OPINION, P6 ECONOMY, P2 A GULATI & R ROY Many inequality assessors ignore impact of education UDAN SCHEME ALL-CASH OFFER Urea pricing must be fixed if usage levels are to be halved by 2022 SUNIL JAIN INTERNATIONAL, P4 Civil aviation ministry is likely to face funds crunch Caine-led Thales to buy Gemalto for $5.42 billion NEW DELHI, MONDAY, DECEMBER 18, 2017 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME XLIII NO. 248, 16 PAGES, `5.00 (PATNA `6.00, RAIPUR `7.00) 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 OIL ON BOIL Rising crude prices to hurt economy AUTOMOBILE INDUSTRY BODY SIAM is seeking two tax rates for passenger vehicles under GST instead of multiple rates levied currently, as part of its wish list for the upcoming Budget, reports PTI. It has also sought a special tax rate of 12% for electric and hydrogen fuel cell powered vehicles. Index of Industrial Production April to Nov, % chg; y-o-y 13.4 0 Q1 FY16 Tonnage (mt) Q2 FY18 24 22 Credit offtake Outstanding; ` lakh crore Nov ‘16 Apr ‘17 Nov ‘17 Bank loan of just 1.2% y-o-y between April and November, on a negative base. The biggest disappointment has been exports which have grown just 12% in FY18 Corp bond CP 57,091 61,679 5.2 6 5.2 -1.6 26 26.4 8% 622 651 71.7 74 78.9 21.95 20.19 25.87 3.86 3.63 4.74 -2.7 2.3 4.9 10.9 6 5.6 Investments (Gross fixed capital formation; at current prices) 10 32 % GDP 6.3 8 30 6 30.4 28 4.4 % chg; y-o-y FY18 4.7% Cement Electricity 4 FY17 FY18 (% chg; y-o-y) FY16 FY17 FY18 April to Oct, % chg; y-o-y 2 FY16 FY17 Steel 2.5 Two-wheelers April to Oct Core sector Overall 5.5 Rail freight M&HCVs 3.5 RISING PRICES OF crude oil, higher local inflation and slim chances of lower interest rates threaten to rein in the economy evenastheperformancein201718, so far, points to a muted recovery. While the worst may be over, unless the government keeps up spending in 2018-19, the economy may see middling growth in the next few quarters. India’s GDP growth slowed to a 13-quarter low of 5.7% year-onyear in the April-June period but recovered to 6.3% y-o-y in the July-September quarter. Despite a small base, many segments of the economy haven’t really reported meaningful improvements so far. For instance,railway freight (in tonnage) has increased byjust 4.7% betweenApril and October.Also, the M&HCVsegment,a proxyfor the economy, reported a growth 1.2 -0.3 Passenger cars 4.8 1.7 11.3 3.8 4.7 FE BUREAU New Delhi, December 17 April to Oct, % chg; y-o-y 9.6 31.4 FY16 FY17 FY18 « SIAM seeks two GST rates for PVs Vehicle sales (domestic) « STATE-RUN ONGC HAS torn into regulator DGH's proposal for auctioning its discovered oil and gas fields, reports PTI. It said national oil companies can raise production if they are offered the same fiscal concessions as being extended to private companies. ONGC said national oil companies should also be allowed to participate. High frequency data trends 2 IN THE NEWS ONGC tears into DGH proposal to sell oil, gas fields Unless govt keeps up spending in FY19, economy may see middling growth in next few quarters Freight earnings (` cr) Exports April to Nov % chg; y-o-y 0.38 FY17 12.1 FY18 Sources: Siam, CSO, Indian Railways, RBI thus far; in the corresponding period of FY17 they had stayed virtually flat. Continued on Page 2 AFFORDABLE HOUSING Special Feature PSU land to be used to build homes Cloud is essential for success of Digital India, Smart Cities Amazon Web Services’ Peter Moore says cloud computing can bring tremendous transparency and agility to government programmes and services in India ■ EFE, P8 PRASANTA SAHU & SURBHI PRASAD New Delhi, December 17 QuickPicks Not all banks to get capital support in first tranche NOT ALL banks will be eligible for the government’s capital support this fiscal, but those who have performed relatively better and need capital most will be considered, sources said, reports PTI. It is not necessary that all banks will be issued recapitalisation bonds in the first tranche, but the money will be given depending on fulfilment of various parameters, a senior official said. The quantum of the capital infusion in the current fiscal would be known after Parliament gives its approval. DoT mulls allotment of backhaul spectrum through auction THE DEPARTMENT of telecom's working group on backhaul spectrum is mulling to allot such airwaves through auction instead of 'fixed fee' as suggested by the sector regulator Trai, reports PTI. “The working group on microwave access and microwave backbone at the DoT is largely in favour of allocating E and V band spectrum through auction. The report of the committee will be placed before the Telecom Commission in its meeting scheduled for December 21,” an official source said. PAGE 2 THE GOVERNMENT PLANS to tweak the land use policy to ensure affordable housing is accorded top priority. That will make availablevast tracts of surplus land belonging to sick public sectorundertakings (PSUs) for low-cost housing in urban areas. A back of the envelope calculation shows more than one lakh homes — of around 800 sq ft each — can be built on the land with just eight PSUs of around 2,500 acres.The“Housing forAll by 2022 Mission” has targetted 12 million homes. Officials indicated to FE, a Cabinet notewould be floated in the next couple of weeks by the department of public enterprises. Moreover, the state-run NBCC is likely to be appointed the land management agency for ailing PSUs. NBCC will help sell the land the proceeds of which will be used to meet their outstanding liabilities and implement voluntary retirement schemes before the enterprises are closed or privatised. Under extant guidelines for monetisation of land of sick PSUs, proposals from government organisations are invited on priorityto purchase land.The Homes for poor 1.2 crore houses to be built in urban areas across the country 30.76 lakh houses already sanctioned, of which 15.65 lakh houses are underconstruction 4.13 lakh constructed since the launch of the mission Unavailability of land has become a stumbling block for housing-for-all by 2022 unsold land,if any,could be auctioned by the government or be used for affordable housing and othergovernment programmes. Of the nearlytwo dozen PSUs identified and in the process of being shut down, eight PSUs have around 2,500 acres. Continued on Page 2 INVESTMENT OF $23.34 BN Private equity deals scale record high PE/VC investments in India Top PE/VC investments Amount ($ m) No. of deals In 2017 (YTD) 2007 2008 2009 2017 REWIND PE/VC 2010 15,104 9,968 4,090 8,350 536 Company 488 Flipkart 307 Flipkart 418 One97 Comm 2011 10,618 554 2012 9,793 540 2013 SUNDAR SETHURAMAN Mumbai, December 17 2014 THISYEAR HAS been the biggest year for venture capital and private equity (PE/VC) investments inthepastdecade.Riskcapitalinvestors have infused a record $23.34billionthrough537deals 2017 2015 2016 7,930 501 11,427 17,530 15,380 577 823 725 23,341 537 Source: Venture Intelligence Ola Amt ($ m) SoftBank Corp 2,500 Tencent, others 1,400 SoftBank Corp 1,400 Tencent, SoftBank 1,100 Investors Corp, others 1,049 952 GlobalLogic CPPIB 720 Ruchi Soya Inds Devonshire Capital 615 IndoSpace Core CPPIB 500 LOGOS India CDPQ , others 400 Axis Bank Bain Capital Bharti Infratel KKR, CPPIB in 2017 so far, according to research firmVenture Intelligence. In 2016, the PE/VC segment saw a higher number of deals, at 725, but the $15.38 billion invested was much lower than in the current year. The previous highest investment was of $17.5 billionin2015through823deals. Market participants said the increase in fund sizes, some bigticket deals and successful exits in the primary markets for PE players have helped fuel the boom.Rahul Bashin,founderand managing partner, Baring Private Equity Partners, said, “Fundraising going up when markets dowell is prettynormal. Exits have also been very high thisyear,and the numberof deals has come down because there has been more consolidation.” Continued on Page 2 ● FOOD SECURITY India to call meet ofWTO members in February PRESS TRUST OF INDIA Buenos Aires, December 17 COMMERCE AND INDUSTRY minister Suresh Prabhu has said India will call a meeting of some WTO members in February to mustersupport forfood security and other issues.“We are planning a meeting of WTO members in February,” the minister said, adding it would be like a mini-ministerial meeting. Although the contours of the meeting would be worked out later,he said the aimwas to bring like-minded nations together and explain to them the country’s position as well as concerns over issues of common interest. This comes against the backdrop of developed nations forming groupings to prepare the ground for pushing investment facilitation, preparing rules for e-commerce, promoting gender equality and reducing subsidy on fisheries. India has been keenly pushing agriculture issues at the WTO. It has also been raising its voice against bringing new issues, especially those which are not directly linked to trade, on the negotiating table.The meeting would help India in explaining its stand on various issues to the membernations and preparing them for collective action. BONDING WITH THE BEST Foreigners prefer bonds, buy $40 bn of paper in ’17 Biggest chunk of $23 bn has flowed into domestic markets where FPIs snapped up both gilts, corp paper BHAVIK NAIR Mumbai, December 17 INDIA'S STOCK MARKET may have scaled new peaks in 2017 but it’s the bond markets that have really caught the fancy of foreign investors this year.With less than a month to go, Indian companies and firms have raised around $40 billion from foreign investors; that’s more than a tenfold jump over the amount they picked up in 2016. Manish Wadhawan, MD & head, Fixed Income, Global Markets,HSBCIndia,sayswithmasala bondsanddollarbondshavingattractedrobustdemandfromoverseas investors,foreign fund flows intoIndiandebtareatthehighest everin the last 15years. The biggest chunk of $23 billion has flowed into the domestic markets where foreign portfolio investors have snapped up both giltsandcorporatepaper.Closeto $16 billion has been mopped up by borrowers in the overseas dollar markets while around $2 bil- Foreign debt investment ($ billion) 2016 41.06 2017 22.86 16.4 8 1.46 1.8 3.01 6.45 Foreign currency bond issuances Net FPI debt investment Masala bond issuances Total $ lion has been picked up by companies via masala bonds. Even before Moody’s upgraded India’s sovereign rating to Baa2 on November17,the appetite for Indian paperwas high. For example, spreads at the beginning of the year, on investment grade five-yearUSD bonds issued by Indian banks were around 150 basis points over five year US Treasuries. Today, these spreads are in the range of 100 to 125 bps,pointing to a 2550 basis points compression. As Neville Fernandes, head, debt capital markets, Citibank, says there has been a compression in dollarbond credit spreads in2017.“Thetighteningincredit spreadsforsub-investmentgrade dollarbondsissuedbyIndiancorporates has been higher with spreads tightening by approximately50-75basispointsduring the year,”Fernandes noted. Post the upgrade, borrowing costs have come down further as seen from the recent issuance by PowerFinanceCorporation(PFC). The company priced its $400milliondollarbondsatjust157.5 bps over US treasury.Investment bankerssaidthiswaspossiblythe tightest spread for 10-year paper issued by public sector units, in about 15 years.PFC’s bonds were rated BBB- by S&P. Continued on Page 2
The Financial Express (FE) is a business paper that’s closest to the people who are in the business of business. From business policies to market trends to new developments, The Financial Express comes packed with incisive news on every relevant issue.