OPINION, P8 COMPANIES, P6 INTERNATIONAL, P16 TURNAROUND STRATEGY A BATTLE LOST MD Butschek says Tata Motors to spend `4k cr this fiscal on launches Warren Buffett loses out to Sempra in race to buy Oncor EDITORIAL Decades of neglect mean fixing railway safety will take time Banks won’t cut rates even if RBI does until their balance sheets start looking better PUNE, TUESDAY, AUGUST 22, 2017 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME VIII NO. 172, 20 PAGES, `4.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 31,258.85 ▼ 265.83 NIFTY: 9,754.35 ▼ 83.05 NIKKEI 225: 19,393.13 ▼ 77.28 HANG SENG: 27,154.68 ▲ 107.11 `/$: 64.14 ▲ 0.01 `/€: 75.44 ▼ 0.10 BRENT: $52.18 ▼ $0.54 GOLD: `28,944.00 ▼ `190.00 IN THE NEWS Indian Energy Exchange gets Sebi nod for IPO ESSAR OIL-ROSNEFT DEAL THE INDIAN Energy Exchange (IEX) has received the approval of capital markets regulator Sebi to float an initial public offering (IPO), reports PTI. The firm had filed IPO papers with Sebi in June and got ‘observations’ from it on August 14, which is necessary for a company to launch the IPO. EOL owes Indian lenders close to `40,000 crore; the exposure to be transferred to Rosneft’s books GROSS GST REVENUE Local banks to get 10% of dues Indian Hotels to raise `1.5k cr via rights issue TATA GROUP hospitality arm Indian Hotels on Monday said its board has approved raising up to `1,500 crore through a rights issue, reports PTI. Funds are being raised to "meet the company’s long-term financing needs for capital expenditure, growth plans and debt repayment", Indian Hotels said in a filing to the BSE. Special Features Ways to use a systematic withdrawal plan When equity market has run up and we are not sure whether to stay invested, SWP may be used for a gradual withdrawal into a defensive asset class to get the benefit of exit cost averaging ■ Personal Finance, P15 Go-Carting for groceries: Growth of the segment From a time where there was a laundry list of e-tailers in the online grocery space, we are down to relatively fewer but in-it-for-the-long-run players. How the e-grocery segment shapes up will redefine how India shops for groceries QuickPicks FPI inflows into insurance IPOs may push rupee higher WITH CLOSE to `30,000 crore of insurance IPOs lined up over the next few months, significant participation by foreign portfolio investors (FPI) is expected to take the rupee to higher levels, reports Bhavik Nair in Mumbai. Five insurance companies—SBI Life Insurance, HDFC Standard Life Insurance, New India Assurance Company, General Insurance Corporation of India (GIC Re) and ICICI Lombard General Insurance—are expected to raise over `30,000 crore in the next few months. PAGE 10 ` PM to meet young CEOs to push investments, add jobs FOUR DAYS after meeting start-up entrepreneurs, Prime Minister Narendra Modi will meet 200 young CEOs on Tuesday to share ideas on policies across sectors with a view to promote private investment and create jobs, reports fe Bureau in New Delhi. Under the Champions of Change dialogue with entrepreneurs, Modi will interact with the CEOs to seek their feedback on how to boost government-to-business partnership to create a new India by 2022, the 75th year of Independence. PAGE 2 HC to DMRC: Pay `60 cr more to DAMEPL lender as interest THE DELHI Metro Rail Corporation was on Monday asked by the Delhi High Court to pay `60 crore more to a lender of its former concessionaire for the Airport Express line towards interest for the next three months on loans taken to build the line, reports PTI. Justice Sanjeev Sachdeva issued the interim order after he was informed that the May 30 order directing Delhi Metro to pay `60 crore as interest being borne by the concessionaire Delhi Airport Metro Express (DAMEPL) was only for 3 months, which expired in June. Debt reduction `1.3 lakh cr `70,400 cr LITANY OF IOUs Prior to the Rosneft deal, here’s a dekko at the total liability of the subsidiaries of the steel-to-shipping conglomerate For FY16 Essar subsidiaries’ total debt (` crore) Essar Steel Consolidated revenues `52,465.9 cr Consolidated net profit 5,025 5,597 `2,156.26 cr 17,304 OVER SIX months after a bitter split, rival AIADMK factions on Monday merged following a power-sharing arrangement under which K Palaniswami will remain the chief minister and O Panneerselvam will be his deputy, reports PTI. Essar’s overall debt pre-acquisition 23,450 INDIAN BANKS WILL be repaid only `4,000 crore or $600 million of the repayments of `36,000 crore ($5.6 billion) that the EssarGroup intends to make to lenders following the sale of Essar Oil (EOL) to a Rosneft-led consortium. While EOL owes Indian lenders close to `40,000 crore, seniorexecutives at State Bank of India (SBI) said this would not be fully repaid. Instead, the exposurewould be transferred to Rosneft’s books. As of now, some smallerbanks and Life Insurance Corporation,which had initially withheld their no-objection certificates for the transaction, are being repaid. Among the lenders to Essar Oil are SBI, Punjab National Bank,ICICI Bank,IDBI Bank,Axis Bank,Yes Bank,LIC and a couple of other insurers. The Essar Group management said in a release that in ad- — PRASHANT RUIA Essar Group pared its debt substantially following the nearly $13-billion acquisition of Essar Oil by a consortium led by Russia’s Rosneft. Here’s how 31,443 SHUBHRA TANDON & SHAYAN GHOSH Mumbai, August 21 to sell 98% of EOL.The transaction will bring down its debt by around `70,400 crore or $11 billion.Of the enterprisevalue of $12.9 billion, the debt component is $ 5.4 billion. According to Capitaline data, the total outstanding shares of EOL were 151.26 crore as on February 9, 2016, the last day of trading before the companywas delisted. Going by the equity value of $7.5 billion, the value per share works out to `336.67 ($4.96), a 28% premium over the last traded price of `262.60. The transactionwill see EOL, Vadinar Oil Terminal and Vadinar Power Companybeing taken over by Rosneft and TrafiguraUCP consortium. In October 2016, Essar Energy Holdings and Oil Bidco (Mauritius) had agreed to sell 98.26% stake of EOL. Rosneft, via its subsidiary Petrol Complex, acquired a 49.13% stake and the TrafiguraUCPconsortium (through Kesani Enterprises Company) acquired an equal stake. The remaining 1.74% stake continues to be held by retail shareholders. The Rosneft consortium will get EOL’s 20 million tonnes per annum Vadinar Refinery, its pan-India network of over3,500 retail outlets,as well as the associated refinery infrastructure. CLOSING THE GAP 42,726 AIADMK factions merge, OPS to be deputy CM Lenders have elected to stay with the firm and this exposure. So, whether that will get repaid or not is a decision the new shareholders will make Essar Essar Essar Essar Essar Oil Global Power Shipping Projects Fund Source: Kotak Institutional Equities dition to the $600 million it repays Indian banks, Essar Energy will repay loans about $5 billion (`32,000 crore) to lenders of Essar Global,the holding company for EOL. However, the management did not specifically name these lenders. Essar Global is a Mauritius-based company. Prashant Ruia,MDandgroup CEO, Essar Global, said at a press conference that Indian lenders were receiving just about 10% of the amount owed to them since this was the agreement reached between the banks and the company. Ruia said he was not sure the bankswant to more of the exposure repaid. “EOLhasVadinarPort,Vadinar PANAYA PROBE Murthy camp hits out at Infy board PP THIMMAYA Bengaluru, August 21 EVEN AS SOURCES close to NR Narayana Murthy claimed on Monday,the chairman emeritus had refrained from participating in the probe in the $200-million Panaya acquisition since he had found terms of reference unsatisfactory, the Infosys stock lost an additional 5.37% on Monday. The stock ended the session at `873.50 and has lost close to `34,000 crore in investorwealth across two sessions. It is no longer in the list of top ten most valued companies. The IT ma- FALLING STOCK The company lost `33,914 cr of m-cap in last two sessions Infosys Intra-day on BSE (`), Aug 21 940 929 920 900 880 860 873.5 Previous close 923.10 Open Close jor’s CEO and MD, Vishal Sikka, stepped down on Fridaywith the Infosys board attributing the blame for the resignation to a continuous assault on him by Murthy. Sources close to Murthy told FE the international law firms engaged in probing the allegations into the acquisition of Panaya by Infosys did meet Murthy who asked them about the scope of the investigation and the Infosys executives including board members who would be interviewed.“He was not satisfied with the responses given and felt that many executives who should have been part of the probe were not involved,” the sources said. The sources from the Murthy camp were responding to the board’s statement released on August 18 that Murthy was invited to provide anyinformation or evidence he believed would support the allegations being investigated but he did not provide anyevidence since none existed. R Seshasayee, chairman, Infosys said at a press conference on Friday that the Panaya acquisition had been investigated as many as three times but no evidence of any malpractices had been found.“All the complaints were anonymous and none of the whistle-blowers ever produced any evidence,”Seshasayee said. Continued on Page 2 Related reports on P6, 11 Govt mops up `40,000 crore Total debt as on March 31, 2016 `29,767.64 cr Essar Oil stopped trading on Indian stock exchanges from Feb 10, 2016 Source: Capitaline Powerwhichhavedoneextremely wellandmetallitscommitments. The lenders have elected to stay with the company and this exposure. So whether that will get repaid or not is a decision the new shareholderswillmake,”Ruiasaid. The Essar Group has struck a $12.9-billion deal with Rosneft and Trafigura-UCP consortium Of this, `15,000 crore has come in as I-GST, `5,000 crore by way of cess on demerit goods SUMIT JHA New Delhi, August 21 A direct benefit PRASANTA SAHU Aadhaar-linked DBT gathers pace Government welfare payments via Aadhaar Payment Bridge doubled year-on-year in April-July 2017 as 90% of the beneficiaries’ data are now seeded with Aadhaar against 70% a year ago. DBT disbursals ` crore DBT disbursals via Aadhaar Payment Bridge 280 Schemes on board the DBT platform compared to 74 in the year-ago period `57,029 cr Savings reported due to plugging of leakages via DBT in FY14-17 28,682 29,530 7,197 14,344 2016 2017 DBT includes Aadhaar-linked transfers and other electronic transfers including NEFT registered taxpayers filed interim July return till Monday 22 lakh THE GOVERNMENT HAS collected a gross goods and service tax (GST) amount of `40,000 crore so far with 13 lakh assessees having filed an interim tax return on the GST Network as of Monday evening. In addition, 22 lakh assessees have filled in the relevant details on the portal but are yet to file return, senior government officials said. Of the total amount of `40,000 crore, `15,000 crore has come in as integrated-GST, which is levied on interstate movement of goods. Another `5,000 crore, a revenue department official said,had been paid byassessees bywayof cess on demerit goods such as cars and tobacco. The remaining `22,000 crore has come in as central GST and state GST, which would be split equally between the Centre and the states, government officials explained. The `40,000 crore collected is a gross amount and the final amount in the government’s kitty would be smaller since there would refunds for input tax credit,the official added. With just four says to go before the extended deadline for filing summarised returns expires on August 25, only 15% of the nearly 86 lakh registered taxpayers have filed so far. Last Saturday, the government decided to extend the deadline for filing the interim summarised tax return to August 25 from August 20 earlier, citing requests from taxpayers and difficultyexperienced bythe states hit byfloods.This came after taxpayers and GST Suvidha providers (GSPs) — ITcompanies authorised to file return on behalf of customers — complained the GSTN system wasn’t accepting the filings. “Taxpayers faced some issues Continued on Page 2 Related report on Page 6 ADDING TO THE KITTY 15% or 13 lakh taxpayers have saved details on portal but yet to file return 86 lakh taxpayers are registered on GST Network when they tried to log in but it was spotted quickly and was resolved in an hour,” GSTN chairman Navin Kumar told FE. Kumar reiterated that technical glitches were not related to GSTN’s ability to handle a rush of taxpayers. “Taxpayers experienced system errors and were unable to file their summary return on GST portal. These technical glitches possibly happened due to heavytraffic.Considering this is the first return for taxpayers under the GST system, it is acceptable that businesses need time to understand the system,” RN Iyer, managing director, Vayana Network,a GSP said. AlthoughGSTNclaimsitssystem is designed to handle a load of 40 lakh taxpayers in the last two days, there are other issues that could trip the system.Forinstance,onlyhalfofthe34selected GSPs had been connected to GSTN servers till Monday while others were not prepared. Similarly, an estimated 30% of the registered taxpayers are yet to complete the registration process thatwould allowthem to file a return for July. Approximately 87 lakh taxpayers are understood to have registered on the GSTN portal as taxpayers.Of this,nearly71 lakh businesses have migrated from earlierVAT, central excise or service tax regime, while 16 lakh new taxpayers too have registered with the portal. Related report on Page 6 FE SPECIAL: RAILWAY ACCIDENT ‘Huge traffic, no time for maintenance’ SAURABH KUMAR New Delhi, August 21 RECORDINGS OF PURPORTED conversationsbetweenrailwayofficialssuggestFriday’sderailment of the Puri-Haridwar Kalinga Utkal Express near Khatauli in Uttar Pradesh, in which 20 people died, could have been averted had the maintenance crewbeengiventhe20minutesit neededtorepairthetrack.Instead, with heavytraffic on the line,this requestwas denied. FE has not been able to independentlyverifytheauthenticity oftherecordings.Anemailsentto a railways spokesperson remained unanswered. The Train derailments 2012-13 2013-14 2014-15 2015-16 2016-17* 327 265 196 159 104 65 76 49 53 63 5 6 No. of derailments 93 36 Persons killed *till February 28, 2017 spokesperson,however,said“the railwayshasadmittedthatprima facie it is a case of negligence” sincemanyhigh-rankingofficers 100 Persons injured Source: Ministry of railways had been suspended and some had been sent on leave including member,engineering,oftheRailway Board,Aditya Kumar Mittal. As per the voice recordings of conversations between the Khatauli assistant station manager (ASM) and the controller (who oversees and authorises trainmovements),atleasttworequests fora 15-20 minute period weremadebythe permanentway inspector (PWI) to fix a fish plate. Thiswas,however,turneddownas there were too many trains lined up to cross the section. In one of the recordings just before Utkal Expresswas cleared formovement,theASM could be heard saying“20 minute ka PWI maangte hain block (PWI is asking for a block of 20 minutes)”. Continued on Page 2 FRANCHISE AGREEMENT McDonald’s not loving it, ends deal with Connaught Plaza Restaurant PRESS TRUST OF INDIA New Delhi, August 21 MCDONALD’S HAS TERMINATED franchise agreement for 169 out of its 430 fast-food outlets in the country, alleging breach of contract terms and payment default by the operator of the franchise in north and east India. McDonald’s India,which operatesinthecountrythroughtwo franchisees, terminated the agreementwithConnaughtPlaza Restaurants (CPRL), in which the fast food chain’s estranged franchise partner Vikram Bakshi holds a 50% stake. The termination notice barred CPRL from using the McDonald’s brand at any of the 169 outlets,which employ thousands of staff. Statingthat“appropriatelegal remedies” are being considered, Bakshi said the decision is an open challenge to the National Company Law Tribunal (NCLT) judgment that had directed the ILLUSTRATION: SHYAM CPRL board to meet to discuss various issues. “The timing of this notice is hugely suspect because it comes on the morning of the first board meeting, scheduled by the administrator,”he said. Theadministrator—aformer judge of the Supreme Court — was appointed by the NCLT. TheUSfoodgianthasanother franchise agreement with Hardcastle Restaurants, which operates 261 McDonald’s outlets in western and southern India. McDonald’s India unit said in a statement that it has ended agreement as CPRL“has failed to remedy the breaches (to terms of pact),despitebeingprovidedwith an opportunity to do so in accordance with the agreements”. It,however,said a prioritywill be given to mitigate the impact on affected parties such as employees, suppliers and landlords and it is open to working with CPRLto achieve this. Continued on Page 2
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