NEW DELHI, MUMBAI, BENGALURU, KOLKATA, CHENNAI, AHMEDABAD, HYDERABAD, CHANDIGARH*, PUNE* VOL. 13 NO.

254

WEDNESDAY, OCTOBER 23, 2019

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mint primer
Just how safe are Beware of
whistleblowers Dhoni!
under Indian law?
BY JAYSHREE P. UPADHYAY
Whistleblowers are back in focus after the accusations against Infosys
CEO Salil Parekh and other senior officials of indulging in irregular
accounting. Whistleblowers can blow the lid off corporate and
financial scams, but does India have enough laws to protect them?
Disclosing discrepancies
The number of whistleblowing complaints have risen in corporate India, with
Wipro and SBI seeing the most in 2018.
Number of complaints 1,526
3,139
2016-17
3,508
2017-18
Wipro
How’s whistleblowing
1 defined in India?
According to the Companies Act,
2013, whistleblowing is an action
aimed at drawing the attention of
stakeholders to instances of
unethical practices in an
organization. Under central law
concerning allegations against
public servants, it is a mechanism
to receive complaints relating to
alleged corruption or wilful
misuse of power or discretion. A
whistleblower can be anyone who
chooses to expose wrong practices
and has evidence to support the
allegations. They can be either
from within or outside the
organization—such as current and
former employees, shareholders,
external auditors, and lawyers.
QUICK EDIT
On the field, M.S. Dhoni can be
a delight to watch for his cricket
fans. Off it, he can be dangerous,
albeit unintentionally. He has
emerged as the riskiest celeb-
rity on the internet this year.
Sachin Tendulkar comes next
on McAfee’s Most Dangerous
Celebrity list for 2019. The
ranking is based on a study by
the cybersecurity firm to iden-
tify celebrities who generate the
riskiest results when searched
Companies with most for online, an exercise that
complaints
could expose their fans to mali-
cious websites and viruses.
908 The modus operandi of cyber
Figures as of 2018 criminals is simple. They attach
malware to names of celebrities
to bait unsuspecting fans. Major
373 359 content providers are putting
138 up paywalls, and some web sur-
fers try to get around this by
SBI Tata Steel Tech
Mahindra
TCS clicking on pirated content or
Source: Annual reports unreliable links to watch sports
or movies. Cyber criminals
How does the law exploit this behaviour, espe-
2 protect them?
In India, whistleblowers are
cially of fans who instinctively
click on any search result. Mil-
protected by the Whistle Blowers lennials seem to be soft targets
Protection Act, 2014. The law for such phishing expeditions.
provides for the protection of their They must stay highly alert to
identity and also has strict norms malware. Else, they risk their
to prevent their victimization. For devices secretly being installed
instance, an organization cannot
with bugs that spy on them to
initiate proceedings against a
whistleblower pending a probe relay bank information, pass-
into allegations. The same sections words and other critical data to
have been adopted in the shadowy spymasters—all for
Companies Act, which applies to the love of a cricketer.
listed companies, and are a part of
the Securities and Exchange Board
of India’s governance norms. All
listed and public sector firms need
to have a whistleblower policy that
outlines procedures and recourses
MINT METRIC
available to complainants. by Bibek Debroy

Do not be appalled
3 What happens in case of
frivolous complaints?
Whistleblowing may sometimes be
If you do turn bald.
used to settle personal vendettas or
In Kerala such men
manipulate the stock market. To prevent Formed a union of brethren,
this from occurring, the audit committee
that investigates the allegations will
We don’t know what it is called.
examine them for their merit. If a
complaint is proven to be frivolous, the
complainant can face a jail term of up to
two years. QUOTE OF THE DAY
The banking crisis is
4 What is Infosys’ track
record on this?
In October 2013, Infosys agreed to
5 What provisions does
Sebi have?
India has a poor track record in
frightening. We should worry
an $8 million settlement offer by a dealing with insider trading. To
about it... One day the bank is
US federal court after a former improve success rates, the market fine and then suddenly it is in
IT manager with the firm filed a regulator recently introduced a
whistleblower lawsuit against it. tipping mechanism. Sebi will
crisis...We should be able to
The manager alleged that he was award up to ₹1 crore for stop the crisis much ahead
sidelined and victimized by the information and successful action
firm’s top bosses after he refused against insider traders. It has also
before it happens.
an internal settlement offer. The created a “cooperate and
episode showed the need for strict confidentiality” mechanism. This
rules to protect whistleblowers. means that if someone guilty of
Subsequently, in 2014, Parliament violating securities law is willing to
approved the Whistle Blowers assist in the larger probe, the ABHIJIT BANERJEE
ECONOMICS NOBEL
Protection Act. The Infosys board person will be given exemption
LAUREATE
then amended its vigil mechanism from penal action and their
in line with the new law. identity will be kept confidential.

m MINT SHORT

Trump to celebrate Diwali at the White House

REUTERS
PTI the White House was in his Oval Office
feedback@livemint.com in 2017 in the presence of a select group
WASHINGTON of Indian-American community leaders
and members of his administration.

U
S President Donald Trump will
celebrate Diwali at the White
House on Thursday, three days
ahead of the formal celebrations of the
festival of lights in India.
This would be Trump’s third Diwali
celebrations at the White House, a tradi-
tion that began with his predecessor
Barack Obama in 2009. According to
the White House, Trump will partici-
pate in the Diwali celebrations by light-
Trump’s first Diwali at the White House
was in 2017 in his Oval Office.
ing a ceremonial diya on Thursday. No
other details of the celebrations were
immediately available.
Trump’s first Diwali celebrations at
Last year, Trump invited the then
Indian Ambassador to the US, Navtej
Singh Sarna, for the Diwali celebrations
in the Roosevelt room.
In 2017, after lighting the diya, Trump
hailed the Indian community’s contri-
bution in different fields.
“America is especially thankful for its
many Indian-American citizens who
serve bravely in our armed forces,” he
had said.
 FLIP SIDE

Trudeau wins 2nd term

but nation more divided
Canada’s Prime Minister Justin Trudeau with his wife Sophie Gregoire Trudeau after winning a second term on Tuesday. AP

AP certainly deserves credit for what has happened he’s really

feedback@livemint.com going to have to demonstrate qualities that he hasn’t yet
TORONTO shown.”
Trudeau’s clean-cut image had taken a hit after old pho-

C
anadian Prime Minister Justin Trudeau won a sec- tos of him in blackface and brownface surfaced last month.
ond term in Canada’s national elections, losing the “I’m surprised at how well Trudeau has done,” said Nel-
majority but saying on Tuesday he was given a clear son Wiseman, a political science professor at the University
mandate despite an increasingly divided Parliament and of Toronto. “I don’t think anybody expected Trudeau to get
nation. a majority, but they are not that far off.”
Trudeau’s Liberal Party took the most seats in Parlia- Perhaps sensing Trudeau was in trouble, Barack Obama
ment. However Trudeau fell short of a majority, so the Lib- made an unprecedented endorsement by a former Ameri-
erals would have to rely on an opposition party to pass leg- can president in urging Canadians to re-elect Trudeau. The
islations. son of liberal icon and late prime minister Pierre Trudeau
His early morning address to supporters came, unusu- is one of the few remaining progressive world leaders in the
ally, as his Conservative rival, Andrew Scheer, had just Trump era.
begun speaking to his own supporters, forcing networks The unassuming Scheer, 40, is a career politician who
to tear away from Scheer’s speech. was seen as a possible antidote to Trudeau’s flash. But
But the Prime Minister struck a conciliatory note: “To Bothwell said late Monday that he expected Scheer to
those who did not vote for us, know that we will work every resign. “He’s gone,” Bothwell said. “He ran a really dirty
single day for you, we will govern for everyone,” Trudeau campaign. There is nothing to be proud of on his side. He
said. had the opportunity and blew it.”
With results still trickling in early Tuesday, the Liberals Among other things, Scheer called Trudeau a phony who
had 157 seats—13 short of the 170 needed couldn’t even remember how many times
for a majority in the 338-seat House of Trudeau’s Liberal he had worn blackface.
Commons—while the Conservatives had Scheer suggested he would try to stay
121. Party took the most on as leader, saying that holding Trudeau
Still, Trudeau’s Liberal Party won fewer seats in Parliament. to a minority was the first step toward
raw votes nationally than the Conserva- restrengthening a Conservative govern-
tives did, and his party failed to win a sin- However, he fell ment.
gle seat in the western provinces of short of a majority Trudeau also was hurt by a scandal this
Alberta and Saskatchewan where the year when his former attorney general
Conservatives dominated. said he pressured her to halt the prosecution of a Quebec
The Prime Minister showed up at a Montreal subway sta- company. Trudeau has said he was standing up for jobs, but
tion on Tuesday morning to greet Canadians and take self- the damage gave a boost to the Conservative Party.
ies. Trudeau said Canadians rejected division and negativ- Trudeau’s Liberals will likely rely on the New Democrats
ity and elected a progressive agenda. to form a new government and pass legislation. Opposition
But in what was supposed to be a concession speech, the New Democrat leader Jagmeet Singh said early Tuesday he
Conservative leader Scheer said the results showed Tru- had congratulated Trudeau and vowed to play a construct-
deau was much weakened since his 2015 election, when ive role in Parliament.
pundits had predicted the beginning of another Trudeau Trudeau embraced immigration at a time when the US
dynasty after a decade of Conservative government. and other countries are closing their doors, and he legal-
“Conservatives have put Justin Trudeau on notice,” ized cannabis nationwide.
Scheer said. “And Mr. Trudeau, when your government His efforts to strike a balance on the environment and
falls, Conservatives will be ready and we will win.” the economy have been criticized by both the right and left.
Trudeau delivered an unexpectedly strong result despite He brought in a carbon tax to fight climate change but res-
a series of scandals that tarnished his image as a liberal cued a stalled pipeline expansion project to get Alberta’s
icon. oil to international markets.
“It’s not quite the same as 2015,” when Trudeau first took His also negotiated a new free trade deal for Canada with
offce. “It’s not all owing to the leader,” said Robert Both- the US and Mexico amid threats by US President Donald
well, a professor of Canadian history and international rela- Trump to scrap it.
tions at the University of Toronto. Trump, who has clashed with Trudeau over trade,
“Trudeau is Prime Minister because the rest of the party tweeted his congratulations early Tuesday, saying,
was able to pull itself together and prevail. While Trudeau “Canada is well served.”

BOOKMARK
The perks of making eye contact
In his new book, Brian Grazer argues that the road to innovation, creativity and good
business pitches starts with having a real-life conversation

F
or Brian Grazer, the Oscar winner behind movies such as Apollo 13 and A Beautiful
Mind, a major reason for his success is his ability to connect deeply with other people.
It sounds trite, but he insists it’s true. “Human connection is my antidote to living
a life that would have been more defined by my learning disability,” writes the spiky-
haired director in his new book, Face To Face: The Art Of Human Connection, which
includes his interactions with people like Bill Gates, Barack Obama, Eminem, Prince and
the Afghani rapper activist Sonita. The book is built upon his 2015 book, A Curious Mind:
The Secret to a Bigger Life, which was based on his habit of engaging in “curiosity conversa-
tions”. In Face to Face, Grazer, who co-founded Imagine Entertainment with Ron Howard
in 1986, offers the several benefits of getting people to open up with one another, starting
with basic eye contact. “... the modern impulse is for quick, transactional communication.
I find it especially true in business, where people can be more interested in ‘getting ahead’
and ‘getting it done’ than getting to know one another—what motivates someone else,
what they care about,” he writes. At a time when we are trying to make our lives more
convenient by connecting with people across the world with the touch of an icon, perhaps
the key to a better, more real life lies in showing up in person.
POOJA SINGH
Write to us at businessoflife@livemint.com

PEANUTS by Charles M. Schulz

 NEW DELHI, MUMBAI, BENGALURU, KOLKATA, CHENNAI, AHMEDABAD, HYDERABAD, CHANDIGARH*, PUNE* VOL. 13 NO. 254 Rs 5.00 IN DELHI-NCR; Rs 6.00 OUTSIDE DELHI-NCR. PRICE WITH HINDUSTAN TIMES Rs 9.50 (FOR DELHI & NCR) 26 PAGES

PLAIN
FACTS
WHERE ARE INDIA’S INDIAN PROMOTERS
WEDNESDAY, OCTOBER 23, 2019
LIVEMINT.COM
UNHEALTHIEST CHILDREN? uP2 CLAW BACK CONTROL uP10

DON’T MISS
Infy in damage control The money trail
Out of the around ₹27,000 crore worth of loans raised by
DHFL from banks for on-lending to home buyers, around
₹10,050 crore was invested in mutual funds, reveal the

mode as stock plunges

findings of the audit by KPMG.
Outstanding (In ₹ crore)
Bank term loan 26,324
Short-term bank loans
including cash credit 1,203

Bank NCDs Total debt

10,815 83,873 cr
Law firm hired to independently examine claims made by whistleblowers External commercial
borrowings 2,747
GETTY IMAGES
SARVESH KUMAR SHARMA/MINT
WeWork accepts SoftBank rescue Swaraj Singh Dhanjal, m MINT GRAPHITI
National Housing Bank 2,350
deal, founder Neumann departs Ravindra Sonavane & FEELING THE PRESSURE NCDs including
SoftBank is taking control of WeWork as part masala bonds 30,616
of a rescue plan that will see founder Adam Ayushman Baruah
TO ENSURE an independent Investors log out As on 6 July 2019 Source: DHFL draft resolution plan
Neumann depart from the company board.
Neumann will likely sell stock worth $1 bn
MUMBAI/BENGALURU
probe, CEO Salil Parekh and
691 Infosys lost $7 billion in market value on PARAS JAIN/MINT
Facebook 9.15am
CFO Nilanjan Roy have been Tuesday as its stock plummeted 16.2% to

I
to SoftBank as part of the deal. See Page 8 and Amazon
set lobbying
records
amid
nfosys Ltd on Tuesday
scrambled to contain the
fallout from allegations of
recused from the matter. close at ₹643.30, marking its steepest
single-day drop since 12 April 2013.
(in ₹)
25 DHFL group firms
Axis Bank posts surprise loss for Washington accounting malpractices
Sep quarter on high tax expense
Axis Bank incurred a loss of ₹112 crore for the
September quarter due to a one-time hit of
scrutiny
bit.ly/2MDikP9
that sent its shares plung-
ing the most in more than six
US-BASED Rosen Law Firm
said it is preparing a class
action lawsuit to recover losses
suffered by shareholders.
INFOSYS
643.3
3.30pm
with ₹1 lakh avg profit
years by engaging accounting
₹2,138 crore as the value of future relief
through deferred tax assets will fall because
of the corporate tax rate cut. See Page 8
firm EY and law firm Shardul
Amarchand Mangaldas & Co.
to examine the claims made by
ALLEGATIONS OF unethical
took ₹14,000 cr loans
accounting practices could lead
whistleblowers. to a de-rating of the Infosys
In a statement, Infosys stock, say analysts. Shayan Ghosh sory Services.
SC grants three months to Centre chairman Nandan Nilekani Source: Bloomberg shayan.g@livemint.com The forensic report
to revise social media guidelines said that the company’s audit MUMBAI showed that current out-
Netizens may soon have to link their social committee began consulta- MARK TO MARKET: How Infosys’s accounting stands up vis-à-vis whistleblowers’ charges See P4 standing loans and ICDs

A
media accounts with government approved tions with internal auditors on bout 25 group compa- (inter-corporate deposits) to
IDs after the Centre formulates guidelines to terms of reference for an ate steps based on the outcome The sharp fall in share price holders. The company’s nies to which Dewan these 25 entities from DHFL
actively regulate the digital platforms in the
investigation into the allega- of the investigation,” he said. was not the only bad news for American depository receipts Housing Finance totalled ₹13,000 crore.
country. See Page 20
tions after its 11 October board The move to the Bengaluru- had fallen 3.61% to $8.955 on Corp. Ltd (DHFL) had lent a Interestingly, loans of
meeting while law firm Shar- start an inde- Audit committee based software the New York Stock Exchange total of ₹14,000 crore had an ₹7,000 crore to 15 such com-
dul Amarchand Mangaldas pendent investi- has begun services company at 9.55pm (IST). average profit of about ₹1 panies were not classified as
Eight states account for bulk of was retained on 21 October to gation comes as that is considered The law firm said in a state- lakh, a forensic audit of the non-performing assets
economic crimes in India: NCRB consultations
conduct a separate independ- i n v e s t o r s with internal to be the gold ment that it is investigating company has found, raising (NPAs) by DHFL despite their
The number of economic offences across ent investigation. dumped shares of standard for cor- potential securities claims on suspicion that the mortgage repayments being overdue.
India rose from 143,524 in 2016 to 148,972 in auditors on terms porate govern-
To ensure an independent Infosys. The com- behalf of shareholders of Info- lender may have diverted KPMG also said it has found
2017. Rajasthan and Uttar Pradesh were the probe, Nilekani said chief pany lost $7 bil- of reference for ance in India. sys resulting from allegations funds. that these group companies
two states that accounted for the highest
executive Salil Parekh and lion in market an investigation On Tuesday, that the company may have Out of the around ₹27,000 had invested ₹4,000 crore in
share of economic crimes. See Page 19
chief financial officer Nilanjan value on Tuesday New York-based issued “materially misleading crore worth of loans raised by purchasing preference shares
Roy have been recused from as it plummeted Rosen Law Firm business information to the DHFL from banks for of some other entities.
this matter. “The board, in 16.2% to close at ₹643.30, said it is preparing a class investing public.” on-lending to home buyers, As of 6 July, DHFL had a
Chidambaram gets bail in CBI consultation with the audit marking its steepest single-day action lawsuit to recover losses around ₹10,050 crore was debt of ₹83,873 crore, of
case but stays in jail for ED probe committee, will take appropri- drop since 12 April 2013. suffered by Infosys’s share- TURN TO PAGE 6 invested in mutual funds, the which ₹38,342 crore is owed
The Supreme Court on Tuesday granted bail findings of the audit revealed. to banks.
to P. Chidambaram in the INX Media case The draft report of the The report found that
registered by the CBI, but clarified that its audit was shared with the some of the related-party
order will not have any bearing on the money ARTHANOMICS CAFE ECONOMICS EX MACHINA members of DHFL’s commit- transactions undertaken by
laundering case filed by the ED. See Page 20 R JAGANNATHAN NIRANJAN RAJADHYAKSHA RAHUL MATTHAN tee of creditors DHFL were not
See Page 16 See Page 17 See Page 16 (CoC) last week approved by its
and will be pre- audit committee.
sented to the Emails sent to

Uber’s Khosrowshahi Abhijit meets Modi, bats for banking reforms board of the
mortgage lender
DHFL
KPMG remained
once it is final- The draft forensic unanswered till
and

audit report will

urges Indians to shun Gireesh Chandra Prasad
gireesh.p@livemint.com
new projects, impacting
investments in the economy.
ized.
Mint has
reviewed parts of
be presented to
the board once
the time of going
to press.
However, a
NEW DELHI “He (the Prime Minister) the 90-page it is finalized person close to
car ownership ‘trap’ also very nicely explained to report prepared DHFL said,

Shreya Nandi & Leroy Leo many youngsters are prefer-
NEW DELHI ring gadgets over cars as they
can continue using Ola and
A
bhijit Banerjee, the me how he is trying to reform by accounting “Lenders had
winner of the 2019 the bureaucracy to make it firm KPMG. appointed various firms to
Nobel prize for eco- more responsive to under- The findings of the forensic conduct due diligence across
nomics, on Tuesday backed stand the ways in which peo- audit, initiated by the lenders various streams including
the government’s flagship ple’s views need to be taken of the debt-laden home finan- accounts, wholesale book val-
health insurance scheme into account and expose them cier, can potentially scupper uation, title search of loans,

U
ber Inc. chief executive Uber for their mobility needs Ayushman Bharat and Prime (the bureaucracy) to the reality a proposed debt restructur- legal diligence as a part of the
Dara Khosrowshahi on which is much more economi- Minister Narendra Modi’s on the ground. I think it is a ing plan aimed at reviving resolution plan. The banks
Tuesday dived into the cal. efforts to reform the country’s very important point for India DHFL. It may also prompt appointed a steering commit-
raging debate in India on “For the newer generation, bureaucracy, but called for to create a bureaucracy that lenders to the company to tee of seven banks to take the
whether millennials prefer the dream is not to own a car aggressive steps to deal with lives on the ground and gets its push for a change in the man- final resolution plan to all-
purchasing cars over other but the freedom to have any the problems in the banking stimulus from how life is on agement of the Wadhawan lenders for consent and exe-
options such as electronic gad- kind of service on demand. I sector. Nobel laureate Abhijit Banerjee, who called on Prime Minister the ground,” Banerjee said family-run company. cution.”
gets. think that established proto- Banerjee, who called on Narendra Modi on Tuesday, said the PM discussed his vision of after the meeting in a video “The resolution process In a related development,
Khosrowshahi urged Indi- cols and industries are ene- Modi, said the Prime Minister India as well as his efforts to reform the bureaucracy. PTI posted on social media by may now take a different the Enforcement Directorate
ans to resist falling into the mies of innovation and India gave him quite a lot of time, news agency ANI. direction. The system will (ED) has also begun a parallel
trap of owning cars, like their can be a trailblazer by taking discussing his vision of India as remarks. He declined to take 50% so that decisions were “Without that (a responsive have to spend its energies and probe on DHFL’s loans to real
counterparts in the developed on established industries,” well as his efforts to reform the questions on the state of the taken without fear of the Cen- bureaucracy), we get an unre- bandwidth in investigating estate firm Sunblink Real
world, and instead take on Khosrowshahi said. bureaucracy. economy, saying the questions tral Vigilance Commission sponsive government. Thank the matter. It is important that Estate, which is alleged to
these so-called “established He was speaking to report- Banerjee, who later were too broad. (CVC), news agency PTI you, Prime Minister, it was a in the midst of all of that, we have links with drug traf-
industries” by focusing on ers during an event to addressed reporters, said the Banerjee, however, said reported. unique experience for me,” do not forget the resolution ficker Iqbal Mirchi.
innovations to make travel announce Uber’s tie-up with Prime Minister joked about there was a need to bring down The toxic assets plaguing Banerjee said. and asset recovery,” said Ash- “In light of the above devel-
convenient. Delhi Metro Rail Corporation the media trying to bait him the government’s stake in state-run banks’ books have win Parekh, managing part-
He said there is very high car (DMRC) to provide last mile into giving “anti-Modi” state-run banks to less than limited their ability to finance TURN TO PAGE 18 ner at Ashwin Parekh Advi- TURN TO PAGE 8
ownership in the developed transportation services.
countries, which His comments
is “a trap that can India can be a come in the back-
sometimes pre- trailblazer by drop of India
vent innovation taking on becoming a key
because you have
a central infra-
structure that is
established
industries, said
focus region for
the ride-hailing
platform, espe-
CREDIT CARD FIRMS TRYING TO MAKE E-SHOPPING EASIER
designed for the the Uber chief cially in the after-
last 10 years ver- executive math of losing the Jennifer Surane ment”. They’ve developed a ing out their own buttons, such to promote the “click to pay”
sus infrastructure battle in China to feedback@livemint.com checkout option that com- as Visa Checkout, Masterpass, option. The card companies
that is designed local rival Didi NEW YORK petes with established offer- and AmEx Express Checkout. have begun discussions with
for the next 10-20 years.” Chuxing. ings from PayPal and Apple But those options struggled banking partners about how to

S
Khosrowshahi comments India is one of Uber’s largest martphones have made Pay that lets consumers save with less than 5% of online roll out the technology. For
follow the government’s markets globally, and Khas- taking a photo and their payment details all in one merchants accepting them, now, the networks don’t plan
recent statement that a change rowshahi said the San Francis- accessing the internet a place. Retailers then offer it as according to a to introduce any
in mindset, especially among co-based company has com- breeze, but inputting credit a payment button, thus elimi- survey by Companies are incentives or pen-
millennials is affecting car mitted to continue its invest- card details on that small nating the need to type in pymnts.com, a eliminating the alties to entice
sales in India. ments in the country for the screen can still be frustrating 16-digit card numbers and payments publi- need to type in retailers to adopt
Last month, finance minis- next 5-10 years. enough that many shoppers expiration dates in tiny boxes. cation. 16-digit card the new option.
ter Nirmala Sitharaman attrib- India’s automobile sector is just give up, costing retailers The new button is “allowing They are shut- “It’s not a man-
numbers and
uted the fall in car sales, among the middle of its worst slump billions. the consumer to go through a tering them in date or anything
other factors, to millennials in about two decades amid a Now, the world’s biggest guest checkout experience favour of the new expiry dates in that’s pushing
not wanting to commit to slowdown in the economy, led card networks—a group that with very limited friction and Finding it frustrating to enter card details, many shoppers simply option. But get- tiny boxes people there,’’
monthly instalments for buy- by sluggish demand and slow- includes Visa Inc., Mastercard no static password to remem- ‘abandon’ their carts, costing retailers billions. ISTOCKPHTOTO ting people to said T.S. Anil,
ing cars and instead preferring ing private investment. Inc., American Express Co. and ber,” said Jess Turner, Master- switch or sign up global head of
to take app-based taxis such as “The opportunity here in Discover Financial Services — card’s executive vice-president ilar to Amazon.com, which often hesitant to share their could be difficult, given Pay- payment products and plat-
Ola and Uber. She found sup- India is that India doesn’t need have joined forces in an effort of product and innovation for offers one-click shopping for financial information with Pal’s big head start and that form for Visa. “There’s clearly
port from R.C. Bhargava, to be trapped by this establish- to make web purchases easier North America. consumers who stored their smaller merchants. only a handful of big retailers a pull already in terms of a real-
chairman, Maruti Suzuki India and reduce what the industry Many retailers have longed credentials with the e-com- The credit card companies have signed on so far. The world problem that needs solv-
Ltd, who in an interview said TURN TO PAGE 18 calls “online cart abandon- for a checkout experience sim- merce giant. But shoppers are have already spent years build- offering uses an arrow symbol ing.’’ BLOOMBERG
02 WEDNESDAY, 23 OCTOBER 2019
NEW DELHI
PLAIN
FACTS

INDIA AND ITS UNHEALTHY CHILDREN

Affluent states like Gujarat are failing to ensure their poorer children have a decent diet and that the richer ones are protected from lifestyle diseases
Rukmini S. m MINT GRAPHITI Chart 1 Chart 2
indicator and sub-indicator.
feedback@livemint.com From the six sub-indicators, we India's healthiest children are in India's best and worst states for different measures
composed a final ranking. its extreme north, south and east of child nutrition and health

I
ndia’s healthiest children The diet sub-indicator Jammu & Kashmir Even richer states like Haryana and Measured in multiple ways, The prosperous states of Haryana
live in its northeastern looked at four indicators that 8 Gujarat fail to ensure that children malnutrition is most common and Gujarat are producing acutely
states and Kerala, an analy- deal with healthy eating prac- have a balanced diet in the Gangetic belt and Gujarat iron-deficient and anaemic
sis of a national survey con- tices and the composition of children, especially girls
Himachal Pradesh
7
ducted by the government meals. The malnutrition sub- Punjab Arunachal 5
shows, but children in these indicator looked at 17 indica- 22 Uttarakhand Pradesh
states are also at greater risk of tors that dealt with anthropo- 12 Meghalaya 3 4 26
Haryana 1 2 28
“lifestyle diseases”. However, metric measures of malnour- 19 Sikkim 30 1
NCT of 1 4 28
4 29
some of the most affluent ishment, including both Delhi
3 28 3 3
states—particularly Gujarat, traditional measures such as Rajasthan 9 Uttar 30 27 29 25 1
Pradesh Assam 26 27
Maharashtra and Haryana— height-for-age (stunting) and 28 23 Nagaland 26
18 Bihar 26
perform the worst on both weight-for-age (wasting), and 15 4
16 29 Diet rank Malnutrition Iron deficiency
sides of the spectrum. Gujarat is other measures like waist cir- rank 2
rank
the country’s unhealthiest state cumference and body fat. Gujarat Jharkhand 21 Manipur
West 0-10 0-10 0-10
29 Madhya Pradesh 24 2
for children (See chart 1). The anaemia and iron defi- 26
Bengal
Tripura
13 11-20 5 11-20 4 11-20
Chhattisgarh 5 21-30 21-30 21-30
Released earlier this month, ciency sub-indicator com- Mizoram NA NA NA
the Comprehensive National prised six indicators, while the 25
Odisha
Nutrition Survey (CNNS) col- micronutrient sub-indicator Maharashtra 17
27 Here too, Gujarat features at Otherwise healthy states like Goa States in the northeast that
lected primary looked at deficien- the very bottom in ensuring its and Kerala run the risk of children provide better nutrition to
information on Over 10% of cies comprising 18 children have the required suffering from lifestyle diseases, but children are prone to the rising
the medical Delhi’s teenagers indicators, includ- Telangana micro-nutrients here too Gujarat does even worse risk of obesity
health and allied are hypertensive, ing levels of Vita- 20
5 29
behaviour from and nearly 25% of min A, vitamin Goa
6 Child health rank 3
more than
5- to 9-year-olds B12, zinc, and
Andhra
Pradesh 0-10 26
112,000 children sodium. The non- 5
14 2 4
between the ages in WB have high communicable
11-20 2
1 3 30
Karnataka 21-30
of 0 and 19 years cholesterol disease sub-indi- 10 NA 29 25 28 1 2 27 28
29
1 2 27
28
26 26
across 30 states. cator looked at 19 27 25 5
Kerala Tamil
The survey indicators per- 2 Nadu
expands on the data covered by taining to diabetes, hyperten- 11 4
Micro deficiency Non-communicable Obesity rank
Overall rank is based on the average ranks of six sub-indicators (see chart 2), rank disease rank 4
key past health surveys, includ- sion, cholesterol and other con- which themselves are comprised of various health and nutrition indicators. 0-10 0-10 0-10
ing the National Family Health ditions. Finally, the obesity Nagaland could not be assigned an overall rank because of gaps in the data. 11-20 11-20 11-20
Survey (NFHS), to give a more sub-indicator used a range of 21-30 21-30 21-30
Source: Author's calculations derived from the Comprehensive National Nutrition Survey, 2016-18 NA NA NA
rounded and more detailed anthropometric measures to
look into the health and lives of consider 13 indicators of AHMED RAZA KHAN/MINT

India’s children. weight. The indicators dealt a diversified diet, relative to its months gets a minimum also makes significant progress min D and over 50% of adoles- dren in the north-eastern states high cholesterol (See chart 6).
It includes an expanded with children in three groups— income. In addition to the acceptable diet. in measuring a range of vital cents aged 10-19 are deficient in are less likely to have abnor- Managing these new threats,
range of anthropometric meas- those aged 1-4, those aged 5-9, poorer northern states, richer As a result, India continues to micronutrients in the bodies of zinc. West Bengal is the best- mally low height for their age which are typically associated
ures to comprehensively cap- and adolescents aged 10-19. states such as Maharashtra, make very little progress on children, beyond iron, which performing state on this sub- than those in the northern with richer countries, will be a
ture malnutrition and previ- Unsurprisingly, the better Telangana, Gujarat, and anaemia. The fourth round of can be critical for health. indicator, despite its relatively states. public health challenge for
ously unstudied micronutrient off states, including those in the Andhra Pradesh feature in the NFHS found that the preva- “While deficiencies of indi- lower prosperity. Yet, the states that provide states that are doing a better job
deficiencies.To come up with a south and the northeast have bottom of this distribution. lence among women fell by just vidual micronutrients can have Across a range of new better nutrition to children are of caring for their poor. The
composite health indicator, we India’s healthiest children, and These states do poorly at two percentage points and that an adverse effect, multiple anthropometric measures also prone to the rising risk of greater challenge lies before
aggregated more than 50 indi- the Gangetic belt states have ensuring children receive iron- among men by one percentage micronutrient deficiencies can approved by World Health obesity and the precursors to states failing at both ends.
cators to create six sub-indica- among India’s least healthy rich foods, natural, home-made point between 2005-06 and have a disabling effect on chil- Organization, the northern non-communicable lifestyle This is the first of a three-part
tors—diet, malnutrition, iron children. However, there are or fortified. Even in the rest of 2015-16. Prosperous states, dren and adolescents even states and Gujarat fare the diseases. More than 10% of ado- series on insights from the Com-
deficiency, micronutrient defi- some significant exceptions the number, the numbers are including Punjab, Haryana, when deficiencies are mild to worst. These results also rein- lescents in Delhi are classified prehensive National Nutrition
ciency, non-communicable (See chart 2). For instance, West stark. Just three states ensure and Gujarat have a high preva- moderate,” the report notes. In force the well-studied idea that as hypertensive and nearly a Survey.
diseases, and obesity—and Bengal and Odisha do better at that even one out of five chil- lence of anaemia and iron defi- Gujarat, over a quarter of all heights in India are not purely quarter of 5- to 9-year-olds in Rukmini S. is a freelance jour-
ranked all 30 states on each ensuring young children have dren between the age of 6-23 ciency among children. CNNS children are deficient in Vita- genetically determined. Chil- Sikkim and West Bengal have nalist based in Chennai.

m CRICKET DASHBOARD How remittances drive economic growth

MEN’S TEAM RANKINGS Nikita Kwatra
REUTERS
base for 80 developing coun-
TEST ODI T20 nikita.k@livemint.com tries during 1974-2014, the
# Team Rating # Team Rating # Team Rating
MUMBAI study shows that, on an aver-
age, a 1% increase in remittan-

A
nnual remittances to ces raises real gross domestic
1. INDIA 119 1. ENGLAND 125 1. PAKISTAN 274
low- and middle-in- product (GDP) by about 0.07%
2. NEW ZEALAND 109 2. INDIA 122 2. ENGLAND 266 come countries in the long run.
reached a record high in 2018, The authors do, however,
3. ENGLAND 104 3. NEW ZEALAND 112 3. SOUTH AFRICA 262
according to the World Bank. find that remittances can also
4. SOUTH AFRICA 102 4. AUSTRALIA 111 4. INDIA 261 Such remittances from have some negative effects.
migrants are often associated For instance, remittance may
5. AUSTRALIA 99 5. SOUTH AFRICA 110 5. AUSTRALIA 261 with poverty reduc- discourage remit-
6. SRI LANKA 95 6. PAKISTAN 98 6. NEW ZEALAND 252 tion and improved m tance beneficiaries
access to health and from working, since Policymakers should focus on easing the impediments of
7. PAKISTAN 84 7. BANGLADESH 86 7. SRI LANKA 241 education services SNAP FACT they can be an alter- migrant remittances to developing economies, finds new study.
8. WEST INDIES 80 8. SRI LANKA 81 8. AFGHANISTAN 235 in the migrants’ native to wages. The
home country, but their net effect of remittances, come countries. They suggest that the cost of
9. BANGLADESH 61 9. WEST INDIES 76 9. WEST INDIES 224 effects on overall economic though, remains positive. The authors thus suggest remittances across the world
10. AFGHANISTAN 55 10. AFGHANISTAN 59 10. BANGLADESH 223 output are less known. The extent of this positive that policies should focus on continues to remain high at
A new study authored by impact depends on the income easing the impediments of around 7% of the remittance
MEN’S BATTING RANKINGS Nazneen Ahmad of Weber level of the receiving country. migrant remittances to devel- amount.
State University, and others, The results suggest that on an oping economies by lowering Also Read: Remittances and
TEST ODI T20 finds that remittances do sig- average, the same increase in the transaction costs, as this Domestic Output in the Long-
# Player Rating # Player Rating Player
nificantly increase economic remittances is likely to raise could permanently increase run (bit.ly/2MDRSF8)
# Rating
output. the output more in upper- and the GDP of developing coun- Snap Fact features new and
Based on the World Devel- middle-income nations, than tries more effectively than for- interesting reads from the
1 Steve Smith 937 1 Virat Kohli 895 1 Babar Azam 868
AUS IND PAK opment Indicators 2019 data- in low- and lower middle-in- eign aid. world of research.

2. Virat Kohli 936 2. Rohit Sharma 863 2. Glenn Maxwell 815

IND IND AUS
3. Kane Williamson 878 3. Babar Azam 834 3. Colin Munro 796
NZ PAK NZ
4. Cheteshwar Pujara 817 4. Francois du Plessis 820 4. Aaron Finch 782
m NEWS IN NUMBERS CORRECTIONS AND
IND SA AUS CLARIFICATIONS
AFP

5. Henry Nicholls 749 5. Ross Taylor 817 5. Hazratullah 727 46.85% 11 Mint welcomes comments,
NZ NZ AFG What is it? The percentage of votes won What is it? The suggestions or complaints
by Bolivia’s incumbent President Evo number of home about errors.
MEN’S BOWLING RANKINGS Morales in the country’s general elections Test series the
Readers can alert the
TEST ODI T20 held on Sunday. Indian cricket
newsroom to any errors in the
Why is it important? Morales—who has team has won paper by emailing us, with your
# Player Rating # Player Rating # Player Rating been in power since 2006—needs at least consecutively, as full name and address to
10 percentage points more than rival the India vs South feedback@livemint.com.
1 Pat Cummins 908 1 Jasprit Bumrah 797 1 Rashid Khan 757 Carlos Mesa to avoid a second-round run- Africa series
AUS IND AFG off. With 95% of the votes counted, he has ended on Tuesday. It is our policy to promptly
respond to all complaints.
2. Kagiso Rabada 835 2. Trent Boult 740 2. Imad Wasim 715 that margin against Mesa’s 36.74%. The Why is it important? India had already Readers dissatisfied with the
SA NZ PAK final results will take another week. The secured the record after winning the response or concerned about
interim result has sparked protests amid second match of the Test series earlier this Mint’s journalistic integrity may
3. Jasprit Bumrah 818 3. Kagiso Rabada 694 3. Adil Rashid 702 suspicion that there was a counting fraud. month, and has now wrapped it up with a write directly to the editor by
IND SA ENG Tell me more: The Bolivian constitution 3-0 whitewash. sending an email to
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4. Jason Holder 814 4. Pat Cummins 693 4. Shadab Khan 678
WI AUS PAK president. Morales stood for polls for a most number of straight home Test series Mint’s journalistic Code of
fourth term with special court permission. wins was held by Australia. Conduct that governs our
5. James Anderson 798 5. Mujeeb Ur Rahman 681 5. Mitchell Santner 673
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All data as of 4pm, 22 October 2019 SOURCE: ICC Data and text compiled by Howindialives howindialives.com is a search engine for public data

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 DEALS WEDNESDAY, 23 OCTOBER 2019
NEW DELHI 03

Ujjivan Small
REVERSE PITCH Investors eye social e-comm Finance Bank
Reverse Pitch is like a normal investors pitch, but
gets Sebi’s nod
with the roles reversed. That means the startup
doesn’t present its business to investors but investors
and companies pitch their business concept,
challenges and the like to startups.
startups to target new users for ₹1,200cr IPO
PTI
feedback@livemint.com
“Startups must focus NEW DELHI
on developing Social e-commerce startups have raised $157 mn from venture investors this year
U
jjivan Small Finance
solutions for issues Ridhima Saxena m MINT GRAPHITI Bank has received mar-
While investors look for inter- kets regulator Sebi’s
faced by farmers.” ridhima.s@livemint.com Funding snapshot esting models within the space, (Securities and Exchange
MUMBAI Social e-commerce startup funding doubled in 2019. Meesho is the business-to-business (B2B) Board of India) go-ahead to
KISHORE GANJI the most funded startup, having raised $190 million so far. model attracted the most funding. raise ₹1,200 crore through an

S
Investor ocial e-commerce start- Investments in social No. of Top investments in
Besides Meesho, other B2B com- initial public offer (IPO).
ups, which allow users to e-commerce companies investments social e-commerce panies in this space include Mum- Bounce has Microfinance lender Ujjivan
startups 100,000
leverage their social net- (in $ million) (Right-hand scale) bai-based Shop101 and Bengalu- rides per
Financial Services is the hold-
176 8 (in $ million)
work to buy and sell 7 ru-based GlowRoad. Shop101 had day in ing company of Ujjivan Small

F
armers are the lifeline of any economy and, most products, are catching
importantly, are the source of health and prosper- investors’ fancy, with a growing
ity in any country. However, agriculture is a sec- number of new internet users in
tor that has not got much attention from the startup India starting to transact online.
community in India, though it presents numerous These startups have raised $157
opportunities for startups. Time and again, there have million from venture investors
been constant efforts by the government so that farm- this year, nearly double the
ers can yield maximum benefits in the demand and amount raised in 2018, according
supply chain. There is still so much that needs to be to data from Venture Intelligence,
done and that is where startups can step in to provide a private equity and venture capi-
innovative solutions to the real problems facing the tal data tracker. Meesho, the most
country. funded social commerce startup,
There are two broad areas that startups can focus on. has raised $190 million so far.
One is providing the maximum profit to farmers, while “Online retail has single-digit
the other involves educating them. One can think of an per cent penetration in India and,
ecosystem where farmers, fast moving consumer therefore, has massive headroom
goods (FMCG) companies, and end consumers are all for growth, especially for catego-
on the same platform. In this ecosystem, the product ries such as grocery and home
prices are optimised so that the farmers receive more goods,” said Gourav Bhattacharya,
and FMCG companies eliminate middlemen from the director, Matrix Partners India, an
procurement chain. This will not only benefit farmers, early-stage venture capital firm
but will also ensure that end consumers are satisfied that led a Series A round in social
because of the overall price achieved.This platform commerce startup DealShare ear-
should be developed in such a way that it is centered lier this month.
towards the growth of the farmers, not just in terms of “E-commerce and social com-
money but also educational upliftment in the farming merce are not necessarily differ-
sector. On the same platform, farmers can be educated ent. The recent ‘social’ commerce
about the latest farming techniques, weather forecasts, companies are creating a new dis-
and be given guidance about what their next crop tribution layer for certain ‘push’
should be based on the opportunities available. In this or ‘impulse’ categories, but are
manner, the farmers are supported by education and still very much online retail.
knowhow of the crop and farm so that they can ensure There will be significant new
better yield. online penetration driven by
The problems that the country’s farming sector these new distribution models
faces requires immediate attention and startups must and hopefully, value creation as
focus on developing solutions for these as they affect well,” he added.
everyone in the country. Moreover, the opportunities While the retail market was
in this field are endless as farming is not a niche area expected to grow from $795 bil-
guaranteeing assured returns on investments. lion in 2017 to $1.2 trillion in 2021,
the e-commerce space, at $24 bil-
lion, formed a mere 3% of the
154 7 16 raised $11 million from Kalaari Bengaluru, Finance Bank. The bank, which
Shop 101 190 Capital and Unilever Ventures in users had filed draft papers with the
132 6
Meesho complete 70
157 December. GlowRoad had raised mn kms till
regulator in August, obtained
110 5
$10 million in April in a round led date its observations on 16 October,
88 4 by China’s CDH, with participa- bit.ly/35ScaSV
according to Sebi. The observa-
66 3 14 tion from existing investor Accel tions are very important to any
GlowRoad Partners. company for launching public
44 2
1 “B2B has clearly worked better issues like IPO, follow-on pub-
22 1 11 9 in the social e-commerce space in lic offer (FPO) and rights issue.
3 DealShare Mall91 India. Investors are preferring As per the draft papers, the
0 0
2015 2019* companies that are trying to cre- bank is proposing to undertake
*Year-to-date Source: Venture Intelligence
ate a platform for small businesses an IPO of equity shares of face
NAVEEN KUMAR SAINI/MINT
and individual sellers in tier-2,3 value of ₹10 each, comprising a
overall industry, according to a Search: Insights for Brands Report, cities and beyond, than investing fresh issue of shares aggregat-
February report by Deloitte and said over 70% of all smartphones- in startups that are active in the ing up to ₹12,000 crore. The
Retailers’ Association of India. related searches come from small business-to-consumer (B2C) proposed issue includes reser-
The e-commerce market is towns. space. That is mainly because B2B vation of equity shares aggre-
expected to reach $84 billion by “We believe that for deeper startups are adopting a platform- gating up to around ₹120 crore
2021, driven by growing internet penetration in the country, the neutral approach that connects for subscription by eligible
penetration and smartphone e-commerce model has to be dif- sellers to potential customers on shareholders of Ujjivan Finan-
usage in the country, the report ferent from what it is for the first- social media platforms, unlike cial. The proceeds of the issue
added. generation internet users. The B2C startups which are creating a will be utilized towards aug-
According to social media-led menting the company’s capital
Sajith Pai, director, SMALL TOWNS DRIVE INTERNET USE shopping destina- base to meet future require-
Blume Ventures, tion that will ments.
the growth of social THE e-comm market GROWTH of social OVER 70% of all eventually com- Ujjivan Financial Services
commerce is being is expected to reach
$84 bn by 2021,
commerce is being
driven by a surge of
smartphones-related
searches come from
pete with bigger had raised ₹300 crore in Feb-
driven by a surge of driven by growing new internet users small towns, shows a e-commerce ruary from a clutch of investors,
new internet users internet penetration from small towns report firms such as including HDFC Life and Sun-
from small towns, Amazon and Flip- daram MF, in a pre-IPO place-
who were still not kart” said Abi- ment. The funding valued the
well versed with the ways of tradi- new internet users in tier-2, 3 and nand Natarajan, assistant director, company at around ₹2,000
tional e-commerce. 4 cities and rural India need a ver- Rothschild and Co., who oversees crore. After the IPO, Ujjivan
“While there are multiple rea- nacular, easy-to-use platform that technology investment banking in Small Finance Bank will join
sons why social e-commerce is offers the best price, along with an India. listed peers like AU Small
attractive, it all boils down to one interface which is connected to “Even though Meesho has done Finance Bank. Earlier this
key factor, which is to do with get- their community or based on the very well, it is just one flavour of month, Kerala-based CSB
ting non-traditional users to recommendation of friends,” said social commerce and there are Bank, formerly known as Cath-
transact in a manner that is crafted Vineet Rao, chief executive officer many different types of models olic Syrian Bank, received
for them,” said Pai. and head of technology, Deal- that are emerging within the Sebi’s go-ahead to launch an
In May, a Google report, Year in Share. space’, said Pai. initial share-sale.
04 WEDNESDAY, 23 OCTOBER 2019
NEW DELHI MARK TO MARKET

S&P BSE Sensex Nifty 50 Nifty 500 Nifty Next 50 Nifty 100 S&P BSE Mid-cap S&P BSE Small Cap
CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE

38,963.84 -0.85 11,588.35 -0.63 9,448.25 -0.35 28,163.95 0.53 11,749.90 -0.48 14,407.36 -0.09 13,190.37 0.48
PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN

39,298.38 39,233.40 11,661.85 11,657.15 9,479.20 9,481.05 28,014.15 28,088.00 11,806.20 11,806.05 14,420.25 14,461.05 13,126.83 13,151.01
HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW

39,426.47 38,924.85 11,714.35 11,573.65 9,526.80 9,435.85 28,379.95 28,049.40 11,863.55 11,733.50 14,521.18 14,394.49 13,235.68 13,142.48

Hunger for cash

SHORT TAKES
How Infosys’s accounting stands up
Yield on China’s government bonds has risen
amid waning bets on intense policy easing.
3.5

3.4
3.4
Yield on 10-year govt bonds (in %) vis-à-vis whistleblowers’ charges
3.3 Mobis Philipose & R. Sree Ram But what about the charges regard- somewhat reflects the aggressive rev-
3.2
3.2 mobis.p@livemint.com ing aggressive accounting? Do Info- enue recognition policies the whis- Payment due? Free cash flow as
a % of net profit
Receivables and unbilled
revenues as a % of trailing
sys’s recent financial statements givetleblowers spoke about. While receivables and (Left-hand scale) 12-month revenue

I
3.1 unbilled revenue of 100 30
nfosys Ltd’s shares fell 16.2% on any clues about this? The company answered that there 26.7
3 the National Stock Exchange on Interestingly, in the company’s was no change in its accounting pol- Infosys has spiked in
23.32
Tuesday, even after investors had conference call with investors earliericy, but there were a few clients where FY20, its free cash flow 80 24
2.9 generation has more or
22 Apr 22 Oct Several a day to sleep over the news of a this month, an analyst had ques- there was a difference in timing with
Source: Bloomberg bank less remained steady. 60 78.75 78.85 18
branches,
whistleblowers’ complaint, alleg- tioned the management about an regards to revenue recognition and
SATISH KUMAR/MINT ATMs could ing aggressive accounting practices unusual jump in unbilled revenues actual billing milestones reached. 40 12
be shut as and attempts to blindside the board. and whether there was a change in This is true for all IT firms, and in
unions A number of senior Infosys’s case, it may be
China central bank boosts protest
analysts covering the QUESTION MARK? pronounced because
20 6
against
liquidity before payments mergers stock have refrained the proportion of fixed- 0
FY17 FY20
0
bit.ly/33U3rhe
from putting out notes AN analyst had THIS is reflected in ALSO, Infosys’s free price projects had risen Source: Company (Till Sep)
China’s central bank used open-market opera- to clients on the devel- questioned Infosys
about an unusual
the rise in fixed-price cash flow generation
projects, where has remained steady
to more than 53% of
tions to inject the largest amount of cash into opment, saying that jump in unbilled revenue recognition at around 79% of revenue in FY19, from NAVEEN KUMAR SAINI/MINT

the banking system since May, as forthcoming the content of the revenues this year norms are different net profit 49% in FY17. With large The key then is to check if the analyst of a domestic institutional
corporate tax payments tighten liquidity con- complaint letters can fixed-price projects, increase in account receivables and brokerage firm, requesting anonym-
ditions. The People’s Bank of China on Tuesday be categorized as the company exercises unbilled revenues is resulting in ity.
net injected 250 billion yuan ($35 billion) via hearsay at this point in time. accounting policy. Unbilled revenue discretion on when to recognize reve- lower cash flow generation. As the From the available data, claims of
seven-day reverse repurchase agreements, In that case, what explains the is revenue that is recognized before nues. chart alongside shows, Infosys’s con- malfeasance are exaggerated, said
according to a statement. There were no facili- sharp drop in the company’s shares? being billed to the client. Besides, the company’s recent version of net profit into free cash most analysts Mint spoke to. The
ties coming due on Tuesday, and the central To start with, the markets have been In terms of incremental sales, acquisitions, such as HIPUS and flow has remained fairly steady at main worry for investors is the
bank kept the rate steady at 2.55%. China’s fragile, and investors now tend to act unbilled revenues jumped to 24-25% Stater, have higher receivable posi- about 79% in the first six months of alleged attempt to hide information
10-year bond yield was little changed at 3.22%. first and ask questions later. Besides, in the first six months of this fiscal tions, and are bound to impact overall FY20. from the company’s board. Another
The central bank is acting to fine-tune inter- not so long ago, Infosys had a murky year, compared to 10-11% in FY19, the trade receivables of the company. But “If, as the complainant alleged, rev- tussle between the board and the top
bank liquidity conditions while it keeps tussle between the board and its man- analyst had pointed out during the they also have high account payables, enue recognition was inappropriate, management is the last thing inves-
broader monetary-policy settings stable, seek- agement. So, fears of a repeat were call. which nets out when it boils down to this would have reflected in lower tors want for a company that has
ing to keep credit growth appropriate while enough to hit investor sentiment. One way to look at this is that it cash flow generation. cash flow conversion ratios,” said an barely healed from a similar episode.
avoiding rapid debt build-up as the economy
slows. The move comes before a 24 October
deadline for companies to pay tax, which typi-
cally increases the demand for cash and tight-
ens liquidity. BLOOMBERG

As Bajaj Finance mirrors the demand Lead price spurt amid weak auto
All seems well
Emerging market benchmark indices are near
their strongest levels since August.
EM index
slowdown, lights to dim on valuations sales a concern for battery firms
MSCI equity Bloomberg
2
MSCI currency Barclays debt
Aparna Iyer vertical, which deals in discretion- man of the company, had warned of Vatsala Kamat
1
0 aparna.i@livemint.com ary spending. Consumer B2B grew a dramatic slowdown. vatsala.k@livemint.com Hot metal 170
MCX Lead (in /kg)
0
by just 19%, far lower than the 24% a Ironically, the warnings on slow- An unexpected 164
0

T B
-1 he festive season is not all year ago. Simply put, Indians are down and pressure on asset quality attery makers face a surge in lead price
in early June, which 160
-1 bright this time with muted not buying that latest gadget or have been coming from Bajaj double whammy—fall-
-2 looks unabated in
consumption demand, and appliance with the fervour seen ear- Finance. Last quarter, the company ing sales and a 30% rise
-3 the near term, can 150
consumer lender Bajaj Finance lier. This is worrisome, more so, as had said the slowdown was affect- in lead prices in the past three adversely impact 144.35
-4 Ltd’s performance didn’t impress the ongoing festival season was sup- ing the payment capacity of bor- months. This poses risks to the the profit margins
investors. If the first quarter showed posed to inspire con- rowers. The percent- companies’ profitability. The of battery makers. 140
-5
signs of a demand slowdown, troub- sumers to loosen their The segment age of 30-day overdue concern is evident from the 7%
-6 les have piled in the second quarter purse strings. most affected loans had risen for fall in shares of Exide Indus- 130
-7 for the non-banking financial com- Rajeev Jain, manag- was its consumer most products on a tries Ltd and Amara Raja Bat-
1 Aug 21 Oct pany (NBFC). ing director of Bajaj B2B vertical, sequential basis. This teries Ltd since 1 October.
120
Base value taken as zero Source: MSCI, Barclays, Bloomberg Bajaj Finance reported 38% Finance, said the has continued even in Though sales have declined 19 Oct 2018 22 Oct 2019
which deals in Source: Bloomberg
SATISH KUMAR/MINT growth in its consolidated assets pickup in disburse- the September quarter. steadily over the past 12
under management (AUM) for the ments during the cur- discretionary In fact, excluding months, stable demand from NAVEEN KUMAR SAINI/MINT
spending
EMs next ‘asset bubble’ September quarter, lower than 41% rent festival season is
from the previous quarter. Exactly not living up to previ-
home loans, all other
loan categories showed
the replacement market and before interest, tax, deprecia- across auto segments—pas-
lower year-on-year lead pri- tion and amortization). senger vehicles, two-wheelers
amid yield hunt and debt a year ago, when the credit crisis hit ous years, but he was a rise in delinquencies ces, till recently, managed to But things have now taken a and commercial vehicles—has
NBFCs, the lender’s AUM growth hopeful that the next one week will from a year earlier. Some categories, offset the impact of falling turn for the worse, and sud- dimmed hope of better offtake
A look at the price action and you’d be forgiven was at the same level. In short, busi- be different. “While I would not be such as loan against property and demand. denly. The 30% spurt in lead even in the second half.
for thinking all was well in emerging markets ness doesn’t seem to have able to hazard a guess on third quar- auto loans, showed comparatively Demand from the replace- prices since end-May has sur- Further, if vehicle sales con-
(EMs). While indices of stocks, bonds and cur- improved. ter so soon, the next few weeks are sharper deterioration. ment market was largely sta- prised analysts. Also, the surge tinue to fall, it would have an
rencies hover around their strongest levels Deceleration was witnessed critical,” Jain said over the phone. It is clear that the average Indian ble on the back of robust auto comes at a time when auto adverse impact on replace-
since early August, political crises from Ecua- across the board, but the segment Bajaj Finance has however seen is finding it harder to pay EMIs sales between original equip- ment market sales as well.
dor and Argentina to Turkey, South Africa most affected was that of its con- the slowdown coming. Four (equated monthly instalments), but FY16 and FY18. Battery firms ment sales are yet Battery firms have had it
and—most recently—Chile and Lebanon are sumer business-to-business (B2B) months ago, Sanjiv Bajaj, vice chair- the levels are not alarming. Even so, Auto batteries, have had it tough to pick up and, tough so far this fiscal year,
reminding investors of the risk of getting too the rise in delinquencies only adds which account so far, with noth- hence, business with nothing to write home
deep in some of the highest-yielding markets. to the narrative of the ongoing for over half the ing to write home for battery makers about even in home inverter
For David Levy, chairman of the Jerome Mapping the slowdown slowdown. sales of both the is yet to improve. and telecom battery sales.
As measures of demand slowdown go, Bajaj Finance is blinking red in about in home
Levy Forecasting Center, the combination of Investors worried over the slow- listed companies, In fact, analysts And, if all this is not enough
the clamour for higher returns and ballooning some verticals as a sign of slowing consumption. down impact drove the Bajaj are typically inverter, telecom forecast a revenue for investors to tread with cau-
debt levels in the developing world is reminis- Loans with 30-day 8 Finance stock down by 2.5% on replaced in battery sales drop, albeit in sin- tion, both Exide Industries
1.6
overdue payment as 1.35
cent of the US housing market before the a % of total book
Tuesday. But the stock still trades at three-four years. gle digits (4-6% and Amara Raja also face the
5.68 5.97
global financial crisis. “This cycle’s asset bub- (Left-hand scale) 6 1.2 a steep multiple of seven times its And lead prices year-on-year) for challenge of transitioning to
ble is the emerging-market sector,” said Levy. Two-and three-wheelers
0.74 1.14 estimated book value for FY21. Part have been cascading since the both Exide Industries and lithium-ion batteries over the
Loan against property
“In the next recession there will be serious 4 0.8 of this premium is simply because middle of 2018, giving a leg-up Amara Raja in Q2 FY20. next few years. The paradigm
(Right-hand scale) 0.84
problems for emerging markets.” The turmoil Consumer durables most other NBFCs are either bat- to battery makers’ profits. While the maximum impact shift in technology could keep
was underscored when Chile, which has Latin Lifestyle
0.67 2.3 0.4 tling a rise in delinquencies or a Lead prices comprise of the rise in lead prices will be valuations suppressed, with
2
America’s highest-rated debt, was engulfed in Digital products 0.62 liquidity crunch. For Bajaj Finance, 50-60% of the cost of making felt in Q3, it would dampen the 16-18 times price-to-earn-
protests. That prompted the government to 0.81 its asset-liability profile is superior a lead-acid battery. That’s how profitability even in Q2. Ebitda ings ratio for the estimated
0 0
declare a state of emergency, triggering a drop to most peers. But perhaps, in light both Exide Industries and margin for the quarter is likely FY21 earnings looking steep,
Q2 FY19 Q2 FY20
in the peso and in its stocks. BLOOMBERG of the slowdown, its valuations may Amara Raja clocked an to be flat on an annual basis. given the risk to growth and
Source: Company
prompt a relook. increase in Ebitda (earnings The 50-60 day inventory profitability in the near term.
SANTOSH SHARMA/MINT

Half the world’s banks too

weak to survive downturn
More than half of the world’s banks are too
weak to survive a downturn, according to a sur-
vey from consultancy McKinsey and Co. A
Slowdown makes its presence felt in Kotak Mahindra Bank’s loan book
majority of banks globally may not be econom-
ically viable because their returns on equity Aparna Iyer 15.3% for the September quarter, the bank, said that in times of Q2 FY20. Clearly, provisioning
aren’t keeping pace with costs, McKinsey said aparna.i@livemint.com a steady fall for the third straight Huffing Special mention
accounts (in ₹ crore)
Loan growth (in %)
(Right-hand scale) stress, the key is to get the pricing was not enough in the wake of
in its annual review of the industry released on quarter. The strongest growth and hurting 500 25 of the risk right. Further, the len- increase in bad loans.

K
Monday. It urged firms to take steps such as otak Mahindra Bank Ltd’s
developing technology, farming out operations blockbuster net profit
and bulking up through mergers ahead of a growth of 51% not only
potential economic slowdown. beat Street estimates, but seems
“We believe we’re in the late economic cycle to have vindicated the near 6%
and banks need to make bold moves now rise in the company’s stock in the
because they are not in great shape,” said past month.
Kausik Rajgopal, a senior partner at McKinsey. The fact that it came on the
“In the late cycle, nobody can afford to rest on back of a 25% increase in core
their laurels.” The decade since the global interest income and an expan-
financial crisis has seen a wave of innovation in sion in net interest margin
financial services, bringing new competitors should also boost sentiments.
from fintech startups to giants like Apple Inc. But beyond that, the private
and Alphabet Inc.’s Google. Banks have pon- sector lender’s performance had
dered whether to compete with, partner or little to offer. Its loan growth
acquire some of these newcomers. BLOOMBERG decelerated year-on-year to
came from mortgages, while
commercial vehicle loans disap-
pointed. Even disbursal to small
businesses didn’t perk up much.
What’s more is that Kotak
Mahindra Bank saw its delin-
quencies increase. Optically, its
bad loan ratios passed muster,
even though they rose from the
year-ago period. What should
worry investors is that special
mention accounts, which are the
first signs of stress, have risen for
the third straight quarter. These
accounts stood at ₹431 crore as of
September end.
Kotak Mahindra 431 der is willing to lend to good Analysts say that deposit
Bank has reported 400 20 credit even in commercial real growth, too, had slowed in the
22.9
a slowing loan estate—a sector considered risky September quarter. But the man-
300 15
growth and an 15.33 by banks and the banking regula- agement has clarified that the
increase in special tor as well. In the September bank wants to improve the gran-
200 10
mention accounts, quarter, the exposure to com- ularity of deposits, and the
which is a sign of
emerging stress.
100 5 mercial real estate comprised 2% increase in current account and
72 of the bank’s loan book. savings account deposits should
0 0
Source: Company Q4 FY18 Q2 FY20
In times of rising risk, beefing give some comfort.
provisions is what Kotak Mahin- The Kotak Mahindra Bank
SATISH KUMAR/MINT
dra Bank has been doing in the stock didn’t move much on Tues-
Of course, as a percentage of ratios are far superior to its peers. past quarters. The lender contin- day and trades at a multiple of
the total loan book, they are still The commentary from the ued with the practice in the Sep- five times its estimated book
a meagre 0.2%, a level most peer management on asset quality tember quarter as well. But the value for FY21, making it one of
banks cannot boast about. Also, didn’t offer much clarity. Dipak provision coverage ratio fell from the most expensive private sector
Kotak Mahindra Bank’s bad loan Gupta, joint managing director of 67% in the June quarter to 64% in bank stocks.

Mark to Market writers do not have positions in the companies they have discussed here
06 WEDNESDAY, 23 OCTOBER 2019
NEW DELHI CORPORATE

Toyota to venture into mass EXPERT

VIEW
market electric vehicle space ANDY MUKHERJEE

Respond to this column at

feedback@livemint.com

Japanese carmaker is set to introduce a compact EV in India in next few years in alliance with Suzuki
SOME PRIVATE TIME
Malyaban Ghosh including India, for more incen-
COULD BE EXACTLY
malyaban.g@livemint.com
TOKYO
tives for hybrid vehicles as it con-
siders the technology to be an
interim step towards full electrifi-
WHAT INFY NEEDS

T
oyota Motor Corp. plans cation of vehicles.
to introduce a compact Only petrol and hybrid vehicles M.S. Dhoni
is the
electric car in India in will not be sufficient to meet the riskiest
the next few years in alli- stringent fuel efficiency norms and celebrity to
ance with Suzuki Motor it would have to provide battery- search for
Corp., Shigeki Terashi, executive electric and hydrogen fuel cell elec- online:
McAfee
vice-president and member of the tric vehicles according to the
board of Toyota, said on Tuesday. demand of specific markets, Tera- bit.ly/35ZfU4P

“Suzuki has a larger share of the
Indian market and we have
announced our collaboration with
them. We will introduce a compact
battery electric vehicle (EV) but I
can’t divulge anything more right
now. Some of the OEMs (original
equipment manufacturers) have
already introduced electric vehi-
cles in India and we don’t want to
be left behind,” Terashi said in
Tokyo ahead of the motor show
that officially opens on 24 October.
Terashi was referring to the elec-
tric car based on the Wagon R
hatchback being developed by Suz-
shi said. Toyota’s new EV will have
a range of 100 kilometres on a sin-
gle charge. “Users of EV will have to
be patient when it comes to charg-
ing time and price, compared to
internal combustion vehicles.
Compared to hybrid, electric vehi-
cles require 50 times bigger battery
and we are working with various
partners such as Panasonic, China’s
BYD and CATL to improve our bat-
Shigeki Terashi, executive vice-president and member of the board of Toyota. BLOOMBERG tery technology,” he said. As a private company, Infosys could rediscover its moorings and
Toyota, in its bid to become a find a new purpose in a digital world where clients increasingly
hybrid models, both companies mainly used for last mile connectiv- ing partnerships with other compa- mobility solutions provider, also want nimble, cloud-based, on-demand software, rather than
now plan to jointly develop autono- ity. With governments worldwide nies to develop EV technology. aims to supply various technologies clunky, on-premise enterprise solutions. MINT
mous driving technology. formulating stringent rules to curb Toyota has been the leader in such as hybrid systems to other

I
uki in India. Toyota has a small market share vehicle emissions, the Akio Toyo- hybrid and plug-in hybrid power- companies. Earlier this year, it ndia’s best-known software exporter is facing an impossible
Toyota and Suzuki first part- in India but “it is one of the offered other companies trinity of sorts: Out of sales, margins and governance, Infosys
nered in 2017 to develop affordable markets which is in the ELECTRIC DEBUT free access to its hybrid Ltd can hit only two goals at a time.
hybrid and electric vehicles for the mind (of the top execu- powertrain system. Or so it would appear from yet-to-be-proven whistle-blower
Indian market. tives of the company TOYOTA to unveil a THE EV will go on THE new electric TOYOTA is also Toyota’s key rival, allegations against chief executive officer (CEO) Salil Parekh
Toyota had then agreed to sup- when it comes to launch- sub-compact EV this
week to mark its
sale in the second
half of 2020 and will
vehicle will have a
range of up to 100
exploring tie-ups
with other
Volkswagen AG, show- and chief financial officer (CFO) Nilanjan Roy that they used
ply its hybrid technology to Suzuki ing battery electric vehi- debut in the global be mainly used for kilometres on a single companies to cased its first electric car, hyper-aggressive accounting practices to hide from investors
as part of the alliance. Subse- cles)”, Terashi said. mass market EV sector last mile connectivity charge develop EV tech the ID.3, in September. the lack of profitability on large deals.
quently, the companies agreed to Toyota will, mean- Toyota is also trying to The stock tanked as much as 16% in Mumbai after the letter
sell each other’s products in India while, unveil a sub-com- improve its hydrogen fuel was published by the Deccan Herald.
and overseas markets. pact electric vehicle this week to da-led company is gearing up to trains but has lagged rivals such as cell technology and will focus on It’s a deja vu moment for co-founder and non-executive
In August this year, the compa- mark its debut in the global mass meet those challenges with diverse China’s SAIC Motor Corp. and the heavy commercial vehicle seg- chairman Nandan Nilekani, who returned to the Bengaluru-
nies deepened their ties by buying market electric vehicle industry. technologies—hybrid and plug- in France’s Renault SA in developing ment towards this end. based company two years ago during a previous crisis—
small stakes in each other. Apart The vehicle will go on sale in the hybrid, battery-electric and hydro- electric vehicles. Toyota has also The writer is in Tokyo at the invi- sparked by a set of different anonymous charges against
from manufacturing electric and second half of 2020 and will be gen fuel cell. Toyota is also explor- been lobbying with governments, tation of Toyota Motor Corp. Parekh’s predecessor, the former SAP executive Vishal Sikka,
who was accused of impropriety in a $200 million acquisition
in Israel.
That scandal culminated in an unseemly spat between Sikka
and the board on one side and N.R. Narayana Murthy, another
of the company’s co-founders, on the other. Sikka resigned in
m SHORT TAKES Infy in damage control mode as stock plunges August 2017. The new board exonerated him, but by then the
damage was done.
It’s been a slow road to recovery. At
Jio, Vodafone Idea, Airtel pay govt It might not be a one-year-forward price-to-earnings
FROM PAGE 1 “The disclosure of such a a bad idea for a multiple of 20 times at the end of
over ₹4500 crore in spectrum dues complaint is driven by how
buyout fund to September, Infosys’s valuation is now
Analysts expect the allega- material the information is. almost 50% higher than at the depth
New Delhi: Private telecom operators Reliance Jio, Vodafone Idea tions will remain an overhang Right now there are a bunch of step in and take of the last crisis. The risk is of a repeat
and Bharti Airtel have paid the telecom department over ₹4,500 on the Infosys stock. allegations, but one does not Infy out of the of that slump.
crore in spectrum dues in the last three to four days, according to “We expect the stock to be how material these are. Fur- markets’ glare If investors start to believe that the
people familiar with the matter. The payments came in before the volatile till the company clari- ther, there is no aggregate culture at the software services pro-
due date, they said. fies on these complaints,” bro- quantification of the allega- vider, once seen as India’s most trans-
While Mukesh Ambani-led Reliance Jio has paid ₹1,133 crore to kerage firm Motilal Oswal said tions. The current board has parent company, is beyond redemption, expect a durable
the department of telecom, Vodafone Idea has made ₹2,421 crore in a note. experience in dealing with deepening of the 10% discount at which Infosys traded against
payment towards spectrum dues. Sunil Mittal’s Bharti Airtel has Analysts also fear that alle- whistleblower letters,” she larger rival Tata Consultancy Services Ltd, or TCS, at the end
paid ₹977 crore. Taken together, these three players have paid over gations of unethical account- said. of last month. Since the company’s American depository
₹4,531 crore towards spectrum dues late last week. PTI ing practices could lead to a However, other proxy advi- receipts trade in New York, there’s also the threat of expensive
de-rating of the stock. sory firms said that a com- class-action suits.
“The key allegation is many Salil Parekh, chief executive of Infosys. The company has dealt pany’s disclosures on such The allegations are being evaluated by the audit committee
Court issues production warrant recent large deals wins have with whistleblower issues in the past as well. MINT events should not be and the board. The CEO and the CFO won’t be a part of those
negligible margins and reve- restricted based on materiality deliberations. Whatever the truth of the whistleblower’s com-
for Singh brothers in RFL case nue and cost recognition have ogy company Panaya. The epi- records of its employees, trig- of allegations since they point plaints, another protracted governance saga could be just as
RAMESH PATHANIA/MINT
not adhered to accounting sode eventually saw the exit of gered by a case filed by Jack to important company poli- damaging.
norms to help improve near- then CEO Vishal Palmer, a former cies such as accounting prac- It might not be a bad idea for a buyout fund to step in and
term profitability. The issue is Sikka, although Analysts fear that U S - b a s e d tices. take Infosys out of the glare of the public markets. As a private
likely to remain an overhang he was exoner- allegations of employee, in 2011 “Materiality is not the right company, it could rediscover its moorings and find a new pur-
pending further clarity,” bro- ated by the board unethical in an Alabama measure when it comes to a pose in a digital world where clients increasingly want nimble,
kerage firm Jefferies said in a after his depar- accounting court. policy matter. If accounting cloud-based, on-demand software, rather than clunky,
note on Tuesday. ture from the Hetal Dalal, practices are being ques- on-premise enterprise solutions.
practices could
To be sure, this is not the company. chief operating tioned, then materiality will be At $12 billion in the fiscal year that ended in March, Infosys
first time Infosys is dealing In 2013, Info- lead to a de-rating officer at proxy immaterial because you do not revenue is nowhere close to Sikka’s 2020 target of $20 billion.
with a major whistleblower sys agreed to pay of the stock advisory firm know what other policies too An operating margin of less than 23% was lower than the near
issue. $34 million to IiAS, said one will are not being followed,” said 26% at TCS, according to data compiled by Bloomberg.
In 2017, a complaint settle a civil law- have to wait to see J.N. Gupta, founder and man- After a period of rehabilitation, Infosys should be able to
emerged alleging irregulari- suit with the US government the impact of the allegations as aging director at Stakeholders deliver all three targets: sales growth, margins and good gov-
ties in the $200 million acqui- that charged it with visa fraud their materiality has not been Empowerment Services. ernance. Some private time could be just what it needs to get
New Delhi: A Delhi court Tuesday issued production war- sition of automation technol- and errors in immigration quantified yet. swaraj.d@livemint.com fixed. BLOOMBERG
rant against former Fortis Healthcare promoters Malvinder
Singh and his brother Shivinder, arrested for allegedly mis-
appropriating funds of Religare Finvest Ltd (RFL), for settle-
ment talks on Wednesday. The court has put up the matter
on 24 October for hearing arguments on the interim bail
application.
Chief Metropolitan Magistrate Deepak Sherawat issued
the orders during the hearing of interim bail applications of
the Singh brothers. Malvinder and Shivinder, who were
Whistleblower allegations at Infosys—To trust or not?
arrested by the Economic Offences Wing (EOW) of the Delhi Shriram Subramanian could be attributed to business of ₹10 crore per year. In the 2019 Shardul Amarchand Mangaldas
Police on 11 October and 10 October respectively, have feedback@livemint.com decisions taken by the executive Plan, if the company underper- to conduct an independent
sought interim bail from the court on 18 October saying they leadership, as long as they did formed, there was a possibility investigation. If one were to

wanted to settle the case with the complainant. PTI
PMC Bank case: Court extends HDIL
promoters’ ED custody till 24 Oct
Mumbai: A Mumbai court on Tuesday extended the Enforcement
Directorate (ED) custody of Housing Development Infrastructure
Ltd (HDIL) promoters Rakesh Wadhawan and his son Sarang
Wadhawan, arrested in connection with ₹4,355 crore Punjab and
Maharashtra Co-operative (PMC) Bank scam, 24 till October.
REUTERS The ED produced HDIL chair-
man and managing director
Rakesh Wadhawan and his son
before special Prevention of
Money Laundering Act court
judge P. Rajvaidya, after their
remand ended on Tuesday. It
sought to extend the custody of the
duo to probe them further in con-
nection with the scam. The money
trail of proceeds received from the
bank and properties derived from
the same were yet to be ascer-
tained, the ED said. PTI
T
he recent whistleblower not circumvent internal proc- that no RSUs would be vested. fault the company till now, it is
complaints have dented esses. The Nominations and Remu- on the tardy response to inves-
Infosys’s stellar reputa- The third bucket is about neration Committee had flexi- tors. The fact that it was the
tion. Given the corporate gov- over recognizing revenues, hid- bility in determining the com- media and not that company
ernance issues at many Indian ing costs and consequently ponents of the performance that first reported the whistle-
companies, investors have been boosting margins and profits. It parameters and also the num- blower complaints to investors
paying a premium for compa- has also been alleged that infor- ber of RSUs vesting. If one were will increase the scrutiny on the
nies with good corporate gov- mation was withheld from the to seek out the motivating fac- company. Investors will be
ernance practices. Historically, auditors and the company’s Allegations of malpractices are also made against Infosys CEO tors for why the senior manage- expecting that the board act
Infosys held on to the highest board. The allegations of mal- Salil Parekh and CFO Nilanjan Roy (pictured). MINT ment, including the CEO, with greater alacrity and ensure
standards in cor- practices were would want to show enhanced that investigations are con-
porate govern- COMMENTARY also made against during the quarterly results will total shareholder returns, reve- revenue growth and higher cluded quickly, and the results
ance, and seemed the CEO and the be broken. Infosys can ill afford nue growth and operating mar- margins, one needs to go of the investigations are shared
to have maintained its standing CFO Nilanjan Roy . This bucket such a loss of trust. Additionally, gins. The 2015 time-vested through the details of the 2019 publicly. Investors also need to
since the new CEO Salil Parekh of allegations is very grave and management bandwidth could stock incentive plans compen- plan. The company seems to be assured that internal proc-
took over in the second half of deserves the highest and urgent be spent on defending class sated employees even when the have acted in due process by esses are robust to mitigate
FY18. attention from the company. action suits. company was not performing bringing the whistleblower risks of misreporting and
The whistleblower com- The whistleblowers also claim It should be noted that the well. It was thought that the complaints to the notice of the accounting malpractices, as
plaints can be broadly catego- to have evidence, including 2019 Stock Ownership Pro- 2019 performance-linked plan audit committee, and after the they hope that Infosys will be
rized into three buckets. The emails and voice recordings. If gramme was approved by would ensure that stock owner- board meeting of 11 October, the able to come out of this storm
first bucket comprises seem- auditors and the board were not shareholders in June. Unlike ship by employees based on audit committee has consulted unscathed.
ingly trivial complaints on the presented the true picture, then the 2015 ESOP plan, which was company performance, would with EY, as the independent Shriram Subramanian is
CEO’s travels and deductions the investors were also not pre- time-vested, the 2019 stock align with shareholders’ inter- internal auditors, on terms of founder and managing director,
on taxes. The second bucket sented the true picture. The vesting was purely perform- ests. From the 2019 Plan, the reference for the investigation. InGovern Research Services, a
relates to bidding for contracts trust that investors have on the ance-vested, linked to multiple CEO was also granted restricted On 21 October, the audit com- corporate governance advisory
with low or nil margin, which numbers presented to them performance metrics, mostly, stock units (RSUs) with a value mittee retained the law firm of firm.
08 WEDNESDAY, 23 OCTOBER 2019
NEW DELHI CORPORATE

ANIRUDDHA CHOWDHURY/MINT

Axis reports loss of ₹112 cr Bharti Infratel, Indus

Towers merger faces
on one-off tax adjustment govt clearance delays
Navadha Pandey
navadha.p@livemint.com
The bank takes a hit of ₹2,138 cr as it restated DTA to new corporate tax rate of 25% NEW DELHI

T
he proposed merger
Gopika Gopakumar between Bharti Infratel
gopika.g@livemint.com Ltd and Indus Towers
MUMBAI Ltd cannot be completed by 24
The findings of the forensic October as the company is still

audit into DHFL can
potentially scupper the debt
restructuring plan.
DHFL loaned
₹14,000 cr to
group cos with
paltry profits
FROM PAGE 1
opments, the proposed reso-
lution plan of DHFL may run
into serious trouble,” said a
banker aware of the audit
report.
In August, DHFL said its
draft resolution plan submit-
ted to lenders spares credit-
ors from having to take hair-
cuts on principal payments.
Lenders are currently
assessing the resolution plan
under Reserve Bank of
India’s (RBI) 7 June circular
on resolution of stressed
assets.
According to the RBI circu-
lar, 75% of lenders by value of
the total outstanding credit
facilities to a stressed com-
pany and 60% by number
must agree for an inter-cred-
itor agreement to be binding
on all lenders.
On 19 October, the ED con-
ducted searches at 14 prem-
ises of DHFL. The searches
were in relation to a case of
money laundering in a land
deal involving Mirchi.
Mint reported on 19 Octo-
ber that DHFL had allegedly
given loans to the tune of
₹2,100 crore to Sunblink over
nine years.
In a regulatory filing on 18
October, DHFL said: “…in the
normal course of its busi-
ness”, it “has funded certain
projects of various companies
which were executed in and
around Mumbai. The dues of
₹2,186 crore comprise the
principal amount and the
interest payable on the prin-
cipal sum. On account of cer-
tain corporate actions under-
taken with/by Sunblink, as on
A
xis Bank Ltd incurred a awaiting a key government
loss of ₹112 crore for Trump approval, Bharti Infratel chair-
Tower
the quarter ended 30 builder
man Akhil Gupta said, adding
September, due to a dumps that a new committee will
one-time hit of ₹2,138
crore as the value of future relief
luxury for
cheap
meet on Thursday to evaluate
“all possible options” for
homes as
through deferred tax assets (DTA)
will fall because of the corporate tax
India slows
future strategy.
“We had announced the Airtel will hold between 33.8%
bit.ly/33Rr0ak
rate cut. Adjusted for this extraordi- merger in April 2018. The long and 37.2% in the new firm. MINT
nary item, net profit would have stop period was for 18 months,
surged 156% to ₹2,026 crore from that is till 24 October. This companies had agreed to
₹789.61 crore a year earlier. required many closing condi- merge their businesses to cre-
Axis Bank said it has been fully tions to be met, including gov- ate the world’s largest tower
adjusted through Q2FY20 finan- ernment approvals. We have company, barring state-owned
cials, which has impacted the earn- received all approvals except China Tower.
ings significantly. the one pertaining to FDI (for- The proposed combined
“The hit that we have taken is eign direct investment) entity will own more than
because of restatement of DTA. enhancement from depart- 163,000 towers. Its nearest
With tax rates reduced, the entire ment of telecommunications,” rival in India will be ATC with
DTA has to be restated at 25% Gupta said in a post-earnings 78,000 towers.
instead of 35%,” said Jairam Srid- call on Tuesday. Once the merger is com-
haran, group executive and chief The private lender added fresh bad loans worth ₹4,983 crore in the quarter ended 30 September compared to “The delay in getting this pleted, the two companies
financial officer, Axis Bank. ₹4,798 crore in the previous quarter. BLOOMBERG approval is because of the pro- have envisaged that Airtel will
Asset quality improved as the cedure involved,” hold between
bank wrote off ₹3,104 crore in the there for a long period of time. In a September quarter. Its loan book quarters with a focus on improving he added. A new committee 33.8% and 37.2%
second quarter of FY20. Gross non- deteriorating economic environ- saw a growth of 19% with the retail the current and savings account Gupta’s state- will meet on in the combined
performing assets as a percentage ment, you will see some of this loan book growing at 23% year-on- (CASA) ratio. It had 4,284 domestic ment comes a day Thursday to entity.
of total assets stood at 5.03% in the stock go into slippages. So, yes, our year. Growth in retail was led by branches as on 30 September. after Bharti evaluate ‘all Vodafone
September quarter compared with slippages will remain at elevated strong growth in the unsecured Separately, RBL Bank reported Infratel informed Group Plc will
possible options’ own between
5.25% in the June quarter. The levels if economic conditions don’t portfolio, auto and small business 73% year-on-year decline in net the stock
bank added fresh bad loans worth improve,” he added. banking, while SME witnessed a profit because of a sharp increase in exchanges that its for future 26.7% and 29.4%.
₹4,983 crore in the second quarter Sridharan said cash flows of marginal blip in growth. provisions and bad loans. Profit board had noted strategy Airtel and Voda-
compared to ₹4,798 crore in the SMEs were being stretched The corporate segment wit- during the quarter plunged to that all the requi- fone will have
previous quarter. Corpo- ₹54.31 crore from ₹204.54 site government equal rights in the
rate slippages stood at ASSET QUALITY IMPROVES crore a year earlier. approvals had not been merged entity.
₹2,862 crore—97% of this In the June quarter, the received till date, and condi- Vodafone Idea’s 11.15% stake
came from previously dis- AXIS BANK’S asset THE performance of THE BANK’S loan IT opened 190 bank’s management had tions precedent and processes in Indus Towers had an
closed clients with ratings quality improved as
it wrote off ₹3,104
the bank improved
with net interest
book saw a growth of branches in Q2, the
19% with the retail highest in 24 quarters
cautioned about the stress were not completed. implied value of ₹5,630 crore
of BB and below. crore in the second income growing 17% loan book growing at with a focus on in its corporate loan book, “Accordingly, the board as of June-end, which it plans
In a post-earnings press quarter of FY20 y-o-y to ₹6,102 crore 23% y-o-y improving CASA ratio given the difficult corpo- authorized a committee of to monetize on completion,
meet, Axis Bank’s manag- rate-credit environment. directors to explore and evalu- the telecom firm had said on
ing director and chief exec- Asset quality deteriorated ate all possible options to 29 July.
utive officer Amitabh Chaudhry because of delayed payments from nessed single-digit growth on a sharply in the September quarter secure the best interests of the Airtel and Vodafone Idea
said while momentum is picking up large companies. He also said the year-on-year basis, primarily led by with gross non-performing assets company and its shareholders need to raise cash ahead of the
in car and vehicle loans, the bank is bank is seeing stress in its agricul- degrowth in the international as a percentage of gross advances under the current facts and planned auction of airwaves in
“cautious” in chasing growth tural loan portfolio. book. Net interest margin rising sequentially from 1.385% to circumstances,” the company January for the launch of 5G
opportunities in the small and Operationally, the bank’s per- improved by 11 basis points, 2.6% in the three months ended 30 told the exchanges on Mon- services. The operators are
medium enterprises (SMEs) seg- formance improved with net inter- sequentially, due to a rise in spread September, and net non-perform- day. already saddled with a moun-
ment. est income growing 17% year-on- and interest reversal. ing assets climbing from 0.56% to The board’s decision is tain of debt, largely due to
“Some of the assets in our stock year to ₹6,102 crore. Net interest Axis Bank opened 190 branches 1.56% during the period under con- expected on 24 October. spectrum-related dues to the
of BB and below rating have been margins stood at 3.51% at the end of in the quarter, the highest in 24 sideration. In April 2018, the two tower government.
AirAsia India to increase fleet size to 29 by year-end, says COO Sanjay Kumar
Rhik Kundu daily flights to over 20 desti- by AirAsia India in the During the winter sched- schedule 2018,” it had added.
rhik.k@livemint.com nations across the country, upcoming winter schedule ule, Indian airlines are set to Jet Airways had grounded
NEW DELHI including New Delhi, Mum- between 27 October 2019 and operate 23,403 departures its operations in April 2019
bai, Bengaluru, Hyderabad, 28 March 2020. This is an per week covering 103 air- following an acute cash

date, Sunblink is mentioned
as a borrower. The amounts
were never lent to Sunblink
as alleged in the media.”
Meanwhile, the mortgage
lender said in the notes
accompanying its unaudited
March quarter results on 13
July that there are documen-
tation deficiencies with
respect to grant and rollover
of ICDs are being rectified.
It said that in respect of
certain project and mortgage
loans, the management is
actively engaged with the
loanees to remediate certain
lacunae in loan documenta-
tion.This exercise was
expected to be completed by
September.
B
udget carrier AirAsia
India will increase its
fleet size to 29 aircraft
by December-end, as it aims
to increase frequencies to
metro cities and prune
unprofitable routes in the
upcoming winter schedule,
said Sanjay Kumar, chief
operating officer of the air-
line.
Air Asia, a joint venture
between Tata Sons Pvt. Ltd
and Malaysia-based AirAsia
Berhad, has 23 aircraft and
will induct two aircraft in the
next fortnight, he added.
Tata Sons holds a 51% stake
in the airline, while AirAsia
Berhad holds a 49% stake.
AirAsia India operates 175
Kolkata and Ahmedabad.
The airline operates an Air-
bus A320 fleet that’s powered
by CFM engines. CFM Inter-
national is a joint venture
between US-based GE Avia-
tion and French aerospace
engine manufacturer Safran
Aircraft Engines.
“We don’t want to spread
too thin and operate at sta-
tions with only one flight or
so. Our aim is to strengthen
our network, especially in
metros, and have multiple fre-
quencies between two cities,”
said Kumar.
The directorate general of
civil aviation (DGCA) has
approved the operation of
1,345 departures every week
increase of 326 departures
every week compared to the
corresponding period of the
previous year.
This will lead to the airline
increasing the frequencies of
flights on busy metro routes,
including Mumbai-Pune,
New Delhi-Chennai, Delhi-
Bengaluru, New Delhi-Hy-
derabad, Guwahati-New
Delhi, Guwahati-Kolkata,
Guwahati-Bengaluru, and
New Delhi-Srinagar.
AirAsia India recently
started a daily flight on the
Delhi-Jaipur route and flights
from Agartala to destinations
such as Guwahati, Imphal,
Kolkata and New Delhi from
20 October.
ports, as compared to 23,117 crunch.
departures a week during the AirAsia India has tempora-
winter schedule of the previ- rily been allocated some of
ous year. the slots at major airports that
About 3,600 earlier belonged
weekly depar- Airline has 23 to Jet Airways,
tures w e r e aircraft in its fleet Kumar said.
reduced because and will induct a “This has helped
of the sudden couple of aircraft us increase fre-
suspension of q u e n c i e s
during the next
operations by Jet between key
AirAsia India operates 175 daily flights over 20 destinations Airways (India) fortnight taking metro cities.”
across the country, including New Delhi, Mumbai, Bengaluru, Ltd from the its fleet size to 25 AirAsia India
Hyderabad, Kolkata, and Ahmedabad. MINT scheduled carried 725,000
domestic avia- domestic passen-
“Agartala is now connected when we open a (new) station tion, DGCA had recently said. gers during September to reg-
to four destinations in the and network,” Kumar said. “Prompt steps by the govern- ister 6.3% market share. The
country on the very first day All the airline’s upcoming ment has filled the void cre- airline had carried 498,000
of the operations. This is the new stations will be con- ated by Jet Airways and has passengers during September
kind of philosophy we are nected to other destinations helped to achieve growth of 2018 with a market share of
going to follow, especially across its network. 1.2% compared to winter 4.4%.

SoftBank takes control of WeWork as part of bailout, Neumann set to leave

Gillian Tan & Michelle F. Davis On these terms, Neumann’s about $8 billion, marks a package for WeWork. Last the company even before the erhouse. SoftBank is currently
NEW YORK net worth would be at least $1 shocking fall from grace for a week, the company had been bailout. As its estimated valua- looking to raise funding for a
billion, according to calcula- business emblematic of the leaning toward the bank’s tion cratered, WeWork last second version of the Vision

S
oftBank Group Corp. is
taking control of
WeWork, part of a res-
cue financing plan that will see
founder Adam Neumann
depart the company’s board,
according to people familiar
with the matter.
Neumann is expected to sell
a little under $1 billion of stock
to the Japanese investment
firm as part of the deal, said the
people, who asked to remain
anonymous because the
agreement hasn’t been
announced. He’ll remain as a
board observer and can assign
two board seats, one of the
people said. Neumann will also
get a roughly $185 million con-
sulting fee.
tions by the Bloomberg Bil-
lionaires Index. While that’s a
fraction of what it was on
paper in January—the last
time SoftBank made an invest-
ment in WeWork—it’s a
remarkable return from a
business that has never made a
profit and seen its initial public
offering (IPO) spurned by
sceptical investors
WeWork, reeling since it
scrapped a planned public
offering in September, had
been considering two separate
rescue packages from Soft-
Bank and JPMorgan Chase &
Co., to keep it from running
out of money as soon as next
month. The deal, which values
the office-sharing startup at
latest tech boom that had been
valued as recently as January
at $47 billion.
As part of SoftBank’s plan,
one of its executives, Marcelo
Claure, will take over as chair-
man of WeWork’s board, one
of the people said.
SoftBank and JPMorgan
declined to comment.
WeWork couldn’t immedi-
ately be reached. Dow Jones
earlier reported details of the
deal.
SoftBank’s stock purchase
from Neumann is part of a
broader offer to buy as much
as $3 billion from existing
shareholders, one of the peo-
ple familiar with the matter
said. The investment firm will
WeWork founder Adam Neumann is expected to sell a little under
$1 billion of stock to SoftBank as part of the deal. GETTY IMAGES
also provide Neumann with a
$500 million credit line,
secured by some of his stock.
A $500 million loan to Neu-
mann extended by JPMorgan,
UBS and Credit Suisse will be
repaid, one of the people said.
In addition to the proposal
from SoftBank, JPMorgan had
been pitching a $5 billion debt
plan, because it wouldn’t month ousted Neumann as Fund, its $100 billion tech
dilute existing shareholders or chief executive officer and, fund that reshaped the way the
force the startup to cede con- eventually, pulled its IPO Silicon Valley startup world
trol. But disagreements over paperwork. works by dint of its sheer size.
the valuation— The cancelled Today, investors are express-
JPMorgan’s plan One of SoftBank’s public offering ing hesitance about the fund’s
had pegged executives, also left WeWork, second iteration, which Soft-
WeWork’s valua- Marcelo Claure, which lost $900 Bank hopes to make even big-
tion at about $5 will take over million in the first ger than the first.
billion—pushed half of the year, In a recent interview with
as chairman
the company without a crucial the Nikkei Business magazine,
toward SoftBank, of WeWork’s source of fund- Son said he was “embarrassed
which was willing board ing: a $6 billion and impatient” with his recent
to increase its loan that had track record. WeWork is not
equity stake and been contingent the only big bet for SoftBank
provide a payout to Neumann, on a successful entrance into that went south. It was also the
according to a person familiar the public market. largest investor in Uber Tech-
with the situation. SoftBank’s bailout of nologies Inc., whose stock
SoftBank is WeWork’s larg- WeWork is happening at a price is down about a third
est investor, and had commit- particularly sensitive time for since its May IPO. BLOOMBERG
ted more than $10 billion to the Japanese investment pow- feedback@livemint.com
10 WEDNESDAY, 23 OCTOBER 2019
NEW DELHI

REPORTAGE | TALKING POINTS | IDEAS | INSIGHT | THE BOTTOMLINE

INDIAN PROMOTERS
CLAW BACK CONTROL
Founders of Indian startups are looking at ways to take back control from investors. What are the implications?
MINT BLOOMBERG MINT MINT

(L-R) Byju Raveendran, founder and CEO of Byju’s; Ritesh Agarwal, founder and CEO of Oyo; Kunal Bahl, co-founder and CEO of Snapdeal; Sachin Bansal, co-founder of Flipkart.

Mihir Dalal and Varsha Bansal whelming majority of shares. This leads to $10 billion valuation, it will spell trouble Ola by bolstering promoters’ holdings and bought back shares from the company’s
mint
BENGALURU complicated situations, especially when for Agarwal and his lenders. SHORT rights at ANI Technologies Pvt. Ltd, Ola’s institutional investors including Sequoia
the startup goes through a difficult spell. “Oyo’s strong growth, improved mar- STORY holding company. ANI Technologies has Capital and TA Associates, according to

I
n July, Ritesh Agarwal, founder and gins, superior improvements in customer made sweeping changes in its shareholder filings with the Registrar of Companies.
chief executive officer (CEO) of Oyo THE OYO EXCEPTION experience led to Ritesh Agarwal, through terms, strengthening the rights of its Like Snapdeal, Micromax has struggled
WHAT
Hotels and Homes, announced that he
will invest $2 billion to purchase Oyo T he executive quoted above as well as
venture capitalists said the Oyo deal
shares from some of the company’s is likely to be an exception rather than a
RA Hospitality Holdings, signing a $2 bil-
lion primary and secondary management
investment round... making it one of the After Ritesh Agarwal bought back
founders and restricting those of SoftBank
and others.
Last October, Lazarus Holdings Pte Ltd,
to survive after bleeding market share in
smartphones to Chinese rivals. And like at
Snapdeal, Micromax investors were des-
early investors and invest more capital in precedent. Agarwal’s purchase is ostensi- first founder and executive-led manage- shares from early investors to a Singapore-registered entity, acquired perate to recover whatever money they
the hospitality startup. The capital infu- bly designed to give him more control ment purchases in the technology and increase his stake in Oyo, more 6.72% of ANI Technologies, according to could and took a large haircut on their
sion allowed Agarwal to triple his stake in over Oyo, but the deal has been made pos- hospitality sector, globally,” wrote an Oyo entrepreneurs have expressed the Competition Commission of India. original investments. The valuation of
the company to about 30%. sible only because it was facilitated by spokesperson in an email to Mint. eagerness to buy back stakes in Lazarus is controlled by Ola Founders’ Micromax crashed about 93% in roughly
The Oyo deal was a landmark moment Masayoshi Son, the founder of SoftBank their own company. Trust and a unit of Temasek, a Singapore- four years from a peak of ₹21,000 crore in
in the Indian startup ecosystem, even glo- Group Corp., Oyo’s largest investor. RISK AND REWARD based investment firm. In April this year, 2015 to less than ₹1,500 crore in the trans-
bally. It was the first instance in India of an It is well-known that Son is a mentor to
internet entrepreneur increasing their Agarwal. Son is presently the most power-
holding in their startup in such a signifi- ful figure in the startup world given the
W e don’t advise our founders to do
something on these lines where
they take a loan and buy back stock from
WHY
Aggarwal and Ankit Bhati, the other Ola
co-founder, increased their ownership in
ANI Technologies through a rights issue,
action, according to a 29 August report in
The Economic Times.

cant way. sheer size of SoftBank’s investment dry existing investors,” said Rutvik Doshi, Founders’ attempts are driven by documents show. THE GLOBAL PICTURE
their need to ensure they don’t
After Agarwal’s announcement, powder. His backing of Agarwal was the
founders of at least two other Indian uni- driving force behind the Oyo deal.
corns, ride-hailing service Ola (ANI Tech- “What happened with Oyo is not a stan-
managing director at venture capital firm
Investus (India) Advisors. “Starting up
itself is a huge risk with all their eggs in
lose control of their firms since,
at most Indian unicorns,
At Ola Electric, which was spun off from
the parent firm, Aggarwal has also
attracted fresh capital from the same
G lobally, the tide is turning against the
founders of private internet compa-
nies and in favour of the investors. In 2017,
nologies Pvt. Ltd) and education content dard globally and to do that is not easy,” one basket and then taking a loan to buy investors control an investors he was battling. Ola Electric Uber co-founder and then CEO Travis
provider Byju’s, are considering ways to said a partner at a top venture capital firm. more stock is more risky. Similar things overwhelming majority of shares. Mobility Pvt. Ltd said in July that it had Kalanick was forced out by the investors
increase their ownership in their compa- “People understand that it’s a unique have happened in the public markets. Pro- raised about $250 million from SoftBank after the company became embroiled in
nies, people familiar with the matter said. transaction that is driven by the strong moters of publicly listed companies have to become the fastest firm to become a scandals. Kalanick was replaced by Dara
In recent times, Ola’s founder and CEO relationship between Ritesh and Masa tried to buy back shares by taking a loan BUT unicorn after Udaan, a business-to-busi- Khosrowshahi. Despite efforts to make a
Bhavish Aggarwal has been at the fore- (Masayoshi Son). A lot of our portfolio and if the share price falls, they are in the ness commerce platform. comeback, Kalanick has been kept out of
front of taking back control of his startup entrepreneurs discussed it with us on how soup,” Doshi said. With the exits of Travis Kalanick the company. Last month, Adam Neu-
from investors. Then there’s Byju’s, one of they could do this. But how many people Though Agarwal’s move at Oyo is and Adam Neumann combined SNAPDEAL AND MICROMAX mann was forced to leave WeWork, the
with the tepid IPO of Uber,
the fastest growing internet companies in can actually do it?”
India. Its valuation has jumped to nearly Madhukar Sinha, founding partner at
$6 billion from a few hundred million dol- venture capital firm India Quotient, said
unlikely to be repeated at other startups,
there are other means to reward founders
and key employees. At several unicorns
investors are likely to rein in
founders and exert more control
A t Snapdeal, the battle between inves- office-sharing startup, after the company
tors and founders ended in bitter dis- had to postpone its initial public offering.
appointment for the latter. In April 2018, The exits of Kalanick and Neumann
lars just three years ago. The company’s only when large strategic investors like including Ola, Paytm and Rivigo, founders at their portfolio companies. Kalaari Capital and Bessemer Venture combined with the tepid stock market
founder Byju Raveen- SoftBank are involved and senior employees have received large Partners transferred debut of Uber are
dran and his family still can unconventional cash payouts from secondary share sales most of their 10% stake momentous events in
control more than a transactions be consid- and bonus awards. Even at smaller compa- to increase his stake in the company. Ban- in Snapdeal to funds the internet space. Uber
third of the firm—far ered. “Venture funds or nies such as payments firm Razorpay, sal’s initiative fell through after he was controlled by the fami- and WeWork were pio-
higher than most other financial investors can- logistics provider BlackBuck and online forced out of the company ahead of its sale lies of the company’s neering startups, and
unicorn founders. not support such deals. marketplace for used cars Droom, inves- to Walmart in May 2018. founders, Kunal Bahl their growth-at-all-
Executives at three Only large strategic tors have rewarded key employees by Indeed, in the past two years there have and Rohit Bansal. costs approach had
venture capital firms investors can back or buying part of their employee stock been several instances of power struggles The share repurchase been copied by startups
confirmed that the underwrite such a com- option plans (Esops). between investors and star founders. transaction was a big let- in India and China.
founders of some of plicated transaction like Another way for founders and senior Many entrepreneurs now view venture down for the investors Their success had also
their portfolio firms had Oyo’s. Oyo is still an employees to get rewards for good per- capital investors warily. They are who had to take a hair- made their founders
also expressed eager- We don’t advise our unprofitable company formance is to receive additional Esops. In demanding stronger rights for themselves cut on their original Only large strategic seem invulnerable to
ness to undertake simi- and for a founder of the past, the founders and senior leaders and trying to limit those of their investors. investments in Snap- investor pressure. Now
lar transactions. “Sev- founders to take a loan such a company to bor- of Ola, Snapdeal and a handful of other In India, investors have had the upper deal. In 2017, Bahl and investors can back or that these companies
eral entrepreneurs have and buy back stock from row billions of dollars to startups have received either additional hand in dealings with entrepreneurs. That Bansal were locked in a underwrite such a have seen disappointing
approached us to figure increase his personal direct equity or new Esops in their firms. is a typical feature of a nascent startup eco- months-long board- outcomes, investors are
out ways to buy back existing investors as it is stake in the company, “Where portfolio companies are doing system. But after a short period of 18 room row with SoftBank complicated transaction likely to rein in founders
stock in their own that is unlikely to be well, investors are drawing up Msops months starting from early 2014 when it and Kalaari Capital, and exert more control
startup,” an executive at more risky repeated elsewhere,” (management stock option plans) to fur- seemed like Indian founders were becom- which wanted to like Oyo’s at their portfolio firms.
a top investment bank RUTVIK DOSHI Sinha said. ther incentivise founders and manage- ing powerful, in the last two years, the arrange a sale of the MADHUKAR SINHA “These events will
said. MD, INVESTUS (INDIA) ADVISORS Moreover, the Oyo ment teams. All investors want founders founders of three of India’s leading start- struggling online mar- FOUNDING PARTNER, INDIA QUOTIENT have a cascading impact
Ola and Byju’s didn’t deal is a high-risk trans- to be incentivised and this is an effective ups—Flipkart, Ola and Snapdeal—have ketplace to bigger rival on consumer internet
respond to emails seeking comment. action. Agarwal has borrowed $2 billion way to reward them,” Sinha of India Quo- had a particularly tough time with their Flipkart. Finally in August 2017, the Snap- startups,” a venture capitalist said, on con-
These attempts by entrepreneurs to from financial institutions to fund the pur- tient said. investors. deal founders blocked the sale, angering dition of anonymity. “All the consumer
increase their stakes are driven by their chase. At least part of the transaction val- The power struggles at these three many of their board members and other internet unicorns in India are loss-making
need to ensure they don’t lose control of ued the hotels brand at $10 billion. That’s FOUNDERS’ BATTLE FOR CONTROL firms have led to very different outcomes. investors. and they have no path to profitability.
their companies. After raising large a massive increase from the $800-900
rounds of capital, the holdings of founders million valuation the same company
drop to the single digits within a few years fetched only two years ago when it raised
A transaction similar to Oyo had been
attempted last year by Flipkart
co-founder Sachin Bansal. The then Flip-
Flipkart was sold at a valuation of $21 bil-
lion even as Bansal left the firm after fail-
ing in his quest to obtain operational con-
A similar transaction followed at When funding dries up these companies
another startup that has seen its business will be in trouble and you’ll see investors
collapse after a promising start. Earlier do whatever they can to recover their
of starting out. At most Indian unicorns, $250 million from SoftBank. kart chairman had kicked off efforts to trol. Then there’s Ola. Starting in 2017, this year, the founders of smartphone and money.”
institutional investors control an over- If Oyo fails to maintain or increase its borrow between $450 million to $1 billion Aggarwal has expanded his control over other electronics maker Micromax mihir.d@livemint.com
 EXCLUSIVE FROM

12 WEDNESDAY, 23 OCTOBER 2019

NEW DELHI

‘When the economy is in a bad shape, invest in

cheap stocks to get good returns in the long run’
Latha Venkatesh & Prashant Nair Not once in 12 years? quality, like even the BPCL figures in his
CNBC-TV18 Agrawal: No. No comments on that. He (Agrawal’s) portfolio. It is quality just
Despite a strong is buying the performance to be coming up; because it is PSU doesn’t mean you write it

S
tock market experts Manish Cho- market, there are the 12 years accumulated fatigue which is off and there are enough examples like that.
khani, director, Enam Holdings there… When the private sector and individ-
Pvt. Ltd; Raamdeo Agrawal, more pessimists than And when that comes, will it be stu- ual corporate makes mistakes of capi-
chairman, Motilal Oswal Finan- optimists. I am 100% pendous? tal allocation, how do the govern-
cial Services Ltd; and S. Naren, invested and I will Agrawal: It will be a blast—like all the ments come in for the greater good? I
executive director and chief investment PSUs; HPCL, BPCL, Coal India. All of them, mean you alluded to that problem.
officer, ICICI Prudential Asset Manage- always remain fully they are dead for 12 years and dead means What should the government do in
ment Co. Ltd; shared their views on the invested. literally dead; 5-6 PE multiple, 7-8-10% div- that regard—fix a sector or two?
current market outlook and what the idend yield and, now on top of it, the gov- Naren: I think you have to deleverage
future holds. Edited excerpts: Raamdeo Agrawal ernment is actually saying that we want to the economy. You can’t have, say, in Cen-
chairman of Motilal Oswal Financial
There is a kind of bullishness. We are Services sell them. People are so apprehensive tral Mumbai, $1-5 million flats half con-
at a distance from that 10,600 mark, at about this whole process, whether this structed or fully constructed without occu-
least 1,000 up on the Nifty. Are we past process will get completed that’s a ques- pants. I believe that something has to be
the worst? tion. done to resolve capital allocation mistakes.
Chokhani: You actually expressed it Is divestment a theme that you will Bankruptcy code was a superb step in that
very well in the last line. I think the worst is play for Samvat 2076 and beyond? regard, and we would want to see more clo-
behind us. You always come on the Diwali Chokhani: Let me preface it by saying sures of all the old problems through the
show looking to be optimistic, nobody how an economic cycle starts. You follow bankruptcy code quickly, along with real
wants to invite a bear on a Diwali show. We those typical six phases of any emerging estate deleveraging, which needs to hap-
always start the year on an optimistic note. market, or an economy where, in phase pen in Central Mumbai and Delhi and
When you go through a normal economic one, there is a small profit opportunity and Noida and Gurugram.
cycle, the bottom of the cycle is when you everyone is skeptical. If these two happens, that itself pushes
realize that the authorities are throwing If you think back to when you were refer- the economy from whatever growth we
everything that they can at the problem. ring to the Vajpayee government of have now by 1-1.5%. After that, we have to
So, the government is giving you tax 2002-03, they started that whole cycle decide which are the areas where we need
cuts, the Reserve Bank of India (RBI) is giv- with divestment and privatization, and one to take leadership—like the government
ing you interest rate cuts—everyone is try- company went to Tata, one went to Reli- seems to be taking some steps in electric
ing to revive the economy and all the indus- ance, one went to Anil Agarwal, and one vehicles, for example. I think there is mas-
try associations are being heard. The Prime went to Suzuki, which were foreigners, and sive opportunity in healthcare services at
Minister had recently gone to the US and, they kind of spread the animal spirit there. this point in time, given that the world is
apparently, made some commitments to There was a catalyst which came from the becoming much older and requires health-
investors and corporates to come to India. world where commodity prices started tak- care services at a cheap cost. Like what we
There is no reason to believe that the ing off, steel for example started doing did in IT services there is potential in
pain that we kept enduring is going to con- incredibly well—that’s phase one, but it healthcare services.
tinue forever. I would think when we look met with skepticism because people said I believe we have to identify 3-4 areas.
back to 2019, it would have looked like a incentivized. this won’t last. Then that profit spreads Manish very well spoke about areas like
base formation year, wherein you certainly With these steps we will be through with because there are contractors or beneficia- textile, leather, aquaculture all the areas
formed a bottom. Though I don’t expect a the problem, and I believe that overnight ries of that start. Then you see widespread where there is some amount of employ-
V-shaped recovery, it certainly should be these problems are not going to get earnings growth and then the mid-caps, ment possibility along with exports. I think
on its way up (from hereon). resolved. Time will be the biggest healer small-caps at the end of the market starts those are all superb areas as well, besides
Since the late 1990s, the RBI was cut- and slowly the economy will recover. We coming in, and then the foreign brokers agriculture.
ting rates and the benchmark prime are clearly towards the bottom and, there- and all will come out with new themes. We have come to a conclusion that India
lending rate (PLR) had come down fore, it’s an interesting period for long-term This time it is different. ‘BRICS’ (Brazil, cannot manage without some amount of
from 18% to 8% or thereabouts by investors. Russia, India, China and South Africa) will rupee depreciation. Rupee touch 68/USD
2002. You had a lot of money being Give us some ideas to ruminate for be the new world engine. You form an in 2013 and it hovers at 71-72/USD six years
thrown in, and the Vajpayee govern- Samvat 2076, which are the sectors or incredible high, where we get the price to later. While Manish correctly pointed out,
ment doing great things such as the stocks or trends that you are already infinity kind of stocks coming to market there is a need for rupee deprecation
golden quadrilateral. However, it took betting on, or will bet on shortly? with IPOs and so on, which we saw with against the dollar because the inflation dif-
four-five years for us to bottom out. Naren: Over the last six months, we power and real estate in 2008. Then you ferential is still there. Without the rupee
Are you getting a sense that the recov- have been saying that essentially you bet on get that sharp sell-off where some market becoming cheaper it is very difficult to
ery we are seeing in the market presa- companies and sectors which have deliv- leader or someone gets in trouble. Then push exports, and exports have to improve
ges a recovery in the economy in the ered no returns for 12 years; power, tele- people who left out, they try and buyback, in India—that has always been the way
next quarter or two? com, some of the infra spaces, corporate but the market starts narrowing, and it most of the corporates have done. I am not
Naren: It is much clearer for long-term banks. Increasingly, if you look at from becomes more and more quality. Then saying it can be done China-like, but at least
investors that you invest when the econ- 2017 top, even many of the small-caps interest rates and inflation are peaking so we need to have a better exports sector than
omy is down in cheap stocks and you get rather than some quality small-caps have the RBI starts getting after your case and we have today.
very good returns in the long run. hardly delivered returns. then there is a burst, and you come to a situ- What is your take on the world of
We look at five indicators of the econ- So, I believe that you have a wide variety ation like we are today, wherein the gov- finance? Would you buy – just crystal
omy: One is credit growth, second is power of stocks and sectors which have delivered ernment, the RBI, investors, bankers, the gaze for Samvat 2076, do you expect
demand, third is oil demand, fourth would no returns for 12 years, which are looking whole world is jumping at the problem. an external force like the government
be container traffic and fifth would be auto appetizingly interesting, because if you Money is available, nobody wants; no coming and creating a bad bank and,
numbers. And, all these are high-fre- have not delivered returns for 12 years, no one wants to lend, no one wants to borrow. therefore, will you start betting on it?
quency, good-quality numbers. All of them one enters a sector and, therefore, incre- It is what we call phase zero. The catalyst Agrawal: Let me say why we are in the
are telling you that the economy is in a rela- mental competition from new entrants typically starts with new profit opportu- finance sector. 25-30% of our portfolio
tively bad shape. When the economy is in S. Naren, executive director and chief investment officer, ICICI Pru AMC. S. KUMAR/MINT comes down to zero, and many of the exist- nity, which is so easy that you are kind of even today is still in finance sector. Led by
bad shape, invest in small-caps. When the ing entrants also wind up and go away. incredulous, that how can it be so easy. And HDFC Bank. One of the things is that credit
economy is in great shape, you will be able A huge number of companies, 527, change which is not necessarily the best So, I believe you can pick up anything in that way I am happy that finally the gov- intensity in the economy is about 70% of
to make money, or you invest in value which have over ₹100-crore market- portfolio to hold long-term, but there is a which has not done well for 12 years. For ernment has come back to number one, the GDP—so, ₹200 trillion of our GDP, the
stocks when the economy is in bad shape, cap, have lost 67% from their all-time trade over there. the sectors, I think the next 5-10 years will where you have to start fixing the balance outstanding credit must be about ₹140-150
and you make money. highs. What is the message from this Let’s try and identify what will cause be very good. It is very interesting; in 2007 sheets and corporate profitability of India. trillion. But the world over, what happens
But, this time around, the only differ- table? this shift in sentiment because we have quality like pharma and tech were very You have busted the balance sheets over is the next $3 trillion will have a signifi-
ence I would say, is that while the economy Chokhani: First, you should give credit been in a period of extreme pessimism. cheap, and at that point in time, people the last 7-8 year purge coming from the cantly higher credit intensity. So, if the
is in a bad shape, many of the large-caps or to this claim from corporate data basis. It is Some of the pessimism may have gone used to say that you cannot bet on quality; RBI, the government, GST, demonetiza- credit flow is not there, there is no GDP.
mega-caps are not cheap at all. Normally, not my data but thanks to Durgesh bhai away, but will it turn into optimism, you have to bet on infra. Now we are tion—which are all good structural moves You can make it minus 100% and there is
when the economy is in a bad shape, you who keeps bringing out very insightful sta- and what is required for that? We have reversed; people say you bet on quality and it has taken a flight to quality. But the no GDP growth. That kind of thing. It is just
will see the entire market being cheap, but tistics for us to see. I think the point he was seen what the government is doing, mega-caps and do not bother about any- reality is that the corporate sector profits one-to-one correlation. So, it is a tower of
this time you can clearly see that the mega- trying to make is that the top 50 companies the RBI is doing. But, in your assess- thing else. have gone from 7-8% of GDP to 3%, credit.
caps are not cheap, and the rest of the mar- as Raamdeo is saying have taken the bulk of ment, what will cause that fundamen- But when you have stocks trading at whereas in the US it has gone closer to 10%. My sense is that we will go to $3 trillion,
ket is reasonably valued. the flows away in the market. tal shift in sentiment for people to be 70-80 PE and marketcap is running into So, unless we fix that profit cycle, the tax we wrote about this trillion dollar economy
How long the economy will take to Also, another friend sent me some data wanting to buy stocks, buy assets? billions of dollars, I believe there is very lit- cuts are a good start, divestment and priva- in 2008. So we are watching it for the last 10
revive, that is a debate, which we don’t have recently where he said since the norms Naren: The problem is not in stock mar- tle value, whereas there is a huge value in all tization will be a necessary second step. years, it will go to $6 trillion and it will go to
an answer to. My belief is it should take came out last year, about local mutual ket, if you ask me. People are buying stocks. the sectors which have done badly for 12 The third step will be to find 2-3 sectors $12 trillion also, but let us talk about this $6
longer (than two quarters), but that doesn’t funds not being able to do style drift The problem is that today you have AA years. So that’s how we are looking at it and which the government starts backing that trillion and this will happen by 2026-2027.
mean this is not the time to invest for the between large-caps being ₹25,000 crore, companies and companies which we think there is a wide number of stocks. we want to create a profit over here. When this happens, you will need about
long-term. mid-caps being ₹8,000 crore and then the are AA; they are raising money at high Will you buy the 12-year theory? Illustratively, I will give an example, tex- ₹200-250 trillion of credit to be underwrit-
Where do you stand? Do you think we smaller ones being ₹3,000 crore. If some- rates. I believe that the problem is that peo- Agrawal: When Naren spoke it was fan- tile industry, for instance in India, is a very ten in the next six-seven years. So, how can
have seen the worst? thing falls from ₹25,000 crore to ₹22,000 ple are not willing to take risks in debt, and tastic to hear, but my way of picking stocks large employer. We have a 3% you not bet on finance.
Agrawal: Only after some- crore, the fund is forced to, in in my opinion, that is the whole problem maybe different. In a stock market there are global market share at a time Secondly, which are the
time we will realize whether a way, to sell it rather than rather than the problem in equity markets. multiple ways of making money. when our currency has col- Although the institutions. Public sector
that was the worst. I think the I think the worst is adding to its position. And What is happening is all the companies ICICI, Bharti...all attest to what he is lapsed, we were 6 to the Yuan, economy is in a undertaking (PSU) banks—
kind of pessimism we have behind us. that may have kind of accen- which require debt, which are decent and saying... in 2008, we are probably bad shape, mega- how have they performed,
gone through – only time will Though I don’t tuated the pain. not junk, they are not able to get money in Agrawal: I can appreciate that and get closed to 11, with that level of and large-caps and I don’t see them improv-
tell, because still lot of these excited about what he is saying and, clearly, depreciation of our exports
expect a V- So, you put these two debt, and that has become a problem. The
are not cheap at ing significantly whatever
six parameters Naren talked there is wisdom in that, but our style is not haven’t gone up. I don’t know they do, despite consolida-
shaped recovery, things together, the carnage borrowing costs for them have gone up
about are yet to show some which has happened in the because somewhere people want to lend that. Our strategy is QGLP; we will buy what people want that will the all. The rest of the tion and all. Three, non-bank-
signs of a recovery. it certainly should broader market is unprece- only to save companies or they are happy quality, growth, longevity and reasonable rupee go to 100 and miracu- market is fairly ing financial companies
We have seen some be on its way up dented, which is why Raam- keeping the money idle in debt because price (QGLP). So that stays and, maybe, we lously exports will go up I valued, says (NBFCs) which was the real
amount of bottoming out of from hereon, says deo is rightly saying the mood that is the challenge, if you ask me. will make some less money. Our style is don’t know. Bangladesh and Naren discovery of the past 10 years,
the pessimism, intense pessi- Chokhani is so pessimistic among inves- Therefore, there is a need for people to slightly in favour, and right now a lot in Vietnam market share in tex- they have started delivering
mism, which prompted the tors. take risks in debt. The second is that there favour. tile is double that of India, last-mile and everything—but
government to take lots of I am guessing a lot of pro- is a phenomenal amount of money which So, obviously you have to pay a price, but they are at 6%. Turkey is equal to India and even they have gone haywire. So, at least it
steps, and they are committed to do even fessionals picked up early what was hap- is stuck in real estate, in under-construc- the underlying index is broadly QGLP. I we have everything growing and then tour- will take some time to come back again. My
more. The RBI is very proactive on liquid- pening—that in this whole churn being tion projects, as well as projects where lot of have gone through the entire 50 compa- ism; if you want to create employment you sense is all this credit delivery institutions,
ity, cost of money, and then finally the caused by the goods and services tax (GST) real estate, even completed is stuck, and nies, except for 3-4 junk. Indian index is want to create profit opportunity—the gov- four-six banks, whatever is there, they are
number came that 88% decline, the credit and the move towards the more compliant somehow people are not willing to drop the extremely active, it is not passive. It is very ernment has to choose what sectors it going to remain flat unless something dra-
flow – I think that is the most scathing sta- society. It was the winners and the leaders price there and sell off. active and made up of diversified leader wants to go after and create that. matically changes.
tistics you have. So what is happening to in every sector who are the more compliant That has become a problem because, at companies. So I am glad privatization has come and Chokhani: I completely support that
that, we will come to know. I don’t think it ones, who are winning market share and, the end of the day, if you have misallocated In fact, some of the companies which having said that BPCL, I think last year and as the economy will get more and more
will go worse than that. The pessimism was therefore, everyone’s portfolios have tilted money, that is a big challenge from an Naren is talking are also there. So, all the ran-up what 80% in anticipation of this. It financialised, thematically it is a no-brainer
at a very low level. Of course, it will happen towards those people and it includes sec- Indian point of view, and the biggest chal- leaders are there of all the businesses and is up Diwali to Diwali 80%. He (Raamdeo to be in this space. I recall last year even we
with the evidence of a slowdown, and the tors, which normally people would have lenge the government is dealing with is if all of them are profit-making and dividend- Agrawal) was tipping at last Diwali, so there spoke about private banks, we spoke about
slowdown is on. not touched. individuals or corporate misallocate paying. To compete against them and beat is a lot more room. Most PSUs are down asset management companies, which have
And, there are more pessimists than For instance, last year, even in real estate, money, how do you solve it. That is a very them, you require a very conscious strategy between 65-80%, the aggregate market cap done incredibly well, we spoke about life
optimists despite a strong market. I am Godrej or Prestige and others have done complicated debate which the government or portfolio. Therefore, we have decided to of PSUs is barely ₹10 trillion, and if you say insurance, which has also done very well.
100% invested and I will always remain incredibly well. So, it has not only been in is going through at this point in time. stick to our QGLP process. That is what we disinvestment is ₹1 trillion every year, and Like he rightly said, it is kind of becoming
fully invested. Whatever money comes, we the financials or only in the consumers, The day the government is able to solve have done research on; that is what we assuming government would not sell more a winner take all because the weaker ones
have to find one or two ideas and buy into even sectors like the leaders have done dis- that problem, I think we will be through. I understand; and that’s what we are com- than 51%, pretty much in 2-3 years we are or the less capable managements or the less
that because we are buying QG (quality and proportionately well, and that is the under- would say you need the misallocation to fortable with. Quality works during good out of disinvestment target. compliant managements are all falling by
growth). Today, market is looking high or lying message that you cannot have the slowly come down in real estate, you need times, as well as bad time. Many of the strat- So, privatization is inevitable. We have to the wayside. It seems strange to me that a
almost all-time high because the QG stocks entire country getting decimated. If people to take a little bit more risk in debt egies work only in good time. So, we are do it and, once this starts coming in, I will $3 trillion country will not have a $100 bil-
are doing very well. So, my portfolio is posi- indeed, the revival has to come, at some and you need some animal spirit among the waiting for good time to come for many of not be surprised if these valuations them- lion bank. HDFC is not yet a $100 billion
tioned for this particular kind of rally, not point trade will move away from quality businessmen. The tax concession for new the strategies to work. With public money, selves become 2x or 3x, because they and surely that will be the largest market
that it has done some great numbers, but it because the markets discount what is the units, which was recently announced, is a particularly, I would rather stick with haven’t indeed fallen from those highs. cap bank – it is already – it will be the largest
is at least not showing too much of a down- rate of change. So, you may go from terrible very good step. I believe we also need a something which works all the time, that is Directionally, that is what is giving you marketcap company of India going ahead.
side. to bad and that may give you a rate of much weaker rupee so that exports are all-weather stocks. hope that these will also start being seen as feedback@livemint.com
14 WEDNESDAY, 23 OCTOBER 2019
NEW DELHI PERSONAL FINANCE

GLOBETROTTER CITIES RIO DE JANEIRO SHOPPING

Price in Price multiple Price in Rio de
RESTAURANT
Price in Price multiple Price in Rio de
STAY & TRANSPORTATION
Price in Price multiple Price in Rio de
The Mint Globetrotter Index compares the cost of 25 essential travel spends Delhi () (times) Janeiro () Delhi () (times) Janeiro () Delhi () (times) Janeiro ()
for 50 cities across five regions. The analysis, published on 15 May, can be
seen on www.livemint.com/globetrotter2019. Every Wednesday, in this space, Coke/Pepsi (0.33 litre) 32 2.8 90 Inexpensive meal 250 1.7 431 Hotel tariff (per day) 3,408 2.7 9,205
we will list these 25 spends for a city and compare it with Delhi. 3-course meal Airbnb (per day) 2,446 2.0 4,804
Milk (regular, 1 litre) 49 1.4 68 (mid-range restaurant) 1,200 1.4 1,724
Mint One-way ticket
Globetrotter White bread (500 gm) 30 3.1 94 McMeal 250 1.7 431 (local transport) 30 2.3 70
Index 2019
ranking Local cheese (1 kg) 301 1.7 526 Local beer Taxi fare
118
(0.5 litre draught) 120 0.9 103 (base fare + 5 km) 3.1 364
RANK Apples (1 kg) 124 0.9 107
(out of 50) Cappuccino (regular) 124 0.9 113 Petrol (1 litre) 74 1.2 86
Bananas (1 kg) 53 1.6 85
22 Oranges (1 kg) 59 1.5 87 LEISURE
1. All data from www.numbeo.com, barring
two exceptions (given below). 2. City-
specific price data as of 21 October, 2019.
Water (1.5 litre) 29 1.8 53 Price in Delhi () Price multiple (times) Rio de Janeiro () Globetrotter ranking as of 19 April 2019. 3.
Overall price For hotel tariffs, we considered three-star
multiple Wine (mid-range) 700 0.9 646 Movie ticket (1 seat) 300 2.0 603 hotels on Hotels.com and Expedia.com. We
to Delhi (times) searched for two guests, stay of 1-2 June, and
Local beer (0.5 litre) 103 0.8 82 Jeans (Levi's 501 or similar) 2,485 1.4 3,417 sorted the top seven listings by guest rating,
and took their average. 4. Airbnb tariffs
Cigarettes
300 0.5 138 Summer dress (Zara, H&M or similar) 2,737 1.2 3,233
1.7
sourced from Airdna.co (the analytics arm
(Marlboro, pack of 20) of Airbnb). Tariff shows average for studio
Nike running shoes (mid-range) 3,949 1.4 5,364 apartment or one-room apartment for city.
Source: howindialives.com

SANTOSH SHARMA/MINT

Traditional insurance plans need POWER

POINT
to look at Ulips for cost structure M R I N AG A RWA L

Respond to this column at

mintmoney@livemint.com

Policyholders are at the receiving end due to high surrender costs and poor disclosure about returns
TRIED-AND-TESTED
Deepti Bhaskaran didn’t want to be named.
MFs SCORE OVER
Surrender value in a Ulip vs a traditional savings plan
deepti.bh@livemint.com
Traditional bundled plans are opaque products which do not disclose costs. However, the embedded costs
To remove this inequity, the
commission structure will need ALTERNATE FUNDS
H
ow would you react if are exorbitant that come home to bite very hard during a surrender. Comparatively, the costs in Ulips are change. “Commissions are much

I
you were told that capped and surrender charges are much lower. Here is how the costs in Ulips and traditional plans stack up higher in traditional plans com- t’s been a bad year for alternate investments. Investors who have
you could lose your and what a policyholder would get if she plans to surrender after a year. Since this is for illustrative purposes pared to Ulips. Commissions are held these for the last seven to 10 years have got little or no
money if you exited a only, it assumes a zero growth rate in the fund value front-loaded so in the first year it returns on their investments (read: bit.ly/2P6X6L0). Whether
product before its Ulip Traditional plan can be as high as 35% and then it it is real estate funds, credit-oriented funds or PE funds, most
term expired or that if you stuck comes down, but in the first five alternate investment funds (AIFs) have faltered. Looking back at
on, the returns may be nothing to 1 lakh Premium invested 1 lakh years, an agent gets about 60%. If New rule on the way these investments have played out, it is clear that investors
market
write home about? This straight Premium allocation the quantum can’t come down conduct
got swayed by fancy brochures, back testing and eulogies of the
talk, in all likelihood, will prevent 12,500 Not disclosed then there is definitely a case to fund manager, not to mention the “different” and exotic nature of
charge capped at 12.5% does little
many from buying traditional evenly distribute the commission to curb the instrument which they believed would return them 15%-plus
insurance-cum-investment plans. Fund management that will also encourage persis- insurance per annum, without really understanding the risks involved.
1,181 Not disclosed
charge capped at 1.35% mis-selling
But, in reality, the agents’ smooth tency,” said the official. Most investors believed that these were secured instruments,
talk and smart product packaging bit.ly/33NwkLG with little risk. After all, why would it be difficult to sell flats in a
Policy administration
get many to line up for them— 6,000 charge capped at 500 Not disclosed POOR DISCLOSURE residential complex. Fund managers also touted the security,
these bundled plans are sold as per month (6,000 a year) Another problem area is poor dis- guarantees and other covenants they had in place to “secure” the
guaranteed products, with an ele- closure. For instance, agents need funds’ investments. However, what played out was very different.
Mortality cost for a
ment of insurance and tax bene- 2,832 30-year-old male for 15 years Not disclosed to show customers a benefit illus- Real estate developers could not sell flats for various reasons,
fits. Lack of proper disclosures and 10 lakh sum assured tration that shows policy benefits which hit the receivables and with the Indian economy strug-
makes matters worse. On top of all for each policy year. The illustra- gling, companies found it difficult to pay off or refinance debt.
that, these plans come with heavy Surrender charge tion is made assuming returns of This led to write-offs in investments made by these funds.
surrender penalties that can eat up 6,000 applicable in the first 100% 4% and 8%. But what this benefit The liquidity crisis which has crippled the lending industry
the entire investment in the first year capped at 6,000 illustration lacks is the net return looks to be getting widespread and I do believe equity-linked
year. The two areas of costs and 71,487 Your corpus Nil that takes the costs into account. debentures (ELD) are next in line to be hit. This is because most
disclosures are crying for atten- So if a fund grows at, say, 8% and ELDs issued by non-banking finance companies (NBFCs) use the
tion. Here are the details. Percentage of principal the net return is 7%, the costs funds raised not to invest in markets but to lend to finance con-
71% Nil
corpus you get back would have shaved 1 percentage struction or give loans to promoters. Clearly, these companies
PRODUCT CONSTRUCT point off the gross return. Given may not have access to cheaper bank financing. If you have
Keep in mind that a Ulip comes with a lock-in of five years to discourage early surrenders. Hence, when you surrender, you will only get the
These are opaque plans that can money after the lock-in period is over; The insurance cost is for a 30-year-old male, for a 15-year term and for a sum assured of ₹10 lakh; Ulips can that these plans don’t disclose invested in AIFs or ELDs, you may want to study the offer docu-
broadly be classified as participat- charge lower than the maximum allowed, but for illustration purposes we have taken the maximum limit; Cost of insurance is based on the costs, mentioning the net return ment carefully to, firstly, understand the risks to decide if you
benefit illustration given by the insurer Source: Mint research
ing and non-participating plans. becomes important. want to remain invested. If not, check if there is a premature exit
SANTOSH SHARMA/MINT
Participating plans guarantee a In fact, mentioning the surren- option, and exit even if it means paying a penalty (which could be
certain minimum amount, typi- exit from traditional plans means According to Irdai figures, the deduction from the premium, the der value at the end of each year— in the range of 3-5%). AIFs and ELDs have many issues, which
cally the sum assured, and promise loss of the principal invested. Cur- average 13th month persistency other three are deducted from the to drive home the point that early make them unsuitable for individual investors, the biggest being
periodic additions, which are rently, the rules discourage early was at 69% and 61st month persis- invested corpus. The current rules exits can be costly—followed by a transparency and accessibility.
pegged to the performance of the surrender by not returning any tency at 35% for FY18. define cost caps by a cap on the column that explains the net
underlying fund (also known as money if you exit before paying Since traditional plans form a reduction in yield (the difference return for early exit at different TRANSPARENCY AND ACCESSIBILITY
par fund) and that, once declared, three premiums for a policy with a huge chunk of insurance sold, between gross yield and net yield points in time is also important. Firstly, the end use of funds is not always clear, especially in the
are guaranteed. In the case of non- term of more than 10 years. For they also have a larger share of dis- is capped). However, the new The market conduct guidelines case of ELDs. The offer documents only cover the specs of the
participating plans, the returns are policies with a tenure less than 10 continued policies. It’s not diffi- rules, once implemented, will also have made it mandatory for insur- product with other standard disclosures. In case an instrument
guaranteed, and the benefits are years, you need to pay at least two cult to imagine then how big an cap individual cost heads, barring ers to mention the surrender value like ELD is secured, the cover provided is very low—one time the
declared upfront. annual premiums to get some amount customers are paying for the mortality cost since that would and that’s a step in the right direc- value. Even for loans against shares, a cover of 2.5 times is pro-
As investment products, their money back in case of surrender. surrender. depend on the policyholder’s age. tion, but the mention of net return vided. The security provided in most cases in pari passu, which
USP is the fact that they come with The new rules, once implemented, One of the reasons why the “Costs in Ulips provide a basis for is still missing. means an equal right on the security. One offer document that I
an added layer of insurance, but so will bring down the period to two industry has moved to traditional how costs can be set,”said Kapil The second layer of disclosure read, mentioned a pari passu mortgage, which means the investor
far these products have not years for all policy terms. Even plans is high commission struc- Mehta, co-founder, Securenow.in. happens when policyholders get will only get back his funds once the mortgaged property has been
impressed financial after paying two pre- ture. “After costs on Ulips (unit- A rough back-of- the periodic state- sold by the financial institution it has
planners due to poor Due to the high miums, the surren- linked insurance plans) were the-envelope calcula- Given that costs ment on the bonuses MFs are liquid, been mortgaged to. Such covers given
returns. “These plans surrender der value you will get streamlined, we find that many tion shows that if you are not disclosed accrued in the plan. well-regulated, as security along with receivables
enjoy superior tax is 30% of your invest- distribution channels have surrender a Ulip in “The method of
penalties, early
ment. This surrender migrated to selling traditional the first
in traditional transparent and won’t really help in case of a problem.
treatment compared exit from year, assum- plans, they should expressing bonuses is provide
In many cases, investors do not
to a normal fixed important. The cur-
traditional plans value increases to a plans due to better remuneration. ing no fund growth, mention the net rent default is as a know the placement or distribution
deposit due to the minimum of 50% However, this results in higher you would get back risk-adjusted fees on AIFs and ELDs. This is because
insurance wrapper. means loss of the between the fourth costs for customers, eating into the around 70% of the return in benefit percentage of the
returns they don’t bother to read the offer doc-
Despite this, the principal invested and seventh years. returns,” added Sunder. corpus. In compari- illustrations sum assured. This ument and advisers would not share
returns are not very What is disturbing A compliance officer at an son, traditional plans could also be the same unless asked for by the client.
competitive,” said is that the industry insurance company told Mint, on return no money (see expressed on pre- Further, clients do not care about the placement fees when it is
Shyam Sunder, managing director has moved towards selling more condition of anonymity, that the graph). In fact, as mentioned ear- mium as a base to be better under- being deducted from the investment versus paying it separately.
and co-founder, PeakAlpha traditional plans. For the private commission ratio in a traditional lier, in traditional plans, even by stood and more relatable. The AIFs and ELDs are, typically, not listed and their valuations are
Investment Services Pvt. Ltd. sector, according to data provided plan is around 25% compared to the seventh year, the minimum annual statement could include a difficult to compare with other products or a benchmark. Less
Returns from participating by the Insurance Regulatory and 6% for Ulips. guaranteed surrender value is 50% net return on investment for poli- transparency means higher risk for investors. One is better off
plans are in the range of 4-6%, Development Authority of India of the premiums paid. cyholders and some form of a investing in transparent products like mutual funds, which are
according to experts, while the (Irdai) for FY18, nearly 55% of the THE COST FACTOR “Even when a person puts benchmark,” said Mehta. Even more regulated, have lower costs and are liquid. While mutual
many non-participating or guar- premiums come from the non- Unlike traditional plans, which money in a recurring deposit, she non-participating plans that funds too have made some serious errors, action from the regula-
anteed plans that Mint’s personal linked or traditional portfolio, have high embedded costs and, gets her principal back if she declare returns upfront don’t give tor has been swift and investor friendly.
finance team has decoded in the whereas for the overall industry, therefore, exorbitant surrender decides to liquidate. In traditional the net return. Most alternate products do not allow premature exit, limiting
past give returns of around 4%. including Life Insurance Corp. of penalties, in Ulips, the costs are plans, the cost of liquidating the A product overhaul that trans- access to one’s money, when required. These funds may not work
Moreover, traditional plans India, this figure is 86%. defined by the regulator. investment before the term is very forms the market from “buyer for goal-based investing. Imagine if you invested for a goal which
come with huge surrender penal- At the same time, the industry Ulips come with four main cost high and this is unfair especially beware” to “seller beware” is is a few years away and in the year the money was required, the
ties, despite the new guidelines— has been witnessing poor persis- heads: premium allocation, policy because other bundled insurance needed, and so is a relook at com- fund decided to extend the maturity.
likely to be enforced in Decem- tency ratio, which shows the con- administration, fund management products like Ulips give much missions. Adding more disclosures
ber—that have reduced them. tinuity of a policy by measuring and mortality charges. While pre- more in case of early surrender,” so that investors are able to assess OTHER ISSUES
Due to the high penalties, early the number of premiums paid. mium allocation is a straight said a senior industry official, who their returns is equally essential. Funds may be new and untested and investors fall for the “exclu-
sive” tag on these. What surprises me is that investors who are not
willing to commit for long term in equities invest in these funds
driven by high fixed return expectations or dazzled by brand
names, especially if there’s an overseas parent.
These funds may not actually provide the diversification which
ISTOCK they are sold for. Most investors have real estate-heavy portfolios
What equity-linked debentures are and how to use them and it makes no sense to then invest in a real estate fund or Reit.
Similarly, ELDs would only end up increasing concentration risk,
since money will be invested in one NBFC’s debentures.
Sunita Abraham pon income is based on thus protected. The balance ticipation ratio of 75% and The risk-adjusted post tax returns on these funds are really not
sunita.a@livemint.com returns from a pre-defined is invested in equity markets the index goes up by 12%, much higher than mutual funds. A PE/credit fund giving a net
equity product, such as a through derivative products then the coupon will be 9%. return of 10% or a ELD giving 17% pre-tax return is not commen-

E quity-linked debentures
(ELDs) are structured
fixed-income products that
combine the benefits of capi-
tal protection along with
participation in returns from
equity markets. Their cou-
market index like the Nifty. A
portion of the principal
amount in ELDs is invested
such as call options. The
coupon earned by ELDs
depends on the performance
ELDs have to be held to
maturity for the benefits to
accrue. ELDs are credit rated
surate with the risk taken.
Alternate products are meant for sophisticated investors or
ultra HNIs who understand the product and the risks associated.
in fixed- income securities so of the stock markets during and listed on stock For retail investors, I would recommend sticking to tried and
that it matures to the face its tenor and the participa- exchanges. However, the tested mutual funds, which are well-regulated, liquid, transpar-
value of ELDs at the time of tion ratio defined at the time liquidity is very poor in the ent and provide commensurate risk-adjusted returns.
maturity. The principal is of issue. If an ELD has a par- secondary markets. Mrin Agarwal is a financial educator, founder director of Finsafe
India Pvt. Ltd and co-founder of Womantra
 PERSONAL FINANCE WEDNESDAY, 23 OCTOBER 2019
NEW DELHI 15

ISTOCK

Why it doesn’t make sense

to stop your SIPs mid-way
SIP stoppages have grown by around 4% in the past six months, according to industry data
ISTOCK
Neil Borate a fresh one in the new scheme,
neil.b@livemint.com which can drive up both num-
bers in absolute terms. One Coparceners can ask for
E
ven though net way to look at this is to exam-
mutual fund inflows
have been volatile
over the past few
ine the ratio of SIP stoppages
to fresh SIPs. The ratio
climbed from 60% to 66% over
partition of HUF property
months, the figure for the April-September period—
monthly systematic invest- stoppages have increased
ment plans (SIP) has been reas- compared to fresh SIPs but the Abhilash Pillai
ASK MINT
suringly steady. Experts used increase is not substantial. “It m
this stability to conclude that is also unclear whether sys- What is the rule regarding death of E S TAT E P L A N N I N G
the Indian retail mutual fund tematic transfer plans (STPs) a female coparcener (daughter) in a
investor has matured, is not are included in the SIP figure Hindu Undivided Family (HUF) if ther, a probate of a Will is required to be
easily swayed by market gyra- released by Amfi. Typically, Five she is married? Does her legal heir obtained from a competent court if the
situations
tions and stays put for the long bonuses and one-off payments when SIPs
become a member of the HUF? testator was subject to the jurisdiction
term. However, a few data are invested in mutual funds can harm —Name withheld on request of the lieutenant-governor of Bengal; or
points over the past six months through STPs,” said Prakash your Prior to 9 September 2005, daugh- if the testator or the property involved
have raised some concern. Praharaj, a Mumbai-based portfolio ters were not entitled to get rights over were within the local limits of the ordi-
There has been a slight slow- financial adviser. He also dis- bit.ly/2ondk7L their father’s ancestral properties under nary original civil jurisdiction of the
down in fresh SIP registrations missed the notion that the SIP Hindu law. This position changed ever high courts of Madras or Bombay.
and a small uptick in SIP stop- slowdown may be because of since Section 6 of the Hindu Succession Since you haven’t mentioned the
pages. Some financial advisers layoffs or lower increments. Act, 1956 was amended in 2005. Post location of the testator at the time of
have publicly flagged the risks the 2005 amendment, daughters have execution of her last Will or the location
when it comes to SIP stoppa- MINT TAKE been held to become coparceners since of the property, it is not possible to com-
ges. We tell you what’s hap- The monthly net SIP inflows their birth in the same manner as sons, ment whether a probate of the Will of
pening and what this means have remained flat and this enjoying the same rights and liabilities the deceased wife is required.
for you—the retail investor. Besides, there are two more Shyam Sekhar, founder, does represent a slowdown. over the coparcenary properties. Further, as per the Will executed by
worrying trends. SIP stoppa- iThought, an investment advi- Inconclusive data However, when it comes to the Therefore, upon demise of a female your wife, you are stated to have the
SLOWDOWN IN SIPs ges have grown by around 4% sory firm, last week. SIP stoppages have risen SIP stoppage data, it does not coparcener, who is governed by Mitak- ownership of her one-third share in the
The monthly net SIP inflow in over the past six months and Vishal Dhawan, founder, 4% and fresh SIPs have lend itself to a definitive con- shara laws, her sons and daughters will residential apartment. In case you
fallen 5.5% over six months.
mutual funds in quarter ended fresh SIP registrations are Plan Ahead Wealth Advisors But the numbers are too
clusion. also become coparceners to her share in intend to sell the one-third share, along
September 2019 was ₹8,253 down by 5.7%, a senior indus- raised the possibility of a drag small to establish a trend Data aside, stopping SIPs is the coparcenary property by virtue of with the co-owners of the remaining
crore, marginally higher than try official told Mint, who did on SIPs from slower salary a poor strategy for an equity their birth. In other words, the sons and share, you can opt either of the options.
New SIPs SIP stoppages
the ₹8,238 crore figure in not want to be named. Similar hikes and slower income investor because markets give daughters of a deceased First, you can directly
quarter ended April 2019, data has been recently cited by growth while rejecting any Figures in lakh asymmetric returns over dif- coparcener become mem- It should be kept execute a conveyance deed
12
according to data from indus- other publications as well. substantial effect on SIPs. 9.02 ferent time periods. For bers and coparceners of the in mind that all in favour of the prospective
try body Association of Mutual SIP stoppages grew from Some experts allay this fear. 10 instance, on 20 September, HUF automatically. coparceners are buyer, along with the other
Funds in India (Amfi). 540,000 in April to 563,000 “We are not seeing anything the Nifty rose 5.32% to post its All coparceners are members of a co-owners as a co-seller of
8
This marginal change over in September, an increase of alarming in terms of SIP stop- largest single-day gain in 10 members of an HUF, but
5.4
8.5
Hindu Undivided the apartment. In this sce-
six months was in stark con- 4.2%. But the movement has pages or registrations of fresh 6 years after several weeks of not vice-versa. The main nario, you are required to
trast with the ₹1,037 crore been uneven. SIP stoppages SIPs,” said Arun Kumar, head negativity. Before the rally, the difference is that coparce- Family, but the be present before the con-
5.63
jump (an increase of 15.5%) in were at 586,000 in May, of research at FundsIndia. 4
Apr Sep
average five-year return for ners are entitled to ask for reverse is not true cerned sub-registrar of
SIP net inflows 540,000 in June, In fact, Paytm Money saw Sources: Industry
large-cap funds had dipped to partition of an HUF. People properties for presenting
over the corre- Stopping SIPs is a 563,000 in July, the highest-ever SIP registra- 7.8%; after the rally, it climbed married into a family, such the conveyance deed for
SANTOSH SHARMA/MINT
sponding period poor strategy for 5 8 3 , 0 0 0 in tions in September, claimed to a more respectable 9.26%. as wife of a coparcener, become mem- registration and for admitting execution
in FY19. an equity investor A u g u s t a n d managing director and CEO great enthusiasm to increase Also, SIP amounts should be bers but not coparceners. Therefore, a of the same in favour of the prospective
The slowdown because markets 563,000 in Sep- Pravin Jadhav. Payments wal- SIPs either,” he said. But not increased in line with salary husband will become a member of the buyer. Second, you can execute and reg-
in SIP inflows lets have expanded the reach hikes because inflation erodes
give asymmetric tember. Clearly, stopping SIPs is a sign of HUF and inherit from the deceased wife, ister a power of attorney in favour of the
coincides with a the monthly fig- of mutual funds to young peo- maturity, he added. the value of SIPs over time. but won’t become a coparcener. co-owners or a third party authorizing
slowdown in the returns over ure has moved up ple in smaller towns and villa- The fact the number of SIP Moreover, expectations them to execute a conveyance deed in
Indian economy different periods and down with no ges where traditional advisers accounts rose from 26.6 mil- change as income goes up My wife was the owner of one-third favour of the buyer with respect to your
and the episodes definitive direc- may not find it viable to set lion to 28.4 million (a 7% leading to higher goal values. of an undivided residential apart- one-third share and receive the sale
of bad bonds in tion. shop and this could probably increase), according to data This can be met only with ment. She bequeathed her share to price on your behalf. In this case, you are
debt schemes of mutual funds explain the contrasting trend provided by Amfi, also dilutes higher investments, and stop- me in her Will. If all owners were to not required to be present before the
that eroded the confidence of WHAT EXPLAINS THIS they are witnessing as com- the impact of data regarding ping and stagnating SIPs don’t sell the property, how can I convey concerned sub-registrar of properties
investors. Economic growth Does this mean that the pared to the overall industry. SIP stoppages. However, augur well for meeting goals. my share to the buyer? for presenting the conveyance deed for
slid from 8.2% in the first quar- patient SIP investor is finally Though Kumar said the monthly SIP contributions Anyone losing patience should —Kishore Chandran registration and for admitting execution
ter (Q1) of FY19 to just 5% in Q1 giving up? “SIP stoppage is quantum of SIP stoppages was have remained almost flat at note that an equity SIP should We are assuming that the deceased of the same in favour of the prospective
FY20 which in turn dragged rapidly gaining momentum. not worrisome, he acknowl- ₹8,253 crore (a 0.2% increase) ideally be continued for seven wife is Hindu. The Indian Succession buyer. In such cases, the power of attor-
down both income growth While everyone is entitled to edged the stagnation in over the past six months, to 10 years, shows a recent Act, 1925 empowers a Hindu to dispose ney-holder will represent you before
(from where SIPs originate) choice, the lack of discipline monthly SIP net inflows. according to Amfi data. study by Mint (read here: of his or her property by way of a Will or the concerned sub-registrar of proper-
and returns on equity markets and understanding of what “Most SIP investors entered in In addition, switching to a bit.ly/2k6eRwT). So don’t stop other testamentary dispossession. The ties for the completion of the sale.
(which influence investor creates success in equity 2016-18 and are yet to see great different mutual fund scheme, your SIPs unless you have person who has executed his or her last Abhilash Pillai is partner, Cyril Amar-
optimism about equity invest- investing is now seen in more returns. So, though they are typically, results in stoppage of reached your goal or your situ- Will is a testator. The person who is chand Mangaldas. Queries and views at
ment). people than ever,” tweeted not stopping SIPs, there is no a previous SIP and opening of ation has changed. named in the Will is a beneficiary. Fur- mintmoney@livemint.com

A-rated health H ow do you buy a health insurance plan? If you settle with the plan
your agent sells or are happy knowing you have bought the cheapest
plan, there is a bit of unlearning and a lot of learning in store for you. To
give you a ready comparison, we designed Mint SecureNow Mediclaim
plans for you
Ratings (MSMR). The full ratings can be seen here: www.livemint.com/
mintmediratings2019. Here, only the A-rated plans have been shown. For
the policies that scored B and C, see the link mentioned. For family floater
plans, there are four sum insureds (₹5 lakh, ₹10 lakh, ₹20 lakh and ₹50
lakh) and two age categories—eldest insured is 30 years old or 45 years
old. For the first category of eldest person being 30, the cover is for three
people, two adults and one child. For the 45-years category, the cover is MEDICLAIM
for two adults and two children. For individual plans, the sum assured are
₹5 lakh, ₹10 lakh, ₹20 lakh and ₹50 lakh. In each of these, the ages are 30, RATINGS
45, 60 and 75 years. By Deepti Bhaskaran

Individual SCORE
policies PREMIUM PRE-EXISTING LIMIT ON
INSURANCE PRODUCT (R; INCLUDING DISEASE ROOM NO-CLAIM WELLNESS RESTORE CLAIMS CLAIM CLAIMS
COMPANY NAME 18% GST) PREMIUM EXCLUSION RENT BONUS PROGRAMME BENEFIT SETTLEMENT COMPLAINTS AGEING TOTAL
Sum insured
R20 lakh Maximum score 25.00 15.00 15.00 5.00 2.50 2.50 25.00 5.00 5.00 100.00
No. of people
covered 1 ICICI Lombard Gen. Ins. Complete Health Ins.(iHealth)
9,603 25.00 9.90 15.00 2.50 2.50 2.50 12.50 5.00 5.00 80
1 2 Bajaj Allianz Gen. Ins. Health Care Supreme
Age 22,546 12.50 9.90 15.00 2.50 0.00 2.50 25.00 5.00 2.50 75
3 ManipalCigna Health Ins. ProHealth Ins. (Accumulate Plan)
30 years 14,880 25.00 0.00 15.00 5.00 2.50 2.50 12.50 5.00 5.00 73
4 Bajaj Allianz Gen. Ins. Health Guard
14,843 12.50 4.95 15.00 5.00 0.00 2.50 25.00 5.00 2.50 72
5 Royal Sundaram Gen. Ins. Lifeline - Supreme
10,006 25.00 4.95 15.00 5.00 0.00 2.50 12.50 5.00 2.50 72
6 Apollo Munich Health Ins. Optima Restore
15,488 18.75 4.95 15.00 5.00 2.50 2.50 12.50 5.00 5.00 71
7 Apollo Munich Health Ins. Easy Health Exclusive
15,067 18.75 4.95 15.00 5.00 2.50 0.00 12.50 5.00 5.00 69
8 Religare Health Ins. Care
11,311 25.00 0.00 15.00 2.50 0.00 2.50 12.50 5.00 5.00 68
9 HDFC Ergo Gen. Ins. Health Suraksha Gold - Regain ECB
15,124 25.00 0.00 15.00 5.00 0.00 2.50 12.50 5.00 0.00 65

Individual 1 ICICI Lombard Gen. Ins. Complete Health Ins.(iHealth)

policies 12,406 25.00 9.90 15.00 2.50 2.50 2.50 12.50 5.00 5.00 80
2 Bajaj Allianz Gen. Ins. Health Care Supreme
32,646 12.50 9.90 15.00 2.50 0.00 2.50 25.00 5.00 2.50 75
Sum insured
3 ManipalCigna Health Ins. ProHealth Ins. (Accumulate Plan)
R20 lakh 17,653 25.00 0.00 15.00 5.00 2.50 2.50 12.50 5.00 5.00 73
4 Bajaj Allianz Gen. Ins. Health Guard
No. of people 21,373 12.50 4.95 15.00 5.00 0.00 2.50 25.00 5.00 2.50 72
covered 5 Royal Sundaram Gen. Ins. Lifeline - Supreme
1 15,234 25.00 4.95 15.00 5.00 0.00 2.50 12.50 5.00 2.50 72
Age 6 Apollo Munich Health Ins. Optima Restore
17,875 18.75 4.95 15.00 5.00 2.50 2.50 12.50 5.00 5.00 71
45 years 7 Apollo Munich Health Ins. Easy Health Exclusive
17,391 18.75 4.95 15.00 5.00 2.50 0.00 12.50 5.00 5.00 69
8 Religare Health Ins. Care
14,782 25.00 0.00 15.00 2.50 0.00 2.50 12.50 5.00 5.00 68
9 HDFC Ergo Gen. Ins. Health Suraksha Gold - Regain ECB
16,860 25.00 0.00 15.00 5.00 0.00 2.50 12.50 5.00 0.00 65

Data updated as on 23 September 2019 SANTOSH SHARMA/MINT

16 WEDNESDAY, 23 OCTOBER 2019
NEW DELHI VIEWS

OUR VIEW MY VIEW | ARTHANOMICS

MINT

Why higher taxes are not the

way to better welfare in India
Unlike in the West, conditions in the country are not suitable for soak-the-rich policies to succeed

study by Peter Diamond and Emmanuel
Saez of MIT and University of California
at Berkeley, respectively, has even rec-
ommended that the US raise its top
marginal tax rate to 73%.
Evidence from Europe, especially
Scandinavia, where the top marginal
rates are usually in the 40-50%-plus
range, also suggests that the rich do not
R. JAGANNATHAN flee high-tax jurisdictions.
is editorial director, ‘Swarajya’ magazine The problem with these arguments is
that they are being universalized with-
out context. If the US and Europe can
raise taxes without investors voting
true, given the venal nature of our
bureaucracy and the legal system’s end-
less delays. As for corporate taxes, even
the US finds it tough to prevent corpo-
rations from keeping their profits
abroad in tax havens. Competitive tax
rates are thus crucial till we reach a
global understanding that countries
must not compete on tax rates.
But beyond the simple ability to
impose high marginal tax rates on indi-
viduals, there is the question of desira-
bility. Despite high state capacity in
advanced countries, few people would

The Infy investigation

with their feet, it is because they are glo- argue that states can spend money more
bally powerful and their governments efficiently than private parties. In India,

A
bhijit Banerjee, winner of the can impose their laws on smaller coun- this is even more true. In these circum-
2019 Economics Nobel along tries and tax havens. Consider how eas- stances, a rupee left in the hands of pri-
with Esther Duflo and Michael ily Indians have been forced to comply vate individuals and companies may be

needs a broader ambit Kremer, has been talking up the idea of

high and rising marginal tax rates for
the rich. He has also criticized the Nar-
endra Modi government’s recent corpo-
with the US Foreign Account Tax Com-
pliance Act, though the US has no juris-
diction over Indian citizens. Equally,
totalitarian countries can enforce high
put to better use than if handed over to
politicians and bureaucrats.
It is also time to question the basic
hypothesis that states can deliver welfare
rate rate cut and said the money would rates. Consider the case of China, where better to the poor, and that higher taxa-
have been better spent on the poor, financial repression is the norm and the tion is the way to fund this munificence.
The software major has been rocked by whistleblower charges that need a probe. The which would have helped revive state can commandeer resources from The marginal utility of higher incomes
demand. He argues that there is no evi- anyone with its ability to track almost reduces as one moves up the income
company has initiated one. But its scope should include fresh questions that have arisen dence that high tax rates deter invest- every citizen in every activity. scale. This implies that beyond a certain
ment or growth. Monocultural countries also find it level of income, wealth and personal
One need not quarrel with the idea of easier to tax their citizens at a high consumption, the rich work largely to
putting more money in the pockets of rate; acquiescence is aided by the public earn psychological rewards—by winning

S
ome two years ago, when Infosys
Ltd. co-founder Nandan Nilekani
returned to the company as chair-
man after the exit of then chief exec-
utive officer (CEO) Vishal Sikka
amid concerns of corporate govern-
ance lapses, its shareholders thought the worst
was behind them. Little did they expect half a
trillion rupees of the software major’s market
capitalization to be wiped out in a single day, as
happened on Tuesday, the first day of domes-
tic trading after it was rocked by allegations of
scandalous behaviour at the top. No charge has
been proven yet, but in the eye of the latest
storm are its current CEO Salil Parekh and
chief financial officer Nilanjan Roy. An anony-
mous complaint, purportedly filed by a group
of employees by means of a letter to its board
dated 20 September, accuses Parekh and Roy
of demanding “unethical accounting prac-
tices” designed to overstate quarterly profits
and revenues and thereby prop up Infosys’s
share price. Not only were accounts being
fudged, the whistleblowers allege, but depre-
standable, since a large number of such incom-
ing messages are frivolous, there is a long gap
between the receipt of the complaint on 30
September by a board member, as Nilekani’s
statement dates this event, and it being turned
over to the audit committee, which was done
on 10 October. Stock exchanges were
informed even later, on 21 October. Prima
facie, this seems to be in accordance with legal
principles on how to proceed in such cases.
The gravity of the charges was for Infosys to
determine, and the firm has stated that it did
not receive any corroborative material by way
of emails or voice recordings. Yet, for the sake
of investor confidence, the probe should
examine whether its public disclosure took
longer than it ought to have.
The timeline assumes importance for the
reason that the information had the potential
to influence the market price of the company’s
stock. Moreover, all listed firms are required to
keep the public informed of such develop-
ments. Delays create space for suspicions of
insider trading. There has been some specula-
the poor, provided it can be funded
appropriately and without setting off
high inflation. But it is surprising that
he should be advocating soak-the-rich
policies in a country which is estimated
to have lost around 5,000 millionaires
in 2018 alone, according to an AfrAsia
Bank-New World Wealth report.
While the rich may be leaving India for
reasons other than just high tax rates,
surely, hiking marginal taxes will hardly
convince them to return and invest in
this country. Jobs and growth are cre-
ated by boosting investment and entre-
preneurship, not just consumption.
There have been studies to suggest
that high marginal tax rates do not
endanger growth, and the Eisenhower
era US top rate of 91% is often cited as
evidence that one should indeed fleece
the rich to fund welfare. A research
www.livemint.com
New Delhi, Mumbai, Bangalore, Kolkata, Chennai, Chandigarh*, Pune*
knowledge that these taxes will serve to
benefit someone we can identify with in
terms of race or kinship. Once countries
become diverse and culturally diver-
gent, this willingness to pay high taxes
reduces—as is the case with India.
To repeat, high tax rates are likely to
work if a country offers huge economic
opportunities, can enforce compliance
even outside its sovereign jurisdiction,
is largely homogeneous and mono-cul-
tural, makes a reasonable assurance that
the money will be put to good use, and
its economy is largely free of corruption
and the legal system is capable of pun-
ishing violations.
Almost none of these conditions are
true in India at this stage of its develop-
ment, and even small efforts to enforce
better tax compliance attract the charge
of tax terrorism, which may be partially
Friday, October 23, 2009 Vol.3 No.253 Rs. 3.00 24 PAGES
+ 4 PAGES MARKETS WATCH
against competitors, taking on new chal-
lenges, earning plaudits from peers, and
contributing to society. This may sound
like an argument for higher taxation, but
it is actually an argument to incentivize
the rich to do more for society.
Ask yourself: If toilets have to be built
for the poor, is it more likely that the
Tatas would do it well or the govern-
ment? So, rather than tax the Tatas and
get the government to spend money on
building poor quality toilets, wouldn’t it
make more sense to incentivize the
Tatas (or Birlas, or Ambanis or Shiv
Nadars and Azim Premjis) to promote
social entrepreneurship and invest-
ment in human capital?
Companies and individuals are more
primed to deliver better outcomes. It is
time to let go of the idea that higher
taxes are the way to better welfare.

catory words were also used by top executives tion among traders on social media over alleg- Q&A: Sir
Thomas Harris on
StanChart Capital’s plans >16
CORPORATE: Narayana Murthy sells part

for a few non-executive board members. In a
edly unusual positions taken on Infosys shares.
of stake in Infosys to start VC fund >11
EXCLUSIVE PARTNER
TECH: Microsoft’s Windows 7 at least 20%
cheaper in India to tackle piracy >7

statement issued on Tuesday, Nilekani said Attention has been drawn to some put
SENSEX 16,789.74 æ 219.43 NIFTY 4,988.60 æ 75 DOLLAR Rs46.74 Æ Re0.25 EURO Rs69.94 Æ Re0.64 GOLD Rs16,035 Æ Rs115 OIL $79.50 Æ $1.60

STATE ELECTIONS CHAMPIONS LEAGUE

that Infosys had placed the letter before its options—which let traders make gains off a
What’s inside
Biocon Ltd posts a threefold increase in profits to
Rs74 crore for the quarter ended 30 September, up
from Rs25 crore in the same period last year. The
biotechnology firm’s revenue grew 31% to Rs580 crore,
from Rs442 crore in the year-ago period, on account
of a product mix that yielded good margins. >P10
Wins boost
Congress,
Festive season takes
sparkle out of cricket
B Y P RIYANKA M EHRA
R ASUL B AILAY
·························
& response to a query about the
South African club, one of the
12 teams participating in the
Corporate governance
should be done more
LEADING THE NEWS MONEY MATTERS NEW DELHI two-week tournament that
Adopting a Squeezed margins, negative
E mpty ticket counters, va- ends on Friday. Krishna, an

audit committee, which had started consulta- price slide in the future—said to have been Sonia
rational pricing outlook for cement are me- cant stadiums and rock- avid cricket fan otherwise, has
approach has dium-term dampeners for bottom television ratings say it given the tournament a com-
helped protect Jaiprakash Associates, says all. Cricket fans in India— plete miss.
the profitability Mint’s Mark to Market. >P14 where the game is supposed to “I don’t feel I’m missing any-
of most IT *** be a religion—have been left thing. Besides, there have been
service providers catering Gold is a commodity at the cold by the inaugural Champi- other social obligations such
to the US and Europe. >P9 end of the day, and like any ons League, hyped as a billion- as weddings and Diwali in the
*** other commodity, its value Fragmented opposition to provide a fresh start to the dollar sporting spectacle. last one month,” added
Banks have shrunk by should depend on supply helps party win a clear government by backing a se- “Cape Cobras, who?” was

tions with an independent internal auditor to bought in advance. These could simply be part
26.4% their off-balance-
sheet exposure, such as
derivatives and guarantees,
to Rs1.06 trillion at the end
of March. >P15
through principles than
and demand, ries of new policy initiatives, 26-year-old Madhav Krishna’s TURN TO BACK PAGE ®
say Rajeshree majority in Arunachal, reorganizing the party and,
Varangaonkar close to forming govts in eventually, reshaping the cabi-
and Bharat net of ministers.
Maharashtra, Haryana
Indurkar. >P15 Although the Congress-led
United Progressive Alliance Telecom dept tral Bureau of Investigation
(CBI), registered a case under
B Y L IZ M ATHEW
R UHI T EWARI
·························
& won easily in the general elec-
tion earlier this year that it under CBI lens the country’s Prevention of
Corruption Act against un-
contested on the strength of
over licensing named officials in the depart-

probe the matter. of a regular trading strategy, but if data pat-

NEW DELHI
ment of telecommunications

A n impressive perfor- TURN TO PAGE 3® (DoT) as well as private indi-

rules.
mance that belied anti- B Y S HAUVIK G HOSH viduals and firms, a statement
incumbency sentiments ALSO SEE shauvik.g@livemint.com from the agency said.
in the assembly elections in ························· CBI didn’t provide details of
Maharashtra, Haryana and >Raj Thackeray: the NEW DELHI
the officials and companies
nephew also rises >P4
CORPORATE NEWS ECONOMY & POLITICS
The success of Pratibadh,
Arunachal Pradesh, will, ana-
lysts say, boost the morale of
the Congress and, more im-
>In defeat, BJP seeks to
connect with cadre >P5
>The final count >P5
S ince early 2008, the Indian
telecom sector has been
abuzz with unsubstantiated al-
being investigated. In January
2008, six companies were giv-
en licences along with bundled

What’s true and what’s false would take time terns warrant a closer look, then these may
Roomy Khan, a hedge fund
manager who worked for
Galleon Group in the 1990s,
the 13-year-old publication
that won a Manthan Award
last year in the e-news
category, can be gauged
not only from its financial
sustainability, but also be-
cause it is a tool of empow-
erment and access to infor-
mation for its rural readers,
portantly, vest party president
Sonia Gandhi with crucial po-
litical capital required to deal
with some restive state units
and allies.
Some Congressmen expect
Gandhi to use the opportunity
>Youth aspirations help legations in how new licences
regional parties >P6 were awarded to some compa-
> Maharashtra on a nies that wished to enter the
platter for Cong >P6 country’s fast growing mobile
>Views: Securing telephony business.
wins by default >P22 On Wednesday, the federal
investigative agency, the Cen-
4.4MHz spectrum (or air-
waves) to start mobile services.
Telecom minister A. Raja,
who happened to be in charge
of the portfolio in January
TURN TO PAGE 2®

to determine. However, given the high levels need to be probed as well. It is not in the inter-
has been named as the
informant in the insider says Osama Manzar. >P8
trading case involving the
hedge fund by people fa-
***
The Wholesale Price Index
Rs325 cr service
miliar with the matter. The
group is set to “conduct an
climbed 1.21% in the week
to 10 October from a year tax notice to
Tata Motors
A D I G OD R E J
orderly wind down”. >P17 earlier. Economists had ex-
*** pected it to rise 1.1%. >P20
Govind Sankaranarayanan
VIEWS B Y K HUSHBOO N ARAYAN

of transparency expected of Infosys, whose est of Infosys shareholders alone to attain clar-
on why global luxury
brands have had a rough
ride in India.
>P10
***
Larsen and Toubro Ltd has
recorded a 26% increase
in net profit to Rs580 crore
in the September quarter,
riding on a revenue of
Mrinal Pande says khushboo.n@livemint.com
·························
facilities for a properly MUMBAI
performed abortion
should be viewed
as an important
reproductive
T he service tax department
in Mumbai, a wing of the
Central Board of Excise and
right for Customs (CBEC), has issued a
young women show-cause notice to Tata Mo-

success is an integral part of India’s entrepre- ity on this episode. With its founders serving as
Rs7,866 crore. >P10 everywhere. >P22 tors Ltd, relating to a potential
service tax liability of Rs325
crore for five years between
2004-05 and 2008-09, accord-
ing to two officials of the agen-
QUICK EDIT cy familiar with the develop-
ment.

The return of leverage CBEC is the apex body that

regulates and administers col-

neurial story, it would be best if the investiga- role models for entrepreneurs across the coun-
lection of indirect taxes.

T he insider trading charges

against hedge fund firm
Galleon Group have forced
it to start winding down
all its hedge funds.
The growing scandal has
grabbed public attention
and thus taken the spotlight
New funds are also being
planned. John Meriwether, a
talented trader who was a
prime mover of Long-Term
Capital Management, which
went belly up during the
financial crisis of 1998 and
almost pulled the global
“We have issued the notice
to Tata Motors for violation of
service tax norms,” one of the
officials told Mint last week.
He declined to give details on
the alleged violation of service
tax norms by the firm. Neither
he nor his colleague, one of

tion broadens its scope to include other ques- try, every citizen qualifies as a stakeholder in
off a bigger trend: Hedge
fund assets grew for a fifth
month in a row on the back
of strong stock markets and
renewed investor confidence,
reports Bloomberg.
These secretive and private
pools of capital seem to have
survived the gut-wrenching
financial system down with it,
is back on the road to raise
money for a new hedge fund.
The return of hedge funds
is part of a bigger story: the
return of leverage and the
carry trade. That’s natural,
given rock-bottom interest
rates and rising asset values.
the officials involved in inves-
tigation of the case, was will-
ing to be identified as they are
not authorized to speak to the
media.
In an email response to Mint
queries, a Tata Motors spokes-
person said on Thursday: “The
demand raised by the service

tions that have arisen. While a delayed this case. Infosys has bounced back from a
fall in global equities at the Are we headed for a new tax authorities has been ar-
end of 2008 and early 2009. blowout down the line? rived at without considering

Mint is also available for Rs5.50 with Hindustan Times under a combo offer TURN TO PAGE 2®

response to the blow of a whistle is under- crisis before and we expect it to do so again.

MY VIEW | EX MACHINA

The case for meat options that taste like the real thing
uses up anywhere between 70% and 90% of
RAHUL MATTHAN the world’s freshwater.
This has come at significant environmen-
tal cost. Because of the huge amounts of
nutrients and organic by-products of animal
farming that make their way into our water
this deeply disconcerting. I absolutely relish Central to its verisimilitude is a food mole- the Impossible Meat burger patty—and
the many different flavours, tastes and tex- cule called heme that Impossible Foods asked the server to make sure that they
tures of animal proteins, and the thought of claims to have been the first to identify. looked as much like each other as possible.
having to live the rest of my life eating only Heme is found in every living plant and ani- I then asked him not to tell me which one
plant-based foods gives me the chills. But mal, but is most abundantly available in ani- was which till I was done tasting.
given what industrial production of animals mal tissue. This, apparently, is what makes When the burgers were brought to my

A
ccording to the United Nations Food
and Agriculture Organization
(bit.ly/2MXe4Ja), rapid increases in
the demand for foods derived from animals
has led to an unprecedented increase in live-
stock production. Livestock accounts for
about 40% of the global value of agricultural
output today and supports the livelihoods
bodies, the algae and plants in our lakes and
ponds have begun to grow aggressively,
using up all the oxygen available at the
expense of other species. A recent study in
Nature magazine (go.nature.com/2pTrxXv)
indicated that 72–78% of all food related
greenhouse gas emissions are related to ani-
mal products. According to the study, the
is doing to the planet, it doesn’t seem like we meat taste like meat and what we yearn for table, I tried my best to see if there were any
have many other options. when we bite into a burger. visual differences between the two. To the
For more than a few Plant-based heme is widely naked eye, it was impossible to tell them
years now, I have been It is only by available—most commonly apart, and when I first bit in, there was liter-
hearing about new meat in the root nodules of soy- ally no difference in terms of mouth-feel,
substitutes that are sup- making drastic bean plants—but Impossi- texture or taste. Given all that I had read, I
posed to taste, smell and ble Foods seems to have knew I was not going to be served some
feel so much like real meat
changes to our found a way to produce bland, meat flavoured tofu, but even so, I was

is a partner at Trilegal and

and food security of almost 1.3 billion people
on the planet. The total volume of land set
author of ‘Privacy 3.0: Unlocking
Our Data Driven Future’
apart for grazing and for the cultivation of
crops dedicated to feeding livestock repre-
sents almost 80% of all land under agricul-
tural cultivation today.
Animal husbandry has become an indus-
trial enterprise designed to churn out live-
stock like widgets. Modern livestock farms
are factories, keeping animals indoors so
that they can be fed to a plan and bred faster.
As a result of all of this, the average time-to-
market for a US chicken has come down
from 112 days to 48 over the last century,
while its weight has more than doubled.
Estimates vary, but in general farming today
environmental impacts of the food system
exceeds the planetary boundaries for food-
related greenhouse gas emissions by 110%,
for cropland use by 70%, for nitrogen appli-
cation by 125%, and for phosphorus applica-
tion by 75%.
Unless we make drastic changes to our
global dietary habits, we will not be able to
meet our planetary target of keeping global
warming to under 1.5 degrees Celsius. This
means that everyone on the planet will have
to eat, on average, 75% less beef, 90% less
pork and half the number of eggs, while trip-
ling our consumption of beans and pulses
and quadrupling the nuts and seeds we eat.
As an unabashed lover of food, I find all
that it is impossible to tell
the difference. There are a
dietary habits heme at an industrial scale
through the fermentation
pleasantly surprised by how authentic it felt.
As I made my way through the burgers, I
number of companies
competing to produce the
that we can of genetically engineered
yeast. This is what makes
began to pick up a few subtle differences:
just the tiniest hint of a stronger Maillard
most authentic faux-pro- meet our their meatballs, kebabs, reaction on one over the other that made the
tein, the most famous of sausages and burger pat- caramelization on the burnt ends just a tad
which is arguably Impossi- planetary goals ties so hard to distinguish more authentic.
ble Foods, which has from the real stuff. I guess it is still possible to tell Impossible
recently started retailing I wanted to see for Meat from the real stuff—if only just. How-
its meat products in grocery stores around myself whether this was true or not. There- ever, I have no doubt that even these differ-
the US. The company’s most sought-after fore, last week when I was in Washington, I ences will soon be too subtle to detect. Given
product is the Impossible Burger, a patty walked into a restaurant and did a taste test. human consumption patterns, it seems inev-
made from a combination of soy and potato I did not have the time to organize a full-on itable that we will need to change the way we
proteins, coconut and sunflower oils and double-blind trial. Thus, I did the next best farm. In which case, instead of banning meat
food starch that offers the texture, sizzle and thing. I asked the server to get me two burg- altogether, we’d do well to encourage a tasty
taste of a real burger. ers—one regular and the other made from alternative.
 VIEWS WEDNESDAY, 23 OCTOBER 2019
NEW DELHI 17

MY VIEW | CAFE ECONOMICS G LO B A L VO I C E S

What a look at the long waves of No persuasive evidence in Clinton email probe

W hat about her emails? Donald Trump raised that question like a red flag for
three years, as candidate and president, casting doubts on how Hillary Clin-

India’s credit cycle could tell us ton used a private email server to communicate with her staff and others while she
was secretary of state. “Hillary set up an illegal server for the obvious purpose of
shielding her criminal conduct from public disclosure and exposure, knowing full
well that her actions put our national security at risk,” Trump said late in the cam-
paign. Now a three-year State Department investigation has found that, while about
three dozen people violated protocols about classified material, they “did their best
Bank lending should normally outpace nominal GDP in an emerging economy, but that’s not the case in India right now to implement them in their operations” and “there was no persuasive evidence of
systemic, deliberate mishandling of classified information.”
The keeping and preservation of records isn’t just a matter of concern for histori-
ISTOCKPHOTO ans, it is essential to the smooth functioning of the government. When government
officials do business outside official channels, it not only hampers the business of
governing, it also raises the concern that there is something to hide. A State Depart-
ment investigation in 2016 found that other secretaries of state had handled classi-
fied information on unclassified email systems. While Mrs. Clinton’s name will
always be associated with the practice, it is disappointing to see the use of personal
email accounts proliferate across the government.
The New York Times

NIRANJAN RAJADHYAKSHA
is a member of the academic board of the Netanyahu’s reign might still not be over
Meghnad Desai Academy of Economics

T he announcement by Israeli Prime Minister Benjamin Netanyahu that he has

abandoned his latest attempt to form a governing coalition, after two general
elections within a calendar year, might be seen in some democracies as marking
the end of his decade in power. But in the case of Israel, such an assumption would
be premature. The onus of forming a government and—at least as importantly for
weary voters—avoiding a third successive election now falls to Blue and White,

T
he length of the average Indian finan-
cial cycle is 15 years, according to
recent research by economists at the
Reserve Bank of India (RBI). There
was thus good historical reason to
hope that the financial downturn that
began around seven years ago would bottom out
soon. However, the silver linings seem to be get-
ting blurred again.
The recent collapse of a cooperative bank in
Mumbai, the deepening crisis among non-bank
financial companies (NBFCs), subterranean fears
about the stability of some banks, and the unusual
statement issued by the Indian central bank on
1 October that the banking system is “safe” are
some indications of how the malaise in the finan-
cial sector persists.
Here are some relevant numbers. In the first six
months of the current fiscal year, most of the new
deposits that banks have collected since April
have been parked in government securities
rather than being lent to enterprises. Aggregate
deposits till the week ended 27 September grew
by ₹3.32 trillion. The increase in investment in
government securities was of almost the same
amount—₹3.10 trillion. Food credit grew by
₹18,475 crore while non-food credit fell by
₹18,887 crore. So, there was almost no increase in
bank credit to the private economy as a whole.
Bank credit growth has been weak for many
years. The slack in bank lending was until
recently picked up by NBFCs and, to a lesser
extent, by funding from the financial markets,
which is available only to large companies. How-
ever, even the NBFC lending pipe is now choked.
A table from the new Monetary Policy Report,
published by the central bank earlier this month,
shows that growth in total funding to the com-
mercial sector from both bank and non-bank
sources has collapsed this fiscal year till mid-Sep-
tember. It is not a pretty picture.
The total flow of funds has come down sharply
from ₹7.36 trillion in the first six months of fiscal
year 2018-19 to a mere ₹90,995 crore in the same
period this fiscal year. Nearly half of that reduc-
tion is explained by the decline in lending by
banks and NBFCs. My guess is that the reduction
in financial support to the industrial sector is
because of
inventory destocking by firms that are seeing
weak demand while the decline in funds flow to
the services sector is a sign of stress in the real
estate industry. These two micro factors are over-
laid on an overall drop in nominal gross domestic
product (GDP) growth to perhaps its lowest level
in two decades.
The funds crunch would have been worse if it
had not been for foreign capital inflows, through
either foreign direct investment (FDI) or external
commercial borrowings (ECBs). Needless to add,
such foreign capital inflows are sensitive to global
financial or geopolitical shocks. They provide
relief, but are also a source of funding risk.
The growing dependence on foreign capital
inflows to fund the Indian commercial sector fits
well with deepening fears of a lower domestic
savings rate, especially a sharp decline in the net
savings rate of households, which have borrowed
to maintain consumption levels during a period
of weak income growth. The hidden message
here is that India could face current account pres-
sures if there is a domestic investment revival
without a matching revival in domestic savings.
This column began with a long-term argument
about the length of the Indian financial cycle,
before going into recent credit data. Here is a final
data point that switches attention back to the
longer term. The Bank of International Settle-
ments provides a very useful data series on what it
calls the credit gap, which measures the extent to
which the ratio of credit-to-GDP has deviated
from the historical trend as calculated by the
Hodrik-Prescott filter. The credit gap has been
N ot since the Cedar revolution of 2005, which resulted in Syrian forces leaving
negative for 22 consecutive quarters now, or the
credit-GDP ratio has been below trend. Compare
this with
55 quarters of a positive credit gap from the three-
month period ended December 2000.
A developing economy such as India should
normally have bank credit growing faster than
nominal GDP because of financial deepening.
The recent negative credit gap should also be
seen in the context of a broadening of the sources
of finance, especially from financial markets as
well as NBFCs. Yet, there is no doubt that the
credit gap has been negative since the end of
2013.
Economists have for long debated whether
bank credit moves in tandem with the economy,
anticipates what is going to happen in it, or moves
with
a lag. An analysis of India’s boom in bank credit
followed by a bust is profoundly dependent on
the answer. It is an issue this column will soon
return to. Till then, it is important that the Indian
public debate focuses on not just immediate bank
credit data, but also on longer waves.
itself a coalition created to wrest the country from Netanyahu’s grip... But what
would a future without the longest-serving prime minister in the nation’s history
look like?
The very length of his tenure means that Netanyahu has become the face of every
impasse in Israeli public life, from the failure to reconcile the country’s religious
and secular communities to African immigration... How Blue and White’s leader,
former military chief Benny Gantz, might change any of this is not clear. But it
should surprise no one if, four weeks from now, Mr Gantz still faces the prospect
of a rotating prime ministership with Netanyahu, and ends up taking the first two-
year turn in charge so that his rival has time to clear a daunting legal inbox.
The Sydney Morning Herald
The WhatsApp revolt in Lebanon
the country after 15 years of post-civil war involvement, have crowds taken to
the streets of Lebanon in such numbers or for so long. Protesters blocked roads and
forced schools, banks and businesses to close... Far from petering out, the move-
ment appears to be gaining momentum and now poses a serious challenge that the
government of Prime Minister Saad al-Hariri cannot dismiss. Public discontent
tipped after the cabinet approved a range of new taxes, among them a levy on use
of the messaging tool WhatsApp. The government, which presides over one of the
most indebted states in the world, withdrew the WhatsApp tax, but it was too little,
too late. The protests reflect much wider, long-simmering anger over Lebanon’s
crumbling services, price rises and what many Lebanese see as a culture of corrup-
tion and nepotism in the ruling elite.
In Tunis and Cairo in 2011, incumbent governments misjudged the scale of public
anger and wrongly assumed that expressions of sympathy would amount to an ade-
quate response. Sheikh Hassan Nasrallah, leader of Hizbollah, the most powerful
political force in the country, has said he opposes the government’s resignation.
But even that may not be enough. If the political class wants to get ahead of the cri-
sis, it may require the dissolution of the parliament itself.
The Irish Times
The IMF’s troubling economic outlook
T he global economy continues to slow and the primary problem is the geopoliti-
cal outlook. That is the primary message in the latest International Monetary
Fund World Economic Outlook, released last week in anticipation of the fall meet-
ings of that organization and the World Bank. Other dangers loom, however, and
policymakers must be alert to a range of challenges that threaten global stability
and well-being. Growth in 2019 will be the weakest since the 2008 financial crisis.
The IMF anticipates global growth of 3 percent, a drop of 0.3 percentage points
from its April forecast, and a substantial reduction from the 3.6 percent expansion
that occurred last year. The risk factors are well known: the US-China trade war,
rising tensions in the Middle East and the Persian Gulf, Brexit and a slowdown in
the largest economies. Trade disputes are the biggest problem.
Japan’s economy is anticipated to grow just 0.5 percent next year, its structural
problems compounded by the trade war waged by its two largest trade partners...
To their credit, Japanese companies have improved profitability and, almost alone,
reduced speculative debt, but a downturn on the scale of the global financial crisis
would render too large a portion of corporate debt unserviceable. Alert and antici-
patory policy is required; while their influence is limited, Japanese policymakers
must do more to shape the global economic environment.
The Japan Times

THEIR VIEW

The RCEP as a trade opportunity rather than threat

domestic income. With apt policies, the ben-
PRADEEP S. MEHTA efits can eventually reach the poor and less
fortunate by creating jobs and job creators.
The import of intermediate goods and
their use in exports is also made possible
through GVCs. The WDR notes that GVCs
India has not been able to fully exploit the
potential of GVCs in the past, owing to our
extremely cautious approach towards for-
eign goods and services, and our apparent
inability to implement difficult domestic
reforms. We have now been presented with
rience, and not by rhetoric. Since opposition
to any major move, especially a difficult one,
is considered fashionable these days, criti-
cism of the idea naturally grabs the attention
of the media, which doesn’t always seem
keen to cover unpopular counter opinions.
factors of production, leading to enhanced
productivity—will enable firms to efficiently
add value and command decent margins in
international markets.
India is currently experiencing a slow-
down in consumption, traceable in part to

I
n 2013, a World Trade Organization high-
level panel, of which yours truly was a
member, estimated that the share of inter-
mediate goods in global merchandise trade
was anywhere between 60% and 70%. In
recent years, as pointed out by the World
Bank in its World Development Report (WDR)
2020, owing to a spate of protectionist poli-
have helped poor countries grow faster, cre-
ated new jobs and lifted many out of poverty.
A single percentage point increase in GVC
participation is estimated to boost per capita
income levels by more than 1%, much more
than the 0.2 % income gain from standard
trade, says the WDR. These value chains can
foster inclusive and sustainable growth, cre-
an opportunity in the form of the RCEP, Many CSOs, including CUTS Interna- unsatisfactory levels of disposable income
which includes the most tional, have analysed evi- among workers across various sectors. A
dynamic economies of the dence across countries for well thought out and harmonized approach
Asia-Pacific region, to cor- Joining the RCEP years, and thus have been to the RCEP, linked to an improvement in
rect course and truly par- arguing that it is possible wages and conditions of workers, may not
take in the GVC revolution. could boost for India to gain from the only be required from the perspective of sus-
Joining the RCEP would RCEP. This needs to be tainable development and inclusive growth,
thus make eminent sense.
productivity, coupled with the right set but also for boosting domestic demand.

is Secretary General of CUTS

cies around the world, it has come down to
50%, but remains substantial.
International India has been poor in accessing Global
Value Chains (GVCs)—about 16%—but the
opportunity to change that is knocking on
our doors by way of the Regional Compre-
hensive Economic Partnership (RCEP) deal.
Furthermore, the RCEP is important for
our strategic interests, and to resuscitate a
rules-based international trading order.
That said, the import of high quality and/
or less costly intermediate inputs is shown to
have multiple benefits: cheaper access for
end consumers; positive effect on the pro-
ductivity of firms; raised export growth;
expanded employment and increased
ate better jobs, and reduce both poverty and
inequality if developing countries imple-
ment deeper reforms and industrial coun-
tries pursue open, predictable policies.
This does not mean that domestic value
addition is not important. According to a
recent study by the Indira Gandhi Institute
of Development Research reported in this
newspaper on 18th October, Exports, Global
Production Sharing, And Jobs In India
(bit.ly/32pDaqu), between 1999-00 and
2012-13, the domestic value-added content
of India’s aggregate exports increased signif-
icantly from $46 billion to $234 billion. Also,
export-related jobs grew faster than total
employment.
Globally, the import
content in exports has
bolster our of policies, particularly
domestic reforms that
Going forward, India should embrace
GVCs, the RCEP in particular, as it has more
risen from around 20% in
the 1970s to around 40% in
‘Make in India’ would help run a business
by reducing input costs
to lose than others by staying out. It would
raise productivity, which is necessary to cre-
2013. In India’s case, fol- agenda and such as on finance, power ate export-oriented jobs with better wages,
lowing an increase from and logistics, removing and help the Make in India programme.
around 19% in 2005 to deliver gains bureaucratic hindrances, India needs the RCEP more than the other
around 25% in 2011, the and encouraging active way around. This government has time and
foreign-value added con- cooperative federalism. again shown the resolve to take difficult
tent of India’s export has declined sharply to Instead of considering measures like decisions that would deliver gains in the
around 16 % in 2016. export and import restrictions, Indian poli- long run. It should not lose this opportunity.
While some civil society organizations cymakers should focus their energy on cre- Most importantly, we need to reduce
(CSOs) have opposed India’s entry to the ating conditions for domestic stakeholders transaction costs for our businesses to help
RCEP citing concerns of a huge upsurge in to use the opportunity to add value in GVCs them become competitive globally. An
imports, the government must make a deci- formed under the RCEP. Measures to reduce embrace of the RCEP could and should
sion informed by vision, evidence and expe- input costs—by facilitating easy access to hasten our domestic reforms agenda.
18 WEDNESDAY, 23 OCTOBER 2019
NEW DELHI POLICY

P O L I C Y 1 0 1

How the trade seesaw

tilted towards Beijing
is hurting India badly
During the Mamallapuram informal summit between Xi and Modi A $671 million trade deficit in FY01 swelled to $63 billion in FY18
it was decided to set up a high-level group to tackle India’s trade Indian industry is sceptical that the RCEP deal would lead to a
deficit with the world’s second-biggest economy. REUTERS flooding of goods from China. TWITTER@PIYUSHGOYAL
Asit Ranjan Mishra m MINT GRAPHITI

Economic ties hinge asit.m@livemint.com

NEW DELHI
Chinese chequers
Trade deficit in FY19 declined for the first time to $53 billion as a result of a 25%
RCEP an opportunity
A
rise in Indian exports to China during the same year, but the Chinese made up

on China addressing lmost two decades ago,

when India was self-suffi-
cient in producing penicil-
for the shortfall by pushing more exports to India through Hong Kong.
Trade between Asian giants... ...and the deficit
before Asian giants to
lin, primarily by state-
strategic concerns owned firms, China started
dumping the essential antibiotic drug at
dirt-cheap prices. Consequently,
40

30
Exports

18.4
Imports (year-on-year in %)

25.64
70

60
(in $ billion)

53.5
show a united front
20 50 48.5
domestic production of the medicine
Harsh V. Pant could not be sustained. 10 40
Geethanjali Nataraj
feedback@livemint.com With state backing, non-transparent 10.42 feedback@livemint.com
0 30
export subsidies, robust infrastructure

C A
-10
hina’s economy grew by 6% in the third quarter of this facilities and cheaper credit, the domi- -20
20 n alarming level of deficit has now cast a shadow on the
year from a year earlier—its slowest GDP rise in more nance of Chinese exports through its -20 10 flourishing trade between the two fastest growing
than 27 years. The International Monetary Fund is sug- state-owned enterprises has been -30
economies of the world and the engines of growth in
0
gesting that the Chinese economy could grow at 5.8% next year, unprecedented. FY15 FY19 FY15 FY19 Asia. Bilateral trade between China and India touched $87 bil-
even slower than the 6.1% forecast for this year. Clearly, China’s Today, though India has become a lion in 2018-19, with the trade deficit widening to $53 billion
trade war with the US is taking a toll on its economic health, leading generic drug producer in the Top 5 exports to China Top 5 imports from China in China’s favour. Imports from China were 13.6% of India’s
making the end of this conflict a veritable necessity. China and world, two-thirds of the raw material, or FY19 (year-on-year in %) FY19 (year-on-year in %) total merchandise imports in 2018-19. These imports mainly
the US managed to reach a preliminary deal a few days back, a active pharmaceutical ingredients Electrical machinery comprise consumer goods and electronics, such as phones
Organic chemicals 54.27 and equipment -28.06
“love fest”, according to US President Donald Trump, hoping (API), are still sourced from China. Machinery and and ICs. Despite the political frictions on the border, it is trade
that it would finally ease trade tensions though a comprehen- Mineral fuels 89.47 mechanical appliances
-1.15 which has steered relations between the two countries.
sive trade agreement is still nowhere on the horizon. WIDENING TRADE GAP Cotton 78.09 Organic chemicals 21.22
Though bilateral trade is expected to touch $100 billion next
China is passing through a difficult economic phase at a time India’s trade deficit with China rose year, it is largely overshadowed by the rising deficit concerns
when other challenges are also mounting for Beijing. Chinese from $671 million in FY01 to $63 billion Ores, slag and ash -3.14 Plastic and articles 15.1 on the Indian side. Indian industry is worried that the further
president Xi Jinping has made an already authoritarian system in FY18. Trade deficit in FY19 declined influx of goods from China will hurt local companies, espe-
Plastic and articles 100.48 Fertilizers 91.51
even more rigid and hierarchical by centralizing power to an for the first time to $53 billion with cially those in consumer durables and manufacturing. In fact,
unprecedented level. For a nation that till a few years back gave exports to China rising by 25%, but many years ago, the India-China free trade agreement (FTA)
a sense it has worked out an uber efficient model of political China made up for the shortfall by push- How the neighbours stack up was put on hold even after a Joint Study Group from both the
economy management, today seems to be struggling on a num- ing more exports to India through Hong Indian and Chinese side recommended the FTA largely due
India China
ber of fronts. Kong. to lobbying by the chambers of commerce in India. Indian
Evolving Sino-Indian relations too should be contextualized Electronic items dominate India’s GDP (2018) Gross national income GDP growth (2018) industry is also concerned that the 16-member Regional
against this backdrop. During the Mamallapuram informal imports from China, but cheaper inter- per capita Year-on-year in % Comprehensive Economic Partnership (RCEP) agreement,
summit between Xi and Modi earlier this month, it was decided mediary and capital goods such as steel, (2018) led by Asean and China, will further increase India’s trade def-
$2.7 $13.6 6.8 6.6
to set up a high-level group to tackle India’s galloping trade def- machine parts, and chemicals, includ- trillion trillion
icit with all its major trading partners.
icit with the world’s second-biggest economy to be led by ing APIs, help India’s small and medium $2,020 $9,470 India’s existing FTAs with RCEP members have increased
finance minister Nirmala Sitharaman and Chinese vice premier enterprises thrive. India’s trade with the region. However, Indian industry has
Hu Chunhua. This complexity of trade relations has held the view that these FTAs have
China and India Though bilateral trade between baffled policymakers and made it diffi-
Trade balance (2018) WEF competitiveness Ease of Doing
Trade deficit largely increased imports into India
talking RCEP China and India reached around $95 cult for them to devise a coherent strat- with China has rather than increasing Indian
ranking (2019) Business rank (2019)
billion in 2018, the trade deficit at a egy to counter China’s aggressive trade
is a good whopping $53 billion was in China’s push. New Delhi has imposed anti- -$190 bn to be solved for exports to regional markets. Notable
is the fact that India runs a trade defi-
beginning, but favour, the biggest India has with any dumping duties against cheap Chinese 68 28 77 46 creation of job cit with 10 of the 16 RCEP member-
$352 bn
there is a long country. Since the Wuhan summit of items to protect the domestic industry, opportunities countries at a whopping $104 bil-
way ahead last year, there have been signs that but Beijing has been reluctant in giving
Source: Mint research in India lion—64% of India’s total trade defi-
Chinese policymakers are taking market access to Indian products. The cit in 2017-18, and this deficit has
PARAS JAIN/MINT
their imbalance with India relatively product profile of India’s exports have reportedly been growing over the
more seriously. New Delhi not only wants to boost exports to more or less remained unchanged over crackers to flood Indian markets. Indian industry representatives have past few years. This makes it all the more difficult for India to
China but is also seeking more Chinese investments in an effort the last decade and have been domi- “The impact of Chinese imports has been opposing the RCEP, apprehend- accommodate the demands of RCEP member-countries to
to correct the trade imbalance. Chinese President, during his nated by raw materials such as cotton, been such that India is threatened to ing that it would lead to a surge in open up its market to 92% of traded goods.
recent India visit, suggested that China would welcome both iron ore, copper, coal, and chemicals. become a country of importers and imports that will harm the domestic So far, India has offered to relax tariffs on 86% of traded
India’s IT services and generic drugmakers who have long India has benefitted immensely from traders with domestic factories either industry further. Analysts have said that goods to Asean, South Korea and Japan under the respective
sought greater market access to China. For its part, China the import of cheap intermediate and cutting down on production or shutting India was unlikely to gain major market FTAs it has signed with them, as well as up to 74% of traded
remains keen on Huawei’s entry into India, a topic that has gen- capital goods. However, the burgeoning down completely. The committee is access to China even if Beijing substan- goods with China, New Zealand and Australia. But this, too,
erated much debate in the country. trade deficit, which India has often very clear that it does not want such a tially reduces its tariff levels, as New has been rejected by the participating countries as being too
Meanwhile, Modi and Xi also discussed the issue of Regional termed “unsustainable”, could not be state of affairs to prevail in the country. Delhi has not negotiated non-tariff bar- little, too late.
Comprehensive Economic Partnership (RCEP) and Indian dealt with. The country can ill-afford its industry, riers with RCEP members, especially The Indian industry is particularly concerned about China
concerns during their informal summit in Mamallapuram. Now, the two countries have set up including MSMEs, getting annihilated,” China. in RCEP. Various sectors, including dairy, metals, electronics,
Though India has made a set of demands including changing India has been giving conflicting sig- chemicals and textiles, have urged the government to not
the base year to apply the reduction of tariffs from 2013 to 2019 nals on joining the deal in the final leg of agree on duty cut in these segments. Indian industry is scepti-
and right to determine differential tariffs among others, its China has a lot of state-owned discussions, which analysts said could cal that the RECP deal would lead to further lowering of tariffs
main concern largely centres around limited market access to enterprises which do not allow others be part of pressure tactics to convince resulting in a flood of goods from China, while not assuring
Indian products, the protectionist policies of Beijing as well as other members on its demands on mar- India of an equal access to the Chinese markets, thereby wid-
the danger of Chinese products swarming the Indian market. to compete, whereas in India, we open ket access, investment, e-commerce ening its large trade deficit and wreaking havoc on the Indian
The fact that China and India are talking RCEP is a good begin- and services. industry, especially small manufacturers of articles such as
ning but there is a long way ahead. it up for everybody to compete. A section of analysts, including econ- toys and consumer durables. Given the slowdown in the
However, resolution of economic issues between China and PIYUSH GOYAL omist Arvind Subramanian, said the Indian economy, this is something which needs to be avoided.
India will also require China addressing India’s strategic con- Trade minister other reason why India needs to be Nonetheless, the RCEP is also a perfect opportunity for
cerns. China cannot expect a robust trade and technology rela- more cautious in having a trade deal both India and China to take their cooperation in all mutual
tionship with India even as it continues to scuttle India’s rise on with China in the form of RCEP was the areas of interest, including trade to another level and show a
the global stage and remains insensitive to India’s core security yet another committee—the High-level the parliamentary standing committee “geostrategic dimension”. India has united front to the world. Indian industry will need to get
concerns. So far, there is little indication that China’s strategic Economic and Trade Dialogue mecha- on commerce had said in July 2018. openly opposed Beijing’s aggressive competitive and prepare itself effectively to meet the influx of
approach to India is evolving in a positive direction. And that nism—following the just-concluded push for the China-Pakistan Economic imports from all major trading partners, and the government
will continue to have an impact on how India looks at the eco- informal leadership summit between RCEP PLAY Corridor, which it considers a security will have to make consistent and concerted efforts by con-
nomic questions involving China. Beijing should adjust the Prime Minister Narendra Modi and Chi- The ongoing negotiations for a free threat. China’s support to Pakistan in stantly talking to the Chinese officials on reducing the deficit.
strategic lens with which it views New Delhi. Otherwise, its nese President Xi Jinping. trade agreement among the 16-member most international fora and opposition This trade imbalance between the two countries needs to be
attempts to re-adjust its economic lens will yield only limited The lack of mandatory technical stan- Regional Comprehensive Economic to India’s entry into the Nuclear Suppli- addressed for sustained growth and employment opportuni-
results. dards on a number of items also pro- Partnership (RCEP) has been stuck ers Group also makes it difficult for ties in India.
Harsh V. Pant is professor of international relations at King’s vides an easy passage to low-quality mostly because of India’s reluctance to India to sell a trade deal with its north- Geethanjali Nataraj is professor of economics at Indian
College, London. Chinese products such as toys and fire- further open up its market to China. ern neighbour to its domestic audience. Institute of Public Administration, Delhi.

Banerjee meets PM Modi, praises Ayushman Shun car ownership ‘trap’, says Uber CEO
Bharat scheme but bats for banking reforms
FROM PAGE 1
The Prime Minister said in a
tweet that the meeting with
Banerjee was an excellent one,
and his passion towards
human empowerment was
clearly visible. “We had a
healthy and extensive interac-
tion on various subjects. India
is proud of his accomplish-
ments. Wishing him the very
best for his future endeav-
ours,” Modi said in his tweet.
The Modi administration,
which has a strong majority in
the Lok Sabha, has an effective
administrative set up under
his supervision. The govern-
ment recently sent over two
dozen officials facing charges
PRADEEP GAUR/MINT
Banerjee said there was a need
to bring down the govt’s stake
in PSBs to less than 50%.
of illegal gratification into
compulsory retirement.
Banerjee said the Ayush-
man Bharat scheme serves a
useful purpose in ensuring
access to healthcare for the
poor.
The scheme aims to give
free health insurance of ₹5
lakh per family to nearly 40%
of the population—more than
100 million poor and vulnera-
ble families.
“Healthcare expenses often
wipe out families. We need it
(the scheme) so that families
do not lose all their assets
when someone in the family
falls sick. It fills an important
gap in our economic struc-
ture,” said the economist.
He also said that the Indian
Council of Medical Research
and the Abdul Latif Jameel
Poverty Action Lab, the orga-
nization that he had
co-founded with Esther Duflo,
one of the co-recipients of this
year’s Nobel prize for econom-
ics and Banerjee’s wife, could
partner in research.
Banerjee, who won the
Nobel prize for his experimen-
tal approach to finding solu-
tions to global poverty, had in
an interview published in
Mint on Monday endorsed the
government’s pro-poor
schemes, but not tax cuts for
businesses.
Banerjee is of the view that
higher taxes on businesses
could help the government
spend more on welfare meas-
ures in the short term, and
bridge its fiscal deficit in the
medium term.
FROM PAGE 1 Uber did not disclose invest- The Motor Vehicles
ment and commercial details (Amendment) Act, 2019 recog-
ment. India can actually be an of the partnership with DMRC. nized aggregators as digital
innovator at mass for the DMRC managing director intermediaries or marketpla-
developing countries in the Mangu Singh said Uber’s ser- ces, which can be used by pas-
world and can be a trailblazer vice has started at four sta- sengers to connect with a
and today we can look back at tions. “We are open to all ser- driver for transportation.
a day when innovation was vice providers. Whoever wants Uber’s global chief product
accelerated,” Khosrowshahi to provide a ser- officer, Manik
said. vice to our pas- Uber launched Gupta, said the
Uber on Tuesday launched a sengers, we are Uber Transit at company has
commuter service, Uber Tran- ready to help select Delhi Metro partnered with
sit, at select Metro stations in Khosrowshahi said very high them,” Singh stations, making it local transit app
Delhi, making it the first city in car ownership is a trap that said. provider MoovIt
the first city in
Asia for the service. The firm can prevent innovation. PTI Pradeep Par- for the data,
already runs the service in ameswaran, pres- Asia for the which will be
eight cities globally. ros and buses. Walking direc- ident for Uber’s service shown to users on
Under the public transport tions, to and from nearby India and South the Uber app. The
feature, riders will be able to Metro stations and bus stops, Asia operations, company will
see the fastest and cheapest can also be viewed, Uber said said recent amendments in the look to expand to other cities if
routes to the Metro station, in a statement. Motor Vehicles Act will help the service receives a positive
real-time schedules as well as The service will be the company focus on innova- response from customers,
departure time for public expanded to 210 Metro sta- tions and scale, rather than Gupta said in an interview.
transportation, including Met- tions in a phased manner. facing regulatory uncertainty. shreya.n@livemint.com
 POLITICS WEDNESDAY, 23 OCTOBER 2019
NEW DELHI 21

REUTERS

8 states account for 67.2% Trouble mounts for

Praful as ED arrests
of financial crimes in 2017 Mirchi aide Merchant
Shaswati Das
shaswati.d@livemint.com
Rajasthan, UP, Telangana reported bulk of economic crimes in 2017, states NCRB data NEW DELHI

A file photo of construction
work under way at Darbar
Sahib Gurdwara in Kartarpur.
T
m MINT GRAPHITI rouble mounted for
Gireesh Chandra Prasad & former civil aviation min-
Utpal Bhaskar ister Praful Patel as the
Crime diary Enforcement Directorate (ED)
NEW DELHI Rajasthan and Uttar Pradesh accounted for the highest share of reported economic crimes in 2017, while on Tuesday arrested Humayun
north-eastern states and Union territories reported fewer such cases. Merchant, an aide of the late

E
ight states, including Donald Iqbal Memon “Mirchi”, in con-
Economic offences Share of states with high crime incidence Economic crimes reported Trump
Delayed by a Rajasthan, Uttar Pradesh,
Maharashtra and Telan-
reported in total cases reported in 2017 (in %) from 19 cities in 2017 likens
House
nection with an ongoing
money laundering investiga-
150,170
day, India will gana, accounted for more Rajasthan 14.5 29,064 impeachme tion.
than two-thirds of eco- 148,972 nt inquiry to Patel, a senior leader of the
nomic crimes reported in 2017, the Uttar Pradesh 13.9 ‘a lynching’
Nationalist Congress Party Former civil aviation minister
sign Kartarpur bulk of which were cases of forgery, Maharashtra 9.4
Share of metro cities (in %)
16.5
bit.ly/2Pbt4WK (NCP), has already been Praful Patel is being probed for
cheating and fraud, according to 14.9 15.4 quizzed by the Mumbai divi- his connection to underworld
pact on 24 Oct data released by the National Crime
Records Bureau (NCRB).
Telangana 7.3
11.9
sion of the ED with regard to his figure Iqbal Mirchi.
connection to Mirchi, who is
HT

143,524 West Bengal 6.7

The number of economic offen- alleged to have been an under- the probe agencies after several
Elizabeth Roche ces across India rose from 143,524 in Bihar 5.4 world figure. property deals, including those
elizabeth.r@livemint.com 2016 to 148,972 cases in 2017, data Karnataka 5.1 Patel came under the probe related to Patel, on behalf of
NEW DELHI showed. Rajasthan and Uttar Pra- agency’s scanner and had been Mirchi and his wife, were found
desh, were the two states accounting 2015 2016 2017
Assam 4.9 Bengaluru Delhi Jaipur Mumbai summoned by it for recording to be channelled through him.

T
he signing of a pact that
would allow Indian pil-
grims to cross over to
Pakistan to visit the Darbar
Sahib Gurdwara at Kartarpur
in Narowal district, is likely to
be delayed by a day to 24
October for the mutual con-
venience of both parties, one
person familiar with the
development said, requesting
anonymity.
Officials of the two sides are
expected to meet at the Attari-
Wagah crossing to sign the
pact, the official said on Tues-
day.
India had said on Monday
that it was “disappointed”
with Islamabad’s insistence
on levying a $20 service fee on
every pilgrim crossing over to
Pakistan, but would sign the
pact on 23 October keeping in
mind the religious sentiments
of the people.
News reports quoting
Union home ministry officials
said that registration of Indian
pilgrims, which was to start
on Sunday, was delayed.
Reports on Sunday also said
that key unresolved issues
include Pakistan’s insistence
of charging $20 from each pil-
grim and the daily timings of
the pilgrimage to the Kartar-
pur shrine.
The proposed corridor will
connect Darbar Sahib in Kar-
tarpur with the Dera Baba
Nanak shrine in Gurdaspur
district of Punjab, and facili-
tate visa-free movement of
Indian pilgrims, who will have
to just obtain a permit to cross
for the highest share of reported his statement at its Mumbai The probe agency has
Source: National Crime Records Bureau
economic crimes in 2017, at 14.5% office on 18 October in the same alleged, on the basis of Mumbai
and 13.9%, respectively. The other PARAS JAIN/MINT case. Police reports, that Mirchi had
four states with a high incidence of ₹10 lakh, and in 21 cases, it was more 100,000 people. The total eco- of fraud (12,213 out of 21,796 cases) Merchant was arrested in given Merchant the power of
economic offences are West Bengal, than ₹100 crore. nomic offences reported from these followed by sexual exploitation with Mumbai under the Prevention attorney to arrange the deals on
Bihar, Karnataka and Assam. The Police has investigated over cities showed a moderating trend in 6.7% (1,460 cases) and causing disre- of Money Laundering Act his (Mirchi’s) behalf.
eight states account for 67.2% of all 294,978 cases in 2017, including 2017 from the previous two years. In pute with 4.6% (1,002 cases),” the (PMLA) on Tuesday and pro- The agency has already
cases reported in 2017, data showed. pending cases from past years, lead- 2016, they had reported 30,734 NCRB data showed. duced before a PMLA court in arrested Mirchi’s associates
Rajasthan and Telangana ing to filing of charge sheet in 77,492 cases. It was 32,183 in the previous With the Centre scrambling to Mumbai, which sent him to ED Haroun Yousuf and Ranjit
reported the highest crime rate at cases. In 8,094 cases, proceedings year. Bulk of these offences, too, fall fortify India’s cyber operations amid custody till 24 Singh Bindra
29.2% each, defined as reported have resulted in conviction and, in in the categories of forgery, cheating growing warnings of malware October. Merchant was under PMLA and
cases per 100,000 people. over 23,000 cases, the accused were and fraud. attacks on personal and organiza- Merchant, too, arrested on was granted cus-
Union territories in general acquitted. Trial was pending in NCRB also said that cybercrimes tional devices, intelligence and was questioned charges of money tody by the PMLA
reported fewer cases of eco- cyber law experts have said by the ED last laundering; he court till 12 Octo-
nomic offences. States with RISE IN ECONOMIC OFFENCES much like crimes against week. The ED has
was sent to ED
ber.
fewer reported cases of eco- women, India suffers from alleged that in The agency,
nomic offences include THE number of POLICE investigated BENGALURU, Delhi, CYBERCRIMES in dismal under-reporting of 2006, Millen- custody till during its probe,
Arunachal Pradesh, Goa, economic offences over 294,978 cases in Jaipur and Mumbai India almost cybercrimes. nium Developers 24 October had also identified
across India rose to 2017, including accounted for 58.7% doubled to 21,796
Manipur, Meghalaya, Mizo- 148,972 cases in 2017 pending cases from of all the economic cases in 2017, from India recorded 9,622, Pvt. Ltd devel- the benami assets
ram, Nagaland, Sikkim and from 143,524 in 2016 past years crimes from 19 cities 12,317 cases in 2016 11,592 and 12,317 cases of oped Ceejay belonging to Mir-
Tripura. Delhi, which is cybercrime in 2014, 2015 House in Mumbai, of which chi.
classified as a Union terri- and 2016, respectively. The two floors were transferred to Later in the day, the ED
tory in the statistics released by the 485,257 cases at the end of 2017. in India almost doubled in 2017. The data for 2017 comes after a two-year Mirchi’s wife Hazra Iqbal in arrested Rinku Deshpande, a
Bureau, reported 3.5% of all cases in Among 19 cities with more than 2 data comes in the backdrop of India delay, with the Centre blaming 2007. 45-year-old woman from Ben-
2017. million population, Bengaluru, aspiring to become a trillion-dollar states for the delay in providing sta- The probe agency has galuru in connection with the
The latest data also showed the Delhi, Jaipur and Mumbai digital economy. tistics for compilation. alleged that the sale of the land money laundering probe
nature of impact white collar crimes accounted for the highest share of Interestingly, cybercrimes The crime in India 2017 document to Millennium Developers, of against Mirchi for allegedly
had on their victims. Over 91,000 the 29,064 cases of economic offen- accounted for less than 1 percentage said data was captured at the police which Patel and his wife are forging documents, PTI
cases resulted in loss of property. ces reported in 2017. These four cit- (0.43%) or 21,796 cases of a total of station or district level, but the stakeholders, was allegedly reported. Officials said the
The amount involved was less than ies accounted for 58.7% of all eco- about 5 million cognizable crimes in socio-economic causative factors, or done through dubious means, woman had forged documents
₹1 lakh in more than half of these nomic crimes reported from the 19 2017. reasons of crimes, were not being with the proceeds being laun- and had been shown as a tenant
cases. In 29,500 cases, the amount cities. In terms of crime rate, Jaipur “During 2017, 56% of cyber-crime captured by the NCRB. dered by Mirchi. in one of the property that was
involved was between ₹1 lakh and had the highest—140.5 cases per cases registered were for the motive gireesh.p@livemint.com Merchant was arrested by dealt by Mirchi.
US says bilateral dialogue between India, Pakistan best way to resolve disputes
Elizabeth Roche detention of local residents The White House later back- based on Pakistan taking sus- United States supports the
elizabeth.r@livemint.com and political leaders, including pedalled on the offer. tained and irreversible steps rights of Kashmiris to peace-
NEW DELHI former chief ministers of “Restarting a productive against militants and terrorists fully protest, but condemns
Jammu and Kashmir. bilateral dialogue requires in its territory,” Wells said, the actions of terrorists who

over to Pakistan.
On Sunday, Pakistan prime
minister Imran Khan had said
his country will open the Kar-
tarpur Corridor on 9 Novem-
ber. A programme released by
Pakistan last week said two
batches of Indian pilgrims
numbering 2,500 would
arrive on 5-6 November at
Wagah, the land border
between India and Pakistan
on the Pakistani side, and
depart for Gurdwara Janam
Sthan at Nankana Sahib. The
pilgrims would then leave by
bus for the Kartarpur gurd-
wara on 7 November.
After attending the inaugu-
ration ceremony on 9 Novem-
ber, the pilgrims will go to
Nankana Sahib where they
will stay till 12 November
before returning on 13-14
November in two batches.
T
he US on Tuesday said it
supports direct dialogue
between Islamabad and
New Delhi as outlined in the
1972 Simla Agreement, echo-
ing India’s stand and giving it a
shot in the arm on the Kashmir
issue.
The “chief obstacle” to bilat-
eral talks was Islamabad’s con-
tinued support to terrorists
who engage in cross-border
terrorism, US acting assistant
secretary of state for south and
central Asia Alice G. Wells also
told the subcommittee on
Asia, the Pacific, and Nonpro-
liferation of the House Foreign
Affairs Committee in Wash-
ington.
In her remarks, posted on
the committee website, Wells
also said that the state depart-
ment had “raised concerns”
with New Delhi over the
“We have urged Indian
authorities to respect human
rights and restore full access to
services, including internet
and mobile networks. Post-
paid mobile service has been
restored in the Valley, but
internet access remains inter-
mittent,” she said.
On Pakistan, Wells backed
India’s position that bilateral
dialogue between New Delhi
and Islamabad was the best
way to solve disputes between
the two countries.
“We believe that direct dia-
logue between India and Paki-
stan, as outlined in the 1972
Simla Agreement, holds the
most potential for reducing
tensions,” Wells said.
“History shows us what is
possible,” Wells added, point-
ing to back channel discus-
sions that had taken place
Alice G. Wells, US acting assistant secretary of state for South
and Central Asia.
between 2006 and 2007,
when India and Pakistan had
made significant progress on
several issues, including Kash-
mir.
The remarks by Wells come
after a major effort by Pakistan
to engage the US as a mediator,
especially after India scrapped
AP
Article 370 of the Constitu-
tion, which gave special status
to Jammu and Kashmir. Ear-
lier this year, US President
Donald Trump caused a stir
when he said Prime Minister
Narendra Modi had asked him
to mediate between India and
Pakistan and offered to do so.
building trust and the chief clearly putting the onus on seek to use violence and fear to
obstacle remains Pakistan’s Pakistan to create a conducive undermine dialogue,” she
continued support for extrem- atmosphere for dialogue, said.
ist groups that while endorsing The state department has
engage in cross- US BACKS India’s long-held encouraged India “to follow
border terrorism,” INDIA position on the through on its commitment to
Wells said. matter. New Delhi hold assembly elections at the
“Pakistan’s har- WELLS’S remarks has repeatedly said earliest opportunity. Small
bouring of terror- come after a major
effort by Pakistan to
that “talks and ter- numbers of local political lead-
ist groups such as engage the US as a rorism cannot go ers were released earlier this
Lashkar-e-Taiba mediator together”. month, a trend we hope will
and Jaish-e-Mo- The US official continue. Government offices,
hammed, which US said the ‘chief took note of the primary schools, and colleges
obstacle’ to bilateral
seek to foment vio- talks was Islamabad’s security situation are open, though student
lence across the continued support in Jammu and attendance remains low,” she
Line of Control, is to terrorists Kashmir and said said.
destabilising and that security forces Wells also spoke about inci-
Pakistani authori- have killed terror- dents of violence and discrimi-
ties remain accountable for ists in multiple encounters last nation against minorities,
their actions,” she said in what week. “We are concerned including attacks on Dalits and
can be seen as a stern warning about reports of local and for- Muslims by cow vigilantes.
to Pakistan. eign militants attempting to These, the US official said,
“We believe the foundation intimidate local residents and “were not in keeping with
of any successful dialogue business owners to stymie nor- India’s legal protections for
between India and Pakistan is mal economic activity. The minorities”.

yam fraud, according to people familiar with the matter. Sebi has
m SHORT TAKES moved the Supreme Court against the tribunal’s ruling that was
CAIT says Walmart CEO’s letter Even after India’s palm oil boycott,
passed on 10 September, they added. to PM is just a ‘pressure tactic’ Mahathir stands by J&K comments
On 10 January 2018, Sebi slapped a two-year ban on PwC, an
Central govt to soon change arm of PwC India, from auditing any listed company in connec-
BLOOMBERG
Kuala Lumpur: Malaysian
REUTERS

definition of MSMEs, says Gadkari
HT
New Delhi: The government
will soon make changes to the
definition of a micro, small and
medium enterprise (MSME),
Union minister Nitin Gadkari
said on Tuesday.
He added that he hopes to
create 50 million jobs in the
sector in the next five years, and
may further improve India’s ease of doing business scenario.PTI
Market regulator challenges SAT
ruling in PwC-Satyam case
New Delhi: Markets watchdog Securities and Exchange Board
of India (Sebi) has challenged Securities Appellate Tribunal’s
(SAT’s) decision to quash a two-year ban that was imposed on
Price Waterhouse (PwC) in connection with the ₹7,800 crore Sat-
tion with PwC’s role in the Satyam scam. PTI
Railways to implement ₹18,000cr
project to run trains at 160kmph
New Delhi: The railways will implement a ₹18,000-crore project
to operate trains at a speed of 160kmph on the busy Delhi-Mum-
bai and Delhi-Kolkata routes by upgrading infrastructure, Rail-
way Board chairman V.K. Yadav said on Tuesday.
Currently, the average maximum speed of trains is 99kmph
and the recently introduced Delhi-Varanasi Vande Bharat
PRADEEP GAUR/MINT Express touches an average
speed of 104kmph on the Delhi-
Kanpur section. Once the
project begins, it will take at
least four years to be completed,
said Yadav. The railways is in a
“transformation mode” and “is
in the process of moderniza-
tion”, he added. PTI
Prime Minister Mahathir
Mohamad said on Tuesday he
would not retract his criticism
of New Delhi’s actions in
Jammu and Kashmir (J&K) even
though Indian traders have
urged a boycott of Malaysian
palm oil.
The impasse could exacerbate what Mahathir described as a
trade war between the world’s second-biggest producer and
exporter of palm oil, and its biggest buyer so far this year. REUTERS
New Delhi: Doug McMillon, chief executive officer (CEO)
of Walmart, in a two-page letter to Prime Minister Naren- Centre relaxes gift policy for
dra Modi dated 11 October, sought a stable and open busi-
employees, hikes monetary limits
ness environment that protects investments and demanded
a cut in licences and time required to open a store in India.
Reacting to the letter, domestic retailers’ body Confeder- New Delhi: The Central government has increased the mone-
ation of All India Traders (CAIT) termed the Walmart letter tary limits for accepting gifts for all its employees, relaxing the
as “a pressure tactic” to find a headway into the ₹45 trillion ceiling by more than threefold, officials said on Tuesday.
business. PTI The Centre has also removed the ₹1,000 limit for government
employees to receive and retain gifts from foreign dignitaries.PTI