MONDAY, 5 MARCH 2018

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VOLUME XXII NUMBER 144

How markets performed last week

% chg over Dec 29, ‘17
Index on *One- --————————————————————————————————————————————————————————

Mar 2, ‘18 week Local currency in US $

Sensex# 34,047 -0.3 0.0 -2.0
Nifty# 10,458 -0.3 -0.7 -2.7
Dow Jones 24,538 -3.0 -0.7 -0.7 POLITICS & PUBLIC AFFAIRS P18 BUSINESS LAW P16

HOW YOGI TREADS THE FINE LINE WILL FUGITIVE ECONOMIC OFFENDERS
Nasdaq 7,258 -1.1 5.1 5.1
Hang Seng 30,583 -2.2 2.2 2.0
Nikkei 21,182 -3.2 -7.0 -0.9
FTSE
DAX
7,070
11,914
-2.4
-4.6
*Change (%) over previous week, # as on March 1, 2018
-8.0
-7.8
-6.1
-5.4 BETWEEN POPULISM AND REFORM BILL CATCH THE NEXT NIRAV MODI?
Source: Bloomberg PUBLISHED SIMULTANEOUSLY FROM AHMEDABAD, BENGALURU, BHUBANESWAR, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI (ALSO PRINTED IN BHOPAL), NEW DELHI AND PUNE

‘TIME’S UP’ DOMINATES

HOLLYWOOD’S
AWARDS SEASON 5 more banks face PCA ArcelorMittal’s
bid for Essar
CANARA BANK, UNION BANK, PUNJAB
NATIONAL BANK POSSIBLE CANDIDATES
MAY LEAD TO RECALL OF
~157-BILLION AT-1 BONDS
Steel illegal: VTB
Says will accommodate interests
ABHIJIT LELE
Mumbai, 4 March BANK-WISE IMPACT OF RECALL are Bank of India, IDBI Bank,
Central Bank of India, Dena Bank, of all stakeholders
As of Dec ‘17 and Corporation Bank.

F
The Academy Awards show has set aside a ive public sector banks
moment to feature the Time’s Up campaign
against workplace sexual misconduct
(PSBs), including Canara
and Union Bank of India,
during Sunday’s Oscars ceremony. are on the brink of being
Organisers of the campaign said they have
worked with the producers of Sunday’s
put under the Reserve Bank of
India’s (RBI’s) prompt corrective
ceremony to bring attention their cause, action (PCA) plan. According to rat-
Hollywood trade publications Variety and ing agency Icra, their net non-
The Hollywood Reporter said on Friday. 8 > performing assets (NPAs) rose above
6 per cent in December 2017.
If the banking regulator places
ECONOMY P4 them under PCA, the action may
Karti, Indrani face-off drive these banks to recall
additional tier-1 (AT-1) bonds, which
in INX Media case is included in Tier-1 capital, of
Karti Chidambaram, arrested in the INX ~157 billion from investors.
Media case, was brought to Mumbai’s Besides Canara and Union
Byculla prison and faced Indrani Mukerjea
on Sunday as part of the CBI’s probe into
Bank, three other PSBs that may
come under PCA are Andhra Bank,
the matter, an official said. He said Karti Punjab National Bank, and
and Indrani were brought face-to-face
and questioned for four hours.
Punjab & Sind Bank.
While taking the decision on
putting a bank under PCA, the RBI
assesses its standing on three counts,
ECONOMY & PUBLIC AFFAIRS P21 namely capitaladequacy ratio(CAR),
Conrad Sangma meets netNPAs,andreturnonassets(RoA).
Meghalaya governor
National People’s Party President
Conrad Sangma met Meghalaya Governor
Ganga Prasad on Sunday evening and Turnaround eludes start-ups
staked claim to form the government in
Bank Outstanding AT-1 bonds (~ billion) The inclusion in PCA, coupled DEV CHATTERJEE & KRISHNA KANT
PNB
% net NPA % Tier-1
7.5 10.3 52.5
with recapitalisation of PSBs, by the
government has triggered a
Mumbai, 4 March ARCELORMITTAL,
Union Bank 7.0 10.2 42.5 ‘regulatory event’ and an early recall ArcelorMittal is “spoiling” NUMETAL BOOST
Andhra Bank 7.7 9.3 27.0
of AT-1 bonds by banks under PCA.
These 11 banks account for
the bidding game of Essar
Steel. Despite its lobbying CREDENTIALS
Canara Bank 6.8 10.8 25.0 ~219 billion of AT-1 bonds, which with the Indian govern- Aheadofameetingbetweenthe
P&SB 7.2 10.6 10.0 are likely to be called off during the ment, its “illegal bid” should resolutionprofessionaland
next few weeks. not be cleared as it does not lenders,thetwobiddersforEssar
NPA: During the last four years, PSBs meet the eligibility criteria Steel,ArcelorMittalandNumetal,
Non-performing
asset have raised AT-1 bonds totalling as per the current Insolv- areworkingonstrengthening
PNB: Punjab ~603.85 billion to shore-up their ency and Bankruptcy Code theircredentialstoshoreuptheir
National
Bank Tier-1 capital ratios. These AT-1 bond
issuances took place in the backdrop
(IBC), said VTB Capital, one
of the two bidders for
countforthequalitativepartof
thebid,acrucialcogiftheyqua-
P&SB: Punjab
& Sind Bank
of losses, increasing capital require- Essar Steel. ArcelorMittal lify. ISHITA AYAN DUTT writes 2 >
Source: Icra ments under Basel-III, and limited is the other bidder.
capital infusion by the government “We have taken legal
Banks become PCA candidates face restrictions on expanding loan
in relation to their requirements.
While the recapitalisation of PSBs
opinion from three different
law firms and they are all of
CONFIDENTIALITY
when they feel the minimum book, as the aim is to turn the was expected to improve their the opinion that Arcelor- CRISIS GRIPS
requirements of CAR or net
NPAs rise above 6 per cent or the
bank around and improve financial
and credit profiles.
capital ratios, huge losses during the
third quarter (Q3) of FY18 and an
Mittal and its promoters’
investments in two non- BHUSHAN CASE
RoA is negative for two years. Breach With losses during the last three early recall of AT-1 bonds are likely to performing assets (NPAs) in Thelegalbattlethathasbroken
of any one condition is seen as years, 11 out of 21 PSBs have been partially negate the recapitalisation India will debar it from looseintheinsolvencyresolution
sufficient to trigger PCA. placed under the PCA framework by programme of the government. bidding. Hence, we are processofBhushanPower&
Those banks under PCA regime the RBI. Prominent amongst them Turn to Page 6 > confident that it is out of the
game, but has made the
Steelunderlinestheimportance
ofaconfidentialityclausein
offer just to spoil the game biddingordealsinvolving
for others,” said Makram mergersandacquisitions.The
BATTLEGROUND Abboud, vice-chairman,
international of VTB
twobidders,TataSteeland
LibertyHouse,seemtoknow
SURVIVAL FOR Capital, which is owned eachother’sofferpriceand

as big cheques vanish

the state with the support of 34 MLAs in 60 per cent by the havebeenthrowingthatasan
the 60-member Assembly.
GOOGLE, FB Government of Russia.
ArcelorMittal, however,
argumentsupportingtheirclaim
forbailingoutthetroubled
OPINION P13 in the past has said it is lenders. JYOTI MUKUL &
E D I T : Message from Northeast RANJU SARKAR SOME Start-up Amount (in $ mn) Investors led by eligible to bid for Essar Steel.
The results of both bids are
ADITI DIVEKAR write 2>
BigBasket 300 Alibaba,SandsCap,IFC,AbraajCap
RECENT
New Delhi, 4 March
expected this week.
ECONOMY & FINANCE P6 Zomato 200 AntFinancial(AlibabaGroup)
NCLT bars over 60 entities
In the last few weeks, several start-
ups raised money: Zomato, Swiggy, DEALS Gaana 115 Tencent,TimesInternet
VTB Capital and its partner, Tyazhpromexport, an
engineering company, own 75 per cent stake in
BigBasket, and Zoomcar were among Numetal Mauritius, which has made a bid for Essar Steel.
from selling assets the prominent names. Has the
Swiggy 100 Naspers,Meituan-Dianping
“The current IBC norms are very clear that defaulting
Amidtheongoingmulti-agencyprobeinto fundingcycle turnedforstart-ups? NestAway 51 GoldmanSachs,UC-RNTFund In the David versus Goliath companies and their promoters are not eligible to bid. Yet,
the~127-billionPunjabNationalBankscam, The big deals may suggest so, but Zoomcar 40 M&M,Sequoia,Empire,NokiaGrowth fight between technology, ArcelorMittal bid for Essar Steel,” said Abboud. A Singapore-
theNCLThasrestrainedmorethan60 they don’t reflect the full story. PharmEasy 30 Bessemer,Orios,JMFinancial,MEMG fintech, and e-commerce based trust with Rewant Ruia as its beneficiary owns 25 per cent
entities,includingNiravModi,MehulChoksi, While the outlook is positive, firms in India and global stake in Numetal. Reports say Ruia as beneficiary of the trust
variousindividuals,firmsandlimitedliability there’s hardly any sign of angel conglomerates Google and could also make Numetal ineligible, as
PHOTO: KAMLESH PEDNEKAR

partnershipfirms,fromsellingtheirassets. activity returning. According to a
top executive of a venture capital
> TRADEFINANCE HIT AS CAUTION (VC) firm, the pace of investment is
PREVAILS, PREMIUM SOARS P6 picking up after the slowdown in
2016 and a large part of 2017. “Most
of the discount and high-burn
WORLD P8 behaviour of the companies was
UK athlete Roger rationalised during 2016 and 2017
Bannister dies at 88 and the surviving companies have
made good progress in the last two
Roger Bannister, the UK athlete who as a years, which is resulting in a good
medical student six decades ago became number of Series C, Series B, and
the first person to run a mile in less than Pre-Series B deals,” he said.
four minutes, has died, the BBC reported The executive attributed the low
on Sunday. He was 88. He was diagnosed deal flow on the seed side to a
with Parkinson’s disease in 2011. ripple effect of 2015, when many
companies started and then died.
On top of that, imposition of angel
tax, too, has reduced angel
investments in the last six to eight
months, analysts pointed out.
Ankur Warikoo, founder,
Nearbuy (earlier Groupon India)
that was bought by Paytm, said the
past two years were a cleansing
period, when funding dried up and
only those that had either built scale
or had positive unit economics
survived. “This year, these will be
rewarded. There was never a dearth
of capital. With the cleansing, these
opportunities are much clearer.”
But, Dhruv Agarwala, chief Facebook, Goliath seems Ruia-promoted Essar Steel defaulted on bank
executive officer (CEO) of PropTiger, to be winning hands down. loans of ~440 billion. Turn to Page 6 >
which acquired rival Housing.com, With one-stop shop solutions
does not think there is a funding ranging from business
cycle turnaround yet. “The issue is listings, travel bookings, THE CURRENT IBC NORMS ARE VERY
that barring Alibaba/Ant Financial, money transfers, and
Naspers/Tencent, and SoftBank, financial services available
CLEAR THAT DEFAULTING FIRMS
there are really no other investors on both these platforms and AND THEIR PROMOTERS ARE NOT
writing large cheques,” he said. many firms relying on Google ELIGIBLE TO BID. YET,
Among the recent deals, Zomato, and Facebook to promote
Swiggy, and BigBasket have been their services, it is becoming ARCELORMITTAL BID
funded by the Alibaba Group and a matter of survival. FOR ESSAR STEEL”
Tencent, while Zoomcar has raised KARAN CHOUDHURY decodes
money from Mahindra & Mahindra why Google and MAKRAM ABBOUD
(M&M), which has a strategic intent. Facebook are pushing Vice-chairman
Turn to Page 6 > out sectoral players 22 > (international), VTB Capital

ON
MONDAY
SPECIALS
BRAND WORLD:
Horlicks widens
its brand appeal
The market leader looks to
expand its footprint with
more targeted advertising and a broader portfolio of
products. VIVEAT SUSAN PINTO takes a big gulp 15 >

THE SMART STRATEGY:

INVESTOR: Nykaa dons
InterGlobe stock warpaint
to catch up Beauty marketplace
Despite capacity issues and is utilising technology
premium valuation, Street to meet customer
is positive on IndiGo, given expectations across
its lower costs and strong channels. RITWIK
balance sheet. RAM SHARMA goes
PRASAD SAHU reports 19 > skin deep 14 >

START-UP CORNER:
Smart bandage to control bleeding
Axiostat bandage is used by Indian armed forces.
It needs to be sold directly to consumers.
SHAMEEN ALAUDDIN on a solution that sticks 17 >

PERSONAL
FINANCE:
Relationship
managers,
interrupted
Increased internet
penetration, surge
in millennial
consumers, and rise of
independent financial investment platforms could
diminish their growth. PAVAN LALL writes 9>

STATSGURU:
The anatomy of India’s growth 4>

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MUMBAI | MONDAY, 5 MARCH 2018 1

IN BRIEF
GMR-Megawide submits $3 bn
Motorcycles back on growth track
proposal for Manila airport plan AJAY MODI
New Delhi, 4 march
ed by 1.06 million units during
April-January period, against a
DOMESTIC SALES YoY volume change in scooter (units)
YoY volume change in motorcycle (units)
goods and services tax). Being a
large player in the rural mar-
TheGMR-Megawideconsortium volume addition of 0.97 million ket, we were also impacted. But

1,068,197
1,054,213
thatmanagestheMactan-Cebu Motorcycles have once again units in scooter sales. with the recent focus on agri-

975,469
internationalairportinthe started overtaking scooters in During FY17, the motor- culture and rural market in the

902,786
Philippineshassubmitteda the world’s biggest two-wheeler cycle volume growth Budget, we will be the gainers,”

485,184
$3-billionproposaltodecongest market. Riding on a revival in was just 0.39 million Pawan Munjal, chairman and

364,420

679,342
andredeveloptheNinoyAquino demand from the rural mar- units, compared with managing director at Hero, said

262,434

572,923
internationalairportinManila. kets, visible in double-digit sales 0.57 million units for last month.

530,758
Accordingtoaregulatoryfilingby growth of sub-125cc motorcy- scooters. Scooter vol- Strong growth in motorcy-

395,529

394,137
MegawidetothePhilippinesStockExchangeinManila,theproposal

-25,547
cles, the absolute expansion in ume addition has cles has also helped domestic

12,283
involvesincreasingthecapitalcity'sairport'scapacityto950-1,000 motorcycle volume is higher to been higher for five two-wheeler sales expand 13.62
aircraftmovementsadayfromthepresent730movementsandtake scooters after a gap of five years. consecutive years, as per cent to a record 16.76 million
theoverallpassengerhandlingcapacityto72millionperannum.The Scooters, which were clock- motorcycles saw impact units in the first 10 months.
Mactan-Cebuinternationalairportisthesecondlargestairportinthe ing a double-digit growth for of an erratic monsoon. FY12 FY13 FY14 FY15 FY16 FY17 FY18 Motorcycles form 62 per cent of
PacificislandnationandisoperatedbytheGMRGroupand eight consecutive years, have Unlike scooters, bulk of motor- largest segment in (Apr-Jan) the domestic two-wheeler mar-
Source: Siam
Megawideina40:60jointventure. PTI< expanded by 21 per cent this cycles is sold in rural areas motorcycles had ket, while scooters bring over
year (April-January). where farm income shapes shrunk marginally last year. HeroMotoCorp,growitsdomes- umes. Hero’s former partner 35 per cent. The rest are mope-
Motorcycles, on the other demand. Sales of 110-125cc segment also tic motorcycle sales by 13 per Honda clocked a 23 per cent ds. The double-digit growth in
AirAsia India to begin Spectrum auction hand, are seeing a double-dig- The strong revival in rural grew by 15 per cent to 1.84 mil- centinApril-Januaryto5.33mil- growth in motorcycle sales to two-wheelers also comes after a
it growth (11.43 per cent) after a demand for motorcycles is evi- lion units. Interestingly, the 125- lion units. The company had 1.63 million units. TVS Motor’s five-year gap. During FY17, the
overseas operations recommendation five-year gap. dent in the double-digit volume 150cc segment, which is slight- seen a flat volume performance motorcycle volume grew by 12 two-wheeler market had
by January 2019 within a quarter Data with industry body growth of entry segment bikes. ly premium, declined over 15 during FY16 and FY17. It enjoys per cent to 761,025 units. expanded by 7 per cent. Siam
BudgetcarrierAirAsiaIndiahas ThetelecomregulatorTrai Society of Indian Automobile The sales of 100-110cc motor- per cent to 0.92 million units. a 50 per cent share of motorcy- “I would say that the econo- had raised the FY18 growth
chartedoutexpansionplansto expectstofinaliserecommend- Manufacturers (Siam) shows cycles grew over 12 per cent to The revival in motorcycle cle market. Like Hero, most my is now coming back on forecast for two-wheelers to 12
connectmoretier-IIandIIIcities ationforthecountry'slargest the volume of motorcycles sold 6.12 million units in the first 10 demand has helped the coun- players in the segment have track after a couple of big dis- per cent in January from 9-11
andsetatargettocommence everspectrumauctionwithina in the domestic market expand- months of FY18. The single try’s largest motorcycle player, seen a growth in motorcycle vol- ruptions (demonetisation and per cent earlier.
flightstooverseasdestinations quarter,atopofficialsaid."We
byJanuary2019,atopofficial havecompletedthe

said.Theairlinerlastweek
inductedits16thaircraftand
announcedtheadditionof
NagpurandIndoretoitslistof
destinations.Accordingto
AirAsiaIndia,ManagingDirector
andCEO,AmarAbrol,theairliner
hasplannedtocommence
overseasoperationbyJanuary
2019onceithas20ormore
planes. PTI<
Bhushan Power
consultationprocess(for
spectrumauction)andare ESSAR STEEL BIDDING
draftingtherecommend-
ations,"TraiChairmanRS
Sharmasaid.Hewasreplyingto
queriesaroundIndia's ArcelorMittal, Numetal
case faces issues boost credentials
readinessfor5Gandregulatory
environmentinthecountry.
Whenaskedabouttimelinefor
therecommendations,hesaid
"verysoon...Maybewithin

over bid secrecy

quarter". PTI< ISHITA AYAN DUTT

Coal mine allotted

to Essar Power may
be cancelled
Statingthattheperformanceof
EssarPowerhasnotbeenupto
themarkwithregardtomaking
operationalacoalminein
Jharkhand,aseniorofficialsaid
thegovernmentmaycancelthe
coalblockallottedtofirmonce
thecourtstayonthemineis
vacated.“InEssar'smatterthere
isaninjunctionbyHon'blecourt
prohibitingthegovernmentto
takeanycoerciveaction.When
theinjunctionisvacated,wewill
takeappropriateactionagainst
themintermsoftheagreement
whichmayincludeeven
cancellation(ofTokisudNorth
coalblock),”CoalSecretary
SusheelKumarsaid. PTI<
Kolkata, 4 March
Axis Bank chief: Bar
Govt harmonising
spectrum for 5G:
Ahead of a meeting between the resolution pro-
fessional (RP) and lenders, the two bidders for defaulting promoters
Telecom secretary Essar Steel — ArcelorMittal and Numetal — are
working on strengthening their credentials to from bidding
Thegovernment shore up their count for the qualitative part of the
hasstarted bid, an important cog if they qualify. Axis Bank chief Shikha
tuning From ArcelorMittal, the most important Sharma has said called
spectrumfor development was an agreement with Nippon for creating a better
5Gservicesas Steel & Sumitomo Metal (NSSMC) regarding joint credit culture for the
partofits acquisition of Essar Steel. Though NSSMC will long-term benefits and
roadmaptobecomeearly proceed with ArcelorMittal to form the joint ven- opined that one way to
adopterofthenextgeneration ture once ArcelorMittal’s resolution plan is select- achieve that is to debar
services,whichisexpectedto ed by the National Company Law Tribunal defaulting promoters from bidding for their
providedownloadspeedover (NCLT), it’s sending a message that two metal assets during insolvency proceedings.
1,000megabitpersecondon giants are coming together to acquire Essar. With the Reserve Bank doing away with all
mobiledevices."Onspectrum ArcelorMittal is the world’s largest steel com- the past dispensations to resolve the bad
wearealreadymoreorless pany and Nippon is the fourth. The agreement loan problem, and voting for initiation of
alignedwithglobalpositionin The two bidders, Tata Steel and Liberty House, seem to know each other’s offer price alsogivesArcelor,majoritypartnerintheventure, insolvency proceedings against erring
5G.Thosebandsweare a chance to showcase the turnaround of AM/NS borrowers, there is a need to strengthen the
harmonisinginlinewithglobal JYOTI MUKUL & ADITI DIVEKAR only for the money part but all aspects of the Calvert, acquired in partnership with NSSMC in National Company Law Tribunals (NCLTs),
community,"Telecomsecretary New Delhi/Mumbai, 4 March resolution process.” He said action should be 2014. In two years, the capacity utilisation rates she said.
ArunaSundararajan taken against those breaching it. there have improved by about 20 per cent, ship- “Certainly a lot more cases are going to

IOC bids for stake
in Vietnam’s
Binh Son refinery
State-ownedIndianOilCorp(IOC)
hasbidforastakeinVietnam's
BinhSonRefiningand
PetrochemicalCompanyasit
looksattheSouthEasternnation
toexpandbusinessbeyond
Indianshores.IOCisamongthe
atleastfourcompaniesthathave
evincedinterestin BinhSon
RefiningandPetrochemical
Companybytaking49percent
stake,officialsourcessaid.
Indonesianstate-ownedoilfirm
Pertamina,Vietnam'sbiggest
petroldealerPetrolimexand
Thailand'sBangchakCorpora-
tionPublicCompanyLtdarethe
otherfirmswhichhaveputin
expressionofinterest(EoI). PTI<
Bajaj Corp eyes
acquisitions in
personal care
Fastmovingconsumergoods
companyBajajCorpis
sharpeningfocusonruralareas
todrivevolumesandisalso
scoutingforacquisitionsinthe
personalcarecategory.“Weare
opentoacquisitionsinthe
personalcarecategoryifthey
havesomesortofsynergywith
ourdistributionsystem,”
SandeepVerma,salesand
marketingpresidentat
BajajCorp. PTI<
(pictured)said. PTI<
Groupe SEB to
take Maharaja
Whiteline global
FrenchfirmGroupeSEB,which
ownsMaharajaWhiteline,
planstotakethehomegrown
appliancesbrandtothe
internationalmarketswithina
year,atopcompanyofficial
said.Itwouldintroduce
productsundertheMaharaja
Whitelinebrandincountries
wheretheIndiandiasporais
presentinlargenumbers,
amongothers."Wearenow
thinkingaboutexports,"
GroupeSEBIndiaVPMarketing
FlorenceTardysaid. PTI<
Rivigo to increase
headcount by
50% to 3,200
Technology-enabledlogistics
firmRivigoisonitswayto
increasingitsteamof
professionalsbynearly50per
centto3,200inthenextsix-
eightmonths,atopcompany
officialsaid.Inordertobecome
atechintelligentlogistic
company,Rivigoisfocusedon
hiringalgorithmtrading
professionalsaswellasartificial
intelligence(AI)talentasit
believesautomationand
machinelearningwillincrease
efficiency,lowercostandbring
reliability. PTI<
T
he legal battle that has broken loose in Sanjeev Gupta-led Liberty House had filed a ments to the automotive sector more than dou- go to the NCLT; so it is important that their
the insolvency resolution process of petition with the NCLT against the rejection of its bled between 2015 and 2017, and productivity at capacity is expanded so that they can deal
Bhushan Power & Steel underlines the bid to acquire debt-ridden Bhushan Power & the hot strip mill has increased by over a million with all cases,” the managing director and
importance a confidentiality clause in bidding or Steel, which owes nearly ~450 billion to its tonnes since the acquisition. chief executive of the third largest private
deals involving mergers and acquisitions. The lenders. The Committee of Creditors had reject- Industry sources said spurning sector lender said recently.
two bidders, Tata Steel and Liberty House, seem ed Liberty House’s resolution plan, saying the ArcelorMittal’s bid would now mean turning Sharma said there is "some
to know each other’s offer price and have been bid was submitted after the deadline. The parties down two giants. conversation" on this aspect already and
throwing that as an argument supporting their would now be heard on March 5. A meeting between the Essar Steel RP and added the RBI would have kept such a
claim for bailing out the troubled lenders to the Under the resolution process rules, the reso- lenders could be held as early as Monday. requirement in mind already.
steel company. lution professional, the suitors for the company, Eligibility of ArcelorMittal and Numetal bids She said the promoters of companies
AbhishekManuSinghvi,theTataSteellawyer, and the committee of creditors that eventually are likely to be discussed. The bids came on against whom banks have initiated
last week stated in the National decides on the offer are required to February 12 and were sent to a firm, Cyril insolvency proceedings should be kept out
Company Law Tribunal that Liberty “It’s a sealed bid. maintain confidentiality. The Amarchand Mangaldas, for advice. of the bidding process for the same assets
House’s bid was higher by “only ~10 I do not know required secrecy is similar to the ArcelorMittal India Pvt Ltd (AMIPL) has also for the long-term benefit of improving
billion”. The Liberty offer, he argued, where Tata Steel processinvolvingmergersandacqui- been assigned a long-term issuer rating of AA credit culture.
came after it was informed that the got this sition between companies that sign byratingagencyICRA.Thiswillhelpshoreupthe A short-term goal for banks would be to
Tata Steel bid was the highest. He information. such confidentiality clause to avoid company’scountonthequalitativefront.Thebid look at maximising the value from the
said the Liberty offer should not be I am surprised external influence on valuation. for Essar Steel was formally submitted by AMIPL. assets which are being put up for bidding
considered on this ground. how Tata Steel Interestingly, the two rivals in the ICRA has also rated the ultimate holding and that can happen by allowing the
London-based Liberty House too can make such Bhushan Power & Steel case, Tata company, ArcelorMittal SA, AA positive. It promoters to bid for the assets, while from a
has been claiming its bid is higher statement. I Steel and Liberty House, have been was uploaded on the ICRA website on longer-term perspective getting the right
than that of the Tata’s. While there is don’t wish to in deal talks earlier when the Indian February 13 and might have been submitted credit culture where every borrower repays
no contradiction in the statements comment more steelmaker sold its UK speciality with the Essar bid. is more important, she said. "I believe in the
by the two sides, other stakeholders on this matter” business to Liberty House. The the qualitative part of the bid has 30 per long-term as opposed to the short- term.
are questioning the breach of confi- RAJIV BAJAJ, Since Liberty House’s offer for cent weight. According to the evaluation criteria You can take some pains in the short-term
dentiality in the process.
Executive director,
Bhushan Power & Steel came after for the Reserve Bank of India’s first list of 12 major as long as the right things are happening in
“It’s a sealed bid. I do not know Tata Steel’s bid, the committee of non-performing assets, Essar Steel being one, 70 the long-term," Sharma said. PTI
where Tata Steel got this informa-
Business
creditors rejected it. Liberty House per cent weight is attached to the quantitative
Development (Asia),
tion. I am surprised how Tata Steel Liberty House challenged the decision, stating, part.
can make such statement. I don’t “Our bid is superior in every way, AnRPsaidthequalitativepartwassignificant, shareholders, VTB Capital and TPE, had over
wish to comment more,” Rajiv Bajaj, why would the creditors reject a as a resolution would not only mean cash 60 years of experience in the industry, includ-
executive director, Business Development (Asia), higher offer?” This, however, meant that even upfront. On each of the categories in the quanti- ing in stressed asset situations. VTB Bank, 60
Liberty House, told Business Standard. they were aware of the Tata offer. tative part, there was a cap. In the qualitative per cent owned by Russian government, has
Calls and text messages to Singhvi and his While Tata Steel is said to be the aggressive part, previous record, turnaround experience been part of almost all the Russian steel mills
office did not get any response, while questions bidder for both Bhushan Steel and Bhushan and dealings with stakeholders, all figure. through boom and bust, they said. VTB Bank
emailed to Tata Steel remained unanswered. Power & Steel, leaving behind Sajjan Jindal-led However, ArcelorMittal is not the only bidder has a balance sheet size of over $400 billion,
Pavan Kumar Vijay, founder, Corporate JSW Steel, the $6.8 billion Liberty House claims to showcase its strengths. Last week, Numetal with about $215 billion of assets under man-
Professionals, and an expert in the Insolvency to have a track record of turning around nearly partner Tyazpromexport (TPE) said it would agement. These are believed to figure in
and Bankruptcy Code said the law provided for two dozen businesses. It has plans to invest $10 ensure a quick turnaround of Essar. TPE has Numetal’s qualitative part of the bid.
confidentiality but it was not being seriously billion in India over the next five years if it suc- assisted in the construction, modernisation, The marking would be by the lenders.
implemented earlier. “All persons involved, ceeds to take over the stressed assets. Liberty upgrade and operation of around 100 industrial “Ultimately the committee of creditors would
whether resolution professional, valuer or those House, which bought Tata Steel’s two mills in enterprises, including integrated steel plants in decide which investor would take charge,” the
representing creditors, are now made to sign a Britain last year, has already managed to turn- Bokaro, Bhilai, Durgapur and Visakhapatnam. RP said. In this case, however, it might also be
confidentiality agreement. This is required not around the units. Sources close to Numetal said its main the courts.

Adani Group goes for an for image makeover

Underpoliticalfireandecologists’ire,hiresSuhelSeth,
revampsmediacommunicationpolicyandteam
AMRITHA PILLAY & SHREYA JAI
Mumbai /New Delhi, 4 March
It is image makeover time for Adani
Group, one of the country’s largest busi-
ness conglomerates. The Gautam Adani-
led entity is redesigning its communica-
tion strategy and planning a redo of its
brand image. Part of this is the recent hir-
ing of Suhel Seth, a known name in this
segment, to be brand consultant.
The group has a presence in ports,
power, realty and foods. And, has been at
the receiving end, both from opposition
parties in India (it is seen as close to the
ruling party in India) and environmental-
ists abroad. The latter since its coal min-
ing and transportation projects in
Australia are seen as harming the Great
Barrier Reef.
Seth, in the business of brand build-
ing, had also been consulted by Tata
Group during its management crisis in
2016; he helped rebuild their brand.
Sources said Seth is to work closely with
the promoters and the social media, cor-
porate communications and external
public relations team. Calls made to him
by this publication did not get a response.
"The last decade was unprecedented
for the (Adani) Group in terms of growth.
However, this wasn't projected well. Be it
criticism or achievements, the group's
communication never responded well.
This hampered the brand building," said a
source who did not wish to be identified.
An e-mail query to the Adani Group
on Wednesday remained unanswered.
Adani has faced a lot of criticism for its
coal mining and railways project at
Queensland, Australia. In December,
Adani's proposed Carmichael mine there
Seth had also been consulted by Tatas
during their 2016 management crisis
was listed at fifth position in a global
compilation by environmentalists of
‘Dirty Dozen’ projects that put the goal of
keeping global warming under 1.5
degrees Celsius under threat. And, under-
mine the efforts made by last December’s
‘One Planet Summit’, convened in Paris
with the help of the United Nations.
"For any conglomerate, positive
branding is important, right from the
hiring part, the financing and supplier
network. It is important the brand con-
veys the right image," said Harish H V,
partner at global accountancy entity
Grant Thornton. This is true for Adani,
which has struggled to find financers
for its Australia project. Globally, banks
have been under pressure to not fund
coal projects.
Also, for the first time ever, Adani
Group has set up a team of professionals
to coordinate and liaise with the media
and for government dialogue in Delhi.
Till now, their communications team was
at the corporate headquarters in
Ahmedabad; its press relation agency,
Adfactors, operated from Mumbai. "I
think it is less of a branding problem and
more of a PR (public relations) problem.
Adani Group is not talking to the public.
Which is, therefore, forming its own opin- College of Commerce, on his journey
ions about the group, based on media as an entrepreneur.
reports," said Prabhakar Mundkur, chief Until the recent past, the group's
mentor with HGS Interactive, a strategy major presence was across business to
consulting entity from Hinduja Group. business (B2B) segments like power
Mundkur adds he is not sure if the generation, port operations and coal
group's policy to remain silent on most trading. In terms of direct consumer
issues has worked well. "Because it has connect, the Adani food brand,
preferred to remain silent, the silence is Fortune, is a joint venture with Wilmar,
being interpreted as guilt. The right thing and the only business to have been
for the group to do would be to address advertised aggressively till now.
the doubts of the public. For example, in This is changing, with the company
an open interview with Gautam Adani, foraying into the real estate and power
who can take on all the questions head- distribution businesses.
on. Silence is always interpreted as want- In December, Reliance Infrastructure
ing to hide something, therefore only entered into an agreement with Adani
increasing the suspicion," he explains. Transmission for sales of its entire inte-
The group seems to have taken a grated Mumbai power business for
cue from the same thought process. ~132.5 billion. The latter business faces
Part of the new brand strategy would competition, as consumers are to some
also be to push Gautam Adani as an extent allowed to choose their electricity
entrepreneur, according to the source provider. Tata Power is a direct competi-
quoted earlier in the story. The usually tor to Reliance Infrastructure, and now
reticent chairman Adani recently gave Adani Transmission, once the deal is
a lecture at Delhi University's Shri Ram complete.

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4 ECONOMY
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MUMBAI | MONDAY, 5 MARCH 2018 1

GST: ONE NATION, ONE TAX

Karti, Indrani
Govt in a fix over HUL offer
Anti-profiteering structure under GST not clear on accepting payment offers by companies on their own
face-off in INX
Media case probe
DILASHA SETH the consumer welfare fund only
New Delhi, 4 March after investigation is done and an

THE PROBLEM IN HAND order is passed by the Authority.

T
he central government There has to be a process outlined
has been taken aback by | HUL offered ~1.19 bn in two tranches for for suo motu acceptance or an
consumer goods major not passing on GST benefits to customers investigation would need to be car-
Hindustan Unilever’s (HUL) offer ried out,” said Pratik Jain, partner at
of ~1.19 billion in two tranches for | HUL is still awaiting instructions on consultants PwC India.
not having passed on goods how to deposit the sum in the The anti-profiteering rules
and services tax (GST) cut benefits consumer welfare fund suggest that if the eligible person
to customers. | DGS has officially launched an (i.e the buyer) does not claim the
HUL is actually in the process of return or the person is unidentifi-
investigation. Which has asked HUL to
offering another tranche as well but able, the amount must be
is still awaiting instructions on how give the details of the method used to deposited to the fund.
to deposit the allegedly profiteered calculate the amount The GST Council had
sum in the consumer welfare fund. | The CBEC apparently reduced rates for 200-odd items
According to officials, the cur- cannot accept of common use on November 10. Karti Chidambaram at the Byculla jail in Mumbai on Sunday
rent guidelines allow the govern- the This took effect from November 15. PHOTO: KAMLESH PEDNEKAR
ment to accept penalties in the DGS, investigative arm of the
offered
said fund after an investigation by anti-profiteering authority, has sent PRESS TRUST OF INDIA security prison. Karti and
Directorate General of Safeguards
cheques as notices to Pyramid Infratech, Mumbai, 4 March Mukerjea were questioned by
(DGS) and then an order from the this cannot be Honda Motor Vehicles, Lifestyle the CBI as part of its probe in
anti-profiteering authority. considered part of International and Hardcastle Karti Chidambaram, arrest- the INX Media deal, in which
However, HUL waited for neither; govt revenue Restaurants (master fran- ed in the INX Media the former allegedly received
it did the calculation on its own | It checked the law and was chisee of eatery chain case, was brought to the kickbacks.
and, in effect, told the government told revenue cannot be any McDonald’s) for allegedly not Byculla prison here and Karti was arrested by the
it was penalising itself. passing on GST benefits to the faced Indrani Mukerjea as CBI on February 28, after a
collection in excess of the tax rate
“What do we do in case of suo final consumer. It had asked part of the Central Bureau of confessional statement giv-
motu action?” asked a government ILLUSTRATION: AJAY MOHANTY these entities to provide their bal- Investigation’s (CBI’s) probe en by Mukerjea before a mag-
officer. ance sheets, trial balance and prof- into the matter, a senior istrate. He was sentenced to
What the DGS has done is to offi- “In the absence of clear legal The company had suggested it The Central Board of Excise and it and loss accounts for the past year. official said. five day’s in CBI custody on
cially launch an investigation. provisions on this subject, officials deposit money on a monthly basis Customs (CBEC) apparently cannot The anti-profiteering mecha- Karti, son of Congress March 1.
Which has asked HUL to give it the had forwarded our request to for the benefits which have accrued accept the offered cheques as this nism is a three-stage process. leader and former Union min- Karti, 46, was arrested at
details of the method used to cal- DGS. We are awaiting advice from to it and which need to be passed on cannot be considered part of gov- There are state-level screening com- ister P Chidambaram, was Chennai airport on his return
culate the amount. Thereafter, the the officials, so that we can deposit to consumers until the transition is ernment revenue. It checked the law mittees for local complaints brought to the jail in central from the United Kingdom. A
anti-profiteering authority will the cheques at the earliest,” HUL completed. “Or till we hear from the and was told revenue cannot be any and a standing committee for Mumbai around 11.15 am police case was lodged on May
apparently have to issue an order to told Business Standard in response government, suggesting a different collection in excess of the tax rate. national-level complaints. And, by a six-member team of 15 last year, alleging irregular-
accept the payment as penalty. to a query. course of action,” said HUL. “GST law envisages deposit to investigation by DGS. CBI, he said. ities in Foreign Investment
The official said Karti and Promotion Board (FIPB) clear-
Mukerjea were brought face- ance to INX Media for receiv-
to-face and questioned by the ing foreign funds. The firm

Banks to bear additional Rent on electricity meter CBI team for about four hours.
Mukerjea, a former direc-
tor of INX Media, is in jail in
received ~3.05 billion in funds
during 2007, when Karti’s
father was the Union finance

cost due to GST comes under GST

connection with the Sheena minister. It is alleged Karti had
Bora murder case. After the received funds to the tune of
questioning, the CBI team left ~1,000,000 in the case, offi-
the prison with Karti and cials had earlier said.
INDIVJAL DHASMANA “Thus, PSLCs are taxable as goods at INDIVJAL DHASMANA labour charges from customers headed towards the airport. The fresh evidence was
New Delhi, 4 March the standard rate of 18 per cent New Delhi, 4 March for shifting meters or shifting While entering the prison, based on the statement of Mu-
under the residuary item.” service lines. Karti waved at the media kerjea before a magistrate on
A recent circular by the indirect tax However, there is one relief. GST Indirect tax department has clarified The department also clarifed that assembled outside the high February 17.
department to impose 18 per cent payable on the certificates would be that rent on electricity meter draws retreading of tyres is a service,
goods and services tax (GST) for cer- available as input tax credit to the goods and service tax (GST), a devel- against the popular notion that it is
tificates issued on excess priority lenders buying these. opment which is likely to draw criti- both goods and services. This service
sector lending by banks would
increase lenders’ cost, as these are
Abhishek Rastogi, partner,
Khaitan & Co, said banks are eligible
cism from the industry.
The Central Board of Excise and
would be taxed at 28 per cent under
the GST.
India to retain its position as
not eligible for full input tax credit. for only 50 per cent of input tax Customs (CBEC) said even though CBEC said the pre-dominant ele- fastest growing economy: FM
The Central Board of Excise credit. Hence, the remaining 50 per electricity is exempted from GST, rent ment here is the process of retread-
and Customs (CBEC) recently cent would become a cost. on electricity meter is not. ing, which is a supply of service. Finance Minister Arun Jaitley the University of Jammu.
clarified that Priority Sector Lending Therefore, there would be some Pratik Jain, partner PwC, said Rubber used for retreading is an on Sunday exhorted Asserting that the Jammu
Certificates (PSLCs) would not additional burden of tax on banks in there was a contrary circular under ancillary supply and hence this activ- confidence that India would and Kashmir would have
be treated as securities but as Priority Sector Lending the days ahead, he added. the service tax laws. “Industry is like- ity is a service. retain its position of fastest been the most affluent part of
goods. Hence, would draw an 18 per Certificates would not be treated Rastogi also suggested GST be ly to pitch in for an exemption on In the case of bus body building, growing economy in the the country if not struck by
cent tax. as securities but as goods. Hence, collected on the reverse charge these ancillary charges else con- there is both supply of goods and serv- coming years, as China did in insurgency, Jaitley hoped that
PSLCs are a tool for promoting would draw 18% tax mechanism, as it is difficult to find sumers will have to bear the addi- ices. Thus, classification of this as the past three decades. the educated youth will lead
priority sector lending obligations. the buyer of these certificates, since tional burden,” he said. goods or services would depend on “The way the situation in the state to achieve its
Banks have to give 40 per cent of to buy these. these are traded through He said industry view is that it which is the principal supply. It may be the world is changing, there is objective of bringing peace
net lending to priority sector such as Suppose a bank lends ~105 to e-Kuber, a Core Banking Solution. should not be taxable and should be determined on the basis of facts and a great opportunity that has and ensure development of
agriculture, micro enterprises, agriculture, whereas its requirement In reverse charge, it is the treated as an incidental to transmis- circumstances of each case, said CBEC. come in the way of India. The all the regions.
weaker sections, etc. was only ~100. It will then earn a seller who pays GST instead of sion and distribution of electricity. “The circular clarifies certain world keeps facing challenges Jaitley further said the
If a bank gives an excessive certificate of ~5. This certificate may the buyer. That mean tax should Besides, GST will also be imposed important aspects. It was mentioned and (in) the last few years student community, despite
amount of priority lending, it will be lent to any other bank needing it. be paid by the bank which lends on application fee for releasing that value is not the only determinant India has started leaving its living in the midst of a
earn these certificates. Banks falling CBEC said there was no exemp- ~105, instead of the buyer of connection of electricity; testing fee to arrive at the dominant nature of footprints behind,” Jaitley disturbed environment,
short of the target would be required tion for trading in PSLCs under GST. that certificate. for meters, transformers, capacitors; supply (goods or service),” Jain said. said at the 17th convocation of excelled academically. PTI

STATSGURU 1: GDP GROWTH ESTIMATES REVISED UPWARDS 2: ECONOMIC ACTIVITY GAINS MOMENTUM
@AllEpapers

(% y-o-y) IN Q3FY18 (%y-o-y)

Business Standard The anatomy of

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No Air Surcharge
India’s growth
THE FIRST Advance Estimates
of national income, released
in January, projected that
economic growth will recover
steadily in the second half of
2017-18. The second Advance
Estimates, released by the Ministry of *
Statistics and Programme Implementation
last week, showed that economic growth did
actually cross the psychologically significant
7 per cent-mark in the third quarter of 2017-
18. As a result, estimates for both gross 4: MANUFACTURING GROWTH REBOUNDS AS 5: TRADE AND FINANCE SECTORS ALSO POST
domestic product and gross value added GST’S DISRUPTIVE IMPACT REDUCES (%y-o-y) STRONG GROWTH (%y-o-y)
have been revised upwards, as shown in
Chart 1. Chart 2 shows the salutary impact Q3
has had after Q1 growth slumped below the
6 per cent-mark.
Chart 3 provides the sectoral break-up of
growth over FY17 and FY18. Overall, compared 3: PUBLIC ADMIN, TRADE AND FINANCE SECTORS
to FY17, growth in FY18 has been driven by TO DRIVE GROWTH IN FY18
trade, financial services and public
administration. While these were the (%y-o-y)
outstanding performers, equally heartening 2016-17 2017-18
was the rebound in the manufacturing
sector. Manufacturing growth in FY18 may Public administration, defence 10.7
have fallen short of the growth in FY17, yet, and other services 10.1
*
as shown in Chart 4, there have been a sharp Trade, hotels, transport,
*
improvement over the first quarter, when 7.2
communication and services
there was an actual contraction. The 8.3
related to broadcasting
recovery is being widely attributed to the
disruptive impacts of the goods and services Electricity, gas, water supply & 9.2 6: PRIVATE SPENDING REMAINS SUBDUED 7: BUT INVESTMENT GROWTH RECOVERS
tax lessening over time. Chart 5 shows the other utility services 7.3 (%y-o-y) SHARPLY
quarterly break-up of growth in the trade
Financial, real estate & 6.0 Gross fixedcapital formation (%y-o-y)
and financial services sectors.
If one looks at GDP accounting from the
professional services 7.2
expenditure side, it is clear, as shown in
GVA 7.1
Chart 6, that private final consumption 6.4
expenditure (PFCE) is still subdued. However,
PFCE has improved between the first and Manufacturing 7.9
second Advance Estimates and it has also 5.1
improved in 2017-18, compared to 2016-17.
Construction 1.3
However, the most important information 4.3
carried in the second Advance Estimates
pertained to the sharp improvement in the Agriculture, forestry & fishing 6.3
rate of growth of new investments, 3.0
measured by gross fixed capital formation, 13.0
* *

as shown in Chart 7. Mining & quarrying

3.0
UDIT MISRA & ISHAN BAKSHI
*Q4 data calculated based on existing estimates, Source: Ministry of Statistics and Programme Implementation

StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines Compiled by BS Research Bureau

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6 ECONOMY & FINANCE
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>
IN BRIEF
Banks write off NPAs worth
~5 bn of 38 wilful defaulters
Public sector banks have written off loans worth
~5.16 billion owed by wilful defaulters in the
first half of the current financial year,
according to the finance ministry. Thirty eight
loan accounts of wilful defaulters were
written off the books of banks during April-
September. Write-off in banking parlance means
the bank has made 100 per cent provision from its earning
against that account. Following this, non-performing asset
(NPA) is no longer part of its balance sheet. However, the write-
off puts pressure on balance sheet of banks as it erodes
operating profit. Since recovery in case of wilful default is very
remote so the possibility of a write-back in the future is also
little, said a senior bank official.
Govt's stake
in IOB to go
up by 7.49%
The Centre's stake in the Indian
Overseas Bank (IOB) will
increase 7.49 per cent, after a
planned infusion of ~46.94
billion. According to the
announcement, the amount
for IOB will be allocated
through recapitalisation
bonds and the budgetary
support by preferential
allotment of equity shares in
favour of the government. Of
the total amount, ~41.32
billion will be through the
bonds. The bank said after the
infusion, the government's
stake will increase to 89.9
from 82.4 per cent currently.
BS REPORTER<
Flexi-fare in
premium trains to
be tweaked: Lohani
Railway Board chairman
Ashwani Lohani on Sunday
hinted at a change in the
flexi-fare system on premium
trains, saying there will be
some tweaking to benefit
both passengers and railways.
Lohani said the structure
worked well in competitive
transportation like the
airlines, where private opera-
tors vie with each other to
increase occupancy. However,
Indian Railways is the only
passenger service operator
and flexi-fare system might
not be conducive for
passengers, the Railway
Board chairman said. PTI<
RBI tightens private sector MANY STATE-OWNED BANKS EXIST BECAUSE OF THE STATE
lending norms for MNC banks
PRESS TRUST OF INDIA
New Delhi, 4 March
The Reserve Bank of India has
further tightened the priority
sector lending (PSL) norms for
foreign banks, directing them
to mandatorily create sub-tar-
gets to ensure they lend a por-
tion of their loans to small and
marginal farmers and micro
enterprises from April.
The move, directed at for-
eign banks with over 20
branches, will impact the likes
of Standard Chartered, Citi
and HSBC, which much high-
er branch presence. The PSL
norms also mandate foreign
banks to eventually lend 40
per cent of their total loan
book to priority sector, such as
agriculture, rural infra, and
MSMEs, among others, from
April 2020.
In a notification over the
> FROM PAGE 1
5 more banks
face PCA
Depending on AT-1 bonds
issued by individual banks,
the capital ratios can reduce
by 0.7-2.0 per cent of risk
weighted assets of these
banks, Icra said.
Cumulatively, the PSBs
reported losses before tax of
over ~920 billion between
Q3FY16 and Q3FY18.
With huge losses, PSBs’
ability to service AT-1
bonds while meeting regu-
latory features had been
steadily weakening, as
bonds can be serviced
through profits of the year
or accumulated profits (in
case there is a loss during
the year).
“Though the Tier-1 cap-
ital ratios are likely to
weaken on the early recall
of these AT-1 bonds by
PSBs, however, the risk of
coupon skip by weaker
PSBs on their AT-1 bonds
has significantly been
reduced,” Icra added.
PTI
India eyes Russia’s
S-400 deal during
Sitharaman’s visit
A nearly ~400 billion deal to
procure S-400 Triumf air
defence missile systems from
Russia is yet to be concluded
mainly due to differences over
prices which India would look
to sort during Defence
Minister Nirmala Sitharaman's
coming visit to Moscow,
official sources said. India
wants to procure the
long-range missile systems to
tighten its air defence
mechanism, particularly
when China has been ram-
ping up military manoeuvring
along the nearly 4,000 km
Sino-India border. PTI<
359 infrastructure
projects show cost
overrun of ~2.05 trn
As many as 359 infrastr-
ucture projects, each worth
~1.5 billion and above, have
shown cost overrun to the
tune of ~2.05 trillion, owing
to delays and other reasons,
a report said. The ministry of
statistics and programme
implementation monitors
infrastructure projects worth
~1.5 billion and above.
"Total original cost of
implementation of the 1,289
projects was ~16 trillion and
their anticipated completion
cost is likely to be ~18 trillion,
which reflects overall cost
overruns of ~2.05 trillion,"
ministry's the latest
report said. PTI<
The RBI has directed the foreign banks to mandatorily create
sub-targets so that they lend a portion of loans to small and
marginal farmers and micro enterprises from April
weekend, RBI has said a sub-
target of 8 per cent of net bank
credit, or credit equivalent
amount of off-balance sheet
exposure, whichever is high-
er, "shall become applicable
for foreign banks with 20
branches and above, for lend-
ing to MSMEs from FY19."
Another sub-target of 7.50 per
Turnaround...
Experts argue that the top two players
in each category will receive funding
sooner or later, but for laggards, the
market is still challenging. Anybody
who’s not No. 1 or 2 will find it difficult
to raise late-stage capital unless the
froth returns, which is not imminent,
according to analysts. So, while there is
a spurt in late-stage deals for category
leaders or challengers, deal activity
has slowed down in early stage, while
the crunch continues in Series A/B/C.
In fact, after the hype in 2015,
investors are taking more time to close
deals. According to a study last year,
the average age of start-ups raising
angel funding in 2015-16 was 1.8 years,
which increased to 3.8 years in 2017.
Also, only 24 per cent of the start-ups
that raised money in 2016 were gener-
ating revenues; in 2017, 88 per cent of
the start-ups that raised money were
generating revenues.
“It is a vicious cycle. A slowdown
in angel or seed stage deals means
fewer companies getting to Series A,”
says Ashish Sharma, CEO at
Temasek-backed InnoVen Capital. A
virtuous cycle works the other way,
like in 2015, when there was excess
liquidity. There’s one more trend: VCs
are doing more follow-on rounds in
investee companies.
While VC firms have dry powder of
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MUMBAI | MONDAY, 5 MARCH 2018 1
PUNJAB NATIONAL BANK FRAUD
Sixty entities barred Trade finance hit
as caution prevails,
from selling assets
premium soars
PRESS TRUST OF INDUA
Mauritius promises 4 March Sebi to push for
PRESS TRUST OF INDIA
4 March necessary action In what could impact the urgent disclosure
The alleged fraud at Punjab
export and import trade, the by listed firms
A
mid the ongoing mul- ~127 billion scam at Punjab
ti-agency probe into National Bank appears National Bank has affected The Securities and Exchange
the ~127 billion Punjab spread across various trade finance activities as Board of India (Sebi) plans to
National Bank scam, the countries, Mauritius has lenders have become cau- make it mandatory for listed
National Company Law promised "necessary tious, while the premium on companies to make urgent
Tribunal (NCLT) has regulatory action" against Indian paper has shot up by disclosure about all major loan
restrained more than 60 enti- all entities found to be 10-50 bps, say bankers. defaults. Concerned over an
ties from selling their assets. linked with any fraudulent "The PNB fraud has alleged loan fraud of over
These include Nirav Modi, practices. The Financial already affected trade financ- ~127 billion at Punjab National
Mehul Choksi, various indi- Services Commission (FSC) of ing. No bank is now prepared Bank remaining undetected for
viduals, companies and lim- Mauritius said in a to extend Letters of years, the capital markets
ited liability partnership statement it had taken Undertaking (LoUs). The watchdog is revisiting its "on-
firms. cognizance of media reports ability of a company to raise hold" proposal to mandate
The NCLT has passed The NCLT has passed directions against Nirav Modi and Mehul about the purported fraud money through LoUs from listed firms to disclose all
directions against Modi and Choksi, the alleged main perpetrators of the PNB fraud, as well allegations with regards to abroad has been affected 'substantial' loan defaults
Choksi, the alleged main per- as their firms and relatives, among other entities PHOTO:REUTERS Punjab National Bank, Nirav badly," said a senior official within a day. The proposal is
petrators of the fraud, as well Modi and Mehul Choksi. from a state-run bank. expected to be discussed by
as their firms and relatives, petition under Section 221, the barred companies. The "The FSC is also in constant A private sector banker Sebi's board at a meeting later
among other entities, accord- which pertains to freezing of partnership firms include communication with closely associated with the this month, even as a final
ing to a public announce- assets of a company on Solar Exports and Stellar international counterparts activity added lenders had decision is yet to be reached on
ment by the corporate affairs inquiry and investigation, Diamond. under existing exchange of taken a "cautious" approach the threshold limit for
ministry. and Section 222 that relates According to the ministry, information agreements," in the aftermath of the finan- quantifying a loan default as
The order was passed on a to imposition of restrictions the petition came for an it said. The FSC is the cial fraud. 'substantial', a senior official
petition filed by the ministry upon securities. urgent hearing before the regulator of non-banking Despite the immediate said. PTI
under various sections of the Gitanjali Gems, Gilli Mumbai bench of the NCLT financial services and global setback, bankers, however,
Companies Act, 2013. India, Nakshatra Brands and on February 23 and that an business sectors in feel there will not be a com-
The ministry moved the Firestar Diamond are among ex-parte order was passed. Mauritius. PTI plete freeze, so that a genuine exporters/importers had
businessman’s operations are gone up considerably follow-
affected. ing the scam, as for the LoUs
CBI arrests 4 officials of Nirav Modi, The fraud unearthed at
the Brady House branch of
PNB had diamontiare Nirav
already issued, a "risk premi-
um" has already been set in
for any Indian paper.
Mehul Choksi’s companies Modi and his various compa-
ny officials colluding with
senior officials of the PNB,
LoU-based short-term
loans are coming at a premi-
um of 10-30 basis points,
PRESS TRUST OF INDIA owned by Nirav Modi, and he was the authorised signa- applicant. wherein LoUs were issued another private banker said
4 March then finance manager Miten tory for the applications sub- In case of default, the bank without proper checks and in some cases, it has gone up
Anil Pandya, were arrested for mitted to PNB for issuance of issuing the LoU has to pay the security. to 50 bps.
The Central Bureau of their alleged role in the prepa- purported LoUs and Foreign liability to the credit-giving The fraud went undetect- One of the two bankers
Investigation (CBI) on ration of applications for Letters of Credit (FLCs), bank with accruing interest. ed for many years, as the cited said calls were being
Sunday made four arrests in fraudulent letters of under- they said. The PNB officials alleged- SWIFT, financial transaction made to the issuer bank for
connection with the alleged takings (LoUs) submitted to The accused officials of ly sent these messages to messaging system was not re-confirming. An LoU is
~127 billion fraud at Punjab PNB, they said. Auditor PNB did not enter the instruc- Indian banks — Canara Bank, linked to PNB's Core Banking generally taken at face value.
National Bank. Sanjay Rambhia, partner in tions for these LoUs and FLCs State Bank of India, Bank of System. As a result of this the "Historically, there has
The agency has arrested the chartered accountancy in their internal software to India, Axis Bank, Allahabad issues LoUs were not shown been no default on buyer's
two employees and an auditor firm Sampat and Mehta, avoid scrutiny. These sent bank — located in Antwerp, in the bank's books. An LoU credit, as it is guaranteed by
of the Nirav Modi group of Mumbai, has also been arrest- through an international Hong Kong, Bahrain, is a guarantee by a bank to another bank, and so we take
companies, while a director of ed, the officials said. messaging system for bank- Mauritius, Frankfurt, without pay another lender for it as 100 per cent safe busi-
the Gitanjali group of compa- The CBI has also arrested ing called SWIFT, used to pass making entries in the bank- import by companies and is ness. This is for the first time
nies owned by Mehul Choksi the then Director of Mehul instructions among banks ing software about the LoUs. considered crucial for cross- that we saw a problem. We
has also been taken into cus- Choksi's company, Gili India, globally to transfer funds. Upon receiving the mes- border trade which helps the are building some mecha-
tody, they said. Aniyath Shiv Raman Nair. An LoU is a guarantee given sages from PNB under SWIFT, importer access funds at low- nisms to strengthen it,"
Manish K Bosamiya, the It was alleged beside being by an issuing bank to Indian the banks abroad transferred er costs. Union Bank of India manag-
then AGM (operations) of one of the directors of the banks having branches abroad, these amounts into NOSTRO Meanwhile, bankers said ing director and chief execu-
Firestarter International Ltd Gitanjali group of companies, to grant short-term credit to the account of PNB with them. the cost of funds for domestic tive Rajkiran Rai G said.
In an interview to a leading daily, State
Bank of India (SBI) Chairman
Figures in
Capital infusion FY17
into PSBs by govt Networth Accumulated Netprofit
Rajnish Kumar (pictured) hit back at critics
of state-run enterprises and their calls for (~ mn) in 5 years profit& loss of the year
privatising the state-run banks. He said IDBI Bank 64,840 171,459 -84,924 -51,581
almost all bad loans and poor governance Indian Overseas Bank 68,600 115,791 -69,790 -34,167
standards cases were from the private Central Bankof India 61,380 147,458 -53,564 -24,391
sector, “They all default and sit in the front UCO Bank 37,410 104,283 -11,596 -18,507
rows of the industry associations. That is Bankof India 82,520 268,004 -85,568 -15,583
the reality today,'' he said. Business
Bankof Maharashtra 19,000 61,731 -13,920 -13,725
Standard pulled out the key financials of Oriental Bankof Commerce 4,500 126,729 0 -10,941
the listed public sector ones and found for
Dena Bank 22,930 65,867 -17,989 -8,636
many loss-making banks, the capital
infusion in the last five years was almost Allahabad Bank 21,440 121,139 -6,736 -3,135
Andhra Bank 17,980 105,169 15 1,743
equal to their accumulated losses. In other words, keeping aside the
capital infusion by the government, many of these banks could have Punjab & Sind Bank 2,400 52,692 18,573 2,011
seriously eroded their net worth, which is equity (mainly infused by United Bankof India 23,060 68,428 0 2,195
the government) and reserves (set aside from profits). Take the case of Syndicate Bank 21,760 125,886 0 3,590
cent, using the same criterion, IDBI Bank. Its accumulated loss as of FY17 was ~84.92 billion, of which Union Bankof India 32,350 215,194 0 5,552
will be applicable to these ~51.58 billion happened in fiscal year 2017 alone. But in five years, from Corporation Bank 20,190 120,487 -4,508 5,612 Compiled by
banks from FY19 for lending 2012-13 to 2016-17, government infused ~64.84 billion in the bank, Vijaya Bank 4,700 73,210 12,749 7,505
BS research
Bureau
to micro enterprises. virtually rescuing it. About one-fourth of the bank’s loan book was
But, in a partial relief, the Canara Bank 27,622 283,124 -27,489 11,219 Sources:
bad debt at the end of December quarter. SBI received capital of ~190.5 Department Of
apex bank removed the prior billion from the government. The largest bank, it is also one of the Punjab National Bank 64,620 380,964 0 13,248 Financial
condition that only loans of up Bankof Baroda 44,460 403,033 0 13,831 Services,
healthiest. Yet, it showed a divergence of ~230 billion in its non- Capitaline
to ~50 million and ~100 mil- performing assets as reported, against what the Reserve Bank of India Indian Bank 2,800 144,616 971 14,057
lion given to MSMEs would be
auditors estimated. BS REPORTERS State Bankof India 190,480 1,567,004 3 104,841
PSL-compliant.
SNAPSHOT OF INVESTMENTS IN 2017 AND 2016
Round of investment (Value in $mn)
ArcelorMittal’s bid for... the Miglani family dated
September 4, 2009, stood termi-
nated, it had said.
2016
658.62 (20)
648.00 (38)
628.76 (22)
Abboud said Numetal’s equity such as India. As opinion received by Numetal,
1054.53 (99)
550.76 (142)
581.59 (23)
2017 structure meets the current IBC VTB Capital has been interested ArcelorMittal has been promoter of
norms and is open to discussions in acquiring Essar Steel for the last a corporate debtor (Uttam Galva)
848.74 (20)
384.76 (932)
with the resolution professional. two years, done due diligence, and for over one year prior to com-
753.04 (49)
293.39 (492)
703.60 (195)
VTB Capital also indicated that had even given a proposal to buy mencement of the resolution
707.21 (96)
it is open to raise its bid amount equity earlier to banks. “We have process of Essar Steel. The only way
for Essar Steel if desired by the studied Essar Steel very well and the person who is a promoter of a
resolution professionals/lenders. we are ready to invest to expand corporate debtor becomes eligible is
“We are very flexible in our its capacity,” said Abboud. “We did if he makes payment of all overdue
approach and are willing to not bid for other stressed steel amounts with interest.
accommodate the interests of all assets, as we think there was very Apart from Uttam Galva, L N
stakeholders involved with Essar less time to conduct due diligence,” Mittal, promoter of ArcelorMittal,
Angel/Seed Series A Series B Series C Series D Series E+ Steel,” said Abboud. he added. also had a personal holding of 33
“The Russian government owns On reports that the bids of both per cent in KazStroyService (KSS)
Source: VCCedge 60 per cent stake in our bank. In Numetal and ArcelorMittal have of Kazakhstan, an oil infrastruc-
the past, the Russian government been rejected, Abboud said the res- ture provider company, which, in
$5 billion to $7 billion, many VCs are Suresh Narasimha, founder, CoCreate (erstwhile Soviet Union) helped olution professional had made it turn, had a 100 per cent stake in
doing follow-on rounds in companies Ventures, said, “We now know it takes India to set up all the steel plans of very clear that no such decision KSS Petron, which became an NPA
they have invested earlier - if they are a lot of money to build venture scale SAIL (Steel Authority of India). We was taken by the legal advisor. “We in 2015. Despite several reminders
bullish, they are investing in propor- business and we have the metrics to have great experience in running are awaiting communication from from State Bank of India to Mittal,
tion to their share and even leading spot the winners.” Series A will see less- steel plants and turning them the resolution professional and will KSS loans were not paid and the
the Series B rounds in these compa- er companies, higher valuations, and around when the industry goes then take action,” he said. company became an NPA.
nies. “There is enough supply of cap- higher fund infusions, he pointed out. through a downcycle,” said The controversy over However, Mittal again sold his
ital, but there is a flight to quality. How This could result in a rush of con- Abboud. VTB Capital, he said, has ArcelorMittal’s bid ignited as the shares in KSS Petron just before sub-
many start-ups raising Series A/B/C solidation across the sector. “I am see- done over $13 billion of transac- group held a 29.05 per cent stake in mission of Essar Steel bid. Some of
money are able to achieve what they ing higher dollar invested per angel, tions in India. Uttam Galva Steels as a co-pro- the lenders had raised questions
promise? The say-to-do ratio has to but lesser angels per syndication, and VTB Capital is the investment moter along with the Miglani fam- about the promoter status at the
be a lot higher,” said Sharma. In any definitely more stringent control and banking arm of VTB Bank, one of ily, which is now an NPA. However, time of the company turning into
case, not all companies raising Series terms. We will see more active the top universal banks in Russia. on February 7, just before bidding an NPA and not sale of shares.
A will get Series B, and not all raising investors than what we have seen ear- Its investment activity outside for Essar Steel, ArcelorMittal trans- Earlier, a senior source in
Series B capital will be able to raise a lier,” said Narasimha. Russia is part of the broader plan to ferred its entire shareholding to the Numetal had indicated that it will
Series C round. increase Russia’s investment in Miglani family at ~1. Consequently, move the courts if its bid is incor-
There’s much learning from all this. More on business-standard.com fast-growing emerging markets the co-promotion agreement with rectly rejected.
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MUMBAI | MONDAY, 5 MARCH 2018 1

IN BRIEF
TRUMP’S TARIFF IMPACT
EU eyes tax on tech giants closer
to 2% than 6% of revenue
The European Union (EU) this
month will unveil plans to tax large
global tech companies’ revenue at
EU threatens Levi’s and other brands
JOE DEAUX, ANDREW MAYEDA,
a rate in the 2-to-6-per cent
range, though more likely closer to
TOLUSE OLORUNNIPA, & ERIK WASSON
4 March
European Commission
President Jean-Claude
China to hold talks with US
2 than to 6 per cent, French Finance Juncker was prepared to
Minister Bruno Le Maire said in a respond forcefully by

U
S President Donald Trump set China will host US officials for a new the opening of the annual meeting of
newspaper interview. To those the stage for a trade war by sla- targeting imports of round of dialogue on trade issues, the legislature. The rubber-stamp par-
who might say the measure is too modest, Le Maire said his answer pping tariffs on steel and alum- Harley-Davidson Vice Foreign Minister Zhang liament is expected to enact sweeping
was:”It’s a starting point. I prefer a text that will be implemented inum imports, daring other countries to motorbikes, Levi Strauss Yesui said at a briefing on Sunday, as changes during its two-week session
very quickly rather than endless negotiations. We will fine tune it retaliate and leading the EU to warn & Co jeans and bourbon tensions rise between the world’s that would allow President Xi Jinping
later”. The proposal aims at increasing the tax bill of firms like that it would target iconic American whiskey from the US. His two largest economies. to rule indefinitely and give him
Amazon.com, Alphabet’s Google and Facebook, which are accused brands. In turn, Trump put the threat heightened the Zhang, who is also spokesman for greater control over the levers of mon-
by large EU states of paying too little by rerouting their EU profits to European auto industry in his sights. prospects of a global the National People’s Congress, said ey and power. On Thursday, President
low-tax countries such as Luxembourg and Ireland. REUTERS Hours after Trump said in a Twitter free-for-all, as the WTO China doesn’t want a trade war but Donald Trump said the US would slap
message that “trade wars are good, and said the potential of wouldn’t allow its interests to be tariffs on steel and aluminum imports
easy to win,” European Commission escalating tensions “is harmed. He gave no details on timing to protect national security, drawing
US court dismisses Geely chairman not President Jean-Claude Juncker said real” and the IMF for the talks or who might be included. threats of retaliation from Asian and
VW suit over excess planning more the bloc was prepared to respond force- warned the restrictions The briefing was held a day before European countries. BLOOMBERG
fully by targeting imports of Harley- will likely damage the US
emissions automotive deals Davidson motorbikes, Levi Strauss &
A US judge on late Friday
dismissed a lawsuit filed by
Li Shufu, the founder and main
owner of China’s Geely has no
Co jeans and bourbon whiskey from
the US. Juncker’s threat heightened which freely pour into the US.” Saturday. Commerce Secretary Wilbur
Hyundai warns tariffs may jeopardise production
institutional investors who plans to buy further stakes in the prospects of a global free-for-all, The president faces anger from Ross said on Friday the president has Hyundai Motor warned it may rethink how many
purchased bonds from carmakers after building up a as the World Trade Organization manufacturers and trade partners in chosen to impose the tariffs on all coun- vehicles it builds in the US, joining the world’s
Volkswagen US unit and holding of almost 10 per cent in (WTO) said the potential of escalating Asia and Europe, as well as from allies tries and products, dimming the hopes largest automakers in speaking out against US
claimed the automaker had Germany’s Daimler, he told a tensions “is real” and the International such as Republican lawmakers, after for nations such as Australia still press- President Donald Trump’s crackdown on steel
made false and misleading German newspaper. “Currently Monetary Fund (IMF) warned the announcing tariffs of 25 per cent on ing for an exemption. and aluminum imports. “Changes to the existing
statements before its massive we have no plans for further restrictions would likely damage the imported steel and 10 per cent on alu- Meanwhile, Peter Navarro, director tariff structure could negatively impact our
diesel emissions scandal purchases. We will concentrate US and global economy. minum for “a long period of time.” of the National Trade Council at the current US production and further expansion,”
became public. Investors for now on the development of Trump tweeted on Saturday that “If He’s expected to sign the formal White House, said on Sunday that cer- Jim Trainor, a Hyundai spokesman, said.
bought $8.3 billion in dollar- existing holdings. There are the EU wants to further increase their order as early as the coming week after tain exemptions could be made to the “Imposing tariffs on steel could increase production costs, which could lead to
denominated bonds many ideas, and there is much already massive tariffs and barriers on certain formalities are completed, Peter tariffs on foreign steel and aluminum, higher prices for US consumers, and, potentially, decreased demand.” Trump said
Volkswagen Group of America to do,” weekly Bild am Sonntag US companies doing business there, Navarro, director of the National Trade but exclusions for entire countries on March 1 the US plans to order tariffs of 25 per cent on imported steel and 10 per
Finance LLC sold in 2014 and quoted Li as saying in an we will simply apply a Tax on their Cars Council at the White House, said on aren’t expected. BLOOMBERG cent on aluminum, with a formal order to be signed next week. BLOOMBERG
2015. A group of those investors interview published on Sunday.
sued the company after it Li has led a major acquisition
admitted in September 2015 to push globally since 2010, when

YouTube cracks down British athlete Roger

secretly installing software to
evade emissions rules for at
least six years that led to the
ouster of its chief executive,
damaged the company’s
reputation and prompted
massive bills. REUTERS<
US Northeast still
facing flooding,
outages after storm
More than 1.5 million customers
remained without power
throughout the eastern US early
on Sunday, and communities
on the New England coast faced
more flooding two days after a
powerful storm snapped trees,
downed wires and killed at
least nine people. The
remnants of the storm, known
as a nor’easter, lingered on
Sunday with flood watches and
wind advisories in effect until 1
pm in northeastern US even as it
moved hundreds of miles out to
sea, hampering efforts to
restore power. The governors of
both Massachusetts and New
York declared a state of
emergency on Saturday
afternoon, following similar
announcements by the
governors of Virginia and
Maryland on Friday. REUTERS<
Dialog may supply
chips to Apple
through 2020: CEO
Dialog Semiconductor expects
Apple, its top customer, to use
its chips for a significant
proportion of its devices in 2019
and 2020, Chief Executive Jalal
Bagherli told a German
newspaper. “Apple at the start
of the year commissioned us
with the design of chips for
many devices for 2019 and
2020,” weekly Euro am
Sonntagquoted Bagherli as
saying in an interview
published on Saturday,
without providing details.
Dialog’s stock has lost more
than half of its value over the
past year on investor concerns
that Apple is working on its
own battery-saving chips for
iPhones. Analysts reckon Dialog
derives more than half its
revenue from supplying Apple
with power management
integrated circuits. REUTERS<
he took over Swedish car brand
Volvo from Ford Motor in a $1.8
billion deal. Over the last year,
he has snapped up a $3.3 billion
stake in truck maker AB Volvo, a
majority stake in sports car
maker Lotus, a 49.9 per cent
stake in Malaysian automaker
Proton and flying car start-up
Terrafugia. REUTERS<
Porsche could
build flying taxis,
says sales chief
Volkswagen’s sports car maker
Porsche could develop a flying
passenger vehicle to compete
with rivals in a possible market
for urban air taxis and ride-
sharing services, Porsche sales
chief Detlev von Platen told a
German magazine. “That would
really make sense. If I drive from
(the Porsche plant in)
Zuffenhausen to Stuttgart
airport, I need at least half an
hour, if I’m lucky. Flying would
take only three and a half
minutes,” Automobilwoche
quoted von Platen as saying.
Porsche would join a raft of
companies working on designs
for flying cars in anticipation of a
shift in the transport market
away from conventional cars to
self-driving vehicles shared via
ride-hailing apps. REUTERS<
Equistone in talks
to buy French tour
operators
Private equity firm Equistone
Partners Europe confirmed on
Saturday that it had entered
exclusive talks to buy French
online travel agency Karavel-
Promovacances and tour
operator Fram from
investment firm LBO France. A
deal for the companies with
combined revenue of around
^600 million could be finalised
in April, a spokeswoman for
Equistone told Reuters,
confirming a report in Le
Figaro. Further details were
not immediately available.
This latest move follows recent
consolidation in the French
tourism sector, notably the
acquisition of Look Voyages
and Vacances Transat by sector
leader TUI France.
REUTERS<
Bannister dies at 88
on far-right videos
AGENCE FRANCE-PRESSE
4 March
JONAH ENGEL BROMWICH YouTube terminates it. without notice or explanation. News out-
4 March The company’s guidelines prohibit lets including The Outline and Breitbart Record-breaking British athlete
“videos that contain nudity or sexual con- have pointed to more than a dozen other Roger Bannister, the first man
YouTube this week cracked down on the tent, violent or graphic content, harmful right-wing or right-leaning accounts that to run a mile in under four min-
videos of some prominent far-right actors or dangerous content, hateful content, have been disciplined, claiming they have utes, has died, his family
and conspiracy theorists, continuing an threats, spam, misleading metadata, or either received strikes or been banned announced on Sunday.
effort that has become more visible since scams.” Mike Cernovich, the right-wing outright in the past several weeks. “Sir Roger Bannister, died
the school shooting in Parkland, Florida, agitator and conspiracy theorist, said They include the violent neo-Nazi peacefully in Oxford on March
last month caused a torrent of misinfor- Wednesday that his channel, which has group Atomwaffen and the YouTube star 3, 2018, aged 88, surrounded by
mation to be featured promi- more than 66,000 subscribers, Carl Benjamin, known by his username his family,” his family said.
nently on the site. had been given a strike. Sargon of Akkad, who criticizes femi- “He banked his treasure in Sir Roger Bannister REUTERS
A week after the shooting, News outlets (Cernovich said Saturday that nism and identity politics. Benjamin the hearts of his friends,” they
many of the videos on have pointed YouTube had reversed the posted a screenshot on Facebook on added, in a statement pub- Olympics and Commonw-
YouTube’s “Trending” list con- to more than strike and that the video that Thursday that said he had been locked lished by the Press Association ealths is more important than
tained misinformation about a dozen other had been banned was again out of his Google account because “it news agency. breaking records,” Bannister
the teenage survivors of the right-wing or available on the site.) looked like it was being used in a way Bannister gained global said in 2014.
shooting. The top video on the right-leaning Infowars, the conspiracy that violated Google’s policies.” sporting glory on May 6, 1954, “Vancouver was the pinna-
list for some time falsely accounts that theory outlet headed by Alex YouTube said it was not aware of any when he ran a mile (1.6 kilo- cle of my athletics career. It is
claimed that a student at the have been Jones, said Tuesday that it had prominent accounts that had falsely metres) three minutes 59.4 very difficult to break records
school, David Hogg, was a paid disciplined received a second strike in two reported strikes, though it did say that seconds at the Iffley Road during Olympic competition,
actor. That video and others weeks, both for videos about Benjamin had violated its policy on copy- track in Oxford. Half a century but winning races was better
like it led to intense criticism of the Parkland shooting. right infringement. YouTube denied that later, the Royal Mint celebrat- than holding world records.”
the site. Since then, many prominent (Infowars, which has more than 2.2 mil- the deletions and other actions were ide- ed Bannister’s record by issu- The current one-mile record
right-wing personalities have reported lion YouTube subscribers, later said the ologically driven. It said accounts that ing a 50 pence coin showing has since 1999 been held by
that YouTube has issued them strikes, second strike had been removed.) had been disciplined or banned were only an athlete’s running legs Morocco’s Hicham El Guerrouj
which the site uses to enforce its com- Infowars’ Washington bureau chief, the most prominent, and vocal, of many against a stopwatch. with a time of 3:43.13 secs.
munity guidelines. If a channel receives Jerome Corsi, said on Twitter that his across the ideological spectrum. But despite being famed for The black-leather pair of
three strikes within three months, YouTube channel had been terminated © 2018 The New York Times News Service breaking the four-minute bar- shoes, he wore while breaking
rier, Bannister said he felt a the record, sold for £266,500
greater sense of achievement in September 2015 — about
winning gold at the 1954 Com- $409,000 at the exchange rate
monwealth Games in Van- at the time. By then Bannister
CHINESE PRESIDENT GETS DOWN TO BUSINESS couver, beating his great rival was having trouble walking,
Australian John Landy in a race let alone running, after reveal-
later dubbed the “Miracle Mile.” ing he was suffering from
“I think that racing in the Parkinson’s disease.
Social Democrats back
coalition led by Merkel
Germany’s Social Democrats grand coalition that has gov-
(SPD) voted decisively for erned since 2013. The chal-
another coalition with lenges are piling up for Merkel,
Chancellor Angela Merkel’s who has been acting chancellor
conservatives on Sunday, clear- for more than five months
ing the way for a new govern- since an inconclusive election,
ment in Europe’s largest econ- with Europe looking to its
omy and ending months of largest country for leadership
political uncertainty. on a host of economic and
Two thirds of the member- security issues. Acting SPD
ship voted “yes” to the deal, a leader Olaf Scholz said: “We
party official said — a wider now have clarity: the SPD will
Chinese President Xi Jinping is seen on a large screen at the opening session of the Chinese People’s Political Consultative margin than many had expect- join the next German govern-
Conference in Beijing’s Great Hall of the People, on Saturday. Xi is prepared to approve changes that will let him rule ed — meaning Merkel could be ment.” Merkel took to her par-
indefinitely and undo decades of efforts to prevent a return to crushing dictatorship. China defended the move saying it was sworn in for a fourth term by ty’s Twitter feed to congratu-
important to uphold the authority of the ruling Communist Party and unity of the state leadership PHOTO: AP/PTI mid-March, in a repeat of the late the SPD. REUTERS

Time’s Up campaign dominates Hollywood’s awards season

ERIC KELSEY legal defence fund which aims to support peo-
Los Angeles, 4 March ple reporting sexual harassment in the enter-
tainment industry and beyond.
5 CLASSIC When it comes to horror films,
the response from the Academy
The Academy Awards show has set aside a
moment to feature the Time’s Up campaign
It has the support of some of
Hollywood’s biggest female stars, including
HORROR Awards has generally been:
against workplace sexual misconduct during
Sunday’s Oscars ceremony.
Reese Witherspoon, Natalie Portman,
DuVernay and Grey’s Anatomy producer FILMS Get out!
Organisers of the campaign said they have Shonda Rhimes.
worked with the producers of Sunday’s cere-
mony to bring attention their cause,
Celebrities wore black en masse at the
Golden Globe awards ceremony in January to
THAT DID NOT However, there have been exceptions to this. The Silence ofthe
Lambs swept the major categories in 1992, Guillermo del Toro’s
Hollywood trade publications Variety and
The Hollywood Reporter said on Friday.
signal support for victims of sexual harassment,
and at music’s Grammy Awards in January
GET MUCH 2006 dark fantasy Pan’s Labyrinth emerged triumphant for best
cinematography, art direction and makeup. Barring a few, the
“There’s a moment that’s been carved out,”
Variety quoted film director Ava DuVernay as
many artists held or pinned white roses to their
clothes. Time’s Up on Friday also announced a
OSCAR Oscars have mostly given chillers the cold shoulder. But, that could
change this year with GetOut. Here are some of the others that
saying. The organisers did not give details,
and producers of the Oscars show did not
partnership with the US oral history project
StoryCorps to document experiences by ACCLAIM didn’t receive much appreciation: © 2018 The New York Times News Service
respond to a request for comment. women about discrimination and abuse in the Frankenstein Rosemary’s Baby
The sexual misconduct scandal has domi- workplace. Actresses Jane Fonda, Ashley Judd
The Shining
(1931) (1968) (1980)
nated Hollywood’s awards season and forced and Rashida Jones are among a first group of
No nominations 2 nominations, 1 win No
dozens of actors, filmmakers and agents to step women, including domestic workers and
down, be fired or dropped from creative proj- human rights activists, to record their stories, nominations
ects. The Oscars ceremony on Sunday will give organisers said in a statement. Women around Psycho (1960) The Exorcist (1973)
the Time’s Up campaign its biggest public the world will be invited to share their experi- 4nominations, 10 nominations,
moment, reaching an audience of A-list celebri- ences via a #TIMESUPxStoryCorps campaign no wins 2 wins
ties and millions watching on television world- across social media platforms, and a free
wide. Time’s Up, launched on January 1, is a StoryCorps app. REUTERS

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 PERSONAL FINANCE 9
https://telegram.me/AllEpapers https://telegram.me/TheHindu_Zone
http://www.estore33.com
MUMBAI | MONDAY, 5 MARCH 2018

VALUE OF ~1 LAKH SENSEX

1-YEAR
GOLD SILVER FD (SBI) PPF
INVESTED IN VARIOUS ASSET 117,466 102,544 86,410 1,06,900 1,08,000
CLASSES 1-YEAR 117,466 101,781 NA# 1,04,830 1,08,000
POST-TAX RETURNS
# Silver prices suffered losses;
All post-tax returns are calculated for an 5-YEAR 179,966 102,788 69,740 152,456 152,456
individual in the 30 per cent tax bracket,
without considering the indexation benefit 5-YEAR 179,966 102,509 NA# 134,613 152,456
POST-TAX RETURNS
As on March 1, in ~; data compiled by BS Research Bureau
> .

Gold , real estate

may see revival
Relationship managers, interrupted
Increased internet penetration, a surge in millennial consumers YESTERDAY'S RM What is emerging is a scenario
Imposition of LTCG on equities and the rise of independent financial investment platforms
where dissatisfaction with RMs is
| Personalised service with growing due to lack of personalised
without indexation will make could diminish their growth human interface attention, while self-service tech-
these asset classes attractive | Larger banks need bigger
nologies are growing more sophisti-
cated. Customers have and will con-
PAVAN LALL IMAGE: iSTOCK
teams of relationship tinue to migrate to buying/servicing
The change in long-term managers, requiring more without human intervention and buy-
real estate at branches
R
capital gains (LTCG) tax on elationship managers or RMs, ing directly from institutions.
equity coupled to the relat- in the past decade or so, have
| RMs offer one-stop shop
ed tax on equity-oriented been the cornerstone of every Technology rules: Meanwhile, tech-
funds could lead to signif- private bank’s revenues. They sell service nology has brought about a revolu-
icant changes in invest- almost every financial product— FUTURE RM tion in self-service, Kushan says,
ment strategies for from fixed deposits, mutual funds pointing to internet/mobile channels
investors. To recap, the and insurance—and also offer | Service representatives will for servicing and sales fulfilment
tax-meter starts ticking advice. But if the smoke signs on the augment technology as part emerging chat bots for queries,
MARKET INSIGHT only from a base date of horizon materialise, there’s evidence of consumer connect, using upcoming robo-advisors for mutual
January 31, 2018 due to the that could all change. video conference, digital fund recommendations and execu-
DEVANGSHU DATTA ‘grandfathering’ concept. The government-led digital push tion; sophisticated back-office capa-
platforms
The price of a stock on for banks has resulted in most lenders bilities developed by the Reserve Bank
January 31, 2018 is used for calculating LTCG. (A more opening fewer and smaller sized | Data-backed service will of India and exchanges to allow online
complicated formula is used for mutual funds where branches which logically results in mean one RM will be able to execution and third party market-
systematic investment plans (SIPs) complicate the ques- fewer RMs. Industry reports point to service five times the present places for comparing products and
tion of acquisition price). the number of internet connections accounts rates. He’s not wrong. Platforms like
The tax rate itself is moderate at 10 per cent. But nearing 500 million and millennials Fundsindia.com, scripbox, and poli-
there is no indexation for long-term gains. Comparing are prone to doing business digitally | Smaller banks will need cybazaar.com, loantap.com, lend-
short-term gains taxes to LTCG, the difference will be five as opposed to walk-ins. The wide- smaller RM teams box.in, lendingkart.com, etc, are
percentage points from 2018-19. The short-term capital spread availability of broadband and | Advent of external already cutting out the intermediaries
gains (STCG) tax will continue to be taxed at 15 per cent related services across the country and offering products directly to the
(plus cesses). The direct equity investor has an incentive means that being smartly-connected
e-commerce platforms will consumer. The result — lower cost
to hold stocks beyond 12 months. But it isn't as much of is no longer an amenity exclusive to reduce RM service offerings and higher returns — at least in prin-
an incentive as earlier. Also, the lack of indexation big city dwellers. Lastly, market reg- ciple. For ICICI’s part at least, Bagchi
reduces the incentive to hold for the very long-term. ulator – the Securities and Exchange RMs doubled in the last five years, large volume of personalised service tions tend to use RMs as their main welcomes the entry of such platforms,
The lack of indexation makes the new tax regime Board of India – is putting pressure to there has been an advent of technol- for any one person to deal with. Which sales force. His point, and rightly so, saying “market competition brings
unfair to equity investors compared to those who hold segregate mutual fund (MF) advice ogy and preference among certain is why HDFC Bank is increasing pro- is that there’s a conflict of interest out the best in an industry.”
other long-term assets. Indexation offers a huge incen- from distribution. customers to use technology to inter- grammes around their virtual RMs, when people who offer advice, then Does that mean the RM will be a
tive to hold real estate, jewellery and debt funds for the act with RMs,” he adds. For example, off-line RMs and engaging customers sell those because they lean towards thing of the past entirely? Pai, for one
long-term. Over say, a period of three-six years or Slower growth on the anvil: Ravi HDFC Bank, has a platform called through video chats and phone sys- those on which they can generate disagrees as he points to two truths.
longer, even moderate indexation rates will compound Narayanan, HDFC Bank’s country Gyaan Line built by Senseforth tems. Read between the lines, RMs better commission, than in the One is that the maturing of automa-
to excellent tax savings. head for branch banking and retail Technologies, which also built their will progressively be operating out of client’s interest. Then there’s also tion and robotics is at least a decade
The following numbers are imaginary but illustrative. trade forex business, says expansion website’s chatbot Eva, HDFC Bank call centres. Bagchi goes on to add the matter of performance bonuses if not more away and second the
Suppose an investor buys real estate costing ~100. The has moderated in larger cities for a officials say, adding that the Gyaan that for ICICI if RMs handle between that are linked to such targets. biggest differentiator for traditional
value appreciates at seven per cent per annum. He sells couple of reasons – digital platforms Line which is based on artificial intel- 100 and 200 clients each then in the banks is that at least in principle,
after 10 years. The property has almost doubled in val- and banking enable customers to ligence and machine learning dis- future “that number could easily go to Regulatory hurdles: Which is why they embody trust and a place and a
ue – it's up by 96 per cent to ~196. Assume that indexation transact without a physical bank penses related information to RMs to 500 accounts per RM, along with the the Securities and Exchange Board of name that you can identify and con-
is at five per cent per annum for the period. Then the presence, especially for salaried pro- help service clientele better. support of technologies like video- India’s (SEBI) January 2018 paper nect with, if all else fails. What he
indexed cost amounts to ~163. Hence, the real estate file customers and second, the ramp Narayanan says he has around conferencing etc.” pushes for advisors to do away with does agree with is that the RM as we
investor is only liable to pay LTCG on ~33. The LTCG rate up on expanding in non-metros, 7,500 RMs at HDFC Bank catering to Pai, like HDFC Bank, says that Yes concealing any potential conflicts of know it will change and become a
for real estate is 20 per cent post-indexation. The prop- second-tier semi-urban and rural some 4 million accounts. ICICI Bank Bank has also resized its banks to be interest. That means that banks, cor- nameless, faceless extension of your
erty sale will attract ~6.5 tax. areas. In addition, the existing declined to provide overall specifics 500 square feet large as opposed to porates, NBFCs and so on will not be bank, augmented with technology
Suppose an equity investor sees the same gain over banks at metros have been over- but has between 12 and 15 RMs in a the typical 2,500 square feet and so permitted to distribute financial prod- and equipped with all the informa-
the same period. A stock bought at ~100 climbs to ~196 hauled to reduce teller space branch at a busy suburb like Bandra, not only will the role of the RM ucts directly or through a holding, tion necessary to treat you in the
over 10 years. The 10 per cent tax is levied without index- and create a more casual lounge says Anup Bagchi, executive director diminish in time but in smaller cities subsidiary, or associate company. same way as an RM who’s dealt with
ation. Hence, the equity investor would pay ~9.6 tax on environment where customers with ICICI Bank. Ritesh Pai, chief banks, it may altogether leapfrog the While finer points in that paper you for years.
a sale. Given the power of compounding, the longer an can interact with RMs to get digital officer at Yes Bank, says their friendly RM phase and jump straight remain to be spelled out, the big pic- Last year, HDFC Bank’s Ira (intel-
equity asset is held, the more the lack of indexation hurts specific information. company has around 2,000 RMs to digital platforms to handle ture implication is that private ligent robotic assistant) showcased
the equity investor. While that’s great for customers, servicing 2.5 million accounts. accounts. API-led banking, e-KYC account holders would need talk to in its Kochi branch was an interactive
This ‘tax-efficiency comparison’ must also be made by the slowdown in branch expansion That could translate to an average norms, are all aiding that. two separate professionals for invest- humanoid that greeted customers
an investor when choosing between a debt-fund and an means Narayanan won’t see the num- of a 1,000 clients per RM which even Ravi Kushan, managing partner of ment and account servicing. Sebi’s and helped guide them to relevant
equity fund. Equity funds also don't receive indexation ber of RMs at his branches grow as allowing for some overlap on group, consultancy Roland Berger India, 2013 paper had warned investors to counters. That may be a sign of
benefits (the tax is deducted by the fund and reflects on fast anymore. “While the number of family or bundled accounts forms a says that generally financial institu- deal with registered advisors only. things to come.
the net asset value) while debt funds do have the indexa-
tion benefit. So the power of compounded indexation
narrows any positive difference in returns for equity.
Post-tax returns from debt funds can therefore, out-
perform that from equity, if there's a period when there
is a burst of high inflation (increasing the indexation
rate and thus lowering the tax incidence on debt returns).
PROTECT DOWNSIDE RISK WITH THESE FUNDS FUNDS THAT HELD UP BETTER IN FALLING
MARKETS
Incidentally, equity linked savings schemes also become
less attractive since these are also subject to LTCG with-
When markets turn volatile, exposure to a few fund categories can offer VALUE FUNDS 2008 2011 2015
out indexation and there's a three-year lock-in. Unit- downside protection, as past data demonstrate Quantum LT Equity Fund
ICICI Pru Value Discovery
-47.11 -20.39 3.33
-55.80 -23.97 5.13
linked insurance plans (Ulips) may find more takers on
IMAGE: iSTOCK
the other hand since these instruments are not subject to Templeton India Equity Income -52.68 -24.01 -1.61
LTCG. But there's a five year lock-in period for Ulips.
HOW VARIOUS CATEGORIES FARED
DIVIDEND YIELD FUNDS
This change in the tax system could also hurt hybrid AGAINST THE SENSEX
funds and arbitrage funds as well since those will also be 2008 2011 2015 BNP Paribas Dividend Yield -48.59 -17.60 6.15
hit by LTCG without indexation. The portfolio mix usu- S&P BSE SENSEX -52.48 -24.83 -5.05 Tata Dividend Yield Fund -53.46 -17.74 4.27
ally means that arbitrage funds or hybrids don't, in the Value funds -52.30 -24.99 3.95 UTI Dividend Yield Fund -44.77 -17.69 -5.30
long term, generate the same level of returns as pure
equity. So these segments of the mutual fund industry Dividend yield funds -49.56 -19.90 -2.66 DYNAMIC EQUITY FUNDS
could end up with far fewer takers. Dynamic equity funds -47.77 -18.77 1.70 Franklin India Dynamic PE Ratio FOFs -25.74 -5.60 4.99
Of course, equity does in general give higher returns International funds -41.01 -2.87 -2.46 Invesco India Dynamic Equity -49.55 -20.85 5.27
than debt. But that return would really have to be much Balanced funds -43.00 -17.14 2.57 ICICI Pru Dynamic -45.33 -20.53 -1.63
higher to make it worth holding equity over long periods
Numbers are category average returns
if this indexation anomaly remains. In time, this could INTERNATIONAL FUNDS
mean investors cutting their exposure to equity-orient- Aditya Birla SL Intl. Equity Fund-A(G) -29.94 7.69 0.25
ed mutual funds, as well as being reluctant to park mon- | Year 2018 promises to be volatile for to fall steeply when markets are | Dynamic equity funds, which reduce
declining DHFL Pramerica Euro Equity Fund(G) -36.65 -2.76 6.31
ey directly in equity. equity markets, with the US Fed prom- exposure to equities as markets rise,
This could mean household savings in particular ising three or even four rate hikes and are well placed when markets begin Principal Global Opportunities Fund(G) -44.79 -2.60 -9.65
| Since they don't invest in high PE,
could seek other investment avenues as the new tax the European Central Bank too reduc- momentum-oriented stocks, they tend to fall BALANCED FUNDS
becomes applicable. Over the next year or so, we may see ing bond buying to correct less UTI CC Balanced Plan -118.50 -4.33 6.33
more in the way of money flows into two investment sta- | International funds offer diversifi-
ples, gold and real estate. Gold is already seeing some | These measures could reduce liq- | Dividend yield funds invest in stocks cation into foreign markets which Canara Rob Balance Scheme-Reg(G) -39.06 -9.84 5.61
revival in interest. Debt is less likely to look attractive uidity and cause volatility in equities that offer high dividends. The portfo- don't always move in sync with HDFC Balanced Fund(G) -36.92 -10.76 2.86
lio's dividend yield acts as a floor and Indian stock markets, and can there-
since inflation expectations are high and debt funds per- | Past data show that among equity fore be a good hedge
Source: Ace MF
form badly when inflation rises. fund categories value funds tend not stems its fall

Don’t let the numbers fool you

The sales pitch may showcase the best data, but there could be mis-selling involved.
Learn the right ways to evaluate financial instruments
TINESH BHASIN
In the complex world of finance,
numbers can be deceiving. A good
salesperson can sell a poor invest-
ment product as the best available in
the market. He doesn’t even need
or agents lie about certain features,
avoid mentioning conditions or give
false promises. That’s not entirely
correct. They also need to be wary of
the number game,” says Suresh
Sadagopan, founder, Ladder7
Financial Advisories.
THE NUMBERS GAME
Return on ~100,000
invested for 10 yrs
Value Return on
principal (%)
179,085 79
215,893 116
what the agent didn’t share is that for
which are much higher than the rest
259,374 159 10
10 years there will be no payout whileof the category. But when you look at
the money will earn interest and the historical returns, a clearer 310,585 211 12
grow. At 7.5 per cent interest, the picture emerges. Interest rate on a 5-yr loan
money can double in a decade. If the If you look at the 10-year peri- Flat rate Reducing balance
insurer pays ~100,000 annuity on a od, a few of the diversified equity 8 14.12
corpus of ~2 million, that’s just fivefunds delivering over 20 per cent
10 17.27
period is 46.9 per cent. Some com-
panies simply divide this by five
and say the “effective” return that
they offer is 9.38 per cent.
Annualised
returns (%)
Arnav Pandya, a certified finan-
cial planner, says that many times
6 in tax-saving products the tax
deduction is added to the returns,
8
bloating them when the actual ben-
efit might be less. Usually, for such
calculations, product manufactur-
ers or agents show the benefit an
individual in the 30 per cent tax
bracket can get.
IMAGE: iSTOCK

to tell a lie. Staying within the norms
the regulators have prescribed, he
can mis-sell a product showing cor-
rect figures. After all, 7.5 per cent
annualised returns over a decade
also mean 100 per cent returns on
the principal amount. A 12 per cent
loan can turn out to be a 21.2 per
cent one if a borrower doesn’t
understand the difference between
flat rate and reducing balance rate.
Investors and borrowers, who are
smart and cautious, usually spend
time understanding terms and con-
ditions when evaluating a product.
They tally the information provided
by an executive or agent with the
product documents. “Many think
that mis-selling is when executives
Being aware of a few basic invest-
ment principles and financial con-
cepts can help you evaluate a prod-
uct easily and take a call regarding
whether you should opt for it.
Time value of money: Recently, an
insurance agent approached 45-year
old Raj Prakash Singh with a prom-
ise that the product offers lifelong 10
per cent return on investment. No
annuity plan for life gives this kind
of return. At present, the returns are
around 4.5-6 per cent. The agent
explained: If Singh invests ~1 mil-
lion now, he will start getting around
~100,000 a year after 10 years.
While the returns are indeed 10
per cent on the investment amount,
per cent annual return. “If the returns have underperformed the Untangling complex calcula-
amount is invested in equities for category as well as their bench- 12 20.30 tions: If you don’t understand a
such a long period, the returns can mark. Historical returns are one 14 23.24 product, it’s best to stay away from it.
even be higher. On retirement, the way to look at performance, but Financial planners give an exam-
money can be invested in an instru- rolling returns are the best way to deduction of various charges. If a your investment. But the bonus is ple of mis-selling of bonds. In a low-
ment that can earn better post-tax evaluate a fund’s performance. It 30-year-old and 50-year-old both given at the end of the policy tenure. interest rate, many investors chase
returns,” says Malhar Majumder, a means, an investor should look at invest the same amount, the latter If you combine the two (50,000 + bonds that have a high coupon rate.
certified financial planner. returns over different periods will have much lower returns as the 40,000) and multiply with the num- But they don’t realise how to cal-
rather than just point-to-point mortality charges will be higher for ber of years (20), you will end up culate the correct bond price. They
Fund performance can be returns – it can be from February an older investor. with a corpus of ~1.8 million. That’s are sold bonds based on the coupon
deceiving: This is the oldest trick 2017 to February 2018, January around 5.4 per cent annualised rate, and they pay a higher price
in the trade to sell a mutual fund or 2017 to January 2018, and so on. Returns can be manipulated: In returns on investment. than the face value, which reduces
insurance product. When certain Deepesh Raghaw, a Sebi-regis- traditional insurance plans, the Sadagopan points out that many the yields. Lovaii Navlakhi, MD and
mutual funds start doing well, the tered investment adviser, points out agent lures investors with bonuses, companies show simple interest CEO of International Money
agents begin showing one-year that many invest in unit-linked which are the return on investment. rate as the return from their fixed Matters, points out that similar
returns to market them. In the cur- insurance plans based on returns. The pitch goes like this: If you invest deposit (FD), which is misleading. complexities exist in the returns
rent market, a few diversified equi- But what those investors don’t ~50,000 every year, the insurance If the FD is giving 8 per cent inter- calculations of Nifty and Sensex-
ty schemes have given over 20 per realise is that the money that goes company will give a bonus of est, in five years ~100 would grow linked structures that are popular
cent returns in the past one year, into the investment amount is after ~40,000. That’s 80 per cent extra on to ~146.93. The return in a five-year among the wealthy.
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12 ISSUES AND INSIGHTS
https://telegram.me/AllEpapers
>
Scams and electoral outcomes
How did the BJP manage to prevent the adverse impact of the PNB scam on its
electoral prospects in the Northeast?
RAISINA HILL
A K BHATTACHARYA
O
n February 14, 2018, the Nirav
Modi scam hit the nation. India’s
second largest state-controlled
lender, Punjab National Bank, informed
the Bombay Stock Exchange that it had
detected some “fraudulent and unautho-
rised transactions” pertaining to the let-
ters of undertaking (LoU) it had issued at
an estimated value of over ~114 billion.
The amount involved was later
revised to ~126 billion as more such trans-
actions came to light. Companies owned
Making an elephant dance
Building digital products, analytical models and using technology is the easy part of the digital transformation journey. Decision
makers would be well advised to include a “transformation fund” when they create the business case for such initiatives
KUSHE BAHL
T
here’s a lot to love about elephants
— like the best traditional compa-
nies, they are strong, powerful and
have long memories! What they aren’t
known for is agility — they can gallop at
quite a pace but find it hard to make
sharp turns. A quick scan of YouTube
will show that elephants can in fact
be trained to dance to music or to a train-
er’s command. Digital transformations
for traditional companies require similar
special music and trainer skills. Without
these, organisations frequently make
predictable missteps in setting up and
managing such transformations.
We have learnt seven important les-
sons from our work with organisations in
various stages of the digital transforma-
tion journey — some like musical notes
and some like trainer instructions — all
designed to increase chances of success
in the journey!
Prioritise ruthlessly: It is hard to pick
amongst all the “cool” ideas, especially
once you have unlocked the creative
energy of the organisation. But no more
than two initiatives in year one, and four
in year two are likely to succeed. Don’t
Laser-worn Levi's are the startof something big
Another step in the computer-driven transformation of apparel manufacturing
VIRGINIA POSTREL
T
he jeans are brand new and uni-
formly dark blue. To eyes accus-
tomed to fashionably distressed
denim, they look stiff and cheap, like
off-brand items from a 1970s discount
store. Then a technician mounts the
legs on V-shaped supports, taps a few
touchscreen menus, and hits a button.
A laser begins working its way down the
pants, trailing a puff of blue smoke. In
less than a minute the too-blue fabric
has taken on the whiskered and faded
look of well-worn jeans, broken-in and
beloved. It’s high-tech magic.
Levi Strauss drew great press atten-
tion for its plans to completely replace
hand labour with lasers to distress its
jeans. The announcement marks yet
another step in the computer-driven
transformation of apparel manufactur-
ing from a labour-intensive industry to
a capital-intensive one.
The system itself isn’t new.
Jeanologia, the Spanish company
whose machines do the work, has been
around since 1994. Along with Levi’s,
its roster of clients includes such brands
as Polo Jeans, Hilfiger Denim and
Abercrombie & Fitch.
“This is the bottleneck of any [jeans]
company,” Rolando Sierra,
Jeanologia’s Mexico area director,
explained at the 2016 TexProcess
Americas trade show, where I saw the
system demonstrated. “Imagine man-
aging 300 to 400 people who do noth-
ing for eight to 10 hours but to load a
mannequin and then with sandpaper
on their hands to begin the destruc-
tion process to remove the indigo.”
Integrating computer-aided
design systems and automated man-
ufacturing offers apparel makers
more than the obvious savings on
labour costs, however.
1) It cuts turnaround time and
reduces unsold inventories. Levi’s
developed new software that lets
designers digitally prototype new styles
by billionaire Nirav Modi, a luxury dia-
mond jewellery designer, and his uncle,
Mehul Choksi, were alleged to have used
these LoUs, obtained without any guar-
antee, to fund their businesses.
Several days before these “fraudulent”
transactions came to light and PNB’s stock
prices fell sharply, Modi and Choksi had
left India. Even as law enforcement agen-
cies began seizing assets belonging to
them, it became clear that the Narendra
Modi government was dealing with its
biggest financial sector scam. Newspapers
on February 15 front-paged this news with
a display that reminded you of other major
financial scams of yesteryears – involving
Harshad Mehta and Ketan Parekh.
On February 18, elections were held in
Tripura. In the fray were the Left Front,
which was seeking re-election for the fifth
time in a row, and the Bharatiya Janata
Party (BJP), which had allied with a local
party by the name of Indigenous People’s
Front (IPF). Left Front was led by Manik
chase all 20 ideas on your road map at
once, since most of them will remain half-
baked and some may never see the light
of day. Don’t underestimate the energy,
resources and time required to drive
behaviour change (using the new digi-
tal/analytics enabled process) or to drive
adoption (for instance, of a new prod-
uct/proposition). Building digital prod-
ucts, analytical models and using tech-
nology is the easy part of the journey.
CEO led: Bottom-up idea generation as
a way to unleash creativity and enhance
ownership is great, but large digital trans-
formations (like any other kind of trans-
formation) need to be driven by the CEO.
This is because most require cross-func-
tional collaboration, induction of new
kinds of talent, potentially new compen-
sation models, partnerships with eco-
system players, and dynamic budget allo-
cation, besides the obvious challenge of
changing mindsets and behaviour.
Partner wherever possible: Large
companies love to build everything them-
selves. In a digital transformation, this
can lead to delays and waste. Partners can
provide components for solution building
or help boost customer acquisition. Using
tried and tested components helps save
both time and reputation with users. This
is especially useful when using an agile
approach where you don’t know exactly
what you want in the solution at the out-
set. Once you know exactly what you
want, and only if it’s uneconomical to
partner, it can be built in-house.
Be truly “customer first”:This starts by
admitting that corporate decision makers
aren’t really the best people to opine on
what customers/users need or want. Then,
CONSUMER LIFE
and send their files directly to vendors.
Combined with the laser distressing,
the system cuts design and develop-
ment time in half. Levi’s increased
automation “allows us to shift to a
make-what-you-sell model,” Bart
Sights, the company’s vice president of
technical innovation, told Fortune.
“Instead of making a bunch of stuff
months and years in advance and try-
ing to sell it, we’re able to see what’s
selling and make accordingly.”
2) It’s more precise. Computers are
more exact than even seasoned crafts-
men. As with the sewing robots I’ve
previously written about, Jeanologia’s
system offers greater control over exact-
ly how jeans come out. “What you see is
what you get,” it boasts. This precision
not only improves quality control but
enables new forms of design innova-
tion. VF Corp.’s Lee Jeans worked with
Jeanologia’s system to produce a new
line of “optical designs” that subtly
change the shading of jeans to create
more flattering lines, much the way
contouring makeup works. “Lasers
have long been used to create worn-
effects on denim and this is basically
doing the opposite, by using the light in
order to enhance the wearer,”
Jeanologia said of Lee’s Body Optix line.
3) It’s more adaptable. By reducing
setup costs, CAD-driven manufactur-
http://www.estore33.com
Sarkar, who led Tripura as chief minister
for about two decades and made a repu-
tation for himself as a man of honesty and
integrity. Prime Minister Narendra Modi
also left no stone unturned by campaign-
ing hard in Tripura to defeat the Left Front.
Almost 10 days later, Assembly elec-
tions were held in two other north-eastern
states - Meghalaya and Nagaland. In these
elections also, the BJP was seeking to
establish its rule in the two states, main-
ly through alliances with regional parties.
The results declared last Saturday
showed that the BJP has overthrown the
Left Front and its “honest” chief minister.
In Nagaland, it switched over to a new
regional party and formed an alliance that
won the necessary number of seats to be
part of the government. And in
Meghalaya, it ensured that the Congress
would not be able to form a government
on its own and it could well stitch togeth-
er a post-poll alliance to stake claim to
form a government.
there are three ways to bring “customer
first” into design and decision making —
involve a user panel in the design process
right up front, get specialists to help with
the “art” of understanding customers, and
organise immersions for executives to gain
a deeper understanding of
customers/users.
Test and learn:Managers are trained to
get things right the first time, to be “per-
fect” and “bullet proof”. This can be a dan-
ing systems offer the promise of effi-
cient short-run production, including
customisation. Knitwear is far ahead
of sewn products here, thanks largely
to Shima Seiki’s computerised knit-
ting machines. Quickly changing fin-
ishes, whether with digital printing or
Jeanologica’s laser systems, offer a
way to adapt tailored garments. At the
2016 Super Bowl, for instance, Levi’s
partnered with Jeanologia to offer fans
personalised denim.
4) It responds to public concerns
about labour conditions and environ-
mental impacts. Although major
brands have cleaned up the worst con-
ditions, distressing jeans is difficult,
unpleasant work. Machines may lack
the personal touch of hand craft, but
they also don’t get repetitive motion
injuries. And their precision can reduce
environmental waste. Jeanologia’s
marketing emphasises the savings on
water, and Levi’s told the Wall Street
Journal that its new process will cut
the number of chemicals it uses to pro-
duce jeans from 1,000 to “a few dozen.”
If these trends continue, within a
decade or two we’re likely to see most
apparel manufacturing return to high-
wage countries — with less waste, more
resilience, and many fewer employees.
© 2018 Bloomberg
https://telegram.me/Estore33
What does this mean for the time-hon-
oured belief that financial scams can
prove to be a liability for any political par-
ty seeking popular mandate in an elec-
tion? Remember that corruption was one
of the issues that the BJP used effectively
to overthrow the Congress in the general
elections in 2014. So, did the BJP manage
to get away easily in spite of its govern-
ment at the Centre being accused of hav-
ing allowed the PNB scam and letting the
accused leave the country? Here was a
squeaky clean chief minister of a state
seeking re-election for the fifth time. And
the BJP, who was hoping to defeat him,
had just been accused of having failed to
prevent the PNB scam.
It is possible that voters are discerning
enough to differentiate between the respon-
sibilities of a ruling party at the Centre with
those of a party that hopes to form a gov-
ernment in a state. The issues in a state elec-
tions are different, as indeed they were in
Tripura, Meghalaya and Nagaland. Voters
there were more concerned about issues
about regional autonomy, development or
greater say in governance. A financial sector
scam involving a state-controlled bank and
the failure of the Union government or the
regulator to prevent it may not have become
an election issue.
There is another explanation of why
ILLUSTRATED BY BINAY SINHA
gerous approach when building solutions
that aren’t fully known at the outset. There
is a lot of merit to starting with something
minimal and learning through actual
experience with customers/users. The
concept of a “Minimum Viable Product”
can be used to reinforce this. And a hawk's
eye view by the CEO/sponsor that we
aren’t letting this tendency creep into our
design is critical. To enable this iterative
approach, set up agile “garages” where
> LETTERS
Regulating the regulator
This refers to the article, “Evaluating pol-
icy and regulation” (February 28) by A K
Bhattacharya. He has concluded that, “It is
time the concept of independent evalua-
tion offices for different regulators and
even for the administration of fiscal and
monetary policies was revived”.
Permit me to differ from the above
view. In the case of the banks including
public sector banks, the regulator is the
Reserve Bank of India (RBI). The RBI is
quite independent in respect of supervi-
sion of the functioning of the banks. It is
not anybody's case that there was no inde-
pendence of the regulator, namely RBI,
because of which this scam has taken
place. This scam has taken place because
the auditors have miserably failed in their
job of detecting accounting irregularities.
It has been reported that there were six
types of audit and all of them failed in
detecting that the LoUs were not entered
into the core sector database of PNB. It is
a matter of abject failure of the auditors.
There is no policy involved in it. If any-
thing, the number of auditors should be
reduced. In the revenue department, that
is, income tax, customs, central excise,
service tax, sales tax etc. there are only
two stages of audit. One is the internal
audit and the other is CAG's audit. No
scam has taken place in the last hundred
years because a proper auditing system is
in force. Evasions have taken place which
are not the job of audit to find out. That is
for anti evasion and anti smuggling set
up to detect. But the type of scam that
has taken place in PNB because of not
auditing properly, has never taken place
in customs or income tax.
The real remedy is not to have so many
regulators thinking that the higher level of
regulator will be independent. The real
remedy is to chargesheet the failing audi-
tors and throw them into jail if financial
involvement is proved. Crime and pun-
ishment should be directly related.
Building one regulator on the top of anoth-
er regulator will be a complete failure.
Sukumar Mukhopadhyay
New Delhi
https://telegram.me/TheHindu_Zone
MUMBAI | MONDAY, 5 MARCH 2018
the link between a financial scam and
outcomes in state elections has become
tenuous. It appears that the BJP gov-
ernment has succeeded in managing
> CHINESE
the communication of the PNB scam in
a manner that its adverse impact on
its electoral fortunes is largely con-
tained. The Congress or the Left Front,
too, failed to drive home the electoral
advantage from the PNB scam and
they must examine what could have
gone wrong.
Simultaneously, the BJP government
at the Centre also worked hard to devise a
series of administrative responses to
counter the negative impact of the PNB
scam. While the law enforcement agencies
were made to work overtime to initiate
action against the offenders and seize the
assets of those who may have run away
from the country, the government decid-
ed to set up a new independent regulator
for audit firms and frame new laws tar-
geted at fugitive economic offenders.
In many ways, the biggest relief for
the BJP after Saturday’s Assembly elec-
tion results is that it succeeded in pre-
venting the PNB scam from adversely
impacting its electoral prospects in the
three north-eastern states. Or has the link
between scams and electoral outcomes
become tenuous?
cross-functional teams work with digital
specialists and technology developers
(including SIs) to design, build, test, launch
and maintain digital solutions.
Budget based on milestones:
Budgeting once a year, as per usual cor-
porate processes, doesn’t gel with the agile
nature of digital projects. It is more pru-
dent to allocate increased budgets based
on milestone achievements and to starve
those that don’t seem to be delivering
impact or aren’t “learning” fast enough.
Create a “transformation fund”:
The biggest digital disruptions have
been possible due to funding of years of
operating losses by venture capitalists.
In contrast, corporate digital transfor-
mations are expected to generate huge
ROIs and be profit generating right at
the outset. Corporate sponsors focus a
lot on the costs of building digital solu-
tions, which are usually quite small.
They forget the money and resources
required to drive adoption of new solu-
tions, either by external customers or
internal users. Decision makers would
be well advised to include a “transfor-
mation fund” when they create the busi-
ness case for digital transformation ini-
tiatives, which can be drawn down as
required to drive adoption at pace.
In our experience, following these
simple learnings can be the crucial start-
ing point for a truly transformative digi-
tal journey — after all, once an elephant
has been put on the right path, sheer
momentum will carry it forward.
The author is partner and lead, digital
and analytics practice, McKinsey &
Company, India
Fugitive bill
It is good that the Cabinet has approved
the Fugitive Economic Offenders bill
and the finance minister will introduce
the same in the ensuing session of the
Parliament. No doubt, the Bill will arm
bankers to attach the properties of
alleged fraudsters. But mere attaching
will not serve the purpose. Bankers had
attached raw materials, good in process,
finished goods, machines, landed prop-
erties and buildings in the past and
recently precious metals like gold and
diamond of Nirav Modi. But how much
of those assets have been sold/auc-
tioned/realised and credited to the loan
accounts to reduce the liability? Most
of the attached properties are lying
locked resulting in deterioration in the
value of the assets. In Nirav Modi's case,
it is reported that more than ~60 billion
of precious metal has been seized.
Unless this is sold and proceeds credit-
ed to the loan account speedily, no pur-
pose will be served.
B G Rao Bengaluru
> HAMBONE
1
WHISPERS
Sigh of relief
The Bharatiya Janata Party (BJP) moved its
national headquarters from 11, Ashoka Road
in Lutyens’ Delhi to 6A, Deendayal Upadhyay
Marg on February 18, 2018. Party leaders were
nervous that the new office might be
deemed unlucky if the party were to lose in
the three northeastern states that went to
polls subsequently. Incidentally, the polling
for the Tripura assembly also took place on
February 18, while that for Nagaland and
Meghalaya was held on February 27. The
foundation stone for the new BJP office was
laid on August 18, 2016, and construction was
completed in 18 months. The party leadership
heaved a sigh of relief after the poll results
were announced on Saturday. The BJP win in
Tripura, and its improved showing in
Nagaland and Meghalaya, was proof that the
new office was indeed propitious.
Tripura ripples likely in Hyderabad
The Communist Party of India (Marxist)
had fielded its Rajya Sabha member from
Tripura, Jharna Das Baidya, as one of its
candidates in the state assembly polls.
There was speculation within the party
that if the CPI (M) wins Tripura, and if
Baidya also emerges victorious from her
seat, she might be made a minister in the
state government. In that case, she would
quit her Rajya Sabha seat. However, not
only was the CPI (M) ousted in Tripura, but
Baidya too lost her seat to BJP's Dilip
Sarkar. The CPI (M) defeat in Tripura has
made the Hyderabad conclave of the
party in April more interesting. Outgoing
Tripura Chief Minister Manik Sakar had
supported former party chief Prakash
Karat's line in his battle with current party
chief Sitaram Yechury. Many in the party
expect the Karat camp to ensure Yechury
doesn't get a second term as party chief at
the conclave, but the Tripura loss queers
the pitch for the Karat camp.
Some remembered, some didn't
March 1 was Bihar Chief Minister Nitish
Kumar's birthday. Most senior Bharatiya
Janata Party leaders, including Prime
Minister Narendra Modi and Finance
Minister Arun Jaitley, tweeted their
wishes. Kumar's counterparts in
Maharashtra, Rajasthan and Assam,
among others, also wished him. The
Janata Dal (United) leader shares his
birthday with DMK working president MK
Stalin and former West Bengal chief
minister Buddhadeb Bhattacharjee.
Congress president Rahul Gandhi wished
Stalin and Bhattacharjee but not Kumar.
@AllEpapers
So did West Bengal chief minister Mamata
Banerjee, a friend of Kumar till he became
an ardent supporter of demonetisation.
Ready for 2019?
This refers to “Govt gets tough on econom-
ic offenders” (March 2). It is a welcome step.
Admittedly this government has brought in
several big ticket structural economic
reforms like demonetisation and GST. Such
measures have a long gestation period and
will definitely show excellent results in the
long run. People are however looking for
immediate results; they want to see some-
thing concrete now. These expectations
have now assumed greater urgency after
the devastating Punjab National Bank
(PNB) scam. The government must act
before time runs out. The general election
of 2019 is like a board examination for the
government that cannot afford to flounder
at the moment. The current scenario is akin
to a pre-board examination which are often
tough for students but also reassure those
who do well on time. This is perhaps a great
opportunity for the government to assert its
claims of being action-oriented and hav-
ing zero tolerance towards corruption.
Prompt attachment and auction of the
properties belonging to fugitive economic
offenders, regulating auditors, tightening
up of the working of errant public sector
banks are all measures that can show quick
results and give the government some
ammunition for the big battle of 2019.
Krishan Kalra Gurugram
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
BY MIKE FLANAGAN
https://telegram.me/AllEpapers

>
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ILLUSTRATION BY AJAY MAHANTY

Volume XXII Number 144
and-balances, through which the RBI will contin-
MUMBAI | MONDAY, 5 MARCH 2018 uously refine the text of the regulations and the
process manuals for enforcement, so as to achieve

Moving on corruption high state capacity?

Let’s start at the drafting of regulations. At pres-
ent, RBI staff has arbitrary power in rushing regu-
Govt’s actions deserve credit but also require follow-up lations to the RBI website. This is done without
input from experts and practitioners, and without

T
he criticism surrounding the scandal involving Nirav Modi and oversight by the board. This arbitrary power yields
Punjab National Bank seems to have spurred the Union government low state capacity: We routinely get the wrong reg-
into taking certain anti-corruption moves. Last Thursday, the ulations.
Cabinet approved the Fugitive Economic Offenders (FEO) Bill, What is a sound process for writing regulations?
which aims to confiscate the property of those who evade police or judicial Regulation-making projects should be commis-
sioned by the board. The problem that is sought to
summons after being accused of fraud worth over ~1 billion. The Bill propos-
be solved should be clearly articulated along with
es the establishment of a special court that could declare such an alleged fraud- a demonstration that market failure is present.
ster an economic offender, clearing the way to attach, manage and dispose of The lowest cost intervention should be designed,
their assets. Finance Minister Arun Jaitley also argued that the “next step” and it should be demonstrated that the proposed
would require international co-operation to recover assets stashed abroad, intervention addresses the problem that is sought
though it is far from clear what this mechanism could be. Some important reg- to be solved. The regulation should be drafted.

How to build
These documents should be put up for public com-
ulatory steps were also cleared, such as the decision to create a National ment. The staff must modify the regulation, util-
Financial Reporting Authority (NFRA) that would regulate chartered account- ising the comments that were received. This pack-
ants, or CAs. The NFRA was envisioned in the Companies Act that was passed et should go back to the board for one last debate,
in 2013, so no further legislative changes are needed. Finally, the govern- and only the board should be able to authorise

capacity at RBI
ment has sought to start the process of appointing a Lokpal, an anti-corrup- the release of a new regulation.
tion ombudsman, at the central level — a more than five-year-old demand of This process forces the application of mind. It
will force the staff to work harder, to rise to high-
anti-corruption activists. er levels of intellectual capability, and produce
The government’s energy over the last 10 days in the matter of setting up better regulations. This is how we get to state
a more vigilant anti-corruption and anti-fraud mechanism is to be com- capacity, to an RBI which does not make mistakes
mended. However, certain gaps still need to be plugged in this planned sys- To achieve it we need good governance procedures on the drafting of regulations.
tem. Action now on the FEO Bill is somewhat like locking the stable door after Similar issues apply on the executive branch. At

W
ith the non-performing assets (NPA) cri-
the horse has bolted. What matters for existing cases is following up on extra-
sis and the Punjab National Bank (PNB)
dition requests with proper judicial resources. The extradition case against crisis, all eyes are on Reserve Bank of
fugitive liquor baron Vijay Mallya, for example, could have been argued with India (RBI) reform. We should not engage in a
more vigour. On the NFRA, similarly, it could be asked why the government witch-hunt and we should not fight the last war.
has waited five years after the passage of the Companies Act by its predeces- The place to focus on is the rules of the game that
sor to finally notify the new authority. It should, however, be seen as an make the RBI. These rules need to be modified so
as to create the institutionalised application of
acceptance that self-regulation by the accounting profession has not been up
mind. State capacity at the RBI will come from
to the mark. Complicity by accountants has been a feature of many major focus and from good governance procedures.
scams in the last decade, and some form of regulation was overdue. Few oth- Banks make a promise to
er major economies have persisted with self-regulation by the accounting pro- depositors that money will be
fession for so long. returned with interest. The pur-
The movement to finally appoint a Lokpal comes after the Opposition, pose of micro-prudential regula-
tion is to obtain a high probability
including the Congress Party, had questioned the government’s failure to do
that this promise will, indeed, be
so, and the Supreme Court had asked for a report on the implementation of upheld. Bank regulation pushes
the Lokpal Act. Last week, the government convened a meeting of the selec- towards this by writing regulations
tion committee for the new Lokpal. However, the Congress’ leader in the Lok and by enforcing them. The PNB
Sabha, Mallikarjun Kharge, boycotted the meeting, saying he was being called crisis, and the vastly larger NPA
crisis, have demonstrated that the
as a “special invitee” and not to fulfil the role of Leader of the Opposition in
the committee, as envisaged by the Lokpal Act of 2013. Mr Kharge argued that
RBI’s oversight of banks is flawed. SNAKES & LADDERS
With trillions of rupees of public
he had not even been provided with the names of the proposed candidates for money at stake, there is an urgent AJAY SHAH
the “eminent jurist” slot. It is important for this impasse to end swiftly. The gov- need for RBI reforms.
ernment must act to take the Opposition along, and the Congress, in turn, must As an example of what banking regulation
be reasonable and co-operative. needs to do, consider the problem of NPAs.
Regulations must be written which require
banks to rapidly mark down the value of a
defaulted loan to zero. These losses should
think about compliance. The first level issue is
that of a bank that explicitly says to the RBI that it
is in violation with the rules (either on recognition
of NPAs or on adequacy of equity capital). The
bank must be forced to bring in more equity cap-
ital or reduce deposits.
Far more dangerous is a bank that lies; e.g. a bank
that claims to not have bad assets while it actually
does. An audit process run by the regulator must test
the veracity of claims made by the bank. This would
work at two levels. First, the regula-
tor would examine all steps of the
audit process that was run by the
board of the bank. Second, the reg-
ulator would mistrust these claims,
and conduct/commission studies
on its own. For example, the regula-
tor may take a statistical sample of
100 loan accounts in a bank, and
test the extent to which the internal
valuation of these assets is consis-
tent with their market value. Using
this, it would get independent feed-
back about what is going on inside
the bank, over and beyond the audit
process of the bank.
In India, we know that both steps — writing
regulations and conducting examinations — have
had weaknesses. The RBI is a remarkable Indian
government institution on the question of cor-
present, RBI staff has arbitrary power in how
supervision is done, which generates low state
capacity. The path to state capacity lies in having
well-designed formal processes. The board must
lead the process of designing the enforcement
process. Formal process manuals must be drafted,
put out for public comment, debated, and then
authorised by the board. As an example, the US
Federal Reserve website shows us full manuals
about how supervision is done, but the RBI website
does not. The organisation must be reshaped to
live by these manuals.
When violations are detected, punishments are
triggered. At present, RBI staff has arbitrary pow-
er in secretively awarding punishments. Arbitrary
power yields low state capacity. The Securities
and Exchange Board of India (Sebi) has a better
arrangement. The accused must get a hearing in
front of a neutral party, and a reasoned order
should come out on the website, which awards
punishment. The accused can appeal the order at
the Securities Appellate Tribunal (SAT). The rigour
of this process will force the executive branch to
rise to higher levels of capability, as was the case at
Sebi when the SAT was created.
Finally, there is the question of focus. The
RBI suffers from a sprawling mandate. Limited
capacity is being frittered across too many objec-
tives. The scarcest resource is the time and atten-
tion of the board and the top management.

Message from Northeast immediately appear in the income and expen-

diture statement. Later on, recoveries through
the bankruptcy code will directly travel into
Assembly results herald major shifts in Indian politics equity capital. These regulations should be
accompanied by rules about adequacy of equity
ruption. Why has a team, with a remarkably strong
ethos on the question of corruption, failed on its
core objectives? There are two lines of thought in
Focus will yield enhanced state capacity. The
RBI’s objectives should be narrowed down to
just two things: Sound money (i.e. inflation tar-
RBI reform which are wrong. We should not geting) and sound banking.
engage in a witch-hunt, and we should not fight

F
rom sweeping the polls in Tripura to being in the driver’s seat in capital that limit the leverage of banks.
Nagaland and being the kingmaker in Meghalaya, the Bharatiya Once these regulations are in place, we have to
Janata Party (BJP) has had an even more rousing start to 2018 than
its landslide victory in Uttar Pradesh at the beginning of 2017. Even
though the three states contribute just five Lok Sabha seats, yet the political
message is priceless for the BJP. Together with recent victories in Assam,
Arunachal Pradesh, and Manipur, the BJP has ripped apart the tag of being
just a North-India party, as it now dominates the seven sister states of the
Who wants PSB reforms, anyway?
E
Northeast. The results will salve the BJP’s wounds from recent electoral set- very few months, our public sector banks
backs — an underwhelming victory in Gujarat and a series of by-election loss- (PSBs) are in the news. One kind of news is
es in Rajasthan and Madhya Pradesh, two states that go to polls later in the year. about their huge losses. Some ~5 billion here
or ~10 billion there quarterly loss is the new nor-
Equally, the BJP’s performance will have a salutary effect on the party cadre’s mal. The second kind of news is when a major
morale as it braces for a busy election season that will culminate with the gen- scam or an egregious case of bad lending stuns the
eral elections in about a year’s time. nation. For instance, a ~50-billion scam where the
The results in Tripura best exemplify the growing notion that the BJP is high-profile promoter of Winsome Diamonds dis-
the go-to party for all those voters — often overruling longstanding caste or appears after a carefully planned swindle or a ~127-
creed affiliations, or indeed, age and gender considerations — who are unhap- billion scam where jeweller Nirav Modi and his
uncle Mehul Choksi go absconding. A third kind of
py with the status quo in their respective states. The state saw the first direct news is generated as a response to the first two —
ideological fight between the centre-right BJP and the Communist Party of bank recapitalisation, change in recruitment
India (Marxist), which led the Left Front government there for the last 25 process of top management or a
years. The BJP, which had less than 2 per cent vote share five years ago, wiped change in the monitoring sys-
the floor with both the Left and the principal Opposition party in the state, the tem and so on. Once the initial
amazement, anger and discus-
Congress, by achieving over 43 per cent vote share as well as a comfortable
sion about all such news reports
majority by itself. While the Left managed to still receive a substantial vote share, die down and the inevitable
it was reduced to insignificance in terms of seats, while the Congress drew a clamour for “reforms” ends, the
blank, tamely surrendering both its key leaders and its vote share to the BJP. PSBs continue in their same old
The results have varying implications for different political parties. The ways. If we had to hold someone
starkest message is, of course, for the Left parties. While their growing mar- accountable for the enormous
and continuous loot of public
ginalisation — Kerala is the only state ruled by the Left — dilutes the plural-
money and pin responsibility on
ity of India’s democratic discourse, yet the truth is there is a big question mark
on the modern-day viability of their economic policies. At a crushing 20 per
them, who should we really tar-
get? In my view, it should be IRRATIONAL CHOICE
cent, Tripura suffers from the highest unemployment rate in the country. these three: DEBASHIS BASU
Without adequate policy response, it is only a matter of time that the Indian Banks managements and
youth rules out the Left altogether. For the Congress, the result is a reminder RBI: The massive bad loans
reflect a breakdown of basic banking: Bank offi-
that politics is 24x7. Its disinterest not only dents the image of its president
cials have lent money without adequate collater-
Rahul Gandhi (whose absence raises suspicions of the general being shield- al, as part of their nexus with promoters.
ed by the soldiers instead of the other way round) but also questions its abil- Remember, banking is one of the most regulated
ity and commitment to compete toe-to-toe with the BJP. On the whole, it businesses in India. Worthies from the Reserve
appears that non-BJP parties will hang separately if they do not hang togeth- Bank of India (RBI) and the Ministry of Finance
er, although it is anyone’s guess how effective a formal grand alliance will be (MoF) grace every PSB board. Banks are subjected
to dozens of audit and compliance norms:
against the BJP in 2019. For its part, the BJP, which already rules 70 per cent
Concurrent audit, internal audit, statutory audit,
of India, is still hungry for more — namely, Kerala, West Bengal, Odisha and and RBI audit. According to reports, Punjab
Karnataka. But with each victory comes a growing responsibility to come National Bank, which was robbed of more than
through with its electoral promises. ~127 billion with complete ease, also has a credit
audit, risk-based internal audit, revenue audit,
the last war. The right question to ask in RBI
reforms is: What are the processes, and the checks-
information systems audit, snap audit, segment
audit, compliance audit, legal audit, and audit
under the Foreign Exchange Management Act.
But none of these stopped the frauds or the relent-
less rise of bad loans, because no banking or reg-
ulatory official is ever held accountable for them.
This group is certainly not interested in PSB
reforms.
MoF bureaucracy: In India, change can also
come through the bureaucracy — the traditional
policymakers. In banking and finance, it is the
Department of Financial Services (DFS) and is
overseen by six secretaries, two additional secre-
taries, two economic advisors,
and a deputy director general.
Lok Ranjan is possibly the sen-
ior most of six joint secretaries.
His breathtakingly wide respon-
sibility (abridged here) includes
financial inclusion, business
correspondents, mobile bank-
ing, e-governance, e-payments,
point-of-sale & prepaid cards,
district- and state-level bankers’
committee, lead bank scheme,
direct benefit transfer, payment
regulatory board, and expansion
of banking network, etc. Mr
Ranjan took charge in August
2017 and immediately became
a director at Bank of Baroda. Finance is a spe-
cialised field requiring highly complex operations
and DFS officers are anything but specialised. Mr
Ranjan’s previous job was principal secretary in the
tourism department of Tripura.
Pankaj Jain, another bright joint secretary, is
responsible for the Pradhan Mantri Mudra Yojana
and Stand-up India. He was a director of Canara
Bank and is on the board of IDBI Bank now — two
other scam-ridden banks. Perhaps banking and
financial talent is scarce in India and can only be
found among the Indian Administrative Service;
and so, he is holding the additional charge of India
The writer is a professor at National Institute of Public
Finance and Policy, New Delhi
Infrastructure Finance Company Ltd. His previous
job: Secretary with the Meghalaya government.
Amit Agrawal, a third joint secretary, oversees
banking operations and accounts, industrial rela-
tions, recovery, cell for board of directors for banks,
core banking solution-related issues, computeri-
sation of PSBs, cybersecurity. He was finance sec-
retary of the Chhattisgarh government. Then there
are joint secretaries for education loans and “Vidya
Lakshmi portal”, the goods and services tax (GST)
cell, regional rural banks, agriculture credit, pen-
sion reforms, and one for bad loans and centralised
KYC (know your customer).
These are all top minds who fly under the radar
and do an honest day’s work, expanding their over-
sight but hardly making any difference to the only
outcome that matters in democratic capitalism:
Cheaper and easier finance for users, through
more competition and greater efficiency among
the financial sector players. Are they interested in
PSB reforms? Well, over the past two decades their
work has expanded to fill the time available for its
completion. And then more work has been found.
But bank losses continued to swell rapidly.
Politicians: They have the real power, because
they alone can change the law. And yet, the deep
rot in the PSBs can be directly attributed to them
for actions such as pressuring banks to sanction
loans to weak corporate borrowers, to appointing
top dubious bankers in top positions as quid pro
quo. Are they interested in PSB reforms at all? It
would be laughable to think so. And so, the out-
come of the current banking crisis will also have a
depressing and familiar end: Endless debates on
pros and cons of processes, systems, checks and
balances, audits, whether the top management
could have known, etc. All this is quite useless
because those who are debating can effect no
change. And those who can change things have
deep vested interest in preserving the status quo.
The writer is the editor of www.moneylife.in
Twitter: @Moneylifers

The glass half full
BOOK REVIEW
SARAH BAKEWELL
Optimism is not generally thought cool,
and it is often thought foolish. In the
previous century, Voltaire’s Candide
had attacked what its author called
“optimism”. After suffering through
one disaster after another, Candide
decides that optimism is merely “a
mania for insisting that all is well when
things are going badly.”
Yet one might argue (and Steven
Pinker does) that the philosophy Voltaire
satirises here is not optimism at all. If
you think this world is already as good as
it gets, then you just have to accept it. A
true optimist would say that, although
human life will never be perfect, crucial
aspects of it can improve if we work at it,
for example by refining building
standards and seismological predictions
so that fewer people die in earthquakes.
This optimist’s revenge on Candide is
one of the passing pleasures in
Enlightenment Now, Mr Pinker’s follow-
up to his 2011 book The Better Angels of
Our Nature. The earlier work assembled
banks of data in support of his argument
that human life is becoming, not worse
as many seem to feel, but globally safer,
healthier, longer, less violent, more
prosperous, better educated, more
tolerant and more fulfilling. His new
book makes the same case with updated
statistics, and adds two extra elements.
First, it takes into account the recent rise
of authoritarian populism, especially in
the form of Donald Trump — a
development that has led some to feel
more despairing than ever. Second, it
raises the polemical level with a rousing
defence of the four big ideas named in
the subtitle: Progress, reason, science
and humanism. Who could be against
any of that? Yet humanism has been seen structures that have made progress
in some quarters as unfashionable, or
unachievable, or both. Mr Pinker wants
us to take another look.
Much of the book is taken up with
evidence-based philosophising, with
charts showing a worldwide increase in
life expectancy, a decline in life-
shattering diseases, ever better
education and access to information,
greater recognition of female equality
and LGBT rights, and so on.
Improvements in health have bettered
the human condition enormously, and
Mr Pinker tells us that his favourite
sentence in the whole English language
comes from Wikipedia: “Smallpox was an run amok, that immigration is
infectious disease caused by either of two disastrous and that the world has lost its
virus variants, Variola major and Variola ethical direction in some terrible way.
minor.” The word “was” is what he likes.
He later adds that he could have
https://telegram.me/Estore33
ended every chapter by saying, “But all
this progress is threatened if Donald
Trump gets his way.” Trumpism risks
knocking the world backward in almost
every department of life, especially by
trying to undo the international
possible: Peace and trade agreements,
health care, climate change accords and
the general understanding that nuclear
weapons should never be used. All this is
now in question. Mr Pinker is
particularly sharp on the dangers of
ignoring or overriding the systems that
make nuclear war unlikely.
Having said this, he argues that
catastrophism is itself a risk — that is, the
pessimistic tendency to fix on the worst
imaginable outcome, and to panic.
Authoritarian populism itself has fed on
the feeling that everything is going
wrong: That crime and terrorism have
Meanwhile, fear and despair play havoc
with the opposition too. In general,
people are more likely to work
constructively if they think problems are
solvable, or that progress has already
been made and can be extended.
This book will attract some
hammering itself: It contains something
to upset almost everyone. When not
attacking the populist right, Mr Pinker
lays into leftist intellectuals. He is
especially scathing about newspaper
editorialists who, in 2016, fell over
themselves in their haste to proclaim the
death of Enlightenment values and the
advent of “post-truth.” His (rather too
broadly painted) targets include
humanities professors, postmodernists,
the politically correct and anyone who
has something nice to say about
Friedrich Nietzsche. “Progressive”
thinkers seem to consider progress a bad
thing, he claims; they reject as crass or
naïve “the notion that we should apply
our collective reason to enhance
flourishing and reduce suffering.”
Bertrand Russell once pointed out
that maintaining a sense of hope can be
hard work. In the closing pages of his
autobiography, with its account of his
many activist years, he wrote: “To
preserve hope in our world makes calls
upon our intelligence and our energy. In
those who despair it is frequently the
energy that is lacking.” Mr Pinker’s book
is full of vigour and vim, and it sets out to
inspire a similar energy in its readers.
He cites one study of “negativity bias”
that says a critic who pans a book “is
perceived as more competent than a
critic who praises it.” I will just have to
take that risk: Enlightenment Now strikes
me as an excellent book, lucidly written,
timely, rich in data and eloquent in its
championing of a rational humanism
that is — it turns out — really quite cool.
©New York Times News Service
ENLIGHTENMENT NOW
The Case for Reason, Science,
Humanism, and Progress
Steven Pinker
Viking
556 pages; $35
14 STRATEGY
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MUMBAI | MONDAY, 5 MARCH 2018

“In line with our global strategy to be more “Most agency groups will consolidate or “At Royal Enfield, price is the last lever
accessible and relevant, we will ensure that our bring together synergistic offers. It is led of growth; we have many other levers
dealerships are located in the right markets and partly by clients that find it impossible to to play with. It does not affect us in
continue to deliver a lifestyle experience” deal with multiple agent partners” the medium to long term”
PETER MACKENZIE ASHISH BHASIN RUDRATEJ SINGH
Managing director, Harley Davidson India and China Chairman & CEO, South Asia, Dentsu Aegis Network Country president, Royal Enfield
> .

Nykaa dons warpaint

the app installed it will sense that
and the screen located right next to it VANTAGE POINT
would recognise you and show prod-
INSIGHTS FROM CUTTING-EDGE RESEARCH
ucts based on your past history,”
points out Suri.
The Mumbai-based company be- Global investment in fintech
Beauty marketplace is utilising technology to meet customer expectations across channels gan investing heavily in technology.
It has a product tech team in
Mumbai, while in late 2016, it also
sees all-time high in 2017
RITWIK SHARMA opened a centre to hire fresh talent Global investment in financial technology (fintech) ven-
in Gurgaon. tures reached another all-time high in 2017, buoyed by a

F
or home-grown marketplace
Nykaa, which enjoys a third of
the online beauty market, use
of technology to ensure an omni-
channel experience and offline
retail expansion are critical drivers
as it looks to grow further.
Sanjay Suri, chief technology offi-
cer of the company, says Nykaa is
utilising technology towards build-
ing a service-oriented architecture.
“On the platform, we used to be
on a monolith system, which is a
single complex piece of software
that does everything. Over the last
one year, we moved to a component
or modular system which is also
called service-oriented architecture.
It’s built with security in mind, is
highly scalable, gives really fast page
loads, and also opens up new busi-
ness models. And through this we
have brought down our operational
cost also,” he says.
Second, Nykaa is looking at ways
of enhancing the buying experience
through technology, and thirdly, it is
focused on personalisation.
“We are thinking of personalisa-
tion as starting conversations with
customers, beginning with rolling
out a chatbot where the user can not
just get transactional questions
answered, but also get prompted
through the chatbot with product
recommendations,” says Suri, adding
that besides chatbot, augmented
reality-based mirror for virtual trials
in offline stores would be big inno-
vation themes for Nykaa.
With emphasis on omni-channel
experience, in about six months
Nykaa is aiming to have facilities in
stores such as product returns, pick-
up as well as shipment, besides
allowing customers to look up if a
particular store has the products
they are looking for.
The company, which began as an
online player in 2012, has branched
into offline retail in the last couple of
years with 13 stores at present. It aims
to grow to 45 stores by 2018-19.
STATSPEAK
Offline contributes about five per
cent of the overall business for
Nykaa, which is looking at a gross
merchandise value run rate of ~10
billion for 2018-19.
In offline retail, the company
has store formats—Nykaa On Trend
and, for stocking premier brands,
Nykaa Luxe. In its On Trend store,
the first of which was opened last
August, the company relies on tech-
nology-driven curation to adopt
learnings from online which are
displayed offline for an omnichan-
nel experience.
Suri explains most websites
highlight products a user may like
thanks to algorithms so that there’s
a popularity order based on which
products are shown to individuals.
“All of this falls under the realm of
the wisdom of the crowd. That’s the
trending stuff, and it’s only in online
world,” he adds.
Harminder Sahni, founder and
managing director, Wazir Advisors,
points out that Nykaa has taken up a
category—beauty and personal
care—that does not have any retail
option in the offline world, including
in major cities, as mostly there are
few standalone stores or departmen-
tal stores with cosmetic counters.
“You don’t have too many multi-
brand outlets for beauty and person-
al care. In smaller towns even those
brands are not available, so when
they came up with that concept it
became possible for people in every
city or town to access this category
and thereby Nykaa managed to cre-
ate a niche for themselves.”
Also, while starting out across
offline and online channels simul-
taneously is not feasible for compa-
nies in general, a convergence
through an omnichannel approach
is necessary.
“There is convergence because
it is about selling to the consumer
eventually. The products, the con-
sumers and the pricing remain the
same. Even a brand like Coca-Cola
has been an omni-channel player
BUILDING BLOCKS forever, and given a period of time
„ In the last one year, experience through experience, Nykaa is every player has to be,” says Sahni.
Nykaa has moved from technology aiming to have facilities In a market like India, the use of
single software to a in stores such as technology across retail channels is
„ In personalisation,
component or modular product returns, pick- still very limited. Therefore, adop-
chatbot and AR-based tion of augmented reality, for
system that is service- mirror for virtual trials up as well as shipment
instance, is likely to put a brand
oriented in offline stores are key „ Nykaa aims to grow ahead of the curve. However, Sahni
„ It is looking at ways of innovation themes to 45 stores by 2018-19, has a word of caution given the
enhancing the buying from 13 at present money involved and despite main-
„ For omni-channel
streaming of technology as compe-
tition embraces new tools.
But with the On Trend store, In the store the barcode of prod- “If somebody goes to a store, are
what Nykaa has done is to highlight ucts throws up details that appear on we saying people would not like to
the top 10 categories, based on the app, just as online catalogues try clothes but merely go for a vir-
which products are displayed. have data for each product includ- tual trial in front of a mirror? At the
“Someone who walks into the retail ing video content. The online user is same time, not every consumer is
store has the benefit of the wisdom recognised in the physical store, comfortable shopping online, and
of the crowd. They can buy what’s while there is price parity across some consumers need to see the
selling, and people are happy to go channels and coupons, reward points products offline. Wherever con-
with what’s trending unless you are etc. can be redeemed equally. “Going sumers want to shop, brands have a
looking for something very specif- forward, we will look into enabling responsibility to be present. They
ic,” he says. beacons in the store. So if you have have to test it out.”
IMPACT OF
IT LEADERSHIP IS ABSENT TODAY DIGITAL
Have clear road map and role for
34 DISRUPTION
surge in funding for start-ups in the United States, United
Kingdom and India, according to Accenture analysis of data
from CB Insights, a global venture-finance data and analyt-
ics firm. Fintech financing rose 18 per cent in 2017, to $27.4 bil-
lion, with the value of deals in the US. jumping 31 per cent, to
$11.3 billion. Deal values almost quadrupled in the UK, to $3.4
billion, and soared nearly fivefold in India, to $2.4 billion. The
number of fintech deals also rose sharply, from just over
1,800 in 2016 to nearly 2,700 in 2017, underscoring continued
appetite from investors scouring the globe for innovation in
insurance, banking and capital markets start-ups.
India’s digital payments start-up Paytm received $1.4 bil-
lion in venture capital, helping drive fintech fundraising
activity to nearly five times the 2016 levels. The number of fin-
tech deals in India increased 65 per cent over 2016. This was
largely spurred by the central bank’s demonetisation initia-
tive geared to combat corruption by banning high-value
bank notes, which prompted millions to shift to mobile paym-
ents and other cashless
service providers such
as Paytm.
Total global invest-
ment in fintech ven-
tures between 2010 and
2017 reached US$97.7
billion, with US. start-
ups accounting for more
than half (54 per cent)
of all investments. The volume of fintech deals globally with-
in that time frame grew at a compound annual rate of 35 per-
cent, with total funding growing at a compound annual rate
of 47 percent. “Much of the growth, particularly in the US. and
UK, has been driven by big new investment flows from China,
Russia, the Middle East and other emerging economies,”
said Julian Skan, senior managing director in Accenture’s
financial services practice. “In addition, we saw more and
more business to business fintech models proving out at the
banks, coupled with larger and later-stage investments as the
fintech world scales up. Also fueling growth was the rapid rise
of “insurtech” ventures where traditional carriers see oppor-
tunities. India’s boom was driven by strong demand for cash-
less services following the country’s ‘demonetisation’ events.”
Kabbage Inc, a US online lender for small businesses,
alone raised $900 million in three separate rounds in 2017.
Online lender Social Finance Inc, also known as SoFi, raised
$500 million in February, and LendingPoint raised $500 mil-
lion from a credit transaction in September. As start-ups
grow and their businesses mature, funding rounds have
increased in size, while some companies have opted to use
credit facilities to speed up their expansion.
Science, tech, engineering and
math sector faces talent crunch
The average level of shortage of skilled talent in India has
increased from 6 per cent in January 2014 to 12 per cent in

HIT BY technology in digital transformation vision

Invested in resources to provide staff
34
My job has been
impacted
January 2018 in the science, technology, engineering and
mathematics (STEM) sector, according to job search portal
Indeed. Home to a record number of engineering colleges,

DISRUPTION with next-gen computing resources

Eightyper centofbusiness
and IT leaders agree that
their industries have been
impacted bydigital
disruption, according to a
surveybyCATechnologies
covering Asia Pacific and
Japan. However, most
organisations are lagging
when itcomes to staying
relevantand competitive in
this digital economyas only
17 per centsurveyed have
fully-formed digital
Have set right policies and technologies
to protect against cyber security 34 78
India produces over 1 million graduates annually. However,
despite there being ample talent, India continues to face the
issue of jobs and skills mismatch. With 78 million fresh grad-
uates in 2016 alone, India had the highest number of gradu-
Have the manpower to provide
always-available IT support 32 My company has
ates worldwide in 2016,
of which 2.6 million
been impacted were STEM graduates.
Can create, launch and maintain quality
apps as part of transformation efforts 32 This puts India in a posi-
78 tion to outstrip the US
Can support technology resources and in terms of STEM grad-
requirements with agility 31 uates produced annual-
My industry has
ly, given that it leads by
a margin of over 2.5 mil-
been impacted
TOP THREE ELEMENTS CRUCIAL FOR SUCCESSFUL STATE OF DIGITAL TRANSFORMATION lion. Initiatives such as
Prime Minister’s Research Fellowship is expected to help
DIGITAL TRANSFORMATION Have fully formed transformation
17 80 serve as a great opportunity to create the right talent pool.
initiatives today Indeed’s data also indicates that job seekers in the age
Strong Technologies and Are looking at digitising their
entire organisation
9 My market has
group of 21-25-year-olds show 12 per cent more interest in
STEM jobs than in any other sector. The leading sectors hir-

transformation strategies
All figures in %
Source: CA Technologies Asia Pacific and
Japan Digital Transformation Impact and
Readiness Study, 2018
leadership technology skill sets Have low-risk, small-scale and
siloed transformation initiatives
22
Corporate culture Have transformation projects
launched with clear corporate goals
been impacted
ing STEM talent include information technology, banking
and financial services. The top job roles these companies
offer include software engineer, web developer, business
80 analyst, software architect and SAP consultant. The top 10
51 companies for charting out a career in STEM are Capgemini,
Wipro Ltd., JP Morgan Chase, Oracle, HCL Technologies,
IBM, Magna Infotech, PWC, Barclays, Citi Bank.

‘The events sector is organised but the environment is disorganised’

Wizcraft is just beginning to operate in an organised industry after 30 years
in the events business,SABBAS JOSEPH tells Vanita Kohli-Khandekar
Unlike other media segments events is
still considered a disorganised,
fragmented business. Pleasecomment.
The BTL spend by the five marketing
groups (WPP, Publicis and others that
control a bulk of spends) is about ~80
billion. You could add another ~20 billion
for direct spends. That is the events
industry. The top 30-40 per cent of
companies control 80 per cent of
the business. All the big firms
have offices in multiple cities,
businesses are headed by
qualified, trained people, we
are competitive, aggressive,
and we work with licences and
are accountable and pay our
taxes. So the sector is very
organised but the environ-
ment is very disorganised.
There is multiple licensing,
copyright laws are written
and rewritten, and banking
finance is not available
because we are not an
equipment-based business. We did an
Arijit Singh concert in Gurgaon—it took 7-
10 permissions from different bodies and
each was dependent on the other. So the
challenge is how you manage in the
shortest possible time. Therefore
predictability is not there.
Now in Delhi they have
started online licensing—
which is a big relief. It is the
only city where this has
happened and the credit
goes to Chief Minister SABBAS JOSEPH
Arvind Kejriwal and to the Director & co-founder,
lieutenant-governor. If the Wizcraft Entertainment
Delhi example can be
replicated across states it
solves 50 per cent of our problems.
The film industry took more than 100
years to value IP. So the value of the IP of
events is questioned. We have to give bank
guarantees for government jobs. So it is a
very capital-intensive business.
Where is Wizcraft now?
In 2017-18 we had a top line of ~5 billion. Of
this activation brought in the bulk at ~3
billion, our IP (intellectual property)
events brought ~1.5 billion and the rest
came from weddings, special projects
(like events for state governments, Com-
monwealth opening ceremony et al) and
PR. Activation (below-the-
line brand events and corpo-
rate events) is the most pro-
fitable part of the business.
IP events are a risk; on a
good day you can make 100
per cent profit and on a bad
day you can be down by 50
per cent. But our IP events
(the ones we own) have
helped showcase our work better. IIFA (an
annual event celebrating Indian films in
an overseas location) allowed us to
experience big stars, corporates,
government. (IIFA has been held in
Amsterdam, Macau, Yorkshire, and
Tampa Bay among other locations) As a
result when those governments want to
come to India we are their partners. IIFA is
not an entertainment event but a business
event because Indian films have grown in
areas where IIFA has been held. It is a
bridge that connects India to the world.
Now we are taking South Indian cinema
there, there is the Global Indian Music
Awards or GIMA. We ventured into sports
18 months ago. We are working on the
National Badminton Championship
among others. Welcome to New York is the
first film we co-produced. We are getting
into rural activation, digital content
creation. We are the most integrated BTL
agency and are looking for an investor that
will help us take Wizcraft global.
What offers hope?
The fact that the government is unable to
do events without the event companies
helps in the realisation that something
needs to be done. Different government
departments realise what we go through
since the government is thinking about
events. This is a very event-friendly gov-
ernment not just at the Centre but across
the country. Every government prog-
ramme needs an event—Make in India, an
app, a food festival. So government
departments are more events-friendly.
What are the big challenges in scaling
up—is it capital, talent..?
We are at the beginning of the journey in
the growth of this industry. Capital can be
found. It is manpower and skill develo-
pment that is an issue. Events are a very
people-intensive business. Wizcraft alone
has 480 employees and every year we hire
between 2,000-3,000 freelancers for the
900-1,000 events we do. Usually event
management is taught in mass commun-
ication schools or as brand management
courses. It requires mass media skills, plus
culture/creative understanding, oper-
ational/executional skills and the ability to
manage it all. However, most of the learn-
ing is on the job. I am on the Media and
Entertainment Skills Council—which is
promoted by Federation of Indian Cham-
bers of Commerce and Industry with
financial support from National Skill
Development Corporation. We are work-
ing at trying to get the skills this industry
needs approved and to start courses
designed around these skills. Eventually
schools/institutes will be set up to fund the
training and internship of people in the
(certified and approved) skills that this
industry needs so that event management
is not just about learning on the job.

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<

ADVERTISING OPINION

In its latest campaign
#Fearless Kota, Horlicks
appeals to young adults
studying to become
engineers and doctors,
picking up a local theme
to carry forward its
brand message of
fighting exam phobia
In search of marketing
on the benefit of quality proteins to help
Indians lead a healthier, more fulfilling
lifestyle," he says.
Madhavan’s appointment inciden-
tally preceded that of actor Tapsee
Pannu’s in November 2017, when she
was brought on board to promote
Women’s Horlicks, the variant targeted
perfection
at females.
While Horlicks has been launching
Marketers are required to be more Sisyphus
products beyond its core base of moth- than The Vitruvian Man
ers and school-going kids over the last
few years, this effort has been gal- than NASA’s spellbinding to the products we buy from
vanised now. The current initiative Cassini Mission. A group of the brands we admire.
comes, say experts, as people increas- outstanding men and People are always changing.
ingly get health-conscious and demand women sent a spacecraft on And because people
more specialised products, a point a remarkable interplanetary never stay still, relation-
endorsed by Bahl. journey covering 7.8 billion ships never stay still. Look
In many respects, Horlicks, the kilometres. Launched on under the surface of even
largest brand of GSK Consumer October 15, 1997 Cassini’s the most successful mar-
Healthcare in India, estimated to con- mission ended on riages and you will find a
tribute nearly 70-75 per cent to its September 15, 2017 with a lifelong management of the
topline in the country (FY2016-17 net deliberate plunge into relationship by both part-
BHARAT BAMBAWALE
sales of the company stood at ~44.21 Saturn’s atmosphere. Cassini ners. Unlike a marriage the
billion), is also filling gaps in its portfo- collected and transmitted consumer-brand relation-

Horlicks widens its

lio. While a drink for pre-schoolers, lac- Business leaders would like data until the very last sec- ship is not an equal one,
tating mothers and women had been nothing more than perfect onds of the mission, telling with the brand having to do
launched some years ago, a health food marketing systems. Smooth, us more about Saturn than the heavy lifting.
drink targeted mainly at males was efficient, predictable; deliv- we’ve ever known. If we can Then there is competi-
clearly missing and so was the need to ering a specified output do that, a business leader tion, of course. The obvious
address issues plaguing the youth. against a specified input. If may well ask, why can’t we and the unseen. The mobile

brand appeal
Those loopholes have been plugged ‘production’ can achieve this, do better on the infinitely phone is ringing the death
now, say experts, but is the battle over raising the bar on quality smaller scale of marketing? knell of more traditional
for Horlicks? Far from it, they say. while reducing material con- The principal reason, businesses than their cate-
As K V Sridhar, founder and chief sumption and wastage, why unfortunately, is us. gory competitors. Look at
creative officer, HyperCollective, says, can’t ‘marketing’? In the 1964 Marketing is ultimately music: the CD store is extinct
the health food drink market throws up musical My Fair Lady, Henry and streaming services grow
The market leader looks to expand its footprint with more targeted new challenges every few years. The
reason being evolving lifestyles, bring-
Higgins, played by Rex
Harrison laments about
every day. Neither the declin-
ing business nor the emerg-
advertising and a broader portfolio of products, hopes to beat the clutter ing with it the risk of disease and the Eliza Doolittle, played by ing one can survive with
task of managing it. Though general Audrey Hepburn: “Why marketing inertia.
and stay relevant for an increasingly health conscious consumer health consciousness in the country has can’t a woman be more like a Leonardo da Vinci’s
grown in the last few years, lifestyle- man?” In the same vein, one Vitruvian Man, drawn in
VIVEAT SUSAN PINTO lege-going youth taking competitive related diseases are also on the rise, can imagine a business 1490, is widely considered the
Mumbai, 4 March engineering and medical tests. BRAND TRACKER implying health food drinks have new- leader complain, “Why can’t most perfectly proportionate
Coming at a time when the nearly er goal posts every few years. ‘marketing’ be more like ‘pro- representation of the human

A
month ago, health food drink
Horlicks attempted something
novel. It launched a digital cam-
paign that spoke of exam pressure faced
by youth sitting for competitive
entrance tests. Titled ‘Fearless Kota’, the
campaign put India’s coaching capital
in the spotlight, bringing to the fore an
uncomfortable reality — of students
committing suicide due to exam pres-
sure in Kota — and the need for emo-
tional support for them.
While Horlicks, the country’s largest
health food drink, has traditionally
addressed mothers and kids through
the years and has even picked up the
issue of exam phobia faced by children,
this is the first time the brand has
picked up on an extremely local prob-
lem to push out a global message. At
the same time it appears to be address-
ing an older target group, namely, col-
~75-billion domestic health food drink
market is seeing competitive intensity,
it is not surprising, say experts. Horlicks
is addressing a wider set of people and
emphasising its strong ties with the
country with its communication.
As rivals such as Mondelez with
Bournvita, Kraft-Heinz with Complan,
Nestle with Milo and Danone with
Protinex Grow renew aggression in the
marketplace with newer products and
bigger and bolder campaigns, the pres-
sure on the leader Horlicks, which is
estimated to control over 50 per cent
of the domestic health food drink mar-
ket, is only growing.
Last week, the company that manu-
factures and markets Horlicks, namely,
GlaxoSmithKline (GSK) Consumer
Healthcare launched a protein variant
of the health food drink called Horlicks
Protein+, targeted at adults, mostly,
| To targetthe health conscious consumer,
Horlicks launched a protein variantfor
men; appointed actors R Madhavan
and Tapsee Pannu as brand
ambassadors
|The latestcampaign looks to increase its
appeal among an older-age group,
the students appearing forengineering
and medical entrance exams
males. It also appointed a brand ambas-
sador in actor R Madhavan to drive
home the point of protein as a daily
nutritional requirement.
Vikram Bahl, area marketing lead,
nutrition & digestive health, GSK
Consumer Healthcare, India, said the
launch (of Horlicks Protein+) tapped
into a felt need for relevant products
driven by consumer insight. "It delivers
To put things in perspective, India duction’?” male. It has remained largely
leads in deaths due to heart failure in Even as marketers strive unchallenged and
the world, according to an International to create and maintain an Leonardo da Vinci’s unchanged for over 500
Congestive Heart Failure study con- order that is perfect, they Vitruvian Man, drawn years. Sadly, modern day
ducted last year. Other issues such as rarely get there. Marketing in 1490, is considered marketing has no such luck.
obesity are on the rise, putting pressure tends to be messy, con- the most perfectly It faces what seems to be a
on health food drinks to address all of founding and with a natural proportionate situation more like the myth
this in some way. entropy that can be alarm- representation of of Sisyphus, doomed to carry
Horlicks seems to be acknowledg- ing. Just when you hit a pur- the human male a rock uphill time and again,
ing the need for such products with ple patch, unforeseen events only to have it roll back to the
variants such as Growth+ (to aid growth occur. Marketing perfection about people and relation- ground. Unlike Sisyphus,
in children) and Cardia+ (to boost heart is fragile and illusory—when ships and these are unpre- who was condemned to this
health) respectively. But as health food everything seems to be going dictable and messy. People, fate, modern day marketers
drinks, say experts, increasingly begin right, everything needs to even those with apparently must learn to enjoy their
to play on the platform of science and change again. calm exteriors, are anything quest as a mountaineer does
nutrition—something that Nestle’s The frustration is under- but stable. A lava of ideas, his climbs—even when time
Milo, Danone’s Protinex Grow are also standable. Mankind over- impressions, desires, afflic- at the summit is all too
doing apart from GSK Consumer, the comes staggering unknowns tions, attachments and per- ephemeral.
need to stand out will only grow. and achieves startling per- versions churns inside us.
Horlicks then has quite a challenge of fection in certain spheres. Sometimes it seeps out, oth- The author is Founder, Bharat
not only expanding the market, but also We need to look no further er times it erupts. Leading us Bambawale & Associates
fighting rivals.

ECONOMY
. <

Govt may ask PSU insurers Grappling with exporter credit

variance with details provid- be utilised to discharge any GST shown only those tiles that are

to buy out smaller ones

PRESS TRUST OF INDIA
New Delhi, 4 March
Taking cue from the ONGC
buyout of HPCL, the govern-
ment may look at replicating
the same in the insurance
sector by asking cash rich
PSU general insurers to buy-
out the smaller ones.
A finance ministry offi-
cial said apart from buy out
by cash-rich general insur-
ers, a share-swap could also
be considered for smaller
insurers.
In the 2018-19 Budget,
Finance Minister Arun
Jaitley proposed merging
three public sector general
insurance companies —
National Insurance, United
India Insurance and Oriental
India Insurance — into a sin-
gle insurance entity.
ed in the shipping bill. liability. It is not clear what the relevant for them.
For this, CBEC has pre- position is if an appeal against The Directorate General of
scribed a form that exporters such an OIO/OIA is pending Foreign Trade has asked its
must send to the Customs, giv- before the appellate forums. Or regional offices to process
ing details of taxable value and how to decide whether the cred- applications for duty credit
tax amount in the GST invoice it disallowed vide an OIO/OIA is scrips under the Merchandise
The merged entity would ONGC announced acquisi-
IiAS questions EXIM MATTERS and shipping bill. The appro- part of the balance carried for- Exports from India (MEIS)
be subsequently listed on the tion of government's priate officer will verify the ward as transitional credit. scheme only on the basis of the
T N C RAJAGOPALAN
bourses. The official said entire 51.11 per cent stake in
if an insurer buys stake in the oil refiner HPCL for ONGC-HPCL deal details, determine the correct
refund amount and enter this
Meanwhile, GSTN has intro-
duced some facilitation meas-
iTC (HS) Code declared in the
shipping bill. However, in the
another, the government will ~369 billion. Proxy advisory firm IiAS has The Central Board of Excise and into the Customs EDI system. ures. Once any GST case of 154 specified codes,
get some money in return of The proceeds from questioned the state-owned ONGC Customs (CBEC) has put in Plus, if need be, edit the IGST Identification Number (GSTIN) MEIS claims will be processed
its stake. ONGC-HPCL seeking exemption from taking place an alternative mechanism paid details in a case of short is fed into the system, taxpayer only after matching the noti-
"Cash rich In the Budget, deal helped gov- shareholders' nod for the acquisition to refund Integrated Goods and shipment or incorrect calcula- details like legal name, status fied code and description with
insurers may be Finance Minister ernment peg the of the government's stake in HPCL, Services Tax (IGST) already paid tion by the exporter. (active or cancelled), jurisdic- those declared in the shipping
asked to buy Arun Jaitley had revised disin- saying such leniency with regard to on goods exported. Under the Thereafter, a payment scroll tion office and status of the past bill. The relaxation will help
out the smaller proposed merging vestment target public votes is not warranted. system till now, refunds of only will be generated as in the nor- 10 returns -- showing return clear MEIS claims that are
ones where the- three public sector for current fiscal ONGC bought the government's ·40 billion have been granted. mal process, based on which type, financial year, tax period, stuck due to mismatch in the
re is operational general insurance at ~1 trillion, 51.11 per cent stake in Hindustan Essentially it involves the the exporter’s bank account date of filing and status description. Surprisingly, how-
synergy. A share companies into besides restrict- Petroleum for ~369.16 billion. intervention of Customs offi- will be credited electronically (whether GST paid or not) will ever, cases rejected earlier due
swap could also a single entity ing the fiscal The acquisition price of ~473.97 cers, who will verify the infor- through the Public Finance show up. Thus, buyers would to mismatch in description will
be considered," deficit at 3.5 per per share was finalised on January 20 mation furnished on the Management System. be able to know the return filing not be re-assessed, which
the official told PTI. cent of GDP. and the deal was completed as an Goods and Services Tax There is another develop- status of suppliers. Letters of seems unfair.
As on March 31, 2017, In 2017-18, two other PSU off-market transaction on January 31 Network (GSTN, the system’s ment on Cenvat credit. CBEC Undertaking for export of goods These measures will help
Oriental India Insurance general insurers — General and ONGC is now asking shareholders information technology back- says if its eligibility is under dis- and services without payment but not compensate for the
had cash and bank balance Insurance and New India to ratify it, IiAS said.The purchase bone) and the Customs EDI pute and disallowed through an of IGST may now be filed online. grave consequences of delay in
of ~23.57 billion compared Assurance — got listed on qualifies as a related party transaction (Electronic Data Interchange) Order in Original (OIO) or Order The GSTR-3B return has been grant of refund for taxes already
with ~19.16 billion held by the bourses. The initial pub- (RPT) as the government holds system. And, sanction refund in Appeal (OIA) under the erst- simplified to the extent that the paid by exporters.
United India Assurance and lic offering of these two com- majority stake in ONGC and was in cases where invoice details while law, this cannot be car- tax amount due is visible to
~15.87 billion by National panies had fetched ~209.72 selling its stake in HPCL. PTI provided in Table 6A of GSTR- ried forward as transitional assessees even before they sub- E-mail:
Insurance. In January 2018, billion to the exchequer. 1 returns are correct, even if at credit. If carried forward, cannot mit the return. They will be tncrajagopalan@gmail.com

> THE BS CROSSWORD # 2976 > BS SUDOKU # 2435 > WEATHER TODAY’S FORECAST
O
Max/min temperatures in C
27 Made revolutionary progress up 17 Get all the wickets or blow ! (4,3)
ACROSS or down (9) NATIONAL
18 Used by writer and poet,
1 Having the hump (7) 28 As Rev. Spooner might say, perhaps (7) Ahmedabad . . . . . . . . . . .Sunny 36/19
5 Girl by no means a vehement "Please remain tomorrow" (7) 20 Current force of a small book Aizawl . . . . . . . . . . . . . . . .Sunny 27/14
left-winger (7) 29 A member of family boards (7) with a note on the label (7) Bengaluru . . . . . . . . . . . .Sunny 33/15
9 Ante up after raise from volatile
Sicilian? (5,4) 21 Having missed first aid, dares to Bhopal . . . . . . . . . .Partly cloudy 33/185
10 No mistake about who talked DOWN study pottery? (7)
Bhubaneswar Partly cloudy 38/22
the Trojans into accepting the 1 Lolly that fell out of a tree (7) 23 How to rescue some ointment (5)
Chandigarh . . . . . . . . . . .Sunny 26/13
horse (5) 2 Tory safe, having shown 24 Hard at work outside - it's full of
11 Decorate from top to bottom, or shrubs (5) Chennai . . . . . . . . .Partly cloudy 32/21
readiness to go overseas (4,5)
bottom to top (7) 3 Not a full month's work it is Delhi . . . . . . . . . . .Partly cloudy 28/14
12 Unyielding and difficult games found, in the main (7) Guwahati . . . . . . . . . . . . .Foggy 29/19
on the tennis court (4-3)
4 Go to bed in a rough sea, in Hyderabad . . . . . . . . . . . .Sunny 36/19
13 Splitting atoms up gives new SOLUTION to # 2975
gloomy fashion (9) Imphal . . . . . . . . . . . . . . .Sunny 28/16
metal (9)
15 Traditional stories involving 5 Flesh hothead found in Ireland Indore . . . . . . . . . .Partly cloudy 33/19
confused, shy and heartless (5) Very Hard: SOLUTION TO #2434 Kochi . . . . . . . . . . .Partly cloudy 35/24
Maoist (5) 6 Five year period of craving spirit  Kolkata . . . . . . . . . . . . . . .Sunny 35/22
17 Nobleman unable to support (7) Solution tomorrow
7 Continues to operate around Lucknow . . . . . . . .Partly cloudy 32/26
growth of crops, it's said (5)
19 Even lined features can be midnight with crosspieces (5) HOW TO PLAY Mangalore . . . . . . .Partly cloudy 34/23
revitalised (9) 8 Gives a note in to teachers (7) Fill in the grid so Mumbai . . . . . . . . .Partly cloudy 33/25
22 Bath - what bus runs there? (7) 14 Spy hides in his trousers! (9) that every row, Pune . . . . . . . . . . . . . . . . .Sunny 36/22
25 "Save the A-55" written in green 16 Simple accommodation with every Srinagar . . . . . . . . . . . . . . . .Rain 14/2
(7) power and unfinished less column and every
26 Alternatively, cut the deck (5) 3x3 box contains Surat . . . . . . . . . . . . . . . . .Sunny 37/23
flexible appendages (9)
the digits 1 to 9 Thiru’puram . . . . . . . . . . .Sunny 35/25

https://telegram.me/Estore33
16 BUSINESS LAW
https://telegram.me/AllEpapers

.
http://www.estore33.com MUMBAI | MONDAY https://telegram.me/TheHindu_Zone
5 MARCH 2018
<

BRIEF CASEN z M J ANTONY FUGITIVE ECONOMIC OFFENDERS BILL, 2018

Will it catch the

A weekly selection of key court orders

SC: Arbitration clause must be specific

ILLUSTRATION: BINAY SINHA

An arbitration clause in an agreement
between two main parties cannot
automatically be read into a sub-

next Nirav Modi?

contract without a specific reference to it
in the sub-contract, making the
intention clear, said the Supreme Court
in its judgment in the case Elite
Engineering vs Techtrans Construction India.
In this case, the National Highway Authority of India had a
concession agreement with TK Toll Ltd for construction a road Legal experts are not sure if threat of confiscation of property
from Coimbatore to Nagapattinam. The latter entrusted the
work to Utility Energy Tech Ltd. It further entered into an will be deterrent enough for fleeing offenders
agreement with Techtrans, which in turn floated a tender for
the work and Elite Engineering’s bid was accepted. A sub- SUDIPTO DEY offender cannot be brought before the court to
contract was signed. participate in the trial and defend himself, the
When disputes over payment arose between the sub-

V
ijay Mallya reportedly left Indian shores on objective of the existing laws is often frustrated,”
contractors at the end of the chain, Elite moved civil courts March 2, 2016. It has taken the government says Ajay Bhargava, partner, Khaitan & Co.
and the Madras High Court for the appointment of arbitrators. two years to expedite the introduction of a Under the existing laws, the power of the court
The High Court, however, maintained there was no arbitration law to deter economic offenders from fleeing the is confined to the attachment of properties of the
clause in the contract between them. Elite argued that its sub- country. A sense of déjà vu prevailed in the Punjab offender which were secured or those properties
contract had adopted the main contract with an arbitration National Bank fraud case, involving diamond which are proceeds of the alleged crimes.
clause. The contention was rejected by the High Court and the traders Nirav Modi and Mehul Choksi. The pro- However, under the proposed Bill, the Special
Supreme Court. posed Fugitive Economic Offenders (FEO) Bill, Court has the power to authorise confiscation of all
The judgment emphasised that the sub-contract referred 2018, seeks to empower the government to con- properties owned by the fugitive offender.
only to technical details and not to arbitration. If the fiscate the property of proclaimed economic Under the PML Act, only the proceeds of crime
arbitration clause is incorporated in another contract, it offenders who have fled the country. However, or such property that is involved in money laun-
should contain a clear reference to the documents containing experts expect several legal challenges in its imple- dering attract the provisions of attachment. That
the arbitration clause and the intention to incorporate it. mentation that may nullify the deterrence caused is not the case in the proposed FEO Bill. It seeks to
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> by the threat of forfeiture for economic offenders allow authorities to also attach the personal prop-
leaving the country. erties owned by such offender.
Essar objection to port expansion rejected The existing provisions of the law Taking away the The PML Act provides that all the
The Supreme Court has dismissed the do not deter the fugitive economic right of the fugitive properties attached shall vest with
appeal of Essar Bulk Terminal Ltd against offenders largely because the extra- offender to pursue the central government. An admin-
the Gujarat government’s notification dition processes between India and civil proceedings is istrator is responsible for proper
expanding the limits of Hazira port. other countries are generally cum- contrary to the maintenance and custody of such made against such provision on the ground that it Bhargava.
According to the firm, it had spent a lot bersome and time-taking, say legal basic tenets of properties. However, the provisions is disproportionate and arbitrary,” says Berry. Experts say taking away the right of the
on the reclamation of land nearby and experts. “India is not a favoured coun- justice and fair play of the FEO Bill provide for the dis- Chandrasekhar Tampi, partner, Kochhar & Co, accused to pursue or defend civil proceedings is
the expansion would affect them. The try in case of extradition requests. posal of all such properties by the points out that this provision effectively punish- contrary to the basic tenets of justice and fair play,
Gujarat Maritime Board and the state government contended Courts in the UK have rejected the extradition administrator to satisfy the claims of the creditors. es the fugitive economic offender as well as the besides being violative of the Constitution.
that the port had to be expanded because of the arrival of requests on the ground that the jail condition in “This proposed Bill would create an added minority shareholder(s) of the company who may Berry points out that though the scope of the
more vessels and the consequent increase in facilities. It was India was inhumane and that the accused could pressure on the fugitive economic offender as all have had nothing to do with the offence. proposed FEO Bill is restricted to those offences
made in public interest. The Supreme Court accepted the not be guaranteed a fair prosecution,” noted Anuj the properties belonging to the offender will auto- “Significantly, from the standpoint of constitu- value of which is ~1 billion or more, this provision
contention and stated that the ownership of the reclaimed Berry, partner, Shardul Amarchand Mangaldas. matically come under its ambit,” says Sandeep tionality, this provision may face a challenge on the could easily be circumvented by mischievous or
land was with the government and the maritime board, and The provision to confiscate the property of Grover, partner, IndusLaw. ground that it seeks to oust the principle of natu- devious actions. “There is no such monetary lim-
therefore, there was no violation of the right to private proclaimed offenders is already there under dif- While the measures to deter economic offend- ral justice,” he adds. it under other corresponding laws, other than the
property. Moreover, “the alteration of the limits of the port ferent laws. For instance, the Prevention of Money ers to turn fugitive may appear well-intentioned, Legal experts say the draft Bill that is in public PML Act, which has a limit of ~10 million. The
cannot possibly be said to affect Essar’s rights with reference to Laundering (PML) Act, 2002, prescribes three legal experts stress on the need for ironing out domain does not provide for a situation where monetary limit of ~1 billion appears to be exces-
the reclaimed land, which has been reclaimed illegally i.e. stages before the final confiscation of an accused’s several loopholes in the draft Bill. The provision the confiscated property is in excess of the claims sive,” he says. This limit must be made harmo-
without prior permission under the Gujarat Maritime Board property. This involves provisional attachment of that empowers any court to disentitle any person against the fugitive offender. “There also may be nious with such other laws, he adds.
Act,” the judgment said. the property, confirmation of the attachment pur- from putting forward or defending any civil action a challenge to the pre-determination of the status Legal experts agree, as is the case with any
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> suant to adjudication and finally the confiscation if that he/she is declared as a fugitive economic of the property as proceeds of crime without con- new law, the various provisions of the proposed Bill
of the property subject to conviction. “If the alleged offender is seen as draconian. “A challenge may be sidering evidence and without trial,” says is likely to be tested in the court.
What is a brand name?
Affixing the details of a product on the
package would not make it a declaration
of the brand name. A brand name is NATIONAL FINANCIAL REPORTING AUTHORITY: MAKING THE NEW REGULATOR WORK
used to enhance the value of the
product. But if the information printed The Cabinet last week approved constitution of the National Financial Reporting Authority (NFRA) to oversee auditors of listed entities and
on the package is under compulsion of
law, it could not be called a brand name, large unlisted companies. The jurisdiction of the existing self-regulatory body, the Institute of Chartered Accounts of India (ICAI), will continue
said the Supreme Court stated after discussing the meaning of
‘brand name’ and allowing the appeals of jute manufacturers
over its members and over those firms that are below the threshold to be announced by the government.
against the ruling of the Excise Appellate Tribunal (RDB Textiles Experts share their insights on the implications of the dual regulatory structure for the accounting and audit profession:
vs CCE). The manufacturers sold bags to the Food Corporation
of India and other state entities for the retail sale of foodgrain
in the PDS. The excise authorities maintained that the details
printed on the bags, like the date and place of manufacture
and BIS certificate, amounted to brand name and therefore
‘The threshold limit has ‘Oversight over larger
to be pragmatic’ audit firms a must’
excise exemption was denied to the firms. The tribunal upheld
that view. On appeal, the Supreme Court stated that by
printing the bare details, which were compulsory under the
Jute Control Order, would not make it a brand name.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Let us first try to understand why it ciplinary mechanism. Independence is not a science. quality. This will, in turn, lead to
took five years for NFRA to be noti- The day NFRA would be notified, It’s what others perceive, not better financial reporting, which
IOL ‘arbitrary’ in rejecting a bid fied. The Companies Act 2013, vide the National Advisory Committee on what you feel. Independence is, is essential for efficient capital
The Delhi High Court has stated the Section 132, had envisaged constitu- Accounting Standards (NACAS) therefore, about being seen to be markets. In the end, the NFRA
exclusion of Offshore Infrastructure Ltd in tion of the NFRA. But due to the would come to an end. Earlier, independent. Post major frauds will lead to enhancing the repu-
a tender floated by Indian Oil efforts of the ICAI, it did not get noti- accounting standards were being pre- at the turn of the millennium, tation of the audit profession and
Corporation (IOL) was “unfair and fied. It was argued by the ICAI that pared by the ICAI, approved by the the audit profession, globally, no the value from an audit. So if the
arbitrary”. The court, while quashing the the governing council is composed of NACAS and notified by the govern- longer appeared independent. ICAI and its members are inter-
decision of the public-sector 40 members, out of which eight are AMARJIT CHOPRA ment. Now, the same procedure The profession had been ‘self- VISHESH C ested, they would unequivocally
undertaking rejecting the bid, directed government nominees. Similarly, the Former president, would be applicable to notification of regulated’ by member-controlled promote the NFRA.
CHANDIOK
that it shall also be considered on merits. Tenders were invited ICAI’s disciplinary committee has standards on auditing. bodies -- American Institute of Overall, the NFRA should focus
Institute of Chartered National managing
for a package of projects in Andhra Pradesh. The offer of government nominees as its mem- Bureaucracy had been pushing for Certified Public Accountants its efforts not on standard setting
Accounts of India partner, Grant Thornton
Offshore Infrastructure was rejected because it did not meet bers. Also, the number of disciplinary- the NFRA, citing examples from other (AIPCA) in the US, Institute of (where it should rely entirely on
the technical standards. The firm alleged that IOL had not paid related cases decided by the ICAI was presented countries but the political leadership resisted Chartered Accountants (CAs) in India the ICAI as standards are now
outstanding dues from a previous project and when it was to the government. Barring one or two years, the such move. The PNB scam created an environ- England & Wales (ICAEW) in the aligned to global standards) but on
pointed out, it was warned that if it continued to persist on number of cases decided has been credible. It ment socially and politically for the government UK, and others. oversight over larger audit firms that audit
those claims, its bids would face rejection. Allowing the was also explained that in high-profile cases var- that it could not be delayed further. India remains the only major economy public interest entities (PIEs).
petition, the High Court stated in the guidelines for the ious courts were granting stay leading to delay in Questions are being raised whether a dual where CAs are still effectively self-regulat- The Supreme Court’s recent order on
Contract Performance Evaluation that was used by IOL, there judgements. All these arguments found favour regulatory structure would work. In my view, ed. The alternative to ‘independent regula- MAFs (multinational accounting firms)
was “apparent and glaring procedural irregularity”. The with the government and Section 132 despite the dual structure is the best case scenario for tion’ is for the audit profession to continue along with the NFRA provides a brilliant
bidder was also kept in the dark about the guidelines, among being there was not implemented for five years. the constitution of the NFRA. However, for the to field disproportionate blame in the event opportunity to the government to help the
other things. Though courts would not interfere with the There were times when the demand for con- NFRA to be effective, the threshold limit has to of fraud -- as if auditors were the only peo- Indian audit profession catch up. The key
contractual matters, it could look into the procedure adopted stitution of the NFRA became louder but with be pragmatic. The NFRA should focus on cas- ple ‘sleeping at the wheel’, as auditors have issue is defining what is not an MAF;
to check whether it was fair, especially in the case of a the efforts of the council and the cooperation of es where substantial public interest is involved. ‘other auditors as cops’, and therefore the according to the said order, as many as 171
government corporation. certain political leaders who saw merits in the The technical committee and the enforcement natural perception that there is little con- firms are MAFs. These 171 firms collective-
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> ICAI arguments, its formation did not take place. committee of the NFRA should have experts sequence of getting it wrong. ly represent pretty much the entire PIE
The scam in Punjab National Bank (PNB) undid in accounting, auditing and the disciplinary India today has a quasi-independent reg- audit profession in India! It’s high time the
Compensation should not deduct pension all the efforts of the ICAI and the Cabinet mechanism. ulator called the Quality Review Board (QRB). regulation of these 171 PIE audit firms
The Bombay High Court has ruled that approved constitution of the NFRA in a diluted There is an issue that needs to be addressed The QRB is a ‘joint venture’ between the gov- moves out from the ICAI to the NFRA. The
the pension received by a woman form. Whereas disciplinary cases in respect of in case of listed banks, non-bank finance com- ernment and the ICAI. The need for the NFRA ICAI can continue to regulate all individual
should not be taken into account while listed entities and unlisted entities above a panies or similar such entities. Should the would have never emerged had the profes- CA members and firms that perform serv-
awarding compensation for the road threshold limit (which to my mind would be branch auditors of these entities be covered by sion understood the direction of the wind ices other than PIE audits.
accident death of her husband. In this quite significant) would be dealt with by the the NFRA? In my view, even if it were so, this and ceded control of oversight to the QRB. The alternative is PIE audit continuing to
case, Bajaj Allianz General Insurance Co NFRA, all other cases would be dealt with by should be in respect of branches that conduct a Learning from that experience, the ICAI lose its value, and that is an undesirable con-
vs Prabhavati, the woman was getting a the ICAI. This would mean that a large part of the large amount of business, keeping in view the and the NFRA need to collaborate towards sequence for all -- auditors, CAs, regulators,
pension as her deceased husband was a government servant. membership would be still under the ICAI dis- overall entity size. a common objective -- enhancing audit companies, and the society at large.
The insurer argued that to that extent, her loss of dependency
was compensated. Therefore, the amount received as pension
should be deducted from the compensation. The High Court,
while awarding ~1 million, stated that the compensation
under the Motor Vehicles Act is based on contractual liability
while the payment of pension is a statutory obligation of the
Concept of inverted duty structure in Customs is a myth
government. These two cannot be merged. Pension cannot be
called a “pecuniary advantage” and deducted from the the concept of inverted duty struc- of these particular industries such as ing duty on input compared to output. claimed that ink rate should be
compensation package, the judgment said. ture, or it is a myth. those who own tyre industry or toy Finally, what is important is not brought down to below 10%, it was
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> The concept means that the rate industry or machinery industry who just the nominal rate of protection but calculated that the actual duty
of duty on raw materials and inter- argue for protection of duty on their the Effective Rate of Protection (ERP). amount on the ink to make one ball
UCO Bank fined for frivolous litigation mediates (input) must be necessarily input in relation to their output. But if An economist or industrialist can point pen comes only to 50 paise. If a
The Supreme Court imposed a penalty of lower than the duty on output. This it is granted individual industry wise point out that if the duty on the output 10% reduction is given, then the dif-
~100,000 on public sector UCO Bank for assumption that there is a clear cut then there will be a cross purpose. For is lower than the duty on inputs, then ference would come to only 5 paise
“unnecessarily litigating against an distinction between input and out- example, if the duty on textile is the effective protection is lower than which is immaterial because the ball
employee who had superannuated”. He put is itself wrong. It can be true only reduced because it is an the nominal duty rate. point pen sells for at least Rs10/-.
was dismissed on the eve of for a particular commodity under input for toy industry, But the reply to this point So the conclusion is that the log-
superannuation, denied pension and some conditions but not in general. then the duty on the input The logic of is that the effective rate of ic of inverted duty structure is not
subsistence allowance, and the bank In the macro economic sense there is in the textile industry will inverted duty protection is determined correct. What is more relevant is the
appealed three times when it lost its case in courts against EXPERT EYE no such distinction between input have to be further reduced structure is not not merely by the nomi- Effective Rate of Protection. Rate of
him. He was not given a fair chance of defending himself
SUKUMAR MUKHOPADHYAY and output. For what is an output in and so on. What one does correct. What is nal rate of duty but by the customs duty is a potent instrument
during the departmental proceedings. The judgment also one industry is an input in another not take into account is more relevant is value addition. With a of economic dirigisme. So tying it
pointed the same bank had lost its case before the Supreme industry. Steel sheets are output in that machinery is also an the Effective substantial value addi- down to a dogma that the rate of duty
Court two times earlier on similar facts. By starving Rajendra The discussion on inverted duty struc- the steel industry but inputs in the input. If the duty on tex- Rate of tion, the effective rate of on input should be lower than that of
Shankar, a former manager, of all financial sources, the bank, ture has once again assumed impor- machinery industry which manufac- tile (as a input) is reduced Protection protection will most like- output will be a biggest mistake
in fact, had denied him access to justice. Moreover, the charge tance because in the Budget 2018-19 ture pipes and machinery. All the then even the duty on ly be positive. when the difference between input
sheet against him was filed seven years after the alleged there is a mention in the Annexure-VI chemicals are finished products in machinery will have to be And it is not exactly and output itself is non-existent and
misconduct. The Supreme Court observed that this “inordinate to Part B of the Budget Speech that chemical industry and raw material reduced further because machinery is the rate of duty but the actual amount when effective rate of protection and
and unexplained” delay alone was cause enough to dismiss certain duties on some medical in other industries. Arvind Virmani also the input for making textile. of duty necessary to produce an item many other considerations are much
the charge sheet. The misconduct was that he issued a cheque devices have been reduced from 2.5% submitted a report in the year 2001 There will be a chain reaction. It will which is important. For example, at more relevant.
for ~300,000 to his brother when he had only ~1,000 in his to nil which is because of the need to with this conclusion. lead to an impractical situation and one point of time, the rate of central
account. He later stopped payment of the cheque. The court correct inversion in the rate of duty. So However, input and output are finally the revenue collection will fall excise duty on ball point pen (output) The writer is member, Central Board of
observed that if there was any complaint, it should have been the issue that we are now discussing clearly distinguishable in the case of a so heavily that the Budget maker will was 10%. The central excise duty on Excise & Customs (retired)
filed by his brother who was the payee. here is whether there is any validity in particular industry. It is the owners have to give up such an idea of reduc- ink was 15%. When the manufacturer Email: smukher2000@yahoo.com

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<

Smart bandage to
In an emergency situation, the first 60 minutes is termed
the ‘golden hour’. It is within this time when it is critical that
the victim has access to basic medical attention. In India, vic-
tims usually lack access to such care.
Of the top 10 common causes of death in India in 2016,
road accidents, which often cause excessive bleeding, ranked

control bleeding
eighth. These claimed 254,000 lives in 2016, up 22 per cent
from 2005, according to the Global Burden of Disease Report,
issued last September. Heart disease stood first.
Self-harm, which can cause bleeding, ranked 10th after
230,000 died in 2016, up 5 per cent from 2005, according to
the report. Axiostat can marginally fill these gaps if it expands
Axiostat bandage is used by Indian armed forces. It needs to be into retail segments and sells its products directly to con-
sumers. And, the company says its goal is to grab a place in
sold directly to consumers, writes Shameen Alauddin everyone’s first-aid kit.

Opportunity
“Uncontrollable bleeding is the major reason for deaths,”
says Mavely. “Whether in battlefields where 50 per cent of sol-
diers die due to uncontrollable bleeding and about 30 per
Wydr makes retail
purchasing easy
cent of these deaths can be prevented, or road accident vic-
tims, where 40 per cent of deaths are due to bleeding out.”
“Ambulances in India lack first-aid equipment and the
skills required to start treatment before a patient reaches a
hospital. Axiostat comes right at the interventional stage, to NIRMALYA BEHERA ufacturers and wholesalers. It servic-
stop bleeding within two-three minutes of usage. In an acci- es retailers in 22,000 pin code loca-
dent, the dressing can give the victim ample time to reach the Retailers often travel to multiple cities tions across the 29 states.
hospital for further treat- for procuring products at competi- According to Rai, Wydr is
ment,” he says. tive rates. In tier-II and -III cities, they “unique” because wholesalers and
FAC T B OX The start-up currently do not have direct access to better retailers can negotiate and customise
Inception: 2014 caters to only four segments products at lower rates. orders, like they do in a real market.
— military, emergency, car- Manufacturers and distributors, He sees opportunities in the
Area of business: diovascular and dental. The on the other hand, do not get access to online B2B market, estimated to be
Health care India military earlier used to markets beyond their respective $700 billion and expected to reach $1
import haemostats from the regions because the wholesale sup- trillion by 2022. Rai said, “Over last
Funding:$7.4-mn in US but later switched to ply chain in India is frag- year, we have been able to
Series-B by UC-RNT Fund, them, claims the firm. mented and unorganised. make a mark and are
Accel Partners and IDG It faces competition from Wydr, a Gurugram- growing at a CAGR (com-
global giants, the biggest based online marketplace, pound annual growth
Userbase: Military,
being Johnson and Johnson. has a solution. Launched rate) of 56.6 per cent... We
emergency,
in March 2016, the start- have over one million
cardiovascular and Revenue up brings wholesalers, retailers onboard in a short
dental The price of each product manufacturers, and retail- Wyder has 1.2 time.”
Team strength: 85 varies depending on the seg- ers on one platform. million users, It registered $30 mil-
Leo Mavely, founder of Axio Biosolutions, with bleeding control product Axiostat ment it is being used in. “Wholesalers and including 5,000 lion in sales this year and
While the dental variant costs retailers did not have a manufacturers expects to touch $40 mil-
and

D
uring the surgical strike in 2016 along the Line of US. The start-up also has a CE (Conformité Européenne)- ~75, the military variant comes at ~3,000-5,000. technology platform lion in 2018-19 and $100
Control, bleeding control product Axiostat was used approved mark to sell in Europe. Even after a decade of being in the health care industry where they could discover wholesalers million in 2019-20.
to sustain the life of an Indian soldier until a helicop- and close to four years of launching its flagship product, and transact directly and The start-up generates
ter transferred him to a medical facility, claims Leo Mavely, Concept Axio Biosolutions is yet to achieve break-even. It says it conveniently. That’s why we came up transactional and non-transactional
founder and chief executive officer of Axio Biosolutions. The main component of the product is chitosan, extracted by expects to do so in 18 to 24 months. with the concept of Wydr.in,” said revenues. Transactional revenues are
Founded in 2008, Bengaluru-based Axiostat is a clini- treating the chitin shells of shrimp and other crustaceans . Beside the defence forces in India, the start-up has Devesh Rai, founder. Rai, who had primarily through orders placed on
cally-endorsed bandage to stop excessive blood loss. It recent- Negative-charged blood components react with positive- shipped around 350,000 units to 12 countries — the United co-founded ShopClues, formed Wydr the marketplace, which vary 3 per
ly raised $7.4-million in Series-B funding from Ratan Tata- charged Axiostat, forming a sticky substance that clots the Kingdom, France, Poland, Bangladesh, Saudi Arabia, the with Hitha Uchil and Varun Kumar. cent to 20 per cent on sales. Non-
backed UC-RNT Fund and existing investors Accel Partners blood. Once the patient receives medical attention, the prod- UAE, Kenya, South Africa, Romania, Indonesia, Qatar and “Retailers no longer have to travel transactional revenues cover adver-
and IDG. Last week, it received clearance from the Food and uct can be removed by applying water. It absorbs the water Oman. It also supplies to medical institutions, such as AIIMS, long distances to procure goods. They tising-led opportunities, monthly vir-
Drug Administration (FDA) to market its products in the to become a gel-like substance that can be peeled off. Manipal, Apollo, Breach Candy and Fortis. can sit in their shops and order goods tual exhibitions for different
from any part of the country,” he said. categories, premium features and
E X P E R T TA K E Ahead Wydr.in provides complete mar- services. It aims to achieve break-even
Mavely estimates the global haemostatic market at $3 bil- ketplace platform services, including in 18 months.
‘We found Axiostat effective’ application and is simple enough to be
used even by a layman to control bleeding.
lion and the Indian one at $400-500 million. “We hope to
be a ~1-billion company by 2020, as we are registering 300
technology, marketing, payment, Wydr.in raised Series-A funding
logistics, customer care and billing, in November 2016, and a round of
In 2013, I met Leo, who briefed me about We found it very effective compared to per cent year-on-year growth,” Mavely says. and payment to wholesale traders. seed funding in February 2016 from
Axiostat and got me impressed with the other methods and most satisfactory in The start-up that manufactures the product in It deals in products across around Jungle Ventures, Bessemer Venture
product and its usage. To certify the product children, who tend to panic a lot. The Ahmedabad recently increased its annual capacity to 20 categories, such as mobiles, elec- Partners and Stellaris Venture
KETAN PATEL and its ability to be used in emergency results were promising. around 800,000 units. “In the past few years, we have tronics, fashion and home. The com- Partners. In February, it had raised
Consultant & head of the medicine, we conducted the first clinical Axio Biosolutions has also done a seen the company transform into a global player,” says pany claims the largest inventory of another round from Jungle Ventures
emergency medicine study for chitosan haemostatic dressings in remarkable job by getting CE and FDA Avinash Raghava from Accel, one of Axio’s investment products across categories; around and Stellaris Venture Partners.
department, Zydus Hospitals India. approvals. I think it is a first for an Indian partners. The start-up plans to use the fund to build its 850,000 products are available. The firm plans to use the new cap-
and Healthcare, Ahmedabad The product works soon after product of this kind. footprint in Europe and America, and for new products in Wyder’s platform has around 1.2 ital to strengthen its seller and buyer
the advanced wound care segment. million users, including 5,000 man- base and set up pan-India offices.

NOTICE OF LOSS OF SHARES OF

HINDUSTAN UNILEVER LIMITED
(FORMERLYHINDUSTAN LEVER LIMITED)
REGD. OFF. HINDUSTAN UNILEVER LIMITED,
UNILEVER HOUSE, B D SAVANT MARG, CHAKALA, ANDHERI (EAST) MUMBAI - 400 099
Notice is hereby given that the following share certificates have been reported as lost / misplaced and the
Company intends to issue duplicate certificates in lieu thereof, in due course.
Any person who has a valid claim on the said shares should lodge such claim with the Company at its
Registered Office within 15 days hereof.
Name of the Holder Folio No. Shares Certificate Distinctive No(s)
(Rs. 1/- f.v) No.(s)
RAJIV JAIN HLL1842560 120 5095161 84762941 - 84763060
LYNETTE SEQUEIRA HLL1251394 750 5059748 52352311 - 52353060
CLAUDIUS SEQUEIRA
BHAVANA SHAH HLL2874244 810 5221962 1067685061 - 1067685870
MAHENDRA SHAH
BIPINKUMAR RANCHHODBHAI PATEL HLL3003702 1120 5297974 1254601991 - 1254603110
MRS. INDRABEN BIPINKUMAR PATEL
R. MOORTHY HLL2815323 550 5188632 1017754801 - 1017755350
TUNABEN BHUPENDRA SHAH HLL3649793 10 5390574 2201540916 - 2201540925
BHUPENDRKUMAR SARABHAI SHAH
DEV BAJPAI
Date : 03 .03.2018 Company Secretary
Rameshwar Media

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18 POLITICS & PUBLIC AFFAIRS
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"Only those who "That (privatising state-owned "The BJP comes to

consider Bharat Mata banks) also involves amending the Meghalaya and offers
their own mother are law... Indian political opinion may crores of rupees to the
true Hindus” not find favour with this idea" churches in the state"
MOHAN BHAGWAT, RSS chief ARUN JAITLEY, Finance Minister RAHUL GANDHI, Congress President

> .

Yogi treads fine line between populism & reform

PTI

A year on, the UP Chief

Minister is on treacherous Investors want
bureaucratic terrain
RADHIKA RAMASESHAN
govt to deliver
SAHIL MAKKAR is being seen as an alternative to

Y
ogi Adityanath — who completes his
first year as the Uttar Pradesh Chief
Minister on March 19 — has spent the
last 12 months sizing up his potential chal-
lengers, consolidating and expanding his turf,
balancing Hindutva and caste interests, hom-
ing in on governance, and scouring the state’s
polarised bureaucracy and police to build a
team of loyalists to administer through them.
Adityanath’s spokespersons showcased an
event and a policy measure as the “stellar
achievements” of his first year in the office.
Between them, the “achievements” encompass
the space-straddling “development” and “hard-
as-nails governance”.
The recent investors’ jamboree had the gov-
ernment and the Bharatiya Janata Party (BJP)
over the moon. The Chief Minister often high-
lights that memoranda of understanding
(MoUs) worth ~4.28 trillion — equalling his
budget for 2018-19 — were signed.
“Uttar Pradesh is coming out of the BIMARU
(an acronym of Bihar, Madhya Pradesh,
Rajasthan and UP, denoting sickness) condi-
tion,” said state BJP spokesperson Chandra
Mohan. “Everyone, from India’s top-drawer
industrialists to foreign investors, reposed faith
in the state,” said Sidharth Nath Singh, health
minister and government spokesperson.
Another “achievement” was the crackdown
on “copying mafia”. In 1991, the BJP had enact-
ed an anti-copying law, but it became a key rea-
son for the party being voted out of power in
1993 because Uttar Pradesh cannot stomach a
policy that challenges the status quo.
“Circumstances have changed. Most youths
today aspire to become someone on their own
merit and not by cheating,” a minister said.
Adityanath’s greatest help has been the
Centre’s handholding and largesse. The next
Lok Sabha election is approaching, and the BJP
must retain most, if not all, of the 71 (out of 80)
seats it won in 2014. Besides, Prime Minister
Narendra Modi is an MP from Varanasi.
Shrikant Sharma, the power minister,
acknowledged 90 per cent of the cost of the
vaulting Sahaj Bijli Har Ghar Yojana or
Saubhagya scheme was underwritten by the
Centre. Launched in December 2017,
Saubhagya aims at providing free electricity
connections to 1.57 million rural and 302,000
urban households below the poverty line by
CM Yogi Adityanath with his deputies K P Maurya, left, and Dinesh Sharma, right. They have to ensure the BJP’s popularity till 2019
MILES TO GO BEFORE 2019...
Follow-up on investment pledges
Defence industrial corridor in
Bundelkhand that projects 250,000 jobs
”One district, one product” scheme to
promote traditional craft and small and
medium industries
December 2018.
“The advantage of a BJP government at the
Centre is it ensures a double-engine growth for
the state,” said Sharma.
The Centre has also helped the Adityanath
government in the agriculture sector. The
strength of workforce in the state is 23.7 per
cent, out of which 65.9 per cent are farmers and
5.6 per cent are industrial workers, according to
official figures.
The farm loan waiver cost the exchequer
~363.59 billion but has not deterred the gov-
ernment from continuingwithas well as scaling
up the development programmes.
The state had a debt of ~3.75 trillion in March
2017, up from the ~2.25 trillion in 2012-13. But
the Centre is playing Santa Claus — grants for
At the recently concluded Uttar
Pradesh Investors Summit, all
from President Ram Nath
Kovind to Prime Minister
Narendra Modi, Union cabinet
ministers and industry captains,
including Reliance Industries
Chairman Mukesh Ambani,
praised Chief Minister Yogi
Adityanath for “improved” law
and order situation in the first 11
months of his rule. They also
lauded his commitment to per-
sonally monitor the execution of
all 1,045 investment proposals
worth ~4.28 trillion.
This was perhaps the first
time when a prime minister had
personally led 18 Cabinet minis-
ters, including those from allies,
to a state investors’ summit. The
message was clear to investors
that the Bharatiya Janata Party
Airports at Jewar and Kushinagar Dues of around ~25 billion from 32 sugar
mills still to be paid to cane growers
(BJP) government at the Centre
Will GST bring in the prospective and the state would not leave any
~80-~90 billion to commercial tax kitty? Farm loan waivers of ~73.71 billion were stone unturned to execute the
projects.
Interlinking of Ken and Betwa to irrigate processed in first phase but only 11 per cent “Not red tape but red carpet
parched Bundelkhand and develop region of farmers received maximum benefit of will welcome investors,” Modi
as industrial hub ~100,000 under the scheme
told investors on the first day of
Expressway connecting Bundelkhand 13.7 million rural households yet to the event on February 21.
and Poorvanchal to Delhi be electrified Finance Minister Arun Jaitley
assured the investors on the con-
cluding day, saying: “Investors
UttarPradeshescalatedby39percentto~680.52 picked by party president Amit Shah to exe- like to invest in a state that is cor-
billion for 2017-18; for most others it was around cute his Uttar Pradesh’s blueprint, has made it ruption-free and has good law
5 per cent. clear the party’s writ would run over the gov- and order. In the past 11 months,
Surya Pratap Shahi, the agriculture minister, ernment, especially regarding transfers and the Adityanath government has
said,“ThePrimeMinister’sdirectiveisdonotbe postings. proved its capability in this.”
afraid, make the targets ambitious.” “Adityanathhasinstitutionalisedasystemto The investor summit also
The Centre’s solicitous attention, however, keep Bansal out. Transfers and postings are served the purpose of sending a
has limited Adityanath’s carte blanche. It was routed through the chief secretary, the message down rank and file of
conveyed that he would not have a free rein in appointments secretary and the concerned the BJP in the state that
makingbureaucraticpostings.Hewashemmed department,” a government source said. Adityanath enjoys the confi-
in by deputy CM Keshav Prasad Maurya, who is Unlike his predecessors, Adityanath is yet dence of both Modi and party
reportedly slow in implementing orders passed put in place his secretariat of apparatchiks. The president Amit Shah despite
by Adityanath regarding Public Works, Food RSShasnominateda“swayamsevak”,Abhishek murmurs of alleged extra-judi-
Processing and Public Enterprises (portfolios Kaushik, in Adityanath’s office and the CM cial killings in the state.
that Maurya holds). worksthroughtwoaidesfromtheGorakhpeeth, Political analysts said it suits
On the other hand, Sunil Bansal, the BJP’s R B S Rawat and Balu Rai. But he is fumbling on the BJP top brass to throw their
state general secretary (organisation) hand- the treacherous bureaucratic terrain. weight behind Adityanath, who
Modi in the future.
“Yogi Adityanath is the sec-
ond most popular leader in Uttar
Pradesh after Modi. The BJP in
Uttar Pradesh needs him to
repeat the success of the 2014
Lok Sabha elections in the
upcoming general election, espe-
cially when the party is facing an
anti-incumbency elsewhere,”
says a BJP leader, who claims to
be close to Adityanath.
“Yogi Adityanath is also see-
ing this an opportunity to
cement his position in the party.
He has many competitors in the
party, including Madhya Pradesh
Chief Minister Shivraj Singh
Chouhan,” the leader said. The
party leadership is keeping a
close eye on the Adityanath gov-
ernment, with many senior offi-
cers from the Modi government
returning to Uttar Pradesh,
which is not only the most pop-
ulated state but also sends the
most lawmakers (80) to
Parliament.
The biggest challenge for the
Chief Minister is to deliver on the
memoranda of understanding
(MoUs) signed during the sum-
mit. Uttar Pradesh performance
has not been impressive regard-
ing the implementation of pro-
posals signed during the previ-
ous Akhilesh Yadav-led
Samajwadi Party and Mayawati-
led Bhaujan Samaj Party govern-
ments.
Investors were still jittery
about investing in the state.
“Some concerns, such as labour
unions in Uttar Pradesh, need
urgent attention. The state gov-
ernment needs to provide infra-
structure beyond Noida and
Greater Noida. Investors are cur-
rently interested in investing in
these two areas only,” says a busi-
nessman, who had signed an
MoU with the state government.

PERISCOPE STORY IN NUMBERS SPENDING

PTI
ON SECTORS
Wait for PM 16.7
14.1 13.9
(PERCENTAGE OF TOTAL SPENDING)
Prime Minister Narendra
Modi will visit Jhunjhunu THE GUJARAT | 2017-18 BE | 2017-18RE | 2018-19BE
BE: Budget Estimates; RE: Revised Estimates
in Rajasthan on
Thursday to launch the
National Nutrition
BUDGET: 5.3 6.0

CONTINUITY 4.0 4.5 3.9 4.2

Mission (NNM) and 3.3 3.0 3.0
expand the ‘Beti
Bachao-Beti Padhao’
campaign. He may also
distribute ‘Nari Shakti’
AND CHANGE EDUCATION HEALTH AGRICULTURE RURAL DEVELOPMENT
awards during the visit. StatefinanceministerNitinPatel,
The assembly elections
are due in Rajasthan whopresentedthe2018-19
later this year. budget,focussedonutilisationof 16.1 4.8 6.4 5.6
fundsratherthanallocation
AVERAGE OF 19 STATES, 2017-18 BUDGET ESTIMATES
New regimes Back in business The graphs compare Gujarat’s expenditure cent on education in 2018-19. This is lower
PTI

New governments in Meghalaya, Tripura
and Nagaland will be likely sworn in this
week, after assembly polls earlier. The results
of assembly elections, especially Meghalaya
that elected a hung Assembly, could cause an
upset in the neighbouring states like
Manipur. This needs to be monitored.
Budget time
The Budget session of the Maharashtra
assembly will start on March 9 and the
Budget will be tabled on March 18,
parliamentary affairs minister Girish Bapat
said. A meeting of the Business Advisory
Committee of the legislature finalised the
agenda of the session. BS REPORTER
Goa Chief Minister Manohar Parrikar, whose
sudden hospitalisation had turned the
political situation the the state fluid as he led
a rickety coalition, is likely to chair a Cabinet
meeting on Wednesday. Local parties had
supported the BJP on the condition that
Parrikar remained in the saddle. He was
admitted to Lilavati Hospital in Mumbai on
February 15 and was discharged on February
22, and on the same day attended the
Assembly, presented the budget and made a
brief speech. The session was truncated to
four days owing to his illness. He was again
hospitalised on February 25 and discharged
on March 1. The Opposition Congress had
claimed the administration was on the verge
of collapse, a claim rejected by the BJP. PTI
on four key sectors, as a proportion of its
total budget, with 18 other states. The
budget reveals the development strategy
and, in this case, represents continuity,
rather than change. Like many other states
i Gujarat too has realised its capacity to
absorb state funding in several sectors is
low – it has been unable to utilise allocated
funds and therefore sets its sight on
utilisation rather than allocation.
There is a perception that the BJP
returned to power with a lower tally of seats
because of inadequate funding and reform
in the agriculture and education sectors
Education: Gujarat has allocated 13.9 per
than the average expenditure allocated to
education by 18 other states (using 2017-18
Budget Estimates or BE).
Health: It has allocated 4.5 per cent
towards health, marginally lower than the
average expenditure of 18 other states.
Agriculture: The state has earmarked
3.3 per cent of its total budget for agriculture
and allied activities — lower than the
average allocation in 18 other states
(6.4 per cent).
Rural development: Gujarat has allocated
3 per cent of its expenditure on rural
development, significantly lower than the
average (5.6 per cent) of the 18 other states.
Nitin Patel
Data: Budget documents; Text: Aditi Phadnis

HAM crosses over – but does it even matter? ManjhijoinedtheBharatiyaJanataParty

ADITI PHADNIS
TheHindustanAwamMorcha(HAM),
ledbyaformerchiefministerandDalit
leaderJitanRamManjhi,hasquitthe
BJP-ledNationalDemocraticAlliance
(NDA)andjoinedtheRashtriyaJanata
Dal-ledelectoralalliance.Whatdoesthe
movemeaninBiharpolitics?Doesiteven
matterinBihar’scomplexpoliticaland
casteequations?
IntheolddayswhenJitanKumar
ManjhiandNitishKumarweretogether
intheJanataDal-United(JD-U),Kumar
choseManjhiashissuccessoraschief
minister.Itwasadifficulttime.TheJD-U
hadperformedbadlyinthe2014general
electionsandKumarknewthatunlesshe
managedtopullarabbitoutofthehat,it
wouldbehardtowintheassembly
(BJP)-ledNDA.
AlthoughRamvilasPaswan’sLok
JanashaktiPartywasalreadyintheNDA,
wantedthatatleastJehanabadseatis
contestedbyhisson.Hebelievedthat
withtheBJPbehindhimandtheJD-U
optingtostayoutofthecontest,hecould
electionsduein2015.Whathe He,however,did himwasabigmistake. hewelcomedManjhi.Later,Manjhi wintheseat.NotonlydidtheBJPnotgive
neededwasthekindofcaste everythingthatKumarwas ManjhiisaMusahar.Havingbeen realisedthathehadnovoiceintheNDA-- himtheseat,theyoptedtogiveittoan
alliancethathadsustained opposedto--"corruption"and thrownoutofpower,ManjhiquittheJD- Paswan’svoicewaslouderandhisappeal uppercastecandidatefromtheJDU!
himearlier:amassive "nepotism".Atanyothertime, Uandtwoyearsago,formedhisown amongtheDalitswider.Itdidn’thelpthat Obviously,thisdidnotgodownwell.
coalitionofextremely Kumar'sdecisiontodislodge party,theHindustaniAwamMorcha inthe2015Assemblyelections, Manjhihasbeguntalkingabout
backwardsocialand himmighthavebeencheered (Secular).Thepopulationofthe theHAMputupan contesting50seatsintheassembly
economicforces.By butManjhi'sDalitbackground Musahars,oneofthemostbackward extremelydisappointing elections.Hismissionistocreatea
proposingManjhiasCM,the insulatedhimfromchargesof DalitcommunitiesinBihar,is performance.Caught commonplatformofleaders
opticswouldbethatKumar corruption.Infact,healleged estimatedtobearound2.2million, betweenthedevilandthe fromtheextremelybackward
wasempoweringtheseforces. thatKumarwasinterferingin accordingtostate’sMahadalit deepsea,Manjhioptedto communitiesinBihar.
Kumarwaslabouring day-to-daygovernanceand Commissioninterimreport. bidehistime:tillby- Whilethismightgetonlylimited
underthemistakenbeliefthat notlettinghimwork. ButtheHAMknewitcould elections(tobeheldon traction,noleaderlikestobemadetolook
whatOPanneerselvamhad Gradually,Manjhi’s notsurviveonitsown.And 11March)tothe small.So,hehasgonetotherivalalliance,
beentoJayalalithaa,Manjhi disappointingtenuremade whentheJD-Uallied Jehanabadand whichhasproblemsofitsownbuthas
wouldbetohim. Kumarpushhimout.Butthe withLaluPrasad’s Bhabhua welcomedhimwithopenarms.
Momentarily,heallowedhimselftoforget disapprovalofManjhiwasseenasa RashtriyaJanata Assemblyseats Assemblyelectionsarefarawaybutin
thepoliticalhistoryoftheHindi stratagemtogetbackinto1,AnneMarg. Dalandthe andtheAraria Bihar,socialengineeringlives.Byturning
heartlandwhereloyaltiesareoften KumarrealisedtheJD-Uwaslosing Congressahead LokSabha Manjhiaway,theJDU-BJPalliancemay
sheatheddaggers.Manjhiwasmadethe groundwithManjhi.Buthavinginstalled ofthe2015 seat. havecreatedanunnecessaryandentirely
chiefminister. him,thedecisiontoabruptlydethrone elections, Manjhi avoidableproblem.

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THE SMART INVESTOR 19 https://telegram.me/TheHindu_Zone

BSE 200: TOP 5 GAINERS OF LAST WEEK QUICK TAKE: JINDAL STEEL HEADED FOR GOOD TIMES “INDIA WILL OUTPACE CHINA IN TERMS OF
BSE price in ~ Feb 23, ‘18 Mar 1, ’18 % chg After a strong rally that started in mid-December, the Jindal GROWTH. WE ARE ALREADY SEEING THAT AND IT
Info Edge India 1,202.7 1,296.4 7.8
Edelweiss Financial Services 259.9 277.6 6.8
Steel and Power stock has seen some correction. Analysts, WILL BE SUSTAINED. THE RECENT GROWTH
however, say that the steelmaker will gain significantly
City Union Bank 169.7 181.0 6.6 driven by 30-35 per cent increase in sales volumes SLOWDOWN WAS TEMPORARY”
PI Industries 841.0 884.0 5.1 as well as higher metal prices. So, any steep fall in MARKMOBIUS
Voltas 588.7 618.1 5.0 the stock could be a good entry point Former executive chairman, Templeton Emerging Markets Group
<

InterGlobe stock to catch up

jumped 34 per cent over the year-
ago period. This is despite the rise
in crude oil prices, which puts
STREET
pressure on unit costs.
SIGNS
Shouldinvestorsbuy?
Despite capacity issues and premium valuation, the Street is positive on IndiGo, given its lower costs, strong balance sheet While these are positive signs, PNB Housing closes gap with PNB
should investors pay a premium The plunge in share prices of Punjab
RAM PRASAD SAHU for owning the InterGlobe National Bank (PNB) following the
Aviation stock? InterGlobe trades ~127-billion fraud has narrowed the market
Mumbai, 4 March
OPERATING PROFIT TO TRIPLE BY FY20 at a 10-15 per cent premium to Jet capitalisation gap between the lender and

T
he stock of InterGlobe
Aviation, which operates
the IndiGo airline, after lag-
ging peers in the past, gained 13
per cent in the last one month and
has been hitting new 52-week
highs recently. This is on expecta-
tion of a strong double-digit
growth in passenger traffic, a grad-
ual pick-up in capacity and
improving yields, in line with the
performance seen in the
December 2017 quarter.
While demand is expected to
be strong, the key factor for the
Street is clarity on the resolution
of the Pratt & Whitney (P&W)
engine issues for the A320neo air-
craft InterGlobe had procured;
more of these are due for delivery.
Delay in deliveries and the
grounding of some of the existing
A320neos was the key reason the
stock underperformed peers over
the past year. While Jet Airways
and SpiceJet doubled, share price
of InterGlobe grew 56 per cent.
While P&W has not given a
timeline for resolution of the
engine issue, Airbus has indicat-
ed its 2018 aircraft delivery target
of 800 units remains on schedule.
The uncertainty, however, means
deliveries could get delayed.
Analysts at Kotak Institutional
Equities, though, do not expect
this issue to take long to resolve;
they assume deliveries would
resume over the next few months.
They estimate IndiGo’s capacity
growth at 21.7 per cent for FY19,
on the back of stable deliveries of
the neo. Coupled with leased air-
craft, this would make up for the
shortfall in capacity addition dur-
In ~ billion FY17 FY18E FY19E FY20E Airways and SpiceJet (based on its housing finance arm. Currently, PNB
Revenues 185.80 234.90 290.10 352.50 FY19 estimates) and its market Housing, in which PNB owns a 33 per cent
Operating profit 21.40 34.80 49.70 60.10 capitalisation at ~515 billion is stake, is valued at ~201 billion. On the other
thrice the combined one of the hand, PNB is valued at ~245 billion. The
Operating profit margin (%) 11.50 14.80 17.10 17.00 other two. Analysts justify some value of PNB’s holdings in its two listed arms
Net profit 16.59 26.90 35.30 41.20 of the premium, given that — PNB Housing and PNB Gilts — is ~72 billion,
Earnings per share (~) 46.00 70.40 92.40 107.90 InterGlobe’s unit costs are 15-26 which is 30 per cent of the state-owned
E: estimates; Source: Kotak Institutional Equities per cent lower than listed players. lender’s market capitalisation.
This, they say, will be a major PAVAN BURUGULA
advantage if crude oil prices go
through the roof. Given the com- Close shave with jewellery firm loan
petitive nature of the business, The valuation of a diamond is a tricky
InterGlobe could be the business. And a private sector bank realised it
last man standing. recently when a jeweller approached it for a
Also, high debt on oth- loan and offered an equal value of diamonds
ers’ balance sheet as collateral. However, when the bank sent it
(especially for Jet) means they for independent valuation, it turned out that
would not have the flexibility to the diamonds were worth just 10 per cent of
resort to aggressive pricing, says the quoted value. But the jeweller argued
an analyst. that the value of diamond was correct,
The other factor that helps according to his books. The bank manager
InterGlobe is its cash and cash refused to sanction the loan unless more
equivalent of over ~100 billion, a loan-worthy collateral was given.
fifth of it’s market capitalisation. JOYDEEP GHOSH
This will help tide over adverse
periods. And, in periods of high BSE shares soft despite buyback
growth, its capacity, which is more Share price of the BSE dropped 10 per cent in
ing FY18. If the capacity addition digit for 42 months. Passenger achieved in October 2016. than thrice SpiceJet’s, should help February even as the exchange commenced
comes through, the company can load factors (indicates capacity This uptick in demand should reap the demand upside. its ~1.66-billion share repurchase
tap the ongoing strong demand utilisation) have hit 89 per cent help the company and the sector Given the 10-year record on programme. The stock underperformed the
growth more efficiently. for the sector; InterGlobe’s is 89.7 improve its pricing and, thus, profit, a strong balance sheet and benchmark Sensex, which fell nearly 5 per
per cent. As the strong growth yields — a function of pricing and a cost structure that is difficult to cent during the month, and even slipped
Traffic growth trend is expected to continue, passenger traffic. In the replicate any time soon by com- below its initial public offer price of ~806.
Passenger traffic in January was IndiGo, with a market share of December quarter, for example, petitors, analysts expect the pre- According to buyback data, the BSE so far
up 20 per cent from a year before. just under 40 per cent, will look to yields were up 6 per cent and mium valuation to continue and purchased 274,320 shares, or 36 per cent of its
This metric has grown in double- again hit its peak of 43 per cent, operating profit before rentals the stock to outperform. total buyback size of 754,545 shares. The
maximum buyback price has been set at
~1,100 apiece. As buyback is done through
the ‘open market’ route, the BSE can

‘CY18willbemuchmorevolatilebutinvestorsshouldstayput’ purchase shares below the maximum price.

There are a lot of macro headwinds but micros have started improving, making it tricky for
investors, VIKAS KHEMANI, president and chief executive officer, Edelweiss Securities, tells
Puneet Wadhwa. After strong returns last year, investors should tone down expectations in
the current year, Khemani says. Edited excerpts:
tion of the goods and services tax
(GST) is behind. Demand has started
picking up for consumer goods and
on the infrastructure /investment
side. The government is spending a
VIKAS KHEMANI lot on urban infrastructure, roads,
President and chief executive officer, affordable housing, railways, and
Edelweiss Securities ports, among others. Also, corporate
earnings are looking up after almost
Do you see markets undergoing a no growth for seven years.
time-wise correction?
It is important to look at the back- Are markets factoring in the
drop CY18 (calendar year 2018) has possibility of higher inflation and
started with. There are a lot of macro sub-par monsoon?
headwinds, but micros have started Inflation, yes. They are not factoring
improving. This is a tricky situation in a bad monsoon yet. There is no
for the investors. CY17 was the least data or trend available around mon-
volatile year in decades. CY18 will be soon for markets to get worried.
much more volatile. After delivering
around 27 per cent return in CY17, How are markets likely to react to the
markets should consolidate. One results of state Assembly elections
should be satisfied even with a 15 per scheduled over the next 12 months?
cent return in CY18. I do not see the results of the state
elections as a verdict on the general
What are the key risks? elections scheduled for May 2019.
We have Assembly elections spread However, we do see a hype around
over the next 12 months. Also, we the event, which creates market
expect the US Federal Reserve to hike volatility. This is what we expect in
rates thrice this year. Inflation is look- 2018 as well.
ing up in India as well. All these are In politics, one year is a long peri-
creating headwinds. If the monsoon od to predict anything. For now, mar-
disappoints, the markets will have kets expect the Narendra Modi gov-
another problem to deal with. ernment to return in 2019. Any
On the brighter side, the impact hypothesis that this will not happen
of demonetisation and implementa- will create volatility.
WE HAVE STATE ELECTIONS SPREAD OVER THE NEXT 12 MONTHS. WE
EXPECT THE US FEDERAL RESERVE TO HIKE RATES THRICE THIS YEAR.
INFLATION IS LOOKING UP IN INDIA AS WELL. ALL THESE ARE CREATING
HEADWINDS. IF THE MONSOON DISAPPOINTS, THE MARKETS WILL
HAVE ANOTHER PROBLEM TO DEAL WITH
What policy change or initiatives do
you expect from the government till
the general elections?
There will not be any major policy
change. It is now about accelerating
the implementation of the policies
announced thus far. The focus will
be to kick-start economic growth, cre-
ate jobs and boosting incomes, espe-
cially rural. There has been a renewed
focus on infrastructure development.
What is your message for retail
investors?
Stay invested in the markets and not
get perturbed over the near-term dis-
ruptions. Indian economy is on the
verge of a take-off and investors should
ride this with a long-term vision.
Which sectors are you bullish on?
Financials will continue to do well.
Most people do not realise the wealth
that will get created by this sector. I
am also bullish on the Indian con-
sumption story. As the per capita
income improves over time, spending
power will go up. This will boost con-
sumption-related stocks. Information
technology (IT) stocks should do well
in CY18. Growth is coming back in IT
and valuations are not expensive. A
weaker rupee will also benefit these
stocks. We also like commodity-relat-
ed plays. Limited capacity expansion
with huge demand on anvil will make
them attractive over the next three-
four years.
What is your view on public sector
banks (PSBs)? Should one use the
dip to bottom fish?
It has been known for a while that the
public sector banks were misused.
There have been instances of political
interference. There was aggressive
lending by PSBs from 2009 to 2014,
which partly boosted capital expen-
diture in companies. Public sector
banks need better governance frame-
work. The market share of PSBs will
go down over time. Consolidation is
the need of the hour. From an
investor standpoint, it is better to stay
in private banks. PSBs can, at best, be
a short-term trading idea. Private
banks will capture the market share
from public sector banks.
According to the Securities and Exchange
Board of India’s regulations, the BSE will
have to buyback at least half of the shares
proposed in the offer.
SAMIE MODAK
> EVENTS THIS WEEK
Date Particulars
5-Mar India - Nikkei PMI services &
composite
US - Markit PMI services &
composite
UK - Markit/CIPS PMI services &
composite
China - Caixin PMI services &
composite
6-Mar US - factory orders data
7-Mar US - ADP employment change,
non-farm productivity data
US - trade balance data
UK - Halifax house prices
China - foreign reserves data
8-Mar US - consumer credit figures
US - jobless claims
China - import, exports &
trade balance data
9-Mar US - underemployment &
unemployment rate
UK - industrial output &
manufacturing production,
and trade balance figures
UK - NIESR GDP estimate
China - PPI & CPI data
10-Mar India - BoP current account
balance*
* tentativebetweenMarch10andMarch30
Source: exchange/websites/Bloomberg
CompiledbyBSResearchBureau

> COMMODITY PICKS

An answer to India’s banking crisis Technology shares make a comeback
Sorry, no tips target was divergent with 75 per cent in the last four days. The
MUSTARD SEED
this time. its stated philosophy of disadvantages of the latter: There PAVAN BURUGULA and L&T Infotech also saw
Let me report enhancing customer was a danger of volumes prevailing their shares go up by more
TECH IS BACK
that my travels took value (‘Where is the cus- over book quality; there was the Performance of top five IT stocks
Information technology (IT) than 30 per cent each
me to a company tomer’s priority in our danger of the ‘chief credit officer’ YTD change (%)
stocks have emerged as top during the year. Big-ticket
that may well be the corporate target?’). evolving into the ‘chief marketing TCS 12.4
bets in 2018 amid a rise in IT firms also have put up a
answer to the coun- Aavas replaced the con- officer’ under pressure from col- market volatility. The S&P positive performance, with Infosys 12.5
try’s banking crisis. ventional top line met- leagues. What transpired was a con- BSE IT index, a gauge for TCS and Infosys up 12 per HCLTechnologies 5.6
Aavas Financiers ric with a service metric scious realignment initially slowed Wipro -6.8 Mustardseedistradingat~4,050perquintalin
technology stocks, has cent each.
is a mortgage instead: A turnaround throughput, then revived with the Tech Mahindra 21.5 thebenchmarkJaipurmarket.Inthecoming
gained 10.3 per cent during At the start of 2018,
financing company
with contrarian MARKET MIND time in completing a
customer transaction —
desired spread-out.
The third dramatic Aavas trans- the year even as the most IT stocks were trading Best-performing IT stocks
days,pricesareexpectedtoheadtowards~4,125
perquintal.Expectationsofgooddemandforoil
strains which are MUDAR PATHERYA query to disbursement formation was something that most benchmark Sensex at valuations below their YTD change (%) afterthemarketreopenspostHoliholidays,
immediately visible: — within ‘x’ days at a doubted would ever be effective: a remained flat. Technology long-term averages L&TTechnology 37.3 coupledwithstrongdemandforcakeandmeal
Most would have assumed that an time when the company was at 3x conscious ‘switching off’ of the shares also dominated the following years of Mindtree 32.9 wouldsupportdemandfromprocessors.
NBFC (non-banking finance com- its enunciated target. Aavas entire IT system at 7 PM each list of best-performing underperformance due to
NIITTech 35.1
pany) of its kind would have been explained how this sequence evening, which meant that all work stocks in 2018. Half of the concerns like slower
top 15 performing stocks in growth and regulatory L&T Infotech 25.7
headquartered out of Mumbai; would translate into a virtuous would have to completed during
Aavas is based in Jaipur. Most cycle: The faster it disbursed, the business hours. One would have the S&P BSE 500 index are headwinds such as Firstsource Solutions 30.4 COTTON SEED OILCAKE
would have assumed that a com- more delighted the customer feared work spillover; surprisingly, from the IT space. tightening of the US visa Best-performing non-IT stocks in
pany about a half a decade old would be, the better the reference productivity spiked and work-life The sector has emerged rules. However, in the last the S&P BSE 500 index
would still be climbing the learning to others, the stronger the cus- imbalance corrected. as a defensive play, as IT few months, the sector has YTD change (%)
curve; Aavas has already emerged tomer accretion and quicker the One would have considered stocks remain relatively shown signs of revival. Venky's 47.5
as a micro case study. Most would revenue growth. these changes to be academic but stable when markets go The order books of Welspun Corp 31.5
have assumed that Aavas would be Aavas turned the screw tighter: for two numbers: Aavas expects to through a turbulent phase. Indian IT firms are showing
barely matching the sectoral It linked the achievement of this grow its loan book more than 50 IDBI Bank 34.3
They also act as a natural signs of improvement in Jindal Steel & Power 21.4
growth rate (low double-digit per- turnaround time with the per- per cent this financial year and Cotton seed oilcake prices have fallen by 15 per
centage); the company is reporting formance of each employee includ- cap its non-performing assets at
hedge as the fall in the global growth. Analysts Phillips Carbon Black 20.5
equity market is typically also say the better-than- cent in 2018 so far, and are close to the seasonal
5x that number. ing individual bonuses and pro- 0.5 per cent. YTD: year-to-date Source: NSE lows of ~1,400 per quintal. Since then, the crop
Aavas is turning heads in the motions. The organisation moved By combining both, Aavas has accompanied by a expected growth in the US size estimate has been cut sharply. Good export
country’s mortgage financing space from ‘Saab, kaisey hoga?’ to ‘if we demonstrated that it is possible to weakening of the rupee, a and the developed world cash on the balance sheet. demand for the new crops such as mustard meal
because it selected to do business in implement idea ‘A’ we may be able grow rapidly without compromising positive for the export- has led to a re-rating in the Good performance of IT and the sharp rally in soybean meal will attract
a different way. to save three hours.’ asset quality. oriented tech sector. Indian IT stocks. Also, the stocks is a positive for the bargain buying for cotton seed oilcake from the
The first discernible difference Now that it was aligned on the Isn’t that what the country’s Among IT companies, medium-term outlook for overall market. The sector cattle feed industry. Current cotton seed oilcake
is that Aavas stopped the practice of same strategic page (cause-driven banking systems need anyway? L&T Technology Services is many IT companies looks has an 11.7 per cent weight prices in Akola are around ~1,550. Expect prices
announcing annual top line busi- as opposed to result-derived), the the best performing stock positive on the back of good in the Sensex, second-most to rise to ~1,600 and more in the next ten days.
ness targets. Most would have dis- company articulated its next objec- The author is a stock market with a year-to-date gain growth in dollar revenues after the banking sector’s
missed this as culture-destroying tive: Generate 75 per cent of busi- writer, tracking corporate earnings of 37 per cent. Mindtree and efficient use of surplus weight of over 30 per cent. Prerana Desai,
(‘How will employees drive them- ness in any month in the first three and investor psychology to gauge VP-Research -Edelweiss Agri Services and Credit,
selves?’); Aavas stated that such a weeks compared with the existing where markets are not headed Edelweiss Agri Value Chain
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MUMBAI | MONDAY, 5 MARCH 2018 1

Packaged food & beverage Indian media & entertainment

sector to touch ~2 trn by 2020
firms see uptick in sales URVI MALVANIA
Mumbai, 4 March
the consumption of video serv-
ices in 2015. This is expected to ESTIMATED CONSUMER SEGMENTATION
Number of subscribers in million
VIVEAT SUSAN PINTO
Mumbai, 4 March
PERFORMANCE IN DECEMBER QUARTER The country’s media and enter-
touch 72 per cent by 2020.
2017 2020
Company Netsales Netsales YoYchg Netprofit Netprofit YoYchg tainment (M&E) sector touched Television
Digital only 1-1.5 4

S
ome of the country’s top
food and beverage com-
panies appear to be put-
ting the rough sales patch
behind them as consumer
spending kicks in. For the
October-December 2017 period,
companies, such as Nestlé
India, Britannia, Varun
Beverages, GlaxoSmithKline
Consumer Healthcare, Heritage
Foods, Parag Milk Foods, and
Manpasand Beverages, report-
ed good top line numbers.
The good run is likely to con-
tinue in the coming quarters.
Net sales growth for these
firms hovered between 13 per
cent and 39 per cent for the peri-
od under review, the highest in
four quarters. Analysts said top
line growth in this period was
high because of a lower base in
the year-ago quarter. The note
ban crippled growth during the
three months ended December
2016,saidSachinBobade,senior
analyst at Mumbai-based bro-
kerage Dolat Capital.
While performance at the
bottom line level was mixed for
these companies in the period
under review, analysts said this
could go up as companies
reined in overall expenditure to
improve net profit growth.
Nestlé, Britannia, Glaxo-
SmithKline Consumer and
Manpasand Beverages saw dou-
ble-digit net profit growth
between 19 per cent and 65 per
cent for the quarter under
review. While net profit growth
for Heritage Foods declined 19
per cent, Varun Beverages
reported a loss and Parag Milk
Foods reported a profit after a
loss in the year-ago period.
Abneesh Roy, senior vice-
president, research (institu-
tional equities), Edelweiss, said
the broader trend of growing
packaged food and beverage
penetration in India remained
intact, presenting an opportu-
nity for these companies. Both
(figuresin~mn) Dec-16 Dec-17 (%)
NestléIndia 22,410 25,896
BritanniaIndustries 22,648 25,583
GSKConsumer
HeritageFoods
8,604
4,656
10,347
5,817
VarunBeverages 4,342 5,274
ParagMilkFoods 4,461 5,193
ManpasandBeverages 1,025 1,431
small and large companies in
the sector, therefore, would take
advantage of this as consumer
sentiment improved.
Last week, Nestlé said it was
decentralising its decision-mak-
ing procedure to have better
consumer insights, focused
offerings to different sets of peo-
ple, and to revamp market pen-
etration. The aim was to double
turnover in the next two to three
years from ~100 billion now. For
this, the company has been set-
ting up 15 virtual teams for dif-
ferent clusters, launching local
variants of its established
brandsandcomingoutwithtar-
geted communication and
regional distribution strategies,
according to Suresh Narayanan,
chairman and managing direc-
Dec-16 Dec-17 (%) ~1.5 trillion ($22.7 billion) in 2017, TheTVindustrygrewfrom~594
15.6 1,954 3,118 59.6 with a growth of around 13 per billion in 2016 to ~660 billion in Tactical digital consumer (PayTV+ PayOTT) 6 20
cent over 2016. A study by the 2017, at 11.2 per cent (9.8 per Mass consumers (Pay or Free TV +Free OTT) 200+ 500+
13.0 2,204 2,637 19.6 consultancy firm EY India said cent, net of taxes). Advertising
20.3
24.9
1,364 1,637 20.0
207 168 -19.1
this is expected to cross ~2 tril-
lion ($31 billion) by 2020, with a
grew to ~267 billion, while dis-
tribution grew to ~393 billion
SEGMENTATION GROWTH
compounded annual growth and comprised 41 per cent of CY2016 CY2017 Growth
21.4 -1,117 -721 - (~mn) (~mn) (%)
(CAGR) of 11.6 per cent. revenues. Distribution was 59
16.4 -411 255 - This growth is being led by per cent of total revenues. At a TV 594 660 11.11
39.7 72 120 65.6 the digital segment, showing broadcaster level, however, sub- Print 296 303 2.36
Source: Capitaline that advertising budgets are in scription revenues (including Filmed Entertainment 122 156 27.87
line with the changes in content international subscription)
Digital 92 119 29.35
tor, Nestlé India. consumption patterns. The made up about 28 per cent of
The move, said Roy, came as report observes the sector con- the total. Advertising is 41 per Animation and VFX 54 67 24.07
Nestlé eyed growth in rural and tinues to grow faster than that of cent of total revenues. The Live Events 56 65 16.07
semi-urban areas, the regions the country’s gross domestic report expects this to grow to 43 Online Gaming 26 30 15.38
where it has a limited presence. product. Subscription growth per cent by 2020. Out of Home 32 34 6.25
Nestlé is targeting 100 towns in outpaced advertising during Radio 24 26 8.33
the country. 2017 but advertising will con- Print
Music 12 13 8.33
Britannia is also widening its tinue to grow till 2020, led by Print continues to hold the sec-
distribution network through a the digital segment. ond-largest share of the sector, Source: EY India
focus on direct reach, targeting Farokh Balsara, partner and despite growing under 3 per
rural areas, and investing in its
brands to achieve profitable
M&E leader at EY India, asked,
“With digital subscribers
cent to reach ~303 billion in
2017. The segment is estimated Irani promises umbrella
body for film industry
growth, managing director expected to reach 20 million by to grow at an overall CAGR of 7
Varun Berry said. Britannia 2020, has Indian M&E reached per cent till 2020, with the non-
would introduce 50 products its digital tipping point? We English segment at 8-9 per cent
under existing as well as new need to re-imagine the future of and English a bit slower. This is
categories by 2020 from 16 now. Indian M&E.” expected despite the foreign
These launches would be sup- direct investment limit remain-
ported by in-house R&D and Digital ing unchanged at 26 per cent
marketing as well as manufac- Ashish Pherwani, partner and for the sector, restricting access
turing in new and existing fac- M&E advisor at EY India, said: to foreign print players. And,
tories, Berry said. “Growth in 2017 was led by the despite imposition of the GST
digital, film and animation and at 5 per cent on the advertising
VFX (visual effects) segments.” revenues of the print industry
Digital media has grown sig- for the first time in history.

Lupin stock in global worst-performer list
ANEESH PHADNIS
Mumbai, 4 March
Lupin was among the five worst-perform-
ing mid-cap pharma stocks globally in
2017, according to a report by Evaluate —
an UK-based market intelligence firm. The
drug major’s stock price fell 40 per cent
and its market capitalisation declined $3.9
billion to $6.1 billion in 2017.
US Food and Drug Administration’s
warning letters to two Lupin plants in Goa
and Indore in November was the main rea-
son for the decline in the stock price, ana-
lysts said. The company’s share price
tanked 20 per cent in November.
Other major losers include Tesaro,
Hikma Pharmaceuticals, Opko Health, and
Mallinckrodt. Their share prices dropped
38-55 per cent last year. The mid-cap stocks
comprise companies with market capitali-
sation between $5 billion and $25 billion.
Evaluate’s pharmaceutical sector 2017
review was released earlier this week.
An email query sent to Lupin remained
unanswered.
Major health care indices in the US,
Europe, and Japan gained in 2017 as fears
about the economic impact of Donald
Trump’s US presidency failed to materi-
alise, the report shows. In comparison, the
BSE health care index remained flat, while
the Nifty Pharma fell 6.9 per cent in 2017.
The scrips of Sun Pharmaceutical
Industries, Dr Reddy’s Laboratories, and
Glenmark also fell during the year.
“The warning letters were a setback. It
came as a surprise to the management.
Even investors were expecting that the Goa
and Indore plants will be cleared in the
inspection,”saidAmeyChalke,analystwith
HDFC Securities.
A delay in lucrative product approvals
for the company was another overhang.
The market is betting big on the launch
of key drugs like Levothyroxine and early
resolution of regulatory issues.
Chalke expects the growth trajectory to
resume in 12 months. The company is seek-
ing help from consultants to resolve the
issues of warning letters.
nificantly over the past few
years. And, continues to lead
the growth charts in advertis-
ing. Subscription revenues are
emerging and are expected to
make their presence felt by
2020. In 2017, digital media grew
29.4percent(27.8percent,netof
the impact of goods and servic-
es tax), on the back of 28.8 per
cent growth in advertising and
of 50 per cent in subscription.
Subscription was only 3.3
per cent of total digital revenues
in 2016. It is expected to grow to
9 per cent by 2020. Around 250
million viewed videos online in
2017 and this is expected to dou-
ble by 2020. Around 40 per cent
of all mobile traffic came from
While magazines contributed
4.3 per cent to the print seg-
ment, the latter was largely at
status quo, with not many sig-
nificant new launches in 2017.
Films
Films grew 27 per cent in 2017,
on the back of box office (BO)
growth, both domestic and
international. Coupled with
increased revenues from sale of
satellite and digital rights. All
sub-segments grew, with the
exception of home video, and
the film segment reached ~156
billion in 2017.
Forfullreport,visit
www.business-standard.com
Smriti Irani, Union minister for information & broadcasting,
Siddharth Roy Kapur, president, Producers Guild of India, and
Karan Johar, director, at the inauguration of FICCI FRAMES
2018 in Mumbai on Sunday PHOTO: KAMLESH PEDNEKAR
The government is creating an umbrella body to provide assistance
to filmmakers, Union information and broadcasting minister
Smriti Irani said in Mumbai on Sunday. She said the present mode
of functioning makes the whole industry work in a fragmented
manner. "We are planning to create a committee that will bring all
of these functionalities under one umbrella…We would like to
leverage technology to ensure that the distance between
government and the a filmmaker needing assistance is lessened,"
she said. The industry must look at using artificial intelligence to
enhance customer experience, she added.
Irani said the government is planning to make the Indian Institute
of Mass Communication a deemed university so that it helps the
students enhance their creativity by allowing them to pursue
different subjects. PTI

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Mayawati indicates opening Conrad Sangma meets Meghalaya guv

for Opposition unity in UP
PRESS TRUST OF INDIA NPP, six of the the United Democratic Party “We met the governor and sought his
Shillong, 4 March (UDP), four of the People’s Democratic invitation to the single largest party to be
Front (PDF), two each of the Hill State called first to form the government as per
NPP President Conrad Sangma met People’s Democratic Party (HSPDP) and convention,” former Union minister Nath
ARCHIS MOHAN temple agitation. The two had Meghalaya Governor Ganga Prasad on the BJP and an Independent,” 40-year-old had told PTI.
NewDelhi,4March formed a coalition government Sunday and staked claim to form the gov- Sangma said. The Congress won 21 seats out the 59
but the alliance was severed, fol- ernment in the state with the support of 34 The NPP leader is the youngest son of that went to polls last month. The party is
With the Budget session of lowed by the infamous ‘guest MLAs in the 60-member Assembly. former Lok Sabha Speaker (L) P A Sangma 10 seats short of a simple majority. The
Parliament resuming on house incident’ (where the SP Meghalaya threw up a fractured man- who died in 2016. He was elected a Member Congress has been in power in the state
Monday after a break of nearly a cadre had surrounded the place date on Saturday with the ruling Congress of Parliament in a by-election from Tura for the last 10 years. Asked about the chal-
month, there are indications of where Mayawati was staying emerging as the largest party, marginally constituency after his father’s death. A del- lenges of running a coalition govern-
Opposition parties aligning in and threatened violence). aheadofitsrival,theNationalPeople’sParty egation of three Congress leaders — Kamal ment, Sangma said, “It is not an easy
the key state of Uttar Pradesh In 1996, the Congress and (NPP), an ally of the BJP at the Centre and Nath, Ahmed Patel and C P Joshi — had task. But the parties who are supporting
for the next Lok Sabha poll. BSP had an alliance for the UP in Manipur. yesterday staked a claim to form the gov- us are committed to work for the wel-
This comes as the ruling assembly poll. This was the last “We met the governor and submitted a ernment in the state at a meeting with the fare of the people and the state. We will
Bharatiya Janata Party (BJP) such occasion of the BSP having letter of support from 34 MLAs — 19 of the governor. work on a common agenda.”
savoured its victories in the a pre-poll electoral alliance with
northeastern states, especially any party.
its emphatic victory in Tripura. However, the BSP recently
Bahujan Samaj Party (BSP) announced a a pre-poll alliance
chief Mayawati said on Sunday with the Janata Dal (Secular) for
her foremost objective in the BSP Chief Mayawati says BJP defeat is a priority and suggests the Karnataka assembly poll.
2019 general election would be alliances for Rajya Sabha and council polls In Parliament, opposition
to defeat the BJP. Her party, she parties are set to raise the big
said, would not share stage with islators for its candidates in the occasions, the party did hold bank fraud case, with the
its Samajwadi party arch-rival Rajya Sabha elections from hold on to a significant 20 per Congress having given notice
but would support the latter’s Madhya Pradesh. cent vote share. for its discussion. The session is
candidates for the Phulpur and The Rajya Sabha polls are According to sources, sever- expected to be stormy, with
Gorakhpur byelections to the scheduled for March 23. al Opposition parties have BJP members likely to raise the
Lok Sabha. The polling is on the Elections will be held for 58 reached out to Mayawati, to be issue of the arrest of Karti
coming Sunday and BSP peo- seats, including 10 from UP. agreeable on an electoral under- Chidambaram, son of Congress
ple have been told to campaign Given its strength, the BJP is set standing with the SP and leader P Chidambaram, by the
against the BJP. to win nine of these. However, Congress for the next Lok Sabha Central Bureau of
Mayawati said her party the SP, BSP and Congress can poll. A possible scenario is that Investigation.
would also support the SP can- unitedly send one candidate to the SP and BSP contest 25 seats There is no consensus yet
didates for the Uttar Pradesh the Rajya Sabha. Mayawati had each of the 80 from UP, while within the opposition over
legislative council election. In quit her Rajya Sabha seat in July the Congress contests 10. With a unitedly demanding a joint
turn, she expects that party to last year. “friendly fight” among these parliamentary committee
support the BSP candidates in The BSP did poorly at the three in the other 20. probe in the bank fraud. The
the coming poll to the Rajya 2017 legislative assembly poll in BSP and SP had an alliance Trinamool Congress opposes
Sabha. Also, that her party Uttar Pradesh, winning only 19 for the 1993 Uttar Pradesh this. Apart from getting
expected the Congress to sup- of the 403 seats. And, couldn’t assembly poll. The two had demands for budgetary grants
port the BSP in the Rajya Sabha win even a single seat (of 80 combined to defeat the BJP, in passed, the government could
elections from Uttar Pradesh, if from the state) in the 2014 Lok the wake of the demolition of also seek to get the ‘triple talaq’
itwantedthesupportofBSPleg- Sabha poll. However, on both the Babri mosque and the Ram Bill passed.

Tardy allocation to ministry Rio, Zeliang

for northeastern states stake claim to
form govt in
Nagaland
PRESS TRUST OF INDIA
Kohima, 4 March

The issue of government for-

mation in Nagaland took a
newturnonSundaywithboth
NDPP leader Neiphiu Rio and
Call it lack of absorptive capacity of Northeastern states or
outgoing Chief Minister T R
willingness to spend, the actual allocation of money to the Zeliang of the NPF staking
ministry of development of the north eastern region claim to form the government
(DONER) always falls short of what was projected in the with the support of a majority
Budget, except for the past couple of years. The situation of the MLAs in the 60-mem-
remained so in the second stint of the United Progressive ber Assembly.
Alliance government and in the first two years of the State Governor P B
National Democrative Alliance government. Also, actual Acharya gave both the lead-
Budget Allocation went down in the first year of both ers 48 hours time to submit
governments. It fell from ~18 billion in 2013-14 to ~ 17.2 the signatures of the MLAs
billion in 2014-15, the first year of the NDA government. It supporting them. Earlier in
reduced to ~13.9 billion in 2009-10, the first year of UPA II, the day, the governor said the
from ~14.7 billion in 2008-09 (not given in chart). Actual Nationalist Democratic
allocation remained more or less stagnant in 2011-12 and Progressive Party (NDPP)
2012-13, compared to the previous years. DONER, meant for leader Rio, who claimed the
support of 32 MLAs, had the
the region comprising eight states, including the three,
majority and should form the
which went to polls recently, is a small ministry. Its
government.
allocation was only ~30 billion in 2018-19 (Budget After meeting Zeliang,
Estimates). Acharya said Rio and Zeliang
COMPILED BY INDIVJAL DHASMANA have claimed to have majority
support, but “I have not invit-
| Budget Estimates | Actuals (in ~bn) ed anyone to form the gov-
26.8*
26.8

ernment as of now. I have giv-

24.9
24.3

30.0
23.6
23.3

en them 48 hours to submit

20.3

19.8

the signatures of the elected

19.3

18.0
17.6

17.6
16.5
16.4

16.7

17.2

members supporting them”.

14.7
13.9

“As the constitutional

head, my duty is to see who
has the majority and call him
to form the new government.
Whoever brings the signa-
NA

tures of more than 30 elected

‘09-10 ‘10-11 ‘11-12 ‘12-13 ‘13-14 ’14-15 ‘15-16 ‘16-17 ‘17-18 ‘18-19
members I will accept,” he
UPA NDA said as the political situation
*Revised Estimates Source: Budget Papers in the state became fluid.

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Google, Facebook offensive
pushes out sectoral players
KARAN CHOUDHURY
New Delhi, 4 March
I
n the fight between information
technology, fintech and e-com-
merce firms in India and Google and
Facebook, the global giants seem to be
winning hands down. It is becoming a
matter of survival for these sectoral ones,
as one-stop solutions such as business
listings, travel bookings, money trans-
fers and financial services are available
on both platforms and these firms rely
on Google and Facebook to promote
their services.
Google has in the past two years sys-
tematically got into a host of sectors and
businesses. Starting from listings where
it competes with firms such as Just Dial
and Zomato. Google Tez competes with
mobile wallets such as Paytm. And, most
recently, Google Flights has taken on
MakeMyTrip, Yatra and others in the
travel sites segment. Facebook is launch-
ing its own wallet via WhatsApp Pay. It
also has its own e-commerce arm and
plans to bring more services.
According to experts, Google has
been placing its sponsored flights unit
TECH GIANTS VS REST OF THE WORLD
Google
Flights and travel —MakeMyTrip,
ClearTrip,Yatra
Listings —JustDial,Zomato,Swiggy
Tez — Paytm, MobiKwik and other
mobile wallets
prominently on a search result page,
pushing down travel sites such as
MakeMyTrip, Cleartrip and Yatra in
favourofGoogle’sownspecialisedsearch
service, Flights. Players in other sectors
have raised similar issues.
While Google has market capitalisa-
tion of almost $753 billion and Facebook
commands one of $515 billion, it is the
wealth of user data they have that one
fear. Many believe it is this data that gives
them the power to create a monopoly on
almost everything under the sun.
“The kind of data they generate on
individuals, they can tailor that to offer a
wide range of products and services.
Their algorithm is such that they push
options to people. That information can
be marketed, which they are currently
doing. In Europe, we are seeing author-
http://www.estore33.com
Facebook
WhatsApp Pay —Paytm,
MobiKwik,otherMobilewallets
Facebook marketplace —
Flipkart,Amazondistribution
system
ities taking notice of this and taking
measures to curb their powers. We also
need to take significant regulatory
action. The Competition Commission of
India and the government need pro-
actively work on it, so that sector players
are not pushed out and a monopoly not
created,” said Arvind Singhal, chairman
and managing director, Technopak.
Recently, Vijay Shekhar Sharma,
founder of Paytm, the country’s biggest
mobile wallet and financial services firm,
in an interview with Business Standard
actually said: “I believe Facebook is the
most evil company in the world. Earlier,
they tried to dupe the country with what
called free internet. Now, they are flout-
ing all guidelines and rules and bringing
out an app that does not need three-step
authentication to make online and
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MUMBAI | MONDAY, 5 MARCH 2018 1
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mobile payments.”
This was in response to chat messen-
ger WhatsApp launching its WhatsApp
Paywallet,forabetatestwithoutthecom-
plete authentication process mandated
by National Payments Council of India.
According to experts, WhatsApp has
already started WhatsApp for Business.
From getting e-ticketing, delivery
updates from online marketplaces,
paying utility bills, buying financial
services to even booking a plumber,
the app is rapidly adding a host of prod-
ucts to its platform.
Critics contend this is not a protec-
tionist attitude. “India is an open coun-
try. Most of the major firms are owned by
Chinese, Japanese or American compa-
nies. It is not about India versus global
players. Global players such as Google
should not misuse their monopoly sta-
tus. They should not put their reference
on top or take undue advantage,” said
Murugavel Janakiraman, founder and
chief executive, Matrimony.com. His
company took on Google and this later
ledtoCCIimposinga~1.36-billionfineon
the latter for 'search bias' and abuse of a
dominant position.