THURSDAY, 7 FEBRUARY 2019

84 pages in 2 sections www.business-standard.com

MUMBAI (CITY)
~8.00
VOLUME XXIII NUMBER 126

THE MARKETS ON WEDNESDAY Chg#

Sensex 36,975.2 358.4
Nifty 11,062.5 128.1 BRAND WORLD P23 COMPANIES P2
Nifty futures* 11,090.3 27.8
Dollar
Euro
~71.6
~81.5
~71.6**
~81.7** FIAT DRIVES ITSELF TO SAMSUNG INDIA SET TO MAKE
THE FINISH LINE COMPONENTS FROM APRIL
Brent crude ($/bbl)## 61.4## 61.7**
Gold (10 gm)### ~33,210.0 ~5.0
*(Feb.) 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

NIFTY RECLAIMS 11,000

AFTER FOUR MONTHS HoldCo model for ‘Wouldhavedone100more
banks on the cards
The benchmark indices rose for a fifth

thingsbutforinterimBudget’
straight day on Wednesday on hopes of an
interest rate cut by the Reserve Bank of
India (RBI). The benchmark Nifty reclaimed
the 11,000-mark for the first time since
October 1, 2018. The 50-share index ended Union Finance Minister PIYUSH GOYAL, who presented quarter. I don’t want to make any comment on
the session at 11,062, gaining 1.2 per cent
over its previous close. The BSE Sensex
RBI’snewnormsmayleadtoconsolidationacrossfinancialsector his maiden and the NDA government’s last Budget,
says it is not inflationary, expresses hope the
what the MPC will do.

gained 358 points, or 0.98 per cent, to close

at 36,975. The index touched an intra-day
RAGHU MOHAN
New Delhi, 6 February
OLD VS NEW disinvestment target will be met, and insists jobs
are being created as “you don’t grow at 7.5 per cent
Isn’t the PM-Kisan scheme ‘too little, too late’
in the day?
high of 37,005. Strong buying by both Existing model without creating jobs”. In an interview with You don’t probably realise how important this is

domestic and foreign institutional
investors was seen on Wednesday.
THE SMART INVESTOR P10
>Nifty gains, broader market in pain
ECONOMY & PUBLIC AFFAIRS P4
Bill to tighten noose on
T
he Reserve Bank of
10 > India (RBI) is set to
overhaul the equity
holding structures in
financial conglomerates and
take the first formal steps
towards the holding company
(HoldCo) model when it comes
Jyoti Mukul & Indivjal Dhasmana, Goyal accuses the
Atypical bank-centric structure, Congress of ruining the economy. Edited excerpts:
which is currentlyfollowed
There are fears in the market that this Budget
Insurance
is inflationary and fiscal expansionary, which
may put pressure on the monetary policy
committee (MPC) to not cut the rates. Do you
Securities
BANK agree?
for small farmers.
But critics say only a little over ~16 a day for
farmers is too little…
A sum of ~6,000 a year is very significant for a
small farmer whose land holding is very small
and whose produce is very small. All these cal-
culations on a daily basis are extremely unfor-

ILLUSTRATION: AJAY MOHANTY

Ponzi schemes cleared
The Union Cabinet on Wednesday cleared
amendments to the Banning of Unregulated
Deposit Scheme Bill, 2018, to check illicit
deposit schemes. Deposit takers will now be
banned from promoting, operating or
advertising an unregulated scheme, said
Law Minister Ravi Shankar Prasad.
RELATED REPORTS
ON
out with guidelines on banks’ I don’t think it is inflationary at all, neither is it tunate and an insult to farmers.
subsidiaries. The norms,
Asset
management
expansionary. We have stuck to all the It is with respect that we are provid-
expected to be announced soon, fiscal consolidation numbers. ing money for them and they have also
will bring to fruition a glide path Considering that we wanted to respect received it with dignity — not as an enti-
that has engaged the regulatory Others farmers’ contribution to ‘Make in India’ tlement or a dole. You have to see what
authorities since 2007. and making the nation food-secure, we we have inherited from the Congress.
The new guidelines from added a scheme for farmers and pro- The economy was shattered. We were
Mint Road will entail a thorough
Proposed model Insurance vided full money for it. We in the fragile five economies. There were ~1.6
review and recast by banks of have announced pay- trillion of unpaid bills. There was high inflation,
P4 their current exposure to sub- Main banking FINANCIAL Securities ments to farmers in low growth, high fiscal deficit, and high current
subsidiary
sidiaries, which straddle busi- HOLDING three instalments, account deficit.
nesses ranging from investment so that every time If at that point in time, we had not set the
banking and mutual funds to Other banking
COMPANY Asset management
there is harvest, economy in order and prepared the ground for
(FHC)
insurance and broking. In some
cases, they have dedicated arms
subsidiaries
Others
there is some spare
cash in their hands
strong fiscal fundamentals, today we would be
having double-digit inflation, like it was in the

SPECIALS
THURSDAY for credit cards and various
back-end services. How restructuring will help
to enable them pay
electricity bills and
Congress’s time. All of us would be spending 35-
40 per cent more on our day-to-day expenses.
The move comes at a time Movewilllead Will ringfence Growth of arms Bank boards buy some seeds and Throughout this period, we have taken a series
when a host of state-run banks to cleaner banks from willnotbe willnotbe fertilisers. Inflation is of measures for a better future for farmers.
are set to jettison some of their quite low at 2.19 per Please don’t belittle by questioning what has
holding change constrained burdened
non-banking ventures to raise cent in December, and it been given to farmers.
structures in the bycapital withhassles
capital. In effect, the stage is set would be even lower this Turn to Page 4 >
within banking fortunes of constraints of of managing
for a spate of portfolio buyouts,
groups subsidiaries parent bank subsidiaries
TECHNOLOGY: leading to consolidation across
AI does delicious! 22 > the financial mart as outright
Artificial intelligence is mergers and acquisitions ous discussion papers, will will not sit on the top of its sub- OUR EVERY PLAN IS FULLY BUDGETED AND
among banks will get a fillip. gather steam. sidiaries, and as an investor you
revolutionising the food tech
business. PEERZADA ABRAR The differentiated-bank licens- “It (new norms) will lead to will have better visibility of what ACCOUNTED. I DO NOT SEE THE NEXT
gives the lowdown ing policy, which has been cleaner holding structures with- you are getting into,” said a GOVERNMENT FACING ANY PROBLEM
articulated by the RBI in vari- in banking groups. The bank source. Turn to Page 23 >

PRIVATE EQUITY:
Brookfield may invest over

Voda Idea Q3 loss

$1 bn in India 6>

widens to ~5,004 cr
BANKING ANNUAL
The Business Standard BankingAnnual, a special
60-page magazine being distributed free with
today’s edition, carries a detailed profile and ROMITA MAJUMDAR
interview of Business Standard Banker of theYear Mumbai, 6 February
Romesh Sobti, MD & CEO, IndusInd Bank.The
magazine also has leading In its second quarterly results after the
experts from the merger, Vodafone Idea (VIL) posted a
banking and net loss of ~5,004 crore, which was
financial services higher than Street estimates.
The December quarter loss was
industry discussing
higher than the previous quarter, when
the opportunities the firm had posted a loss of ~4,974
and challenges
ahead of them.
crore, primarily on account of network-
expansion costs. The telco lost 35 mil- KEY FINANCIALS
lion customers during the quarter. The
average revenue per user (Arpu), how- FY19 Ebitda margin (%)

> RESULTS
ever, improved. Q2 8.1
RECKONER Compared to a 7.1 per cent decline in
Q3 9.7
Q2, the revenue decline slowed on a
Quarter ended Dec 31, 2018; common sample quarter-on-quarter basis in the third
1,136.8
11,764.8
12,023.8

5,004.6
4,973.8

quarter of 2018-19. With the company's

977.8

of 901 companies (results available of 1,062)

strategy of focusing on high-revenue
SALES customers starting to show results, rev-
Dec 31, ’17 11.8% 10.73 trillion enue in the December quarter dipped Revenue Ebitda Net loss
Dec 31, ’18 20.6% 12.94 trillion 2.2 per cent (within estimates) to (~ crore) (~ crore) (~ crore)
~11,764 crore. Ebitda (Earnings before Note: Ebitda is earnings before interest, tax,
NET PROFIT interest, tax, depreciation and amorti- depreciation and amortisation
Dec 31, ’17 14.3% 98,076 crore sation) grew 16.3 per cent, driven by
Dec 31, ’18 -5.6% 92,549 crore the reduction in operating expenses, arrest the rapid ARPU decline, with
to ~1,137 crore. their minimum value recharge and
Companies that have reported zero sales are excluded
Data compiled by BS Research Bureau Source: Capitaline The company also managed to bundled plan offering. Turn to Page 23 >

Govt explores pre-packaged

bankruptcy plan
Proposal aims to cut cost and time of resolution process
VEENA MANI
FOR SPEEDY RESOLUTION New Delhi, 6 February
| Move seeks to aid the existing The feasibility of implementing a
insolvency framework, reduce ‘pre-packaged’ bankruptcy
litigation scheme, prevalent in the US, is
under consideration, it is learnt.
| Will effectively bypass various
The move is meant to strengthen
requirements and interventions by the insolvency framework, while
NCLT at different stages cutting the cost and time of the
| Will need approval of resolution process, according to
at least two-thirds of officials in the Ministry of
creditors before filing Corporate Affairs.
an insolvency Under the pre-packaged
application scheme, a company in financial
distress will be able to chalk out
| The new regime could a resolution plan prior to moving
be a mix of pre-IBC the National Company Law
and IBC Tribunal (NCLT).
mechanisms “The scheme will typically allow
a stressed company to prepare a
financial reorganisation plan with
the approval of at least two-thirds of
the creditors before filing of an
insolvency application by any party
at the NCLT,” an official said. The
resolution plan, prepared by
debtors and creditors, will then be
placed before the NCLT for
approval. This will be done by
amending the Insolvency and
Bankruptcy Act.
Government officials argue that
since the plan is already endorsed
by lenders, it will effectively bypass
various requirements and
interventions by the NCLT at
different stages under the IBC
process. This is likely to help reduce
the litigation cost and delays.
The concept gained currency
within the government after the
insolvency process started getting
caught in rounds of litigation.
Usually, it takes about a month for
the NCLT to either admit or reject a
case after it is filed, with
interventions by various parties
coming in the way.
Turn to Page 23 >
2 COMPANIES MUMBAI | THURSDAY, 7 FEBRUARY 2019

STOCKS > Reliance Infrastructure

Top loser among
> Tech Mahindra
Q3 net profit up
> Tata Chemicals
Q3 net profit down
> SRF
Q3 net profit up
> Adani Ports & Special Economic Zone
Q3 Ebitda 2% lower on
IN THE NEWS the ADAG group 28 per cent at 71 per cent at 26 per cent at account of forex loss, lower
stocks ~1,203 crore YoY ~219 crore YoY ~166 crore YoY SEZ port-led development
~154.00 CLOSE ~811.00 CLOSE ~594.45 CLOSE ~2,228.15 CLOSE ~331.15 CLOSE
q32.22% DOWN* p8.13% UP* q8.04% DOWN* p10.21% UP* q2.46% DOWN*
*OVER PREVIOUS CLOSE

>

IN BRIEF
ITC wins court battle against
Tea Board for Darjeeling tag
Samsung to make components from April
TheCalcuttaHighCourthasdismissed
India unit to begin production at Noida PHASED MANUFACTURING PROGRAMME ROAD MAP
anine-yearoldappealfromtheTea ARNAB DUTTA facturing programme (PMP) dead- Govt may extend FY20 deadline to April 2020
BoardofIndiathatallegedITCtobe New Delhi, 6 February line, announced last year, hampered
infringingupontheBoard’s Samsung’s plans to regain the top Basic Applicable Components applicable on

T
certification-markrights.Since2003, he country’s largest mobile spot in the smartphone market. For Customs from
ITChasbeenoperatingapremier component producer the first time since 2012, Samsung fin- duty
executiveloungereservedonlyfor Samsung India is preparing to ished the calendar year 2018 at the 15% FY17 Charger/adaptor, battery pack, wired headset
guestsbythenameofDarjeeling begin production of key components second spot with 24 per cent share,
Lounge.ItledtheBoard,whichhassecuredGeographicalIndication like display screens, touch panels and behind Xiaomi (28 per cent).
15% FY18 Mechanics, die cut parts, microphone &
tagaswellascertification-markoverusageofthename‘Darjeeling’, vibrator motors from April. The move Following the government’s ear-
receiver, key pad, USB cable
toallegeinfringementofitslegalrights.TheBoardaskedfora is significant as it comes after the gov- lier notification that had advanced 10% FY19 Printed circuit board assembly, camera
compensationof~50crorefromITCasdamages.ITCcontendedthat ernment backtracked on its plan to the deadline for local production — module, connectors
sincetheBoardhadonlycertificationofthetrademark— therightto impose Customs duty on those pricier from FY19-20 to February 1, 2019 — Nil FY20 Display assembly, touch panel/cover glass
certifyteaoriginatingfromDarjeeling—namingthehotel’slounge components from February 1. Samsung, in a letter to the prime assembly, vibrator motor/ringer
asDarjeelingLoungedoesn’tamounttoinfringement.TheCalcutta According to sources, the with- minister’s office expressed deep con- Source: Ministry of Electronics & Information Technology
HighCourtfoundthatthoughtheBoardwasinpossessionoftheGI drawal of the February 1 deadline cerns over sustainability of the local
tagoverDarjeeling,ithadnotobtainedaregisteredtrademark came as a breather for the company manufacturing unit. The firm had turer had announced a mega-expan- display screens, touch panels and tion of television in India. Early last
undercertainprovisionsoftheTrademarksAct,1999,andonlyhad that had in the past one and a half said that the advancement of the sion plan for the Noida facility in an vibrator motors between April 1, 2019, year, it had stopped producing TVs
certificationtrademarkregistrationundertheTradeand years struggled to improve its share deadline would hamper its produc- extravagant ceremony with Prime and March 31, 2020. But sources say locally after the government imposed
MerchandiseMarksAct,1958,whichdoesn’tgivetheBoardfull in the local smartphone market. After tion and export plans from the India Minister Narendra Modi as its chief the Centre may extend the deadline a 5 per cent import duty on panels.
powersontrademark. BS REPORTER< it lost the top slot to Xiaomi in unit. Further, Samsung might have guest. It planned to develop the plant to April 1, 2020. Industry bodies like Since then, the firm is importing ful-
September 2017, it charted a come- to stop production of some of its flag- as the world’s largest mobile manu- India Cellular and Electronics ly-finished TV sets from its Vietnam
back plan. It heavily focused on India ship models like Galaxy S9 and facturing facility by expanding its Association and Consumer Elect- facilities. The firm imports from
Cipla targets US Essar Oil to acquire specific innovations and increased Note9, apart from a cut in export production capacity to 120 million ronics and Appliances Manufac- Vietnam without paying any import
market after pipeline, oil the scope of local value addition in from India to 15 per cent of its total units of handsets a year by 2020 from turers Association had been lobbying duty due to a free-trade agreement.
profit dip terminal from BP handset production by moving
towards complete-knocked down
production from 40 per cent
planned earlier, the letter said.
68 million. Further, Samsung said it
would increase exports from India
for an extension in the original dead-
line, given many handset makers are
“Until the government makes local TV
production competitive, it is unlikely
Essar Oil UK on Wednesday (CKD) manufacturing. The firm is now set to manufac- and would invest ~4,915 crore. yet to meet the previous deadline of that Samsung India would resume
announced acquisition of BP’s However, the government’s ture those components at its Noida According to the original PMP, 2017-18 and 2018-19. production,” said a senior executive
stake in a pipeline and oil abrupt change in the phased manu- facility. In July, the Korean manufac- firms may begin local production of Samsung is not resuming produc- with knowledge of the developments.
terminals in the UK to get rights
over infra used by its Stanlow
refinery for evacuation of petro
US market will drive the growth
for Cipla which reported 17 per
cent year-on-year decline in
products. Essar Oil will buy 11 per
cent of BP in the UK Oil Pipeline
as well as its 45 per cent share
CognizantnamesHumphriesCEO JSW Steel profit
‘New leadership will stick to aftertaxdips10%
net in the December quarter. in the Kingsbury terminal and a
Revenue from operations for 100 per cent interest in the DEBASIS MOHAPATRA
the period grew 2 per cent to Northampton oil storage Bengaluru, 6 February

mid-term growth strategy’

~4,008 crore and net dipped to
~332 crore in Q3 FY19. Revenue
growth was sluggish due to
challenges in tender business
in Africa and destocking by
distributors in the domestic
market. "We are focusing on
high-value differentiated
products and are on track to
file 20 plus products in FY19,"
said Kedar Upadhye, global
chief financial officer. US
market contributes to around
19 per cent of its revenue.
ANEESH PHADNIS<
Still optimistic
about Indian
market: Walmart
Walmart,whichinvested$16
billioninFlipkart,hassaiditwas
committedtotheIndianmarket
andisoptimisticdespiterecent
changesintheFDIpolicy.Its
statementcameafterarecent
reportbyglobalconsultancy
firmMorganStanley,whichhad
hintedthatWalmartmayquit
FlipkartasthenewFDIpolicy
cameintoeffect,whichwould
loweritsprofitabilityinthe
longrun. PTI<
Dalmia-OCL acquires
Germany-based GSB
Group for ~122 crore
Dalmia-OCL, a part of Dalmia
Bharat Group, on Wednesday
announced acquisition of
German speciality refractory
maker GSB Group GmbH for
15 million euros (nearly
~122 crore), which would help
the company to expand in
Europe. PTI<
terminal, CEO S Thangapandian
said in a note. BS REPORTER<
ICICI Bank allowed
to recover ~221 crore
from Subhiksha
The Madras High Court has
allowed ICICI Bank to recover
~221 crore from Subhiksha
Trading Services Ltd, the retail
chain which was shut in 2008,
and its guarantors, including
its promoter R Subramanian.
Today's order, passed by the
Chief Justice of Madras High
Court Justice Vijaya Kamlesh
Tahilramani and Justice M
Duraiswamy, comes in resp-
onse to a revision petition filed
by Subramanian, managing
director, Subhiksha Trading
against Debt Recovery App-
ellate Tribunal’s order which
allowed the Bank to recover
~221 crore, from Subhiksha and
it's promoter. PTI<
Fitch places Tata
Motors on ‘rating
watch’ over Brexit
Fitch Ratings on Wednesday
placed Tata Motors’ rating on
‘Rating Watch Negative’ on
increasing risks of a dis-
orderly Brexit impacting its
profits mainstay Jaguar Land
Rover. JLR, which accounts
for the majority of the firm’s
profit generation, has a
significant production bias to
the UK despite a reasonable
degree of geographic
diversification in its sales
mix, Fitch said. BS REPORTER<
IT services major Cognizant on Wednesday
announced a major reshuffle in the senior man-
agement, with the appointment of Brian
Humphries as its chief executive officer (CEO),
succeeding co-founder and current CEO,
Francisco D’Souza. Humphries, currently CEO
of Vodafone Business, will take up the role from
April 1. D’Souza, heading the firm since 2007,
will serve as executive vice-chairman till June
30 and remain on the board as vice-chairman.
The US-based firm also announced the exit
of its President Rajeev Mehta, who will step
down from April 1, and
act as advisor to the
new CEO till May 1.
Mehta, with the firm
since 1997, was largely
seen as the next CEO.
Humphries’ appoint-
ment ends the era of
founders, who have
driven the firm. The
reshuffle comes at a
time when the firm has
given muted revenue
BRIAN HUMPHRIES
guidance for 2019, with
TO TAKE UP NEW ROLE
marginal rise in growth FROM APRIL 1, 2019
outlook. The firm is
expecting its revenue to grow in the range of 7-
9 per cent in constant currency terms in 2019,
compared to 8.5 per cent reported in 2018.
Cognizant, which follows the January-
December financial cycle, posted $16.13 billion
of revenue, up 8.9 per cent year-on-year (YoY)
in dollar terms and 8.5 per cent in constant cur-
rency terms for the 2018 fiscal year. Its net profit
for the entire financial year stood at $2.10 bil-
lion, a growth of 40 per cent over the same peri-
od of the previous year. “Cognizant executed
well in 2018, diversifying its revenue base and
client roster, and investing to build distinctive
leadership in six advanced digital capabilities,”
said D’Souza. For the quarter, net profit was at
$648 million against a loss of $18 million report-
ed in December 2017. Sequentially, net profit
grew by 36 per cent. Revenues during the quar-
ter were at $4.13 billion, a rise of 7.9 per cent
YoY and 1.22 per cent in sequential terms.
FRANCISCO D’SOUZA, co-founder and
current CEO, Cognizant, in a
conversation with Debasis Mohapatra
& Peerzada Abrar, exudes confidence
about a smooth leadership transition
and higher growth. Edited excerpts:
What prompted you to step down?
What is the rationale behind the
reshuffle at this juncture?
I spent 25 years in Cognizant, literally
half of my life. I spent the last 12 years
as CEO. I am proud of what the team
has built. In these 12 years, Cognizant's
revenues grew from $1.4 billion to $16
billion. We moved Cognizant into the
Fortune 200 (list). Our employee base
rose from 39,000 to 282,000. Since the
IPO, the market cap increased 100 fold
— from less than $100 million to about
$40 billion. So, I thought the time was
right and spoke to fellow board
members and informed that I
was considering stepping down
in 2019. What we announced
today is the result of that process.
Do you feel your continuance in some
form would have helped Cognizant,
given the disruption the industry is
going through?
I will continue as CEO till April 1. After
that, I will take the role of executive
vice-chairman to assist the new CEO
and the board in the transition. And
after that, I will remain on the board.
In that capacity, I will be available to
provide the required guidance.
President Rajeev Mehta, who was
largely seen as the next CEO, is
leaving. Any specific reason?
I will not comment on Raj's reasons for
stepping down. But I will say that he
made countless contribution to the suc-
cess of Cognizant. He joined when we
were just $20 million in revenue and
for that entire time — from $20 million
to $16 billion — he provided Cognizant
leadership, operational skills. I think
he has decided that he is ready for a
new challenge and has agreed to help
with the transition.
Will priorities of Cognizant
change with the new CEO?
Three months ago we laid out a
mid-term strategy before
investors. That was developed
by the management and our board of
directors. That is the strategy we would
continue to execute. Of course, it will
be shaped by Brian’s perspectives.
Has profitability taken precedence
over revenue with the company
becoming choosy about quality of
revenue?
There is no direct trade-off between
profitability and revenue growth. We
have focused on high-quality sustain-
able revenue growth, but at the same
time focused on running the business
efficiently, which drives higher margins.
We are investing heavily in the business
to drive growth. At the same time, we
are building operating discipline and
muscle to make the firm better.
ADITI DIVEKAR
Mumbai, 6 February
Sajjan Jindal-led JSW Steel on
Wednesday reported a lower-
than-expected consolidated
net profit of ~1,603 crore for
the December quarter, down
10 per cent from the same
period last year on the back of
increased expenses. The
expenses went up due to high-
er cost of raw materials such
as iron ore and coking coal.
The top line for October-
December stood at ~20,318
crore, up 11 per cent from the
same period last year, mainly
because of higher realisations.
These were achieved through
long-term contracts, more
sales in the domestic market,
and a better product mix,
even as domestic steel prices
were lower during the period.
In terms of volumes, the
company took a hit as exports
declined 70 per cent year on
year, thanks to a global sur-
plus, slowdown in China, and
trade measures taken by vari-
ous countries. JSW Steel’s
exports comprise 10 per cent
of the company’s net revenue.
JSW Steel’s saleable steel pro-
duction in the quarter under
review stood at 3.68 million
tonne, down 7 per cent from
last year. “The lost volumes
are unlikely to be recouped
during the fourth quarter and
the company’s overall sales
volumes for FY19 are likely to
fall short by 2-3 per cent from
the guidance of 16 million
tonnes,” the company said.
According to Bloomberg
estimates, the revenue was
In terms of volumes, the
firm took a hit as exports
declined 70% YoY, thanks
to global surplus,
slowdown in China,
and trade war
expected to be ~20,918 crore in
the December quarter, while
the bottom line was expected
to be at ~1,727 crore.
The earnings before inter-
est, tax, deduction and amor-
tisation per tonne on a con-
solidated basis stood at
~12,441 as against ~9,557, while
on standalone basis it was at
~4,063, down from ~8,994 in
the same period last year. In
the period under review, input
costs rose by 20 per cent on
year-on-year basis, while total
expenses rose 11 per cent.
At the standalone level, the
company’s net profit was
higher than consolidated bot-
tomline at ~1,892 crore.
“At the consolidated level,
there is depreciation and
interest from the global acqui-
sitions in the US and Europe
which has led to lower net
profit,” explained Seshagiri
Rao, joint managing director
and group chief financial offi-
cer at JSW Steel.

RCom’s journey from Monsoon Hungama to Jio onslaught

SURAJEET DAS GUPTA
New Delhi, 6 February
In June 2005, Anil Ambani’s brother
Mukesh agreed to hand him the telecom
business as part of a family settlement.
Observers said Anil got a lemon while the
cash cow of the group (oil and gas) was
kept by his brother.
The wireless telecom Anil was handed
over had an over 20 per cent (December
2006) market share. But bulk of users were
on CDMA, a tech losing out to GSM (it had
only 3 per cent of that market). And data,
which was the cornerstone of that tech,
was still not hot. Also, Mukesh’s ‘Monsoon
Hungama’ scheme, offering devices bun-
dled with voice and data at ~501, forced
the firm (then Reliance Infocom) to write
off ~450 crore of bad debts and disconnect
10 per cent of the subscriber base.
But the junior Ambani still took the
firm on a roll with some swift action. He
shifted his bets to GSM and laid out serv-
ices within 12 months. He grabbed users
through an aggressive pricing strategy (he
was 60 per cent cheaper than rivals) and
had an ambitious target to reach 100 mil-
lion users. Seeing an opportunity in 3G,
he decided again to enter with a bang —
Reliance Communications (RCom)
shelled out ~8,500 crore to buy 3G spec-
trum in over 13 circles, which included the
expensive Delhi and Mumbai circles.
The gamble seemed to be working —
five years after accepting the family set-
tlement, he had catapulted RCom to make
it the second-largest telco in India with a
five-fold increase in its customer base
which hit 125 million by December 2010.
But 14 years after he took over the busi-
ness, RCom, which decided to stop oper-
ations in 2017 and sell its assets to pay off
~43,000 crore of debt (it also got a seller in
his brother with whom he had patched
up), last week went to the National
Company Law Tribunal (NCLT). Its plea
is to get a nod to the sale, after a committee
of creditors failed to come to a consensus.
So, what changed in the last seven
years for Anil to reverse what looked like
a success story? There is no doubt that the
latest trigger came from Mukesh’s re-entry
into telecom through Jio, which in over
three years grabbed 300 million users.
Jio’s disruptive strategy forced consol-
idation in the industry much earlier than
anyone was expecting. And, RCom was
just one of many others (TTSL, Telenor,
MTS) who had to put shutters down. As
customers rushed to embrace 4G of Jio at
rock bottom prices, telcos saw their mar-
ket share fall. RCom’s share fell from 9.54
per cent in June (before Jio’s entry) to as
low as 5.20 per cent in October 2017.
The first signs that competition was
taking its toll on RCom were evident dur-
ing communications minister A Raja’s lib-
eral dispensation of new licenses after
which the number of mobile players dou-
bled overnight to 14. The new players
unleased a price war and squeezed mar-
gins for all. In 2012, RCom lost the No. 2
slot to Vodafone, moved further down to
No. 4 in 2016, and its grip of the market
(in October 2011 it had a nearly 17 per cent
MARKET SHARE (%)
December 2010
16.70
October 2011
12.60
November 2015
10.58
September 2016
8.30
October 2017
5.20
September 2018
0.004
Source:TRAI
ANALYSTS SAY RCOM HAD MANY
ASSETS BUT IT DID NOT TIME THE
SALE RIGHT. SUN TV IS REPORTED
TO HAVE OFFERED ~2,500 CR FOR
A 26% IN RCOM’S DIRECT-TO-
HOME ARM, WHICH EVENTUALLY
IT SOLD WITH NO CASH
share) was clearly getting eroded.
The CBI probe, after the Supreme
Court cancelled many licences, also
wreaked havoc. Even Anil, who went to
court, admits it was a harrowing time. Yet
the final judgment came cleared all. A lot
of time was lost to deal with the case rather
than concentrating on the business.
Analysts say the other key reason for
the slow decline was its growing debt bur-
den without the commensurate increase
in income. And, one key reason to take
loans, apart from investment in networks,
was the hefty price of spectrum which it
had to buy now through auctions, where
the base price was kept very steep.
And money also had to be found to lib-
eralise administered spectrum in the 850
MHz band for which the firm forked out
over ~6,600 crore so it could be used for
4G. According to estimates, nearly half of
the company’s debt was to buy spectrum.
The pressure was showing. The firm’s
debt doubled from ~25,000 crore in 2010
to the current figure of around ~43,000
crore. But analysts say its net debt to
earnings before interest, tax, deprecia-
tion and amortisation ratio also nearly
doubled. And with rising debt, its ability
to make investments, especially in 4G,
were stymied. It tried to find solutions
— one was a proposed merger with
Aircel, but the deal fell through.
Could RCom have done something dif-
ferently? Some analysts point to the Bharti
Airtel model, which is also facing Jio but
still has been able to generate enough to
invest ~24,000 crore annually. And it is
doing so not only through internal accru-
als but by smartly monetising its tower,
fibre and even African telecom assets.
Analysts say RCom had many assets
but it did not time the sale right. It was
offered over ~30,000 crore by Tillman and
TPG for its tower and fibre assets about
four years ago, but when it did a deal with
Jio, the assets were valued at ~8,500 crore.
Similarly, Sun TV reportedly offered
~2,500 crore for a 26 per cent stake in
RCom’s direct-to-home arm, which even-
tually it sold with no cash. But those who
have been close to the firm say that with
the 4G-LTE roll-out followed by 5G, there
would have been a huge upside in tenancy
revenues as telcos would require thou-
sands of more towers. So, by waiting, it
could have got a better deal.
Insolvency route is
dishonest: Ericsson
In a fresh contempt plea moved before the
Supreme Court, Ericsson India has alleged
that the insolvency route taken by RCom
has “dishonest intention” intended to
frustrate the orders of the court, sources
close to the development said. The SC had
ordered RCom to pay ~550 crore to Ericsson
India by December 15. The purpose of the
application filed by RCom to take the
company into “voluntary winding up” is
to obtain a moratorium which would
prevent it from making any payments to
all creditors, including Ericsson, sources
said. Ericsson has further alleged that
despite the completion of sale of RCom’s
fibre and related infrastructure worth
~3000 crore to Reliance Jio, dues were not
paid. As SBI was the lead banker for the
Joint Lenders’ Forum which had allowed
the spectrum sale of RCom to Jio, it should
also be held liable for the nonpayment of
dues till date, the sources said. On
Monday, RCom also moved the National
Company Law Appellate Tribunal (NCLAT) to
withdraw its opposition to an insolvency
petition filed by Ericsson India in the NCLT
Bench at Mumbai. Ericsson, however, is
opposing RCom's move to go for insolvency
as it fears that under the Insolvency and
Bankruptcy Code proceedings, it will end
up being only an operational creditor, and
consequently, get less than ~550 crore it is
now getting, company sources had said.
AASHISH ARYAN
.
MUMBAI | THURSDAY, 7 FEBRUARY 2019 COMPANIES 3 <

Retail chains gain from

consumer uptick in Q3
VIVEAT SUSAN PINTO November, on the other hand, chains
Mumbai, 6 February gained from Dussehra-Diwali spends tho-
ugh e-tailers were aggressive during this

L
ike their counterparts in food servic-
es, some of the country’s top retail
chains have reported strong same-
store sales growth (SSG) for the three
months ended December 2018.
At 8-20 per cent, which is the SSG range
for most of the key players in Q3, such as
Pantaloons, Big Bazaar, Shoppers Stop,
Westside, V-Mart, Central and Brand
Factory, have reported their strongest sales
growth figures in four quarters, said ana-
lysts. SSG is sales growth for stores one
year and above.
While festive season spends by con-
sumers did contribute to the uptick seen in
Q3, experts said greater aggression dis-
played by retailers to corner a larger share
of the shopper’s wallet also worked.
As Kaustubh Pawaskar, senior research
analyst at brokerage Sharekhan, said, “For
instance, most players in the fashion and
lifestyle space advanced their end-of-sea-
son sales festivals (in Q3), helping them
take on e-tailers far better than earlier.
Chains were also better prepared in terms
of their offers, discounts and overall shop-
ping strategies, giving them an edge over
their rivals in the online space.”
Some experts pointed out the latent
Same-store sales growth reported by
most key players was in the 8-20 per cent
region, the highest in four quarters
demand that existed among consumers,
which compelled them to make their way
back to stores after a gap of a few quarters.
“Overall consumer sentiment has
improved, which resulted in higher dis-
cretionary spends in Q3,” said Arvind
Singhal, chairman, Technopak, a retail
consultancy based in Gurugram. Accord-
ing to Singhal, this uptick could last for a
while, which is good for retailers.
The end-of-season sales, which begins
around Christmas, was advanced by a
week in December of 2018 in a bid to fend
off competition from Amazon, Flipkart
and Myntra. Experts said in October and
period, coming out with multiple rounds
of shopping festivals.
According to Future Group executives,
some sanity has now been brought to the
market with the change in the foreign
direct investment guidelines, which were
announced at the end of December and
have since been implemented (from
February 1).
The norms bar exclusive tie-ups
between e-commerce firms that follow
the ‘marketplace model’ and vendors
using their platform. In a marketplace
model, the e-tailers are not allowed to
directly or indirectly influence the sale
price of goods or services and is required
to offer a level playing field to all vendors.
Retailers also remain optimistic about
the overall consumption boost that the
interim Budget announced last week. Last
Friday’s interim Budget, announced by
Finance Minister Piyush Goyal, had a slew
of measures to improve income for rural
and urban consumers.
Both retail company executives and
experts said discretionary income would
further improve as a result of these sops,
pushing up footfalls into stores. Sales
growth will get a fillip.

Zomato raises StanChart getting more than two times

~284 cr from
Glade Brook Cap its share: Essar Steel CoC to NCLT
Onlinefooddeliverystart-up Contrary to its allegation, Standard Chartered allocation among creditors has been made on
Zomatohasraised~284crore Bank has not been discriminated and has been the basis of value of security held by them with
fromUS-basedinvestorGlade allotted its valid share in ArcelorMittal’s takeover Essar Steel. As a result, almost all the other
BrookCapitalPartners,which bid for Essar Steel, the committee of creditors members of the CoC held a direct share in Essar
countsfirmssuchasUber,Air- (CoC) to the stressed steelmaker told the Ahmed- Steel India’s assets worth ~45,000 crore. As
bnbandSnapchatamongits abad Bench of National Law Company Tribunal against this, Standard Chartered’s value of
portfoliofirms.Thefinancingis (NCLT) on Wednesday. security came to around ~24 crore in form of sha-
apartofZomato’sSeries-I The CoC’s legal counsel told the two-member res pledged by Essar Steel as a guarantee to the
fundingroundthatstartedin Ahmedabad Bench that Standard Chartered was bank’s loan in its subsidiary Essar Mauritius
November,2018,whenAlib- actually getting two times its share. The Offshore, the CoC told NCLT. VINAY UMARJI
aba-backedAntFinancialin-
vested~1,539croreinthefirm.
Zomatoallotted13,000‘comp-
ulsorilyconvertiblecumulative
preferenceshares’for~218,790
persharetoGladeBrookfor
thefundraising,accordingto
regulatorydocumentsfiledby
Zomato,whichweresourced
frompaper.vc.Thefunding
willhelpZomatocompete
withrivalssuchasSwiggy,
UberEatsandOla-owned
Foodpanda,whicharealso
bettingbigontheonlinefood
orderinganddeliverymarket.
Theonlineorderingand
deliverymarketisexpectedto
growatacompounded
annualgrowthrateofover45
percenttoreach$11billionin
grossmerchandisevalueby
2023,accordingtoRedSeer
Consulting,aresearchand
advisoryfirm. PEERZADA ABRAR
4 ECONOMY & PUBLIC AFFAIRS MUMBAI | THURSDAY, 7 FEBRUARY 2019

"Upar Modi, neechey Yogi (Modi as "Farmers do not get the right prices, "BJP won't stop till it ends Mamata
prime minister and Adityanath as the youth do not get the right jobs, Banerjee's 'misrule' in Bengal;
chief minister). This general election in 'jumla raja's chaupat raj', no more you try to stop us more we'll
will be Modi versus the rest " hard working person gets respect" come to Bengal "
AMIT SHAH, RAHUL GANDHI, SHIVRAJ SINGH CHOUHAN,
BJP president Congress president BJP leader
>

‘People becoming job creators than depending on govt jobs’

The Centre will be relying on states for
data on land holdings for
implementing the scheme for farmers.
Some states such as West Bengal and
Madhya Pradesh are reluctant to join
in. Is there political opposition to the
scheme?
The farmers of West Bengal will realise
that Prime Minister Narendra Modi
wants to give them some honorarium
which Mamata Didi (Banerjee) is not
allowing. Farmers will give response to
the state government. This approach is a
petty approach. It shows that these states
don’t want to allow farmers to get what
the Centre is giving. They don’t want
farmers to have a better future. They
want the poor to live a life of misery. After
all, the Centre has so many schemes and
gives so much funds to all states.
On fiscal deficit numbers, your figures
for revenues look very ambitious. For
instance, the disinvestment figure has
been pegged at ~80,000 crore, but only
over ~30,000 crore has come in so far.
Will you be able to meet the target?
Data will show you that 50-55 per cent of
the disinvestment proceeds come in the
last quarter. All the plans are very well
laid out. We will meet the target.
GST collections could not meet the
Budget Estimate for the current
financial year and you are now
projecting an 18 per cent growth rate for
FY20. Is it not ambitious?
We have already given a true reflection
of GST collections. We have given a lot of
refunds. Even the pending refunds were
cleared this year. It is not 18 per cent
growth next year literally, because we
have paid refunds which had
accumulated. That has compressed this
year’s revenue. We are collecting about
~97,000 crore a month on an average this
year from GST. In the year, this will give
~11.5 trillion, the Centre’s share would be
about ~6 trillion. Next year, refunds will
not be that much because the backlog
has been cleared.
Moody’s has said fiscal slippage for two
years in a row is credit negative. Do you
fear a rating downgrade by Moody’s?
I don’t see it is credit negative. In the
good old days, whenever there used to
be good monsoon, the whole economy
used to get a boost. People in rural areas
spend when they have money in their
hands; they spend and the economy gets
a boost. When we put more money in the
pockets of the middle class, it is a boost
to the economy. I can see better growth
for the economy, going forward. Any
benefit given for these sections of the
society — be it farmers, the middle class
or the poor — is going to benefit the
economy.
You have not stopped the practice of
subsidy roll-over.
The amount that comes towards the end
of the year is given the next year. This is
routine. But this is not as huge as we
inherited from the Congress.
The Budget is being seen as an election
Budget. Don’t you think it will be
difficult for the next government to
manage the finances?
If not for elections, I would have done
“I have already announced
150,000 jobs, which are
underway and the process
is finished. There are
120,000 jobs for which the
process has started. And
99,000 which will fall
vacant due to retirement.
So, around 200,000 jobs
for which the process has
started, there will be
10 per cent reservation
for the economically
weaker section”
PIYUSH GOYAL
Finance minister
hundred other things. But it was an
interim Budget. These are welfare
measures that were in the making for a
long time. Prime Minister Narendra
Modi is coming to power and we are
confident the BJP-led NDA will form the
government. And, therefore, our every
plan is fully budgeted and accounted for.
I do not see the next government facing
any problem. The next government will
be ours and we have planned so that we
do not face any problem.
Any time during Budget-making, did
you think of universal basic income
(UBI)? Or do you think the income
support scheme is a better idea?
In one of the programmes in a TV
channel, before me there was a
Congress leader speaking about UBI.
When he was asked how it would be
financed, he said they would stop all
the subsidies. But I would like to know
from all my Congress friends whether
they are going to make the fertiliser
five times more expensive? Are they
going to start charging farmers five
times more? Is the Congress going to
disrupt the Food Security Act by
stopping the food grain that we give to
800 million citizens at ~2 or 3? Will
cooking gas become twice as costly
then? We will not stop all these
subsidies.
The government is facing criticism on
job creation. You head the railway
ministry that is a very big job creator,
and yet there are pending vacancies.
I have already announced 150,000 jobs,
which are underway and the process is
finished. There are 120,000 jobs for
which the process has started. And
99,000 which will fall vacant due to
retirement. So, around 200,000 jobs for
which the process has started, there will
be 10 per cent reservation for the
economically weaker section. This will
be the first employment opportunity
which will have this category, without
affecting in any way the 50 per cent
reservation for the SC/ST and OBCs.
You had pending vacancies in railways
and yet the government was unable to
create jobs.
Wherever there are vacancies, the
government will fill it up. No one
expects jobs to be created only in the
government sector. The world has
changed and the nature of jobs has
changed too. We are also evolving new
ways of creating opportunities. We are
going for renewable energy, where 10 or
20 times more jobs are being created
compared to coal-based power plants.
We are now engaging with the world in a
new way. Then, there are 150 million
Mundra loans, where ~7 trillion has been
given over the last few years. All this is
helping people become self-reliant and
self-sufficient. We started Start-Up India
and Stand-Up India, which are making
people entrepreneurs. People are
becoming job creators rather than
depending on government jobs and the
organised sector.
A lot would have happened on the job
front if ‘Make in India’ would have
succeeded. What is your assessment?
It has succeeded in many ways. First
Vande Bharat Express is coming out of
Indian factories; all its parts have largely
come out of Indian factories. Mobile
manufacturing units have increased to
250 something. We are seeing a lot of
action. There were certain sectors where
capacity was already too high and there
was low capacity utilisation. Obviously,
no one will invest in those sectors. As
capacity in these sectors gets used up,
there will be investors. We have invested
in capital expenditure in railways and
roads. All these don’t happen out of thin
air. Jobs obviously are created. You
name the sector and jobs are happening.
After all, you don’t grow at 7.5 per cent
without creating jobs.
CAG had criticised the government for
offline borrowings. What do you have to
say on it?
There are only a few things that are
offline. Those have a payback period
and because of that they get off Budget.
For instance, if we set up railway
infrastructure which gets paid off in
five-six years, I see no harm in that and it
is good that we invest fast and get the
benefits for people of India who get
better services or houses. I think it is
incumbent on any government to give
benefits quickly to the people. Our effort
is what is more important for our
citizens, we should not delay by even
one day.

Cabinet nod to single Bill to crack down on unregulated

deposit schemes gets green light
regulator for GIFT City
ARUP ROYCHOUDHURY An IFSC like GIFT City tries to
INDIVJAL DHASMANA
New Delhi, 6 February

The Union Cabinet on

New Delhi, 6 February
The Union Cabinet, on
Wednesday, approved a
unified regulating author-
ity for international finan-
cial services centres
(IFSCs) such as
Gujarat International
Finance Tec-City
(GIFT City).
The authority will be
established through the
International Financial Services
Centres Authority Bill, 2019. The
draft Bill was approved by the
Cabinet and will now go to
Parliament.
“Currently, banking and capital
markets and the insurance sectors
in IFSCs are regulated by multiple
regulators such as the Reserve
Bank of India, the Securities and
Exchange Board of India, and the
Insurance Regulatory and
Development Authority of India.
The dynamic nature of business in
the IFSCs necessitates a high
degree of inter-regulatory coordi-
nation. It also requires regular clar-
ifications and frequent amend-
ments in the existing regulations,”
The proposed authority will be
headed by a chairperson and
will have one member each
nominated by the RBI, Sebi,
Irdai and the PFRDA
said an official statement.
According to the draft Bill, pre-
pared by the finance ministry, the
proposed authority will be headed
by a chairperson and will have one
member each nominated by the
RBI, Sebi, Irdai and the Pension
Fund Regulatory and
Development Authority (PFRDA).
Two members will be nominated
by the central government. There
will be two other full-time or part-
time members.
provide a business and regulatory
environment comparable to any
leading international finan-
cial centre in the world.
This is aimed at provid-
ing Indian corporate
entities with easier
access to financial
markets and also
attracting services and
transactions that are now
carried out in offshore loca-
tions.
The need for a separate unified
regulator arose after the existing
regulators expressed concerns that
transactions in GIFT City can have
an impact on the domestic mar-
kets.
“The establishment of a unified
financial regulator for IFSCs will
result in providing a world-class
regulatory environment to market
participants from an ease of doing
business perspective. This will
provide stimulus for further devel-
opment of IFSCs in India and
enable bringing back financial ser-
vices and transactions that are cur-
rently carried out in offshore
financial centres,” said the official
statement.
Wednesday cleared amend-
ments to the Banning of
Unregulated Deposit Scheme
Bill, 2018, to check illicit deposit
schemes. Deposit takers will
now be banned from promoting,
operating, or advertising an
unregulated scheme, said Law
and Information Technology
Minister Ravi Shankar Prasad
after the Cabinet meeting.
This comes barely a day after
the resolution of an imbroglio
between the Centre and the
West Bengal government over
the process followed by the
Central Bureau of Investigation
(CBI) in its probe into the
Saradha ponzi scam.
“The principle is that the Bill
would ban unregulated deposits
altogether, by making them an
offence ex ante, rather than the
existing legislative-cum-regula-
tory framework, which comes
into effect ex post with consid-
erable time lags,” the official
statement said.
The Bill provides severe pun-
ishment and heavy pecuniary
fines. It also has provisions for
disgorgement or repayment of
OTHER IMPORTANT DECISIONS
and restitution to depositors. It
also enables the creation of an
online central database, for
collection and sharing of
information on deposit-taking
activities in the country,
Prasad said.
The Bill defines “deposit tak-
Nod for Abolition of Approval ~1,054-cr Setting up er” and “deposit” comprehen-
setting up Ombudsman for setting scheme of cow sively. “Deposit takers” include
12,000 for direct, up Agri- approved commission all possible entities (including
Mw solar indirect Market for Prasar gets a individuals) receiving or solicit-
ing deposits, except specific
power taxes Infra Fund Bharati go-ahead
entities such as those incorpo-
projects approved rated by legislation. “Deposit” is
defined in such a manner that
deposit-takers are restricted
deposits in cases where such protect investors. from camouflaging public
schemes manage to raise The committee had, howev- deposits as receipts, and at the
deposits illegally. er, also expressed apprehension same time, not to curb or hinder
Prasad said any entity or that the Bill may end up leaving acceptance of money by an
company raising these kinds of unfettered discretion upon establishment in the ordinary
deposits and hiring celebrities enforcement authorities at the course of its business.
as brand ambassador will be ground level, where a large Prasad said the CBI has
liable for punishment. number of people depend on lodged 166 cases against these
To a query on whether the small, short-term credit or schemes in the four years till
Bill will have retrospective deposits for their various needs. November 30, 2018. Most of
effect, he said that would be “Such ambiguities should these schemes were in West
examined. be cleared to prevent harass- Bengal, followed by Odisha, he
The Narendra Modi govern- ment and misuse,” the commit- said.
ment had introduced the tee had said. He also said the Supreme
amendment Bill in Parliament. To a query on this, Prasad Court had shifted investigations
It was referred to the standing said this would be examined. in the Saradha case in West
committee on finance. The com- The Bill, approved by the Bengal to the CBI on May 12,
mittee suggested strengthening Cabinet, provides for clear time 2014, when the Modi govern-
penal provisions in the Bill to lines for attachment of property ment had not assumed office.

Bond market looks to RBI for cues on liquidity support
What the markets perceive as comfortable liquidity is different from the central bank’s stance
ANUP ROY
Mumbai, 6 February
Bond dealers and economists would keenly
watch the Reserve Bank of India’s (RBI’s) stance
on liquidity in the monetary policy statement
on Thursday, as there seems to be a mismatch
between what the central bank perceives as
comfortable liquidity and what the market
expects the liquidity to be to keep bond yields
under check.
RBI’s Deputy Governor Viral Acharya is of
the view that as long as call rates remain below
the policy repo rate, the liquidity scene is
comfortable. But this is disputed by the bond
market, which expects the central bank to
continue with its open market operations
(OMO) support, under which it buys bonds
from the secondary market to infuse liquidity.
The banking system liquidity is now
comfortable and is in the positive territory. The
RBI has done about ~2.4 trillion of OMO
purchases this fiscal, and has promised to
support the market as and when required. In
February, the plan is to buy ~35,000 crore of
bonds from the secondary market to support
weekly borrowings of ~18,000 crore each.
The banking system is happy with the way
the RBI has supported liquidity needs.
“As far as liquidity deficit is concerned, the
RBI has taken care of it by undertaking OMO
purchases from time to time, as a result of
which the banking system has moved into a
liquidity surplus as of February 4, 2019,” Care
Ratings wrote in a report.
However, the market has a problem with the
RBI’s yardstick of liquidity measurement.
30,000 youth
converge in
Delhi to protest
lack of jobs
BANKING SYSTEM LIQUIDITY ARCHIS MOHAN
New Delhi, 6 February
(~cr)
(negative number connotates deficit) Office goers in Delhi were
intrigued by traffic jams in
2,25,000 the central parts of the city
on Wednesday morning. But
-19,936 16,367 1,50,000 much bigger traffic snarls are
on the anvil on Thursday. An
estimated 30,000 young
75,000 men and women from across
the country have converged
in the National Capital to
0
protest lack of jobs.
The youngsters, associat-
-75,000 ed with dozens of students’
Jun 1,’18 Feb 5,’19 unions and youth organisa-
tions, including those affili-
ated to opposition parties,
“Call money market is just 1 per cent of the According to market participants, rather However, in the medium term, the bond will take out the ‘Young
total bond market. That one per cent cannot be than such indirect measures as call money market needs either rate cut, or persistent India Adhikar March’ from
the yardstick for the system liquidity,” said a rates, bond yields should be a direct indicator. liquidity support to keep the rates under check. Delhi’s Red Fort to Jantar
bond dealer. Bond yields had risen sharply in 2018 as the The longer tenure yields have firmed up on Mantar on Thursday. The
According to a senior economist, the RBI stubbornly refused to provide OMO persistent supply and the next fiscal’s ~7.1 protesters have invited
liquidity situation is comfortable now because support. But they had to do it eventually from trillion of gross borrowing will strain the Union ministers Arun
the government is running a low cash balance September, as the 10-year bond yields crossed 8 market even further. Jaitley and Piyush Goyal to
with the RBI. The government is spending the per cent. “If the RBI doesn’t support the market in the the march. The agitators
money before the year comes to a close. But As on February 5, the banking system had a next fiscal, like what it did in the later part of have said they will reserve a
from the next fiscal, it will start cutting down on liquidity surplus of about ~16,367 crore, but on this year, the bond yields will easily cross 8 per chair for Goyal at the protest
its expenses and cash balances will build up. January 22, the system ran into a deficit of cent,” said the head of investment of a mutual site at Jantar Mantar, since
Besides, advanced tax outflow in March will ~21,269 crore. These numbers, though, are fund. Much of that support should be comm- Jaitley is currently conva-
also run the system dry. perfectly acceptable, as up to ~1 trillion deficit unicated in the February policy, instead of wait- lescing in New York. One of
These were a few feedbacks that economists or surplus can be handled by the banking ing for the next policy in the next fiscal, he said. them will be Ashish Mishra,
and market participants had given to the RBI system smoothly. Anything more than the The most traded nine-year bond yields who had famously protested
top officials, including Governor Shaktikanta figure strains the system, bond dealers say. closed at 7.57 per cent, while the new 10-year in front of Railway Minister
Das and Deputy Governor Acharya, to Most don’t expect a rate cut on Thursday, yields closed at 7.36 per cent, down from 7.38 Goyal in Lucknow on
consider, rooting for more OMO support. but expect a change in stance to neutral. per cent on Tuesday. November 16.
6 PRIVATE EQUITY
>
MUMBAI | THURSDAY, 7 FEBRUARY 2019 1

PE INFLOWS IN JANUARY
 Deal volume  Deal value ($mn)
Brookfield may invest over $1 bn in India
995.8
3,070.8 Canadian asset management firm
116

raised $15 bn; might pump funds into BROOKFIELD IN INDIAN REALTY
59

Jan 1-31 Jan 1-31

commercial real estate in the country  Brookfield has put $3 bn in commercial
space, $450 mn in residential space
2018 2019 2018 2019 RAGHAVENDRA KAMATH ment on the story.
MUMBAI, 6 FEBRUARY In comparison, Blackstone has  Brookfield invests in residential estates
committed over $5 billion in through PE funds, in commercial
anada’s Brookfield Asset Indian properties, mostly in IT through realty funds
KEY DEALS LAST WEEK
Investor & target Stake (%) Value ($ mn) C Management which raised
$15 billion for global real
estate last week, could put as
parks and office properties. It is
gearing up for the country’s first
real estate investment trust or real
 Brookfield has a commercial property
portfolio of 25 mn sq ft
Piramal Fund Mgmt NA 69.9
much as 10 per cent of the funds estate investment trust (REIT)  Portfolio includes the 5 mn sq ft of
Lodha Buildcon
raised in Indian real estate, said with its partner Embassy group commercial properties in Powai, the IT
TPG Capital Inc 30.0 sources in the know. of Bengaluru. parks bought from Unitech group,
NA
Solara Active Pharma “Past funds have gone as much Brookfield invests in residen- Equinox Business Park bought from
1 as 10 per cent of their corpus in tial properties from its private Essar group and so on
OikocreditInternational NA 29.6 Indian real estate. So this fund equity funds and its real estate
Annapurna Finance
could also hit that mark,” said funds invests in commercial  Globally, it has $171 bn of real estate AUM;
2 it owns 450 mn sq ft of commercial
EightRoads Ventures NA 6.3 sources. properties.
Ashish Life Science Out of that money, Brookfield Brookfield has a commercial real estate
3 could put more money in Indian property portfolio of 25 million
ConnecticutInnovations
NA 3.1 commercial properties and com- square feet, which includes the
Aureus Analytics
pete with its global rival five million sq ft of commercial
1 Includes: Bamboo Finance SA, Oman India Joint Blackstone more aggressively, properties in Powai bought from
Investment Fund II, Asian Development Bank said sources in the know. Hiranandani family, the IT parks that there is huge demand for such announced the closing of its lat- Fund has made 10 investments commercial real estate globally.
2 Includes: Anterra Capital BV Brookfield has invested $3 bil- bought from Unitech group, properties and rents are going up. est flagship global private real around the world totalling more In total, Brookfield has over
3 Includes:Alpine Meridian Ventures LP, Multi-Act
lion in commercial properties and Equinox Business Park bought The supply is also limited,” said estate fund, Brookfield Strategic than $5 billion. $330 billion in assets under man-
Trade and Investments
invested $450 million in residen- from Essar group and so on. Shishir Baijal, chairman at Knight Real Estate Partners III (BSREP Globally, it has $171 billion of real agement across real estate, renew-
There were 15 PE deals worth $143.56 million and
1 exit worth $10.45 million in the last seven days
tial properties here. “It is a great idea to put money Frank India. III), which is Brookfield’s largest estate assets under management able power, infrastructure, and
ended Feb 06, 2019 Source: NewsCorp VCCEdge Brookfield declined to com- in commercial properties given On January 31, Brookfield private fund to date. So far, the (AUM). It owns 450 million sq ft of private equity.

‘Our fund will help companies move up the ESG scale’

Last week, three former Tata executives led by MUKUND RAJAN joined hands with Quantum Advisors’ managements of the companies we invest in, close the fund within the coming fiscal year.
AJIT DAYAL to launch a $1-billion ESG fund. Adopting a private equity kind of approach to public markets, similar to any PE firm. We will give sufficient
they will look to invest $50 million each in 20-odd companies which seek to become better on their ESG time for our engagement to play out, as many What is Quantum’s track record in terms of
practices and require help to do so, the duo tell Ranju Sarkar in an email interview. Edited excerpts: PE firms do, before exercising the choice of funds raised /managed and returned?
exit. Such engagement will be collaborative Ajit: Quantum Advisors manages over $2 bil-
Why an ESG fund? What kind of cos will you Mukund: A pressing context is provided by and will respect the unique situations of dif- lion in the Indian stock market. Its 100 per
invest & on what basis (criteria) will you environmental change — we are witnessing ferent companies, recognising that there is no cent subsidiary is the Quantum AMC which
pick them? rising global concerns around the rapid pace one size fits all solution. It will be undertaken manages the Quantum Long Term Equity
Ajit: Many owners of capital, especially in of global warming, and India already ranks as by experienced corporate leaders who are Value Fund (QLTEVF); this has given a return MUKUND RAJAN
developed markets, are concerned that their the third largest greenhouse gas emitter. deeply respectful of the skills and risk-taking of about 13.5 per cent per annum compound-
investments in economies and in companies Meanwhile, a framework for sustainable capability of promoters. ed, after all expenses and fees, since its
may be supporting activities that development has been provided inception in March 2006 nearly 13 AJIT DAYAL
are damaging to the environment by the United Nations Sustainable How is the market for fund-raising? By years ago. It is classified as a “value”
or propping up governments which Development Goals (SDGs), and when do you expect to make the first and the fund and invests in more estab-
have laws and regulations that may the corporate sector needs to final close? lished companies listed on the
not be in the larger interest of their shoulder a significant part of the Ajit: Though there are concerns of various stock exchanges in India.
citizens. Additionally, the pension responsibility for meeting these kinds in the world, ranging from Brexit, to a QLTEVF adopts what is called a
and sovereign funds also believe goals. There are also challenges of slowing US economy, to the impact of the US- bottom-up, long term approach
that, while they take the same risk social justice. In an emerging China trade war, to the outcome of the next to investing. It is important to
as other equity shareholders in a market like India, therefore, the general election India, there is also growing note that QLTEVF has not used
company, there are numerous cases where ESG theme becomes even more critical. concern around the factors of ESG — so that any formal ESG framework to
promoters or managements treat public capi- will help us. ESG investing is one of the fastest invest so the record cannot be
tal as private fiefdoms. Given this disconnect How are you similar to a private equity fund? growing equity approaches globally, with over used in any way to suggest what
between the owners of capital and the actions (LPs, engagement) Is this unique for a public $20 trillion now invested behind it. There is may happen with the proposed
of companies in the ESG (environmental, markets fund? strong and growing research evidence that ESG fund.
social and governance) space, we wish to iden- Mukund: We will undertake detailed due ESG investment and good returns correlate.
tify companies that seek to become better on diligence of companies and sustain our Mukund: We will target a first close in the For full interview visit:
their ESG practices and require help to do so. engagement with the promoters, boards and second half of this calendar year and hope to mybs.in/2X3fHtQ?1549463007
8 ISSUES AND INSIGHTS
>
MUMBAI | THURSDAY 7 FEBRUARY 2019

> CHINESE WHISPERS

All eyes on Walmart
Will Walmart stay put in India or will the policy flip-flop make it review its plans?
Amazon’s exit from China but not
Walmart’s from several foreign markets
over the years.
Even though a few changes, however
life-changing they may be, in the e-com-
merce rules may or may not make the
American retail major leave India, exit
is nothing new for Walmart. Last year, it
realised that it was tough to win the UK
market alone. So, it sold a majority stake
in its UK arm ASDA to UK’s second
NOT FOR PROFIT biggest supermarket chain Sainsbury for
around $10 billion. It was around the
NIVEDITA MOOKERJI same time that it was buying a control-
ling stake in Flipkart for $16 billion.
Korea. China hasn’t been a great story
either for Walmart till it partnered with
JD.com to take on Alibaba. In Japan
too, it recently withdrew from general
merchandise retailing so that it could
use its resources more effectively in
other geographies. There have been
other break-ups as well, including the
one with the Bharti group a few years
ago, though Walmart stayed on looking
for a better future in India. And then
Flipkart happened.
That brings us back to the current
confusion over Walmart’s India plans.
If conspiracy theories are to be believed,
tory processes. There was no doubt
then that the biggest retailer of the
world was here to stay in India, though
its multi-brand retail dreams had been
shattered long ago.
Online looked like a safe bet
despite some fringe protests by trade
bodies against international hold over
e-commerce companies and deep dis-
counts that they were offering. Once
the Flipkart founders — Sachin Bansal
and Binny Bansal — were out of the
scheme of things, Walmart had settled
down to compete with Amazon and
plan things ahead of Reliance’s entry
into e-commerce.
But the e-commerce universe
turned upside down when the govern-
ment issued revised foreign direct
investment (FDI) guidelines that meant
doing the online retail business in a
completely different way from
to its promise made to the traders back
in 2014 that FDI wouldn’t be permitted
in multi-brand retail.
In the middle of all the chaos when
Amazon and Flipkart (Walmart) are busy Maya'sTwitterdebut
restructuring sellers and products on
their respective marketplace platforms
to comply with the latest e-commerce
rules, conspiracy theorists are again
wondering if the regulatory changes may
offer an escape route to the international
majors from a market that looks tough
to operate in. As foreign investors
depend more rigidly on board approvals
for every investment and business deci- Twitter is treating this as nothing short of a
sion, policy stability is critical to them. coup. The Bahujan Samaj Party (BSP)
A continuing policy flip flop, like the one president, Mayawati (pictured), has finally
in e-commerce currently, could possibly debuted on the social media platform. In the
force them to look out. past, Mayawati had not just disapproved of
For now, Walmart has said it her party members officially joining the
remains optimistic about India. That platform, but a youth leader was publicly
could change without prior notice. ticked off for operating a quasi-official Twitter

A
merican brokerage firm Morgan
Stanley put out a warning note
earlier this week that Walmart
may exit Flipkart, similar to what
Amazon had done in China, if there’s
no clear path to profitability. While
Flipkart chief executive Kalyan
Krishnamurthy countered that theory
immediately in a communication to
the company employees, it’s surprising
that Morgan Stanley mentioned
Brazil was yet another market where it
sold some 80 per cent stake to private
equity firm Advent International as
recently as in June 2018. While it wanted
to beat the top player Tesco in the UK
through the deal with Sainsbury, the
move in Brazil was prompted by an
under-performing business.
Walmart’s exits had started more
than a decade ago when it didn’t have
a good going in Germany and South
the American major has not exactly
been on top of the world after the much
anticipated Flipkart deal due to share-
holders’ concern. According to one such
theory, Walmart may have been looking
for a way out of the deal soon after its
shares plunged and market cap eroded.
A ''no'' from the Competition
Commission of India (CCI) may have
provided the company an escape route,
but Walmart swam through the regula-
February 1. Walmart-owned Flipkart
and Amazon were at the receiving end,
while domestic traders’ bodies such as
CAIT claimed victory as the govern-
ment refused to even extend the
February 1 deadline. The most obvious
interpretation was that the government
didn’t want to annoy domestic traders’
lobby, a large voter base, ahead of a cru-
cial Lok Sabha poll. After all, through-
out its term, this government held on
Flash back to October 2013: Then
Walmart Asia chief executive Scott
Price had chosen Bali to famously say,
"frankly, the FDI has passed". That
ended a partnership that had begun
on long-term promise.
Exit, whether partial or full, is not
uncommon for any business, includ-
ing in retail. Tesco, Walmart, Carrefour
and others — everyone has done it rou-
tinely. And it can happen again.
handle in the name of the party, and had to
eventually quit the party. On Wednesday, an
anodyne press statement from the BSP stated
that Mayawati "has for the first time decided
to join Twitter for speedy interaction with
media and masses, besides expressing her
views on various issues of national and
political importance through Twitter". The BSP
chief's Twitter handle is @SushriMayawati,
and the first tweet on it was posted on
January 22. However, no one took it seriously
until the official statement considering
previous similar handles were termed fake by
the party.

GMS 2.0: Banks’ participation key to success Together we can

Bravado is probably a necessary requirement
for a politician's job profile. On Wednesday,
The scheme’s inability to convince big players like Indian National Lok Dal (INLD) leader Abhay
Singh Chautala rejected reports that his
temples has to be sorted on a war footing the medium or long term – this tanta- party's alliance with the Bahujan Samaj
mounts to selling gold, which is pro- Party (BSP) was under strain after the
RAJESH BHAYANI guidance after getting customers’ hibited by the trust deeds. drubbing it received in the Jind bypoll,
queries. But nothing happened. Experts suggest that the govern- asserting that the two would jointly contest

A
fter three years of launching the
Gold Monetisation Scheme
(GMS), the central government
is planning to rehaul the entire scheme
to attract physical gold hoarders. The
reason: The scheme has collected less
than 20 tonnes. To put the number in
perspective, two years back, the World
Gold Council had estimated that Indian
households held as much as 24,000
tonnes of gold.
Banks have been the main culprit in
this fiasco. That is, 14 banks have
indeed signed tripartite agreements
with seven refineries and 47 hallmark-
ing centres to run the scheme.
However, they have not returned
signed agreements with the respective
centres to start the process. In other
words, they have not launched the
scheme.
The only bank that
seems to have some kind of
scheme in place is the State
Bank of India. And that too
because it has been running
a gold deposit scheme for
years, and has its systems in
place. “We are getting sev-
eral inquiries from deposi-
tors who wish to deposit
gold ranging from 30 gram
(which is the minimum) to
5 kg in the Gold Monetisation Scheme,”
said Kolkata-based Harshad Ajmera,
president, Indian Association of
Hallmarking Centres (IAHC), adding
that if banks show interest, a few hun-
dred kilograms of gold may be deposit-
ed in a very short time. Another bullion
refiner from Kochi said he had even
approached the finance ministry for
The GMS, introduced by the gov-
ernment in 2015, has these key fea-
tures. There are three kinds of deposits
— short, medium and long term.
Under the short-term (one to three
years) scheme, banks are allowed to
lend to jewellers, collect it back and
return to depositors on maturity.
Under the medium- and long-term
schemes (five to 15 years), the liability
of the deposit is with the government.
The mobilised gold is to be auctioned
by the MMTC on behalf of the govern-
ment, and the money collected will be
treated as market borrowings. If the
price of gold goes up on maturity, the
government will pay back the higher
amount to the depositor.
The Narendra Modi-led govern-
ment’s plan to unlock the gold held by
temples and individuals was intro-
duced after India’s current
account deficit shot up to 4.7
per cent of GDP, or $88 bil-
lion, in 2012-13, necessitating
the need to reduce gold
imports for which India was
spending $50 billion-plus on
import bills. The govern-
ment decided to unlock the
value of idle gold through
GMS. The idea was to
mobilise gold and lend it to
jewellers. This was expected to reduce
the import bill. The World Gold
Council, two years back, had estimated
that 24,000 tonnes of gold might be
with Indian households (worth over
440 per cent of GDP) . This holding fig-
ure has only increased now.
Last week, the finance ministry stat-
ed in its Interim Budget document that
GLITTERING FACTS
24,000 tonnes of gold Deposit from temples are The target under the
are estimated to be in estimated to be around scheme is to mobilise
Indian households 2-3 tonnes under the 50 tonnes of gold per
new GMS-2015 annum
20 tonnes have been
mobilised under the 16 tonnes were 47 collection centres
GMS
mobilised under old ready, over 700 more
13 tonnes are to be gold deposit scheme ready to participate in
which is closed now
auctioned by MMTC GMS
“broad guidelines for amendment of will allow banks to return gold in the
Gold Monetisation Scheme has been metal form on maturity instead of the
prepared and is under consideration.” equivalent value in cash. This move
While the government’s proposals are could be particularly attractive to tem-
yet to be made public, the Reserve Bank ples, which hold around 3,500 to 4,000
of India has already started taking some tonnes, as they would like to get back
concrete actions. For example, last gold in metal format instead of cash.
month it allowed banks to accept gold Apart from some big temples, sev-
from government agencies (those con- eral small temples across the country
fiscating gold for any reason are poten- can potentially deposit 25-50 kg gold
tial depositors) and trusts. in GMS. However, they are managed
According to the source, the govern- by trusts that have deeds that do not
ment is planning to ask banks to open allow selling of gold. And the GMS, in
a gold metal deposit account, which its present format, gives back cash over
ment consider more moves. For exam- the coming Lok Sabha polls. Abhay is the
ple, James Jose, secretary, Association younger son of INLD president and former
of Gold Refineries and Mints said: Haryana chief minister Om Prakash Chautala.
“The government should open a GMS In the Jind bypolls, Digvijay Chautala of the
portal giving details of banks that will Jannayak Janata Party (JJP) finished at
accept gold with branches and desig- number two, while the INLD candidate lost
nated officials. Also, information his security deposit and the Bharatiya Janata
about locations of hallmarking centres Party (BJP) emerged the winner. Abhay's
– the first point for customers to melt brother Ajay Singh Chautala, currently
and weigh gold and issue certificates serving a jail term, is a patron of the JJP and
– should also be provided in this por- his two sons — Digvijay and Dushyant — are
tal. Banks will open gold deposit spearheading the party in his absence.
accounts, based on the certificates Interestingly, BSP chief Mayawati, in a press
issued by hallmarking centres. Such statement issued on Monday, said her party
information will help customers who would not have any truck with the INLD till
want to deposit gold.” the warring family reunites.
Another issue that needs attention
is the lack of availability of bills. Many
potential depositors do not want to go
through the hassle of depositing gold,
Missing in action
as they don’t have supporting bills.
The Congress and Janata Dal (Secular) coalition
Some might not even know the origin
government in Karnataka has moved from
since they may have received family
one crisis to another since it was formed last
heirloom held to many decades. They
May. On Wednesday, Congress general
would be clearly worried about the
secretary K C Venugopal rushed to Bengaluru
income-tax department’s queries.
following reports that at least four Congress
Professor Arvind Sahay, chairperson,
legislators were missing on the first day of the
India Gold Policy Center, IIM-A rec-
Assembly session. On Tuesday, a whip had
ommended the government should
been issued to all MLAs of the ruling coalition
give a clarification that up to 1 kg of
to be present in the Assembly on all days of
gold deposited by the gold under GMS
the Budget session. That was seen as a move
will not go through any tax scrutiny.
by the ruling coalition to pre-empt any plans
At today’s price 1 kg gold bought 25
of disgruntled Congress MLAs on the radar of
years back would be around ~33 lakh.
BJP to stay away from the Assembly and
To encourage banks, Sahay suggest-
threaten the government. Former chief
ed incentivising banks to make them
minister and Congress leader Siddaramaiah
feel that GMS is a profitable business
served a second notice to the MLAs who did
proposition. “This can be done by pro-
not turn up for the meeting. Congress sources
viding monetary incentives, allowing
claimed some of the BJP legislators have also
gold collected under GMS to be treated
gone missing.
as part of the cash reserve ratio and oth-
er moves,” he added.

INSIGHT > LETTERS

India’s employment: The challenges
In the concluding part of the series, the author says India’s next challenge is to meet
the aspirations of people who are employed but want higher incomes
AMITABH KANT
Beyond the drama
The drama involving the West Bengal
government and the Central Bureau of
Investigation (CBI) has been both dis-
turbing and unedifying. To the non-
aligned, both parties’ behaviour fails
exports, approximately 750,000 vehi- the smell-test. The Kolkata Police
cles were sold in FY18 in India. Commissioner Rajeev Kumar should
Considering a replacement rate of 25 have joined the investigation much ear-
per cent, this still translates to lier. If he had apprehensions that he
560,000 new commercial vehicles might be framed or coerced, then he
added to the transport sector. could have sought the presence of his
Assuming a capacity of employment lawyer. The CBI team should have been
for each commercial vehicle at two, treated with greater courtesy. Similarly,
we can infer that 1.1 million jobs are the CBI could have come at normal
annually added in this sector alone. hours, not at 7 pm, and with less show
To this if one added the sales of cars, of strength. The CBI’s inaction over the
three-wheelers and tractors, around past four years, the fact that it’s not pur-
30-plus lakh jobs are created in this suing others allegedly involved, the
of that state. The other is the post of the
governor. He/she is the most senior
unelected constitutional authority but
there is little transparency in the appoint-
ment. The governor’s ability to seek dis-
solution of an elected state government
on his own determination, should have
had no place in a democratic
Constitution.
Our states are not to the Union of India
what a district of the state is to the state.
P Datta New Delhi
Improve skill sets
This refers to “Challenge is to create more
organised jobs” (February 6). The econo-
my, as rightly pointed out in the article,
has to be more organised and infrastruc-
ture needs to be of a better quality to ensure

S
o what is the true picture of
employment in India? We now
have extensive data available on
people contributing to social security
benefits are provided through the
Employee Provident Fund
Organisation (EPFO), the Employee
State Insurance Corporation (ESIC) and
the National Pension Fund (NPS).
Between September 2017 and
November 2018, a total of 73,50,786 new
subscribers were added to the EPFO,
an average of 490,000 subscribers each
month. ESIC tells a similar story. On an
average, between September 2017 and
November 2018, approximately 1-1.1
million subscribers were added each
month. Even if we consider a 50 per
cent overlap with EPFO data, it yields
about 1 million workers being added to
the formal workforce per month, or 12
million annually. An analysis of NPS
shows that we are adding close to
600,000-plus jobs in central and all
state governments.
Another complementary measure
of employment can be based on the
transport sector. Consider the sale of
commercial vehicles. The net of
sector alone yearly.
Self-employment is also a critical
source of employment generation in
India. Job creation among profes-
sional service providers such as char-
tered accountants, lawyers and doc-
tors is also robust, as per data from
their respective regulatory bodies.
Income Tax (IT) data provides an
indication on the number of new
self-employed professionals. As per
data available, an average of 150,000
tax paying professionals were added
annually between assessment year
(AY) 2014-15 and AY 2017-18. One can
further assume that most of these
professional tax payers hire support
staff, likely to be below the threshold
of 20 employees which then makes
social security registration manda-
tory. Assuming each professional
hires a support staff of five, this indi-
cates an average of 750,000 jobs
being created annually. Under
MUDRA Yojana, 155.6 million loans
have been disbursed amounting to
over ~7 trillion. Over 40 million first
time borrowers have started their
business enterprises. Such a huge
magnitude of loans being given to
small entrepreneurs has created
gainful employment.
A study by McKinsey Global
Institute titled “India’s Labour Market
— A New Emphasis on Gainful
Employment” has highlighted that
increased government spending, rise
of independent work and
entrepreneurship have boosted incre-
mental job for 20-26 million people
during 2014-17. According to an anal-
ysis by the Ministry of Tourism, the
tourism sector alone has created 14.62
million job opportunities in the coun-
try during last four years.
While the above statistics do not
present the full extent of employ-
ment generation, they do lend
irrefutable and concrete evidence of
the extent of employment being gen-
erated across the country. There is
certainly enough evidence to doubt
and even contradict the narrative of
joblessness with shrinking workforce
and rise in unemployment.
Does this mean that India has no
challenges related to employment?
That’s also not true. Over the last few
years, India’s next challenge is to
meet the aspirations of people who
are employed but want higher
incomes. This requires creation of
enough well-paying jobs for existing
industrial workforce and for those
who want to move out of agriculture.
This requires policies that encourage
productivity growth in the country,
which necessitate concerted efforts
towards formalisation, urbanisation
and industrialisation of Indian econ-
omy. Regarding the PLFS, I feel that
the experience of the pilot should be
used to improve the survey through
use of technology, accessing real-time
data, and increasing the sample size.
The draft estimates just do not add
up. The above are issues I would have
raised if I had been presented a copy
beforehand as member of the
Commission or if the full
Commission had met to discuss the
draft report. (Concluded)
The author is CEO of NITI Aayog. Views
expressed are personal.
timing of the visit, that is, on the last
day of the interim chief of the agency,
and doing all that just a few months
before the elections — can be seen as
part of a script.
This, however, brings up the bigger
question of Union-state relations. By
design, the Union government has been
successful in extending its say over mat-
ters that can be better handled at the
state level. The inter-state National
Development Council is hardly function-
al. Another example is the duality over
the cadre distribution of the Indian
Administrative Services and the Indian
Police Services officers. Once allotted to
a state, these officers logically should be
under the sole administrative authority
> HAMBONE
access to basic requirements such as health
care, education and financial services. This
inadequacy and a lack of connectivity are
responsible for the high level of informal
employment currently. Adequate geo-
graphical and regional connectivity is
essential to ensure growth in formal organ-
ised employment and encourage the infor-
mal sector to switch over.
C Gopinath Nair Kochi
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201 · E-mail: letters@bsmail.in
All letters must have a postal address and telephone
number
 >
OPINION 9
STAY INFORMED THROUGH THE DAY @ WWW.BUSINESS-STANDARD.COM.

Volume XXIII Number 126

CHART 1: TREND IN CORPORTATE CHART 2: GROSS CORPORATE PROFITS % GDP
MUMBAI | THURSDAY, 7 FEBRUARY 2019 PROFITS AND INDIA'S NOMINAL GDP % %GDP Change since 2005 (RHS) %
40 8
35 6
Premature assumptions 30
25
20
4
2
0
Opposition parties lack a coherent alternative plan 15 -2
ith the interim Budget out of the way, the focus is now on the next 10 -4

W
5 -6
general elections in May. Opinion polls have started on whether divergent special interest groups.
0 -8
the Indian voter will return Prime Minister Narendra Modi-led  Another is incomplete or dysfunctional design,

Republic
Mexico

S Africa
Chile

Korea

China
Japan

Russia
Poland

UK
US
France
Turkey

Germany
National Democratic Alliance government (NDA) to the Centre whereas expenditure must produce surpluses. For

Czech
or not. The Opposition parties are seemingly determined to form a grand example, a new metro service in one part of the
National Capital Region does not connect with the
alliance, or mahagathbandhan, to challenge the ruling party. Several age-old Indexed to base 100 Sources: Capitaline, Reserve Bank of India
Compiled by BS Research Bureau
Source: OECD,latest data as 2015 for all countries other than China, South Korea and South Africa,
Delhi Metro. What’s more, the interchange is sepa-
which are to 2014
opponents such as the Bahujan Samaj Party and the Samajwadi Party in Uttar rated by several kilometres, and is reportedly
Pradesh have announced that they will fight elections together. The Congress designed to end ultimately with a gap of 350 metres
party is hoping to ally with parties that it opposes bitterly at the state level such
as the Trinamool Congress or even the Communist Party of India (Marxist).
Indeed, on January 19, leaders from as many as 20 parties shared a common
Guns or butter, both at street level. A ‘rapid transit’ system that slows you
down? If this were designed by enemy action to tie
up resources and make people unproductive, they
could not have done better. Similar problems assail

need investments
platform in West Bengal to signal their combined challenge to the NDA. But
it is not going to be an easy task, as evident from the SP-BSP’s decision to keep
the Congress out of the alliance and Mayawati’s assertion that she would
reconsider her support to Madhya Pradesh and Rajasthan governments if some
of her conditions are not met. Our common interest requires building a consensus on cash flows
Going by some of the recent opinion polls, it would appear that the NDA
is way ahead of the grand alliance, though it might fall short of a majority in the
oney, money, money… makes the world
House. One of the opinion polls, unveiled in January-end, assessed what the per-
formance of the leading political alliances would be in case the elections were “M go round”. This line from a musical set
in the 1930s' Berlin is inescapable in the
held immediately. The BJP-led NDA, according to this poll, is poised to get 252 commercial, economic, and often the political
seats — 20 short of the majority mark of 272 in the 543-seat Lok Sabha. Though aspects of reality. While the show emphasised escap-
this is considerably less than what the NDA managed in 2014, the fact is that it ing through make-believe, the real-world actually
follows closely along.
is within sniffing distance of the critical mark. The result suggests that the Take India’s economy: Despite growth, without
NDA will become the largest pre-poll alliance by a significant margin. The commensurate profits, employment, and wellbe-
Congress-led United Progress Alliance is pegged at 147 seats and all the rest, a ing, we are marking time. Analysts point out that cor-
sort of a non-BJP, non-Congress front, is slated to get 144 seats. Two other sur- porate profits languished since 2008, trending down
as a percentage of GDP from 2010, excluding a minor
veys, however, predicted a less flattering picture of NDA fortunes. The verdict
improvement in 2017.1 In fact, profits have not grown
in both the surveys was that it will be a hung House, with NDA stopping at 233- in real terms despite annual GDP growth of about 7
237 seats, while the UPA might have to settle for less than 170 seats. per cent for 10 years. This comes through powerful-
There are many reasons why one should not jump to conclusions based on ly in Chart 1.
these opinion polls. The fact is these are early days and the easy assumptions In the boom from 2003 to
2008, profits to GDP doubled from
made by many about an Opposition alliance unseating Mr Modi may be pre- 2.8 per cent to 5.5 per cent. Growth
mature. For instance, there is no overriding seat adjustment in key states such was driven by investment and
as UP. With little time left before the polls, there is still no clarity whether the exports as well as by consump-
Congress is with the SP-BSP combine or whether there will be a triangular con- tion. After the subprime crisis of
2008 and the recession, profits in
test. Moreover, several regional parties that rule states such as Odisha and
India slumped, partly because of
Telangana have stayed away from the emerging mahagathbandhan. It is not dif- excess capacity, and the rising
ficult to see them siding with the party most likely to reach the majority mark. costs of additional debt caused
And NDA has a clear edge in all the surveys. Lastly, the grand alliance per se has by inflation targeting (the compo-
nents being wages, taxes, corpo-
not yet gone beyond an anti-Modi rhetoric; they have not presented a coherent
rate profits, interest payments
SHYAM PONAPPA
alternative plan, except for criticising the NDA. The only real promise so far is and rents).
Rahul Gandhi’s minimum income guarantee scheme, which could be an oper- Although profits recovered somewhat, they
ational nightmare since it would mean assessing beneficiaries’ income first. It’s trended downward, and by 2018 were 3 per cent, the
time for the opposition alliance to wake up and smell the coffee. same as in 2003. By comparison, US figures (after a
low of 4.95 per cent in Q4 2008) ranged from 9 to 11.7
per cent. Gross profit to GDP in the US was 20 per
the design of communications systems that often
don’t ‘connect the pipes’ all the way through, such
as spectrum regulations that hinder communica-
tions, hastily applied GST regulations, or express-
ways with bottlenecks.
 A third is behavioural acts of omission or com-
mission that increase costs and reduce surpluses.
Ignoring laws, rules and regulations, whether it’s
investment as the driver, with growth in sectors such driving down the wrong side, lane indiscipline,
as automobiles, consumer durables and retail. Some
commentators expect these trends to continue, with
jumping traffic lights, breaking queues, littering,
polluting, and such other lapses, including govern-
some optimism on the revival of investment. ment agencies not paying bills.
The counterfactual is that we haven’t had any  Yet another is accepting mediocrity, ignoring stan-
required reforms of structure and organisation for dards and protocols required for quality outcomes,
surpluses to grow in PSU banks, utilities or telecom. products or services.
For instance: If we are to achieve surpluses, we will have to
 In banking, the NPA crisis remains, but the focus build a consensus focused on cash flows. The build-
has moved away to elections. ing blocks are ‘trainable’ virtues, with appropriate
 Reliable electricity supply needs financial sus- structures, processes, and behaviour. Social disci-
tainability and stable pricing, and neither is avail- plines such as a sense of responsibility for and a
able. Coal mine auctions haven’t resolved resource desire to maintain good order, working logically,
costs and availability, while financial gambits in the cooperatively, to plan — an ‘objective oriented, proj-
form of race-to-the-bottom bids to start projects and ect management approach’ for individual and group
sell out early, instead of staying for profits from oper- gain — needs to be taught, ideally from the cradle,
ations, aggravate problems in pric- and reinforced in our activities, provided the con-
ing and delivery for renewable nectivity and content are built to support this. These
energy as for conventional fuels. values can also be introduced at any level. Playing
The financial incapacity of state for group stakes and open, direct communication
electricity boards has created can be habituated through practice, by education-
another set of problems, com- al, economic and political systems treating them as
pounded by continued populism worthy of inculcation and reward.
(unsustainable prices). A necessary adjunct is to embrace long-hori-
 In telecom there has been only zon plans and group gains through multipartisan
one major reform for 5 GHz activity. For example, export initiatives are needed
spectrum for WiFi, despite the new using digital technologies that feed into a digitally
National Digital Communications informed foreign trade policy (DIFTP).3 Such ini-
Policy. tiatives require diligent collective effort, recognis-
Meanwhile, electoral wran- ing that short cuts are at the cost of larger gains.
gling threatens to further deplete the treasury, Until we practice such convergent, national-gain
whereas the problem is the opposite: Lack of sur- behaviour, we are unlikely to generate the sur-
pluses (profits, and ultimately, cash). Profits have pluses we wish for.
been stagnant for a decade starting from UPA-II,
partly because of the excess capacity of the boom.2 shyamponappa@gmail.com

Sticking to his guns
Mr Trump promises bipartisanship, but his speech was divisive
nited States President Donald Trump’s annual State of the Union
cent in 2015, while in China (2014) it was nearly 30
per cent (Chart 2). Surpluses are essential for
investment and development, because neither can
happen without them. Only thereafter is a higher
wage-share affordable.
Of the decline in India from 2008 to 2018, about
This has constrained development spending,
because low surpluses have kept investments
down. By contrast, investments and exports were
1: "Corporate profit to GDP: Analyzing growth across cycles -
2018 mirroring 2003 bottom":
https://www.motilaloswal.com/site/rreports/63684004127
strong from 2003-2008. 6772228.pdf
Several other social forces add to the downdraft. 2: https://thewire.in/political-economy/what-explains-
 One is a political system that encourages splin- india-incs-corporate-earnings-conundrum

U address to both houses of the US Congress was billed by the

Republican administration as an exercise in bipartisanship. That is
what, presumably, is necessary at a time when once again the US has
to deal with a House of Representatives that is controlled by one party and a White
House that is controlled by another. But that is not at all how things turned out.
nine-tenths happened in four sectors: PSU banks
(36 per cent), oil and gas (19), metals (18) and telecom
(15). During this period, consumption replaced
tering and divergence. As large parties have estab-
lished hierarchies, it’s easier to start anew to get
and control funding for splinter parties around
3: https://www.researchgate.net/profile/RASHMI_BANGA/
publication/330824656_Is_India_Digitally_Prepared_ for_I
nternational_Trade

While Mr Trump did gesture towards bipartisanship at times, most of his speech
was focused on energising his base, and he showed no sign of abandoning his hard
line on several issues — particularly immigration. He spoke of an “urgent nation-
India’s management conundrum
hen you line up people from India Inc who dark glasses, surely one of the most glamorous dhar- media business, then, Mr Chandra was not great at

W
al crisis” at the US border with Mexico, demanding funds to build the border wall
that has already this year shut down the government for over a month. have dominated news from the latter half
of 2017 to the end of 2018, examples of poor
He also made it clear that in his view, “legislation” could not co-exist with management, due diligence, business judgement
“investigation” — that, in other words, House Democrats should not examine his and outright fraud abound.
record, his ties with Russia, or other problematic aspects of his 2016 campaign. Nirav Modi, Vijay Mallya, Naresh Goyal, Subhash
The only moments of genuine bipartisan applause were when he committed to Chandra, IL&FS, Chanda Kochhar, the Ruia family,
Anil Ambani, Shikha Sharma, Rana Kapoor…
eliminating HIV, the virus that causes AIDS, in 10 years, and when he men-
The notable successes, on the other hand, are
tioned criminal justice reform that became law in December with support from conspicuously few: Mukesh Ambani, Ritesh Agarwal
both Democrats and Republicans. The record number of women legislators — all of Oyo and Flipkart duo Sachin &
female Democrats in Congress dressed in suffragette white for the speech — was Binny Bansal (but only for making
also another shared applause line. a successful sale).
So: Are Indian businesspeople,
Mr Trump praised the strength of the US economy, and warned that only managers and bankers sub-par or
“war and investigation” could derail it. While he is wrong about those two — and are they victims of a sub-optimal
his unmistakable desire to get out of Afghanistan as soon as possible will vastly business environment, where lob-
imperil the security of South Asia and the world — it is certainly true that the eco- bying trumps rules and policy-
making is capricious?
nomic recovery is fragile and a divided Washington will struggle to keep the revival
A bit of both, if you scan the two
going. Infrastructure building, for example, which both parties agree is neces- lists above. Vijay Mallya, Naresh
sary, might be impossible to put into place given the sharp divisions in polity.
Another aspect of his speech with economic implications was his continuing
Goyal and Subhash Chandra all
confessed to poor decision-mak-
SWOT
tough line on China. “The theft of American jobs and wealth has come to an end,” ing. For the first two the principal KANIKA DATTA
failing has been a basic one: Cost-
said Mr Trump, underlining his economic nationalist approach. Mr Trump also control, the bread and butter of any airline any-
asked for more tariff-setting authority for the White House — but, although the where in the world.
Democrats have traditionally been less of a free-trade party than the Republicans, In Mr Goyal’s case, it would be wrong to attribute
it is not sure that the House majority will be willing to cede more power to a Trump only soaring oil prices to his current woes. His strug-
gles with cost, and its related challenge, people man-
White House. Indeed, bipartisan legislation has been introduced last week to lim-
agement, date back at least a decade, the legacy of
it, and not expand, the president's powers to prosecute a trade war. the decision to buy the sinking Air Sahara in 2006.
For the world and for India, the implications of a divided Washington are wor- Recall the drama played out on TV when he
rying. An inward-looking US will continue to see its role in the world diminish. sacked some 1,900 employees — cabin crew, ground
Those areas of bipartisanship that remain are likely to be net negative for India staff etc — and then reinstated them after a dra-
matic late night press conference in 2008. Few
— such as the possibility that the US will strike a bad deal with the Taliban and Bollywood blockbusters could have matched the
exit precipitately from Afghanistan. histrionics of this episode. Youthful protesters gath-
ered in their bright yellow Jet Airways uniform and
nas in recent memory. Then came Mr Goyal’s turn at
the presser, where he teared up and swore on his late
mother that he bore them no ill will.
Mr Mallya has long cultivated a theatrical per-
sona, but Kingfisher Airlines’ crash landing was
unprecedented in its drama. As with Jet Airways, an
ill-judged acquisition, this time of Air Deccan, to
beat government rules for flying overseas routes,
proved his undoing as did his weird strategy of offer-
ing business class facilities to econ-
omy class passengers. An 18th
birthday present for a son with a
personality resembling Donald
Trump Jr, Mallya pater called it a
business failure.
The banks, owed more than
~7,000 crore, begged to differ.
Questions arose as to how aviation
came to be designated “infrastruc-
ture lending” when he, a Rajya
Sabha MP, was accessing loans. By
2012, the airline closed leaving
scores of employees jobless. Then
came reports of spectacular assets
being requisitioned by lenders — zillions of cars,
luxury homes, private jets. Topping this out were
his flight to England after selling his core liquor
business to Diageo, extradition hearings that
involved an improbable photo of an Indian jail where
he would be incarcerated to assure a British judge
that he would not be mistreated.
Subhash Chandra, whose Essel group saw its stocks
hammered last week, offered a point-by-point expla-
nation of why he’s in this predicament: “Incorrect
bids” in infrastructure; a “key error” in acquiring D2H;
shouldering a major debt when the family business-
es were separated; the IL&FS crisis which “dimin-
ished” his ability to service borrowings. Bar his core
diversification. But he blamed his problems as much
on “negative forces” (unspecified) that intentionally
hammered down his company’s shares.
Managing costs and diversifying wisely are basics
of management. It is notable that several groups —
IL&FS among them — have been felled by splurging
on expensive projects in infrastructure, a sector so
tied up in unpredictable government policy that it
now accounts for the bulk of bad debts in the Indian
banking system.
But basic management also demands due dili-
gence. Axis Bank’s Shikha Sharma and YES Bank’s
Rana Kapoor, once poster-people for the Indian
banking system, were both asked by the central
banker to step aside on these grounds. Ms Kochhar’s
case, yet unclear since the investigative documents
against her have not been made public, suggests, at
the very least, a casual approach to the issue of con-
flict of interest.
Which brings us to the successes. Of these, the
steady and exponential growth of Mr Agarwal’s OYO
Rooms appears to be unambiguously a business suc-
cess. It is now India’s largest hotel firm by number of
rooms and has ventured overseas. Mukesh Ambani’s
Jio, the most formidable force on the Indian telecom
scene today, would qualify a distant second only
because the company leveraged gaps — perfectly
legal ones — in Indian competition and regulatory
laws to establish itself. It is worth wondering, how-
ever, whether it would have succeeded with quite the
same dominance in any other rule-based polity.
Overall, then, the picture is a dismal one. On the
cusp of the third decade of the 21st century and after
nearly three decades of economic liberalisation,
India is struggling to create a vibrant business cli-
mate. This says as much for those who run busi-
nesses as for the legal and regulatory environment in
which they operate.

Countering India’s e-commerce cacophony how much of the foundation of India’s

BOOK REVIEW
AJIT BALAKRISHNAN
In When it Clicks: Field Notes from India’s
E-Commerce Revolution, an India Railway
Reservation pioneer tells his story in a
world that is awash with misgivings about
what the internet revolution has wrought.
Such misgivings range from accusations
that e-commerce is destroying the liveli-
hood of small shopkeepers, who employ
half of India’s young who are desperately
seeking jobs in urban India to escape the
misery of rural India, to accusations that
the internet is being used to fix elections.
In this dismal scenario, the book shines a
bright light on an achievement most
Indians will probably agree on: the avail-
ability of online reservations on Indian
Railways. Gone are the days of waiting
for hours in queue at dawn or dealing
with sleazy brokers in dark alleys to get a
railway ticket to go see your parents. And
this book is by one of the key people who
fought against overwhelming odds to
make the Online Railway Reservation sys-
tem happen.
Few people would have dared to take
on a job as gigantic as this. The Indian
Railway system has 7,300-plus railway
stations that carries millions of passen-
gers every year over 67,000-plus kilome-
tres in the country. Imagine also the task
of making it happen in an organisation
that employs more than 1.3 million peo-
ple. Amitabh Pandey’s book is about how
he went about enthusing teams inside
the Indian Railways and facilitating
online reservations — with all its com-
plexities of keeping track of seats avail-
ability across thousands of trains, to tak-
ing the booking, getting payment systems
implemented and ensuring that tickets
are delivered safely to ticket buyers across
the vast expanse of India.
The Indian Railways website went live
in August 2002 complete with online pay-
ments at a time when most Indian corpo-
rate bosses viewed the internet as a play-
thing where their teenage children went
and listened to pirated music and films or
viewed pornography. Yet in those early
days, when telephone lines barely worked
and most banks did not offer online pay-
ment facilities, online ticketing at Indian
Railways leapt from a few hundred tickets
a day to several thousand tickets a day in
a few months. The cliché is that real start-
ups get started in garages. Mr Pandey and
the online Railway Reservations team
were given a stretch of corridor in an
Indian Railways building where they cre-
ated a small room barely large enough to
house three server racks and his team.
We are a country in which selfless,
faceless civil servants undertake some
truly heroic acts, but the media glory is
focused on “start-ups” and business
tycoons. Enabling the online booking and
payment for Indian Railway tickets is one
such case. Having toiled in the internet
industry for two decades, I can venture to
say that just about the only worthwhile
achievement of India’s e-commerce
industry is this: creating the online reser-
vation and payment of the Indian
Railways. The rest of India’s e-commerce
industry seemed to be devoted to flood-
ing the Indian market with cheap Chinese
fake-name consumer electronic goods
and running up astronomical losses.
Reading this book, I suddenly recalled
later success in Information Technology
services was laid by outsourcing contracts
that the India Railways (and later the
nationalised banks) handed out in the
late 1980s to Indian entrepreneurs. These
projects enabled and nurtured the early
IT services companies and helped them
prepare to capitalise on the worldwide
Y2K boom of the late 1990s
The author devotes some of his book
to an overview of the online travel indus-
try in India, particularly the venture-
funded air-travel portion of it. He analy-
ses the various segments of this industry
and concludes that “the pattern is slight-
ly disturbing”. He says that there is a
“tendency towards hubris when large
sums of money are available to burn…”
and that there is an attitude “of ‘get me
the best there is, money is no object!’ This
leads to unnecessary waste”. He con-
cludes that maybe “venture capital per-
haps needs to introspect…” and adds that
“most VCs have their roots in the West”.
He asks, like many others, about the e-
commerce industry, “How long will
…loss-making operations last?” and fol-
lows it up with an interesting discussion
on whether the market share they have
acquired by discounting prices be lost
once the discounting stops.
These questions, plus the ones he rais-
es on “Dark-Suited Bankers” in India who,
in his view, never take risks, and on
whether electronic transactions can
replace “overworked, often rude and ill-
informed and unhelpful ‘babu’” and thus
make the life of ordinary citizens in India
a little more bearable, should make this
book appealing to all thinking people. Mr
Pandey accomplishes all of this in a mere
156 pages, something you can easily read,
let’s say, on a Bombay-Delhi flight.
WHEN IT CLICKS:
Field Notes from India's
E-Commerce Revolution
Amitabh Pandey
Pan Macmillan, ~299, 156 pages
 The Smart 1QUICK TAKE: PROFITABILITY WORRIES FOR EXIDE

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TSI P11
The Exide Industries’ stock shed over 3 per cent in the
last three trading sessions on lower-than-expected
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come under pressure on account of weak pricing SHARES OF ADAG
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WWW.SMARTINVESTOR.IN.FOR INFORMED DECISION MAKING <

Nifty reclaims 11K after 4 months

Top gainers
NIFTY GAINS, BROADER Nifty Change (%)
MARKET IN PAIN Titan Company 31
The benchmark Nifty is back above the Bajaj Finance 23
Stock markets upbeat amid hopes of a rate cut, strong institutional buying & global cues 11,000-mark for the first time since Oct 1.
While the benchmark indices are at a
Axis Bank 22
four-month high, the broader market UPL 21
SUNDAR SETHURAMAN
Mumbai, 6 February
AUS$ plunges, Europe drags continues to go through turbulence. Only a Asian Paints 15
third of the stocks in the BSE500 index and
The Australian dollar nosedived on Wednesday after 21 stocks in the Nifty 50 index are currently
BSE500

B
enchmark indices rose for a fifth straight its central bank opened the door to a possible rate above their October 1 levels. A fourth of the InterGlobe Aviation 48
session on Monday on hopes of a rate cut, in yet another indication the global slowdown is Adani Power 46
stocks in the Nifty and BSE 500 index are
cut by the Reserve Bank of India (RBI) persuading policymakers to go easy on rate hikes.
down more than 15 per cent since October 1. Kajaria Ceramics 44
and supported by positive global cues. World stocks, too, stalled just off two-month
The 10 per cent rebound in the Nifty from its
The Nifty reclaimed the 11,000-mark for highs, undermined by growth worries as well as US Oriental Bank 43
the first time since October 1. The 50-share President Donald Trump’s combative State of the October lows is on account of gains in index
heavyweights such as ICICI Bank, HDFC Aarti Industries 42
index ended the session 11,062, gaining 1.2 per Union address, in which he unveiled no new policy
cent over its previous close. The Sensex gained initiatives. European shares traded marginally in the and RIL.
358 points, or 0.98 per cent, to close at 36,975. black and equity futures signalled a flat to weaker SAMIE MODAK Top losers
The index touched an intra-day high of 37,005. open on Wall Street. Australia’s central bank is only Nifty Change (%)
Strong buying by both domestic and foreign the latest to signal policy; the Fed has all but given up Sun Pharma -34
institutional investors was seen on Wednesday. plans for further hikes, while the European Central
Foreign portfolio investors bought shares worth Bank also sounded less certain that it will start Indiabulls Housing -27
~694 crore and domestic institutional investors tightening policy. Concerns for world growth fanned JSW Steel -27
STRONG COMEBACK bought shares worth ~525 crores.
Market players said investors were hoping
fears for global energy demand, hitting crude oil
prices. Brent futures were trading around $61.59 a
Grasim -27
the RBI changes its monetary policy stance to barrel on Wednesday. REUTERS Vedanta -24
SENSEX NIFTY 50 ‘neutral’ from ‘calibrated tightening’ at its first BSE500
policy meeting under new governor
Shaktikanta Das. research) at Religare Securities. Market partic-
Shankara Building -74
In the Sensex pack, Tata Steel, Bajaj Finance, ipants, however, cautioned that volatility is DHFL -63
ONGC, Bajaj Auto, and ICICI Bank were the going to persist in the Indian markets for the Sun Pharma Advanced -57
biggest gainers. Meanwhile, Axis Bank and next few months.
Jindal Stainless -55
IndusInd Bank were the only two stocks to end “Volatility will continue to persist. We may
with losses. Barring two, all the sectoral index- not see much downside, but it will remain RCom -54
es of the BSE ended with gains. The BSE Metal volatile given a lot of events which are lined up
index rose the most at 2.4 per cent. domestically and globally," said Siddhartha
Gainers Losers Total
“Since November, the Nifty has been con- Khemka, vice president, Motilal Oswal Nifty 21 29 50
solidating in the broad range of 10,500- 11,000 Financial Services. The general elections, glob- BSE500 199 321 520
range. Today, it broke this range on the upside. al developments, and the quarterly earnings
Note: Comparision of current stock prices with levels seen on
Compiled by BS Research Bureau Source: Bloomberg Following the breakout, we could see follow will determine the market direction in the com- October 1 Source: Bloomberg
up buying,” said Hitesh Agarwal, head (retail ing days, Khemka added.

THE COMPASS Sebi, exchanges DLF plans QIP when market conducive
PRESS TRUST OF INDIA cial officer Ashok Tyagi told analysts.

LIC Housing: Rising share of in a huddle as

New Delhi, 6 February

RealtymajorDLFonWednesdaysaiditwouldsell
The company also expressed confidence that
it would achieve sales booking guidance of ~2,250
crore as the company has achieved nearly ~1,800

non-retail loans a negative

shares to institutional investors to raise about crore sales in the first three quarters of this fiscal.

Valuations attractive but Street to keep eye on slippages

HAMSINI KARTHIK
In the December quarter
(Q3), which was extremely
painstaking for non-bank-
ing financial companies
(NBFCs), LIC Housing was
relatively better off. Known
as a steady player not
boasting of astronomical
growth rates, it has main-
tained its loan growth at 15-
18 per cent over the last
three years.
This is why the 16 per
cent year-on-year (YoY)
growth in loan assets dur-
ing the quarter was viewed
positively by the Street.
This, consequently, led to
an 18 per cent YoY increase
(~1,042 crore) in net interest
income (adjusted for net
loss on modification of
loans from fixed to variable
pricing), and 26 per cent
growth in net profit (~596
crore).
However, there are
some concerns, especially
on loan book composition.
Going by the loan dis-
bursement numbers, Q3
saw much of its growth
coming from non-retail
loans (28 per cent YoY),
which comprise loan
against property and to
projects (developers).
These are perceived to be
riskier.
Individual loans (77 per
cent of overall) grew only 4
per cent YoY. Share of non-
retail loans, thus, stands at
23 per cent of the loan
book, compared to 17 per
cent a year-ago. The silver
lining is that on a sequen-
tial basis, non-retail loan
disbursements declined by
11 per cent, while retail
grew 2 per cent.
LIC Housing improved
its asset quality metric on
builder loans, with the gross
non-performing assets
(NPA) ratio for the segment
at 6.2 per cent, as against
10.6 per cent a year-ago.
Gross NPAs among retail
loans rose from 0.4 per cent
to almost 1 per cent.
“The steady rise in indi-
vidual gross NPAs is dis-
concerting and needs to be
closely monitored,” says
HDFC Securities. Overall,
gross and net NPAs for Q3
came at 1.26 per cent and
0.85 per cent, respectively
— an increase of 30-40
basis points year-on-year
(up 6-31 bps sequentially).
A key positive was that
profitability didn't take a
hit in Q3. Higher contribu-
tion of developer loans,
which are more profitable,
helped the firm. Analysts
believe net interest mar-
gins (NIM) have bottomed
out and could increase by
30–60 bps over the next
two to four quarters, from
the current 2.3 per cent in
Q3, on the back of loan
book re-pricing in favour of
floating interest rates.
Despite attractive stock
valuations (1.4x its FY20
book), any slippage in asset
quality or profitability —
especially on account of
builder book exposure —
will not be taken kindly by
the Street.
stocks tumble
SUNDAR SETHURAMAN &
SAMIE MODAK
Mumbai, 6 February
The Securities and Exchange
Board of India (Sebi) and stock
exchanges have got into a hud-
dle amid a sharp slide in stock
prices of firms that belong to
front-line groups.
People in the know say
Sebi and exchange officials
have held meetings to discuss
the regulatory framework per-
taining to stock price move-
ments, additional disclosures,
governance standards, and
surveillance systems. The
markets regulator has asked
exchanges to raise the guard to
ensure market manipulators
do not take advantage of the
situation.
The move comes amid
unprecedented intra-day slide
~3,000 crore when market conditions are con-
ducive. The company plans to issue up to 17.3
croresharesthroughqualifiedinstitutionalplace-
ment (QIP) to raise funds, as part of its objective
In August 2017, DLF promoters sold their
entire 40 per cent stake in rental arm DLF Cyber
City Developers (DCCDL) for ~11,900 crore. This
deal included sale of 33.34 per cent stake in
to become a debt-free company. DCCDL to Singapore’s sovereign wealth fund GIC
Its current debt stands at ~7,224 crore as of for~8,900crore,andbuybackofremainingshares
December 2018. worth ~3,000 crore by DCCDL.
Sources had earlier said the company plans to As a result, DLF stake in DCCDL increased to
raise ~3,000-4,000 crore through QIP. 66.66 per cent stake from 60 per cent, while GIC
DLF will launch the QIP at an opportune time, has the balance 33.34 per cent stake in the joint
its whole-time director and group chief finan- venture firm.
NIGHTMARE ON
DALAL STREET
Stock prices are witnessing
wild swings
Frontline group stocks
falling over 30% a day
High debt, share pledging
making investors nervous
Sebi, exchanges have
raised their guard
Regulators concerned over
contagion, impact on
investor sentiment
Trading curbs, additional
disclosures and pruning of
F&O list on the anvil
ue will be weeded out of the
F&O segment soon.
Market participantsare call-

Volume growth expected for in shares of companies in the

Anil Ambani, Adani, and Essel
groups. In the past two weeks,
ing for a change in the regula-
tory framework to tide over
market volatility.

Marico amid new launches shares of most firms of these

Impact of rising market share on margins will interest investors
SHREEPAD S AUTE
Marico’s stock gained about
2 per cent on Wednesday
on account of good traction
in volumes of its flagship
brand — Parachute hair oil
(volume growth of 9 per
cent). However, Marico’s
overall domestic volume
rose just by 5 per cent,
while other FMCG players
reported double-digit vol-
ume growth in Q3.
This was due to muted
volume growth of Saffola
and smaller coconut oil
brands. A 15 per cent year-
on-year (YoY) rise in net
sales to ~1,861 crore (mar-
ginally below analysts’
expectations of ~1,867
crore) was also driven by
higher prices, mainly of its
Parachute hair oil.
In the near term, there
are some tailwinds. Saugata
Gupta, managing director
and chief executive of
Marico, believes there will
be a 15-20 per cent YoY
decline in copra prices
(copra accounts for 40-50
per cent of raw material
costs), which will be posi-
tive from the margins point
of view.
However, the company
is considering investing
aggressively in new prod-
ucts to drive volumes and
market share. Higher
investments, therefore,
could keep margins under
check. While the company
is confident about its
upcoming launches, ana-
lysts are skeptical of suc-
cess of its new products.
According to analysts at
Prabhudas Lilladher,
Marico had launched
Saffola FITTIFY Gourmet
and Set Wet global edition
range of perfume sprays,
but the success rate of its
new launches has been
poor.
While the company
expects 9-10 per cent
growth in overall volumes
in FY20 (8 per cent in FY19),
Ebitda margin may get
capped at Q3 levels of about
18-19 per cent. The expect-
ed volume growth will also
be supported by a double-
digit rise in the value-
added hair oil category and
an improvement in Saffola
(expectation of 5-6 per cent
rise during October 2018-
March 2019).
In Q3, Marico saw a 39-
basis-point contraction in
gross profit margin to 46.3
per cent — despite a 20 per
cent YoY fall in copra prices
— mainly on account of a
time lag in reflecting
changes of raw material
prices.
However, control on
other operating expenses
helped improve Ebitda
margin YoY after a gap of
six quarters, albeit margin-
ally, to 18.8 per cent.
Net profit rose 13 per
cent to ~251.7 crore against
analyst expectations of
~259 crore. The Street will
keenly watch out for the
impact of the company’s
push to improve volumes
and market share, on
margins.
groups have tumbled by more
than 30 per cent in a single
trading session.
High debt and share pledg-
ing are being seen as a com-
mon thread in firms whose
shares are getting hammered
at the bourses.
“The regulator is con-
cerned about the systemic risk
and impact on retail investor
sentiment. Additional disclo-
sures and trading curbs are
being mulled to keep the situ-
ation under check,” said a per-
son with direct knowledge of
the development.
The people said some com-
panies have approached Sebi
to probe the unusual move-
ment in their stock prices.
Another common pattern
is that most stocks that have
tumbled in recent days are
traded in the futures and
options (F&O) segment. Stocks
with F&O contracts do not have
circuit filters. They can fall or
rise by any amount. There are
more than 200 stocks in the
derivatives segment.
Non-derivatives stocks typ-
ically have filters between 5 per
cent and 20 per cent.
Sources say exchanges and
Sebi mulled filters for deriva-
tives stocks. However, the
feedback received was that it
could come in the way of price
discovery.
People in the know added
that companies that have seen
a sharp fall in their market val-
“Indian regulators could
well consider restoring circuit
limits for all stocks and exer-
cising their extant powers to
suspend trading in a stock in
an extraordinary event,” said
Sanjeev Prasad, co-head, Kotak
Institutional Equities, in a note.
“We understand that there
is a fine line between main-
taining the sanctity of the mar-
ket and over-enthusiastic reg-
ulation, but we believe wild
allegations and equally wild
market responses serve little
purpose and probably dent the
confidence of small investors
in the market,” said Prasad.
Market experts also say the
current disclosure regime
around pledged shares is
opaque and needs to be re-
looked. “Share-pledging data
is closed at the end of every
quarter. While most investors
look at fundamentals of a com-
pany, often they are caught off
guard,” said Alok Churiwla,
managing director, Churiwala
Securities.
Further, promoter shares in
a lot of cases are held through
holding companies, which
make it challenging for minor-
ity shareholders.
Experts say recent events
have underscored the impor-
tance of having high corporate
governance standards. Dhiraj
Relli, MD and CEO of HDFC
Securities, said they are
increasing the margin require-
ment to deal with the spike in
volatility.
.
MUMBAI | THURSDAY, 7 FEBRUARY 2019 THE SMART INVESTOR 11 <

> TODAY’S PICKS

Nifty
MFs’ collateral declines as Lupin registers
tepid growth in
shares of ADAG firms tank
Current: 11,062 (fut: 11,098)
Target: NA
Stop-long positions at 10,990.
Stop-short positions at 11,205. Big
moves could go till 11,275, 10,900.
India revenues
Extra volatility likely. Trend will
depend on MPC. A long 11,300c Franklin Templeton, Indiabulls MF & DHFL Pramerica MF have ~1,418-cr exposure UJJVAL JAUHARI
(58), long 10,900p (84) can be New Delhi, 6 February
offset with short 11,400c (32), JASH KRIPLANI & DEV CHATTERJEE
short 10,800p (63). Mumbai, 6 February Lupin’s December quarter
performance was aided by

M
utual funds (MFs) led by Franklin
Bank Nifty Templeton, which has the highest
Current: 27,402 (fut: 27,466) exposure of ~1,244 crore through
Target: NA its debt schemes in the promoter entities of
Stop-long positions at 27,275. Anil Ambani group companies, will have to
Stop-short positions at 27,625. either seek higher collateral by way of top-
Big moves could go till 28,000, ping-up of shares from promoter entities or
26,900. Extra volatility likely due risk lowering values of their schemes.
to MPC. If there’s a rate cut, PSU According to data from Value Research,
banks may outperform. mutual funds’ exposure to the debt papers
of Anil Ambani’s Reliance group’s promot-
er entities — Reliance Infrastructure
Bajaj Finserv Consulting & Engineers, Reliance Big
Current price: ~6,209 Entertainment and Reliance Big — stood at
Target price: ~6,310 ~1,418 crore as on December 31, 2018.
Keep a stop at ~6,150 and go These Reliance group companies had
long. Add to the position borrowed by putting group firms’ listed
between ~6,275 and ~6,300. shares as collateral.
Book profits at ~6,310. The share prices of Reliance
Infrastructure fell by 32 per cent on
Wednesdayinwhichpromoterentitieshold
Tech Mahindra almost half of the equity. Of this, 84 per
Current price: ~812 cent of the stake is pledged to funds and
Target price: ~825 lenders. Similarly, other group companies’
Keep a stop at ~805 and go shares also declined, sending a wake-up
long. Add to the position call to mutual funds.
between ~820 and ~823. Ane-mailsenttoReliancegroupseeking
~Book profits at 825. a comment did not elicit any response.
“The cash top-up available in these
transactions was used to reduce outstand-
Adani Ports ing exposure and the transactions remain
Current price: ~330 adequately covered. We continue to engage
Target price: ~324 with the company,” a Franklin Templeton
Keep a stop at ~333 and go short. spokesperson said. According to sources,
Add to the position between Indiabulls MF this week used the cash top-
~325 and ~326. up available to reduce its outstanding expo-
Book profits at ~324 sures to ~14 crore from ~25 crore.
DEVANGSHU DATTA “OurexposureinthecaseofRelianceBig
Entertainment is secured primarily by col-
Target prices, projected movements in terms of next session, lateral of equity shares of Reliance Capital.
unless otherwise stated Our outstanding exposure has already been
LOSING SHEEN
ADAG companies saw a sharp correction during the week
Value of promoter stake (~ crore)
Feb 1,’19 Feb 6,’19 Change Change (%)
Reliance Infrastructure
Reliance Capital
Reliance Nippon Life Asset Management
Reliance Power
Reliance Naval & Engineering
Reliance Communications
Reliance Home Finance
Compiled by BS Research Bureau
reduced in the last few days by utilising
existing cash in the structure to retire over
40 per cent of the debentures. We are com-
fortable with our security cover at this point
of time,” a spokesperson for DHFL
Pramerica MF said.
The fall in share prices of Anil Ambani
group companies was triggered by the news
that the group’s telecom company Reliance
Communications (RCom) will file for insol-
vency at the National Company Law
Tribunal (NCLT). The Supreme Court is
expectedtohearapetitionfiledbyEricsson,
one of the operational creditors, on
February 12.
good growth in the domestic
formulations market. The
India unit, which contributes
30 per cent to its overall rev-
enues, registered a growth of
11.4 per cent year-on-year.
North America sales (pri-
marily US), which accounts
for about 35 per cent of sales,
remained subdued.
The positive, however, was crore during Q3FY2019. The
that sales in the US saw just a operating profits thereby got a
per cent decline compared to boost, and at ~796 crore,
much higher declines in the marked a growth of 11 per cent
past. On a sequential basis, it year-on-year despite some
3,395.1 1,958.6 -1,436.5 -42.3 grew 13.5 per cent and this forex losses. Nevertheless,
reflects the fact that the US adjusted for the licensing
2,485.1 1,888.6 -596.5 -24.0 generics business is turning income, the same would have
3,563.7 4,225.1 661.3 18.6 around. remained muted.
5,542.2 2,681.7 -2,860.5 -51.6 The Street will keenly Nilesh Gupta, managing
260.2 181.1 -79.0 -30.4 watch out for improvement in director, Lupin, said, “After a
growth in the coming quarters. tough first half, we are now
1,699.0 802.6 -896.4 -52.8 The company’s active pharma starting to see growth in the
1,256.7 987.6 -269.2 -21.4 ingredients business also sup- US. The growth momentum
Sources: Capitaline, exchanges ported overall growth, rising at in the US will continue into
35.2 per cent year-on-year and the next quarter as we are on
Franklin Templeton MF held its 8.5 per cent, sequentially. track with important launch-
Reliance group exposure in five of its While the actual December es like Levothyroxine (thyroid
schemes — Franklin India Low Duration quarter revenue was much treatment) and Ranolazine
Fund, Franklin India Short Term Income, more than estimates, the same (angina drug). The brand
Franklin India Credit Risk Fund, Franklin was due to higher licensing Solosec (gynecology drug) is
India Dynamic Accrual Fund and Franklin income. also progressing well. While a
India Income Opportunities Fund – as on The bottom line, on the major boost may be expected
December 2018. other hand, was impacted by from Ranolazine, where the
DHFLPramericaMF’sexposurestoodat litigation provisions. Reven- company will also get three
~149 crore, while Indiabulls MF’s exposure ues adjusted for licensing months exclusivity,
was below ~25 crore as on December 31, income at ~4,168 crore was Levothyroxine is expected to
2018. Analysts said the sharp fall in share marginally higher than the be ramped up gradually.
prices of Anil Ambani group companies estimates of ~4,104 crore. Lupin also expects a respira-
could mean that the collateral may need to The company had received tory launch approval by the
be enhanced. licensing income of ~210.3 end of FY20.”

Rising valuations trigger

SoftBank’s $5-bn buyback
‘Big Bull’ Jhunjhunwala bets on NDA 2.0
PRESS TRUST OF INDIA tion, there is little uniqueness in but can ensure easy survival even investors was only high valuations.
Mumbai, 6 February these firms. if they blow the rest of the fortune. The passion for investing and
SAM NUSSEY million shares worth 600 billion The only savings the big bull Terming investing as a serious the eat-drink-sleep- dream stock
Tokyo, 6 February yen in the next 11 months, or Rakesh Jhunjunwala, the largest has now is a fixed deposit of business, he advised non-profes- markets routine is the secret
about 10.3 per cent of its total out- individual investor in the domes- ~50,000 in a bank and ~1 crore in sional investors like the salaried behind his fortune, he said, admit-
Japan’s SoftBank Group standing shares excluding treas- tic equities market, has admitted public provident fund, while rest class to invest through the mutual ting that he cannot be anything
announced a $5.5 billion share ury stock. that his risk appetite is reducing of huge investments are in equi- funds route and keep aside not else but a stock market player.
buyback on Wednesday, as it The company raised 2.35 tril- on account of his age, and wants to ties, he said. more than 10 per cent for Blaming the IL&FS crisis on
reported a 60 per cent increase lion yen in December by listing set aside up to 10 per cent of his “I must put 5-10 per The ace investor self-investing if excite- multiple issues including lax reg-
in quarterly operating profit, about a third of the shares in wealth in saving products soon. cent of my money into is reported to ment is what they are ulation, he expressed satisfaction
buoyed by rising valuations for SoftBank Corp, which on Tuesday Having suffered losses on his (savings products)... age have a net looking for. with the corporate governance
its technology investments. reported a 24 per cent jump in start-up bets both in 2000 and is catching up, and I worth of over On the bloodbath in practices in companies saying
Funded by proceeds from the quarterly operating profit. 2007, Jhunjunwala said he does should limit my risk $2.7 billion the midcaps last year, in those are 5,000 times better than
bumper initial public offering of Son said about one third of not see any value in them from appetite,” Jhunjunwala or close to which he lost heavily, the olden days.
its domestic telco, founder and the IPO proceeds will be used for both investment and business told the Tiecon summit ~19,000 crore Jhunjunwala said The investor said he wants the
Chief Executive Masayoshi Son the buyback, one third to repay perspectives, as most of them lack here on Wednesday. investors should blame ruling BJP to return to power after
said the buyback — its largest ever debt and the remaining on its any real uniqueness. The ace investor is reported to themselves for the mistake of the summer elections because of
— was driven by what he sees as a investments. Stating that he is keeping away have a net worth of over $2.7 bil- investing at such high valuations. the change in attitudes brought
chronic undervaluation of SoftBank Group shares closed from investing in start-ups as it is lion or nearly ~19,000 crore. He, however, quickly added about by Prime Minister Narendra
SoftBank’s shares. up 0.6 per cent at 1,322 yen before difficult to understand their busi- Jhunjunwala said he will also that there was no fundamental Modi, and also supported its issues According to Rakesh Jhunjhunwla,
The technology and telecom the announcement. “I think ness like the one presented by cab leave 5 per cent of his fortune in issue with any of those stocks like uniform civil code, Ram corporate governance practices in
conglomerate said that from they’re too cheap,” Son told an aggregator Uber, he said: “Though fixed deposits for his two kids, which bore the brunt of the market Temple or buying property in companies today are 5,000 times
Thursday, it will repurchase 112 earnings briefing. REUTERS many of them talk about innova- which cannot be touched by them mayhem and the problem for Jammu & Kashmir. better than the olden days

COMMODITIES1
>

Sugar mills line up ~6,000-crore Groundnutauction

byNafed re-starts
investment for ethanol output fromMonday
DILIP KUMAR JHA
Mumbai, 6 February

Apart from that, IOC and SunLight Fuels are also entering with over ~2,500-cr greenfield investment The National Agricultural Cooperative
Marketing Federation (Nafed), the govern-
> PRICE CARD
VIRENDRA SINGH RAWAT PROPOSED INVESTMENT IN ETHANOL CAPACITY ment-funded farmers’ cooperative, has
Lucknow, 6 February decided to re-start auctioning of groundnut
(~ cr) from Monday after completing procurement

A
2,250

2,250

As on Feb 6 International
------------------------------------------------------------------------------
Domestic
------------------------------------------------------------------------------
mid the growing clamour to for the current season.
Price %Chg# Price %Chg# insulate the ~1-trillion domestic The agency has announced closure of
METALS ($/tonne) sugar industry from market procurement this week in most mandis due
1,500

1,500

800

volatility, the country’s sugar mills to the lack of arrivals. Nafed procured
Aluminium 1,896.5 -2.7 2,110.1 -6.6
have lined up fresh funds to the tune of around 668,486 tonnes of groundnut worth
Copper 6,174.0 -0.5 6,595.9 0.7 ~6,000 crore for producing ethanol ~3,269 crore for the current season, and car-
150

100

Zinc 2,770.0 7.7 3,088.3 -0.7 from sugarcane. ried over an inventory of around 300,000
Gold ($/ounce) 1,313.5* 7.0 1,443.5 6.5 Apart from that, Indian Oil tonnes worth ~1,500 crore.
Maharashtra Other SunLight UP sugar IOC Private UP
Corporation (IOC) and SunLight Fuels "We are planning to re-start the sale of
Silver ($/ounce) 15.8* 8.3 17.4 6.8 are also foraying into ethanol produc-
sugar mills sugar Fuels in mills in sector cooperative
kharif 2017 and 2018
mills Sitapur (UP) Gorakhpur in five sugar
ENERGY tion with an over ~2,500 crore green- groundnut in Gujarat, The agency has
bioethanol plant (UP) bioethanol mills
Crude Oil ($/bbl) 61.5* -13.6 62.9 -12.2 field investment. These are declared Rajasthan, Uttar announced
plants in UP
investment figures and many more pri- Pradesh and Madhya closure of
Natural Gas ($/mmBtu) 2.7* -24.4 2.7 -23.6 vate sugar mills and cooperatives will Pradesh from procurement this
AGRI COMMODITIES ($/tonne) also follow suit to address the issue of mixed with petrol against the federal exchange by importing crude oil and Gorakhpur, the pocket borough of UP February 11,” said a week in most
Wheat 218.7 -0.6 285.4 2.9 excess sugar production. target of 10 per cent blending with bio- liquefied natural gas. chief minister Adityanath, with an senior Nafed official. mandis due to the
The Uttar Pradesh government is fuel by 2022, which is lower than the 25 The sugar sector has been facing investment of ~800 crore. The auction of lack of arrivals
Sugar 342.4* 0.1 457.1 -0.5
investing ~100 crore to upgrade coop- per cent mandated ethanol mixing in the vicious cycle of mounting arrears The state government has also abol- kharif 2017 and 2018
Palm oil 565.0 8.1 893.7 -0.2 erative sugar mills to produce ethanol Brazil. Even for 10 per cent blending, owing to glut, muted sugar realisation ished dual taxation policy on the sale of groundnut was sus-
Rubber 1,719.5* 39.5 1,725.8 0.4 along with sugar. there is a requirement for 3.3 billion vis-à-vis cane prices, export market ethanol mixed with petrol to promote pended a few months ago due to a sharp fall
Cotton 1,617.8 -5.2 1,693.4 -5.4 Mills in top sugar producing states, litres of ethanol, which indicates the squeeze and working capital drought, ethanol doping. Earlier, a petrol retail- in its prices leading to fears of a weak
* As on Feb 6, 1800 hrs IST, # Change Over 3 Months that is, Maharashtra and Uttar Pradesh, enormous economic opportunities for among others. er paid value-added tax (VAT) at the response to Nafed’s auctions.
Conversion rate 1 USD = 71.6 & 1 Ounce = 31.1032316 grams. are projected to account for 40 per cent Indian sugar mills. Acknowledging the tight sugar sce- rate of ~14.41/litre while procuring Groundnut in shell prices fell to trade at
Notes: and 30 per cent of the fresh ethanol Total ethanol supplied by mills to nario and negative outlook in petrol for distribution in UP. around ~4,300 a quintal in October 2018,
1) International metals, Indian basket crude, Malaysia Palm oil
capacity addition, according to Care oil marketing companies (OMCs) for September 2018, the Centre approved Later, if the company mixed sharply lower than its minimum support
and Wheat LIFFE pertains to previous days price.
2) International metal are LME Spot prices and domestic metal Ratings deputy general manager (cor- blending in petrol grew from 380 mil- 25 per cent hike in the price of ethanol ethanol, it was subjected to additional price of ~4,450 a quintal (including ~200 a
are Mumbai local spot prices except for Steel. porate rating) Gaurav Dixit. lion litres in 2013-14 to 1.11 billion litres produced directly from sugarcane juice VAT levy. This was hampering the quintal as bonus).
3) International Crude oil is Brent crude and Domestic Crude oil
is Indian basket. While Maharashtra-based mills are in 2015-16 before dropping to 660 mil- for blending in petrol to cut surplus ethanol chain in UP. Now, its prices have recovered to trade
4) International Natural gas is Nymex near month future & likely to invest ~2,250 crore, UP mills lion litres the following year. During sugar production and reduce oil Additionally, the Adityanath gov- intermittently above the MSP for 2018-19 of
domestic natural gas is MCX near month futures.
5) International Wheat and White sugar are LIFF E future prices would spend ~1,500 crore towards such 2017-18, the total ethanol supplies were imports. ernment had last year cleared six bio ~4,890 a quintal. After hitting in spot mandis
of near month contract. capital expenditure, thus totalling pegged at 1.40 billion litres. The central government had fuel investment proposals worth ~1,700 at ~5,000 a quintal, prices fell to trade at
6) International Maize is MATIF near month future, Rubber is
Tokyo-TOCOM near month future and Palm oil is Malaysia FOB ~3,750 crore for the two states. The Centre hopes to double ethanol received applications from nearly 200 crore in Sitapur, Hapur, Meerut, around ~4,900 a quintal. Therefore, Nafed is
spot price. In UP, mills belonging to the doping to 8 per cent in the 2018-19 sug- sugar mills for installing ethanol units. Bareilly and Muzaffarnagar districts. set to gain from the sale of groundnut at the
7) Domestic Wheat is NCDEX future price of near month contract,
Palm oil & Rubber are NCDEX spot prices. Triveni, Dhampur, Balrampur and ar season with petroleum minister Of this, 114 projects have been The biggest plant would be set up by market-driven price.
8) Domestic Coffee is Karnataka robusta and Sugar is M30 Dwarikesh are collectively projected Dharmendra Pradhan, suggesting the approved and this would add nearly SunLight Fuels in Sitapur, costing To intensify sales, Nafed has convened a
Mumbai local spot price.
9) International cotton is Cotton no.2-NYBOT near month future to install fresh ethanol production sugar industry to also consider pro- 25 per cent to the existing ethanol ~1,550 crore, which would use bagasse, meeting of traders, stockists, processors and
& domestic cotton is MCX Future prices near month futures. capacity of almost 1,200 kilo litres per ducing ethanol from other agro capacity. a sugarcane byproduct extracted dur- millers on February 9 in Junagadh, Gujarat,
Source: Bloomberg Compiled by BS Research Bureau day, he added. residue, such as rice husk. The Centre Meanwhile in UP, IOC is also setting ing sugar production process to gen- to discuss the operational difficulties faced
Currently, 4-5 per cent of ethanol is spends ~8-10 trillion of foreign up a greenfield ethanol plant in erate biofuel. by domestic processors and exporters.
.
MUMBAI | THURSDAY 7 FEBRUARY 2019
Split large-cap allocation between
active and passive funds
Fixed-income investors should be in funds that limit both credit and duration risk
SANJAY KUMAR SINGH & TINESH BHASIN
M
utual fund investors, both
in debt or equity, are in a
quandary today. The cat-
egory average returns from their
systematic investment plans (SIPs)
in actively managed large-cap
funds over the past one year stands
at -1.39 per cent. An investor in a
Nifty 50 index fund would, on the
other hand, have made 4.38 per
cent (category average return). On
the fixed-income side, net asset
values (NAVs) of many debt funds
have been hit by events surround-
ing Infrastructure Leasing &
Financial Services (IL&FS), Zee and
DHFL groups. Many investors are
worried and seeking advice regard-
ing whether they should move to
passive funds in the equity domain
and to the safety of fixed deposits
(FDs) on the fixed-income side.
Last year was an aberration: As far
as the underperformance of large-
cap active funds goes, experts say
that the past one year was an aberra-
tion. Within the large-cap space, the
performance of the index was driven
by just five-seven heavyweights such
as HDFC, HDFC Bank, Reliance, Bajaj
Finance, Infosys and TCS. The rest
of the large-cap universe gave either
flat or negative returns. Fund man-
agers running diversified portfolios
hold at least 30-40 stocks. If they did
not have exposure to these index
heavyweights, or had lower weigh-
tage to them than in the index, as is
likely, they would have underper-
formed. “One year is too short a peri-
od of time to judge the performance
of active funds, and this trend of nar-
row market rally could well change
in the future,” says Anil Ghelani, sen-
ior vice president and head of passive
Investments, DSP Investment
Take loan against security with caution
It is a good and quick option during an emergency, but repay as quickly as possible
SARBAJEET K SEN
There are many times you have to
raise cash in an emergency. Some of
the instruments that can help do so
include loans against shares, mutual
funds, fixed-maturity plans,
exchange-traded funds, insurance
policies, government bonds, saving
bonds, non-convertible debentures
and National Savings Certificates.
Typically called loans against secu-
rities (LAS), most
banks and other
lenders give this
YOUR MONEY
option to borrowers.
“If you are looking for
an easy loan, then
LAS is a very good
option. Instead of liq-
uidating your asset to
arrange money dur-
ing a financial emer-
gency, you can use a
qualified investment product to
raise a loan at an attractive interest
rate. The processing fee on LAS is
usually lower compared to personal
loan. So, if you want to borrow mon-
ey with a low-interest rate, need pre-
payment flexibility, have collateral
ready for the pledge, then LAS
should be your preferred choice,”
READER’S CORNER : TAX
KULDIP KUMAR
What’s the difference between
non-resident external (NRE)
and non-resident ordinary
(NRO)? As a person deputed
abroad (non-resident), which
account should I open?
As a person deputed abroad,
you can open any of the two
accounts or even both. You will
probably need both as there are
different purposes for which
these accounts can be used. The
primary distinction between
NRO and NRE account is the
taxability and repatriability.
In NRO accounts, the per-
missible credits are inward
remittances from outside India,
legitimate dues in India, current
income like rent, dividend, pen-
sion, interest, and so on.
Similarly, the permissible debits
are local disbursements, remit-
tance outside India up to ~10
Managers.
Alpha generation by large-cap
active fund managers may not have
vanished altogether, but it has been
shrinking and may continue to do
so. “After the re-categorisation exer-
cise, and with the size of assets under
management (AUM) growing, large-
cap fund managers will find it
increasingly difficult to generate
alpha,” says Kaustubh Belapurkar,
director-manager research,
Morningstar Investment Adviser
India. The leeway available has
shrunk after the Security and
Exchange Board of India’s recate-
gorisation exercise. Now large-cap
fund managers can only take expo-
sure of up to 20 per cent of their port-
folio in mid- and small-cap stocks.
The shift from price return to total
return index as the benchmark has
also made it harder for large-cap
active fund managers to outperform.
Start taking exposure to passive
funds: So far, outperformance by
says Adhil Shetty, CEO,
Bankbazaar.com.
Naveen Kukreja, CEO & co-
founder, Paisabazaar.com says LAS
provide quick liquidity along with
flexibility for the borrower. “This
facility allows borrowers to receive
credit of dividends, bonuses, etc
during the period of the pledge.
Loan against securities also does not
come with any end-usage restriction
of the loan proceeds, except for spec-
ulative purposes.”
Attractive interest
rates: The interest rate
on loan against securi-
ties varies from bank to
bank and could vary
anywhere between 9-
13.5 per cent. In con-
trast, the interest rate on
personal loans could be
in the range of 14-22 per
cent or even more. The interest rate
could be based on the type of secu-
rities pledged and the credit score
of the borrower. “Usually, lenders
require borrowers just to service the
interest cost each month. The prin-
cipal component can be repaid as
per the convenience of the borrower
without incurring
lakh (subject to the conditions),
transfer to another NRO/foreign
currency non-resident (FCNR)
accounts, investments in India.
On the other hand, in an
NRE account, permissible cred-
its are inward remittance from
outside India, interest accruing
on the account, maturity pro-
ceeds of investments (if such
investments were made from
this account or through inward
remittance), etc. Similarly, per-
missible debits are local dis-
bursements, remittance outside
India, investments in India, etc.
The interest earned on NRE
account is exempt so long as
you continue to be a non-resi-
dent under the foreign
exchange regulations while
interest earned on NRO
accounts is fully taxable.
Please bear in mind that
where you are holding any bank
accounts in India, you should
inform your banks about your
leaving India so that they can
designate your existing bank
accounts to NRO status. Above
is a general guidance and you
may contact your bank for fur-
ther details and clarification.
I am about to sell my house. My
project was delayed. I paid the
LARGE-CAP PASSIVE FUNDS DOING
WELL CURRENTLY
Category
Large-cap funds
Mid-cap funds
Nifty 50 index funds
Midcap 30 index
large-cap active funds has not van-
ished entirely. “You need to identify
quality active fund managers, with
the help of an advisor if need be, and
then give them at least a five-seven-
year timeframe to perform,” says
Belapurkar. Select funds that have a
track record of consistent calendar-
year wise performance, and have a
relatively lower expense ratio.
According to Ghelani, you
should have a complementary allo-
cation to both active and passive
funds at present in the large-cap cat-
egory. “Don't stop your SIPs in
actively managed funds. Any incre-
mental amount you may invest may
go into passive funds,” he adds.
In the mid- and small-cap space,
the universe of stocks is much larger
(there are 150 stocks in the midcap
space and all stocks beyond 250
ranked by market cap are small-
cap). This larger universe of stocks
is not yet as rigorously researched,
so there is still scope for outperfor-
mance by fund managers here.
CHEAPER CREDIT OPTIONS
Security offered
for loan
Shares or equity mutual funds
Debt funds
Sovereign gold bonds
Life insurance, NSC, KVP
Fixed deposit
Note: Above table gives interest rates and LTV of top banks. Non-banking finance companies
may charge higher; Source: Bank websites
prepayment/foreclosure charges.
Thus, the absence of equated
monthly instalments and prepay-
ment charges allows higher flexibil-
ity in repayment to the borrowers,”
says Kukreja. However, there could
be other charges, such as processing
charge, overdraft maintenance fee,
stamp duty on the loan agreement,
pledge creation fee, de-pledge fee,
annual maintenance charges, etc.
Loan-to-value (LTV) ratio:
Depending on the security, the
lender decides the LTV. So, for a
fixed deposit, the bank may lend up
to 90 per cent of the value. But it
entire money in the first year.
In the second year, I registered
the flat. The developer got the
occupation certificate in the
seventh year. We received the
house much later. Which of
these dates should be
considered to calculate the
capital gains after selling my
home?
There is no specific provision
contained in the tax laws on this
aspect, and it depends on vari-
ous specific circumstances.
According to one view, an
under-construction property,
till the time possession is avail-
able, is merely a right. The hold-
ing period for disposal of such
under-construction property
shall start from the date of reg-
istration. Where a flat is con-
structed, the holding period of
the flat will commence from the
date when possession is taken
over or available for the user.
It may also be possible to
argue that holding period of flat
should start from the date of
allotment of the flat. A reference
can be made to the Central
Board of Direct Taxes (CBDT)
Circular No 471 dated October
15, 1986, wherein it was clarified
that the period of holding of the
property booked by an assessee
Category average SIP returns (%)
1 year 3 years 5 years
-1.39 5.92 7.48
-11.29 2.06 6.53
4.38 10.17 9.27
-10.99 -0.87 - Select debt fund categories care-
Source: Ace Mutual Fund
Moreover, there are very few passive
fund or exchange traded fund
options available at present in the
mid- and small-cap space.
Credit risk comes to
the fore: On the
fixed-income side,
investors, who have
experienced inter-
est-rate risk, are
now experienc-
ing credit risk like never before. Net
asset values (NAVs) of many funds
have been affected by defaults,
downgrades, and the risk of future
defaults. Experts say that part of the
blame lies with the credit cycle.
“Both banks and mutual funds are
lenders to corporates. The banking
system has been struggling with
non-performing assets (NPAs) for
several years now. It is only natural
that some of the stress within the
economy gets reflected in debt fund
portfolios as well, as they too lend
to the same set of corporates,” says
Akhil Mittal, senior fund manager
(fixed income), Tata Mutual Fund.
The silver lining, according to him,
however, is that barely 1-1.5 per cent
of the AUM of debt funds has been
affected by these problems, land a
arge part of it is expected to come
out of the current issues and stay
good.
Interest Loan-to-
rates (%) value ratio (%)
9.25-13 50-60
9.25-13 Up to 85
10.45-11 Up to 65
12.5-13.5 Varies with time
1-2 above the
remaining for maturity
Up to 90
relative FD rate
could be much lower, especially in
case of a stock. “For instance, if you
have applied for a loan against secu-
rities by pledging qualified equity
product, then the bank usually
allows loan up to 50-60 per cent of
its market value. So, while looking
for LAS, try to pledge the appropri-
ate asset to get maximum loan
amount by pledging minimum col-
lateral,” Shetty points out.
Borrower-agnostic: Since the loan
is backed by security, lenders are
usually comfortable to extend credit
to individuals with low credit score
or irregular income, if they are in
under self-finance scheme of
Delhi Development Authority
(DDA) will be counted from the
date of issuance of allotment
letter by the DDA. This Circular
may be referred for the property
under-construction-linked plan
as well. However, this is not free
from litigation.
Various judicial precedents
are available in this regard. It is
essential to pay attention to sur-
rounding facts and circum-
stances such as terms and con-
ditions of the allotment letter,
whether transformation from
'right' to 'building' is automatic
or dependent upon conditions,
payments made by the buyer,
etc. Considering the entire sce-
nario, one may accordingly take
the position regarding the date
from which the period of hold-
ing of flat should start – whether
it should be from the date of
allotment, date of registration
or date when you got the occu-
pation certificate and the prop-
erty is ready for possession.
The writer is partner and leader,
personal tax, PwC India. The views
expressed are the expert’s own. Send
your queries to
yourmoney@bsmail.in
PERSONAL FINANCE 13 <
RIP, tax terrorism?
“All returns will be processed in
twenty-four hours and refunds
issued simultaneously. Within
the next two years, almost all
verification and assessment of
returns selected for scrutiny
will be done electronically
Debt funds offer the diversifica- through anonymised back of-
tion benefit and should hence be fice, manned by tax experts
preferred over options like corporate and officials, without any per-
fixed deposits and non-convertible sonal interface between tax-
debentures (NCDs). “An investor gets FRANKLY payers and tax officers,” said
exposure to multiple companies for Finance Minister Piyush Goyal
a small amount of money. Even if SPEAKING in his Union Budget speech
there are issues with a company or 2019-20, on Friday.
two, the rest of the investment is pro- HARSH ROONGTA This promise will require a
tected and offers gains,” says Malhar complete overhaul of the way targets are fixed for tax col-
Majumder, founder, Positive Vibes lections. Currently, the jurisdictional tax officer is respon-
Consulting and Advisory. sible for tax collections from cases that are allocated to her,
whether this is as tax deductible at source (TDS) /advance
tax from these taxpayers or from demands raised after de-
fully: After these developments, tailed scrutiny of the tax returns. As a result, the jurisdic-
investors need to stop thinking of tional tax officer tries every trick in the book to postpone
debt funds as fixed deposit like the refund claimed by the taxpayer. In many cases, this is
products that offer higher returns, done by simply selecting the high refund cases for detailed
as many have in the past. “The scrutiny, thus postponing the refund due to the taxpayer.
major portion of a conservative In the new system, one assumes that no specific tax of-
investor’s allocation should be to ficer will be responsible for the re-
those debt funds that control both funds. If, as promised, the refunds The promise of
duration and credit risk,” says are done within 24 hours it will ob- electronic
Suyash Choudhary, head-fixed viate one of the biggest reasons that scrutiny is much
income, IDFC Mutual Fund. taxpayers distrust the tax depart- more difficult to
Broadly, this means that you should ment – delayed refunds especially achieve. But it
stick to funds that invest largely in in cases of large refunds. This is will limit the
AAA bonds and have an average more so because most returns filed number of issues
maturity of two-five years. Banking by businesses mostly claim large re- that can be
and PSU bond funds are another funds. TDS rates were fixed in the scrutinised
safe category you may consider. 1960s and 1970s assuming a busi-
Exposure to high-risk categories like ness margin that no longer exists in today’s competitive
credit risk funds should be taken environment. For example, 10 per cent is deducted from
only by investors who have the nec- bills for professional services. So, on every bill for ~100, it
essary risk appetite, and in limited is assumed that the organisation makes a profit of ~33 on
amounts, via the direct route. which the tax payable comes to around ~10. As anybody
A complete exit from debt funds who runs a service organisation will tell you, very few serv-
to the safe haven of fixed deposits ice businesses have a profit margin of 33 per cent today.
may not be necessary. “Remember Hence, most businesses file tax returns with refund claims.
that there is a tax arbitrage between The government refuses to bring down TDS rates as it con-
debt funds and fixed deposits. If you stitutes the bulk of the tax collections. All governments, ir-
hold the former for three years, you respective of party labels, like to hold on to the taxpayers’
get an indexation benefit and pay money so that they can bridge the budget deficit. After all,
minimal tax. On a post-tax basis, the government accounts for tax receipts on a cash basis
debt funds usually make more and does not account for the liability for refunds due to the
sense,” says Belapurkar. taxpayers. They try and kick the can down the road for an-
For ultra-conservative investors, other year. So, if the government refunds the money in 24
who do not have any taxable hours (including the large refund cases), it will remove the
income, or are in the lowest tax largest source of friction between taxpayers and the tax de-
bracket, fixed deposits may make partment.
sense. Also, investors who are risk- The second promise about scrutiny being done elec-
averse may stick to FDs. tronically through anonymised back office, manned by tax
experts and officials, is far more difficult to deliver. By its
very nature an anonymised detailed scrutiny, independent
of geography, will ensure attention on the reasons for
which the returns were selected for detailed scrutiny.
While disputes are unlikely to come down in these cases,
it will at least be limited to major points. While tax officers
may continue to make absurd decisions in the name of rev-
enue collection, they will have much less room for subjec-
tivity in the treatment of issues, and thus, the chances of
corruption and harassment will come down. Corporates
possession of good security. “LAS though are likely to continue to face absurdly high-pitched
proves to be even more attractive in assessment orders, but at least they will be limited in scope
a situation when the borrower has and number.
no past borrowing record, or when
he/she is falling short of credit score The writer is a Sebi-registered investment advisor
requirement,” Shetty says. Also, the
time taken to borrow could be less
than one day against your securi-
ties, especially when they are held
in demat form.
TIPPING POINT
Borrower beware: While LAS is a
great option to avail a loan, there is
Should you HOUSING TREND IN TOP 9 CITIES
a catch. Since the security is buys a house Q2 FY19 Q3 FY19
pledged, if the borrower fails to now? Launches -27 -1
repay, the lender has the right to The best invest- Sales
invoke and sell the security the 8 -8
ments in any
moment the amount outstanding
asset class are Price trend 1 0
reaches closer to the value of the
made when it is Inventory overhang -10 -9
underlying asset. In such situations, All figures in %, Source: PropTiger DataLabs
the borrower might be required to
viewed
offer more security as collateral. unfavourably by
This can happen, especially in the the majority of buyers and investors. The residential
case of stocks. real estate market still fits the bill. However, you
Thus, if you are availing of LAS, need to act soon before the window of opportunity
don’t go overboard and limit your- closes. Despite lower launches, sales momentum has
self to the amount you need that picked up in almost all the cities except Gurugram,
you urgently need. Also, since according to PropTiger DataLabs. Total sales of the top
banks don’t charge any prepayment 9 cities increased by 30 per cent year-on-year.
penalty on LAS, whenever you have Unsold inventory of top 9 cities reached the lowest
adequate funds in hand, clear the level in the last 13 quarters. Recent numbers show
outstanding loan to save on the that the worst may be over for the residential market.
interest cost.
BUDGET: ~50 LAKH - ~1 CRORE
Realty check
Business Standard brings you a snapshot of average current rates and unit sizes in localities
that offer property in the price range of ~50 lakh-~1 crore. If you are looking at buying real
estate, an idea about prevailing rates would come in handy
Avg price (~/sq ft) Avg unit size (sq ft) Avg price (~/sq ft) Avg unit size (sq ft)
BHOPAL Sitapur Road 4,102 1,558
Hoshangabad Road 3,249 1,842 Kanpur Road 3,491 1,648
Kolar road 2,645 2,313 SURAT
Salaiya 3,337 1,865 Vesu 4,366 1,645
Bawadiya Kalan 3,863 1,778 Mota Varachha 3,654 1,733
Airport Road 3,579 1,615 Adajan 4,094 2,113
Misrod 3,269 1,859 Palanpur 3,576 1,772
COIMBATORE Jahangir Pura 3,688 1,847
Vadvalli 4,231 1,441 Dumas 3,405 2,077
Saravanampatty 3,896 1,640 Sarthana 3,992 2,168
Peelamedu 4,845 1,396 VADODARA
Ganapathy 4,602 1,439 Sama-Savli Road 3,103 2,015
Trichy Road 4,993 1,545 VIP Road 3,800 1,608
Saibaba Colony 4,894 1,449 Vasna Bhayli 3,079 2,123
INDORE Karelibaug 3,986 1,692
Nipania 3,347 2,025 Bhayali Road 2,991 2,030
Bicholi Mardana 3,191 2,063 Vasna Road 3,870 1,605
Ring Road 3,400 2,020 Laxmipura 2,633 2,607
Snehlataganj 3,318 1,692 Padra road 2,377 2,380
Gumasta Nagar 3,612 1,838
Note
Vijay Nagar 3,235 2,131 · Ticket price range considered for the above data points is between ~50 lakh
and ~1 crore
LUCKNOW · All the data points discussed in the above table refer to primary market only
Vrindavan Yojna 3,731 1,694 · Above residential data set comprises of residential apartments only
Gomti Nagar 6,496 1,195 · Above residential data is representative of organized real estate developers only
· The top performing micromarkets based on sales during last year (Dec-2017 to
Gomti Nagar Extension 3,892 1,660 Nov-2018) is represented on the above table
Faizabad Road 3,563 1,651 · Data points are updated till Nov 2018 Source: PropEquity
20 ECONOMY & PUBLIC AFFAIRS
>
Govt employee? Paying tax?
No PM-KISAN aid for you
SANJEEB MUKHERJEE
New Delhi, 6 February
amilies of farmers who
F have one or more mem-
bers paying taxes or are a
government employee will be
ineligible for benefit under the
PM-KISAN scheme.
Those families with at least
one member drawing a month-
ly pension of ~10,000 or have
professionals such a doctors,
engineers, layers, chartered
accountants or architects will
also be ineligible, according to
the guidelines issued to the
states by the Centre on
Wednesday.
Announced in the interim The first tranche is expected to be transferred before March 31.
Budget, the scheme is supposed According to the interim Budget, a sum of ~75,000 crore has been
to provide an additional ~6,000 allocated for the scheme in FY20
per annum income support to
small and marginal farmers. Families of former members ing staff or classified in Class IV
A small or marginal farmer of Parliament or Legislative or Group “D” categories.
family is defined as “a family Assemblies or even chairper-
comprising husband, wife, and sons of district panchayats governments can allow self-dec-
minor children, who collec- would also be ineligible for ben- laration of the beneficiary for
tively own cultivable land up efit. Some government employ- exclusion, but the entire
to 2 hectare according to the ees, however, have been income-support transferred to
land records of the state or exempted from exclusion, such him could be recovered and
Union Territory.” as those among the multitask- penal action initiated if the dec-
Consumer’s choice supreme, operators
shouldn’t interfere, says Trai chief
MEGHA MANCHANDA
New Delhi, 6 February
Asserting that a consumer's choice is the
ultimate, Telecom Regulatory Authority
of India (Trai) Chief R S Sharma said any
service operator’s interference in exer-
cising that choice will be considered a
violation of the regulatory framework.
However, Sharma stopped short of
saying that errant operators will be
penalised for doing so.
He said Trai had received consumer
complaints related to blackout (on one
DTH platform), long duration packs and
offerings for multiple TV connections,
and the regulator was looking into the
grievances and issuing suitable direc-
tions to operators.
“Consumers must have a choice...
and interfering with their freedom is a
violation of regulatory framework,”
Sharma said.
Trai has also asked platform opera-
tors to revert, in two days, with special
schemes and plans for households with
multiple TV connections.
The guidelines also said state
R S Sharma, chief of Telecom
Regulatory Authority of India,
Trai has emphasised that players
have to allow individual set top boxes
(even within a same household) to have
separate choice of channels, if the con-
sumer wishes.
According to regulations, players can
choose to offer discounts or even waive
Govt may roll over ~35,000 cr
in subsidy payments to FY20
laration is incorrect.
ARUP ROYCHOUDHURY
New Delhi, 6 February
Land owned by temples or To help meet its revised fiscal
other institutions won’t form deficit target of 3.4 per cent of
part of the scheme. The guide- gross domestic product for
lines also state if the spouse of a
farmer falls within the exclusion
criteria, he won’t be considered
2018-19, the Centre is highly
likely to rollover as much as
~33,000-35,000 crore in com-
eligible for the benefit. bined food, petroleum and fer-
The first tranche is expected tiliser subsidies to 2019-20.
to be transferred before March Additionally, Business
31, 2019. According to the Standard has learnt that the
Interim Budget, a sum of 2019-20 interim Budget
~75,000 crore has been allocated assumed an average crude oil
for the scheme in financial year price of $65 a barrel for the next
2020 (FY20). Further, ~20,000 fiscal year, the same as this year.
crore has been allocated in the If these sums are not rolled
revised estimates of FY19. over, the fiscal deficit for this
The guidelines also state that year could be as high as 3.55 per
cases where transfer of owner- cent of gross domestic product
ship of cultivable land has hap- (GDP). The combined fertiliser,
pened due to any reason — pur- food and petroleum subsidy
chase, succession, will, gift, etc budgeted estimate for FY19 is
— between December 1, 2018, ~2.64 trillion, while the revised
and January 31, 2019, shall be estimate is ~2.66 trillion. If the
eligible for benefits under the carrying forward to FY20 does
scheme. But, the first install- not happen, the revised esti-
ment during the financial year mates for the major subsidies
(2018-19) shall be proportionate could actually cross ~3 trillion
amount from date of transfer till for the first time ever.
March 31, 2019 with respect to Business Standard has learnt
the four months’ period, the from senior government offi-
guidelines said. cials that the petroleum subsidy
issues. There were complaints that some
Trai issues showcause platforms were not offering the freedom
notice to Airtel of choice to consumers as far as the first
100 channels are concerned,” Sharma
Trai has served a showcause notice to said. Contesting the claims of Crisil
Airtel over the blackout faced by some of report, Trai chief said the consumers will
its DTH customers during the switchover see a drop in their monthly bills as mar-
to the new tariff regime, sources said. ket forces will come to play under the
The showcause notice was issued new tariff regime for broadcasting and
earlier this week, and Airtel has been cable services.
given three days time to respond, they The regulator said data sourced by
told PTI. When contacted, an Airtel Trai separately from two operators
spokesperson said a few customers may showed prices were actually lower in
have experienced delays in provisioning places such as Mumbai, and Delhi com-
of channels, owing to a massive surge in pared to the previous regime.
last-minute requests during migration, Crisil in a report claimed that the new
and that the service provider remains tariff regime will see a 25 per cent rise in
committed to ensuring compliance with cost per consumer. “Our analysis of the
all regulatory norms. PTI impact of the regulations indicates a var-
ied impact on monthly TV bills. Based on
off network capacity fee on the subse- current pricing, the monthly TV bill can go
quent connection. Trai said it was main- up by 25 per cent from ~230-240 to around
taining a close watch on the issue and ~300 per month for viewers who opt for
will intervene, if required. the top 10 channels, but will come down
“There are certain concerns that had for those who opt for the top five chan-
come to our notice and we have directed nels,” Crisil Senior Director Sachin Gupta
platform operators to address these was quoted as saying in the report.
RESULTS
Allahabad Bank posts loss of ~733 core
NAMRATA ACHARYA
Kolkata, 6 February
Allahabad Bank posted a net
loss of ~733 crore for the third
quarter of the present finan-
cial year, against a net loss of
~1,264 crore in the same period
of the last financial year. In Q2
of FY19, the net loss stood at
~1,822 crore.
The slippages of the bank
the last quarter stood at ~2,450
crore, against the expectation
of less than ~2,000 crore, said S
S Mallikarjuna Rao, MD and
CEO, Allahabad Bank.
About ~300 crore exposure
in three accounts to IL&FS,
turned into NPAs, he said. The
bank has total exposure of
about ~1,245 crore to IL&FS cov-
ering 12 to 13 accounts. The rest
IDFC First Bank aims
5.5% NIM in six years
ABHIJIT LELE
Mumbai, 6 February
IDFC First Bank is targeting
net interest margin (NIM) to
5.5 per cent in 5-6 years, from
3.27 per cent in the
December 2018 quarter, on
higher yield on loans and ris-
ing share of low-cost
deposits. The bank said
gross yield was expected to
continuously increase as the
share of retail assets moves
towards 70 per cent of the
total fund assets.
The retail loan portfolio,
including Small and
Medium Enterprises (SME)
credit, was over ~36,000
crore at end of December.
The bank plans to grow the
retail asset book to over ~1
trillion in six years.
Capital First, a finance
company, merged with pri-
vate lender IDFC Bank in
December. The bank is
working to increase gross
yield on its loan book from
MUMBAI | THURSDAY, 7 FEBRUARY 2019
SUBSIDY ROLLOVER
Figures (~ cr) FY19 BE
Fertiliser 70,080
Food 169,323
Petroleum
Total
24,933
264,336
#That could be carried over to next fiscal year; *Petroleum subsidy estimate for FY20
already assumes a carry-over amount of ~13,000 cr, while food and fertiliser do not.
Source: indiabudget.gov.in, govt sources
amount rolled over to FY20 will
be around ~13,000 crore. Food
subsidy could see a rollover of
around ~10,000 crore, while fer-
tiliser subsidy rolled over to
FY20 may be in the region of
~10,000-12,000 crore.
“We are admitting that we
will roll over ~13,000 crore in
petroleum next year. This year
we had budgeted the subsidies
at $65 a barrel. It went to above
$80 and then came down again,
and hence the higher subsidy
bills. For the next year also we
have budgeted $65/barrel. The
budgeted estimates for the next
year is more than revised esti-
mates this year because of
rolled over payments,” said an
official.
In the 2018 calendar year,
Pradeep Singh Kharola is
new civil aviation secretary
PRESS TRUST OF INDIA
New Delhi, 6 February
Air India chief Pradeep Singh
Kharola (pictured) has been
appointed Civil Aviation secre-
tary, a year after he came on
board the national carrier, as
part of a minor top-level
bureaucratic reshuffle effected
on Wednesday, according to an
official order.
Kharola, a 1985-batch IAS
officer of the Karnataka cadre,
was in November 2017 named
the chairman and managing
director of Air India Ltd. He
took over the reins of the debt-
ridden national carrier on
January 9, last year.
It was under Kharola's
tenure that the government
last year came up with the pro-
posal to sell off 76 per cent of its
stake in Air India. However, the
proposal was later put on hold
due to unavailability of possi-
of the accounts worth about
~900 crore are in standard cat-
egory, he said.
The bank expects to break
even by June 2019, and pres-
ent its plan to come out of
PCA (prompt corrective
action) to the RBI, said Rao.
The bank expects 10 major
accounts in NCLT, with an
exposure of around ~2,749
crore, to be settled by March
2019, with a haircut of around
51 per cent. The bank expects
a write back of about ~350
crore from these accounts.
The bank will seek further
capital infusion from the gov-
ernment by March 2019. At
present, the government
shareholding in the bank
stands at about 83 per cent.
However, since the bank needs
9.2 per cent (before merger)
to 12 per cent in the next 5-
6 years. This will be done
with growth of the retail
loan assets at a relatively
higher yield, compared to
wholesale loans.
NIM, or net interest
income as a percentage of
interest-earning assets, was
3.27 per cent in Q3FY19
(post-merger), as compared
to 1.7 per cent in Q2FY19
(pre-merger).
Total deposits of the
bank stood at ~61,914 crore.
Of total deposits, low-cost
deposits — current account
savings accounts deposits
(CASA) — were at ~6,421
crore, contributing 10.37 per
cent to the total deposits.
The bank would like to
increase share of CASA to
30-33 per cent in 5-6 years
and set a trajectory to reach
a CASA ratio of 40-50 per
cent there on, said Managing
Director and Chief Executive
Officer V Vaidyanathan.
FY19RE Approx amount# FY20BE
70,075 10,000-12,000 74,986
171,298 10,000 184,220
24,833
266,206
13,000 37,478*
33,000-35,000 296,684
global crude oil prices reached
a four-year high of around $86
a barrel in October and aver-
aged around $73.69 a barrel in
April-September. As on
Wednesday, Brent Crude was
trading at $61.77 a barrel.
The official, however, added
that next year’s food and fer-
tiliser subsidy estimates do not
assume any rollovers. This
means that any carried forward
amounts under these two
heads will add to next year’s
subsidy burden. (see table).
For 2019-20, the major sub-
sidies are budgeted at around
~2.96 trillion. Finance Minister
Piyush Goyal, while presenting
the interim Budget on February
1, kept a fiscal deficit target of
3.4 per cent of GDP as well.
ble buyer.
The Air India has a debt of
about Rs 55,000 crore. The gov-
ernment has started the process
of restructuring the national
carrier to help it reduce its debt.
Kharola has been appoint-
ed as the Civil Aviation
Secretary in place of Rajiv
Nayan Choubey, who superan-
nuated on January 31.
Choubey, after his retire-
ment, has been appointed as a
member in the Union Public
Service Commission (UPSC),
that conducts civil services
to bring down the government
shareholding to 75 per cent by
October 2020 according to reg-
ulations, it will go to market
in tranches to reduce the gov-
ernment stake after March
2019, said Rao.
The gross NPA as a per-
centage of total advances stood
at 17.81 per cent in the last quar-
ter, against 14.38 per cent in
the same period of the last
financial year. The net NPA
percentage stood at 7.7 per cent
in Q3 of FY19, against 8.97 per
cent in the same period last
financial year.
Indian Overseas Bank,
along with Allahabad Bank, has
appointed Choice Consultant
towards partial or full exit from
Universal Sompo General
Insurance, said Rao.
SIDBI Q3 net up
34% at ~540.3 cr
ABHIJIT LELE
Mumbai, 6 February
Small Industries Development Bank
of India (SIDBI) has posted 34 per
cent increase in net profit at ~540.3
crore in the third quarter ended
December 2018 (Q3Fy19) on sharp
rise in interest income.
It had posted a net profit of
~403.18 crore in October-December
2017 (Q3Fy18).
Refinancing agency in state-
ment said its Net Interest Income
rose by 40.3 per cent to ~725.59 crore
in Q3FY19 from ~517.15 crore in
Q3FY18. However, its Net Interest
Margin (NIM-annualised) went
down by 64 basis points (Bps) to 1.86
per cent in December 2018 from 2.5
per cent in December 2017 due to
focus on low risk assets and
increased cost of funding.
The average yield declined to 5.3
per cent as on December 2018 from
5.6 per cent as on December 2017,
SIDBI said.
The NIM was down by 19.41 per
cent to ~137.99 crore in Q3FY19 from
~171.22 crore in Q3FY18.
1
Separately, in an interview
with Business Standard, Goyal
said, when asked on rolling over
of subsidies, “The amount that
comes towards the end of year
is given the next year. This is
routine. But this is not as huge
as we inherited from the
Congress.”
The official said while there
was a mild possibility of food
subsidy seeing rollovers, the
possibility could not be ruled
out. The person admitted that
the government was still in the
dark on the status of fertiliser
subsidies, since that additional
demand comes in March.
“For fertiliser, we will get a
demand from the fertiliser
companies via the fertiliser
ministry in March. The addi-
tional demand we get in recent
years is approximately ~10,000-
12,000 crore,” the official said.
Successive governments
have resorted to time-tested
methods of rolling over addi-
tional subsidy burden, taking
back unspent amounts from
ministries, converting certain
expenditure entries to ways and
means advance, and running
down the cash reserves.
examination to select officers
of Indian Administrative
Service (IAS), Indian Foreign
Service (IFS) and Indian Police
Service (IPS) among others.
The name of new Air India
chief or a caretaker head was
not announced by the govern-
ment. Also, senior bureaucrat
Radheyshyam Julaniya has
been appointed as Secretary,
Department of Sports, in place
of Rahul Prasad Bhatnagar.
Julaniya, a 1985-batch IAS
officer, is serving in his cadre
state Madhya Pradesh.
Bhatnagar, a 1983-batch IAS
officer, will now be Secretary,
the Ministry of Panchayati Raj.
Senior IAS officer Sailesh
will be Secretary, the Minority
Affairs Ministry.
Sailesh, a 1985-batch IAS
offcer of Assam-Meghalaya
cadre, is at present Secretary,
the Department of Official
Language.
Temple board’s
U-turn, says
women
allowed in
Sabarimala
PRESS TRUST OF INDIA
New Delhi, 6 February
The Travancore Devaswom
Board, which runs the
Sabarimala temple, on
Wednesday made a U-turn to
support the Supreme Court’s
order allowing women of all
ages to enter the shrine. It
joined the Kerala govern-
ment to oppose a batch of
pleas seeking review of the
historic verdict.
A five-judge Constitution
Bench headed by Chief
Justice Ranjan Gogoi
reserved its decision after
hearing various parties for
three and half hours, includ-
ing those seeking re-consid-
eration of the September 28,
2018 judgement, even as the
board later asserted its latest
position was not due to any
political pressure.
Some right-wing activists
have alleged the board
changed its stand before the
court under pressure from the
state’s CPI(M)-led LDF gov-
ernment. The apex court, by a
majority of 4:1, had lifted the
ban hat prevented women
between the age of 10 and 50
from entering the Ayyappa
shrine in Kerala and had held
that this centuries-old Hindu
religious practice was illegal
and unconstitutional.
However, as many as 65
petitions — including 56
review petitions and four
fresh writ petitions and five
transfer pleas — were filed in
the apex court after its verdict
sparked violent protests in
Kerala. The five-judge consti-
tution bench, which had ear-
lier agreed to hear the pleas in
an open court, reserved its
decision after hearing the par-
ties, including Nair Service
Society, Thantry of temple,
temple Board and the state
government, in favour and
against the review plea.
22 TECHNOLOGY 4.0
>
MUMBAI | THURSDAY, 7 FEBRUARY 2019 1

AI does delicious! Small sats,

en for delivery. “We gather data at the
zone level so we can predict the impact
on the delivery time, say, the next time
it rains,” says Vaz, adding that use of

smart
ML has helped the company see a 23
per cent reduction in driver wait time
and a 50 per cent improvement in ‘on-
Artificial intelligence is revolutionising the food tech time delivery’ of orders.

analytics
Swiggy is also setting up an AI-
business. Peerzada Abrar gives the lowdown research lab in Bengaluru which will
focus on voice and computer vision
technologies. Earlier this week, it

F
ancy a robot cooking your and accepts food orders only acqui-hired Kint.io, a Bengaluru- If you are planning to
meal for you? That day may through an online order- based AI start-up which applies keep an eye on your
be nearer than you think. ing system. deep learning and computer competition, it might
In fact, the next time you Many of the vision to recognise objects in help to use satellite
order a chicken biryani processes at Rebel videos. Vaz says that in images. You can
from internet restaurant company Foods’ kitchens future, voice and computer check, for instance,
Rebel Foods, chances are that it would are already auto- vision would play a key role how busy is the manu-
be made by a robot. The Mumbai- mated. For exam- in how customers interact facturing plant of your
based firm, which is known for its ple, a dish like with Swiggy and order food rival. Satellite images
brands like Faasos and Behrouz masala paneer tik- using multiple Indian lan- can track the move-
Biryani, is looking to use artificial intel- ka has 30 machine
ligence (AI) and robotics to automate learning tags
guages. “So when you wake
up in the morning and say KRANTI NATION ment of people and
product over a period
the processes at its network of cloud which help classify ‘hey Swiggy get me PRANJAL SHARMA and see how many
kitchens. The aim is not just to stan- customer prefer- breakfast,’ we will be trucks carrying raw
dardise food items and maintain the ences such as the able to deliver it to materials or final products are at the facility. Add a
quality and taste of food across all its level of oil, calories you,” he explains. layer of data analytics and you can get a fair idea of
kitchens in the country, but also to and the number of Swiggy’s New your rival’s situation.
deploy less manpower and reduce herbs in it. Moreover, Delhi-based rival Small satellites with focused capabilities are
human error. using machine learn- Zomato is also offering data insights for commercial use. Smart
“We are building robots that can ing, its kitchens are able investing heavily start-ups are now using cube satellites for getting
prepare food items like dosas in min- to forecast the number of orders they in AI, machine data that companies can deploy for a variety of
utes. These are AI and Internet of can expect to get at any given time and learning and data uses. More importantly, data analytics is being used
Things (IoT) enabled devices where location, and the kind of inventory analytics. The with satellite imagery to get insights which was not
we feed in the recipe to make the dish- they need to maintain to fulfil them. DELIVERING THE GOODS online restaurant easy earlier.
es,” says Soumyadeep Barman, chief The foodtech firm has already seen a guide and food Deploying satellite images has long been the pre-
technology officer at Rebel Foods. 60-70 per cent reduction in food MLAND DATA science have helped ordering firm, serve of governments across the world. From civil to
Rebel Foods is among a growing wastage through the use of ML and in 60-70 per cent reduction in which provides defence matters, the satellites were meant mostly for
number of food tech companies in data sciences. Moreover, by being able food wastage information on over 1.4 million usage by government agencies. In recent years, the
India that are betting big on AI, to predict demand, the delivery time restaurants across 24 countries, is weather data gleaned from satellite imagery was
TECH AUTOMATICALLYclassifies
machine learning (ML) and data ana- has reduced by 20-30 per cent. busy developing the road to drone- commercialised and sold to private enterprises.
lytics to automate their processes. The Food delivery firm Swiggy is being
food images as vegetarian, based food delivery system. The Commercial satellite imaging market is rising
applications range from predicting equally aggressive in its effort to auto- non-vegetarian and eggetarian idea is to create a hub-to-hub deliv- sharply because of the increasing use of cube satel-
demand, understanding customer mate. It is building an AI-driven plat- IT RECOMMENDS dishes the way ery network powered by hybrid mul- lites. Start-ups like Orbital Insight and SpaceKnow
preferences, preparing dishes and form for hyperlocal discovery and on- Netflix suggest films based on ti-rotor drones. With this in mind, last are offering a range of services for their clients across
delivering the orders in the fastest pos- demand delivery. One of its movies customers watch December Zomato acquired Lucknow- the world.
sible time. innovations involves ‘cataloguing’, based drone start-up TechEagle Globally, the market for this segment is expect-
According to RedSeer Consulting, a where machine learning is used to DELIVERYTIME has reduced by Innovations. In the first phase, ed to be $5.2 billion in three years. The traditional
research and advisory firm, the online automatically classify the images of 20-30 per cent as technology is Zomato is designing drones that can use of environment mapping, border surveillance
food ordering and the delivery mar- food items as vegetarian, non-vege- able to predict demand lift a payload of under 5 kg. “It is a is now moving into more precise objectives. Not just
ket in India is expected to grow at a tarian and ‘eggetarian’. Swiggy, which IN FUTURE drones might deliver big investment and as the tech- business rivals, even regulators and governments
compounded annual growth rate of commanded a valuation of $3.3 billion nology evolves, it will have a huge keep track of business activities using information
food items to customers
more than 45 per cent to reach $11 bil- after its $1 billion funding round in impact in the future,” says Gunjan which is now easily available from commercial
lion in gross merchandise value (GMV) December 2018, is also using technol- Patidar, chief technocrat at Zomato. sources. The government of Tanzania for instance
by 2023. Little wonder ogy to give recommenda- Patidar claims that in India, early discovered that a
that all the major players tions to customers. an “AI-first company”. investments into building an in-house mining company was
are pushing to drive effi- Unlike shopping “It’s similar to the way Unlike shopping on e-com- data platform, AI, ML and data science Earlier govts who under-reporting dia-
ciency by employing cut- on e-commerce Netflix recommends films merce sites such as Amazon and have helped refine several aspects of did not own mond exports. It was
ting-edge technologies so sites like Amazon based on the movies you Flipkart where the products can the business such as reviews, search, satellites would suspected that the
as to be able to corner a and Flipkart have watched earlier. For be delivered in a few days, fulfilling order personalisation, demand pre- have to seek company was directly
bigger bite of the market. where the example, if you have been food orders is extremely time sensi- diction and route optimisation, among inputs from flying out diamonds
Rebel Foods, which products can be ordering a lot of paneer, I tive. For instance, Swiggy promises to others. “User personalisation has friendly countries. from a private airfield
was founded by INSEAD delivered in a few would like to show you deliver food within 32 minutes. The pare the order and then to deliver the helped decrease the average time tak- But commercial without reporting the
alumni Jaydeep Barman days, fulfilling more paneer dishes,” says Bengaluru-based company has close to food. Based on these, the system finds en by a user to decide the order by availability of exports to the govern-
and Kallol Banerjee, oper- food orders is Dale Vaz, head of engi- 1.20 lakh active delivery partners. The the best route and the rider who can about 10 per cent,” he says. satellite imagery ment.
ates about 1,100 online time sensitive. neering and AI at Swiggy. mobile devices of these partners beam deliver the product in the fastest pos- With AI and robotics revolutionis- is exposing almost Several of such
restaurants and 176 deliv- For instance, Vaz, who joined Swiggy back their location to Swiggy’s servers sible time. ing the food tech business, consumers all activities to errant behaviour can
ery cloud kitchens across Swiggy promises last year and was previ- every few seconds. And Swiggy uses The technology also enables will want to know when they can get a seekers be caught by govern-
16 Indian cities. A ‘cloud to deliver food ously the head of engi- machine learning-based models to Swiggy to factor in the impact of robot in their kitchens to take the pain ment agencies using
kitchen’ is one that does in 32 minutes neering at Amazon India, predict the time it would take them to weather conditions, traffic patterns out of daily cooking. All we can say is, satellite imagery from
not offer dine-in facility is helping Swiggy become reach the restaurants, the time to pre- and road construction on the time tak- watch this space. private companies. Earlier the governments who did
not own satellites would have to seek inputs from
friendly countries. But commercial availability of
satellite imagery is exposing almost all activities to
ALGO RHYTHM seekers.
Most valuable companies in these segments ISRO has been deploying small satellites too con-
tributing to the trend. “About 7,000 small sats are due

INDIA DISTANT FOURTH IN GLOBAL UNICORN MAP Internet software & services -Infor
$10bn
to be launched over the next 10 years, i.e. a six-fold
increase from the 1,200 units launched over the past
decade. About 50 constellations, two of which are
The startup valuation across the continued to lead being home
globe is hitting the sky with to 49 per cent of these unicorns
Category-wise breakup of unicorns E-commerce - Airbnb
mega constellations, account for over 80 per cent of
the small sat count,” says a report by Euroconsult.
some 112 new companies joining (an improvement of 2 13% The use of satellites for internet of things and con-
the unicorn club (companies percentage points over an 24% Ecommerce $29.3bn nected devices will drive the commercial usage. “By
with valuation of $1 billion and August 2018 report), China's Internet 2022, an average of 580 small sats will be launched
software Payments - Stripe every year as a result of initial constellation deploy-
above) in 2018 alone, a rise of 58 share feel from 30 per cent to 26 10% ment. This compares to an annual average of 190
per cent over the previous year, per cent. India & services Fintech
taking the number of such ranked at fourth $20bn satellites launched over the past five years,” says
Maxime Puteaux, senior consultant at Euroconsult
companies to 310. The collective place with a and editor of the report.
worth of these companies that share of 4 per Another company HawkEye 360 is sending up a
raised a total of $257 billion in cent (13 collection of nano satellites that will track radio fre-
funding, stood at $1052 unicorns to be 54% Most valuable unicorn startups in the world quency signals over specific areas. The data will then
billion as of January 23, precise) while the UK with Others be analysed for maritime or terrestrial activity.
2019, according a market 17 unicorns or 6 per cent Company Country Category Valuation The combination of using artificial intelligence to
intelligence platform CB share was in third of Origin ($ billion) analyse data sent by lots of small satellites is proving
to be a killer app. The use of AI can help stitch togeth-
Insights. While position. Bytedance China Media 75 er various bits of information to give a picture that a
the US
19 private 25 % approx. of Uber USA Ride-hailing 70 simple image can’t.
From large satellites to swarms that orbit around
companies companies Didi Chuxing China Ride-hailing 56
the earth, this is a significant shift for the commercial
(6% of total unicorns) included in the WeWork USA Co-working 47 world. As the government monopoly on such images
are considered global unicorn is reduced, virtually every physical economic activ-
JUULLabs USA E-cigarette maker 38
decacorns (valuation club are valued ity will be open for analysis. Companies and enter-
of $10 billion at exactly prises will find that their claims of growth will be
and above) $1 billion SOURCE: CB INSIGHTS keenly watched by the eyes in the sky.

TOY STORY system only in our second year of they can listen to their call, feed them or KPMGforecaststhatIndia’sonline
engineering,” says Amin. watch them fly. Smartivity’s image educationmarketwillhit$2billionby

STEMcellsofeducation
Augmented reality and IoT-driven educational
toys are helping children bone up on basic
scientific concepts, reports Romita Majumdar
Ritam Ghosh’s parents fondly threw a fit because he had to go without
remember their son taking apart every his online games. That is whenGhosh
toy car, clock-wound toy animal, pen or realisedthathischildneededmentally
even cycle chains to try and see how engagingactivitiesthatcanhelphim
they worked. Back in the 1980s, this innovateonhisown.
meant that his toys often had to be Childpsychologistshavebeensaying
replaced. But the investment paid off as thesamethingforalongtime.Theyhave
their son’s skill with pointedtothenegative
machines ensured that he Educational toys and impactoflettingchildren
got into a premier games help children spendlonghoursonthe
engineering institute after understand basic internetwheretheyget
he finished school. concepts while readymadeanswerstotheir
In 2019, Ghosh’s seven- improving their queriesratherthanlearning
year-old son Ivan is having a cognitive and andexperiencingknowledge
very different sort of analytical skills asariteofpassage.
childhood. The boy never “The current generation
takes a crack at dismantling of children are running
a toy — partly because toys are of better between tuition, classes and school so
quality today and cannot easily be taken when you leave them on their own in a
apart, but also because Ivan and his playground, they don’t know what to
peers spend much more time playing do,” says Mona Gajre, professor of
games on tablets and smartphones paediatrics at the Paediatric
rather than with physical toys. So much Neurodevelopment Centre, Mumbai.
so that when the family experienced a Gajre suggests a mix of structured and
wifi disruption last month, the boy unstructured playtime for children
where they can innovate and create,
going beyond just learning new skills.
To address this need, a number of
products and technology startups are
coming out with smart and fun learning
options for children, especially in the
science, technology, engineering and
mathematics (STEM) fields. These
educational toys and games help
children understand basic concepts
while improving their cognitive and
analytical skills.
Take Smartivity, which has
developed augmented reality (which
combines computer-generated images
with the real world to provide a
composite view) and STEM-based
educational toys. Co-founder Tushar
Amin says that though all four
founders of Smartivity were alumni
of premier engineering institutes,
they know that they made it
because they managed to
game the system.
“We crammed
formulae and secured
good marks. There was no
practical understanding of the
concepts involved. We aced gear-
ratio problems in secondary
school, but saw an actual gear
Smartivity’s toys, games and puzzles,
which are based on augmented reality
(AR) or Internet of things (IoT)
technologies, help children develop an
understanding of STEM concepts and
encourage logical thinking. For
example, once children finish colouring
an AR drawing sheet, they caninteract
withtheircreationsthroughtheARapp.
Soiftheyhavedrawnananimalorabird,
processing and colour recognition
technologies ensure that the picture
they have coloured comes to life on their
screen in 3D. The company has worked
with leading multinational brands like
Glaxo Smith-Kline (Junior Horlicks),
Aviva, Hewlett-Packard, and AXIS Bank
to develop and distribute its
educational toys.
Othersaremakingasimilareffortto
helpkidslearnSTEMconceptsinsimple
andfun-filledways.“STEMeducationis
thefuture.Soweneedtoensurethat
childrenaretaughtthesesubjectsinaway
thattheyunderstand,”saysTarunBhalla,
founderandCEOofAvishkaar.Bhallahas
setupmorethan400roboticsand
tinkeringlabsacrossthecountryafterhe
lefthisjobatMicrosoftmorethana
decadeago.
Avishkaar’sproducts,tailoredto
differentagegroups,helpschoolchildren
understandtheconceptsofdifferent
typesofmachinesandrobotsand
encouragethemtobuildsimple
machines.Forinstance,a
programmingkitfor11-year
pluschildrenteachesthemto
useprogrammingconcepts
likevariablesandconstants
anddecisioncontrolstructures
likeloops.Allprogrammingis
doneontheirin-houseOSplatform
calledAvishkaarMakerStudio,built
specificallyforyoungusers.
2021.Theworldwideedu-techindustry
(whichincludesthehugecorporate
trainingmarket)isahundredtimesthat
size,withaneventualpotentialmarket
sizeof$5trillion.Expertssaythatmuchof
theexpectedgrowthinthefuturewill
comefromIndia.
Meanwhile,moreandmoreedu-tech
startupsarehittingthemarketwith
innovativeofferings.Angaza,agamified
e-learningplatform,isfocussedon
optimisinge-learningforhighschool
students.Emotix,aMumbai-based
startup,hascomeoutwitharobotcalled
Miko2,whichhelpsschoolkidsrevise
lessonsandhavemeaningful
conversationswithit.AcuteAI
companionaboutthesizeofakitten,
Miko2bridgesthegapbetweenanAlexa
andababysitter—acrucialneedatatime
whennuclearfamiliesandworking
parentsarethenormandchildrenare
oftenlonelyandlefttotheirowndevices.
While Ghosh is excited about the
multitude of fun learning options in the
market, he sometimes wonders if his
son will ever know the joy of poring over
a tattered atlas or an old wooden globe.
But when young Ivan tells him about the
animals found in different African
countries and the monuments that he
discovered on his AR globe called Shifu
Orboot, Ghosh feels that perhaps the
boy will turn out to be better informed
than his father was when he was a child.
.
MUMBAI | THURSDAY, 7 FEBRUARY 2019 BRAND WORLD 23
<

Fiat drives itself

ing line up of Fiat models, as
per reports. Given Fiat’s weak
positioning in the market, it
doesn’t merit such a mammoth

to the finish line

investment. Therefore, the
company will have no choice
but to phase out Fiat models
from India.
Fiat’s current product port-
folio, which consists of the
Long after the iconic Italian auto brand went off the road Linea and Grande Punto will
not comply with the upcom-
in India, it is all set to become history ing stricter safety and emission
IMAGE:iSTOCK regulations. The company has
SHALLY SETH MOHILE made minimal investment in
Mumbai, 6 February these ageing models, which
have been on sale for around a

T
here aren’t too many
brands in India’s 56-
year-old motoring his-
tory that have had their epi-
taph written as many times as
the iconic Fiat. Thanks to its
chequered past, the local arm
of the Italian carmaker has
found itself in the dumpyard
many times over—but now
come 2020, as the new emis-
sion norms kick in, it is time
for the last sign off.
Even this time around, if
company insiders are to be
believed, “it’s only a pause,”
and not an exit from India. A
temporary lull before Fiat firms
up a plan to bring out the next
generation models that can
meet the advanced safety and
fuel emission regulations. A
Fiat Chrysler Automotive
(FCA) spokesperson declined
to comment for the story.
While the list of brands
going off the road in 2020 is
long, it is Fiat’s impending
demise that has caught popular
attention. So what is about the
brand that continues to engen-
der interest? Heritage, history
and the way it touched lives of
millions in its various avatars;
be it the Premier President and
Premier Padmini (1970s) or the
more recent Uno, Siena, Palio,
Petra, Avventura, Punto and
Linea (1996-till date), the brand
ticks all the boxes on the nos-
talgia front.
However, despite the
romance around the car and its
early models, Fiat in India will
also be remembered as a brand
that frittered away the first
mover advantage. “It is yet
another case of a legendary
brand, being mismanaged.
Purely out of lack of focus on
what the Indian consumer
wants,” says Avik
Chhatopadhyay, co-founder at
Expereal,brandconsultingfirm.
decade. Therefore, investing in
upgrading the Linea and
Grande Punto, which are well
beyond their lifecycle and
whose combined sales dipped
to 102 units in 12 months (from
December 2017-November
2018), has become pointless.
Fiat also lost out on telling
its brand story to a new band of
consumers. Chattopadhyay
says Fiat did try through inter-
esting experiments like the Fiat
Cafes but that was only a “third
of the business plan which they
got right. The balance was miss-
ing or deficient.” The agree-
ment with Tata Motors which
was part of a global plan to
stitch an alliance with local
companies to get scale and
access to network didn’t work
THE JOURNEY TO THE BRINK either. “Knee jerk arrange-
1974: Premier Padmini launched in India under licensing ments with the likes of Tata
agreement with Fiat S.p.A Motors would never have
helped as they are two distinct
1997: Fiat establishes a wholly owned India subsidiary brands and cannot be effec-
2006: Signs a dual partnership for engine manufacturing tively marketed by the same
and distribution with Tata Motors people. They can only be dis-
2012: Fiat Group Automobiles India formed as a direct counted and pushed out of the
subsidiary of Fiat Chrysler Automobile (FCA) India showrooms,” points out
Chattopadhyay.
2013: Distribution agreement with Tata Motors ends
“The discontinuation of
2017: FCA launches locally made Jeep Compass in India brand Fiat from India has been
a foregone conclusion," said
The company faltered on already maturing and had Puneet Gupta, associate direc-
many fronts—it found itself reached the 1.2 million mark tor at I.H.S Markit, a sales fore-
edged out of the market and every global carmaker casting and market research
because of high prices, for had a wheel in the mix. firm adding that it makes little
bringing obsolete offerings The other problem was a sense to revive the brand and
such as the Uno, which was shoddy and apathetic after pump fresh investment given
nearing the end of its life- sales service record. The its troubled past.
cycle when it was introduced brand’s global woes also came At the core of the brand’s
and so on. Fiat misread the home to roost and despite sev- tragic fall however was the lack
market even as rivals from eral attempts, Fiat never really of interest by the brand’s cus-
Japan and Korea were quick found a way back from the todians, say experts. The man-
to learn and capitalise on the brink. The fact that Fiat in agement got swayed by the
opportunity. While the com- India was writing its final chap- engine supply business to car-
pany did make an effort to ter however was evident when makers. “They saw salvation
correct course with the FCA India was formed in 2012 in the engine business, actu-
launch of the Linea and and the new company decided ally letting the vehicle busi-
Punto models (2008), it was to focus on the Jeep brand. It ness flounder,” Chattopadhyay
too little too late. By then the will have to pump in at least said. And the brand found
car market in India was ~ 4,300 crore to replace the age- itself kicked to the kerb.

> FROM PAGE 1

Voda Idea Q3 loss Govt explores

widens to ~5,004 cr
Reported ARPU increased 1.5 per cent to ~89,
which was in line with expectations, following
the new bundled plan and minimum ARPU
strategy stated last quarter.
“We are progressing well on our stated
strategy. The initiatives taken during the quar-
ter started showing encouraging trends by
the end of the quarter. We are moving faster
than expected on integration, specifically on
the network front, and we are well on track to
deliver our synergy target," said Balesh
Sharma, chief executive officer at VIL.
The company said its headline tariffs had
remained stable during the quarter.
The minimum ARPU plans led to higher
churn of ‘incoming only’ or ‘minimal ARPU’
customers and reduced the total subscriber
base by 35 million to 387.2 million. During the
same quarter, Bharti Airtel reported a 4 per
cent increase in ARPU and a loss of 49 million
subscribers after following the same strategy.
As of the December quarter, Reliance Jio
has around 280 million subscribers, while
Airtel India has 284 million. In the September
quarter, VIL had lost 13 million customers.
In Q3, overall operating expenses dropped
sequentially due to the realisation of merger
synergies. In the third quarter, the operating
expenses were ~8,150 crore (excluding licence
fees, spectrum usage charges, and roaming
and access charges), lower by ~750 crore, com-
pared to Q1 operating expenses.
Street estimates for synergy benefits were
much lower at about ~450 crore. The compa-
ny has given a guidance of ~8,400 crore of
run-rate costs synergies to be achieved during
FY21, two years ahead of the initial target set
at the time of the original merger announce-
ment in March 2017.
Cash and cash equivalents were ~8,900
crore, resulting in net debt of ~1.14 trillion,
as against ~1.12 trillion in the second quar-
ter of 2018-19. VIL’s capex (~1,170 crore for
the December quarter) continued to worry
sector analysts as its rival telcos reported
higher capex numbers. Bharti Airtel India
reported a capex of ~5,309 crore, while Jio
reported ~14,000 crore in Q3. The level of
capital expenditure is expected to be high-
er in Q4, as contracts with suppliers were
finalised during Q3.
More on business-standard.com
pre-packaged
bankruptcy plan
At present, the debtor company,
its financial creditors or the
operational creditors can move
the NCLT to initiate insolvency
proceedings and find a resolu-
tion and way to repay loans. The
insolvency and bankruptcy code
was brought into effect in 2016
to find a solution to bad loans.
According to the code, a com-
pany has up to 270 days to
finalise a resolution plan failing
which its assets will be liquidat-
ed. Also, the promoter of a com-
pany cannot bid to get back the
company. The government
inserted a new clause as Section
20 (A) prohibiting anyone relat-
ed to the company from placing
a bid.
A resolution professional
appointed by the NCLT oversees
the functioning of the company
and invites resolution plans
which are then put up for the tri-
bunal’s approval.
The government had earlier
indicated that once the initial
clutter of the IBC is cleared, a
pre-IBC framework could be
considered to sort out the non-
performing assets issue.

HoldCo model for banks on the cards

The source pointed out that both the
HoldCo and its one-drop subsidiaries can
be listed; in the case of the latter, it will
depend on the nature of business – whether
it is a capital guzzler or not. A big benefit is
that once the subsidiaries are separated
from banks, their growth would not be con-
strained on account of capital, given that as
on date there are also restrictions on the
level of exposure to these entities.
The RBI, it is surmised, may also come
out with a variant – a main banking sub-
sidiary under the HoldCo, which, in turn,
will house all pure-play banking related
arms as these anyway will have to report to
Mint Road for operational purposes even as
it helps cut down on regulatory and super-
visory overlaps.
The Committee on Financial Sector
Assessment (CFSA), in its report of March
2009, had noted the absence of the HoldCo
structure in financial conglomerates, which
it said exposed depositors and the parent
company to risks and strains its ability to
funds the core business. In the new
arrangement, it will be up to the HoldCo to
infuse capital in the subsidiaries. This will
act as a bulwark for the bank -- from the
direct impact of the losses in the sub-
sidiaries when it is up-streamed to the con-
solidated balance sheet (of the bank). Bank
boards, too, need not be burdened with the
hassles of managing the subsidiaries. It will
also enable a cleaner resolution in the cas-
es wherein the parent bank is liquidated,
without leading to the same fate for its sub-
sidiaries.
The bigger picture is that after the finan-
cial crisis of 2008, deduction from a bank’s
capital of its investments in the subsidiaries
was not the uniform practice to test the cap-
ital adequacy on a standalone basis. The
Basel-III framework wanted to plug this
loophole, and since banks were found to
be undercapitalised, it provided a long
phase-in period till 2019 for banks and
banking groups to recapitalise themselves.
Fromthisperspective,theHoldCoisseenas
faring better.
It’snotknownhowtheHoldCowillwork
inthecaseofstate-runbanksasstatuteswill
needtobeamended.Theadvantagethough
is that the capital needs of banks’ sub-
sidiarieswouldbede-linkedfromthebanks’
capital.
The P J Nayak Committee, which
reviewedgovernanceinbanksinIndia,was
for the Centre transferring its holding in
bankstoaBankInvestmentCompany(BIC),
which, in effect, would be the HoldCo, and
the transitioning of powers to bank boards
withtheintentoffullyempoweringthem.It
suggested the BIC to be set up as a core
investment company under the RBI's regis-
tration and regulation. “The character of its
business would make it resemble a passive
sovereign wealth fund,” the panel said.
24
>
MUMBAI | THURSDAY, 7 FEBRUARY 2019 1

Govt begins hunt for Lokpal chief GSAT-31 IN ORBIT; TO AID ATMS, STOCK MARKET APPS
India's40thcommunicationsatelliteGSAT-31wassuccessfullyplacedintoorbiton
WednesdaybyEuropeanlaunchservicesproviderAriane5rocketfromFrenchGuiana
ISSUES ADVERTISEMENT SEEKING APPLICATIONS PHOTO: ISRO/TWITTER

IT WILL aid in ATMs and

PRESS TRUST OF INDIA four need to be judicial members. stock market
New Delhi, 6 February “Not less than 50 per cent of the operations, and
members of the Lokpal shall be from
provide for

T
he government has sought appli-
cations for chairman and mem-
bers of anti-corruption ombuds-
man Lokpal, nearly five years after the
Lokpal Act came into force, officials said
Wednesday.
An advertisement seeking applica-
tions from desired and eligible candi-
dates has been issued by the Personnel
Ministry. For the appointment as the
chairman, a person who is or has been
Chief Justice of India or a Supreme Court
judge is eligible to apply.
Besides, individuals with “impecca-
ble integrity and outstanding ability”
having special knowledge and expertise
of not less than 25 years in matters relat-
ed to anti-corruption policy, public
administration, vigilance, finance
including insurance and banking, and
law and management are eligible to
apply. Those with less than 45 years of
age are not eligible to apply.
According to rules, there is a provi-
sionforachairpersonandamaximumof
eight members in the Lokpal. Of these,
amongst the persons belonging to the
Scheduled Castes, the Scheduled Tribes,
Other Backward Classes, minorities and
women,” the advertisement seeking the
applications reads.
Upon selection, the chairperson and
members shall hold office for a term of
five years or till they attain 70 years of
age. The salary and allowances of the
chairman of the Lokpal will be same as
that of the Chief Justice of India. The
members will be paid salary and
allowances same as that of a judge of the
Supreme Court.
The last date to apply for the post is
February 22.
The advertisement was issued fol-
lowing a meeting of an eight-member
search panel late last month. The search
committee, mandated to form a panel
of candidates who could be considered
for the appointment as chief and the
members of Lokpal, held its first meeting
on January 29. The panel, headed by for-
mer Supreme Court judge Ranjana
Prakash Desai, had then discussed
uninterrupted
DTH services
"THEGSAT-31isa
"high-power"
communication
satellitewithKu-
band,andisgoingto
modalities related to the appointments. vants, was passed in 2013. serveandreplace
The Supreme Court had recently set As per the advertisement, the chief someofthesatellites
up a February-end deadline for the and members of the Lokpal are not eli- thataregoingto
Lokpal search committee to send a pan- gible for reappointments. expiresoon,"said
el of names who could be considered for They will also not be eligible for any RatanShrivastava,
the appointment as its chairman and diplomatic assignment, appointment as advisor(space
members by Prime Minister Narendra administratorofaUnionterritoryandfor division),Federation
Modi-led selection committee. further employment to any other office ofIndianChambersof
The apex court had on January 17 of profit under the government of India.
asked the search committee to complete The Act prevents the chief and mem-
Commerceand
its deliberations and recommend the bers of the Lokpal from contesting any Industry
names by the end of February. election of President or member of either IT WILLalso provide
The Lokpal Act, which envisages house of Parliament or member of either continuity to the
establishment of the anti-graft body house of a state legislature or munici- Insat-4CR and 4A
Lokpal at the Centre and Lokayuktas in pality or panchayat within a period of T E NARASIMHAN
states to look into cases of corruption five years from the date of relinquishing
against certain categories of public ser- the post.

WhatsApp says won’t rule out exiting India
SaysproposedchangestoITActare
notconsistentwithstrongprivacy
protectionsaroundtheworld
NEHA ALAWADHI
New Delhi, 6 February
WhatsApp has not ruled out
the possibility of exiting the
India market even as it has
upped efforts to ensure politi-
cal parties do not abuse the
platform to spread misinfor-
mation via bulk messages in
the run-up to elections.
Referring to recent pro-
posed changes to a section of
the Information Technology
Act, which requires platforms
to assist in tracing the origin
of content, WhatsApp’s Head
of Communications Carl Woog
said, “The proposed changes
are overbroad and are not con-
sistent with the strong privacy
protections available to people
everywhere.”
When asked if WhatsApp
would go down the same path
as BlackBerry Messenger,
which gave in to government
demands for access to its
encrypted consumer messag-
ing system in 2013, Woog was
non-committal.
Responding to a question
on whether WhatsApp would
consider quitting India, Woog
said it won’t be “helpful to
speculate” at this time.
The freeware and cross-
platform messaging and Voice
over IP services owned by
Facebook said it is weeding out
suspicious behaviour by iden-
tifying messaging patterns.
NUMBERS GAME
13% daily active users in
India, which is WhatsApp’s
largest market
1.5 bn monthly active users
worldwide
2 mn accounts banned over
the last 3 months for bulk
automated behaviour
20% ofaccountswere
bannedatthetimeof
registrationafterWhatsApp
startedusingAIandbehaviour
patternsofnumbersand
As a way to deal with the
spread of misinformation,
WhatsApp is using artificial
intelligence to identify suspi-
cious behaviour from
accounts. The company said it
removes over 2 million
computernetworks
75% of the 2 mn accounts
blocked for sending
automated messages
without a user reporting it
accounts per month globally
for bulk or automated behav-
iour. Woog declined to provide
the number of accounts
blocked from India.
As an example of how it
identifies suspicious behav-
iour, WhatsApp said if an
account that registered five
minutes ago attempts to send
100 messages in 15 seconds, it
is almost certain to be engaged
in abuse. Similarly, a
WhatsApp account that
attempts to quickly create
dozens of groups or add thou-
sands of users to a series of
existing groups is also likely to
be sending bulk messages. “We
ban these accounts immedi-
ately and automatically,”
WhatsApp said.
Company executives told
reporters here that WhatsApp
was intended to be a medium
for private conversations and
not a public forum.
“We have, for the last cou-
ple of months, engaged with
political parties to explain our
firm view that WhatsApp is
not a broadcast platform. It is
not a place to send messages
at scale and to explain to them
that we will be banning
accounts that engage in auto-
mated bulk behaviour. And we
do this, regardless of the pur-
pose of the accounts, because
we’re trying to maintain the
private nature of the plat-
form,” said Woog.
WhatsApp had come under
fire in India the past year over
several instances of “fake
news” or spread of misinfor-
mation. In 2018, several people
were killed by lynchmobs that
were fuelled by rumours
spread on WhatsApp.
India is WhatsApp’s
largest market, with over 200
million users out of the 1.5
billion it has worldwide.
Political parties using
WhatsApp groups as a way to
spread communally and
politically sensitive videos,
messages, and images is also
becoming increasingly
common.
Trump makes a strong pitch
for merit-based immigration
PRESS TRUST OF INDIA
Washington, 6 February
President Donald Trump on
Wednesday made yet another
strong pitch for merit-based
immigration in his annual
State of the Union address,
saying legal immigrants
enrich the US in countless
ways, raising hopes of hun-
dreds of thousands of Indian
IT professionals who are the
worst sufferers of the current
per country quota system.
Indian-Americans, most of
whom are highly-skilled and
go to the US mainly on H-1B
work visas, are the worst suf-
ferers of the current immigra-
tion system, which imposes a
sevenpercentpercountryquo-
ta on allotment of green cards
or permanent legal residency.
In his second State of the
Union (SOTU) address,
President Trump said: “We
have a moral duty to create an
immigration system that pro-
tects the lives and jobs of our
citizens”.
According to experts, the
decades-old diversity lottery
visa system gave green cards
to people from countries
from where people would
normally not qualify to come
to the US through a merit-
based system.
Trump has also called for
ending the chain migration,
the fastest and easiest way to
gain legal entry into America,
through sponsorship by a
family member who is
already a legal resident or cit-
izen of the US. The current
wait period for Indian skilled
immigrants for green card
can be as long as 70 years,
according to official reports.
Having a Green Card allows a
person to live and work per-
manently in the US.