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

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

Therupeeslumpedby30paise
tofinishatanewlowof74.06
againstthedollaronMonday
amidthestrengtheningofthe
grades similar to the ones mined in India,
Those will especially be electronic
items meant for holiday or Christmas sea-
Source: Association of Mutual Funds in India there can be curbs,” said an official. son in the US.” Turn to Page 6 >
~ vs $
(Inverted scale) JASH KRIPLANI September. “However, the outflows
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 >
https://t.me/pdf4exams https://www.estore33.com/ https://t.me/TheHindu_Zone_official

.
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
give ~35.6 billion by way
of cash and 5.86 per
cent stake in its airport holding
company to three private equi-
ty (PE) investors, ending two
years of litigation.
The immediate cash pay-
out works out to around ~15 bil-
lion, as the three investors are
to give new loans of ~20.05 bil-
lion as part of the transaction.
In 2010-11 and 2011-
12, GMR Group had
raised ~14.78 billion
via compulsorily
convertible prefer-
ence shares from
SBI Macquarie,
Standard Chartered
Private Equity, JM
Financial Old Lane
and others. The
investment was
made in GMR Airports (GAL),
which controls the airports at
Delhi and Hyderabad.
In the agreement, the PE
companies were assured of an
exit through an Initial Public
Offer of equity (IPO) or pro-
moter buyback. Neither mate-
rialised. The PE investors had a
right to acquire 49 per cent in
GAL in an event of a default. In
2015, GMR Group exercised a
call option to buy back shares
held by the PE investors but
thiswassubjecttofulfillmentof
certain conditions and regula-
tory approvals. As the latter did
not come, there was a stale-
mate, leading to arbitration.
GMR Group announced
on Monday it had got a con-
sent award from the arbitra-
PE investors. It said the
investors would acquire a 5.86
per cent equity of GAL, at an
equity valuation of ~210 bil-
lion, and receive payment of
~35.6 billion in lieu of the pref-
erence share investment. The
5.86 per cent stake will be val-
ued around ~12 billion.
It said the cash payment
would be partly funded by
GMR's listed arm, by selling its
stake in airports in
the Philippines and
Delhi Airport
Parking Services to
GAL. These transac-
tions will be funded
through issue of
non-convertible
debentures to the PE
investors.
“This is a signifi-
cant positive devel-
opment for the group. It rein-
forces the fundamental
strengths of the airport busi-
ness and paves the way for
value unlocking of the airport
business. This will act as a cat-
alyst for potential deleverag-
ing of GMR Infrastructure's
balance sheet and value cre-
ation for shareholders,” stated
GMR Group.
It had recently emerged as
the highest bidder for the
Nagpur airport privatisation
project, and is expanding its
footprint by securing con-
tracts in Philippines and
Greece. According to media
reports, GMR is looking at
raising $500 million (about
~36 billion) through an IPO of
its airport division.
from import and export of coal, tonnes per annum (mmtpa), Visakhapatnam (7.24%).
crude and petroleum products. Vizhinjam Port which would cater to the pro- The Kamarajar port growth
“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
export, energy is one big growth 2025. For all the 12 major ports, in other liquids by 29.63%,
area and as the country keeps master plans have been miscellaneous cargo by
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-
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%.
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-
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
APSEZ, told BusinessStandard. Andhra Pradesh, and Kattupalli it is crude and rest is the con- business.” thenext20yearsandareexpect- i.e. 30.36%, followed by con-
“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
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
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
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
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-
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.
Suzlon aims to nearly halve debt by March CIL, NLC join hands for solar,
JYOTI MUKUL capacity ahead of the SECI timelines, said the company would soon announce thermal power diversification
New Delhi, 8 October despite the challenges, uncertainties and a few international order wins. “We will AVISHEK RAKSHIT company in the near term.
initial teething issues of the new bidding continue to remain market leader. We Kolkata, 8 October According to the agree-
Suzlon, this country’s largest maker of wind regime,” said Chalasani. have won orders from largescale utilities ment, this JV will have 15
power gear, is looking at monetising some According to him, – Sembcorp, Torrent and Coal India (CIL) has signed an months to complete the solar
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
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-
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
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,
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
integrated operations. The sector will wit- pleted project. including the recently second largest operations thermal electricity. Electricity Regulatory Comm-
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
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
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
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.
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,
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
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
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
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
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
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
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
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
leaking info to Pak
PRESS TRUST OF INDIA
Nagpur, 8 October
An engineer with the
BrahMos Aerospace unit near
Nagpur was arrested on
Will buy Iran oil despite Price cut credit
negative for
Agrawal hails from
US sanctions: Pradhan OMCs: Moody’s
AMRITHA PILLAY
THE IMPACT
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
staying with his wife here and SUBHAYAN CHAKRABORTY official. India is yet to respond The government’s decision last „ Ebitda FY2019E
had given his Aadhaar card New Delhi, 8 October to this, he added. week to reduce fuel prices „ Impact on Ebitda for FY19
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

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

31

18

an ATS official said.
The engineer was living
in a rented accommodation
on Wardha Road since last
year, his landlord Manohar
Kale said.
The police team arrived at
the building at 5.30 am and
was there till 5 pm, he said.
IN BRIEF
Data localisation:
Jaitley meets RBI
dy guv, IT secy
Finance Minister Arun Jaitley
on Monday met RBI Deputy
Governor B P Kanungo to
discuss RBI’s data localisa-
tion norm for global financial
technology companies.
The Reserve Bank in April
gave six months time to
global payment companies
to store transaction data
of Indian customers within
India. PTI<
Panel on SEZs
plans continuation
of incentives
A commerce ministry-
appointed committee on
promoting special economic
zones has suggested conti-
nuation of tax incentives,
and host of other steps to
revive special economic
zones (SEZs), an official said.
With a view to focus on job
creation, the committee has
proposed migration of
SEZs to employment and
economic enclaves, and
creation of link infrast-
ructure and maintenance
for enclaves. PTI<
DIPP: Taking steps
to cut time to grant
patents, trade marks
India is taking several steps,
including hiring more
manpower and increasing
use of technology, to reduce
time for granting patents
and trade marks, a top
government official said
on Monday. PTI<
Mashinostroyenia) of Russia.
The company was set up
through an inter-governmen-
tal agreement signed on
February 12, 1998, between
India and Russia. The name
BrahMos represents the fury
of Brahmaputra and the grace
of Moskva rivers.
Deadline extended
for filing ITR, audit
report till Oct 31
The government on Monday
extended by a fortnight till
October 31 the deadline for
filing Income Tax return (ITR)
and audit report for financial
year 2017-18. This is the sec-
ond extension within a
fortnight of the Central
Board of Direct Taxes (CBDT),
earlier extending the
deadline for tax payers
whose accounts have to be
audited from September 30
to October 15.
PTI<
Gadkari to lay
foundation stone for
~12bn NH projects
Union Minister Nitin
Gadkari on Tuesday will lay
foundation stone for ~12.24
bn highway projects in
Uttar Pradesh. Besides, the
highway projects, Gadkari
will also lay foundation
stone for development of
National Waterway 40,
Ministry of Road Transport
and Highways said in a
statement. PTI<
Goldman: RBI to
up rates by 25 bps
in Q1 of 2019
The Reserve Bank of India is
expected to increase policy
rates by 25 basis points in
the first quarter of the next
year, primarily led by i
nflationary pressures and
depreciation of the rupee,
says a Goldman Sachs
report. PTI<
However, this will be done
with an aim to create a rupee-
based trading mechanism with
these nations, so as to reduce
the exposure of the US dollar to
India’s largest import category.
At an inter-ministerial meeting
last week, Commerce and
Industry Minister Suresh
Prabhu asked the commerce,
revenue, and petroleum
departments to work on the
possibility of a rupee trade
mechanism with all these
nations, according to senior
source in the know.
Petroleum Minister Dhar-
mendra Pradhan on Monday
said the two Indian oil refiners
had contracted Iranian crude
oil for November. India is
hoping to get a waiver from the
US as the sanctions are set to be
in place on November 4. “Two
oil companies of ours have
made nominations
purchase Iranian oil in
to
November. We do not know if
we will get a waiver (from US
sanctions),” Pradhan said at
The Energy Forum. India will
be buying 1.2 million tonnes of
Iranian crude, he said.
“We will be guided by our
national interest,” Pradhan
added. He said India has
requested Saudi Arabia to
increase the supply of crude.
Meanwhile, Indian Oil
Corporation Chairman Sanjiv
Singh said India is considering
Iran crude oil payments in
1920 Act needs redoing to sort out bankruptcy rules
VEENA MANI
New Delhi, 8 October
The government will have to
repeal some sections of the
Provincial Insolvency Act,
1920, to frame rules for bank-
ruptcy, including those for
corporate guarantors.
“For the bankruptcy pro-
visions, there is one hurdle.
We are working on the sec-
tions of the Provincial
Insolvency Act that need to
be repealed before the bank-
ruptcy provisions are noti-
fied,” said an official.
TOP 10 IMPORT SOURCES FOR INDIA’S
CRUDE IN 2017-18
Total import bill: $87.37 bn
Nations Amount ($ billion)
Iraq 17.54
Saudi Arabia 15.26
Iran 8.97
Nigeria 8.19
UAE 6.12
Venezuela 5.85
Kuwait 5.28
Angola 3.08
Mexico 2.75
Oman 2.41
rupee terms. At present, Iran is
the third-largest supplier of
crude oil to India. The rupee
payment mechanism has been
suggested as the best possible
way to cut India’s dollar
exposure as well as shore up the
value of the rupee, which has
continued to plummet.
The Donald Trump
Administration has cancelled
the nuclear deal with Tehran
and announced the re-
imposition of several
sanctions on the Iranian
regime that will target the
nation’s crude oil exports
starting November 4. Over the
The Provincial Act already
has sections pertaining to
corporate guarantors. "Once
they are repealed, we can
notify the rules,” he said.
In fact, some sections of
the Act also need to be done
away with for rules for
individual bankruptcy, said
officials.
While rules for insolvency
under Insolvency and
Bankruptcy Code (IBC) have
been framed, those for bank-
ruptcy are yet to come.
Bankruptcy rules include
those for corporate guaran-
past two months, Washington
DC has continued to put
pressure on governments and
companies worldwide to cut
their imports from the nation.
As a result, the US has made
the issue a part of its current
trade negotiations with New
Delhi. “Senior US officials
visiting India have suggested
they may be willing to give
India a waiver on America’s
tariff hikes on aluminium and
steel imports, provided India
commits to significantly
change its sourcing pattern
with regards to petroleum,” a
senior trade department
tors, proprietorship firms and
individual insolvency.
Once rules for corporate
this time around as leading
European Union nations
have also supported Trump’s
call for sanctions.
On the other hand, senior
industry insiders pointed out
that India remains among the
few countries paying Vene-
zuela for oil imports through
the US dollar. However, the
government believes the South
American nation — facing an
economic crisis rife with hyper-
inflation and food shortages —
will not part with a significant
source of US dollars. “Suggesti-
ons to use bitcoins for oil pay-
ments to Venezuela have been
struck down as we did not find it
feasible to buy and sell an onl-
ine currency not governed by
sovereign laws,” a senior reve-
nue department official said.
As for Russia, New Delhi is
open to a barter arrangement
for the two largest imports —
diamonds and oil — apart from
a rupee mechanism. Global oil
prices have dropped from the
highest levels they reached in
the early part of the year, as
investors focused on rising out-
put from other producers, such
as top exporter Saudi Arabia, to
compensate for lower Iranian
supplies. Saudi Arabia said last
week it plans to raise
production in November from
October output of 10.7 million
barrels per day, indicating
Riyadh will be increasing its
supply to the highest-ever level.
guarantors are released,
bankers dealing with compa-
nies going insolvent under
Moody’s in its note raises con-
cerns over increased borrow-
ings for OMCs, rating down-
grades, further directives to
absorb fuel prices and pressure
on upstream companies to
increase in shareholder returns
or subsidise crude oil prices.
On October 4, the govern-
ment (“Baa2 stable”) reduced
petrol and diesel retail selling
prices by ~2.5 per litre, through
cuts in excise duties by ~1.5 per
litre and asking the OMCs to
absorb the remaining ~1 per litre
price cut. “The government’s
decision to reduce fuel prices is
credit negative for IOC, BPCL
and HPCL — because they can-
Oil firms threaten
to cut supply to AI
State oil marketing companies
have stepped up pressure on
Air India, threatening to sus-
pend supplies in case of default.
On Monday, the Indian Oil
Corporation threatened to snap
supply at eight airports over
pending dues. However, sup-
ply was not discontinued, as
the airline made a payment of
~1 billion. Air India group com-
panies uplift fuel around ~220-
230 million daily and the
amount has risen over last cou-
ple of weeks because of
the IBC will soon be able to
get better valuation for insol-
vent companies. This would
be so because the corporate
guarantor’s assets would
be added to the company’s
concerned.
The rules will be so framed
that if creditors want a better
valuation, they can add
the value of the guarantor’s
assets as well.
The current insolvency
rules allow creditors to only
take into consideration the
company’s assets and not the
corporate guarantors.
16
IOCL BPCL HPCL
A-actual; E- Expected
Ebitda is earnings before interest, tax, depreciation
and amortisation
Source: Moody’s report
not fully pass on higher crude
oil prices to consumers and
their earnings will be negative-
ly affected,” the note said.
Moody’s estimated that the
government’s decision will
reduce the combined Earnings
before Interest, Taxation,
Depreciation And Amortisation
of the three OMCs by ~65 bil-
lion in FY19, which is around 9
per cent of their total Ebitda of
~692 billion in the 2018 fiscal.
increase in fuel prices.
“We have paid about ~1 bil-
lion today. We are regular in
our present day payments. We
have also made hike in fares
and will be able to raise
enough cash to make regular
payments. There was no dis-
continuation of fuel supplies
and our operations are nor-
mal,” said an Air India official.
An Indian Oil official con-
firmed that a letter had been
issued on discontinuation of
fuel supplies. BS REPORTER
After corporate guaran-
tors, the government will also
make rules for proprietorship
firms and individuals.
Meanwhile, the govern-
ment is working on strength-
ening Debt Recovery
Tribunals in the country so
that these cases can go there.
The IBC is in force since 2016
for corporate entities.
Officials say bankruptcy is
still seen in India in a deroga-
tory sense that could affect
families. Hence a caution is
exercised in finalising rules
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
6 ECONOMY & FINANCE
>
MCA seeks Companies Act relaxation
This will enable the reconstituted board to proceed smoothly and help the board to take important decisions: Ministry
ADVAIT RAO PALEPU
Mumbai, 8 October
T
he Ministry of Corporate Affairs
(MCA) has sought relaxation in will take a lot of time, which will derail
provisions of the Companies the resolution [of IL&FS]".
Act to enable the reconstituted board
of Infrastructure Leasing &
Financial Services (IL&FS) to
proceed smoothly and help it
to take decisions regarding 348
subsidiaries of the belea-
guered firm.
On October 1, by an order of
the National Company Law
Tribunal (NCLT) in Mumbai,
IL&FS' previous board was
superseded by a government-nomi- appoint an MD of over 75 years. For
nated board of directors, chaired by this, IL&FS needs to give 21 days' notice
Uday Kotak, managing director and to its shareholders.
chief executive officer of Kotak
Mahindra Bank.
The NCLT, while hearing the ment and boards of the 348 entities.
MCA's petition on Monday, observed The MCA requested the tribunal to
Microfinance likely to take IL&FS defaults
a hit due to liquidity crunch again, on ICDs
NAMRATA ACHARYA & ABHIJIT LELE
Kolkata/Mumbai, 8 October
Growth in the microfinance sec-
tor might get constrained due to
limited funding, as banks
become selective in lending. The
non-banking finance companies
(NBFCs) face liquidity squeeze
following the IL&FS crisis.
While bigger Micro Finance
Institutions (MFIs) depend upon
banks and money market to
raise funds, mid and smaller
MFIs depend on non-banking
finance companies.
The series of defaults by
Infrastructure Leasing and
Financial Services (IL&FS) and
its lending arm on financial
instruments almost freezed the
financing of NBFCs. It has
brought the issue of liquidity
management to the fore, push-
ing the cost of finance and hesi-
tation on lending to finance
companies, senior bankers and
financial sector executives said.
In September, on average,
the cost of funds of MFIs has
gone up by 25-50 basis points.
Capital constraints in the middle
of festive season may dent over-
all growth of the MFIs this year.
Over the last few months, the
MFI sector has been witnessing
a growth of about 40 per cent on
a year-on-year basis. A recent
report by credit rating agency
Icra suggests that MFIs would
need between ~60 and ~90 bil-
‘No time limit prescribed
in law for amendment
of shipping bill’
CHATROOM
T N C RAJAGOPALAN
We made shipments in
January 2018 to June 2018
under advance
authorization and now
came to know that inputs
mentioned in the advance
authorization can be
imported duty free under
Free Trade Agreements. We
want to convert our above
shipping bills from advance
authorisation to drawback
shipping bills, as per Para
4.49 (e) of Handbook of
Procedures, Vol 1, where no
time limit for conversion is
mentioned. However, the
relevant custom circular for
conversion of shipping bill
36/2010-customs dated 23rd
September 2010 says that
request for conversion must
be made within 90 days.
Considering the fact that
our shipping bills are of
January to June 2018 and
that more than 90 days have
passed since exports, what
should we do to get duty
drawback?
In the case of Diamond Engg
(Chennai) P. Ltd. [2013(288) ELT
Business Standard invites readers’ SME queries related to excise, VAT and exim policy.
You can write to us at smechat@bsmail.in
the Companies Act did not permit
exemptions from particular proce-
dural rules.
The MCA argued "all procedures
The MCA requested relaxation in
three aspects of the Companies
Act. The first request involves
appointing Vineet Nayyar, 80,
managing director (MD) of
IL&FS. The MCA wants the
appointment to be expedited
IL&FS because the Companies Act
CRISIS required a special resolution to
be passed by a general body
meeting of shareholders to
The second hindrance for the new
board is with regard to the manage-
DEEPENING CRISIS
| IL&FS defaults rise in cost
squeezes of money
financing in | Have to rework
market
liquidity
| MFIs brace for management
lion over the next three years to
meet its growth plans.
“Their (MFIs and HFCs) bor-
rowing costs are going up in the
market. Their issuance (fund
raising via market) will happen
but raising desired amounts
may become uphill task. As a
result, they will have a tough
challenge to lend at pace, which
they did earlier,” a senior SBI
executive said.
Echoing challenges ahead
for MFIs Kuldip Maity, MD &
CEO, Village Financial Services,
0265 (Tri. Mad.), the Tribunal
held that Section 149 of the
Customs Act, 1962 does not
prescribe any time-limit for
amendment of the document.
The only condition is that the
document on the basis of
which amendment is sought
should be available at the time
of export. Therefore, the
amendment sought cannot be
denied on the ground of limi-
tation. There are other case
laws on the same point such as
VRA Cotton Mills Pvt. Ltd.
[2014 (309) ELT 0100 (Tri.
Ahmd.)] and Parle Products
Pvt. Ltd. [2017 (358) ELT 341
(Tri. Mumbai)].
The exporters of readymade
garments (RMG) are granted
Rebate of State Levies
(ROSL) namely Value Added
Tax (VAT) on fuel used in
power generation duty on
electricity generation and
charges on purchase of grid
power, mandi tax an
purchase of cotton, stamp
duties on export
documents, SGST on inputs
used in production of cotton
and embedded SGST on
purchases from
unregistered dealers. Please
confirm that the above said
levies are not subsumed in
GST. If the answer is in
affirmative, should RMG
exporters continue to avail
ROSL?
The Ministry of Textiles
introduced the ROSL
scheme through notifica-
tions 12020/03/2016-IT, dat-
THE BIG BAILOUT
provide directions to allow IL&FS' new
board to supersede the boards of all
group companies, so that important
decisions may be taken quicker while
finding replacements.
The NCLT is yet to pass a final order
in the case and will monitor the devel-
opments and decisions the reconsti-
tuted board takes. The new board has
| Boardbase
sources of funds
| Temper growth
targets for
medium term
a Kolkata-based mid-sized MFI
said, “Till now, MFIs did not face
problems in liquidity, but fund-
ing from NBFCs is taking little
longer. We expect the situation
to improve in the next four-five
weeks.”
Mutual funds too have
shrunk their lending to the MFIs.
“At present, mutual funds are
not clear which MFIs they can
lend to. With shrinkage of assets
under management, the sectoral
limit is also a problem for mutu-
al funds. They are waiting for
ed 12-8-2016 and 31-8-2016,
much before introduction of
GST. The ROSL rates were
notified through notification
12020/03/2016-IT dated 13-
8-2016. In ROSL scheme, the
rebate of State levies is
understood to comprise
State VAT/CST on inputs
including packaging, fuel,
duty on electricity genera-
tion and duties and charges
on purchase of grid power,
as accumulated through the
stages of production from
yarn to finished garments.
The taxes like VAT/CST, pur-
chase tax etc. have been sub-
sumed under the GST but
taxes on fuel etc. have not
been subsumed under GST.
So, the ROSL rates were
reduced upon introduction
of GST through notification
14/26/2016-IT dated 27-6-
2017 effective from 1-7-2017.
The revised rates are 0.39%
for ROSL and 0.23% for
ROSL under Advance
Authorization-All Industry
Rates (AA-AIR) combination
respectively.
IGST exemption on imports
under advance authorisation
and EPCG authorisation was
available till 1st October 2018.
Has it been extended?
Yes. Notification 66/2018-
Customs dated 26th
September 2018 has
extended the IGST exemp-
tion on imports under
advance authorisation and
EPCG authorisation till 31st
March 2019.
https://www.estore33.com/
to provide the tribunal with a road map
or resolution plan for “rescuing” the
company by October 31.
The MCA has also sought protec-
tion (for the new board) from regula-
tory action by state authorities with
respect to defaults. Over the next 30
days the company needs to repay ~40
billion of debt, including bonds of
some redemptions to happen so
that they free up their limit and
they are able to start lending
again. The unsecured nature of
lending in the MFI sector is fur-
ther adding to their woes,” said
Ajay Manglunia, executive vice-
president, Edelweiss Financial
Services. The company is
engaged in arranging funds for
financial sector players.
According to a recent analy-
sis by Northern Arc Capital, an
NBFC that connects debt lender
to borrowers in the financial
inclusion space, many large
NBFCs that lend to NBFC-MFIs
have slowed down and cut quan-
tum of disbursements.
“We will see NBFC-MFIs
trimming their growth plans for
the next couple of months.
While none of our NBFC-MFI
clients sees any risk with respect
to ALM, they are worried about
the festival season business
being hit with lack of clarity on
their debt pipeline. This cuts
across clients in all asset classes
too,” according to Kshama
Fernandes, CEO & MD, Northern
Arc Capital.
“Pricing might have gone up,
especially for smaller MFIs, but
as of now there are no liquidity
issues as MFI are A&L positive,”
said Udaya Kumar, president,
Microfinance Institutions
Network and chief executive and
managing director of Grameen
Koota, one of the biggest MFIs.
> FROM PAGE 1
Fresh import
curbs soon to
frame...
Copper ore import stood at
$4.31 billion in 2017-18, up by
over 58 per cent from the year
before. If an import duty hike
on copper ore is considered,
from the present 5 per cent to
at least 7 per cent, and if the 2
per cent export incentive on
copper cathodes and rods is
reinstated, it will help govern-
ment companies like
Hindustan Copper in improv-
ing their valuations, sources
said.
Also, as a large quantity
of iron ore is lying idle,
experts said there was a
need to encourage export of
surplus by removing duty.
“If the government allows
iron ore export from
Karnataka, it will benefit
public sector undertakings
like NMDC. Similarly, restart
of Goa mining should also
be considered,” said an
expert who is part of the
deliberations.
China has recently levied
import duty on aluminium
scrap because of which
import has gone up. There is
a call to increase import duty
on aluminium scrap from the
current level of 7.5 per cent.
Another commodity that
may come under the non-
essential list is zinc. According
to reports, India has an extra
capacity of 80,000 tonnes but
still imports more than double
that of refined zinc, with 70 per
cent of it coming from South
Korea.
The total import bill of the
items on which tariff hikes
were imposed last month
stood at ~860 billion in 2017-
18, according to the finance
ministry. This, however, con-
stituted just 2.8 per cent of
MUMBAI | TUESDAY, 9 OCTOBER 2018
~10.66 billion. In case the company de-
faults on these payments, given that it
needs ~35 billion of liquidity support,
the MCA requested the NCLT to exem-
pt the new board from any regulatory
action or action from the authorities.
In a press conference last week,
Kotak said the new board would first
conduct an audit of the 348 entities
and would seek legal as well as finan-
cial advice before taking any decisions.
IL&FS has defaulted on loans and
liabilities worth ~37.6 billion as of
September 29. Between September 30
and October 4, the company defaulted
on loans from banks, inter-corporate
deposits, and commercial paper worth
~3.4 billion.
Major public and private banks,
mutual funds, insurance companies
and pension funds have an exposure to
the IL&FS group. With ~910 billion in
debt, the company needs to raise both
equity and debt.
DEV CHATTERJEE
Mumbai, 8 October
LIST OF LIABILITIES
Secured Loans: ~120.8 billion
Beleaguered infrastructure fin-
„ Secured Debentures: ~97.3 bn
ancier Infrastructure Leasing
& Financial Services (IL&FS) „ Secured Term Loans: ~23.46 bn
has defaulted on interest and
Unsecured loan: ~38.5 billion
principal payments on inter-
corporate deposits (ICDs) of „ Inter corporate deposits: ~14 bn
~1.72 billion due last Friday. „ Commercial Paper: ~20 bn
In a statement to the stock
exchanges, IL&FS said the „ Other Unsecured: ~2 bn
interest default by the compa- Equity: Shareholders
ny on September 29 was set off Fund: ~69.5 billion
by IndusInd Bank towards Source: Annual Report
interest for ~164 million against
interest service reserve consolidated debt of ~910 bil-
account maintained by the
company with IndusInd Bank.
lion as in March this year.
“Asset sales like the expect-
“The liability of IL&FS thus ed sale of IISL to IndusInd
stands cancelled to that extent Bank for ~15 billion may solve
for IndusInd Bank for the some issues but is unlikely to
month of September 2018,” it bring in new cash into the
said. company as these assets may
In June this year, IndusInd be pledged for borrowings.
Bank had signed a definitive IndusInd Bank has an unse-
share purchase agreement cured loan of ~7.5 billion to
with IL&FS to acquire IL&FS Chenani-Nashri Tunnelway
Securities Services (ISSL). In special purpose vehicle (SPV),
the last week of September, and there are chances that the
IndusInd announced that it shares of IISL may already be
had received all regulatory pledged to lenders. The com-
approvals to take over ISSL. pany has not provided any
The closure of the deal is information on asset pledges,”
underway, the statement said. distressed debt specialist firm,
Analysts have said these REDD Intelligence, said in a
asset sales will help reduce report dated September 27.
overall debt of the company, The research firm said the
but the sale proceeds would go secured loans at the parent lev-
to the banks that are holding el of IL&FS are less secure than
charge on assets. IL&FS had a previous estimates.
4,000
India's total import bill last
financial year, raising ques-
tions over the efficacy of the
cancelled
measure.
“The hike in import duties
on the identified non-essen- NBFCs...
tial items is likely to have a
modest impact on curtailing
It classified them under the
high-risk category, seeking
the size of the CAD in FY19,”
Aditi Nayar, principal econo-
immediate action.
Under PMLA rules, an
mist at ICRA, said on Friday. NBFC is required to appoint a
The rating agency expects
CAD to widen to $72-77 bil-
principal officer registered
with the FIU to file tax returns
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
2017-18 (1.9 per cent of GDP).
Also, despite India import-
above.
“It was observed that sev-
ing $21 billion worth of elec- eral of these NBFCs had not
tronics in 2017-18, led mostly
by finished high-end elec-
even red-flagged the suspi-
cious transactions, which are
tronic products, mobile in the form of cash, transfer
phones and their compo- from one account to another,
nents, no tariffs has been and so on,” said another tax
announced. The commerce source.
ministry has pointed out to Banking experts are of the
an inter-ministerial panel on view that the central bank has
CAD that the trade gap for not been supportive of “para
electronics products has dou- banking” because they are
bled in the past five years. over-leveraged.
The deficit stood at $38.94 bil- “The reason is that NBFCs
lion for 2017-18, compared use a lot of public funds, and
with $18.86 billion in 2013-14. many of them are over-lever-
The domestic market aged. So it is necessary to have
stands at $71 billion as of now regulatory control over such
and is likely to grow to $100 practices. As far as action by
billion by 2020-21. The law-enforcement agencies is
mobile phone segment, a concerned, there is a potential
major contributor to the sec- risk of illicit transactions via
tor, is pegged at $25 billion, these platforms as over-lever-
but is expected to grow to $80 aging leads to multiplication
billion by 2025. of balance sheet. So it is appro-
Customs duties on 43 priate to have proper checks
broad categories of goods, and balances of these firms,”
including electronics, were said Ashvin Parekh, managing
raised in this year's Budget. partner, Ashvin Parekh
The ballooning of the trade Advisory Services.
deficit is mostly underlined The central bank cancelled
by a rebound in oil global more than 4,000 licences as of
crude oil prices over the past September 11. Many of these
few months. A surge in NBFCs have failed to meet the
inbound capital goods such eligibility criteria of having
as chemicals, ores, and net-owned funds of ~20 mil-
machinery inputs together lion while some of them have
with consumer durables, par- surrendered the registration
ticularly smartphones and owing to inadequate funds.
luxury items, have compli- The issues around NBFCs
cated matters further. have come under the spotlight
https://t.me/TheHindu_Zone_official
NHB raises cap
on refinancing
to ~300 billion
SOMESH JHA
New Delhi, 8 October
The National Housing Bank
(NHB) on Monday enhanced
the limit to refinance eligible
housing finance institutions to
~300 billion for 2018-19 in the
wake of the present liquidity
position of the sector.
For the present financial
year, between July 2018 and
June 2019, the NHB had ini-
tially set the refinance target
at ~240 million.
This refinancing is a “cred-
it flow” to the housing finance
companies facing liquidity
crunch following a series of
defaults by group of compa-
nies of IL&FS Ltd.
The NHB, a principal
agency to promote and provide
financial support to 97 hous-
ing finance institutions, had
sanctioned ~88.35 billion till
date. “Housing finance com-
panies are secured assets in the
Rupee slips 30 paise,
breaches 74 versus $
PRESS TRUST OF INDIA
Mumbai, 8 October
The rupee slumped by 30 paise
to finish at a fresh lifetime low
of 74.06 against the US dollar on
Monday amid strengthening of
the greenback and steady cap-
ital outflows.
The rupee had opened low-
er by 14 paisa against Friday’s
close of 73.76 in early trade as
the US dollar strength against
major global currencies
weighed on the rupee senti-
ment. During the day, the
domestic currency recovered
to a high of 73.76, but failed to
sustain the momentum and
plunged to 74.10. It finally
closed at 74.06, down by 30
paise, marking its fifth straight
session of decline. On Friday,
the domestic unit plummeted
by 18 paise to end at 73.76.
“Rupee is expected to trade
with a negative bias amid
strong Dollar and rising crude
oil prices. Demand for dollar is
going up on solid economic
data from the US and, as US
Federal Reserve raised interest
rates by 25 bps and signalled
further monetary tightening,”
said Saif Mukadam, Research
Analyst, Sharekhan by BNP
Paribas.
Mukadam said traders
as defaults at debt-laden
Infrastructure Leasing &
Financial Services have
spooked the financial sector.
After this, a fund house sold
short-term bonds of Dewan
Housing Finance (DHFL) at
high yields, raising fears of liq-
uidity crunch for the sector.
IL&FS jitters
erode 12.5%
of MF assets
“Some banks have already
started returning to the liquid
schemes. Hopefully, the situa-
tion will improve within a
week,” an official of a fund
house said.
However, other industry
participants believe investors
may take more time to return
to debt market schemes. “The
recent revelation that as many
as 348 entities are part of the
IL&FS group has raised con-
cerns over the real contagion
risk the IL&FS group poses for
the corporate bond market.”
While debt market schemes
saw outflows in September, the
equity schemes saw net inflow
of ~111 billion, rising 33 per cent
month on month. The contri-
bution through systematic
investment plans (SIPs) saw a
marginal rise to ~77.27 billion.
Market players said equity and
SIP inflows could be impacted
1
Non-Banking Financial
Company (NBFC) space. This
move will provide some com-
fort to the eligible housing
finance institutions. Though
no regulator has so far talked
about a liquidity crunch in this
market but we have taken this
step proactively,” said a senior
government official.
Shares of most of the hous-
ing finance firms, including
DHFL, have been hammered
on bourses in the past few
weeks due to liquidity con-
cerns triggered by debt
defaults by IL&FS.
“Now, eligible Housing
Finance Companies and other
entities will have increased
availability of funds,” the
finance ministry said in the
release. Stock of housing
finance firms DHFL closed
18.52 per cent down at Rs
223.50 on the BSE.
With inputs from PTI
would remain cautious ahead
of the macroeconomic data, US
treasury currency report and
IMF meeting. “Correction in
rupee may be seen if the RBI
permits for special dollar swap
window with some state-run
fuel retailers or come up with
other options to check Rupee
fall,” Mukadam said, adding
that the expected trading range
in near term is ~72.50-74.60.
The dollar demand strength-
ened after China’s central bank
eased its domestic policy to sup-
port the economy, amid a deep-
ening trade war with the US that
has increased pressure on
growth in the world’s second
largest economy.
China’s central bank said on
Sunday said that it was cutting
the reserve requirement rations
(RRRs) by 1 per cent from
October 15, which will inject a
net $109.2 billion in cash into
the banking system.
Markets were caught off
guard as the RBI maintained
status quo on the benchmark
interest rate. However, the cen-
tral bank warned that rising oil
prices and tightening of global
financial conditions pose sub-
stantial risks to growth and
inflation. Meanwhile, heavy
capital outflows also added
pressure to the rupee.
going ahead given the surge in
equity market volatility.
Nordhaus,
Romer win
economics...
The Nobel Prize committee
cited Nordhaus for his work in
showing that “the most effi-
cient remedy for problems
caused by greenhouse gases is
a global scheme of universally
imposed carbon taxes.”
Nordhaus also was honored
for his role in developing a
model that allows economists
to analyse the costs of climate
change.
Romer, 62, sought to
explain the role of technologi-
cal advances in driving eco-
nomic growth. His work was
inspired by a desire to under-
stand the remarkable acceler-
ation in growth that began
with the Industrial Revolution.
Romer’s big idea was to
argue that policymakers
could foster technological
innovation, for example, by
investing in research and
development and by writing
patent laws that provided suf-
ficient rewards for new ideas
without letting inventors
permanently monopolise
those rewards. He argued that
national differences in such
public policies helped to
explain differences in eco-
nomic growth rates. Romer
said in an interview that the
value of his work was in being
precise about a broadly intu-
itive idea. “It helps to see con-
nections that weren’t obvious
at first,” he said.
In 2016, Romer was named
chief economist of the World
Bank, a prestigious perch for a
development economist. But
he resigned 15 months later, in
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
Echoes RBI on exchange rate intervention, but The government’s sovereign
gold bond scheme will be open
differs on rate tightening for subscription from mid-
October, running up to five
INDIVJAL DHASMANA India will continue to be the fastest- tranches till February, the
New Delhi, 8 October growing major economy as China’s Reserve Bank of India (RBI) said
growth projection was retained by the on Monday.
release.
The bonds would be sold
through banks, Stock Holding
Corporation of India (SHCIL),
designated post offices, and
stock exchanges — National
Stock Exchange and BSE.
The first tranche of the
scheme would be open for sub-
scription from October 15-19 and
would be available for subscrip-
tion from December 24-28 and
the bonds would be issued on
January 1, 2019.
Another tranche would open
for subscription from January 14-
18 and the issuance of bonds
would be on January 22. The final
one would be from February 4-8
and those would be issued on
The sovereign gold bond
scheme was launched in
November 2015 with an objec-
tive to reduce the demand for
physical gold and shift a part of
the domestic savings —used for
the purchase of gold — into
financial savings.
Under the scheme, the bonds
are denominated in units of one

T
he International Monetary Fund
(IMF) on Monday retained eco-
nomic growth projection for India
at 7.3 per cent for 2018-19 (FY19), lower
than the government’s and the Reserve
Bank of India’s (RBI’s) forecasts. This
is, however, noteworthy as the IMF
cut global growth projections by 0.2 per-
centage points.
In its World Economic
Outlook (WEO), the IMF said
foreign exchange interven-
tions should be limited to
address disorderly market
conditions, something which
RBI Governor Urjit Patel also
talked about. The IMF wants
the RBI to tighten monetary
conditions, something which
it did not do in the October policy review.
For the next year (FY20), the IMF low-
ered India’s growth projections by 0.1 per-
centage points to 7.4 per cent.
As such, the IMF does not see India’s
growth reaching 7.5 per cent even in FY19.
However, the RBI pegged India’s growth
projections at 7.5 per cent. The govern-
ment expected the rate to exceed 7.5 per
cent this year on the back of 8.2 per cent
growth rate in the first quarter. India’s
economy grew 6.7 per cent in FY18.
IMF at 6.6 per cent for FY19. For FY20, the
Chinese economic growth rate was cut
by 0.2 percentage points to 6.2 per cent.
The IMF releases its annual WEO
ahead of its meeting with the World Bank.
This year, the meeting is being hosted in
Bali, Indonesia, since Friday.
The IMF said its forecast for invest-
ment growth for FY19 is
weaker than in April, despite
higher capital spending in
India, on account of con-
tracting investment in
economies under stress, such
as Argentina and Turkey,
which is also reflected in a
downward revision for
import growth.
Acceleration in the
growth rate from 2017-18 reflects a
rebound from transitory shocks (the cur-
rency exchange initiative and imple-
mentation of the goods and services tax),
with strengthening investment and
robust private consumption, the IMF said.
India’s medium-term growth prospects
remain strong at 7.75 per cent, benefitting
from ongoing structural reform, but have
been marked down by just under 0.5 per-
centage point relative to the April 2018
WEO, the IMF said.
The sovereign gold bonds the bonds would be issued on February 12. gram of gold and multiples there-
would be issued every month October 23. The next tranche For the current fiscal year, of. Minimum investment in the
from October 2018 to February would be open from November the first tranche of the sovereign bonds is one gram with a maxi-
2019 according to the calendar 5-9 and issuance would be on gold bond and its subscription mum limit of subscription of 500
specified, the RBI said in a November 13. The next one opened on April 16. grams per person per fiscal year.
Personal wealth of Indians seen at $5 trn by ’22: BCG
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
Mumbai, 8 October constitutes the second-largest pool of wealth wealth at $3 trillion, largest pool of wealth from market in number of
from emerging markets in the coming years, forecasted to grow to emerging markets in the affluent, HNW, and UHNW
The country’s personal wealth is expected to with $2.2 billion. It is the fifth-largest Asian $5 trillion by 2022 coming years individuals
grow at a compound annual growth rate market in the number of affluent, high net- Personal financial wealth ($ trn) Absolute change of Affluent*
(CAGR) of 13 per cent to $5 trillion by 2022, worth, and ultra high networth individuals. wealth ‘17-’22 ($ bn)
according a report by the Boston Consulting There were 322,000 affluents, 87,000 5
22.3 4,257
Group (BCG). Its personal wealth was esti- high networth individuals and 4,000 ultra
mated to be $3 trillion in 2017. high networth individuals in the country in 3 3 1,118 1,105
999
The country is also expected to become 2017, according to the report. 2 2.2
the 11th wealthiest nation globally by 2022 in It observed that nearly 70 per cent of the 1.7
1.2 1.1
terms of total personal wealth, improving country's personal financial wealth would be 322
its rank by four places from 2017, the report accessible to wealth managers in 2022.
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
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
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.
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
personal wealth of $21 trillion, which is non-investable wealth includes life insur- emerging markets
Market Sizing Database.
expected to more than double to $43 tril- ance and pensions.
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>
OPINION 11
STAY INFORMED THROUGH THE DAY @ WWW.BUSINESS-STANDARD.COM.

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

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
or more. The finance minister has insisted that there will be no fiscal slip-
page as a consequence of this move and that the fiscal deficit target of 3.3
per cent of gross domestic product, set in the Union Budget for 2018-19, will
be met.
However, there are concerns on this move. The sharp downward move-
ment in the share prices of the state-controlled oil-marketing companies —
about 20 per cent — reflects widespread fears that they will once again be
conundrum
point, resting on the comforting presumption that
many Nice Pakistanis are forcibly counterposed
against All Us Nice Indians by a Bad Pakistani fringe
— the army, the jihadis and the increasingly rabid
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
provides a model to emulate in the India-Pakistan context whether this stems from a peculiarly Punjabi love for
the uniform, or the absence of other functional insti-

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

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

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,

BOOK REVIEW
A K BHATTACHARYA
When does the law become effective? Why
do some people observe the law and others
flout them? What circumstances trigger
such different responses to the law? How
can we bring about a change in human
behaviour so that laws can be enforced
with greater effectiveness, thereby enhanc-
ing economic gains? These are some of the
key questions Kaushik Basu, an eminent
economist and former chief economic
advisor to the Indian government, tries to
explore in this highly readable book.
Dr Basu presents these issues through
the prism of economic theories — using
game theory in abundance, but at a philo-
sophical level these have tremendous res-
onance in Indian society. One, India is a
developing economy and a democracy. Its
economic policy imperatives often put to
the test the durability and enforceability of
laws in far more complex ways than in a
developed economy or a country that is
not a democracy. That is also because
Indians are not only argumentative by
nature, but also excel in ingenuity when it
comes to bypassing the law. Not surpris-
ingly, Dr Basu relies on many Indian expe-
riences to illustrate how there are serious
problems in applying the lessons of law
and economics in several economies of
the world, particularly the emerging and
developing ones.
In India, for instance, the perennial
problem is how the law is impeccable on
paper but is often poorly implemented. An
associated problem arises out of the chal-
argues Basu, can take many forms, but the
heart of the corruption problem is the vio-
lation of the law. Perpetrated either indi-
vidually or in league with a group of gov-
ernment officials or enforcers of the law,
corruption prospers in spite of the exis-
tence of a legal framework. There are also
no satisfactory answers to why some laws
work, some laws work partially and some
others don’t work at all. And this is one of
the biggest failures of law and economics.
So, what solution or an alternative
strategy does Dr Basu offer? The compli-
cating parts of the book start here. He
posits that the focal point approach is a
possible way out of the failure of law and
economics in dealing with corruption. The
focal point approach is premised on the
belief that a better-founded theory of law
and economics should recognise that the
outcome of a law is largely determined by
its effect on the beliefs of people. But the
challenge is how to influence the beliefs of
people in an effective way.
Dr Basu argues that a successful law is
one that shifts human behaviour by creat-
ing a new focal point in the game every
stakeholder in society plays. In other
words, a new law can be effective only
when it creates a new focal point to shift
the behaviour pattern of people. He also
proposes the idea of a focal player, who
can make a big difference in changing the
way people behave. A focal player is like a
leader who directs a group to a certain out-
come by asking them to behave in certain
ways in a situation. The role of a leader
deserves further scrutiny to determine
how well it enhances the effectiveness of
the focal point approach in changing peo-
ple’s behaviour while dealing with new
laws and economic situations.
Dr Basu writes simply and attractively,
but many of the ideas are abstract. In spite
of his lucidity, he is clearly not at his best
while explaining them. For instance, his
explanation of the way the focal area
approach functions and how it can change
the behaviour of people is likely to fall short
of expectations of many readers.
Dr Basu is aware of the difficulty of the
concept that he is trying to explain. Writing
on the focal point approach, he confesses
that “though there is need to sharpen these
concepts and ideas and give them more
formal structure, that is beyond the scope
of the present book, which is the econo-
mist’s jargon for beyond the ability of the
author.” You can’t really quarrel with an
author whose self-deprecating humour
enlivens many of the eight chapters that
complete this monograph.
By way of entertainment, there are
many interesting anecdotes picked up
from his days as chief economic advisor in
the Manmohan Singh government. One
of them deserves to be recounted here.
Within months of joining the government,
Dr Basu wrote a short paper on the need for
amending the country’s corruption pre-
vention law by declaring the giving of
harassment bribes a legal act. His logic was
that this would encourage the person who
is being coerced to pay a bribe to spill the
beans as he would no longer be treated the
same way as the bribe receiver. And the
incidence of bribery would come down.
In his naivety, Dr Basu even posted his
paper on the finance ministry website,
only to create a furore with parliamentar-
ians questioning the immorality of the
idea. He managed to ward off that contro-
versy through some clever phrasing of
written replies to questions raised in
Parliament. This was an example of how Dr
Basu saw the need for changing the focal
area approach to law-making.
In less than a decade since the publi-
cation of that paper, the Indian govern-
ment earlier this year amended the cor-
ruption prevention law in a bid to achieve
precisely what Dr Basu had advocated.
Perhaps Dr Basu’s contention that the dis-
cipline of law and economics must
embrace the focal area approach has
already been heard!
THE REPUBLIC OF BELIEFS
A New Approach To Law And Economics
Kaushik Basu
Princeton University Press
238+XVII pages; ~699
https://t.me/pdf4exams
Investor
1 Bharat Electronics (BEL) is down 7.5% as the
MUMBAI |
TUESDAY, 9 OCTOBER 2018
WWW.SMARTINVESTOR.IN.FOR INFORMED DECISION MAKING
NBFC stocks fall on stricter rule fear
Analysts expect growth, margins to come under pressure
SAMIE MODAK
Mumbai, 8 October
T
he correction in non-banking
financial companies (NBFCs)
extended on Monday as investors
dumped shares fearing that the pro-
posed norms by the Reserve Bank of
India (RBI) would impact growth and
profitability. The central bank on Friday
said it was looking to strengthen norms
for NBFCs to avoid rollover risks. It also
urged financial firms to reduce their
dependence on short-term funding, and
instead make use of long-term funding.
Shares of Dewan Housing Finance
Corporation (DHFL) tumbled 18.5 per
cent, extending its year-to-date (YTD)
fall to 61.7 per cent. Edelweiss Financial
Services tumbled 13.7 per cent, taking
its YTD fall to 49 per cent. JM Financial,
Magma Fincorp, and Shriram
Transport Finance fell more than 10
per cent each.
CLSA, in a note, said many NBFCs
are becoming systemically important
and have a higher dependence on
short-term sources such as commercial
papers and mutual funds. The RBI
could extend requirements such as liq-
uidity coverage ratio to NBFCs, which
are currently applicable to banks.
Investor sentiment towards the
NBFC sector has been weak, following
the default by Infrastructure Leasing &
Financial Services (IL&FS). The infra-
structure finance major’s huge depend-
ence on short-term funding for long-
gestation projects is seen as the key
reason for the crisis.
The RBI has said the new stricter
regulations would be aimed at curbing
default risks arising from such asset-
liability mismatch (ALM).
Markets yet to factor in state polls
PUNEET WADHWA
New Delhi, 8 October SHADOW OF THE BALLOT BOX
Markets have not yet fac-
tored in a major upset for
Andhra Pradesh
the ruling Bharatiya Janata
Arunachal Pradesh
Party (BJP)-led National
Odisha
Democratic Alliance (NDA)
in the coming elections in Sikkim
Chhattisgarh, Rajasthan, Telangana
Madhya Pradesh, Mizoram, Haryana
and Telangana, claim Maharashtra
analysts.
These state elections are Jammu & Kashmir Dec 23, 2014
being viewed as a run-up to Jharkhand
the Lok Sabha elections, Delhi
slated for May next year.
Experts believe these will Bihar
test the popularity of the Assam
government and its policies Kerala
amid rising crude prices Puducherry
that might lead to inflation,
Tamil Nadu
turmoil in the banking sec-
West Bengal
tor and non-banking
finance companies, and a Goa
falling rupee. Manipur
“The markets are grad- Punjab
ually realising that it will Uttar Pradesh
not be easy for the NDA to Uttarakhand
secure a simple majority in
state elections. Given Gujarat
domestic and global Tripura
cues, the markets are likely Nagaland
to remain choppy and are Meghalaya
yet to fully price in a major
upset for any pan-Indian Karnataka
political party in the Data compiled by BS Research Bureau
coming elections,”
said G Chokkalingam,
founder and managing Pradesh and Chhattisgarh
director at Equinomics after nearly 15 years.
Research. Rajasthan, currently ruled
A recent survey predict- by the BJP, is also likely to
ed that the Congress may be a tough challenge for the
return to power in Madhya ruling party; since 1998, the
Fall in energy stocks hits CPSE ETF
ASHLEY COUTINHO
Mumbai, 8 October
Investors in the government-backed
CPSE Exchange Traded Fund (ETF)
are deep in the red, after an 11 per
cent fall in the last three trading ses-
sions, following the government’s
decision to make the companies
absorb the rise in fuel prices.
The ETF has a skewed weightage
towards energy and oil marketing
companies, and is down 17 per cent in
the past one year. Oil and Natural Gas
Corporation, Coal India, Indian Oil
and GAIL (India) together constitute
more than 75 per cent of the CPSE
ETF. In the past year, CPSE ETF
has shed 20 per cent, compared
to 8.25 per cent gains made by
the Sensex.
“The government recently asked
Bharat Electronics to sacrifice mar-
gins and the OMCs to absorb the fuel
price burden. Unless the government
gives confidence to investors that
they will not go back on reform in the
real sense the CPSE ETF is unlikely to
outperform in the near term,” said G
Chokkalingam, founder and manag-
ing director, Equinomics Research &
Advisory.
The Smart
Depending on short-term debt to
garner a bigger share of the lending mar-
ket is a “myopic strategy,” RBI Deputy
Governor Viral Acharya had said at the
post-policy conference on Friday.
“The RBI said that it would look at
measures to strengthen ALM at NBFCs
to prevent mismatches. We await details
but this could have negative implica-
tions for loan spreads and loan growth,”
said Morgan Stanley in a note. “Every 1
percentage point shift in mix of borrow-
ings from commercial paper to long term
non-convertible debentures (NCDs) or
bank borrowings could increase cost of
funding by 0.5 to 1 basis points, depend-
ing on the credit rating profile.”
The brokerage said investors should
prefer large lenders such as HDFC Ltd,
who are positioned well in terms of liq-
uidity. Shares of HDFC Ltd fell 2.6 per
cent to ~1,670 on Monday.
“With increasing regulatory scrutiny
on ALM, we expect NBFCs to ‘nor-
malise’ their borrowing profile — that is
migrate from opportunistic funding to
Result 1-mth before (%) 1-mth after(%)
date Nifty Sensex Nifty Sensex
May 16, 2014 7.9 8.3
Oct 19, 2014 -3.0 -2.4
-2.5 -2.9
Feb 10, 2015 3.4 3.3
Nov 8, 2015 -2.6 -2.7
May 19, 2016 -1.7 -1.6
Mar11, 2017 3.3 3.9
Dec 18, 2017 1.0 0.8
Mar8, 2018 -3.2 -3.1
May 15, 2018 3.11 4 0.15
electorate in the state has
alternated between the two
parties every election.
This time, experts claim,
Chief Minister Vasundhara
Raje might be facing strong
TROUBLED TIMES
Compiled by BS Research Bureau
The government’s recent move
asking OMCs to bear ~1 per litre on
petrol and diesel may indicate its
inclination to go back on oil and gas
reforms which were instrumental in
re-rating of OMCs in the past couple
of years, say analysts.
“We cut our FY19/20E earnings for
OMCs by 12-37 per cent and target
prices by 39-52 per cent as ~1 burden
on downstream companies gives an
indication of partial controls in oil
and gas sector in a rising crude envi-
ronment,” said a recent note put out
by Prabhudas Lilladher.
Last Thursday’s sell-off in the
market was led by energy stocks such
https://www.estore33.com/ https://t.me/TheHindu_Zone_official
QUICK TAKE: ENOUGH FIREPOWER IN BEL
TSI P13
government’s recent policy on pricing of defence VEDANTA TRIPS
equipment will hurt the company’s margins. Even ON PRICING,
after cutting its target price to ~96, Kotak Securities is
positive because of BEL’s high order book, healthy SUPPLY
balance sheet, and upside in the stock WORRIES
<
Titan’s jewellery sales back
THE COMPASS
on track in September
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
Titan’s businesses, accounting for over 80
DHFC 223.5 -18.5 -61.7 per cent of its sales.
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
in two trading sessions on expectations of a September quarter, on the back of new
Magma Fincorp 98.5 -10.9 -38.7 pick-up in the jewellery segment sales in the designs and higher marketing spends. The
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
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
Cholamandalam Inv. 1,049.95 -6.1 -18.9 est in about eight quarters. Helios. The watches seg-
SENSEX The management, in a ment, which contributes 13
Repco Home Finance 377.45 -5.6 -44.7
quarterly update, indicated per cent to Titan’s overall
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
on the back of new product per cent in the June quar-
launches and studded dia- ter. In the prescription eye-
more stable and sustainable funding. mond sales. The company wear segment, the compa-
This would lead to a larger-than-expect- managed to gain market ny is looking to increase the
ed increase in cost of funds. We believe share despite the overall pace of sales growth by
this would have a twin impact on both muted demand and head- introducing products at
margins and growth. We expect growth winds such as higher gold affordable price points and
to taper for some of the fastest-growing prices, a decline in wedding consumer awareness cam-
NBFCs,” said Motilal Oswal in a note NIFTY 50 dates, and costlier credit for paigns. The company had
on Monday. the sector. achieved a growth of 19 per
The brokerage cut earnings estimate The new launches cent in the June quarter.
for the current and next fiscal year by 4 included the Gulnaz collection in July in the Among other businesses, its Skinn brand
to 7 per cent for NBFCs. It also lowered studded jewellery segment as well as the has emerged as the largest-selling fragrance
the price targets for NBFCs across its contemporary silver collection under the product in the department store format, both
coverage universe by 8 to 27 per cent to Mia brand. The share of studded jewellery, in terms of volumes and value. The compa-
factor in cut in earnings and higher cost which accounts for 25 per cent of jewellery ny has launched a new variant in July.
of equity. segment sales is expected to increase. While Given the market share gains and 20 per
JM Financial in a note said strong the sector is going through a lean patch, the cent plus revenue growth prospects, ana-
promoter-backed NBFCs and housing company continues to expand adding 16 lysts believe the recent correction is an
finance companies (HFCs) will get dis- Tanishq stores year-to-date translating to opportunity to accumulate as the stock is
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
competition from new and small Oct 8 1 Day Change % The Jewellery segment is the largest of estimates.
NBFCs will come down massively. GAINERS
It said broker-backed NBFCs like YES Bank 220.80 7.10
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
down. LOSERS
Vedanta
HDFC
206.90
1,670.20 -2.60
-10.80 for PNB Housing
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
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.
director at Dalton Capital, battered banking, oil and gas, and Housing Finance bucked the trend, gain- Also, ~70-billion proposed bank borrow-
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
markets were linked to the session losing streak, helping the sion. Raising external commercial bor- benefits for PNB Housing.
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-
“There is nervousness in tive note on Monday. billion, and liquidity position updates ing finance companies would come at a
4.6 4.4
the markets, as the recent The Sensex swung over 660 given by the company supported the sen- slightly higher cost and hence would
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
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-
6.4 6.1 In other states, it might be a The 30-share Sensex touched a profitability while bility to refinancing given
close fight. In a worst-case high of 34,636.43 on the back of ensuring loan growth. the current turmoil in the
scenario, the Nifty50 can sustained buying by domestic While the company money market,” said Rajesh
5.9 5.3 slip to 9,700 levels,” he institutional investors, but later plans to raise ~20 billion Gupta, AVP, retail research,
added. turned choppy and hit a low of non-convertible deben- at SBICAP Securities.
1.7 1.2 After a 2017, during 33,974.66 as selling pressure gath- tures (NCDs), it is grad- Positively, the ECBs
which the 50-share ered momentum. ually reducing its along with other proposed
-2.7 -3.1 Nifty rallyed 27 per cent, However, amid buying towards dependence on debt borrowing plans would
markets have registered a 3 the fag-end, it recovered to close the market borrowings help maintain liquidity
per cent fall on a year-to- day higher by 97.39 points, or 0.28 (commercial papers position at satisfactory lev-
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-
10,200 levels. Other emerg- The 30-scrip gauge had lost per cent as of June to vide liquidity but also
ing markets such as Brazil, 2,149.15 points in the previous three 43.3 per cent as of enhance our asset-liability
Taiwan, and Thailand have straight sessions. December. Also, accord- management position, as
also seen a correction dur- The 50-share NSE Nifty, too, ing to Kapish Jain, chief the facility (recent ECB) is
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.
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
“Recent developments, session, it moved between 10,198.4 cheaper than the domestic market. Put recent ECB, liquidity should not be a con-
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-
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-
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
market volatility high. the market. Top gainers in the Sensex company. Housing will get affected is what the
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.
tion, the equity market per cent, followed by Reliance
remains vulnerable on both Industries at 5.53 per cent.
0.22 valuation and earnings On Monday, foreign portfolio
concerns. Despite a 16 per investors (FPIs) sold shares worth
cent correction in 2018, ~18 billion, taking their month-to-
the rupee remains under date selling tally to ~122 billion (about
pressure to depreciate. $1.6 billion). Domestic investors on
It can reach 78 per dollar the other hand net-bought shares
in the next six-nine worth nearly ~20 billion. In the past
months,” said a recent five sessions, mutual funds have
report from Anand Rathi invested nearly ~95 billion into
Institutional Equities. stocks. PTI
Sebi revises norms
for recovery of
as Reliance Industries and ONGC.
Shares of oil marketing companies
investors’ money
also tumbled 10-20 per cent after the
government announced a cut of ~2.50 Markets regulator Sebi has put in
a litre in petrol and diesel prices. place revised norms for recovering
Global crude oil prices are up investor money, wherein a regis-
more than 50 per cent in the year to tered insolvency professional will
date. Brent has been hovering above be appointed as administrator to
$85 a barrel, the most since undertake the sale of assets.
November 2014, on fears that the The regulator has revised the
impending sanctions on Iran’s petro- procedures to be followed for
leum industry would lead to con- refunding investors’ money pur-
stricted supplies. suant to the failure of complying
Bharat 22 ETF, another public sec- with disgorgement or refund
tor ETF launched in November last orders passed by it.
year as part of the Centre’s 2017-18 In case an entity is not trace-
disinvestment programme, is down able or is not complying with Sebi
12 per cent since inception. directions, the recovery officer can
More than 50 per cent of the fund appoint an administrator for the
is made up of ITC, L&T, SBI and Axis purpose of selling the properties
Bank. The government, which has attached, the regulator said in a
raised ~229 billion through two notification dated October 3.
tranches of the ETF, reportedly plans Only an entity registered with
to list Bharat-22 ETF on an overseas the IBBI as insolvency resolution
stock exchange to raise foreign professional would be considered
capital. eligible for appointment as admin-
ETFs are traded on stock istrator.
exchanges, with stocks, bonds or The Insolvency and Bankruptcy
commodities as the underlying prod- Board of India (IBBI) is imple-
uct. An ETF's portfolio exactly mim- menting the Insolvency and
ics the securities in its underlying Bankruptcy Code.
index, in the same weightage. PTI
https://t.me/pdf4exams https://www.estore33.com/ https://t.me/TheHindu_Zone_official

.
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.
https://t.me/pdf4exams https://www.estore33.com/ https://t.me/TheHindu_Zone_official
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-
ple’s attention, but also the
shift in the nature of advertis-
ing by a category such as fur-
niture. Conventionally an
unorganised sector with a few
branded players, furniture has
undergone a big change in
recent years with the entry of
digital-first brands such as
Pepperfry and Urban Ladder,
the emergence of branded fur-
niture rental services and most
recently, with the entry of Ikea.
Traditional branding strate-
gies are being rapidly shelved.
Instead of lavish spreads and
television commercials, Godrej
Interio took to digital and used
a mix of Hindi and English to
pun on the name Ikea. The tar-
get: milllennial consumers.
In the past Coca-Cola and
PepsiCo have indulged in such
guerllia warfare, major health
drink brands occasionally did
too and more recently e-com-
merce players and auto majors
have followed similar tactics.
However for furniture brands,
this is uncharted territory and
for Godrej Interio, a sharp
detour from its old ways.
Experts said that in the
increasingly digital world we
live, it is no longer possible for
any customer segment to exist
in a time vacuum. The Indian
furniture space is witnessing
such a change as market
dynamics are set to evolve.
“Unlike our parents’ genera-
tion where furniture was seen
as a family heirloom, this gen-
eration has a utilitarian rela-
tionship with the category and
this compels marketers to not
only deliver functionally but
also create the right attitudinal
appeal, said Venkatesh
Top: Ikea advertises its living
rooms, (right) Godrej Interio
promotes its furtniture
Rangachari, co-founder,
Hypersonic Advisory.
Ashish Mishra, managing
director of Interbrand India
explains that we live in an era
that’s not digital and offline
separated anymore. “We call it
post digital. And this post dig-
ital marketing is essentially
about optimising the experi-
ence at each touch point in the
customer journey,” he added.
Two major factors are driv-
ing change in the way furni-
ture brands communicate with
their customers. One is the
medium, the digital format is
impacting the message. And
the second is the rapidly evolv-
ing nature of the category; the
entry of new e-tailers and fur-
niture rental marketplaces has
changed customer perception
about the category.
Experts also said that
engaging in banter with other
brands, being open about their
rivalries in a way, allows the
advertising to feel more
authentic to the consumer.
Product integration on digital
channels is another means
through which furniture adver-
tisers are trying to connect with
audiences.
“If we look at furniture and
the new role it plays in our
lives, we will find that many of
the key touch points are so
naturally digital,” said Mishra.
The new brands are engaging
with them on digital media in a
variety of ways, not just direct
advertising but also by being a
part of web series or comedy
shows. Mishra points out that
India,Godre
j
IMAGE:ikea
SHOOTING FROM THE LIP
| Godrej Interio ran one-liner ads that said ‘EMI pe kea?
NaIKEA’, ‘Warranty ke saath kea? NaIKEA’, ‘Free installation
kea? NaIKEA’ and so on. Finally there was a rejoinder from an
anonymous source that said ‘Thank you God(rej) for thinking
of us’. Ikea was not a part of the campaign
| When Britannia turned 100 early this year, rival Parle said,
‘Hope you find the melody to many more little hearts’.
Melody is a Parle brand of toffee and Little Hearts is a
Britannia brand of biscuits
| Netflix and actor Radhika Apte were trolled for the huge
number of shows the two had done together. While Netflix
came back with funny rejoinders, Zomato, Ceat Tyres among
others engaged in friendly banter with Netflix
furniture is also turning into a Pepperfry also tied up with
more personalised expression Miss Malini for a web show.
of oneself, the new brands have “The power of this medi-
grasped that to an extent. um should not be ignored by
Kashyap Vadapalli, chief anyone,” said Aditi
marketing officer, Shrivastava, co-founder
Pepperfry.com said, “We have Pocket Aces.Even within dig-
two types of customers, tradi- ital marketing, brands are
tional (early 30s to late 40s) and delivering different messages
new age (early 20s to early 30s). for different customers.
Both behave differently. Shrivastava explains that
Millennials look at furniture as Furlenco focuses much more
a lifestyle accessory, so, we on the millennial audience,
can’t use a transactional first jobbers, who are children
approach to sell furniture to of the shared economy and
them. Also they don’t want to highlights functional spaces
be advertised to directly as they in the home. PepperFry
are overexposed to all medi- focuses on young couples
ums of communication.” In and family audiences that
addition to partnering with want to make their homes
Pocket Aces for a web series, beautiful at affordable prices.

> THE BS CROSSWORD # 3163

hundred error, familiar to
mathematicians (8)
16 Can the deity, or is he a fake?
(3,3)
17 “Attacks” could be “onsets”
(6)
19 Arse about with a sickbed (8)
21 Box, perhaps, made of wood
(4)
22 Does it erase all footprints
you leave? (6,4)
25 Box adds weight to the
vehicle (6)
26 Independence provided by
car? No money without one
(8)
27 Simply wizard girls ? (8)
28 Another foot and this boy’s
seen back around city from
which I must disappear (6)
8 Song about character
rejected by good feudal
superior (5,4)
14 Outcome of later wrangler’s
work in America (9)
15 Bessemer the missionary ? (9)
18 Yes, quite worried about the
call to give an injection (7)
19 Robert’s musical wild animals
(7)
20 Deceived Edward; followed
he-cat outside! (7)
23 Carrying on thus, for some
reason I create a sort of boom (5)
24 Cockney’s surprised
expression without the
b — Britisher (5)
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
Jute spins a modern yarn
A few jute companies are reaping the benefits of diversifying into agro-textiles and designer bags,
but a likely shortage of good quality jute this year could hobble their progress
KUNAL BOSE
Kolkata, 8 october
T
he over a century-and-a-half-
old jute mill industry in the
country is sharply divided in
two groups. About half a
dozen composite jute factories have
by way of risking investment in new-
age value added products (VAP)
requiring installation of modern
machinery and bringing about major
changes in work culture in a highly
unionised industry environment have
seen their profits soar.
A textile ministry note says
around 90 per cent of the industry’s
annual production ranging from 1.15
million tonnes (mt) to 1.25 mt in
recent years is domestically con-
sumed as a packaging material. But in
this industry, a few truly modern fac-
tories have managed to earn anything
between 20 and 30 per cent of their
revenues from exports. The majority
in the industry have, however,
remained frozen in time.
The stock market has not failed to
take note of the success of the small
group of jute mills, which made bold
not to remain bound by traditional
constructions such as sacking bags,
hessian cloth and yarn and archaic
https://www.estore33.com/ https://t.me/TheHindu_Zone_official
TAKE TWO 17 <
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
The crop shortfall is somewhat
intriguing since during the sowing
months of March and April, the weath-
handle Elon Musk
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
FIBRE OF THE FUTURE India’s rawjute
position in 2017-18 cent of sugar production presently includes duty on jute goods from
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
Tesla as well as the rocket manufacturer SpaceX
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
Opening stock: 2.2 agencies on a cost plus natural fibres and uncut jute. According to profitability and also manage Musk, whose
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
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
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
however much a factory furnishing fabrics factories making VAP for and who, not incidentally, was busy on Twitter
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
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
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
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
capacity. New age jute products are raw jute exports. for, contending that the board has failed to
not about tonnage, but high margins. The challenge for the government sufficiently govern the chief executive officer
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,
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
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
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.
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
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
“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
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
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
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
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.”
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
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
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
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
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
fuel, jute is an eco-friendly, renewable made by the likes of Mercedes, Kuthari says, “The 2018-19 raw jute productivity. independent.