the recent past, the Ve- 50 per cent of its operations on should continue to get a boost.
As many as 128 initial public danta stock fell by October 5. The segment contributed 26
offerings (IPOs) garnered almost 11 per cent on Monday. This development is likely per cent to Vedanta’s segment
$5.24 billion this year until This has erased most of the to put pressure on the prices profits and should drive future
August and the IPO momen- gains since mid-July. of alumina, too — a key input earnings.
tum is expected to improve in Vedanta, a natural resource to produce aluminium. Against this backdrop, ana-
the coming months, says an major with interests in alu- Analysts at Edelweiss say that lysts maintain their positive
EY report. minium, zinc, crude oil, iron in the futures market, alumina stance on Vedanta. Edelweiss,
According to the India ore, etc, gets affected by is still trading at $620 per for instance, has retained it
IPO Market Insight report by ket in the near term should changes in global base metal tonne, up 25 per cent over the “buy” on Vedanta on October
EY, IPO activity in the third start proactively looking for and oil prices. Thus, correction past three sessions. However, 8, while a few days back Citi
quarter this year registered a alternative sources of capi- in aluminium prices on the they expect it to correct and in Research had said that expec-
significant decline vis-a-vis tal as well”. London Metal Exchange the medium term expect alu- tation of falling alumina
the corresponding period The report further cited a (LME) and talks of a possible mina/LME aluminium price prices/bauxite sourcing cost,
last year. number of macro-economic oversupply of zinc in the com- ratio to be about 20 per cent, strong crude prices and grow-
Only three IPOs were factors which are contribut- ing years affecting investor down from around 32 per cent ing international zinc business
launched on BSE and NSE in ing uncertainties such as, cur- sentiment are no surprises. in September 2018. (declining costs) augur well.
the third quarter of 2018 ver- rency volatilities (deprecia- The two segments had con- The declining aluminium Vedanta remains a story of
sus 11 public offerings in the tion of rupee), higher inflation tributed about two-third to the prices is negative for Vedanta. ramping-up operations to full
same quarter of 2017. in the US which may compel company’s segment profit in However, since the company since zinc prices are now seen potential with some capital
A similar trend was wit- central banks to tighten mon- the June quarter (Q1FY19). Yet, is dependent on external alu- correcting. MARGINS REMAIN ROBUST expenditure already invested,
nessed in the SME segment etary policies (increase in if analysts are to be believed, mina supplies it should also Vedanta’s Zinc India busi- (~ billion) FY18 FY19E FY20E which should translate into
too. There were 19 IPOs in the interest rates), resulting in corrections could offer a good benefit on the profitability ness (represented by its listed earnings growth and delever-
Revenues 918.7 930.8 1,044.4
third quarter (Q3) of 2018 ver- withdrawal of investments entry point in the stock. Their front. Aluminium had con- subsidiary, Hindustan Zinc) aging. An interesting observa-
sus 49 IPOs in Q3 2017, repre- from emerging markets, back optimism is based on improv- tributed 17.5 per cent to had contributed about half to % change y-o-y 27.2 1.3 12.2 tion that analysts make is that
senting a significant drop of to the US. ing oil prices, rising produc- Vedanta’s segment profits dur- the company’s segment prof- Ebitda 251.6 315.0 367.4 93 per cent of Vedanta’s debt is
61 per cent. Going forward, the IPO tion in zinc business, and soft- ing Q1FY19. its in the June quarter. The Margins (%) 27.4 33.8 35.2 rupee-dominated and hence
“With an ongoing volatili- activity is expected to remain er input prices offsetting lower In zinc, the global supply at solace for investors, however Net profit 103.4 122.1 156.2 the depreciation in rupee does
ty in equity markets along busy for the rest of the year, as aluminium prices. 13.7 million tonnes (mt) is can come from the improving not significantly impact the
with the rising risk of trade- there is a strong pipeline of To begin with, the per expected to fall short of the the volume outlook for the % change y-o-y 9.6 52.1 27.9 company. On the other hand,
wars across different markets, Draft Red Herring Prospectus tonne price of aluminium on estimated demand of 14.8 mt zinc segment. Although the E: Estimates Source: Citi Research revenues of most business seg-
it is becoming difficult for filed with the Securities and the LME, after rising from in calendar year 2018. June quarter remained sub- ments are linked to global (dol-
companies to raise equity cap- Exchange Board of India. around $2,000 levels in last However, an analyst from a for- dued in terms of production, from 0.95 mt in 2017-18. come on stream. Thus, a better lar-based) prices, so a weak local
ital,” said Sandip Khetan “On the account of next week of September to $2,243 eign brokerage, on Monday, owing to the company shift- Vedanta plans to further volume run-rate and currency should only help.
Partner and National Leader year’s general elections, on October 4, has corrected by said he expects a largely bal- ing from open-cast mining to raise its annual zinc produc- favourable impact on costs Hindustan Zinc, having a strong
Financial Accounting companies are expected to more than 5 per cent. The price anced market in CY2019 and underground mining, ana- tion to 1.5 MT. The company’s with rising scale of operations balance sheet, should also con-
Advisory Services, EY India. advance their IPOs in the last fall comes as the earlier eupho- an oversupply situation in zinc lysts say Vedanta is on track to Zinc International business, should provide cushion to tinue to with its healthy divi-
Khetan said “companies quarter of 2018,” the report ria that cost-push will keep alu- in CY2020. Such worries also achieve 1.2 mt per annum too is seeing rising production earnings, feel analysts. dend pay-outs, thereby bene-
that were looking to tap mar- noted. minium prices firm after com- affected investor sentiment run-rate by the end of FY19 with new mines expected to The bigger trigger for fitting Vedanta.

Increase allocation to gold in your portfolio Investment in P-notes


rises to ~846.47 bn
Analysts say that the upside may be limited, but it could be a safe haven in these turbulent times PRESS TRUST OF INDIA
TINESH BHASIN level talks to reduce the spiralling
trade and military tensions between
STARTING TO RALLY will see a rally. But a clear picture will
emerge in December after the US
New Delhi, 8 October

Domestic International
Unlike the past few years, this the two. The oil price is rising, which Federal Reserve meets and gives an Investments in the capital market through
Dussehra can be slightly better for can cause inflation rates in the US to Duration ~/10gm Return (%) $ / Oz Return (%) outlook on further interest rate hikes,” participatory notes (P-notes) climbed to
your gold investment. Rising oil go up. But the country has now 5-year 30,510 2.15 1,319 -9.51 says Thiagarajan. ~846.47 billion till August end , making
prices and risks in the global economy become one of the largest oil 3-year 26,275 18.61 1,139 4.81 Analysts say investors should it the first rise in such fund infusion in
can help investors get better returns producers in the world. The US increase their exposure to gold up to 10 months.
1-year 29,360 6.15 1,277 -6.49
on gold. The upside, however, will economy also continues to do well, 10 per cent of their portfolio, P-notes are issued by registered foreign
be capped. keeping the dollar stable. Year-to-date 29,240 6.58 1,303 -8.38 depending on their comfort with a portfolio investors (FPIs) to overseas players
In the past one week The positives and 6-month 30,440 2.38 1,334 -10.49 two-year horizon. But buy on dips, who wish to be part of the stock market with-
alone, the yellow metal negatives for gold have 1-month 30,430 2.42 1,196 -0.20 considering that gold prices could out registering themselves directly. They, how-
gained 2 per cent in the YOUR MONEY kept analysts guessing on 1 -week 30,525 2.10 1,189 0.40 hold steady around ~30,700 levels. ever, need to go through due diligence.
domestic market, and its price movement in the One way you may hold gold for the According to the Securities Exchange
0.4 per cent in the future. They, however,
Oct 8, 2018 31,165 1,194 long term is via sovereign gold bonds. Board of India (Sebi) data, total value of
Compiled by BS Research Bureau Sources: Bloomberg, IBJA
international market feel there is going to be a They pay an interest rate of 2.5 per P-note investments in the Indian market -
after Italy increased its small rally as the effect of cent annually on the initial purchase equity, debt, and derivatives — rose to ~846.47
budget deficit target to the trade war and rising volatility for gold,” says Navneet will be seen as long as price holds price but suffer from a lack of billion till August-end from ~803.41 billion
2.5 per cent of gross oil prices slowly start Damani, associate vice-president, above support of ~30,700-30,900,” liquidity. The government will clocked by the end of July.
domestic product. It led showing in the global Motilal Oswal Financial Services. says Damani. repurchase these bonds from Prior to this, an increase in investment
to a fall in the euro economy. “We expect Damani says in the short to Gnanasekar Thiagarajan, director investors only after five years, and was seen in October 2017, when the cumula-
against the dollar, and investors that lack of global cues could keep medium term, the trade war impact at Commtrendz Research, points out they trade at a discount in the tive value of such fund infusion rose
resorted to gold, a safe haven. volatility low for gold but on the will gradually start catching up on the effect of the trade war has secondary market. Gold mutual to ~1,310 billion, from ~1,227 billion at the end
While many events should lead to a domestic bourses, prices could gold and trigger a rally. The upside surfacing showing as the data shows funds offer liquidity, but you will have of September.
rally in gold, there are also other continue to gain on the weakness of could extend towards $1,260-1,270 US job growth slowed more than to pay an annual expense ratio (0.4-1.2 Of the total investments made last month,
factors that would limit the price rise. the rupee. The expectation is that internationally, while that on the expected last month. “For domestic per cent). Avoid investing in physical P-note holdings in equities were at ~662.33 bil-
The US and China are at trade war, but inflation could remain unchanged in domestic bourses will extend towards investors, the downside is limited as gold or deposit schemes run by lion and the remaining in debt and deriva-
both countries are set to hold high- September and that could keep the ~32,200. “A sideways-to-positive move the dollar remains strong. Investors jewellers. tives markets.

COMMODITIES1
>

> PRICE CARD


China may end 6-year TN wants
higher MSP
Scant rain to dent cotton
As on Oct 8 International
Price %Chg# Price
Domestic
------------------------------------------------------------------------------

%Chg#
------------------------------------------------------------------------------

ban on Indian oilmeal for copra output, exports: CAI


METALS ($/tonne) T E NARASIMHAN RAJENDRA JADHAV

Aluminium 2,140.0 2.0 2,403.1 -1.5


DILIP KUMAR JHA
Mumbai, 8 October
NEW START China annually imported
350,000 to 400,000 tonnes of
Chennai, 8 October Mumbai, 8 October
India’s oilmeal exports
Copper 6,182.5 -2.3 6,574.9 -8.9 rapeseed meal and Tamil Nadu has asked the Cotton production in 2018-19 is likely to
(In mn tonnes)

C
hina is set to lift its near- 100,000tonnes of soybean Union Ministry of Agriculture fall 4.7 per cent from the previous sea-
2.47

Nickel 12,400.0 -9.9 13,028.2 -11.6


3.03

ly six-year-old ban on meal from India. to raise the minimum support son to 34.8 million bales, as scant rain-
1.88
1.53

import of oilmeal from Economic sanctions on price (MSP) for milling copra fall and an attack of pink bollworms
1.40

Lead 1,971.0 -15.1 2,187.1 -10.9


India, to bridge its deficit after Iran, political turbulence in to ~105 a kg for the current are expected to squeeze crop yields,
Tin 18,950.0 -2.4 19,373.6 -4.7 supply from the US reduced West Asia and slow economic season, in the interest of the head of a leading trade body told
Zinc 2,645.0 -4.1 3,240.2 1.0 under the ongoing trade war growth in Europe had lately coconut growers. The Centre Reuters. COTTON CHART
between the two leading world reduced global demand for had earlier fixed the MSP at The drop in output could limit In million bales (1 bale = 170 kg)
Gold ($/ounce) 1,186.0* -5.5 1,308.7 -5.1 economies. oilmeal. India’s export was ~75.11 a kg. exports from the world’s biggest pro- Year Production Export
Industry sources said ‘14-15 ’15-16 ‘16-17 ‘17-18 ‘18-19* down 73 per cent to 81,511 State chief minister ducer of the fibre amid rising demand
Silver($/ounce) 14.3* -10.7 16.0 -9.7 *Apr–Sep 2018 2013-14 39.8 11.7
China’s inter-ministerial Source: Solvent Extractors’ Association tonnes this September, from Edapadi K Palaniswami met from top consumer China and in turn
ENERGY General Administration of 298,182 tonnes in the same Prime Prime Narendra Modi support global prices, which are hov- 2014-15 38.6 5.8
Quality Supervision, months of last year. However, on Monday and gave a 20- ering near their lowest level in more 2015-16 33.8 6.9
Crude Oil ($/bbl) 82.9* 8.4 81.2 8.8
Inspection and Quarantine director, the Solvent in the April-September peri- point memorandum of which than nine months hit last week. 2016-17* 33.7 5.8
Natural Gas ($/mmBtu) 3.3* 13.6 3.2 12.8 (AQSIQ) has already taken a Extractors’ Association. od, first six months of this this is one. “This request,” “In Gujarat, we are expecting a big
2017-18* 36.5 7.0
decision in this regard. The AQSIQ would, once the financial year, these had risen went the CM, “would be in drop in production due to dry weather,”
AGRI COMMODITIES ($/tonne) “The US-China trade dis- ban gets lifted, visit Indian nine per cent to 1.4 million tune with your (Modi’s) vision said Atul Ganatra, president of the
*Estimated, Compiled by BS Research Bureau
Sources:Cotton Association of India,Cotton Corp. Of India
Wheat 234.0 12.2 276.4 2.3 pute is forcing the latter to look units for inspection and tonnes, from 1.28 mt for the of doubling farmers’ income Cotton Association of India (CAI).
to other origins for soybean approval. Industry sources say corresponding period last year. (by 2022).” Tamil Nadu is a Gujarat, the country’s top cotton pro- new marketing season that started on
Maize 199.7* -1.0 187.9 9.1 and oilmeal. We understand Chinese companies are inter- Export of rapeseed meal was major grower of coconut, on ducing state, received 28 per cent lower October 1, he said.
Sugar 350.2* 2.7 453.8 -9.0 from the ministry of com- ested in import of rapeseed almost doubled in these six 435,000 hectares. The mar- rainfall than normal in the June- In Maharashtra, the country’s sec-
merce/Export Inspection meal through six-odd months, to 601,105 tonnes ket price at present in the September monsoon season, according ond-biggest cotton producer, output
Palm oil 550.0 -6.4 908.0 -10.0 Council that China will lift the approved Indian exporters, from 300,627 tonnes in April- major copra markets of the to the India Metrological Department. is expected to ease to 8.1 million bales
Rubber 1,397.7* -6.0 1,734.8 -5.5 ban very soon for import of including Adani Wilmar and September 2017, mainly to south is between ~90 and ~110 The western state’s fibre output is from 8.3 million bales due to an
rapeseed meal from India,” Ambuja Exports. South Korea, Vietnam and a kg, expected to continue till estimated to drop 14.3 per cent from a attack of the pink bollworm pest,
Coffee Robusta 1,690.0* -2.7 2,200.6 -0.3 said B V Mehta, executive Prior to the ban in 2012, Thailand. the season ends. year earlier to 9 million bales in the Ganatra said. REUTERS
Cotton 1,686.3 -11.4 1,768.6 -7.5
* As on Oct 8, 1800 hrs IST, # Change Over 3 Months

Farm profit stressed despite normal monsoon: CRISIL


Conversion rate 1 USD = 74.1 & 1 Ounce = 31.1032316 grams.
Notes:
1) International metals, Indian basket crude, Malaysia Palm oil,
Wheat LIFFE and Coffee Karnataka robusta pertains to
previous days price.
2) International metal are LME Spot prices and domestic metal
are Mumbai local spot prices except for Steel. DILIP KUMAR JHA “normal” by the India “But, there are some spoilers. announced higher minimum rain, of 18 to 27 per cent of the LPA. tion came from the recently
3) International Crude oil is Brent crude and Domestic Crude oil Mumbai, 8 October Meteorological Department. This Rainfall distribution has been support prices (MSPs) might offer And, though Rajasthan, Madhya released crop output estimates of
is Indian basket.
4) International Natural gas is Nymex near month future & is so for a third year in a row; the patchy and farmer income is an upside of up to 50 basis points Pradesh, Uttar Pradesh, Andhra the Union ministry of agriculture.
domestic natural gas is MCX near month futures. Despite normal rainfall, farm earlier such period was 2010 to down. The good news is that the to overall inflation. That’s because Pradesh, Karnataka and Still, prices of most agricultural
5) International Wheat, White sugar & Coffee Robusta are LIFF E
future prices of near month contract. profitability remained under 2013. During those earlier years rural non-farm side is seeing bet- the combined weight of the 13 Maharashtra saw normal overall commodities are falling. Thus, it is
6) International Maize is MATIF near month future, Rubber is stress this year, says ratings of normal rain, average agricul- ter days. Also, given healthy over- kharif crops on which MSP was rain, they also had pockets of turning out to be another year
Tokyo-TOCOM near month future and Palm oil is Malaysia FOB
spot price. agency CRISIL. tural gross domestic product all production, food inflation hiked is only about five per cent in severe deficiency. That, too, in the where farmer incomes would
7) Domestic Wheat & Maize are NCDEX future prices of near The southwest monsoon, (GDP) grew 4.7 per cent annually. might stay contained,” said Consumer Price Index inflation. crucial months of July and August. remain low. Higher MSPs have
month contract, Palm oil & Rubber are NCDEX spot prices.
8) Domestic Coffee is Karnataka robusta and Sugar is M30 which begins in June and ends in Growth in agriculture GDP this Dharmakirti Joshi, chief econo- Meanwhile, three key kharif This had impacted sowing. done little to lift crop profitability
Mumbai local spot price. September, closed this season 9 year will be lower than that, mist at CRISIL. crop growing states — Gujarat, Deficient rain could impact so far. In fact, wholesale (mandi)
9) International cotton is Cotton no.2-NYBOT near month future
& domestic cotton is MCX Future prices near month futures. per cent short of the Long Period though well on trend, says CRISIL Depending on the govern- West Bengal and Bihar — are reel- groundnut, tur (pigeon pea), jowar prices have been trailing the MSPs
Source: Bloomberg Compiled by BS Research Bureau Average (LPA). This was termed in a report issued on Monday. ment’s procurement efficacy, the ing under the impact of deficient (sorghum) and cotton. An indica- announced in July.
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16 BRAND WORLD
>
MUMBAI | TUESDAY, 9 OCTOBER 2018

Brands look to earn their


millennial credentials
Godrej Interio takes on rival Ikea on social media, shows how the medium is
changing the message even for old and traditional brands
NIKHAT HETAVKAR
Mumbai, 8 October

B
y now it is well known
that social media alters
the way people behave,
giving them a persona often at
variance with their real-life
characters. Now brands seem
to be following in the footsteps
of their human counterparts.
Godrej Interio, counted as part
of the pre-internet genteel set
of brands, recently took on Ikea
with uncharacteristic vim and
vigour; with pithy tweets it
aimed some friendly fire at the
Swedish brand that has just
opened its first store in India.
It is not just the new tone
and approach of brands such
as Godrej Interio that has peo- Top: Ikea advertises its living
ple’s attention, but also the rooms, (right) Godrej Interio
shift in the nature of advertis- promotes its furtniture
ing by a category such as fur-
niture. Conventionally an Rangachari, co-founder,
unorganised sector with a few Hypersonic Advisory.
branded players, furniture has Ashish Mishra, managing
undergone a big change in director of Interbrand India India,Godre
j
IMAGE:ikea
recent years with the entry of explains that we live in an era
digital-first brands such as that’s not digital and offline
Pepperfry and Urban Ladder,
the emergence of branded fur-
separated anymore. “We call it
post digital. And this post dig-
SHOOTING FROM THE LIP
niture rental services and most ital marketing is essentially | Godrej Interio ran one-liner ads that said ‘EMI pe kea?
recently, with the entry of Ikea. about optimising the experi- NaIKEA’, ‘Warranty ke saath kea? NaIKEA’, ‘Free installation
Traditional branding strate- ence at each touch point in the kea? NaIKEA’ and so on. Finally there was a rejoinder from an
gies are being rapidly shelved. customer journey,” he added. anonymous source that said ‘Thank you God(rej) for thinking
Instead of lavish spreads and Two major factors are driv- of us’. Ikea was not a part of the campaign
television commercials, Godrej ing change in the way furni-
Interio took to digital and used ture brands communicate with | When Britannia turned 100 early this year, rival Parle said,
a mix of Hindi and English to their customers. One is the ‘Hope you find the melody to many more little hearts’.
pun on the name Ikea. The tar- medium, the digital format is Melody is a Parle brand of toffee and Little Hearts is a
get: milllennial consumers. impacting the message. And Britannia brand of biscuits
In the past Coca-Cola and the second is the rapidly evolv- | Netflix and actor Radhika Apte were trolled for the huge
PepsiCo have indulged in such ing nature of the category; the number of shows the two had done together. While Netflix
guerllia warfare, major health entry of new e-tailers and fur-
came back with funny rejoinders, Zomato, Ceat Tyres among
drink brands occasionally did niture rental marketplaces has
others engaged in friendly banter with Netflix
too and more recently e-com- changed customer perception
merce players and auto majors about the category.
have followed similar tactics. Experts also said that
However for furniture brands, engaging in banter with other furniture is also turning into a Pepperfry also tied up with
this is uncharted territory and brands, being open about their more personalised expression Miss Malini for a web show.
for Godrej Interio, a sharp rivalries in a way, allows the of oneself, the new brands have “The power of this medi-
detour from its old ways. advertising to feel more grasped that to an extent. um should not be ignored by
Experts said that in the authentic to the consumer. Kashyap Vadapalli, chief anyone,” said Aditi
increasingly digital world we Product integration on digital marketing officer, Shrivastava, co-founder
live, it is no longer possible for channels is another means Pepperfry.com said, “We have Pocket Aces.Even within dig-
any customer segment to exist through which furniture adver- two types of customers, tradi- ital marketing, brands are
in a time vacuum. The Indian tisers are trying to connect with tional (early 30s to late 40s) and delivering different messages
furniture space is witnessing audiences. new age (early 20s to early 30s). for different customers.
such a change as market “If we look at furniture and Both behave differently. Shrivastava explains that
dynamics are set to evolve. the new role it plays in our Millennials look at furniture as Furlenco focuses much more
“Unlike our parents’ genera- lives, we will find that many of a lifestyle accessory, so, we on the millennial audience,
tion where furniture was seen the key touch points are so can’t use a transactional first jobbers, who are children
as a family heirloom, this gen- naturally digital,” said Mishra. approach to sell furniture to of the shared economy and
eration has a utilitarian rela- The new brands are engaging them. Also they don’t want to highlights functional spaces
tionship with the category and with them on digital media in a be advertised to directly as they in the home. PepperFry
this compels marketers to not variety of ways, not just direct are overexposed to all medi- focuses on young couples
only deliver functionally but advertising but also by being a ums of communication.” In and family audiences that
also create the right attitudinal part of web series or comedy addition to partnering with want to make their homes
appeal, said Venkatesh shows. Mishra points out that Pocket Aces for a web series, beautiful at affordable prices.

> THE BS CROSSWORD # 3163


hundred error, familiar to 8 Song about character
mathematicians (8) rejected by good feudal
16 Can the deity, or is he a fake? superior (5,4)
(3,3) 14 Outcome of later wrangler’s
17 “Attacks” could be “onsets” work in America (9)
(6) 15 Bessemer the missionary ? (9)
19 Arse about with a sickbed (8)
18 Yes, quite worried about the
21 Box, perhaps, made of wood
call to give an injection (7)
(4)
22 Does it erase all footprints 19 Robert’s musical wild animals
you leave? (6,4) (7)
25 Box adds weight to the 20 Deceived Edward; followed
vehicle (6) he-cat outside! (7)
26 Independence provided by 23 Carrying on thus, for some
car? No money without one reason I create a sort of boom (5)
(8) 24 Cockney’s surprised
27 Simply wizard girls ? (8) expression without the
28 Another foot and this boy’s b — Britisher (5)
seen back around city from
which I must disappear (6) SOLUTION TO #3162

DOWN
2 Leonard Marx taking silver
with temporary problem
from the Windy City (5)
ACROSS 3 Adore inconstant nymph (5)
(4,4)
1 Shoots about a hundred and 4 As divers, cut a figure (7)
10 Greek capital framed by artist
one children (6)
- an attractive thing (6) 5 Despite distress (7)
5 Bet garbage swallowed by
11 Mark the division between 6 MEP trained to enter match
MP gives him a big stomach
one state and the next (10) play (7)
(3-5)
12 Grounds or pastures, say (4) 7 Vegetables are chickens? (9)
9 Edit clueing device to cope
13 Usual pound two

Very hard:  > WEATHER TODAY’S FORECAST


> BS SUDOKU # 2590 Solution tomorrow
Max/min temperatures in C
O

NATIONAL
HOW TO PLAY
Ahmedabad . . . . . . . . .Mostly sunny 39/24
Fill in the grid so that every Aizawl . . . . . . . . . .Scattered showers 26/17
row, every column and
Bengaluru . . . . . . . . . . .Partly cloudy 29/19
every 3x3 box contains the
Bhopal . . . . . . . . . . . . . . . . . . . . . . .Sunny 35/22
digits 1 to 9
Bhubaneswar . . . . . . .Partly cloudy 33/24
Chandigarh . . . . . . . . . . . . . . . . . .Sunny 31/20
Chennai . . . . . . . . . . . . . .Partly cloudy 33/26
Delhi . . . . . . . . . . . . . . . . .Mostly sunny 34/22
Guwahati . . . . . . . . . . . .Partly cloudy 30/21
SOLUTION TO #2589 Hyderabad . . . . . . . . . . .Partly cloudy 34/21
Imphal . . . . . . . . .Scattered showers 28/17
Indore . . . . . . . . . . . . . . . .Mostly sunny 34/22
Kochi . . . . . . . . . . . . . . . . . . . . .Thundery 31/24
Kolkata . . . . . . . . . . . . . . .Partly cloudy 34/24
Lucknow . . . . . . . . . . . . .Mostly sunny 36/23
Mangalore . . . . . . . . . . . . . . .Thundery 30/24
Mumbai . . . . . . . . . . . . . .Partly cloudy 33/27
Pune . . . . . . . . . . . . . . . . . .Partly cloudy 34/22
Srinagar . . . . . . . .Scattered showers 19/09
Surat . . . . . . . . . . . . . . . . . .Partly cloudy 37/27
Thiru’puram . . . . . . . . . . . . . . . .Thundery 28/24
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.
MUMBAI | TUESDAY, 9 OCTOBER 2018 TAKE TWO 17 <

Jute spins a modern yarn Tesla is looking


crop will be down to 6.2 million bales
(mb) of 180 kg each from last time’s 7.4
mb. Not only is there a major fall in
production, the crop quality is also
not good.”
for a manager to
A few jute companies are reaping the benefits of diversifying into agro-textiles and designer bags,
The crop shortfall is somewhat
intriguing since during the sowing
months of March and April, the weath-
handle Elon Musk
but a likely shortage of good quality jute this year could hobble their progress er in West Bengal, the principal source BLOOMBERG
of jute for making sacking bags, was 8 October
Toyota and Tesla. quite favourable. According to the
The local demand for geo-textiles, Indian Jute Balers Association (JBA) Wanted: A seasoned executive with a steady
which prevents waste of construction Secretary General SP Bakshi, “The hand, a passion for electric cars and the mettle to
materials while allowing water move- growers frustrated by selling jute at rein in a CEO with itchy Twitter fingers.
ment in building of highways and low prices last season moved lands to That’s pretty much the job posting Tesla
roads, is to grow at high rates as under other crops such as oilseeds and veg- agreed to as part of the settlement nine days ago
the Bharatmala Pariyojana, 66,100 km etables. The fibre quality depends with the US Securities and Exchange
of roads will be built to strengthen the much on what seeds are made avail- Commission, which requires the company to
country's highway network. At the able to them and availability of water appoint an independent chairman to replace
same time, the global market for jute in for retting jute. There have been prob- Elon Musk and add two directors to the board.
construction is expanding with the lems this year on these two counts.” Names being floated as candidates for the
developing and emerging countries Against last year’s 653,740 hectares chairmanship have ranged from former Vice
strengthening their infrastructure. under jute, the crop is grown only on President Al Gore to one-time CEOs, including
Of the 78 working jute mills in the 494,150 hectares in 2018-19. If there is Jim McNerney of Boeing and Alan Mulally of
country, as many as 61 are on the a setback in crop in West Bengal, it Ford Motor.
banks of the river Hooghly in West cannot be otherwise in jute growing What shareholders want, of course, is
Bengal where most of the country’s centres in Bangladesh where the qual- someone who can put Tesla on the path to
raw jute is grown. The discomforting ity too is down.
fact about the industry is that except Quality fall of raw jute will make
the six factories, all the others, assured operation of VAP making factories dif-
of government orders for bags under ficult. They are already under pres-
the Jute Packaging Materials (JPM) sure since January with the
Act, 1987, for packing of foodgrains, Bangladesh government putting a ban
care little for product diversification. on export of uncut raw jute. The
The Act ordains that 90 Dhaka move was
per cent of the country’s VAP is an expanding prompted by New Delhi
foodgrains and 20 per universe that putting antidumping
KUNAL BOSE FIBRE OF THE FUTURE India’s rawjute
position in 2017-18 cent of sugar production presently includes duty on jute goods from
Kolkata, 8 october Production ofjute goods in India (In '000 tonnes) will have to be compulso- geo-textiles, agro- Bangladesh and suspi-
(in million bales of
Carpet- rily packed in jute bags. textiles, composites, cion that some traders Elon Musk may be stretched too thin, running
180 kg each)
Apr-Mar Hessian Sacking backing Others Total Kanoria says purchases of fabrics made of jute in there were exporting

T
he over a century-and-a-half- Tesla as well as the rocket manufacturer SpaceX
old jute mill industry in the 2011-12 239.9 1,165.1 3.6 173.8 1,582.4 „ Supply jute bags by government blends with other high grades of raw jute as
country is sharply divided in Opening stock: 2.2 agencies on a cost plus natural fibres and uncut jute. According to profitability and also manage Musk, whose
two groups. About half a 2012-13 210.0 1,218.2 2.9 160.3 1,591.3 basis are enabling the many lifestyle the JBA, India’s imports tweets about having secured the funding and
Jute mesta crop: 7.2 to
dozen composite jute factories have 2013-14 202.5 1,150.4 3.3 171.5 1,527.7 7.4; Imports: 0.4 industry to generate sur- products such as of raw jute last year were investor support to take the company private
by way of risking investment in new- Total: 9.8 to 10 pluses. The fact remains designer bags and 400,000 bales. Indian was what got him into hot water with the SEC —
2014-15 211.3 901.8 3.0 151.2 1,267.3
age value added products (VAP) however much a factory furnishing fabrics factories making VAP for and who, not incidentally, was busy on Twitter
requiring installation of modern 2015-16 196.5 891.9 0.0 128.9 1,217.3 „ Consumption is diversified, it must exports seek Bangladeshi last week taunting the agency. The Sept 29
machinery and bringing about major 2016-17 178.6 871.6 0.0 92.3 1,142.5 Mills: 7; Local off-mill: 1 depend on government origin jute for its silky settlement will keep him out of the top board
changes in work culture in a highly Closing stock: 1.8 to 2 orders for bags to ensure high levels of lustre. Hopefully, India will be able to seat for three years. This is what some
unionised industry environment have
2017-18* 158.5 824.3 0.0 93.5 1,076.3 Source: Jute Balers Association use of their spinning and weaving prevail upon Dhaka to lift the ban on institutional investors have long been calling
*(up to Feb'18) Source: National Jute Board
seen their profits soar. capacity. New age jute products are raw jute exports. for, contending that the board has failed to
A textile ministry note says not about tonnage, but high margins. The challenge for the government sufficiently govern the chief executive officer
around 90 per cent of the industry’s production practices. Owners of and soil enriching biodegradable fibre It will be ideal if instead of the is to rid the industry of the perennial and that Musk may be stretched too thin,
annual production ranging from 1.15 shares of Cheviot, Gloster, Ludlow and posing no disposable problem. industry pleading for “extension of uncertainty about the local crop qual- running Tesla as well as the rocket
million tonnes (mt) to 1.25 mt in Birla Corporation have been rewarded Any mention of jute VAP will JPM Act” every year, the industry has ity. It is with this in view that New manufacturer SpaceX, where he’s also both
recent years is domestically con- with major capital appreciation, regu- immediately conjure up an image of the assurance of government sticking Delhi assigned National Jute Board to CEO and chairman.
sumed as a packaging material. But in lar dividend and share buyback. bags for shopping, an eco-friendly to foodgrains packaging in jute bags at launch the Jute-ICARE (improved cul- “The SEC settlement is a moment for the
this industry, a few truly modern fac- Ludlow Chairman RV Kanoria says: replacement for plastic bags. But VAP the current rate over longer periods, tivation and advanced retting exer- board and the company to take a deep breath and
tories have managed to earn anything “Thanks to the initiative of a few con- is an expanding universe that Kanoria says. On its part, jute factories cise) programme in 2015, now extend- rethink,” said Dieter Waizenegger, executive
between 20 and 30 per cent of their stituents of the industry, the brand presently includes geo-textiles, agro- must ensure at all times uninterrupt- ed up to March 2020. The director of Ctw Investment Group, which works
revenues from exports. The majority equity of our diversified jute products textiles, composites, fabrics made of ed supply of bags of right quality. The comprehensive programme, includ- with union pension funds. “This board really
in the industry have, however, is established in many parts of the jute in blends with other natural challenge this season for the indus- ing supply of certified seeds, line sow- needs to evolve — it needs more women and more
remained frozen in time. world.” But this needs to be further fibres and many lifestyle products try will be to make regular supplies ing of jute using seed drill, weed man- people of color. It’s a very insular board.”
The stock market has not failed to strengthened by the industry explor- such as designer bags for women and of bags to government procurement agement and scientific retting that has At the moment, six of the nine directors are
take note of the success of the small ing new markets riding on the growing furnishing fabrics. Not many will be agencies in an environment of an a big bearing on jute quality, has the white males and all but three have connections
group of jute mills, which made bold world concern about pollution caused aware that the humble jute in the expected major raw jute crop short- potential to increase grower income to or investments in one or more of the
not to remain bound by traditional by unbridled use of synthetics. Unlike form of composites is finding increas- fall, but a good kharif foodgrains pro- by ~10,000 a hectare by way of lower- companies Musk controls. The SEC settlement
constructions such as sacking bags, plastic, which is derived from a fossil ing application in the interiors of cars duction. Leading jute trader Jyoti ing cultivation cost and improving requires that the two additional directors be
hessian cloth and yarn and archaic fuel, jute is an eco-friendly, renewable made by the likes of Mercedes, Kuthari says, “The 2018-19 raw jute productivity. independent.